<PAGE>
Registration Nos. 333-17217
811-07953
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON May 30, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 17 /x/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 19 /x/
(Check appropriate box or boxes)
EQ ADVISORS TRUST
(formerly 787 Trust)
(Exact name of registrant as specified in charter)
1290 Avenue of the Americas
New York, New York 10104
(Address of principal executive offices)
Registrant's Telephone Number, including area code: (212) 554-1234
Peter D. Noris, Executive Vice President and
Chief Investment Officer
The Equitable Life Assurance Society of the United States
1290 Avenue of the Americas
New York, New York 10104
(Name and address of agent for service)
Please send copies of all communications to:
Jane A. Kanter
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
---------
on [date] pursuant to paragraph (b)
---------
60 days after filing pursuant to paragraph (a)
---------
on [date] pursuant to paragraph (a) of Rule 485
---------
X 75 days after filing pursuant to paragraph (a)
---------
<PAGE>
EQ Advisors Trust (SM)
PROSPECTUS DATED SEPTEMBER 1, 2000
------
1
--------------------------------------------------------------------------------
This Prospectus describes four (4) Portfolios offered by EQ Advisors Trust and
the Class IA shares offered by the Trust on behalf of each Portfolio that you
can choose as investment alternatives. Each Portfolio has its own investment
objective and strategies that are designed to meet different investment goals.
This Prospectus contains information you should know before investing. Please
read this Supplement and the Prospectus carefully before investing and keep it
for future reference.
DOMESTIC PORTFOLIOS
-------------------
EQ/AXP New Dimensions Portfolio
EQ/AXP Strategy Aggressive Portfolio
EQ/Janus Large Cap Growth Portfolio
EQ/Mid Cap Portfolio
-------------------------------------------------------------------------------
YOU SHOULD BE AWARE THAT THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED OF THE INVESTMENT MERIT OF THESE PORTFOLIOS OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Supplement-Class A
<PAGE>
Overview
------
2
--------------------------------------------------------------------------------
EQ ADVISORS TRUST
This Prospectus tells you about four (4) current Portfolios of EQ Advisors
Trust ("Trust") and the Class IA shares offered by the Trust on behalf of each
Portfolio. The Trust is an open-end management investment company. Each
Portfolio is a separate series of the Trust with its own investment objective,
investment strategies and risks, which are described in this Prospectus. Each
of the current Portfolios of the Trust are diversified for purposes of the
Investment Company Act of 1940, as amended ("1940 Act").
The Trust's shares are currently sold only to insurance company separate
accounts in connection with variable life insurance contracts and variable
annuity certificates and contracts (the "Contract" or collectively, the
"Contracts") issued by The Equitable Life Assurance Society of the United
States ("Equitable") and Equitable of Colorado, Inc. ("EOC") as well as
insurance companies that are not affiliated with Equitable or EOC
("non-affiliated insurance companies") and to The Equitable Investment Plan
for Employees, Managers and Agents ("Equitable Plan"). The Prospectus is
designed to help you make informed decisions about the Portfolios that are
available under your Contract or under the Equitable Plan. You will find
information about your Contract and how it works in the accompanying
prospectus for the Contracts if you are a Contractholder or participant under
a Contract.
Equitable currently serves as the Manager of the Trust. In such capacity,
Equitable currently has overall responsibility for the general management and
administration of the Trust.
Information about the Advisers for each Portfolio is contained in the
description concerning that Portfolio in the section entitled "About the
Investment Portfolios." The Manager has the ultimate responsibility to oversee
each of the Advisers and to recommend their hiring, termination and
replacement. Subject to approval by the Board of Trustees, the Manager has
been granted relief by the Securities and Exchange Commission ("SEC")
("Multi-Manager Order") that enables the Manager without obtaining shareholder
approval to: (i) select new or additional Advisers for each of the Trust's
Portfolios; (ii) enter into new investment advisory agreements and materially
modify existing investment advisory agreements; and (iii) terminate and
replace the Advisers.
<PAGE>
Table of contents
------
3
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
--------------------------------------------------
1
SUMMARY INFORMATION CONCERNING EQ
ADVISORS TRUST 4
--------------------------------------------------
--------------------------------------------------
2
ABOUT THE INVESTMENT PORTFOLIOS 6
--------------------------------------------------
DOMESTIC PORTFOLIOS 8
EQ/AXP New Dimensions Portfolio 8
EQ/AXP Strategy Aggressive Portfolio 10
EQ/Janus Large Cap Growth Portfolio 12
EQ/Mid Cap Portfolio 14
--------------------------------------------------
--------------------------------------------------
3
MORE INFORMATION ON PRINCIPAL RISKS 16
--------------------------------------------------
--------------------------------------------------
4
MANAGEMENT OF THE TRUST 20
--------------------------------------------------
The Trust 20
The Manager 20
Expense Limitation Agreement 21
The Advisers 21
The Administrator 22
The Transfer Agent 22
Brokerage Practices 22
Brokerage Transactions with Affiliates 22
--------------------------------------------------
--------------------------------------------------
5
FUND DISTRIBUTION ARRANGEMENTS 24
--------------------------------------------------
--------------------------------------------------
6
PURCHASE AND REDEMPTION 25
--------------------------------------------------
--------------------------------------------------
7
HOW ASSETS ARE VALUED 26
--------------------------------------------------
--------------------------------------------------
8
TAX INFORMATION 27
--------------------------------------------------
--------------------------------------------------
9
PRIOR PERFORMANCE OF EACH ADVISER 28
--------------------------------------------------
</TABLE>
<PAGE>
1
Summary information concerning EQ Advisors Trust
------
4
--------------------------------------------------------------------------------
The following chart highlights the four (4) Portfolios described in this
Prospectus that you can choose as investment alternatives under your Contracts
offered by Equitable or EOC. The chart and accompanying information identify
each Portfolio's investment objective(s), principal investment strategies, and
principal risks. "More Information on Principal Risks", which more fully
describes each of the principal risks, is provided beginning on page 16.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST DOMESTIC PORTFOLIOS
--------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
--------------------------------------------------------------------------------------------------
<S> <C>
EQ/AXP NEW DIMENSIONS PORTFOLIO Seeks long-term growth of capital.
--------------------------------------------------------------------------------------------------
EQ/AXP STRATEGY AGGRESSIVE PORTFOLIO Seeks long-term growth of capital.
--------------------------------------------------------------------------------------------------
EQ/JANUS LARGE CAP GROWTH PORTFOLIO Seeks long-term growth of capital in a manner consistent
with preservation of capital.
--------------------------------------------------------------------------------------------------
EQ/FIDELITY MID CAP PORTFOLIO Seeks long-term growth of capital.
--------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-----
5
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks of companies showing the potential for General investment, growth investing and foreign securities
significant growth (often including securities of companies risks.
operating in areas with dynamic economic and
technological changes occurring and foreign markets).
-----------------------------------------------------------------------------------------------------------------------------
Equity securities of growth companies the Adviser chooses General investment, growth investing, small-cap and
based on: (i) considering opportunities and risks within mid-cap company and foreign securities risks.
growing industries and new technologies; (ii) aggressive
growth prospects; and (iii) identification of small and
medium capitalization companies with effective
management, financial strength and competitive market
positions.
-----------------------------------------------------------------------------------------------------------------------------
Common stocks of growth companies with a large market General investment, growth investing, fixed income, junk
capitalization. bond, foreign securities, derivatives and portfolio turnover
risks.
-----------------------------------------------------------------------------------------------------------------------------
Common stocks of companies with medium market General investment, mid-cap company, growth investing,
capitalizations (similar to S&P MidCap 400), but also in value investing, foreign securities, and portfolio turnover
companies with smaller or larger market capitalizations. risks.
Investments may include growth or value stocks with both
growth and value characteristics.
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------- EQ Advisors Trust
<PAGE>
2
About the investment portfolios
------
6
--------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
principal investment objectives, strategies, and risks of each of the
Portfolios. Of course, there can be no assurance that any Portfolio will
achieve its investment objective.
Please note that:
o A fuller description of each of the principal risks is included in the
section "More Information on Principal Risks," which follows the
description of each Portfolio in this section of the Prospectus.
o Additional information concerning each Portfolio's strategies, investments,
and risks can also be found in the Trust's Statement of Additional
Information.
GENERAL INVESTMENT RISKS
Each of the Portfolios is subject to the following risks:
ASSET CLASS RISK: The returns from the types of securities in which a
Portfolio invests may underperform returns from the various general securities
markets or different asset classes.
MARKET RISK: You could lose money over short periods due to fluctuation in a
Portfolio's share price in reaction to stock or bond market movements, and
over longer periods during extended market downturns.
SECURITY SELECTION RISK: There is the possibility that the specific securities
selected by a Portfolio's Adviser will underperform other funds in the same
asset class or benchmarks that are representative of the general performance
of the asset class.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
THE BENCHMARKS
The performance of each of the Trust's Portfolios as shown on the following
pages compares each Portfolio's performance to that of a broad-based
securities market index, an index of funds with similar investment objectives
and/or a blended index. Each of the Portfolios' annualized rates of return are
net of: (i) its investment management fees; and (ii) its other expenses. These
rates are not representative of the actual return you would receive under your
Contract.
Broad-based securities indices are unmanaged and are not subject to fees and
expenses typically associated with managed investment company portfolios.
Broad-based securities indices are also not subject to contract and
insurance-related expenses and charges. Investments cannot be made directly in
a broad-based securities index. Comparisons with these benchmarks, therefore,
are of limited use. They are included because they are widely known and may
help you to understand the universe of securities from which each Portfolio is
likely to select its holdings.
THE RUSSELL MIDCAP GROWTH INDEX is an unmanaged list of common stocks that
measures the performance of the 800 smallest companies in the Russell 1000
Index representing approximately 35% of the total market capitalization of the
Russell 1000 Index. (The Russell 1000 Index measures the performance of the
1,000 largest companies based on total market capitalization.) The Russell
MidCap Growth Index measures the performance of those companies with higher
price-to-book ratios and higher forecasted growth values. It is compiled by
the Frank Russell Company.
THE RUSSELL 1000 GROWTH INDEX is an unmanaged list of common stocks that
measures the performance of Russell 1000 Index companies with higher
price-to-book ratios and higher forecasted growth values. (The Russell 1000
Index measures the performance of the 1,000 largest companies in the Russell
3000 Index, which represents approximately
<PAGE>
------
7
--------------------------------------------------------------------------------
92% of the total market capitalization of the Russell 3000 Index. The Russell
3000 Index measures the performance of the 3,000 largest U.S. companies based
on total market capitalization, which represents approximately 98% of the
investable U.S. equity market). The Russell 1000 Growth Index is compiled by
the Frank Russell Company.
THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500") is an
unmanaged weighted index containing common stocks of 500 industrial,
transportation, utility and financial companies, regarded as generally
representative of the larger capitalization portion of the United States stock
market. The S&P 500 returns reflect the reinvestment of dividends, if any, but
do not reflect fees, brokerage commissions or other expenses of investing.
THE STANDARD & POOR'S MIDCAP 400 INDEX ("S&P 400 MidCap") is an unmanaged
weighted index of 400 domestic stocks chosen for market size (median market
capitalization of about $610 million), liquidity, and industry group
representation. The S&P 400 returns reflect the reinvestment of dividends, if
any, but do not reflect fees, brokerage commissions or other expenses of
investing.
------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS
------
8
--------------------------------------------------------------------------------
EQ/AXP NEW DIMENSIONS PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio primarily invests in common stocks of companies showing the
potential for significant growth. These companies often operate in areas where
dynamic economic and technological changes are occurring. The Portfolio may
also invest up to 30% of its total assets in foreign securities.
The Portfolio's Adviser selects investments by:
o identifying companies the Adviser believes have above-average long-term
growth potential based on: effective management; financial strength; and
competitive market position.
o considering opportunities and risks with respect to interest rate and
economic forecasts both domestically and abroad.
In evaluating whether to sell a security, the Adviser
considers, among other factors, whether:
o the security is overvalued relative to alternative investments;
o the company has met the Adviser's earnings and/or growth expectations;
o political, economic, or other events could affect the company's performance;
o the Adviser wishes to minimize potential losses (i.e., in a market
down-turn); and
o the Adviser identifies a more attractive opportunity.
Although not a primary investment strategy, the Portfolio also may invest in
other instruments, such as money market securities, preferred stocks, debt
obligations (of any rating), and convertible securities. Additionally, the
Portfolio may utilize derivative instruments (such as options and futures
contracts) to produce incremental earnings, hedge existing positions and
increase flexibility.
When market or financial conditions warrant, the Portfolio may invest without
limitation in money market securities for temporary or defensive purposes.
During these times, the Portfolio may make frequent securities trades that
could cause the Portfolio to incur additional transaction costs that could be
passed through to shareholders. Such investment strategies could result in the
Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: The Portfolio may use a growth oriented approach to
stock selection. The price of growth stocks may be more sensitive to changes
in current or expected earnings than the prices of other stocks. The price of
growth stocks is also subject to the risk that the stock price of one or more
companies will fall or will fail to appreciate as anticipated by the Adviser,
regardless of movements in the securities market.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
<PAGE>
------
9
--------------------------------------------------------------------------------
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is September 1, 2000. Therefore, no
prior performance information is available.
WHO MANAGES THE PORTFOLIO
AMERICAN EXPRESS FINANCIAL CORPORATION ("AEFC"), IDS Tower 10, Minneapolis, MN
55440-0010. AEFC has been the Adviser to the Portfolio since the Portfolio
commenced operations. AEFC is a wholly-owned subsidiary of American Express
Company, a financial services company with headquarters at American Express
Tower, World Financial Center, New York, NY 10285. AEFC has provided financial
services since 1894. In addition to offering mutual funds, its family of
companies also offers insurance, annuities, investment certificates and a broad
range of financial management services.
GORDON FINES is principally responsible for the day-to-day management of the
Portfolio. Mr. Fines, a Vice President and senior portfolio manager of AEFC,
has been associated with AEFC since 1991.
------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
------
10
--------------------------------------------------------------------------------
EQ/AXP STRATEGY AGGRESSIVE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio primarily invests in securities of growth companies. Under
normal market conditions, at least 65% of the Portfolio's total assets are
invested in equity securities. The selection of common stocks is the primary
decision in building the investment portfolio.
In pursuit of the Portfolio's goal, the Adviser chooses equity investments by:
o considering opportunities and risks within growing industries and new
technologies;
o selecting companies that the Adviser believes have aggressive growth
prospects; and
o identifying small and medium capitalization companies with: effective
management, financial strength, and competitive market position. Small and
medium capitalization companies are those whose market capitalization is
similar to the market capitalization of companies in the Russell MidCap
Growth Index.
In evaluating whether to sell a security, the Adviser
considers, among other factors, whether:
o the security is overvalued relative to other potential investments;
o the security has reached the Adviser's price objective;
o the company's characteristics change;
o the company has met the Adviser's earnings and/or growth expectations;
o political, economic, or other events could affect the company's performance;
o the Adviser wishes to minimize potential losses (i.e., in a market
down-turn);
o the Adviser wishes to lock in profits;
o the Adviser identifies a more attractive investment opportunity; and
o the company or the security continue to meet the other standards described
above.
Although not a primary investment strategy, the Portfolio also may invest in
foreign securities (up to 25% of its total assets), money market securities,
debt obligations (rated B or higher), derivative instruments (such as options
and futures contracts), and convertible securities.
When market or financial conditions warrant, the Portfolio may invest without
limitation in money market instruments or investment grade debt obligations
(rated BBB or higher) for temporary or defensive purposes. During these times,
the Portfolio may make frequent securities trades that could cause the
Portfolio to incur additional transaction costs that could be passed through
to shareholders. Such investments strategies could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: The Portfolio may use a growth oriented approach to
stock selection. The price of growth stocks may be more sensitive to changes
in current or expected earnings than the prices of other stocks. The price of
growth stocks is also subject to the risk that the stock price of one or more
companies will fall or will fail to appreciate as anticipated by the Adviser,
regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in new or
unseasoned small-cap and mid-cap companies may be subject to more abrupt or
erratic movements in price than are those of larger, more established
companies because: the securities of such companies are less well-known and
may trade less frequently and in lower volume; such companies are more likely
to experience greater or more unexpected changes in their earnings and growth
prospects; and the products or
<PAGE>
------
11
--------------------------------------------------------------------------------
technologies of such companies may be at a relatively early stage of
development or not fully tested.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is September 1, 2000. Therefore, no
prior performance information is available.
WHO MANAGES THE PORTFOLIO
AMERICAN EXPRESS FINANCIAL CORPORATION ("AEFC"), IDS Tower 10, Minneapolis, MN
55440-0010. AEFC has been the Adviser to the Portfolio since the Portfolio
commenced operations. AEFC is a wholly-owned subsidiary of American Express
Company, a financial services company with headquarters at American Express
Tower, World Financial Center, New York, NY 10285. AEFC has provided financial
services since 1894. In addition to offering mutual funds, its family of
companies also offers insurance, annuities, investment certificates and a broad
range of financial management services.
LOUIS GIGLIO and SCOTT MULLINIX are principally responsible for the day-to-day
management of the Portfolio. Mr. Giglio, portfolio manager, has been
associated with AEFC since January 1994 as a senior equity analyst. Mr.
Mullinix, associate portfolio manager, has been associated with AEFC since
1987.
------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
------
12
--------------------------------------------------------------------------------
EQ/JANUS LARGE CAP GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital in a manner consistent
with the preservation of capital.
THE INVESTMENT STRATEGY
The Portfolio invests in securities of growth-oriented companies. Under normal
market conditions, the Portfolio will invest at least 65% of its total assets
in common stocks of growth companies with a large market capitalization.
The Adviser may invest substantially all of the Portfolio's assets in common
stocks if the Adviser believes common stocks will appreciate in value. The
Portfolio is diversified for purposes of the 1940 Act, however, it is highly
concentrated.
-------------------------------------------------------------------------------
For purposes of this Portfolio, generally companies having a market
capitalization greater than $10 billion are considered large companies.
-------------------------------------------------------------------------------
The Adviser applies a "bottom-up" approach in choosing investments, focusing
on the financial condition and competitiveness of individual companies. The
Adviser seeks to identify companies with earnings growth potential that may
not be recognized by the market at large. Although themes may emerge in the
Portfolio, securities are generally selected without regard to any defined
industry sector or other similarly defined selection procedure. If the Adviser
is unable to find investments with earnings growth potential, a significant
portfolio of the Portfolio's assets may be in cash or similar investments.
The Portfolio may also invest without limit in foreign securities either
indirectly (e.g., depositary receipts) or directly in foreign markets. The
Adviser will seek companies that meet its selection criteria, regardless of
where a company is located. Foreign securities are generally selected on a
stock-by-stock basis without regard to any defined allocation among countries
or geographic regions. In addition, the Portfolio may invest in
high-yield/high-risk bonds (less than 35% of the Portfolio's total assets) and
other debt securities, options, futures, forwards, swaps and other types of
derivatives for hedging purposes, or for non-hedging purposes, such as seeking
to enhance return, and securities purchased on a when-issued, delayed delivery
or forward commitment basis.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
JUNK BOND RISK: The Portfolio may invest up to 35% of its total assets in
"junk bonds" or lower-rated securities rated BB or lower by S&P or an
equivalent rating by any other NRSRO or unrated securities of similar quality.
Therefore, credit risk is particularly significant for this Portfolio. Junk
bonds have speculative elements or are predominantly speculative credit risks.
This Portfolio may also be subject to greater credit risk because it may
invest in debt securities issued in connection with corporate restructurings
by highly leveraged issuers or in debt securities not current in the payment
of interest or principal, or in default.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities markets.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest
<PAGE>
------
13
--------------------------------------------------------------------------------
rates fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment-grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
if it invested in higher-rated obligations because BBB-rated securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
DERIVATIVES RISK: Derivatives are financial contracts whose value depends on,
or is derived from the value of an underlying asset, reference rate or index.
Derivatives include stock options, securities index options, currency options,
forward currency exchange contracts, futures contracts, swaps and options on
futures contracts. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate is likely to exceed
100% per year. Higher portfolio turnover (e.g., over 100% per year) will cause
the Portfolio to incur additional transaction costs that could be passed
through to shareholders.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is September 1, 2000. Therefore, no
prior performance information is available.
WHO MANAGES THE PORTFOLIO
JANUS CAPITAL CORPORATION ("Janus"), 100 Fillmore Street, Denver, Colorado
80206-4928. Janus has been the Adviser to the Portfolio since it commenced
operations. Janus manages investment companies, private-label mutual funds and
provides separate account advisory services for institutional accounts. Kansas
City Southern Industries, Inc. ("KCSI") owns approximately 82% of the
outstanding voting stock of Janus, indirectly, through its wholly-owned
subsidiary, Stillwell Financial, Inc. KCSI is a publicly traded holding company
whose primary subsidiaries are engaged in transportation, information
processing and financial services. KCSI has announced its intention to spin-off
its financial services subsidiaries, which it expects to occur in 2000.
MARC PINTO is the Portfolio Manager responsible for the day-to-day management
of the Portfolio. Mr. Pinto manages institutional separate accounts in the
Large Cap Growth discipline and has also served as Assistant Portfolio Manager
for certain Janus funds since joining Janus in 1994.
------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
------
14
--------------------------------------------------------------------------------
EQ/MID CAP PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital.
THE INVESTMENT STRATEGY
The Adviser's principal investment strategies include:
o Normally investing at least 65% of its total assets in common stocks of
companies with medium market capitalizations. Medium market capitalization
companies are those whose market capitalization is similar to the market
capitalization of companies in the S&P MidCap 400 at the time of the
Portfolio's investment. Companies whose capitalization no longer meets
this definition after purchase continue to be considered to have a medium
market capitalization for purposes of the 65% policy.
o Potentially investing up to 35% of its total assets in companies with market
capitalizations that are smaller or larger than those in the S&P MidCap
400 Index.
o Investing in domestic and foreign issuers.
o Investing in either "growth" stocks or "value" stocks or both. The Adviser
is not constrained by any particular investment style. At any given time,
the Adviser may tend to buy "growth" stocks or "value" stocks, or a
combination of both types.
o Using fundamental analysis of each issuer's financial condition and industry
position and market and economic conditions to select investments. In
buying and selling securities for the Portfolio, the Adviser relies on
fundamental analysis of each issuer and its potential for success in light
of its current financial condition, its industry position, and economic
and market conditions. Factors considered include growth potential,
earning estimates and management.
The Adviser may lend the Portfolio's securities to broker-dealers or other
institutions to earn income for the Portfolio. The Adviser may use various
techniques, such as buying and selling futures contracts, to increase or
decrease the Portfolio's exposure to changing security prices or other factors
that affect security values If the Adviser's strategies do not work as
intended, the Portfolio may not achieve its objective.
When market or financial conditions warrant, the Portfolio may invest without
limitation in preferred stocks and investment-grade debt instruments for
temporary or defensive purposes. During these times, the Portfolio may make
frequent securities trades that could cause the Portfolio to incur additional
transaction costs that could be passed through to shareholders. Such
investments could result in the Portfolio not achieving its investment
objectives.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
MID-CAP COMPANY RISK: The Portfolio's investments in new or unseasoned mid-cap
companies may be subject to more abrupt or erratic movements in price than are
those of larger, more established companies because: the securities of such
companies are less well-known and may trade less frequently and in lower
volume; such companies are more likely to experience greater or more
unexpected changes in their earnings and growth prospects; and the products or
technologies of such companies may be at a relatively early stage of
development or not fully tested.
GROWTH INVESTING RISK: The Portfolio may use a growth oriented approach to
stock selection. The price of growth stocks may be more sensitive to changes
in current or expected earnings than the prices of other stocks. The price of
growth stocks is also subject to the risk that the stock price of one or more
companies will fall or will fail to appreciate as anticipated by the Adviser,
regardless of movements in the securities market.
VALUE INVESTING: The Portfolio may also use a value-oriented approach to stock
selection. Value investing is subject to the risk that a value stock's
intrinsic value may never be fully recognized or realized by the market, or
its
<PAGE>
------
15
--------------------------------------------------------------------------------
price may go down. There is also the risk that a stock judged to be
undervalued may actually be appropriately priced.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate is likely to be over
100% per year. Higher portfolio turnover (e.g., over 100% per year) will cause
the Portfolio to incur additional transaction costs that could be passed
through to shareholders.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is September 1, 2000. Therefore, no
prior performance information is available.
WHO MANAGES THE PORTFOLIO
FIDELITY MANAGEMENT & RESEARCH COMPANY ("FMR"), 82 Devonshire Street, Boston,
MA 02109. FMR has been the Adviser to the Portfolio since the Portfolio
commenced operations. FMR Corp., organized in 1972, is the ultimate parent
company of FMR.
DAVID FELMAN is principally responsible for the day-to-day management of the
Portfolio. Mr. Felman, a Vice President and portfolio manager, has been
associated with FMR since 1993.
------------------- EQ Advisors Trust
<PAGE>
3
More information on principal risks
------
16
--------------------------------------------------------------------------------
Risk is the chance that you will lose money on your investment or that it will
not earn as much as you expect. In general, the greater the risk, the more
money your investment can earn for you and the more you can lose. Like other
investment companies, the value of each Portfolio's shares may be affected by
the Portfolio's investment objective(s), principal investment strategies and
particular risk factors. Consequently, each Portfolio may be subject to
different principal risks. Some of the principal risks of investing in the
Portfolios are discussed below. However, other factors may also affect each
Portfolio's net asset value.
There is no guarantee that a Portfolio will achieve its investment objective(s)
or that it will not lose principal value.
GENERAL INVESTMENT RISKS: Each Portfolio is subject to the following risks:
ASSET CLASS RISK: There is the possibility that the returns from the types of
securities in which a Portfolio invests will underperform returns from the
various general securities markets or different asset classes. Different types
of securities tend to go through cycles of outperformance and underperformance
in comparison to the general securities markets.
MARKET RISK: Each Portfolio's share price moves up and down over the short
term in reaction to stock or bond market movements. This means that you could
lose money over short periods, and perhaps over longer periods during extended
market downturns.
SECURITY SELECTION RISK: The Adviser(s) for each Portfolio rely on the
insights of different specialists in making investment decisions based on the
Portfolio's particular investment objective(s) and investment strategies.
There is the possibility that the specific securities held by a Portfolio will
underperform other funds in the same asset class or benchmarks that are
representative of the general performance of the asset class because of the
Adviser's choice of portfolio securities.
As indicated in "Summary Information Concerning EQ Advisors Trust" and "About
the Investment Portfolios," a particular Portfolio may also be subject to the
following risks:
CONVERTIBLE SECURITIES RISK: Convertible securities may include both
convertible debt and convertible preferred stock. Such securities may be
converted into shares of the underlying common stock at either a stated price
or stated rate. Therefore, convertible securities enable you to benefit from
increases in the market price of the underlying common stock. Convertible
securities provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. The value of convertible securities fluctuates in relation to changes
in interest rates and, in addition, fluctuates in relation to the underlying
common stock. Subsequent to purchase by a Portfolio, convertible securities
may cease to be rated or a rating may be reduced below the minimum required
for purchase by that Portfolio. Each Adviser will consider such event in its
determination of whether a Portfolio should continue to hold the securities.
DERIVATIVES RISK: Derivatives are financial contracts whose value depends on,
or is derived from the value of an underlying asset, reference rate or index.
Derivatives include stock options, securities index options, currency options,
forward currency exchange contracts, futures contracts, swaps and options of
futures contracts. Certain Portfolios can use derivatives involving the U.S.
Government and foreign government securities and currencies. Investments in
derivatives can significantly increase your exposure to market risk, or credit
risk of the counterparty. Derivatives also involve the risk of mispricing or
improper valuation and the risk that changes in value of the derivative may
not correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that the Portfolio invests a substantial
amount of its assets in fixed income securities, the Portfolio may be subject
to the following risks:
<PAGE>
------
17
--------------------------------------------------------------------------------
CREDIT RISK: Credit risk is the risk that the issuer or guarantor of a debt
security or counterparty to a Portfolio's transactions will be unable or
unwilling to make timely principal and/or interest payments, or otherwise
will be unable or unwilling to honor its financial obligations. Each of the
Portfolios may be subject to credit risk to the extent that it invests in
debt securities or engages in transactions, such as securities loans or
repurchase agreements, which involve a promise by a third party to honor an
obligation to the Portfolio. Credit risk is particularly significant for the
Portfolios, such as the Alliance Growth Investors Portfolio and the Alliance
High Yield Portfolio, that invest a material portion of their assets in
"JUNK BONDS" or lower-rated securities (i.e., rated BB or lower by S&P or an
equivalent rating by any other NRSRO or unrated securities of similar
quality). These debt securities and similar unrated securities have
speculative elements or are predominantly speculative credit risks.
Portfolios such as the Alliance Growth Investors Portfolio and the Alliance
High Yield Portfolio may also be subject to greater credit risk because they
may invest in debt securities issued in connection with corporate
restructurings by highly leveraged issuers or in debt securities not current
in the payment of interest or principal, or in default.
INTEREST RATE RISK: The price of a bond or a fixed income security is
dependent upon interest rates. Therefore, the share price and total return
of a Portfolio investing a significant portion of its assets in bonds or
fixed income securities will vary in response to changes in interest rates.
A rise in interest rates causes the value of a bond to decrease, and vice
versa. There is the possibility that the value of a Portfolio's investment
in bonds or fixed income securities may fall because bonds or fixed income
securities generally fall in value when interest rates rise. The longer the
term of a bond or fixed income instrument, the more sensitive it will be to
fluctuations in value from interest rate changes. Changes in interest rates
may have a significant effect on Portfolios holding a significant portion of
their assets in fixed income securities with long term maturities.
INVESTMENT GRADE SECURITIES RISK: Debt securities are rated by national bond
ratings agencies. Securities rated BBB by S&P or Baa by Moody's are
considered investment grade securities, but are somewhat riskier than higher
rated obligations because they are regarded as having only an adequate
capacity to pay principal and interest, and are considered to lack
outstanding investment characteristics.
JUNK BONDS OR LOWER RATED SECURITIES RISK: Bonds rated below investment
grade by S&P and Moody's are speculative in nature, may be subject to
certain risks with respect to the issuing entity and to greater market
fluctuations than higher rated fixed income securities. They are usually
issued by companies without long track records of sales and earnings, or by
those companies with questionable credit strength. These bonds are
considered "below investment grade." The retail secondary market for these
"junk bonds" may be less liquid than that of higher rated securities and
adverse conditions could make it difficult at times to sell certain
securities or could result in lower prices than those used in calculating
the Portfolio's net asset value.
FOREIGN SECURITIES RISK: A Portfolio's investments in foreign securities,
including depositary receipts, involve risks not associated with investing in
U.S. securities and can affect a Portfolio's performance. Foreign markets,
particularly emerging markets, may be less liquid, more volatile and subject to
less government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. The specific risks of investing in foreign securities, among
others, include:
------------------- EQ Advisors Trust
<PAGE>
----------
18
--------------------------------------------------------------------------------
CURRENCY RISK: The risk that changes in currency exchange rates will
negatively affect securities denominated in, and/or receiving revenues in,
foreign currencies. Adverse changes in currency exchange rates (relative to
the U.S. dollar) may erode or reverse any potential gains from a Portfolio's
investment in securities denominated in a foreign currency or may widen
existing losses.
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging market countries and/or their securities markets. Generally,
economic structures in these countries are less diverse and mature than
those in developed countries, and their political systems are less stable.
Investments in emerging markets countries may be affected by national
policies that restrict foreign investment in certain issuers or industries.
The small size of their securities markets and low trading volumes can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines. As a result, a Portfolio investing in emerging market countries
may be required to establish special custody or other arrangements before
investing.
POLITICAL/ECONOMIC RISK: Changes in economic and tax policies, government
instability, war or other political or economic actions or factors may have
an adverse effect on a Portfolio's foreign investments.
REGULATORY RISK: Less information may be available about foreign companies.
In general, foreign companies are not subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices
and requirements as are U.S. companies.
TRANSACTION COSTS RISK: The costs of buying and selling foreign securities,
including tax, brokerage and custody costs, generally are higher than those
involving domestic transactions.
GROWTH INVESTING RISK: Growth investing generally focuses on companies that,
due to their strong earnings and revenue potential, offer above-average
prospects for capital growth, with less emphasis on dividend income. Earnings
predictability and confidence in earnings forecasts are an important part of
the selection process. As a result, the price of growth stocks may be more
sensitive to changes in current or expected earnings than the prices of other
stocks. Advisers using this approach generally seek out companies experiencing
some or all of the following: high sales growth, high unit growth, high or
improving returns on assets and equity, and a strong balance sheet. Such
Advisers also prefer companies with a competitive advantage such as unique
management, marketing or research and development. Growth investing is also
subject to the risk that the stock price of one or more companies will fall or
will fail to appreciate as anticipated by the Advisers, regardless of
movements in the securities market.
LIQUIDITY RISK: Certain securities held by a Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like. A
Portfolio may have to hold these securities longer than it would like and may
forego other investment opportunities. There is the possibility that a
Portfolio may lose money or be prevented from earning capital gains if it can
not sell a security at the time and price that is most beneficial to the
Portfolio. Portfolios that invest in privately-placed securities, high-yield
bonds, mortgage-backed securities or foreign or emerging market securities,
which have all experienced periods of illiquidity, are subject to liquidity
risks. A particular Portfolio may be more susceptible to some of these risks
than others, as noted in the description of each Portfolio.
PORTFOLIO TURNOVER RISK: Consistent with their investment policies, the
Portfolios also will purchase and sell securities without regard to the effect
on portfolio turnover. Higher portfolio turnover (e.g., over 100% per year)
will cause a Portfolio to incur additional transaction costs that could be
passed through to shareholders.
<PAGE>
------
19
--------------------------------------------------------------------------------
SMALL-CAP AND MID-CAP COMPANY RISK: A Portfolio's investments in small-cap and
mid-cap companies may involve greater risks than investments in larger, more
established issuers. Smaller companies may have narrower product lines, more
limited financial resources and more limited trading markets for their stock,
as compared with larger companies. Their securities may be less well-known and
trade less frequently and in more limited volume than the securities of
larger, more established companies. In addition, small-cap and mid-cap
companies are typically subject to greater changes in earnings and business
prospects than larger companies. Consequently, the prices of small company
stocks tend to rise and fall in value more frequently than the stocks of
larger companies. Although investing in small-cap and mid-cap companies offers
potential for above-average returns, the companies may not succeed and the
value of their stock could decline significantly.
VALUE INVESTING RISK: Value investing attempts to identify strong companies
selling at a discount from their perceived true worth. Advisers using this
approach generally select stocks at prices, in their view, that are
temporarily low relative to the company's earnings, assets, cash flow and
dividends. Value investing is subject to the risk that the stocks' intrinsic
value may never be fully recognized or realized by the market, or their prices
may go down. In addition, there is the risk that a stock judged to be
undervalued may actually be appropriately priced. Value investing generally
emphasizes companies that, considering their assets and earnings history, are
attractively priced and may provide dividend income.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
------------------- EQ Advisors Trust
<PAGE>
4
Management of the Trust
------
20
--------------------------------------------------------------------------------
This section gives you information on the Trust, the Manager and the Advisers
for the Portfolios. More detailed information concerning each of the Advisers
and portfolio managers is included in the description for each Portfolio in
the section "About The Investment Portfolios."
THE TRUST
The Trust is organized as a Delaware business trust and is registered with the
Securities and Exchange Commission ("SEC") as an open-end management
investment company. The Trust issues shares of beneficial interest that are
currently divided among forty-five (45) Portfolios, each of which has
authorized Class IA and Class IB shares. Each Portfolio has its own
objectives, investment strategies and risks, which have been previously
described in this prospectus.
THE MANAGER
The Equitable Life Assurance Society of the United States ("Equitable"), 1290
Avenue of the Americas, New York, New York 10104, currently serves as the
Manager of the Trust. EQ Financial Consultants, Inc. ("EQFC") previously
served as the Manager of the Trust, until September 17, 1999 when the Trust's
Investment Management Agreement was transferred to Equitable. Equitable is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended, and a wholly-owned subsidiary of AXA Financial, Inc. ("AXA
Financial"), a subsidiary of AXA, a French insurance holding company.
Subject to the supervision and direction of the Board of Trustees, the Manager
has overall responsibility for the general management of the Trust. In the
exercise of that responsibility and under the Multi-Manager Order, the
Manager, without obtaining shareholder approval but subject to the review and
approval by the Board of Trustees, may: (i) select new or additional Advisers
for the Portfolios; (ii) enter into new investment advisory agreements and
materially modify existing investment advisory agreements; and (iii) terminate
and replace the Advisers. The Manager also monitors each Adviser's investment
program and results, reviews brokerage matters, and carries out the directives
of the Board of Trustees. The Manager also supervises the provision of
services by third parties such as the Trust's custodian.
<PAGE>
------
21
--------------------------------------------------------------------------------
The contractual management fee rates payable by the Trust are at the following
annual percentages of the value of each Portfolio's average daily net assets:
CONTRACTUAL FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
FIRST NEXT NEXT NEXT
EQUITY PORTFOLIOS $1 BILLION $1 BILLION $3 BILLION $5 BILLION THEREAFTER
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EQ/AXP New Dimensions 0.650% 0.600% 0.575% 0.550% 0.525%
EQ/AXP Strategy Aggressive 0.700% 0.650% 0.625% 0.600% 0.575%
EQ/Janus Large Cap Growth 0.900% 0.850% 0.825% 0.800% 0.775%
EQ/Mid Cap 0.700% 0.650% 0.625% 0.600% 0.575%
------------------------------------------------------------------------------------------------------
</TABLE>
EXPENSE LIMITATION AGREEMENT
In the interest of limiting until expenses of each Portfolio, the
Manager has entered into an amended and restated expense limitation agreement
with the Trust with respect to the Portfolios ("Expense Limitation Agreement").
Pursuant to that Expense Limitation Agreement, the Manager has agreed to waive
or limit its fees and to assume other expenses so that the total annual
operating expenses of each Portfolio other than interest, taxes, brokerage
commissions (other expenditures which are capitalized in accordance with
generally accepted accounting principles, other extraordinary expenses not
incurred in the ordinary course of each Portfolio's business and amounts
payable pursuant to a plan adopted in accordance with Rule 12b-1 under the 1940
Act) are limited to the following respective expense ratios:
EXPENSE LIMITATION PROVISIONS
<TABLE>
<CAPTION>
-----------------------------------------------------
TOTAL EXPENSES
LIMITED TO (% OF
PORTFOLIOS DAILY NET ASSETS)
-----------------------------------------------------
<S> <C>
EQ/AXP New Dimensions 0.95%
EQ/AXP Strategy Aggressive 1.00%
EQ/Janus Large Cap Growth 1.20%
EQ/Mid Cap 1.00%
-----------------------------------------------------
</TABLE>
Each Portfolio may at a later date reimburse to the Manager the management fees
waived or limited and other expenses assumed and paid by the Manager pursuant to
the Expense Limitation Agreement provided such Portfolio has reached a
sufficient asset size to permit such reimbursement to be made without causing
the total annual expense ratio of each Portfolio to exceed the percentage limits
stated above. Consequently, no reimbursement by a Portfolio will be made unless:
(i) the Portfolio's assets exceed $100 million; (ii) the Portfolio's total
annual expense ratio is less than the respective percentages stated above; and
(iii) the payment of such reimbursement has been approved by the Trust's Board
of Trustees on a quarterly basis.
The total amount of reimbursement to which the Manager may be entitled will
equal, at any time, the sum of (i) all investment management fees previously
waived or reduced by the Manager and (ii) all other payments previously
remitted by the Manager to the Portfolio during any of the previous five (5)
fiscal years, less any reimbursement that the Portfolio has previously paid to
the Manager with respect to (a) such investment management fees previously
waived or reduced and (b) such other payments previously remitted by the
Manager to the Portfolio.
THE ADVISERS
Each Portfolio has one or more Advisers that furnish an investment program for
the Portfolio (or portion thereof for which the entity serves as Adviser)
pursuant to an investment advisory agreement with the Manager. Each
------------------- EQ Advisors Trust
<PAGE>
------
22
--------------------------------------------------------------------------------
Adviser makes investment decisions on behalf of the Portfolio (or portion
thereof for which the entity serves as Adviser), places all orders for the
purchase and sale of investments for the Portfolio's account with brokers or
dealers selected by such Adviser or the Manager and may perform certain
limited related administrative functions in connection therewith.
The Manager has received an exemptive order, the Multi-Manager Order, from the
SEC that permits the Manager, subject to board approval and without the
approval of shareholders to: (a) employ a new Adviser or additional Advisers
for any Portfolio; (b) enter into new investment advisory agreements and
materially modify existing investment advisory agreements; and (c) terminate
and replace the Advisers without obtaining approval of the relevant Portfolio'
s shareholders. However, the Manager may not enter into an investment advisory
agreement with an "affiliated person" of the Manager (as that term is defined
in Section 2(a)(3) of the 1940 Act) ("Affiliated Adviser"), such as Alliance,
unless the investment advisory agreement with the Affiliated Adviser,
including compensation, is approved by the affected Portfolio's shareholders,
including, in instances in which the investment advisory agreement pertains to
a newly formed Portfolio, the Portfolio's initial shareholder. In such
circumstances, shareholders would receive notice of such action, including the
information concerning the Adviser that normally is provided in an information
statement under Schedule 14C of the Securities Exchange Act of 1934 ("1934
Act").
The Manager pays each Adviser a fee based on the Portfolio's average daily net
assets. No Portfolio is responsible for the fees paid to each of the Advisers.
THE ADMINISTRATOR
Pursuant to an agreement, Equitable currently serves as the Administrator to
the Trust. As Administrator, Equitable provides the Trust with necessary
administrative, fund accounting and compliance services, and makes available
the office space, equipment, personnel and facilities required to provide such
services to the Trust.
Equitable may carry out its responsibilities either directly or through
sub-contracting with third party service providers. For these services, the
Trust pays Equitable $30,000 for each Portfolio, and a monthly fee at the
annual rate of 0.04 of 1% of the first $3 billion of total Trust assets, 0.03
of 1% of the next $3 billion of the total Trust assets; 0.025 of 1% of the
next $4 billion of the total Trust assets; and 0.0225% of 1% of the total
Trust assets in excess of $10 billion.
THE TRANSFER AGENT
Equitable serves as the transfer agent and dividend disbursing agent of the
Trust and receives no compensation for serving in such capacity.
BROKERAGE PRACTICES
In selecting brokers and dealers, in accordance with Section 28(e) of the 1934
Act, the Manager and each Adviser may consider research and brokerage services
received by the Manager, the Advisers, the Trust or any Portfolio. Subject to
seeking the most favorable net price and execution available, the Manager and
each Adviser may also consider sales of shares of the Trust as a factor in the
selection of brokers and dealers. Finally, at the discretion of the Board, the
Trust may direct the Manager to cause Advisers to effect securities
transactions through broker-dealers in a manner that would help to generate
resources to (i) pay the cost of certain expenses which the Trust is required
to pay or for which the Trust is required to arrange payment or (ii) finance
activities that are primarily intended to result in the sale of Trust shares.
BROKERAGE TRANSACTIONS WITH AFFILIATES
To the extent permitted by law, the Trust may engage in securities and other
transactions with entities that may be affiliated with the Manager or the
Advisers. The 1940 Act generally prohibits the Trust from engaging in
principal
<PAGE>
------
23
--------------------------------------------------------------------------------
securities transactions with an affiliate of the Manager or the Advisers
unless pursuant to an exemptive order from the SEC. For these purposes,
however, the Trust has considered this issue and believes, based upon advice
of counsel, that a broker-dealer affiliate of an Adviser to one Portfolio
should not be treated as an affiliate of an Adviser to another Portfolio for
which such Adviser does not provide investment advice in whole or in part. The
Trust has adopted procedures that are reasonably designed to provide that any
commission it pays to affiliates of the Manager or Advisers does not exceed
the usual and customary broker's commission. The Trust has also adopted
procedures permitting it to purchase securities, under certain restrictions
prescribed by a rule under the 1940 Act, in a public offering in which an
affiliate of the Manager or Advisers is an underwriter.
------------------- EQ Advisors Trust
<PAGE>
5
Fund distribution arrangements
------
24
--------------------------------------------------------------------------------
The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares and Class IB shares. AXA Advisors, LLC ("AXA Advisors") serves as one
of the distributors for the Class IA shares of the Trust offered by this
Prospectus as well as one of the distributors for the Class IB shares.
Equitable Distributors, Inc. ("EDI") serves as the other distributor for the
Class IA shares of the Trust as well as the Class IB shares. Both classes of
shares are offered and redeemed at their net asset value without any sales
load. AXA Advisors and EDI are affiliates of Equitable. Both AXA Advisors and
EDI are registered as broker-dealers under the 1934 Act and are members of the
National Association of Securities Dealers, Inc.
The Trust has adopted a Distribution Plan under Rule 12b-1 under the 1940 Act
for the Trust's Class IB shares. Under the Class IB Distribution Plan the
Class IB shares of the Trust pay each of the distributors an annual fee to
compensate them for promoting, selling and servicing shares of the Portfolios.
The annual fees equal 0.25% of each Portfolio's average daily net assets. Over
time, the fees will increase your cost of investing and may cost you more than
other types of charges.
<PAGE>
6
Purchase and redemption
------
25
--------------------------------------------------------------------------------
The price at which a purchase or redemption is effected is based on the next
calculation of net asset value after an order is placed by an insurance company
or qualified retirement plan investing in or redeeming from the Trust.
Net asset value per share is calculated for purchases and redemption of shares
of each Portfolio by dividing the value of total Portfolio assets, less
liabilities (including Trust expenses and class related expenses, which are
accrued daily), by the total number of outstanding shares of that Portfolio.
The net asset value per share of each Portfolio is determined each business day
at 4:00 p.m. Eastern time. Net asset value per share is not calculated on days
on which the New York Stock Exchange ("NYSE") is closed for trading.
Portfolios that invest a significant portion of their assets in foreign
securities may experience changes in their net asset value on days when a
shareholder may not purchase or redeem shares of that Portfolio because foreign
securities (other than depositary receipts) are valued at the close of business
in the applicable foreign country.
All shares are purchased and redeemed in accordance with the Trust's Amended
and Restated Declaration of Trust and By-Laws. Sales and redemptions of shares
of the same class by the same shareholder on the same day will be netted for
each Portfolio. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders.
The Trust may suspend redemption, if permitted by the 1940 Act, for any period
during which the New York Stock Exchange is closed or during which trading is
restricted by the SEC or the SEC declares that an emergency exists. Redemption
may also be suspended during other periods permitted by the SEC for the
protection of the Trust's shareholders. If the Board of Trustees determines
that it would be detrimental to the best interest of the Trust's remaining
shareholders to make payment in cash, the Trust may pay redemption proceeds in
whole or in part by a distribution-in-kind of readily marketable securities.
You should note that the Trust is not designed for professional "market timing"
organizations, or other organizations or individuals engaging in a market
timing strategy, making programmed transfers, frequent transfers or transfers
that are large in relation to the total assets of each of the Trust's
Portfolios. Market timing strategies are disruptive to the Trust's Portfolios.
If we determine that your transfer patterns among the Trust's Portfolios
reflect a market timing strategy, we reserve the right to take action
including, but not limited to: restricting the availability of transfers
through telephone requests, facsimile transmissions, automated telephone
services, internet services or any electronic transfer services. We may also
refuse to act on transfer instructions of an agent acting under a power of
attorney who is acting on behalf of more than one owner.
<PAGE>
7
How assets are valued
------
26
--------------------------------------------------------------------------------
Values are determined according to accepted practices and all laws and
regulations that apply. The assets of each Portfolio are generally valued as
follows:
o Stocks and debt securities which mature in more than 60 days are valued on
the basis of market quotations.
o Foreign securities not traded directly, including depositary receipts, in
the United States are valued at representative quoted prices in the
currency in the country of origin. Foreign currency is converted into
United States dollar equivalents at current exchange rates. Because
foreign markets may be open at different times than the NYSE, the value of
a Portfolio's shares may change on days when shareholders are not able to
buy or sell them. If events materially affecting the values of the
Portfolios' foreign investments occur between the close of foreign markets
and the close of regular trading on the NYSE, these investments may be
valued at their fair value.
o Short-term debt securities in the Portfolios, which mature in 60 days or
less are valued at amortized cost, which approximates market value.
o Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided are valued in good
faith by the Valuation Committee of the Board of Trustees of the Trust
using its best judgment.
<PAGE>
8
Tax information
------
27
--------------------------------------------------------------------------------
Each Portfolio of the Trust is a separate regulated investment company for
federal income tax purposes. Regulated investment companies are usually not
taxed at the entity (Portfolio) level. They pass through their income and
gains to their shareholders by paying dividends. Their shareholders include
this income on their respective tax returns. A Portfolio will be treated as a
regulated investment company if it meets specified federal income tax rules,
including types of investments, limits on investments, calculation of income,
and dividend payment requirements. Although the Trust intends that it and each
Portfolio will be operated to have no federal tax liability, if they have any
federal tax liability, that could hurt the investment performance of the
Portfolio in question. Also, any Portfolio investing in foreign securities or
holding foreign currencies could be subject to foreign taxes which could
reduce the investment performance of the Portfolio.
It is important for each Portfolio to maintain its federal income tax
regulated investment company status because the shareholders of the Portfolio
that are insurance company separate accounts will then be able to use a
favorable federal income tax investment diversification testing rule in
determining whether the Contracts indirectly funded by the Portfolio meet tax
qualification rules for variable insurance contracts. If a Portfolio fails to
meet specified investment diversification requirements, owners of non-pension
plan Contracts funded through the Trust could be taxed immediately on the
accumulated investment earnings under their Contracts and could lose any
benefit of tax deferral. Equitable, in its capacity as Administrator therefore
carefully monitors compliance with all of the regulated investment company
rules and variable insurance contract investment diversification rules.
<PAGE>
9
Prior performance of each adviser
------
28
--------------------------------------------------------------------------------
The following table provides information concerning the historical performance
of another registered investment company (or series), account or other
institutional private accounts managed by each Adviser that has investment
objectives, policies, strategies and risks substantially similar to those of
the respective Portfolio(s) of the Trust for which it serves as Adviser. The
data is provided to illustrate the past performance of each Adviser in managing
a substantially similar investment vehicle as measured against specified market
indices. This data does not represent the past performance of any of the
Portfolios or the future performance of any Portfolio or its Adviser.
Consequently, potential investors should not consider this performance data as
an indication of the future performance of any Portfolio of the Trust or of its
Adviser and should not confuse this performance data with performance data for
each of the Trust's Portfolios, which is shown for each Portfolio that has at
least one full year of operations under the caption "ABOUT THE INVESTMENT
PORTFOLIOS."
Each Adviser's performance data shown below for other registered investment
companies (or series thereof) was calculated in accordance with standards
prescribed by the SEC for the calculation of average annual total return
information for registered investment companies. Average annual total return
reflects changes in share prices and reinvestment of dividends and
distributions and is net of fund expenses. In each such instance, the share
prices and investment returns will fluctuate, reflecting market conditions as
well as changes in company-specific fundamentals of portfolio securities.
Composite performance data relating to the historical performance of
institutional private accounts as well as registered investment companies
managed by Janus was calculated on a total return basis and includes all
losses. The total returns for the Janus LargeCap Growth Composite reflect the
deduction of all fees assessed paid by the private accounts and investment
companies. The includes all accounts with assets above $5 million for which
Janus has discretionary authority, including mutual funds. Accounts enter the
composite upon the first full quarter under management in which assets exceed
the stated minimum. Prior to 1995, all discretionary accounts were included in
the appropriate composite, regardless of asset size, and there has been no
restatement of pre-1995 performance. As of March 31, 2000 the LargeCap Growth
Composite included 57 accounts and assets of $5,129.5 million, which
represented 1.62% of total assets under management. Securities transactions are
accounted for on the trade date and accrual accounting is utilized. Cash and
equivalents are included in performance returns. The institutional private
accounts that are included in the LargeCap Growth Composite are not subject to
the same types of expenses to which the relevant Portfolio is subject or to the
diversification requirements, specific tax restrictions and investment
limitations imposed on the Portfolio by the 1940 Act or Subchapter M of the
Internal Revenue Code. Consequently, the performance results for the LargeCap
Growth Composite could have been adversely affected if the institutional
private accounts included in the LargeCap Growth Composite had been regulated
as investment companies under the federal securities laws.
The investment results presented below are unaudited. For more information on
the specified market indices used below, see the section "The Benchmarks." The
name of the other fund or account managed by the adviser is shown in BOLD. The
name of the Trust Portfolio is shown in (parentheses). The name of the
benchmark is shown in italics.
<PAGE>
------
29
--------------------------------------------------------------------------------
ANNUAL RATES OF RETURN OF OTHER FUNDS OR ACCOUNTS
MANAGED BY ADVISERS AS OF [12/31/99]
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1 5 10 SINCE INCEPTION
YEAR YEARS YEARS INCEPTION DATE
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OTHER FUND OR ACCOUNT MANAGED BY ADVISER
(EQAT Portfolio)
-----------------------------------------------------------------------------------------
Benchmark
-----------------------------------------------------------------------------------------
AXP NEW DIMENSIONS FUND
(EQ/AXP New Dimensions Portfolio)
-----------------------------------------------------------------------------------------
Russell 1000 Growth Index1
-----------------------------------------------------------------------------------------
AXP STRATEGY AGGRESSIVE FUND2
(EQ/AXP Strategy Aggressive Portfolio)
-----------------------------------------------------------------------------------------
Russell MidCap Growth Index3
-----------------------------------------------------------------------------------------
FIDELITY [ ] FUND
(EQ/Mid Cap Portfolio)
-----------------------------------------------------------------------------------------
S&P MidCap 400 Index3
-----------------------------------------------------------------------------------------
JANUS LARGECAP GROWTH COMPOSITE
(EQ/Janus Large Cap Growth Portfolio)
-----------------------------------------------------------------------------------------
Russell 1000 Growth Index1
-----------------------------------------------------------------------------------------
</TABLE>
1 THE RUSSELL 1000 GROWTH INDEX is an unmanaged list of common stocks that
measures the performance of Russell 1000 Index companies with higher
price-to-book ratios and higher forecasted growth values. (The Russell 1000
Index measures the performance of the 1,000 largest companies in the Russell
3000 Index, which represents approximately 92% of the total market
capitalization of the Russell 3000 Index. The Russell 3000 Index measures the
performance of the 3,000 largest U.S. companies based on total market
capitalization, which represents approximately 98% of the investable U.S.
equity market). The Russell 1000 Growth Index does not include fees or
operating expenses and is not available for actual investment. It is compiled
by the Frank Russell Company.
2 [ADDITIONAL INFORMATION ABOUT RELEVANT CLASS TO BE ADDED].
3 THE STANDARD & POOR'S MIDCAP 400 INDEX ("S&P 400 MidCap") is an unmanaged
weighted index of 400 domestic stocks chosen for market size (median market
capitalization of about $610 million), liquidity, and industry group
representation. The S&P 400 MidCap reflects the reinvestment of income
dividends and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing.
4 The Russell MidCap Growth Index is an unmanaged index (with no defined
investment objective) measuring the performance of those Russell MidCap Index
companies with higher price-to-book ratios and higher forecasted growth
values. The Russell MidCap Index measures the performance of the 800 smallest
companies in the Russell 1000 Index, which represent approximately 26% of the
total market capitalization of the Russell 1000 Index. The index does not
include fees or operating expenses and is not available for actual
investment. It is compiled by the Frank Russell Company.
------------------- EQ Advisors Trust
<PAGE>
EQ Advisors Trust(Service Mark)
PROSPECTUS DATED SEPTEMBER 1, 2000
-----
1
--------------------------------------------------------------------------------
This Prospectus describes four (4) Portfolios offered by EQ Advisors Trust and
the Class IB shares offered by the Trust on behalf of each Portfolio that you
can choose as investment alternatives. Each Portfolio has its own investment
objective and strategies that are designed to meet different investment goals.
This Prospectus contains information you should know before investing. Please
read this Supplement and the Prospectus carefully before investing and keep it
for future reference.
DOMESTIC PORTFOLIOS
-------------------
EQ/AXP New Dimensions Portfolio
EQ/AXP Strategy Aggressive Portfolio
EQ/Janus Large Cap Growth Portfolio
EQ/Mid Cap Portfolio
-------------------------------------------------------------------------------
YOU SHOULD BE AWARE THAT THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED OF THE INVESTMENT MERIT OF THESE PORTFOLIOS OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Supplement-Class B
<PAGE>
Overview
-----
2
--------------------------------------------------------------------------------
EQ ADVISORS TRUST
This Prospectus tells you about four (4) current Portfolios of EQ Advisors Trust
("Trust") and the Class IB shares offered by the Trust on behalf of each
Portfolio. The Trust is an open-end management investment company. Each
Portfolio is a separate series of the Trust with its own investment objective,
investment strategies and risks, which are described in this Prospectus. Each of
the current Portfolios of the Trust are diversified for purposes of the
Investment Company Act of 1940, as amended ("1940 Act").
The Trust's shares are currently sold only to insurance company separate
accounts in connection with variable life insurance contracts and variable
annuity certificates and contracts (the "Contract" or collectively, the
"Contracts") issued by The Equitable Life Assurance Society of the United States
("Equitable") and Equitable of Colorado, Inc. ("EOC") as well as insurance
companies that are not affiliated with Equitable or EOC ("non-affiliated
insurance companies") and to The Equitable Investment Plan for Employees,
Managers and Agents ("Equitable Plan"). The Prospectus is designed to help you
make informed decisions about the Portfolios that are available under your
Contract or under the Equitable Plan. You will find information about your
Contract and how it works in the accompanying prospectus for the Contracts if
you are a Contractholder or participant under a Contract.
Equitable currently serves as the Manager of the Trust. In such capacity,
Equitable currently has overall responsibility for the general management and
administration of the Trust.
Information about the Advisers for each Portfolio is contained in the
description concerning that Portfolio in the section entitled "About the
Investment Portfolios." The Manager has the ultimate responsibility to oversee
each of the Advisers and to recommend their hiring, termination and replacement.
Subject to approval by the Board of Trustees, the Manager has been granted
relief by the Securities and Exchange Commission ("SEC") ("Multi-Manager Order")
that enables the Manager without obtaining shareholder approval to: (i) select
new or additional Advisers for each of the Trust's Portfolios; (ii) enter into
new investment advisory agreements and materially modify existing investment
advisory agreements; and (iii) terminate and replace the Advisers.
<PAGE>
Table of contents
-----
3
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
---------------------------------------------------
1
SUMMARY INFORMATION CONCERNING EQ
ADVISORS TRUST 4
---------------------------------------------------
2
ABOUT THE INVESTMENT PORTFOLIOS 6
---------------------------------------------------
DOMESTIC PORTFOLIOS 8
EQ/AXP New Dimensions Portfolio 8
EQ/AXP Strategy Aggressive Portfolio 10
EQ/Janus Large Cap Growth Portfolio 12
EQ/Mid Cap Portfolio 14
---------------------------------------------------
3
MORE INFORMATION ON PRINCIPAL RISKS 16
---------------------------------------------------
4
MANAGEMENT OF THE TRUST 20
---------------------------------------------------
The Trust 20
The Manager 20
Expense Limitation Agreement 21
The Advisers 21
The Administrator 22
The Transfer Agent 22
Brokerage Practices 22
Brokerage Transactions with Affiliates 22
---------------------------------------------------
5
FUND DISTRIBUTION ARRANGEMENTS 24
---------------------------------------------------
6
PURCHASE AND REDEMPTION 25
---------------------------------------------------
7
HOW ASSETS ARE VALUED 26
---------------------------------------------------
8
TAX INFORMATION 27
---------------------------------------------------
9
PRIOR PERFORMANCE OF EACH ADVISER 28
---------------------------------------------------
</TABLE>
<PAGE>
1
Summary information concerning EQ Advisors Trust
-----
4
--------------------------------------------------------------------------------
The following chart highlights the four (4) Portfolios described in this
Prospectus that you can choose as investment alternatives under your Contracts
offered by Equitable or EOC. The chart and accompanying information identify
each Portfolio's investment objective(s), principal investment strategies, and
principal risks. "More Information on Principal Risks", which more fully
describes each of the principal risks, is provided beginning on page 16.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
EQ ADVISORS TRUST DOMESTIC PORTFOLIOS
--------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
--------------------------------------------------------------------------------
<S> <C>
EQ/AXP NEW DIMENSIONS PORTFOLIO Seeks long-term growth of capital.
--------------------------------------------------------------------------------
EQ/AXP STRATEGY AGGRESSIVE PORTFOLIO Seeks long-term growth of capital.
--------------------------------------------------------------------------------
EQ/JANUS LARGE CAP GROWTH PORTFOLIO Seeks
long-term growth of capital in a manner
consistent with preservation of
capital.
--------------------------------------------------------------------------------
EQ/FIDELITY MID CAP PORTFOLIO Seeks long-term growth of capital.
--------------------------------------------------------------------------------
</TABLE>
<PAGE>
-----
5
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks of companies showing the potential for General investment, growth investing and foreign securities
significant growth (often including securities of companies risks.
operating in areas with dynamic economic and
technological changes occurring and foreign markets).
-----------------------------------------------------------------------------------------------------------------------------
Equity securities of growth companies the Adviser chooses General investment, growth investing, small-cap and
based on: (i) considering opportunities and risks within mid-cap company and foreign securities risks.
growing industries and new technologies; (ii) aggressive
growth prospects; and (iii) identification of small and
medium capitalization companies with effective
management, financial strength and competitive market
positions.
-----------------------------------------------------------------------------------------------------------------------------
Common stocks of growth companies with a large market General investment, growth investing, fixed income, junk
capitalization. bond, foreign securities, derivatives and portfolio turnover
risks.
-----------------------------------------------------------------------------------------------------------------------------
Common stocks of companies with medium market General investment, mid-cap company, growth investing,
capitalizations (similar to S&P MidCap 400), but also in value investing, foreign securities, and portfolio turnover
companies with smaller or larger market capitalizations. risks.
Investments may include growth or value stocks with both
growth and value characteristics.
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-------------------- EQ Advisors Trust
<PAGE>
2
About the investment portfolios
-----
6
--------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
principal investment objectives, strategies, and risks of each of the
Portfolios. Of course, there can be no assurance that any Portfolio will achieve
its investment objective.
Please note that:
o A fuller description of each of the principal risks is included in the
section "More Information on Principal Risks," which follows the
description of each Portfolio in this section of the Prospectus.
o Additional information concerning each Portfolio's strategies, investments,
and risks can also be found in the Trust's Statement of Additional
Information.
GENERAL INVESTMENT RISKS
Each of the Portfolios is subject to the following risks:
ASSET CLASS RISK: The returns from the types of securities in which a Portfolio
invests may underperform returns from the various general securities markets or
different asset classes.
MARKET RISK: You could lose money over short periods due to fluctuation in a
Portfolio's share price in reaction to stock or bond market movements, and over
longer periods during extended market downturns.
SECURITY SELECTION RISK: There is the possibility that the specific securities
selected by a Portfolio's Adviser will underperform other funds in the same
asset class or benchmarks that are representative of the general performance of
the asset class.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
THE BENCHMARKS
The performance of each of the Trust's Portfolios as shown on the following
pages compares each Portfolio's performance to that of a broad-based securities
market index, an index of funds with similar investment objectives and/or a
blended index. Each of the Portfolios' annualized rates of return are net of:
(i) its investment management fees; and (ii) its other expenses. These rates are
not representative of the actual return you would receive under your Contract.
Broad-based securities indices are unmanaged and are not subject to fees and
expenses typically associated with managed investment company portfolios.
Broad-based securities indices are also not subject to contract and
insurance-related expenses and charges. Investments cannot be made directly in a
broad-based securities index. Comparisons with these benchmarks, therefore, are
of limited use. They are included because they are widely known and may help you
to understand the universe of securities from which each Portfolio is likely to
select its holdings.
THE RUSSELL MIDCAP GROWTH INDEX is an unmanaged list of common stocks that
measures the performance of the 800 smallest companies in the Russell 1000 Index
representing approximately 35% of the total market capitalization of the Russell
1000 Index. (The Russell 1000 Index measures the performance of the 1,000
largest companies based on total market capitalization.) The Russell MidCap
Growth Index measures the performance of those companies with higher
price-to-book ratios and higher forecasted growth values. It is compiled by the
Frank Russell Company.
THE RUSSELL 1000 GROWTH INDEX is an unmanaged list of common stocks that
measures the performance of Russell 1000 Index companies with higher
price-to-book ratios and higher forecasted growth values. (The Russell 1000
Index measures the performance of the 1,000 largest companies in the Russell
3000 Index, which represents approximately
<PAGE>
-----
7
--------------------------------------------------------------------------------
92% of the total market capitalization of the Russell 3000 Index. The Russell
3000 Index measures the performance of the 3,000 largest U.S. companies based on
total market capitalization, which represents approximately 98% of the
investable U.S. equity market). The Russell 1000 Growth Index is compiled by the
Frank Russell Company.
THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500") is an
unmanaged weighted index containing common stocks of 500 industrial,
transportation, utility and financial companies, regarded as generally
representative of the larger capitalization portion of the United States stock
market. The S&P 500 returns reflect the reinvestment of dividends, if any, but
do not reflect fees, brokerage commissions or other expenses of investing.
THE STANDARD & POOR'S MIDCAP 400 INDEX ("S&P 400 MidCap") is an unmanaged
weighted index of 400 domestic stocks chosen for market size (median market
capitalization of about $610 million), liquidity, and industry group
representation. The S&P 400 returns reflect the reinvestment of dividends, if
any, but do not reflect fees, brokerage commissions or other expenses of
investing.
-------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS
-----
8
--------------------------------------------------------------------------------
EQ/AXP NEW DIMENSIONS PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio primarily invests in common stocks of companies showing the
potential for significant growth. These companies often operate in areas where
dynamic economic and technological changes are occurring. The Portfolio may also
invest up to 30% of its total assets in foreign securities.
The Portfolio's Adviser selects investments by:
o identifying companies the Adviser believes have above-average long-term
growth potential based on: effective management; financial strength; and
competitive market position.
o considering opportunities and risks with respect to interest rate and
economic forecasts both domestically and abroad.
In evaluating whether to sell a security, the Adviser considers, among other
factors, whether:
o the security is overvalued relative to alternative investments;
o the company has met the Adviser's earnings and/or growth expectations;
o political, economic, or other events could affect the company's
performance;
o the Adviser wishes to minimize potential losses (i.e., in a market
down-turn); and
o the Adviser identifies a more attractive opportunity.
Although not a primary investment strategy, the Portfolio also may invest in
other instruments, such as money market securities, preferred stocks, debt
obligations (of any rating), and convertible securities. Additionally, the
Portfolio may utilize derivative instruments (such as options and futures
contracts) to produce incremental earnings, hedge existing positions and
increase flexibility.
When market or financial conditions warrant, the Portfolio may invest without
limitation in money market securities for temporary or defensive purposes.
During these times, the Portfolio may make frequent securities trades that could
cause the Portfolio to incur additional transaction costs that could be passed
through to shareholders. Such investment strategies could result in the
Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: The Portfolio may use a growth oriented approach to stock
selection. The price of growth stocks may be more sensitive to changes in
current or expected earnings than the prices of other stocks. The price of
growth stocks is also subject to the risk that the stock price of one or more
companies will fall or will fail to appreciate as anticipated by the Adviser,
regardless of movements in the securities market.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; expropriation or nationalization; adverse changes in foreign economic and
tax policies; and foreign government instability, war or other adverse political
or economic actions.
<PAGE>
-----
9
--------------------------------------------------------------------------------
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is September 1, 2000. Therefore, no prior
performance information is available.
WHO MANAGES THE PORTFOLIO
AMERICAN EXPRESS FINANCIAL CORPORATION ("AEFC"), IDS Tower 10, Minneapolis, MN
55440-0010. AEFC has been the Adviser to the Portfolio since the Portfolio
commenced operations. AEFC is a wholly-owned subsidiary of American Express
Company, a financial services company with headquarters at American Express
Tower, World Financial Center, New York, NY 10285. AEFC has provided financial
services since 1894. In addition to offering mutual funds, its family of
companies also offers insurance, annuities, investment certificates and a broad
range of financial management services.
GORDON FINES is principally responsible for the day-to-day management of the
Portfolio. Mr. Fines, a Vice President and senior portfolio manager of AEFC, has
been associated with AEFC since 1991.
-------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
------
10
--------------------------------------------------------------------------------
EQ/AXP STRATEGY AGGRESSIVE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio primarily invests in securities of growth companies. Under normal
market conditions, at least 65% of the Portfolio's total assets are invested in
equity securities. The selection of common stocks is the primary decision in
building the investment portfolio.
In pursuit of the Portfolio's goal, the Adviser chooses equity investments by:
o considering opportunities and risks within growing industries and new
technologies;
o selecting companies that the Adviser believes have aggressive growth
prospects; and
o identifying small and medium capitalization companies with: effective
management, financial strength, and competitive market position. Small and
medium capitalization companies are those whose market capitalization is
similar to the market capitalization of companies in the Russell MidCap
Growth Index.
In evaluating whether to sell a security, the Adviser considers, among other
factors, whether:
o the security is overvalued relative to other potential investments;
o the security has reached the Adviser's price objective;
o the company's characteristics change;
o the company has met the Adviser's earnings and/or growth expectations;
o political, economic, or other events could affect the company's
performance;
o the Adviser wishes to minimize potential losses (i.e., in a market
down-turn);
o the Adviser wishes to lock in profits;
o the Adviser identifies a more attractive investment opportunity; and
o the company or the security continue to meet the other standards described
above.
Although not a primary investment strategy, the Portfolio also may invest in
foreign securities (up to 25% of its total assets), money market securities,
debt obligations (rated B or higher), derivative instruments (such as options
and futures contracts), and convertible securities.
When market or financial conditions warrant, the Portfolio may invest without
limitation in money market instruments or investment grade debt obligations
(rated BBB or higher) for temporary or defensive purposes. During these times,
the Portfolio may make frequent securities trades that could cause the Portfolio
to incur additional transaction costs that could be passed through to
shareholders. Such investments strategies could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: The Portfolio may use a growth oriented approach to stock
selection. The price of growth stocks may be more sensitive to changes in
current or expected earnings than the prices of other stocks. The price of
growth stocks is also subject to the risk that the stock price of one or more
companies will fall or will fail to appreciate as anticipated by the Adviser,
regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in new or
unseasoned small-cap and mid-cap companies may be subject to more abrupt or
erratic movements in price than are those of larger, more established companies
because: the securities of such companies are less well-known and may trade less
frequently and in lower volume; such companies are more likely to experience
greater or more unexpected changes in their earnings and growth prospects; and
the products or
<PAGE>
------
11
--------------------------------------------------------------------------------
technologies of such companies may be at a relatively early stage of development
or not fully tested.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; expropriation or nationalization; adverse changes in foreign economic and
tax policies; and foreign government instability, war or other adverse political
or economic actions.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is September 1, 2000. Therefore, no prior
performance information is available.
WHO MANAGES THE PORTFOLIO
AMERICAN EXPRESS FINANCIAL CORPORATION ("AEFC"), IDS Tower 10, Minneapolis, MN
55440-0010. AEFC has been the Adviser to the Portfolio since the Portfolio
commenced operations. AEFC is a wholly-owned subsidiary of American Express
Company, a financial services company with headquarters at American Express
Tower, World Financial Center, New York, NY 10285. AEFC has provided financial
services since 1894. In addition to offering mutual funds, its family of
companies also offers insurance, annuities, investment certificates and a broad
range of financial management services.
LOUIS GIGLIO and SCOTT MULLINIX are principally responsible for the day-to-day
management of the Portfolio. Mr. Giglio, portfolio manager, has been associated
with AEFC since January 1994 as a senior equity analyst. Mr. Mullinix, associate
portfolio manager, has been associated with AEFC since 1987.
-------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
------
12
--------------------------------------------------------------------------------
EQ/JANUS LARGE CAP GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital in a manner consistent
with the preservation of capital.
THE INVESTMENT STRATEGY
The Portfolio invests in securities of growth-oriented companies. Under normal
market conditions, the Portfolio will invest at least 65% of its total assets in
common stocks of growth companies with a large market capitalization.
The Adviser may invest substantially all of the Portfolio's assets in common
stocks if the Adviser believes common stocks will appreciate in value. The
Portfolio is diversified for purposes of the 1940 Act, however, it is highly
concentrated.
--------------------------------------------------------------------------------
For purposes of this Portfolio, generally companies having a market
capitalization greater than $10 billion are considered large companies.
--------------------------------------------------------------------------------
The Adviser applies a "bottom-up" approach in choosing investments, focusing on
the financial condition and competitiveness of individual companies. The Adviser
seeks to identify companies with earnings growth potential that may not be
recognized by the market at large. Although themes may emerge in the Portfolio,
securities are generally selected without regard to any defined industry sector
or other similarly defined selection procedure. If the Adviser is unable to find
investments with earnings growth potential, a significant portfolio of the
Portfolio's assets may be in cash or similar investments.
The Portfolio may also invest without limit in foreign securities either
indirectly (e.g., depositary receipts) or directly in foreign markets. The
Adviser will seek companies that meet its selection criteria, regardless of
where a company is located. Foreign securities are generally selected on a
stock-by-stock basis without regard to any defined allocation among countries or
geographic regions. In addition, the Portfolio may invest in
high-yield/high-risk bonds (less than 35% of the Portfolio's total assets) and
other debt securities, options, futures, forwards, swaps and other types of
derivatives for hedging purposes, or for non-hedging purposes, such as seeking
to enhance return, and securities purchased on a when-issued, delayed delivery
or forward commitment basis.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
JUNK BOND RISK: The Portfolio may invest up to 35% of its total assets in "junk
bonds" or lower-rated securities rated BB or lower by S&P or an equivalent
rating by any other NRSRO or unrated securities of similar quality. Therefore,
credit risk is particularly significant for this Portfolio. Junk bonds have
speculative elements or are predominantly speculative credit risks. This
Portfolio may also be subject to greater credit risk because it may invest in
debt securities issued in connection with corporate restructurings by highly
leveraged issuers or in debt securities not current in the payment of interest
or principal, or in default.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities markets.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with
<PAGE>
------
13
--------------------------------------------------------------------------------
longer durations or maturities, will go down. When interest rates fall, the
reverse is true. In addition, to the extent that the Portfolio invests in
investment-grade securities which are rated BBB by S&P or an equivalent rating
by any other NRSRO, it will be exposed to greater risk than if it invested in
higher-rated obligations because BBB-rated securities are regarded as having
only an adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative.
DERIVATIVES RISK: Derivatives are financial contracts whose value depends on, or
is derived from the value of an underlying asset, reference rate or index.
Derivatives include stock options, securities index options, currency options,
forward currency exchange contracts, futures contracts, swaps and options on
futures contracts. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; expropriation or nationalization; adverse changes in foreign economic and
tax policies; and foreign government instability, war or other adverse political
or economic actions.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate is likely to exceed 100%
per year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs that could be passed through to
shareholders.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is September 1, 2000. Therefore, no prior
performance information is available.
WHO MANAGES THE PORTFOLIO
JANUS CAPITAL CORPORATION ("Janus"), 100 Fillmore Street, Denver, Colorado
80206-4928. Janus has been the Adviser to the Portfolio since it commenced
operations. Janus manages investment companies, private-label mutual funds and
provides separate account advisory services for institutional accounts. Kansas
City Southern Industries, Inc. ("KCSI") owns approximately 82% of the
outstanding voting stock of Janus, indirectly, through its wholly-owned
subsidiary, Stillwell Financial, Inc. KCSI is a publicly traded holding company
whose primary subsidiaries are engaged in transportation, information processing
and financial services. KCSI has announced its intention to spin-off its
financial services subsidiaries, which it expects to occur in 2000.
MARC PINTO is the Portfolio Manager responsible for the day-to-day management of
the Portfolio. Mr. Pinto manages institutional separate accounts in the Large
Cap Growth discipline and has also served as Assistant Portfolio Manager for
certain Janus funds since joining Janus in 1994.
-------------------- EQ Advisors Trust
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
------
14
--------------------------------------------------------------------------------
EQ/MID CAP PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital.
THE INVESTMENT STRATEGY
The Adviser's principal investment strategies include:
o Normally investing at least 65% of its total assets in common stocks of
companies with medium market capitalizations. Medium market capitalization
companies are those whose market capitalization is similar to the market
capitalization of companies in the S&P MidCap 400 at the time of the
Portfolio's investment. Companies whose capitalization no longer meets this
definition after purchase continue to be considered to have a medium market
capitalization for purposes of the 65% policy.
o Potentially investing up to 35% of its total assets in companies with
market capitalizations that are smaller or larger than those in the S&P
MidCap 400 Index.
o Investing in domestic and foreign issuers.
o Investing in either "growth" stocks or "value" stocks or both. The Adviser
is not constrained by any particular investment style. At any given time,
the Adviser may tend to buy "growth" stocks or "value" stocks, or a
combination of both types.
o Using fundamental analysis of each issuer's financial condition and
industry position and market and economic conditions to select investments.
In buying and selling securities for the Portfolio, the Adviser relies on
fundamental analysis of each issuer and its potential for success in light
of its current financial condition, its industry position, and economic and
market conditions. Factors considered include growth potential, earning
estimates and management.
The Adviser may lend the Portfolio's securities to broker-dealers or other
institutions to earn income for the Portfolio. The Adviser may use various
techniques, such as buying and selling futures contracts, to increase or
decrease the Portfolio's exposure to changing security prices or other factors
that affect security values If the Adviser's strategies do not work as intended,
the Portfolio may not achieve its objective.
When market or financial conditions warrant, the Portfolio may invest without
limitation in preferred stocks and investment-grade debt instruments for
temporary or defensive purposes. During these times, the Portfolio may make
frequent securities trades that could cause the Portfolio to incur additional
transaction costs that could be passed through to shareholders. Such investments
could result in the Portfolio not achieving its investment objectives.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
MID-CAP COMPANY RISK: The Portfolio's investments in new or unseasoned mid-cap
companies may be subject to more abrupt or erratic movements in price than are
those of larger, more established companies because: the securities of such
companies are less well-known and may trade less frequently and in lower volume;
such companies are more likely to experience greater or more unexpected changes
in their earnings and growth prospects; and the products or technologies of such
companies may be at a relatively early stage of development or not fully tested.
GROWTH INVESTING RISK: The Portfolio may use a growth oriented approach to stock
selection. The price of growth stocks may be more sensitive to changes in
current or expected earnings than the prices of other stocks. The price of
growth stocks is also subject to the risk that the stock price of one or more
companies will fall or will fail to appreciate as anticipated by the Adviser,
regardless of movements in the securities market.
VALUE INVESTING: The Portfolio may also use a value-oriented approach to stock
selection. Value investing is subject to the risk that a value stock's intrinsic
value may never be fully recognized or realized by the market, or its
<PAGE>
------
15
--------------------------------------------------------------------------------
price may go down. There is also the risk that a stock judged to be undervalued
may actually be appropriately priced.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; expropriation or nationalization; adverse changes in foreign economic and
tax policies; and foreign government instability, war or other adverse political
or economic actions.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate is likely to be over 100%
per year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs that could be passed through to
shareholders.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is September 1, 2000. Therefore, no prior
performance information is available.
WHO MANAGES THE PORTFOLIO
FIDELITY MANAGEMENT & RESEARCH COMPANY ("FMR"), 82 Devonshire Street, Boston, MA
02109. FMR has been the Adviser to the Portfolio since the Portfolio commenced
operations. FMR Corp., organized in 1972, is the ultimate parent company of FMR.
DAVID FELMAN is principally responsible for the day-to-day management of the
Portfolio. Mr. Felman, a Vice President and portfolio manager, has been
associated with FMR since 1993.
-------------------- EQ Advisors Trust
<PAGE>
3
More information on principal risks
------
16
--------------------------------------------------------------------------------
Risk is the chance that you will lose money on your investment or that it will
not earn as much as you expect. In general, the greater the risk, the more money
your investment can earn for you and the more you can lose. Like other
investment companies, the value of each Portfolio's shares may be affected by
the Portfolio's investment objective(s), principal investment strategies and
particular risk factors. Consequently, each Portfolio may be subject to
different principal risks. Some of the principal risks of investing in the
Portfolios are discussed below. However, other factors may also affect each
Portfolio's net asset value.
There is no guarantee that a Portfolio will achieve its investment objective(s)
or that it will not lose principal value.
GENERAL INVESTMENT RISKS: Each Portfolio is subject to the following risks:
ASSET CLASS RISK: There is the possibility that the returns from the types of
securities in which a Portfolio invests will underperform returns from the
various general securities markets or different asset classes. Different types
of securities tend to go through cycles of outperformance and underperformance
in comparison to the general securities markets.
MARKET RISK: Each Portfolio's share price moves up and down over the short term
in reaction to stock or bond market movements. This means that you could lose
money over short periods, and perhaps over longer periods during extended market
downturns.
SECURITY SELECTION RISK: The Adviser(s) for each Portfolio rely on the insights
of different specialists in making investment decisions based on the Portfolio's
particular investment objective(s) and investment strategies. There is the
possibility that the specific securities held by a Portfolio will underperform
other funds in the same asset class or benchmarks that are representative of the
general performance of the asset class because of the Adviser's choice of
portfolio securities.
As indicated in "Summary Information Concerning EQ Advisors Trust" and "About
the Investment Portfolios," a particular Portfolio may also be subject to the
following risks:
CONVERTIBLE SECURITIES RISK: Convertible securities may include both convertible
debt and convertible preferred stock. Such securities may be converted into
shares of the underlying common stock at either a stated price or stated rate.
Therefore, convertible securities enable you to benefit from increases in the
market price of the underlying common stock. Convertible securities provide
higher yields than the underlying common stocks, but generally offer lower
yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates in relation to changes in interest rates and,
in addition, fluctuates in relation to the underlying common stock. Subsequent
to purchase by a Portfolio, convertible securities may cease to be rated or a
rating may be reduced below the minimum required for purchase by that Portfolio.
Each Adviser will consider such event in its determination of whether a
Portfolio should continue to hold the securities.
DERIVATIVES RISK: Derivatives are financial contracts whose value depends on, or
is derived from the value of an underlying asset, reference rate or index.
Derivatives include stock options, securities index options, currency options,
forward currency exchange contracts, futures contracts, swaps and options of
futures contracts. Certain Portfolios can use derivatives involving the U.S.
Government and foreign government securities and currencies. Investments in
derivatives can significantly increase your exposure to market risk, or credit
risk of the counterparty. Derivatives also involve the risk of mispricing or
improper valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that the Portfolio invests a substantial amount
of its assets in fixed income securities, the Portfolio may be subject to the
following risks:
<PAGE>
------
17
--------------------------------------------------------------------------------
CREDIT RISK: Credit risk is the risk that the issuer or guarantor of a debt
security or counterparty to a Portfolio's transactions will be unable or
unwilling to make timely principal and/or interest payments, or otherwise
will be unable or unwilling to honor its financial obligations. Each of the
Portfolios may be subject to credit risk to the extent that it invests in
debt securities or engages in transactions, such as securities loans or
repurchase agreements, which involve a promise by a third party to honor an
obligation to the Portfolio. Credit risk is particularly significant for
the Portfolios, such as the Alliance Growth Investors Portfolio and the
Alliance High Yield Portfolio, that invest a material portion of their
assets in "Junk Bonds" or lower-rated securities (i.e., rated BB or lower
by S&P or an equivalent rating by any other NRSRO or unrated securities of
similar quality). These debt securities and similar unrated securities have
speculative elements or are predominantly speculative credit risks.
Portfolios such as the Alliance Growth Investors Portfolio and the Alliance
High Yield Portfolio may also be subject to greater credit risk because
they may invest in debt securities issued in connection with corporate
restructurings by highly leveraged issuers or in debt securities not
current in the payment of interest or principal, or in default.
INTEREST RATE RISK: The price of a bond or a fixed income security is
dependent upon interest rates. Therefore, the share price and total return
of a Portfolio investing a significant portion of its assets in bonds or
fixed income securities will vary in response to changes in interest rates.
A rise in interest rates causes the value of a bond to decrease, and vice
versa. There is the possibility that the value of a Portfolio's investment
in bonds or fixed income securities may fall because bonds or fixed income
securities generally fall in value when interest rates rise. The longer the
term of a bond or fixed income instrument, the more sensitive it will be to
fluctuations in value from interest rate changes. Changes in interest rates
may have a significant effect on Portfolios holding a significant portion
of their assets in fixed income securities with long term maturities.
INVESTMENT GRADE SECURITIES RISK: Debt securities are rated by national
bond ratings agencies. Securities rated BBB by S&P or Baa by Moody's are
considered investment grade securities, but are somewhat riskier than
higher rated obligations because they are regarded as having only an
adequate capacity to pay principal and interest, and are considered to lack
outstanding investment characteristics.
JUNK BONDS OR LOWER RATED SECURITIES RISK: Bonds rated below investment
grade by S&P and Moody's are speculative in nature, may be subject to
certain risks with respect to the issuing entity and to greater market
fluctuations than higher rated fixed income securities. They are usually
issued by companies without long track records of sales and earnings, or by
those companies with questionable credit strength. These bonds are
considered "below investment grade." The retail secondary market for these
"junk bonds" may be less liquid than that of higher rated securities and
adverse conditions could make it difficult at times to sell certain
securities or could result in lower prices than those used in calculating
the Portfolio's net asset value.
FOREIGN SECURITIES RISK: A Portfolio's investments in foreign securities,
including depositary receipts, involve risks not associated with investing in
U.S. securities and can affect a Portfolio's performance. Foreign markets,
particularly emerging markets, may be less liquid, more volatile and subject to
less government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. The specific risks of investing in foreign securities, among others,
include:
-------------------- EQ Advisors Trust
<PAGE>
------
18
--------------------------------------------------------------------------------
CURRENCY RISK: The risk that changes in currency exchange rates will
negatively affect securities denominated in, and/or receiving revenues in,
foreign currencies. Adverse changes in currency exchange rates (relative to
the U.S. dollar) may erode or reverse any potential gains from a
Portfolio's investment in securities denominated in a foreign currency or
may widen existing losses.
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging market countries and/or their securities markets. Generally,
economic structures in these countries are less diverse and mature than
those in developed countries, and their political systems are less stable.
Investments in emerging markets countries may be affected by national
policies that restrict foreign investment in certain issuers or industries.
The small size of their securities markets and low trading volumes can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines. As a result, a Portfolio investing in emerging market countries
may be required to establish special custody or other arrangements before
investing.
POLITICAL/ECONOMIC RISK: Changes in economic and tax policies, government
instability, war or other political or economic actions or factors may have
an adverse effect on a Portfolio's foreign investments.
REGULATORY RISK: Less information may be available about foreign companies.
In general, foreign companies are not subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices
and requirements as are U.S. companies.
TRANSACTION COSTS RISK: The costs of buying and selling foreign securities,
including tax, brokerage and custody costs, generally are higher than those
involving domestic transactions.
GROWTH INVESTING RISK: Growth investing generally focuses on companies that, due
to their strong earnings and revenue potential, offer above-average prospects
for capital growth, with less emphasis on dividend income. Earnings
predictability and confidence in earnings forecasts are an important part of the
selection process. As a result, the price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
Advisers using this approach generally seek out companies experiencing some or
all of the following: high sales growth, high unit growth, high or improving
returns on assets and equity, and a strong balance sheet. Such Advisers also
prefer companies with a competitive advantage such as unique management,
marketing or research and development. Growth investing is also subject to the
risk that the stock price of one or more companies will fall or will fail to
appreciate as anticipated by the Advisers, regardless of movements in the
securities market.
LIQUIDITY RISK: Certain securities held by a Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like. A
Portfolio may have to hold these securities longer than it would like and may
forego other investment opportunities. There is the possibility that a Portfolio
may lose money or be prevented from earning capital gains if it can not sell a
security at the time and price that is most beneficial to the Portfolio.
Portfolios that invest in privately-placed securities, high-yield bonds,
mortgage-backed securities or foreign or emerging market securities, which have
all experienced periods of illiquidity, are subject to liquidity risks. A
particular Portfolio may be more susceptible to some of these risks than others,
as noted in the description of each Portfolio.
PORTFOLIO TURNOVER RISK: Consistent with their investment policies, the
Portfolios also will purchase and sell securities without regard to the effect
on portfolio turnover. Higher portfolio turnover (e.g., over 100% per year) will
cause a Portfolio to incur additional transaction costs that could be passed
through to shareholders.
<PAGE>
------
19
--------------------------------------------------------------------------------
SMALL-CAP AND MID-CAP COMPANY RISK: A Portfolio's investments in small-cap and
mid-cap companies may involve greater risks than investments in larger, more
established issuers. Smaller companies may have narrower product lines, more
limited financial resources and more limited trading markets for their stock, as
compared with larger companies. Their securities may be less well-known and
trade less frequently and in more limited volume than the securities of larger,
more established companies. In addition, small-cap and mid-cap companies are
typically subject to greater changes in earnings and business prospects than
larger companies. Consequently, the prices of small company stocks tend to rise
and fall in value more frequently than the stocks of larger companies. Although
investing in small-cap and mid-cap companies offers potential for above-average
returns, the companies may not succeed and the value of their stock could
decline significantly.
VALUE INVESTING RISK: Value investing attempts to identify strong companies
selling at a discount from their perceived true worth. Advisers using this
approach generally select stocks at prices, in their view, that are temporarily
low relative to the company's earnings, assets, cash flow and dividends. Value
investing is subject to the risk that the stocks' intrinsic value may never be
fully recognized or realized by the market, or their prices may go down. In
addition, there is the risk that a stock judged to be undervalued may actually
be appropriately priced. Value investing generally emphasizes companies that,
considering their assets and earnings history, are attractively priced and may
provide dividend income.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
-------------------- EQ Advisors Trust
<PAGE>
4
Management of the Trust
------
20
--------------------------------------------------------------------------------
This section gives you information on the Trust, the Manager and the Advisers
for the Portfolios. More detailed information concerning each of the Advisers
and portfolio managers is included in the description for each Portfolio in the
section "About The Investment Portfolios."
THE TRUST
The Trust is organized as a Delaware business trust and is registered with the
Securities and Exchange Commission ("SEC") as an open-end management investment
company. The Trust issues shares of beneficial interest that are currently
divided among forty-five (45) Portfolios, each of which has authorized Class IA
and Class IB shares. Each Portfolio has its own objectives, investment
strategies and risks, which have been previously described in this prospectus.
THE MANAGER
The Equitable Life Assurance Society of the United States ("Equitable"), 1290
Avenue of the Americas, New York, New York 10104, currently serves as the
Manager of the Trust. EQ Financial Consultants, Inc. ("EQFC") previously served
as the Manager of the Trust, until September 17, 1999 when the Trust's
Investment Management Agreement was transferred to Equitable. Equitable is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended, and a wholly-owned subsidiary of AXA Financial, Inc. ("AXA Financial"),
a subsidiary of AXA, a French insurance holding company.
Subject to the supervision and direction of the Board of Trustees, the Manager
has overall responsibility for the general management of the Trust. In the
exercise of that responsibility and under the Multi-Manager Order, the Manager,
without obtaining shareholder approval but subject to the review and approval by
the Board of Trustees, may: (i) select new or additional Advisers for the
Portfolios; (ii) enter into new investment advisory agreements and materially
modify existing investment advisory agreements; and (iii) terminate and replace
the Advisers. The Manager also monitors each Adviser's investment program and
results, reviews brokerage matters, and carries out the directives of the Board
of Trustees. The Manager also supervises the provision of services by third
parties such as the Trust's custodian.
<PAGE>
------
21
--------------------------------------------------------------------------------
The contractual management fee rates payable by the Trust are at the following
annual percentages of the value of each Portfolio's average daily net assets:
CONTRACTUAL FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
FIRST NEXT NEXT NEXT
EQUITY PORTFOLIOS $1 BILLION $1 BILLION $3 BILLION $5 BILLION THEREAFTER
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EQ/AXP New Dimensions 0.650% 0.600% 0.575% 0.550% 0.525%
EQ/AXP Strategy Aggressive 0.700% 0.650% 0.625% 0.600% 0.575%
EQ/Janus Large Cap Growth 0.900% 0.850% 0.825% 0.800% 0.775%
EQ/Mid Cap 0.700% 0.650% 0.625% 0.600% 0.575%
--------------------------------------------------------------------------------------------------------
</TABLE>
EXPENSE LIMITATION AGREEMENT
In the interest of limiting until expenses of each Portfolio,
the Manager has entered into an amended and restated expense limitation
agreement with the Trust with respect to the Portfolios ("Expense Limitation
Agreement"). Pursuant to that Expense Limitation Agreement, the Manager has
agreed to waive or limit its fees and to assume other expenses so that the total
annual operating expenses of each Portfolio other than interest, taxes,
brokerage commissions (other expenditures which are capitalized in accordance
with generally accepted accounting principles, other extraordinary expenses not
incurred in the ordinary course of each Portfolio's business and amounts payable
pursuant to a plan adopted in accordance with Rule 12b-1 under the 1940 Act) are
limited to the following respective expense ratios:
EXPENSE LIMITATION PROVISIONS
<TABLE>
<CAPTION>
---------------------------------------------------
TOTAL EXPENSES
LIMITED TO (% OF
PORTFOLIOS DAILY NET ASSETS)
---------------------------------------------------
<S> <C>
EQ/AXP New Dimensions 0.95%
EQ/AXP Strategy Aggressive 1.00%
EQ/Janus Large Cap Growth 1.20%
EQ/Mid Cap 1.00%
---------------------------------------------------
</TABLE>
Each Portfolio may at a later date reimburse to the Manager the management fees
waived or limited and other expenses assumed and paid by the Manager pursuant to
the Expense Limitation Agreement provided such Portfolio has reached a
sufficient asset size to permit such reimbursement to be made without causing
the total annual expense ratio of each Portfolio to exceed the percentage limits
stated above. Consequently, no reimbursement by a Portfolio will be made unless:
(i) the Portfolio's assets exceed $100 million; (ii) the Portfolio's total
annual expense ratio is less than the respective percentages stated above; and
(iii) the payment of such reimbursement has been approved by the Trust's Board
of Trustees on a quarterly basis.
The total amount of reimbursement to which the Manager may be entitled will
equal, at any time, the sum of (i) all investment management fees previously
waived or reduced by the Manager and (ii) all other payments previously remitted
by the Manager to the Portfolio during any of the previous five (5) fiscal
years, less any reimbursement that the Portfolio has previously paid to the
Manager with respect to (a) such investment management fees previously waived or
reduced and (b) such other payments previously remitted by the Manager to the
Portfolio.
THE ADVISERS
Each Portfolio has one or more Advisers that furnish an investment program for
the Portfolio (or portion thereof for which the entity serves as Adviser)
pursuant to an investment advisory agreement with the Manager. Each
-------------------- EQ Advisors Trust
<PAGE>
------
22
--------------------------------------------------------------------------------
Adviser makes investment decisions on behalf of the Portfolio (or portion
thereof for which the entity serves as Adviser), places all orders for the
purchase and sale of investments for the Portfolio's account with brokers or
dealers selected by such Adviser or the Manager and may perform certain limited
related administrative functions in connection therewith.
The Manager has received an exemptive order, the Multi-Manager Order, from the
SEC that permits the Manager, subject to board approval and without the approval
of shareholders to: (a) employ a new Adviser or additional Advisers for any
Portfolio; (b) enter into new investment advisory agreements and materially
modify existing investment advisory agreements; and (c) terminate and replace
the Advisers without obtaining approval of the relevant Portfolio' s
shareholders. However, the Manager may not enter into an investment advisory
agreement with an "affiliated person" of the Manager (as that term is defined in
Section 2(a)(3) of the 1940 Act) ("Affiliated Adviser"), such as Alliance,
unless the investment advisory agreement with the Affiliated Adviser, including
compensation, is approved by the affected Portfolio's shareholders, including,
in instances in which the investment advisory agreement pertains to a newly
formed Portfolio, the Portfolio's initial shareholder. In such circumstances,
shareholders would receive notice of such action, including the information
concerning the Adviser that normally is provided in an information statement
under Schedule 14C of the Securities Exchange Act of 1934 ("1934 Act").
The Manager pays each Adviser a fee based on the Portfolio's average daily net
assets. No Portfolio is responsible for the fees paid to each of the Advisers.
THE ADMINISTRATOR
Pursuant to an agreement, Equitable currently serves as the Administrator to the
Trust. As Administrator, Equitable provides the Trust with necessary
administrative, fund accounting and compliance services, and makes available the
office space, equipment, personnel and facilities required to provide such
services to the Trust.
Equitable may carry out its responsibilities either directly or through
sub-contracting with third party service providers. For these services, the
Trust pays Equitable $30,000 for each Portfolio, and a monthly fee at the annual
rate of 0.04 of 1% of the first $3 billion of total Trust assets, 0.03 of 1% of
the next $3 billion of the total Trust assets; 0.025 of 1% of the next $4
billion of the total Trust assets; and 0.0225% of 1% of the total Trust assets
in excess of $10 billion.
THE TRANSFER AGENT
Equitable serves as the transfer agent and dividend disbursing agent of the
Trust and receives no compensation for serving in such capacity.
BROKERAGE PRACTICES
In selecting brokers and dealers, in accordance with Section 28(e) of the 1934
Act, the Manager and each Adviser may consider research and brokerage services
received by the Manager, the Advisers, the Trust or any Portfolio. Subject to
seeking the most favorable net price and execution available, the Manager and
each Adviser may also consider sales of shares of the Trust as a factor in the
selection of brokers and dealers. Finally, at the discretion of the Board, the
Trust may direct the Manager to cause Advisers to effect securities transactions
through broker-dealers in a manner that would help to generate resources to (i)
pay the cost of certain expenses which the Trust is required to pay or for which
the Trust is required to arrange payment or (ii) finance activities that are
primarily intended to result in the sale of Trust shares.
BROKERAGE TRANSACTIONS WITH AFFILIATES
To the extent permitted by law, the Trust may engage in securities and other
transactions with entities that may be affiliated with the Manager or the
Advisers. The 1940 Act generally prohibits the Trust from engaging in principal
<PAGE>
------
23
--------------------------------------------------------------------------------
securities transactions with an affiliate of the Manager or the Advisers unless
pursuant to an exemptive order from the SEC. For these purposes, however, the
Trust has considered this issue and believes, based upon advice of counsel, that
a broker-dealer affiliate of an Adviser to one Portfolio should not be treated
as an affiliate of an Adviser to another Portfolio for which such Adviser does
not provide investment advice in whole or in part. The Trust has adopted
procedures that are reasonably designed to provide that any commission it pays
to affiliates of the Manager or Advisers does not exceed the usual and customary
broker's commission. The Trust has also adopted procedures permitting it to
purchase securities, under certain restrictions prescribed by a rule under the
1940 Act, in a public offering in which an affiliate of the Manager or Advisers
is an underwriter.
-------------------- EQ Advisors Trust
<PAGE>
5
Fund distribution arrangements
------
24
--------------------------------------------------------------------------------
The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares and Class IB shares. AXA Advisors, LLC ("AXA Advisors") serves as one of
the distributors for the Class IA shares of the Trust offered by this Prospectus
as well as one of the distributors for the Class IA shares. Equitable
Distributors, Inc. ("EDI") serves as the other distributor for the Class IB
shares of the Trust as well as the Class IA shares. Both classes of shares are
offered and redeemed at their net asset value without any sales load. AXA
Advisors and EDI are affiliates of Equitable. Both AXA Advisors and EDI are
registered as broker-dealers under the 1934 Act and are members of the National
Association of Securities Dealers, Inc.
The Trust has adopted a Distribution Plan under Rule 12b-1 under the 1940 Act
for the Trust's Class IB shares. Under the Class IB Distribution Plan the Class
IB shares of the Trust pay each of the distributors an annual fee to compensate
them for promoting, selling and servicing shares of the Portfolios. The annual
fees equal 0.25% of each Portfolio's average daily net assets. Over time, the
fees will increase your cost of investing and may cost you more than other types
of charges.
<PAGE>
6
Purchase and redemption
-------
25
--------------------------------------------------------------------------------
The price at which a purchase or redemption is effected is based on the next
calculation of net asset value after an order is placed by an insurance company
or qualified retirement plan investing in or redeeming from the Trust.
Net asset value per share is calculated for purchases and redemption of shares
of each Portfolio by dividing the value of total Portfolio assets, less
liabilities (including Trust expenses and class related expenses, which are
accrued daily), by the total number of outstanding shares of that Portfolio. The
net asset value per share of each Portfolio is determined each business day at
4:00 p.m. Eastern time. Net asset value per share is not calculated on days on
which the New York Stock Exchange ("NYSE") is closed for trading.
Portfolios that invest a significant portion of their assets in foreign
securities may experience changes in their net asset value on days when a
shareholder may not purchase or redeem shares of that Portfolio because foreign
securities (other than depositary receipts) are valued at the close of business
in the applicable foreign country.
All shares are purchased and redeemed in accordance with the Trust's Amended and
Restated Declaration of Trust and By-Laws. Sales and redemptions of shares of
the same class by the same shareholder on the same day will be netted for each
Portfolio. All redemption requests will be processed and payment with respect
thereto will normally be made within seven days after tenders.
The Trust may suspend redemption, if permitted by the 1940 Act, for any period
during which the New York Stock Exchange is closed or during which trading is
restricted by the SEC or the SEC declares that an emergency exists. Redemption
may also be suspended during other periods permitted by the SEC for the
protection of the Trust's shareholders. If the Board of Trustees determines that
it would be detrimental to the best interest of the Trust's remaining
shareholders to make payment in cash, the Trust may pay redemption proceeds in
whole or in part by a distribution-in-kind of readily marketable securities.
You should note that the Trust is not designed for professional "market timing"
organizations, or other organizations or individuals engaging in a market timing
strategy, making programmed transfers, frequent transfers or transfers that are
large in relation to the total assets of each of the Trust's Portfolios. Market
timing strategies are disruptive to the Trust's Portfolios. If we determine that
your transfer patterns among the Trust's Portfolios reflect a market timing
strategy, we reserve the right to take action including, but not limited to:
restricting the availability of transfers through telephone requests, facsimile
transmissions, automated telephone services, internet services or any electronic
transfer services. We may also refuse to act on transfer instructions of an
agent acting under a power of attorney who is acting on behalf of more than one
owner.
<PAGE>
7
How assets are valued
------
26
--------------------------------------------------------------------------------
Values are determined according to accepted practices and all laws and
regulations that apply. The assets of each Portfolio are generally valued as
follows: o Stocks and debt securities which mature in more than 60 days are
valued on the basis of market quotations.
o Foreign securities not traded directly, including depositary receipts, in
the United States are valued at representative quoted prices in the
currency in the country of origin. Foreign currency is converted into
United States dollar equivalents at current exchange rates. Because foreign
markets may be open at different times than the NYSE, the value of a
Portfolio's shares may change on days when shareholders are not able to buy
or sell them. If events materially affecting the values of the Portfolios'
foreign investments occur between the close of foreign markets and the
close of regular trading on the NYSE, these investments may be valued at
their fair value.
o Short-term debt securities in the Portfolios, which mature in 60 days or
less are valued at amortized cost, which approximates market value.
o Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided are valued in good
faith by the Valuation Committee of the Board of Trustees of the Trust
using its best judgment.
<PAGE>
8
Tax information
------
27
--------------------------------------------------------------------------------
Each Portfolio of the Trust is a separate regulated investment company for
federal income tax purposes. Regulated investment companies are usually not
taxed at the entity (Portfolio) level. They pass through their income and gains
to their shareholders by paying dividends. Their shareholders include this
income on their respective tax returns. A Portfolio will be treated as a
regulated investment company if it meets specified federal income tax rules,
including types of investments, limits on investments, calculation of income,
and dividend payment requirements. Although the Trust intends that it and each
Portfolio will be operated to have no federal tax liability, if they have any
federal tax liability, that could hurt the investment performance of the
Portfolio in question. Also, any Portfolio investing in foreign securities or
holding foreign currencies could be subject to foreign taxes which could reduce
the investment performance of the Portfolio.
It is important for each Portfolio to maintain its federal income tax regulated
investment company status because the shareholders of the Portfolio that are
insurance company separate accounts will then be able to use a favorable federal
income tax investment diversification testing rule in determining whether the
Contracts indirectly funded by the Portfolio meet tax qualification rules for
variable insurance contracts. If a Portfolio fails to meet specified investment
diversification requirements, owners of non-pension plan Contracts funded
through the Trust could be taxed immediately on the accumulated investment
earnings under their Contracts and could lose any benefit of tax deferral.
Equitable, in its capacity as Administrator therefore carefully monitors
compliance with all of the regulated investment company rules and variable
insurance contract investment diversification rules.
<PAGE>
9
Prior performance of each adviser
------
28
--------------------------------------------------------------------------------
The following table provides information concerning the historical performance
of another registered investment company (or series), account or other
institutional private accounts managed by each Adviser that has investment
objectives, policies, strategies and risks substantially similar to those of the
respective Portfolio(s) of the Trust for which it serves as Adviser. The data is
provided to illustrate the past performance of each Adviser in managing a
substantially similar investment vehicle as measured against specified market
indices. This data does not represent the past performance of any of the
Portfolios or the future performance of any Portfolio or its Adviser.
Consequently, potential investors should not consider this performance data as
an indication of the future performance of any Portfolio of the Trust or of its
Adviser and should not confuse this performance data with performance data for
each of the Trust's Portfolios, which is shown for each Portfolio that has at
least one full year of operations under the caption "ABOUT THE INVESTMENT
PORTFOLIOS."
Each Adviser's performance data shown below for other registered investment
companies (or series thereof) was calculated in accordance with standards
prescribed by the SEC for the calculation of average annual total return
information for registered investment companies. Average annual total return
reflects changes in share prices and reinvestment of dividends and distributions
and is net of fund expenses. In each such instance, the share prices and
investment returns will fluctuate, reflecting market conditions as well as
changes in company-specific fundamentals of portfolio securities.
Composite performance data relating to the historical performance of
institutional private accounts as well as registered investment companies
managed by Janus was calculated on a total return basis and includes all losses.
The total returns for the Janus LargeCap Growth Composite reflect the deduction
of all fees assessed paid by the private accounts and investment companies. The
includes all accounts with assets above $5 million for which Janus has
discretionary authority, including mutual funds. Accounts enter the composite
upon the first full quarter under management in which assets exceed the stated
minimum. Prior to 1995, all discretionary accounts were included in the
appropriate composite, regardless of asset size, and there has been no
restatement of pre-1995 performance. As of March 31, 2000 the LargeCap Growth
Composite included 57 accounts and assets of $5,129.5 million, which represented
1.62% of total assets under management. Securities transactions are accounted
for on the trade date and accrual accounting is utilized. Cash and equivalents
are included in performance returns. The institutional private accounts that are
included in the LargeCap Growth Composite are not subject to the same types of
expenses to which the relevant Portfolio is subject or to the diversification
requirements, specific tax restrictions and investment limitations imposed on
the Portfolio by the 1940 Act or Subchapter M of the Internal Revenue Code.
Consequently, the performance results for the LargeCap Growth Composite could
have been adversely affected if the institutional private accounts included in
the LargeCap Growth Composite had been regulated as investment companies under
the federal securities laws.
The investment results presented below are unaudited. For more information on
the specified market indices used below, see the section "The Benchmarks." The
name of the other fund or account managed by the adviser is shown in bold. The
name of the Trust Portfolio is shown in (parentheses). The name of the benchmark
is shown in italics.
<PAGE>
------
29
--------------------------------------------------------------------------------
ANNUAL RATES OF RETURN OF OTHER FUNDS OR ACCOUNTS
MANAGED BY ADVISERS AS OF [12/31/99]
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1 5 10 SINCE INCEPTION
YEAR YEARS YEARS INCEPTION DATE
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OTHER FUND OR ACCOUNT MANAGED BY ADVISER
(EQAT Portfolio)
-----------------------------------------------------------------------------------------
Benchmark
-----------------------------------------------------------------------------------------
AXP NEW DIMENSIONS FUND
(EQ/AXP New Dimensions Portfolio)
-----------------------------------------------------------------------------------------
Russell 1000 Growth Index(1)
-----------------------------------------------------------------------------------------
AXP STRATEGY AGGRESSIVE FUND(2)
(EQ/AXP Strategy Aggressive Portfolio)
-----------------------------------------------------------------------------------------
Russell MidCap Growth Index(3)
-----------------------------------------------------------------------------------------
FIDELITY [ ] FUND
(EQ/Mid Cap Portfolio)
-----------------------------------------------------------------------------------------
S&P MidCap 400 Index(3)
-----------------------------------------------------------------------------------------
JANUS LARGECAP GROWTH COMPOSITE
(EQ/Janus Large Cap Growth Portfolio)
-----------------------------------------------------------------------------------------
Russell 1000 Growth Index(1)
-----------------------------------------------------------------------------------------
</TABLE>
(1) The Russell 1000 Growth Index is an unmanaged list of common stocks that
measures the performance of Russell 1000 Index companies with higher
price-to-book ratios and higher forecasted growth values. (The Russell 1000
Index measures the performance of the 1,000 largest companies in the
Russell 3000 Index, which represents approximately 92% of the total market
capitalization of the Russell 3000 Index. The Russell 3000 Index measures
the performance of the 3,000 largest U.S. companies based on total market
capitalization, which represents approximately 98% of the investable U.S.
equity market). The Russell 1000 Growth Index does not include fees or
operating expenses and is not available for actual investment. It is
compiled by the Frank Russell Company.
(2) [ADDITIONAL INFORMATION ABOUT RELEVANT CLASS TO BE ADDED].
(3) The Standard & Poor's MidCap 400 Index ("S&P 400 MidCap") is an unmanaged
weighted index of 400 domestic stocks chosen for market size (median market
capitalization of about $610 million), liquidity, and industry group
representation. The S&P 400 MidCap reflects the reinvestment of income
dividends and capital gain distributions, if any, but does not reflect
fees, brokerage commissions, or other expenses of investing.
(4) The Russell MidCap Growth Index is an unmanaged index (with no defined
investment objective) measuring the performance of those Russell MidCap
Index companies with higher price-to-book ratios and higher forecasted
growth values. The Russell MidCap Index measures the performance of the 800
smallest companies in the Russell 1000 Index, which represent approximately
26% of the total market capitalization of the Russell 1000 Index. The index
does not include fees or operating expenses and is not available for actual
investment. It is compiled by the Frank Russell Company.
-------------------- EQ Advisors Trust
<PAGE>
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 ......................................... 38
Investment Management and Other Services ........................ 42
Brokerage Allocation and Other Strategies ....................... 56
Purchase and Pricing of Shares .................................. 63
Redemption of Shares ............................................ 64
Taxation ........................................................ 65
Portfolio Performance ........................................... 66
Code of Ethics .................................................. 67
Other Services .................................................. 67
Financial Statements ............................................ 67
</TABLE>
MASTER
--------------------------------------------------------------------------------
<PAGE>
TRUST HISTORY
EQ Advisors Trust (the "Trust") is an open-end management investment company
and is registered as such under the Investment Company Act of 1940, as amended
("1940 Act"). The Trust is organized as a Delaware business trust and was
formed on October 31, 1996 under the name "787 Trust." The Trust changed its
name to "EQ Advisors Trust" effective November 25, 1996.
DESCRIPTION OF THE TRUST AND ITS INVESTMENTS AND RISKS
The Trust currently offers two classes of shares on behalf of the following
Portfolios: the Alliance Common Stock Portfolio, Alliance Conservative
Investors Portfolio, Alliance Equity Index Portfolio, Alliance Global
Portfolio, Alliance Growth and Income Portfolio, Alliance Growth Investors
Portfolio, Alliance High Yield Portfolio, Alliance Intermediate Government
Securities Portfolio, Alliance International Portfolio, Alliance Money Market
Portfolio, Alliance Quality Bond Portfolio, and Alliance Small Cap Growth
Portfolio (collectively referred to herein as the "Alliance Portfolios"),
EQ/Aggressive Stock Portfolio, EQ/Balanced Portfolio, T. Rowe Price
International Stock Portfolio, T. Rowe Price Equity Income Portfolio, EQ/Putnam
Growth & Income Value Portfolio, EQ/Putnam International Equity Portfolio,
EQ/Putnam Investors Growth Portfolio, EQ/Putnam Balanced Portfolio, MFS
Research Portfolio, MFS Emerging Growth Companies Portfolio, MFS Growth with
Income Portfolio, Morgan Stanley Emerging Markets Equity Portfolio, Warburg
Pincus Small Company Value Portfolio, Mercury World Strategy Portfolio, Mercury
Basic Value Equity Portfolio, Lazard Large Cap Value Portfolio, Lazard Small
Cap Value Portfolio, J.P. Morgan Core Bond Portfolio, BT Small Company Index
Portfolio, BT International Equity Index Portfolio, BT Equity 500 Index
Portfolio, EQ/Evergreen Foundation Portfolio, EQ/Evergreen Portfolio,
EQ/Alliance Premier Growth Portfolio, Capital Guardian Research Portfolio,
Capital Guardian U.S. Equity Portfolio, Capital Guardian International
Portfolio, Calvert Socially Responsible Portfolio, EQ/Alliance Technology
Portfolio, EQ/AXP New Dimensions Portfolio, EQ/AXP Strategy Aggressive
Portfolio, EQ/Janus Large Cap Growth Portfolio, and EQ/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
2
<PAGE>
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").
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
3
<PAGE>
by law (except that the Mercury World Strategy Portfolio and the Mercury
Basic Value Equity Portfolio may purchase securities on margin to the
extent permitted by applicable law. Any borrowings which come to exceed
this amount will be reduced in accordance with applicable law. Each
Portfolio may borrow from banks or other persons to the extent permitted
by applicable law. In addition, the Lazard Large Cap Value Portfolio may
borrow for leveraging purposes (in order to increase its investment in
portfolio securities) to the extent that the amount so borrowed does not
exceed 33 1/3% of the Portfolio's total assets (including the amount
borrowed) less liabilities (other than borrowings);
b. as a matter of non-fundamental operating policy, no Portfolio, except
the Lazard Large Cap Value Portfolio, will purchase additional
securities when money borrowed exceeds 5% of its total assets;
c. the EQ/Putnam Growth & Income Value Portfolio, EQ/Putnam International
Equity Portfolio, EQ/Putnam Investors Growth Portfolio, EQ/Putnam
Balanced Portfolio, and Lazard Large Cap Value Portfolio each, as a
matter of non-fundamental operating policy, may borrow only from banks
(i) as a temporary measure to facilitate the meeting of redemption
requests (not for leverage) which might otherwise require the untimely
disposition of portfolio investments or (ii) for extraordinary or
emergency purposes, provided that the combination of (i) and (ii) shall
not exceed 10% of the applicable Portfolio's net assets (taken at lower
of cost or current value), not including the amount borrowed, at the
time the borrowing is made. Each Portfolio will repay borrowings made
for the purposes specified above before any additional investments are
purchased;
d. the Mercury World Strategy Portfolio, as a matter of fundamental policy,
and the Mercury Basic Value Equity Portfolio, as a matter of
non-fundamental operating policy, may, to the extent permitted by
applicable law, borrow up to an additional 5% of their respective total
assets for temporary purposes;
e. the Lazard Small Cap Value Portfolio, as a matter of non-fundamental
operating policy, may borrow only from banks (i) as a temporary measure
to facilitate the meeting of redemption requests (not for leverage)
which might otherwise require the untimely disposition of portfolio
investments or (ii) for extraordinary or emergency purposes, provided
that the combination of (i) and (ii) shall not exceed 15% of the
Portfolio's net assets, not including the amount borrowed, at the time
the borrowing is made. The Lazard Small Cap Value Portfolio will repay
borrowings before any additional investments are purchased;
f. the Warburg Pincus Small Company Value Portfolio and J.P. Morgan Core
Bond Portfolio, each as a matter of non-fundamental operating policy,
may borrow only from banks for extraordinary or emergency purposes,
provided such amount shall not exceed 30% of the respective Portfolio's
total assets, not including the amount borrowed, at the time the
borrowing is made;
g. EQ/Evergreen Portfolio and EQ/Evergreen Foundation Portfolio, each as a
matter of non-fundamental policy, may, in addition to the amount
specified above, also borrow up to an additional 5% of its total assets
from banks or other lenders;
h. the MFS Growth with Income Portfolio, as a matter of non-fundamental
policy, may borrow up to 10% of its total assets (taken at cost), or its
net assets (taken at market value), whichever is less, but only as a
temporary measure for extraordinary or emergency purposes;
i. the EQ/Alliance Premier Growth Portfolio, Capital Guardian Research
Portfolio, Capital Guardian U.S. Equity Portfolio, Capital Guardian
International Portfolio and EQ/Alliance Technology Portfolio as a matter
of non-fundamental operating policy, may only borrow for temporary or
emergency purposes, provided such amount does not exceed 5% of the
Portfolio's total assets at the time the borrowing is made;
j. The Alliance Portfolios, EQ/Aggressive Stock Portfolio and EQ/Balanced
Portfolio, as a matter of non-fundamental operating policy, may borrow
money only from banks: (i) for
4
<PAGE>
temporary purposes; (ii) to pledge assets to banks in order to transfer
funds for various purposes as required without interfering with the
orderly liquidation of securities in a Portfolio (but not for leveraging
purposes); (iii) to make margin payments or pledges in connection with
options, futures contracts, options on futures contracts, forward
contracts or options on foreign currencies; or (iv) with respect to
Alliance Quality Bond Portfolio, in connection with transactions in
interest rate swaps, caps and floors.
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.
(2) Purchase or sell physical commodities, except that it may (i) enter into
futures contracts and options thereon in accordance with applicable law
and (ii) purchase or sell physical commodities if acquired as a result of
ownership of securities or other instruments. No Portfolio will consider
stock index futures contracts, currency contracts, hybrid investments,
swaps or other similar instruments to be commodities;
(3) Purchase the securities of any issuer if, as a result, more than 25% of the
value of the Portfolio's total assets would be invested in the securities
of issuers having their principal business activities in the same
industry. This restriction does not apply to investments by the Alliance
Money Market Portfolio in certificates of deposit or securities issued and
guaranteed by domestic banks. In addition, the United States, state or
local governments, or related agencies or instrumentalities are not
considered an industry. Industries are determined by reference to the
classifications of industries set forth in each Portfolio's semi-annual
and annual reports;
(4) Make loans, except that:
a. This restriction shall not apply to the Alliance High Yield Portfolio
and Alliance Intermediate Government Securities Portfolio and each may
make secured loans, including lending cash or portfolio securities with
limitation.
b. each other Portfolio may: (i) lend portfolio securities provided that no
such loan may be made if, as a result, the aggregate of such loans would
exceed 33 1/3% of the value of the Portfolio's total assets (50% in the
case of each of the other Alliance Portfolios); (ii) purchase money
market securities and enter into repurchase agreements; and (iii)
acquire publicly-distributed or privately-placed debt securities and
purchase debt securities. Each Portfolio will consider the acquisition
of a debt security to include the execution of a note or other evidence
of an extension of credit with a term of more than nine months. For
purposes of this restriction, each Portfolio will treat purchases of
loan participations and other direct indebtedness, including investments
in mortgages, as not subject to this limitation;
c. the EQ/Putnam Growth & Income Value Portfolio and EQ/Putnam
International Equity Portfolio, as a matter of non-fundamental operating
policy, may purchase debt obligations consistent with the respective
investment objectives and policies of each of those Portfolios: (i) by
entering into repurchase agreements with respect to not more than 25% of
the Portfolios' respective total assets (taken at current value) or (ii)
through the lending of the Portfolios' portfolio securities with respect
to not more than 25% of the Portfolios' respective total assets (taken
at current value);
d. the MFS Emerging Growth Companies Portfolio, BT Small Company Index
Portfolio, BT International Equity Index Portfolio, 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
5
<PAGE>
e. the Warburg Pincus Small Company Value Portfolio, the Mercury World
Strategy Portfolio, and the Mercury Basic Value Equity Portfolio, as a
matter of non-fundamental policy, may each lend its portfolio securities
provided that no such loan may be made if, as a result, the aggregate of
such loans would exceed 20% of such Portfolio's total assets (taken at
market value);
f. the Lazard Large Cap Value Portfolio and the Lazard Small Cap Value
Portfolio, as a matter of non-fundamental policy, may each lend its
portfolio securities provided that no such loan may be made if, as a
result, the aggregate of such loans would exceed 10% of such Portfolio's
total assets (taken at market value);
g. MFS Growth with Income Portfolio, as a matter of non-fundamental
operating policy, may lend its portfolio securities provided that no
such loan may be made if, as a result, the aggregate of such loans would
exceed 25% of its net assets (taken at market value);
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/Mid Cap Portfolio, as a matter of non-fundamental policy, will
not make cash loans if the total commitment amount exceeds 15% of the
Portfolio's net assets.
m. 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);
(5) Purchase a security if, as a result, with respect to 75% of the value of
its total assets, more than 5% of the value of the Portfolio's total
assets would be invested in the securities of a single issuer, except (i)
securities issued or guaranteed by the United States Government, its
agencies or instrumentalities and (ii) securities of other investment
companies:*
a. As a matter of operating policy, each Portfolio will not consider
repurchase agreements to be subject to the above stated 5% limitation if
the collateral underlying the repurchase agreements consists exclusively
of obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities;
b. The Alliance Money Market Portfolio, as a matter of non-fundamental
policy, will not invest more than 5% of its total assets in securities
of any one issuer, other than U.S. Government securities, except that it
may invest up to 25% of its total assets in First Tier Securities (as
defined in Rule 2a-7 of the 1940 Act) of a single issuer for a period of
up to three business days after the purchase of such security. Further,
as a matter of operating policy, the Alliance Money Market Portfolio
will not invest more than (i) the greater of 1% of its total assets or
$1,000,000 in Second Tier Securities (as defined in Rule 2a-7 under the
1940 Act) of a single issuer and (ii) 5% of its total assets, at the
time a Second Tier Security is acquired, in Second Tier Securities;
6
<PAGE>
(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 if, with respect to
positions in futures or options on futures which do not represent bona
fide hedging, the aggregate initial margin and premiums on such options
would exceed 5% of the Portfolio's net asset value. As a matter of
operating policy, the Alliance Money Market Portfolio, the MFS Research
Portfolio, the Lazard Large Cap Value Portfolio, the Lazard Small Cap
Value Portfolio, the Capital Guardian Research Portfolio, the Capital
Guardian U.S. Equity Portfolio and the Capital Guardian International
Portfolio, and the EQ/Janus Large Cap 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 Aggressive Portfolio, and EQ/Mid
Cap 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 a futures
contract if the obligations underlying all such futures contracts would
exceed 50% of the value of each such Portfolio's total assets.
----------
* The 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>
(2) Purchase: (a) illiquid securities, (b) securities restricted as to resale
(excluding securities determined by the Board of Trustees to be readily
marketable), and (c) repurchase agreements maturing in more than seven
days if, as a result, more than 15% of each Portfolio's net assets (10%
for the Alliance Money Market Portfolio, the Warburg Pincus Small Company
Value Portfolio, Lazard Large Cap Value Portfolio, Lazard Small Cap Value
Portfolio, the EQ/Alliance Technology Portfolio, EQ/AXP New Dimensions
Portfolio and EQ/AXP Strategy Aggressive Portfolio, and the EQ/ Mid Cap
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;
(3) Purchase securities on margin, except that each Portfolio may: (a) make use
of any short-term credit necessary for clearance of purchases and sales of
portfolio securities and (b) make initial or variation margin deposits in
connection with futures contracts, options, currencies, or other
permissible investments;
(4) Mortgage, pledge, hypothecate or, in any manner, transfer any security
owned by the Portfolio as security for indebtedness, except as may be
necessary in connection with permissible borrowings or investments; and
then such mortgaging, pledging or hypothecating may not exceed 33 1/3% of
the respective total assets of each Portfolio (except as specified below
for the EQ/Putnam International Equity Portfolio, Mercury World Strategy
Portfolio, Mercury Basic Value Equity Portfolio and MFS Investor
Portfolio). Such mortgaging, pledging or hypothecating may not exceed 15%
of EQ/Putnam International Equity Portfolio's total assets; 10% of each of
the Mercury World Strategy Portfolio's and Mercury Basic Value Equity
Portfolio's total assets, (taken at the lower of cost or market value);
15% of MFS Investor Portfolio's gross assets (taken at cost); and 15% of
EQ/Janus Large Cap Growth Portfolio's net assets, each taken at the time
of the permissible borrowing or investment. The Alliance Portfolios, the
EQ/Aggressive Stock Portfolio and the EQ/Balanced Portfolio, will not
pledge assets for leveraging purposes. The deposit of underlying
securities and other assets in escrow and collateral arrangements with
respect to margin accounts for futures contracts, options, currencies or
other permissible investments are not deemed to be mortgages, pledges, or
hypothecations for these purposes;
(5) Purchase participations or other direct interests in or enter into leases
with respect to, oil, gas, or other mineral exploration or development
programs, except that the MFS Emerging Growth Companies Portfolio, Warburg
Pincus Small Company Value Portfolio, Mercury World Strategy Portfolio,
Mercury Basic Value Equity Portfolio, J.P. Morgan Core Bond Portfolio,
EQ/Evergreen Foundation Portfolio, EQ/Evergreen Portfolio, EQ/Alliance
Premier Growth Portfolio, Capital Guardian Research Portfolio, Capital
Guardian U.S. Equity Portfolio and Capital Guardian International
Portfolio may invest in securities issued by companies that engage in oil,
gas or other mineral exploration or development activities or hold mineral
leases acquired as a result of its ownership of securities;
(6) Invest in puts, calls, straddles, spreads, swaps or any combination
thereof, except to the extent permitted by the Portfolio's Prospectus and
Statement of Additional Information, as may be amended from time to time;
or
(7) Effect short sales of securities unless at all times when a short position
is open the Portfolio owns an equal amount of such securities or owns
securities which, without payment of any further consideration, are
convertible into or exchangeable for securities of the same issue as, and
at least equal in amount to, the securities sold short. Permissible
futures contracts, options, or currency transactions will not be deemed to
constitute selling securities short. As a matter of operating policy, the
Capital Guardian Research Portfolio, Capital Guardian U.S. Equity
Portfolio, Capital Guardian International Portfolio and EQ/Alliance
Technology Portfolio will not effect short sales of securities or
property.
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 (except the Warburg Pincus Small Company Value Portfolio) may
make contracts to purchase forward commitments if it holds, and maintains until
the settlement date in a segregated account, cash or liquid securities in an
amount sufficient to meet the purchase price, or if it enters into offsetting
contracts for the forward sale of other securities it owns. Forward commitments
may be considered securities in themselves and involve a risk of loss if the
value of the security to be purchased declines prior to the settlement date,
which risk is in addition to the risk of decline in value of the Portfolio's
other assets. Where such purchases are made through dealers, a Portfolio relies
on the dealer to consummate the sale. The dealer's failure to do so may result
in the loss to a Portfolio of an advantageous yield or price.
A Portfolio will only enter into forward commitments and make commitments to
purchase securities on a when-issued or delayed delivery basis with the
intention of actually acquiring the securities. However, the Portfolio may sell
these securities before the settlement date if it is deemed advisable as a
matter of investment strategy. Forward commitments and when-issued and delayed
delivery transactions are generally expected to settle within three months from
the date the transactions are entered into, although the Portfolio may close
out its position prior to the settlement date by entering into a matching sales
transaction.
Although none of the Portfolios intends to make such purchases for speculative
purposes and each Portfolio intends to adhere to the policies of the Securities
and Exchange Commission ("SEC"), purchases of securities on such a basis may
involve more risk than other types of purchases. For example, by committing to
purchase securities in the future, a Portfolio subjects itself to a risk of
loss on such commitments as well as on its portfolio securities. Also, a
Portfolio may have to sell assets which have been set aside in order to meet
redemptions. In addition, if a Portfolio determines it is advisable as a matter
of investment strategy to sell the forward commitment or when-issued or delayed
delivery securities before delivery, that Portfolio may incur a gain or loss
because of market fluctuations since the time the commitment to purchase such
securities was made. Any such gain or loss would be treated as a 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
18
<PAGE>
securities index at a future point in time, preferred stock with dividend rates
determined by reference to the value of a currency, or convertible securities
with the conversion terms related to a particular commodity rates. Under
certain conditions, the redemption value of such an instrument could be zero.
Hybrid instruments can have volatile prices and limited liquidity and their use
by a Portfolio may not be successful.
Hybrid instruments may bear interest or pay preferred dividends at below market
(or even relatively nominal) rates. Alternatively, hybrid instruments may bear
interest at above market rates but bear an increased risk of principal loss (or
gain). The latter scenario may result if "leverage" is used to structure the
hybrid instrument. Leverage risk occurs when the hybrid instrument is
structured so that a given change in a Benchmark or Underlying Asset is
multiplied to produce a greater value change in the hybrid instrument, thereby
magnifying the risk of loss as well as the potential for gain.
Hybrid instruments can be an efficient means of creating exposure to a
particular market, or segment of a market, with the objective of enhancing
total return. For example, a Portfolio may wish to take advantage of expected
declines in interest rates in several European countries, but avoid the
transaction costs associated with buying and currency-hedging the foreign bond
positions. One solution would be to purchase a United States dollar-denominated
hybrid instrument whose redemption price is linked to the average three year
interest rate in a designated group of countries. The redemption price formula
would provide for payoffs of greater than par if the average interest rate was
lower than a specified level, and payoffs of less than par if rates were above
the specified level. Furthermore, a Portfolio could limit the downside risk of
the security by establishing a minimum redemption price so that the principal
paid at maturity could not be below a predetermined minimum level if interest
rates were to rise significantly. The purpose of this arrangement, known as a
structured security with an embedded put option, would be to give the Portfolio
the desired European bond exposure while avoiding currency risk, limiting
downside market risk, and lowering transaction costs. Of course, there is no
guarantee that the strategy will be successful and a Portfolio could lose money
if, for example, interest rates do not move as anticipated or credit problems
develop with the issuer of the hybrid instrument.
Although the risks of investing in hybrid instruments reflect a combination of
the risks of investing in securities, options, futures and currencies, hybrid
instruments are potentially more volatile and carry greater market risks than
traditional debt instruments. The risks of a particular hybrid instrument will,
of course, depend upon the terms of the instrument, but may include, without
limitation, the possibility of significant changes in the Benchmarks or the
prices of Underlying Assets to which the instrument is 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
19
<PAGE>
Portfolio's ability to raise cash for redemptions or other purposes. The
liquidity of securities purchased by a Portfolio which are eligible for resale
pursuant to Rule 144A 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 29.
As indicated in Appendix A, certain of the Portfolios may also write and
purchase put and call options. Options (another type of potentially high-risk
security) give the purchaser of an option the right, but not the obligation, to
buy or sell in the future an asset at a predetermined price during the term of
the option. (The writer of a put or call option would be obligated to buy or
sell the underlying asset at a predetermined price during the term of the
option.) Each Portfolio will write put and call options only if such options
are considered to be "covered". A call option on a security is covered, for
example, when the writer of the call option owns throughout the option period
the security on which the option is written (or a security convertible into
such a security without the payment of additional consideration). A put option
on a security is covered, for example, when the writer of the put has deposited
and maintained in a segregated account throughout the option period sufficient
cash or other liquid assets in an amount equal to or greater than the exercise
price of the put option.
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. However, the Warburg Pincus Small Company Value Portfolio
may commit up to 10% of its total assets to premiums when purchasing put or
call options.
WRITING CALL OPTIONS. A call option is a contract which gives the purchaser of
the option (in return for a premium paid) the right to buy, and the writer of
the option (in return for a premium received) the obligation to sell, the
underlying security at the exercise price at any time prior to the expiration
of the option, regardless of the market price of the security during the option
period. A call option on a security is covered, for example, when the writer of
the call option owns the security on which the option is written (or on a
security convertible into such a security without additional consideration)
throughout the option period.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the underlying securities. If the futures price at
expiration is below the exercise price, the Portfolio will retain the full
amount of the option premium, which provides a partial hedge against any
decline that may have occurred in the value of the Portfolio's holdings of
securities. The writing of a put option on a futures contract is analogous to
the purchase of a futures contract in that it hedges against an increase in the
price of securities the Portfolio intends to acquire. However, the hedge is
limited to the amount of premium received for writing the put.
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 of the Portfolios may each invest in
swap contracts, which are derivatives in the form of a contract or other
similar instrument which is an agreement to exchange the return generated by
one instrument for the return generated by another instrument. The payment
streams are calculated by reference to a specified index and agreed upon
notional amount. The term "specified index" includes, but is not limited to,
currencies, fixed interest rates, prices and total return on interest rate
indices, fixed income indices, stock indices and commodity indices (as well as
amounts derived from arithmetic operations on these indices). For example, a
Portfolio may agree to swap the return generated by a fixed income index for
the return generated by a second fixed income index. The currency swaps in
which a Portfolio may enter will generally involve an agreement to pay interest
streams in one currency based on a specified index in exchange for receiving
interest streams denominated in another currency. Such swaps may involve
initial and final exchanges that correspond to the agreed upon notional amount.
A Portfolio will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Portfolio receiving or paying, as the
case may be, only the net amount of the two payments. A Portfolio's obligations
under a swap agreement will be accrued daily (offset against any amounts owing
to the Portfolio) and any accrued but unpaid net amounts owed to a swap
counterparty will be covered by the maintenance of a segregated account
consisting of unencumbered liquid assets, to avoid any potential leveraging of
a Portfolio. To the extent that these swaps are entered into for hedging
purposes, the Advisers believe such obligations do not constitute "senior
securities" under the 1940 Act and, accordingly, the Adviser will not treat
them as being subject to a Portfolio's borrowing restrictions. A Portfolio may
enter into OTC swap transactions with counterparties that are approved by the
Advisers in accordance with guidelines established by the Board of Trustees.
These guidelines provide for a minimum credit rating for each counterparty and
various credit enhancement techniques (for example, collateralization of
amounts due from counterparties) to limit exposure to counterparties that have
lower credit ratings.
The Portfolio will usually enter into swaps on a net basis, i.e., the two
return streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Portfolio receiving or paying, as the
case may be, only the net amount of the two returns. The Portfolio's
obligations under a swap agreement will be accrued daily (offset against any
amounts owing to the Portfolio) and any accrued but unpaid net amounts owed to
a swap counterparty will be covered by the maintenance of a segregated account
consisting of cash, United States Government securities, or high grade debt
obligations. No Portfolio will enter into any swap agreement unless the
counterparty meets the rating requirements set forth in guidelines established
by the Trust's Board of Trustees. The swap market has grown substantially in
recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. As
a result, the swap market has become relatively liquid. Swaps that include more
recent innovations for which standardized documentation has not yet been fully
developed are less liquid than "traditional" swaps. The use of swaps is a
highly specialized activity that involves investment techniques and risks
different from those associated with ordinary
35
<PAGE>
portfolio securities transactions. If an Adviser is incorrect in its forecasts
of market values, interest rates, and currency exchange rates, the investment
performance of the Portfolio would be less favorable than it would have been if
this investment technique were not used.
The swaps in which a Portfolio may engage may include instruments under which
one party pays a single or periodic fixed amount(s) (or premium), and the other
party pays periodic amounts based on the movement of a specified index. Swaps
do not involve the delivery of securities, other underlying assets, or
principal. Accordingly, the risk of loss with respect to swaps is limited to
the net amount of payments the Portfolio is contractually obligated to make. If
the other party to a swap defaults, the Portfolio's risk of loss consists of
the net amount of payments that the Portfolio contractually is entitled to
receive. Currency swaps usually involve the delivery of the entire principal
value of one designated currency in exchange for the other designated currency.
Therefore, the entire principal value of a currency swap is subject to the risk
that the other party to the swap will default on its contractual delivery
obligations. If there is a default by the counterparty, a Portfolio may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Certain swap transactions involve more recent
innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than traditional swap
transactions.
The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If an Adviser is incorrect in its forecasts of market
values, interest rates, and currency exchange rates, the investment performance
of the Portfolio would be less favorable than it would have been if this
investment technique were not used.
UNITED STATES GOVERNMENT SECURITIES. Each Portfolio may invest in debt
obligations of varying maturities issued or guaranteed by the United States
Government, its agencies or instrumentalities ("United States Government
securities"). Direct obligations of the United States Treasury include a
variety of securities that differ in their interest rates, maturities and dates
of issuance. United States Government securities also include securities issued
or guaranteed by government agencies that are supported by the full faith and
credit of the United States (e.g., securities issued by the Federal Housing
Administration, Export-Import Bank of the United States, Small Business
Administration, and Government National Mortgage Association); securities
issued or guaranteed by government agencies that are supported by the ability
to borrow from the United States Treasury (e.g., securities issued by the
Federal National Mortgage Association); and securities issued or guaranteed by
government agencies that are only supported by the credit of the particular
agency (e.g., Interamerican Development Bank, the International Bank for
Reconstruction and Development, and the Tennessee Valley Authority).
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.
36
<PAGE>
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.
37
<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 (53) ........................ From 1986 to present, Partner and Consultant,
Trustee Syrus Associates (business and marketing
consulting firm); from 1992 to present, Trustee,
Provident Investment Counsel Trust (investment
company); from 1995 to present, Director, The
PBHG Funds, Inc. (investment company).
David W. Fox (68) ............................. From 1987 to present, Director of USG
Trustee Corporation; Public Governor (1989 to present)
and Chairman (1996 to present) of the Chicago
Stock Exchange; from 1990-1995, Chairman and
Chief Executive Officer, Northern Trust
Corporation.
Michael Hegarty* (55) ......................... From April 1998 to present, Director, President
Trustee and Chief Operating Officer, Equitable; from 1996
to 1998, Vice Chairman, Chase Manhattan
Corporation; from 1995 to 1996, Vice Chairman,
Chemical Bank (Chase Manhattan Corporation
and Chemical Bank merged in 1996); from 1991 to
1995, Senior Executive Vice President, Chemical
Bank.
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
--------------------------------------------- ----------------------------------------------------
<S> <C>
William M. Kearns, Jr. (64) ................. From 1994 to present, President, W.M. Kearns &
Trustee Co., Inc. (private investment company); from 1998
to present, Vice Chairman, Keefe Managers,
Inc. (financial services funds); Director, Malibu
Entertainment Worldwide, Inc., Marine Transport
Corporation, Selective Insurance Group, Inc.,
Transistor Devices, Inc., as well as a number of
private and venture backed companies.
Christopher P.A. Komisarjevsky (55) ......... From 1998 to present, President and Chief
Trustee Executive Officer, Burson-Marsteller Worldwide
(public relations); from 1996 to 1998, President
and Chief Executive Officer, Burson-Marstellar
USA; from 1994 to 1995, President and Chief
Executive Officer, Gavin Anderson & Company,
New York.
Harvey Rosenthal (57) ....................... From 1996 to present, Consultant/Director; from
Trustee 1994 to 1996, President and Chief Operating
Officer, Melville Corporation (now CVS
Corporation); Director, Schein Pharmaceutical, Inc.
and LoJack Corporation.
Gary S. Schpero* (46) ....................... Prior to January 1, 2000, Partner of Simpson
Trustee Thacher & Bartlett (law firm) and Managing
Partner of Investment Management and
Investment Company Practice Group.
</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
39
<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:
40
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH TRUST PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
------------------------------------------ --------------------------------------------------------
<S> <C>
Peter D. Noris (44) ...................... From May 1995 to present, Executive Vice President
President and Chief Investment Officer, Equitable; from 1992 to
1995, Vice President, Salomon Brothers, Inc.; from July
1995 to present, Director, Alliance Capital Management,
L.P.; from July 1995 to October 1999, Trustee, Hudson
River Trust (investment company); from November
1996 to present, Executive Vice President, AXA
Advisors.
Brian S. O'Neil (47) ..................... From July 1998 to present, Executive Vice President
Vice President AXA Financial; from 1997 to 1998, Director of
Investment, AXA Investment Managers-Europe; from
1995 to 1997, Chief Investment Officer, AXA
Investment Management Paris; from 1992 to June 1995,
Executive Vice President and Chief Investment Officer
AXA Financial.
Steven M. Joenk (41) ..................... From July 1999 to present, Senior Vice President AXA
Vice President and Chief Financial Officer Financial; from 1996 to 1999, Managing Director of
MeesPierson; from 1994 to 1996, Executive Vice
President and Chief Financial Officer, Gabelli Funds,
Inc.
Kevin R. Byrne (44) ...................... From July 1997 to present, Senior Vice President and
Vice President and Treasurer Treasurer, AXA Financial and Equitable; from 1990 to
present, Treasurer, Frontier Trust Company; from 1997
to present, President and Chief Executive Officer,
Equitable Casualty Insurance Company.
Patricia Louie, Esq. (44) ................ From July 1999 to present, Vice President and Counsel,
Vice President and Secretary AXA Financial and Equitable; from September 1994 to
July 1999, Assistant General Counsel of The Dreyfus
Corporation.
Kenneth T. Kozlowski (38) ................ From October 1999 to present, Assistant Vice President,
Controller AXA Financial; from October 1996 to October 1999,
Director-Fund Administration, Prudential Investments;
from 1992 to 1996, Vice President-Fund Administration,
Prudential Securities Incorporated.
Steven Case (41) ......................... From January 2000 to present, Vice President, AXA
Vice President Financial; from September 1999 to December 1999,
Assistant Treasurer, The Rockefeller Foundation; from
March 1998 to September 1999, Senior Vice President,
Putnam Investments; from January 1989 to March 1998,
Managing Director, Rogers Casey & Associates.
Mary E. Cantwell (38) .................... From July 1999 to present, Vice President, Equitable;
Vice President from September 1997 to July 1999, Assistant Vice
President, Office of the Chief Investment Officer,
Equitable; from September 1997 to present, Assistant
Vice President, AXA Advisors; from September 1997
to present, Marketing Director, Income Management
Group, Equitable.
</TABLE>
41
<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"), Rowe Price-Fleming
International, Inc. ("Price-Fleming"), Putnam Investment Management, Inc.
("Putnam Management"), Massachusetts Financial Services Company ("MFS"), Morgan
Stanley Asset Management Inc. ("MSAM"), Credit Suisse Asset Management, LLC
("CSAM"), Mercury Asset Management US, a division of Fund Asset Management, LP
("Mercury"), Lazard Asset
42
<PAGE>
Management ("LAM"), a division of Lazard Freres and Company, LLC, J.P. Morgan
Investment Management Inc. ("J.P. Morgan"), Bankers Trust Company ("Bankers
Trust"), Evergreen Asset Management Corp. ("Evergreen"), Alliance Capital
Management, L.P. ("Alliance"), Capital Guardian Trust Company ("Capital
Guardian") Calvert Asset Management Company, Inc. ("Calvert"), Brown Capital
Management, Inc. ("Brown Capital"), Prudential Investments Fund Management LLC
("PIFM"), Jennison Associates LLC ("Jennison"), American Express Financial
Corporation ("AEFC"), Fidelity Management & Research Company ("FMR"), 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 and by shareholders at a meeting held on April
14, 2000. Subject always to the direction and control of the Trustees of the
Trust, under the Management Agreement the Manager will have (i) overall
supervisory responsibility for the general management and investment of each
Portfolio's assets; (ii) full discretion to select new or additional Advisers
for each Portfolio; (iii) full discretion to enter into and materially modify
existing Advisory Agreements with Advisers; (iv) full discretion to terminate
and replace any Adviser; and (v) full investment discretion to make all
determinations with respect to the investment of a Portfolio's assets not then
managed by an Adviser. In connection with the Manager's responsibilities under
the Management Agreement, the Manager will assess each Portfolio's investment
focus and will seek to implement decisions with respect to the allocation and
reallocation of each Portfolio's assets among one or more current or additional
Advisers from time to time, as the Manager deems appropriate, to enable each
Portfolio to achieve its investment goals. In addition, the Manager will
monitor compliance of each Adviser with the investment objectives, policies and
restrictions of any Portfolio or Portfolios (or portions of any Portfolio)
under the management of such Adviser, and review and report to the Trustees of
the Trust on the performance of each Adviser. The Manager will furnish, or
cause the appropriate Adviser(s) to furnish, to the Trust such statistical
information, with respect to the investments that a Portfolio (or portions of
any Portfolio) may hold or contemplate purchasing, as the Trust may reasonably
request. On the Manager's own initiative, the Manager will apprise, or cause
the appropriate Adviser(s) to apprise, the Trust of important developments
materially affecting each Portfolio (or any portion of a Portfolio that they
advise) and will furnish the Trust, from time to time, with such information as
may be appropriate for this purpose. Further, the Manager agrees to furnish, or
cause the appropriate Adviser(s) to furnish, to the Trustees of the Trust such
periodic and special reports as the Trustees of the Trust may reasonably
request. In addition, the Manager agrees to cause the appropriate Adviser(s) to
furnish to third-party data reporting services all currently available
standardized performance information and other customary data.
Under the Management Agreement, the Manager also is required to furnish to the
Trust, at its own expense and without remuneration from or other cost to the
Trust, the following:
o Office space, all necessary office facilities and equipment.
43
<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).
44
<PAGE>
The tables below show the fees paid by each Portfolio to the Manager (or the
predecessor Manager to the Alliance Portfolios) during the years ended December
31, 1997, 1998 and 1999 respectively. The first column shows each fee without
fee waivers, the second column shows the fees actually paid to the Manager
after fee waivers and the third column shows the total amount of fees waived by
the Manager and other expenses of each Portfolio assumed by the Manager
pursuant to the Expense Limitation Agreement.
FISCAL YEAR ENDED DECEMBER 31, 1997*
<TABLE>
<CAPTION>
TOTAL AMOUNT OF
MANAGEMENT FEE FEES WAIVED AND
PAID TO MANAGER OTHER EXPENSES
PORTFOLIO MANAGEMENT FEE AFTER FEE WAIVER ASSUMED BY MANAGER
------------------------------------------------ ---------------- ------------------ -------------------
<S> <C> <C> <C>
Mercury Basic Value Equity ..................... $ 73,477 $ 0 $123,460
Mercury World Strategy ......................... $ 49,425 $ 0 $115,763
MFS Emerging Growth Companies .................. $169,781 $ 0 $280,111
MFS Research ................................... $186,533 $ 0 $292,185
EQ/Putnam Balanced ............................. $ 50,946 $ 0 $137,739
EQ/Putnam Growth & Income Value ................ $227,936 $ 0 $350,861
EQ/Putnam International Equity ................. $130,202 $ 0 $228,427
EQ/Putnam Investors Growth ..................... $ 67,578 $ 0 $141,578
T. Rowe Price Equity Income .................... $166,401 $ 0 $250,098
T. Rowe Price International Stock .............. $213,839 $ 0 $365,096
Warburg Pincus Small Company Value ............. $252,178 $ 5,693 $246,485
Morgan Stanley Emerging Markets Equity ......... $ 66,404 $23,496 $ 42,908
</TABLE>
----------
* Except for Morgan Stanley Emerging Markets Equity Portfolio, each of the
Portfolios above commenced operations on May 1, 1997. Morgan Stanley
Emerging Markets Equity Portfolio commenced operations on August 20, 1997.
The BT Equity 500 Index, BT International Equity Index, BT Small Company
Index, J.P. Morgan Core Bond, Lazard Large Cap Value and Lazard Small Cap
Value Portfolios are not included in the above table because they had no
operations during the fiscal year ended December 31, 1997 except for the
issuance of Class IB shares.
CALENDAR YEAR ENDED DECEMBER 31, 1998*
<TABLE>
<CAPTION>
TOTAL AMOUNT OF
MANAGEMENT FEE FEES WAIVED AND
PAID TO MANAGER OTHER EXPENSES
PORTFOLIO MANAGEMENT FEE AFTER FEE WAIVER ASSUMED BY MANAGER
------------------------------------------------ ---------------- ------------------ -------------------
<S> <C> <C> <C>
Mercury Basic Value Equity ..................... $ 632,783 $ 396,615 $236,168
Mercury World Strategy ......................... $ 179,486 $ 75,018 $104,468
MFS Emerging Growth Companies .................. $1,351,932 $ 881,342 $470,590
MFS Research ................................... $1,319,969 $ 842,389 $477,580
EQ/Putnam Balanced ............................. $ 269,939 $ 99,960 $169,979
EQ/Putnam Growth & Income Value ................ $1,654,313 $1,069,169 $585,144
EQ/Putnam International Equity ................. $ 673,315 $ 421,928 $251,387
EQ/Putnam Investors Growth ..................... $ 497,899 $ 282,976 $214,923
T. Rowe Price Equity Income .................... $1,000,224 $ 661,278 $338,946
T. Rowe Price International Stock .............. $ 788,805 $ 573,446 $215,359
Warburg Pincus Small Company Value ............. $1,012,129 $ 738,570 $273,559
Morgan Stanley Emerging Markets Equity ......... $ 364,795 $ 105,117 $259,678
BT Equity 500 Index ............................ $ 210,001 $ 0 $232,207
BT International Equity Index .................. $ 98,039 $ 0 $180,103
BT Small Company Index ......................... $ 45,728 $ 0 $220,614
J.P. Morgan Core Bond .......................... $ 172,507 $ 86,266 $ 86,241
Lazard Large Cap Value ......................... $ 160,570 $ 73,011 $ 87,559
Lazard Small Cap Value ......................... $ 194,797 $ 111,500 $ 83,297
</TABLE>
45
<PAGE>
The EQ/Aggressive Stock, EQ/Balanced, Alliance Common Stock, Alliance
Conservative Investors Portfolio, Alliance Equity Index, Alliance Global,
Alliance Growth and Income, Alliance Growth Investors, Alliance High Yield,
Alliance Intermediate Government Securities, Alliance International, Alliance
Money Market, Alliance Quality Bond, Alliance Small Cap Growth, EQ/Evergreen
Foundation, EQ/Evergreen, MFS Growth with Income, EQ/Alliance Premier Growth,
Capital Guardian Research, Capital Guardian U.S. Equity and Capital Guardian
International Portfolios are not included in the above tables because they had
no operations before the year ended December 31, 1998.
CALENDAR YEAR ENDED DECEMBER 31, 1999*
<TABLE>
<CAPTION>
TOTAL AMOUNT OF
MANAGEMENT FEE FEES WAIVED AND
PAID TO MANAGER OTHER EXPENSES
PORTFOLIO MANAGEMENT FEE AFTER FEE WAIVER ASSUMED BY MANAGER
------------------------------------------------------- ---------------- ------------------ -------------------
<S> <C> <C> <C>
Mercury Basic Value Equity ............................ $ 1,290,548 $ 1,027,977 $262,571
Mercury World Strategy ................................ $ 214,078 $ 152,180 $ 61,898
MFS Emerging Growth Companies ......................... $ 4,668,243 $ 3,839,743 $828,500
MFS Research .......................................... $ 2,891,285 $ 2,318,049 $573,236
EQ/Putnam Balanced .................................... $ 526,299 $ 362,752 $163,547
EQ/Putnam Growth & Income Value ....................... $ 2,955,452 $ 2,393,031 $562,421
EQ/Putnam International Equity ........................ $ 1,352,745 $ 1,238,715 $114,030
EQ/Putnam Investors Growth ............................ $ 1,469,035 $ 1,328,348 $140,687
T. Rowe Price Equity Income ........................... $ 1,487,784 $ 1,170,353 $317,391
T. Rowe Price International Stock ..................... $ 1,186,330 $ 1,044,609 $141,721
Warburg Pincus Small Company Value .................... $ 974,661 $ 845,954 $128,707
Morgan Stanley Emerging Markets Equity ................ $ 960,297 $ 426,642 $533,655
BT Equity 500 Index ................................... $ 1,077,825 $ 571,204 $506,691
BT International Equity Index ......................... $ 230,274 $ 159,545 $ 70,729
BT Small Company Index ................................ $ 104,701 $ 0 $207,306
J.P. Morgan Core Bond ................................. $ 589,231 $ 466,067 $123,164
Lazard Large Cap Value ................................ $ 578,767 $ 513,394 $ 65,373
Lazard Small Cap Value ................................ $ 480,925 $ 421,716 $ 59,209
EQ/Aggressive Stock** ................................. $23,118,072 $23,118,072 $ 0
EQ/Balanced** ......................................... $ 8,110,873 $ 8,110,873 $ 0
Alliance Common Stock** ............................... $51,373,606 $51,373,606 $ 0
Alliance Conservative Investors** ..................... $ 2,038,794 $ 2,038,794 $ 0
Alliance Equity Index** ............................... $ 6,630,350 $ 6,630,350 $ 0
Alliance Global** ..................................... $10,032,682 $10,032,682 $ 0
Alliance Growth and Income** .......................... $ 6,692,196 $ 6,692,196 $ 0
Alliance Growth Investors** ........................... $11,425,161 $11,425,161 $ 0
Alliance High Yield** ................................. $ 3,569,825 $ 3,569,825 $ 0
Alliance Intermediate Government Securities** ......... $ 1,009,174 $ 1,009,174 $ 0
Alliance International** .............................. $ 2,054,558 $ 2,054,558 $ 0
Alliance Money Market** ............................... $ 4,094,768 $ 4,094,768 $ 0
Alliance Quality Bond** ............................... $ 1,768,157 $ 1,768,157 $ 0
Alliance Small Cap Growth** ........................... $ 2,702,328 $ 2,702,328 $ 0
EQ/Evergreen Foundation ............................... $ 28,270 $ 0 $ 44,492
EQ/Evergreen .......................................... $ 19,857 $ 0 $ 47,864
MFS Growth with Income ................................ $ 233,224 $ 103,187 $130,037
EQ/Alliance Premier Growth ............................ $ 968,447 $ 728,821 $239,626
Capital Guardian Research ............................. $ 79,240 $ 29,124 $ 50,116
Capital Guardian U.S. Equity .......................... $ 137,165 $ 77,338 $ 59,827
Capital Guardian International ........................ $ 110,978 $ 43,763 $ 67,215
Calvert Socially Responsible .......................... $ 4,861 $ 0 $ 31,969
</TABLE>
----------
* The EQ/Alliance Premier Growth, Capital Guardian Research, Capital Guardian
U.S. Equity, and Capital Guardian International Portfolios commenced
operations on April 30, 1999. The Calvert Socially Responsible Portfolio
commenced operations on August 30, 1999. The EQ/Aggressive Stock,
46
<PAGE>
EQ/Balanced, Alliance Common Stock, Alliance Conservative Investors,
Alliance Equity Index, Alliance Global, Alliance Growth and Income, Alliance
Growth Investors, Alliance High Yield, Alliance Intermediate Government
Securities, Alliance International, Alliance Money Market, Alliance Quality
Bond, and Alliance Small Cap Growth Portfolios commenced operations on
October 18, 1999. The EQ/Alliance Technology, EQ/AXP New Dimensions, EQ/AXP
Strategy Aggressive, EQ/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.
THE ADVISERS
On behalf of the T. Rowe Price Equity Income Portfolio and the T. Rowe Price
International Stock Portfolio, the Manager has entered into investment advisory
agreements ("Advisory Agreements") with T. Rowe Price and Price-Fleming,
respectively. Additionally, the Manager has entered into an Advisory Agreement
on behalf of EQ/Putnam Growth & Income Value Portfolio, EQ/Putnam International
Equity Portfolio, EQ/Putnam Investors Growth Portfolio and EQ/Putnam Balanced
Portfolio with Putnam Management. The Manager has entered into an Advisory
Agreement on behalf of EQ/Aggressive Stock Portfolio, MFS Research Portfolio,
MFS Emerging Growth Companies Portfolio and MFS Growth with Income Portfolio
with MFS. The Manager has entered into Advisory Agreements on behalf of Morgan
Stanley Emerging Markets Equity Portfolio and Warburg Pincus Small Company
Value Portfolio with MSAM and CSAM, respectively. The Manager has entered into
an Advisory Agreement on behalf of Mercury World Strategy Portfolio and Mercury
Basic Value Equity Portfolio with Mercury. The Manager has entered into an
Advisory Agreement on behalf of Lazard Large Cap Value Portfolio and Lazard
Small Cap Value Portfolio with LAM. The Manager has entered into an Advisory
Agreement on behalf of the J.P. Morgan Core Bond Portfolio with J.P. Morgan.
The Manager has entered into an Advisory Agreement on behalf of BT Small
Company Index Portfolio, BT International Equity Index Portfolio and BT Equity
500 Index Portfolio with Bankers Trust. The Manager has entered into an
Advisory Agreement on behalf of EQ/Evergreen Foundation Portfolio and
EQ/Evergreen Portfolio with Evergreen. The Manager has entered into an Advisory
Agreement on behalf of EQ/Alliance Premier Growth Portfolio, Alliance
Portfolios, EQ/Aggressive Stock Portfolio, EQ/Balanced Portfolio and the EQ/
Alliance Technology Portfolio with Alliance. The Manager has entered into an
Advisory Agreement on behalf of Capital Guardian Research Portfolio, Capital
Guardian U.S. Equity Portfolio, Capital Guardian International Portfolio and
EQ/Balanced Portfolio with Capital Guardian. The Manager has entered into
Advisory Agreements on behalf of Calvert Socially Responsible Portfolio with
Calvert and Brown Capital. 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 EQ/Mid
Cap Portfoilio with FMR. The Advisory Agreements obligate T. Rowe Price,
Price-Fleming, Putnam Management, MFS, CSAM, MSAM, Mercury, LAM, J.P. Morgan,
Bankers Trust, Evergreen, Alliance, Capital Guardian, Calvert, Brown Capital,
PIFM, Jennison, AEFC, and FMR 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.
47
<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.
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, Alliance Money
Market, Alliance Quality Bond, Alliance Small Cap Growth, EQ/Evergreen Foun-
48
<PAGE>
dation, EQ/Evergreen, MFS Growth with Income, EQ/Alliance Premier Growth,
Capital Guardian Research, Capital Guardian U.S. Equity, Capital Guardian
International and Calvert Socially Responsible Portfolios are not included
in the above tables because they had no operations before the year ended
December 31, 1998.
CALENDAR YEAR ENDED DECEMBER 31, 1999*
<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
49
<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, EQ/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.
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")
served as the administrator for the Trust through April 30, 2000.
During the years ended December 31, 1997, 1998 and 1999, respectively, Chase
Global as the administrator was paid the following fees, by the Trust with
respect to each Portfolio:
50
<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.
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.
51
<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, EQ/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.
52
<PAGE>
THE DISTRIBUTORS
The Trust has distribution agreements with AXA Advisors and EDI (each also
referred to as a "Distributor," and together "Distributors"), in which AXA
Advisors and EDI serve as Distributors for the Trust's Class IA shares and
Class IB shares. AXA Advisors and EDI are each an indirect wholly-owned
subsidiary of Equitable and the address for each is 1290 Avenue of the
Americas, New York, New York 10104.
The Trust's distribution agreements with respect to the Class IA shares and
Class IB shares ("Distribution Agreements") were reapproved by the Board of
Trustees at a Board meeting held on April 12, 1999. The Distribution Agreements
will remain in effect from year to year provided each Distribution Agreement's
continuance is approved annually by (i) a majority of the Trustees who are not
parties to such agreement or "interested persons" (as defined in the 1940 Act)
of the Trust or a Portfolio and, if applicable, who have no direct or indirect
financial interest in the operation of the Class IB Distribution Plan or any
such related agreement ("Independent Trustees") and (ii) either by vote of a
majority of the Trustees or a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Trust.
The Distributors or their affiliates for the Class IA shares will pay for
printing and distributing prospectuses or reports prepared for their use in
connection with the offering of the Class IA shares to prospective Contract
owners and preparing, printing and mailing any other literature or advertising
in connection with the offering of the Class IA shares to prospective Contract
owners.
Pursuant to the Class IB Distribution Plan the Trust compensates the
Distributors from assets attributable to the Class IB shares for services
rendered and expenses borne in connection with activities primarily intended to
result in the sale of the Trust's Class IB shares. It is anticipated that a
portion of the amounts received by the Distributors will be used to defray
various costs incurred or paid by the Distributors in connection with the
printing and mailing of Trust prospectuses, statements of additional
information, and any supplements thereto and shareholder reports, and holding
seminars and sales meetings with wholesale and retail sales personnel designed
to promote the distribution of Class IB shares. The Distributors may also use a
portion of the amounts received to provide compensation to financial
intermediaries and third-party broker-dealers for their services in connection
with the distribution of Class IB shares.
The Class IB Distribution Plan provides that the Trust, on behalf of each
Portfolio, may pay annually up to 0.50% of the average daily net assets of a
Portfolio attributable to its Class IB shares in respect of activities
primarily intended to result in the sale of Class IB shares. However, under the
Distribution Agreements, payments to the Distributors for activities pursuant
to the Class IB Distribution Plan are limited to payments at an annual rate
equal to 0.25% of average daily net assets of a Portfolio attributable to its
Class IB shares. Under terms of the Class IB Distribution Plan and the
Distribution Agreements, each Portfolio is authorized to make payments monthly
to the Distributors that may be used to pay or reimburse entities providing
distribution and shareholder servicing with respect to the Class IB shares for
such entities' fees or expenses incurred or paid in that regard.
The Class IB Distribution Plan is of a type known as a "compensation" plan
because payments are made for services rendered to the Trust with respect to
Class IB shares regardless of the level of expenditures by the Distributors.
The Trustees will, however, take into account such expenditures for purposes of
reviewing operations under either the Class IB Distribution Plan and in
connection with their annual consideration of the Class IB Distribution Plan's
renewal. The Distributors have indicated that they expect their expenditures to
include, without limitation: (a) the printing and mailing of Trust
prospectuses, statements of additional information, any supplements thereto and
shareholder reports for prospective Contract owners with respect to the Class
IB shares of the Trust; (b) those relating to the development, preparation,
printing and mailing of advertisements, sales literature and other promotional
materials describing and/or relating to the Class IB shares of the Trust; (c)
holding seminars and sales meetings designed to promote the distribution of
Trust Class IB shares; (d) obtaining information and providing explanations to
wholesale and retail distributors of Contracts regarding Trust investment
objectives and policies and other information about the Trust and its
Portfolios, including the performance of the Portfolios; (e) training sales
personnel regarding the Class IB shares of the Trust; and (f) financing any
other activity that the Distributors determine is primarily intended to result
in the sale of Class IB shares.
53
<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.
54
<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, EQ/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.
55
<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.
56
<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.
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
57
<PAGE>
Portfolio, Alliance Intermediate Government Securities Portfolio, Alliance
International Portfolio, Alliance Money Market Portfolio, Alliance Quality
Bond Portfolio, Alliance Small Cap Growth Portfolio, EQ/Evergreen
Foundation, EQ/Evergreen, MFS Growth with Income, EQ/Alliance Premier
Growth, Capital Guardian Research, Capital Guardian U.S. Equity, Capital
Guardian International and Calvert Socially Responsible Portfolios did not
pay any brokerage commissions during the year ended December 31, 1998.
CALENDAR YEAR ENDED DECEMBER 31, 1999*
<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>
58
<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, EQ/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.
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 Price-Fleming, the Advisers to the T. Rowe Price
International Stock and T. Rowe Price Equity Income Portfolios, may execute
portfolio transactions through certain affiliates of Price Fleming and Jardine
Fleming, which are persons indirectly related to the Advisers, acting as agent
in accordance with procedures established by the Trust's Board of Trustees.
Mercury, the Adviser to the Mercury World Strategy and Mercury Basic Value
Equity Portfolios, may execute portfolio transactions through certain
affiliates of Mercury. MSAM, the Adviser to the Morgan Stanley Emerging Markets
Equity Portfolio, may execute portfolio transactions through certain affiliates
of MSAM. LAM, the Adviser to the Lazard Large Cap Value and Lazard Small Cap
Value Portfolios, may execute portfolio transactions through certain affiliates
of LAM. J.P. Morgan, the Adviser to the J.P. Morgan Core Bond Portfolio, may
execute portfolio transactions through certain affiliates of J.P. Morgan. MFS,
the Adviser to the MFS Emerging Growth Companies, MFS Growth with Income and
MFS Research Portfolios, and an adviser to the EQ/Aggressive Stock Portfolio,
may execute portfolio transactions through certain affiliates of MFS, including
MFS Fund Distributors, Inc. Putnam Management, the Adviser to the EQ/Putnam
Balanced, EQ/Putnam Growth & Income, EQ/Putnam International Equity, and
EQ/Putnam Investors Growth Portfolios, does not have an affiliated broker
through which it would execute portfolio transactions. Bankers Trust, the
Adviser to BT Small Company Index Portfolio, BT International Equity Index
Portfolio and BT Equity 500 Index Portfolio, may execute portfolio transactions
through certain affiliates of Bankers Trust. Evergreen, the Adviser to the
EQ/Evergreen Foundation Portfolio and EQ/Evergreen Portfolio, may execute
portfolio transactions through certain affiliates of Evergreen and First Union
National Bank, including Lieber & Company. Alliance, the Adviser to the
EQ/Alliance Premier Growth Portfolio, EQ/Alliance Technology Portfolio,
Alliance Common Stock Portfolio, Alliance Conservative Investors Portfolio,
Alliance Equity Index Portfolio, Alliance Global Portfolio, Alliance Growth and
Income Portfolio, Alliance Growth Investors Portfolio, Alliance High Yield
Portfolio, Alliance Intermediate Government Securities Portfolio, Alliance
International Portfolio, Alliance Money Market Portfolio, Alliance Quality Bond
Portfolio, Alliance Small Cap Growth Portfolio, and an Adviser to the
EQ/Aggressive Stock Portfolio and EQ/Balanced Portfolio, may execute portfolio
transactions with certain affiliates of Alliance, including DLJ and the
Pershing Division of Donaldson, Lufkin & Jenrette Securities Corporation.
Capital Guardian, the Adviser to the Capital Guardian Research Portfolio, the
Capital Guardian U.S. Equity Portfolio and the Capital Guardian International
Portfolio, and an Adviser to the EQ/Balanced Portfolio, does not have an
affiliated broker
59
<PAGE>
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. FMR may execute portfolio transactions through
certain affiliates of FMR, including National Financial Services Corporation
and Fidelity Brokerage Services Japan LLC. Janus 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>
60
<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.
61
<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, EQ/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.
62
<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.
63
<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.
64
<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.
65
<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.
66
<PAGE>
Each Portfolio's total return will vary from time to time depending upon market
conditions, the composition of each Portfolio's investment portfolio and
operating expenses of the Trust allocated to each Portfolio. Total return
should also be considered relative to changes in the value of a Portfolio's
shares and to the relative risks associated with the investment objectives and
policies of the Portfolios. These total return figures do not reflect insurance
company expenses and fees applicable to the Contracts. At any time in the
future, total return may be higher or lower than in the past and there can be
no assurance that any historical results will continue.
NON-STANDARD PERFORMANCE
In addition to the performance information described above, each Portfolio may
provide total return information with respect to the Portfolios for designated
periods, such as for the most recent six months or most recent twelve months.
This total return information is computed as described under "Computation of
Total Return" above except that no annualization is made.
CODE OF ETHICS
The Trust, its Manager, its Distributors, and each of its Advisers, have
adopted Codes of Ethics pursuant to Rule 17j-1 under the Investment Company Act
of 1940 (as amended). Each of these Codes of Ethics permits the personnel of
their respective organizations to invest in securities for their own accounts.
A copy of each of the Codes of Ethics are on public file with, and are
available from, the SEC.
OTHER SERVICES
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, serves as the Trust's independent accountants. PricewaterhouseCoopers
LLP is responsible for auditing the annual financial statements of the Trust.
CUSTODIAN
The Chase Manhattan Bank, 1211 Avenue of the Americas, New York, New York 10036
serves as custodian of the Trust's portfolio securities and other assets. Under
the terms of the custody agreement between the Trust and The Chase Manhattan
Bank, The Chase Manhattan Bank maintains and deposits in separate accounts,
cash, securities and other assets of the Portfolios. The Chase Manhattan Bank
is also required, upon the order of the Trust, to deliver securities held by
The Chase Manhattan Bank, and to make payments for securities purchased by the
Trust. The Chase Manhattan Bank has also entered into sub-custodian agreements
with a number of foreign banks and clearing agencies, pursuant to which
portfolio securities purchased outside the United States are maintained in the
custody of these entities.
TRANSFER AGENT
Equitable serves as the transfer agent and dividend disbursing agent for the
Trust. Equitable receives no compensation for providing such services for the
Trust.
COUNSEL
Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington, D.C. 20006, serves
as counsel to the Trust.
Sullivan & Worcester, LLP, 1025 Connecticut Avenue, N.W., Suite 1000,
Washington, D.C. 20036, serves as counsel to the Independent Trustees of the
Trust.
FINANCIAL STATEMENTS
The audited financial statements for the period ended December 31, 1999,
including the financial highlights, appearing in the Trust's Annual Report to
Shareholders, filed electronically with the SEC, are incorporated by reference
and made a part of this document.
67
<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
</TABLE>
<TABLE>
<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>
Warburg Pincus Small
Company Value ............. N Y-30.0% N Y N
Mercury World Strategy ..... N Y-33.3% N Y N
Mercury Basic Value
Equity .................... N Y-33.3% N Y N
Lazard Large Cap Value ..... N Y-10.0% Y-33.3% Y Y
Lazard Small Cap Value ..... N Y-15.0%(E) N Y Y
J. P. Morgan Core Bond ..... Y Y-33.3% N Y N
BT Small Company
Index ..................... Y Y-33.3% N Y N
BT International Equity
Index ..................... Y Y-33.3% N Y N
BT Equity 500 Index ........ Y Y-33.3% N Y N
EQ/Evergreen ............... N Y-33.3% N Y N
EQ/Evergreen
Foundation ................ N Y-33.3% N Y N
EQ/Alliance Premier
Growth .................... N Y-5.0% N Y N
Capital Guardian
Research .................. N Y-5.0% N Y N
Capital Guardian U.S.
Equity .................... N Y-5.0% N Y N
Capital Guardian
International ............. N Y-5.0% N Y N
Calvert Socially
Responsible ............... Y Y-33.3% N Y Y
EQ/AXP New
Dimensions ................ Y Y-33.3% N Y Y
EQ/AXP Strategy
Aggressive ................ Y Y-33.3% N Y Y
EQ/Mid Cap ................. Y Y-33.3% N Y Y
EQ/Janus Large Cap
Growth Portfolio .......... Y Y-25% N Y Y
</TABLE>
<TABLE>
<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>
Warburg Pincus Small
Company Value ............. N N Y Y Y Y Y
Mercury World Strategy ..... N N Y Y Y Y Y
Mercury Basic Value
Equity .................... N N Y-10% Y Y Y Y
Lazard Large Cap Value ..... N N Y-10% Y N N N
Lazard Small Cap Value ..... N N Y N N N N
J. P. Morgan Core Bond ..... N Y Y Y Y Y Y
BT Small Company
Index ..................... N N N N N N N
BT International Equity
Index ..................... N N Y Y Y Y Y
BT Equity 500 Index ........ N N Y N N N N
EQ/Evergreen ............... N N Y Y N N N
EQ/Evergreen
Foundation ................ N N Y Y Y Y Y
EQ/Alliance Premier
Growth .................... N N Y Y Y Y Y
Capital Guardian
Research .................. N N Y Y N N N
Capital Guardian U.S.
Equity .................... N N Y Y N N N
Capital Guardian
International ............. N N Y Y Y Y Y
Calvert Socially
Responsible ............... Y Y Y Y Y Y Y
EQ/AXP New
Dimensions ................ N Y Y Y Y Y Y
EQ/AXP Strategy
Aggressive ................ N Y Y Y Y Y Y
EQ/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.
<PAGE>
(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%
</TABLE>
<TABLE>
<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
<PAGE>
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>
Warburg Pincus Small
Company Value ................. N Y Y N N Y-15%
Mercury World Strategy ......... Y Y Y Y N Y-15%
Mercury Basic Value
Equity ........................ N Y Y Y N Y-15%
Lazard Large Cap Value ......... N Y Y Y N Y-10%
Lazard Small Cap Value ......... N N Y Y N Y-10%
J. P. Morgan Core Bond ......... Y Y Y Y N Y-15%
BT Small Company
Index ......................... N N N Y N Y-15%
BT International Equity
Index ......................... Y Y Y Y N Y-15%
BT Equity 500 Index ............ N N Y Y N Y-15%
EQ/Evergreen ................... Y Y Y Y N Y-15%
EQ/Evergreen
Foundation .................... N Y Y Y N Y-15%
EQ/Alliance Premier
Growth ........................ Y Y Y Y N Y-15%
Capital Guardian
Research ...................... N N Y-15% Y Y-10% Y-15%
Capital Guardian U.S.
Equity ........................ N N Y Y Y-10% Y-15%
Capital Guardian
International ................. Y Y Y Y Y-10% Y-15%
Calvert Socially
Responsible ................... Y Y Y-10% Y Y-5% Y-15%
EQ/AXP New
Dimensions .................... Y Y Y-30% Y Y Y-10%
EQ/AXP Strategy
Aggressive .................... Y Y Y-25% Y Y Y-10%
EQ/Mid Cap ..................... Y Y Y Y Y Y-10%
EQ/Janus Large Cap
Growth Portfolio .............. Y Y Y Y Y Y-15%
</TABLE>
<TABLE>
<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>
Warburg Pincus Small
Company Value ............... Y Y N N N N Y Y
Mercury World Strategy ....... Y N N N N N Y Y
Mercury Basic Value
Equity ...................... Y N N N N N Y Y
Lazard Large Cap Value ....... Y N Y Y N N N N
Lazard Small Cap Value ....... Y N Y Y N N N N
J. P. Morgan Core Bond ....... Y N Y Y Y Y Y Y
BT Small Company
Index ....................... Y N N Y N N Y Y
BT International Equity
Index ....................... Y N N Y N N Y Y
BT Equity 500 Index .......... Y N N Y N N Y Y
EQ/Evergreen ................. Y N N N N N Y Y
EQ/Evergreen
Foundation .................. Y Y N Y N N Y Y
EQ/Alliance Premier
Growth ...................... Y N N N N N Y Y
Capital Guardian
Research .................... Y N N N N N Y Y
Capital Guardian U.S.
Equity ...................... Y N N N N N Y Y
Capital Guardian
International ............... Y N N N N N Y Y
Calvert Socially
Responsible ................. Y Y-20% N N N Y Y Y
EQ/AXP New
Dimensions .................. Y Y-5% Y Y N Y Y Y
EQ/AXP Strategy
Aggressive .................. Y Y-5% Y Y N Y Y Y
EQ/Mid Cap ................... Y Y Y Y N Y Y Y
EQ/Janus Large Cap
Growth Portfolio ............ Y Y Y Y N Y Y Y
</TABLE>
-------
(A) Considered a derivative security.
(B) Considered a foreign security.
<PAGE>
(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%
</TABLE>
<TABLE>
<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
<PAGE>
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>
Warburg Pincus Small
Company Value ............. N N N Y N Y - 20.0%
Mercury World Strategy ..... N N N Y N Y - 20.0%
Mercury Basic Value
Equity .................... N N N Y N Y - 20.0%
Lazard Large Cap Value ..... N N Y Y Y Y - 10.0%
Lazard Small Cap Value ..... N N Y Y N Y - 10.0%
J.P. Morgan Core Bond ...... N Y Y Y Y Y - 33.3%
BT Small Company
Index ..................... N N Y Y Y Y - 30.0%
BT International Equity
Index ..................... N N Y Y Y Y - 30.0%
BT Equity 500 Index ........ N N Y Y Y Y - 30.0%
EQ/Evergreen ............... N N N Y Y Y - 33.3%
EQ/Evergreen
Foundation ................ N N Y Y Y Y - 33.3%
EQ/Alliance Premier
Growth .................... N N Y Y N Y - 25.0%
Capital Guardian
Research .................. N N Y Y N Y-33.3%
Capital Guardian U.S.
Equity .................... N N Y Y N Y-33.3%
Capital Guardian
International ............. Y N Y Y N Y-33.3%
Calvert Socially
Responsible ............... N N Y Y Y Y-33.3%
EQ/AXP New
Dimensions ................ Y Y Y Y Y Y-30%
EQ/AXP Strategy
Aggressive ................ Y Y Y Y Y Y-30%
EQ/Mid Cap ................. Y Y Y Y Y Y-30%
EQ/Janus Large Cap
Growth Portfolio .......... Y-10% Y Y Y-25%
</TABLE>
<TABLE>
<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>
Warburg Pincus Small
Company Value ............. Y Y N N Y Y N
Mercury World Strategy ..... N N N N Y Y N
Mercury Basic Value
Equity .................... N N N N Y Y N
Lazard Large Cap Value ..... N N N N Y Y N
Lazard Small Cap Value ..... N Y N N Y Y N
J.P. Morgan Core Bond ...... Y N N Y Y Y Y
BT Small Company
Index ..................... N Y N N Y Y N
BT International Equity
Index ..................... N N N Y Y Y N
BT Equity 500 Index ........ N N N N Y Y N
EQ/Evergreen ............... Y Y N N Y Y N
EQ/Evergreen
Foundation ................ N N N N Y Y N
EQ/Alliance Premier
Growth .................... N N N N Y Y N
Capital Guardian
Research .................. N Y N N Y Y N
Capital Guardian U.S.
Equity .................... N Y N N Y Y N
Capital Guardian
International ............. N Y N N Y Y N
Calvert Socially
Responsible ............... Y Y Y Y Y Y Y
EQ/AXP New
Dimensions ................ N Y Y Y Y Y Y
EQ/AXP Strategy
Aggressive ................ N Y Y Y Y Y Y
EQ/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.
B-2
<PAGE>
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS
(a)(1) Agreement and Declaration of Trust.(1)
(a)(2) Amended and Restated Agreement and Declaration of Trust.(2)
(a)(3) Certificate of Trust.(1)
(a)(4) Certificate of Amendment.(2)
(b)(1)(i) By-Laws of the Trust.(1)
(c)(1)(ii) None other than Exhibit (a)(2) and (b)(1)(i).
(d) Investment Advisory Contracts
(d)(1)(i) Investment Management Agreement between EQ Advisors Trust
("Trust") and EQ Financial Consultants, Inc. ("EQFC") dated April
14, 1997.(4)
(d)(1)(ii) Amendment No. 1, dated December 9, 1997 to Investment Management
Agreement between the Trust and EQFC dated April 14, 1997.(7)
(d)(1)(iii) Amendment No. 2, dated as of December 31, 1998 to Investment
Management Agreement between the Trust and EQFC dated April 14,
1997.(11)
(d)(1)(iv) Form of Amendment No. 3, dated as of April 30, 1999, to Investment
Management Agreement between the Trust and EQFC.(11)
(d)(1)(v) Form of Amendment No. 4, dated as of August 30, 1999, to
Investment Management Agreement between the Trust and EQFC.(12)
(d)(1)(vi) Amended and Restated Investment Management Agreement, dated as of
May 1, 2000, between the Trust and The Equitable Life Assurance
Society of the United States ("Equitable"). (15)
(d)(1)(vii) Amendment No. 1 to Amended and Restated Investment Management
Agreement dated May 1, 2000 between the Trust and Equitable. (16)
(d)(2) Investment Advisory Agreement between EQFC and T. Rowe Price
Associates, Inc. dated April 1997.(4)
(d)(3) Investment Advisory Agreement between EQFC and Rowe Price-Fleming
International, Inc. dated April 1997.(4)
(d)(4) Investment Advisory Agreement between EQFC and Putnam Investment
Management, Inc. dated April 1997.(4)
(d)(5)(i) Investment Advisory Agreement between EQFC and Massachusetts
Financial Services Company ("MFS") dated April 1997.(4)
C-1
<PAGE>
(d)(5)(ii) Amendment No. 1, dated as of December 31, 1998 to Investment
Advisory Agreement by and between EQFC and MFS dated April 1997.
(11)
(d)(5)(iii) Amendment No. 2, dated as of May 1, 2000 to Investment Advisory
Agreement between Equitable and MFS dated April 1997. (14)
(d)(6) Investment Advisory Agreement between EQFC and Morgan Stanley
Asset Management Inc. dated April 1997.(4)
(d)(7) Investment Advisory Agreement between EQFC and Merrill Lynch Asset
Management, L.P. dated April 1997.(4)
(d)(8) Investment Advisory Agreement between EQFC and Lazard Freres & Co.
LLC dated December 9, 1997.(7)
(d)(9) Investment Advisory Agreement between EQFC and J.P. Morgan
Investment Management, Inc. dated December 9, 1997.(7)
(d)(10) Investment Advisory Agreement between EQFC and Credit Suisse Asset
Management, LLC, dated as of July 1, 1999.(12)
(d)(11) Investment Advisory Agreement between EQFC and Evergreen Asset
Management Corp., dated as of December 31, 1998.(11)
(d)(12)(i) Form of Investment Advisory Agreement between EQFC and Alliance
Capital Management L.P. ("Alliance") dated as of April 30,
1999.(11)
(d)(12)(ii) Amendment No. 1, dated as of October 1, 1999 to Investment
Advisory Agreement by and between EQFC and Alliance, dated as of
April 30, 1999. (14)
(d)(12)(iii) Amendment No. 2, as of dated May 1, 2000 to Investment Advisory
Agreement by and between Equitable and Alliance, dated as of May
1, 2000. (15)
(d)(13) Investment Advisory Agreement between EQFC and Capital Guardian
Trust Company, dated as of May 1, 1999.(11)
(d)(13)(i) Amendment No. 1, dated as of May 1, 2000 to Investment Advisory
Agreement between Equitable and Capital Guardian Trust Company,
dated May 1, 1999. (15)
(d)(14) Investment Advisory Agreement between EQFC and Calvert Asset
Management Company, Inc., dated as of August 30, 1999.(12)
(d)(15) Investment Advisory Agreement between EQFC and Brown Capital
Management, dated as of August 30, 1999.(12)
(d)(16) Investment Advisory Agreement between EQFC and Bankers Trust
Company dated as of December 9, 1997. (7)
(d)(17) Investment Advisory Agreement between Equitable and Prudential
Investment Fund Management LLC and Jennison Associates LLC, dated
as of May 15, 2000.
C-2
<PAGE>
(d)(18) Investment Advisory Agreement between Equitable and American
Express Financial Corporation.(16)
(d)(19) Investment Advisory Agreement between Equitable and Fidelity
Management & Research Company.(16)
(d)(20) Investment Advisory Agreement between Equitable and Janus Capital
Corporation.(16)
(e) Underwriting Contracts
(e)(1)(i) Distribution Agreement between the Trust and EQFC with respect to
the Class IA shares dated April 14, 1997.(4)
(e)(1)(ii) Amendment No. 1 dated December 9, 1997 to the Distribution
Agreement between the Trust and EQFC with respect to the Class IA
shares dated April 14, 1997.(7)
(e)(1)(iii) Amendment No. 2 dated as of December 31, 1998 to the Distribution
Agreement between the Trust and EQFC with respect to the Class 1A
shares dated April 14, 1997.(11)
(e)(1)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Distribution Agreement between the Trust and EQFC with respect to
the Class IA shares dated April 14, 1997.(11)
(e)(1)(v) Amendment No. 4 dated as of August 30, 1999 to the Distribution
Agreement between the Trust and EQFC with respect to the Class IA
shares dated April 14, 1997.(14)
(e)(1)(vi) Amendment No. 5 dated as of May 1, 2000 to the Distribution
Agreement between the Trust and EQFC with respect to the Class IA
shares dated April 14, 1997.(14)
(e)(1)(vii) Amendment No. 6 to the Distribution Agreement between the Trust
and AXA Advisors with respect to Class IA shares. (16)
(e)(2)(i) Distribution Agreement between the Trust and EQFC with respect to
the Class IB shares dated April 14, 1997.(4)
(e)(2)(ii) Amendment No. 1 dated December 9, 1997 to the Distribution
Agreement between the Trust and EQFC with respect to the Class IB
shares dated April 14, 1997.(7)
(e)(2)(iii) Amendment No. 2 dated as of December 31, 1998 to the Distribution
Agreement between the Trust and EQFC with respect to the Class IB
shares dated April 14, 1997.(11)
(e)(2)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Distribution Agreement between the Trust and EQFC with respect to
the Class IB shares dated April 14, 1997.(11)
(e)(2)(v) Amendment No. 4 dated as of August 30, 1999 to the Distribution
Agreement between the Trust and EQFC with respect to the Class IB
shares dated April 14, 1997.(14)
(e)(2)(vi) Amendment No. 5 dated as of May 1, 2000 to the Distribution
Agreement between the Trust and AXA Advisors with respect to the
Class IB shares dated April 14, 1997.(14)
(e)(2)(vii) Amendment No. 6 to the Distribution Agreement between the Trust
and AXA Advisors with respect to the Class IB shares dated April
14, 1997. (16)
C-3
<PAGE>
(e)(3)(i) Distribution Agreement between the Trust and Equitable
Distributors, Inc. ("EDI") with respect to the Class IA shares
dated April 14, 1997.(4)
(e)(3)(ii) Amendment No. 1 dated December 9, 1997 to the Distribution
Agreement between the Trust and EDI with respect to the Class IA
shares dated April 14, 1997.(7)
(e)(3)(iii) Amendment No. 2 dated as of December 31, 1998 to the Distribution
Agreement between the Trust and EDI with respect to the Class IA
shares dated April 14, 1997.(11)
(e)(3)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Distribution Agreement between the Trust and EDI with respect to
the Class IA shares dated April 14, 1997.(11)
(e)(3)(v) Amendment No. 4 dated as of August 30, 1999 to the Distribution
Agreement between the Trust and EDI with respect to the Class IA
shares dated April 14, 1997.(14)
(e)(3)(vi) Amendment No. 5 dated as of May 1, 2000 to the Distribution
Agreement between the Trust and EDI with respect to the Class IA
shares dated April 14, 1997. (14)
(e)(3)(vii) Amendment No. 6 to the Distribution Agreement between the Trust
and EDI with respect to the Class IA shares dated April 14,
1997.(16)
(e)(4)(i) Distribution Agreement between the Trust and EDI with respect to
the Class IB shares dated April 14, 1997.(4)
(e)(4)(ii) Amendment No. 1 dated December 9, 1997 to the Distribution
Agreement between the Trust and EDI with respect to the Class IB
shares dated April 14, 1997.(7)
(e)(4)(iii) Amendment No. 2 dated as of December 31, 1998 to the Distribution
Agreement between the Trust and EDI with respect to the Class IB
shares dated April 14, 1997.(11)
(e)(4)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Distribution Agreement between the Trust and EDI with respect to
the Class IB shares dated April 14, 1997.(11)
(e)(4)(v) Amendment No. 4 dated as of August 30, 1999 to the Distribution
Agreement between the Trust and EDI with respect to the Class IB
shares dated April 14, 1997.(14)
(e)(4)(vi) Amendment No. 5 dated as of May 1, 2000 to the Distribution
Agreement between the Trust and EDI with respect to the Class IB
shares dated April 14, 1997. (14)
(e)(4)(vii) Amendment No. 6 to the Distribution Agreement between the Trust
and EDI with respect to the Class IB shares dated April 14,
1997.(16)
(f) Form of Deferred Compensation Plan.(3)
(g) Custodian Agreements
(g)(1)(i) Custodian Agreement between the Trust and The Chase Manhattan Bank
dated April 17, 1997 and Global Custody Rider.(4)
(g)(1)(ii) Amendment No. 1 dated December 9, 1997 to the Custodian Agreement
between the Trust and The Chase Manhattan Bank dated April 17,
1997.(7)
C-4
<PAGE>
(g)(1)(iii) Amendment No. 2 dated as of December 31, 1998 to the Custodian
Agreement between the Trust and The Chase Manhattan Bank dated
April 17, 1997.(11)
(g)(1)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Custodian Agreement between the Trust and The Chase Manhattan Bank
dated April 17, 1997.(11)
(g)(1)(v) Form of Amendment No. 4 dated as of August 30, 1999 to the
Custodian Agreement between the Trust and The Chase Manhattan Bank
dated April 17, 1997.(14)
(g)(1)(vi) Form of Amendment No. 5 dated as of May 1, 2000 to the Custodian
Agreement between the Trust and the Chase Manhattan Bank dated
April 17, 1997.(14)
(g)(1)(vii) Amendment No. 6 to the Custodian Agreement between the Trust and
the Chase Manhattan Bank dated April 17, 1997.(16)
(g)(2)(i) Amended and Restated Global Custody Rider to the Domestic Custody
Agreement for Mutual Funds between the Chase Manhattan Bank and
the Trust dated August 31, 1998.(11)
(h) Other Material Contracts
(h)(1)(i) Mutual Fund Services Agreement between the Trust and Chase Global
Funds Services Company dated April 25, 1997.(4)
(h)(1)(ii) Form of Mutual Fund Services Agreement between the Trust and
Equitable dated May 1, 2000. (14)
(h)(2)(i) Amended and Restated Expense Limitation Agreement between the
Trust and EQFC dated March 3, 1998.(8)
(h)(2)(ii) Amended and Restated Expense Limitation Agreement by and between
EQFC and the Trust dated as of December 31, 1998.(11)
(h)(2)(iii) Amended and Restated Expense Limitation Agreement between EQFC and
The Trust dated as of May 1, 1999.(11)
(h)(2)(iv) Amendment No. 1 dated as of August 30, 1999, to the Amended and
Restated Expense Limitation Agreement between EQFC and the Trust
dated as of May 1, 1999. (14)
(h)(2)(v) Second Amended and Restated Expense Limitation Agreement between
Equitable and the Trust dated as of May 1, 2000.(14)
(h)(2)(vi) Amendment No. 1 to the Amended and Restated Expense Limitation
Agreement between Equitable and the Trust.(16)
(h)(3)(i) Organizational Expense Reimbursement Agreement by and between EQFC
and the Trust, on behalf of each series of the Trust except for
the Lazard Large Cap Value Portfolio, Lazard Small Cap Value
Portfolio, the JPM Core Bond Portfolio, BT Small Company Index
Portfolio, BT International Equity Index Portfolio and BT Equity
500 Index Portfolio and EQ Financial Consultants, Inc. dated April
14, 1997.(4)
(h)(3)(ii) Organizational Expense Reimbursement Agreement by and between EQFC
and the Trust, on behalf of the Lazard Large Cap Value Portfolio,
Lazard Small Cap Value Portfolio, JPM Core Bond Portfolio, BT
Small Company Index Portfolio, BT International Equity Index
Portfolio,
C-5
<PAGE>
and BT Equity 500 Index Portfolio and EQ Financial Consultants,
Inc. dated December 9, 1997.(7)
(h)(3)(iii) Organizational Expense Reimbursement Agreement by and between EQFC
and the Trust, on behalf of the MFS Income with Growth Portfolio,
EQ/Evergreen Foundation Portfolio and EQ/Evergreen Portfolio dated
December 31, 1998.(11)
(h)(4)(i) Participation Agreement by and among the Trust, Equitable,
Equitable Distributors, Inc., and EQFC dated April 14, 1997.(4)
(h)(4)(ii) Amendment No. 1 dated December 9, 1997 to the Participation
Agreement by and among the Trust, Equitable, Equitable
Distributors, Inc., and EQFC dated April 14, 1997.(7)
(h)(4)(iii) Amendment No. 2 dated as of December 31, 1998 to the Participation
Agreement by and among the Trust, Equitable, Equitable
Distributors, Inc., and EQFC dated April 14, 1997.(11)
(h)(4)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Participation Agreement among the Trust, Equitable, Equitable
Distributors, Inc., and EQFC dated April 14, 1997.(11)
(h)(4)(v) Form of Amendment No.4 dated as of October 18, 1999 to the
Participation Agreement among the Trust, Equitable, Equitable
Distributors, Inc., and AXA Advisors dated April 14, 1997.(14)
(h)(4)(vi) Form of Amendment No. 5 dated as of May 1, 2000 to the
Participation Agreement among the Trust, Equitable, Equitable
Distributors, Inc. and AXA Advisors dated April 14, 1997. (15)
(h)(4)(vii) Amendment No. 6 to the Participation Agreement among the Trust,
Equitable, EDI and AXA Advisors.(16)
(h)(5) Retirement Plan Participation Agreement dated December 1, 1998
among the Trust, EQFC, with The Equitable Investment Plan for
Employees, Managers and Agents and Equitable.(11)
(h)(5)(i) Form of Amendment No. 1 to the Retirement Plan Participation
Agreement dated April 30, 1999 among the Trust, EQFC, with The
Equitable Investment Plan for Employees, Managers and Agents and
Equitable.(11)
(h)(6) License Agreement Relating to Use of Name between Merrill Lynch &
Co., Inc., and the Trust dated April 28, 1997.(4)
(i)(1) Opinion and Consent of Katten Muchin & Zavis regarding the
legality of the securities being registered.(1)
(i)(2) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
Lazard Large Cap Value Portfolio, Lazard Small Cap Value
Portfolio, and JPM Core Bond Portfolio.(5)
(i)(3) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the BT
Small Company Index Portfolio, BT International Equity Index
Portfolio, and BT Equity 500 Index Portfolio.(6)
(i)(4) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
EQ/Evergreen Foundation Portfolio, EQ/Evergreen Portfolio, and MFS
Growth with Income Portfolio.(9)
C-6
<PAGE>
(i)(5) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
EQ/Alliance Premier Growth Portfolio, EQ/Capital Research
Portfolio, EQ/Capital U.S. Equities Portfolio and EQ/Capital
International Equities Portfolio.(10)
(i)(6) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
Alliance Money Market Portfolio, Alliance Intermediate Government
Securities Portfolio, Alliance Quality Bond Portfolio, Alliance
High Yield Portfolio, Alliance Balanced Portfolio, Alliance
Conservative Investors Portfolio, Alliance Growth Investors
Portfolio, Alliance Common Stock Portfolio, Alliance Equity Index
Portfolio, Alliance Growth and Income Portfolio, Alliance
Aggressive Stock Portfolio, Alliance Small Cap Growth Portfolio,
Alliance Global Portfolio, Alliance International Portfolio and
the Calvert Socially Responsible Portfolio.(12)
(i)(7) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
Alliance Technology Portfolio. (15)
(i)(8) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
EQ/AXP New Dimensions Portfolio, EQ/AXP Strategy Aggressive
Portfolio, EQ/Janus Large Cap Growth Portfolio and EQ/Mid Cap
Portfolio. (16)
(j) Consent of PricewaterhouseCoopers LLP, Independent Public
Accountants. (16)
(k) None
(l) Stock Subscription Agreement between the Trust, on behalf of the
T. Rowe Price Equity Income Portfolio, and Separate Account FP.(3)
(m) Distribution Plan Pursuant to Rule 12b-1 for the Trust's Class IB
shares.(4)
(n) Plan Pursuant to Rule 18f-3 under the 1940 Act.(4)
C-7
<PAGE>
(p) Codes of Ethics
(p)(1) Code of Ethics of the Trust, AXA Advisors, LLC and Equitable
Distributors. (15)
(p)(2) Code of Ethics of Alliance Capital Management, L.P., dated August
1999. (15)
(p)(3) Code of Ethics of Bankers Trust/Deutsche Bank. (15)
(p)(4) Code of Ethics of Brown Capital Management, Inc., dated February
10, 1994. (15)
(p)(5) Code of Ethics of Calvert Asset Management Company, Inc. (15)
(p)(6) Code of Ethics of Capital Guardian Trust Company. (15)
(p)(7) Code of Ethics of Evergreen Asset Management, Corp., dated
December 17, 1999. (15)
(p)(8) Code of Ethics of J.P. Morgan Investment Management, Inc.(15)
(p)(9) Code of Ethics of Lazard Asset Management, as revised September
27, 1999.(15)
(p)(10) Code of Ethics of Massachusetts Financial Services Company, dated
March 1, 2000.(15)
(p)(11) Code of Ethics of Merrill Lynch Asset Management Group.(15)
(p)(12) Code of Ethics of Morgan Stanley Asset Management.(15)
(p)(13) Code of Ethics of Putnam Investment Management.(15)
(p)(14)(i) Code of Ethics of Rowe Price Fleming International, dated March
1999.(15)
(p)(14)(ii) Code of Ethics of T. Rowe Price Associates, Inc., effective March
1, 2000.(15)
(p)(15) Code of Ethics of Warburg Pincus Asset Management/Credit Suisse
Asset Management, dated March 1, 2000.(15)
(p)(16)(i) Code of Ethics of Prudential Investments Fund Management, LLC.(15)
(p)(16)(ii) Code of Ethics of Jennison Associates LLC, as amended December 6,
1999.(15)
(p)(17) Code of Ethics of American Express Financial Corporation.(16)
(p)(18) Code of Ethics of Fidelity Management & Research Company.(16)
(p)(19) Code of Ethics of Janus Capital Corporation.(16)
Other Exhibits:
Power of Attorney.(3)
Power of Attorney for Michael Hegarty.(8)
C-8
<PAGE>
Power of Attorney for Steven M. Joenk.(12)
Power of Attorney for Theodossios (Ted) Athanassiades. (15)
Power of Attorney for David W. Fox.
Power of Attorney for Gary S. Schpero.
---------------
1. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on December 3, 1996 (File No. 333-17217).
2. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on January 23, 1997 (File No. 333-17217).
3. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on April 7, 1997 (File No. 333-17217).
4. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on August 28, 1997 (File No. 333-17217).
5. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on October 15, 1997 (File No. 333-17217).
6. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on October 31, 1997 (File No. 333-17217).
7. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on December 29, 1997 (File No. 333-17217).
8. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on March 5, 1998 (File No. 333-17217).
9. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on October 15, 1998 (File No. 333-17217).
10. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on February 16, 1999 (File No. 333-17217).
11. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on April 29, 1999 (File No. 333-17217).
12. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on August 30, 1999 (File No. 333-17217).
13. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on February 1, 2000 (File No. 333-17217).
14. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on February 16, 2000 (File No. 333-17217).
C-9
<PAGE>
15. Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A filed on April 21, 2000 (File No. 333-17217).
16. To be filed by amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE TRUST
The Equitable Life Assurance Society of the United States ("Equitable")
controls the Trust by virtue of its ownership of more than 99% of the Trust's
shares as of April 17, 2000. All shareholders of the Trust are required to
solicit instructions from their respective contract owners as to certain
matters. The Trust may in the future offer its shares to insurance companies
unaffiliated with Equitable.
On July 22, 1992, Equitable converted from a New York mutual life
insurance company to a publicly-owned New York stock life insurance company. At
that time Equitable became a wholly-owned subsidiary of AXA Financial, Inc.
("AXA Financial"). AXA Financial continues to own 100% of Equitable's common
stock as well as approximately 70% of the common stock of Donaldson, Lufkin &
Jenrette, Inc., a registered broker-dealer.
AXA is the largest shareholder of AXA Financial. On April 17, 2000, AXA
owned, directly or indirectly through its affiliates, 60% of the outstanding
common stock of AXA Financial. AXA is the holding company for an international
group of insurance and related financial services companies. AXA's insurance
operations include activities in life insurance, property and casualty insurance
and reinsurance. The insurance operations are diverse geographically, with
activities principally in Western Europe, North America, and the Asia/Pacific
area and, to a lesser extent, in Africa and South America. AXA is also engaged
in asset management, investing banking, securities trading, brokerage, real
estate and other financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area..
ITEM 25. INDEMNIFICATION
Amended and Restated Agreement and Declaration of Trust ("Declaration
of Trust") and By-Laws.
Article VII, Section 2 of the Trust's Declaration of Trust of the Trust
("Trust") states, in relevant part, that a "Trustee, when acting in such
capacity, shall not be personally liable to any Person, other than the Trust or
a Shareholder to the extent provided in this Article VII, for any act, omission
or obligation of the Trust, of such Trustee or of any other Trustee. The
Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, Manager, or Principal Underwriter of
the Trust. The Trust shall indemnify each Person who is serving or has served at
the Trust's request as a director, officer, trustee, employee, or agent of
another organization in which the Trust has any interest as a shareholder,
creditor, or otherwise to the extent and in the manner provided in the By-Laws."
Article VII, Section 4 of the Trust's Declaration of Trust further states, in
relevant part, that the "Trustees shall be entitled and empowered to the fullest
extent permitted by law to purchase with Trust assets insurance for liability
and for all expenses reasonably incurred or paid or expected to be paid by a
Trustee, officer, employee, or agent of the Trust in connection with any claim,
action, suit, or proceeding in which he or she may become involved by virtue of
his or her capacity or former capacity as a Trustee of the Trust."
Article VI, Section 2 of the Trust's By-Laws states, in relevant part,
that "[s]ubject to the exceptions and limitations contained in Section 3 of this
Article VI, every [Trustee, officer, employee or other agent of the Trust] shall
be indemnified by the Trust to the fullest extent permitted by law against all
liabilities and against all expenses reasonably incurred or paid by him or her
in connection with any proceeding in which he or she becomes involved as a party
or otherwise by virtue of his or her being or having been an agent." Article VI,
Section 3 of the Trust's By-Laws further states, in relevant part, that "[n]o
indemnification shall
C-10
<PAGE>
be provided hereunder to [a Trustee, officer, employee or other agent of the
Trust]: (a) who shall have been adjudicated, by the court or other body before
which the proceeding was brought, to be liable to the Trust or its Shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office
(collectively, "disabling conduct"); or (b) with respect to any proceeding
disposed of (whether by settlement, pursuant to a consent decree or otherwise)
without an adjudication by the court or other body before which the proceeding
was brought that such [Trustee, officer, employee or other agent of the Trust]
was liable to the Trust or its Shareholders by reason of disabling conduct,
unless there has been a determination that such [Trustee, officer, employee or
other agent of the Trust] did not engage in disabling conduct: (i) by the court
or other body before which the proceeding was brought; (ii) by at least a
majority of those Trustees who are neither Interested Persons of the Trust nor
are parties to the proceeding based upon a review of readily available facts (as
opposed to a full trial-type inquiry); or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts (as
opposed to a full trial-type inquiry); provided, however, that indemnification
shall be provided hereunder to [a Trustee, officer, employee or other agent of
the Trust] with respect to any proceeding in the event of (1) a final decision
on the merits by the court or other body before which the proceeding was brought
that the [Trustee, officer, employee or other agent of the Trust] was not liable
by reason of disabling conduct, or (2) the dismissal of the proceeding by the
court or other body before which it was brought for insufficiency of evidence of
any disabling conduct with which such [Trustee, officer, employee or other agent
of the Trust] has been charged." Article VI, Section 4 of the Trust's By-Laws
also states that the "rights of indemnification herein provided (i) may be
insured against by policies maintained by the Trust on behalf of any [Trustee,
officer, employee or other agent of the Trust], (ii) shall be severable, (iii)
shall not be exclusive of or affect any other rights to which any [Trustee,
officer, employee or other agent of the Trust] may now or hereafter be entitled
and (iv) shall inure to the benefit of [such party's] heirs, executors and
administrators."
UNDERTAKING
Insofar as indemnification for liability arising under the Securities
Act of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE MANAGER AND ADVISERS
The description of AXA Advisors under the caption of "Management of the Trust"
in the Prospectus and under the caption "Investment Management and Other
Services" in the Statement of Additional Information constituting Parts A and B,
respectively, of this Registration Statement are incorporated by reference
herein.
The information as to the directors and officers of AXA Advisors is set forth in
AXA Advisors' Form ADV filed with the Securities and Exchange Commission on July
1, 1996 (File No. 801-14065) and amended through the date hereof, is
incorporated by reference.
C-11
<PAGE>
The information as to the directors and officers of T. Rowe Price Associates,
Inc., is set forth in T. Rowe Price Associates, Inc.'s Form ADV filed with the
Securities and Exchange Commission on March 31, 1997 (File No. 801-00856) and
amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Rowe Price-Fleming
International, Inc. is set forth in Rowe Price-Fleming International, Inc.'s
Form ADV filed with the Securities and Exchange Commission on March 31, 1997
(File No. 801-14713) and amended through the date hereof, is incorporated by
reference.
The information as to the directors and officers of Putnam Investment
Management, Inc. is set forth in Putnam Investment Management, Inc.'s Form ADV
filed with the Securities and Exchange Commission on April 2, 1996 (File No.
801-07974) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Massachusetts Financial
Services Company is set forth in Massachusetts Financial Services Company's Form
ADV filed with the Securities and Exchange Commission on March 31, 1998 (File
No. 801-17352) and amended through the date hereof, is incorporated by
reference.
The information as to the directors and officers of Morgan Stanley Asset
Management Inc. is set forth in Morgan Stanley Asset Management Inc.'s Form ADV
filed with the Securities and Exchange Commission on August 1, 1997 (File No.
801-15757) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Warburg Pincus Asset
Management is set forth in Warburg Pincus Asset Management, Inc.'s Form ADV
filed with the Securities and Exchange Commission on March 31, 1997 (File No.
801-07321) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Fund Asset Management, L.P.
is set forth in Merrill Lynch Asset Management, L.P.'s Form ADV filed with the
Securities and Exchange Commission on March 25, 1998 (File No. 801-11583) and
amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Lazard Asset Management (a
division of Lazard Freres & Co. LLC) is set forth in Lazard Freres & Co. LLC's
Form ADV filed with the Securities and Exchange Commission on June 9, 1997 (File
No. 801-6568) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of J. P. Morgan Investment
Management Inc. is set forth in J.P. Morgan Investment Management Inc.'s Form
ADV filed with the Securities and Exchange Commission on March 27, 1998 (File
No. 801-21011) and amended through the date hereof, is incorporated by
reference.
The information as to the directors and officers of Evergreen Asset Management
Corp. is set forth in Evergreen Asset Management Corp.'s Form ADV filed with the
Securities and Exchange Commission on March 31, 1998 (File No. 801-46522) and
amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Alliance Capital Management
Corporation, the general partner of Alliance Capital Management L.P., is set
forth in Alliance Capital Management Corporation's Form ADV filed with the SEC
on April 21, 1998 (File No. 801-32361) and as amended through the date hereof,
is incorporated by reference.
The information as to the directors and officers of Calvert Asset Management
Company, Inc. is set forth in Calvert Asset Management Company's Form ADV filed
with the Securities and Exchange Commission on May 12, 1999 (File No. 801-17044)
and amended through the date hereof, is incorporated by reference.
C-12
<PAGE>
The information as to the directors and officers of Brown Capital Management is
set forth in Brown Capital Management's Form ADV filed with the Securities and
Exchange Commission on May 30, 1995 (File No. 801-19287) and amended through the
date hereof, is incorporated by reference.
The information as to the directors and officers of Prudential Investments Fund
Management LLC is set forth in Prudential Investments Fund Management LLC's Form
ADV filed with the Securities and Exchange Commission on November 29, 1999 (File
No. 801-31104) and as amended through the dated hereof, is incorporated by
reference.
The information as to the directors and officers of Jennison Associates LLC is
set forth in Jennison Associates LLC's Form ADV filed with the Securities and
Exchange Commission on July 22, 1999 (File No. 801-5608) and as amended through
the date hereof, is incorporated by reference.
The information as to the directors and officers of Fidelity Management and
Research Company is set forth in Fidelity Management & Research Company's Form
ADV filed with the Securities and Exchange Commission on March 31, 2000 (File
No. 801-7884) and as amended through the date hereof, is incorporated by
reference.
The information as to the directors and officers of American Express Financial
Corporation is set forth in American Express Financial Corporation's Form ADV
filed with the Securities and Exchange Commission on March 16, 2000 (File No.
801-14721) and as amended through the date hereof, is incorporated by reference.
Information as to the directors and officers of Janus Capital Corporation will
be filed by Amendment.
THE INFORMATION AS TO THE DIRECTORS AND OFFICERS OF BANKERS TRUST COMPANY IS SET
FORTH BELOW. TO THE KNOWLEDGE OF THE TRUST, NONE OF THE DIRECTORS OR OFFICERS OF
BANKERS TRUST, EXCEPT THOSE SET FORTH BELOW, IS OR HAS BEEN AT ANYTIME DURING
THE PAST TWO FISCAL YEARS ENGAGED IN ANY OTHER BUSINESS, PROFESSION, VOCATION OR
EMPLOYMENT OF A SUBSTANTIAL NATURE, EXCEPT THAT CERTAIN DIRECTORS AND OFFICERS
ALSO HOLD VARIOUS POSITIONS WITH AND ENGAGE IN BUSINESS FOR BANKERS TRUST NEW
YORK CORPORATION. SET FORTH BELOW ARE THE NAMES AND PRINCIPAL BUSINESSES OF THE
DIRECTORS AND OFFICERS OF BANKERS TRUST WHO ARE OR DURING THE PAST TWO FISCAL
YEARS HAVE BEEN ENGAGED IN ANY OTHER BUSINESS, PROFESSION, VOCATION OR
EMPLOYMENT OF A SUBSTANTIAL NATURE.
These persons may be contacted c/o Bankers Trust Company, 130 Liberty Street,
New York, New York 10006.
Josef Ackermann, Chairman of the Board, Chief Executive Officer and President of
Bankers Trust Company and Bankers Trust Corporation. Member of the Board,
Deutsche Bank AG. Chairman of the Supervisory Board, Deutsche Bank Luxembourg
S.A., and a Member Supervisory Board of the following organizations; Eurex
Frankfurt AG, Eurex Zurich AG, Linde AG, Stora Enso Oyj and Mannesmann AG,
Director of Deutsche Bank Americas Holding Corp.
Hans H. Angermueller, Director of Bankers Trust Company and Bankers Trust
Corporation. Counsel, Shearman & Sterling.
George B. Beitzel, Director of Bankers Trust Company and Bankers Trust
Corporation. [Director of Various Corporations. Retired Senior Vice President
and Director, International Business Machines Corporation.] Also a director of
Computer Task Group and Staff Leasing; Chairman Emeritus of Amherst College; and
Chairman of The Colonial Williamsburg Foundation.
C-13
<PAGE>
William R. Howell, Director of Bankers Trust Company and Bankers Trust
Corporation. Chairman Emeritus, J.C. Penney Company, Inc. Also a director of
Exxon Corporation, Haliburton Company, Warner-Lambert Company, and The Williams
Companies, Inc. Member of the American Society of Corporation Executives, Beta
Gamma Sigma, Directors Table, the Business Council, Delta Sigma Pi, University
of Oklahoma, Dean's Advisory Board, College of Business Administration. Chairman
of Southern Methodist University Board of Trustees.
Hermann-Josef Lamberti, Director of Bankers Trust Company and Director and Vice
Chairman Bankers Trust Corporation. Executive Vice President of Deutsche Bank
AG; Board member of Euroclear plc (London) and Euroclear sc. (Brussels); and a
Supervisory Board Member of GZS (Frankfurt) and European Transaction Bank
(e.t.b.) and Director of Deutsche Bank Americas Holding Corp.
Troland S. Link, Managing Director and General Counsel of Bankers Trust Company.
General Counsel of Bankers Trust Corporation. General Counsel of Deutsche Bank
North America.
Rodney A. McLauchlan, Executive Vice President of Bankers Trust Corporation and
Bankers Trust Company.
John A. Ross, President and Director of Bankers Trust Company and Bankers Trust
Corporation. Chief Executive Officer of the Americas, Deutsche Bank AG.;
President and Chief Executive Officer, Deutsche Bank Americas Holding Corp. and
Taunus Corporation; and a Board Member of the following; Deutsche Bank
Securities, Inc., and DB Alex. Brown LLC.
Ronaldo H. Schmitz, Director of Bankers Trust Company and Bankers Trust
Corporation. Member of the Board, Deutsche Bank AG; and non-executive
Directorship of the following; Bertelsmann AG, Glaxo Wellcome plc and Rohm &
Haas Co. and Director of Deutsche Bank Americas Holding Corp.
Mayo A. Shattuck, III, Vice Chairman Bankers Trust Corporation, Co-Chairman and
Co-Chief Executive Officer of DB Alex, Brown LLC, Director, Bankers Trust
International, plc, Alex. Brown & Sons Holdings Limited, Alex. Brown & Sons
Limited, Alex. Brown Asset Management, Inc., Alex. Brown Capital Advisory,
Incorporated and Investment Company Capital Corporation; Co-Chairman and
Co-Chief Executive Officer, Deutsche Bank Securities Inc.; Director and
President - AB Administrative Partner, Inc., ABFS I Incorporated, ABS Leasing
Services Company, ABS MB Ltd., Alex. Brown Financial Corporation, Alex. Brown
Financial Services Incorporated, Alex. Brown Investments Incorporated, Alex.
Brown Management Services Inc. and Alex. Brown Mortgage Capital Corporation; and
Director and Vice President, Alex. Brown & Sons Holdings Limited. Director,
Constellation Holdings; President, South Street Aviation; Co-Chairman and
Co-Chief Executive Officer, Deutsche Bank Securities.
THE INFORMATION AS TO THE DIRECTORS AND OFFICERS OF CAPITAL GUARDIAN TRUST
COMPANY IS SET FORTH BELOW. TO THE KNOWLEDGE OF THE TRUST, NONE OF THE DIRECTORS
OR OFFICERS OF CAPITAL GUARDIAN IS OR HAS BEEN AT ANYTIME DURING THE PAST TWO
FISCAL YEARS ENGAGED IN ANY OTHER BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT
OF A SUBSTANTIAL NATURE, EXCEPT AS SET FORTH BELOW.
These persons may be contacted c/o Capital Guardian Trust Company, 333 South
Hope Street, Los Angeles, California 90071.
-------------------------------------------------------------------------------
NAME AFFILIATIONS WITHIN LAST TWO YEARS
-------------------------------------------------------------------------------
C-14
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
NAME AFFILIATIONS WITHIN LAST TWO YEARS
---------------------------------------------------------------------------------------
<S> <C>
Timothy D. Amour Director, Capital Guardian Trust Company, Capital Research
and Management Company and Capital Management Services,
Inc.; Chairman and Chief Executive Officer, Capital
Research Company.
---------------------------------------------------------------------------------------
Donnalisa Barnum Senior Vice President, Capital Guardian Trust Company; Vice
President, Capital International, Inc. and Capital
International Limited.
---------------------------------------------------------------------------------------
Andrew F. Barth Director, Capital Guardian Trust Company and, Capital
Research and Management Company; Director and Research
Director, Capital International Research, Inc.; President,
Capital Guardian Research Company; Formerly Director and
Executive Vice President, Capital Guardian Research
Company.
---------------------------------------------------------------------------------------
Michael D. Beckman Senior Vice President, Treasurer and Director, Capital
Guardian Trust Company; Director, Capital Guardian Trust
Company of Nevada; Treasurer, Capital International
Research, Inc. and Capital Guardian Research Company;
Director and Treasurer, Capital Guardian (Canada), Inc.;
Formerly Chairman and Director, Capital International Asia
Pacific Management Company.
---------------------------------------------------------------------------------------
Michael A. Burik Senior Counsel, The Capital Group Companies, Inc.; Senior
Vice President, Capital Guardian Trust Company.
---------------------------------------------------------------------------------------
Elizabeth A. Burns Senior Vice President, Capital Guardian Trust Company.
---------------------------------------------------------------------------------------
Larry P. Clemmensen Director, Capital Guardian Trust Company and American Funds
Distributors, Inc.; Chairman and Director, American Funds
Service Company; Director and President, The Capital Group
Companies, Inc. and Capital Management Services, Inc.;
Senior Vice President and Director, Capital Research and
Management Company, Treasurer, Capital Strategy, Inc.
---------------------------------------------------------------------------------------
Kevin G. Clifford Director and President, American Funds Distributors, Inc.;
Director, Capital Guardian Trust Company
---------------------------------------------------------------------------------------
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
NAME AFFILIATIONS WITHIN LAST TWO YEARS
---------------------------------------------------------------------------------------
<S> <C>
Roberta A. Conroy Senior Vice President, Director and Counsel, Capital
Guardian Trust Company; Senior Vice President and
Secretary, Capital International, Inc.; Assistant General
Counsel, The Capital Group Companies, Inc., Secretary,
Capital Guardian International, Inc.; Formerly, Secretary,
Capital Management Services, Inc.
---------------------------------------------------------------------------------------
John B. Emerson Senior Vice President, Capital Guardian Trust Company;
Director, Capital Guardian Trust Company, a Nevada
Corporation.
---------------------------------------------------------------------------------------
Michael Ericksen Senior Vice President, Capital Guardian Trust Company;
Director and Senior Vice President, Capital International
Limited.
---------------------------------------------------------------------------------------
David I. Fisher Vice Chairman and Director, Capital International, Inc.,
Capital International Limited and Capital International
K.K.; Chairman and Director, Capital International S. A.
and Capital Guardian Trust Company; Director and President,
Capital International Limited (Bermuda); Director, The
Capital Group Companies, Inc., Capital International
Research, Inc., Capital Group Research, Inc. and Capital
Research and Management Company.
---------------------------------------------------------------------------------------
Richard N. Havas Senior Vice President, Capital Guardian Trust Company,
Capital International, Inc. and Capital International
Limited; Director and Senior Vice President, Capital
International Research, Inc.; Director and Senior Vice
President Capital Guardian (Canada), Inc.
---------------------------------------------------------------------------------------
Frederick M. Hughes, Jr. Senior Vice President, Capital Guardian Trust Company.
---------------------------------------------------------------------------------------
William H. Hurt Senior Vice President and Director, Capital Guardian Trust
Company; Chairman and Director, Capital Guardian Trust
Company, a Nevada Corporation and Capital Strategy
Research, Inc.; Formerly, Director, The Capital Group
Companies, Inc.
---------------------------------------------------------------------------------------
Peter C. Kelly Senior Vice President, Capital Guardian Trust Company;
Assistant General Counsel, The Capital Group Companies,
Inc.; Director and Senior Vice President, Capital
International, Inc.
---------------------------------------------------------------------------------------
</TABLE>
C-16
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
NAME AFFILIATIONS WITHIN LAST TWO YEARS
---------------------------------------------------------------------------------------
<S> <C>
Robert G. Kirby Chairman Emeritus, Capital Guardian Trust Company; Senior
Partner, The Capital Group Companies, Inc.
---------------------------------------------------------------------------------------
Nancy J. Kyle Senior Vice President and Director, Capital Guardian Trust
Company; President and Director, Capital Guardian (Canada),
Inc.
---------------------------------------------------------------------------------------
Karin L. Larson Director, The Capital Group Companies, Inc., Capital
Group Research, Inc., Capital Guardian Trust Company,
Director and Chairman, Capital Guardian Research Company
and Capital International Research, Inc., Formerly,
Director and Senior Vice President , Capital Guardian
Research Company.
---------------------------------------------------------------------------------------
James R. Mulally Senior Vice President and Director, Capital Guardian Trust
Company; Senior Vice President, Capital International
Limited; Vice President, Capital Research Company; Formerly,
Director, Capital Guardian Research Company.
---------------------------------------------------------------------------------------
Shelby Notkin Senior Vice President, Capital Guardian Trust Company;
Director, Capital Guardian Trust Company, a Nevada
Corporation.
---------------------------------------------------------------------------------------
Mary M. O'Hern Senior Vice President, Capital Guardian Trust Company and
Capital International Limited; Vice President, Capital
International, Inc.
---------------------------------------------------------------------------------------
Jeffrey C. Paster Senior Vice President, Capital Guardian Trust Company.
---------------------------------------------------------------------------------------
Robert V. Pennington Senior Vice President, Capital Guardian Trust Company;
President and Director Capital Guardian Trust Company, a
Nevada Corporation Company.
---------------------------------------------------------------------------------------
Jason M. Pilalas Director, Capital Guardian Trust Company; Senior Vice
President and Director, Capital International Research,
Inc.; Formerly, Director and Senior Vice President,
Capital Guardian Research Company.
---------------------------------------------------------------------------------------
Robert Ronus President and Director, Capital Guardian Trust Company;
Chairman and Director, Capital Guardian (Canada), Inc.,
Director, Capital International, Inc. and Capital Guardian
Research Company; Senior Vice President, Capital
International, Inc.; Capital International Limited and
Capital International S.A.; Formerly, Chairman, Capital
Guardian International Research Company and Director,
Capital International, Inc.
---------------------------------------------------------------------------------------
</TABLE>
C-17
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
NAME AFFILIATIONS WITHIN LAST TWO YEARS
---------------------------------------------------------------------------------------
<S> <C>
James F. Rothenberg Director, American Funds Distributors, Inc., American Funds
Service Company, The Capital Group Companies, Inc., Capital
Group Research, Inc., Capital Guardian Trust Company and
Capital Management Services, Inc.; Director and President,
Capital Research and Management, Inc.; Formerly, Director
of Capital Guardian Trust Company, a Nevada Corporation,
and Capital Research Company.
---------------------------------------------------------------------------------------
Theodore R. Samuels Senior Vice President and Director, Capital Guardian Trust
Company; Director, Capital International Research, Inc.;
Formerly, Director, Capital Guardian Research Company
---------------------------------------------------------------------------------------
Lionel A. Sauvage Senior Vice President, Capital Guardian Trust Company;
Vice President, Capital International Research, Inc.;
Formerly, Director, Capital Guardian Research Company.
---------------------------------------------------------------------------------------
John H. Seiter Executive Vice President and Director, Capital Guardian
Trust Company; Senior Vice President, Capital Group
International, Inc.; and Vice President, The Capital Group
Companies, Inc.
---------------------------------------------------------------------------------------
Karen Skinner-Twoney Vice President, Capital Guardian Trust Company; Director,
Vice President and Treasurer, Capital Guardian Trust Company,
a Nevada Corporation.
---------------------------------------------------------------------------------------
Eugene P. Stein Executive Vice President and Director, Capital Guardian
Trust Company; Formerly, Director, Capital Guardian
Research Company.
---------------------------------------------------------------------------------------
Phil A. Swan Senior Vice President, Capital Guardian Trust Company.
---------------------------------------------------------------------------------------
Shaw B. Wagener Director, Capital Guardian Trust Company, Capital
International Asia Pacific Management Company S.A., Capital
Research and Management Company and Capital International
Management Company S.A.; President and Director, Capital
International, Inc.; Senior Vice President, Capital Group
International, Inc.
---------------------------------------------------------------------------------------
Joanne Weckbacher Senior Vice President, Capital Guardian Trust Company.
---------------------------------------------------------------------------------------
</TABLE>
C-18
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
NAME AFFILIATIONS WITHIN LAST TWO YEARS
---------------------------------------------------------------------------------------
<S> <C>
Eugene M. Waldron Senior Vice President, Capital Guardian Trust Company.
---------------------------------------------------------------------------------------
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) AXA Advisors and Equitable Distributors, Inc. ("EDI") are the
principal underwriters of the Trust's Class IA shares and Class IB shares. AXA
Advisors also serves as a principal underwriter for the following entities:
Separate Account Nos. 45, 66 and 301 of Equitable; and Separate Accounts A, I
and FP of Equitable. EDI serves as the principal underwriter for the Class IB
shares of Separate Account No. 49 of Equitable.
(b) Set forth below is certain information regarding the directors and
officers of AXA Advisors and of EDI, the principal underwriters of the Trust's
Class IA and Class IB shares. The business address of the persons whose names
are preceded by a single asterisk is 1290 Avenue of the Americas, New York, New
York 10104. The business address of the persons whose names are preceded by a
double asterisk is 660 Newport Center Drive, Suite 1200, Newport Beach, CA
92660. Mr. Laughlin's business address is 1345 Avenue of the Americas, 39th
Floor, New York, New York 10105. Mr. Kornweiss's business address is 4251 Crums
Mill Road, Harrisburg, PA 17112. The business address of Mr. Bullen and Ms.
Fazio is 200 Plaza Drive, Secaucus, New Jersey 07096.
C-19
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================================
AXA ADVISORS LLC
=====================================================================================================================
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH AXA POSITIONS AND OFFICES WITH THE
BUSINESS ADDRESS ADVISORS LLC TRUST
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DIRECTORS
* Derry E. Bishop Director
Harvey E. Blitz Director
Michael J. Laughlin Director
G. Patrick McGunagle Director Vice President
* Michael S. Martin Director
* Michael F. McNelis Director
* Richard V. Silver Director
* Mark R. Wutt Director
---------------------------------------------------------------------------------------------------------------------
OFFICERS
* Michael S. Martin Chairman of the Board and Chief Vice President
Executive Officer
* Michael F. McNelis President and Chief Operating
Officer
* Martin J. Telles Executive Vice President and Chief Vice President
Marketing Officer
* Derry E. Bishop Executive Vice President
* Harvey Blitz Executive Vice President Chief Financial Officer and
Vice President
* G. Patrick McGunagle Executive Vice President
* Edward J. Hayes Executive Vice President
* Craig A. Junkins Executive Vice President
* Peter D. Noris Executive Vice President President
* Mark A. Silberman Senior Vice President and Chief
Financial Officer
Stephen T. Burnthall Senior Vice President
* Richard Magaldi Senior Vice President
Robert Schmidt Senior Vice President
Cindy Schreiner Senior Vice President
Catherine P. Earl Senior Vice President
James P. Bordovitz Senior Vice President and
General Counsel
* Donna M. Dazzo First Vice President
* John Bratten First Vice President
Amy Franceschini First Vice President
Anne Nussbaum First Vice President
Philomena Scamardella First Vice President First Vice President
* Michael Brzozowski Vice President and Compliance
Director
* Raymond T. Barry Vice President
* Claire A. Comerford Vice President
* Linda Funigiello Vice President
* Mark Generales Vice President
Mark D. Godofsky Vice President and Controller
* Rosemary Magee Vice President
* Michael McBryan Vice President
=====================================================================================================================
</TABLE>
C-20
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================================
<S> <C> <C>
* Bill Nestel Vice President
* Laura A. Pellegrini Vice President
* Dan Roebuck Vice President
* Sid Smith Vice President
* Don Wiley Vice President
Beth Andreozzi Vice President
* Mike Woodhead Vice President
Greg Andonian Vice President
Debra Brogan Vice President
Randall Brown Vice President
Louis Calabrese Vice President
Joseph Carew Vice President
Catherine Gentry Vice President
Robert Hatton Vice President
Michael Lanio Vice President
John Mapes Vice President
Frank Massa Vice President
Sandi Narvaez Vice President
Michael Ryniker Vice President
Teresa M. West Vice President
James Woodley Vice President
Charlton Bulkin Vice President
Mary Gabbett Vice President
* Mary E. Cantwell Assistant Vice President Vice President
* Tom C. Gosnell Assistant Vice President
* Ara Klidjian Secretary
* John T. McCabe Assistant Vice President
* Janet E. Hannon Secretary
* Linda J. Galasso Assistant Secretary
Francesca Divone Assistant Secretary
=====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================================================
EQUITABLE DISTRIBUTORS, INC.
=====================================================================================================================
POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH THE
NAME AND PRINCIPAL BUSINESS ADDRESS EQUITABLE DISTRIBUTORS, INC. TRUST
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DIRECTORS
* Edward J. Hayes Director
* Jose S. Suquet Director
* Charles Wilder Director
---------------------------------------------------------------------------------------------------------------------
OFFICERS
* Jose S. Suquet Chairman of the Board
** Patricia Miller Chief Executive Officer and
** Alex MacGillivray President
** Charles Wilder Chief Operating Officer
** Hunter Allen Senior Vice President
* Elizabeth Forget Senior Vice President
=====================================================================================================================
</TABLE>
C-21
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================================
<S> <C> <C>
** Al Haworth Senior Vice President
** Stuart Hutchins Senior Vice President
** Ken Jaffe Senior Vice President
** Michael McDaniel Senior Vice President
** Michael Dougherty Senior Vice President
David Hughes Senior Vice President
Norman J. Abrams Vice President and Counsel
* Debora Buffington Vice President and Chief
Compliance Officer
Raymond T. Barry Vice President
** Mark Brandenberger Vice President
Anthony Llopis Vice President
Partick O'shea Vice President and Chief
Financial Officer
* Ronald R. Quist Treasurer
* Linda J. Galasso Secretary
Van Rubiano President
Michael Dibbert President
Alex MacGillivray President
Patrick Miller President
Francesca Divone Assistant Secretary
=====================================================================================================================
</TABLE>
(c) Inapplicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940, and the Rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6);
(8); (12); and 31a-1(d), the required books and records are maintained
at the offices of Registrant's Custodian:
1211 Avenue of the Americas
New York, New York 10036
(b) With respect to Rules 31a-1(a); 31a-1(b)(1), (4); (2)(C) and (D); (4);
(5); (6); (8); (9); (10); (11) and 31a-1(f), the required books and
records are currently maintained at the offices of the Registrant's
Administrator:
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of
the Registrant's Manager or Advisers:
C-22
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Equitable T. Rowe Price Associates, Inc.
1290 Avenue of the Americas 100 East Pratt St.
New York, NY 10104 Baltimore, MD 21202
Rowe Price-Fleming International, Inc. Putnam Investment Management, Inc.
100 East Pratt Street One Post Office Square
Baltimore, MD 21202 Boston, MA 02109
Massachusetts Financial Services Company Fund Asset Management, L.P.
500 Boylston Street 800 Scudders Mill Road
Boston, MA 02116 Plainsboro, NJ 08543-9011
Warburg Pincus Asset Management, Inc. Morgan Stanley Asset Management Inc.
466 Lexington Avenue 1221 Avenue of the Americas
New York, NY 10017-3147 New York, NY 10020
Lazard Asset Management J.P Morgan Investment Management Inc.
30 Rockefeller Plaza 522 Fifth Avenue
New York, NY 10020 New York, NY 10036
Bankers Trust Company Evergreen Asset Management Corp.
130 Liberty Street 1311 Mamaroneck Avenue, 2nd Floor
One Bankers Trust Plaza White Plains, NY 10577
New York, NY 10006
Alliance Capital Management L.P. Capital Guardian Trust Company
1345 Avenue of the Americas 11100 Santa Monica Boulevard
New York, NY 10105 17th Floor
Los Angeles, CA 90025
Calvert Asset Management Company, Inc. Brown Capital Management, Inc.
4550 Montgomery Avenue 1201 North Calvert Street
Suite 1000N Baltimore, MD 21202
Bethesda, MD 20814
Prudential Investments Fund Management LLC Jennison Associates LLC
100 Mulberry Street 466 Lexington Avenue
Gateway Center 3 New York, NY 10017
14th Floor
Newark, NJ 07102
Fidelity Management and Research Company American Express Financial Corporation
82 Devonshire Street 80 South 8th Street
Boston MA 02109 Minneapolis MN 55440-0010
Janus Capital Corporation
100 Fillmore Street
Denver Colorado 80206-4928
</TABLE>
C-23
<PAGE>
ITEM 29. MANAGEMENT SERVICES: None.
ITEM 30. UNDERTAKINGS
Inapplicable.
C-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, ("1933
Act") and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Post-Effective Amendment No. 17 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, and the State of New York on the 26th day of May, 2000.
EQ ADVISORS TRUST
By:
------------------------
Peter D. Noris
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 17 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
President and Trustee May 26, 2000
------------------------------------
Peter D. Noris
* Trustee May 26, 2000
------------------------------------
Michael Hegarty
* Trustee May 26, 2000
------------------------------------
Jettie M. Edwards
* Trustee May 26, 2000
------------------------------------
William M. Kearns, Jr.
* Trustee May 26, 2000
------------------------------------
Christopher P.A. Komisarjevsky
* Trustee May 26, 2000
------------------------------------
Theodossios (Ted) Athanassiades
* Trustee May 26, 2000
------------------------------------
Harvey Rosenthal
* Trustee May 26, 2000
------------------------------------
David W. Fox
* Trustee May 26, 2000
------------------------------------
Gary S. Schpero
* Vice President and Chief May 26, 2000
------------------------------------ Financial Officer
Steven M. Joenk
</TABLE>
C-25
<PAGE>
* By:
-------------------------------
Peter D. Noris
(Attorney-in-Fact)
C-26
<PAGE>
EXHIBIT LIST
(d)(17) Investment Advisory Agreement between Equitable, Prudential
Investments Fund Management LLC, and Jennison Associates LLC,
dated as of May 15, 2000.
Other Exhibits:
Power of Attorney for David W. Fox
Power of Attorney for Gary S. Schpero
C-27