<PAGE>
Registration Nos. 333-17217
811-07953
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 16 /x/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 18 /x/
(Check appropriate box or boxes)
EQ ADVISORS TRUST
(formerly 787 Trust)
(Exact name of registrant as specified in charter)
1290 Avenue of the Americas
New York, New York 10104
(Address of principal executive offices)
Registrant's Telephone Number, including area code: (212) 554-1234
Peter D. Noris, Executive Vice President and
Chief Investment Officer
The Equitable Life Assurance Society of the United States
1290 Avenue of the Americas
New York, New York 10104
(Name and address of agent for service)
Please send copies of all communications to:
Jane A. Kanter
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b)
on [date] pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on [date] pursuant to paragraph (a) of Rule 485
75 days after filing pursuant to paragraph (a)
<PAGE>
EQ Advisors Trust(Service Mark)
PROSPECTUS DATED MAY 1, 2000
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This Prospectus describes nineteen (19) Portfolios offered by EQ Advisors Trust
and the Class IA shares offered by the Trust on behalf of each Portfolio that
you can choose as investment alternatives. Each Portfolio has its own investment
objective and strategies that are designed to meet different investment goals.
This Prospectus contains information you should know before investing. Please
read this Prospectus carefully before investing and keep it for future
reference.
<TABLE>
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INTERNATIONAL STOCK PORTFOLIOS
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DOMESTIC PORTFOLIOS Alliance Global
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Alliance International
EQ/Aggressive Stock*
BT International Equity Index
Alliance Common Stock
Alliance Equity Index FIXED INCOME PORTFOLIOS
--------------------------------------------
Alliance Growth and Income
Alliance High Yield
EQ/Alliance Premier Growth
Alliance Intermediate Government Securities
Alliance Small Cap Growth
Alliance Money Market
MFS Emerging Growth Companies
Alliance Quality Bond
T. Rowe Price Equity Income
Warburg Pincus Small Company Value BALANCED/HYBRID PORTFOLIOS
--------------------------------------------
EQ/Balanced*
Alliance Conservative Investors
Alliance Growth Investors
</TABLE>
* Effective May 1, 2000, the name of the Alliance Aggressive Stock Portfolio was
changed to the "EQ/Aggressive Stock Portfolio" and the Alliance Balanced
Portfolio was changed to the "EQ/Balanced Portfolio."
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YOU SHOULD BE AWARE THAT THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED OF THE INVESTMENT MERIT OF THESE PORTFOLIOS OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Master-Class A
<PAGE>
Overview
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EQ ADVISORS TRUST
This Prospectus tells you about nineteen (19) current Portfolios of EQ Advisors
Trust ("Trust") and the Class IA shares offered by the Trust on behalf of each
Portfolio. The Trust is an open-end management investment company. Each
Portfolio is a separate series of the Trust with its own investment objective,
investment strategies and risks, which are described in this Prospectus. Each of
the current Portfolios of the Trust are diversified for purposes of the
Investment Company Act of 1940, as amended ("1940 Act").
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 (the "Contract" or collectively, the
"Contracts") issued by The Equitable Life Assurance Society of the United States
("Equitable") and Equitable of Colorado, Inc. ("EOC") as well as insurance
companies that are not affiliated with Equitable or EOC ("non-affiliated
insurance companies") and to The Equitable Investment Plan for Employees,
Managers and Agents ("Equitable Plan"). The Prospectus is designed to help you
make informed decisions about the Portfolios that are available under your
Contract or under the Equitable Plan. You will find information about your
Contract and how it works in the accompanying prospectus for the Contracts if
you are a Contractholder or participant under a Contract.
Equitable currently serves as the Manager of the Trust. In such capacity,
Equitable currently has overall responsibility for the general management and
administration of the Trust.
Information about the Advisers for each Portfolio is contained in the
description concerning that Portfolio in the section entitled "About the
Investment Portfolios." The Manager has the ultimate responsibility to oversee
each of the Advisers and to recommend their hiring, termination and replacement.
Subject to approval by the Board of Trustees, the Manager has been granted
relief by the Securities and Exchange Commission ("SEC") ("Multi-Manager Order")
that enables the Manager without obtaining shareholder approval to: (i) select
new or additional Advisers for each of the Trust's Portfolios; (ii) enter into
new investment advisory agreements and materially modify existing investment
advisory agreements; and (iii) terminate and replace the Advisers.
<PAGE>
Table of contents
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<TABLE>
<S> <C>
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1
SUMMARY INFORMATION CONCERNING EQ
ADVISORS TRUST 4
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2
ABOUT THE INVESTMENT PORTFOLIOS 12
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DOMESTIC PORTFOLIOS 15
EQ/Aggressive Stock 15
Alliance Common Stock 19
Alliance Equity Index 22
Alliance Growth and Income 25
EQ/Alliance Premier Growth 28
Alliance Small Cap Growth 30
MFS Emerging Growth Companies 33
T. Rowe Price Equity Income 35
Warburg Pincus Small Company Value 38
INTERNATIONAL STOCK PORTFOLIOS 41
Alliance Global 41
Alliance International 44
BT International Equity Index 48
FIXED INCOME PORTFOLIOS 51
Alliance High Yield 51
Alliance Intermediate Government Securities 55
Alliance Money Market 59
Alliance Quality Bond 62
BALANCED/HYBRID PORTFOLIOS 66
EQ/Balanced 66
Alliance Conservative Investors 71
Alliance Growth Investors 75
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3
MORE INFORMATION ON PRINCIPAL RISKS 78
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4
MANAGEMENT OF THE TRUST 84
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The Trust 84
The Manager 84
Expense Limitation Agreement 86
The Advisers 87
The Administrator 87
The Transfer Agent 87
Brokerage Practices 87
Brokerage Transactions with Affiliates 88
</TABLE>
<TABLE>
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5
FUND DISTRIBUTION ARRANGEMENTS 89
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6
PURCHASE AND REDEMPTION 90
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7
HOW ASSETS ARE VALUED 91
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8
TAX INFORMATION 92
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9
FINANCIAL HIGHLIGHTS 93
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10
PRIOR PERFORMANCE OF EACH ADVISER 112
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</TABLE>
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1
Summary information concerning
EQ Advisors Trust
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4
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The following chart highlights the nineteen (19) Portfolios described in this
Prospectus that you can choose as investment alternatives under your Contracts
offered by Equitable or EOC. The chart and accompanying information identify
each Portfolio's investment objective(s), principal investment strategies, and
principal risks. "More Information on Principal Risks", which more fully
describes each of the principal risks, is provided beginning on page 78.
<TABLE>
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EQ ADVISORS TRUST DOMESTIC PORTFOLIOS
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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EQ/AGGRESSIVE STOCK Seeks to achieve long-term growth of capital
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ALLIANCE COMMON STOCK Seeks to achieve long-term growth of capital and increased
income
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ALLIANCE EQUITY INDEX Seeks a total return before expenses that approximates
the total return performance of the S&P 500 Index, including
reinvestment of dividends, at a risk level consistent with that
of the S&P 500 Index
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ALLIANCE GROWTH AND INCOME Seeks to provide a high total return through a combination of
current income and capital appreciation by investing primarily
in income-producing common stocks and securities convertible
into common stocks
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EQ/ALLIANCE PREMIER GROWTH Seeks long-term growth of capital by primarily investing in
equity securities of a limited number of large, carefully
selected, high quality United States companies that are judged,
by the Adviser, likely to achieve superior earnings growth
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ALLIANCE SMALL CAP GROWTH Seeks to achieve long-term growth of capital
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</TABLE>
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Summary information concerning
EQ Advisors Trust
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<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
Stocks and other equity securities of small and General investment, small-cap and mid-cap company,
medium-sized companies (including securities of growth investing, leveraging, derivatives, liquidity,
companies in cyclical industries, companies whose securities lending, and foreign securities risks
securities are temporarily undervalued, companies in
special situations (e.g., change in management, new
products or changes in customer demand) and less
widely known companies)
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Stocks and other equity securities (including preferred General investment, foreign securities, leveraging,
stocks or convertible debt) and fixed income securities derivatives, convertible securities, small-cap and mid-cap
(including junk bonds), foreign securities, derivatives, company, junk bond, securities lending, and fixed income
and securities lending risks
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Securities in the S&P 500 Index, derivatives, and General investment, index-fund, derivatives, leveraging,
securities lending and securities lending risks
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Stocks and securities convertible into stocks General investment, convertible securities, leveraging,
(including junk bonds) derivatives, foreign securities, junk bond, and fixed
income risks
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Equity securities of a limited number of large, General investment, focused portfolio, growth investing,
high-quality companies that are likely to offer convertible securities, derivatives, and foreign securities
superior earnings growth risks
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Stocks and other equity securities of smaller companies General investment, small-cap and mid-cap company,
and undervalued securities (including securities of growth investing, leveraging, derivatives, liquidity,
companies in cyclical industries, companies whose securities lending, portfolio turnover and foreign
securities are temporarily undervalued, companies in securities risks
special situations (e.g., change in management, new
products or changes in customer demand) and less widely
known companies)
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</TABLE>
------------------------- EQ Advisors Trust
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Summary information concerning
EQ Advisors Trust
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<TABLE>
<CAPTION>
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EQ ADVISORS TRUST DOMESTIC PORTFOLIOS
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
MFS EMERGING GROWTH COMPANIES Seeks to provide long-term capital growth
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T. ROWE PRICE EQUITY INCOME Seeks to provide substantial dividend income and also
capital appreciation by investing primarily in
dividend-paying common stocks of established companies
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WARBURG PINCUS SMALL COMPANY VALUE Seeks long-term capital appreciation
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</TABLE>
<PAGE>
Summary information concerning
EQ Advisors Trust
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<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
Equity securities of emerging growth companies with the General investment, small-cap and mid-cap company,
potential to become major enterprises or that are foreign securities, portfolio turnover, and growth
major enterprises whose rates of earnings growth are investing risks
expected to accelerate
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Dividend-paying common stocks of established companies General investment, value investing, foreign securities,
fixed income risks
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Equity securities of U.S. small cap companies General investment, small-cap and mid-cap company,
portfolio turnover, foreign securities, fixed income, and
value investing risks
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</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
Summary information concerning
EQ Advisors Trust
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<TABLE>
<CAPTION>
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EQ ADVISORS TRUST INTERNATIONAL STOCK PORTFOLIOS
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
ALLIANCE GLOBAL Seeks long-term growth of capital
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ALLIANCE INTERNATIONAL Seeks to achieve long-term growth of capital by investing
primarily in a diversified portfolio of equity securities
selected principally to permit participation in non-U.S.
companies with prospects for growth
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BT INTERNATIONAL EQUITY INDEX Seeks to replicate as closely as possible (before deduction
of Portfolio expenses) the total return of the MSCI EAFE
Index
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</TABLE>
<TABLE>
<CAPTION>
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EQ ADVISORS TRUST FIXED INCOME PORTFOLIOS
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
ALLIANCE HIGH YIELD Seeks to achieve a high return by maximizing current income
and, to the extent consistent with that objective, capital
appreciation
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ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES Seeks to achieve high current income consistent with
relative stability of principal through investment primarily
in debt securities issued or guaranteed as to principal and
interest by the U.S. Government or its agencies or
instrumentalities
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</TABLE>
<PAGE>
Summary information concerning
EQ Advisors Trust
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<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
Equity securities of U.S. and established foreign companies General investment, foreign securities, liquidity, derivatives,
(including shares of other mutual funds investing in foreign securities lending, and fixed income risks
securities), debt securities, derivatives, and securities
lending
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Equity securities of non-U.S. companies (including those in General investment, foreign securities, liquidity, growth
emerging markets securities) or foreign government investing, leveraging, derivatives, securities lending,
enterprises (including other mutual funds investing in portfolio turnover, and fixed income risks
foreign securities), debt securities, derivatives, and
securities lending)
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Equity securities of companies in the MSCI EAFE Index General investment, index-fund, foreign securities, liquidity,
and derivatives risks
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</TABLE>
<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
High yield debt securities rated BB/Ba or below or unrated General investment, fixed income, leveraging, loan
securities of comparable quality ("junk bonds"), common participation and assignment, derivatives, liquidity, junk
stocks and other equity securities, foreign securities, bond, foreign securities, small-cap and mid-cap company,
derivatives, and securities lending and securities lending risks
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Securities issued or guaranteed by the U.S. Government, General investment, fixed income, leveraging, derivatives,
including repurchase agreements and forward and securities lending risks
commitments related to U.S. Government securities, debt
securities of non-governmental issuers that own
mortgages, short sales, the purchase or sale of securities
on a when-issued or delayed delivery basis, derivatives,
and securities lending
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</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
Summary information concerning
EQ Advisors Trust
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10
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<TABLE>
<CAPTION>
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EQ ADVISORS TRUST FIXED INCOME PORTFOLIOS
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
ALLIANCE MONEY MARKET Seeks to obtain a high level of current income, preserve its
assets and maintain liquidity
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ALLIANCE QUALITY BOND Seeks to achieve high current income consistent with
preservation of capital by investing primarily in investment
grade fixed income securities
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</TABLE>
<TABLE>
<CAPTION>
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EQ ADVISORS TRUST BALANCED/HYBRID PORTFOLIOS
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
EQ/BALANCED Seeks to achieve a high return through both appreciation
of capital and current income
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ALLIANCE CONSERVATIVE INVESTORS Seeks to achieve a high total return without, in the opinion
of the Adviser, undue risk to principal
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ALLIANCE GROWTH INVESTORS Seeks to achieve the highest total return consistent with
the Adviser's determination of reasonable risk
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</TABLE>
<PAGE>
Summary information concerning
EQ Advisors Trust
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11
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<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
High quality U.S. dollar-denominated money market General investment, money market, leveraging, foreign
instruments (including foreign securities) and securities securities, and securities lending risks
lending
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Investment-grade debt securities rated at least BBB/Baa or General investment, fixed income, convertible securities,
unrated securities of comparable quality at the time of leveraging, derivatives, securities lending, and foreign
purchase, convertible debt securities, preferred stock, securities risks
dividend-paying common stocks, foreign securities, the
purchase or sale of securities on a when-issued,
delayed-delivery or forward commitment basis, derivatives,
and securities lending
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</TABLE>
<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
Debt and equity securities, money market instruments, General investment, asset allocation, fixed income,
foreign securities, derivatives, and securities lending derivatives, leveraging, liquidity, securities lending,
portfolio turnover, and foreign securities risks
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Investment grade debt securities and equity securities of General investment, asset allocation, fixed income,
U.S. and foreign issuers, derivatives, and securities derivatives, convertible securities, liquidity,
lending leveraging, securities lending, portfolio turnover, and
foreign securities risks
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Equity securities (including foreign stocks, preferred stocks, General investment, asset allocation, fixed income,
convertible securities, securities of small and medium-sized leveraging, derivatives, liquidity, convertible
companies) and debt securities (including foreign debt securities, small-cap and mid-cap company, securities
securities and junk bonds), derivatives, and securities lending, junk bond, portfolio turnover, and foreign
lending securities risks
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</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
2
About the investment portfolios
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12
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This section of the Prospectus provides a more complete description of the
principal investment objectives, strategies, and risks of each of the
Portfolios. Of course, there can be no assurance that any Portfolio will achieve
its investment objective.
Please note that:
o A fuller description of each of the principal risks is included in the
section "More Information on Principal Risks," which follows the description
of each Portfolio in this section of the Prospectus.
o Additional information concerning each Portfolio's strategies, investments,
and risks can also be found in the Trust's Statement of Additional
Information.
GENERAL INVESTMENT RISKS
Each of the Portfolios is subject to the following risks:
ASSET CLASS RISK: The returns from the types of securities in which a Portfolio
invests may underperform returns from the various general securities markets or
different asset classes.
MARKET RISK: You could lose money over short periods due to fluctuation in a
Portfolio's share price in reaction to stock or bond market movements, and over
longer periods during extended market downturns.
SECURITY SELECTION RISK: There is the possibility that the specific securities
selected by a Portfolio's Adviser will underperform other funds in the same
asset class or benchmarks that are representative of the general performance of
the asset class.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
THE BENCHMARKS
The performance of each of the Trust's Portfolios as shown on the following
pages compares each Portfolio's performance to that of a broad-based securities
market index, an index of funds with similar investment objectives and/or a
blended index. Each of the Portfolios' annualized rates of return are net of:
(i) its investment management fees; and (ii) its other expenses. These rates are
not representative of the actual return you would receive under your Contract.
Broad-based securities indices are unmanaged and are not subject to fees and
expenses typically associated with managed investment company portfolios.
Broad-based securities indices are also not subject to contract and
insurance-related expenses and charges. Investments cannot be made directly in a
broad-based securities index. Comparisons with these benchmarks, therefore, are
of limited use. They are included because they are widely known and may help you
to understand the universe of securities from which each Portfolio is likely to
select its holdings.
THE CREDIT SUISSE FIRST BOSTON GLOBAL HIGH YIELD INDEX ("CSFB Index") has been
maintained since January 1986 and has several modules representing different
sectors of the high yield market, including a cash paying module, a pay-in-kind
module, and a default module. The CSFB Index is priced weekly and can be sorted
by industry, rating, seniority, liquidity, country of issue, price, yield and
spread.
THE LEHMAN AGGREGATE BOND INDEX ("Lehman Aggregate Bond") is an index comprised
of investment grade fixed income securities, including U.S. Treasury,
mortgage-backed, corporate and "Yankee" bonds (U.S. dollar-denominated bonds
issued outside the United States).
<PAGE>
About the investment portfolios
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13
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THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX ("Lehman Gov't/Corp") represents an
unmanaged group of securities widely regarded by investors as representative of
the bond market.
THE LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX ("Lehman Intermediate Government
Bonds") represents an unmanaged group of securities consisting of all U.S.
Treasury and agency securities with remaining maturities of from one to ten
years and issue amounts of at least $100 million outstanding.
THE LEHMAN TREASURY BOND INDEX ("Lehman Treasury") represents an unmanaged group
of securities consisting of all currently offered public obligations of the U.S.
Treasury intended for distribution in the domestic market.
THE MERRILL LYNCH HIGH YIELD MASTER INDEX ("ML Master") represents an unmanaged
group of securities widely regarded by investors as representative of the high
yield bond market.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX ("MSCI EAFE") is a market
capitalization weighted equity index composed of a sample of companies
representative of the market structure of Europe, Australasia and the Far East.
MSCI EAFE Index returns assume dividends reinvested net of withholding taxes and
do not reflect any fees or expenses.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE INDEX ("MSCI
EMF") is a market capitalization weighted equity index composed of companies
that are representative of the market structure of the following 25 countries:
Argentina, Brazil Free, Chile, China Free, Colombia, Czech Republic, Greece,
Hungary, India, Indonesia Free, Israel, Jordan, Korea, Mexico Free, Pakistan,
Peru, Philippines Free, Poland, Russia, South Africa, Sri Lanka, Taiwan,
Thailand Free, Turkey and Venezuela. "Free" MSCI indices exclude those shares
not purchasable by foreign investors.
THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX ("MSCI World") is an
arithmetic, market value-weighted average of the performance of over 1,300
securities listed on the stock exchanges of twenty foreign countries and the
United States.
THE RUSSELL 2000 INDEX ("Russell 2000") is an unmanaged index which tracks the
performance of 2,000 publicly-traded U.S stocks. It is often used to indicate
the performance of smaller company stocks. It is compiled by the Frank Russell
Company.
THE RUSSELL 2000 GROWTH INDEX ("Russell 2000 Growth") is an unmanaged index
which measures the performance of those companies in the Russell 2000 Index with
higher price-to-book ratios and higher forecasted growth than other companies in
the Russell 2000 Index. It is compiled by the Frank Russell Company.
THE RUSSELL 2000 VALUE INDEX ("Russell 2000 Value") is an unmanaged index which
measures the performance of those Russell 2000 companies with lower
price-to-book ratios and lower forecasted growth values. It is compiled by the
Frank Russell Company.
THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500") is an
unmanaged weighted index containing common stocks of 500 industrial,
transportation, utility and financial companies, regarded as generally
representative of the larger capitalization portion of the United States stock
market. The S&P 500 returns reflect the reinvestment of dividends, if any, but
do not reflect fees, brokerage commissions or other expenses of investing.
THE STANDARD & POOR'S MIDCAP 400 INDEX ("S&P 400 MidCap") is an unmanaged
weighted index of 400 domestic stocks chosen for market size (median market
capitalization of about $610 million), liquidity, and industry group
representation. The S&P 400 returns reflect the reinvestment of dividends, if
any, but do not reflect fees, brokerage commissions or other expenses of
investing.
------------------------ EQ Advisors Trust
<PAGE>
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14
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THE VALUE LINE CONVERTIBLE INDEX ("Value Line Convertible") is comprised of 585
of the most actively traded convertible bonds and preferred stocks on an
unweighted basis.
THE LIPPER AVERAGES are contained in Lipper's survey of the performance of funds
underlying a large universe of variable life and annuity contracts, where
performance averages are based on net asset values which reflect the deduction
of investment management fees and direct operating expenses, and, for funds with
Rule 12b-1 plans, asset-based sales charges. This survey is published by Lipper
Analytical Services, Inc., a firm recognized for its reporting of performance of
actively managed funds. Performance data shown for the portfolios does not
reflect the deduction of any insurance-related expenses (which are assumed at
the contract level).
"Blended" performance numbers (e.g., 50% S&P 400/50% Russell 2000 or 60% S&P
500/40% Lehman Gov't/Corp) assume a static mix of the two indices. We believe
that these indices reflect more closely the market sectors in which certain
Portfolios invest.
50% S&P 400 MIDCAP INDEX/50% RUSSELL 2000 INDEX - is made up of 50% of the S&P
400 Index, which is an unmanaged weighted index of 400 domestic stocks chosen
for market size (median market capitalization of about $610 million), liquidity
and industry group representation; and 50% of the Russell 2000 Index, which is
an unmanaged index which tracks the performance of 2,000 publicly-traded U.S.
stocks.
50% S&P 500 INDEX/50% LEHMAN GOV'T/CORP. INDEX - is made up of 50% of the S&P
500 Index, which is an unmanaged weighted index containing common stocks of 500
industrial, transportation, utility and financial companies, regarded as
generally representative of the larger capitalization portion of the United
States stock market, and 50% of the Lehman Government/Corporate Index, which
represents an unmanaged group of securities widely regarded by investors as
representative of the bond market.
75% S&P 500 INDEX/25% VALUE LINE CONVERTIBLE INDEX - is made up of 75% of the
S&P 500 Index, which is an unmanaged weighted index containing common stocks of
500 industrial, transportation, utility and financial companies, regarded as
generally representative of the larger capitalization portion of the United
States stock market, and 25% of the Value Line Convertible Index, which is
comprised of 585 of the most actively traded convertible bonds and preferred
stocks on an unweighted basis.
70% S&P 500 INDEX/30% LEHMAN GOV'T/CORP. INDEX - is made up of 70% of the S&P
500 Index, which is an unmanaged weighted index containing common stocks of 500
industrial, transportation, utility and financial companies, regarded as
generally representative of the larger capitalization portion of the United
States stock market, and 30% of the Lehman Government/Corporate Index, which
represents an unmanaged group of securities widely regarded by investors as
representative of the bond market.
70% LEHMAN TREASURY/30% S&P 500 INDEX - is made up of 70% of the Lehman Treasury
Bond Index, which represents an unmanaged group of securities consisting of all
currently offered public obligations of the U.S. Treasury intended for
distribution in the domestic market, and 30% of the S&P 500 Index, which is an
unmanaged weighted index containing common stocks of 500 industrial,
transportation, utility and financial companies, regarded as generally
representative of the larger capitalization portion of the United States stock
market.
<PAGE>
DOMESTIC PORTFOLIOS
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EQ/AGGRESSIVE STOCK PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks and other equity securities of
small and medium-sized companies that, in the opinion of the Adviser, have
favorable appreciation prospects. The Portfolio may also invest in securities of
companies in cyclical industries, companies whose securities are temporarily
undervalued, companies in special situations (e.g., change in management, new
products or changes in customer demand) companies stocks whose growth prospects
are not recognized by the market and less widely known companies.
The Portfolio may also invest up to 25% of its total assets in foreign
securities and may also make use of various other investment strategies, (e.g.,
investments in debt securities, making secured loans of its portfolio
securities). The Portfolio may also use derivatives, including: writing covered
call options and purchasing call and put options on individual equity
securities, securities indexes and foreign currencies. The Portfolio may also
purchase and sell stock index and foreign currency futures contracts and options
thereon.
When market or financial conditions warrant, or it appears that the Portfolio's
investment objective will not be achieved primarily through investments in
common stocks, the Portfolio may invest in other equity-type securities (such as
preferred stocks and convertible debt instruments) and options for hedging
purposes. The Portfolio may also make temporary investments in corporate fixed
income securities, which will generally be investment grade, or invest part of
its assets in cash or cash equivalents, including high-quality money market
instruments for liquidity or defensive purposes. Such investments could result
in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
MULTIPLE-ADVISER RISK: The EQ/Aggressive Stock Portfolio employs multiple
Advisers. Each of the Advisers independently chooses and maintains a portfolio
of common stocks for the Portfolio and each is responsible for investing a
specific allocated portion of the Portfolio's assets. Because each Adviser will
be managing its allocated portion of the Portfolio independently from the other
Advisers, the same security may be held in two different portions of the
Portfolio, or may be acquired for one portion of the Portfolio at a time when
the Adviser of another portion deems it appropriate to dispose of the security
from that other portion. Similarly, under some market conditions, one Adviser
may believe that temporary, defensive investments in short-term instruments or
cash are appropriate when the other Adviser or Advisers believe continued
exposure to the equity markets is appropriate for their portions of the
Portfolio. Because each Adviser directs the trading for its own portion of the
Portfolio, and does not aggregate its transactions with those of the other
Advisers, the Portfolio may incur higher brokerage costs than would be the case
if a single Adviser were managing the entire Portfolio.
GROWTH INVESTING RISK: Certain of the Advisers for this Portfolio may use a
growth oriented approach to stock selection. The price of growth stocks may be
more sensitive to changes in current or expected earnings than the prices of
other stocks. The price of growth stocks is also subject to the risk that the
stock price of one or more companies will fall or will fail to appreciate as
anticipated by the Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because:
--------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
EQ/AGGRESSIVE STOCK PORTFOLIO
- ------------
16
- --------------------------------------------------------------------------------
the securities of such companies are less well-known, held primarily by insiders
or institutional investors and may trade less frequently and in lower volume;
such companies are more likely to experience greater or more unexpected changes
in their earnings and growth prospects; such companies have limited financial
resources or may depend on a few key employees; and the products or technologies
of such companies may be at a relatively early stage of development or not fully
tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which may
cause the Portfolio to lose money or be prevented from earning capital gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; expropriation or nationalization; adverse changes in foreign economic and
tax policies; and foreign government instability, war or other adverse political
or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last ten calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one, five and ten
years and compares the Portfolio's performance to: (i) the returns of a
broad-based index; (ii) the returns of a "blended" index of two broad-based
indices; and (iii) the returns of an index of funds with similar investment
objectives. Past performance is not an indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Aggressive Stock
Portfolio) managed by Alliance using the same investment objectives and strategy
as the Portfolio. For these purposes, the Portfolio is considered to be the
successor entity to the predecessor registered investment company (HRT/Alliance
Aggressive Stock Portfolio) whose inception date is January 27, 1986. The assets
of the predecessor were transferred to the Portfolio on October 18, 1999.
Following that transfer, the performance shown (for the period October 19, 1999
through December 31, 1999) is that of the Portfolio. For these purposes, the
performance results of the Portfolio and its predecessor registered investment
company have been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
<PAGE>
EQ/AGGRESSIVE STOCK PORTFOLIO
- -----------
17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
8.2% 86.9% -3.2% 16.8% -3.8% 31.6% 22.2% 10.9% 0.3% 18.84%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Best quarter (% and time period) Worst quarter (% and time period)
40.10% (1991 1st Quarter) (27.19)% (1998 3rd Quarter)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
EQ/Aggressive Stock Portfolio
- Class IA Shares 18.84% 16.29% 16.68%
- --------------------------------------------------------------------------------
50% S&P 400 MidCap
Index/50% Russell
2000*,** 18.09% 19.92% 15.41%
- --------------------------------------------------------------------------------
S&P 400 MidCap Index* 14.72% 23.05% 17.32%
Lipper MidCap Growth Funds
Average* 46.25% 22.54% 16.19%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
In accordance with the Multi-Manager Order, the Manager may, among other things,
select new or additional Advisers for the Portfolio and may allocate and
re-allocate the Portfolio's assets among Advisers. Currently, Alliance Capital
Management, L.P. and Massachusetts Financial Services Company have been selected
by the Manager to serve as Advisers for this Portfolio. It is anticipated that
additional Advisers may be added in the future.
The Manager initially allocated the assets of the Portfolio and will allocate
all daily cash inflows (share purchases) and outflows (redemptions and expense
items) among the Advisers, subject to the oversight of the Board. The Manager
intends, on a periodic basis, to review the asset allocation in the Portfolio.
The Manager does not intend, but reserves the right, subject to the oversight of
the Board, to reallocate assets from one Adviser to another when it would be in
the best interest of the Portfolio and its shareholders to do so. In some
instances, the effect of the reallocation will be to shift assets from a better
performing Adviser to other Adviser(s).
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance was the exclusive Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
ALDEN M. STEWART and RANDALL E. HAASE have been the persons principally
responsible for the day-to-day management of the Portfolio and its
predecessor since 1993. Mr. Stewart, an Executive Vice President of
Alliance, has been associated with Alliance since 1970. Mr. Haase, a
Senior Vice President of Alliance, has been associated with Alliance
since 1988.
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS was added as an Adviser to the Portfolio as of May 1, 2000. MFS
is America's oldest mutual fund organization. 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. MFS is a subsidiary of Sun Life of Canada (United States) Financial
Services Holdings Inc., which, in turn, is an indirect wholly-owned subsidiary
of Sun Life Assurance Company of Canada.
The Portfolio Managers are TONI Y. SHIMURA, a Senior Vice President of
MFS, who has been employed by MFS
------------------------ EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
EQ/AGGRESSIVE STOCK PORTFOLIO
- -----------
18
- --------------------------------------------------------------------------------
as a portfolio manager since 1995 and JOHN W. BALLEN, Chief Investment
Officer and President of MFS, who provides general oversight in the
management of the Portfolio.
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
ALLIANCE COMMON STOCK PORTFOLIO
- ------------
19
- --------------------------------------------------------------------------------
ALLIANCE COMMON STOCK PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of capital and increase
income.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks and other equity-type
securities (such as preferred stocks or convertible debt) that the Adviser
believes will share in the growth of the nation's economy over a long period.
Most of the time, the Portfolio will invest primarily in common stocks that are
listed on national securities exchanges. Smaller amounts will be invested in
stocks that are traded over-the-counter and in other equity-type securities.
Current income is an incidental consideration. The Portfolio generally will not
invest more than 20% of its total assets in foreign securities.
The Portfolio may also make use of various other investment strategies,
including making secured loans of up to 50% of its total assets. The Portfolio
may also use derivatives, including: writing covered call and put options,
buying call and put options on individual common stocks and other equity-type
securities, securities indexes, and foreign currencies. The Portfolio may also
purchase and sell stock index and foreign currency futures contracts and options
thereon.
When market or financial conditions warrant or it appears that the Portfolio's
investment objective will not be achieved by purchasing equity securities, the
Portfolio may invest a portion of its assets in debt securities, including
nonparticipating and nonconvertible preferred stocks, investment grade debt
securities and junk bonds, e.g., rated BB or lower by Standard & Poor's ("S&P")
or Ba or lower by Moody's Investor Service, Inc. ("Moody's"). The Portfolio also
may make temporary investments in high-quality U.S. dollar-denominated money
market instruments. Such investment strategies could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; expropriation or nationalization; adverse changes in foreign economic and
tax policies; and foreign government instability, war or other adverse political
or economic actions.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying common
stock and provide higher yields than the underlying common stocks, but generally
offer lower yields than nonconvertible securities of similar quality. The value
of convertible securities fluctuates both in relation to changes in interest
rates and changes in the value of the underlying common stock.
------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
ALLIANCE COMMON STOCK PORTFOLIO
- ----------
20
- --------------------------------------------------------------------------------
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less well-known, held primarily by insiders or institutional
investors and may trade less frequently and in lower volume; such companies are
more likely to experience greater or more unexpected changes in their earnings
and growth prospects; such companies have limited financial resources or may
depend on a few key employees; and the products or technologies of such
companies may be at a relatively early stage of development or not fully tested.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment-grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than if it invested in higher-rated
obligations because BBB-rated securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
JUNK BOND RISK: The Portfolio may invest a portion of its assets in "junk bonds"
or lower-rated securities rated BB or lower by S&P or an equivalent rating by
any other NRSRO or unrated securities of similar quality. Junk bonds have
speculative elements or are predominantly speculative credit risks, therefore,
credit risk is particularly significant for this Portfolio. This Portfolio may
also be subject to greater credit risk because it may invest in debt securities
issued in connection with corporate restructurings by highly leveraged issuers
or in debt securities not current in the payment of interest or principal, or in
default.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. 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.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last ten calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one, five and ten
years and compares the Portfolio's performance to: (i) the returns of a
broad-based index and (ii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Common Stock Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance Common
Stock Portfolio) whose inception date is June 16, 1975. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the performance
results of the Portfolio and its predecessor registered investment company have
been linked.
<PAGE>
ALLIANCE COMMON STOCK PORTFOLIO
- ----------
21
- --------------------------------------------------------------------------------
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- -8.1% 37.9% 3.2% 24.8% -2.1% 32.5% 24.3% 29.4% 29.4% 25.19%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Best quarter (% and time period) Worst quarter (% and time period)
28.42% (1998 4th Quarter) (20.22)% (1990 3rd Quarter)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Common Stock Portfolio
- Class IA Shares 25.19% 28.11% 18.61%
- --------------------------------------------------------------------------------
S&P 500 Index* 21.03% 28.56% 18.21%
- --------------------------------------------------------------------------------
Lipper Growth Equity Mutual
Funds Average* 31.48% 26.45% 17.79%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment compay since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
TYLER J. SMITH has been responsible for the day-to-day management of the
Portfolio and its predecessor since 1977. Mr. Smith, a Senior Vice President of
Alliance, has been associated with Alliance since 1970.
------------------------ EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
ALLIANCE EQUITY INDEX PORTFOLIO
- -----------
22
- --------------------------------------------------------------------------------
ALLIANCE EQUITY INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks a total return before expenses that approximates the
total return performance of the S&P 500 Index, including reinvestment of
dividends, at a risk level consistent with that of the S&P 500 Index.
THE INVESTMENT STRATEGY
The Adviser will not utilize customary economic, financial or market analyses or
other traditional investment techniques in managing the Portfolio. Rather, the
Adviser will use proprietary modeling techniques to construct a portfolio that
it believes will, in the aggregate, approximate the performance results of the
S&P 500 Index.
The Adviser will first select from the largest capitalization securities in the
S&P 500 on a capitalization-weighted basis. Generally, the largest
capitalization securities reasonably track the S&P 500 because the S&P 500 is
significantly influenced by a small number of securities. However, in the
Adviser's view, selecting securities on the basis of their capitalization alone
would distort the Portfolio's industry diversification, and therefore economic
events could potentially have a dramatically different impact on the performance
of the Portfolio from that of the S&P 500. Recognizing this fact, the modeling
techniques also consider industry diversification when selecting investments for
the Portfolio. The Adviser also seeks to diversify the Portfolio's assets with
respect to market capitalization. As a result, the Portfolio will include
securities of smaller and medium-sized capitalization companies in the S&P 500.
Cash may be accumulated in the Portfolio until it reaches approximately 1% of
the value of the Portfolio at which time such cash will be invested in common
stocks as described above. Accumulation of cash increases tracking error. The
Portfolio will, however, remain substantially fully invested in common stocks
even when common stock prices are generally falling. Similarly, adverse
performance of a stock will ordinarily not result in its elimination from the
Portfolio.
For more information on the S&P 500, see the preceding section "The Benchmarks."
The Portfolio is not sponsored, endorsed, sold or promoted by Standard & Poor's
Corporation ("S&P") and S&P makes no guarantee as to the accuracy and/or
completeness of the S&P 500 or any data included therein.
In order to reduce brokerage costs, maintain liquidity to meet shareholder
redemptions or minimize tracking error when the Portfolio holds cash, the
Portfolio may from time to time buy and hold futures contracts on the S&P 500
Index and options on such futures contracts. The contract value of futures
contracts purchased by the Portfolio plus the contract value of futures
contracts underlying call options purchased by the Portfolio will not exceed 20%
of the Portfolio's total assets. The Portfolio may seek to increase income by
lending its portfolio securities with a value of up to 50% of its total assets
to brokers-dealers.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
INDEX-FUND RISK: The Portfolio is not actively managed and invests in securities
included in the index regardless of their investment merit. Therefore, the
Portfolio cannot modify its investment strategies to respond to changes in the
economy and may be particularly susceptible to a general decline in the U.S. or
global stock market segment relating to the index. Although the Portfolio's
modeling techniques are intended to produce performance that approximates that
of the S&P 500 (before expenses), there can be no assurance that these
techniques will reduce "tracking error" (i.e., the difference between the
Portfolio's investment results (before expenses) and the S&P 500's). Tracking
error may arise as a result of brokerage costs, fees
<PAGE>
ALLIANCE EQUITY INDEX PORTFOLIO
- -----------
23
- --------------------------------------------------------------------------------
and operating expenses and a lack of correlation between the Portfolio's
investments and the S&P 500.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. 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.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last five calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one year, five years
and since inception and compares the Portfolio's performance to: (i) the returns
of a broad-based index and (ii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Equity Index Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance Equity
Index Portfolio) whose inception date is March 1, 1994. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the performance
results of the Portfolio and its predecessor registered investment company have
been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
36.5% 22.4% 32.6% 28.1% 20.38%
1995 1996 1997 1998 1999
Best quarter (% and time period) Worst quarter (% and time period)
21.13% (1998 4th Quarter) (9.97)% (1998 3rd Quarter)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Equity Index Portfolio
- Class IA Shares 20.38% 27.84% 23.63%
- --------------------------------------------------------------------------------
S&P 500 Index* 21.03% 28.56% 24.14%
- --------------------------------------------------------------------------------
Lipper S&P 500 Index Funds
Average* 20.48% 28.07% 25.07%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment company since the
------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
ALLIANCE EQUITY INDEX PORTFOLIO
- -----------
24
- --------------------------------------------------------------------------------
predecessor commenced operations. Alliance, a publicly traded limited
partnership, is indirectly majority-owned by Equitable. Alliance manages
investment companies, endowment funds, insurance companies, foreign entities,
qualified and non-tax qualified corporate funds, public and private pension and
profit-sharing plans, foundations and tax-exempt organizations.
JUDITH A. DEVIVO has been responsible for the day-to-day management of the
Portfolio and its predecessor since its inception. Ms. DeVivo, a Vice President
of Alliance, has been associated with Alliance since 1970.
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
ALLIANCE GROWTH AND INCOME
- -----------
25
- --------------------------------------------------------------------------------
ALLIANCE GROWTH AND INCOME
PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide a high total return through a
combination of current income and capital appreciation by investing primarily
in income-producing common stocks and securities convertible into common
stocks.
THE INVESTMENT STRATEGY
The Portfolio seeks to maintain a portfolio yield above that of issuers
comprising the S&P 500 and to achieve (in the long run) a rate of growth in
Portfolio income that exceeds the rate of inflation. The Portfolio will
generally invest in common stocks of "blue chip" issuers, i.e., those:
o that have a total market capitalization of at least $1 billion;
o that pay periodic dividends; and
o whose common stock is in the highest four issuer ratings for S&P (i.e., A+,
A, B or B+) or Moody's (i.e., high grade, investment grade, upper medium
grade or medium grade) or, if unrated, is determined to be of comparable
quality by the Adviser.
It is expected that on average the dividend rate of these issuers will exceed
the average rate of issuers constituting the S&P 500.
The Portfolio may also invest without limit in securities convertible into
common stocks, which include convertible bonds, convertible preferred stocks
and convertible warrants. The Portfolio may also invest up to 30% of its total
assets in high yield, high risk convertible securities rated at the time of
purchase below investment grade (i.e., rated BB or lower by S&P or Ba or lower
by Moody's or determined by the Adviser to be of comparable quality).
The Portfolio does not expect to invest more than 25% of its total assets in
foreign securities, although it may do so without limit. It may enter into
foreign currency futures contracts (and related options), forward foreign
currency exchange contracts and options on currencies for hedging purposes.
The Portfolio may also write covered call and put options on securities and
securities indexes for hedging purposes or to enhance its return and may
purchase call and put options on securities and securities indexes for hedging
purposes. The Portfolio may also purchase and sell securities index futures
contracts and may write and purchase options thereon for hedging purposes.
When market or financial conditions warrant, the Portfolio may invest in
certain money market instruments for temporary or defensive purposes. Such
investment strategies could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar quality.
The value of convertible securities fluctuates both in relation to changes in
interest rates and changes in the value of the underlying common stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income
---------------------------------------------------- EQ Advisors Trust
ALLIANCE GROWTH AND INCOME PORTFOLIO
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
26
- --------------------------------------------------------------------------------
securities, that portion of the Portfolio's performance will be affected by
changes in interest rates, the credit risk of the issuer, the duration or
maturity of the Portfolio's fixed income holdings, and adverse market or
economic conditions. When interest rates rise, the value of the Portfolio's
fixed income securities, particularly those with longer durations or
maturities, will go down. When interest rates fall, the reverse is true. In
addition, to the extent that the Portfolio invests in investment-grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than if it invested in higher-rated
obligations because BBB-rated securities are regarded as having only an
adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative.
JUNK BOND RISK: The Portfolio may invest a portion of its assets in "junk
bonds" or lower-rated securities rated BB or lower by S&P or an equivalent
rating by any other NRSRO or unrated securities of similar quality. Therefore,
credit risk is particularly significant for this Portfolio. Junk bonds have
speculative elements or are predominantly speculative credit risks. This
Portfolio may also be subject to greater credit risk because it may invest in
debt securities issued in connection with corporate restructurings by highly
leveraged issuers or in debt securities not current in the payment of interest
or principal, or in default.
FOREIGN SECURITIES RISK: To the extent the Portfolio invests in foreign
securities, it is subject to risks not associated with investing in U.S.
securities, which can adversely affect the Portfolio's performance. Foreign
markets, particularly emerging markets, may be less liquid, more volatile, and
subject to less government supervision than domestic markets. There may be
difficulties enforcing contractual obligations, and it may take more time for
trades to clear and settle. In addition, the value of foreign investments can
be adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in foreign
economic and tax policies; and foreign government instability, war or other
adverse political or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last six calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one year,
five years and since inception and compares the Portfolio's performance to: (i)
the returns of a broad-based index; (ii) the returns of a "blended" index of
equity and fixed income securities; and (iii) the returns of an index of funds
with similar investment objectives. Past performance is not an indication of
future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Growth and Income
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance and Growth Income Portfolio) whose inception date is October 1,
1993. The assets of the predecessor were transferred to the Portfolio on
October 18, 1999. Following that transfer, the performance shown (for the
period October 19, 1999 through December 31, 1999) is that of the Portfolio.
For these purposes, the performance results of the Portfolio and its
predecessor registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not
ALLIANCE GROWTH AND INCOME PORTFOLIO
<PAGE>
- ----------
27
- --------------------------------------------------------------------------------
reflect any insurance and Contract-related fees and expenses, which would
reduce the performance results.
- ---------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- ---------------------------------
[GRAPHIC OMITTED]
1994 -0.6 %
1995 24.1 %
1996 20.1 %
1997 26.9 %
1998 20.9 %
1999 18.66%
Best quarter (% and time period) Worst quarter (% and time period)
26.28% (1998 4th Quarter) (15.03)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Growth and Income
Portfolio - Class IA Shares 18.66% 22.08% 17.15%
- -------------------------------------------------------------------------------
S&P 500 Index* 21.03% 28.56% 23.43%
- -------------------------------------------------------------------------------
75% S&P 500 Index/25%
Value Line Convertible*,** 20.71% 25.01% 18.77%
- -------------------------------------------------------------------------------
Lipper Growth and Income Funds
Average* 14.51% 21.78% 17.57%
- -------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
PAUL RISSMAN and W. THEODORE KUCK have been the persons responsible for the
day-to-day management of the Portfolio, Mr. Rissman since 1996 and Mr. Kuck
since the Portfolio and its predecessor's inception. Mr. Rissman, a Senior
Vice President of Alliance, has been associated with Alliance since 1989. Mr.
Kuck, a Vice President of Alliance, has been associated with Alliance since
1971.
---------------------------------------------------- EQ Advisors Trust
ALLIANCE GROWTH AND INCOME PORTFOLIO
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
28
- --------------------------------------------------------------------------------
EQ/ALLIANCE PREMIER GROWTH
PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth of capital by primarily
investing in equity securities of a limited number of large, carefully
selected, high-quality United States companies that are judged, by the Adviser,
likely to achieve superior earnings growth.
THE INVESTMENT STRATEGY
The Portfolio invests primarily (at least 85% of its total assets) in equity
securities of United States companies. The Portfolio is diversified for
purposes of the 1940 Act, however it is still highly concentrated. The
Portfolio focuses on a relatively small number of intensively researched
companies. The Adviser selects the Portfolio's investments from a research
universe of more than 600 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects. An emphasis is placed on identifying securities of companies whose
substantially above-average prospective earnings growth is not fully reflected
in current market valuations.
Normally, the Portfolio invests in about 40-50 companies, with the 25 most
highly regarded of these companies usually constituting approximately 70% of
the Portfolio's net assets. In managing the Portfolio, the Adviser seeks to
capitalize on apparently unwarranted price fluctuations both to purchase or
increase positions on weakness and to sell or reduce overpriced holdings. The
Portfolio normally remains nearly fully invested and does not take significant
cash positions for market timing purposes. During market declines, while adding
to positions in favored stocks, the Portfolio becomes somewhat more aggressive,
gradually reducing the number of companies represented in its holdings.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Portfolio becomes somewhat more conservative, gradually
increasing the number of companies represented in its holdings. Through this
approach, the Adviser seeks to gain positive returns in good markets while
providing some measure of protection in poor markets.
The Adviser expects the average market capitalization of companies represented
in the Portfolio normally to be in the range, or in excess, of the average
market capitalization of companies included in the S&P 500.
The Portfolio may invest up to 20% of its net assets in convertible securities
and 15% of its total assets in securities of foreign issuers.
The Portfolio may write covered exchange-traded call options on its securities
of up to 15% of its total assets, and purchase and sell exchange-traded call
and put options on common stocks written by others of up to, for all options,
10% of its total assets.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOCUSED PORTFOLIO RISK: The Portfolio invests in the securities of a limited
number of companies. Consequently, the Portfolio may incur more risk because
changes in the value of a single security may have a more significant effect,
either positive or negative, on the Portfolio's net asset value.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in
EQ/ALLIANCE PREMIER GROWTH PORTFOLIO
<PAGE>
- ----------
29
- --------------------------------------------------------------------------------
relation to changes in interest rates and changes in the value of the
underlying common stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT L.P.: ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance's sole general partner is Alliance Capital
Management Corporation, which is an indirect wholly-owned subsidiary of
Equitable, one of the largest life insurance companies in the United States and
a wholly-owned subsidiary of The Equitable Companies Incorporated. Therefore,
the Manager and Alliance are affiliates of each other. Alliance, a Delaware
limited partnership, is a leading international investment manager.
ALFRED HARRISON is the Portfolio Manager and has been responsible for the
day-to-day management of the Portfolio since its inception. Mr. Harrison is
Vice Chairman of Alliance Capital Management Corporation and has been with
Alliance since 1978.
---------------------------------------------------- EQ Advisors Trust
EQ/ALLIANCE PREMIER GROWTH PORTFOLIO
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
30
- --------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term
growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in U.S. common stocks and other equity-type
securities issued by smaller companies with favorable growth prospects. The
Portfolio may at times invest in companies in cyclical industries, companies
whose securities are temporarily undervalued, companies in special situations
(e.g., change in management, new products or changes in customer demand) and
less widely known companies.
Under normal market conditions, the Portfolio intends to invest at least 65% of
its total assets in securities of small capitalization companies (currently
considered by the Adviser to mean companies with market capitalization at or
below $3 billion).
The Portfolio may invest in foreign securities and may also make use of various
other investment strategies, including making secured loans of up to 50% of its
total portfolio securities. The Portfolio may also use derivatives including:
writing covered call options and purchasing call and put options on individual
equity securities, securities indexes and foreign currencies. The Portfolio may
also purchase and sell stock index and foreign currency futures contracts and
options thereon.
The Portfolio may invest up to 20% of its net asset value, measured at the time
of investment, in securities principally traded on foreign securities markets
(other than commercial paper).
When market or financial conditions warrant, the Portfolio may invest in other
equity-type securities (such as preferred stocks and convertible debt
instruments) and investment grade corporate fixed income securities. For
temporary or defensive purposes, the Portfolio may invest without limitation in
cash or cash equivalents or high-quality money market instruments. Such
investments could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known, held primarily by insiders or
institutional investors and may trade less frequently and in lower volume; such
companies are more likely to experience greater or more unexpected changes in
their earnings and growth prospects; such companies have limited financial
resources or may depend on a few key employees; and the products or
technologies of such companies may be at a relatively early stage of
development or not fully tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the
ALLIANCE SMALL CAP GROWTH PORTFOLIO
<PAGE>
- ----------
31
- --------------------------------------------------------------------------------
risk that changes in value of the derivative may not correlate perfectly with
the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in foreign
economic and tax policies; and foreign government instability, war or other
adverse political or economic actions.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio
to incur additional transaction costs that could be passed through to
shareholders.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for 1998
and 1999, the Portfolio's first two years of existence and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for one year and since inception and compares the Portfolio's performance to:
(i) the returns of a broad-based index and (ii) the returns of an index of
funds with similar investment objectives. Past performance is not an indication
of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Small Cap Growth
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Small Cap Growth Portfolio) whose inception date is May 1, 1997.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1998 -4.4 %
1999 27.75%
Best quarter (% and time period) Worst quarter (% and time period)
28.30% (1999 4th Quarter) (28.07)% (1998 3rd Quarter)
- -------------------------------------------------------------------------------
---------------------------------------------------- EQ Advisors Trust
ALLIANCE SMALL CAP GROWTH PORTFOLIO
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
32
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Alliance Small Cap Growth Portfolio -
Class IA Shares 27.75% 17.83%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index* 43.09% 25.88%
- --------------------------------------------------------------------------------
Lipper Small Company Growth Funds
Average* 38.28% 19.36%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
BRUCE ARONOW has been responsible for the day-to-day management of the
Portfolio since February 2000. Mr. Aronow is a Vice President of Alliance and
has been associated with Alliance since May 1999. Prior thereto, he had been
associated with Invesco since May 1998, and before that a Vice President of
Chancellor LGT Asset Management since 1996 and a Vice President of Chancellor
Capital Management since before 1995.
ALLIANCE SMALL CAP GROWTH PORTFOLIO
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
33
- --------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide long-term
capital growth.
THE INVESTMENT STRATEGY
The Portfolio invests, under normal market conditions, primarily (at least 65%
of its total assets) in common stocks and related securities, such as preferred
stock, convertible securities and depositary receipts of emerging growth
companies. Emerging growth companies that the Adviser believes are either:
o early in their life cycle but have the potential to become major
enterprises; or
o are major enterprises 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.
For purposes of this Portfolio, emerging growth companies may be of any size
and the Adviser would expect these companies to have products, technologies,
management, markets and opportunities that will facilitate earnings growth over
time that is well above the growth rate of the overall economy and rate of
inflation. The Portfolio's investments may include securities traded in the
over-the-counter markets.
The Adviser uses a "bottom-up" investment style in managing the Portfolio. This
means the securities are selected based upon fundamental analysis (such as an
analysis of earnings, cash flows, competitive position and management's
abilities) performed by the Adviser.
In addition, up to 25% of the Portfolio's assets may be invested in foreign
securities, including those in emerging markets, or in cash and cash
equivalents.
When adverse market, financial or political conditions warrant, the Portfolio
may depart from its principal strategies for temporary or defensive purposes.
Such investment strategies are inconsistent with the Portfolio's investment
objectives and could result in the Portfolio not achieving its investment
objective.
The Portfolio may engage in active and frequent trading to achieve its
principal investment strategies. Frequent trading increases transaction costs,
which could detract from the Portfolio's performance.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In
---------------------------------------------------- EQ Advisors Trust
MFS EMERGING GROWTH COMPANIES PORTFOLIO
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
34
- --------------------------------------------------------------------------------
addition, the value of foreign investments can be adversely affected by:
unfavorable currency exchange rates (relative to the U.S. dollar for securities
denominated in foreign currencies); inadequate or inaccurate information about
foreign companies; higher transaction, brokerage and custody costs; adverse
changes in foreign economic and tax policies; and foreign government
instability, war or other adverse political or economic actions.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio
to incur additional transaction costs that could be passed through to
shareholders.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The inception date for
the Portfolio is May 1, 1997.
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
1998 34.57%
1999 74.43%
[GRAPHIC OMITTED]
Best quarter: Worst quarter:
53.47% (1999 4th Quarter) 0.72% (1999 3rd Quarter)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
MFS Emerging Growth Companies
Portfolio 74.43% 97.31%**
- --------------------------------------------------------------------------------
Russell 2000 Index* 21.26% 26.37%
- --------------------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
** Investment operations commenced with respect to Class IA shares on November
24, 1998
WHO MANAGES THE PORTFOLIO
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS has been the Adviser to the Portfolio since it commenced
operations. MFS is America's oldest mutual fund organization. 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. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
The Portfolio Managers are TONI Y. SHIMURA, a Senior Vice President of MFS, who
has been employed by MFS as a portfolio manager for the Portfolio since 1995,
and JOHN W. BALLEN, Chief Investment Officer and President of MFS, who provides
general oversight in the management of the Portfolio.
MFS EMERGING GROWTH COMPANIES PORTFOLIO
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
35
- --------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide substantial dividend income and also
capital appreciation by investing primarily in dividend-paying common stocks
of established companies.
THE INVESTMENT STRATEGY
The Portfolio invests primarily (at least 65%) in dividend-paying common stocks
of well established companies paying above-average dividends.
The Adviser bases its investment decisions on three premises: (1) over time,
dividend income can account for a significant portion of the Portfolio's
return; (2) dividends are a more stable and predictable source of return; and
(3) prices of stocks that pay a high current income tend to be less volatile
than those paying below average dividends.
The Adviser uses a "value" approach in choosing securities. The Adviser's
in-house research team seeks companies that appear to be undervalued by various
measures and may be temporarily out of favor, but have good prospects for
capital appreciation and dividend growth. It looks for common stocks of
companies that have:
o established operating histories;
o above-average dividend yields relative to the S&P 500;
o low price to earnings ratios relative to the S&P 500;
o sound balance sheets and other positive financial characteristics; and
o low stock price relative to the company's asset value, cash flow or business
franchises.
Equity income investing involves finding common stocks that pay dividend
income. As an example, utility company stocks often provide dividend income
while a shareholder waits for the stock price to move. Dividends can help
reduce the Portfolio's volatility during turbulent markets and help offset
losses when stock prices are falling.
The Portfolio may invest up to 25% of its total assets in foreign securities.
These securities include non-dollar-denominated securities traded outside the
United States and dollar-denominated securities of foreign issuers traded in
the U.S. such as American Depositary Receipts. The Portfolio may also purchase
preferred stocks, convertible securities, warrants, futures, options, U.S.
Government securities, high-quality money market securities, as well as
investment grade debt securities and high yielding debt securities ("junk
bonds").
When market or financial conditions warrant, the Portfolio may invest without
limitation in high quality money market securities, and United States
Government debt securities for temporary or defensive purposes. Such investment
strategies are inconsistent with the Portfolio's investment objectives and
could result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. The Portfolio's emphasis on
stocks of established companies paying high dividends and its potential
investments in fixed income securities may limit its potential for appreciation
in a broad market advance. Such securities may also be hurt when interest rates
rise sharply. Also, a company may reduce or eliminate its dividend. Other
principal risks include:
---------------------------------------------------- EQ Advisors Trust
T.ROWE PRICE EQUITY INCOME PORTFOLIO
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
36
- --------------------------------------------------------------------------------
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged to
be undervalued may actually be appropriately priced.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. The risk that an issuer or guarantor of a fixed income security or
counterparty to the Portfolio's fixed income transaction is unable to meet its
financial obligations is particularly significant for this Portfolio because
this Portfolio may invest a portion of its assets in "junk bonds" (i.e.,
securities rated below investment grade). Junk bonds are issued by companies
with questionable credit strength and, consequently, are considered to be
speculative in nature and may be subject to greater market fluctuations than
investment grade fixed-income securities.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of operations, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses,which would reduce the perfomance results. The inception date for the
Portfolio is May 1, 1997.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1998 9.11%
1999 3.80%
Best quarter: Worst quarter:
13.28% (1999 2nd Quarter) (8.48)% (1999 3rd Quarter)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- -------------------------------------------------------------------------------
T. Rowe Price Equity Income Portfolio 3.80% 3.29%**
- -------------------------------------------------------------------------------
S&P 500 Index* 21.03% 25.68%
- -------------------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
** Investment operations commenced with respect to Class IA shares on November
24, 1998
T.ROWE PRICE EQUITY INCOME PORTFOLIO
<PAGE>
- ----------
37
- --------------------------------------------------------------------------------
WHO MANAGES THE PORTFOLIO
T. ROWE PRICE ASSOCIATES, INC. ("T. Rowe Price"), 100 East Pratt Street,
Baltimore, MD 21202. T. Rowe Price has been the Adviser to the Portfolio since
the Portfolio commenced operations. T. Rowe Price serves as investment manager
to a variety of individual and institutional investor accounts, including
limited partnerships and other
mutual funds.
Investment decisions with respect to the Portfolio are made by an Investment
Advisory Committee. BRIAN C. ROGERS has been the Committee Chairman since the
inception of the Portfolio and 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 joined T. Rowe Price in 1982 and
has been managing investments since 1983.
---------------------------------------------------- EQ Advisors Trust
T.ROWE PRICE EQUITY INCOME PORTFOLIO
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
38
- --------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term capital
appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of U.S. small-cap
companies with above-average growth potential that the Adviser believes to be
undervalued. Typically, such investments may include common stocks, preferred
stocks, convertible securities, warrants and rights of small-cap companies.
Once 65% of the Portfolio's assets are invested in small-cap companies, the
Portfolio may also invest in companies with a market capitalization of any
size.
For purposes of this Portfolio, small-cap companies are companies having
market capitalizations within the range of capitalizations of companies
represented in the Russell 2000 Index.
In determining whether a company's stock is undervalued, the Adviser considers
all relevant factors which may include a company's:
o price/earnings ratio;
o price to book value ratio;
o price to cash flow ratio; and
o debt to capital ratio.
The Portfolio will invest primarily (at least 65% of its net assets) in the
securities of U.S. companies traded in the U.S. securities markets. The
Portfolio may invest to a lesser extent in foreign securities, investment grade
debt securities and high quality domestic and foreign short-term (one year or
less) and medium-term money-market securities.
When market or financial conditions warrant, the Portfolio may invest without
limitation in investment grade debt obligations and in domestic and foreign
obligations, including repurchase agreements for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged to
be undervalued may actually be appropriately priced.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs that could be passed through
to shareholders.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
<PAGE>
- ----------
39
- --------------------------------------------------------------------------------
addition, the value of foreign investments can be adversely affected by:
unfavorable currency exchange rates (relative to the U.S. dollar for securities
denominated in foreign currencies); inadequate or inaccurate information about
foreign companies; higher transaction, brokerage and custody costs; adverse
changes in foreign economic and tax policies; and foreign government
instability, war or other adverse political or economic actions.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities, which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than higher-rated obligations because
BBB rated investment grade securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce performance results. The inception date for the
Portfolio is May 1, 1997.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1998 -10.02%
1999 1.97%
Best quarter: Worst quarter:
13.42% (1999 2nd Quarter) (10.75)% (1999 1st Quarter)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C>
Warburg Pincus Small Company Value
Portfolio 2.07 % 4.25%**
- -------------------------------------------------------------------------------
Russell 2000 Value Index*, *** (1.49)% 1.47%
- -------------------------------------------------------------------------------
Russell 2000 Index* 21.26 % 26.37%
- -------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
** Investment operations commenced with respect to Class IA shares on
November 24, 1998.
*** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
CREDIT SUISSE ASSET MANAGEMENT, LLC. ("CSAM"), 466 Lexington Avenue, New York,
New York 10017-3147. CSAM is the successor to Warburg Pincus Asset Management,
Inc., which served as the Adviser to the Portfolio since it commenced
operations. CSAM is a professional investment advisory firm that provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. CSAM is indirectly
controlled by
---------------------------------------------------- EQ Advisors Trust
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
40
- --------------------------------------------------------------------------------
Credit Suisse Group. CSAM manages over $60 billion in assets in the U.S., and
together with its global affiliates, over $168 billion worldwide.
KYLE F. FREY is the Portfolio Manager and has been responsible for the
day-to-day management of the Portfolio since the Portfolio commenced
operations. Mr. Frey is a managing director of CSAM and has been with CSAM or
its predecessor since 1989.
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS
- ----------
41
- --------------------------------------------------------------------------------
ALLIANCE GLOBAL PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified mix of equity securities of
U.S. and established foreign companies. The Adviser believes the equity
securities of these established non-U.S. companies have prospects for growth.
The Portfolio intends to make investments in several countries and to have
represented in the Portfolio business activities in not less than three
different countries (including the United States).
These non-U.S. companies may have operations in the United States, in their
country of incorporation or in other countries.
The Portfolio may invest in any type of security including, but not limited to,
common and preferred stock, as well as shares of mutual funds that invest in
foreign securities, bonds and other evidences of indebtedness, and other
securities of issuers wherever organized and governments and their political
subdivisions. Although no particular proportion of stocks, bonds or other
securities is required to be maintained, the Portfolio intends under normal
conditions to invest in equity securities.
The Portfolio may also make use of various other investment strategies,
including making secured loans of up to 50% of its total assets. The Portfolio
may also use derivatives including: writing covered call and put options,
purchasing call and put options on individual equity securities, securities
indexes, and foreign currencies. The Portfolio may also purchase and sell stock
index, foreign currency and interest rate futures contracts and options on such
contracts, as well as forward foreign currency exchange contracts.
When market or financial conditions warrant, the Portfolio may at times invest
substantially all of its assets in securities issued by U.S. companies or in
cash or cash equivalents, including money market instruments issued by foreign
entities for temporary or defensive purposes. Such investment strategies could
result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISK: Investing in foreign securities involves risks not
associated with investing in U.S. securities that can adversely affect the
Portfolio's performance. Foreign markets, particularly emerging markets, may be
less liquid, more volatile and subject to less government supervision than
domestic markets. There may be difficulties enforcing contractual obligations,
and it may take more time for trades to clear and settle. In addition, foreign
investments can be adversely affected by: unfavorable currency exchange rates
(relative to the U.S. dollar for securities denominated in a foreign
currencies); inadequate or inaccurate information about foreign companies;
higher transaction, brokerage and custody costs; expropriation or
nationalization; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions. Other specific risks of investing in foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines.
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency.
---------------------------------------------------- EQ Advisors Trust
ALLIANCE GLOBAL PORTFOLIO
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
42
- --------------------------------------------------------------------------------
During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is expected
to become the sole currency of the participating states. The introduction
of the Euro will result in the redenomination of European debt and equity
securities over a period of time, which may result in various legal and
accounting differences and/or tax treatments that otherwise would not
likely occur. During this period, the creation and implementation of
suitable clearing and settlement systems and other operational problems
may cause market disruptions that could adversely affect investments
quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. 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.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment-grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than if it invested in higher-rated
obligations because BBB-rated securities are regarded as having only an
adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one, five
and ten years and compares the Portfolio's performance to: (i) the returns of a
broad-based index and (ii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Global Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance Global
Portfolio) whose inception date is August 27, 1987. The assets of the
ALLIANCE GLOBAL PORTFOLIO
<PAGE>
- ----------
43
- --------------------------------------------------------------------------------
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the
performance results of the Portfolio and its predecessor registered investment
company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1990 -6.1 %
1991 30.5 %
1992 -0.5 %
1993 32.1 %
1994 5.2 %
1995 18.8 %
1996 14.6 %
1997 11.7 %
1998 21.8 %
1999 38.53%
Best quarter (% and time period) Worst quarter (% and time period)
26.59% (1998 4th Quarter) (16.99)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Global
Portfolio -
Class IA Shares 38.53% 20.74% 15.84%
- -------------------------------------------------------------------------------
Lipper Global
Mutual Funds
Average* 44.18% 19.42% 11.73%
- -------------------------------------------------------------------------------
MSCI World
Index* 24.93% 19.76% 11.42%
- -------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
SANDRA L. YEAGER has been responsible for the day-to-day management of the
Portfolio's and its predecessor's investment program since 1998. Ms. Yeager, a
Senior Vice President of Alliance, has been associated with Alliance since
1990.
---------------------------------------------------- EQ Advisors Trust
ALLIANCE GLOBAL PORTFOLIO
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
44
- --------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of capital by
investing primarily in a diversified portfolio of equity securities selected
principally to permit participation in non-U.S. companies with prospects for
growth.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified portfolio of equity securities
selected principally to permit participation in non-U.S. companies or foreign
governmental enterprises that the Adviser believes have prospects for growth.
The Portfolio may invest anywhere in the world (including developing countries
or "emerging markets"), although it will not generally invest in the United
States. The Portfolio may purchase securities of developing countries, which
include, among others, Mexico, Brazil, Hong Kong, India, Poland, Turkey and
South Africa.
These non-U.S. companies may have operations in the United States, in their
country of incorporation and/or in other countries.
The Portfolio intends to have represented in the Portfolio business activities
in not less than three different countries.
The Portfolio may also invest in any type of investment grade, fixed income
security including, but not limited to, preferred stock, convertible
securities, bonds, notes and other evidences of indebtedness of foreign
issuers, including obligations of foreign governments. Although no particular
proportion of stocks, bonds or other securities is required to be maintained,
the Portfolio intends under normal market conditions to invest primarily in
equity securities.
The Portfolio may also make use of various other investment strategies,
including the purchase and sale of shares of other mutual funds investing in
foreign securities and making loans of up to 50% of its portfolio securities.
The Portfolio may also use derivatives, including: writing covered call and put
options, purchasing purchase call and put options on individual equity
securities, securities indexes, and foreign currencies. The Portfolio may also
purchase and sell stock index, foreign currency and interest rate futures
contracts and options on such contracts, as well as forward foreign currency
exchange contracts.
For temporary or defensive purposes, when market or financial conditions
warrant, the Portfolio may at times invest substantially all of its assets in
securities issued by a single major developed country (e.g., the United States)
or in cash or cash equivalents, including money market instruments issued by
that country. In addition, the Portfolio may establish and maintain temporary
cash balances in U.S. and foreign short-term high-grade money market
instruments for defensive purposes or to take advantage of buying
opportunities. Such investments could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISK: Investing in foreign securities involves risks not
associated with investing in U.S. securities that can adversely affect the
Portfolio's performance. Foreign markets, particularly emerging markets, may be
less liquid, more volatile and subject to less government supervision than
domestic markets. There may be difficulties enforcing contractual obligations,
and it may take more time for trades to clear and settle. In addition, foreign
investments can be adversely affected by: unfavorable currency exchange rates
(relative to the U.S. dollar for securities denominated in a foreign
currencies); inadequate or inaccurate information about foreign companies;
higher transaction, brokerage and custody costs; expropriation or
nationalization; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions. Other specific risks of investing in foreign securities include:
ALLIANCE INTERNATIONAL PORTFOLIO
<PAGE>
- ----------
45
- --------------------------------------------------------------------------------
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines.
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency. During
a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is expected
to become the sole currency of the participating states. The introduction
of the Euro will result in the redenomination of European debt and equity
securities over a period of time, which may result in various legal and
accounting differences and/or tax treatments that otherwise would not
likely occur. During this period, the creation and implementation of
suitable clearing and settlement systems and other operational problems
may cause market disruptions that could adversely affect investments
quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment-grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than if it invested in higher-rated
obligations because BBB-rated securities are regarded as having only an
adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. 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.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over
---------------------------------------------------- EQ Advisors Trust
ALLIANCE INTERNATIONAL PORTFOLIO
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
46
- --------------------------------------------------------------------------------
100% per year) will cause the Portfolio to incur additional transaction costs
that could be passed through to shareholders.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last four calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one year
and since inception and compares the Portfolio's performance to: (i) the
returns of a broad-based index and (ii) the returns of an index of funds with
similar investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance International
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance International Portfolio) whose inception date is April 3, 1995.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1996 9.8 %
1997 -2.98%
1998 10.6 %
1999 37.78%
Best quarter (% and time period) Worst quarter (% and time period)
25.95% (1999 4th Quarter) (15.68)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
Alliance International
Portfolio - Class IA
Shares 37.31% 13.16%*
- --------------------------------------------------------------------------------
MSCI EAFE Index** 26.96% 13.11%
- --------------------------------------------------------------------------------
Lipper International Mutual
Funds Average** 42.88% 17.58%
- --------------------------------------------------------------------------------
</TABLE>
* Since inception as of April 3, 1995.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
ALLIANCE INTERNATIONAL PORTFOLIO
<PAGE>
- ----------
47
- --------------------------------------------------------------------------------
SANDRA L. YEAGER has been responsible for the day-to-day management of the
Portfolio and its predecessor since January 1999. Ms. Yeager, a Senior Vice
President of Alliance, has been associated with Alliance since 1990.
---------------------------------------------------- EQ Advisors Trust
ALLIANCE INTERNATIONAL PORTFOLIO
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
48
- --------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to replicate as closely as possible (before
deduction of Portfolio expenses) the total return of the MSCI EAFE Index.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of companies included in
the MSCI EAFE Index. The Portfolio is constructed to have aggregate investment
characteristics similar to those of the MSCI EAFE Index. The Portfolio invests
in a statistically selected sample of the securities of companies included in
the MSCI EAFE Index, although not all companies within a country will be
represented in the Portfolio at the same time. Stocks are selected 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 securities should be purchased or sold in order
to replicate the MSCI EAFE index.
For more information on the MSCI EAFE Index see the preceding section "The
Benchmarks." The MSCI 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 MSCI EAFE Index or any data included therein.
Over time, the correlation between the performance of the Portfolio and the
MSCI EAFE Index is expected to be 95% or higher before deduction of Portfolio
expenses. The Portfolio's ability to track the MSCI EAFE Index may be affected
by, among others, transaction costs, administration and other expenses incurred
by the Portfolio, changes in either the composition of the MSCI EAFE Index or
the assets of the Portfolio, and the timing and amount of Portfolio investor
contributions and withdrawals, if any. The Portfolio seeks to track the MSCI
EAFE Index, therefore, the Adviser generally will not attempt to judge the
merits of any particular security as an investment.
The Portfolio may invest to a lesser extent in short-term debt securities and
money market instruments to meet redemption requests or to facilitate
investment in the securities of the MSCI EAFE Index. Securities index futures
contracts and related options, warrants and convertible securities may be used
for a number of reasons, including: to simulate full investment in the MSCI
EAFE Index 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 MSCI EAFE
Index. These instruments are considered to be derivatives.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
INDEX FUND RISK: The Portfolio is not actively managed and invests in
securities included in the index regardless of their investment merit.
Therefore, the Portfolio cannot modify its investment strategies to respond to
changes in the economy and may be particularly susceptible to a general decline
in the U.S. or global stock market segment relating to the index.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities that can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, foreign investments can be adversely affected
by: unfavorable currency exchange rates (relative to the U.S. dollar for
securities denominated in a foreign currencies);
BT INTERNATIONAL EQUITY INDEX PORTFOLIO
<PAGE>
- ----------
49
- --------------------------------------------------------------------------------
inadequate or inaccurate information about foreign companies; higher
transaction, brokerage and custody costs; adverse changes in foreign economic
and tax policies; and foreign government instability, war or other adverse
political or economic actions. Other specific risks of investing in foreign
securities include:
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency. During
a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is expected
to become the sole currency of the participating states. The introduction
of the Euro will result in the redenomination of European debt and equity
securities over a period of time, which may result in various legal and
accounting differences and/or tax treatments that otherwise would not
likely occur. During this period, the creation and implementation of
suitable clearing and settlement systems and other operational problems
may cause market disruptions that could adversely affect investments
quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's average annual total return for
1998 and 1999, the Portfolio's first two years of existence, and some of the
risks of investing in the Portfolio by showing yearly changes in the
Portfolio's performance. The table below shows the Portfolio's average annual
total returns for the Portfolio for one year and since inception. The table
also compares the Portfolio's performance to the returns of a broad based
index. Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance. The
performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the perfomance results.
The Portfolio's inception date was January 1, 1998.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1998 20.07%
1999 27.75%
Best quarter: Worst quarter:
17.97% (1999 4th Quarter) 1.35% (1999 1st Quarter)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
BT International Equity Index Portfolio 27.75% 28.17%*
- --------------------------------------------------------------------------------
MSCI EAFE Index** 26.96% 29.29%
- --------------------------------------------------------------------------------
</TABLE>
* Investment operations commenced with respect to Class IA shares on November
24, 1998.
** For more information on this index, see the preceding section "The
Benchmarks."
---------------------------------------------------- EQ Advisors Trust
BT INTERNATIONAL EQUITY INDEX PORTFOLIO
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
50
- --------------------------------------------------------------------------------
WHO MANAGES THE PORTFOLIO
BANKERS TRUST COMPANY ("Bankers Trust"), 130 Liberty Street (One Bankers Trust
Plaza), New York, New York 10006. Bankers Trust has been the Adviser to the
Portfolio since it commenced operations. Bankers Trust is a wholly-owned
subsidiary of Bankers Trust 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,
including investment management. In 1999, Bankers Trust Corporation finalized a
merger in which Bankers Trust Corporation was acquired by and became a
subsidiary of Deutsche Bank AG.
BT INTERNATIONAL EQUITY INDEX PORTFOLIO
<PAGE>
FIXED INCOME PORTFOLIOS
- ----------
51
- --------------------------------------------------------------------------------
ALLIANCE HIGH YIELD PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve a high return by maximizing current
income and, to the extent consistent with that objective, capital
appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified mix of high yield, fixed
income securities (so-called "junk bonds"), which generally involve greater
volatility of price and risk of principal and income than high quality fixed
income securities. Junk bonds generally have a higher current yield but are
rated either in the lower categories by NRSROs (i.e., rated Baa or lower by
Moody's or BBB or lower by S&P) or are unrated securities of comparable
quality.
The Portfolio will attempt to maximize current income by taking advantage of
market developments, yield disparities and variations in the creditworthiness
of issuers. Substantially all of the Portfolio's investments will be income
producing.
The Portfolio may also make use of various other investment strategies,
including investments in common stocks and other equity-type securities (such
as convertible debt securities) and secured loans of its portfolio securities
without limitation in order to enhance its current return and to reduce
fluctuations in net asset value. The Portfolio may also use derivatives,
including: writing covered call and put options; purchasing call and put
options on individual fixed income securities, securities indexes and foreign
currencies; and purchasing and selling stock index, interest rate and foreign
currency futures contracts and options thereon. The Portfolio may also invest
in participations and assignments of loans originally made by institutional
lenders or lending syndicates.
The Portfolio will not invest more than 10% of its total assets in:
(i) fixed income securities which are rated lower than B3 or B- or their
equivalents by one NRSRO or if unrated are of equivalent quality as determined
by the Adviser; and
(ii) money market instruments of any entity which has an outstanding issue of
unsecured debt that is rated lower than B3 or B- or their equivalents by an
NRSRO or if unrated is of equivalent quality as determined by the Adviser;
however, this restriction will not apply to:
o fixed income securities which the Adviser believes have similar
characteristics to securities which are rated B3 or higher by Moody's or B-
or higher by S&P, or
o money market instruments of any entity that has an unsecured issue of
outstanding debt which the Adviser believes has similar characteristics to
securities which are so rated.
In the event that any securities held by the Portfolio fall below those
ratings, the Portfolio will not be obligated to dispose of such securities and
may continue to hold such securities if the Adviser believes that such
investments are considered appropriate under the circumstances.
The Portfolio may also invest in fixed income securities that are providing
high current yields because of risks other than credit, such as prepayment
risks, in the case of mortgage-backed securities, or currency risks, in the
case of non-U.S. dollar denominated foreign securities.
When market or financial conditions warrant, the Portfolio may also make
temporary investments in high-quality U.S. dollar-denominated money market
instruments. Such investment strategies could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
JUNK BOND RISK: The Portfolio invests primarily in "junk bonds" or lower-rated
securities rated BBB or lower by S&P or an equivalent rating by any other NRSRO
or unrated securities of similar quality. Junk bonds have speculative elements
or are predominantly speculative credit risks, therefore, credit risk is
particularly significant for this Portfolio. Although junk bonds generally have
higher yields than debt securities with higher credit ratings, they are
high-risk investments that may not pay interest or return principal as
scheduled. Junk bonds generally are also less liquid and experience more price
volatility than higher rated fixed income securities. This Portfolio may also
be subject to
---------------------------------------------------- EQ Advisors Trust
ALLIANCE HIGH YIELD PORTFOLIO
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
52
- --------------------------------------------------------------------------------
greater credit risk because it may invest in debt securities issued in
connection with corporate restructurings by highly leveraged issuers or in debt
securities not current in the payment of interest or principal, or in default.
FIXED INCOME RISK: This Portfolio invests primarily in fixed income securities,
therefore, the Portfolio's performance will be affected by changes in interest
rates, credit risks of the issuer, the duration and maturity of the Portfolio's
fixed income holdings, and adverse market and economic conditions. Other risks
that relate to the Portfolio's investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share
price and total return) of the Portfolio's fixed income securities,
particularly those with longer durations or maturities, will go down.
When interest rates fall, the reverse is true.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase, making them even more
susceptible to interest rate changes. Falling interest rates may cause
the value and yield of mortgage-backed securities to fall. Falling
interest rates also may encourage borrowers to pay off their mortgages
sooner than anticipated (pre-payment). The Portfolio would need to
reinvest the pre-paid funds at the newer, lower interest rates.
LOAN PARTICIPATION AND ASSIGNMENT RISK: In addition to the risks associated
with fixed income investments generally, the Portfolio's investments in loan
participations and assignments are subject to the risk that the financial
institution acting as agent for all interests in a loan, might fail
financially. It is also possible that, under emerging legal theories of lender
liability, the Portfolio could be held liable as a co-lender.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known; held primarily by insiders or
institutional investors and may trade less frequently and in lower volume; such
companies are more likely to experience greater or more unexpected changes in
their earnings and growth prospects; such companies have limited financial
resources or may depend on a few key employees; and the products or
technologies of such companies may be at a relatively early stage of
development or not fully tested.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in foreign
economic and tax policies; and foreign government instability, war or other
adverse political or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
ALLIANCE HIGH YIELD PORTFOLIO
<PAGE>
- ----------
53
- --------------------------------------------------------------------------------
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities without restriction. The risk 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.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one, five
and ten years and compares the Portfolio's performance to: (i) the returns of a
broad-based index and (ii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance High Yield Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance High
Yield Portfolio) whose inception date is January 2, 1987. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the
performance results of the Portfolio and its predecessor registered investment
company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1990 -1.1 %
1991 24.5 %
1992 12.3 %
1993 23.2 %
1994 -2.8 %
1995 19.9 %
1996 23.0 %
1997 18.5 %
1998 -5.2 %
1999 -3.35%
Best quarter (% and time period) Worst quarter (% and time period)
8.00% (1997 2nd Quarter) (10.97)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance High Yield Portfolio
- Class IA Shares (3.35)% 9.86% 10.23%
- --------------------------------------------------------------------------------
CSFB Index*, ** 3.28% 9.07% 11.06%
- --------------------------------------------------------------------------------
ML Master* 1.57% 9.61% 10.79%
- --------------------------------------------------------------------------------
Lipper High Current Yield Bond
Funds Average* 3.83% 9.48% 10.15%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities,
---------------------------------------------------- EQ Advisors Trust
ALLIANCE HIGH YIELD PORTFOLIO
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
54
- --------------------------------------------------------------------------------
qualified and non-tax qualified corporate funds, public and private pension and
profit-sharing plans, foundations and tax-exempt organizations.
NELSON JANTZEN has been responsible for the day-to-day management of the
Portfolio since January 2000. Mr. Jantzen is a Senior Vice President and
Portfolio Manager in the Global High Yield Group and is responsible for the
management of domestic high yield securities. Mr. Jantzen joined Alliance in
1993.
ALLIANCE HIGH YIELD PORTFOLIO
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
55
- --------------------------------------------------------------------------------
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve high current income consistent with
relative stability of principal through investment primarily in debt securities
issued or guaranteed as to principal and interest by the U.S. Government or its
agencies or instrumentalities.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in U.S. Government securities. The Portfolio
may also invest in repurchase agreements and forward commitments related to
U.S. Government securities and may also purchase debt securities of
non-government issuers that own mortgages.
Duration is a measure of the weighted average maturity of the bonds held by
the Portfolio and can be used by the Adviser as a measure of the sensitivity
of the market value of the Portfolio to changes in interest rates. Generally,
the longer the duration of the Portfolio, the more sensitive its market value
will be to changes in interest rates.
In some cases, the Adviser's calculation of duration will be based on certain
assumptions (including assumptions regarding prepayment rates, in the
mortgage-backed or asset-backed securities, and foreign and domestic interest
rates). As of December 31, 1999, the Adviser considered the duration of a
10-year Treasury bond to be 7.3 years. The Portfolio's investments will
generally have a final maturity of not more than ten years or a duration not
exceeding that of a 10-year Treasury note.
The Portfolio buys and sells securities with a view to maximizing current
return without, in the opinion of the Adviser, undue risk to principal.
Potential capital gains resulting from possible changes in interest rates will
not be a major consideration. The Portfolio may take full advantage of a wide
range of maturities of U.S. Government securities and may adjust the
dollar-weighted average maturity of its portfolio from time to time, depending
on the Adviser's assessment of relative yields on securities of different
maturities and the expected effect of future changes in interest rates on the
market value of the securities held by the Portfolio. The Portfolio may also
invest a substantial portion of its assets in money market instruments.
In order to enhance its current return, to reduce fluctuations in net asset
value, and to hedge against changes in interest rates, the Portfolio may write
covered call and put options on U.S. Government securities and may purchase
call and put options on U.S. Government securities. The Portfolio may also
enter into interest rate futures contracts with respect to U.S. Government
securities, and may write and purchase options thereon. The Portfolio may also
make secured loans of its portfolio securities without limitation and enter
into repurchase agreement with respect to U.S. Government securities with
commercial banks and registered broker-dealers.
The Portfolio may also make use of various other investment strategies,
including covered short sales, and the purchase or sale of securities on a
when-issued, delayed delivery or forward commitment basis.
Under normal market conditions, the Portfolio will invest at least 65%, and
expects to invest at least 80%, of its total assets in U.S. Government
securities and repurchase agreements and forward commitments relating to U.S.
Government securities. U.S. Government securities include:
o U.S. Treasury Bills: Direct obligations of the U.S. Treasury which are
issued in maturities of one year or less.
o U.S. Treasury Notes: Direct obligations of the U.S. Treasury issued in
maturities which vary between one and ten years, with interest payable
every six months.
---------------------------------------------------- EQ Advisors Trust
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
56
- --------------------------------------------------------------------------------
o U.S. Treasury Bonds: Direct obligations of the U.S. Treasury which are
issued in maturities more than ten years from the date of issue, with
interest payable every six months.
o "Ginnie Maes": Debt securities issued by a mortgage banker or other
mortgagee and represent an interest in a pool of mortgages insured by the
Federal Housing Administration or the Farmer's Home Administration or
guaranteed by the Veteran's Administration. The Government National Mortgage
Association ("GNMA") guarantees the timely payment of principal and
interest. Ginnie Maes, although not direct obligations of the U.S.
Government, are guaranteed by the U.S. Treasury.
o "Fannie Maes": The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private stockholders
that purchases residential mortgages from a list of approved
seller/servicers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA and supported by
FNMA's right to borrow from the U.S. Treasury, at the discretion of the
U.S. Treasury. Fannie Maes are not backed by the full faith and credit of
the U.S. Government.
o "Freddie Macs": The Federal Home Loan Mortgage Corporation ("FHLMC"), a
corporate instrumentality of the U.S. Government, issues participation
certificates ("PCs") which represent an interest in residential mortgages
from FHLMC's National Portfolio. FHLMC guarantees the timely payment of
interest and ultimate collection of principal, but PCs are not backed by the
full faith and credit of the U.S. Government.
o Governmental Collateralized Mortgage Obligations: These are securities
issued by a U.S. Government instrumentality or agency which are backed by a
portfolio of mortgages or mortgage-backed securities held under an
indenture.
o "Sallie Maes": The Student Loan Marketing Association ("SLMA") is a
government-sponsored corporation owned entirely by private stockholders that
provides liquidity for banks and other institutions engaged in the
Guaranteed Student Loan Program. These loans are either directly guaranteed
by the U.S. Treasury or guaranteed by state agencies and reinsured by the
U.S. Government. SLMA issues both short term notes and longer term public
bonds to finance its activities.
The Portfolio may also invest in "zero coupon" U.S. Government securities which
have been stripped of their unmatured interest coupons and receipts or in
certificates representing undivided interests in such stripped U.S. Government
securities and coupons. These securities tend to be more volatile than other
types of U.S. Government securities.
Guarantees of the Portfolio's U.S. Government securities guarantee only the
payment of principal at maturity and interest when due on the guaranteed
securities, and do not guarantee the securities' yield or value or the yield
or value of the Portfolio's shares.
The Portfolio may also purchase collateralized mortgage obligations ("CMOs")
issued by non-governmental issuers and securities issued by a real estate
mortgage investment conduits ("REMICs"), but only if they are collateralized by
U.S. Government securities. However, CMOs issued by entities other than U.S.
Government agencies and instrumentalities and securities issued by REMICs are
not considered U.S. Government securities for purposes of the Portfolio meeting
its policy of investing at least 65% of its total assets in U.S. Government
securities.
THE PRINCIPAL RISKS
FIXED INCOME RISK: This Portfolio invests primarily in fixed income securities,
therefore, the Portfolio's performance will be affected by changes in interest
rates, the duration and maturity of the Portfolio's fixed income holdings, and
adverse market and economic conditions. Other risks that relate to the
Portfolio's investment in fixed income securities include:
ASSET-BACKED SECURITIES RISK: The Portfolio's
investments in asset-backed securities represent interests
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
<PAGE>
- ----------
57
- --------------------------------------------------------------------------------
in pools of consumer loans such as credit card receivables, automobile loans
and leases, leases on equipment such as computers, and other financial
instruments and are subject to certain additional risks. Rising interest
rates tend to extend the duration of asset-backed securities, making them
more sensitive to changes in interest rates. As a result, in a period of
rising interest rates, the Portfolio may exhibit additional volatility. When
interest rates are declining, there are usually more prepayments of loans
which will shorten the life of these securities. Prepayments also vary based
on among other factors, general economic conditions and other demographic
conditions. The reinvestment of cash received from prepayments will,
therefore, usually be at a lower interest rate than the original investment,
lowering the Portfolio's yield.
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price
and total return) of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true.
INVESTMENT GRADE SECURITIES RISK: With respect to fixed income investments
of the Portfolio, other than U.S. Government securities, rated BBB by S&P or
an equivalent rating by any other nationally recognized statistical rating
organization ("NRSRO"), the Portfolio could lose money if the issuer or
guarantor of a debt security or counterparty to a Portfolio's transaction is
unable or unwilling to make timely principal and/or interest payments, or to
honor its financial obligations. Investment grade securities which are rated
BBB by S&P, or an equivalent rating by any other NRSRO, are somewhat riskier
than higher rated obligations because they are regarded as having only an
adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase, making them even more
susceptible to interest rate changes. Falling interest rates may cause the
value and yield of mortgage-backed securities to fall. Falling interest
rates also may encourage borrowers to pay off their mortgages sooner than
anticipated (pre-payment). The Portfolio would need to reinvest the pre-paid
funds at the newer, lower interest rates.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities without restriction. The risk 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.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last eight calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one year,
five years and since inception and compares the Portfolio's performance to: (i)
the returns of a broad-based index and (ii) the returns of an index of funds
---------------------------------------------------- EQ Advisors Trust
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
58
- --------------------------------------------------------------------------------
with similar investment objectives. Past performance is not an indication of
future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Intermediate Government
Securities Portfolio) managed by the Adviser using the same investment
objectives and strategy as the Portfolio. For these purposes, the Portfolio is
considered to be the successor entity to the predecessor registered investment
company (HRT/Alliance Intermediate Government Securities Portfolio) whose
inception date is April 1, 1991. The assets of the predecessor were transferred
to the Portfolio on October 18, 1999. Following that transfer, the performance
shown (for the period October 19, 1999 through December 31, 1999) is that of
the Portfolio. For these purposes, the performance results of the Portfolio and
its predecessor registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1992 5.5%
1993 10.6%
1994 -4.4%
1995 13.3%
1996 3.8%
1997 7.3%
1998 7.7%
1999 0.2%
Best quarter (% and time period) Worst quarter (% and time period)
5.31% (1991 3rd Quarter) (2.96)% (1994 1st Quarter)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Intermediate
Government Securities
Portfolio - Class IA Shares 0.02% 6.34% 6.26%
- -------------------------------------------------------------------------------
Lehman Intermediate
Government Bonds* 0.49% 6.93% 6.76%
- -------------------------------------------------------------------------------
Lipper Intermediate Government
Funds Average* (2.13)% 6.94% 6.84%
- -------------------------------------------------------------------------------
</TABLE>
*For more information on this index, see the preceding section "The Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
JEFFREY S. PHLEGAR has been responsible for the day-to-day management of the
Portfolio and its predecessor since January 1999. Mr. Phlegar, a Senior Vice
President of Alliance, has been associated with Alliance for the past five
years.
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
59
- --------------------------------------------------------------------------------
ALLIANCE MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to obtain a high level of
current income, preserve its assets and maintain liquidity.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified portfolio of high-quality U.S.
dollar-denominated money market instruments. The Portfolio will maintain a
dollar-weighted average portfolio maturity of 90 days or less.
The instruments in which the Portfolio invests include:
o marketable obligations of, or guaranteed as to the timely payment of
principal and interest by, the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities");
o certificates of deposit, bankers' acceptances, bank notes, time deposits and
interest bearing savings deposits issued or guaranteed by:
(a) domestic banks (including their foreign branches) or savings and loan
associations having total assets of more than $1 billion and which are
FDIC members in the case of banks, or insured by the FDIC, in the case
of savings and loan associations; or
(b) foreign banks (either by their foreign or U.S. branches) having total
assets of at least $5 billion and having an issue of either (i)
commercial paper rated at least A-1 by S&P or Prime-1 by Moody's or
(ii) long term debt rated at least AA by S&P or Aa by Moody's;
o commercial paper (rated at least A-1 by S&P or Prime-1 by Moody's or, if not
rated, issued by domestic or foreign companies having outstanding debt
securities rated at least AA by S&P or Aa by Moody's) and participation
interests in loans extended by banks to such companies;
o mortgage-backed and asset-backed securities that have remaining maturities
of less than one year;
o corporate debt obligations with remaining maturities of less than one year,
rated at least AA by S&P or Aa by Moody's, as well as corporate debt
obligations rated at least A by S&P or Moody's, provided the corporation
also has outstanding an issue of commercial paper rated at least A-1 by S&P
or Prime-1 by Moody's;
o floating rate or master demand notes; and
o repurchase agreements covering U.S. Government securities.
If the Adviser believes a security held by the Portfolio is no longer deemed to
present minimal credit risk, the Portfolio will dispose of the security as soon
as practicable unless the Board of Trustees determines that such action would
not be in the best interest of the Portfolio.
Purchases of securities that are unrated must be ratified by the Board of
Trustees. Because the market value of debt obligations fluctuates as an inverse
function of changing interest rates, the Portfolio seeks to minimize the effect
of such fluctuations by investing only in instruments with a remaining maturity
of 397 calendar days or less at the time of investment, except for obligations
of the U.S. Government, which may have a remaining maturity of 762 calendar
days or less. Time deposits with maturities greater than seven days are
considered to be illiquid securities.
The Portfolio may make use of various other investment strategies, including
investing up to 20% of its total assets in U.S. dollar-denominated money market
instruments of foreign issuers and making secured loans of up to 50% of its
total portfolio securities.
THE PRINCIPAL RISKS
MONEY MARKET RISK: While money market funds are designed to be relatively low
risk investments, they are not entirely free of risk. Despite the short
maturities and high credit quality of the Portfolio's investments, increases in
interest rates and deteriorations in the credit quality of the instruments the
Portfolio has purchased may reduce the Portfolio's net asset value. In
addition, the Portfolio is still subject to the risk that the value of an
investment may be eroded over time by inflation. An investment in the Portfolio
is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
---------------------------------------------------- EQ Advisors Trust
ALLIANCE MONEY MARKET PORTFOLIO
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
60
- --------------------------------------------------------------------------------
Although the Portfolio seeks to preserve the value of your investment, it is
possible to lose money by investing in the Portfolio.
ASSET-BACKED SECURITIES RISK: The Portfolio's investments in asset-backed
securities represent interests in pools of consumer loans such as credit card
receivables, automobile loans and leases, leases on equipment such as
computers, and other financial instruments and are subject to certain
additional risks. Rising interest rates tend to extend the duration of
asset-backed securities, making them more sensitive to changes in interest
rates. As a result, in a period of rising interest rates, the Portfolio may
exhibit additional volatility. When interest rates are declining, there are
usually more prepayments of loans which will shorten the life of these
securities. Prepayments also vary based on among other factors, general
economic conditions and other demographic conditions. The reinvestment of cash
received from prepayments will, therefore, usually be at a lower interest rate
than the original investment, lowering the Portfolio's yield.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risks will tend to be compounded.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: inadequate or inaccurate information about foreign
companies; higher transaction, brokerage and custody costs; expropriation or
nationalization; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. 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.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one, five
and ten years and compares the Portfolio's performance to: (i) the returns on
three-month U.S. Treasury bills and (ii) the returns of an index of funds with
similar investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Money Market Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance Money
Market Portfolio) whose inception date is July 13, 1981. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the
performance results of the Portfolio and its predecessor registered investment
company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
ALLIANCE MONEY MARKET PORTFOLIO
<PAGE>
- ----------
61
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
{GRAPHIC OMITTED]
<S> <C>
1990 8.2 %
1991 6.2 %
1992 3.6 %
1993 3.0 %
1994 4.0 %
1995 5.7 %
1996 5.3 %
1997 5.4 %
1998 5.3 %
1999 4.96%
Best quarter (% and time period) Worst quarter (% and time period)
2.08% (1990 4th Quarter) .46% (2000 1st Quarter)
The Portfolio's 7-day yield for the quarter ended December 31, 1999 was
5.30%.
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
<S> <C> <C> <C>
Alliance Money Market Portfolio
- Class IA Shares 4.96% 5.36% 5.16%
- --------------------------------------------------------------------------------
3-Month Treasury Bill 4.74% 5.20% 5.06%
- --------------------------------------------------------------------------------
Lipper Money Market Mutual
Fund Average* 4.75% 5.13% 4.87%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
RAYMOND J. PAPERA has been responsible for the day-to-day management of the
Portfolio and its predecessor since 1990. Mr. Papera, a Senior Vice President
of Alliance, has been associated with Alliance since 1990.
---------------------------------------------------- EQ Advisors Trust
ALLIANCE MONEY MARKET PORTFOLIO
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
62
- --------------------------------------------------------------------------------
ALLIANCE QUALITY BOND PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve high current income consistent with
preservation of capital by investing primarily in investment grade fixed income
securities.
THE INVESTMENT STRATEGY
The Portfolio expects to invest in readily marketable securities with
relatively attractive yields that the Adviser believes do not involve undue
risk.
The Portfolio will follow a policy of investing at least 65% of its total
assets in securities which are rated at the time of purchase at least Baa by
Moody's or BBB by S&P, or in unrated fixed income securities that the Adviser
determines to be of comparable quality.
In the event that the credit rating of a security held by the Portfolio falls
below investment grade (or, in the case of unrated securities, the Adviser
determines that the quality of such security has deteriorated below investment
grade), the Portfolio will not be obligated to dispose of such security and may
continue to hold the obligation if the Adviser believes such an investment is
appropriate in the circumstances. The Portfolio will also seek to maintain an
average aggregate quality rating of its portfolio securities of at least A
(Moody's and S&P).
The Portfolio has complete flexibility as to the types of securities in which
it will invest and the relative proportions thereof. In this regard, the
Portfolio plans to vary the proportions of its holdings of long- and short-term
fixed income securities (including debt securities, convertible debt securities
and U.S. Government obligations), preferred stocks and dividend-paying common
stocks in order to reflect the Adviser's assessment of prospective cyclical
changes even if such action may adversely affect current income.
The Portfolio may also invest in foreign securities, although it will not
invest more than 20% of its total assets in securities denominated in
currencies other than the U.S. dollar. The Portfolio may enter into foreign
currency futures contracts (and related options), forward foreign currency
exchange contracts and options on foreign currencies for hedging purposes.
The Portfolio may also make use of various other investment strategies,
including zero coupon pay-in-kind securities, collateralized mortgage
obligations, securities lending with a value of up to 50% of its total assets,
the purchase or sale of securities on a when-issued, delayed delivery or
forward commitment basis and repurchase agreements. The Portfolio may also use
derivatives, including: purchasing put and call options and writing covered put
and call options on securities it may purchase. The Portfolio also intends to
write covered call options for cross-hedging purposes, which are designed to
provide a hedge against a decline in value of another security which the
Portfolio owns or has the right to acquire.
The Portfolio may seek to protect the value of its investments from interest
rate fluctuations by entering into various hedging transactions, such as
interest rate swaps and the purchase or sale of interest rate caps and floors.
When market or financial conditions warrant, the Portfolio may invest in
certain money market instruments for temporary or defensive purposes. Such
investments could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
FIXED INCOME RISK: This Portfolio invests primarily in fixed income securities,
therefore, the Portfolio's performance will be affected by changes in interest
rates, credit risks of the issuer, the duration and maturity of the Portfolio's
fixed income holdings, and adverse market and economic conditions. Other risks
that relate to the Portfolio's investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share
price and total return) of the Portfolio's fixed income securities,
particularly those with longer durations or maturities, will go down.
When interest rates fall, the reverse is true.
ALLIANCE QUALITY BOND PORTFOLIO
<PAGE>
- ----------
63
- --------------------------------------------------------------------------------
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the
issuer or guarantor of a debt security or counterparty to a Portfolio's
transaction is unable or unwilling to make timely principal and/or
interest payments, or to honor its financial obligations. Investment
grade securities which are rated BBB or S&P or an equivalent rating by
any other nationally recognized statistical rating organization, are
somewhat riskier than higher rated obligations because they are regarded
as having only an adequate capacity to pay principal and interest, are
considered to lack outstanding investment characteristics, and may be
speculative.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase, making them even more
susceptible to interest rate changes. Falling interest rates may cause
the value and yield of mortgage-backed securities to fall. Falling
interest rates also may encourage borrowers to pay off their mortgages
sooner than anticipated (pre-payment). The Portfolio would need to
reinvest the prepaid funds at the newer, lower interest rates.
ZERO COUPON AND PAY-IN-KIND SECURITIES RISK: A zero coupon or pay-in-kind
security pays no interest in cash to its holder during its life.
Accordingly, zero coupon securities usually trade at a deep discount from
their face or par value and, together with pay-in-kind securities, will
be subject to greater fluctuations in market value in response to
changing interest rates than debt obligations of comparable maturities
that make current distributions of interest in cash.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar quality.
The value of convertible securities fluctuates both in relation to changes in
interest rates and changes in the value of the underlying common stock.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in foreign
economic and tax policies; and foreign government instability, war or other
adverse political or economic actions.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. 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.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
---------------------------------------------------- EQ Advisors Trust
ALLIANCE QUALITY BOND PORTFOLIO
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
64
- --------------------------------------------------------------------------------
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last six calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one and
five years and compares the Portfolio's performance to: (i) the returns of a
broad-based index and (ii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Quality Bond Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance Quality
Bond Portfolio) whose inception date is October 1, 1993. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the
performance results of the Portfolio and its predecessor registered investment
company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------
1994 -5.1 %
1995 17.0 %
1996 5.4 %
1997 9.1 %
1998 8.7 %
1999 -2.00%
Best quarter (% and time period) Worst quarter (% and time period)
6.19% (1995 2nd Quarter) (4.04)% (1994 1st Quarter)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Quality Bond Portfolio
- Class IA Shares (2.00)% 7.47% 4.96%*
- --------------------------------------------------------------------------------
Lehman Aggregate Bonds** (0.82)% 7.73% 5.64%
- --------------------------------------------------------------------------------
Lipper Corporate Debt Funds
BBB Rated Average** (1.62)% 7.83% 5.32%
- --------------------------------------------------------------------------------
</TABLE>
* Since inception as of October 1, 1993.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
ALLIANCE QUALITY BOND PORTFOLIO
<PAGE>
- ----------
65
- --------------------------------------------------------------------------------
MATTHEW BLOOM has been responsible for the day-to-day management of the
Portfolio and its predecessor since 1995. Mr. Bloom, a Senior Vice President of
Alliance, has been associated with Alliance since 1989.
---------------------------------------------------- EQ Advisors Trust
ALLIANCE QUALITY BOND PORTFOLIO
<PAGE>
BALANCED/HYBRID PORTFOLIOS
- ----------
66
- --------------------------------------------------------------------------------
EQ/BALANCED PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve a high return through both appreciation
of capital and current income.
THE INVESTMENT STRATEGY
The Portfolio invests varying portions of its assets primarily in
publicly-traded equity and debt securities and money market instruments
depending on economic conditions, the general level of common stock prices,
interest rates and other relevant considerations, including the risks
associated with each investment medium.
The Portfolio attempts to achieve long-term growth of capital by investing in
common stock and other equity-type instruments. It will try to achieve a
competitive level of current income and capital appreciation through
investments in publicly traded debt securities and a high level of current
income through investments primarily in high-quality U.S. dollar denominated
money market instruments.
The Portfolio's investments in common stocks will primarily consist of common
stocks that are listed on national securities exchanges. Smaller amounts will
be invested in stocks that are traded over-the-counter and in other equity-type
securities. The Portfolio may also invest up to 20% of its total assets in
securities of issuers domiciled outside the United States and not included in
the S&P 500 (i.e., foreign securities).
The Portfolio at all times will hold at least 25% of its total assets in fixed
income securities (including, for these purposes, that portion of the value of
securities convertible into common stock which is attributable to the fixed
income characteristics of those securities, as well as money market
instruments). The Portfolio's equity securities will always comprise at least
25%, but never more than 75%, of the Portfolio's total assets. Consequently,
the Portfolio will have a minimum or "core holdings" of at least 25% fixed
income securities and 25% equity securities. Over time, holdings are expected
to average approximately 50% in fixed income securities and approximately 50%
in equity securities. Asset mixes will periodically be rebalanced by the
Manager to maintain the expected asset mix.
The Portfolio may also invest up to 20% of its total assets in foreign
securities (which may include American depositary receipts and other depositary
arrangements) and may also make use of various other investment strategies,
including using up to 50% of its total portfolio assets for securities lending
purposes. The Portfolio may also use derivatives, including: writing covered
call and put options, purchasing call and put options on all the types of
securities in which it may invest, as well as securities indexes and foreign
currencies. The Portfolio may also purchase and sell stock index, interest rate
and foreign currency futures contracts and options thereon.
The debt securities will consist principally of bonds, notes, debentures and
equipment trust certificates, as well as debt securities with equity features
such as conversion or exchange rights or warrants for the acquisition of stock
or participations based on revenues, rates or profits. These debt securities
will principally be investment grade securities rated at least Baa by Moody's
or BBB by S&P, or will be U.S. Government Securities. If such Baa or BBB debt
securities held by the Portfolio fall below those ratings, the Portfolio will
not be obligated to dispose of them and may continue to hold them if an Adviser
considers them appropriate investments under the circumstances. In addition,
the Portfolio may at times hold some of its assets in cash.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
MULTIPLE-ADVISER RISK: The EQ/Balanced Portfolio employs multiple Advisers.
Each of the Advisers independently chooses and maintains a portfolio of
common stocks for the Portfolio and each is responsible for investing a
specific allocated portion of the Portfolio's assets. Because each Adviser
will be managing its allocated portion of the Portfolio independently from
the other
EQ/BALANCED PORTFOLIO
<PAGE>
- ----------
67
- --------------------------------------------------------------------------------
Advisers, the same security may be held in two different portions of the
Portfolio, or may be acquired for one portion of the Portfolio at a time when
the Adviser of another portion deems it appropriate to dispose of the security
from that other portion. Similarly, under some market conditions, one Adviser
may believe that temporary, defensive investments in short-term instruments or
cash are appropriate when the other Adviser or Advisers believe continued
exposure to the equity markets is appropriate for their portions of the
Portfolio. Because each Adviser directs the trading for its own portion of the
Portfolio, and does not aggregate its transactions with those of the other
Advisers, the Portfolio may incur higher brokerage costs than would be the case
if a single Adviser were managing the entire Portfolio.
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that the
actual allocation of the Portfolio's assets between debt and equity securities
may adversely affect the Portfolio's value between the Manager's periodic
rebalancing.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in foreign
economic and tax policies; and foreign government instability, war or other
adverse political or economic actions.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
FIXED INCOME RISK: This Portfolio invests at least 25% of its total assets in
fixed income securities, therefore, the Portfolio's performance will be
affected by changes in interest rates, credit risks of the issuer, the duration
and maturity of the Portfolio's fixed income holdings, and adverse market and
economic conditions. Other risks that relate to the Portfolio's investment in
fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share
price and total return) of the Portfolio's fixed income securities,
particularly those with longer durations or maturities, will go down.
When interest rates fall, the reverse is true.
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the
issuer or guarantor of a debt security or counterparty to a Portfolio's
transaction is unable or unwilling to make timely principal and/or
interest payments, or to honor its financial obligations. Investment
grade securities which are rated BBB by S&P or an equivalent rating by
any other NRSRO, are somewhat riskier than higher rated obligations
because they are regarded as having only an adequate capacity to pay
principal and interest, are considered to lack outstanding investment
characteristics, and may be speculative.
---------------------------------------------------- EQ Advisors Trust
EQ/BALANCED PORTFOLIO
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
68
- --------------------------------------------------------------------------------
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio
to incur additional transaction costs that could be passed through to
shareholders.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. 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.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one, five
and ten years and compares the Portfolio's performance to: (i) the returns of a
broad-based index; (ii) the returns of a "blended" index of equity and fixed
income securities; and (iii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Balanced Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance Balanced
Portfolio) whose inception date is January 27, 1986. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the
performance results of the Portfolio and its predecessor registered investment
company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
1990 0.3 %
1991 41.3 %
1992 -2.8 %
1993 12.3 %
1994 -8.0 %
1995 19.8 %
1996 11.7 %
1997 15.1 %
1998 18.1 %
1999 17.79%
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
15.13% (1991 4th Quarter) (8.29)% (1990 3rd Quarter)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
EQ/Balanced Portfolio - Class
IA Shares 17.79% 16.44% 11.77%
- --------------------------------------------------------------------------------
50% S&P 500 Index/50%
Lehman Gov't/Corp.*, ** 9.07% 17.93% 13.04%
- --------------------------------------------------------------------------------
S&P 500 Index* 21.03% 28.56% 18.21%
- --------------------------------------------------------------------------------
Lipper Flex. Port. Average* 12.07% 17.11% 12.94%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
In accordance with the Multi-Manager Order, the Manager may, among other
things, select new or additional Advisers for the Portfolio and may allocate
and re-allocate the Portfolio's assets among Advisers. Currently, Alliance
Capital Management, L.P., Capital Guardian Trust Company, Prudential
Investments Fund Management LLC and Jennison
EQ/BALANCED PORTFOLIO
<PAGE>
- ----------
69
- --------------------------------------------------------------------------------
Associates LLC have been selected by the Manager to serve as Advisers for this
Portfolio. It is anticipated that additional Advisers may be added in the
future.
The Manager initially allocated the assets of the Portfolio and will allocate
all daily cash inflows (share purchases) and outflows (redemptions and expense
items) among the Advisers, subject to the oversight of the Board. The Manager
intends, on a periodic basis, to review the asset allocation in the Portfolio.
The Manager does not intend, but reserves the right, subject to the oversight
of the Board, to reallocate assets from one Adviser to another when it would be
in the best interest of the Portfolio and its shareholders to do so. In some
instances, the effect of the reallocation will be to shift assets from a better
performing Adviser to other Adviser(s).
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance was the exclusive Adviser to the Portfolio
and its predecessor registered investment company since the predecessor
commenced operations. Alliance, a publicly traded limited partnership, is
indirectly majority-owned by Equitable. Alliance manages investment companies,
endowment funds, insurance companies, foreign entities, qualified and non-tax
qualified corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
The portfolio manager responsible for that portion of the Portfolio's total
assets that will be advised by Alliance as an Adviser is as follows:
ROBERT G. HEISTERBERG has been responsible for the day-to-day management
of the Portfolio and its predecessor since February 12, 1996. Mr.
Heisterberg, a Senior Vice President of Alliance and Global Economic
Policy Analysis, has been associated with Alliance since 1977.
CAPITAL GUARDIAN TRUST COMPANY: ("Capital Guardian"), 333 South Hope Street,
Los Angeles, CA 90071. Capital Guardian is a wholly-owned subsidiary of
Capital Group International, Inc., which itself is a wholly owned subsidiary
of The Capital Group Companies, Inc. Capital Guardian has been providing
investment management services since 1968 and manages approximately $123
billion as of December 31, 1999.
Capital Guardian uses a multiple portfolio manager system under which the
assets of the Portfolio for which Capital Guardian serves as Adviser are
divided into several segments. Each segment is individually managed with the
portfolio manager free to decide on company and industry selections as well as
valuation and transaction assessment. An additional portion of the Portfolio's
total assets allocated to Capital Guardian as Adviser is managed by a group of
investment research analysts.
The individual portfolio managers of each segment of the Portfolio's total
assets that will be advised by Capital Guardian as an Adviser, other than that
managed by the group of research analysts, are as follows:
DONNALISA P. BARNUM. Donnalisa Barnum is a Senior Vice President and a
portfolio manager for Capital Guardian. She joined the Capital Guardian
organization in 1986.
MICHAEL R. ERICKSON. Michael Erickson is a Senior Vice President and
portfolio manager for Capital Guardian and a Senior Vice President and
Director for Capital International Limited. He joined the Capital
Guardian organization in 1987.
DAVID I. FISHER. David Fisher is Chairman of the Board of Capital Group
International, Inc. and Capital Guardian. He joined the Capital Guardian
organization in 1969.
THEODORE R. SAMUELS. Theodore Samuels is a Senior Vice President and a
Director for Capital Guardian, as well as a Director of Capital
International Research, Inc. He joined the Capital Guardian organization
in 1981.
EUGENE P. STEIN. Eugene Stein is Executive Vice President, a Director, a
portfolio manager, and
---------------------------------------------------- EQ Advisors Trust
EQ/BALANCED PORTFOLIO
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
70
- --------------------------------------------------------------------------------
Chairman of the Investment Committee for Capital Guardian. He joined the
Capital Guardian organization in 1972.
TERRY BERKEMEIER. Terry Berkemeier is a Vice President of Capital
International Research, Inc. with U.S. equity portfolio management
responsibility in Capital Guardian Trust Company and research
responsibilities for the global metals and mining industries. He joined
the Capital Guardian organization in 1992.
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC ("PIFM"), Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102 was added as an Adviser to the
Portfolio as of May 1, 2000. PIFM and its predecessors have served as manager
or administrator to investment companies since 1987. As of October 31, 1999,
PIFM served as either the manager or administrator to various investment
companies, with aggregate assets of approximately $72 billion.
JENNISON ASSOCIATES LLC ("Jennison"), 466 Lexington Avenue, New York, New York
10017 was added as an Adviser to the Portfolio as of May 1, 2000. PIFM
supervises Jennison. Jennison has served as an investment adviser to investment
companies since 1990 and manages approximately $48.4 billion in assets as of
September 30, 1999.
The individual portfolio managers for that portion of the Portfolio's total
assets that will be advised by PIFM as an Adviser and Jennison are as
follows:
MICHAEL A. DEBALSO. Michael A. DeBalso is a Director, Executive Vice
President, Director of Equity Research and Equity Portfolio Manager of
Jennison. Mr. DeBalso joined Jennison in 1972.
KATHLEEN A. MCCARRAGHER. Ms. McCarragher is a Director, Executive Vice
President, Domestic Growth Equity Investment Strategist and Equity
Portfolio Manager of Jennison. Ms. McCarragher joined Jennison in 1998.
From 1992-1998, she was a Managing Director and Director of Large Cap
Growth Equities at Weiss, Peck & Greer.
PIFM and Jennison are wholly-owned subsidiaries of The Prudential Insurance
Company of America.
EQ/BALANCED PORTFOLIO
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
71
- --------------------------------------------------------------------------------
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve a high total return without, in the
opinion of the Adviser, undue risk to principal.
THE INVESTMENT STRATEGY
The Portfolio invests varying portions of its assets in high quality,
publicly-traded fixed income securities (including money market instruments and
cash) and publicly-traded common stocks and other equity securities of U.S. and
non-U.S. issuers.
The Portfolio will at all times hold at least 40% of its assets in investment
grade fixed income securities, each having a duration, as determined by the
Adviser, that is less than that of a 10-year Treasury bond (the "fixed income
core"). The Portfolio is generally expected to hold approximately 70% of its
assets in fixed income securities (including the fixed income core) and 30% in
equity securities. Actual asset mixes will be adjusted in response to economic
and credit market cycles. The fixed income asset class will always comprise at
least 50%, but never more than 90%, of the Portfolio's total assets. The equity
class will always comprise at least 10%, but never more than 50%, of the
Portfolio's total assets.
Duration is a measure of the weighted average maturity of the bonds held by
the Portfolio and can be used by the Adviser as a measure of the sensitivity
of the market value of the Portfolio to changes in interest rates. Generally,
the longer the duration of the Portfolio, the more sensitive its market value
will be to changes in interest rates.
In some cases, the Adviser's calculation of duration will be based on certain
assumptions (including assumptions regarding prepayment rates, in the
mortgage-backed or asset-backed securities, and foreign and domestic interest
rates). As of December 31, 1999, the Adviser considered the duration of a
10-year Treasury bond to be 7.3 years. The Portfolio's investments will
generally have a final maturity of not more than ten years or a duration not
exceeding that of a 10-year Treasury note.
All debt securities held by the Portfolio will be of investment grade (i.e.,
rated at least BBB by S&P or Baa by Moody's) or unrated securities of
comparable quality as determined by the Adviser. The equity securities invested
in by the Portfolio will consist primarily of common stock (including
convertible securities). The Portfolio may also invest in stocks that are
traded over-the-counter and in other equity-type securities. No more than 15%
of the Portfolio's assets will be invested in securities of non-U.S. issuers.
The Portfolio may also make use of various other investment strategies and
derivatives. Up to 50% of its total assets may be used for securities lending
purposes.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that the
Adviser's allocation of the Portfolio's assets between debt and equity
securities may adversely affect the Portfolio's value.
FIXED INCOME RISK: This Portfolio invests primarily in fixed income
securities, therefore, the Portfolio's performance will be affected by changes
in interest rates, credit risks of the issuer, the duration and maturity of
the Portfolio's fixed
---------------------------------------------------- EQ Advisors Trust
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
72
- --------------------------------------------------------------------------------
income holdings, and adverse market and economic conditions. Other risks that
relate to the Portfolio's investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share
price and total return) of the Portfolio's fixed income securities,
particularly those with longer durations or maturities, will go down.
When interest rates fall, the reverse is true.
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the
issuer or guarantor of a debt security or counterparty to a Portfolio's
transaction is unable or unwilling to make timely principal and/or
interest payments, or to honor its financial obligations. Investment
grade securities which are rated BBB by S&P or an equivalent rating by
any other NRSRO, are somewhat riskier than higher rated obligations
because they are regarded as having only an adequate capacity to pay
principal and interest, are considered to lack outstanding investment
characteristics, and may be speculative.
MORTGAGE BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase, making them even more
susceptible to interest rate changes. Falling interest rates may cause
the value and yield of mortgage-backed securities to fall. Falling
interest rates also may encourage borrowers to pay off their mortgages
sooner than anticipated (pre-payment). The Portfolio would need to
reinvest the pre-paid funds at the newer, lower interest rates.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar quality.
The value of convertible securities fluctuates both in relation to changes in
interest rates and changes in the value of the underlying common stock.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. 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.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in foreign
economic and tax policies; and foreign government instability, war or other
adverse political or economic actions.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like, which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO
<PAGE>
- ----------
73
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio
to incur additional transaction costs that could be passed through to
shareholders.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one year,
five years and since inception and compares the Portfolio's performance to: (i)
the returns of a broad-based index; (ii) the returns of a "blended" index of
fixed income and equity securities; and (iii) the returns of an index of funds
with similar investment objectives. Past performance is not an indication of
future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Conservative Investors
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Conservative Investors Portfolio) whose inception date is October
2, 1989. The assets of the predecessor were transferred to the Portfolio on
October 18, 1999. Following that transfer, the performance shown (for the
period October 19, 1999 through December 31, 1999) is that of the Portfolio.
For these purposes, the performance results of the Portfolio and its
predecessor registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1990 6.3%
1991 19.8%
1992 5.6%
1993 10.8%
1994 -4.1%
1995 20.4%
1996 5.2%
1997 13.3%
1998 13.9%
1999 10.4%
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
- ----------------------------------- ----------------------------------
7.65% (1998 4th Quarter) (3.21)% (1994 1st Quarter)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Conservative
Investors Portfolio -
Class IA Shares 10.14% 12.47% 9.94%
- --------------------------------------------------------------------------------
70% Lehman Treasury/30%
S&P 500 Index*, ** 4.19% 13.60% 10.75%
- --------------------------------------------------------------------------------
S&P 500 Index* 21.03% 28.56% 18.21%
- --------------------------------------------------------------------------------
Lipper Income Average* 4.65% 14.57% 10.84%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
ROBERT G. HEISTERBERG has been responsible for the day-to-day management of
the Portfolio and its predecessor
---------------------------------------------------- EQ Advisors Trust
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
74
- --------------------------------------------------------------------------------
since February 12, 1996. Mr. Heisterberg, a Senior Vice President of Alliance
and Global Economic Policy Analysis, has been associated with Alliance since
1977.
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
75
- --------------------------------------------------------------------------------
ALLIANCE GROWTH INVESTORS PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve the highest total return consistent
with the Adviser's determination of reasonable risk.
THE INVESTMENT STRATEGY
The Portfolio allocates varying portions of its assets to a number of asset
classes. The fixed income asset class will always comprise at least 10%, but
never more than 60%, of the Portfolio's total assets. The equity class will
always comprise at least 40%, but never more than 90%, of the Portfolio's total
assets. Over time, the Portfolio's holdings, on average, are expected to be
allocated 70% to equity securities and 30% to debt securities. Actual asset
mixes will be adjusted in response to economic and credit market cycles.
The Portfolio's investments in equity securities will include both
exchange-traded and over-the-counter common stocks and other equity securities,
including foreign stocks, preferred stocks, convertible debt instruments, as
well as securities issued by small-and mid-sized companies that have favorable
growth prospects.
The Portfolio's debt securities may include foreign debt securities, investment
grade fixed income securities (including cash and money market instruments) as
well as lower quality, higher yielding debt securities (junk bonds). The
Portfolio may also make use of various other investment strategies and
derivatives. Up to 50% of its total assets may be used for securities lending
purposes. No more than 30% of the Portfolio's assets will be invested in
securities of foreign issuers.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that the
Adviser's allocation of the Portfolio's assets between debt and equity
securities may adversely affect the Portfolio's value.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment-grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than if it invested in higher-rated
obligations because BBB- rated securities are regarded as having only an
adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative. Other risks
that relate to the Portfolio's investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share
price and total return) of the Portfolio's fixed income securities,
particularly those with longer durations or maturities, will go down.
When interest rates fall, the reverse is true.
JUNK BOND RISK: The Portfolio may invest a portion of its assets in "junk
bonds" or lower-rated securities rated BB or lower by S&P or an
equivalent rating by any other NRSRO or unrated securities of similar
quality. Therefore, credit risk is particularly significant for this
Portfolio. Junk bonds have speculative elements or are predominantly
speculative credit risks. This Portfolio may also be subject to greater
credit risk because it may invest in debt securities issued in connection
with corporate
---------------------------------------------------- EQ Advisors Trust
ALLIANCE GROWTH INVESTORS PORTFOLIO
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
76
- --------------------------------------------------------------------------------
restructurings by highly leveraged issuers or in debt securities not current
in the payment of interest or principal, or in default.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known, held primarily by insiders or
institutional investors and may trade less frequently and in lower volume; such
companies are more likely to experience greater or more unexpected changes in
their earnings and growth prospects; such companies have limited financial
resources or may depend on a few key employees; and the products or
technologies of such companies may be at a relatively early stage of
development or not fully tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar quality.
The value of convertible securities fluctuates both in relation to changes in
interest rates and changes in the value of the underlying common stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in foreign
economic and tax policies; and foreign government instability, war or other
adverse political or economic actions.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio
to incur additional transaction costs that could be passed through to
shareholders.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. 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.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one year,
five years and ten years and compares the
ALLIANCE GROWTH INVESTORS PORTFOLIO
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Portfolio's performance to: (i) the returns of a broad-based index; (ii) the
returns of a "blended" index of equity and fixed income securities; and (iii)
the returns of an index of funds with similar investment objectives. Past
performance is not an indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Growth Investors
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Growth Investors Portfolio) whose inception date is October 2,
1989. The assets of the predecessor were transferred to the Portfolio on
October 18, 1999. Following that transfer, the performance shown (for the
period October 19, 1999 through December 31, 1999) is that of the Portfolio.
For these purposes, the performance results of the Portfolio and its
predecessor registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1990 10.7 %
1991 48.8 %
1992 4.9 %
1993 15.3 %
1994 -3.2 %
1995 26.4 %
1996 12.6 %
1997 16.9 %
1998 19.1 %
1999 26.58%
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
18.16% (1998 4th Quarter) (10.60)% (1990 3rd Quarter)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Growth Investors
Portfolio - Class IA Shares 26.58% 20.19% 17.08%
- --------------------------------------------------------------------------------
70% S&P 500 Index/30%
Lehman Gov't/Corp.*, ** 13.77% 22.15% 15.13%
- --------------------------------------------------------------------------------
S&P 500 Index* 21.03% 28.56% 18.21%
- --------------------------------------------------------------------------------
Lipper Flexible Portfolio
Average* 12.07% 17.11% 12.94%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
ROBERT G. HEISTERBERG has been responsible for the day-to-day management of
the Portfolio and its predecessor since February 12, 1996. Mr. Heisterberg, a
Senior Vice President of Alliance and Global Economic Policy Analysis, has
been associated with Alliance since 1977.
---------------------------------------------------- EQ Advisors Trust
ALLIANCE GROWTH INVESTORS PORTFOLIO
<PAGE>
3
More information on principal risks
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Risk is the chance that you will lose money on your investment or that it will
not earn as much as you expect. In general, the greater the risk, the more
money your investment can earn for you and the more you can lose. Like other
investment companies, the value of each Portfolio's shares may be affected by
the Portfolio's investment objective(s), principal investment strategies and
particular risk factors. Consequently, each Portfolio may be subject to
different principal risks. Some of the principal risks of investing in the
Portfolios are discussed below. However, other factors may also affect each
Portfolio's net asset value.
There is no guarantee that a Portfolio will achieve its investment objective(s)
or that it will not lose principal value.
GENERAL INVESTMENT RISKS: Each Portfolio is subject to the following risks:
ASSET CLASS RISK: There is the possibility that the returns from the types of
securities in which a Portfolio invests will underperform returns from the
various general securities markets or different asset classes. Different types
of securities tend to go through cycles of outperformance and underperformance
in comparison to the general securities markets.
MARKET RISK: Each Portfolio's share price moves up and down over the short term
in reaction to stock or bond market movements. This means that you could lose
money over short periods, and perhaps over longer periods during extended
market downturns.
SECURITY SELECTION RISK: The Adviser(s) for each Portfolio rely on the insights
of different specialists in making investment decisions based on the
Portfolio's particular investment objective(s) and investment strategies. There
is the possibility that the specific securities held by a Portfolio will
underperform other funds in the same asset class or benchmarks that are
representative of the general performance of the asset class because of the
Adviser's choice of portfolio securities.
As indicated in "Summary Information Concerning EQ Advisors Trust" and "About
the Investment Portfolios," a particular Portfolio may also be subject to the
following risks:
CONVERTIBLE SECURITIES RISK: Convertible securities may include 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. Therefore, convertible securities enable you 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.
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. Each Adviser will consider such event in its
determination of whether a Portfolio should continue to hold the securities.
DERIVATIVES RISK: Derivatives are financial contracts whose value depends on,
or is derived from the value of an underlying asset, reference rate or index.
Derivatives include stock options, securities index options, currency options,
forward currency exchange contracts, futures contracts, swaps and options on
futures contracts. Certain Portfolios can use derivatives involving the U.S.
Government and foreign government securities and currencies. Investments in
derivatives can significantly increase your exposure to market risk, or credit
risk of the counterparty. Derivatives also involve the risk of mispricing or
improper valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that any of the Portfolios invest a
substantial amount of its assets in fixed income securities, a Portfolio may be
subject to the following risks:
MORE INFORMATION ON PRINCIPAL RISKS
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ASSET-BACKED SECURITIES RISK: The Portfolio's investments in asset-backed
securities represent interests in pools of consumer loans such as credit
card receivables, automobile loans and leases, leases on equipment such
as computers, and other financial instruments and are subject to certain
additional risks. Rising interest rates tend to extend the duration of
asset-backed securities, making them more sensitive to changes in
interest rates. As a result, in a period of rising interest rates, the
Portfolio may exhibit additional volatility. When interest rates are
declining, there are usually more prepayments of loans which will shorten
the life of these securities. Prepayments also vary based on among other
factors, general economic conditions and other demographic conditions.
The reinvestment of cash received from prepayments will, therefore,
usually be at a lower interest rate than the original investment,
lowering the Portfolio's yield.
CREDIT RISK: Credit risk is the risk that the issuer or guarantor of a
debt security or counterparty to a Portfolio's transactions will be
unable or unwilling to make timely principal and/or interest payments, or
otherwise will be unable or unwilling to honor its financial obligations.
Each of the Portfolios may be subject to credit risk to the extent that
it invests in debt securities or engages in transactions, such as
securities loans or repurchase agreements, which involve a promise by a
third party to honor an obligation to the Portfolio.
Credit risk is particularly significant for the Portfolios, such as the
Alliance Growth Investors Portfolio and the Alliance High Yield
Portfolio, that invest a material portion of their assets in "JUNK BONDS"
or lower-rated securities (i.e., rated BB or lower by S&P or an
equivalent rating by any other NRSRO or unrated securities of similar
quality). These debt securities and similar unrated securities have
speculative elements or are predominantly speculative credit risks.
Portfolios such as the Alliance Growth Investors Portfolio and the
Alliance High Yield Portfolio may also be subject to greater credit risk
because they may invest in debt securities issued in connection with
corporate restructurings by highly leveraged issuers or in debt
securities not current in the payment of interest or principal, or in
default.
INTEREST RATE RISK: The price of a bond or a fixed income security is
dependent upon interest rates. Therefore, the share price and total
return of a Portfolio investing a significant portion of its assets in
bonds or fixed income securities will vary in response to changes in
interest rates. A rise in interest rates causes the value of a bond to
decrease, and vice versa. There is the possibility that the value of a
Portfolio's investment in bonds or fixed income securities may fall
because bonds or fixed income securities generally fall in value when
interest rates rise. The longer the term of a bond or fixed income
instrument, the more sensitive it will be to fluctuations in value from
interest rate changes. Changes in interest rates may have a significant
effect on Portfolios holding a significant portion of their assets in
fixed income securities with long term maturities.
MORTGAGE-BACKED SECURITIES RISK: In the case of mortgage-backed
securities, rising interest rates tend to extend the term to maturity of
the securities, making them even more susceptible to interest rate
changes. When interest rates drop, not only can the value of fixed income
securities drop, but the yield can drop, particularly where the yield on
the fixed income securities is tied to changes in interest rates, such as
adjustable mortgages. Also when interest rates drop, the holdings of
mortgage-backed securities by a Portfolio can reduce returns if the
owners of the underlying mortgages pay off their mortgages sooner than
anticipated since the funds prepaid will have to be reinvested at the
then lower prevailing rates. This is known as prepayment risk. When
interest rates rise,
---------------------------------------------------- EQ Advisors Trust
MORE INFORMATION ON PRINCIPAL RISKS
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the holdings of mortgage-backed securities by a Portfolio can reduce
returns if the owners of the underlying mortgages pay off their
mortgages later than anticipated. This is known as extension risk.
INVESTMENT GRADE SECURITIES RISK: Debt securities are rated by national
bond ratings agencies. Securities rated BBB by S&P or Baa by Moody's are
considered investment grade securities, but are somewhat riskier than
higher rated obligations because they are regarded as having only an
adequate capacity to pay principal and interest, and are considered to
lack outstanding investment characteristics.
JUNK BONDS OR LOWER RATED SECURITIES RISK: Bonds rated below investment
grade by S&P and Moody's are speculative in nature, may be subject to
certain risks with respect to the issuing entity and to greater market
fluctuations than higher rated fixed income securities. They are usually
issued by companies without long track records of sales and earnings, or
by those companies with questionable credit strength. These bonds are
considered "below investment grade." The retail secondary market for
these "junk bonds" may be less liquid than that of higher rated
securities and adverse conditions could make it difficult at times to
sell certain securities or could result in lower prices than those used
in calculating the Portfolio's net asset value.
FOREIGN SECURITIES RISK: A Portfolio's investments in foreign securities,
including depositary receipts, involve risks not associated with investing in
U.S. securities and can affect a Portfolio's performance. Foreign markets,
particularly emerging markets, may be less liquid, more volatile and subject to
less government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. The specific risks of investing in foreign securities, among
others, include:
CURRENCY RISK: The risk that changes in currency exchange rates will
negatively affect securities denominated in, and/or receiving revenues
in, foreign currencies. Adverse changes in currency exchange rates
(relative to the U.S. dollar) may erode or reverse any potential gains
from a Portfolio's investment in securities denominated in a foreign
currency or may widen existing losses.
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging market countries and/or their securities markets. Generally,
economic structures in these countries are less diverse and mature than
those in developed countries, and their political systems are less
stable. Investments in emerging markets countries may be affected by
national policies that restrict foreign investment in certain issuers or
industries. The small size of their securities markets and low trading
volumes can make investments illiquid and more volatile than investments
in developed countries and such securities may be subject to abrupt and
severe price declines. As a result, a Portfolio investing in emerging
market countries may be required to establish special custody or other
arrangements before investing.
EURO RISK: Certain of the Portfolios may invest in securities issued by
European issuers. On January 1, 1999, 11 of the 15 member states of the
European Monetary Union ("EMU") introduced the "Euro" as a common
currency. During a three-year transitional period, the Euro will coexist
with each participating state's currency and, on July 1, 2002, the Euro
is expected to become the sole currency of the participating states. The
introduction of the Euro will result in the redenomination of European
debt and equity securities over a period of time, which may result in
various legal and accounting differences and/or tax treatments that
otherwise would not likely occur. During this period, the creation and
implementation of suitable clearing and settlement
MORE INFORMATION ON PRINCIPAL RISKS
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systems and other operational problems may cause market disruptions that
could adversely affect investments quoted in the Euro.
POLITICAL/ECONOMIC RISK: Changes in economic and tax policies, government
instability, war or other political or economic actions or factors may
have an adverse effect on a Portfolio's foreign investments.
REGULATORY RISK: Less information may be available about foreign
companies. In general, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards or to other
regulatory practices and requirements as are U.S. companies.
TRANSACTION COSTS RISK: The costs of buying and selling foreign
securities, including tax, brokerage and custody costs, generally are
higher than those involving domestic transactions.
GROWTH INVESTING RISK: Growth investing generally focuses on companies that,
due to their strong earnings and revenue potential, offer above-average
prospects for capital growth, with less emphasis on dividend income. Earnings
predictability and confidence in earnings forecasts are an important part of
the selection process. As a result, the price of growth stocks may be more
sensitive to changes in current or expected earnings than the prices of other
stocks. Advisers using this approach generally seek out companies experiencing
some or all of the following: high sales growth, high unit growth, high or
improving returns on assets and equity, and a strong balance sheet. Such
Advisers also prefer companies with a competitive advantage such as unique
management, marketing or research and development. Growth investing is also
subject to the risk that the stock price of one or more companies will fall or
will fail to appreciate as anticipated by the Advisers, regardless of movements
in the securities market.
INDEX-FUND RISK: The Alliance Equity Index and BT International Equity Index
Portfolios are not actively managed (which involves buying and selling of
securities based upon economic, financial and market analysis and investment
judgment). Rather, the Alliance Equity Index Portfolio utilizes proprietary
modeling techniques to match the performance results of the S&P 500 Index. The
BT International Equity Index Portfolio utilizes a "passive" or "indexing"
investment approach and attempts to duplicate the investment performance of the
particular index the Portfolio is tracking (i.e. MSCI EAFE Index) through
statistical procedures. Therefore, the Portfolio will invest in the securities
included in the relevant index or substantially identical securities regardless
of market trends. The Portfolio cannot modify their investment strategies to
respond to changes in the economy, which means it may be particularly
susceptible to a general decline in the U.S. or global stock market segment
relating to the relevant index.
LEVERAGING RISK: When a Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in that Portfolio will be more volatile
and all other risks will tend to be compounded. All of the Portfolios may take
on leveraging risk by investing in collateral from securities loans and by
borrowing money to meet redemption requests.
LIQUIDITY RISK: Certain securities held by a Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like. A
Portfolio may have to hold these securities longer than it would like and may
forego other investment opportunities. There is the possibility that a
Portfolio may lose money or be prevented from earning capital gains if it can
not sell a security at the time and price that is most beneficial to the
Portfolio. Portfolios that invest in privately-placed securities, high-yield
bonds, mortgage-backed securities or foreign or emerging market securities,
which have all experienced periods of illiquidity, are subject to liquidity
risks. A particular Portfolio may be more susceptible to some of these risks
than others, as noted in the description of each Portfolio.
---------------------------------------------------- EQ Advisors Trust
MORE INFORMATION ON PRINCIPAL RISKS
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MONEY MARKET RISK: Although a money market fund is designed to be a relatively
low risk investment, it is not entirely free of risk. Despite the short
maturities and high credit quality of the Alliance Money Market Portfolio's
investments, increases in interest rates and deteriorations in the credit
quality of the instruments the Portfolio has purchased may reduce the
Portfolio's yield. In addition, the Portfolio is still subject to the risk that
the value of an investment may be eroded over time by inflation.
MULTIPLE-ADVISER RISK: The EQ/Aggressive Stock and EQ/Balanced Portolios employ
multiple Advisers. Each of the Advisers independently chooses and maintains a
portfolio of common stocks for the Portfolio and each is responsible for
investing a specific allocated portion of the Portfolio's assets. Because each
Adviser will be managing its allocated portion of the Portfolio independently
from the other Advisers, the same security may be held in two different
portions of the Portfolio, or may be acquired for one portion of the Portfolio
at a time when the Adviser of another portion deems it appropriate to dispose
of the security from that other portion. Similarly, under some market
conditions, one Adviser may believe that temporary, defensive investments in
short-term instruments or cash are appropriate when the other Adviser or
Advisers believe continued exposure to the equity markets is appropriate for
their portions of the Portfolio. Because each Adviser directs the trading for
its own portion of the Portfolio, and does not aggregate its transactions with
those of the other Advisers, the Portfolio may incur higher brokerage costs
than would be the case if a single Adviser were managing the entire Portfolio.
PORTFOLIO TURNOVER RISK: Consistent with their investment policies, the
Portfolios also will purchase and sell securities without regard to the effect
on portfolio turnover. Higher portfolio turnover (e.g., over 100% per year)
will cause a Portfolio to incur additional transaction costs that could be
passed through to shareholders.
SECURITIES LENDING RISK: For purposes of realizing additional income, each
Portfolio may lend securities to broker-dealers approved by the Board of
Trustees. In addition, the Alliance High Yield and Alliance Intermediate
Government Securities Portfolios may each make secured loans of its portfolio
securities without restriction. Any such loan of portfolio securities will be
continuously secured by collateral at least equal to the value of the security
loaned. Such collateral will be in the form of cash, marketable securities
issued or guaranteed by the U.S. Government or its agencies, or a standby
letter of credit issued by qualified banks. 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 the 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.
SMALL-CAP AND MID-CAP COMPANY RISK: A Portfolio's investments in small-cap and
mid-cap companies may involve greater risks than investments in larger, more
established issuers. Smaller companies may have narrower product lines, more
limited financial resources and more limited trading markets for their stock,
as compared with larger companies. Their securities may be less well-known and
trade less frequently and in more limited volume than the securities of larger,
more established companies. In addition, small-cap and mid-cap companies are
typically subject to greater changes in earnings and business prospects than
larger companies. Consequently, the prices of small company stocks tend to rise
and fall in value more frequently than the stocks of larger companies. Although
investing in small-cap and mid-cap companies offers potential for above-average
returns, the companies may not succeed and the value of their stock could
decline significantly.
MORE INFORMATION ON PRINCIPAL RISKS
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VALUE INVESTING RISK: Value investing attempts to identify strong companies
selling at a discount from their perceived true worth. Advisers using this
approach generally select stocks at prices, in their view, that are temporarily
low relative to the company's earnings, assets, cash flow and dividends. Value
investing is subject to the risk that the stocks' intrinsic value may never be
fully recognized or realized by the market, or their prices may go down. In
addition, there is the risk that a stock judged to be undervalued may actually
be appropriately priced. Value investing generally emphasizes companies that,
considering their assets and earnings history, are attractively priced and may
provide dividend income.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
---------------------------------------------------- EQ Advisors Trust
MORE INFORMATION ON PRINCIPAL RISKS
<PAGE>
4
Management of the Trust
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This section gives you information on the Trust, the Manager and the Advisers
for the Portfolios. More detailed information concerning each of the Advisers
and portfolio managers is included in the description for each Portfolio in the
section "About The Investment Portfolios."
THE TRUST
The Trust is organized as a Delaware business trust and is registered with the
Securities and Exchange Commission ("SEC") as an open-end management investment
company. The Trust issues shares of beneficial interest that are currently
divided among forty-one (41) Portfolios, each of which has authorized Class IA
and Class IB shares. Each Portfolio has its own objectives, investment
strategies and risks, which have been previously described in this prospectus.
THE MANAGER
The Equitable Life Assurance Society of the United States ("Equitable"), 1290
Avenue of the Americas, New York, New York 10104, currently serves as the
Manager of the Trust. EQ Financial Consultants, Inc. ("EQFC") previously served
as the Manager of the Trust, until September 17, 1999 when the Trust's
Investment Management Agreement was transferred to Equitable. Equitable is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended, and a wholly-owned subsidiary of AXA Financial, Inc. ("AXA
Financial"), a subsidiary of AXA, a French insurance holding company.
Subject to the supervision and direction of the Board of Trustees, the Manager
has overall responsibility for the general management of the Trust. In the
exercise of that responsibility and under the Multi-Manager Order, the Manager,
without obtaining shareholder approval but subject to the review and approval
by the Board of Trustees, may: (i) select new or additional Advisers for the
Portfolios; (ii) enter into new investment advisory agreements and materially
modify existing investment advisory agreements; and (iii) terminate and replace
the Advisers. The Manager also monitors each Adviser's investment program and
results, reviews brokerage matters, and carries out the directives of the Board
of Trustees. The Manager also supervises the provision of services by third
parties such as the Trust's custodian.
The contractual management fee rates payable by the Trust are at the following
annual percentages of the value of each Portfolio's average daily net assets:
CONTRACTUAL FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)(FEE ON ALL ASSETS)
<TABLE>
<CAPTION>
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INDEX PORTFOLIOS
- ---------------------------------------------
<S> <C>
Alliance Equity Index 0.250%
BT International Equity Index 0.350%
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</TABLE>
MANAGEMENT OF THE TRUST
<PAGE>
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CONTRACTUAL FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
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FIRST NEXT NEXT NEXT
DEBT PORTFOLIOS $750 MILLION $750 MILLION $1 BILLION $2.5 BILLION THEREAFTER
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<S> <C> <C> <C> <C> <C>
Alliance High Yield 0.600% 0.575% 0.550% 0.530% 0.520%
Alliance Intermediate Government Securities 0.500% 0.475% 0.450% 0.430% 0.420%
Alliance Money Market 0.350% 0.325% 0.300% 0.280% 0.270%
Alliance Quality Bond 0.525% 0.500% 0.475% 0.455% 0.445%
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</TABLE>
CONTRACTUAL FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
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FIRST NEXT NEXT NEXT
EQUITY PORTFOLIOS $1 BILLION $1 BILLION $3 BILLION $5 BILLION THEREAFTER
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<S> <C> <C> <C> <C> <C>
EQ/Aggressive Stock 0.650% 0.600% 0.575% 0.550% 0.525%
EQ/Balanced 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance Common Stock 0.550% 0.500% 0.475% 0.450% 0.425%
Alliance Conservative Investors 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance Global 0.750% 0.700% 0.675% 0.650% 0.625%
Alliance Growth and Income 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance Growth Investors 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance International 0.850% 0.800% 0.775% 0.750% 0.725%
Alliance Small Cap Growth 0.750% 0.700% 0.675% 0.650% 0.625%
EQ/Alliance Premier Growth 0.900% 0.850% 0.825% 0.800% 0.775%
MFS Emerging Growth Companies 0.650% 0.600% 0.575% 0.550% 0.525%
T. Rowe Price Equity Income 0.600% 0.550% 0.525% 0.500% 0.475%
Warburg Pincus Small Company Value 0.750% 0.700% 0.675% 0.650% 0.625%
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</TABLE>
For one Portfolio (i.e., Warburg Pincus Small Cap Value Portfolio) the Manager
has agreed not to implement any increase in the applicable management fee rate
(as approved by shareholders) until July 31, 2001, unless the Board agrees that
such a management fee increase should be put into operation earlier.
------------------------- EQ Advisors Trust
MANAGEMENT OF THE TRUST
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The table below shows the annual rate of the management fees (as a percentage
of each Portfolio's average daily net assets) that the Manager (or the
predecessor Manager for certain of the Portfolios) received in 1999 for
managing each of the Portfolios and the rate of the management fees waived by
the Manager (or the predecessor Manager for certain of the Portfolios) in 1999
in accordance with the provisions of the Expense Limitation Agreement, as
defined directly below, between the Manager and the Trust with respect to
certain of the Portfolios.
MANAGEMENT FEES PAID BY THE PORTFOLIOS IN 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------
ANNUAL RATE OF
RATE FEES
PORTFOLIOS RECEIVED WAIVED
- ----------------------------------------------------------
<S> <C> <C>
EQ/Aggressive Stock 0.54% 0.00%
EQ/Balanced 0.41% 0.00%
Alliance Common Stock 0.36% 0.00%
Alliance Conservative Investors 0.48% 0.00%
Alliance Equity Index 0.30% 0.00%
Alliance Global 0.63% 0.00%
Alliance Growth & Income 0.54% 0.00%
Alliance Growth Investors 0.50% 0.00%
Alliance High Yield 0.60% 0.00%
Alliance Intermediate 0.50% 0.00%
Government Securities
Alliance International 0.90% 0.00%
Alliance Money Market 0.34% 0.00%
EQ/Alliance Premier Growth 0.90% 0.22%
Alliance Quality Bond 0.53% 0.00%
Alliance Small Cap Growth 0.90% 0.00%
BT International Equity Index 0.35% 0.11%
MFS Emerging Growth 0.55% 0.11%
Companies
T. Rowe Price Equity Income 0.55% 0.15%
Warburg Pincus Small Company 0.65% 0.13%
Value
- ----------------------------------------------------------
</TABLE>
EXPENSE LIMITATION AGREEMENT
In the interest of limiting until April 30, 2001 expenses of each Portfolio
(except for the Portfolios for which Alliance serves as Investment Adviser,
other than EQ/Alliance Premier Growth Portfolio), the Manager has entered into
an amended and restated expense limitation agreement with the Trust with
respect to those Portfolios ("Expense Limitation Agreement"). Pursuant to that
Expense Limitation Agreement, 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 other than interest, taxes, brokerage commissions (other
expenditures which are capitalized in accordance with generally accepted
accounting principles, other extraordinary expenses not incurred in the
ordinary course of each Portfolio's business and amounts payable pursuant to a
plan adopted in accordance with Rule 12b-1 under the 1940 Act) are limited to
the following respective expense ratios:
EXPENSE LIMITATION PROVISIONS
- ------------------------------------------------------------
TOTAL EXPENSES
LIMITED TO (% OF
PORTFOLIOS DAILY NET ASSETS)
- ------------------------------------------------------------
BT International Equity Index 0.75%
EQ/Alliance Premier Growth 0.90%
MFS Emerging Growth Companies 0.75%
T. Rowe Price Equity Income 0.70%
Warburg Pincus Small Company Value 0.85%
- ------------------------------------------------------------
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.
MANAGEMENT OF THE TRUST
<PAGE>
- ----------
87
- --------------------------------------------------------------------------------
The total amount of reimbursement to which the Manager may be entitled will
equal, at any time, the sum of (i) all investment management fees previously
waived or reduced by the Manager and (ii) all other payments previously
remitted by the Manager to the Portfolio during any of the previous five (5)
fiscal years, less any reimbursement that the Portfolio has previously paid to
the Manager with respect to (a) such investment management fees previously
waived or reduced and (b) such other payments previously remitted by the
Manager to the Portfolio.
THE ADVISERS
Each Portfolio has one or more Advisers that furnish an investment program for
the Portfolio (or portion thereof for which the entity serves as Adviser)
pursuant to an investment advisory agreement with the Manager. Each Adviser
makes investment decisions on behalf of the Portfolio (or portion thereof for
which the entity serves as Adviser), places all orders for the purchase and
sale of investments for the Portfolio's account with brokers or dealers
selected by such Adviser or the Manager and may perform certain limited related
administrative functions in connection therewith.
The Manager has received an exemptive order, the Multi-Manager Order, from the
SEC that permits the Manager, subject to board approval and without the
approval of shareholders to: (a) employ a new Adviser or additional Advisers
for any Portfolio; (b) enter into new investment advisory agreements and
materially modify existing investment advisory agreements; and (c) terminate
and replace the Advisers without obtaining approval of the relevant Portfolio'
s shareholders. However, the Manager may not enter into an investment advisory
agreement with an "affiliated person" of the Manager (as that term is defined
in Section 2(a)(3) of the 1940 Act) ("Affiliated Adviser"), such as Alliance,
unless the investment advisory agreement with the Affiliated Adviser, including
compensation, is approved by the affected Portfolio's shareholders, including,
in instances in which the investment advisory agreement pertains to a newly
formed Portfolio, the Portfolio's initial shareholder. In such circumstances,
shareholders would receive notice of such action, including the information
concerning the Adviser that normally is provided in an information statement
under Schedule 14C of the Securities Exchange Act of 1934 ("1934 Act").
The Manager pays each Adviser a fee based on the Portfolio's average daily net
assets. No Portfolio is responsible for the fees paid to each of the Advisers.
THE ADMINISTRATOR
Pursuant to an agreement, Equitable currently serves as the Administrator to
the Trust. As Administrator, Equitable provides the Trust with necessary
administrative, fund accounting and compliance services, and makes available
the office space, equipment, personnel and facilities required to provide such
services to the Trust.
Equitable may carry out its responsibilities either directly or through
sub-contracting with third party service providers. For these services, the
Trust pays Equitable $30,000 for each Portfolio, and a monthly fee at the
annual rate of 0.04 of 1% of the first $3 billion of total Trust assets, 0.03
of 1% of the next $3 billion of the total Trust assets; 0.025 of 1% of the next
$4 billion of the total Trust assets; and 0.0225% of 1% of the total Trust
assets in excess of $10 billion.
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.
BROKERAGE PRACTICES
In selecting brokers and dealers, in accordance with Section 28(e) of the 1934
Act, the Manager and each Adviser may consider research and brokerage services
received by the Manager, the Advisers, the Trust or any Portfolio. Subject to
seeking the most favorable net price and execution
---------------------------------------------------- EQ Advisors Trust
MANAGEMENT OF THE TRUST
<PAGE>
- ----------
88
- --------------------------------------------------------------------------------
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. Finally, at the
discretion of the Board, the Trust may direct the Manager to cause Advisers to
effect securities transactions through broker-dealers in a manner that would
help to generate resources to (i) pay the cost of certain expenses which the
Trust is required to pay or for which the Trust is required to arrange payment
or (ii) finance activities that are primarily intended to result in the sale of
Trust shares.
BROKERAGE TRANSACTIONS WITH AFFILIATES
To the extent permitted by law, the Trust may engage in securities and other
transactions with entities that may be affiliated with the Manager or the
Advisers. The 1940 Act generally prohibits the Trust from engaging in principal
securities transactions with an affiliate of the Manager or the Advisers unless
pursuant to an exemptive order from the SEC. For these purposes, however, the
Trust has considered this issue and believes, based upon advice of counsel,
that a broker-dealer affiliate of an Adviser to one Portfolio should not be
treated as an affiliate of an Adviser to another Portfolio for which such
Adviser does not provide investment advice in whole or in part. The Trust has
adopted procedures that 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. The Trust has also 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.
MANAGEMENT OF THE TRUST
<PAGE>
5
Fund distribution arrangements
- ----------------
89
- --------------------------------------------------------------------------------
The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares and Class IB shares. AXA Advisors, LLC ("AXA Advisors") serves as one of
the distributors for the Class IA shares of the Trust offered by this
Prospectus as well as one of the distributors for the Class IB shares.
Equitable Distributors, Inc. ("EDI") serves as the other distributor for the
Class IA shares of the Trust as well as the Class IB shares. Both classes of
shares are offered and redeemed at their net asset value without any sales
load. AXA Advisors and EDI are affiliates of Equitable. Both AXA Advisors and
EDI are registered as broker-dealers under the 1934 Act and are members of the
National Association of Securities Dealers, Inc.
The Trust has adopted a Distribution Plan under Rule 12b-1 under the 1940 Act
for the Trust's Class IB shares. Under the Class IB Distribution Plan the Class
IB shares of the Trust pay each of the distributors an annual fee to compensate
them for promoting, selling and servicing shares of the Portfolios. The annual
fees equal 0.25% of each Portfolio's average daily net assets. Over time, the
fees will increase your cost of investing and may cost you more than other
types of charges.
FUND DISTRIBUTION ARRANGEMENTS
<PAGE>
6
Purchase and redemption
- ----------------
90
- --------------------------------------------------------------------------------
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
or qualified retirement plan 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 and class related 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 days
on which the New York Stock Exchange ("NYSE") is closed for trading.
Portfolios that invest a significant portion of their assets in foreign
securities may experience changes in their net asset value on days when a
shareholder may not purchase or redeem shares of that Portfolio because foreign
securities (other than depositary receipts) are valued at the close of business
in the applicable foreign country.
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.
You should note that the Trust is not designed for professional "market timing"
organizations, or other organizations or individuals engaging in a market
timing strategy, making programmed transfers, frequent transfers or transfers
that are large in relation to the total assets of each of the Trust's
Portfolios. Market timing strategies are disruptive to the Trust's Portfolios.
If we determine that your transfer patterns among the Trust's Portfolios
reflect a market timing strategy, we reserve the right to take action
including, but not limited to: restricting the availability of transfers
through telephone requests, facsimile transmissions, automated telephone
services, internet services or any electronic transfer services. We may also
refuse to act on transfer instructions of an agent acting under a power of
attorney who is acting on behalf of more than one owner.
PURCHASE AND REDEMPTION
<PAGE>
7
How assets are valued
- ----------------
91
- --------------------------------------------------------------------------------
Values are determined according to accepted 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, including depositary receipts, in
the United States are valued at representative quoted prices in the currency
in the country of origin. Foreign currency is converted into United States
dollar equivalents at current exchange rates. Because foreign markets may be
open at different times than the NYSE, the value of a Portfolio's shares may
change on days when shareholders are not able to buy or sell them. If events
materially affecting the values of the Portfolios' foreign investments occur
between the close of foreign markets and the close of regular trading on the
NYSE, these investments may be valued at their fair value.
o Short-term debt securities in the Portfolios, other than the Alliance Money
Market Portfolio, which mature in 60 days or less are valued at amortized
cost, which approximates market value. Securities held in the Alliance Money
Market Portfolio are valued at prices based on equivalent yields or yield
spreads.
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.
HOW ASSETS ARE VALUED
<PAGE>
8
Tax information
- ----------------
92
- --------------------------------------------------------------------------------
Each Portfolio of the Trust is a separate regulated investment company for
federal income tax purposes. Regulated investment companies are usually not
taxed at the entity (Portfolio) level. They pass through their income and gains
to their shareholders by paying dividends. Their shareholders include this
income on their respective tax returns. A Portfolio will be treated as a
regulated investment company if it meets specified federal income tax rules,
including types of investments, limits on investments, calculation of income,
and dividend payment requirements. Although the Trust intends that it and each
Portfolio will be operated to have no federal tax liability, if they have any
federal tax liability, that could hurt the investment performance of the
Portfolio in question. Also, any Portfolio investing in foreign securities or
holding foreign currencies could be subject to foreign taxes which could reduce
the investment performance of the Portfolio.
It is important for each Portfolio to maintain its federal income tax regulated
investment company status because the shareholders of the Portfolio that are
insurance company separate accounts will then be able to use a favorable
federal income tax investment diversification testing rule in determining
whether the Contracts indirectly funded by the Portfolio meet tax qualification
rules for variable insurance contracts. If a Portfolio fails to meet specified
investment diversification requirements, owners of non-pension plan Contracts
funded through the Trust could be taxed immediately on the accumulated
investment earnings under their Contracts and could lose any benefit of tax
deferral. Equitable, in its capacity as Administrator therefore carefully
monitors compliance with all of the regulated investment company rules and
variable insurance contract investment diversification rules.
TAX INFORMATION
<PAGE>
9
Financial Highlights
The financial highlights table is intended to help you understand the financial
performance for the Trust's Class IA and Class IB shares since May 1, 1997.
With respect to the Portfolios that are advised by Alliance (other than
EQ/Alliance Premier Growth Portfolio) financial information in the table below
is for the past five (5) years (or, if shorter, the period of the Portfolio's
operations). The information for the Class IA and Class IB shares have been
derived from the financial statements of the Trust, which have been audited by
PricewaterhouseCoopers LLP, independent public accountants.
PricewaterhouseCoopers LLP's report on the Trust's financial statements as of
December 31, 1999 appears in the Trust's Annual Report. The information should
be read in conjunction with the financial statements contained in the Trust's
Annual Report which are incorporated by reference into the Trust's Statement of
Additional Information (SAI) and available upon request.
- --------
93
- --------------------------------------------------------------------------------
EQ/AGGRESSIVE STOCK PORTFOLIO (FKA ALLIANCE AGGRESSIVE STOCK PORTFOLIO)(D)(E):
<TABLE>
<CAPTION>
CLASS IA
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $34.15 $36.22 $35.85 $35.68 $30.63
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) ........... 0.12 0.09 0.04 0.09 0.10
Net realized and unrealized gain
(loss) on investments ................. 6.22 (0.28) 3.71 7.52 9.54
------ ------ ------ ------ ------
Total from investment operations........ 6.34 (0.19) 3.75 7.61 9.64
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................ (0.12) (0.16) (0.05) (0.09) (0.10)
Dividends in excess of net
investment income ..................... - - - - -
Distributions from realized gains ...... (2.36) (1.72) (3.33) (7.33) (4.49)
Distributions in excess of realized
gains ................................. - - - (0.02) -
Tax return of capital distributions .... - - - - -
------ ------ ------ ------ ------
Total dividends and distributions ...... (2.48) (1.88) (3.38) (7.44) (4.59)
------ ------ ------ ------ ------
Net asset value, end of period ........... $38.01 $34.15 $36.22 $35.85 $35.68
====== ====== ====== ====== ======
Total return ............................. 18.84% 0.29% %10.94% 22.20% 31.63%
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........ $4,368,877 $4,346,907 $4,589,771 $3,865,256 $2,700,515
Ratio of expenses to average net
assets ................................. 0.56% 0.56% 0.54% 0.48% 0.49%
Ratio of net investment income (loss)
to average net assets .................. 0.33% 0.24% 0.11% 0.24% 0.28%
Portfolio turnover rate .................. 87% 105% 123% 108% 127%
<CAPTION>
CLASS IB
--------------------------------------------------------
OCTOBER 2,*
YEAR ENDED DECEMBER 31, 1996 TO
------------------------------------- DECEMBER 31,
1999 1998 1997 1996
------------ ------------ ----------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..... $34.01 $36.13 $35.83 $37.28
------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) ........... 0.03 0.01 (0.11) (0.01)
Net realized and unrealized gain
(loss) on investments ................. 6.20 (0.29) 3.77 0.85
------ ------ ------ ------
Total from investment operations........ 6.23 (0.28) 3.66 0.84
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................ (0.05) (0.12) (0.03) -
Dividends in excess of net
investment income ..................... - - - (0.02)
Distributions from realized gains ...... (2.36) (1.72) (3.33) (0.23)
Distributions in excess of realized
gains ................................. - - - (2.04)
Tax return of capital distributions .... - - - -
------ ------ ------ ------
Total dividends and distributions ...... (2.41) (1.84) (3.36) (2.29)
------ ------ ------ ------
Net asset value, end of period ........... $37.83 $34.01 $36.13 $35.83
====== ====== ====== ======
Total return ............................. 18.55% 0.05% 10.66% 2.32%(b)
====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........ $233,265 $153,782 $73,486 $613
Ratio of expenses to average net
assets ................................. 0.81% 0.82% 0.81% 0.73%(a)
Ratio of net investment income (loss)
to average net assets .................. 0.07% 0.02% (0.28)% (0.10)%(a)
Portfolio turnover rate .................. 87% 105% 123% 108%
</TABLE>
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
94
- --------------------------------------------------------------------------------
EQ/BALANCED PORTFOLIO (FKA ALLIANCE BALANCED PORTFOLIO)(D)(E):
<TABLE>
<CAPTION>
CLASS IA
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...... $18.51 $17.58 $16.64 $16.76 $14.87
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ................... 0.52 0.56 0.58 0.53 0.54
Net realized and unrealized gain on
investments and foreign currency
transactions ........................... 2.69 2.54 1.86 1.31 2.36
------ ------ ------- ------ -------
Total from investment operations ........ 3.21 3.10 2.44 1.84 2.90
------ ------ ------- ------ -------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................. (0.56) (0.50) (0.59) (0.53) (0.54)
Dividends in excess of net
investment income ...................... - - - - -
Distributions from realized gains ....... (1.98) (1.67) (0.91) (1.40) (0.47)
Distributions in excess of realized
gains .................................. - - - (0.03) -
Tax return of capital distributions ..... - - - - -
------ ------- ------ ------ -------
Total dividends and distributions ....... (2.54) (2.17) (1.50) (1.96) (1.01)
------ ------- ------ ------ -------
Net asset value, end of period ............ $19.18 $18.51 $17.58 $16.64 $16.76
====== ======= ====== ====== =======
Total return .............................. 17.79% 18.11% 15.06% 11.68% 19.75%
====== ======= ====== ====== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ......... $2,126,313 $1,936,429 $1,724,089 $1,637,856 $1,523,142
Ratio of expenses to average net
assets .................................. 0.44% 0.45% 0.45% 0.41% 0.40%
Ratio of net investment income to
average net assets ...................... 2.68% 3.00% 3.30% 3.15% 3.33%
Portfolio turnover rate ................... 107% 95% 146% 177% 186%
<CAPTION>
CLASS IB
-------------------------------------
JULY 8, 1998*
YEAR ENDED TO
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------ ------------------
<S> <C> <C>
Net asset value, beginning of period ...... $18.51 $19.48
------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ................... 0.47 0.24
Net realized and unrealized gain on
investments and foreign currency
transactions ........................... 2.69 0.66
------ ------
Total from investment operations ........ 3.16 0.90
------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................. (0.54) (0.20)
Dividends in excess of net
investment income ...................... - -
Distributions from realized gains ....... (1.98) (1.67)
Distributions in excess of realized
gains .................................. - -
Tax return of capital distributions ..... - -
------ ------
Total dividends and distributions ....... (2.52) (1.87)
------ ------
Net asset value, end of period ............ $19.15 $18.51
====== ======
Total return .............................. 17.50% 4.92%(b)
====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ......... $10,701 $10
Ratio of expenses to average net
assets .................................. 0.69% 0.70%(a)
Ratio of net investment income to
average net assets ...................... 2.43% 2.65%(a)
Portfolio turnover rate ................... 107% 95%
</TABLE>
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
95
- --------------------------------------------------------------------------------
ALLIANCE COMMON STOCK PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------ ------------------ ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period .......................... $24.35 $21.61 $18.23 $16.48 $13.36
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.17 0.18 0.14 0.15 0.20
Net realized and unrealized
gain on investments and
foreign currency
transactions ................... 5.84 5.99 5.12 3.73 4.12
------ ------ ------ ------- ------
Total from investment
operations ..................... 6.01 6.17 5.26 3.88 4.32
------ ------ ------ ------- ------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. (0.16) (0.15) (0.11) (0.15) (0.20)
Dividends in excess of net
investment income .............. - - - - (0.02)
Distributions from realized
gains .......................... (4.03) (3.28) (1.77) (1.76) (0.95)
Distributions in excess of
realized gains ................. - - - (0.22) (0.03)
Tax return of capital
distributions .................. - - - - -
------ ------ ------ ------- ------
Total dividends and
distributions .................. (4.19) (3.43) (1.88) (2.13) (1.20)
------ ------ ------ ------- ------
Net asset value, end of period..... $26.17 $24.35 $21.61 $18.23 $16.48
====== ====== ====== ======= ======
Total return ...................... 25.19% 29.39% 29.40% 24.28% 32.45%
====== ====== ====== ======= ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $14,951,495 $12,061,977 $9,331,994 $6,625,390 $4,879,677
Ratio of expenses to average
net assets ...................... 0.38% 0.39% 0.39% 0.38% 0.38%
Ratio of net investment
income to average net
assets .......................... 0.65% 0.75% 0.69% 0.85% 1.27%
Portfolio turnover rate ........... 57% 46% 52% 55% 61%
<CAPTION>
CLASS IB
---------------------------------------------------------
OCTOBER 2,*
1996 TO
YEAR ENDED DECEMBER 31, DECEMBER
---------------------------------------- 31,
1999 1998 1997 1996
-------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period .......................... $24.30 $21.58 $18.22 $17.90
------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.10 0.10 0.10 0.02
Net realized and unrealized
gain on investments and
foreign currency
transactions ................... 5.82 6.00 5.11 1.52
------ ------ ------ ------
Total from investment
operations ..................... 5.92 6.10 5.21 1.54
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. (0.14) (0.10) (0.08) -
Dividends in excess of net
investment income .............. - - - (0.03)
Distributions from realized
gains .......................... (4.03) (3.28) (1.77) (0.16)
Distributions in excess of
realized gains ................. - - - (1.03)
Tax return of capital
distributions .................. - - - -
------ ------ ------ ------
Total dividends and
distributions .................. (4.17) (3.38) (1.85) (1.22)
------ ------ ------ ------
Net asset value, end of period..... $26.05 $24.30 $21.58 $18.22
====== ====== ====== ======
Total return ...................... 24.88% 29.06% 29.07% 8.49%(b)
====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) .........................$1,642,066 $834,144 $228,780 $1,244
Ratio of expenses to average
net assets ...................... 0.63% 0.64% 0.64% 0.63%(a)
Ratio of net investment
income to average net
assets .......................... 0.39% 0.44% 0.46% 0.61%(a)
Portfolio turnover rate ........... 57% 46% 52% 55%
</TABLE>
------------------------- EQ Advisors Trust
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
96
- --------------------------------------------------------------------------------
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ........................ $12.32 %11.89 $11.29 $11.52 $10.15
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ......... 0.47 0.49 0.49 0.50 0.60
Net realized and unrealized
gain on investments and
foreign currency
transactions ................. 0.76 1.12 0.97 0.07 1.43
------ ------ ------ ------ ------
Total from investment
operations ................... 1.23 1.61 1.46 0.57 2.03
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income ............ (0.44) (0.48) (0.49) (0.51) (0.59)
Distributions from realized
gains ........................ (0.56) (0.70) (0.37) (0.27) (0.07)
Distributions in excess of
realized gains ............... - - - (0.02) -
Tax return of capital
distributions ................ - - - - -
------ ------ ------ ------ ------
Total dividends and
distributions ................ (1.00) (1.18) (0.86) (0.80) (0.66)
------ ------ ------ ------ ------
Net asset value, end of
period ......................... $12.55 $12.32 $11.89 $11.29 $11.52
====== ====== ====== ====== ======
Total return .................... 10.14% 13.88% 13.25% 5.21% 20.40%
======= ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ....................... $394,489 $355,441 $307,847 $282,402 $252,101
Ratio of expenses to average
net assets .................... 0.53% 0.53% 0.57% 0.61% 0.59%
Ratio of net investment
income to average
net assets .................... 3.73% 3.99% 4.17% 4.48% 5.48%
Portfolio turnover rate ......... 111% 103% 206% 181% 287%
<CAPTION>
CLASS 1B
----------------------------------------
YEAR ENDED MAY 1, 1997*
DECEMBER 31, TO
----------------------- DECEMBER 31,
1999 1998 1997
----------- ----------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of
period ........................ $12.31 $11.88 $11.29
------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ......... 0.44 0.46 0.31
Net realized and unrealized
gain on investments and
foreign currency
transactions ................. 0.75 1.12 1.01
------ ------ ------
Total from investment
operations ................... 1.19 1.58 1.32
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income ............ (0.43) (0.45) (0.36)
Distributions from realized
gains ........................ (0.56) (0.70) (0.37)
Distributions in excess of
realized gains ............... - - -
Tax return of capital
distributions ................ - - -
------ ------ ------
Total dividends and
distributions ................ (0.99) (1.15) (0.73)
------ ------ ------
Net asset value, end of
period ......................... $12.51 $12.31 $11.88
====== ======= ======
Total return .................... 9.87% 13.60% 11.84%(b)
====== ======= ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ....................... $81,555 $32,653 $5,694
Ratio of expenses to average
net assets .................... 0.78% 0.78% 0.80%(a)
Ratio of net investment
income to average
net assets .................... 3.48% 3.68% 3.82%(a)
Portfolio turnover rate ......... 111% 103% 206%
</TABLE>
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
97
- --------------------------------------------------------------------------------
ALLIANCE EQUITY INDEX PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period .......................... $25.00 $19.74 $15.16 $13.13 $ 9.87
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.28 0.27 0.26 0.27 0.26
Net realized and unrealized
gain on investments and
foreign currency
transactions ................... 4.78 5.25 4.64 2.65 3.32
------ ------ ------ ------ ------
Total from investment
operations ..................... 5.06 5.52 4.90 2.92 3.58
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. (0.27) (0.25) (0.25) (0.25) (0.22)
Dividends in excess of net
investment income - ............ - - - - -
Distributions from realized
gains .......................... (0.22) (0.01) (0.07) (0.64) (0.09)
Distributions in excess of
realized gains ................. - - - - (0.01)
Tax return of capital
distributions .................. - - - - -
------ ------ ------ ------ ------
Total dividends and
distributions .................. (0.49) (0.26) (0.32) (0.89) (0.32)
------ ------ ------ ------ ------
Net asset value, end of period..... $29.57 $25.00 $19.74 $15.16 $13.13
====== ====== ====== ====== ======
Total return ...................... 20.38% 28.07% 32.58% 22.39% 36.48%
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $2,618,539 $1,689,913 $943,631 $386,249 $165,785
Ratio of expenses to average
net assets ...................... 0.33% 0.34% 0.37% 0.39% 0.48%
Ratio of net investment
income to average net
assets .......................... 1.05% 1.23% 1.46% 1.91% 2.16%
Portfolio turnover rate ........... 5% 6% 3% 15% 9%
<CAPTION>
CLASS 1B
----------------------------------------
YEAR ENDED MAY 1, 1997*
DECEMBER 31, TO
----------------------- DECEMBER 31,
1999 1998 1997
----------- ----------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of
period .......................... $24.98 $19.73 $16.35
------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.21 0.22 0.14
Net realized and unrealized
gain on investments and
foreign currency
transactions ................... 4.78 5.24 3.48
------ ------ ------
Total from investment
operations ..................... 4.99 5.46 3.62
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. (0.25) (0.20) (0.17)
Dividends in excess of net
investment income - ............ - - -
Distributions from realized
gains .......................... (0.22) (0.01) (0.07)
Distributions in excess of
realized gains ................. - - -
Tax return of capital
distributions .................. - - -
------ ------ ------
Total dividends and
distributions .................. (0.47) (0.21) (0.24)
------ ------ ------
Net asset value, end of period..... $29.50 $24.98 $19.73
====== ======= ======
Total return ...................... 20.08% 27.74% 22.28%(b)
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $20,931 $443 $110
Ratio of expenses to average
net assets ...................... 0.58% 0.59% 0.62%(a)
Ratio of net investment
income to average net
assets .......................... 0.78% 0.98% 1.10%(a)
Portfolio turnover rate ........... 5% 6% 3%
</TABLE>
------------------------- EQ Advisors Trust
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
98
- --------------------------------------------------------------------------------
ALLIANCE GLOBAL PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period .......................... $19.46 $17.29 $16.92 $15.74 $13.87
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.10 0.14 0.17 0.21 0.26
Net realized and unrealized
gain on investments and
foreign currency
transactions ................... 7.25 3.56 1.75 2.05 2.32
------ ------ ------ ------ ------
Total from investment
operations ..................... 7.35 3.70 1.92 2.26 2.58
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. (0.02) (0.22) (0.36) (0.21) (0.25)
Dividends in excess of net
investment income .............. - - - (0.08) -
Distributions from realized
gains .......................... (1.63) (1.31) (1.19) (0.79) (0.42)
Distributions in excess of
realized gains ................. - - - - (0.03)
Tax return of capital
distributions .................. - - - - (0.01)
------ ------ ------ ------ ------
Total dividends and
distributions .................. (1.65) (1.53) (1.55) (1.08) (0.71)
------- ------- ------ ------ ------
Net asset value, end of period..... $25.16 $ 19.46 $17.29 $16.92 $15.74
======= ======= ====== ====== ======
Total return ...................... 38.53% 21.80% 11.66% 14.60% 18.81%
======= ======= ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $1,869,185 $1,360,220 $1,203,867 $997,041 $686,140
Ratio of expenses to average
net assets ...................... 0.70% 0.71% 0.69% 0.60% 0.61%
Ratio of net investment
income to average net
assets .......................... 0.45% 0.72% 0.97% 1.28% 1.76%
Portfolio turnover rate ........... 93% 105% 57% 59% 67%
<CAPTION>
CLASS 1B
-----------------------------------------------------
OCTOBER 2,*
YEAR ENDED DECEMBER 31, 1996 TO
------------------------------------ DECEMBER 31,
1999 1998 1997 1996
------------ ----------- ----------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period .......................... $19.41 $17.27 $16.91 $16.57
------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.03 0.08 0.12 0.02
Net realized and unrealized
gain on investments and
foreign currency
transactions ................... 7.24 3.56 1.76 0.81
------ ------ ------ ------
Total from investment
operations ..................... 7.27 3.64 1.88 0.83
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. - (0.19) (0.33) -
Dividends in excess of net
investment income .............. - - - (0.11)
Distributions from realized
gains .......................... (1.63) (1.31) (1.19) (0.10)
Distributions in excess of
realized gains ................. - - - (0.28)
Tax return of capital
distributions .................. - - - -
------ ------ ------ ------
Total dividends and
distributions .................. (1.63) (1.50) (1.52) (0.49)
------ ------ ------ ------
Net asset value, end of period..... $25.05 $19.41 $17.27 $16.91
====== ====== ====== ======
Total return ...................... 38.17% 21.50% 11.38% 4.98%(b)
====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $121,052 $47,982 $21,520 $290
Ratio of expenses to average
net assets ...................... 0.95% 0.96% 0.97% 0.86%(a)
Ratio of net investment
income to average net
assets .......................... 0.16% 0.41% 0.67% 0.48%(a)
Portfolio turnover rate ........... 93% 105% 57% 59%
</TABLE>
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
99
- --------------------------------------------------------------------------------
ALLIANCE GROWTH AND INCOME PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...... $16.99 $15.38 $ 13.01 $ 11.70 $ 9.70
------ ------ ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ................... 0.06 0.06 0.15 0.24 0.33
Net realized and unrealized gain
(loss) on investments .................. 3.05 3.08 3.30 2.05 1.97
------- ------ ------- ------- -------
Total from investment operations ........ 3.11 3.14 3.45 2.29 2.30
------- ------ ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................. (0.05) (0.05) ( 0.15) ( 0.23) ( 0.30)
Distributions from realized gains ....... (1.81) (1.48) ( 0.93) ( 0.75) -
Tax return of capital distributions ..... - - - - -
------- ------ -------- -------- -------
Total dividends and distributions ....... (1.86) (1.53) ( 1.08) ( 0.98) ( 0.30)
------- ------ -------- -------- -------
Net asset value, end of period ............ $18.24 $16.99 $ 15.38 $ 13.01 $ 11.70
======= ====== ======== ======== =======
Total return .............................. 18.66% 20.86% 26.90% 20.09% 24.07%
======= ====== ======== ======== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ......... $1,241,619 $877,744 $555,059 $232,080 $98,053
Ratio of expenses to average net
assets .................................. 0.57% 0.58% 0.58% 0.58% 0.60%
Ratio of net investment income to
average net assets ...................... 0.33% 0.38% 0.99% 1.94% 3.11%
Portfolio turnover rate ................... 70% 74% 79% 88% 65%
<CAPTION>
CLASS IB
--------------------------------------------
YEAR END DECEMBER 31, MAY 1, 1997*
------------------------- TO
1999 1998 DECEMBER 31, 1997
------------ ------------ ------------------
<S> <C> <C> <C>
Net asset value, beginning of period ...... $16.95 $15.36 $13.42
------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ................... 0.01 0.03 0.05
Net realized and unrealized gain
(loss) on investments .................. 3.04 3.07 2.91
------ ------ ------
Total from investment operations ........ 3.05 3.10 2.96
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................. (0.03) (0.03) (0.09)
Distributions from realized gains ....... (1.81) (1.48) (0.93)
Tax return of capital distributions ..... - - -
------ ------ ------
Total dividends and distributions ....... (1.84) (1.51) (1.02)
------ ------ ------
Net asset value, end of period ............ $18.16 $16.95 $15.36
====== ====== ======
Total return .............................. 18.37% 20.56% 22.41%(b)
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ......... $261,663 $120,558 $32,697
Ratio of expenses to average net
assets .................................. 0.82% 0.83% 0.83%(a)
Ratio of net investment income to
average net assets ...................... 0.06% 0.17% 0.43%(a)
Portfolio turnover rate ................... 70% 74% 79%
</TABLE>
------------------------- EQ Advisors Trust
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
100
- --------------------------------------------------------------------------------
ALLIANCE GROWTH INVESTORS PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
-------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period .......................... $19.87 $18.55 $17.20 $17.68 $14.66
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.37 0.41 0.41 0.40 0.57
Net realized and unrealized
gain on investments and
foreign currency
transactions ................... 4.83 3.03 2.43 1.66 3.24
------ ------ ------ ------ ------
Total from investment
operations ..................... 5.20 3.44 2.84 2.06 3.81
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. (0.35) (0.41) (0.46) (0.40) (0.54)
Dividends in excess of net
investment income .............. - - - (0.03) (0.01)
Distributions from realized
gains .......................... (2.15) (1.71) (1.03) (2.10) (0.24)
Distributions in excess of
realized gains ................. - - - (0.01) -
Tax return of capital
distributions .................. - - - - -
------ ------ ------ ------- ------
Total dividends and
distributions .................. (2.50) (2.12) (1.49) (2.54) (0.79)
------ ------ ------ ------- ------
Net asset value, end of period..... $22.57 $19.87 $18.55 $17.20 $17.68
====== ====== ====== ======= ======
Total return ...................... 26.58% 19.13% 16.87% 12.61% 26.37%
====== ====== ====== ======= ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $2,495,787 $1,963,074 $1,630,389 $1,301,643 $896,134
Ratio of expenses to average
net assets ...................... 0.53% 0.55% 0.57% 0.57% 0.56%
Ratio of net investment
income to average net
assets .......................... 1.71% 2.10% 2.18% 2.31% 3.43%
Portfolio turnover rate ........... 98% 102% 121% 190% 107%
<CAPTION>
CLASS IB
-----------------------------------------------------
YEAR ENDED OCTOBER 2,
DECEMBER 31, 1996 TO
------------------------------------ DECEMBER 31,
1999 1998 1997 1996
------------ ----------- ----------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period .......................... $19.84 $18.52 $17.19 $16.78
------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.31 0.36 0.36 0.07
Net realized and unrealized
gain on investments and
foreign currency
transactions ................... 4.82 3.03 2.43 0.71
------ ------ ------ ------
Total from investment
operations ..................... 5.13 3.39 2.79 0.78
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. (0.31) (0.36) (0.43) (0.02)
Dividends in excess of net
investment income .............. - - - (0.09)
Distributions from realized
gains .......................... (2.15) (1.71) (1.03) (0.02)
Distributions in excess of
realized gains ................. - - - (0.24)
Tax return of capital
distributions .................. - - - -
------ ------ ------ ---------
Total dividends and
distributions .................. (2.46) (2.07) (1.46) (0.37)
-------- ------- ------ ---------
Net asset value, end of period..... $22.51 $19.84 $18.52 $17.19
====== ======= ====== ========
Total return ...................... 26.27% 18.83% 16.58% 4.64%(b)
====== ======= ======= =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $202,850 $92,027 $35,730 $472
Ratio of expenses to average
net assets ...................... 0.78% 0.80% 0.82% 0.84%(a)
Ratio of net investment
income to average net
assets .......................... 1.44% 1.85% 1.88% 1.69%(a)
Portfolio turnover rate ........... 98% 102% 121% 190%
</TABLE>
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
101
- --------------------------------------------------------------------------------
ALLIANCE HIGH YIELD PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ............................ $ 8.71 $10.41 $10.02 $ 9.64 $ 8.91
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ............. 0.90 1.07 1.04 1.02 0.98
Net realized and unrealized
gain (loss) on investments. ...... (1.19) (1.56) 0.75 1.07 0.73
------- ------ ------- ------ ------
Total from investment
operations ....................... (0.29) (0.49) 1.79 2.09 1.71
------- ------ ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ........................... (0.96) (1.03) (0.97) (0.98) (0.94)
Dividends in excess of net
investment income ................ - - - (0.03) (0.04)
Distributions from realized
gains ............................ (0.01) (0.18) (0.43) (0.70) -
Distributions in excess of
realized gains ................... - - - - -
Return of capital distributions ... (0.02) - - - -
------- ------ ------ ------- ------
Total dividends and
distributions .................... (0.99) (1.21) (1.40) (1.71) (0.98)
------- ------ ------ ------ ------
Net asset value, end of period ...... $ 7.43 $8.71 $10.41 $10.02 $ 9.64
====== ====== ====== ====== ======
Total return ........................ (3.35)% (5.15)% 18.48% 22.89% 19.92%
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ... $336,292 $405,308 $355,473 $199,360 $118,129
Ratio of expenses to average net
assets ............................ 0.63% 0.63% 0.62% 0.59% 0.60%
Ratio of net investment income to
average net assets ................ 10.53% 10.67% 9.82% 9.93% 10.34%
Portfolio turnover rate ............. 178% 181% 390% 485% 350%
<CAPTION>
CLASS IB
-------------------------------------------------------
OCTOBER 2,*
YEAR ENDED DECEMBER 31, 1996 TO
-------------------------------------- DECEMBER 31,
1999 1998 1997 1996
------------ ------------- ----------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period ............................ $8.69 $10.39 $10.01 $10.25
----- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ............. 0.87 1.04 1.05 0.19
Net realized and unrealized
gain (loss) on investments. ...... (1.18) (1.56) 0.71 0.15
------ ------ ------ ------
Total from investment
operations ....................... (0.31) (0.52) 1.76 0.34
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ........................... (0.95) (1.00) (0.95) (0.03)
Dividends in excess of net
investment income ................ - - - (0.25)
Distributions from realized
gains ............................ (0.01) (0.18) (0.43) (0.01)
Distributions in excess of
realized gains ................... - - - (0.29)
Return of capital distributions ... (0.02) - - -
------ ------ ------ ------
Total dividends and
distributions .................... (0.98) (1.18) (1.38) (0.58)
------ ------ ------ ------
Net asset value, end of period ...... $ 7.40 $ 8.69 $10.39 $0.01
====== ====== ====== ======
Total return ........................ (3.58)% (5.38)% 18.19% 3.32%(b)
====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ... $230,290 $207,042 $66,338 $685
Ratio of expenses to average net
assets ............................ 0.88% 0.88% 0.88% 0.82%(a)
Ratio of net investment income to
average net assets ................ 10.25% 10.60% 9.76% 8.71%(a)
Portfolio turnover rate ............. 178% 181% 390% 485%
</TABLE>
------------------------- EQ Advisors Trust
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
102
- --------------------------------------------------------------------------------
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 9.67 $ 9.44 $ 9.29 $ 9.47 $ 8.87
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................ 0.50 0.50 0.53 0.54 0.58
Net realized and unrealized gain (loss) on
investments ................................. (0.49) 0.21 0.13 (0.19) 0.57
------ ------ ------ ------ ------
Total from investment operations ............. 0.01 0.71 0.66 0.35 1.15
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income. ........ (0.50) (0.48) (0.51) (0.53) (0.55)
------ ------ ------ ------ ------
Net asset value, end of period ................. $ 9.18 $ 9.67 $ 9.44 $ 9.29 $ 9.47
====== ====== ====== ====== ======
Total return ................................... 0.02% 7.74% 7.29% 3.78% 13.33%
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) .............. $156,864 $153,383 $115,114 $88,384 $71,780
Ratio of expenses to average net assets ........ 0.55% 0.55% 0.55% 0.56% 0.57%
Ratio of net investment income to average
net assets ................................... 5.16% 5.21% 5.61% 5.73% 6.15%
Portfolio turnover rate ........................ 408% 539% 285% 318% 255%
<CAPTION>
CLASS IB
--------------------------------------------------
MAY 1, 1997*
YEAR ENDED DECEMBER 31, TO
------------------------------ DECEMBER 31,
1999 1998 1997
-------------- --------------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of period ........... $ 9.66 $ 9.43 $ 9.27
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................ 0.47 0.47 0.32
Net realized and unrealized gain (loss) on
investments ................................. (0.49) 0.22 0.22
------ ------ ------
Total from investment operations ............. (0.02) 0.69 0.54
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income. ........ (0.49) (0.46) (0.38)
------ ------ ------
Net asset value, end of period ................. $ 9.15 $ 9.66 $ 9.43
====== ====== ======
Total return ................................... (0.23)% 7.48% 5.83%(b)
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) .............. $45,911 $30,898 $5,052
Ratio of expenses to average net assets ........ 0.80% 0.80% 0.81%(a)
Ratio of net investment income to average
net assets ................................... 4.91% 4.87% 5.15%(a)
Portfolio turnover rate ........................ 408% 539% 285%
</TABLE>
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
103
- --------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
---------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------- APRIL 3, 1995*
TO
DECEMBER 31,
1999 1998 1997 1996 1995
------------ ------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period .......................... $11.13 $10.27 $11.50 $10.87 $10.00
------ ------ ------ ------ -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.08 0.09 0.10 0.13 0.14
Net realized and unrealized
gain (loss) on
investments and foreign
currency transactions .......... 4.07 0.97 (0.45) 0.94 0.98
------ ------ ------ ------ ------
Total from investment
operations ..................... 4.15 1.06 (0.35) 1.07 1.12
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. - (0.20) (0.32) (0.10) (0.07)
Dividends in excess of net
investment income .............. - - - (0.09) (0.13)
Distributions from realized
gains .......................... (0.25) - (0.56) (0.25) (0.05)
Tax return of capital
distributions .................. - - - - -
------ ------ ------ ------ ------
Total dividends and
distributions .................. (0.25) (0.20) (0.88) (0.44) (0.25)
------ ------ ------ ------ ------
Net asset value, end of period..... $15.03 $11.13 $10.27 $11.50 $10.87
====== ====== ====== ====== ======
Total return ...................... 37.31% 10.57% (2.98)% 9.82% 11.29%(b)
====== ====== ====== ======= ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $268,541 $204,767 $190,611 $151,907 $28,684
Ratio of expenses to average
net assets ...................... 1.08% 1.06% 1.08% 1.06% 1.03%(a)
Ratio of net investment
income to average net
assets .......................... 0.70% 0.81% 0.83% 1.10% 1.71%(a)
Portfolio turnover rate ........... 152% 59% 59% 48% 56%
<CAPTION>
CLASS IB
-----------------------------------------------
MAY 1, 1997*
YEAR ENDED DECEMBER 31, TO
---------------------------- DECEMBER 31,
1999 1998 1997
-------------- ------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of
period .......................... $11.11 $10.26 $11.39
------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.04 0.05 0.02
Net realized and unrealized
gain (loss) on
investments and foreign
currency transactions .......... 4.06 0.98 (0.31)
------ ------ ------
Total from investment
operations ..................... 4.10 1.03 (0.29)
------- ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. - (0.18) (0.28)
Dividends in excess of net
investment income .............. - - -
Distributions from realized
gains .......................... (0.25) - (0.56)
Tax return of capital
distributions .................. - - -
------ ------ ------
Total dividends and
distributions .................. (0.25) (0.18) (0.84)
------ ------ ------
Net asset value, end of period..... $14.96 $11.11 $10.26
====== ====== ======
Total return ...................... 36.90% 10.30% (2.54)%(b)
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $18,977 $7,543 $3,286
Ratio of expenses to average
net assets ...................... 1.33% 1.31% 1.38%(a)
Ratio of net investment
income to average net
assets .......................... 0.36% 0.44% 0.20%(a)
Portfolio turnover rate ........... 152% 59% 59%
</TABLE>
------------------------- EQ Advisors Trust
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
104
- --------------------------------------------------------------------------------
ALLIANCE MONEY MARKET PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period .............................. $10.22 $10.18 $10.17 $10.16 $10.14
------ ------ ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ............... 0.51 0.53 0.54 0.54 0.57
Net realized and unrealized
gain (loss) on investments ......... - - - (0.01) -
------ ------- ------- ------ ------
Total from investment
operations ......................... 0.51 0.53 0.54 0.53 0.57
------ ------ ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ............................. (0.45) (0.49) (0.53) (0.52) (0.55)
Dividends in excess of net
investment income .................. - - - - -
Dividends from realized gains ....... - - - - -
------ ------ ------ ------ ------
Total dividends and
distributions ...................... (0.45) (0.49) (0.53) (0.52) (0.55)
------- ------ ------ ------ --------
Net asset value, end of period ........ $10.28 $10.22 $10.18 $10.17 $10.16
====== ====== ====== ====== ========
Total return .......................... 4.96% 5.34% 5.42% 5.33% 5.74%
====== ====== ====== ====== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ..... $883,988 $723,311 $449,960 $463,422 $386,691
Ratio of expenses to average net
assets .............................. 0.37% 0.37% 0.39% 0.43% 0.44%
Ratio of net investment income to
average net assets .................. 4.91% 5.13% 5.28% 5.17% 5.53%
<CAPTION>
CLASS IB
-----------------------------------------------------------------
OCTOBER 2,
YEAR ENDED DECEMBER 31, 1996* TO
------------------------------------------------ DECEMBER 31,
1999 1998 1997 1996
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period .............................. $10.21 $10.17 $10.16 $10.16
------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ............... 0.49 0.49 0.52 0.11
Net realized and unrealized
gain (loss) on investments ......... (0.01) 0.02 - 0.01
------ ------ ------- ------
Total from investment
operations ......................... 0.48 0.51 0.52 0.12
------ ------ ------- ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ............................. (0.44) (0.47) (0.51) (0.02)
Dividends in excess of net
investment income .................. - - - (0.10)
Dividends from realized gains ....... - - - -
------ ------ ------ ------
Total dividends and
distributions ...................... (0.44) (0.47) (0.51) (0.12)
------- ------ ------ ------
Net asset value, end of period ........ $10.25 $10.21 $10.17 $10.16
======= ====== ====== ======
Total return .......................... 4.71% 5.08% 5.16% 1.29%(b)
======= ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ..... $559,713 $386,718 $123,675 $3,184
Ratio of expenses to average net
assets .............................. 0.62% 0.62% 0.63% 0.67%(a)
Ratio of net investment income to
average net assets .................. 4.68% 4.82% 5.02% 4.94%(a)
</TABLE>
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
105
- --------------------------------------------------------------------------------
ALLIANCE QUALITY BOND PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period .............................. $ 9.84 $ 9.74 $ 9.49 $ 9.61 $ 8.72
------ ------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ............... 0.54 0.55 0.60 0.57 0.57
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ....................... (0.74) 0.28 0.24 (0.07) 0.88
------ ------ ------ ------ ------
Total from investment
operations ......................... (0.20) 0.83 0.84 0.50 1.45
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ............................. (0.50) (0.53) (0.59) (0.60) (0.56)
Dividends in excess of net
investment income .................. - - - (0.02) -
Distributions from realized
gains .............................. (0.03) (0.20) - - -
Tax return of capital
distributions ...................... - - - - -
------ ------- ------ ------ ------
Total dividends and
distributions ...................... (0.53) (0.73) (0.59) (0.62) (0.56)
------ ------ ------ ------ ------
Net asset value, end of period ........ $ 9.11 $ 9.84 $ 9.74 $ 9.49 $ 9.61
====== ======= ======= ======= ======
Total return .......................... (2.00)% 8.69% 9.14% 5.36% 17.02%
====== ====== ====== ====== =====
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ..... $329,895 $322,418 $203,233 $155,023 $157,443
Ratio of expenses to average net
assets .............................. 0.56% 0.57% 0.57% 0.59% 0.59%
Ratio of net investment income to
average net assets .................. 5.64% 5.48% 6.19% 6.06% 6.13%
Portfolio turnover rate ............... 147% 194% 374% 431% 411%
<CAPTION>
CLASS 1B
-------------------------------
JULY 8, 1998*
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1999 1998
-------------- ----------------
<S> <C> <C>
Net asset value, beginning of
period .............................. $ 9.84 $ 9.90
------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ............... 0.52 0.25
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ....................... (0.75) 0.14
------ ------
Total from investment
operations ......................... (0.23) 0.39
------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ............................. (0.49) (0.25)
Dividends in excess of net
investment income .................. - -
Distributions from realized
gains .............................. (0.03) (0.20)
Tax return of capital
distributions ...................... - -
------- ------
Total dividends and
distributions ...................... (0.52) (0.45)
------- ------
Net asset value, end of period ........ $ 9.09 $ 9.84
======= ======
Total return .......................... (2.25)% 4.05%(b)
======= ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ..... $ 1,094 $10
Ratio of expenses to average net
assets .............................. 0.81% 0.81%(a)
Ratio of net investment income to
average net assets .................. 5.39% 5.06%(a)
Portfolio turnover rate ............... 147% 194%
</TABLE>
------------------------- EQ Advisors Trust
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
106
- --------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------- MAY 1, 1997*
TO
1999 1998 DECEMBER 31, 1997
------------ ------------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of period ..... $11.82 $12.35 $10.00
------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) ........... (0.05) 0.01 0.01
Net realized and unrealized gain
(loss) on investments ................. 3.34 (0.54) 2.65
------ ------ ------
Total from investment operations ....... 3.29 (0.53) 2.66
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................ - - (0.01)
Dividends in excess of net
investment income ..................... - - -
Distributions from realized gains ...... - - (0.30)
Tax return of capital distributions .... - - -
------ ------ ------
Total dividends and distributions ...... - - (0.31)
------ ------ ------
Net asset value, end of period ........... $15.11 $11.82 $12.35
====== ====== ======
Total return ............................. 27.75% (4.28)% 26.74%(b)
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........ $241,000 $198,360 $94,676
Ratio of expenses to average net
assets ................................. 0.95% 0.96% 0.95%(a)
Ratio of net investment income (loss)
to average net assets .................. (0.40)% 0.08% 0.10%(a)
Portfolio turnover rate .................. 221% 94% 96%
<CAPTION>
CLASS IB
----------------------------------------------
YEAR ENDED DECEMBER 31, MAY 1, 1997*
--------------------------- TO
1999 1998 DECEMBER 31, 1997
------------- ------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period ..... $11.79 $12.34 $10.00
------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) ........... (0.08) (0.02) (0.01)
Net realized and unrealized gain
(loss) on investments ................. 3.32 (0.53) 2.65
------ ------ ------
Total from investment operations ....... 3.24 (0.55) 2.64
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................ - - -
Dividends in excess of net
investment income ..................... - - -
Distributions from realized gains ...... - - (0.30)
Tax return of capital distributions .... - - -
------ ------ ------
Total dividends and distributions ...... - - (0.30)
------ ------ ------
Net asset value, end of period ........... $15.03 $11.79 $12.34
====== ====== ======
Total return ............................. 27.46% (4.44)% 26.57%(b)
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........ $162,331 $112,254 $46,324
Ratio of expenses to average net
assets ................................. 1.20% 1.20% 1.15%(a)
Ratio of net investment income (loss)
to average net assets .................. (0.65)% (0.17)% (0.12)%(a)
Portfolio turnover rate .................. 221% 94% 96%
</TABLE>
Financial Highlights
<PAGE>
- -----
107
- --------------------------------------------------------------------------------
EQ/ALLIANCE PREMIER GROWTH PORTFOLIO
<TABLE>
<CAPTION>
CLASS IA
----------------------
MAY 1, 1999*
TO
DECEMBER 31, 1999
----------------------
<S> <C>
Net asset value, beginning of period .................................................... $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................................................. 0.02
Net realized and unrealized gain on investments and foreign currency transactions ..... 1.89
------
Total from investment operations ...................................................... 1.91
------
LESS DISTRIBUTIONS:
Dividends from net investment income .................................................. (0.01)
Dividends in excess of net investment income .......................................... -
Distributions from realized gains ..................................................... (0.03)
Distributions in excess of realized gains ............................................. -
Tax return of capital distributions ................................................... -
------
Total dividends and distributions ..................................................... (0.04)
------
Net asset value, end of period .......................................................... $11.87
======
Total return ............................................................................ 19.14%(b)
======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ....................................................... $28,834
Ratio of expenses to average net assets after waivers ................................... 0.90%(a)(c)
Ratio of expenses to average net assets before waivers (f) .............................. 1.12%(a)(c)
Ratio of net investment income to average net assets after waivers ...................... 0.45%(a)(c)
Ratio of net investment income to average net assets before waivers (f) ................. 0.23%(a)(c)
Portfolio turnover rate ................................................................. 29%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ........................................... $ 0.01
<CAPTION>
CLASS IB
------------------------
MAY 1, 1999*
TO
DECEMBER 31, 1999
------------------------
<S> <C>
Net asset value, beginning of period .................................................... $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................................................. 0.01
Net realized and unrealized gain on investments and foreign currency transactions ..... 1.89
------
Total from investment operations ...................................................... 1.90
------
LESS DISTRIBUTIONS:
Dividends from net investment income .................................................. (0.01)
Dividends in excess of net investment income .......................................... -
Distributions from realized gains ..................................................... (0.03)
Distributions in excess of realized gains ............................................. -
Tax return of capital distributions ................................................... -
-------
Total dividends and distributions ..................................................... (0.04)
------
Net asset value, end of period .......................................................... $11.86
======
Total return ............................................................................ 18.97%(b)
======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ....................................................... $451,323
Ratio of expenses to average net assets after waivers ................................... 1.15%(a)(c)
Ratio of expenses to average net assets before waivers (f) .............................. 1.37%(a)(c)
Ratio of net investment income to average net assets after waivers ...................... 0.20%(a)(c)
Ratio of net investment income to average net assets before waivers (f) ................. (0.02)%(a)(c)
Portfolio turnover rate ................................................................. 29%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ........................................... $ 0.01
</TABLE>
------------------------- EQ Advisors Trust
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
108
- --------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX PORTFOLIO:**
<TABLE>
<CAPTION>
CLASS IA
------------------------------------------
NOVEMBER 24, 1998*
YEAR ENDED TO
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period ..................... $11.84 $11.67
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.16 0.03
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 3.10 0.31
------ ------
Total from investment operations ....................... 3.26 0.34
------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.13) (0.17)
Dividends in excess of net investment income ........... (0.01) -
Distributions from realized gains ........................ (0.11) -
------ ------
Total dividends and distributions ...................... (0.25) (0.17)
------ ------
Net asset value, end of period ........................... $14.85 $11.84
====== ======
Total return ............................................. 27.75% 2.94%(b)
====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $3,629 $735
Ratio of expenses to average net assets after waivers..... 0.69%(c) 0.59%(a)(c)
Ratio of expenses to average net assets before
waivers (f) ............................................ 0.80%(c) 1.24%(a)(c)
Ratio of net investment income to average net assets
after waivers .......................................... 1.21%(c) 1.36%(a)(c)
Ratio of net investment income to average net assets
before waivers (f) ..................................... 1.10%(c) 0.71%(a)(c)
Portfolio turnover rate .................................. 7% 3%
Average commission rate paid .............................
Effect of voluntary expense limitation during the
period: (f)
Per share benefit to net investment income ............ $ 0.03 $ 0.26
<CAPTION>
CLASS IB
--------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period ..................... $11.85 $10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.10 0.08
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 3.15 1.92
------ ------
Total from investment operations ....................... 3.25 2.00
------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.10) (0.15)
Dividends in excess of net investment income ........... (0.02) -
Distributions from realized gains ........................ (0.11) -
------- ------
Total dividends and distributions ...................... (0.23) (0.15)
------- ------
Net asset value, end of period ........................... $14.87 $11.85
======= ======
Total return ............................................. 27.50% 20.07%
======= ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $94,581 $48,075
Ratio of expenses to average net assets after waivers..... 0.94%(c) 0.84%(c)
Ratio of expenses to average net assets before
waivers (f) ............................................ 1.05%(c) 1.49%(c)
Ratio of net investment income to average net assets
after waivers .......................................... 0.96%(c) 1.11%(c)
Ratio of net investment income to average net assets
before waivers (f) ..................................... 0.85%(c) 0.46%(c)
Portfolio turnover rate .................................. 7% 3%
Average commission rate paid .............................
Effect of voluntary expense limitation during the
period: (f)
Per share benefit to net investment income ............ $ 0.03 $ 0.05
</TABLE>
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
109
- --------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
--------------------------------------------
NOVEMBER 24, 1998*
YEAR ENDED TO
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------------
<S> <C> <C>
Net asset value, beginning of period ....... $16.04 $14.18
------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) ............. 0.01 -
Net realized and unrealized gain on
investments and foreign currency
transactions ............................ 11.83 1.86
----- ------
Total from investment operations ......... 11.84 1.86
----- ------
LESS DISTRIBUTIONS:
Dividends from net investment
income .................................. - -
Dividends in excess of net investment
income .................................. - -
Distributions from realized gains ........ (0.48) -
Distributions in excess of realized
gains ................................... - -
------ -------
Total dividends and distributions ........ (0.48) -
------ -------
Net asset value, end of period ............. $27.40 $16.04
====== =======
Total return ............................... 74.43% 13.12%(b)
====== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) .......... $46,248 $ 5,978
Ratio of expenses to average net assets
after waivers ............................ 0.60%(c) 0.60%(a)(c)
Ratio of expenses to average net assets
before waivers (f) ....................... 0.70%(c) 0.79%(a)(c)
Ratio of net investment income to
average net assets after waivers ......... 0.09%(c) (0.05)%(a)(c)
Ratio of net investment income to
average net assets before waivers (f)..... (0.01)%(c) (0.24)%(a)(c)
Portfolio turnover rate .................... 184 % 79%
Effect of voluntary expense limitation
during the period: (f)
Per share benefit to net investment
income ................................. $0.01 $ -
<CAPTION>
CLASS IB
----------------------------------------------------------
MAY 1, 1997*
YEAR ENDED YEAR ENDED TO
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
------------------- ------------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period ....... $16.04 $11.92 $10.00
------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) ............. (0.02) (0.03) 0.02
Net realized and unrealized gain on
investments and foreign currency
transactions ............................ 11.79 4.15 2.21
------ ------ ------
Total from investment operations ......... 11.77 4.12 2.23
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income .................................. - - (0.02)
Dividends in excess of net investment
income .................................. - - -
Distributions from realized gains ........ (0.48) - (0.18)
Distributions in excess of realized
gains ................................... - - (0.11)
------ ------ ------
Total dividends and distributions ........ (0.48) - (0.31)
------ ------ ------
Net asset value, end of period ............. $27.33 $16.04 $11.92
====== ====== ======
Total return ............................... 73.62% 34.57% 22.42%(b)
====== ======= =====
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) .......... $1,665,635 $461,307 $99,317
Ratio of expenses to average net assets
after waivers ............................ 0.85%(c) 0.85%(c) 0.85%(a)
Ratio of expenses to average net assets
before waivers (f) ....................... 0.95%(c) 1.04%(c) 1.82%(a)
Ratio of net investment income to
average net assets after waivers ......... (0.16)%(c) (0.30)%(c) 0.61%(a)
Ratio of net investment income to
average net assets before waivers (f)..... (0.26)%(c) (0.49)%(c) (0.36)%(a)
Portfolio turnover rate .................... 184% 79 % 116 %
Effect of voluntary expense limitation
during the period: (f)
Per share benefit to net investment
income ................................. $ 0.01 $ 0.02 $ 0.04
</TABLE>
------------------------- EQ Advisors Trust
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
110
- --------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
-------------------------------------
NOVEMBER 24,
1998*
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1999 1998
-------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period ..................... $12.67 $13.22
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.28 0.06
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 0.20 (0.09)+
------ ------
Total from investment operations ....................... 0.48 (0.03)
------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.29) (0.24)
Distributions from realized gains ...................... (0.52) (0.28)
------ ------
Total dividends and distributions ...................... (0.81) (0.52)
------ ------
Net asset value, end of period ........................... $12.34 $12.67
====== ======
Total return ............................................. 3.80% (0.15)%(b)
====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $5,181 $2,415
Ratio of expenses to average net assets after waivers..... 0.60% 0.60%(a)(c)
Ratio of expenses to average net assets before
waivers (f) ............................................ 0.72% 0.79%(a)(c)
Ratio of net investment income to average net assets
after waivers .......................................... 2.15% 2.45%(a)(c)
Ratio of net investment income to average net assets
before waivers (f) ..................................... 2.03% 2.26%(a)(c)
Portfolio turnover rate .................................. 31% 17%
Effect of voluntary expense limitation during the
period: (f)
Per share benefit to net investment income ............ $ 0.02 $ 0.03
<CAPTION>
CLASS IB
--------------------------------------------------
MAY 1, 1997*
YEAR ENDED YEAR ENDED TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
-------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $12.67 $12.08 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.24 0.22 0.10
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 0.20 0.87 2.11
------ ------ ------
Total from investment operations ....................... 0.44 1.09 2.21
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.25) (0.22) (0.09)
Distributions from realized gains ...................... (0.52) (0.28) (0.04)
------ ------ ------
Total dividends and distributions ...................... (0.77) (0.50) (0.13)
------ ------ ------
Net asset value, end of period ........................... $12.34 $12.67 $12.08
======= ====== ======
Total return ............................................. 3.54% 9.11% 22.11%(b)
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $273,031 $242,001 $99,947
Ratio of expenses to average net assets after waivers..... 0.85% 0.85%(c) 0.85%(a)
Ratio of expenses to average net assets before
waivers (f) ............................................ 0.97% 1.04%(c) 1.74%(a)
Ratio of net investment income to average net assets
after waivers .......................................... 1.90% 2.20% (c) 2.49%(a)
Ratio of net investment income to average net assets
before waivers (f) ..................................... 1.78% 2.01% (c) 1.60%(a)
Portfolio turnover rate .................................. 31% 17% 9%
Effect of voluntary expense limitation during the
period: (f)
Per share benefit to net investment income ............ $ 0.02 $ 0.02 $ 0.03
</TABLE>
FINANCIAL HIGHLIGHTS
<PAGE>
- -----
111
- --------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
---------------------------------------
NOVEMBER 24,
1998*
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1999 1998
---------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period ..................... $10.59 $10.40
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.03 0.03
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 0.19 0.23+
------- -------
Total from investment operations ....................... 0.22 0.26
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.05) (0.06)
Distributions in excess of realized gains .............. - -
Return of capital distributions ........................ - (0.01)
------- ------
Total dividends and distributions ...................... (0.05) (0.07)
------ ------
Net asset value, end of period ........................... $10.76 $10.59
====== ======
Total return ............................................. 2.07% 2.63%(b)
====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $2,339 $747
Ratio of expenses to average net assets after waivers..... 0.75%(c) 0.75%(a)(c)
Ratio of expenses to average net assets before
waivers (f) ............................................ 0.84%(c) 0.92%(a)(c)
Ratio of net investment income to average net assets
after waivers .......................................... 0.40%(c) 0.72 %(a)(c)
Ratio of net investment income to average net assets
before waivers (f) ..................................... 0.32%(c) 0.55%(a)(c)
Portfolio turnover rate .................................. 192% 111%
Effect of voluntary expense limitation during the
period: (f)
Per share benefit to net investment income ........... $ 0.01 $ 0.17
<CAPTION>
CLASS IB
----------------------------------------------------
MAY 1, 1997*
YEAR ENDED YEAR ENDED TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
---------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $10.61 $ 11.85 $10.00
------ ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.02 0.05 0.01
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 0.17 (1.24) 1.90
------ ------- ------
Total from investment operations ....................... 0.19 (1.19) 1.91
------ ------- ------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.02) (0.04) (0.01)
Distributions in excess of realized gains .............. - - (0.05)
Return of capital distributions ........................ - (0.01) -
------ ------- ------
Total dividends and distributions ...................... (0.02) (0.05) (0.06)
------ ------ ------
Net asset value, end of period ........................... $10.78 $ 10.61 $11.85
====== ======= ======
Total return ............................................. 1.80% (10.02)% 19.15%(b)
====== ======= ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $149,618 $166,746 $120,880
Ratio of expenses to average net assets after waivers..... 1.00%(c) 1.00%(c) 1.00%(a)
Ratio of expenses to average net assets before
waivers (f) ............................................ 1.09%(c) 1.17%(c) 1.70%(a)
Ratio of net investment income to average net assets
after waivers .......................................... 0.21%(c) 0.47%(c) 0.26%(a)
Ratio of net investment income to average net assets
before waivers (f) ..................................... 0.12%(c) 0.30%(c) (0.44)%(a)
Portfolio turnover rate .................................. 192% 111% 44%
Effect of voluntary expense limitation during the
period: (f)
Per share benefit to net investment income ........... $ 0.02 $ 0.02 $ 0.03
</TABLE>
- ----------
* Commencement of Operations
** Commenced operations on January 1, 1998.
+ The amount shown for a share outstanding throughout the period does not
accord with the aggregate net gains on investments for that period
because of the timing of sales and repurchases of the Portfolio shares in
relation to fluctuating market value of the investments in the Portfolio.
(a) Annualized
(b) Total return is not annualized.
(c) Reflects overall Portfolio ratios for investment income and
non-class specific expense.
(d) On October 18, 1999, this Portfolio received, through a substitution
transaction, the assets and liabilities of the Hudson River Trust
Portfolio that followed the same investment objectives as this
Portfolio. The information for each of the preceding periods is that
of the predecessor Hudson River Trust Portfolio. Information for the
year ended December 31, 1999 includes the results of operations of
the predecessor Hudson River Trust Portfolio from January 1, 1999
through October 17, 1999.
(e) Net investment income and capital changes per share are based on
monthly average shares outstanding.
(f) For further information concerning fee waivers see the section
entitled "Expense Limitation Agreement" in this Prospectus.
------------------------- EQ Advisors Trust
FINANCIAL HIGHLIGHTS
<PAGE>
10
Prior performance of each adviser
- ----------------
112
- --------------------------------------------------------------------------------
The following table provides information concerning the historical performance
of another registered investment company (or series) and/or other institutional
private accounts managed by each Adviser that have investment objectives,
policies, strategies and risks substantially similar to those of the respective
Portfolio(s) of the Trust for which it serves as Adviser. The data is provided
to illustrate the past performance of the Advisers in managing substantially
similar investment vehicle as measured against specified market indices. This
data 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 and should
not confuse this performance data with performance data for each of the Trust's
Portfolios, which is shown for each Portfolio under the caption "ABOUT THE
INVESTMENT PORTFOLIOS."
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. Average annual total return
reflects changes in share prices and reinvestment of dividends and
distributions and is net of fund expenses. In each such instance, the share
prices and investment returns will fluctuate, reflecting market conditions as
well as changes in company-specific fundamentals of portfolio securities.
The performance results for the registered investment companies presented below
are generally subject to somewhat lower fees and expenses than the relevant
Portfolios although in most instances the fees and expenses are substantially
similar. In addition, holders of Contracts representing interests in the
Portfolios below will be subject to charges and expenses relating to such
Contracts. The performance results presented below do not reflect any insurance
related expenses and would be reduced if such charges were reflected.
The investment results presented below are unaudited. For more information on
the specified market indices used below, see the section "The Benchmarks."
PRIOR PERFORMANCE OF EACH ADVISER
<PAGE>
- -----
113
- --------------------------------------------------------------------------------
ANNUAL RATES OF RETURN OF OTHER FUNDS OR ACCOUNTS MANAGED BY ADVISERS AS OF
12/31/99 The name of the other fund or account managed by the Adviser is shown
in BOLD. The name of the Trust Portfolio is shown in (parentheses). The name of
the benchmark is shown in italics.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1 5 10 Since Inception
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT Portfolio) Year Years Years Inception Date
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Benchmark
- ------------------------------------------------------------------------------------------------------------------------
ALLIANCE PREMIER GROWTH FUND, INC. - ADVISOR CLASS(4),(7) (EQ/ALLIANCE PREMIER GROWTH PORTFOLIO)
29.42% N/A N/A 38.65% 10/1/96
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(1) 21.04% N/A N/A 21.60%
- ------------------------------------------------------------------------------------------------------------------------
BT ADVISORS FUNDS - EAFE EQUITY INDEX FUND - INSTITUTIONAL CLASS(6) (BT INTERNATIONAL EQUITY INDEX PORTFOLIO)
27.95% N/A N/A 14.07% 1/24/96
- ------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(3) 26.96% N/A N/A 13.88%
- ------------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH FUND(7) (MFS EMERGING GROWTH COMPANIES PORTFOLIO)
41.45% 28.05% 24.72% N/A 12/29/86
- ------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(2) 21.26% 16.69% 13.40% N/A
- ------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME FUND(6) (T. ROWE PRICE EQUITY INCOME PORTFOLIO)
3.82% 18.59% 14.14% N/A 10/31/85
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(1) 21.04% 28.51% 18.21% N/A
- ------------------------------------------------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE FUND(7) (WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO)
7.55% N/A N/A 14.21% 12/29/95
- ------------------------------------------------------------------------------------------------------------------------
Russell 2000 Value Index(5) (1.49)% N/A N/A 10.19%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The S&P 500 Index ("S&P 500") is an unmanaged weighted index containing
common stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the larger capitalization
portion of the United States stock market. The S&P 500 returns reflect the
reinvestment of dividends, if any, but do not reflect fees, brokerage
commissions, or other expenses of investing.
(2) The Russell 2000 Index ("Russell 2000") is an unmanaged index which tracks
the performance of 2,000 publicy-traded U.S.stocks. It is often used to
indicate the performance of smaller company stocks. It is compiled by the
Frank Russell Company.
(3) The Morgan Stanley Capital International EAFE Index ("EAFE Index") is a
market capitalization-weighted equity index composed of a sample of
companies representative of the market structure of Europe, Australasia and
the Far East. The returns of the EAFE Index assume dividends are reinvested
net of withholding tax and do not reflect any fees or operating expenses.
(4) Annualized performance for the Advisor Class shares. The Advisor Class
shares had a total expense ratio of 1.26% of its average daily net assets
for the year ended December 31, 1998. Other share classes have different
expenses and their performance will vary.
(5) The Russell 2000 Value Index ("Russell 2000 Value") is an unmanaged index
which measures the performance of those Russell 2000 companies with lower
price-to-book ratios and lower forecasted growth values. It is compiled by
the Frank Russell Company.
(6) The annual fees and expenses of the similar registered investment company
(or series thereof) (or composite) whose prior performance is shown in the
table above were less than those of the relevant Trust's Portfolio.
Consequently, if the Trust Portfolio's annual fees and expenses were used in
the calculation of the performance of the similar registered investment
company (or composite) that performance would be reduced.
(7) The annual fees and expenses of the similar registered investment company
(or series thereof) (or composite) whose prior performance is shown in the
table above were higher than those of the relevant Trust's Portfolio.
Consequently, if the Trust Portfolio's annual fees and expenses were used in
the calculation of the performance of the similar registered investment
company (or composite) that performance would be increased.
------------------------- EQ Advisors Trust
PRIOR PERFORMANCE OF EACH ADVISER
<PAGE>
- ----------------
114
- --------------------------------------------------------------------------------
If you wish to know more, you will find additional information about the Trust
and its Portfolios in the following documents, which are available, free of
charge by calling our toll-free number at 1-800-528-0204:
ANNUAL AND SEMI-ANNUAL REPORTS
The Annual and Semi-Annual Reports include more information about the Trust's
performance and are available upon request free of charge. The Annual Reports
usually includes performance information, a discussion of market conditions and
the investment strategies that affected the Portfolios' performance during the
last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI, dated May 1, 2000, is incorporated into this Prospectus by reference
and is available upon request free of charge by calling our toll free number at
1-800-528-0204.
You may visit the SEC's website at www.sec.gov to view the SAI and other
information about the Trust. You can also review and copy information about the
Trust, including the SAI, at the SEC's Public Reference Room in Washington,
D.C. or by electronic request at [email protected] or by writing the SEC's
Public Reference Section, Washington, D.C. 20549-0102. You may have to pay a
duplicating fee. To find out more about the Public Reference Room, call the SEC
at 1-202-942-8090.
Investment Company Act File Number: 811-07953
<PAGE>
EQ Advisors Trust(SM)
PROSPECTUS DATED MAY 1, 2000
- --------
1 EQ Advisors Trust(SM)
- --------------------------------------------------------------------------------
This Prospectus describes the forty-one (41) Portfolios offered by EQ Advisors
Trust and the Class IB shares offered by the Trust on behalf of each Portfolio
that you can choose as investment alternatives. Each Portfolio has its own
investment objective and strategies that are designed to meet different
investment goals. This Prospectus contains information you should know before
investing. Please read this Prospectus carefully before investing and keep it
for future reference.
<TABLE>
<S> <C>
INTERNATIONAL STOCK PORTFOLIOS
--------------------------------------------
DOMESTIC PORTFOLIOS Alliance Global
- ------------------------------------------- Alliance International
EQ/Aggressive Stock* BT International Equity Index
Alliance Common Stock Capital Guardian International
Alliance Equity Index Morgan Stanley Emerging Markets Equity
Alliance Growth and Income EQ/Putnam International Equity
EQ/Alliance Premier Growth T. Rowe Price International Stock
Alliance Small Cap Growth
EQ/Alliance Technology
BT Equity 500 Index FIXED INCOME PORTFOLIOS
BT Small Company Index --------------------------------------------
Calvert Socially Responsible Alliance High Yield
Capital Guardian Research Alliance Intermediate Government Securities
Capital Guardian U.S. Equity Alliance Money Market
EQ/Evergreen Alliance Quality Bond
Lazard Large Cap Value J.P. Morgan Core Bond*
Lazard Small Cap Value
MFS Emerging Growth Companies
MFS Growth with Income BALANCED/HYBRID PORTFOLIOS
MFS Research --------------------------------------------
Mercury Basic Value Equity* EQ/Balanced*
EQ/Putnam Growth & Income Value Alliance Conservative Investors
EQ/Putnam Investors Growth Alliance Growth Investors
T. Rowe Price Equity Income EQ/Evergreen Foundation
Warburg Pincus Small Company Value Mercury World Strategy*
EQ/Putnam Balanced
</TABLE>
*Effective May 1, 2000, the name of the Alliance Aggressive Stock Portfolio was
changed to the "EQ/Aggressive Stock Portfolio," the Alliance Balanced
Portfolio was changed to the "EQ/Balanced Portfolio," the JPM Core Bond
Portfolio was changed to the "J.P. Morgan Core Bond Portfolio," the Merrill
Lynch Basic Value Equity Portfolio was changed to the "Mercury Basic Value
Equity Portfolio," and the Merrill Lynch World Strategy Portfolio was changed
to the "Mercury World Strategy Portfolio."
- -------------------------------------------------------------------------------
YOU SHOULD BE AWARE THAT THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED OF THE INVESTMENT MERIT OF THESE PORTFOLIOS OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Master-Class B
<PAGE>
Overview
- ----------------
2 Overview
- --------------------------------------------------------------------------------
EQ ADVISORS TRUST
This Prospectus tells you about the forty-one (41) current Portfolios of EQ
Advisors Trust ("Trust") and the Class IB shares offered by the Trust on
behalf of each Portfolio. The Trust is an open-end management investment
company. Each Portfolio is a separate series of the Trust with its own
investment objective, investment strategies and risks, which are described in
this Prospectus. Each of the current Portfolios of the Trust, except for the
Lazard Small Cap Value Portfolio, the Morgan Stanley Emerging Markets Equity
Portfolio and the Mercury World Strategy Portfolio, are diversified for
purposes of the Investment Company Act of 1940, as amended ("1940 Act").
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 (the "Contract" or collectively, the
"Contracts") issued by The Equitable Life Assurance Society of the United
States ("Equitable") and Equitable of Colorado, Inc. ("EOC") as well as
insurance companies that are not affiliated with Equitable or EOC
("non-affiliated insurance companies") and to The Equitable Investment Plan
for Employees, Managers and Agents ("Equitable Plan"). The Prospectus is
designed to help you make informed decisions about the Portfolios that are
available under your Contract or under the Equitable Plan. You will find
information about your Contract and how it works in the accompanying
prospectus for the Contracts if you are a Contractholder or participant under
a Contract.
Equitable currently serves as the Manager of the Trust. In such capacity,
Equitable currently has overall responsibility for the general management and
administration of the Trust.
Information about the Advisers for each Portfolio is contained in the
description concerning that Portfolio in the section entitled "About the
Investment Portfolios." The Manager has the ultimate responsibility to oversee
each of the Advisers and to recommend their hiring, termination and
replacement. Subject to approval by the Board of Trustees, the Manager has
been granted relief by the Securities and Exchange Commission ("SEC")
("Multi-Manager Order") that enables the Manager without obtaining shareholder
approval to: (i) select new or additional Advisers for each of the Trust's
Portfolios; (ii) enter into new investment advisory agreements and materially
modify existing investment advisory agreements; and (iii) terminate and
replace the Advisers.
<PAGE>
Table of contents
- ----------------
3 Table of contents
- --------------------------------------------------------------------------------
- -------------------------------------------------------
1 SUMMARY INFORMATION CONCERNING EQ ADVISORS
TRUST 4
- -------------------------------------------------------
- -------------------------------------------------------
2 ABOUT THE INVESTMENT PORTFOLIOS 16
- -------------------------------------------------------
DOMESTIC PORTFOLIOS 20
EQ/Aggressive Stock 20
Alliance Common Stock 24
Alliance Equity Index 27
Alliance Growth and Income 30
EQ/Alliance Premier Growth 33
Alliance Small Cap Growth 35
EQ/Alliance Technology 38
BT Equity 500 Index 40
BT Small Company Index 42
Calvert Socially Responsible 44
Capital Guardian Research 46
Capital Guardian U.S. Equity 48
EQ/Evergreen 50
Lazard Large Cap Value 52
Lazard Small Cap Value 54
MFS Emerging Growth Companies 56
MFS Growth with Income 58
MFS Research 60
Mercury Basic Value Equity 62
EQ/Putnam Growth & Income Value 65
EQ/Putnam Investors Growth 67
T. Rowe Price Equity Income 69
Warburg Pincus Small Company Value 72
INTERNATIONAL STOCK PORTFOLIOS 74
Alliance Global 74
Alliance International 77
BT International Equity Index 81
Capital Guardian International 84
Morgan Stanley Emerging Markets Equity 87
EQ/Putnam International Equity 91
T. Rowe Price International Stock 94
FIXED INCOME PORTFOLIOS 97
Alliance High Yield 97
Alliance Intermediate Government Securities 101
Alliance Money Market 105
Alliance Quality Bond 108
J.P. Morgan Core Bond 111
BALANCED/HYBRID PORTFOLIOS 114
EQ/Balanced 114
Alliance Conservative Investors 119
Alliance Growth Investors 123
EQ/Evergreen Foundation 126
Mercury World Strategy 128
EQ/Putnam Balanced 131
- ------------------------------------------------------------
3 MORE INFORMATION ON PRINCIPAL RISKS 134
- ------------------------------------------------------------
- ------------------------------------------------------------
4 MANAGEMENT OF THE TRUST 140
- ------------------------------------------------------------
The Trust 140
The Manager 140
Expense Limitation Agreement 142
The Advisers 143
The Administrator 144
The Transfer Agent 144
Brokerage Practices 144
Brokerage Transactions with Affiliates 144
- ------------------------------------------------------------
5 FUND DISTRIBUTION ARRANGEMENTS 145
- ------------------------------------------------------------
- ------------------------------------------------------------
6 PURCHASE AND REDEMPTION 146
- ------------------------------------------------------------
- ------------------------------------------------------------
7 HOW ASSETS ARE VALUED 147
- ------------------------------------------------------------
- ------------------------------------------------------------
8 TAX INFORMATION 148
- ------------------------------------------------------------
- ------------------------------------------------------------
9 FINANCIAL HIGHLIGHTS 149
- ------------------------------------------------------------
- ------------------------------------------------------------
10 PRIOR PERFORMANCE OF EACH ADVISER 190
- ------------------------------------------------------------
<PAGE>
1
Summary information concerning EQ Advisors Trust
- -------
4 Summary information concerning EQ Advisors Trust
- --------------------------------------------------------------------------------
The following chart highlights the forty-one (41) Portfolios described in this
Prospectus that you can choose as investment alternatives under your Contracts
offered by Equitable or EOC. The chart and accompanying information identify
each Portfolio's investment objective(s), principal investment strategies, and
principal risks. "More Information on Principal Risks", which more fully
describes each of the principal risks, is provided beginning on page 134.
<TABLE>
<CAPTION>
EQ ADVISORS TRUST DOMESTIC PORTFOLIOS
PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
- --------------------------------------------------------------------------------------------
EQ/AGGRESSIVE STOCK Seeks to achieve long-term growth of capital
- --------------------------------------------------------------------------------------------
ALLIANCE COMMON STOCK Seeks to achieve long-term growth of capital and increased
income
- --------------------------------------------------------------------------------------------
ALLIANCE EQUITY INDEX Seeks a total return before expenses that approximates the
total return performance of the S&P 500 Index, including
reinvestment of dividends, at a risk level consistent with
that of the S&P 500 Index
- --------------------------------------------------------------------------------------------
ALLIANCE GROWTH AND INCOME Seeks to provide a high total return through a combination
of current income and capital appreciation by investing
primarily in income-producing common stocks and
securities convertible into common stocks
- --------------------------------------------------------------------------------------------
EQ/ALLIANCE PREMIER GROWTH Seeks long-term growth of capital by primarily investing in
equity securities of a limited number of large, carefully
selected, high quality United States companies that are
judged, by the Adviser, likely to achieve superior earnings
growth
- --------------------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH Seeks to achieve long-term growth of capital
- --------------------------------------------------------------------------------------------
EQ/ALLIANCE TECHNOLOGY Seeks to achieve growth of capital. Current income is
incidental to the Portfolio's objective
- --------------------------------------------------------------------------------------------
BT EQUITY 500 INDEX Seeks to replicate as closely as possible (before deduction
of Portfolio expenses) the total return of the S&P 500 Index
- --------------------------------------------------------------------------------------------
BT SMALL COMPANY INDEX Seeks to replicate as closely as possible (before the
deduction of Portfolio expenses) the total return of the
Russell 2000 Index
</TABLE>
<PAGE>
- -----
5 Summary information concerning EQ Advisors Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Stocks and other equity securities of small and General investment, small-cap and mid-cap company,
medium-sized companies (including securities of growth investing, leveraging, derivatives, liquidity,
companies in cyclical industries, companies whose securities lending, and foreign securities risks
securities are temporarily undervalued, companies in
special situations (e.g., change in management, new
products or changes in customer demand) and less widely
known companies)
- ------------------------------------------------------------------------------------------------------------------------------
Stocks and other equity securities (including preferred General investment, foreign securities, leveraging,
stocks or convertible debt) and fixed income securities derivatives, convertible securities, small-cap and mid-cap
(including junk bonds), foreign securities, derivatives, and company, junk bond, securities lending, and fixed income
securities lending risks
Securities in the S&P 500 Index, derivatives, and securities General investment, index-fund, derivatives, leveraging,
lending and securities lending risks
- ------------------------------------------------------------------------------------------------------------------------------
Stocks and securities convertible into stocks (including junk General investment, convertible securities, leveraging,
bonds) derivatives, foreign securities, junk bond, and fixed income
risks
- ------------------------------------------------------------------------------------------------------------------------------
Equity securities of a limited number of large, high-quality General investment, focused portfolio, growth investing,
companies that are likely to offer superior earnings growth convertible securities, derivatives, and foreign securities
risks
- ------------------------------------------------------------------------------------------------------------------------------
Stocks and other equity securities of smaller companies General investment, small-cap and mid-cap company,
and undervalued securities (including securities of growth investing, leveraging, derivatives, liquidity,
companies in cyclical industries, companies whose securities lending, portfolio turnover and foreign securities
securities are temporarily undervalued, companies in risks
special situations (e.g., change in management, new
products or changes in customer demand) and less widely
known companies)
- ------------------------------------------------------------------------------------------------------------------------------
Securities of companies in various industries that are General investment, sector, growth investing, small-cap
expected to benefit from technological advances and and mid-cap companies, derivatives, foreign securities,
improvements with potential for capital appreciation and fixed income, and securities lending risks
growth of capital, including well-known, established
companies or new or unseasoned companies
- ------------------------------------------------------------------------------------------------------------------------------
Common stocks of companies in the S&P 500 Index General investment, index-fund, and fixed income risks
- ------------------------------------------------------------------------------------------------------------------------------
Common stocks of small-cap companies in the Russell General investment, index-fund, small-cap and mid-cap
2000 Index company, derivatives, and fixed income risks
</TABLE>
-----------------EQ Advisors Trust
<PAGE>
- -----
6 Summary information concerning EQ Advisors Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQ ADVISORS TRUST DOMESTIC PORTFOLIOS
PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
- -------------------------------------------------------------------------------------------------
CALVERT SOCIALLY RESPONSIBLE Seeks long-term capital appreciation
- -------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN RESEARCH Seeks long-term growth of capital
- -------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN U.S. EQUITY Seeks long-term growth of capital
- -------------------------------------------------------------------------------------------------
EQ/EVERGREEN Seeks long-term capital growth
- -------------------------------------------------------------------------------------------------
LAZARD LARGE CAP VALUE Seeks capital appreciation by investing primarily in equity
securities of companies with relatively large capitalizations
(i.e., companies having market capitalizations of at least
$3 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
- -------------------------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE Seeks capital appreciation by investing in equity securities
of U.S. 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
- -------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES Seeks to provide long-term capital growth
- -------------------------------------------------------------------------------------------------
MFS GROWTH WITH INCOME Seeks to provide reasonable current income and long-term
growth of capital and income
- -------------------------------------------------------------------------------------------------
MFS RESEARCH Seeks to provide long-term growth of capital and future
income
- -------------------------------------------------------------------------------------------------
MERCURY BASIC VALUE EQUITY Seeks capital appreciation and secondarily, income by
investing in securities, primarily equities, that the Adviser
believes are undervalued and therefore represent basic
investment value
</TABLE>
<PAGE>
- -----
7 Summary information concerning EQ Advisors Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Common stocks of medium to large U.S. companies that General investment, growth investing, mid-cap company,
meet both investment and social criteria liquidity, and derivatives risks
- ---------------------------------------------------------------------------------------------------------------------------
Equity securities primarily of United States issuers and General investment, growth investing, convertible
securities whose principal markets are in the United States securities, and foreign securities risks
- ---------------------------------------------------------------------------------------------------------------------------
Equity securities primarily of United States companies with General investment, growth investing, convertible
market capitalization greater than $1 billion at the time of securities, and foreign securities risks
purchase
- ---------------------------------------------------------------------------------------------------------------------------
Common stocks of large U.S. companies that the Adviser General investment, mid-cap company, fixed income,
believes have anticipated earnings ranging from steady to growth investing portfolio turnover and value investing
accelerated growth and are undervalued. risks
- ---------------------------------------------------------------------------------------------------------------------------
Equity securities of companies with relatively large General investment, value investing, derivatives, and fixed
capitalizations that the Adviser believes are undervalued income risks
based on their return on equity or capital
- ---------------------------------------------------------------------------------------------------------------------------
Equity securities of small-cap U.S. companies in the range General investment, small-cap and mid-cap company,
of companies included in the Russell 2000 Index that the value investing, non-diversification, and fixed income risks
Adviser believes are undervalued based on their return on
equity or capital
- ---------------------------------------------------------------------------------------------------------------------------
Equity securities of emerging growth companies with the General investment, small-cap and mid-cap company,
potential to become major enterprises or that are major foreign securities, and growth investing risks
enterprises whose rates of earnings growth are expected to
accelerate
- ---------------------------------------------------------------------------------------------------------------------------
Equity securities (common stock, preferred stock, General investment, mid-cap company, foreign securities,
convertible securities, warrants and depositary receipts) and growth investing risks
- ---------------------------------------------------------------------------------------------------------------------------
Common stock or securities convertible into common stock General investment, small-cap and mid-cap company,
of companies with better than average prospects for foreign securities, fixed income, and growth investing risks
long-term growth
- ---------------------------------------------------------------------------------------------------------------------------
Equity securities that the Adviser believes are undervalued General investment, small-cap and mid-cap company,
value investing, and foreign securities risks
</TABLE>
-----------------EQ Advisors Trust
<PAGE>
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8 Summary information concerning EQ Advisors Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQ ADVISORS TRUST DOMESTIC PORTFOLIOS
PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
- ---------------------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME VALUE Seeks capital growth. Current income is a secondary
objective
- ---------------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH Seeks long-term growth of capital and any increased
income that results from this growth
- ---------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME Seeks to provide substantial dividend income and also
capital appreciation by investing primarily in
dividend-paying common stocks of established companies
- ---------------------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE Seeks long-term capital appreciation
</TABLE>
<PAGE>
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9 Summary information concerning EQ Advisors Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Common stocks (plus convertible bonds, convertible General investment, derivatives, foreign securities, value
preferred stocks, preferred stocks and debt securities) investing, and fixed income risks
- ----------------------------------------------------------------------------------------------------------------------------
Common stocks and convertible securities of companies General investment, growth investing, small-cap and
whose earnings are believed likely to grow faster than the mid-cap company, derivatives, foreign securities, and fixed
economy as a whole income risks
- ----------------------------------------------------------------------------------------------------------------------------
Dividend-paying common stocks of established companies General investment, value investing, foreign securities, and
fixed income risks
- ----------------------------------------------------------------------------------------------------------------------------
Equity securities of U.S. small-cap companies General investment, small-cap and mid-cap company,
portfolio turnover, foreign securities, fixed income, and
value investing risks
</TABLE>
-----------------EQ Advisors Trust
<PAGE>
- -----
10 Summary information concerning EQ Advisors Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQ ADVISORS TRUST INTERNATIONAL STOCK PORTFOLIOS
PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
- ------------------------------------------------------------------------------------------------------
ALLIANCE GLOBAL Seeks long-term growth of capital
- ------------------------------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL Seeks to achieve long-term growth of capital by investing
primarily in a diversified portfolio of equity securities
selected principally to permit participation in non-U.S.
companies with prospects for growth
- ------------------------------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX Seeks to replicate as closely as possible (before deduction
of Portfolio expenses) the total return of the MSCI EAFE
Index
- ------------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN INTERNATIONAL Seeks long-term growth of capital by investing primarily in
non-United States equity securities
- ------------------------------------------------------------------------------------------------------
MORGAN STANLEY EMERGING MARKETS EQUITY Seeks long-term capital appreciation by investing primarily
in equity securities of issuers in emerging countries
- ------------------------------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY Seeks capital appreciation
- ------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL STOCK Seeks long-term growth of capital through investment
primarily in common stocks of established non-U.S.
companies
</TABLE>
<PAGE>
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11 Summary information concerning EQ Advisors Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Equity securities of U.S. and established foreign companies General investment, foreign securities, liquidity, derivatives,
(including shares of other mutual funds investing in foreign securities lending, and fixed income risks
securities), debt securities, derivatives, and securities
lending
- --------------------------------------------------------------------------------------------------------------------------------
Equity securities of non-U.S. companies (including those in General investment, foreign securities, liquidity, growth
emerging markets securities) or foreign government investing, leveraging, derivatives, securities lending,
enterprises (including other mutual funds investing in portfolio turnover, and fixed income risks
foreign securities), debt securities, derivatives, and
securities lending)
- --------------------------------------------------------------------------------------------------------------------------------
Equity securities of companies in the MSCI EAFE Index General investment, index-fund, foreign securities, liquidity,
and derivatives risks
- --------------------------------------------------------------------------------------------------------------------------------
Non-United States equity securities primarily of companies General investment, foreign securities, growth investing,
located in Europe, Canada, Australia, and the Far East convertible securities, and derivatives risks
- --------------------------------------------------------------------------------------------------------------------------------
Equity securities of emerging market country companies General investment, foreign securities, convertible
securities, liquidity, derivatives, portfolio turnover,
non-diversification, and fixed income risks
- --------------------------------------------------------------------------------------------------------------------------------
Equity securities of foreign companies General investment, foreign securities, small-cap and
mid-cap company, liquidity, portfolio turnover, and
derivatives risks
- --------------------------------------------------------------------------------------------------------------------------------
Common stocks of established foreign companies General investment, foreign securities, liquidity, and
derivatives risks
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
12 Summary information concerning EQ Advisors Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQ ADVISORS TRUST FIXED INCOME PORTFOLIOS
PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
- ----------------------------------------------------------------------------------------------------------------
ALLIANCE HIGH YIELD Seeks to achieve a high return by maximizing current
income and, to the extent consistent with that objective,
capital appreciation
- ----------------------------------------------------------------------------------------------------------------
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES Seeks to achieve high current income consistent with
relative stability of principal through investment primarily in
debt securities issued or guaranteed as to principal and
interest by the U.S. Government or its agencies or
instrumentalities
- ----------------------------------------------------------------------------------------------------------------
ALLIANCE MONEY MARKET Seeks to obtain a high level of current income, preserve its
assets and maintain liquidity
- ----------------------------------------------------------------------------------------------------------------
ALLIANCE QUALITY BOND Seeks to achieve high current income consistent with
preservation of capital by investing primarily in investment
grade fixed income securities
- ----------------------------------------------------------------------------------------------------------------
J.P. MORGAN CORE BOND Seeks to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity
</TABLE>
<PAGE>
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13 Summary information concerning EQ Advisors Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------
High yield debt securities rated BB/Ba or below or unrated General investment, fixed income, leveraging, loan
securities of comparable quality ("junk bonds"), common participation and assignment, derivatives, liquidity, junk
stocks and other equity securities, foreign securities, bond, foreign securities, small-cap and mid-cap company,
derivatives, and securities lending and securities lending risks
- --------------------------------------------------------------------------------------------------------------------------
Securities issued or guaranteed by the U.S. Government, General investment, fixed income, leveraging, derivatives,
including repurchase agreements and forward and securities lending risks
commitments related to U.S. Government securities, debt
securities of non-governmental issuers that own
mortgages, short sales, the purchase or sale of securities
on a when-issued or delayed delivery basis, derivatives,
and securities lending
- --------------------------------------------------------------------------------------------------------------------------
High quality U.S. dollar-denominated money market General investment, money market, leveraging, foreign
instruments (including foreign securities) and securities securities, and securities lending risks
lending
- --------------------------------------------------------------------------------------------------------------------------
Investment-grade debt securities rated at least BBB/Baa or General investment, fixed income, convertible securities,
unrated securities of comparable quality at the time of leveraging, derivatives, securities lending, and foreign
purchase, convertible debt securities, preferred stock, securities risks
dividend-paying common stocks, foreign securities, the
purchase or sale of securities on a when-issued,
delayed-delivery or forward commitment basis, derivatives,
and securities lending
- --------------------------------------------------------------------------------------------------------------------------
Investment grade securities rated BBB/Baa or better at the General investment, fixed income, liquidity, portfolio
time of purchase (including foreign issuers) turnover, derivatives, and foreign securities risks
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
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14 Summary information concerning EQ Advisors Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQ ADVISORS TRUST BALANCED/HYBRID PORTFOLIOS
PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
- --------------------------------------------------------------------------------------------------
EQ/BALANCED Seeks to achieve a high return through both appreciation
of capital and current income
- --------------------------------------------------------------------------------------------------
ALLIANCE CONSERVATIVE INVESTORS Seeks to achieve a high total return without, in the opinion
of the Adviser, undue risk to principal
- --------------------------------------------------------------------------------------------------
ALLIANCE GROWTH INVESTORS Seeks to achieve the highest total return consistent with
the Adviser's determination of reasonable risk
- --------------------------------------------------------------------------------------------------
EQ/EVERGREEN FOUNDATION Seeks to provide, in order of priority, reasonable income,
conservation of capital and capital appreciation
- --------------------------------------------------------------------------------------------------
MERCURY WORLD STRATEGY Seeks 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
- --------------------------------------------------------------------------------------------------
EQ/PUTNAM BALANCED Seeks to provide a balanced investment composed of a
well-diversified portfolio of stocks and bonds that will
produce both capital growth and current income
</TABLE>
<PAGE>
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15 Summary information concerning EQ Advisors Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Debt and equity securities, money market instruments, General investment, asset allocation, fixed income,
foreign securities, derivatives, and securities lending derivatives, leveraging, liquidity, securities lending,
portfolio turnover, and foreign securities risks
- --------------------------------------------------------------------------------------------------------------------------------
Investment grade debt securities and equity securities of General investment, asset allocation, fixed income,
U.S. and foreign issuers, derivatives, and securities lending derivatives, convertible securities, liquidity, leveraging,
securities lending, portfolio turnover, and foreign securities
risks
- --------------------------------------------------------------------------------------------------------------------------------
Equity securities (including foreign stocks, preferred stocks, General investment, asset allocation, fixed income,
convertible securities, securities of small and medium-sized leveraging, derivatives, liquidity, convertible securities,
companies) and debt securities (including foreign debt small-cap and mid-cap company, securities lending, junk
securities and junk bonds), derivatives, and securities bond, portfolio turnover, and foreign securities risks
lending
- --------------------------------------------------------------------------------------------------------------------------------
Common stocks, preferred stocks, securities convertible General investment, convertible securities, portfolio
into or exchangeable for common stocks, corporate debt turnover, and fixed income risks
obligations, U.S. Government securities and short-term
debt instruments
- --------------------------------------------------------------------------------------------------------------------------------
Equity and fixed income securities of U.S. and foreign General investment, foreign securities, fixed income,
companies derivatives, non-diversification, liquidity, and portfolio
turnover risk
- --------------------------------------------------------------------------------------------------------------------------------
Well-diversified portfolio of stocks and bonds, and General investment, fixed income, derivatives, portfolio
negotiable instruments turnover and foreign securities risks
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
2
About the investment portfolios
- ----------------
16 About the investment portfolios
- --------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
principal investment objectives, strategies, and risks of each of the
Portfolios. Of course, there can be no assurance that any Portfolio will
achieve its investment objective.
Please note that:
o A fuller description of each of the principal risks is included in the
section "More Information on Principal Risks," which follows the
description of each Portfolio in this section of the Prospectus.
o Additional information concerning each Portfolio's strategies, investments,
and risks can also be found in the Trust's Statement of Additional
Information.
GENERAL INVESTMENT RISKS
Each of the Portfolios is subject to the following risks:
ASSET CLASS RISK: The returns from the types of securities in which a
Portfolio invests may underperform returns from the various general securities
markets or different asset classes.
MARKET RISK: You could lose money over short periods due to fluctuation in a
Portfolio's share price in reaction to stock or bond market movements, and
over longer periods during extended market downturns.
SECURITY SELECTION RISK: There is the possibility that the specific securities
selected by a Portfolio's Adviser will underperform other funds in the same
asset class or benchmarks that are representative of the general performance
of the asset class.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
THE BENCHMARKS
The performance of each of the Trust's Portfolios as shown on the following
pages compares each Portfolio's performance to that of a broad-based
securities market index, an index of funds with similar investment objectives
and/or a blended index. Each of the Portfolios' annualized rates of return are
net of: (i) its investment management fees; and (ii) its other expenses. These
rates are not representative of the actual return you would receive under your
Contract.
Broad-based securities indices are unmanaged and are not subject to fees and
expenses typically associated with managed investment company portfolios.
Broad-based securities indices are also not subject to contract and
insurance-related expenses and charges. Investments cannot be made directly in
a broad-based securities index. Comparisons with these benchmarks, therefore,
are of limited use. They are included because they are widely known and may
help you to understand the universe of securities from which each Portfolio is
likely to select its holdings.
THE CREDIT SUISSE FIRST BOSTON GLOBAL HIGH YIELD INDEX ("CSFB Index") has been
maintained since January 1986 and has several modules representing different
sectors of the high yield market, including a cash paying module, a
pay-in-kind module, and a default module. The CSFB Index is priced weekly and
can be sorted by industry, rating, seniority, liquidity, country of issue,
price, yield and spread.
THE LEHMAN AGGREGATE BOND INDEX ("Lehman Aggregate Bond") is an index
comprised of investment grade fixed income securities, including U.S.
Treasury, mortgage-backed, corporate and "Yankee" bonds (U.S.
dollar-denominated bonds issued outside the United States).
<PAGE>
- ----------
17 About the investment portfolios
- --------------------------------------------------------------------------------
THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX ("Lehman Gov't/Corp") represents an
unmanaged group of securities widely regarded by investors as representative of
the bond market.
THE LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX ("Lehman Intermediate Government
Bonds") represents an unmanaged group of securities consisting of all U.S.
Treasury and agency securities with remaining maturities of from one to ten
years and issue amounts of at least $100 million outstanding.
THE LEHMAN TREASURY BOND INDEX ("Lehman Treasury") represents an unmanaged group
of securities consisting of all currently offered public obligations of the U.S.
Treasury intended for distribution in the domestic market.
THE MERRILL LYNCH HIGH YIELD MASTER INDEX ("ML Master") represents an unmanaged
group of securities widely regarded by investors as representative of the high
yield bond market.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX
("MSCI EAFE") is a market capitalization weighted equity index composed of a
sample of companies representative of the market structure of Europe,
Australasia and the Far East. MSCI EAFE Index returns assume dividends
reinvested net of withholding taxes and do not reflect any fees or expenses.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE INDEX ("MSCI
EMF") is a market capitalization weighted equity index composed of companies
that are representative of the market structure of the following 25 countries:
Argentina, Brazil Free, Chile, China Free, Colombia, Czech Republic, Greece,
Hungary, India, Indonesia Free, Israel, Jordan, Korea, Mexico Free, Pakistan,
Peru, Philippines Free, Poland, Russia, South Africa, Sri Lanka, Taiwan,
Thailand Free, Turkey and Venezuela. "Free" MSCI indices excludes those shares
not purchasable by foreign investors.
THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX ("MSCI World") is an
arithmetic, market value-weighted average of the performance of over 1,300
securities listed on the stock exchanges of twenty foreign countries and the
United States.
THE RUSSELL 2000 INDEX ("Russell 2000") is an unmanaged index which tracks the
performance of 2,000 publicly-traded U.S. stocks. It is often used to indicate
the performance of smaller company stocks. It is compiled by the Frank Russell
Company.
THE RUSSELL 2000 GROWTH INDEX ("Russell 2000 Growth") is an unmanaged index
which measures the performance of those companies in the Russell 2000 Index with
higher price-to-book ratios and higher forecasted growth than other companies in
the Russell 2000 Index. It is compiled by the Frank Russell Company.
THE RUSSELL 2000 VALUE INDEX ("Russell 2000 Value") is an unmanaged index which
measures the performance of those Russell 2000 companies with lower
price-to-book ratios and lower forecasted growth values. It is compiled by the
Frank Russell Company.
SB WORLD (SALOMON BROTHERS NON-U.S.-DOLLAR WORLD GOVERNMENT BOND INDEX) This
index measures total-return performance of government bonds with a maturity of
one year or more in 12 countries other than the United States. The index weights
bonds based on market capitalization, so that large debt-issuing countries such
as Japan and Germany have larger representations than do smaller issuing
countries.
SALOMON BROTHERS BROAD INVESTMENT BOND INDEX ("SAL BIG") is an unmanaged
weighted index that contains approximately 4,700 individually priced investment
grade bonds.
THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500") is an
unmanaged weighted index containing common stocks of 500 industrial,
transportation, utility and financial companies, regarded as generally
------------------------------- EQ Advisors Trust
<PAGE>
- ----------
18 About the investment portfolios
- --------------------------------------------------------------------------------
representative of the larger capitalization portion of the United States stock
market. The S&P 500 returns reflect the reinvestment of dividends, if any, but
do not reflect fees, brokerage commissions or other expenses of investing.
THE STANDARD & POOR'S MIDCAP 400 INDEX ("S&P 400 MidCap") is an unmanaged
weighted index of 400 domestic stocks chosen for market size (median market
capitalization of about $610 million), liquidity, and industry group
representation. The S&P 400 returns reflect the reinvestment of dividends, if
any, but do not reflect fees, brokerage commissions or other expenses of
investing.
THE VALUE LINE CONVERTIBLE INDEX ("Value Line Convertible") is comprised of
585 of the most actively traded convertible bonds and preferred stocks on an
unweighted basis.
THE LIPPER AVERAGES are contained in Lipper's survey of the performance of
funds underlying a large universe of variable life and annuity contracts,
where performance averages are based on net asset values which reflect the
deduction of investment management fees and direct operating expenses, and,
for funds with Rule 12b-1 plans, asset-based sales charges. This survey is
published by Lipper Analytical Services, Inc., a firm recognized for its
reporting of performance of actively managed funds. Performance data shown for
the portfolios does not reflect the deduction of any insurance-related
expenses (which are assessed at the contract-level).
"Blended" performance numbers (e.g., 50% S&P 400/50% Russell 2000 or 60% S&P
500/40% Lehman Gov't/Corp) assume a static mix of the two indices. We believe
that these indices reflect more closely the market sectors in which certain
Portfolios invest.
50% S&P 400 MIDCAP INDEX/50% RUSSELL 2000 INDEX - is made up of 50% of the S&P
400 Index, which is an unmanaged weighted index of 400 domestic stocks chosen
for market size (median market capitalization of about $610 million), liquidity
and industry group representation; and 50% of the Russell 2000 Index, which is
an unmanaged index which tracks the performance of 2,000 publicly-traded U.S.
stocks.
50% (OR 60%) S&P 500 INDEX/50% (OR 40%) LEHMAN GOV'T/CORP. INDEX - is made up
of 50% (or 60%) of the S&P 500 Index, which is an unmanaged weighted index
containing common stocks of 500 industrial, transportation, utility and
financial companies, regarded as generally representative of the larger
capitalization portion of the United States stock market, and 50% (or 40%) of
the Lehman Government/Corporate Index, which represents an unmanaged group of
securities widely regarded by investors as representative of the bond market.
60% S&P 500 INDEX/40% LEHMAN AGGREGATE BOND INDEX - is made up of 60% of the
S&P 500 Index, which is an unmanaged weighted index containing common stocks of
500 industrial, transportation, utility and financial companies, regarded as
generally representative of the larger capitalization portion of the United
States stock market, and 40% of the Lehman Aggregate Bond Index, which is an
index comprised of investment grade fixed income securities, including U.S.
Treasury, mortgage-backed, corporate and "Yankee" bonds (U.S.
dollar-denominated bonds issued outside the United States).
75% S&P 500 INDEX/25% VALUE LINE CONVERTIBLE INDEX - is made up of 75% of the
S&P 500 Index, which is an unmanaged weighted index containing common stocks of
500 industrial, transportation, utility and financial companies, regarded as
generally representative of the larger capitalization portion of the United
States stock market, and 25% of the Value Line Convertible Index, which is
comprised of 585 of the most actively traded convertible bonds and preferred
stocks on an unweighted basis.
<PAGE>
- ----------
19 About the investment portfolios
- --------------------------------------------------------------------------------
70% S&P 500 INDEX/30% LEHMAN GOV'T/CORP. INDEX - is made up of 70% of the S&P
500 Index, which is an unmanaged weighted index containing common stocks of 500
industrial, transportation, utility and financial companies, regarded as
generally representative of the larger capitalization portion of the United
States stock market, and 30% of the Lehman Government/Corporate Index, which
represents an unmanaged group of securities widely regarded by investors as
representative of the bond market.
70% LEHMAN TREASURY/30% S&P 500 INDEX - is made up of 70% of the Lehman
Treasury Bond Index, which represents an unmanaged group of securities
consisting of all currently offered public obligations of the U.S. Treasury
intended for distribution in the domestic market, and 30% of the S&P 500
Index, which is an unmanaged weighted index containing common stocks of 500
industrial, transportation, utility and financial companies, regarded as
generally representative of the larger capitalization portion of the United
States stock market.
MERCURY WORLD STRATEGY COMPOSITE MARKET BENCHMARK - is made up of 36% of the
S&P 500 Index, which is an unmanaged weighted index containing common stocks of
500 industrial, transportation, utility and financial companies, regarded as
generally representative of the larger capitalization portion of the United
States stock market; 24% of the MSCI EAFE Index, which is a market
capitalization weighted equity index composed of a sample of companies
representative of the market structure of Europe, Australasia and the Far East;
21% of the Salomon Brothers U.S. Treasury Bond 1 year; and 14% Salomon Brothers
World Government ex U.S., and 5% U.S. Treasury Bill.
NASDAQ COMPOSITE INDEX - the Nasdaq Composite Index measures all Nasdaq
domestic and non-U.S. based common stocks listed on The Nasdaq Stock Market.
The Index is market-value weighted. This means that each company's security
affects the Index in proportion to its market value. The market value, the
last sale price multiplied by total shares outstanding, is calculated
throughout the trading day, and is related to the total value of the Index.
--------------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS
- ----------
20 EQ/AGGRESSIVE STOCK PORTFOLIO
- --------------------------------------------------------------------------------
EQ/AGGRESSIVE STOCK PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks and other equity securities
of small and medium-sized companies that, in the opinion of the Adviser, have
favorable appreciation prospects. The Portfolio may also invest in securities
of companies in cyclical industries, companies whose securities are
temporarily undervalued, companies in special situations (e.g., change in
management, new products or changes in customer demand), companies stocks
whose growth prospects are not recognized by the market and less widely known
companies.
The Portfolio may also invest up to 25% of its total assets in foreign
securities and may also make use of various other investment strategies,
(e.g., investments in debt securities, making secured loans of its portfolio
securities). The Portfolio may also use derivatives, including: writing
covered call options and purchasing call and put options on individual equity
securities, securities indexes and foreign currencies. The Portfolio may also
purchase and sell stock index and foreign currency futures contracts and
options thereon.
When market or financial conditions warrant, or it appears that the
Portfolio's investment objective will not be achieved primarily through
investments in common stocks, the Portfolio may invest in other equity-type
securities (such as preferred stocks and convertible debt instruments) and
options for hedging purposes. The Portfolio may also make temporary
investments in corporate fixed income securities, which will generally be
investment grade, or invest part of its assets in cash or cash equivalents,
including high-quality money market instruments for liquidity or defensive
purposes. Such investments could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
MULTIPLE-ADVISER RISK: The EQ/Aggressive Stock Portfolio employs multiple
Advisers. Each of the Advisers independently chooses and maintains a portfolio
of common stocks for the Portfolio and each is responsible for investing a
specific allocated portion of the Portfolio's assets. Because each Adviser
will be managing its allocated portion of the Portfolio independently from the
other Advisers, the same security may be held in two different portions of the
Portfolio, or may be acquired for one portion of the Portfolio at a time when
the Adviser of another portion deems it appropriate to dispose of the security
from that other portion. Similarly, under some market conditions, one Adviser
may believe that temporary, defensive investments in short-term instruments or
cash are appropriate when the other Adviser or Advisers believe continued
exposure to the equity markets is appropriate for their portions of the
Portfolio. Because each Adviser directs the trading for its own portion of the
Portfolio, and does not aggregate its transactions with those of the other
Advisers, the Portfolio may incur higher brokerage costs than would be the
case if a single Adviser were managing the entire Portfolio.
GROWTH INVESTING RISK: Certain of the Advisers for this Portfolio may use a
growth oriented approach to stock selection. The price of growth stocks may be
more sensitive to changes in current or expected earnings than the prices of
other stocks. The price of growth stocks is also subject to the risk that the
stock price of one or more companies will fall or will fail to appreciate as
anticipated by the Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because:
<PAGE>
- ----------
21 EQ/AGGRESSIVE STOCK PORTFOLIO
- --------------------------------------------------------------------------------
the securities of such companies are less well-known, held primarily by
insiders or institutional investors and may trade less frequently and in lower
volume; such companies are more likely to experience greater or more
unexpected changes in their earnings and growth prospects; such companies have
limited financial resources or may depend on a few key employees; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one,
five and ten years and compares the Portfolio's performance to: (i) the
returns of a broad-based index; (ii) the returns of a "blended" index of two
broad-based indices; and (iii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Aggressive Stock
Portfolio) managed by Alliance using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Aggressive Stock Portfolio) whose inception date is January 27,
1986. The assets of the predecessor were transferred to the Portfolio on
October 18, 1999. Following that transfer, the performance shown (for the
period October 19, 1999 through December 31, 1999) is that of the Portfolio.
For these purposes, the performance results of the Portfolio and its
predecessor registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
---------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
22 EQ/AGGRESSIVE STOCK PORTFOLIO
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1990 7.9%
1991 86.6%
1992 -3.4%
1993 16.5%
1994 -4.1%
1995 31.4%
1996 22.1%
1997 10.7%
1998 0.1%
1999 18.55%
Best quarter (% and time period) Worst quarter (% and time period)
26.02% (1998 4th Quarter) (27.23)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------
<S> <C> <C> <C>
EQ/Aggressive Stock Portfolio
- Class IB Shares 18.55% 16.05% 16.41%
- --------------------------------------------------------------------------
50% S&P 400 MidCap
Index/50% Russell
2000**, *** 18.09% 19.92% 15.41%
- --------------------------------------------------------------------------
S&P 400 MidCap Index** 14.72% 23.05% 17.32%
- --------------------------------------------------------------------------
Lipper MidCap Growth Funds
Average** 46.25% 22.54% 16.19%
</TABLE>
* For periods prior to the inception of Class IB Shares (October 1, 1996),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
*** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
In accordance with the Multi-Manager Order, the Manager may, among other
things, select new or additional Advisers for the Portfolio and may allocate
and re-allocate the Portfolio's assets among Advisers. Currently, Alliance
Capital Management, L.P. and Massachusetts Financial Services Company have
been selected by the Manager to serve as Advisers for this Portfolio. It is
anticipated that additional Advisers may be added in the future.
The Manager initially allocated the assets of the Portfolio and will allocate
all daily cash inflows (share purchases) and outflows (redemptions and expense
items) among the Advisers, subject to the oversight of the Board. The Manager
intends, on a periodic basis, to review the asset allocation in the Portfolio.
The Manager does not intend, but reserves the right, subject to the oversight
of the Board, to reallocate assets from one Adviser to another when it would
be in the best interest of the Portfolio and its shareholders to do so. In
some instances, the effect of the reallocation will be to shift assets from a
better performing Adviser to other Adviser(s).
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance was the exclusive Adviser to the Portfolio
and its predecessor (registered investment company) since the predecessor
commenced operations. Alliance, a publicly traded limited partnership, is
indirectly majority-owned by Equitable. Alliance manages investment companies,
endowment funds, insurance companies, foreign entities, qualified and non-tax
qualified corporate funds, public and private pension and profit-sharing
plans, foundations and tax-exempt organizations.
ALDEN M. STEWART and RANDALL E. HAASE have been the persons principally
responsible for the day-to-day management of the Portfolio and its
predecessor since 1993. Mr. Stewart, an Executive Vice President of
Alliance, has been associated with Alliance since 1970. Mr. Haase, a
Senior Vice President of Alliance, has been associated with Alliance since
1988.
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS was added as an Adviser to the Portfolio as of May 1, 2000. MFS
is America's oldest mutual fund organization. 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. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
<PAGE>
- ----------
23 EQ/AGGRESSIVE STOCK PORTFOLIO
- --------------------------------------------------------------------------------
The Portfolio Managers are TONI Y. SHIMURA, a Senior Vice President of
MFS, who has been employed by MFS as a portfolio manager since 1995; and
JOHN W. BALLEN, Chief Investment Officer and President of MFS, who
provides general oversight in the management of the Portfolio.
------------------------------ EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
24 ALLIANCE COMMON STOCK PORTFOLIO
- --------------------------------------------------------------------------------
ALLIANCE COMMON STOCK PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of capital and increase
income.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks and other equity-type
securities (such as preferred stocks or convertible debt) that the Adviser
believes will share in the growth of the nation's economy over a long period.
Most of the time, the Portfolio will invest primarily in common stocks that
are listed on national securities exchanges. Smaller amounts will be invested
in stocks that are traded over-the-counter and in other equity-type
securities. Current income is an incidental consideration. The Portfolio
generally will not invest more than 20% of its total assets in foreign
securities.
The Portfolio may also make use of various other investment strategies,
including making secured loans of up to 50% of its total assets. The Portfolio
may also use derivatives, including: writing covered call and put options,
buying call and put options on individual common stocks and other equity-type
securities, securities indexes, and foreign currencies. The Portfolio may also
purchase and sell stock index and foreign currency futures contracts and
options thereon.
When market or financial conditions warrant or it appears that the Portfolio's
investment objective will not be achieved by purchasing equity securities, the
Portfolio may invest a portion of its assets in debt securities, including
nonparticipating and nonconvertible preferred stocks, investment grade debt
securities and junk bonds, e.g., rated BB or lower by Standard & Poor's
("S&P") or Ba or lower by Moody's Investor Service, Inc. ("Moody's"). The
Portfolio also may make temporary investments in high-quality U.S.
dollar-denominated money market instruments. Such investment strategies could
result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. The value of convertible securities fluctuates both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
<PAGE>
- ----------
25 ALLIANCE COMMON STOCK PORTFOLIO
- --------------------------------------------------------------------------------
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known, held primarily by insiders
or institutional investors and may trade less frequently and in lower volume;
such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; such companies have limited
financial resources or may depend on a few key employees; and the products or
technologies of such companies may be at a relatively early stage of
development or not fully tested.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment-grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
if it invested in higher-rated obligations because BBB-rated securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
JUNK BOND RISK: The Portfolio may invest a portion of its assets in "junk
bonds" or lower-rated securities rated BB or lower by S&P or an equivalent
rating by any other nationally recognized statistical rating organization
("NRSRO") or unrated securities of similar quality. Junk bonds have
speculative elements or are predominantly speculative credit risks, therefore,
credit risk is particularly significant for this Portfolio. This Portfolio may
also be subject to greater credit risk because it may invest in debt
securities issued in connection with corporate restructurings by highly
leveraged issuers or in debt securities not current in the payment of interest
or principal, or in default.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. 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.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one,
five and ten years and compares the Portfolio's performance to: (i) the
returns of a broad-based index and (ii) the returns of an index of funds with
similar investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Common Stock
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Common Stock Portfolio) whose inception date is June 16, 1975.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
----------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
26 ALLIANCE COMMON STOCK PORTFOLIO
- --------------------------------------------------------------------------------
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1990 -8.4%
1991 37.6%
1992 3.0%
1993 24.6%
1994 -2.4%
1995 32.2%
1996 24.0%
1997 29.1%
1998 29.1%
1999 24.88%
Best quarter (% and time period) Worst quarter (% and time period)
28.34% (1998 4th Quarter) (15.05)% (1998 3rd Quarter)
AVERAGE ANNUAL TOTAL RETURNS*
---------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- -----------------------------------------------------------------------------
Alliance Common Stock Portfolio
- Class IB Shares 24.88% 27.74% 18.30%
- -----------------------------------------------------------------------------
S&P 500 Index** 21.03% 28.56% 18.21%
- -----------------------------------------------------------------------------
Lipper Growth Equity Mutual
Funds Average** 31.48% 26.45% 17.79%
- -----------------------------------------------------------------------------
* For periods prior to the inception of Class IB Shares (October 1, 1998),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
TYLER J. SMITH has been responsible for the day-to-day management of the
Portfolio and its predecessor since 1977. Mr. Smith, a Senior Vice President
of Alliance, has been associated with Alliance since 1970.
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
27 ALLIANCE EQUITY INDEX PORTFOLIO
- --------------------------------------------------------------------------------
ALLIANCE EQUITY INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks a total return before expenses that approximates
the total return performance of the S&P 500 Index, including reinvestment of
dividends, at a risk level consistent with that of the S&P 500 Index.
THE INVESTMENT STRATEGY
The Adviser will not utilize customary economic, financial or market analyses
or other traditional investment techniques in managing the Portfolio. Rather,
the Adviser will use proprietary modeling techniques to construct a portfolio
that it believes will, in the aggregate, approximate the performance results
of the S&P 500 Index.
The Adviser will first select from the largest capitalization securities in
the S&P 500 on a capitalization-weighted basis. Generally, the largest
capitalization securities reasonably track the S&P 500 because the S&P 500 is
significantly influenced by a small number of securities. However, in the
Adviser's view, selecting securities on the basis of their capitalization
alone would distort the Portfolio's industry diversification, and therefore
economic events could potentially have a dramatically different impact on the
performance of the Portfolio from that of the S&P 500. Recognizing this fact,
the modeling techniques also consider industry diversification when selecting
investments for the Portfolio. The Adviser also seeks to diversify the
Portfolio's assets with respect to market capitalization. As a result, the
Portfolio will include securities of smaller and medium-sized capitalization
companies in the S&P 500.
Cash may be accumulated in the Portfolio until it reaches approximately 1% of
the value of the Portfolio at which time such cash will be invested in common
stocks as described above. Accumulation of cash increases tracking error. The
Portfolio will, however, remain substantially fully invested in common stocks
even when common stock prices are generally falling. Similarly, adverse
performance of a stock will ordinarily not result in its elimination from the
Portfolio.
For more information on the S&P 500, see the preceding section "The
Benchmarks." The Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's Corporation ("S&P") and S&P makes no guarantee as to the
accuracy and/or completeness of the S&P 500 or any data included therein.
In order to reduce brokerage costs, maintain liquidity to meet shareholder
redemptions or minimize tracking error when the Portfolio holds cash, the
Portfolio may from time to time buy and hold futures contracts on the S&P 500
Index and options on such futures contracts. The contract value of futures
contracts purchased by the Portfolio plus the contract value of futures
contracts underlying call options purchased by the Portfolio will not exceed
20% of the Portfolio's total assets. The Portfolio may seek to increase income
by lending its portfolio securities with a value of up to 50% of its total
assets to brokers-dealers.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
INDEX-FUND RISK: The Portfolio is not actively managed and invests in
securities included in the index regardless of their investment merit.
Therefore, the Portfolio cannot modify its investment strategies to respond to
changes in the economy and may be particularly susceptible to a general
decline in the U.S. or global stock market segment relating to the index.
Although the Portfolio's modeling techniques are intended to produce
performance that approximates that of the S&P 500 (before expenses), there can
be no assurance that these techniques will reduce "tracking error" (i.e., the
difference between the Portfolio's investment results (before expenses) and
the S&P 500's). Tracking error may arise as a result of brokerage costs, fees
--------------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
28 ALLIANCE EQUITY INDEX PORTFOLIO
- --------------------------------------------------------------------------------
and operating expenses and a lack of correlation between the Portfolio's
investments and the S&P 500.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. 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.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last five calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one
year, five years and since inception and compares the Portfolio's performance
to: (i) the returns of a broad-based index and (ii) the returns of an index of
funds with similar investment objectives. Past performance is not an
indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Equity Index
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Equity Index Portfolio) whose inception date is March 1, 1994.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
<PAGE>
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1995 36.2%
1996 22.1%
1997 32.3%
1998 27.7%
1999 20.08%
Best quarter (% and time period) Worst quarter (% and time period)
21.05% (1998 4th Quarter) (10.02)% (1998 3rd Quarter)
AVERAGE ANNUAL TOTAL RETURNS*
--------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- ----------------------------------------------------------------------------
Alliance Equity Index Portfolio
- Class IB Shares 20.08% 27.61% 23.43%
- ----------------------------------------------------------------------------
S&P 500 Index** 21.03% 28.56% 24.14%
- ----------------------------------------------------------------------------
Lipper S&P 500 Index Funds
Average** 20.48% 28.07% 25.07%
- ----------------------------------------------------------------------------
* For periods prior to the inception of Class IB Shares (May 2, 1997),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345
Avenue of the Americas, New York, New York 10105.
<PAGE>
- ----------
29 ALLIANCE EQUITY INDEX PORTFOLIO
- --------------------------------------------------------------------------------
Alliance has been the Adviser to the Portfolio and its predecessor registered
investment company since the predecessor commenced operations. Alliance, a
publicly traded limited partnership, is indirectly majority-owned by
Equitable. Alliance manages investment companies, endowment funds, insurance
companies, foreign entities, qualified and non-tax qualified corporate funds,
public and private pension and profit-sharing plans, foundations and
tax-exempt organizations.
JUDITH A. DEVIVO has been responsible for the day-to-day management of the
Portfolio and its predecessor since its inception. Ms. DeVivo, a Vice
President of Alliance, has been associated with Alliance since 1970.
------------------------------ EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
30 ALLIANCE GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
ALLIANCE GROWTH AND INCOME PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide a high total return through a
combination of current income and capital appreciation by investing primarily
in income-producing common stocks and securities convertible into common
stocks.
THE INVESTMENT STRATEGY
The Portfolio seeks to maintain a portfolio yield above that of issuers
comprising the S&P 500 and to achieve (in the long run) a rate of growth in
Portfolio income that exceeds the rate of inflation. The Portfolio will
generally invest in common stocks of "blue chip" issuers, i.e., those:
o that have a total market capitalization of at least $1 billion;
o that pay periodic dividends; and
o whose common stock is in the highest four issuer ratings for S&P (i.e., A+,
A, B or B+) or Moody's (i.e., high grade, investment grade, upper medium
grade or medium grade) or, if unrated, is determined to be of comparable
quality by the Adviser.
It is expected that on average the dividend rate of these issuers will exceed
the average rate of issuers constituting the S&P 500.
The Portfolio may also invest without limit in securities convertible into
common stocks, which include convertible bonds, convertible preferred stocks
and convertible warrants. The Portfolio may also invest up to 30% of its total
assets in high yield, high risk convertible securities rated at the time of
purchase below investment grade (i.e., rated BB or lower by S&P or Ba or lower
by Moody's or determined by the Adviser to be of comparable quality).
The Portfolio does not expect to invest more than 25% of its total assets in
foreign securities, although it may do so without limit. It may enter into
foreign currency futures contracts (and related options), forward foreign
currency exchange contracts and options on currencies for hedging purposes.
The Portfolio may also write covered call and put options on securities and
securities indexes for hedging purposes or to enhance its return and may
purchase call and put options on securities and securities indexes for hedging
purposes. The Portfolio may also purchase and sell securities index futures
contracts and may write and purchase options thereon for hedging purposes.
When market or financial conditions warrant, the Portfolio may invest in
certain money market instruments for temporary or defensive purposes. Such
investment strategies could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. The value of convertible securities fluctuates both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income
<PAGE>
- ----------
31 ALLIANCE GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
securities, that portion of the Portfolio's performance will be affected by
changes in interest rates, the credit risk of the issuer, the duration or
maturity of the Portfolio's fixed income holdings, and adverse market or
economic conditions. When interest rates rise, the value of the Portfolio's
fixed income securities, particularly those with longer durations or
maturities, will go down. When interest rates fall, the reverse is true. In
addition, to the extent that the Portfolio invests in investment-grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than if it invested in higher-rated
obligations because BBB-rated securities are regarded as having only an
adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative.
JUNK BOND RISK: The Portfolio may invest a portion of its assets in "junk
bonds" or lower-rated securities rated BB or lower by S&P or an equivalent
rating by any other NRSRO or unrated securities of similar quality. Therefore,
credit risk is particularly significant for this Portfolio. Junk bonds have
speculative elements or are predominantly speculative credit risks. This
Portfolio may also be subject to greater credit risk because it may invest in
debt securities issued in connection with corporate restructurings by highly
leveraged issuers or in debt securities not current in the payment of interest
or principal, or in default.
FOREIGN SECURITIES RISK: To the extent the Portfolio invests in foreign
securities, it is subject to risks not associated with investing in U.S.
securities, which can adversely affect the Portfolio's performance. Foreign
markets, particularly emerging markets, may be less liquid, more volatile, and
subject to less government supervision than domestic markets. There may be
difficulties enforcing contractual obligations, and it may take more time for
trades to clear and settle. In addition, the value of foreign investments can
be adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last six calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one
year, five years and since inception and compares the Portfolio's performance
to: (i) the returns of a broad-based index; (ii) the returns of a "blended"
index of equity and fixed income securities; and (iii) the returns of an index
of funds with similar investment objectives. Past performance is not an
indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Growth and Income
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance and Growth Income Portfolio) whose inception date is October 1,
1993. The assets of the predecessor were transferred to the Portfolio on
October 18, 1999. Following that transfer, the performance shown (for the
period October 19, 1999 through December 31, 1999) is that of the Portfolio.
For these purposes, the performance results of the Portfolio and its
predecessor registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not
---------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
32 ALLIANCE GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
reflect any insurance and Contract-related fees and expenses, which would
reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1994 -0.8%
1995 23.8%
1996 19.8%
1997 26.6%
1998 20.6%
1999 18.37%
Best quarter (% and time period) Worst quarter (% and time period)
26.2% (1998 4th Quarter) (15.09)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
----------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
Alliance Growth and Income
Portfolio - Class IB Shares 18.37% 21.79% 16.87%
- ----------------------------------------------------------------------------
S&P 500 Index** 21.03% 28.56% 23.43%
- ----------------------------------------------------------------------------
75% S&P 500 Index/25%
Value Line Convertible**,*** 20.71% 25.01% 18.77%
- ----------------------------------------------------------------------------
Lipper Growth and Income Funds
Average** 14.51% 21.78% 17.57%
- ----------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (May 2, 1997),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
*** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
PAUL RISSMAN and W. THEODORE KUCK have been the persons responsible for the
day-to-day management of the Portfolio, Mr. Rissman since 1996 and Mr. Kuck
since the Portfolio and its predecessor's inception. Mr. Rissman, a Senior
Vice President of Alliance, has been associated with Alliance since 1989. Mr.
Kuck, a Vice President of Alliance, has been associated with Alliance since
1971.
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
33 EQ/ALLIANCE PREMIER GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
EQ/ALLIANCE PREMIER GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth of capital by primarily
investing in equity securities of a limited number of large, carefully
selected, high-quality United States companies that are judged, by the
Adviser, likely to achieve superior earnings growth.
THE INVESTMENT STRATEGY
The Portfolio invests primarily (at least 85% of its total assets) in equity
securities of United States companies. The Portfolio is diversified for
purposes of the 1940 Act, however it is still highly concentrated. The
Portfolio focuses on a relatively small number of intensively researched
companies. The Adviser selects the Portfolio's investments from a research
universe of more than 600 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects. An emphasis is placed on identifying securities of companies whose
substantially above-average prospective earnings growth is not fully reflected
in current market valuations.
Normally, the Portfolio invests in about 40-50 companies, with the 25 most
highly regarded of these companies usually constituting approximately 70% of
the Portfolio's net assets. In managing the Portfolio, the Adviser seeks to
capitalize on apparently unwarranted price fluctuations both to purchase or
increase positions on weakness and to sell or reduce overpriced holdings. The
Portfolio normally remains nearly fully invested and does not take significant
cash positions for market timing purposes. During market declines, while
adding to positions in favored stocks, the Portfolio becomes somewhat more
aggressive, gradually reducing the number of companies represented in its
holdings. Conversely, in rising markets, while reducing or eliminating fully
valued positions, the Portfolio becomes somewhat more conservative, gradually
increasing the number of companies represented in its holdings. Through this
approach, the Adviser seeks to gain positive returns in good markets while
providing some measure of protection in poor markets.
The Adviser expects the average market capitalization of companies represented
in the Portfolio normally to be in the range, or in excess, of the average
market capitalization of companies included in the S&P 500.
The Portfolio may invest up to 20% of its net assets in convertible securities
and 15% of its total assets in securities of foreign issuers.
The Portfolio may write covered exchange-traded call options on its securities
of up to 15% of its total assets, and purchase and sell exchange-traded call
and put options on common stocks written by others of up to, for all options,
10% of its total assets.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOCUSED PORTFOLIO RISK: The Portfolio invests in the securities of a limited
number of companies. Consequently, the Portfolio may incur more risk because
changes in the value of a single security may have a more significant effect,
either positive or negative, on the Portfolio's net asset value.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in
----------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
34 EQ/ALLIANCE PREMIER GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
relation to changes in interest rates and changes in the value of the
underlying common stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT L.P.: ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance's sole general partner is Alliance Capital
Management Corporation, which is an indirect wholly-owned subsidiary of
Equitable, one of the largest life insurance companies in the United States
and a wholly-owned subsidiary of The Equitable Companies Incorporated.
Therefore, the Manager and Alliance are affiliates of each other. Alliance, a
Delaware limited partnership, is a leading international investment manager.
ALFRED HARRISON is the Portfolio Manager and has been responsible for the
day-to-day management of the Portfolio since its inception. Mr. Harrison is
Vice Chairman of Alliance Capital Management Corporation and has been with
Alliance since 1978.
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
35 ALLIANCE SMALL CAP GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in U.S. common stocks and other equity-type
securities issued by smaller companies with favorable growth prospects. The
Portfolio may at times invest in companies in cyclical industries, companies
whose securities are temporarily undervalued, companies in special situations
(e.g., change in management, new products or changes in customer demand) and
less widely known companies.
Under normal market conditions, the Portfolio intends to invest at least 65%
of its total assets in securities of small capitalization companies (currently
considered by the Adviser to mean companies with market capitalization at or
below $3 billion).
The Portfolio may invest in foreign securities and may also make use of
various other investment strategies, including making secured loans of up to
50% of its total portfolio securities. The Portfolio may also use derivatives
including: writing covered call options and purchasing call and put options on
individual equity securities, securities indexes and foreign currencies. The
Portfolio may also purchase and sell stock index and foreign currency futures
contracts and options thereon.
The Portfolio may invest up to 20% of its net asset value, measured at the
time of investment, in securities principally traded on foreign securities
markets (other than commercial paper).
When market or financial conditions warrant, the Portfolio may invest in other
equity-type securities (such as preferred stocks and convertible debt
instruments) and investment grade corporate fixed income securities. For
temporary or defensive purposes, the Portfolio may invest without limitation
in cash or cash equivalents or high-quality money market instruments. Such
investments could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known, held primarily by insiders
or institutional investors and may trade less frequently and in lower volume;
such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; such companies have limited
financial resources or may depend on a few key employees; and the products or
technologies of such companies may be at a relatively early stage of
development or not fully tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the
----------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
36 ALLIANCE SMALL CAP GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
risk that changes in value of the derivative may not correlate perfectly with
the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio
to incur additional transaction costs that could be passes through to
shareholders.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for 1998
and 1999, the Portfolio's first two years of existence and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for one year and since inception and compares the Portfolio's
performance to: (i) the returns of a broad-based index and (ii) the returns of
an index of funds with similar investment objectives. Past performance is not
an indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Small Cap Growth
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Small Cap Growth Portfolio) whose inception date is May 1, 1997.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1998 -4.4%
1999 27.46%
Best quarter (% and time period) Worst quarter (% and time period)
28.22% (1999 4th Quarter) (28.09)% (1998 3rd Quarter)
<PAGE>
- ----------
37 ALLIANCE SMALL CAP GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- ------------------------------------------------------------------
Alliance Small Cap Growth Portfolio
- Class IB Shares 27.46% 17.60%
- ------------------------------------------------------------------
Russell 2000 Growth Index* 43.09% 25.88%
- ------------------------------------------------------------------
Lipper Small Company Growth Funds
Average* 38.28% 19.36%
- ------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
BRUCE ARONOW has been responsible for the day-to-day management of the
Portfolio since February 2000. Mr. Aronow is a Vice President of Alliance and
has been associated with Alliance since May 1999. Prior thereto, he had been
associated with Invesco since May 1998, and before that a Vice President of
Chancellor LGT Asset Management since 1996 and a Vice President of Chancellor
Capital Management since before 1995.
------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
38 EQ/ALLIANCE TECHNOLOGY PORTFOLIO
- --------------------------------------------------------------------------------
EQ/ALLIANCE TECHNOLOGY PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of capital. Current
income is incidental to the Portfolio's objective.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of companies expected to
benefit from technological advances and improvements (i.e., companies that use
technology extensively in the development of new or improved products or
processes). The Portfolio normally will have at least 80% of its assets
invested in the securities of these companies. The Portfolio invests for
capital growth. Within this framework, the Portfolio may invest in any company
and industry and in any type of security having the potential for capital
appreciation, including well-known, established companies or new or unseasoned
companies.
Although current income is only an incidental consideration, the Portfolio may
seek income by writing listed call options. The Portfolio normally will have
substantially all its assets invested in equity securities, but it may also
invest in debt securities that offer an opportunity for price appreciation.
The Portfolio may invest in both listed and unlisted U.S. securities and may
invest up to 10% of its total assets in foreign securities, including
depositary receipts.
The Portfolio also may:
o write covered call options on its portfolio securities of up to 15% of its
total assets and may purchase exchanged-listed call and put options,
including exchange-traded index put options of up to, for all options, 10%
of its total assets;
o invest up to 10% of its total assets in warrants; and
o make loans of its portfolio securities of up to 33.3% of its total assets.
When market or financial conditions warrant, the Portfolio may invest for
temporary or defensive purposes, without limit, in preferred stocks in
investment grade or corporate fixed income securities, including U.S.
Government securities, qualifying bank high quality money market instruments,
including prime commercial paper and other types of short-term fixed income
securities. These temporary investments may also include short-term
foreign-currency denominated securities of the type mentioned above issued by
foreign governmental entities, companies, and supranational organizations.
Such investments could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
SECTOR RISK: As noted above, the Portfolio invests primarily in companies in
the technology sector. Therefore, market or economic factors affecting those
types of companies could have a major effect on the value of a Fund's
investments and, therefore, its net asset value. Many technology stocks,
especially those of smaller, less seasoned companies, tend to be more volatile
than the overall market.
GROWTH INVESTING RISK: This Portfolio uses a growth oriented approach to stock
selection. The price of growth stocks may be more sensitive to changes in
current or expected earnings than the prices of other stocks. The price of
growth stocks is also subject to the risk that the stock price of one or more
companies will fall or will fail to appreciate as anticipated by the Adviser,
regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in new or
unseasoned small-cap and mid-cap companies may be subject to more abrupt or
erratic movements in price than are those of larger, more established
companies because: the securities of such companies are less well-known, held
primarily by insiders or institutional investors and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; such companies
have limited financial resources or may depend on a few key employees; and the
<PAGE>
- ----------
39 EQ/ALLIANCE TECHNOLOGY PORTFOLIO
- --------------------------------------------------------------------------------
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
DERIVATIVES RISK: The Portfolio's investments in derivatives (such as its use
of call and put options) can significantly increase the Portfolio's exposure
to market risk or the credit risk of a counterparty. Derivatives also involve
the risk of mispricing or improper valuation and the risk that changes in
value of the derivative may not correlate perfectly with the relevant assets,
rates and indices.
FOREIGN SECURITIES RISKS: To the extent that the Portfolio invests in foreign
securities including depositary receipts, its investments in foreign
securities involve risks not associated with investing in U.S. securities,
which can adversely affect the Portfolio's performance. Foreign markets,
particularly emerging markets, may be less liquid, more volatile, and subject
to less government supervision than domestic markets. There may be
difficulties enforcing contractual obligations, and it may take more time for
trades to clear and settle. In addition, the value of foreign investments can
be adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
FIXED INCOME SECURITIES RISK: To the extent that a substantial amount of the
Portfolio's assets are invested in fixed income securities, that portion of
the Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in securities which are rated BBB by S&P or an equivalent rating by
any other nationally recognized statistical rating organization, it will be
exposed to greater risk than if it invested in higher-rated obligations
because BBB-rated securities are regarded as having only an adequate capacity
to pay principal and interest, are considered to lack outstanding investment
characteristics, and may be speculative.
SECURITIES LENDING RISK: 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.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is May 1, 2000. Therefore, no prior
performance information is available.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio since
the Portfolio commenced its operations. Alliance, a publicly traded limited
partnership, is indirectly majority-owned by Equitable. Alliance manages
investment companies, endowment funds, insurance companies, foreign entities,
qualified and non-tax qualified corporate funds, public and private pension and
profit-sharing plans, foundations and tax-exempt organizations.
PETER ANASTOS and GERALD MALONE are principally responsible for the day-to-day
management of the Portfolio. Mr. Anastos, Senior Vice President of Alliance,
has been associated with Alliance since 1992. Mr. Malone, a Senior Vice
President of Alliance, has been associated with Alliance since 1992.
------------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
40 BT EQUITY 500 INDEX PORTFOLIO
- --------------------------------------------------------------------------------
BT EQUITY 500 INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to replicate as closely as possible (before
deduction of Portfolio expenses) the total return of the S&P 500.
THE INVESTMENT STRATEGY
The Portfolio invests in equity securities of companies included in the S&P
500. The Adviser seeks to match the risk and return characteristics of the S&P
500 by investing in a statistically selected sample of the securities found in
the S&P 500, using a process known as "optimization". This process selects
stocks for the Portfolio so that industry weightings, market capitalizations
and fundamental characteristics (price to book ratios, price to earnings
ratios, debt to asset ratios and dividend yields) closely match those of the
securities included in the S&P 500. This approach helps to increase the
Portfolio's liquidity and reduce costs. The securities held by the Portfolio
are weighted to make the Portfolio's total investment characteristics similar
to those of the S&P 500 as a whole.
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.
For more information on the S&P 500, see the preceding section "The
Benchmarks." The Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's Corporation ("S&P") and S&P makes no guarantee as to the
accuracy and/or completeness of the S&P 500 or any data included therein.
Over time, the correlation between the performance of the Portfolio and the
S&P is expected to be 95% or higher before deduction of Portfolio expenses.
The Portfolio's ability to track the S&P 500 may be affected by, among others,
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. The Portfolio seeks securities to track the S&P 500,
therefore, the Adviser generally will not attempt to judge the merits of any
particular security as an investment.
The Portfolio may also invest 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 a number of reasons, including: to simulate full investment in the
S&P 500 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 S&P 500. These
instruments are considered to be derivatives.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
<PAGE>
- ----------
41 BT EQUITY 500 INDEX PORTFOLIO
- --------------------------------------------------------------------------------
INDEX FUND RISK: The Portfolio is not actively managed and invests in
securities included in the index regardless of their investment merit.
Therefore, the Portfolio cannot modify its investment strategies to respond to
changes in the economy and may be particularly susceptible to a general
decline in the U.S. or global stock market segment relating to the index.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of existence, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The Portfolio's inception
date was January 1, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1998 25.14%
1999 20.30%
Best quarter: Worst quarter:
21.26% (1998 4th Quarter) (10.03)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- ---------------------------------------------------------------
BT Equity 500 Index Portfolio 20.30% 22.66%
- ---------------------------------------------------------------
S&P 500 Index* 21.03% 24.76%
- ---------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
BANKERS TRUST COMPANY ("Bankers Trust"), 130 Liberty Street (One Bankers Trust
Plaza), New York, New York 10006. Bankers Trust has been the Adviser to the
Portfolio since it commenced operations. Bankers Trust is a wholly-owned
subsidiary of Bankers Trust Corporation. Bankers Trust conducts a variety of
general banking and trust activities and is a major wholesale supplier of
financial services, including investment management to the international and
domestic institutional markets. In 1999, Bankers Trust Corporation finalized a
merger in which Bankers Trust Corporation was acquired by and became a
subsidiary of Deutsche Bank AG.
-------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
42 BT SMALL COMPANY INDEX PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE: Seeks to replicate as closely as possible (before the
deduction of Portfolio expenses) the total return of the Russell 2000 Index
("Russell 2000").
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of small-cap companies
included in the Russell 2000. The Adviser seeks to match the returns of the
Russell 2000. The Portfolio invests in a statistically selected sample of the
securities found in the Russell 2000, using a process known as "optimization."
This process selects stocks for the Portfolio so that industry weightings,
market capitalizations and fundamental characteristics (price to book ratios,
price to earnings ratios, debt to asset ratios and dividend yields) closely
match those of the securities included in the Russell 2000. This approach helps
to increase the Portfolio's liquidity and reduce costs. The securities held by
the Portfolio are weighted to make the Portfolio's total investment
characteristics similar to those of the Russell 2000 as a whole.
For more information on The Russell 2000, see the preceding section "The
Benchmarks." 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.
Over time, the correlation between the performance of the Portfolio and the
Russell 2000 is expected to be 95% or higher before the deduction of Portfolio
expenses. 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. The Portfolio seeks to track
the Russell 2000, therefore, the Adviser generally will not attempt to judge
the merits of any particular security as an investment.
Securities index futures contracts and related options, warrants and
convertible securities may be used for a number of reasons, including: to
simulate full investment in the Russell 2000 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 Russell 2000. These instruments are considered
to be derivatives.
The Portfolio may invest to a lesser extent in short-term debt securities and
money market securities to meet redemption requests or to facilitate
investment in the securities included in the Russell 2000.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
INDEX FUND RISK: The Portfolio is not actively managed and invests in
securities included in the index regardless of their investment merit.
Therefore, the Portfolio cannot modify its investment strategies to respond to
changes in the economy and may be particularly susceptible to a general
decline in the U.S. or global stock market segment relating to the index.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less known and may trade less frequently and
in lower volume; such companies are more likely to experience greater or more
unexpected changes in their earnings and growth prospects; and the products or
technologies of such companies may be at a relatively early stage of
development or not fully tested.
<PAGE>
- ----------
43 BT SMALL COMPANY INDEX PORTFOLIO
- --------------------------------------------------------------------------------
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of existence, and in some of the
risks of investing in the Portfolio by showing the yearly changes in the
Portfolio's performance. The table below shows the Portfolio's average annual
total returns for the Portfolio for one year and since inception. The table
also compares the Portfolio's performance to the returns of a broad based
index. Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results. The Portfolio's inception date was January 1, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1998 -2.27%
1999 20.68%
Best quarter: Worst quarter:
18.52% (1999 4th Quarter) (19.52)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- ------------------------------------------------------------------
BT Small Company Index Portfolio 20.68% 8.59%
- ------------------------------------------------------------------
Russell 2000 Index* 21.26% 8.70%
- ------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
BANKERS TRUST COMPANY ("Bankers Trust"), 130 Liberty Street (One Bankers Trust
Plaza), New York, New York 10006. Bankers Trust has been the Adviser to the
Portfolio since it commenced operations. 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. 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. In
1999, Bankers Trust Corporation finalized a merger in which Bankers Trust
Corporation was acquired by and became a subsidiary of Deutsche Bank AG.
------------------------ EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
44 CALVERT SOCIALLY RESPONSIBLE PORTFOLIO
- --------------------------------------------------------------------------------
CALVERT SOCIALLY RESPONSIBLE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term capital appreciation
THE INVESTMENT STRATEGY
The portfolio invests primarily in common stocks of medium to large U.S.
companies that meet both investment and social criteria. Brown Capital (and
Calvert) use a tandem investment process to select potential investments for
the Portfolio. Brown Capital creates a universe of potential investments from
which it and Calvert will ultimately select portfolio securities. Once Brown
Capital identifies a potential investment, Calvert promptly socially screens
each potential investment to assure that it meets Calvert's social criteria.
During that process, Brown Capital continues to evaluate each potential
investment based on whether that investment will satisfy Brown Capital's
investment criteria. The criteria of both Brown Capital and Calvert must be
satisfied before a security will be purchased for the Portfolio.
For purposes of this Portfolio, companies having market capitalizations
greater than $1 billion are considered medium to large companies.
INVESTMENT CRITERIA: Brown Capital's investment process balances the growth
potential of investments with the price or value of the investment in order to
identify stocks that offer above average growth potential at reasonable
prices. Brown Capital evaluates each stock in terms of its growth potential,
the return on risk-free investments, and the specific risk features of the
company to determine the reasonable price for the stock.
The Portfolio may invest up to 15% of its net assets in illiquid securities,
which are securities that cannot be readily sold because there is no active
market for them.
The Portfolio may invest in derivative instruments, such as foreign currency
contracts (up to 5% of its total assets), options on securities and indices
(up to 5% of its total assets), and futures contracts (up to 5% of its net
assets).
When market or financial conditions warrant, the Portfolio may invest a
substantial portion of its assets in short-term obligations for temporary or
defensive purposes. If such action is taken, it will detract from achievement
of the Portfolio's investment objective during such periods.
SOCIAL CRITERIA: Calvert analyzes investments from a social activist
perspective. Calvert's philosophy is that long-term rewards to investors will
come from those organizations whose products, services and methods enhance the
human condition and the traditional American values of individual initiative,
equity of opportunity and cooperative effort. These criteria represent
standards of behavior which few, if any, organizations totally satisfy. As a
matter of practice, evaluation of a particular organization in the context of
these criteria will involve subjective judgment by Calvert.
The Portfolio seeks to invest in companies that:
o deliver safe products and services in ways that sustain our natural
environment. For example, the Portfolio looks for companies that produce
energy from renewable resources, while avoiding consistent polluters;
o manage with participation throughout the organization in defining and
achieving objectives. For example, the Portfolio looks for companies that
offer employee stock ownership or profit-sharing plans;
o negotiate fairly with their workers, provide an environment supportive of
their wellness, do not discriminate on the basis of race, gender,
religion, age, disability, ethnic origin, or sexual orientation, do not
consistently violate regulations of the U.S. Equal Employment Opportunity
Commission, and provide opportunities for women, disadvantaged minorities,
and others for whom equal opportunities have often been denied. For
example, the Portfolio considers both unionized and non-union firms with
good labor relations; and
o foster awareness of a commitment to human goals, such as creativity,
productivity, self-respect and responsibility, within the organization and
the world, and continually recreates a context within which these goals
can be realized. For example, the Portfolio looks for companies with an
above average commitment to community affairs and charitable giving.
<PAGE>
- ----------
45 CALVERT SOCIALLY RESPONSIBLE PORTFOLIO
- --------------------------------------------------------------------------------
The Portfolio will not invest in companies that Calvert determines to be
significantly engaged in:
o production of or the manufacture of equipment to produce nuclear
energy;
o business activities in support of repressive regimes;
o manufacture of weapon systems;
o manufacture of alcoholic beverages or tobacco products;
o operation of gambling casinos; or
o a pattern and practice of violating the rights of indigenous people.
We urge companies to end negative stereotypes of Native Americans and
other indigenous peoples. For example, the Portfolio objects to the
unauthorized use of names and images that portray Native Americans in
a negative light, and supports the promotion of positive portrayals of
all individuals and ethnic groups.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities markets.
MID-CAP COMPANY RISK: The Portfolio's investments in mid-cap companies may be
subject to more abrupt or erratic movements in price than are those of larger,
more established companies because: the securities of such companies are less
well-known and may trade less frequently and in lower volume; such companies
are more likely to experience greater or more unexpected changes in their
earnings and growth prospects; and the products or technologies of such
companies may be at a relatively early stage of development or not fully
tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is August 30, 1999. Therefore, no prior
performance information is available.
WHO MANAGES THE PORTFOLIO
CALVERT ASSET MANAGEMENT COMPANY, INC. ("Calvert"), 4550 Montgomery Avenue,
Suite 1000N, Bethesda, Maryland 20814, a subsidiary of Calvert Group Ltd.,
which is a subsidiary of Ameritas Acacia Mutual Holding Company. Calvert has
been the Adviser to the Portfolio since it commenced operations. It has been
managing mutual funds since 1976. Calvert is the investment adviser for over
25 mutual fund portfolios, including the first and largest family of socially
screened funds. Calvert provides the social investment research and screening
of the Portfolio's investments. As of December 31, 1999, Calvert had $6.5
billion in assets under management.
BROWN CAPITAL MANAGEMENT, INC. ("Brown Capital"), 1201 North Calvert Street,
Baltimore, Maryland 21201. Brown Capital initially identifies potential
investments for the Portfolio, which are then promptly screened by Calvert
using the Portfolio's social criteria.
EDDIE C. BROWN, founder and President of Brown Capital, heads the management
team for the Portfolio. He has over 24 years of investment management
experience, and has held positions with T. Rowe Price Associates, Inc. and
Irwing Management Company. Mr. Brown is a frequent panelist on "Wall Street
Week with Louis Rukeyser" and is a member of the Wall Street Week Hall of
Fame.
---------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
46 CAPITAL GUARDIAN RESEARCH PORTFOLIO
- --------------------------------------------------------------------------------
CAPITAL GUARDIAN RESEARCH PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of United States issuers
and securities whose principal markets are in the United States, including
American Depositary Receipts and other United States registered foreign
securities. The Portfolio invests primarily in common stocks (or securities
convertible or exchangeable into common stocks) of companies with market
capitalization greater than $1 billion at the time of purchase.
The Portfolio may invest up to 15% of its total assets, at the time of
purchase, in securities of issuers domiciled outside the United States and not
included in the S&P 500 (i.e., foreign securities).
When market or financial conditions warrant, the Portfolio may invest a
substantial portion of its assets in high-quality debt securities, including
short-term obligations for temporary or defensive purposes. If such action is
taken, it will detract from achievement of the Portfolio's investment
objective during such periods.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: This Portfolio uses a growth oriented approach to stock
selection. The price of growth stocks may be more sensitive to changes in
current or expected earnings than the prices of other stocks. The price of
growth stocks is also subject to the risk that the stock price of one or more
companies will fall or will fail to appreciate as anticipated by the Adviser,
regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in relation to changes in interest
rates and changes in the value of the underlying common stock.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
CAPITAL GUARDIAN TRUST COMPANY ("Capital Guardian"), 333 South Hope Street,
Los Angeles, CA 90071. Capital Guardian is a wholly-owned subsidiary of
Capital Group International, Inc., which itself is a wholly owned subsidiary
of The Capital Group Companies, Inc. Capital Guardian has been providing
investment management services since 1968 and manages approximately $123
billion as of December 31, 1999.
<PAGE>
- ----------
47 CAPITAL GUARDIAN RESEARCH PORTFOLIO
- --------------------------------------------------------------------------------
The Portfolio is managed by a group of investment research professionals, led
by the Research Portfolio Coordinator, each of whom has investment discretion
over a segment of the total Portfolio. The size of each segment will vary over
time and may be based upon: (1) the level of conviction of specific research
professionals as to their designated sectors; (2) industry weights within the
relevant benchmark for the Portfolio; and (3) the judgment of the Research
Portfolio Coordinator in assessing the level of conviction of research
professionals compared to industry weights within the relevant benchmark.
Sectors may be overweighted relative to their benchmark weighting if there is
a substantial number of stocks that are judged to be attractive based on the
research professionals research in that sector, or may be underweighted if
there are relatively fewer stocks viewed to be attractive in the sector. The
Research Portfolio Coordinator also coordinates the cash holdings
of the Portfolio.
------------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
48 CAPITAL GUARDIAN U.S. EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
CAPITAL GUARDIAN U.S. EQUITY PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio strives to accomplish its investment objectives through constant
supervision, careful securities selection and broad diversification.
The Portfolio invests primarily in equity securities of United States
companies with market capitalization greater than $1 billion at the time of
purchase. In selecting securities for investment, the Adviser focuses
primarily on the potential of capital appreciation.
The Portfolio may invest up to 15% of its total assets in securities of
issuers domiciled outside the United States and not included in the S&P 500
(i.e., foreign securities). These securities may include American Depositary
Receipts.
When market or financial conditions warrant, the Portfolio may invest a
substantial portion of its assets in high-quality debt securities, including
short-term obligations for temporary or defensive purposes. If such action is
taken, it will detract from achievement of the Portfolio's investment
objective during such periods.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: This Portfolio uses a growth oriented approach to stock
selection. The price of growth stocks may be more sensitive to changes in
current or expected earnings than the prices of other stocks. The price of
growth stocks is also subject to the risk that the stock price of one or more
companies will fall or will fail to appreciate as anticipated by the Adviser,
regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in relation to changes in interest
rates and changes in the value of the underlying common stock.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
CAPITAL GUARDIAN TRUST COMPANY ("Capital Guardian"), 333 South Hope Street,
Los Angeles, CA 90071. Capital Guardian is a wholly-owned subsidiary of
Capital Group International, Inc., which itself is a wholly owned subsidiary
of The Capital Group Companies, Inc. Capital Guardian has been providing
investment management services since 1968 and manages approximately $123
billion as of December 31, 1999.
<PAGE>
- ----------
49 CAPITAL GUARDIAN U.S. EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
Capital Guardian uses a multiple portfolio manager system under which the
Portfolio is divided into several segments. Each segment is individually
managed with the portfolio manager free to decide on company and industry
selections as well as valuation and transaction assessment. An additional
portion of the Portfolio is managed by a group of investment research
analysts.
The individual portfolio managers of each segment of the Portfolio, other than
that managed by the group of research analysts, are as follows:
DONNALISA P. BARNUM. Donnalisa Barnum is a Senior Vice President and a
portfolio manager for Capital Guardian. She joined the Capital Guardian
organization in 1986.
MICHAEL R. ERICKSON. Michael Erickson is a Senior Vice President and portfolio
manager for Capital Guardian and a Senior Vice President and Director for
Capital International Limited. He joined the Capital Guardian organization
in 1987.
DAVID I. FISHER. David Fisher is Chairman of the Board of Capital Group
International, Inc. and Capital Guardian. He joined the Capital Guardian
organization in 1969.
THEODORE R. SAMUELS. Theodore Samuels is a Senior Vice President and a
Director for Capital Guardian, as well as a Director of Capital International
Research, Inc. He joined the Capital Guardian organization in 1981.
EUGENE P. STEIN. Eugene Stein is Executive Vice President, a Director, a
portfolio manager, and Chairman of the Investment Committee for Capital
Guardian. He joined the Capital Guardian organization in 1972.
TERRY BERKEMEIER. Terry Berkemeier is a Vice President of Capital
International Research, Inc. with U.S. equity portfolio management
responsibility in Capital Guardian Trust Company and research responsibilities
for the global metals and mining industries. He joined the Capital Guardian
organization in 1992.
-------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
50 EQ/EVERGREEN PORTFOLIO
- --------------------------------------------------------------------------------
EQ/EVERGREEN PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term capital growth
THE INVESTMENT STRATEGY
The Portfolio invests primarily in the common stocks of large U.S. companies.
The Adviser selects stocks using a "growth-at-a-reasonable-price" method. This
style of diversified equity management is best defined as a blend between growth
and value stocks. "Growth" stocks are stocks of companies which the Adviser
believes have anticipated earnings ranging from steady to accelerated growth.
"Value" stocks are stocks of companies that the Adviser believes are
undervalued.
The Portfolio may also invest in preferred stocks and convertible securities.
When market financial conditions warrant, the Portfolio may invest without
limits in high quality money market instruments. Such instruments could result
in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
MID-CAP COMPANY RISK: The Portfolio's investments in mid-cap companies may be
subject to more abrupt or erratic movements in price than are those of larger,
more established companies because: the securities of such companies are less
well-known and may trade less frequently and in lower volume; such companies are
more likely to experience greater or more unexpected changes in their earnings
and growth prospects; and the products or technologies of such companies may be
at a relatively early stage of development or not fully tested.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a value
stock's intrinsic value may never be fully recognized or realized by the market,
or its price may go down. There is also the risk that a stock judged to be
undervalued may actually be appropriately priced.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio to
incur additional transaction costs that could be passed through to shareholders.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than higher-rated obligations because
BBB rated investment grade securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1999,
tfhe Portfolio's first full year of operations. The table below shows the
Portfolio's average annual total returns for the Portfolio for one year and
since inception.
<PAGE>
- ----------
51 EQ/EVERGREEN PORTFOLIO
- --------------------------------------------------------------------------------
The table also compares the Portfolio's performance to the returns of a
broad-based index. Both the bar chart and table assume reinvestment of
dividends and distributions. Past performance is not an indication of future
performance. The performance results presented below do not reflect any
insurance and Contract-related fees and expenses, which would reduce the
performance results. The inception date for this Portfolio is December 31,
1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1999 9.70%
Best quarter: Worst quarter:
12.63% (1999 4th Quarter) (8.54)% (1999 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- ------------------------------------------------------
EQ/Evergreen Portfolio 9.70% 9.70%
- ------------------------------------------------------
S&P 500 Index*,** 21.03% 21.03%
- ------------------------------------------------------
Russell 2000 Index* 21.26% 21.26%
- ------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
** We believe that this index reflects more closely the market sectors in which
the Portfolio invests.
WHO MANAGES THE PORTFOLIO
EVERGREEN ASSET MANAGEMENT CORP. ("Evergreen"), 1311 Mamaroneck Avenue, White
Plains, New York 10605. Evergreen has been the Adviser to the Portfolio since
it commenced operations. Evergreen is a registered investment adviser and a
wholly-owned subsidiary of First Union Corporation. Evergreen offers a broad
range of financial services to individuals and businesses throughout the
United States.
JEAN LEDFORD and RICHARD WELSH became co-managers of the Portfolio in August
1999. Jean Ledford, CFA, became President and Chief Executive Officer of
Evergreen in August 1999. From February 1997 until she joined Evergreen, Ms.
Ledford worked as a portfolio manager at American Century Investments
("American Century"). From 1980 until she joined American Century, Ms. Ledford
was the investment director at the State of Wisconsin Investment Board.
Mr. Welsh joined Evergreen as Senior Vice President and portfolio manager in
August 1999. Prior to joining Evergreen, he worked for five years as a
portfolio manager and analyst at American Century.
------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
52 LAZARD LARGE CAP VALUE PORTFOLIO
- --------------------------------------------------------------------------------
LAZARD LARGE CAP VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital appreciation by investing primarily in
equity securities of companies with relatively large capitalizations (i.e.,
companies having market capitalizations of at least $3 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.
THE INVESTMENT STRATEGY
The Portfolio normally invests at least 80% of its total assets primarily in
equity securities of large capitalization companies. Equity securities include
common stocks, preferred stocks and securities convertible into or
exchangeable for common stocks.
The Portfolio uses a value-oriented approach in searching for securities. The
Adviser uses a "bottom-up" approach (individual stock selection) to find
companies that have:
o low price to earnings ratios;
o high yield;
o unrecognized assets;
o the possibility of management change; and/or
o the prospect of improved profitability.
The Portfolio may also invest up to 20% of its assets in U.S. Government
securities and investment grade debt securities of domestic corporations rated
BBB or better by S&P or Baa or better by Moody's.
The Portfolio may also invest up to 10% of its assets in foreign equity or
debt securities, or depositary receipts.
The Portfolio may also invest without limitation in high-quality short-term
money market instruments. The Portfolio may engage in options transactions,
including writing covered call options or foreign currencies to offset costs
of hedging and writing and purchasing put and call options on securities.
Although the Portfolio will engage in options transactions primarily to hedge
its Portfolio, it may use options to increase returns and there is the risk
that these transactions sometimes may reduce returns or increase volatility.
When market or financial conditions warrant, the Portfolio may invest, without
limit, in money market securities for temporary or defensive purposes. Such
investment strategies could have the effect of reducing the benefit of any
upswing in the market. Such investment strategies are inconsistent with the
Portfolio's investment objectives and could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged
to be undervalued may actually be appropriately priced.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest
<PAGE>
- ----------
53 LAZARD LARGE CAP VALUE PORTFOLIO
- --------------------------------------------------------------------------------
rates fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
higher-rated obligations because BBB rated investment grade securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's average annual total return for
1998 and 1999, the Portfolio's first two years of existence, and in some of the
risks of investing in the Portfolio by showing yearly changes in the
Portfolio's performance. The table below shows the Portfolio's average annual
total returns for the Portfolio for one year and since inception. The table
also compares the Portfolio's performance to the returns of a broad based
index. Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance. The
performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
The Portfolio's inception date was January 1, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1998 20.01%
1999 3.55%
Best quarter: Worst quarter:
23.34% (1998 4th Quarter) (13.43)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
-----------------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- ------------------------------------------------------------------
Lazard Large Cap Value Portfolio 3.55% 11.46%
- ------------------------------------------------------------------
S&P 500 Index* 21.03% 24.76%
- ------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
LAZARD ASSET MANAGEMENT ("LAM"), 30 Rockefeller Plaza, New York, New York
10112. LAM has been the Adviser to the Portfolio since it commenced
operations. LAM is a division of Lazard Fr-res & Co. LLC ("Lazard Fr-res"), a
New York limited liability company, which is registered as an investment
adviser with the SEC. Lazard Fr-res provides its clients with a wide variety
of investment banking, brokerage and related services, including investment
management.
The Portfolio Managers, responsible for the day to day management of the
Portfolio are HERBERT W. GULLQUIST, a Vice-Chairman, Managing Director and
Chief Investment Officer of LAM, who has been with LAM since 1982; and EILEEN
D. ALEXANDERSON, a Managing Director of LAM responsible for U.S./Global equity
management and overseeing the day-to-day operations of the U.S./Global equity
investment teams, who has been with LAM since 1979.
------------------------ EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ---------
54 LAZARD SMALL CAP VALUE PORTFOLIO
- --------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital appreciation by investing 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 INVESTMENT STRATEGY
The Portfolio is a non-diversified Portfolio that invests primarily in equity
securities of U.S. companies with small market capitalizations that the Adviser
believes are undervalued based on their return on equity or capital. The
Portfolio will have characteristics similar to the Russell 2000 Index. The
equity securities that may be purchased by the Portfolio include common stocks,
preferred stocks, securities convertible into or exchangeable for common stocks,
rights and warrants.
For more information on The Russell 2000, see the preceding section "The
Benchmarks".
A Portfolio may be considered to be "non-diversified" for federal securities law
purposes because it invests in a limited number of securities. In all cases, the
Portfolio intends to be diversified for tax purposes so that it can qualify as a
regulated investment company.
In selecting investments for the Portfolio, the Adviser looks for equity
securities of companies that have one or more of the following characteristics:
(i) are undervalued relative to their earnings, cash flow or asset values; (ii)
have an attractive price/value relationship with expectations that some catalyst
will cause the perception of value to change within two years; (iii) are out of
favor due to circumstances which are unlikely to harm the company's franchise or
earnings power; (iv) have low projected price to earnings or price-to-cash flow
multiples; (v) have the potential to become a larger factor in the company's
business; (vi) have significant debt but have high levels of free cash flow; and
(vii) have a relatively short corporate history with the expectation that the
business may grow.
Although the Portfolio will principally invest at least 80% of its assets in
small capitalization securities, the Portfolio may also invest up to 20% of its
assets in larger capitalization equity securities or investment grade debt
securities.
When market or financial conditions warrant, the Portfolio may invest without
limitation in short-term money market instruments or hold its assets in cash for
temporary or defensive purposes. Such investment strategies could have the
effect of reducing the benefit of any upswing in the market. Such investment
strategies are inconsistent with the Portfolio's investment objectives and could
result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a value
stock's intrinsic value may never be fully recognized or realized by the market,
or its price may go down. There is also the risk that a stock judged to be
undervalued may actually be appropriately priced.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less-well known and may trade less frequently and in lower
volume; such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; and the products or technologies
of such companies may be at a relatively early stage of development or not fully
tested.
<PAGE>
- ----------
55 LAZARD SMALL CAP VALUE PORTFOLIO
- --------------------------------------------------------------------------------
NON-DIVERSIFICATION RISK: Since a relatively high percentage of the
Portfolio's assets may be invested in the securities of a limited number of
issuers, some of which may be within the same industry, the securities of the
Portfolio may be more sensitive to changes in the market value of a single
issuer or industry or to risks associated with a single economic, political or
regulatory event than a diversified portfolio.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment grade securities, which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
higher-rated obligations because BBB rated investment grade securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of existence, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for the Portfolio for one year and since inception. The table also
compares the Portfolio's performance to the returns of a broad based index.
Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the perfomance results.
The Portfolio's inception date was January 1, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1998 -7.03%
1999 1.66%
Best quarter: Worst quarter:
19.39% (1999 2nd Quarter) (20.10)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- ------------------------------------------------------------------
Lazard Small Cap Value Portfolio 1.66% (2.77)%
- ------------------------------------------------------------------
Russell 2000 Index* 21.26% 8.70%
- ------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
LAZARD ASSET MANAGEMENT ("LAM"), 30 Rockefeller Plaza, New York, New York
10112. LAM has been the Adviser to the Portfolio since it commenced
operations. LAM is a division of Lazard Fr-res & Co. LLC ("Lazard Fr-res"), a
New York limited liability company, which is registered as an investment
adviser with the SEC. Lazard Freres provides its clients with a wide variety
of investment banking and related services, including investment management.
The Portfolio Managers, responsible for the day-to-day management since the
inception of the Portfolio, are: EILEEN D. ALEXANDERSON, a Managing Director
responsible for U.S./Global equity management and overseeing the day-to-day
operations of the U.S./Global equity teams, who has been with LAM since 1979,
and HERBERT W. GULLQUIST, a Vice-Chairman, Managing Director and Chief
Investment Officer of LAM, who has been with LAM since 1982.
------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
56 MFS EMERGING GROWTH COMPANIES PORTFOLIO
- --------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide long-term capital growth.
THE INVESTMENT STRATEGY
The Portfolio invests, under normal market conditions, primarily (at least 65%
of its total assets) in common stocks and related securities, such as
preferred stock, convertible securities and depositary receipts of emerging
growth companies. Emerging growth companies that the Adviser believes are
either:
o early in their life cycle but have the potential to become major
enterprises; or
o are major enterprises 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.
For purposes of this Portfolio, emerging growth companies may be of any size
and the Adviser would expect these companies to have products, technologies,
management, markets and opportunities that will facilitate earnings growth
over time that is well above the growth rate of the overall economy and rate
of inflation. The Portfolio's investments may include securities traded in the
over-the-counter markets.
The Adviser uses a "bottom-up" investment style in managing the Portfolio.
This means the securities are selected based upon fundamental analysis (such
as an analysis of earnings, cash flows, competitive position and management's
abilities) performed by the Adviser.
In addition, up to 25% of the Portfolio's assets may be invested in foreign
securities, including those in emerging markets, or in cash and cash
equivalents.
When adverse market, financial or political conditions warrant, the Portfolio
may depart from its principal strategies for temporary or defensive purposes.
Such investment strategies are inconsistent with the Portfolio's investment
objectives and could result in the Portfolio not achieving its investment
objective.
The Portfolio may engage in active and frequent trading to achieve its
principal investment strategies. Frequent trading increases transaction costs,
which could detract from the Portfolio's performance.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In
<PAGE>
- ----------
57 MFS EMERGING GROWTH COMPANIES PORTFOLIO
- --------------------------------------------------------------------------------
addition, the value of foreign investments can be adversely affected by:
unfavorable currency exchange rates (relative to the U.S. dollar for
securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio
to incur additional transaction costs that could be passed through to
shareholders.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for the Portfolio for one year and since inception. The table also
compares the Portfolio's performance to the returns of a broad-based index.
Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results. The inception date for the Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1998 34.57%
1999 73.62%
Best quarter: Worst quarter:
53.01% (1999 4th Quarter) (12.69)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- -----------------------------------------------------------
MFS Emerging Growth Companies
Portfolio 73.62% 48.20%
- -----------------------------------------------------------
Russell 2000 Index* 21.26% 16.99%
- -----------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS has been the Adviser to the Portfolio since it commenced
operations. MFS is America's oldest mutual fund organization. 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. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
The Portfolio Managers are TONI Y. SHIMURA, a Senior Vice President of MFS,
who has been employed by MFS as a portfolio manager for the Portfolio since
1995 and JOHN W. BALLEN, Chief Investment Officer and President of MFS, who
provides general oversight in the management of the Portfolio.
----------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
58 MFS GROWTH WITH INCOME PORTFOLIO
- --------------------------------------------------------------------------------
MFS GROWTH WITH INCOME PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide reasonable current income and long-term
growth of capital and income.
For purposes of this Portfolio, the words "reasonable current income" mean
moderate income.
THE INVESTMENT STRATEGY
The Portfolio invests, under normal market conditions, primarily (at least 65%
of its total assets) in equity securities, including common stocks, preferred
stocks, convertible securities, warrants and depositary receipts for those
securities. Equity securities may be listed on a securities exchange or traded
in the over-the-counter markets. While the Portfolio may invest in companies
of any size, the Portfolio generally focuses on companies with larger market
capitalizations that the Adviser believes have sustainable growth prospects
and attractive valuations based on current and expected earnings or cash flow.
The Portfolio will also seek to provide income equal to approximately 90% of
the dividend yield on the Standard & Poor's 500 Index.
The Adviser uses a "bottom-up" investment style in managing the Portfolio.
This means that securities are selected based upon fundamental analysis (such
as an analysis of earnings, cash flows, competitive position and management's
abilities) performed by the Adviser's large group of equity research analysts.
The Portfolio may invest up to 25% of its net assets in foreign securities,
including those in emerging markets and depository receipts, through which it
may have exposure to foreign currencies.
When adverse market, financial or political conditions warrant, the Portfolio
may depart from its principal strategies for temporary or defensive purposes.
Such investment strategies are inconsistent with the Portfolio's investment
objective and could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and
<PAGE>
- ----------
59 MFS GROWTH WITH INCOME PORTFOLIO
- --------------------------------------------------------------------------------
custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1999,
the Portfolio's first full year of operations. The table below shows the
Portfolio's average annual total returns for the Portfolio for one year and
since inception. The table also compares the Portfolio's performance to the
returns of a broad-based index. Both the bar chart and table assume
reinvestment of dividends and distributions. Past performance is not an
indication of future performance. The performance results presented below do
not reflect any insurance and Contract-related fees and expenses, which would
reduce the performance results and if reflected the results would be reduced.
The inception date for this Portfolio is December 31, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1999 8.76%
Best quarter: Worst quarter:
10.87% (1999 4th Quarter) (8.23)% (1999 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- ---------------------------------------------------------------
MFS Growth with Income Portfolio 8.76% 8.76%
- ---------------------------------------------------------------
S&P 500 Index* 21.03% 21.03%
- ---------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS has been the Adviser to the Portfolio since it commenced
operations. MFS is America's oldest mutual fund organization. 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. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
The Portfolio Managers are JOHN D. LAUPHEIMER, JR., Senior Vice President of
MFS, who has been employed as a portfolio manager by MFS since 1981; and
MITCHELL D. DYNAN, a Senior Vice President of MFS, who has been employed as a
portfolio manager by MFS since 1986.
------------------------ EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
60 MFS RESEARCH PORTFOLIO
- --------------------------------------------------------------------------------
MFS RESEARCH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide long-term growth of capital and future
income.
THE INVESTMENT STRATEGY
The Portfolio invests, at least 80% of its total assets in equity securities,
such as common stocks, securities convertible into common stocks, preferred
stocks and depositary receipts of companies believed by the Adviser to have:
o favorable prospects for long-term growth;
o attractive valuations based on current and expected earnings or cash
flow;
o dominant or growing market share; and
o superior management.
The Portfolio may invest in securities of companies of any size. The Portfolio's
investments may include securities traded on securities exchanges or in the
over-the-counter markets.
The Portfolio may invest up to 20% of its net assets in foreign equity
securities, including those of emerging markets. The Portfolio may invest in
foreign equity securities, through which it may have exposure to foreign
currencies.
When adverse market, financial or political conditions warrant, the Portfolio
may depart from its principal investment strategies for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
The Portfolio may invest up to 10% of its assets in high yielding debt
securities rated below investment grade ("junk bonds").
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less well-known and may trade less frequently and in lower
volume; such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; and the products or technologies
of such companies may be at a relatively early stage of development or not fully
tested.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than higher-rated obligations because
BBB rated investment grade securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative. The risk that an issuer or
guarantor of a fixed income security or counterparty to the Portfolio's fixed
income transaction is unable to meets its financial obligations is particularly
significant for this Portfolio because this Portfolio invests a
<PAGE>
- ----------
61 MFS RESEARCH PORTFOLIO
- --------------------------------------------------------------------------------
portion of its assets in "junk bonds" (i.e., securities rated below investment
grade). Junk bonds are issued by companies with questionable credit strength
and, consequently, are considered to be speculative in nature and may be subject
to greater market fluctuations than investment grade fixed-income securities.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of operations, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The inception date for the
Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1998 24.11%
1999 23.12%
Best quarter: Worst quarter:
21.36% (1998 4th Quarter) (14.24)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
-----------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- ------------------------------------------------------
MFS Research Portfolio 23.12% 23.93%
- ------------------------------------------------------
S&P 500 Index* 21.03% 27.36%
- ------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS has been the Adviser to the Portfolio since it commenced
operations. MFS is America's oldest mutual fund organization. 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. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
A committee of investment research analysts selects portfolio securities for the
Portfolio. 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 committee allocates the Portfolio's assets among various industries.
Individual analysts then select what they view as the securities best suited to
achieve the Portfolio's investment objective within their assigned industry
responsibility.
----------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
62 MERCURY BASIC VALUE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
MERCURY BASIC VALUE EQUITY PORTFOLIO
INVESTMENT OBJECTIVE: Seeks 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 INVESTMENT STRATEGY
The Portfolio chooses securities for capital appreciation that are expected to
increase in value. In selecting securities the Adviser emphasizes stocks that
are undervalued, are selling at a discount, or seem capable of recovering from
being temporarily out of favor. The Adviser places particular emphasis on
securities with statistical characteristics associated with undervaluation.
The Adviser follows a contrary opinion/out-of-favor investment style. The
Adviser believes that favorable changes in market prices are more likely to
occur when:
o stocks are out of favor;
o company earnings are depressed;
o price/earnings ratios are relatively low;
o investment expectations are limited; and/or
o there is no general interest in a security or industry.
On the other hand, the Adviser believes that negative developments are more
likely to occur when:
o investment expectations are high;
o stock prices are advancing or have advanced rapidly;
o price/earnings ratios have been inflated; and/or
o an industry or security continues to become popular among investors.
In other words, the Adviser believes that stocks with relatively high
price/earnings ratios are more vulnerable to price declines from unexpected
adverse developments. At the same time, stocks with relatively low
price/earnings ratios are more likely to benefit from favorable but generally
unanticipated events. Thus, the Portfolio may invest a
large part of its net assets in stocks that have weak
research ratings.
The Portfolio invests primarily in common stocks of U.S. companies, but may
buy equity securities other than common stock and may also invest up to 10% of
its total assets in securities issued by foreign companies. The Portfolio may
also invest a substantial portion of its assets in companies with market
capitalizations below the largest companies. The Adviser believes that large
institutional investors may overlook these companies, making them undervalued.
The Portfolio has no minimum holding period for investments, and will buy or
sell securities whenever the Portfolio's management sees an appropriate
opportunity.
When market or financial conditions warrant, the Portfolio may invest in U.S.
Government and agency securities, money market securities and other fixed
income securities for temporary or defensive purposes. Such investment
strategies are inconsistent with the Portfolio's investment objectives and
could result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged
to be undervalued may actually be appropriately priced.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because:
<PAGE>
- ----------
63 MERCURY BASIC VALUE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
the securities of such companies are less well-known and may trade less
frequently and in lower volume; such companies are more likely to experience
greater or more unexpected changes in their earnings and growth prospects; and
the products or technologies of such companies may be at a relatively early
stage of development or not fully tested.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of operations, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results and if reflected the
results would be reduced. The inception date for the Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1998 11.59%
1999 19.00%
Best quarter: Worst quarter:
13.57% (1999 2nd Quarter) (10.91)% (1998 3rd Quarter)
AVERAGE ANNUAL TOTAL RETURNS
-----------------------------------------
SINCE
ONE YEAR INCEPTION
- ---------------------------------------------------------------------
Mercury Basic Value Equity Portfolio 19.00% 17.93%
- ---------------------------------------------------------------------
S&P 500 Index* 21.03% 27.36%
- ---------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MERCURY ASSET MANAGEMENT, US, ("MERCURY"), A DIVISION OF FUND ASSET MANAGEMENT,
L.P. ("FAM"), 800 Scudders Mill Road, Plainsboro, NJ 08543. Mercury, or the
Portfolio's predecessor Adviser, Merrill Lynch Asset Management, L.P., ("MLAM")
has been the Adviser to the Portfolio since it commenced operations. FAM and
MLAM are both part of the Merrill Lynch Asset Management Group and each is an
indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc., a financial
services holding company. The general partner of FAM and MLAM is Princeton
Services, Inc., a wholly-owned subsidiary of Merrill Lynch & Co., Inc. Mercury
and its affiliates act as the manager for more than 100 registered investment
companies. Mercury also offers portfolio management and portfolio analysis
services to individuals and institutions.
KEVIN RENDINO, and ROBERT J. MARTORELLI are co-Portfolio Managers of the
Portfolio. Mr. Rendino is a First Vice President of Mercury since 1997, has been
the
------------------------ EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
64 MERCURY BASIC VALUE EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio Manager responsible for the day to day management of the Portfolio
since it commenced operations. Mr. Rendino was a Vice President of Mercury from
1993 to 1997. Mr. Martorelli is a Senior Vice President of Mercury and has been
a co-Portfolio Manager of the Portfolio since May 2000. Mr. Martorelli has been
a First Vice President of Mercury since 1997 and was Vice President from 1987 to
1997.
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
65 EQ/PUTNAM GROWTH & INCOME VALUE
- --------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME VALUE
PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital growth. Current income is a secondary
objective.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks that offer potential for
capital growth and may invest in stocks that offer potential for current income.
In analyzing companies for investment, the Adviser tries to identify common
stocks of companies that are significantly undervalued compared with their
underlying assets or earnings potential and offer growth and current income
potential.
The Portfolio may also invest in corporate bonds, notes and debentures,
preferred stocks or convertible securities (both debt securities and preferred
stocks) or U.S. Government securities.
It may also invest a portion of its assets in debt securities rated below
investment grade (commonly referred to as "junk bonds"), zero-coupon bonds and
payment-in-kind bonds, and high quality U.S. and foreign dollar-denominated
money market securities. The Portfolio may invest up to 20% of its total assets
in foreign securities, including transactions involving futures contracts,
forward contracts and options and foreign currency exchange transactions.
There may be times when the Adviser will use additional investment strategies to
achieve the Portfolio's investment objectives. For example, the Portfolio may
engage in a variety of investment management practices such as buying and
selling derivatives, including stock index futures contracts and call and put
options.
When market or financial conditions warrant, the Portfolio may invest up to 100%
of its assets in debt securities, preferred stocks or other securities for
temporary or defensive purposes. Such investment strategies are inconsistent
with the Portfolio's investment objectives and could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a value
stock's intrinsic value may never be fully recognized or realized by the market,
or its price may go down. There is also the risk that a stock judged to be
undervalued may actually be appropriately priced.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the
---------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
66 EQ/PUTNAM GROWTH & INCOME PORTFOLIO
- --------------------------------------------------------------------------------
issuer, the duration or maturity of the Portfolio's fixed income holdings, and
adverse market or economic conditions. When interest rates rise, the value of
the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse
is true. In addition, to the extent that the Portfolio invests in investment
grade securities which are rated BBB by S&P or an equivalent rating by any
other NRSRO, it will be exposed to greater risk than higher-rated obligations
because BBB rated investment grade securities are regarded as having only an
adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative. The risk that
an issuer or guarantor of a fixed income security or counterparty to the
Portfolio's fixed income transaction is unable to meets its financial
obligations is particularly significant for this Portfolio because this
Portfolio invests a portion of its assets in "junk bonds" (i.e., securities
rated below investment grade). Junk bonds are issued by companies with
questionable credit strength and, consequently, are considered to be
speculative in nature and may be subject to greater market fluctuations than
investment grade fixed-income securities.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for the Portfolio for one year and since inception. The table also
compares the Portfolio's performance to the returns of a broad-based index.
Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results. The inception date for the Portfolio is May 1, 1997.
<TABLE>
<CAPTION>
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1998 12.75%
1999 -1.27%
<S> <C>
Best quarter: Worst quarter:
16.49% (1998 4th Quarter) (11.94)% (1999 3rd Quarter)
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
------------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- ----------------------------------------------------------------
EQ/Putnam Growth & Income Value
Portfolio (1.27)% 10.13%
- ----------------------------------------------------------------
S&P 500 Index* 21.03% 27.36%
- ----------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC. ("Putnam Management"), One Post Office
Square, Boston, MA 02109. Putnam Management has been the Adviser to the
Portfolio since the Portfolio commenced operations. Putnam Management has been
managing mutual funds since 1937. Putnam Management is a subsidiary of Putnam
Investments, Inc., which is itself a subsidiary of Marsh & McLennan Companies,
Inc.
DEBORAH KUENSTNER has been the Portfolio Manager responsible for the
day-to-day management of the Portfolio since January 2000. Ms. Kuenstner is
Managing Director, Chief Investment Officer of the Large Cap Value Equities
Group and joined Putnam in 1997 as Senior Vice President and Senior Portfolio
Manager in the International Core and Value Equity Group. Prior to joining
Putnam, Ms. Kuenstner was the Senior Portfolio Manager, International Equities
of the DuPont Pension Fund Investment from 1989 to 1997.
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
67 EQ/PUTNAM INVESTORS GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital and any increased
income that results from this growth.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks of companies with market
capitalizations of $3 billion or more. The Adviser gives consideration to
growth potential rather than to dividend income. The Portfolio may purchase
securities of medium-sized companies having a proprietary product or
profitable market niches and the potential to grow very rapidly.
The Adviser invests mostly in "growth" stocks whose earnings the Adviser
believes are likely to grow faster than the economy as a whole. The Adviser
evaluates a company's future earnings potential and dividends, financial
strength, working assets and competitive position in its industry.
Although the Portfolio invests primarily in U.S. stocks, the Portfolio may
invest without limit in securities of foreign issuers that are traded in U.S.
public markets. It may also, to a lesser extent, invest in securities of
foreign issuers that are not traded in U.S. public markets.
The Portfolio may also engage in a variety of transactions involving
derivatives, such as futures, options, warrants and swaps and may also invest
in convertible securities, preferred stocks and debt securities.
When market or financial conditions warrant, the Portfolio may invest without
limit in debt securities, preferred stocks, United States Government and
agency obligations, cash or money market instruments, or any other securities
for temporary or defensive purposes. Such investment strategies are
inconsistent with the Portfolio's investment objectives and could result in
the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities market.
MID-CAP COMPANY RISK: The Portfolio's investments in mid-cap companies may be
subject to more abrupt or erratic movements in price than are those of larger,
more established companies because: the securities of such companies are less
well-known and may trade less frequently and in lower volume; such companies
are more likely to experience greater or more unexpected changes in their
earnings and growth prospects; and the products or technologies of such
companies may be at a relatively early stage of development or not fully
tested.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to
---------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
68 EQ/PUTNAM INVESTORS GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
the U.S. dollar for securities denominated in foreign currencies); inadequate
or inaccurate information about foreign companies; higher transaction,
brokerage and custody costs; adverse changes in foreign economic and tax
policies; and foreign government instability, war or other adverse political
or economic actions.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
higher-rated obligations because BBB rated investment grade securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for the Portfolio for one year and since inception. The table also
compares the Portfolio's performance to the returns of a broad-based index.
Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results
and if reflected the results would be reduced. The inception date for the
Portfolio is May 1, 1997.
<TABLE>
<CAPTION>
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1998 36.27%
1999 30.24%
<S> <C>
Best quarter: Worst quarter:
25.29% (1998 4th Quarter) (11.25)% (1998 First Quarter)
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- --------------------------------------------------------------------
EQ/Putnam Investors Growth Portfolio 30.24% 34.64%
- --------------------------------------------------------------------
S&P 500 Index* 21.03% 27.36%
- --------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC. ("Putnam Management"), One Post Office
Square, Boston, MA 02109. Putnam Management has been the Adviser to the
Portfolio since the Portfolio commenced operations. Putnam Management has been
managing mutual funds since 1937. Putnam Management is a subsidiary of Putnam
Investments, Inc., which is itself a subsidiary of Marsh & McLennan Companies,
Inc.
The Portfolio Managers, responsible for the day to day management of the
Portfolio since its inception, are: C. BETH COTNER, who has been employed by
Putnam Management as an investment professional* since 1995; RICHARD B.
ENGLAND, who has been employed by Putnam Management as an investment
professional* since 1992; and MANUAL WEISS HERRERRO, who has been employed by
Putnam Management as investment professional* since 1987. (*Investment
professional means that the manager was either a portfolio manager or analyst.)
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
69 T. ROWE PRICE EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide substantial dividend income and also
capital appreciation by investing primarily in dividend-paying common stocks
of established companies.
THE INVESTMENT STRATEGY
The Portfolio invests primarily (at least 65%) in dividend-paying common
stocks of well established companies paying above-average dividends.
The Adviser bases its investment decisions on three premises: (1) over time,
dividend income can account for a significant portion of the Portfolio's
return; (2) dividends are a more stable and predictable source of return; and
(3) prices of stocks that pay a high current income tend to be less volatile
than those paying below average dividends.
The Adviser uses a "value" approach in choosing securities. The Adviser's
in-house research team seeks companies that appear to be undervalued by
various measures and may be temporarily out of favor, but have good prospects
for capital appreciation and dividend growth. It looks for common stocks of
companies that have:
o established operating histories;
o above-average dividend yields relative to the S&P 500;
o low price to earnings ratios relative to the S&P 500;
o sound balance sheets and other positive financial characteristics; and
o low stock price relative to the company's asset value, cash flow or
business franchises.
Equity income investing involves finding common stocks that pay
dividend income. As an example, utility company stocks often
provide dividend income while a shareholder waits for the stock
price to move. Dividends can help reduce the Portfolio's
volatility during turbulent markets and help offset losses when
stock prices are falling.
The Portfolio may invest up to 25% of its total assets in foreign securities.
These securities include non-dollar-denominated securities traded outside the
United States and dollar-denominated securities of foreign issuers traded in
the U.S. such as American Depositary Receipts. The Portfolio may also purchase
preferred stocks, convertible securities, warrants, futures, options, U.S.
Government securities, high-quality money market securities, as well as
investment grade debt securities and high yielding debt securities ("junk
bonds").
When market or financial conditions warrant, the Portfolio may invest without
limitation in high quality money market securities, and United States
Government debt securities for temporary or defensive purposes. Such
investment strategies are inconsistent with the Portfolio's investment
objectives and could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. The Portfolio's emphasis on
stocks of established companies paying high dividends and its potential
investments in fixed income securities may limit its potential for
appreciation in a broad market advance. Such securities may also be hurt when
interest rates rise sharply. Also, a company may reduce or eliminate its
dividend. Other principal risks include:
----------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
70 T. ROWE PRICE EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged
to be undervalued may actually be appropriately priced.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. The risk that an issuer or guarantor of a fixed
income security or counterparty to the Portfolio's fixed income transaction is
unable to meet its financial obligations is particularly significant for this
Portfolio because this Portfolio may invest a portion of its assets in "junk
bonds" (i.e., securities rated below investment grade). Junk bonds are issued
by companies with questionable credit strength and, consequently, are
considered to be speculative in nature and may be subject to greater market
fluctuations than investment grade fixed-income securities.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses,which would reduce the perfomance results. The inception date for the
Portfolio is May 1, 1997.
<TABLE>
<CAPTION>
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1998 9.11%
1999 3.54%
<S> <C>
Best quarter: Worst quarter:
13.29% (1999 2nd Quarter) (8.56)% (1999 3rd Quarter)
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
-----------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- --------------------------------------------------------------------
T. Rowe Price Equity Income Portfolio 3.54% 12.80%
- --------------------------------------------------------------------
S&P 500 Index* 21.03% 27.36%
- --------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
T. ROWE PRICE ASSOCIATES, INC. ("T. Rowe Price"), 100
East Pratt Street, Baltimore, MD 21202. T. Rowe Price has
<PAGE>
- ----------
71 T. ROWE PRICE EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
been the Adviser to the Portfolio since the Portfolio commenced operations. T.
Rowe Price serves as investment manager to a variety of individual and
institutional investor accounts, including limited partnerships and other
mutual funds.
Investment decisions with respect to the Portfolio are made by an Investment
Advisory Committee. BRIAN C. ROGERS has been the Committee Chairman since the
inception of the Portfolio and 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 joined T. Rowe Price in 1982 and
has been managing investments since 1983.
-------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
72 WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
- --------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term capital
appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of U.S. small-cap
companies with above-average growth potential that the Adviser believes to be
undervalued. Typically, such investments may include common stocks, preferred
stocks, convertible securities, warrants and rights of small-cap companies.
Once 65% of the Portfolio's assets are invested in small-cap companies, the
Portfolio may also invest in companies with a market capitalization of any
size.
For purposes of this Portfolio, small-cap companies are companies having market
capitalizations within the range of capitalizations of companies represented in
the Russell 2000 Index.
In determining whether a company's stock is undervalued, the Adviser considers
all relevant factors which may include a company's:
o price/earnings ratio;
o price to book value ratio;
o price to cash flow ratio; and
o debt to capital ratio.
The Portfolio will invest primarily (at least 65% of its net assets) in the
securities of U.S. companies traded in the U.S. securities markets. The
Portfolio may invest to a lesser extent in foreign securities, investment
grade debt securities and high quality domestic and foreign short-term (one
year or less) and medium-term money-market securities.
When market or financial conditions warrant, the Portfolio may invest without
limitation in investment grade debt obligations and in domestic and foreign
obligations, including repurchase agreements for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged
to be undervalued may actually be appropriately priced.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs that could be passed through
to shareholders.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely
<PAGE>
- ----------
73 WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
- --------------------------------------------------------------------------------
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities, which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than higher-rated obligations because
BBB rated investment grade securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of operations, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce performance results. The inception date for the
Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1998 -10.02%
1999 1.80%
Best quarter: Worst quarter:
12.40% (1999 4th Quarter) (20.25)% (1998 3rd Quarter)
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------
SINCE
ONE YEAR INCEPTION
- -------------------------------------------------------------------
Warburg Pincus Small Company Value
Portfolio 1.80% 3.33%
- -------------------------------------------------------------------
Russell 2000 Value Index*,** (1.49)% 7.06%
- -------------------------------------------------------------------
Russell 2000 Index* 21.26% 16.99%
- -------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
** We believe that this index reflects more closely the market sectors in which
the Portfolio invests.
WHO MANAGES THE PORTFOLIO
CREDIT SUISSE ASSET MANAGEMENT, LLC. ("CSAM"), 466 Lexington Avenue, New York,
New York 10017-3147. CSAM is the successor to Warburg Pincus Asset Management,
Inc., which served as the Adviser to the Portfolio since it commenced
operations. CSAM is a professional investment advisory firm that provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. CSAM is indirectly
controlled by Credit Suisse Group. CSAM manages over $60 billion in assets in
the U.S., and together with its global affiliates, over $168 billion worldwide.
KYLE F. FREY is the Portfolio Manager and has been responsible for the
day-to-day management of the Portfolio since the Portfolio commenced operations.
Mr. Frey is a managing director of CSAM and has been with CSAM or its
predecessor since 1989.
------------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS
- ----------
74 ALLIANCE GLOBAL PORTFOLIO
- --------------------------------------------------------------------------------
ALLIANCE GLOBAL PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified mix of equity securities of
U.S. and established foreign companies. The Adviser believes the equity
securities of these established non-U.S. companies have prospects for growth.
The Portfolio intends to make investments in several countries and to have
represented in the Portfolio business activities in not less than three
different countries (including the United States).
These non-U.S. companies may have operations in the United States, in their
country of incorporation or in other countries.
The Portfolio may invest in any type of security including, but not limited
to, common and preferred stock, as well as shares of mutual funds that invest
in foreign securities, bonds and other evidences of indebtedness, and other
securities of issuers wherever organized and governments and their political
subdivisions. Although no particular proportion of stocks, bonds or other
securities is required to be maintained, the Portfolio intends under normal
conditions to invest in equity securities.
The Portfolio may also make use of various other investment strategies,
including making secured loans of up to 50% of its total assets. The Portfolio
may also use derivatives including: writing covered call and put options,
purchasing call and put options on individual equity securities, securities
indexes, and foreign currencies. The Portfolio may also purchase and sell
stock index, foreign currency and interest rate futures contracts and options
on such contracts, as well as forward foreign currency exchange contracts.
When market or financial conditions warrant, the Portfolio may at times invest
substantially all of its assets in securities issued by U.S. companies or in
cash or cash equivalents, including money market instruments issued by foreign
entities for temporary or defensive purposes. Such investment strategies could
result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISK: Investing in foreign securities involves risks not
associated with investing in U.S. securities that can adversely affect the
Portfolio's performance. Foreign markets, particularly emerging markets, may
be less liquid, more volatile and subject to less government supervision than
domestic markets. There may be difficulties enforcing contractual obligations,
and it may take more time for trades to clear and settle. In addition, foreign
investments can be adversely affected by: unfavorable currency exchange rates
(relative to the U.S. dollar for securities denominated in a foreign
currencies); inadequate or inaccurate information about foreign companies;
higher transaction, brokerage and custody costs; expropriation or
nationalization; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions. Other specific risks of investing in foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines.
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency.
<PAGE>
- ----------
75 ALLIANCE GLOBAL PORTFOLIO
- --------------------------------------------------------------------------------
During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is
expected to become the sole currency of the participating states. The
introduction of the Euro will result in the redenomination of European
debt and equity securities over a period of time, which may result in
various legal and accounting differences and/or tax treatments that
otherwise would not likely occur. During this period, the creation and
implementation of suitable clearing and settlement systems and other
operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. 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.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment-grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
if it invested in higher-rated obligations because BBB-rated securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one,
five and ten years and compares the Portfolio's performance to: (i) the
returns of a broad-based index and (ii) the returns of an index of funds with
similar investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Global Portfolio)
managed by the Adviser using the same investment objectives and strategy as
the Portfolio. For these purposes, the Portfolio is considered to be the
successor entity to the predecessor registered investment company
(HRT/Alliance Global Portfolio) whose inception date is August 27, 1987. The
assets of the
-------------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
76 ALLIANCE GLOBAL PORTFOLIO
- --------------------------------------------------------------------------------
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the
performance results of the Portfolio and its predecessor registered investment
company have been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
<TABLE>
<CAPTION>
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1990 -6.3%
1991 30.2%
1992 -0.7%
1993 31.9%
1994 5.0%
1995 18.6%
1996 14.4%
1997 11.4%
1998 21.5%
1999 38.17%
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
26.51% (1998 4th Quarter) (17.04)% (1999 3rd Quarter)
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
--------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
<S> <C> <C> <C>
- ----------------------------------------------------------------
Alliance Global
Portfolio -
Class IB Shares 38.17% 20.42% 15.55%
- ----------------------------------------------------------------
Lipper Global
Mutual Funds
Average** 44.18% 19.42% 11.73%
- ----------------------------------------------------------------
MSCI World
Index** 24.93% 19.76% 11.42%
- ----------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (October 1, 1996),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
SANDRA L. YEAGER has been responsible for the day-to-day management of the
Portfolio's and its predecessor's investment program since 1998. Ms. Yeager, a
Senior Vice President of Alliance, has been associated with Alliance since
1990.
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
77 ALLIANCE INTERNATIONAL PORTFOLIO
- --------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of capital by
investing primarily in a diversified portfolio of equity securities selected
principally to permit participation in non-U.S. companies with prospects for
growth.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified portfolio of equity
securities selected principally to permit participation in non-U.S. companies
or foreign governmental enterprises that the Adviser believes have prospects
for growth. The Portfolio may invest anywhere in the world (including
developing countries or "emerging markets"), although it will not generally
invest in the United States. The Portfolio may purchase securities of
developing countries, which include, among others, Mexico, Brazil, Hong Kong,
India, Poland, Turkey and South Africa.
These non-U.S. companies may have operations in the United States, in their
country of incorporation and/or in other countries.
The Portfolio intends to have represented in the Portfolio
business activities in not less than three different countries.
The Portfolio may also invest in any type of investment grade, fixed income
security including, but not limited to, preferred stock, convertible
securities, bonds, notes and other evidences of indebtedness of foreign
issuers, including obligations of foreign governments. Although no particular
proportion of stocks, bonds or other securities is required to be maintained,
the Portfolio intends under normal market conditions to invest primarily in
equity securities.
The Portfolio may also make use of various other investment strategies,
including the purchase and sale of shares of other mutual funds investing in
foreign securities and making loans of up to 50% of its portfolio securities.
The Portfolio may also use derivatives, including: writing covered call and
put options, purchasing purchase call and put options on individual equity
securities, securities indexes, and foreign currencies. The Portfolio may also
purchase and sell stock index, foreign currency and interest rate futures
contracts and options on such contracts, as well as forward foreign currency
exchange contracts.
For temporary or defensive purposes, when market or financial conditions
warrant, the Portfolio may at times invest substantially all of its assets in
securities issued by a single major developed country (e.g., the United
States) or in cash or cash equivalents, including money market instruments
issued by that country. In addition, the Portfolio may establish and maintain
temporary cash balances in U.S. and foreign short-term high-grade money market
instruments for defensive purposes or to take advantage of buying
opportunities. Such investments could result in the Portfolio not achieving
its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISK: Investing in foreign securities involves risks not
associated with investing in U.S. securities that can adversely affect the
Portfolio's performance. Foreign markets, particularly emerging markets, may
be less liquid, more volatile and subject to less government supervision than
domestic markets. There may be difficulties enforcing contractual obligations,
and it may take more time for trades to clear and settle. In addition, foreign
investments can be adversely affected by: unfavorable currency exchange rates
(relative to the U.S. dollar for securities denominated in a foreign
currencies); inadequate or inaccurate information about foreign companies;
higher transaction, brokerage and custody costs; expropriation or
nationalization; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions. Other specific risks of investing in foreign securities include:
----------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
78 ALLIANCE INTERNATIONAL PORTFOLIO
- --------------------------------------------------------------------------------
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines.
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency.
During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is
expected to become the sole currency of the participating states. The
introduction of the Euro will result in the redenomination of European
debt and equity securities over a period of time, which may result in
various legal and accounting differences and/or tax treatments that
otherwise would not likely occur. During this period, the creation and
implementation of suitable clearing and settlement systems and other
operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities market.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment-grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
if it invested in higher-rated obligations because BBB-rated securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. 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.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher turnover rate (e.g., over 100%
<PAGE>
- ----------
79 ALLIANCE INTERNATIONAL PORTFOLIO
- --------------------------------------------------------------------------------
per year) will cause the Portfolio to incur additional transaction costs that
could be passed through to shareholders.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last four calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one year
and since inception and compares the Portfolio's performance to: (i) the
returns of a broad-based index and (ii) the returns of an index of funds with
similar investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance International
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance International Portfolio) whose inception date is April 3, 1995.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
CALENDAR YEAR ANNUAL TOTAL RETURN
---------------------------------
[GRAPHIC OMITTED]
Year Percentage
----------------------------------
1996 9.6%
1997 (3.2)%
1998 10.3%
1999 36.90%
----------------------------------
Best quarter (% and time period) Worst quarter (% and time period)
25.87% (1999 4th Quarter) (15.72)% (1998 3rd Quarter)
-----------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- -----------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- -----------------------------------------------------------------------
Alliance International
Portfolio - Class IB
Shares 36.90% 12.83%
- -----------------------------------------------------------------------
MSCI EAFE Index** 26.96% 13.11%
- -----------------------------------------------------------------------
Lipper International Mutual
Funds Average** 42.88% 17.58%
- ----------------------------------------------------------------------
* For periods prior to the inception of Class IB Shares (May 1, 1997),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
80 ALLIANCE INTERNATIONAL PORTFOLIO
- --------------------------------------------------------------------------------
SANDRA L. YEAGER has been responsible for the day-to-day management of the
Portfolio and its predecessor since January 1999. Ms. Yeager, a Senior Vice
President of Alliance, has been associated with Alliance since 1990.
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
81 BT INTERNATIONAL EQUITY INDEX PORTFOLIO
- --------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to replicate as closely as possible (before
deduction of Portfolio expenses) the total return of the MSCI EAFE Index.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of companies included in
the MSCI EAFE Index. The Portfolio is constructed to have aggregate investment
characteristics similar to those of the MSCI EAFE Index. The Portfolio invests
in a statistically selected sample of the securities of companies included in
the MSCI EAFE Index, although not all companies within a country will be
represented in the Portfolio at the same time. Stocks are selected 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 securities should be purchased or sold in order
to replicate the MSCI EAFE index.
For more information on the MSCI EAFE Index see the preceding section "The
Benchmarks." The MSCI 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 MSCI EAFE Index or any data included therein.
Over time, the correlation between the performance of the Portfolio and the
MSCI EAFE Index is expected to be 95% or higher before deduction of Portfolio
expenses. The Portfolio's ability to track the MSCI EAFE Index may be affected
by, among others, transaction costs, administration and other expenses
incurred by the Portfolio, changes in either the composition of the MSCI EAFE
Index or the assets of the Portfolio, and the timing and amount of Portfolio
investor contributions and withdrawals, if any. The Portfolio seeks to track
the MSCI EAFE Index, therefore, the Adviser generally will not attempt to
judge the merits of any particular security as an investment.
The Portfolio may invest to a lesser extent in short-term debt securities and
money market instruments to meet redemption requests or to facilitate
investment in the securities of the MSCI EAFE Index. Securities index futures
contracts and related options, warrants and convertible securities may be used
for a number of reasons, including: to simulate full investment in the MSCI
EAFE Index 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
MSCI EAFE Index. These instruments are considered to be derivatives.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
INDEX FUND RISK: The Portfolio is not actively managed and invests in
securities included in the index regardless of their investment merit.
Therefore, the Portfolio cannot modify its investment strategies to respond to
changes in the economy and may be particularly susceptible to a general
decline in the U.S. or global stock market segment relating to the index.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities that can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, foreign investments can be adversely affected
by: unfavorable currency exchange rates (relative to the U.S. dollar for
securities denominated in a foreign currencies);
---------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
82 BT INTERNATIONAL EQUITY INDEX PORTFOLIO
- --------------------------------------------------------------------------------
inadequate or inaccurate information about foreign companies; higher
transaction, brokerage and custody costs; adverse changes in foreign economic
and tax policies; and foreign government instability, war or other adverse
political or economic actions. Other specific risks of investing in foreign
securities include:
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency.
During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is
expected to become the sole currency of the participating states. The
introduction of the Euro will result in the redenomination of European
debt and equity securities over a period of time, which may result in
various legal and accounting differences and/or tax treatments that
otherwise would not likely occur. During this period, the creation and
implementation of suitable clearing and settlement systems and other
operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's average annual total return for
1998 and 1999, the Portfolio's first two years of existence, and some of the
risks of investing in the Portfolio by showing yearly changes in the
Portfolio's performance. The table below shows the Portfolio's average annual
total returns for the Portfolio for one year and since inception. The table
also compares the Portfolio's performance to the returns of a broad based
index. Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance. The
performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the perfomance results.
The Portfolio's inception date was January 1, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
----------------------------------
[GRAPHIC OMITTED]
Year Percentage
----------------------------------
1998 20.07%
1999 27.50%
----------------------------------
Best quarter: Worst quarter:
20.43% (1998 4th Quarter) (13.90)% (1998 3rd Quarter)
----------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------
BT International Equity Index Portfolio 27.50% 23.69%
- --------------------------------------------------------------------------
MSCI EAFE Index* 26.96% 23.43%
- --------------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
<PAGE>
- ----------
83 BT INTERNATIONAL EQUITY INDEX PORTFOLIO
- --------------------------------------------------------------------------------
WHO MANAGES THE PORTFOLIO
BANKERS TRUST COMPANY ("Bankers Trust"), 130 Liberty Street (One Bankers Trust
Plaza), New York, New York 10006. Bankers Trust has been the Adviser to the
Portfolio since it commenced operations. Bankers Trust is a wholly-owned
subsidiary of Bankers Trust 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,
including investment management. In 1999, Bankers Trust Corporation finalized
a merger in which Bankers Trust Corporation was acquired by and became a
subsidiary of Deutsche Bank AG.
--------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
84 CAPITAL GUARDIAN INTERNATIONAL PORTFOLIO
- --------------------------------------------------------------------------------
CAPITAL GUARDIAN INTERNATIONAL
PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth of capital by investing
primarily in non-U.S. equity securities.
THE INVESTMENT STRATEGY
The Portfolio invests primarily (at least 80% of its net assets) in securities
of non-U.S. issuers (including American Depositary Receipts and U.S.
registered securities) and securities whose principal markets are outside of
the U.S. While the assets of the Portfolio can be invested with geographic
flexibility, the Portfolio will emphasize investment in securities of
companies located in Europe, Canada, Australia, and the Far East, giving due
consideration to economic, social, and political developments, currency risks
and the liquidity of various national markets. In addition, the Portfolio may
invest in securities of issuers domiciled in other countries including
developing countries. In determining the domicile of an issuer, the Adviser
takes into account where the company is legally organized, the location of its
principal corporate offices and where it conducts its principal operations.
The Portfolio primarily invests in common stocks (or securities convertible
into common stocks), warrants, rights, and non-convertible preferred stock.
However, when the Adviser believes that market and economic conditions
indicate that it is desirable to do so, the Portfolio may also purchase
high-quality debt securities rated, at the time of purchase, within the top
three quality categories by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") (or unrated securities of equivalent
quality), repurchase agreements, and short-term debt obligations denominated
in U.S. dollars or foreign currencies.
Although the Portfolio does not intend to seek short-term profits, securities
in the Portfolio will be sold whenever the Adviser believes it is appropriate
to do so without regard to the length of time a particular security may have
been held.
To the extent the Portfolio invests in non-U.S. dollar denominated securities
or holds non-U.S. dollar assets, the Portfolio may hedge against possible
variations in exchange rates between currencies by purchasing and selling
currency futures or put and call options and may also enter into forward
foreign currency exchange contracts to hedge against changes in currency
exchange rates. The Portfolio may also cross-hedge between two non-U.S.
currencies.
When market or financial conditions warrant, the Portfolio may invest a
substantial portion of its assets in short-term obligations for temporary or
defensive purposes. If such action is taken, it will detract from achievement
of the Portfolio's investment objective during such periods.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions. Other specific risks of investing in foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
<PAGE>
- ----------
85 CAPITAL GUARDIAN INTERNATIONAL PORTFOLIO
- --------------------------------------------------------------------------------
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines.
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency.
During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is
expected to become the sole currency of the participating states. The
introduction of the Euro will result in the redenomination of European
debt and equity securities over a period of time, which may result in
various legal and accounting differences and/or tax treatments that
otherwise would not likely occur. During this period, the creation and
implementation of suitable clearing and settlement systems and other
operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
GROWTH INVESTING RISK: This Portfolio uses a growth oriented approach to stock
selection. The price of growth stocks may be more sensitive to changes in
current or expected earnings than the prices of other stocks. The price of
growth stocks is also subject to the risk that the stock price of one or more
companies will fall or will fail to appreciate as anticipated by the Adviser,
regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in relation to changes in interest
rates and changes in the value of the underlying common stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
CAPITAL GUARDIAN TRUST COMPANY ("Capital Guardian"), 333 South Hope Street,
Los Angeles, CA 90071. Capital Guardian is a wholly-owned subsidiary of
Capital Group International, Inc., which itself is a wholly owned subsidiary
of The Capital Group Companies, Inc. Capital Guardian has been providing
investment management services since 1968 and manages approximately $123
billion as of December 31, 1999.
Capital Guardian uses a multiple portfolio manager system under which the
Portfolio is divided into several segments. Each segment is individually
managed with the portfolio manager free to decide on company and industry
selections as well as valuation and transaction assessment. An additional
portion of the Portfolio is managed by a group of investment research
analysts.
The individual portfolio managers of each segment of the Portfolio, other than
that managed by the group of research analysts, are as follows:
DAVID I. FISHER. David Fisher is Chairman of the Board of Capital Group
International, Inc. and Capital Guardian. He joined the Capital Guardian
organization in 1969.
------------------------ EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
86 CAPITAL GUARDIAN INTERNATIONAL PORTFOLIO
- --------------------------------------------------------------------------------
HARTMUT GIESECKE. Hartmut Giesecke is Chairman of the Board of Capital's
Japanese investment management subsidiary, Capital International K.K., and
Managing Director Asia-Pacific, Capital Group International, Inc. He is also a
Senior Vice President and a Director of Capital International Research, Inc.
and Capital International, Inc. He joined the Capital Guardian organization in
1972.
RICHARD N. HAVAS. Richard Havas is a Senior Vice President and a portfolio
manager for Capital Guardian and Capital International Limited. He is also a
Senior Vice President and Director for Capital Guardian (Canada), Inc. and
Capital International Research, Inc. He joined the Capital Guardian
organization in 1986.
NANCY J. KYLE. Nancy Kyle is a Senior Vice President and a Director and
member of the Executive Committee of Capital Guardian. She is also President
and a Director of Capital Guardian (Canada), Inc. and a Vice President of
Emerging Markets Growth Fund. She is an international equity and emerging
markets portfolio manager. She joined the Capital Guardian organization in
1991.
ROBERT RONUS. Robert Ronus is President and a Director of Capital Guardian. He
is also Chairman of the Board of Capital International Research, Inc. Chairman
of the Board and a Director of Capital Guardian (Canada), Inc., a Director of
The Capital Group Companies, Inc. and Capital Group International, Inc., and a
Senior Vice President of Capital International S.A. and Capital International
Limited. He joined the Capital Guardian organization in 1972.
LIONEL M. SAUVAGE. Lionel Sauvage is a Senior Vice President and portfolio
manager for Capital Guardian and a Vice President and a Director for Capital
International Research, Inc. He joined the Capital Guardian organization in
1987.
NILLY SIKORSKY. Nilly Sikorsky is President and Managing Director of Capital
International S.A., Chairman of Capital International Perspective S.A.,
Managing Director-Europe and a Director of Capital Group International, Inc.,
as well as a Director of The Capital Group Companies, Inc., Capital
International Limited, and Capital International K.K. She joined the Capital
Guardian organization in 1962.
RUDOLF M. STAEHELIN. Rudolf Staehelin is a Senior Vice President and Director
of Capital International Research, Inc. and Capital International S.A. He is a
portfolio manager for Capital Guardian, Capital International S.A., and
Capital International Limited. He joined the Capital Guardian organization in
1981.
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
87 MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term capital appreciation by investing
primarily in equity securities of issuers in emerging market countries.
THE INVESTMENT STRATEGY
The Portfolio is a non-diversified Portfolio that invests primarily in equity
securities of companies located in emerging market countries. Such equity
securities may include common stocks, preferred stocks, convertible
securities, depositary receipts, rights and warrants. The Adviser focuses on
growth-oriented companies in emerging market countries that it believes have
strong developing economies and increasingly sophisticated markets. The
Portfolio generally invests only in emerging market countries whose currencies
are freely convertible into United States dollars.
A Portfolio may be considered to be "non-diversified" for federal
securities law purposes because it invests in a limited number of
securities. In all cases, the Portfolio intends to be diversified for tax
purposes so that it can qualify as a regulated investment company.
For purposes of this Portfolio, an emerging market country security is
defined as a security of an issuer having one or more of the following
characteristics:
o Its principal securities trading market is in an emerging market
country;
o alone or on a consolidated basis, at least 50% of its revenues are
derived from goods produced, sales made or services performed in an
emerging market country; and
o it is organized under the laws of or has a principal office in an
emerging market country.
The Adviser's investment approach combines top-down country allocation with
bottom-up stock selection.
In a "top-down" approach, country allocations are made based on relative
economic, political and social fundamentals, stock valuations and investor
sentiment. In a "bottom-up" approach, securities are reviewed and chosen
individually.
The Portfolio may invest to a lesser extent in corporate or government-issued
or guaranteed debt securities of issuers in emerging market countries,
including debt securities that are rated or considered to be below investment
grade ("junk bonds"). The Portfolio also may, to a lesser extent, invest in
equity or debt securities (including "junk bonds") of corporate or
governmental issuers located in industrialized countries, foreign currency or
investment funds and supranational entities such as the World Bank. In
addition, the Portfolio may utilize forward foreign currency contracts,
options and futures contracts and swap transactions.
When market or financial conditions warrant, the Portfolio may invest in
certain short- and medium-term fixed income securities of issuers other than
emerging market issuers and may invest without limitation in high quality
money market instruments for temporary or defensive purposes. Such investment
strategies are inconsistent with the Portfolio's investment objectives and
could result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests primarily in equity securities, therefore, its
performance may go up or down depending on general market conditions. Other
principal risks include:
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities that can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile and subject to less
government supervision than domestic markets. There
----------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
88 MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
may be difficulties enforcing contractual obligations, and it may take more
time for trades to clear and settle. In addition, foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in a foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions. Other specific risks of investing in foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging market countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines.
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency.
During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is
expected to become the sole currency of the participating states. The
introduction of the Euro will result in the redenomination of European
debt and equity securities over a period of time, which may result in
various legal and accounting differences and/or tax treatments that
otherwise would not likely occur. During this period, the creation and
implementation of suitable clearing and settlement systems and other
operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs that could be passed through
to shareholders.
NON-DIVERSIFICATION RISK: Since a relatively high percentage of the
Portfolio's assets may be invested in the securities of a limited number of
issuers, some of which may be within the same industry, the securities of the
Portfolio may be more sensitive to changes in the market value of a single
issuer or industry or to risks associated with a single economic, political or
regulatory event than a diversified portfolio.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with
<PAGE>
- ----------
89 MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
longer durations or maturities, will go down. When interest rates fall, the
reverse is true. In addition, to the extent that the Portfolio invests in
investment grade securities, that are rated BBB by S&P or an equivalent rating
by any other NRSRO, it will be exposed to greater risk than higher-rated
obligations because BBB rated investment grade securities are regarded as
having only an adequate capacity to pay principal and interest and are
considered to lack outstanding investment characteristics. The risk that an
issuer or guarantor of a fixed income security or counterparty to the
Portfolio's fixed income transaction is unable to meets its financial
obligations may be is particularly significant for this Portfolio because this
Portfolio may invest a portion of its assets in "junk bonds" (i.e., securities
rated below investment grade). Junk bonds are issued by companies with
questionable credit strength and, consequently, are considered to be
speculative in nature and may be subject to greater market fluctuations than
investment grade fixed-income securities.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for the Portfolio for one year and since inception. The table also
compares the Portfolio's performance to the returns of a broad-based index.
Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results. The inception date for the Portfolio is August 20, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
---------------------------------
[GRAPHIC OMITTED]
Year Percentage
---------------------------------
1998 (27.10)%
1999 95.82%
---------------------------------
Best quarter: Worst quarter:
49.70% (1999 4th Quarter) (22.14)% (1998 2nd Quarter)
----------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- ------------------------------------------------------------------
Morgan Stanley Emerging Markets
Equity Portfolio 95.82% 5.76%
- ------------------------------------------------------------------
MSCI Emerging Markets Free* 66.41% (0.88)%
- ------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MORGAN STANLEY ASSET MANAGEMENT ("MSAM"), 1221 Avenue of the Americas, New
York, NY 10020. MSAM has been the Adviser to the Portfolio since the Portfolio
commenced operations. MSAM conducts a worldwide investment management
business, providing a broad range of portfolio management services to
customers in the United States and abroad. MSAM serves as an investment
adviser to numerous open-end and closed-end investment companies. On December
1, 1998, Morgan Stanley Asset Management Inc. changed its name to Morgan
Stanley Dean Witter Investment Management Inc. but continues to do business in
certain instances using the name Morgan Stanley Asset Management.
The Portfolio Managers, responsible for the day to day management of the
Portfolio since the Portfolio commenced
------------------------ EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
90 MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
operations, are: ROBERT MEYER, a Managing Director of MSAM and Morgan Stanley
& Co. Incorporated, who is head of MSAM's Emerging Markets Equity Group and
who joined MSAM in 1989; and ANDY SKOV, a Managing Director of MSAM and Morgan
Stanley & Co. Incorporated who joined MSAM in 1994.
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
91 EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of companies in a number
of different countries. Such equity securities normally include common stocks,
preferred stocks, securities convertible into common or preferred stocks and
warrants. Under normal market circumstances, a majority of the Portfolio's
assets will be invested in companies located in at least three different
countries outside the United States. The countries in which the Portfolio may
invest include emerging market countries.
The Portfolio considers the following to be an issuer of securities located in
a country other than the U.S.:
o companies organized under the laws of a country other than the U.S. with a
principal office outside the U.S.; or
o companies that earn 50% or more of their total revenues from business
outside the U.S.
The Portfolio may engage in a variety of transactions using "derivatives,"
such as futures, options, warrants, forward and swap contracts on both
securities and currencies.
The Portfolio will not limit its investments to any particular type of
company. The Portfolio may invest in companies of any size whose earnings the
Adviser believes to be in a relatively strong growth trend or whose securities
the Adviser considers to be undervalued. The Adviser considers, among other
things, a company's financial strength, competitive position in its industry
and projected future earnings and dividends when deciding whether to buy or
sell investments.
When market or financial conditions warrant, the Portfolio may invest, without
limitation, in securities of any kind, including securities traded primarily
in U.S. markets, cash and money market instruments for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities that can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, foreign investments can be adversely affected
by: unfavorable currency exchange rates (relative to the U.S. dollar for
securities denominated in a foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
Other specific risks of investing in foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines.
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency.
During a three-year transitional period, the Euro will coexist with
----------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- --------
92 EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
each participating state's currency and, on July 1, 2002, the Euro is
expected to become the sole currency of the participating states. The
introduction of the Euro will result in the redenomination of European
debt and equity securities over a period of time, which may result in
various legal and accounting differences and/or tax treatments that
otherwise would not likely occur. During this period, the creation and
implementation of suitable clearing and settlement systems and other
operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs and may result in higher
taxable gains that could be passed through to shareholders.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for the Portfolio for one year and since inception. The table also
compares the Portfolio's performance to the returns of a broad-based index.
Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
The inception date for the Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
---------------------------------
[GRAPHIC OMITTED]
Year Percentage
- -----------------------------------
1998 19.51%
1999 60.24%
- -----------------------------------
Best quarter: Worst quarter:
36.26% (1999 4th Quarter) (18.48)% (1998 3rd Quarter)
- -----------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- -----------------------------------------------------------------------
EQ/Putnam International Equity Portfolio 60.24% 31.98%
- -----------------------------------------------------------------------
MSCI EAFE Index* 26.96% 18.32%
- -----------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
<PAGE>
- ----------
93 EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
WHO MANAGES THE PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC. ("Putnam Management"), One Post Office
Square, Boston, MA 02109. Putnam Management has been the Adviser to the
Portfolio since the Portfolio commenced operations. Putnam Management has been
managing mutual funds since 1937. Putnam Management is a subsidiary of Putnam
Investments, Inc. which is itself a subsidiary of Marsh & McLennan Companies,
Inc.
The Portfolio Manager, responsible for the day to day management of the
Portfolio since the inception of the Portfolio, is OMID KAMSHAD, Managing
Director and Chief Investment Officer of Core International Equity, who has
been employed as an investment professional* by Putnam Management since 1996.
Prior to January 1996, he was a Director of Investments at Lombard Odier
International Portfolio Management Limited and prior to April 1995, he was
Director at Baring Asset Management Company. (*Investment professional means
that the manager was either a portfolio manager or analyst.)
------------------------ EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
94 T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO
- --------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital through investment
primarily in common stocks of established non-United States companies.
THE INVESTMENT STRATEGY
The Portfolio invests substantially all of its assets in common stocks of
established companies outside of the United States. The Portfolio intends to
diversify broadly among countries throughout the world by having securities
from at least five different countries represented in the Portfolio. No more
than 20% of its assets will be invested in securities of any one country,
except that up to 35% can be invested in stocks of companies in Australia,
Canada, France, Japan, United Kingdom or Germany. In determining the
appropriate distribution of investments among various countries and geographic
regions, the Adviser ordinarily considers the following factors:
o prospects for relative economic growth between foreign countries;
o expected levels of inflation;
o government policies influencing business conditions;
o the outlook for currency relationships; and
o the range of individual investment opportunities available to
international investors.
Country allocation is driven largely by stock selection, though the Adviser
may limit investments in markets that appear to have poor overall prospects.
The Portfolio expects to invest substantially all of its assets in common
stocks of large and, to a lesser extent, medium-sized companies. Typically,
however, the Portfolio may also invest in a variety of other equity securities
such as preferred stocks, warrants and convertible securities as well as
governmental debt securities and investment grade debt securities. The
Portfolio may also invest in certain foreign investment funds, hybrid
instruments and derivative instruments in keeping with the Portfolio
objective. Stock selection reflects a growth style. In analyzing companies for
investment, the Adviser uses a "bottom-up" approach and looks for companies
that have one or more of the following characteristics:
o leading market position;
o attractive business niche;
o strong franchise or natural monopoly;
o technological leadership or proprietary advantages;
o seasoned management;
o earnings growth and cash flow sufficient to support growing dividends;
o healthy balance sheet with relatively low debt.
This means that the securities are selected based upon fundamental analysis
performed by the Adviser in an effort to identify companies capable of
achieving and sustaining above-average long-term earnings growth.
When market or financial conditions warrant, the Portfolio may invest without
limitation in high quality U.S. Government and corporate debt obligations for
temporary or defensive purposes. Such investment strategies are inconsistent
with the Portfolio's investment objectives and could result in the Portfolio
not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Funds that invest overseas
generally carry more risk than funds that invest strictly in U.S. stocks.
Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities market.
<PAGE>
- ----------
95 T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO
- --------------------------------------------------------------------------------
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities that can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, foreign investments can be adversely affected
by: unfavorable currency exchange rates (relative to the U.S. dollar for
securities denominated in a foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
Other specific risks of investing in foreign securities include:
CURRENCY RISK: The risk that changes in currency exchange rates will
negatively affect securities denominated in, and/or receiving revenues
in, foreign currencies. Adverse changes in currency exchange rates
(relative to the U.S. dollar) may erode or reverse any potential gains
from a Portfolio's investment in securities denominated in a foreign
currency or may widen existing losses.
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines. Fund performance will likely be negatively affected by
portfolio exposure to nations suffering severe inflation or currency
devaluation.
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency.
During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is
expected to become the sole currency of the participating states. The
introduction of the Euro will result in the redenomination of European
debt and equity securities over a period of time, which may result in
various legal and accounting differences and/or tax treatments that
otherwise would not likely occur. During this period, the creation and
implementation of suitable clearing and settlement systems and other
operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
GEOGRAPHIC RISK: The economies and financial markets of certain regions,
such as Latin America and Asia, can be highly interdependent and may
decline all at the same time.
FUTURES/OPTIONS RISK: To the extent the Portfolio uses futures and options, it
is exposed to additional volatility and potential losses.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
---------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ---------
96 T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO
- --------------------------------------------------------------------------------
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for the Portfolio for one year and since inception. The table also
compares the Portfolio's performance to the returns of a broad-based index.
Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results. The inception date for the Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
---------------------------------
[GRAPHIC OMITTED]
Year Percentage
---------------------------------
1998 13.68%
1999 31.92%
---------------------------------
Best quarter: Worst quarter:
24.01% (1999 4th Quarter) (13.68)% (1998 3rd Quarter)
---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- -----------------------------------------------------------------
T. Rowe Price International
Stock Portfolio - Class IB Shares 31.92% 15.73%
- -----------------------------------------------------------------
MSCI EAFE Index* 26.96% 18.32%
- -----------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ROWE PRICE-FLEMING INTERNATIONAL, INC. ("Price-Fleming"), 100 East Pratt
Street, Baltimore, MD 21202. Price-Fleming has been the Adviser to the
Portfolio since it commenced its operations. Price-Fleming was incorporated in
Maryland in 1979 as a joint venture between T. Rowe Price and Robert Fleming
Holdings Limited ("Flemings"). Flemings is a diversified investment
organization that participates in a global network of regional investment
offices. The common stock of Price-Fleming is 50% owned by a wholly owned
subsidiary of T. Rowe Price, 25% owned by a subsidiary of Flemings and 25%
owned by a subsidiary of Jardine Fleming Group Limited ("Jardine Fleming").
Flemings owns 10% of Jardine Fleming.
Investment decisions with respect to the Portfolio are made by an Investment
Advisory Group. The Investment Advisory Group has day-to-day responsibility
for managing the Portfolio and developing and executing the Portfolio's
investment program.
<PAGE>
FIXED INCOME PORTFOLIOS
- ----------
97 ALLIANCE HIGH YIELD PORTFOLIO
- --------------------------------------------------------------------------------
ALLIANCE HIGH YIELD PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve a high return by maximizing current
income and, to the extent consistent with that objective, capital
appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified mix of high yield fixed
income securities (so-called "junk bonds"), which generally involve greater
volatility of price and risk of principal and income than high quality fixed
income securities. Junk bonds generally have a higher current yield but are
rated either in the lower categories by NRSROs (i.e., rated Ba or lower by
Moody's or BB or lower by S&P) or are unrated securities of comparable
quality.
The Portfolio will attempt to maximize current income by taking advantage of
market developments, yield disparities and variations in the creditworthiness
of issuers. Substantially all of the Portfolio's investments will be income
producing.
The Portfolio may also make use of various other investment strategies,
including investments in common stocks and other equity-type securities (such
as convertible debt securities) and secured loans of its portfolio securities
without limitation in order to enhance its current return and to reduce
fluctuations in net asset value. The Portfolio may also use derivatives,
including: writing covered call and put options; purchasing call and put
options on individual fixed income securities, securities indexes and foreign
currencies; and purchasing and selling stock index, interest rate and foreign
currency futures contracts and options thereon. The Portfolio may also invest
in participations and assignments of loans originally made by institutional
lenders or lending syndicates.
The Portfolio will not invest more than 10% of its total assets in:
(i) fixed income securities which are rated lower than B3 or B- or their
equivalents by one NRSRO or if unrated are of equivalent quality as determined
by the Adviser; and
(ii) money market instruments of any entity which has an outstanding issue of
unsecured debt that is rated lower than B3 or B- or their equivalents by an
NRSRO or if unrated is of equivalent quality as determined by the Adviser;
however, this restriction will not apply to:
o fixed income securities which the Adviser believes have similar
characteristics to securities which are rated B3 or higher by Moody's or
B- or higher by S&P, or
o money market instruments of any entity that has an unsecured issue of
outstanding debt which the Adviser believes has similar characteristics to
securities which are so rated.
In the event that any securities held by the Portfolio fall below those
ratings, the Portfolio will not be obligated to dispose of such securities and
may continue to hold such securities if the Adviser believes that such
investments are considered appropriate under the circumstances.
The Portfolio may also invest in fixed income securities that are providing
high current yields because of risks other than credit, such as prepayment
risks, in the case of mortgage-backed securities, or currency risks, in the
case of non-U.S. dollar denominated foreign securities.
When market or financial conditions warrant, the Portfolio may also make
temporary investments in high-quality U.S. dollar-denominated money market
instruments. Such investment strategies could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
JUNK BOND RISK: The Portfolio invests primarily in "junk bonds" or lower-rated
securities rated BB or lower by S&P or an equivalent rating by any other NRSRO
or unrated securities of similar quality. Junk bonds have speculative elements
or are predominantly speculative credit risks, therefore, credit risk is
particularly significant for this Portfolio. Although junk bonds generally
have higher yields than debt securities with higher credit ratings, they are
high-risk investments that may not pay interest or return principal as
scheduled. Junk bonds generally are also less liquid and experience more price
volatility than higher rated fixed income securities. This Portfolio may also
be subject to
--------------------- EQ Advisors Trust
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
98 ALLIANCE HIGH YIELD PORTFOLIO
- --------------------------------------------------------------------------------
greater credit risk because it may invest in debt securities issued in
connection with corporate restructurings by highly leveraged issuers or in
debt securities not current in the payment of interest or principal, or in
default.
FIXED INCOME RISK: This Portfolio invests primarily in fixed income
securities, therefore, the Portfolio's performance will be affected by changes
in interest rates, credit risks of the issuer, the duration and maturity of
the Portfolio's fixed income holdings, and adverse market and economic
conditions. Other risks that relate to the Portfolio's investment in fixed
income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share
price and total return) of the Portfolio's fixed income securities,
particularly those with longer durations or maturities, will go down.
When interest rates fall, the reverse is true.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase, making them even
more susceptible to interest rate changes. Falling interest rates may
cause the value and yield of mortgage-backed securities to fall. Falling
interest rates also may encourage borrowers to pay off their mortgages
sooner than anticipated (pre-payment). The Portfolio would need to
reinvest the pre-paid funds at the newer, lower interest rates.
LOAN PARTICIPATION AND ASSIGNMENT RISK: In addition to the risks associated
with fixed income investments generally, the Portfolio's investments in loan
participations and assignments are subject to the risk that the financial
institution acting as agent for all interests in a loan, might fail
financially. It is also possible that, under emerging legal theories of lender
liability, the Portfolio could be held liable as a co-lender.
SMALL CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known; held primarily by insiders
or institutional investors and may trade less frequently and in lower volume;
such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; such companies have limited
financial resources or may depend on a few key employees; and the products of
technologies of such companies may be at a relatively early stage of
development or not fully tested.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
<PAGE>
- ----------
99 ALLIANCE HIGH YIELD PORTFOLIO
- --------------------------------------------------------------------------------
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities without restriction. The risk 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.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one,
five and ten years and compares the Portfolio's performance to: (i) the
returns of a broad-based index and (ii) the returns of an index of funds with
similar investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance High Yield Portfolio)
managed by the Adviser using the same investment objectives and strategy as
the Portfolio. For these purposes, the Portfolio is considered to be the
successor entity to the predecessor registered investment company
(HRT/Alliance High Yield Portfolio) whose inception date is January 2, 1987.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
CALENDAR YEAR ANNUAL TOTAL RETURN*
----------------------------------
[GRAPHIC OMITTED]
Year Percentage
----------------------------------
1990 (1.4)%
1991 24.2%
1992 12.1%
1993 22.9%
1994 (3.0)%
1995 19.7%
1996 22.6%
1997 18.2%
1998 (5.4)%
1999 (3.58)%
-----------------------------------
Best quarter (% and time period) Worst quarter (% and time period)
7.94% (1997 2nd Quarter) (11.02)% (1998 3rd Quarter)
-----------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- -------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- -------------------------------------------------------------------------------
Alliance High Yield Portfolio
- Class IB Shares (3.58)% 9.58% 9.96%
- -------------------------------------------------------------------------------
CSFB Index**,*** 3.28% 9.07% 11.06%
- -------------------------------------------------------------------------------
ML Master** 1.57% 9.61% 10.79%
- -------------------------------------------------------------------------------
Lipper High Current Yield Bond
Funds Average** 3.83% 9.48% 10.15%
- -------------------------------------------------------------------------------
* For periods prior to the inception of Class IB Shares (October 1, 1996),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
*** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies,
----------------------- EQ Advisors Trust
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
100 ALLIANCE HIGH YIELD PORTFOLIO
- --------------------------------------------------------------------------------
endowment funds, insurance companies, foreign entities, qualified and non-tax
qualified corporate funds, public and private pension and profit-sharing
plans, foundations and tax-exempt organizations.
NELSON JANTZEN has been responsible for the day-to-day management of the
Portfolio since January 2000. Mr. Jantzen is a Senior Vice President and
Portfolio Manager in the Global High Yield Group and is responsible for the
management of domestic high yield securities. Mr. Jantzen joined Alliance in
1993.
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ---------
101 ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve high current income consistent with
relative stability of principal through investment primarily in debt
securities issued or guaranteed as to principal and interest by the U.S.
Government or its agencies or instrumentalities.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in U.S. Government securities. The Portfolio
may also invest in repurchase agreements and forward commitments related to
U.S. Government securities and may also purchase debt securities of
non-government issuers that own mortgages.
Duration is a measure of the weighted average maturity of the bonds held by
the Portfolio and can be used by the Adviser as a measure of the
sensitivity of the market value of the Portfolio to changes in interest
rates. Generally, the longer the duration of the Portfolio, the more
sensitive its market value will be to changes in interest rates.
In some cases, the Adviser's calculation of duration will be based on
certain assumptions (including assumptions regarding prepayment rates, in
the mortgage-backed or asset-backed securities, and foreign and domestic
interest rates). As of December 31, 1999, the Adviser considered the
duration of a 10-year Treasury bond to be 7.3 years. The Portfolio's
investments will generally have a final maturity of not more than ten years
or a duration not exceeding that of a 10-year Treasury note.
The Portfolio buys and sells securities with a view to maximizing current
return without, in the opinion of the Adviser, undue risk to principal.
Potential capital gains resulting from possible changes in interest rates will
not be a major consideration. The Portfolio may take full advantage of a wide
range of maturities of U.S. Government securities and may adjust the
dollar-weighted average maturity of its portfolio from time to time, depending
on the Adviser's assessment of relative yields on securities of different
maturities and the expected effect of future changes in interest rates on the
market value of the securities held by the Portfolio. The Portfolio may also
invest a substantial portion of its assets in money market instruments.
In order to enhance its current return, to reduce fluctuations in net asset
value, and to hedge against changes in interest rates, the Portfolio may write
covered call and put options on U.S. Government securities and may purchase
call and put options on U.S. Government securities. The Portfolio may also
enter into interest rate futures contracts with respect to U.S. Government
securities, and may write and purchase options thereon. The Portfolio may also
make secured loans of its portfolio securities without limitation and enter
into repurchase agreement with respect to U.S. Government securities with
commercial banks and registered broker-dealers.
The Portfolio may also make use of various other investment strategies,
including covered short sales, and the purchase or sale of securities on a
when-issued, delayed delivery or forward commitment basis.
Under normal market conditions, the Portfolio will invest at least 65%, and
expects to invest at least 80%, of its total assets in U.S. Government
securities and repurchase agreements and forward commitments relating to U.S.
Government Securities. U.S. Government securities include:
o U.S. Treasury Bills: Direct obligations of the U.S. Treasury which are
issued in maturities of one year or less.
o U.S. Treasury Notes: Direct obligations of the U.S. Treasury issued in
maturities which vary between one and ten years, with interest payable
every six months.
--------------------- EQ Advisors Trust
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ---------
102 ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
o U.S. Treasury Bonds: Direct obligations of the U.S. Treasury which are
issued in maturities more than ten years from the date of issue, with
interest payable every six months.
o "Ginnie Maes": Debt securities issued by a mortgage banker or other
mortgagee and represent an interest in a pool of mortgages insured by
the Federal Housing Administration or the Farmers Home Administration or
guaranteed by the Veterans Administration. The Government National
Mortgage Association ("GNMA") guarantees the timely payment of principal
and interest. Ginnie Maes, although not direct obligations of the U.S.
Government, are guaranteed by the U.S. Treasury.
o "Fannie Maes": The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private stockholders
that purchases residential mortgages from a list of approved
seller/servicers. Pass-through securities issued by FNMA are guaranteed
as to timely payment of principal and interest by FNMA and supported by
FNMA's right to borrow from the U.S. Treasury, at the discretion of the
U.S. Treasury. Fannie Maes are not backed by the full faith and credit
of the U.S. Government.
o "Freddie Macs": The Federal Home Loan Mortgage Corporation ("FHLMC"),
a corporate instrumentality of the U.S. Government, issues participation
certificates ("PCs") which represent an interest in residential
mortgages from FHLMC's National Portfolio. FHLMC guarantees the timely
payment of interest and ultimate collection of principal, but PCs are
not backed by the full faith and credit of the U.S. Government.
o Governmental Collateralized Mortgage Obligations: These are securities
issued by a U.S. Government instrumentality or agency which are backed
by a portfolio of mortgages or mortgage-backed securities held under an
indenture.
o "Sallie Maes": The Student Loan Marketing Association ("SLMA") is a
government-sponsored corporation owned entirely by private stockholders
that provides liquidity for banks and other institutions engaged in the
Guaranteed Student Loan Program. These loans are either directly
guaranteed by the U.S. Treasury or guaranteed by state agencies and
reinsured by the U.S. Government. SLMA issues both short term notes and
longer term public bonds to finance its activities.
The Portfolio may also invest in "zero coupon" U.S. Government securities
which have been stripped of their unmatured interest coupons and receipts or
in certificates representing undivided interests in such stripped U.S.
Government securities and coupons. These securities tend to be more volatile
than other types of U.S. Government securities.
Guarantees of the Portfolio's U.S. Government Securities guarantee only the
payment of principal at maturity and interest when due on the guaranteed
securities, and do not guarantee the securities' yield or value or the
yield or value of the Portfolio's shares.
The Portfolio may also purchase collateralized mortgage obligations ("CMOs")
issued by non-governmental issuers and securities issued by a real estate
mortgage investment conduits ("REMICs"), but only if they are collateralized
by U.S. Government Securities. However, CMOs issued by entities other than
U.S. Government agencies and instrumentalities and securities issued by REMICs
are not considered U.S. Government securities for purposes of the Portfolio
meeting its policy of investing at least 65% of its total assets in U.S.
Government securities.
THE PRINCIPAL RISKS
FIXED INCOME RISK: This Portfolio invests primarily in fixed income
securities, therefore, the Portfolio's performance will be affected by changes
in interest rates, the duration and maturity of the Portfolio's fixed income
holdings, and adverse market and economic conditions. Other risks that relate
to the Portfolio's investment in fixed income securities include:
ASSET-BACKED SECURITIES RISK: The Portfolio's investments in
asset-backed securities represent interests
<PAGE>
- ----------
103 ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
in pools of consumer loans such as credit card receivables, automobile
loans and leases, leases on equipment such as computers, and other
financial instruments and are subject to certain additional risks.
Rising interest rates tend to extend the duration of asset-backed
securities, making them more sensitive to changes in interest rates. As
a result, in a period of rising interest rates, the Portfolio may
exhibit additional volatility. When interest rates are declining, there
are usually more prepayments of loans which will shorten the life of
these securities. Prepayments also vary based on among other factors,
general economic conditions and other demographic conditions. The
reinvestment of cash received from prepayments will, therefore, usually
be at a lower interest rate than the original investment, lowering the
Portfolio's yield.
INTEREST RATE RISK: When interest rates rise, the value (i.e., share
price and total return) of the Portfolio's fixed income securities,
particularly those with longer durations or maturities, will go down.
When interest rates fall, the reverse is true.
INVESTMENT GRADE SECURITIES RISK: With respect to fixed income
investments of the Portfolio, other than U.S. Government securities,
rated BBB by S&P or an equivalent rating by any other nationally
recognized statistical rating organization ("NRSRO"), the Portfolio
could lose money if the issuer or guarantor of a debt security or
counterparty to a Portfolio's transaction is unable or unwilling to make
timely principal and/or interest payments, or to honor its financial
obligations. Investment grade securities which are rated BBB by S&P, or
an equivalent rating by any other NRSRO, are somewhat riskier than
higher rated obligations because they are regarded as having only an
adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase, making them even
more susceptible to interest rate changes. Falling interest rates may
cause the value and yield of mortgage-backed securities to fall. Falling
interest rates also may encourage borrowers to pay off their mortgages
sooner than anticipated (pre-payment). The Portfolio would need to
reinvest the pre-paid funds at the newer, lower interest rates.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities without restriction. The risk 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.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last eight calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one
year, five years and since inception and compares the Portfolio's performance
to: (i) the returns of a broad-based index and (ii) the returns of an index of
funds
-------------------- EQ Advisors Trust
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
104 ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
with similar investment objectives. Past performance is not an indication of
future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Intermediate
Government Securities Portfolio) managed by the Adviser using the same
investment objectives and strategy as the Portfolio. For these purposes, the
Portfolio is considered to be the successor entity to the predecessor
registered investment company (HRT/Alliance Intermediate Government Securities
Portfolio) whose inception date is April 1, 1991. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the
performance results of the Portfolio and its predecessor registered investment
company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
CALENDAR YEAR ANNUAL TOTAL RETURN*
-----------------------------------
[GRAPHIC OMITTED]
Year Percentage
----------------------------------
1992 5.4%
1993 10.3%
1994 (4.6)%
1995 13.1%
1996 3.5%
1997 7.0%
1998 7.5%
1999 (0.23)%
-----------------------------------
Best quarter (% and time period) Worst quarter (% and time period)
4.23% (1998 3rd Quarter) (0.79)% (1999 2nd Quarter)
------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- -------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- -------------------------------------------------------------------------------
Alliance Intermediate
Government Securities
Portfolio - Class IB Shares (0.23)% 6.06% 6.00%
- -------------------------------------------------------------------------------
Lehman Intermediate
Government Bonds** 0.49% 6.93% 6.76%
- -------------------------------------------------------------------------------
Lipper Intermediate Government
Funds Average** (2.13)% 6.94% 6.84%
- -------------------------------------------------------------------------------
* For periods prior to the inception of Class IB Shares (May 2, 1997),
performance information shown is the performance of Class IA shares adjusted
to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
JEFFREY S. PHLEGAR has been responsible for the day-to-day management of the
Portfolio and its predecessor since January 1999. Mr. Phlegar, a Senior Vice
President of Alliance, has been associated with Alliance for more than five
years.
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
105 ALLIANCE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
ALLIANCE MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to obtain a high level of
current income, preserve its assets and maintain liquidity.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified portfolio of high-quality
U.S. dollar-denominated money market instruments. The Portfolio will maintain
a dollar-weighted average portfolio maturity of 90 days or less.
The instruments in which the Portfolio invests include:
o marketable obligations of, or guaranteed as to the timely payment of
principal and interest by, the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities");
o certificates of deposit, bankers' acceptances, bank notes, time deposits and
interest bearing savings deposits issued or guaranteed by:
(a) domestic banks (including their foreign branches) or savings and
loan associations having total assets of more than $1 billion and
which are FDIC members in the case of banks, or insured by the FDIC,
in the case of savings and loan associations; or
(b) foreign banks (either by their foreign or U.S. branches) having
total assets of at least $5 billion and having an issue of either (i)
commercial paper rated at least A-1 by S&P or Prime-1 by Moody's or
(ii) long term debt rated at least AA by S&P or Aa by Moody's;
o commercial paper (rated at least A-1 by S&P or Prime-1 by Moody's or, if not
rated, issued by domestic or foreign companies having outstanding debt
securities rated at least AA by S&P or Aa by Moody's) and participation
interests in loans extended by banks to such companies;
o mortgage-backed and asset-backed securities that have remaining maturities
of less than one year;
o corporate debt obligations with remaining maturities of less than one year,
rated at least AA by S&P or Aa by Moody's, as well as corporate debt
obligations rated at least A by S&P or Moody's, provided the corporation
also has outstanding an issue of commercial paper rated at least A-1 by
S&P or Prime-1 by Moody's;
o floating rate or master demand notes; and
o repurchase agreements covering U.S. Government securities.
If the Adviser believes a security held by the Portfolio is no longer deemed
to present minimal credit risk, the Portfolio will dispose of the security as
soon as practicable unless the Board of Trustees determines that such action
would not be in the best interest of the Portfolio.
Purchases of securities that are unrated must be ratified by the Board of
Trustees. Because the market value of debt obligations fluctuates as an
inverse function of changing interest rates, the Portfolio seeks to minimize
the effect of such fluctuations by investing only in instruments with a
remaining maturity of 397 calendar days or less at the time of investment,
except for obligations of the U.S. Government, which may have a remaining
maturity of 762 calendar days or less. Time deposits with maturities greater
than seven days are considered to be illiquid securities.
The Portfolio may make use of various other investment strategies, including
investing up to 20% of its total assets in U.S. dollar-denominated money
market instruments of foreign issuers and making secured loans of up to 50% of
its total portfolio securities.
THE PRINCIPAL RISKS
MONEY MARKET RISK: While money market funds are designed to be relatively low
risk investments, they are not entirely free of risk. Despite the short
maturities and high credit quality of the Portfolio's investments, increases
in interest rates and deteriorations in the credit quality of the instruments
the Portfolio has purchased may reduce the Portfolio's net asset value. In
addition, the Portfolio is still subject to the risk that the value of an
investment may be eroded over time by inflation. An investment in the
Portfolio is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
--------------------- EQ Advisors Trust
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
106 ALLIANCE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
Although the Portfolio seeks to preserve the value of your investment, it is
possible to lose money by investing in the Portfolio.
ASSET-BACKED SECURITIES RISK: The Portfolio's investments in asset-backed
securities represent interests in pools of consumer loans such as credit card
receivables, automobile loans and leases, leases on equipment such as
computers, and other financial instruments and are subject to certain
additional risks. Rising interest rates tend to extend the duration of
asset-backed securities, making them more sensitive to changes in interest
rates. As a result, in a period of rising interest rates, the Portfolio may
exhibit additional volatility. When interest rates are declining, there are
usually more prepayments of loans which will shorten the life of these
securities. Prepayments also vary based on among other factors, general
economic conditions and other demographic conditions. The reinvestment of cash
received from prepayments will, therefore, usually be at a lower interest rate
than the original investment, lowering the Portfolio's yield.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risks will tend to be compounded.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: inadequate or inaccurate information about foreign
companies; higher transaction, brokerage and custody costs; expropriation or
nationalization; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. 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.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one,
five and ten years and compares the Portfolio's performance to: (i) the
returns on three-month U.S. Treasury bills and (ii) the returns of an index of
funds with similar investment objectives. Past performance is not an
indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Money Market
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Money Market Portfolio) whose inception date is July 13, 1981.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not
<PAGE>
- ----------
107 ALLIANCE MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
reflect any insurance and Contract-related fees and expenses, which would
reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN*
-----------------------------------
[GRAPHIC OMITTED]
Year Percentage
----------------------------------
1990 8.0%
1991 5.9%
1992 3.3%
1993 2.7%
1994 3.8%
1995 5.5%
1996 5.1%
1997 5.2%
1998 5.1%
1999 4.71%
-----------------------------------
Best quarter (% and time period) Worst quarter (% and time period)
1.32% (1999 4th Quarter) .44% (2000 1st Quarter)
- ----------------------------------------------------------------------------
The Portfolio's 7-day yield for the quarter ended December 31, 1999 was
5.05%.
AVERAGE ANNUAL TOTAL RETURNS*
- ----------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- ----------------------------------------------------------------------------
Alliance Money Market Portfolio
- Class IB Shares 4.71% 5.10% 4.92%
- ----------------------------------------------------------------------------
3-Month Treasury Bill 4.74% 5.20% 5.06%
- ----------------------------------------------------------------------------
Lipper Money Market Mutual
Fund Average** 4.75% 5.13% 4.87%
- ----------------------------------------------------------------------------
* For periods prior to the inception of Class IB Shares (October 10, 1996),
performance information shown is the performance of Class IA shares adjusted
to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
RAYMOND J. PAPERA has been responsible for the day-to-day management of the
Portfolio and its predecessor since 1990. Mr. Papera, a Senior Vice President
of Alliance, has been associated with Alliance since 1990.
------------------------ EQ Advisors Trust
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
108 ALLIANCE QUALITY BOND PORTFOLIO
- --------------------------------------------------------------------------------
ALLIANCE QUALITY BOND PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve high current income consistent with
preservation of capital by investing primarily in investment grade fixed
income securities.
THE INVESTMENT STRATEGY
The Portfolio expects to invest in readily marketable securities with
relatively attractive yields that the Adviser believes do not involve undue
risk.
The Portfolio will follow a policy of investing at least 65% of its total
assets in securities which are rated at the time of purchase at least Baa by
Moody's or BBB by S&P, or in unrated fixed income securities that the Adviser
determines to be of comparable quality.
In the event that the credit rating of a security held by the Portfolio falls
below investment grade (or, in the case of unrated securities, the Adviser
determines that the quality of such security has deteriorated below investment
grade), the Portfolio will not be obligated to dispose of such security and
may continue to hold the obligation if the Adviser believes such an investment
is appropriate in the circumstances. The Portfolio will also seek to maintain
an average aggregate quality rating of its portfolio securities of at least A
(Moody's and S&P).
The Portfolio has complete flexibility as to the types of securities in which
it will invest and the relative proportions thereof. In this regard, the
Portfolio plans to vary the proportions of its holdings of long- and
short-term fixed income securities (including debt securities, convertible
debt securities and U.S. Government obligations), preferred stocks and
dividend-paying common stocks in order to reflect the Adviser's assessment of
prospective cyclical changes even if such action may adversely affect current
income.
The Portfolio may also invest in foreign securities, although it will not
invest more than 20% of its total assets in securities denominated in
currencies other than the U.S. dollar. The Portfolio may enter into foreign
currency futures contracts (and related options), forward foreign currency
exchange contracts and options on foreign currencies for hedging purposes.
The Portfolio may also make use of various other investment strategies,
including zero coupon pay-in-kind securities, collateralized mortgage
obligations, securities lending with a value of up to 50% of its total assets,
the purchase or sale of securities on a when-issued, delayed delivery or
forward commitment basis and repurchase agreements. The Portfolio may also use
derivatives, including: purchasing put and call options and writing covered
put and call options on securities it may purchase. The Portfolio also intends
to write covered call options for cross-hedging purposes, which are designed
to provide a hedge against a decline in value of another security which the
Portfolio owns or has the right to acquire.
The Portfolio may seek to protect the value of its investments from interest
rate fluctuations by entering into various hedging transactions, such as
interest rate swaps and the purchase or sale of interest rate caps and floors.
When market or financial conditions warrant, the Portfolio may invest in
certain money market instruments for temporary or defensive purposes. Such
investments could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
FIXED INCOME RISK: This Portfolio invests primarily in fixed income
securities, therefore, the Portfolio's performance will be affected by changes
in interest rates, credit risks of the issuer, the duration and maturity of
the Portfolio's fixed income holdings, and adverse market and economic
conditions. Other risks that relate to the Portfolio's investment in fixed
income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share
price and total return) of the Portfolio's fixed income securities,
particularly those with longer durations or maturities, will go down.
When interest rates fall, the reverse is true.
<PAGE>
- ----------
109 ALLIANCE QUALITY BOND PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the
issuer or guarantor of a debt security or counterparty to a Portfolio's
transaction is unable or unwilling to make timely principal and/or
interest payments, or to honor its financial obligations. Investment
grade securities which are rated BBB or S&P or an equivalent rating by
any other nationally recognized statistical rating organization, are
somewhat riskier than higher rated obligations because they are regarded
as having only an adequate capacity to pay principal and interest, are
considered to lack outstanding investment characteristics, and may be
speculative.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase, making them even
more susceptible to interest rate changes. Falling interest rates may
cause the value and yield of mortgage-backed securities to fall. Falling
interest rates also may encourage borrowers to pay off their mortgages
sooner than anticipated (pre-payment). The Portfolio would need to
reinvest the prepaid funds at the newer, lower interest rates.
ZERO COUPON AND PAY-IN-KIND SECURITIES RISK: A zero coupon or
pay-in-kind security pays no interest in cash to its holder during its
life. Accordingly, zero coupon securities usually trade at a deep
discount from their face or par value and, together with pay-in-kind
securities, will be subject to greater fluctuations in market value in
response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest in cash.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. The value of convertible securities fluctuates both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. 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.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
---------------------- EQ Advisors Trust
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
110 ALLIANCE QUALITY BOND PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last six calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one and
five years and compares the Portfolio's performance to: (i) the returns of a
broad-based index and (ii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Quality Bond
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Quality Bond Portfolio) whose inception date is October 1, 1993.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
CALENDAR YEAR ANNUAL TOTAL RETURN*
----------------------------------
[GRAPHIC OMITTED]
Year Percentage
----------------------------------
1994 (5.4)%
1995 16.8%
1996 5.1%
1997 8.9%
1998 8.4%
1999 (2.25)%
-----------------------------------
Best quarter (% and time period) Worst quarter (% and time period)
3.77% (1998 3rd Quarter) (1.66)% (1999 2nd Quarter)
-----------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- ------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- ------------------------------------------------------------------------------
Alliance Quality Bond Portfolio
- Class IB Shares (2.25)% 7.15% 4.66%
- -----------------------------------------------------------------------------
Lehman Aggregate Bonds** (0.82)% 7.73% 5.64%
- -----------------------------------------------------------------------------
Lipper Corporate Debt Funds
BBB Rated Average** (1.62)% 7.83% 5.32%
- -----------------------------------------------------------------------------
* For periods prior to the inception of Class IB Shares (July 8, 1998),
performance information shown is the performance of Class IA shares adjusted
to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
MATTHEW BLOOM has been responsible for the day-to-day management of the
Portfolio and its predecessor since 1995. Mr. Bloom, a Senior Vice President
of Alliance, has been associated with Alliance since 1989.
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
111 J.P. MORGAN CORE BOND PORTFOLIO
- --------------------------------------------------------------------------------
J.P. MORGAN CORE BOND PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity.
THE INVESTMENT STRATEGY
This Portfolio's total return will consist of income plus realized and
unrealized capital gains and losses. The Portfolio currently invests all of
its assets in investment grade debt securities rated BBB or better by Standard
& Poor's ("S&P") or Baa or better by Moody's Investors Services, Inc.
("Moody's") or unrated securities of similar quality.
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 based on the
Adviser's view of the market and interest rates. The Adviser also actively
allocates the Portfolio's assets among the broad sectors of the fixed income
market. These securities principally include U.S. Government and agency
securities, corporate securities, private placements, asset-backed securities,
mortgage-related securities and direct mortgage obligations. The securities
can be of any duration but will generally mature within one year of the
Salomon Brothers Broad Investment Grade Bond Index (currently about 5 years).
The Portfolio may also use futures contracts to change the duration of the
Portfolio's bond holdings.
Duration is a measure of the weighted average maturity of the bonds held by
the Portfolio and can be used by the Adviser as a measure of the
sensitivity of the market value of the Portfolio to changes in interest
rates. Generally, the longer the duration of the Portfolio, the more
sensitive its market value will be to changes in interest rates.
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
currencies of developed foreign countries.
Under normal market conditions, the Portfolio will be primarily invested in
bonds. When market or financial conditions warrant, the Portfolio may invest
up to 100% of its assets in money market securities for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objective and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
FIXED INCOME RISK: This Portfolio invests primarily in fixed income
securities, therefore, the Portfolio's performance will be affected by changes
in interest rates, credit risks of the issuer, the duration and maturity of
the Portfolio's fixed income holdings, and adverse market and economic
conditions. Other specific risks of investing in fixed income securities
include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share
price and total return) of the Portfolio's fixed income securities,
particularly those with longer durations or maturities, will go down.
When interest rates fall, the reverse is true.
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the
issuer or guarantor of a debt security or counterparty to a Portfolio's
transaction is unable or unwilling to make timely principal and/or
interest payments, or to honor its financial obligations. Investment
grade securities (rated, e.g., BBB by S&P) are somewhat riskier than
higher rated obligations because they are regarded as having only an
adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase. Falling interest
rates may cause the value and yield of mortgage-backed securities to
fall. Falling interest rates also may encourage borrowers to pay off
their mortgages sooner than anticipated
--------------------- EQ Advisors Trust
<PAGE>
FIXED INCOME PORTFOLIOS (CONTINUED)
- ----------
112 J.P. MORGAN CORE BOND PORTFOLIO
- --------------------------------------------------------------------------------
(pre-payment). The Portfolio would need to reinvest the pre-paid funds
at the newer, lower interest rates.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs that could be passed through
to shareholders.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of existence, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance
results presented below do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results. The Portfolio
commenced operations on January 1, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
----------------------------------
[GRAPHIC OMITTED]
Year Percentage
---------------------------------
1998 9.02%
1999 (1.64)%
----------------------------------
Best quarter: Worst quarter:
4.72% (1998 3rd Quarter) (1.62)% (1999 2nd Quarter)
- ------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- -----------------------------------------------------------------
J.P. Morgan Core Bond Portfolio (1.64)% 3.55%
- -----------------------------------------------------------------
Salomon Brothers Broad Investment
Grade Bond Index* (0.83)% 3.84%
- -----------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
J.P. MORGAN INVESTMENT MANAGEMENT INC. ("J.P. Morgan"), 522 Fifth Avenue, New
York, New York 10036. J.P. Morgan has been the Adviser to the Portfolio since
it commenced operations. J.P. Morgan is a registered investment adviser and is
a wholly owned subsidiary of J.P. Morgan & Co. Incorporated, a bank holding
company. J.P. Morgan manages portfolios for corporations, governments,
<PAGE>
- ----------
113 J.P. MORGAN CORE BOND PORTFOLIO
- --------------------------------------------------------------------------------
endowments, as well as many of the largest corporate retirements plans in the
nation.
The Portfolio Managers, responsible for the day to day management of the
Portfolio since it commenced operations, are PAUL L. ZEMSKY, a Managing
Director of J.P. Morgan and a portfolio manager specializing in quantitative
techniques, who joined J.P. Morgan in 1985; and ROBERT J. TEATOM, a Managing
Director of J.P. Morgan and head of its U.S. Fixed Income Group, who joined
J.P. Morgan in 1975; and E. LUKE FARRELL, Vice President of J.P. Morgan and a
portfolio manager in the Fixed Income Group, who joined J.P. Morgan in 1993.
---------------------- EQ Advisors Trust
<PAGE>
BALANCED/HYBRID PORTFOLIOS
- ----------
114 EQ/BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
EQ/BALANCED PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve a high return
through both appreciation of capital and current income.
THE INVESTMENT STRATEGY
The Portfolio invests varying portions of its assets primarily in
publicly-traded equity and debt securities and money market instruments
depending on economic conditions, the general level of common stock prices,
interest rates and other relevant considerations, including the risks
associated with each investment medium.
The Portfolio attempts to achieve long-term growth of capital by investing in
common stock and other equity-type instruments. It will try to achieve a
competitive level of current income and capital appreciation through
investments in publicly traded debt securities and a high level of current
income through investments primarily in high-quality U.S. dollar denominated
money market instruments.
The Portfolio's investments in common stocks will primarily consist of common
stocks that are listed on national securities exchanges. Smaller amounts will
be invested in stocks that are traded over-the-counter and in other
equity-type securities. The Portfolio may also invest up to 20% of its total
assets in securities of issuers domiciled outside the United States and not
included in the S&P 500 (i.e., foreign securities).
The Portfolio at all times will hold at least 25% of its total assets in fixed
income securities (including, for these purposes, that portion of the value of
securities convertible into common stock which is attributable to the fixed
income characteristics of those securities, as well as money market
instruments). The Portfolio's equity securities will always comprise at least
25%, but never more than 75%, of the Portfolio's total assets. Consequently,
the Portfolio will have a minimum or "core holdings" of at least 25% fixed
income securities and 25% equity securities. Over time, holdings are expected
to average approximately 50% in fixed income securities and approximately 50%
in equity securities. Asset mixes will periodically be rebalanced by the
Manager to maintain the expected asset mix.
The Portfolio may also invest up to 20% of its total assets in foreign
securities (which may include American depositary receipts and other
depositary arrangements) and may also make use of various other investment
strategies, including using up to 50% of its total portfolio assets for
securities lending purposes. The Portfolio may also use derivatives,
including: writing covered call and put options, purchasing call and put
options on all the types of securities in which it may invest, as well as
securities indexes and foreign currencies. The Portfolio may also purchase and
sell stock index, interest rate and foreign currency futures contracts and
options thereon.
The debt securities will consist principally of bonds, notes, debentures and
equipment trust certificates, as well as debt securities with equity features
such as conversion or exchange rights or warrants for the acquisition of stock
or participations based on revenues, rates or profits. These debt securities
will principally be investment grade securities rated at least Baa by Moody's
or BBB by S&P, or will be U.S. Government Securities. If such Baa or BBB debt
securities held by the Portfolio fall below those ratings, the Portfolio will
not be obligated to dispose of them and may continue to hold them if an
Adviser considers them appropriate investments under the circumstances. In
addition, the Portfolio may at times hold some of its assets in cash.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
MULTIPLE-ADVISER RISK: The EQ/Balanced Portfolio employs multiple Advisers.
Each of the Advisers independently chooses and maintains a portfolio of common
stocks for the Portfolio and each is responsible for investing a specific
allocated portion of the Portfolio's assets. Because each Adviser will be
managing its allocated portion of the Portfolio independently from the other
<PAGE>
- ----------
115 EQ/BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
Advisers, the same security may be held in two different portions of the
Portfolio, or may be acquired for one portion of the Portfolio at a time when
the Adviser of another portion deems it appropriate to dispose of the security
from that other portion. Similarly, under some market conditions, one Adviser
may believe that temporary, defensive investments in short-term instruments or
cash are appropriate when the other Adviser or Advisers believe continued
exposure to the equity markets is appropriate for their portions of the
Portfolio. Because each Adviser directs the trading for its own portion of the
Portfolio, and does not aggregate its transactions with those of the other
Advisers, the Portfolio may incur higher brokerage costs than would be the
case if a single Adviser were managing the entire Portfolio.
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that the
actual allocation of the Portfolio's assets between debt and equity securities
may adversely affect the Portfolio's value between the Manager's periodic
rebalancing.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
FIXED INCOME RISK: This Portfolio invests at least 25% of its total assets in
fixed income securities, therefore, the Portfolio's performance will be
affected by changes in interest rates, credit risks of the issuer, the
duration and maturity of the Portfolio's fixed income holdings, and adverse
market and economic conditions. Other risks that relate to the Portfolio's
investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share
price and total return) of the Portfolio's fixed income securities,
particularly those with longer durations or maturities, will go down.
When interest rates fall, the reverse is true.
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the
issuer or guarantor of a debt security or counterparty to a Portfolio's
transaction is unable or unwilling to make timely principal and/or
interest payments, or to honor its financial obligations. Investment
grade securities which are rated BBB by S&P or an equivalent rating by
any other NRSRO, are somewhat riskier than higher rated obligations
because they are regarded as having only an adequate capacity to pay
principal and interest, are considered to lack outstanding investment
characteristics, and may be speculative.
--------------------- EQ Advisors Trust
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
116 EQ/BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio
to incur additional transaction costs that could be passed through to
shareholders.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. 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.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one,
five and ten years and compares the Portfolio's performance to: (i) the
returns of a broad-based index; (ii) the returns of a "blended" index of
equity and fixed income securities; and (iii) the returns of an index of funds
with similar investment objectives. Past performance is not an indication of
future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance/Balanced Portfolio)
managed by the Adviser using the same investment objectives and strategy as
the Portfolio. For these purposes, the Portfolio is considered to be the
successor entity to the predecessor registered investment company
(HRT/EQ/Balanced Portfolio) whose inception date is January 27, 1986. The
assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN *
-----------------------------------
[GRAPHIC OMITTED]
Year Percentage
----------------------------------
1990 0.0%
1991 41.0%
1992 (3.1)%
1993 12.0%
1994 (8.3)%
1995 19.5%
1996 11.4%
1997 14.8%
1998 17.8%
1999 17.50%
-----------------------------------
Best quarter (% and time period) Worst quarter (% and time period)
13.76% (1998 4th Quarter) (7.77)% (1998 3rd Quarter)
--------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- ---------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- ---------------------------------------------------------------------------
EQ/Balanced Portfolio - Class
IB Shares 17.50% 15.88% 11.37%
- ---------------------------------------------------------------------------
50% S&P 500 Index/50%
Lehman Gov't/Corp.**,*** 9.07% 17.93% 13.04%
- ---------------------------------------------------------------------------
S&P 500 Index** 21.03% 28.56% 18.21%
- ---------------------------------------------------------------------------
Lipper Flex. Port. Funds
Average** 12.07% 17.11% 12.94%
- --------------------------------------------------------------------------
* For periods prior to the inception of Class IB Shares (July 8, 1998),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
*** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
In accordance with the Multi-Manager Order, the Manager may, among other
things, select new or additional Advisers for the Portfolio and may allocate
and re-allocate the Portfolio's assets among Advisers. Currently, Alliance
Capital Management, L.P., Capital Guardian Trust Company,
<PAGE>
- ----------
117 EQ/BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
Prudential Investments Fund Management LLC and Jennison Associates, LLC have
been selected by the Manager to serve as Advisers for this Portfolio. It is
anticipated that additional advisers may be added in the future.
The Manager initially allocated the assets of the Portfolio and will allocate
all daily cash inflows (share purchases) and outflows (redemptions and expense
items) among the Advisers, subject to the oversight of the Board. The Manager
intends, on a periodic basis, to review the asset allocation in the Portfolio.
The Manager does not intend, but reserves the right, subject to the oversight
of the Board, to reallocate assets from one Adviser to another when it would
be in the best interest of the Portfolio and its shareholders to do so. In
some instances, the effect of the reallocation will be to shift assets from a
better performing Adviser to other Adviser(s).
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance was the exclusive Adviser to the Portfolio
and its predecessor registered investment company since the predecessor
commenced operations. Alliance, a publicly traded limited partnership, is
indirectly majority-owned by Equitable. Alliance manages investment companies,
endowment funds, insurance companies, foreign entities, qualified and non-tax
qualified corporate funds, public and private pension and profit-sharing
plans, foundations and tax-exempt organizations.
The portfolio manager responsible for that portion of the Portfolio's total
assets that will be advised by Alliance as an Adviser is as follows:
ROBERT G. HEISTERBERG has been responsible for the day-to-day management
of the Portfolio and its predecessor since February 12, 1996. Mr.
Heisterberg, a Senior Vice President of Alliance and Global Economic
Policy Analysis, has been associated with Alliance since 1977.
CAPITAL GUARDIAN TRUST COMPANY. ("Capital Guardian"), 333 South Hope Street,
Los Angeles, CA 90071 Capital Guardian was added as an Adviser to the
Portfolio as of May 1, 2000. Capital Guardian is a wholly-owned subsidiary of
Capital Group International, Inc., which itself is a wholly owned subsidiary
of The Capital Group Companies, Inc. Capital Guardian has been providing
investment management services since 1968 and manages approximately $123
billion as of December 31, 1999.
Capital Guardian uses a multiple portfolio manager system under which assets
of the Portfolio for which Capital Guardian serves as Adviser are divided into
several segments. Each segment is individually managed with the portfolio
manager free to decide on company and industry selections as well as valuation
and transaction assessment. An additional portion of the Portfolio's total
assets allocated to Capital Guardian as Adviser is managed by a group of
investment research analysts.
The individual portfolio managers of each segment of the Portfolio's total
assets that will be advised by Capital Guardian as an Adviser, other than that
managed by the group of research analysts, are as follows:
DONNALISA P. BARNUM. Donnalisa Barnum is a Senior Vice President and a
portfolio manager for Capital Guardian. She joined the Capital Guardian
organization in 1986.
MICHAEL R. ERICKSON. Michael Erickson is a Senior Vice President and
portfolio manager for Capital Guardian and a Senior Vice President and
Director for Capital International Limited. He joined the Capital
Guardian organization in 1987.
DAVID I. FISHER. David Fisher is Chairman of the Board of Capital Group
International, Inc. and Capital Guardian. He joined the Capital Guardian
organization in 1969.
THEODORE R. SAMUELS. Theodore Samuels is a Senior Vice President and a
Director for Capital Guardian, as well as a Director of Capital
International Research, Inc. He joined the Capital Guardian organization
in 1981.
--------------------- EQ Advisors Trust
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
118 EQ/BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
EUGENE P. STEIN. Eugene Stein is Executive Vice President, a Director, a
portfolio manager, and Chairman of the Investment Committee for Capital
Guardian. He joined the Capital Guardian organization in 1972.
TERRY BERKEMEIER. Terry Berkemeier is a Vice President of Capital
International Research, Inc. with U.S. equity portfolio management
responsibility in Capital Guardian Trust Company and research
responsibilities for the global metals and mining industries. He joined
the Capital Guardian organization in 1992.
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC ("PIFM"), Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102 was added as an Adviser to the
Portfolio as of May 1, 2000. PIFM and its predecessors have served as manager
or administrator to investment companies since 1987. As of October 31, 1999,
PIFM served as either the manager or administrator to various investment
companies, with aggregate assets of approximately $72 billion.
JENNISON ASSOCIATES LLC ("Jennison"), 466 Lexington Avenue, New York, New York
10017 was added as an Adviser to the Portfolio as of May 1, 2000. PIFM
supervises Jennison. Jennison has served as an investment adviser to
investment companies since 1990 and manages approximately $48.4 billion in
assets as of September 30, 1999.
The individual portfolio managers for that portion of the Portfolio's total
assets that will be advised by PIFM as an Adviser and Jennison are as follows:
MICHAEL A. DEBALSO. Michael A. DeBalso is a Director, Executive Vice
President, Director of Equity Research and Equity Portfolio Manager of
Jennison. Mr. DeBalso joined Jennison in 1972.
KATHLEEN A. MCCARRAGHER. Ms. McCarragher is a Director, Executive Vice
President, Domestic Growth Equity Investment Strategist and Equity
Portfolio Manager of Jennison. Ms. McCarragher joined Jennison in 1998.
From 1992-1998, she was a Managing Director and Director of Large Cap
Growth Equities at Weiss, Peck & Greer.
PIFM and Jennison are wholly-owned subsidiaries of The Prudential Insurance
Company of America.
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
119 ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO
- --------------------------------------------------------------------------------
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve a high total return without, in the
opinion of the Adviser, undue risk to principal.
THE INVESTMENT STRATEGY
The Portfolio invests varying portions of its assets in high quality,
publicly-traded fixed income securities (including money market instruments
and cash) and publicly-traded common stocks and other equity securities of
U.S. and non-U.S. issuers.
The Portfolio will at all times hold at least 40% of its assets in investment
grade fixed income securities, each having a duration, as determined by the
Adviser, that is less than that of a 10-year Treasury bond (the "fixed income
core"). The Portfolio is generally expected to hold approximately 70% of its
assets in fixed income securities (including the fixed income core) and 30% in
equity securities. Actual asset mixes will be adjusted in response to economic
and credit market cycles. The fixed income asset class will always comprise at
least 50%, but never more than 90%, of the Portfolio's total assets. The
equity class will always comprise at least 10%, but never more than 50%, of
the Portfolio's total assets.
Duration is a measure of the weighted average maturity of the bonds held by
the Portfolio and can be used by the Adviser as a measure of the
sensitivity of the market value of the Portfolio to changes in interest
rates. Generally, the longer the duration of the Portfolio, the more
sensitive its market value will be to changes in interest rates.
In some cases, the Adviser's calculation of duration will be based on
certain assumptions (including assumptions regarding prepayment rates, in
the mortgage-backed or asset-backed securities, and foreign and domestic
interest rates). As of December 31, 1999, the Adviser considered the
duration of a 10-year Treasury bond to be 7.3 years. The Portfolio's
investments will generally have a final maturity of not more than ten years
or a duration not exceeding that of a 10-year Treasury note.
All debt securities held by the Portfolio will be of investment grade (i.e.,
rated at least BBB by S&P or Baa by Moody's) or unrated securities of
comparable quality as determined by the Adviser. The equity securities
invested in by the Portfolio will consist primarily of common stocks
(including convertible securities). The Portfolio may also invest in stocks
that are traded over-the-counter and in other equity-type securities. No more
than 15% of the Portfolio's assets will be invested in securities of non-U.S.
issuers.
The Portfolio may also make use of various other investment strategies and
derivatives. Up to 50% of its total assets may be used for securities lending
purposes.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that the
Adviser's allocation of the Portfolio's assets between debt and equity
securities may adversely affect the Portfolio's value.
FIXED INCOME RISK: This Portfolio invests primarily in fixed income
securities, therefore, the Portfolio's performance will be affected by changes
in interest rates, credit risks of the issuer, the duration and maturity of
the Portfolio's fixed
---------------------- EQ Advisors Trust
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ---------
120 ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO
- --------------------------------------------------------------------------------
income holdings, and adverse market and economic conditions. Other risks that
relate to the Portfolio's investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share
price and total return) of the Portfolio's fixed income securities,
particularly those with longer durations or maturities, will go down.
When interest rates fall, the reverse is true.
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the
issuer or guarantor of a debt security or counterparty to a Portfolio's
transaction is unable or unwilling to make timely principal and/or
interest payments, or to honor its financial obligations. Investment
grade securities which are rated BBB by S&P or an equivalent rating by
any other NRSRO, are somewhat riskier than higher rated obligations
because they are regarded as having only an adequate capacity to pay
principal and interest, are considered to lack outstanding investment
characteristics, and may be speculative.
MORTGAGE BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase, making them even
more susceptible to interest rate changes. Falling interest rates may
cause the value and yield of mortgage-backed securities to fall. Falling
interest rates also may encourage borrowers to pay off their mortgages
sooner than anticipated (pre-payment). The Portfolio would need to
reinvest the pre-paid funds at the newer, lower interest rates.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. The value of convertible securities fluctuates both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. 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.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like, which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
<PAGE>
- ----------
121 ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio
to incur additional transaction costs that could be passed through to
shareholders.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one
year, five years and since inception and compares the Portfolio's performance
to: (i) the returns of a broad-based index; (ii) the returns of a "blended"
index of fixed income and equity securities; and (iii) the returns of an index
of funds with similar investment objectives. Past performance is not an
indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Conservative Investors
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Conservative Investors Portfolio) whose inception date is
October 2, 1989. The assets of the predecessor were transferred to the
Portfolio on October 18, 1999. Following that transfer, the performance shown
(for the period October 19, 1999 through December 31, 1999) is that of the
Portfolio. For these purposes, the performance results of the Portfolio and
its predecessor registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
CALENDAR YEAR ANNUAL TOTAL RETURN *
-----------------------------------
[GRAPHIC OMITTED]
Year Percentage
----------------------------------
1990 6.2%
1991 19.6%
1992 5.5%
1993 10.5%
1994 (4.4)%
1995 20.2%
1996 5.0%
1997 13.0%
1998 13.6%
1999 9.87%
-----------------------------------
Best quarter (% and time period) Worst quarter (% and time period)
7.58% (1998 4th Quarter) (2.05)% (1998 3rd Quarter)
------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- -------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- -------------------------------------------------------------------------
Alliance Conservative
Investors Portfolio -
Class IB Shares 9.87% 12.17% 9.66%
- -------------------------------------------------------------------------
70% Lehman Treasury/30%
S&P 500 Index**, *** 4.19% 13.60% 10.75%
- -------------------------------------------------------------------------
S&P 500 Index** 21.03% 28.56% 18.21%
- -------------------------------------------------------------------------
Lipper Income Average** 4.65% 14.57% 10.84%
- -------------------------------------------------------------------------
* For periods prior to the inception of Class IB Shares (May 2, 1997),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
*** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
------------------------ EQ Advisors Trust
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
122 ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO
- --------------------------------------------------------------------------------
ROBERT G. HEISTERBERG has been responsible for the day-to-day management of
the Portfolio and its predecessor since February 12, 1996. Mr. Heisterberg, a
Senior Vice President of Alliance and Global Economic Policy Analysis, has
been associated with Alliance since 1977.
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
123 ALLIANCE GROWTH INVESTORS PORTFOLIO
- --------------------------------------------------------------------------------
ALLIANCE GROWTH INVESTORS PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve the highest total return consistent
with the Adviser's determination of reasonable risk.
THE INVESTMENT STRATEGY
The Portfolio allocates varying portions of its assets to a number of asset
classes. The fixed income asset class will always comprise at least 10%, but
never more than 60%, of the Portfolio's total assets. The equity class will
always comprise at least 40%, but never more than 90%, of the Portfolio's
total assets. Over time, the Portfolio's holdings, on average, are expected to
be allocated 70% to equity securities and 30% to debt securities. Actual asset
mixes will be adjusted in response to economic and credit market cycles.
The Portfolio's investments in equity securities will include both
exchange-traded and over-the counter common stocks and other equity
securities, including foreign stocks, preferred stocks, convertible debt
instruments, as well as securities issued by small-and mid-sized companies
that have favorable growth prospects.
The Portfolio's debt securities may include foreign debt securities,
investment grade fixed income securities (including cash and money market
instruments) as well as lower quality, higher yielding debt securities (junk
bonds). The Portfolio may also make use of various other investment strategies
and derivatives. Up to 50% of its total assets may be used for securities
lending purposes. No more than 30% of the Portfolio's assets will be invested
in securities of foreign issuers.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that the
Adviser's allocation of the Portfolio's assets between debt and equity
securities may adversely affect the Portfolio's value.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment-grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
if it invested in higher-rated obligations because BBB- rated securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative. Other risks that relate to the Portfolio's investment in fixed
income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share
price and total return) of the Portfolio's fixed income securities,
particularly those with longer durations or maturities, will go down.
When interest rates fall, the reverse is true.
JUNK BOND RISK: The Portfolio may invest a portion of its assets in
"junk bonds" or lower-rated securities rated BB or lower by S&P or an
equivalent rating by any other NRSRO or unrated securities of similar
quality. Therefore, credit risk is particularly significant for this
Portfolio. Junk bonds have speculative elements or are predominantly
speculative credit risks. This Portfolio may also be subject to greater
credit risk because it may invest in debt securities issued in
connection with corporate
------------------------ EQ Advisors Trust
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
124 ALLIANCE GROWTH INVESTORS PORTFOLIO
- --------------------------------------------------------------------------------
restructurings by highly leveraged issuers or in debt securities not
current in the payment of interest or principal, or in default.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known, held primarily by insiders
or institutional investors and may trade less frequently and in lower volume;
such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; such companies have limited
financial resources or may depend on a few key employees; and the products of
technologies of such companies may be at a relatively early stage of
development or not fully tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. The value of convertible securities fluctuates both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio
to incur additional transaction costs that could be passed through to
shareholders.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. 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.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one
year, five years and ten years and compares the
<PAGE>
- ----------
125 ALLIANCE GROWTH INVESTORS PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio's performance to: (i) the returns of a broad-based index; (ii) the
returns of a "blended" index of equity and fixed income securities; and (iii)
the returns of an index of funds with similar investment objectives. Past
performance is not an indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Growth Investors
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to be
the successor entity to the predecessor registered investment company
(HRT/Alliance Growth Investors Portfolio) whose inception date is October 2,
1989. The assets of the predecessor were transferred to the Portfolio on October
18, 1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN *
- -----------------------------------
[GRAPHIC OMITTED]
Year Percentage
- ----------------------------------
1990 10.4%
1991 48.7%
1992 4.7%
1993 15.0%
1994 (3.4)%
1995 26.1%
1996 12.4%
1997 16.6%
1998 18.8%
1999 26.27%
- -----------------------------------
Best quarter (% and time period) Worst quarter (% and time period)
18.09% (1998 4th Quarter) (9.8)% (1998 3rd Quarter)
--------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- ----------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- ----------------------------------------------------------------------------
Alliance Growth Investors
Portfolio - Class IB Shares 26.27% 19.86% 16.78%
- ---------------------------------------------------------------------------
70% S&P 500 Index/30%
Lehman Gov't/Corp.**, *** 13.77% 22.15% 15.13%
- ---------------------------------------------------------------------------
S&P 500 Index** 21.03% 28.56% 18.21%
- ---------------------------------------------------------------------------
Lipper Flexible Portfolio
Average** 12.07% 17.11% 12.94%
- ---------------------------------------------------------------------------
* For periods prior to the inception of Class IB Shares (October 1, 1996),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
*** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
ROBERT G. HEISTERBERG has been responsible for the day-to-day management of the
Portfolio and its predecessor since February 12, 1996. Mr. Heisterberg, a Senior
Vice President of Alliance and Global Economic Policy Analysis, has been
associated with Alliance since 1977.
----------------------- EQ Advisors Trust
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
126 EQ/EVERGREEN FOUNDATION PORTFOLIO
- --------------------------------------------------------------------------------
EQ/EVERGREEN FOUNDATION PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide, in order of priority, reasonable income,
conservation of capital and capital appreciation.
For purposes of this Portfolio, the words "reasonable income" mean moderate
income.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a combination of common stocks, preferred
stocks, securities that are convertible into or exchangeable for common stocks,
investment grade corporate debt securities, securities of or guaranteed by the
U.S. Government, its agencies or instrumentalities, and short-term debt
instruments, such as high quality commercial paper, and obligations of
FDIC-member banks. Investments in common stocks focus on those that pay
dividends and have the potential for capital appreciation. Common stocks are
selected based on a combination of financial strength and estimated growth
potential. Bonds are selected based on the Adviser's projections of interest
rates, varying amounts and maturities in order to achieve capital protection
and, when possible, capital appreciation. The asset allocation of the Portfolio
will vary in accordance with changing economic and market conditions.
Under normal market conditions, at least 25% of the Portfolio's net assets will
be invested in fixed income securities. In selecting debt securities, the
Adviser will emphasize securities that the Adviser believes will not be subject
to significant fluctuations in value. The corporate debt obligations purchased
by the Portfolio will be rated A or higher by S&P and Moody's. The Fund is not
managed with a targeted maturity.
When market or financial conditions warrant, the Portfolio may invest 100% of
its assets in short-term obligations for temporary or defensive purposes. Such
investment strategies are inconsistent with the Portfolio's investment
objectives and could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
Nationally Recognized Statistical Rating Organization ("NRSRO"), it will be
exposed to greater risk than higher-rated obligations because BBB rated
investment grade securities are regarded as having only an adequate capacity to
pay principal and interest, are considered to lack outstanding investment
characteristics, and may be speculative.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio to
incur additional transaction costs that could be passed through to shareholders.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying common
stocks, but generally offer lower yields than unconvertible securities of
similar quality. Convertible securities fluctuate both in relation to changes in
interest rates and changes in the value of the underlying common stock.
<PAGE>
- ----------
127 EQ/EVERGREEN FOUNDATION PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1999,
the Portfolio's first full year of operations. The table below shows the
Portfolio's average annual total returns for the Portfolio for one year and
since inception. The table also compares the Portfolio's performance to the
returns of a broad-based index. Both the bar chart and table assume
reinvestment of dividends and distributions. Past performance is not an
indication of future performance. The performance results presented below do
not reflect any insurance and Contract-related fees and expenses, which would
reduce the performance results. The inception date for this Portfolio is
December 31, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
---------------------------------
[GRAPHIC OMITTED]
Year Percentage
---------------------------------
1999 7.38%
---------------------------------
Best quarter: Worst quarter:
10.70% (1999 4th Quarter) (7.27)% (1999 4th Quarter)
-------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- -------------------------------------------------------------------
EQ/Evergreen Foundation Portfolio 7.38% 7.38%
- -------------------------------------------------------------------
60% S&P 500/40% Lehman Aggregate
Bond*,** 11.15% 11.15%
- -------------------------------------------------------------------
S&P 500 Index* 21.03% 21.03%
- -------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
EVERGREEN ASSET MANAGEMENT CORP. ("Evergreen"), 1311 Mamaroneck Avenue, White
Plains, New York 10605. Evergreen has been the Adviser to the Portfolio since
it commenced operations. Evergreen is a registered investment adviser and a
wholly-owned subsidiary of First Union Corporation. Evergreen offers a broad
range of financial services to individuals and businesses throughout the
United States.
JEAN LEDFORD and RICHARD WELSH became co-managers of the Portfolio in August
1999. Jean Ledford, CFA, became President and Chief Executive Officer of
Evergreen in August 1999. From February 1997 until she joined Evergreen, Ms.
Ledford worked as a portfolio manager at American Century Investments
("American Century"). From 1980 until she joined American Century, Ms. Ledford
was the investment director at the State of Wisconsin Investment Board.
Mr. Welsh joined Evergreen as Senior Vice President and portfolio manager in
August 1999. Prior to joining Evergreen, he worked for five years as a
portfolio manager and analyst at American Century.
------------------------- EQ Advisors Trust
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
128 MERCURY WORLD STRATEGY PORTFOLIO
- --------------------------------------------------------------------------------
MERCURY WORLD STRATEGY PORTFOLIO
INVESTMENT OBJECTIVE: Seeks 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.
For purposes of this Portfolio, "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.
THE INVESTMENT STRATEGY
The Portfolio is a non-diversified Portfolio that invests in both equity
securities and fixed income securities. The Portfolio may invest entirely in
equity securities, entirely in fixed income securities, or partly in equity
securities and partly in fixed income securities.
A Portfolio may be considered to be "non-diversified" for federal
securities law purposes because it invests in a limited number of
securities. In all cases, the Portfolio intends to be diversified for tax
purposes so that it can qualify as a regulated investment company.
The Portfolio will normally invest a significant portion of its assets in
equity securities of companies throughout the world. The equity securities in
which the Portfolio invests will primarily be common stocks of large
companies.
There are no limits on the Portfolio's ability to invest in any country or
geographic region. The Portfolio can invest primarily in U.S. securities,
primarily in foreign securities, or partly in both. It normally invests in at
least three countries at any given time. The Portfolio may invest in companies
in emerging markets, but the Adviser anticipates that a substantially greater
portion of the Portfolio's equity investments will be in companies in
developed countries. At the present time, the Portfolio focuses on investments
in Canada, Western Europe, the Far East, and Latin America, as well as in the
United States. The Adviser will select the percentage of the Portfolio's
assets that will be invested in equity securities and fixed income securities,
as well as the geographic allocation of the Portfolio's investments, based on
its view of general economic and financial trends in various countries and
industries, such as inflation, commodity prices, the direction of interest and
currency movements, estimates of growth in industry output and profits, and
government fiscal policies. For example, if the Adviser believes that falling
commodity prices and decreasing estimates of industrial output globally signal
low growth and limited returns from equity securities, the Portfolio may
emphasize fixed income investments. Similarly, if the Adviser believes that
low inflation, new technologies and improvements in economic productivity in a
country or region signal a promising environment for equity securities in that
country or region the Portfolio may emphasize equity investments in that
country or region.
The Portfolio may invest in fixed-income securities of any maturity, including
United States and foreign government securities and corporate debt securities.
The Portfolio will only invest in debt securities that are rated investment
grade by S&P or Moody's or unrated securities that are of comparable quality.
The Portfolio may also invest in securities denominated in currencies other
than the U.S. dollar. The Portfolio may also engage in currency transactions
to hedge against the risk of loss from changes in currency exchange rates. In
addition, the Portfolio may also employ a variety of instruments and
techniques to enhance income and to hedge against market and currency risk.
The Portfolio has no stated minimum holding period for investments, and will
buy or sell securities whenever the Adviser sees an appropriate opportunity.
<PAGE>
- ----------
129 MERCURY WORLD STRATEGY PORTFOLIO
- --------------------------------------------------------------------------------
When market or financial conditions warrant, the Portfolio may invest up to
100% of its assets in United States Government or Government agency
securities, money market securities, other fixed income securities, or cash
for temporary or defensive purposes. Such investment strategies are
inconsistent with the Portfolio's investment objective and could result in the
Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stocks, but generally offer lower yields than unconvertible securities
of similar quality. Convertible securities fluctuate both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities that can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, foreign investments can be adversely affected
by: unfavorable currency exchange rates (relative to the U.S. dollar for
securities denominated in a foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
Other specific risks of investing in foreign securities include:
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
higher-rated obligations because BBB rated investment grade securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
NON-DIVERSIFICATION RISK: Since a relatively high percentage of the
Portfolio's assets may be invested in the securities of a limited number of
issuers, some of which may be within the same industry, the securities of the
Portfolio may be more sensitive to changes in the market value of a single
issuer or industry or to risks associated with a single economic, political or
regulatory event than a diversified portfolio.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the
----------------------- EQ Advisors Trust
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ---------
130 MERCURY WORLD STRATEGY PORTFOLIO
- --------------------------------------------------------------------------------
price the seller would like which may cause the Portfolio to lose money or be
prevented from earning capital gains.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs that could be passed through
to shareholders.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The inception date for
the Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
---------------------------------
[GRAPHIC OMITTED]
Year Percentage
---------------------------------
1998 6.81%
1999 21.35%
---------------------------------
Best quarter: Worst quarter:
14.72% (1999 4th Quarter) (11.15)% (1998 3rd Quarter)
-------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- -------------------------------------------------------------------
Mercury World Strategy Portfolio 21.35% 12.11%
- -------------------------------------------------------------------
Mercury World Strategy Composite
Market Benchmark Index*,** 13.07% 16.18%
- -------------------------------------------------------------------
S&P 500 Index* 21.03% 27.36%
- -------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
MERCURY ASSET MANAGEMENT, US, ("MERCURY"), A DIVISION OF FUND ASSET
MANAGEMENT, L.P. ("FAM"), 800 Scudders Mill Road, Plainsboro, New Jersey
08543. Mercury, or the Portfolio's predecessor Adviser, Merrill Lynch Asset
Management, L.P. ("MLAM"), has been the Adviser to the Portfolio since it
commenced operations. FAM and MLAM are both part of the Merrill Lynch Asset
Management Group and each is an indirect wholly-owned subsidiary of Merrill
Lynch & Co., Inc., a financial services holding company. The general partner
of FAM and MLAM is Princeton Services, Inc., a wholly-owned subsidiary of
Merrill Lynch & Co., Inc. Mercury and its affiliates act as the manager for
more than 100 registered investment companies. Mercury also offers portfolio
management and portfolio analysis services to individuals and institutions.
THOMAS R. ROBINSON is the Portfolio Manager primarily responsible for the
day-to-day management of the Portfolio since it commenced operations. Mr.
Robinson has served as a First Vice President of Mercury or its predecessor
since 1997 and as a Senior Portfolio Manager of Mercury or its predecessor
since 1995.
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
131 EQ/PUTNAM BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
EQ/PUTNAM BALANCED PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide a balanced investment composed of a
well-diversified portfolio of stocks and bonds that will produce both capital
growth and current income.
THE INVESTMENT STRATEGY
The Portfolio may invest in almost any type of security or negotiable
instrument, including common stocks, corporate bonds, cash and money market
securities. Although the proportion invested in each type of security is not
fixed, generally, no more than 75% of the Portfolio's assets will be invested
in common stocks, securities that are convertible into common stocks and other
equity securities.
The Portfolio uses a value-oriented approach by investing in stocks the
Adviser believes are currently selling below their true worth.
Value-investing attempts to identify strong companies selling at a discount
from their perceived true worth. The Adviser selects stocks for the Portfolio
at prices which in its view are temporarily low relative to the company's
earnings, assets, cash flow and dividends.
The Portfolio may also invest in debt securities, issued by the U.S.
Government or by private companies. Most of the Portfolio's debt securities
will be investment grade (rated at least BBB) and are generally intermediate-
to long-term (with maturities of more than three (3) years). The Portfolio may
also invest in lower-rated debt securities (called "junk bonds").
The Portfolio may also invest up to 20% of its total assets in foreign
securities and may purchase Eurodollar certificates of deposit (i.e.,
short-term time deposits issued by European banks) without regard to this 20%
limit.
When market or financial conditions warrant, the Portfolio may invest up to
100% of its assets in short term obligations for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged
to be undervalued may actually be appropriately priced.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
higher-rated obligations because BBB rated investment grade securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative. The risk that an issuer or guarantor of a fixed income security
or counterparty to the Portfolio's fixed income transaction is unable to meet
its financial obligations is particularly significant for this Portfolio
because this Portfolio invests a
--------------------- EQ Advisors Trust
<PAGE>
BALANCED/HYBRID PORTFOLIOS (CONTINUED)
- ----------
132 EQ/PUTNAM BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
portion of its assets in "junk bonds" (i.e., securities rated below investment
grade). Junk bonds are issued by companies with questionable credit strength
and, consequently, are considered to be speculative in nature and may be
subject to greater market fluctuations than investment grade fixed-income
securities.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio
to incur additional transaction costs that could be passed through to
shareholders.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations. The table below shows
the Portfolio's average annual total returns for the Portfolio for one year
and since inception, and some of the risks of investing in the Portfolio by
showing yearly changes in the Portfolio's performance. The table also compares
the Portfolio's performance to the returns of a broad-based index. Both the
bar chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance
results presented below do not reflect any insurance and Contract-related fees
and expenses, which would reduce performance results. The inception date for
the Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
---------------------------------
[GRAPHIC OMITTED]
Year Percentage
---------------------------------
1998 11.92%
1999 0.01%
---------------------------------
Best quarter: Worst quarter:
9.33% (1999 4th Quarter) (7.21)% (1999 3rd Quarter)
-----------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- ------------------------------------------------------------------------
EQ/Putnam Balanced Portfolio 0.01% 9.69%
- ------------------------------------------------------------------------
60% S&P 500/40% Lehman Gov't/Corp.
Index*,** 11.39% 18.81%
- ------------------------------------------------------------------------
S&P 500 Index* 21.03% 27.36%
- ------------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC. ("Putnam Management"), One Post Office
Square, Boston, MA 02109. Putnam Management has been the Adviser to the
Portfolio since it commenced operations. Putnam Management has been managing
mutual funds since 1937. Putnam Management is a subsidiary of Putnam
Investments, Inc., which is itself a subsidiary of Marsh & McLennan Companies,
Inc.
<PAGE>
- ----------
133 EQ/PUTNAM BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
DEBORAH KUENSTNER manages the team responsible for the day-to-day management
of the equities portion of the Portfolio since April 2000. Ms. Kuenstner is
Managing Director, Chief Investment Officer of the Large Cap Value Equities
Group and joined Putnam in 1997 as Senior Vice President and Senior Portfolio
Manager in the International Core and Value Equity Group. Prior to joining
Putnam, Ms. Kuenstner was the Senior Portfolio Manager, International Equities
of DuPont Pension Fund Investment from 1989 to 1997. JAMES M. PRUSKO, Senior
Vice President, manages the Core Fixed Income Team responsible for the
day-to-day management of the fixed income portion of the Portfolio. He has
been employed by Putnam Management as an investment professional since 1992.
---------------------- EQ Advisors Trust
<PAGE>
3
MORE INFORMATION ON PRINCIPAL RISKS
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134 MORE INFORMATION ON PRINCIPAL RISKS
- --------------------------------------------------------------------------------
Risk is the chance that you will lose money on your investment or that it will
not earn as much as you expect. In general, the greater the risk, the more money
your investment can earn for you and the more you can lose. Like other
investment companies, the value of each Portfolio's shares may be affected by
the Portfolio's investment objective(s), principal investment strategies and
particular risk factors. Consequently, each Portfolio may be subject to
different principal risks. Some of the principal risks of investing in the
Portfolios are discussed below. However, other factors may also affect each
Portfolio's net asset value.
There is no guarantee that a Portfolio will achieve its investment objective(s)
or that it will not lose principal value.
GENERAL INVESTMENT RISKS: Each Portfolio is subject to the following risks:
ASSET CLASS RISK: There is the possibility that the returns from the types of
securities in which a Portfolio invests will underperform returns from the
various general securities markets or different asset classes. Different types
of securities tend to go through cycles of outperformance and underperformance
in comparison to the general securities markets.
MARKET RISK: Each Portfolio's share price moves up and down over the short term
in reaction to stock or bond market movements. This means that you could lose
money over short periods, and perhaps over longer periods during extended market
downturns.
SECURITY SELECTION RISK: The Adviser(s) for each Portfolio rely on the insights
of different specialists in making investment decisions based on the Portfolio's
particular investment objective(s) and investment strategies. There is the
possibility that the specific securities held by a Portfolio will underperform
other funds in the same asset class or benchmarks that are representative of the
general performance of the asset class because of the Adviser's choice of
portfolio securities.
As indicated in "Summary Information Concerning EQ Advisors Trust" and "About
the Investment Portfolios," a particular Portfolio may also be subject to the
following risks:
CONVERTIBLE SECURITIES RISK: Convertible securities may include 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.
Therefore, convertible securities enable you 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. 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.
Each Adviser will consider such event in its determination of whether a
Portfolio should continue to hold the securities.
DERIVATIVES RISK: Derivatives are financial contracts whose value depends on, or
is derived from the value of an underlying asset, reference rate or index.
Derivatives include stock options, securities index options, currency options,
forward currency exchange contracts, futures contracts, swaps and options on
futures contracts. Certain Portfolios can use derivatives involving the U.S.
Government and foreign government securities and currencies. Investments in
derivatives can significantly increase your exposure to market risk, or credit
risk of the counterparty. Derivatives also involve the risk of mispricing or
improper valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that any of the Portfolios invest a substantial
amount of its assets in fixed income securities, a Portfolio may be subject to
the following risks:
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135 MORE INFORMATION ON PRINCIPAL RISKS
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ASSET-BACKED SECURITIES RISK: The Portfolio's investments in
asset-backed securities represent interests in pools of consumer loans
such as credit card receivables, automobile loans and leases, leases on
equipment such as computers, and other financial instruments and are
subject to certain additional risks. Rising interest rates tend to
extend the duration of asset-backed securities, making them more
sensitive to changes in interest rates. As a result, in a period of
rising interest rates, the Portfolio may exhibit additional volatility.
When interest rates are declining, there are usually more prepayments of
loans which will shorten the life of these securities. Prepayments also
vary based on among other factors, general economic conditions and other
demographic conditions. The reinvestment of cash received from
prepayments will, therefore, usually be at a lower interest rate than
the original investment, lowering the Portfolio's yield.
CREDIT RISK: Credit risk is the risk that the issuer or guarantor of a
debt security or counterparty to a Portfolio's transactions will be
unable or unwilling to make timely principal and/or interest payments,
or otherwise will be unable or unwilling to honor its financial
obligations. Each of the Portfolios may be subject to credit risk to the
extent that it invests in debt securities or engages in transactions,
such as securities loans or repurchase agreements, which involve a
promise by a third party to honor an obligation to the Portfolio.
Credit risk is particularly significant for the Portfolios, such as the
Alliance Growth Investors Portfolio and the Alliance High Yield
Portfolio, that invest a material portion of their assets in "JUNK
BONDS" or lower-rated securities (i.e., rated BB or lower by S&P or an
equivalent rating by any other NRSRO or unrated securities of similar
quality). These debt securities and similar unrated securities have
speculative elements or are predominantly speculative credit risks.
Portfolios such as the Alliance Growth Investors Portfolio and the
Alliance High Yield Portfolio may also be subject to greater credit risk
because they may invest in debt securities issued in connection with
corporate restructurings by highly leveraged issuers or in debt
securities not current in the payment of interest or principal, or in
default.
INTEREST RATE RISK: The price of a bond or a fixed income security is
dependent upon interest rates. Therefore, the share price and total
return of a Portfolio investing a significant portion of its assets in
bonds or fixed income securities will vary in response to changes in
interest rates. A rise in interest rates causes the value of a bond to
decrease, and vice versa. There is the possibility that the value of a
Portfolio's investment in bonds or fixed income securities may fall
because bonds or fixed income securities generally fall in value when
interest rates rise. The longer the term of a bond or fixed income
instrument, the more sensitive it will be to fluctuations in value from
interest rate changes. Changes in interest rates may have a significant
effect on Portfolios holding a significant portion of their assets in
fixed income securities with long term maturities.
MORTGAGE-BACKED SECURITIES RISK: In the case of mortgage-backed
securities, rising interest rates tend to extend the term to maturity of
the securities, making them even more susceptible to interest rate
changes. When interest rates drop, not only can the value of fixed
income securities drop, but the yield can drop, particularly where the
yield on the fixed income securities is tied to changes in interest
rates, such as adjustable mortgages. Also when interest rates drop, the
holdings of mortgage-backed securities by a Portfolio can reduce returns
if the owners of the underlying mortgages pay off their mortgages sooner
than anticipated since the funds prepaid will have to be reinvested at
the then lower prevailing rates. This is known as prepayment risk. When
interest rates rise,
------------------------ EQ Advisors Trust
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136 MORE INFORMATION ON PRINCIPAL RISKS
- --------------------------------------------------------------------------------
the holdings of mortgage-backed securities by a Portfolio can reduce
returns if the owners of the underlying mortgages pay off their
mortgages later than anticipated. This is known as extension risk.
INVESTMENT GRADE SECURITIES RISK: Debt securities are rated by national
bond ratings agencies. Securities rated BBB by S&P or Baa by Moody's are
considered investment grade securities, but are somewhat riskier than
higher rated obligations because they are regarded as having only an
adequate capacity to pay principal and interest, and are considered to
lack outstanding investment characteristics.
JUNK BONDS OR LOWER RATED SECURITIES RISK: Bonds rated below investment
grade by S&P and Moody's are speculative in nature, may be subject to
certain risks with respect to the issuing entity and to greater market
fluctuations than higher rated fixed income securities. They are usually
issued by companies without long track records of sales and earnings, or
by those companies with questionable credit strength. These bonds are
considered "below investment grade." The retail secondary market for
these "junk bonds" may be less liquid than that of higher rated
securities and adverse conditions could make it difficult at times to
sell certain securities or could result in lower prices than those used
in calculating the Portfolio's net asset value.
FOREIGN SECURITIES RISK: A Portfolio's investments in foreign securities,
including depositary receipts, involve risks not associated with investing in
U.S. securities and can affect a Portfolio's performance. Foreign markets,
particularly emerging markets, may be less liquid, more volatile and subject
to less government supervision than domestic markets. There may be
difficulties enforcing contractual obligations, and it may take more time for
trades to clear and settle. The specific risks of investing in foreign
securities, among others, include:
CURRENCY RISK: The risk that changes in currency exchange rates will
negatively affect securities denominated in, and/or receiving revenues
in, foreign currencies. Adverse changes in currency exchange rates
(relative to the U.S. dollar) may erode or reverse any potential gains
from a Portfolio's investment in securities denominated in a foreign
currency or may widen existing losses.
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging market countries and/or their securities markets. Generally,
economic structures in these countries are less diverse and mature than
those in developed countries, and their political systems are less
stable. Investments in emerging markets countries may be affected by
national policies that restrict foreign investment in certain issuers or
industries. The small size of their securities markets and low trading
volumes can make investments illiquid and more volatile than investments
in developed countries and such securities may be subject to abrupt and
severe price declines. As a result, a Portfolio investing in emerging
market countries may be required to establish special custody or other
arrangements before investing.
EURO RISK: Certain of the Portfolios may invest in securities issued by
European issuers. On January 1, 1999, 11 of the 15 member states of the
European Monetary Union ("EMU") introduced the "Euro" as a common
currency. During a three-year transitional period, the Euro will coexist
with each participating state's currency and, on July 1, 2002, the Euro
is expected to become the sole currency of the participating states. The
introduction of the Euro will result in the redenomination of European
debt and equity securities over a period of time, which may result in
various legal and accounting differences and/or tax treatments that
otherwise would not likely occur. During this period, the creation and
implementation of suitable clearing and settlement
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137 MORE INFORMATION ON PRINCIPAL RISKS
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systems and other operational problems may cause market disruptions that
could adversely affect investments quoted in the Euro.
POLITICAL/ECONOMIC RISK: Changes in economic and tax policies,
government instability, war or other political or economic actions or
factors may have an adverse effect on a Portfolio's foreign investments.
REGULATORY RISK: Less information may be available about foreign
companies. In general, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards or to other
regulatory practices and requirements as are U.S. companies.
TRANSACTION COSTS RISK: The costs of buying and selling foreign
securities, including tax, brokerage and custody costs, generally are
higher than those involving domestic transactions.
GROWTH INVESTING RISK: Growth investing generally focuses on companies that,
due to their strong earnings and revenue potential, offer above-average
prospects for capital growth, with less emphasis on dividend income. Earnings
predictability and confidence in earnings forecasts are an important part of
the selection process. As a result, the price of growth stocks may be more
sensitive to changes in current or expected earnings than the prices of other
stocks. Advisers using this approach generally seek out companies experiencing
some or all of the following: high sales growth, high unit growth, high or
improving returns on assets and equity, and a strong balance sheet. Such
Advisers also prefer companies with a competitive advantage such as unique
management, marketing or research and development. Growth investing is also
subject to the risk that the stock price of one or more companies will fall or
will fail to appreciate as anticipated by the Advisers, regardless of
movements in the securities market.
INDEX-FUND RISK: The Alliance Equity Index, BT Equity 500 Index, BT Small
Company Index and BT International Equity Index Portfolios are not actively
managed (which involves buying and selling of securities based upon economic,
financial and market analysis and investment judgment). Rather, the Alliance
Equity Index Portfolio utilizes proprietary modeling techniques to match the
performance results of the S&P 500 Index. The BT Equity 500 Index, BT Small
Company Index and BT International Equity Index Portfolios utilize a "passive"
or "indexing" investment approach and attempt to duplicate the investment
performance of the particular index the Portfolio is tracking (i.e., S&P 500
Index, Russell 2000 Index or MSCI EAFE Index) through statistical procedures.
Therefore, the Portfolios will invest in the securities included in the
relevant index or substantially identical securities regardless of market
trends. The Portfolios cannot modify their investment strategies to respond to
changes in the economy, which means they may be particularly susceptible to a
general decline in the U.S. or global stock market segment relating to the
relevant index.
LEVERAGING RISK: When a Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in that Portfolio will be more volatile
and all other risks will tend to be compounded. All of the Portfolios may take
on leveraging risk by investing in collateral from securities loans and by
borrowing money to meet redemption requests.
LIQUIDITY RISK: Certain securities held by a Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like. A
Portfolio may have to hold these securities longer than it would like and may
forego other investment opportunities. There is the possibility that a
Portfolio may lose money or be prevented from earning capital gains if it can
not sell a security at the time and price that is most beneficial to the
Portfolio. Portfolios that invest in privately-placed securities, high-yield
bonds, mortgage-backed securities or foreign or emerging market securities,
which have all experienced periods of illiquidity, are subject to liquidity
risks. A particular Portfolio may be
--------------------- EQ Advisors Trust
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138 MORE INFORMATION ON PRINCIPAL RISKS
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more susceptible to some of these risks than others, as noted in the
description of each Portfolio.
MONEY MARKET RISK: Although a money market fund is designed to be a relatively
low risk investment, it is not entirely free of risk. Despite the short
maturities and high credit quality of the Alliance Money Market Portfolio's
investments, increases in interest rates and deteriorations in the credit
quality of the instruments the Portfolio has purchased may reduce the
Portfolio's yield. In addition, the Portfolio is still subject to the risk
that the value of an investment may be eroded over time by inflation.
MULTIPLE-ADVISER RISK: The EQ/Aggressive Stock and EQ/Balanced Portfolios
employ multiple Advisers. Each of the Advisers independently chooses and
maintains a portfolio of common stocks for the Portfolio and each is
responsible for investing a specific allocated portion of the Portfolio's
assets. Because each Adviser will be managing its allocated portion of the
Portfolio independently from the other Advisers, the same security may be held
in two different portions of the Portfolio, or may be acquired for one portion
of the Portfolio at a time when the Adviser of another portion deems it
appropriate to dispose of the security from that other portion. Similarly,
under some market conditions, one Adviser may believe that temporary,
defensive investments in short-term instruments or cash are appropriate when
the other Adviser or Advisers believe continued exposure to the equity markets
is appropriate for their portions of the Portfolio. Because each Adviser
directs the trading for its own portion of the Portfolio, and does not
aggregate its transactions with those of the other Advisers, the Portfolio may
incur higher brokerage costs than would be the case if a single Adviser were
managing the entire Portfolio.
NON-DIVERSIFICATION RISK: The Lazard Small Cap Value Portfolio, the Morgan
Stanley Emerging Markets Equity and Mercury World Strategy Portfolios are
classified as "non-diversified" investment companies, which means that the
proportion of each Portfolio's assets that may be invested in the securities
of a single issuer is not limited by the 1940 Act. Since a relatively high
percentage of each non-diversified Portfolio's assets may be invested in the
securities of a limited number of issuers, some of which may be within the
same industry, the securities of each Portfolio may be more sensitive to
changes in the market value of a single issuer or industry. The use of such a
focused investment strategy may increase the volatility of a Portfolio's
investment performance, as the Portfolio may be more susceptible to risks
associated with a single economic, political or regulatory event than a
diversified portfolio. If the securities in which the Portfolio invests
perform poorly, the Portfolio could incur greater losses than it would have
had it been invested in a greater number of securities. However to qualify as
a regulated investment company ("RIC") under the Internal Revenue Code of
1986, as amended (the "Code") and receive pass through tax treatment, each
Portfolio at the close of each fiscal quarter, may not have more than 25% of
its total assets invested in the securities of any one issuer (excluding U.S.
Government obligations) and with respect to 50% of its assets, (i) may not
have more than 5% of its total assets invested in the securities of any one
issuer and (ii) may not own more than 10% of the outstanding voting securities
of any one issuer. Each non-diversified Portfolio intends to qualify as a RIC.
PORTFOLIO TURNOVER RISK: Consistent with their investment policies, the
Portfolios also will purchase and sell securities without regard to the effect
on portfolio turnover. Higher portfolio turnover (e.g., over 100% per year)
will cause a Portfolio to incur additional transaction costs that could be
passed through to shareholders.
SECTOR RISK: Market or economic factors affecting certain companies or
industries in a particular industry sector could have a major effect on the
value of a Portfolio's investments. Many technology stocks, especially those
of smaller less-seasoned companies, tend to be more volatile than the overall
market.
SECURITIES LENDING RISK: For purposes of realizing additional income, each
Portfolio may lend securities to
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broker-dealers approved by the Board of Trustees. In addition, the Alliance
High Yield and Alliance Intermediate Government Securities Portfolios may each
make secured loans of its portfolio securities without restriction. Any such
loan of portfolio securities will be continuously secured by collateral at
least equal to the value of the security loaned. Such collateral will be in
the form of cash, marketable securities issued or guaranteed by the U.S.
Government or its agencies, or a standby letter of credit issued by qualified
banks. 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 the 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.
SMALL-CAP AND MID-CAP COMPANY RISK: A Portfolio's investments in small-cap and
mid-cap companies may involve greater risks than investments in larger, more
established issuers. Smaller companies may have narrower product lines, more
limited financial resources and more limited trading markets for their stock,
as compared with larger companies. Their securities may be less well-known and
trade less frequently and in more limited volume than the securities of
larger, more established companies. In addition, small-cap and mid-cap
companies are typically subject to greater changes in earnings and business
prospects than larger companies. Consequently, the prices of small company
stocks tend to rise and fall in value more frequently than the stocks of
larger companies. Although investing in small-cap and mid-cap companies offers
potential for above-average returns, the companies may not succeed and the
value of their stock could decline significantly.
VALUE INVESTING RISK: Value investing attempts to identify strong companies
selling at a discount from their perceived true worth. Advisers using this
approach generally select stocks at prices, in their view, that are
temporarily low relative to the company's earnings, assets, cash flow and
dividends. Value investing is subject to the risk that the stocks' intrinsic
value may never be fully recognized or realized by the market, or their prices
may go down. In addition, there is the risk that a stock judged to be
undervalued may actually be appropriately priced. Value investing generally
emphasizes companies that, considering their assets and earnings history, are
attractively priced and may provide dividend income.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
----------------------- EQ Advisors Trust
<PAGE>
4
MANAGEMENT OF THE TRUST
- ----------------
140 MANAGEMENT OF THE TRUST
- --------------------------------------------------------------------------------
This section gives you information on the Trust, the Manager and the Advisers
for the Portfolios. More detailed information concerning each of the Advisers
and portfolio managers is included in the description for each Portfolio in
the section "About The Investment Portfolios."
THE TRUST
The Trust is organized as a Delaware business trust and is registered with the
Securities and Exchange Commission ("SEC") as an open-end management
investment company. The Trust issues shares of beneficial interest that are
currently divided among forty-one (41) Portfolios, each of which has
authorized Class IA and Class IB shares. Each Portfolio has its own
objectives, investment strategies and risks, which have been previously
described in this prospectus.
THE MANAGER
The Equitable Life Assurance Society of the United States ("Equitable"), 1290
Avenue of the Americas, New York, New York 10104, currently serves as the
Manager of the Trust. EQ Financial Consultants, Inc. ("EQFC") previously
served as the Manager of the Trust, until September 17, 1999 when the Trust's
Investment Management Agreement was transferred to Equitable. Equitable is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended, and a wholly-owned subsidiary of AXA Financial, Inc. ("AXA
Financial"), a subsidiary of AXA, a French insurance holding company.
Subject to the supervision and direction of the Board of Trustees, the Manager
has overall responsibility for the general management of the Trust. In the
exercise of that responsibility, and under the Multi-Manager Order, the
Manager, without obtaining shareholder approval but subject to the review and
approval by the Board of Trustees, may: (i) select new or additional Advisers
for the Portfolios; (ii) enter into new investment advisory agreements and
materially modify existing investment advisory agreements; and (iii) terminate
and replace the Advisers. The Manager also monitors each Adviser's investment
program and results, reviews brokerage matters, and carries out the directives
of the Board of Trustees. The Manager also supervises the provision of
services by third parties such as the Trust's custodian.
The contractual management fee rates payable by the Trust are at the following
annual percentages of the value of each Portfolio's average daily net assets:
CONTRACTUAL FEE UNDER MANAGEMENT AGREEMENT (AS A PERCENTAGE OF AVERAGE DAILY
NET ASSETS)(FEE ON ALL ASSETS)
INDEX PORTFOLIOS
----------------------------------------
Alliance Equity Index 0.250%
BT Equity 500 Index 0.250%
BT International Equity Index 0.350%
BT Small Company Index 0.250%
-----------------------------------------
<PAGE>
- -----
141 MANAGEMENT OF THE TRUST
- --------------------------------------------------------------------------------
CONTRACTUAL FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
FIRST NEXT NEXT NEXT
DEBT PORTFOLIOS $750 MILLION $750 MILLION $1 BILLION $2.5 BILLION THEREAFTER
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alliance High Yield 0.600% 0.575% 0.550% 0.530% 0.520%
Alliance Intermediate Government Securities 0.500% 0.475% 0.450% 0.430% 0.420%
Alliance Money Market 0.350% 0.325% 0.300% 0.280% 0.270%
Alliance Quality Bond 0.525% 0.500% 0.475% 0.455% 0.445%
J.P. Morgan Core Bond 0.450% 0.425% 0.400% 0.380% 0.370%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
CONTRACTUAL FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
FIRST NEXT NEXT NEXT
EQUITY PORTFOLIOS $1 BILLION $1 BILLION $3 BILLION $5 BILLION THEREAFTER
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EQ/Aggressive Stock 0.650% 0.600% 0.575% 0.550% 0.525%
EQ/Balanced 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance Common Stock 0.550% 0.500% 0.475% 0.450% 0.425%
Alliance Conservative Investors 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance Global 0.750% 0.700% 0.675% 0.650% 0.625%
Alliance Growth and Income 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance Growth Investors 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance International 0.850% 0.800% 0.775% 0.750% 0.725%
Alliance Small Cap Growth 0.750% 0.700% 0.675% 0.650% 0.625%
Calvert Socially Responsible 0.650% 0.600% 0.575% 0.550% 0.525%
Capital Guardian International 0.850% 0.800% 0.775% 0.750% 0.725%
Capital Guardian Research 0.650% 0.600% 0.575% 0.550% 0.525%
Capital Guardian U.S. Equity 0.650% 0.600% 0.575% 0.550% 0.525%
EQ/Alliance Premier Growth 0.900% 0.850% 0.825% 0.800% 0.775%
EQ/Alliance Technology 0.900% 0.850% 0.825% 0.800% 0.775%
EQ/Evergreen Foundation 0.600% 0.550% 0.525% 0.500% 0.475%
EQ/Evergreen 0.650% 0.600% 0.575% 0.550% 0.525%
EQ/Putnam Balanced 0.600% 0.550% 0.525% 0.500% 0.475%
EQ/Putnam Growth & Income Value 0.600% 0.550% 0.525% 0.500% 0.475%
EQ/Putnam International Equity 0.850% 0.800% 0.775% 0.750% 0.725%
EQ/Putnam Investors Growth 0.650% 0.600% 0.575% 0.550% 0.525%
Lazard Large Cap Value 0.650% 0.600% 0.575% 0.550% 0.525%
Lazard Small Cap Value 0.750% 0.700% 0.675% 0.650% 0.625%
Mercury Basic Value Equity 0.600% 0.550% 0.525% 0.500% 0.475%
Mercury World Strategy 0.700% 0.650% 0.625% 0.600% 0.575%
MFS Emerging Growth Companies 0.650% 0.600% 0.575% 0.550% 0.525%
MFS Growth with Income 0.600% 0.550% 0.525% 0.500% 0.475%
MFS Research 0.650% 0.600% 0.575% 0.550% 0.525%
Morgan Stanley Emerging Markets Equity 1.150% 1.100% 1.075% 1.050% 1.025%
T. Rowe Price Equity Income 0.600% 0.550% 0.525% 0.500% 0.475%
T. Rowe Price International Stock 0.850% 0.800% 0.775% 0.750% 0.725%
Warburg Pincus Small Company Value 0.750% 0.700% 0.675% 0.650% 0.625%
- -------------------------------------------------------------------------------------------------------
</TABLE>
For five Portfolios (i.e., Lazard Large Cap Value, T. Rowe Price International
Stock, EQ/Putnam Growth and Income Value , EQ/Putnam Balanced, and Warburg
Pincus Small Cap Value Portfolios) the Manager has agreed not to implement any
increase in the applicable management fee rates (as approved by shareholders)
until July 31, 2001, unless the Board agrees that such a management fee
increase should be put into operation earlier.
------------------------- EQ Advisors Trust
<PAGE>
- ----------
142 MANAGEMENT OF THE TRUST
- --------------------------------------------------------------------------------
The table below shows the annual rate of the management fees (as a percentage of
each Portfolio's average daily net assets) that the Manager (or the predecessor
Manager for certain of the Portfolios) received in 1999 for managing each of the
Portfolios and the rate of the management fees waived by the Manager (or the
predecessor Manager for certain of the Portfolios) in 1999 in accordance with
the provisions of the Expense Limitation Agreement, as defined directly below,
between the Manager and the Trust with respect to certain of the Portfolios.
MANAGEMENT FEES PAID BY THE PORTFOLIOS IN 1999*
ANNUAL RATE OF
RATE FEES
PORTFOLIOS RECEIVED WAIVED
- -------------------------------------------------------------
EQ/Aggressive Stock 0.54% 0.00%
EQ/Balanced 0.41% 0.00%
Alliance Common Stock 0.36% 0.00%
Alliance Conservative Investors 0.48% 0.00%
Alliance Equity Index 0.30% 0.00%
Alliance Global 0.63% 0.00%
Alliance Growth & Income 0.54% 0.00%
Alliance Growth Investors 0.50% 0.00%
Alliance High Yield 0.60% 0.00%
Alliance Intermediate 0.50% 0.00%
Government Securities
Alliance International 0.90% 0.00%
Alliance Money Market 0.34% 0.00%
EQ/Alliance Premier Growth 0.90% 0.22%
Alliance Quality Bond 0.53% 0.00%
Alliance Small Cap Growth 0.90% 0.00%
BT Equity 500 Index 0.25% 0.12%
BT International Equity Index 0.35% 0.11%
BT Small Company Index 0.25% 0.49%
Calvert Socially Responsible 0.65% 4.33%
Capital Guardian International 0.75% 0.45%
Capital Guardian Research 0.65% 0.40%
Capital Guardian U.S. Equity 0.65% 0.28%
EQ/Evergreen 0.75% 1.81%
EQ/Evergreen Foundation 0.63% 0.99%
J.P. Morgan Core Bond 0.45% 0.09%
Lazard Large Cap Value 0.55% 0.06%
Lazard Small Cap Value 0.80% 0.10%
Mercury Basic Value 0.55% 0.11%
Mercury World Strategy 0.70% 0.20%
MFS Emerging Growth 0.55% 0.10%
Companies
MFS Growth with Income 0.55% 0.31%
MFS Research 0.55% 0.11%
Morgan Stanley Emerging 1.15% 0.64%
Markets Equity
EQ/Putnam Balanced 0.55% 0.17%
EQ/Putnam Growth & Income 0.55% 0.10%
Value
EQ/Putnam International Equity 0.70% 0.06%
EQ/Putnam Investors Growth 0.55% 0.05%
T. Rowe Price Equity Income 0.55% 0.15%
T. Rowe Price International 0.75% 0.09%
Warburg Pincus Small Company Value 0.65% 0.13%
- --------------------------------------------------------------
* The EQ/Alliance Technology Portfolio is not included in the above
table because it had no operations during the fiscal year ended
December 31, 1999.
EXPENSE LIMITATION AGREEMENT
In the interest of limiting until April 30, 2001 the expenses of each Portfolio
(except for the Portfolios for which Alliance serves as Investment Adviser,
other than EQ/Alliance Premier Growth Portfolio), the Manager has entered into
an amended and restated expense limitation agreement with the Trust with respect
to those Portfolios ("Expense Limitation Agreement"). Pursuant to that Expense
Limitation Agreement, 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 (other than interest, taxes, brokerage commissions, other expenditures
which are capitalized in accordance with generally accepted accounting
principles, other extraordinary expenses not incurred in the ordinary course of
each Portfolio's business and amounts payable pursuant to a plan adopted in
accordance with Rule 12b-1 under the 1940 Act), are limited to the following
respective expense ratios:
<PAGE>
- ----------
143 MANAGEMENT OF THE TRUST
- --------------------------------------------------------------------------------
EXPENSE LIMITATION PROVISIONS
TOTAL EXPENSES
LIMITED TO (% OF
PORTFOLIOS DAILY NET ASSETS)
----------------------------------------------------------
BT Equity 500 Index 0.35%
BT International Equity Index 0.75%
BT Small Company Index 0.50%
Calvert Socially Responsible 0.80%
Capital Guardian International 0.95%
Capital Guardian Research 0.70%
Capital Guardian U.S. Equity 0.70%
EQ/Alliance Technology 0.90%
EQ/Alliance Premier Growth 0.90%
EQ/Evergreen 0.70%
EQ/Evergreen Foundation 0.70%
EQ/Putnam Balanced 0.65%
EQ/Putnam Growth & Income Value 0.70%
EQ/Putnam International Equity 1.00%
EQ/Putnam Investors Growth 0.70%
J.P. Morgan Core Bond 0.55%
Lazard Large Cap Value 0.70%
Lazard Small Cap Value 0.85%
Mercury Basic Value Equity 0.70%
Mercury World Strategy 0.95%
MFS Emerging Growth Companies 0.75%
MFS Growth with Income 0.70%
MFS Research 0.70%
Morgan Stanley Emerging Markets 1.50%
Equity
T. Rowe Price Equity Income 0.70%
T. Rowe Price International Stock 1.00%
Warburg Pincus Small Company Value 0.85%
-----------------------------------------------------
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.
The total amount of reimbursement to which the Manager may be entitled will
equal, at any time, the sum of (i) all investment management fees previously
waived or reduced by the Manager and (ii) all other payments previously
remitted by the Manager to the Portfolio in accordance with the Expense
Limitation Agreement during any of the previous five (5) fiscal years, (or
three (3) fiscal years for certain Portfolios) less any reimbursement that the
Portfolio has previously paid to the Manager with respect to (a) such
investment management fees previously waived or reduced and (b) such other
payments previously remitted by the Manager to the Portfolio.
THE ADVISERS
Each Portfolio has one or more Advisers that furnish an investment program for
the Portfolio (or portion thereof for which the entity serves as Adviser)
pursuant to an investment advisory agreement with the Manager. Each Adviser
makes investment decisions on behalf of the Portfolio (or portion thereof for
which the entity serves as Adviser), places all orders for the purchase and
sale of investments for the Portfolio's account with brokers or dealers
selected by such Adviser or the Manager and may perform certain limited
related administrative functions in connection therewith.
The Manager has received an exemptive order, the Multi-Manager Order, from the
SEC that permits the Manager, subject to board approval and without the
approval of shareholders to: (a) employ a new Adviser or additional Advisers
for any Portfolio; (b) enter into new investment advisory agreements and
materially modify existing investment advisory agreements; and (c) terminate
and replace the Advisers without obtaining approval of the
---------------------- EQ Advisors Trust
<PAGE>
- ----------
144 MANAGEMENT OF THE TRUST
- --------------------------------------------------------------------------------
relevant Portfolio's shareholders. However, the Manager may not enter into an
investment advisory agreement with an "affiliated person" of the Manager (as
that term is defined in Section 2(a)(3) of the 1940 Act ("Affiliated
Adviser"), such as Alliance, unless the investment advisory agreement with the
Affiliated Adviser, including compensation, is approved by the affected
Portfolio's shareholders, including, in instances in which the investment
advisory agreement pertains to a newly formed Portfolio, the Portfolio's
initial shareholder. In such circumstances, shareholders would receive notice
of such action, including the information concerning the Adviser that normally
is provided in an information statement under Schedule 14C of the Securities
Exchange Act of 1934, as amended ("1934 Act").
The Manager pays each Adviser a fee based on the Portfolio's average daily net
assets. No Portfolio is responsible for the fees paid to each of the Advisers.
THE ADMINISTRATOR
Pursuant to an agreement, Equitable currently serves as the Administrator to
the Trust. As Administrator, Equitable provides the Trust with necessary
administrative, fund accounting and compliance services, and makes available
the office space, equipment, personnel and facilities required to provide such
services to the Trust.
Equitable may carry out its responsibilities either directly or through
sub-contracting with third party service providers. For these services, the
Trust pays Equitable $30,000 for each Portfolio, and a monthly fee at the
annual rate of 0.04 of 1% of the first $3 billion of total Trust assets, 0.03
of 1% of the next $3 billion of the total Trust assets; 0.025 of 1% of the
next $4 billion of the total Trust assets; and 0.0225% of 1% of the total
Trust assets in excess of $10 billion.
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.
BROKERAGE PRACTICES
In selecting brokers and dealers in accordance with Section 28(e) of the 1934
Act, the Manager and each Adviser may consider research and brokerage services
received by the Manager, the Advisers, the Trust or any Portfolio. 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. Finally, at the discretion of the Board, the
Trust may direct the Manager to cause Advisers to effect securities
transactions through broker-dealers in a manner that would help to generate
resources to (i) pay the cost of certain expenses which the Trust is required
to pay or for which the Trust is required to arrange payment or (ii) finance
activities that are primarily intended to result in the sale of Trust shares.
BROKERAGE TRANSACTIONS WITH AFFILIATES
To the extent permitted by law, the Trust may engage in securities and other
transactions with entities that may be affiliated with the Manager or the
Advisers. The 1940 Act generally prohibits the Trust from engaging in
principal securities transactions with an affiliate of the Manager or the
Advisers unless pursuant to an exemptive order from the SEC. For these
purposes, however, the Trust has considered this issue and believes, based
upon advice of counsel, that a broker-dealer affiliate of an Adviser to one
Portfolio should not be treated as an affiliate of an Adviser to another
Portfolio for which such Adviser does not provide investment advice in whole
or in part. The Trust has adopted procedures that 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. The Trust has
also 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.
<PAGE>
5
FUND DISTRIBUTION ARRANGEMENTS
- ----------------
145 FUND DISTRIBUTION ARRANGEMENTS
- --------------------------------------------------------------------------------
The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares and Class IB shares. AXA Advisors, LLC ("AXA Advisors") serves as one
of the distributors for the Class IB shares of the Trust offered by this
Prospectus as well as one of the distributors for the Class IA shares.
Equitable Distributors, Inc. ("EDI") serves as the other distributor for the
Class IB shares of the Trust as well as the Class IA shares. Both classes of
shares are offered and redeemed at their net asset value without any sales
load. AXA Advisors and EDI are affiliates of Equitable. Both AXA Advisors and
EDI are registered as broker-dealers under the 1934 Act and are members of the
National Association of Securities Dealers, Inc.
The Trust has adopted a Distribution Plan under Rule 12b-1 under the 1940 Act
for the Trust's Class IB shares. Under the Class IB Distribution Plan the
Class IB shares of the Trust pay each of the distributors an annual fee to
compensate them for promoting, selling and servicing shares of the Portfolios.
The annual fees equal 0.25% of each Portfolio's average daily net assets. Over
time, the fees will increase your cost of investing and may cost you more than
other types of charges.
<PAGE>
6
PURCHASE AND REDEMPTION
- ----------------
146 PURCHASE AND REDEMPTION
- --------------------------------------------------------------------------------
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 or qualified retirement plan 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 and class related 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
days on which the New York Stock Exchange ("NYSE") is closed for trading.
Portfolios that invest a significant portion of their assets in foreign
securities may experience changes in their net asset value on days when a
shareholder may not purchase or redeem shares of that Portfolio because
foreign securities (other than depositary receipts) are valued at the close of
business in the applicable foreign country.
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.
You should note that the Trust is not designed for professional "market
timing" organizations, or other organizations or individuals engaging in a
market timing strategy, making programmed transfers, frequent transfers or
transfers that are large in relation to the total assets of each of the
Trust's Portfolios. Market timing strategies are disruptive to the Trust's
Portfolios. If we determine that your transfer patterns among the Trust's
Portfolio's reflect a market timing strategy, we reserve the right to take
action including, but not limited to: restricting the availability of transfer
through telephone requests, facsimile transmissions, automated telephone
services, internet services or any electronic transfer services. We may also
refuse to act on transfer instructions of an agent acting under a power of
attorney who is acting on behalf of more than one owner.
<PAGE>
7
HOW ASSETS ARE VALUED
- ----------------
147 HOW ASSETS ARE VALUED
- --------------------------------------------------------------------------------
Values are determined according to accepted 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, including depositary receipts, in
the United States are valued at representative quoted prices in the
currency in the country of origin. Foreign currency is converted into
United States dollar equivalents at current exchange rates. Because
foreign markets may be open at different times than the NYSE, the value of
a Portfolio's shares may change on days when shareholders are not able to
buy or sell them. If events materially affecting the values of the
Portfolios' foreign investments occur between the close of foreign markets
and the close of regular trading on the NYSE, these investments may be
valued at their fair value.
o Short-term debt securities in the Portfolios, other than the Alliance Money
Market Portfolio, which mature in 60 days or less are valued at amortized
cost, which approximates market value. Securities held in the Alliance
Money Market Portfolio are valued at prices based on equivalent yields or
yield spreads.
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.
<PAGE>
8
TAX INFORMATION
- ----------------
148 TAX INFORMATION
- --------------------------------------------------------------------------------
Each Portfolio of the Trust is a separate regulated investment company for
federal income tax purposes. Regulated investment companies are usually not
taxed at the entity (Portfolio) level. They pass through their income and
gains to their shareholders by paying dividends. Their shareholders include
this income on their respective tax returns. A Portfolio will be treated as a
regulated investment company if it meets specified federal income tax rules,
including types of investments, limits on investments, calculation of income,
and dividend payment requirements. Although the Trust intends that it and each
Portfolio will be operated to have no federal tax liability, if they have any
federal tax liability, that could hurt the investment performance of the
Portfolio in question. Also, any Portfolio investing in foreign securities or
holding foreign currencies could be subject to foreign taxes which could
reduce the investment performance of the Portfolio.
It is important for each Portfolio to maintain its federal income tax
regulated investment company status because the shareholders of the Portfolio
that are insurance company separate accounts will then be able to use a
favorable federal income tax investment diversification testing rule in
determining whether the Contracts indirectly funded by the Portfolio meet tax
qualification rules for variable insurance contracts. If a Portfolio fails to
meet specified investment diversification requirements, owners of non-pension
plan Contracts funded through the Trust could be taxed immediately on the
accumulated investment earnings under their Contracts and could lose any
benefit of tax deferral. Equitable, in its capacity as Administrator therefore
carefully monitors compliance with all of the regulated investment company
rules and variable insurance contract investment diversification rules.
<PAGE>
9
FINANCIAL HIGHLIGHTS
- --------
149 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the financial
performance for the Trust's Class IA and Class IB shares since May 1, 1997.
With respect to the Portfolios that are advised by Alliance (other than
EQ/Alliance Premier Growth Portfolio and the EQ/Alliance Technology Stock
Portfolio) financial information in the table below is for the past five (5)
years (or, if shorter, the period of the Portfolio's operations). Since the
EQ/Alliance Technology Stock Portfolio will commence operations on May 1, 2000,
no information for that Portfolio is provided below. The information below for
the Class IA and Class IB shares has been derived from the financial statements
of the Trust, which have been audited by PricewaterhouseCoopers LLP,
independent public accountants. PricewaterhouseCoopers LLP's report on the
Trust's financial statements as of December 31, 1999 appears in the Trust's
Annual Report. The information should be read in conjunction with the financial
statements contained in the Trust's Annual Report which are incorporated by
reference into the Trust's Statement of Additional Information (SAI) and
available upon request.
EQ/AGGRESSIVE STOCK PORTFOLIO (FKA ALLIANCE AGGRESSIVE STOCK PORTFOLIO)(D)(E):
<TABLE>
<CAPTION>
CLASS IA
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 34.15 $ 36.22 $ 35.85 $ 35.68 $ 30.63
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) ........... 0.12 0.09 0.04 0.09 0.10
Net realized and unrealized gain
(loss) on investments ................. 6.22 (0.28) 3.71 7.52 9.54
---------- ---------- --------- --------- ---------
Total from investment operations........ 6.34 (0.19) 3.75 7.61 9.64
---------- ---------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................ (0.12) (0.16) (0.05) (0.09) (0.10)
Dividends in excess of net
investment income ..................... - - - - -
Distributions from realized gains ...... (2.36) (1.72) (3.33) (7.33) (4.49)
Distributions in excess of realized
gains ................................. - - - (0.02) -
Tax return of capital distributions .... - - - - -
--------- ---------- ---------- ---------- ----------
Total dividends and distributions ...... (2.48) (1.88) (3.38) (7.44) (4.59)
--------- ---------- ---------- ---------- ----------
Net asset value, end of period ........... $ 38.01 $ 34.15 $ 36.22 $ 35.85 $ 35.68
========= ========== ========== ========== ==========
Total return ............................. 18.84% 0.29% 10.94% 22.20% 31.63%
========= ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........ $4,368,877 $4,346,907 $4,589,771 $3,865,256 $2,700,515
Ratio of expenses to average net
assets ................................. 0.56% 0.56% 0.54% 0.48% 0.49%
Ratio of net investment income (loss)
to average net assets .................. 0.33% 0.24% 0.11% 0.24% 0.28%
Portfolio turnover rate .................. 87% 105% 123% 108% 127%
<CAPTION>
CLASS IB
--------------------------------------------------------
OCTOBER 2,*
YEAR ENDED DECEMBER 31, 1996 TO
------------------------------------- DECEMBER 31,
1999 1998 1997 1996
------------ ------------ ----------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 34.01 $ 36.13 $ 35.83 $ 37.28
------- ------- ------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) ........... 0.03 0.01 (0.11) (0.01)
Net realized and unrealized gain
(loss) on investments ................. 6.20 (0.29) 3.77 0.85
------- -------- ------- ----------
Total from investment operations........ 6.23 (0.28) 3.66 0.84
------- -------- ------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................ (0.05) (0.12) (0.03) -
Dividends in excess of net
investment income ..................... - - - (0.02)
Distributions from realized gains ...... (2.36) (1.72) (3.33) (0.23)
Distributions in excess of realized
gains ................................. - - - (2.04)
Tax return of capital distributions .... - - - -
-------- -------- ------- ----------
Total dividends and distributions ...... (2.41) (1.84) (3.36) (2.29)
-------- -------- ------- ----------
Net asset value, end of period ........... $ 37.83 $ 34.01 $ 36.13 $ 35.83
======== ======== ======= ==========
Total return ............................. 18.55% 0.05% 10.66% 2.32%(b)
======== ======== ======= ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........ $233,265 $153,782 $73,486 $ 613
Ratio of expenses to average net
assets ................................. 0.81% 0.82% 0.81% 0.73%(a)
Ratio of net investment income (loss)
to average net assets .................. 0.07% 0.02% (0.28)% (0.10)%(a)
Portfolio turnover rate .................. 87% 105% 123% 108%
</TABLE>
<PAGE>
- -----
150 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
EQ/BALANCED PORTFOLIO (FKA ALLIANCE BALANCED PORTFOLIO)(D)(E):
<TABLE>
<CAPTION>
CLASS IA
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 18.51 $ 17.58 $ 16.64 $ 16.76 $ 14.87
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .................. 0.52 0.56 0.58 0.53 0.54
Net realized and unrealized gain
on investments and foreign
currency transactions ................. 2.69 2.54 1.86 1.31 2.36
--------- --------- --------- --------- ---------
Total from investment operations ....... 3.21 3.10 2.44 1.84 2.90
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................ (0.56) (0.50) (0.59) (0.53) (0.54)
Dividends in excess of net
investment income ..................... - - - - -
Distributions from realized gains ...... (1.98) (1.67) (0.91) (1.40) (0.47)
Distributions in excess of realized
gains ................................. - - - (0.03) -
Tax return of capital distributions .... - - - - -
---------- ---------- ---------- ---------- ----------
Total dividends and distributions ...... (2.54) (2.17) 1.50) (1.96) (1.01)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ........... $ 19.18 $ 18.51 $ 17.58 $ 16.64 $ 16.76
========== ========== ========== ========== ==========
Total return ............................. 17.79% 18.11% 15.06% 11.68% 19.75%
========== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........ $2,126,313 $1,936,429 $1,724,089 $1,637,856 $1,523,142
Ratio of expenses to average net
assets ................................. 0.44% 0.45% 0.45% 0.41% 0.40%
Ratio of net investment income to
average net assets ..................... 2.68% 3.00% 3.30% 3.15% 3.33%
Portfolio turnover rate .................. 107% 95% 146% 177% 186%
<CAPTION>
CLASS IB
-------------------------------------
JULY 8, 1998*
YEAR ENDED TO
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------ ------------------
<S> <C> <C>
Net asset value, beginning of period ..... $ 18.51 $ 19.48
------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .................. 0.47 0.24
Net realized and unrealized gain
on investments and foreign
currency transactions ................. 2.69 0.66
------- -------
Total from investment operations ....... 3.16 0.90
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................ (0.54) (0.20)
Dividends in excess of net
investment income ..................... - -
Distributions from realized gains ...... (1.98) (1.67)
Distributions in excess of realized
gains ................................. - -
Tax return of capital distributions .... - -
------- -------
Total dividends and distributions ...... (2.52) (1.87)
------- -------
Net asset value, end of period ........... $ 19.15 $ 18.51
======= =======
Total return ............................. 17.50% 4.92%(b)
======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........ $10,701 $10
Ratio of expenses to average net
assets ................................. 0.69% 0.70%(a)
Ratio of net investment income to
average net assets ..................... 2.43% 2.65%(a)
Portfolio turnover rate .................. 107% 95%
</TABLE>
<PAGE>
- -----
151 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------ ------------------ ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ........................... $ 24.35 $ 21.61 $ 18.23 $ 16.48 $ 13.36
------------- ---------- ----------- ------------ -----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ............. 0.17 0.18 0.14 0.15 0.20
Net realized and unrealized
gain on investments and
foreign currency
transactions ..................... 5.84 5.99 5.12 3.73 4.12
------------- ---------- ----------- ------------ -----------
Total from investment
operations ....................... 6.01 6.17 5.26 3.88 4.32
------------- ---------- ----------- ------------ -----------
LESS DISTRIBUTIONS:
Dividends from net
investment income ................ (0.16) (0.15) (0.11) (0.15) (0.20)
Dividends in excess of net
investment income ................ - - - - (0.02)
Distributions from realized
gains ............................ (4.03) (3.28) (1.77) (1.76) (0.95)
Distributions in excess of
realized gains ................... - - - (0.22) (0.03)
Tax return of capital
distributions .................... - - - - -
-------------- ----------- ------------ ------------- ------------
Total dividends and
distributions .................... (4.19) (3.43) (1.88) (2.13) (1.20)
-------------- ----------- ------------ ------------- ------------
Net asset value, end of period ..... $ 26.17 $ 24.35 $ 21.61 $ 18.23 $ 16.48
============== =========== ============ ============= ============
Total return ....................... 25.19% 29.39% 29.40% 24.28% 32.45%
============== =========== ============ ============= ============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) .......................... $ 14,951,495 $12,061,977 $9,331,994 $6,625,390 $4,879,677
Ratio of expenses to average net
assets ........................... 0.38% 0.39% 0.39% 0.38% 0.38%
Ratio of net investment income
to average net assets ............ 0.65% 0.75% 0.69% 0.85% 1.27%
Portfolio turnover rate ............ 57% 46% 52% 55% 61%
<CAPTION>
CLASS IB
- --------------------------------------------------------------------
OCTOBER 2,*
YEAR ENDED DECEMBER 31, 1996 TO
- ------------------------------------------------ DECEMBER 31,
1999 1998 1997 1996
- ----------------- --------------- -------------- -------------------
<S> <C> <C> <C>
$ 24.30 $ 21.58 $ 18.22 $ 17.90
------------ --------- --------- ---------
0.10 0.10 0.10 0.02
5.82 6.00 5.11 1.52
------------ --------- --------- ---------
5.92 6.10 5.21 1.54
------------ --------- --------- ---------
(0.14) (0.10) (0.08) -
- - - (0.03)
(4.03) (3.28) (1.77) (0.16)
- - - (1.03)
- - - -
------------ --------- --------- ---------
(4.17) (3.38) (1.85) (1.22)
------------ --------- --------- ---------
$ 26.05 $ 24.30 $ 21.58 $ 18.22
============ ========= ========= =========
24.88% 29.06% 29.07% 8.49%(b)
============ ========= ========= =========
$ 1,642,066 $ 834,144 $228,780 $ 1,244
0.63% 0.64% 0.64% 0.63%(a)
0.39% 0.44% 0.46% 0.61%(a)
57% 46% 52% 55%
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
152 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ........................ $ 12.32 $ 11.89 $ 11.29 $ 11.52 $ 10.15
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ......... 0.47 0.49 0.49 0.50 0.60
Net realized and unrealized
gain on investments and
foreign currency
transactions ................. 0.76 1.12 0.97 0.07 1.43
------- ------- ------- ------- -------
Total from investment
operations ................... 1.23 1.61 1.46 0.57 2.03
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net
investment income ............ (0.44) (0.48) (0.49) (0.51) (0.59)
Distributions from realized
gains ........................ (0.56) (0.70) (0.37) (0.27) (0.07)
Distributions in excess of
realized gains ............... - - - (0.02) -
Tax return of capital
distributions ................ - - - - -
------- ------- ------- ------- -------
Total dividends and
distributions ................ (1.00) (1.18) (0.86) (0.80) (0.66)
------- ------- ------- ------- -------
Net asset value, end of
period ......................... $ 12.55 $ 12.32 $ 11.89 $ 11.29 $ 11.52
======= ======= ======= ======= =======
Total return .................... 10.14% 13.88% 13.25% 5.21% 20.40%
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ....................... $394,489 $ 355,441 $307,847 $282,402 $252,101
Ratio of expenses to average
net assets .................... 0.53% 0.53% 0.57% 0.61% 0.59%
Ratio of net investment
income to average
net assets .................... 3.73% 3.99% 4.17% 4.48% 5.48%
Portfolio turnover rate ......... 111% 103% 206% 181% 287%
<CAPTION>
CLASS 1B
----------------------------------------
YEAR ENDED MAY 1, 1997*
DECEMBER 31, TO
----------------------- DECEMBER 31,
1999 1998 1997
----------- ----------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of
period ........................ $ 12.31 $ 11.88 $ 11.29
------- ------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ......... 0.44 0.46 0.31
Net realized and unrealized
gain on investments and
foreign currency
transactions ................. 0.75 1.12 1.01
------- ------- ---------
Total from investment
operations ................... 1.19 1.58 1.32
------- ------- ---------
LESS DISTRIBUTIONS:
Dividends from net
investment income ............ (0.43) (0.45) (0.36)
Distributions from realized
gains ........................ (0.56) (0.70) (0.37)
Distributions in excess of
realized gains ............... - - -
Tax return of capital
distributions ................ - - -
------- ------- ---------
Total dividends and
distributions ................ (0.99) (1.15) (0.73)
------- ------- ---------
Net asset value, end of
period ......................... 12.51 $ 12.31 $ 11.88
======= ======= =========
Total return .................... 9.87% 13.60% 11.84%(b)
======= ======= =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ....................... $81,555 $32,653 $ 5,694
Ratio of expenses to average
net assets .................... 0.78% 0.78% 0.80%(a)
Ratio of net investment
income to average
net assets .................... 3.48% 3.68% 3.82%(a)
Portfolio turnover rate ......... 111% 103% 206%
</TABLE>
<PAGE>
- -----
153 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ALLIANCE EQUITY INDEX PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period .......................... $ 25.00 $ 19.74 $ 15.16 $ 13.13 $ 9.87
--------- --------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.28 0.27 0.26 0.27 0.26
Net realized and unrealized
gain on investments and
foreign currency
transactions ................... 4.78 5.25 4.64 2.65 3.32
--------- --------- ------- ------- -------
Total from investment
operations ..................... 5.06 5.52 4.90 2.92 3.58
--------- --------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. (0.27) (0.25) (0.25) (0.25) (0.22)
Dividends in excess of net
investment income - ............ - - - - -
Distributions from realized
gains .......................... (0.22) (0.01) (0.07) (0.64) (0.09)
Distributions in excess of
realized gains ................. - - - - (0.01)
Tax return of capital
distributions .................. - - - - -
---------- ---------- -------- -------- --------
Total dividends and
distributions .................. (0.49) (0.26) (0.32) (0.89) (0.32)
---------- ---------- -------- -------- --------
Net asset value, end of period..... $ 29.57 $ 25.00 $ 19.74 $ 15.16 $ 13.13
========== ========== ======== ======== ========
Total return ...................... 20.38% 28.07% 32.58% 22.39% 36.48%
========== ========== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $2,618,539 $1,689,913 $943,631 $386,249 $165,785
Ratio of expenses to average
net assets ...................... 0.33% 0.34% 0.37% 0.39% 0.48%
Ratio of net investment
income to average net
assets .......................... 1.05% 1.23% 1.46% 1.91% 2.16%
Portfolio turnover rate ........... 5% 6% 3% 15% 9%
<CAPTION>
CLASS 1B
----------------------------------------
YEAR ENDED MAY 1, 1997*
DECEMBER 31, TO
----------------------- DECEMBER 31,
1999 1998 1997
----------- ----------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of
period .......................... $ 24.98 $ 19.73 $ 16.35
------- ------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.21 0.22 0.14
Net realized and unrealized
gain on investments and
foreign currency
transactions ................... 4.78 5.24 3.48
------- ------- ---------
Total from investment
operations ..................... 4.99 5.46 3.62
------- ------- ---------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. (0.25) (0.20) (0.17)
Dividends in excess of net
investment income - ............ - - -
Distributions from realized
gains .......................... (0.22) (0.01) (0.07)
Distributions in excess of
realized gains ................. - - -
Tax return of capital
distributions .................. - - -
------- -------- ---------
Total dividends and
distributions .................. (0.47) (0.21) (0.24)
------- -------- ---------
Net asset value, end of period..... $ 29.50 $ 24.98 $ 19.73
======= ======== =========
Total return ...................... 20.08% 27.74% 22.28%(b)
======= ======== =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $20,931 $ 443 $ 110
Ratio of expenses to average
net assets ...................... 0.58% 0.59% 0.62%(a)
Ratio of net investment
income to average net
assets .......................... 0.78% 0.98% 1.10%(a)
Portfolio turnover rate ........... 5% 6% 3%
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
154 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ALLIANCE GLOBAL PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period .......................... $ 19.46 $ 17.29 $ 16.92 $ 15.74 $ 13.87
--------- --------- --------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.10 0.14 0.17 0.21 0.26
Net realized and unrealized
gain on investments and
foreign currency
transactions ................... 7.25 3.56 1.75 2.05 2.32
--------- --------- --------- ------- -------
Total from investment
operations ..................... 7.35 3.70 1.92 2.26 2.58
--------- --------- --------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. 0.02) (0.22) (0.36) (0.21) (0.25)
Dividends in excess of net
investment income .............. - - - (0.08) -
Distributions from realized
gains .......................... (1.63) (1.31) (1.19) (0.79) (0.42)
Distributions in excess of
realized gains ................. - - - - (0.03)
Tax return of capital
distributions .................. - - - - (0.01)
---------- ---------- ---------- -------- --------
Total dividends and
distributions .................. (1.65) (1.53) (1.55) (1.08) (0.71)
---------- ---------- ---------- -------- --------
Net asset value, end of period..... $ 25.16 $ 19.46 $ 17.29 $ 16.92 $ 15.74
========== ========== ========== ======== ========
Total return ...................... 38.53% 21.80% 11.66% 14.60% 18.81%
========== ========== ========== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $1,869,185 $1,360,220 $1,203,867 $997,041 $686,140
Ratio of expenses to average
net assets ...................... 0.70% 0.71% 0.69% 0.60% 0.61%
Ratio of net investment
income to average net
assets .......................... 0.45% 0.72% 0.97% 1.28% 1.76%
Portfolio turnover rate ........... 93% 105% 57% 59% 67%
<CAPTION>
CLASS 1B
-----------------------------------------------------
OCTOBER 2,*
YEAR ENDED DECEMBER 31, 1996 TO
------------------------------------ DECEMBER 31,
1999 1998 1997 1996
------------ ----------- ----------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period .......................... $ 19.41 $ 17.27 $ 16.91 $ 16.57
------- ------- ------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.03 0.08 0.12 0.02
Net realized and unrealized
gain on investments and
foreign currency
transactions ................... 7.24 3.56 1.76 0.81
------- ------- ------- ---------
Total from investment
operations ..................... 7.27 3.64 1.88 0.83
------- ------- ------- ---------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. - (0.19) (0.33) -
Dividends in excess of net
investment income .............. - - - (0.11)
Distributions from realized
gains .......................... (1.63) (1.31) (1.19) (0.10)
Distributions in excess of
realized gains ................. - - - (0.28)
Tax return of capital
distributions .................. - - - -
-------- ------- ------- ---------
Total dividends and
distributions .................. (1.63) (1.50) (1.52) (0.49)
-------- ------- ------- ---------
Net asset value, end of period..... $ 25.05 $ 19.41 $ 17.27 $ 16.91
======== ======= ======= =========
Total return ...................... 38.17% 21.50% 11.38% 4.98%(b)
======== ======= ======= =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... 121,052 $47,982 $21,520 $290
Ratio of expenses to average
net assets ...................... 0.95% 0.96% 0.97% 0.86%(a)
Ratio of net investment
income to average net
assets .......................... 0.16% 0.41% 0.67% 0.48%(a)
Portfolio turnover rate ........... 93% 105% 57% 59%
</TABLE>
<PAGE>
- -----
155 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ALLIANCE GROWTH AND INCOME PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ........................... $ 16.99 $ 15.38 $ 13.01 $ 11.70 $ 9.70
---------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ............ 0.06 0.06 0.15 0.24 0.33
Net realized and unrealized
gain (loss) on investments....... 3.05 3.08 3.30 2.05 1.97
---------- ------- ------- ------- -------
Total from investment
operations ...................... 3.11 3.14 3.45 2.29 2.30
---------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net
investment income ............... (0.05) (0.05) (0.15) (0.23) (0.30)
Distributions from realized
gains ........................... (1.81) (1.48) (0.93) (0.75) -
Tax return of capital
distributions ................... - - - - -
---------- ------- ------- -------- -------
Total dividends and
distributions ................... (1.86) (1.53) (1.08) (0.98) (0.30)
---------- ------- ------- ------- -------
Net asset value, end of period ..... $ 18.24 $ 16.99 $ 15.38 $ 13.01 $ 11.70
---------- ------- ------- ------- -------
Total return ....................... 18.66% 20.86% 26.90% 20.09% 24.07%
========== ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) .......................... $ 1,241,619 $877,744 $555,059 $232,080 $98,053
Ratio of expenses to average net
assets ........................... 0.57% 0.58% 0.58% 0.58% 0.60%
Ratio of net investment income
to average net assets ............ 0.33% 0.38% 0.99% 1.94% 3.11%
Portfolio turnover rate ............ 70% 74% 79% 88% 65%
<CAPTION>
CLASS IB
--------------------------------------------
YEAR END DECEMBER 31, MAY 1, 1997*
------------------------- TO
1999 1998 DECEMBER 31, 1997
------------ ------------ ------------------
<S> <C> <C> <C>
Net asset value, beginning of
period ........................... $ 16.95 $ 15.36 $ 13.42
------- ------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ............ 0.01 0.03 0.05
Net realized and unrealized
gain (loss) on investments....... 3.04 3.07 2.91
------- ------- ---------
Total from investment
operations ...................... 3.05 3.10 2.96
------- ------- ---------
LESS DISTRIBUTIONS:
Dividends from net
investment income ............... (0.03) (0.03) (0.09)
Distributions from realized
gains ........................... (1.81) (1.48) (0.93)
Tax return of capital
distributions ................... - - -
-------- -------- ---------
Total dividends and
distributions ................... (1.84) (1.51) (1.02)
-------- -------- ---------
Net asset value, end of period ..... $ 18.16 $ 16.95 $ 15.36
-------- -------- ---------
Total return ....................... 18.37% 20.56% 22.41%(b)
======== ======== =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) .......................... $261,663 $120,558 $ 32,697
Ratio of expenses to average net
assets ........................... 0.82% 0.83% 0.83%(a)
Ratio of net investment income
to average net assets ............ 0.06% 0.17% 0.43%(a)
Portfolio turnover rate ............ 70% 74% 79%
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
156 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ALLIANCE GROWTH INVESTORS PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- --------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ............................. $ 19.87 $ 18.55 $ 17.20 $ 17.68 $ 14.66
--------- --------- ---------- --------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .............. 0.37 0.41 0.41 0.40 0.57
Net realized and unrealized
gain on investments and
foreign currency
transactions ...................... 4.83 3.03 2.43 1.66 3.24
--------- --------- ---------- --------- --------
Total from investment
operations ........................ 5.20 3.44 2.84 2.06 3.81
--------- --------- ---------- --------- --------
LESS DISTRIBUTIONS:
Dividends from net investment
income ............................ (0.35) (0.41) (0.46) (0.40) (0.54)
Dividends in excess of net
investment income ................. - - - (0.03) (0.01)
Distributions from realized
gains ............................. (2.15) (1.71) (1.03) (2.10) (0.24)
Distributions in excess of
realized gains .................... - - - (0.01) -
Tax return of capital
distributions ..................... - - - - -
---------- ---------- ----------- ---------- --------
Total dividends and
distributions ..................... (2.50) (2.12) (1.49) (2.54) (0.79)
---------- ---------- ----------- ---------- --------
Net asset value, end of period ....... $ 22.57 $ 19.87 $ 18.55 $ 17.20 $ 17.68
========== ========== =========== ========== ========
Total return ......................... 26.58% 19.13% 16.87% 12.61% 26.37%
========== ========== =========== ========== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)..... $2,495,787 $1,963,074 $1,630,389 $1,301,643 $896,134
Ratio of expenses to average net
assets ............................. 0.53% 0.55% 0.57% 0.57% 0.56%
Ratio of net investment income to
average net assets ................. 1.71% 2.10% 2.18% 2.31% 3.43%
Portfolio turnover rate .............. 98% 102% 121% 190% 107%
<CAPTION>
CLASS IB
- ----------------------------------------------------------
OCTOBER 2,*
YEAR ENDED DECEMBER 31, 1996 TO
- ----------------------------------------- DECEMBER 31,
1999 1998 1997 1996
- ------------- -------------- ------------ ----------------
<S> <C> <C> <C>
$ 19.84 $ 18.52 $ 17.19 $ 16.78
-------- --------- ------- --------
0.31 0.36 0.36 0.07
4.82 3.03 2.43 0.71
--------- --------- ------- --------
5.13 3.39 2.79 0.78
--------- --------- ------- --------
(0.31) (0.36) (0.43) (0.02)
- - - (0.09)
(2.15) (1.71) (1.03) (0.02)
- - - (0.24)
- - - -
--------- ---------- -------- --------
( 2.46) (2.07) (1.46) (0.37)
--------- ---------- -------- --------
$ 22.51 $ 19.84 $ 18.52 $ 17.19
========= ========== ======== ========
26.27% 18.83% 16.58% 4.64%(b)
========= ========== ======== ========
$202,850 $ 92,027 $35,730 $ 472
0.78% 0.80% 0.82% 0.84%(a)
1.44% 1.85% 1.88% 1.69%(a)
98% 102% 121% 190%
</TABLE>
<PAGE>
- -----
157 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ALLIANCE HIGH YIELD PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ............................. $ 8.71 $ 10.41 $ 10.02 $ 9.64 $ 8.91
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .............. 0.90 1.07 1.04 1.02 0.98
Net realized and unrealized
gain (loss) on investments......... (1.19) (1.56) 0.75 1.07 0.73
------- ------- ------- ------- -------
Total from investment
operations ........................ (0.29) (0.49) 1.79 2.09 1.71
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net
investment income ................. (0.96) (1.03) (0.97) (0.98) (0.94)
Dividends in excess of net
investment income ................. - - - (0.03) (0.04)
Distributions from realized
gains ............................. (0.01) (0.18) (0.43) (0.70) -
Distributions in excess of
realized gains .................... - - - - -
Return of capital distributions..... (0.02) - - - -
------- ------- -------- -------- --------
Total dividends and
distributions ..................... (0.99) (1.21) (1.40) (1.71) (0.98)
------- ------- -------- -------- --------
Net asset value, end of period ....... $ 7.43 $ 8.71 $ 10.41 $ 10.02 $ 9.64
======= ======= ======== ======== ========
Total return ......................... (3.35)% (5.15)% 18.48% 22.89% 19.92%
======= ======= ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ............................ $336,292 $405,308 $355,473 $199,360 $118,129
Ratio of expenses to average net
assets ............................. 0.63% 0.63% 0.62% 0.59% 0.60%
Ratio of net investment income
to average net assets .............. 10.53% 10.67% 9.82% 9.93% 10.34%
Portfolio turnover rate .............. 178% 181% 390% 485% 350%
<CAPTION>
CLASS IB
-------------------------------------------------------
OCTOBER 2,*
YEAR ENDED DECEMBER 31, 1996 TO
-------------------------------------- DECEMBER 31,
1999 1998 1997 1996
------------ ------------- ----------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period ............................. $ 8.69 $ 10.39 $ 10.01 $ 10.25
------- ------- ------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .............. 0.87 1.04 1.05 0.19
Net realized and unrealized
gain (loss) on investments......... (1.18) (1.56) 0.71 0.15
------- ------- ------- ---------
Total from investment
operations ........................ (0.31) (0.52) 1.76 0.34
------- ------- ------- ---------
LESS DISTRIBUTIONS:
Dividends from net
investment income ................. (0.95) (1.00) (0.95) (0.03)
Dividends in excess of net
investment income ................. - - - (0.25)
Distributions from realized
gains ............................. (0.01) (0.18) 0.43) (0.01)
Distributions in excess of
realized gains .................... - - - (0.29)
Return of capital distributions..... (0.02) - - -
------- ------- ------- ---------
Total dividends and
distributions ..................... (0.98) (1.18) (1.38) (0.58)
------- ------- ------- ---------
Net asset value, end of period ....... $ 7.40 $ 8.69 $ 10.39 $ 10.01
======= ======= ======= =========
Total return ......................... (3.58)% (.38)% 18.19% 3.32%(b)
======= ======= ======= =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ............................ $230,290 $207,042 $66,338 $ 685
Ratio of expenses to average net
assets ............................. 0.88% 0.88% 0.88% 0.82%(a)
Ratio of net investment income
to average net assets .............. 10.25% 10.60% 9.76% 8.71%(a)
Portfolio turnover rate .............. 178% 181% 390% 485%
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
158 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 9.67 $ 9.44 $ 9.29 $ 9.47 $ 8.87
-------- ------- ------- ------ --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.50 0.50 0.53 0.54 0.58
Net realized and unrealized gain (loss) on
investments .................................. (0.49) 0.21 0.13 (0.19) 0.57
-------- ------- ------- ------- --------
Total from investment operations .............. 0.01 0.71 0.66 0.35 1.15
-------- ------- ------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income. ......... (0.50) (0.48) (0.51) (0.53) (0.55)
-------- --------- -------- ------- ---------
Net asset value, end of period .................. $ 9.18 $ 9.67 $ 9.44 $ 9.29 $ 9.47
======== ========= ======== ======= =========
Total return .................................... 0.02% 7.74% 7.29% 3.78% 13.33%
======== ======== =========== ========= ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............... $156,864 $153,383 $115,114 $88,384 $71,780
Ratio of expenses to average net assets ......... 0.55% 0.55% 0.55% 0.56% 0.57%
Ratio of net investment income to average
net assets .................................... 5.16% .21% 5.61% 5.73% 6.15%
Portfolio turnover rate ......................... 408% 539% 285% 318% 255%
<CAPTION>
CLASS IB
--------------------------------------------------
MAY 1, 1997*
YEAR ENDED DECEMBER 31, TO
------------------------------ DECEMBER 31,
1999 1998 1997
-------------- --------------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of period ............ $ 9.66 $ 9.43 $ 9.27
-------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.47 0.47 0.32
Net realized and unrealized gain (loss) on
investments .................................. (0.49) 0.22 0.22
-------- ---------- ---------
Total from investment operations .............. (0.02) 0.69 0.54
-------- ---------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income. ......... (0.49) (0.46) (0.38)
-------- ---------- ---------
Net asset value, end of period .................. $ 9.15 $ 9.66 $ 9.43
======== ========== =========
Total return .................................... (0.23)% 7.48% 5.83%(b)
======== ========== =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............... $45,911 $30,898 $5,052
Ratio of expenses to average net assets ......... 0.80% 0.80% 0.81%(a)
Ratio of net investment income to average
net assets .................................... 4.91% 4.87% 5.15%(a)
Portfolio turnover rate ......................... 408% 539% 285%
</TABLE>
<PAGE>
- -----
159 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------------------------------------
YEAR ENDED DECEMBER 31, APRIL 3, 1995*
---------------------------------------------------- TO
1999 1998 1997 1996 DECEMBER 31, 1995
------------------------- ------------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period .......................... $ 11.13 $ 10.27 $ 11.50 $ 10.87 $ 10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.08 0.09 0.10 0.13 0.14
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ................... 4.07 0.97 (.45) 0.94 0.98
------- ------- ------- ------- -------
Total from investment
operations ..................... 4.15 1.06 (0.35) 1.07 1.12
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. - (0.20) (0.32) (0.10) (0.07)
Dividends in excess of net
investment income .............. - - - (0.09) (0.13)
Distributions from realized
gains .......................... (0.25) - (0.56) (0.25) (0.05)
Tax return of capital
distributions .................. - - - - -
------- ------- ------- ------- -------
Total dividends and
distributions .................. (0.25) (0.20) (0.88) (0.44) (0.25)
------- ------- ------- ------- -------
Net asset value, end of period .... $ 15.03 $ 11.13 $ 10.27 $ 11.50 $ 10.87
======= ======= ======= ======= =======
Total return ...................... 37.31% 10.57% (2.98)% 9.82% 11.29%(b)
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) . $268,541 $204,767 $190,611 $151,907 $28,684
Ratio of expenses to average net
assets .......................... 1.08% 1.06% 1.08% 1.06% 1.03%(a)
Ratio of net investment income
to average net assets ........... 0.70% 0.81% 0.83% 1.10% 1.71%(a)
Portfolio turnover rate ........... 152% 59% 59% 48% 56%
<CAPTION>
CLASS IB
-----------------------------------------------
YEAR ENDED DECEMBER 31, MAY 1, 1997*
---------------------------- TO
1999 1998 DECEMBER 31, 1997
-------------- ------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of
period .......................... $ 11.11 $ 10.26 $ 11.39
--------- -------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.04 0.05 0.02
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ................... 4.06 0.98 (0.31)
--------- -------- ----------
Total from investment
operations ..................... 4.10 1.03 (0.29)
--------- -------- ----------
LESS DISTRIBUTIONS:
Dividends from net
investment income .............. - (0.18) (0.28)
Dividends in excess of net
investment income .............. - - -
Distributions from realized
gains .......................... (0.25) - (0.56)
Tax return of capital
distributions .................. - - -
--------- -------- ----------
Total dividends and
distributions .................. (0.25) (0.18) (0.84)
--------- -------- ----------
Net asset value, end of period .... $ 14.96 $ 11.11 $ 10.26
========= ======== ==========
Total return ...................... 36.90% 10.30% (2.54)%(b)
========= ======== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $18,977 $7,543 $ 3,286
Ratio of expenses to average net
assets .......................... 1.33% 1.31% 1.38%(a)
Ratio of net investment income
to average net assets ........... 0.36% 0.44% 0.20%(a)
Portfolio turnover rate ........... 152% 59% 59%
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
160 FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------
ALLIANCE MONEY MARKET PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.22 $ 10.18 $ 10.17 $ 10.16 $ 10.14
---------- --------- --------- ---------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ................ 0.51 0.53 0.54 0.54 0.57
Net realized and unrealized gain
(loss) on investments ............... - - - (0.01) -
----------- ---------- ---------- ----------- ----------
Total from investment operations...... 0.51 0.53 0.54 0.53 0.57
----------- ---------- ---------- ----------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment
income .............................. (0.45) (0.49) (0.53) (0.52) (0.55)
Dividends in excess of net
investment income ................... - - - - -
Dividends from realized gains ........ - - - - -
----------- ---------- ---------- ----------- ----------
Total dividends and distributions..... (0.45) (0.49) (0.53) (0.52) (0.55)
----------- ---------- ---------- ----------- ----------
Net asset value, end of period ......... $ 10.28 $ 10.22 $ 10.18 $ 10.17 $ 10.16
=========== ========== ========== =========== ==========
Total return ........................... 4.96% 5.34% 5.42% 5.33% 5.74%
=========== ========== ========== =========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ...... $883,988 $723,311 $449,960 $463,422 $386,691
Ratio of expenses to average net
assets ............................... 0.37% 0.37% 0.39% 0.43% 0.44%
Ratio of net investment income to
average net assets ................... 4.91% 5.13% 5.28% 5.17% 5.53%
<CAPTION>
CLASS IB
------------------------------------------------------------------
OCTOBER 2,
YEAR ENDED DECEMBER 31, 1996* TO
------------------------------------------------ DECEMBER 31,
1999 1998 1997 1996
--------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.21 $ 10.17 $ 10.16 $ 10.16
---------- ----------- ---------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ................ 0.49 0.49 0.52 0.11
Net realized and unrealized gain
(loss) on investments ............... (0.01) 0.02 - 0.01
----------- ----------- ----------- ---------
Total from investment operations...... 0.48 0.51 0.52 0.12
----------- ----------- ----------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment
income .............................. (0.44) (0.47) (0.51) (0.02)
Dividends in excess of net
investment income ................... - - - (0.10)
Dividends from realized gains ........ - - - -
----------- ------------ ----------- ---------
Total dividends and distributions..... (0.44) (0.47) (0.51) (0.12)
----------- ------------ ----------- ---------
Net asset value, end of period ......... $ 10.25 $ 10.21 $ 10.17 $ 10.16
=========== ============ =========== =========
Total return ........................... 4.71% 5.08% 5.16% 1.29%(b)
=========== ============ =========== =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ...... $559,713 $386,718 $123,675 $ 3,184
Ratio of expenses to average net
assets ............................... 0.62% 0.62% 0.63% 0.67%(a)
Ratio of net investment income to
average net assets ................... 4.68% 4.82% 5.02% 4.94%(a)
</TABLE>
<PAGE>
- -----
161 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
EQ/ALLIANCE PREMIER GROWTH PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA CLASS IB
---------------------- -----------------------
MAY 1, 1999* MAY 1, 1999*
TO TO
DECEMBER 31, 1999 DECEMBER 31, 1999
----------------------- ---------------------
<S> <C> <C>
Net asset value, beginning of period ........................................ $ 10.00 $ 10.00
----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................................... 0.02 0.01
Net realized and unrealized gain on investments
and foreign currency transactions ...................................... 1.89 1.89
----------- -----------
Total from investment operations .......................................... 1.91 1.90
----------- -----------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.01) (0.01)
Dividends in excess of net investment income .............................. - -
Distributions from realized gains ......................................... (0.03) (0.03)
Distributions in excess of realized gains ................................. - -
Tax return of capital distributions ....................................... - -
----------- -----------
Total dividends and distributions ......................................... (0.04) (0.04)
----------- -----------
Net asset value, end of period .............................................. $ 11.87 $ 11.86
=========== ===========
Total return ................................................................ 19.14%(b) 18.97%(b)
=========== ===========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $ 28,834 $ 451,323
Ratio of expenses to average net assets after waivers ....................... 0.90%(a)(c) 1.15%(a)(C)
Ratio of expenses to average net assets before waivers (f) .................. 1.12%(a)(c) 1.37%(a)(c)
Ratio of net investment income to average net assets after waivers .......... 0.45%(a)(c) 0.20%(a)(c)
Ratio of net investment income to average net assets before waivers (f) ..... 0.23%(a)(c) (0.02)%(a)(c)
Portfolio turnover rate ..................................................... 29% 29%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................... $ 0.01 $ 0.01
</TABLE>
<PAGE>
- -----
162 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ALLIANCE QUALITY BOND PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
-------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995
--------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period .............................. $ 9.84 $ 9.74 $ 9.49 $ 9.61 $ 8.72
-------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ............... 0.54 0.55 0.60 0.57 0.57
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ....................... (0.74) 0.28 0.24 (0.07) 0.88
-------- ------- ------- ------- -------
Total from investment
operations ......................... (0.20) 0.83 0.84 0.50 1.45
-------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment
income ............................. (0.50) (0.53) (0.59) (0.60) (0.56)
Dividends in excess of net
investment income .................. - - - (0.02) -
Distributions from realized
gains .............................. (0.03) (0.20) - - -
Tax return of capital
distributions ...................... - - - - -
-------- -------- ------- ------- -------
Total dividends and
distributions ...................... (0.53) (0.73) (0.59) (0.62) (0.56)
-------- ------- ------- ------- -------
Net asset value, end of period........ $ 9.11 $ 9.84 $ 9.74 $ 9.49 $ 9.61
======== ======= ======= ======= =======
Total return .......................... (2.00)% 8.69% 9.14% 5.36% 17.02%
======== ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ..... $329,895 $322,418 $203,233 $155,023 $157,443
Ratio of expenses to average net
assets .............................. 0.56% 0.57% 0.57% 0.59% 0.59%
Ratio of net investment income to
average net assets .................. 5.64% 5.48% 6.19% 6.06% 6.13%
Portfolio turnover rate ............... 147% 194% 374% 431% 411%
<CAPTION>
CLASS 1B
-------------------------------
JULY 8, 1998*
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1999 1998
-------------- ----------------
<S> <C> <C>
Net asset value, beginning of
period .............................. $ 9.84 $ 9.90
-------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ............... 0.52 0.25
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ....................... (0.75) 0.14
-------- ---------
Total from investment
operations ......................... (0.23) 0.39
-------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment
income ............................. (0.49) (0.25)
Dividends in excess of net
investment income .................. - -
Distributions from realized
gains .............................. (0.03) (0.20)
Tax return of capital
distributions ...................... - -
-------- ---------
Total dividends and
distributions ...................... (0.52) (0.45)
-------- ---------
Net asset value, end of period........ $ 9.09 $ 9.84
======== =========
Total return .......................... (2.25)% 4.05%(b)
======== =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ..... $ 1,094 $ 10
Ratio of expenses to average net
assets .............................. 0.81% 0.81%(a)
Ratio of net investment income to
average net assets .................. 5.39% 5.06%(a)
Portfolio turnover rate ............... 147% 194%
</TABLE>
<PAGE>
- -----
163 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH PORTFOLIO(D)(E):
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------- MAY 1, 1997*
TO
1999 1998 DECEMBER 31, 1997
------------ ------------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of period ..... $ 11.82 $ 12.35 $ 10.00
-------- ------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) ........... (0.05) 0.01 0.01
Net realized and unrealized gain
(loss) on investments ................. 3.34 (0.54) 2.65
-------- ------- ---------
Total from investment operations ....... 3.29 (0.53) 2.66
-------- ------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................ - - (0.01)
Dividends in excess of net
investment income ..................... - - -
Distributions from realized gains ...... - - (0.30)
Tax return of capital distributions .... - - -
-------- ------- ---------
Total dividends and distributions ...... - - (0.31)
-------- ------- ---------
Net asset value, end of period ........... $ 15.11 $ 11.82 $ 12.35
======== ======= =========
Total return ............................. 27.75% (4.28)% 26.74%(b)
=========== ======= =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........ $241,000 $198,360 $ 94,676
Ratio of expenses to average net
assets ................................. 0.95% 0.96% 0.95%(a)
Ratio of net investment income (loss)
to average net assets .................. (0.40)% 0.08% 0.10%(a)
Portfolio turnover rate .................. 221% 94% 96%
<CAPTION>
CLASS IB
--------------------------------------------------
YEAR ENDED DECEMBER 31, MAY 1, 1997*
--------------------------- TO
1999 1998 DECEMBER 31, 1997
------------- ------------- ----------------------
<S> <C> <C> <C>
Net asset value, beginning of period ..... $ 11.79 $ 12.34 $ 10.00
--------- ------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) ........... (0.08) (0.02) (0.01)
Net realized and unrealized gain
(loss) on investments ................. 3.32 (0.53) 2.65
--------- ------- --------
Total from investment operations ....... 3.24 (0.55) 2.64
--------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................ - - -
Dividends in excess of net
investment income ..................... - - -
Distributions from realized gains ...... - - (0.30)
Tax return of capital distributions .... - - -
--------- ------- --------
Total dividends and distributions ...... - - (0.30)
--------- ------- --------
Net asset value, end of period ........... $ 15.03 $ 11.79 $ 12.34
========= ======= --------
Total return ............................. 27.46% (4.44)% 26.57%(b)
========= ======= --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........ $ 162,331 $112,254 $ 46,324
Ratio of expenses to average net
assets ................................. 1.20% 1.20% 1.15%(a)
Ratio of net investment income (loss)
to average net assets .................. (0.65)% (0.17)% (0.12)%(a)
Portfolio turnover rate .................. 221% 94% 96%
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
164 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
BT EQUITY 500 INDEX PORTFOLIO:**
<TABLE>
<CAPTION>
CLASS IB
--------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period .................................................... $ 12.45 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................................................. 0.08 0.06
Net realized and unrealized gain on investments and foreign currency transactions ..... 2.44 2.45
------- -------
Total from investment operations ...................................................... 2.52 2.51
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .................................................. (0.08) (0.06)
Distributions from realized gains ..................................................... (0.04) -
-------- --------
Total dividends and distributions ..................................................... (0.12) (0.06)
-------- --------
Net asset value, end of period .......................................................... $ 14.85 $ 12.45
======== ========
Total return ............................................................................ 20.30% 25.14%
======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ....................................................... $683,544 $224,247
Ratio of expenses to average net assets after waivers ................................... 0.55% 0.55%
Ratio of expenses to average net assets before waivers (f) .............................. 0.67% 0.83%
Ratio of net investment income to average net assets after waivers ...................... 0.84% 1.22%
Ratio of net investment income to average net assets before waivers (f) ................. 0.72% 0.94%
Portfolio turnover rate ................................................................. 2% 2%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ........................................... $ 0.01 $ 0.01
</TABLE>
<PAGE>
- -----
165 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX PORTFOLIO:**
<TABLE>
<CAPTION>
CLASS IA
------------------------------------------
NOVEMBER 24, 1998*
YEAR ENDED TO
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period ..................... $ 11.84 $ 11.67
--------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.16 0.03
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 3.10 0.31
--------- -------
Total from investment operations ....................... 3.26 0.34
--------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.13) (0.17)
Dividends in excess of net investment income ........... (0.01) -
Distributions from realized gains ........................ (0.11) -
--------- -------
Total dividends and distributions ...................... (0.25) (0.17)
--------- -------
Net asset value, end of period ........................... $ 14.85 $ 11.84
========= =======
Total return ............................................. 27.75% 2.94%(b)
========= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $ 3,629 $ 735
Ratio of expenses to average net assets after waivers..... 0.69%(c) 0.59%(a)(c)
Ratio of expenses to average net assets before
waivers (f) ............................................ 0.80%(c) 1.24%(a)(c)
Ratio of net investment income to average net assets
after waivers .......................................... 1.21%(c) 1.36%(a)(c)
Ratio of net investment income to average net assets
before waivers (f) ..................................... 1.10%(c) 0.71%(a)(c)
Portfolio turnover rate .................................. 7% 3%
Average commission rate paid .............................
Effect of voluntary expense limitation during the
period: (f)
Per share benefit to net investment income ............ $ 0.03 $ 0.26
<CAPTION>
CLASS IB
--------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period ..................... $ 11.85 $ 10.00
------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.10 0.08
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 3.15 1.92
------- --------
Total from investment operations ....................... 3.25 2.00
------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.10) (0.15)
Dividends in excess of net investment income ........... (0.02) -
Distributions from realized gains ........................ (0.11) -
------- --------
Total dividends and distributions ...................... (0.23) (0.15)
------- --------
Net asset value, end of period ........................... $ 14.87 $ 11.85
======= ========
Total return ............................................. 27.50% 20.07%
======= ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $94,581 $48,075
Ratio of expenses to average net assets after waivers..... 0.94%(c) 0.84%(c)
Ratio of expenses to average net assets before
waivers (f) ............................................ 1.05%(c) 1.49%(c)
Ratio of net investment income to average net assets
after waivers .......................................... 0.96%(c) 1.11%(c)
Ratio of net investment income to average net assets
before waivers (f) ..................................... 0.85%(c) 0.46%(c)
Portfolio turnover rate .................................. 7% 3%
Average commission rate paid .............................
Effect of voluntary expense limitation during the
period: (f)
Per share benefit to net investment income ............ $ 0.03 $ 0.05
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
166 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
BT SMALL COMPANY INDEX PORTFOLIO:**
<TABLE>
<CAPTION>
CLASS IB
--------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period ............................................ $ 9.56 $ 10.00
------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................................................... 0.09 0.07
Net realized and unrealized gain (loss) on investments and foreign currency 1.85 (0.30)
------- --------
transactions
Total from investment operations .............................................. 1.94 (0.23)
------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income .......................................... (0.09) (0.07)
Distributions from realized gains ............................................. (0.56) (0.13)
Distributions in excess of realized gains ..................................... - (0.01)
------- --------
Total dividends and distributions ............................................. (0.65) (0.21)
------- --------
Net asset value, end of period .................................................. $ 10.85 $ 9.56
======= ========
Total return .................................................................... 20.68% (2.27)%
======= ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............................................... $59,931 $32,609
Ratio of expenses to average net assets after waivers ........................... 0.71% 0.60%
Ratio of expenses to average net assets before waivers (f) ...................... 1.20% 1.81%
Ratio of net investment income to average net assets after waivers .............. 1.11% 1.18%
Ratio of net investment income to average net assets before waivers (f) ......... 0.62% (0.03)%
Portfolio turnover rate ......................................................... 59% 35%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ................................... $ 0.04 $ 0.07
</TABLE>
<PAGE>
- -----
167 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CALVERT SOCIALLY RESPONSIBLE PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IB
-------------------
SEPTEMBER 1, 1999*
TO
DECEMBER 31, 1999
-------------------
<S> <C>
Net asset value, beginning of period ........................................ $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .............................................. (0.01)
Net realized and unrealized gain (loss) on investments .................... 0.83
-------
Total from investment operations .......................................... 0.82
-------
LESS DISTRIBUTIONS:
Distributions from realized gains ......................................... (0.06)
-------
Total dividends and distributions ......................................... (0.06)
-------
Net asset value, end of period .............................................. $ 10.76
=======
Total return ................................................................ 8.09%(b)
=======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $2,622
Ratio of expenses to average net assets after waivers ....................... 1.05%(a)
Ratio of expenses to average net assets before waivers (f) .................. 5.38%(a)
Ratio of net investment income to average net assets after waivers .......... (0.19)%(a)
Ratio of net investment income to average net assets before waivers (f) ..... (4.52)%(a)
Portfolio turnover rate ..................................................... 45%
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
168 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CAPITAL GUARDIAN INTERNATIONAL PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IB
------------------
MAY 1, 1999*
TO
DECEMBER 31, 1999
------------------
<S> <C>
Net asset value, beginning of period ............................................ $ 10.00
----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................................................... -
Net realized and unrealized gain (loss) on investments and foreign currency 4.10
----------
transactions
Total from investment operations .............................................. 4.10
----------
LESS DISTRIBUTIONS:
Dividends from net investment income .......................................... -
----------
Total dividends and distributions ............................................. -
----------
Net asset value, end of period .................................................. $ 14.10
==========
Total return .................................................................... 41.00%(b)
==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............................................... $ 52,049
Ratio of expenses to average net assets after waivers ........................... 1.20%(a)
Ratio of expenses to average net assets before waivers (f) ...................... 1.65%(a)
Ratio of net investment income to average net assets after waivers .............. 0.02%(a)
Ratio of net investment income to average net assets before waivers (f) ......... (0.43)%(a)
Portfolio turnover rate ......................................................... 28%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income .................................... $ 0.02
</TABLE>
<PAGE>
- -----
169 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CAPITAL GUARDIAN RESEARCH PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IB
------------------
MAY 1, 1999*
TO
DECEMBER 31, 1999
------------------
<S> <C>
Net asset value, beginning of period ............................................ $ 10.00
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................................................... 0.02
Net realized and unrealized gain (loss) on investments and foreign currency 0.69
---------
transactions
Total from investment operations .............................................. 0.71
---------
LESS DISTRIBUTIONS:
Dividends from net investment income .......................................... (0.02)
Dividends in excess of net investment income .................................. -
---------
Total dividends and distributions ............................................. (0.02)
---------
Net asset value, end of period .................................................. $ 10.69
=========
Total return .................................................................... 7.10%(b)
=========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............................................... $ 33,903
Ratio of expenses to average net assets after waivers ........................... 0.95%(a)
Ratio of expenses to average net assets before waivers (f) ...................... 1.35%(a)
Ratio of net investment income to average net assets after waivers .............. 0.37%(a)
Ratio of net investment income to average net assets before waivers (f) ......... (0.03)%(a)
Portfolio turnover rate ......................................................... 36%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ................................... $ 0.02
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
170 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CAPITAL GUARDIAN U.S. EQUITY PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IB
------------------
MAY 1, 1999*
TO
DECEMBER 31, 1999
------------------
<S> <C>
Net asset value, beginning of period .................................................... $ 10.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................................................. 0.02
Net realized and unrealized gain on investments and foreign currency transactions ..... 0.35
--------
Total from investment operations ...................................................... 0.37
--------
LESS DISTRIBUTIONS:
Dividends from net investment income .................................................. (0.02)
Dividends in excess of net investment income .......................................... -
Distributions from realized gains ..................................................... (0.02)
Distributions in excess of realized gains ............................................. (0.01)
Tax return of capital distributions ................................................... -
--------
Total dividends and distributions ..................................................... (0.05)
--------
Net asset value, end of period .......................................................... $ 10.32
========
Total return ............................................................................ 3.76%(b)
========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ....................................................... $67,472
Ratio of expenses to average net assets after waivers ................................... 0.95%(a)
Ratio of expenses to average net assets before waivers (f) .............................. 1.23%(a)
Ratio of net investment income to average net assets after waivers ...................... 0.63%(a)
Ratio of net investment income to average net assets before waivers (f) ................. 0.35%(a)
Portfolio turnover rate ................................................................. 50%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ........................................... $ 0.01
</TABLE>
<PAGE>
- -----
171 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
EQ/EVERGREEN PORTFOLIO:***
<TABLE>
<CAPTION>
CLASS IB
------------------
YEAR ENDED
DECEMBER 31, 1999
------------------
<S> <C>
Net asset value, beginning of period .................................................... $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................................................. 0.04
Net realized and unrealized gain on investments and foreign currency transactions ..... 0.93
-------
Total from investment operations ...................................................... 0.97
-------
LESS DISTRIBUTIONS:
Dividends from net investment income .................................................. (0.04)
Dividends in excess of net investment income .......................................... -
Distributions from realized gains ..................................................... -
Distributions in excess of realized gains ............................................. -
Tax return of capital distributions ................................................... -
-------
Total dividends and distributions ..................................................... (0.04)
-------
Net asset value, end of period .......................................................... $ 10.93
=======
Total return ............................................................................ 9.70%
=======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ....................................................... $ 4,818
Ratio of expenses to average net assets after waivers ................................... 1.05%
Ratio of expenses to average net assets before waivers (f) .............................. 2.86%
Ratio of net investment income to average net assets after waivers ...................... 0.63%
Ratio of net investment income to average net assets before waivers (f) ................. (1.18)%
Portfolio turnover rate ................................................................. 148%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ........................................... $ 0.11
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
172 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
EQ/EVERGREEN FOUNDATION PORTFOLIO:***
<TABLE>
<CAPTION>
CLASS IB
------------------
YEAR ENDED
DECEMBER 31, 1999
------------------
<S> <C>
Net asset value, beginning of period ..................................................... $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................................................. 0.12
Net realized and unrealized gain (loss) on investments and foreign currency 0.62
-------
transactions
Total from investment operations ....................................................... 0.74
-------
LESS DISTRIBUTIONS:
Dividends from net investment income ................................................... (0.12)
--------
Total dividends and distributions ...................................................... (0.12)
--------
Net asset value, end of period ........................................................... $ 10.62
--------
Total return ............................................................................. 7.38%
========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................................ 8,887
Ratio of expenses to average net assets after waivers and reimbursements ................. 0.95%
Ratio of expenses to average net assets before waivers and reimbursements (f) ............ 1.94%
Ratio of net investment income to average net assets after waivers and reimbursements .... 2.03%
Ratio of net investment income to average net assets before waivers and reimbursements 1.04%
(f)
Portfolio turnover rate .................................................................. 105%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................................ $ 0.06
</TABLE>
<PAGE>
- -----
173 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
J.P. MORGAN CORE BOND PORTFOLIO (FKA JPM CORE BOND PORTFOLIO):**
<TABLE>
<CAPTION>
CLASS IB
----------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period ............................................ $ 10.57 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................................................... 0.49 0.21
Net realized and unrealized gain (loss) on investments and foreign currency (0.66) 0.70
------- -------
transactions
Total from investment operations .............................................. (0.17) 0.91
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .......................................... (0.48) (0.21)
Dividends in excess of net investment income .................................. - (0.01)
Distributions from realized gains ............................................. - (0.11)
Distributions in excess of realized gains ..................................... - (0.01)
------- --------
Total dividends and distributions ............................................. (0.48) (0.34)
------- --------
Net asset value, end of period .................................................. $ 9.92 $ 10.57
======= ========
Total return (b) ................................................................ (1.64)% 9.02%
======= ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............................................... $156,581 $103,326
Ratio of expenses to average net assets after waivers ........................... 0.80% 0.80%
Ratio of expenses to average net assets before waivers (f) ...................... 0.89% 1.03%
Ratio of net investment income to average net assets after waivers .............. 5.53% 4.95%
Ratio of net investment income to average net assets before waivers (f) ......... 5.44% 4.72%
Portfolio turnover rate ......................................................... 233% 428%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ................................... $ 0.01 $ 0.01
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
174 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
LAZARD LARGE CAP VALUE PORTFOLIO:**
<TABLE>
<CAPTION>
CLASS IB
---------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
Net asset value, beginning of period ............................................ $ 11.94 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................................................... 0.11 0.06
Net realized and unrealized gain (loss) on investments and foreign currency 0.31 1.94
------- -------
transactions
Total from investment operations .............................................. 0.42 2.00
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .......................................... (0.11) (0.06)
Dividends in excess of net investment income .................................. - -
Distributions from realized gains ............................................. (0.19) -
------- -------
Total dividends and distributions ............................................. (0.30) (0.06)
------- -------
Net asset value, end of period .................................................. $ 12.06 $ 11.94
======= -------
Total return .................................................................... 3.55% 20.01%
======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............................................... $133,503 $74,588
Ratio of expenses to average net assets after waivers ........................... 0.94% 0.90%
Ratio of expenses to average net assets before waivers (f) ...................... 1.00% 1.20%
Ratio of net investment income to average net assets after waivers .............. 1.10% 1.19%
Ratio of net investment income to average net assets before waivers (f) ......... 1.04% 0.89%
Portfolio turnover rate ......................................................... 32% 37%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ................................... $ 0.01 $ 0.02
</TABLE>
<PAGE>
- -----
175 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE PORTFOLIO:**
<TABLE>
<CAPTION>
CLASS IB
---------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period ............................................ $ 9.27 $ 10.00
------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................................................... 0.04 0.02
Net realized and unrealized gain (loss) on investments and foreign currency 0.11 (0.72)
------ -------
transactions
Total from investment operations .............................................. 0.15 (0.70)
------ -------
LESS DISTRIBUTIONS:
Dividends from net investment income .......................................... (0.04) (0.03)
Distributions from realized gains ............................................. (0.06) -
------ -------
Total dividends and distributions ............................................. (0.10) (0.03)
------ -------
Net asset value, end of period .................................................. $ 9.32 $ 9.27
====== =======
Total return .................................................................... 1.66% (7.03)%
====== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............................................... $72,607 $51,046
Ratio of expenses to average net assets after waivers ........................... 1.20% 1.20%
Ratio of expenses to average net assets before waivers (f) ...................... 1.30% 1.54%
Ratio of net investment income to average net assets after waivers .............. 0.48% 0.52%
Ratio of net investment income to average net assets before waivers (f) ......... 0.39% 0.18%
Portfolio turnover rate ......................................................... 48% 21%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ................................... $ 0.01 $ 0.02
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
176 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
MERCURY BASIC VALUE EQUITY PORTFOLIO (FKA MERRILL LYNCH BASIC VALUE EQUITY
PORTFOLIO):
<TABLE>
<CAPTION>
CLASS IB
-------------------
YEAR ENDED
DECEMBER 31, 1999
-------------------
<S> <C>
Net asset value, beginning of period ....................................... $ 12.36
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................................... 0.17
Net realized and unrealized gain on investments and foreign
currency transactions ................................................... 2.15
-------
Total from investment operations ......................................... 2.32
-------
LESS DISTRIBUTIONS:
Dividends from net investment income ..................................... (0.18)
Dividends in excess of net investment income ............................. -
Distributions from realized gains ........................................ (0.74)
Distributions in excess of realized gains ................................ -
--------
Total dividends and distributions ........................................ (0.92)
--------
Net asset value, end of period ............................................. $ 13.76
========
Total return ............................................................... 19.00%
========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) .......................................... $300,467
Ratio of expenses to average net assets after waivers ...................... 0.85%
Ratio of expenses to average net assets before waivers (f) ................. 0.96%
Ratio of net investment income to average net assets after waivers ......... 1.42%
Ratio of net investment income to average net assets before waivers (f) 1.31%
Portfolio turnover rate .................................................... 71%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income .............................. $ 0.01
<CAPTION>
CLASS IB
--------------------------------------
MAY 1, 1997*
YEAR ENDED TO
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period ....................................... $ 11.58 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................................... 0.12 0.06
Net realized and unrealized gain on investments and foreign
currency transactions ................................................... 1.21 1.64
------- -------
Total from investment operations ......................................... 1.33 1.70
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ..................................... (0.12) (0.06)
Dividends in excess of net investment income ............................. - -
Distributions from realized gains ........................................ (0.43) (0.05)
Distributions in excess of realized gains ................................ - (0.01)
-------- -------
Total dividends and distributions ........................................ (0.55) (0.12)
-------- -------
Net asset value, end of period ............................................. $ 12.36 $ 11.58
======== =======
Total return ............................................................... 11.59% 16.99%(b)
======== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) .......................................... $174,104 $49,495
Ratio of expenses to average net assets after waivers ...................... 0.85% 0.85%(a)
Ratio of expenses to average net assets before waivers (f) ................. 1.06% 1.89%(a)
Ratio of net investment income to average net assets after waivers ......... 1.41% 1.91%(a)
Ratio of net investment income to average net assets before waivers (f) 1.20% 0.87%(a)
Portfolio turnover rate .................................................... 83% 25%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income .............................. $ 0.02 $ 0.03
</TABLE>
<PAGE>
- -----
177 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
MERCURY WORLD STRATEGY PORTFOLIO (FKA MERRILL LYNCH WORLD STRATEGY
PORTFOLIO):
<TABLE>
<CAPTION>
CLASS IB
-------------------
YEAR ENDED
DECEMBER 31, 1999
-------------------
<S> <C>
Net asset value, beginning of period ........................................ $ 10.93
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................................... 0.11
Net realized and unrealized gain on investments and foreign currency
transactions ............................................................. 2.22
-------
Total from investment operations .......................................... 2.33
-------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.08)
Dividends in excess of net investment income .............................. (0.03)
Distributions from realized gains ......................................... (0.17)
Distributions in excess of realized gains ................................. -
-------
Total dividends and distributions ......................................... (0.28)
-------
Net asset value, end of period .............................................. $ 12.98
=======
Total return ................................................................ 21.35%
=======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $35,722
Ratio of expenses to average net assets after waivers ....................... 1.20%
Ratio of expenses to average net assets before waivers (f) .................. 1.40%
Ratio of net investment income to average net assets after waivers .......... 0.99%
Ratio of net investment income to average net assets before waivers (f) ..... 0.79%
Portfolio turnover rate ..................................................... 116%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................... $ 0.02
<CAPTION>
CLASS IB
--------------------------------------
MAY 1, 1997*
YEAR ENDED TO
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period ........................................ $ 10.31 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................................... 0.15 0.08
Net realized and unrealized gain on investments and foreign currency
transactions ............................................................. 0.55 0.39
------- -------
Total from investment operations .......................................... 0.70 0.47
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.04) (0.05)
Dividends in excess of net investment income .............................. (0.04) -
Distributions from realized gains ......................................... - -
Distributions in excess of realized gains ................................. - (0.11)
------- -------
Total dividends and distributions ......................................... (0.08) (0.16)
------- -------
Net asset value, end of period .............................................. $ 10.93 $ 10.31
======= =======
Total return ................................................................ 6.81% 4.70%(b)
======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $30,631 $18,210
Ratio of expenses to average net assets after waivers ....................... 1.20% 1.20%(a)
Ratio of expenses to average net assets before waivers (f) .................. 1.61% 3.05%(a)
Ratio of net investment income to average net assets after waivers .......... 1.63% 1.89%(a)
Ratio of net investment income to average net assets before waivers (f) ..... 1.22% 0.04%(a)
Portfolio turnover rate ..................................................... 115% 58%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................... $ 0.04 $ 0.08
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
178 FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
--------------------------------------------
NOVEMBER 24, 1998*
YEAR ENDED TO
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------------
<S> <C> <C>
Net asset value, beginning of period ..... $ 16.04 $ 14.18
--------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) ........... 0.01 -
Net realized and unrealized gain on
investments and foreign currency
transactions .......................... 11.83 1.86
--------- -----------
Total f rom investment operations ..... 11.84 1.86
--------- -----------
LESS DISTRIBUTIONS:
Dividends from net investment income ... - -
Dividends in excess of net
investment income ..................... - -
Distributions from realized gains ...... (0.48) -
Distributions in excess of realized
gains ................................. - -
--------- -----------
Total dividends and distributions ...... (0.48) -
--------- -----------
Net asset value, end of period ........... $ 27.40 $ 16.04
========= ===========
Total return ............................. 74.43% 13.12%(b)
========= ===========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........ $ 46,248 $ 5,978
Ratio of expenses to average net
assets after waivers ................... 0.60%(c) 0.60%(a)(c)
Ratio of expenses to average net
assets before waivers (f) .............. 0.70%(c) 0.79%(a)(c)
Ratio of net investment income to
average net assets after waivers ....... 0.09%(c) (0.05)%(a)(c)
Ratio of net investment income to
average net assets before
waivers (f) ............................ (0.01)%(c) (0.24)%(a)(c)
Portfolio turnover rate .................. 184% 79%
Effect of voluntary expense
limitation during the period: (f)
Per share benefit to net
investment income .................... $ 0.01 $ -
<CAPTION>
CLASS IB
--------------------------------------------------------
MAY 1, 1997*
YEAR ENDED YEAR ENDED TO
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period ..... $ 16.04 $ 11.92 $ 10.00
--------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) ........... (0.02) (0.03) 0.02
Net realized and unrealized gain on
investments and foreign currency
transactions .......................... 11.79 4.15 2.21
--------- ------- --------
Total from investment operations ....... 11.77 4.12 2.23
--------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ... - - (0.02)
Dividends in excess of net
investment income ..................... - - -
Distributions from realized gains ...... (0.48) - (0.18)
Distributions in excess of realized
gains ................................. - - (0.11)
--------- ------- --------
Total dividends and distributions ...... (0.48) - (0.31)
--------- ------- --------
Net asset value, end of period ........... $ 27.33 $ 16.04 $ 11.92
========= ======= ========
Total return ............................. 73.62% 34.57% 22.42%(b)
========= ======= ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........ $1,665,635 $461,307 $99,317
Ratio of expenses to average net
assets after waivers ................... 0.85%(c) 0.85%(c) 0.85%(a)
Ratio of expenses to average net
assets before waivers (f) .............. 0.95%(c) 1.04%(c) 1.82%(a)
Ratio of net investment income to
average net assets after waivers ....... (0.16)%(c) (0.30)%(c) 0.61%(a)
Ratio of net investment income to
average net assets before
waivers (f) ............................ (0.26)%(c) (0.49)%(c) (0.36)%(a)
Portfolio turnover rate .................. 184% 79% 116%
Effect of voluntary expense
limitation during the period: (f)
Per share benefit to net
investment income .................... $ 0.01 $ 0.02 $ 0.04
</TABLE>
<PAGE>
- -----
179 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
MFS GROWTH WITH INCOME PORTFOLIO:***
<TABLE>
<CAPTION>
CLASS IB
------------------
YEAR ENDED
DECEMBER 31, 1999
------------------
<S> <C>
Net asset value, beginning of period ............................................ $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................................................... 0.04
Net realized and unrealized gain (loss) on investments and foreign currency 0.84
-------
transactions
Total from investment operations .............................................. 0.88
-------
LESS DISTRIBUTIONS:
Dividends from net investment income ............................................ (0.04)
Dividends in excess of net investment income .................................... -
--------
Total dividends and distributions ............................................... (0.04)
--------
Net asset value, end of period .................................................. $ 10.84
========
Total return .................................................................... 8.76%
========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............................................... $109,828
Ratio of expenses to average net assets after waivers ........................... 0.85%
Ratio of expenses to average net assets before waivers (f) ...................... 1.16%
Ratio of net investment income to average net assets after waivers .............. 0.80%
Ratio of net investment income to average net assets before waivers (f) ......... 0.49%
Portfolio turnover rate ......................................................... 64%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ................................... $ 0.01
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
180 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
MFS RESEARCH PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IB
-------------------
YEAR ENDED
DECEMBER 31, 1999
-------------------
<S> <C>
Net asset value, beginning of period ........................................ $ 14.21
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................................... 0.02
Net realized and unrealized gain on investments and foreign currency
transactions ............................................................. 3.24
-------
Total from investment operations .......................................... 3.26
-------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.02)
Dividends in excess of net investment income .............................. -
Distributions from realized gains ......................................... (0.39)
Distributions in excess of realized gains ................................. -
--------
Total dividends and distributions ......................................... (0.41)
--------
Net asset value, end of period .............................................. $ 17.06
========
Total return ................................................................ 23.12%
========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $685,270
Ratio of expenses to average net assets after waivers ....................... 0.85%
Ratio of expenses to average net assets before waivers (f) .................. 0.96%
Ratio of net investment income to average net assets after waivers .......... 0.12%
Ratio of net investment income to average net assets before waivers (f) ..... 0.01%
Portfolio turnover rate ..................................................... 91%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................... $ 0.01
<CAPTION>
CLASS IB
--------------------------------------
MAY 1, 1997*
YEAR ENDED TO
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period ........................................ $ 11.48 $ 10.00
------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................................... 0.04 0.02
Net realized and unrealized gain on investments and foreign currency
transactions ............................................................. 2.73 1.58
------- ----------
Total from investment operations .......................................... 2.77 1.60
------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.04) (0.02)
Dividends in excess of net investment income .............................. - -
Distributions from realized gains ......................................... - (0.01)
Distributions in excess of realized gains ................................. - (0.09)
-------- ----------
Total dividends and distributions ......................................... (0.04) (0.12)
-------- ----------
Net asset value, end of period .............................................. $ 14.21 $ 11.48
======== ==========
Total return ................................................................ 24.11% 16.07%(b)
======== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $407,619 $ 114,754
Ratio of expenses to average net assets after waivers ....................... 0.85% 0.85%(a)
Ratio of expenses to average net assets before waivers (f) .................. 1.05% 1.78%(a)
Ratio of net investment income to average net assets after waivers .......... 0.44% 0.65%(a)
Ratio of net investment income to average net assets before waivers (f) ..... 0.24% (0.28)%(a)
Portfolio turnover rate ..................................................... 73% 51%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................... $ 0.02 $ 0.03
</TABLE>
<PAGE>
- -----
181 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IB
-------------------
YEAR ENDED
DECEMBER 31, 1999
-------------------
<S> <C>
Net asset value, beginning of period ........................................ $ 5.79
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) .............................................. (0.01)
Net realized and unrealized gain (loss) on investments and foreign
currency transactions .................................................... 5.55
--------
Total from investment operations .......................................... 5.54
--------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... -
Distributions from realized gains ......................................... (0.11)
--------
Total dividends and distributions ......................................... (0.11)
--------
Net asset value, end of period .............................................. $ 11.22
========
Total return ................................................................ 95.82%
========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $191,581
Ratio of expenses to average net assets after waivers ....................... 1.75%
Ratio of expenses to average net assets before waivers (f) .................. 2.38%
Ratio of net investment income to average net assets after waivers .......... (0.18)%
Ratio of net investment income to average net assets before waivers (f) ..... (0.82)%
Portfolio turnover rate ..................................................... 138%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................... $ 0.02
<CAPTION>
CLASS IB
--------------------------------------
AUGUST 20, 1997*
YEAR ENDED TO
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period ........................................ $ 7.96 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) .............................................. 0.03 0.04
Net realized and unrealized gain (loss) on investments and foreign
currency transactions .................................................... (2.18) (2.06)
------- -------
Total from investment operations .......................................... (2.15) (2.02)
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.02) (0.02)
Distributions from realized gains ......................................... - -
------- -------
Total dividends and distributions ......................................... (0.02) (0.02)
------- -------
Net asset value, end of period .............................................. $ 5.79 $ 7.96
======= =======
Total return ................................................................ (27.10)% (20.16)%(b)
======= ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $41,359 $21,433
Ratio of expenses to average net assets after waivers ....................... 1.75% 1.75%(a)
Ratio of expenses to average net assets before waivers (f) .................. 2.63% 2.61%(a)
Ratio of net investment income to average net assets after waivers .......... 0.73% 1.96%(a)
Ratio of net investment income to average net assets before waivers (f) ..... (0.09)% 1.10%(a)
Portfolio turnover rate ..................................................... 114% 25%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................... $ 0.03 $ 0.02
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
182 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
EQ/PUTNAM BALANCED PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IB
-------------------
YEAR ENDED
DECEMBER 31, 1999
-------------------
<S> <C>
Net asset value, beginning of period ........................................ $ 12.16
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................................... 0.32
Net realized and unrealized gain (loss) on investments and foreign
currency transactions .................................................... (0.32)
-------
Total from investment operations .......................................... -
-------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.32)
Dividends in excess of net investment income .............................. -
Distributions from realized gains ......................................... (0.28)
Distributions in excess of realized gains ................................. (0.12)
-------
Total dividends and distributions ......................................... (0.72)
-------
Net asset value, end of period .............................................. $ 11.44
=======
Total return ................................................................ 0.01%
=======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $104,977
Ratio of expenses to average net assets after waivers ....................... 0.90%
Ratio of expenses to average net assets before waivers (f) .................. 1.07%
Ratio of net investment income to average net assets after waivers .......... 2.85%
Ratio of net investment income to average net assets before waivers (f) ..... 2.68%
Portfolio turnover rate ..................................................... 140%
Effect of voluntary expense limitation during the period: (f) .............
Per share benefit to net investment income ............................... $ 0.02
<CAPTION>
CLASS IB
--------------------------------------
MAY 1, 1997*
YEAR ENDED TO
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period ........................................ $ 11.21 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................................... 0.25 0.14
Net realized and unrealized gain (loss) on investments and foreign
currency transactions .................................................... 1.08 1.30
------- -------
Total from investment operations .......................................... 1.33 1.44
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.23) (0.13)
Dividends in excess of net investment income .............................. - (0.01)
Distributions from realized gains ......................................... (0.15) (0.09)
Distributions in excess of realized gains ................................. - -
------- -------
Total dividends and distributions ......................................... (0.38) (0.23)
------- -------
Net asset value, end of period .............................................. $ 12.16 $ 11.21
======= =======
Total return ................................................................ 11.92% 14.38%(b)
======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $75,977 $25,854
Ratio of expenses to average net assets after waivers ....................... 0.90% 0.90%(a)
Ratio of expenses to average net assets before waivers (f) .................. 1.25% 2.55%(a)
Ratio of net investment income to average net assets after waivers .......... 2.88% 3.19%(a)
Ratio of net investment income to average net assets before waivers (f) ..... 2.53% 1.54%(a)
Portfolio turnover rate ..................................................... 135% 117%
Effect of voluntary expense limitation during the period: (f) .............
Per share benefit to net investment income ............................... $ 0.03 $ 0.07
</TABLE>
<PAGE>
- -----
183 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IB
-------------------
YEAR ENDED
DECEMBER 31, 1999
-------------------
<S> <C>
Net asset value, beginning of period ........................................ $ 12.77
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................................... 0.16
Net realized and unrealized gain on investments and foreign currency
transactions ............................................................. (0.34)
-------
Total from investment operations .......................................... (0.18)
-------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.16)
Dividends in excess of net investment income .............................. -
Distributions from realized gains ......................................... (0.74)
Distributions in excess of realized gains ................................. (0.13)
-------
Total dividends and distributions ......................................... (1.03)
-------
Net asset value, end of period .............................................. $ 11.56
=======
Total return ................................................................ (1.27)%
=======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $544,271
Ratio of expenses to average net assets after waivers ....................... 0.85%
Ratio of expenses to average net assets before waivers (f) .................. 0.95%
Ratio of net investment income to average net assets after waivers .......... 1.29%
Ratio of net investment income to average net assets before waivers (f) ..... 1.19%
Portfolio turnover rate ..................................................... 77%
Effect of voluntary expense limitation during the period: (f) .............
Per share benefit to net investment income ............................... $ 0.01
<CAPTION>
CLASS IB
-------------------------------------
MAY 1, 1997*
YEAR ENDED TO
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period ........................................ $ 11.52 $10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................................... 0.11 0.06
Net realized and unrealized gain on investments and foreign currency
transactions ............................................................. 1.35 1.56
------- -------
Total from investment operations .......................................... 1.46 1.62
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.11) (0.06)
Dividends in excess of net investment income .............................. - -
Distributions from realized gains ......................................... - (0.01)
Distributions in excess of realized gains ................................. (0.10) (0.03)
------- -------
Total dividends and distributions ......................................... (0.21) (0.10)
------- -------
Net asset value, end of period .............................................. $ 12.77 $ 11.52
======= =======
Total return ................................................................ 12.75% 16.23%(b)
======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $460,744 $150,260
Ratio of expenses to average net assets after waivers ....................... 0.85% 0.85%(a)
Ratio of expenses to average net assets before waivers (f) .................. 1.04% 1.75%(a)
Ratio of net investment income to average net assets after waivers .......... 1.30% 1.67%(a)
Ratio of net investment income to average net assets before waivers (f) ..... 1.11% 0.77%(a)
Portfolio turnover rate ..................................................... 74% 61%
Effect of voluntary expense limitation during the period: (f) .............
Per share benefit to net investment income ............................... $ 0.02 $ 0.03
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
184 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IB
-----------------
YEAR ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
Net asset value, beginning of period ........................................ $ 13.01
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................................... 0.07
Net realized and unrealized gain on investments and foreign currency
transactions ............................................................. 7.69
-------
Total from investment operations .......................................... 7.76
-------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.13)
Dividends in excess of net investment income .............................. (0.22)
Distributions from realized gains ......................................... (1.07)
Distributions in excess of realized gains ................................. -
-------
Total dividends and distributions ......................................... (1.42)
-------
Net asset value, end of period .............................................. $ 19.35
=======
Total return ................................................................ 60.24%
=======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $299,159
Ratio of expenses to average net assets after waivers ....................... 1.20%
Ratio of expenses to average net assets before waivers (f) .................. 1.26%
Ratio of net investment income to average net assets after waivers .......... 0.54%
Ratio of net investment income to average net assets before waivers (f) ..... 0.48%
Portfolio turnover rate ..................................................... 119%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................... $ 0.01
<CAPTION>
CLASS IB
--------------------------------------
MAY 1, 1997*
YEAR ENDED TO
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------- -----------------
<S> <C> <C>
Net asset value, beginning of period ........................................ $ 10.89 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................................... 0.05 0.03
Net realized and unrealized gain on investments and foreign currency
transactions ............................................................. 2.07 0.93
------- -------
Total from investment operations .......................................... 2.12 0.96
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... - (0.02)
Dividends in excess of net investment income .............................. - -
Distributions from realized gains ......................................... - (0.01)
Distributions in excess of realized gains ................................. - (0.04)
------- -------
Total dividends and distributions ......................................... - (0.07)
------- -------
Net asset value, end of period .............................................. $ 13.01 $ 10.89
======= =======
Total return ................................................................ 19.51% 9.58%(b)
======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $143,721 $55,178
Ratio of expenses to average net assets after waivers ....................... 1.20% 1.20%(a)
Ratio of expenses to average net assets before waivers (f) .................. 1.46% 2.53%(a)
Ratio of net investment income to average net assets after waivers .......... 0.64% 0.74%(a)
Ratio of net investment income to average net assets before waivers (f) ..... 0.38% (0.59)%(a)
Portfolio turnover rate ..................................................... 94% 43%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................... $ 0.02 $ 0.05
</TABLE>
<PAGE>
- -----
185 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IB
-------------------
YEAR ENDED
DECEMBER 31, 1999
-------------------
<S> <C>
Net asset value, beginning of period ........................................ $ 16.79
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .............................................. (0.03)
Net realized and unrealized gain (loss) on investments and foreign
currency transactions .................................................... 5.09
-------
Total from investment operations .......................................... 5.06
-------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... -
Distributions from realized gains ......................................... (0.44)
Distributions in excess of realized gains ................................. -
-------
Total dividends and distributions ......................................... (0.44)
-------
Net asset value, end of period .............................................. $ 21.41
=======
Total return ................................................................ 30.24%
=======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $384,175
Ratio of expenses to average net assets after waivers ....................... 0.93%
Ratio of expenses to average net assets before waivers (f) .................. 0.98%
Ratio of net investment income to average net assets after waivers .......... (0.20)%
Ratio of net investment income to average net assets before waivers (f) ..... (0.25)%
Portfolio turnover rate ..................................................... 76%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................... $ 0.01
<CAPTION>
CLASS IB
--------------------------------------
MAY 1, 1997*
YEAR ENDED TO
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period ........................................ $ 12.33 $ 10.00
------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .............................................. 0.01 0.02
Net realized and unrealized gain (loss) on investments and foreign
currency transactions .................................................... 4.46 2.45
------- ----------
Total from investment operations .......................................... 4.47 2.47
------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.01) (0.03)
Distributions from realized gains ......................................... - (0.04)
Distributions in excess of realized gains ................................. - (0.07)
------- ----------
Total dividends and distributions ......................................... (0.01) (0.14)
------- ----------
Net asset value, end of period .............................................. $ 16.79 $ 12.33
======= ==========
Total return ................................................................ 36.27% 24.70%(b)
======= ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $175,015 $ 39,695
Ratio of expenses to average net assets after waivers ....................... 0.85% 0.85%(a)
Ratio of expenses to average net assets before waivers (f) .................. 1.09% 2.13%(a)
Ratio of net investment income to average net assets after waivers .......... 0.14% 0.58%(a)
Ratio of net investment income to average net assets before waivers (f) ..... (0.10)% (0.70)%(a)
Portfolio turnover rate ..................................................... 64% 47%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................... $ 0.02 $ 0.05
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
186 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
-------------------------------------
NOVEMBER 24,
1998*
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1999 1998
-------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period ..................... $ 12.67 $ 13.22
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.28 0.06
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 0.20 (0.09)+
------- -------
Total from investment operations ....................... 0.48 (0.03)
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.29) (0.24)
Distributions from realized gains ...................... (0.52) (0.28)
-------- -------
Total dividends and distributions ...................... (0.81) (0.52)
-------- -------
Net asset value, end of period ........................... $ 12.34 $ 12.67
======== =======
Total return ............................................. 3.80% (0.15)%(b)
======== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $ 5,181 $ 2,415
Ratio of expenses to average net assets after waivers..... 0.60% 0.60%(a)(c)
Ratio of expenses to average net assets before
waivers (f) ............................................ 0.72% 0.79%(a)(c)
Ratio of net investment income to average net assets
after waivers .......................................... 2.15% 2.45%(a)(c)
Ratio of net investment income to average net assets
before waivers (f) ..................................... 2.03% 2.26%(a)(c)
Portfolio turnover rate .................................. 31% 17%
Effect of voluntary expense limitation during the
period: (f)
Per share benefit to net investment income ............ $ 0.02 $ 0.03
<CAPTION>
CLASS IB
------------------------------------------------
MAY 1, 1997*
YEAR ENDED YEAR ENDED TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
-------------- -------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $ 12.67 $ 12.08 $ 10.00
-------- --------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.24 0.22 0.10
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 0.20 0.87 2.11
-------- --------- -------
Total from investment operations ....................... 0.44 1.09 2.21
-------- --------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.25) (0.22) (0.09)
Distributions from realized gains ...................... (0.52) (0.28) (0.04)
-------- --------- -------
Total dividends and distributions ...................... (0.77) (0.50) (0.13)
-------- --------- -------
Net asset value, end of period ........................... $ 12.34 $ 12.67 $ 12.08
======== ========= =======
Total return ............................................. 3.54% 9.11% 22.11%(b)
======== ========= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $273,031 $ 242,001 $99,947
Ratio of expenses to average net assets after waivers..... 0.85% 0.85%(c) 0.85%(a)
Ratio of expenses to average net assets before
waivers (f) ............................................ 0.97% 1.04%(c) 1.74%(a)
Ratio of net investment income to average net assets
after waivers .......................................... 1.90% 2.20%(c) 2.49%(a)
Ratio of net investment income to average net assets
before waivers (f) ..................................... 1.78% 2.01%(c) 1.60%(a)
Portfolio turnover rate .................................. 31% 17% 9%
Effect of voluntary expense limitation during the
period: (f)
Per share benefit to net investment income ............ $ 0.02 $ 0.02 $ 0.03
</TABLE>
<PAGE>
- -----
187 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IB
------------------
YEAR ENDED
DECEMBER 31, 1999
------------------
<S> <C>
Net asset value, beginning of period ........................................ $ 11.10
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................................... 0.06
Net realized and unrealized gain (loss) on investments and foreign
currency transactions .................................................... 3.46
-------
Total from investment operations .......................................... 3.52
-------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.05)
Dividends in excess of net investment income .............................. -
Distributions in excess of realized gains ................................. (0.15)
Tax return of capital distributions ....................................... -
-------
Total dividends and distributions ......................................... (0.20)
-------
Net asset value, end of period .............................................. $ 14.42
=======
Total return ................................................................ 31.92%
=======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $214,899
Ratio of expenses to average net assets after waivers ....................... 1.20%
Ratio of expenses to average net assets before waivers (f) .................. 1.29%
Ratio of net investment income to average net assets after waivers .......... 0.51%
Ratio of net investment income to average net assets before waivers (f) ..... 0.42%
Portfolio turnover rate ..................................................... 25%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................... $ 0.01
<CAPTION>
CLASS IB
-------------------------------------
MAY 1, 1997*
YEAR ENDED TO
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period ........................................ $ 9.85 $ 10.00
------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................................... 0.06 0.02
Net realized and unrealized gain (loss) on investments and foreign
currency transactions .................................................... 1.28 (0.17)
------- --------
Total from investment operations .......................................... 1.34 (0.15)
------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................................... (0.07) -
Dividends in excess of net investment income .............................. (0.02) -
Distributions in excess of realized gains ................................. - -
Tax return of capital distributions ....................................... - -
------- --------
Total dividends and distributions ......................................... (0.09) -
------- --------
Net asset value, end of period .............................................. $ 11.10 $ 9.85
======= ========
Total return ................................................................ 13.68% (1.49)%(b)
======= ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................................... $134,653 $ 69,572
Ratio of expenses to average net assets after waivers ....................... 1.20% 1.20%(a)
Ratio of expenses to average net assets before waivers (f) .................. 1.40% 2.56%(a)
Ratio of net investment income to average net assets after waivers .......... 0.67% 0.45%(a)
Ratio of net investment income to average net assets before waivers (f) ..... 0.47% (0.91)%(a)
Portfolio turnover rate ..................................................... 22% 17%
Effect of voluntary expense limitation during the period: (f)
Per share benefit to net investment income ............................... $ 0.02 $ 0.05
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
188 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
----------------------------------------
NOVEMBER 24,
1998*
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1999 1998
----------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period ..................... $ 10.59 $ 10.40
-------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.03 0.03
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 0.19 0.23 +
-------- -------
Total from investment operations ....................... 0.22 0.26
-------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.05) (0.06)
Distributions in excess of realized gains .............. - -
Return of capital distributions ........................ - (0.01)
-------- -------
Total dividends and distributions ...................... (0.05) (0.07)
-------- -------
Net asset value, end of period ........................... $ 10.76 $ 10.59
======== =======
Total return ............................................. 2.07% 2.63%(b)
======== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $ 2,339 $ 747
Ratio of expenses to average net assets after waivers..... 0.75%(c) 0.75%(a)(c)
Ratio of expenses to average net assets before
waivers (f) ............................................ 0.84%(c) 0.92%(a)(c)
Ratio of net investment income to average net assets
after waivers .......................................... 0.40%(c) 0.72%(a)(c)
Ratio of net investment income to average net assets
before waivers (f) ..................................... 0.32%(c) 0.55%(a)(c)
Portfolio turnover rate .................................. 192% 111%
Effect of voluntary expense limitation during the
period: (f)
Per share benefit to net investment income ........... $ 0.01 $ 0.17
<CAPTION>
CLASS IB
--------------------------------------------------
MAY 1, 1997*
YEAR ENDED YEAR ENDED TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
--------------- -------------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $ 10.61 $ 11.85 $ 10.00
------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.02 0.05 0.01
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 0.17 (1.24) 1.90
------- -------- -------
Total from investment operations ....................... 0.19 (1.19) 1.91
------- -------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.02) (0.04) (0.01)
Distributions in excess of realized gains .............. - - (0.05)
Return of capital distributions ........................ - (0.01) -
------- -------- -------
Total dividends and distributions ...................... (0.02) (0.05) (0.06)
------- -------- -------
Net asset value, end of period ........................... $ 10.78 $ 10.61 $ 11.85
======= ======== =======
Total return ............................................. 1.80% (10.02)% 19.15%(b)
======= ======== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $149,618 $166,746 $120,880
Ratio of expenses to average net assets after waivers..... 1.00%(c) 1.00%(c) 1.00%(a)
Ratio of expenses to average net assets before
waivers (f) ............................................ 1.09%(c) 1.17%(c) 1.70%(a)
Ratio of net investment income to average net assets
after waivers .......................................... 0.21%(c) 0.47%(c) 0.26%(a)
Ratio of net investment income to average net assets
before waivers (f) ..................................... 0.12%(c) 0.30%(c) (0.44)%(a)
Portfolio turnover rate .................................. 192% 111% 44%
Effect of voluntary expense limitation during the
period: (f)
Per share benefit to net investment income ........... $ 0.02 $ 0.02 $ 0.03
</TABLE>
- ----------
* Commencement of Operations
** Commenced operations on January 1, 1998.
*** Commenced operations on January 1, 1999.
+ The amount shown for a share outstanding throughout the period does not
accord with the aggregate net gains on investments for that period
because of the timing of sales and repurchases of the Portfolio shares in
relation to fluctuating market value of the investments in the Portfolio.
(a) Annualized
(b) Total return is not annualized.
(c) Reflects overall Portfolio ratios for investment income and
non-class specific expense.
<PAGE>
- -----
189 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(d) On October 18, 1999, this Portfolio received, through a substitution
transaction, the assets and liabilities of the Hudson River Trust
Portfolio that followed the same investment objectives as this
Portfolio. The information for each of the preceding periods is that
of the predecessor Hudson River Trust Portfolio. Information for the
year ended December 31, 1999 includes the results of operations of
the predecessor Hudson River Trust Portfolio from January 1, 1999
through October 17, 1999.
(e) Net investment income and capital changes per share are based on
monthly average shares outstanding.
(f) For further information concerning fee waivers see the section
entitled "Expense Limitation Agreement" in this Prospectus.
------------------------- EQ Advisors Trust
<PAGE>
10 PRIOR PERFORMANCE OF EACH ADVISER
- ----------------
190 PRIOR PERFORMANCE OF EACH ADVISER
- --------------------------------------------------------------------------------
The following table provides information concerning the historical performance
of another registered investment company (or series) and/or other institutional
private accounts managed by each Adviser that have investment objectives,
policies, strategies and risks substantially similar to those of the respective
Portfolio(s) of the Trust for which it serves as Adviser. The data is provided
to illustrate the past performance of the Advisers in managing substantially
similar investment vehicles as measured against specified market indices. This
data 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 and should
not confuse this performance data with performance data for each of the Trust's
Portfolios, which is shown for each Portfolio under the caption "ABOUT THE
INVESTMENT PORTFOLIOS."
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. Average annual total return
reflects changes in share prices and reinvestment of dividends and distributions
and is net of fund expenses. In each such instance, the 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 on
a total return basis and includes all losses. As specified below, this composite
performance data is provided only for the J.P. Morgan Active Fixed Income
Composite, the Capital Guardian U.S. Equity Research Portfolio Diversified
Composite, the Capital Guardian U.S. Equity Composite, and the Capital Guardian
Non-U.S Equity Composite (collectively, the "Composites"). The total returns for
each Composite reflect the deduction of investment advisory fees, brokerage
commissions and execution costs paid by J.P. Morgan's and Capital Guardian's
institutional private accounts, without provision for federal or state income
taxes. Custodial fees, if any, were not included in the calculation. Each
Composite includes all actual, fee-paying, discretionary institutional private
accounts managed by J.P. Morgan and Capital Guardian 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. The institutional private accounts that are included in the
Composite are not subject to the same types of expenses to which the relevant
Portfolio is subject or to the diversification requirements, specific tax
restrictions and investment limitations imposed on the Portfolio by the 1940 Act
or Subchapter M of the Internal Revenue Code. 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.
The major difference between the SEC prescribed calculation of average annual
total returns for registered investment companies or (series thereof) and total
returns for composite performance is that average annual total returns reflect
all fees and charges applicable to the registered investment company in question
and the total return calculation for the Composite reflects only those fees and
charges described in the paragraph directly above.
The performance results for the registered investment companies or Composite
presented below are generally subject to somewhat lower fees and expenses than
the relevant Portfolios although in most instances the fees and expenses are
substantially similar. In addition, holders of Contracts representing interests
in the Portfolios below will be subject to charges and expenses relating to such
<PAGE>
- -----
191 PRIOR PERFORMANCE OF EACH ADVISER
- --------------------------------------------------------------------------------
Contracts. The performance results presented below do not reflect any insurance
related expenses and would be reduced if such charges were reflected.
The investment results presented below are unaudited. For more information on
the specified market indices used below, see the section "The Benchmarks."
ANNUAL RATES OF RETURN OF OTHER FUNDS OR ACCOUNTS MANAGED BY ADVISERS
AS OF 12/31/99
The name of the other fund or account managed by the Adviser is shown in BOLD.
The name of the Trust Portfolio is shown in (parentheses). The name of the
benchmark is shown in italics.
<TABLE>
<CAPTION>
1 5 10 Since Inception
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT Portfolio) Year Years Years Inception Date
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Benchmark
- -----------------------------------------------------------------------------------------------------------------------------
ALLIANCE PREMIER GROWTH FUND, INC. - ADVISOR CLASS(9),(13) (EQ/ALLIANCE PREMIER GROWTH PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
29.42% N/A N/A 38.65% 10/1/96
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% N/A N/A 21.60%
- -----------------------------------------------------------------------------------------------------------------------------
ALLIANCE TECHNOLOGY FUND - ADVISOR CLASS(13) (EQ/ALLIANCE TECHNOLOGY PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
71.78% 38.52% 29.98% N/A 3/1/82
- -----------------------------------------------------------------------------------------------------------------------------
NASDAQ Composite Index 85.59% 40.17% 24.50% N/A
- -----------------------------------------------------------------------------------------------------------------------------
BT ADVISORS FUNDS - EAFE EQUITY INDEX FUND - INSTITUTIONAL CLASS(12) (BT INTERNATIONAL EQUITY INDEX PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
27.95% N/A N/A 14.07% 1/24/96
- -----------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(5) 26.96% N/A N/A 13.88%
- -----------------------------------------------------------------------------------------------------------------------------
BT ADVISORS FUNDS - SMALL CAP INDEX FUND-INSTITUTIONAL CLASS(12) (BT SMALL COMPANY INDEX PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
21.70% N/A N/A 14.41% 7/10/96
- -----------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4) 21.26% N/A N/A 14.52%
- -----------------------------------------------------------------------------------------------------------------------------
BT INSTITUTIONAL FUNDS - EQUITY 500 INDEX FUND - INSTITUTIONAL CLASS(12) (BT EQUITY 500 INDEX PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
20.75% 28.46% N/A 21.45% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.56% N/A 21.53%
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN NON-U.S. EQUITY COMPOSITE(12) (CAPITAL GUARDIAN INTERNATIONAL PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
70.77% 23.99% 15.31% N/A 12/31/78
- -----------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(5) 26.96% 12.83% 7.01% N/A
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN U.S. EQUITY COMPOSITE(12) (CAPITAL GUARDIAN U.S. EQUITY PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
23.83% 27.70% 17.97% N/A 12/31/66
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.56% 18.19% N/A
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN U.S. EQUITY RESEARCH PORTFOLIO - DIVERSIFIED COMPOSITE(12) (CAPITAL GUARDIAN RESEARCH PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
24.23% 29.43% N/A 22.62% 3/31/93
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.56% N/A 21.58%
- -----------------------------------------------------------------------------------------------------------------------------
EVERGREEN FUND - CLASS Y SHARES(13) (EQ/EVERGREEN PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
16.05% 21.21% 14.17% N/A 10/15/71
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.56% 18.19% N/A
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
192 PRIOR PERFORMANCE OF EACH ADVISER
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 5
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT Portfolio) Year Years
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EVERGREEN FOUNDATION FUND - CLASS Y SHARES(13) (EQ/EVERGREEN FOUNDATION PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
13.69% 18.32%
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.56%
- -----------------------------------------------------------------------------------------------------------------------------
J.P. MORGAN ACTIVE FIXED INCOME COMPOSITE(12) (J.P. MORGAN CORE BOND PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
0.08% 8.29%
- -----------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Broad Investment Grade Bond Index(1) (0.82)% 7.74%
- -----------------------------------------------------------------------------------------------------------------------------
THE LAZARD FUNDS, INC. - LAZARD EQUITY PORTFOLIO(12) (LAZARD LARGE CAP VALUE PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
4.23% 20.36%
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.55%
- -----------------------------------------------------------------------------------------------------------------------------
THE LAZARD FUNDS, INC. - LAZARD SMALL CAP PORTFOLIO(12) (LAZARD SMALL CAP VALUE PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
1.77% 11.39%
- -----------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4) 21.26% 16.69%
- -----------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS INVESTORS TRUST(2),(12) (MFS GROWTH WITH INCOME PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
0.81% 23.42%
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.55%
- -----------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. - MERRILL LYNCH BASIC VALUE FOCUS FUND(12) (MERCURY BASIC VALUE EQUITY PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
21.12% 19.35%
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.55%
- -----------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. - MERRILL LYNCH GLOBAL STRATEGY FOCUS FUND(12) (MERCURY WORLD STRATEGY PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
21.37% 13.11%
- -----------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(5) 26.96% 12.83%
- -----------------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH FUND(6),(13) (MFS EMERGING GROWTH COMPANIES PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
41.45% 28.05%
- -----------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4) 21.26% 16.69%
- -----------------------------------------------------------------------------------------------------------------------------
MFS RESEARCH FUND(10),(12) (MFS RESEARCH PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
16.70% 24.43%
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.56%
- -----------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY INSTITUTIONAL FUND, INC. - EMERGING MARKETS PORTFOLIO(7),(13) (MORGAN STANLEY EMERGING MARKETS
EQUITY PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
105.14% 9.20%
- -----------------------------------------------------------------------------------------------------------------------------
IFC Global Total Return Composite Index(8) 62.69% 0.75%
- -----------------------------------------------------------------------------------------------------------------------------
THE GEORGE PUTNAM FUND OF BOSTON(10),(12) (EQ/PUTNAM BALANCED PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
0.12% 15.18%
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.56%
- -----------------------------------------------------------------------------------------------------------------------------
PUTNAM GROWTH & INCOME FUND II(10),(13) (EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------
(0.91)% N/A
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% N/A
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
10 Since Inception
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT Portfolio) Years Inception Date
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EVERGREEN FOUNDATION FUND - CLASS Y SHARES(13) (EQ/EVERGREEN FOUNDATION PORTFOLIO)
- ---------------------------------------------------------------------------------------------------------------------------------
N/A 16.57% 1/2/90
- --------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) N/A 16.16%
- --------------------------------------------------------------------------------------------------------------------------------
J.P. MORGAN ACTIVE FIXED INCOME COMPOSITE(12) (J.P. MORGAN CORE BOND PORTFOLIO)
- --------------------------------------------------------------------------------------------------------------------------------
8.44% 9.91% 5/31/77
- --------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Broad Investment Grade Bond Index(1) 7.75% N/A
- --------------------------------------------------------------------------------------------------------------------------------
THE LAZARD FUNDS, INC. - LAZARD EQUITY PORTFOLIO(12) (LAZARD LARGE CAP VALUE PORTFOLIO)
- --------------------------------------------------------------------------------------------------------------------------------
14.83% 14.08% 6/87
- --------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 18.21% 16.85%
- --------------------------------------------------------------------------------------------------------------------------------
THE LAZARD FUNDS, INC. - LAZARD SMALL CAP PORTFOLIO(12) (LAZARD SMALL CAP VALUE PORTFOLIO)
- --------------------------------------------------------------------------------------------------------------------------------
N/A 14.24% 10/1/91
- --------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4) N/A 14.77%
- --------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS INVESTORS TRUST(2),(12) (MFS GROWTH WITH INCOME PORTFOLIO)
- --------------------------------------------------------------------------------------------------------------------------------
15.83% N/A 7/15/24
- --------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 18.21% N/A
- --------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. - MERRILL LYNCH BASIC VALUE FOCUS FUND(12) (MERCURY BASIC VALUE EQUITY PORTFOLIO)
- --------------------------------------------------------------------------------------------------------------------------------
N/A 16.60% 7/1/93
- --------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) N/A 22.46%(2)
- --------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. - MERRILL LYNCH GLOBAL STRATEGY FOCUS FUND12 (MERCURY WORLD STRATEGY PORTFOLIO)
- --------------------------------------------------------------------------------------------------------------------------------
N/A 11.00% 2/28/92
- --------------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(5) N/A 12.00%
- --------------------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH FUND(6),(13) (MFS EMERGING GROWTH COMPANIES PORTFOLIO)
- --------------------------------------------------------------------------------------------------------------------------------
24.72% N/A 12/29/86
- --------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4) 13.40% N/A
- --------------------------------------------------------------------------------------------------------------------------------
MFS RESEARCH FUND(10),(12) (MFS RESEARCH PORTFOLIO)
- --------------------------------------------------------------------------------------------------------------------------------
17.53% N/A 10/13/71
- --------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 18.21% N/A
- --------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY INSTITUTIONAL FUND, INC. - EMERGING MARKETS PORTFOLIO(7),(13) (MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO)
- --------------------------------------------------------------------------------------------------------------------------------
N/A 16.40% 9/25/92
- --------------------------------------------------------------------------------------------------------------------------------
IFC Global Total Return Composite Index(8) N/A 7.73%
- --------------------------------------------------------------------------------------------------------------------------------
THE GEORGE PUTNAM FUND OF BOSTON(10),(12) (EQ/PUTNAM BALANCED PORTFOLIO)
- --------------------------------------------------------------------------------------------------------------------------------
11.39% N/A 11/5/37
- --------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 18.21% N/A
- --------------------------------------------------------------------------------------------------------------------------------
PUTNAM GROWTH & INCOME FUND II(10),(13) (EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO)
- --------------------------------------------------------------------------------------------------------------------------------
N/A 17.65% 1/5/95
- --------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) N/A 28.58%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -----
193 PRIOR PERFORMANCE OF EACH ADVISER
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 5 10 Since Inception
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT Portfolio) Year Years Years Inception Date
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PUTNAM INTERNATIONAL GROWTH FUND(10),(13)(EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
60.77% 24.41% N/A 17.82% 2/28/91
- -------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(5) 26.96% 12.83% N/A 9.62%
- -------------------------------------------------------------------------------------------------------------------------
PUTNAM INVESTORS FUND(10),(12)(EQ/PUTNAM INVESTORS GROWTH PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
30.14% 31.69% 19.81% N/A 12/1/25
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.51% 18.21% N/A
- -------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME FUND(12) (T. ROWE PRICE EQUITY INCOME PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
3.82% 18.59% 14.14% 15.67% 10/31/85
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.51% 18.21% N/A
- -------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL STOCK FUND(12) (T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
34.60% 15.71% 11.38% 15.17% 5/9/80
- -------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(5) 27.30% 13.15% 7.33% N/A
- -------------------------------------------------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE FUND(13) (WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
7.55% N/A N/A 14.21% 12/29/95
- -------------------------------------------------------------------------------------------------------------------------
Russell 2000 Value Index(11) (1.49)% N/A N/A 10.19%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Salomon Brothers Broad Investment Grade Bond Index is an unmanaged,
weighted index that contains approximately 4,700 individually priced
investment grade bonds.
(2) Since inception percentage was calculated as of 6-30-93.
(3) The S&P 500 Index ("S&P 500") is an unmanaged weighted index containing
common stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the larger
capitalization portion of the United States stock market. The S&P 500
returns reflect the reinvestment of dividends, if any, but do not reflect
fees, brokerage commissions, or other expenses of investing.
(4) The Russell 2000 Index is an unmanaged index which tracks the performance
of 2,000 publicly-traded U.S. stocks. It is often used to indicate the
performance of smaller company stocks. It is compiled by the Frank Russell
Company.
(5) The Morgan Stanley Capital International EAFE Index ("EAFE Index") is a
market capitalization weighted equity index composed of a sample of
companies representative of the market structure of Europe, Australasia and
the Far East. EAFE Index assume dividends reinvested net of withholding
taxes and do not reflect any fees or expenses.
(6) The results for the MFS Emerging Growth Fund (Class B shares) do not
reflect sales charges that may be imposed on the such shares.
(7) The Class B shares of the Morgan Stanley Institutional Fund, Inc. -
Emerging Markets Portfolio are subject to a Rule 12b-1 fee equal to 0.25%
of the Portfolio's assets. The expense ratio of Morgan Stanley
Institutional Fund, Inc. - Emerging Markets Portfolio has been capped at
1.75% since inception.
(8) 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.
(9) Annualized performance for the Advisor Class shares. The Advisor Class
shares had a total expense ratio of 1.26% of its average daily net
assets for the year ended December 31, 1998. Other share classes have
different expenses and their performance will vary.
(10) Performance for the Class A shares. The Class A shares are in many
instances subject to a front-end sales charge of up to 5.75%. Other share
classes have different expenses and their performance will vary.
(11) The Russell 2000 Value Index ("Russell 2000 Value") is an unmanaged index
which measures the performance of those Russell 2000 companies with lower
price-to-book ratios and lower forecasted growth values. It is compiled by
the Frank Russell Company.
(12) The annual fees and expenses of the similar registered investment company
(or series thereof) (or composite) whose prior performance is shown in the
table above were less than those of the relevant Trust's Portfolio.
Consequently, if the Trust Portfolio's annual fees and expenses were used
in the calculation of the performance of the similar registered investment
company (or composite) that performance would be reduced.
(13) The annual fees and expenses of the similar registered investment company
(or series thereof) (or composite) whose prior performance is shown in the
table above were higher than those of the relevant Trust's Portfolio.
Consequently, if the Trust Portfolio's annual fees and expenses were used
in the calculation of the performance of the similar registered investment
company (or composite) that performance would be increased.
------------------------- EQ Advisors Trust
<PAGE>
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194
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If you wish to know more, you will find additional information about the Trust
and its Portfolios in the following documents, which are available, free of
charge by calling our toll-free number at 1-800-528-0204:
ANNUAL AND SEMI-ANNUAL REPORTS
The Annual and Semi-Annual Reports include more information about the Trust's
performance and are available upon request free of charge. The reports usually
include performance information, a discussion of market conditions and the
investment strategies that affected the Portfolios' performance during the last
fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI, dated May 1, 2000, is incorporated into this Prospectus by reference
and is available upon request free of charge by calling our toll free number at
1-800-528-0204.
You may visit the SEC's website at www.sec.gov to view the SAI and other
information about the Trust. You can also review and copy information about the
Trust, including the SAI, at the SEC's Public Reference Room in Washington, D.C.
or by electronic request at [email protected] or by writing the SEC's Public
Reference Section, Washington, D.C. 20549-0102 You may have to pay a duplicating
fee. To find out more about the Public Reference Room, call the SEC at
1-202-942-8090.
Investment Company Act File Number: 811-07953
<PAGE>
EQ ADVISORS TRUST(SM)
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
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 May
1, 2000, 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
-----
Trust History ................................................... 2
Description of the Trust and its Investments and Risks .......... 2
Trust Policies .................................................. 3
Investment Strategies and Risks ................................. 8
Management of the Trust ......................................... 37
Investment Management and Other Services ........................ 41
Brokerage Allocation and Other Strategies ....................... 55
Purchase and Pricing of Shares .................................. 62
Redemption of Shares ............................................ 63
Taxation ........................................................ 64
Portfolio Performance ........................................... 65
Code of Ethics .................................................. 66
Other Services .................................................. 66
Financial Statements ............................................ 66
MASTER
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<PAGE>
TRUST HISTORY
EQ Advisors Trust (the "Trust") is an open-end management investment company and
is registered as such under the Investment Company Act of 1940, as amended
("1940 Act"). The Trust is organized as a Delaware business trust and was formed
on October 31, 1996 under the name "787 Trust." The Trust changed its name to
"EQ Advisors Trust" effective November 25, 1996.
DESCRIPTION OF THE TRUST AND ITS INVESTMENTS AND RISKS
The Trust currently offers two classes of shares on behalf of the following
Portfolios: the Alliance Common Stock Portfolio, Alliance Conservative Investors
Portfolio, Alliance Equity Index Portfolio, Alliance Global Portfolio, Alliance
Growth and Income Portfolio, Alliance Growth Investors Portfolio, Alliance High
Yield Portfolio, Alliance Intermediate Government Securities Portfolio, Alliance
International Portfolio, Alliance Money Market Portfolio, Alliance Quality Bond
Portfolio, and Alliance Small Cap Growth Portfolio (collectively referred to
herein as the "Alliance Portfolios"), EQ/Aggressive Stock Portfolio, EQ/Balanced
Portfolio, 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, MFS Growth with Income Portfolio, Morgan Stanley Emerging Markets
Equity Portfolio, Warburg Pincus Small Company Value Portfolio, Mercury World
Strategy Portfolio, Mercury Basic Value Equity Portfolio, Lazard Large Cap Value
Portfolio, Lazard Small Cap Value Portfolio, J.P. Morgan Core Bond Portfolio, BT
Small Company Index Portfolio, BT International Equity Index Portfolio, BT
Equity 500 Index Portfolio, EQ/Evergreen Foundation Portfolio, EQ/Evergreen
Portfolio, EQ/Alliance Premier Growth Portfolio, Capital Guardian Research
Portfolio, Capital Guardian U.S. Equity Portfolio, Capital Guardian
International Portfolio, Calvert Socially Responsible Portfolio and EQ/Alliance
Technology Portfolio (collectively, together with the Alliance Portfolios,
referred to herein as 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 ("Class IB
Distribution Plan") adopted pursuant to Rule 12b-1 under the 1940 Act.
Both classes of shares are offered under the Trust's multi-class distribution
system, 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, 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 Class IB Distribution Plan adopted pursuant to Rule 12b-1 under
the 1940 Act.
The Trust's shares are currently sold to: (i) insurance company separate
accounts in connection with variable life insurance contracts and variable
annuity certificates and contracts ("Contract" or collectively, "Contracts")
issued by The Equitable Life Assurance Society of the United States
("Equitable") and Equitable of Colorado, Inc. ("EOC"), as well as insurance
company separate accounts of: Integrity Life Insurance Company, National
Integrity Life Insurance Company, The American Franklin Life Insurance Company,
and Transamerica Occidental Life Insurance Company, each of which is
unaffiliated with Equitable; and (ii) to The Equitable Investment Plan for
Employees, Managers and Agents ("Equitable Plan").
2
<PAGE>
The Trust does not currently foresee any disadvantage to Contract owners arising
from offering the Trust's shares to separate accounts of insurance companies
that are unaffiliated with each other. However, it is theoretically possible
that the interests of owners of various contracts participating in the Trust
through separate accounts might at some time be in conflict. In the case of a
material irreconcilable conflict, one or more separate accounts might withdraw
their investments in the Trust, which might force the Trust to sell portfolio
securities at disadvantageous prices.
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 any
meeting.
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.
TRUST POLICIES
FUNDAMENTAL RESTRICTIONS
Each Portfolio has also adopted certain investment restrictions that 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 Mercury 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, 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 Mercury World
Strategy Portfolio and the Mercury 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. In
addition, the Lazard Large Cap Value Portfolio may borrow
3
<PAGE>
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 (including the
amount borrowed) less liabilities (other than borrowings);
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;
d. the Mercury World Strategy Portfolio, as a matter of fundamental
policy, and the Mercury 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 J.P. Morgan 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;
g. EQ/Evergreen Portfolio and EQ/Evergreen Foundation Portfolio, each as
a matter of non-fundamental policy, may, in addition to the amount
specified above, also borrow up to an additional 5% of its total
assets from banks or other lenders;
h. the MFS Growth with Income Portfolio, as a matter of non-fundamental
policy, may borrow up to 10% of its total assets (taken at cost), or
its net assets (taken at market value), whichever is less, but only as
a temporary measure for extraordinary or emergency purposes;
i. the EQ/Alliance Premier Growth Portfolio, Capital Guardian Research
Portfolio, Capital Guardian U.S. Equity Portfolio, Capital Guardian
International Portfolio and EQ/Alliance Technology Portfolio as a
matter of non-fundamental operating policy, may only borrow for
temporary or emergency purposes, provided such amount does not exceed
5% of the Portfolio's total assets at the time the borrowing is made;
j. The Alliance Portfolios, EQ/Aggressive Stock Portfolio and EQ/Balanced
Portfolio, as a matter of non-fundamental operating policy, may borrow
money only from banks: (i) for temporary purposes; (ii) to pledge
assets to banks in order to transfer funds for various purposes as
required without interfering with the orderly liquidation of
securities in a Portfolio (but not for leveraging purposes); (iii) to
make margin payments or pledges in connection with options, futures
contracts, options on futures contracts, forward contracts or options
on foreign currencies; or (iv) with respect to Alliance Quality Bond
Portfolio, in connection with transactions in interest rate swaps,
caps and floors.
4
<PAGE>
(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
stock index futures contracts, 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.
This restriction does not apply to investments by the Alliance Money Market
Portfolio in certificates of deposit or securities issued and guaranteed by
domestic banks. In addition, the 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. This restriction shall not apply to the Alliance High Yield Portfolio
and Alliance Intermediate Government Securities Portfolio and each may
make secured loans, including lending cash or portfolio securities with
limitation.
b. each other 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 (50%
in the case of each of the other Alliance Portfolios); (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;
c. 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);
d. the MFS Emerging Growth Companies Portfolio, BT Small Company 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
e. the Warburg Pincus Small Company Value Portfolio, the Mercury World
Strategy Portfolio, and the Mercury 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);
f. 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);
g. MFS Growth with Income Portfolio, as a matter of non-fundamental
operating policy, may lend its portfolio securities provided that no
such loan may be made if, as a result, the aggregate of such loans
would exceed 25% of its net assets (taken at market value);
5
<PAGE>
h. the EQ/Alliance Premier Growth Portfolio and EQ/Alliance Technology
Portfolio, as a matter of non-fundamental policy, each may not make
loans of its assets, which will not be considered as including the
purchase of publicly-distributed debt obligations in accordance with
its investment objectives, except that each Portfolio may lend its
portfolio securities to the extent permitted in (4)(b) above;
i. the Capital Guardian Research Portfolio, Capital Guardian U.S. Equity
Portfolio and Capital Guardian International Portfolio, as a matter of
fundamental policy, will not make loans;
j. The Alliance Portfolios, EQ/Aggressive Stock Portfolio, and EQ/Balanced
Portfolio, as a matter of non-fundamental policy, will also treat this
restriction as not preventing any such Portfolio from purchasing debt
obligations as consistent with its investment policies, government
obligations, short-term commercial paper, or publicly-traded debt,
including bonds, notes, debentures, certificates of deposit, and
equipment trust certificates and loans made under insurance policies;
(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 (i)
securities issued or guaranteed by the United States Government, its
agencies or instrumentalities and (ii) securities of other investment
companies:*
a. As a matter of operating policy, each Portfolio will not consider
repurchase agreements to be subject to the above stated 5% limitation
if the collateral underlying the repurchase agreements consists
exclusively of obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities;
b. The Alliance Money Market Portfolio, as a matter of non-fundamental
policy, will not invest more than 5% of its total assets in securities
of any one issuer, other than U.S. Government securities, except that
it may invest up to 25% of its total assets in First Tier Securities
(as defined in Rule 2a-7 of the 1940 Act) of a single issuer for a
period of up to three business days after the purchase of such
security. Further, as a matter of operating policy, the Alliance Money
Market Portfolio will not invest more than (i) the greater of 1% of its
total assets or $1,000,000 in Second Tier Securities (as defined in
Rule 2a-7 under the 1940 Act) of a single issuer and (ii) 5% of its
total assets, at the time a Second Tier Security is acquired, in Second
Tier Securities;
(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 (i) obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities and (ii) securities of other investment companies);*
(7) Purchase or sell real estate, except that:
a. each Portfolio, except the J.P. Morgan Core Bond Portfolio, may
purchase securities of issuers which deal in real estate, securities
which are directly or indirectly secured by interests in real estate,
and securities which represent interests in real estate, and each
Portfolio 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 J.P. Morgan 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
- ----------
* The Morgan Stanley Emerging Markets Equity, Mercury World Strategy and
Lazard Small Cap Value Portfolios are classified as non-diversified
investment companies under the 1940 Act and therefore, these restrictions
are not applicable to these Portfolios.
6
<PAGE>
(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. As a matter of operating
policy, the Alliance Money Market Portfolio, the MFS Research Portfolio, the
Lazard Large Cap Value Portfolio, the Lazard Small Cap Value Portfolio, the
Capital Guardian Research Portfolio, the Capital Guardian U.S. Equity
Portfolio and the Capital Guardian International Portfolio may not invest in
commodities or commodity contracts including futures contracts. As a matter
of operating policy, the EQ/Aggressive Stock Portfolio, EQ/ Balanced
Portfolio, Alliance Common Stock Portfolio, Alliance Conservative Investors
Portfolio, Alliance Equity Index Portfolio, Alliance Global Portfolio,
Alliance Growth and Income Portfolio, Alliance Growth Investors Portfolio,
Alliance High Yield Portfolio, Alliance Intermediate Government Securities
Portfolio, Alliance International Portfolio, Alliance Quality Bond
Portfolio, Alliance Small Cap Growth Portfolio, EQ/Alliance Premier Growth
Portfolio, T. Rowe Price Equity Income Portfolio, T. Rowe Price
International Stock Portfolio and the EQ/Alliance Technology Portfolio may
purchase and sell exchange-traded index options and stock index futures
contracts;
(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
Alliance Money Market Portfolio, the Warburg Pincus Small Company Value
Portfolio, Lazard Large Cap Value Portfolio, Lazard Small Cap Value
Portfolio and the EQ/Alliance Technology 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, Mercury World Strategy Portfolio,
Mercury Basic Value Equity Portfolio and MFS Investor Portfolio). Such
mortgaging, pledging or hypothecating may not exceed 15% of EQ/Putnam
International Equity Portfolio's total assets; 10% of each of the Mercury
World Strategy Portfolio's and Mercury Basic Value Equity Portfolio's total
assets, (taken at the lower of cost or market value); and 15% of MFS
Investor Portfolio's gross assets (taken at cost), each taken at the time of
the permissible borrowing or investment. The Alliance Portfolios, the
EQ/Aggressive Stock Portfolio and the EQ/Balance Portfolio, will not pledge
assets for leveraging purposes. 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;
7
<PAGE>
(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, Mercury World Strategy Portfolio,
Mercury Basic Value Equity Portfolio, J.P. Morgan Core Bond Portfolio,
EQ/Evergreen Foundation Portfolio, EQ/Evergreen Portfolio, EQ/Alliance
Premier Growth Portfolio, Capital Guardian Research Portfolio, Capital
Guardian U.S. Equity Portfolio and Capital Guardian International 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. As a matter of operating policy, the
Capital Guardian Research Portfolio, Capital Guardian U.S. Equity Portfolio,
Capital Guardian International Portfolio and EQ/Alliance Technology
Portfolio will not effect short sales of securities or property.
INVESTMENT STRATEGIES AND RISKS
In addition to the Portfolios' principal investment strategies discussed in the
Prospectus, each Portfolio may engage in other types of investment strategies as
further described in the descriptions 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 instrument are
specifically referred to in the descriptions below of such investment strategy
or instrument.
ASSET-BACKED SECURITIES. As indicated in Appendix A, certain of the Portfolios
may invest in asset-backed securities. 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 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. In the case of automobile
loans, 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 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.
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
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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.
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.
BRADY BONDS. As indicated in Appendix A, certain of the Portfolios may invest in
Brady Bonds. Brady Bonds 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 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.
CONVERTIBLE SECURITIES. As indicated in Appendix A, certain 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, which 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. 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.
DEPOSITARY RECEIPTS. As indicated in Appendix A, certain of the Portfolios may
invest in depositary receipts. Depositary receipts exist for many foreign
securities and 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 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 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 below .
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
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receipt. In addition, the issuers of the securities underlying unsponsored
depositary receipts are not obligated to disclose material information in the
United States 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.
DERIVATIVES. Each Portfolio (except the MFS Research Portfolio and the Alliance
Money Market 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, floaters and inverse floaters, hybrid instruments, mortgage-backed
securities, options and future transactions, 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.
EURODOLLAR AND YANKEE DOLLAR OBLIGATIONS. Eurodollar bank obligations are United
States dollar-denominated certificates of deposit and time deposits issued
outside the United States capital markets by foreign branches of United States
banks and by foreign banks. Yankee dollar bank obligations are United States
dollar-denominated obligations issued in the United States 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.
FLOATERS AND INVERSE FLOATERS. As indicated in Appendix A, certain of the
Portfolios may invest in floaters and inverse 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 CURRENCY TRANSACTIONS. As indicated in Appendix A, certain of the
Portfolios may purchase securities denominated in foreign currencies, including
the purchase of foreign currency on a spot (or cash) basis. 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.
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Currency exchange rates may be affected unpredictably by intervention (or the
failure to intervene) by United States or foreign governments or central banks,
by currency controls or political developments in the United States or abroad.
For example, significant uncertainty surrounds the recent introduction of the
Euro (a common currency for the European Union) in January 1999 and its effect
on the value of securities denominated in local European currencies. These and
other currencies in which a Portfolio's assets are denominated may be devalued
against the United States dollar, resulting in a loss to the Portfolio. Certain
Portfolios may also invest in the following types of foreign currency
transactions:
FORWARD FOREIGN CURRENCY TRANSACTIONS. As indicated in Appendix A, certain of
the Portfolios may engage in forward foreign currency exchange 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. A 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
United States 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 United States 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 United States
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.
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 Advisers to the Portfolios believe
that it is important to have the flexibility to enter into such forward
contracts when they determine that the best interests of the Portfolios 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.
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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 each Portfolio values its assets daily in terms of United States
dollars, it does not intend to convert its holdings of foreign currencies into
United States 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. As indicated in Appendix A, certain of the Portfolios may also purchase
and sell foreign currency futures contracts and may purchase and write
exchange-traded call and put options on foreign currency futures contracts and
on foreign currencies. Those Portfolios 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,
United States 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 futures 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 currency upon which the call is written. Option transactions
may be effected to hedge the currency risk on non-United States
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 United States
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.
OVER THE COUNTER OPTIONS ON FOREIGN CURRENCY TRANSACTIONS. As indicated in
Appendix A, certain of the Portfolios may engage in over the counter options on
foreign currency transactions. Each Alliance Portfolio (other than Alliance
Equity Index Portfolio, Alliance Money Market Portfolio, and Alliance
Intermediate Government Securities Portfolio), EQ/Aggressive Stock Portfolio,
EQ/Balanced Portfolio and the Mercury World Strategy Portfolio will engage in
over the counter 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 over the counter 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").
Certain differences exist between
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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.
Hedging transactions involve costs and may result in losses. As indicated in
Appendix A, certain of the Portfolios may also write covered call options on
foreign currencies to offset some of the costs of hedging those currencies. A
Portfolio will engage in over the counter 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.
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 additional information concerning the risks associated with utilizing
options, forward foreign currency exchange contracts, please see "Risks of
Transactions in Options, Futures Contracts and Forward Currency Contracts" in
this section.
FOREIGN SECURITIES. As indicated in Appendix A, certain of the Portfolios may
also invest in other types of foreign securities or engage in the certain types
of transactions related to foreign securities, such as Brady Bonds, Depositary
Receipts, Eurodollar and Yankee Dollar Obligations and Foreign Currency
Transactions, including forward foreign currency transactions, foreign currency
options and foreign currency futures contracts and options on futures. 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.
Foreign investments involve certain risks that are not present in domestic
securities. For example, foreign securities may be subject to currency risks or
to foreign government taxes which reduce their attractiveness. 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 uniform accounting,
auditing and financial reporting standards and practices comparable to those in
the United States. 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. 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
incurred in converting between various currencies in connection with purchases
and sales of foreign securities.
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
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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, banks and listed companies abroad 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", which can result in losses to a Portfolio.
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.
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.
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. See "Emerging Markets Securities" below for additional
risks.
Fluctuations in exchange rates may also affect the earning power and asset value
of the foreign entity issuing a security, even one denominated in United States
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.
In less liquid and well developed stock markets, such as those in some Eastern
European, Southeast 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.
Additionally, investments in emerging market regions or the following geographic
regions are subject to more specific risks, as discussed below:
EMERGING MARKET SECURITIES. Investments in emerging market country securities
involve special risks. The economies, markets and political structures of a
number of the emerging market 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. Similarly, many of these countries, particularly in
Southeast Asia, Latin America, and Eastern Europe, are grappling with severe
inflation or recession, high levels of national debt, currency exchange problems
and government instability. 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.
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
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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.
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 United States 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.
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. For example, Russian
companies with more than 1,000 shareholders are required by law to employ an
independent 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
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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 custodian containing certain
protective conditions, including, among other things, the 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.
LATIN AMERICA
Inflation Most Latin American countries have experienced, at one time or
another, severe and persistent levels of inflation, including, in some cases,
hyperinflation. This has, in turn, led to high interest rates, extreme measures
by governments to keep inflation in check, and a generally debilitating effect
on economic growth. Although inflation in many countries has lessened, there is
no guarantee it will remain at lower levels.
Political Instability The political history of certain Latin American countries
has been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such developments, if
they were to reoccur, could reverse favorable trends toward market and economic
reform, privatization, and removal of trade barriers, and result in significant
disruption in securities markets.
Foreign Currency Certain Latin American countries may have managed currencies
which are maintained at artificial levels to the U.S. dollar rather than at
levels determined by the market. This type of system can lead to sudden and
large adjustments in the currency which, in turn, can have a disruptive and
negative effect on foreign investors. For example, in late 1994 the value of the
Mexican peso lost more than one-third of its value relative to the dollar.
Certain Latin American countries also restrict the free conversion of their
currency into foreign currencies, including the U.S. dollar. There is no
significant foreign exchange market for many currencies and it would, as a
result, be difficult for the Fund to engage in foreign currency transactions
designed to protect the value of the Fund's interests in securities denominated
in such currencies.
Sovereign Debt A number of Latin American countries are among the largest
debtors of developing countries. There have been moratoria on, and reschedulings
of, repayment with respect to these debts. Such events can restrict the
flexibility of these debtor nations in the international markets and result in
the imposition of onerous conditions on their economies.
PACIFIC BASIN REGION. 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.
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
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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 United States dollar will result in
corresponding changes in the United States dollar value of a Portfolio's assets
denominated in those currencies.
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 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.
Each Portfolio (except the Warburg Pincus Small Company Value Portfolio) may
make contracts to purchase 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.
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
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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 TRANSACTIONS. For information on "Futures Transactions," see the
discussion in this section under "Options and Futures Transactions."
HYBRID INSTRUMENTS. As indicated in Appendix A, certain of the Portfolios may
invest in hybrid instruments (a type of potentially high-risk derivative).
Hybrid instruments have recently been developed and combine the elements of
futures contracts or options with those of debt, preferred equity or a
depositary instrument. Generally, a hybrid instrument will be a debt security,
preferred stock, depositary 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 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.
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 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 United States 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.
Although the risks of investing in hybrid instruments reflect a combination of
the risks of investing in securities, options, futures and currencies, hybrid
instruments are potentially more volatile and carry greater market risks than
traditional debt instruments. The risks of a particular hybrid instrument will,
of course, depend 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
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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 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 United States, the
SEC, which regulates the offer and sale of securities by and to persons in the
United States, 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.
ILLIQUID SECURITIES OR NON-PUBLICLY TRADED SECURITIES. As indicated in Appendix
A, certain of the Portfolios may invest in illiquid securities or non-publicly
traded securities. The inability of a Portfolio to dispose of illiquid or not
readily marketable investments readily or at a reasonable price could impair a
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.
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).
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.
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INVESTMENT COMPANY SECURITIES. Investment company securities are securities of
other open-end or closed-end investment companies. Except for so-called
fund-of-funds, 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. Except for funds-of-funds, 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. As indicated in
Appendix A, certain of the Portfolios may invest in or hold investment grade
securities, but not lower quality fixed income securities. Investment grade
securities are securities rated Baa or higher by Moody's Investors Service Inc.
("Moody's") or Bbb or higher by Standard & Poor's Rating Services, a division of
McGraw-Hill Companies, Inc. ("Standard & Poor's") 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 nationally recognized statistical rating organizations ("NRSRO")
(i.e., Ba or lower by Moody's and BB or lower by Standard & Poor's) 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 this
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.
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.
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LOAN PARTICIPATIONS AND OTHER DIRECT INDEBTEDNESS. As indicated in Appendix A,
certain of the Portfolios may invest a portion of each of their assets in loan
participations and other direct indebtedness. These loans are made generally to
finance internal growth, mergers, acquisitions, stock repurchases, leveraged
buy-outs and other corporate activities. 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.
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. 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.
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. 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.
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.
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
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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 above.
MORTGAGE-BACKED OR MORTGAGE-RELATED SECURITIES. As indicated in Appendix A,
certain of the Portfolios 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. 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. 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.
CMOs may be issued by a United States 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
United States Government or its agencies or instrumentalities, these CMOs
represent obligations solely of the private issuer and are not insured or
guaranteed by the United States 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 than traditional debt securities, and, therefore,
potentially increasing the volatility of a Portfolio that invests in CMOs.
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 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.
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. 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
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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.
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 securities may be issued by agencies or instrumentalities of the
United States 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 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 Portfolios may invest in both the IO class and
the PO class. The prices of stripped mortgage-backed securities may be
particularly affected by changes in interest rates. 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. 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.
Prepayments may also result in losses on stripped mortgage-backed securities. 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 J.P. Morgan 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, it could
end up acquiring a direct interest in the underlying real property and the
Portfolio would then 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. Investment in direct mortgages involve many of the same risks as
investments in mortgage-related securities. 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.
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MORTGAGE DOLLAR ROLLS. The J.P. Morgan 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
mortgage dollar rolls depend upon the Adviser's ability to manage mortgage
prepayments. There is no assurance that mortgage dollar rolls can be
successfully employed.
MUNICIPAL SECURITIES. As indicated in Appendix A, certain of the Portfolios 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. As indicated in Appendix A, the BT Small
Company Index Portfolio, BT International Equity Index Portfolio and BT Equity
500 Index Portfolio each may not at any time commit more than 20% of its 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.
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; to protect the value of
portfolio securities and to adjust the duration of fixed income investments.
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 over the counter
option and the resulting inability to close a futures position or over the
counter option prior to its maturity date.
Following is a description of specific Options and Futures Transactions,
followed by a discussion concerning the risks associated with utilizing options,
futures contracts, and forward foreign currency exchange contracts.
FUTURES TRANSACTIONS. As indicated in Appendix A, certain of the Portfolios 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. 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").
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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. 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.
OPTIONS ON FUTURES CONTRACTS. As indicated in Appendix A, certain of the
Portfolios 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.
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 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 future if the
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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.
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 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.
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 29.
As indicated in Appendix A, certain of the Portfolios 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 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.
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Certain of the Portfolios will not commit more than 5% of their total assets to
premiums when purchasing call or put options. In addition, the total market
value of securities against which a Portfolio has written call or put options
generally will not exceed 25% of its total assets. However, the Warburg Pincus
Small Company Value Portfolio may commit up to 10% of its total assets to
premiums when purchasing put or call 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.
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.
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 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,
United States 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
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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 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.
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 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 Standard & Poor's 500 or the NYSE Composite Index, or a
narrower market index such as the Standard & Poor's 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.
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OVER THE COUNTER OPTIONS. As indicated in Appendix A, certain of the Portfolios
may engage in over the counter put and call option transactions. 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 such options.
Such over the counter options, and the securities used as "cover" for such
options, may be considered illiquid securities. 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.
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
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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 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.
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<PAGE>
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 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.
PASSIVE FOREIGN INVESTMENT COMPANIES. As indicated in Appendix A, certain of the
Portfolios may purchase the securities of certain foreign investment funds or
trusts called passive foreign investment companies ("PFICs"). Such entities have
been the only or primary way to invest in certain countries because 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.
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 PFICs, to the limitation that no more than 10%
of the value of the Portfolio's total assets may be invested in such securities.
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. As indicated in Appendix A, certain of the Portfolios 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.
REPURCHASE AGREEMENTS. Each Portfolio, other than the Alliance Equity Index
Portfolio, may enter into repurchase agreements with qualified and 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.
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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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 United States Government obligations, certificates
of deposit, or bankers' acceptances) with registered brokers-dealers, United
States 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.
REAL ESTATE INVESTMENT TRUSTS. As indicated in Appendix A, certain of the
Portfolios may each invest up to 15% of its respective net assets in investments
related to real estate, including real estate investment trusts ("REITs"). Risks
associated with investments in securities of companies in the real estate
industry include: decline in the value of real estate; risks related to general
and local economic conditions; overbuilding and increased competition; increases
in property taxes and operating expenses; changes in zoning laws; casualty or
condemnation losses; variations in rental income; changes in neighborhood
values; the appeal of properties to tenants; and increases in interest rates. In
addition, equity REITs may be affected by changes in the values of the
underlying property owned by the trusts, while mortgage real estate investment
trusts may be affected by the quality of credit extended. REITs are dependent
upon management skills, may not be diversified and are subject to the risks of
financing projects. Such REITs are also subject to heavy cash flow dependency,
defaults by borrowers, self liquidation and the possibility of failing to
qualify for tax-free pass-through of income under the Code and to maintain
exemption from the 1940 Act. In the event an issuer of debt securities
collateralized by real estate defaults, it is conceivable that the REITs could
end up holding the underlying real estate.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. As indicated in Appendix A,
certain of the Portfolios 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. 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). If interest rates rise
during a reverse repurchase agreement, it may adversely affect the Portfolio's
net asset value. See "Fundamental Restrictions" for more information concerning
restrictions on borrowing by each Portfolio. Reverse repurchase agreements are
considered to be borrowings under the 1940 Act.
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
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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 roll" 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.
SECURITIES LOANS. 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.
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,
United States Government securities, letters of credit or such other collateral
as may be permitted under a Portfolio's securities lending 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.
SHORT SALES AGAINST THE BOX. As indicated in Appendix A, certain of the
Portfolios 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 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.
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SMALL COMPANY SECURITIES. As indicated in Appendix A, certain of the Portfolios
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 Alliance Portfolios, EQ/Aggressive Stock Portfolio, EQ
Balanced Portfolio and 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. Structured notes are interests in entities organized and
operated solely for the purpose of restructuring the investment characteristics
of 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 Morgan Stanley Emerging
Markets Equity Portfolio may invest typically involve no credit enhancement,
their credit risk generally will be equivalent to that of the underlying
instruments. The Morgan Stanley Emerging Markets Equity 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 Morgan Stanley Emerging Markets
Equity 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.
SWAPS. As indicated in Appendix A, certain Portfolios 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 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.
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
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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 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 Government securities, 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.
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, the Portfolio's risk of loss consists of the net amount of
payments that the Portfolio contractually is 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.
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.
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 Federal Housing
Administration, Export-Import Bank of the United States, Small Business
Administration, and 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.,
Interamerican Development Bank, the International Bank for Reconstruction and
Development, and the Tennessee Valley Authority).
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WARRANTS. All of the Portfolios (except the Alliance Money Market Portfolio),
may purchase warrants and similar rights. 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.
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 price 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.
ZERO COUPON BONDS. As indicated in Appendix A, certain Portfolios 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." A high
turnover rate (100% or more) increases transaction costs (e.g., brokerage
commissions) which must be born by the Portfolio and its shareholders and
increases realized gains and losses. See "Financial Highlights" in the
Prospectus for the actual portfolio turnover rates of the Portfolios through
December 31, 1999.
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MANAGEMENT OF THE TRUST
The Board has the responsibility for the overall management of the Trust and its
Portfolios, including general supervision and review of the investment
activities and the conformity with Delaware Law and the stated policies of the
Trust's Portfolios. The Board elects the officers of the Trust who are
responsible for administering the Trust's day-to-day operations. Trustees and
officers of the Trust, together with information as to their principal business
occupations during the last five years, and other information are shown below.
As of December 31, 1999 the Trustees and officers of the Trust, as a group,
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 AND AGE PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
- ----------------------------------------------- ----------------------------------------------------
<S> <C>
Peter D. Noris* (44) .......................... From May 1995 to present, Executive Vice
President and Trustee President and Chief Investment Officer, Equitable;
from 1992 to 1995, Vice President, Salomon Brothers
Inc.; from July 1995 to present,
Director, Alliance Capital Management, L.P.; from
July 1995 to October 1999, Trustee, Hudson River
Trust (investment company); from November 1996 to
present, Executive Vice President, AXA Advisors LLC.
Theodossios (Ted) Athanassiades (60) .......... From 1994 to present, Director, Atlantic Bank of
Trustee New York; 1996, Vice-Chairman, Metropolitan
Life Insurance Company; from 1993-1995, President
and Chief Operating Officer, Metropolitan
Life Insurance Company.
Jettie M. Edwards (53) ........................ From 1986 to present, Partner and Consultant,
Trustee Syrus Associates (business and marketing
consulting firm); from 1992 to present, Trustee,
Provident Investment Counsel Trust
(investment company); from 1995 to present,
Director, The PBHG Funds, Inc. (investment company).
David W. Fox (68) ............................. From 1987 to present, Director of USG
Trustee Corporation; Public Governor (1989 to present)
and Chairman (1996 to present) of the Chicago
Stock Exchange; from 1990-1995, Chairman and
Chief Executive Officer, Northern Trust
Corporation.
Michael Hegarty* (55) ......................... From April 1998 to present, Director, President
Trustee and Chief Operating Officer, Equitable; from 1996
to 1998, Vice Chairman, Chase Manhattan Corporation;
from 1995 to 1996, Vice Chairman, Chemical
Bank (Chase Manhattan Corporation and Chemical Bank
merged in 1996); from 1991 to 1995, Senior Executive
Vice President, Chemical Bank.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
- --------------------------------------------- ----------------------------------------------------
<S> <C>
William M. Kearns, Jr. (64) ................. From 1994 to present, President, W.M. Kearns &
Trustee Co., Inc. (private investment company); from 1998
to present, Vice Chairman, Keefe Managers,
Inc. (financial services funds); Director, Malibu
Entertainment Worldwide, Inc., Marine Transport
Corporation, Selective Insurance Group, Inc.,
Transistor Devices, Inc., as well as a number of
private and venture backed companies.
Christopher P.A. Komisarjevsky (55) ......... From 1998 to present, President and Chief
Trustee Executive Officer, Burson-Marsteller Worldwide
(public relations); from 1996 to 1998, President
and Chief Executive Officer, Burson-Marstellar USA;
from 1994 to 1995, President and Chief Executive
Officer, Gavin Anderson & Company, New York.
Harvey Rosenthal (57) ....................... From 1996 to present, Consultant/Director; from
Trustee 1994 to 1996, President and Chief Operating
Officer, Melville Corporation (now CVS
Corporation); Director, Schein Pharmaceutical, Inc.
and LoJack Corporation.
Gary S. Schpero* (46) ....................... Prior to January 1, 2000, Partner of Simpson
Trustee Thacher & Bartlett (law firm) and Managing
Partner of Investment Management
and Investment Company Practice
Group for approximately fifteen
years.
</TABLE>
- ----------
* "Interested person" of the Trust (as that term is defined in the 1940
Act).
COMMITTEES OF THE BOARD
The Trust has a standing Audit Committee consisting of all of the Trustees who
are not "interested persons" of the Trust (as that term is defined in the 1940
Act) ("Independent Trustees"). The Audit Committee's function is to recommend to
the Board independent accountants to conduct the annual audit of the Trust's
financial statements; review with the independent accountants 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 Audit
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 Nominating and Compensation Committee consisting of all of the
Independent Trustees. The Nominating and Compensation Committee's function is to
nominate and evaluate independent trustee candidates and review the compensation
arrangements for each of the Trustees.
The Trust has a Valuation Committee consisting of Peter D. Noris, Steven M.
Joenk, Kevin R. Byrne, Brian S. O'Neil, and such other officers of the Trust and
the Manager, as well as such officers of any Adviser to any Portfolio as are
deemed necessary by Mr. Noris or Mr. Joenk 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.
COMPENSATION OF THE TRUSTEES
Each Trustee, who is not an employee of the Manager or any of its affiliates,
currently receives from the Trust an annual fee of $40,000 plus (i) an
additional fee of $4,000 for each regularly scheduled Board
38
<PAGE>
meeting attended, (ii) $2,000 for each special Board meeting or special
committee meeting attended, and (iii) $1,000 for each telephone or other
committee meeting attended, plus reimbursement for expenses in attending
in-person meetings. Upon election by the Independent Trustees of a lead
Independent Trustee, a supplemental retainer of $10,000 per year will be paid to
the lead Independent Trustee. A supplemental retainer may also be paid on
occasion to each chair of the Trust's two committees for special services.
TRUSTEE COMPENSATION TABLE
FOR THE YEAR ENDED DECEMBER 31, 1999*
-------------------------------------
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL
AGGREGATE BENEFITS ACCRUED COMPENSATION
COMPENSATION AS PART OF FROM TRUST PAID
TRUSTEE FROM THE TRUST TRUST EXPENSES TO TRUSTEES
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Peter D. Noris $ -0- $-0- $ -0-
Ted Athanassiades* $ -0- $-0- $ -0-
Jettie M. Edwards $ 39,271 $-0- $ 39,271
David W. Fox* $ -0- $-0- $ -0-
Michael Hegarty $ -0- $-0- $ -0-
William M. Kearns, Jr. $ 39,271 $-0- $ 39,271
Christopher P.A. Komisarjevsky $ 38,271** $-0- $ 38,271**
Harvey Rosenthal $ 39,271 $-0- $ 39,271
Gary S. Schpero* $ -0- $-0- $ -0-
- ---------------------------------------------------------------------------------------
</TABLE>
- ----------
* Mssrs. Athanassiades, Fox and Schpero did not receive any compensation
from the Trust in 1999 because they were not members of the Board in 1999.
** Mr. Komisarjevsky has elected to participate in the Trust's deferred
compensation plan. As of December 31, 1999, Mr. Komisarjevsky had accrued
$39,218 (including interest).
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 or her 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 20 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 Equitable, AXA Advisors, LLC ("AXA
Advisors"), Equitable Distributors, Inc. ("EDI"), or Chase Global Funds Services
Company ("Chase Global"). The Trust's principal officers are:
39
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH TRUST PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------ --------------------------------------------------------
<S> <C>
Peter D. Noris (44) ...................... From May 1995 to present, Executive Vice President
President and Chief Investment Officer, Equitable; from 1992 to
1995, Vice President, Salomon Brothers, Inc.; from July
1995 to present, Director, Alliance Capital Management,
L.P.; from July 1995 to October 1999, Trustee, Hudson
River Trust (investment company); from November
1996 to present, Executive Vice President, AXA
Advisors.
Brian S. O'Neil (47) ..................... From July 1998 to present, Executive Vice President
Vice President AXA Financial; from 1997 to 1998, Director of
Investment, AXA Investment Managers-Europe; from 1995
to 1997, Chief Investment Officer, AXA Investment
Management Paris; from 1992 to June 1995, Executive
Vice President and Chief Investment Officer AXA
Financial.
Steven M. Joenk (41) ..................... From July 1999 to present, Senior Vice President AXA
Vice President and Chief Financial Officer Financial; from 1996 to 1999, Managing Director of
MeesPierson; from 1994 to 1996, Executive Vice President
and Chief Financial Officer, Gabelli Funds, Inc.
Kevin R. Byrne (44) ...................... From July 1997 to present, Senior Vice President and
Vice President and Treasurer Treasurer, AXA Financial and Equitable; from 1990 to
present, Treasurer, Frontier Trust Company; from 1997
to present, President and Chief Executive Officer,
Equitable Casualty Insurance Company.
Patricia Louie, Esq. (44) ................ From July 1999 to present, Vice President and Counsel,
Vice President and Secretary AXA Financial and Equitable; from September 1994 to
July 1999, Assistant General Counsel of The Dreyfus
Corporation.
Kenneth T. Kozlowski (38) ................ From October 1999 to present, Assistant Vice President,
Controller AXA Financial; from October 1996 to October 1999,
Director-Fund Administration, Prudential Investments;
from 1992 to 1996, Vice President-Fund Administration,
Prudential Securities Incorporated.
Steven Case (41) ......................... From January 2000 to present, Vice President, AXA
Vice President Financial; from September 1999 to December 1999,
Assistant Treasurer, The Rockefeller Foundation; from
March 1998 to September 1999, Senior Vice President,
Putnam Investments; from January 1989 to March 1998,
Managing Director, Rogers Casey & Associates.
Mary E. Cantwell (38) .................... From July 1999 to present, Vice President, Equitable;
Vice President from September 1997 to July 1999, Assistant Vice
President, Office of the Chief Investment Officer,
Equitable; from September 1997 to present, Assistant
Vice President, AXA Advisors; from September 1997 to
present, Marketing Director, Income Management Group,
Equitable.
</TABLE>
40
<PAGE>
CONTROL PERSON AND PRINCIPAL HOLDERS OF SECURITIES
The Trust continuously offers its shares to separate accounts of insurance
companies in connection with variable life insurance contracts and variable
annuity certificates and contracts (the "Contracts") and to tax-qualified
retirement plans. The Trust's shares currently are sold to the following
shareholders: (i) insurance company separate accounts in connection with
Contracts issued by Equitable and EOC; (ii) to the Equitable Plan; and (iii)
insurance company separate accounts of: Integrity Life Insurance Company,
National Integrity Life Insurance Company, The American Franklin Life Insurance
Company, and Transamerica Occidental Life Insurance Company, each of which is
unaffiliated with Equitable. Equitable may be deemed to be a control person with
respect to the Trust by virtue of its ownership of more than 99% of the Trust's
shares as of January 25, 2000. Equitable is organized as a New York Stock life
insurance company and is a wholly owned subsidiary of AXA Financial, Inc. ("AXA
Financial"), a subsidiary of AXA, a French insurance holding company.
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
owners of the Contracts ("Contract owners") the opportunity to instruct
shareholders as to how shares allocable to 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"), the following owned Contracts entitling such persons to give voting
instructions regarding more than 5% of the outstanding shares of any Portfolio:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENTAGE
PORTFOLIO CONTRACT OWNER OWNED OF OWNERSHIP
- ---------------------------- ------------------------------------ --------------------- -------------
<S> <C> <C> <C>
Alliance Intermediate Georges Borchardt, Inc./Trustee 1,765,071 8.3%
Government Securities
Alliance Quality Bond Boston Safe Deposit and Trust Co.* 36,020,343 65.1%
EQ/Alliance Premier Growth Boston Safe Deposit and Trust Co.* 30,901,385 39.4%
EQ/Evergreen Foundation Sandra Denise Williams 65,146 7.1%
</TABLE>
- ----------
* Boston Safe Deposit and Trust Co., successor Trustee under Master Trust
Agreement for SBC Communications, Inc.'s Deferred Compensation Plans and
other Executive Benefit Plans.
The Trust may continue to offer its shares to separate accounts of insurance
companies unaffiliated with Equitable, as well as to tax-qualified retirement
plans in addition to the Equitable Plan. The Trust does not foresee any
disadvantages to Contract owners or participants in the Equitable Plan 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 in
addition to the Equitable Plan. However, it is theoretically possible that, at
some time, the interests of various Contract owners participating in the Trust
through their separate accounts and tax-qualified retirement plans might
conflict. In the case of a material irreconcilable conflict, one or more
separate accounts or 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.
INVESTMENT MANAGEMENT AND OTHER SERVICES
THE MANAGER
Equitable currently serves as the investment manager for each Portfolio. T.
Rowe Price Associates, Inc. ("T. Rowe Price"), Rowe Price-Fleming
International, Inc. ("Price-Fleming"), Putnam Investment Management, Inc.
("Putnam Management"), Massachusetts Financial Services Company ("MFS"), Morgan
Stanley Asset Management Inc. ("MSAM"), Credit Suisse Asset Management, LLC
("CSAM"),
41
<PAGE>
Mercury Asset Management US, a division of Fund Asset Management, LP
("Mercury"), Lazard Asset Management ("LAM"), a division of Lazard Freres and
Company, LLC, J.P. Morgan Investment Management Inc. ("J.P. Morgan"), Bankers
Trust Company ("Bankers Trust"), Evergreen Asset Management Corp.
("Evergreen"), Alliance Capital Management, L.P. ("Alliance"), Capital Guardian
Trust Company ("Capital Guardian") Calvert Asset Management Company, Inc.
("Calvert"), Brown Capital Management, Inc. ("Brown Capital"), Prudential
Investments Fund Management LLC ("PIFM") and Jennison Associates LLC
("Jennison") (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.
Equitable, which is a New York life insurance company and one of the largest
life insurance companies in the United States, is an indirect wholly-owned
subsidiary of AXA Financial, a subsidiary of AXA, a French 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 is the largest shareholder of AXA Financial. On January 25, 2000, AXA owned,
directly or indirectly through its affiliates, 58.4% of the outstanding common
stock of AXA Financial. AXA is the holding company for an international group of
insurance and related financial services companies. AXA's insurance operations
include activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically, with
activities principally in Western Europe, North America, and the Asia/Pacific
area and, to a lesser extent, in Africa and South America. AXA is also engaged
in asset management, investment banking, securities trading, brokerage, real
estate 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 Amended and Restated Management
Agreement ("Management Agreement"), which was initially approved by the Board of
Trustees on January 28, 2000 and by shareholders at a meeting held on April 14,
2000. Subject always to the direction and control of the Trustees of the Trust,
under the Management Agreement the Manager will have (i) overall supervisory
responsibility for the general management and investment of each Portfolio's
assets; (ii) full discretion to select new or additional Advisers for each
Portfolio; (iii) full discretion to enter into and materially modify existing
Advisory Agreements with Advisers; (iv) full discretion to terminate and replace
any Adviser; and (v) full investment discretion to make all determinations with
respect to the investment of a Portfolio's assets not then managed by an
Adviser. In connection with the Manager's responsibilities under the Management
Agreement, the Manager will assess each Portfolio's investment focus and will
seek to implement decisions with respect to the allocation and reallocation of
each Portfolio's assets among one or more current or additional Advisers from
time to time, as the Manager deems appropriate, to enable each Portfolio to
achieve its investment goals. In addition, the Manager will monitor compliance
of each Adviser with the investment objectives, policies and restrictions of any
Portfolio or Portfolios (or portions of any Portfolio) under the management of
such Adviser, and review and report to the Trustees of the Trust on the
performance of each Adviser. The Manager will furnish, or cause the appropriate
Adviser(s) to furnish, to the Trust such statistical information, with respect
to the investments that a Portfolio (or portions of any Portfolio) may hold or
contemplate purchasing, as the Trust may reasonably request. On the Manager's
own initiative, the Manager will apprise, or cause the appropriate Adviser(s) to
apprise, the Trust of important developments materially affecting each Portfolio
(or any portion of a Portfolio that they advise) and will furnish the Trust,
from time to time, with such information as may be appropriate for this purpose.
Further, the Manager agrees to furnish, or cause the appropriate Adviser(s) to
furnish, to the Trustees of the Trust such periodic and special reports as the
Trustees of the Trust may reasonably request. In addition, the Manager agrees to
cause the appropriate Adviser(s) to furnish to third-party data reporting
services all currently available standardized performance information and other
customary data.
Under the Management Agreement, the Manager also is required to furnish to the
Trust, at its own expense and without remuneration from or other cost to the
Trust, the following:
o Office space, all necessary office facilities and equipment.
42
<PAGE>
o Necessary executive and other personnel, including personnel for the
performance of clerical and other office functions, other than those
functions:
o related to and to be performed under the Trust's contract or contracts for
administration, custodial, accounting, bookkeeping, transfer and dividend
disbursing agency or similar services by the entity selected to perform
such services; or
o related to the investment advisory services to be provided by any Adviser
pursuant to an advisory agreement with the Trust ("Advisory Agreement").
o Information and services, other than services of outside counsel or
independent accountants or investment advisory services to be provided by any
Adviser under an Advisory Agreement, required in connection with the
preparation of all registration statements, prospectuses and statements of
additional information, any supplements thereto, annual, semi-annual, and
periodic reports to Trust Shareholders, regulatory authorities, or others,
and all notices and proxy solicitation materials, furnished to Shareholders
or regulatory authorities, and all tax returns.
The Management Agreement also requires the Manager (or its affiliates) to pay
all salaries, expenses, and fees of the Trustees and officers of the Trust who
are affiliated with the Manager or its affiliates.
Each Portfolio pays a fee to the Manager as set forth in the Prospectus. The
Manager and the Trust have also entered into an expense limitation agreement
with respect to each Portfolio (except for the EQ/Aggressive Stock Portfolio,
the EQ/Balanced Portfolio and the Portfolios for which Alliance serves as
Investment Adviser, other than EQ/Alliance Premier Growth Portfolio and
EQ/Alliance Technology Portfolio) ("Expense Limitation Agreement"), 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 (with certain exceptions
described in the Prospectus) of each Portfolio are limited to the extent
described in the "Management of the Trust--Expense Limitation Agreement" section
of the Prospectus.
In addition to the management fees, the Management Agreement requires the Trust
to pay all expenses not specifically assumed by the Manager, including without
limitation, the following: fees and expense of its organization, operations, and
business not specifically assumed or agreed to be paid by the Manager under the
Management Agreement, or by an Adviser, as provided in an Advisory Agreement;
fees and expenses of its independent accountants and of legal counsel for itself
and the Trust's independent Trustees; the costs of preparing, setting in type,
printing and mailing annual and semi-annual reports, proxy statements,
prospectuses, prospectus supplements and statements of additional information to
shareholders; 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 on a basis that the Board deems 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. In
addition, as discussed in greater detail below under "Distribution of the
Trust's Shares," the Class IB shares of each Portfolio may pay for certain
distribution-related expenses in connection with activities primarily intended
to result in the sale of its shares.
The continuance of the Management Agreement, with respect to each Portfolio,
must be specifically approved at least annually (i) by the Board 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).
43
<PAGE>
The tables below show the fees paid by each Portfolio to the Manager (or the
predecessor Manager to the Alliance Portfolios) during the years ended December
31, 1997, 1998 and 1999 respectively. The first column shows each fee without
fee waivers, the second column shows the fees actually paid to the Manager after
fee waivers and the third column shows the total amount of fees waived by the
Manager and other expenses of each Portfolio assumed by the Manager pursuant to
the Expense Limitation Agreement.
FISCAL YEAR ENDED DECEMBER 31, 1997*
<TABLE>
<CAPTION>
TOTAL AMOUNT OF
MANAGEMENT FEE FEES WAIVED AND
PAID TO MANAGER OTHER EXPENSES
PORTFOLIO MANAGEMENT FEE AFTER FEE WAIVER ASSUMED BY MANAGER
- ------------------------------------------------ ---------------- ------------------ -------------------
<S> <C> <C> <C>
Mercury Basic Value Equity ..................... $ 73,477 $ 0 $123,460
Mercury World Strategy ......................... $ 49,425 $ 0 $115,763
MFS Emerging Growth Companies .................. $169,781 $ 0 $280,111
MFS Research ................................... $186,533 $ 0 $292,185
EQ/Putnam Balanced ............................. $ 50,946 $ 0 $137,739
EQ/Putnam Growth & Income Value ................ $227,936 $ 0 $350,861
EQ/Putnam International Equity ................. $130,202 $ 0 $228,427
EQ/Putnam Investors Growth ..................... $ 67,578 $ 0 $141,578
T. Rowe Price Equity Income .................... $166,401 $ 0 $250,098
T. Rowe Price International Stock .............. $213,839 $ 0 $365,096
Warburg Pincus Small Company Value ............. $252,178 $ 5,693 $246,485
Morgan Stanley Emerging Markets Equity ......... $ 66,404 $23,496 $ 42,908
</TABLE>
- ----------
* Except for Morgan Stanley Emerging Markets Equity Portfolio, each of the
Portfolios above commenced operations on May 1, 1997. Morgan Stanley
Emerging Markets Equity Portfolio commenced operations on August 20,
1997. The BT Equity 500 Index, BT International Equity Index, BT Small
Company Index, J.P. Morgan Core Bond, Lazard Large Cap Value and Lazard
Small Cap Value Portfolios are not included in the above table because
they had no operations during the fiscal year ended December 31, 1997
except for the issuance of Class IB shares.
CALENDAR YEAR ENDED DECEMBER 31, 1998*
<TABLE>
<CAPTION>
TOTAL AMOUNT OF
MANAGEMENT FEE FEES WAIVED AND
PAID TO MANAGER OTHER EXPENSES
PORTFOLIO MANAGEMENT FEE AFTER FEE WAIVER ASSUMED BY MANAGER
- ------------------------------------------------ ---------------- ------------------ -------------------
<S> <C> <C> <C>
Mercury Basic Value Equity ..................... $ 632,783 $ 396,615 $236,168
Mercury World Strategy ......................... $ 179,486 $ 75,018 $104,468
MFS Emerging Growth Companies .................. $1,351,932 $ 881,342 $470,590
MFS Research ................................... $1,319,969 $ 842,389 $477,580
EQ/Putnam Balanced ............................. $ 269,939 $ 99,960 $169,979
EQ/Putnam Growth & Income Value ................ $1,654,313 $1,069,169 $585,144
EQ/Putnam International Equity ................. $ 673,315 $ 421,928 $251,387
EQ/Putnam Investors Growth ..................... $ 497,899 $ 282,976 $214,923
T. Rowe Price Equity Income .................... $1,000,224 $ 661,278 $338,946
T. Rowe Price International Stock .............. $ 788,805 $ 573,446 $215,359
Warburg Pincus Small Company Value ............. $1,012,129 $ 738,570 $273,559
Morgan Stanley Emerging Markets Equity ......... $ 364,795 $ 105,117 $259,678
BT Equity 500 Index ............................ $ 210,001 $ 0 $232,207
BT International Equity Index .................. $ 98,039 $ 0 $180,103
BT Small Company Index ......................... $ 45,728 $ 0 $220,614
J.P. Morgan Core Bond .......................... $ 172,507 $ 86,266 $ 86,241
Lazard Large Cap Value ......................... $ 160,570 $ 73,011 $ 87,559
Lazard Small Cap Value ......................... $ 194,797 $ 111,500 $ 83,297
</TABLE>
44
<PAGE>
The EQ/Aggressive Stock, EQ/Balanced, Alliance Common Stock, Alliance
Conservative Investors Portfolio, Alliance Equity Index, Alliance Global,
Alliance Growth and Income, Alliance Growth Investors, Alliance High Yield,
Alliance Intermediate Government Securities, Alliance International, Alliance
Money Market, Alliance Quality Bond, Alliance Small Cap Growth, EQ/Evergreen
Foundation, EQ/Evergreen, MFS Growth with Income, EQ/Alliance Premier Growth,
Capital Guardian Research, Capital Guardian U.S. Equity and Capital Guardian
International Portfolios are not included in the above tables because they had
no operations before the year ended December 31, 1998.
CALENDAR YEAR ENDED DECEMBER 31, 1999*
<TABLE>
<CAPTION>
TOTAL AMOUNT OF
MANAGEMENT FEE FEES WAIVED AND
PAID TO MANAGER OTHER EXPENSES
PORTFOLIO MANAGEMENT FEE AFTER FEE WAIVER ASSUMED BY MANAGER
- ------------------------------------------------------- ---------------- ------------------ -------------------
<S> <C> <C> <C>
Mercury Basic Value Equity ............................ $ 1,290,548 $ 1,027,977 $262,571
Mercury World Strategy ................................ $ 214,078 $ 152,180 $ 61,898
MFS Emerging Growth Companies ......................... $ 4,668,243 $ 3,839,743 $828,500
MFS Research .......................................... $ 2,891,285 $ 2,318,049 $573,236
EQ/Putnam Balanced .................................... $ 526,299 $ 362,752 $163,547
EQ/Putnam Growth & Income Value ....................... $ 2,955,452 $ 2,393,031 $562,421
EQ/Putnam International Equity ........................ $ 1,352,745 $ 1,238,715 $114,030
EQ/Putnam Investors Growth ............................ $ 1,469,035 $ 1,328,348 $140,687
T. Rowe Price Equity Income ........................... $ 1,487,784 $ 1,170,353 $317,391
T. Rowe Price International Stock ..................... $ 1,186,330 $ 1,044,609 $141,721
Warburg Pincus Small Company Value .................... $ 974,661 $ 845,954 $128,707
Morgan Stanley Emerging Markets Equity ................ $ 960,297 $ 426,642 $533,655
BT Equity 500 Index ................................... $ 1,077,825 $ 571,204 $506,691
BT International Equity Index ......................... $ 230,274 $ 159,545 $ 70,729
BT Small Company Index ................................ $ 104,701 $ 0 $207,306
J.P. Morgan Core Bond ................................. $ 589,231 $ 466,067 $123,164
Lazard Large Cap Value ................................ $ 578,767 $ 513,394 $ 65,373
Lazard Small Cap Value ................................ $ 480,925 $ 421,716 $ 59,209
EQ/Aggressive Stock** ................................. $23,118,072 $23,118,072 $ 0
EQ/Balanced** ......................................... $ 8,110,873 $ 8,110,873 $ 0
Alliance Common Stock** ............................... $51,373,606 $51,373,606 $ 0
Alliance Conservative Investors** ..................... $ 2,038,794 $ 2,038,794 $ 0
Alliance Equity Index** ............................... $ 6,630,350 $ 6,630,350 $ 0
Alliance Global** ..................................... $10,032,682 $10,032,682 $ 0
Alliance Growth and Income** .......................... $ 6,692,196 $ 6,692,196 $ 0
Alliance Growth Investors** ........................... $11,425,161 $11,425,161 $ 0
Alliance High Yield** ................................. $ 3,569,825 $ 3,569,825 $ 0
Alliance Intermediate Government Securities** ......... $ 1,009,174 $ 1,009,174 $ 0
Alliance International** .............................. $ 2,054,558 $ 2,054,558 $ 0
Alliance Money Market** ............................... $ 4,094,768 $ 4,094,768 $ 0
Alliance Quality Bond** ............................... $ 1,768,157 $ 1,768,157 $ 0
Alliance Small Cap Growth** ........................... $ 2,702,328 $ 2,702,328 $ 0
EQ/Evergreen Foundation ............................... $ 28,270 $ 0 $ 44,492
EQ/Evergreen .......................................... $ 19,857 $ 0 $ 47,864
MFS Growth with Income ................................ $ 233,224 $ 103,187 $130,037
EQ/Alliance Premier Growth ............................ $ 968,447 $ 728,821 $239,626
Capital Guardian Research ............................. $ 79,240 $ 29,124 $ 50,116
Capital Guardian U.S. Equity .......................... $ 137,165 $ 77,338 $ 59,827
Capital Guardian International ........................ $ 110,978 $ 43,763 $ 67,215
Calvert Socially Responsible .......................... $ 4,861 $ 0 $ 31,969
</TABLE>
- ----------
* The EQ/Alliance Premier Growth, Capital Guardian Research, Capital
Guardian U.S. Equity, and Capital Guardian International Portfolios
commenced operations on April 30, 1999. The Calvert Socially Responsible
Portfolio commenced operations on August 30, 1999. The EQ/Aggressive
Stock,
45
<PAGE>
EQ/Balanced, Alliance Common Stock, Alliance Conservative Investors, Alliance
Equity Index, Alliance Global, Alliance Growth and Income, Alliance Growth
Investors, Alliance High Yield, Alliance Intermediate Government Securities,
Alliance International, Alliance Money Market, Alliance Quality Bond, and
Alliance Small Cap Growth Portfolios commenced operations on October 18,
1999. The EQ/Alliance Technology Portfolio is not included in the above table
because it had no operations during the fiscal year ended December 31, 1999.
** Also reflects fees paid to the previous Investment Manager, Alliance Capital
Management, LP, during 1999.
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 T. Rowe Price and Price-Fleming,
respectively. Additionally, the Manager has entered into an Advisory Agreement
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. The Manager has entered into an Advisory
Agreement on behalf of EQ/Aggressive Stock Portfolio, MFS Research Portfolio,
MFS Emerging Growth Companies Portfolio and MFS Growth with Income Portfolio
with MFS. 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 CSAM, respectively. The Manager has entered into an
Advisory Agreement on behalf of Mercury World Strategy Portfolio and Mercury
Basic Value Equity Portfolio with Mercury. 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 entered into an Advisory
Agreement on behalf of the J.P. Morgan Core Bond Portfolio with J.P. Morgan. The
Manager has entered into an Advisory Agreement on behalf of BT Small Company
Index Portfolio, BT International Equity Index Portfolio and BT Equity 500 Index
Portfolio with Bankers Trust. The Manager has entered into an Advisory Agreement
on behalf of EQ/Evergreen Foundation Portfolio and EQ/Evergreen Portfolio with
Evergreen. The Manager has entered into an Advisory Agreement on behalf of
EQ/Alliance Premier Growth Portfolio, Alliance Portfolios, EQ/Aggressive Stock
Portfolio, EQ/Balanced Portfolio and the EQ/ Alliance Technology Portfolio with
Alliance. The Manager has entered into an Advisory Agreement on behalf of
Capital Guardian Research Portfolio, Capital Guardian U.S. Equity Portfolio,
Capital Guardian International Portfolio and EQ/Balanced Portfolio with Capital
Guardian. The Manager has entered into Advisory Agreements on behalf of Calvert
Socially Responsible Portfolio with Calvert and Brown Capital. Finally, the
Manager has entered into Advisory Agreements on behalf of EQ/Balanced Portfolio
with PIFM and Jennison. The Advisory Agreements obligate T. Rowe Price,
Price-Fleming, Putnam Management, MFS, CSAM, MSAM, Mercury, LAM, J.P. Morgan,
Bankers Trust, Evergreen, Alliance, Capital Guardian, Calvert, Brown Capital,
PIFM and Jennison to: (i) make investment decisions on behalf of 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.
46
<PAGE>
During the years ended December 31, 1997, 1998 and 1999, respectively, the
Manager paid the following fees to each Adviser with respect to the Portfolios
listed below pursuant to the Investment Advisory Agreements:
FISCAL YEAR ENDED DECEMBER 31, 1997*
PORTFOLIO ADVISORY FEE PAID
- ---------------------------------------------------- ------------------
Mercury Basic Value Equity ...................... $ 53,462
Mercury World Strategy .......................... $ 35,301
MFS Emerging Growth Companies ................... $123,543
MFS Research .................................... $135,730
EQ/Putnam Balanced .............................. $ 46,342
EQ/Putnam Growth & Income Value ................. $207,320
EQ/Putnam International Equity .................. $120,864
EQ/Putnam Investors Growth ...................... $ 61,471
T. Rowe Price Equity Income ..................... $121,142
T. Rowe Price International Stock ............... $185,338
Warburg Pincus Small Company Value .............. $193,934
Morgan Stanley Emerging Markets Equity .......... $ 66,277
- ----------
* Except for Morgan Stanley Emerging Markets Equity Portfolio, each of the
Portfolios above commenced operation on May 1, 1997. Morgan Stanley
Emerging Markets Equity Portfolio commenced operations on August 20, 1997.
No advisory fees were paid to Bankers Trust, J.P. Morgan, LAM, Evergreen,
MFS on behalf of MFS Growth with Income Portfolio, Alliance, Capital
Guardian, Calvert, or Brown Capital during the fiscal year ended December
31, 1997.
CALENDAR YEAR ENDED DECEMBER 31, 1998*
PORTFOLIO ADVISORY FEE PAID
- ---------------------------------------------------- ------------------
Mercury Basic Value Equity ...................... $ 454,234
Mercury World Strategy .......................... $ 128,253
MFS Emerging Growth Companies ................... $ 955,058
MFS Research .................................... $ 935,189
EQ/Putnam Balanced .............................. $ 245,492
EQ/Putnam Growth & Income Value ................. $1,395,817
EQ/Putnam International Equity .................. $ 625,984
EQ/Putnam Investors Growth ...................... $ 453,137
T. Rowe Price Equity Income ..................... $ 727,501
T. Rowe Price International Stock ............... $ 506,294
Warburg Pincus Small Company Value .............. $ 778,163
Morgan Stanley Emerging Markets Equity .......... $ 364,354
BT Equity 500 Index ............................. $ 42,047
BT International Equity Index ................... $ 42,067
BT Small Company Index .......................... $ 9,143
J.P. Morgan Core Bond ........................... $ 15,022
Lazard Large Cap Value .......................... $ 123,634
Lazard Small Cap Value .......................... $ 158,214
- ----------
* No advisory fees were paid to Evergreen, MFS on behalf of MFS Growth with
Income Portfolio, Alliance, Capital Guardian, Calvert or Brown Capital
during the year ended December 31, 1998. The EQ/Aggressive Stock,
EQ/Balanced, Alliance Common Stock, Alliance Conservative Investors
Portfolio, Alliance Equity Index, Alliance Global, Alliance Growth and
Income, Alliance Growth Investors, Alliance High Yield, Alliance
Intermediate Government Securities, Alliance International, Alliance
Money Market, Alliance Quality Bond, Alliance Small Cap Growth,
EQ/Evergreen Foun-
47
<PAGE>
dation, EQ/Evergreen, MFS Growth with Income, EQ/Alliance Premier Growth,
Capital Guardian Research, Capital Guardian U.S. Equity, Capital Guardian
International and Calvert Socially Responsible Portfolios are not included in
the above tables because they had no operations before the year ended December
31, 1998.
CALENDAR YEAR ENDED DECEMBER 31, 1999*
PORTFOLIO ADVISORY FEE PAID
- --------------------------------------------------------- ------------------
Mercury Basic Value Equity ........................... $ 1,043,205
Mercury World Strategy ............................... $ 153,072
MFS Emerging Growth Companies ........................ $ 2,684,397
MFS Research ......................................... $ 1,954,323
EQ/Putnam Balanced ................................... $ 478,431
EQ/Putnam Growth & Income Value ...................... $ 2,255,697
EQ/Putnam International Equity ....................... $ 1,215,477
EQ/Putnam Investors Growth ........................... $ 1,270,694
T. Rowe Price Equity Income .......................... $ 1,082,031
T. Rowe Price International Stock .................... $ 872,269
Warburg Pincus Small Company Value ................... $ 749,779
Morgan Stanley Emerging Markets Equity ............... $ 942,520
BT Equity 500 Index .................................. $ 215,782
BT International Equity Index ........................ $ 99,030
BT Small Company Index ............................... $ 20,962
J.P. Morgan Core Bond ................................ $ 388,531
Lazard Large Cap Value ............................... $ 433,489
Lazard Small Cap Value ............................... $ 390,856
EQ/Aggressive Stock .................................. $17,824,782
EQ/Balanced .......................................... $ 5,551,057
Alliance Common Stock ................................ $34,006,030
Alliance Conservative Investors ...................... $ 1,407,022
Alliance Equity Index ................................ $ 3,820,426
Alliance Global ...................................... $ 7,963,394
Alliance Growth and Income ........................... $ 5,040,401
Alliance Growth Investors ............................ $ 8,512,916
Alliance High Yield .................................. $ 2,714,429
Alliance Intermediate Government Securities .......... $ 706,450
Alliance International ............................... $ 1,711,969
Alliance Money Market ................................ $ 2,487,138
Alliance Quality Bond ................................ $ 1,263,047
Alliance Small Cap Growth ............................ $ 1,952,795
EQ/Evergreen Foundation .............................. $ 18,853
EQ/Evergreen ......................................... $ 14,832
MFS Growth with Income ............................... $ 577,857
EQ/Alliance Premier Growth ........................... $ 538,783
Capital Guardian Research ............................ $ 60,957
Capital Guardian U.S. Equity ......................... $ 105,500
Capital Guardian International ....................... $ 96,545
Calvert Socially Responsible ......................... $ 2,600
- ----------
* The EQ/Alliance Premier Growth, Capital Guardian Research, Capital
Guardian U.S. Equity, and Capital Guardian International Portfolios
commenced operations on April 30, 1999. The Calvert
48
<PAGE>
Socially Responsible Portfolio commenced operations on August 30, 1999. The
EQ/Aggressive Stock, EQ/Balanced, Alliance Common Stock, Alliance
Conservative Investors, Alliance Equity Index, Alliance Global, Alliance
Growth and Income, Alliance Growth Investors, Alliance High Yield, Alliance
Intermediate Government Securities, Alliance International, Alliance Money
Market, Alliance Quality Bond, and Alliance Small Cap Growth Portfolios
commenced operations on October 18, 1999. The EQ/Alliance Technology
Portfolio is not included in the above table because it had no operations
during the fiscal year ended December 31, 1999.
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 received an exemptive order from the SEC ("Multi-Manager Order"). The
Multi-Manager Order permits the Manager, subject to approval of the Board of
Trustees, to: (i) select new or additional Advisers for the of the Trust's
Portfolios; (ii) enter into new investment advisory agreements and materially
modify existing investment advisory agreements; and (iii) terminate and replace
the Advisers without obtaining approval of the relevant Portfolio's
shareholders. However, the Manager may not enter into an investment advisory
agreement with an "affiliated person" of the Manager (as that term is defined in
Section 2(a)(3) of the 1940 Act) ("Affiliated Adviser"), such as Alliance,
unless the investment advisory agreement with the Affiliated Adviser, including
compensation hereunder, is approved by the affected Portfolio's Shareholders,
including, in instances in which the investment advisory agreement pertains to a
newly formed Portfolio, the Portfolio's initial shareholder. 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 Section
17(e) of the 1940 Act.
THE ADMINISTRATOR
Pursuant to an administrative agreement ("Mutual Funds Services Agreement"),
Equitable ("Administrator") provides the Trust with 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. Chase Global Funds Services Company ("Chase Global")
served as the administrator for the Trust through April 30, 2000.
During the years ended December 31, 1997, 1998 and 1999, respectively, Chase
Global as the administrator was paid the following fees, by the Trust with
respect to each Portfolio:
49
<PAGE>
FISCAL YEAR ENDED DECEMBER 31, 1997*
PORTFOLIO ADMINISTRATION FEE
- ---------------------------------------------------- -------------------
Mercury Basic Value Equity ...................... $ 11,213
Mercury World Strategy .......................... $ 13,633
MFS Emerging Growth Companies ................... $ 17,902
MFS Research .................................... $ 18,033
EQ/Putnam Balanced .............................. $ 12,451
EQ/Putnam Growth & Income Value ................. $199,904
EQ/Putnam International Equity .................. $ 16,721
EQ/Putnam Investors Growth ...................... $ 11,247
T. Rowe Price Equity Income ..................... $ 17,376
T. Rowe Price International Stock ............... $ 30,599
Warburg Pincus Small Company Value .............. $ 17,213
Morgan Stanley Emerging Markets Equity .......... $ 9,652
- ----------
* Except for Morgan Stanley Emerging Markets Equity Portfolio, each of the
Portfolios above commenced operations on May 1, 1997. Morgan Stanley
Emerging Markets Equity Portfolio commenced operations on August 20, 1997.
The BT Equity 500 Index, BT International Equity Index, BT Small Company
Index, J.P. Morgan Core Bond, Lazard Large Cap Value, Lazard Small Cap
Value Portfolios did not pay a fee to the Administrator during the fiscal
year ended December 31, 1997.
CALENDAR YEAR ENDED DECEMBER 31, 1998*
PORTFOLIO ADMINISTRATION FEE
- ---------------------------------------------------- -------------------
Mercury Basic Value Equity ...................... $ 92,138
Mercury World Strategy .......................... $ 48,992
MFS Emerging Growth Companies ................... $166,093
MFS Research .................................... $160,767
EQ/Putnam Balanced .............................. $ 65,412
EQ/Putnam Growth & Income Value ................. $191,609
EQ/Putnam International Equity .................. $ 92,040
EQ/Putnam Investors Growth ...................... $ 80,365
T. Rowe Price Equity Income ..................... $131,283
T. Rowe Price International Stock ............... $120,081
Warburg Pincus Small Company Value .............. $113,472
Morgan Stanley Emerging Markets Equity .......... $ 58,490
BT Equity 500 Index ............................. $ 91,209
BT International Equity Index ................... $ 89,083
BT Small Company Index .......................... $ 97,220
J.P. Morgan Core Bond ........................... $ 52,546
Lazard Large Cap Value .......................... $ 47,035
Lazard Small Cap Value .......................... $ 45,857
- ----------
* The EQ/Aggressive Stock, EQ/Balanced, Alliance Common Stock, Alliance
Conservative Investors, Alliance Equity Index, Alliance Global, Alliance
Growth and Income, Alliance Growth Investors, Alliance High Yield,
Alliance Intermediate Government Securities, Alliance International,
Alliance Money Market, Alliance Quality Bond, Alliance Small Cap Growth,
EQ/Evergreen Foundation, EQ/Evergreen, MFS Growth with Income,
EQ/Alliance Premier Growth, Capital Guardian Research, Capital Guardian
U.S. Equity, Capital Guardian International, and Calvert Socially
Responsible Portfolios did not pay a fee to the Administrator during the
year ended December 31, 1998.
50
<PAGE>
CALENDAR YEAR ENDED DECEMBER 31, 1999*
PORTFOLIO ADMINISTRATION FEE
- ---------------------------------------------------------- -------------------
Mercury Basic Value Equity ............................. $132,383
Mercury World Strategy ................................. $ 49,920
MFS Emerging Growth Companies .......................... $432,631
MFS Research ........................................... $259,717
EQ/Putnam Balanced ..................................... $ 84,637
EQ/Putnam Growth & Income Value ........................ $264,626
EQ/Putnam International Equity ......................... $129,023
EQ/Putnam Investors Growth ............................. $149,208
T. Rowe Price Equity Income ............................ $161,862
T. Rowe Price International Stock ...................... $148,409
Warburg Pincus Small Company Value ..................... $105,578
Morgan Stanley Emerging Markets Equity ................. $ 89,226
BT Equity 500 Index .................................... $245,934
BT International Equity Index .......................... $119,286
BT Small Company Index ................................. $135,672
J.P. Morgan Core Bond .................................. $103,847
Lazard Large Cap Value ................................. $ 90,123
Lazard Small Cap Value ................................. $ 67,826
EQ/Aggressive Stock** .................................. $144,899
EQ/Balanced** .......................................... $ 73,801
Alliance Common Stock** ................................ $515,943
Alliance Conservative Investors** ...................... $ 20,311
Alliance Equity Index** ................................ $ 87,436
Alliance Global** ...................................... $ 64,383
Alliance Growth and Income** ........................... $ 51,841
Alliance Growth Investors** ............................ $ 87,536
Alliance High Yield** .................................. $ 24,663
Alliance Intermediate Government Securities** .......... $ 12,095
Alliance International** ............................... $ 13,802
Alliance Money Market** ................................ $ 50,261
Alliance Quality Bond** ................................ $ 16,718
Alliance Small Cap Growth** ............................ $ 16,927
EQ/Evergreen Foundation ................................ $ 33,544
EQ/Evergreen ........................................... $ 31,311
MFS Growth with Income ................................. $ 53,070
EQ/Alliance Premier Growth ............................. $ 64,596
Capital Guardian Research .............................. $ 29,002
Capital Guardian U.S. Equity ........................... $ 33,230
Capital Guardian International ......................... $ 35,925
Calvert Socially Responsible ........................... $ 16,776
- ----------
* The EQ/Alliance Premier Growth, Capital Guardian Research, Capital
Guardian U.S. Equity, and Capital Guardian International Portfolios
commenced operations on April 30, 1999. The Calvert Socially Responsible
Portfolio commenced operations on August 30, 1999. The EQ/Aggressive
Stock, EQ/Balanced, Alliance Common Stock, Alliance Conservative
Investors, Alliance Equity Index, Alliance Global, Alliance Growth and
Income, Alliance Growth Investors, Alliance High Yield, Alliance
Intermediate Government Securities, Alliance International, Alliance
Money Market, Alliance Quality Bond, and Alliance Small Cap Growth
Portfolios commenced operations on October 18, 1999. The EQ/Alliance
Technology Portfolio is not included in the above table because it had no
operations during the fiscal year ended December 31, 1999.
** Amount paid to Administrator for the period October 18, 1999 to December
31, 1999.
51
<PAGE>
THE DISTRIBUTORS
The Trust has distribution agreements with AXA Advisors and EDI (each also
referred to as a "Distributor," and together "Distributors"), in which AXA
Advisors and EDI serve as Distributors for the Trust's Class IA shares and Class
IB shares. AXA Advisors and EDI are each an indirect wholly-owned subsidiary of
Equitable and the address for each is 1290 Avenue of the Americas, New York, New
York 10104.
The Trust's distribution agreements with respect to the Class IA shares and
Class IB shares ("Distribution Agreements") were reapproved by the Board of
Trustees at a Board meeting held on April 12, 1999. The Distribution Agreements
will remain in effect from year to year provided 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 Class IB 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 their use in
connection with the offering of the Class IA shares to prospective Contract
owners and preparing, printing and mailing any other literature or advertising
in connection with the offering of the Class IA shares to prospective Contract
owners.
Pursuant to the Class IB 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, and 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 Class IB 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 Class IB 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 Class IB Distribution Plan and the Distribution
Agreements, each Portfolio is authorized to make payments monthly to the
Distributors that 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 Class IB 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 either the Class IB Distribution Plan and in
connection with their annual consideration of the Class IB Distribution 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.
52
<PAGE>
The Distributors for each class of shares will pay all fees and expenses in
connection with their respective 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. AXA Advisors also serves as the Distributor for
shares of the Trust to the Equitable Plan. 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 Class IB Distribution Plan with respect to the Class IB
shares and related services and fees thereunder is provided in the Prospectus
for each class of shares of the Portfolios. On March 14, 2000, the Board of
Trustees of the Trust, including the Independent Trustees, considered the
reapproval of the Class IB Distribution Plan. In connection with its
consideration of the Class IB Distribution Plan, the Board of Trustees was
furnished with a copy of the Class IB Distribution Plan and the related
materials, including information related to the advantages and disadvantages of
the Class IB Distribution Plan. Legal counsel for the Independent Trustees
discussed the legal and regulatory considerations in readopting the Class IB
Distribution Plan.
The Board of Trustees considered various factors in connection with its decision
as to whether to reapprove the Class IB Distribution Plan, including: (i) the
nature and causes of the circumstances which makes continuation of the Class IB
Distribution Plan, necessary and appropriate; (ii) the way in which the Class IB
Distribution Plan would continue to address those circumstances, including the
nature and potential amount of expenditures; (iii) the nature of the anticipated
benefits; (iv) the possible benefits of the Class IB Distribution Plan to any
other person relative to those of the Trust; (v) the effect of the Class IB
Distribution Plan on existing owners of Contracts; (vi) the merits of possible
alternative plans or pricing structures; (vii) competitive conditions in the
variable products industry; and (viii) the relationship of the Class IB
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, including the Independent Trustees, unanimously determined, in the
exercise of its business judgment, that the Class IB Distribution Plan is
reasonably likely to continue to benefit the Trust and the shareholders of its
Portfolios and approved its continuance.
The Class IB 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 Class IB 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 Class IB Distribution Plan or
any Rule 12b-1 related agreement, as applicable. In addition, the Class IB
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 Class IB 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 any Portfolio without the approval of Class IB shareholders
of that Portfolio.
53
<PAGE>
The table below shows the amount paid by each Portfolio to each of the
Distributors pursuant to the Distribution Plan for the year ended December 31,
1999*:
<TABLE>
<CAPTION>
DISTRIBUTION FEE DISTRIBUTION FEE TOTAL
PORTFOLIO PAID TO AXA ADVISORS PAID TO EDI DISTRIBUTION FEES
- ----------------------------------------------------- ---------------------- ------------------ ------------------
<S> <C> <C> <C>
Alliance Common Stock ............................... $1,479,837 $1,482,881 $2,962,718
Alliance Conservative Investors ..................... $ 140,852 $ 0 $ 140,852
Alliance Equity Index ............................... $ 18,758 $ 18 $ 18,776
Alliance Global ..................................... $ 142,573 $ 34,120 $ 176,693
Alliance Growth and Income .......................... $ 450,842 $ 0 $ 450,842
Alliance Growth Investors ........................... $ 288,332 $ 48,694 $ 337,026
Alliance High Yield ................................. $ 172,597 $ 381,059 $ 553,656
Alliance Intermediate Government Securities ......... $ 100,645 $ 0 $ 100,645
Alliance International .............................. $ 24,988 $ 0 $ 24,988
Alliance Money Market ............................... $ 381,873 $ 630,827 $1,012,700
Alliance Quality Bond ............................... $ 612 $ 0 $ 612
Alliance Small Cap Growth ........................... $ 87,238 $ 197,833 $ 285,071
BT Equity 500 Index ................................. $ 297,414 $ 780,411 $1,077,825
BT International Equity Index ....................... $ 23,965 $ 134,928 $ 158,893
BT Small Company Index .............................. $ 20,847 $ 83,854 $ 104,701
Calvert Socially Responsible ........................ $ 1,869 $ 0 $ 1,869
Capital Guardian U.S. Equity ........................ $ 12,357 $ 40,399 $ 52,756
Capital Guardian International ...................... $ 12,107 $ 24,886 $ 36,993
Capital Guardian Research ........................... $ 11,913 $ 18,569 $ 30,482
EQ/Aggressive Stock ................................. $ 220,148 $ 238,459 $ 458,607
EQ/Balanced ......................................... $ 17,801 $ 0 $ 17,801
EQ/Alliance Premier Growth .......................... $ 141,457 $ 103,105 $ 244,562
EQ/Evergreen ........................................ $ 3,082 $ 3,532 $ 6,614
EQ/Evergreen Foundation ............................. $ 2,162 $ 9,048 $ 11,210
EQ/Putnam Balanced .................................. $ 239,227 $ 0 $ 239,227
EQ/Putnam Growth & Income Value ..................... $ 389,327 $ 954,060 $1,343,387
EQ/Putnam International Equity ...................... $ 47 $ 483,076 $ 483,123
EQ/Putnam Investors Growth .......................... $ 81 $ 667,662 $ 667,743
J.P. Morgan Core Bond ............................... $ 0 $ 327,351 $ 327,351
Lazard Large Cap Value .............................. $ 1 $ 263,075 $ 263,076
Lazard Small Cap Value .............................. $ 248 $ 150,041 $ 150,289
Mercury Basic Value Equity .......................... $ 409,938 $ 176,675 $ 586,613
Mercury World Strategy .............................. $ 58,253 $ 18,203 $ 76,456
MFS Emerging Growth Companies ....................... $1,514,437 $ 557,262 $2,071,699
MFS Growth with Income .............................. $ 8,032 $ 98,062 $ 106,094
MFS Research ........................................ $ 630,001 $ 684,220 $1,314,221
Morgan Stanley Emerging Markets Equity .............. $ 151,994 $ 56,766 $ 208,760
T. Rowe Price Equity Income ......................... $ 676,266 $ 0 $ 676,266
T. Rowe Price International Stock ................... $ 395,443 $ 0 $ 395,443
Warburg Pincus Small Company Value .................. $ 370,028 $ 0 $ 370,028
</TABLE>
* The EQ/Alliance Technology Portfolio is not included in the above table
because it had no operations during the fiscal year ended December 31,
1999.
54
<PAGE>
BROKERAGE ALLOCATION AND OTHER STRATEGIES
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.
Transactions on stock exchanges involve the payment of brokerage commissions. In
transactions on stock exchanges in the United States, 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.
The Manager, subject to seeking the most favorable price and best execution and
in compliance with the Conduct Rules of the National Association of Securities
Dealers, Inc., may consider sales of shares of the Trust as a factor in the
selection of broker-dealers. The Trust may direct the Manager to cause Advisers
to effect securities transactions through broker-dealers in a manner that would
help to generate resources to (i) pay the cost of certain expenses which the
Trust is required to pay or for which the Trust is required to arrange payment
pursuant to the Management Agreement ("Trust Expenses"); or (ii) finance
activities that are primarily intended to result in the sale of Trust shares. At
the discretion of the Board of Trustees, such resources may be used to pay or
cause the payment of Trust Expenses or may be used to finance activities that
are primarily intended to result in the sale of Trust shares.
55
<PAGE>
During the years ended December 31, 1997, 1998 and 1999, respectively, the
Portfolios paid the amounts indicated in brokerage commissions:
FISCAL YEAR ENDED DECEMBER 31, 1997*
PORTFOLIO BROKERAGE COMMISSIONS PAID
- ------------------------------------------------- ---------------------------
Mercury Basic Value Equity ................... $ 75,654
Mercury World Strategy ....................... $ 43,547
MFS Emerging Growth Companies ................ $146,321
MFS Research ................................. $146,977
EQ/Putnam Balanced ........................... $ 15,797
EQ/Putnam Growth & Income Value .............. $109,815
EQ/Putnam International Equity ............... $164,293
EQ/Putnam Investors Growth ................... $ 25,284
T. Rowe Price Equity Income .................. $ 67,627
T. Rowe Price International Stock ............ $244,072
Warburg Pincus Small Company Value ........... $220,138
Morgan Stanley Emerging Markets Equity ....... $ 64,176
- ----------
* Except for Morgan Stanley Emerging Markets Equity Portfolio, each of the
Portfolios above commenced operations on May 1, 1998. Morgan Stanley
Emerging Markets Equity Portfolio commenced operations on August 20,
1997. The BT Equity 500 Index, BT International Equity Index, BT Small
Company Index, J.P. Morgan Core Bond, Lazard Large Cap Value and Lazard
Small Cap Value Portfolios are not included in the above table because
they had no operations during the fiscal year ended December 31, 1997
except for the issuance of Class IB shares.
CALENDAR YEAR ENDED DECEMBER 31, 1998*
PORTFOLIO BROKERAGE COMMISSIONS PAID
- ---------------------------------------------- -------------------------
Mercury Basic Value Equity ................ $397,472
Mercury World Strategy .................... $ 89,702
MFS Emerging Growth Companies ............. $572,677
MFS Research .............................. $602,002
EQ/Putnam Balanced ........................ $ 62,166
EQ/Putnam Growth & Income Value ........... $529,088
EQ/Putnam International Equity ............ $502,896
EQ/Putnam Investors Growth ................ $141,031
T. Rowe Price Equity Income ............... $143,543
T. Rowe Price International Stock ......... $179,993
Warburg Pincus Small Company Value ........ $690,305
Morgan Stanley Emerging Markets Equity .... $246,559
BT Equity 500 Index ....................... $ 87,608
BT International Equity Index ............. $ 26,510
BT Small Company Index .................... $ 38,914
J.P. Morgan Core Bond ..................... $ 7,380
Lazard Large Cap Value .................... $ 95,425
Lazard Small Cap Value .................... $ 79,393
- ----------
* The EQ/Aggressive Stock Portfolio, EQ/Balanced Portfolio, Alliance Common
Stock Portfolio, Alliance Conservative Investors Portfolio, Alliance
Equity Index Portfolio, Alliance Global Portfolio, Alliance Growth and
Income Portfolio, Alliance Growth Investors Portfolio, Alliance High Yield
56
<PAGE>
Portfolio, Alliance Intermediate Government Securities Portfolio, Alliance
International Portfolio, Alliance Money Market Portfolio, Alliance Quality
Bond Portfolio, Alliance Small Cap Growth Portfolio, EQ/Evergreen Foundation,
EQ/Evergreen, MFS Growth with Income, EQ/Alliance Premier Growth, Capital
Guardian Research, Capital Guardian U.S. Equity, Capital Guardian
International and Calvert Socially Responsible Portfolios did not pay any
brokerage commissions during the year ended December 31, 1998.
CALENDAR YEAR ENDED DECEMBER 31, 1999*
PORTFOLIO BROKERAGE COMMISSIONS PAID
- ------------------------------------------------- -------------------------
Mercury Basic Value Equity ...................... $ 631,781
Mercury World Strategy .......................... $ 57,705
MFS Emerging Growth Companies ................... $ 1,964,072
MFS Research .................................... $ 1,162,496
EQ/Putnam Balanced .............................. $ 132,835
EQ/Putnam Growth & Income Value ................. $ 914,745
EQ/Putnam International Equity .................. $ 957,606
EQ/Putnam Investors Growth ...................... $ 292,639
T. Rowe Price Equity Income ..................... $ 201,931
T. Rowe Price International Stock ............... $ 174,803
Warburg Pincus Small Company Value .............. $ 1,117,202
Morgan Stanley Emerging Markets Equity .......... $ 855,959
BT Equity 500 Index ............................. $ 153,052
BT International Equity Index ................... $ 71,637
BT Small Company Index .......................... $ 43,854
J.P. Morgan Core Bond ........................... $ 26,095
Lazard Large Cap Value .......................... $ 128,406
Lazard Small Cap Value .......................... $ 150,164
EQ/Aggressive Stock ............................. $10,057,431
EQ/Balanced ..................................... $ 3,302,792
Alliance Common Stock ........................... $10,679,612
Alliance Conservative Investors ................. $ 375,448
Alliance Equity Index ........................... $ 0
Alliance Global ................................. $ 5,738,044
Alliance Growth and Income ...................... $ 1,966,341
Alliance Growth Investors ....................... $ 4,400,655
Alliance High Yield ............................. $ 66,504
Alliance Intermediate Government Securities ..... $ 4,063
Alliance International .......................... $ 1,811,114
Alliance Money Market ........................... $ 0
Alliance Quality Bond ........................... $ 0
Alliance Small Cap Growth ....................... $ 2,143,273
EQ/Evergreen Foundation ......................... $ 33,763
EQ/Evergreen .................................... $ 12,983
MFS Growth with Income .......................... $ 132,885
EQ/Alliance Premier Growth ...................... $ 426,324
Capital Guardian Research ....................... $ 39,924
Capital Guardian U.S. Equity .................... $ 84,692
Capital Guardian International .................. $ 70,257
Calvert Socially Responsible .................... $ 2,113
57
<PAGE>
- ----------
* The EQ/Alliance Premier Growth, Capital Guardian Research, Capital
Guardian U.S. Equity, and Capital Guardian International Portfolios
commenced operations on April 30, 1999. The Calvert Socially Responsible
Portfolio commenced operations on August 30, 1999. The EQ/Aggressive
Stock, EQ/Balanced, Alliance Common Stock, Alliance Conservative
Investors, Alliance Equity Index, Alliance Global, Alliance Growth and
Income, Alliance Growth Investors, Alliance High Yield, Alliance
Intermediate Government Securities, Alliance International, Alliance
Money Market, Alliance Quality Bond, and Alliance Small Cap Growth
Portfolios commenced operations on October 18, 1999. The EQ/Alliance
Technology Portfolio is not included in the above table because it had no
operations during the fiscal year ended December 31, 1999.
BROKERAGE TRANSACTIONS WITH AFFILIATES
Equitable and its indirect corporate parent, AXA Financial, Inc., currently own
approximately 70% of Donaldson, Lufkin & Jenrette, Inc. ("DLJ"). As a result,
DLJ is considered to be an affiliate of Equitable under the 1940 Act. 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 those entities or may invest in shares of the investment
companies with which those entities have affiliations.
T. Rowe Price and Price-Fleming, the Advisers to the T. Rowe Price International
Stock and T. Rowe Price Equity Income Portfolios, may execute portfolio
transactions through certain affiliates of Price Fleming and Jardine Fleming,
which are persons indirectly related to the Advisers, acting as agent in
accordance with procedures established by the Trust's Board of Trustees.
Mercury, the Adviser to the Mercury World Strategy and Mercury Basic Value
Equity Portfolios, may execute portfolio transactions through certain affiliates
of Mercury. MSAM, the Adviser to the Morgan Stanley Emerging Markets Equity
Portfolio, may execute portfolio transactions through certain affiliates of
MSAM. LAM, the Adviser to the Lazard Large Cap Value and Lazard Small Cap Value
Portfolios, may execute portfolio transactions through certain affiliates of
LAM. J.P. Morgan, the Adviser to the J.P. Morgan Core Bond Portfolio, may
execute portfolio transactions through certain affiliates of J.P. Morgan. MFS,
the Adviser to the MFS Emerging Growth Companies, MFS Growth with Income and MFS
Research Portfolios, and an adviser to the EQ/Aggressive Stock Portfolio, may
execute portfolio transactions through certain affiliates of MFS, including MFS
Fund Distributors, Inc. Putnam Management, the Adviser to the EQ/Putnam
Balanced, EQ/Putnam Growth & Income, EQ/Putnam International Equity, and
EQ/Putnam Investors Growth Portfolios, does not have an affiliated broker
through which it would execute portfolio transactions. Bankers Trust, 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. Evergreen, the Adviser to the
EQ/Evergreen Foundation Portfolio and EQ/Evergreen Portfolio, may execute
portfolio transactions through certain affiliates of Evergreen and First Union
National Bank, including Lieber & Company. Alliance, the Adviser to the
EQ/Alliance Premier Growth Portfolio, EQ/Alliance Technology Portfolio, Alliance
Common Stock Portfolio, Alliance Conservative Investors Portfolio, Alliance
Equity Index Portfolio, Alliance Global Portfolio, Alliance Growth and Income
Portfolio, Alliance Growth Investors Portfolio, Alliance High Yield Portfolio,
Alliance Intermediate Government Securities Portfolio, Alliance International
Portfolio, Alliance Money Market Portfolio, Alliance Quality Bond Portfolio,
Alliance Small Cap Growth Portfolio, and an Adviser to the EQ/Aggressive Stock
Portfolio and EQ/Balanced Portfolio, may execute portfolio transactions with
certain affiliates of Alliance, including DLJ and the Pershing Division of
Donaldson, Lufkin & Jenrette Securities Corporation. Capital Guardian, the
Adviser to the Capital Guardian Research Portfolio, the Capital Guardian U.S.
Equity Portfolio and the Capital Guardian International Portfolio, and an
Adviser to the EQ/Balanced Portfolio, does not have an affiliated broker through
which it would execute portfolio transactions. Calvert, an Adviser to the
Calvert Socially
58
<PAGE>
Responsible Portfolio, may execute portfolio transactions through certain
affiliates of Calvert, including Ameritas Investment Corporation and The
Advisors Group. Brown Capital, an Adviser to the Calvert Socially Responsible
Portfolio, does not have an affiliated broker through which it would execute
portfolio transactions.
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 brokers
that are affiliates of an Adviser to a Portfolio for which that Adviser provides
investment advice 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.
During the years ended December 31, 1997, 1998 and 1999, respectively, the
following Portfolios paid the amounts indicated to the affiliated broker-dealers
of the Manager or affiliates of the Advisers to each Portfolio.
FISCAL YEAR ENDED DECEMBER 31, 1997*
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF PERCENTAGE OF
AFFILIATED BROKERAGE TOTAL BROKERAGE TRANSACTIONS (BASED
PORTFOLIO BROKER-DEALER COMMISSIONS PAID COMMISSIONS ON DOLLAR AMOUNTS)
- ------------------------ --------------------------------- ------------------ ----------------- --------------------
<S> <C> <C> <C> <C>
Mercury Basic Value Donaldson, Lufkin & $1,444 1.91% 1.48%
Equity Jenrette Securities
Corporation ("DLJ")
Merrill Lynch, Pierce Fenner $7,984 10.55% 10.93%
& Smith Incorporated
("Merrill Lynch")
Mercury World Strategy DLJ $ 166 0.38% 0.74%
Merrill Lynch $2,622 6.02% 5.72%
MFS Emerging Growth Pershing Trading Company, $ 72 0.05% 0.05%
Companies L.P. ("Pershing")
EQ/Putnam Balanced Equico Securities Corp. $ 75 0.47% 0.33%
EQ/Putnam Growth & Equico Securities Corporation $ 363 0.33% 0.23%
Income Value
T. Rowe Price Equity DLJ $ 694 1.03% 0.55%
Income
T. Rowe Price Jardine Fleming Securities Ltd. $ 454 0.19% 0.18%
International Stock
Robert Fleming Securities Ltd. $2,210 0.91% 1.29%
Fleming Martin Limited $ 69 0.03% 0.04%
</TABLE>
- ----------
* Except for Morgan Stanley Emerging Markets Equity Portfolio, each of the
Portfolios above
59
<PAGE>
commenced operations on May 1, 1997. Morgan Stanley Emerging Markets Equity
Portfolio commenced operations on August 20, 1997. The BT Equity 500 Index, BT
International Equity Index, BT Small Company Index, J.P. Morgan Core Bond,
Lazard Large Cap Value, Lazard Small Cap Value, Portfolios did not pay any
brokerage commissions during the fiscal year ended December 31, 1997.
CALENDAR YEAR ENDED DECEMBER 31, 1998*
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF PERCENTAGE OF
AFFILIATED BROKERAGE TOTAL BROKERAGE TRANSACTIONS (BASED
PORTFOLIO BROKER-DEALER COMMISSIONS PAID COMMISSIONS ON DOLLAR AMOUNTS)
- ------------------------- ---------------------------- ------------------ ----------------- --------------------
<S> <C> <C> <C> <C>
Mercury Basic Value DLJ $14,104 3.55% 4.43%
Equity
Merrill Lynch and Co. $13,238 3.33% 3.15%
Mercury World Strategy DLJ $ 2,260 2.52% 3.40%
Merrill Lynch and Co. $ 5,171 5.76% 7.31%
MFS Research DLJ $ 408 .07% .07%
Pershing $ 48 .01% .01%
MFS Emerging Growth Pershing $ 600 .10% .12%
Companies
T. Rowe Price Equity DLJ $ 3,544 2.47% 1.53%
Income
T. Rowe Price Jardine Fleming Securities $ 1,978 1.10% .72%
International Stock Ltd.
Robert Fleming Co. $ 5,249 2.92% 3.41%
Ord Minnett -- New $ 326 .18% .13%
Zealand -- Ltd.
Ord Minnett Group, Ltd. $ 155 .09% .06%
DLJ $ 165 .09% .14%
Morgan Stanley Emerging Morgan Stanley & Co. $ 596 .24% .18%
Markets Equity
Lazard Small Cap Value DLJ $ 150 .19% .15%
</TABLE>
- ----------
* The EQ/Aggressive Stock, EQ/Balanced, Alliance Common Stock, Alliance
Conservative Investors, Alliance Equity Index, Alliance Global, Alliance
Growth and Income, Alliance Growth Investors, Alliance High Yield,
Alliance Intermediate Government Securities, Alliance International,
Alliance Money Market, Alliance Quality Bond, Alliance Small Cap Growth,
EQ/Evergreen Foundation, EQ/Evergreen, MFS Growth with Income,
EQ/Alliance Premier Growth, Capital Guardian Research, Capital Guardian
U.S. Equity, Capital Guardian International, and Calvert Socially
Responsible Portfolios did not pay any brokerage commissions during the
year ended December 31, 1998.
60
<PAGE>
CALENDAR YEAR ENDED DECEMBER 31, 1999*
<TABLE>
<CAPTION>
PERCENTAGE
AGGREGATE PERCENTAGE OF OF TRANSACTIONS
AFFILIATED BROKERAGE TOTAL BROKERAGE (BASED ON
PORTFOLIO BROKER-DEALER COMMISSIONS PAID COMMISSIONS DOLLAR AMOUNTS)
- ----------------------------- ---------------------------- ------------------ ----------------- ----------------
<S> <C> <C> <C> <C>
Mercury Basic Value Equity DLJ $19,906 3.15% .54%
Merrill Lynch $21,572 3.41% .74%
Mercury World Strategy DLJ $ 357 .10% .05%
Merrill Lynch $ 4,852 8.41% 1.65%
T. Rowe Price Equity Income DLJ $ 6,381 3.16% 1.01%
Autranet $ 610 .30% .10%
T. Rowe Price International Jardine Fleming Securities $ 1,972 1.13% 1.77%
Stock Ltd.
Robert Fleming Co. $ 3,022 1.73% 1.71%
DLJ $ 1,132 .71% .77%
Morgan Stanley Emerging DLJ $ 6,812 .80% .76%
Markets Equity Morgan Stanley & Co. $11,316 1.32% .92%
EQ/Evergreen Foundation DLJ $ 13 .04% .07%
Lieber & Company $12,526 37.10% 50.02%
EQ/Evergreen DLJ $ 8 .06% .06%
Lieber & Company $11,864 91.37% 47.81%
Capital Guardian DLJ $ 99 .14% .13%
International
Alliance Global DLJ $ 3,460 .06% .01%
Alliance International DLJ $ 1,086 .06% .02%
</TABLE>
- ----------
* The EQ/Alliance Premier Growth, Capital Guardian Research, Capital
Guardian U.S. Equity, and Capital Guardian International Portfolios
commenced operations on April 30, 1999. The Calvert Socially Responsible
Portfolio commenced operations on August 30, 1999. The EQ/Aggressive
Stock, EQ/Balanced, Alliance Common Stock, Alliance Conservative
Investors, Alliance Equity Index, Alliance Global, Alliance Growth and
Income, Alliance Growth Investors, Alliance High Yield, Alliance
Intermediate Government Securities, Alliance International, Alliance
Money Market, Alliance Quality Bond, and Alliance Small Cap Growth
Portfolios commenced operations on October 18, 1999. The EQ/Alliance
Technology Portfolio is not included in the above table because it had no
operations during the fiscal year ended December 31, 1999.
61
<PAGE>
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 as defined below. 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." 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 (other than ADRs) it is the close of business in the
applicable foreign country, with exchange rates determined at 12:00 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
United States, are valued at representative quoted prices in the currency
of the country of origin. Foreign currency is converted into United States
dollar equivalent at current exchange rates.
o United States Treasury securities and other obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities, are valued at representative quoted prices.
o Long-term corporate bonds may be valued on the basis of prices provided by
a pricing service when such prices are believed to reflect the fair market
value of such securities. The prices provided by a pricing service take
into account many factors, including institutional size, trading in
similar groups of securities and any developments related to specific
securities; however, when such prices are not available, such bonds are
valued at a bid price estimated by a broker.
62
<PAGE>
o Short-term debt securities in the Portfolios, other than the Alliance
Money Market Portfolio, 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. Securities held by the Alliance Money
Market Portfolio are valued at prices based on equivalent yields or yield
spreads.
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.
Convertible bonds may be matrix-priced based upon the conversion value to
the underlying common stocks and market premiums.
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.
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. In
addition, there may be occasions when a different pricing provider or
methodology is used. In addition, there may be occasions where a different
pricing provider or methodology is used. 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.
63
<PAGE>
TAXATION
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.
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 Contract owners.
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 United States Government securities (including any security that is issued,
guaranteed or insured by the United States or an instrumentality of the United
States) each United States 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.
64
<PAGE>
PORTFOLIO PERFORMANCE
Returns and yields shown do not reflect insurance company charges and fees
applicable to the Contracts.
ALLIANCE MONEY MARKET PORTFOLIO YIELD
The Alliance Money Market Portfolio calculates yield information for seven-day
periods and may illustrate that information in advertisements or sales
materials. The seven-day current yield calculation is based on a hypothetical
shareholder account with one share at the beginning of the period. To determine
the seven-day rate of return, the net change in the share value is computed by
subtracting the share value at the beginning of the period from the share value
(exclusive of capital changes) at the end of the period. The net change is
divided by the share value at the beginning of the period to obtain the base
period rate of return. This seven-day base period return is then multiplied by
365/7 to produce an annualized current yield figure carried to the nearest
one-hundredth of one percent.
Realized capital gains or losses and unrealized appreciation or depreciation of
the Portfolio are excluded from this calculation. The net change in share values
also reflects all accrued expenses of the Alliance Money Market Portfolio as
well as the value of additional shares purchased with dividends from the
original shares and any additional shares.
The effective yield is obtained by adjusting the current yield to give effect to
the compounding nature of the Alliance Money Market Portfolio's investments, as
follows: The unannualized base period return is compounded by adding one to the
base period return, raising the sum to a power equal to 365 divided by 7, and
subtracting one from the result--i.e., effective yield = [(base period return +
1)365/7]-1.
Alliance Money Market Portfolio yields will fluctuate daily. Accordingly, yields
for any given period are not necessarily representative of future results. Yield
is a function of the type and quality of the instruments in the Alliance Money
Market Portfolio, maturities and rates of return on investments, among other
factors. In addition, the value of shares of the Alliance Money Market Portfolio
will fluctuate and not remain constant.
The Alliance Money Market Portfolio yield may be compared with yields of other
investments. However, it should not be compared to the return of fixed rate
investments which guarantee rates of interest for specified periods. The yield
also should not be compared to the yield of money market funds made available to
the general public because their yields usually are calculated on the basis of a
constant $1 price per share and they pay out earnings in dividends which accrue
on a daily basis. Investment income of the Alliance Money Market Portfolio,
including any realized gains as well as accrued interest, is not paid out in
dividends but is reflected in the share value. The Alliance Money Market
Portfolio yield also does not reflect insurance company charges and fees
applicable to Contracts.
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
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.
65
<PAGE>
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.
CODE OF ETHICS
The Trust, its Manager, its Distributors, and each of its Advisers, have adopted
Codes of Ethics pursuant to Rule 17j-1 under the Investment Company Act of 1940
(as amended). Each of these Codes of Ethics permits the personnel of their
respective organizations to invest in securities for their own accounts. A copy
of each of the Codes of Ethics are on public file with, and are available from,
the SEC.
OTHER SERVICES
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, serves as the Trust's independent accountants. PricewaterhouseCoopers LLP
is responsible for auditing the annual financial statements of the Trust.
CUSTODIAN
The Chase Manhattan Bank, 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 The Chase Manhattan
Bank, The Chase Manhattan Bank maintains and deposits in separate accounts,
cash, securities and other assets of the Portfolios. The Chase Manhattan Bank is
also required, upon the order of the Trust, to deliver securities held by The
Chase Manhattan Bank, and to make payments for securities purchased by the
Trust. The 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 United States 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, 1775 Eye Street, N.W. Washington, D.C. 20006, serves as
counsel to the Trust.
Sullivan & Worcester, LLP, 1025 Connecticut Avenue, N.W., Suite 1000,
Washington, D.C. 20036, serves as counsel to the Independent Trustees of the
Trust.
FINANCIAL STATEMENTS
The audited financial statements for the period ended December 31, 1999,
including the financial highlights, appearing in the Trust's Annual Report to
Shareholders, filed electronically with the SEC, are incorporated by reference
and made a part of this document.
66
<PAGE>
APPENDIX A
EQ ADVISORS TRUST
INVESTMENT STRATEGIES SUMMARY
<TABLE>
<CAPTION>
BORROWINGS BORROWINGS
ASSET-BACKED (EMERGENCIES, (LEVERAGING CONVERTIBLE
PORTFOLIO SECURITIES REDEMPTIONS) PURPOSES) SECURITIES FLOATERS(A)
- ---------------------------- -------------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
EQ/Aggressive Stock ........ Y Y N Y Y
EQ/Balanced ................ Y Y N Y Y
Alliance Common Stock ...... Y Y N Y Y
Alliance Conservative
Investors ................. Y Y N Y Y
Alliance Equity Index ...... N Y N Y Y
Alliance Global ............ Y Y N Y Y
Alliance Growth and
Income .................... Y Y N Y Y
Alliance Growth
Investors ................. Y Y N Y Y
Alliance High Yield ........ Y Y N Y Y
Alliance Intermediate
Government Securities...... Y Y N Y Y
Alliance International ..... Y Y N Y Y
Alliance Money Market ...... Y Y N Y Y
Alliance Quality Bond ...... Y Y N Y Y
Alliance Small Cap
Growth .................... Y Y N Y Y
EQ/Alliance Technology ..... Y Y-33.3% N Y Y
T. Rowe Price
International Stock ....... N Y-33.3% N Y N
T. Rowe Price Equity
Income .................... N Y-33.3% N Y N
EQ/Putnam Growth &
Income Value .............. N Y-10.0% N Y N
EQ/Putnam International
Equity .................... N Y-10.0% N Y N
EQ/Putnam Investors
Growth .................... N Y-10.0% N Y N
EQ/Putnam Balanced ......... Y Y-10.0% N Y Y
MFS Research ............... N Y-33.3% N Y N
MFS Emerging Growth
Companies ................. N Y-33.3% N Y N
<CAPTION>
FOREIGN FOREIGN
FOREIGN CURRENCY CURRENCY OPTIONS
INVERSE BRADY DEPOSITORY CURRENCY FORWARD FUTURES (EXCHANGE
PORTFOLIO FLOATERS(A) BONDS(B) RECEIPTS(B) SPOT TRANS. TRANS. TRANS.(A) TRADED)
- ---------------------------- ------------- ---------- ------------- ------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
EQ/Aggressive Stock ........ Y Y Y Y Y Y Y
EQ/Balanced ................ Y Y Y Y Y Y Y
Alliance Common Stock ...... Y Y Y Y Y Y Y
Alliance Conservative
Investors ................. Y Y Y Y Y Y Y
Alliance Equity Index ...... Y N N N N N N
Alliance Global ............ Y Y Y Y Y Y Y
Alliance Growth and
Income .................... Y Y Y Y Y Y Y
Alliance Growth
Investors ................. Y Y Y Y Y Y Y
Alliance High Yield ........ Y Y Y Y Y Y Y
Alliance Intermediate
Government Securities...... Y Y N Y N N Y
Alliance International ..... Y Y Y Y Y Y Y
Alliance Money Market ...... Y N Y N N N N
Alliance Quality Bond ...... Y Y Y Y Y Y Y
Alliance Small Cap
Growth .................... Y Y Y Y Y Y Y
EQ/Alliance Technology ..... Y Y Y Y Y Y Y
T. Rowe Price
International Stock ....... N N Y Y Y Y Y
T. Rowe Price Equity
Income .................... N N Y Y Y Y Y
EQ/Putnam Growth &
Income Value .............. N N Y Y Y Y Y
EQ/Putnam International
Equity .................... N N Y Y Y Y Y
EQ/Putnam Investors
Growth .................... N N Y Y Y Y Y
EQ/Putnam Balanced ......... N Y Y Y Y Y Y
MFS Research ............... N N Y Y Y N N
MFS Emerging Growth
Companies ................. N N Y Y Y Y Y
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
BORROWINGS BORROWINGS
ASSET-BACKED (EMERGENCIES, (LEVERAGING CONVERTIBLE
PORTFOLIO SECURITIES REDEMPTIONS) PURPOSES) SECURITIES FLOATERS(A)
- ---------------------------- -------------- ----------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
MFS Growth with
Income .................... N Y-10.0% N Y N
Morgan Stanley Emerging
Markets Equity ............ Y Y-33.3% N Y Y
Warburg Pincus Small
Company Value ............. N Y-30.0% N Y N
Mercury World Strategy ..... N Y-33.3% N Y N
Mercury Basic Value
Equity .................... N Y-33.3% N Y N
Lazard Large Cap Value ..... N Y-10.0% Y-33.3% Y Y
Lazard Small Cap Value ..... N Y-15.0%(E) N Y Y
J. P. Morgan Core Bond ..... Y Y-33.3% N Y N
BT Small Company
Index ..................... Y Y-33.3% N Y N
BT International Equity
Index ..................... Y Y-33.3% N Y N
BT Equity 500 Index ........ Y Y-33.3% N Y N
EQ/Evergreen ............... N Y-33.3% N Y N
EQ/Evergreen
Foundation ................ N Y-33.3% N Y N
EQ/Alliance Premier
Growth .................... N Y-5.0% N Y N
Capital Guardian
Research .................. N Y-5.0% N Y N
Capital Guardian U.S.
Equity .................... N Y-5.0% N Y N
Capital Guardian
International ............. N Y-5.0% N Y N
Calvert Socially
Responsible ............... Y Y-33.3% N Y Y
<CAPTION>
FOREIGN FOREIGN
FOREIGN CURRENCY CURRENCY OPTIONS
INVERSE BRADY DEPOSITORY CURRENCY FORWARD FUTURES (EXCHANGE
PORTFOLIO FLOATERS(A) BONDS(B) RECEIPTS(B) SPOT TRANS. TRANS. TRANS.(A) TRADED)
- ---------------------------- ------------- ---------- ------------- ------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
MFS Growth with
Income .................... N N Y Y Y Y Y
Morgan Stanley Emerging
Markets Equity ............ Y Y Y Y Y Y Y
Warburg Pincus Small
Company Value ............. N N Y Y Y Y Y
Mercury World Strategy ..... N N Y Y Y Y Y
Mercury Basic Value
Equity .................... N N Y-10% Y Y Y Y
Lazard Large Cap Value ..... N N Y-10% Y N N N
Lazard Small Cap Value ..... N N Y N N N N
J. P. Morgan Core Bond ..... N Y Y Y Y Y Y
BT Small Company
Index ..................... N N N N N N N
BT International Equity
Index ..................... N N Y Y Y Y Y
BT Equity 500 Index ........ N N Y N N N N
EQ/Evergreen ............... N N Y Y N N N
EQ/Evergreen
Foundation ................ N N Y Y Y Y Y
EQ/Alliance Premier
Growth .................... N N Y Y Y Y Y
Capital Guardian
Research .................. N N Y Y N N N
Capital Guardian U.S.
Equity .................... N N Y Y N N N
Capital Guardian
International ............. N N Y Y Y Y Y
Calvert Socially
Responsible ............... Y Y Y Y Y Y Y
</TABLE>
- -------
(A) Considered a derivative security.
(B) Considered a foreign security.
(C) Written options must be "covered."
(D) Certain mortgages are considered derivatives.
(E) May not exceed 15% for temporary or emergency purposes, including to
meet redemptions (otherwise such borrowings may not exceed 5% of
total assets).
A-2
<PAGE>
EQ ADVISORS TRUST
INVESTMENT STRATEGIES SUMMARY (CONTINUED)
<TABLE>
<CAPTION>
FOREIGN CURRENCY
FOREIGN -----------------------------
OPTIONS (WRITTEN, CALL FOREIGN FORWARD HYBRID ILLIQUID
PORTFOLIO (OTC) OPTIONS) SECURITIES COMMITMENTS INSTRUMENTS(A) SECURITIES
- ---------------------------- --------- ---------------- ------------ ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
EQ/Aggressive Stock ........ Y Y Y-25% Y Y Y-15%
EQ/Balanced ................ Y Y Y-20% Y Y Y-15%
Alliance Common Stock ...... Y Y Y Y Y Y-15%
Alliance Conservative
Investors ................. Y Y Y-15% Y Y Y-15%
Alliance Equity Index ...... N N N Y Y Y-15%
Alliance Global ............ Y Y Y Y Y Y-15%
Alliance Growth and
Income .................... Y Y Y Y N Y-15%
Alliance Growth
Investors ................. Y Y Y-30% Y Y Y-15%
Alliance High Yield ........ Y Y Y Y Y Y-15%
Alliance Intermediate
Government Securities...... Y N N Y Y Y-15%
Alliance International ..... Y Y Y Y Y Y-15%
Alliance Money Market ...... N N Y-20% Y N Y-10%
Alliance Quality Bond ...... Y Y Y Y Y Y-15%
Alliance Small Cap
Growth .................... Y Y Y-20% Y Y Y-15%
EQ/Alliance Technology ..... Y Y Y Y Y-10% Y-10%
T. Rowe Price
International Stock ....... Y Y Y Y Y-10% Y-15%
T. Rowe Price Equity
Income .................... N Y Y-25% Y Y-10% Y-15%
EQ/Putnam Growth &
Income Value .............. Y Y Y Y N Y-15%
EQ/Putnam International
Equity .................... Y Y Y Y N Y-15%
EQ/Putnam Investors
Growth .................... Y Y Y Y N Y-15%
EQ/Putnam Balanced ......... Y Y Y Y N Y-15%
MFS Research ............... N N Y-20% Y N Y-15%
MFS Emerging Growth
Companies ................. Y Y Y-25% Y N Y-15%
<CAPTION>
INVESTMENT NON-INV.
GRADE GRADE SECURITY SECURITY
FIXED FIXED LOAN MORTGAGE DIRECT MUNICIPAL FUTURES OPTIONS
PORTFOLIO INCOME INCOME PARTICIPATIONS RELATED(D) MORTGAGES SECURITIES TRANS.(A) TRANS.(C)
- ---------------------------- ------------ --------- ---------------- ------------ ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQ/Aggressive Stock ........ Y N Y Y N N Y Y
EQ/Balanced ................ Y Y Y Y N N Y Y
Alliance Common Stock ...... Y Y Y Y N N Y Y
Alliance Conservative
Investors ................. Y N Y Y N N Y Y
Alliance Equity Index ...... Y N Y N N N Y N
Alliance Global ............ Y N Y Y N N Y Y
Alliance Growth and
Income .................... Y Y-30% Y Y N N Y Y
Alliance Growth
Investors ................. Y-60% Y-15% Y Y N N Y Y
Alliance High Yield ........ Y Y Y Y N N Y Y
Alliance Intermediate
Government Securities...... Y N Y Y N N Y Y
Alliance International ..... Y N Y Y N N Y Y
Alliance Money Market ...... Y N N Y N N N N
Alliance Quality Bond ...... Y N Y Y N N Y Y
Alliance Small Cap
Growth .................... Y N Y Y N N Y Y
EQ/Alliance Technology ..... Y N N Y N N Y Y
T. Rowe Price
International Stock ....... Y N N N N N Y Y
T. Rowe Price Equity
Income .................... Y Y-10% N N N N Y Y
EQ/Putnam Growth &
Income Value .............. Y Y N N N N Y Y
EQ/Putnam International
Equity .................... Y Y N N N N Y Y
EQ/Putnam Investors
Growth .................... Y Y N N N N Y Y
EQ/Putnam Balanced ......... Y Y Y Y N N Y Y
MFS Research ............... Y Y-10% N N N N N N
MFS Emerging Growth
Companies ................. Y Y N N N N Y Y
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
FOREIGN CURRENCY
-----------------------------
FOREIGN
OPTIONS (WRITTEN, CALL FOREIGN FORWARD HYBRID ILLIQUID
PORTFOLIO (OTC) OPTIONS) SECURITIES COMMITMENTS INSTRUMENTS(A) SECURITIES
- -------------------------------- --------- ---------------- ------------ ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
MFS Growth with
Income ........................ N N Y-20% Y N Y-15%
Morgan Stanley Emerging
Market Equity ................. Y Y Y Y Y Y-15%
Warburg Pincus Small
Company Value ................. N Y Y N N Y-15%
Mercury World Strategy ......... Y Y Y Y N Y-15%
Mercury Basic Value
Equity ........................ N Y Y Y N Y-15%
Lazard Large Cap Value ......... N Y Y Y N Y-10%
Lazard Small Cap Value ......... N N Y Y N Y-10%
J. P. Morgan Core Bond ......... Y Y Y Y N Y-15%
BT Small Company
Index ......................... N N N Y N Y-15%
BT International Equity
Index ......................... Y Y Y Y N Y-15%
BT Equity 500 Index ............ N N Y Y N Y-15%
EQ/Evergreen ................... Y Y Y Y N Y-15%
EQ/Evergreen
Foundation .................... N Y Y Y N Y-15%
EQ/Alliance Premier
Growth ........................ Y Y Y Y N Y-15%
Capital Guardian
Research ...................... N N Y-15% Y Y-10% Y-15%
Capital Guardian U.S.
Equity ........................ N N Y Y Y-10% Y-15%
Capital Guardian
International ................. Y Y Y Y Y-10% Y-15%
Calvert Socially
Responsible ................... Y Y Y-10% Y Y-5% Y-15%
<CAPTION>
INVESTMENT NON-INV.
GRADE GRADE SECURITY
FIXED FIXED LOAN MORTGAGE DIRECT MUNICIPAL FUTURES
PORTFOLIO INCOME INCOME PARTICIPATIONS RELATED(D) MORTGAGES SECURITIES TRANS.(A)
- -------------------------------- ----------- ---------- ---------------- ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
MFS Growth with
Income ........................ Y Y N N N N Y
Morgan Stanley Emerging
Market Equity ................. Y Y Y Y N Y Y
Warburg Pincus Small
Company Value ................. Y Y N N N N Y
Mercury World Strategy ......... Y N N N N N Y
Mercury Basic Value
Equity ........................ Y N N N N N Y
Lazard Large Cap Value ......... Y N Y Y N N N
Lazard Small Cap Value ......... Y N Y Y N N N
J. P. Morgan Core Bond ......... Y N Y Y Y Y Y
BT Small Company
Index ......................... Y N N Y N N Y
BT International Equity
Index ......................... Y N N Y N N Y
BT Equity 500 Index ............ Y N N Y N N Y
EQ/Evergreen ................... Y N N N N N Y
EQ/Evergreen
Foundation .................... Y Y N Y N N Y
EQ/Alliance Premier
Growth ........................ Y N N N N N Y
Capital Guardian
Research ...................... Y N N N N N Y
Capital Guardian U.S.
Equity ........................ Y N N N N N Y
Capital Guardian
International ................. Y N N N N N Y
Calvert Socially
Responsible ................... Y Y-20% N N N Y Y
<CAPTION>
SECURITY
OPTIONS
PORTFOLIO TRANS.(C)
- -------------------------------- ----------
<S> <C>
MFS Growth with
Income ........................ Y
Morgan Stanley Emerging
Market Equity ................. Y
Warburg Pincus Small
Company Value ................. Y
Mercury World Strategy ......... Y
Mercury Basic Value
Equity ........................ Y
Lazard Large Cap Value ......... N
Lazard Small Cap Value ......... N
J. P. Morgan Core Bond ......... Y
BT Small Company
Index ......................... Y
BT International Equity
Index ......................... Y
BT Equity 500 Index ............ Y
EQ/Evergreen ................... Y
EQ/Evergreen
Foundation .................... Y
EQ/Alliance Premier
Growth ........................ Y
Capital Guardian
Research ...................... Y
Capital Guardian U.S.
Equity ........................ Y
Capital Guardian
International ................. Y
Calvert Socially
Responsible ................... Y
</TABLE>
- -------
(A) Considered a derivative security.
(B) Considered a foreign security.
(C) Written options must be "covered."
(D) Certain mortgages are considered derivatives.
(E) May not exceed 15% for temporary or emergency purposes, including to
meet redemptions (otherwise such borrowings may not exceed 5% of
total assets).
A-4
<PAGE>
EQ ADVISORS TRUST
INVESTMENT STRATEGIES SUMMARY (CONCLUDED)
<TABLE>
<CAPTION>
PASSIVE PAYMENT REAL ESTATE REVERSE
FOREIGN IN-KIND INVESTMENT REPURCHASE REPURCHASE SECURITIES
PORTFOLIO INV. COMP. BONDS TRUSTS AGREEMENTS AGREEMENTS LENDING
- -------------------------- ------------ --------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
EQ/Aggressive Stock ...... Y Y Y Y N Y-50%
EQ/Balanced .............. Y Y Y Y N Y-50.0%
Alliance Common Stock .... Y Y Y Y N Y-50.0%
Alliance Conservative
Investors ............... Y Y Y Y N Y-50.0%
Alliance Equity Index .... Y Y Y N N Y-50.0%
Alliance Global .......... Y Y Y Y N Y-50.0%
Alliance Growth and
Income .................. Y Y Y Y N Y-50.0%
Alliance Growth
Investors ............... Y Y Y Y N Y-50.0%
Alliance High Yield ...... Y Y Y Y N Y
Alliance Intermediate
Government Securities.... Y Y Y Y N Y
Alliance International ... Y Y Y Y N Y-50.0%
Alliance Money Market .... Y Y Y Y N Y-50.0%
Alliance Quality Bond .... Y Y Y Y N Y-50.0%
Alliance Small Cap
Growth .................. Y Y Y Y N Y-50.0%
EQ/Alliance Technology ... N Y Y Y Y Y-33.3%
T. Rowe Price
International Stock ..... Y N N Y Y Y - 33.3%
T. Rowe Price Equity
Income .................. N Y Y Y Y Y - 33.3%
EQ/Putnam Growth &
Income Value ............ N Y N Y N Y - 25.0%
EQ/Putnam International
Equity .................. Y N N Y N Y - 25.0%
EQ/Putnam Investors
Growth .................. N N N Y N Y - 25.0%
EQ/Putnam Balanced ....... N Y Y Y N Y - 25.0%
MFS Research ............. N N N Y N Y - 33.3%
MFS Emerging Growth
Companies ............... N Y N Y N Y - 30.0%
MFS Growth with
Income .................. N N N Y N Y - 25.0%
<CAPTION>
SHORT SALES SMALL ZERO
AGAINST- COMPANY STRUCTURED SWAP U.S. GOV'T COUPON
PORTFOLIO THE-BOX SECURITIES NOTES(A) TRANS.(A) SECURITIES WARRANTS BONDS
- -------------------------- ------------- ------------ ------------ ----------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
EQ/Aggressive Stock ...... Y Y Y Y Y Y Y
EQ/Balanced .............. Y Y Y Y Y Y Y
Alliance Common Stock .... Y Y Y Y Y Y Y
Alliance Conservative
Investors ............... Y Y Y Y Y Y Y
Alliance Equity Index .... Y Y Y Y Y Y Y
Alliance Global .......... Y Y Y Y Y Y Y
Alliance Growth and
Income .................. Y Y Y Y Y Y Y
Alliance Growth
Investors ............... Y Y Y Y Y Y Y
Alliance High Yield ...... Y Y Y Y Y Y Y
Alliance Intermediate
Government Securities.... Y Y Y Y Y Y Y
Alliance International ... Y Y Y Y Y Y Y
Alliance Money Market .... Y Y Y N Y N Y
Alliance Quality Bond .... Y Y Y Y Y Y Y
Alliance Small Cap
Growth .................. Y Y Y Y Y Y Y
EQ/Alliance Technology ... N Y Y Y Y Y Y
T. Rowe Price
International Stock ..... Y N N N Y Y N
T. Rowe Price Equity
Income .................. Y N N N Y Y Y
EQ/Putnam Growth &
Income Value ............ N N N N Y Y Y
EQ/Putnam International
Equity .................. N Y N Y Y Y N
EQ/Putnam Investors
Growth .................. N N N Y Y Y N
EQ/Putnam Balanced ....... N Y N N Y Y Y
MFS Research ............. Y Y N N Y Y Y
MFS Emerging Growth
Companies ............... N Y N N Y Y Y
MFS Growth with
Income .................. N N N N Y Y Y
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
PASSIVE PAYMENT REAL ESTATE REVERSE
FOREIGN IN-KIND INVESTMENT REPURCHASE REPURCHASE SECURITIES
PORTFOLIO INV. COMP. BONDS TRUSTS AGREEMENTS AGREEMENTS LENDING
- ---------------------------- ------------ --------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Morgan Stanley Emerging
Markets Equity ............ Y Y Y Y Y Y - 33.3%
Warburg Pincus Small
Company Value ............. N N N Y N Y - 20.0%
Mercury World Strategy ..... N N N Y N Y - 20.0%
Mercury Basic Value
Equity .................... N N N Y N Y - 20.0%
Lazard Large Cap Value ..... N N Y Y Y Y - 10.0%
Lazard Small Cap Value ..... N N Y Y N Y - 10.0%
J.P. Morgan Core Bond ...... N Y Y Y Y Y - 33.3%
BT Small Company
Index ..................... N N Y Y Y Y - 30.0%
BT International Equity
Index ..................... N N Y Y Y Y - 30.0%
BT Equity 500 Index ........ N N Y Y Y Y - 30.0%
EQ/Evergreen ............... N N N Y Y Y - 33.3%
EQ/Evergreen
Foundation ................ N N Y Y Y Y - 33.3%
EQ/Alliance Premier
Growth .................... N N Y Y N Y - 25.0%
Capital Guardian
Research .................. N N Y Y N Y-33.3%
Capital Guardian U.S.
Equity .................... N N Y Y N Y-33.3%
Capital Guardian
International ............. Y N Y Y N Y-33.3%
Calvert Socially
Responsible ............... N N Y Y Y Y-33.3%
<CAPTION>
SHORT SALES SMALL ZERO
AGAINST- COMPANY STRUCTURED SWAP U.S. GOV'T COUPON
PORTFOLIO THE-BOX SECURITIES NOTES(A) TRANS.(A) SECURITIES WARRANTS BONDS
- ---------------------------- ------------- ------------ ------------ ----------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Morgan Stanley Emerging
Markets Equity ............ Y Y Y Y Y Y Y
Warburg Pincus Small
Company Value ............. Y Y N N Y Y N
Mercury World Strategy ..... N N N N Y Y N
Mercury Basic Value
Equity .................... N N N N Y Y N
Lazard Large Cap Value ..... N N N N Y Y N
Lazard Small Cap Value ..... N Y N N Y Y N
J.P. Morgan Core Bond ...... Y N N Y Y Y Y
BT Small Company
Index ..................... N Y N N Y Y N
BT International Equity
Index ..................... N N N Y Y Y N
BT Equity 500 Index ........ N N N N Y Y N
EQ/Evergreen ............... Y Y N N Y Y N
EQ/Evergreen
Foundation ................ N N N N Y Y N
EQ/Alliance Premier
Growth .................... N N N N Y Y N
Capital Guardian
Research .................. N Y N N Y Y N
Capital Guardian U.S.
Equity .................... N Y N N Y Y N
Capital Guardian
International ............. N Y N N Y Y N
Calvert Socially
Responsible ............... Y Y Y Y Y Y Y
</TABLE>
- -------
(A) Considered a derivative security.
(B) Considered a foreign security.
(C) Written options must be "covered."
(D) Certain mortgages are considered derivatives.
(E) May not exceed 15% for temporary or emergency purposes, including to
meet redemptions (otherwise such borrowings may not exceed 5% of
total assets).
A-6
<PAGE>
APPENDIX B
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 Standard & Poor's. Commercial paper rated A-1 by Standard & Poor's 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 Standard & Poor's 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 RATINGS
Bonds are considered to be "investment grade" if they are in one of the top four
ratings.
Standard & Poor's ratings are as follows:
o Bonds rated AAA have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
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
B-1
<PAGE>
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.
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.
B-2
<PAGE>
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS
(a)(1) Agreement and Declaration of Trust.1
(a)(2) Amended and Restated Agreement and Declaration of Trust.2
(a)(3) Certificate of Trust.1
(a)(4) Certificate of Amendment.2
(b)(1)(i) By-Laws of the Trust.1
(c)(1)(ii) None other than Exhibit (a)(2) and (b)(1)(i).
(d) Investment Advisory Contracts
(d)(1)(i) Investment Management Agreement between EQ Advisors Trust
("Trust") and EQ Financial Consultants, Inc. ("EQFC") dated April
14, 1997.4
(d)(1)(ii) Amendment No. 1, dated December 9, 1997 to Investment Management
Agreement between the Trust and EQFC dated April 14, 1997.7
(d)(1)(iii) Amendment No. 2, dated as of December 31, 1998 to Investment
Management Agreement between the Trust and EQFC dated April 14,
1997.11
(d)(1)(iv) Form of Amendment No. 3, dated as of April 30, 1999, to Investment
Management Agreement between the Trust and EQFC.11
(d)(1)(v) Form of Amendment No. 4, dated as of August 30, 1999, to
Investment Management Agreement between the Trust and EQFC.12
(d)(1)(vi) Amended and Restated Investment Management Agreement, dated as of
May 1, 2000, between the Trust and The Equitable Life Assurance
Society of the United States ("Equitable").
(d)(2) Investment Advisory Agreement between EQFC and T. Rowe Price
Associates, Inc. dated April 1997.4
(d)(3) Investment Advisory Agreement between EQFC and Rowe Price-Fleming
International, Inc. dated April 1997.4
(d)(4) Investment Advisory Agreement between EQFC and Putnam Investment
Management, Inc. dated April 1997.4
(d)(5)(i) Investment Advisory Agreement between EQFC and Massachusetts
Financial Services Company ("MFS") dated April 1997.4
(d)(5)(ii) Amendment No. 1, dated as of December 31, 1998 to Investment
Advisory Agreement by and between EQFC and MFS dated April 1997.11
C-1
<PAGE>
(d)(5)(iii) Amendment No. 2, dated as of May 1, 2000 to Investment Advisory
Agreement by and between Equitable and MFS dated April 1997.14
(d)(6) Investment Advisory Agreement between EQFC and Morgan Stanley
Asset Management Inc. dated April 1997.4
(d)(7) Investment Advisory Agreement between EQFC and Merrill Lynch Asset
Management, L.P. dated April 1997.4
(d)(8) Investment Advisory Agreement between EQFC and Lazard Freres & Co.
LLC dated December 9, 1997.7
(d)(9) Investment Advisory Agreement between EQFC and J.P. Morgan
Investment Management, Inc. dated December 9, 1997.7
(d)(10) Investment Advisory Agreement between EQFC and Credit Suisse Asset
Management, LLC, dated as of July 1, 1999.12
(d)(11) Investment Advisory Agreement between EQFC and Evergreen Asset
Management Corp., dated as of December 31, 1998.11
(d)(12)(i) Form of Investment Advisory Agreement between EQFC and Alliance
Capital Management L.P. ("Alliance") dated as of April 30, 1999.11
(d)(12)(ii) Amendment No. 1, dated as of October 1, 1999 to Investment
Advisory Agreement by and between EQFC and Alliance, dated as of
April 30, 1999.14
(d)(12)(iii) Amendment No. 2, dated May 1, 2000 to Investment Advisory
Agreement by and between Equitable and Alliance, dated as of May
1, 2000.
(d)(13) Investment Advisory Agreement between EQFC and Capital Guardian
Trust Company, dated as of May 1, 1999.11
(d)(13)(i) Amendment No. 1 dated as of May 1, 2000 to Investment Advisory
Agreement between Equitable and Capital Guardian Trust Company
dated May 1, 1999.
(d)(14) Investment Advisory Agreement between EQFC and Calvert Asset
Management Company, Inc., dated as of August 30, 1999.12
(d)(15) Investment Advisory Agreement between EQFC and Brown Capital
Management, dated as of August 30, 1999.12
(d)(16) Investment Advisory Agreement between EQFC and Bankers Trust
Company dated as of December 9, 1997.7
(e) Underwriting Contracts
(e)(1)(i) Distribution Agreement between the Trust and EQFC with respect to
the Class IA shares dated April 14, 1997.4
(e)(1)(ii) Amendment No. 1 dated December 9, 1997 to the Distribution
Agreement between the Trust and EQFC with respect to the Class IA
shares dated April 14, 1997.7
(e)(1)(iii) Amendment No. 2 dated as of December 31, 1998 to the Distribution
Agreement between the Trust and EQFC with respect to the Class 1A
shares dated April 14, 1997.11
C-2
<PAGE>
(e)(1)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Distribution Agreement between the Trust and EQFC with respect to
the Class IA shares dated April 14, 1997.11
(e)(1)(v) Amendment No. 4 dated as of August 30, 1999 to the Distribution
Agreement between the Trust and EQFC with respect to the Class IA
shares dated April 14, 1997.14
(e)(1)(vi) Amendment No. 5 dated as of May 1, 2000 to the Distribution
Agreement between the Trust and EQFC with respect to the Class IA
shares dated April 14, 1997.14
(e)(2)(i) Distribution Agreement between the Trust and EQFC with respect to
the Class IB shares dated April 14, 1997.4
(e)(2)(ii) Amendment No. 1 dated December 9, 1997 to the Distribution
Agreement between the Trust and EQFC with respect to the Class IB
shares dated April 14, 1997.7
(e)(2)(iii) Amendment No. 2 dated as of December 31, 1998 to the Distribution
Agreement between the Trust and EQFC with respect to the
Class IB shares dated April 14, 1997.11
(e)(2)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Distribution Agreement between the Trust and EQFC with respect to
the Class IB shares dated April 14, 1997.11
(e)(2)(v) Amendment No. 4 dated as of August 30, 1999 to the Distribution
Agreement between the Trust and EQFC with respect to the
Class IB shares dated April 14, 1997.14
(e)(2)(vi) Amendment No. 5 dated as of May 1, 2000 to the Distribution
Agreement between the Trust and AXA Advisors LLC ("AXA Advisors")
with respect to the Class IB shares dated April 14, 1997.14
(e)(3)(i) Distribution Agreement between the Trust and Equitable
Distributors, Inc. ("EDI") with respect to the Class IA shares
dated April 14, 1997.4
(e)(3)(ii) Amendment No. 1 dated December 9, 1997 to the Distribution
Agreement between the Trust and EDI with respect to the Class IA
shares dated April 14, 1997.7
(e)(3)(iii) Amendment No. 2 dated as of December 31, 1998 to the Distribution
Agreement between the Trust and EDI with respect to the Class IA
shares dated April 14, 1997.11
(e)(3)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Distribution Agreement between the Trust and EDI with respect to
the Class IA shares dated April 14, 1997.11
(e)(3)(v) Amendment No. 4 dated as of August 30, 1999 to the Distribution
Agreement between the Trust and EDI with respect to the Class IA
shares dated April 14, 1997.14
(e)(3)(vi) Amendment No. 5 dated as of May 1, 2000 to the Distribution
Agreement between the Trust and EDI with respect to the Class IA
shares dated April 14, 1997.14
(e)(4)(i) Distribution Agreement between the Trust and EDI with respect to
the Class IB shares dated April 14, 1997.4
(e)(4)(ii) Amendment No. 1 dated December 9, 1997 to the Distribution
Agreement between the Trust and EDI with respect to the Class IB
shares dated April 14, 1997.7
C-3
<PAGE>
(e)(4)(iii) Amendment No. 2 dated as of December 31, 1998 to the Distribution
Agreement between the Trust and EDI with respect to the Class IB
shares dated April 14, 1997.11
(e)(4)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Distribution Agreement between the Trust and EDI with respect to
the Class IB shares dated April 14, 1997.11
(e)(4)(v) Amendment No. 4 dated as of August 30, 1999 to the Distribution
Agreement between the Trust and EDI with respect to the Class IB
shares dated April 14, 1997.14
(e)(4)(vi) Amendment No. 5 dated as of May 1, 2000 to the Distribution
Agreement between the Trust and EDI with respect to the Class IB
shares dated April 14, 1997.14
(f) Form of Deferred Compensation Plan.3
(g) Custodian Agreements
(g)(1)(i) Custodian Agreement between the Trust and The Chase Manhattan Bank
dated April 17, 1997 and Global Custody Rider.4
(g)(1)(ii) Amendment No. 1 dated December 9, 1997 to the Custodian Agreement
between the Trust and The Chase Manhattan Bank dated April 17,
1997.7
(g)(1)(iii) Amendment No. 2 dated as of December 31, 1998 to the Custodian
Agreement between the Trust and The Chase Manhattan Bank dated
April 17, 1997.11
(g)(1)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Custodian Agreement between the Trust and The Chase Manhattan Bank
dated April 17, 1997.11
(g)(1)(v) Form of Amendment No. 4 dated as of August 30, 1999 to the
Custodian Agreement between the Trust and The Chase Manhattan Bank
dated April 17, 1997.14
(g)(1)(vi) Form of Amendment No. 5 dated as of May 1, 2000 to the Custodian
Agreement between the Trust and the Chase Manhattan Bank dated
April 17, 1997.14
(g)(2)(i) Amended and Restated Global Custody Rider to the Domestic Custody
Agreement for Mutual Funds between the Chase Manhattan Bank and
the Trust dated August 31, 1998.11
(h) Other Material Contracts
(h)(1)(i) Mutual Fund Services Agreement between the Trust and Chase Global
Funds Services Company dated April 25, 1997.4
(h)(1)(ii) Form of Mutual Fund Services Agreement between the Trust and
Equitable dated May 1, 2000.14
(h)(2)(i) Amended and Restated Expense Limitation Agreement between the
Trust and EQFC dated March 3, 1998.8
(h)(2)(ii) Amended and Restated Expense Limitation Agreement by and between
EQFC and the Trust dated as of December 31, 1998.11
(h)(2)(iii) Amended and Restated Expense Limitation Agreement between EQFC and
The Trust dated as of May 1, 1999.11
C-4
<PAGE>
(h)(2)(iv) Amendment No. 1 dated as of August 30, 1999, to the Amended and
Restated Expense Limitation Agreement between EQFC and the Trust
dated as of May 1, 1999.14
(h)(2)(v) Second Amended and Restated Expense Limitation Agreement between
Equitable and the Trust dated as of May 1, 2000.14
(h)(3)(i) Organizational Expense Reimbursement Agreement by and between EQFC
and the Trust, on behalf of each series of the Trust except for
the Lazard Large Cap Value Portfolio, Lazard Small Cap Value
Portfolio, the JPM Core Bond Portfolio, BT Small Company Index
Portfolio, BT International Equity Index Portfolio and BT Equity
500 Index Portfolio and EQ Financial Consultants, Inc. dated April
14, 1997.4
(h)(3)(ii) Organizational Expense Reimbursement Agreement by and between EQFC
and the Trust, on behalf of the Lazard Large Cap Value Portfolio,
Lazard Small Cap Value Portfolio, JPM Core Bond Portfolio, BT
Small Company Index Portfolio, BT International Equity Index
Portfolio, and BT Equity 500 Index Portfolio and EQ Financial
Consultants, Inc. dated December 9, 1997.7
(h)(3)(iii) Organizational Expense Reimbursement Agreement by and between EQFC
and the Trust, on behalf of the MFS Income with Growth Portfolio,
EQ/Evergreen Foundation Portfolio and EQ/Evergreen Portfolio dated
December 31, 1998.11
(h)(4)(i) Participation Agreement by and among the Trust, Equitable,
Equitable Distributors, Inc., and EQFC dated April 14, 1997.4
(h)(4)(ii) Amendment No. 1 dated December 9, 1997 to the Participation
Agreement by and among the Trust, Equitable, Equitable
Distributors, Inc., and EQFC dated April 14, 1997.7
(h)(4)(iii) Amendment No. 2 dated as of December 31, 1998 to the Participation
Agreement by and among the Trust, Equitable, Equitable
Distributors, Inc., and EQFC dated April 14, 1997.11
(h)(4)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Participation Agreement among the Trust, Equitable, Equitable
Distributors, Inc., and EQFC dated April 14, 1997.11
(h)(4)(v) Form of Amendment No. 4 dated as of October 18, 1999 to the
Participation Agreement among the Trust, Equitable, Equitable
Distributors, Inc., and AXA Advisors dated April 14, 1997.14
(h)(4)(vi) Form of Amendment No. 5 dated as of May 1, 2000 to the
Participation Agreement among the Trust, Equitable, Equitable
Distributors, Inc. and AXA Advisors dated April 14, 1997.
(h)(5) Retirement Plan Participation Agreement dated December 1, 1998
among the Trust, EQFC, with The Equitable Investment Plan for
Employees, Managers and Agents and Equitable.11
(h)(5)(i) Form of Amendment No. 1 to the Retirement Plan Participation
Agreement dated April 30, 1999 among the Trust, EQFC, with The
Equitable Investment Plan for Employees, Managers and Agents and
Equitable.11
C-5
<PAGE>
(h)(6) License Agreement Relating to Use of Name between Merrill Lynch &
Co., Inc., and the Trust dated April 28, 1997. 4
(i)(1) Opinion and Consent of Katten Muchin & Zavis regarding the
legality of the securities being registered.1
(i)(2) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
Lazard Large Cap Value Portfolio, Lazard Small Cap Value
Portfolio, and JPM Core Bond Portfolio.5
(i)(3) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the BT
Small Company Index Portfolio, BT International Equity Index
Portfolio, and BT Equity 500 Index Portfolio.6
(i)(4) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
EQ/Evergreen Foundation Portfolio, EQ/Evergreen Portfolio, and MFS
Growth with Income Portfolio.9
(i)(5) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
EQ/Alliance Premier Growth Portfolio, EQ/Capital Research
Portfolio, EQ/Capital U.S. Equities Portfolio and EQ/Capital
International Equities Portfolio.10
(i)(6) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
Alliance Money Market Portfolio, Alliance Intermediate Government
Securities Portfolio, Alliance Quality Bond Portfolio, Alliance
High Yield Portfolio, Alliance Balanced Portfolio, Alliance
Conservative Investors Portfolio, Alliance Growth Investors
Portfolio, Alliance Common Stock Portfolio, Alliance Equity Index
Portfolio, Alliance Growth and Income Portfolio, Alliance
Aggressive Stock Portfolio, Alliance Small Cap Growth Portfolio,
Alliance Global Portfolio, Alliance International Portfolio and
the Calvert Socially Responsible Portfolio.12
(i)(7) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
Alliance Technology Portfolio.
(j) Consent of PricewaterhouseCoopers LLP, Independent Public
Accountants.
(k) None
(l) Stock Subscription Agreement between the Trust, on behalf of the
T. Rowe Price Equity Income Portfolio, and Separate Account FP.3
(m) Distribution Plan Pursuant to Rule 12b-1 for the Trust's Class IB
shares.4
(n) Plan Pursuant to Rule 18f-3 under the 1940 Act.4
(p) Codes of Ethics.
(p)(1) Code of Ethics of the Trust, AXA Advisors, LLC and Equitable
Distributors.
(p)(2) Code of Ethics of Alliance Capital Management, L.P., dated
August 1999.
C-6
<PAGE>
(p)(3) Code of Ethics of Bankers Trust/Deutsche Bank.
(p)(4) Code of Ethics of Brown Capital Management, Inc., dated
February 10, 1994.
(p)(5) Code of Ethics of Calvert Asset Management Company, Inc.
(p)(6) Code of Ethics of Capital Guardian Trust Company.
(p)(7) Code of Ethics of Evergreen Asset Management, Corp., dated
December 17, 1999.
(p)(8) Code of Ethics of J.P. Morgan Investment Management, Inc.
(p)(9) Code of Ethics of Lazard Asset Management, as revised
September 27, 1999.
(p)(10) Code of Ethics of Massachusetts Financial Services Company,
dated March 1, 2000.
(p)(11) Code of Ethics of Merrill Lynch Asset Management Group.
(p)(12) Code of Ethics of Morgan Stanley Asset Management.
(p)(13) Code of Ethics of Putnam Investment Management.
(p)(14)(i) Code of Ethics of Rowe Price Fleming International, dated
March 1999.
(p)(14)(ii) Code of Ethics of T. Rowe Price Associates, Inc., effective
March 1, 2000.
(p)(15) Code of Ethics of Warburg Pincus Asset Management/Credit Suisse
Asset Management, dated March 1, 2000.
(p)(16)(i) Code of Ethics of Prudential Investments Fund Management, LLC.
(p)(16)(ii) Code of Ethics of Jennison Associates LLC, as amended
December 6, 1999.
Other Exhibits:
Power of Attorney.3
Power of Attorney for Michael Hegarty.8
Power of Attorney for Steven M. Joenk.12
Power of Attorney for Theodossios (Ted) Athanassiades.
- ---------------
1. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on December 3, 1996 (File No. 333-17217).
2. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on January 23, 1997 (File No. 333-17217).
C-7
<PAGE>
3. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on April 7, 1997 (File No. 333-17217).
4. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on August 28, 1997 (File No. 333-17217).
5. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on October 15, 1997 (File No. 333-17217).
6. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on October 31, 1997 (File No. 333-17217).
7. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on December 29, 1997 (File No. 333-17217).
8. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on March 5, 1998 (File No. 333-17217).
9. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on October 15, 1998 (File No. 333-17217).
10. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on February 16, 1999 (File No. 333-17217).
11. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on April 29, 1999 (File No. 333-17217).
12. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on August 30, 1999 (File No. 333-17217).
13. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on February 1, 2000 (File No. 333-17217).
14. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on February 16, 2000 (File No. 333-17217).
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE TRUST
The Equitable Life Assurance Society of the United States ("Equitable")
controls the Trust by virtue of its ownership of more than 99% of the Trust's
shares as of April 17, 2000. All shareholders of the Trust are required to
solicit instructions from their respective contract owners as to certain
matters. The Trust may in the future offer its shares to insurance companies
unaffiliated with Equitable.
On July 22, 1992, Equitable converted from a New York mutual life
insurance company to a publicly-owned New York stock life insurance company. At
that time Equitable became a wholly-owned subsidiary of AXA Financial, Inc.
("AXA Financial"). AXA Financial continues to own 100% of Equitable's common
stock as well as approximately 70% of the common stock of Donaldson, Lufkin &
Jenrette, Inc., a registered broker-dealer.
C-8
<PAGE>
AXA is the largest shareholder of AXA Financial. On April 17, 2000, AXA
owned, directly or indirectly through its affiliates, 60% of the outstanding
common stock of AXA Financial. AXA is the holding company for an international
group of insurance and related financial services companies. AXA's insurance
operations include activities in life insurance, property and casualty insurance
and reinsurance. The insurance operations are diverse geographically, with
activities principally in Western Europe, North America, and the Asia/Pacific
area and, to a lesser extent, in Africa and South America. AXA is also engaged
in asset management, investing banking, securities trading, brokerage, real
estate and other financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area..
ITEM 25. INDEMNIFICATION
Amended and Restated Agreement and Declaration of Trust ("Declaration
of Trust") and By-Laws.
Article VII, Section 2 of the Trust's Declaration of Trust of the Trust
("Trust") states, in relevant part, that a "Trustee, when acting in such
capacity, shall not be personally liable to any Person, other than the Trust or
a Shareholder to the extent provided in this Article VII, for any act, omission
or obligation of the Trust, of such Trustee or of any other Trustee. The
Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, Manager, or Principal Underwriter of
the Trust. The Trust shall indemnify each Person who is serving or has served at
the Trust's request as a director, officer, trustee, employee, or agent of
another organization in which the Trust has any interest as a shareholder,
creditor, or otherwise to the extent and in the manner provided in the By-Laws."
Article VII, Section 4 of the Trust's Declaration of Trust further states, in
relevant part, that the "Trustees shall be entitled and empowered to the fullest
extent permitted by law to purchase with Trust assets insurance for liability
and for all expenses reasonably incurred or paid or expected to be paid by a
Trustee, officer, employee, or agent of the Trust in connection with any claim,
action, suit, or proceeding in which he or she may become involved by virtue of
his or her capacity or former capacity as a Trustee of the Trust."
Article VI, Section 2 of the Trust's By-Laws states, in relevant part,
that "[s]ubject to the exceptions and limitations contained in Section 3 of this
Article VI, every [Trustee, officer, employee or other agent of the Trust] shall
be indemnified by the Trust to the fullest extent permitted by law against all
liabilities and against all expenses reasonably incurred or paid by him or her
in connection with any proceeding in which he or she becomes involved as a party
or otherwise by virtue of his or her being or having been an agent." Article VI,
Section 3 of the Trust's By-Laws further states, in relevant part, that "[n]o
indemnification shall be provided hereunder to [a Trustee, officer, employee or
other agent of the Trust]: (a) who shall have been adjudicated, by the court or
other body before which the proceeding was brought, to be liable to the Trust or
its Shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his or her office
(collectively, "disabling conduct"); or (b) with respect to any proceeding
disposed of (whether by settlement, pursuant to a consent decree or otherwise)
without an adjudication by the court or other body before which the proceeding
was brought that such [Trustee, officer, employee or other agent of the Trust]
was liable to the Trust or its Shareholders by reason of disabling conduct,
unless there has been a determination that such [Trustee, officer, employee or
other agent of the Trust] did not engage in disabling conduct: (i) by the court
or other body before which the proceeding was brought; (ii) by at least a
majority of those Trustees who are neither Interested Persons of the Trust nor
are parties to the proceeding based upon a review of readily available facts (as
opposed to a full trial-type inquiry); or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts (as
opposed to a full trial-type inquiry); provided, however, that indemnification
shall be provided hereunder to [a Trustee, officer, employee or other agent of
the Trust] with respect to any proceeding in the event of (1) a final decision
on the merits by the court or other body before which the proceeding was brought
that the [Trustee, officer, employee or other agent of the Trust] was not liable
by reason of disabling conduct, or (2) the dismissal of the proceeding by the
court or other body before which it was brought for
C-9
<PAGE>
insufficiency of evidence of any disabling conduct with which such [Trustee,
officer, employee or other agent of the Trust] has been charged." Article VI,
Section 4 of the Trust's By-Laws also states that the "rights of indemnification
herein provided (i) may be insured against by policies maintained by the Trust
on behalf of any [Trustee, officer, employee or other agent of the Trust], (ii)
shall be severable, (iii) shall not be exclusive of or affect any other rights
to which any [Trustee, officer, employee or other agent of the Trust] may now or
hereafter be entitled and (iv) shall inure to the benefit of [such party's]
heirs, executors and administrators."
UNDERTAKING
Insofar as indemnification for liability arising under the Securities
Act of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE MANAGER AND ADVISERS
The description of AXA Advisors under the caption of "Management of the Trust"
in the Prospectus and under the caption "Investment Management and Other
Services" in the Statement of Additional Information constituting Parts A and B,
respectively, of this Registration Statement are incorporated by reference
herein.
The information as to the directors and officers of AXA Advisors is set forth in
AXA Advisors' Form ADV filed with the Securities and Exchange Commission on July
1, 1996 (File No. 801-14065) and amended through the date hereof, is
incorporated by reference.
The information as to the directors and officers of T. Rowe Price Associates,
Inc., is set forth in T. Rowe Price Associates, Inc.'s Form ADV filed with the
Securities and Exchange Commission on March 31, 1997 (File No. 801-00856) and
amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Rowe Price-Fleming
International, Inc. is set forth in Rowe Price-Fleming International, Inc.'s
Form ADV filed with the Securities and Exchange Commission on March 31, 1997
(File No. 801-14713) and amended through the date hereof, is incorporated by
reference.
The information as to the directors and officers of Putnam Investment
Management, Inc. is set forth in Putnam Investment Management, Inc.'s Form ADV
filed with the Securities and Exchange Commission on April 2, 1996 (File No.
801-07974) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Massachusetts Financial
Services Company is set forth in Massachusetts Financial Services Company's Form
ADV filed with the Securities and Exchange Commission on March 31, 1998 (File
No. 801-17352) and amended through the date hereof, is incorporated by
reference.
C-10
<PAGE>
The information as to the directors and officers of Morgan Stanley Asset
Management Inc. is set forth in Morgan Stanley Asset Management Inc.'s Form ADV
filed with the Securities and Exchange Commission on August 1, 1997 (File No.
801-15757) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Warburg Pincus Asset
Management is set forth in Warburg Pincus Asset Management, Inc.'s Form ADV
filed with the Securities and Exchange Commission on March 31, 1997 (File No.
801-07321) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Fund Asset Management, L.P.
is set forth in Fund Asset Management, L.P.'s Form ADV filed with the Securities
and Exchange Commission on March 25, 1998 (File No. 801-11583) and amended
through the date hereof, is incorporated by reference.
The information as to the directors and officers of Lazard Asset Management (a
division of Lazard Freres & Co. LLC) is set forth in Lazard Freres & Co. LLC's
Form ADV filed with the Securities and Exchange Commission on June 9, 1997 (File
No. 801-6568) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of J. P. Morgan Investment
Management Inc. is set forth in J.P. Morgan Investment Management Inc.'s Form
ADV filed with the Securities and Exchange Commission on March 27, 1998 (File
No. 801-21011) and amended through the date hereof, is incorporated by
reference.
The information as to the directors and officers of Evergreen Asset Management
Corp. is set forth in Evergreen Asset Management Corp.'s Form ADV filed with the
Securities and Exchange Commission on March 31, 1998 (File No.
801-46522) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Alliance Capital Management
Corporation, the general partner of Alliance Capital Management L.P., is set
forth in Alliance Capital Management Corporation's Form ADV filed with the SEC
on April 21, 1998 (File No. 801-32361) and as amended through the date hereof,
is incorporated by reference.
The information as to the directors and officers of Calvert Asset Management
Company, Inc. is set forth in Calvert Asset Management Company's Form ADV filed
with the Securities and Exchange Commission on May 12, 1999 (File No. 801-17044)
and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Brown Capital Management is
set forth in Brown Capital Management's Form ADV filed with the Securities and
Exchange Commission on May 30, 1995 (File No. 801-19287) and amended through the
date hereof, is incorporated by reference.
The information as to the directors and officers of Prudential Investment Fund
Management LLC is set forth in Prudential Investment Fund Management LLC's Form
ADV filed with the Securities and Exchange Commission on November 29, 1999 (File
No. 801-31104) and as amended through the date hereof, is incorporated by
reference.
The information as to the directors and officers of Jennison Associates LLC is
set forth in Jennison Associates LLC's Form ADV filed with the Securities and
Exchange Commission on July 22, 1999 (File No. 801-5608) and amended through the
date hereof.
THE INFORMATION AS TO THE DIRECTORS AND OFFICERS OF BANKERS TRUST COMPANY IS SET
FORTH BELOW. TO THE KNOWLEDGE OF THE TRUST, NONE OF THE DIRECTORS OR OFFICERS OF
BANKERS TRUST, EXCEPT THOSE SET FORTH BELOW, IS OR HAS BEEN AT ANYTIME DURING
THE PAST TWO FISCAL YEARS ENGAGED IN ANY OTHER BUSINESS, PROFESSION, VOCATION OR
EMPLOYMENT OF A SUBSTANTIAL NATURE, EXCEPT THAT CERTAIN DIRECTORS AND OFFICERS
ALSO HOLD VARIOUS POSITIONS WITH AND ENGAGE IN BUSINESS FOR BANKERS TRUST NEW
YORK CORPORATION. SET FORTH BELOW ARE THE NAMES AND PRINCIPAL BUSINESSES OF THE
DIRECTORS AND OFFICERS OF BANKERS TRUST WHO ARE OR DURING THE PAST TWO FISCAL
YEARS HAVE BEEN ENGAGED IN ANY OTHER BUSINESS, PROFESSION, VOCATION OR
EMPLOYMENT OF A SUBSTANTIAL NATURE.
These persons may be contacted c/o Bankers Trust Company, 130 Liberty Street,
New York, New York 10006.
C-11
<PAGE>
Josef Ackermann, Chairman of the Board, Chief Executive Officer and President of
Bankers Trust Company and Bankers Trust Corporation. Member of the Board,
Deutsche Bank AG. Chairman of the Supervisory Board, Deutsche Bank Luxembourg
S.A., and a Member Supervisory Board of the following organizations; Eurex
Frankfurt AG, Eurex Zurich AG, Linde AG, Stora Enso Oyj and Mannesmann AG,
Director of Deutsche Bank Americas Holding Corp.
Hans H. Angermueller, Director of Bankers Trust Company and Bankers Trust
Corporation. Counsel, Shearman & Sterling.
George B. Beitzel, Director of Bankers Trust Company and Bankers Trust
Corporation. [Director of Various Corporations. Retired Senior Vice President
and Director, International Business Machines Corporation.] Also a director of
Computer Task Group, and Staff Leasing; Chairman Emeritus of Amherst College;
and Chairman of The Colonial Williamsburg Foundation.
William R. Howell, Director of Bankers Trust Company and Bankers Trust
Corporation. Chairman Emeritus, J.C. Penney Company, Inc. Also a director of
Exxon Corporation, Haliburton Company, Warner-Lambert Company, and The Williams
Companies, Inc. Member of the American Society of Corporation Executives, Beta
Gamma Sigma, Directors Table, the Business Council, Delta Sigma Pi, University
of Oklahoma, Dean's Advisory Board, College of Business Administration. Chairman
of Southern Methodist University Board of Trustees.
Hermann-Josef Lamberti, Director of Bankers Trust Company and Director and Vice
Chairman Bankers Trust Corporation. Executive Vice President of Deutsche Bank
AG; Board member of Euroclear plc (London) and Euroclear sc. (Brussels); and a
Supervisory Board Member of GZS (Frankfurt) and European Transaction Bank
(e.t.b.) and Director of Deutsche Bank Americas Holding Corp.
Troland S. Link, Managing Director and General Counsel of Bankers Trust Company.
General Counsel of Bankers Trust Corporation. General Counsel of Deutsche Bank
North America.
Rodney A. McLauchlan, Executive Vice President of Bankers Trust Company and
Bankers Trust Corporation.
John A. Ross, President and Director of Bankers Trust Company and Bankers Trust
Corporation. Chief Executive Officer of the Americas, Deutsche Bank AG;
President and Chief Executive Officer, Deutsche Bank Americas Holding Corp. and
Taunus Corporation; and a Board Member of the following; Deutsche Bank
Securities, Inc., and DB Alex. Brown LLC.
C-12
<PAGE>
Ronaldo H. Schmitz, Director of Bankers Trust Company and Bankers Trust
Corporation. Member of the Board, Deutsche Bank AG; and non-executive
Directorship of the following; Bertelsmann AG, Glaxo Wellcome plc and Rohm &
Haas Co. and Director of Deutsche Bank Americas Holding Corp.
Mayo A. Shattuck, III, Vice Chairman Bankers Trust Corporation, Co-Chairman and
Co-Chief Executive Officer of DB Alex, Brown LLC, Director, Bankers Trust
International, plc, Alex. Brown & Sons Holdings Limited, Alex. Brown & Sons
Limited, Alex. Brown Asset Management, Inc., Alex. Brown Capital Advisory,
Incorporated and Investment Company Capital Corporation; Co-Chairman and
Co-Chief Executive Officer, Deutsche Bank Securities Inc.; Director and
President - AB Administrative Partner, Inc., ABFS I Incorporated, ABS Leasing
Services Company, ABS MB Ltd., Alex. Brown Financial Corporation, Alex. Brown
Financial Services Incorporated, Alex. Brown Investments Incorporated, Alex.
Brown Management Services Inc. and Alex. Brown Mortgage Capital Corporation; and
Director and Vice President, Alex. Brown & Sons Holdings Limited. Director,
Constellation Holdings; President, South Street Aviation; Co-Chairman and
Co-Chief Executive Officer, Deutsche Bank Securities.
THE INFORMATION AS TO THE DIRECTORS AND OFFICERS OF CAPITAL GUARDIAN TRUST
COMPANY IS SET FORTH BELOW. TO THE KNOWLEDGE OF THE TRUST, NONE OF THE DIRECTORS
OR OFFICERS OF CAPITAL GUARDIAN IS OR HAS BEEN AT ANYTIME DURING THE PAST TWO
FISCAL YEARS ENGAGED IN ANY OTHER BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT
OF A SUBSTANTIAL NATURE, EXCEPT AS SET FORTH BELOW.
These persons may be contacted c/o Capital Guardian Trust Company, 333 South
Hope Street, Los Angeles, California 90071.
<TABLE>
<CAPTION>
NAME AFFILIATIONS WITHIN LAST TWO YEARS
- -----------------------------------------------------------------------------------------
<S> <C>
Timothy D. Amour Director, Capital Guardian Trust Company, Capital Research
and Management Company and Capital Management Services, Inc.;
Chairman and Chief Executive Officer, Capital Research Company.
- -----------------------------------------------------------------------------------------
Donnalisa Barnum Senior Vice President, Capital Guardian Trust Company; Vice
President, Capital International, Inc. and Capital
International Limited.
- -----------------------------------------------------------------------------------------
Andrew F. Barth Director, Capital Guardian Trust Company and, Capital Research
and Management Company; Director and Research Director,
Capital International Research, Inc.; President, Capital
Guardian Research Company; Formerly Director and Executive
Vice President, Capital Guardian Research Company.
- -----------------------------------------------------------------------------------------
Michael D. Beckman Senior Vice President, Treasurer and Director, Capital
Guardian Trust Company; Director, Capital Guardian Trust
Company of Nevada; Treasurer, Capital International Research,
Inc. and Capital Guardian Research Company; Director and
Treasurer, Capital Guardian (Canada), Inc.; Formerly Chairman
and Director, Capital International Asia Pacific Management
Company.
- -----------------------------------------------------------------------------------------
Michael A. Burik Senior Counsel, The Capital Group Companies, Inc.; Senior
Vice President, Capital Guardian Trust Company.
- -----------------------------------------------------------------------------------------
Elizabeth A. Burns Senior Vice President, Capital Guardian Trust Company.
- -----------------------------------------------------------------------------------------
Larry P. Clemmensen Director, Capital Guardian Trust Company and American Funds
Distributors, Inc.; Chairman and Director, American Funds
Service Company; Director and President, The Capital Group
Companies, Inc. and
- -----------------------------------------------------------------------------------------
C-13
<PAGE>
NAME AFFILIATIONS WITHIN LAST TWO YEARS
- -----------------------------------------------------------------------------------------
Capital Management Services, Inc.; Senior Vice President and
Director, Capital Research and Management Company, Treasurer,
Capital Strategy, Inc.
- -----------------------------------------------------------------------------------------
Kevin G. Clifford Director and President, American Funds Distributors, Inc.;
Director, Capital Guardian Trust Company
- -----------------------------------------------------------------------------------------
Roberta A. Conroy Senior Vice President, Director and Counsel, Capital Guardian
Trust Company; Senior Vice President and Secretary, Capital
International, Inc.; Assistant General Counsel, The Capital
Group Companies, Inc., Secretary, Capital Guardian
International, Inc.; Formerly, Secretary, Capital Management
Services, Inc.
- -----------------------------------------------------------------------------------------
John B. Emerson Senior Vice President, Capital Guardian Trust Company;
Director, Capital Guardian Trust Company, a Nevada
Corporation.
- -----------------------------------------------------------------------------------------
Michael Ericksen Senior Vice President, Capital Guardian Trust Company;
Director and Senior Vice President, Capital International
Limited.
- -----------------------------------------------------------------------------------------
David I. Fisher Vice Chairman and Director, Capital International, Inc.,
Capital International Limited and Capital International K.K.;
Chairman and Director, Capital International S. A. and
Capital Guardian Trust Company; Director and President,
Capital International Limited (Bermuda); Director, The Capital
Group Companies, Inc., Capital International Research, Inc.,
Capital Group Research, Inc. and Capital Research and
Management Company.
- -----------------------------------------------------------------------------------------
Richard N. Havas Senior Vice President, Capital Guardian Trust Company, Capital
International, Inc. and Capital International Limited;
Director and Senior Vice President, Capital International
Research, Inc.; Director and Senior Vice President Capital
Guardian (Canada), Inc.
- -----------------------------------------------------------------------------------------
Frederick M. Hughes, Jr. Senior Vice President, Capital Guardian Trust Company.
- -----------------------------------------------------------------------------------------
William H. Hurt Senior Vice President and Director, Capital Guardian Trust
Company; Chairman and Director, Capital Guardian Trust
Company, a Nevada Corporation and Capital Strategy Research,
Inc.; Formerly, Director,
- -----------------------------------------------------------------------------------------
C-14
<PAGE>
NAME AFFILIATIONS WITHIN LAST TWO YEARS
- -----------------------------------------------------------------------------------------
The Capital Group Companies, Inc.
- -----------------------------------------------------------------------------------------
Peter C. Kelly Senior Vice President, Capital Guardian Trust Company;
Assistant General Counsel, The Capital Group Companies, Inc.;
Director and Senior Vice President, Capital International,
Inc.
- -----------------------------------------------------------------------------------------
Robert G. Kirby Chairman Emeritus, Capital Guardian Trust Company; Senior
Partner, The Capital Group Companies, Inc.
- -----------------------------------------------------------------------------------------
Nancy J. Kyle Senior Vice President and Director, Capital Guardian Trust
Company; President and Director, Capital Guardian (Canada),
Inc.
- -----------------------------------------------------------------------------------------
Karin L. Larson Director, The Capital Group Companies, Inc., Capital Group
Research, Inc., Capital Guardian Trust Company, Director and
Chairman, Capital Guardian Research Company and Capital
International Research, Inc., Formerly, Director and Senior
Vice President , Capital Guardian Research Company.
- -----------------------------------------------------------------------------------------
James R. Mulally Senior Vice President and Director, Capital Guardian Trust
Company; Senior Vice President, Capital International
Limited; Vice President, Capital Research Company; Formerly,
Director, Capital Guardian Research Company.
- -----------------------------------------------------------------------------------------
Shelby Notkin Senior Vice President, Capital Guardian Trust Company;
Director, Capital Guardian Trust Company, a Nevada
Corporation.
- -----------------------------------------------------------------------------------------
Mary M. O'Hern Senior Vice President, Capital Guardian Trust Company and
Capital International Limited; Vice President, Capital
International, Inc.
- -----------------------------------------------------------------------------------------
Jeffrey C. Paster Senior Vice President, Capital Guardian Trust Company.
- -----------------------------------------------------------------------------------------
Robert V. Pennington Senior Vice President, Capital Guardian Trust Company;
President and Director Capital Guardian Trust Company, a
Nevada Corporation Company.
- -----------------------------------------------------------------------------------------
Jason M. Pilalas Director, Capital Guardian Trust Company; Senior Vice
President and Director, Capital International Research, Inc.;
Formerly, Director and Senior Vice President, Capital
Guardian Research Company.
- -----------------------------------------------------------------------------------------
C-15
<PAGE>
NAME AFFILIATIONS WITHIN LAST TWO YEARS
- -----------------------------------------------------------------------------------------
Robert Ronus President and Director, Capital Guardian Trust Company;
Chairman and Director, Capital Guardian (Canada), Inc.,
Director, Capital International, Inc. and Capital Guardian
Research Company; Senior Vice President, Capital International,
Inc.; Capital International Limited and Capital International
S.A.; Formerly, Chairman, Capital Guardian International
Research Company and Director, Capital International, Inc.
- -----------------------------------------------------------------------------------------
James F. Rothenberg Director, American Funds Distributors, Inc., American Funds
Service Company, The Capital Group Companies, Inc., Capital
Group Research, Inc., Capital Guardian Trust Company and
Capital Management Services, Inc.; Director and President,
Capital Research and Management, Inc.; Formerly, Director of
Capital Guardian Trust Company, a Nevada Corporation, and
Capital Research Company.
- -----------------------------------------------------------------------------------------
Theodore R. Samuels Senior Vice President and Director, Capital Guardian Trust
Company; Director, Capital International Research, Inc.;
Formerly, Director, Capital Guardian Research Company
- -----------------------------------------------------------------------------------------
Lionel A. Sauvage Senior Vice President, Capital Guardian Trust Company; Vice
President, Capital International Research, Inc.; Formerly,
Director, Capital Guardian Research Company.
- -----------------------------------------------------------------------------------------
John H. Seiter Executive Vice President and Director, Capital Guardian Trust
Company; Senior Vice President, Capital Group International,
Inc.; and Vice President, The Capital Group Companies, Inc.
- -----------------------------------------------------------------------------------------
Karen Skinner-Twoney Vice President, Capital Guardian Trust Company; Director,
Vice President and Treasurer, Capital Guardian Trust
Company, a Nevada Corporation.
- -----------------------------------------------------------------------------------------
Eugene P. Stein Executive Vice President and Director, Capital Guardian Trust
Company; Formerly, Director, Capital Guardian Research
Company.
- -----------------------------------------------------------------------------------------
Phil A. Swan Senior Vice President, Capital Guardian Trust Company.
- -----------------------------------------------------------------------------------------
Shaw B. Wagener Director, Capital Guardian Trust Company, Capital
International Asia Pacific Management Company S.A., Capital
Research and Management Company
- -----------------------------------------------------------------------------------------
C-16
<PAGE>
NAME AFFILIATIONS WITHIN LAST TWO YEARS
- -----------------------------------------------------------------------------------------
and Capital International Management Company S.A.; President
and Director, Capital International, Inc.; Senior Vice
President, Capital Group International, Inc.
- -----------------------------------------------------------------------------------------
Joanne Weckbacher Senior Vice President, Capital Guardian Trust Company.
- -----------------------------------------------------------------------------------------
Eugene M. Waldron Senior Vice President, Capital Guardian Trust Company.
- -----------------------------------------------------------------------------------------
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) AXA Advisors and Equitable Distributors, Inc. ("EDI") are the
principal underwriters of the Trust's Class IA shares and Class IB shares. AXA
Advisors also serves as a principal underwriter for the following entities:
Separate Account Nos. 45, 66 and 301 of Equitable; and Separate Accounts A, I
and FP of Equitable. EDI serves as the principal underwriter for the Class IB
shares of Separate Account No. 49 of Equitable.
(b) Set forth below is certain information regarding the directors and
officers of AXA Advisors and of EDI, the principal underwriters of the Trust's
Class IA and Class IB shares. The business address of the persons whose names
are preceded by a single asterisk is 1290 Avenue of the Americas, New York, New
York 10104. The business address of the persons whose names are preceded by a
double asterisk is 660 Newport Center Drive, Suite 1200, Newport Beach, CA
92660. Mr. Laughlin's business address is 1345 Avenue of the Americas, 39th
Floor, New York, New York 10105. Mr. Kornweiss's business address is 4251 Crums
Mill Road, Harrisburg, PA 17112. The business address of Mr. Bullen and Ms.
Fazio is 200 Plaza Drive, Secaucus, New Jersey 07096.
C-17
<PAGE>
<TABLE>
<CAPTION>
===============================================================================
AXA ADVISORS LLC
===============================================================================
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH AXA ADVISORS LLC WITH THE TRUST
- -------------------------------------------------------------------------------
<S> <C> <C>
DIRECTORS
* Derry E. Bishop Director
Harvey E. Blitz Director
Michael J. Laughlin Director Vice President
G. Patrick McGunagle Director
* Michael S. Martin Director
* Michael F. McNelis Director
* Richard V. Silver Director
* Mark R. Wutt Director
- -------------------------------------------------------------------------------
OFFICERS
* Michael S. Martin Chairman of the Board and Chief Vice President
Executive Officer
* Michael F. McNelis President and Chief Operating
Officer
* Martin J. Telles Executive Vice President and Vice President
Chief Marketing Officer
* Derry E. Bishop Executive Vice President
* Harvey Blitz Executive Vice President Chief Financial Officer and
Vice President
* G. Patrick McGunagle Executive Vice President
* Edward J. Hayes Executive Vice President
* Craig A. Junkins Executive Vice President
* Peter D. Noris Executive Vice President President
* Mark A. Silberman Senior Vice President and Chief
Financial Officer
Stephen T. Burnthall Senior Vice President
* Richard Magaldi Senior Vice President
Robert Schmidt Senior Vice President
Cindy Schreiner Senior Vice President
Catherine P. Earl Senior Vice President
James P. Bordovitz Senior Vice President and
General Counsel
* Donna M. Dazzo First Vice President
* John Bratten First Vice President
Amy Franceschini First Vice President
Anne Nussbaum First Vice President
Philomena Scamardella First Vice President First Vice President
* Michael Brzozowski Vice President and Compliance
Director
* Raymond T. Barry Vice President
* Claire A. Comerford Vice President
* Linda Funigiello Vice President
* Mark Generales Vice President
Mark D. Godofsky Vice President and Controller
* Rosemary Magee Vice President
* Michael McBryan Vice President
- -------------------------------------------------------------------------------
C-18
<PAGE>
- -------------------------------------------------------------------------------
* Bill Nestel Vice President
* Laura A. Pellegrini Vice President
* Dan Roebuck Vice President
* Sid Smith Vice President
* Don Wiley Vice President
Beth Andreozzi Vice President
* Mike Woodhead Vice President
Greg Andonian Vice President
Debra Brogan Vice President
Randall Brown Vice President
Louis Calabrese Vice President
Joseph Carew Vice President
Catherine Gentry Vice President
Robert Hatton Vice President
Michael Lanio Vice President
John Mapes Vice President
Frank Massa Vice President
Sandi Narvaez Vice President
Michael Ryniker Vice President
Teresa M. West Vice President
James Woodley Vice President
Charlton Bulkin Vice President
Mary Gabbett Vice President
* Mary E. Cantwell Assistant Vice President Vice President
* Tom C. Gosnell Assistant Vice President
* Ara Klidjian Secretary
* John T. McCabe Assistant Vice President
* Janet E. Hannon Secretary
* Linda J. Galasso Assistant Secretary
Francesca Divone Assistant Secretary
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================================
EQUITABLE DISTRIBUTORS, INC.
============================================================================================================================
<S> <C> <C>
NAME AND PRINCIPAL BUSINESS POSITIONS AND OFFICES POSITIONS AND OFFICES
ADDRESS WITH EQUITABLE DISTRIBUTORS, INC. WITH THE TRUST
- ----------------------------------------------------------------------------------------------------------------------------
DIRECTORS
* Edward J. Hayes Director
* Jose S. Suquet Director
* Charles Wilder Director
- ----------------------------------------------------------------------------------------------------------------------------
OFFICERS
* Jose S. Suquet Chairman of the Board
** Patricia Miller Chief Executive Officer
** Alex MacGillivray President
** Charles Wilder Chief Operating Officer
- ----------------------------------------------------------------------------------------------------------------------------
C-19
<PAGE>
============================================================================================================================
EQUITABLE DISTRIBUTORS, INC.
============================================================================================================================
NAME AND PRINCIPAL BUSINESS POSITIONS AND OFFICES POSITIONS AND OFFICES
ADDRESS WITH EQUITABLE DISTRIBUTORS, INC. WITH THE TRUST
- ----------------------------------------------------------------------------------------------------------------------------
** Hunter Allen Senior Vice President
* Elizabeth Forget Senior Vice President
** Al Haworth Senior Vice President
** Stuart Hutchins Senior Vice President
** Ken Jaffe Senior Vice President
** Michael McDaniel Senior Vice President
** Michael Dougherty Senior Vice President
David Hughes Senior Vice President
Norman J. Abrams Vice President and Counsel
* Debora Buffington
Vice President and Chief
Compliance Officer
Raymond T. Barry Vice President
** Mark Brandenberger Vice President
Anthony Llopis Vice President
Partick O'shea Vice President and Chief
Financial Officer
* Ronald R. Quist Treasurer
* Linda J. Galasso Secretary
Van Rubiano President
Michael Dibbert President
Alex MacGillivray President
Patrick Miller President
Francesca Divone Assistant Secretary
============================================================================================================================
</TABLE>
(c) Inapplicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940, and the Rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6);
(8); (12); and 31a-1(d), the required books and records are maintained
at the offices of Registrant's Custodian:
1211 Avenue of the Americas
New York, New York 10036
(b) With respect to Rules 31a-1(a); 31a-1(b)(1), (4); (2)(C) and (D); (4);
(5); (6); (8); (9); (10); (11) and 31a-1(f), the required books and
records are currently maintained at the offices of the Registrant's
Administrator:
C-20
<PAGE>
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of
the Registrant's Manager or Advisers:
Equitable T. Rowe Price Associates, Inc.
1290 Avenue of the Americas 100 East Pratt St.
New York, NY 10104 Baltimore, MD 21202
Rowe Price-Fleming International, Inc. Putnam Investment Management, Inc.
100 East Pratt Street One Post Office Square
Baltimore, MD 21202 Boston, MA 02109
Massachusetts Financial Services Company Fund Asset Management, L.P.
500 Boylston Street 800 Scudders Mill Road
Boston, MA 02116 Plainsboro, NJ 08543-9011
Warburg Pincus Asset Management, Inc. Morgan Stanley Asset Management Inc.
466 Lexington Avenue 1221 Avenue of the Americas
New York, NY 10017-3147 New York, NY 10020
Lazard Asset Management J.P Morgan Investment Management Inc.
30 Rockefeller Plaza 522 Fifth Avenue
New York, NY 10020 New York, NY 10036
Bankers Trust Company Evergreen Asset Management Corp.
130 Liberty Street 1311 Mamaroneck Avenue, 2nd Floor
One Bankers Trust Plaza White Plains, NY 10577
New York, NY 10006
Alliance Capital Management L.P. Capital Guardian Trust Company
1345 Avenue of the Americas 11100 Santa Monica Boulevard
New York, NY 10105 17th Floor
Los Angeles, CA 90025
Calvert Asset Management Company, Inc. Brown Capital Management, Inc.
4550 Montgomery Avenue 1201 North Calvert Street
Suite 1000N Baltimore, MD 21202
Bethesda, MD 20814
Prudential Investments Fund Jennison Associates LLC
Management LLC 466 Lexington Avenue
100 Mulberry Street New York, NY 10017
Gateway Center 3
14th Floor
Newark, NJ 07102
ITEM 29. MANAGEMENT SERVICES: None.
ITEM 30. UNDERTAKINGS
Inapplicable.
C-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, ("1933
Act") and the Investment Company Act of 1940, as amended, the Registrant
certifies that this filing meets all of the requirements for effectiveness
pursuant to Rule 485(b) under the 1933 Act and the Registrant has duly caused
this Post-Effective Amendment No. 16 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, and the State of New York on the __ day of April, 2000.
EQ ADVISORS TRUST
By: /s/
--------------------
Peter D. Noris
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 16 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ President and Trustee April __, 2000
- ----------------------------------
Peter D. Noris
* Trustee April __, 2000
- ----------------------------------
Michael Hegarty
* Trustee April __, 2000
- ----------------------------------
Jettie M. Edwards
* Trustee April __, 2000
- ----------------------------------
William M. Kearns, Jr.
* Trustee April __, 2000
- ----------------------------------
Christopher P.A. Komisarjevsky
* Trustee April __, 2000
- ----------------------------------
Theodossios (Ted) Athanassiades
* Trustee April __, 2000
- ----------------------------------
Harvey Rosenthal
* Vice President and Chief April __, 2000
- ---------------------------------- Financial Officer
Steven M. Joenk
</TABLE>
* By: /s/
--------------------------
Peter D. Noris
(Attorney-in-Fact)
C-22
<PAGE>
EXHIBIT LIST
<TABLE>
<CAPTION>
<S> <C>
(d)(1)(vi) Amended and Restated Investment Management Agreement, dated as of
May 1, 2000, between the Trust and Equitable.
(d)(12)(iii) Form of Amendment No. 2, dated May 1, 2000 to Investment Advisory
Agreement between Equitable and Alliance, dated as of May 1, 2000.
(d)(13)(i) Amendment No. 1, dated as of May 1, 2000 to Investment Advisory
Agreement between Equitable and Capital Guardian Trust Company,
dated May 1, 1999.
(h)(4)(vi) Form of Amendment No. 5 dated as of May 1, 2000 to the
Participation Agreement among the Trust, Equitable, Equitable
Distributors, Inc., and AXA Advisors LLC dated April 14, 1997.
(i)(7) Opinion and consent of Dechert, Price & Rhoads regarding the
legality of the securities being registered with respect to the
Alliance Technology Portfolio.
(j) Consent of PricewaterhouseCoopers LLP, Independent Public
Accountants.
(p)(1) Code of Ethics of the Trust, AXA Advisors, LLC and Equitable
Distributors.
(p)(2) Code of Ethics of Alliance Capital Management, L.P., dated
August 1999.
(p)(3) Code of Ethics of Bankers Trust/Deutsche Bank.
(p)(4) Code of Ethics of Brown Capital Management, Inc., dated
February 10, 1994.
(p)(5) Code of Ethics of Calvert Asset Management Company, Inc.
(p)(6) Code of Ethics of Capital Guardian Trust Company.
(p)(7) Code of Ethics of Evergreen Asset Management, Corp., dated
December 17, 1999.
(p)(8) Code of Ethics of J.P. Morgan Investment Management, Inc.
(p)(9) Code of Ethics of Lazard Asset Management, as revised
September 27, 1999.
(p)(10) Code of Ethics of Massachusetts Financial Services Company,
dated March 1, 2000.
(p)(11) Code of Ethics of Merrill Lynch Asset Management Group.
(p)(12) Code of Ethics of Morgan Stanley Asset Management.
(p)(13) Code of Ethics of Putnam Investment Management.
(p)(14)(i) Code of Ethics of Rowe Price Fleming International, dated
March 1999.
(p)(14)(ii) Code of Ethics of T. Rowe Price Associates, Inc., effective
March 1, 2000.
(p)(15) Code of Ethics of Warburg Pincus Asset Management/Credit Suisse
Asset Management, dated March 1, 2000.
(p)(16)(i) Code of Ethics of Prudential Investments Fund Management, LLC.
(p)(16)(ii) Code of Ethics of Jennison Associates LLC, as amended
December 6, 1999.
</TABLE>
Other Exhibits:
Power of Attorney for Theodossios (Ted) Athanassiades.
C-23
<PAGE>
Exhibit (d)(1)(vi)
AMENDED AND RESTATED
INVESTMENT MANAGEMENT AGREEMENT
AMENDED AND RESTATED AGREEMENT ("AGREEMENT"), dated as of May 1, 2000,
between the EQ Advisors Trust, a Delaware business trust ("Trust"), and The
Equitable Life Assurance Society of the United States, a New York Stock life
insurance company ("Equitable" or "Manager").
WHEREAS, the Trust is registered as an investment company under the
Investment Company Act of 1940, as amended ("Investment Company Act");
WHEREAS, Equitable is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
WHEREAS, the Trust's shareholders are and will be primarily separate
accounts maintained by insurance companies for variable life insurance policies
and variable annuity contracts (the "Policies") under which income, gains, and
losses, whether or not realized, from assets allocated to such accounts are, in
accordance with the Policies, credited to or charged against such accounts
without regard to other income, gains, or losses of such insurance companies; as
well as other shareholders as permitted under Section 817(h) of the Internal
Revenue Code of 1986, as amended ("Code"), and the rules and regulations
thereunder with respect to the qualification of variable annuity contracts and
variable life insurance policies as insurance contracts under the Code.
WHEREAS, the Trust is and will continue to be a series fund having two
or more investment portfolios, each with its own investment objectives,
investment policies and restrictions;
WHEREAS, the Investment Company Act prohibits any person from acting as
an investment adviser to a registered investment company except pursuant to a
written contract; and
WHEREAS, the Board of Trustees of the Trust wishes to appoint Equitable
as the investment manager of the Trust;
NOW, THEREFORE, the Trust and Equitable hereby amend and restate this
Agreement as follows:
1. APPOINTMENT OF MANAGER
The Trust hereby appoints Equitable as the investment manager
for each of the portfolios of the Trust specified in Appendix A to this
Agreement, as such Appendix A may be amended by Manager and the Trust from time
to time ("Portfolios"), subject to the supervision of the Trustees of the Trust
and in the manner and under the terms and conditions set forth in this
Agreement. Manager accepts such appointment and agrees to render the services
and to assume the obligations set forth in this Agreement commencing on its
effective date. Manager will be an independent contractor and will have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent unless expressly authorized in this Agreement or another writing by the
Trust and Manager.
<PAGE>
2. DUTIES OF THE MANAGER
A. Subject to the general supervision and control of the Trustees of
the Trust and under the terms and conditions set forth in this Agreement, the
Trust acknowledges and agrees that it is contemplated that Manager will, at its
own expense, select and contract with one or more investment advisers
("Advisers") to manage the investment operations and composition of each and
every Portfolio of the Trust and render investment advice for each Portfolio,
including the purchase, retention, and disposition of the investments,
securities and cash contained in each Portfolio, in accordance with each
Portfolio's investment objectives, policies and restrictions as stated in the
Trust's Amended and Restated Agreement and Declaration of Trust, By-Laws, and
such Portfolio's Prospectus and Statement of Additional Information ("SAI"), as
is from time to time in effect; provided, that any contract with an Adviser (an
"Advisory Agreement") shall be in compliance with and approved as required by
the Investment Company Act or in accordance with exemptive relief granted by the
Securities and Exchange Commission ("SEC") under the Investment Company Act.
B. Subject always to the direction and control of the Trustees of the
Trust, Manager will have (i) overall supervisory responsibility for the general
management and investment of each Portfolio's assets; (ii) full discretion to
select new or additional Advisers for each Portfolio; (iii) full discretion to
enter into and materially modify existing Advisory Agreements with Advisors;
(iv) full discretion to terminate and replace any Adviser; and (v) full
investment discretion to make all determinations with respect to the investment
of a Portfolio's assets not then managed by an Adviser. In connection with
Manager's responsibilities herein, Manager will assess each Portfolio's
investment focus and will seek to implement decisions with respect to the
allocation and reallocation of each Portfolio's assets among one or more current
or additional Advisers from time to time, as the Manager deems appropriate, to
enable each Portfolio to achieve its investment goals. In addition, Manager will
monitor compliance of each Adviser with the investment objectives, policies and
restrictions of any Portfolio or Portfolios (or portions of any Portfolio) under
the management of such Adviser, and review and report to the Trustees of the
Trust on the performance of each Adviser. Manager will furnish, or cause the
appropriate Adviser(s) to furnish, to the Trust such statistical information,
with respect to the investments that a Portfolio (or portions of any Portfolio)
may hold or contemplate purchasing, as the Trust may reasonably request. On
Manager's own initiative, Manager will apprise, or cause the appropriate
Adviser(s) to apprise, the Trust of important developments materially affecting
each Portfolio (or any portion of a Portfolio that they advise) and will furnish
the Trust, from time to time, with such information as may be appropriate for
this purpose. Further, Manager agrees to furnish, or cause the appropriate
Adviser(s) to furnish, to the Trustees of the Trust such periodic and special
reports as the Trustees of the Trust may reasonably request. In addition,
Manager agrees to cause the appropriate Adviser(s) to furnish to third-party
data reporting services all currently available standardized performance
information and other customary data.
C. Manager will also furnish to the Trust, at its own expense and
without renumeration from or other cost to the Trust, the following:
(i) Office Space. Manager will provide office space in the
offices of the Manager or in such other place as may be reasonably
agreed upon by the parties hereto from time to time, and all necessary
office facilities and equipment;
<PAGE>
(ii) Personnel. Manager will provide necessary executive and
other personnel, including personnel for the performance of clerical
and other office functions, exclusive of those functions: (a) related
to and to be performed under the Trust's contract or contracts for
administration, custodial, accounting, bookkeeping, transfer, and
dividend disbursing agency or similar services by any entity, including
Manager or its affiliates, selected to perform such services under such
contracts; and (b) related to the services to be provided by any
Adviser pursuant to an Advisory Agreement; and
(iii) Preparation of Prospectus and Other Documents. Manager
will provide other information and services, other than services of
outside counsel or independent accountants or services to be provided
by any Adviser under any Advisory Agreement, required in connection
with the preparation of all registration statements and Prospectuses,
prospectus supplements, SAIs, all annual, semiannual, and periodic
reports to shareholders of the Trust, regulatory authorities, or
others, and all notices and proxy solicitation materials, furnished to
shareholders of the Trust or regulatory authorities, and all tax
returns.
D. Limitations on Liability. Manager will exercise its best judgment in
rendering its services to the Trust, and the Trust agrees, as an inducement to
Manager's undertaking to do so, that the Manager will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, but will be liable
only for willful misconduct, bad faith, gross negligence, reckless disregard of
its duties or its failure to exercise due care in rendering its services to the
Trust as specified in this Agreement. Any person, even though an officer,
director, employee or agent of Manager, who may be or become an officer,
Trustee, employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or when acting on any business of the Trust, to be
rendering such services to or to be acting solely for the Trust and not as an
officer, director, employee or agent, or one under the control or direction of
Manager, even though paid by it.
E. Section 11 of the Securities Exchange Act of 1934, as amended. The
Trust hereby agrees that any entity or person associated with Manager that is a
member of a national securities exchange is authorized to effect any transaction
on such exchange for the account of a Portfolio to the extent and as permitted
by Section 11(a)(1)(H) of the Securities Exchange Act of 1934, as amended ("1934
Act").
F. Section 28(e) of the 1934 Act. Subject to the appropriate policies
and procedures approved by the Board of Trustees, the Manager may, to the extent
authorized by Section 28(e) of the 1934 Act, cause a Portfolio to pay a broker
or dealer that provides brokerage or research services to the Manager, the
Adviser, the Trust and the Portfolio an amount of commission for effecting a
portfolio transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Manager
determines, in good faith, that such amount of commission is reasonable in
relationship to the value of such brokerage or research services provided in
terms of that particular transaction or the Manager's overall responsibilities
to the Portfolio, the Trust or its other investment advisory clients. To the
extent authorized by said Section 28(e) and the Board of Trustees, the Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of such action. In
addition, subject to seeking the most favorable price and best execution
<PAGE>
available and in compliance with the Conduct Rules of the National Association
of Securities Dealers, Inc., the Manager may also consider sales of shares of
the Trust as a factor in the selection of brokers and dealers.
G. Directed Brokerage. Subject to the requirement to seek best price
and execution, and to the appropriate policies and procedures approved by the
Board of Trustees, the Trust reserves the right to direct the Manager to cause
Advisers to effect transactions in portfolio securities through broker-dealers
in a manner that will help generate resources to: (i) pay the cost of certain
expenses which the Trust is required to pay or for which the Trust is required
to arrange payment pursuant to this Agreement; or (ii) finance activities that
are primarily intended to result in the sale of Trust shares. At the discretion
of the Board of Trustees, such resources may be used to pay or cause the payment
of Trust Expenses or may be used to finance activities that are primarily
intended to result in the sale of Trust shares.
3. ALLOCATION OF EXPENSES
A. Expenses Paid by the Manager:
(i) Salaries, Expenses and Fees of Certain Persons. Manager
(or its affiliates) shall pay all salaries, expenses, and fees of the
Trustees and officers of the Trust who are officers,
directors/trustees, partners, or employees of Manager or its
affiliates; and
(ii) Assumption of Trust Expenses. The payment or assumption
by Manager of any expense of the Trust that Manager is not required by
this Agreement to pay or assume shall not obligate Manager to pay or
assume the same or any similar expense of the Trust on any subsequent
occasion.
B. Expenses Paid by the Trust: The Trust will pay all expenses of its
organization, operations, and business not specifically assumed or agreed to be
paid by Manager, as provided in this Agreement, or by an Adviser, as provided in
an Advisory Agreement. Without limiting the generality of the foregoing, the
Trust shall pay or arrange for the payment of the following:
(i) Preparing, Printing and Mailing of Certain Documents. The
costs of preparing, setting in type, printing and mailing of
Prospectuses, Prospectus supplements, SAIs, annual, semiannual and
periodic reports, and notices and proxy solicitation materials required
to be furnished to shareholders of the Trust or regulatory authorities,
and all tax returns;
(ii) Officers and Trustees. Compensation of the officers and
Trustees of the Trust who are not officers, directors/trustees,
partners or employees of Manager or its affiliates;
(iii) Registration Fees and Expenses. All legal and other fees
and expenses incurred in connection with the affairs of the Trust,
including those incurred with respect to registering its shares with
regulatory authorities and all fees and expenses incurred in connection
with the preparation, setting in type, printing, and filing with
necessary regulatory authorities of any registration statement and
Prospectus, and any amendments or
<PAGE>
supplements that may be made from time to time, including registration,
filing and other fees in connection with requirements of regulatory
authorities;
(iv) Custodian and Accounting Services. All expenses of the
transfer, receipt, safekeeping, servicing and accounting for the
Trust's cash, securities, and other property, including all charges of
depositories, custodians, and other agents, if any;
(v) Independent Legal and Accounting Fees and Expenses. The
charges for the services and expenses of the independent accountants
and legal counsel retained by the Trust, for itself or its Independent
Trustees (as defined herein);
(vi) Transfer Agent. The charges and expenses of maintaining
shareholder accounts, including all charges of transfer, bookkeeping,
and dividend disbursing agents appointed by the Trust;
(vii) Brokerage Commissions. All brokers' commissions and
issue and transfer taxes chargeable to the Trust in connection with
securities transactions to which the Trust is a party;
(viii) Taxes. All taxes and corporate fees payable by or with
respect to the Trust to federal, state, or other governmental agencies;
(ix) Trade Association Fees. Any membership fees, dues or
expenses incurred in connection with the Trust's membership in any
trade association or similar organizations;
(x) Bonding and Insurance. All insurance premiums for fidelity
and other coverage;
(xi) Shareholder and Board Meetings. All expenses incidental
to holding shareholders and Trustees meetings, including the printing
of notices and proxy materials and proxy solicitation fees and
expenses;
(xii) Pricing. All expenses of pricing of the net asset value
per share of each Portfolio, including the cost of any equipment or
services to obtain price quotations; and
(xiii) Nonrecurring and Extraordinary Expenses. Such
extraordinary expenses, such as indemnification payments or damages
awarded in litigation or settlements made.
4. COMPENSATION OF MANAGER
For its services performed hereunder, the Trust will pay Manager with
respect to each Portfolio the compensation specified in Appendix B to this
Agreement. Such compensation shall be paid to Manager by the Trust on the first
day of each month; however, the Trust will calculate this charge on the daily
average value of the assets of each Portfolio and accrue it on a daily basis.
<PAGE>
5. NON-EXCLUSIVITY
The services of Manager to the Trust are not to be deemed to be
exclusive, and Manager shall be free to render investment management, advisory
or other services to others (including other investment companies) and to engage
in other activities so long as the services provided hereunder by Manager are
not impaired. It is understood and agreed that the directors, officers and
employees of Manager are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving as
partners, officers, directors/trustees, or employees of any other firm or
corporation, including other investment companies.
6. SUPPLEMENTAL ARRANGEMENTS
Manager may enter into arrangements with its parent or other persons
affiliated or unaffiliated with Manager for the provision of certain personnel
and facilities to Manager to enable Manager to fulfill its duties and
obligations under this Agreement.
7. REGULATION
Manager shall submit to all regulatory and administrative bodies having
jurisdiction over the services provided pursuant to this Agreement any
information, reports, or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
8. RECORDS
The records relating to the services provided under this Agreement
shall be the property of the Trust and shall be under its control; however, the
Trust shall furnish to Manager such records and permit it to retain such records
(either in original or in duplicate form) as it shall reasonably require in
order to carry out its duties. In the event of the termination of this
Agreement, such records shall promptly be returned to the Trust by Manager free
from any claim or retention of rights therein. Manager shall keep confidential
any information obtained in connection with its duties hereunder and disclose
such information only if the Trust has authorized such disclosure or if such
disclosure is expressly required or lawfully requested by applicable federal or
state regulatory authorities.
9. DURATION OF AGREEMENT
This Agreement, as amended and restated, shall become effective for
each Portfolio on May 1, 2000, unless the requisite approval is not obtained by
May 1, 2000, in which case the effective date for any such Portfolio will be the
date indicated in Appendix A. Further amendments to this Agreement shall become
effective on the later of the date specified in such amendment (after execution
by all parties) or the date of any meeting of the shareholders of the Trust
relating to such amendment, which for these purposes may be the sole initial
shareholder of the Trust, at which meeting this Agreement is approved by the
vote of a majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Portfolios. The Agreement will continue in effect
for a period more than one year from the date of its execution only so long as
such continuance is specifically approved at least annually either by (i) the
Trustees of the Trust or (ii) by the vote of either a majority of the
outstanding voting securities of
<PAGE>
the Trust or, as appropriate, a majority of the outstanding voting securities of
any affected Portfolio, provided that, in either event, such continuance shall
also be approved by the vote of a majority of the Trustees of the Trust who are
not "interested persons" ("Independent Trustees") of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval. The required shareholder approval of the Agreement or of any
continuance of the Agreement shall be effective with respect to any affected
Portfolio if a "majority of the outstanding voting securities" (as defined in
Rule 18f-2(h) under the Investment Company Act) of the affected Portfolio votes
to approve the Agreement or its continuance, notwithstanding that the Agreement
or its continuance may not have been approved by a majority of the outstanding
voting securities of (a) any other Portfolio affected by the Agreement or (b)
all the Portfolios of the Trust.
If the shareholders of any Portfolio fail to approve the Agreement or
any continuance of the Agreement, Manager will continue to act as investment
manager with respect to such Portfolio pending the required approval of the
Agreement or its continuance or of a new contract with Manager or a different
investment manager or other definitive action; provided, that the compensation
received by Manager in respect of such Portfolio during such period will be no
more than its actual costs incurred in furnishing investment advisory and
management services to such Portfolio or the amount it would have received under
the Agreement in respect of such Portfolio, whichever is less.
10. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time, without the payment of
any penalty, by the Trustees, including a majority of the Independent Trustees
of the Trust, by the vote of a majority of the outstanding voting securities of
the Trust, or with respect to any affected Portfolio, by the vote of a majority
of the outstanding voting securities of such Portfolio, on sixty (60) days'
written notice to Manager, or by Manager on sixty (60) days' written notice to
the Trust. This Agreement will automatically terminate, without payment of any
penalty, in the event of its assignment.
11. PROVISION OF CERTAIN INFORMATION BY MANAGER
Manager will promptly notify the Trust in writing of the occurrence of
any of the following events:
A. Manager fails to be registered as an investment adviser under the
Advisers Act or under the laws of any jurisdiction in which Manager is required
to be registered as an investment adviser in order to perform its obligations
under this Agreement;
B. Manager is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Trust; and/or
C. the chief executive officer or controlling stockholder of Manager or
the portfolio manager of any Portfolio changes or there is otherwise an actual
change in control or management of Manager.
<PAGE>
12. AMENDMENTS TO THE AGREEMENT
Except to the extent permitted by the Investment Company Act or the
rules or regulations thereunder or pursuant to any exemptive relief granted by
the SEC, this Agreement may be amended by the parties only if such amendment, if
material, is specifically approved by the vote of a majority of the outstanding
voting securities of each of the Portfolios affected by the amendment (unless
such approval is not required by Section 15 of the Investment Company Act as
interpreted by the SEC or its staff) and by the vote of a majority of the
Independent Trustees of the Trust cast in person at a meeting called for the
purpose of voting on such approval. The required shareholder approval shall be
effective with respect to any Portfolio if a majority of the outstanding voting
securities of the [series of] shares of that Portfolio vote to approve the
amendment, notwithstanding that the amendment may not have been approved by a
majority of the outstanding voting securities of (a) any other Portfolio
affected by the amendment or (b) all the Portfolios of the Trust.
13. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
14. HEADINGS
The headings in the sections of this Agreement are inserted for
convenience of reference only and shall not constitute a part hereof.
15. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or Manager
in person or by registered mail or a private mail or delivery service providing
the sender with notice of receipt. Notice shall be deemed given on the date
delivered or mailed in accordance with this section.
16. FORCE MAJEURE
Manager shall not be liable for delays or errors occurring by reason of
circumstances beyond its control, including but not limited to acts of civil or
military authority, national emergencies, work stoppages, fire, flood,
catastrophe, acts of God, insurrection, war, riot, or failure of communication
or power supply. In the event of equipment breakdowns beyond its control,
Manager shall take reasonable steps to minimize service interruptions but shall
have no liability with respect thereto.
17. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void
in law or in equity, the Agreement shall be construed, insofar as is possible,
as if such portion had never been contained herein.
<PAGE>
18. INTERPRETATION
Nothing herein contained shall be deemed to require the Trust to take
any action contrary to its Amended and Restated Agreement and Declaration of
Trust or By-Laws, or any applicable statutory or regulatory requirements to
which it is subject or by which it is bound, or to relieve or deprive the
Trustees of their responsibility for and control of the conduct of the affairs
of the Trust.
19. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of Delaware (without giving effect to its
conflict of laws principles), or any of the applicable provisions of the
Investment Company Act. To the extent that the laws of the State of Delaware, or
any of the provisions in this Agreement, conflict with applicable provisions of
the Investment Company Act, the latter shall control. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the Investment Company Act
shall be resolved by reference to such term or provision of the Investment
Company Act and to interpretations thereof, if any, by the United States courts
or, in the absence of any controlling decision of any such court, by rules,
regulations or orders of the SEC validly issued pursuant to the Investment
Company Act. Specifically, the terms "vote of a majority of the outstanding
voting securities," "interested persons," "assignment," and "affiliated
persons," as used herein shall have the meanings assigned to them by Section
2(a) of the Investment Company Act unless otherwise stated herein. In addition,
where the effect of a requirement of the Investment Company Act reflected in any
provision of this Agreement is relaxed by a rule, regulation or order of the
SEC, whether of special or of general application, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first mentioned above.
EQ ADVISORS TRUST
By:
------------------------------------
Peter D. Noris
President and Trustee
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By:
------------------------------------
Brian O'Neil
Executive Vice President
<PAGE>
APPENDIX A
TO THE
AMENDED AND RESTATED
INVESTMENT MANAGEMENT AGREEMENT
Portfolios
EQ/Aggressive Stock Portfolio
EQ/Balanced Portfolio
EQ/Alliance Technology Portfolio
EQ/Alliance Premier Growth Portfolio
Alliance Money Market Portfolio
Alliance Intermediate Government Securities Portfolio
Alliance Quality Bond Portfolio
Alliance High Yield Portfolio
Alliance Conservative Investors Portfolio
Alliance Growth Investors Portfolio
Alliance Common Stock Portfolio
Alliance Equity Index Portfolio
Alliance Growth And Income Portfolio
Alliance Small Cap Growth Portfolio
Alliance Global Portfolio
Alliance International Portfolio
BT Equity 500 Index Portfolio
BT International Equity Index Portfolio
BT Small Company Index Portfolio
Capital Guardian Research Portfolio
Capital Guardian U.S. Equity Portfolio
Capital Guardian International Portfolio
Calvert Socially Responsible Portfolio
EQ/Evergreen Foundation Portfolio
EQ/Evergreen Portfolio
EQ/Putnam Balanced Portfolio
EQ/Putnam Growth & Income Value Portfolio
EQ/Putnam International Equity Portfolio
EQ/Putnam Investors Growth Portfolio
J.P. Morgan Core Bond Portfolio
Lazard Large Cap Value Portfolio
Lazard Small Cap Value Portfolio
MFS Growth with Income Portfolio
Mercury Basic Value Equity Portfolio
Mercury World Strategy Portfolio
MFS Emerging Growth Companies Portfolio
MFS Research Portfolio
Morgan Stanley Emerging Markets Equity Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price International Stock Portfolio
Warburg Pincus Small Company Value Portfolio
Date: May 1, 2000
<PAGE>
APPENDIX B
The Trust shall pay the Manager, at the end of each calendar month,
compensation computed daily at an annual rate equal to the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS) (FEE ON ALL ASSETS)
- ------------------------------------------------------------------------------------------------------------------------------
INDEX PORTFOLIOS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Alliance Equity Index 0.250%
- ------------------------------------------------------------------------------------------------------------------------------
BT Equity 500 Index 0.250%
- ------------------------------------------------------------------------------------------------------------------------------
BT International Equity Index 0.350%
- ------------------------------------------------------------------------------------------------------------------------------
BT Small Company Index 0.250%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
- ------------------------------------------------------------------------------------------------------------------------------
FIRST NEXT NEXT NEXT
DEBT PORTFOLIOS $750 MILLION $750 MILLION $1 BILLION $2.5 BILLION THEREAFTER
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alliance High Yield 0.600% 0.575% 0.550% 0.530% 0.520%
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Intermediate Government
Securities 0.500% 0.475% 0.450% 0.430% 0.420%
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Money Market 0.350% 0.325% 0.300% 0.280% 0.270%
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Quality Bond 0.525% 0.500% 0.475% 0.455% 0.445%
- ------------------------------------------------------------------------------------------------------------------------------
J.P. Morgan Core Bond 0.450% 0.425% 0.400% 0.380% 0.370%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
- ------------------------------------------------------------------------------------------------------------------------------
FIRST NEXT NEXT
EQUITY PORTFOLIOS $1 BILLION $1 BILLION $3 BILLION NEXT $5 BILLION THEREAFTER
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alliance Common Stock 0.550% 0.500% 0.475% 0.450% 0.425%
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Conservative Investors 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Global 0.750% 0.700% 0.675% 0.650% 0.625%
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Growth and Income 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Growth Investors 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------
Alliance International 0.850% 0.800% 0.775% 0.750% 0.725%
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth 0.750% 0.700% 0.675% 0.650% 0.625%
- ------------------------------------------------------------------------------------------------------------------------------
Calvert Socially Responsible 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------
Capital Guardian International 0.850% 0.800% 0.775% 0.750% 0.725%
- ------------------------------------------------------------------------------------------------------------------------------
Capital Guardian Research 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------
Capital Guardian U.S. Equity 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------
EQ/Aggressive Stock 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------
EQ/Alliance Premier Growth 0.900% 0.850% 0.825% 0.800% 0.775%
- ------------------------------------------------------------------------------------------------------------------------------
EQ/Alliance Technology 0.900% 0.850% 0.825% 0.800% 0.775%
- ------------------------------------------------------------------------------------------------------------------------------
EQ/Balanced 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------
EQ/Evergreen Foundation 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------
EQ/Evergreen Portfolio 0.650% 0.600% 0.575% 0.550% 0.525%`
- ------------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Balanced 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Growth & Income Value 0.600% 0.550% .0525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------
EQ/Putnam International Equity 0.850% 0.800% 0.775% 0.750% 0.725%
- ------------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Investors Growth 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------
Lazard Large Cap Value 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------
Lazard Small Cap Value 0.750% 0.700% 0.675% 0.650% 0.625%
- ------------------------------------------------------------------------------------------------------------------------------
Mercury Basic Value Equity 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------
Mercury World Strategy 0.700% 0.650% 0.625% 0.600% 0.575%
- ------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Companies 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
- ------------------------------------------------------------------------------------------------------------------------------
FIRST NEXT NEXT
EQUITY PORTFOLIOS $1 BILLION $1 BILLION $3 BILLION NEXT $5 BILLION THEREAFTER
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MFS Growth with Income 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------
MFS Research 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Markets
Equity 1.150% 1.100% 1.075% 1.050% 1.025%
- ------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Income 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock 0.850% 0.800% 0.775% 0.750% 0.725%
- ------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Small Company Value 0.750% 0.700% 0.675% 0.650% 0.625%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Date: May 1, 2000
<PAGE>
Exhibit (d)(12)(iii)
AMENDMENT NO. 2
TO
INVESTMENT ADVISORY AGREEMENT
AMENDMENT NO. 2 to Investment Advisory Agreement ("Amendment No. 2"),
dated as of May 1, 2000, between The Equitable Life Assurance Society of the
United States, a New York corporation ("Equitable") and Alliance Capital
Management L.P., a Delaware limited partnership ("Adviser").
Equitable and the Adviser agree to modify and amend the Investment
Advisory Agreement dated as of May 1, 1999 ("Agreement"), as amended by
Amendment No. 1 dated October 18, 1999 ("Amendment No. 1") as follows:
1. Portfolios. Equitable hereby affirms its appointment of the Adviser as the
investment adviser for the EQ/Alliance Premier Growth Portfolio and each of the
Portfolios added to the Agreement by Amendment No. 1 on the terms and conditions
set forth in the Agreement and Amendment No. 1. With respect to the
EQ/Aggressive Stock Portfolio and the EQ/Balanced Portfolio, Equitable may from
time to time allocate and reallocate the assets of each of those Portfolios to
one or more investment advisers in addition to the Adviser.
2. New Portfolio. Equitable hereby affirms its appointment of the Adviser as the
investment adviser for the EQ/Alliance Technology Portfolio ("New Portfolio") on
the terms and conditions set forth in the Agreement and Amendment No. 1.
3. Duration. Section 9 of the Agreement is replaced in its entirety as follows:
(a) The Agreement became effective with respect to the EQ/Alliance
Premier Growth Portfolio on May 1, 1999, and became effective on October 18,
1999 for each of the Portfolios added to the Agreement by Amendment No. 1,
including the Alliance Aggressive Stock Portfolio (which is being renamed the
"EQ/Aggressive Stock Portfolio") and the Alliance Balanced Portfolio (which is
being renamed the "EQ/Balanced Portfolio').
(b) The Agreement will continue in effect with respect to the
EQ/Alliance Premier Growth Portfolio until April 30, 2001 and may be continued
thereafter pursuant to (d) below.
(c) The Agreement will continue in effect with respect to each of the
Portfolios specified in Amendment No. 1, including the EQ/Aggressive Stock
Portfolio, and EQ/Balanced Portfolio until October 17, 2001 and may be continued
thereafter pursuant to (d) below.
(d) The Agreement will continue in effect with respect to the
EQ/Alliance Technology Portfolio until May 1, 2002 and may be continued
thereafter pursuant to (e) below.
(e) With respect to each Portfolio this Agreement shall continue in
effect annually after the date specified in subsection (b), or (c), as the case
may be, only so long as such continuance is specifically approved at least
annually either by the Board of Trustees or by a majority of the outstanding
voting securities of the Portfolio, provided that in either event such
continuance shall also be approved by the vote of a majority of the Trustees of
the EQ Advisors Trust who are not "interested persons" (as defined in the
Investment Company Act of 1940) (the "Independent Trustees") of any party to the
Agreement cast in person at a meeting called for the purpose of voting on such
approval. Any required shareholder approval of the Agreement or of
<PAGE>
any continuance of the Agreement shall be effective with respect to a Portfolio
if a majority of the outstanding voting securities of the series (as defined in
Rule 18f-2(h) under the Investment Company Act of 1940) of shares of such
Portfolio votes to approve the Agreement or its continuance, notwithstanding
that the Agreement or its continuance may not have been approved by a majority
of the outstanding voting securities of (a) any other portfolio affected by this
Agreement or (b) all the portfolios of the Trust.
4. Appendix A. Appendix A to the Agreement, setting forth the Portfolios of the
Trust for which the Adviser is appointed as the investment adviser (or one of
the investment advisers) and the fees payable to the Adviser with respect to
each Portfolio (or portion thereof) for which the Adviser provides services
under the Agreement, as designated from time to time by Equitable, is hereby
replaced in its entirety by Appendix A attached hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 2 as of the date first above set forth.
ALLIANCE CAPITAL
MANAGEMENT L.P.
THE EQUITABLE LIFE ASSURANCE BY: ALLIANCE CAPITAL
SOCIETY OF THE UNITED STATES MANAGEMENT CORPORATION, ITS
GENERAL PARTNER
BY: BY:
----------------------------- -----------------------------
PETER D. NORIS MARK R. MANLEY
EXECUTIVE VICE PRESIDENT ASSISTANT SECRETARY
<PAGE>
APPENDIX A
TO AMENDMENT NO. 2
TO INVESTMENT ADVISORY AGREEMENT
<TABLE>
<CAPTION>
BREAKPOINTS
- ---------------------------------------------------------------------------------------------------------------------------------
$150 Million $300 Million $400 Million $450 Million $500 Million
First $150 to to to to to
Million $300 Million $350 Million $450 Million $500 Million $750 Million
----------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Common Stock 0.325% 0.325% 0.325% 0.340% 0.340% 0.340%
Alliance Conservative Investors 0.300% 0.300% 0.300% 0.300% 0.300% 0.300%
Alliance Equity Index 0.050% 0.050% 0.050% 0.050% 0.050% 0.050%
Alliance Global 0.600% 0.500% 0.400% 0.400% 0.400% 0.350%
Alliance Growth and Income 0.350% 0.350% 0.350% 0.350% 0.300% 0.300%
Alliance Growth Investors 0.380% 0.380% 0.380% 0.380% 0.380% 0.380%
Alliance High Yield 0.380% 0.380% 0.380% 0.380% 0.380% 0.380%
Alliance Intermediate Gov't 0.280% 0.280% 0.280% 0.280% 0.280% 0.280%
Alliance International 0.650% 0.550% 0.450% 0.450% 0.450% 0.400%
Alliance Money Market 0.130% 0.130% 0.130% 0.130% 0.130% 0.130%
Alliance Quality Bond 0.305% 0.305% 0.305% 0.305% 0.305% 0.305%
Alliance Small Cap Growth 0.500% 0.500% 0.500% 0.500% 0.500% 0.500%
EQ/Alliance Aggressive* 0.300% 0.300% 0.300% 0.300% 0.300% 0.300%
EQ/Alliance Balanced* 0.300% 0.300% 0.300% 0.300% 0.300% 0.300%
EQ/Alliance Premier Growth Portfolio 0.500% 0.500% 0.500% 0.500% 0.500% 0.500%
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
$750 Million $1 Billion 1.5 Billion 2 Billion 2.5 Billion 5 Billion
to to to to to Over
$1 Billion $1.5 Billion $2.0 Billion $2.5 Billion $5 Billion $10 Billion $10 Billion
---------- ------------ ------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Common Stock 0.305% 0.305% 0.255% 0.255% 0.235% 0.225% 0.225%
Alliance Conservative Investors 0.280% 0.280% 0.230% 0.230% 0.205% 0.180% 0.180%
Alliance Equity Index 0.050% 0.050% 0.050% 0.050% 0.050% 0.050% 0.050%
Alliance Global 0.350% 0.350% 0.350% 0.350% 0.350% 0.350% 0.350%
Alliance Growth and Income 0.300% 0.300% 0.300% 0.300% 0.300% 0.300% 0.300%
Alliance Growth Investors 0.380% 0.330% 0.330% 0.305% 0.305% 0.280% 0.255%
Alliance High Yield 0.355% 0.355% 0.330% 0.330% 0.310% 0.300% 0.300%
Alliance Intermediate Gov't 0.255% 0.255% 0.230% 0.230% 0.210% 0.200% 0.200%
Alliance International 0.400% 0.400% 0.400% 0.400% 0.400% 0.400% 0.400%
Alliance Money Market 0.105% 0.105% 0.080% 0.080% 0.060% 0.050% 0.050%
Alliance Quality Bond 0.280% 0.280% 0.255% 0.255% 0.235% 0.225% 0.225%
Alliance Small Cap Growth 0.500% 0.450% 0.450% 0.425% 0.425% 0.400% 0.375%
EQ/Alliance Aggressive* 0.300% 0.250% 0.250% 0.250% 0.250% 0.250% 0.250%
EQ/Alliance Balanced* 0.280% 0.280% 0.230% 0.230% 0.205% 0.180% 0.180%
EQ/Alliance Premier Growth Portfolio 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500%
</TABLE>
First $500 Next $500 Over $1
Million Million Billion
------- ------- -------
EQ/Alliance Technology Portfolio 0.650% 0.570% 0.525%
*Fee to be paid with respect to this Portfolio shall be based only on the
portion of the Portfolio's average daily net assets advised by the Adviser,
which may be referred to as the "Alliance Allocated Portion".
<PAGE>
Exhibit (d)(13)(i)
AMENDMENT NO. 1
TO
INVESTMENT ADVISORY AGREEMENT
AMENDMENT NO. 1 to the Investment Advisory Agreement ("Amendment No.
1") dated as of May 1, 2000, between The Equitable Life Assurance Society of the
United States, a New York corporation ("Equitable" or the "Manager") and Capital
Guardian Trust Company, a California corporation (the"Adviser").
Equitable and the Adviser agree to modify and amend the Investment
Advisory Agreement ("Agreement") dated as of May 1, 1999, between them as
follows:
1. New Portfolio. Equitable hereby appoints the Adviser as the investment
adviser of that portion of the total assets of the EQ/Balanced Portfolio
allocated to it from time to time by Equitable on the terms and conditions
contained in the Agreement.
2. Duration. Section 9 of the Agreement is replaced in its entirety as follows:
(a) The Agreement became effective with respect to the Capital Guardian
Research Portfolio, Capital Guardian U.S. Equities Portfolio and Capital
Guardian International Equities Portfolio on May 1, 1999 and will become
effective with respect to the New Portfolio on the date of this amendment.
(b) The Agreement will continue in effect with respect to the Capital
Guardian Research Portfolio, Capital Guardian U.S. Equities Portfolio and
Capital Guardian International Equities Portfolio until May 1, 2001 and may be
continued thereafter pursuant to subsection (d) below.
(c) The Agreement will continue in effect with respect to the New
Portfolio until May 1, 2002 and may be continued thereafter pursuant to
subsection (d) below.
(d) With respect to each Portfolio this Agreement shall continue in
effect annually after the date specified in subsection (b) or (c), as the case
may be, only so long as such continuance is specifically approved at least
annually either by the Board of Trustees or by a majority of the outstanding
voting securities of the Portfolio, provided that in either event such
continuance shall also be approved by the vote of a majority of the Trustees of
the EQ Advisors Trust who are not "interested persons" (as defined in the
Investment Company Act of 1940) ("Independent Trustees") of any party to the
Agreement cast in person at a meeting called for the purpose of voting on such
approval. The required shareholder approval of the Agreement or of any
continuance of the Agreement shall be effective with respect to a Portfolio if a
majority of the outstanding voting securities of the series (as defined in Rule
18f-2(h) under the Investment Company Act of 1940) of shares of such Portfolio
votes to approve the Agreement or its continuance, notwithstanding that the
Agreement or its continuance may not have been approved by a majority of the
outstanding voting securities of (a) any other portfolio affected by this
Agreement or (b) all the portfolios of the Trust.
<PAGE>
3. Appendix A. Appendix A to the Agreement, setting forth the Portfolios of the
Trust for which the Adviser is appointed as the investment adviser (or one of
the investment advisers) and the fees payable to the Adviser with respect to
each Portfolio (or portion thereof) for which the Adviser provides advisory
services under the Agreement, is hereby replaced in its entirety by Appendix A
attached hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 1 as of the date first above set forth.
THE EQUITABLE LIFE ASSURANCE CAPITAL GUARDIAN TRUST COMPANY
SOCIETY OF THE UNITED STATES
By: By:
------------------------------ -------------------------------
Brian S. O'Neil Name:
Executive Vice President Title:
<PAGE>
APPENDIX A
AMENDMENT NO. 1
INVESTMENT ADVISORY AGREEMENT
Portfolio Annual Advisory Fee
- --------- -------------------
Capital Guardian Research .50% of the Portfolio's daily net assets
up to and Portfolio including $150 million;
.45% of the Portfolio's daily net assets
over $150 million and up to and including
$300 million; .35% of the Portfolio's daily
net assets over $300 million and up to and
including $500 million; and .30% of the
Portfolio's daily net assets in excess of
$500 million.
Capital Guardian U.S. Equities .50% of the Portfolio's daily net assets up
to and Portfolio including $150 million;
.45% of the Portfolio's daily net assets
over $150 million and up to and including
$300 million; .35% of the Portfolio's daily
net assets over $300 million and up to and
including $500 million; and .30% of the
Portfolio's daily net assets in excess of
$500 million.
Capital Guardian International .65% of the Portfolio's daily net assets up
to and Equities Portfolio including $150
million; .55% of the Portfolio's daily net
assets over $150 million and up to and
including $300 million; .45% of the
Portfolio's daily net assets over $300
million and up to and including $500
million; and .40% of the Portfolio's daily
net assets in excess of $500 million.
EQ/ Balanced Portfolio* .50% of the Capital Guardian Allocated
Portion's average daily net assets of the
first $100 million; .40% of the Capital
Guardian Allocated Portion's average daily
net assets over $100 million and up to and
including $200 million of the Capital
Guardian Allocated Portion's average daily
net assets; and .30% of the Capital Guardian
Allocated Portion's average daily net assets
over $200 million.
* For purposes of calculating the advisory fee for the Capital Guardian U.S.
Equities Portfolio and the EQ/Balanced Portfolio, the total assets of each
of these Portfolios will be aggregated.
<PAGE>
Exhibit (h)(4)(vi)
AMENDMENT NO. 5
TO
PARTICIPATION AGREEMENT
Amendment No. 5, dated as of May 1, 2000 ("Amendment"), to the
Participation Agreement dated as of April 14, 1997 ("Original Agreement"), as
amended by Amendment No. 1, dated as of December 9, 1997, Amendment No. 2, dated
as of December 31, 1998, Amendment No. 3 dated as of April 30, 1999, and
Amendment No. 4, dated as of October 18, 1999, (collectively the "Agreement") by
and among EQ Advisors Trust, The Equitable Life Assurance Society of the United
States, Equitable Distributors, Inc. and AXA Advisors, LLC,. (collectively, the
"Parties").
The Parties hereby agree that Schedule B to the Agreement is replaced
in its entirety by the schedule attached hereto entitled "Schedule B".
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this Form
of Amendment No. 5 as of the date first above set forth.
EQ ADVISORS TRUST THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: By:
-------------------------------- ---------------------------------
Name: Peter D. Noris Name: Brian S. O'Neil
Title: President and Trustee Title: Executive Vice President
EQUITABLE DISTRIBUTORS, INC. AXA ADVISORS, LLC (formerly "EQ
FINANCIAL CONSULTANTS, INC.")
By: By:
-------------------------------- ---------------------------------
Name: Jose S. Suquet Name: Michael S. Martin
Title: Chairman of the Board Title: Chairman of the Board and
Chief Executive Officer
<PAGE>
SCHEDULE B
TO
FORM OF AMENDMENT NO 5 TO PARTICIPATION AGREEMENT
DESIGNATED PORTFOLIOS AND CLASSES
PORTFOLIOS OF
EQ ADVISORS TRUST
Portfolios Classes
- ---------- -------
Alliance Equity Index Portfolio Class IA and Class IB
Alliance Growth And Income Portfolio Class IA and Class IB
Alliance Small Cap Growth Portfolio Class IA and Class IB
Alliance Money Market Portfolio Class IA and Class IB
Alliance Global Portfolio Class IA and Class IB
Alliance International Portfolio Class IA and Class IB
Alliance Intermediate Government Securities Portfolio Class IA and Class IB
Alliance Quality Bond Portfolio Class IA and Class IB
Alliance High Yield Portfolio Class IA and Class IB
Alliance Conservative Investors Portfolio Class IA and Class IB
Alliance Growth Investors Portfolio Class IA and Class IB
Alliance Common Stock Portfolio Class IA and Class IB
EQ/Alliance Premier Growth Portfolio Class IA and Class IB
EQ/Aggressive Stock Portfolio Class IA and Class IB
EQ/Balanced Portfolio Class IA and Class IB
EQ/Capital Guardian International Equities Portfolio Class IA and Class IB
EQ/Capital Guardian Research Portfolio Class IA and Class IB
EQ/Capital Guardian U.S. Equities Portfolio Class IA and Class IB
BT International Equity Index Portfolio Class IA and Class IB
BT Small Company Index Portfolio Class IA and Class IB
Calvert Socially Responsibly Portfolio Class IA and Class IB
EQ/Putnam Growth & Income Value Portfolio Class IA and Class IB
EQ/Putnam International Equity Portfolio Class IA and Class IB
EQ/Putnam Investors Growth Portfolio Class IA and Class IB
EQ/Evergreen Foundation Portfolio Class IA and Class IB
EQ/Evergreen Portfolio Class IA and Class IB
J. P. Morgan Core Bond Portfolio Class IA and Class IB
Lazard Large Cap Value Portfolio Class IA and Class IB
Lazard Small Cap Value Portfolio Class IA and Class IB
Mercury Basic Value Equity Portfolio Class IA and Class IB
Mercury World Strategy Portfolio Class IA and Class IB
MFS Emerging Growth Companies Portfolio Class IA and Class IB
<PAGE>
MFS Growth with Income Portfolio Class IA and Class IB
MFS Research Portfolio Class IA and Class IB
Morgan Stanley Emerging Markets Equity Portfolio Class IA and Class IB
T. Rowe Price Equity Income Portfolio Class IA and Class IB
T. Rowe Price International Stock Portfolio Class IA and Class IB
Warburg Pincus Small Company Value Portfolio Class IA and Class IB
<PAGE>
Exhibit (i)(7)
[DECHERT PRICE & RHOADS LETTERHEAD]
April 17, 2000
VIA FEDERAL EXPRESS
EQ Advisors Trust
1290 Avenue of the Americas
New York, New York 10104
Dear Ladies and Gentlemen:
This opinion is given in connection with the filing by EQ Advisors
Trust, a Delaware business trust ("Trust"), of Post-Effective Amendment No. 16
to the Registration Statement on Form N-1A ("Registration Statement") under the
Securities Act of 1933 ("1933 Act") and Amendment No. 18 under the Investment
Company Act of 1940 ("1940 Act") relating to an indefinite amount of authorized
shares of beneficial interest, at a par value of $.01 per share, of a new
separate series of the Trust: EQ/Alliance Technology Portfolio ("Portfolio").
The authorized shares of beneficial interest of the Portfolio are hereinafter
referred to as the "Shares."
We have examined the following Trust documents: Certificate of Trust;
Certificate of Amendment; Amended and Restated Agreement and Declaration of
Trust; By-Laws; Registration Statement filed on December 3, 1996; Pre-Effective
Amendment No. 1 to the Registration Statement filed January 23, 1997;
Pre-Effective Amendment No. 2 to the Registration Statement filed April 7, 1997;
Post-Effective Amendment No. 1 to the Registration Statement ("PEA") on filed
August 28, 1997, PEA No. 2 filed October 15, 1997; PEA No. 3 filed October 31,
1997; PEA No. 4 filed December 29, 1997, PEA No. 5 filed March 5, 1998; PEA No.
6 filed April 22, 1998; PEA No. 7 filed October 15, 1998; PEA No. 8 filed
February 16, 1999, PEA No. 9 filed February 16, 1999; PEA No. 10 filed April 29,
1999; PEA No. 11 filed May 27, 1999; PEA No. 12 filed June 10, 1999; PEA No. 13
filed August 30, 1999; PEA No. 14 filed February 1, 2000; and PEA No. 15 filed
February 16, 2000; pertinent provisions of the laws of the State of Delaware;
and such other corporate records, certificates, documents and statutes that we
have deemed relevant in order to render the opinion expressed herein.
<PAGE>
EQ Advisors Trust
April 17, 2000
Page 2
Based on such examination, we are of the opinion that:
1. EQ Advisors Trust is a Delaware business trust duly
organized, validly existing, and in good standing
under the laws of the State of Delaware; and
2. The Shares to be offered for sale by EQ Advisors
Trust, when issued in the manner contemplated by the
Registration Statement, will be legally issued,
fully-paid and non-assessable.
This letter expresses our opinion as to the Delaware Business Trust Act
governing matters such as the due organization of EQ Advisors Trust and the
authorization and issuance of the Shares, but does not extend to the securities
or "Blue Sky" laws of the State of Delaware or to federal securities or other
laws.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to Dechert Price & Rhoads under the caption
"Counsel" in the Statement of Additional Information, which is incorporated by
reference into the Prospectus comprising a part of the Registration Statement.
Very truly yours,
DECHERT PRICE & RHOADS
<PAGE>
Exhibit (j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated February 14, 2000, relating to the
financial statements and financial highlights which appears in the December 31,
1999 Annual Report to Shareholders of EQ Advisors Trust, which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" and "Independent
Accountants" in such Registration Statement.
PricewaterhouseCoopers LLP
New York, New York
April 17, 2000
<PAGE>
Exhibit (p)(1)
CODE OF ETHICS
EQ ADVISORS TRUST
EQ FINANCIAL CONSULTANTS, INC.
EQUITABLE DISTRIBUTORS, INC.
EQ Advisors Trust (the "Fund"), EQ Financial Consultants, Inc. (in its
capacities as the "Manager and one of the distributors of the Fund's two
classes of shares) and Equitable Distributors, Inc. ("EDI") (in its capacity as
the other distributor of the Fund's two classes of shares), collectively
referred to as the "Companies," hold their employees to a high standard of
integrity and business practice. In serving their clients, the Companies strive
to avoid conflicts of interest or the appearance of conflicts of interest in
connection with transactions in securities for their employees and for the Fund
or its series.
While affirming their confidence in the integrity and good faith of all of
their officers and directors, the Companies recognize that the knowledge of
present or future portfolio transactions and, in certain instances, the power
to influence portfolio transactions in securities that may be possessed by
certain of their officers, employees and directors could place such
individuals, if they engage in personal transactions in securities that are
eligible for investment by the Fund, in a position where their personal
interests may conflict with the interests of the Fund.
In view of the foregoing and of the provisions of Rule 17j-1 under the
Investment Company Act of 1940 (the "1940 Act"), each Company has determined to
adopt this Code of Ethics to specify and prohibit certain types of transactions
deemed to create conflicts of interest (or at least the potential for or the
appearance of such a conflict), and to establish reporting requirements and
enforcement procedures.
I. Statement of General Principles.
In recognition of the trust and confidence placed in the Companies by the
Fund's shareholders(1) and to give effect to the Companies' shared belief that
their operations should be directed to the benefit of the Fund's shareholders,
the Companies hereby adopt the following general principles to guide the
actions of their trustees, directors, officers and employees.
A. The interests of the Fund's shareholders are paramount, and all of
the Fund's personnel must conduct themselves and their operations to
give maximum effect to this tenet by assiduously placing the
interests of the shareholders before their own.
B. All personal transactions in securities by the Fund's personnel must
be accomplished so as to avoid even the appearance of a conflict of
interest on the part of such personnel with the interests of the Fund
and its shareholders.
C. All of the Fund's personnel must avoid actions or activities that
allow (or appear to allow) a person to profit or benefit from his or
her position with respect to the Fund, or that otherwise bring into
question the person's independence or judgment.
II. Definitions.
A. "Access Person" means:
- ---------
(1) FOR THESE PURPOSES, THE TERM "SHAREHOLDER" SHALL BE DEEMED TO INCLUDE
OWNERS OF VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES
FUNDED THROUGH SEPARATE ACCOUNTS INVESTING IN THE FUND.
<PAGE>
1. each Trustee, director, general partner, or officer
of the Fund, the Manager or any investment adviser
retained by the Manager to the Fund ("Advisers");
2. each employee of the Fund or any Adviser (or of any
company in a control relationship to the Fund or any
Adviser) who, in connection with his or her regular
functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of
a security by the Fund, or whose functions relate to
the making of any recommendations with respect to
such purchases or sales;
3. each employee of the Manager (or any company in a
control relationship with the Manager) who, in
connection with his or her regular functions or
duties, makes, participates in, or obtains
information regarding the purchase or sale of a
security by the Fund or any other investment company,
or whose functions relate to the making of any
recommendations with respect to such purchase or
sale;
4. each director, officer or general partner of EDI who
in the ordinary course of his business, makes,
participates in or obtains information regarding the
purchase or sale of securities for the Fund or any
other investment company whose functions or duties as
part of the ordinary course of his business relates
to the making of any recommendation to the Fund or
any other investment company regarding the purchase
or sale of securities; and
5. any natural person in a control relationship to the
Fund, the Manager, or any Adviser, or employed by an
entity in a control relationship to the Fund, the
Manager, or any Adviser, who obtains information
concerning recommendations made to or by the Fund,
the Manager, or any Adviser, with respect to the
purchase or sale of a security by the Fund.
6. Notwithstanding the above, where the Manager or any
Adviser is primarily engaged in a business or
businesses other than advising registered investment
companies or other advisory clients, the term "access
person" shall mean: any director, officer, general
partner, or employee of the Manager or any such
Adviser who, with respect to any registered
investment company makes any recommendation,
participates in the determination of which
recommendation shall be made, or whose principal
function or duties relate to the determination of
which recommendation shall be made to any registered
investment company; or who, in connection with his
duties, obtains any information concerning securities
recommendations being made by such Manager or Adviser
to any registered investment company.
B. A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security for the Fund has
been made and communicated and, with respect to the person
making the recommendation, when such person seriously
considers making such a recommendation.
C. "Beneficial Ownership" of a security is to be determined in
the same manner as for purposes of Section 16 of the
Securities Exchange Act of 1934 as amended ("1934 Act"). A
person will generally be deemed the beneficial owner of any
securities in which he or she has a direct or indirect
pecuniary interest. In addition, Beneficial Ownership includes
the accounts of a spouse, minor children, relatives resident
in the person's home, or other persons by reason of any
contract, arrangement, understanding or relationship that
provides the person with sole or shared voting or investment
power.
D. "Control" shall have the same meaning as that set forth in
Section 2(a)(9) of the 1940 Act. Section 2(a)(9) provides (as
of the date of adoption of this Code of Ethics) that "control"
means the power to exercise a controlling influence over the
management or policies of a company, unless such power is
solely the result of an official position with such company.
Ownership of 25% or more of a company's outstanding voting
security is presumed to give the holder thereof control over
the
<PAGE>
company. Such presumption may be countered by the facts
and circumstances of a given situation. This definition is
subject to any amendments in text or interpretation of Section
2(a)(9).
E. "Disinterested Trustee" means a Trustee of the Fund who is not
an "interested person" of the Fund within the meaning of
Section 2(a)(19) of the 1940 Act.
F. "Fund" means EQ Advisors Trust or each of its separate series
(each a "Portfolio").
G. "Investment Personnel" means:
1. all Access Persons who occupy the position of
portfolio manager (or who serves on an investment
committee that carries out the portfolio management
function) with respect to the Fund (or any
Portfolio);
2. all Access Persons who provide or supply information,
advice and/or recommendations regarding the purchase
or sale of any security by the Fund (or any
Portfolio), or who execute or help execute any
portfolio manager's decisions; and
3. all Access Persons who, in connection with their
regular functions, obtain contemporaneous information
regarding the purchase or sale of a security by the
Fund (or any Portfolio).
H. "Purchase or sale of a security" includes, among other things,
the writing of an option to purchase or sell a security.
I. "Restricted Period" is the number of days before or after a
Security is being purchased or sold by the Fund during which,
subject to an exception under the particular circumstances
made by the Fund's currently designated Compliance Officer in
his or her discretion, no Investment Personnel may purchase or
sell, directly or indirectly, any Security in which he or she
had or by reason of such transaction acquires any Beneficial
Ownership.
J. "Review Officer" shall mean the person charged with the
responsibility, at any given time, to pre-clear trades, grant
exceptions to prohibitions under the Code, receive reports and
notices required by this Code to be generated, and to
accomplish any other requirement of this Code related to the
oversight of activities, the exercise of discretion or the
making of decisions relating to the activities of persons
covered by this Code.
1. A person may be designated by the Board of Trustees,
or the Compliance Officer as a Review Officer (or
Compliance Officer may undertake the responsibility
of serving as the Review Officer) for purposes of
this Code without otherwise formally carrying that
title or the responsibility for functions otherwise
generally associated with the responsibilities of a
Compliance Officer.
2. The Review Officer may delegate certain functions as
appropriate.
K. "Security" shall have the same meaning as that set forth in
Section 2(a)(36) of the 1940 Act, except that it shall not
include securities issued by the Government of the United
States or an agency thereof, bankers' acceptances, bank
certificates of deposit, commercial paper and shares of
registered, open-end management investment companies.
L. A "Security held or to be acquired" by the Fund means any
Security which, within the most recent fifteen (15) days, (i)
is or has been held by any Portfolio of the Fund, or (ii) is
being or has been considered for purchase by any Portfolio of
the Fund.
<PAGE>
M. A Security is "being purchased or sold" by any Portfolio of the
Fund from the time when a purchase or sale program has been
communicated to the person who places the buy and sell orders
for any Portfolio of the Fund until the time when such program
has been fully completed or terminated.
N. "Compliance Statement" refers to a statement in the form
attached to this Code of Ethics as Appendix A.
O. "Personal Account" refers to any brokerage account with a
broker-dealer in which an Access Person, a spouse, a minor
child or other relative resident in the Access Person's home
or other persons by reason of any contract, arrangement,
understanding or relationship that provides the Access Person
with a Beneficial Ownership interest directly or by reason of
a sole or shared voting or investment power.
III. Prohibited Purchases and Sales of Securities.
A. In connection with the purchase or sale, directly or
indirectly, of a Security held or to be acquired by any
Portfolio of the Fund, no Access Person shall (1) employ any
device, scheme or artifice to defraud the Fund or any
Portfolio of the Fund; (2) make to the Fund any untrue
statement of a material fact or omit to state to the Fund a
material fact necessary in order to make the statements made,
in light of the circumstances under which they are made, not
misleading; (3) engage in any act, practice or course of
business that would operate as a fraud or deceit upon any
Portfolio of the Fund, or (4) engage in any manipulative
practice with respect to the Fund or any Portfolio of the
Fund. Such acts shall include, but not be limited to, the
following:
1. Intentionally inducing or causing the Fund to take
action or to fail to take action, for the purpose of
achieving a personal benefit rather than to benefit
the Fund, shall be a violation of this Code. Examples
of this violation include:
a. causing any Portfolio of the Fund to
purchase a Security owned by the individual
for the purpose of supporting or driving up
the price of the Security; and
b. causing any Portfolio of the Fund to refrain
from selling a Security in an attempt to
protect the value of the individual's
investment, such as an outstanding option.
2. Using actual knowledge of transactions for any
Portfolio of the Fund to profit by the market effect
of such transactions shall be a violation of this
Code. Subject to the discretion of the Review
Officer, one test that may be applied in determining
whether this prohibition has been violated will be to
review the securities transactions of Access Persons
for patterns (noting, however, that a violation could
be deemed to have resulted from a single transaction
if the circumstances so warrant). For example:
a. Any pattern involving parallel transactions
(for any Portfolio of the Fund and the
individual both buying or both selling the
same security) or opposite transactions
(buy/sell or sell/buy) within the Restricted
Period specified below in Subsection B may
be analyzed to determine whether the
individual's transaction may have violated
the prohibition.
b. Among the factors that may be considered in
the analysis are:
(1) the number and dollar value of the
transactions;
(2) the trading volume of the
Securities in question;
(3) the length of time the Security has
been held by the individual; and
<PAGE>
(4) the individual's involvement in the
investment process.
3. Access Persons have an affirmative duty to bring
suitable Securities to the attention of the
investment personnel. The intentional failure to
recommend a suitable Security to, or the failure to
purchase a Security for, any Portfolio of the Fund
for the purpose of avoiding the appearance of
conflict with respect to a personal transaction in
that Security may be considered a violation of this
Code. Personal transactions will be reviewed with
regard to this policy.
B. Subject to Section IV, on Pre-Clearance of Transactions, no
Investment Personnel shall purchase or sell, directly or
indirectly, any Security in which he had or by reason of such
transaction acquires any Beneficial Ownership, within the
Restricted Period, currently designated as seven (7) days
before or after the time that the same (or a related) Security
is being purchased or sold by the Fund.
C. No Investment Personnel may acquire a Security as part of an
initial public offering by the issuer.
D. No Investment Personnel may sell a Security within 60 days of
acquiring Beneficial Ownership of that Security.
IV. Pre-Clearance of Transactions.
A. All Investment Personnel must pre-clear all proposed personal
transactions in Securities with the Fund's designated Review
Officer prior to proceeding with the securities transaction.
1. No transaction in Securities may be effected by
Investment Personnel without the prior written
approval of the Review Officer, as set forth in a
signed Personal Request and Trading Authorization
Form, a sample of which is attached to this Code.
2. Clearance authorizations are effective only until the
close of trading on the date the approval is
received, unless otherwise indicated in writing.
3. The Review Officer will promptly provide a copy of
each Personal Trading Request and Authorization Form
it receives to the Fund's Compliance Officer.
B. Transactions exempted in Section V.B below do not have to be
pre-cleared.
V. Exempt Purchases and Sales.
A. The following transactions must be pre-cleared, but shall be
entitled to clearance from the Review Officer absent
circumstances that the Review Officer, in his or her
discretion, believes warrant treatment other than immediate
approval:
1. Purchases or sales of Securities that are not
eligible for purchase or sale by a Portfolio of the
Fund to which the proposed investor is the relevant
Investment Personnel.
2. Transactions which, after consideration of all the
facts and circumstances, are deemed not to be in
violation of Section III, of this Code, and to
present no reasonable likelihood of harm to the Fund.
Such transactions may include, but are not limited
to:
a. Transactions within the Restricted Period
that the Review Officer determines would not
benefit or disadvantage the position of any
Portfolio of the Fund in the Security;
<PAGE>
b. Transactions within the Restricted Period
that the Review Officer determines would not
benefit the applicable Investment
Personnel's position in the Security as a
result of a trade by the relevant Portfolio;
c. Transactions in connection with which the
potential harm to the Fund or any of its
Portfolios is remote;
d. Transactions unlikely to affect a highly
institutionalized market; and
e. Transactions clearly, in the opinion of the
Review Officer, not related economically to
Securities to be purchased, sold or held by
any Portfolio of the Fund.
3. The Review Officer may exercise discretion to exempt
any person from certain provisions of this Code if
such person's services are:
a. deemed to be valuable, and
b. without the exemption the person could not
perform the function for which he or she was
hired by any of the Companies.
Any such exemptions shall be in writing and subject
to approval of the Board of Trustees of the Fund or
the Compliance Officer.
B. The requirements of Section IV, (dealing with pre-clearance
obligations of Investment Personnel under this Code) shall not
apply to the following transactions:
1. Purchases or sales over which Investment Personnel
had no direct or indirect influence or control;
2. Purchases or sales that are non-volitional on the
part of Investment Personnel or any Portfolio,
including purchases or sales upon the exercise of
puts or calls written by Investment Personnel and
sales from a margin account pursuant to a bona fide
margin call;
3. Purchases that are part of an automatic dividend
reinvestment plan;
4. Purchases effected upon the exercise of rights issued
by an issuer pro rata to all holders of a class of
its Securities, to the extent such rights were
acquired from such issuer;
5. Transactions that appear, pursuant to reasonable
inquiry and investigation, to present no reasonable
likelihood of harm to the Fund and that are otherwise
in accordance with Rule l7j-l. Such transactions
would normally include purchases or sales of up to
1,000 shares of a Security being considered for
purchase or sale by the Fund (but not then being
purchased or sold for the Fund) if the issuer has a
market capitalization of over $1 billion;
6. Purchases or sales of Securities effected by
Investment Personnel who are required to pre-clear
their proposed Securities transactions in accordance
with a code of ethics described in Section IX, of
this Code (addressing the codes of ethics of Advisers
retained by the Manager to the Fund and the code of
ethics of the Fund's administrator ("Chase")),
provided that such Investment Personnel comply with
these preclearance requirements.
VI. Additional Restrictions and Requirements.
A. Gifts. No Access Person shall accept or receive any gift of
more than de minimis value (i.e., $100) from any person or
entity that does business with or on behalf of any of the
Companies.
<PAGE>
B. Directorships. No Investment Personnel may accept a position
as a director, trustee or general partner of a publicly-traded
company or partnership, unless such position has been
presented to and approved by the Fund's Board of Trustees as
consistent with the interests of the Fund and its
shareholders.
C. Duplicate Confirmations.
1. All Investment Personnel must submit duplicate
confirmations to the Review Officer, either by (a)
directing each brokerage firm or bank at which such
persons maintain securities accounts to send
simultaneous duplicate copies of such persons'
statements to the Review Officer, or (b) by the
Investment Personnel personally providing duplicate
copies of all such statements directly to the Review
Officer within two (2) business days of receipt.
2. Investment Personnel who provide copies of their
brokerage account statements to a designated review
officer pursuant to a code of ethics described in
Section IX, of this Code are not required to provide
copies of such statements to the Fund's Review
Officer pursuant to this paragraph.
D. List of Securities.
1. Initial Report. Each Access Person except for each
Disinterested Trustee of the Fund must provide to the
Review Officer an initial complete listing of all
securities owned by such person as of the date the
Fund commences operation, or as of the date the
person first becomes an Access Person. The initial
listing must be submitted no later than 10 days after
the event that gave rise to the obligation to provide
a list.
2. Subsequent Reports. Each Access Person except for
each Disinterested Trustee of the Fund must
thereafter submit a revised list of such holdings to
the Review Officer, covering the prior calendar year,
no later than January 10.
3. Exception. Any Access Person that would be required
to provide an initial or subsequent listing of all
securities owned by such person pursuant to Section
VI.D., hereof, shall not be required to file reports
pursuant to Section VI.D. where such Access Person is
subject to a code of ethics described in Section IX
of this Code.
E. Confidentiality. All reports of securities transactions and
any other information filed with the Fund pursuant to this
Code shall be treated as confidential. In this connection, no
Access Person shall reveal to any other person (except in the
normal course of his or her duties on behalf of any of the
Companies) any information regarding Securities transactions
made or being considered by or on behalf of any Portfolio of
the Fund.
VII. Reporting Obligations.
A. Each Access Person (other than the Fund's Disinterested
Trustees) shall file quarterly with the Review Officer a
report indicating all transactions in Securities in which the
person has, or by reason of such transaction acquires, any
direct or indirect Beneficial Ownership. The Review Officer
shall submit confidential quarterly reports with respect to
his or her own personal securities transactions to an
Alternate Review Officer, as designated by the Board of
Trustees or the Compliance Officer. The Alternate Review
Officer designated to receive and review the Review Officer's
reports shall undertake those responsibilities in a manner
consistent with the responsibilities of the Review Officer
under this Code.
B. Every report shall be made not later than 10 days after the
end of the calendar quarter in which the transaction to which
the report relates was effected, and shall contain the
following information:
<PAGE>
1. The date of the transaction, the title and the number
of shares or the principal amount of each Security
involved;
2. The nature of the transaction (i.e., purchase, sale
or any other type of acquisition or disposition);
3. The price at which the transaction was effected;
4. The name of the broker, dealer or bank with or
through whom the transaction was effected; and
5. The date the report was signed.
C. In the event no reportable transactions occurred during the
quarter, the report should be so noted and returned signed and
dated.
D. Any Access Person that would otherwise be required to report
his or her transactions under this Code shall not be required
to file reports pursuant to this section of the Code where
such Access Person is required to file reports pursuant to a
code of ethics described in Section IX, of this Code.
E. A Disinterested Trustee shall report transactions in
Securities only if the Trustee knew at the time of the
transaction or, in the ordinary course of fulfilling his or
her official duties as a Trustee, should have known, that
during the 15-day period immediately preceding or following
the date of the transaction (or such period prescribed by
applicable law), such security was purchased or sold, or was
being considered for purchase or sale, by any Portfolio of the
Fund. (The "should have known" standard implies no duty of
inquiry, does not presume there should have been any deduction
or extrapolation from discussions or memoranda dealing with
tactics to be employed meeting any Portfolio's investment
objectives, or that any knowledge is to be imputed because of
prior knowledge of any Portfolio's portfolio holdings, market
considerations, or any Portfolio's investment policies,
objectives and restrictions.)
F. Any such report may contain a statement that the report shall
not be construed as an admission by the person making such
report that he has any direct or indirect Beneficial Ownership
in the Security to which the report relates.
G. Any Access Person who files a Compliance Statement with the
Review Officer and directs all broker-dealers named therein to
submit duplicate copies of all confirmation statements and
periodic statements to the Review Officer shall not be
required to file quarterly reports pursuant to Section VII.A
with respect to any Personal Accounts listed thereon for the
next four succeeding calendar quarters. Each Access Person
filing a Compliance Statement with the Review Officer shall
promptly notify the Review Officer if any Personal Account is
opened or closed.
VIII. Review and Enforcement.
A. The Review Officer, in consultation with each Adviser, shall
compare all reported personal Securities transactions with
completed portfolio transactions of each Portfolio of the Fund
and a list of securities being considered for purchase or sale
by any Portfolio of the Fund to determine whether a violation
of this Code may have occurred. Before making any
determination that a violation has been committed by any
person, the Review Officer shall give such person an
opportunity to supply additional explanatory material.
B. If the Review Officer determines that a violation of this Code
may have occurred, the Review Officer shall submit his or her
written determination, together with a confidential report and
any additional
<PAGE>
explanatory material provided by the individual, to the
President of the Fund (or to a person to whom the President
shall delegate this authority, such as the Compliance
Officer, to the extent such person also serves as Review
Officer) and outside counsel to the Fund, who shall make an
independent determination as to whether a violation has
occurred.
C. If the President (or designee) and outside counsel find that a
violation has occurred, the President shall impose upon the
individual such sanctions as he or she deems appropriate and
shall report the violation and the sanction imposed to the
Board of Trustees of the Fund.
D. No person shall participate in a determination of (1) whether
he or she personally has committed a violation of the Code, or
(2) the imposition of any sanction. If a Securities
transaction of the President is under consideration, any Vice
President shall act in all respects in the manner prescribed
in this Code for the President.
IX. Adviser and Chase Codes of Ethics. Adviser and Chase shall each:
A. Submit to the Board of Trustees of the Fund a copy of its code
of ethics adopted pursuant to Rule 17j-1;
B. Promptly report to the Fund in writing any material amendments
to such code;
C. On a quarterly basis provide to the Fund written certification
of the compliance of their Access Persons with their Code of
Ethics ; and
D. Shall immediately furnish to the Fund all information deemed
reasonably necessary by the Board of Trustees or its counsel
or counsel to the Fund for their consideration regarding any
material violation or series of other violations of such Code
by an Access Person.
X. Records. The Companies shall maintain records in the manner and to the
extent set forth below, which may be maintained on microfilm or by such
other means permissible under the conditions described in Rule 31a-2
under the 1940 Act, or under no-action letters or interpretations under
that rule, and shall be available for examination by representatives of
the Securities and Exchange Commission.
A. A copy of this Code shall be preserved in an easily accessible
place;
B. A record of any violation of this Code and of any action taken
as a result of such violation shall be preserved in an easily
accessible place for a period of not less than five (5) years
following the end of the fiscal year in which the violation
occurs;
C. A copy of each report made by an Access Person pursuant to
this Code shall be preserved for a period of not less than
five (5) years from the end of the fiscal year in which it is
made, the first two years in an easily accessible place; and
D. A list of all Access Persons who are, or within the past five
(5) years have been, required to make reports pursuant to this
Code shall be maintained in an easily accessible place.
XI. Approval, Amendment and Interpretation of Provisions.
A. This Code was approved by the Board of Trustees of the Fund
prior to shares of the Fund commencing operations, and may be
amended as necessary or appropriate with the approval of the
Board of Trustees.
<PAGE>
B. The President of the Fund shall report to the Board of
Trustees at least annually as to the operation of this Code
and shall address in any such report the need (if any) for
further changes or modifications to this Code.
C. This Code is subject to interpretation by the Board of
Trustees in its discretion.
<PAGE>
APPENDIX A
EQ ADVISORS TRUST ("FUND")
EQUITABLE DISTRIBUTORS, INC. ("EDI")
AND EQ FINANCIAL CONSULTANTS, INC. ("Manager")
I hereby certify that I have read and understand the Code of Ethics for
the Fund, EDI and the Manager and hereby agree, to comply with the policies and
procedures contained in the Code of Ethics.
1. In connection therewith, I agree to:
a. file with the Review Officer and maintain on
a current basis a list of all Personal
Accounts (as defined in Section II.(P) of
the Code);
b. arrange to have duplicate trade
confirmations and periodic statements for
each Personal Account submitted to the
Review Officer directly by the securities
firm maintaining the Personal Account(s);
and
c. be personally responsible for determining if
any security transaction for my Personal
Account(s) is prohibited by the Code or any
other policy statement of the Equitable Life
Assurance Society of the United States.
2. The following Personal Account(s) are maintained at
the broker- dealer(s) and/or financial institution(s)
named below (if none write "none"):
a. registered in my name at the following
broker-dealer(s):
-------------------------------------------
-------------------------------------------
-------------------------------------------
b. registered in the name of my spouse at the
following broker- dealer(s):
-------------------------------------------
-------------------------------------------
-------------------------------------------
c. registered in the name of a family member
who resides with me at the following
broker-dealer(s):
name of family member name of broker-dealer
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
<PAGE>
d. registered in the name of any other person
who resides with me at the following
broker-dealer(s):
name of person name of broker-dealer
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
3. I have a direct or indirect Beneficial
Ownership interest with respect to the
following other account(s) at the following
broker-dealer(s) (do not list client
accounts):
name and description
of account name of broker-dealer
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
4. I will notify the Review Officer if a
Personal Account is opened or closed. If the
answers to paragraphs a through d of Section
2 above are all "none," I certify that
neither I nor any member of my family who
resides with me or any other person who
resides with me currently maintains a
brokerage account.
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Date Signature
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Type or print name
<PAGE>
Exhibit (p)(2)
AUGUST 1999
ALLIANCE CAPITAL MANAGEMENT L.P.
CODE OF ETHICS AND STATEMENT OF POLICY AND PROCEDURES REGARDING
PERSONAL SECURITIES TRANSACTIONS
1. PURPOSES
(a) Alliance Capital Management L.P. ("Alliance", "we" or "us") is a
registered investment adviser and acts as investment manager or
adviser to investment companies and other Clients. In this capacity,
we serve as fiduciaries and owe our Clients an undivided duty of
loyalty. We must avoid even the appearance of a conflict that may
compromise the trust Clients have placed in us and must insist on
strict adherence to fiduciary standards and compliance with all
applicable federal and state securities laws. Adherence to this Code
of Ethics and Statement of Policy and Procedures Regarding Personal
Securities Transactions (the "Code and Statement") is a fundamental
condition of service with us, any of our subsidiaries or our general
partner (the "Alliance Group").
(b) The Code and Statement is intended to comply with Rule 17j-1 under the
Investment Company Act which applies to us because we serve as an
investment adviser to registered investment companies. Rule 17j-1
specifically requires us to adopt a code of ethics that contains
provisions reasonably necessary to prevent our "access persons"
(defined in Rule 17j-1 to cover persons such as officers, directors,
portfolio managers, traders, research analysts and others) from
engaging in fraudulent conduct, including insider trading. Each
investment company we advise has also adopted a code of ethics with
respect to its access persons. As set forth in Section 3 below, our
Code and Statement applies to all Employees and all other individuals
who are Access Persons. The Code and Statement is also intended to
comply with the provisions of Rule 204-2 under the Investment Advisers
Act of 1940 (the "Advisers Act") which requires us to maintain records
of securities transactions in which certain of our personnel have any
Beneficial Ownership.
(c) All Employees and all other individuals who are Access Persons
(collectively, "you") also serve as fiduciaries with respect to our
Clients and in this capacity you owe an undivided duty of loyalty to
our Clients. As part of this duty and as expressed throughout the Code
and Statement, you must at all times:
(i) Place the interests of our Clients first;
(ii) Conduct all personal securities transactions consistent with this
Code and Statement and in such a manner that avoids any actual or
potential conflict of interest or any abuse of your
responsibility and position of trust; and
<PAGE>
(iii) Abide by the fundamental standard that you not take
inappropriate advantage of your position.
(d) This Code and Statement does not attempt to identify all possible
conflicts of interests and literal compliance with each of the
specific procedures will not shield you from liability for personal
trading or other conduct which violates your fiduciary duties to our
Clients. In addition to the specific prohibitions contained in this
Code and Statement, you are also subject to a general requirement not
to engage in any act or practice that would defraud our Clients. This
general prohibition includes, in connection with the purchase or sale
of a Security held or to be acquired or sold (as this phrase is
defined below in Section 2(k)) by a Client:
(i) Making any untrue statement of a material fact;
(ii) Creating materially misleading impressions by omitting to state
or failing to provide any information necessary to make any
statements made, in light of the circumstances in which they are
made, not misleading;
(iii) Making investment decisions, changes in research ratings and
trading decisions other than exclusively for the benefit of and
in the best interest of our Clients;
(iv) Using information about investment or trading decisions or
changes in research ratings (whether considered, proposed or
made) to benefit or avoid economic injury to you or anyone other
than our Clients;
(v) Taking, delaying or omitting to take any action with respect to
any research recommendation, report or rating or any investment
or trading decision for a Client in order to avoid economic
injury to you or anyone other than our Clients;
(vi) Purchasing or selling a Security on the basis of knowledge of a
possible trade by or for a Client;
(vii) Revealing to any other person (except in the normal course of
your duties on behalf of a Client) any information regarding
Securities transactions by any Client or the consideration by
any Client of Alliance of any such Securities transactions; or
(viii) Engaging in any manipulative practice with respect to any
Client.
(e) The provisions contained in this Code and Statement must be followed
when making a personal securities transaction. These policies and
procedures, which must be followed, are considerably more restrictive
and time-consuming than those applying to investments in the mutual
funds and other Clients we advise. If you are not
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prepared to comply with these policies and procedures, you must
forego personal trading.
2. DEFINITIONS
The following definitions apply for purposes of the Code and Statement in
addition to the definitions contained in the text itself.
(a) "ACCESS PERSON" means any director or officer of the general partner
of Alliance, as well as any of the following persons:
(i) any Employee who, in connection with his or her regular functions
or duties --
(A) makes, participates in, or obtains information regarding the
purchase or sale of a Security by a Client, or whose
functions relate to the making of any recommendations with
respect to such purchases or sales;
(B) obtains information from any source regarding any change, or
consideration of any change in Alliance's internal research
coverage, a research rating or an internally published view
on a Security or issuer; or
(C) obtains information from any source regarding the placing or
execution of an order for a Client account; and
(ii) any natural person having the power to exercise a controlling
influence over the management or policies of Alliance (unless
that power is solely the result of his or her position with
Alliance) who:
(A) obtains information concerning recommendations made to a
Client with regard to the purchase or sale of a Security;
(B) obtains information from any source regarding any change, or
consideration of any change in research coverage, research
rating or a published view on a Security or issuer; and
(C) obtains information from any source regarding the placing or
execution of an order for a Client account.
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(b) A SECURITY IS "BEING CONSIDERED FOR PURCHASE OR SALE" WHEN:
(i) AN ALLIANCE RESEARCH ANALYST ISSUES RESEARCH INFORMATION
(INCLUDING AS PART OF THE DAILY MORNING CALL) REGARDING INITIAL
COVERAGE OF, OR CHANGING A RATING WITH RESPECT TO, A SECURITY;
(ii) A PORTFOLIO MANAGER HAS INDICATED (DURING THE DAILY MORNING CALL
OR OTHERWISE) HIS OR HER INTENTION TO PURCHASE OR SELL A
SECURITY;
(iii) A PORTFOLIO MANAGER PLACES AN ORDER FOR A CLIENT; OR
(iv) A PORTFOLIO MANAGER GIVES A TRADER DISCRETION TO EXECUTE AN
ORDER FOR A CLIENT OVER A SPECIFIED PERIOD OF TIME.
(c) "BENEFICIAL OWNERSHIP" is interpreted in the same manner as in
determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 ("Exchange Act"), Rule 16a-1
and the other rules and regulations thereunder and includes ownership
by any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares a
direct or indirect pecuniary interest in a Security. For example, an
individual has an indirect pecuniary interest in any Security owned by
the individual's spouse. Beneficial Ownership also includes, directly
or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise, having or sharing "voting power" or
"investment power," as those terms are used in Section 13(d) of the
Exchange Act and Rule 13d-3 thereunder.
(d) "CLIENT" means any person or entity, including an investment company,
for which Alliance serves as investment manager or adviser.
(e) "COMPLIANCE OFFICER" refers to Alliance's Compliance Officer.
(f) "EMPLOYEE" refers to any person who is an employee of any member of
the Alliance Group, including both part-time employees, as well as
consultants (acting in the capacity of a portfolio manager, trader or
research analyst) under the control of Alliance who, but for their
status as consultants, would otherwise come within the definition of
Access Person.
(g) "INVESTMENT PERSONNEL" refers to any Employee who:
(i) acts in the capacity of a portfolio manager, research analyst or
trader;
(ii) assists someone acting in the capacity of a portfolio manager,
research analyst or trader and as an assistant has access to
information generated or used by portfolio managers, research
analysts and traders (including, for example,
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<PAGE>
assistants who have access to the Alliance Investment Review or
the Alliance International Investment Review); or
(iii) receives the Alliance Investment Review or the Alliance
International Investment Review.
(h) "PERSONAL ACCOUNT" refers to any account (including, without
limitation, a custody account, safekeeping account and an account
maintained by an entity that may act in a brokerage or a principal
capacity) in which an Access Person or Employee has any Beneficial
Ownership and any such account maintained by or for a financial
dependent. For example, this definition includes Personal Accounts of:
(i) an Access Person's or Employee's spouse, including a legally
separated or divorced spouse who is a financial dependent,
(ii) financial dependents residing with the Access Person or Employee
and
(iii) any person financially dependent on an Access Person or Employee
who does not reside with that person, including financially
dependent children away at college.
(i) "PURCHASE OR SALE OF A SECURITY" includes, among other transactions,
the writing or purchase of an option to sell a Security and any short
sale of a Security.
(j) "SECURITY" has the meaning set forth in Section 2(a)(36) of the
Investment Company Act and any derivative thereof, commodities,
options or forward contracts, except that it shall not include shares
of open-end investment companies registered under the Investment
Company Act, securities issued by the Government of the United States,
short-term debt securities that are government securities within the
meaning of Section 2(a)(16) of the Investment Company Act, bankers'
acceptances, bank certificates of deposit, commercial paper, and such
other money market instruments as are designated by the Compliance
Officer.
(k) "SECURITY HELD OR TO BE ACQUIRED OR SOLD" means:
(i) any Security which, within the most recent 15 days (1) is or has
been held by a Client or (2) is being or has been considered by a
Client (to the extent known by Alliance) or Alliance for purchase
by the Client; and
(ii) any option to purchase or sell, and any Security convertible into
or exchangeable for, a Security.
(l) "SUBSIDIARY" refers to either of the following types of entities with
respect to which Alliance, directly or indirectly, through the
ownership of voting securities, by
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<PAGE>
contract or otherwise has the power to direct or cause the direction
of management or policies of such entity:
(i) any U.S. entity engaged in money management; and
(ii) any non-U.S. entity engaged in money management for U.S.
accounts.
3. APPLICATION
(a) This Code and Statement applies to all Employees and to all other
individuals who are Access Persons. Please note that certain
provisions apply to all Employees while other provisions apply only to
Access Persons and others apply only to certain categories of Access
Persons who are also Investment Personnel (e.g., portfolio managers
and research analysts).
(b) Alliance will provide a copy of this Code and Statement to all
Employees and all individuals who are Access Persons. In addition, the
Compliance Officer will maintain lists of Access Persons and
Investment Personnel, including a separate list of portfolio managers
and research analysts.
4. LIMITATIONS ON PERSONAL SECURITIES TRANSACTIONS
(a) ALL EMPLOYEES
It is the responsibility of each Employee to ensure that all personal
securities transactions are made in strict compliance with the
restrictions and procedures in the Code and Statement and otherwise
comply with all applicable legal and regulatory requirements.
EMPLOYEES MUST HOLD ALL SECURITIES IN A PERSONAL ACCOUNT. This
requirement applies to all types of personal securities transactions
including, for example, the purchase of Securities in a private
placement or other direct investment. In addition, Employees may not
take physical possession of certificates or other formal evidence of
ownership.
Personal securities transactions for Employees may be effected only in
a Personal Account and in accordance with the following provisions:
(i) DESIGNATED BROKERAGE ACCOUNTS
All Personal Accounts of an Employee that are maintained as
brokerage accounts must be held only at the following designated
broker-dealers: Donaldson, Lufkin & Jenrette, Merrill Lynch
& Co., and Charles Schwab.
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<PAGE>
(ii) SECURITIES BEING CONSIDERED FOR CLIENT PURCHASE OR SALE
An Employee may not purchase or sell a Security, or engage in any
short sale of a Security, in a Personal Account if, at the time
of the transaction, the Security is being considered for purchase
or sale for a Client or is being purchased or sold for a Client.
The following non-exhaustive list of examples illustrates
this restriction:
o An Alliance research analyst issues research information
(including as part of the daily morning call) regarding
initial coverage of, or changing a rating with respect to, a
Security.
o A portfolio manager has, during the daily morning call,
indicated his or her intention to purchase or sell a
Security.
o A portfolio manager places an order in the Security to
purchase or sell the Security for a Client.
o An open order in the Security exists on the trading desk.
o An open limit order exists on the trading desk, and it is
reasonably likely that the Security will reach that limit
price in the near future.
(iii) RESTRICTED LIST
A Security may not be purchased or sold in a Personal
Account if, at the time of the transaction, the Security appears
on the Alliance Daily Restricted List and is restricted for
Employee transactions. The Daily Restricted List is made
available each business day to all Employees via Lotus Notes and
the Alliance Alert.
(iv) PRECLEARANCE REQUIREMENT
An Employee may not purchase or sell, directly or indirectly, any
Security in which the Employee has (or after such transaction
would have) any Beneficial Ownership unless the Employee obtains
the prior written approval to the transaction from the Compliance
Department AND, IN THE CASE OF INVESTMENT PERSONNEL, THE HEAD OF
THE BUSINESS UNIT IN WHICH THE EMPLOYEE WORKS. A request for
preclearance must be made in writing in advance of the
contemplated transaction and must state:
a. the name of the Security involved,
b. the number of shares or principal amount to be purchased or
sold, and
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<PAGE>
c. a response to all questions contained in the appropriate
pre-clearance form.
Preclearance requests will be acted on only between the hours of
10:00 a.m. and 3:30 p.m. Any approval given under this paragraph
will remain in effect only until the end of the trading day on
which the approval was granted.
When a Security is being considered for purchase or sale for
a Client or is being purchased or sold for a Client following the
approval on the same day of a personal trading request form with
respect to the same security, the Compliance Department is
authorized to cancel the personal order if (x) it has not been
executed and the order exceeds a market value of $50,000 or (y)
the Compliance Department determines, after consulting with the
trading desk and the appropriate business unit head (if
available), that the order, based on market conditions, liquidity
and other relevant factors, could have an adverse impact on a
Client or on a Client's ability to purchase or sell the Security
or other Securities of the issuer involved.
(v) AMOUNT OF TRADING
No more than an aggregate of 20 securities transactions may occur
in an Employee's Personal Accounts in any consecutive thirty-day
period.
(vi) DISSEMINATION OF RESEARCH INFORMATION
An Employee may not buy or sell any Security that is the
subject of "significantly new" or "significantly changed"
research during a forty-eight hour period commencing with the
first publication or release of the research. The terms
"significantly new" and "significantly changed" include:
a. the initiation of coverage by an Alliance research analysts;
b. any change in a research rating or position by an Alliance
research analyst (unless the research analyst who makes the
change advises the Compliance Department in writing that the
change is the result of an unanticipated widely disseminated
announcement or market event, e.g., the announcement of a
major earnings warning as opposed to the research analysts
independently rethinking his or her subjective assessment of
the security); and
c. any other rating, view, opinion, or advice from an Alliance
research analyst, the issuance (or reissuance) of which in
the opinion of such research analyst or head of research
would be reasonably likely to have a material effect on the
price of the security.
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<PAGE>
(b) ACCESS PERSONS
In addition to the requirements set forth in paragraph (a) of this
Section 4, the following restrictions apply to all Access Persons:
(i) SHORT SALES
No Access Person shall engage in any short sale of a
Security if, at the time of the transaction, any Client has a
long position in such Security (except that an Access Person may
engage in short sales against the box and covered call writing
provided that these personal securities transactions do not
violate the prohibition against short-term trading).
(ii) SHORT-TERM TRADING
All Access Persons are subject to a mandatory buy and hold
of all Securities for 60 calendar days. An Access Person may,
however, after 30 calendar days, sell a Security if the sale
price is lower than the original purchase price (i.e., at a loss
on the original investment). Any trade made in violation of this
paragraph shall be unwound, or, if that is not practicable, all
profits from the short-term trading must be disgorged as
directed by the Compliance Officer.
(iii) NON-EMPLOYEE ACCESS PERSONS
Any non-Employee Access Person with actual knowledge that a
Security is being considered for purchase or sale for a Client
may not purchase or sell such Security.
(c) INVESTMENT PERSONNEL
In addition to the requirements set forth in paragraphs (a) and (b) of
this Section 4, the following restrictions apply to all Investment
Personnel:
(i) INITIAL PUBLIC OFFERINGS
No Investment Personnel shall acquire any direct or indirect
Beneficial Ownership in any Securities in any initial public
offering.
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(ii) PRIVATE PLACEMENTS
No Investment Personnel shall acquire any Beneficial
Ownership in any Securities in any private placement of
Securities unless the Compliance Officer and the business unit
head give express prior written approval and document the basis
for granting or denying approval after due inquiry. The
Compliance Officer, in determining whether approval should be
given, will take into account, among other factors, whether the
investment opportunity should be reserved for a Client and
whether the opportunity is being offered to the individual by
virtue of his or her position with the Alliance Group.
Investment Personnel so authorized to acquire Securities in a
private placement must disclose that investment when they play
a part in any Client's subsequent consideration of an
investment in the issuer, and in such a case, the decision of
Alliance to purchase Securities of that issuer for a Client will
be subject to an independent review by Investment Personnel
with no personal interest in such issuer.
(iii) BOARD MEMBER OR TRUSTEE
No Investment Personnel shall serve on any board of
directors or trustees or in any other management capacity of any
private or public company without prior written authorization
from the Compliance Officer based upon a determination that such
service would not be inconsistent with the interests of any
Client. This prohibition does not include non-profit
corporations, charities or foundations; however, approval from
the Investment Personnel's supervisor is necessary.
(iv) RECEIPT OF GIFTS
No Investment Personnel shall receive any gift or other
thing of more than de minimis value from any person or entity,
other than a member of the Alliance Group, that does business
with Alliance on behalf of a Client, provided, however, that
receipt of the following shall not be prohibited:
a. an occasional breakfast, luncheon, dinner or reception,
ticket to a sporting event or the theater, or comparable
entertainment, that is not so frequent, so costly, nor so
extensive as to raise any question of impropriety;
b. a breakfast, luncheon, dinner, reception or cocktail party
in conjunction with a bona fide business meeting; and
c. a gift approved in writing by the Compliance Officer.
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(d) PORTFOLIO MANAGERS
In addition to the requirements set forth in paragraphs (a), (b)
and (c) of this Section 4, the following restrictions apply to all
persons acting in the capacity of a portfolio manager of a Client
account:
(i) BLACKOUT PERIODS
No person acting in the capacity of a portfolio manager
shall buy or sell a Security for a Personal Account within seven
calendar days before and after a Client trades in that Security.
In the case of Client accounts managed by more than one
portfolio manager, this restriction will apply to the portfolio
manager who makes the decision to purchase or sell the relevant
Security. If a portfolio manager engages in such a personal
securities transaction during a blackout period, the Compliance
Officer will break the trade or, if the trade cannot be broken,
the Compliance Officer will direct that any profit realized on
the trade be disgorged.
(ii) ACTIONS DURING BLACKOUT PERIODS
No person acting in the capacity of a portfolio manager
shall delay or accelerate a Client trade due to a previous
purchase or sale of a Security for a Personal Account. In the
event that a portfolio manager determines that it is in the best
interest of a Client to buy or sell a Security for the account
of the Client within seven days of the purchase or sale of the
same Security in a Personal Account, the portfolio manager
should contact the Compliance Officer immediately who may
direct that the trade in the Personal Account be canceled or
take other appropriate relief.
(iii) TRANSACTIONS CONTRARY TO CLIENT POSITIONS
No person acting in the capacity of a portfolio manager shall
purchase or sell a Security in a Personal Account contrary
to investment decisions made on behalf of a Client, unless the
portfolio manager represents and warrants in the personal
trading request form that (x) it is appropriate for the Client
account to buy, sell or continue to hold that Security and (y)
the decision to purchase or sell the Security for the Personal
Account arises from the need to raise or invest cash or some
other valid reason specified by the portfolio manager and
approved by the Compliance Officer and is not otherwise based
on the portfolio manager's view of how the Security is likely
to perform.
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(e) RESEARCH ANALYSTS
In addition to the requirements set forth in paragraphs (a), (b),
(c) of this Section 4, the following restrictions apply to all persons
acting in the capacity of a research analyst:
(i) BLACKOUT PERIODS
No person acting as a research analyst shall buy or sell a
Security within seven calendar days before and after making a
change in a rating or other published view with respect to that
Security. If a research analyst engages in such a personal
securities transaction during a blackout period, the Compliance
Officer will break the trade or, if the trade cannot be broken,
the Compliance Officer will direct that any profit realized on
the trade be disgorged.
(ii) ACTIONS DURING BLACKOUT PERIODS
No person acting as a research analyst shall delay or
accelerate a rating or other published view with respect to any
Security because of a previous purchase or sale of a Security in
such person's Personal Account. In the event that a research
analyst determines that it is appropriate to make a change in a
rating or other published view within seven days of the purchase
or sale of the same Security in a Personal Account, the research
analyst should contact the Compliance Officer immediately who
may direct that the trade in the Personal Account be canceled
or take other appropriate relief.
(iii) ACTIONS CONTRARY TO RATINGS
No person acting as a research analyst shall purchase or
sell a Security (to the extent such Security is included in the
research analyst's research universe) contrary to an outstanding
rating or a pending ratings change, unless (x) the research
analyst represents and warrants in the personal trading request
form that (as applicable) there is no reason to change the
outstanding rating and (y) the research analyst's personal trade
arises from the need to raise or invest cash or some other valid
reason specified by the research analyst and approved by the
Compliance Officer and is not otherwise based on the research
analyst's view of how the security is likely to perform.
5. EXEMPTED TRANSACTIONS
(a) The pre-clearance requirements, as described in Section 4(a)(iv) of
this Code and Statement, do not apply to:
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(i) NON-VOLITIONAL TRANSACTIONS
Purchases or sales that are non-volitional (including, for
example, any Security received as part of an individual's
compensation) on the part of an Employee (and any Access Person
who is not an Employee) or are pursuant to a dividend
reinvestment plan (up to an amount equal to the cash value of a
regularly declared dividend, but not in excess of this amount).
(ii) EXERCISE OF PRO RATA ISSUED RIGHTS
Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of the issuer's
Securities, to the extent such rights were acquired from such
issuer, and sales of such rights so acquired. This exemption
applies only to the exercise or sale of rights that are issued in
connection with a specific upcoming public offering on a
specified date, as opposed to rights acquired from the issuer
(such as warrants or options), which may be exercised from
time-to-time up until an expiration date. This exemption does not
apply to the sale of stock acquired pursuant to the exercise of
rights.
(b) The restrictions on effecting transactions in a (1) Security being
considered for purchase or sale, as described in Sections 4(a)(ii) and
4(b)(iii) or (2) that is the subject of "significantly new" or
"significantly changed" research, as described in Section 4(a)(vi) of
this Code and Statement, do not apply to:
(i) NON-VOLITIONAL TRANSACTIONS
Purchases or sales that are non-volitional (including, for
example, any Security received as part of an individual's
compensation) on the part of an Access Person or are pursuant to
a dividend reinvestment plan (up to an amount equal to the cash
value of a regularly declared dividend, but not in excess of this
amount).
(ii) EXERCISE OF PRO RATA ISSUED RIGHTS
Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of the issuer's
Securities, to the extent such rights were acquired from such
issuer, and sales of such rights so acquired. This exemption
applies only to the exercise or sale of rights that are issued in
connection with a specific upcoming public offering on a
specified date, as opposed to rights acquired from the issuer
(such as warrants or options), which may be exercised from
time-to-time up until an expiration date. This exemption does not
apply to the sale of stock acquired pursuant to the exercise of
rights.
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(iii) DE MINIMIS TRANSACTIONS -- FIXED INCOME SECURITIES
Any of the following Securities, if at the time of the
transaction, the Access Person has no actual knowledge that the
Security is being considered for purchase or sale by a Client,
that the Security is being purchased or sold by the Client or
that the Security is the subject of significantly new or
significantly changed research:
a. Fixed income securities transaction involving no more than
100 units or having a principal amount not exceeding
$25,000; or
b. Non-convertible debt securities and non-convertible
preferred stocks which are rated by at least one nationally
recognized statistical rating organization ("NRSRO") in one
of the three highest investment grade rating categories.
(iv) DE MINIMIS TRANSACTIONS -- EQUITY SECURITIES
Any equity Securities transaction, or series of related
transactions, involving shares of common stock and excluding
options, warrants, rights and other derivatives, provided
a. any orders are entered after 10:00 a.m. and before 3:00 p.m.
and are not designated as "market on open" or "market on
close";
b. the aggregate value of the transactions do not exceed (1)
$10,000 for securities with a market capitalization of less
than $1 billion; (2) $25,000 for securities with a market
capitalization of $1 billion to $5 billion and (3) $50,000
for securities with a market capitalization of greater than
$5 billion; and
c. the Access Person has no actual knowledge that the Security
is being considered for purchase or sale by a Client, that
the Security is being purchased or sold by or for the Client
or that the Security is the subject of significantly new or
significantly changed research.
(c) NON-EMPLOYEE ACCESS PERSONS
The restrictions on Employees and Access Persons, as described in
Sections 4(a) and 4(b) of this Code and Statement, do not apply to
non-Employee Access Persons, if at the time of the transaction
involved, such person has no actual knowledge that the Security
involved is being considered for purchase or sale.
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(d) EXTREME HARDSHIP
In addition to the exceptions contained in Section 5(a) and (b),
the Compliance Officer may, in very limited circumstances, grant other
exceptions under any Section of the Code and Statement on a
case-by-case basis, provided:
(i) The individual seeking the exception furnishes to the Compliance
Officer:
a. a written statement detailing the efforts made to comply
with the requirement from which the individual seeks an
exception;
b. a written statement containing a representation and warranty
that (1) compliance with the requirement would impose a
severe undue hardship on the individual and (2) the
exception would not, in any manner or degree, harm or
defraud the Client or compromise the individual's or
Alliance's fiduciary duty to any Client; and
c. any supporting documentation that the Compliance Officer may
request;
(ii) The Compliance Officer conducts an interview with the individual
or takes such other steps the Compliance Officer deems
appropriate in order to verify that granting the exception will
not in any manner or degree, harm or defraud the Client or
compromise the individual's or Alliance's fiduciary duty to any
Client; and
(iii) The Compliance Officer maintains, along with statements provided
by the individual, a written record that contains:
a. the name of the individual;
b. the specific requirement of Section 4 from which the
individual sought an exception;
c. the name of the Security involved, the number of shares or
principal amount purchased or sold, and the date or dates
on which the Securities were purchased or sold;
d. the reason(s) the individual sought an exception from the
requirements of Section 4;
e. the efforts the individual made to comply with the
requirements of Section 4 from which the individual sought
to be excepted; and
f. the independent basis upon which the Compliance Officer
believes that the exemption should be granted.
-15-
<PAGE>
(e) Any Employee or Access Person who acquires an interest in any private
investment fund (including a "hedge fund") or any other Security that
cannot be purchased and held in a Personal Account shall be excepted
from the requirement that all Securities be held in a Personal
Account, as described in Section 4(a) of this Code and Statement. Such
Employee or Access Person shall provide the Compliance Officer with a
written statement detailing the reason why such Security cannot be
purchased and held in a Personal Account. Transactions in these
Securities nevertheless remain subject to all other requirements of
this Code and Statement, including applicable private placement
procedures, preclearance requirements and blackout period trading
restrictions.
6. REPORTING
(a) DISCLOSURE OF PERSONAL ACCOUNTS AND BENEFICIALLY OWNED SECURITIES
Upon commencement of employment with a member of the Alliance
Group, an Employee must:
(i) file with the Compliance Officer a list of all Personal Accounts
by completing the Employee Compliance Statement (a copy of which
is attached as Appendix A), and while so employed maintain the
list on a current basis; and
(ii) Disclose to the Compliance Officer all Securities holdings in
which the Employee has any Beneficial Ownership, and thereafter
on an annual basis, to the extent these Securities do not appear
on the Employee's account statements.
(b) ACCESS PERSONS WHO ARE NOT EMPLOYEES OF ALLIANCE
Every Access Person who is not an Employee of Alliance, shall
report to the Compliance Officer the information described in Section
6(d) below with respect to transactions in any Security in which such
Access Person has, or by reason of such transaction acquires, any
Beneficial Ownership in the Security; provided, however, that such
Access Person is not required to make a report with respect to
transactions effected in any account over which the Access Person does
not have any direct or indirect influence or control, including such
an account in which an Access Person has any Beneficial Ownership.
(c) REPORT CONTENTS
Every report of a non-Employee Access Person required by Section
6(b) above shall be in writing and shall be delivered not later than
ten days after the end of the calendar quarter in which a transaction
to which the report relates was effected, and shall contain the
following information:
-16-
<PAGE>
(i) the date of the transaction, the title and the number of shares,
and the principal amount of each Security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) the price at which the transaction was effected; and
(iv) the name of the broker, dealer or bank with or through whom the
transaction was effected.
(d) REPORT REPRESENTATIONS
Any such report may contain a statement that the report is not to
be construed as an admission by the person making the report that he
or she has any direct or indirect Beneficial Ownership in the Security
to which the report relates.
(e) MAINTENANCE OF REPORTS
The Compliance Officer shall maintain the statements required by
paragraph (a) above, the reports required by paragraph (c) above and
such other records, if any, as are required by Rule 17j-1 under the
Investment Company Act and Rule 204-2 under the Advisers Act. All
reports furnished pursuant to this Section will be kept confidential,
subject to the rights of inspection by the Compliance Officer, the
Transaction Compliance Committee, the Securities and Exchange
Commission and by other third parties pursuant to applicable law.
7. ANNUAL VERIFICATIONS
Each person subject to this Code and Statement must certify annually
that he or she has read and understands this Code and Statement, recognizes
that he or she is subject thereto and has complied with its provisions and
disclosed or reported all personal Securities transactions required to be
disclosed or reported by this Code and Statement. Such certificates and
reports are to be given to the Compliance Officer.
-17-
<PAGE>
8. SANCTIONS
Upon learning of a violation of this Code and Statement, any member of
the Alliance Group, with the advice of the Compliance Officer, may impose
such sanctions as it deems appropriate, including, among other things,
censure, suspension or termination of service. Individuals subject to this
Code and Statement who fail to comply with this Code and Statement may also
be violating the federal securities laws or other federal and state laws.
Any such person who is suspected of violating this Code and Statement
should be reported immediately to the Compliance Officer.
-18-
<PAGE>
CERTIFICATION
I hereby acknowledge receipt of the Code of Ethics and Statement of
Policy and Procedures Regarding Personal Securities Transactions (the "Code and
Statement") of Alliance Capital Management L.P. and its Subsidiaries. I certify
that I have read and understand the Code and Statement and recognize that I am
subject to its provisions. I also certify that I have complied with the
requirements of the Code and Statement and have disclosed or reported all
personal securities transactions required to be disclosed or reported pursuant
to the Code and Statement.
Name _______________________________________
(please print)
Signature _______________________________________
Date _______________________________________
-19-
<PAGE>
APPENDIX A
ALLIANCE CAPITAL MANAGEMENT L.P.
EMPLOYEE COMPLIANCE STATEMENT
I hereby certify that I have read and understand the Code of
Ethics and Statement of Policy and Procedures Regarding Personal Securities
Transactions (the "Code and Statement"), dated August 1999 and hereby agree, in
consideration of my continued employment by Alliance Capital Management L.P. or
one of its subsidiaries, to comply with the policies and procedures contained in
the Code and Statement.
1. In connection therewith, I agree to:
a. file with the Compliance Officer and maintain on a current basis a
list of all Personal Accounts (as defined in paragraph 2(h) of the
Code and Statement);
b. arrange to have duplicate trade confirmations and periodic statements
for each Personal Account submitted to the Compliance Officer directly
by the securities firm maintaining the Account(s); and
c. be personally responsible for determining if any security transaction
for my Personal Account(s) is prohibited by the Code and Statement or
any other Alliance policy statement.
2. The following Personal Account(s) are maintained at the
broker-dealer(s) and/or financial institution(s) named below (if none
write "none"):
a. registered in my name at the following BROKER-DEALER(S) AND/OR
FINANCIAL INSTITUTION(S):
_____________________________________________________________________
_____________________________________________________________________
__________________________________________________________________
b. registered in the name of my spouse at the following BROKER-DEALER(S)
AND/OR FINANCIAL INSTITUTION(S):
_____________________________________________________________________
_____________________________________________________________________
__________________________________________________________________
-20-
<PAGE>
c. registered in the name of a family member who resides with me at the
following BROKER-DEALER(S) AND/OR FINANCIAL INSTITUTION(S):
name of family member name of broker-dealer and/or financial
institution(s)
________________________ _______________________________________
________________________ _______________________________________
________________________ _______________________________________
d. registered in the name of any other person who resides with me and is
financially dependent on me at the following BROKER-DEALER(S) AND/OR
FINANCIAL INSTITUTION(S):
name of person name of broker-dealer and/or financial
institution(s)
________________________ _______________________________________
________________________ _______________________________________
________________________ _______________________________________
e. registered in the name of any other person who does not reside with
me, but who is financially dependent on me, at the following
BROKER-DEALER(S) AND/OR FINANCIAL INSTITUTION(S):
name of person name of broker-dealer and/or financial
institution(s)
________________________ _______________________________________
________________________ _______________________________________
________________________ _______________________________________
3. I have investment discretion over the following other account(s) at the
following BROKER-DEALER(S) AND/OR FINANCIAL INSTITUTION(S) (do not list
Client accounts):
name and description of name of broker-dealer and/or financial
account institution(s)
_________________________ _______________________________________
_________________________ _______________________________________
_________________________ _______________________________________
4. I will notify the Compliance Officer if a Personal Account is opened or
closed. If the answers to paragraphs a through e of Section 2 above are
all "none", I certify that neither I nor any member of my family who
resides with me, any other person who resides with me currently and is
financially dependent on me, or any other person who is financially
dependent on me maintains a BROKERAGE ACCOUNT OR OTHER TYPE OF
FINANCIAL ACCOUNT.
- ----------------------- ---------------------------------
Date Employee Signature
---------------------------------
Type or print name
-21-
<PAGE>
Exhibit (p)(3)
1998 BANKERS TRUST CORPORATION
INTRODUCTION
This policy statement, Personal Securities Transactions by Employees, applies
worldwide to all employees of Bankers Trust Corporation and its subsidiaries
(referred to herein as "Bankers Trust" or the "Firm"). Along with the standards
provided in this booklet, you should be familiar with the contents of the Firm's
related policy statement Confidential Information, Insider Trading and Related
Matters.
As used in this Guide, "securities" transactions include those involving equity
or debt securities, derivatives of securities (such as options, warrants and
indexes), futures, commodities and similar instruments.
You should always conduct your personal trading activities lawfully, properly
and responsibly, and are encouraged to adopt long-term investment strategies
that are consistent with your financial resources and objectives. The Firm
generally discourages short-term trading strategies, and you are cautioned that
such strategies may inherently carry a higher risk of regulatory and other
scrutiny. In any event, excessive or inappropriate trading that interferes with
your job performance, or compromises the duty that Bankers Trust owes to its
clients and shareholders, will not be tolerated.
SUMMARY
This booklet is organized to help you comply with Bankers Trust policies and
procedures, and to protect you and the Firm from potential liability. In
summary, the section entitled:
o OPENING AND MAINTAINING EMPLOYEE RELATED ACCOUNTS describes the types of
accounts you must disclose to the Compliance Department upon joining the
Firm and your requirement to obtain explicit permission from the Compliance
Department prior to opening and maintaining Employee Related Accounts (as
defined);
o PRE-CLEARING TRANSACTIONS IN EMPLOYEE RELATED ACCOUNTS describes the
procedures you must follow to pre-clear your personal securities
transactions with the Compliance Department before you place any order with
your broker; and
o RESTRICTIONS REGARDING PERSONAL SECURITIES TRANSACTIONS describes certain
trading prohibitions and procedures you must observe to avoid violating the
Firm policies and various securities laws and regulations.
Questions about this policy and the matters discussed herein should be directed
to your Compliance Officer or to the Compliance Department at (212) 250-5812.
<PAGE>
OPENING AND MAINTAINING EMPLOYEE RELATED ACCOUNTS
1. The Basic Policy
All employees must obtain the explicit permission of the Compliance Department
prior to opening a new Employee Related Account (as defined below). Upon joining
Bankers Trust, new employees are required to disclose all of their Employee
Related Accounts to the Compliance Department and must carry out the
instructions provided to conform such accounts, if necessary, to the Firm's
policies.
Under no circumstance are you permitted to open or maintain any Employee Related
Account that is undisclosed to the Compliance Department. Also, the policies,
procedures and rules described throughout this Guide apply to all of your
Employee Related Accounts.
2. Employee Related Accounts Defined
"Employee Related Accounts" include all accounts in which you have an ownership
or beneficial interest (or can exercise investment discretion or control) and
have the capability of holding securities, or in which securities transactions
may be executed, even if the accounts are inactive. Employee Related Accounts
include:
o your own accounts;
o your spouse accounts and the accounts of your minor children and other
relatives (whether by marriage or otherwise) living in your home;
o accounts in which you, your spouse, your minor children or other relatives
living in your home have a beneficial interest; and
o accounts over which you or your spouse exercise investment discretion or
control.
Although they are securities in the technical sense, money market funds and
open-ended mutual funds held directly with the fund or its transfer agent are
not considered Employee Related Accounts for the purposes of applying the above
definition.
3. "Designated Broker" Rule
Depending on your Bankers Trust location, you may be required to open and
maintain your Employee Related Accounts with a "Designated Broker", which refers
to brokerage firms specifically identified by the Compliance Department for
employee use. Employee Related Accounts with the Designated Brokers must be
opened in accordance with local Compliance Department procedures.
Employees who wish to open and maintain an Employee Related Account in the
U.S. must do so with one of the following Designated Brokers:
o BT Alex. Brown Incorporated
o Quick & Reilly (Wall Street Office)
<PAGE>
o Salomon Smith Barney (the Rasweiler Group, New York)
Information about opening such an account can be obtained from the Compliance
Department at (212) 250-5812.
Employees assigned to Bankers Trust offices outside the U.S. are provided local
guidelines regarding Designated Brokers (and instructions about opening and
maintaining Employee Related Accounts) by Regional Compliance Groups for Asia,
Australia/New Zealand, Europe/Middle East/Africa and Latin America. You should
contact your Regional Compliance Officer if you have questions.
4. Waivers to the Designated Broker Rule
In very limited situations, the Compliance Department may grant you permission
to open or maintain an Employee Related Account at a brokerage firm other than a
Designated Broker. Generally, such permission is limited to the following types
of situations:
o your spouse or close relative, by reason of employment, is required by his
or her employer to maintain their brokerage accounts with a firm other than
a Designated Broker; or
o your Employee Related Account is maintained on a "discretionary" basis.
This means that full investment discretion has been granted to an outside
bank, investment manager or trustee, and neither you nor a close relative
participates in the investment decisions or is informed in advance
regarding transactions in the account.
An employee's request to the Compliance Department for an exemption to the
Designated Broker policy must be submitted in writing. If permission is granted,
duplicates of account statements and transaction confirmations must be provided
to the Compliance Department. Your continued eligibility for an exception to the
Designated Broker policy is periodically reviewed and evaluated and can be
revoked at any time.
NOTE -- Do not open an account with another brokerage firm until you receive
authorization to do so from the Compliance Department.
5. Monitoring Employee Related Accounts
To ensure adherence to Bankers Trust's policies, the Compliance Department
monitors transactions in Employee Related Accounts, whether they are maintained
with a Designated Broker or otherwise. If you violate the Firm's policies and
procedures as described herein, you may be required to cancel, reverse or freeze
any transaction or position in your Employee Related Account at your expense,
regardless of where the account is held. Such action may be required without
advance notice.
<PAGE>
PRE-CLEARING TRANSACTIONS IN EMPLOYEE RELATED ACCOUNTS
1. The Basic Policy
You must contact the Compliance Department to pre-clear all transactions
involving securities or their derivatives in your Employee Related Accounts
(other than transactions involving only U.S. Treasury securities or open-ended
mutual funds) prior to placing an order with your broker. You are personally
responsible for ensuring that your proposed transaction does not violate the
Firm's policies or applicable securities laws and regulations by virtue of your
Bankers Trust responsibilities or information you may possess about the
securities or their issuer.
2. Pre-Clearance Procedures
Proposed transactions in your Employee Related Accounts must be personally
pre-cleared with the Compliance Department. After providing the requested
information about the transaction, you will be informed whether you have been
granted permission to place the order with your broker which is valid for the
day given and the next business day. If permission is denied to proceed with the
proposed transaction, such denial is confidential and should not be disclosed to
others.
For employees assigned to Bankers Trust offices in the U.S. and Canada,
securities transactions can be pre-cleared by contacting the Compliance
Department at (212) 250-5812.
Employees assigned to Bankers Trust offices outside of the U.S. and Canada are
provided local guidelines and contacts for pre-clearing securities transactions
by Regional Compliance Groups for Asia, Australia/New Zealand, Europe/Middle
East/Africa and Latin America. You should contact your Regional Compliance
Officer if you have questions.
3. Additional Supervisory Pre-Clearance
Depending on your area of assignment, you may be subject to additional
departmental policies that require you to first pre-clear your proposed
securities transaction with your supervisor prior to requesting pre-clearance
from the Compliance Department. If you are assigned to one of the Bankers Trust
departments in which employees are subject to this requirement, you will be
informed of this fact when you contact the Compliance Department for
pre-clearance.
4. Private Securities Transactions
Investment transactions in private securities, such as limited partnerships or
the securities of private companies, are likely to be made directly with the
sponsor and not executed in your Employee Related Account. Prior to engaging in
a private securities transaction,
<PAGE>
you must first obtain the approval of your supervisor and then pre-clear the
transaction with the Compliance Department. Private securities transactions that
give rise to actual or apparent conflicts of interest are prohibited.
RESTRICTIONS REGARDING PERSONAL SECURITIES TRANSACTIONS
1. The Basic Policy
You have a personal obligation to conduct your investing activities and related
securities transactions lawfully and in a manner that avoids actual or potential
conflicts between your own interests and the interests of Bankers Trust and its
customers. You must carefully consider the nature of your Bankers Trust
responsibilities - and the type of information you might be deemed to possess in
light of any particular securities transaction - BEFORE you engage in that
transaction.
2. Material Nonpublic Information
If you possess material nonpublic information about or affecting securities, or
their issuer, you are prohibited from buying or selling such securities, or
advising any other person to buy or sell such securities.
3. Corporate and Departmental Restricted Lists
You are not permitted to buy or sell any securities that are included on the
Corporate Restricted List and/or other applicable departmental restricted lists.
4. "Frontrunning"
You are prohibited from engaging in "frontrunning", which means that you may not
buy or sell securities or other instruments for your Employee Related Accounts
so as to benefit from your knowledge of the Firm or a client's trading
positions, plans or strategies, or forthcoming research recommendations.
5. Employee Transactions in Bankers Trust Securities
Bankers Trust recognizes the special interest many employees have in investing
in the securities of Bankers Trust Corporation. Observe, however, that your
employment relationship with the Firm gives rise to special rules concerning
such transactions to avoid potential conflicts of interest.
a. Transactions Subject to Special Rules
Personal trading activity in Bankers Trust Corporation securities that are
subject to special rules are generally transactions that change your beneficial
ownership interest, such as:
o purchases, sales or other transactions in Employee Related Accounts;
o employee investment elections in Bankers Trust benefit plans, such as
investment elections affecting the Bankers Trust Common Stock Fund in the
PartnerShare Plan;
o exercise of Bankers Trust stock options granted as part of an employee's
compensation
<PAGE>
o optional cash purchases of common stock through Bankers Trust Dividend
Reinvestment and Common Stock Purchase Plan; and
o gifts or donations of Bankers Trust Corporation stock to charitable
organizations, relatives or others.
b. Special Rules
The following special rules apply to all transactions that change your
beneficial ownership interest in the securities of Bankers Trust Corporation:
o ALL employees must pre-clear transactions involving Bankers Trust
Corporation securities with Corporate Compliance in New York (212)
250-5812, even if assigned to an office outside the U.S. or Canada;
o Bankers Trust Corporation securities may not be pledged or used as
collateral for any loan except for a margin loan associated with an
Employee Related Account;
o any short sale of Bankers Trust Corporation securities is prohibited;
o any transaction that involves options or warrants referenced to Bankers
Trust Corporation securities, other than exercising stock options granted
under a Bankers Trust incentive compensation plan, is prohibited; and
o over-the-counter derivative transactions that are referenced to the value
of Bankers Trust Corporation securities are prohibited.
c. "Blackout" Periods
During certain times of the year, you are prohibited from conducting
transactions in Bankers Trust Corporation securities which affect your
beneficial interest in the Firm. These "blackout" periods surround the end of
each fiscal quarter or year and begin on the first day of each calendar quarter
and end 48 hours after public release of the financial reports for the quarter
or year.
Additional restricted periods may be required for certain individuals and
events, and you will be informed of whether such a restricted period is in
effect when you request pre-clearance of your proposed transaction involving
Bankers Trust Corporation securities. Any questions concerning whether you are
subject to additional restrictions should be directed to the Compliance
Department.
6. Avoiding Conflicts with Your Bankers Trust Job
Responsibilities
You are prohibited from buying, selling or holding positions in securities and
other instruments for your Employee Related Accounts that give rise to a
conflict of interest, or the appearance of conflict, between your personal
financial interests and your Bankers Trust job responsibilities.
<PAGE>
Following is a summary of the Firm's basic rules and procedures that are
designed to prevent actual or apparent conflicts of interest. If you believe a
proposed personal securities transaction may give rise to a potential conflict
of interest, or may not comply with the following rules and procedures, you
should resolve the matter with your Compliance Officer before placing the order.
A. SECURITIES IN COMPANIES WITH WHICH YOU HAVE SIGNIFICANT DEALINGS
You are prohibited from buying or selling, for your Employee Related Accounts,
securities of companies with which you have significant dealings on behalf of
Bankers Trust, or for which you have ongoing relationship management
responsibilities on behalf of the Firm. This rule applies to all employees who
have significant dealings with the customers, counterparties, suppliers or
vendors. Also, you are generally prohibited from acquiring an interest in any
private equity investment vehicle sponsored by such companies.
B. SECURITIES IN WHICH YOU HAVE TRADING OR TRADING-RELATED RESPONSIBILITIES
To prevent actual or apparent conflicts of interest, employees with "trading or
trading-related responsibilities" with respect to particular types of securities
or instruments may be limited or prohibited from buying or selling the same
types of securities or instruments for their Employee Related Accounts.
Employees have trading or trading-related responsibilities with respect to
particular types of securities or instruments if their duties:
o involve the Firm's proprietary dealing or investing activities (e.g., where
committing the Firm's capital may be involved); and
o are associated with the origination, structuring, trading, market making,
positioning, bookrunning, distribution, sales, research or analysis of
particular types of securities or instruments.
If you have trading or trading-related responsibilities for equity securities,
investment grade debt securities or U.S. Government, Government Agency or
municipal securities (including derivatives thereof), you are permitted to buy
or sell such securities for your Employee Related Accounts subject to compliance
with certain departmental guidelines that may require supervisory approval and
minimum holding periods.
If you have trading or trading-related responsibilities for non-investment grade
debt securities, commodities, futures, FX or other instruments (including
derivatives thereof), you are prohibited from buying or selling the same type of
securities or instruments for your Employee Related Accounts.
C. PORTFOLIO MANAGERS, INVESTMENT ADVISORY PROFESSIONALS AND ACCESS
Persons
If you are a portfolio manager, investment advisory professional or access
person associated with the asset or funds management businesses, you may be
subject to certain
<PAGE>
rules designed to prevent conflicts of interest. You can obtain more information
about these rules from your supervisor or the Compliance Department.
D. TRANSACTIONS SUBJECT TO MINIMUM HOLDING PERIODS
Securities bought or sold for your Employee Related Accounts may be subject to a
minimum holding period to address potential conflicts of interest. Examples of
the type of job functions and transactions that typically require a minimum
holding period include:
o equity securities bought or sold by an employee with proprietary equity
trading or trading-related responsibilities (60-day holding period);
o certain debt securities bought or sold by an employee with proprietary
trading or trading-related responsibilities for U.S. Government, Government
Agency, municipal or investment-grade corporate debt securities (60-day
holding period);
o securities bought or sold by an equity research analyst, falling within the
research analyst assigned industry group (up to a six-month holding
period); and
o securities bought or sold by employees assigned to most Bankers Trust
offices outside the U.S. (holding period varies by region).
E. ADDITIONAL INTERNATIONAL PROCEDURES
Regional Compliance Groups for Asia, Australia/New Zealand, Europe/Middle
East/Africa and Latin America may modify the procedures described in this
section to reflect local market practices and regulatory requirements. You
should contact your Regional Compliance Officer to obtain information about
local modifications, if any, to these requirements.
7. Initial Public Offerings and New Issues
For regulatory reasons, you are prohibited from purchasing or subscribing for
securities connected with an initial public offering or a new issue where a
U.S.-registered broker-dealer is involved in the distribution, or where any part
of the distribution is offered in the U.S. This prohibition applies even if
Bankers Trust has no role or involvement in the distribution.
For initial public offerings and new issues of securities of non-U.S. companies
distributed entirely outside of the U.S., employees assigned to international
offices of Bankers Trust may be permitted to purchase or subscribe for such
securities, provided that the appropriate Regional Compliance Group of the
Compliance Department approves such proposed transaction in advance. You should
contact your Regional Compliance Officer for local guidelines that apply.
<PAGE>
OTHER MATTERS
1. Waivers and Exceptions
Bankers Trust policies regarding personal securities transactions by employees
as described in this booklet is necessarily a general summary. In practice, some
situations may arise to warrant making exceptions to some general rules set
forth herein, and you must obtain approval from the Compliance Department before
taking action regarding such an exception.
2. Confirming Your Compliance with Policies
Annually, you are required to sign a statement as a Bankers Trust employee
acknowledging that you have received this supplement to the policy statement
Confidential Information, Insider Trading and Related Matters and confirm your
adherence to Bankers Trust's standards of conduct.
3. If You Have Questions
You should refer all questions concerning the interpretation or application of
these policies, the propriety of any particular conduct, or other
compliance-related matters to the Compliance Department.
NOTE -- ADHERING TO THE POLICIES AND STANDARDS OF CONDUCT DISCUSSED IN THIS
GUIDE IS ONE OF THE CONDITIONS OF EMPLOYMENT WITH BANKERS TRUST. FAILURE TO
COMPLY WITH THEM MAY SUBJECT YOU TO DISCIPLINARY ACTION, INCLUDING POSSIBLE
DISMISSAL. IN ADDITION, VIOLATION OF THE RULES DESCRIBED IN THIS GUIDE MAY ALSO
SUBJECT YOU TO POSSIBLE CIVIL OR CRIMINAL PENALTIES IN ACCORDANCE WITH THE
SECURITIES LAWS OR REGULATORY RULES APPLICABLE IN VARIOUS JURISDICTIONS.
<PAGE>
- ---------------------------------------------------------
Entered: 11/23/98 11:09:39 AM: Jessie Wolk
Revisions: 12/09/98 12:40:14 PM: Anne-Marie Pitale
12/03/98 12:07:31 PM: Sonia M Quinones
12/03/98 12:06:43 PM: Sonia M Quinones
12/03/98 12:04:47 PM: Sonia M Quinones
12/03/98 12:04:13 PM: Sonia M Quinones
-------------------------------------------------------------------------
Copyright
1998 Bankers Trust Company
All rights reserved. Although information herein has been obtained from sources
believed to be reliable, we do not guarantee its accuracy, completeness or
fairness. Opinions and estimates herein may be changed without notice. We or our
affiliates may act upon or use material in this report prior to publication.
<PAGE>
Exhibit (p)(4)
CODE OF ETHICS
INCLUDING:
STANDARDS OF CONDUCT OF
BROWN CAPITAL MANAGEMENT,
INC. AND ITS EMPLOYEES
STATEMENT OF POLICY ON
EMPLOYEE SECURITIES
TRANSACTIONS
AND STATEMENT OF POLICY ON
INSIDERTRADING
Adopted Effective February 10, 1994
(C) Copyright 1994, Brown Capital Management, Inc.,
All Rights Reserved
<PAGE>
CODE OF ETHICS
OF
BROWN CAPITAL MANAGEMENT, INC.
TABLE OF CONTENTS
TOPIC
GENERAL POLICY STATEMENT .................................................. 1
Purpose and Scope of Code of Ethics................................ 1
Who is Subject to the Code ........................................ 1
Brown Capital's Status as a Fiduciary ............................. 1
What the Code Does Not Cover ...................................... 1
Compliance with the Code .......................................... 2
Questions Regarding the Code
Administration of the Code...................................... 2
STATEMENT OF CONDUCT OF BROWN CAPITAL AND IITS EMPLOYEES.................... 3
Conflicts of Interest ............................................. 3
Relationships with Profitmaking Enterprises
Including Investment Clubs............................. 3
Service with Nonprofitmaking Enterprises.................. 4
Relationships with Financial Service Firms................ 4
Confidentiality.................................................... 4
Internal Operating Procedures and Planning................ 5
Clients and Brown Capital Mutual Fund
Shareholders.............................................. 5
Investment Advice......................................... 5
Investment Research....................................... 6
Illegal Payments................................................... 6
Policy Regarding Acceptance of Gifts and Gratuities................ 6
Gifts..................................................... 6
Entertainment............................................. 6
Research Trips..................................................... 7
Political Activities .............................................. 7
Protection of Corporate Assets..................................... 7
Quality of Services................................................ 7
Record Retention................................................... 7
Referral Fees...................................................... 8
Release of Information to the Press................................ 8
Responsibility to Report Violations................................ 8
Service as Trustee, Executor or
Personal Representative.......................................... 8
Speaking Engagements and Publications.............................. 8
Trading in Securities with Material, Non-Publ1c
Information ..................................................... 9
Understanding as to Client's Accounts and
Company Records at Time of Employee, Termination................. 9
STATEMENT OF POLICY ON EMPLOYEE SECURITIES TRANSACTIONS.....................10
STATEMENT OF POLICY ON INSIDER TRADING......................................21
<PAGE>
- -------------------------------------------------------------------------------
CODE OF ETHICS
OF
BROWN CAPITAL MANAGEMENT, INC.
GENERAL POLICY STATEMENT
- -------------------------------------------------------------------------------
Purpose and Scope of the Code of Ethics. In recognition of Brown Capital
Management, Inc.'s ("Brown Capital") commitment to maintain the highest
standards of professional conduct and ethics, the firm's Board of Directors has
adopted this Code of Ethics (the "Code") which composed of:
1. Standards of Conduct of Brown Capital Management, Inc. and Employees (the
"Standards of Conduct");
2. Statement Of Policy on Employee Securities Transactions (the "Employee
Securities Transactions Statement"); and
3. Statement of Policy on Insider Trading (the "Insider Trading Statement").
The purpose of this Code is to help preserve our most valuable asset - the
reputation of Brown Capital and its employees.
WHO IS SUBJECT TO THE CODE. Brown Capital, its officers, directors and employees
are all subject to the Code.
BROWN CAPITAL'S STATUS AS A FIDUCIARY. Simply stated, the primary responsibility
of Brown Capital as an investment adviser is to render to its clients on a
professional basis unbiased and continuous advice regarding their investments.
As an investment adviser, Brown Capital has a fiduciary relationship with all of
its clients, which means that it has an absolute duty of undivided 1oyalty,
fairness and good faith toward its clients and mutual fund shareholders and a
corresponding obligation to refrain from taking any action or seeking any
benefit for itself which would, or which would appear to, prejudice the rights
of any client or shareholder or conflict with his or her best interests.
WHAT THE CODE DOES NOT COVER. The Code was not written for the purpose of
covering all policies, rules and regulations to which Brown Capital personnel
may be subject. Rather it is intended only to address certain legal, ethical and
other related considerations which are unique to firms engaged in the
investment advisory business. Accordingly, Brown Capital reserves the right to
adopt in the future additional polices, regulations and guidelines to which its
employees will be subject.
<PAGE>
COMPLIANCE WITH THE CODE. Strict compliance with the provisions of the Code is
considered a basic condition of employment with the firm. An employee may be
required to surrender any profit realized from a transaction which is deemed to
be in violation of the Code. In addition, any breach of the Code may constitute
grounds for disciplinary action, including dismissal from employment.
QUESTIONS_REGARDING THE CODE; ADMINISTRATION OF THE CODE. All questions
regarding the Code should be directed to Brown Capital's Compliance Officer. In
situations requiring interpretation or any other ruling or determination
regarding the Code, the Compliance Officer will consult with, or refer the
matter to, the Ethics Committee of Brown Capital's Board of Directors. The
Ethics Committee may, in the exercise of its discretion, refer issues arising
under the Code to the full Brown Capital Board of Directors. Any determination
regarding the Code made by the Ethics Committee or the Board of Directors, as
the case may be, shall be final, binding and conclusive for all purposes of
every nature, kind and description whatsoever.
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STATEMENT OF CONDUCT
OF
BROWN CAPITAL AND ITS EMPLOYEES
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CONFLICTS OF INTEREST. Brown Capital has a fiduciary relationship with all of
its clients, which means that it has an absolute duty, of undivided loyalty,
fairness and good faith toward its clients and mutual fund shareholders. This
duty imposes an obligation on all Brown Capital personnel to refrain from taking
any action or seeking any benefit for itself which would, or which would appear
to, prejudice the rights of any client or shareholder or conflict with his or
her best interests. As an employee of Brown Capital, you are expected to conduct
all of your affairs in a manner which serves to promote and enhance the
reputation of Brown Capital. While achieving this result usually involves no
more than the exercise of good judgment, set forth, below Is a discussion of
some of the guidelines Brown Capital expects you to follow (the "Statement of
Conduct").
Relationships with Profitmaking Enterprises, - Including Investment
Clubs. A conflict may occur when an employee of Brown Capital is also
employed by another firm, directly or as a consultant; has a direct
financial interest in another firm; has an immediate family financial
interest in another firm; or, is a director, officer or partner of
another firm.
Employees of our firm sometimes serve as directors, officers, partners,
or in other capacities with profitmaking enterprises not related to
Brown Capital or its mutual funds. Employees are generally prohibited
from serving as officers or directors of corporations which are
approved or are likely to be approved for purchase in our firm's client
accounts.
An employee who is contemplating obtaining an interest that might
conflict or appear to conflict with the interests of Brown Capital,
such as accepting an appointment as a director, officer or partner of
an outside profitmaking enterprise or forming or participating in a
stock or investment club, must receive the prior approval of the
Compliance Officer. Upon review by the Compliance Officer, the employee
will be advised of the decision. In addition, transactions through
investment clubs are subject to the firm's Employee Securities
Transactions Statement. Decisions by the Compliance Officer regarding
outside directorships in profitmaking enterprises will be reviewed by
the Ethics Committee before becoming final. Outside business interests
that will not conflict or appear to conflict with the interests of the
firm need not be reviewed by the Compliance Officer, but must be
approved by the employee's supervisor.
Certain employees may serve as directors or as members of committees of
the Board of Directors or in similar positions for non-public,
for-profit entities in connection with their professional activities at
Brown Capital. An employee must obtain the permission of the Compliance
Officer before accepting such a position and must relinquish the
position if the entity becomes publicly held, unless otherwise
determined by the Ethics Committee.
<PAGE>
Service with Nonprofitmaking Enterprises. Brown Capital encourages its
employees to become involved in community programs and civic affairs.
However, employees should not permit such activities to affect the
performance of their job responsibilities. Approval by the Compliance
Officer must be obtained before an employee accepts a position as a
trustee or member of the Board of Directors of any non-profit
organization.
Relationships with Financial Service Firms. In order to avoid any
actual or apparent conflicts of interest, employees are prohibited from
investing in or entering into any relationship, either directly or
indirectly, with corporations, partnerships, or other entities which
are engaged in business as a broker, a dealer, an underwriter, and/or
an investment adviser. This, however, is not meant to prevent employees
from purchasing publicly traded securities of broker/dealers,
investment advisers or other companies engaged in the mutual fund
industry. Of course, all such purchases are subject to normal prior
clearance and reporting procedures, set forth elsewhere in this Code.
This policy does not preclude an employee from engaging an outside
investment adviser to manage his or her assets.
If any member of an employees immediate family is employed by, has a
partnership interest in, or has an equity interest of 0.5% or more in a
broker/dealer, investment adviser or other company engaged in the
mutual fund industry, such relationship must be reported to the
Compliance Officer.
CONFIDENTIALITY. The exercise of confidentiality extends to four major areas of
our operations: internal operating procedures and planning; clients and mutual
fund shareholders; investment advice; and investment research.
<PAGE>
Internal Operating Procedures and Planning. During the years we have been in
business, a great deal of creative talent has been used to develop specialized
and unique methods of operations and portfolio management. In many cases, we
feel these methods give us an advantage over our competitors, and we do not want
these ideas disseminated outside our firm. Accordingly, employees should be
guarded in discussing our business practices with outsiders. Any requests from
outsiders for specific information of this type should be cleared with your
supervisor before it is released.
Clients and Brown Capital Mutual Fund Shareholders. In many instances, when
clients subscribe to our services, we ask them to disclose fully their financial
status and needs. This is done only after we have assured them that every member
of our organization will hold this information in the strictest of confidences.
It is essential that we respect and honor their trust. A simple rule for
employees to follow is that the names of our clients or fund shareholders or any
information pertaining to, their investments must never be divulged to anyone
outside the firm, not even to members of their immediate families.
Investment Advice. Because of the fine reputation our firm enjoys, there is a
great deal of public interest in what we are doing in the market. There are two
major considerations that dictate why we must not provide investment "tips":
o From the point of view of our clients, it is not fair to give other people
information which clients must purchase.
o From the point of view of the firm, it is not desirable to create an
outside demand for a stock when, we are trying to buy it for our clients,
as this will only serve to push the price up. The reverse is true if we are
selling.
In light of these considerations, employees must never disclose to outsiders our
buy and sell recommendations, securities we are considering for future
investment, or the portfolio holdings of our clients or mutual funds.
The practice of giving investment advice informally to members of your immediate
family should be restricted to very close relatives. Any transactions resulting
from such advice are subject to the prior approval and reporting requirements of
the Securities Transactions Statement. Under no circumstances should an employee
receive compensation directly or indirectly (other than from Brown Capital) for
rendering advice to either clients or nonclients.
INVESTMENT RESEARCH. Any report circulated by a research analyst with the word
"confidential" stamped on the first page is confidential in its entirety and
should not be reproduced or shown to anyone outside of our organization, except
our clients where appropriate.
Employees must use care in disposing of any confidential records or
correspondence. Confidential material that is to be discarded should be
destroyed and disposed of properly.
<PAGE>
ILLEGAL PAYMENTS. State, federal and foreign laws prohibit the payment of
bribes, kickbacks or other illegal gratuities or payments by or on behalf of
Brown Capital. Brown Capital, through its policies and practices, is committed
to comply fully with these laws.
POLICY REGARDING ACCEPTANCE OF GIFTS AND GRATUITIES. The firm, as well as its
employees and members of their families, should not accept gifts, gratuities or
other accommodations from business contacts, brokers, securities salespersons,
approved companies, suppliers, clients, or any other individual or organization
with whom our firm has a business relationship which might in any way create or
appear to create a conflict of interest or interfere with the impartial
discharge of our responsibilities to clients or place our firm in a difficult or
embarrassing position.
Gifts. Personal contacts may lead to gifts which are offered on a
friendship basis and may be perfectly proper. It must be remembered,
however, that business relationships cannot always be separated from
personal relationships and that the integrity of a business
relationship is always susceptible to criticism in hindsight where
gifts are made or received.
Under no circumstances may employees accept gifts, from business
contacts in the form of cash or cash equivalents. There may be an
occasion where it might be awkward to refuse a token expression of
appreciation given in the spirit of friendship. In such cases, the
value should not exceed $100 from any one source in any given 12-month
period. Gifts received which are unacceptable according to this policy
must be returned to the donors.
Entertainment. Our firm's $100 limit on gifts set forth above not only
applies to gifts of merchandise, but also covers the enjoyment or use
of property or facilities for weekends, vacations, trips, dinners, and
the like. However this limitation does not apply to dinners, sporting
events and other activities which are a normal part of a business
relationship.
RESEARCH TRIPS. Attendance at any and all research conferences, tours of
portfolio companies facilities, or meetings with the management of such
companies, and all arrangements and understandings regarding the payment of any
and all travel, lodging, food and any other related expenses must be approved in
advance by the Compliance Officer.
POLITICAL ACTIVITIES. Employees are encouraged to participate and vote in all
federal, state and local elections. No political contribution of corporate
funds, direct or indirect, to any political candidate or party, or to any other
organization that might use the contribution for a political candidate or party,
or use of corporate property, services or other assets may be made without the
written approval of the Compliance Officer. These prohibitions cover not only
direct contributions but also indirect assistance or support of candidates or
political parties through purchase of tickets to special dinners or other fund
raising events, or the furnishing of any other goods, services or equipment to
political parties or committees.
PROTECTION OF CORPORATE ASSETS. All employees are responsible for taking
measures to insure that Brown Capital's assets are properly protected. This
responsibility not only applies to our
<PAGE>
business facilities, equipment and supplies, but also to intangible assets such
as: proprietary research or marketing information; corporate trademarks and
servicemarks; and copyrights.
QUALITY OF SERVICES. It is a continuing policy of Brown Capital to provide
investment products and services which: (1) meet applicable laws, regulations
and industry standards; (2) are offered to the public in a manner which insures
that each client/shareholder understands the objectives of each investment
product selected; and (3) are properly advertised and sold in accordance with
all Securities and Exchange Commission (the "SEC"), state and other applicable
rules and regulations.
The quality of Brown Capital's investment products and services and operations
enhances our reputation, productivity, profitability and market position. Brown
Capital's goal is to be a quality leader and to create conditions that allow and
encourage all employees to perform their duties in. an efficient, effective
manner.
RECORD RETENTION. Under various federal and state laws and regulations, Brown
Capital is required to produce, maintain and retain various records, documents
and other written communications. Each employee is responsible for adhering to
Brown Capital's record maintenance and retention policies.
REFERRAL FEES. Federal securities laws strictly prohibit the payment of any type
of referral fee unless certain conditions are met. This would include any
compensation to persons who refer clients or shareholders to us (e.g., brokers,
registered representatives or any other persons) either directly in cash, by fee
splitting, or indirectly by the providing of gifts or services (including the
allocation of brokerage). No arrangements should be entered into obligating
Brown Capital or any employee to pay a referral fee unless approved by the
Compliance Officer.
RELEASE OF INFORMATION TO THE PRESS. All requests for information from the media
concerning Brown Capital's corporate affairs, mutual funds, investment services,
investment philosophy and policies, and related subjects should be referred to
the Compliance Officer for reply. Investment, professionals who are contacted
directly by the press concerning a particular fund's investment strategy or
market outlook may use their own discretion, but are advised to check with the
Compliance Officer if they do not know the reporter or feel it may be
inappropriate to comment on a particular matter.
RESPONSIBILITY TO REPORT VIOLATIONS. Every employee who becomes aware of a
violation of this Code is encouraged to report, on a confidential basis, the
violation to his or her supervisor it is Brown Capital's policy that no adverse
action will be taken against any employee who reports a violation in good faith.
If the supervisor appears to be involved in the wrongdoing, the report should be
made to the Compliance Officer.
SERVICE AS TRUSTEE, EXECUTOR OR PERSONAL REPRESENTATIVE. Employees may serve as
trustees, co-trustees, executors or personal representatives for the estates of
or trusts created by close family members. Employees may also serve in such
capacities for estates or trusts created by nonfamily members. However, if an
employee expects to be actively involved in an investment
<PAGE>
capacity in connection with an estate or trust created by a nonfamily member, he
or she must first be granted permission by the Compliance Officer. If an
employee serves in any of these capacities, securities transactions effected in
such accounts will be subject to the prior approval and reporting requirements
of our Securities Transactions Statement.
SPEAKING ENGAGEMENTS AND PUBLICATIONS. Employees are often asked to accept
speaking engagements on the subject of investments, finance, or their own
particular specialty with our organization. This is encouraged by the firm, as
it enhances our public relations, but you should obtain approval from your
supervisor before you accept such requests. Before making any commitment to
write or publish any article or book on a subject related to investments or your
work at Brown Capital, approval should be obtained from your supervisor.
TRADING IN SECURITIES WITH MATERIAL, NON-PUBLIC INFORMATION. The purchase or
sale of securities while in possession of material, non-public information is
strictly prohibited by state and federal laws. Information is considered inside
and material if it has not been publicly disclosed and is sufficiently important
that it may be reasonably expected to affect the decision of a reasonable person
to buy, sell or hold stock in a company. Under no circumstances may an employee
transmit such information to any other person, except to other employees who are
required to be kept informed on the subject. All employees should read carefully
and understand fully the Insider Trading Statement included elsewhere in this
Code.
UNDERSTANDING AS TO CLIENTS' ACCOUNTS AND COMPANY RECORDS AT TIME OF EMPLOVEE
TERMINATION. The accounts and all related records, materials and other
information of every nature kind and description and in any form or medium
whatsoever of both clients and mutual fund shareholders are the sole property of
Brown Capital. This applies to all clients for whom Brown Capital acts as
investment adviser, regardless of how or through whom the client relationship
originated and regardless of who may be the counselor for a particular client.
Except as may otherwise expressly be agreed to in writing at the time of any
termination whatsoever of employment with Brown Capital, an employee must: (1)
surrender to Brown Capital in good condition any and all materials, reports or
records (including all copies in his possession or subject to his control)
developed by him or any other person which are considered confidential
information of Brown Capital (except copies of any research material in the
production of which the employee participated to a material extent); and (2)
refrain from communicating, transmitting or making known to any person or firm
any information relating to any materials or matters whatsoever which are
considered by Brown Capital to be confidential.
<PAGE>
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STATEMENT OF POLICY
ON
EMPLOYEE SECURITIES TRANSACTIONS
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BACKGROUND INFORMATION
LEGAL REQUIREMENT. In accordance with the requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), the Investment Company Act of 1940
(the "Company Act"), the Investment Advisers Act of 1940 (the "Advisers Act"),
and the Insider Trading and Securities Fraud Enforcement Act of 1988 (the
"Enforcement Act"), Brown Capital has adopted this Statement of Policy on
Employee Securities Transactions (the "Securities Transactions Statement").
BROWN CAPITAL'S FIDUCIARY POSITION. As an investment adviser, Brown Capital is
in a fiduciary position which requires it to act with an eye only to the benefit
of its clients, avoiding those situations which might place, or appear to place,
the interests of Brown Capital or its employees in conflict with the interests
of clients.
PURPOSE OF SECURITIES TRANSACTIONS STATEMENT. The Securities Transactions
Statement was developed to help guide Brown Capital and its employees in the
conduct of their personal investments and in order to: (i) prevent, as well as
detect, the misuse of material, non-public information; (ii) eliminate the
possibility of a transaction occurring that the SEC or other regulatory bodies
would view as illegal; and (iii) avoid situations where it might appear that
Brown Capital or any of its officers, directors or employees had personally
benefited at the expense of a client or fund shareholder. Employees are urged to
consider the reasons for the adoption of this Securities Transactions Statement.
Brown Capital's reputation could be adversely affected as the result of even a
single transaction considered questionable in light of the fiduciary duty Brown
Capital owes to its clients.
In order to achieve the goals set forth above, this Securities Transactions
Statement contains two broad requirements: (l) subject to limited stated
exceptions, all securities transactions must receive prior clearance from the
Compliance Officer; and (2) all securities transactions must be promptly
reported in writing to the Compliance Officer.
<PAGE>
QUESTIONS ABOUT THE SECURITIES TRANSACTIONS STATEMENT. Employees are urged to
seek the advice of the Compliance Officer when they have questions as to the
application of this Securities Transactions Statement to their individual
circumstances.
PERSONS SUBJECT TO SECURITIES TRANSACTIONS STATEMENT. The provisions of this
Securities Transactions Statement (including the prior clearance and reporting
requirements) apply to:
Brown Capital Personnel. Each officer, inside director and employee of
Brown Capital and its subsidiaries.
Retired Brown Capital Employees. Retired employees of Brown Capital who
continue to receive investment research information from Brown Capital.
Independent Directors of Brown Capital. Directors of Brown Capital who
are neither officers nor employees of Brown Capital. However, they are
subject to modified reporting requirements and are exempt from prior
clearance requirements.
TRANSACTIONS SUBJECT TO SECURITIES TRANSACTIONS STATEMENT. Except as provided
below, the provisions of this Securities Transactions Statement apply to every
securities transaction in which an employee has, or by reason of the transaction
may acquire, any direct or indirect beneficial ownership interest and over which
transaction the employee has direct or indirect control. This includes a right
to dividends that is separated or separable from the underlying securities (but
not merely the right to dividends alone), and the right to acquire equity
securities through the exercise or conversion of any derivative security,
whether or not presently exercisable.
The concept, of "beneficial ownership" is key. Generally, an employee is
considered to have beneficial ownership in securities:
o held in his or her name;
o held in the name of a member of the employee's immediate family who
resides with the employee;.
o held by a trust for which the employee acts as, a trustee; if at
least one trust beneficiary is a member of the employee's immediate
family;
o held by a trust of which the employee is a beneficiary where the
trustee does not exercise exclusive investment control;
o held by a general or limited partnership of which the employee is a
general partner;
<PAGE>
o held by a general or limited partnership of which the employee is a
limited partner, if he or she has some control over portfolio
securities held by the partnership; and
o held by any entity or person (including partnership, corporation or
trust) if the employee makes the investment decisions for that
entity or person.
If an employee is involved in an investment account for a family situation,
trust, partnership, corporation, etc., which the employee feels should not be
subject to the Securities Transactions Statement's prior approval or reporting
requirements, a request for clarification or exemption may be submitted to the
Compliance Officer. An example of this type of situation is where a person has a
direct or indirect beneficial interest in an account, but over which the person
has no direct or indirect control in the investment management process. Any such
request for clarification or exemption should name the account, the interest of
the employee in such account, the persons or firms responsible for its
management, and the basis upon which the exemption is being claimed.
PRIOR CLEARANCE OF SECURITIES TRANSACTIONS. Except as provided below, employees
are required to obtaining prior clearance before directly or indirectly
initiating, recommending, or in any way participating in, the purchase or sale
of a security in which the employee has, or by reason of such transaction may
acquire, any beneficial interest. Prior clearance must be obtained without
regard to the manner in which the transaction is effected. Receiving prior
clearance does not relieve employees from conducting their personal securities
transactions in full compliance with the Code, including its prohibition on
trading while in possession of material, non-public information, and with
applicable law, including the prohibition on "front running".
If an employee, has been denied prior clearance he or she may apply to the
Ethics Committee for a waiver. All such requests must be in writing and must
fully describe the basis upon which the waiver is being requested.
From time to time the Compliance officer may circulate a list of companies (the
"Restricted List") in which Brown Capital, its employees and clients are
prohibited from investing due to the fact that Brown Capital possesses material,
non-public information concerning such companies. Such list is provided merely
to alert Brown Capital personnel of the identity of such companies as a
pre-emptive matter and in no way relieves the separate and independent duty of
Brown Capital personnel to obtain clearance from the Compliance Officer for all
securities transactions. See the Insider Trading Statement appearing elsewhere
in this Code.
Transactions Exempt From Prior Clearance Requirements. All securities
transactions must receive prior clearance except the following:
o OPEN-END MUTUAL FUNDS. Purchases or redemptions of shares of any
open-end investment companies, including any shares of the Brown
Capital Mutual Funds.
<PAGE>
o U.S. GOVERNMENT OBLIGATIONS. Purchases or sales of direct
obligations of the U.S. Government.
o PRO RATA DISTRIBUTIONS. Purchases effected by the exercise of rights
issued pro rata to all holders of a class of securities or the sale
of rights so received.
o MANDATORY TENDERS. Purchases and sales of securities pursuant to a
mandatory tender offer.
o PAYROLL DEDUCTION PLANS. Purchases by an employee's spouse pursuant
to a payroll deduction plan, provided the Compliance Officer is
notified by the employee that the spouse is participating in the
payroll deduction plan.
o EXERCISE OF STOCK OPTION OF CORPORATE EMPLOYER BY SPOUSE.
Transactions involving the exercise by an employee's spouse of a
stock option issued by the corporation employing the spouse.
o SYSTEMATIC INVESTMENT PLANS. Purchases effected through a systematic
investment plan involving the automatic investment of a set dollar
amount on predetermined dates, provided the Compliance Officer is
notified by the Employee that he or she is participating In the
plan.
o GIFTS. The giving of or receipt of as a security as a gift.
Procedure for Obtaining Prior Clearance. Requests for prior clearance
may be made orally or in writing to the Compliance Officer, which will
be responsible for processing and maintaining the records of all such
requests. All requests must indicate the name of the security, the
number of shares or amount of bond involved, whether a foreign security
is involved, and the nature of the transaction, i.e., whether the
transaction is a purchase, sale or short sale. Responses to all requests
will be made by the Compliance Officer on a standard form documenting
the request and its approval/disapproval. The requesting employee will
receive the original of the form for record keeping purposes.
Requests will normally be processed on the same day; however, additional
time may be required for prior clearance of transactions in foreign
securities.
Effectiveness of Prior Clearance. Prior clearance of a securities
transaction is effective for three (3) business days from and including
the date the clearance is granted. If the proposed securities
transaction is not executed within this time, a new clearance must be
obtained.
Reasons for Disallowing Proposed Transactions. A proposed security
transaction will be disapproved if:
<PAGE>
PENDING CLIENT ORDERS. Orders have been placed by Brown Capital to
purchase or sell the security and the market price of the security is
within 10% of the order price to purchase or sell.
PURCHASES AND SALES WITHIN TWO (2) BUSINESS DAYS. The security has been
purchased or sold by any client of Brown Capital within two (2) business
days immediately prior to the date of the proposed transaction. If all
clients have eliminated their holdings in a particular security, the
2-day restriction is not applicable to an employee's transactions in the
security.
PURCHASES AND/OR SALES BEING CONSIDERED. The security is being actively
considered for purchase or sale for the account of a client of Brown
Capital even though no order has been placed.
SECURITIES SUBJECT TO INTERNAL TRADING RESTRICTIONS. The securities
limited or restricted by Brown Capital as to purchase or sale for client
accounts.
DUPLICATE BROKERAGE CONFIRMATIONS. All employees and inside directors must send
a duplicate confirmation with respect to each and every transaction to the
attention of Compliance Officer, Brown Capital Management, Inc., 809 Cathedral
Street, Baltimore, Maryland 21201.
NOTIFICATION OF BROKER/DEALER ACCOUNTS. All Brown Capital personnel are required
to take the following steps in connection with securities accounts maintained
with any broker/dealer:
o Give written notice to Brown Capital before opening or trading in a
securities account with another broker/dealer.
o Obtain approval from Brown Capital before such an account is opened
or an initial trade is made.
o Provide the broker/dealer with written notice of his or her
association with Brown Capital.
REPORTING REQUIREMENTS FOR EMPLOYEES.
Transactions That Must Be Reported. Other than the transactions
specified below as exempt, employees and inside directors are required
to file with the Compliance Officer a report of the following securities
transactions:
CLEARED TRANSACTIONS. Any transaction that is subject to the prior
clearance requirements.
<PAGE>
BROWN CAPITAL MUTUAL FUNDS. The purchase or redemption of shares of
Brown Capital Mutual Funds in accounts where notification has not
been given to the Compliance Officer of the employee's ownership
interest in that account, the account registration and the account
number.
INHERITANCE. Acquisition of securities through, inheritance.
GIFTS. Acquisition or disposition of securities by gift.
MANDATORY TENDERS. Purchases and sales of securities pursuant to a
mandatory tender offer.
PAYROLL DEDUCTION PLANS/SPOUSAL STOCK OPTION. Transactions involving
the purchase or exchange of securities by an employee's spouse
pursuant to a payroll deduction plan or the exercise by an
employee's spouse of a stock option issued by the spouse's employer.
Reporting of these transactions need only be made annually.
SYSTEMATIC INVESTMENT PLANS. Transactions involving the purchase of
securities by an Employee pursuant to a systematic investment plan.
Reporting of these transactions need only be made annually.
Transactions Exempt From Reporting. The following transactions are
exempt from the reporting requirements:
MONEY MARKET MUTUAL FUNDS. Purchases or redemptions of shares of any
and all money market mutual funds.
NON-BROWN CAPITAL MUTUAL FUNDS. The purchase or redemption of shares
of mutual funds other than Brown Capital Mutual Funds.
BROWN CAPITAL MUTUAL FUNDS. Purchases or redemptions of shares of
the Brown Capital Mutual Funds in any account, provided that the
employee has notified the Compliance Officer in writing of his or
her interest in such account, giving the account registration and
number.
STOCK SPLITS, DIVIDENDS AND SIMILAR ACQUISITIONS. The acquisition of
additional shares of existing corporate holdings through the
reinvestment of income dividends and capital gains in mutual funds,
stock splits, stock dividends, exercise of rights, exchange or
conversion.
U.S. GOVERNMENT OBLIGATIONS. Purchases or redemptions of direct
obligations of the U.S. Government.
<PAGE>
ReportForms. Reports should be made on the form designated "Brown
Capital Management, Inc. Employee's Report of Securities Transactions,"
which is available from the Compliance Officer.
When Reports are Due. A securities transaction must be reported within
ten (10) days after the date on which the employee first gains knowledge
of the transaction, except that the reporting of transactions involving
the purchase of securities by an employee's spouse pursuant to a payroll
deduction plan may be reported annually.
REPORTING REQUIREMENTS OF THE INDEPENDENT DIRECTORS OF BROWN CAPITAL. The
independent directors of Brown Capital are subject to the same reporting
requirements as employees except that reports need only be filed quarterly.
Specifically: (1) a report, for each securities transaction must be filed with
the Compliance Officer no later than ten (10) days after the end of the calendar
quarter in which the transaction was effected; (2) a report must be filed for
each quarter, regardless of whether there have been any reportable transactions.
<PAGE>
MISCELLANEOUS RULES REGARDING PERSONAL SECURITIES TRANSACTIONS
Without limiting the pre-clearance and reporting requirements regarding
securities transactions set forth above, the following provisions address
special situations which warrant additional requirements:
Dealing with Clients. Employees may not, directly or indirectly, sell
to or purchase from a client any security. This prohibition does not
preclude employees from purchasing and redeeming shares from any mutual
fund that is a client of Brown Capital.
Large Company Exemption. Although subject to prior clearance,
transactions involving shares in certain large companies, within the
parameters set by the Compliance Officer and Ethics Committee, will be
approved under normal circumstances. This exemption applies to
transactions involving no more than $10,000 per security per week in
securities of companies with market capitalizations of $5 billion or
more. In the case of options, an employee may purchase or sell the
greater of 5 contracts or sufficient option contracts to control
$10,000 in the underlying security. These parameters are subject to
change by the Compliance Officer and Ethics Committee.
Margin Accounts. While brokerage margin accounts are discouraged,
employees may open and maintain margin accounts for the purchase of
securities provided such accounts are with brokerage firms with which
the employee maintains a regular brokerage account.
New Issues. Employees may purchase securities which are the subject of
an underwritten new or secondary issue only if first approved by the
Compliance Officer. In making its decision, the Compliance Officer will
determine whether the proposed transaction presents a conflict of
interest with any of the firm's clients or otherwise violates the Code.
The Compliance Officer will also determine whether the following
conditions have been met:
1. The purchase is made through the employee's regular broker;
2. The number of shares to be purchased is commensurate with the
normal size and activity of the employee's account;
3. The transaction otherwise meets the requirement of the NASD's
rules on "free riding" and withholding.
An employee will not be permitted to purchase in an underwritten new
or secondary issue or in the aftermarket for the first five (5)
trading days following that issue if the issue involved an affiliate
of the firm.
Investment Clubs. An employee may not form or participate in a stock or
investment club unless prior written approval has been obtained from the
Compliance Officer. All
<PAGE>
transactions by such a stock or investment club are subject to the same
pre-clearance and reporting requirements applicable to an individual
employee's trades. Private Placements. Employees may not invest in a
private placement of securities, including the purchase of limited
partnership interests, unless prior written approval has been obtained
from the Compliance Officer.
Options and Futures.
Options and Futures on Securities and Indices Not Held By Brown
Capital's Clients. There are no specific restrictions with
respect to the purchase, sale or writing of put or call options
or any other option, or futures activity, such as multiple
writings, spreads and straddles, on securities of companies (and
options or futures on such securities) which are not held by any
of Brown Capital's clients.
Select Options on Securities of Companies Held by Brown
Capital's Clients. With respect to options on securities of
companies which are held by any of Brown Capital's clients,
employees may: (i) purchase call options and sell covered call
options and (ii) purchase covered put options and sell put
options. In addition an employee may purchase uncovered put
options or sell uncovered call options if purchased in
connection with other options on the same security as part of a
straddle, combination or spread strategy which is designed to
result in a profit to the employee if the underlying security
rises in or does not change in value. The purchase, sale and
exercise of options are subject to the same restrictions as
those set forth with respect to securities, i.e., the option
should be treated as if it were the common stock itself.
ALL OTHER OPTIONS AND FUTURES HELD BY BROWN CAPITAL'S CLIENTS.
Any other option or futures transaction with respect to
securities held by any of Brown Capital is clients will be
approved or disapproved on a case-by-case basis after due
consideration is given as to whether the proposed transaction or
series of transactions might appear to or actually create a
conflict with the interests of any of Brown Capital's clients.
Such transactions include transactions in futures and options on
futures involving financial instruments regulated solely by the
CFTC.
Short Sales. Employees may not sell any security short which is owned by
any client of Brown Capital, except that short sales may be made
"against the box" for tax purposes.
Trading Activity. Employees are discouraged from engaging in a pattern
of securities transactions which are either:
1. So excessively frequent as to potentially impact an
employee's ability to carry out his or her assigned
responsibilities; or
2. Involve securities positions which are disproportionate to
or inappropriate for the employee's net assets and financial
condition.
<PAGE>
OWNERSHIP REPORTING REQUIREMENTS - 0.5% OWNERSHIP. If an employee owns more than
1/2 of 1% of the total outstanding shares of a public company (or any company
anticipating a public offering of an equity security), he or she must
immediately report in writing such fact to the Compliance Officer, providing the
name of the publicly owned company and the total number of such company's shares
beneficially owned.
CONFIDENTIALITY OF RECORDS. Brown Capital makes every effort to protect the
privacy of its employees in connection with ownership and personal securities
transaction reports.
SANCTIONS. Strict compliance with the provisions of this Securities Transactions
Statement is considered a basic provision of association with Brown Capital. The
Compliance Officer is responsible for administering this Securities Transactions
Statement. In fulfilling this function, the Compliance Officer will institute
such written procedures as it deems reasonably necessary to monitor employees
compliance with this Securities Transactions Statement and to otherwise prevent
and detect violations. Upon discovering a material violation of this Securities
Transactions Statement, the Compliance Officer may impose such sanctions as it
deems appropriate and as are approved by the Board of Directors including, among
other things, a letter of censure or suspension or termination of employment,
and/or officership of the violator. In addition, the violator may be required to
surrender to Brown Capital, or to the party or parties it may designate, any
profit realized from any transaction which is in violation of this Securities
Transactions Statement. All material violations of this Securities Transactions
Statement and any sanctions imposed with respect thereto shall be reported to
the Board of Directors of Brown Capital and to the Board of Directors of any
Brown Capital Mutual Fund with respect to whose securities such violations may
have been involved.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF POLICY
ON
INSIDER TRADING
- --------------------------------------------------------------------------------
INTRODUCTION. In recent years, "insider trading" has become a top enforcement
priority of the SEC. In 1988, the Insider Trading and Securities Fraud
Enforcement Act. (the "Enforcement Act") was signed into law. The Enforcement
Act has had a far reaching impact on all public companies and especially those
engaged in the securities brokerage or investment advisory industries, including
directors, executive officers and other controlling persons of such companies.
While the Enforcement Act does not provide a statutory definition of "insider
trading," it contains major changes to the previous law. Specifically, the
Enforcement Act:
Written Procedures. Adds new sections to federal securities laws to
require SEC registered brokers, dealers and investment advisers to
establish, maintain and enforce written policies and procedures
reasonably designed to prevent the misuse of material, non-public
information by such persons.
Civil Penalties. Imposes severe civil penalties on brokerage firms,
investment advisers, their management and advisory personnel and other
"controlling persons" who fail to take adequate steps to prevent insider
trading and illegal tipping by employees and other "controlled persons."
Persons who directly or indirectly control violators, including entities
such as Brown Capital and their officers and directors, now face
penalties up to the greater of $1,000,000 or three times the amount of
profit gained or loss avoided as a result of the violation.
Criminal Penalties. Increases the penalties for criminal securities law
violations:
o Maximum jail term -- from five to 10 years;
o Maximum criminal fine for Individuals from $100,000 to $1,000,000;
o Maximum criminal fine for entities -- from $500,000 to $2,500,000.
Private Right of Action. Establishes a new statutory private right of
action on behalf of contemporaneous traders against insider traders and
their controlling persons.
Bounty Payments. Authorizes the SEC to award bounty payments to persons
who provide information leading to the successful prosecution of insider
trading violations. Bounty payments are at the discretion of the SEC, up
to 10% of the penalty imposed.
PURPOSE OF INSIDER TRADING STATEMENT. The purpose of this Statement of Policy on
Insider Trading (the "Insider 'Trading Statement") Is to comply with the
Enforcement Act's requirement to establish, maintain, and enforce written,
procedures designed to prevent insider trading. This
<PAGE>
Insider Trading Statement explains: (I) the general legal prohibitions and
sanctions regarding insider trading; (ii) the meaning of the key concepts
underlying the prohibitions; (III) the obligations of each employee of Brown
Capital in the event he or she comes into possession of material, non-public
information; and (iv) the firm's educational program regarding insider trading.
Brown Capital has separately adopted a Securities Transactions Statement which
generally requires all Brown Capital personnel both to obtain prior clearance
with respect to all their personal securities transactions and also to report
such transactions on a timely basis to management.
THE BASIC INSIDER TRADING PROHIBITION. The "insider trading" doctrine under
federal securities laws generally prohibits any person whatsoever from:
o trading in a security while in possession of material, nonpublic information
regarding the security;
o tipping such information to others;
o recommending the purchase or sale of securities while in possession of such
information;
o assisting someone who is engaged in any of the above activities.
Thus, "insider trading" is not limited to insiders of the company whose
securities are being traded. It applies to anyone in possession of such
information and can include non-insiders, such as investment analysts, portfolio
managers and stockbrokers. In addition, it is not limited to persons who trade.
It also covers persons who "tip" material, non-public information or recommend
transactions in securities to others while in possession of such information.
<PAGE>
POLICY OF BROWN CAPITAL ON INSIDER TRADING. It is the policy of Brown Capital to
forbid any of their officers, directors, or employees, while in possession of
material, non-public information, from trading securities or recommending
transactions, either personally or in its proprietary accounts or on behalf of
others (including mutual funds and private accounts), or communicating material,
non-public information to others in violation of federal securities laws.
"NEED TO KNOW" POLICY. All information regarding planned, prospective or ongoing
securities transactions by Brown Capital must be treated as confidential. Such
information must be confined, even within the firm, to only those individuals
who must have such information in order for Brown Capital to carry out its
engagement properly and effectively. Ordinarily, these prohibitions will
restrict information to only those persons who are involved in the matter.
SANCTIONS. Severe penalties for trading on material, non-public information
exist, both for the individuals involved and their employers. An employee of
Brown Capital who violates the insider trading laws, can be subject to some or
all of the penalties described, below, even if he or she does not personally
benefit from the violation:
o Jail sentences;
o Criminal fines;
o Triple money damages;
o Injunctions;
o Return of profits;
o Civil penalties for the person who committed the violation (which would,
under normal circumstances, be the employee and not the firm) of up to
three times the profit gained or loss avoided, whether or not the
individual actually benefited; and
o Civil penalties for Brown Capital (and other persons, such as managers
and supervisors, who are deemed to be controlling persons) of up to the
greater of $1,000,000 or three times the amount of the profit gained or
loss avoided.
In addition, any violation of this Insider Trading Statement can be expected to
result in serious sanctions being imposed by Brown Capital, including dismissal
of the person(s) involved.
Basic Concepts of Insider Trading. The four critical concepts in insider trading
cases are: (1) whether a duty to refrain from such trading exists, based either
upon a pre-existing fiduciary duty or a misappropriation theory; (2) the
"materiality" of the information involved; (3) whether the information involved
is "insider information," that is, non-public; and (4) whether the person
involved is deemed to have possession of the involved information. Each concept
is discussed briefly below.
<PAGE>
FIDUCIARY DUTY/MISAPPROPRIATION. The United States Supreme Court has ruled that
insider trading and tipping violate the federal securities law if the trading or
tipping of the information results in a breach of duty of trust or confidence.
A typical breach of duty arises when an insider, such as a corporate officer,
purchases securities of his or her corporation on the basis of material,
non-public information. Such conduct breaches a duty owed to the corporation's
shareholders. The duty breached, however, need not be to shareholders to support
liability for insider trading; it could also involve a breach of duty to a
client, an employer, employees, or even a personal acquaintance.
The concept of who constitutes an "insider" is broad it includes officers,
directors and employees of a company. In addition, a person can be a "temporary
insider" if he or she enters into a confidential relationship in the conduct of
a company's affairs and, as a result, is given access to information solely for
the company's, purpose. Any person may become a temporary insider of a company
if he or she advises the company or provides other services, provided the
company expects such person to keep any material, non-public information
disclosed confidential.
Apart from the breach of a duty discussed above, other court decisions now hold
that under a "misappropriation" theory, an outsider (such as an investment
analyst) may be liable if he or she breaches a duty to anyone by: (1) obtaining
information improperly; or (2) using information that was obtained properly for
an improper purpose. For example, if information is given to an analyst on a
confidential basis and the analyst uses that information for trading purposes,
liability could arise under the misappropriation theory. Similarly, an analyst
who trades in breach of a duty owed either to his or her employer or client may
be liable under the misappropriation theory.
THE SITUATIONS IN WHICH A PERSON CAN TRADE IN POSSESSION OF MATERIAL, NON-PUBLIC
INFORMATION WITHOUT BREACHING A DUTY ARE SO COMPLEX AND UNCERTAIN THAT THE ONLY
SAFE COURSE IS NOT TO TRADE, TIP OR RECOMMEND SECURITIES WHILE IN POSSESSION OF
MATERIAL, NON-PUBLIC INFORMATION.
<PAGE>
MATERIALITY. Insider trading restrictions arise only when the information that
is used for trading, tipping or recommendations is "material." The information
need not be so important that it would have actually changed an investors
decision to buy or sell rather, it is enough if a reasonable investor would
consider it important in reaching his or her investment decision - that is, the
investor would attach actual significance to the information in the total mix of
data considered when making his or her investment decision. It is impossible to
make a complete catalog of all "material" information, but the following
recurring types of events are illustrative of what is considered material:
significant mergers or acquisitions, stock splits, adoption of a dividend policy
or changes in dividends, major increases or decreases in revenues or profits not
previously announced, changes in key senior executives, and important new
contracts, products or services.
Resolvlnq Close Cases. The Supreme Court has held that, in close cases
doubts about whether or not information is material should be resolved
in favor of a finding of materiality. You should also be aware that your
judgment regarding materiality may be reviewed by a court or the SEC
with the 20-20 vision of hindsight.
Effect on Market Price. Any information that, upon disclosure, is likely
to have a significant impact on the market price of a security should be
considered material.
Future Events. The materiality of facts relating to the possible
occurrence of future events depends on the likelihood that the event
will occur and the significance of the event if it does occur.
NON-PUBLIC VS. PUBLIC INFORMATION. Any information that is not "public" is
deemed to "non-public." Just as an investor is permitted to trade on the basis
of information that is not material, he or she may also trade on the basis of
information that is public. Information is-considered public if it has been
disseminated in a manner making it available to investors generally. An example
of non-public information would include material information provided to a
select group of analysts but not made available to the investment community at
large. Set forth below are a number of ways in which non-public information may
be made public.
Disclosure to News Services and National Papers. The U.S. stock
exchanges require exchange-traded issuers to disseminate material,
non-public information about their companies to: (1) the national
business and financial newswire services, (Dow Jones and Reuters); (2)
the national service (Associated Press); and (3) The New York Times and
The Wall Street Journal.
Local Disclosure. An announcement by an issuer in a local newspaper
might be sufficient for a company that is only locally traded, but might
not be sufficient for a company that has a national market.
Information in SEC Reports. Information contained in reports filed with
the SEC will be deemed to be public.
<PAGE>
Information in Brokerage Reports. Information published in bulletins
reports disseminated by brokerage firms will, as a general matter, be
deemed to be public.
If Brown Capital itself is in possession of material, non-public
information with respect to a security before such information is
disseminated to the public (i.e., such as being disclosed in one of the
public media described above), Brown Capital and its employees must wait
a sufficient period of time after the information is first publicly
released before trading or initiating transactions to allow the
information to be fully disseminated.
CONCEPT OF POSSESSION. It is important to note that the SEC takes the position
that the law regarding insider trading prohibits any person from trading in a
security in violation of a duty of trust and confidence merely while in
possession of material, non-public information regarding the security trading on
the basis of the material, non-public information is not required to be found
guilty of insider trading. To illustrate the problems created by the use of this
expansive "possession" standard, as opposed to the more narrow "caused"
standard, note that if the investment committee to a Brown Capital mutual fund
were to obtain material, non-public information about-one of its portfolio
companies, that fund would be prohibited from trading in the securities to which
that information relates. The prohibition would last until the information is no
longer material or non-public.
TENDER OFFERS. Tender offers are subject to particularly strict regulation under
the securities laws. Specifically, trading in securities which are the subject
of an actual or impending tender offer by a person who is in possession of
material, non-public information relating to the offer is illegal, regardless of
whether there was a breach of fiduciary duty under no circumstances should you
trade in securities while in possession of material, non-public information
regarding a potential tender offer.
PROCEDURES TO BE FOLLOWED WHEN RECEIVING MATERIAL, NON-PUBLIC INFORMATION
Whenever an employee comes into possession of material, nonpublic information
regarding a public company, he or she should immediately contact the compliance
Officer and refrain from disclosing the information to anyone else, including
other persons within Brown Capital, unless specifically advised to the contrary.
Specifically, employees may not:
o Trade in securities to which the material, non-public information
relates;
o Disclose the information to others; or
o Recommend purchases or sales of the securities to which the information
relates.
If the Compliance Officer determines that the information is material and
non-public it will decide whether or not to place the Security on a restricted
list of securities (the "Restricted List") in order to prohibit trading in the
security by both clients and employees. The Restricted List is
<PAGE>
highly confidential and should, under no circumstances, be disseminated to
anyone outside Brown Capital. THE INCLUSION OF A COMPANY ON THE RESTRICTED LIST
MEANS ONLY THAT BROWN CAPITAL HAS DETERMINED THAT TRADING IN THAT ISSUER'S
SECURITIES IS PROHIBITED. IT DOES NOT MEAN THAT BROWN CAPITAL PERSONNEL ARE FREE
TO TRADE IN OTHER SECURITIES. ALL SECURITIES TRANSACTIONS ARE SUBJECT TO THE
SECURITIES TRANSACTIONS STATEMENT INCLUDED ELSEWHERE IN THIS CODE.
EDUCATION PROGRAM. While the probability of research analysts and portfolio
managers being exposed to material, non-public information with respect to
companies considered for investment by clients Is greater than that of other
employees, it is imperative that all employees have a full understanding of this
Insider Trading Statement.
To insure that all employees are properly informed of and understand Brown
Capital's policy with respect to insider trading, the following program has been
adopted.
Initial Review for New Employees. All new employees will be given a copy
of this insider Trading Statement at of their the time employment and
will be required to certify that they have read it. The Compliance
Officer will review the Insider Trading Statement with each new research
analyst, counselor and trader at the time of his/her employment.
<PAGE>
Distribution of Revised Insider Trading Statement. Any time this Insider
Trader Statement is revised, copies will be distributed to all
employees.
QUESTIONS. If you have any questions with respect to the interpretation or
application of this Insider Trading Statement, you are encouraged to discuss
them with your immediate supervisor or the Compliance Officer.
<PAGE>
Exhibit (p)(5)
CODE OF ETHICS AND INSIDER TRADING POLICY AND PROCEDURES
CALVERT ASSET MANAGEMENT COMPANY, INC.
CALVERT-SLOAN, ADVISERS, L.L.C.
CALVERT DISTRIBUTORS, INC.
FIRST VARIABLE RATE FUND FOR GOVERNMENT INCOME
CALVERT TAX-FREE RESERVES
CALVERT SOCIAL INVESTMENT FUND
THE CALVERT FUND
CALVERT MUNICIPAL FUND INC.
CALVERT WORLD VALUES FUND, INC.
CALVERT VARIABLE SERIES, INC.
CALVERT CASH RESERVES
CALVERT NEW WORLD FUND, INC.(1)
The Code of Ethics and Insider Trading Policies and Procedures are designed to
protect the public from abusive trading practices and to maintain ethical
standards for access persons when dealing with the public.(2) Active leadership
and integrity of management dictates these principles be diligently implemented
and monitored. The Code of Ethics imposes the following general obligations:
o Information concerning the purchase and sale of securities learned in
connection with an access person's service, is property of the Fund,
Adviser or employer and may not be used for personal benefit.
o Fiduciary duties mandate suitable investment opportunities be presented
first to the Fund, Adviser, or employer and should not be exercised
even after full disclosure for personal benefit.
o Material inside information must be kept confidential and restricts
trading of securities.
o Front running, market manipulation and deceptive trading practices are
abusive techniques prohibited by these procedures and may result, in
fines, termination or legal actions by third parties.
o Access persons may not purchase IPOs due to the high potential for
abusive trading practices.
- -------------------
(1) The term "entity" will be used for any organization adopting these
procedures. For those organizations which are investment companies as defined
under the Investment Company Act of 1940, the term "Fund" may also be used if
applicable.
(2) Access person means any director/trustee, officer, general partner, or
employee of any entity adopting these procedures who participates in the
selection of securities (other than high social impact securities or special
equity securities) or who has access to information regarding impending
purchases or sales [See rule 17 j-1(e)]. The General Counsel or Compliance
Officer may designate any person, including an independent contractor or
consultant, as an access person, who, as such, shall provide signed
acknowledgement of the receipt of these procedures and their applicability. A
current list of access persons and investment personnel subject to preclearance
or other requirements shall be maintained by the Compliance Officer.
<PAGE>
o Access persons must not trade in securities with knowledge that the
Fund, Adviser, Sub-Adviser or employer is considering to make a similar
purchase or sale of the same securities.(3)
o Access persons shall not engage in transactions that create a conflict
of interest including but not limited to inappropriately making
decisions on behalf of a Fund regarding securities or private
placements personally owned by the access person.
CODE OF ETHICS GUIDELINES
The legal definition of a security is very broad and incorporates the purchase
and sale of public, private, registered and exempt from registration securities,
as well as derivatives. To ease the burden of following these guidelines, the
Code of Ethics reporting and disclosure obligations as well as preclearance
policies do not apply to the following:
1) The sale and purchase of open-end mutual funds including money
market funds.
2) The sale and purchase of U.S. Government, U.S. Government agency
securities and municipal securities in trade amounts of less than
$20,000.
3) Acquisitions through stock dividend plans, spin-offs or other
distributions applied to all holders of the same class of
securities.
4) Acquisitions through the exercise of rights issued pro rata to all
holders.
5) Acquisitions through gifts or bequests.
6) Trades in any S & P 500 company of 500 shares or less.
7) Trades in REITS and variable insurance products.
A. DISCLOSURE OF HOLDINGS & DUPLICATE STATEMENTS AND CONFIRMATIONS FOR THE
PURCHASE AND SALE OF SECURITIES OR OPTIONS ON SECURITIES BY ACCESS PERSONS.(4)
To assure that abusive or unethical trading practices are not conducted by
access persons, access persons are required to disclose personal securities
holdings including private placement holdings and send duplicate brokerage and
confirmation statements to the attention of the Compliance Officer at Calvert
Group, Ltd., 4550 Montgomery Avenue, Bethesda, MD 20814. Personal securities
holdings must be disclosed at the point of hire and upon annual acknowledgement
of these procedures. Duplicate statements and confirmations are required for any
access person's account or an account over which the access person has either
custody, control or beneficial
- -----------------
(3) For this purpose, "securities" include options on securities and securities
that are convertible into or exchangeable for securities held or to be acquired
by a fund. A security is being considered for purchase once a recommendation has
been documented, communicated and under serious evaluation by the purchaser or
seller. Evidence of consideration may include such things as approved
recommendations in current research reports, pending or active order tickets,
and a watch list of securities under current evaluation.
(4) Disinterested Directors and/or Trustees as defined by the Investment Company
Act of 1940, are excluded from the duplicate statement and confirmation
requirement unless the General Counsel or Compliance Officer imposes a different
standard due to an entity's active trading strategy and/or the information
available to the Disinterested Directors and/or Trustees.
<PAGE>
ownership. Account statements for immediate family members are also required.(5)
All information provided to the Compliance Officer will be confidential.(6)
Statements and confirmations will be reviewed by the Compliance Officer or his
or her designee(s) for any pattern of transactions involving parallel
transactions (portfolio and individual both buying or both selling the same
security) generally within a 15 day period before or after the transaction date.
Among the factors that will be considered in the analysis of whether any
provision of the Code has been violated will be the number and dollar value of
the transactions, the trading volume of the securities in question, the length
of time the security is held by the individual and the individual's involvement
in the investment process. While the focus of this procedure of the Code is on
"patterns", it is important to note that a violation could result from a single
transaction if the circumstances warrant a finding that the underlying
principles of fair dealing have been violated. The Compliance Officer or his or
her designee(s), will similarly review the personal securities holdings reports
provided to the Compliance Officer.
B. PRECLEARANCE POLICY
Because of the sensitive nature of securities trading, the Compliance Officer
will notify certain access persons and investment personnel about the need to
follow a preclearance policy. Attachment A will be used by designated access
persons seeking preclearance for securities trades including preclearance by
investment personnel for private placement transactions. Those individuals
subject to the preclearance policy will not be exempt from the general
prohibitions listed in the Code or the Policies and Procedures designed to
prevent insider trading. The Compliance Officer will review with the
Directors/Trustees periodically a list of persons who are subject to the
preclearance policy and the criteria used to select such individuals.
The preclearance authorization shall be valid for a period of three business
days unless a further extension of time is indicated by the Compliance Officer.
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(5) "Beneficial ownership" shall have the same meaning as in Rule 16a-1(a)(2)
under the Securities Exchange Act of 1934. Generally, a person has a beneficial
ownership in a security if he or she, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or shares a
direct or indirect pecuniary interest in the security, [has or shares voting
power (the power to vote or direct the voting of the security) or investment
power (the power to dispose of or direct the disposition of the security).]
Beneficial ownership" includes accounts of a spouse, minor children and
relatives resident in the access person's home, as well as accounts of another
person if by reason of any contract, understanding, relationship, agreement or
other arrangement the access person obtains therefrom benefits substantially
equivalent to those of ownership, e.g., as Trustee, Settlor, Beneficiary, Power
of Attorney.
(6) All account information is subject to regulatory review. The trade
confirmations of persons other than disinterested directors or trustees may be
disclosed to other senior officers of the Fund or to legal counsel as deemed
necessary for compliance purposes and to otherwise administer the Code of
Ethics.
<PAGE>
C. NOTIFICATION OF REPORTING OBLIGATION - ANNUAL CERTIFICATION TO BOARD
Members of the Legal Department will be responsible for notifying all access
persons about the duty to forward trade confirmations to the Compliance Officer.
Once informed of the duty to forward trade confirmations, an access person has a
continuing obligation to provide such confirms, in a timely manner, until such
time as notified otherwise. Information compiled in Compliance Officer reports
is available for inspection by the SEC or other regulatory authorities at any
time during the five-year period following the end of the fiscal year in which
each report is made.
Annually, the Legal Department will prepare a written " Issues and Certification
Report" for the Board that:
o describes any issues that have arisen under this Code of Ethics or its
procedures since the last report, including information about material
Code of Ethics or procedure violations and sanctions imposed in
response to those violations; and
o certifies to the Board that the adopted Code of Ethics and its
procedures provide reasonably necessary measures to prevent investment
personnel from violating the Code and applicable procedures.
The Code of Ethics and any material changes to its provisions and/or procedures
must be approved by a majority of the Board, including a majority of the
independent directors.
D. RESTRICTIONS AS TO GIFTS, ENTERTAINMENT, FAVORS AND DIRECTORSHIPS
1. Gifts, Entertainment and Favors. Access Persons must not make business
decisions that are influenced or appear to be influenced by giving or
accepting gifts, entertainment or favors. Access persons are prohibited
from receiving any gift or other thing of more than de minimis value
from any person or entity that does business with or on behalf of
Calvert Asset Management Company, Calvert-Sloan Advisers, or Calvert
Distributors Inc. Invitations to an occasional meal, sporting event or
other similar activity will not be deemed to violate this restriction
unless the occurrence of such events is so frequent or lavish as to
suggest an impropriety. The President/CEO of Calvert Group must approve
the acceptance of any gift, entertainment or favor with a per gift
value of more than $100.00.
2. Directorships.
(a) General Rule:
No access person, other than a Disinterested Fund
Director/Trustee, may serve on the Board of Directors of a
publicly-held or private for-profit company absent prior written
approval from the Calvert Group, Ltd. Board of Directors and/or
the applicable Fund's Board of Directors/Trustees. Disinterested
Directors/Trustees must provide annual disclosure about
directorships and other potential conflicts of interest.
<PAGE>
(b) Applications for Approval:
Applications for approval to serve as a director of a publicly
traded or private for-profit company shall be directed, in
writing, to the office of the General Counsel for prompt
forwarding to the Calvert Group, Ltd. Board of Directors and the
respective Fund's Board of Directors/Trustees. Authorization may
be granted where it is determined that such board service would be
consistent with the interests of the Funds and their shareholders.
(c) Subsequent Investment Management Activities:
Whenever an access person is granted approval to serve as a
director of a publicly-traded or private for-profit company, he or
she shall personally refrain from participating in any
deliberation, recommendations, or considerations of whether or not
to recommend that any securities of that company be purchased,
sold or retained in the investment portfolio of any Calvert Group
Fund or Calvert Asset Management Company managed account.
E. ENFORCEMENT AND SANCTIONS
Each violation of this Code shall be reported to the Board of
Directors/Trustees of the applicable Fund or entity at or before the next
regular meeting of the Board. Upon discovering or otherwise being informed of a
violation of this Code, the Board of Directors/Trustees may take any action it
deems appropriate including, inter alia, a letter of censure, termination with
respect to portfolio management duties regarding the Fund, or recommending to
the operating companies, suspension or removal from office, imposition of a fine
or termination of employment of the violator.
F. RECORDKEEPING
Each entity shall maintain such lists, records, and reports as are
required by law.
<PAGE>
G. INSIDER TRADING POLICY AND PROCEDURES
1. SCOPE OF POLICY STATEMENT
This Policy Statement is drafted broadly; it will be applied and
interpreted in a similar manner. This Policy Statement applies to securities
trading and information handling by all access persons.
The law of insider trading is unsettled; an individual legitimately may
be uncertain about the application of the Policy Statement in a particular
circumstance. Often, a single question can forestall disciplinary action or
complex legal problems. You should direct any questions relating to the Policy
Statement to an attorney in the Calvert Group Legal Department. You must also
notify an attorney in the Legal Department if you have any reason to believe
that a violation of the Policy Statement has occurred or is about to occur.
2. POLICY STATEMENT ON INSIDER TRADING
Calvert forbids any officer, director\trustee or employee from trading,
either personally or on behalf of others, including mutual funds managed by
Calvert, on material nonpublic information or communicating material nonpublic
information to others in violation of the law. This conduct is frequently
referred to as "insider trading." Calvert's policy applies to each Fund, its
investment advisor, its principal underwriter, and every officer, director and
employee thereof, and extends to activities within and outside their duties at
Calvert. Every officer, director, trustee and employee must read and retain this
policy statement. Any questions regarding Calvert's policy and procedures should
be referred to an attorney in the Calvert Legal Department. An officer,
director, trustee or employee must notify an attorney in the Legal Department
immediately if they have any reason to believe that a violation of the Policy
Statement has occurred or is about to occur.
The term "insider trading" is not defined in the federal securities
laws, but generally is used to refer to the use of material nonpublic
information to trade in securities (whether or not one is an "insider") or to
communications of material nonpublic information to others.
While the law concerning insider trading is not static, it is generally
understood that the law prohibits:
a) trading by an insider, while in possession of material
nonpublic information; or
b) trading by a non-insider, while in possession of material nonpublic
information, where the information either was disclosed to the
non-insider in violation of an insider's duty to keep it confidential
or was misappropriated; or
c) communicating material nonpublic information to others.
i. Who is an Insider?
The concept of "insider" is broad. It includes officers,
directors, trustees and employees of a company. In addition, a
person can be a "temporary insider" if he
<PAGE>
or she enters into a special confidential relationship in the
conduct of a company's affairs and as a result is given access
to information solely for the company's purposes. A temporary
insider can include, among others, a company's attorneys,
accountants, consultants, bank lending officers, and the
employees of such organizations. In addition, Calvert may
become a temporary insider of a company it advises or for
which it performs other services. According to the Supreme
Court, the company must expect the outsider to keep the
disclosed nonpublic information confidential and the
relationship must at least imply such a duty before the
outsider will be considered an insider.
ii. What is Material Information?
Trading on inside information is not a basis for liability
unless the information is material. "Material Information"
generally is defined as information for which there is a
substantial likelihood that a reasonable investor would
consider it important in making his or her investment
decisions, or information that is reasonably certain to have a
substantial effect on the price of a company's securities.
Information that officers, directors and employees should
consider material includes, but is not limited to: dividend
changes, earnings estimates, changes in previously released
earnings estimates, significant merger or acquisition
proposals or agreements, major litigation, liquidation
problems, and extraordinary management developments.
Material information also may relate to the market for a
company's securities. Information about a significant order to
purchase or sell securities may, in some contexts, be deemed
material. Similarly, prepublication information regarding
reports in the financial press also may be deemed material.
For example, the Supreme Court upheld the criminal convictions
of insider trading defendants who capitalized on
prepublication information about the Wall Street Journal's
Heard on the Street column.
It is conceivable that similar advance reports of securities
to be bought or sold by a large, influential institutional
investor, such as a Fund, may be deemed material to an
investment in those portfolio securities. Advance knowledge of
important proposed government regulation, for example, could
also be deemed material information regarding companies in the
regulated industry.
iii. What is Nonpublic Information?
Information is nonpublic until it has been disseminated
broadly to investors in the market place. Tangible evidence of
such dissemination is the best indication that the information
is public. For example, information is public after it has
become available to the general public through a public filing
with the SEC or some other governmental agency, the Dow Jones
"tape" or the Wall Street Journal or some other publication of
general circulation, and after sufficient time has passed so
that the information has been disseminated widely
iv. Penalties for Insider Trading
Penalties for trading on or communicating material nonpublic
information are severe, both for individuals involved in such
unlawful conduct and their
<PAGE>
employers. A person can be subject to some or all of the
penalties below even if he or she does not personally benefit
from the violation. Penalties include:
o civil injunctions
o treble damages
o disgorgement of profits
o jail sentences
o fines for the person who committed the violation of up to
three times the profit gained or loss avoided, whether or
not the person actually benefited, and
o fines for the employer or other controlling person of up
to the greater of $1,000,000 or three times the amount of
the profit gained or loss avoided.
In addition, any violation of this policy statement can be
expected to result in serious sanctions by Calvert, up to and
including dismissal of the persons involved.
<PAGE>
3. IDENTIFYING INSIDE INFORMATION
Before a Calvert employee executes any trade for him/herself or on
behalf of others, including investment companies managed by Calvert, in the
securities of a company about which the employee may have potential inside
information, the following questions should be considered:
a) Is the information material? Is this information that an
investor would consider important in making his or her
investment decisions? Is this information that would
substantially affect the market price of the securities if
generally disclosed?
b) Is the information nonpublic? How was the information
obtained? To whom has this information been provided? Has the
information been disseminated broadly to investors in the
marketplace by being published in Reuters, The Wall Street
Journal or other publications of general circulation? Is it on
file with the Securities and Exchange Commission?
If, after consideration of the above, it is found that the information
is material and nonpublic, or if there are questions as to whether the
information is material and nonpublic, the following steps should be taken:
a) Report the matter immediately to the Compliance Officer or an
attorney in the Legal Department.
b) The securities should not be purchased or sold by the officer,
director, trustee or employee for him/herself or on behalf of
others, including investment companies managed by Calvert.
c) The information should not be communicated inside or outside
Calvert, other than to the Legal Department.
d) After the issue has been reviewed, the Legal Department will
instruct the officer, director, or employee as to whether to
continue the prohibitions against trading and communication,
or allowing the trade and communication of the information.
4. CONTACTS WITH PUBLIC COMPANIES.
For Calvert, contacts with public companies represent an important part
of our research efforts. Calvert may make investment decisions on the basis of
the firm's conclusions formed through such contacts and analysis of
publicly-available information. Difficult legal issues arise, however, when, in
the course of these contacts, a Calvert employee or other person subject to this
Policy Statement becomes aware of material, nonpublic information. This could
happen, for example, if a company's chief financial officer prematurely
discloses quarterly results to an analyst or an investor relation representative
makes a selective disclosure of adverse news to a handful of investors. In such
situation, Calvert must make a judgment as to its further conduct. For the
protection of the company and its employees, the Legal Department should be
contacted if an employee believes that he/she has received material, nonpublic
information.
<PAGE>
5. TENDER OFFERS
Tender offers represent a particular concern in the law of insider
trading for two reasons. First, tender offer activity often produces
extraordinary gyrations in the price of the target company's securities. Trading
during this time period is more likely to attract regulatory attention (and
produces a disproportionate percentage of insider trading cases). Second, the
SEC has adopted a rule which expressly forbids trading and "tipping" while in
possession of material, nonpublic information regarding a tender offer received
from the tender offeror, the target company or anyone acting on behalf of
either. Calvert employees and others subject to this Policy Statement should
exercise particular caution any time they become aware of nonpublic information
relating to a tender offer.
6. EDUCATION
Another aspect of Calvert's compliance procedures will be to keep
Calvert personnel and other access persons informed. This memorandum serves as a
basic primer on what constitutes inside information and periodic memoranda will
be distributed, particularly when a significant case dealing with the subject
has been decided.
All new employees will be given a copy of this statement and will be
required to read it and agree to its conditions. All employees will be required
to confirm their understanding and acknowledgment of the statement on an annual
basis.
<PAGE>
ATTACHMENT A
[CALVERT GROUP LOGO] MEMO
- --------------------------------------------------------------------------------
TO: LEGAL DEPARTMENT; COMPLIANCE
FROM:
RE: PRIOR APPROVAL OF ACCESS PERSON TRADING IN SECURITIES
The following proposed security(ies) transaction(s) was (were) reviewed by the
Fund, or designated employee of the Advisor (Chief Investment Officer or
Director of Research) pursuant to Calvert Group's Code of Ethics:
Name of Advisory Person:
- ------------------------
Security (ies) to be Purchased or Sold:
- ---------------------------------------
Basis of Approval or Denial:
- ----------------------------
- -----------------------------------------
Fund or Advisor Designee Signature
<PAGE>
SIGNATURE PAGE
CODE OF ETHICS AND INSIDER TRADING POLICY AND PROCEDURES
ACKNOWLEDGEMENT FORM
I have read and understand Calvert Group's Code of Ethics and Insider Trading
Policy and Procedures and will comply in all respects with such procedures.
- ---------------------------- ------------------
Signature Date
- ----------------------------
Print Name
<PAGE>
ATTACHMENT B
ACCESS PERSONS SUBJECT TO PRECLEARANCE FOR SECURITIES
TRANSACTIONS INCLUDING PRIVATE PLACEMENTS
Michael Abramo
Fatima Batalvi
Susan Bender
Ying-Wei Chen
Tom Dailey
Ivy Duke
Patrick Faul
Victor Frye
David Gibson
Ceasar Gonzales
Donna Gomez
Greg Habeeb
Dan Hayes
Hui Ping Ho
Mohammed Javaid
Anu Khondokar
Tracy Knight
Barbara Krumsiek
Emmett Long
Reno Martini
Gary Miller
John Nichols
Matt Nottingham
Kendra Plemmons
Carmen Reid
Chris Santos
Bill Tartikoff
Laurie Webster
Ron Wolfsheimer
Mike Yuhas
INVESTMENT PERSONNEL SUBJECT SOLEY TO PRIVATE PLACEMENT
PRECLEARANCE
MEMBERS OF THE SPECIAL EQUITIES COMMITTEE OF THE BOARD OF DIRECTORS/TRUSTEES
<PAGE>
Exhibit (p)(6)
CAPITAL GUARDIAN TRUST COMPANY
CODE OF CONDUCT
All of us within the Capital organization are responsible for maintaining the
very highest ethical standards when conducting business. In keeping with these
standards, we must never allow our own interests to be placed ahead of our
shareholders' and clients' interests.
Over the years we have earned a reputation for the highest integrity. Regardless
of lesser standards that may be followed through business or community custom,
we must observe exemplary standards of honesty and integrity.
REPORTING VIOLATIONS
If you know of any violation of our Code of Conduct, you have a
responsibility to report it. Deviations from controls or procedures that
safeguard the company, including the assets of shareholders and clients,
should also be reported.
You can report confidentially to:
o Your manager or department head
o CGC Audit Committee:
Wally Stern -- CHAIRMAN
Donnalisa Barnum
David Beevers
Jim Brown
Larry P. Clemmensen
Roberta Conroy
Bill Hurt -- (emeritus)
Sonny Kamm
Mike Kerr
Victor Kohn
John McLaughlin
Don O'Neil
Tom Rowland
John Smet
Antonio Vegezzi
Shaw Wagener
Kelly Webb
o Mike Downer or any other lawyer in the CGC Legal Group
o Don Wolfe of Deloitte & Touche LLP (CGC's auditors).
<PAGE>
CGC GIFTS POLICY -- CONFLICTS OF INTEREST
A conflict of interest occurs when the private interests of associates
interfere or could potentially interfere with their responsibilities at
work. Associates must not place themselves or the company in a position of
actual or potential conflict. Associates may not accept gifts worth more
than $100, excessive business entertainment, loans, or anything else
involving personal gain from those who conduct business with the company. In
addition, a business entertainment event exceeding $200 in value should not
be accepted unless the associate receives permission from the Gifts Policy
Committee.
REPORTING -- Although the limitations on accepting gifts applies to all
associates as described above, some associates will be asked to fill out
quarterly reports. If you receive a reporting form, you must report any gift
exceeding $50 (although it is recommended that you report all gifts received)
and business entertainment in which an event exceeds $75.
GIFTS POLICY COMMITTEE
The Gifts Policy Committee oversees administration of and compliance with the
Policy.
INSIDER TRADING
Antifraud provisions of the federal securities laws generally prohibit persons
while in possession of material nonpublic information from trading on or
communicating the information to others. Sanctions for violations can include
civil injunctions, permanent bars from the securities industry, civil
penalties up to three times the profits made or losses avoided, criminal fines
and jail sentences.
While investment research analysts are most likely to come in contact with
material nonpublic information, the rules (and sanctions) in this area apply
to all CGC associates and extend to activities both within and outside each
associate's duties.
PERSONAL INVESTING POLICY
As an associate of the Capital Group companies, you may have access to
confidential information. This places you in a position of special trust.
You are associated with a group of companies that is responsible for the
management of many billions of dollars belonging to mutual fund shareholders
and other clients. The law, ethics and our own policy place a heavy burden on
all of us to ensure that the highest standards of honesty and integrity are
maintained at all times.
There are several rules that must be followed to avoid possible conflicts of
interest in personal securities transactions.
2
<PAGE>
ALL ASSOCIATES
Information regarding proposed or partially completed plans by CGC companies
to buy or sell specific securities must not be divulged to outsiders.
Favors or preferential treatment from stockbrokers may not be accepted.
Associates may not subscribe to any initial public offering or any other
securities offering that is subject to allocation (so-called "hot issues").
Generally, this prohibition applies to spouses of associates and any family
member residing in the same household. However, an associate may request that
the Personal Investing Policy Committee consider granting an exception. PLEASE
NOTE THAT ANY INVESTMENTS IN PRIVATE PLACEMENTS THAT ARE NOT PROHIBITED AS
DESCRIBED ABOVE MUST BE PRE-CLEARED.
COVERED PERSONS
Associates who have access to investment information in connection with their
regular duties are generally considered "covered persons." If you receive a
quarterly personal securities transactions report form, you are a covered
person. A DETAILED DESCRIPTION OF THE PERSONAL INVESTING POLICY CAN BE FOUND
AT THE CGC WEB HOME page. You should take the time to review this policy as
ongoing interpretations of the policy will be explained therein.
Covered persons must conduct their personal securities transactions in such a
way that they do not conflict with the interests of the funds and client
accounts. This policy also includes securities transactions of family members
living in the covered person's household and any trust or custodianship for
which the associate is trustee or custodian. A conflict may occur if you, a
family member in the same household, a trust or custodianship for which you
are trustee or custodian have a transaction in a security when the funds or
client accounts are considering or concluding a transaction in the same
security.
Additional rules apply to "investment personnel" including portfolio
counselors/managers, research analysts, traders, and investment administration
personnel (see below).
PRE-CLEARANCE OF SECURITIES TRANSACTIONS
Before buying or selling securities, covered persons should find out if the
purchase or sale of a particular security would involve a conflict of
interest. This involves checking with the CGC Legal Group based in LAO by
calling (phone number). (You will generally receive a response within one
business day.) Unless a shorter period is specified, clearance is good for two
trading days (including the day you check). If you have not executed your
transaction within this period, you must again pre-clear your transaction.
Covered persons must PROMPTLY submit quarterly reports of certain
transactions. Transactions of securities (including fixed-income securities)
or options (see below) must be pre-cleared as described above and reported
except for: gifts or bequests of securities (although receipt of securities as
a gift must be reported and pre-clearance and reporting are required if these
securities are later sold); open-end investment companies (mutual funds);
shares of CGC stock; money market instruments with maturities of one year or
less; direct obligations of the U.S. Government, bankers' acceptances, CDs or
other commercial paper; commodities; and options
3
<PAGE>
or futures on broad-based indices. Covered persons must also report
transactions made by family members in their household and by those for which
they are a trustee or custodian. Reporting forms will be supplied at the
appropriate times AND MUST BE SUBMITTED BY THE DATE INDICATED ON THE FORM.
In addition, the following transactions must be reported but need not have
been pre-cleared: transactions in debt instruments rated "A" or above by at
least one national rating service; sales pursuant to tender offers; and
dividend reinvestment plan purchases (provided the purchase pursuant to such
plan is made with dividend proceeds only).
PERSONAL INVESTING SHOULD BE VIEWED AS A PRIVILEGE, NOT A RIGHT. AS SUCH,
LIMITATIONS MAY BE PLACED ON THE NUMBER OF PRE-CLEARANCES AND/OR TRANSACTIONS
AS DEEMED APPROPRIATE BY THE PERSONAL INVESTING COMMITTEE.
BROKERAGE ACCOUNTS
Covered persons should inform their stockbrokers that they are employed by an
investment adviser, trust company or affiliate of either. The broker is
subject to certain rules designed to prevent favoritism toward such accounts.
Associates may not accept negotiated commission rates which they believe may
be more favorable than the broker grants to accounts with similar
characteristics. In addition, covered persons must direct their brokers to
send duplicate confirmations and copies of all periodic statements on a timely
basis to The Legal Group of The Capital Group Companies, Inc.,(special post
office box address). ALL DOCUMENTS RECEIVED IN THIS POST OFFICE BOX ARE KEPT
STRICTLY CONFIDENTIAL.
[If extraneous information is included on an associate's statements (e.g.,
checking account information or other information that is not subject to the
policy), the associate might want to establish a separate account solely for
transactions subject to the policy.]
ANNUAL DISCLOSURE OF PERSONAL SECURITIES HOLDINGS
Covered persons will be required to disclose all personal securities holdings
upon commencement of employment (or upon becoming a covered person) and
thereafter on an annual basis. Reporting forms will be supplied for this
purpose.
ANNUAL RE-CERTIFICATION
All access persons will be required to certify annually that they have read
and understood the Personal Investing Policy and recognize that they are
subject thereto.
ADDITIONAL RULES FOR INVESTMENT PERSONNEL
DISCLOSURE OF OWNERSHIP OF RECOMMENDED SECURITIES -- Ownership of securities
that are held professionally as well as personally will be reviewed on a
periodic basis by the Legal Group
4
<PAGE>
and may also be reviewed by the applicable Management Committee and/or
Investment Committee or Subcommittee. In addition, to the extent that
disclosure has not already been made by the Legal Group to the applicable
Management Committee and/or Investment Committee or Subcommittee, any
associate who is in a position to recommend the purchase or sale of securities
by the fund or client accounts that s/he personally owns should first disclose
such ownership either in writing (in a company write-up) or orally (when
discussing the company at investment meetings) prior to making a
recommendation.(1)
BLACKOUT PERIOD -- Portfolio counselors/managers and research analysts may not
buy or sell a security within at least seven calendar days before and after a
fund or client account that his or her company manages transacts in that
security. Profits resulting from transactions occurring within this time
period are subject to special review and may be subject to disgorgement.
BAN ON SHORT-TERM TRADING PROFITS -- Investment personnel are prohibited from
profiting from the purchase and sale or sale and purchase of the same (or
equivalent) securities within 60 days. THIS RESTRICTION APPLIES TO THE
PURCHASE OF AN OPTION AND THE EXERCISE OF THE OPTION WITHIN 60 DAYS.
SERVICE AS A DIRECTOR -- Investment personnel must obtain prior authorization
of the investment committee of the appropriate management company before
serving on the board of directors of publicly traded companies. This can be
arranged by calling the LAO Legal Group.
PERSONAL INVESTING POLICY COMMITTEE
Any questions or hardships that result from these policies or requests for
exceptions should be referred to CGC's Personal Investing Policy Committee by
calling the LAO Legal Group.
- --------
(1) Note that this disclosure requirement is consistent with both AIMR standards
as well as the ICI Advisory Group Guidelines.
5
<PAGE>
Exhibit (p)(7)
CODE OF ETHICS
CAPITAL MANAGEMENT GROUP OF FIRST UNION NATIONAL BANK
EVERGREEN INVESTMENT MANAGEMENT
FIRST CAPITAL GROUP
FIRST INVESTMENT ADVISORS
EVERGREEN ASSET MANAGEMENT CORP.
EVERGREEN INVESTMENT MANAGEMENT COMPANY
LIEBER & COMPANY
MENTOR INVESTMENT ADVISORS
MENTOR PERPETUAL ADVISORS
MERIDIAN INVESTMENT COMPANY
TATTERSALL ADVISORY GROUP, INC.
Effective December 17, 1999
As an Employee of any of the CMG Covered Companies, you are required to read,
understand and abide by this Code of Ethics. The Code contains affirmative
requirements as well as prohibitions that you are required to adhere to in
connection with securities transactions effected on your behalf and on behalf of
clients (including the Evergreen Funds). Such requirements include, among other
things, (i.) notifying the Compliance Department upon establishing a personal
securities account with a broker/dealer, (ii.) in certain cases, obtaining
permission prior to engaging in a personal securities transaction, and (iii.)
reporting personal securities transactions to the Compliance Department. FAILURE
TO ADHERE TO THE CODE COULD RESULT IN SANCTIONS, INCLUDING DISMISSAL FROM
EMPLOYMENT, AND COULD ALSO IN CERTAIN CASES EXPOSE YOU TO CIVIL OR CRIMINAL
PENALTIES SUCH AS FINES AND/OR IMPRISONMENT.
No written code can explicitly cover every situation that possibly may arise.
Even in situations not expressly described, the Code and your fiduciary
obligations generally require you to put the interests of your clients ahead of
your own. If you have any questions regarding the appropriateness of any action
under this Code or under your fiduciary duties generally, you should contact
your Compliance Officer or Assistant General Counsel to discuss the matter
before taking the action in question. Similarly, you should consult with your
Compliance or Legal officer if you have any questions concerning the meaning or
interpretation of any provision of the Code.
Finally, as an Employee of First Union Corporation or one of its divisions or
subsidiaries, you should consult First Union's Code of Conduct contained in your
Employee Handbook. This Code uses many defined terms that are defined in Section
V.
I. PROHIBITED ACTIVITIES
A. No Employee shall engage in any Security transactions, activity or
relationship that creates or has the appearance of creating a conflict of
interest (financial or other) between the Employee and a Covered Company or a
Client Account. Each Employee shall always place the financial and business
interests of the Covered Companies and Client Accounts before his or her own
personal financial and business interests.
B. No Employee shall:
(1) employ any device, scheme or artifice to defraud a Client Account;
(2) engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon a Client Account; or
(3) engage in any fraudulent, deceptive or manipulative practice with
respect to a Client Account.
C. No Employee shall purchase or sell, directly or indirectly, any Security for
any Personal
<PAGE>
Account, any Client Account, the account of a Covered Company, or any other
account, while in possession of Inside Information concerning that Security or
the issuer without the prior written approval of the Compliance Officer and the
Assistant General Counsel and (per First Union's Code of Conduct) First Union's
Conflict of Interest Committee, which approval shall specifically determine that
such trading would not constitute an improper use of such Inside Information.
Employees possessing Inside Information shall take reasonable precautions to
ensure that such information is not disseminated beyond those Employees with a
need to know such information. Any questions should be directed to the
Compliance Officer or Assistant General Counsel.
D. No Employee shall recommend or cause a Covered Company or Client Account to
take action or refrain from taking action for the Employee's own personal
benefit.
E. It is presumed that Employees in one geographic location will not have
knowledge of transactions effected in another geographic location, but use of
any such information would likewise be prohibited.
(1) No Employee shall purchase or sell any Security for any Personal
Account if he or she knows such Security (i.) is being purchased or
sold for any Covered Company or Client Account or (ii.) is being
actively considered for purchase or sale by any Covered Company or
Client account.
(2) A Covered Company shall not purchase or sell any Security for its own
account if the Employee making such purchase or sale knows such
Security (i.) is being purchased or sold for any Client Account or
(ii.) is being actively considered for purchase or sale by any Client
Account.
The prohibitions contained in E.(1) and E.(2) shall not apply to:
(a) purchases pursuant to a dividend reinvestment program or
purchases based upon preexisting status as a security holder,
policy holder or depositor;
(b) purchases of Securities through the exercise of rights issued to
the Employee as part of a pro rata issue to all holders of such
Securities, and the sale of such rights;
(c) transactions that are non-volitional, including any sale out of a
brokerage account resulting from a bona fide margin call as long
as collateral was not withdrawn from such account within 10 days
prior to the call; and
(d) transactions previously approved in writing by the Compliance
Officer that have been determined not to be harmful to any Client
Account because of the volume of trading in the Security.
F. No Employee shall purchase a Security for any Personal Account in an initial
public offering, except for initial public offerings where the individual has a
right to purchase the Security based on a preexisting status as a security
holder, policy holder or depositor.
G. No Employee shall maintain or open a brokerage account constituting a
Personal Account unless duplicate confirmations and statements of all account
activity are forwarded to the Compliance Officer.
H. No Employee shall use any Derivative to evade the restrictions of this Code
of Ethics.
I. No Investment Person shall be a director of a publicly traded company other
than First Union Corporation without prior written approval of the Compliance
Officer. Approval generally will not be granted.
J. No Access Person shall make investments for any Personal Account in any
investment club without prior written approval from the Compliance Officer.
K. No Access Person may purchase a Security for any Personal Account in a
private offering without prior written approval of the person's Chief Investment
Officer or the Compliance Officer. In considering whether to grant such
approval, the Compliance Officer or Chief Investment Officer will consider
several factors, including but not limited to:
2
<PAGE>
(1) whether the investment opportunity should be reserved for a Client
Account; and
(2) whether the opportunity is being offered to the Access Person by
virtue of his or her position with respect to a Client Account or a
Covered Company.
If approval is granted, the Access Person must disclose the investment to the
appropriate Chief Investment Officer before participating in any way in any
decision as to whether a Client Account should invest in such Security or in
another Security issued by the same issuer. In such circumstances, the Chief
Investment Officer will conduct a review by investment personnel with no
interest in the issuer prior to a purchase on behalf of a Client Account. The
Compliance Officer shall retain a record of this approval and the rationale
supporting it.
L. No Access Person may offer investment advice or manage any person's portfolio
in which he or she does not have Beneficial Ownership other than a Client
Account without prior written approval from the Compliance Officer.
M. No Investment Person may profit from the purchase and sale or sale and
purchase of the same (or equivalent) Securities (other than securities issued by
First Union Corporation) in a Personal Account within 60 calendar days. Any
resulting profits will be disgorged as instructed by the Compliance Officer.
N. No Investment Person may buy or sell a Security for any Personal Account
within seven calendar days before or after a Client Account that he or she
manages, or provides information or advice to, or executes investment decisions
for, trades in that Security, except:
(1) purchases pursuant to a dividend reinvestment program or purchases
based upon preexisting status as a security holder, policy holder or
depositor;
(2) purchases of Securities through the exercise of rights issued to the
Employee as part of a pro rata issue to all holders of such
Securities, and the sale of such rights;
(3) transactions that are non-volitional, including any sale out of a
brokerage account resulting from a bona fide margin call as long as
collateral was not withdrawn from such account within ten days prior
to the call; and
(4) transactions previously approved in writing by the Compliance Officer
that have been determined not to be harmful to any Client Account
because of the volume of trading in the Security.
Any related profits from such transaction will be disgorged as instructed
by the Compliance Officer.
O. No Employee shall, directly or indirectly, in connection with any purchase or
sale of any Security by a Client Account or a Covered Company or in connection
with the business of a Client Account or a Covered Company, accept or receive
from a third party any gift or other thing of more than de minimis value, other
than (i.) business entertainment such as meals and sporting events involving no
more than ordinary amenities and (ii.) unsolicited advertising or promotional
materials that are generally available. An Employee also should consult First
Union Corporation's Code of Conduct relating to acceptance of gifts from
customers and suppliers. An Employee shall refer questions regarding the
permissibility of accepting items of more than de minimis value to the
Compliance Officer.
II. PRE-CLEARING PERSONAL TRADES
Pre-Clearance Procedures and Standards
A. No Access Person may engage in a Securities transaction (other than a
transaction described in Section B. below) involving a Personal Account
unless he/she has first pre-cleared the transaction by completing a
Personal Investment Pre-Clearance Form and had the form signed and/or
initialed as set forth therein. Approval shall be indicated by the Access
Person's Chief Investment Officer or other designated supervisor signing
and dating the Form where indicated at the bottom. Any such approval shall
only be valid until the end of the next trading day. The time allotment is
limited to the actual time of purchase or sale of the Security. If
execution of the trade does not take place by the end of the next trading
day, then another pre-clearance request must be processed and approved.
"Good till
3
<PAGE>
cancelled" orders are forbidden and "no limit" orders must be cancelled or
pre-cleared again by the end of the next trading day after the approval if
the trade is not executed.
B. The following transactions are excluded from the pre-clearance requirement:
(1) any transactions in Securities traded on a national securities
exchange or NASDAQ NMS with an aggregate amount of (i.) 500 shares or
less or (ii.) $25,000 or less (whichever is a lesser amount) of a
particular security within a seven-day window. The de minimis is not
valid for an Investment Person who has knowledge of recent purchases
and sales of the same security within Client accounts.
(2) purchases pursuant to a dividend reinvestment program (DRIP) or
purchases based upon preexisting status as a security holder, policy
holder or depositor;
(3) purchases of Securities through the exercise of rights issued to the
Employee as part of a pro rata issue to all holders of such
Securities, and the sale of such rights;
(4) transactions that are non-volitional, including any sale out of a
brokerage account resulting from a bona fide margin call as long as
collateral was not withdrawn from such account within ten days prior
to the call;
(5) transactions in Securities issued by First Union Corporation;
(6) transactions by an Investment Person in a Security that all Client
Accounts for which the person makes or executes investment decisions
or recommendations are prohibited under their investment guidelines
from purchasing; and
(7) transactions previously approved in writing by the Compliance Officer
that have been determined not to be harmful to any Client Account
because of the volume of trading in the Security.
C. Failure to receive pre-approval on applicable trades will result in the
following actions:
(1) First Failure: Letter of Reprimand;
(2) Second Failure: $100.00 fine, payable to a charity agreeable to the
Compliance Officer and the Access Person;
(3) Third Failure: $250.00 fine, payable to a charity agreeable to the
Compliance Officer and the Access Person;
(4) Fourth Failure: Referral to appropriate management for action.
D. All employees should consult the First Union Code of Conduct regarding the
permissibility of investing in other financial institutions.
III. REPORTING REQUIREMENTS
A. Each year every Employee must sign an acknowledgment stating that he/she
has received and reviewed and will comply with this Code of Ethics. New
Employees should read and sign the policy within 30 days of employment.
B. Each Employee shall give written instructions to every broker with whom he
or she transacts for any Personal Account to provide duplicate confirmation
for all purchases and sales of Securities to:
For First Union Capital Management Group, First Capital Group, and Evergreen
Investment Management (not EIMCO) Employees:
First Union National Bank
201 South College St./CP3
Charlotte, NC 28202-0137
ATTN: CMG Compliance
For Lieber & Company and Evergreen Asset Management Corp. Employees:
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<PAGE>
Evergreen Funds
2500 Westchester Avenue
Purchase, NY 10577
ATTN: Compliance Department
For Evergreen Investment Management Company, Inc. Employees:
Evergreen Funds
200 Berkeley Street
Boston, MA 02116
ATTN: Compliance Department
For Mentor Investment Advisor and Mentor Perpetual Advisors Employees:
Evergreen Funds
901 E. Byrd St.
Richmond, VA 23219
ATTN: Compliance Department
For Tattersall Advisory Group, Inc. Employees:
Tattersall Advisory Group, Inc.
6802 Paragon Place, Suite 200
Richmond, VA 23230
ATTN: Compliance Department
For Meridian Investment Company Employees:
Vicki Calhoun
First Union National Bank/Trust Compliance
PO Box 7558
Philadelphia, PA 19101-7558
C. Employees who are not Investment Persons or Access Persons must report all
transactions for their Personal Account annually for each year ending
December 31 by the following January 31.
D. Each Access Person must report all Securities holdings in all Personal
Accounts upon commencement of employment (or within ten days of becoming an
Access Person) and thereafter annually, for each year ending December 31 by
the following January 31. A separate holdings list need not be provided if
all personal security holdings are otherwise listed on copies of brokerage
statements received by Compliance.
E. Each Access Person shall file with the Compliance Officer within ten
calendar days after the end of each calendar quarter (March 31, June 30,
September 30, December 31) a report listing each Security transaction
(including those exempt from the pre-clearance requirements) effected
during the quarter for any Personal Account; provided, however, a Security
transaction need not be separately reported under this paragraph if a copy
of a broker confirmation for the transaction was forwarded to the
appropriate Compliance Officer as required under Section 1.G.
F. Any Employee who becomes aware of any person trading on or communicating
Inside Information (or contemplating such actions) must report such event
to the Compliance Officer or the Assistant General Counsel.
G. Any Employee who becomes aware of any person violating this Code of Ethics
must report such event to the Compliance Officer or the Assistant General
Counsel.
5
<PAGE>
IV. ENFORCEMENT
A. Review - The Compliance Officer shall review reports filed under the Code
of Ethics to determine whether any violation of this Code of Ethics may
have occurred.
B. Investigation - The Assistant General Counsel shall investigate any
substantive alleged violation of the Code of Ethics. An Employee allegedly
involved in a violation of the Code of Ethics may be required to deliver to
the Assistant General Counsel or his/her designee all tax returns involving
any Personal Account or any Securities for which the Employee has
Beneficial Ownership for all years requested. Failure to comply may result
in termination.
C. Sanctions - In determining the sanctions to be imposed for a violation of
this Code of Ethics, the following factors, among others, may be
considered:
(1) the degree of willfulness of the violation;
(2) the severity of the violation;
(3) the extent, if any, to which an Employee profited or benefited from
the violation;
(4) the adverse effect, if any, of the violation on a Covered Company or a
Client Account; and
(5) any history of prior violation of the Code.
The following sanctions, among others, may be considered:
(1) disgorgement of profits;
(2) fines;
(3) letter of reprimand;
(4) suspension or termination of employment; and
(5) such other actions as the Compliance Officer in concert with
appropriate legal counsel, or the Boards of Trustees of the Evergreen
Funds, shall determine.
D. All violations of the Code of Ethics involving Employees with
responsibilities relating to the Evergreen Funds or otherwise involving the
Evergreen Funds, and any sanctions imposed shall be reported to the Boards
of Trustees of the Evergreen Funds. All violations of the Code and any
sanctions also shall be reported to the Employee's supervisor, and any
regulatory agency requiring such reporting, and shall be filed in the
Employee's personnel record.
E. Potential Legal Penalties for Misuse of Inside Information
(1) civil penalties up to three times the profit gained or loss avoided;
(2) disgorgement of profits;
(3) injunctions, including being banned from the securities industry;
(4) criminal penalties up to $1 million; and/or
(5) jail sentences.
V. DEFINITIONS
ACCESS PERSON: Access Person includes: (i.) any director of a Covered Company or
any officer of a Covered Company with the title of Vice President or above, but
excluding any such director or officer excluded in writing by the Covered
Company's Compliance Officer with the approval of the Assistant General Counsel;
(ii.) any Investment Person, but excluding any such person excluded in writing
by the appropriate person's Compliance Officer with the approval of the
Assistant General Counsel; and (iii.) any Employee of a Covered Company who, in
connection with his or her regular duties, makes, participates in, or obtains
information regarding the purchase or sale of a Security by a Client Account or
a Covered Company. Upon being notified of the hiring of a new Employee or of a
change in an Employee's job title or responsibilities, the appropriate
Compliance Officer will determine and notify the Employee as to whether he/she
is or has become an Access Person under the Code.
6
<PAGE>
ASSISTANT GENERAL COUNSEL: Michael H. Koonce - 617/210-3663
BENEFICIAL OWNERSHIP: A direct or indirect financial interest in an investment
giving a person the opportunity directly or indirectly to participate in the
risks and rewards of the investment, regardless of the actual owner of record.
Securities of which a person may have Beneficial Ownership include, but are not
limited to:
(1) securities owned by a spouse, by or for minor children, or by
relatives of the person or his/her spouse who live in his/her home,
including Securities in trusts of which such persons are
beneficiaries;
(2) a proportionate interest in Securities held by a partnership of which
the person is a general partner;
(3) securities for which a person has a right to dividends that are
separated or separable from the underlying securities; and
(4) securities that a person has a right to acquire through the exercise
or conversion of another Security.
CLIENT ACCOUNT: Any account of any person or entity (including an investment
company) for which a Covered Company provides investment advisory or investment
management services. Client Account does not include brokerage or other accounts
not involving investment advisory or management services.
COMPLIANCE OFFICER: The Compliance Officers for each Covered Company are set
forth below:
First Union Capital Management Group
Evergreen Investment Management, and
First Capital Group
Clint Lackey 704/374-3476
Karen Knudtsen 704-374-2249
Joni McCabe 704/374-6404
Donna Mooney 704/383-8197
Vicki Calhoun 215/985-8742
Evergreen Asset Management Corp.
Lieber & Company
Christina Carroll 914/641-2301
Jim Angelos 617/210-3690
Evergreen Investment Management Company, Inc.
Cathy White 617/210-3606
Jim Angelos 617/210-3690
Meridian Investment Company
Vicki Calhoun 215/985-8742
Tattersall Advisory Group
Margaret Corwin 804/289-2663
Mentor Investment Advisors
Mentor Perpetual Advisors
Taylor Nelson 804/782-3209
7
<PAGE>
COVERED COMPANY: Includes Evergreen Asset Management Company, Evergreen
Investment Management Company, Inc., Lieber & Company, Mentor Investment
Advisors, Mentor Perpetual Advisors, Meridian Investment Company, Tattersall
Advisory Group, Inc. and the investment groups included within the Capital
Management Group of First Union National Bank, which currently include Evergreen
Investment Management, First Capital Group, and First Investment Advisors.
Covered Company also includes any CMG advisors that are acquired during the time
this Code is in effect.
DERIVATIVE: Every financial arrangement whose value is linked to, or derived
from, fluctuations in the prices of stock, bonds, currencies or other assets.
Derivatives include but are not limited to futures, forward contracts, options
and swaps on interest rates, currencies, and stocks.
DIRECT OR INDIRECT INFLUENCE OR CONTROL: The power on the part of an Employee,
his/her spouse or a relative living in his/her home to directly or indirectly
influence the selection or disposition of investments.
EMPLOYEE: Any director, officer, or employee of a Covered Company, including
temporary or part-time employees and employees on short-term disability or leave
of absence. Independent contractors and their employees providing services to a
Covered Company, if designated by the Compliance Officer, shall be treated as
Employees under this Code.
EVERGREEN FUNDS: The open and closed-end investment companies advised or
administered by the Covered Companies.
INSIDE INFORMATION: Information regarding a Security or its issuer that has not
yet been effectively communicated to the public through an SEC filing or widely
distributed news release, and which a reasonable investor would consider
important in making an investment decision or which is reasonably likely to
impact the trading price of the Security. Inside Information includes, but is
not limited to, information about (i.) dividend changes, (ii.) earnings
estimates and changes to previously released estimates, (iii.) other changes in
financial status, (iv.) proposed mergers or acquisitions, (v.) purchases or
sales of material amounts of assets, (vi.) significant new business, products or
discoveries or losses of business, (vii.) litigation or investigations, (viii.)
liquidity difficulties or (ix.) management changes.
INVESTMENT PERSON: An Employee who is a portfolio manager, securities analyst,
or trader, or who otherwise makes recommendations regarding or effects the
purchase or sale of securities by a Client Account.
PERSONAL ACCOUNT: Any holding of Securities constituting Beneficial Ownership,
other than a holding of Securities previously approved by the Compliance Officer
over which the Employee has no Direct Influence or Control. A Personal Account
is not limited to securities accounts maintained at brokerage firms, but also
includes holdings of Securities owned directly by an Employee.
SECURITY: Any type of equity or debt instrument and any rights relating thereto,
such as derivatives, warrants and convertible securities.
Unless otherwise noted, Security does not include:
(1) US Government Securities (see definition below);
(2) commercial paper, certificates of deposit, repurchase agreements,
bankers' acceptances, or any other money market instruments;
(3) shares of registered open-end investment companies (i.e., mutual
funds);
(4) commodities (except the Security that does include options on
individual equity or debt securities);
(5) real estate investment trusts;
(6) guaranteed insurance contracts/ bank investment contracts; or
(7) index based securities;
(8) derivatives based on any instruments listed above.
8
<PAGE>
Shares issued by all closed end funds (excluding index-based derivatives) are
included in the definition of Security.
U.S. GOVERNMENT SECURITIES: All direct obligations of the U.S. Government and
its agencies and instrumentalities (for instance, obligations of GNMA, FHLCC, or
FHLBs).
9
<PAGE>
EXHIBIT (P)(8)
J.P. MORGAN INVESTMENT MANAGEMENT, INC.
CODE OF ETHICS
1. Purposes
This Code of Ethics (the "Code") has been adopted by the Directors of J.P.
Morgan Investment Management Inc. (the "Adviser"), in accordance with Rule
17j-1(c) promulgated under the Investment Company Act of 1940, as amended (the
"Act"). Rule 17j-1 under the Act generally proscribes fraudulent or manipulative
practices with respect to purchases or sales of securities held or to be
acquired by investment companies, if effected by associated persons of such
companies. The purpose of this Code is to adopt provisions reasonably necessary
to prevent Access Persons from engaging in any unlawful conduct as set forth in
Rule 17j-1(b) as follows:
(b) It is unlawful for any affiliated person of or principal underwriter
for a Fund, or any affiliated person of an investment adviser of or principal
underwriter for a Fund, in connection with the purchase or sale, directly or
indirectly, by the person of a Security Held or to be Acquired by the Fund:
(i) To employ any device, scheme or artifice to defraud the Fund;
(ii) To make any untrue statement of a material fact to the Fund or
omit to state a material fact necessary in order to make the
statements made to the Fund, in light of the circumstances under
which they are made, not misleading;
(iii) To engage in any act, practice, or course of business that
operates or would operate as a fraud or deceit on the Fund; or
(iv) To engage in any manipulative practice with respect to the Fund.
2. Definitions
(a) "Access Person" means any director, officer, general partner or
Advisory Person of the Adviser.
(b) "Administrator" means Morgan Guaranty Trust Company.
(c) "Advisory Person" means (i) any employee of the Adviser or the
Administrator (or any company in a control relationship to the Adviser) who, in
connection with his or her regular functions or duties, makes, participates in,
or obtains information regarding the purchase or sale of securities for a Fund,
or whose functions relate to the making of any recommendations with respect to
such purchases or sales; and (ii) any natural person in a control relationship
to the Adviser who obtains information concerning recommendations regarding the
purchase or sale of securities by a Fund.
<PAGE>
(d) "Beneficial ownership" shall be interpreted in the same manner as it
would be under Exchange Act Rule 16a-1(a)(2)in determining whether a person is
subject to the provisions of Section 16 of the Securities Exchange Act of 1934
and the rules and regulations thereunder.
(e) "Control" has the same meaning as in Section 2(a)(9) of the Act.
(f) "Covered Security" shall have the meaning set forth in Section 2(a)(36)
of the Act, except that it shall not include shares of open-end funds, direct
obligations of the United States Government, bankers' acceptances, bank
certificates of deposit, commercial paper and high quality short-term debt
instruments, including repurchase agreements.
(g) "Fund" means an Investment Company registered under the Investment
Company Act of 1940.
(h) "Initial Public Offering" means an offering of Securities registered
under the Securities Act of 1933, the issuer of which, immediately before the
registration, was not subject to the reporting requirements of Sections 13 or
15(d) of the Securities Exchange Act.
(i) "Limited Offering" means an offering that is exempt from registration
under the Securities Act pursuant to Section 4(2) or Section 4(6) or pursuant to
Rule 504, Rule 505, or Rule 506 under the Securities Act.
(j) "Purchase or sale of a Covered Security" includes, among other things,
the writing of an option to purchase or sell a Covered Security.
(k) "Security Held or to be Acquired" by a Adviser means: (i) any Covered
Security which, within the most recent 15 days, is or has been held by a Fund or
other client of the Adviser or is being or has been considered by the Adviser
for purchase by a Fund or other client of the Adviser; and (ii) any option to
purchase or sell, and any security convertible into or exchangeable for, a
Covered Security.
3. Statement of Principles
It is understood that the following general fiduciary principles govern the
personal investment activities of Access Persons:
(a) the duty to at all times place the interests of shareholders and other
clients of the Adviser first;
(b) the requirement that all personal securities transactions be conducted
consistent with this Code of Ethics and in such a manner as to avoid any actual
or potential conflict of interest or any abuse of an individual's position of
trust and responsibility;
(c) the fundamental standard that Investment Personnel may not take
inappropriate advantage of their position; and
(d) all personal transactions must be oriented toward investment, not
short-term or speculative trading.
It is further understood that the procedures, reporting and recordkeeping
requirements set forth below are hereby adopted and certified by the Adviser as
reasonably necessary to prevent Access Persons from violating the provisions of
this Code of Ethics.
<PAGE>
4. Procedures to be followed regarding Personal Investments by Access Persons
(a) Pre-clearance requirement. Each Access Person must obtain prior written
approval from his or her group head (or designee) and from the Adviser's trading
desk before transacting in any Covered Security. For details regarding
transactions in mutual funds, see Section 4(e).
(b) Brokerage transaction reporting requirement. Each Access Person working
in the United States must maintain all of his or her accounts and the accounts
of any person of which he or she is deemed to be a beneficial owner with a
broker designated by the Adviser and must direct such broker to provide broker
trade confirmations to the Adviser's legal/compliance department, unless an
exception has been granted by the Adviser's legal/compliance department. Each
Access Person to whom an exception to the designated broker requirement has been
granted must instruct his or her broker to forward all trade confirms and
monthly statements to the Adviser's legal/compliance department. Access Persons
located outside the United States are required to provide details of each
brokerage transaction of which he or she is deemed to be the beneficial owner,
to the Adviser's legal/compliance group, within the customary period for the
confirmation of such trades in that market.
(c) Initial public offerings (new issues). Access Persons are prohibited
from participating in Initial Public Offerings, whether or not J.P. Morgan or
any of its affiliates is an underwriter of the new issue, while the issue is in
syndication.
(d) Minimum investment holding period. Each Access Person is subject to a
60-day minimum holding period for personal transactions in Covered Securities.
An exception to this minimum holding period requirement may be granted in the
case of hardship as determined by the legal/compliance department.
(e) Mutual funds. Each Access Person must pre-clear transactions in shares
of closed-end Funds with the Adviser's trading desk, as they would with any
other Covered Security. See Section 4(a). Each Access Person must obtain
pre-clearance from his or her group head(or designee) before buying or selling
shares in an open-end Fund or a sub-advised Fund managed by the Adviser if such
Access Person or the Access Person's department has had recent dealings or
responsibilities regarding such mutual fund.
(f) Limited offerings. An Access Person may participate in a limited
offering only with written approval of such Access Person's group head (or
designee) and with advance notification to the Adviser's compliance group.
(g) Blackout periods. Access Persons are subject to blackout periods 7
calendar days before and after the trade date of a Covered Security where such
Access Person initiated a trade order for the Covered Security for any of their
client Accounts.
(h) Prohibitions. Short sales are generally prohibited. Transactions in
options, rights, warrants, or other short-term securities and in futures
contracts (unless for bona fide hedging) are prohibited, except for purchases of
options on widely traded indices specified by the Adviser's compliance group if
made for investment purposes.
(i) Securities of J.P. Morgan. No Access Person may buy or sell any
security issued by J.P. Morgan from the 27th of each March, June, September,
<PAGE>
and December until the first full business day after earnings are released in
the following month. All transactions in securities issued by J.P. Morgan must
be pre-cleared with the Adviser's compliance group and executed through an
approved trading area. Transactions in options and short sales of J.P. Morgan
stock are prohibited.
(j) Certification requirements. In addition to the reporting requirements
detailed in Sections 6 below, each Access Person, no later than 30 days after
becoming an Access Person, must certify to the Adviser's compliance group that
he or she has complied with the broker requirements in Section 4(b).
5. Other Potential Conflicts of Interest
(a) Gifts. No employee of the Adviser or the Administrator may (i)accept
gifts, entertainment, or favors from a client, potential client, supplier, or
potential supplier of goods or services to the Adviser or the Administrator
unless what is given is of nominal value and refusal to accept it would be
discourteous or otherwise harmful to the Adviser or Administrator; (ii)provide
excessive gifts or entertainment to clients or potential clients; and (iii)
offer bribes, kickbacks, or similar inducements.
(b) Outside Business Activities. The prior consent of the Chairman of the
Board of J.P. Morgan, or his or her designee, is required for an officer of the
Adviser or Administrator to engage in any business-related activity outside of
the Adviser or Administrator, whether the activity is intermittent or
continuing, and whether or not compensation is received. For example, such
approval is required such an officer to become:
-An officer, director, or trustee of any corporation (other than a
nonprofit corporation or cooperative corporation owning the building in
which the officer resides);
-A member of a partnership (other than a limited partner in a
partnership established solely for investment purposes);
-An executor, trustee, guardian, or similar fiduciary advisor (other
than for a family member).
6. Reporting Requirements
(a) Every Access Person must report to the Adviser:
(i) Initial Holding Reports. No later than 10 days after the person
becomes an Access Person, the following information: (A) the
title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect
beneficial ownership when the person became an Access Person; (B)
the name of any broker, dealer or bank with whom the Access
Person maintained an account in which any Covered Securities were
held for the direct or indirect benefit of the Access Person as
of the date the person became an Access Person; and (C) the date
that the report is submitted by the Access Person.
<PAGE>
(ii) Quarterly Transaction Reports. No later than 10 days after the
end of a calendar quarter, with respect to any transaction during
the quarter in a Covered Security in which the Access Person had
any direct or indirect beneficial ownership: (A) the date of the
transaction, the title, the interest rate and maturity date (if
applicable), the number of shares and principal amount of each
Covered Security involved; (B) the nature of the transaction; (C)
the price of the Covered Security at which the transaction was
effected; (D) the name of the broker, dealer or bank with or
through which the transaction was effected; and (E) the date that
the report is submitted by the Access Person.
(iii) New Account Report. No later than 10 days after the calendar
quarter, with respect to any account established by the Access
Person in which any Covered Securities were held during the
quarter for the direct or indirect benefit of the Access Person:
(A) the name of the broker, dealer or bank with whom the Access
Person established the account; (B) the date the account was
established; and (C) the date that the report is submitted by the
Access Person.
(iv) Annual Holding Report. Annually, the following information (which
information must be current as of a date no more than 30 days
before the report is submitted): (A) the title, number of shares
and principal amount of each Covered Security in which the Access
Person had any direct or indirect beneficial ownership; (B) the
name of any broker, dealer or bank with whom the Access Person
maintains an account in which any Covered Securities are held for
the direct or indirect benefit of the Access Person: and (C) the
date that the report is submitted by the Access Person.
(b) Exceptions from the Reporting Requirements.
(i) Notwithstanding the provisions of Section 6(a), no Access Person
shall be required to make:
A. a report with respect to transactions effected for any
account over which such person does not have any direct or
indirect influence or control;
B. a Quarterly Transaction Report under Section 6(a)(ii) if the
report would duplicate information contained in broker trade
confirmations or account statements received by the Adviser
with respect to the Access Person no later than 10 days
after the calendar quarter end, if all of the information
required by Section 6(a)(ii) is contained in the broker
trade confirmations or account statements, or in the records
of the Adviser.
(c) Each Access Person shall promptly report any transaction which is, or might
appear to be, in violation of this Code. Such report shall contain the
information required in quarterly reports filed pursuant to Section
6(a)(ii).
(d) All reports prepared pursuant to this Section 6 shall be filed with the
appropriate compliance personnel designated by the Adviser and reviewed in
accordance with procedures adopted by such personnel.
<PAGE>
(e) The Adviser will identify all Access Persons who are required to file
reports pursuant to this Section 6 and will inform them of their reporting
obligation.
(f) The Adviser no less frequently than annually shall furnish to a Fund's
board of directors for their consideration a written report that:
(a) describes any issues under this Code of Ethics or related
procedures since the last report to the board of directors,
including, but limited to, information about material violations
of the Code or procedures and sanctions imposed in response to
the material violations; and
(b) certifies that the Adviser has adopted procedures reasonably
necessary to prevent Access Persons from violating this Code of
Ethics.
7. Recordkeeping Requirements
The Adviser must at its principal place of business maintain records in the
manner and extent set out in this Section of this Code and must make available
to the Securities and Exchange Commission (SEC) at any time and from time to
time for reasonable, periodic, special or other examination:
(a) A copy of its code of ethics that is in effect, or at any time within
the past five years was in effect, must be maintained in an easily
accessible place;
(b) A record of any violation of the code of ethics, and of any action
taken as a result of the violation, must be maintained in an easily
accessible place for at least five years after the end of the fiscal
year in which the violation occurs;
(c) A copy of each report made by an Access Person as required by Section
6(a) including any information provided in lieu of a quarterly
transaction report, must be maintained for at least five years after
the end of the fiscal year in which the report is made or the
information is provided, the first two years in an easily accessible
place.
(d) A record of all persons, currently or within the past five years, who
are or were required to make reports as Access Persons or who are or
were responsible for reviewing these reports, must be maintained in an
easily accessible place.
(e) A copy of each report required by 6(f) above must be maintained for at
least five years after the end of the fiscal year in which it is made,
the first two years in an easily accessible place.
(f) A record of any decision and the reasons supporting the decision to
approve the acquisition by Access Persons of securities under Section
4(f) above, for at least five years after the end of the fiscal year
in which the approval is granted.
8. Sanctions
Upon discovering a violation of this Code, the Directors of the Adviser may
impose such sanctions as they deem appropriate, including, inter alia, financial
penalty, a letter of censure or suspension or termination of the employment of
the violator.
<PAGE>
EXHIBIT (p)(9)
LAZARD ASSET MANAGEMENT
A DIVISION OF
LAZARD FRERES & CO. LLC. ("LAZARD")
CODE OF ETHICS
Set forth below is Lazard's policy on personal securities transactions. As a
general rule, Lazard personnel are reminded that the interests of Lazard clients
take priority over the investment desires of Lazard personnel. All Lazard
personnel must conduct themselves in a manner consistent with Lazard's
requirements as set forth in this Code of Ethics and the respective Codes of
Ethics of The Lazard Funds, Inc. and Lazard Retirement Series, Inc. as well as
the Compliance Manual of Lazard Freres & Co. LLC ("LF&Co" or the "Firm") then in
effect. Please review this Code of Ethics carefully and contact the Compliance
Department if there are any questions.
PERSONAL SECURITIES ACCOUNTS COVERED
The restrictions set forth below apply to trading for all "Personal Securities
Accounts." These include:
- - Accounts in the Managing Director's or employee's name or accounts in which
the Managing Director or employee or any Related Person has a direct or
indirect beneficial interest other than an account which is managed by
another manager, or by other Lazard portfolio managers, for a fee;
- - Accounts in the name of the Managing Director's or employee's spouse;
- - Accounts in the name of children under the age of 21, whether or not living
with the Managing Director or employee, and relatives or other individuals
living with the Managing Director or employee or for whose support the
Managing Director or employee is wholly or partially responsible (together
with the Managing Director's or employee's spouse, "Related Persons");
- - Accounts in which the Managing Director or employee or any Related Person
directly or indirectly controls, participates in, or has the right to
control or participate in, investment decisions, except for trades where
the Managing Director or employee or Related Person does not provide input.
RESTRICTIONS
The following restrictions apply to trading for Personal Securities Accounts of
Lazard personnel, all of which are subject to certain de minimus provisions and
may be waived upon consent of Lazard's or; to the extent applicable, LF&Co's,
compliance personnel:
1. No transactions for a Personal Securities Account may be made in a security
that is on the Restricted List;
2. No security may be purchased or sold for a Personal Securities Account:
(a) if the security is currently being considered for purchase or sale for
an Lazard client; or
<PAGE>
(b) if the security is being purchased or sold for an Lazard client on
that day or has been purchased or sold for an Lazard client within the
immediately preceding 7 calendar day period;
3. No purchase and sale, or sale and purchase, of a security for a Personal
Securities Account may occur within any 60-day period without prior
approval of Norman Eig, Herb Gullquist or Bill Butterly;
4. No transaction for a Personal Securities Account may be made in securities
offered pursuant to a public offering. Securities offered pursuant to a
private placement may not be purchased for Personal Securities Accounts
without the approval of Norman Eig, Herb Gullquist or Bill Butterly;
5. No transaction for a Personal Securities Account may be made in "deal" or
"rumor" securities, which are defined as securities of companies that are
the subject of reports or rumors of actual or anticipated extraordinary
corporate transactions or other corporate events;
6. Absent approval from the appropriate compliance personnel, Managing
Directors and employees are prohibited from engaging in the trading of
options or futures and from engaging in speculative trading as opposed to
investment activity. When such approval is given and Managing Directors and
employees effect opening transactions in options, the resulting closing
transaction will be considered effected on the day that the opening
transaction was effected for compliance purposes. The Managing Director or
employee must wait 60 days from the date of the opening transaction before
effecting the closing transaction. Managing Directors and employees are
prohibited from engaging in short sales of any security.
7. No transaction may be made in violation of the Material Non-Public
Information Policies and Procedures as outlined in Chapter X of LF&Co's
Compliance Manual; and
8. All transactions for Personal Securities Accounts must be approved by a
Managing Director of Lazard, preferably the Managing Director to whom the
employee reports, and pre-cleared by Don Klein and Bill Butterly, or their
respective representatives. These approvals should be written on the trade
ticket. In addition, each Managing Director or employee should complete and
deliver to Bill Butterly, prior to the transaction, the attached personal
securities transaction form. The procedure for pre-clearing a personnel
trade is explained in greater detail below.
EXEMPTIONS
The restrictions and prohibitions contained in this Code shall not apply
to:
(a) Purchases or sales of securities which receive the prior approval of
either Norman Eig or Herbert W. Gullquist and Bill Butterly (the
approving officer having no personal interest in such purchases or
sales) because
<PAGE>
such purchases or sales are not likely to have any economic impact on
any client account managed or advised by Lazard
(b) Any securities transaction, or series of related transactions during
any 30-day period, involving 500 shares or less in the aggregate of
any security, if the issuer has a market capitalization (outstanding
shares multiplied by the current price per share) greater than US $1
billion ("de minimus exemption"). This provision does not provide an
exemption from the 60-day holding period.
OTHER ITEMS
1. Lazard personnel may not serve on the board of directors of any corporation
(other than a not-for-profit corporation or a related Lazard entity)
without the prior approval of Norman Eig or Herb Gullquist;
2. All Lazard personnel must complete quarterly Personal Security Account
transaction reports. By law, these reports must be returned to Compliance
by the tenth day following the end of the quarter. To ensure strict
compliance with these requirements, the forms should be returned by the
seventh day following the end of the quarter; and
3. Each Lazard Managing Director and employee must annually certify compliance
with the Lazard Code of Ethics with respect to all Personal Securities
Accounts.
SECURITIES COVERED
Lazard's policies and procedures regarding personal securities trading set forth
herein apply to transactions involving all equity and debt securities, including
common and preferred stock, investment and non-investment grade debt securities,
investments convertible into or exchangeable for stock or debt securities, or
any derivative instrument relating to any such security or securities index,
including options, warrants and futures, or any interest in a partnership or
other entity that invests in any of the foregoing. Investments in mutual funds,
certificates of deposit and federal government obligations are not covered by
these policies and procedures. Any other exception to personal securities
trading policies and procedures must be approved.
TRANSACTION APPROVAL PROCEDURES
INTERNAL ACCOUNTS
To pre-clear a transaction being made in a Personal Securities Account held at
the Firm (an "Internal Account"), Lazard personnel must:
1. Electronically complete and "sign" a "New Equity Order" or "New Bond Order"
trade ticket located in the Firm's Lotus-Notes e-mail application under the
heading "Employee Trades." The ticket should be directed to the employee's
<PAGE>
supervising Managing Director, or, in the absence of the supervising
Managing Director, to another Lazard Managing Director or one of the Lazard
Directors designated in the database.
2. Upon review of the ticket by the designated supervisor, the employee should
receive an automatic e-mail notification informing her/him that the trade
has been approved or rejected.
3. Following the supervisor's approval, the ticket is transmitted to the
Compliance Department where it is processed and, if approved, is routed to
the trading desk for execution, provided the employee had selected the
"Direct Execution" button when completing the ticket.
The cut-off time for receipt of supervisor-approved tickets in the Compliance
Department is 9.30 a.m. each trading day. Any ticket received after this time
will be processed for execution the next trading day. It is the responsibility
of each employee to ensure that tickets sent to a supervisor for approval
receive the supervisor's timely attention.
NOTE
In completing a new ticket, if the employee de-selects the "Direct Execution"
button, the ticket will be returned to her/him after Compliance approval for
submission to the trading desk. In such case, the trade must be submitted within
2 days or it will expire and be null and void.
To assist each employee with monitoring the status of a trade ticket submitted
for approval, the system is designed to generate an e-mail notification to the
employee every time the ticket is reviewed or acted upon by the supervisor,
compliance department or the trading desk. Additionally, every supervisor's
assistant is set up to receive a summary of the each approval request sent to
the supervisor so that in the absence of the supervisor, the assistant would
advise the employee to re-rout the trade to another supervisor. For more details
on the set-up and use of the Employee Trades database, please contact David
Osunkwo at ext. 6065.
OUTSIDE ACCOUNTS
Lazard personnel may not maintain a securities or commodities account (including
a foreign securities account) at any other broker or dealer or bank (an "Outside
Account") without the prior written consent of the Firm. Where such consent is
given, employees must provide the Firm with the name of the broker-dealer firm
with whom they carry their personal accounts and must request that the
broker-dealer send to Lazard, to the attention of both Donald Klein and Bill
Butterly, copies of monthly account statements and all trade confirmations.
These same principles apply to establishing an account at another brokerage
house where the employee has control over the trading in that account (such as a
discretionary account, a nominee account, an account for a general or limited
partnership, a trust account), or an account of a corporation where trading is
controlled or influenced by the Lazard employee. If you already have an Outside
Account, please notify Bill Butterly as soon as possible to facilitate the
distribution and review of your monthly account statements and trade
confirmations.
<PAGE>
Managing Directors and employees are required to report promptly to Donald Klein
and Bill Butterly any change in status or location of any account in which they
have a beneficial interest as defined above. With respect to a trust account of
which a Managing Director or employee or member of his immediate family is a
beneficiary, the Firm policy requires that the Firm receive duplicate
confirmations and monthly account statements for each such account. Similarly,
Managing Directors and employees are required to report private securities and
commodities transactions effected by or for (i) themselves, (ii) spouses and
unemancipated family members, (iii) accounts over which the employee has control
as described above, or (iv) accounts of which the employee or a member of his
family is a beneficiary, or (v) accounts of family members including accounts of
in-laws where introduced or carried by an employee or Managing Director's member
organization. Deviations from the foregoing policies will be permitted only with
the prior written approval of an appropriate individual with compliance
responsibilities.
To pre-clear a transaction being made in an outside account, Lazard personnel
must follow the "Transaction Approval Procedures" relating to Internal Accounts.
NOTE:
Once a Managing Director or employee receives approval, the Lazard personnel
must transmit appropriate trade instructions to their outside broker within two
days, or the approval will become null and void.
<PAGE>
Exhibit (p)(10)
MASSACHUSETTS FINANCIAL SERVICES COMPANY
STATEMENT OF POLICY ON
PERSONAL SECURITIES TRANSACTIONS
(CODE OF ETHICS)
AS ADOPTED BY THE AUDIT COMMITTEE
EFFECTIVE AS OF MARCH 1, 2000
As an investment advisory organization with substantial
responsibilities to clients, Massachusetts Financial Services Company ("MFS")
has an obligation to implement and maintain a meaningful policy governing the
securities transactions of its Directors, officers and employees ("MFS
representatives").(1) This policy is intended to minimize conflicts of interest,
and even the appearance of conflicts of interest, between members of the MFS
organization and its clients in the securities markets as well as to effect
compliance with the Investment Company Act, the Investment Advisers Act and the
Securities Exchange Act. This policy inevitably will restrict MFS
representatives in their securities transactions, but this is the necessary
consequence of undertaking to furnish investment advice to clients. In addition
to complying with the specific rules, we all must be sensitive to the need to
recognize any conflict, or the appearance of conflict, of interest whether or
not covered by the rules. When such situations occur, the interests of our
clients must supersede the interest of MFS representatives.
1. GENERAL FIDUCIARY PRINCIPLES. All personal investment activities
conducted by MFS representatives are subject to compliance with the following
principles: (i) the duty at all times to place the interests of MFS' clients
first; (ii) the requirement that all personal securities transactions be
conducted consistent with this Code of Ethics and in such a manner as to avoid
any actual or potential conflict of interest or any abuse of an individual's
position of trust and responsibility; and (iii) the fundamental standard that
MFS representatives should not take inappropriate advantage of their positions.
2. APPLICABILITY OF RESTRICTIONS AND PROCEDURES. In recognition of the
different circumstances surrounding each MFS representative's employment,
various categories of MFS employees are subject to different restrictions under
this Code of Ethics. For purposes of applying this Code of Ethics, MFS employees
are divided into the general categories of Portfolio Managers, Investment
Personnel, Access Persons and Non-Access Persons, as each such term is defined
in Appendix A to this Code of Ethics, as amended from time to time by the Audit
Committee.
As used in this Code of Ethics, the term "securities" includes not only
publicly traded equity securities, but also privately issued equity securities,
shares of closed-end funds, fixed income securities (including municipal bonds
and many types of U.S. Government securities), futures, options, warrants,
rights, swaps, commodities and other similar instruments. Moreover, the
restrictions of this Code of Ethics apply to transactions by Access Persons
involving
- --------
(1) Employees of MFS Institutional Advisors, Inc., MFS Fund Distributors,
Inc., MFS Retirement Services, Inc., MFS International Ltd., MFS International
(U.K.) Ltd., MFS Service Center, Inc., Vertex Investment Management Inc. and MFS
Heritage Trust Company also are covered by this Code of Ethics.
<PAGE>
securities and other instruments related to, but not necessarily the same as,
securities held or to be acquired on behalf of an MFS client.
3. RESTRICTIONS ON PERSONAL SECURITIES TRANSACTIONS. No Access Person
shall trade in any security which is subject to a pending "buy" or "sell" order,
or is being considered for purchase or sale,(2) for a client of MFS until such
order is executed or withdrawn or such a transaction is no longer being
considered. In addition, no Investment Personnel shall trade in any security
after an MFS client trades in such security or such security has been considered
for purchase or sale on behalf of an MFS client until: (i) the next business day
following such trade or consideration (in the case of a proposed trade by an
Investment Personnel in the same direction as the MFS client); or (ii) the
eighth calendar day thereafter (in the case of a proposed trade by an Investment
Personnel in the opposite direction from the MFS client's trade). No Portfolio
Manager shall trade in any security within at least seven calendar days before
or after an MFS client whose account he or she manages trades in such security
or such security has been considered for purchase or sale on behalf of such an
MFS client. Any profits realized on trades within these proscribed periods must
be disgorged to the affected MFS client or, in the event that the amount to be
disgorged is relatively minor or difficult to allocate, to charity. In addition,
no MFS representative shall provide any information about such transaction or
recommendation to any person other than in connection with the proper execution
of such purchase or sale for an MFS client's account.
Portfolio Managers should consider the problems inherent in purchasing
for their own account securities that are or may be suitable for a client's
portfolio. For example, a fortuitous early sale by the Manager for his or her
personal account may be criticized in hindsight if the same security later is
sold from the client's account at a lower price.
GIFTS AND TRANSFERS. A gift or transfer shall be excluded from the
preclearance requirements provided that the recipient represents in
writing that he, she, they or it has no present intention of selling
the donated security.
SHORT SALES. No Access Person shall effect a short sale in any security
held in a portfolio managed by MFS. Access Persons may engage in
transactions in options and futures, subject to special preclearance
rules applicable to certain of those transactions as described in
Section 5 below.
INITIAL PUBLIC OFFERINGS. The purchase by Access Persons of securities
(other than securities of registered open-end investment companies)
offered at fixed public offering price by underwriters or a selling
group is prohibited.(3) Rights (including rights purchased to acquire
an additional full share) issued in respect of securities any Access
- --------
(2) A security is deemed to have been "considered for purchase or sale"
when a recommendation to purchase or sell such security has been made and
communicated to a portfolio manager and, with respect to the person making the
recommendation, when such person seriously considers making such a
recommendation.
(3) The reason for this rule is that it precludes any possibility that
Access Persons might use MFS' clients' market stature as a means of obtaining
for themselves "hot" issues which otherwise might not be offered to them. In
addition, this rule eliminates the possibility that underwriters and selling
group members might seek by this means to gain favor with individuals in order
to obtain preferences from MFS.
<PAGE>
Persons owns may be exercised, subject to preclearance; the decision
whether or not to grant preclearance shall take into account, among
other factors, whether the investment opportunity should be reserved
for an MFS client and whether the investment opportunity is being or
was offered to the individual by virtue of his or her position with
MFS.
PRIVATE PLACEMENTS. Any acquisition by Access Persons of securities
issued in a private placement is subject to preclearance. The decision
whether or not to grant preclearance shall take into account, among
other factors, whether the investment opportunity should be reserved
for an MFS client and whether the investment opportunity is being
offered to the individual by virtue of his or her position with MFS.
Investment Personnel who have been precleared to acquire securities in
a private placement are required to disclose that investment when they
play a part in any subsequent consideration of an investment in the
issuer for an MFS client. In such circumstances, the decision to
purchase securities of the issuer for the MFS client shall be subject
to an independent review by Investment Personnel with no personal
interest in the issuer.
NOTE: Acquisitions of securities in private placements by country
clubs, yacht clubs and other similar entities need not be precleared,
but are subject to the reporting, disclosure and independent review
requirements.
PROHIBITION ON SHORT-TERM TRADING PROFITS. All Investment Personnel are
prohibited from profiting in the purchase and sale, or sale and
purchase, of the same (or equivalent) securities within 60 calendar
days. Any profits realized on such short-term trades must be disgorged
to the affected MFS client (if any) or, in the event that the amount to
be disgorged is relatively minor or difficult to allocate, to charity.
This restriction on short-term trading profits shall not apply to
transactions exempt from preclearance requirements, as described in
Section 8 below.
It is expected that all MFS representatives will follow these
restrictions in good faith and conduct their personal trading in keeping with
the intended purpose of this Code of Ethics. NOTE: ANY NON-ACCESS PERSON WHO
RECEIVES ANY INFORMATION ABOUT ANY PARTICULAR INVESTMENT RECOMMENDATION OR
EXECUTED OR PROPOSED TRANSACTION FOR ANY MFS CLIENT IS REQUIRED TO COMPLY WITH
ALL PRECLEARANCE AND OTHER REQUIREMENTS OF THIS CODE OF ETHICS APPLICABLE TO
ACCESS PERSONS. Any individual should feel free to take up with the Audit
Committee any case in which he or she feels inequitably burdened by these
policies. The Audit Committee may, in its sole discretion, grant appropriate
exceptions from the requirements of this Code of Ethics where warranted by
applicable facts and circumstances.
4. BENEFICIAL OWNERSHIP. The requirements of this Code of Ethics apply
to any account in which an MFS representative has (i) "direct or indirect
beneficial ownership" or (ii) any "direct or indirect influence or control."
Under applicable SEC interpretations, such "beneficial ownership" includes
accounts of a spouse, minor children and dependent relatives resident in the MFS
representative's house, as well as any other contract, relationship,
understanding or other arrangement which results in an opportunity for the MFS
representative to profit or share profits from a transaction in securities.
NOTE: The exception for accounts with respect to which an MFS
representative lacks "direct or indirect influence or control" is extremely
narrow, and should only be relied upon in
<PAGE>
cases which have been pre-approved in writing by Stephen E. Cavan or Robert T.
Burns of the Legal Department. Certain "blind trust" arrangements approved by
the Legal Department may be excluded from the preclearance (but not the
quarterly reporting) requirements of this Code of Ethics.
5. PRECLEARANCE REQUIREMENTS. In order to facilitate compliance with
this Code of Ethics, preclearance requests must be made and approved before any
transaction may be made by an Access Person or for any other account
beneficially owned by an Access Person. A preclearance request in the form set
forth in MFS' automated Code of Ethics system, as amended from time to time,
should be completed and submitted electronically for any order for an Access
Person's own account or one described in Section 4 above, or, in the case of an
Access Person who wishes to preclear while outside of the Boston area, should
either: (i) be completed in the form attached hereto, as amended from time to
time, signed and submitted by facsimile machine, to the Compliance Department;
or (ii) be submitted by telephone call to the Compliance Department. Any
preclearance request received before 3:00 p.m. on a business day will be
responded to as soon as available on the following business day. Preclearance
requests will be reviewed by Equity and Fixed Income Department personnel who
will be kept apprised of recommendations and orders to purchase and sell
securities on behalf of MFS clients, the completion or cancellation of such
orders and the securities currently held in portfolios managed by MFS. Their
advice will be forwarded to the Compliance Department.
The preclearance process imposes significant burdens on the investment
and administrative departments within MFS. Accordingly, if the MFS Audit
Committee determines that an Access Person is making an excessive number of
preclearance requests, it reserves the right to limit such Access Person to a
certain number of preclearance requests per day or per period.
An Access Person who obtains electronic or written notice from the
Compliance Department indicating consent to an order which the Access Person
proposes to enter for his or her own account or one described in Section 4 above
may execute that order ONLY ON THE DAY WHEN SUCH NOTICE IS RECEIVED unless
otherwise stated on the notice. Such notices will always be electronic or in
writing; however, in the case of an Access Person who wishes to preclear a
transaction while outside the Boston area, the Compliance Department will also
provide oral confirmation of the content of the written notice.
Preclearance requests may be denied for any number of appropriate
reasons, most of which are confidential. For example, a preclearance request for
a security that is being considered for purchase or sale on behalf of an MFS
client may be denied for an extended period (e.g. 10 business days).
Accordingly, an Access Person is not entitled to receive any explanation or
reason if his or her preclearance request is denied, and repetitive requests for
an explanation by an Access Person will be deemed a violation of this Code of
Ethics.
SIGNIFICANT OWNERSHIP BY MFS CLIENTS. In cases where MFS clients own,
in the aggregate, 8% or more of the outstanding equity securities of an
issuer, requests by Access Persons to purchase the securities of such
issuer will be denied. Requests to preclear sales of such securities
may be granted, subject to the standard requirements set forth in
Section 3 above.
SECURITIES SUBJECT TO AUTOMATIC PURCHASES AND SALES FOR MFS CLIENTS.
Certain MFS funds and institutional accounts are managed such that the
securities held in such
<PAGE>
portfolios are regularly purchased or sold on an equal proportionate
basis so as to preserve specified percentage weightings of such
securities across such portfolios. Requests to preclear purchases of
securities held in such portfolios will be denied. Requests to sell
such securities may be granted, subject to the standard preclearance
requirements set forth in Section 3 above.
OPTIONS AND FUTURES TRANSACTIONS. Access Persons may purchase (to open)
and sell (to close) call and put options and futures contracts on
securities, subject to the preclearance and other requirements of this
Code of Ethics; however, an Access Person may neither buy a put option
on any security held in a portfolio managed by MFS nor write (sell to
open) options and futures contracts. In the case of purchased put and
call options, the preclearance of the exercise of such options as well
as their purchase and sale, is required. Preclearance of the exercise
of purchased put and call options shall be requested on the day before
the proposed exercise or, if notice to the writer of such options is
required before the proposed exercise date, the date before notice is
proposed to be given, setting forth the proposed exercise date as well
as the proposed notice date.(4) Purchases and sales of options or
futures contracts to "close out" existing options or futures contracts
must be precleared.(5)
MFS CLOSED-END FUNDS. All transactions effected by any MFS
representative in shares of any closed-end fund for which MFS or one of
its affiliates acts as investment adviser shall be subject to
preclearance and reporting in accordance with this Code of Ethics.
Non-Access Persons are exempt from the preclearance and reporting
requirements set forth in this Code of Ethics with respect to
transactions in any other type of securities, so long as they have not
received any information about any particular investment recommendation
or executed or proposed transaction for any MFS client with respect to
such security.
6. DUPLICATE CONFIRMATION STATEMENT REQUIREMENT. In order to implement
and enforce the above policies, every Access Person shall arrange for his or her
broker to send MFS duplicate copies of all confirmation statements issued with
respect to the Access Person's transactions and all periodic statements for such
Access Person's securities accounts (or other accounts beneficially owned by
such Access Person). The Compliance Department will coordinate with brokerage
firms in order to assist Access Persons in complying with this requirement.
7. REPORTING REQUIREMENT. Each Access Person shall report on or before
the tenth day of each calendar quarter any securities transactions during the
prior quarter in accounts covered by Section 4 above. EMPLOYEES WHO FAIL TO
COMPLETE AND FILE SUCH QUARTERLY REPORTS ON A TIMELY BASIS WILL BE REPORTED TO
THE AUDIT COMMITTEE AND WILL BE SUBJECT TO SANCTIONS. Reports shall be reviewed
by the Compliance Department.
- --------
(4) Access Persons should note that this requirement may result in their
not being allowed to exercise an option purchased by them on the exercise date
they desire, and in the case of a "European" option on the only date on which
exercise is permitted by the terms of the option.
(5) Access Persons should note that as a result of this requirement, they
may not be able to obtain preclearance consent to close out an option or futures
contract before the settlement date. If such an option or futures contract is
automatically closed out, the gain, if any, on such transaction will be
disgorged in the manner described in Section 3 above.
<PAGE>
In filing the reports for accounts within these rules, please note:
(i) You must file a report for every calendar quarter even if you
had no reportable transactions in that quarter; all such reports
shall be completed and submitted in the form set forth in MFS'
automated Code of Ethics system.
(ii) Reports must show any sales, purchases or other acquisitions or
dispositions, including gifts, exercises of conversion rights
and exercises or sales of subscription rights. See Section 8
below for certain exceptions to this requirement.
(iii) Reports will be treated confidentially unless a review of
particular reports with the representative is required by the
Audit Committee.
(v) Reports are made available for review by the Boards of Trustees
of MFS investment company clients upon their request.
NOTE: Any Access Person who maintains all of his or her personal
securities accounts with one or more broker-dealer firms that send
confirmation and periodic account statements in an electronic format
approved by the Compliance Department, and who arranges for such firms
to send such statements (no less frequently than quarterly) required by
Section 6 above, shall not be required to prepare and file the
quarterly reports required by this Section 7. However, each such Access
Person shall be required to verify the accuracy and completeness of all
such statements on at least an annual basis.
8. CERTAIN EXCEPTIONS.
MUTUAL FUNDS. Transactions in shares of any open-end investment companies,
including funds for which the MFS organization is investment adviser, need not
be precleared or reported.
CLOSED-END FUNDS. Automatic reinvestments of distributions of
closed-end funds advised by MFS pursuant to dividend reinvestment plans of such
funds need only be reported. All other closed-end fund transactions must be
precleared and reported.
MFS COMMON STOCK. Transactions in shares of stock of MFS need not be
precleared or reported.
LARGE CAPITALIZATION STOCKS. Transactions in securities issued by
companies with market capitalizations of at least $5 billion generally will be
eligible for automatic preclearance (subject to certain exceptions), but must be
reported and are subject to post-trade monitoring. The Compliance Department
will maintain a list of issuers that meet this market capitalization
requirement. A preclearance request for a large capitalization company will be
denied whenever deemed appropriate.
U.S. GOVERNMENT SECURITIES. Transactions in U.S. Treasury securities
(including options and futures contracts and other derivatives with respect to
such securities) need not be precleared or reported. Option and futures
contracts on U.S. Government obligations (other than
<PAGE>
U.S. Treasury securities) and securities indices need not be precleared but must
be reported. Transactions in U.S. Government securities offered on the basis of
"non-competitive tender" need not be precleared or reported. However, U.S.
Government obligations (other than U.S. Treasury securities) offered by
"subscription" must be precleared and reported.
OTHER EXCEPTIONS. Transactions in money market instruments and in
options on broad-based indices need not be precleared, although such
transactions must be reported. In addition, the following types of transactions
need not be precleared or reported: (i) stock dividends and stock splits; (ii)
foreign currency transactions; and (iii) transactions in real estate limited
partnership interests.
9. DISCLOSURE OF PERSONAL SECURITIES HOLDINGS. All Access Persons are
required to disclose all personal securities holdings within 10 days after
becoming an Access Person (i.e. upon commencement of employment with MFS or
transfer within MFS to an Access Person position) and thereafter on an annual
basis. Reports shall be reviewed by the Compliance Department.
10. GIFTS, ENTERTAINMENT AND FAVORS. MFS representatives must not make
business decisions that are influenced or appear to be influenced by giving or
accepting gifts, entertainment or favors. Investment Personnel are prohibited
from receiving any gift or other thing of more than de minimis value from any
person or entity that does business with or on behalf of MFS or its clients.
Invitations to an occasional meal, sporting event or other similar activity will
not be deemed to violate this restriction unless the occurrence of such events
is so frequent or lavish as to suggest an impropriety.
11. SERVICE AS A DIRECTOR. All MFS representatives are prohibited from
serving on the boards of directors of commercial business enterprises, absent
prior authorization by the Management Committee based upon a determination that
the board service would be consistent with the interests of MFS' clients. In the
relatively small number of instances in which board service is authorized, MFS
representatives serving as directors may be isolated from other MFS
representatives through "Chinese Wall" or other appropriate procedures.
12. CERTIFICATION OF COMPLIANCE WITH CODE OF ETHICS. All MFS
representatives (including Non-Access Persons) shall be required to certify
annually that (i) they have read and understand this Code of Ethics and
recognize that they are subject to its requirements applicable to them and (ii)
they have complied with all requirements of this Code of Ethics applicable to
them, and (in the case of Access Persons) have reported all personal securities
transactions (whether pursuant to quarterly reports from the Access Person or
duplicate confirmation statements and periodic reports from the Access Person's
broker-dealer) required to be reported pursuant to this Code of Ethics. This
certification shall apply to all accounts beneficially owned by an MFS
representative.
13. BOARDS OF TRUSTEES OF MFS FUNDS. Any material amendment to this
Code of Ethics shall be subject to the approval by each of the Boards of
Trustees (including a majority of the disinterested Trustees on each such Board)
of each of the registered investment companies with respect to which MFS, or any
subsidiary of MFS, acts as investment adviser. In addition, on at least an
annual basis, MFS shall provide each such Board with a written report that: (i)
describes issues that arose during the preceding year under this Code of Ethics,
including without limitation information about any material violations of this
Code of Ethics and any sanctions
<PAGE>
imposed with respect to such violations; and (ii) certifies to each such Board
that MFS has adopted procedures reasonably necessary to prevent Access Persons
from violating this Code of Ethics.
14. SANCTIONS. Any trading for an MFS representative's account which
does not evidence a good faith effort to comply with these rules will be subject
to Audit Committee review. If the Audit Committee determines that a violation of
this Code of Ethics or its intent has occurred, it may impose such sanctions as
it deems appropriate including forfeiture of any profit from a transaction
and/or termination of employment. Any violations resulting in sanctions will be
reported to the Boards of Trustees of MFS investment company clients and will be
reflected in the employee's personnel file.
<PAGE>
APPENDIX A
CERTAIN DEFINED TERMS
As used in this Code of Ethics, the following shall terms shall have
the meanings set forth below, subject to revision from time to time by the Audit
Committee:
PORTFOLIO MANAGERS -- employees who are authorized to make investment
decisions for a mutual fund or client portfolio. Note: research
analysts are deemed to be Portfolio Managers with respect to the entire
portfolio of any fund managed collectively by a committee of research
analysts (e.g. MFS Research Fund).
INVESTMENT PERSONNEL -- all Portfolio Managers as well as research
analysts, traders and other members of the Equity Trading, Fixed Income
and Equity Research Departments.
ACCESS PERSONS -- all Portfolio Managers, Investment Personnel and
other members of the following departments or groups: Institutional
Advisors; Compliance; Fund Accounting; Investment Communications; and
Technology Services & Solutions ("TS&S") (excluding, however, TS&S
employees who are employed at Lafayette Corporate Center and certain
TS&S employees who may be specifically excluded by the Compliance or
Legal Departments); also included are members of the MFS Management
Committee, the MFS Administrative Committee and the MFS Operations
Committee. In certain instances, non-employee consultants and other
independent contractors may be deemed Access Persons and therefore be
subject to some or all of the requirements set forth in this Code of
Ethics.
NON-ACCESS PERSONS -- all employees of the following departments or
groups: Corporate Communications; Corporate Finance; Facilities
Management; Human Resources; Internal Audit (unless undergoing an audit
of an access area); Legal; MFS Service Center, Inc. (other than TS&S
employees who are employed at 500 Boylston Street); Retired Partners;
Travel and Conference Services; the International Division; MFS
International Ltd.; MFS Fund Distributors, Inc.; and MFS Retirement
Services, Inc. NOTE: ANY NON-ACCESS PERSON WHO RECEIVES ANY INFORMATION
ABOUT ANY PARTICULAR INVESTMENT RECOMMENDATION OR EXECUTED OR PROPOSED
TRANSACTION FOR ANY MFS CLIENT IS REQUIRED TO COMPLY WITH ALL
PRECLEARANCE AND OTHER REQUIREMENTS OF THIS CODE OF ETHICS APPLICABLE
TO ACCESS PERSONS. ANY NON-ACCESS PERSON WHO REGULARLY RECEIVES SUCH
INFORMATION WILL BE RECLASSIFIED AS AN ACCESS PERSON. IN ADDITION,
TRANSACTIONS IN SHARES OF THE MFS CLOSED-END FUNDS BY ALL MFS
REPRESENTATIVES ARE SUBJECT TO ALL SUCH PRECLEARANCE AND REPORTING
REQUIREMENTS (SEE SECTION 5 OF THIS CODE OF ETHICS).
<PAGE>
PERSONAL SECURITIES TRANSACTION
PRECLEARANCE REQUEST
[ONLY FOR USE BY MFS EMPLOYEES
NOT LOCATED IN BOSTON]
DATE:_________________________, _____
All transactions must be precleared, regardless of their size, except those in
certain specific categories of securities that are exempted under the MFS Code
of Ethics. If necessary, continue on the reverse side. Please note that special
rules apply to the preclearance of option and futures transactions. If the
transaction is to be other than a straightforward sale or purchase of
securities, mark it with an asterisk and explain the nature of the transaction
on the reverse side. Describe the nature of each account in which the
transaction is to take place, i.e., personal, spouse, children, charitable
trust, etc.
SALES
CUSIP/TICKER AMOUNT OR NATURE* OF
SECURITY NO. OF SHARES BROKER ACCOUNT
-------- ------------- ------ -------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
PURCHASES
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
I represent that I am not in possession of material non-public information
concerning the securities listed above or their issuer. If I am an MFS access
person charged with making recommendations to MFS with respect to any of the
securities listed above, I represent that I have not determined or been
requested to make a recommendation in that security except as permitted by the
MFS Code of Ethics.
---------------------------------------
Signature and Date
---------------------------------------
Name of MFS Access Person
(please print)
EXPLANATORY NOTES: This form must be filed by 3:00 p.m. on the business day
prior to the business day on which you wish to trade and covers all accounts in
which you have an interest, direct or indirect. This includes any account in
which you have "beneficial ownership" (unless you have no influence or control
over it) and non-client accounts over which you act in an advisory or
supervisory capacity. No trade can be effected until approval from the
Compliance Department has been obtained.
- -----------------------
* Check if you wish to claim that the reporting of the account or the securities
transaction shall not be construed as an admission that you have any direct or
indirect beneficial ownership in such account or securities.
<PAGE>
Exhibit (p)(11)
CODE OF ETHICS
MERRILL LYNCH ASSET MANAGEMENT GROUP (MLAMG)
REGISTERED INVESTMENT COMPANIES
AND THEIR INVESTMENT ADVISERS
AND PRINCIPAL UNDERWRITER
SECTION 1 - BACKGROUND
This Code of Ethics is adopted under Rule 17j-1 under the Investment
Company Act of 1940 ("1940 Act") and Rule 204-2(a) under the Investment Advisers
Act of 1940 and has been approved by the Boards of Directors of each of the
MLAMG funds.(1) Except where noted, the Code applies to all MLAMG employees.
Section 17(j) under the Investment Company Act of 1940 makes it
unlawful for persons affiliated with investment companies, their principal
underwriters or their investment advisers to engage in fraudulent personal
securities transactions. Rule 17j-1 requires each Fund, investment adviser and
principal underwriter to adopt a Code of Ethics that contains provisions
reasonably necessary to prevent an employee from engaging in conduct prohibited
by the principles of the Rule. The Rule also requires that reasonable diligence
be used and procedures be instituted which are reasonably necessary to prevent
violations of the Code of Ethics.
On August 23, 1999, the SEC adopted amendments to Rule 17j-1 which
require greater board oversight of personal trading practices, more complete
reporting of employee securities trading and preclearance of employee purchases
of initial public offerings and private placements. The amendments require,
among other things, that MLAMG provide its fund boards annually a written report
that (i) describes issues that arose during the previous year under the Code,
including information about material code violations and sanctions imposed and
(ii) certifies to the board that MLAMG has adopted procedures reasonably
necessary to prevent access persons from violating the Code.
- --------
(1) As applicable herein, MLAMG includes all AMG investment advisory affiliates
and the affiliated principal underwriter of investment companies registered
under the 1940 Act with the exception of Mercury Asset Management
International Ltd., which maintains its own Code of Ethics. MLAMG Funds
include the registered Funds advised by the AMG investment advisory
affiliates (with the exception of Mercury Asset Management International
Ltd.) or distributed by the AMG affiliated principal underwriter.
<PAGE>
SECTION 2 - STATEMENT OF GENERAL FIDUCIARY PRINCIPLES
The Code of Ethics is based on the fundamental principle that MLAMG and
its employees must put client interests first. As an investment adviser, MLAMG
has fiduciary responsibilities to its clients, including the registered
investment companies (the "Funds") for which it serves as investment adviser.
Among MLAMG's fiduciary responsibilities is the responsibility to ensure that
its employees conduct their personal securities transactions in a manner which
does not interfere or appear to interfere with any Fund transactions or
otherwise take unfair advantage of their relationship to the Funds. All MLAMG
employees must adhere to this fundamental principle as well as comply with the
specific provisions set forth herein. It bears emphasis that technical
compliance with these provisions will not insulate from scrutiny transactions
which show a pattern of compromise or abuse of an employee's fiduciary
responsibilities to the Funds. Accordingly, all MLAMG employees must seek to
avoid any actual or potential conflicts between their personal interest and the
interest of the Funds. In sum, all MLAMG employees shall place the interest of
the Funds before personal interests.
SECTION 3 - INSIDER TRADING POLICY
All MLAMG employees are subject to MLAMG's Insider Trading Policy,
which is considered an integral part of this Code of Ethics. MLAMG's Insider
Trading Policy, which is set forth in the MLAMG Code of Conduct, prohibits MLAMG
employees from buying or selling any security while in the possession of
material nonpublic information about the issuer of the security. The policy also
prohibits MLAMG employees from communicating to third parties any material
nonpublic information about any security or issuer of securities. Additionally,
no MLAMG employee may use his or her position or knowledge of MLAMG activities
or the activities of any Merrill Lynch & Co., Inc. entity to benefit the Funds
or to gain personal benefit. Any violation of MLAMG's Insider Trading Policy may
result in sanctions, which could include termination of employment with MLAMG.
(See Section 10--Sanctions).
SECTION 4 - RESTRICTIONS RELATING TO SECURITIES TRANSACTIONS
A. GENERAL TRADING RESTRICTIONS FOR ALL EMPLOYEES
The following restrictions apply to all MLAMG employees:
1. ACCOUNTS AT MERRILL LYNCH. No employee may engage in personal securities
transactions other than through an account maintained with Merrill
Lynch, Pierce, Fenner & Smith Inc. or another Merrill Lynch
broker/dealer entity ("Merrill Lynch") unless written permission is
obtained from the Compliance Director.
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<PAGE>
2. ACCOUNTS INCLUDE FAMILY MEMBERS AND OTHER ACCOUNTS. Accounts of
employees include the accounts of their spouses, dependent relatives and
members of the same household, trustee and custodial accounts or any
other account in which the employee has a financial interest or over
which the employee has investment discretion.
3. PRECLEARANCE. All employees must obtain approval from the Compliance
Director or delegatee in the Compliance Department prior to entering any
securities transaction (with the exception of exempted securities as
listed in Section 5) in all accounts. Approval of a transaction, once
given, is effective only for the business day on which approval was
requested or until the employee discovers that the information provided
at the time the transaction was approved is no longer accurate.
4. RESTRICTIONS ON PURCHASES. No employee may purchase any security which
at the time is being purchased, or to the employee's knowledge is being
considered for purchase, by any Fund managed by MLAMG. This restriction,
however, does not apply to personal trades of employees which coincide
with trades by any MLAMG index fund.
5. RESTRICTIONS ON SALES. No employee may sell any security which at the
time is actually being sold, or to the employee's knowledge is being
considered for sale, by any Fund managed by MLAMG. This restriction,
however, does not apply to personal trades of employees which coincide
with trades by any MLAMG index fund.
6. RESTRICTIONS ON RELATED SECURITIES. The restrictions and procedures
applicable to the transactions in securities by employees set forth in
this Code of Ethics shall similarly apply to securities whose value or
return is related, in whole or in part, to the value or return of a
security purchased or sold or being contemplated for purchase or sale
during the relevant period by the Fund. For example, options or warrants
to purchase common stock, and convertible debt and convertible preferred
stock would be considered related to the underlying common stock for
purposes of this policy. In sum, the related security would be treated
as if it were the underlying security for the purpose of the
pre-clearance procedures described herein.
7. PRIVATE PLACEMENTS. Employee purchases and sales of "private placement"
securities (including all private equity partnerships, hedge funds,
limited partnership or venture capital funds) must be precleared
directly with the Compliance Director or designee. No employee may
engage in any such transaction unless the Compliance Director or his
designee and the employee's senior manager have each previously
determined in writing that the contemplated investment does not involve
any potential for conflict with the investment activities of the Funds.
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<PAGE>
If, after receiving the required approval, an employee has any material
role in the subsequent consideration by any Fund of an investment in the
same or affiliated issuer, the employee must disclose his or her
interest in the private placement investment to the Compliance Director
and the employee's department head. The decision to purchase securities
of the issuer by a Fund must be independently reviewed and authorized by
both the employee's department head.
8. INITIAL PUBLIC OFFERINGS. Employees may not purchase securities in "hot"
initial public offerings.
9. PROHIBITION ON SHORT-TERM PROFITS. Employees are prohibited from
profiting on any sale and subsequent purchase, or any purchase and
subsequent sale of the same (or equivalent) securities occurring within
60 calendars days ("short-term profit"). This holding period also
applies to all permitted options transactions; therefore, for example,
an employee may not purchase or write an option if the option will
expire in less than 60 days (unless the employee is buying or writing an
option on a security that the employee has held more than 60 days). In
determining short-term profits, all transactions within a 60-day period
in all accounts related to the employee shall be netted regardless of an
employee's intentions to do otherwise (e.g., tax or other trading
strategies). Should an employee fail to preclear a trade that results in
a short-term profit, the trade would be subject to reversal with all
costs and expenses related to the trade borne by the employee, and the
employee would be required to disgorge the profit. Transactions not
required to be precleared under Section 5 will not be subject to this
prohibition.
B. ADDITIONAL TRADING RESTRICTIONS FOR DECISION-MAKING EMPLOYEES
The following additional restrictions apply to decision-making employees
(i.e., employees who recommend or determine which securities transactions a Fund
undertakes). The Compliance Department will retain and keep current a list of
decision-making employees.
1. NOTIFICATION. A decision-making employee must notify the Compliance
Department of any intended transactions in a security for his or her
own personal account which is owned or contemplated for purchase by a
Fund for which the employee has decision-making authority.
2. BLACKOUT PERIODS. A decision-making employee may not buy or sell a
security within 7 CALENDAR DAYS either before or after a purchase or
sale of the same or related security by a Fund or portfolio management
group for which the employee has decision-making authority. For
example, if a Fund trades a security on day 0, day 8 is the first day
the manager, analyst or portfolio
-4-
<PAGE>
management group member of that Fund may trade the security for his or
her own account.
3. ESTABLISHING POSITIONS COUNTER TO FUND POSITIONS. No decision-making
employee may establish a long position in a personal account in a
security if a Fund for which the employee is a decision-making employee
holds a put option on such security (aside from a put purchased for
hedging purposes where the fund holds the underlying security), has
written a call option on such security, or otherwise maintains a
position that would benefit from a decrease in the value of the
underlying security (e.g., a short sale other than a short sale
"against-the-box").
No decision-making employee may purchase a put option or write a call
option where a Fund for which such person has decision-making
responsibilities holds a long position in the underlying security.
No decision-making employee may short sell any security where a Fund
for which the employee has decision-making authority holds a long
position in the same security or where such Fund otherwise maintains a
position in respect of which the Fund would benefit from an increase in
the value of the security.
4. PURCHASING AN INVESTMENT FOR A FUND THAT IS A PERSONAL HOLDING. A
decision-making employee may not purchase an investment for a Fund that
is also a personal holding of the employee or any other account covered
by this Code of Ethics, or the value of which is materially linked to a
personal holding, unless the decision-making employee has obtained
prior approval from the employee's senior manager.
5. INDEX FUNDS. The restrictions of this Section 4.B. do not apply to
purchases and sales of securities by decision-making employees which
coincide with trades by any MLAMG index fund.
C. TRADING RESTRICTIONS FOR DISINTERESTED DIRECTORS OF THE MLAMG FUNDS
The following restrictions apply only to disinterested directors of the
MLAMG Funds (i.e., any director who is not an "interested person" of a MLAMG
fund within the meaning of Section 2(a)(10) of the 1940 Act):
1. RESTRICTIONS ON PURCHASES. No disinterested director may purchase any
security which, to the director's knowledge at the time, is being
purchased or is being considered for purchase by any Fund managed by
MLAMG.
2. RESTRICTIONS ON SALES. No disinterested director may sell any security
which, to the director's knowledge at the time, is being sold or is
being considered for sale by any Fund managed by MLAMG.
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<PAGE>
3. RESTRICTIONS ON TRADES IN SECURITIES RELATED IN VALUE. The restrictions
applicable to the transactions in securities by disinterested directors
shall similarly apply to securities whose value or return is related,
in whole or in part, to the value or return of a security purchased or
sold by the Fund (see Section 4.A.5.).
SECTION 5 - EXEMPTED TRANSACTIONS/SECURITIES
MLAMG has determined that the following securities transactions do not
present the opportunity for improper trading activities that Rule 17j-1 is
designed to prevent; therefore, the restrictions set forth in Section 4 of this
Code (including preclearance, prohibition on short-term profits and blackout
periods) shall not apply.
Exempted transactions/securities may not be executed/held in brokerage
accounts maintained outside of Merrill Lynch.
THE REPORTING REQUIREMENTS LISTED IN SECTION 6 OF THIS CODE, HOWEVER,
SHALL APPLY TO THE SECURITIES AND TRANSACTION TYPES SET FORTH IN PARAGRAPHS F-J
OF THIS SECTION.
A. Purchases or sales in an account over which the employee has no direct or
indirect influence or control (e.g., an account managed on a fully
discretionary basis by an investment adviser or trustee).
B. Purchases or sales of direct obligations of the U.S. Government.
C. Purchases or sales of open-end investment companies (including money market
funds), variable annuities and unit investment trusts. (However, unit
investment trusts traded on a stock exchange (e.g., MITS, SPDRS, DIAMONDS,
NASDAQ 100, etc.) must be precleared.)
D. Purchases or sales of bank certificates, bankers acceptances, commercial
paper and other high quality short-term debt instruments, including
repurchase agreements.
E. Merrill Lynch common stock which is purchased and sold within any Merrill
Lynch employee benefit plan and stock purchased and sold through similar
such employer-sponsored plans in which a spouse of a MLAMG employee may
participate.
F. Purchases or sales which are non-volitional on the part of the employee
(e.g., an in-the-money option that is automatically exercised by a broker; a
security that is called away as a result of an exercise of an option; or a
security that is sold by a broker, without employee consultation, to meet a
margin call not met by the employee).
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<PAGE>
G. Purchases which are made by reinvesting cash dividends pursuant to an
automatic dividend reinvestment plan.
H. Purchases effected upon the exercise of rights issued by an issuer pro rata
to all holders of a class of its securities, to the extent such rights were
acquired from such issuer.
I. Purchases or sales of commodities, futures (including currency futures and
futures on broad-based indices), options on futures and options on
broad-based indices. (Currently, "broad-based indices" include only the S&P
100, S&P 500, FTSE 100 and Nikkei 225.)
J. The receipt of a bona fide gift of securities. (Donations of securities,
however, require preclearance.)
SECTION 6 - REPORTING BY EMPLOYEES
The requirements of this Section 6 apply to all MLAMG employees. The
requirements will also apply to all transactions in the accounts of spouses,
dependent relatives and members of the same household, trustee and custodial
accounts or any other account in which the employee has a financial interest or
over which the employee has investment discretion. The requirements do not apply
to securities acquired for accounts over which the employee has no direct or
indirect control or influence. All employees whose accounts are maintained at
Merrill Lynch are deemed to have automatically complied with the requirements of
this Section 6 B. and C. as to reporting executed transactions and personal
holdings. Transactions and holdings in such accounts are automatically reported
to the Compliance Department through the automated Merrill Lynch Employee
Activity Review System.
Employees who have approved accounts outside of Merrill Lynch are
deemed to have complied with the requirements of this Section 6 B. and C.
provided that the Compliance Department receives duplicate statements and
confirmations directly from their brokers.
Employees who effect reportable transactions outside of a brokerage
account (e.g., optional purchases or sales through an automatic investment
program directly with an issuer) will be deemed to have complied with this
requirement by preclearing transactions with the Compliance Department and by
reporting their holdings annually on the "Personal Securities Holdings" form, as
required by the MLAMG Compliance Department.
A. INITIAL HOLDINGS REPORT. Each new MLAMG employee will be given a copy of
this Code of Ethics upon commencement of employment. All new employees must
disclose their personal securities holdings to the Compliance Department
-7-
<PAGE>
within 10 days of commencement of employment with MLAMG. (Similarly,
securities holdings of all new related accounts must be reported to the
Compliance Department within 10 days of the date that such account becomes
related to the employee.) With respect to exempt securities referred to in
Section 5 which do not require preclearance/reporting, employees must
nonetheless initially report those exempt securities defined in Section
5.F.-J. (This reporting requirement does not apply to holdings that are the
result of transactions in exempt securities as defined in Section 5.A.-E.)
Initial holdings reports must identify the title, number of shares, and
principal amount with respect to each security holding. Within 10 days of
commencement of employment, each employee shall file an Acknowledgement
stating that he or she has read and understands the provisions of the Code.
B. RECORDS OF SECURITIES TRANSACTIONS. All employees must preclear each
securities transaction (with the exception of exempt transactions in Section
5) to the Compliance Department. At the time of preclearance, the employee
must provide a complete description of the security and the nature of the
transaction. As indicated above, employees whose accounts are maintained at
Merrill Lynch or who provide monthly statements directly from their
brokers/dealers are deemed to have automatically complied with the
requirement to report executed transactions.
C. ANNUAL HOLDINGS REPORT. All employees must submit an annual holdings report
reflecting holdings as of a date no more than 30 days before the report is
submitted. As indicated above, employees whose accounts are maintained at
Merrill Lynch or who provide monthly statements directly from their
brokers/dealers are deemed to have automatically complied with this
requirement.
With respect to exempt securities referred to in Section 5 which do not
require preclearance/reporting, employees must nonetheless annually report
the holdings of those exempt securities that are defined in Section
5.F.-J. (This reporting requirement, however, does not apply to exempt
securities as defined in Section 5.A.-E.)
D. ANNUAL CERTIFICATION OF COMPLIANCE. All MLAMG employees must certify
annually to the MLAMG Compliance Department that (1) they have read and
understand and agree to abide by this Code of Ethics; (2) they have complied
with all requirements of the Code of Ethics, except as otherwise notified by
the MLAMG Compliance Department that they have not complied with certain of
such requirements; and (3) they have reported all transactions required to
be reported under the Code of Ethics.
E. REVIEW OF TRANSACTIONS AND HOLDINGS REPORTS. All transactions reports and
holdings reports will be reviewed by appropriate management or compliance
personnel according to procedures established by the Compliance Department.
-8-
<PAGE>
SECTION 7 - REPORTING BY DISINTERESTED DIRECTORS OF MLAMG FUNDS
A disinterested director of a Fund need only report a transaction in a
security if the director, at the time of that transaction, knew or, in the
ordinary course of fulfilling the official duties of a director of such Fund,
should have known that, during the 15-day period immediately preceding the date
of the transaction by the director, the security was purchased or sold by the
Fund or was being considered for purchase or sale by the Fund. In reporting such
transactions, disinterested directors must provide: the date of the transaction,
a complete description of the security, number of shares, principal amount,
nature of the transaction, price, commission, and name of broker/dealer through
which the transaction was effected.
As indicated in Section 6, disinterested directors are required to
certify annually to the MLAMG Compliance Department that (1) they have read and
understand and agree to abide by this Code of Ethics; (2) they have complied
with all requirements of the Code of Ethics, except as otherwise reported to the
MLAMG Compliance Department that they have no complied with certain of such
requirements; and (3) they have reported all transactions required to be
reported under the Code of Ethics.
SECTION 8 - APPROVAL AND REVIEW BY BOARDS OF DIRECTORS
The Board of Directors of each MLAMG Fund, including a majority of
directors who are disinterested directors, must approve this Code of Ethics.
Additionally, any material changes to this Code must be approved by the Board of
Directors within six months after adoption of any material change. The Board of
Directors must base its approval of the Code and any material changes to the
Code on a determination that the Code contains provisions reasonably necessary
to prevent employees from engaging in any conduct prohibited by Rule 17j-1.
Prior to approving the Code or any material change to the Code, the Board of
Directors must receive a certification from the Fund, the Investment Adviser or
Principal Underwriter that it has adopted procedures reasonably necessary to
prevent employees from violating the Code of Ethics.
SECTION 9 - REVIEW OF MLAMG ANNUAL REPORT
At least annually, the Fund, the Investment Adviser and the Principal
Underwriter must furnish to the Fund's Board of Directors, and the Board of
Directors must consider, a written report that (1) describes any issues arising
under this Code of Ethics or procedures since the last report to the Board of
Directors, including, but not limited to, information about material violations
of the Code of Ethics or procedures and sanctions imposed in response to the
material violations and (2) certifies that the Fund, Investment Adviser and
Principal Underwriter have adopted procedures reasonably necessary to prevent
employees from violating this Code of Ethics.
-9-
<PAGE>
SECTION 10 - SANCTIONS
Potential violations of the Code of Ethics must be brought to the
attention of the Compliance Director or his designee and are investigated. Upon
completion of the investigation, if necessary, the matter will be reviewed by
the Code of Ethics Review Committee and the employee's senior manager. The Code
of Ethics Review Committee will make a determination as to whether any sanction
should be imposed. Sanctions will include, but are not limited to, a letter of
caution or warning, reversal of a trade, fine or other monetary penalty,
disgorgement of a profit or absorption of costs associated with a trade,
suspension of personal trading privileges, suspension of employment (with or
without compensation), and termination of employment.
SECTION 11 - EXCEPTIONS
An exception to any of the policies, restrictions or requirements set forth
herein may be granted only upon a showing by the employee to the Code of Ethics
Review Committee that such employee would suffer extreme financial hardship
should an exception not be granted. Should the subject of the exception request
involve a transaction in a security, a change in the employee's investment
objectives, tax strategies, or special new investment opportunities would not
constitute acceptable reasons for a waiver.
-10-
<PAGE>
Exhibit (p)(12)
MORGAN STANLEY DEAN WITTER AFRICA INVESTMENT FUND, INC.
MORGAN STANLEY DEAN WITTER ASIA-PACIFIC FUND, INC.
MORGAN STANLEY DEAN WITTER EASTERN EUROPE FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS DEBT FUND, INC.
MORGAN STANLEY DEAN WITTER GLOBAL OPPORTUNITY BOND FUND, INC.
MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
MORGAN STANLEY DEAN WITTER INDIA INVESTMENT FUND, INC.
THE LATIN AMERICAN DISCOVERY FUND, INC.
THE MALAYSIA FUND, INC.
THE PAKISTAN INVESTMENT FUND, INC.
THE THAI FUND, INC.
THE TURKISH INVESTMENT FUND, INC.
(THE "CLOSED-END FUNDS")
AND
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(THE "OPEN-END FUNDS", AND TOGETHER WITH THE CLOSED-END FUNDS, THE "FUNDS")
AND
MORGAN STANELY DEAN WITTER INVESTMENT MANAGEMENT INC.
("MSDW INVESTMENT MANAGEMENT")
AND
MILLER ANDERSON & SHERRARD, LLP
("MAS", AND TOGETHER WITH MSDW INVESTMENT MANAGEMENT, THE "INVESTMENT
MANAGERS")
AND
MORGAN STANLEY & CO. INCORPORATED
("MS&CO.")
CODE OF ETHICS
1. Purposes
--------
This Code of Ethics has been adopted by the Funds, the Investment
Managers and MS&Co., the principal underwriter of the Open-End Funds, in
accordance with Rule 17j-1 under the Investment Company Act of 1940, as amended
(the "Act"). Rule 17j-1 under the Act generally proscribes fraudulent or
manipulative practices with respect to purchases or sales of securities held or
to be acquired by investment companies, if effected by affiliated persons (as
defined under the Act) of such companies. Specifically, Rule 17j-1 provides that
it is unlawful for any affiliated person of or principal underwriter for a
registered investment company, or any affiliated person of an investment adviser
of or principal underwriter for a registered investment company, in connection
with the purchase or sale, directly or indirectly, by such person of a security
held or to be acquired by such registered investment company:
(a) To employ any device, scheme or artifice to defraud such registered
investment company;
<PAGE>
(b) To make to such registered investment company any untrue statement of a
material fact or omit to state to such registered investment company a
material fact necessary in order to make the statements made, in light
of the circumstances under which they are made, not misleading;
(c) To engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon any such registered investment
company; or
(d) To engage in any manipulative practice with respect to such registered
investment company.
While Rule 17j-1 is designed to protect only the interests of the Funds
and their stockholders, the Investment Managers apply the policies and
procedures described in this Code of Ethics to all employees of the Investment
Managers to protect the interests of their non-Fund clients as well
(hereinafter, where appropriate, non-Fund clients of the Investment Managers are
referred to as "Advisory Clients" and any reference to an Advisory Client(s)
relates only to the activities of employees of the Investment Managers).
The purpose of this Code of Ethics is to (i) ensure that Access Persons
conduct their personal securities transactions in a manner which does not (a)
create an actual or potential conflict of interest with the Funds' or an
Advisory Client's portfolio transactions, (b) place their personal interests
before the interest of the Funds and their stockholders or an Advisory Client or
(c) take unfair advantage of their relationship to the Funds or an Advisory
Client and (ii) provide policies and procedures consistent with the Act and Rule
17j-1 designed to give effect to the general prohibitions set forth in Rule
17j-l.
Among other things, the procedures set forth in this Code of Ethics
require that all (i) Access Persons review this Code of Ethics at least
annually, (ii) Access Persons, unless excepted by Sections 8. (d) or (e) of
this Code of Ethics, report transactions in Covered Securities, (iii) Access
Persons refrain from engaging in certain transactions, and (iv) employees of the
Investment Managers pre-clear with the Compliance Department or the trading desk
at MAS any transactions in Covered Securities.
2. Definitions
-----------
(a) "Access Person" (i) means any director, officer or Advisory
Person of the Funds or of the Investment Managers, and (ii)
any director or officer of MS&Co., who, in the ordinary
course of business, makes, participates in or obtains
information regarding the purchase or sale of Covered
Securities by the Funds.
(b) "Advisory Person" means any employee of the Funds, or of the
Investment Managers (or of any company in a control
relationship to the Funds or the Investment Managers), who, in
connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase
or sale of Covered Securities by the Funds or an Advisory
Client, or whose functions relate to the making of any
recommendations with respect to such purchases or sales.
2
<PAGE>
(c) "Beneficial ownership" shall be interpreted in the same manner
as it would be in determining whether a person is subject to
the provisions of Section 16 of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder,
except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an Access Person
has or acquires.
(d) "Control" shall have the same meaning as that set forth in
Section 2(a)(9) of the Act.
(e) "Compliance Department" means the MSDW Investment Management
or MAS Compliance Department.
(f) "Covered Security" means a security as defined in Section
2(a)(36) of the Act, except that it does not include: (i)
shares of registered open-end investment companies, (ii)
direct obligations of the Government of the United States, and
(iii) bankers' acceptances, bank certificates of deposit,
commercial paper, and high quality short-term debt
instruments, including repurchase agreements.
(g) "Disinterested Director" means a director of a Fund who is not
an "interested person" of such Fund within the meaning of
Section 2(a)(19) of the Act.
(h) "Purchase or sale (or sell)" with respect to a Covered
Security means any acquisition or disposition of a direct or
indirect beneficial interest in a Covered Security, including,
inter alia, the writing or buying of an option to purchase or
sell a Covered Security.
(i) "Security held or to be acquired" means (i) any Covered
Security which, within the most recent 15 days, is or has been
held by a Fund or an Advisory Client, or is being or has been
considered by a Fund or an Advisory Client or the Investment
Managers for purchase by a Fund or an Advisory Client and
(ii) any option to purchase or sell, and any security
convertible into or exchangeable for, a Covered Security
described in this paragraph.
3. Prohibited Transactions
-----------------------
(a) No Access Person or employee of the Investment Managers shall
purchase or sell any Covered Security which to his or her
actual knowledge at the time of such purchase or sale:
(i) is being considered for purchase or sale by a Fund or
an Advisory Client; or
(ii) is being purchased or sold by a Fund or an Advisory
Client.
3
<PAGE>
(b) No employee of the Investment Managers shall purchase or sell
a Covered Security while there is a pending "buy" or "sell"
order in the same or a related security for a Fund or an
Advisory Client until that order is executed or withdrawn.
(c) No Advisory Person shall purchase or sell a Covered Security
within seven calendar days before or after any portfolio(s) of
the Funds over which such Advisory Person exercises investment
discretion or an Advisory Client over which the Advisory
Person exercises investment discretion purchases or sells the
same or a related Covered Security. Any profits realized or
unrealized by the Advisory Person on a prohibited purchase or
sale within the proscribed period shall be disgorged to a
charity.
(d) No employee of the Investment Managers shall profit from the
purchase and sale or sale and purchase of the same (or
equivalent) Covered Security within 60 calendar days except
that he or she may sell a Covered Security for a loss after
30 calendar days. Any profits realized within 60 calendar days
on such purchase or sale shall be disgorged to a charity.
(e) No employee of the Investment Managers shall purchase any
securities in an initial public offering.
(f) No employee of the Investment Managers shall purchase
privately-placed securities unless such purchase is
pre-approved by the Compliance Department. Any such person who
has previously purchased privately-placed securities must
disclose such purchases to the Compliance Department before
such person participates in a Fund's or an Advisory Client's
subsequent consideration of an investment in the securities of
the same or a related issuer. Upon such disclosure, the
Compliance Department shall appoint another person with no
personal interest in the issuer, to conduct an independent
review of such Fund's or such Advisory Client's decision to
purchase securities of the same or a related issuer.
(g) No Access Person or employee of the Investment Managers shall
recommend the purchase or sale of any Covered Securities to a
Fund or to an Advisory Client without having disclosed to the
Compliance Department his or her interest, if any, in such
Covered Securities or the issuer thereof, including without
limitation (i) his or her direct or indirect beneficial
ownership of any securities of such issuer, (ii) any
contemplated purchase or sale by such person of such
securities, (iii) any position with such issuer or its
affiliates, and (iv) any present or proposed business
relationship between such issuer or its affiliates, on the one
hand, and such person or any party in which such person has a
significant interest, on the other; provided, however, that in
the event the interest of such person in such securities or
the issuer thereof is not material to his or her personal net
worth and any contemplated purchase or sale by such person in
such securities cannot reasonably be expected to have a
material adverse effect on any such purchase or sale by a Fund
or an Advisory Client or on the market for the securities
generally, such person shall not be required to disclose his
or her interest in the securities or the issuer thereof in
connection with any such recommendation.
4
<PAGE>
(h) No Access Person or employee of the Investment Managers shall
reveal to any other person (except in the normal course of his
or her duties on behalf of a Fund or an Advisory Client) any
information regarding the purchase or sale of any Covered
Security by a Fund or an Advisory Client or consideration of
the purchase or sale by a Fund or an Advisory Client of any
such Covered Security.
4. Pre-Clearance of Covered Securities Transactions and Permitted
--------------------------------------------------------------
Brokerage Accounts
------------------
No employee of MSDW Investment Management shall purchase or sell
Covered Securities without prior written authorization from its Compliance
Department. No employee of MAS shall purchase or sell Covered Securities
without prior written authorization from the appropriate trading desk. Unless
otherwise indicated by the Compliance Department, pre-clearance of a purchase
or sale shall be valid and in effect only for the business day in which such
pre-clearance is given; provided, however, that the approval of an unexecuted
purchase or sale is deemed to be revoked when the employee becomes aware of
facts or circumstances that would have resulted in the denial of approval of the
approved purchase or sale were such facts or circumstances made known to the
Compliance Department or MAS trading desk, as appropriate, at the time the
proposed purchase or sale was originally presented for approval. The Investment
Managers require all of their employees to maintain their personal brokerage
accounts at MS&Co. or a broker/dealer affiliated with MS&Co. (hereinafter, a
"Morgan Stanley Account"). Outside personal brokerage accounts are permitted
only under very limited circumstances and only with express written approval by
the Compliance Department. The Compliance Department has implemented procedures
reasonably designed to monitor purchases and sales effected pursuant to the
aforementioned pre-clearance procedures.
5. Exempted Transactions
---------------------
(a) The prohibitions of Section 3 and Section 4 of this Code of
Ethics shall not apply to:
(i) Purchases or sales effected in any account over which
an Access Person or an employee of the Investment
Managers has no direct or indirect influence or
control;
(ii) Purchases or sales which are non-volitional;
(iii) Purchases which are part of an automatic purchase
plan directly with the issuer or its agent or
which are part of an automatic dividend reinvestment
plan; or
(iv) Purchases effected upon the exercise of rights issued
by an issuer pro rata to all holders of a class of
its securities and sales of such rights so acquired,
but only to the extent such rights were acquired from
such issuer.
(b) Notwithstanding the prohibitions of Sections 3. (a), (b) and
(c) of this Code of Ethics, the Compliance Department or MAS
trading desk, as appropriate, may approve a purchase or sale
of a Covered Security by employees of the Investment Managers
which would appear to be in contravention of the prohibitions
in Sections 3. (a), (b) and (c) if it is determined that (i)
the facts
5
<PAGE>
and circumstances applicable at the time of such purchase or
sale do not conflict with the interests of a Fund or an
Advisory Client, or (ii) such purchase or sale is only
remotely potentially harmful to a Fund or an Advisory Client
because it would be very unlikely to affect a highly
institutional market, or because it is clearly not related
economically to the securities to be purchased, sold or held
by such Fund or Advisory Client, and (iii) the spirit and
intent of this Code of Ethics is met.
6. Restrictions on Receiving Gifts
-------------------------------
No employee of the Investment Managers shall receive any gift or other
consideration in merchandise, service or otherwise of more than de minimis value
from any person, firm, corporation, association or other entity that does
business with or on behalf of the Funds or an Advisory Client.
7. Service as a Director
---------------------
No employee of the Investment Managers shall serve on the board of
directors of a publicly-traded company without prior written authorization from
the Compliance Department. Approval will be based upon a determination that the
board service would not conflict with the interests of the Funds and their
stockholders or an Advisory Client.
8. Reporting
---------
(a) Unless excepted by Section 8. (d) or (e) of this Code of
Ethics, each Access Person must disclose all personal holdings
in Covered Securities to the Compliance Department for its
review no later than 10 days after becoming an Access Person
and annually thereafter. The initial and annual holdings
reports must contain the following information:
(i) The title, number of shares and principal amount of
each Covered Security in which the Access Person has
any direct or indirect beneficial ownership;
(ii) The name of any broker, dealer or bank with or
through whom the Access Person maintained an account
in which any securities were held for the direct or
indirect benefit of the Access Person; and
(iii) The date the report was submitted to the Compliance
Department by the Access Person.
(b) Unless excepted by Section 8. (d) or (e) of this Code of
Ethics, each Access Person and each employee of the Investment
Managers must report to the Compliance Department for its
review within 10 days of the end of a calendar quarter the
information described below with respect to transactions in
Covered Securities in which such person has, or by reason of
such transactions acquires any direct or indirect beneficial
interest:
6
<PAGE>
(i) The date of the transaction, the title, the interest
rate and maturity date (if applicable), the number of
shares and the principal amount of each Covered
Security involved;
(ii) The nature of the transaction (i.e., purchase, sale
or any other type of acquisition or disposition);
(iii) The price of the Covered Security at which the
purchase or sale was effected;
(iv) The name of the broker, dealer or bank with or
through which the purchase or sale was effected; and
(v) The date the report was submitted to the Compliance
Department by such person.
(c) Unless excepted by Section 8. (d) or (e) of this Code of
Ethics, each Access Person and each employee of the Investment
Managers must report to the Compliance Department for its
review within 10 days of the end of a calendar quarter the
information described below with respect to any account
established by such person in which any securities were held
during the quarter for the direct or indirect benefit of such
person:
(i) The name of the broker, dealer or bank with whom the
account was established;
(ii) The date the account was established; and
(iii) The date the report was submitted to the Compliance
Department by such person.
(d) An Access Person will not be required to make any reports
described in Sections 8. (a), (b) and (c) above for any
account over which the Access Person has no direct or indirect
influence or control. An Access Person or an employee of the
Investment Managers will not be required to make the annual
holdings report under Section 8. (a) and the quarterly
transactions report under Section 8. (b) with respect to
purchases or sales effected for, and Covered Securities held
in: (i) a Morgan Stanley Account, (ii) an account in which the
Covered Securities were purchased pursuant to an automatic
purchase plan set up directly with the issuer or its agent or
pursuant to a dividend reinvestment plan or (iii) an account
for which the Compliance Department receives duplicate trade
confirmations and quarterly statements. An Access Person or
an employee of MSDW Investment Management will not be required
to make a report under Section 8.(c) for any account in which
only shares of open-end registered investment companies can
be purchased or sold. Lastly, an employee of MSDW Investment
Management will not be required to make a report under
Section 8.(c) for any account established with MS&Co. or a
broker/dealer affiliated with MS&Co., or for any account
which was pre-approved by the Compliance Department.
(e) A Disinterested Director of a Fund, who would be required to
make a report solely by reason of being a Fund director, is
not required to make initial and annual holdings reports.
Additionally, such Disinterested Director need only make a
quarterly transactions report for a purchase or sale of
Covered Securities if he or she, at the time of that
transaction, knew or, in the ordinary course of fulfilling his
or her official duties as a Disinterested Director of a Fund,
should have known
7
<PAGE>
that, during the 15-day period immediately preceding or
following the date of the Covered Securities transaction by
him or her, such Covered Security is or was purchased or sold
by a Fund or was being considered for purchase or sale by a
Fund.
(f) The reports described in Sections 8. (a), (b) and (c) above
may contain a statement that the reports shall not be
construed as an admission by the person making such reports
that he or she has any direct or indirect beneficial ownership
in the Covered Securities to which the reports relate.
9. Annual Certifications
All Access Persons and employees of the Investment Managers must
certify annually that they have read, understood and complied with the
requirements of this Code of Ethics and recognize that they are subject to this
Code of Ethics by signing the certification attached hereto as Exhibit A.
10. Board Review
The management of the Funds and representatives or officers of the
Investment Managers and, with respect to the Open-End Funds, MS&Co., shall each
provide each Fund's Board of Directors, at least annually, with the following:
(a) a summary of existing procedures concerning personal investing
and any changes in the procedures made during the past year;
(b) a description of any issues arising under this Code of Ethics
or procedures since the last such report, including, but not
limited to, information about material violations of this Code
of Ethics or procedures and sanctions imposed in response to
material violations;
(c) any recommended changes in the existing restrictions or
procedures based upon a Fund's or the Investment Managers'
experience under this Code of Ethics, evolving industry
practices or developments in applicable laws and regulations;
and
(d) a certification (attached hereto as Exhibits B, C, D, and E,
as appropriate) that each has adopted procedures reasonably
necessary to prevent its Access Persons from violating this
Code of Ethics.
11. Sanctions
Upon discovering a violation of this Code of Ethics, the Board of
Directors of such Fund or of the Investment Managers, as the case may be, may
impose such sanctions as it deems appropriate.
8
<PAGE>
12. Recordkeeping Requirements
The management of the Funds and representatives or officers of the
Investment Managers and, with respect to the Open-End Funds, MS&Co., each shall
maintain, as appropriate, the following records for a period of five years, the
first two years in an easily accessible place, and shall make these records
available to the Securities and Exchange Commission or any representative of
such during an examination of the Funds or of the Investment Managers:
(a) a copy of this Code of Ethics or any other Code of Ethics
which was in effect at any time within the previous five
years;
(b) a record of any violation of this Code of Ethics during the
previous five years, and of any action taken as a result of
the violation;
(c) a copy of each report required by Section 8. of this Code of
Ethics, including any information provided in lieu of each
such report;
(d) a record of all persons, currently or within the past five
years, who are or were subject to this Code of Ethics and who
are or were required to make reports under Section 8. of this
Code of Ethics;
(e) a record of all persons, currently or within the past five
years, who are or were responsible for reviewing the reports
required under Section 8. of this Code of Ethics; and
(f) a record of any decision, and the reasons supporting the
decision, to approve the acquisition of securities described
in Sections 3. (e) and (f) of this Code of Ethics.
9
<PAGE>
EXHIBIT A
MORGAN STANLEY DEAN WITTER AFRICA INVESTMENT FUND, INC.
MORGAN STANLEY DEAN WITTER ASIA-PACIFIC FUND, INC.
MORGAN STANLEY DEAN WITTER EASTERN EUROPE FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS DEBT FUND, INC.
MORGAN STANLEY DEAN WITTER GLOBAL OPPORTUNITY BOND FUND, INC.
MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
MORGAN STANLEY DEAN WITTER INDIA INVESTMENT FUND, INC.
THE LATIN AMERICAN DISCOVERY FUND, INC.
THE MALAYSIA FUND, INC.
THE PAKISTAN INVESTMENT FUND, INC.
THE THAI FUND, INC.
THE TURKISH INVESTMENT FUND, INC.
(THE "CLOSED-END FUNDS")
AND
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(THE "OPEN-END FUNDS", AND TOGETHER WITH THE CLOSED-END FUNDS, THE "FUNDS")
AND
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
("MSDW INVESTMENT MANAGEMENT")
AND
MILLER ANDERSON & SHERRERD, LLD.
("MAS", AND TOGETHER WITH MSDW INVESTMENT
MANAGEMENT, THE "INVESTMENT MANAGERS")
AND
MORGAN STANLEY & CO., INCORPORATED
("MS&CO.")
CODE OF ETHICS
ANNUAL CERTIFICATION
I hereby certify that I have read and understand the Code of Ethics
(the "Code") which has been adopted by the Funds, the Investment Managers and
MS&Co. and recognize that it applies to me and agree to comply in all respects
with the policies and procedures described therein. Furthermore, I hereby
certify that I have complied with the requirements of the Code in effect, as
amended, for the year ended December 31, ____, and that all of my reportable
transactions in Covered Securities were executed and reflected accurately in a
Morgan Stanley Account (as defined in the Code) or that I have attached a report
that satisfies the annual holdings disclosure requirement as described in
Section 8. (a) of the Code.
Date:______________, ____ Name:______________________________
Signature:_________________________
<PAGE>
Exhibit (p)(13)
Code of Ethics
piv
s
It is the personal responsibility of every Putnam employee to avoid any
conduct that could create a conflict, or even the appearance of a
conflict, with our clients, or to do anything that could damage or
erode the trust our clients place in Putnam and its employees.
44156 3/2000
<PAGE>
Table of Contents
<TABLE>
<S> <C> <C>
Overview .......................................................................................iii
Preamble .......................................................................................vii
Definitions: Code of Ethics..........................................................................ix
Section I. Personal Securities Rules for All Employees..............................................1
A. Restricted List............................................................1
B. Prohibited Purchases and Sales.............................................6
C. Discouraged Transactions...................................................9
D. Exempted Transactions.....................................................10
Section II. Additional Special Rules for Personal Securities Transactions of Access Persons and
Certain Investment Professionals........................................................13
Section III. Prohibited Conduct for All Employees....................................................19
Section IV. Special Rules for Officers and Employees of Putnam Europe Ltd...........................29
Section V. Reporting Requirements for All Employees................................................31
Section VI. Education Requirements for All Employees................................................33
Section VII. Compliance and Appeal Procedures........................................................35
Appendix A ........................................................................................37
Preamble ....................................................................39
Definitions: Insider Trading.....................................................41
Section 1. Rules Concerning Inside Information.................................43
Section 2. Overview of Insider Trading.........................................47
Appendix B. Policy Statement Regarding Employee Trades in Shares of Putnam Closed-End Funds.........53
Appendix C. Clearance Form for Portfolio Manager Sales Out of Personal Account of Securities Also
Held by Fund (For compliance with "Contra-Trading"Rule).................................55
Appendix D. Procedures for Approval of New Financial Instruments....................................57
Index ........................................................................................59
</TABLE>
s i
<PAGE>
A
Overview
Every Putnam employee is required, as a condition of continued employment, to
read, understand, and comply with the entire Code of Ethics. This Overview is
provided only as a convenience and is not intended to substitute for a careful
reading of the complete document.
It is the personal responsibility of every Putnam employee to avoid any conduct
that could create a conflict, or even the appearance of a conflict, with our
clients, or do anything that could damage or erode the trust our clients place
in Putnam and its employees. This is the spirit of the Code of Ethics. In
accepting employment at Putnam, every employee accepts the absolute obligation
to comply with the letter and the spirit of the Code of Ethics. Failure to
comply with the spirit of the Code of Ethics is just as much a violation of the
Code as failure to comply with the written rules of the Code.
The rules of the Code cover activities, including personal securities
transactions, of Putnam employees, certain family members of employees, and
entities (such as corporations, trusts, or partnerships) that employees may be
deemed to control or influence.
Sanctions will be imposed for violations of the Code of Ethics. Sanctions may
include bans on personal trading, reductions in salary increases or bonuses,
disgorgement of trading profits, suspension of employment, and termination of
employment.
- -- Insider trading:
Putnam employees are forbidden to buy or sell any security while either
Putnam or the employee is in possession of non-public information ("inside
information") concerning the security or the issuer. A violation of
Putnam's insider trading policies may result in criminal and civil
penalties, including imprisonment and substantial fines.
- -- Conflicts of interest:
The Code of Ethics imposes limits on activities of Putnam employees where
the activity may conflict with the interests of Putnam or its clients.
These include limits on the receipt and solicitation of gifts and on
service as a fiduciary for a person or entity outside of Putnam.
For example, Putnam employees generally may not accept gifts over $50 in
total value in a calendar year from any entity or any supplier of goods or
services to Putnam. In addition, a Putnam employee may not serve as a
director of any corporation without prior approval of the Code of Ethics
Officer, and Putnam employees may not be members of investment clubs.
- -- Confidentiality:
Information about Putnam clients and Putnam investment activity and
research is proprietary and confidential and may not be disclosed or used
by any Putnam employee outside Putnam without a valid business purpose.
s iii
<PAGE>
- -- Personal securities trading:
Putnam employees may not buy or sell any security for their own account
without clearing the proposed transaction in advance with the Code of
Ethics Administrator.
Certain securities are excepted from this requirement (e.g., Marsh &
McLennan stock and shares of open-end (not closed-end) Putnam Funds). The
Code of Ethics Officer will permit employees to purchase or sell up to
1,000 shares of stock of an issuer whose capitalization exceeds $1
billion, but such purchases or sales must still be cleared.
Clearance must be obtained in advance, between 11:30 a.m. and 4:00 p.m.
EST on the day of the trade. Clearance may be obtained between 9:00 a.m.
and 4:00 p.m. on the day of the trade for up to 1,000 shares of stock of
an issuer whose capitalization exceeds $1 billion. A clearance is valid
only for the day it is obtained. The Code also strongly discourages
excessive trading by employees for their own account (i.e., more than 10
trades in any calendar quarter). Trading in excess of this level will be
reviewed with the Code of Ethics Oversight Committee.
- -- Short Selling:
Putnam employees are prohibited from short selling any security, whether
or not it is held in a Putnam client portfolio, except that short selling
against the S&P 100 and 500 indexes and "against the box" are permitted.
- -- Confirmations of trading and periodic account statements:
All Putnam employees must have their brokers send confirmations of
personal securities transactions, including transactions of immediate
family members and accounts over which the employee has investment
discretion, to the Code of Ethics Officer. Employees must contact the Code
of Ethics Administrator to obtain an authorization letter from Putnam for
setting up a personal brokerage account.
- -- Quarterly and annual reporting:
Certain Putnam employees (so-called "Access Persons" as defined by the SEC
and in the Code of Ethics) must report all their securities transactions
in each calendar quarter to the Code of Ethics Officer within 10 days
after the end of the quarter. All Access Persons must disclose all
personal securities holdings upon commencement of employment and
thereafter on an annual basis. You will be notified if these requirements
apply to you. If these requirements apply to you and you fail to report as
required, salary increases and bonuses will be reduced.
iv s
<PAGE>
- -- IPOs and private placements:
Putnam employees may not buy any securities in an initial public offering
or in a private placement, except in limited circumstances when prior
written authorization is obtained.
- -- Procedures for Approval of New Financial Instruments:
No new types of securities or instruments may be purchased for any Putnam
fund or other client account without the prior approval of the Risk
Management Committee.
- -- Personal securities transactions by Access Persons and certain investment
professionals:
The Code imposes several special restrictions on personal securities
transactions by Access Persons and certain investment professionals, which
are summarized as follows:
-- "60-Day Holding Period". No Access Person shall profit from the
purchase and sale, or sale and purchase, of any security or related
derivative security within 60 calendar days.
-- "15-Day" Rule. Before a portfolio manager places an order to buy a
security for any portfolio he manages, he must sell from his
personal account any such security or related derivative security
purchased within the preceding 15 calendar days and disgorge any
profit from the sale.
-- "Blackout" Rules. No portfolio manager may sell any security or
related derivative security for her personal account until 15
calendar days have passed since the most recent purchase of that
security or related derivative security by any portfolio she
manages. No portfolio manager may buy any security or related
derivative security for his personal account until 15 calendar days
have passed since the most recent sale of that security or related
derivative security by any portfolio he manages.
-- "Contra-Trading" Rule. No portfolio manager may sell out of her
personal account any security or related derivative security that is
held in any portfolio she manages unless she has received the
written approval of a CIO and the Code of Ethics Officer.
-- No manager may cause a Putnam client to take action for the
manager's own personal benefit.
-- SIMILAR RULES LIMIT PERSONAL SECURITIES TRANSACTIONS BY ANALYSTS,
CO-MANAGERS, AND CHIEF INVESTMENt OFFICERS. PLEASE READ THESE RULES
CAREFULLY. YOU ARE RESPONSIBLE FOR UNDERSTANDING THE RESTRICTIONS.
This Overview is qualified in its entirety by the provisions of the Code of
Ethics. The Code requires that all Putnam employees read, understand, and comply
with the entire Code of Ethics.
s v
<PAGE>
A
Preamble
It is the personal responsibility of every Putnam employee to avoid any conduct
that would create a conflict, or even the appearance of a conflict, with our
clients, or embarrass Putnam in any way. This is the spirit of the Code of
Ethics. In accepting employment at Putnam, every employee also accepts the
absolute obligation to comply with the letter and the spirit of the Code of
Ethics. Failure to comply with the spirit of the Code of Ethics is just as much
a violation of the Code as failure to comply with the written rules of the Code.
Sanctions will be imposed for violations of the Code of Ethics, including the
Code's reporting requirements. Sanctions may include bans on personal trading,
reductions in salary increases or bonuses, disgorgement of trading profits,
suspension of employment and termination of employment.
Putnam Investments is required by law to adopt a Code of Ethics. The purpose of
the law is to prevent abuses in the investment advisory business that can arise
when conflicts of interest exist between the employees of an investment adviser
and its clients. Having an effective Code of Ethics is good business practice,
as well. By adopting and enforcing a Code of Ethics, we strengthen the trust and
confidence reposed in us by demonstrating that, at Putnam, client interests come
before personal interests.
Putnam has had a Code of Ethics for many years. The first Putnam Code was
written more than 30 years ago by George Putnam. It has been revised
periodically, and was re-drafted in its entirety in 1989 to take account of
legal and regulatory developments in the investment advisory business. Since
1989, the Code has been revised regularly to reflect developments in our
business.
The Code that follows represents a balancing of important interests. On the one
hand, as a registered investment adviser, Putnam owes a duty of undivided
loyalty to its clients, and must avoid even the appearance of a conflict that
might be perceived as abusing the trust they have placed in Putnam. On the other
hand, Putnam does not want to prevent conscientious professionals from investing
for their own account where conflicts do not exist or are so attenuated as to be
immaterial to investment decisions affecting Putnam clients.
When conflicting interests cannot be reconciled, the Code makes clear that,
first and foremost, Putnam employees owe a fiduciary duty to Putnam clients. In
most cases, this means that the affected employee will be required to forego
conflicting personal securities transactions. In some cases, personal
investments will be permitted, but only in a manner which, because of the
circumstances and applicable controls, cannot reasonably be perceived as
adversely affecting Putnam client portfolios or taking unfair advantage of the
relationship Putnam employees have to Putnam clients.
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The Code contains specific rules prohibiting defined types of conflicts. Because
every potential conflict cannot be anticipated in advance, the Code also
contains certain general provisions prohibiting conflict situations. In view of
these general provisions, it is critical that any individual who is in doubt
about the applicability of the Code in a given situation seek a determination
from the Code of Ethics Officer about the propriety of the conduct in advance.
The procedures for obtaining such a determination are described in Section VII
of the Code.
It is critical that the Code be strictly observed. Not only will adherence to
the Code ensure that Putnam renders the best possible service to its clients, it
will ensure that no individual is liable for violations of law.
It should be emphasized that adherence to this policy is a fundamental condition
of employment at Putnam. Every employee is expected to adhere to the
requirements of this Code of Ethics despite any inconvenience that may be
involved. Any employee failing to do so may be subject to such disciplinary
action, including financial penalties and termination of employment, as
determined by the Code of Ethics Oversight Committee or the Chief Executive
Officer of Putnam Investments.
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A
Definitions: Code of Ethics
The words given below are defined specifically for the purposes of Putnam's Code
of Ethics.
Gender references in the Code of Ethics alternate.
Rule of construction regarding time periods. Unless the context indicates
otherwise, time periods used in the Code of Ethics shall be measured
inclusively, i.e., including the dates from and to which the measurement
is made.
Access Persons. Access Persons are (i) all officers of Putnam Investment
Management, Inc. (the investment manager of Putnam's mutual funds), (ii)
all employees within Putnam's Investment Division, and (iii) all other
employees of Putnam who, in connection with their regular duties, have
access to information regarding purchases or sales of portfolio securities
by a Putnam mutual fund, or who have access to information regarding
recommendations with respect to such purchases or sales.
Code of Ethics Administrator. The individual designated by the Code of Ethics
Officer to assume responsibility for day-to-day, non-discretionary
administration of this Code. The current Code of Ethics Administrator is
Laura Rose, who can be reached at extension 11104.
Code of Ethics Officer. The Putnam officer who has been assigned the
responsibility of enforcing and interpreting this Code. The Code of Ethics
Officer shall be the General Counsel or such other person as is designated
by the President of Putnam Investments. If the Code of Ethics Officer is
unavailable, the Deputy Code of Ethics Officer (to be appointed by the
Code of Ethics Officer) shall act in his stead.
Code of Ethics Oversight Committee. Has oversight responsibility for
administering the Code of Ethics. Members include the Code of Ethics
Officer, the Head of Investments, and other members of Putnam's senior
management approved by the Chief Executive Officer of Putnam.
Immediate family. Spouse, minor children, or other relatives living in the same
household as the Putnam employee.
Policy Statements. The Policy Statement Concerning Insider Trading Prohibitions
attached to the Code as Appendix A and the Policy Statement Regarding
Employee Trades in Shares of Putnam Closed-End Funds attached to the
Code as Appendix B.
Private placement. Any offering of a security not to the public, but to
sophisticated investors who have access to the kind of information which
would be contained in a prospectus, and which does not require
registration with the relevant securities authorities.
Purchase or sale of a security. Any acquisition or transfer of any interest in
the security for direct or indirect consideration, and includes the
writing of an option.
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Putnam. Any or all of Putnam Investments, Inc., and its subsidiaries, any one of
which shall be a "Putnam company."
Putnam client. Any of the Putnam Funds, or any advisory, trust, or other client
of Putnam.
Putnam employee (or "employee"). Any employee of Putnam.
Restricted List. The list established in accordance with Rule 1 of Section I.A.
Security. Any type or class of equity or debt security and any rights relating
to a security, such as put and call options, warrants, and convertible
securities. Unless otherwise noted, the term "security" does not include:
currencies, direct and indirect obligations of the U.S. government and its
agencies, commercial paper, certificates of deposit, repurchase
agreements, bankers' acceptances, any other money market instruments,
shares of open-end mutual funds (including Putnam open-end mutual funds),
securities of The Marsh & McLennan Companies, Inc., commodities, and any
option on a broad-based market index or an exchange-traded futures
contract or option thereon.
Transaction for a personal account (or "personal securities transaction").
Securities transactions: (a) for the personal account of any employee; (b)
for the account of a member of the immediate family of any employee; (c)
for the account of a partnership in which a Putnam employee or immediate
family member is a general partner or a partner with investment
discretion; (d) for the account of a trust in which a Putnam employee or
immediate family member is a trustee with investment discretion; (e) for
the account of a closely-held corporation in which a Putnam employee or
immediate family member holds shares and for which he has investment
discretion; and (f) for any account other than a Putnam client account
which receives investment advice of any sort from the employee or
immediate family member, or as to which the employee or immediate family
member has investment discretion.
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A
Section I. Personal Securities Rules for All Employees
A. Restricted List
RULE 1
No Putnam employee shall purchase or sell for his personal account any
security without prior clearance obtained through Putnam's Intranet
pre-clearance system or from the Code of Ethics Administrator. No
clearance will be granted for securities appearing on the Restricted
List. Securities shall be placed on the Restricted List in the following
circumstances:
(a) when orders to purchase or sell such security have been entered for
any Putnam client, or the security is being actively considered for
purchase or sale for any Putnam client;
(b) with respect to voting securities of corporations in the banking,
savings and loan, communications, or gaming (i.e., casinos)
industries, when holdings of Putnam clients exceed 7% (for public
utilities, the threshold is 4%);
(c) when, in the judgment of the Code of Ethics Officer, other
circumstances warrant restricting personal transactions of Putnam
employees in a particular security;
(d) the circumstances described in the Policy Statement Concerning
Insider Trading Prohibitions, attached as Appendix A.
Reminder: Securities for an employee's "personal account" include
securities owned by certain family members of a Putnam employee. Thus,
this Rule prohibits certain trades by family members of Putnam
employees. See Definitions.
Compliance with this rule does not exempt an employee from complying with
any other applicable rules of the Code, such as those described in
Section III. In particular, Access Persons and certain investment
professionals must comply with the special rules set forth in Section II.
EXCEPTIONS
A. "Large Cap" Exception. If a security appearing on the Restricted
List is an equity security for which the issuer has a market
capitalization (defined as outstanding shares multiplied by current
price per share) of over $1 billion, then a Putnam employee may
purchase or sell up to 1,000 shares of the security per day for his
personal account. This exception does not apply if the security
appears on the Restricted List in the circumstances described in
subpart (b), (c), or (d) of Rule 1.
B. Investment Grade Or Higher Fixed-Income Exception. If a security
being traded or considered for trade for a Putnam client is a
non-convertible fixed-income security which bears a rating of BBB
(Standard & Poor's) or Baa (Moody's) or any comparable rating or
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higher, then a Putnam employee may purchase or sell that security
for his personal account without regard to the activity of Putnam
clients. This exception does not apply if the security has been
placed on the Restricted List in the circumstances described in
subpart (b), (c), or (d) of Rule 1.
C. Pre-Clearing Transactions Effected by Share Subscription. The
purchase and sale of securities made by subscription rather than on
an exchange are limited to issuers having a market capitalization of
$1 billion or more and are subject to a 1,000 share limit. The
following are procedures to comply with Rule 1 when effecting a
purchase or sale of shares by subscription:
(a) The Putnam employee must pre-clear the trade on the day he or
she submits a subscription to the issuer, rather than on the
actual day of the trade since the actual day of the trade
typically will not be known to the employee who submits the
subscription. At the time of pre-clearance, the employee will
be told whether the purchase is permitted (in the case of a
corporation having a market capitalization of $1 billion or
more), or not permitted (in the case of a smaller
capitalization issuer).
(b) The subscription for any purchase or sale of shares must be
reported on the employee's quarterly personal securities
transaction report, noting the trade was accomplished by
subscription.
(c) As no brokers are involved in the transaction, the
confirmation requirement will be waived for these
transactions, although the Putnam employee must provide the
Legal and Compliance Department with any transaction
summaries or statements sent by the issuer.
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SANCTION GUIDELINES
A. Failure to Pre-Clear a Personal Trade
1. First violation: One month trading ban with written warning
that a future violation will result in a longer trading ban.
2. Second violation: Three month trading ban and written notice
to Managing Director of the employee's division.
3. Third violation: Six month trading ban with possible longer or
permanent trading ban based upon review by Code of Ethics
Oversight Committee.
B. Failure to Pre-Clear Securities on the Restricted List
1. First violation: Disgorgement of any profit from the
transaction, one month trading ban, and written warning that a
future violation will result in a longer trading ban.
2. Second violation: Disgorgement of any profit from the
transaction, three month trading ban, and written notice to
Managing Director of the employee's division.
3. Third violation: Disgorgement of any profit from the
transaction, and six month trading ban with possible longer or
permanent trading ban based upon review by Code of Ethics
Oversight Committee.
NOTE: These are the sanction guidelines for successive failures to
pre-clear personal trades within a 2-year period. The Code of
Ethics Oversight Committee retains the right to increase or
decrease the sanction for a particular violation in light of the
circumstances. The Committee's belief that an employee
intentionally has violated the Code of Ethics will result in more
severe sanctions than outlined in the guidelines above. The
sanctions described in Paragraph B apply to Restricted List
securities that are: (i) small cap stocks (i.e., stocks not
entitled to the "Large Cap" exception) and (ii) large cap stocks
that exceed the daily 1,000 share maximum permitted under the
"Large Cap" exception. Failure to pre-clear an otherwise permitted
trade of up to 1,000 shares of a large cap security is subject to
the sanctions described above in Paragraph A.
IMPLEMENTATION
A. Maintenance of Restricted List. The Restricted List shall be
maintained by the Code of Ethics Administrator.
B. Consulting Restricted List. An employee wishing to trade any
security for his personal account shall first obtain clearance
through Putnam's Intranet pre-clearance system. The system may be
accessed from your desktop computer through Internet access
software and following the directions provided in the system. The
current address of the
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Intranet pre-clearance system can be obtained from the Code of
Ethics Administrator. Employees may pre-clear all securities
between 11:30 a.m. and 4:00 p.m. EST, and may pre-clear purchases
or sales of up to 1,000 shares of issuers having a market
capitalization of more than $1 billion between 9:00 a.m. and 4:00
p.m. EST. Requests to make personal securities transactions may
not be made using the system or presented to the Code of Ethics
Administrator after 4:00 p.m.
The pre-clearance system will inform the employee whether the
security may be traded and whether trading in the security is
subject to the "Large Cap" limitation. The response of the
pre-clearance system as to whether a security appears on the
Restricted List and, if so, whether it is eligible for the
exceptions set forth after this Rule shall be final, unless the
employee appeals to the Code of Ethics Officer, using the procedure
described in Section VII, regarding the request to trade a
particular security.
A CLEARANCE IS ONLY VALID FOR TRADING ON THE DAY IT IS OBTAINED.
Trades in securities listed on Asian or European stock exchanges,
however, may be executed WITHIN ONE BUSINESS DAY AFTER
PRE-CLEARANCE IS OBTAINED.
If a security is not on the Restricted List, other classes of
securities of the same issuer (e.g., preferred or convertible
preferred stock) may be on the Restricted List. It is the
employee's responsibility to identify with particularity the class
of securities for which permission is being sought for a personal
investment.
If the Intranet pre-clearance system does not recognize a security,
or if an employee is unable to use the system or has any questions
with respect to the system or pre-clearance, the employee may
consult the Code of Ethics Administrator. The Code of Ethics
Administrator shall not have authority to answer any questions
about a security other than whether trading is permitted. The
response of the Code of Ethics Administrator as to whether a
security appears on the Restricted List and, if so, whether it is
eligible for the exceptions set forth after this Rule shall be
final, unless the employee appeals to the Code of Ethics Officer,
using the procedure described in Section VII, regarding the request
to trade a particular security.
C. Removal of Securities from Restricted List. Securities shall be
removed from the Restricted List when: (a) in the case of
securities on the Restricted List pursuant to Rule 1(a), they are
no longer being purchased or sold for a Putnam client or actively
considered for purchase or sale for a Putnam client; (b) in the
case of securities on the Restricted List pursuant to Rule 1(b),
the holdings of Putnam clients fall below the applicable
threshold designated in that Rule, or at such earlier time as the
Code of Ethics Officer deems appropriate; or (c) in the case of
securities on the Restricted List pursuant
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to Rule 1(c) or 1(d), when circumstances no longer warrant
restrictions on personal trading.
COMMENTS
1. Pre-Clearance. Subpart (a) of this Rule is designed to avoid the
conflict of interest that might occur when an employee trades for
his personal account a security that currently is being traded or is
likely to be traded for a Putnam client. Such conflicts arise, for
example, when the trades of an employee might have an impact on the
price or availability of a particular security, or when the trades
of the client might have an impact on price to the benefit of the
employee. Thus, exceptions involve situations where the trade of a
Putnam employee is unlikely to have an impact on the market.
2. Regulatory Limits. Owing to a variety of federal statutes and
regulations in the banking, savings and loan, communications, and
gaming industries, it is critical that accounts of Putnam clients
not hold more than 10% of the voting securities of any issuer (5%
for public utilities). Because of the risk that the personal
holdings of Putnam employees may be aggregated with Putnam holdings
for these purposes, subpart (b) of this Rule limits personal trades
in these areas. The 7% limit (4% for public utilities) will allow
the regulatory limits to be observed.
3. Options. For the purposes of this Code, options are treated like the
underlying security. See Definitions. Thus, an employee may not
purchase, sell, or "write" option contracts for a security that is
on the Restricted List. A securities index will not be put on the
Restricted List simply because one or more of its underlying
securities have been put on the Restricted List. The exercise of an
options contract (the purchase or writing of which was previously
pre-cleared) does not have to be pre-cleared. Note, however, that
the sale of securities obtained through the exercise of options must
be pre-cleared.
4. Involuntary Transactions. "Involuntary" personal securities
transactions are exempted from the Code. Special attention should be
paid to this exemption. (See Section I.D.)
5. Tender Offers. This Rule does not prohibit an employee from
tendering securities from his personal account in response to an
any-and-all tender offer, even if Putnam clients are also tendering
securities. A Putnam employee is, however, prohibited from tendering
securities from his personal account in response to a partial tender
offer, if Putnam clients are also tendering securities.
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B. Prohibited Purchases and Sales
RULE 1
Putnam employees are prohibited from short selling any security, whether
or not the security is held in a Putnam client portfolio.
EXCEPTIONS
Short selling against the S&P 100 and 500 indexes and "against the box"
are permitted.
RULE 2
No Putnam employee shall purchase any security for her personal account
in an initial public offering.
EXCEPTIONS
Pre-existing Status Exception. A Putnam employee shall not be barred by
this Rule or by Rule 1(a) of Section I.A. from purchasing securities for
her personal account in connection with an initial public offering of
securities by a bank or insurance company when the employee's status as a
policyholder or depositor entitles her to purchase securities on terms
more favorable than those available to the general public, in connection
with the bank's conversion from mutual or cooperative form to stock form,
or the insurance company's conversion from mutual to stock form, provided
that the employee has had the status entitling her to purchase on
favorable terms for at least two years. This exception is only available
with respect to the value of bank deposits or insurance policies that an
employee owns before the announcement of the initial public offering.
This exception does not apply, however, if the security appears on the
Restricted List in the circumstances set forth in subparts (b), (c), or
(d) of Section I.A., Rule 1.
IMPLEMENTATION
A. General Implementation. An employee shall inquire, before any
purchase of a security for her personal account, whether the
security to be purchased is being offered pursuant to an initial
public offering. If the security is offered through an initial
public offering, the employee shall refrain from purchasing that
security for her personal account unless the exception applies.
B. Administration of Exception. If the employee believes the exception
applies, she shall consult the Code of Ethics Administrator
concerning whether the security appears on the Restricted List and
if so, whether it is eligible for this exception.
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COMMENTS
1. The purpose of this rule is twofold. First, it is designed to
prevent a conflict of interest between Putnam employees and Putnam
clients who might be in competition for the same securities in a
limited public offering. Second, the rule is designed to prevent
Putnam employees from being subject to undue influence as a result
of receiving "favors" in the form of special allocations of
securities in a public offering from broker-dealers who seek to do
business with Putnam.
2. Purchases of securities in the immediate after-market of an initial
public offering are not prohibited, provided they do not constitute
violations of other portions of the Code of Ethics. For example,
participation in the immediate after-market as a result of a special
allocation from an underwriting group would be prohibited by Section
III, Rule 3 concerning gifts and other "favors."
3. Public offerings subsequent to initial public offerings are not
deemed to create the same potential for competition between Putnam
employees and Putnam clients because of the pre-existence of a
market for the securities.
RULE 3
No Putnam employee shall purchase any security for his personal account
in a limited private offering or private placement.
COMMENTS
1. The purpose of this Rule is to prevent a Putnam employee from
investing in securities for his own account pursuant to a limited
private offering that could compete with or disadvantage Putnam
clients, and to prevent Putnam employees from being subject to
efforts to curry favor by those who seek to do business with Putnam.
2. Exemptions to the prohibition will generally not be granted where
the proposed investment relates directly or indirectly to
investments by a Putnam client, or where individuals involved in the
offering (including the issuers, broker, underwriter, placement
agent, promoter, fellow investors and affiliates of the foregoing)
have any prior or existing business relationship with Putnam or a
Putnam employee, or where the Putnam employee believes that such
individuals may expect to have a future business relationship with
Putnam or a Putnam employee.
3. An exemption may be granted, subject to reviewing all the facts
and circumstances, for investments in:
(a) Pooled investment funds, including hedge funds, subject to the
condition that an employee investing in a pooled investment
fund would have no involvement in the
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activities or decision-making process of the fund except
for financial reports made in the ordinary course of the
fund's business.
(b) Private placements where the investment cannot relate, or be
expected to relate, directly or indirectly to Putnam or
investments by a Putnam client.
4. Employees who apply for an exemption will be expected to disclose to
the Code of Ethics Officer in writing all facts and relationships
relating to the proposed investment.
5. Limited partnership interests are frequently sold in private
placements. An employee should assume that investment in a limited
partnership is barred by these rules, unless the employee has
obtained, in advance of purchase, a written exemption under the ad
hoc exemption set forth in Section I.D., Rule 2. The procedure for
obtaining an ad hoc exemption is described in Section VII, Part 4.
6. Applications to invest in private placements will be reviewed by the
Code of Ethics Oversight Committee. This review will take into
account, among other factors, the considerations described in the
preceding comments.
RULE 4
No Putnam employee shall purchase or sell any security for her personal
account or for any Putnam client account while in possession of material,
nonpublic information concerning the security or the issuer.
EXCEPTIONS
NONE. Please read Appendix A, Policy Statement Concerning Insider Trading
Prohibitions.
RULE 5
No Putnam employee shall purchase from or sell to a Putnam client any
securities or other property for his personal account, nor engage in any
personal transaction to which a Putnam client is known to be a party, or
which transaction may have a significant relationship to any action taken
by a Putnam client.
EXCEPTIONS
None.
IMPLEMENTATION
It shall be the responsibility of every Putnam employee to make inquiry
prior to any personal transaction sufficient to satisfy himself that the
requirements of this Rule have been met.
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COMMENT
This rule is required by federal law. It does not prohibit a Putnam
employee from purchasing any shares of an open-end Putnam fund. The
policy with respect to employee trading in closed-end Putnam funds is
attached as Appendix B.
C. Discouraged Transactions
RULE 1
Putnam employees are strongly discouraged from engaging in naked option
transactions for their personal accounts.
EXCEPTIONS
None.
COMMENT
Naked option transactions are particularly dangerous, because a Putnam
employee may be prevented by the restrictions in this Code of Ethics from
"covering" the naked option at the appropriate time. All employees should
keep in mind the limitations on their personal securities trading imposed
by this Code when contemplating such an investment strategy. Engaging in
naked options transactions on the basis of material, nonpublic
information is prohibited. See Appendix A, Policy Statement Concerning
Insider Trading Prohibitions.
RULE 2
Putnam employees are strongly discouraged from engaging in excessive
trading for their personal accounts.
EXCEPTIONS
None.
COMMENTS
1. Although a Putnam employee's excessive trading may not itself
constitute a conflict of interest with Putnam clients, Putnam
believes that its clients' confidence in Putnam will be enhanced
and the likelihood of Putnam achieving better investment results
for its clients over the long term will be increased if Putnam
employees rely on their investment-- as opposed to trading--
skills in transactions for their own account. Moreover, excessive
trading by a Putnam employee for his or her own account diverts an
employee's attention from the responsibility of servicing Putnam
clients, and increases the possibilities for transactions that are
in actual or apparent conflict with Putnam client transactions.
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2. Although this Rule does not define excessive trading, employees
should be aware that if their trades exceed 10 trades per quarter
the trading activity will be reviewed by the Code of Ethics
Oversight Committee.
D. Exempted Transactions
RULE 1
Transactions which are involuntary on the part of a Putnam employee are
exempt from the prohibitions set forth in Sections I.A., I.B., and I.C.
EXCEPTIONS
None.
COMMENTS
1. This exemption is based on categories of conduct that the Securities
and Exchange Commission does not consider "abusive."
2. Examples of involuntary personal securities transactions include:
(a) sales out of the brokerage account of a Putnam employee as a
result of bona fide margin call, provided that withdrawal of
collateral by the Putnam employee within the ten days previous
to the margin call was not a contributing factor to the margin
call;
(b) purchases arising out of an automatic dividend reinvestment
program of an issuer of a publicly traded security.
3. Transactions by a trust in which the Putnam employee (or a member of
his immediate family) holds a beneficial interest, but for which the
employee has no direct or indirect influence or control with respect
to the selection of investments, are involuntary transactions. In
addition, these transactions do not fall within the definition of
"personal securities transactions." See Definitions.
4. A good-faith belief on the part of the employee that a transaction
was involuntary will not be a defense to a violation of the Code of
Ethics. In the event of confusion as to whether a particular
transaction is involuntary, the burden is on the employee to seek a
prior written determination of the applicability of this exemption.
The procedures for obtaining such a determination appear in Section
VII, Part 3.
RULE 2
Transactions which have been determined in writing by the Code of Ethics
Officer before the transaction occurs to be no more than remotely
potentially harmful to Putnam clients because
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the transaction would be very unlikely to affect a highly institutional
market, or because the transaction is clearly not related economically to
the securities to be purchased, sold, or held by a Putnam client, are
exempt from the prohibitions set forth in Sections I.A., I.B., and I.C.
EXCEPTIONS
N.A.
IMPLEMENTATION
An employee may seek an ad hoc exemption under this Rule by following the
procedures in Section VII, Part 4.
COMMENTS
1. This exemption is also based upon categories of conduct that the
Securities and Exchange Commission does not consider "abusive."
2. The burden is on the employee to seek a prior written determination
that the proposed transaction meets the standards for an ad hoc
exemption set forth in this Rule.
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A
Section II. Additional Special Rules for Personal Securities Transactions of
Access Persons and Certain Investment Professionals
Access Persons (including all Investment
Professionals and other employees as defined on page ix)
RULE 1 ("60-DAY" RULE)
No Access Person shall profit from the purchase and sale, or sale and purchase,
of any security or related derivative security within 60 calendar days.
EXCEPTIONS
None, unless prior written approval from the Code of Ethics Officer is obtained.
Exceptions may be granted on a case-by-case basis when no abuse is involved and
the equities of the situation support an exemption. For example, although an
Access Person may buy a stock as a long-term investment, that stock may have to
be sold involuntarily due to unforeseen activity such as a merger.
IMPLEMENTATION
1. The 60-Day Rule applies to all Access Persons, as defined in the
Definitions section of the Code.
2. Calculation of whether there has been a profit is based upon the market
prices of the securities. THE CALCULATION IS NOT NET OF COMMISSIONS OR
OTHER SALES CHARGES.
3. As an example, an Access Person would not be permitted to sell a security
at $12 that he purchased within the prior 60 days for $10. Similarly, an
Access Person would not be permitted to purchase a security at $10 that she
had sold within the prior 60 days for $12. If the proposed transaction
would be made at a loss, it would be permitted if the pre-clearance
requirements are met. See, Section I, Rule 1.
COMMENTS
1. The prohibition against short-term trading profits by Access Persons is
designed to minimize the possibility that they will capitalize
inappropriately on the market impact of trades involving a client portfolio
about which they might possibly have information.
2. Although Chief Investment Officers, Portfolio Managers, and Analysts may
sell securities at a profit within 60 days of purchase in order to comply
with the requirements of the 15-Day Rule applicable to them (described
below), the profit will have to be disgorged to charity under the terms of
the 15-Day Rule.
3. Access Persons occasionally make a series of transactions in securities
over extended periods of time. For example, an Access Person bought 100
shares of Stock X on Day 1 at $100 per
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share and then bought 50 additional shares on Day 45 at $95 per share. On
Day 75, the Access Person sold 20 shares at $105 per share. The question
arises whether the Access Person violated the 60-Day Rule. The
characterization of the employee's tax basis in the shares sold determines
the analysis. If, for personal income tax purposes, the Access Person
characterizes the shares sold as having a basis of $100 per share (i.e.,
shares purchased on Day 1), the transaction would be consistent with the
60-Day Rule. However, if the tax basis in the shares is $95 per share
(i.e., shares purchased on Day 45), the transaction would violate the
60-Day Rule.
RULE 2
Access Persons must disclose all personal securities holdings to the Code of
Ethics Officer upon commencement of employment and thereafter on an annual
basis.
EXCEPTIONS
None.
COMMENT
These requirements are mandated by SEC regulations and are designed to
facilitate the monitoring of personal securities transactions. Putnam's Code of
Ethics Administrator will provide Access Persons with the form for making these
reports and the specific information that must be disclosed at the time that the
disclosure is required.
Certain Investment Professionals
RULE 3 ("15-DAY" RULE)
(a) Portfolio Managers: Before a portfolio manager places an order to buy a
security for any Putnam client portfolio that he manages, he shall sell any such
security or related derivative security purchased in a transaction for his
personal account within the preceding fifteen calendar days.
(b) Co-Managers: Before a portfolio manager places an order to buy a security
for any Putnam client he manages, his co-manager shall sell any such security or
related derivative security purchased in transaction for his personal account
within the preceding fifteen calendar days.
(c) Analysts: Before an analyst makes a buy recommendation for a security, he
shall sell any such security or related derivative security purchased in a
transaction for his personal account within the preceding fifteen calendar days.
(d) Chief Investment Officers: The Chief Investment Officer of an investment
group must sell any security or related derivative security purchased in a
transaction for his personal account within
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the preceding fifteen calendar days before any portfolio manager in the CIO's
investment group places an order to buy such security for any Putnam client
account he manages.
EXCEPTIONS
None.
COMMENTS
1. This Rule applies to portfolio managers and Chief Investment Officers with
respect to any purchase (no matter how small) in any client account managed
or overseen by that portfolio manager or CIO (even so-called "clone
accounts"). In particular, it should be noted that the requirements of this
rule also apply with respect to purchases in client accounts, including
"clone accounts," resulting from "cash flows." To comply with the
requirements of this rule, it is the responsibility of each portfolio
manager and CIO to be aware of the placement of all orders for purchases of
a security by client accounts that he or she manages or oversees for 15
days following the purchase of that security for his or her personal
account.
2. An investment professional who must sell securities to be in compliance
with the 15-Day Rule must absorb any loss and disgorge to charity any
profit resulting from the sale.
3. This Rule is designed to avoid even the appearance of a conflict of
interest between an investment professional and a Putnam client. A more
stringent rule is warranted because, with their greater knowledge and
control, these investment professionals are in a better position than other
employees to create an appearance of manipulation of Putnam client accounts
for personal benefit.
4. "Portfolio manager" is used in this Section as a functional label, and is
intended to cover any employee with authority to authorize a trade on
behalf of a Putnam client, whether or not such employee bears the title
"portfolio manager." "Analyst" is also used in this Section as a
functional label, and is intended to cover any employee who is not a
portfolio manager but who may make recommendations regarding investments
for Putnam clients.
RULE 4 ("BLACKOUT RULE")
(a) Portfolio Managers: No portfolio manager shall: (i) sell any security or
related derivative security for her personal account until fifteen calendar days
have elapsed since the most recent purchase of that security or related
derivative security by any Putnam client portfolio she manages or co-manages; or
(ii) purchase any security or related derivative security for her personal
account until fifteen calendar days have elapsed since the most recent sale of
that security or related derivative security from any Putnam client portfolio
that she manages or co-manages.
(b) Analysts: No analyst shall: (i) sell any security or related derivative
security for his personal account until fifteen calendar days have elapsed since
his most recent buy recommendation for that
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security or related derivative security; or (ii) purchase any security or
related derivative security for his personal account until fifteen calendar days
have elapsed since his most recent sell recommendation for that security or
related derivative security.
(c) Chief Investment Officers: No Chief Investment Officer shall: (i) sell any
security or related derivative security for his personal account until fifteen
calendar days have elapsed since the most recent purchase of that security or
related derivative security by a portfolio manager in his investment group; or
(ii) purchase any security or related derivative security for his personal
account until fifteen calendar days have elapsed since the most recent sale of
that security or related derivative security from any Putnam client portfolio
managed in his investment group.
EXCEPTIONS
None.
COMMENTS
1. This Rule applies to portfolio managers and Chief Investment Officers with
respect to any transaction (no matter how small) in any client account
managed or overseen by that portfolio manager or CIO (even so-called "clone
accounts"). In particular, it should be noted that the requirements of this
rule also apply with respect to transactions in client accounts, including
"clone accounts," resulting from "cash flows." In order to comply with the
requirements of this rule, it is the responsibility of each portfolio
manager and CIO to be aware of all transactions in a security by client
accounts that he or she manages or oversees that took place within the 15
days preceding a transaction in that security for his or her personal
account.
2. This Rule is designed to prevent a Putnam portfolio manager or analyst from
engaging in personal investment conduct that appears to be counter to the
investment strategy she is pursuing or recommending on behalf of a Putnam
client.
3. Trades by a Putnam portfolio manager for her personal account in the "same
direction" as the Putnam client portfolio she manages, and trades by an
analyst for his personal account in the "same direction" as his
recommendation, do not present the same danger, so long as any "same
direction" trades do not violate other provisions of the Code or the Policy
Statements.
RULE 5 ("CONTRA TRADING" RULE)
(a) Portfolio Managers: No portfolio manager shall, without prior clearance,
sell out of his personal account securities or related derivative securities
held in any Putnam client portfolio that he manages or co-manages.
(b) Chief Investment Officers: No Chief Investment Officer shall, without prior
clearance, sell out of his personal account securities or related derivative
securities held in any Putnam client portfolio managed in his investment group.
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EXCEPTIONS
None, unless prior clearance is given.
IMPLEMENTATION
A. Individuals Authorized to Give Approval. Prior to engaging in any such
sale, a portfolio manager shall seek approval, in writing, of the proposed
sale. In the case of a portfolio manager or director, prior written
approval of the proposed sale shall be obtained from a chief investment
officer to whom he reports or, in his absence, another chief investment
officer. In the case of a chief investment officer, prior written approval
of the proposed sale shall be obtained from another chief investment
officer. In addition to the foregoing, prior written approval must also be
obtained from the Code of Ethics Officer.
B. Contents of Written Approval. In every instance, the written approval form
attached as Appendix C (or such other form as the Code of Ethics Officer
shall designate) shall be used. The written approval should be signed by
the chief investment officer giving approval and dated the date such
approval was given, and shall state, briefly, the reasons why the trade was
allowed and why the investment conduct pursued by the portfolio manager,
director, or chief investment officer was deemed inappropriate for the
Putnam client account controlled by the individual seeking to engage in the
transaction for his personal account. Such written approval shall be sent
by the chief investment officer approving the transaction to the Code of
Ethics Officer within twenty-four hours or as promptly as circumstances
permit. Approvals obtained after a transaction has been completed or while
it is in process will not satisfy the requirements of this Rule.
COMMENT
This Rule, like Rule 4 of this Section, is designed to prevent a Putnam
portfolio manager from engaging in personal investment conduct that appears to
be counter to the investment strategy that he is pursuing on behalf of a Putnam
client.
RULE 6
No portfolio manager shall cause, and no analyst shall recommend, a Putnam
client to take action for the portfolio manager's or analyst's own personal
benefit.
EXCEPTIONS
None.
COMMENTS
1. A portfolio manager who trades in, or an analyst who recommends,
particular securities for a Putnam client account in order to support the
price of securities in his personal account, or who
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"front runs" a Putnam client order is in violation of this Rule. Portfolio
managers and analysts should be aware that this Rule is not limited to
personal transactions in securities (as that word is defined in
"Definitions"). Thus, a portfolio manager or analyst who "front runs" a
Putnam client purchase or sale of obligations of the U.S. government is in
violation of this Rule, although U.S. government obligations are excluded
from the definition of "security."
2. This Rule is not limited to instances when a portfolio manager or analyst
has malicious intent. It also prohibits conduct that creates an appearance
of impropriety. Portfolio managers and analysts who have questions about
whether proposed conduct creates an appearance of impropriety should seek a
prior written determination from the Code of Ethics Officer, using the
procedures described in Section VII, Part 3.
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A
Section III. Prohibited Conduct for All Employees
RULE 1
All employees must comply with applicable laws and regulations as well as
company policies. This includes tax, antitrust, and political contribution laws.
EXCEPTIONS
None.
COMMENTS
It should also be noted that the U.S. Foreign Corrupt Practices Act makes it a
criminal offense to make a payment or offer of payment to any non-U.S.
governmental official, political party, or candidate to induce that person to
affect any governmental act or decision, or to assist Putnam's obtaining or
retaining business.
RULE 2
No Putnam employee shall conduct herself in a manner which is contrary to the
interests of, or in competition with, Putnam or a Putnam client, or which
creates an actual or apparent conflict of interest with a Putnam client.
EXCEPTIONS
None.
COMMENTS
1. This Rule is designed to recognize the fundamental principle that Putnam
employees owe their chief duty and loyalty to Putnam and Putnam clients.
2. It is expected that a Putnam employee who becomes aware of an investment
opportunity that she believes is suitable for a Putnam client who she
services will present it to the appropriate portfolio manager, prior to
taking advantage of the opportunity herself.
RULE 3
No Putnam employee shall seek or accept gifts, favors, preferential treatment,
or special arrangements of material value from any broker-dealer, investment
adviser, financial institution, corporation, or other entity, or from any
existing or prospective supplier of goods or services to Putnam or Putnam Funds.
Specifically, any gift over $50 in value, or any accumulation of gifts which in
aggregate exceeds $50 in value from one source in one calendar year, is
prohibited. Any Putnam employee who is offered or receives an item prohibited by
this Rule must report the details in writing to the Code of Ethics Officer.
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EXCEPTIONS
None.
COMMENTS
1. This rule is intended to permit only proper types of customary business
amenities. Listed below are examples of items that would be permitted under
proper circumstances and of items that are prohibited under this rule.
These examples are illustrative and not all-inclusive. Notwithstanding
these examples, a Putnam employee may not, under any circumstances, accept
anything that could create the appearance of any kind of conflict of
interest. For example, acceptance of any consideration is prohibited if it
would create the appearance of a "reward" or inducement for conducting
Putnam business either with the person providing the gift or his employer.
2. This rule also applies to gifts or "favors" of material value that an
investment professional may receive from a company or other entity being
researched or considered as a possible investment for a Putnam client
account.
3. Among items not considered of "material value" which, under proper
circumstances, would be considered permissible are:
(a) Occasional lunches or dinners conducted for business purposes;
(b) Occasional cocktail parties or similar social gatherings conducted for
business purposes;
(c) Occasional attendance at theater, sporting or other entertainment
events conducted for business purposes; and
(d) Small gifts, usually in the nature of reminder advertising, such as
pens, calendars, etc., with a value of no more than $50.
4. Among items which are considered of "material value" and which are
prohibited are:
(a) Entertainment of a recurring nature such as sporting events, theater,
golf games, etc.;
(b) The cost of transportation to a locality outside the Boston
metropolitan area, and lodging while in another locality, unless such
attendance and reimbursement arrangements have received advance
written approval of the Code of Ethics Officer;
(c) Personal loans to a Putnam employee on terms more favorable than those
generally available for comparable credit standing and collateral; and
(d) Preferential brokerage or underwriting commissions or spreads or
allocations of shares or interests in an investment for the personal
account of a Putnam employee.
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5. As with any of the provisions of the Code of Ethics, a sincere belief by
the employee that he was acting in accordance with the requirements of this
Rule will not satisfy his obligations under the Rule. Therefore, an
employee who is in doubt concerning the propriety of any gift or "favor"
should seek a prior written determination from the Code of Ethics Officer,
as provided in Part 3 of Section VII.
RULE 4
No Putnam employee may pay, offer, or commit to pay any amount of consideration
which might be or appear to be a bribe or kickback in connection with Putnam's
business.
EXCEPTIONS
None.
COMMENT
Although the rule does not specifically address political contributions, Putnam
employees should be aware that it is against corporate policy to use company
assets to fund political contributions of any sort, even where such
contributions may be legal. No Putnam employee should offer or agree to make any
political contributions (including political dinners and similar fund-raisers)
on behalf of Putnam, and no employee will be reimbursed by Putnam for such
contributions made by the employee personally.
RULE 5
No contributions may be made with corporate funds to any political party or
campaign, whether directly or by reimbursement to an employee for the expense of
such a contribution. No Putnam employee shall solicit any charitable, political
or other contributions using Putnam letterhead or making reference to Putnam in
the solicitation. No Putnam employee shall personally solicit any such
contribution while on Putnam business.
EXCEPTIONS
None.
COMMENT
1. Putnam has established a political action committee (PAC) that contributes
to worthy candidates for political office. Any request received by a Putnam
employee for a political contribution must be directed to Putnam's Legal
and Compliance Department.
2. This rule does not prohibit solicitation on personal letterhead by Putnam
employees. Nonetheless, Putnam employees should use discretion in
soliciting contributions from individuals or entities who provide services
to Putnam. There should never be a suggestion that any service provider
must contribute to keep Putnam's business.
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RULE 6
No unauthorized disclosure may be made by any employee or former employee of any
trade secrets or proprietary information of Putnam or of any confidential
information. No information regarding any Putnam client portfolio, actual or
proposed securities trading activities of any Putnam client, or Putnam research
shall be disclosed outside the Putnam organization without a valid business
purpose.
EXCEPTIONS
None.
COMMENT
All information about Putnam and Putnam clients is strictly confidential. Putnam
research information should not be disclosed unnecessarily and never for
personal gain.
RULE 7
No Putnam employee shall serve as officer, employee, director, trustee or
general partner of a corporation or entity other than Putnam, without prior
approval of the Code of Ethics Officer.
EXCEPTION
Charitable or Non-profit Exception. This Rule shall not prevent any Putnam
employee from serving as officer, director, or trustee of a charitable or
not-for-profit institution, provided that the employee abides by the spirit of
the Code of Ethics and the Policy Statements with respect to any investment
activity for which she has any discretion or input as officer, director, or
trustee. The pre-clearance and reporting requirements of the Code of Ethics do
not apply to the trading activities of such charitable or not-for-profit
institutions for which an employee serves as an officer, director, or trustee.
COMMENTS
1. This Rule is designed to ensure that Putnam cannot be deemed an affiliate
of any issuer of securities by virtue of service by one of its officers or
employees as director or trustee.
2. Certain charitable or not-for-profit institutions have assets (such as
endowment funds or employee benefit plans) which require prudent
investment. To the extent that a Putnam employee (because of her position
as officer, director, or trustee of an outside entity) is charged with
responsibility to invest such assets prudently, she may not be able to
discharge that duty while simultaneously abiding by the spirit of the Code
of Ethics and the Policy Statements. Employees are cautioned that they
should not accept service as an officer, director, or trustee of an outside
charitable or not-for-profit entity where such investment responsibility is
involved, without seriously considering their ability to discharge their
fiduciary duties with respect to such investments.
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RULE 8
No Putnam employee shall serve as a trustee, executor, custodian, any other
fiduciary, or as an investment adviser or counselor for any account outside
Putnam.
EXCEPTIONS
Charitable or Religious Exception. This Rule shall not prevent any Putnam
employee from serving as fiduciary with respect to a religious or charitable
trust or foundation, so long as the employee abides by the spirit of the Code of
Ethics and the Policy Statements with respect to any investment activity over
which he has any discretion or input. The pre-clearance and reporting
requirements of the Code of Ethics do not apply to the trading activities of
such a religious or charitable trust or foundation.
Family Trust or Estate Exception. This Rule shall not prevent any Putnam
employee from serving as fiduciary with respect to a family trust or estate, so
long as the employee abides by all of the Rules of the Code of Ethics with
respect to any investment activity over which he has any discretion.
COMMENT
The roles permissible under this Rule may carry with them the obligation to
invest assets prudently. Once again, Putnam employees are cautioned that they
may not be able to fulfill their duties in that respect while abiding by the
Code of Ethics and the Policy Statements.
RULE 9
No Putnam employee may be a member of any investment club.
EXCEPTIONS
None.
COMMENT
This Rule guards against the danger that a Putnam employee may be in violation
of the Code of Ethics and the Policy Statements by virtue of his personal
securities transactions in or through an entity that is not bound by the
restrictions imposed by this Code of Ethics and the Policy Statements. Please
note that this restriction also applies to the spouse of a Putnam employee and
any relatives of a Putnam employee living in the same household as the employee,
as their transactions are covered by the Code of Ethics (see page x).
RULE 10
No Putnam employee may become involved in a personal capacity in consultations
or negotiations for corporate financing, acquisitions or other transactions for
outside companies (whether or not held by any Putnam client), nor negotiate nor
accept a fee in connection with these activities without obtaining the prior
written permission of the president of Putnam Investments.
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EXCEPTIONS
None.
RULE 11
No new types of securities or instruments may be purchased for a Putnam fund or
other client account without the prior approval of the Risk Management
Committee.
EXCEPTIONS
None.
COMMENT
See Appendix D.
RULE 12
No employee may create or participate in the creation of any record that is
intended to mislead anyone or to conceal anything that is improper.
EXCEPTIONS
None.
COMMENT
In many cases, this is not only a matter of company policy and ethical behavior
but also required by law. Our books and records must accurately reflect the
transactions represented and their true nature. For example, records must be
accurate as to the recipient of all payments; expense items, including personal
expense reports, must accurately reflect the true nature of the expense. No
unrecorded fund or asset shall be established or maintained for any reason.
RULE 13
No employee should have any direct or indirect (including by a family member or
close relative) personal financial interest (other than normal investments not
material to the employee in the entity's publicly traded securities) in any
business, with which Putnam has dealings unless such interest is disclosed and
approved by the Code of Ethics Officer.
RULE 14
No employee shall, with respect to any affiliate of Putnam that provides
investment advisory services and is listed below in Comment 4 to this Rule, as
revised from time to time (each an "NPA"),
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(a) directly or indirectly seek to influence the purchase, retention, or
disposition of, or exercise of voting, consent, approval or similar rights with
respect to, any portfolio security in any account or fund advised by the NPA and
not by Putnam,
(b) transmit any information regarding the purchase, retention or disposition
of, or exercise of voting, consent, approval or similar rights with respect to,
any portfolio security held in a Putnam or NPA client account to any personnel
of the NPA,
(c) transmit any trade secrets, proprietary information, or confidential
information of Putnam to the NPA without a valid business purpose,
(d) use confidential information or trade secrets of the NPA for the benefit of
the employee, Putnam, or any other NPA, or
(e) breach any duty of loyalty to the NPA by virtue of service as a director or
officer of the NPA.
COMMENT
1. Sections (a) and (b) of the Rule are designed to help ensure that the
portfolio holdings of Putnam clients and clients of the NPA need not be
aggregated for purposes of determining beneficial ownership under Section
13(d) of the Securities Exchange Act or applicable regulatory or
contractual investment restrictions that incorporate such definition of
beneficial ownership. Persons who serve as directors or officers of both
Putnam and an NPA would take care to avoid even inadvertent violations of
Section (b). Section (a) does not prohibit a Putnam employee who serves as
a director or officer of the NPA from seeking to influence the modification
or termination of a particular investment product or strategy in a manner
that is not directed at any specific securities. Sections (a) and (b) do
not apply when a Putnam affiliate serves as an adviser or subadviser to the
NPA or one of its products, in which case normal Putnam aggregation rules
apply.
2. As a separate entity, any NPA may have trade secrets or confidential
information that it would not choose to share with Putnam. This choice must
be respected.
3. When Putnam employees serve as directors or officers of an NPA, they are
subject to common law duties of loyalty to the NPA, despite their Putnam
employment. In general, this means that when performing their duties as NPA
directors or officers, they must act in the best interest of the NPA and
its shareholders. Putnam's Legal and Compliance Department will assist any
Putnam employee who is a director or officer of an NPA and has questions
about the scope of his or her responsibilities to the NPA.
4. Entities that are currently non-Putnam affiliates within the scope of this
Rule are: Cisalpina Gestioni, S.p.A., PanAgora Asset Management Inc.,
PanAgora Asset Management Ltd., Nissay Asset Management Co., Ltd., and
Thomas H. Lee Partners, L.P.
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RULE 15
No employee shall use computer hardware, software, data, Internet, electronic
mail, voice mail, electronic messaging ("e-mail" or "cc: Mail"), or telephone
communications systems in a manner that is inconsistent with their use as set
forth in policy statements governing their use that are adopted from time to
time by Putnam. No employee shall introduce a computer "virus" or computer code
that may result in damage to Putnam's information or computer systems.
EXCEPTIONS
None.
COMMENT
1. Internet and Electronic Messaging Policies. As more and more employees of
Putnam Investments use the Internet to connect with Putnam's customers,
vendors, suppliers and other key organizations, it is important that all
Putnam employees understand the appropriate use guidelines and how to
protect assets of Putnam and its clients whenever using the Internet.
Internet access is provided to designated employees to connect with
worldwide information resources for the benefit of the company and its
clients. Such access is not intended for personal use. Employees using the
Internet or any electronic messaging system must do so in a responsible,
ethical and lawful manner.
o Putnam has adopted a Policy and Guidelines on Internet Use. A copy of this
policy statement is included in the Putnam Employee Handbook and is
available online (you may contact Putnam's Human Resources Department for
the on-line address). Failure to comply with this policy statement is a
violation of Putnam's Code of Ethics.
2. System Security Policy Statement. It is the policy of Putnam Investments to
secure its computer hardware, software, data, electronic mail, voice mail
and Internet access by placing strict controls and restrictions on their
access and use.
o Putnam has adopted a System Security Policy Statement. This policy
statement governs the use of computer hardware and software, data,
electronic mail, voice mail, Internet and commercial online services,
computer passwords and logon Ids, and workstation security. A copy of this
policy statement is included in the Putnam Employee Handbook and is
available online (you may contact Putnam's Human Resources Department for
the on-line address). Failure to comply with this policy statement is a
violation of Putnam's Code of Ethics.
3. Computer Virus Policy and Procedure. Putnam has adopted a Computer Virus
Policy and Procedure. This policy sets forth guidelines to prevent computer
viruses, procedures to be followed in the event a computer may be infected
with a virus, and a description of virus symptoms. A copy of this policy
statement is included in the Putnam Employee Handbook and
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is available online (you may contact Putnam's Human Resources Department
for the on-line address). Failure to comply with this policy statement is a
violation of Putnam's Code of Ethics.
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A
Section IV. Special Rules for Officers and Employees of Putnam Europe Ltd.
RULE 1
In situations subject to Section I.A., Rule 1 (Restricted List Personal
Securities Transactions), the Putnam Europe Ltd. ("PEL") employee must obtain
clearance not only as provided in that rule, but also from PEL's Compliance
Officer or her designee, who must approve the transaction before any trade is
placed and record the approval.
EXCEPTIONS
None.
IMPLEMENTATION
Putnam's Code of Ethics Administrator in Boston (the "Boston Administrator") has
also been designated the Assistant Compliance Officer of PEL and has been
delegated the right to approve or disapprove personal securities transactions in
accordance with the foregoing requirement. Therefore, approval from the Code of
Ethics Administrator for PEL employees to make personal securities investments
constitutes approval under the Code of Ethics and also for purposes of
compliance with IMRO, the U.K. self-regulatory organization that regulates PEL.
The position of London Code of Ethics Administrator (the "London Administrator")
has also been created (Jane Barlow is the current London Administrator). All
requests for clearances must be made by e-mail to the Boston Administrator
copying the London Administrator. The e-mail must include the number of shares
to be bought or sold and the name of the broker(s) involved. Where time is of
the essence clearances can be made by telephone to the Boston Administrator but
they must be followed up by e-mail.
Both the Boston and London Administrators will maintain copies of all clearances
for inspection by senior management and regulators.
RULE 2
No PEL employee may trade with any broker or dealer unless that broker or dealer
has sent a letter to the London Administrator agreeing to deliver copies of
trade confirmations to PEL. No PEL employee may enter into any margin or any
other special dealing arrangement with any broker-dealer without the prior
written consent of the PEL Compliance Officer.
EXCEPTIONS
None.
IMPLEMENTATION
PEL employees will be notified separately of this requirement once a year by the
PEL Compliance Officer, and are required to provide an annual certification of
compliance with the Rule.
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All PEL employees must inform the London Administrator of the names of all
brokers and dealers with whom they trade prior to trading. The London
Administrator will send a letter to the broker(s) in question requesting them to
agree to deliver copies of confirms to PEL. The London Administrator will
forward copies of the confirms to the Boston Administrator. PEL employees may
trade with a broker only when the London Administrator has received the signed
agreement from that broker.
RULE 3
For purposes of the Code of Ethics, including Putnam's Policy Statement on
Insider Trading Prohibitions, PEL employees must also comply with Part V of the
Criminal Justice Act 1993 on insider dealing.
EXCEPTIONS
None.
IMPLEMENTATION
To ensure compliance with U.K. insider dealing legislation, PEL employees must
observe the relevant procedures set forth in PEL's Compliance Manual, a copy of
which is sent to each PEL employee, and sign an annual certification as to
compliance.
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A
Section V. Reporting Requirements for All Employees
RULE 1
Each Putnam employee shall ensure that broker-dealers send all confirmations of
securities transactions for his personal accounts to the Code of Ethics Officer.
(For the purpose of this Rule, "securities" shall include securities of The
Marsh & McLennan Companies, Inc., and any option on a security or securities
index, including broad-based market indexes.)
EXCEPTIONS
None.
IMPLEMENTATION
1. Putnam employees must instruct their broker-dealers to send confirmations
to Putnam and must follow up with the broker-dealer on a reasonable basis
to ensure that the instructions are being followed. Putnam employees should
contact the Code of Ethics Administrator to obtain a letter from Putnam
authorizing the setting up of a personal brokerage account. Confirmations
should be submitted to the Code of Ethics Administrator. (Specific
procedures apply to employees of Putnam Europe Ltd. ("PEL"). Employees of
PEL should contact the London Code of Ethics Administrator.) Failure of a
broker-dealer to comply with the instructions of a Putnam employee to send
confirmations shall be a violation by the Putnam employee of this Rule.
COMMENTS
1. "Transactions for personal accounts" is defined broadly to include more
than transaction in accounts under an employee's own name. See Definitions.
2. A confirmation is required for all personal securities transactions,
whether or not exempted or excepted by this Code.
3. To the extent that a Putnam employee has investment authority over
securities transactions of a family trust or estate, confirmations of those
transactions must also be made, unless the employee has received a prior
written exception from the Code of Ethics Officer.
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RULE 2
Every Access Person shall file a quarterly report, within ten calendar days of
the end of each quarter, recording all purchases and sales of any securities for
personal accounts as defined in the Definitions. (For the purpose of this Rule,
"securities" shall include securities of The Marsh & McLennan Companies, Inc.,
and any option on a security or securities index, including broad-based market
indexes.)
EXCEPTIONS
None.
IMPLEMENTATION
All employees required to file such a report will receive a blank form at the
end of the quarter from the Code of Ethics Administrator. The form will specify
the information to be reported. The form shall also contain a representation
that employees have complied fully with all provisions of the Code of Ethics.
COMMENT
1. The date for each transaction required to be disclosed in the quarterly
report is the trade date for the transaction, not the settlement date.
2. If the requirement to file a quarterly report applies to you and you fail
to report within the required 10-day period, salary increases and bonuses
will be reduced in accordance with guidelines stated in the form.
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Section VI. Education Requirements for All Employees
Every Putnam employee has an obligation to fully understand the requirements of
the Code of Ethics. The Rules set forth below are designed to enhance this
understanding.
RULE 1
A copy of the Code of Ethics will be distributed to every Putnam employee
periodically. All Access Persons will be required to certify periodically that
they have read, understood, and will comply with the provisions of the Code of
Ethics, including the Code's Policy Statement Concerning Insider Trading
Prohibitions.
RULE 2
Every investment professional will attend a meeting periodically at which the
Code of Ethics will be reviewed.
s 33
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A
Section VII. Compliance and Appeal Procedures
1. Assembly of Restricted List. The Code of Ethics Administrator will
coordinate the assembly and maintenance of the Restricted List. The list
will be assembled each day by 11:30 a.m. EST. No employee may engage in a
personal securities transaction without prior clearance on any day, even if
the employee believes that the trade will be subject to an exception. Note
that pre-clearance may be obtained after 9:00 a.m. for purchases or sales
of up to 1,000 shares of issuers having a market capitalization in excess
of $1 billion.
2. Consultation of Restricted List. It is the responsibility of each employee
to pre-clear through the Intranet pre-clearance system or consult with the
Code of Ethics Administrator prior to engaging in a personal securities
transaction, to determine if the security he proposes to trade is on the
Restricted List and, if so, whether it is subject to the "Large Cap"
limitation. The Intranet pre-clearance system and the Code of Ethics
Administrator will be able to tell an employee whether a security is on the
Restricted List. No other information about the Restricted List is
available through the Intranet pre-clearance system. The Code of Ethics
Administrator shall not be authorized to answer any questions about the
Restricted List, or to render an opinion about the propriety of a
particular personal securities transaction. Any such questions shall be
directed to the Code of Ethics Officer.
3. Request for Determination. An employee who has a question concerning the
applicability of the Code of Ethics to a particular situation shall request
a determination from the Code of Ethics Officer before engaging in the
conduct or personal securities transaction about which he has a question.
If the question pertains to a personal securities transaction, the request
shall state for whose account the transaction is proposed, the relationship
of that account to the employee, the security proposed to be traded, the
proposed price and quantity, the entity with whom the transaction will take
place (if known), and any other information or circumstances of the trade
that could have a bearing on the Code of Ethics Officer's determination. If
the question pertains to other conduct, the request for determination shall
give sufficient information about the proposed conduct to assist the Code
of Ethics Officer in ascertaining the applicability of the Code. In every
instance, the Code of Ethics Officer may request additional information,
and may decline to render a determination if the information provided is
insufficient.
The Code of Ethics Officer shall make every effort to render a
determination promptly.
No perceived ambiguity in the Code of Ethics shall excuse any violation.
Any person who believes the Code to be ambiguous in a particular situation
shall request a determination from the Code of Ethics Officer.
s 35
<PAGE>
4. Request for Ad Hoc Exemption. Any employee who wishes to obtain an ad hoc
exemption under Section I.D., Rule 2, shall request from the Code of Ethics
Officer an exemption in writing in advance of the conduct or transaction
sought to be exempted. In the case of a personal securities transaction,
the request for an ad hoc exemption shall give the same information about
the transaction required in a request for determination under Part 3 of
this Section, and shall state why the proposed personal securities
transaction would be unlikely to affect a highly institutional market, or
is unrelated economically to securities to be purchased, sold, or held by
any Putnam client. In the case of other conduct, the request shall give
information sufficient for the Code of Ethics Officer to ascertain whether
the conduct raises questions of propriety or conflict of interest (real or
apparent).
The Code of Ethics Officer shall make every effort to promptly render a
written determination concerning the request for an ad hoc exemption.
5. Appeal to Code of Ethics Officer with Respect to Restricted List. If an
employee ascertains that a security that he wishes to trade for his
personal account appears on the Restricted List, and thus the transaction
is prohibited, he may appeal the prohibition to the Code of Ethics Officer
by submitting a written memorandum containing the same information as would
be required in a request for a determination. The Code of Ethics Officer
shall make every effort to respond to the appeal promptly.
6. Information Concerning Identity of Compliance Personnel. The names of Code
of Ethics personnel are available by contacting the Legal and Compliance
Department.
36 s
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Appendix A
Policy Statement Concerning
Insider Trading Prohibitions
piv
s
s 37
<PAGE>
A
Preamble
Putnam has always forbidden trading on material nonpublic information ("inside
information") by its employees. Tougher federal laws make it important for
Putnam to restate that prohibition in the strongest possible terms, and to
establish, maintain, and enforce written policies and procedures to prevent the
misuse of material nonpublic information.
Unlawful trading while in possession of inside information can be a crime.
Today, federal law provides that an individual convicted of trading on inside
information go to jail for some period of time. There is also significant
monetary liability for an inside trader; the Securities and Exchange Commission
can seek a court order requiring a violator to pay back profits and penalties of
up to three times those profits. In addition, private plaintiffs can seek
recovery for harm suffered by them. The inside trader is not the only one
subject to liability. In certain cases, "controlling persons" of inside traders
(including supervisors of inside traders or Putnam itself) can be liable for
large penalties.
Section 1 of this Policy Statement contains rules concerning inside information.
Section 2 contains a discussion of what constitutes unlawful insider trading.
Neither material nonpublic information nor unlawful insider trading is easy to
define. Section 2 of this Policy Statement gives a general overview of the law
in this area. However, the legal issues are complex and must be resolved by the
Code of Ethics Officer. If an employee has any doubt as to whether she has
received material nonpublic information, she must consult with the Code of
Ethics Officer prior to using that information in connection with the purchase
or sale of a security for his own account or the account of any Putnam client,
or communicating the information to others. A simple rule of thumb is if you
think the information is not available to the public at large, don't disclose it
to others and don't trade securities to which the inside information relates. If
an employee has failed to consult the Code of Ethics Officer, Putnam will not
excuse employee misuse of inside information on the ground that the employee
claims to have been confused about this Policy Statement or the nature of the
information in his possession.
If Putnam determines, in its sole discretion, that an employee has failed to
abide by this Policy Statement, or has engaged in conduct that raises a
significant question concerning insider trading, he will be subject to
disciplinary action, including termination of employment.
THERE ARE NO EXCEPTIONS TO THIS POLICY STATEMENT AND NO ONE IS EXEMPT.
s 39
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A
Definitions: Insider Trading
Gender references in Appendix A alternate.
Code of Ethics Administrator. The individual designated by the Code of Ethics
Officer to assume responsibility for day-to-day, non-discretionary
administration of this Policy Statement.
Code of Ethics Officer. The Putnam officer who has been assigned the
responsibility of enforcing and interpreting this Policy Statement. The
Code of Ethics Officer shall be the General Counsel or such other person as
is designated by the President of Putnam Investments. If he is unavailable,
the Deputy Code of Ethics Officer (to be appointed by the Code of Ethics
Officer) shall act in his stead.
Immediate family. Spouse, minor children or other relatives living in the same
household as the Putnam employee.
Purchase or sale of a security. Any acquisition or transfer of any interest in
the security for direct or indirect consideration, including the writing of
an option.
Putnam. Any or all of Putnam Investments, Inc., and its subsidiaries, any one of
which shall be a "Putnam company."
Putnam client. Any of the Putnam Funds, or any advisory or trust client of
Putnam.
Putnam employee (or "employee"). Any employee of Putnam.
Security. Anything defined as a security under federal law. The term includes
any type of equity or debt security, any interest in a business trust or
partnership, and any rights relating to a security, such as put and call
options, warrants, convertible securities, and securities indices. (Note:
The definition of "security" in this Policy Statement varies significantly
from that in the Code of Ethics. For example, the definition in this Policy
Statement specifically includes securities of The Marsh & McLennan
Companies, Inc.)
Transaction for a personal account (or "personal securities transaction").
Securities transactions: (a) for the personal account of any employee; (b)
for the account of a member of the immediate family of any employee; (c)
for the account of a partnership in which a Putnam employee or immediate
family member is a partner with investment discretion; (d) for the account
of a trust in which a Putnam employee or immediate family member is a
trustee with investment discretion; (e) for the account of a closely-held
corporation in which a Putnam employee or immediate family member holds
shares and for which he has investment discretion; and (f) for any account
other than a Putnam client account which receives investment advice of any
sort from the employee or immediate family member, or as to which the
employee or immediate family member has investment discretion.
s 41
<PAGE>
Officers and employees of Putnam Europe Ltd. ("PEL") must also consult the
relevant procedures on compliance with U.K. insider dealing legislation set
forth in PEL's Compliance Manual (see Rule 3 of Section IV of the Code of
Ethics).
42 s
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A
Section 1. Rules Concerning Inside Information
RULE 1
No Putnam employee shall purchase or sell any security listed on the Inside
Information List (the "Red List") either for his personal account or for a
Putnam client.
IMPLEMENTATION
When an employee contacts the Code of Ethics Administrator seeking clearance for
a personal securities transaction, the Code of Ethics Administrator's response
as to whether a security appears on the Restricted List will include securities
on the Red List.
COMMENT
This Rule is designed to prohibit any employee from trading a security while
Putnam may have inside information concerning that security or the issuer. Every
trade, whether for a personal account or for a Putnam client, is subject to this
Rule.
RULE 2
No Putnam employee shall purchase or sell any security, either for a personal
account or for the account of a Putnam client, while in possession of material,
nonpublic information concerning that security or the issuer, without the prior
written approval of the Code of Ethics Officer.
IMPLEMENTATION
In order to obtain prior written approval of the Code of Ethics Officer, a
Putnam employee should follow the reporting steps prescribed in Rule 3.
COMMENTS
1. Rule 1 concerns the conduct of an employee when Putnam possesses material
nonpublic information. Rule 2 concerns the conduct of an employee who
herself possesses material, nonpublic information about a security that is
not yet on the Red List.
2. If an employee has any question as to whether information she possesses is
material and/or nonpublic information, she must contact the Code of Ethics
Officer in accordance with Rule 3 prior to purchasing or selling any
security related to the information or communicating the information to
others. The Code of Ethics Officer shall have the sole authority to
determine what constitutes material, nonpublic information for the purposes
of this Policy Statement. An employee's mistaken belief that the
information was not material nonpublic information will not excuse a
violation of this Policy Statement.
s 43
<PAGE>
RULE 3
Any Putnam employee who believes he may have received material, nonpublic
information concerning a security or the issuer shall immediately report the
information to the Code of Ethics Officer and to no one else. After reporting
the information, the Putnam employee shall comply strictly with Rule 2 by not
trading in the security without the prior written approval of the Code of Ethics
Officer and shall: (a) take precautions to ensure the continued confidentiality
of the information; and (b) refrain from communicating the information in
question to any person.
EXCEPTION
This rule shall not apply to material, nonpublic information obtained by Putnam
employees who are directors or trustees of publicly traded companies, to the
extent that such information is received in their capacities as directors or
trustees, and then only to the extent such information is not communicated to
anyone else within the Putnam organization.
IMPLEMENTATION
1. In order to make any use of potential material, nonpublic information,
including purchasing or selling a security or communicating the information
to others, an employee must communicate that information to the Code of
Ethics Officer in a way designed to prevent the spread of such information.
Once the employee has reported potential material, nonpublic information to
the Code of Ethics Officer, the Code of Ethics Officer will evaluate
whether information constitutes material, nonpublic information, and
whether a duty exists that makes use of such information improper. If the
Code of Ethics Officer determines either (a) that the information is not
material or is public, or (b) that use of the information is proper, he
will issue a written approval to the employee specifically authorizing
trading while in possession of the information, if the employee so
requests. If the Code of Ethics Officer determines (a) that the information
may be nonpublic and material, and (b) that use of such information may be
improper, he will place the security that is the subject of such
information on the Red List.
2. An employee who reports potential inside information to the Code of Ethics
Officer should expect that the Code of Ethics Officer will need significant
information to make the evaluation described in the foregoing paragraph,
including information about (a) the manner in which the employee acquired
the information, and (b) the identity of individuals to whom the employee
has revealed the information, or who have otherwise learned the
information. The Code of Ethics Officer may place the affected security or
securities on the Red List pending the completion of his evaluation.
3. If an employee possesses documents, disks, or other materials containing
the potential inside information, an employee must take precautions to
ensure the confidentiality of the information in question. Those
precautions include (a) putting documents containing such information out
44 s
<PAGE>
of the view of a casual observer, and (b) securing files containing such
documents or ensuring that computer files reflecting such information are
secure from viewing by others.
s 45
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A
Section 2. Overview of Insider Trading
A. Introduction
This section of the Policy Statement provides guidelines for employees as
to what may constitute inside information. It is possible that in the
course of her employment, an employee may receive inside information. No
employee should misuse that information, either by trading for her own
account or by communicating the information to others.
B. What constitutes unlawful insider trading?
The basic definition of unlawful insider trading is trading on material,
nonpublic information (also called "inside information") by an individual
who has a duty not to "take advantage" of the information. What does this
definition mean? The following sections help explain the definition.
1. What is material information?
Trading on inside information is not a basis for liability unless the
information is material. Information is "material" if a reasonable
person would attach importance to the information in determining his
course of action with respect to a security. Information which is
reasonably likely to affect the price of a company's securities is
"material," but effect on price is not the sole criterion for
determining materiality. Information that employees should consider
material includes but is not limited to: dividend changes, earnings
estimates, changes in previously released earnings estimates,
reorganization, recapitalization, asset sales, plans to commence a
tender offer, merger or acquisition proposals or agreements, major
litigation, liquidity problems, significant contracts, and
extraordinary management developments.
Material information does not have to relate to a company's business.
For example, a court considered as material certain information about
the contents of a forthcoming newspaper column that was expected to
affect the market price of a security. In that case, a reporter for
The Wall Street Journal was found criminally liable for disclosing to
others the dates that reports on various companies would appear in
the Journal's "Heard on the Street" column and whether those reports
would be favorable or not.
2. What is nonpublic information?
Information is nonpublic until it has been effectively communicated
to, and sufficient opportunity has existed for it to be absorbed by,
the marketplace. One must be able to point to some fact to show that
the information is generally public. For example, information found
in a report filed with the Securities and Exchange Commission, or
48 s
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appearing in Dow Jones, Reuters Economic Services, The Wall Street
Journal, or other publications of general circulation would be
considered public.
3. Who has a duty not to "take advantage" of inside information?
Unlawful insider trading occurs only if there is a duty not to "take
advantage" of material nonpublic information. When there is no such
duty, it is permissible to trade while in possession of such
information. Questions as to whether a duty exists are complex,
fact-specific, and must be answered by a lawyer.
a. Insiders and Temporary Insiders. Corporate "insiders" have a duty
not to take advantage of inside information. The concept of
"insider" is broad. It includes officers, directors, and
employees of a corporation. In addition, a person can be a
"temporary insider" if she enters into a special confidential
relationship with a corporation and as a result is given access
to information concerning the corporation's affairs. A temporary
insider can include, among others, accounting firms, consulting
firms, law firms, banks and the employees of such organizations.
Putnam would generally be a temporary insider of a corporation it
advises or for which it performs other services, because
typically Putnam clients expect Putnam to keep any information
disclosed to it confidential.
Example
An investment adviser to the pension fund of a large
publicly-traded corporation, Acme, Inc., learns from an Acme
employee that Acme will not be making the minimum required annual
contribution to the pension fund because of a serious downturn in
Acme's financial situation.
The information conveyed is material and nonpublic.
Comment
Neither the investment adviser, its employees, nor clients can
trade on the basis of that information, because the investment
adviser and its employees could be considered "temporary
insiders" of Acme.
b. Misappropriators. Certain people who are not insiders (or
temporary insiders) also have a duty not to deceptively take
advantage of inside information. Included in this category is an
individual who "misappropriates" (or takes for his own use)
material, nonpublic information in violation of a duty owed
either to the corporation that is the subject of inside
information or some other entity. Such a misappropriator can be
held liable if he trades while in possession of that material,
nonpublic information.
48 s
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Example
The chief financial officer of Acme, Inc., is aware of Acme's
plans to engage in a hostile takeover of Profit, Inc. The
proposed hostile takeover is material and nonpublic.
COMMENT
The chief financial officer of Acme cannot trade in Profit,
Inc.'s stock for his own account. Even though he owes no duty to
Profit, Inc., or its shareholders, he owes a duty to Acme not to
"take advantage" of the information about the proposed hostile
takeover by using it for his personal benefit.
c. Tippers and Tippees. A person (the "tippee") who receives
material, nonpublic information from an insider or
misappropriator (the "tipper") has a duty not to trade while in
possession of that information if he knew or should have known
that the information was provided by the tipper for an improper
purpose and in breach of a duty owed by the tipper. In this
context, it is an improper purpose for a person to provide such
information for personal benefit, such as money, affection, or
friendship.
Example
The chief executive officer of Acme, Inc., tells his daughter
that negotiations concerning a previously-announced acquisition
of Acme have been terminated. This news is material and, at the
time the father tells his daughter, nonpublic. The daughter sells
her shares of Acme.
Comment
The father is a tipper because he has a duty to Acme and its
shareholders not to "take advantage" of the information
concerning the breakdown of negotiations, and he has conveyed the
information for an "improper" purpose (here, out of love and
affection for his daughter). The daughter is a "tippee" and is
liable for trading on inside information because she knew or
should have known that her father was conveying the information
to her for his personal benefit, and that her father had a duty
not to "take advantage" of Acme information.
A person can be a tippee even if he did not learn the information
directly from the tipper, but learned it from a previous tippee.
Example
An employee of a law firm which works on mergers and acquisitions
learns at work about impending acquisitions. She tells her friend
and her friend's stockbroker
s 49
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about the upcoming acquisitions on a regular basis. The
stockbroker tells the brother of a client on a regular basis, who
in turn tells two friends, A and B. A and B buy shares of the
companies being acquired before public announcement of the
acquisition, and regularly profit from such purchases. A and B do
not know the employee of the law firm. They do not, however, ask
about the source of the information.
Comment
A and B, although they have never heard of the tipper, are
tippees because they did not ask about the source of the
information, even though they were experienced investors, and
were aware that the "tips" they received from this particular
source were always right.
C. Who can be liable for insider trading?
The categories of individuals discussed above (insiders, temporary
insiders, misappropriators or tippees) can be liable if they trade while
in possession of material nonpublic information.
In addition, individuals other than those who actually trade on inside
information can be liable for trades of others. A tipper can be liable if
(a) he provided the information in exchange for a personal benefit in
breach of a duty and (b) the recipient of the information (the "tippee")
traded while in possession of the information.
Most importantly, a controlling person can be liable if the controlling
person "knew or recklessly disregarded" the fact that the controlled
person was likely to engage in misuse of inside information and failed to
take appropriate steps to prevent it. Putnam is a "controlling person" of
its employees. In addition, certain supervisors may be "controlling
persons" of those employees they supervise.
Example
A supervisor of an analyst learns that the analyst has, over a long
period of time, secretly received material inside information from Acme,
Inc.'s chief financial officer. The supervisor learns that the analyst
has engaged in a number of trades for his personal account on the basis
of the inside information.
The supervisor takes no action.
Comment
Even if he is not liable to a private plaintiff, the supervisor can be
liable to the Securities and Exchange Commission for a civil penalty of
up to three times the amount of the analyst's profit. (Penalties are
discussed in the following section.)
50 s
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D. Penalties for Insider Trading
Penalties for misuse of inside information are severe, both for
individuals involved in such unlawful conduct and their employers. A
person who violates the insider trading laws can be subject to some or
all of the penalties below, even if he does not personally benefit from
the violation. Penalties include:
-- jail sentences (of which at least one to three years must be served)
-- criminal penalties for individuals of up to $1,000,000, and for
corporations of up to $2,500,000
-- injunctions permanently preventing an individual from working in the
securities industry
-- injunctions ordering an individual to pay over profits obtained
from unlawful insider trading
-- civil penalties of up to three times the profit gained or loss
avoided by the trader, even if the individual paying the penalty did
not trade or did not benefit personally
-- civil penalties for the employer or other controlling person of up
to the greater of $1,000,000 or three times the amount of profit
gained or loss avoided
-- damages in the amount of actual losses suffered by other
participants in the market for the security at issue.
Regardless of whether penalties or money damages are sought by others, Putnam
will take whatever action it deems appropriate (including dismissal) if Putnam
determines, in its sole discretion, that an employee appears to have committed
any violation of this Policy Statement, or to have engaged in any conduct which
raises significant questions about whether an insider trading violation has
occurred.
s 51
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A
Appendix B. Policy Statement Regarding Employee Trades in Shares of Putnam
Closed-End Funds
1. Pre-clearance for all employees
Any purchase or sale of Putnam closed-end fund shares by a Putnam employee must
be pre-cleared by the Code of Ethics Officer or, in his absence, the Deputy Code
of Ethics Officer. A list of the closed-end funds can be obtained from the Code
of Ethics Administrator. Trading in shares of closed-end funds is subject to all
the rules of the Code of Ethics.
2. Special Rules Applicable to Managing Directors of Putnam Investment
Management, Inc. and officers of the Putnam Funds
Please be aware that any employee who is a Managing Director of Putnam
Investment Management, Inc. (the investment manager of the Putnam mutual funds)
and officers of the Putnam Funds will not receive clearance to engage in any
combination of purchase and sale or sale and purchase of the shares of a given
closed-end fund within six months of each other. Therefore, purchases should be
made only if you intend to hold the shares more than six months; no sales of
fund shares should be made if you intend to purchase additional shares of that
same fund within six months.
You are also required to file certain forms with the Securities and Exchange
Commission in connection with purchases and sales of Putnam closed-end funds.
Please contact the Code of Ethics Officer or Deputy Code of Ethics Officer for
further information.
3. Reporting by all employees
As with any purchase or sale of a security, duplicate confirmations of all such
purchases and sales must be forwarded to the Code of Ethics Officer by the
broker-dealer utilized by an employee. If you are required to file a quarterly
report of all personal securities transactions, this report should include all
purchases and sales of closed-end fund shares.
Please contact the Code of Ethics Officer or Deputy Code of Ethics Officer if
there are any questions regarding these matters.
s 53
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A
Appendix C. Clearance Form for Portfolio Manager Sales Out of Personal Account
of Securities Also Held by Fund (For compliance with
"Contra-Trading" Rule)
TO: Code of Ethics Officer
FROM:
--------------------------------------
DATE:
--------------------------------------
RE: Personal Securities Transaction of
--------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This serves as prior written approval of the personal securities transaction
described below:
NAME OF PORTFOLIO MANAGER CONTEMPLATING PERSONAL TRADE:
- --------------------------------------------------------------------------------
SECURITY TO BE TRADED:
- --------------------------------------------------------------------------------
AMOUNT TO BE TRADED:
------------------------------------------------------------
FUND HOLDING SECURITIES:
--------------------------------------------------------
AMOUNT HELD BY FUND:
------------------------------------------------------------
REASON FOR PERSONAL TRADE:
------------------------------------------------------
SPECIFIC REASON SALE OF SECURITIES IS INAPPROPRIATE FOR FUND:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please attach additional sheets if necessary.)
APPROVED: DATE:
--------------------------------- ------------------------------
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A
Appendix D. Procedures for Approval of New Financial Instruments
1. Summary
a. The Putnam Risk Management Committee ("RMC") has adopted
procedures for the introduction of new instruments and
securities, focusing on, but not limited to, derivatives.
b. No new types of securities or instruments may be purchased for
any Putnam fund or other client account without the approval of
the RMC.
c. The RMC publishes from time to time a list of approved
derivatives. The purchase of any derivative not listed is
prohibited without specific authorization from the RMC.
2. Procedures
a. Introduction. The purchase and sale of financial instruments that
have not been used previously at Putnam raise significant
investment, business, operational, and compliance issues. In
order to address these issues in a comprehensive manner, the RMC
has adopted the following procedures for obtaining approval of
the use of new instruments or investments. In addition, to
provide guidance regarding the purchase of derivatives, the RMC
publishes from time to time a list of approved derivatives. Only
derivatives listed may be used for Putnam funds or accounts
unless specifically authorized by the RMC.
b. Process of approval. An investment professional wishing to
purchase a new type of investment should discuss it with the
Investment Division's Administrative office (the current contact
is Julie Malloy). Investment Division Administration will
coordinate a review of a new instrument by appropriate RMC
members from an investment, operational and compliance
perspective, including the review of instruments by the
Administrative Services Division of PFTC. Based on this review,
the RMC will then approve or disapprove the proposed new
investment. Investment professionals must build in adequate time
for this review before planned use of a new instrument. Further,
the approval of the RMC is only a general one. Individual fund
and account guidelines must be reviewed in accordance with
standard compliance procedures to determine whether purchase is
permitted. In addition, if the instrument involves legal
documentation, that documentation must be reviewed and be
completed before trading. The RMC may prepare a compliance and
operational manual for the new derivative.
s 57
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3. Violations
a. Putnam's Operating Committee has determined that adherence to
rigorous internal controls and procedures for novel securities
and instruments is necessary to protect Putnam's business
standing and reputation. Violation of these procedures will be
treated as violation of both compliance guidelines and Putnam's
Code of Ethics. The RMC encourages questions and expects that
these guidelines will be interpreted conservatively.
58 s
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A
Index
"15-Day Rule"
for transactions by managers, analysts and CIOs, 14
"60-Day Rule", 13
Access Persons
definition, ix
special rules on trading, 13, 32
Analysts
special rules on trading by, 13
Appeals
Procedures, 35
Bankers'acceptances
excluded from securities, x
Blackout rule
on trading by portfolio managers, analysts and CIOs, 16
Bribes, 21
CDs
excluded from securities, x
Clearance
how long pre-clearance is valid, 4
required for personal securities transactions, 1
Closed-end funds
rules on trading, 53
Commercial paper
excluded from securities, x
Commodities (other than securities indices)
excluded from securities, x
Computer use
compliance with corporate policies required, 26
Confidentiality
required of all employees, 22
Confirmations
of personal transactions required, 31
Conflicts of interest
with Putnam and Putnam clients prohibited, 19
Contra-trading rule
transactions by managers and CIOs, 17
Convertible securities
defined as securities, x
Currencies
excluded as securities, x
Director
serving as for another entity prohibited, 22
Employee
serving as for another entity prohibited, 22
Excessive trading (over 10 trades)
by employees strongly discouraged, 10
Exemptions
basis for, 10
Family members
covered in personal securities transactions, x, 41
Fiduciary
serving as for another entity prohibited, 23
Gifts
restrictions on receipt of by employees, 19
Holdings
disclosure of by Access Persons, 14
Initial public offerings/IPOs
purchases in prohibited, 6
Insider trading
policy statement and explanations, 37
prohibited, 9
Investment clubs
prohibited, 24
Investment Grade Exception
for clearance of fixed income securities on Restricted List, 2
Involuntary personal securities transactions
exempted, 10
exemption defined, 6
Large Cap exception
for clearance of securities on Restricted List, 1
Marsh & McLennan Companies stock
excluded from securities, x
Money market instruments
excluded from securities, x
Mutual fund shares (open end)
excluded from securities, x
Naked options
by employees discouraged, 9
New financial instruments
procedures for approval, 57
Non-Putnam affiliates (NPAs)
transactions and relationships with, 25
Officer
serving as for another entity prohibited, 22
Options
defined as securities, x
relationship to securities on Restricted or Red Lists, 5
Partner
serving as general partner of another entity prohibited, 22
Partnerships
covered in personal securities transactions, x, 41
Personal securities transaction
defined, x, 41
s 59
<PAGE>
Pink sheet reports
quarterly reporting requirements, 32
Political contributions, 21
Portfolio managers
special rules on trading by, 13
Private offerings or placements
purchases of prohibited, 7
Putnam Europe Ltd.
special rules for, 29
Repurchase agreements
excluded from securities, x
Sale
defined, x, 41
Sanctions, vii
for failure to pre-clear properly, 3
Shares by Subscription
procedures to preclear the purchase and sales of Shares by Subscription, 2
Short sales
by employees prohibited conduct, 6
Solicitations
by Putnam employees restricted, 21
Tender offers
partial exemption from clearance rules, 6
Trustee
serving as for another entity prohibited, 22
Trusts
covered in personal securities transactions, x, 41
U.S. government obligations
excluded from securities, x
Warrants
defined as securities, x
60 s
<PAGE>
Exhibit (p)(14)(i)
CODE OF ETHICS
ROWE PRICE-FLEMING INTERNATIONAL, INC.
<PAGE>
CODE OF ETHICS
OF
ROWE PRICE-FLEMING INTERNATIONAL, INC.
GENERAL POLICY STATEMENT
PURPOSE AND SCOPE OF CODE OF ETHICS. In recognition of Rowe Price-Fleming
International, Inc.'s ("RPFI") commitment to maintain the highest standards of
professional conduct and ethics, the firm's Board of Directors has adopted this
Code of Ethics ("CODE") composed of Standards of Conduct and the following
Statements of Policy ("STATEMENTS"):
1. Statement of Policy on Material, Inside (Non-Public) Information
2. Statement of Policy on Securities Transactions
3. Statement of Policy on Corporate Responsibility
4. Statement of Policy with Respect to Compliance with Copyright Laws
5. Statement of Policy with Respect to Computer Security
6. Statement of Policy on Compliance with United States Antitrust Laws
The purpose of this Code is to help preserve our most valuable asset - the
reputation of RPFI and its employees.
WHO IS SUBJECT TO THE CODE. Except as provided below, RPFI and its officers,
directors and employees are all subject to the Code. In addition, the following
persons are also subject to the Code:
o Any temporary or consultant where his or her assignment at RPFI exceeds or
will exceed four weeks or when his or her cumulative assignment exceeds
eight weeks over a twelve-month period; and
o Any contingent worker immediately at the time of engagement if his or her
assignment is more than casual in nature or if he or she will be exposed to
the kinds of information and situations that would create conflicts on
matters covered in the Code.
<PAGE>
Employees in the Baltimore office are subject to the Code of Ethics of T. Rowe
Price Associates, Inc. ("PRICE ASSOCIATES"), rather than this Code.
RPFI'S STATUS AS A FIDUCIARY. The primary responsibility of RPFI as an
investment adviser is to render to its clients on a professional basis unbiased
and continuous advice regarding their investments. As an investment adviser,
RPFI has a fiduciary relationship with all of its clients, which means that it
has an absolute duty of undivided loyalty, fairness and good faith toward its
clients and mutual fund shareholders and a corresponding obligation to refrain
from taking any action or seeking any benefit for itself which would, or which
would appear to, prejudice the rights of any client or shareholder or conflict
with his or her best interests.
WHAT CODE DOES NOT COVER. The Code was not written for the purpose of covering
all policies, rules and regulations to which employees may be subject. As an
example, RPFI is also subject to the rules and regulations of the Investment
Management Regulatory Organization ("IMRO").
COMPLIANCE WITH CODE. Strict compliance with the provisions of this Code is
considered a basic condition of employment with the firm. An employee may be
required to surrender any profit realized from a transaction which is deemed to
be in violation of the Code. In addition, any breach of the Code may constitute
grounds for disciplinary action, including dismissal from employment. Employees
may appeal to the Ethics Committee any ruling or decision rendered with respect
to the Code.
QUESTIONS REGARDING THE CODE. Questions regarding the Code should be referred as
follows:
1. Standards of Conduct of RPFI and its employees: The Ethics Committee or
Legal Department, Baltimore.
2. Statement of Policy on Material, Inside (Non-Public) Information: Legal
Department, Baltimore or the London Compliance Team.
3. Statement of Policy on Securities Transactions: The Ethics Committee.
4. Statement of Policy on Corporate Responsibility: Corporate Responsibility
Committee.
5. Statement of Policy with Respect to Compliance with United States Copyright
Laws: Legal Department, Baltimore.
6. Statement of Policy with Respect to Computer Security and Related Issues:
Local Help Desk or Information Security area.
<PAGE>
7. Statement of Policy on Compliance with United States Antitrust Laws: Legal
Department, Baltimore.
LIST OF COMMITTEES AND PERSONNEL. The following Committees and compliance and
management personnel are referenced in the Code:
Brokerage/Trading Committee
Ethics Committee
Baltimore Legal Department
Martin Wade
Carol Eve
Christine To
Dottie Jones
Public Relations Department, Baltimore
London Compliance Team
Robert Fleming ("RF") Group Compliance
RF Dealing Desk
RF Head Dealer
Henry Hopkins
M. David Testa
Secretary of T. Rowe Price Associates, Inc.
Baltimore Compliance
Hong Kong Head Dealer
JF Compliance
John Ford
Corporate Responsibility Committee
Help Desk
Information Security
March, 1999
<PAGE>
STANDARDS OF CONDUCT OF ROWE PRICE-FLEMING INTERNATIONAL, INC.
AND ITS EMPLOYEES
ALLOCATION OF CLIENT BROKERAGE. The firm's policies with respect to the
allocation of client brokerage are set forth in Part II of Form ADV, RPFI's
registration statement filed with the United States Securities and Exchange
Commission ("SEC"). It is imperative that all employees -- especially those who
are in a position to make recommendations regarding brokerage allocation, or who
are authorized to select brokers who will execute securities transactions on
behalf of our clients -- read and become fully knowledgeable concerning our
policies in this regard. Any questions regarding our firm's allocation of client
brokerage should be addressed to the RPFI Brokerage/Trading Committee.
ANTITRUST. The United States antitrust laws are designed to ensure fair
competition and preserve the free enterprise system. Some of the most common
antitrust issues with which an employee may be confronted are in the areas of
pricing (adviser fees) and trade association activity. To ensure its employees'
understanding of these laws, RPFI has adopted a Statement of Policy on
Compliance with United States Antitrust Laws. All employees should read and
understand this Statement (see page 8-1).
COMPLIANCE WITH COPYRIGHT LAWS. To protect RPFI and its employees, RPFI has
adopted a Statement of Policy with Respect to Compliance with United States
Copyright Laws. All employees should read and understand this Statement (see
page 6-1).
COMPUTER SECURITY. Computer systems and programs play a central role in RPFI's
operations. To establish appropriate computer security to minimize potential for
loss or disruptions to our computer operations, RPFI has adopted the computer
security policies of its affiliates in London, Buenos Aires, Tokyo, Singapore,
Paris, and Hong Kong. Employees in each location should read and understand the
policy in effect for his or her location. (see page 7-1).
CONFLICTS OF INTEREST. A direct or indirect interest in a supplier, creditor,
debtor or competitor may conflict with the interests of RPFI. All employees must
avoid placing themselves in a "compromising position" where their interests may
be in conflict with those of RPFI or its clients.
RELATIONSHIPS WITH PROFITMAKING ENTERPRISES, INCLUDING INVESTMENT
CLUBS. A conflict may occur when an employee of RPFI is also employed
by another firm, directly or as a consultant or independent contractor;
has a direct financial interest in another firm; has an immediate
family financial interest in another firm; or is a director, officer or
partner of another firm.
Employees of our firm sometimes serve as directors, officers, partners,
or in other capacities with profitmaking enterprises not related to
RPFI or its mutual funds. Employees are generally prohibited from
serving as officers or directors of corporations which are approved or
are likely to be approved for purchase in our firm's client accounts.
<PAGE>
An employee may not accept outside employment that would require him or
her to become registered (or dually registered) as a representative of
an unaffiliated broker/dealer, investment adviser, or an insurance
broker or company. An employee may also not become independently
registered as an investment adviser. An employee who is contemplating
obtaining another interest or relationship that might conflict or
appear to conflict with the interests of RPFI, such as accepting
employment with or an appointment as a director, officer or partner of
or as a consultant or independent contractor to, an outside
profitmaking enterprise or forming or participating in a stock or
investment club, must receive the prior approval of the Ethics
Committee. Upon review by the Ethics Committee, the employee will be
advised in writing of the Committee's decision. In addition,
transactions through investment clubs are subject to the firm's
Statement of Policy on Securities Transactions. Decisions by the Ethics
Committee regarding outside directorships in profitmaking enterprises
will be reviewed by the Board of Directors before becoming final.
Outside business interests (such as part-time employment, or acting as
a consultant for or independent contractor to an outside profitmaking
enterprise) that will not conflict or appear to conflict with the
interests of the firm need not be reviewed by the Ethics Committee, but
must be approved by the employee's supervisor.
Certain employees may serve as directors or in similar positions for
non-public, for-profit entities in connection with their professional
activities at RPFI. An employee must obtain the permission of the Board
of Directors before accepting such a position and must relinquish the
position if the entity becomes publicly held, unless otherwise
determined by the Board of Directors.
SERVICE WITH NONPROFITMAKING ENTERPRISES. RPFI encourages its employees
to become involved in community programs and civic affairs. However,
employees should not permit such activities to affect the performance
of their job responsibilities. Prior to accepting a position as a
trustee or member of the Board of Directors of any non-profit
organization, an employee should receive the approval of the Ethics
Committee.
RELATIONSHIPS WITH FINANCIAL SERVICE FIRMS. In order to avoid any
actual or apparent conflicts of interest, employees are prohibited from
investing in or entering into any relationship, either directly or
indirectly, with corporations, partnerships, or other entities which
are engaged in business as a broker, a dealer, an underwriter
(including an underwriter of insurance), and/or an investment adviser.
As described above, this prohibition extends to the registration and/or
licensure with an unaffiliated firm. This prohibition, however, is not
meant to prevent employees from purchasing publicly traded securities
of broker/dealers, investment advisers or other companies engaged in
the mutual fund industry. Of course, all such purchases are subject to
normal prior clearance and reporting procedures. This policy does not
preclude an employee from engaging an outside investment adviser to
manage his or her assets.
If any member of an employee's immediate family is employed by, has a
partnership interest in, or has an equity interest of .5% or more in a
broker/dealer, investment adviser or other
<PAGE>
company engaged in the mutual fund industry, the relationship must be
reported to the Ethics Committee.
CONFIDENTIALITY. The exercise of confidentiality extends to four major areas of
our operations: internal operating procedures and planning; clients and fund
shareholders; investment advice; and investment research. The duty to exercise
confidentiality applies not only when an employee is with the firm, but also
after he or she terminates employment with the firm.
INTERNAL OPERATING PROCEDURES AND PLANNING. During the years we have
been in business, a great deal of creative talent has been used to
develop specialized and unique methods of operations and portfolio
management. In many cases, we feel these methods give us an advantage
over our competitors, and we do not want these ideas disseminated
outside our firm. Accordingly, employees should be guarded in
discussing our business practices with outsiders. Any requests from
outsiders for specific information of this type should be cleared with
your supervisor before it is released.
Also, from time to time management holds meetings with employees in
which material, non-public information concerning the future plans of
the firm or any of its affiliates is disclosed. Employees should never
discuss confidential information with, or provide copies of written
material concerning the firm's internal operating procedures or
projections for the future to, unauthorized persons outside the firm.
CLIENTS AND FUND SHAREHOLDERS. In many instances, when clients
subscribe to our services, we ask them to disclose fully their
financial status and needs. This is done only after we have assured
them that every member of our organization will hold this information
in strict confidence. It is essential that we respect their trust. A
simple rule for employees to follow is that the names of our clients or
fund shareholders or any information pertaining to their investments
must never be divulged to anyone outside the firm, not even to members
of their immediate families and must never be used as a basis for
personal trades over which the employee has beneficial interest or
control.
INVESTMENT ADVICE. Because of the fine reputation our firm enjoys,
there is a great deal of public interest in what we are doing in the
market. There are two major considerations that dictate why we must not
provide investment "tips":
o From the point of view of our clients, it is not fair to give
other people information which clients must purchase.
o From the point of view of the firm, it is not desirable to create
an outside demand for a stock when we are trying to buy it for
our clients, as this will only serve to push the price up. The
reverse is true if we are selling.
<PAGE>
In light of these considerations, employees must never disclose to
outsiders our buy and sell recommendations, securities we are
considering for future investment, or the portfolio holdings of our
clients or mutual funds unless the disclosure is required by law.
The practice of giving investment advice informally to members of your
immediate family should be restricted to very close relatives. Any
transactions resulting from such advice are subject to the prior
approval and reporting requirements of the Statement of Policy on
Securities Transactions. Under no circumstances should an employee
receive compensation directly or indirectly (other than from RPFI or an
affiliate) for rendering advice to either clients or non-clients.
INVESTMENT RESEARCH. Any report circulated by a research analyst is
confidential in its entirety and should not be reproduced or shown to
anyone outside of our organization, except our clients where
appropriate.
UNDERSTANDING AS TO CLIENTS' ACCOUNTS AND COMPANY RECORDS AT TIME OF
EMPLOYEE TERMINATION. The accounts of clients and mutual fund
shareholders are the sole property of RPFI. This applies to all clients
for whom RPFI acts as investment adviser, regardless of how or through
whom the client relationship originated and regardless of who may be
the (counselor) for a particular client. At the time of termination of
employment with RPFI, an employee must: (1) surrender to RPFI in good
condition any and all materials, reports or records (including all
copies in his or her possession or subject to his or her control)
developed by him or her or any other person which are considered
confidential information of RPFI (except copies of any research
material in the production of which the employee participated to a
material extent); and (2) refrain from communicating, transmitting or
making known to any person or firm any information relating to any
materials or matters whatsoever which are considered by RPFI to be
confidential.
Employees must use care in disposing of any confidential records or
correspondence. Confidential material that is to be discarded should be torn up
or shredded.
CORPORATE RESPONSIBILITY. As a major institutional investor with a fiduciary
duty to its clients, including its mutual fund shareholders, RPFI has adopted a
Statement of Policy on Corporate Responsibility (see page 5-1). The purpose of
this Statement is to establish formal standards and procedures to guide RPFI
with respect to its responsibilities to deal with matters of corporate and
social responsibilities which may affect the companies in which client assets
are invested.
EMPLOYMENT OF FORMER GOVERNMENT EMPLOYEES. United States laws and regulations
govern the employment of former employees of the U.S. Government and its
agencies, including the SEC. In addition, certain states have adopted similar
statutory restrictions. Finally, certain states and municipalities which are
clients of RPFI have imposed contractual restrictions in this regard. Before any
action is taken to discuss employment by RPFI of a former government
<PAGE>
employee, guidance must be obtained from the Legal Department in Baltimore
("BALTIMORE LEGAL DEPARTMENT").
EMPLOYMENT PRACTICES.
EQUAL OPPORTUNITY. RPFI is committed to the principles of Equal
Employment. We belive our continued success depends on talented people,
without regard to race, color, religion, national origin, gender, age,
disability, sexual orientation, Vietnam era military service or any
other classification protected by law.
This commitment to Equal Opportunity covers all aspects of the
employment relationship, including recruitment, application and initial
employment, promotion and transfer, selection for training
opportunities, wage and salary administration, and the application of
service, retirement, and employee benefit plan policies.
All members of RPFI's staff are expected to comply with the spirit and
intent of this Equal Employment Opportunity Policy.
If you feel you have not been treated in accordance with this Policy,
contact your immediate supervisor, your manager or the Baltimore Legal
Department. No retaliation will be taken against any employee who
reports an incident of alleged discrimination.
HARASSMENT. RPFI intends to provide employees a workplace free from any
form of harassment. This includes sexual harassment which may result
from unwelcome advances, requests for favors or any verbal or physical
conduct of a sexual nature. Such actions or statements may or may not
be accompanied by explicit or implied promises of preferential
treatment or negative consequences in connection with one's employment.
Harassment might include uninvited sex-oriented conversations,
touching, comments, jokes, suggestions or innuendos. This type of
behavior can create a stressful, intimidating and offensive atmosphere;
it may adversely affect morale and work performance.
Any employee who feels offended by the action or comments of another,
or any employee who has observed such behavior, should report the
matter, in confidence, to his or her immediate supervisor or manager.
If that presents a problem, report the matter to Martin Wade or the
Baltimore Legal Department. All complaints will be investigated
immediately and confidentially. Any employee who has behaved in a
reprehensible manner will be subject to disciplinary action in keeping
with the gravity of the offense.
DRUG AND ALCOHOL ABUSE. RPFI's policy is to maintain a drug-free
workplace and prevent alcohol abuse. This policy fosters a safe,
healthful and productive environment for its employees and customers
and protects RPFI's property, equipment, operations and reputation in
the community and the industry.
<PAGE>
PAST AND CURRENT LITIGATION. As a condition of employment, new employees answer
a questionnaire regarding certain regulatory and related matters. RPFI uses the
information obtained through these questionnaires and others to answer questions
asked on United States, state, IMRO and other governmental registration forms
and for insurance and bonding purposes. Each employee is responsible for keeping
answers on the questionnaire current. If an employee becomes party to any
proceeding that could lead to his or her conviction for any felony or
misdemeanor (other than traffic or other minor offenses) or becomes the subject
of a regulatory action by the SEC, IMRO, a state, or any government, regulatory
agency, or self-regulatory organization relating to securities or investment
activities, he or she should notify the Baltimore Legal Department promptly.
FINANCIAL REPORTING. RPFI's records are maintained in a manner that provides for
an accurate record of all financial transactions in conformity with generally
accepted accounting principles. No false or deceptive entries may be made and
all entries must contain an appropriate description of the underlying
transaction. All reports, vouchers, bills, invoice, payroll and service records
and other essential data must be accurate, honest and timely and should provide
an accurate and complete representation of the facts.
HEALTH AND SAFETY IN THE WORKPLACE. RPFI recognizes its responsibility to
provide employees a safe and healthful workplace and proper facilities to help
them do their jobs effectively.
ILLEGAL PAYMENTS AND INDUCEMENTS. U.S., U.K., state, and certain foreign laws
prohibit the payment of bribes, kickbacks, inducements or other illegal
gratuities or payments by or on behalf of RPFI. RPFI, through its policies and
practices, is committed to comply fully with these laws. The United States
Foreign Corrupt Practices Act makes it a crime to corruptly give, promise or
authorize payment, in cash or in kind, for any service to a foreign official or
political party in connection with obtaining or retaining business. If an
employee is solicited to make or receive an illegal payment, he or she should
contact the Baltimore Legal Department.
MARKETING AND SALES ACTIVITIES. All written and oral marketing materials and
presentations (including performance data) must be in compliance with applicable
SEC, National Association of Securities Dealers, Inc. ("NASD"), IMRO and
Association of Investment Management and Research ("AIMR") requirements. All
advertisements, sales literature, and other written marketing materials must be
reviewed and approved by the advertising section of the Baltimore Legal
Department prior to use. All performance data distributed outside the firm,
including total return and yield information, must be obtained from the
Baltimore RPFI Performance Group before distribution.
POLICY REGARDING ACCEPTANCE AND GIVING OF GIFTS AND GRATUITIES. The firm, as
well as its employees and members of their families, should not accept or give
gifts that might in any way create or appear to create a conflict of interest or
interfere with the impartial discharge of our responsibilities to clients or
place our firm in a difficult or embarrassing position.
Such gifts would include gratuities or other accommodations from or to business
contacts, brokers, securities salespersons, approved companies, suppliers,
clients, or any other individual or
<PAGE>
organization with whom our firm has a business relationship, but would not
include certain types of business entertainment as described later in this
section.
RECEIPT OF GIFTS. Personal contacts may lead to gifts which are offered
on a friendship basis and may be perfectly proper. It must be
remembered, however, that business relationships cannot always be
separated from personal relationships and that the integrity of a
business relationship is always susceptible to criticism in hindsight
where gifts are received.
Under no circumstances may employees accept gifts from any business or
business contact in the form of cash or cash equivalents, including
gift certificates. There may be an occasion where it might be awkward
to refuse a token expression of appreciation given in the spirit of
friendship. In such cases, the value should not exceed $100 (U.S.
dollars) from each business or business contact in any twelve-month
period. Gifts received which are unacceptable according to this policy
must be returned to the donors.
GIVING OF GIFTS. An employee may never give a gift to a business
contact in the form of cash or cash equivalents, including gift
certificates. Token gifts may be given to business contacts, but the
aggregate value of all such gifts given to the business contact may not
exceed $100 (U.S. dollars) in any twelve-month period without the
permission of the Ethics Committee. If an employee believes that it
would be appropriate to give a gift with a value exceeding $100 to a
business contact in a specific situation, he or she must submit a
written request to the Ethics Committee. The request should specify:
X the name of the giver;
X the name of the intended recipient and his or her employer;
X the nature of the gift and its monetary value;
X the nature of the business relationship; and
X the reason the gift is being given.
NASD regulations prohibit exceptions to the $100 (U.S. dollars) limit
for gifts given in connection with Investment Services' business. The
Corporate Gift Department in Baltimore or compliance personnel in
London (the "LONDON COMPLIANCE TEAM"), as appropriate, will retain a
record of ALL gifts given in connection with Investment Services'
business, as required by NASD Conduct Rule 3060.
ENTERTAINMENT. Our firm's $100 (U.S. dollars) limit on the acceptance
and giving of gifts not only applies to gifts of merchandise, but also
covers the enjoyment or use of property or facilities for weekends,
vacations, trips, dinners, and the like. However, this limitation does
not apply to dinners, sporting events and other activities which are a
normal part of a business relationship. The acceptance of an invitation
from brokers to sporting or other
<PAGE>
events is an appropriate way to maintain good relationships. However,
if any employee engages in such activities in excess, serious conflict
of interest questions can arise. When such invitations involve time
away from the office, they should be checked by the employee's
supervisor. As a matter of firm policy, employees are limited to two
days in any calendar year for such entertainment events. Further
invitations may be accepted, but they must be accommodated within the
employee's own time or holiday leave. Acceptance of invitations under
this rule should be advised to the relevant recordkeeper of holiday
entitlements, otherwise these days will be deducted from holiday
entitlements.
To illustrate the principle behind the entertainment policy, the
following examples are provided:
First Example: The head of institutional research at brokerage
firm "X" (whom you have known and done business with for a
number of years) invites you and your husband to join her and
her husband for dinner and afterwards a theatrical production.
Second Example: You wish to see a recent hit musical in
London, but are told it is sold out. You call a broker
friend who works at company "X" to see if he can get tickets
for you. The broker says yes and offers you two tickets free
of charge.
Third Example: You have been invited by a vendor to a
multi-day excursion to a resort where the primary focus is
entertainment as opposed to business. The vendor has offered
to pay your travel and lodging for this trip.
In the first example, it would be proper for you to accept the
invitation.
With respect to the second example, it would not be proper to solicit
a person doing business with the firm for free tickets to any event.
You could, however, accept the tickets if you pay for them at their
fair value or, if greater, at the cost to the broker.
With respect to the third example, trips of substantial value, such as
multi-day excursions to resorts, hunting locations or sports events,
where the primary focus is entertainment as opposed to business
activities, would not be considered a normal part of a business
relationship. Generally, such invitations may not be accepted unless
our firm or the employee pays for the cost of the excursion and the
employee has obtained approval from Martin Wade or his designee.
The same principles apply if an employee wishes to entertain a
business contact. Inviting business contacts and, if appropriate,
their guests, to an occasional meal, sporting event, the theater, or
comparable entertainment is acceptable as long as it is neither so
frequent nor so extensive as to raise any question of propriety. If an
employee wishes to pay for a business
<PAGE>
guest's transportation (e.g., airfare) and/or accommodations as part
of business entertainment, he or she must first receive the permission
of the Ethics Committee.
RESEARCH TRIPS. Occasionally, brokers or portfolio companies invite employees of
our firm to attend or participate in research conferences, tours of portfolio
companies' facilities, or meetings with the management of such companies. These
invitations may involve traveling extensive distances to and from the sites of
the specified activities and may require overnight lodging. Employees may not
accept any such invitations until approval has been secured from Martin Wade or
his designee. As a general rule, such invitations should only be accepted after
a determination has been made that the proposed activity constitutes a valuable
research opportunity which will be of primary benefit to our clients. All travel
expenses to and from the sites of the activities and the expenses of any
overnight lodging, meals or other accommodations provided in connection with
such activities, should be paid for by our firm except in situations where the
costs are considered to be insubstantial and are not readily ascertainable.
Employees may not accept reimbursement from brokers or portfolio companies for
travel and hotel expenses; speaker fees or honoraria for addresses or papers
given before audiences; or consulting services or advice they may render.
Likewise, employees may neither request nor accept loans or personal services
from brokers or portfolio companies.
POLITICAL ACTIVITIES. Employees are encouraged to participate and vote in all
national and local elections.
No political contribution of corporate funds, direct or indirect, to any
political candidate or party, or to any other organization that might use the
contribution for a political candidate or party, or use of corporate property,
services or other assets may be made without the written approval of the
Baltimore Legal Department. These prohibitions cover not only direct
contributions but also indirect assistance or support of candidates or political
parties through purchase of tickets to special dinners or other fund raising
events, or the furnishing of any other goods, services or equipment to political
parties or committees.
PROTECTION OF CORPORATE ASSETS. All employees are responsible for taking
measures to ensure that RPFI's assets are properly protected. This
responsibility not only applies to our business facilities, equipment and
supplies, but also to intangible assets such as: proprietary, research or
marketing information; corporate trademarks and servicemarks; and copyrights.
QUALITY OF SERVICES. It is a continuing policy of RPFI to provide investment
products and services which: (1) meet applicable laws, regulations and industry
standards; (2) are offered to the public in a manner which ensures that each
client/shareholder understands the objectives of each investment product
selected; and (3) are properly advertised and sold in accordance with all
applicable SEC, IMRO, state and NASD rules and regulations.
The quality of RPFI's investment products and services and operations affects
our reputation, productivity, profitability and market position. RPFI's goal is
to be quality leader and to create conditions that allow and encourage all
employees to perform their duties in an efficient, effective manner.
<PAGE>
RECORD RETENTION. Under various U.S., U.K., and other governmental laws and
regulations, RPFI is required to produce, maintain and retain various records,
documents and other written (including electronic) communications. Each employee
is responsible for adhering to RPFI's record maintenance and retention policies.
Any questions regarding this requirement should be addressed to the Baltimore
Legal Department.
REFERRAL FEES. United States securities laws strictly prohibit the payment of
any type of referral fee unless certain conditions are met. This would include
any compensation to persons who refer clients or shareholders to us (e.g.,
brokers, registered representatives or any other persons) either directly in
cash, by fee splitting, or indirectly by the providing of gifts or services
(including the allocation of brokerage). IMRO also prohibits the payment of
certain inducements. No arrangements involving referral fees or inducements
should be entered into obligating RPFI or any employee unless approved by the
Baltimore Legal Department.
RELEASE OF INFORMATION TO THE PRESS. All requests for information from the media
concerning RPFI's corporate affairs, mutual funds, investment services,
investment philosophy and policies, and related subjects should be referred to
Martin Wade, David Testa, or to the Public Relations Department in Baltimore for
reply. Investment professionals who are contacted directly by the press
concerning a particular fund's investment strategy or market outlook may use
their own discretion, but are advised to check with the Public Relations
Department in Baltimore if they do not know the reporter or feel it may be
inappropriate to comment on a particular matter.
RESPONSIBILITY TO REPORT VIOLATIONS. Every employee who becomes aware of a
violation of this Code is encouraged to report, on a confidential basis, the
violation to his or her supervisor. If the supervisor appears to be involved in
the wrongdoing, the report should be made to the next level of supervisory
authority or to Martin Wade. Upon notification of the alleged violation, the
supervisor is obligated to advise the Baltimore Legal Department.
It is RPFI's policy that no adverse action will be taken against any employee
who reports a violation in good faith.
SERVICE AS TRUSTEE, EXECUTOR OR PERSONAL REPRESENTATIVE. Employees may serve as
trustees, co-trustees, executors or personal representatives for the estates of
or trusts created by close family members. Employees may also serve in such
capacities for estates or trusts created by nonfamily members. However, if an
employee expects to be actively involved in an investment capacity in connection
with an estate or trust created by a nonfamily member, he or she must first be
granted permission by the Ethics Committee. If an employee serves in any of
these capacities, securities transactions effected in such accounts will be
subject to the prior approval and reporting requirements of our Statement of
Policy on Securities Transactions.
If any employees presently serve in any of these capacities for nonfamily
members, they should report these relationships in writing to the Ethics
Committee.
SPEAKING ENGAGEMENTS AND PUBLICATIONS. Employees are often asked to accept
speaking engagements on the subject of investments, finance, or their own
particular specialty with
<PAGE>
our organization. This is encouraged by the firm, as it enhances our public
relations, but you should obtain approval from Martin Wade before you accept
such requests.
You may also accept an offer to teach a course on investments or related topics
(for example, at a local college) in your individual capacity with the approval
of the head of your Division. You should also contact the Baltimore Legal
Department in this instance to discuss any guidelines triggered by NASD or other
regulatory requirements.
Before making any commitment to write or publish any article or book on a
subject related to investments or your work at RPFI, approval should be obtained
from Martin Wade.
TRADING IN SECURITIES WITH INSIDE INFORMATION. The purchase or sale of
securities while in possession of material, inside information is prohibited by
U.S., U.K., and other governmental laws. Information is considered inside and
material if it has not been publicly disclosed and is sufficiently important
that it would affect the decision of a reasonable person to buy, sell or hold
stock in an issuer, including T. Rowe Price Associates' stock. Under no
circumstances may an employee transmit such information to any other person,
except to other employees who are required to be kept informed on the subject.
All employees should read and understand the Statement of Policy on Material,
Inside (Non-Public) Information (see page 3-1). Any questions regarding the
firm's policies in this area should be addressed to the Baltimore Legal
Department, the London Compliance Team, Robert Fleming Group Compliance in
London ("RF GROUP COMPLIANCE"), or the Jardine Fleming Compliance Office in Hong
Kong ("JF COMPLIANCE").
O:\WPDATA\SARAH\CODEOFET.HIC\rpfi\RPFICODE3.wpd
March, 1999
<PAGE>
ROWE PRICE-FLEMING INTERNATIONAL, INC.
STATEMENT OF POLICY
ON
MATERIAL, INSIDE (NON-PUBLIC) INFORMATION
PURPOSE OF STATEMENT OF POLICY. The purpose of this Statement of Policy
("STATEMENT") is to comply with the requirement of the United States Insider
Trading and Securities Fraud Enforcement Act to establish, maintain, and enforce
written procedures designed to prevent insider trading. This Statement explains:
(i) the general legal prohibitions and sanctions regarding insider trading; (ii)
the meaning of the key concepts underlying the prohibitions; (iii) the
obligations of each officer, director, and employee ("EMPLOYEE") of Rowe
Price-Fleming International, Inc. ("RPFI") in the event he or she comes into
possession of material, non-public information; and (iv) the firm's educational
program regarding insider trading. RPFI has also adopted a Statement of Policy
on Securities Transactions ("SECURITIES TRANSACTIONS STATEMENT"), which requires
certain persons to obtain prior clearance with respect to their personal
securities transactions and to report such transactions on a timely basis.
The general principles of this Statement also apply to Personnel of Related
Entities as that term is defined in the Securities Transactions Statement;
Personnel of Related Entities, however, should follow the specific procedures
regarding inside information established by their respective firms.
THE BASIC INSIDER TRADING PROHIBITION. The "insider trading" doctrine under
United States securities laws generally prohibits any person (including
investment advisers) from:
o trading in a security while in possession of material, non-public
information regarding the security;
o tipping such information to others;
o recommending the purchase or sale of securities while in possession of such
information;
o assisting someone who is engaged in any of the above activities.
Thus, "insider trading" is not limited to insiders of the company whose
securities are being traded. It can also apply to non-insiders, such as
investment analysts, portfolio managers and stockbrokers. In addition, it is not
limited to persons who trade. It also covers persons who tip material,
non-public information or recommend transactions in securities while in
possession of such information.
POLICY OF RPFI ON INSIDER TRADING. It is the policy of RPFI to prohibit any of
its Employees, while in possession of material, non-public information, from
trading securities or recommending transactions, either personally or in its
proprietary accounts or on behalf of others (including mutual funds and private
accounts), or communicating material, non-public information
<PAGE>
to others in violation of the securities laws of the United States or any other
country that has jurisdiction over its activities.
"NEED TO KNOW" POLICY. All information regarding planned, prospective or ongoing
securities transactions must be treated as confidential. Such information must
be confined, even within the firm, to only those individuals and departments who
must have such information in order for RPFI to carry out its engagement
properly and effectively.
TRANSACTIONS INVOLVING T. ROWE PRICE ASSOCIATES, INC. STOCK. One of RPFI's
parents is T. Rowe Price Associates, Inc. ("PRICE ASSOCIATES"), which is a
public company whose stock is traded on the NASDAQ/NMS System. Certain Employees
of RPFI could, under certain circumstances, be deemed to be "insiders" with
respect to Price Associates. It is therefore important that these persons not
discuss with family, friends or other persons any matter concerning Price
Associates which might involve material, non-public information, whether
favorable or unfavorable.
SANCTIONS. Penalties for trading on material, non-public information are severe,
both for the individuals involved in such unlawful conduct and their employers.
An Employee of RPFI who violates the insider trading laws can be subject to some
or all of the penalties described below, even if he or she does not personally
benefit from the violation:
o Injunctions;
o Treble damages;
o Disgorgement of profits;
o Criminal fines;
o Jail sentences;
o Civil penalties for the person who committed the violation (which would,
under normal circumstances, be the Employee and not the firm) of up to
three times the profit gained or loss avoided, whether or not the
individual actually benefitted; and
o Civil penalties for RPFI (and other persons, such as managers and
supervisors, who are deemed to be controlling persons) of up to the greater
of $1,000,000 or three times the amount of the profit gained or loss
avoided under U.S. law. Fines can be unlimited under U.K. law.
In addition, any violation of this Statement can be expected to result in
serious sanctions being imposed by RPFI, including dismissal of the person(s)
involved.
The provisions of both U.S. and U.K. law discussed below are complex and wide
ranging. So if you are in any doubt about how they affect you, you must consult
a member of the RPFI Compliance Team in London (the "LONDON COMPLIANCE TEAM") or
the Legal Department in Baltimore ("BALTIMORE LEGAL DEPARTMENT").
<PAGE>
U.S. LAW REGARDING INSIDER TRADING PROHIBITIONS.
INTRODUCTION. "Insider trading" is a top enforcement priority of the United
States Securities and Exchange Commission ("SEC"). In 1988, the United States
Insider Trading and Securities Fraud Enforcement Act (the "ACT") was signed into
law. This Act has had a far reaching impact on all public companies and
especially those engaged in the securities brokerage or investment advisory
industries, including directors, executive officers and other controlling
persons of such companies. While the Act does not provide a statutory definition
of "insider trading," it contains major changes to the previous law.
Specifically, the Act:
WRITTEN PROCEDURES. Requires SEC-registered brokers, dealers and
investment advisers to establish, maintain and enforce written policies
and procedures reasonably designed to prevent the misuse of material,
non-public information by such persons.
CIVIL PENALTIES. Imposes severe civil penalties on brokerage firms,
investment advisers, their management and advisory personnel and other
"controlling persons" who fail to take adequate steps to prevent insider
trading and illegal tipping by Employees and other "controlled persons."
Persons who directly or indirectly control violators, including entities
such as RPFI, and their officers and directors, now face penalties to be
determined by the court in light of the facts and circumstances, but not
to exceed the greater of $1,000,000 (U.S. dollars) or three times the
amount of profit gained or loss avoided as a result of the violation.
CRIMINAL PENALTIES. Provides penalties for criminal securities law
violations:
o Maximum jail term -- ten years;
o Maximum criminal fine for individuals -- $1,000,000;
o Maximum criminal fine for entities --$2,500,000.
PRIVATE RIGHT OF ACTION. Establishes a statutory private right of action
on behalf of contemporaneous traders against insider traders and their
controlling persons.
BOUNTY PAYMENTS. Authorizes the SEC to award bounty payments to persons
who provide information leading to the successful prosecution of insider
trading violations. Bounty payments are at the discretion of the SEC, but
may not exceed 10% of the penalty imposed.
BASIC CONCEPTS OF INSIDER TRADING. The four critical concepts in United States
insider trading cases are: (1) fiduciary duty/misappropriation, (2) materiality,
(3) non-public, and (4) possession. Each concept is discussed below.
FIDUCIARY DUTY/MISAPPROPRIATION. In two decisions, Dirks v. SEC and Chiarella v.
United States, the United States Supreme Court held that insider trading and
tipping violate the federal securities law if the trading or tipping of the
information results in a breach of duty of trust or confidence.
<PAGE>
A typical breach of duty arises when an insider, such as a corporate officer,
purchases securities of his or her corporation on the basis of material,
non-public information. Such conduct breaches a duty owed to the corporation's
shareholders. The duty breached, however, need not be to shareholders to support
liability for insider trading; it could also involve a breach of duty to a
client, an employer, employees, or even a personal acquaintance.
The concept of who constitutes an "insider" is broad. It includes officers,
directors and employees of a company. In addition, a person can be a "temporary
insider" if he or she enters into a confidential relationship in the conduct of
a company's affairs and, as a result, is given access to information solely for
the company's purpose. A temporary insider can include, among others, a
company's attorneys, accountants, consultants, and bank lending officers, as
well as the employees of such organizations. In addition, any person may become
a temporary insider of a company if he or she advises the company or provides
other services, provided the company expects such person to keep any material,
non-public information disclosed confidential.
Court decisions in the United States have held that, under a "misappropriation"
theory, an outsider (such as an investment analyst) may be liable if he or she
breaches a duty to anyone by: (1) obtaining information improperly or (2) using
information that was obtained properly for an improper purpose. For example, if
information is given to an analyst on a confidential basis and the analyst uses
that information for trading purposes, liability could arise under the
misappropriation theory. Similarly, an analyst who trades in breach of a duty
owed either to his or her employer or client may be liable under the
misappropriation theory. For example, the United States Supreme Court upheld the
misappropriation theory when a lawyer received material, non-public information
from a law partner who represented a client contemplating a tender offer, where
that lawyer used the information to trade in the securities of the target
company.
The situations in which a person can trade while in possession of material,
non-public information without breaching a duty are so complex and uncertain
that the only safe course is not to trade, tip or recommend securities while in
possession of material, non-public information.
MATERIALITY. Insider trading restrictions arise only when the information that
is used for trading, tipping or recommendations is "material." The information
need not be so important that it would have changed an investor's decision to
buy or sell; rather, it is enough that it is the type of information on which
reasonable investors rely in making purchase or sale decisions.
RESOLVING CLOSE CASES. The United States Supreme Court has held that, in
close cases, doubts about whether or not information is material should be
resolved in favor of a finding of materiality. You should also be aware
that your judgment regarding materiality may be reviewed by a court or the
SEC with the 20-20 vision of hindsight.
EFFECT ON MARKET PRICE. Any information that, upon disclosure, is likely
to have a significant impact on the market price of a security should be
considered material.
<PAGE>
FUTURE EVENTS. The materiality of facts relating to the possible occurrence
of future events depends on the likelihood that the event will occur and
the significance of the event if it does occur.
ILLUSTRATIONS. The following list, though not exhaustive, illustrates the
types of matters that might be considered material: a joint venture, merger
or acquisition; the declaration or omission of dividends; the acquisition
or loss of a significant contract; a change in control or a significant
change in management; a call of securities for redemption; the borrowing of
a significant amount of funds; the purchase or sale of a significant asset;
a significant change in capital investment plans; a significant labor
dispute or disputes with subcontractors or suppliers; an event requiring a
company to file a current report on Form 8-K with the SEC; establishment of
a program to make purchases of the company's own shares; a tender offer for
another company's securities; an event of technical default or default on
interest and/or principal payments; advance knowledge of an upcoming
publication that is expected to affect the market price of the stock.
These illustrations are equally applicable to Price Associates as a public
company and should serve as examples of the types of matters that Employees
should not discuss with persons outside the firm. Remember, even though you
may have no intent to violate any securities law, an offhand comment to a
friend might be used unbeknownst to you by such friend to effect purchases
or sales of Price Associates' stock. If such transactions were discovered
and your friend were prosecuted, your status as an informant or "tipper"
would directly involve you in the case.
NON-PUBLIC VS. PUBLIC INFORMATION. Any information which is not "public" is
deemed to be "non-public." Just as an investor is permitted to trade on the
basis of information that is not material, he or she may also trade on the basis
of information that is public. Information is considered public if it has been
disseminated in a manner making it available to investors generally. An example
of non-public information would include material information provided to a
select group of analysts but not made available to the investment community at
large. Set forth below are a number of ways in which non-public information may
be made public:
DISCLOSURE TO NEWS SERVICES AND NATIONAL PAPERS. The U.S. stock exchanges
require each exchange-traded issuer to disseminate material, non-public
information about itself to: (1) the national business and financial
newswire services (Dow Jones and Reuters); (2) the national service
(Associated Press); and (3) The New York Times and The Wall Street Journal.
LOCAL DISCLOSURE. An announcement by an issuer in a local newspaper might
be sufficient for a company that is only locally traded, but might not be
sufficient for a company that has a national market.
INFORMATION IN SEC REPORTS. Information contained in reports filed with the
SEC will be deemed to be public.
INFORMATION IN BROKERAGE REPORTS. Information published in bulletins and
research reports disseminated by brokerage firms will, as a general matter,
be deemed to be public.
<PAGE>
If RPFI is in possession of material, non-public information with respect to a
security before such information is disseminated to the public (i.e., such as
being disclosed in one of the public media described above), RPFI and its
Employees must wait a sufficient period of time after the information is first
publicly released before trading or initiating transactions to allow the
information to be fully disseminated.
CONCEPT OF POSSESSION. It is important to note that the SEC takes the position
that the United States law regarding insider trading prohibits any person from
trading in a security in violation of a duty of trust and confidence while in
possession of material, non-public information regarding the security. This is
in contrast to trading on the basis of the material, non-public information. To
illustrate the problems created by the use of the "possession" standard, as
opposed to the "caused" standard, the following three examples are provided:
FIRST, if the investment committee to the International Stock Fund were to
obtain material, non-public information about one of its portfolio
companies from an RPFI equity research analyst, that fund would be
prohibited from trading in the securities to which that information
relates. The prohibition would last until the information is no longer
material or non-public.
SECOND, if the investment committee to the International Stock Fund
obtained material, non-public information about a particular portfolio
security but continued to trade in that security, then the committee
members, RPFI, and possibly management personnel might be liable for
insider trading violations.
THIRD, even if the investment committee to the Fund does not come into
possession of the material, non-public information known to an RPFI equity
research analyst, if it trades in the security, it may have a difficult
burden of proving to the SEC or to a court that it was not in possession
of such information.
TENDER OFFERS. Tender offers are subject to particularly strict regulation under
the United States securities laws. Specifically, trading in securities which are
the subject of an actual or impending tender offer by a person who is in
possession of material, non-public information relating to the offer is illegal,
regardless of whether there was a breach of fiduciary duty. Under no
circumstances should you trade in securities while in possession of material,
non-public information regarding a potential tender offer.
U.K. LAW REGARDING INSIDER TRADING PROHIBITIONS.
THE U.K. ACT. The Criminal Justice Act 1993 (the "U.K. ACT") prohibits an
"insider" from:
o dealing in "securities" about which he or she has "inside
information";
<PAGE>
o encouraging another person to deal in those securities;
o disclosing the "inside information" otherwise than in the proper
performance of the insider's employment office or profession.
The definition of "securities" is very wide and is not limited to U.K.
securities. The U.K. Act also covers all dealing in "securities," whether on or
off market and whether done within or without the U.K.
The following flow chart illustrates the core concepts under the U.K. Act:
DOES THE
TRANSACTION
INVOLVE
"SECURITIES"
ARE YOU AN
INDIVIDUAL
WITH "INSIDE
INFORMATION"
DO YOU
HAVE THE
INFORMATION AS
AN "INSIDER"?
ARE YOU
"DISCLOSING"?
ARE YOU
"ENCOURAGING"
DEALING?
DOES DEALING
INVOLVE A
"PROFESSIONAL
INTERMEDIARY"?
ARE YOU
DEALING ON A
"REGULATED
MARKET"?
DOES A DEFENSE APPLY?
GO FREE
GO TO JAIL
<PAGE>
WHO IS AN INSIDER? A person has information as an "insider" if:
o it is, and he or she knows that it is, "inside information" and;
o he or she has it, and knows that he or she has it, directly or
indirectly from an "inside source". An "inside source" is any
director, employee or shareholder of an issuer of securities or
anyone having access to the information by virtue of his or her
employment, profession, office and duties.
WHAT IS INSIDE INFORMATION UNDER THE U.K. ACT? "Inside Information" is
information which:
o relates to particular securities, or particular issuers of
securities;
o is specific or precise;
o has not been "made public"; and
o is likely to have a significant effect on the price if it were
"made public". Examples of price-sensitive information would
include knowledge of any:
o proposed takeover or merger;
o potential company insolvency;
o unpublished information as to profits or losses of any
company for any period;
o decision by a company concerning dividends or other
distributions;
o proposed change in the capital structure of a company;
o material acquisitions or realizations of assets by a
company;
o substantial acquisition or disposal of shares of a company;
o proposal to change the general character or nature of the
business of a company or group;
o proposed change in the directors or senior executives of a
company; and
o substantial borrowing by a company.
WHEN IS INFORMATION MADE PUBLIC? Information is "made public" if it:
<PAGE>
o is published in accordance with the rules of a regulated market
for the purpose of informing investors and their professional
advisers;
o is contained in records open to public inspection;
o can be readily acquired by any person likely to deal in the
securities
o to which the information relates, or
o of an issuer to which the information relates;
o is derived from information which has been "made public".
CRIMINAL PENALTIES. The penalties under the U.K. Act are a maximum of seven
years imprisonment and an unlimited fine.
PROCEDURES TO BE FOLLOWED WHEN RECEIVING MATERIAL, NON-PUBLIC INFORMATION.
All Employees stationed in London, Paris, and Buenos Aires will be referred to
in this portion of the Statement as "LONDON EMPLOYEES." All Employees stationed
in Hong Kong, Singapore and Tokyo will be referred to in this portion of the
Statement as "HONG KONG EMPLOYEES." Unless specified in this manner, the
Statement applies to ALL RPFI Employees, except those who are subject to the
Price Associates Code of Ethics and its Procedures. The list of issuers about
which Employees have material, inside information will be referred to in this
Statement as the RPFI RESTRICTED LIST. Although the general principles of this
Statement apply to Personnel of Related Entities, they should follow the
specific procedures regarding inside information established by their respective
firms.
A. PROCEDURES FOR LONDON EMPLOYEES. Whenever a London Employee comes into
possession of material, non-public information about a security or an
issuer of a security, he or she should immediately inform Carol Eve of
the London Compliance Team that he or she is in possession of such
information and the nature of the information. Carol Eve will make a
record of this notification by placing the issuer on the RPFI
Restricted List, noting the person(s) in possession of the
information, the reason for its inclusion, and the local time and date
on which the issuer was placed on this List. She will also promptly
relay this information to Dottie Jones in the Compliance Department in
Baltimore ("BALTIMORE COMPLIANCE"), Christine To, the Head Dealer at
the RPFI Hong Kong Dealing Desk ("HONG KONG HEAD Dealer"), and the
Head Dealer at the Robert Fleming Investment Management Dealing Desk
("RF DEALING Desk") or his or her designee ("RF HEAD DEALER"). Dottie
Jones will add the issuer to the Price Associates' Restricted List. If
the London Employee is unsure about whether the information is
material and non-public, he or she should immediately contact the
London Compliance Team, the RF Group Compliance, or the Baltimore
Legal Department for advice. The London Employee shall refrain from
disclosing the information to anyone else, including persons within
RPFI, unless specifically advised to the contrary.
<PAGE>
When the information is no longer material and/or non-public, Carol
Eve will remove the issuer from the RPFI Restricted List and note the
reason for and the date and local time of removal of the issuer from
this List. She will also promptly relay the information to Dottie
Jones, Christine To, and the RF Head Dealer. Dottie Jones will remove
the issuer from the Price Associates' Restricted List. If the London
Employee or Carol Eve is unsure whether the issuer should be removed
from the RPFI Restricted List, he or she should first contact RF Group
Compliance or the Baltimore Legal Department for advice.
B. PROCEDURES FOR HONG KONG EMPLOYEES. Whenever a Hong Kong Employee
comes into possession of material, non-public information about a
security or the issuer of any security, he or she should immediately
inform Christine To that he or she is in possession of such
information and the nature of the information. Christine To will make
a record of this notification by placing the issuer on the RPFI
Restricted List, noting the person(s) in possession of the
information, the reason for its inclusion, and the local time and date
on which the issuer was placed on this List. She will also promptly
relay this information to JF Compliance, Dottie Jones and Carol Eve.
Carol Eve will relay this information to the RF Head Dealer. Dottie
Jones will add the issuer to the Price Associates' Restricted List. If
the Hong Kong Employee is unsure about whether the information is
material and/or non-public, he or she should immediately contact the
London Compliance Team, JF Compliance or the Baltimore Legal
Department for advice. The Hong Kong Employee shall refrain from
disclosing the information to anyone else, including persons within
RPFI, unless specifically advised to the contrary.
When the information is no longer material and/or non-public,
Christine To will remove the issuer from the RPFI Restricted List and
note the reason for and the date and local time of removal of the
issuer from this List. She will also promptly relay this information
to Dottie Jones, JF Compliance, and Carol Eve, who will inform the RF
Head Dealer. Dottie Jones will remove the issuer from the Price
Associates' Restricted List. If the Hong Kong Employee or Christine To
is unsure whether the issuer should be removed from the RPFI
Restricted List, he or she should first contact JF Compliance or the
Baltimore Legal Department for advice.
C. PROCEDURES FOR BALTIMORE EMPLOYEES. Employees working in Baltimore
("BALTIMORE EMPLOYEES") are subject primarily to Price Associates'
Code of Ethics and Procedures. Under this Code and Procedures, if a
Baltimore Employee or a Price Associates' employee comes into
possession of material, non-public information about a security or the
issuer of any security, he or she must immediately inform the
Baltimore Legal Department. If that Department determines that the
information is both material and non-public, the issuer will be placed
on either the Price Associates' Watch or Restricted List and, if the
issuer is a non-U.S. issuer, on the RPFI Restricted List. If the
issuer is a non-U.S. issuer, Dottie Jones will promptly relay the
identity of the issuer, the person(s) in possession of the
information, the reason for its inclusion, and the local time and date
on which the issuer was placed on the RPFI List to Christine To and
Carol Eve, who will relay this information to the RF Head Dealer.
Dottie Jones will document the addition as required by Price
Associates'
<PAGE>
Procedures. The Baltimore Employee shall refrain from disclosing the
information to anyone else, including persons within RPFI, unless
specifically advised to the contrary.
When the information is no longer material and/or non-public, Dottie
Jones will remove the issuer from the Price Associates' List and, if
applicable, the RPFI List, and, if the issuer is a non-U.S. issuer,
promptly relay this information to Christine To and Carol Eve, who
will inform the RF Head Dealer. Dottie Jones will document the removal
as required by Price Associates' Procedures.
Carol Eve will keep a record of all inclusions and removals of issuers
on the RPFI Restricted List for six(6) years.
D. GENERAL PROCEDURES FOR ALL EMPLOYEES. Specifically, Employees in any
office may not:
o Trade in securities to which the material, non-public information
relates;
o Disclose the information to others;
o Recommend purchases or sales of the securities to which the
information relates.
The RPFI Restricted List is highly confidential and should, under no
circumstances, be disseminated to anyone outside RPFI, the Dealing Desks, RF
Group Compliance, JF Compliance, the Baltimore Legal Department, and Baltimore
Compliance.
SPECIFIC PROCEDURES RELATING TO THE SAFEGUARDING OF INSIDE INFORMATION.
To ensure the confidentiality of the RPFI Restricted List, it is important that
all Employees take the following steps to safeguard the confidentiality of
material, non-public information:
o Do not discuss confidential information in public places such as
elevators, hallways or social gatherings;
o To the extent practical, limit access to the areas of the firm where
confidential information could be observed or overheard to Employees
with a business need for being in the area;
o Avoid using speaker phones in areas where unauthorized persons may
overhear conversations;
o Where appropriate, maintain the confidentiality of client identities
by using code names or numbers for confidential projects;
o Exercise care to avoid placing documents containing confidential
information in areas where they may be read by unauthorized persons
and store such documents in secure locations when they are not in use;
and
<PAGE>
o Destroy copies of confidential documents no longer needed for a
project.
RPFI has adopted specific written procedures, Procedures Pertaining to the
Administration of the Statement of Policy on Material, Inside (Non-Public)
Information ("PROCEDURES"). They are considered a part of this Statement and
will be distributed to all appropriate personnel.
EDUCATION PROGRAM. While the probability of research analysts and portfolio
managers being exposed to material, non-public information with respect to
issuers considered for investment by clients is greater than that of other
Employees, it is imperative that all Employees have a full understanding of this
Statement.
To ensure that all Employees are properly informed of and understand RPFI's
policy with respect to insider trading, the following program has been adopted:
INITIAL REVIEW FOR NEW EMPLOYEES. All new Employees and Personnel of
Related Entities will be given a copy of the Code of Ethics, which
includes this Statement. Each such person is required to read the Code and
acknowledge in writing that he or she will abide by its applicable
provisions. A member of the London Compliance Team will review this
Statement with each new portfolio manager, research analyst, and trader
promptly after the person's assumption of one of these positions.
DISTRIBUTION OF STATEMENT. Any time this Statement is materially revised,
copies will be distributed to all Employees and Personnel of Related
Entities.
ANNUAL REVIEW WITH RESEARCH ANALYSTS, PORTFOLIO MANAGERS AND TRADERS. A
member of the London Compliance Team will review this Statement at least
annually with RPFI portfolio managers, research analysts, and traders.
ANNUAL CONFIRMATION OF COMPLIANCE. All Employees and Personnel of Related
Entities will be asked to confirm their understanding of and adherence to
this Statement on an annual basis.
QUESTIONS. If you have any questions with respect to the interpretation or
application of this Statement generally or in connection with a specific issuer,
you should consult with the London Compliance Team, RF Group Compliance, JF
Compliance or a member of the Baltimore Legal Department.
O:\WPDATA\SARAH\CODEOFET.HIC\RPFI\STPO13.DOC
March, 1999
<PAGE>
ROWE PRICE-FLEMING INTERNATIONAL, INC.
STATEMENT OF POLICY
ON
SECURITIES TRANSACTIONS
BACKGROUND INFORMATION.
LEGAL REQUIREMENT. In accordance with the requirements of the securities
laws of the United States (i.e., the Securities Exchange Act of 1934,
the Investment Company Act of 1940, the Investment Advisers Act of 1940
and the Insider Trading and Securities Fraud Enforcement Act of 1988)
and the various United Kingdom laws and regulations, Rowe Price-Fleming
International, Inc. ("RPFI") and the mutual funds which it manages
("RPFI FUNDS") have adopted this Statement of Policy on Securities
Transactions ("STATEMENT"). A similar Statement ("TRPA STATEMENT") has
been adopted by T. Rowe Price Associates, Inc. ("PRICE Associates"), its
other affiliated companies and the Price Funds. Funds sponsored and
managed by Price Associates or RPFI may be referred to collectively in
this Statement as the "PRICE FUNDS."
RPFI'S FIDUCIARY POSITION. As an investment adviser, RPFI is in a
fiduciary position which requires it to act with an eye only to the
benefit of its clients, avoiding those situations which might place, or
appear to place, the interests of RPFI or its officers, directors or
employees in conflict with the interests of clients.
PURPOSE OF STATEMENT. The Statement was developed to help guide RPFI and
its officers, non-affiliated directors and employees and the independent
directors of the RPFI Funds and Personnel of Related Entities in the
conduct of their personal investments and to:
o eliminate the possibility of a transaction occurring that the
United States Securities and Exchange Commission or other
regulatory bodies would view as illegal, such as FRONT RUNNING
(see definition below);
o avoid situations where it might appear that RPFI or the RPFI
Funds or any of their officers, directors or employees had
personally benefitted at the expense of a client or fund
shareholder or taken inappropriate advantage of their fiduciary
positions; and
o prevent, as well as detect, the misuse of material, non-public
information.
All those covered by this Statement are urged to consider the reasons
for the adoption of this Statement. RPFI's and the RPFI Funds'
reputations could be adversely affected as the result of even a single
transaction considered questionable in light of the fiduciary duties of
RPFI and the independent directors of the RPFI Funds.
<PAGE>
FRONT RUNNING. Front Running is illegal. It is generally defined as the
purchase or sale of a security by an officer, director or employee of an
investment adviser or mutual fund in anticipation of and prior to the
adviser effecting similar transactions for its clients in order to take
advantage of or avoid changes in market prices effected by the clients'
transactions.
ETHICS COMMITTEE. RPFI has established an Ethics Committee which is responsible
for the administration of this Statement. Its members are Martin Wade (London)
and Henry Hopkins and M. David Testa (Baltimore).
LONDON COMPLIANCE OFFICER. The Ethics Committee has designated the London
Compliance Team to carry out the compliance functions described in this
Statement. The members of the London Compliance Team include Carol Eve and
Rachel Dickens.
PERSONS SUBJECT TO STATEMENT. The provisions of this Statement apply to the
following, who will be referred to as "COVERED PERSONS." In the case of an
individual, the term "Covered Person" includes the individual's spouse, minor
children, and certain other relatives, as further described on page 4-5 of this
Statement.
RPFI. RPFI for its own account, including sponsored retirement plans of the
firm, if any.
RPFI EMPLOYEES AND OFFICERS. Each officer and employee of RPFI
("EMPLOYEES"). Employees shall be divided into the following categories:
Employees stationed in RPFI's Buenos Aires, Paris and London offices
will be referred to as "LONDON EMPLOYEES";
Employees stationed in RPFI's Hong Kong, Singapore and Tokyo office
will be referred to as "HONG KONG EMPLOYEES";
Employees stationed in RPFI's Baltimore office will be referred to as
"BALTIMORE EMPLOYEES". Baltimore Employees are subject to all the
provisions of the TRPA Statement, including its prior clearance and
various reporting requirements. Therefore, although Baltimore
Employees will be subject to this Statement's general principles, they
will not be subject to the Statement's prior clearance or reporting
requirements or the restrictions on the use of non-affiliated brokers.
The TRPA Statement is considered a part of this Statement.
CERTAIN TEMPORARY WORKERS. These workers include:
o Any temporary or consultant when his or her assignment at RPFI
exceeds or will exceed four weeks or when his or her cumulative
assignments exceed eight weeks over a twelve-month period; and
o Any contingent worker immediately at the time of engagement if
his or her assignment is more than casual in nature or if he or
she will be exposed to the
<PAGE>
kinds of information and situations that would create conflicts
on matters covered in the Code.
PERSONNEL OF RELATED ENTITIES. Any officer, director or employee of one of
the entities ("RELATED Entities") listed below ("PERSONNEL OF RELATED
ENTITIES") who, in connection with his or her regular functions or duties,
makes, participates in, or obtains information regarding the purchase or
sale of a security by any one of RPFI's clients, or whose functions or
duties relate to the making of any such recommendation with respect to the
purchase or sale of securities by any one or more of RPFI's clients.
o Robert Fleming Holdings Limited,
o Jardine Fleming International Limited,
o Jardine Fleming Holdings Limited, or
o Any other company in a control relationship to RPFI.
The London Compliance Team will keep a record of all such Related Entity
Personnel. This list, which shall be revised to reflect any changes on a
quarterly basis, shall be sent to the Compliance Section of the Legal
Department in Baltimore ("BALTIMORE COMPLIANCE").
NON-AFFILIATED DIRECTORS OF RPFI. Directors of RPFI who are neither
officers nor employees of RPFI or Price Associates and who, in connection
with their regular functions or duties, do not make, participate in, or
obtain information regarding the purchase or sale of a security by any one
of RPFI's clients, or whose functions or duties do not relate to the making
of any such recommendation with respect to the purchase or sale of
securities by any one of RPFI's clients. They are SUBJECT to:
o the Statement's general principles;
o the Statement's transaction reporting requirements;
o dealing with clients restrictions;
o co-investing restrictions;
o investment in client investment partnership restrictions; and
o 1/2% ownership reporting requirements
They are EXEMPT from:
o prior clearance requirements; and
o the requirements and rules dealing with:
o new issues;
o investment clubs;
o private placements;
o short sales;
o trading activity;
o non-affiliated brokers;
o brokerage confirmations, periodic account statements and
notification of broker/dealer accounts;
<PAGE>
o the 60 day rule; and
o disclosure of personal securities holdings.
However, they are subject to personal securities transaction rules adopted
by their respective employers (Robert Fleming Holdings or Jardine Fleming
and their affiliates). In addition, any Non-Affiliated Director who, in
connection with his or her regular duties, receives information that would
create conflicts on matters covered by the Code, will be treated as
Personnel of Related Entities.
INDEPENDENT DIRECTORS OF RPFI FUNDS. The Independent Directors of the RPFI
Funds include those directors of the RPFI Funds who are not deemed to be
"interested persons" of RPFI. The Independent Directors of the RPFI Funds
are prohibited from owning the stock of Price Associates. They are SUBJECT
to:
o the Statement's general principles;
o the Statement's transaction reporting requirements;
o dealing with clients restrictions;
o co-investing restrictions;
o investment in client investment partnership restrictions; and
o 1/2% ownership reporting requirements
They are EXEMPT from:
o prior clearance requirements; and
o the requirements and rules dealing with:
o new issues;
o investment clubs;
o private placements;
o short sales;
o trading activity;
o non-affiliated brokers;
o brokerage confirmations, periodic account statements and
notification of broker/dealer accounts;
o the 60 day rule; and
o disclosure of personal securities holdings.
RETIRED EMPLOYEES OF RPFI. Each retired officer, director or employee of
RPFI who continues to receive investment research information from RPFI
will be considered an Employee under this Statement.
INVESTMENT PERSONNEL. The term "Investment Personnel" includes those
Employees and Personnel of Related Entities:
<PAGE>
o who are authorized to make investment decisions or to recommend
securities transactions on behalf of the Firm's clients (e.g.,
separate account managers and members of the RPFI Fund Advisory
groups and Cash Management Team);
o who are research analysts; and
o who are traders for RPFI.
QUESTIONS ABOUT THE STATEMENT. Covered Persons are urged to seek the advice of
Martin Wade or Henry Hopkins or their designees when they have questions as to
the application of this Statement to their individual circumstances.
TRANSACTIONS SUBJECT TO STATEMENT. Except as provided below, the provisions of
this Statement apply to every securities transaction in which a Covered Person
has, or by reason of the transaction may acquire, any direct or indirect
beneficial ownership interest AND over which transaction the Covered Person has
direct or indirect control. This includes a right to dividends that is separated
or separable from the underlying securities (but not merely the right to
dividends alone), and the right to acquire equity securities through the
exercise or conversion of any derivative security, whether or not presently
exercisable.
Generally, a natural person is considered to have BENEFICIAL OWNERSHIP in
securities:
o held in his or her name
o held in the name of a member of the person's immediate family who
resides with the person
o held by a trust for which the person acts as trustee, if at least one
trust beneficiary is a member of the person's immediate family
o held by a trust of which the person is a beneficiary where the trustee
does not exercise exclusive investment control
o held by a general or limited partnership of which the person is a
general partner
o held by a general or limited partnership of which the person is a
limited partner, if he or she has some control over portfolio
securities held by the partnership
o held by any entity or person (including partnership, corporation or
trust) if the person makes the investment decisions for that entity or
person.
If a Covered Person is involved in an investment account for a family situation,
trust, partnership, corporation, etc., which the Covered Person feels should not
be subject to the Statement's prior
<PAGE>
approval and/or reporting requirements, a request for clarification or exemption
may be submitted to the London Compliance Team, which will refer the matter to a
member of the Ethics Committee for decision. An example of this type of
situation is where a person has a direct or indirect beneficial interest in an
account, but has no direct or indirect control over the investment management
process. Any such request for clarification or exemption should name the
account, the interest of the Covered Person in such account, the persons or
firms responsible for its management, and the basis upon which the exemption is
being claimed.
PRIOR CLEARANCE OF SECURITIES TRANSACTIONS (OTHER THAN PRICE ASSOCIATES' STOCK).
Except as provided below, Covered Persons are required to obtain prior clearance
before directly or indirectly initiating, recommending, or in any way
participating in the purchase or sale of a security in which the Covered Person
has, or by reason of such transaction may acquire, any beneficial interest.
PRIOR CLEARANCE MUST BE OBTAINED REGARDLESS OF HOW OR THROUGH WHAT ENTITY THE
TRANSACTION IS EFFECTED. Receiving prior clearance does not relieve a Covered
Person from conducting his or her personal securities transactions in full
compliance with the Code including its prohibition on trading while in
possession of material, inside information, and with applicable law, including
the prohibition on Front Running (see page 4-1 for definition of Front Running).
PERSONS EXEMPT FROM PRIOR CLEARANCE REQUIREMENTS. These prior clearance
requirements (except the requirements applying to Price Associates'
stock) do not apply to the Non-Affiliated Directors of RPFI who, in
connection with their regular functions or duties, do not make,
participate in, or obtain information regarding the purchase or sale of
a security by any one of RPFI's clients, or whose functions or duties do
not relate to the making of any such recommendation with respect to the
purchase or sale of securities by any one of RPFI's clients, or to the
Independent Directors of the RPFI Funds (who are prohibited from owning
Price Associates' stock). Those Covered Persons who ARE subject to these
and related requirements are hereinafter referred to as "CLEARING
COVERED PERSONS."
If a Clearing Covered Person has been denied prior clearance, he or she
may apply to the London Compliance Team, which will refer the matter to
a member of the Ethics Committee for a waiver. All such requests must be
in writing and must fully describe the basis upon which the waiver is
being requested. Clearing Covered Persons should be aware that waivers
are NOT routinely granted.
TRANSACTIONS EXEMPT FROM PRIOR CLEARANCE REQUIREMENTS. All securities
transactions must receive prior clearance except the following:
OPEN-ENDED COLLECTIVE INVESTMENT SCHEMES, INCLUDING UNIT TRUSTS
AND U.S. MUTUAL FUNDS. Purchases or redemptions of shares of any
open-ended collective investment scheme, unit trust and U.S.
open-end investment companies, including the Price Funds, and
similar foreign-registered investment vehicles.
GOVERNMENT OBLIGATIONS. Purchases or sales of direct U.S. or
Foreign Government obligations.
<PAGE>
SECURITIES OF ROBERT FLEMING HOLDINGS, LTD. Purchases or sales of
the securities of Robert Fleming Holdings, Ltd. directly from or
to the issuer.
REGULAR SAVINGS SCHEMES. Purchases effected through a systematic
investment plan involving the automatic investment of a set
amount on predetermined dates (i.e., a regular savings scheme or
savings plan), provided that, if the underlying investment(s) in
the scheme or plan is not exempt from prior clearance, the London
Compliance Team has been previously notified by the Clearing
Covered Person that he or she will be participating in the scheme
or plan and any purchase to initiate participation in the scheme
or plan receives prior clearance.
DIVIDEND REINVESTMENT PLANS. Purchases effected through an
established Dividend Reinvestment Plan ("DRP"), provided the
London Compliance Team is first notified by the Clearing Covered
Persons that he or she will be participating in the DRP. A
Clearing Covered Person's purchase of share(s) of the issuer to
initiate participation in the DRP or his or her purchase of
shares in addition to those purchased with dividends (a
"CONNECTED PURCHASE") MUST receive prior clearance.
CORPORATE ACTIONS (E.G., STOCK SPLITS AND SIMILAR TRANSACTIONS).
The acquisition of additional shares of an existing holding
through the reinvestment of income dividends and capital gains in
mutual funds and similar investment vehicles, stock splits, stock
dividends, exercise of rights, exchanges or conversions.
MANDATORY TENDERS. Purchases and sales of securities pursuant to
a mandatory tender offer.
PAYROLL DEDUCTION PLANS. Purchases or exchanges by a Clearing
Covered Person's spouse pursuant to a payroll deduction plan,
provided the London Compliance Team has been previously notified
by the Clearing Covered Person that the spouse will be
participating in the payroll deduction plan.
EXERCISE OF STOCK OPTION OF CORPORATE EMPLOYER BY SPOUSE.
Transactions involving the exercise by a Clearing Covered
Person's spouse of a stock option issued by the corporation
employing the spouse.
INHERITANCES. Acquisition of securities through inheritance.
GIFTS. Acquisition or disposition of securities by gift.
PROCEDURE FOR OBTAINING PRIOR CLEARANCE. Requests for prior clearance
may be made orally, by electronic mail, or by submitting a written form
to the London Compliance Team. The London Compliance Team, which is
responsible for processing all such requests, will enter on a standard
form entitled "Confirmation of Prior Clearance of Proposed Security
Transactions Form ("CONFIRMATION FORM") the following information: (i)
the date of the
<PAGE>
request, (ii) the person making the request, (iii) the name of the
security, (iv) the number of shares or amount of bond involved, (v) the
nature of the transaction, i.e., whether the transaction is a purchase or
sale, (vi) whether the request was approved or disapproved, and the date
and time of the approval or disapproval (vii) if disapproved, the reason
for the disapproval, (viii) if approval was granted pursuant to an
exemption being granted, the name of the person granting the exemption, and
(ix) whether the value of the requested transaction exceeds U.S. $100,000.
Responses to all requests will be confirmed by the London Compliance Team
by electronic mail or on a standard written form documenting the request
and its approval/disapproval.
Requests will normally be processed on the same day; however, additional
time may be required.
EFFECTIVENESS OF PRIOR CLEARANCE. Prior clearance of a securities
transaction is effective for three (3) business days FROM AND INCLUDING the
date the clearance is granted. If the proposed securities transaction is
not executed within this time, a new clearance must be obtained.
REASONS FOR DISALLOWING PROPOSED TRANSACTIONS. A proposed security
transaction will be disapproved by the London Compliance Team if:
PENDING CLIENT ORDERS BY RPFI. An order has been placed by RPFI to
purchase or sell the security.
PENDING CLIENT ORDERS BY PRICE ASSOCIATES. An order has been placed by
Price Associates to purchase or sell the security.
PURCHASES AND SALES WITHIN SEVEN (7) CALENDAR DAYS. The security has
been purchased or sold by any client of RPFI or Price Associates
within the seven (7) calendar days immediately prior to the date of
the proposed transaction. For example, if a client transaction occurs
on Monday, a Clearing Covered Person may not purchase or sell that
security until Tuesday of the following week. If all clients have
eliminated their holdings in a particular security, the seven-day
restriction is not applicable to a Clearing Covered Person's
transactions in that security.
SECURITIES SUBJECT TO INTERNAL TRADING RESTRICTIONS. The issuer has
been placed on the RPFI Restricted List.
TRANSACTIONS IN STOCK OF PRICE ASSOCIATES. Because Price Associates is a public
company, ownership of its stock subjects its officers, inside and independent
directors, and employees to special legal requirements under the United States
securities laws. These requirements have been extended to apply to Covered
Persons, except the Independent Directors of the RPFI Funds, who are prohibited
from owning the stock of Price Associates. Each Covered Person (excluding the
Independent Directors of the RPFI Funds) is responsible for his or her own
compliance with these requirements. Price Associates' stock may be purchased
through any broker-
<PAGE>
dealer, including T. Rowe Price Investment Services, Inc's TRP Brokerage
division, as long as all other requirements have been met. In connection with
these legal requirements, RPFI has adopted the following rules and procedures:
QUARTERLY EARNINGS REPORT. Covered Persons must refrain from initiating
transactions in Price Associates' stock in which they have a beneficial
interest, generally from the sixth trading day following the end of the
quarter (or such other date as management shall from time to time
determine) until the third trading day following the public release of
earnings. Employees will be notified in writing through the Office of
the Secretary of Price Associates ("SECRETARY") from time to time as to
the controlling dates.
PRIOR CLEARANCE. Covered Persons are required to obtain clearance prior
to effecting any proposed transaction (including gifts and transfers)
involving shares of Price Associates' stock owned beneficially. Requests
for prior clearance must be in writing on the form entitled
"Notification of Proposed Transaction" (available from the Price
Associates' Corporate Records Department) and submitted to the Secretary
who is responsible for processing and maintaining the records of all
such requests. Receiving prior clearance does not relieve Covered
Persons from conducting their personal securities transactions in full
compliance with the applicable securities laws and regulations,
including the prohibition on trading while in possession of material,
inside information. Transactions in Price Associates' stock effected
through certain options exercises are exempted from the application of
the 60 day rule. See p. 4-17.
------------------------------------------------------
ALL COVERED PERSONS MUST OBTAIN PRIOR CLEARANCE OF ANY
TRANSACTION INVOLVING PRICE ASSOCIATES' STOCK FROM THE
OFFICE OF THE SECRETARY OF PRICE ASSOCIATES.
------------------------------------------------------
DIVIDEND REINVESTMENT PLANS. Purchases of Price Associates' stock
effected through a dividend reinvestment plan need not receive prior
clearance if the Secretary's office has been previously notified by the
Employee that he or she will be participating in that plan. Reporting of
transactions effected through that plan need only be made quarterly,
except that Covered Persons who are subject to Section 16 of the United
States Securities Exchange Act of 1934 reporting must report such
transactions monthly.
EFFECTIVENESS OF PRIOR CLEARANCE. Prior clearance of transactions in
Price Associates' stock is effective for five (5) business days from and
including the date the clearance is granted, unless (i) advised to the
contrary by the Secretary prior to the proposed transaction, or (ii) the
person receiving the approval comes into possession of material,
non-public information concerning the firm. If the proposed transaction
in Price Associates' stock is not executed within this time period, a
new clearance must be obtained.
REPORTING OF DISPOSITION OF PROPOSED TRANSACTION. Covered Persons must
notify the Secretary of the disposition (whether the proposed
transaction was effected or not) of each transaction involving shares of
Price Associates' stock owned directly within two business days of its
execution, or within seven days of the date of prior clearance, if not
executed.
<PAGE>
INSIDER REPORTING AND LIABILITY. Under current rules, certain officers,
directors and 10% stockholders of a publicly traded company ("INSIDERS")
are subject to the requirements of Section 16. The Secretary will inform
you if you are an Insider. If you are an Insider, you should refer to
the TRPA Code for further information on reporting requirements for
Insiders. Insiders include the directors and certain managing directors
of Price Associates.
LIABILITY FOR SHORT-SWING PROFITS. Under United States securities laws,
profit realized by certain officers, as well as directors and 10%
stockholders of a company (including Price Associates) as a result of a
purchase and sale (or sale and purchase) of stock of the company within
a period of less than six months must be returned to the firm upon
request.
USE OF NON-AFFILIATED BROKERS.
Clearing Covered Persons must effect all their non-U.S. personal securities
transactions through the trading desks of Robert Fleming and Jardine Fleming,
respectively, unless otherwise exempted. The following transactions are exempt
from this requirement without approval by the London Compliance Team if approved
by RF Compliance or JF Compliance, as appropriate:
Open-ended Collective Investment Schemes, including Unit Trusts
and U.S. Mutual Funds
New Issues
Investments in Investment Trusts made through Personal Equity
Plans unless self-managed
Exercise of Options and Warrants
Acquisitions of shares in investment trusts under any dividend
reinvestment or regular savings scheme
Exercise of Price Associates' stock options, including cashless
exercises, if exercised through BT-Alex Brown and duplicate
account information is sent directly to RF Group Compliance by
BT-Alex Brown.
Application for any other exemption from this requirement, including for a
Clearing Covered Person's spouse's securities transactions if the spouse is
subject to conflicting requirements due to his or her employment, must be made
to the London Compliance Team. If the London Compliance Team approves the
application, it will forward it to RF Group Compliance or to JF Compliance, as
appropriate, for its approval as well.
BROKERAGE CONFIRMATIONS AND PERIODIC ACCOUNT STATEMENTS. For transactions other
than those effected through the Robert Fleming and Jardine Fleming trading
desks, Clearing Covered Persons must request broker-dealers executing
transactions in which they are
<PAGE>
considered to have beneficial ownership and control (see page 4-5 for definition
of Beneficial Ownership) to send to the attention of the London Compliance Team
the following documents:
DUPLICATE CONFIRMATIONS. A duplicate confirmation with respect to each and
every reportable transaction (see pp. 4-9, 4-11, 4-12), including any
transaction in Price Associates' stock.
PERIODIC STATEMENTS. A copy of all periodic statements for all such
securities accounts.
PERMISSION REGARDING BROKER/DEALER ACCOUNTS (OTHER THAN WITH ROBERT FLEMING AND
JARDINE FLEMING).
CLEARING COVERED PERSONS. Clearing Covered Persons must contact the London
Compliance Team to obtain RF Group Compliance or JF Compliance permission,
as appropriate, before opening or trading in a securities account with any
broker/dealer, including T. Rowe Price Investment Services, Inc.'s TRP
Brokerage division.
NEW CLEARING COVERED PERSONS. New Clearing Covered Persons must apply to RF
Group Compliance or JF Compliance, as appropriate, through the London
Compliance Team for permission to maintain any existing securities accounts
with any broker/dealer promptly upon joining the firm.
REPORTING REQUIREMENTS (OTHER THAN PRICE ASSOCIATES' STOCK).
TRANSACTIONS THAT MUST BE REPORTED. Other than for the transactions
specified below as exempt, every Covered Person is required to file with
the London Compliance Team (or, in the case of the Independent Directors of
the RPFI Funds, with Baltimore Compliance) a report of the following
securities transactions:
CLEARED TRANSACTIONS. Any transaction that is subject to the prior
clearance requirements, including purchases in underwritten new or
secondary issues, purchases and sales of shares of Investment Trusts,
and private placement transactions.
SECURITIES OF ROBERT FLEMING HOLDINGS, LTD. Transactions involving the
purchase or sale of the securities of Robert Fleming Holdings, Ltd.
directly from or to the issuer.
REGULAR SAVINGS SCHEMES. Transactions involving the purchase of
securities by a Covered Person pursuant to a systematic investment
plan, (i.e., a regular savings scheme or savings plan) if the
underlying investment(s) is not exempt from prior clearance. REPORTING
OF THESE TRANSACTIONS MUST BE MADE PROMPTLY AFTER THE COVERED PERSON
RECEIVES HIS OR HER REPORTS REGARDING THESE TRANSACTIONS (e.g., if the
Covered Person receives reports semi-annually only, he or she must
report the transactions on that basis).
MANDATORY TENDERS. Purchases and sales of securities pursuant to a
mandatory tender offer.
<PAGE>
PAYROLL DEDUCTION PLANS/SPOUSAL STOCK OPTION. Transactions involving
the purchase or exchange of securities by a Covered Person's spouse
pursuant to a payroll deduction plan or the exercise by a Covered
Person's spouse of a stock option issued by the spouse's employer.
REPORTING OF THESE TRANSACTIONS MUST BE MADE PROMPTLY AFTER THE
COVERED PERSON RECEIVES HIS OR HER REPORTS REGARDING THESE
TRANSACTIONS (e.g., if the Covered Person receives reports
semi-annually only, he or she must report the transactions on that
basis).
INHERITANCES. Acquisition of securities through inheritance.
GIFTS. Acquisition or disposition of securities by gift.
TRANSACTIONS EXEMPT FROM REPORTING. The following transactions are exempt from
the reporting requirements:
OPEN-ENDED COLLECTIVE INVESTMENT SCHEMES, INCLUDING UNIT TRUSTS AND
U.S. MUTUAL FUNDS. Purchases or redemptions of shares of any
open-ended collective investment schemes, unit trust and U.S. open-end
investment companies, including the Price Funds and similar,
foreign-registered investment vehicles, except that any Covered Person
who serves as the president or executive vice president of a Price
Fund must report his or her beneficial ownership or control of shares
in that Fund to Baltimore Compliance.
GOVERNMENT OBLIGATIONS. Purchases or sales of direct U.S. or Foreign
Government obligations.
CORPORATE ACTIONS (E.G., STOCK SPLITS AND SIMILAR TRANSACTIONS). The
acquisition of additional shares of existing corporate holdings
through the reinvestment of income dividends and capital gains in
mutual funds and similar investment vehicles, stock splits, stock
dividends, exercise of rights, exchanges or conversions.
DIVIDEND REINVESTMENT PLANS. The purchase of securities with dividends
effected through an established DRP. If, however, a Connected Purchase must
receive prior clearance (see p. 4-7), that transaction must also be
reported.
REPORT FORM. Reports should be made either:
FOR TRANSACTIONS CONDUCTED THROUGH ROBERT FLEMING OR JARDINE FLEMING
TRADING DESKS -- by submitting a printout, signed by the reporting
person, from the Robert Fleming or Jardine Fleming mainframe that
reports all transactions conducted through the pertinent Robert
Fleming or Jardine Fleming trading desk; OR
FOR TRANSACTIONS NOT CONDUCTED THROUGH ROBERT FLEMING OR JARDINE
FLEMING TRADING DESKS -- on the form designated "Rowe Price-Fleming
International, Inc. Report of Personal Securities Transactions," a
supply of which is available from the London
<PAGE>
Compliance Team, unless a transaction is executed through a
broker-dealer that sends duplicate confirmations and account
statements regarding the transaction to the London Compliance Team or
Baltimore Compliance, as required; when such duplicate reporting
occurs, the Covered Person does not need to make a further report.
WHEN REPORTS ARE DUE. A securities transaction report must be filed within
ten (10) calendar days after the end of the calendar quarter, regardless of
whether there have been any reportable transactions. London Employees,
Personnel of Related Entities, and the Non-affiliated Directors of RPFI
must file these reports directly with the London Compliance Team, which
shall compare each signed report with the appropriate prior clearance
record. Hong Kong Employees must file these reports with JF Compliance. JF
Compliance shall forward the completed signed reports promptly to the
London Compliance Team, which will compare each signed report with the
appropriate prior clearance record.
The London Compliance Team will send a copy of all such reports to
Baltimore Compliance quarterly.
REPORTING REQUIREMENTS OF THE INDEPENDENT DIRECTORS OF THE RPFI FUNDS. The
Independent Directors of the RPFI Funds are subject to similar reporting
requirements as other Covered Persons. Specifically, each Independent Director
must file a report for each quarter's transactions with Baltimore Compliance no
later than ten (10) calendar days after the end of the calendar quarter in which
the transactions were effected. Reports must be filed for each quarter,
regardless of whether there have been any reportable transactions. Baltimore
Compliance will send the Independent Directors of the RPFI Funds a reminder
letter and Reporting Form approximately ten (10) days prior to the end of each
calendar quarter.
MISCELLANEOUS RULES REGARDING PERSONAL SECURITIES TRANSACTIONS.
DEALING WITH CLIENTS. Covered Persons may not, directly or indirectly, sell
to or purchase from a RPFI client any security. This prohibition does not
preclude the purchase or redemption of shares of any mutual fund that is a
client of RPFI.
CLIENT INVESTMENT PARTNERSHIPS.
CO-INVESTING. Covered Persons and the RPFI Funds are not permitted to
co-invest in client investment partnerships of RPFI, Price Associates,
or their affiliates, such as International Partners, Strategic
Partners and Threshold.
DIRECT INVESTMENT. The Independent Directors of the RPFI Funds are not
permitted to invest as limited partners in client investment
partnerships of RPFI, Price Associates, or their affiliates.
LARGE CAPITALIZATION EXEMPTION. Although subject to prior clearance,
transactions involving securities in certain large companies, within the
parameters set by the Ethics Committee, will be approved under normal
circumstances ("LARGE CAPITALIZATION SECURITIES").
<PAGE>
TRANSACTIONS INVOLVING LARGE CAPITALIZATION SECURITIES. This exemption
applies to transactions involving no more than $10,000 (all dollar
references are to U.S. dollars) or the nearest round lot (if the amount of
the transaction only marginally exceeds $10,000) per security per week in
securities of companies with market capitalizations of $5 billion or more.
TRANSACTIONS INVOLVING OPTIONS ON LARGE CAPITALIZATION SECURITIES. Clearing
Covered Persons may not purchase uncovered put options or sell uncovered
call options unless otherwise permitted under the "Options and Futures"
discussion on p. 4-16. Otherwise, in the case of options on an individual
security qualifying for the Large Capitalization Exemption, a Clearing
Covered Person may trade the GREATER of 5 contracts or sufficient option
contracts to control $10,000 in the underlying security; thus a Clearing
Covered Person may trade 5 contracts even if this permits the Clearing
Covered Person to control more than $10,000 in the underlying security.
Similarly, the Clearing Covered Person may trade more than 5 contracts as
long as the number of contracts does not permit him or her to control more
than $10,000 in the underlying security.
These parameters are subject to change by the Ethics Committee.
MARGIN ACCOUNTS. Clearing Covered Persons are not permitted to trade on margin
for the purchase of securities.
UNDERWRITTEN NEW AND SECONDARY ISSUES.
INVESTMENT PERSONNEL. Although subject to prior clearance, Investment
Personnel may purchase securities which are the subject of an underwritten
new or secondary issue if:
o The issue is open to the general public and allocations are made
by the issuer / syndicate on a purely random basis (lottery) or
on a pro-rata basis per application ( collectively "PRO-RATA
OFFERING"); and
o No order for the purchase of any such securities has been entered
by RPFI or Price Associates on behalf of any client; and
o The number of shares to be purchased is commensurate with the
normal size and activity of the Investment Personnel's account;
and
o The Investment Personnel wishing to purchase the securities will
NOT participate in the firm's investment decision regarding any
client investment in the underwritten issue.
This restriction extends to corporate and municipal debt securities.
<PAGE>
NON-INVESTMENT PERSONNEL. Clearing Covered Persons other than Investment
Personnel ("NON-INVESTMENT PERSONNEL") may purchase securities in a
Pro-rata Offering if the first three of the four conditions described above
are met. Non-Investment Personnel may also purchase securities, including
corporate and municipal debt securities, which are the subject of an
underwritten new or secondary issue (and are not part of a Pro-rata
Offering) IF prior approval has been obtained from the London Compliance
Team. In considering such a request for approval, the London Compliance
Team will determine whether the proposed transaction presents a conflict of
interest with any of the firm's clients or otherwise violates the Code. The
London Compliance Team will also consider whether:
1. The purchase is made through the Non-Investment Personnel's
regular broker, bank, or from a syndicate member through a
general solicitation or subscription form, if relevant;
2. The number of shares to be purchased is commensurate with the
normal size and activity of the Non-Investment Personnel's
account; and
3. If the transaction is a public offering in the United States, it
otherwise meets the restrictions on free riding and withholding
set by the National Association of Securities Dealers, Inc.
ALL PERSONNEL. Neither Investment Personnel nor Non-Investment Personnel
will be permitted to purchase in an underwritten new or secondary issue if
any of RPFI's or Price Associates' clients are prohibited from doing so.
This prohibition will remain in effect until these clients have had the
opportunity to purchase in the secondary market once the underwriting is
completed -- commonly referred to as the aftermarket. In addition, the 60
day rule applies to transactions in securities purchased in an underwritten
new or secondary issue.
JAPANESE NEW ISSUES. All Clearing Covered Persons are prohibited from
purchasing a security which is the subject of an underwritten new or
secondary issue in Japan.
INVESTMENT CLUBS. Clearing Covered Persons may not form or participate in a
stock or investment club unless prior written approval has been obtained from a
member of the Ethics Committee. All transactions by such a stock or investment
club are subject to the same prior clearance and reporting requirements
applicable to an individual Clearing Covered Person's trades.
PRIVATE PLACEMENTS.
PRIOR CLEARANCE PROCEDURE. Clearing Covered Persons may not invest in a
private placement of securities, including the purchase of limited
partnership interests, unless prior written approval has been obtained from
a member of the Ethics Committee and the Baltimore Legal Department. In
considering such a request for approval, the
<PAGE>
member of the Ethics Committee and the Baltimore Legal Department will
determine whether the investment opportunity (private placement) should be
reserved for the firm's clients, and whether the opportunity is being
offered to the employee by virtue of his or her position with the firm. The
member of the Ethics Committee or the Baltimore Legal Department will
inform the London Compliance Team whenever such an investment has been
approved. The London Compliance Team will send written notice of the
approval to Baltimore Compliance, and to RF Group Compliance or JF
Compliance, as appropriate.
CONTINUING OBLIGATION. Any person who has received approval to invest in a
private placement of securities and who, at a later date, anticipates
participating in the firm's investment decision process regarding the
purchase or sale of securities of the issuer of that private placement on
behalf of any client, must immediately disclose his or her prior investment
in the private placement to the London Compliance Team.
OPTIONS AND FUTURES.
-----------------------------------------------------------------
Before engaging in options and futures transactions, Clearing
Covered Persons should understand the impact that the 60-day Rule
may have on their ability to close out a position (see page
4-17).
-----------------------------------------------------------------
OPTIONS AND FUTURES ON SECURITIES AND INDICES NOT HELD BY RPFI'S OR PRICE
ASSOCIATES' CLIENTS. There are no specific restrictions with respect to the
purchase, sale or writing of put or call options or any other option or
futures activity, such as multiple writings, spreads and straddles, on
securities of issuers (and options or futures on such securities) which are
not held by any of RPFI's or Price Associates' clients.
OPTIONS ON SECURITIES OF COMPANIES HELD BY RPFI'S OR PRICE ASSOCIATES'
CLIENTS. With respect to options on securities of issuers which are held by
any of RPFI's or Price Associate's clients, it is the Firm's policy that a
Clearing Covered Person should not profit from a price decline of a
security owned by a client. Therefore, such a Clearing Covered Person may:
(i) purchase call options and sell covered call options and (ii) purchase
covered put options and sell put options. A Clearing Covered Person may NOT
purchase uncovered put options or sell uncovered call options, even if the
issuer of the underlying security is eligible for the Large Capitalization
Exemption, unless purchased in connection with other options on the same
security as part of a straddle, combination or spread strategy which is
designed to result in a profit to the Clearing Covered Person if the
underlying security rises in or does not change in value. The purchase,
sale and exercise of options are subject to the same restrictions as those
set forth with respect to securities, i.e., the option should be treated as
if it were the common stock itself.
<PAGE>
OTHER OPTIONS AND FUTURES HELD BY RPFI'S OR PRICE ASSOCIATES' CLIENTS.
Any other option or futures transaction with respect to securities
held by any of RPFI's or Price Associates' clients will be approved or
disapproved on a case-by-case basis after due consideration is given
as to whether the proposed transaction or series of transactions might
appear to or actually create a conflict with the interests of any of
RPFI's or Price Associates' clients. Such transactions include
transactions in futures and options on futures involving financial
instruments regulated solely by the United States Commodity Futures
Trading Commission ("CFTC").
SHORT SALES. Clearing Covered Employees may not sell any security short
which is owned by any client of RPFI or Price Associates.
TRADING ACTIVITY.
GENERAL RULE. Clearing Covered Persons are discouraged from engaging
in a pattern of securities transactions which are either:
1. So excessively frequent as to potentially impact the
person's ability to carry out his or her assigned
responsibilities, or
2. Involve securities positions which are disproportionate to
the person's net assets.
60 DAY RULE. Robert Fleming and Jardine Fleming do not permit Clearing
Covered Persons to engage in any security transaction (even a sale at
a loss) unless the security has been held for 60 days. Under U.S.
procedures, Clearing Covered Persons are prohibited from profiting
from the purchase and sale or sale and purchase of the same (or
equivalent) securities within 60 calendar days. An "equivalent"
security means any option, warrant, convertible security, stock
appreciation right, or similar right with an exercise or conversion
privilege at a price related to the subject security, or similar
securities with a value derived from the value of the subject
security.
The 60 day rule does not apply:
X to any transaction exempt from prior clearance (see p. 4-6);
X to the purchase and sale or sale and purchase of exchange
traded index options; and
X to the cashless exercise of options/same day sale of Price
Associates' and/or Robert Fleming stock if the options are
"in the money" and have been held for at least 60 days
Clearing Covered Persons may apply for a waiver from the 60 day rule
to the London Compliance Team, which will refer the matter to a member
of the Ethics Committee and to RF Group Compliance or JF Compliance,
as appropriate. All such requests must be in writing and must fully
describe the basis upon which the waiver is being requested; such
waivers are NOT routinely granted.
<PAGE>
INVESTMENTS IN NON-LISTED SECURITIES FIRMS. Clearing Covered Persons may
not purchase or sell the shares of a broker/dealer, underwriter or a
U.S. or other government registered investment adviser unless that
entity is traded on a recognized U.S., U.K., or foreign exchange, listed
as a NASDAQ/NMS stock, or permission is given under the Private
Placement Procedures (See p. 4-15).
OWNERSHIP REPORTING REQUIREMENTS - ONE-HALF OF ONE PERCENT OWNERSHIP. If a
Covered Person owns more than 1/2 of 1% of the total outstanding shares of a
public or private company, he or she must immediately report in writing such
fact to the London Compliance Team, providing the name of the company and the
total number of such company's shares beneficially owned. The London Compliance
Team will inform Baltimore Compliance about any such ownership promptly.
DISCLOSURE OF PERSONAL SECURITIES HOLDINGS BY CERTAIN EMPLOYEES. Promptly after
commencement of employment or appointment and thereafter on an annual basis (to
be provided in conjunction with the annual verification form), each director
(other than a Non-Affiliated Director, who, in connection with his or her
regular functions or duties, does not make, participate in, or obtain
information regarding the purchase or sale of a security by any one of RPFI's
clients, or whose functions or duties do not relate to the making of any such
recommendation with respect to the purchase or sale of securities by any one or
more of RPFI's clients), trader, portfolio manager, and research analyst of RPFI
is required to disclose in writing all securities holdings in which he or she is
considered to have beneficial ownership and control (see page 4-5 for the
definition of the term Beneficial Ownership). The form will be provided upon
commencement of employment or appointment and thereafter annually and should be
submitted directly to the London Compliance Team, which will provide a copy to
Baltimore Compliance.
CONFIDENTIALITY OF RECORDS. RPFI makes every effort to protect the privacy of
its Covered Persons in connection with Personal Securities Holdings and Personal
Securities Transaction Reports.
SANCTIONS. Strict compliance with the provisions of this Statement is considered
a basic provision of association with RPFI and the RPFI Funds. The Ethics
Committee and the London Compliance Team are primarily responsible for
administering this Statement. In fulfilling this function, the Ethics Committee
will institute such procedures as it deems reasonably necessary to monitor
Covered Persons' compliance with this Statement and to otherwise prevent and
detect violations.
VIOLATIONS BY EMPLOYEES AND DIRECTORS OF RPFI. Upon discovering a
material violation of this Statement by a Covered Person other than an
Independent Director of a RPFI Fund, the Ethics Committee will impose
such sanctions as it deems appropriate or may, in its discretion, refer
the matter to the Board of Directors of RPFI to determine the
appropriate sanctions. Sanctions may include, inter alia, a letter of
censure or suspension or termination of employment, and/or officership
of the violator. In addition, the violator may be required to surrender
to RPFI, or to the party or parties it may designate, any profit
realized from any transaction that is in violation of this Statement.
All material violations of this Statement shall be reported to the Board
of Directors of RPFI and to the Board of Directors of any RPFI Fund with
respect to whose securities such violations may have been involved.
<PAGE>
VIOLATIONS BY INDEPENDENT DIRECTORS OF RPFI FUNDS. Upon discovering a
material violation of this Statement by an Independent Director of a
RPFI Fund, the Ethics Committee shall report such violation to the Board
of Directors of RPFI and to the RPFI Fund Boards on which the director
serves. The RPFI Board of Directors and the RPFI Fund Boards will impose
such sanctions as they deem appropriate.
VIOLATIONS BY BALTIMORE EMPLOYEES OF RPFI. Upon discovering a material
violation of the Price Associates' Statement of Policy on Securities
Transactions by a Baltimore-based employee of RPFI, the Price
Associates' Ethics Committee shall report such violation to the Board of
Directors of RPFI and to the Board of Directors of any RPFI Fund with
respect to whose securities such violations may have been involved.
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<PAGE>
ROWE PRICE FLEMING INTERNATIONAL, INC.
STATEMENT OF POLICY
ON
CORPORATE RESPONSIBILITY
ROWE PRICE-FLEMING INTERNATIONAL, INC.'S FIDUCIARY POSITION. As an investment
adviser, Rowe Price-Fleming International, Inc. ("RPFI") is in a fiduciary
relationship with each of its clients. This fiduciary duty obligates RPFI to act
with an eye only to the benefit of its clients. Accordingly, when managing its
client accounts (whether private counsel clients, mutual funds, limited
partnerships, or otherwise), RPFI's primary responsibility is to optimize the
financial returns of its clients consistent with their objectives and investment
program.
DEFINITION OF CORPORATE RESPONSIBILITY ISSUES. Concern over the behavior of
corporations has been present since the Industrial Revolution. Each generation
has focused its attention on specific issues. Concern over the abuses of the use
of child labor in the 1800's was primarily addressed by legislative action which
mandated industrialized countries to adhere to new laws restricting and
otherwise governing the employment of children. In other instances, reform has
been achieved through shareholder action -- namely, the adoption of shareholder
proposals. The corporate responsibility issues most often addressed during the
past decade have involved:
o Ecological issues, including toxic hazards and pollution of the air
and water;
o Employment practices, such as the hiring of women and minority groups;
o Product quality and safety;
o Advertising practices;
o Animal testing;
o Military and nuclear issues; and
o International politics and operations, including the world debt
crisis, infant formula, and child labor laws.
CORPORATE RESPONSIBILITY ISSUES IN THE INVESTMENT PROCESS. RPFI recognizes the
legitimacy of public concern over the behavior of business with respect to
issues of corporate responsibility. RPFI's policy is to review the merits of
such issues that pertain to any issuer which is held in a client portfolio or
which is being considered for investment. RPFI believes that a corporate
management's record of identifying and resolving issues of corporate
responsibility is one of many criteria for evaluating the investment merits of
the issuer. Enlightened corporate responsibility can enhance an issuer's long
term prospects for business success. The absence of such a policy can have the
converse effect.
QUESTIONS REGARDING CORPORATE RESPONSIBILITY. Should an employee have any
questions regarding RPFI's policy with respect to a corporate responsibility
issue or the manner in
<PAGE>
which RPFI has voted or intends to vote on a proxy matter, he or she should
contact a member of the Corporate Responsibility Committee, which is responsible
for the administration of this Statement. Its members are Martin Wade and John
Ford (London) and M. David Testa (Baltimore).
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<PAGE>
ROWE PRICE-FLEMING INTERNATIONAL, INC.
STATEMENT OF POLICY
WITH RESPECT TO COMPLIANCE WITH UNITED STATES COPYRIGHT LAWS
PURPOSE OF STATEMENT OF POLICY. To protect the interests of Rowe Price-Fleming
International, Inc. ("RPFI") and its employees, RPFI has adopted this Statement
of Policy with Respect to Compliance with Copyright Laws ("STATEMENT") to: (1)
inform its employees regarding the legal principles governing copyrights,
trademarks, and service marks; and (2) ensure that RPFI's various copyrights,
trademarks, and service marks are protected from infringement.
DEFINITION OF TRADEMARK, SERVICE MARK, AND COPYRIGHT UNDER UNITED STATES LAW
TRADEMARK. A trademark is normally a word, phrase, or symbol used to
identify and distinguish a product or a company. For example, KLEENEX is a
trademark for a particular brand of facial tissues.
SERVICE MARK. A service mark is normally a word, phrase, or symbol used to
identify and distinguish a service or the provider of a service. For
example, INVEST WITH CONFIDENCE is a registered service mark which
identifies and distinguishes the mutual fund management services offered by
Price Associates. The words "trademark" and "service mark" are often used
interchangeably, but as a general rule a trademark is for a tangible
product, whereas a service mark is for an intangible good or service.
Because most of RPFI's and Price Associates' business activities involve
providing services (e.g. investment management; transaction processing and
account maintenance; information, etc.), most of RPFI's and Price
Associates' registered marks are service marks.
COPYRIGHT. In order to protect the authors and owners of books, articles,
drawings, music, or computer programs and software, the U.S. copyright law
makes it a crime to reproduce, IN ANY MANNER, any copyrighted material
without the express written permission of the author or publisher. Under
current law, all original works are copyrighted at the moment of creation;
it is no longer necessary to register a copyright. Copyright infringements
may result in judgments of actual damages (i.e., the cost of additional
subscriptions), as well as punitive damages, which can be as high as
$100,000 (U.S. dollars) per infringement.
REGISTERED TRADEMARKS AND SERVICE MARKS. Once RPFI has registered a trademark or
service mark with the United States Patent and Trademark Office, it has the
exclusive right to use that mark. In order to preserve rights to a registered
trademark or service mark, RPFI must (1) use the mark on a continuous basis and
in a manner consistent with the Certificate of Registration; (2) place an
encircled "R" (R) next to the mark in the first, or most prominent, occurrence
in all publicly distributed media; and (3) take action against any party
infringing upon the mark.
<PAGE>
ESTABLISHING A TRADEMARK OR SERVICE MARK. The Baltimore Legal Department has the
responsibility to register and maintain all trademarks and service marks and
protect them against any infringement. If RPFI wishes to utilize a particular
word, phrase, or symbol as a trademark or service mark, the Baltimore Legal
Department must be notified as far in advance as possible so that a search may
be conducted to determine if the proposed mark has already been registered or
used by another entity. Until clearance is obtained from the Baltimore Legal
Department, no new mark should be used. This procedure has been adopted to
ensure that RPFI does not unknowingly infringe upon another company's mark. Once
a proposed mark is cleared for use, it must be accompanied by the abbreviations
"TM" or "SM," as appropriate, until it has been registered. All trademarks and
service marks which have been registered with the U.S. Patent and Trademark
Office must be accompanied by an encircled "R" when used in any public document.
These symbols need only accompany the mark in the first or most prominent place
it is used in each publicly circulated document. Subsequent use of the same
trademark or service mark in such material does not need to be marked. The
Baltimore Legal Department maintains a written summary of all RPFI's registered
and pending trademarks and service marks. All registered and pending trademarks
and service marks are also listed in the T. Rowe Price Style Guide. If you have
any questions regarding the status of a trademark or service mark, you should
contact the Baltimore Legal Department.
INFRINGEMENT OF RPFI'S REGISTERED MARKS. If an employee notices that another
entity is using a mark similar to one which RPFI has registered, the Baltimore
Legal Department should be notified immediately so that appropriate action can
be taken to protect RPFI's interests in the mark.
REPRODUCTION OF ARTICLES AND SIMILAR MATERIALS FOR INTERNAL DISTRIBUTION, OR FOR
DISTRIBUTION TO SHAREHOLDERS, CLIENTS AND OTHERS OUTSIDE THE FIRM. In general,
the reproduction of copyrighted material is a violation of United States law.
Exceptions under the "FAIR USE" doctrine include reproduction for scholarly
purposes, criticism, or commentary, which ordinarily do not apply in a business
environment. OCCASIONAL copying of a relatively small portion of a newsletter or
magazine to keep in a file, circulate to colleagues with commentary, or send to
a client with commentary is generally permissible under the "fair use" doctrine.
Written permission from the author or publisher must be obtained by any employee
wishing to reproduce copyrighted material for INTERNAL OR EXTERNAL distribution,
including distribution via the Internet (or the T. Rowe Price Associates'
intranet). It is the responsibility of each employee to obtain permission to
reproduce copyrighted material. Such permission must be in writing and forwarded
to the Baltimore Legal Department. If the publisher will not grant permission to
reproduce copyrighted material, then the requestor must purchase from the
publisher either additional subscriptions to the periodical or the reprints of
specific articles. The original article or periodical may be circulated as an
alternative to purchasing additional subscriptions or reprints.
PERSONAL COMPUTER SOFTWARE PROGRAMS. Software products and on-line information
services purchased for use on RPFI's personal computers are generally
copyrighted material under United States copyright laws and may not be
reproduced without proper authorization from the software vendor. See the RPFI
Statement of Policy With Respect to Computer Security and Related Issues (page
7-1 et seq.) for more information.
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<PAGE>
ROWE PRICE-FLEMING INTERNATIONAL, INC.
STATEMENT OF POLICY
WITH RESPECT TO COMPUTER SECURITY AND RELATED ISSUES
PURPOSE OF STATEMENT OF POLICY. The central role of computer systems ("SYSTEMS")
in the operations of Rowe Price-Fleming International, Inc. ("RPFI") underscores
the importance of minimizing potential loss or disruption to these systems. The
data stored on computers, as well as the specialized software programs and
systems developed for RPFI's use, are valuable assets and must be protected
accordingly. In addition, the data, programs and systems are highly
confidential. For these reasons, each office of the firm has developed computer
security measures to prevent unauthorized use, change, destruction, or
disclosure of information stored on computers, whether intentional or
unintentional. Employees in each office must familiarize themselves with and
adhere to their office's policies in this area.
PARTICIPATION ON BULLETIN BOARDS. Because communications by our firm or any of
its employees on on-line bulletin boards are subject to United States, state,
and NASD advertising regulations, unsupervised participation can result in
serious securities violations. An employee must first receive the authorization
of the Baltimore Legal Department before initiating or responding to a message
on any computer bulletin board relating to the firm, or RPFI or Price Fund, or
any investment option or service. This policy applies whether or not the
employee intends to disclose his or her relationship to the firm, whether or not
our firm sponsored the bulletin board, and whether or not the firm is the
principal focus of the bulletin board.
CONFIDENTIALITY OF SYSTEMS ACTIVITIES AND INFORMATION. Systems activities and
information stored on our firm's computers (including e-mail) may be subject to
monitoring by RPFI personnel or others. All such information, including messages
on the firm's e-mail system, are records of the firm and the sole property of
the firm. The firm reserves the right to monitor, access and disclose for any
purpose all information, including all messages sent, received, or stored
through the Systems. The use of the firm's computer Systems is for the
transaction of firm business and is for authorized users only.
By using the firm's Systems, you agree to be bound by this Statement and consent
to the access to and/or disclosure of all information, including e-mail
messages, by the firm. Employees do not have any expectation of privacy in
connection with the use of the Systems, or with the transmission, receipt, or
storage of information in the Systems. In addition, employees should understand
that e-mail sent through the Internet is not secure and could be intercepted by
a third party. Therefore, if you have a need to exchange secure e-mail using the
Internet, you should contact your Help Desk or Information Security area for
assistance.
Information entered into our firm's computers but later deleted from the Systems
may continue to be maintained permanently on our firm's back-up tapes. Employees
should take care so that they do
<PAGE>
not create documents that might later be embarrassing to them or to our firm.
This policy applies to e-mail as well to any other communication on the Systems.
APPLICATION OF U.S. COPYRIGHT LAW TO SOFTWARE PROGRAMS. Software products and
on-line information services purchased for use on RPFI's personal computers are
generally copyrighted material under United States copyright laws and may not be
reproduced without proper authorization from the software vendor. This includes
both the software diskette(s) and any program manuals or documentation as well
as data retrievable from on-line information systems. Unauthorized reproduction
of such material or information or downloading or printing such material is a
violation of United States law, and the software vendor can sue to protect the
developer's rights. In addition to criminal penalties such as fines and
imprisonment, civil damages can be awarded in excess of $50,000 (U.S. dollars).
QUESTIONS REGARDING THIS STATEMENT. Employees should direct any questions
regarding this Statement to their office's Help Desk or Information Security
area or to the Baltimore Legal Department as appropriate.
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<PAGE>
ROWE PRICE-FLEMING INTERNATIONAL, INC.
STATEMENT OF POLICY
ON
COMPLIANCE WITH UNITED STATES ANTITRUST LAWS
PURPOSE
To protect the interests of the company and its employees, Rowe
Price-Fleming International, Inc. ("RPFI") has adopted this Statement of Policy
on Compliance with United States Antitrust Laws ("STATEMENT"). The Statement (1)
informs employees about the legal principles governing prohibited
anticompetitive activity in the conduct of RPFI's business, and (2) establishes
guidelines for contacts with other members of the investment management industry
to avoid violations of United States antitrust laws.
THE BASIC ANTICOMPETITIVE ACTIVITY PROHIBITION UNDER UNITED STATES LAW
Section 1 of the United States Sherman Antitrust Act (the "ACT") prohibits
agreements, understandings, or joint actions between companies that constitute a
"restraint of trade," i.e., reduce or eliminate competition.
This prohibition is triggered only by an agreement or action among two or
more companies; unilateral action never violates the Act. To constitute an
illegal agreement, however, an understanding does not need to be formal or
written. Comments made in conversations, casual comments at meetings, or even as
little as "a knowing wink," as one case says, may be sufficient to establish an
illegal agreement under the Act.
The agreed upon action must be anticompetitive. Some actions are "per se"
anticompetitive, while others are judged according to a "rule of reason."
X Some activities have been found to be so inherently anticompetitive
that a United States court will not even permit the argument that they
have a procompetitive component. Examples of such per se illegal
activities are agreements between competitors to fix prices or divide
up markets into exclusive territories.
X Other joint agreements or activities will be examined by a court using
the rule of reason approach to see if the procompetitive results of
the arrangement outweigh the anticompetitive effects. Permissible
agreements among competitors may include a buyers' cooperative, or a
syndicate of buyers for an initial public offering. In rare
<PAGE>
instances, an association of sellers (such as ASCAP) may be
permissible.
There is also an exception for joint activity designed to influence
government action. Such activity is protected by the First Amendment to the
United States Constitution. For example, members of an industry may agree to
lobby the Congress of the United States jointly to enact legislation that may be
manifestly anticompetitive.
PENALTIES FOR VIOLATING THE SHERMAN ACT
A charge that the Act has been violated can be brought as a civil or a
criminal action. Civil damages can include treble damages, plus attorneys fees.
Criminal penalties for individuals can include fines of up to $350,000 and three
years in jail, and $100 million (U.S. dollars) or more for corporations.
SITUATIONS IN WHICH ANTITRUST ISSUES MAY ARISE
To avoid violating the Act, any agreement with other members of the
investment management industry regarding which securities to buy or sell and
under what circumstances we buy or sell them, or about the manner in which we
market our mutual funds and investment and other services, must be made with the
prohibitions of the Act in mind.
TRADE ASSOCIATION MEETINGS AND ACTIVITIES. A trade association is a group
of competitors who join together to share common interests and seek common
solutions to common problems. Such associations are at a high risk for
anticompetitive activity and are closely scrutinized by regulators.
Attorneys for trade associations, such as the Investment Company Institute,
are typically present at meetings of members to assist in avoiding
violations.
Permissible Activities:
X Discussion of how to make the industry more competitive or
efficient.
X An exchange of information or ideas that have procompetitive or
competitively neutral effects, such as: methods of protecting the
health or safety of workers; methods of educating customers and
preventing abuses; and information regarding how to design and
operate training programs.
X Collective action to petition government entities.
Activities to be Avoided:
X Any discussion or direct exchange of current information about
prices, salaries, fees, or terms and conditions of sales. Even if
such information is publicly available, problems can arise if the
information available to the public is difficult to compile or
not as current as that being exchanged.
<PAGE>
EXCEPTION: A third party consultant can, with appropriate
safeguards, collect, compile and disseminate some of this
information, such as salary information.
X Discussion of future business plans, strategies, or arrangements
that might be considered to involve competitively sensitive
information.
X Discussion of specific customers, markets, or territories.
X Negative discussions of service providers that could give rise to
an inference of a joint refusal to deal with the provider (a
"BOYCOTT").
INVESTMENT-RELATED DISCUSSIONS
PERMISSIBLE ACTIVITIES: Buyers or sellers with a common economic interest may
join together to facilitate securities transactions that might otherwise not
occur, such as the formation of a syndicate to buy in a private placement or
initial public offering of an issuer's stock, or negotiations among creditors of
an insolvent or bankrupt company.
Competing investment managers are permitted to serve on creditors committees
together and engage in other similar activities in connection with bankruptcies
and other judicial proceedings.
ACTIVITIES TO BE AVOIDED: It is important to avoid anything that suggests
involvement with any other firm in any threats to "boycott" or "blackball" new
offerings, including making any ambiguous statement that, taken out of context,
might be misunderstood to imply such joint action. Avoid careless or unguarded
comments that a hostile or suspicious listener might interpret as suggesting
prohibited coordinated behavior between RPFI and any other potential buyer.
EXAMPLE: After an Illinois municipal bond default where the state
legislature retroactively abrogated some of the bondholders'
rights, several investment management complexes organized to
protest the state's action. In doing so, there was arguably an
implied threat that members of the group would boycott future
Illinois municipal bond offerings. Such a boycott would be a
violation of the Act. The investment management firms' action led
to an 18-month United States Department of Justice investigation.
Although the investigation did not lead to any legal action, it
was extremely expensive and time consuming for the firms and
individual managers involved.
If you are present when anyone outside of RPFI suggests that two or more
investors with a grievance coordinate future purchasing decisions, you should
immediately reject any such suggestion. As soon as possible thereafter, you
should notify the Baltimore Legal Department, which will take whatever further
steps are necessary.
<PAGE>
BENCHMARKING. Benchmarking is the process of measuring and comparing an
organization's processes, products and services to those of industry leaders for
the purpose of adopting innovative practices for improvement.
X Because benchmarking usually involves the direct exchange of
information with competitors, it is particularly subject to the risk
of violating the antitrust laws.
X The list of issues that may and should not be discussed in the context
of a trade association also applies in the benchmarking process.
X All proposed benchmarking agreements must be reviewed by the Baltimore
Legal Department before RPFI agrees to participate in such a survey.
O:\WPDATA\SARAH\CODEOFET.HIC\rpfi\STPLANT2RPF.wpd
March, 1999
<PAGE>
Exhibit (p)(14)(ii)
EFFECTIVE MARCH 1, 2000
CODE OF ETHICS
T. ROWE PRICE ASSOCIATES, INC.
AND ITS AFFILIATES
<PAGE>
CODE OF ETHICS
OF
T. ROWE PRICE ASSOCIATES, INC.
AND ITS AFFILIATES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL POLICY STATEMENT.............................................................1-1
Purpose and Scope of Code of Ethics...........................................1-1
Who is Subject to the Code....................................................1-1
Price Associates' Status as a Fiduciary.......................................1-2
What the Code Does Not Cover..................................................1-2
Compliance with the Code......................................................1-2
Questions Regarding the Code..................................................1-2
STANDARDS OF CONDUCT OF PRICE ASSOCIATES AND ITS EMPLOYEES...........................2-1
Allocation of Client Brokerage................................................2-1
Antitrust .............................................................2-1; 8-1
Compliance with Copyright Laws................................................2-1
Computer Security........................................................2-1; 7-1
Conflicts of Interest.........................................................2-1
Relationships with Profitmaking Enterprises.............................2-1
Service with Nonprofitmaking Enterprises................................2-2
Relationships with Financial Service Firms..............................2-2
Investment Clubs........................................................2-2
Confidentiality...............................................................2-3
Internal Operating Procedures and Planning..............................2-3
Clients, Fund Shareholders, and TRP Brokerage Customers.................2-3
Investment Advice.......................................................2-3
Investment Research.....................................................2-4
Understanding as to Clients' Accounts and Company Records
at time of Employee Termination.......................................2-4
Corporate Responsibility.................................................2-4; 5-1
Employment of Former Government Employees.....................................2-5
Employment Practices..........................................................2-5
<PAGE>
Equal Opportunity.......................................................2-5
Harassment..............................................................2-5
Drug and Alcohol Abuse..................................................2-5
Past and Current Litigation...................................................2-6
Financial Reporting...........................................................2-6
Health and Safety in the Workplace............................................2-6
Illegal Payments..............................................................2-6
Marketing and Sales Activities................................................2-6
Policy Regarding Acceptance and Giving of Gifts and Gratuities................2-6
Receipt of Gifts........................................................2-7
Giving of Gifts.........................................................2-7
Additional Requirements for the Giving of Gifts in Connection
with the Broker/Dealer................................................2-7
Entertainment...........................................................2-8
Research Trips..........................................................2-9
Political Activities..........................................................2-9
Protection of Corporate Assets...............................................2-10
Quality of Services..........................................................2-10
Record Retention.............................................................2-10
Referral Fees................................................................2-10
Release of Information to the Press..........................................2-10
Responsibility to Report Violations..........................................2-10
Service as Trustee, Executor or Personal Representative......................2-11
Speaking Engagements and Publications........................................2-11
Trading in Securities with Inside Information...........................2-11; 3-1
STATEMENT OF POLICY ON MATERIAL, INSIDE (NON-PUBLIC) INFORMATION.....................3-1
STATEMENT OF POLICY ON SECURITIES TRANSACTIONS.......................................4-1
STATEMENT OF POLICY ON CORPORATE RESPONSIBILITY......................................5-1
STATEMENT OF POLICY WITH RESPECT TO COMPLIANCE
WITH COPYRIGHT LAWS...............................................................6-1
STATEMENT OF POLICY WITH RESPECT TO COMPUTER SECURITY
AND RELATED ISSUES................................................................7-1
STATEMENT OF POLICY ON COMPLIANCE WITH
ANTITRUST LAWS ...................................................................8-1
</TABLE>
<PAGE>
CODE OF ETHICS
OF
T. ROWE PRICE ASSOCIATES, INC.
AND ITS AFFILIATES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Access Persons...................................................................................4-3
Activities, Political............................................................................2-9
Alcohol Abuse....................................................................................2-5
Allocation of Client Brokerage...................................................................2-1
Antitrust...................................................................................2-1; 8-1
Approved Company Rating Changes.................................................................4-11
Assets, Protection of Corporate.................................................................2-10
Association of Investment Management and Research ("AIMR").......................................2-6
Brokerage Accounts........................................................................4-11; 4-12
Chinese Wall.....................................................................................3-6
Client Brokerage, Allocation of..................................................................2-1
Client Limit Orders.............................................................................4-16
Code of Ethics, Compliance with..................................................................1-2
Code of Ethics, Purpose and Scope of.............................................................1-1
Code of Ethics, Questions Regarding..............................................................1-2
Code of Ethics, Who is Subject to................................................................1-1
Co-Investment by Employees with Client Investment Partnerships..................................4-14
Computer Security...........................................................................2-1; 7-1
Conduct, Standards of, Price Associates and its Employees........................................2-1
Confidentiality..................................................................................2-3
Confidentiality of Computer Systems Activities and Information...................................7-1
Conflicts of Interest............................................................................2-1
Copyright Laws, Compliance with.............................................................2-1; 6-1
Corporate Assets, Protection of.................................................................2-10
Corporate Responsibility....................................................................2-4; 5-1
<PAGE>
Drug Abuse.......................................................................................2-5
Employee Co-Investment with Client Investment Partnerships......................................4-14
Employees, Standards of Conduct..................................................................2-1
Employment of Former Government Employees........................................................2-5
Employment Practices.............................................................................2-5
Entertainment....................................................................................2-8
Equal Opportunity................................................................................2-5
Exchange - Traded Index Options.................................................................4-16
Executor, Service as............................................................................2-11
Fees, Referral..................................................................................2-10
Fiduciary, Price Associates' Status as a ........................................................1-2
Financial Reporting..............................................................................2-6
Financial Service Firms, Relationships with......................................................2-2
Front Running....................................................................................4-1
General Policy Statement.........................................................................1-1
Gifts, Giving....................................................................................2-7
Gifts, Receipt of................................................................................2-7
Government Employees, Employment of Former.......................................................2-5
Harassment.......................................................................................2-5
Health and Safety in the Workplace...............................................................2-6
Illegal Payments.................................................................................2-6
Information, Release to the Press...............................................................2-10
Initial PubliX Offerings.........................................................................4-9
Inside Information, Trading in Securities with..................................................2-11
Interest, Conflicts of...........................................................................2-1
Internet, Access to..............................................................................7-2
Investment Clubs...........................................................................2-2; 4-14
Investment Personnel.............................................................................4-3
Large Company Exemption for Securities Transactions.............................................4-15
Margin Accounts.................................................................................4-15
Marketing and Sales Activities...................................................................2-6
Non-Access Persons...............................................................................4-4
Nonprofitmaking Enterprises, Service with........................................................2-2
Options and Futures.............................................................................4-16
Payments, Illegal................................................................................2-6
<PAGE>
Personal Securities Holdings, Disclosure of by Access Persons...................................4-18
Personal Representative, Service as.............................................................2-11
Political Activities.............................................................................2-9
Press, Release of Information to the............................................................2-10
Price Associates, Standards of Conduct...........................................................2-1
Price Associates' Stock, Transactions in.........................................................4-5
Prior Clearance of Securities Transactions (other than Price Associates' stock)..................4-8
Private Placement, Investment In................................................................4-10
Private Placement Memoranda......................................................................3-7
Profitmaking Enterprises, Relationships with.....................................................2-1
Protection of Corporate Assets..................................................................2-10
Publications....................................................................................2-11
Quality of Services.............................................................................2-10
Questions Regarding the Code.....................................................................1-2
Rating Changes, Approved Company................................................................4-11
Record Retention................................................................................2-10
Referral Fees...................................................................................2-10
Release of Information to the Press.............................................................2-10
Reporting, Financial.............................................................................2-6
Reporting, Price Associates' Stock Transactions..................................................4-6
Reporting, Securities Transactions (other than Price Associates' stock).........................4-12
Research Trips...................................................................................2-9
Responsibility, Corporate...................................................................2-4; 5-1
Restricted List..................................................................................3-7
Retention, Record...............................................................................2-10
Safety and Health in the Workplace...............................................................2-6
Securities Transactions, Reporting of (other than Price Associates' stock)......................4-12
Services, Quality of............................................................................2-10
Short Sales.....................................................................................4-17
Sixty (60) Day Rule.............................................................................4-17
Software Programs, Application of Copyright Law..................................................7-5
Speaking Engagements............................................................................2-11
Standards of Conduct of Price Associates and its Employees.......................................2-1
Statement, General Policy........................................................................1-1
Temporary Workers, Application of Code to...................................................1-1; 4-2
<PAGE>
Termination of Employment........................................................................2-4
Trading Activity................................................................................4-15
Trips, Research..................................................................................2-9
Trustee, Service as.............................................................................2-11
Violations, Responsibility to Report............................................................2-10
Watch List.......................................................................................3-6
</TABLE>
<PAGE>
CODE OF ETHICS
OF
T. ROWE PRICE ASSOCIATES, INC.
AND ITS AFFILIATES
GENERAL POLICY STATEMENT
PURPOSE AND SCOPE OF CODE OF ETHICS. In recognition of T. Rowe Price Associates,
Inc.'s ("PRICE ASSOCIATES") commitment to maintain the highest standards of
professional conduct and ethics, the firm's Board of Directors has adopted this
Code of Ethics ("CODE") composed of Standards of Conduct and the following
Statements of Policy ("STATEMENTS"):
1. Statement of Policy on Material, Inside (Non-Public) Information
2. Statement of Policy on Securities Transactions
3. Statement of Policy on Corporate Responsibility
4. Statement of Policy with Respect to Compliance with Copyright Laws
5. Statement of Policy with Respect to Computer Security and Related Issues
6. Statement of Policy on Compliance with Antitrust Laws
The purpose of this Code is to help preserve our most valuable asset - the
reputation of Price Associates and its employees.
WHO IS SUBJECT TO THE CODE. Price Associates, its subsidiaries and their
officers, directors and employees are all subject to the Code, as are all Rowe
Price-Fleming International, Inc. ("RPFI") and T. Rowe Fleming Asset Management
Limited ("TRFAM") personnel (officers, directors, and employees) who are
stationed in Baltimore. In
addition, the following persons are also subject to the Code:
1. All temporary workers hired on the Price Associates payroll ("TRPA
TEMPORARIES");
2. All agency temporaries, whose assignments at Price Associates exceed four
weeks or whose cumulative assignments exceed eight weeks over a
twelve-month period;
3. All independent or agency-provided consultants whose assignments exceed
four weeks or whose cumulative assignments exceed eight weeks over a
twelve-month period AND whose work is closely related to the ongoing work
of Price Associates' employees (versus project work that stands apart from
ongoing work); and
4. Any contingent worker whose assignment is more than casual in nature or who
will be exposed to the kinds of information and situations that would
create conflicts on matters covered in the Code.
<PAGE>
PRICE ASSOCIATES' STATUS AS A FIDUCIARY. The primary responsibility of Price
Associates as an investment adviser is to render to its clients on a
professional basis unbiased and continuous advice regarding their investments.
As an investment adviser, Price Associates has a fiduciary relationship with all
of its clients, which means that it has an absolute duty of undivided loyalty,
fairness and good faith toward its clients and mutual fund shareholders and a
corresponding obligation to refrain from taking any action or seeking any
benefit for itself which would, or which would appear to, prejudice the rights
of any client or shareholder or conflict with his or her best interests.
WHAT THE CODE DOES NOT COVER. The Code was not written for the purpose of
covering all policies, rules and regulations to which employees may be subject.
As an example, T. Rowe Price Investment Services, Inc. ("INVESTMENT SERVICES")
is a member of the National Association of Securities Dealers, Inc. ("NASD")
and, as such, is required to maintain written supervisory procedures to enable
it to supervise the activities of its registered representatives and associated
persons to ensure compliance with applicable securities laws and regulations,
and with the applicable rules of the NASD and its regulatory subsidiary, NASD
Regulation, Inc. ("NASDR").
COMPLIANCE WITH THE CODE. Strict compliance with the provisions of this Code is
considered a basic condition of employment with the firm. An employee may be
required to surrender any profit realized from a transaction which is deemed to
be in violation of the Code. In addition, any breach of the Code may constitute
grounds for disciplinary action, including dismissal from employment. Employees
may appeal to the Management Committee any ruling or decision rendered with
respect to the Code.
QUESTIONS REGARDING THE CODE. Questions regarding the Code should be referred as
follows:
1. Standards of Conduct of Price Associates and its Employees: the Chairperson
of the Ethics Committee or the Director of Human Resources.
2. Statement of Policy on Material, Inside (Non-Public) Information: Legal
Department.
3. Statement of Policy on Securities Transactions: The Chairperson of the
Ethics Committee or his or her designee.
4. Statement of Policy on Corporate Responsibility: Corporate Responsibility
Committee.
5. Statement of Policy with Respect to Compliance with Copyright Laws: Legal
Department.
6. Statement of Policy with Respect to Computer Security and Related Issues:
Legal Department.
7. Statement of Policy on Compliance with Antitrust Laws: Legal Department.
March, 2000
<PAGE>
STANDARDS OF CONDUCT OF PRICE ASSOCIATES AND ITS EMPLOYEES
ALLOCATION OF CLIENT BROKERAGE. The firm's policies with respect to the
allocation of client brokerage are set forth in Part II of Form ADV, Price
Associates' registration statement filed with the Securities and Exchange
Commission ("SEC"). It is imperative that all employees -- especially those who
are in a position to make recommendations regarding brokerage allocation, or who
are authorized to select brokers who will execute securities transactions on
behalf of our clients -- read and become fully knowledgeable concerning our
policies in this regard. Any questions regarding our firm's allocation of client
brokerage should be addressed to the Chairperson of the Brokerage Control
Committee.
ANTITRUST. The U.S. antitrust laws are designed to ensure fair competition and
preserve the free enterprise system. Some of the most common antitrust issues
with which an employee may be confronted are in the areas of pricing (adviser
fees) and trade association activity. To ensure its employees' understanding of
these laws, Price Associates has adopted a Statement of Policy on Compliance
with Antitrust Laws. All employees should read and understand this Statement.
(See page 8-1).
COMPLIANCE WITH COPYRIGHT LAWS. To protect Price Associates and its employees,
Price Associates has adopted a Statement of Policy with Respect to Compliance
with Copyright Laws. All employees should read and understand this Statement
(see page 6-1).
COMPUTER SECURITY. Computer systems and programs play a central role in Price
Associates' operations. To establish appropriate computer security to minimize
potential for loss or disruptions to our computer operations, Price Associates
has adopted a Statement of Policy with Respect to Computer Security and Related
Issues. All employees should read and understand this Statement (see page 7-1).
CONFLICTS OF INTEREST. A direct or indirect interest in a supplier, creditor,
debtor or competitor may conflict with the interests of Price Associates. All
employees must avoid placing themselves in a "compromising position" where their
interests may be in conflict with those of Price Associates or its clients.
RELATIONSHIPS WITH PROFITMAKING ENTERPRISES. A conflict may occur when
an employee of Price Associates is also employed by another firm,
directly or as a consultant or independent contractor; has a direct
financial interest in another firm; has an immediate family financial
interest in another firm; or is a director, officer or partner of
another firm.
Employees of our firm sometimes serve as directors, officers, partners,
or in other capacities with profitmaking enterprises not related to
Price Associates or its mutual funds. Employees are generally
prohibited from serving as officers or directors of corporations which
are approved or are likely to be approved for purchase in our firm's
client accounts.
An employee may not accept outside employment that would require him or
her to become registered (or dually registered) as a representative of
an unaffiliated broker/dealer, investment adviser, or an insurance
broker or company. An employee may also not become independently
registered as an investment adviser.
<PAGE>
An employee who is contemplating obtaining another interest or
relationship that might conflict or appear to conflict with the
interests of Price Associates, such as accepting employment with or an
appointment as a director, officer or partner of an outside
profitmaking enterprise must receive the prior approval of the Ethics
Committee. Upon review by the Ethics Committee, the employee will be
advised in writing of the Committee's decision. Decisions by the Ethics
Committee regarding outside directorships in profitmaking enterprises
will be reviewed by the Management Committee before becoming final.
Outside business interests that will not conflict or appear to conflict
with the interests of the firm need not be reviewed by the Ethics
Committee, but must be approved by the Employee's supervisor.
Certain employees may serve as directors or as members of Creditors
Committees or in similar positions for non-public, for-profit entities
in connection with their professional activities at Price Associates.
An employee must obtain the permission of the Management Committee
before accepting such a position and must relinquish the position if
the entity becomes publicly held, unless otherwise determined by the
Management Committee.
SERVICE WITH NONPROFITMAKING ENTERPRISES. Price Associates encourages
its employees to become involved in community programs and civic
affairs. However, employees should not permit such activities to affect
the performance of their job responsibilities. Approval by the
Chairperson of the Ethics Committee must be obtained before an employee
accepts a position as a trustee or member of the Board of Directors of
any non-profit organization.
RELATIONSHIPS WITH FINANCIAL SERVICE FIRMS. In order to avoid any
actual or apparent conflicts of interest, employees are prohibited from
investing in or entering into any relationship, either directly or
indirectly, with corporations, partnerships, or other entities which
are engaged in business as a broker, a dealer, an underwriter, and/or
an investment adviser. As described above, this prohibition extends to
registration and/or licensure with an unaffiliated firm. This
prohibition, however, is not meant to prevent employees from purchasing
publicly traded securities of broker/dealers, investment advisers or
other companies engaged in the mutual fund industry. Of course, all
such purchases are subject to prior clearance and reporting procedures,
as applicable. This policy does not preclude an employee from engaging
an outside investment adviser to manage his or her assets.
If any member of an employee's immediate family is employed by, has a
partnership interest in, or has an equity interest of .5% or more in a
broker/dealer, investment adviser or other company engaged in the
mutual fund industry, the relationship must be reported to the Ethics
Committee.
INVESTMENT CLUBS. Access Persons (defined on p. 4-3 of the Code) must
receive the prior approval of the Chairperson of the Ethics Committee
before forming or participating in a stock or investment club.
Transactions in which Access Persons have beneficial ownership or
control (see p. 4-4) through investment clubs are subject to the firm's
Statement of Policy on Securities Transactions. Non-Access Persons
(defined on p. 4-4) do not have to receive prior approval to form or
participate in a stock or investment club and need only obtain prior
clearance of transactions in Price Associates' stock. As described on
p. 4-16, an exemption from prior clearance for an Access Person (except
for transactions in Price Associates' stock) is generally available if
the Access Person has beneficial ownership solely by virtue of his or
her spouse's participation in the club and has no investment control or
input into decisions regarding the club's securities transactions.
<PAGE>
CONFIDENTIALITY. The exercise of confidentiality extends to four major areas of
our operations: internal operating procedures and planning; clients, fund
shareholders and TRP Brokerage customers; investment advice; and investment
research. The duty to exercise confidentiality applies not only when an employee
is with the firm, but also after he or she terminates employment with the firm.
INTERNAL OPERATING PROCEDURES AND PLANNING. During the years we have
been in business, a great deal of creative talent has been used to
develop specialized and unique methods of operations and portfolio
management. In many cases, we feel these methods give us an advantage
over our competitors, and we do not want these ideas disseminated
outside our firm. Accordingly, employees should be guarded in
discussing our business practices with outsiders. Any requests from
outsiders for specific information of this type should be cleared with
your supervisor before it is released.
Also, from time to time management holds meetings with employees in
which material, non-public information concerning the firm's future
plans is disclosed. Employees should never discuss confidential
information with, or provide copies of written material concerning the
firm's internal operating procedures or projections for the future to,
unauthorized persons outside the firm.
CLIENTS, FUND SHAREHOLDERS, AND TRP BROKERAGE CUSTOMERS. In many
instances, when clients subscribe to our services, we ask them to
disclose fully their financial status and needs. This is done only
after we have assured them that every member of our organization will
hold this information in strict confidence. It is essential that we
respect their trust. A simple rule for employees to follow is that the
names of our clients, fund shareholders, or TRP Brokerage customers or
any information pertaining to their investments must never be divulged
to anyone outside the firm, not even to members of their immediate
families, and must never be used as a basis for personal trades over
which the employee has beneficial interest or control.
INVESTMENT ADVICE. Because of the fine reputation our firm enjoys,
there is a great deal of public interest in what we are doing in the
market. There are two major considerations that dictate why we must not
provide investment "tips":
o From the point of view of our clients, it is not fair to give
other people information which clients must purchase.
o From the point of view of the firm, it is not desirable to
create an outside demand for a stock when we are trying to buy
it for our clients, as this will only serve to push the price
up. The reverse is true if we are selling.
In light of these considerations, employees must never disclose to
outsiders our buy and sell recommendations, securities we are
considering for future investment, or the portfolio holdings of our
clients or mutual funds.
The practice of giving investment advice informally to members of your
immediate family should be restricted to very close relatives. Any
transactions resulting from such advice are subject to the prior
approval (Access Persons only) and reporting requirements (Access
Persons AND Non-Access Persons) of the Statement of Policy on
Securities Transactions.
<PAGE>
Under no circumstances should an employee receive compensation directly
or indirectly (other than from Price Associates or an affiliate) for
rendering advice to either clients or non-clients.
INVESTMENT RESEARCH. Any report circulated by a research analyst is
confidential in its entirety and should not be reproduced or shown to
anyone outside of our organization, except our clients where
appropriate.
UNDERSTANDING AS TO CLIENTS' ACCOUNTS AND COMPANY RECORDS AT TIME OF
EMPLOYEE TERMINATION. The accounts of clients, mutual fund
shareholders, and TRP Brokerage customers are the sole property of
Price Associates. This applies to all clients for whom Price Associates
acts as investment adviser, regardless of how or through whom the
client relationship originated and regardless of who may be the
counselor for a particular client. At the time of termination of
employment with Price Associates, an employee must: (1) surrender to
Price Associates in good condition any and all materials, reports or
records (including all copies in his or her possession or subject to
his or her control) developed by him or her or any other person which
are considered confidential information of Price Associates (except
copies of any research material in the production of which the employee
participated to a material extent); and (2) refrain from communicating,
transmitting or making known to any person or firm any information
relating to any materials or matters whatsoever which are considered by
Price Associates to be confidential.
Employees must use care in disposing of any confidential records or
correspondence. Confidential material that is to be discarded should be torn up
or, if a quantity of material is involved, you should contact Document
Management for instructions regarding proper disposal.
CORPORATE RESPONSIBILITY. As a major institutional investor with a fiduciary
duty to its clients, including its mutual fund shareholders, Price Associates
has adopted a Statement of Policy on Corporate Responsibility (see page 5-1).
The purpose of this Statement is to establish formal standards and procedures to
guide Price Associates with respect to its responsibilities to deal with matters
of corporate and social responsibilities which may affect the companies in which
client assets are invested.
EMPLOYMENT OF FORMER GOVERNMENT EMPLOYEES. Federal laws and regulations govern
the employment of former employees of the U.S. Government and its agencies,
including the SEC. In addition, certain states have adopted similar statutory
restrictions. Finally, certain states and municipalities which are clients of
Price Associates have imposed contractual restrictions in this regard. Before
any action is taken to discuss employment by Price Associates of a former
government employee, guidance must be obtained from the Legal Department.
EMPLOYMENT PRACTICES
EQUAL OPPORTUNITY. Price Associates is committed to the principles of
Equal Employment. We believe our continued success depends on talented
people, without regard to race, color, religion, national origin,
gender, age, disability, sexual orientation, Vietnam era military
service or any other classification protected by federal, state or
local laws.
This commitment to Equal Opportunity covers all aspects of the
employment relationship including recruitment, application and initial
employment, promotion and transfer, selection
<PAGE>
for training opportunities, wage and salary administration, and the
application of service, retirement, and employee benefit plan policies.
All members of T. Rowe Price staff are expected to comply with the
spirit and intent of our Equal Employment Opportunity Policy.
If you feel you have not been treated in accordance with this policy,
contact your immediate supervisor, your manager or a Human Resources
Representative. No retaliation will be taken against any employee who
reports an incident of alleged discrimination.
HARASSMENT. Price Associates intends to provide employees a workplace
free from any form of harassment. This includes sexual harassment
which, banned by and punishable under the Civil Rights Act of 1964, may
result from unwelcome advances, requests for favors or any verbal or
physical conduct of a sexual nature. Such actions or statements may or
may not be accompanied by explicit or implied promises of preferential
treatment or negative consequences in connection with one's employment.
Harassment might include uninvited sex-oriented conversations,
touching, comments, jokes, suggestions or innuendos. This type of
behavior can create a stressful, intimidating and offensive atmosphere;
it may adversely affect morale and work performance.
Any employee who feels offended by the action or comments of another,
or any employee who has observed such behavior, should report the
matter, in confidence, to his or her immediate supervisor. If that
presents a problem, report the matter to the Director of Human
Resources or another person in the Human Resources Department. All
complaints will be investigated immediately and confidentially. Any
employee who has behaved in a reprehensible manner will be subject to
disciplinary action in keeping with the gravity of the offense.
DRUG AND ALCOHOL ABUSE. Price Associates has adopted a Statement of
Policy, available from Human Resources, to maintain a drug-free
workplace and prevent alcohol abuse. This policy fosters a safe,
healthful and productive environment for its employees and customers
and protects Price Associates' property, equipment, operations and
reputation in the community and the industry.
PAST AND CURRENT LITIGATION. As a condition of employment, each new employee is
required to answer a questionnaire regarding past and current civil and criminal
actions and certain regulatory matters. Price Associates uses the information
obtained through these questionnaires to answer questions asked on federal and
state registration forms and for insurance and bonding purposes. Each employee
is responsible for keeping answers on the questionnaire current. If an employee
becomes party to any proceeding that could lead to his or her conviction for any
felony or misdemeanor (other than traffic or other minor offenses) or becomes
the subject of a regulatory action by the SEC, a state, a foreign government or
any domestic or foreign self-regulatory organization relating to securities or
investment activities, he or she should notify the Legal Department promptly.
FINANCIAL REPORTING. Price Associates' records are maintained in a manner that
provides for an accurate record of all financial transactions in conformity with
generally accepted accounting principles. No false or deceptive entries may be
made and all entries must contain an appropriate description of the underlying
transaction. All reports, vouchers, bills, invoice, payroll and service
<PAGE>
records and other essential data must be accurate, honest and timely and should
provide an accurate and complete representation of the facts.
HEALTH AND SAFETY IN THE WORKPLACE. Price Associates recognizes its
responsibility to provide employees a safe and healthful workplace and proper
facilities to help them do their jobs effectively.
ILLEGAL PAYMENTS. State, federal and foreign laws prohibit the payment of
bribes, kickbacks, inducements or other illegal gratuities or payments by or on
behalf of Price Associates. Price Associates, through its policies and
practices, is committed to comply fully with these laws. The Foreign Corrupt
Practices Act makes it a crime to corruptly give, promise or authorize payment,
in cash or in kind, for any service to a foreign official or political party in
connection with obtaining or retaining business. If an employee is solicited to
make or receive an illegal payment, he or she should contact the Legal
Department.
MARKETING AND SALES ACTIVITIES. All written and oral marketing materials and
presentations (including performance data) must be in compliance with applicable
SEC, NASD, and Association of Investment Management and Research ("AIMR")
requirements. All advertisements, sales literature and other written marketing
materials (whether they be for the Price Funds, non-Price funds, or various
advisory or brokerage services) must be reviewed and approved by the advertising
section of the Legal Department prior to use. All performance data distributed
outside the firm, including total return and yield information, must be obtained
from the Performance Group before distribution.
POLICY REGARDING ACCEPTANCE AND GIVING OF GIFTS AND GRATUITIES. The firm, as
well as its employees and members of their families, should not accept or give
gifts that might in any way create or appear to create a conflict of interest or
interfere with the impartial discharge of our responsibilities to clients or
place our firm in a difficult or embarrassing position. Such gifts would include
gratuities or other accommodations from or to business contacts, brokers,
securities salespersons, approved companies, suppliers, clients, or any other
individual or organization with whom our firm has a business relationship, but
would not include certain types of business entertainment as described later in
this section.
RECEIPT OF GIFTS. Personal contacts may lead to gifts which are offered
on a friendship basis and may be perfectly proper. It must be
remembered, however, that business relationships cannot always be
separated from personal relationships and that the integrity of a
business relationship is always susceptible to criticism in hindsight
where gifts are received.
Under no circumstances may employees accept gifts from any business or
business contact in the form of cash or cash equivalents. Gift
certificates may only be accepted if used; they may not be converted to
cash except for nominal amounts not consumed when the gift certificate
is used.
There may be an occasion where it might be awkward to refuse a token
non-cash expression of appreciation given in the spirit of friendship.
In such cases, the value of all gifts received from a business contact
should not exceed $100 in any twelve-month period. The value of a gift
directed to the members of a department as a group may be divided by
the number of the employees in that Department. Gifts received which
are unacceptable according to this policy must be returned to the
givers.
<PAGE>
GIVING OF GIFTS. An employee may never give a gift to a business
contact in the form of cash or cash equivalents, including gift
certificates. Token gifts may be given to business contacts, but the
aggregate value of all such gifts given to the business contact may not
exceed $100 in any twelve-month period without the permission of the
Chairperson of the Ethics Committee. If an employee believes that it
would be appropriate to give a gift with a value exceeding $100 to a
business contact in a specific situation, he or she must submit a
written request to the Chairperson of the Ethics Committee. The request
should specify:
X the name of the giver;
X the name of the intended recipient and his or her employer;
X the nature of the gift and its monetary value;
X the nature of the business relationship; and
X the reason the gift is being given.
NASD regulations prohibit exceptions to the $100 limit for gifts given
in connection with Investment Services' business. Baltimore/Legal
Compliance will retain a record of all such gifts.
ADDITIONAL REQUIREMENTS FOR THE GIVING OF GIFTS IN CONNECTION WITH THE
BROKER/DEALER. NASD Conduct Rule 3060 imposes stringent reporting
requirements for gifts given to any principal, employee, agent or
similarly situated person where the gift is in connection with
Investment Services' business with the person's employer. Examples of
gifts that fall under this rule would include any gift given to an
employee of a company to which our firm provides investment products
such as mutual funds (e.g., many 401(k) plans) or to which we are
marketing investment products. Under this NASD rule, gifts may not
exceed $100 (without exception) and persons associated with Investment
Services, including its registered representatives, must report EACH
such gift.
The NASD reporting requirement is normally met when an item is ordered
electronically from the Corporate Gift website. If a gift is obtained
from another source, it must be reported to Baltimore/Legal Compliance.
The report to Baltimore Legal/Compliance must include:
X the name of the giver;
X the name of the recipient and his or her employer;
X the nature of the gift and its monetary value;
X the nature of the business relationship; and
X the date the gift was given.
ENTERTAINMENT. Our firm's $100 limit on the acceptance and giving of
gifts not only applies to gifts of merchandise, but also covers the
enjoyment or use of property or facilities for weekends, vacations,
trips, dinners, and the like. However, this limitation does not apply
to
<PAGE>
dinners, sporting events and other activities which are a normal part
of a business relationship. To illustrate this principle, the following
examples are provided:
First Example: The head of institutional research at brokerage
firm "X" (whom you have known and done business with for a
number of years) invites you and your wife to join her and her
husband for dinner and afterwards a theatrical production.
Second Example: You are going to New York for a weekend with
your wife. You wish to see a recent Broadway hit, but are told
it is sold out. You call a broker friend who works at company
"X" to see if he can get tickets for you. The broker says yes
and offers you two tickets free of charge.
Third Example: You have been invited by a vendor to a
multi-day excursion to a resort where the primary focus is
entertainment as opposed to business. The vendor has offered
to pay your travel and lodging for this trip.
In the first example, it would be proper for you to accept the
invitation.
With respect to the second example, it would not be proper to solicit a
person doing business with the firm for free tickets to any event. You
could, however, accept the tickets if you pay for them at their fair
value or, if greater, at the cost to the broker.
With respect to the third example, trips of substantial value, such as
multi-day excursions to resorts, hunting locations or sports events,
where the primary focus is entertainment as opposed to business
activities, would not be considered a normal part of a business
relationship. Generally, such invitations may not be accepted unless
our firm or the employee pays for the cost of the excursion and the
employee has obtained approval from his or her Division Head.
The same principles apply if an employee wishes to entertain a business contact.
Inviting business contacts and, if appropriate, their guests, to an occasional
meal, sporting event, the theater, or comparable entertainment is acceptable as
long as it is neither so frequent nor so extensive as to raise any question of
propriety. If an employee wishes to pay for a business guest's transportation
(e.g., airfare) and/or accommodations as part of business entertainment, he or
she must first receive the permission of the Chairperson of the Ethics
Committee.
RESEARCH TRIPS. Occasionally, brokers or portfolio companies invite employees of
our firm to attend or participate in research conferences, tours of portfolio
companies' facilities, or meetings with the management of such companies. These
invitations may involve traveling extensive distances to and from the sites of
the specified activities and may require overnight lodging. Employees may not
accept any such invitations until approval has been secured from their Division
heads. As a general rule, such invitations should only be accepted after a
determination has been made that the proposed activity constitutes a valuable
research opportunity which will be of primary benefit to our clients. All travel
expenses to and from the sites of the activities, and the expenses of any
overnight lodging, meals or other accommodations provided in connection with
such activities, should be paid for by our firm except in situations where the
costs are considered to be insubstantial and are not readily ascertainable.
Employees may not accept reimbursement from brokers or portfolio companies for:
travel and hotel expenses; speaker fees or honoraria for addresses or papers
given before audiences; or consulting services or advice they may render.
Likewise, employees may neither request nor accept loans or personal services
from brokers or portfolio companies.
<PAGE>
POLITICAL ACTIVITIES. Employees are encouraged to participate and vote in all
federal, state and local elections. All officers and directors of Price
Associates are required to disclose certain Maryland local and state political
contributions on a semi-annual basis (a Political Contribution Questionnaire is
sent to officers and directors each January and July).
No political contribution of corporate funds, direct or indirect, to any
political candidate or party, or to any other organization that might use the
contribution for a political candidate or party, or use of corporate property,
services or other assets may be made without the written approval of the Legal
Department. These prohibitions cover not only direct contributions but also
indirect assistance or support of candidates or political parties through
purchase of tickets to special dinners or other fund raising events, or the
furnishing of any other goods, services or equipment to political parties or
committees.
PROTECTION OF CORPORATE ASSETS. All employees are responsible for taking
measures to ensure that Price Associates' assets are properly protected. This
responsibility not only applies to our business facilities, equipment and
supplies, but also to intangible assets such as proprietary, research or
marketing information, corporate trademarks and servicemarks, and copyrights.
QUALITY OF SERVICES. It is a continuing policy of Price Associates to provide
investment products and services which: (1) meet applicable laws, regulations
and industry standards; (2) are offered to the public in a manner which ensures
that each client/shareholder understands the objectives of each investment
product selected; and (3) are properly advertised and sold in accordance with
all applicable SEC, state and NASD rules and regulations.
The quality of Price Associates' investment products and services and operations
affects our reputation, productivity, profitability and market position. Price
Associates' goal is to be a quality leader and to create conditions that allow
and encourage all employees to perform their duties in an efficient, effective
manner.
RECORD RETENTION. Under various federal and state laws and regulations, Price
Associates is required to produce, maintain and retain various records,
documents and other written (including electronic) communications. Each employee
is responsible for adhering to Price Associates' record maintenance and
retention policies.
REFERRAL FEES. Federal securities laws strictly prohibit the payment of any type
of referral fee unless certain conditions are met. This would include any
compensation to persons who refer clients or shareholders to us (e.g., brokers,
registered representatives or any other persons) either directly in cash, by fee
splitting, or indirectly by the providing of gifts or services (including the
allocation of brokerage). No arrangements should be entered into obligating
Price Associates or any employee to pay a referral fee unless approved by the
Legal Department.
RELEASE OF INFORMATION TO THE PRESS. All requests for information from the media
concerning T. Rowe Price Associates' corporate affairs, mutual funds, investment
services, investment philosophy and policies, and related subjects should be
referred to the Public Relations Department for reply. Investment professionals
who are contacted directly by the press concerning a particular fund's
investment strategy or market outlook may use their own discretion, but are
advised to check with the Public Relations Department if they do not know the
reporter or feel it may be inappropriate to comment on a particular matter.
<PAGE>
RESPONSIBILITY TO REPORT VIOLATIONS. Every employee who becomes aware of a
violation of this Code is encouraged to report, on a confidential basis, the
violation to his or her supervisor. If the supervisor appears to be involved in
the wrongdoing, the report should be made to the next level of supervisory
authority or to the Director of the Human Resources Department. Upon
notification of the alleged violation, the supervisor is obligated to advise the
Legal Department.
It is Price Associates' policy that no adverse action will be taken against any
employee who reports a violation in good faith.
SERVICE AS TRUSTEE, EXECUTOR OR PERSONAL REPRESENTATIVE. Employees may serve as
trustees, co-trustees, executors or personal representatives for the estates of
or trusts created by close family members. Employees may also serve in such
capacities for estates or trusts created by nonfamily members. However, if an
Access Person expects to be actively involved in an investment capacity in
connection with an estate or trust created by a nonfamily member, he or she must
first be granted permission by the Ethics Committee. If an employee serves in
any of these capacities, securities transactions effected in such accounts will
be subject to the prior approval (Access Persons only) and reporting
requirements (Access Persons AND Non-Access Persons) of our Statement of Policy
on Securities Transactions.
If any employees presently serve in any of these capacities for nonfamily
members, they should report these relationships in writing to the Ethics
Committee.
SPEAKING ENGAGEMENTS AND PUBLICATIONS. Employees are often asked to accept
speaking engagements on the subject of investments, finance, or their own
particular specialty with our organization. This is encouraged by the firm, as
it enhances our public relations, but you should obtain approval from the head
of your Division before you accept such requests. You may also accept an offer
to teach a course or seminar on investments or related topics (for example, at a
local college) in your individual capacity with the approval of the head of your
Division and provided the course is in compliance with the Guidelines found in
Investment Services' Compliance Manual.
Before making any commitment to write or publish any article or book on a
subject related to investments or your work at Price Associates, approval should
be obtained from your Division head.
TRADING IN SECURITIES WITH INSIDE INFORMATION. The purchase or sale of
securities while in possession of material, inside information is prohibited by
state and federal laws. Information is considered inside and material if it has
not been publicly disclosed and is sufficiently important that it would affect
the decision of a reasonable person to buy, sell or hold stock in a company,
including Price Associates' stock. Under no circumstances may an employee
transmit such information to any other person, except to other employees who are
required to be kept informed on the subject. All employees should read and
understand the Statement of Policy on Material, Inside (Non-Public) Information
(see page 3-1).
March, 2000
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
ON
MATERIAL, INSIDE (NON-PUBLIC) INFORMATION
INTRODUCTION. "Insider trading" is a top enforcement priority of the Securities
and Exchange Commission. In 1988, the Insider Trading and Securities Fraud
Enforcement Act (the "ACT") was signed into law. This Act has had a far reaching
impact on all public companies and especially those engaged in the securities
brokerage or investment advisory industries, including directors, executive
officers and other controlling persons of such companies. While the Act does not
provide a statutory definition of "insider trading," it contained major changes
to the previous law. Specifically, the Act:
WRITTEN PROCEDURES. Requires SEC-registered brokers, dealers and
investment advisers to establish, maintain and enforce written policies
and procedures reasonably designed to prevent the misuse of material,
non-public information by such persons.
CIVIL PENALTIES. Imposes severe civil penalties on brokerage firms,
investment advisers, their management and advisory personnel and other
"controlling persons" who fail to take adequate steps to prevent insider
trading and illegal tipping by employees and other "controlled persons."
Persons who directly or indirectly control violators, including entities
such as Price Associates and their officers and directors, face penalties
to be determined by the court in light of the facts and circumstances, but
not to exceed the greater of $1,000,000 or three times the amount of
profit gained or loss avoided as a result of the violation.
CRIMINAL PENALTIES. Provides as penalties for criminal securities law
violations:
o Maximum jail term -- from five to ten years;
o Maximum criminal fine for individuals -- from $100,000 to
$1,000,000;
o Maximum criminal fine for entities -- from $500,000 to $2,500,000.
PRIVATE RIGHT OF ACTION. Establishes a statutory private right of action
on behalf of contemporaneous traders against insider traders and their
controlling persons.
BOUNTY PAYMENTS. Authorizes the SEC to award bounty payments to persons
who provide information leading to the successful prosecution of insider
trading violations. Bounty payments are at the discretion of the SEC, but
may not exceed 10% of the penalty imposed.
PURPOSE OF STATEMENT OF POLICY. The purpose of this Statement of Policy
("STATEMENT") is to comply with the Act's requirement to establish, maintain,
and enforce written procedures designed to prevent insider trading. This
Statement explains: (i) the general legal prohibitions and sanctions regarding
insider trading; (ii) the meaning of the key concepts underlying the
prohibitions; (iii) the obligations of each employee of Price Associates in the
event he or she comes into possession of material, non-public information; and
(iv) the firm's educational program regarding insider trading. Price Associates
has also adopted a Statement of Policy on Securities Transactions (see page
4-1), which requires both Access Persons (see p. 4-3) and Non-Access Persons
(see p. 4-4) to obtain prior clearance with respect to their transactions in
Price Associates' stock and requires Access Persons
<PAGE>
to obtain prior clearance with respect to all pertinent securities
transactions. In addition, both Access Persons and Non-Access Persons are
required to report such transactions on a timely basis to the firm.
THE BASIC INSIDER TRADING PROHIBITION. The "insider trading" doctrine under
federal securities laws generally prohibits any person (including investment
advisers) from:
o trading in a security while in possession of material, non-public
information regarding the issuer of the security;
o tipping such information to others;
o recommending the purchase or sale of securities while in possession
of such information;
o assisting someone who is engaged in any of the above activities.
Thus, "insider trading" is not limited to insiders of the company whose
securities are being traded. It can also apply to non-insiders, such as
investment analysts, portfolio managers and stockbrokers. In addition, it is not
limited to persons who trade. It also covers persons who tip material,
non-public information or recommend transactions in securities while in
possession of such information.
POLICY OF PRICE ASSOCIATES ON INSIDER TRADING. It is the policy of Price
Associates and its affiliates to forbid any of their officers, directors, or
employees, while in possession of material, non-public information, from trading
securities or recommending transactions, either personally or in its proprietary
accounts or on behalf of others (including mutual funds and private accounts),
or communicating material, non-public information to others in violation of
federal securities laws.
"NEED TO KNOW" POLICY. All information regarding planned, prospective or ongoing
securities transactions must be treated as confidential. Such information must
be confined, even within the firm, to only those individuals and departments who
must have such information in order for Price Associates to carry out its
engagement properly and effectively. Ordinarily, these prohibitions will
restrict information to only those persons who are involved in the matter.
TRANSACTIONS INVOLVING PRICE ASSOCIATES' STOCK. Officers, directors and
employees are reminded that they are "insiders" with respect to Price Associates
since Price Associates is a public company and its stock is traded in the
over-the-counter market. It is therefore important that employees not discuss
with family, friends or other persons any matter concerning Price Associates
which might involve material, non-public information, whether favorable or
unfavorable.
SANCTIONS. Penalties for trading on material, non-public information are severe,
both for the individuals involved in such unlawful conduct and their employers.
An employee of Price Associates who violates the insider trading laws can be
subject to some or all of the penalties described below, even if he or she does
not personally benefit from the violation:
o Injunctions;
o Treble damages;
o Disgorgement of profits;
o Criminal fines;
o Jail sentences;
<PAGE>
o Civil penalties for the person who committed the violation (which
would, under normal circumstances, be the employee and not the firm)
of up to three times the profit gained or loss avoided, whether or
not the individual actually benefitted; and
o Civil penalties for Price Associates (and other persons, such as
managers and supervisors, who are deemed to be controlling persons)
of up to the greater of $1,000,000 or three times the amount of the
profit gained or loss avoided.
In addition, any violation of this Statement can be expected to result in
serious sanctions being imposed by Price Associates, including dismissal of the
person(s) involved.
BASIC CONCEPTS OF INSIDER TRADING. The four critical concepts in insider trading
cases are: (1) fiduciary duty/misappropriation, (2) materiality, (3) non-public,
and (4) possession. Each concept is discussed below.
FIDUCIARY DUTY/MISAPPROPRIATION. In two decisions, Dirks v. SEC and Chiarella v.
United States, the United States Supreme Court held that insider trading and
tipping violate the federal securities law if the trading or tipping of the
information results in a breach of duty of trust or confidence.
A typical breach of duty arises when an insider, such as a corporate officer,
purchases securities of his or her corporation on the basis of material,
non-public information. Such conduct breaches a duty owed to the corporation's
shareholders. The duty breached, however, need not be to shareholders to support
liability for insider trading; it could also involve a breach of duty to a
client, an employer, employees, or even a personal acquaintance. For example,
courts have held that if the insider receives a personal benefit (either direct
or indirect) from the disclosure, such as a pecuniary gain or reputational
benefit, that would be enough to find a fiduciary breach.
The concept of who constitutes an "insider" is broad. It includes officers,
directors and employees of a company. In addition, a person can be a "temporary
insider" if he or she enters into a confidential relationship in the conduct of
a company's affairs and, as a result, is given access to information solely for
the company's purpose. A temporary insider can include, among others, a
company's attorneys, accountants, consultants, and bank lending officers, as
well as the employees of such organizations. In addition, any person may become
a temporary insider of a company if he or she advises the company or provides
other services, provided the company expects such person to keep any material,
non-public information disclosed confidential.
Court decisions have held that under a "misappropriation" theory, an outsider
(such as an investment analyst) may be liable if he or she breaches a duty to
anyone by: (1) obtaining information improperly, or (2) using information that
was obtained properly for an improper purpose. For example, if information is
given to an analyst on a confidential basis and the analyst uses that
information for trading purposes, liability could arise under the
misappropriation theory. Similarly, an analyst who trades in breach of a duty
owed either to his or her employer or client may be liable under the
misappropriation theory. For example, the Supreme Court upheld the
misappropriation theory when a lawyer received material, non-public information
from a law partner who represented a client contemplating a tender offer, where
that lawyer used the information to trade in the securities of the target
company.
The situations in which a person can trade while in possession of material,
non-public information without breaching a duty are so complex and uncertain
that the only safe course is not to trade, tip or recommend securities while in
possession of material, non-public information.
<PAGE>
MATERIALITY. Insider trading restrictions arise only when the information that
is used for trading, tipping or recommendations is "material." The information
need not be so important that it would have changed an investor's decision to
buy or sell; rather, it is enough that it is the type of information on which
reasonable investors rely in making purchase, sale, or hold decisions.
RESOLVING CLOSE CASES. The Supreme Court has held that, in close cases,
doubts about whether or not information is material should be resolved in
favor of a finding of materiality. You should also be aware that your
judgment regarding materiality may be reviewed by a court or the SEC with
the 20-20 vision of hindsight.
EFFECT ON MARKET PRICE. Any information that, upon disclosure, is likely
to have a significant impact on the market price of a security should be
considered material.
FUTURE EVENTS. The materiality of facts relating to the possible
occurrence of future events depends on the likelihood that the event will
occur and the significance of the event if it does occur.
ILLUSTRATIONS. The following list, though not exhaustive, illustrates the
types of matters that might be considered material: a joint venture,
merger or acquisition; the declaration or omission of dividends; the
acquisition or loss of a significant contract; a change in control or a
significant change in management; a call of securities for redemption; the
borrowing of a significant amount of funds; the purchase or sale of a
significant asset; a significant change in capital investment plans; a
significant labor dispute or disputes with subcontractors or suppliers; an
event requiring a company to file a current report on Form 8-K with the
SEC; establishment of a program to make purchases of the company's own
shares; a tender offer for another company's securities; an event of
technical default or default on interest and/or principal payments;
advance knowledge of an upcoming publication that is expected to affect
the market price of the stock.
These illustrations are equally applicable to Price Associates as a public
company and should serve as examples of the types of matters that
employees should not discuss with persons outside the firm. Remember, even
though you may have no intent to violate any federal securities law, an
offhand comment to a friend might be used unbeknownst to you by such
friend to effect purchases or sales of Price Associates' stock. If such
transactions were discovered and your friend were prosecuted, your status
as an informant or "tipper" would directly involve you in the case.
NON-PUBLIC VS. PUBLIC INFORMATION. Any information which is not "public" is
deemed to be "non-public." Just as an investor is permitted to trade on the
basis of information that is not material, he or she may also trade on the basis
of information that is public. Information is considered public if it has been
disseminated in a manner making it available to investors generally. An example
of non-public information would include material information provided to a
select group of analysts but not made available to the investment community at
large. Set forth below are a number of ways in which non-public information may
be made public.
DISCLOSURE TO NEWS SERVICES AND NATIONAL PAPERS. The U.S. stock exchanges
require exchange-traded issuers to disseminate material, non-public
information about their companies to: (1) the national business and
financial newswire services (Dow Jones and Reuters); (2) the national
service (Associated Press); and (3) The New York Times and The Wall Street
Journal.
<PAGE>
LOCAL DISCLOSURE. An announcement by an issuer in a local newspaper might
be sufficient for a company that is only locally traded, but might not be
sufficient for a company that has a national market.
INFORMATION IN SEC REPORTS. Information contained in reports filed with
the SEC will be deemed to be public.
INFORMATION IN BROKERAGE REPORTS. Information published in bulletins and
research reports disseminated by brokerage firms will, as a general
matter, be deemed to be public.
If Price Associates is in possession of material, non-public information with
respect to a security before such information is disseminated to the public
(i.e., such as being disclosed in one of the public media described above),
Price Associates and its employees must wait a sufficient period of time after
the information is first publicly released before trading or initiating
transactions to allow the information to be fully disseminated.
CONCEPT OF POSSESSION. It is important to note that the SEC takes the position
that the law regarding insider trading prohibits any person from trading in a
security in violation of a duty of trust and confidence WHILE in possession of
material, non-public information regarding the security. This is in contrast to
trading ON THE BASIS of the material, non-public information. To illustrate the
problems created by the use of the "possession" standard, as opposed to the
"caused" standard, the following three examples are provided:
FIRST, if the investment committee to a Price mutual fund were to obtain
material, non-public information about one of its portfolio companies from
a Price equity research analyst, that fund would be prohibited from
trading in the securities to which that information relates. The
prohibition would last until the information is no longer material or
non-public.
SECOND, if the investment committee to a Price mutual fund obtained
material, non-public information about a particular portfolio security but
continued to trade in that security, then the committee members, Price
Associates, and possibly management personnel might be liable for insider
trading violations.
THIRD, even if the investment committee to the Fund does not come into
possession of the material, non-public information known to the equity
research analyst, if it trades in the security, it may have a difficult
burden of proving to the SEC or to a court that it was not in possession
of such information.
TENDER OFFERS. Tender offers are subject to particularly strict regulation under
the securities laws. Specifically, trading in securities which are the subject
of an actual or impending tender offer by a person who is in possession of
material, non-public information relating to the offer is illegal, regardless of
whether there was a breach of fiduciary duty. Under no circumstances should you
trade in securities while in possession of material, non-public information
regarding a potential tender offer.
PROCEDURES TO BE FOLLOWED WHEN RECEIVING MATERIAL, NON-PUBLIC INFORMATION.
Whenever an employee comes into possession of material, non-public information,
he or she should immediately contact the Legal Department and refrain from
disclosing the information to anyone else, including persons within Price
Associates, unless specifically advised to the contrary.
<PAGE>
Specifically, employees may not:
o Trade in securities to which the material, non-public information
relates;
o Disclose the information to others;
o Recommend purchases or sales of the securities to which the
information relates.
If the Legal Department determines that the information is material and
non-public, it will decide whether to:
o Place the security on a Watch List ("WATCH LIST") and restrict the
flow of the information to others within Price Associates in order
to allow Price Associates' investment personnel to continue their
ordinary investment activities. This procedure is commonly referred
to as a CHINESE WALL; or
o Place the security on a Restricted List ("RESTRICTED LIST") in order
to prohibit trading in the security by both clients and employees.
The Watch List is highly confidential and should, under no circumstances, be
disseminated to anyone except authorized personnel in the Legal Department. The
Restricted List is also highly confidential and should, under no circumstances,
be disseminated to anyone outside Price Associates.
The employee whose possession of or access to inside information has caused the
inclusion of an issuer on the Watch List may never trade or recommend the trade
of the securities of that issuer without the specific prior approval of the
Legal Department.
If an employee receives a private placement memorandum and the existence of the
private offering and/or the contents of the memorandum is material and
non-public, the employee should contact the Legal Department for a determination
of whether the issuer should be placed on the Watch or Restricted List.
SPECIFIC PROCEDURES RELATING TO THE SAFEGUARDING OF INSIDE INFORMATION.
To ensure the integrity of the Chinese Wall, and the confidentiality of
the Restricted List, it is important that ALL EMPLOYEES take the following steps
to safeguard the confidentiality of material, non-public information:
o Do not discuss confidential information in public places such as
elevators, hallways or social gatherings;
o To the extent practical, limit access to the areas of the firm where
confidential information could be observed or overheard to employees
with a business need for being in the area;
o Avoid using speaker phones in areas where unauthorized persons may
overhear conversations;
o Where appropriate, maintain the confidentiality of client identities
by using code names or numbers for confidential projects;
<PAGE>
o Exercise care to avoid placing documents containing confidential
information in areas where they may be read by unauthorized persons
and store such documents in secure locations when they are not in
use; and
o Destroy copies of confidential documents no longer needed for a
project.
Price Associates has adopted specific written procedures, Procedures
Pertaining to the Administration of the Statement of Policy on Material, Inside
(Non-Public) Information ("PROCEDURES") to deal with those situations where
employees of the firm are in possession of material, non-public information with
respect to securities which may be in or are being considered for inclusion in
the portfolios of clients managed by other areas of the firm and when tender
offer financing information is received. These Procedures also describe the
procedures for managing relationship conflicts in the municipal area. These
Procedures have been designed to isolate and keep confidential material,
non-public information known to one investment group or employee from the
remainder of the firm. They are considered a part of this Statement and will be
distributed to all appropriate personnel.
EDUCATION PROGRAM. While the probability of research analysts and portfolio
managers being exposed to material, non-public information with respect to
companies considered for investment by clients is greater than that of other
employees, it is imperative that all employees have a full understanding of this
Statement, particularly since the insider trading restrictions also apply to
transactions in the stock of Price Associates.
To ensure that all employees are properly informed of and understand Price
Associates' policy with respect to insider trading, the following program has
been adopted.
INITIAL REVIEW FOR NEW EMPLOYEES. All new employees will be given a copy
of the Code, which includes this Statement, at the time of their
employment and will be required to certify that they have read it. A
representative of the Legal Department will review the Statement with each
new portfolio manager, research analyst, and trader, as well as with any
person who joins the firm as a vice president of Price Associates,
promptly after his or her employment.
DISTRIBUTION OF STATEMENT. Any time this Statement is materially revised,
copies will be distributed to all employees.
ANNUAL REVIEW WITH RESEARCH ANALYSTS, COUNSELORS AND TRADERS. A
representative of the Legal Department will review this Statement at least
annually with portfolio managers, research analysts, and traders.
<PAGE>
ANNUAL CONFIRMATION OF COMPLIANCE. All employees will be asked to confirm
their understanding of and adherence to this Statement on an annual basis.
QUESTIONS. If you have any questions with respect to the interpretation or
application of this Statement, you are encouraged to discuss them with your
immediate supervisor or the Legal Department.
March, 2000
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
ON
SECURITIES TRANSACTIONS
BACKGROUND INFORMATION.
LEGAL REQUIREMENT. In accordance with the requirements of the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940 and the Insider Trading and Securities Fraud
Enforcement Act of 1988, T. Rowe Price Associates, Inc. ("PRICE
ASSOCIATES") and the mutual funds ("TRPA FUNDS") which it manages have
adopted this Statement of Policy on Securities Transactions
("STATEMENT"). Both Rowe Price-Fleming International, Inc. ("RPFI") and
T. Rowe Fleming Asset Management Limited ("TRFAM") have also adopted
Statements of Policy on Securities Transactions. Funds sponsored and
managed by Price Associates or RPFI will be referred to as the "PRICE
FUNDS."
PRICE ASSOCIATES' FIDUCIARY POSITION. As an investment adviser, Price
Associates is in a fiduciary position which requires it to act with an
eye only to the benefit of its clients, avoiding those situations which
might place, or appear to place, the interests of Price Associates or
its officers, directors and employees in conflict with the interests of
clients.
PURPOSE OF STATEMENT. The Statement was developed to help guide Price
Associates' employees and independent directors and the independent
directors of the Price Funds in the conduct of their personal
investments and to:
o eliminate the possibility of a transaction occurring that the
Securities and Exchange Commission or other regulatory bodies
would view as illegal, such as FRONT RUNNING (see definition
below);
o avoid situations where it might appear that Price Associates or
the Price Funds or any of their officers, directors or employees
had personally benefited at the expense of a client or fund
shareholder or taken inappropriate advantage of their fiduciary
positions; and
o prevent, as well as detect, the misuse of material, non-public
information.
Employees and the independent directors of Price Associates and the
Price Funds are urged to consider the reasons for the adoption of this
Statement. Price Associates' and the Price Funds' reputations could be
adversely affected as the result of even a single transaction considered
questionable in light of the fiduciary duties of Price Associates and
the independent directors of the Price Funds.
FRONT RUNNING. Front Running is illegal. It is generally defined as the
purchase or sale of a security by an officer, director or employee of an
investment adviser or mutual fund in anticipation of and prior to the
adviser effecting similar transactions for its clients in order to take
advantage of or avoid changes in market prices effected by client
transactions.
PERSONS SUBJECT TO STATEMENT. The provisions of this Statement apply as
described
<PAGE>
below to the following persons and entities. Each person and entity is
classified as either an Access Person or a Non-Access Person as described below.
The provisions of this Statement may also apply to an Access Person's or
Non-Access Person's spouse, minor children, and certain other relatives, as
further described on page 4-4 of this Statement. Access Persons are subject to
all provisions of this Statement. Non-Access Persons are subject to the general
principles of the Statement and its reporting requirements, but are exempt from
prior clearance requirements except for transactions in Price Associates' stock.
The persons and entities covered by this Statement are:
PRICE ASSOCIATES. Price Associates, each of its subsidiaries and their
retirement plans, and the Price Associates Employee Partnerships.
PERSONNEL. Each officer, inside director and employee of Price
Associates and its subsidiaries, including T. Rowe Price Investment
Services, Inc., the principal underwriter of the Price Funds.
CERTAIN TEMPORARY WORKERS. These workers include:
o All temporary workers hired on the Price Associates payroll
("TRPA TEMPORARIES");
o All agency temporaries whose assignments at Price Associates
exceed four weeks or whose cumulative assignments exceed eight
weeks over a twelve-month period;
o All independent or agency-provided consultants whose assignments
exceed four weeks or whose cumulative assignments exceed eight
weeks over a twelve-month period AND whose work is closely
related to the ongoing work of Price Associates' employees
(versus project work that stands apart from ongoing work); and
o Any contingent worker whose assignment is more than casual in
nature or who will be exposed to the kinds of information and
situations that would create conflicts on matters covered in the
Code.
RPFI PERSONNEL. As stated in the first paragraph, a Statement of Policy
on Securities Transactions has been adopted by RPFI. Under that
Statement, all RPFI personnel (officers, directors and employees)
stationed in Baltimore will be subject to this Statement.
TRFAM PERSONNEL. As stated in the first paragraph, a Statement of Policy
on Securities Transactions has been adopted by TRFAM. Under that
Statement, all TRFAM personnel (officers, directors, and employees)
stationed in Baltimore will be subject to this Statement.
RETIRED EMPLOYEES. Retired employees of Price Associates who continue to
receive investment research information from Price Associates.
INDEPENDENT DIRECTORS OF PRICE ASSOCIATES AND THE PRICE FUNDS. The independent
directors of Price Associates include those directors of Price Associates who
are neither officers nor employees of Price Associates. The independent
directors of the Price Funds include those directors of the Price Funds who are
not deemed to be "interested persons" of Price Associates.
Although subject to the general principles of this Statement, including the
definition of "beneficial ownership," independent directors are subject only to
modified reporting requirements. The
<PAGE>
independent directors of the Price Funds are exempt from prior clearance
requirements. The independent directors of Price Associates are exempt from the
prior clearance requirements except for Price Associates' stock.
ACCESS PERSONS. Certain persons and entities are classified as "ACCESS PERSONS"
under the Code. The term "ACCESS PERSON" means:
o Price Associates;
o any officer (vice president or above) or director (excluding
independent directors) of Price Associates or the Price Funds;
o any employee of Price Associates or the Price Funds who, in
connection with his or her regular functions or duties, makes,
participates in, or obtains or has access to information
regarding the purchase or sale of securities by a Price Fund or
other advisory client, or whose functions relate to the making
of any recommendations with respect to the purchases or sales;
or
o any person in a control relationship to Price Associates or a
Price Fund who obtains or has access to information concerning
recommendations made to a Price Fund or other advisory client
with regard to the purchase or sale of securities by the Price
Fund or advisory client.
All Access Persons are notified of their status under the Code.
INVESTMENT PERSONNEL. An Access Person is further identified as
"INVESTMENT PERSONNEL" if, in connection with his or her regular
functions or duties, he or she "makes or participates in making
recommendations regarding the purchase or sale of securities" by a Price
Fund or other advisory client.
The term "Investment Personnel" includes, but is not limited to:
o those employees who are authorized to make investment decisions
or to recommend securities transactions on behalf of the firm's
clients (investment counselors and members of the mutual fund
advisory committees);
o research and credit analysts; and
o traders who assist in the investment process.
All Investment Personnel are deemed Access Persons under the Code. All
Investment Personnel are notified of their status under the Code.
Investment Personnel are prohibited from investing in initial public
offerings.
NON-ACCESS PERSONS. Persons who do not fall within the definition of Access
Persons are deemed "NON-ACCESS PERSONS".
QUESTIONS ABOUT THE STATEMENT. You are urged to seek the advice of the
Chairperson of the Ethics Committee when you have questions as to the
application of this Statement to individual circumstances.
<PAGE>
TRANSACTIONS SUBJECT TO STATEMENT. Except as provided below, the provisions of
this Statement apply to transactions that fall under either one of the following
two conditions:
FIRST, you are a "BENEFICIAL OWNER" of the security under the Rule 16a-1 of the
Securities Exchange Act of 1934 ("EXCHANGE ACT"), as defined below.
SECOND, if you CONTROL or direct securities trading for another person or
entity, those trades are subject to this Statement even if you are not a
beneficial owner of the securities. For example, if you have an exercisable
trading authorization of an unrelated person's or entity's brokerage account, or
are directing another person's or entity's trades, those transactions will be
subject to this Statement to the same extent your personal trades would be,
unless exempted as described below.
DEFINITION OF BENEFICIAL OWNER. A "beneficial owner" is any person who, directly
or indirectly, through any contract, arrangement, understanding, relationship,
or otherwise, has or shares in the opportunity, directly or indirectly, to
profit or share in any profit derived from a transaction in the security.
A person has beneficial ownership in:
o securities held by members of the person's immediate family
SHARING THE SAME HOUSEHOLD, although the presumption of
beneficial ownership may be rebutted;
o a person's interest in securities held by a trust, which may
include both trust beneficiaries or trustees with investment
control;
o a person's right to acquire securities through the exercise or
conversion of any derivative security, whether or not presently
exercisable;
o a general partner's proportionate interest in the portfolio
securities held by a general or limited partnership;
o certain performance-related fees other than an asset-based fee,
received by any broker, dealer, bank, insurance company,
investment company, investment adviser, investment manager,
trustee or person or entity performing a similar function; and
o a person's right to dividends that is separated or separable
from the underlying securities. Otherwise, right to dividends
alone shall not represent beneficial ownership in the
securities.
A shareholder shall not be deemed to have beneficial ownership in the portfolio
securities held by a corporation or similar entity in which the person owns
securities if the shareholder is not a controlling shareholder of the entity and
does not have or share investment control over the entity's portfolio.
REQUESTS FOR EXEMPTIONS. If you have beneficial ownership of a security,
any transaction involving that security is presumed to be subject to the
relevant requirements of this Statement, UNLESS you have no control over the
transaction. Such a situation MAY arise, for example, if you
<PAGE>
have delegated investment authority to an independent investment adviser, or
your spouse has an independent trading program in which you have no input.
Similarly, if your spouse has investment control over, but no beneficial
ownership in, an unrelated account, an exemption may be appropriate.
If you are involved in an investment account for a family situation, trust,
partnership, corporation, etc., which you feel should not be subject to the
Statement's relevant prior approval and/or reporting requirements, you should
submit a written request for clarification or exemption to Baltimore
Legal/Compliance (Attn. D. Jones). Any such request for clarification or
exemption should name the account, your interest in the account, the persons or
firms responsible for its management, and the basis upon which the exemption is
being claimed. Exemptions are NOT self-executing; any exemption must be granted
through Baltimore Legal/Compliance.
TRANSACTIONS IN STOCK OF PRICE ASSOCIATES. Because Price Associates is a public
company, ownership of its stock subjects its officers, inside and independent
directors, and employees to special legal requirements under the Federal
securities laws. Each officer, director and employee is responsible for his or
her own compliance with these requirements. In connection with these legal
requirements, Price Associates has adopted the following rules and procedures:
INDEPENDENT DIRECTORS OF PRICE FUNDS. The independent directors of the
Price Funds are prohibited from owning the stock of Price Associates.
QUARTERLY EARNINGS REPORT. Generally, all employees and independent
directors of Price Associates must refrain from initiating transactions
in Price Associates' stock in which they have a beneficial interest from
the sixth trading day following the end of the quarter (or such other
date as management shall from time to time determine) until the third
trading day following the public release of earnings. Employees and
independent directors will be notified in writing through the Office of
the Secretary of Price Associates ("SECRETARY") from time to time as to
the controlling dates.
PRIOR CLEARANCE. Employees and independent directors of Price Associates
are required to obtain clearance prior to effecting any proposed
transaction (including gifts and transfers) involving shares of Price
Associates' stock owned beneficially or through the Employee Stock
Purchase Plan. Requests for prior clearance must be in writing on the
form entitled, "Notification of Proposed Transaction" (available from
Corporate Records Department) and be submitted to the Secretary who is
responsible for processing and maintaining the records of all such
requests. This would include sales of stock purchased through Price
Associates Employee Stock Purchase Plan ("ESPP"). Purchases effected
through the ESPP are automatically reported to the Secretary. Receiving
prior clearance does not relieve employees and independent directors of
Price Associates from conducting their personal securities transactions
in full compliance with the Code, including its prohibition on trading
while in possession of material, inside information. Transactions in
Price Associates' stock are subject to the 60-Day Rule except for
transactions effected through the ESPP and certain options exercises.
See p. 4-18.
================================================================
ALL EMPLOYEES AND INDEPENDENT DIRECTORS OF PRICE
ASSOCIATES MUST OBTAIN PRIOR CLEARANCE OF ANY
TRANSACTION INVOLVING PRICE ASSOCIATES' STOCK FROM THE
OFFICE OF THE SECRETARY OF PRICE ASSOCIATES.
================================================================
<PAGE>
INITIAL DISCLOSURE OF HOLDINGS. Each new employee must report to the
Secretary any shares of Price Associates' stock of which he or she has
beneficial ownership no later than 10 days after his or her starting
date of employment.
DIVIDEND REINVESTMENT PLANS. Purchases of Price Associates' stock owned
outside of the ESPP and effected through a dividend reinvestment plan
need not receive prior clearance if the Secretary's office has been
previously notified by the employee that he or she will be participating
in that plan. Reporting of transactions effected through that plan need
only be made quarterly, except that employees who are subject to Section
16 of the Securities Exchange Act of 1934 reporting must report such
transactions monthly.
EFFECTIVENESS OF PRIOR CLEARANCE. Prior clearance of transactions in
Price Associates' stock is effective for five (5) business days from and
including the date the clearance is granted, unless (i) advised to the
contrary by the Secretary prior to the proposed transaction, or (ii) the
person receiving the approval comes into possession of material,
non-public information concerning the firm. If the proposed transaction
in Price Associates' stock is not executed within this time period, a
new clearance must be obtained.
REPORTING OF DISPOSITION OF PROPOSED TRANSACTION. Covered persons must
notify the Secretary of the disposition (whether the proposed
transaction was effected or not) of each transaction involving shares of
Price Associates' stock owned directly within two business days of its
execution, or within seven business days of the date of prior clearance,
if not executed.
INSIDER REPORTING AND LIABILITY. Under current rules, certain officers,
directors and 10% stockholders of a publicly traded company ("INSIDERS")
are subject to the requirements of Section 16. Insiders include the
directors and certain managing directors of Price Associates.
SEC REPORTING. There are three reporting forms which insiders are
required to file with the SEC to report their purchase, sale and
transfer transactions in, and holdings of, Price Associates' stock.
Although the Secretary will provide assistance in complying with these
requirements as an accommodation to insiders, it remains the legal
responsibility of each insider to assure that the applicable reports are
filed in a timely manner.
o FORM 3. The initial ownership report by an insider is required
to be filed on Form 3. This report must be filed within ten days
after a person becomes an insider (i.e., is elected as a
director or appointed as managing director) to report all
current holdings of Price Associates' stock. Following the
election or appointment of an insider, the Secretary will
deliver to the insider a Form 3 for appropriate signatures and
will file such Form with the SEC.
o FORM 4. Any change in the insider's ownership of Price
Associates' stock must be reported on a Form 4 unless eligible
for deferred reporting on year-end Form 5. The Form 4 is due by
the 10th day following the end of the month in which the
ownership change occurred. Following receipt of the Notice of
Disposition of the
<PAGE>
proposed transaction, the Secretary will deliver to the insider
a Form 4, as applicable, for appropriate signatures and will
file such Form with the SEC.
o FORM 5. Any transaction or holding which is exempt from
reporting on Form 4, such as option exercises, small purchases
of stock, gifts, etc. may be reported on a deferred basis on
Form 5 within 45 days after the end of the calendar year in
which the transaction occurred. No Form 5 is necessary if all
transactions and holdings were previously reported on Form 4.
LIABILITY FOR SHORT-SWING PROFITS. Under Federal securities laws,
profit realized by certain officers, as well as directors and 10%
stockholders of a company (including Price Associates) as a
result of a purchase and sale (or sale and purchase) of stock of
the company within a period of less than six months must be
returned to the firm upon request.
OFFICE OF THRIFT SUPERVISION ("OTS") REPORTING. Price Associates is the
holding company of T. Rowe Price Savings Bank, which is regulated by the
OTS. OTS regulations require that the Managing Directors of Price
Associates, as well as any vice president in charge of any Price
Associates' affiliate, file reports regarding their personal holdings of
the stock of Price Associates and of the stock of any non-affiliated
savings banks or savings and loan holding companies. Although the
Secretary will provide assistance in complying with these requirements
as an accommodation, it remains the responsibility of each person
required to file such reports to ensure that such reports are filed in a
timely manner.
PRIOR CLEARANCE REQUIREMENTS (OTHER THAN PRICE ASSOCIATES' STOCK) FOR ACCESS
PERSONS.
ALL ACCESS PERSONS must obtain prior clearance before directly or indirectly
initiating, recommending, or in any way participating in, the purchase or sale
of a security in which the Access Person has, or by reason of such transaction
may acquire, any beneficial interest or which he or she controls, unless
exempted below. NON-ACCESS PERSONS are NOT required to obtain prior clearance
before engaging in any securities transactions, except for transaction in Price
Associates' stock.
================================================================
ALL EMPLOYEES AND INDEPENDENT DIRECTORS OF PRICE
ASSOCIATES MUST OBTAIN PRIOR CLEARANCE OF ANY
TRANSACTION INVOLVING PRICE ASSOCIATES' STOCK FROM THE
OFFICE OF THE SECRETARY OF PRICE ASSOCIATES.
================================================================
Where required, prior clearance must be obtained regardless of whether the
transaction is effected through TRP Brokerage or through an unaffiliated
broker/dealer. Receiving prior clearance does not relieve Access Persons from
conducting their personal securities transactions in full compliance with the
Code, including its prohibition on trading while in possession of material,
inside information, and with applicable law, including the prohibition on Front
Running (see page 4-1 for definition of Front Running). Please note that the
prior clearance procedures do NOT check compliance with the 60-Day Rule (p.
4-17).
TRANSACTIONS (OTHER THAN IN PRICE ASSOCIATES' STOCK) EXEMPT FROM PRIOR
CLEARANCE. The following transactions are exempt from the prior clearance
requirements:
<PAGE>
MUTUAL FUNDS AND VARIABLE INSURANCE PRODUCTS. Purchases or
redemptions of shares of any open-end investment companies,
including the Price Funds, and variable insurance products.
UNIT INVESTMENT TRUSTS. Purchases or sales of shares in unit
investment trusts.
U.S. GOVERNMENT OBLIGATIONS. Purchases or sales of direct
obligations of the U.S. Government.
PRO RATA DISTRIBUTIONS. Purchases effected by the exercise of
rights issued pro rata to all holders of a class of securities or
the sale of rights so received.
MANDATORY TENDERS. Purchases and sales of securities pursuant to
a mandatory tender offer.
SPOUSAL PAYROLL DEDUCTION PLANS. Purchases by an Access Person's
spouse pursuant to a payroll deduction plan, provided the
Compliance Department has been previously notified by the Access
Person that the spouse will be participating in the payroll
deduction plan.
EXERCISE OF STOCK OPTION OF CORPORATE EMPLOYER BY SPOUSE.
Transactions involving the exercise by an Access Person's spouse
of a stock option issued by the corporation employing the spouse.
DIVIDEND REINVESTMENT PLANS. Purchases effected through an
established Dividend Reinvestment Plan ("DRP"), provided the
Compliance Department is first notified by the Access Person that
he or she will be participating in the DRP. An Access Person's
purchase of share(s) of the issuer to initiate participation in
the DRP or an Access Person's purchase of shares in addition to
those purchased with dividends (a "CONNECTED PURCHASE") AND any
sale of shares from the DRP MUST receive prior clearance.
SYSTEMATIC INVESTMENT PLANS. Purchases effected through a
systematic investment plan involving the automatic investment of
a set dollar amount on predetermined dates, provided the
Compliance Department has been previously notified by the Access
Person that he or she will be participating in the plan. An
Access Person's purchase of securities of the issuer to initiate
participation in the plan AND any sale of shares from such a plan
MUST receive prior clearance.
INHERITANCES. The acquisition of securities through inheritance.
GIFTS. The giving of or receipt of a security as a gift.
PROCEDURES FOR OBTAINING PRIOR CLEARANCE (OTHER THAN PRICE ASSOCIATES' STOCK)
FOR ACCESS PERSONS. ALL Access Persons should follow the procedures set forth
below before engaging in the transactions described.
PROCEDURES FOR OBTAINING PRIOR CLEARANCE FOR INITIAL PUBLIC OFFERINGS
("IPOS"):
<PAGE>
NON-INVESTMENT PERSONNEL. Access Persons who are NOT Investment
Personnel ("NON-INVESTMENT PERSONNEL") may purchase securities
that are the subject of an IPO ONLY if prior written approval has
been obtained from the Chairperson of the Ethics Committee or his
or her designee ("DESIGNEE"), which may include N. Morris, S.
McCafferty or A. Brooks. An IPO is an offering of securities
registered under the Securities Act of 1933 when the issuer of
the securities, immediately before the registration, was not
subject to certain reporting requirements of the Securities
Exchange Act of 1934.
In considering such a request for approval, the Chairperson will
determine whether the proposed transaction presents a conflict of
interest with any of the firm's clients or otherwise violates the
Code. The Chairperson will also determine whether the following
conditions have been met:
1. The purchase is made through the Non-Investment Personnel's
regular broker;
2. The number of shares to be purchased is commensurate with
the normal size and activity of the Non-Investment
Personnel's account; and
3. The transaction otherwise meets the requirements of the
NASD's rules on free riding and withholding.
Non-Investment Personnel will not be permitted to purchase shares in an
IPO if any of the firm's clients are prohibited from doing so.
Therefore, Non-Investment Personnel MUST check with the Equity Trading
Desk the day the offering is priced before purchasing in the IPO. This
prohibition will remain in effect until the firm's clients have had the
opportunity to purchase in the secondary market once the underwriting is
completed -- commonly referred to as the aftermarket.
INVESTMENT PERSONNEL. Investment Personnel may NOT purchase
securities in an IPO.
NON-ACCESS PERSONS. Although Non-Access Persons are not required
to receive prior clearance before purchasing shares in an IPO,
any Non-Access Person who is a registered representative of
Investment Services should be aware that NASD rules may restrict
his or her ability to buy shares in a "hot issue," which is a new
issue that trades at a premium in the secondary market whenever
that trading commences.
PROCEDURES FOR OBTAINING PRIOR CLEARANCE FOR PRIVATE PLACEMENTS. Access
Persons may not invest in a private placement of securities, including
the purchase of limited partnership interests, unless prior written
approval has been obtained from the Chairperson of the Ethics Committee
or a Designee. In considering such a request for approval, the
Chairperson will determine whether the investment opportunity (private
placement) should be reserved for the firm's clients, and whether the
opportunity is being offered to the Access Person by virtue of his or
her position with the firm. The Chairperson will also secure, if
appropriate, the approval of the proposed transaction from the
chairperson of the applicable investment steering committee.
CONTINUING OBLIGATION. An Access Person who has received
approval to invest in a private placement of securities and who,
at a later date, anticipates participating in the firm's
investment decision process regarding the purchase or sale of
securities of the issuer of that private placement on behalf of
any client, must immediately disclose his
<PAGE>
or her prior investment in the private placement to the
Chairperson of the Ethics Committee and to the chairperson of
the appropriate investment steering committee.
PROCEDURES FOR OBTAINING PRIOR CLEARANCE FOR ALL OTHER SECURITIES
TRANSACTIONS. Requests for prior clearance by Access Persons for all
other securities transactions requiring prior clearance may be made
orally, in writing, or by electronic mail (e-mail address "Personal
Trades," which appears under "Trades" in the electronic mail address
book) to the Equity Trading Department of Price Associates, which will
be responsible for processing and maintaining the records of all such
requests. All requests must include the name of the security, the number
of shares or amount of bond involved, whether a foreign security is
involved, and the nature of the transaction, i.e., whether the
transaction is a purchase, sale or short sale. Responses to all requests
will be made by the Trading Department documenting the request and its
approval/disapproval.
Requests will normally be processed on the same day; however, additional
time may be required for prior clearance of transactions in foreign
securities.
EFFECTIVENESS OF PRIOR CLEARANCE. Prior clearance of a securities
transaction is effective for three (3) business days FROM AND INCLUDING
the date the clearance is granted, regardless of the time of day when
clearance is granted. If the proposed securities transaction is not
executed within this time, a new clearance must be obtained
REASONS FOR DISALLOWING ANY PROPOSED TRANSACTION. A proposed securities
transaction will be disapproved by the Trading Department and/or the Chairperson
of the Ethics Committee if:
PENDING CLIENT ORDERS. Orders have been placed by Price
Associates or RPFI to purchase or sell the security.
PURCHASES AND SALES WITHIN SEVEN (7) CALENDAR DAYS. The security
has been purchased or sold by any client of Price Associates or,
in the case of a foreign security, for any client of either Price
Associates or RPFI, within seven calendar days immediately prior
to the date of the proposed transaction. For example, if a client
transaction occurs on Monday, an Access Person may not purchase or
sell that security until Tuesday of the following week. If all
clients have eliminated their holdings in a particular security,
the seven-day restriction is not applicable to an Access Person's
transactions in that security.
APPROVED COMPANY RATING CHANGES. A change in the rating of an
approved company as reported in the firm's Daily Research News has
occurred within seven (7) calendar days immediately prior to the
date of the proposed transaction. Accordingly, trading would not
be permitted until the eighth (8) calendar day.
SECURITIES SUBJECT TO INTERNAL TRADING RESTRICTIONS. The security
is limited or restricted by Price Associates or RPFI as to
purchase or sale for client accounts.
REQUESTS FOR WAIVERS OF PRIOR CLEARANCE DENIALS. If an Access Person's request
for prior clearance has been denied, he or she may apply to the Chairperson of
the Ethics Committee for a waiver. All such requests must be in writing and must
fully describe the basis upon which the waiver is being requested. Waivers are
NOT routinely granted.
<PAGE>
BROKERAGE CONFIRMATIONS AND PERIODIC ACCOUNT STATEMENTS. ALL ACCESS PERSONS AND
NON-ACCESS PERSONS must request broker-dealers executing their transactions to
send to the attention of Compliance, Legal Department, T. Rowe Price Associates,
Inc., P.O. Box 17218, Baltimore, Maryland 21297-1218 a duplicate confirmation
with respect to each and every reportable transaction, including Price
Associates' stock, and a copy of all periodic statements for all securities
accounts in which the Access Person or Non-Access Person is considered to have
beneficial ownership and/or control (see Page 4-4 for a discussion of beneficial
ownership and control concepts).
NOTIFICATION OF BROKER/DEALER ACCOUNTS. ALL ACCESS PERSONS AND NON-ACCESS
PERSONS must give written notice to Baltimore Legal/Compliance before opening or
trading in a securities account with any broker/dealer, including TRP Brokerage.
NEW EMPLOYEES. New employees must give written notice to Baltimore
Legal/Compliance of any existing securities accounts maintained with any
broker/dealer when joining the firm (no later than 10 days after the
starting date).
OFFICERS, DIRECTORS AND REGISTERED REPRESENTATIVES OF INVESTMENT
SERVICES. The NASD requires each associated person of T. Rowe Price
Investment Services, Inc. to:
o Obtain approval from Investment Services (request should be in
writing and be directed to Baltimore Legal/Compliance) before
opening or placing the initial trade in a securities account
with any broker/dealer; and
o Provide the broker/dealer with written notice of his or her
association with Investment Services.
TRANSACTION REPORTING REQUIREMENTS (OTHER THAN PRICE ASSOCIATES' STOCK
TRANSACTIONS). ALL Access Persons AND Non-Access Persons must report all
securities transactions unless the transaction is exempted from reporting below.
TRANSACTIONS EXEMPT FROM REPORTING. The following transactions are
exempt from the reporting requirements:
MUTUAL FUNDS AND VARIABLE INSURANCE PRODUCTS. The purchase or
redemption of shares of any open-end investment companies,
including the Price Funds, and variable insurance products,
except that any employee who serves as the president or executive
vice president of a Price Fund must report his or her beneficial
ownership or control of shares in that Fund to Baltimore
Legal/Compliance through electronic mail to Dottie Jones.
STOCK SPLITS AND SIMILAR ACQUISITIONS. The acquisition of
additional shares of existing corporate holdings through the
reinvestment of income dividends and capital gains in mutual
funds, stock splits, stock dividends, exercise of rights,
exchange or conversion.
U.S. GOVERNMENT OBLIGATIONS. Purchases or redemptions of direct
obligations of the U.S. Government.
<PAGE>
DIVIDEND REINVESTMENT PLANS. The purchase of securities with
dividends effected through an established DRP. If, however, a
Connected Purchase or a sale must receive prior clearance (see
p. 4-9), that transaction must also be reported.
TRANSACTIONS THAT MUST BE REPORTED. Other than the transactions
specified above as exempt, ALL Access Persons AND Non-Access Persons are
required to file a report of the following securities transactions:
CLEARED TRANSACTIONS. Any transaction that is subject to the
prior clearance requirements, including purchases in initial
public offerings and private placement transactions. Although
Non-Access Persons are not required to receive prior clearance
for securities transactions (other than Price Associates' stock),
they MUST report any transaction that would have been required to
be prior cleared by an Access Person.
UNIT INVESTMENT TRUSTS. The purchase or sale of shares of a Unit
Investment Trust.
PRO RATA DISTRIBUTIONS. Purchase effected by the exercise of
rights issued pro rata to all holders of a class of securities or
the sale of rights so received.
INHERITANCES. Acquisition of securities through inheritance.
GIFTS. Acquisition or disposition of securities by gift.
MANDATORY TENDERS. Purchases and sales of securities pursuant to
a mandatory tender offer.
SPOUSAL PAYROLL DEDUCTION PLANS/SPOUSAL STOCK OPTION.
Transactions involving the purchase or exchange of securities by
the spouse of an Access Person or Non-Access Person pursuant to a
payroll deduction plan or the exercise by the spouse of an Access
Person or Non-Access Person of a stock option issued by the
spouse's employer. REPORTING OF SPOUSAL PAYROLL DEDUCTION PLAN
TRANSACTIONS NEED ONLY BE MADE QUARTERLY; REPORTING OF A SPOUSAL
STOCK OPTION EXERCISE MUST BE MADE WITHIN TEN DAYS OF THE
EXERCISE.
SYSTEMATIC INVESTMENT PLANS. Transactions involving the purchase
of securities by an Access Person or Non-Access Person pursuant
to a systematic investment plan. REPORTING OF SYSTEMATIC
INVESTMENT PLAN TRANSACTIONS NEED ONLY BE MADE QUARTERLY.
REPORT FORM. If the executing broker/dealer provides a confirmation or
similar statement directly to Baltimore Legal/Compliance, you do not
need to make a further report. All other transactions must be reported
on the form designated "T. Rowe Price Associates, Inc. Employee's Report
of Securities Transactions," a supply of which is available from
Baltimore Legal/Compliance.
WHEN REPORTS ARE DUE. You must report a securities transaction within
ten (10) days after the trade date or within (10) days after the date on
which you first gain knowledge of the transaction (for example, a
bequest) if this is later. Reporting of transactions involving either
systematic investment plans or the purchase of securities by a spouse
pursuant to a payroll deduction plan, however, may be reported
quarterly.
<PAGE>
TRANSACTION REPORTING REQUIREMENTS FOR THE INDEPENDENT DIRECTORS OF PRICE
ASSOCIATES AND THE INDEPENDENT DIRECTORS OF THE PRICE FUNDS. The independent
directors of Price Associates and the independent directors of the Price Funds
are subject to the same reporting requirements as Access Persons and Non-Access
Persons except that reports need only be filed quarterly. Specifically: (1) a
report for each securities transaction must be filed with Baltimore/Legal
Compliance no later than ten (10) days after the end of the calendar quarter in
which the transaction was effected; and (2) a report must be filed for each
quarter, regardless of whether there have been any reportable transactions.
Baltimore/Legal Compliance will send the independent directors of Price
Associates and the Price Funds a reminder letter and reporting form
approximately ten days prior to the end of each calendar quarter.
MISCELLANEOUS RULES REGARDING PERSONAL SECURITIES TRANSACTIONS. These rules vary
in their applicability depending upon whether you are an Access Person.
The following rules apply to ALL Access Persons AND Non-Access Persons and,
where indicated, to the independent directors of Price Associates and the Price
Funds.
DEALING WITH CLIENTS. Access Persons, Non-Access Persons and the
independent directors of Price Associates and the Price Funds may not,
directly or indirectly, sell to or purchase from a client any security.
This prohibition does not preclude the purchase or redemption of shares
of any mutual fund that is a client of Price Associates.
CLIENT INVESTMENT PARTNERSHIPS.
CO-INVESTING. Access Persons and Non-Access Persons, including
employee partnerships, and the independent directors of Price
Associates and the Price Funds are not permitted to co-invest in
client investment partnerships of Price Associates, RPFI, or
their affiliates, such as Strategic Partners, Threshold, and
International Partners.
DIRECT INVESTMENT. The independent directors of the Price Funds
are not permitted to invest as limited partners in client
investment partnerships of Price Associates, RPFI, or their
affiliates.
INVESTMENT CLUBS. These restrictions vary depending upon the person's
status, as follows:
NON-ACCESS PERSONS. A Non-Access Person may form or participate
in a stock or investment club without approval of the Chairperson
of the Ethics Committee. Only transactions in Price Associates'
stock are subject to prior clearance requirements. Club
transactions must be reported just as the Non-Access Person's
individual trades are reported.
ACCESS PERSONS. An Access Person may not form or participate in a
stock or investment club unless prior written approval has been
obtained from the Chairperson of the Ethics Committee. All
transactions by such a stock or investment club in which an
Access Person has beneficial ownership or control are subject to
the same prior clearance and reporting requirements applicable to
an individual Access Person's trades. However, if the Access
Person has beneficial ownership solely by virtue of his or her
spouse's participation in the club and has no investment control
or input into decisions regarding the club's securities
transactions, he or she may request the waiver of prior clearance
<PAGE>
requirements of the club's transactions (except for transactions
in Price Associates' stock) from the Chairperson of the Ethics
Committee as part of the approval process.
MARGIN ACCOUNTS. While brokerage margin accounts are discouraged, you
may open and maintain margin accounts for the purchase of securities
provided such accounts are with brokerage firms with which you maintain
a regular brokerage account.
TRADING ACTIVITY. You are discouraged from engaging in a pattern of
securities transactions which either:
o Is so excessively frequent as to potentially impact your ability
to carry out your assigned responsibilities, or
o Involves securities positions that are disproportionate to your
net assets.
At the discretion of the Chairperson of the Ethics Committee, written
notification of excessive trading may be sent to your supervisor.
The following rules apply ONLY to ACCESS PERSONS:
LARGE COMPANY EXEMPTION. Although subject to prior clearance,
transactions involving securities in certain large companies, within the
parameters set by the Ethics Committee (the "EXEMPT LIST"), will be
approved under normal circumstances, as follows:
TRANSACTIONS INVOLVING EXEMPT LIST SECURITIES. This exemption
applies to transactions involving no more than $20,000 or the
nearest round lot (even if the amount of the transaction
MARGINALLY exceeds $20,000) per security per week in securities
of companies with market capitalizations of $5 billion or more,
unless the rating on the security as reported in the firm's Daily
Research News has been changed to a 1 or a 5 within the seven (7)
calendar days immediately prior to the date of the proposed
transaction. If such a rating change has occurred, the exemption
is not available.
TRANSACTIONS INVOLVING OPTIONS ON EXEMPT LIST SECURITIES. Access
Persons may not purchase uncovered put options or sell uncovered
call options unless otherwise permitted under the "Options and
Futures" discussion on p. 4-16. Otherwise, in the case of options
on an individual security on the Exempt List (if it has not had a
prohibited rating change), an Access Person may trade the GREATER
of 5 contracts or sufficient option contracts to control $20,000
in the underlying security; thus an Access Person may trade 5
contracts even if this permits the Access Person to control more
than $20,000 in the underlying security. Similarly, the Access
Person may trade more than 5 contracts as long as the number of
contracts does not permit him or her to control more than $20,000
in the underlying security.
These parameters are subject to change by the Ethics Committee.
EXCHANGE-TRADED INDEX OPTIONS. Although subject to prior clearance, an
Access Person's transactions involving exchange-traded index options,
within the parameters set by the Ethics Committee, will be approved
under normal circumstances. Generally, an Access Person may trade the
GREATER of 5 contracts or sufficient contracts to control $20,000 in the
underlying securities; thus an Access Person may trade 5 contracts even
if this permits the Access Person
<PAGE>
to control more than $20,000 in the underlying securities. Similarly, the Access
Person may trade more than 5 contracts as long as the number of contracts does
not permit him or her to control more than $20,000 in the underlying security.
These parameters are subject to change by the Ethics Committee.
CLIENT LIMIT ORDERS. The Equity Trading Desk may approve an Access
Person's proposed trade even if a limit order has been entered for a
client for the same security, if:
o The Access Person's trade will be entered as a market order; and
o The client's limit order is 10% or more away from the market at
the time of approval of the Access Person's trade.
OPTIONS AND FUTURES. Please consult the specific section on
Exchange-Traded Index Options (p. 4-16) for transactions in those
options.
=======================================================================
BEFORE ENGAGING IN OPTIONS AND FUTURE TRANSACTIONS, ACCESS
PERSONS SHOULD UNDERSTAND THE IMPACT THAT THE 60-DAY RULE MAY
HAVE UPON THEIR ABILITY TO CLOSE OUT A POSITION WITH A PROFIT
(SEE PAGE 4-17)
=======================================================================
OPTIONS AND FUTURES ON SECURITIES AND INDICES NOT HELD BY PRICE
ASSOCIATES' OR RPFI'S CLIENTS. There are no specific restrictions
with respect to the purchase, sale or writing of put or call
options or any other option or futures activity, such as multiple
writings, spreads and straddles, on securities of companies (and
options or futures on such securities) which are not held by any
of Price Associates' or RPFI's clients.
OPTIONS ON SECURITIES OF COMPANIES HELD BY PRICE ASSOCIATES' OR
RPFI'S CLIENTS. With respect to options on securities of
companies which are held by any of Price Associates' or RPFI's
clients, it is the firm's policy that an Access Person should not
profit from a price decline of a security owned by a client
(other than an Index account). Therefore, an Access Person may:
(i) purchase call options and sell covered call options and (ii)
purchase covered put options and sell put options. An Access
Person may not purchase uncovered put options or sell uncovered
call options, even if the issuer of the underlying securities is
included on the Exempt List, unless purchased in connection with
other options on the same security as part of a straddle,
combination or spread strategy which is designed to result in a
profit to the Access Person if the underlying security rises in
or does not change in value. The purchase, sale and exercise of
options are subject to the same restrictions as those set forth
with respect to securities, i.e., the option should be treated as
if it were the common stock itself.
OTHER OPTIONS AND FUTURES HELD BY PRICE ASSOCIATES' OR RPFI'S
CLIENTS. Any other option or futures transaction with respect to
domestic or foreign securities held by any of Price Associates'
clients or with respect to foreign securities held by RPFI's
clients will be approved or disapproved on a case-by-case basis
after due consideration is given as to whether the proposed
transaction or series of transactions might appear to or actually
create a conflict with the interests of any of Price Associates'
or RPFI's clients. Such transactions include transactions in
futures and options on futures involving financial instruments
regulated solely by the CFTC.
<PAGE>
SHORT SALES. Short sales by Access Persons are subject to prior
clearance. In addition, Access Persons may not sell any security short
which is owned by any client of Price Associates or RPFI, except that
short sales may be made "against the box" for tax purposes. A short sale
"against the box" is one in which the seller owns an amount of
securities equivalent to the number he or she sells short. All short
sales, including short sales against the box, are subject to the 60-Day
Rule described below.
THE 60-DAY RULE. Access Persons are prohibited from profiting from the
purchase and sale or sale and purchase of the same (or equivalent)
securities within 60 calendar days. An "equivalent" security means any
option, warrant, convertible security, stock appreciation right, or
similar right with an exercise or conversion privilege at a price related
to the subject security, or similar securities with a value derived from
the value of the subject security. Thus, for example, the rule prohibits
options transactions on or short sales of a security within 60 days of
its purchase. In addition, the rule applies regardless of the Access
Person's other holdings of the same security or whether the Access Person
has split his or her holdings into tax lots. For example, if an Access
Person buys 100 shares of XYZ stock on March 1, 1998 and another 100
shares of XYZ stock on March 1, 2000, he or she may not sell ANY shares
of XYZ stock at a profit for 60 days following March 1, 2000. The 60-Day
Rule "clock" restarts EACH time the Access Person trades in that
security.
EXEMPTIONS FROM THE 60-DAY RULE. The 60-Day Rule does not apply
to:
o any transaction by a Non-Access Person except for
transactions in Price Associates' stock not exempted
below;
o any transaction exempt from prior clearance (see p.
4-8);
o the purchase and sale or sale and purchase of exchange
traded index options;
o any transaction in Price Associates' stock effected
through the ESPP; and
o the exercise of "in the money" Price Associates' stock
options and the subsequent sale of the derivative
shares.
Prior clearance procedures do NOT check compliance with the
60-Day Rule when considering a trading request. Access Persons
are responsible for checking their compliance with this rule
before entering a trade.
Access Persons may request a waiver from the 60-Day Rule. Such
requests should be directed in writing to the Chairperson of the
Ethics Committee. These waivers are NOT routinely granted.
INVESTMENTS IN NON-LISTED SECURITIES FIRMS. Access Persons may not
purchase or sell the shares of a broker/dealer, underwriter or federally
registered investment adviser unless that entity is traded on an
exchange or listed as a NASDAQ stock or permission is given under the
Private Placement Procedures (see p. 4-10).
OWNERSHIP REPORTING REQUIREMENTS - ONE-HALF OF ONE PERCENT OWNERSHIP. If an
employee or an independent
<PAGE>
director of Price Associates or an independent director of the Price Funds owns
more than 1/2 of 1% of the total outstanding shares of a public or private
company, he or she must immediately report in writing such fact to Baltimore
Legal/Compliance, providing the name of the company and the total number of such
company's shares beneficially owned.
DISCLOSURE OF PERSONAL SECURITIES HOLDINGS BY ACCESS PERSONS. Upon commencement
of employment, appointment or promotion (no later than 10 days after the
starting date), each Access Person must disclose in writing all current
securities holdings in which he or she is considered to have beneficial
ownership and control ("Securities Holdings Report") (see page 4-4 for
definition of the term Beneficial Owner). The form to provide the Securities
Holding Report will be provided upon commencement of employment, appointment or
promotion and should be submitted to Baltimore Legal/Compliance.
All Investment Personnel and Managing Directors are also required to file a
Securities Holding Report on an annual basis, in conjunction with the annual
verification process. Effective January 2001, this requirement will be extended
to ALL Access Persons, pursuant to federal law.
CONFIDENTIALITY OF RECORDS. Price Associates makes every effort to protect the
privacy of all persons and entities in connection with their Securities Holdings
Reports and Reports of Securities Transactions.
SANCTIONS. Strict compliance with the provisions of this Statement is considered
a basic provision of association with Price Associates and the Price Funds. The
Ethics Committee and Baltimore Legal/Compliance are primarily responsible for
administering this Statement. In fulfilling this function, the Ethics Committee
will institute such procedures as it deems reasonably necessary to monitor each
person's and entity's compliance with this Statement and to otherwise prevent
and detect violations.
VIOLATIONS BY ACCESS PERSONS, NON-ACCESS PERSONS AND DIRECTORS OF PRICE
ASSOCIATES. Upon discovering a material violation of this Statement by
any person or entity other than an independent director of a Price Fund,
the Ethics Committee will impose such sanctions as it deems appropriate
and as are approved by the Management Committee or the Board of
Directors including, INTER ALIA, a letter of censure or suspension, a
fine, a suspension of trading privileges or termination of employment
and/or officership of the violator. In addition, the violator may be
required to surrender to Price Associates, or to the party or parties it
may designate, any profit realized from any transaction that is in
violation of this Statement. All material violations of this Statement
shall be reported to the Board of Directors of Price Associates and to
the Board of Directors of any Price Fund with respect to whose
securities such violations may have been involved.
VIOLATIONS BY INDEPENDENT DIRECTORS OF PRICE FUNDS. Upon discovering a
material violation of this Statement by an independent director of a
Price Fund, the Ethics Committee shall report such violation to the
Board on which the director serves. The Price Fund Boards will impose
such sanctions as they deem appropriate.
VIOLATIONS BY BALTIMORE EMPLOYEES OF RPFI OR TRFAM. Upon discovering a
material violation of this Statement by a Baltimore-based employee of
RPFI or TRFAM, the Ethics Committee shall report such violation to the
Board of Directors of RPFI or TRFAM, as appropriate. A material
violation by a Baltimore-based employee of RPFI shall also be
<PAGE>
reported to the Board of Directors of any RPFI Fund with respect to
whose securities such violations may have been involved.
March, 2000
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
ON
CORPORATE RESPONSIBILITY
PRICE ASSOCIATES' FIDUCIARY POSITION. As an investment adviser, T. Rowe Price
Associates, Inc. ("PRICE Associates") is in a fiduciary relationship with each
of its clients. This fiduciary duty obligates Price Associates to act with an
eye only to the benefit of its clients. Accordingly, when managing its client
accounts (whether private counsel clients, mutual funds, limited partnerships,
or otherwise), Price Associates' primary responsibility is to optimize the
financial returns of its clients consistent with their objectives and investment
program.
DEFINITION OF CORPORATE RESPONSIBILITY ISSUES. Concern over the behavior of
corporations has been present since the Industrial Revolution. Each generation
has focused its attention on specific issues. Concern over the abuses of the use
of child labor in the 1800's was primarily addressed by legislative action which
mandated corporate America to adhere to new laws restricting and otherwise
governing the employment of children. In other instances, reform has been
achieved through shareholder action -- namely, the adoption of shareholder
proposals. The corporate responsibility issues most often addressed during the
past decade have involved:
o Ecological issues, including toxic hazards and pollution of the air
and water;
o Employment practices, such as the hiring of women and minority groups;
o Product quality and safety;
o Advertising practices;
o Animal testing;
o Military and nuclear issues; and
o International politics and operations, including the world debt
crisis, infant formula, and child labor laws.
CORPORATE RESPONSIBILITY ISSUES IN THE INVESTMENT PROCESS. Price Associates
recognizes the legitimacy of public concern over the behavior of business with
respect to issues of corporate responsibility. Price Associates' policy is to
carefully review the merits of such issues that pertain to any issuer which is
held in a client portfolio or which is being considered for investment. Price
Associates believes that a corporate management's record of identifying and
resolving issues of corporate responsibility is a legitimate criteria for
evaluating the investment merits of the issuer. Enlightened corporate
responsibility can enhance a issuer's long term prospects for business success.
The absence of such a policy can have the converse effect.
<PAGE>
CORPORATE RESPONSIBILITY COMMITTEE. Since 1971, Price Associates has had a
Corporate Responsibility Committee, which is responsible for:
o Reviewing and establishing positions with respect to corporate
responsibility issues that are presented in the proxy statements of
portfolio companies; and
o Reviewing questions and inquiries received from clients and mutual
fund shareholders pertaining to issues of corporate responsibility.
QUESTIONS REGARDING CORPORATE RESPONSIBILITY. Should an employee have any
questions regarding Price Associates' policy with respect to a corporate
responsibility issue or the manner in which Price Associates has voted or
intends to vote on a proxy matter, he or she should contact a member of the
Corporate Responsibility Committee or Price Associates' Proxy Administrator.
March, 2000
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
WITH RESPECT TO COMPLIANCE WITH COPYRIGHT LAWS
PURPOSE OF STATEMENT OF POLICY. To protect the interests of Price Associates and
its employees, Price Associates has adopted this Statement of Policy with
Respect to Compliance with Copyright Laws ("STATEMENT" to: (1) inform its
employees regarding the legal principles governing copyrights, trademarks, and
service marks; and (2) ensure that Price Associates' various copyrights,
trademarks, and service marks are protected from infringement.
DEFINITION OF TRADEMARK, SERVICE MARK, AND COPYRIGHT
TRADEMARK. A trademark is normally a word, phrase, or symbol used to
identify and distinguish a product or a company. For example, KLEENEX
is a trademark for a particular brand of facial tissues.
SERVICE MARK. A service mark is normally a word, phrase, or symbol used
to identify and distinguish a service or the provider of a service. For
example, INVEST WITH CONFIDENCE is a registered service mark which
identifies and distinguishes the mutual fund management services
offered by Price Associates. The words "trademark" and "service mark"
are often used interchangeably, but as a general rule a trademark is
for a tangible product, whereas a service mark is for an intangible
good or service. Because most of Price Associates' business activities
involve providing services (e.g., investment management; transaction
processing and account maintenance; information, etc.), most of Price
Associates' registered marks are service marks.
COPYRIGHT. In order to protect the authors and owners of books,
articles, drawings, music, or computer programs and software, the U.S.
copyright law makes it a crime to reproduce, IN ANY MANNER, any
copyrighted material without the express written permission of the
author or publisher. Under current law, all original works are
copyrighted at the moment of creation; it is no longer necessary to
register a copyright. Copyright infringements may result in judgments
of actual damages (i.e., the cost of additional subscriptions), as well
as punitive damages, which can be as high as $100,000 per infringement.
REGISTERED TRADEMARKS AND SERVICE MARKS. Once Price Associates has registered a
trademark or service mark with the U.S. Patent and Trademark Office, it has the
exclusive right to use that mark. In order to preserve rights to a registered
trademark or service mark, Price Associates must (1) use the mark on a
continuous basis and in a manner consistent with the Certificate of
Registration; (2) place an encircled "R" ((R)) next to the mark in the first, or
most prominent, occurrence in all publicly distributed media; and (3) take
action against any party infringing upon the mark.
ESTABLISHING A TRADEMARK OR SERVICE MARK. The Legal Department has the
responsibility to register and maintain all trademarks and service marks and
protect them against any infringement. If Price Associates or a subsidiary
wishes to utilize a particular word, phrase, or symbol as a trademark or service
mark, the Legal Department must be notified as far in advance as possible so
that a search may be conducted to determine if the proposed mark has already
been registered or used by another entity. Until clearance is obtained from the
Legal Department, no new mark should be
<PAGE>
used. This procedure has been adopted to ensure that Price Associates does not
unknowingly infringe upon another company's mark. Once a proposed mark is
cleared for use, it must be accompanied by the abbreviations "TM" or "SM," as
appropriate, until it has been registered. All trademarks and service marks
which have been registered with the U.S. Patent and Trademark Office must be
accompanied by an encircled "R" when used in any public document. These symbols
need only accompany the mark in the first or most prominent place it is used in
each publicly circulated document. Subsequent use of the same trademark or
service mark in such material does not need to be marked. The Legal Department
maintains a written summary of all Price Associates' registered and pending
trademarks and service marks. All registered and pending trademarks and service
marks are also listed in the T. Rowe Price Style Guide. If you have any
questions regarding the status of a trademark or service mark, you should
contact the Legal Department.
INFRINGEMENT OF PRICE ASSOCIATES' REGISTERED MARKS. If an employee notices that
another entity is using a mark similar to one which Price Associates has
registered, the Legal Department should be notified immediately so that
appropriate action can be taken to protect Price Associates' interests in the
mark.
REPRODUCTION OF ARTICLES AND SIMILAR MATERIALS FOR INTERNAL DISTRIBUTION, OR FOR
DISTRIBUTION TO SHAREHOLDERS, CLIENTS AND OTHERS OUTSIDE THE FIRM. In general,
the reproduction of copyrighted material is a federal offense. Exceptions under
the "FAIR USE" doctrine include reproduction for scholarly purposes, criticism,
or commentary, which ordinarily do not apply in a business environment.
OCCASIONAL copying of a relatively small portion of a newsletter or magazine to
keep in a file, circulate to colleagues with commentary, or send to a client
with commentary is generally permissible under the "fair use" doctrine. Written
permission from the author or publisher must be obtained by any employee wishing
to reproduce copyrighted material for INTERNAL OR EXTERNAL distribution,
including distribution via the Internet or the T. Rowe Price Associates'
intranet. It is the responsibility of each employee to obtain permission to
reproduce copyrighted material. Such permission must be in writing and forwarded
to the Legal Department. If the publisher will not grant permission to reproduce
copyrighted material, then the requestor must purchase from the publisher either
additional subscriptions to the periodical or the reprints of specific articles.
The original article or periodical may be circulated as an alternative to
purchasing additional subscriptions or reprints.
PERSONAL COMPUTER SOFTWARE PROGRAMS. Software products and on-line information
services purchased for use on Price Associates' personal computers are generally
copyrighted material and may not be reproduced without proper authorization from
the software vendor. See the T. Rowe Price Associates, Inc. Statement of Policy
With Respect to Computer Security and Related Issues for more information.
March, 2000
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY WITH RESPECT TO
COMPUTER SECURITY AND RELATED ISSUES
PURPOSE OF STATEMENT OF POLICY. The central and critical role of computer
systems in our firm's operations underscores the importance of ensuring the
integrity of these systems. The data stored on our firm's computers, as well as
the specialized software programs and systems developed for the firm's use, are
extremely valuable assets and very confidential.
This Statement of Policy ("STATEMENT") establishes a comprehensive computer
security program which has been designed to:
o prevent the unauthorized use of or access to our firm's computer
systems (collectively the "SYSTEMS"), including the firm's electronic
mail ("E-MAIL") and voice mail systems;
o prevent breaches in computer security;
o maintain the integrity of confidential information; and
o prevent the introduction of computer viruses into our Systems that
could imperil the firm's operations.
In addition, the Statement describes various issues that arise in connection
with the application of U.S. Copyright Law to computer software.
Any material violation of this Statement may lead to sanctions, which may
include dismissal of the employee or employees involved.
CONFIDENTIALITY OF SYSTEMS ACTIVITIES AND INFORMATION. Systems activities and
information stored on our firm's computers (including e-mail and voice mail) may
be subject to monitoring by firm personnel or others. All such information,
including messages on the firm's e-mail and voice mail systems, are records of
the firm and the sole property of the firm. The firm reserves the right to
monitor, access, and disclose for any purpose all information, including all
messages sent, received, or stored through the Systems. The use of the firm's
computer Systems is for the transaction of firm business and is for authorized
users only. All firm policies apply to the use of the Systems. See Employee
Handbook.
By using the firm's Systems, you agree to be bound by this Statement and consent
to the access to and disclosure of all information, including e-mail and voice
mail messages, by the firm. Employees do not have any expectation of privacy in
connection with the use of the Systems, or with the transmission, receipt, or
storage of information in the Systems.
Information entered into our firm's computers but later deleted from the Systems
may continue to be maintained permanently on our firm's back-up tapes. Employees
should take care so that they do not create documents or communications that
might later be embarrassing to them or to our firm. This policy applies to
e-mail and voice mail, as well to any other communication on a System.
<PAGE>
SECURITY ADMINISTRATION. Enterprise Security in T. Rowe Price Investment
Technologies, Inc. ("TRPIT") is responsible for identifying security needs and
overseeing the maintenance of computer security, including Internet-related
security issues.
AUTHORIZED SYSTEMS USERS. In general, access to any type of System is restricted
to authorized users who need access in order to support their business
activities. Access for mainframe, LAN and external Systems must be requested on
a "Systems Access Request" form. A hard copy can be printed from the Enterprise
Security intranet site or obtained from Enterprise Security. Access requests and
changes must be approved by the appropriate supervisor or manager in the user's
department.
AUTHORIZED APPLICATION USERS. Access to specific computer applications (i.e.,
Finance, Retirement Plan Services systems, etc.) can also be requested. Many
application systems have an additional level of security, such as extra
passwords. If a user wants access to an application or data that is outside the
normal scope of his or her business activity, additional approval may be
required from the "Owner" of such application or data. The "Owner" is the
employee who is responsible for making judgments and decisions on behalf of the
firm with regard to the application or data, including the authority to decide
who may have access.
USER-IDS, PASSWORDS, AND OTHER SECURITY ISSUES. Once a request for access is
approved, a unique "User-ID" will be assigned the user. Each User-ID has a
password that must be kept confidential by the user. For most systems, passwords
must be changed on a regular schedule and Enterprise security has the authority
to determine the password policy. User-IDs and passwords may not be shared.
Users can be held accountable for work performed with their User-IDs. Personal
computers must not be left logged on and unattended unless screen savers with
passwords or software-based keyboard locks are utilized. Enterprise Security
recommends that GroupWise e-mail accounts be password protected.
EXTERNAL COMPUTER SYSTEMS. Our data processing environment includes access to
data stored not only on our firm's computers, but also on external systems, such
as DST. Although the security practices governing these outside systems are
established by the providers of these external systems, requests for access to
such systems should be directed to Enterprise Security. User-IDs and passwords
to these systems must be kept confidential by the user.
ACCESS TO THE INTERNET AND OTHER ON-LINE SERVICES. Access to the Internet
(including, but not limited to, e-mail, remote FTP, Telnet, World Wide Web,
Gopher, remote administration, secure shell, and using IP tunneling software to
remotely control Internet servers) presents special security considerations due
to the world-wide nature of the connection and the security weaknesses present
in Internet protocols and services. The firm can provide authorized employees
and other staff with access to Internet e-mail and other Internet services (such
as the World Wide Web) through a direct connection from the firm's network.
Access to the Internet or Internet services from our firm's computers, including
the firm's e-mail system, is permitted only for legitimate business purposes.
Such access must be requested through Enterprise Security, approved by the
employee's supervisor, and provided only through firm approved connections. All
firm policies apply to the use of the Internet or Internet services. See
Employee Handbook.
USE OF INTERNET. In accordance with firm policies, employees are
prohibited from accessing inappropriate sites, including, but not
limited to, adult and gambling sites. Firm personnel monitor Internet
use for visits to inappropriate sites and for inappropriate use. Should
<PAGE>
employees have questions regarding what constitutes an inappropriate
site or inappropriate use, they should discuss it first with their
manager who may refer the question to Human Resources. Inappropriate
use of the Internet, or accessing inappropriate sites, may lead to
sanctions, which may include dismissal of the employee or employees
involved.
DIAL-OUT ACCESS. Using a modem or an Internet connection on a firm
computer housed at any of the firm's offices to access an Internet
service provider using one's home or personal account is prohibited,
unless this account is being used by authorized personnel to service
Price Associates' connection to the Internet. When Internet access is
granted, the employee will be asked to reaffirm his or her
understanding of this Statement.
Unauthorized modems are not permitted. Dial-out access that circumvents
the Internet firewall or proxy server, except by authorized personnel
in the business of Price Associates, is prohibited.
ON-LINE SERVICES. Access to America OnLine ("AOL"), CompuServe, or
other commercial on-line service providers is not permitted from a firm
computer except for a legitimate business purpose approved by the
employee's supervisor and with software obtained through the Help Desk
at x4357 (select menu option 1).
PARTICIPATION ON BULLETIN BOARDS. Because communications by our firm or
any of its employees on on-line service bulletin boards are subject to
federal, state and NASD advertising regulations, unsupervised
participation can result in serious securities violations. Certain
designated employees have been authorized to use AOL to monitor and
respond to inquiries about our firm and its investment services and
products. Any employee other than those assigned to this special group
must first receive the authorization of a member of the Board of T.
Rowe Price Investment Services, Inc. and the Legal Department before
initiating or responding to a message on any computer bulletin board
relating to the firm, a Price Fund or any investment or brokerage
option or service. This policy applies whether or not the employee
intends to disclose his or her relationship to the firm, whether or not
our firm sponsors the bulletin board, and whether or not the firm is
the principal focus of the bulletin board.
E-MAIL USE. Access to the firm's e-mail system is permitted only for
legitimate business purposes. All firm policies apply to the use of
e-mail. Firm personnel may monitor e-mail usage for inappropriate use.
Should employees have questions regarding what constitutes
inappropriate use, they should discuss it first with their manager who
may refer the question to Human Resources. Inappropriate use of e-mail
may lead to sanctions, which may include dismissal of the employee or
employees involved.
E-mail services, other than those provided or approved by Price
Associates, may not be used for business purposes. In addition,
accessing e-mail services not provided or approved by Price Associates
from firm equipment for any reason could allow the introduction of
viruses or malicious code into the network, or lead to the compromise
of confidential data.
Employees should understand that e-mail sent through the Internet is
not secure and could be intercepted by a third party.
DIAL-IN ACCESS. The ability to access our firm's computer Systems from a remote
location is also limited to authorized users. Phone numbers used to access our
firm's computer Systems are confidential. A security system that uses a one-time
password or other strong authentication method
<PAGE>
must be employed when accessing our firm's network from a remote computer.
Authorization for remote access can be requested by completing a "Systems Access
Request" form. Any employee who requires remote access should contact the Help
Desk at x4357 (select menu option 1) for desktop setup.
VIRUS PROTECTION. A computer virus is a program designed to damage or impair
software or data on a computer system. Software from any outside source may
contain a computer virus or similar malicious code. Types of carriers and
transmission methods increase daily and currently include diskettes, CDs, file
downloads, executables, and e-mail attachments. A comprehensive malicious code
prevention and control program is in place throughout Price Associates. This
program provides policy and procedures for anti-virus controls on all systems.
More information about the anti-virus program can be found on the TRPIT
Intranet.
Introducing a virus or similar malicious code into the Price Associates Systems
by engaging in prohibited actions, such as downloading non-business related
software, or by failing to implement recommended precautions, such as updating
virus scanning software on remote machines, may lead to sanctions, which may
include dismissal of the employee or employees involved.
VIRUS SCANNING SOFTWARE. As part of the TRPIT's anti-virus program,
virus scanning software is installed on the majority of applicable
platforms. This software is designed to detect and eradicate malicious
code and viruses. All desktop computers have the corporate standard
anti-virus scanning software installed and running. This software is
installed and configured by the Distributed Processing Support Group
and runs constantly. Virus scanning software updates are automatically
distributed to the desktops as they become available. Desktop virus
scanning software can also be used by the employee to scan diskettes,
CDs, directories, and attachments "on demand". Contact the Help Desk at
x4357 (select menu option 3) for assistance.
E-MAIL. An e-mail anti-virus gateway scans the content of inbound and
outbound e-mail for viruses. Infected e-mail and attachments will be
cleaned when possible and quarantined when not cleanable. Updating of
the e-mail gateway anti-virus software and pattern files is done
automatically.
PORTABLE AND REMOTE COMPUTERS. Laptops and other computers that
remotely access the TRPIT network are also required to have the latest
anti-virus software and pattern files. IT IS THE RESPONSIBILITY OF EACH
USER TO ENSURE THAT HIS OR HER PORTABLE COMPUTER'S ANTI-VIRUS SOFTWARE
IS REGULARLY UPDATED. The Help Desk has instructions available. Contact
the Help Desk at x4357 (select menu option 3) to obtain further
information.
DOWNLOADING OR COPYING. The user of a PC with a modem or with an
Internet connection has the ability to connect to other computers or
on-line services outside of the firm's network and there may be
business reasons to download or copy software from those sources.
Downloading or copying software, which includes documents, graphics,
programs and other computer-based materials, from any outside source is
not permitted unless it is for a legitimate business purpose because
downloads and copies could introduce viruses and malicious code into
the Systems.
OTHER CONSIDERATIONS. Users must log off the System each night. Unless
the user logs off, virus software on each workstation cannot pick up
the most current virus scanning downloads or the most current software
updates for the user's System. Employees must call the Help Desk at
x4357 (select menu option 3) when viruses are detected so that it can
ensure
<PAGE>
that appropriate tracking and follow-up take place. Do not forward any
"virus warning" mail received to other staff until you have contacted
the Help Desk, since many of these warnings are hoaxes. When notified
that a user has received "virus warning" mail, the Help Desk will
contact Enterprise Security, whose personnel will check to determine
the validity of the virus warning.
APPLICATION OF U.S. COPYRIGHT LAW TO SOFTWARE PROGRAMS. Software products and
on-line information services purchased for use on Price Associates' personal
computers are generally copyrighted material and may not be reproduced without
proper authorization from the software vendor. This includes the software on CDs
or diskettes, any program manuals or documentation, and data or software
retrievable from on-line information systems. Unauthorized reproduction of such
material or information, or downloading or printing such material, is a federal
offense, and the software vendor can sue to protect the developer's rights. In
addition to criminal penalties such as fines and imprisonment, civil damages can
be awarded in excess of $50,000.
GUIDELINES FOR USING PERSONAL COMPUTER SOFTWARE
ACQUISITION AND INSTALLATION OF SOFTWARE. Only Distributed Processing
Support Group approved and installed software is authorized. Any
software program that is to be used by an employee of Price Associates
in connection with the business of the firm must be ordered through the
Help Desk at x4357 (select menu option 1) and installed by the
Distributed Processing Support Group of TRPIT.
LICENSING. Software residing on firm LAN servers will be either: (1)
maintained at an appropriate license level for the number of users, or
(2) made accessible only for those for whom it is licensed.
ORIGINAL CDS, DISKETTES AND COPIES. In most cases, software is
installed by the Distributed Processing Support Group and original
software CDs and diskettes are not provided to the user. In the event
that original CDs or diskettes are provided, they must be stored
properly to reduce the possibility of damage or theft. CDs and
diskettes should be protected from extreme heat, cold, and contact with
anything that may act as a magnet or otherwise damage them. Employees
may not make additional copies of software or software manuals obtained
through the firm.
RECOMMENDATIONS, UPGRADES, AND ENHANCEMENTS. All recommendations
regarding computer hardware and software programs are to be forwarded
to the Help Desk at x4357 (select menu option 1), which will coordinate
upgrades and enhancements.
QUESTIONS REGARDING THIS STATEMENT. Any questions regarding this Statement
should be directed to Enterprise Security in TRPIT.
March, 2000
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
STATEMENT OF POLICY
ON
COMPLIANCE WITH ANTITRUST LAWS
PURPOSE
To protect the interests of the company and its employees, Price
Associates has adopted this Statement of Policy on Compliance with Antitrust
Laws ("STATEMENT") to:
(1) Inform employees about the legal principles governing
prohibited anticompetitive activity in the conduct of Price
Associates' business; and
(2) Establish guidelines for contacts with other members of the
investment management industry to avoid violations of the
antitrust laws.
THE BASIC ANTICOMPETITIVE ACTIVITY PROHIBITION
Section 1 of the Sherman Antitrust Act (the "ACT") prohibits
agreements, understandings, or joint actions between companies that constitute a
"restraint of trade," i.e., reduce or eliminate competition.
This prohibition is triggered only by an agreement or action among two
or more companies; unilateral action never violates the Act. To constitute an
illegal agreement, however, an understanding does not need to be formal or
written. Comments made in conversations, casual comments at meetings, or even as
little as "a knowing wink," as one case says, may be sufficient to establish an
illegal agreement under the Act.
The agreed upon action must be anticompetitive. Some actions are "per
se" anticompetitive, while others are judged according to a "rule of reason."
o Some activities have been found to be so inherently
anticompetitive that a court will not even permit the argument
that they have a procompetitive component. Examples of such per se
illegal activities are agreements between competitors to fix
prices or divide up markets in any way, such as exclusive
territories.
o Other joint agreements or activities will be examined by a court
using the rule of reason approach to see if the procompetitive
results of the arrangement outweigh the anticompetitive effects.
Permissible agreements among competitors may include a buyers'
cooperative, or a syndicate of buyers for an initial public
offering of securities. In rare instances, an association of
sellers (such as ASCAP) may be permissible.
<PAGE>
There is also an exception for joint activity designed to influence
government action. Such activity is protected by the First Amendment to the U.S.
Constitution. For example, members of an industry may agree to lobby Congress
jointly to enact legislation that may be manifestly anticompetitive.
PENALTIES FOR VIOLATING THE SHERMAN ACT
A charge that the Act has been violated can be brought as a civil or a
criminal action. Civil damages can include treble damages, plus attorneys fees.
Criminal penalties for individuals can include fines of up to $350,000 and three
years in jail, and $100 million or more for corporations.
SITUATIONS IN WHICH ANTITRUST ISSUES MAY ARISE
To avoid violating the Act, any agreement with other members of the
investment management industry regarding which securities to buy or sell and
under what circumstances we buy or sell them, or about the manner in which we
market our mutual funds and investment and retirement services, must be made
with the prohibitions of the Act in mind.
TRADE ASSOCIATION MEETINGS AND ACTIVITIES. A trade association is a
group of competitors who join together to share common interests and
seek common solutions to common problems. Such associations are at a
high risk for anticompetitive activity and are closely scrutinized by
regulators. Attorneys for trade associations, such as the Investment
Company Institute, are typically present at meetings of members to
assist in avoiding violations.
Permissible Activities:
o Discussion of how to make the industry more competitive.
o An exchange of information or ideas that have procompetitive
or competitively neutral effects, such as: methods of
protecting the health or safety of workers; methods of
educating customers and preventing abuses; and information
regarding how to design and operate training programs.
o Collective action to petition government entities.
Activities to be Avoided:
o Any discussion or direct exchange of current information about
prices, salaries, fees, or terms and conditions of sales. Even
if such information is publicly available, problems can arise
if the information available to the public is difficult to
compile or not as current as that being exchanged.
EXCEPTION: A third party consultant can, with appropriate
safeguards, collect, aggregate and disseminate some of this
information, such as salary information.
o Discussion of future business plans, strategies, or
arrangements that might be considered to involve competitively
sensitive information.
o Discussion of specific customers, markets, or territories.
<PAGE>
o Negative discussions of service providers that could give rise
to an inference of a joint refusal to deal with the provider
(a "BOYCOTT").
INVESTMENT-RELATED DISCUSSIONS
PERMISSIBLE ACTIVITIES: Buyers or sellers with a common
economic interest may join together to facilitate securities
transactions that might otherwise not occur, such as the
formation of a syndicate to buy in a private placement or
initial public offering of a issuer's stock, or negotiations
among creditors of an insolvent or bankrupt company.
Competing investment managers are permitted to serve on
creditors committees together and engage in other similar
activities in connection with bankruptcies and other judicial
proceedings.
ACTIVITIES TO BE AVOIDED: It is important to avoid anything
that suggests involvement with any other firm in any threats
to "boycott" or "blackball" new offerings, including making
any ambiguous statement that, taken out of context, might be
misunderstood to imply such joint action. Avoid careless or
unguarded comments that a hostile or suspicious listener might
interpret as suggesting prohibited coordinated behavior
between T. Rowe Price and any other potential buyer.
EXAMPLE: After an Illinois municipal bond default
where the state legislature retroactively abrogated
some of the bondholders' rights, several investment
management complexes organized to protest the state's
action. In doing so, there was arguably an implied
threat that members of the group would boycott future
Illinois municipal bond offerings. Such a boycott
would be a violation of the Act. The investment
management firms' action led to an 18-month
Department of Justice investigation. Although the
investigation did not lead to any legal action, it
was extremely expensive and time consuming for the
firms and individual managers involved.
<PAGE>
If you are present when anyone outside of T. Rowe Price
suggests that two or more investors with a grievance against
an issuer coordinate future purchasing decisions, you should
immediately reject any such suggestion. As soon as possible
thereafter, you should notify the Legal Department, which will
take whatever further steps are necessary.
BENCHMARKING. Benchmarking is the process of measuring and comparing an
organization's processes, products and services to those of industry
leaders for the purpose of adopting innovative practices for
improvement.
o Because benchmarking usually involves the direct exchange of
information with competitors, it is particularly subject to
the risk of violating the antitrust laws.
o The list of issues that may and should not be discussed in the
context of a trade association also applies in the
benchmarking process.
o All proposed benchmarking agreements must be reviewed by the
T. Rowe Price Legal Department before T. Rowe Price agrees to
participate in such a survey.
March, 2000
<PAGE>
Exhibit (p)(15)
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS
I. APPLICABILITY
This Code of Ethics establishes rules of conduct for "Access Persons" (as
defined below) of Credit Suisse Asset Management, LLC, its subsidiaries and
Credit Suisse Asset Management Securities, Inc. (collectively referred to as
"CSAM") and each U.S. registered investment company that adopts this Code
("Covered Fund") (CSAM and the Covered Funds are collectively referred to as the
"Covered Companies"). For purposes of this Code, "Access Person" shall mean:
o any "Advisory Person" -- any employee or officer of CSAM and any natural
person in a control relationship to a Covered Company (except for a
natural person who, but for his or her holdings in a Covered Fund, would
not be considered an Advisory Person, unless he or she obtains
information concerning recommendations made to the Covered Fund with
regard to the purchase or sale of securities by the Covered Fund, in
which case such person shall be considered an Advisory Person only with
respect to the Covered Fund); or
o any director, trustee or officer of a Covered Fund, whether or not such
person is an Advisory Person, in which case such person shall be
considered an Access Person only with respect to the Covered Fund.
For purposes of this Code:
o the term "security" shall include any option to purchase or sell, any
security that is convertible or exchangeable for, and any other
derivative interest relating to the security;
o the terms "purchase" and "sale" of a security shall include, among other
things, the writing of an option to purchase or sell a security; and
o all other terms shall have the same meanings as under the Investment
Company Act of 1940 ("1940 Act"), unless indicated otherwise.
II. STATEMENT OF GENERAL PRINCIPLES
In conducting personal investment activities, all Access Persons are required to
act consistent with the following general fiduciary principles:
o the interests of CSAM clients, including Covered Funds, must always be
placed first, provided, however, that persons who are Access Persons
only with respect to certain Covered Funds shall place the interests of
such Covered Funds first;
o all personal securities transactions must be conducted in such a manner
as to avoid any actual or potential conflict of interest or any abuse of
an individual's position of trust and responsibility; and
<PAGE>
o Access Persons must not take inappropriate advantage of their positions.
CSAM has a separate policy and procedures designed to detect and prevent insider
trading, which should be read together with this Code. Nothing contained in this
Code should be interpreted as relieving any Access Person from the obligation to
act in accordance with any applicable law, rule or regulation or any other
statement of policy or procedure adopted by any Covered Company.
III. PROHIBITIONS
The following prohibitions and related requirements apply to Advisory Persons
and/or Access Persons (as stated) and accounts in which they have "Beneficial
Ownership" (as defined in Exhibit 1).
A. Short Term Trading. CSAM discourages Advisory Persons from short-term trading
(i.e., purchases and sales within a 60 day period), as such activity could be
viewed as being in conflict with CSAM's general fiduciary principles. In no
event, however, may an Advisory Person make a purchase and sale (or sale and
purchase) of a security, including shares of Covered Funds and other U.S.
registered investment companies (other than money market funds), within five
"Business Days" (meaning days on which the New York Stock Exchange is open for
trading). CSAM reserves the right to extend this prohibition period for the
short-term trading activities of any or all Advisory Persons if CSAM determines
that such activities are being conducted in a manner that may be perceived to be
in conflict with CSAM's general fiduciary principles.
B. Side-by-Side Trading. No Access Person may purchase or sell (directly or
indirectly) any security for which there is a "buy" or "sell" order pending for
a CSAM client (except that this restriction does not apply to any Access Person
who is neither an Advisory Person nor an officer of a Covered Fund, unless he or
she knows, or in the ordinary course of fulfilling official duties with a
Covered Fund should know, that there is a "buy" or "sell" order pending with
respect to such security for a CSAM client), or that such Access Person knows
(or should know) at the time of such purchase or sale:
o is being considered for purchase or sale by or for any CSAM client; or
o is being purchased or sold by or for any CSAM client.
C. Blackout Periods. No Advisory Person may execute a securities transaction
within five Business Days before and one Business Day after a transaction in
that security for a CSAM client.
D. Public Offerings. No Advisory Person may directly or indirectly acquire
Beneficial Ownership in any security in a public offering in the primary
securities market.
E. Private Placements. No Advisory Person may directly or indirectly acquire or
dispose of any Beneficial Ownership in any privately placed security without the
express prior written approval of a supervisory person designated in Section IX
of this Code ("Designated Supervisory Person"). Approval will take into account,
among other factors, whether the investment opportunity should be reserved for a
CSAM client, whether the opportunity is being offered to the Advisory Person
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<PAGE>
because of his or her position with CSAM or as a reward for past transactions
and whether the investment creates or may in the future create a conflict of
interest.
F. Short Selling. Advisory Persons are only permitted to engage in short selling
for hedging purposes. No Advisory Person may engage in any transaction that has
the effect of creating any net "short exposure" in an individual security.
G. Futures Contracts. No Advisory Person may invest in futures contracts, except
through the purchase of options on futures contracts.
H. Options. No Advisory Person may write (i.e., sell) any options except for
hedging purposes and only if the option is fully covered.
I. Trading, Hedging and Speculation in Credit Suisse Group Securities.
Transactions by employees, officers and directors of CSAM in securities of
Credit Suisse Group ("CSG") are prohibited for each period beginning 15 calendar
days before announcement of CSG yearly or half-yearly results and ending two
Business Days after the announcement. Employees, officers and directors of CSAM
may only hedge vested positions in CSG stock through short sales or derivative
instruments. Uncovered short exposure, through short sales or otherwise, is not
permitted without the express prior written approval of a Designated Supervisory
Person.
J. Investment Clubs. No Advisory Person may participate in an "investment club"
or similar activity.
K. Disclosure of Interest. No Advisory Person may recommend to or effect for any
CSAM client any securities transaction without having disclosed his or her
personal interest (actual or potential), if any, in the issuer of the
securities, including without limitation:
o any ownership or contemplated ownership of any privately placed
securities of the issuer or any of its affiliates;
o any employment, management or official position with the issuer or any
of its affiliates;
o any present or proposed business relationship between the Advisory
Person and the issuer or any of its affiliates; and
o any additional factors that may be relevant to a conflict of interest
analysis.
Where the Advisory Person has a personal interest in an issuer, a decision to
purchase or sell securities of the issuer or any of its affiliates by or for a
CSAM client shall be subject to an independent review by a Designated
Supervisory Person.
L. Gifts. No Advisory Person may seek or accept any gift of more than a de
minimis value (approximately $250 per year) from any person or entity that does
business with or on behalf of a CSAM client, other than reasonable,
business-related meals and tickets to sporting events, theater and similar
activities. If any Advisory Person is unsure of the appropriateness of any gift,
a Designated Supervisory Person should be consulted.
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<PAGE>
M. Directorships and Other Outside Business Activities. No Advisory Person may
serve on the board of directors/trustees of any issuer without the express prior
written approval of a Designated Supervisory Person. Approval will be based upon
a determination that the board service would be consistent with the interests of
CSAM clients. Where board service is authorized, Advisory Persons serving as
directors will be isolated from those making investment decisions regarding the
securities of that issuer through "informational barrier" or other procedures
specified by a Designated Supervisory Person.
No Advisory Person may be employed (either for compensation or in a voluntary
capacity) outside his or her regular position with CSAM or its affiliated
companies without the written approval of a Designated Supervisory Person.
IV. EXEMPT TRANSACTIONS
A. Exemptions from Prohibitions.
1. Purchases and sales of securities issued or guaranteed by
the U.S. government or any agencies or instrumentalities of the U.S.
government, municipal securities, and other non-convertible fixed
income securities, which are in each case rated investment grade, are
exempt from the prohibitions described in paragraphs C and D of Section
III if such transactions are made in compliance with the preclearance
requirements of Section V(B) below.
2. Any securities transaction, or series of related
transactions, involving 500 shares or less of an issuer having a market
capitalization (outstanding shares multiplied by the current market
price per share) greater than $2.5 billion is exempt from the
prohibition described in paragraph C of Section III if such transaction
is made in compliance with the preclearance requirements of Section
V(B) below.
B. Exemptions from Prohibitions and Preclearance. The prohibitions described in
paragraphs B through E of Section III and the preclearance requirements of
Section V(B) shall not apply to:
o purchases and sales of securities that are direct obligations of the
U.S. government;
o purchases and sales of securities of U.S. registered open-end investment
companies;
o purchases and sales of bankers' acceptances, bank certificates of
deposit, and commercial paper;
o purchases that are part of an automatic dividend reinvestment plan;
o purchases and sales that are non-volitional on the part of either the
Access Person or the CSAM client;
o purchases and sales in any account maintained with a party that has no
affiliation with the Covered Companies and over which no Advisory Person
has, in the judgment of a Designated Supervisory Person after reviewing
the terms and circumstances, direct or indirect influence or control
over the investment or trading of the account; and
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<PAGE>
o purchases by the exercise of rights offered by an issuer pro rata to all
holders of a class of its securities, to the extent that such rights
were acquired from the issuer.
C. Further Exemptions. Express prior written approval may be granted by a
Designated Supervisory Person if a purchase or sale of securities or other
outside activity is consistent with the purposes of this Code and Section 17(j)
of the 1940 Act and rules thereunder (attached as Attachment A is a form to
request such approval). For example, a purchase or sale may be considered
consistent with those purposes if the purchase or sale is not harmful to a CSAM
client because such purchase or sale would be unlikely to affect a highly
institutional market, or because such purchase or sale is clearly not related
economically to the securities held, purchased or sold by the CSAM client.
V. TRADING, PRECLEARANCE, REPORTING AND OTHER COMPLIANCE PROCEDURES
A. Trading Through CSAM. No Advisory Person shall purchase or sell securities
for an account in which he or she has Beneficial Ownership other than through
the CSAM trading desk persons designated by a Designated Supervisory Person,
unless express prior written approval is granted by a Designated Supervisory
Person.
B. Preclearance. Except as provided in Section IV, before any Advisory Person
purchases or sells any security for any account in which he or she has
Beneficial Ownership, preclearance shall be obtained in writing from a
Designated Supervisory Person (attached as Attachment B is a form to request
such approval). If clearance is given for a purchase or sale and the transaction
is not effected on that Business Day, a new preclearance request must be made.
C. Reporting.
1. Initial Certification. Within 10 days after the commencement of his or her
employment with CSAM or his or her affiliation with any Covered Fund, each
Access Person shall submit to a Designated Supervisory Person an initial
certification in the form of Attachment C to certify that:
o he or she has read and understood this Code of Ethics and recognizes
that he or she is subject to its requirements; and
o he or she has disclosed or reported all personal securities holdings in
which he or she has any direct or indirect Beneficial Ownership and all
accounts in which any securities are held for his or her direct or
indirect benefit.
2. Annual Certification. In addition, each Access Person shall submit to a
Designated Supervisory Person an annual certification in the form of Attachment
D to certify that:
o he or she has read and understood this Code of Ethics and recognizes
that he or she is subject to its requirements;
o he or she has complied with all requirements of this Code of Ethics; and
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<PAGE>
o he or she has disclosed or reported (a) all personal securities
transactions for the previous year and (b) all personal securities
holdings in which he or she has any direct or indirect Beneficial
Ownership and accounts in which any securities are held for his or her
direct or indirect benefit as of a date no more than 30 days before the
annual certification is submitted.
Access Persons may comply with the initial and annual reporting requirements by
submitting account statements and/or Attachment E to a Designated Supervisory
Person within the prescribed periods. An Access Person who is not an Advisory
Person is not required to submit initial or annual certifications, unless such
Access Person is an officer of a Covered Fund.
Each Advisory Person shall annually disclose all directorships and outside
business activities (attached as Attachment F is a form for such disclosure).
3. Quarterly Reporting. All Advisory Persons and each Access Person who is an
officer of a Covered Fund shall also supply a Designated Supervisory Person, on
a timely basis, with duplicate copies of confirmations of all personal
securities transactions and copies of periodic statements for all securities
accounts, including confirmations and statements for transactions and accounts
described in Section IV(B) above (exempt from prohibitions and preclearance).
This information must be supplied at least once per calendar quarter, within 10
days after the end of the calendar quarter.
Each Access Person who is neither an Advisory Person nor an officer of a Covered
Fund is required to report a transaction only if he or she, at the time of that
transaction, knew (or in the ordinary course of fulfilling official duties with
a Covered Fund should have known) that during the 15-day period immediately
before or after the date of the transaction the security such person purchased
or sold was purchased or sold by the Covered Fund or was being considered for
purchase or sale by the Covered Fund.
VI. COMPLIANCE MONITORING AND SUPERVISORY REVIEW
A Designated Supervisory Person will periodically review reports from the CSAM
trading desk (or, if applicable, confirmations from brokers) to assure that all
transactions effected by Access Persons for accounts in which they have
Beneficial Ownership are in compliance with this Code and Rule 17j-1 under the
1940 Act.
Material violations of this Code and any sanctions imposed shall be reported not
less frequently than quarterly to the board of directors of each relevant
Covered Fund and to the senior management of CSAM. At least annually, each
Covered Company shall prepare a written report to the board of
directors/trustees of each Covered Fund, and to the senior management of CSAM,
that:
o describes issues that have arisen under the Code since the last report,
including, but not limited to, material violations of the Code or
procedures that implement the Code and any sanctions imposed in response
to those violations; and
o certifies that each Covered Company has adopted procedures reasonably
necessary to prevent Access Persons from violating the Code.
6
<PAGE>
Material changes to this Code of Ethics must be approved by the Board of
Directors of each Covered Fund no later than six months after the change is
adopted. That approval must be based on a determination that the changes are
reasonably necessary to prevent Access Persons from engaging in any conduct
prohibited by the Code and Rule 17j-1 under the 1940 Act. Board approval must
include a separate vote of a majority of the independent directors.
VII. SANCTIONS
Upon discovering that an Access Person has not complied with the requirements of
this Code, the senior management of the relevant Covered Company may impose on
that person whatever sanctions are deemed appropriate, including censure; fine;
reversal of transactions and disgorgement of profits; suspension; or termination
of employment.
VIII. CONFIDENTIALITY
All information obtained from any Access Person under this Code shall be kept in
strict confidence, except that reports of transactions will be made available to
the Securities and Exchange Commission or any other regulatory or
self-regulatory organization to the extent required by law or regulation.
IX. FURTHER INFORMATION
The Designated Supervisory Persons are Hal Liebes and James W. Bernaiche or
their designees in CSAM's legal and compliance department. Any questions
regarding the Code of Ethics should be directed to a Designated Supervisory
Person.
Dated: March 1, 2000
7
<PAGE>
EXHIBIT 1
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS
CODE OF ETHICS
DEFINITION OF BENEFICIAL OWNERSHIP
The term "Beneficial Ownership" as used in the attached Code of Ethics is to be
interpreted by reference to Rule 16a-1(a)(2) under the Securities Exchange Act
of 1934 ("Rule"). Under the Rule, a person is generally deemed to have
Beneficial Ownership of securities if the person (directly or indirectly),
through any contract, arrangement, understanding, relationship or otherwise, has
or shares a direct or indirect pecuniary interest in the securities.
The term "pecuniary interest" is generally defined in the Rule to mean the
opportunity (directly or indirectly) to profit or share in any profit derived
from a transaction in the securities. A person is deemed to have an "indirect
pecuniary interest" within the meaning of the Rule:
o in any securities held by members of the person's immediate family sharing
the same household; the term "immediate family" includes any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law, as well as adoptive relationships;
o a general partner's proportionate interest in the portfolio securities held
by a general or limited partnership;
o a person's right to dividends that is separated or separable from the
underlying securities;
o a person's interest in certain trusts; and
o a person's right to acquire equity securities through the exercise or
conversion of any derivative security, whether or not presently
exercisable.(1)
For purposes of the Rule, a person who is a shareholder of a corporation or
similar entity is not deemed to have a pecuniary interest in portfolio
securities held by the corporation or entity, so long as the shareholder is not
a controlling shareholder of the corporation or the entity and does not have or
share investment control over the corporation's or the entity's portfolio. The
term "control" means the power to exercise a controlling influence over
management or policies, unless the power is solely the result of an official
position with the company.
- ----------
(1) The term "derivative security" is defined as any option, warrant,
convertible security, stock appreciation right or similar right with an
exercise or conversion privilege at a price related to an equity security
(or similar securities) with a value derived from the value of an equity
security.
<PAGE>
ATTACHMENT A
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS -- SPECIAL APPROVAL FORM
1. The following is a private placement of securities or other investment
requiring special approval in which I want to acquire or dispose of
Beneficial Ownership:
<TABLE>
<CAPTION>
NAME OF PRIVATE
SECURITY OR
OTHER DATE TO BE AMOUNT TO RECORD PURCHASE HOW ACQUIRED
INVESTMENT ACQUIRED BE HELD OWNER PRICE (BROKER/ISSUER)
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
</TABLE>
Would this investment opportunity be appropriate for a CSAM client?
___ Yes ___ No
2. I want to engage in the following outside business activity:
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
3. I want special approval to place personal securities trades other than
through the CSAM trading desk (please describe):
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
I certify, as applicable, that I (a) am not aware of any non-public information
about the issuer, (b) have made all disclosures required by the Code of Ethics
and (c) will comply with all reporting requirements of the Code.
- -------------------------------- -------------------------------
Signature Date
- --------------------------------
Print Name
___ Approved
___ Not Approved
- ------------------------------- ------------------------------
Designated Supervisory Person Date
<PAGE>
ATTACHMENT B
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS -- PERSONAL TRADING PRECLEARANCE FORM
This form should be filled out completely to expedite approval.
1. Security: __________________________________________
Ticker: __________________________________________
____ Purchase ____ Sale
2. Number of shares/bonds/units/contracts: _________________________________
3. Account Name/Shortname: ______________________________________________
4. Brokerage Firm and Account Number: ______________________________________
5. Why do you want to purchase or sell? Is this an opportunity appropriate
for CSAM clients?
-------------------------------------------------------------------------
6. Are you aware of a CSAM Advisory Person who is buying or selling or who
plans to buy or sell this security for his or her personal accounts or
CSAM clients?
___ Yes ___ No
If yes, who?
-------------------------------------------------------------------------
7. If the amount is less than 500 shares, is the issuer market capitalization
greater than $2.5 billion?
____ Yes _____ No
I certify that I (a) am not aware of any non-public information about the
issuer, (b) have made all disclosures required by the Code of Ethics and this
trade otherwise complies with the Code, including the prohibition on investments
in initial public offerings, and (c) will comply with all reporting requirements
of the Code.
- ---------------------------------- ------------------------------------
Signature of Advisory Person Date
- ----------------------------------
Print Name
___ Approved
___ Not Approved
- ---------------------------------- ------------------------------------
Designated Supervisory Person Date - VALID THIS BUSINESS DAY ONLY.
<PAGE>
ATTACHMENT C
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS
INITIAL CERTIFICATION
I certify that I:
o have read and understood the Code of Ethics for Credit Suisse Asset
Management, LLC, the Warburg Pincus Funds and the CSAM Closed-End Funds and
recognize that I am subject to its requirements; and
o have disclosed or reported all personal securities holdings in which I had
any direct or indirect Beneficial Ownership and accounts in which any
securities were held for my direct or indirect benefit as of the date I
commenced employment with CSAM or the date I became affiliated with a
Covered Fund.
- -------------------------------- -------------------------------
Signature of Access Person Date
- --------------------------------
Print Name
<PAGE>
ATTACHMENT D
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS
ANNUAL CERTIFICATION
I certify that I:
o have read and understood the Code of Ethics for Credit Suisse Asset
Management, LLC, the Warburg Pincus Funds and the CSAM Closed-End Funds and
recognize that I am subject to its requirements;
o have complied with all requirements of the Code of Ethics and Policy and
Procedures Designed to Detect and Prevent Insider Trading in effect during
the year ended December 31, 1999; and
o have disclosed or reported all personal securities transactions for the year
ended December 31, 1999 and all personal securities holdings in which I had
any direct or indirect Beneficial Ownership and all accounts in which any
securities were held for my direct or indirect benefit as of December 31,
1999.
- -------------------------------- -------------------------------
Signature of Access Person Date
- --------------------------------
Print Name
<PAGE>
ATTACHMENT E
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS - PERSONAL SECURITIES ACCOUNT DECLARATION
ALL ACCESS PERSONS MUST COMPLETE EACH APPLICABLE ITEM (1, 2, 3 OR 4) AND SIGN
BELOW.
1. The following is a list of securities/commodities accounts in which I have
Beneficial Ownership:
BROKER/DEALER ACCOUNT TITLE AND NUMBER
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2. The following is a list of securities/commodities accounts in which I had
Beneficial Ownership that have been opened or closed in the past year:
BROKER/DEALER ACCOUNT TITLE AND NUMBER
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
3. The following is a list of any other securities or other investment
holdings in which I have Beneficial Ownership (for securities held in
accounts other than those disclosed in response to items 1 and 2):
<TABLE>
<CAPTION>
NAME OF PRIVATE
SECURITY OR
OTHER DATE TO BE AMOUNT TO RECORD PURCHASE HOW ACQUIRED
INVESTMENT ACQUIRED BE HELD OWNER PRICE (BROKER/ISSUER)
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
</TABLE>
4. I do not have Beneficial Ownership in any securities/commodities accounts or
otherwise have Beneficial Ownership of any securities or other instruments
subject to the Code of Ethics. (Please initial.)
-------------
Initials
I declare that the information given above is true and accurate:
- -------------------------------- -------------------------------
Signature of Access Person Date
- -------------------------------
Print Name
<PAGE>
ATTACHMENT F
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS
OUTSIDE BUSINESS ACTIVITIES
Outside business activities include, but are not limited to, the following:
o self-employment;
o receiving compensation from another person or company;
o serving as an officer, director, partner, or consultant of another business
organization (including a family owned company); and
o becoming a general or limited partner in a partnership or owning any stock
in a business, unless the stock is publicly traded and no control
relationship exists.
Outside business activities include serving with a governmental (federal, state
or local) or charitable organization whether or not for compensation.
ALL ADVISORY PERSONS MUST COMPLETE AT LEAST ONE CHOICE (1 OR 2) AND SIGN BELOW.
1. The following are my outside business activities:
OUTSIDE BUSINESS DESCRIPTION OF APPROVED BY DESIGNATED
ACTIVITY ACTIVITY SUPERVISORY PERSON
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
2. I am not involved in any outside business activities. (Please initial)
------------
Initials
I declare that the information given above is true and accurate:
- -------------------------------- -------------------------------
Signature of Advisory Person Date
- --------------------------------
Print Name
<PAGE>
Exhibit (p)(16)(i)
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC
(the Manager)
CODE OF ETHICS ADOPTED PURSUANT TO RULE 17J-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
(THE CODE)
1. PURPOSES
The Code has been adopted by the Board of Directors/Trustees or the Duly
Appointed Officer-In-Charge of the Fund, the Manager, the Adviser/Subadviser,
and the Principal Underwriter in accordance with Rule 17j-1(c) under the
Investment Company Act of 1940 (the Act) and in accordance with the following
general principles:
(1) THE DUTY AT ALL TIMES TO PLACE THE INTERESTS OF SHAREHOLDERS FIRST.
Investment company personnel should scrupulously avoid serving
their own personal interests ahead of shareholders' interests in any
decision relating to their personal investments.
(2) THE REQUIREMENT THAT ALL PERSONAL SECURITIES TRANSACTIONS BE CONDUCTED
CONSISTENT WITH THE CODE AND IN SUCH A MANNER AS TO AVOID ANY ACTUAL
OR POTENTIAL CONFLICT OF INTEREST OR ANY ABUSE OF AN INDIVIDUAL'S
POSITION OF TRUST AND RESPONSIBILITY.
Investment company personnel must not only seek to achieve
technical compliance with the Code but should strive to abide by its
spirit and the principles articulated herein.
(3) THE FUNDAMENTAL STANDARD THAT INVESTMENT COMPANY PERSONNEL SHOULD NOT
TAKE INAPPROPRIATE ADVANTAGE OF THEIR POSITIONS.
Investment company personnel must avoid any situation that might
compromise, or call into question, their exercise of fully independent
judgment in the interest of shareholders, including, but not limited
to the receipt of unusual investment opportunities, perquisites, or
gifts of more than a de minimis value from persons doing or seeking
business with the Fund.
<PAGE>
Rule 17j-1 under the Act generally proscribes fraudulent or
manipulative practices with respect to a purchase or sale of a security held or
to be acquired (as such term is defined in Section 2.) by an investment company,
if effected by an associated person of such company.
The purpose of the Code is to establish procedures consistent with the
Act and Rule 17j-1 to give effect to the following general prohibitions as set
forth in Rule 17j-1(b) as follows:
(a) It shall be unlawful for any affiliated person of or
Principal Underwriter for a registered investment company, or any
affiliated person of an investment adviser of or principal underwriter
for a registered investment company in connection with the purchase or
sale, directly or indirectly, by such person of a security held or to
be acquired, by such registered investment company:
(1) To employ any device, scheme or artifice to defraud
such registered investment company;
(2) To make to such registered investment company any
untrue statement of a material fact or omit to state to
such registered investment company a material fact
necessary in order to make the statements made, in
light of the circumstances under which they are made,
not misleading;
(3) To engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit
upon any such registered investment company; or
(4) To engage in any manipulative practice with respect to
such registered investment company.
<PAGE>
2. DEFINITIONS
(a) "Access Person" means any director/trustee, officer, general
partner or Advisory Person (including any Investment Personnel, as that
term is defined herein) of the Fund, the Manager, the Adviser/Subadviser,
or the Principal Underwriter.
(b) "Adviser/Subadviser" means the Adviser or Subadviser of the Fund
or both as the context may require.
(c) "Advisory Person" means (i) any employee of the Fund, Manager or
Adviser/Subadviser (or of any company in a control relationship to the
Fund, Manager or Adviser/Subadviser) who, in connection with his or her
regular functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of a security by the Fund, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales; and (ii) any natural person in a control relationship
to the Fund who obtains information concerning recommendations made to the
Fund with regard to the purchase or sale of a security.
(d) "Beneficial Ownership" will be interpreted in the same manner as
it would be under Securities Exchange Act Rule 16a-1(a)(2) in determining
which security holdings of a person are subject to the reporting and
short-swing profit provisions of Section 16 of the Securities Exchange Act
of 1934 and the rules and regulations thereunder, except that the
determination of direct or indirect beneficial ownership will apply to all
securities which an Access Person has or acquires (Exhibit A).
(e) "Complex" means the group of registered investment companies for
which Prudential Investments Fund Management LLC serves as Manager;
provided, however, that with respect to Access Persons of the Subadviser
(including any unit or subdivision thereof), "Complex" means the group of
registered investment companies in the Complex advised by the Subadviser or
unit or subdivision thereof.
(f) "Compliance Officer" means the person designated by the Manager,
the Adviser/Subadviser, or Principal Underwriter (including his or her
designee) as having responsibility for compliance with the requirements of
the Code.
(g) "Control" will have the same meaning as that set forth in Section
2(a)(9) of the Act.
(h) "Disinterested Director/Trustee" means a Director/ Trustee of the
Fund who is not an "interested person" of the Fund within the meaning of
Section 2(a)(19) of the Act.
3
<PAGE>
An interested Director/Trustee who would not otherwise be deemed to be
an Access Person, shall be treated as a Disinterested Director/Trustee for
purposes of compliance with the provisions of the Code.
(i) "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933, the issuer of which,
immediately before the registration, was not subject to the reporting
requirements of sections 13 or 15(d) of the Securities Exchange Act of
1934.
(j) "Investment Personnel" means: (a) Portfolio Managers and other
Advisory Persons who provide investment information and/or advice to the
Portfolio Manager(s) and/or help execute the Portfolio Manager's(s')
investment decisions, including securities analysts and traders ; and (b)
any natural person in a control relationship to the Fund who obtains
information concerning recommendations made to the Fund with regard to the
purchase or sale of a security.
(k) "Manager" means Prudential Investments Fund Management, LLC.
(l) "Portfolio Manager" means any Advisory Person who has the direct
responsibility and authority to make investment decisions for the Fund.
(m) "Private placement" means a limited offering that is exempt from
registration under the Securities Act of 1933 pursuant to section 4(2) or
section 4(6) or pursuant to rule 504, rule 505 or rule 506 under such
Securities Act.
(n) "Security" will have the meaning set forth in Section 2(a)(36) of
the Act, except that it will not include shares of registered open-end
investment companies, direct obligations of the Government of the United
States, , short-term debt securities which are "government securities"
within the meaning of Section 2(a)(16) of the Act, bankers' acceptances,
bank certificates of deposit, commercial paper and such other money market
instruments as are designated by the Compliance Officer. For purposes of
the Code, an "equivalent Security" is one that has a substantial economic
relationship to another Security. This would include, among other things,
(1) a Security that is exchangeable for or convertible into another
Security, (2) with respect to an equity Security, a Security having the
same issuer (including a private issue by the same issuer) and any
derivative, option or warrant relating to that Security and (3) with
respect to a fixed-income Security, a Security having the same issuer,
maturity, coupon and rating.
4
2
<PAGE>
(o) Security held or to be acquired means any Security or any
equivalent Security which, within the most recent 15 days: (1) is or has
been held by the Fund; or (2) is being considered by the Fund or its
investment adviser for purchase by the Fund.
3. APPLICABILITY
The Code applies to all Access Persons and the Compliance Officer shall
provide each Access Person with a copy of the Code. The prohibitions described
below will only apply to a transaction in a Security in which the designated
Access Person has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership. The Compliance Officer will maintain a list of
all Access Persons who are currently, and within the past five years, subject to
the Code.
4. PROHIBITED PURCHASES AND SALES
A. INITIAL PUBLIC OFFERINGS
No Investment Personnel may acquire any Securities in an initial public
offering. For purposes of this restriction, "Initial Public Offerings" shall not
include offerings of government and municipal securities.
B. PRIVATE PLACEMENTS
No Investment Personnel may acquire any Securities in a private placement
without prior approval.
(i) Prior approval must be obtained in accordance with the preclearance
procedure described in Section 6 below. Such approval will take into
account, among other factors, whether the investment opportunity
should be reserved for the Fund and its shareholders and
5
<PAGE>
whether the opportunity is being offered to the Investment
Personnel by virtue of his or her position with the Fund. The
Adviser/Subadviser shall maintain a record of such prior approval and
reason for same, for at least 5 years after the end of the fiscal year
in which the approval is granted.
(ii) Investment Personnel who have been authorized to acquire Securities in
a private placement must disclose that investment to the chief
investment officer (including his or her designee) of the
Adviser/Subadviser (or of any unit or subdivision thereof) or the
Compliance Officer when they play a part in any subsequent
consideration of an investment by the Fund in the issuer. In such
circumstances, the Fund's decision to purchase Securities of the
issuer will be subject to an independent review by appropriate
personnel with no personal interest in the issuer.
C. BLACKOUT PERIODS
(i) Except as provided in Section 5 below, Access Persons are prohibited
from executing a Securities transaction on a day during which any
investment company in the Complex has a pending "buy" or "sell" order
in the same or an equivalent Security and until such time as that
order is executed or withdrawn; provided, however, that this
prohibition shall not apply to Disinterested Directors/Trustees except
if they have actual knowledge of trading by any fund in the Complex
and, in any event, only with respect to those funds on whose boards
they sit.
6
<PAGE>
This prohibition shall also not apply to Access Persons of the
Subadviser who do not, in the ordinary course of fulfilling his or her
official duties, have access to information regarding the purchase and sale
of Securities for the Fund and are not engaged in the day-to-day operations
of the Fund; provided that Securities investments effected by such Access
Persons during the proscribed period are not effected with knowledge of the
purchase or sale of the same or equivalent Securities by any fund in the
Complex.
A "pending 'buy' or 'sell' order" exists when a decision to purchase
or sell a Security has been made and communicated.
(ii) Portfolio Managers are prohibited from buying or selling a
Security within seven calendar days before or after the Fund trades in the
same or an equivalent Security. Nevertheless, a personal trade by any
Investment Personnel shall not prevent a Fund in the same Complex from
trading in the same or an equivalent security. However, such a transaction
shall be subject to independent review by the Compliance Officer.
(iii) If trades are effected during the periods proscribed in (i) or
(ii) above, except as provided in (iv) below with respect to (i) above, any
profits realized on such trades will be promptly required to be disgorged
to the Fund.
(iv) A transaction by Access Persons (other than Investment Personnel)
inadvertently effected during the period proscribed in (i) above will not
be considered a violation of the Code and disgorgement will not be required
so long as the transaction was effected in accordance with the preclearance
procedures described in Section 6 below and without prior knowledge of
trading by any fund in the Complex in the same or an equivalent Security.
7
<PAGE>
D. SHORT-TERM TRADING PROFITS
Except as provided in Section 5 below, Investment Personnel are prohibited
from profiting from a purchase and sale, or sale and purchase, of the same or an
equivalent Security within any 60 calendar day period. If trades are effected
during the proscribed period, any profits realized on such trades will be
immediately required to be disgorged to the Fund.
E. SHORT SALES
No Access Person may sell any security short which is owned by any Fund in
the Complex. Access Persons may, however make short sales when he/she owns an
equivalent amount of the same security.
F. OPTIONS
No Access Person may write a naked call option or buy a naked put option on
a security owned by any Fund in the Complex. Access Persons may purchase options
on securities not held by any Fund in the Complex, or purchase call options or
write put options on securities owned by any Fund in the Complex, subject to
preclearance and the same restrictions applicable to other securities. Access
Persons may write covered call options or buy covered put options on a security
owned by any Fund in the Complex at the discretion of the Compliance Officer.
G. INVESTMENT CLUBS
No Access Person may participate in an investment club.
5. EXEMPTED TRANSACTIONS
Subject to preclearance in accordance with Section 6 below with respect to
8
<PAGE>
subitems (b), (e), (f), (g) and (i) hereof, the prohibitions of Sections 4(C)
and 4(D) will not apply to the following:
(a) Purchases or sales of Securities effected in any account over
which the Access Person has no direct or indirect influence or control or
in any account of the Access Person which is managed on a discretionary
basis by a person other than such Access Person and with respect to which
such Access Person does not in fact influence or control such transactions.
(b) Purchases or sales of Securities (or their equivalents) which are
not eligible for purchase or sale by any fund in the Complex.
(c) Purchases or sales of Securities which are non-volitional on the
part of either the Access Person or any fund in the Complex.
(d) Purchases of Securities which are part of an automatic dividend
reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its Securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired.
(f) Any equity Securities transaction, or series of related
transactions effected over a 30 calendar day period, involving 500 shares
or less in the aggregate, if (i) the Access Person has no prior knowledge
of activity in such security by any fund in the Complex and (ii) the issuer
is listed on The New York Stock Exchange or has a market capitalization
(outstanding shares multiplied by the current price per share) greater than
$1 billion (or a corresponding market capitalization in foreign markets).
(g) Any fixed-income Securities transaction, or series of related
transactions effected over a 30 calendar day period, involving 100 units
($100,000 principal amount) or less in the aggregate, if the Access Person
has no prior knowledge of transactions in such Securities by any fund in
the Complex.
(h) Any transaction in index options effected on a broad-based index
(See Exhibit B.)(1)
(i) Purchases or sales of Securities which receive the prior
- -----------------
(1) Exhibit B will be amended by the Compliance Officer as necessary.
9
<PAGE>
approval of the Compliance Officer (such person having no personal
interest in such purchases or sales), based on a determination that no
abuse is involved and that such purchases and sales are not likely to have
any economic impact on any fund in the Complex or on its ability to
purchase or sell Securities of the same class or other Securities of the
same issuer.
(j) Purchases or sales of Unit Investment Trusts.
6. PRECLEARANCE
Access Persons (other than Disinterested Directors/Trustees) must preclear
all personal Securities investments with the exception of those identified in
subparts (a), (c), (d), (h) and (j) of Section 5 above.
All requests for preclearance must be submitted to the Compliance Officer
for approval. All approved orders must be executed no later than 5:00 p.m. local
time on the business day following the date preclearance is granted. If any
order is not timely executed, a request for preclearance must be resubmitted.
7. REPORTING
(a) Disinterested Directors/Trustees shall report to the Secretary of the
Fund or the Compliance Officer the information described in Section 7(b) hereof
with respect to transactions in any Security in which such Disinterested
Director/Trustee has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership in the Security only if such Disinterested
Director/Trustee, at the time of that transaction knew or, in the ordinary
course of fulfilling his or her official duties as a Director/Trustee of the
Fund, should have known that, during the 15-day period immediately preceding or
subsequent to the date of the transaction in a Security by such
Director/Trustee, such Security is or was purchased or sold by the Fund or was
being considered for purchase
10
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or sale by the Fund, the Manager or Adviser/Subadviser; provided, however,
that a Disinterested Director/Trustee is not required to make a report with
respect to transactions effected in any account over which such Director/Trustee
does not have any direct or indirect influence or control or in any account of
the Disinterested Director/Trustee which is managed on a discretionary basis by
a person other than such Director/Trustee and with respect to which such
Director/Trustee does not in fact influence or control such transactions. The
Secretary of the Fund or the Compliance Officer shall maintain such reports and
such other records to the extent required by Rule 17j-1 under the Act.
(b) Every report required by Section 7(a) hereof shall be made not later
than ten days after the end of the calendar quarter in which the transaction to
which the report relates was effected, and shall contain the following
information:
(i) The date of the transaction, the title and the number of shares, and
the principal amount of each Security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any other type
of acquisition or disposition);
(iii) The price at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through whom the
transaction was effected; and
(v) The date that the report is submitted.
(c) Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or she has
any direct or indirect Beneficial Ownership in the Security to which the report
relates.
8. RECORDS OF SECURITIES TRANSACTIONS AND POST-TRADE REVIEW
Access Persons (other than Disinterested Directors/Trustees) are required
to
11
<PAGE>
direct their brokers to supply, on a timely basis, duplicate copies of
confirmations of all personal Securities transactions and copies of periodic
statements for all Securities accounts in which such Access Persons have a
Beneficial Ownership interest to the Compliance Officer. Such instructions must
be made upon becoming an Access Person and promptly as new accounts are
established, but no later than ten days after the end of a calendar quarter,
with respect to any account established by the Access Person in which any
securities were held during the quarter for the direct or indirect beneficial
interest of the Access Person. Notification must be made in writing and a copy
of the notification must be submitted to Compliance. This notification will
include the broker, dealer or bank with which the account was established and
the date the account was established.
Compliance with this Code requirement will be deemed to satisfy the
reporting requirements imposed on Access Persons under Rule 17j-1(d), provided,
however, that such confirmations and statements contain all the information
required by Section 7. b. hereof and are furnished within the time period
required by such section.
The Compliance Officer will periodically review the personal investment
activity and holdings reports of all Access Persons (including Disinterested
Directors/Trustees with respect to Securities transactions reported pursuant to
Section 7 above).
9. DISCLOSURE OF PERSONAL HOLDINGS
Within ten days after an individual first becomes and Access Person and
thereafter on an annual basis, each Access Person (other than Disinterested
Directors/Trustees) must disclose all personal Securities holdings. Such
disclosure must be made in writing and be as of the date the individual first
became an Access
12
<PAGE>
Person with respect to the initial report and by January 30 of each year,
including holdings information as of December 31, with respect to the annual
report. All such reports shall include the following: title, number of shares
and principal amount of each security held, name of broker, dealer or bank with
whom these securities are held and the date of submission by the Access Person.
10. GIFTS
Access Persons are prohibited from receiving any gift or other thing of
more than $100 in value from any person or entity that does business with or on
behalf of the Fund. Occasional business meals or entertainment (theatrical or
sporting events, etc.) are permitted so long as they are not excessive in number
or cost.
11. SERVICE AS A DIRECTOR
Investment Personnel are prohibited from serving on the boards of directors
of publicly traded companies, absent prior authorization based upon a
determination that the board service would be consistent with the interests of
the Fund and its shareholders. In the limited instances that such board service
is authorized, Investment Personnel will be isolated from those making
investment decisions affecting transactions in Securities issued by any publicly
traded company on whose board such Investment Personnel serves as a director
through the use of "Chinese Wall" or other procedures designed to address the
potential conflicts of interest.
12. CERTIFICATION OF COMPLIANCE WITH THE CODE
Access Persons are required to certify annually as follows:
(i) that they have read and understood the Code;
(ii) that they recognize that they are subject to the Code;
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<PAGE>
(iii) that they have complied with the requirements of the Code; and
(iv) that they have disclosed or reported all personal Securities
transactions required to be disclosed or reported pursuant to
the requirements of the Code.
13. CODE VIOLATIONS
All violations of the Code will be reported to the Board of
Directors/Trustees of the Fund on a quarterly basis. The Board of
Directors/Trustees may take such action as it deems appropriate.
14. REVIEW BY THE BOARD OF DIRECTORS/TRUSTEES
The Board of Directors/Trustees will be provided with an annual report
which at a minimum:
(i) certifies to the Board that the Fund, Manager, Investment
Adviser/Subadviser, and Principal Underwriter has adopted procedures reasonably
necessary to prevent its Access persons from violating its Code.
(ii) summarizes existing procedures concerning personal investing and any
changes in the procedures made during the preceding year;
(iii) identifies material Code or procedural violations and sanctions
imposed in response to those material violations; and
(iv) identifies any recommended changes in existing restrictions or
procedures based upon the Fund's experience under the Code, evolving industry
practices, or developments in applicable laws and regulations.
The Board will review such report and determine if any further action is
required.
14
<PAGE>
EXPLANATORY NOTES TO CODE
1. No comparable Code requirements have been imposed upon Prudential Mutual
Fund Services LLC, the Fund's transfer agent, or Prudential Investment
Management Services, LLC , which acts as the Fund's distributor, or those of
their directors or officers who are not Directors/Trustees or Officers of the
Fund since they are deemed not to constitute Access Persons or Advisory Persons
as defined in paragraphs (e)(1) and (2) of Rule 17j-1.
<PAGE>
Exhibit A
Definition of Beneficial Ownership
The term "beneficial ownership" of securities would include not only
ownership of securities held by an access person for his or her own benefit,
whether in bearer form or registered in his or her own name or otherwise, but
also ownership of securities held for his or her benefit by other (regardless of
whether or how they are registered) such as custodians, brokers, executors,
administrators, or trustees (including trusts in which he or she has only a
remainder interest), and securities held for his or her account by pledges,
securities owned by a partnership in which he or she should regard as a personal
holding corporation. Correspondingly, this term would exclude securities held by
an access person for the benefit of someone else.
Ordinarily, this term would not include securities held by executors or
administrators in estates in which an access person is a legatee or beneficiary
unless there is a specific legacy to such person of such securities or such
person is the sole legatee or beneficiary and there are other assets in the
estate sufficient to pay debts ranking ahead of such legacy, or the securities
are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by an access person where such person enjoys "benefits
substantially equivalent to ownership". The SEC has said that although the final
determination of beneficial ownership is a question to be determined in the
light of the facts of the particular case, generally a person is regarded as the
beneficial owner of securities held in the name of his or her spouse and their
minor children. Absent special circumstances such relationship ordinarily
results in such person obtaining benefits substantially equivalent to ownership,
e.g., application of the income derived from such securities to maintain a
common home, to meet expenses which such person otherwise would meet from other
sources, or the ability to exercise a controlling influence over the purchase,
sale or voting of such securities.
An access person also may be regarded as the beneficial owner of securities
held in the name of another person, if by reason of any contact, understanding,
relationship, agreement or other arrangement, he obtains therefrom benefits
substantially equivalent to those of ownership. Moreover, the fact that the
holder is a relative or relative of a spouse and sharing the same home as an
access person may in itself indicate that the access person would obtain
benefits substantially equivalent to those of ownership from securities held in
the name of such relative. Thus, absent countervailing facts, it is expected
that securities held by relatives who share the same home as an access person
will be treated as being beneficially owned by the access person.
An access person also is regarded as the beneficial owner of securities
held in the name of a spouse, minor children or other person, even though he
does not obtain therefrom the aforementioned benefits of ownership, if he can
vest or revest title in himself at once or at some future time.
<PAGE>
Exhibit B
INDEX OPTIONS ON A BROAD-BASED INDEX
TICKER SYMBOL DESCRIPTION
- ---------------------------------------- ---------------------------------------
NIK Nikkei 300 Index CI/Euro
- ---------------------------------------- ---------------------------------------
OEX S&P 100 Close/Amer Index
- ---------------------------------------- ---------------------------------------
OEW S&P 100 Close/Amer Index
- ---------------------------------------- ---------------------------------------
OEY S&P 100 Close/Amer Index
- ---------------------------------------- ---------------------------------------
SPB S&P 500 Index
- ---------------------------------------- ---------------------------------------
SPZ S&P 500 Open/Euro Index
- ---------------------------------------- ---------------------------------------
SPX S&P 500 Open/Euro Index
- ---------------------------------------- ---------------------------------------
SXZ S&P 500 (Wrap)
- ---------------------------------------- ---------------------------------------
SXB S&P 500 Open/Euro Index
- ---------------------------------------- ---------------------------------------
RUZ Russell 2000 Open/Euro Index
- ---------------------------------------- ---------------------------------------
RUT Russell 2000 Open/Euro Index
- ---------------------------------------- ---------------------------------------
MID S&P Midcap 400 Open/Euro Index
- ---------------------------------------- ---------------------------------------
NDX NASDAQ- 100 Open/Euro Index
- ---------------------------------------- ---------------------------------------
NDU NASDAQ- 100 Open/Euro Index
- ---------------------------------------- ---------------------------------------
NDZ NASDAQ- 100 Open/Euro Index
- ---------------------------------------- ---------------------------------------
NDV NASDAQ- 100 Open/Euro Index
- ---------------------------------------- ---------------------------------------
NCZ NASDAQ- 100 Open/Euro Index
- ---------------------------------------- ---------------------------------------
SML S&P Small Cap 600
- ---------------------------------------- ---------------------------------------
TPX U.S. Top 100 Sector
- ---------------------------------------- ---------------------------------------
SPL S&P 500 Long-Term Close
- ---------------------------------------- ---------------------------------------
ZRU Russell 2000 L-T Open./Euro
- ---------------------------------------- ---------------------------------------
VRU Russell 2000 Long-Term Index
- ---------------------------------------- ---------------------------------------
<PAGE>
Exhibit (p)(16)(ii)
JENNISON ASSOCIATES LLC
CODE OF ETHICS,
POLICY ON INSIDER TRADING
AND
PERSONAL TRADING POLICY
AS AMENDED DECEMBER 6, 1999
<PAGE>
SECTION I
CODE OF ETHICS
FOR
JENNISON ASSOCIATES LLC
This Code sets forth rules, regulations and standards of conduct for
the employees of Jennison Associates LLC. It bears the approval of the
Corporation's Board of Directors and applies to Jennison Associates and all
subsidiaries.
The Code incorporates The Prudential Insurance Company of America's
ethics policies as well as additional policies specific to Jennison Associates
LLC. Prudential's Code of Ethics, "Making the Right Choices", may be found as
Exhibit Q in Jennison Associates' Compliance Manual.
The prescribed guidelines assure that the high ethical standards long
maintained by Jennison continue to be applied. The purpose of the Code is to
preclude circumstances which may lead to or give the appearance of conflicts of
interest, insider trading, or unethical business conduct. The rules prohibit
certain activities and personal financial interests as well as require
disclosure of personal investments and related business activities of all
directors, officers and employees.
ERISA and the federal securities laws define an investment advisor as a
fiduciary who owes his clients a duty of undivided loyalty, who shall not engage
in any activity in conflict with the interests of the client. As a fiduciary,
our personal and corporate ethics must be above reproach. Actions which expose
any of us or the organization to even the appearance of impropriety must not
occur.
The excellent name of our firm continues to be a direct reflection of
the conduct of each of us in everything we do.
Being fully aware of and strictly adhering to the Code of Ethics is the
responsibility of each Jennison Associates employee.
2
<PAGE>
CONFIDENTIAL INFORMATION
Employees may become privy to confidential information (information not
generally available to the public) concerning the affairs and business
transactions of Jennison, companies researched by us for investment, our present
and prospective clients, suppliers, officers and other staff members.
Confidential information also includes trade secrets and other proprietary
information of the Corporation such as business or product plans, systems,
methods, software, manuals and client lists. Safeguarding confidential
information is essential to the conduct of our business. Caution and discretion
are required in the use of such information and in sharing it only with those
who have a legitimate need to know.
A) PERSONAL USE: Confidential information obtained or developed as a
result of employment with the Corporation is not to be used or disclosed for the
purpose of furthering any private interest or as a means of making any personal
gain. Use or disclosure of such information could result in civil or criminal
penalties against the Corporation or the individual responsible for disclosing
such information.
Further guidelines pertaining to confidential information are contained
in the "Policy Statement on Insider Trading." (Set forth on page 8 in the
section dedicated specifically to Insider Trading.)
B) RELEASE OF CLIENT INFORMATION: Information concerning a client which
has been requested by third persons, organizations or governmental bodies may
only be released with the consent of the client involved. All requests for
information concerning a client (other than routine credit inquiries), including
requests pursuant to the legal process (such as subpoenas or court orders) must
be promptly referred to Karen E. Kohler. No information may be released, nor
should the client involved be contacted, until so directed by Karen E. Kohler.
In order to preserve the rights of our clients and to limit the firm's
liability concerning the release of client proprietary information, care must be
taken to:
* Limit use and discussion of information obtained on the job to normal
business activities.
* Request and use only information which is related to our business
needs.
* Restrict access to records to those with proper authorization and
legitimate business needs.
* Include only pertinent and accurate data in files which are used as a
basis for taking action or making decisions.
3
<PAGE>
CONFLICTS OF INTEREST
You should avoid actual or apparent conflicts of interest - that is,
any personal interest outside the Company which could be placed ahead of your
obligations to our clients, Jennison Associates or The Prudential Insurance
Company of America. Conflicts may exist even when no wrong is done. The
opportunity to act improperly may be enough to create the appearance of a
conflict.
We recognize and respect an employee's right of privacy concerning
personal affairs, but we must require a full and timely disclosure of any
situation which could result in a conflict of interest or even the appearance of
a conflict. Whether or not a conflict exists will be determined by the Company,
not by the employee involved.
To reinforce our commitment to the avoidance of potential conflicts of
interest, the following rules have been adopted:
1) YOU MAY NOT, without first having secured prior approval from the
Board of Directors, serve as a director, officer, employee, partner or trustee -
nor hold any other position of substantial interest - in any outside business
enterprise. You do not need prior approval, however, if the following three
conditions are met: one, the enterprise is a family firm owned principally by
other members of your family; two, the family business is not doing business
with Jennison or The Prudential; and three, the services required will not
interfere with your duties or your independence of judgment. Significant
involvement by employees in outside business activity is generally unacceptable.
In addition to securing prior approval for outside business activities, you will
be required to disclose all relationships with outside enterprises annually.
* Note - The above deals only with positions in business enterprises.
It does not effect Jennison's practice of permitting employees to be associated
with governmental, educational, charitable, religious or other civic
organizations. These activities may be entered into without prior consent, but
must still be disclosed on an annual basis.
2) YOU MAY NOT act on behalf of Jennison in connection with any
transaction in which you have a personal interest. This rule does not apply to
any personal interest resulting from your participation in any Jennison or
Prudential plan in the nature of incentive compensation, or in the case of a
plan which provides for direct participation in specific transactions by
Jennison's Board of Directors.
3) YOU MAY NOT, without prior approval from the Board of Directors,
have a substantial interest in any outside business which, to your knowledge, is
involved currently in a business transaction with Jennison or The Prudential, or
is engaged in businesses similar to any business engaged in by Jennison. A
substantial interest includes any investment in the outside business involving
an amount greater than 10 percent of your gross assets, or $10,000 if that
amount is larger, or involving an ownership interest greater than 2 percent of
the outstanding equity interests. You do not need approval to invest in
open-ended registered investment companies such as investments in mutual funds
and similar enterprises which are publicly owned.
4
<PAGE>
4) YOU MAY NOT, without prior approval of the Board of Directors,
engage in any transaction involving the purchase of products and/or services
from Jennison, except on the same terms and conditions as they are offered to
the public. Plans offering services to employees approved by the Board of
Directors are exempt from this rule.
5.) YOU MAY NOT purchase an equity interest in any competitor.
Employees and their immediate families are also prohibited from investing in
securities of a client or supplier with whom the staff member regularly deals
even if the securities are widely traded.
OTHER BUSINESS ACTIVITIES
ISSUES REGARDING THE RETENTION OF SUPPLIERS: The choice of our
suppliers must be based on quality, reliability, price, service, and technical
advantages.
GIFTS: Jennison employees and their immediate families should not
solicit, accept, retain or provide any gifts or favors which might influence
decisions you or the recipient must make in business transactions involving
Jennison or which others might reasonably believe could influence those
decisions. Even a nominal gift should not be accepted if, to a reasonable
observer, it might appear that the gift would influence your business decisions.
Modest gifts and favors, which would not be regarded by others as
improper, may be accepted or given on an occasional basis. Examples of such
gifts are those received as normal business courtesies (i.e. meals or golf
games); non-cash gifts of nominal value (such as received at Holiday time);
gifts received because of kinship, marriage or social relationships entirely
beyond and apart from an organization in which membership or an official
position is held as approved by the Corporation. Entertainment which satisfies
these requirements and conforms to generally accepted business practices also is
permissible. Please reference the Gifts and Entertainment section of Jennison
Associates' Compliance Manual for a more detailed explanation of Jennison's
policy towards gifts and entertainment.
IMPROPER PAYMENTS - KICKBACKS: In the conduct of the Corporation's
business, no bribes, kickbacks, or similar remuneration or consideration of any
kind are to be given or offered to any individual or organization or to any
intermediaries such as agents, attorneys or other consultants, for the purpose
of influencing such individual or organization in obtaining or retaining
business for, or directing business to, the Corporation.
BOOKS, RECORDS AND ACCOUNTS: The integrity of the accounting records of
the Corporation is essential. All receipts and expenditures, including personal
expense statements must be supported by documents that accurately and properly
describe such expenses. Staff members responsible for approving expenditures or
for keeping books, records and accounts for the Corporation are required to
approve and record all expenditures and other entries based upon proper
supporting documents so that the accounting records of the Corporation are
maintained in reasonable detail, reflecting accurately and fairly all
transactions of the Corporation including the
5
<PAGE>
disposition of its assets and liabilities. The falsification of any book, record
or account of the Corporation, the submission of any false personal expense
statement, claim for reimbursement of a non-business personal expense, or false
claim for an employee benefit plan payment are prohibited. Disciplinary action
will be taken against employees who violate these rules, which may result in
dismissal.
LAWS AND REGULATIONS: The activities of the Corporation must always be
in full compliance with applicable laws and regulations. It is the Company's
policy to be in strict compliance with all laws and regulations applied to our
business. We recognize, however, that some laws and regulations may be ambiguous
and difficult to interpret. Good faith efforts to follow the spirit and intent
of all laws is expected. To ensure compliance, the Corporation intends to
educate its employees on laws related to Jennison's activities which may include
periodically issuing bulletins, manuals and memoranda. Staff members are
expected to read all such materials and be familiar with their content.
OUTSIDE ACTIVITIES & POLITICAL AFFILIATIONS: Jennison Associates does
not contribute financial or other support to political parties or candidates for
public office except where lawfully permitted and approved in advance in
accordance with procedures adopted by Jennison's Board of Directors. Employees
may, of course, make political contributions, but only on their own behalf; they
will not be reimbursed by the Company for such contributions.
Legislation generally prohibits the Corporation or anyone acting on its
behalf from making an expenditure or contribution of cash or anything else of
monetary value which directly or indirectly is in connection with an election to
political office; as, for example granting loans at preferential rates or
providing non-financial support to a political candidate or party by donating
office facilities. Otherwise, individual participation in political and civic
activities conducted outside of normal business hours is encouraged, including
the making of personal contributions to political candidates or activities.
Employees are free to seek and hold an elective or appointive public
office, provided you do not do so as a representative of the Company. However,
you must conduct campaign activities and perform the duties of the office in a
manner that does not interfere with your responsibilities to the firm.
6
<PAGE>
COMPLIANCE WITH THE CODE & CONSEQUENCES IF VIOLATION OF THE CODE OCCURS:
Each year all employees will be required to complete a form certifying
that they have read this booklet, understand their responsibilities, and are in
compliance with the requirements set forth in this statement.
This process should remind us of the Company's concern with ethical
issues and its desire to avoid conflicts of interest or their appearance. It
should also prompt us to examine our personal circumstances in light of the
Company's philosophy and policies regarding ethics.
Certain key employees will be required to complete a form verifying
that they have complied with all company procedures and filed disclosures of
significant personal holdings and corporate affiliations.
If any staff member has reason to believe that any situation may have
resulted in a violation of any provision of the Code of Ethics, whether by that
staff member or by another, the matter must be reported promptly to Karen E.
Kohler.
Violation of any provision of the Code of Ethics by any staff member
may constitute grounds for disciplinary action, including dismissal.
7
<PAGE>
SECTION II
INSIDER TRADING
As a result of recent legislative events, particularly the enactment of
the Insider Trading and Securities Fraud Enforcement Act of 1988, the Securities
Exchange Acts and the Investment Advisors Act of 1940 require that all
investment advisors establish, maintain and enforce policies and supervisory
procedures designed to prevent the misuse of material, non-public information by
such investment advisor, and any associated person.
This section of the Code sets forth Jennison Associates' policy
statement on insider trading. It explains some of the terms and concepts
associated with insider trading, as well as the civil and criminal penalties for
insider trading violations. In addition, it sets forth the necessary procedures
required to implement Jennison Associates' Insider Trading Policy Statement.
This policy applies to all Jennison Associates' employees, as well as
the employees of all affiliated companies.
8
<PAGE>
JENNISON ASSOCIATES' POLICY STATEMENT
AGAINST INSIDER TRADING
When contemplating a transaction for your personal account, or an
account in which you may have a direct or indirect personal or family interest,
we must be certain that such transaction is not in conflict with the interests
of our clients. Specific rules in this area are difficult, and in the final
analysis, each of us must make our own determination as to whether a transaction
is in conflict with client interests. Although it is not possible to anticipate
all potential conflicts of interest, we have tried to set a standard that
protects the firm's clients, yet is also practical for our employees. The
Company recognizes the desirability of giving its corporate personnel reasonable
freedom with respect to their investment activities, on behalf of themselves,
their families, and in some cases non-client accounts (i.e. charitable or
educational organizations on whose boards of directors corporate personnel
serve). However, personal investment activity may conflict with the interests of
the Company's clients. In order to avoid such conflicts -- or even the
appearance of conflicts -- the Company has adopted the following policy:
Jennison Associates LLC forbids any director, officer or employee
from trading, either personally or on behalf of clients or others, on material,
non-public information or communicating material, non-public information to
others in violation of the law. Said conduct is deemed to be "insider trading."
Such policy applies to every director, officer and employee and extends to
activities within and outside their duties at Jennison Associates.
Every director, officer, and employee is required to read and retain
this policy statement. Questions regarding Jennison Associates' Insider Trading
policy and procedures should be referred to Karen E. Kohler or John H. Hobbs.
EXPLANATION OF RELEVANT TERMS AND CONCEPTS
Although insider trading is illegal, Congress has not defined
"insider", "material" or "non-public information". Instead the courts have
developed definitions of these terms. Set forth below are very general
descriptions of these terms. However, it is usually not easily determined
whether information is "material" or "non-public" and, therefore, whenever you
have any questions as to whether information is material or non-public, consult
with Karen E. Kohler. Do not make this decision yourself.
9
<PAGE>
1) WHO IS AN INSIDER?
The concept of an "insider" is broad. It includes officers, directors
and employees of a company. A person may be a "temporary insider" if he or she
enters into a special confidential relationship in the conduct of a company's
affairs and as a result is given access to information solely for the company's
purposes. Examples of temporary insiders are the company's attorneys,
accountants, consultants and bank lending officers, as well as the employees of
such organizations. Jennison Associates and its employees may become "temporary
insiders" of a company in which we invest, in which we advise, or for which we
perform any other service. An outside individual may be considered an insider,
according to the Supreme Court, if the company expects the outsider to keep the
disclosed non-public information confidential or if the relationship suggests
such a duty of confidentiality.
2) WHAT IS MATERIAL INFORMATION?
Trading on inside information is not a basis for liability unless the
information is material. Material Information is defined, as:
* Information, for which there is a substantial likelihood, that a
reasonable investor would consider important in making his or her investment
decisions, or
* Information that is reasonably certain to have a substantial effect
on the price of a company's securities.
Information that directors, officers and employees should consider
material includes, but is not limited to: dividend changes, earnings estimates,
changes in previously released earnings estimates, a significant increase or
decline in orders, significant new products or discoveries, significant merger
or acquisition proposals or agreements, major litigation, liquidation problems,
and extraordinary management developments.
In addition, knowledge about Jennison Associates' trading information
and patterns may be deemed material.
3) WHAT IS NON-PUBLIC INFORMATION?
Information is "non-public" until it has been effectively communicated
to the market place. One must be able to point to some fact to show that the
information is generally available to the public. For example, information found
in a report filed with the SEC, or appearing in Dow Jones, Reuters Economics
Services, The Wall Street Journal or other publications of general circulation
would be considered public.
4) MISAPPROPRIATION THEORY
Under the "misappropriation" theory liability is established when
trading occurs on material non-public information that is stolen or
misappropriated from any other person. In U.S. v. Carpenter, a columnist
defrauded The Wall Street Journal by stealing non-public information from the
Journal and using it for trading in the securities markets. Note that the
misappropriation
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<PAGE>
theory can be used to reach a variety of individuals not previously thought to
be encompassed under the fiduciary duty theory.
5) WHO IS A CONTROLLING PERSON?
"Controlling persons" include not only employers, but any person with
power to influence or control the direction of the management, policies or
activities of another person. Controlling persons may include not only the
Company, but its directors and officers.
PENALTIES FOR INSIDER TRADING VIOLATIONS
Penalties for trading on or communicating material non-public
information are more severe than ever. The individuals involved in such unlawful
conduct may be subject to both civil and criminal penalties. A controlling
person may be subject to civil or criminal penalties for failing to establish,
maintain and enforce Jennison Associates' Policy Statement against Insider
Trading and/or if such failure permitted or substantially contributed to an
insider trading violation.
Individuals can be subject to some or all of the penalties below even
if he or she does not personally benefit from the violation. Penalties include:
a. CIVIL INJUNCTIONS
b. TREBLE DAMAGES
c. DISGORGEMENT OF PROFITS
d. JAIL SENTENCES - Under the new laws, the maximum jail
sentences for criminal securities law violations increased from 5 years to 10
years.
e. CIVIL FINES - Persons who committed the violation may pay
up to three times the profit gained or loss avoided, whether or not the person
actually benefited.
f. CRIMINAL FINES - The employer or other "controlling
persons" may pay up to $2,500,000.
g. Violators will be barred from the securities industry.
11
<PAGE>
SECTION III
IMPLEMENTATION PROCEDURES & POLICY
The following procedures have been established to assist the officers,
directors and employees of Jennison Associates in preventing and detecting
insider trading as well as to impose sanctions against insider trading. Every
officer, director and employee must follow these procedures or risk serious
sanctions, including possible dismissal, substantial personal liability and
criminal penalties. If you have any questions about these procedures you should
consult Karen E. Kohler or John H. Hobbs.
1) IDENTIFYING INSIDE INFORMATION
Before trading for yourself or others, including client accounts
managed by Jennison Associates, in the securities of a company about which you
may have potential inside information, ask yourself the following questions:
i. IS THE INFORMATION MATERIAL? *Would an investor consider
this information important in making his or her investment decisions? ** Would
this information substantially effect the market price of the securities if
generally disclosed?
ii. IS THE INFORMATION NON-PUBLIC? * To whom has this
information been provided? ** Has the information been effectively communicated
to the marketplace by being published in Reuters, The Wall Street Journal, or
other publications of general circulation?
If, after consideration of the above, you believe that the information
is material and non-public, or if you have questions as to whether the
information is material and non-public, you should take the following steps:
i. Report the matter immediately to Karen E. Kohler or John H.
Hobbs. If neither are available you should contact Mr. Louis Begley, our
attorney at Debevoise and Plimpton ((212)909-6000).
ii. Do not repurchase or sell the securities on behalf of
yourself or others, including client accounts managed by Jennison Associates.
iii. Do not communicate the information inside or outside
Jennison Associates, other than to Karen E. Kohler, John H. Hobbs, or Mr. Begley
our outside counsel.
iv. After Karen E. Kohler, John H. Hobbs, or Mr. Begley has
reviewed the issue, you will be instructed to continue the prohibitions against
trading and communication, or you will be allowed to trade and communicate the
information.
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2) RESTRICTING ACCESS TO MATERIAL NON-PUBLIC INFORMATION
Information that you identify as material and non-public may not be
communicated to anyone, including persons within Jennison Associates LLC, except
as provided above. In addition, care should be taken so that such information is
secure. For example, files containing material non-public information should be
locked; access to computer files containing non-public information should be
restricted.
Jennison employees have no obligation to the clients of Jennison
Associates to trade or recommend trading on the basis of material, non-public
(inside) information in their possession. Jennison's fiduciary responsibility to
its clients requires that the firm and its employees regard the limitations
imposed by Federal securities laws.
3) ALLOCATION OF BROKERAGE
To supplement its own research and analysis, to corroborate data
compiled by its staff, and to consider the views and information of others in
arriving at its investment decisions, Jennison Associates, consistent with its
efforts to secure best price and execution, allocates brokerage business to
those broker-dealers in a position to provide such services.
It is the firm's policy not to allocate brokerage in consideration of
the attempted furnishing of material non-public (inside) information. Employees,
in recommending the allocation of brokerage to broker-dealers, should not give
consideration to the provision of any material non-public (inside) information.
The policy of Jennison Associates as set forth in this statement should be
brought to the attention of such broker-dealer.
4) RESOLVING ISSUES CONCERNING INSIDER TRADING
If doubt remains as to whether information is material or non-public,
or if there is any unresolved question as to the applicability or interpretation
of the foregoing procedures and standards, or as to the propriety of any action,
it must be discussed with Karen E. Kohler or John H. Hobbs before trading or
communicating the information to anyone.
This code will be distributed to all Jennison Associates personnel.
Periodically or upon request, Karen E. Kohler will meet with such personnel to
review this statement of policy, including any developments in the law and to
answer any questions of interpretation or application of this policy.
From time to time this statement of policy will be revised in the light
of developments in the law, questions of interpretation and application, and
practical experience with the procedures contemplated by the statement.
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SECTION IV
JENNISON ASSOCIATES PERSONAL TRADING POLICY
1. GENERAL POLICY AND PROCEDURES
The management of Jennison Associates is fully aware of and in no way
wishes to deter the security investments of its individual employees. The
securities markets, whether equity, fixed income, international or domestic,
offer individuals alternative methods of enhancing their personal investments.
Due to the nature of our business and our fiduciary responsibility to
our client funds, we must protect the firm and its employees from the
possibilities of both conflicts of interest and illegal insider trading in
regard to their personal security transactions.
We have adopted the following policies and procedures on employee
personal trading to insure against violations of the law. These policies and
procedures are in addition to those set forth in the Code of Ethics and the
Policy Statement Against Insider Trading.
2. RECORDKEEPING REQUIREMENTS
Jennison Associates, as an investment advisor, is required by Rule
204-2 of the under the Investment Advisers Act of 1940, to keep records of every
transaction in securities in which any of its personnel has any direct or
indirect beneficial ownership, except transactions effected in any account over
which neither the investment adviser nor any advisory representative of the
investment adviser has any direct or indirect influence or control and
transactions in securities which are direct obligations of the United States,
mutual funds and high-quality short-term instruments. This includes transactions
for the personal accounts of an employee, as well as, transactions for the
accounts of other members of their immediate family (including the spouse, minor
children, and adults living in the same household with the officer, director, or
employee) for which they or their spouse have any direct or indirect influence
or control and trusts of which they are trustees or other accounts in which they
have any direct or indirect beneficial interest or direct or indirect influence
or control, unless the investment decisions for the account are made by an
independent investment manager in a fully discretionary account. Jennison
recognizes that some of its employees may, due to their living arrangements, be
uncertain as to their obligations under this Personal Trading Policy. If an
employee has any question or doubt as to whether they have direct or indirect
influence or control over an account, he or she must consult with the Compliance
Department as to their status and obligations with respect to the account in
question.
In addition, Jennison, as a subadviser to investment companies
registered under the Investment Company Act of 1940 (e.g., mutual funds), is
required by Rule 17j-1 under the
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Investment Company Act to review and keep records of personal investment
activities of "access persons" of these funds, unless the access person does not
have direct or indirect influence or control of the accounts. An "access person"
is defined as any director, officer, general partner or Advisory Person of a
Fund or Fund's Investment Adviser. "Advisory Person" is defined as any employee
of the Fund or investment adviser (or of any company in a control relationship
to the Fund or investment adviser) who, in connection with his or her regular
functions or duties, makes, participates in, or obtains information regarding
the purchase or sale of investments by a Fund, or whose functions relate to the
making of any recommendations with respect to the purchases or sales. Therefore,
Jennison's "access persons" and "advisory persons" include the following:
portfolio managers, investment analysts, traders, officers and directors.
1) ACCESS PERSONS: PORTFOLIO MANAGERS, INVESTMENT ANALYSTS, TRADERS, AND
OTHER JENNISON OFFICERS AND DIRECTORS
Access Persons are required to provide the Compliance Department with the
following:
A) INITIAL HOLDINGS REPORTS:
Within 10 days of commencement of employment, an initial holdings
report detailing all personal investments (including private
placements, and index futures contracts and options thereon, but
excluding US Treasury securities, mutual fund shares, and short-term
high quality debt instruments). The report should contain the following
information:
1. the title, number of shares and principal amount of each
investment in which the Access Person had any direct or
indirect beneficial ownership;
2. The name of any broker, dealer or bank with whom the Access
Person maintained an account in which any securities were
held for the direct or indirect benefit of the Access Person;
and
3. The date that the report is submitted by the Access Person.
B) QUARTERLY REPORTS:
1. TRANSACTION REPORTING:Within 10 days after the end of a
calendar quarter, with respect to any transaction during the
quarter in investments in which the Access Person had any
direct or indirect beneficial ownership:
a. The date of the transaction, the title, the interest rate
and maturity date (if applicable), the number of shares
and the principal amount of each investment involved;
b. The nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
c. The price of the investment at which the transaction was
effected;
d. The name of the broker, dealer or bank with or through
which the transaction was effected; and
e. The date that the report is submitted by the Access
Person.
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2. PERSONAL SECURITIES ACCOUNT REPORTING:Within 10 days after the
end of a calendar quarter, with respect to any account
established by the Access Person in which any securities were
held during the quarter for the direct or indirect benefit of
the Access Person:
a. The name of the broker, dealer or bank with whom the
Access Person established the account;
b. The date the account was established; and
c. The date that the report is submitted by the Access Person.
To facilitate compliance with this reporting requirement, Jennison
Associates requires that a duplicate copy of all trade confirmations
and brokerage statements be supplied directly to Jennison Associates'
Compliance Department and to the Prudential's Corporate Compliance
Department. In addition, the Compliance Department must also be
notified immediately upon the creation of any new personal investment
accounts.
C) ANNUAL HOLDINGS REPORTS
Annually, the following information (which information must be
current as of a date no more than 30 days before the report is
submitted):
1. The title, number of shares and principal amount of each
investment in which the Access Person had any direct or
indirect beneficial ownership;
2. The name of any broker, dealer or bank with whom the Access
Person maintains an account in which any securities are held
for the direct or indirect benefit of the Access Person; and
3. The date that the report is submitted by the Access Person.
D) A copy of all discretionary investment advisory contracts or
agreements between the officer, director or employee and his
investment advisors.
E) A copy of Schedule B, Schedule D, and Schedule E from federal
income tax returns on an annual basis.
2) ALL OTHER EMPLOYEES OF JENNISON ASSOCIATES
In order to ensure compliance with these regulations, all other
employees of Jennison Associates shall submit to the Compliance
Department:
A.) Upon commencement of employment and no less than annually
thereafter, a report of all personal securities holdings and
a report of every personal brokerage account in which they
have any direct or indirect beneficial interest. The
Compliance Department must also be notified immediately upon
the creation of any new personal investment accounts.
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The report must disclose the following material:
* Name and type of account - single, joint, trust,
partnership, etc.
* A statement disclosing the general purpose of the
account (e.g., as a trustee of XYZ College, I have
agreed in accordance with the school's Board of
Directors to invest funds on behalf of XYZ for the
benefit of its annual scholarship fund).
* The institution, bank, or otherwise, where the account is
maintained.
B.) A report, including confirmation and quarter-end brokerage
statements, of every security transaction in which they,
their immediate families (including the spouse, minor
children, and adults living in the same household with the
officer, director, or employee) for which they or their
spouse have any direct or indirect influence or control),
and trusts of which they are trustees or any other account
in which they have a beneficial interest and have
participated or direct or indirect influence or control.
To facilitate this aspect of employee securities trading,
Jennison Associates requires that a duplicate copy of all
trade confirmations and brokerage statements be supplied
directly to Jennison Associates' Compliance Department and
to the Prudential's Corporate Compliance Department.
C.) A copy of all discretionary investment advisory contracts or
agreements between the officer, director or employee and his
investment advisors.
D.) A copy of Schedule B, Schedule D, and Schedule E from
federal income tax returns on an annual basis.
3) NON-EMPLOYEE DIRECTORS
A.) Jennison recognizes that a director not employed by Jennison
(i.e., directors designated by The Prudential Insurance
Company of America to sit on Jennison's Board of Directors)
is subject to his or her employer's own code of ethics, a
copy of which and any amendments thereto shall have been
made available to Jennison's Compliance Department. The
Compliance Department of the non-employee director's
employer must represent quarterly to the Jennison Compliance
Department that the non-employee director has complied with
the recordkeeping and other procedures of its code of ethics
during the most recent calendar quarter. Such representation
shall also state that such policies and procedures shall be
deemed adequate for compliance with both Prudential's and
Jennison's Codes of Ethics. If there have been any
violations of the employer's code of ethics by such
non-employee director, the employer's Compliance Department
must submit a detailed report of such violations and what
remedial action, if any was taken.
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B.) Non-employee directors shall be exempt from supplying a copy
of Schedule B, D, and Schedule E from their federal income
tax returns.
C.) Additionally, all non-employee directors shall be exempt
from the pre-clearance procedures as described below.
3. PRE-CLEARANCE PROCEDURES
All directors, officers, and employees of Jennison Associates may need
to obtain clearance from the Personal Investment Committee prior to effecting
any securities transaction in which they or their immediate families (including
the spouse, minor children, and adults living in the same household with the
officer, director, or employee) for which they or their spouse have any direct
or indirect influence or control, have a beneficial interest on behalf of a
trust of which they are trustee, or for any other account in which they have a
beneficial interest or direct or indirect influence or control. Determination as
to whether or not a particular transaction requires pre-approval should be made
by consulting the "Compliance and Reporting of Personal Transactions Matrix"
found on Exhibit A.
Please note, voluntary tender offers are a recent addition to the
"Compliance and Reporting of Personal Transactions" matrix. They are both a
reportable transaction and one that requires pre-approval. Approval of tendering
shares into a tender offer shall be determined on a case-by-case basis by the
Personal Investment Committee.
The Personal Investment Committee will make its decision of whether to
clear a proposed trade on the basis of the personal trading restrictions set
forth -below. A member of the Compliance Department shall promptly notify the
officer, director, or employee of approval or denial to trade the requested
security. Notification of approval or denial to trade may be verbally given as
soon as possible; however, it shall be confirmed in writing within 24 hours of
the verbal notification. Please note that the approval granted will be valid
ONLY for that day in which the approval has been obtained; provided, however,
that approved orders for securities traded in certain foreign markets may be
executed within 2 business days from the date pre-clearance is granted,
depending on the time at which approval is granted and the hours of the markets
on which the security is traded are open. In other words, if a trade was not
effected on the day for which approval was originally sought, a new approval
form must be re-submitted on each subsequent day in which trading may occur. Or,
if the security for which approval has been granted is traded on foreign
markets, approval is valid for an additional day (i.e., the day for which
approval was granted and the day following the day for which approval was
granted).
Only transactions where the investment decisions for the account are
made by an independent investment manager in a fully discretionary account will
be exempt from the pre-clearance procedures. Copies of the agreement of such
discretionary accounts, as well as transaction statements or another comparable
portfolio report, must be submitted on a quarterly basis to the Compliance
Department for review and record retention.
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Written notice of your intended securities activities must be filed for
approval prior to effecting any transaction for which prior approval is
required. The name of the security, the date, the nature of the transaction
(purchase or sale), the price, the name and relationship to you of the account
holder (self, son, daughter, spouse, father, etc.), and the name of the
broker-dealer or bank involved in the transaction must be disclosed in such
written notice. Such written notice should be submitted on the Pre-Clearance
Transaction Request Forms (Equity/Fixed Income) which can be obtained from the
Compliance Department. If proper procedures are not complied with, action will
be taken against the employee. All violations shall go before the Personal
Investment Committee and Jennison's Compliance Committee. The violators may be
asked to reverse the transaction and/or transfer the security or profits gained
over to the accounts of Jennison Associates. In addition, penalties for personal
trading violations shall be determined in accordance with the penalties schedule
set forth in Section 5, "Penalties for Violating Jennison Associates' Personal
Trading Policies." Each situation and its relevance will be given due weight. If
non-compliance with the pre-clearance procedure becomes repetitive, dismissal,
by the Board of Directors, of the employee can result.
4. PERSONAL TRADING POLICY
The following rules, regulations and restrictions have been set forth
by the Board of Directors and apply to the personal security transactions of all
employees. These rules will govern whether clearance for a proposed transaction
will be granted. These rules also apply to the sale of securities once the
purchase of a security has been pre-approved and completed.
No director, officer or employee of the Company may effect for himself,
an immediate family member (including the spouse, minor children, and adults
living in the same household with the officer, director, or employee) for which
they or their spouse have any direct or indirect influence or control, or any
trust of which they are trustee, or any other account in which they have a
beneficial interest or direct or indirect influence or control any transaction
in a security, or recommend any such transaction in a security, of which, to
his/her knowledge, the Company has effected the same for any of its clients, if
such transaction would in any way conflict with, or be detrimental to, the
interests of such client, or if such transaction was effected with prior
knowledge of material, non-public information.
Except in particular cases in which the Personal Investment Committee
has determined in advance that proposed transactions would not conflict with the
foregoing policy, the following rules shall govern all transactions (and
recommendations) by all corporate personnel for their own accounts, for their
immediate family's accounts (including accounts of the spouse, minor children,
and adults living in the same household with the officer, director, or employee)
for which they or their spouse have any direct or indirect influence or control,
and any trust of which they are trustee, or any other account in which they have
a beneficial interest or direct or indirect influence or control. The provisions
of the following paragraphs do not necessarily imply that the Personal
Investment Committee will conclude that the transactions or recommendations to
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which they relate are in violation of the foregoing policy, but rather are
designed to indicate the transactions for which prior approval should be
obtained to ensure that no conflict occurs.
A. PERSONAL TRADING BY ALL EMPLOYEE DIRECTORS, OFFICERS, AND
EMPLOYEES
(1.) Neither any security recommended, or proposed to be
recommended to any client for purchase, nor any security
purchased or proposed to be purchased for any client may be
purchased by any corporate personnel if such purchase will
interfere in any way with the orderly purchase of such
security by any client.
(2.) Neither any security recommended, or proposed to be
recommended to any client for sale, nor any security sold,
or proposed to be sold, for any client may be sold by any
corporate personnel if such sale will interfere in any way
with the orderly sale of such security by any client.
(3.) No security may be sold after being recommended to any
client for purchase or after being purchased for any client,
and no security may be purchased after being recommended to
any client for sale or after being sold for any client, if
the sale or purchase is effected with a view to making a
profit on the anticipated market action of the security
resulting from such recommendation, purchase or sale.
(4.) In order to prevent even the appearance of a violation of
this rule or a conflict of interest with a client account ,
you should refrain from trading in the SEVEN (7) CALENDAR
DAYS BEFORE AND AFTER Jennison trades in that security.
If an employee trades during a blackout period, disgorgement
may be required. For example, if an Employee's trade is
pre-approved and executed and subsequently, within seven days
of the transaction, the Firm trades on behalf of Jennison's
clients, the Jennison Personal Investment Committee shall
review the personal trade in light of firm trading activity
and determine on a case by case basis the appropriate action.
If the Personal Investment Committee finds that a client is
disadvantaged by the personal trade, the trader may be
required to reverse the trade and disgorge to the firm any
difference due to any incremental price advantage over the
client's transaction.
B. SHORT-TERM TRADING PROFITS
All directors (both employees and non-employees),
officers, and employees of Jennison Associates are prohibited
from profiting in their own accounts and the accounts of their
immediate families (including the spouse, minor children, and
adults living in the same household with the officer,
director, or employee) for which they or their spouse have any
direct or indirect influence or control or any trust of which
they are a trustee, or for any other account in which they
have a beneficial interest or direct or indirect influence or
control from
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the purchase and sale, or the sale and purchase of the same or
equivalent securities within 60 calendar days . Any profits
realized from the purchase and sale or the sale and purchase
of the same (or equivalent) securities within the 60 day
restriction period shall be disgorged to the firm, net of
taxes.
"Profits realized" shall be calculated consistent
with interpretations under section 16(b) of the Securities
Exchange Act of 1934, as amended, and the regulations
thereunder, which require matching any purchase and sale that
occur with in a 60 calendar day period across all accounts
over which a Jennison director, officer or employee has a
direct or indirect beneficial interest (including accounts
that hold securities held by members of a person's immediate
family sharing the same household) over which the person has
direct or indirect control or influence without regard to the
order of the purchase or the sale during the period. As such,
a person who sold a security and then repurchased the same (or
equivalent) security would need to disgorge a profit if
matching the purchase and the sale would result in a profit.
Conversely, if matching the purchase and sale would result in
a loss, profits would not be disgorged.
The prohibition on short-term trading profits shall
not apply to trading of index options and index futures
contracts and options on index futures contracts on broad
based indices. However, such transactions remain subject to
the pre-clearance procedures and other applicable procedures.
A list of broad-based indices is provided on Exhibit B.
C. No purchase of a security by any of the corporate personnel
shall be made if the purchase would deprive any of Jennison's
clients of an investment opportunity, after taking into
account (in determining whether such purchase would constitute
an investment opportunity) the client's investments and
investment objectives and whether the opportunity is being
offered to corporate personnel by virtue of his or her
position at Jennison.
D. None of the corporate personnel may purchase NEW ISSUES OF
EITHER COMMON STOCK or CONVERTIBLE SECURITIES except in
accordance with item E below. This prohibition does not apply
to new issues of shares of open-end investment companies. All
corporate personnel shall also obtain prior written approval
of the Personal Investment Committee in the form of a
completed "Request to Buy or Sell Securities" form before
effecting any purchase of securities on a `PRIVATE PLACEMENT'
basis. Such approval will take into account, among other
factors, whether the investment opportunity should be reserved
for Jennison's clients and whether the opportunity is being
offered to corporate personnel by virtue of his or her
position at Jennison.
E. Subject to the pre-clearance and reporting procedures,
corporate personnel may purchase securities on the date of
issuance, provided that such securities are acquired in the
secondary market. Upon requesting approval of such
transactions, employees must acknowledge that he or she is
aware that such request for approval may not be submitted
until AFTER the security has been issued to the public and is
trading at prevailing market prices in the secondary market.
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Requests for approval of such transactions must be accompanied
by a copy of the final prospectus. Additionally, trade
confirmations of executions of such transaction must be
received by the Compliance Department NO LATER THAN THE CLOSE
OF BUSINESS ON THE DAY FOLLOWING EXECUTION OF SUCH TRADE. If
such trade confirmation is not received, the employee may be
requested to reverse (subject to pre-approval) the trade, and
any profits or losses avoided must be disgorged to the firm.
F. Subject to the preclearance and reporting procedures,
corporate personnel may effect purchases upon the exercise of
rights issued by an issuer pro rata to all holders of a class
of its securities, to the extent that such rights were
acquired from such issuer, and sales of such rights so
acquired. In the event that approval to exercise such rights
is denied, subject to preclearance and reporting procedures,
corporate personnel may obtain permission to sell such rights
on the last day that such rights may be traded.
G. Any transactions in index futures contracts and index options,
including those effected on a broad-based index, are subject
to the preclearance and reporting requirements.
H. No director, officer, or employee of Jennison Associates may
profit in their personal securities accounts or the accounts
of their immediate families (including the spouse, minor
children, and adults living in the same household with the
officer, director, or employee) for which they or their spouse
have any direct or indirect influence or control or any trust
of which they are a trustee, or for any other account in which
they have a beneficial interest or direct or indirect
influence or control by short selling or purchasing put
options on securities that represent a position in any
portfolios managed by Jennison on behalf of its clients. Any
profits realized from such transactions shall be disgorged to
the Firm, net of taxes. Put options, short sales and short
sales against the box are subject to the preclearance rules.
I. No employee, director, or officer of Jennison Associates may
participate in investment clubs.
J. While participation in employee stock purchase plans and
employee stock option plans need not be pre-approved, copies
of the terms of the plans should be provided to the Compliance
Department as soon as possible so that the application of the
various provisions of the Personal Trading Policy may be
determined (e.g., pre-approval, reporting, short-term trading
profits ban). Corporate personnel must obtain pre-approval for
any discretionary disposition of securities or discretionary
exercise of options acquired pursuant to participation in an
employee stock purchase or employee stock option plan.
Nondiscretionary dispositions of securities or exercise are
not subject to pre-approval. Additionally, corporate personnel
should report holdings of such securities and options on an
annual basis.
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K. Subject to pre-clearance, long-term investing through direct
stock purchase plans is permitted. The terms of the plan, the
initial investment, and any purchases through automatic debit
must be provided to and approved by the Personal Investment
Committee. Any changes to the original terms of approval,
e.g., increasing, decreasing, or termination of participation
in the plan, as well as any sales or discretionary purchase of
securities in the plan must be submitted for pre-clearance.
Provided that the automatic monthly purchases have been
approved by the Personal Investment Committee, each automatic
monthly purchase need not be submitted for pre-approval.
"Profits realized" for purposes of applying the ban on
short-term trading profits will be determined by matching the
proposed discretionary purchase or sale transaction against
the most recent discretionary purchase or sale, as applicable,
not the most recent automatic purchase or sale (if
applicable). Additionally, holdings should be disclosed
quarterly.
EXCEPTIONS TO THE PERSONAL TRADING POLICY
Notwithstanding the foregoing restrictions, exceptions to certain
provisions (e.g., blackout period, pre-clearance procedures, and short-term
trading profits) of the Personal Trading Policy may be granted on a case by case
basis when no abuse is involved and the equities of the situation strongly
support an exception to the rule.
Investments in the following instruments are not bound to the rules and
restrictions as set forth above and may be made without the approval of the
Investment Compliance Committee: governments, agencies, money markets,
repurchase orders, reverse repurchase orders and open-ended registered
investment companies.
All employees, on a quarterly basis, must sign a statement that they,
during said period, have been in full compliance with all personal and insider
trading rules and regulations set forth within Jennison Associates' Code of
Ethics, Policy Statement on Insider Trading and Personal Trading Policy.
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5. PENALTIES FOR VIOLATIONS OF JENNISON ASSOCIATES' PERSONAL TRADING
POLICIES
Violations of Jennison's Personal Trading Policy and Procedures, while
in most cases may be inadvertent, must not occur. It is important that every
employee abide by the policies established by the Board of Directors. Penalties
will be assessed in accordance with the schedules set forth below. THESE,
HOWEVER, ARE MINIMUM PENALTIES. THE FIRM RESERVES THE RIGHT TO TAKE ANY OTHER
APPROPRIATE ACTION, INCLUDING TERMINATION.
All violations and penalties imposed will be reported to Jennison's
Compliance Committee on a monthly basis. In addition, the Compliance Committee
will provide the Board of Directors with an annual report which at minimum:
(1) summarizes existing procedures concerning personal
investing and any changes in procedures made during
the preceding year;
(2) identifies any violations requiring significant
remedial action during the preceding year; and
(3) identifies any recommended changes in existing
restrictions or procedures based upon Jennison's
experience under its policies and procedures,
evolving industry practices, or developments in
applicable laws and regulations.
TYPE OF VIOLATION
A. PENALTIES FOR FAILURE TO SECURE PRE-APPROVAL
The minimum penalties for failure to pre-clear personal securities
transactions include POSSIBLE REVERSAL OF THE TRADE, POSSIBLE DISGORGEMENT OF
PROFITS, AS WELL AS THE IMPOSITION OF ADDITIONAL CASH PENALTIES. Please note
that subsections 2 and 3 have been applied retroactively from its effective
date.
1. FAILURE TO PRE-CLEAR PURCHASE
Depending on the circumstances of the violation, the individual
may be asked to reverse the trade (i.e., the securities must be
sold). Any profits realized from the subsequent sale, net of
taxes must be turned over to the firm. PLEASE NOTE: The sale or
reversal of such trade must be submitted for pre-approval.
2. FAILURE TO PRE-CLEAR SALES THAT RESULT IN LONG-TERM CAPITAL GAINS
Depending on the circumstances of the violation, the firm may
require that profits realized from the sale of securities that are
defined as "long-term capital gains" by Internal Revenue Code (the
"IRC") section 1222 and the rules thereunder, as amended, to be turned
over to the firm, subject to the following maximum amounts:
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- --------------------------------------------------------------------------------
JALLC POSITION DISGORGEMENT PENALTY
- --------------------------------------------------------------------------------
Senior Vice Presidents and above Realized long-term capital
gain, net of taxes, up to
$10,000.00
- --------------------------------------------------------------------------------
Vice Presidents and Assistant Vice Presidents Realized long-term capital
gain, net of taxes, up to
$5,000.00
- --------------------------------------------------------------------------------
All other JALLC Personnel 25% of the realized long-term
gain, irrespective of taxes,
up to $3,000.00
- --------------------------------------------------------------------------------
3. FAILURE TO PRE-CLEAR SALES THAT RESULT IN SHORT-TERM CAPITAL
GAINS
Depending on the nature of the violation, the firm may require
that all profits realized from sales that result in profits that are
defined as "short-term capital gains" by IRC section 1222 and the rules
thereunder, as amended. Please note, however, any profits that result
from violating the ban on short-term trading profits are addressed in
section 5.C. "Penalties for Violation of Short-Term Trading
Profit Rule."
4. ADDITIONAL CASH PENALTIES
VP'S AND ABOVE OTHER JALLC PERSONNEL
-------------- ---------------------
FIRST OFFENSE None/Warning None/Warning
SECOND OFFENSE $1000 $200
THIRD OFFENSE $2000 $300
FOURTH OFFENSE $3000 $400
FIFTH OFFENSE $4000 & Automatic Notification $500 & Automatic Notification
of the Board of Directors of the Board of Directors
NOTWITHSTANDING THE FOREGOING, JENNISON RESERVES THE RIGHT TO NOTIFY THE BOARD
OF DIRECTORS FOR ANY VIOLATION.
Penalties shall be assessed over a rolling three year period. For example, if
over a three year period (year 1 through year 3), a person had four violations,
two in year 1, and one in each of the following years, the last violation in
year 3 would be considered a fourth offense. However, if in the subsequent year
(year 4), the person only had one violation of the policy, this violation would
be penalized at the third offense level because over the subsequent three year
period (from year 2 through year 4), there were only three violations. Thus, if
a person had no violations over a three year period, a subsequent offense would
be considered a first offense, notwithstanding the fact that the person may have
violated the policy prior to the three year period.
B. FAILURE TO COMPLY WITH RECORDKEEPING REQUIREMENTS
Such violations occur if Jennison does not receive a broker confirmation within
ten (10) business days following the end of the quarter in which a transaction
occurs or if JACC does not routinely receive brokerage statements. Evidence of
written notices to brokers of Jennison's requirement and assistance in resolving
problems will be taken into consideration in determining the appropriateness of
penalties.
25
<PAGE>
VP'S AND ABOVE OTHER JALLC PERSONNEL
-------------- ---------------------
FIRST OFFENSE None/Warning None/Warning
SECOND OFFENSE $200 $50
THIRD OFFENSE $500 $100
FOURTH OFFENSE $600 $200
FIFTH OFFENSE $700 & Automatic Notification $300 & Automatic Notification
of the Board of the Board
NOTWITHSTANDING THE FOREGOING, JENNISON RESERVES THE RIGHT TO NOTIFY THE BOARD
OF DIRECTORS FOR ANY VIOLATION.
C. PENALTY FOR VIOLATION OF SHORT-TERM TRADING PROFIT RULE
Any profits realized from the purchase and sale or the sale
and purchase of the same (or equivalent) securities within 60 calendar
days shall be disgorged to the firm, net of taxes. "Profits realized"
shall be calculated consistent with interpretations under section 16(b)
of the Securities Exchange Act of 1934, as amended, which requires
matching any purchase and sale that occur with in a 60 calendar day
period without regard to the order of the purchase or the sale during
the period. As such, a person who sold a security and then repurchased
the same (or equivalent) security would need to disgorge a profit if
matching the purchase and the sale would result in a profit.
Conversely, if matching the purchase and sale would result in a loss,
profits would not be disgorged.
D. OTHER POLICY INFRINGEMENTS WILL BE DEALT WITH ON A CASE BY CASE BASIS.
PENALTIES WILL BE COMMENSURATE WITH THE SEVERITY OF THE VIOLATION.
Serious violations would include:
A. Failure to abide by the determination of the Personal Committee.
B. Failure to submit pre-approval for securities in which Jennison
actively trades.
E. DISGORGED PROFITS
Profits disgorged to the firm shall be donated to a charitable
organization selected by the firm in the name of the firm. Such funds
may be donated to such organization at such time as the firm
determines.
26
<PAGE>
EXHIBIT A
COMPLIANCE AND REPORTING OF PERSONAL TRANSACTIONS MATRIX
<TABLE>
<CAPTION>
Investment Sub-Category Required Reportable If
Category/Method ------------ Pre-Approval (Y/N) reportable,
- --------------- (Y/N) ---------- minimum
------------ reporting
frequency
====================================================================================================================
<S> <C> <C> <C> <C>
BONDS Treasury Bills, Notes, Bonds N N N/A
Agency N Y Quarterly
Corporates Y Y Quarterly
MBS N Y Quarterly
ABS N Y Quarterly
CMO's Y Y Quarterly
Municipals N Y Quarterly
Convertibles Y Y Quarterly
STOCKS Common Y Y Quarterly
Preferred Y Y Quarterly
Rights Y Y Quarterly
Warrants Y Y Quarterly
Automatic Dividend Reinvestments N N N/A
Optional Dividend Reinvestments Y Y Quarterly
Direct Stock Purchase Plans with automatic
investments Y Y Quarterly
Employee Stock Purchase/Option Plan Y* Y *
OPEN-END MUTUAL FUNDS
Affiliated Investments: N N N/A
Non-Affiliated Funds N N N/A
CLOSED END FUNDS & UNIT
INVESTMENT TRUSTS
All Affiliated & Non-Affiliated Funds N Y Quarterly
US Funds (including SPDRs, NASDAQ 100 N Y Quarterly
Index Tracking Shares)
Foreign Funds N Y Quarterly
DERIVATIVES Any exchange traded, NASDAQ, or OTC
option or futures contract, including,
but not limited to:
Financial Futures ** Y Quarterly
Commodity Futures N Y Quarterly
Options on Futures ** Y Quarterly
Options on Securities ** Y Quarterly
Non-Broad Based Index Options Y Y Quarterly
Non-Broad Based Index Futures Contracts Y Y Quarterly
and Options on Non-Broad Based Index
Futures Contracts
Broad Based Index Options N Y Quarterly
Broad Based Index Futures Contracts and N Y Quarterly
Options on Broad Based Index Futures
Contracts
LIMITED PARTNERSHIPS, PRIVATE
PLACEMENTS, & PRIVATE
INVESTMENTS Y Y Quarterly
VOLUNTARY TENDER OFFERS Y Y Quarterly
</TABLE>
* Pre-approval of sales of securities or exercises of options acquired through
employee stock purchase or employee stock option plans are required. Holdings
are required to be reported annually; transactions subject to pre-approval are
required to be reported quarterly. Pre-approval is not required to participate
in such plans.
** Pre-approval of a personal derivative securities transaction is required if
the underlying security requires pre-approval.
27
<PAGE>
EXHIBIT B
BROAD-BASED INDICES
----------------------------------------
Nikkei 300 Index CI/Euro
----------------------------------------
S&P 100 Close/Amer Index
----------------------------------------
S&P 100 Close/Amer Index
----------------------------------------
S&P 100 Close/Amer Index
----------------------------------------
S&P 500 Index
----------------------------------------
S&P 500 Open/Euro Index
----------------------------------------
S&P 500 Open/Euro Index
----------------------------------------
S&P 500 (Wrap)
----------------------------------------
S&P 500 Open/Euro Index
----------------------------------------
Russell 2000 Open/Euro Index
----------------------------------------
Russell 2000 Open/Euro Index
----------------------------------------
S&P Midcap 400 Open/Euro Index
----------------------------------------
NASDAQ- 100 Open/Euro Index
----------------------------------------
NASDAQ- 100 Open/Euro Index
----------------------------------------
NASDAQ- 100 Open/Euro Index
----------------------------------------
NASDAQ- 100 Open/Euro Index
----------------------------------------
NASDAQ- 100 Open/Euro Index
----------------------------------------
S&P Small Cap 600
----------------------------------------
U.S. Top 100 Sector
----------------------------------------
S&P 500 Long-Term Close
----------------------------------------
Russell 2000 L-T Open./Euro
----------------------------------------
Russell 2000 Long-Term Index
----------------------------------------
28
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of EQ Advisors Trust (the "Trust"), whose
signature appears below, hereby makes, constitutes and appoints Peter D. Noris,
Patricia Louie, Esq. and Jane A. Kanter, Esq. and each of them acting
individually, to be his true and lawful attorneys and agents, each of them with
the power to act without any other and with full power of substitution, to
execute, deliver and file in the undersigned capacity as shown below, any and
all instruments that said attorneys and agents may deem necessary or advisable
to enable the Trust to comply with the Securities Act of 1933, as amended,
including any and all amendments to the Trust's registration statement, and any
rules, regulations, orders or other requirements of the Securities and Exchange
Commission thereunder in connection with the registration of shares or
additional shares of beneficial interest of the Trust or any of its series or
classes thereof, and the registration of the Trust or any of its series under
the Investment Company Act of 1940, as amended, including any and all amendments
to the Trust's registration statement; and without limitation of the foregoing,
the power and authority to sign said Trustee's name on his behalf, and said
Trustee hereby grants to said attorney or attorneys, full power and authority to
do and perform each and every act and thing whatsoever as said attorney or
attorneys may deem necessary or advisable to carry out fully the intent of this
Power of Attorney to the same extent and with the same effect as of said Trustee
might or could do personally in his capacity as aforesaid and said Trustee
ratifies, confirms and approves all acts and things which said attorney or
attorneys might do or cause to be done by virtue of this Power of Attorney and
his signature as the same may be signed by said attorney or attorneys.
Signature Title Date
- --------- ----- ----
/s/ Trustee April 3, 2000
- --------------------------------
Theodossios (Ted) Athanassiades
