<PAGE>
                                                Filed Pursuant to Rule 497c
                                                Registration File No.: 333-17217
                                                                       811-07953

                              EQ ADVISORS TRUST(SM)

                      STATEMENT OF ADDITIONAL INFORMATION

                                  MAY 1, 2000
                          AS REVISED SEPTEMBER 1, 2000

This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus for the EQ Advisors Trust ("Trust") dated
May 1, 2000, as revised September 1, 2000 which may be obtained without charge
by writing to the Trust at 1290 Avenue of the Americas, New York, New York
10104. Unless otherwise defined herein, capitalized terms have the meanings
given to them in the Prospectus.

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                        PAGE
                                                                       -----
<S>                                                                    <C>
     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 .........................................  37
     Investment Management and Other Services ........................  41
     Brokerage Allocation and Other Strategies .......................  55
     Purchase and Pricing of Shares ..................................  62
     Redemption of Shares ............................................  63
     Taxation ........................................................  64
     Portfolio Performance ...........................................  65
     Code of Ethics ..................................................  66
     Other Services ..................................................  66
     Financial Statements ............................................  66
</TABLE>

MASTER
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TRUST HISTORY

EQ Advisors Trust (the "Trust") is an open-end management investment company
and is registered as such under the Investment Company Act of 1940, as amended
("1940 Act"). The Trust is organized as a Delaware business trust and was
formed on October 31, 1996 under the name "787 Trust." The Trust changed its
name to "EQ Advisors Trust" effective November 25, 1996.


DESCRIPTION OF THE TRUST AND ITS INVESTMENTS AND RISKS

The Trust currently offers two classes of shares on behalf of the following
Portfolios: the Alliance Common Stock Portfolio, Alliance Conservative
Investors Portfolio, Alliance Equity Index Portfolio, Alliance Global
Portfolio, Alliance Growth and Income Portfolio, Alliance Growth Investors
Portfolio, Alliance High Yield Portfolio, Alliance Intermediate Government
Securities Portfolio, Alliance International Portfolio, Alliance Money Market
Portfolio, Alliance Quality Bond Portfolio, and Alliance Small Cap Growth
Portfolio (collectively referred to herein as the "Alliance Portfolios"),
EQ/Aggressive Stock Portfolio, EQ/Balanced Portfolio, T. Rowe Price
International Stock Portfolio, T. Rowe Price Equity Income Portfolio, EQ/Putnam
Growth & Income Value Portfolio, EQ/Putnam International Equity Portfolio,
EQ/Putnam Investors Growth Portfolio, EQ/Putnam Balanced Portfolio, MFS
Research Portfolio, MFS Emerging Growth Companies Portfolio, MFS Growth with
Income Portfolio, Morgan Stanley Emerging Markets Equity Portfolio, FI
Small/Mid Cap Value Portfolio, Mercury World Strategy Portfolio, Mercury Basic
Value Equity Portfolio, Lazard Large Cap Value Portfolio, Lazard Small Cap
Value Portfolio, J.P. Morgan Core Bond Portfolio, BT Small Company Index
Portfolio, BT International Equity Index Portfolio, BT Equity 500 Index
Portfolio, EQ/Evergreen Foundation Portfolio, EQ/  Evergreen Portfolio,
EQ/Alliance Premier Growth Portfolio, Capital Guardian Research Portfolio,
Capital Guardian U.S. Equity Portfolio, Capital Guardian International
Portfolio, Calvert Socially Responsible Portfolio, EQ/Alliance Technology
Portfolio, EQ/AXP New Dimensions Portfolio, EQ/AXP Strategy Aggressive
Portfolio, EQ/Janus Large Cap Growth Portfolio, and FI Mid Cap Portfolio
(collectively, together with the Alliance Portfolios, referred to herein as the
"Portfolios"). Class IA shares are offered at net asset value and are not
subject to distribution fees imposed pursuant to a distribution plan. Class IB
shares are offered at net asset value and are subject to distribution fees
imposed under a distribution plan ("Class IB Distribution Plan") adopted
pursuant to Rule 12b-1 under the 1940 Act.

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

The Trust's shares are currently sold to: (i) insurance company separate
accounts in connection with variable life insurance contracts and variable
annuity certificates and contracts ("Contract" or collectively, "Contracts")
issued by The Equitable Life Assurance Society of the United States
("Equitable") and Equitable of Colorado, Inc. ("EOC"), as well as insurance
company separate accounts of: Integrity Life Insurance Company, National
Integrity Life Insurance Company, The American Franklin Life Insurance Company,
The Prudential Insurance Company of America, and Transamerica Occidental Life
Insurance Company, each of which is unaffiliated with Equitable; and (ii) The
Equitable Investment Plan for Employees, Managers and Agents ("Equitable
Plan").


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<PAGE>

The Trust does not currently foresee any disadvantage to Contract owners
arising from offering the Trust's shares to separate accounts of insurance
companies that are unaffiliated with one another or the Equitable Plan.
However, it is theoretically possible that the interests of owners of various
contracts participating in the Trust through separate accounts or of Equitable
Plan participants might at some time be in conflict. In the case of a material
irreconcilable conflict, one or more separate accounts or the Equitable Plan
might withdraw their investments in the Trust, which might force the Trust to
sell portfolio securities at disadvantageous prices.


LEGAL CONSIDERATIONS

Under Delaware law, annual election of Trustees is not required, and, in the
normal course, the Trust does not expect to hold annual meetings of
shareholders. There will normally be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as less than a majority
of the Trustees holding office have been elected by shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the election
of Trustees. Pursuant to the procedures set forth in Section 16(c) of the 1940
Act, shareholders of record of not less than two-thirds of the outstanding
shares of the Trust may remove a Trustee by a vote cast in person or by proxy
at any meeting.

Except as set forth above, the Trustees will continue to hold office and may
appoint successor Trustees. Voting rights are not cumulative, so that the
holders of more than 50% of the shares voting in the election of Trustees can,
if they choose to do so, elect all the Trustees of the Trust, in which event
the holders of the remaining shares will be unable to elect any person as a
Trustee. The Amended and Restated Declaration of Trust of the Trust requires
the affirmative vote of a majority of the outstanding shares of the Trust.

The shares of each Portfolio, when issued, will be fully paid and
non-assessable and will have no preference, preemptive, conversion, exchange or
similar rights.

TRUST POLICIES

FUNDAMENTAL RESTRICTIONS

Each Portfolio has also adopted certain investment restrictions that are
fundamental and may not be changed without approval by a "majority" vote of the
Portfolio's shareholders. Such majority is defined in the 1940 Act as the
lesser of: (i) 67% or more of the voting securities of such Portfolio present
in person or by proxy at a meeting, if the holders of more than 50% of the
outstanding voting securities are present or represented by proxy; or (ii) more
than 50% of the outstanding voting securities of such Portfolio. Set forth
below are each of the fundamental restrictions adopted by each of the
Portfolios. Fundamental policies (5) and (6) below shall not apply to the
Morgan Stanley Emerging Markets Equity Portfolio, the Mercury World Strategy
Portfolio and the Lazard Small Cap Value Portfolio. Certain non-fundamental
operating policies are also described in this section because of their direct
relevance to the fundamental restrictions adopted by the Portfolios.

Each Portfolio, except as described directly above, may not as a matter of
fundamental policy:

(1) Borrow money, except that:

     a.  each Portfolio may (i) borrow for non-leveraging, temporary or
         emergency purposes (except the Lazard Large Cap Value Portfolio, which
         may also borrow for leveraging purposes) and (ii) engage in reverse
         repurchase agreements, make other investments or engage in other
         transactions, which may involve a borrowing, in a manner consistent
         with the Portfolios' respective investment objective and program,
         provided that the combination of (i) and (ii) shall not exceed 33 1/3%
         of the value of the Portfolios' respective total assets (including the
         amount borrowed) less liabilities (other than borrowings) or such
         other percentage permitted by law (except that the Mercury World
         Strategy Portfolio and the Mercury Basic Value Equity Portfolio may
         purchase securities on margin to the extent permitted by applicable
         law). Any borrowings which come to exceed this amount will be reduced
         in accordance with


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         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, the FI Small/Mid Cap Value
         Portfolio, and the FI Mid Cap Portfolio will purchase additional
         securities when money borrowed exceeds 5% of its total assets;

     c.  the EQ/Putnam Growth & Income Value Portfolio, EQ/Putnam International
         Equity Portfolio, EQ/Putnam Investors Growth Portfolio, EQ/Putnam
         Balanced Portfolio, and Lazard Large Cap Value Portfolio each, as a
         matter of non-fundamental operating policy, may borrow only from banks
         (i) as a temporary measure to facilitate the meeting of redemption
         requests (not for leverage) which might otherwise require the untimely
         disposition of portfolio investments or (ii) for extraordinary or
         emergency purposes, provided that the combination of (i) and (ii)
         shall not exceed 10% of the applicable Portfolio's net assets (taken
         at lower of cost or current value), not including the amount borrowed,
         at the time the borrowing is made. Each Portfolio will repay
         borrowings made for the purposes specified above before any additional
         investments are purchased;

     d.  the Mercury World Strategy Portfolio, as a matter of fundamental
         policy, and the Mercury Basic Value Equity Portfolio, as a matter of
         non-fundamental operating policy, may, to the extent permitted by
         applicable law, borrow up to an additional 5% of their respective
         total assets for temporary purposes;

     e.  the Lazard Small Cap Value Portfolio, as a matter of non-fundamental
         operating policy, may borrow only from banks (i) as a temporary
         measure to facilitate the meeting of redemption requests (not for
         leverage) which might otherwise require the untimely disposition of
         portfolio investments or (ii) for extraordinary or emergency purposes,
         provided that the combination of (i) and (ii) shall not exceed 15% of
         the Portfolio's net assets, not including the amount borrowed, at the
         time the borrowing is made. The Lazard Small Cap Value Portfolio will
         repay borrowings before any additional investments are purchased;

     f.  the J.P. Morgan Core Bond Portfolio, 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
         Portfolio's total assets, not including the amount borrowed, at the
         time the borrowing is made;

     g.  EQ/Evergreen Portfolio and EQ/Evergreen Foundation Portfolio, each as
         a matter of non-fundamental policy, may, in addition to the amount
         specified above, also borrow up to an additional 5% of its total
         assets from banks or other lenders;

     h.  the MFS Growth with Income Portfolio, as a matter of non-fundamental
         policy, may borrow up to 10% of its total assets (taken at cost), or
         its net assets (taken at market value), whichever is less, but only as
         a temporary measure for extraordinary or emergency purposes;

     i.  the EQ/Alliance Premier Growth Portfolio, Capital Guardian Research
         Portfolio, Capital Guardian U.S. Equity Portfolio, Capital Guardian
         International Portfolio and EQ/Alliance Technology Portfolio as a
         matter of non-fundamental operating policy, may only borrow for
         temporary or emergency purposes, provided such amount does not exceed
         5% of the Portfolio's total assets at the time the borrowing is made;

     j.  The Alliance Portfolios, EQ/Aggressive Stock Portfolio and EQ/Balanced
         Portfolio, as a matter of non-fundamental operating policy, may borrow
         money only from banks: (i) for temporary purposes; (ii) to pledge
         assets to banks in order to transfer funds for various purposes as
         required without interfering with the orderly liquidation of securities
         in a Portfolio (but not for leveraging purposes); (iii) to make margin
         payments or pledges in


                                       4
<PAGE>

         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.

     k.  the EQ/Janus Large Cap Growth Portfolio, as a matter of non-fundamental
         operating policy, may only borrow for temporary or emergency purposes,
         provided such amount does not exceed 25% of the Portfolio's total
         assets at the time the borrowing is made. If borrowings come to exceed
         this amount by reason of a decline in net assets, the Portfolio will
         reduce its borrowings within three business days to the extent
         necessary to comply with the 25% limitation.

     l.  As a matter of non-fundamental policy, any borrowings that come to
         exceed 331/3% of the value of the FI Mid Cap Portfolio's or the FI
         Small/Mid Cap Value Portfolio's total assets (including the amount
         borrowed) less liabilities (other than borrowings) will be reduced
         within three days (not including Sundays and holidays) to the extent
         necessary to comply with the 33 1/3% limitation. As a matter of
         non-fundamental policy, the FI Mid Cap Portfolio and FI Small/Mid Cap
         Portfolio may borrow money only (a) from a bank; or (b) by engaging in
         reverse repurchase agreements with any party (reverse repurchase
         agreements are treated as borrowings for purposes of the fundamental
         investment limitation).

(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. As a matter of operating policy, this restriction
    shall not apply to investments of securities of other investment
    companies. Industries are determined by reference to the classifications
    of industries set forth in each Portfolio's semi-annual and annual
    reports;

(4) Make loans, except that:

     a.  This restriction shall not apply to the Alliance High Yield Portfolio
         and Alliance Intermediate Government Securities Portfolio and each may
         make secured loans, including lending cash or portfolio securities
         with limitation.

     b.  each other Portfolio may: (i) lend portfolio securities provided that
         no such loan may be made if, as a result, the aggregate of such loans
         would exceed 33 1/3% of the value of the Portfolio's total assets (50%
         in the case of each of the other Alliance Portfolios); (ii) purchase
         money market securities and enter into repurchase agreements; and
         (iii) acquire publicly-distributed or privately-placed debt securities
         and purchase debt securities. Each Portfolio will consider the
         acquisition of a debt security to include the execution of a note or
         other evidence of an extension of credit with a term of more than nine
         months. For purposes of this restriction, each Portfolio will treat
         purchases of loan participations and other direct indebtedness,
         including investments in mortgages, as not subject to this limitation;


     c.  the EQ/Putnam Growth & Income Value Portfolio and EQ/Putnam
         International Equity Portfolio, as a matter of non-fundamental
         operating policy, may purchase debt obligations consistent with the
         respective investment objectives and policies of each of those
         Portfolios: (i) by entering into repurchase agreements with respect to
         not more than 25% of the Portfolios' respective total assets (taken at
         current value) or (ii) through the lending of the Portfolios'
         portfolio securities with respect to not more than 25% of the
         Portfolios' respective total assets (taken at current value);


                                       5
<PAGE>

     d.  the MFS Emerging Growth Companies Portfolio, BT Small Company Index
         Portfolio, BT International Equity Index Portfolio, BT Equity 500
         Index Portfolio, EQ/AXP New Dimensions Portfolio, and EQ/AXP Strategy
         Aggressive Portfolio as a matter of non-fundamental operating policy,
         may each lend its portfolio securities provided that no such loan may
         be made if, as a result, the aggregate of such loans would exceed 30%
         of such Portfolio's total assets (taken at market value); and

     e.  the Mercury World Strategy Portfolio, and the Mercury Basic Value
         Equity Portfolio, as a matter of non-fundamental policy, may each lend
         its portfolio securities provided that no such loan may be made if, as
         a result, the aggregate of such loans would exceed 20% of such
         Portfolio's total assets (taken at market value);

     f.  the Lazard Large Cap Value Portfolio and the Lazard Small Cap Value
         Portfolio, as a matter of non-fundamental policy, may each lend its
         portfolio securities provided that no such loan may be made if, as a
         result, the aggregate of such loans would exceed 10% of such
         Portfolio's total assets (taken at market value);

     g.  MFS Growth with Income Portfolio, as a matter of non-fundamental
         operating policy, may lend its portfolio securities provided that no
         such loan may be made if, as a result, the aggregate of such loans
         would exceed 25% of its net assets (taken at market value);

     h.  the EQ/Alliance Premier Growth Portfolio and EQ/Alliance Technology
         Portfolio, as a matter of non-fundamental policy, each may not make
         loans of its assets, which will not be considered as including the
         purchase of publicly-distributed debt obligations in accordance with
         its investment objectives, except that each Portfolio may lend its
         portfolio securities to the extent permitted in (4)(b) above;

     i.  the Capital Guardian Research Portfolio, Capital Guardian U.S. Equity
         Portfolio and Capital Guardian International Portfolio, as a matter of
         fundamental policy, will not make loans;

     j.  The Alliance Portfolios, EQ/Aggressive Stock Portfolio, and
         EQ/Balanced Portfolio, as a matter of non-fundamental policy, will also
         treat this restriction as not preventing any such Portfolio from
         purchasing debt obligations as consistent with its investment policies,
         government obligations, short-term commercial paper, or publicly-traded
         debt, including bonds, notes, debentures, certificates of deposit, and
         equipment trust certificates and loans made under insurance policies;

     k.  the EQ/AXP New Dimensions Portfolio, and EQ/AXP Strategy Aggressive
         Portfolio, as a matter of non-fundamental policy, will not make cash
         loans if the total commitment amount exceeds 5% of such portfolio's
         total assets.

     l.  The EQ/Janus Large Cap Growth Portfolio, as a matter of
         non-fundamental policy, may lend its portfolio securities or make
         other loans provided that no such loan may be made if, as a result,
         the aggregate amount of such loans would exceed 25% of the Portfolio's
         total assets (taken at market value);

     m.  the FI Mid Cap Portfolio and the FI Small/Mid Cap Value Portfolio, as
         a matter of non-fundamental policy, do not currently intend to lend
         assets other than securities to other parties, except by acquiring
         loans, loan participations, or other forms of direct debt instruments
         and, in connection therewith, assuming any associated unfunded
         commitments of the sellers. (This limitation does not apply to
         purchases of debt securities or to repurchase agreements.)

(5) Purchase a security if, as a result, with respect to 75% of the value of
    its total assets, more than 5% of the value of the Portfolio's total
    assets would be invested in the securities of a single issuer, except (i)
    securities issued or guaranteed by the United States Government, its
    agencies or instrumentalities and (ii) securities of other investment
    companies:*

     a.  As a matter of operating policy, each Portfolio will not consider
         repurchase agreements to be subject to the above stated 5% limitation
         if the collateral underlying the repurchase agreements consists
         exclusively of obligations issued or guaranteed by the United States
         Government, its agencies or instrumentalities;


                                       6
<PAGE>

     b.  The Alliance Money Market Portfolio, as a matter of non-fundamental
         policy, will not invest more than 5% of its total assets in securities
         of any one issuer, other than U.S. Government securities, except that
         it may invest up to 25% of its total assets in First Tier Securities
         (as defined in Rule 2a-7 of the 1940 Act) of a single issuer for a
         period of up to three business days after the purchase of such
         security. Further, as a matter of operating policy, the Alliance Money
         Market Portfolio will not invest more than (i) the greater of 1% of
         its total assets or $1,000,000 in Second Tier Securities (as defined
         in Rule 2a-7 under the 1940 Act) of a single issuer and (ii) 5% of its
         total assets, at the time a Second Tier Security is acquired, in
         Second Tier Securities;

(6) Purchase a security if, as a result, with respect to 75% of the value of
    the Portfolio's total assets, more than 10% of the outstanding voting
    securities of any issuer would be held by the Portfolio (other than (i)
    obligations issued or guaranteed by the United States Government, its
    agencies or instrumentalities and (ii) securities of other investment
    companies);*

(7) Purchase or sell real estate, except that:

     a.  each Portfolio, except the J.P. Morgan Core Bond Portfolio, may
         purchase securities of issuers which deal in real estate, securities
         which are directly or indirectly secured by interests in real estate,
         and securities which represent interests in real estate, and each
         Portfolio may acquire and dispose of real estate or interests in real
         estate acquired through the exercise of its rights as a holder of debt
         obligations secured by real estate or interests therein;

     b.  the J.P. Morgan Core Bond Portfolio may (i) invest in securities of
         issuers that invest in real estate or interests therein, (ii) invest
         in securities that are secured by real estate or interests therein
         (iii) make direct investments in mortgages, (iv) purchase and sell
         mortgage-related securities and (v) hold and sell real estate acquired
         by the Portfolio as a result of the ownership of securities including
         mortgages;

(8) Issue senior securities except in compliance with the 1940 Act; or

(9) Underwrite securities issued by other persons, except to the extent that
    the Portfolio may be deemed to be an underwriter within the meaning of the
    Securities Act of 1933, as amended (the "1933 Act"), in connection with
    the purchase and sale of its portfolio securities in the ordinary course
    of pursuing its investment objective, policies and program.


NON-FUNDAMENTAL RESTRICTIONS

The following investment restrictions apply to each Portfolio, but are not
fundamental. They may be changed for any Portfolio without a vote of that
Portfolio's shareholders.

Each Portfolio may not:

(1) Purchase a futures contract or an option thereon except in compliance with
    Commodity Exchange Act Section 4.5. As a matter of operating policy, the
    Alliance Money Market Portfolio, the MFS Research Portfolio, the Lazard
    Large Cap Value Portfolio, the Lazard Small Cap Value Portfolio, the
    Capital Guardian Research Portfolio, the Capital Guardian U.S. Equity
    Portfolio and the Capital Guardian International Portfolio, and the
    EQ/Janus Large Cap Growth Portfolio may not invest in commodities or
    commodity contracts including futures contracts. As a matter of operating
    policy, the EQ/Aggressive Stock Portfolio, EQ/ Balanced Portfolio,
    Alliance Common Stock Portfolio, Alliance Conservative Investors
    Portfolio, Alliance Equity Index Portfolio, Alliance Global Portfolio,
    Alliance Growth and Income Portfolio, Alliance Growth Investors Portfolio,
    Alliance High Yield Portfolio, Alliance Intermediate Government Securities
    Portfolio, Alliance International Portfolio, Alliance Quality Bond
    Portfolio, Alliance Small Cap Growth Portfolio, EQ/Alliance Premier Growth
    Portfolio, T. Rowe Price Equity Income Portfolio, T. Rowe Price
    International Stock Portfolio, EQ/Alliance Technology Portfolio, EQ/AXP
    New Dimensions Portfolio, EQ/AXP Strategy Aggres-

----------
*     The Morgan Stanley Emerging Markets Equity, Mercury World Strategy and
      Lazard Small Cap Value Portfolios are classified as non-diversified
      investment companies under the 1940 Act and therefore, these restrictions
      are not applicable to these Portfolios.


                                       7
<PAGE>

    sive Portfolio, and FI Mid Cap Portfolio and the FI Small/Mid Cap Value
    Portfolio, may purchase and sell exchange-traded index options and stock
    index futures contracts; 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 into a futures
    contract if the obligations underlying all such futures contracts would
    exceed 50% of the value of each such Portfolio's total assets.

(2) Except for the FI Mid Cap Portfolio and the FI Small/Mid Cap Value
    Portfolio, 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, Lazard Large Cap Value
    Portfolio, Lazard Small Cap Value Portfolio, the EQ/Alliance Technology
    Portfolio, EQ/AXP New Dimensions Portfolio, and EQ/AXP Strategy Aggressive
    Portfolio) would be invested in such securities. Securities purchased in
    accordance with Rule 144A under the 1933 Act and determined to be liquid
    under procedures adopted by the Trust's Board are not subject to the
    limitations set forth in this investment restriction. The FI Mid Cap
    Portfolio and the FI Small/Mid Cap Value Portfolio do not currently intend
    to purchase any security if, as a result, more than 15% of its net assets
    would be invested in securities that are deemed to be illiquid because
    they are subject to legal or contractual restrictions on resale or because
    they cannot be resold or disposed of in the ordinary course of business at
    approximately the prices at which they are valued.

(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 in compliance
    with the 1940 Act. The deposit of underlying securities and other assets
    in escrow and collateral arrangements with respect to margin accounts for
    futures contracts, options, currencies or other permissible investments
    are not deemed to be mortgages, pledges, or hypothecations for these
    purposes;

(5) Purchase participations or other direct interests in or enter into leases
    with respect to, oil, gas, or other mineral exploration or development
    programs, except that the MFS Emerging Growth Companies Portfolio, FI
    Small/Mid Cap Value Portfolio, Mercury World Strategy Portfolio, Mercury
    Basic Value Equity Portfolio, J.P. Morgan Core Bond Portfolio,
    EQ/Evergreen Foundation Portfolio, EQ/  Evergreen Portfolio, EQ/Alliance
    Premier Growth Portfolio, Capital Guardian Research Portfolio, Capital
    Guardian U.S. Equity Portfolio, Capital Guardian International Portfolio
    and FI Mid Cap Portfolio and FI Small/Mid Cap Value Portfolio may invest in
    securities issued by companies that engage in oil, gas or other mineral
    exploration or development activities or hold mineral leases acquired as a
    result of its ownership of securities;

(6) Invest in puts, calls, straddles, spreads, swaps or any combination
    thereof, except to the extent permitted by the Portfolio's Prospectus and
    Statement of Additional Information, as may be amended from time to time;
    or

(7) Except for the FI Mid Cap Portfolio and the FI Small/Mid Cap Value
    Portfolio, 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. With respect to the FI
    Mid Cap Portfolio and the FI Small/Mid Cap Value Portfolio, these
    Portfolios do not currently intend to sell securities short, unless they
    own or have the right to obtain securities equivalent in kind and amount
    to the securities sold short, and provided that transactions in futures
    contracts and options are not 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.


                                       8
<PAGE>

INVESTMENT STRATEGIES AND RISKS

In addition to the Portfolios' principal investment strategies discussed in the
Prospectus, each Portfolio may engage in other types of investment strategies
as further described in the descriptions below. Each Portfolio may invest in or
utilize any of these investment strategies and instruments or engage in any of
these practices except where otherwise prohibited by law or the Portfolio's own
investment restrictions. Portfolios that anticipate committing 5% or more of
their net assets to a particular type of investment strategy or instrument are
specifically referred to in the descriptions below of such investment strategy
or instrument.

ASSET-BACKED SECURITIES. As indicated in Appendix A, certain of the Portfolios
may invest in asset-backed securities. Asset-backed securities, issued by
trusts and special purpose corporations, are collateralized by a pool of
assets, such as credit card or automobile loans, home equity loans or computer
leases, and represent the obligations of a number of different parties.
Asset-backed securities present certain risks. For instance, in the case of
credit card receivables, these securities are generally unsecured and the
debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due. In
the case of automobile loans, most issuers of automobile receivables permit the
servicers to retain possession of the underlying obligations. If the servicer
were to sell these obligations to another party, there is a risk that the
purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in all of the obligations backing such receivables.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.

To lessen the effect of failures by obligors on underlying assets to make
payments, the securities may contain elements of credit support which fall into
two categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letters of credit obtained by the issuer or sponsor from third parties. A
Portfolio will not pay any additional or separate fees for credit support. The
degree of credit support provided for each issue is generally based on
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


                                       9
<PAGE>

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

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

Depositary receipts may be "sponsored" or "unsponsored". Sponsored depositary
receipts are established jointly by a depositary and the underlying issuer,
whereas unsponsored depositary receipts may be established by a depositary
without participation by the underlying issuer. Holders of an unsponsored
depositary receipt generally bear all the costs associated with establishing
the unsponsored depositary 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,


                                       10
<PAGE>

Yankee dollar) obligations are subject to certain sovereign risks. One such
risk is the possibility that a sovereign country might prevent capital, in the
form of dollars, from flowing across its borders. Other risks include adverse
political and economic developments; the extent and quality of government
regulation of financial markets and institutions; the imposition of foreign
withholding taxes; and the expropriation or nationalization of foreign issuers.


FLOATERS AND INVERSE FLOATERS. As indicated in Appendix A, certain of the
Portfolios may invest in floaters and inverse floaters, which are fixed income
securities with a floating or variable rate of interest, i.e., the rate of
interest varies with changes in specified market rates or indices, such as the
prime rate, or at specified intervals. Certain floaters may carry a demand
feature that permits the holder to tender them back to the issuer of the
underlying instrument, or to a third party, at par value prior to maturity.
When the demand feature of certain floaters represents an obligation of a
foreign entity, the demand feature will be subject to certain risks discussed
under "Foreign Securities".

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

FOREIGN CURRENCY TRANSACTIONS. As indicated in Appendix A, certain of the
Portfolios may purchase securities denominated in foreign currencies, including
the purchase of foreign currency on a spot (or cash) basis. A change in the
value of any such currency against the United States dollar will result in a
change in the United States dollar value of a Portfolio's assets and income. In
addition, although a portion of a Portfolio's investment income may be received
or realized in such currencies, the Portfolio will be required to compute and
distribute its income in United States dollars. Therefore, if the exchange rate
for any such currency declines after a Portfolio's income has been earned and
computed in United States dollars but before conversion and payment, the
Portfolio could be required to liquidate portfolio securities to make such
distributions.

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.


                                       11
<PAGE>

First, when the Portfolio enters into a contract for the purchase or sale of a
security denominated in or exposed to 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 or exposed to 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 or
exposed to such currency. The use of this basket hedging technique may be more
efficient and economical than entering into separate forward contracts for each
currency held in the Portfolio.

The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the diversification strategies. However, the Advisers to the
Portfolios believe that it is important to have the flexibility to enter into
such forward contracts when they determine that the best interests of the
Portfolios will be served.

A Portfolio may enter into forward contracts for any other purpose consistent
with the Portfolio's investment objective and program. However, the Portfolio
will not enter into a forward contract, or maintain exposure to any such
contract(s), if the amount of foreign currency required to be delivered
thereunder would exceed the Portfolio's holdings of liquid, securities and
currency available for cover of the forward contract(s). In determining the
amount to be delivered under a contract, the Portfolio may net offsetting
positions.

At the maturity of a forward contract, a Portfolio may sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and either extend the maturity of the forward contract (by "rolling"
that contract forward) or may initiate a new forward contract. If a Portfolio
retains the portfolio security and engages in an offsetting transaction, the
Portfolio will incur a gain or a loss (as described below) to the extent that
there has been movement in forward contract prices. If the Portfolio engages in
an offsetting transaction, it may subsequently enter into a new forward
contract to sell the foreign currency.

Should forward prices decline during the period between the Portfolio's
entering into a forward contract for the sale of a foreign currency and the
date it enters into an offsetting contract for the purchase of the foreign
currency, the Portfolio will realize a gain to the extent the price of the
currency it has agreed to sell exceeds the price of the currency it has agreed
to purchase. Should forward prices increase, the Portfolio will suffer a loss
to the extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.

Although each Portfolio values its assets daily in terms of United States
dollars, it does not intend to convert its holdings of foreign currencies into
United States dollars on a daily basis. The Portfolio will do so from time to
time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference ("spread") between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to a Portfolio at one rate, while offering a lesser
rate of exchange should the Portfolio desire to resell that currency to the
dealer.


                                       12
<PAGE>

FOREIGN CURRENCY OPTIONS, FOREIGN CURRENCY FUTURES CONTRACTS AND OPTIONS ON
FUTURES. As indicated in Appendix A, certain of the Portfolios may also
purchase and sell foreign currency futures contracts and may purchase and write
exchange-traded call and put options on foreign currency futures contracts and
on foreign currencies. Those Portfolios may purchase or sell exchange-traded
foreign currency options, foreign currency futures contracts and related
options on foreign currency futures contracts as a hedge against possible
variations in foreign exchange rates. The Portfolios will write options on
foreign currency or on foreign currency futures contracts only if they are
"covered." A put on a foreign currency or on a foreign currency futures
contract written by a Portfolio will be considered "covered" if, so long as the
Portfolio is obligated as the writer of the put, it segregates with the
Portfolio's custodian cash, United States Government securities or other liquid
high-grade debt securities equal at all times to the aggregate exercise price
of the put. A call on a foreign currency or on a foreign currency futures
contract written by the Portfolio will be considered "covered" only if the
Portfolio owns short term debt securities with a value equal to the face amount
of the option contract and denominated in the currency upon which the call is
written. Option transactions may be effected to hedge the currency risk on
non-United States dollar-denominated securities owned by a Portfolio, sold by a
Portfolio but not yet delivered or anticipated to be purchased by a Portfolio.
As an illustration, a Portfolio may use such techniques to hedge the stated
value in United States dollars of an investment in a Japanese yen-denominated
security. In these circumstances, a Portfolio may purchase a foreign currency
put option enabling it to sell a specified amount of yen for dollars at a
specified price by a future date. To the extent the hedge is successful, a loss
in the value of the dollar relative to the yen will tend to be offset by an
increase in the value of the put option.

OVER THE COUNTER OPTIONS ON FOREIGN CURRENCY TRANSACTIONS. As indicated in
Appendix A, certain of the Portfolios may engage in over the counter options on
foreign currency transactions. Each Alliance Portfolio (other than Alliance
Equity Index Portfolio, Alliance Money Market Portfolio, and Alliance
Intermediate Government Securities Portfolio), EQ/Aggressive Stock Portfolio,
EQ/Balanced Portfolio and the Mercury World Strategy Portfolio will engage in
over the counter options on foreign currency transactions only with financial
institutions that have capital of at least $50 million or whose obligations are
guaranteed by an entity having capital of at least $50 million. The MFS
Emerging Growth Companies Portfolio may only enter into forward contracts on
currencies in the over the counter market. The Advisers may engage in these
transactions to protect against uncertainty in the level of future exchange
rates in connection with the purchase and sale of portfolio securities
("transaction hedging") and to protect the value of specific portfolio
positions ("position hedging"). Certain differences exist between 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


                                       13
<PAGE>

can achieve at some future point in time. Additionally, although these
techniques tend to minimize the risk of loss due to a decline in the value of
the hedged currency, they tend to limit any potential gain which might result
from the increase in the value of such currency.

A Portfolio will not speculate in foreign currency options, futures or related
options. Accordingly, a Portfolio will not hedge a currency substantially in
excess of the market value of the securities denominated in that currency which
it owns or the expected acquisition price of securities which it anticipates
purchasing.

For additional information concerning the risks associated with utilizing
options, forward foreign currency exchange contracts, please see "Risks of
Transactions in Options, Futures Contracts and Forward Currency Contracts" in
this section.

FOREIGN SECURITIES. As indicated in Appendix A, certain of the Portfolios may
also invest in other types of foreign securities or engage in the certain types
of transactions related to foreign securities, such as Brady Bonds, Depositary
Receipts, Eurodollar and Yankee Dollar Obligations and Foreign Currency
Transactions, including forward foreign currency transactions, foreign currency
options and foreign currency futures contracts and options on futures. Further
information about these instruments and the risks involved in their use are
contained under the description of each of these instruments in this section.

Foreign investments involve certain risks that are not present in domestic
securities. For example, foreign securities may be subject to currency risks or
to foreign government taxes which reduce their attractiveness. There may be
less information publicly available about a foreign issuer than about a United
States issuer, and a foreign issuer is not generally subject to uniform
accounting, auditing and financial reporting standards and practices comparable
to those in the United States. Other risks of investing in such securities
include political or economic instability in the country involved, the
difficulty of predicting international trade patterns and the possibility of
imposition of exchange controls. The prices of such securities may be more
volatile than those of domestic securities. With respect to certain foreign
countries, there is a possibility of expropriation of assets or
nationalization, imposition of withholding taxes on dividend or interest
payments, difficulty in obtaining and enforcing judgments against foreign
entities or diplomatic developments which could affect investment in these
countries. Losses and other expenses may be incurred in converting between
various currencies in connection with purchases and sales of foreign
securities.

Foreign stock markets are generally not as developed or efficient as, and may
be more volatile than, those in the United States. While growing in volume,
they usually have substantially less volume than United 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.


                                       14
<PAGE>

Moreover, investments in foreign government debt securities, particularly those
of emerging market country governments, involve special risks. Certain emerging
market countries have historically experienced, and may continue to experience,
high rates of inflation, high interest rates, exchange rate fluctuations, large
amounts of external debt, balance of payments and trade difficulties and
extreme poverty and unemployment. See "Emerging Markets Securities" below for
additional risks.

Fluctuations in exchange rates may also affect the earning power and asset
value of the foreign entity issuing a security, even one denominated in United
States dollars. Dividend and interest payments will be repatriated based on the
exchange rate at the time of disbursement, and restrictions on capital flows
may be imposed.

In less liquid and well developed stock markets, such as those in some Eastern
European, Southeast Asian, and Latin American countries, volatility may be
heightened by actions of a few major investors. For example, substantial
increases or decreases in cash flows of mutual funds investing in these markets
could significantly affect stock prices and, therefore, share prices.
Additionally, investments in emerging market regions or the following
geographic regions are subject to more specific risks, as discussed below:

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

Certain emerging market countries have historically experienced, and may
continue to experience, high rates of inflation, high interest rates, exchange
rate fluctuations, large amounts of external debt, balance of payments and
trade difficulties and extreme poverty and unemployment. The issuer or
governmental authority that controls the repayment of an emerging market
country's debt may not be able or willing to repay the principal and/or
interest when due in accordance with the terms of such debt. A debtor's
willingness or ability to repay principal and interest due in a timely manner
may be affected by, among 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,


                                       15
<PAGE>

managed adjustments in relative currency values and other protectionist
measures imposed or negotiated by the countries with which they trade. These
economies also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.

Investing in emerging market countries may entail purchasing securities issued
by or on behalf of entities that are insolvent, bankrupt, in default or
otherwise engaged in an attempt to reorganize or reschedule their obligations,
and in entities that have little or no proven credit rating or credit history.
In any such case, the issuer's poor or deteriorating financial condition may
increase the likelihood that the investing Portfolio will experience losses or
diminution in available gains due to bankruptcy, insolvency or fraud.

EASTERN EUROPEAN AND RUSSIAN SECURITIES. The economies of Eastern European
countries are currently suffering both from the stagnation resulting from
centralized economic planning and control and the higher prices and
unemployment associated with the transition to market economics. Unstable
economic and political conditions may adversely affect security values. Upon
the accession to power of Communist regimes approximately 40 years ago, the
governments of a number of Eastern European countries expropriated a large
amount of property. The claims of many property owners against those
governments were never finally settled. In the event of the return to power of
the Communist Party, there can be no assurance that a Portfolio's investments
in Eastern Europe would not be expropriated, nationalized or otherwise
confiscated.

The registration, clearing and settlement of securities transactions involving
Russian issuers are subject to significant risks not normally associated with
securities transactions in the United States and other more developed markets.
Ownership of equity securities in Russian companies is evidenced by entries in
a company's share register (except where shares are held through depositories
that meet the requirements of the 1940 Act) and the issuance of extracts from
the register or, in certain limited cases, by formal share certificates.
However, Russian share registers are frequently unreliable and a Portfolio
could possibly lose its registration through oversight, negligence or fraud.
Moreover, Russia lacks a centralized registry to record shares and companies
themselves maintain share registers. Registrars are under no obligation to
provide extracts to potential purchasers in a timely manner or at all and are
not necessarily subject to effective state supervision. In addition, while
registrars are liable under law for losses resulting from their errors, it may
be difficult for a Portfolio to enforce any rights it may have against the
registrar or issuer of the securities in the event of loss of share
registration. For example, Russian companies with more than 1,000 shareholders
are required by law to employ an independent company to maintain share
registers, in practice, such companies have not always followed this law.
Because of this lack of independence of registrars, management of a Russian
company may be able to exert considerable influence over who can purchase and
sell the company's shares by illegally instructing the registrar to refuse to
record transactions on the share register. Furthermore, these practices could
cause a delay in the sale of Russian securities by a Portfolio if the company
deems a purchaser unsuitable, which may expose a Portfolio to potential loss on
its investment.

In light of the risks described above, the Board of Trustees of the Trust has
approved certain procedures concerning a Portfolio's investments in Russian
securities. Among these procedures is a requirement that a Portfolio will not
invest in the securities of a Russian company unless that issuer's registrar
has entered into a contract with a Portfolio's custodian containing certain
protective conditions, including, among other things, the custodian's right to
conduct regular share confirmations on behalf of a Portfolio. This requirement
will likely have the effect of precluding investments in certain Russian
companies that a Portfolio would otherwise make.

LATIN AMERICA

Inflation Most Latin American countries have experienced, at one time or
another, severe and persistent levels of inflation, including, in some cases,
hyperinflation. This has, in turn, led to high interest rates, extreme measures
by governments to keep inflation in check, and a generally debilitating effect
on economic growth. Although inflation in many countries has lessened, there is
no guarantee it will remain at lower levels.

Political Instability The political history of certain Latin American countries
has been characterized by political uncertainty, intervention by the military
in civilian and economic spheres, and political


                                       16
<PAGE>

corruption. Such developments, if they were to reoccur, could reverse favorable
trends toward market and economic reform, privatization, and removal of trade
barriers, and result in significant disruption in securities markets.

Foreign Currency Certain Latin American countries may have managed currencies
which are maintained at artificial levels to the U.S. dollar rather than at
levels determined by the market. This type of system can lead to sudden and
large adjustments in the currency which, in turn, can have a disruptive and
negative effect on foreign investors. For example, in late 1994 the value of
the Mexican peso lost more than one-third of its value relative to the dollar.
Certain Latin American countries also restrict the free conversion of their
currency into foreign currencies, including the U.S. dollar. There is no
significant foreign exchange market for many currencies and it would, as a
result, be difficult for the Fund to engage in foreign currency transactions
designed to protect the value of the Fund's interests in securities denominated
in such currencies.

Sovereign Debt A number of Latin American countries are among the largest
debtors of developing countries. There have been moratoria on, and
reschedulings of, repayment with respect to these debts. Such events can
restrict the flexibility of these debtor nations in the international markets
and result in the imposition of onerous conditions on their economies.

PACIFIC BASIN REGION. Many Asian countries may be subject to a greater degree
of social, political and economic instability than is the case in the United
States and European countries. Such instability may result from (i)
authoritarian governments or military involvement in political and economic
decision-making; (ii) popular unrest associated with demands for improved
political, economic and social conditions; (iii) internal insurgencies; (iv)
hostile relations with neighboring countries; and (v) ethnic, religious and
racial disaffection.

The economies of most of the Asian countries are heavily dependent on
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally, the United
States, Japan, China and the European Community. The enactment by the United
States or other principal trading partners of protectionist trade legislation,
reduction of foreign investment in the local economies and general declines in
the international securities markets could have a significant adverse effect
upon the securities markets of the Asian countries.

The securities markets in Asia are substantially smaller, less liquid and more
volatile than the major securities markets in the United States. A high
proportion of the shares of many issuers may be held by 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


                                       17
<PAGE>

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

A Portfolio will only enter into forward commitments and make commitments to
purchase securities on a when-issued or delayed delivery basis with the
intention of actually acquiring the securities. However, the Portfolio may sell
these securities before the settlement date if it is deemed advisable as a
matter of investment strategy. Forward commitments and when-issued and delayed
delivery transactions are generally expected to settle within three months from
the date the transactions are entered into, although the Portfolio may close
out its position prior to the settlement date by entering into a matching sales
transaction.

Although none of the Portfolios intends to make such purchases for speculative
purposes and each Portfolio intends to adhere to the policies of the Securities
and Exchange Commission ("SEC"), purchases of securities on such a basis may
involve more risk than other types of purchases. For example, by committing to
purchase securities in the future, a Portfolio subjects itself to a risk of
loss on such commitments as well as on its portfolio securities. Also, a
Portfolio may have to sell assets which have been set aside in order to meet
redemptions. In addition, if a Portfolio determines it is advisable as a matter
of investment strategy to sell the forward commitment or when-issued or delayed
delivery securities before delivery, that Portfolio may incur a gain or loss
because of market fluctuations since the time the commitment to purchase such
securities was made. Any such gain or loss would be treated as a 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


                                       18
<PAGE>

the value of a currency, or convertible securities with the conversion terms
related to a particular commodity rates. Under certain conditions, the
redemption value of such an instrument could be zero. Hybrid instruments can
have volatile prices and limited liquidity and their use by a Portfolio may not
be successful.

Hybrid instruments may bear interest or pay preferred dividends at below market
(or even relatively nominal) rates. Alternatively, hybrid instruments may bear
interest at above market rates but bear an increased risk of principal loss (or
gain). The latter scenario may result if "leverage" is used to structure the
hybrid instrument. Leverage risk occurs when the hybrid instrument is
structured so that a given change in a Benchmark or Underlying Asset is
multiplied to produce a greater value change in the hybrid instrument, thereby
magnifying the risk of loss as well as the potential for gain.

Hybrid instruments can be an efficient means of creating exposure to a
particular market, or segment of a market, with the objective of enhancing
total return. For example, a Portfolio may wish to take advantage of expected
declines in interest rates in several European countries, but avoid the
transaction costs associated with buying and currency-hedging the foreign bond
positions. One solution would be to purchase a United States dollar-denominated
hybrid instrument whose redemption price is linked to the average three year
interest rate in a designated group of countries. The redemption price formula
would provide for payoffs of greater than par if the average interest rate was
lower than a specified level, and payoffs of less than par if rates were above
the specified level. Furthermore, a Portfolio could limit the downside risk of
the security by establishing a minimum redemption price so that the principal
paid at maturity could not be below a predetermined minimum level if interest
rates were to rise significantly. The purpose of this arrangement, known as a
structured security with an embedded put option, would be to give the Portfolio
the desired European bond exposure while avoiding currency risk, limiting
downside market risk, and lowering transaction costs. Of course, there is no
guarantee that the strategy will be successful and a Portfolio could lose money
if, for example, interest rates do not move as anticipated or credit problems
develop with the issuer of the hybrid instrument.

Although the risks of investing in hybrid instruments reflect a combination of
the risks of investing in securities, options, futures and currencies, hybrid
instruments are potentially more volatile and carry greater market risks than
traditional debt instruments. The risks of a particular hybrid instrument will,
of course, depend upon the terms of the instrument, but may include, without
limitation, the possibility of significant changes in the Benchmarks or the
prices of Underlying Assets to which the instrument is 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


                                       19
<PAGE>

a Portfolio which are eligible for resale pursuant to Rule 144A and that have
been determined to be liquid by the Board or its delegates will be monitored by
each Portfolio's Adviser on an ongoing basis, subject to the oversight of the
Board of Trustees of the Trust. In the event that such a security is deemed to
be no longer liquid, a Portfolio's holdings will be reviewed to determine what
action, if any, is required to ensure that the retention of such security does
not result in a Portfolio's having more than 10% or 15% of its assets invested
in illiquid or not readily marketable securities.

Rule 144A Securities will be considered illiquid and therefore subject to a
Portfolio's limit on the purchase of illiquid securities unless the Board or
its delegates determines that the Rule 144A Securities are liquid. In reaching
liquidity decisions, the Board of Trustees and its delegates may consider,
inter alia, the following factors: (i) the unregistered nature of the security;
(ii) the frequency of trades and quotes for the security; (iii) the number of
dealers wishing to purchase or sell the security and the number of other
potential purchasers; (iv) dealer undertakings to make a market in the
security; and (v) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the 1933 Act, securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the 1933 Act are referred
to as private placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not typically hold
a significant amount of these restricted or other illiquid securities because
of the potential for delays on resale and uncertainty in valuation. Limitations
on resale may have an adverse effect on the marketability of portfolio
securities and a mutual fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven days. A mutual fund
might also have to register such restricted securities in order to dispose of
them resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for repayment. The
fact that there are contractual or legal restrictions on resale to the general
public or to certain institutions may not be indicative of the liquidity of
such investments.

INVESTMENT COMPANY SECURITIES. Investment company securities are securities of
other open-end or closed-end investment companies. Except for so-called
fund-of-funds, the 1940 Act generally prohibits a Portfolio from acquiring more
than 3% of the outstanding voting shares of an investment company and limits
such investments to no more than 5% of the Portfolio's total assets in any
investment company and no more than 10% in any combination of unaffiliated
investment companies. Except for funds-of-funds, the 1940 Act further prohibits
a Portfolio from acquiring in the aggregate more than 10% of the outstanding
voting shares of any registered closed-end investment company. A Portfolio may
invest in securities or investment companies in excess of the limitations
imposed by the 1940 Act only if, and only to the extent that, it can rely upon
an SEC order exempting the Portfolio from these limitations.

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.


                                       20
<PAGE>

Lower quality fixed income securities are securities that are rated in the
lower categories by nationally recognized statistical rating organizations
("NRSRO") (i.e., Ba or lower by Moody's and BB or lower by Standard & Poor's)
or comparable quality unrated securities. Such lower quality securities are
known as "junk bonds" and are regarded as predominantly speculative with
respect to the issuer's continuing ability to meet principal and interest
payments. (Each NRSRO's descriptions of these bond ratings are set forth in the
Appendix to this Statement of Additional Information.) Because investment in
lower quality securities involves greater investment risk, achievement of a
Portfolio's investment objective will be more dependent on the Adviser's
analysis than would be the case if that Portfolio were investing in higher
quality bonds. In addition, lower quality securities may be more susceptible to
real or perceived adverse economic and individual corporate developments than
would investment grade bonds. Moreover, the secondary trading market for lower
quality securities may be less liquid than the market for investment grade
bonds. This potential lack of liquidity may make it more difficult for an
Adviser to value accurately certain portfolio securities.

It is the policy of each Portfolio's Adviser to not rely exclusively on ratings
issued by credit rating agencies but to supplement such ratings with the
Adviser's own independent and ongoing review of credit quality. Junk bonds may
be issued as a consequence of corporate restructuring, such as leveraged
buyouts, mergers, acquisitions, debt recapitalizations, or similar events or by
smaller or highly leveraged companies. When economic conditions appear to be
deteriorating, junk bonds may decline in market value due to investors'
heightened concern over credit quality, regardless of prevailing interest
rates. Although the growth of the high yield securities market in the 1980s had
paralleled a long economic expansion, many issuers have been affected by
adverse economic and market conditions. It should be recognized that an
economic downturn or increase in interest rates is likely to have a negative
effect on: (i) the high yield bond market; (ii) the value of high yield
securities; and (iii) the ability of the securities' issuers to service their
principal and interest payment obligations, to meet their projected business
goals or to obtain additional financing. The market for junk bonds, especially
during periods of deteriorating economic conditions, may be less liquid than
the market for investment grade bonds. In periods of reduced market liquidity,
junk bond prices may become more volatile and may experience sudden and
substantial price declines. Also, there may be significant disparities in the
prices quoted for junk bonds by various dealers. Under such conditions, a
Portfolio may find it difficult to value its junk bonds accurately. Under such
conditions, a Portfolio may have to use subjective rather than objective
criteria to value its junk bond investments accurately and rely more heavily on
the judgment of the Trust's Board of Trustees. Prices for junk bonds also may
be affected by legislative and regulatory developments. For example, federal
rules require that savings and loans gradually reduce their holdings of
high-yield securities. Also, from time to time, Congress has considered
legislation to restrict or eliminate the corporate tax deduction for interest
payments or to regulate corporate restructuring such as takeovers, mergers or
leveraged buyouts. Such legislation, if enacted, could depress the prices of
outstanding junk bonds.

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,


                                       21
<PAGE>

the Portfolio may be unable to sell such investments at an opportune time or
may have to resell them at less than fair market value. These commitments may
have the effect of requiring a Portfolio to increase its investment in a
company at a time when a Portfolio might not otherwise decide to do so
(including at a time when the company's financial condition makes it unlikely
that such amounts will be repaid). To the extent that a Portfolio is committed
to advance additional funds, it will at all times hold and maintain in a
segregated account cash or assets in an amount sufficient to meet such
commitments.

Such loans and other direct indebtedness loans are typically made by a
syndicate of lending institutions, represented by an agent lending institution
which has negotiated and structured the loan and is responsible for collecting
interest, principal and other amounts due on its own behalf and on behalf of
the others in the syndicate, and for enforcing its rights and the rights of
other loan participants against the borrower. Alternatively, such loans and
other direct indebtedness may be structured as a "novation" (i.e., a new loan)
pursuant to which a Portfolio would assume all of the rights of the lending
institution in a loan, or as an assignment, pursuant to which a Portfolio would
purchase an assignment of a portion of a lender's interest in a loan or other
direct indebtedness either directly from the lender or through an intermediary.
A Portfolio may also purchase trade or other claims against companies, which
generally represent money owed by the company to a supplier of goods or
services. These claims may also be purchased at a time when the company is in
default.

A Portfolio's ability to receive payment of principal, interest and other
amounts due in connection with these investments will depend primarily on the
financial condition of the borrower. In selecting the loans and other direct
indebtedness that a Portfolio will purchase, the Adviser will rely upon its own
credit analysis of the borrower. As a Portfolio may be required to rely upon
another lending institution to collect and pass on to a Portfolio amounts
payable with respect to the loan and to enforce a Portfolio's rights under the
loan and other direct indebtedness, an insolvency, bankruptcy or reorganization
of the lending institution may delay or prevent a Portfolio from receiving such
amounts. In such cases, a Portfolio will also evaluate the creditworthiness of
the lending institution and will treat both the borrower and the lending
institutions as an "issuer" of the loan for purposes of certain investment
restrictions pertaining to the diversification of a Portfolio's portfolio
investments.

Investments in such loans and other direct indebtedness may involve additional
risks to a Portfolio. For example, if a loan or other direct indebtedness is
foreclosed, a Portfolio could become part owner of any collateral, and would
bear the costs and liabilities associated with owning and disposing of the
collateral. In addition, it is conceivable that under emerging legal theories
of lender liability, a Portfolio could be held liable. It is unclear whether
loans and other forms of direct indebtedness offer securities law protections
against fraud and misrepresentation. In the absence of definitive regulatory
guidance, a Portfolio relies on the Adviser's research in an attempt to avoid
situations where fraud and misrepresentation could adversely affect a
Portfolio. In addition, loans and other direct investments may not be in the
form of securities or may be subject to restrictions on transfer, and only
limited opportunities may 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


                                       22
<PAGE>

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.

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


                                       23
<PAGE>

foregoing. Stripped mortgage-backed securities are usually structured with two
classes that receive different portions of the interest and principal
distributions on a pool of mortgage loans. The holder of the "principal-only"
security ("PO") receives the principal payments made by the underlying
mortgage-backed security, while the holder of the "interest-only" security
("IO") receives interest payments from the same underlying security. The
Portfolios may invest in both the IO class and the PO class. The prices of
stripped mortgage-backed securities may be particularly affected by changes in
interest rates. The yield to maturity on an IO class of stripped
mortgage-backed securities is extremely sensitive not only to changes in
prevailing interest rates but also to the rate of principal payments (including
prepayments) on the underlying assets. As interest rates fall, prepayment rates
tend to increase, which tends to reduce prices of IOs and increase prices of
POs. Rising interest rates can have the opposite effect.

Prepayments may also result in losses on stripped mortgage-backed securities. A
rapid rate of principal prepayments may have a measurable adverse effect on a
Portfolio's yield to maturity to the extent it invests in IOs. If the assets
underlying the IO experience greater than anticipated prepayments of principal,
a Portfolio may fail to recoup fully its initial investments in these
securities. Conversely, POs tend to increase in value if prepayments are
greater than anticipated and decline if prepayments are slower than
anticipated. The secondary market for stripped mortgage-backed securities may
be more volatile and less liquid than that for other mortgage-backed
securities, potentially limiting the Portfolios' ability to buy or sell those
securities at any particular time.

The J.P. Morgan Core Bond Portfolio may also invest in directly placed
mortgages including residential mortgages, multifamily mortgages, mortgages on
cooperative apartment buildings, commercial mortgages, and sale-leasebacks.
These investments are backed by assets such as office buildings, shopping
centers, retail stores, warehouses, apartment buildings and single-family
dwellings. In the event that the Portfolio forecloses on any non-performing
mortgage, it could end up acquiring a direct interest in the underlying real
property and the Portfolio would then be subject to the risks generally
associated with the ownership of real property. There may be fluctuations in
the market value of the foreclosed property and its occupancy rates, rent
schedules and operating expenses. Investment in direct mortgages involve many
of the same risks as investments in mortgage-related securities. There may also
be adverse changes in local, regional or general economic conditions,
deterioration of the real estate market and the financial circumstances of
tenants and sellers, unfavorable changes in zoning, building, environmental and
other laws, increased real property taxes, rising interest rates, reduced
availability and increased cost of mortgage borrowings, the need for
anticipated renovations, unexpected increases in the cost of energy,
environmental factors, acts of God and other factors which are beyond the
control of the Portfolio or the Adviser. Hazardous or toxic substances may be
present on, at or under the mortgaged property and adversely affect the value
of the property. In addition, the owners of the property containing such
substances may be held responsible, under various laws, for containing,
monitoring, removing or cleaning up such substances. The presence of such
substances may also provide a basis for other claims by third parties. Costs of
clean-up or of liabilities to third parties may exceed the value of the
property. In addition, these risks may be uninsurable. In light of these and
similar risks, it may be impossible to dispose profitably of properties in
foreclosure.

MORTGAGE DOLLAR ROLLS. The J.P. Morgan Core Bond Portfolio may enter into
mortgage dollar rolls in which the Portfolio sells securities for delivery in
the current month and simultaneously contracts with the same counterparty to
repurchase similar (same type, coupon and maturity) but not identical
securities on a specified future date. During the roll period, the Portfolio
loses the right to receive principal (including prepayments of principal) and
interest paid on the securities sold. However, the Portfolio may benefit from
the interest earned on the cash proceeds of the securities sold until the
settlement date of the forward purchase. The Portfolio will hold and maintain
in a segregated account until the settlement date cash or liquid securities in
an amount equal to the forward purchase price. The benefits derived from the
use of mortgage dollar rolls depend upon the Adviser's ability to manage
mortgage prepayments. There is no assurance that mortgage dollar rolls can be
successfully employed.

MUNICIPAL SECURITIES. As indicated in Appendix A, certain of the Portfolios may
invest in municipal securities ("municipals"), which are debt obligations
issued by local, state and regional governments that provide interest income
that is exempt from federal income taxes. Municipals include both municipal


                                       24
<PAGE>

bonds (those securities with maturities of five years or more) and municipal
notes (those with maturities of less than five years). Municipal bonds are
issued for a wide variety of reasons: to construct public facilities, such as
airports, highways, bridges, schools, hospitals, mass transportation, streets,
water and sewer works; to obtain funds for operating expenses; to refund
outstanding municipal obligations; and to loan funds to various public
institutions and facilities. Certain industrial development bonds are also
considered municipal bonds if their interest is exempt from federal income tax.
Industrial development bonds are issued by or on behalf of public authorities
to obtain funds for various privately-operated manufacturing facilities,
housing, sports arenas, convention centers, airports, mass transportation
systems and water, gas or sewer works. Industrial development bonds are
ordinarily dependent on the credit quality of a private user, not the public
issuer.

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

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

Following is a description of specific Options and Futures Transactions,
followed by a discussion concerning the risks associated with utilizing
options, futures contracts, and forward foreign currency exchange contracts.

FUTURES TRANSACTIONS. As indicated in Appendix A, certain of the Portfolios may
utilize futures contracts. Futures contracts (a type of potentially high-risk
security) enable the investor to buy or sell an asset in the future at an
agreed upon price. A futures contract is a bilateral agreement to buy or sell a
security (or deliver a cash settlement price, in the case of a contract
relating to an index or otherwise not calling for physical delivery at the end
of trading in the contracts) for a set price in the future. Futures contracts
are designated by boards of trade which have been designated "contracts
markets" by the Commodities Futures Trading Commission ("CFTC").

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.


                                       25
<PAGE>

A Portfolio will incur brokerage fees when it purchases and sells futures
contracts. Positions taken in the futures markets are not normally held until
delivery or cash settlement is required, but are instead liquidated through
offsetting transactions which may result in a gain or a loss. While futures
positions taken by a Portfolio will usually be liquidated in this manner, the
Portfolio may instead make or take delivery of underlying securities whenever
it appears economically advantageous for the Portfolio to do so. A clearing
organization associated with the exchange on which futures are traded assumes
responsibility for closing out transactions and guarantees that as between the
clearing members of an exchange, the sale and purchase obligations will be
performed with regard to all positions that remain open at the termination of
the contract.

OPTIONS ON FUTURES CONTRACTS. As indicated in Appendix A, certain of the
Portfolios may purchase and write exchange-traded call and put options on
futures contracts of the type which the particular Portfolio is authorized to
enter into. These options are traded on exchanges that are licensed and
regulated by the CFTC for the purpose of options trading. A call option on a
futures contract gives the purchaser the right, in return for the premium paid,
to purchase a futures contract (assume a "long" position) at a specified
exercise price at any time before the option expires. A put option gives the
purchaser the right, in return for the premium paid, to sell a futures contract
(assume a "short" position), for a specified exercise price, at any time before
the option expires.

Options on futures contracts can be used by a Portfolio to hedge substantially
the same risks as might be addressed by the direct purchase or sale of the
underlying futures contracts. If the Portfolio purchases an option on a futures
contract, it may obtain benefits similar to those that would result if it held
the futures position itself. Purchases of options on futures contracts may
present less risk in hedging than the purchase and sale of the underlying
futures contracts since the potential loss is limited to the amount of the
premium plus related transaction costs.

The Portfolios will write only options on futures contracts which are
"covered." A Portfolio will be considered "covered" with respect to a put
option it has written if, so long as it is obligated as a writer of the put,
the Portfolio segregates with its custodian cash, United States Government
securities or liquid securities at all times equal to or greater than the
aggregate exercise price of the puts it has written (less any related margin
deposited with the futures broker). A Portfolio will be considered "covered"
with respect to a call option it has written on a debt security future if, so
long as it is obligated as a writer of the call, the Portfolio owns a security
deliverable under the futures contract. A Portfolio will be considered
"covered" with respect to a call option it has written on a securities index
future if the 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


                                       26
<PAGE>

acquired for the Portfolio. If the option is exercised, the Portfolio will
incur a loss in the option transaction, which will be reduced by the amount of
the premium it has received, but which will offset any favorable changes in the
value of its portfolio securities or, in the case of a put, lower prices of
securities it intends to acquire.

LIMITATIONS ON PURCHASE AND SALE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS. The Portfolios will not engage in transactions in futures contracts
and related options for speculation. In addition, the Portfolios will not
purchase or sell futures contracts or related options unless either (1) the
futures contracts or options thereon are purchased for "bona fide hedging"
purposes (as that term is defined under the CFTC regulations) or (2) if
purchased for other purposes, the sum of the amounts of initial margin deposits
on a Portfolio's existing futures and premiums required to establish
non-hedging positions would not exceed 5% of the liquidation value of the
Portfolio's total assets. In instances involving the purchase of futures
contracts or the writing of put options thereon by a Portfolio, an amount of
cash and cash equivalents, equal to the cost of such futures contracts or
options written (less any related margin deposits), will be deposited in a
segregated account with its custodian, thereby insuring that the use of such
futures contracts and options is unleveraged. In instances involving the sale
of futures contracts or the writing of call options thereon by a Portfolio, the
securities underlying such futures contracts or options will at all times be
maintained by the Portfolio or, in the case of index futures and related
options, the Portfolio will own securities the price changes of which are, in
the opinion of its Adviser, expected to replicate substantially the movement of
the index upon which the futures contract or option is based.

For information concerning the risks associated with utilizing options, futures
contracts, and forward foreign currency exchange contracts, please see "Risks
of Transactions in Options, Futures Contracts and Forward Currency Contracts"
on page 30.

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 (except the EQ/Janus Large Cap
Growth Portfolio) has written call or put options generally will not exceed 25%
of its total assets. These limitations do not apply to options attached to or
acquired or traded together with their underlying securities, and do not apply
to securities that incorporate features similar to 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.


                                       27
<PAGE>

A Portfolio will write covered call options both to reduce the risks associated
with certain of its investments and to increase total investment return through
the receipt of premiums. In return for the premium income, the Portfolio will
give up the opportunity to profit from an increase in the market price of the
underlying security above the exercise price so long as its obligations under
the contract continue, except insofar as the premium represents a profit.
Moreover, in writing the call option, the Portfolio will retain the risk of
loss should the price of the security decline. The premium is intended to
offset that loss in whole or in part. Unlike the situation in which the
Portfolio owns securities not subject to a call option, the Portfolio, in
writing call options, must assume that the call may be exercised at any time
prior to the expiration of its obligation as a writer, and that in such
circumstances the net proceeds realized from the sale of the underlying
securities pursuant to the call may be substantially below the prevailing
market price.

A Portfolio may terminate its obligation under an option it has written by
buying an identical option. Such a transaction is called a "closing purchase
transaction." The Portfolio will realize a gain or loss from a closing purchase
transaction if the amount paid to purchase a call option is less or more than
the amount received from the sale of the corresponding call option. Also,
because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the exercise or closing out of a call option is likely to be offset in
whole or part by unrealized appreciation of the underlying security owned by
the Portfolio. When an underlying security is sold from the Portfolio's
securities portfolio, the Portfolio will effect a closing purchase transaction
so as to close out any existing covered call option on that underlying
security.

WRITING PUT OPTIONS. The writer of a put option becomes obligated to purchase
the underlying security at a specified price during the option period if the
buyer elects to exercise the option before its expiration date. A Portfolio
which writes a put option will be required to "cover" it, for example, by
depositing and maintaining in a segregated account with its custodian cash,
United States Government securities or other liquid securities having a value
equal to or greater than the exercise price of the option.

The Portfolios may write put options either to earn additional income in the
form of option premiums (anticipating that the price of the underlying security
will remain stable or rise during the option period and the option will
therefore not be exercised) or to acquire the underlying security at a net cost
below the current value (e.g., the option is exercised because of a decline in
the price of the underlying security, but the amount paid by the Portfolio,
offset by the option premium, is less than the current price). The risk of
either strategy is that the price of the underlying security may decline by an
amount greater than 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


                                       28
<PAGE>

or debited at the close of each trading day to the respective accounts of the
parties to the contract. On the contract's expiration date a final cash
settlement occurs and the futures positions are simply closed out. Changes in
the market value of a particular index futures contract reflect changes in the
specified index of securities on which the future is based.

By establishing an appropriate "short" position in index futures, a Portfolio
may also seek to protect the value of its portfolio against an overall decline
in the market for such securities. Alternatively, in anticipation of a
generally rising market, a Portfolio can seek to avoid losing the benefit of
apparently low current prices by establishing a "long" position in securities
index futures and later liquidating that position as particular securities are
in fact acquired. To the extent that these hedging strategies are successful,
the Portfolio will be affected to a lesser degree by adverse overall market
price movements than would otherwise be the case.

SECURITIES INDEX OPTIONS. A Portfolio may write covered put and call options
and purchase call and put options on securities indexes for the purpose of
hedging against the risk of unfavorable price movements adversely affecting the
value of a Portfolio's securities or securities it intends to purchase. Each
Portfolio writes only "covered" options. A call option on a securities index is
considered covered, for example, if, so long as the Portfolio is obligated as
the writer of the call, it holds securities the price changes of which are, in
the opinion of a Portfolio's Adviser, expected to replicate substantially the
movement of the index or indexes upon which the options written by the
Portfolio are based. A put on a securities index written by a Portfolio will be
considered covered if, so long as it is obligated as the writer of the put, the
Portfolio segregates with its custodian cash, United States Government
securities or other liquid high-grade debt obligations having a value equal to
or greater than the exercise price of the option. Unlike a stock option, which
gives the holder the right to purchase or sell a specified stock at a specified
price, an option on a securities index gives the holder the right to receive a
cash "exercise settlement amount" equal to (i) the difference between the
exercise price of the option and the value of the underlying stock index on the
exercise date, multiplied by (ii) a fixed "index multiplier."

A securities index fluctuates with changes in the market value of the
securities so included. For example, some securities index options are based on
a broad market index such as the Standard & Poor's 500 or the NYSE Composite
Index, or a narrower market index such as the Standard & Poor's 100. Indexes
may also be based on an industry or market segment such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index.

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


                                       29
<PAGE>

formula price the over the counter option written by it, the Portfolio would
treat as illiquid only securities equal in amount to the formula price
described above less the amount by which the option is "in-the-money," i.e.,
the amount by which the price of the option exceeds the exercise price.


RISKS OF TRANSACTIONS IN OPTIONS, FUTURES CONTRACTS AND FORWARD CURRENCY
CONTRACTS

OPTIONS. A closing purchase transaction for exchange-traded options may be made
only on a national securities exchange ("exchange"). There is no assurance that
a liquid secondary market on an exchange will exist for any particular option,
or at any particular time, and for some options, such as over-the-counter
options, no secondary market on an exchange may exist. If a Portfolio is unable
to effect a closing purchase transaction, the Portfolio will not sell the
underlying security until the option expires or the Portfolio delivers the
underlying security upon exercise.

Options traded in the over the counter market may not be as actively traded as
those on an exchange. Accordingly, it may be more difficult to value such
options. In addition, it may be difficult to enter into closing transactions
with respect to options traded over the counter. The Portfolios will engage in
such transactions only with firms of sufficient credit so as to minimize these
risks. Such options and the securities used as "cover" for such options may be
considered illiquid securities.

The effectiveness of hedging through the purchase of securities index options
will depend upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements in the
selected securities index. Perfect correlation is not possible because the
securities held or to be acquired by a Portfolio will not exactly match the
composition of the securities indexes on which options are written. In the
purchase of securities index options the principal risk is that the premium and
transaction costs paid by a Portfolio in purchasing an option will be lost if
the changes (increase in the case of a call, decrease in the case of a put) in
the level of the index do not exceed the cost of the option.

FUTURES. The prices of futures contracts are volatile and are influenced, among
other things, by actual and anticipated changes in the market and interest
rates, which in turn are affected by fiscal and monetary policies and national
and international political and economic events.

Most United States futures exchanges limit the amount of fluctuation permitted
in futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
futures contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting some futures traders to substantial losses.

Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as margin, a subsequent 10%
decrease in the value of the futures contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of the
amount invested in the futures contract.

A decision of whether, when, and how to hedge involves skill and judgment, and
even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior, market trends or interest rate trends. There are
several risks in connection with the use by a Portfolio of futures contracts as
a hedging device. One risk arises because of the imperfect correlation between
movements in the prices of the futures contracts and movements in the prices of
the underlying instruments which are the subject of the hedge. A Portfolio's
Adviser will, however, attempt to reduce this risk by entering into futures
contracts whose movements, in its judgment, will have a significant correlation
with movements in the prices of the Portfolio's underlying instruments sought
to be hedged.


                                       30
<PAGE>

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
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.


                                       31
<PAGE>

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 those PFICs that are investment
companies, to the limitation that no more than 10% of the value of the
Portfolio's total assets may be invested in such securities. 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 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 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 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.


                                       32
<PAGE>

REAL ESTATE INVESTMENT TRUSTS. As indicated in Appendix A, certain of the
Portfolios may each invest up to 15% of its respective net assets in
investments related to real estate, including real estate investment trusts
("REITs"). Risks associated with investments in securities of companies in the
real estate industry include: decline in the value of real estate; risks
related to general and local economic conditions; overbuilding and increased
competition; increases in property taxes and operating expenses; changes in
zoning laws; casualty or condemnation losses; variations in rental income;
changes in neighborhood values; the appeal of properties to tenants; and
increases in interest rates. In addition, equity REITs may be affected by
changes in the values of the underlying property owned by the trusts, while
mortgage real estate investment trusts may be affected by the quality of credit
extended. REITs are dependent upon management skills, may not be diversified
and are subject to the risks of financing projects. Such REITs are also subject
to heavy cash flow dependency, defaults by borrowers, self liquidation and the
possibility of failing to qualify for tax-free pass-through of income under the
Code and to maintain exemption from the 1940 Act. In the event an issuer of
debt securities collateralized by real estate defaults, it is conceivable that
the REITs could end up holding the underlying real estate.

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. As indicated in Appendix A,
certain of the Portfolios may each enter into reverse repurchase agreements
with brokers, dealers, domestic and foreign banks or other financial
institutions. In a reverse repurchase agreement, the Portfolio sells a security
and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. It may
also be viewed as the borrowing of money by the Portfolio. The Portfolio's
investment of the proceeds of a reverse repurchase agreement is the speculative
factor known as leverage. The Portfolio may enter into a reverse repurchase
agreement only if the interest income from investment of the proceeds is
greater than the interest expense of the transaction and the proceeds are
invested for a period no longer than the term of the agreement. At the time a
Portfolio enters into a reverse repurchase agreement, it will establish and
maintain a segregated account with an approved custodian containing cash or
other liquid securities having a value not less than the repurchase price
(including accrued interest). If interest rates rise during a reverse
repurchase agreement, it may adversely affect the Portfolio's net asset value.
See "Fundamental Restrictions" for more information concerning restrictions on
borrowing by each Portfolio. Reverse repurchase agreements are considered to be
borrowings under the 1940 Act.

The assets contained in the segregated account will be marked-to-market daily
and additional assets will be placed in such account on any day in which the
assets fall below the repurchase price (plus accrued interest). A Portfolio's
liquidity and ability to manage its assets might be affected when it sets aside
cash or portfolio securities to cover such commitments. Reverse repurchase
agreements involve the risk that 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 of the Portfolios may lend securities. 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


                                       33
<PAGE>

retain all or a portion of the interest received on investment of cash
collateral or receive a fee from the borrower. Lending portfolio securities
involves risks of delay in recovery of the loaned securities or in some cases
loss of rights in the collateral should the borrower fail financially.

Securities loans are made to broker-dealers or institutional investors or other
persons, pursuant to agreements requiring that the loans be continuously
secured by collateral at least equal at all times to the value of the loaned
securities marked to market on a daily basis. The collateral received will
consist of cash, United States Government securities, letters of credit or such
other collateral as may be permitted under a Portfolio's securities lending
program. While the securities are being loaned, a Portfolio will continue to
receive the equivalent of the interest or dividends paid by the issuer on the
securities, as well as interest on the investment of the collateral or a fee
from the borrower. A Portfolio has a right to call each loan and obtain the
securities on five business days' notice or, in connection with securities
trading on foreign markets, within such longer period for purchases and sales
of such securities in such foreign markets. A Portfolio will generally not have
the right to vote securities while they are being loaned, but its Manager or
Adviser will call a loan in anticipation of any important vote. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in the recovery
of the securities or possible loss of rights in the collateral should the
borrower fail financially. Loans will only be made to firms deemed by a
Portfolio's Adviser to be of good standing and will not be made unless, in the
judgment of the Adviser, the consideration to be earned from such loans would
justify the risk.

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

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. As indicated in Appendix A, certain of the Portfolios 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


                                       34
<PAGE>

among the newly issued structured notes to create securities with different
investment characteristics such as varying maturities, payment priorities and
interest rate provisions, and the extent of the payment made with respect to
structured notes is dependent on the extent of the cash flow on the underlying
instruments. Because structured notes of the type in which the Morgan Stanley
Emerging Markets Equity Portfolio may invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments. The Morgan Stanley Emerging Markets Equity Portfolio
may invest in a class of structured notes that is either subordinated or
unsubordinated to the right of payment of another class. Subordinated
structured notes typically have higher yields and present greater risks than
unsubordinated structured notes. Certain issuers of structured notes may be
deemed to be "investment companies" as defined in the 1940 Act. As a result,
the Morgan Stanley Emerging Markets Equity Portfolio's investment in these
structured notes may be limited by restrictions contained in the 1940 Act.
Structured notes are typically sold in private placement transactions, and
there currently is no active trading market for structured notes.

SWAPS. As indicated in Appendix A, certain Portfolios may invest in swap
contracts, which are derivatives in the form of a contract or other similar
instrument which is an agreement to exchange the return generated by one
instrument for the return generated by another instrument. The payment streams
are calculated by reference to a specified index and agreed upon notional
amount. The term "specified index" includes, but is not limited to, currencies,
fixed interest rates, prices and total return on interest rate indices, fixed
income indices, stock indices and commodity indices (as well as amounts derived
from arithmetic operations on these indices). For example, a Portfolio may
agree to swap the return generated by a fixed income index for the return
generated by a second fixed income index. The currency swaps in which a
Portfolio may enter will generally involve an agreement to pay interest streams
in one currency based on a specified index in exchange for receiving interest
streams denominated in another currency. Such swaps may involve initial and
final exchanges that correspond to the agreed upon notional amount.

A Portfolio will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Portfolio receiving or paying, as the
case may be, only the net amount of the two payments. A Portfolio's obligations
under a swap agreement will be accrued daily (offset against any amounts owing
to the Portfolio) and any accrued but unpaid net amounts owed to a swap
counterparty will be covered by the maintenance of a segregated account
consisting of unencumbered liquid assets, to avoid any potential leveraging of
a Portfolio. To the extent that these swaps are entered into for hedging
purposes, the Advisers believe such obligations do not constitute "senior
securities" under the 1940 Act and, accordingly, the Adviser will not treat
them as being subject to the 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 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 the 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.


                                       35
<PAGE>

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, the Portfolio may have
contractual remedies pursuant to the agreements related to the transaction.

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

The equity security underlying a warrant is authorized at the time the warrant
is issued or is issued together with the warrant. Investing in warrants can
provide a greater potential for profit or loss than an equivalent investment in
the underlying security, and, thus, can be a speculative investment. The value
of a warrant may decline because of a decline in the value of the underlying
security, the passage of time, changes in interest rates or in the dividend or
other policies of the company whose equity underlies the warrant or a change in
the perception as to the future price of the underlying security, or any
combination thereof. Warrants generally pay no dividends and confer no voting
or other rights other than to purchase the underlying security.

ZERO COUPON BONDS. As indicated in Appendix A, certain 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, 1999.


                                       36
<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>
NAME AND AGE                                    PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
----------------------------------------------- ----------------------------------------------------
<S>                                             <C>
Peter D. Noris* (44) .......................... From May 1995 to present, Executive Vice
President and Trustee                           President and Chief Investment Officer, Equitable;
                                                from 1992 to 1995, Vice President, Salomon
                                                Brothers Inc.; from July 1995 to present, Director,
                                                Alliance Capital Management, L.P.; from July 1995
                                                to October 1999, Trustee, Hudson River Trust
                                                (investment company); from November 1996 to
                                                present, Executive Vice President, AXA Advisors
                                                LLC.

Theodossios (Ted) Athanassiades (60) .......... From 1994 to present, Director, Atlantic Bank of
Trustee                                         New York; 1996, Vice-Chairman, Metropolitan
                                                Life Insurance Company; from 1993-1995,
                                                President and Chief Operating Officer,
                                                Metropolitan Life Insurance Company.

Jettie M. Edwards (54) ........................ From 1986 to present, Partner and Consultant,
Trustee                                         Syrus Associates (business and marketing
                                                consulting firm); from 1992 to present, Trustee,
                                                Provident Investment Counsel Trust (investment
                                                company); from 1995 to present, Director, The
                                                PBHG Funds, Inc. (investment company).

David W. Fox (68) ............................. From 1987 to present, Director of USG
Trustee                                         Corporation; Public Governor (1989 to present)
                                                and Chairman (1996 to present) of the Chicago
                                                Stock Exchange; from 1990-1995, Chairman and
                                                Chief Executive Officer, Northern Trust
                                                Corporation.

Michael Hegarty* (55) ......................... From April 1998 to present, Director, President
Trustee                                         and Chief Operating Officer, Equitable; from 1996
                                                to 1998, Vice Chairman, Chase Manhattan
                                                Corporation; from 1995 to 1996, Vice Chairman,
                                                Chemical Bank (Chase Manhattan Corporation
                                                and Chemical Bank merged in 1996); from 1991 to
                                                1995, Senior Executive Vice President, Chemical
                                                Bank.
</TABLE>

                                       37
<PAGE>


<TABLE>
<CAPTION>
NAME AND AGE                                  PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
--------------------------------------------- ----------------------------------------------------
<S>                                           <C>
William M. Kearns, Jr. (65) ................. From 1994 to present, President, W.M. Kearns &
Trustee                                       Co., Inc. (private investment company); from 1998
                                              to present, Vice Chairman, Keefe Managers,
                                              Inc. (financial services funds); Director, Malibu
                                              Entertainment Worldwide, Inc., Marine Transport
                                              Corporation, Selective Insurance Group, Inc.,
                                              Transistor Devices, Inc., as well as a number of
                                              private and venture backed companies.

Christopher P.A. Komisarjevsky (55) ......... From 1998 to present, President and Chief
Trustee                                       Executive Officer, Burson-Marsteller Worldwide
                                              (public relations); from 1996 to 1998, President
                                              and Chief Executive Officer, Burson-Marstellar
                                              USA; from 1994 to 1995, President and Chief
                                              Executive Officer, Gavin Anderson & Company,
                                              New York.

Harvey Rosenthal (57) ....................... From 1996 to present, Consultant/Director; from
Trustee                                       1994 to 1996, President and Chief Operating
                                              Officer, Melville Corporation (now CVS
                                              Corporation); Director, Schein Pharmaceutical, Inc.
                                              and LoJack Corporation.

Gary S. Schpero* (46) ....................... Prior to January 1, 2000, Partner of Simpson
Trustee                                       Thacher & Bartlett (law firm) and Managing
                                              Partner of Investment Management and
                                              Investment Company Practice Group.
</TABLE>

----------
*     "Interested person" of the Trust (as that term is defined in the 1940
      Act).


COMMITTEES OF THE BOARD

The Trust has a standing Audit Committee consisting of all of the Trustees who
are not "interested persons" of the Trust (as that term is defined in the 1940
Act) ("Independent Trustees"). The Audit Committee's function is to recommend
to the Board independent accountants to conduct the annual audit of the Trust's
financial statements; review with the independent accountants the outline,
scope and results of this annual audit; and review the performance and fees
charged by the independent accountants for professional services. In addition,
the Audit Committee meets with the independent accountants and representatives
of management to review accounting activities and areas of financial reporting
and control.

The Trust has a Nominating and Compensation Committee consisting of all of the
Independent Trustees. The Nominating and Compensation Committee's function is
to nominate and evaluate independent trustee candidates and review the
compensation arrangements for each of the Trustees.

The Trust has a Valuation Committee consisting of Peter D. Noris, Steven M.
Joenk, Kevin R. Byrne, Brian S. O'Neil, and such other officers of the Trust
and the Manager, as well as such officers of any Adviser to any Portfolio as
are deemed necessary by Mr. Noris or Mr. Joenk from time to time, each of whom
shall serve at the pleasure of the Board of Trustees as members of the
Valuation Committee. This committee determines the value of any of the Trust's
securities and assets for which market quotations are not readily available or
for which valuation cannot otherwise be provided.

COMPENSATION OF THE TRUSTEES

Each Trustee, who is not an employee of the Manager or any of its affiliates,
currently receives from the Trust an annual fee of $40,000 plus (i) an
additional fee of $4,000 for each regularly scheduled Board


                                       38
<PAGE>

meeting attended, (ii) $2,000 for each special Board meeting or special
committee meeting attended, and (iii) $1,000 for each telephone or other
committee meeting attended, plus reimbursement for expenses in attending
in-person meetings. Upon election by the Independent Trustees of a lead
Independent Trustee, a supplemental retainer of $10,000 per year will be paid
to the lead Independent Trustee. A supplemental retainer may also be paid on
occasion to each chair of the Trust's two committees for special services.


                           TRUSTEE COMPENSATION TABLE
                     FOR THE YEAR ENDED DECEMBER 31, 1999*

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
                                                        PENSION OR
                                                        RETIREMENT           TOTAL
                                       AGGREGATE     BENEFITS ACCRUED    COMPENSATION
                                     COMPENSATION       AS PART OF      FROM TRUST PAID
 TRUSTEE                            FROM THE TRUST    TRUST EXPENSES      TO TRUSTEES
----------------------------------------------------------------------------------------
<S>                                <C>              <C>                <C>
  Peter D. Noris                      $     -0-            $-0-           $     -0-
----------------------------------------------------------------------------------------
  Ted Athanassiades*                  $     -0-            $-0-           $     -0-
----------------------------------------------------------------------------------------
  Jettie M. Edwards                   $  39,271            $-0-           $  39,271
----------------------------------------------------------------------------------------
  David W. Fox*                       $     -0-            $-0-           $     -0-
----------------------------------------------------------------------------------------
  Michael Hegarty                     $     -0-            $-0-           $     -0-
----------------------------------------------------------------------------------------
  William M. Kearns, Jr.              $  39,271            $-0-           $  39,271
----------------------------------------------------------------------------------------
  Christopher P.A. Komisarjevsky      $  38,271**          $-0-           $  38,271**
----------------------------------------------------------------------------------------
  Harvey Rosenthal                    $  39,271            $-0-           $  39,271
----------------------------------------------------------------------------------------
  Gary S. Schpero*                    $     -0-            $-0-           $     -0-
----------------------------------------------------------------------------------------

</TABLE>

----------
*     Mssrs. Athanassiades, Fox and Schpero did not receive any compensation
      from the Trust in 1999 because they were not members of the Board in
      1999.

**    Mr. Komisarjevsky has elected to participate in the Trust's deferred
      compensation plan. As of December 31, 1999, Mr. Komisarjevsky had accrued
      $39,218 (including interest).


A deferred compensation plan for the benefit of the Trustees has been adopted
by the Trust. Under the deferred compensation plan, each Trustee may defer
payment of all or part of the fees payable for such Trustee's services. Each
Trustee may defer payment of such fees until his or her retirement as a Trustee
or until the earlier attainment of a specified age. Fees deferred under the
deferred compensation plan, together with accrued interest thereon, will be
disbursed to a participating Trustee in monthly installments over a five to 20
year period elected by such Trustee.

THE TRUST'S OFFICERS

No officer of the Trust receives any compensation paid by the Trust. Each
officer of the Trust is an employee of Equitable, AXA Advisors, LLC ("AXA
Advisors"), Equitable Distributors, Inc. ("EDI"), or Chase Global Funds
Services Company ("Chase Global"). The Trust's principal officers are:


                                       39
<PAGE>


<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH TRUST            PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
------------------------------------------   --------------------------------------------------------
<S>                                          <C>
Peter D. Noris (44) ......................   From May 1995 to present, Executive Vice President
President                                    and Chief Investment Officer, Equitable; from 1992 to
                                             1995, Vice President, Salomon Brothers, Inc.; from July
                                             1995 to present, Director, Alliance Capital Management,
                                             L.P.; from July 1995 to October 1999, Trustee, Hudson
                                             River Trust (investment company); from November
                                             1996 to present, Executive Vice President, AXA
                                             Advisors.

Brian S. O'Neil (48) .....................   From July 1998 to present, Executive Vice President
Vice President                               AXA Financial; from 1997 to 1998, Director of
                                             Investment, AXA Investment Managers-Europe; from
                                             1995 to 1997, Chief Investment Officer, AXA
                                             Investment Management Paris; from 1992 to June 1995,
                                             Executive Vice President and Chief Investment Officer
                                             AXA Financial.

Steven M. Joenk (41) .....................   From July 1999 to present, Senior Vice President AXA
Vice President and Chief Financial Officer   Financial; from 1996 to 1999, Managing Director of
                                             MeesPierson; from 1994 to 1996, Executive Vice
                                             President and Chief Financial Officer, Gabelli Funds,
                                             Inc.

Kevin R. Byrne (44) ......................   From July 1997 to present, Senior Vice President and
Vice President and Treasurer                 Treasurer, AXA Financial and Equitable; from 1990 to
                                             present, Treasurer, Frontier Trust Company; from 1997
                                             to present, President and Chief Executive Officer,
                                             Equitable Casualty Insurance Company.

Patricia Louie, Esq. (44) ................   From July 1999 to present, Vice President and Counsel,
Vice President and Secretary                 AXA Financial and Equitable; from September 1994 to
                                             July 1999, Assistant General Counsel of The Dreyfus
                                             Corporation.

Kenneth T. Kozlowski (38) ................   From October 1999 to present, Assistant Vice President,
Controller                                   AXA Financial; from October 1996 to October 1999,
                                             Director-Fund Administration, Prudential Investments;
                                             from 1992 to 1996, Vice President-Fund Administration,
                                             Prudential Securities Incorporated.

Steven Case (41) .........................   From January 2000 to present, Vice President, AXA
Vice President                               Financial; from September 1999 to December 1999,
                                             Assistant Treasurer, The Rockefeller Foundation; from
                                             March 1998 to September 1999, Senior Vice President,
                                             Putnam Investments; from January 1989 to March 1998,
                                             Managing Director, Rogers Casey & Associates.

Mary E. Cantwell (38) ....................   From July 1999 to present, Vice President, Equitable;
Vice President                               from September 1997 to July 1999, Assistant Vice
                                             President, Office of the Chief Investment Officer,
                                             Equitable; from September 1997 to present, Assistant
                                             Vice President, AXA Advisors; from September 1997
                                             to present, Marketing Director, Income Management
                                             Group, Equitable.
</TABLE>

                                       40
<PAGE>

CONTROL PERSON AND PRINCIPAL HOLDERS OF SECURITIES

The Trust continuously offers its shares to separate accounts of insurance
companies in connection with variable life insurance contracts and variable
annuity certificates and contracts (the "Contracts") and to tax-qualified
retirement plans. The Trust's shares currently are sold to the following
shareholders: (i) insurance company separate accounts in connection with
Contracts issued by Equitable and EOC; (ii) 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, The Prudential Insurance Company of America, and Transamerica
Occidental Life Insurance Company, each of which is unaffiliated with
Equitable. Equitable may be deemed to be a control person with respect to the
Trust by virtue of its ownership of more than 99% of the Trust's shares as of
January 25, 2000. Equitable is organized as a New York Stock life insurance
company and is a wholly owned subsidiary of AXA Financial, Inc. ("AXA
Financial"), a subsidiary of AXA, a French insurance holding company.

As a "series" type of mutual fund, the Trust issues separate series of shares
of beneficial interest with respect to each Portfolio. Each Portfolio resembles
a separate fund issuing a separate class of stock. Because of current federal
securities law requirements, the Trust expects that its shareholders will offer
owners of the Contracts ("Contract owners") the opportunity to instruct
shareholders as to how shares allocable to Contracts will be voted with respect
to certain matters, such as approval of investment advisory agreements. To the
Trust's knowledge, as of the date of this Statement of Additional Information
("SAI"), the following owned Contracts entitling such persons to give voting
instructions regarding more than 5% of the outstanding shares of any Portfolio:

<TABLE>
<CAPTION>
                                                                       SHARES BENEFICIALLY      PERCENTAGE
          PORTFOLIO                       CONTRACT OWNER                      OWNED            OF OWNERSHIP
----------------------------   ------------------------------------   ---------------------   -------------
<S>                            <C>                                    <C>                     <C>
Alliance Intermediate          Georges Borchardt, Inc./Trustee               1,765,071              8.3%
 Government Securities
Alliance Quality Bond          Boston Safe Deposit and Trust Co.*           36,020,343             65.1%
EQ/Alliance Premier Growth     Boston Safe Deposit and Trust Co.*           30,901,385             39.4%
EQ/Evergreen Foundation        Sandra Denise Williams                           65,146              7.1%
</TABLE>

----------
*     Boston Safe Deposit and Trust Co., successor Trustee under Master Trust
      Agreement for SBC Communications, Inc.'s Deferred Compensation Plans and
      other Executive Benefit Plans.


The Trust may continue to offer its shares to separate accounts of insurance
companies unaffiliated with Equitable, as well as to tax-qualified retirement
plans in addition to the Equitable Plan. The Trust does not foresee any
disadvantages to Contract owners or participants in the Equitable Plan arising
from offering the Trust's shares to separate accounts of insurance companies
that are unaffiliated with each other or to tax-qualified retirement plans in
addition to the Equitable Plan. However, it is theoretically possible that, at
some time, the interests of various Contract owners participating in the Trust
through their separate accounts and tax-qualified retirement plans might
conflict. In the case of a material irreconcilable conflict, one or more
separate accounts or tax-qualified retirement plans might withdraw their
investments in the Trust, which would possibly force the Trust to sell
portfolio securities at disadvantageous prices. The Trustees of the Trust
intend to monitor events for the existence of any material irreconcilable
conflicts between or among such separate accounts and tax-qualified retirement
plans and will take whatever remedial action may be necessary.


INVESTMENT MANAGEMENT AND OTHER SERVICES


THE MANAGER

Equitable currently serves as the investment manager for each Portfolio. T.
Rowe Price Associates, Inc. ("T. Rowe Price"), T. Rowe Price International,
Inc. ("TRPI"), Putnam Investment Management, Inc. ("Putnam Management"),
Massachusetts Financial Services Company ("MFS"), Morgan Stanley Asset
Management Inc. ("MSAM"), Mercury Advisors ("Mercury"), Lazard Asset Management
("LAM"), a division of Lazard Freres and Company, LLC, J.P. Morgan Investment
Management Inc. ("J.P. Morgan"),


                                       41
<PAGE>

Bankers Trust Company ("Bankers Trust"), Evergreen Asset Management Corp.
("Evergreen"), Alliance Capital Management, L.P. ("Alliance"), Capital Guardian
Trust Company ("Capital Guardian") Calvert Asset Management Company, Inc.
("Calvert"), Brown Capital Management, Inc. ("Brown Capital"), Prudential
Investments Fund Management LLC ("PIFM"), Jennison Associates LLC ("Jennison"),
American Express Financial Corporation ("AEFC"), Fidelity Management & Research
Company ("Fidelity"), and Janus Capital Corporation ("Janus") (each an
"Adviser," and together the "Advisers") serve as investment advisers to one or
more of the Portfolios, as described more fully in the Prospectus.

Equitable, which is a New York life insurance company and one of the largest
life insurance companies in the United States, is an indirect wholly-owned
subsidiary of AXA Financial, a subsidiary of AXA, a French holding company. The
principal offices of The Equitable Companies and Equitable are located at 1290
Avenue of the Americas, New York, New York 10104.

AXA is the largest shareholder of AXA Financial. On January 25, 2000, AXA
owned, directly or indirectly through its affiliates, 58.4% of the outstanding
common stock of AXA Financial. AXA is the holding company for an international
group of insurance and related financial services companies. AXA's insurance
operations include activities in life insurance, property and casualty
insurance and reinsurance. The insurance operations are diverse geographically,
with activities principally in Western Europe, North America, and the
Asia/Pacific area and, to a lesser extent, in Africa and South America. AXA is
also engaged in asset management, investment banking, securities trading,
brokerage, real estate and other financial services activities principally in
the United States, as well as in Western Europe and the Asia/Pacific area.

The Trust and Manager have entered into an Amended and Restated Management
Agreement ("Management Agreement"), which was initially approved by the Board
of Trustees on January 28, 2000, by shareholders at a meeting held on April 14,
2000 and reapproved by the Board of Trustees on July 11, 2000. Subject always
to the direction and control of the Trustees of the Trust, under the Management
Agreement the Manager will have (i) overall supervisory responsibility for the
general management and investment of each Portfolio's assets; (ii) full
discretion to select new or additional Advisers for each Portfolio; (iii) full
discretion to enter into and materially modify existing Advisory Agreements
with Advisers; (iv) full discretion to terminate and replace any Adviser; and
(v) full investment discretion to make all determinations with respect to the
investment of a Portfolio's assets not then managed by an Adviser. In
connection with the Manager's responsibilities under the Management Agreement,
the Manager will assess each Portfolio's investment focus and will seek to
implement decisions with respect to the allocation and reallocation of each
Portfolio's assets among one or more current or additional Advisers from time
to time, as the Manager deems appropriate, to enable each Portfolio to achieve
its investment goals. In addition, the Manager will monitor compliance of each
Adviser with the investment objectives, policies and restrictions of any
Portfolio or Portfolios (or portions of any Portfolio) under the management of
such Adviser, and review and report to the Trustees of the Trust on the
performance of each Adviser. The Manager will furnish, or cause the appropriate
Adviser(s) to furnish, to the Trust such statistical information, with respect
to the investments that a Portfolio (or portions of any Portfolio) may hold or
contemplate purchasing, as the Trust may reasonably request. On the Manager's
own initiative, the Manager will apprise, or cause the appropriate Adviser(s)
to apprise, the Trust of important developments materially affecting each
Portfolio (or any portion of a Portfolio that they advise) and will furnish the
Trust, from time to time, with such information as may be appropriate for this
purpose. Further, the Manager agrees to furnish, or cause the appropriate
Adviser(s) to furnish, to the Trustees of the Trust such periodic and special
reports as the Trustees of the Trust may reasonably request. In addition, the
Manager agrees to cause the appropriate Adviser(s) to furnish to third-party
data reporting services all currently available standardized performance
information and other customary data.

Under the Management Agreement, the Manager also is required to furnish to the
Trust, at its own expense and without remuneration from or other cost to the
Trust, the following:

o Office space, all necessary office facilities and equipment.


                                       42
<PAGE>

o Necessary executive and other personnel, including personnel for the
  performance of clerical and other office functions, other than those
  functions:

  o related to and to be performed under the Trust's contract or contracts
    for administration, custodial, accounting, bookkeeping, transfer and
    dividend disbursing agency or similar services by the entity selected to
    perform such services; or

  o related to the investment advisory services to be provided by any
    Adviser pursuant to an advisory agreement with the Trust ("Advisory
    Agreement").

o Information and services, other than services of outside counsel or
  independent accountants or investment advisory services to be provided by
  any Adviser under an Advisory Agreement, required in connection with the
  preparation of all registration statements, prospectuses and statements of
  additional information, any supplements thereto, annual, semi-annual, and
  periodic reports to Trust Shareholders, regulatory authorities, or others,
  and all notices and proxy solicitation materials, furnished to Shareholders
  or regulatory authorities, and all tax returns.

The Management Agreement also requires the Manager (or its affiliates) to pay
all salaries, expenses, and fees of the Trustees and officers of the Trust who
are affiliated with the Manager or its affiliates.

Each Portfolio pays a fee to the Manager as set forth in the Prospectus. The
Manager and the Trust have also entered into an expense limitation agreement
with respect to each Portfolio (except for the EQ/Aggressive Stock Portfolio,
the EQ/Balanced Portfolio and the Portfolios for which Alliance serves as the
sole Adviser, other than EQ/Alliance Premier Growth Portfolio and EQ/Alliance
Technology Portfolio) ("Expense Limitation Agreement"), pursuant to which the
Manager has agreed to waive or limit its fees and to assume other expenses so
that the total annual operating expenses (with certain exceptions described in
the Prospectus) of each Portfolio are limited to the extent described in the
"Management of the Trust--Expense Limitation Agreement" section of the
Prospectus.

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

The continuance of the Management Agreement, with respect to each Portfolio,
must be specifically approved at least annually (i) by the Board or by vote of
a majority of the outstanding voting securities (as defined in the 1940 Act) of
such Portfolio and (ii) by the affirmative vote of a majority of the Trustees
who are not parties to the Management Agreement or "interested persons" (as
defined in the 1940 Act) of any such party by votes cast in person at a meeting
called for such purpose. The Management Agreement with respect to each
Portfolio may be terminated (i) at any time, without the payment of any
penalty, by the Trust upon the vote of a majority of the Trustees or by vote of
the majority of the outstanding voting securities (as defined in the 1940 Act)
of such Portfolio upon sixty (60) days' written notice to the Manager or (ii)
by the Manager at any time without penalty upon sixty (60) days' written notice
to the Trust. The Management Agreement will also terminate automatically in the
event of its assignment (as defined in the 1940 Act).


                                       43
<PAGE>

The tables below show the fees paid by each Portfolio to the Manager (or the
predecessor Manager to the Alliance Portfolios) during the years ended December
31, 1997, 1998 and 1999 respectively. The first column shows each fee without
fee waivers, the second column shows the fees actually paid to the Manager
after fee waivers and the third column shows the total amount of fees waived by
the Manager and other expenses of each Portfolio assumed by the Manager
pursuant to the Expense Limitation Agreement.

                      FISCAL YEAR ENDED DECEMBER 31, 1997*

<TABLE>
<CAPTION>
                                                                                       TOTAL AMOUNT OF
                                                                    MANAGEMENT FEE     FEES WAIVED AND
                                                                    PAID TO MANAGER     OTHER EXPENSES
                    PORTFOLIO                     MANAGEMENT FEE   AFTER FEE WAIVER   ASSUMED BY MANAGER
------------------------------------------------ ---------------- ------------------ -------------------
<S>                                              <C>              <C>                <C>
Mercury Basic Value Equity .....................     $ 73,477           $     0            $123,460
Mercury World Strategy .........................     $ 49,425           $     0            $115,763
MFS Emerging Growth Companies ..................     $169,781           $     0            $280,111
MFS Research ...................................     $186,533           $     0            $292,185
EQ/Putnam Balanced .............................     $ 50,946           $     0            $137,739
EQ/Putnam Growth & Income Value ................     $227,936           $     0            $350,861
EQ/Putnam International Equity .................     $130,202           $     0            $228,427
EQ/Putnam Investors Growth .....................     $ 67,578           $     0            $141,578
T. Rowe Price Equity Income ....................     $166,401           $     0            $250,098
T. Rowe Price International Stock ..............     $213,839           $     0            $365,096
Warburg Pincus Small Company Value** ...........     $252,178           $ 5,693            $246,485
Morgan Stanley Emerging Markets Equity .........     $ 66,404           $23,496            $ 42,908
</TABLE>

----------
*     Except for Morgan Stanley Emerging Markets Equity Portfolio, each of the
      Portfolios above commenced operations on May 1, 1997. Morgan Stanley
      Emerging Markets Equity Portfolio commenced operations on August 20,
      1997. The BT Equity 500 Index, BT International Equity Index, BT Small
      Company Index, J.P. Morgan Core Bond, Lazard Large Cap Value and Lazard
      Small Cap Value Portfolios are not included in the above table because
      they had no operations during the fiscal year ended December 31, 1997
      except for the issuance of Class IB shares.

**    Effective July 24, 2000, the name of the Warburg Pincus Small Company
      Value Portfolio was changed to the FI Small/Mid Cap Value Portfolio.


                    CALENDAR YEAR ENDED DECEMBER 31, 1998*
<TABLE>
<CAPTION>
                                                                                       TOTAL AMOUNT OF
                                                                    MANAGEMENT FEE     FEES WAIVED AND
                                                                    PAID TO MANAGER     OTHER EXPENSES
                    PORTFOLIO                     MANAGEMENT FEE   AFTER FEE WAIVER   ASSUMED BY MANAGER
------------------------------------------------ ---------------- ------------------ -------------------
<S>                                              <C>              <C>                <C>
Mercury Basic Value Equity .....................    $  632,783        $  396,615           $236,168
Mercury World Strategy .........................    $  179,486        $   75,018           $104,468
MFS Emerging Growth Companies ..................    $1,351,932        $  881,342           $470,590
MFS Research ...................................    $1,319,969        $  842,389           $477,580
EQ/Putnam Balanced .............................    $  269,939        $   99,960           $169,979
EQ/Putnam Growth & Income Value ................    $1,654,313        $1,069,169           $585,144
EQ/Putnam International Equity .................    $  673,315        $  421,928           $251,387
EQ/Putnam Investors Growth .....................    $  497,899        $  282,976           $214,923
T. Rowe Price Equity Income ....................    $1,000,224        $  661,278           $338,946
T. Rowe Price International Stock ..............    $  788,805        $  573,446           $215,359
Warburg Pincus Small Company Value** ...........    $1,012,129        $  738,570           $273,559
Morgan Stanley Emerging Markets Equity .........    $  364,795        $  105,117           $259,678
BT Equity 500 Index ............................    $  210,001        $        0           $232,207
BT International Equity Index ..................    $   98,039        $        0           $180,103
BT Small Company Index .........................    $   45,728        $        0           $220,614
J.P. Morgan Core Bond ..........................    $  172,507        $   86,266           $ 86,241
Lazard Large Cap Value .........................    $  160,570        $   73,011           $ 87,559
Lazard Small Cap Value .........................    $  194,797        $  111,500           $ 83,297
</TABLE>

                                       44
<PAGE>

----------
*     The EQ/Aggressive Stock, EQ/Balanced, Alliance Common Stock, Alliance
      Conservative Investors Portfolio, Alliance Equity Index, Alliance Global,
      Alliance Growth and Income, Alliance Growth Investors, Alliance High
      Yield, Alliance Intermediate Government Securities, Alliance
      International, Alliance Money Market, Alliance Quality Bond, Alliance
      Small Cap Growth, EQ/Evergreen Foundation, EQ/Evergreen, MFS Growth with
      Income, EQ/Alliance Premier Growth, Capital Guardian Research, Capital
      Guardian U.S. Equity and Capital Guardian International Portfolios are
      not included in the above tables because they had no operations before
      the year ended December 31, 1998.

**    Effective July 24, 2000, the name of the Warburg Pincus Small Company
      Value Portfolio was changed to the FI Small/Mid Cap Value Portfolio.


                    CALENDAR YEAR ENDED DECEMBER 31, 1999*

<TABLE>
<CAPTION>
                                                                                              TOTAL AMOUNT OF
                                                                           MANAGEMENT FEE     FEES WAIVED AND
                                                                           PAID TO MANAGER     OTHER EXPENSES
                       PORTFOLIO                         MANAGEMENT FEE   AFTER FEE WAIVER   ASSUMED BY MANAGER
------------------------------------------------------- ---------------- ------------------ -------------------
<S>                                                     <C>              <C>                <C>
Mercury Basic Value Equity ............................    $ 1,290,548       $ 1,027,977          $262,571
Mercury World Strategy ................................    $   214,078       $   152,180          $ 61,898
MFS Emerging Growth Companies .........................    $ 4,668,243       $ 3,839,743          $828,500
MFS Research ..........................................    $ 2,891,285       $ 2,318,049          $573,236
EQ/Putnam Balanced ....................................    $   526,299       $   362,752          $163,547
EQ/Putnam Growth & Income Value .......................    $ 2,955,452       $ 2,393,031          $562,421
EQ/Putnam International Equity ........................    $ 1,352,745       $ 1,238,715          $114,030
EQ/Putnam Investors Growth ............................    $ 1,469,035       $ 1,328,348          $140,687
T. Rowe Price Equity Income ...........................    $ 1,487,784       $ 1,170,353          $317,391
T. Rowe Price International Stock .....................    $ 1,186,330       $ 1,044,609          $141,721
Warburg Pincus Small Company Value*** .................    $   974,661       $   845,954          $128,707
Morgan Stanley Emerging Markets Equity ................    $   960,297       $   426,642          $533,655
BT Equity 500 Index ...................................    $ 1,077,825       $   571,204          $506,691
BT International Equity Index .........................    $   230,274       $   159,545          $ 70,729
BT Small Company Index ................................    $   104,701       $         0          $207,306
J.P. Morgan Core Bond .................................    $   589,231       $   466,067          $123,164
Lazard Large Cap Value ................................    $   578,767       $   513,394          $ 65,373
Lazard Small Cap Value ................................    $   480,925       $   421,716          $ 59,209
EQ/Aggressive Stock** .................................    $23,118,072       $23,118,072          $      0
EQ/Balanced** .........................................    $ 8,110,873       $ 8,110,873          $      0
Alliance Common Stock** ...............................    $51,373,606       $51,373,606          $      0
Alliance Conservative Investors** .....................    $ 2,038,794       $ 2,038,794          $      0
Alliance Equity Index** ...............................    $ 6,630,350       $ 6,630,350          $      0
Alliance Global** .....................................    $10,032,682       $10,032,682          $      0
Alliance Growth and Income** ..........................    $ 6,692,196       $ 6,692,196          $      0
Alliance Growth Investors** ...........................    $11,425,161       $11,425,161          $      0
Alliance High Yield** .................................    $ 3,569,825       $ 3,569,825          $      0
Alliance Intermediate Government Securities** .........    $ 1,009,174       $ 1,009,174          $      0
Alliance International** ..............................    $ 2,054,558       $ 2,054,558          $      0
Alliance Money Market** ...............................    $ 4,094,768       $ 4,094,768          $      0
Alliance Quality Bond** ...............................    $ 1,768,157       $ 1,768,157          $      0
Alliance Small Cap Growth** ...........................    $ 2,702,328       $ 2,702,328          $      0
EQ/Evergreen Foundation ...............................    $    28,270       $         0          $ 44,492
EQ/Evergreen ..........................................    $    19,857       $         0          $ 47,864
MFS Growth with Income ................................    $   233,224       $   103,187          $130,037
EQ/Alliance Premier Growth ............................    $   968,447       $   728,821          $239,626
Capital Guardian Research .............................    $    79,240       $    29,124          $ 50,116
Capital Guardian U.S. Equity ..........................    $   137,165       $    77,338          $ 59,827
Capital Guardian International ........................    $   110,978       $    43,763          $ 67,215
Calvert Socially Responsible ..........................    $     4,861       $         0          $ 31,969
</TABLE>

                                       45
<PAGE>

----------
*     The EQ/Alliance Premier Growth, Capital Guardian Research, Capital
      Guardian U.S. Equity, and Capital Guardian International Portfolios
      commenced operations on April 30, 1999. The Calvert Socially Responsible
      Portfolio commenced operations on August 30, 1999. The EQ/Aggressive
      Stock, EQ/Balanced, Alliance Common Stock, Alliance Conservative
      Investors, Alliance Equity Index, Alliance Global, Alliance Growth and
      Income, Alliance Growth Investors, Alliance High Yield, Alliance
      Intermediate Government Securities, Alliance International, Alliance
      Money Market, Alliance Quality Bond, and Alliance Small Cap Growth
      Portfolios commenced operations on October 18, 1999. The EQ/Alliance
      Technology, EQ/AXP New Dimensions, EQ/AXP Strategy Aggressive, FI Mid
      Cap, and EQ/Janus Large Cap Growth Portfolios are not included in the
      above table because they had no operations during the fiscal year ended
      December 31, 1999.

**    Also reflects fees paid to the previous Investment Manager, Alliance
      Capital Management, LP, during 1999.

***   Effective July 24, 2000, the name of the Warburg Pincus Small Company
      Value Portfolio was changed to the FI Small/Mid Cap Value Portfolio.


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 TRPI, respectively.
Additionally, the Manager has entered into an Advisory Agreement on behalf of
EQ/Putnam Growth & Income Value Portfolio, EQ/Putnam International Equity
Portfolio, EQ/Putnam Investors Growth Portfolio and EQ/Putnam Balanced
Portfolio with Putnam Management. The Manager has entered into an Advisory
Agreement on behalf of EQ/Aggressive Stock Portfolio, MFS Research Portfolio,
MFS Emerging Growth Companies Portfolio and MFS Growth with Income Portfolio
with MFS. The Manager has entered into an Advisory Agreement on behalf of
Morgan Stanley Emerging Markets Equity Portfolio with MSAM. The Manager has
entered into an Advisory Agreement on behalf of Mercury World Strategy
Portfolio and Mercury Basic Value Equity Portfolio with Mercury. The Manager
has entered into an Advisory Agreement on behalf of Lazard Large Cap Value
Portfolio and Lazard Small Cap Value Portfolio with LAM. The Manager has
entered into an Advisory Agreement on behalf of the J.P. Morgan Core Bond
Portfolio with J.P. Morgan. The Manager has entered into an Advisory Agreement
on behalf of BT Small Company Index Portfolio, BT International Equity Index
Portfolio and BT Equity 500 Index Portfolio with Bankers Trust. The Manager has
entered into an Advisory Agreement on behalf of EQ/Evergreen Foundation
Portfolio and EQ/Evergreen Portfolio with Evergreen. The Manager has entered
into an Advisory Agreement on behalf of EQ/Alliance Premier Growth Portfolio,
Alliance Portfolios, EQ/Aggressive Stock Portfolio, EQ/Balanced Portfolio and
the EQ/Alliance Technology Portfolio with Alliance. The Manager has entered
into an Advisory Agreement on behalf of Capital Guardian Research Portfolio,
Capital Guardian U.S. Equity Portfolio, Capital Guardian International
Portfolio and EQ/Balanced Portfolio with Capital Guardian. The Manager has
entered into Advisory Agreements on behalf of Calvert Socially Responsible
Portfolio with Calvert and Brown Capital. The Manager has entered into Advisory
Agreements on behalf of EQ/Balanced Portfolio with PIFM and Jennison. The
Manager has entered into an Advisory Agreement on behalf of EQ/Janus Large Cap
Growth Portfolio with Janus. The Manager has entered into an Advisory Agreement
on behalf of EQ/AXP New Dimensions Portfolio and EQ/AXP Strategy Aggressive
Portfolio with AEFC. The Manager has entered into an Advisory Agreement on
behalf on FI Small/Mid Cap Value Portfolio and FI Mid Cap Portfolio with
Fidelity. The Advisory Agreements obligate T. Rowe Price, TRPI, Putnam
Management, MFS, CSAM, MSAM, Mercury, LAM, J.P. Morgan, Bankers Trust,
Evergreen, Alliance, Capital Guardian, Calvert, Brown Capital, PIFM, Jennison,
AEFC, and Fidelity to: (i) make investment decisions on behalf of their
respective Portfolios; (ii) place all orders for the purchase and sale of
investments for their respective Portfolios with brokers or dealers selected by
the Manager or an Adviser; and (iii) perform certain limited related
administrative functions in connection therewith.


                                       46
<PAGE>

During the years ended December 31, 1997, 1998 and 1999, respectively, the
Manager paid the following fees to each Adviser with respect to the Portfolios
listed below pursuant to the Investment Advisory Agreements:


                      FISCAL YEAR ENDED DECEMBER 31, 1997*

<TABLE>
<CAPTION>
PORTFOLIO                                             ADVISORY FEE PAID
---------------------------------------------------- ------------------
<S>                                                  <C>
   Mercury Basic Value Equity ......................      $ 53,462
   Mercury World Strategy ..........................      $ 35,301
   MFS Emerging Growth Companies ...................      $123,543
   MFS Research ....................................      $135,730
   EQ/Putnam Balanced ..............................      $ 46,342
   EQ/Putnam Growth & Income Value .................      $207,320
   EQ/Putnam International Equity ..................      $120,864
   EQ/Putnam Investors Growth ......................      $ 61,471
   T. Rowe Price Equity Income .....................      $121,142
   T. Rowe Price International Stock ...............      $185,338
   Warburg Pincus Small Company Value** ............      $193,934
   Morgan Stanley Emerging Markets Equity ..........      $ 66,277
</TABLE>

----------
*     Except for Morgan Stanley Emerging Markets Equity Portfolio, each of the
      Portfolios above commenced operation on May 1, 1997. Morgan Stanley
      Emerging Markets Equity Portfolio commenced operations on August 20,
      1997. No advisory fees were paid to Bankers Trust, J.P. Morgan, LAM,
      Evergreen, MFS on behalf of MFS Growth with Income Portfolio, Alliance,
      Capital Guardian, Calvert, or Brown Capital during the fiscal year ended
      December 31, 1997.

**    Effective July 24, 2000, the name of the Warburg Pincus Small Company
      Value Portfolio was changed to the FI Small/Mid Cap Value Portfolio.


                    CALENDAR YEAR ENDED DECEMBER 31, 1998*

<TABLE>
<CAPTION>
PORTFOLIO                                             ADVISORY FEE PAID
---------------------------------------------------- ------------------
<S>                                                  <C>
   Mercury Basic Value Equity ......................     $  454,234
   Mercury World Strategy ..........................     $  128,253
   MFS Emerging Growth Companies ...................     $  955,058
   MFS Research ....................................     $  935,189
   EQ/Putnam Balanced ..............................     $  245,492
   EQ/Putnam Growth & Income Value .................     $1,395,817
   EQ/Putnam International Equity ..................     $  625,984
   EQ/Putnam Investors Growth ......................     $  453,137
   T. Rowe Price Equity Income .....................     $  727,501
   T. Rowe Price International Stock ...............     $  506,294
   Warburg Pincus Small Company Value** ............     $  778,163
   Morgan Stanley Emerging Markets Equity ..........     $  364,354
   BT Equity 500 Index .............................     $   42,047
   BT International Equity Index ...................     $   42,067
   BT Small Company Index ..........................     $    9,143
   J.P. Morgan Core Bond ...........................     $   15,022
   Lazard Large Cap Value ..........................     $  123,634
   Lazard Small Cap Value ..........................     $  158,214
</TABLE>

----------
*     No advisory fees were paid to Evergreen, MFS on behalf of MFS Growth with
      Income Portfolio, Alliance, Capital Guardian, Calvert or Brown Capital
      during the year ended December 31, 1998. The EQ/Aggressive Stock,
      EQ/Balanced, Alliance Common Stock, Alliance Conservative Investors
      Portfolio, Alliance Equity Index, Alliance Global, Alliance Growth and
      Income, Alliance Growth Investors, Alliance High Yield, Alliance
      Intermediate Government Securities, Alliance International,


                                       47
<PAGE>

      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.

**    Effective July 24, 2000, the name of the Warburg Pincus Small Company
      Value Portfolio was changed to the FI Small/Mid Cap Value Portfolio.


                    CALENDAR YEAR ENDED DECEMBER 31, 1999*

<TABLE>
<CAPTION>
PORTFOLIO                                                  ADVISORY FEE PAID
--------------------------------------------------------- ------------------
<S>                                                       <C>
   Mercury Basic Value Equity ...........................     $ 1,043,205
   Mercury World Strategy ...............................     $   153,072
   MFS Emerging Growth Companies ........................     $ 2,684,397
   MFS Research .........................................     $ 1,954,323
   EQ/Putnam Balanced ...................................     $   478,431
   EQ/Putnam Growth & Income Value ......................     $ 2,255,697
   EQ/Putnam International Equity .......................     $ 1,215,477
   EQ/Putnam Investors Growth ...........................     $ 1,270,694
   T. Rowe Price Equity Income ..........................     $ 1,082,031
   T. Rowe Price International Stock ....................     $   872,269
   Warburg Pincus Small Company Value** .................     $   749,779
   Morgan Stanley Emerging Markets Equity ...............     $   942,520
   BT Equity 500 Index ..................................     $   215,782
   BT International Equity Index ........................     $    99,030
   BT Small Company Index ...............................     $    20,962
   J.P. Morgan Core Bond ................................     $   388,531
   Lazard Large Cap Value ...............................     $   433,489
   Lazard Small Cap Value ...............................     $   390,856
   EQ/Aggressive Stock ..................................     $17,824,782
   EQ/Balanced ..........................................     $ 5,551,057
   Alliance Common Stock ................................     $34,006,030
   Alliance Conservative Investors ......................     $ 1,407,022
   Alliance Equity Index ................................     $ 3,820,426
   Alliance Global ......................................     $ 7,963,394
   Alliance Growth and Income ...........................     $ 5,040,401
   Alliance Growth Investors ............................     $ 8,512,916
   Alliance High Yield ..................................     $ 2,714,429
   Alliance Intermediate Government Securities ..........     $   706,450
   Alliance International ...............................     $ 1,711,969
   Alliance Money Market ................................     $ 2,487,138
   Alliance Quality Bond ................................     $ 1,263,047
   Alliance Small Cap Growth ............................     $ 1,952,795
   EQ/Evergreen Foundation ..............................     $    18,853
   EQ/Evergreen .........................................     $    14,832
   MFS Growth with Income ...............................     $   577,857
   EQ/Alliance Premier Growth ...........................     $   538,783
   Capital Guardian Research ............................     $    60,957
   Capital Guardian U.S. Equity .........................     $   105,500
   Capital Guardian International .......................     $    96,545
   Calvert Socially Responsible .........................     $     2,600
</TABLE>

----------
*     The EQ/Alliance Premier Growth, Capital Guardian Research, Capital
      Guardian U.S. Equity, and Capital Guardian International Portfolios
      commenced operations on April 30, 1999. The Calvert


                                       48
<PAGE>

     Socially Responsible Portfolio commenced operations on August 30, 1999. The
     EQ/Aggressive Stock, EQ/Balanced, Alliance Common Stock, Alliance
     Conservative Investors, Alliance Equity Index, Alliance Global, Alliance
     Growth and Income, Alliance Growth Investors, Alliance High Yield, Alliance
     Intermediate Government Securities, Alliance International, Alliance Money
     Market, Alliance Quality Bond, and Alliance Small Cap Growth Portfolios
     commenced operations on October 18, 1999. The EQ/Alliance Technology,
     EQ/AXP New Dimensions, EQ/AXP Strategy Aggressive, FI Mid Cap, and EQ/Janus
     Large Cap Growth Portfolios are not included in the above table because
     they had no operations during the fiscal year ended December 31, 1999.

**   Effective July 24, 2000, the name of the Warburg Pincus Small Company Value
     Portfolio was changed to the FI Small/Mid Cap Value Portfolio.


The Manager recommends Advisers for each Portfolio to the Trustees based upon
its continuing quantitative and qualitative evaluation of each Adviser's skills
in managing assets pursuant to specific investment styles and strategies.
Unlike many other mutual funds, the Portfolios are not associated with any one
portfolio manager, and benefit from independent specialists carefully selected
from the investment management industry. Short-term investment performance, by
itself, is not a significant factor in selecting or terminating an Adviser, and
the Manager does not expect to recommend frequent changes of Advisers. The
Trust has received an exemptive order from the SEC ("Multi-Manager Order"). The
Multi-Manager Order permits the Manager, subject to approval of the Board of
Trustees, and without the approval of shareholders to: (i) select new or
additional Advisers for each Portfolio; (ii) enter into new Advisory Agreements
and/or materially modify the terms of any existing Advisory Agreement; (iii)
terminate any existing Adviser and replace the Adviser; and (iv) continue the
employment of an existing Adviser on the same contract terms where the Advisory
Agreement has been assigned because of a change of control of the Adviser.
However, the Manager may not enter into an investment advisory agreement with
an "affiliated person" of the Manager (as that term is defined in Section
2(a)(3) of the 1940 Act) ("Affiliated Adviser"), such as Alliance, unless the
investment advisory agreement with the Affiliated Adviser, including
compensation hereunder, is approved by the affected Portfolio's Shareholders,
including, in instances in which the investment advisory agreement pertains to
a newly formed Portfolio, the Portfolio's initial shareholder. Although
shareholder approval would not be required for the termination of Advisory
Agreements, shareholders of a Portfolio would continue to have the right to
terminate such agreements for the Portfolio at any time by a vote of a majority
of outstanding voting securities of the Portfolio.

When a Portfolio has more than one Adviser, the assets of each Portfolio are
allocated by the Manager among the Advisers selected for the Portfolio. Each
Adviser has discretion, subject to oversight by the Trustees, and the Manager,
to purchase and sell portfolio assets, consistent with each Portfolio's
investment objectives, policies and restrictions and specific investment
strategies developed by the Manager.

Generally, no Adviser provides any services to any Portfolio except asset
management and related recordkeeping services. However, an Adviser or its
affiliated broker-dealer may execute portfolio transactions for a Portfolio and
receive brokerage commissions in connection therewith as permitted by Section
17(e) of the 1940 Act.


THE ADMINISTRATOR

Pursuant to an administrative agreement ("Mutual Funds Services Agreement"),
Equitable ("Administrator") provides the Trust with necessary administrative
services. In addition, the Administrator makes available the office space,
equipment, personnel and facilities required to provide such administrative
services to the Trust. Chase Global Funds Services Company ("Chase Global")
serves as the sub-administrator for the Trust.

During the years ended December 31, 1997, 1998 and 1999, respectively, Chase
Global as the administrator was paid the following fees, by the Trust with
respect to each Portfolio:


                                       49
<PAGE>

                      FISCAL YEAR ENDED DECEMBER 31, 1997*

<TABLE>
<CAPTION>
PORTFOLIO                                             ADMINISTRATION FEE
---------------------------------------------------- -------------------
<S>                                                  <C>
   Mercury Basic Value Equity ......................       $ 11,213
   Mercury World Strategy ..........................       $ 13,633
   MFS Emerging Growth Companies ...................       $ 17,902
   MFS Research ....................................       $ 18,033
   EQ/Putnam Balanced ..............................       $ 12,451
   EQ/Putnam Growth & Income Value .................       $199,904
   EQ/Putnam International Equity ..................       $ 16,721
   EQ/Putnam Investors Growth ......................       $ 11,247
   T. Rowe Price Equity Income .....................       $ 17,376
   T. Rowe Price International Stock ...............       $ 30,599
   Warburg Pincus Small Company Value** ............       $ 17,213
   Morgan Stanley Emerging Markets Equity ..........       $  9,652
</TABLE>

----------
*     Except for Morgan Stanley Emerging Markets Equity Portfolio, each of the
      Portfolios above commenced operations on May 1, 1997. Morgan Stanley
      Emerging Markets Equity Portfolio commenced operations on August 20,
      1997. The BT Equity 500 Index, BT International Equity Index, BT Small
      Company Index, J.P. Morgan Core Bond, Lazard Large Cap Value, Lazard
      Small Cap Value Portfolios did not pay a fee to the Administrator during
      the fiscal year ended December 31, 1997.

**    Effective July 24, 2000, the name of the Warburg Pincus Small Company
      Value Portfolio was changed to the FI Small/Mid Cap Value Portfolio.


                    CALENDAR YEAR ENDED DECEMBER 31, 1998*

<TABLE>
<CAPTION>
PORTFOLIO                                             ADMINISTRATION FEE
---------------------------------------------------- -------------------
<S>                                                  <C>
   Mercury Basic Value Equity ......................       $ 92,138
   Mercury World Strategy ..........................       $ 48,992
   MFS Emerging Growth Companies ...................       $166,093
   MFS Research ....................................       $160,767
   EQ/Putnam Balanced ..............................       $ 65,412
   EQ/Putnam Growth & Income Value .................       $191,609
   EQ/Putnam International Equity ..................       $ 92,040
   EQ/Putnam Investors Growth ......................       $ 80,365
   T. Rowe Price Equity Income .....................       $131,283
   T. Rowe Price International Stock ...............       $120,081
   Warburg Pincus Small Company Value** ............       $113,472
   Morgan Stanley Emerging Markets Equity ..........       $ 58,490
   BT Equity 500 Index .............................       $ 91,209
   BT International Equity Index ...................       $ 89,083
   BT Small Company Index ..........................       $ 97,220
   J.P. Morgan Core Bond ...........................       $ 52,546
   Lazard Large Cap Value ..........................       $ 47,035
   Lazard Small Cap Value ..........................       $ 45,857
</TABLE>

----------
*     The EQ/Aggressive Stock, EQ/Balanced, Alliance Common Stock, Alliance
      Conservative Investors, Alliance Equity Index, Alliance Global, Alliance
      Growth and Income, Alliance Growth Investors, Alliance High Yield,
      Alliance Intermediate Government Securities, Alliance International,
      Alliance Money Market, Alliance Quality Bond, Alliance Small Cap Growth,
      EQ/Evergreen Foundation, EQ/Evergreen, MFS Growth with Income,
      EQ/Alliance Premier Growth, Capital Guardian Research, Capital Guardian
      U.S. Equity, Capital Guardian International, and Calvert Socially
      Responsible Portfolios did not pay a fee to the Administrator during the
      year ended December 31, 1998.

**    Effective July 24, 2000, the name of the Warburg Pincus Small Company
      Value Portfolio was changed to the FI Small/Mid Cap Value Portfolio.


                                       50
<PAGE>

                    CALENDAR YEAR ENDED DECEMBER 31, 1999*
<TABLE>
<CAPTION>
PORTFOLIO                                                   ADMINISTRATION FEE
---------------------------------------------------------- -------------------
<S>                                                        <C>
  Mercury Basic Value Equity .............................       $132,383
  Mercury World Strategy .................................       $ 49,920
  MFS Emerging Growth Companies ..........................       $432,631
  MFS Research ...........................................       $259,717
  EQ/Putnam Balanced .....................................       $ 84,637
  EQ/Putnam Growth & Income Value ........................       $264,626
  EQ/Putnam International Equity .........................       $129,023
  EQ/Putnam Investors Growth .............................       $149,208
  T. Rowe Price Equity Income ............................       $161,862
  T. Rowe Price International Stock ......................       $148,409
  Warburg Pincus Small Company Value*** ..................       $105,578
  Morgan Stanley Emerging Markets Equity .................       $ 89,226
  BT Equity 500 Index ....................................       $245,934
  BT International Equity Index ..........................       $119,286
  BT Small Company Index .................................       $135,672
  J.P. Morgan Core Bond ..................................       $103,847
  Lazard Large Cap Value .................................       $ 90,123
  Lazard Small Cap Value .................................       $ 67,826
  EQ/Aggressive Stock** ..................................       $144,899
  EQ/Balanced** ..........................................       $ 73,801
  Alliance Common Stock** ................................       $515,943
  Alliance Conservative Investors** ......................       $ 20,311
  Alliance Equity Index** ................................       $ 87,436
  Alliance Global** ......................................       $ 64,383
  Alliance Growth and Income** ...........................       $ 51,841
  Alliance Growth Investors** ............................       $ 87,536
  Alliance High Yield** ..................................       $ 24,663
  Alliance Intermediate Government Securities** ..........       $ 12,095
  Alliance International** ...............................       $ 13,802
  Alliance Money Market** ................................       $ 50,261
  Alliance Quality Bond** ................................       $ 16,718
  Alliance Small Cap Growth** ............................       $ 16,927
  EQ/Evergreen Foundation ................................       $ 33,544
  EQ/Evergreen ...........................................       $ 31,311
  MFS Growth with Income .................................       $ 53,070
  EQ/Alliance Premier Growth .............................       $ 64,596
  Capital Guardian Research ..............................       $ 29,002
  Capital Guardian U.S. Equity ...........................       $ 33,230
  Capital Guardian International .........................       $ 35,925
  Calvert Socially Responsible ...........................       $ 16,776
</TABLE>

----------
*     The EQ/Alliance Premier Growth, Capital Guardian Research, Capital
      Guardian U.S. Equity, and Capital Guardian International Portfolios
      commenced operations on April 30, 1999. The Calvert Socially Responsible
      Portfolio commenced operations on August 30, 1999. The EQ/Aggressive
      Stock, EQ/Balanced, Alliance Common Stock, Alliance Conservative
      Investors, Alliance Equity Index, Alliance Global, Alliance Growth and
      Income, Alliance Growth Investors, Alliance High Yield, Alliance
      Intermediate Government Securities, Alliance International, Alliance
      Money Market, Alliance Quality Bond, and Alliance Small Cap Growth
      Portfolios commenced operations on October 18, 1999. The EQ/Alliance
      Technology, EQ/AXP New Dimensions, EQ/AXP Strategy Aggressive, FI Mid
      Cap, and EQ/Janus Large Cap Growth Portfolios are not included in the
      above table because they had no operations during the fiscal year ended
      December 31, 1999.

**    Amount paid to Administrator for the period October 18, 1999 to December
      31, 1999.

***   Effective July 24, 2000, the name of the Warburg Pincus Small Company
      Value Portfolio was changed to the FI Small/Mid Cap Value Portfolio.


                                       51
<PAGE>

THE DISTRIBUTORS

The Trust has distribution agreements with AXA Advisors and EDI (each also
referred to as a "Distributor," and together "Distributors"), in which AXA
Advisors and EDI serve as Distributors for the Trust's Class IA shares and
Class IB shares. AXA Advisors and EDI are each an indirect wholly-owned
subsidiary of Equitable and the address for each is 1290 Avenue of the
Americas, New York, New York 10104.

The Trust's distribution agreements with respect to the Class IA shares and
Class IB shares ("Distribution Agreements") were reapproved by the Board of
Trustees at a Board meeting held on July 11, 2000. The Distribution Agreements
will remain in effect from year to year provided each Distribution Agreement's
continuance is approved annually by (i) a majority of the Trustees who are not
parties to such agreement or "interested persons" (as defined in the 1940 Act)
of the Trust or a Portfolio and, if applicable, who have no direct or indirect
financial interest in the operation of the Class IB Distribution Plan or any
such related agreement ("Independent Trustees") and (ii) either by vote of a
majority of the Trustees or a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Trust.

The Distributors or their affiliates for the Class IA shares will pay for
printing and distributing prospectuses or reports prepared for their use in
connection with the offering of the Class IA shares to prospective Contract
owners and preparing, printing and mailing any other literature or advertising
in connection with the offering of the Class IA shares to prospective Contract
owners.

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

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

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


                                       52
<PAGE>

The Distributors for each class of shares will pay all fees and expenses in
connection with their respective qualification and registration as a broker or
dealer under federal and state laws. In the capacity of agent, each Distributor
currently offers shares of each Portfolio on a continuous basis to the separate
accounts of insurance companies offering the Contracts in all states in which
the Portfolio or the Trust may from time to time be registered or where
permitted by applicable law. AXA Advisors also serves as the Distributor for
shares of the Trust to the Equitable Plan. Each Distribution Agreement provides
that the Distributors shall accept orders for shares at net asset value without
sales commission or load being charged. The Distributors have made no firm
commitment to acquire shares of any Portfolio.


A description of the Class IB Distribution Plan with respect to the Class IB
shares and related services and fees thereunder is provided in the Prospectus
for each class of shares of the Portfolios. On March 14, 2000, the Board of
Trustees of the Trust, including the Independent Trustees, considered the
reapproval of the Class IB Distribution Plan. In connection with its
consideration of the Class IB Distribution Plan, the Board of Trustees was
furnished with a copy of the Class IB Distribution Plan and the related
materials, including information related to the advantages and disadvantages of
the Class IB Distribution Plan. Legal counsel for the Independent Trustees
discussed the legal and regulatory considerations in readopting the Class IB
Distribution Plan.


The Board of Trustees considered various factors in connection with its
decision as to whether to reapprove the Class IB Distribution Plan, including:
(i) the nature and causes of the circumstances which makes continuation of the
Class IB Distribution Plan, necessary and appropriate; (ii) the way in which
the Class IB Distribution Plan would continue to address those circumstances,
including the nature and potential amount of expenditures; (iii) the nature of
the anticipated benefits; (iv) the possible benefits of the Class IB
Distribution Plan to any other person relative to those of the Trust; (v) the
effect of the Class IB Distribution Plan on existing owners of Contracts; (vi)
the merits of possible alternative plans or pricing structures; (vii)
competitive conditions in the variable products industry; and (viii) the
relationship of the Class IB Distribution Plan to other distribution efforts of
the Trust.


Based upon its review of the foregoing factors and the materials presented to
it, and in light of its fiduciary duties under the 1940 Act, the Board of
Trustees, including the Independent Trustees, unanimously determined, in the
exercise of its business judgment, that the Class IB Distribution Plan is
reasonably likely to continue to benefit the Trust and the shareholders of its
Portfolios and approved its continuance.


The Class IB Distribution Plan and any Rule 12b-1 related agreement that is
entered into by the Trust or the Distributors of the Class IB shares in
connection with the Class IB Distribution Plan will continue in effect for a
period of more than one year only so long as continuance is specifically
approved at least annually by a vote of a majority of the Trust's Board of
Trustees, and of a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on the Class IB Distribution Plan or
any Rule 12b-1 related agreement, as applicable. In addition, the Class IB
Distribution Plan and any Rule 12b-1 related agreement may be terminated as to
Class IB shares of a Portfolio at any time, without penalty, by vote of a
majority of the outstanding Class IB shares of the Portfolio or by vote of a
majority of the Independent Trustees. The Class IB Distribution Plan also
provides that it may not be amended to increase materially the amount (up to
 .50% of average daily net assets annually) that may be spent for distribution
of Class IB shares of any Portfolio without the approval of Class IB
shareholders of that Portfolio.


                                       53
<PAGE>

The table below shows the amount paid by each Portfolio to each of the
Distributors pursuant to the Distribution Plan for the year ended December 31,
1999*:

<TABLE>
<CAPTION>
                                                         DISTRIBUTION FEE     DISTRIBUTION FEE         TOTAL
PORTFOLIO                                              PAID TO AXA ADVISORS      PAID TO EDI     DISTRIBUTION FEES
----------------------------------------------------- ---------------------- ------------------ ------------------
<S>                                                   <C>                    <C>                <C>
Alliance Common Stock ...............................       $1,479,837           $1,482,881         $2,962,718
Alliance Conservative Investors .....................       $  140,852           $        0         $  140,852
Alliance Equity Index ...............................       $   18,758           $       18         $   18,776
Alliance Global .....................................       $  142,573           $   34,120         $  176,693
Alliance Growth and Income ..........................       $  450,842           $        0         $  450,842
Alliance Growth Investors ...........................       $  288,332           $   48,694         $  337,026
Alliance High Yield .................................       $  172,597           $  381,059         $  553,656
Alliance Intermediate Government Securities .........       $  100,645           $        0         $  100,645
Alliance International ..............................       $   24,988           $        0         $   24,988
Alliance Money Market ...............................       $  381,873           $  630,827         $1,012,700
Alliance Quality Bond ...............................       $      612           $        0         $      612
Alliance Small Cap Growth ...........................       $   87,238           $  197,833         $  285,071
BT Equity 500 Index .................................       $  297,414           $  780,411         $1,077,825
BT International Equity Index .......................       $   23,965           $  134,928         $  158,893
BT Small Company Index ..............................       $   20,847           $   83,854         $  104,701
Calvert Socially Responsible ........................       $    1,869           $        0         $    1,869
Capital Guardian U.S. Equity ........................       $   12,357           $   40,399         $   52,756
Capital Guardian International ......................       $   12,107           $   24,886         $   36,993
Capital Guardian Research ...........................       $   11,913           $   18,569         $   30,482
EQ/Aggressive Stock .................................       $  220,148           $  238,459         $  458,607
EQ/Balanced .........................................       $   17,801           $        0         $   17,801
EQ/Alliance Premier Growth ..........................       $  141,457           $  103,105         $  244,562
EQ/Evergreen ........................................       $    3,082           $    3,532         $    6,614
EQ/Evergreen Foundation .............................       $    2,162           $    9,048         $   11,210
EQ/Putnam Balanced ..................................       $  239,227           $        0         $  239,227
EQ/Putnam Growth & Income Value .....................       $  389,327           $  954,060         $1,343,387
EQ/Putnam International Equity ......................       $       47           $  483,076         $  483,123
EQ/Putnam Investors Growth ..........................       $       81           $  667,662         $  667,743
J.P. Morgan Core Bond ...............................       $        0           $  327,351         $  327,351
Lazard Large Cap Value ..............................       $        1           $  263,075         $  263,076
Lazard Small Cap Value ..............................       $      248           $  150,041         $  150,289
Mercury Basic Value Equity ..........................       $  409,938           $  176,675         $  586,613
Mercury World Strategy ..............................       $   58,253           $   18,203         $   76,456
MFS Emerging Growth Companies .......................       $1,514,437           $  557,262         $2,071,699
MFS Growth with Income ..............................       $    8,032           $   98,062         $  106,094
MFS Research ........................................       $  630,001           $  684,220         $1,314,221
Morgan Stanley Emerging Markets Equity ..............       $  151,994           $   56,766         $  208,760
T. Rowe Price Equity Income .........................       $  676,266           $        0         $  676,266
T. Rowe Price International Stock ...................       $  395,443           $        0         $  395,443
Warburg Pincus Small Company Value** ................       $  370,028           $        0         $  370,028
</TABLE>

*     The EQ/Alliance Technology, EQ/AXP New Dimensions, EQ/AXP Strategy
      Aggressive, FI Mid Cap, and EQ/Janus Large Cap Growth Portfolios are not
      included in the above table because they had no operations during the
      fiscal year ended December 31, 1999.

**    Effective July 24, 2000, the name of the Warburg Pincus Small Company
      Value Portfolio was changed to the FI Small/Mid Cap Value Portfolio.


                                       54
<PAGE>

BROKERAGE ALLOCATION AND OTHER STRATEGIES


BROKERAGE COMMISSIONS

The Portfolios are charged for securities brokers' commissions, transfer taxes
and similar fees relating to securities transactions. The Manager and each of
the Advisers, as appropriate, seek to obtain the best net price and execution
on all orders placed for the Portfolios, considering all the circumstances
except to the extent they may be permitted to pay higher commissions as
described below.

It is expected that securities will ordinarily be purchased in the primary
markets, whether over-the-counter or listed, and that listed securities may be
purchased in the over-the-counter market if that market is deemed the primary
market.

Transactions on stock exchanges involve the payment of brokerage commissions.
In transactions on stock exchanges in the United States, these commissions are
negotiated, whereas on many foreign stock exchanges these commissions are
fixed. However, brokerage commission rates in certain countries in which the
Portfolios may invest may be discounted for certain large domestic and foreign
investors such as the Portfolios. A number of foreign banks and brokers will be
used for execution of each Portfolio's portfolio transactions. In the case of
securities traded in the foreign and domestic over-the-counter markets, there
is generally no stated commission, but the price usually includes an
undisclosed commission or mark-up. In underwritten offerings, the price
generally includes a disclosed fixed commission or discount.

The Manager and Advisers may, as appropriate, in the allocation of brokerage
business, take into consideration research and other brokerage services
provided by brokers and dealers to Equitable, the Manager or Advisers. The
research services include economic, market, industry and company research
material. Based upon an assessment of the value of research and other brokerage
services provided, proposed allocations of brokerage for commission
transactions are periodically prepared internally. In addition, the Manager and
Advisers may allocate brokerage business to brokers and dealers that have made
or are expected to make significant efforts in facilitating the distribution of
the Trust's shares.

Commissions charged by brokers that provide research services may be somewhat
higher than commissions charged by brokers that do not provide research
services. As permitted by Section 28(e) of the 1934 Act and by policies adopted
by the Trustees, the Manager and Advisers may cause the Trust to pay a
broker-dealer that provides brokerage and research services to the Manager and
Advisers an amount of commission for effecting a securities transaction for the
Trust in excess of the commission another broker-dealer would have charged for
effecting that transaction.

The Manager and Advisers do not engage brokers and dealers whose commissions
are believed to be unreasonable in relation to brokerage and research services
provided. The overall reasonableness of commissions paid will be evaluated by
rating brokers on such general factors as execution capabilities, quality of
research (that is, quantity and quality of information provided, diversity of
sources utilized, nature and frequency of communication, professional
experience, analytical ability and professional stature of the broker) and
financial standing, as well as the net results of specific transactions, taking
into account such factors as price, promptness, size of order and difficulty of
execution. The research services obtained will, in general, be used by the
Manager and Advisers for the benefit of all accounts for which the responsible
party makes investment decisions. The receipt of research services from brokers
will tend to reduce the Manager's and Advisers' expenses in managing the
Portfolios.

The Manager, subject to seeking the most favorable price and best execution and
in compliance with the Conduct Rules of the National Association of Securities
Dealers, Inc., may consider sales of shares of the Trust as a factor in the
selection of broker-dealers. The Trust may direct the Manager to cause Advisers
to effect securities transactions through broker-dealers in a manner that would
help to generate resources to (i) pay the cost of certain expenses which the
Trust is required to pay or for which the Trust is required to arrange payment
pursuant to the Management Agreement ("Trust Expenses"); or (ii) finance
activities that are primarily intended to result in the sale of Trust shares.
At the discretion of the Board of Trustees, such resources may be used to pay
or cause the payment of Trust Expenses or may be used to finance activities
that are primarily intended to result in the sale of Trust shares.


                                       55
<PAGE>

During the years ended December 31, 1997, 1998 and 1999, respectively, the
Portfolios paid the amounts indicated in brokerage commissions:


                      FISCAL YEAR ENDED DECEMBER 31, 1997*
<TABLE>
<CAPTION>
PORTFOLIO                                               BROKERAGE COMMISSIONS PAID
----------------------------------------------------   ---------------------------
<S>                                                    <C>
   Mercury Basic Value Equity ......................             $ 75,654
   Mercury World Strategy ..........................             $ 43,547
   MFS Emerging Growth Companies ...................             $146,321
   MFS Research ....................................             $146,977
   EQ/Putnam Balanced ..............................             $ 15,797
   EQ/Putnam Growth & Income Value .................             $109,815
   EQ/Putnam International Equity ..................             $164,293
   EQ/Putnam Investors Growth ......................             $ 25,284
   T. Rowe Price Equity Income .....................             $ 67,627
   T. Rowe Price International Stock ...............             $244,072
   Warburg Pincus Small Company Value** ............             $220,138
   Morgan Stanley Emerging Markets Equity ..........             $ 64,176
</TABLE>

----------
*     Except for Morgan Stanley Emerging Markets Equity Portfolio, each of the
      Portfolios above commenced operations on May 1, 1998. Morgan Stanley
      Emerging Markets Equity Portfolio commenced operations on August 20,
      1997. The BT Equity 500 Index, BT International Equity Index, BT Small
      Company Index, J.P. Morgan Core Bond, Lazard Large Cap Value and Lazard
      Small Cap Value Portfolios are not included in the above table because
      they had no operations during the fiscal year ended December 31, 1997
      except for the issuance of Class IB shares.

**    Effective July 24, 2000, the name of the Warburg Pincus Small Company
      Value Portfolio was changed to the FI Small/Mid Cap Value Portfolio.


                    CALENDAR YEAR ENDED DECEMBER 31, 1998*

<TABLE>
<CAPTION>
PORTFOLIO                                               BROKERAGE COMMISSIONS PAID
----------------------------------------------------   ---------------------------
<S>                                                    <C>
   Mercury Basic Value Equity ......................             $397,472
   Mercury World Strategy ..........................             $ 89,702
   MFS Emerging Growth Companies ...................             $572,677
   MFS Research ....................................             $602,002
   EQ/Putnam Balanced ..............................             $ 62,166
   EQ/Putnam Growth & Income Value .................             $529,088
   EQ/Putnam International Equity ..................             $502,896
   EQ/Putnam Investors Growth ......................             $141,031
   T. Rowe Price Equity Income .....................             $143,543
   T. Rowe Price International Stock ...............             $179,993
   Warburg Pincus Small Company Value** ............             $690,305
   Morgan Stanley Emerging Markets Equity ..........             $246,559
   BT Equity 500 Index .............................             $ 87,608
   BT International Equity Index ...................             $ 26,510
   BT Small Company Index ..........................             $ 38,914
   J.P. Morgan Core Bond ...........................             $  7,380
   Lazard Large Cap Value ..........................             $ 95,425
   Lazard Small Cap Value ..........................             $ 79,393
</TABLE>

----------
*     The EQ/Aggressive Stock Portfolio, EQ/Balanced Portfolio, Alliance Common
      Stock Portfolio, Alliance Conservative Investors Portfolio, Alliance
      Equity Index Portfolio, Alliance Global Portfolio, Alliance Growth and
      Income Portfolio, Alliance Growth Investors Portfolio, Alliance High
      Yield


                                       56
<PAGE>

  Portfolio, Alliance Intermediate Government Securities Portfolio, Alliance
  International Portfolio, Alliance Money Market Portfolio, Alliance Quality
  Bond Portfolio, Alliance Small Cap Growth Portfolio, EQ/Evergreen
  Foundation, EQ/Evergreen, MFS Growth with Income, EQ/Alliance Premier
  Growth, Capital Guardian Research, Capital Guardian U.S. Equity, Capital
  Guardian International and Calvert Socially Responsible Portfolios did not
  pay any brokerage commissions during the year ended December 31, 1998.

**    Effective July 24, 2000, the name of the Warburg Pincus Small Company
      Value Portfolio was changed to the FI Small/Mid Cap Value Portfolio.


                    CALENDAR YEAR ENDED DECEMBER 31, 1999*

<TABLE>
<CAPTION>
PORTFOLIO                                               BROKERAGE COMMISSIONS PAID
------------------------------------------------------ ---------------------------
<S>                                                    <C>
Mercury Basic Value Equity ...........................         $   631,781
Mercury World Strategy ...............................         $    57,705
MFS Emerging Growth Companies ........................         $ 1,964,072
MFS Research .........................................         $ 1,162,496
EQ/Putnam Balanced ...................................         $   132,835
EQ/Putnam Growth & Income Value ......................         $   914,745
EQ/Putnam International Equity .......................         $   957,606
EQ/Putnam Investors Growth ...........................         $   292,639
T. Rowe Price Equity Income ..........................         $   201,931
T. Rowe Price International Stock ....................         $   174,803
Warburg Pincus Small Company Value** .................         $ 1,117,202
Morgan Stanley Emerging Markets Equity ...............         $   855,959
BT Equity 500 Index ..................................         $   153,052
BT International Equity Index ........................         $    71,637
BT Small Company Index ...............................         $    43,854
J.P. Morgan Core Bond ................................         $    26,095
Lazard Large Cap Value ...............................         $   128,406
Lazard Small Cap Value ...............................         $   150,164
EQ/Aggressive Stock ..................................         $10,057,431
EQ/Balanced ..........................................         $ 3,302,792
Alliance Common Stock ................................         $10,679,612
Alliance Conservative Investors ......................         $   375,448
Alliance Equity Index ................................         $         0
Alliance Global ......................................         $ 5,738,044
Alliance Growth and Income ...........................         $ 1,966,341
Alliance Growth Investors ............................         $ 4,400,655
Alliance High Yield ..................................         $    66,504
Alliance Intermediate Government Securities ..........         $     4,063
Alliance International ...............................         $ 1,811,114
Alliance Money Market ................................         $         0
Alliance Quality Bond ................................         $         0
Alliance Small Cap Growth ............................         $ 2,143,273
EQ/Evergreen Foundation ..............................         $    33,763
EQ/Evergreen .........................................         $    12,983
MFS Growth with Income ...............................         $   132,885
EQ/Alliance Premier Growth ...........................         $   426,324
Capital Guardian Research ............................         $    39,924
Capital Guardian U.S. Equity .........................         $    84,692
Capital Guardian International .......................         $    70,257
Calvert Socially Responsible .........................         $     2,113
</TABLE>


                                       57
<PAGE>

----------
*     The EQ/Alliance Premier Growth, Capital Guardian Research, Capital
      Guardian U.S. Equity, and Capital Guardian International Portfolios
      commenced operations on April 30, 1999. The Calvert Socially Responsible
      Portfolio commenced operations on August 30, 1999. The EQ/Aggressive
      Stock, EQ/Balanced, Alliance Common Stock, Alliance Conservative
      Investors, Alliance Equity Index, Alliance Global, Alliance Growth and
      Income, Alliance Growth Investors, Alliance High Yield, Alliance
      Intermediate Government Securities, Alliance International, Alliance
      Money Market, Alliance Quality Bond, and Alliance Small Cap Growth
      Portfolios commenced operations on October 18, 1999. The EQ/Alliance
      Technology, EQ/AXP New Dimensions, EQ/AXP Strategy Aggressive, FI Mid Cap
      and EQ/Janus Large Cap Growth Portfolios are not included in the above
      table because they had no operations during the fiscal year ended
      December 31, 1999.

**    Effective July 24, 2000, the name of the Warburg Pincus Small Company
      Value Portfolio was changed to the FI Small/Mid Cap Value Portfolio.


BROKERAGE TRANSACTIONS WITH AFFILIATES

Equitable and its indirect corporate parent, AXA Financial, Inc., currently own
approximately 70% of Donaldson, Lufkin & Jenrette, Inc. ("DLJ"). As a result,
DLJ is considered to be an affiliate of Equitable under the 1940 Act. A DLJ
subsidiary, Donaldson, Lufkin & Jenrette Securities Corporation, is one of the
nation's largest investment banking and securities firms. Another DLJ
subsidiary, Autranet, Inc., is a securities broker that markets independently
originated research to institutions. Through the Pershing Division of
Donaldson, Lufkin & Jenrette Securities Corporation, DLJ supplies securities
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 TRPI, the Advisers to the T. Rowe Price International Stock
and T. Rowe Price Equity Income Portfolios, may execute portfolio transactions
through certain affiliates of Price Fleming and Jardine Fleming, which are
persons indirectly related to the Advisers, acting as agent in accordance with
procedures established by the Trust's Board of Trustees. Mercury, the Adviser
to the Mercury World Strategy and Mercury Basic Value Equity Portfolios, may
execute portfolio transactions through certain affiliates of Mercury. MSAM, the
Adviser to the Morgan Stanley Emerging Markets Equity Portfolio, may execute
portfolio transactions through certain affiliates of MSAM. LAM, the Adviser to
the Lazard Large Cap Value and Lazard Small Cap Value Portfolios, may execute
portfolio transactions through certain affiliates of LAM. J.P. Morgan, the
Adviser to the J.P. Morgan Core Bond Portfolio, may execute portfolio
transactions through certain affiliates of J.P. Morgan. MFS, the Adviser to the
MFS Emerging Growth Companies, MFS Growth with Income and MFS Research
Portfolios, and an adviser to the EQ/Aggressive Stock Portfolio, may execute
portfolio transactions through certain affiliates of MFS, including MFS Fund
Distributors, Inc. Putnam Management, the Adviser to the EQ/Putnam Balanced,
EQ/Putnam Growth & Income, EQ/Putnam International Equity, and EQ/Putnam
Investors Growth Portfolios, does not have an affiliated broker through which
it would execute portfolio transactions. Bankers Trust, the Adviser to BT Small
Company Index Portfolio, BT International Equity Index Portfolio and BT Equity
500 Index Portfolio, may execute portfolio transactions through certain
affiliates of Bankers Trust. Evergreen, the Adviser to the EQ/Evergreen
Foundation Portfolio and EQ/Evergreen Portfolio, may execute portfolio
transactions through certain affiliates of Evergreen and First Union National
Bank, including Lieber & Company. Alliance, the Adviser to the EQ/Alliance
Premier Growth Portfolio, EQ/Alliance Technology Portfolio, Alliance Common
Stock Portfolio, Alliance Conservative Investors Portfolio, Alliance Equity
Index Portfolio, Alliance Global Portfolio, Alliance Growth and Income
Portfolio, Alliance Growth Investors Portfolio, Alliance High Yield Portfolio,
Alliance Intermediate Government Securities Portfolio, Alliance International
Portfolio, Alliance Money Market Portfolio, Alliance Quality Bond Portfolio,
Alliance Small Cap Growth Portfolio, and an Adviser to the EQ/Aggressive Stock
Portfolio and EQ/Balanced Portfolio, may execute portfolio transactions with
certain affiliates of Alliance, including DLJ and the Pershing Division of
Donaldson, Lufkin & Jenrette Securities Corporation. Capital Guardian, the
Adviser to the Capital Guardian Research Portfolio, the


                                       58
<PAGE>

Capital Guardian U.S. Equity Portfolio and the Capital Guardian International
Portfolio, and an Adviser to the EQ/Balanced Portfolio, does not have an
affiliated broker through which it would execute portfolio transactions.
Calvert, an Adviser to the Calvert Socially 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. AEFC
may execute portfolio transactions through certain affiliates of AEFC,
including American Enterprise Investment Securities, Inc. FI Mid Cap Portfolio
and FI Small/Mid Cap Value Portfolio may execute portfolio transactions through
its affiliates of Fidelity, including Fidelity Capital Markets, National
Financial Services Corporation LLC and Fidelity Brokerage Services Japan LLC.
EQ/Janus Large Cap Growth Portfolio may execute portfolio transactions through
certain affiliates of Janus, including DST Securities, Inc.

To the extent permitted by law, the Trust may engage in brokerage transactions
with brokers that are affiliates of the Manager and Advisers, with brokers who
are affiliates of such brokers, or with unaffiliated brokers who trade or clear
through affiliates of the Manager and Advisers. The 1940 Act generally
prohibits the Trust from engaging in principal securities transactions with
brokers that are affiliates of the Manager and Advisers or affiliates of such
brokers, unless pursuant to an exemptive order from the SEC. The Trust may
apply for such exemptive relief. The Trust has adopted procedures, prescribed
by the 1940 Act, which are reasonably designed to provide that any commissions
or other remuneration it pays to brokers that are affiliates of the Manager and
brokers that are affiliates of an Adviser to a Portfolio for which that Adviser
provides investment advice do not exceed the usual and customary broker's
commission. In addition, the Trust will adhere to the requirements under the
1934 Act governing floor trading. Also, because of securities law limitations,
the Trust will limit purchases of securities in a public offering, if such
securities are underwritten by brokers that are affiliates of the Manager and
Advisers or their affiliates.

During the years ended December 31, 1997, 1998 and 1999, respectively, the
following Portfolios paid the amounts indicated to the affiliated
broker-dealers of the Manager or affiliates of the Advisers to each Portfolio.


                      FISCAL YEAR ENDED DECEMBER 31, 1997*
<TABLE>
<CAPTION>
                                                                AGGREGATE       PERCENTAGE OF       PERCENTAGE OF
                                     AFFILIATED                 BROKERAGE      TOTAL BROKERAGE   TRANSACTIONS (BASED
        PORTFOLIO                  BROKER-DEALER            COMMISSIONS PAID     COMMISSIONS     ON DOLLAR AMOUNTS)
------------------------ --------------------------------- ------------------ ----------------- --------------------
<S>                      <C>                               <C>                <C>               <C>
Mercury Basic Value      Donaldson, Lufkin &                     $1,444              1.91%               1.48%
 Equity                   Jenrette Securities
                          Corporation ("DLJ")
                         Merrill Lynch, Pierce Fenner            $7,984             10.55%              10.93%
                          & Smith Incorporated
                          ("Merrill Lynch")
Mercury World Strategy   DLJ                                     $  166              0.38%               0.74%
                         Merrill Lynch                           $2,622              6.02%               5.72%
MFS Emerging Growth      Pershing Trading Company,               $   72              0.05%               0.05%
 Companies                L.P. ("Pershing")
EQ/Putnam Balanced       Equico Securities Corp.                 $   75              0.47%               0.33%
EQ/Putnam Growth &       Equico Securities Corporation           $  363              0.33%               0.23%
 Income Value
T. Rowe Price Equity     DLJ                                     $  694              1.03%               0.55%
 Income
T. Rowe Price            Jardine Fleming Securities Ltd.         $  454              0.19%               0.18%
 International Stock
                         Robert Fleming Securities Ltd.          $2,210              0.91%               1.29%
                         Fleming Martin Limited                  $   69              0.03%               0.04%
</TABLE>

                                       59
<PAGE>

----------
*     Except for Morgan Stanley Emerging Markets Equity Portfolio, each of the
      Portfolios above commenced operations on May 1, 1997. Morgan Stanley
      Emerging Markets Equity Portfolio commenced operations on August 20,
      1997. The BT Equity 500 Index, BT International Equity Index, BT Small
      Company Index, J.P. Morgan Core Bond, Lazard Large Cap Value, Lazard
      Small Cap Value, Portfolios did not pay any brokerage commissions during
      the fiscal year ended December 31, 1997.


                     CALENDAR YEAR ENDED DECEMBER 31, 1998*

<TABLE>
<CAPTION>
                                                            AGGREGATE       PERCENTAGE OF       PERCENTAGE OF
                                   AFFILIATED               BROKERAGE      TOTAL BROKERAGE   TRANSACTIONS (BASED
        PORTFOLIO                 BROKER-DEALER         COMMISSIONS PAID     COMMISSIONS     ON DOLLAR AMOUNTS)
------------------------- ---------------------------- ------------------ ----------------- --------------------
<S>                       <C>                          <C>                <C>               <C>
Mercury Basic Value       DLJ                                $14,104             3.55%               4.43%
 Equity
                          Merrill Lynch and Co.              $13,238             3.33%               3.15%
Mercury World Strategy    DLJ                                $ 2,260             2.52%               3.40%
                          Merrill Lynch and Co.              $ 5,171             5.76%               7.31%
MFS Research              DLJ                                $   408              .07%                .07%
                          Pershing                           $    48              .01%                .01%
MFS Emerging Growth       Pershing                           $   600              .10%                .12%
 Companies
T. Rowe Price Equity      DLJ                                $ 3,544             2.47%               1.53%
 Income
T. Rowe Price             Jardine Fleming Securities         $ 1,978             1.10%                .72%
 International Stock       Ltd.
                          Robert Fleming Co.                 $ 5,249             2.92%               3.41%
                          Ord Minnett -- New                 $   326              .18%                .13%
                           Zealand -- Ltd.
                          Ord Minnett Group, Ltd.            $   155              .09%                .06%
                          DLJ                                $   165              .09%                .14%
Morgan Stanley Emerging   Morgan Stanley & Co.               $   596              .24%                .18%
 Markets Equity
Lazard Small Cap Value    DLJ                                $   150              .19%                .15%
</TABLE>

----------
*     The EQ/Aggressive Stock, EQ/Balanced, Alliance Common Stock, Alliance
      Conservative Investors, Alliance Equity Index, Alliance Global, Alliance
      Growth and Income, Alliance Growth Investors, Alliance High Yield,
      Alliance Intermediate Government Securities, Alliance International,
      Alliance Money Market, Alliance Quality Bond, Alliance Small Cap Growth,
      EQ/Evergreen Foundation, EQ/Evergreen, MFS Growth with Income,
      EQ/Alliance Premier Growth, Capital Guardian Research, Capital Guardian
      U.S. Equity, Capital Guardian International, and Calvert Socially
      Responsible Portfolios did not pay any brokerage commissions during the
      year ended December 31, 1998.


                                       60
<PAGE>

                     CALENDAR YEAR ENDED DECEMBER 31, 1999*

<TABLE>
<CAPTION>
                                                                                                   PERCENTAGE
                                                                AGGREGATE       PERCENTAGE OF    OF TRANSACTIONS
                                       AFFILIATED               BROKERAGE      TOTAL BROKERAGE      (BASED ON
PORTFOLIO                             BROKER-DEALER         COMMISSIONS PAID     COMMISSIONS     DOLLAR AMOUNTS)
----------------------------- ---------------------------- ------------------ ----------------- ----------------
<S>                           <C>                          <C>                <C>               <C>
Mercury Basic Value Equity    DLJ                                $19,906             3.15%              .54%
                              Merrill Lynch                      $21,572             3.41%              .74%
Mercury World Strategy        DLJ                                $   357              .10%              .05%
                              Merrill Lynch                      $ 4,852             8.41%             1.65%
T. Rowe Price Equity Income   DLJ                                $ 6,381             3.16%             1.01%
                              Autranet                           $   610              .30%              .10%
T. Rowe Price International   Jardine Fleming Securities         $ 1,972             1.13%             1.77%
 Stock                         Ltd.
                              Robert Fleming Co.                 $ 3,022             1.73%             1.71%
                              DLJ                                $ 1,132              .71%              .77%
Morgan Stanley Emerging       DLJ                                $ 6,812              .80%              .76%
 Markets Equity               Morgan Stanley & Co.               $11,316             1.32%              .92%
EQ/Evergreen Foundation       DLJ                                $    13              .04%              .07%
                              Lieber & Company                   $12,526            37.10%            50.02%
EQ/Evergreen                  DLJ                                $     8              .06%              .06%
                              Lieber & Company                   $11,864            91.37%            47.81%
Capital Guardian              DLJ                                $    99              .14%              .13%
 International
Alliance Global               DLJ                                $ 3,460              .06%              .01%
Alliance International        DLJ                                $ 1,086              .06%              .02%
</TABLE>

----------
*     The EQ/Alliance Premier Growth, Capital Guardian Research, Capital
      Guardian U.S. Equity, and Capital Guardian International Portfolios
      commenced operations on April 30, 1999. The Calvert Socially Responsible
      Portfolio commenced operations on August 30, 1999. The EQ/Aggressive
      Stock, EQ/Balanced, Alliance Common Stock, Alliance Conservative
      Investors, Alliance Equity Index, Alliance Global, Alliance Growth and
      Income, Alliance Growth Investors, Alliance High Yield, Alliance
      Intermediate Government Securities, Alliance International, Alliance
      Money Market, Alliance Quality Bond, and Alliance Small Cap Growth
      Portfolios commenced operations on October 18, 1999. The EQ/Alliance
      Technology, EQ/AXP New Dimensions, EQ/AXP Strategy Aggressive, FI Mid
      Cap, and EQ/Janus Large Cap Growth Portfolios are not included in the
      above table because they had no operations during the fiscal year ended
      December 31, 1999.


                                       61
<PAGE>

PURCHASE AND PRICING OF SHARES

The Trust will offer and sell its shares at each Portfolio's net asset value
per share, which will be determined in the manner set forth below.

The net asset value of the shares of each class of a Portfolio of the Trust
will be determined once daily, immediately after the declaration of dividends,
if any, at the close of business on each business day as defined below. The net
asset value per share of each class of a Portfolio will be computed by dividing
the sum of the investments held by that Portfolio applicable to that class,
plus any cash or other assets, minus all liabilities, by the total number of
outstanding shares of that class of the Portfolio at such time. All expenses
borne by the Trust and each of its Classes, will be accrued daily.

The net asset value per share of each Portfolio will be determined and computed
as follows, in accordance with generally accepted accounting principles, and
consistent with the 1940 Act:

   o  The assets belonging to each Portfolio will include (i) all
      consideration received by the Trust for the issue or sale of shares of
      that particular Portfolio, together with all assets in which such
      consideration is invested or reinvested, (ii) all income, earnings,
      profits, and proceeds thereof, including any proceeds derived from the
      sale, exchange or liquidation of such assets, (iii) any funds or payments
      derived from any reinvestment of such proceeds in whatever form the same
      may be, and (iv) "General Items", if any, allocated to that Portfolio.
      "General Items" include any assets, income, earnings, profits, and
      proceeds thereof, funds, or payments which are not readily identifiable
      as belonging to any particular Portfolio. General Items will be allocated
      as the Trust's Board of Trustees considers fair and equitable.

   o  The liabilities belonging to each Portfolio will include (i) the
      liabilities of the Trust in respect of that Portfolio, (ii) all expenses,
      costs, changes and reserves attributable to that Portfolio, and (iii) any
      general liabilities, expenses, costs, charges or reserves of the Trust
      which are not readily identifiable as belonging to any particular
      Portfolio which have been allocated as the Trust's Board of Trustees
      considers fair and equitable.

The value of each Portfolio will be determined at the close of business on each
"business day." Normally, this would be each day that the New York Stock
Exchange is open and would include some federal holidays. For stocks and
options, the close of trading is 4:00 p.m. and 4:15 p.m. Eastern Time,
respectively; for bonds it is the close of business in New York City, and for
foreign securities (other than ADRs) it is the close of business in the
applicable foreign country, with exchange rates determined at 12:00 p.m.
Eastern Time.

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


   o  Stocks listed on national securities exchanges and certain
      over-the-counter issues traded on the Nasdaq national market system are
      valued at the last sale price, or, if there is no sale, at the latest
      available bid price. Other unlisted stocks are valued at their last sale
      price or, if there is no reported sale during the day, at a bid price
      estimated by a broker.

   o  Foreign securities not traded directly, or in ADRs or similar form in
      the United States, are valued at representative quoted prices in the
      currency of the country of origin. Foreign currency is converted into
      United States dollar equivalent at current exchange rates.

   o  United States Treasury securities and other obligations issued or
      guaranteed by the United States Government, its agencies or
      instrumentalities, are valued at representative quoted prices.

   o  Long-term corporate bonds may be valued on the basis of prices provided
      by a pricing service when such prices are believed to reflect the fair
      market value of such securities. The prices provided by a pricing service
      take into account many factors, including institutional size, trading in
      similar groups of securities and any developments related to specific
      securities; however, when such prices are not available, such bonds are
      valued at a bid price estimated by a broker.


                                       62
<PAGE>

   o  Short-term debt securities in the Portfolios, other than the Alliance
      Money Market Portfolio, which mature in 60 days or less are valued at
      amortized cost, which approximates market value. Short-term debt
      securities in such Portfolios which mature in more than 60 days are
      valued at representative quoted prices. Securities held by the Alliance
      Money Market Portfolio are valued at prices based on equivalent yields or
      yield spreads.

   o  Convertible preferred stocks listed on national securities exchanges
      are valued as of their last sale price or, if there is no sale, at the
      latest available bid price.

   o  Convertible bonds, and unlisted convertible preferred stocks, are
      valued at bid prices obtained from one or more of the major dealers in
      such bonds or stocks. Where there is a discrepancy between dealers,
      values may be adjusted based on recent premium spreads to the underlying
      common stocks. Convertible bonds may be matrix-priced based upon the
      conversion value to the underlying common stocks and market premiums.

   o  Mortgage-backed and asset-backed securities are valued at prices
      obtained from a bond pricing service where available, or at a bid price
      obtained from one or more of the major dealers in such securities. If a
      quoted price is unavailable, an equivalent yield or yield spread quotes
      will be obtained from a broker and converted to a price.

   o  Purchased options, including options on futures, are valued at their
      last bid price. Written options are valued at their last asked price.

   o  Futures contracts are valued as of their last sale price or, if there
      is no sale, at the latest available bid price.

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

The market value of a put or call option will usually reflect, among other
factors, the market price of the underlying security.

When the Trust writes a call option, an amount equal to the premium received by
the Trust is included in the Trust's financial statements as an asset and an
equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option written.
When an option expires on its stipulated expiration date or the Trust enters
into a closing purchase or sale transaction, the Trust realizes a gain (or
loss) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is extinguished. When an option is
exercised, the Trust realizes a gain or loss from the sale of the underlying
security, and the proceeds of sale are increased by the premium originally
received, or reduced by the price paid for the option.

The Manager and Advisers may, from time to time, under the general supervision
of the Board of Trustees or its valuation committee, utilize the services of
one or more pricing services available in valuing the assets of the Trust. In
addition, there may be occasions when a different pricing provider or
methodology is used. In addition, there may be occasions where a different
pricing provider or methodology is used. The Manager and Advisers will
continuously monitor the performance of these services.


REDEMPTION OF SHARES

The Trust may suspend redemption privileges or postpone the date of payment on
shares of the Portfolios for more than seven days during any period (i) when
the New York Stock Exchange is closed or trading on the New York Stock Exchange
is restricted as determined by the SEC, (ii) when an emergency exists, as
defined by the SEC, which makes it not reasonably practicable for a Portfolio
to dispose of securities owned by it or fairly to determine the value of its
assets, or (iii) as the SEC may otherwise permit.

The value of the shares on redemption may be more or less than the
shareholder's cost, depending upon the market value of the portfolio securities
at the time of redemption.


                                       63
<PAGE>

TAXATION

Each Portfolio is treated for federal income tax purposes as a separate
taxpayer. The Trust intends that each Portfolio shall qualify each year and
elect to be treated as a regulated investment company under Subchapter M of the
Code. Such qualification does not involve supervision of management or
investment practices or policies by any governmental agency or bureau.

As a regulated investment company, each Portfolio will not be subject to
federal income or excise tax on any of its net investment income or net
realized capital gains which are timely distributed to shareholders under the
Code. A number of technical rules are prescribed for computing net investment
income and net capital gains. For example, dividends are generally treated as
received on the ex-dividend date. Also, certain foreign currency losses and
capital losses arising after October 31 of a given year may be treated as if
they arise on the first day of the next taxable year.

A Portfolio investing in foreign securities or currencies may be subject to
foreign taxes which could reduce the investment performance of such Portfolio.
However, if foreign securities comprise more than 50% of the year-end value of
a Portfolio, the Portfolio may elect to pass through such foreign taxes as a
deemed dividend to shareholders. In such a case the shareholder and not the
Portfolio would be entitled to claim a federal tax deduction or credit for
foreign taxes, as appropriate. The deduction or credit will not necessarily
result in a direct or immediate benefit to Contract owners.

To qualify for treatment as a regulated investment company, a Portfolio must,
among other things, derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock or securities or foreign
currencies, or other income derived with respect to its business of investing.
For purposes of this test, gross income is determined without regard to losses
from the sale or other dispositions of stock or securities.

In addition, the Secretary of the Treasury has regulatory authority to exclude
from qualifying income described above foreign currency gains which are not
"directly related" to a regulated investment company's "principal business of
investing" in stock, securities or related options or futures. The Secretary of
the Treasury has not to date exercised this authority.

Generally, in order to avoid a 4% nondeductible excise tax, each Portfolio must
distribute to its shareholders during the calendar year the following amounts:

   o  98% of the Portfolio's ordinary income for the calendar year;

   o  98% of the Portfolio's capital gain net income (all capital gains, both
      long-term and short-term, minus all such capital losses), all computed as
      if the Portfolio were on a taxable year ending October 31 of the year in
      question and beginning the previous November 1; and

   o  any undistributed ordinary income or capital gain net income for the
      prior year.

The excise tax generally is inapplicable to any regulated investment company
whose sole shareholders are either tax-exempt pension trusts or separate
accounts of life insurance companies funding variable contracts. Although each
Portfolio believes that it is not subject to the excise tax, the Portfolios
intend to make the distributions required to avoid the imposition of such a
tax.

Because the Trust is used to fund non-qualified Contracts, each Portfolio must
meet the diversification requirements imposed by the Code or these Contracts
will fail to qualify as life insurance and annuities. In general, for a
Portfolio to meet the investment diversification requirements of Subchapter L
of the Code, Treasury regulations require that no more than 55% of the total
value of the assets of the Portfolio may be represented by any one investment,
no more than 70% by two investments, no more than 80% by three investments and
no more than 90% by four investments. Generally, for purposes of the
regulations, all securities of the same issuer are treated as a single
investment. In the context of United States Government securities (including
any security that is issued, guaranteed or insured by the United States or an
instrumentality of the United States) each United States Government agency or
instrumentality is treated as a separate issuer. Compliance with the
regulations is tested on the first day of each calendar year quarter. There is
a thirty (30) day period after the end of each calendar year quarter in which
to cure any non-compliance.


                                       64
<PAGE>

PORTFOLIO PERFORMANCE

Returns and yields shown do not reflect insurance company charges and fees
applicable to the Contracts.


ALLIANCE MONEY MARKET PORTFOLIO YIELD

The Alliance Money Market Portfolio calculates yield information for seven-day
periods and may illustrate that information in advertisements or sales
materials. The seven-day current yield calculation is based on a hypothetical
shareholder account with one share at the beginning of the period. To determine
the seven-day rate of return, the net change in the share value is computed by
subtracting the share value at the beginning of the period from the share value
(exclusive of capital changes) at the end of the period. The net change is
divided by the share value at the beginning of the period to obtain the base
period rate of return. This seven-day base period return is then multiplied by
365/7 to produce an annualized current yield figure carried to the nearest
one-hundredth of one percent.

Realized capital gains or losses and unrealized appreciation or depreciation of
the Portfolio are excluded from this calculation. The net change in share
values also reflects all accrued expenses of the Alliance Money Market
Portfolio as well as the value of additional shares purchased with dividends
from the original shares and any additional shares.

The effective yield is obtained by adjusting the current yield to give effect
to the compounding nature of the Alliance Money Market Portfolio's investments,
as follows: The unannualized base period return is compounded by adding one to
the base period return, raising the sum to a power equal to 365 divided by 7,
and subtracting one from the result--i.e., effective yield = [(base period
return + 1)365/7]-1.

Alliance Money Market Portfolio yields will fluctuate daily. Accordingly,
yields for any given period are not necessarily representative of future
results. Yield is a function of the type and quality of the instruments in the
Alliance Money Market Portfolio, maturities and rates of return on investments,
among other factors. In addition, the value of shares of the Alliance Money
Market Portfolio will fluctuate and not remain constant.

The Alliance Money Market Portfolio yield may be compared with yields of other
investments. However, it should not be compared to the return of fixed rate
investments which guarantee rates of interest for specified periods. The yield
also should not be compared to the yield of money market funds made available
to the general public because their yields usually are calculated on the basis
of a constant $1 price per share and they pay out earnings in dividends which
accrue on a daily basis. Investment income of the Alliance Money Market
Portfolio, including any realized gains as well as accrued interest, is not
paid out in dividends but is reflected in the share value. The Alliance Money
Market Portfolio yield also does not reflect insurance company charges and fees
applicable to Contracts.


COMPUTATION OF TOTAL RETURN

Each Portfolio may provide average annual total return information calculated
according to a formula prescribed by the SEC. According to that formula,
average annual total return figures represent the average annual compounded
rate of return for the stated period. Average annual total return quotations
reflect the percentage change between the beginning value of a static account
in the Portfolio and the ending value of that account measured by the then
current net asset value of that Portfolio assuming that all dividends and
capital gains distributions during the stated period were invested in shares of
the Portfolio when paid. Total return is calculated by finding the average
annual compounded rates of return of a hypothetical investment that would
equate the initial amount invested to the ending redeemable value of such
investment, according to the following formula:

T = (ERV/P)1/n

where "T" equals average annual total return; where "ERV", the ending
redeemable value, is the value at the end of the applicable period of a
hypothetical $1,000 investment made at the beginning of the applicable period;
where "P" equals a hypothetical initial investment of $1,000; and where "n"
equals the number of years.


                                       65
<PAGE>

Each Portfolio's total return will vary from time to time depending upon market
conditions, the composition of each Portfolio's investment portfolio and
operating expenses of the Trust allocated to each Portfolio. Total return
should also be considered relative to changes in the value of a Portfolio's
shares and to the relative risks associated with the investment objectives and
policies of the Portfolios. These total return figures do not reflect insurance
company expenses and fees applicable to the Contracts. At any time in the
future, total return may be higher or lower than in the past and there can be
no assurance that any historical results will continue.


NON-STANDARD PERFORMANCE

In addition to the performance information described above, each Portfolio may
provide total return information with respect to the Portfolios for designated
periods, such as for the most recent six months or most recent twelve months.
This total return information is computed as described under "Computation of
Total Return" above except that no annualization is made.


CODE OF ETHICS

The Trust, its Manager, its Distributors, and each of its Advisers, have
adopted Codes of Ethics pursuant to Rule 17j-1 under the Investment Company Act
of 1940 (as amended). Each of these Codes of Ethics permits the personnel of
their respective organizations to invest in securities for their own accounts.
A copy of each of the Codes of Ethics are on public file with, and are
available from, the SEC.


OTHER SERVICES


INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, serves as the Trust's independent accountants. PricewaterhouseCoopers
LLP is responsible for auditing the annual financial statements of the Trust.


CUSTODIAN

The Chase Manhattan Bank, 1211 Avenue of the Americas, New York, New York 10036
serves as custodian of the Trust's portfolio securities and other assets. Under
the terms of the custody agreement between the Trust and The Chase Manhattan
Bank, The Chase Manhattan Bank maintains and deposits in separate accounts,
cash, securities and other assets of the Portfolios. The Chase Manhattan Bank
is also required, upon the order of the Trust, to deliver securities held by
The Chase Manhattan Bank, and to make payments for securities purchased by the
Trust. The Chase Manhattan Bank has also entered into sub-custodian agreements
with a number of foreign banks and clearing agencies, pursuant to which
portfolio securities purchased outside the United States are maintained in the
custody of these entities.


TRANSFER AGENT

Equitable serves as the transfer agent and dividend disbursing agent for the
Trust. Equitable receives no compensation for providing such services for the
Trust.


COUNSEL

Dechert, 1775 Eye Street, N.W., Washington, D.C. 20006, serves as counsel to
the Trust.

Sullivan & Worcester, LLP, 1025 Connecticut Avenue, N.W., Suite 1000,
Washington, D.C. 20036, serves as counsel to the Independent Trustees of the
Trust.


FINANCIAL STATEMENTS

The audited financial statements for the period ended December 31, 1999,
including the financial highlights, appearing in the Trust's Annual Report to
Shareholders, filed electronically with the SEC, are incorporated by reference
and made a part of this document.


                                       66
<PAGE>

                                  APPENDIX A
                               EQ ADVISORS TRUST
                         INVESTMENT STRATEGIES SUMMARY




<TABLE>
<CAPTION>
                                               BORROWINGS     BORROWINGS
                              ASSET-BACKED   (EMERGENCIES,   (LEVERAGING   CONVERTIBLE
PORTFOLIO                      SECURITIES     REDEMPTIONS)    PURPOSES)     SECURITIES   FLOATERS(A)
---------------------------- -------------- --------------- ------------- ------------- -------------
<S>                          <C>            <C>             <C>           <C>           <C>
EQ/Aggressive Stock ........       Y              Y              N             Y             Y
EQ/Balanced ................       Y              Y              N             Y             Y
Alliance Common Stock ......       Y              Y              N             Y             Y
Alliance Conservative
 Investors .................       Y              Y              N             Y             Y
Alliance Equity Index ......       N              Y              N             Y             Y
Alliance Global ............       Y              Y              N             Y             Y
Alliance Growth and
 Income ....................       Y              Y              N             Y             Y
Alliance Growth
 Investors .................       Y              Y              N             Y             Y
Alliance High Yield ........       Y              Y              N             Y             Y
Alliance Intermediate
 Government Securities......       Y              Y              N             Y             Y
Alliance International .....       Y              Y              N             Y             Y
Alliance Money Market ......       Y              Y              N             Y             Y
Alliance Quality Bond ......       Y              Y              N             Y             Y
Alliance Small Cap
 Growth ....................       Y              Y              N             Y             Y
EQ/Alliance Technology .....       Y             Y-33.3%         N             Y             Y
T. Rowe Price
 International Stock .......       N             Y-33.3%         N             Y             N
T. Rowe Price Equity
 Income ....................       N             Y-33.3%         N             Y             N
EQ/Putnam Growth &
 Income Value ..............       N             Y-10.0%         N             Y             N
EQ/Putnam International
 Equity ....................       N             Y-10.0%         N             Y             N
EQ/Putnam Investors
 Growth ....................       N             Y-10.0%         N             Y             N
EQ/Putnam Balanced .........       Y             Y-10.0%         N             Y             Y
MFS Research ...............       N             Y-33.3%         N             Y             N
MFS Emerging Growth
 Companies .................       N             Y-33.3%         N             Y             N
MFS Growth with
 Income ....................       N             Y-10.0%         N             Y             N
Morgan Stanley Emerging
 Markets Equity ............       Y             Y-33.3%         N             Y             Y



<CAPTION>
                                                                                    FOREIGN    FOREIGN
                                                                       FOREIGN     CURRENCY    CURRENCY    OPTIONS
                                INVERSE       BRADY     DEPOSITORY     CURRENCY     FORWARD    FUTURES    (EXCHANGE
PORTFOLIO                     FLOATERS(A)   BONDS(B)   RECEIPTS(B)   SPOT TRANS.    TRANS.    TRANS.(A)    TRADED)
---------------------------- ------------- ---------- ------------- ------------- ---------- ----------- ----------
<S>                          <C>           <C>        <C>           <C>           <C>        <C>         <C>
EQ/Aggressive Stock ........      Y            Y           Y             Y            Y          Y           Y
EQ/Balanced ................      Y            Y           Y             Y            Y          Y           Y
Alliance Common Stock ......      Y            Y           Y             Y            Y          Y           Y
Alliance Conservative
 Investors .................      Y            Y           Y             Y            Y          Y           Y
Alliance Equity Index ......      Y            N           N             N            N          N           N
Alliance Global ............      Y            Y           Y             Y            Y          Y           Y
Alliance Growth and
 Income ....................      Y            Y           Y             Y            Y          Y           Y
Alliance Growth
 Investors .................      Y            Y           Y             Y            Y          Y           Y
Alliance High Yield ........      Y            Y           Y             Y            Y          Y           Y
Alliance Intermediate
 Government Securities......      Y            Y           N             Y            N          N           Y
Alliance International .....      Y            Y           Y             Y            Y          Y           Y
Alliance Money Market ......      Y            N           Y             N            N          N           N
Alliance Quality Bond ......      Y            Y           Y             Y            Y          Y           Y
Alliance Small Cap
 Growth ....................      Y            Y           Y             Y            Y          Y           Y
EQ/Alliance Technology .....      Y            Y           Y             Y            Y          Y           Y
T. Rowe Price
 International Stock .......      N            N           Y             Y            Y          Y           Y
T. Rowe Price Equity
 Income ....................      N            N           Y             Y            Y          Y           Y
EQ/Putnam Growth &
 Income Value ..............      N            N           Y             Y            Y          Y           Y
EQ/Putnam International
 Equity ....................      N            N           Y             Y            Y          Y           Y
EQ/Putnam Investors
 Growth ....................      N            N           Y             Y            Y          Y           Y
EQ/Putnam Balanced .........      N            Y           Y             Y            Y          Y           Y
MFS Research ...............      N            N           Y             Y            Y          N           N
MFS Emerging Growth
 Companies .................      N            N           Y             Y            Y          Y           Y
MFS Growth with
 Income ....................      N            N           Y             Y            Y          Y           Y
Morgan Stanley Emerging
 Markets Equity ............      Y            Y           Y             Y            Y          Y           Y
</TABLE>

                                      A-1
<PAGE>


<TABLE>
<CAPTION>
                                                BORROWINGS      BORROWINGS
                              ASSET-BACKED    (EMERGENCIES,    (LEVERAGING   CONVERTIBLE
PORTFOLIO                      SECURITIES      REDEMPTIONS)     PURPOSES)     SECURITIES   FLOATERS(A)
---------------------------- -------------- ----------------- ------------- ------------- -------------
<S>                          <C>            <C>               <C>           <C>           <C>
FI Small/Mid Cap Value .....       Y              Y-33.3%          N             Y             Y
Mercury World Strategy .....       N              Y-33.3%          N             Y             N
Mercury Basic Value
 Equity ....................       N              Y-33.3%          N             Y             N
Lazard Large Cap Value .....       N              Y-10.0%      Y-33.3%           Y             Y
Lazard Small Cap Value .....       N              Y-15.0%(E)       N             Y             Y
J. P. Morgan Core Bond .....       Y              Y-33.3%          N             Y             N
BT Small Company
 Index .....................       Y              Y-33.3%          N             Y             N
BT International Equity
 Index .....................       Y              Y-33.3%          N             Y             N
BT Equity 500 Index ........       Y              Y-33.3%          N             Y             N
EQ/Evergreen ...............       N              Y-33.3%          N             Y             N
EQ/Evergreen
 Foundation ................       N              Y-33.3%          N             Y             N
EQ/Alliance Premier
 Growth ....................       N               Y-5.0%          N             Y             N
Capital Guardian
 Research ..................       N               Y-5.0%          N             Y             N
Capital Guardian U.S.
 Equity ....................       N               Y-5.0%          N             Y             N
Capital Guardian
 International .............       N               Y-5.0%          N             Y             N
Calvert Socially
 Responsible ...............       Y              Y-33.3%          N             Y             Y
EQ/AXP New
 Dimensions ................       Y              Y-33.3%          N             Y             Y
EQ/AXP Strategy
 Aggressive ................       Y              Y-33.3%          N             Y             Y
FI Mid Cap .................       Y              Y-33.3%          N             Y             Y
EQ/Janus Large Cap
 Growth Portfolio ..........       Y                Y-25%          N             Y             Y



<CAPTION>
                                                                                    FOREIGN    FOREIGN
                                                                       FOREIGN     CURRENCY    CURRENCY    OPTIONS
                                INVERSE       BRADY     DEPOSITORY     CURRENCY     FORWARD    FUTURES    (EXCHANGE
PORTFOLIO                     FLOATERS(A)   BONDS(B)   RECEIPTS(B)   SPOT TRANS.    TRANS.    TRANS.(A)    TRADED)
---------------------------- ------------- ---------- ------------- ------------- ---------- ----------- ----------
<S>                          <C>           <C>        <C>           <C>           <C>        <C>         <C>
FI Small/Mid Cap Value .....      Y            Y           Y             Y            Y          Y           Y
Mercury World Strategy .....      N            N           Y             Y            Y          Y           Y
Mercury Basic Value
 Equity ....................      N            N         Y-10%           Y            Y          Y           Y
Lazard Large Cap Value .....      N            N         Y-10%           Y            N          N           N
Lazard Small Cap Value .....      N            N           Y             N            N          N           N
J. P. Morgan Core Bond .....      N            Y           Y             Y            Y          Y           Y
BT Small Company
 Index .....................      N            N           N             N            N          N           N
BT International Equity
 Index .....................      N            N           Y             Y            Y          Y           Y
BT Equity 500 Index ........      N            N           Y             N            N          N           N
EQ/Evergreen ...............      N            N           Y             Y            N          N           N
EQ/Evergreen
 Foundation ................      N            N           Y             Y            Y          Y           Y
EQ/Alliance Premier
 Growth ....................      N            N           Y             Y            Y          Y           Y
Capital Guardian
 Research ..................      N            N           Y             Y            N          N           N
Capital Guardian U.S.
 Equity ....................      N            N           Y             Y            N          N           N
Capital Guardian
 International .............      N            N           Y             Y            Y          Y           Y
Calvert Socially
 Responsible ...............      Y            Y           Y             Y            Y          Y           Y
EQ/AXP New
 Dimensions ................      N            Y           Y             Y            Y          Y           Y
EQ/AXP Strategy
 Aggressive ................      N            Y           Y             Y            Y          Y           Y
FI Mid Cap .................      Y            Y           Y             Y            Y          Y           Y
EQ/Janus Large Cap
 Growth Portfolio ..........      Y            Y           Y             Y            Y          Y           Y
</TABLE>

-------
(A)        Considered a derivative security.
(B)        Considered a foreign security.
(C)        Written options must be "covered."
(D)        Certain mortgages are considered derivatives.
(E)        May not exceed 15% for temporary or emergency purposes, including to
           meet redemptions (otherwise such borrowings may not exceed 5% of
           total assets).

                                      A-2
<PAGE>

                               EQ ADVISORS TRUST
                   INVESTMENT STRATEGIES SUMMARY (CONTINUED)



<TABLE>
<CAPTION>
                                             FOREIGN CURRENCY
                              FOREIGN  -----------------------------
                              OPTIONS   (WRITTEN, CALL     FOREIGN      FORWARD         HYBRID        ILLIQUID
PORTFOLIO                      (OTC)       OPTIONS)      SECURITIES   COMMITMENTS   INSTRUMENTS(A)   SECURITIES
---------------------------- --------- ---------------- ------------ ------------- ---------------- ------------
<S>                          <C>       <C>              <C>          <C>           <C>              <C>
EQ/Aggressive Stock ........     Y             Y           Y-25%           Y              Y            Y-15%
EQ/Balanced ................     Y             Y           Y-20%           Y              Y            Y-15%
Alliance Common Stock ......     Y             Y             Y             Y              Y            Y-15%
Alliance Conservative
 Investors .................     Y             Y           Y-15%           Y              Y            Y-15%
Alliance Equity Index ......     N             N             N             Y              Y            Y-15%
Alliance Global ............     Y             Y             Y             Y              Y            Y-15%
Alliance Growth and
 Income ....................     Y             Y             Y             Y              N            Y-15%
Alliance Growth
 Investors .................     Y             Y           Y-30%           Y              Y            Y-15%
Alliance High Yield ........     Y             Y             Y             Y              Y            Y-15%
Alliance Intermediate
 Government Securities......     Y             N             N             Y              Y            Y-15%
Alliance International .....     Y             Y             Y             Y              Y            Y-15%
Alliance Money Market ......     N             N           Y-20%           Y              N            Y-10%
Alliance Quality Bond ......     Y             Y             Y             Y              Y            Y-15%
Alliance Small Cap
 Growth ....................     Y             Y           Y-20%           Y              Y            Y-15%
EQ/Alliance Technology .....     Y             Y             Y             Y            Y-10%          Y-10%
T. Rowe Price
 International Stock .......     Y             Y             Y             Y            Y-10%          Y-15%
T. Rowe Price Equity
 Income ....................     N             Y           Y-25%           Y            Y-10%          Y-15%
EQ/Putnam Growth &
 Income Value ..............     Y             Y             Y             Y              N            Y-15%
EQ/Putnam International
 Equity ....................     Y             Y             Y             Y              N            Y-15%
EQ/Putnam Investors
 Growth ....................     Y             Y             Y             Y              N            Y-15%
EQ/Putnam Balanced .........     Y             Y             Y             Y              N            Y-15%
MFS Research ...............     N             N           Y-20%           Y              N            Y-15%
MFS Emerging Growth
 Companies .................     Y             Y           Y-25%           Y              N            Y-15%
MFS Growth with
 Income ....................     N             N           Y-20%           Y              N            Y-15%
Morgan Stanley Emerging
 Market Equity .............     Y             Y             Y             Y              Y            Y-15%



<CAPTION>
                              INVESTMENT   NON-INV.
                                 GRADE      GRADE                                                           SECURITY   SECURITY
                                 FIXED      FIXED         LOAN         MORTGAGE      DIRECT     MUNICIPAL    FUTURES    OPTIONS
PORTFOLIO                       INCOME      INCOME   PARTICIPATIONS   RELATED(D)   MORTGAGES   SECURITIES   TRANS.(A)  TRANS.(C)
---------------------------- ------------ --------- ---------------- ------------ ----------- ------------ ---------- ----------
<S>                          <C>          <C>       <C>              <C>          <C>         <C>          <C>        <C>
EQ/Aggressive Stock ........      Y           N             Y              Y           N            N           Y          Y
EQ/Balanced ................      Y           Y             Y              Y           N            N           Y          Y
Alliance Common Stock ......      Y           Y             Y              Y           N            N           Y          Y
Alliance Conservative
 Investors .................      Y           N             Y              Y           N            N           Y          Y
Alliance Equity Index ......      Y           N             Y              N           N            N           Y          N
Alliance Global ............      Y           N             Y              Y           N            N           Y          Y
Alliance Growth and
 Income ....................      Y         Y-30%           Y              Y           N            N           Y          Y
Alliance Growth
 Investors .................    Y-60%       Y-15%           Y              Y           N            N           Y          Y
Alliance High Yield ........      Y           Y             Y              Y           N            N           Y          Y
Alliance Intermediate
 Government Securities......      Y           N             Y              Y           N            N           Y          Y
Alliance International .....      Y           N             Y              Y           N            N           Y          Y
Alliance Money Market ......      Y           N             N              Y           N            N           N          N
Alliance Quality Bond ......      Y           N             Y              Y           N            N           Y          Y
Alliance Small Cap
 Growth ....................      Y           N             Y              Y           N            N           Y          Y
EQ/Alliance Technology .....      Y           N             N              Y           N            N           Y          Y
T. Rowe Price
 International Stock .......      Y           N             N              N           N            N           Y          Y
T. Rowe Price Equity
 Income ....................      Y         Y-10%           N              N           N            N           Y          Y
EQ/Putnam Growth &
 Income Value ..............      Y           Y             N              N           N            N           Y          Y
EQ/Putnam International
 Equity ....................      Y           Y             N              N           N            N           Y          Y
EQ/Putnam Investors
 Growth ....................      Y           Y             N              N           N            N           Y          Y
EQ/Putnam Balanced .........      Y           Y             Y              Y           N            N           Y          Y
MFS Research ...............      Y         Y-10%           N              N           N            N           N          N
MFS Emerging Growth
 Companies .................      Y           Y             N              N           N            N           Y          Y
MFS Growth with
 Income ....................      Y           Y             N              N           N            N           Y          Y
Morgan Stanley Emerging
 Market Equity .............      Y           Y             Y              Y           N            Y           Y          Y
</TABLE>

                                      A-3
<PAGE>


<TABLE>
<CAPTION>
                                                 FOREIGN CURRENCY
                                           -----------------------------
                                  FOREIGN
                                  OPTIONS   (WRITTEN, CALL     FOREIGN      FORWARD         HYBRID        ILLIQUID
PORTFOLIO                          (OTC)       OPTIONS)      SECURITIES   COMMITMENTS   INSTRUMENTS(A)   SECURITIES
-------------------------------- --------- ---------------- ------------ ------------- ---------------- ------------
<S>                              <C>       <C>              <C>          <C>           <C>              <C>
FI Small/Mid Cap Value .........     Y             Y             Y             Y              Y            Y-15%
Mercury World Strategy .........     Y             Y             Y             Y              N            Y-15%
Mercury Basic Value
 Equity ........................     N             Y             Y             Y              N            Y-15%
Lazard Large Cap Value .........     N             Y             Y             Y              N            Y-10%
Lazard Small Cap Value .........     N             N             Y             Y              N            Y-10%
J. P. Morgan Core Bond .........     Y             Y             Y             Y              N            Y-15%
BT Small Company
 Index .........................     N             N             N             Y              N            Y-15%
BT International Equity
 Index .........................     Y             Y             Y             Y              N            Y-15%
BT Equity 500 Index ............     N             N             Y             Y              N            Y-15%
EQ/Evergreen ...................     Y             Y             Y             Y              N            Y-15%
EQ/Evergreen
 Foundation ....................     N             Y             Y             Y              N            Y-15%
EQ/Alliance Premier
 Growth ........................     Y             Y             Y             Y              N            Y-15%
Capital Guardian
 Research ......................     N             N           Y-15%           Y            Y-10%          Y-15%
Capital Guardian U.S.
 Equity ........................     N             N             Y             Y            Y-10%          Y-15%
Capital Guardian
 International .................     Y             Y             Y             Y            Y-10%          Y-15%
Calvert Socially
 Responsible ...................     Y             Y           Y-10%           Y            Y-5%           Y-15%
EQ/AXP New
 Dimensions ....................     Y             Y           Y-30%           Y              Y            Y-10%
EQ/AXP Strategy
 Aggressive ....................     Y             Y           Y-25%           Y              Y            Y-10%
FI Mid Cap .....................     Y             Y             Y             Y              Y            Y-15%
EQ/Janus Large Cap
 Growth Portfolio ..............     Y             Y             Y             Y              Y            Y-15%



<CAPTION>
                                  INVESTMENT  NON-INV.
                                    GRADE       GRADE                                                           SECURITY
                                    FIXED       FIXED         LOAN         MORTGAGE      DIRECT     MUNICIPAL    FUTURES
PORTFOLIO                           INCOME     INCOME    PARTICIPATIONS   RELATED(D)   MORTGAGES   SECURITIES   TRANS.(A)
-------------------------------- ----------- ---------- ---------------- ------------ ----------- ------------ ----------
<S>                              <C>         <C>        <C>              <C>          <C>         <C>          <C>
FI Small/Mid Cap Value .........      Y          Y              Y              Y           N            Y           Y
Mercury World Strategy .........      Y          N              N              N           N            N           Y
Mercury Basic Value
 Equity ........................      Y          N              N              N           N            N           Y
Lazard Large Cap Value .........      Y          N              Y              Y           N            N           N
Lazard Small Cap Value .........      Y          N              Y              Y           N            N           N
J. P. Morgan Core Bond .........      Y          N              Y              Y           Y            Y           Y
BT Small Company
 Index .........................      Y          N              N              Y           N            N           Y
BT International Equity
 Index .........................      Y          N              N              Y           N            N           Y
BT Equity 500 Index ............      Y          N              N              Y           N            N           Y
EQ/Evergreen ...................      Y          N              N              N           N            N           Y
EQ/Evergreen
 Foundation ....................      Y          Y              N              Y           N            N           Y
EQ/Alliance Premier
 Growth ........................      Y          N              N              N           N            N           Y
Capital Guardian
 Research ......................      Y          N              N              N           N            N           Y
Capital Guardian U.S.
 Equity ........................      Y          N              N              N           N            N           Y
Capital Guardian
 International .................      Y          N              N              N           N            N           Y
Calvert Socially
 Responsible ...................      Y        Y-20%            N              N           N            Y           Y
EQ/AXP New
 Dimensions ....................      Y        Y-5%             Y              Y           N            Y           Y
EQ/AXP Strategy
 Aggressive ....................      Y        Y-5%             Y              Y           N            Y           Y
FI Mid Cap .....................      Y          Y              Y              Y           N            Y           Y
EQ/Janus Large Cap
 Growth Portfolio ..............      Y          Y              Y              Y           N            Y           Y



<CAPTION>
                                  SECURITY
                                   OPTIONS
PORTFOLIO                         TRANS.(C)
-------------------------------- ----------
<S>                              <C>
FI Small/Mid Cap Value .........      Y
Mercury World Strategy .........      Y
Mercury Basic Value
 Equity ........................      Y
Lazard Large Cap Value .........      N
Lazard Small Cap Value .........      N
J. P. Morgan Core Bond .........      Y
BT Small Company
 Index .........................      Y
BT International Equity
 Index .........................      Y
BT Equity 500 Index ............      Y
EQ/Evergreen ...................      Y
EQ/Evergreen
 Foundation ....................      Y
EQ/Alliance Premier
 Growth ........................      Y
Capital Guardian
 Research ......................      Y
Capital Guardian U.S.
 Equity ........................      Y
Capital Guardian
 International .................      Y
Calvert Socially
 Responsible ...................      Y
EQ/AXP New
 Dimensions ....................      Y
EQ/AXP Strategy
 Aggressive ....................      Y
FI Mid Cap .....................      Y
EQ/Janus Large Cap
 Growth Portfolio ..............      Y
</TABLE>

-------
(A)        Considered a derivative security.

(B)        Considered a foreign security.

(C)        Written options must be "covered."

(D)        Certain mortgages are considered derivatives.

(E)        May not exceed 15% for temporary or emergency purposes, including to
           meet redemptions (otherwise such borrowings may not exceed 5% of
           total assets).

                                      A-4
<PAGE>

                               EQ ADVISORS TRUST
                   INVESTMENT STRATEGIES SUMMARY (CONCLUDED)



<TABLE>
<CAPTION>
                              PASSIVE    PAYMENT   REAL ESTATE                  REVERSE
                              FOREIGN    IN-KIND    INVESTMENT   REPURCHASE   REPURCHASE   SECURITIES
PORTFOLIO                   INV. COMP.    BONDS       TRUSTS     AGREEMENTS   AGREEMENTS     LENDING
-------------------------- ------------ --------- ------------- ------------ ------------ ------------
<S>                        <C>          <C>       <C>           <C>          <C>          <C>
EQ/Aggressive Stock ......       Y          Y           Y             Y            N        Y-50%
EQ/Balanced ..............       Y          Y           Y             Y            N       Y-50.0%
Alliance Common Stock ....       Y          Y           Y             Y            N       Y-50.0%
Alliance Conservative
 Investors ...............       Y          Y           Y             Y            N       Y-50.0%
Alliance Equity Index ....       Y          Y           Y             N            N       Y-50.0%
Alliance Global ..........       Y          Y           Y             Y            N       Y-50.0%
Alliance Growth and
 Income ..................       Y          Y           Y             Y            N       Y-50.0%
Alliance Growth
 Investors ...............       Y          Y           Y             Y            N       Y-50.0%
Alliance High Yield ......       Y          Y           Y             Y            N           Y
Alliance Intermediate
 Government Securities....       Y          Y           Y             Y            N           Y
Alliance International ...       Y          Y           Y             Y            N       Y-50.0%
Alliance Money Market ....       Y          Y           Y             Y            N       Y-50.0%
Alliance Quality Bond ....       Y          Y           Y             Y            N       Y-50.0%
Alliance Small Cap
 Growth ..................       Y          Y           Y             Y            N       Y-50.0%
EQ/Alliance Technology ...       N          Y           Y             Y            Y       Y-33.3%
T. Rowe Price
 International Stock .....       Y          N           N             Y            Y       Y - 33.3%
T. Rowe Price Equity
 Income ..................       N          Y           Y             Y            Y       Y - 33.3%
EQ/Putnam Growth &
 Income Value ............       N          Y           N             Y            N       Y - 25.0%
EQ/Putnam International
 Equity ..................       Y          N           N             Y            N       Y - 25.0%
EQ/Putnam Investors
 Growth ..................       N          N           N             Y            N       Y - 25.0%
EQ/Putnam Balanced .......       N          Y           Y             Y            N       Y - 25.0%
MFS Research .............       N          N           N             Y            N       Y - 33.3%
MFS Emerging Growth
 Companies ...............       N          Y           N             Y            N       Y - 30.0%
MFS Growth with
 Income ..................       N          N           N             Y            N       Y - 25.0%
Morgan Stanley Emerging
 Markets Equity ..........       Y          Y           Y             Y            Y       Y - 33.3%



<CAPTION>
                            SHORT SALES      SMALL                                                       ZERO
                              AGAINST-      COMPANY    STRUCTURED      SWAP     U.S. GOV'T              COUPON
PORTFOLIO                     THE-BOX     SECURITIES    NOTES(A)    TRANS.(A)   SECURITIES   WARRANTS   BONDS
-------------------------- ------------- ------------ ------------ ----------- ------------ ---------- -------
<S>                        <C>           <C>          <C>          <C>         <C>          <C>        <C>
EQ/Aggressive Stock ......       Y             Y            Y           Y            Y           Y        Y
EQ/Balanced ..............       Y             Y            Y           Y            Y           Y        Y
Alliance Common Stock ....       Y             Y            Y           Y            Y           Y        Y
Alliance Conservative
 Investors ...............       Y             Y            Y           Y            Y           Y        Y
Alliance Equity Index ....       Y             Y            Y           Y            Y           Y        Y
Alliance Global ..........       Y             Y            Y           Y            Y           Y        Y
Alliance Growth and
 Income ..................       Y             Y            Y           Y            Y           Y        Y
Alliance Growth
 Investors ...............       Y             Y            Y           Y            Y           Y        Y
Alliance High Yield ......       Y             Y            Y           Y            Y           Y        Y
Alliance Intermediate
 Government Securities....       Y             Y            Y           Y            Y           Y        Y
Alliance International ...       Y             Y            Y           Y            Y           Y        Y
Alliance Money Market ....       Y             Y            Y           N            Y           N        Y
Alliance Quality Bond ....       Y             Y            Y           Y            Y           Y        Y
Alliance Small Cap
 Growth ..................       Y             Y            Y           Y            Y           Y        Y
EQ/Alliance Technology ...       N             Y            Y           Y            Y           Y        Y
T. Rowe Price
 International Stock .....       Y             N            N           N            Y           Y        N
T. Rowe Price Equity
 Income ..................       Y             N            N           N            Y           Y        Y
EQ/Putnam Growth &
 Income Value ............       N             N            N           N            Y           Y        Y
EQ/Putnam International
 Equity ..................       N             Y            N           Y            Y           Y        N
EQ/Putnam Investors
 Growth ..................       N             N            N           Y            Y           Y        N
EQ/Putnam Balanced .......       N             Y            N           N            Y           Y        Y
MFS Research .............       Y             Y            N           N            Y           Y        Y
MFS Emerging Growth
 Companies ...............       N             Y            N           N            Y           Y        Y
MFS Growth with
 Income ..................       N             N            N           N            Y           Y        Y
Morgan Stanley Emerging
 Markets Equity ..........       Y             Y            Y           Y            Y           Y        Y
</TABLE>

                                      A-5
<PAGE>


<TABLE>
<CAPTION>
                                PASSIVE    PAYMENT   REAL ESTATE                  REVERSE
                                FOREIGN    IN-KIND    INVESTMENT   REPURCHASE   REPURCHASE   SECURITIES
PORTFOLIO                     INV. COMP.    BONDS       TRUSTS     AGREEMENTS   AGREEMENTS     LENDING
---------------------------- ------------ --------- ------------- ------------ ------------ ------------
<S>                          <C>          <C>       <C>           <C>          <C>          <C>
FI Small/Mid Cap Value .....       Y         Y            Y             Y            Y       Y - 33.3%
Mercury World Strategy .....       N         N            N             Y            N       Y - 20.0%
Mercury Basic Value
 Equity ....................       N         N            N             Y            N       Y - 20.0%
Lazard Large Cap Value .....       N         N            Y             Y            Y       Y - 10.0%
Lazard Small Cap Value .....       N         N            Y             Y            N       Y - 10.0%
J.P. Morgan Core Bond ......       N         Y            Y             Y            Y       Y - 33.3%
BT Small Company
 Index .....................       N         N            Y             Y            Y       Y - 30.0%
BT International Equity
 Index .....................       N         N            Y             Y            Y       Y - 30.0%
BT Equity 500 Index ........       N         N            Y             Y            Y       Y - 30.0%
EQ/Evergreen ...............       N         N            N             Y            Y       Y - 33.3%
EQ/Evergreen
 Foundation ................       N         N            Y             Y            Y       Y - 33.3%
EQ/Alliance Premier
 Growth ....................       N         N            Y             Y            N       Y - 25.0%
Capital Guardian
 Research ..................       N         N            Y             Y            N       Y-33.3%
Capital Guardian U.S.
 Equity ....................       N         N            Y             Y            N       Y-33.3%
Capital Guardian
 International .............       Y         N            Y             Y            N       Y-33.3%
Calvert Socially
 Responsible ...............       N         N            Y             Y            Y       Y-33.3%
EQ/AXP New
 Dimensions ................       Y         Y            Y             Y            Y        Y-30%
EQ/AXP Strategy
 Aggressive ................       Y         Y            Y             Y            Y        Y-30%
FI Mid Cap .................       Y         Y            Y             Y            Y       Y-33.3%
EQ/Janus Large Cap
 Growth Portfolio ..........               Y-10%                        Y            Y        Y-25%



<CAPTION>
                              SHORT SALES      SMALL                                                       ZERO
                                AGAINST-      COMPANY    STRUCTURED      SWAP     U.S. GOV'T              COUPON
PORTFOLIO                       THE-BOX     SECURITIES    NOTES(A)    TRANS.(A)   SECURITIES   WARRANTS   BONDS
---------------------------- ------------- ------------ ------------ ----------- ------------ ---------- -------
<S>                          <C>           <C>          <C>          <C>         <C>          <C>        <C>
FI Small/Mid Cap Value .....       Y             Y            Y           Y            Y           Y        Y
Mercury World Strategy .....       N             N            N           N            Y           Y        N
Mercury Basic Value
 Equity ....................       N             N            N           N            Y           Y        N
Lazard Large Cap Value .....       N             N            N           N            Y           Y        N
Lazard Small Cap Value .....       N             Y            N           N            Y           Y        N
J.P. Morgan Core Bond ......       Y             N            N           Y            Y           Y        Y
BT Small Company
 Index .....................       N             Y            N           N            Y           Y        N
BT International Equity
 Index .....................       N             N            N           Y            Y           Y        N
BT Equity 500 Index ........       N             N            N           N            Y           Y        N
EQ/Evergreen ...............       Y             Y            N           N            Y           Y        N
EQ/Evergreen
 Foundation ................       N             N            N           N            Y           Y        N
EQ/Alliance Premier
 Growth ....................       N             N            N           N            Y           Y        N
Capital Guardian
 Research ..................       N             Y            N           N            Y           Y        N
Capital Guardian U.S.
 Equity ....................       N             Y            N           N            Y           Y        N
Capital Guardian
 International .............       N             Y            N           N            Y           Y        N
Calvert Socially
 Responsible ...............       Y             Y            Y           Y            Y           Y        Y
EQ/AXP New
 Dimensions ................       N             Y            Y           Y            Y           Y        Y
EQ/AXP Strategy
 Aggressive ................       N             Y            Y           Y            Y           Y        Y
FI Mid Cap .................       Y             Y            Y           Y            Y           Y        Y
EQ/Janus Large Cap
 Growth Portfolio ..........       Y             Y            Y           Y            Y           Y      Y-10%
</TABLE>

-------
(A)        Considered a derivative security.

(B)        Considered a foreign security.

(C)        Written options must be "covered."

(D)        Certain mortgages are considered derivatives.

(E)        May not exceed 15% for temporary or emergency purposes, including to
           meet redemptions (otherwise such borrowings may not exceed 5% of
           total assets).

                                      A-6
<PAGE>

                                  APPENDIX B


DESCRIPTION OF COMMERCIAL PAPER RATINGS


A-1 AND PRIME-1 COMMERCIAL PAPER RATINGS

The rating A-1 (including A-1+) is the highest commercial paper rating assigned
by Standard & Poor's. Commercial paper rated A-1 by Standard & Poor's has the
following characteristics:

      o  liquidity ratios are adequate to meet cash requirements;

      o  long-term senior debt is rated "A" or better;

      o  the issuer has access to at least two additional channels of
         borrowing;

      o  basic earnings and cash flow have an upward trend with allowance made
         for unusual circumstances;

      o  typically, the issuer's industry is well established and the issuer has
         a strong position within the industry; and

      o  the reliability and quality of management are unquestioned.

Relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2 or A-3. Issues rated A-1 that are
determined by Standard & Poor's to have overwhelming safety characteristics are
designated A-1+.

The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:


      o  evaluation of the management of the issuer;

      o  economic evaluation of the issuer's industry or industries and an
         appraisal of speculative-type risks which may be inherent in certain
         areas;

      o  evaluation of the issuer's products in relation to competition and
         customer acceptance;

      o  liquidity;

      o  amount and quality of long-term debt;

      o  trend of earnings over a period of ten years;

      o  financial strength of parent company and the relationships which exist
         with the issuer; and

      o  recognition by the management of obligations which may be present or
         may arise as a result of public interest questions and preparations to
         meet such obligations.


DESCRIPTION OF BOND RATINGS

Bonds are considered to be "investment grade" if they are in one of the top
four ratings.

Standard & Poor's ratings are as follows:

      o  Bonds rated AAA have the highest rating assigned by Standard & Poor's.
         Capacity to pay interest and repay principal is extremely strong.

      o  Bonds rated AA have a very strong capacity to pay interest and repay
         principal although they are somewhat more susceptible to the adverse
         effects of changes in circumstances and economic conditions than bonds
         in higher rated categories.

      o  Bonds rated A have a strong capacity to pay interest and repay
         principal although they are somewhat more susceptible to the adverse
         effects of changes in circumstances and economic conditions than bonds
         in higher rated categories.

      o  Bonds rated BBB are regarded as having an adequate capacity to pay
         interest and repay principal. Whereas they normally exhibit adequate
         protection parameters, adverse economic conditions or


                                      B-1
<PAGE>

         changing circumstances are more likely to lead to a weakened capacity
         to pay interest and repay principal for bonds in this category than in
         higher rated categories.

      o  Debt rated BB, B, CCC, CC or C is regarded, on balance, as
         predominantly speculative with respect to the issuer's capacity to pay
         interest and repay principal in accordance with the terms of the
         obligation. While such debt will likely have some quality and
         protective characteristics, these are outweighed by large uncertainties
         or major risk exposures to adverse debt conditions.

      o  The rating C1 is reserved for income bonds on which no interest is
         being paid.

      o  Debt rated D is in default and payment of interest and/or repayment of
         principal is in arrears.

The ratings from AA to Ccc may be modified by the addition of a plus (+) or
minus (--) sign to show relative standing within the major rating categories.

Moody's ratings are as follows:

      o  Bonds which are rated Aaa are judged to be of the best quality. They
         carry the smallest degree of investment risk and are generally referred
         to as "gilt-edged." Interest payments are protected by a large or by an
         exceptionally stable margin and principal is secure. While the various
         protective elements are likely to change, such changes as can be
         visualized are most unlikely to impair the fundamentally strong
         position of such issues.

      o  Bonds which are rated Aa are judged to be of high quality by all
         standards. Together with the Aaa group they comprise what are generally
         known as high grade bonds. They are rated lower than the best bonds
         because margins of protection may not be as large as in Aaa securities
         or fluctuation of protective elements may be of greater amplitude or
         there may be other elements present which make the long term risks
         appear somewhat larger than in Aaa securities.

      o  Bonds which are rated A possess many favorably investment attributes
         and are to be considered as upper medium grade obligations. Factors
         giving security to principal and interest are considered adequate but
         elements may be present which suggest a susceptibility to impairment
         some time in the future.

      o  Bonds which are rated Baa are considered as medium grade obligations,
         i.e., they are neither highly protected nor poorly secured. Interest
         payments and principal security appear adequate for the present but
         certain protective elements may be lacking or may be characteristically
         unreliable over any great length of time. Such bonds lack outstanding
         investment characteristics and in fact have speculative characteristics
         as well.

      o  Bonds which are rated Ba are judged to have speculative elements; their
         future cannot be considered as well assured. Often the protection of
         interest and principal payments may be very moderate and thereby not
         well safeguarded during both good and bad times over the future.
         Uncertainty of position characterizes bonds in this class.

      o  Bonds which are rated B generally lack characteristics of the desirable
         investment. Assurance of interest and principal payments or of
         maintenance of other terms of the contract over any long period of time
         may be small.

      o  Bonds which are rated Caa are of poor standing. Such issues may be in
         default or there may be present elements of danger with respect to
         principal or interest.

      o  Bonds which are rated Ca represent obligations which are speculative to
         a high degree. Such issues are often in default or have other marked
         shortcomings.

      o  Bonds which are rated C are the lowest class of bonds and issues so
         rated can be regarded as having extremely poor prospects of ever
         attaining any real investment standing.

Moody's applies modifiers to each rating classification from Aa through B to
indicate relative ranking within its rating categories. The modifier "1"
indicates that a security ranks in the higher end of its rating category; the
modifier "2" indicates a mid-range ranking and the modifier "3" indicates that
the issue ranks in the lower end of its rating category.


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