<PAGE>
Registration Nos. 333-17217
811-07953
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 1, 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. 14 /x/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 16 /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:
_________ 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
___X_____ 75 days after filing pursuant to paragraph (a)
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EQ ADVISORS TRUST
PROSPECTUS
May 1, 2000
This Prospectus describes one (1) new Portfolio offered by EQ Advisors Trust
("Trust") and the Class IA shares offered by the Trust on behalf of the
Portfolio. The Trust currently has forty-one (41) Portfolios. The 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.
LARGE-CAP EQUITY PORTFOLIOS
EQ/Alliance Technology Stock
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.
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EQ ADVISORS TRUST
This Prospectus tells you about the new Portfolio of EQ Advisors Trust
("Trust") and the Class IA shares offered by the Trust on behalf of the
Portfolio. The Trust is an open-end management investment company. The
Portfolio is a separate series of the Trust with its own investment objective,
investment strategies and risks, which are described in this Prospectus. The
Portfolio is diversified for purposes of the Investment Company Act of 1940, as
amended ("1940 Act").
The Trust's shares are currently sold 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 each of 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 Contract owner or participant under a Contract.
Equitable currently serves as the investment manager ("Manager") of the Trust
and has overall responsibility for the general management of the Trust. The new
Portfolio's investment adviser ("Adviser") is Alliance Capital Management L.P.
Information about the Adviser for the Portfolio is included under the caption
"Who Manages the Portfolio" in the section of the Prospectus titled "About the
Investment Portfolios--Alliance Technology Portfolio." The Manager has the
ultimate responsibility to oversee the Adviser and to recommend its 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 or
materially modify existing investment advisory agreements; and (iii) terminate
and replace Advisers.
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[2nd right hand page]
TABLE OF CONTENTS
PAGE
SUMMARY INFORMATION CONCERNING EQ ADVISORS TRUST.........................5
ABOUT THE INVESTMENT PORTFOLIOS..........................................6
LARGE-CAP EQUITY PORTFOLIOS...........................................7
EQ/ALLIANCE TECHNOLOGY PORTFOLIO................................7
MORE INFORMATION ON PRINCIPAL RISKS.....................................10
MANAGEMENT OF THE TRUST.................................................14
The Trust............................................................14
The Manager..........................................................14
Expense Limitation Agreement.........................................14
The Advisers.........................................................15
The Administrator....................................................15
The Transfer Agent...................................................16
Brokerage Practices..................................................16
Brokerage Transactions with Affiliates...............................16
FUND DISTRIBUTION ARRANGEMENTS..........................................16
PURCHASE AND REDEMPTION.................................................16
HOW ASSETS ARE VALUED...................................................17
TAX INFORMATION.........................................................18
PRIOR PERFORMANCE OF EACH ADVISER.......................................18
SUMMARY INFORMATION CONCERNING EQ ADVISORS TRUST.........................4
ABOUT THE INVESTMENT PORTFOLIOS..........................................5
LARGE-CAP EQUITY PORTFOLIOS...........................................8
ALLIANCE TECHNOLOGY PORTFOLIO...................................8
MORE INFORMATION ON PRINCIPAL RISKS.....................................11
MANAGEMENT OF THE TRUST.................................................17
The Trust............................................................17
The Manager..........................................................17
Expense Limitation Agreement.........................................18
The Advisers.........................................................18
The Administrator....................................................19
The Transfer Agent...................................................19
Brokerage Practices..................................................19
Brokerage Transactions with Affiliates...............................19
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FUND DISTRIBUTION ARRANGEMENTS..........................................20
PURCHASE AND REDEMPTION.................................................20
HOW ASSETS ARE VALUED...................................................21
TAX INFORMATION.........................................................21
PRIOR PERFORMANCE OF EACH ADVISER.......................................22
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[TWO PAGE SPREAD]
SUMMARY INFORMATION CONCERNING EQ ADVISORS TRUST
The following chart and accompanying information identify the 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 __.
EQ ADVISORS TRUST
LARGE-CAP EQUITY PORTFOLIOS
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE(S) Part A
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<S> <C> <C>
EQ/ALLIANCE TECHNOLOGY Seeks to
achieve growth of capital.
Current income is
incidental to the
Portfolio's objective.
</TABLE>
EQ ADVISORS TRUST
LARGE-CAP EQUITY PORTFOLIOS
<TABLE>
<CAPTION>
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS Part B
--------------------------------------------- -----------------------------------------------------
<S> <C> <C>
Securities of companies in various industries General investment, sector, growth investing,
that are expected to benefit from small-cap and mid-cap company, leveraging,
technological advances and improvements with derivatives, foreign securities, fixed income,
potential for capital appreciation and growth and securities lending risks.
of capital, including well-known, established
companies or new or unseasoned companies.
</TABLE>
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ABOUT THE INVESTMENT PORTFOLIOS
This section of the Prospectus provides a more complete description of the
principal investment objectives, strategies, and risks of the Portfolio. There
can be no assurance that the Portfolio will achieve its investment objective.
Please note that:
o A fuller description of each of the Portfolio's principal risks is
included in the section "More Information on Principal Risks," which
follows the description of the Portfolio in this section of the
Prospectus.
o Additional information concerning the Portfolio's strategies, investments,
and risks can also be found in the Trust's Statement of Additional
Information.
GENERAL INVESTMENT RISKS
The Portfolio is subject to the following risks:
ASSET CLASS RISK: The returns from the types of securities in which
the 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 the 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 the 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. In some cases, certain
investments may not be available, or the Portfolio's Adviser may
choose not to use them under market conditions when, in retrospect,
their use would have been beneficial.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. The Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. The Portfolio is subject to
investment risks and possible loss of principal invested.
THE BENCHMARKS
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 the Portfolio is likely
to select its holdings.
THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500") is an
unmanaged index containing common stock 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.
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LARGE-CAP EQUITY PORTFOLIOS
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 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.
The Portfolio also may:
o write covered call options on its portfolio securities of up to 15% of its
total assets and may purchase exchange-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 30% of its total assets.
When market or financial conditions warrant, the Portfolio may invest for
temporary or defensive purposes, without limit, in preferred stocks or
corporate fixed income securities, including U.S. Government securities,
qualifying bank deposits, money market instruments, prime commercial paper and
other types of short-term fixed income securities including notes and bonds.
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.
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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 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
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
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.
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 RISK: To the extent that the Portfolio invests in foreign
securities, 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.
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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.
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<PAGE>
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 of the Portfolios' shares may be
affected by that 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 each of the Portfolios are discussed below. However, other factors may also
affect each Portfolio's net asset value.
There is no guarantee that each 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 the 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: The 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 for the 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 the 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," the Alliance Technology Portfolio may also be
subject to the following risks:
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, and options on futures
contracts. The Portfolio can use derivatives involving U.S. and foreign
securities and currencies. Investments in derivatives can significantly
increase your exposure to market risk, or 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.
FIXED INCOME RISKS: To the extent that the Portfolio invests a substantial
amount of its assets in fixed income securities, it may be subject to the
following risks:
CREDIT RISK: Credit risk is the risk that the issuer or guarantor of a
debt security or counterparty to the 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. The Portfolio 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.
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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 the 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 the 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.
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 and may
be speculative.
FOREIGN SECURITIES RISKS: The Portfolio's investments in foreign securities,
including depositary receipts, involve risks not associated with investing in
U.S. securities and can 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. 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 the 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 market 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, the
Portfolio investing in emerging markets countries may be required to
establish special custody or other arrangements before investing.
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.
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POLITICAL/ECONOMIC RISK: Changes in economic and tax policies,
expropriation or nationalization; government instability, war or other
political or economic actions or factors may have an adverse effect on
the 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 Adviser, regardless of movements
in the securities market.
LEVERAGING RISK: When the 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. The Portfolio may take on
leveraging risk by using the collateral from securities loans to make
additional investments or by borrowing money to meet redemption requests.
PORTFOLIO TURNOVER RISK: Consistent with its investment objective and
strategies, the Portfolio 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 the Portfolio to incur additional transaction costs and
may result in taxable gains being passed through to shareholders.
SECTOR RISK: Market or economic factors affecting certain companies or
industries in market sector could have a major effect on the value of the
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, the
Portfolio may lend securities to broker-dealers approved by the Board of
Trustees. 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: The Portfolio's investments in new or
unseasoned 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-
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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.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. The Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. The Portfolio is subject to
investment risks and possible loss of principal invested.
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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 the 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. The Portfolio has its own objectives, principal investment
strategies and principal risks, which have been previously described in this
prospectus.
THE MANAGER
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 Manager of the Trust until September 17, 1999 when the
Trust's Investment Management Agreement with EQFC 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, 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 or materially modify existing investment
advisory agreements; and (iii) terminate and replace the Adviser. The Manager
also monitors each Adviser's investment program and results, reviews brokerage
matters, oversees compliance by the Trust with various federal and state
statutes, and carries out the directives of the Board of Trustees. The Manager
also supervises the provision of services to the Trust by third parties such as
the Trust's custodian.
The table below shows the annual rate of the management fees (as a percentage
of the Portfolio's average daily net assets) that the Manager is entitled to
receive in 2000 for managing the Portfolio.
ANNUAL RATE OF MANAGEMENT FEES
PORTFOLIOS ANNUAL RATE
------------------------------------------------ ------------------------
EQ/Alliance Technology Portfolio 0.90%
EXPENSE LIMITATION AGREEMENT
In the interest of limiting expenses of the Portfolios, the Manager has entered
into an expense limitation agreement with the Trust with respect to the
Portfolio ("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 the 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 the Portfolio's
business and
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<PAGE>
amounts payable pursuant to a plan adopted in accordance with Rule 12b-1 under
the 1940 Act, are limited to the following fees:
EXPENSE LIMITATION RATES
PORTFOLIOS AMOUNT EXPENSES LIMITED TO
(% of daily net assets)
- ------------------------------------------ ------------------------------------
EQ/Alliance Technology Portfolio 1.15%
The Portfolio may at a later date, as described below, 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 the Portfolio
has reached a sufficient asset size to permit such reimbursement to be made
without causing the total annual expense ratio of the Portfolio to exceed the
percentage limits stated above. Consequently, no reimbursement by the 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 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
The Portfolio has an Adviser that furnishes an investment program for the
Portfolio. Pursuant to an investment advisory agreement with the Manager, the
Adviser furnishes continuously an investment program for the Portfolio, makes
investment decisions on behalf of the Portfolio, places all orders for the
purchase and sale of investments for the Portfolio's account with brokers or
dealers selected by such Adviser and may perform certain limited related
administrative functions in connection therewith.
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 or materially modify existing
investment advisory agreements; and (iii) terminate and replace Advisers. In
such circumstances, shareholders would receive notice within 90 days of any
such action, including the information concerning the Adviser that normally is
provided to shareholders in a proxy statement.
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. Chase Global Funds Services Company served as the Administrator to
the Trust until May 1, 2000. As Administrator, Equitable provides the Trust
with necessary administrative, fund accounting and compliance services, and
will make available the office space, equipment, personnel and facilities
required to provide such services
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<PAGE>
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 will pay Equitable a monthly fee at the annual rate of 0.04 of 1% of
total Trust assets, plus $30,000 for each Portfolio, until the total Trust
assets reach $3 billion; 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, the Manager and each Adviser may consider
research and brokerage services furnished to either company and their
affiliates. Subject to seeking the most favorable net price and execution
available, the Manager and each Adviser may also consider sales of shares of
the Trust as a factor in the selection of brokers and dealers.
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 Advisers unless
pursuant to an exemptive order from the SEC. For these purposes, however, the
Trust has considered this issue and believes that a broker-dealer affiliate of
an Adviser to one Portfolio should not be treated as an affiliate of the
Adviser to another Portfolios for which such Adviser does not provide
investment advice. The Trust has adopted procedures that are reasonably
designed to provide that any commission paid by a Portfolio to affiliates of
the Manager or broker-dealer affiliates of that same Portfolio's Adviser 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.
FUND DISTRIBUTION ARRANGEMENTS
The Trust offers two classes of shares on behalf of the Portfolio: Class IA
shares and Class IB shares. AXA Advisors LLC ("AXA Advisors") and Equitable
Distributors, Inc. ("EDI") serve as distributors for the both the Class 1A
shares and the Class IB shares of the Trust offered by this Prospectus. Both
classes of shares are offered and redeemed at their net asset value without any
sales load. AXA Advisors and EDI are each an indirect wholly-owned subsidiary
of Equitable. Both AXA Advisors and EDI are registered as broker-dealers under
the Securities Exchange Act of 1934 and are members of the National Association
of Securities Dealers, Inc.
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<PAGE>
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 the 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 the 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 ADRs) are valued by the Trust at the close of business
in the applicable foreign country for those securities.
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
the 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 NYSE is closed or during which trading is restricted by the SEC or
the SEC declares that an emergency exists. Redemption may also be suspended
during other periods permitted by the SEC for the protection of the Trust's
shareholders. If the Board of Trustees determines that it would be detrimental
to the best interest of the Trust's remaining shareholders to make payment in
cash, the Trust may pay redemption proceeds in whole or in part by a
distribution-in-kind of readily marketable securities.
HOW ASSETS ARE VALUED
Values are determined according to accepted practices and all laws and
regulations that apply. The assets of the 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, or in American Depository Receipts
or similar form, 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 the Portfolio's share may change on days when shareholders are
not able to buy or sell them. If events materially affecting the values of
a Portfolio's foreign investments occur between the close of foreign
markets and the close of regular trading on the NYSE, those 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.
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<PAGE>
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.
TAX INFORMATION
The 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. The 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 the
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 the 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 figuring out
whether the Contracts indirectly funded by the Portfolio meet tax qualification
rules for variable insurance contracts. If the 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. The Manager, therefore, carefully monitor compliance
with all of the regulated investment company rules and variable insurance
contract investment diversification rules.
PRIOR PERFORMANCE OF EACH ADVISER
The following table provides information concerning the historical performance
of another registered investment company (or series), managed by the Adviser,
Alliance, that has investment objectives, strategies and risks substantially
similar to those of the Alliance Technology Portfolio. The data is provided to
illustrate the past performance of the Adviser in managing a substantially
similar investment vehicle as measured against specified market indices. This
data does not represent the past performance of the Portfolio or the future
performance of the Portfolio or its Adviser. Consequently, potential investors
should not consider this performance data as an indication of the future
performance of the Portfolio or of its Adviser and should not confuse this
performance data with performance data for the Portfolio, which is shown for
any Portfolio that has at least one full year of operations under the caption
"ABOUT THE INVESTMENT PORTFOLIOS."
The Adviser's performance data shown below for another registered investment
company (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 investment results presented below are unaudited. For more information on
the specified market indices used below, see the section "The Benchmarks." The
name of the other investment company
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<PAGE>
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.
- -------------------------------------------------------------------------------
ANNUAL RATES OF RETURN OF OTHER FUNDS OR ACCOUNTS
MANAGED BY ADVISERS
AS OF 12/31/99
<TABLE>
<CAPTION>
- ----------------------------------------------------- ------------ -------------- ------------- ------------ ------------
OTHER FUND OR ACCOUNT MANAGED BY ADVISER 1 5 10 SINCE INCEPTION
YEAR YEARS YEARS INCEPTION DATE
(EQAT Portfolio)
- ----------------------------------------------------
Benchmark
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------- ------------ -------------- ------------- ------------ ------------
ALLIANCE TECHNOLOGY FUND _____% _____% _____% 5/1/00
(EQ/Alliance Technology Portfolio)
- ----------------------------------------------------- ------------ -------------- ------------- ------------ ------------
S&P 500 Index(1) _____% _____% _____%
- ----------------------------------------------------- ------------ -------------- ------------- ------------ ------------
</TABLE>
(1) The S&P 500 Index ("S&P 500") is an unmanaged 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 reflects the reinvestment
of income dividends and capital gain distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.
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<PAGE>
[BACK COVER]
If you wish to know more, you will find additional information about the Trust
and its Portfolios in the following documents:
ANNUAL REPORTS
The Annual Report includes more information about the Trust's performance and
is 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. You may have to pay a
duplicating fee. To find out more about the Public Reference Room, call the SEC
at 800-SEC-0330.
Investment Company Act File Number: 811-07953
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<PAGE>
EQ ADVISORS TRUST
PROSPECTUS
May 1, 2000
This Prospectus describes one (1) new Portfolio offered by EQ Advisors Trust
("Trust") and the Class IB shares offered by the Trust on behalf of the
Portfolio. The Trust currently has forty-one (41) Portfolios. The 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.
LARGE-CAP EQUITY PORTFOLIOS
EQ/Alliance Technology Stock
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.
<PAGE>
EQ ADVISORS TRUST
This Prospectus tells you about the new Portfolio of EQ Advisors Trust
("Trust") and the Class IB shares offered by the Trust on behalf of the
Portfolio. The Trust is an open-end management investment company. The
Portfolio is a separate series of the Trust with its own investment objective,
investment strategies and risks, which are described in this Prospectus. The
Portfolio is diversified for purposes of the Investment Company Act of 1940, as
amended ("1940 Act").
The Trust's shares are currently sold 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 each of 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 Contract owner or participant under a Contract.
Equitable currently serves as the investment manager ("Manager") of the Trust
and has overall responsibility for the general management of the Trust. The new
Portfolio's investment adviser ("Adviser") is Alliance Capital Management L.P.
Information about the Adviser for the Portfolio is included under the caption
"Who Manages the Portfolio" in the section of the Prospectus titled "About the
Investment Portfolios--EQ/Alliance Technology Portfolio." The Manager has the
ultimate responsibility to oversee the Adviser and to recommend its 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 or
materially modify existing investment advisory agreements; and (iii) terminate
and replace Advisers.
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<PAGE>
[2nd right hand page]
TABLE OF CONTENTS
PAGE
SUMMARY INFORMATION CONCERNING EQ ADVISORS TRUST........................5
ABOUT THE INVESTMENT PORTFOLIOS.........................................6
LARGE-CAP EQUITY PORTFOLIOS..........................................7
EQ/ALLIANCE TECHNOLOGY PORTFOLIO...............................7
MORE INFORMATION ON PRINCIPAL RISKS....................................10
MANAGEMENT OF THE TRUST................................................14
The Trust...........................................................14
The Manager.........................................................14
Expense Limitation Agreement........................................14
The Advisers........................................................15
The Administrator...................................................15
The Transfer Agent..................................................16
Brokerage Practices.................................................16
Brokerage Transactions with Affiliates..............................16
FUND DISTRIBUTION ARRANGEMENTS.........................................16
PURCHASE AND REDEMPTION................................................16
HOW ASSETS ARE VALUED..................................................17
TAX INFORMATION........................................................18
PRIOR PERFORMANCE OF EACH ADVISER......................................18
SUMMARY INFORMATION CONCERNING EQ ADVISORS TRUST........................4
ABOUT THE INVESTMENT PORTFOLIOS.........................................5
LARGE-CAP EQUITY PORTFOLIOS..........................................8
EQ/ALLIANCE TECHNOLOGY PORTFOLIO...............................8
MORE INFORMATION ON PRINCIPAL RISKS....................................11
MANAGEMENT OF THE TRUST................................................17
The Trust...........................................................17
The Manager.........................................................17
Expense Limitation Agreement........................................18
The Advisers........................................................18
The Administrator...................................................19
The Transfer Agent..................................................19
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Brokerage Practices.................................................19
Brokerage Transactions with Affiliates..............................19
FUND DISTRIBUTION ARRANGEMENTS.........................................20
PURCHASE AND REDEMPTION................................................20
HOW ASSETS ARE VALUED..................................................21
TAX INFORMATION........................................................21
PRIOR PERFORMANCE OF EACH ADVISER......................................22
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[TWO PAGE SPREAD]
SUMMARY INFORMATION CONCERNING EQ ADVISORS TRUST
The following chart and accompanying information identify the 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 __.
EQ ADVISORS TRUST
LARGE-CAP EQUITY PORTFOLIOS
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE(S) Part A
--------------------------------------------- -----------------------------------------------------
<S> <C> <C>
EQ/ALLIANCE TECHNOLOGY Seeks to
achieve growth of capital.
Current income is
incidental to the
Portfolio's objective.
</TABLE>
EQ ADVISORS TRUST
LARGE-CAP EQUITY PORTFOLIOS
<TABLE>
<CAPTION>
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS Part B
--------------------------------------------- -----------------------------------------------------
<S> <C> <C>
Securities of companies in various industries General investment, sector, growth investing,
that are expected to benefit from small-cap and mid-cap company, leveraging,
technological advances and improvements with derivatives, foreign securities, fixed income,
potential for capital appreciation and growth and securities lending risks.
of capital, including well-known, established
companies or new or unseasoned companies.
</TABLE>
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<PAGE>
ABOUT THE INVESTMENT PORTFOLIOS
This section of the Prospectus provides a more complete description of the
principal investment objectives, strategies, and risks of the Portfolio. There
can be no assurance that the Portfolio will achieve its investment objective.
Please note that:
o A fuller description of each of the Portfolio's principal risks is
included in the section "More Information on Principal Risks," which
follows the description of the Portfolio in this section of the
Prospectus.
o Additional information concerning the Portfolio's strategies, investments,
and risks can also be found in the Trust's Statement of Additional
Information.
GENERAL INVESTMENT RISKS
The Portfolio is subject to the following risks:
ASSET CLASS RISK: The returns from the types of securities in which
the 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 the 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 the 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. In some cases, certain
investments may not be available, or the Portfolio's Adviser may
choose not to use them under market conditions when, in retrospect,
their use would have been beneficial.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. The Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. The Portfolio is subject to
investment risks and possible loss of principal invested.
THE BENCHMARKS
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 the Portfolio is likely
to select its holdings.
THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500") is an
unmanaged index containing common stock 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.
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<PAGE>
LARGE-CAP EQUITY PORTFOLIOS
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 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.
The Portfolio also may:
o write covered call options on its portfolio securities of up to 15% of its
total assets and may purchase exchange-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 30% of its total assets.
When market or financial conditions warrant, the Portfolio may invest for
temporary or defensive purposes, without limit, in preferred stocks or
corporate fixed income securities, including U.S. Government securities,
qualifying bank deposits, money market instruments, prime commercial paper and
other types of short-term fixed income securities including notes and bonds.
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.
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<PAGE>
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 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
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
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.
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 RISK: To the extent that the Portfolio invests in foreign
securities, 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.
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<PAGE>
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.
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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 of the Portfolios' shares may be
affected by that 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 each of the Portfolios are discussed below. However, other factors may also
affect each Portfolio's net asset value.
There is no guarantee that each 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 the 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: The 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 for the 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 the 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," the EQ/Alliance Technology Portfolio may also be
subject to the following risks:
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, and options on futures
contracts. The Portfolio can use derivatives involving U.S. and foreign
securities and currencies. Investments in derivatives can significantly
increase your exposure to market risk, or 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.
FIXED INCOME RISKS: To the extent that the Portfolio invests a substantial
amount of its assets in fixed income securities, it may be subject to the
following risks:
CREDIT RISK: Credit risk is the risk that the issuer or guarantor of a
debt security or counterparty to the 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. The Portfolio 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.
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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 the 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 the 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.
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 and may
be speculative.
FOREIGN SECURITIES RISKS: The Portfolio's investments in foreign securities,
including depositary receipts, involve risks not associated with investing in
U.S. securities and can 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. 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 the 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 market 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, the
Portfolio investing in emerging markets countries may be required to
establish special custody or other arrangements before investing.
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.
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POLITICAL/ECONOMIC RISK: Changes in economic and tax policies,
expropriation or nationalization; government instability, war or other
political or economic actions or factors may have an adverse effect on
the 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 Adviser, regardless of movements
in the securities market.
LEVERAGING RISK: When the 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. The Portfolio may take on
leveraging risk by using the collateral from securities loans to make
additional investments or by borrowing money to meet redemption requests.
PORTFOLIO TURNOVER RISK: Consistent with its investment objective and
strategies, the Portfolio 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 the Portfolio to incur additional transaction costs and
may result in taxable gains being passed through to shareholders.
SECTOR RISK: Market or economic factors affecting certain companies or
industries in market sector could have a major effect on the value of the
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, the
Portfolio may lend securities to broker-dealers approved by the Board of
Trustees. 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: The Portfolio's investments in new or
unseasoned 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-
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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.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. The Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. The Portfolio is subject to
investment risks and possible loss of principal invested.
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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 the 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. The Portfolio has its own objectives, principal investment
strategies and principal risks, which have been previously described in this
prospectus.
THE MANAGER
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 Manager of the Trust until September 17, 1999 when the
Trust's Investment Management Agreement with EQFC 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, 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 or materially modify existing investment
advisory agreements; and (iii) terminate and replace the Adviser. The Manager
also monitors each Adviser's investment program and results, reviews brokerage
matters, oversees compliance by the Trust with various federal and state
statutes, and carries out the directives of the Board of Trustees. The Manager
also supervises the provision of services to the Trust by third parties such as
the Trust's custodian.
The table below shows the annual rate of the management fees (as a percentage
of the Portfolio's average daily net assets) that the Manager is entitled to
receive in 2000 for managing the Portfolio.
ANNUAL RATE OF MANAGEMENT FEES
PORTFOLIOS ANNUAL RATE
--------------------------------------------- ------------------------
EQ/Alliance Technology Portfolio 0.90%
EXPENSE LIMITATION AGREEMENT
In the interest of limiting expenses of the Portfolios, the Manager has entered
into an expense limitation agreement with the Trust with respect to the
Portfolio ("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 the 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 the Portfolio's
business and
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amounts payable pursuant to a plan adopted in accordance with Rule
12b-1 under the 1940 Act, are limited to the following fees:
EXPENSE LIMITATION RATES
PORTFOLIOS AMOUNT EXPENSES LIMITED TO
(% of daily net assets)
- ------------------------------------------ ------------------------------------
EQ/Alliance Technology Portfolio 1.15%
- ------------------------------------------ ------------------------------------
The Portfolio may at a later date, as described below, 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 the Portfolio
has reached a sufficient asset size to permit such reimbursement to be made
without causing the total annual expense ratio of the Portfolio to exceed the
percentage limits stated above. Consequently, no reimbursement by the 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 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
The Portfolio has an Adviser that furnishes an investment program for the
Portfolio. Pursuant to an investment advisory agreement with the Manager, the
Adviser furnishes continuously an investment program for the Portfolio, makes
investment decisions on behalf of the Portfolio, places all orders for the
purchase and sale of investments for the Portfolio's account with brokers or
dealers selected by such Adviser and may perform certain limited related
administrative functions in connection therewith.
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 or materially modify existing
investment advisory agreements; and (iii) terminate and replace Advisers. In
such circumstances, shareholders would receive notice within 90 days of any
such action, including the information concerning the Adviser that normally is
provided to shareholders in a proxy statement.
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. Chase Global Funds Services Company served as the Administrator to
the Trust until May 1, 2000. As Administrator, Equitable provides the Trust
with necessary administrative, fund accounting and compliance services, and
will make available the office space, equipment, personnel and facilities
required to provide such
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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 will pay Equitable a monthly fee at the annual rate
of 0.04 of 1% of total Trust assets, plus $30,000 for each Portfolio, until the
total Trust assets reach $3 billion; 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, the Manager and each Adviser may consider
research and brokerage services furnished to either company and their
affiliates. Subject to seeking the most favorable net price and execution
available, the Manager and each Adviser may also consider sales of shares of
the Trust as a factor in the selection of brokers and dealers.
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 Advisers unless
pursuant to an exemptive order from the SEC. For these purposes, however, the
Trust has considered this issue and believes that a broker-dealer affiliate of
an Adviser to one Portfolio should not be treated as an affiliate of the
Adviser to another Portfolios for which such Adviser does not provide
investment advice. The Trust has adopted procedures that are reasonably
designed to provide that any commission paid by a Portfolio to affiliates of
the Manager or broker-dealer affiliates of that same Portfolio's Adviser 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.
FUND DISTRIBUTION ARRANGEMENTS
The Trust offers two classes of shares on behalf of the Portfolio: Class IA
shares and Class IB shares. AXA Advisors LLC ("AXA Advisors") and Equitable
Distributors, Inc. ("EDI") serve as distributors for the both the Class 1A
shares and the Class IB shares of the Trust offered by this Prospectus. Both
classes of shares are offered and redeemed at their net asset value without any
sales load. AXA Advisors and EDI are each an indirect wholly-owned subsidiary
of Equitable. Both AXA Advisors and EDI are registered as broker-dealers under
the Securities Exchange Act of 1934 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 the 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.
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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 the 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 the 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 ADRs) are valued by the Trust at the close of business
in the applicable foreign country for those securities.
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
the 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 NYSE is closed or during which trading is restricted by the SEC or
the SEC declares that an emergency exists. Redemption may also be suspended
during other periods permitted by the SEC for the protection of the Trust's
shareholders. If the Board of Trustees determines that it would be detrimental
to the best interest of the Trust's remaining shareholders to make payment in
cash, the Trust may pay redemption proceeds in whole or in part by a
distribution-in-kind of readily marketable securities.
HOW ASSETS ARE VALUED
Values are determined according to accepted practices and all laws and
regulations that apply. The assets of the 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, or in American Depository Receipts
or similar form, 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 the Portfolio's share may change on days when shareholders are
not able to buy or sell them. If events materially affecting the values of
a Portfolio's foreign investments occur between the close of foreign
markets and the close of regular trading on the NYSE, those 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.
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o Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided are valued in good
faith by the Valuation Committee of the Board of Trustees of the Trust
using its best judgment.
TAX INFORMATION
The 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. The 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 the
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 the 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 figuring out
whether the Contracts indirectly funded by the Portfolio meet tax qualification
rules for variable insurance contracts. If the 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. The Manager, therefore, carefully monitor compliance
with all of the regulated investment company rules and variable insurance
contract investment diversification rules.
PRIOR PERFORMANCE OF EACH ADVISER
The following table provides information concerning the historical performance
of another registered investment company (or series), managed by the Adviser,
Alliance, that has investment objectives, strategies and risks substantially
similar to those of the EQ/Alliance Technology Portfolio. The data is provided
to illustrate the past performance of the Adviser in managing a substantially
similar investment vehicle as measured against specified market indices. This
data does not represent the past performance of the Portfolio or the future
performance of the Portfolio or its Adviser. Consequently, potential investors
should not consider this performance data as an indication of the future
performance of the Portfolio or of its Adviser and should not confuse this
performance data with performance data for the Portfolio, which is shown for
any Portfolio that has at least one full year of operations under the caption
"ABOUT THE INVESTMENT PORTFOLIOS."
The Adviser's performance data shown below for another registered investment
company (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 investment results presented below are unaudited. For more information on
the specified market indices used below, see the section "The Benchmarks." The
name of the other investment company
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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.
ANNUAL RATES OF RETURN OF OTHER FUNDS OR ACCOUNTS
MANAGED BY ADVISERS
AS OF 12/31/99
<TABLE>
<CAPTION>
OTHER FUND OR ACCOUNT MANAGED BY ADVISER 1 5 10 SINCE INCEPTION
(EQAT Portfolio) YEAR YEARS YEARS INCEPTION DATE
- -----------------------------------------------------
Benchmark
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------- ------------ -------------- ------------- ------------ ------------
EQ/ALLIANCE TECHNOLOGY FUND _____% _____% _____% 5/1/00
(EQ/Alliance Technology Portfolio)
- ----------------------------------------------------- ------------ -------------- ------------- ------------ ------------
S&P 500 Index(1) _____% _____% _____%
- ----------------------------------------------------- ------------ -------------- ------------- ------------ ------------
</TABLE>
(1) The S&P 500 Index ("S&P 500") is an unmanaged 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 reflects the reinvestment
of income dividends and capital gain distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.
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[BACK COVER]
If you wish to know more, you will find additional information about the Trust
and its Portfolios in the following documents:
ANNUAL REPORTS
The Annual Report includes more information about the Trust's performance and
is 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. You may have to pay a
duplicating fee. To find out more about the Public Reference Room, call the SEC
at 800-SEC-0330.
Investment Company Act File Number: 811-07953
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EQ ADVISORS TRUST
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
August 30, 1999, 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
TRUST HISTORY............................................................2
DESCRIPTION OF THE TRUST AND ITS INVESTMENTS AND RISKS...................2
TRUST POLICIES...........................................................3
INVESTMENT STRATEGIES AND RISKS..........................................9
MANAGEMENT OF THE TRUST.................................................39
INVESTMENT MANAGEMENT AND OTHER SERVICES................................43
BROKERAGE ALLOCATION AND OTHER STRATEGIES...............................55
PURCHASE AND PRICING OF SHARES..........................................61
REDEMPTION OF SHARES....................................................63
TAXATION ...............................................................64
PORTFOLIO PERFORMANCE...................................................65
OTHER SERVICES..........................................................66
FINANCIAL STATEMENTS....................................................67
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TRUST HISTORY
EQ Advisors Trust ("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 each of the
following Portfolios: the Alliance Aggressive Stock Portfolio, Alliance
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 Money Market
Portfolio, Alliance Quality Bond Portfolio, and Alliance Small Cap Growth
Portfolio (collectively referred to herein as the "Alliance Portfolios"), 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, Merrill Lynch World Strategy
Portfolio, Merrill Lynch Basic Value Equity Portfolio, Lazard Large Cap Value
Portfolio, Lazard Small Cap Value Portfolio, JPM Core Bond Portfolio, BT Small
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
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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").
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 policies 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 Merrill Lynch World
Strategy Portfolio and the Lazard Small Cap Value Portfolio. Certain
non-fundamental operating policies are also described in this section because
of their direct relevance to the fundamental restrictions adopted by the
Portfolios.
Each Portfolio, except as described directly above, may not as a matter of
fundamental policy:
(1) Borrow money, except that:
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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 Merrill Lynch World Strategy Portfolio and the Merrill Lynch
Basic Value Equity Portfolio may purchase securities on margin to the
extent permitted by applicable law). Any borrowings which come to
exceed this amount will be reduced in accordance with applicable law.
Each Portfolio may borrow from banks or other persons to the extent
permitted by applicable law. In addition, the Lazard Large Cap Value
Portfolio may borrow for leveraging purposes (in order to increase
its investment in portfolio securities) to the extent that the amount
so borrowed does not exceed 33 1/3% of the Portfolio's total assets
(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 Merrill Lynch World Strategy Portfolio, as a matter of
fundamental policy, and the Merrill Lynch Basic Value Equity
Portfolio, as a matter of non-fundamental operating policy, may, to
the extent permitted by applicable law, borrow up to an additional 5%
of their respective total assets for temporary purposes;
e. the Lazard Small Cap Value Portfolio, as a matter of non-fundamental
operating policy, may borrow only from banks (i) as a temporary
measure to facilitate the meeting of redemption requests (not for
leverage) which might otherwise require the untimely disposition of
portfolio investments or (ii) for extraordinary or emergency
purposes, provided that the combination of (i) and (ii) shall not
exceed 15% of the Portfolio's net assets, not including the amount
borrowed, at the time the borrowing is made. The Lazard Small Cap
Value Portfolio will repay borrowings before any additional
investments are purchased;
f. the Warburg Pincus Small Company Value Portfolio and JPM Core Bond
Portfolio, each as a matter of non-fundamental operating policy, may
borrow only from banks for extraordinary or emergency purposes,
provided such amount shall not exceed 30% of the respective
Portfolio's total assets, not including the amount borrowed, at the
time the borrowing is made;
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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, 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.
(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 without 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% (50% in the case of each of the
other Alliance Portfolios) of the value of the Portfolio's total
assets; (ii) purchase money market securities and enter into
repurchase agreements; and (iii) acquire publicly-distributed or
privately-placed debt securities and purchase debt securities.
Each Portfolio will consider the acquisition of a debt security
to include the execution of a note or other evidence of an
extension of credit with a term of more than nine months. For
purposes of this restriction, each Portfolio will treat
purchases of loan participations and other direct indebtedness,
including investments in mortgages, as not subject to this
limitation;
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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);
e. the Warburg Pincus Small Company Value Portfolio, the Merrill
Lynch World Strategy Portfolio, and the Merrill Lynch Basic
Value Equity Portfolio, as a matter of non-fundamental policy,
may each lend its portfolio securities provided that no such
loan may be made if, as a result, the aggregate of such loans
would exceed 20% of such Portfolio's total assets (taken at
market value);
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);
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 debt publicly
distributed 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 non-fundamental policy, will not make loans, but
each may lend its portfolio securities to the extent permitted
in (4)(b) above; and
j. the Alliance Portfolios, 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
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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 JPM 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 JPM Core Bond Portfolio may (i) invest in securities of
issuers that invest in real estate or interests therein, (ii)
invest in securities that are secured by real estate or
interests therein (iii) make direct investments in mortgages,
(iv) purchase and sell mortgage-related securities and (v) hold
and sell real estate acquired by the Portfolio as a result of
the ownership of securities including mortgages;
(8) Issue senior securities except in compliance with the 1940 Act; or
(9) Underwrite securities issued by other persons, except to the extent that
the Portfolio may be deemed to be an underwriter within the meaning of the
Securities Act of 1933, as amended ("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.
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* The Morgan Stanley Emerging Markets Equity, Merrill Lynch 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.
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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, MFS Research Portfolio, the Lazard Large Cap
Value Portfolio, the Lazard Small Cap 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 Alliance
Aggressive Stock Portfolio, Alliance 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, and 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, Warburg Pincus Small Company Value Portfolio, Lazard
Large Cap Value Portfolio, Lazard Small Cap Value Portfolio, and 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, Merrill Lynch World Strategy Portfolio, Merrill
Lynch 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 Merrill Lynch
World Strategy Portfolio's and Merrill Lynch 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 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;
(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
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Portfolio, Warburg Pincus Small Company Value Portfolio, Merrill Lynch World
Strategy Portfolio, Merrill Lynch Basic Value Equity Portfolio, JPM 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.
(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
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fees for credit support. The degree of credit support provided for each issue
is generally based on historical information respecting the level of credit
risk associated with the underlying assets. Delinquency or loss in excess of
that anticipated or failure of the credit support could adversely affect the
return on an investment in such a security.
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
directly above.
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Depositary receipts may be "sponsored" or "unsponsored". Sponsored depositary
receipts are established jointly by a depositary and the underlying issuer,
whereas unsponsored depositary receipts may be established by a depositary
without participation by the underlying issuer. Holders of an unsponsored
depositary receipt generally bear all the costs associated with establishing
the unsponsored depositary receipt. In addition, the issuers of the securities
underlying unsponsored depositary receipts are not obligated to disclose
material information in the 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. Floaters and Inverse
Floaters 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.
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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.
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
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consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The
projection of short-term currency market movement is extremely difficult, and
the successful execution of a short-term hedging strategy is highly uncertain.
Under normal circumstances, consideration of the prospect for currency parities
will be incorporated into the diversification strategies. However, the Adviser
to the Portfolio believes that it is important to have the flexibility to enter
into such forward contracts when it determines that the best interests of the
Portfolio will be served.
A Portfolio may enter into forward contracts for any other purpose consistent
with the Portfolio's investment objective and program. However, the Portfolio
will not enter into a forward contract, or maintain exposure to any such
contract(s), if the amount of foreign currency required to be delivered
thereunder would exceed the Portfolio's holdings of liquid, securities and
currency available for cover of the forward contract(s). In determining the
amount to be delivered under a contract, the Portfolio may net offsetting
positions.
At the maturity of a forward contract, a Portfolio may sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and either extend the maturity of the forward contract (by "rolling"
that contract forward) or may initiate a new forward contract. If a Portfolio
retains the portfolio security and engages in an offsetting transaction, the
Portfolio will incur a gain or a loss (as described below) to the extent that
there has been movement in forward contract prices. If the Portfolio engages in
an offsetting transaction, it may subsequently enter into a new forward
contract to sell the foreign currency.
Should forward prices decline during the period between the Portfolio's
entering into a forward contract for the sale of a foreign currency and the
date it enters into an offsetting contract for the purchase of the foreign
currency, the Portfolio will realize a gain to the extent the price of the
currency it has agreed to sell exceeds the price of the currency it has agreed
to purchase. Should forward prices increase, the Portfolio will suffer a loss
to the extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.
Although 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. A 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. Each Portfolio, if permitted in the
Prospectus, may purchase or sell exchange-traded foreign currency options,
foreign currency futures contracts and related options on foreign currency
futures contracts as a hedge against possible variations in foreign exchange
rates. The Portfolios will write options on foreign currency or on foreign
currency futures contracts only if they are "covered." A put on a foreign
currency or on a foreign currency futures contract written by a Portfolio will
be considered "covered" if, so long as the Portfolio is obligated as the writer
of the put, it segregates with the Portfolio's custodian cash, 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
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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 the Alliance Equity Index Portfolio, Alliance Money
Market Portfolio, and Alliance Intermediate Government Securities Portfolio)
and the Merrill Lynch 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 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.
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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 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 Market 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
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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 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.
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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 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.
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.
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The economies of most of the Asian countries are heavily dependent on
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally, the United
States, Japan, China and the European Community. The enactment by the United
States or other principal trading partners of protectionist trade legislation,
reduction of foreign investment in the local economies and general declines in
the international securities markets could have a significant adverse effect
upon the securities markets of the Asian countries.
The securities markets in Asia are substantially smaller, less liquid and more
volatile than the major securities markets in the United States. A high
proportion of the shares of many issuers may be held by a limited number of
persons and financial institutions, which may limit the number of shares
available for investment by a Portfolio. Similarly, volume and liquidity in the
bond markets in Asia are less than in the United States and, at times, price
volatility can be greater than in the United States. A limited number of
issuers in Asian securities markets may represent a disproportionately large
percentage of market capitalization and trading value. The limited liquidity of
securities markets in Asia may also affect a Portfolio's ability to acquire or
dispose of securities at the price and time it wishes to do so. In addition,
the Asian securities markets are susceptible to being influenced by large
investors trading significant blocks of securities.
Many stock markets are undergoing a period of growth and change which may
result in trading volatility and difficulties in the settlement and recording
of transactions, and in interpreting and applying the relevant law and
regulations. With respect to investments in the currencies of Asian countries,
changes in the value of those currencies against the 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
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investment strategy. Forward commitments and when-issued and delayed delivery
transactions are generally expected to settle within three months from the date
the transactions are entered into, although the Portfolio may close out its
position prior to the settlement date by entering into a matching sales
transaction.
Although none of the Portfolios intends to make such purchases for speculative
purposes and each Portfolio intends to adhere to the policies of the Securities
and Exchange Commission ("SEC"), purchases of securities on such a basis may
involve more risk than other types of purchases. For example, by committing to
purchase securities in the future, a Portfolio subjects itself to a risk of
loss on such commitments as well as on its portfolio securities. Also, a
Portfolio may have to sell assets which have been set aside in order to meet
redemptions. In addition, if a Portfolio determines it is advisable as a matter
of investment strategy to sell the forward commitment or when-issued or delayed
delivery securities before delivery, that Portfolio may incur a gain or loss
because of market fluctuations since the time the commitment to purchase such
securities was made. Any such gain or loss would be treated as a capital gain
or loss and would be treated for tax purposes as such. When the time comes to
pay for the securities to be purchased under a forward commitment or on a
when-issued or delayed delivery basis, a Portfolio will meet its obligations
from the then available cash flow or the sale of securities, or, although it
would not normally expect to do so, from the sale of the forward commitment or
when-issued or delayed delivery securities themselves (which may have a value
greater or less than a Portfolio's payment obligation).
FUTURES 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
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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 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
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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.
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. 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
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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.
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
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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 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
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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 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.
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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 JPM Core Bond Portfolio may also invest in directly placed mortgages
including residential mortgages, multifamily mortgages, mortgages on
cooperative apartment buildings, commercial mortgages, and sale-leasebacks.
These investments are backed by assets such as office buildings, shopping
centers, retail stores, warehouses, apartment buildings and single-family
dwellings. In the event that the Portfolio forecloses on any non-performing
mortgage, 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. In addition,
in the event that the Portfolio forecloses on any non-performing mortgage, and
acquires a direct interest in the real property, the Portfolio will be subject
to the risks generally associated with the ownership of real property. There
may also be adverse changes in local, regional or general economic conditions,
deterioration of the real estate market and the financial circumstances of
tenants and sellers, unfavorable changes in zoning, building, environmental and
other laws, increased real property taxes, rising interest rates, reduced
availability and increased cost of mortgage borrowings, the need for
anticipated renovations, unexpected increases in the cost of energy,
environmental factors, acts of God and other factors which are beyond the
control of the Portfolio or the Adviser. Hazardous or toxic substances may be
present on, at or under the mortgaged property and adversely affect the value
of the property. In addition, the owners of the property containing such
substances may be held responsible, under various laws, for containing,
monitoring, removing or cleaning up such substances. The presence of such
substances may also provide a basis for other claims by third parties. Costs of
clean-up or of liabilities to third parties may exceed the value of the
property. In addition, these risks may be uninsurable. In light of these and
similar risks, it may be impossible to dispose profitably of properties in
foreclosure.
MORTGAGE DOLLAR ROLLS. The JPM Core Bond Portfolio may enter into mortgage
dollar rolls in which the Portfolio sells securities for delivery in the
current month and simultaneously contracts with the same counterparty to
repurchase similar (same type, coupon and maturity) but not identical
securities on a
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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
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calling for physical delivery at the end of trading in the contracts) for a set
price in the future. Futures contracts are designated by boards of trade which
have been designated "contracts markets" by the Commodities Futures Trading
Commission ("CFTC").
No purchase price is paid or received when the contract is entered into.
Instead, a Portfolio upon entering into a futures contract (and to maintain the
Portfolio's open positions in futures contracts) would be required to deposit
with its custodian in a segregated account in the name of the futures broker an
amount of cash, United States government securities, suitable money market
instruments, or liquid, high-grade debt securities, known as "initial margin."
The margin required for a particular futures contract is set by the exchange on
which the contract is traded, and may be significantly modified from time to
time by the exchange during the term of the contract. Futures contracts are
customarily purchased and sold on margin that may range upward from less than
5% of the value of the contract being traded. By using futures contracts as a
risk management technique, given the greater liquidity in the futures market
than in the cash market, it may be possible to accomplish certain results more
quickly and with lower transaction costs.
If the price of an open futures contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the futures
contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. 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.
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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 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.
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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 ____.
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.
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
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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 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.
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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.
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
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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 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
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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.
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
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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 Board
approved banks, broker-dealers or other financial institutions as a means of
earning a fixed rate of return on its cash reserves for periods as short as
overnight. A repurchase agreement is a contract pursuant to which a Portfolio,
against receipt of securities of at least equal value including accrued
interest, agrees to advance a specified sum to the financial institution which
agrees to reacquire the securities at a mutually agreed upon time (usually one
day) and price. Each repurchase agreement entered into by a Portfolio will
provide that the value of the collateral underlying the repurchase agreement
will always be at least equal to the repurchase price, including any accrued
interest. A Portfolio's right to liquidate such securities in the event of a
default by the seller could involve certain costs, losses or delays and, to the
extent that proceeds from any sale upon a default of the obligation to
repurchase are less than the repurchase price, the Portfolio could suffer a
loss.
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.
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
-34-
<PAGE>
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
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<PAGE>
interest). A Portfolio's liquidity and ability to manage its assets might be
affected when it sets aside cash or portfolio securities to cover such
commitments. Reverse repurchase agreements involve the risk that the market
value of the securities retained in lieu of sale may decline below the price of
the securities a Portfolio has sold but is obligated to repurchase. In the
event the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce a Portfolio's
obligation to repurchase the securities, and a Portfolio's use of the proceeds
of the reverse repurchase agreement may effectively be restricted pending such
decision.
In "dollar 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 investment program.
While the securities are being loaned, a Portfolio will continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities,
as well as interest on the investment of the collateral or a fee from the
borrower. A Portfolio has a right to call each loan and obtain the securities
on five business days' notice or, in connection with securities trading on
foreign markets, within such longer period for purchases and sales of such
securities in such foreign markets. A Portfolio will generally not have the
right to vote securities while they are being loaned, but its Manager or
Adviser will call a loan in anticipation of any important vote. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in the recovery
of the securities or possible loss of rights in the collateral should the
borrower fail financially. Loans will only be made to firms deemed by a
Portfolio's Adviser to be of good standing and will not be made unless, in the
judgment of the Adviser, the consideration to be earned from such loans would
justify the risk.
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
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<PAGE>
sold in connection with short sales against the box. Each Portfolio will
endeavor to offset transaction costs associated with short sales against the
box with the income from the investment of the cash proceeds. Not more than 10%
of a Portfolio's net assets (taken at current value) may be held as collateral
for short sales against the box at any one time. The extent to which a
Portfolio may make short sales may be limited by Code requirements for
qualification as a regulated investment company.
SMALL COMPANY SECURITIES. 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 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 of the 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.
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<PAGE>
A Portfolio will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Portfolio receiving or paying, as the
case may be, only the net amount of the two payments. A Portfolio's obligations
under a swap agreement will be accrued daily (offset against any amounts owing
to the Portfolio) and any accrued but unpaid net amounts owed to a swap
counterparty will be covered by the maintenance of a segregated account
consisting of unencumbered liquid assets, to avoid any potential leveraging of
a Portfolio. To the extent that these swaps are entered into for hedging
purposes, the Advisers believe such obligations do not constitute "senior
securities" under the 1940 Act and, accordingly, the Adviser will not treat
them as being subject to a Portfolio's borrowing restrictions. A Portfolio may
enter into OTC swap transactions with counterparties that are approved by the
Advisers in accordance with guidelines established by the Board of Trustees.
These guidelines provide for a minimum credit rating for each counterparty and
various credit enhancement techniques (for example, collateralization of
amounts due from counterparties) to limit exposure to counterparties that have
lower credit ratings.
The 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.
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<PAGE>
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).
WARRANTS. All of the Alliance Portfolios (except the Alliance Money Market
Portfolio) and the EQ/Alliance Technology 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 of the 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, 1998.
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<PAGE>
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>
LENGTH OF
SERVICE ON THE PRINCIPAL OCCUPATION(S)
NAME AND AGE BOARD DURING THE PAST FIVE YEARS
- ------------------------------------------ ---------------- -------------------------------------------------------
<S> <C> <C>
Peter D. Noris* (44) From March From May 1995 to present, Executive Vice President and
President and Trustee 1997 to present 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.
Jettie M. Edwards (54) From March From 1986 to present, Partner and Consultant, Syrus
Trustee 1997 to present Associates; from 1992 to present, Trustee, Provident
Investment Counsel Trust (investment company); from 1995 to
present, Director, The PBHG Funds, Inc. (investment
company).
William M. Kearns, Jr. (64) From March From 1994 to present, President, W.M. Kearns & Co., Inc.
Trustee 1997 to present (private investment company); from 1998 to present, Vice
Chairman, Keefe Managers, Inc.; Malibu Entertainment
Worldwide, Inc., Marine Transport Corporation, Selective
Insurance Group, Inc., and Transistor Devices, Inc.
</TABLE>
-40-
<PAGE>
<TABLE>
LENGTH OF
SERVICE ON THE PRINCIPAL OCCUPATION(S)
NAME AND AGE BOARD DURING THE PAST FIVE YEARS
- ------------------------------------------ ---------------- -------------------------------------------------------
<S> <C> <C>
Christopher P.A. Komisarjevsky (55) From March From 1998 to present, President and Chief Executive
Trustee 1997 to present Officer, Burson-Marsteller; from 1996 to 1998,
President and Chief Executive Officer,
Burson-Marsteller USA New York; from 1994 to 1995,
President and Chief Executive Officer, Gavin Anderson
& Company New York.
Harvey Rosenthal (57) From March From 1996 to present, Independent Director and
Trustee 1997 to present Investor; from 1994 to 1996, President and Chief
Operating Officer, Melville Corporation (now CVS
Corporation).
Michael Hegarty* (55) From April From April 1998 to current, Director, President and Chief
Trustee 1999 to present 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>
- -------------------
* "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 Trustee(s)"). 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
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<PAGE>
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.
COMPENSATION OF INDEPENDENT TRUSTEES AND OFFICERS. Each Independent
Trustee currently receives from the Trust an annual fee of $40,000 plus (i) an
additional fee of $4,000 for each regularly scheduled Board 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*
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
PENSION OR
RETIREMENT TOTAL
AGGREGATE BENEFITS ACCRUED COMPENSATION
COMPENSATION AS PART OF FROM TRUST PAID TO
TRUSTEE FROM THE TRUST TRUST EXPENSES TRUSTEES
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Peter D. Noris $-0- $-0- $-0-
Jettie M. Edwards $40,271 $-0- $40,271
William M. Kearns, Jr. $40,271 $-0- $40,271
Christopher P.A. Komisarjevsky $39,271 $-0- $39,271
Harvey Rosenthal $40,271 $-0- $40,271
Michael Hegarty $-0- $-0- $-0-
- ------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
* Mr. Komisarjevsky has elected to participate in the Trust's deferred
compensation plan. As of December 31, 1999, Mr. Komisarjevsky had accrued
$40,237 (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. The Trust's principal officers are:
-43-
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND POSITION PRINCIPAL OCCUPATION
WITH TRUST DURING LAST FIVE YEARS
- ---------- ----------------------
<S> <C>
Peter D. Noris (44) From May 1995 to present, Executive Vice President and
President 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.
Steven M. Joenk (40) From July 1999 to present, Senior Vice President, AXA
Vice President and Chief Financial; from 1996 to 1999, Managing Director of
Financial Officer MeesPierson; from 1994 to 1996, Executive Vice President
and Chief Financial Officer, Gabelli Funds, Inc.
Brian S. O'Neil (47) From July 1998 to present, Executive Vice President, AXA
Vice President 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.
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, Insurance
Vice President and Secretary Division, Equitable; from 1994 to July 1999, Assistant General
Counsel of The Dreyfus Corporation.
Kenneth T. Kozlowski (38) From 1998 to present, Vice President and Counsel, Insurance Division,
Controller Equitable Life; from October 1996 to present, Director-Fund
Administration,Prudential Investments; from 1992 to 1996,
Vice President-FundAdministration, Prudential Securities
Incorporated.
Mary E. Cantwell (38) From July 1999 to present, Vice President, Equitable; from
Vice President 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, LLC; from Sept.
1997 to Present, Marketing Director, Income Management Group,
Equitable.
</TABLE>
-44-
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND POSITION PRINCIPAL OCCUPATION
WITH TRUST DURING LAST FIVE YEARS
- ---------- ----------------------
<S> <C>
Paul Roselli (34) From March 1997 to present, Vice President, Fund Administration,
Assistant Treasurer Chase Global Funds Services Company; from July 1993 to March
1997, Assistant Manager of Fund Accounting , Brown Brothers
Harriman.
Helen A. Robichaud, Esq. (47) From 1994 to present, Vice President and Associate General
Assistant Secretary Counsel, Chase Global Funds Services Company.
</TABLE>
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 participants in
tax-qualified retirement plans. The Trust's shares currently are sold to: (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., 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
to owners of the Contracts (the "Contract owners") and participants in the
Equitable Plan the opportunity to instruct them as to how shares allocable to
their Contracts or to the Equitable Plan will be voted with respect to certain
matters, such as approval of investment advisory agreements. To the Trust's
knowledge, as of the date of this Statement of Additional Information ("SAI"),
no Contract owners owned Contracts entitling such persons to give voting
instructions regarding more than 5% of the outstanding shares of any Portfolio.
As of the date of this SAI, no participant in the Equitable Plan had interests
in the Equitable Plan entitling such person to give voting instructions
regarding more than 5% of the outstanding shares of any Portfolio.
The Trust may in the future offer its shares to separate accounts of insurance
companies unaffiliated with Equitable, as well as to tax-qualified retirement
plans in addition to the Equitable Plan. The Trust does not currently 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
-45-
<PAGE>
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"), Warburg Pincus Asset Management, Inc.
("Warburg"), Merrill Lynch Asset Management, L.P. ("MLAM"), Lazard Asset
Management ("LAM"), a division of Lazard Freres and Company, LLC, J.P. Morgan
Investment Management Inc. ("J.P. Morgan"), 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"), and Brown
Capital Management ("Brown Capital") (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 a wholly-owned subsidiary of
AXA Financial, Inc. ("AXA Financial"), a subsidiary of AXA, a French insurance
holding company. The principal offices of Equitable and AXA Financial 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% 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.
-46-
<PAGE>
The Trust and Manager have entered into an investment management agreement
("Management Agreement"). This was initially approved by the Board of Trustees
on March 31, 1997. The Management Agreement obligates the Manager to: (i)
provide investment management services to the Trust; (ii) select the Adviser
for each Portfolio; (iii) monitor the Adviser's investment programs and
results; (iv) review brokerage matters; (v) oversee compliance by the Trust
with various federal and state statutes; and (vi) carry out the directives of
the Board of Trustees. The Management Agreement requires the Manager to provide
the Trust with office space, office equipment, and personnel necessary to
operate and administer the Trust's business, and also to supervise the
provision of services by third parties. The continuance of the Management
Agreement, with respect to each Portfolio, after the first two years must be
specifically approved at least annually (i) by the Trust's Board of Trustees or
by vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of such Portfolio and (ii) by the affirmative vote of a majority of
the Trustees who are not parties to the Management Agreement or "interested
persons" (as defined in the 1940 Act) of any such party by votes cast in person
at a meeting called for such purpose. The Management Agreement with respect to
each Portfolio may be terminated (i) at any time, without the payment of any
penalty, by the Trust upon the vote of a majority of the Trustees or by vote of
the majority of the outstanding voting securities (as defined in the 1940 Act)
of such Portfolio upon sixty (60) days' written notice to the Manager or (ii)
by the Manager at any time without penalty upon sixty (60) days' written notice
to the Trust. The Management Agreement will also terminate automatically in the
event of its assignment (as defined in the 1940 Act).
Each Portfolio pays a fee to the Manager as described below for the investment
management services the Manager provides each Portfolio. The Manager and the
Trust have also entered into an expense limitation agreement with respect to
each 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 Trust pays all expenses not assumed by
the Manager, including, without limitation: the fees and expenses of its
independent accountants and of its legal counsel; the costs of printing and
mailing annual and semi-annual reports to shareholders, proxy statements,
prospectuses, prospectus supplements and statements of additional information,
all to the extent they are sent to existing Contract owners; the costs of
printing registration statements; bank transaction charges and custodian's
fees; any proxy solicitors' fees and expenses; filing fees; any federal, state
or local income or other taxes; any interest; any membership fees of the
Investment Company Institute and similar organizations; fidelity bond and
Trustees' liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of the
Portfolios of the Trust on a basis that the Trustees deem fair and equitable,
which may be on the basis of relative net assets of each Portfolio or the
nature of the services performed and relative applicability to each Portfolio.
As discussed in greater detail below, under "Distribution of the Trust's
Shares," the Class IB shares may pay for certain distribution related expenses
in connection with activities primarily intended to result in the sale of its
shares.
The tables below show the fees paid by each Portfolio to the Manager 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.
-47-
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1997*
--------------------------------------------------------------
PORTFOLIO MANAGEMENT FEE MANAGEMENT FEE TOTAL AMOUNT OF
PAID TO MANAGER FEES WAIVED AND
AFTER FEE WAIVER OTHER EXPENSES
ASSUMED BY MANAGER
- ------------------------------------------------- ----------------- ----------------- ---------------------
<S> <C> <C> <C>
Merrill Lynch Basic Value Equity $73,477 $0 $123,460
Merrill Lynch 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, JPM Core Bond, Lazard Large Cap Value and Lazard Small Cap 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.
<TABLE>
<CAPTION>
CALENDAR YEAR ENDED DECEMBER 31, 1998*
-------------------------------------------------------------------
PORTFOLIO MANAGEMENT FEE MANAGEMENT FEE TOTAL AMOUNT OF
PAID TO MANAGER FEES WAIVED AND
AFTER FEE WAIVER OTHER EXPENSES
ASSUMED BY MANAGER
- -------------------------------------- --------------- ---------------- ---------------------------
<S> <C> <C> <C>
Merrill Lynch Basic Value Equity $632,783 $396,615 $236,168
Merrill Lynch 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
JPM Core Bond $172,507 $86,266 $86,241
Lazard Large Cap Value $160,570 $73,011 $87,559
Lazard Small Cap $194,797 $111,500 $83,297
</TABLE>
* The Alliance Aggressive Stock, Alliance 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 Portfolio, 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 are not included in the above tables because they had no
operations before the year ended December 31, 1998.
-48-
<PAGE>
<TABLE>
<CAPTION>
CALENDAR YEAR ENDED DECEMBER 31, 1999*
-----------------------------------------------------------------
PORTFOLIO MANAGEMENT FEE MANAGEMENT FEE TOTAL AMOUNT OF
PAID TO MANAGER FEES WAIVED AND
AFTER FEE WAIVER OTHER EXPENSES
ASSUMED BY MANAGER
- --------------------------------------- ---------------- ------------------- ---------------------
<S> <C> <C> <C>
Merrill Lynch Basic Value Equity $_______ $_______ $_______
Merrill Lynch World Strategy $_______ $_______ $_______
MFS Emerging Growth Companies $_______ $_______ $_______
MFS Research $_______ $_______ $_______
EQ/Putnam Balanced $_______ $_______ $_______
EQ/Putnam Growth & Income Value $_______ $_______ $_______
EQ/Putnam International Equity $_______ $_______ $_______
EQ/Putnam Investors Growth $_______ $_______ $_______
T. Rowe Price Equity Income $_______ $_______ $_______
T. Rowe Price International Stock $_______ $_______ $_______
Warburg Pincus Small Company Value $_______ $_______ $_______
Morgan Stanley Emerging Markets Equity $_______ $_______ $_______
BT Equity 500 Index $_______ $_______ $_______
BT International Equity Index $_______ $_______ $_______
BT Small Company Index $_______ $_______ $_______
JPM Core Bond $_______ $_______ $_______
Lazard Large Cap Value $_______ $_______ $_______
Lazard Small Cap $_______ $_______ $_______
Alliance Aggressive Stock $_______ $_______ $_______
Alliance 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 $_______ $_______ $_______
Calvert Socially Responsible $_______ $_______ $_______
</TABLE>
* The EQ/Evergreen Foundation, EQ/Evergreen, and MFS Growth with Income
Portfolios coTmmenced operations on January 4, 1999. The EQ/Alliance Premier
Growth, Capital Guardian Research, Capital Guardian U.S. Equity, and Capital
Guardian International Portfolios commenced operations on May 1, 1999. The
Calvert Socially Responsible Portfolio commenced operations on September 1,
1999. The Alliance Aggressive Stock, Alliance 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 1, 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
-49-
<PAGE>
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 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
Warburg, respectively. The Manager has entered into an Advisory Agreement on
behalf of Merrill Lynch World Strategy Portfolio and Merrill Lynch Basic Value
Equity Portfolio with MLAM. 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 JPM 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
each of EQ/Evergreen Foundation Portfolio and EQ/Evergreen Portfolio with
Evergreen. The Manager has entered into an Advisory Agreement with Alliance on
behalf of the Alliance Portfolios, EQ Alliance Premier Growth Portfolio and
EQ/Alliance Technology Portfolio. The Manager has entered into an Advisory
Agreement on behalf Capital Guardian Research Portfolio, Capital Guardian U.S.
Equity Portfolio, and Capital Guardian International Portfolio with Capital
Guardian. Finally, the Manager has entered into Advisory Agreements on behalf
of Calvert Socially Responsible Portfolio with Calvert and Brown Capital. The
Advisory Agreements obligate T. Rowe Price, Price Fleming, Putnam Management,
MFS, Warburg, MSAM, MLAM, LAM, J.P. Morgan, Bankers Trust, Evergreen, Alliance,
Capital Guardian, Calvert, and Brown Capital 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.
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
- --------- -----------------
Merrill Lynch Basic Value Equity $53,462
Merrill Lynch 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 operations on May 1, 1997. Morgan Stanley
Emerging Markets Equity Portfolio commenced operations on August 20, 1997.
No advisory fees were paid to Bankers Trust, JP
-50-
<PAGE>
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
- --------- -----------------
Merrill Lynch Basic Value Equity $454,234
Merrill Lynch 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
JPM 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 Alliance Aggressive Stock,
Alliance 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 Portfolio, 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
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
- --------- -----------------
Merrill Lynch Basic Value Equity $_______
Merrill Lynch World Strategy $_______
MFS Emerging Growth Companies $_______
MFS Research $_______
EQ/Putnam Balanced $_______
EQ/Putnam Growth & Income Value $_______
EQ/Putnam International Equity $_______
EQ/Putnam Investors Growth $_______
T. Rowe Price Equity Income $_______
T. Rowe Price International Stock $_______
Warburg Pincus Small Company Value $_______
Morgan Stanley Emerging Markets Equity $_______
BT Equity 500 Index $_______
BT International Equity Index $_______
BT Small Company Index $_______
JPM Core Bond $_______
Lazard Large Cap Value $_______
Lazard Small Cap Value $_______
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<PAGE>
CALENDAR YEAR ENDED DECEMBER 31, 1999*
PORTFOLIO ADVISORY FEE PAID
- --------- -----------------
Alliance Aggressive Stock $_______
Alliance 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 $_______
Calvert Socially Responsible $_______
* The EQ/Evergreen Foundation, EQ/Evergreen, and MFS Growth with Income
Portfolios commenced operations on January 4, 1999. The EQ/Alliance Premier
Growth, Capital Guardian Research, Capital Guardian U.S. Equity, and Capital
Guardian International Portfolios commenced operations on May 1, 1999. The
Calvert Socially Responsible Portfolio commenced operations on September 1,
1999. The Alliance Aggressive Stock, Alliance 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 1, 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 that permits the Manager,
subject to certain conditions, to enter into Advisory Agreements with Advisers
approved by the Trustees, but without the requirement of shareholder approval.
Pursuant to the terms of the Multi-Manager Order, the Manager is able, subject
to the approval of the Trustees, but without shareholder approval, to employ
new Advisers for new or existing Portfolios change the terms of particular
Advisory Agreements or continue the employment of existing Advisers after
events that under the 1940 Act and the Advisory Agreements would cause an
automatic termination of the agreement. Although shareholder approval would not
be required for the termination of Advisory Agreements, shareholders of a
Portfolio would continue to have the right to terminate such agreements for the
Portfolio at any time by a vote of a majority of outstanding voting securities
of the Portfolio. With respect to these Portfolios for which Alliance serves as
Adviser (other than EQ/Alliance Premier Growth and EQ/Alliance Technology
Portfolio), the Manager will not: (i) terminate Alliance and select a new
Adviser for those Portfolios or (ii) materially modify the
-52-
<PAGE>
existing investment advisory agreement without first either obtaining approval
of shareholders for such actions or obtaining approval of shareholders to
utilize the Multi-Manager Order.
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:
FISCAL YEAR ENDED DECEMBER 31, 1997*
PORTFOLIO ADVISORY FEE PAID
- --------- -----------------
Merrill Lynch Basic Value Equity $11,213
Merrill Lynch 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 commended operations on May 1, 1997. Morgan Stanley
Emerging Equity Portfolio commenced operations on August 20, 1997. The BT
Equity 500 Index, BT International Equity Index, BT Small Company Index,
JPM 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.
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<PAGE>
CALENDAR YEAR ENDED DECEMBER 31, 1998*
PORTFOLIO ADMINISTRATION FEE
- --------- ------------------
Merrill Lynch Basic Value Equity $92,138
Merrill Lynch 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
JPM Core Bond $52,546
Lazard Large Cap Value $47,035
Lazard Small Cap Value $45,857
* The Alliance Aggressive Stock, Alliance 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.
CALENDAR YEAR ENDED DECEMBER 31, 1999*
PORTFOLIO ADMINISTRATION FEE
- --------- ------------------
Merrill Lynch Basic Value Equity $_______
Merrill Lynch World Strategy $_______
MFS Emerging Growth Companies $_______
MFS Research $_______
EQ/Putnam Balanced $_______
EQ/Putnam Growth & Income Value $_______
EQ/Putnam International Equity $_______
EQ/Putnam Investors Growth $_______
T. Rowe Price Equity Income $_______
T. Rowe Price International Stock $_______
Warburg Pincus Small Company Value $_______
Morgan Stanley Emerging Markets Equity $_______
BT Equity 500 Index $_______
BT International Equity Index $_______
BT Small Company Index $_______
JPM Core Bond $_______
Lazard Large Cap Value $_______
Lazard Small Cap Value $_______
Alliance Aggressive Stock $_______
Alliance Balanced $_______
Alliance Common Stock $_______
Alliance Conservative Investors $_______
Alliance Equity Index $_______
Alliance Global $_______
Alliance Growth and Income $_______
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<PAGE>
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 $_______
Calvert Socially Responsible $_______
* The EQ/Evergreen Foundation, EQ/Evergreen, and MFS Growth with Income
Portfolios commenced operations on January 4, 1999. The EQ/Alliance Premier
Growth, Capital Guardian Research, Capital Guardian U.S. Equity, and Capital
Guardian International Portfolios commenced operations on May 1, 1999. The
Calvert Socially Responsible Portfolio commenced operations on September 1,
1999. The Alliance Aggressive Stock, Alliance 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 1, 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 DISTRIBUTORS
The Trust has distribution agreements with AXA Advisors, LLC ("AXA Advisors")
and EDI (each also referred to as a "Distributor," and together "Distributors")
in which EQFC and EDI serve as the 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
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<PAGE>
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.
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 the Class IB shares of the Portfolios. On March __, 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
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<PAGE>
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.
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>
PORTFOLIO DISTRIBUTION FEE DISTRIBUTION FEE TOTAL
PAID TO AXA ADVISORS PAID TO EDI DISTRIBUTION FEES
- -------------------------------------- -------------------- ----------- -----------------
<S> <C> <C> <C>
Merrill Lynch Basic Value Equity $_______ $_______ $_______
Merrill Lynch World Strategy $_______ $_______ $_______
MFS Emerging Growth Companies $_______ $_______ $_______
MFS Research $_______ $_______ $_______
EQ/Putnam Balanced $_______ $_______ $_______
EQ/Putnam Growth & Income Value $_______ $_______ $_______
EQ/Putnam International Equity $_______ $_______ $_______
EQ/Putnam Investors Growth $_______ $_______ $_______
T. Rowe Price Equity Income $_______ $_______ $_______
T. Rowe Price International Stock $_______ $_______ $_______
Warburg Pincus Small Company Value $_______ $_______ $_______
Morgan Stanley Emerging Markets Equity $_______ $_______ $_______
BT Equity 500 Index $_______ $_______ $_______
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO DISTRIBUTION FEE DISTRIBUTION FEE TOTAL
PAID TO AXA ADVISORS PAID TO EDI DISTRIBUTION FEES
- -------------------------------------- -------------------- ----------- -----------------
<S> <C> <C> <C>
BT International Equity Index $_______ $_______ $_______
BT Small Company Index $_______ $_______ $_______
JPM Core Bond $_______ $_______ $_______
Lazard Large Cap Value $_______ $_______ $_______
Lazard Small Cap Value $_______ $_______ $_______
Alliance Aggressive Stock $_______ $_______ $_______
Alliance 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 $_______ $_______ $_______
Calvert Socially Responsible $_______ $_______ $_______
</TABLE>
* The EQ/Evergreen Foundation, EQ/Evergreen, and MFS Growth with Income
Portfolios commenced operations on January 4, 1999. The EQ/Alliance Premier
Growth, Capital Guardian Research, Capital Guardian U.S. Equity, and Capital
Guardian International Portfolios commenced operations on May 1, 1999. The
Calvert Socially Responsible Portfolio commenced operations on September 1,
1999. The Alliance Aggressive Stock, Alliance 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 1, 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 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.
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<PAGE>
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 the Manager or Advisers. The research
services include economic, market, industry and company research material.
Based upon an assessment of the value of research and other brokerage services
provided, proposed allocations of brokerage for commission transactions are
periodically prepared internally. In addition, the Manager and Advisers may
allocate brokerage business to brokers and dealers that have made or are
expected to make significant efforts in facilitating the distribution of the
Trust's shares.
Commissions charged by brokers that provide research services may be somewhat
higher than commissions charged by brokers that do not provide research
services. As permitted by Section 28(e) of the 1934 Act and by policies adopted
by the Trustees, the Manager and Advisers may cause the Trust to pay a
broker-dealer that provides brokerage and research services to the Manager and
Advisers an amount of commission for effecting a securities transaction for the
Trust in excess of the commission another broker-dealer would have charged for
effecting that transaction.
The Manager and Advisers do not engage brokers and dealers whose commissions
are believed to be unreasonable in relation to brokerage and research services
provided. The overall reasonableness of commissions paid will be evaluated by
rating brokers on such general factors as execution capabilities, quality of
research (that is, quantity and quality of information provided, diversity of
sources utilized, nature and frequency of communication, professional
experience, analytical ability and professional stature of the broker) and
financial standing, as well as the net results of specific transactions, taking
into account such factors as price, promptness, size of order and difficulty of
execution. The research services obtained will, in general, be used by the
Manager and Advisers for the benefit of all accounts for which the responsible
party makes investment decisions. The receipt of research services from brokers
will tend to reduce the Manager's and Advisers' expenses in managing the
Portfolios.
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<PAGE>
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
- --------- --------------------------
Merrill Lynch Basic Value Equity $75,654
Merrill Lynch 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, JPM Core Bond, Lazard Large Cap Value and Lazard Small Cap 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
- --------- --------------------------
Merrill Lynch Basic Value Equity $397,472
Merrill Lynch 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
JPM Core Bond $ 7,380
Lazard Large Cap Value $ 95,425
Lazard Small Cap Value $ 79,393
* The Alliance Aggressive Stock Portfolio, Alliance 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 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
- --------- --------------------------
Merrill Lynch Basic Value Equity $_______
Merrill Lynch World Strategy $_______
MFS Emerging Growth Companies $_______
MFS Research $_______
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<PAGE>
CALENDAR YEAR ENDED DECEMBER 31, 1999*
PORTFOLIO BROKERAGE COMMISSIONS PAID
- --------- --------------------------
EQ/Putnam Balanced $_______
EQ/Putnam Growth & Income Value $_______
EQ/Putnam International Equity $_______
EQ/Putnam Investors Growth $_______
T. Rowe Price Equity Income $_______
T. Rowe Price International Stock $_______
Warburg Pincus Small Company Value $_______
Morgan Stanley Emerging Markets Equity $_______
BT Equity 500 Index $_______
BT International Equity Index $_______
BT Small Company Index $_______
JPM Core Bond $_______
Lazard Large Cap Value $_______
Lazard Small Cap Value $_______
Alliance Aggressive Stock $_______
Alliance 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 $_______
Calvert Socially Responsible $_______
* The EQ/Evergreen Foundation, EQ/Evergreen, and MFS Growth with Income
Portfolios commenced operations on January 4, 1999. 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 September 1,
1999. The Alliance Aggressive Stock, Alliance 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 1, 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 72% of Donaldson, Lufkin & Jenrette, Inc. ("DLJ"). As a result,
DLJ is considered to be 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
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<PAGE>
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 Fleming and Jardine
Fleming, which are persons indirectly related to the Advisers, acting as an
agent in accordance with procedures established by the Trust's Board of
Trustees. MLAM, the Adviser to the Merrill Lynch World Strategy Portfolio and
Merrill Lynch Basic Value Equity Portfolio, may execute portfolio transactions
through certain affiliates of MLAM. 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
Portfolio, and Lazard Small Cap Value Portfolio, may execute portfolio
transactions through certain affiliates of LAM. J.P. Morgan, the Adviser to the
JPM Core Bond Portfolio, may execute portfolio transactions through certain
affiliates of J.P. Morgan. 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, including Lieber & Company. Alliance,
the Adviser to the EQ/Alliance Technology Portfolio, EQ/Alliance Premier Growth
Portfolio, Alliance Aggressive Stock Portfolio, Alliance 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 Money Market Portfolio, Alliance Quality Bond
Portfolio, Alliance Small Cap Growth 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, does not have an affiliated broker through which it would execute
portfolio transactions. Calvert, an Adviser to the Calvert Socially 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.
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<PAGE>
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.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1997*
--------------------------------------------------------------------------------------
PORTFOLIO AFFILIATED AGGREGATE PERCENTAGE OF PERCENTAGE OF
BROKER-DEALER BROKERAGE TOTAL BROKERAGE TRANSACTIONS
COMMISSIONS PAID COMMISSIONS (BASED
ON DOLLAR
AMOUNTS)
- ---------------------------------- ------------------------------- ----------------- ---------------- --------------
<S> <C> <C> <C> <C>
Merrill Lynch Basic Value Equity Donaldson, Lufkin & Jenrette $1,444 1.91% 1.48%
Securities Corporation
("DLJ")
Merrill Lynch, Pierce Fenner $7,984 10.55% 10.93%
& Smith Incorporated
("Merrill Lynch")
Merrill Lynch World Strategy DLJ $166 0.38% 0.74%
Merrill Lynch $2,622 6.02% 5.72%
MFS Emerging Growth Companies Pershing Trading Company, $72 0.05% 0.05%
L.P. ("Pershing")
EQ/Putnam Balanced s Equico Securities Corp. $75 0.47% 0.33%
EQ/Putnam Growth & Income Value Equico Securities Corporation $363 0.33% 0.23%
T. Rowe Price Equity Income DLJ $694 1.03% 0.55%
T. Rowe Price International Stock Jardine Fleming Securities $454 0.19% 0.18%
Ltd.
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 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, JPM 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.
<TABLE>
<CAPTION>
CALENDAR YEAR ENDED DECEMBER 31, 1998*
--------------------------------------------------------------------------------------
PORTFOLIO AFFILIATED AGGREGATE PERCENTAGE OF PERCENTAGE OF
BROKER-DEALER BROKERAGE TOTAL BROKERAGE TRANSACTIONS
COMMISSIONS PAID COMMISSIONS (BASED
ON DOLLAR
AMOUNTS)
- ---------------------------------- ------------------------------- ----------------- ---------------- --------------
<S> <C> <C> <C> <C>
Merrill Lynch Basic Value Equity DLJ $14,104 3.55% 4.43%
Merrill Lynch $13,238 3.33% 3.15%
Merrill Lynch 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 Companies Pershing $ 600 .10% .12%
T. Rowe Price Equity Income DLJ $ 3,544 2.47% 1.53%
T. Rowe Price International Stock Jardine Fleming $ 1,978 1.10% .72%
Securities Ltd.
Robert Fleming Co. $ 5,249 2.92% 3.41%
Ord Minnett - New Zealand $ 326 .18% .13%
- Ltd.
Ord Minnett Group, Ltd. $ 155 .09% .06%
DLJ $ 165 .09% .14%
Morgan Stanley Emerging Markets Equity Morgan Stanley & Co. $ 596 .24% .18%
Lazard Small Cap Value DLJ $ 150 .19% .15%
</TABLE>
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<PAGE>
* The Alliance Aggressive Stock, Alliance 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.
<TABLE>
<CAPTION>
CALENDAR YEAR ENDED DECEMBER 31, 1999*
--------------------------------------------------------------------------------------
PORTFOLIO AFFILIATED AGGREGATE PERCENTAGE OF PERCENTAGE OF
BROKER-DEALER BROKERAGE TOTAL BROKERAGE TRANSACTIONS
COMMISSIONS PAID COMMISSIONS (BASED
ON DOLLAR
AMOUNTS)
- ---------------------------------- ------------------------------- ----------------- ---------------- --------------
<S> <C> <C> <C> <C>
Merrill Lynch Basic Value Equity DLJ $_______ _____% _____%
Merrill Lynch $_______ _____% _____%
Merrill Lynch World Strategy DLJ $_______ _____% _____%
Merrill Lynch $_______ _____% _____%
MFS Research DLJ $_______ _____% _____%
Pershing $_______ _____% _____%
MFS Emerging Growth Companies Pershing $_______ _____% _____%
T. Rowe Price Equity Income DLJ $_______ _____% _____%
T. Rowe Price International Stock Jardine Fleming $_______ _____% _____%
Securities Ltd.
Robert Fleming Co. $_______ _____% _____%
Ord Minnett - New Zealand $_______ _____% _____%
- Ltd.
Ord Minnett Group, Ltd. $_______ _____% _____%
DLJ $_______ _____% _____%
Morgan Stanley Emerging Markets Morgan Stanley & Co. $_______ _____% _____%
Equity
Lazard Small Cap Value DLJ $_______ _____% _____%
Alliance Aggressive Stock DLJ $_______ _____% _____%
Pershing
Alliance Balanced DLJ $_______ _____% _____%
Pershing
Alliance Common Stock DLJ $_______ _____% _____%
Pershing
Alliance Conservative Investors DLJ $_______ _____% _____%
Pershing
Alliance Equity Index DLJ $_______ _____% _____%
Pershing
Alliance Global DLJ $_______ _____% _____%
Pershing
Alliance Growth and Income DLJ $_______ _____% _____%
Pershing
</TABLE>
-64-
<PAGE>
<TABLE>
<CAPTION>
CALENDAR YEAR ENDED DECEMBER 31, 1999*
--------------------------------------------------------------------------------------
PORTFOLIO AFFILIATED AGGREGATE PERCENTAGE OF PERCENTAGE OF
BROKER-DEALER BROKERAGE TOTAL BROKERAGE TRANSACTIONS
COMMISSIONS PAID COMMISSIONS (BASED
ON DOLLAR
AMOUNTS)
- ---------------------------------- ------------------------------- ----------------- ---------------- --------------
<S> <C> <C> <C> <C>
Alliance Growth Investors DLJ $_______ _____% _____%
Pershing
Alliance High Yield DLJ $_______ _____% _____%
Pershing
Alliance Intermediate Government DLJ $_______ _____% _____%
Securities Pershing
Alliance International DLJ $_______ _____% _____%
Pershing
Alliance Money Market DLJ $_______ _____% _____%
Pershing
Alliance Quality Bond DLJ $_______ _____% _____%
Pershing
Alliance Small Cap Growth DLJ $_______ _____% _____%
Pershing
EQ/Evergreen Foundation Lieber & Company $_______ _____% _____%
EQ/Evergreen Lieber & Company $_______ _____% _____%
MFS Growth with Income DLJ $_______ _____% _____%
Pershing
EQ/Alliance Premier Growth DLJ $_______ _____% _____%
Pershing
</TABLE>
* The EQ/Evergreen Foundation, EQ/Evergreen, and MFS Growth with Income
Portfolios commenced operations on January 4, 1999. The EQ/Alliance Premier
Growth, Capital Guardian Research, Capital Guardian U.S. Equity, and Capital
Guardian International Portfolios commenced operations on May 1, 1999. The
Calvert Socially Responsible Portfolio commenced operations on September 1,
1999. The Alliance Aggressive Stock, Alliance 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 1, 1999.
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,
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<PAGE>
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.
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.
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<PAGE>
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. 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.
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.
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<PAGE>
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
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<PAGE>
year quarter. There is a thirty (30) day period after the end of each calendar
year quarter in which to cure any non-compliance.
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. Th 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
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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.
Each Portfolio's total return will vary from time to time depending upon market
conditions, the composition of each Portfolio's investment portfolio and
operating expenses of the Trust allocated to each Portfolio. Total return
should also be considered relative to changes in the value of a Portfolio's
shares and to the relative risks associated with the investment objectives and
policies of the Portfolios. These total return figures do not reflect insurance
company expenses and fees applicable to the Contracts. At any time in the
future, total return may be higher or lower than in the past and there can be
no assurance that any historical results will continue.
NON-STANDARD PERFORMANCE
In addition to the performance information described above, each Portfolio may
provide total return information with respect to the Portfolios for designated
periods, such as for the most recent six months or most recent twelve months.
This total return information is computed as described under "Computation of
Total Return" above except that no annualization is made.
OTHER SERVICES
INDEPENDENT ACCOUNTANT
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.
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<PAGE>
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.
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<PAGE>
APPENDIX A
EQ ADVISORS TRUST
INVESTMENT STRATEGIES SUMMARY
<TABLE>
<CAPTION>
Borrowings Borrowings
Asset-backed (emergencies, (leveraging Convertible Inverse
PORTFOLIO Securities(A) redemptions) purposes) Securities Floaters(A) Floaters(A)
--------- ------------- ------------ --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Alliance Aggressive Stock Y Y N Y Y Y
Alliance Balanced Y Y N Y Y Y
Alliance Common Stock Y Y N Y Y Y
Alliance Conservative Investors Y Y N Y Y Y
Alliance Equity Index N Y N Y Y Y
Alliance Global Y Y N Y Y Y
Alliance Growth and Income Y Y N Y Y Y
Alliance Growth Investors Y Y N Y Y Y
Alliance High Yield Y Y N Y Y Y
Alliance Intermediate
Government Securities Y Y N Y Y Y
Alliance International Y Y N Y Y Y
Alliance Money Market Y Y N Y Y Y
Alliance Quality Bond Y Y N Y Y Y
Alliance Small Cap Growth Y Y N Y Y Y
T. Rowe Price International
Stock N Y - 33.3% N Y N N
T. Rowe Price Equity Income N Y - 33.3% N Y N N
EQ/Putnam Growth & Income Value N Y - 10.0% N Y N N
EQ/Putnam International Equity N Y - 10.0% N Y N N
EQ/Putnam Investors Growth N Y - 10.0% N Y N N
EQ/Putnam Balanced Y Y - 10.0% N Y Y N
MFS Research N Y - 33.3% N Y N N
MFS Emerging Growth Companies Y Y - 33.3% N Y N N
MFS Growth with Income N Y - 10.0% N Y N N
Morgan Stanley Emerging Markets
Equity Y Y - 33.3% N Y Y Y
Warburg Pincus Small Company
Value N Y - 30.0% N Y N N
Merrill Lynch World Strategy N Y - 33.3% N Y N N
Merrill Lynch Basic Value Equity N Y - 33.3% N Y N N
Lazard Large Cap Value N Y - 10.0% Y - 33.3% Y Y N
Lazard Small Cap Value N Y - 15.0% (E) N Y Y N
JPM Core Bond Y Y - 33.3% N Y N N
BT Small Company Index Y Y - 33.3% N Y N N
BT International Equity Index Y Y - 33.3% N Y N N
BT Equity 500 Index Y Y - 33.3% N Y N N
EQ/Evergreen N Y - 33.3% N Y N N
EQ/Evergreen Foundation N Y - 33.3% N Y N N
EQ/Alliance Premier Growth N Y - 5.0% N Y N N
Capital Guardian Research N Y - 5.0% N Y N N
Capital Guardian U.S. Equity N Y - 5.0% N Y N N
Capital Guardian International N Y - 5.0% N Y N N
Calvert Socially Responsible Y Y - 33.3% N Y Y Y
EQ/Alliance Technology Y Y - 33.3% N Y Y Y
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
APPENDIX A
EQ ADVISORS TRUST
INVESTMENT STRATEGIES SUMMARY
Foreign Foreign
Foreign Currency Currency Options
Brady Depository Currency Forward Futures (exchange
PORTFOLIO Bonds(B) Receipts(B) Spot Trans. Trans. Trans.(A) traded)
--------- -------- ----------- ----------- ------ --------- -------
<S> <C> <C> <C> <C> <C> <C>
Alliance Aggressive Stock Y Y Y Y Y Y
Alliance Balanced Y Y Y Y Y Y
Alliance Common Stock Y Y Y Y Y Y
Alliance Conservative Investors Y Y Y Y Y Y
Alliance Equity Index N N N N N N
Alliance Global Y Y Y Y Y Y
Alliance Growth and Income Y Y Y Y Y Y
Alliance Growth Investors Y Y Y Y Y Y
Alliance High Yield Y Y Y Y Y Y
Alliance Intermediate
Government Securities Y N Y N N Y
Alliance International Y Y Y Y Y Y
Alliance Money Market N Y N N N N
Alliance Quality Bond Y Y Y Y Y Y
Alliance Small Cap Growth Y Y Y Y Y Y
T. Rowe Price International
Stock N Y Y Y Y Y
T. Rowe Price Equity Income N Y Y Y Y Y
EQ/Putnam Growth & Income Value N Y Y Y Y Y
EQ/Putnam International Equity N Y Y Y Y Y
EQ/Putnam Investors Growth N Y Y Y Y Y
EQ/Putnam Balanced Y Y Y Y Y Y
MFS Research N Y Y N N N
MFS Emerging Growth Companies Y Y Y Y Y Y
MFS Growth with Income N Y Y Y Y Y
Morgan Stanley Emerging Markets
Equity Y Y Y Y Y Y
Warburg Pincus Small Company
Value N Y Y Y Y Y
Merrill Lynch World Strategy N Y Y Y Y Y
Merrill Lynch Basic Value Equity N Y - 10% Y Y Y Y
Lazard Large Cap Value N Y - 10% Y N N N
Lazard Small Cap Value N N N N N N
JPM Core Bond Y Y Y Y Y Y
BT Small Company Index N N N N N N
BT International Equity Index N Y Y Y Y Y
BT Equity 500 Index N N N N N N
EQ/Evergreen N Y N N N N
EQ/Evergreen Foundation N Y Y Y Y Y
EQ/Alliance Premier Growth N Y Y Y Y Y
Capital Guardian Research N Y N N N N
Capital Guardian U.S. Equity N Y N N N N
Capital Guardian International N Y Y Y Y Y
Calvert Socially Responsible Y Y Y Y Y Y
EQ/Alliance Technology 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).
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<PAGE>
APPENDIX A
EQ ADVISORS TRUST
INVESTMENT STRATEGIES SUMMARY
<TABLE>
<CAPTION>
Foreign Currency
Foreign (written, Foreign Forward Hybrid Illiquid
PORTFOLIO Options (OTC) call options Securities Commitments Instruments(A) Securities
- -------------------------- -------------- ------------ ---------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Alliance Aggressive Stock Y Y Y - 20% Y Y Y - 15%
Alliance Balanced Y Y Y - 20% Y Y Y - 15%
Alliance Common Stock Y Y Y Y Y Y - 15%
Alliance Conservative Y Y Y - 15% Y Y Y - 15%
Investors
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 Y N N Y Y Y - 15%
Government Securities
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%
T. Rowe Price International
Stock N Y Y Y Y - 10% Y - 15%
T. Rowe Price Equity Income N Y Y 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 Y N Y - 15%
MFS Emerging Growth Companies Y Y Y Y N Y - 15%
MFS Growth with Income Y Y Y Y N Y - 15%
Morgan Stanley Emerging Y Y Y Y Y Y - 15%
Markets Equity
Warburg Pincus Small Company
Value N Y Y N N Y - 10%
Merrill Lynch World Strategy Y Y Y Y N Y - 15%
Merrill Lynch 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%
JPM 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 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%
EQ/Alliance Technology Y Y Y Y Y -10% Y-10%
</TABLE>
-74-
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
Investment Non-Inv. Security Security
Grade Grade Loan Mortgage Direct Municipal Futures Options
PORTFOLIO Fixed Fixed Participation Related(D) Mortgages Securities Trans.(A) Trans.(C)
- -------------------------- ------ ------ ------------- ---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Aggressive Stock Y N Y Y N N Y Y
Alliance Balanced Y N Y Y N N Y Y
Alliance Common Stock Y N 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
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 Y N N N Y Y
MFS Growth with Income Y Y N N N N Y Y
Morgan Stanley Emerging
Markets Equity Y Y Y Y N Y Y Y
Warburg Pincus Small Company
Value Y Y N N N N Y Y
Merrill Lynch World Strategy Y Y N N N N Y Y
Merrill Lynch Basic Value
Equity Y N N N N N Y Y
Lazard Large Cap Value Y N Y Y N N N N
Lazard Small Cap Value Y N Y Y N N N N
JPM Core Bond Y N Y Y Y Y Y Y
BT Small Company Index Y N N Y N N Y Y
BT International Equity Index Y N N Y N N Y Y
BT Equity 500 Index Y N N Y N N Y Y
EQ/Evergreen Y N N N N N Y Y
EQ/Evergreen Foundation N Y N Y N N Y Y
EQ/Alliance Premier Growth Y N N N N N Y Y
Capital Guardian Research Y N N N N N Y Y
Capital Guardian U.S. Equity Y N N N N N Y Y
Capital Guardian
International Y N N N N N Y Y
Calvert Socially Responsible Y Y - 20% N N N Y Y Y
EQ/Alliance Technology Y N N Y N N 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).
-75-
<PAGE>
APPENDIX A
EQ ADVISORS TRUST
INVESTMENT STRATEGIES SUMMARY
<TABLE>
<CAPTION>
Passive Payment Real Estate Reverse Short Sales Small
Foreign In-Kind Investment Repurchase Repurchase Securities Against- Company
PORTFOLIO Inv. Comp. Bonds Trusts Agreements Agreements Lending the-box Securities
---------- ----- ------ ---------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Aggressive Stock Y Y Y Y N Y - 50.0% Y Y
Alliance Balanced Y Y Y Y N Y - 50.0% Y Y
Alliance Common Stock Y Y Y Y N Y - 50.0% Y Y
Alliance Conservative
Investors Y Y Y Y N Y - 50.0% Y Y
Alliance Equity Index Y Y Y N N Y - 50.0% Y Y
Alliance Global Y Y Y Y N Y - 50.0% Y Y
Alliance Growth and Income Y Y Y Y N Y - 50.0% Y Y
Alliance Growth Investors Y Y Y Y N Y - 50.0% Y Y
Alliance High Yield Y Y Y Y N Y Y Y
Alliance Intermediate
Government Securities Y Y Y Y N Y Y Y
Alliance International Y Y Y Y N Y - 50.0% Y Y
Alliance Money Market Y Y Y Y N Y - 50.0% Y Y
Alliance Quality Bond Y Y Y Y N Y - 50.0% Y Y
Alliance Small Cap Growth Y Y Y Y N Y - 50.0% Y Y
T. Rowe Price International
Stock Y N N Y N Y - 33.3% N N
T. Rowe Price Equity Income N N N Y N Y - 33.3% N N
EQ/Putnam Growth & Income
Value N Y N Y N Y - 25.0% N N
EQ/Putnam International Equity Y N N Y N Y - 25.0% N Y
EQ/Putnam Investors Growth N N N Y N Y - 25.0% N N
EQ/Putnam Balanced N Y Y Y N Y - 25.0% N Y
MFS Research N N N Y N Y - 33.3% N N
MFS Emerging Growth Companies N N N Y N Y - 30.0% N N
MFS Growth with Income N N N Y N Y - 25.0% N N
Morgan Stanley Emerging
Markets Equity Y Y Y Y Y Y - 33.3% Y Y
Warburg Pincus Small Company
Value N N N Y N Y - 20.0% Y Y
Merrill Lynch World Strategy N N N Y N Y - 20.0% N N
Merrill Lynch Basic Value
Equity N N N Y N Y - 20.0% N N
Lazard Large Cap Value N N Y Y Y Y - 10.0% N N
Lazard Small Cap Value N N Y Y N Y - 10.0% N Y
JPM Core Bond N Y Y Y Y Y - 33.3% N N
BT Small Company Index N N Y Y Y Y - 30.0% N Y
BT International Equity Index N N Y Y Y Y - 30.0% N N
BT Equity 500 Index N N Y Y Y Y - 30.0% N N
EQ/Evergreen N N N Y Y Y - 33.3% Y Y
EQ/Evergreen Foundation N N Y Y Y Y - 33.3% N N
EQ/Alliance Premier Growth N N Y Y N Y - 25.0% N N
Capital Guardian Research N N Y Y N Y - 33.3% N Y
Capital Guardian U.S. Equity N N Y Y N Y - 33.3% N Y
Capital Guardian
International Y N Y Y N Y - 33.3% N Y
Calvert Socially Responsible N N Y Y Y Y - 33.3% Y Y
EQ/Alliance Technology N Y Y Y Y Y - 33.3% N Y
</TABLE>
-76-
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
Zero
Structured Swap U.S. Gov't Coupon
PORTFOLIO Notes(A) Trans.(A) Securities Bonds
-------- --------- ---------- -----
<S> <C> <C> <C> <C>
Alliance Aggressive Stock Y Y Y Y
Alliance Balanced Y Y Y Y
Alliance Common Stock Y Y Y Y
Alliance Conservative
Investors Y Y Y Y
Alliance Equity Index Y Y Y Y
Alliance Global Y Y Y Y
Alliance Growth and Income Y Y Y Y
Alliance Growth Investors Y Y Y Y
Alliance High Yield Y Y Y Y
Alliance Intermediate
Government Securities Y Y Y Y
Alliance International Y Y Y Y
Alliance Money Market Y N Y Y
Alliance Quality Bond Y Y Y Y
Alliance Small Cap Growth Y Y Y Y
T. Rowe Price International
Stock N N Y N
T. Rowe Price Equity Income N N Y N
EQ/Putnam Growth & Income
Value N N Y Y
EQ/Putnam International Equity N N Y N
EQ/Putnam Investors Growth N N Y N
EQ/Putnam Balanced N N Y Y
MFS Research N N Y N
MFS Emerging Growth Companies N N Y N
MFS Growth with Income N N Y Y
Morgan Stanley Emerging
Markets Equity Y Y Y Y
Warburg Pincus Small Company
Value N N Y N
Merrill Lynch World Strategy N N Y N
Merrill Lynch Basic Value
Equity N N Y N
Lazard Large Cap Value N N Y N
Lazard Small Cap Value N N Y N
JPM Core Bond N Y Y Y
BT Small Company Index N N Y N
BT International Equity Index N Y Y N
BT Equity 500 Index N N Y N
EQ/Evergreen N N Y N
EQ/Evergreen Foundation N N Y N
EQ/Alliance Premier Growth N N Y N
Capital Guardian Research N N Y N
Capital Guardian U.S. Equity N N Y N
Capital Guardian
International N N Y N
Calvert Socially Responsible Y Y Y Y
EQ/Alliance Technology 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).
-77-
<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 changing
circumstances
-78-
<PAGE>
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.
-79-
<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"). (to be
provided by amendment)
(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. (to
be provided by amendment)
(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 by and 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. (to be provided by amendment)
(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. (to be provided by amendment)
(d)(13) Investment Advisory Agreement between EQFC and Capital Guardian
Trust Company, dated as of May 1, 1999.(11)
(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)
(e) Underwriting Contracts
(e)(1)(i) Distribution Agreement between the Trust and AXA Advisors LLC
("AXA Advisors") 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 AXA Advisors 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 AXA Advisors with
respect to the Class 1A shares dated April 14, 1997.(11)
(e)(1)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Distribution Agreement between the Trust and AXA Advisors with
respect to the Class IA shares dated April 14, 1997.(11)
C-2
<PAGE>
(e)(1)(v) Amendment No. 4 dated as of August 30, 1999 to the Distribution
Agreement between the Trust and AXA Advisors with respect to the
Class IA shares dated April 14, 1997. (to be provided by
amendment)
(e)(1)(vi) Amendment No. 5 dated as of May 1, 2000 to the Distribution
Agreement between the Trust and AXA Advisors with respect to the
Class IA shares dated April 14, 1997. (to be provided by
amendment)
(e)(2)(i) Distribution Agreement between the Trust and AXA Advisors 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 AXA Advisors 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 AXA Advisors 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 AXA Advisors 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 AXA Advisors with respect to the
Class IB shares dated April 14, 1997. (to be provided by
amendment)
(e)(2)(vi) Amendment No. 6 dated as of May 1, 2000 to the Distribution
Agreement between the Trust and AXA Advisors with respect to the
Class IB shares dated April 14, 1997. (to be provided by
amendment)
(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. (to be provided by amendment)
(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. (to be provided by amendment)
(e)(4)(i) Distribution Agreement between the Trust and EDI with respect to
the Class IB shares dated April 14, 1997.(4)
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<PAGE>
(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)
(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. (to be provided by amendment)
(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. (to be provided by amendment)
(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. (to be provided by amendment)
(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. (to be provided by amendment)
(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. (to be provided by amendment)
(h)(2)(i) Amended and Restated Expense Limitation Agreement between the
Trust and EQFC dated March 3, 1998.(8)
C-4
<PAGE>
(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 April 30, 1999.(11)
(h)(2)(iv) Amended and Restated Expense Limitation Agreement between EQFC
and the Trust dated as of August 30, 1999. (to be provided by
amendment)
(h)(2)(v) Second Amended and Restated Expense Limitation Agreement between
Equitable and the Trust dated as of May 1, 2000. (to be provided
by amendment)
(h)(3)(i) Organizational Expense Reimbursement Agreement by and between
AXA Advisors 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
AXA Advisors 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
AXA Advisors 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 AXA Advisors 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 AXA Advisors 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 AXA Advisors 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 AXA Advisors dated April 14, 1997.(11)
(h)(4)(v) Form of Amendment No. 4 dated as of October 1, 1999 to the
Participation Agreement among the Trust, Equitable, Equitable
Distributors, Inc., and AXA Advisors dated April 14, 1997. (to
be provided by amendment)
(h)(5) Retirement Plan Participation Agreement dated December 1, 1998
among the Trust, AXA Advisors, with The Equitable Investment
Plan for Employees, Managers and Agents and Equitable.(11)
C-5
<PAGE>
(h)(5)(i) Form of Amendment No. 1 to the Retirement Plan Participation
Agreement dated April 30, 1999 among the Trust, AXA Advisors,
with The Equitable Investment Plan for Employees, Managers and
Agents and Equitable.(11)
(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
EQ/Alliance Technology Portfolio. (to be provided by amendment)
(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) Financial Data Schedule.
C-6
<PAGE>
(o) Plan Pursuant to Rule 18f-3 under the 1940 Act.(4)
Other Exhibits:
Power of Attorney.(3)
Power of Attorney for Michael Hegarty.(8)
Power of Attorney for Steven M. Joenk.(12)
- ---------------
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).
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).
C-7
<PAGE>
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 January 25, 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 72% of the common stock of Donaldson, Lufkin &
Jenrette, Inc., a registered broker-dealer.
AXA is the largest shareholder of AXA Financial. On January 25, 2000,
AXA owned, directly or indirectly through its affiliates, 58% 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
C-8
<PAGE>
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 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.
C-9
<PAGE>
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.
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 Merrill Lynch Asset
Management, L.P. is set forth in Merrill Lynch 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.
C-10
<PAGE>
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.
1. 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.
2. Hans H. Angermueller, Director of Bankers Trust Company and Bankers Trust
Corporation. Counsel, Shearman & Sterling.
3. 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, Phillips Petroleum Company, TIG
Holdings, Inc.; Chairman Emeritus of Amherst College; and Chairman of The
Colonial Williamburg Foundation.
4. Mary Cirillo, Managing Director of Bankers Trust Company. Executive Vice
President of Bankers Trust Corporation. Director, Cisco Systems and Quest
Diagnostics. Beneficial Owner; Hudson Ventures and Lextra Int'l.
Beneficial Owner & Advisory Board of Opcenter.
5. Michael Fazio, Managing Director of Bankers Trust Company. Executive Vice
President of Bankers Trust Corporation.
6. 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, The
Williams Companies, Inc., the National Retail Federation, and National
Organizational on Disability. 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.
7. Hermann-Josef Lamberti, Vice Chairman of Bankers Trust Company and 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.).
8. Troland S. Link, Managing Director and General Counsel of Bankers Trust
Company. General Counsel of Bankers Trust Corporation. Trustee of The
American University (Cairo) and The New York Downtown Hospital.
Also a Director of The French American Foundation.
C-11
<PAGE>
9. Eugene A. Ludwig, Vice Chairman of Bankers Trust Company and Bankers Trust
Corporation. Director of the following organizations; Local Initiatives
Support Corp., Folio Trade and National Academy Foundation.
10. Rodney A. McLauchlan, Managing Director of Bankers Trust Company.
Executive Vice President of Bankers Trust Corporation. Trustee of Lyric
Opera and the Beneficial Owner & Director of Royal Opera House.
11. John A. Ross, Director of Bankers Trust Company and Bankers Trust
Corporation. Chief Executive Officer, Deutsche Bank Americas Holding Corp.
and Taunus Corporation; and a Board Member of the following; Deutsche
Securities, Inc., DB Alex. Brown LLC and The International Institute of
Finance.
12. 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.
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.
C-12
<PAGE>
- ---------------------------- -------------------------------------------------------------
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 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.
C-13
<PAGE>
- ---------------------------- -------------------------------------------------------------
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, 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.
C-14
<PAGE>
- ---------------------------- -------------------------------------------------------------
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.
- ---------------------------- -------------------------------------------------------------
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.
C-15
<PAGE>
- ---------------------------- -------------------------------------------------------------
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 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-16
<PAGE>
===============================================================================
AXA ADVISORS LLC
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH AXA POSITIONS AND OFFICES WITH THE
BUSINESS ADDRESS ADVISORS LLC TRUST
- ---------------------------------------------- ------------------------------------ ---------------------------------
<S> <C> <C>
DIRECTORS
* Derry E. Bishop Director
Harvey E. Blitz Director
Michael J. Laughlin Director
G. Patrick McGunagle Director Vice President
* 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 Chief Vice President
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-17
<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 Vice President
Charlton Bulkin Vice President
Mary Gabbett Vice President
* Mary E. Cantwell Assistant 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>
EQUITABLE DISTRIBUTORS, INC.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH THE
NAME AND PRINCIPAL BUSINESS ADDRESS EQUITABLE DISTRIBUTORS, INC. TRUST
- ---------------------------------------------- ------------------------------------ ---------------------------------
<S> <C> <C>
DIRECTORS
** Greg Brakovich Director
* Edward J. Hayes Director
** James A. Shepherdson, III Director
* Jose S. Suquet Director
* Charles Wilder Director
- ---------------------------------------------- ------------------------------------ ---------------------------------
OFFICERS
* Jose S. Suquet Chairman of the Board
** Greg Brakovich Co-President and Co-Chief
Executive Officer and
Managing Director
C-18
<PAGE>
<CAPTION>
POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH THE
NAME AND PRINCIPAL BUSINESS ADDRESS EQUITABLE DISTRIBUTORS, INC. TRUST
- ---------------------------------------------- ------------------------------------ ---------------------------------
<S> <C> <C>
** James A. Shepherdson, III Co-President and Co-Chief
Executive Officer and Managing
Director
** 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-19
<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:
<TABLE>
<CAPTION>
<S> <C>
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 Merrill Lynch 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 2500 Westchester Avenue
One Bankers Trust Plaza Purchase, 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 809 Cathedral Street
Suite 1000N Baltimore, MD 21201
Bethesda, MD 20814
</TABLE>
ITEM 29. MANAGEMENT SERVICES: NONE.
ITEM 30. UNDERTAKINGS
Inapplicable.
C-20
<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 has
duly caused this Post-Effective Amendment No. 14 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 31st day of January,
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. 14 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ------------------------- ----------------
/s/ President and Trustee January 31, 2000
- ------------------------------
Peter D. Noris
* Trustee January 31, 2000
- ------------------------------
Michael Hegarty
* Trustee January 31, 2000
- ------------------------------
Jettie M. Edwards
* Trustee January 31, 2000
- ------------------------------
William M. Kearns, Jr.
* Trustee January 31, 2000
- ------------------------------
Christopher P.A. Komisarjevsky
* Trustee January 31, 2000
- ------------------------------
Harvey Rosenthal
* Vice President and January 31, 2000
- ------------------------------ Chief Financial Officer
Steven M. Joenk
* By: /s/
- ------------------------------
Peter D. Noris
(Attorney-in-Fact)
C-21
<PAGE>
EXHIBIT LIST
(j) Consent of PricewaterhouseCoopers LLP.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the reference to us under the heading "Independent
Accountant" in the Post-Effective Amendment No. 14 to the Registration Statement
on Form N-1A of EQ Advisors Trust.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
January 28, 2000
