<PAGE>
811-07953
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 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. 15 /x/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 17 /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)
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on [date] pursuant to paragraph (b)
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X 60 days after filing pursuant to paragraph (a)
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on [date] pursuant to paragraph (a) of Rule 485
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75 days after filing pursuant to paragraph (a)
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<PAGE>
EQ Advisors Trust
PROSPECTUS DATED MAY 1, 2000
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1
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This Prospectus describes the nineteen (19) Portfolios offered by EQ Advisors
Trust and the Class IA shares offered by the Trust on behalf of each Portfolio
that you can choose as investment alternatives. Each Portfolio has its own
investment objective and strategies that are designed to meet different
investment goals. This Prospectus contains information you should know before
investing. Please read this Prospectus carefully before investing and keep it
for future reference.
<TABLE>
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INTERNATIONAL STOCK PORTFOLIOS
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LARGE COMPANY STOCK PORTFOLIOS Alliance Global
- ---------------------------------------- Alliance International
Alliance Common Stock BT International Equity Index
Alliance Equity Index
Alliance Growth and Income SHORT/INTERMEDIATE TERM BOND PORTFOLIOS
EQ/Alliance Premier Growth ---------------------------------------------
T. Rowe Price Equity Income Alliance Intermediate Government Securities
Alliance Quality Bond
SMALL/MID CAP COMPANY STOCK PORTFOLIOS HIGH YIELD BOND PORTFOLIO
- ---------------------------------------- --------------------------------------------
EQ/Aggressive Stock* Alliance High Yield
Alliance Small Cap Growth
MFS Emerging Growth Companies MONEY MARKET PORTFOLIO
Warburg Pincus Small Company Value --------------------------------------------
Alliance Money Market
BALANCED HYBRID PORTFOLIOS
-----------------------------------------
EQ/Balanced*
Alliance Conservative Investors
Alliance Growth Investors
</TABLE>
* Effective May 1, 2000, the name of the Alliance Aggressive Stock Portfolio
was changed to the "EQ/Aggressive Stock Portfolio" and the Alliance Balanced
Portfolio was changed to the "EQ/Balanced Portfolio."
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YOU SHOULD BE AWARE THAT THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED OF THE INVESTMENT MERIT OF THESE PORTFOLIOS OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
PEA 15-Class A
<PAGE>
Overview
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2
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EQ ADVISORS TRUST
This Prospectus tells you about the nineteen (19) current Portfolios of the EQ
Advisors Trust ("Trust") and the Class IA shares offered by the Trust on behalf
of each Portfolio. The Trust is an open-end management investment company. Each
Portfolio is a separate series of the Trust with its own investment objective,
investment strategies and risks, which are described in this Prospectus. Each of
the current Portfolios of the Trust are diversified for purposes of the
Investment Company Act of 1940, as amended ("1940 Act").
The Trust's shares are currently sold only to insurance company separate
accounts in connection with variable life insurance contracts and variable
annuity certificates and contracts (the "Contract" or collectively, the
"Contracts") issued by The Equitable Life Assurance Society of the United States
("Equitable") and Equitable of Colorado, Inc. ("EOC") as well as insurance
companies that are not affiliated with Equitable or EOC ("non-affiliated
insurance companies") and to The Equitable Investment Plan for Employees,
Managers and Agents ("Equitable Plan"). The prospectus is designed to help you
make informed decisions about the Portfolios that are available under your
Contract or under the Equitable Plan. You will find information about your
Contract and how it works in the accompanying prospectus for the Contracts if
you are a Contractholder or participant under a Contract.
Equitable currently serves as the Manager of the Trust. In such capacity,
Equitable currently has overall responsibility for the general management and
administration of the Trust.
Information about the Advisers for each Portfolio is contained in the
description concerning that Portfolio in the section entitled "About the
Investment Portfolios." The Manager has the ultimate responsibility to oversee
each of the Advisers and to recommend their hiring, termination and replacement.
Subject to approval by the Board of Trustees, the Manager has been granted
relief by the Securities and Exchange Commission ("SEC") ("Multi-Manager Order")
that enables the Manager without obtaining shareholder approval to: (i) select
new or additional Advisers for each of the Trust's Portfolios; (ii) enter into
new investment advisory agreements and materially modify existing investment
advisory agreements; and (iii) terminate and replace the Advisers.
<PAGE>
Table of contents
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<TABLE>
<S> <C>
1
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SUMMARY INFORMATION CONCERNING EQ
ADVISORS TRUST 4
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2
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ABOUT THE INVESTMENT PORTFOLIOS 12
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LARGE COMPANY STOCK PORTFOLIOS 15
Alliance Common Stock 15
Alliance Equity Index 18
Alliance Growth and Income 21
EQ/Alliance Premier Growth 24
T. Rowe Price Equity Income 26
SMALL/MID CAP COMPANY STOCK PORTFOLIOS 29
EQ/Aggressive Stock 29
Alliance Small Cap Growth 33
MFS Emerging Growth Companies 36
Warburg Pincus Small Company Value 38
INTERNATIONAL STOCK PORTFOLIOS 40
Alliance Global 40
Alliance International 43
BT International Equity Index 47
SHORT/INTERMEDIATE TERM BOND PORTFOLIOS 50
Alliance Intermediate Government Securities 50
Alliance Quality Bond 54
HIGH YIELD BOND PORTFOLIO 58
Alliance High Yield 58
MONEY MARKET PORTFOLIO 62
Alliance Money Market 62
BALANCED HYBRID PORTFOLIOS 65
EQ/Balanced 65
Alliance Conservative Investors 70
Alliance Growth Investors 73
3
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MORE INFORMATION ON PRINCIPAL RISKS 76
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4
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MANAGEMENT OF THE TRUST 81
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The Trust 81
The Manager 81
Expense Limitation Agreement 83
The Advisers 84
The Administrator 84
The Transfer Agent 84
Brokerage Practices 84
Brokerage Transactions with Affiliates 85
</TABLE>
<TABLE>
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5
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FUND DISTRIBUTION ARRANGEMENTS 86
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6
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PURCHASE AND REDEMPTION 87
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7
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HOW ASSETS ARE VALUED 88
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8
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TAX INFORMATION 89
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9
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FINANCIAL HIGHLIGHTS 90
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10
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PRIOR PERFORMANCE OF EACH ADVISER 91
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</TABLE>
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1
Summary information concerning EQ Advisors Trust
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4
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The following chart highlights the nineteen (19) Portfolios described in this
Prospectus that you can choose as investment alternatives under your Contracts
offered by Equitable or EOC. The chart and accompanying information identify
each Portfolio's investment objective(s), principal investment strategies, and
principal risks. "More Information on Principal Risks", which more fully
describes each of the principal risks, is provided beginning on page 75.
<TABLE>
<CAPTION>
EQ ADVISORS TRUST LARGE COMPANY STOCK PORTFOLIOS
PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
ALLIANCE COMMON STOCK Seeks to achieve long-term growth of its capital
and increased income
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ALLIANCE EQUITY INDEX Seeks a total return before expenses that
approximates the total return performance of the
S&P 500 Index, including reinvestment of
dividends, at a risk level consistent with that
of the S&P 500 Index
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ALLIANCE GROWTH AND INCOME Seeks to provide a high total return through a
combination of current income and capital
appreciation by investing primarily in
income-producing common stocks and securities
convertible into common stocks
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EQ/ALLIANCE PREMIER GROWTH Seeks long-term growth of capital by primarily
investing in equity securities of a limited
number of large, carefully selected, high
quality United States companies that are judged,
by the Adviser, likely to achieve superior
earnings growth
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T. ROWE PRICE EQUITY INCOME Seeks to provide substantial dividend income and
also capital appreciation by investing primarily
in dividend-paying common stocks of established
companies
</TABLE>
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5
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<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
Stocks and other equity securities (including preferred General investment, foreign securities, leveraging,
stocks or convertible debt) and fixed income securities derivatives, convertible securities, small-cap and mid-cap
(including junk bonds), foreign securities, derivatives, and company, junk bond, securities lending, and fixed income
securities lending risks
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Securities in the S&P 500 Index, derivatives, and securities General investment, index-fund, derivatives, leveraging,
lending and securities lending risks
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Stocks and securities convertible into stocks (including junk General investment, convertible securities, leveraging,
bonds) derivatives, foreign securities, junk bond, and fixed income
risks
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Equity securities of a limited number of large, high-quality General investment, focused portfolio, growth investing,
companies that are likely to offer superior earnings growth convertible securities, derivatives, and foreign securities
risks
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Dividend-paying common stocks of established companies General investment, value investing, foreign securities, and
fixed income risks
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</TABLE>
------------------------- EQ Advisors Trust
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<TABLE>
<CAPTION>
EQ ADVISORS TRUST SMALL/MID CAP COMPANY STOCK PORTFOLIOS
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
EQ/AGGRESSIVE STOCK Seeks to achieve long-term growth of capital
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ALLIANCE SMALL CAP GROWTH Seeks to achieve long-term growth of capital
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MFS EMERGING GROWTH COMPANIES Seeks to provide long-term capital growth
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WARBURG PINCUS SMALL COMPANY VALUE Seeks long-term capital appreciation
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</TABLE>
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<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
Stocks and other equity securities of small and General investment, small-cap and mid-cap company,
medium-sized companies (including securities of growth investing, leveraging, derivatives, liquidity,
companies in cyclical industries, companies whose securities lending, and foreign securities risks
securities are temporarily undervalued, companies in
special situations (e.g., change in management, new
products or changes in customer demand) and less widely
known companies)
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Stocks and other equity securities of smaller companies General investment, small-cap and mid-cap company,
and undervalued securities (including securities of growth investing, leveraging, derivatives, liquidity,
companies in cyclical industries, companies whose securities lending, and foreign securities risks
securities are temporarily undervalued, companies in
special situations (e.g., change in management, new
products or changes in customer demand) and less widely
known companies)
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Equity securities of emerging growth companies with the General investment, small-cap and mid-cap company,
potential to become major enterprises or that are major foreign securities, and growth investing risks
enterprises whose rates of earnings growth are expected to
accelerate
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Equity securities of U.S. small cap companies General investment, small-cap and mid-cap company,
portfolio turnover foreign securities, fixed income, and
value investing risks
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</TABLE>
------------------------- EQ Advisors Trust
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<TABLE>
<CAPTION>
EQ ADVISORS TRUST INTERNATIONAL STOCK PORTFOLIOS
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
ALLIANCE GLOBAL Seeks long-term growth of capital
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ALLIANCE INTERNATIONAL Seeks to achieve long-term growth of capital by investing
primarily in a diversified portfolio of equity securities
selected principally to permit participation in non-U.S.
companies with prospects for growth
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BT INTERNATIONAL EQUITY INDEX Seeks to replicate as closely as possible (before deduction
of Portfolio expenses) the total return of the MSCI EAFE
Index
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</TABLE>
<TABLE>
<CAPTION>
EQ ADVISORS TRUST SHORT/INTERMEDIATE TERM BOND PORTFOLIOS
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES Seeks to achieve high current income consistent with
relative stability of principal through investment primarily in
debt securities issued or guaranteed as to principal and
interest by the U.S. Government or its agencies or
instrumentalities
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ALLIANCE QUALITY BOND Seeks to achieve high current income consistent with
preservation of capital by investing primarily in investment
grade fixed income securities
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</TABLE>
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9
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<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
Equity securities of U.S. and established foreign companies General investment, foreign securities, liquidity, derivatives,
(including shares of other mutual funds investing in foreign securities lending, and fixed income risks
securities), debt securities, derivatives, and securities
lending
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Equity securities of non-U.S. companies (including those in General investment, foreign securities, liquidity, growth
emerging markets securities) or foreign government investing, leveraging, derivatives, securities lending, and
enterprises (including other mutual funds investing in fixed income risks
foreign securities), debt securities, derivatives, and
securities lending)
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Equity securities of companies in the MSCI EAFE Index General investment, index-fund, foreign securities, liquidity,
and derivatives risks
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
Securities issued or guaranteed by the U.S. Government, General investment, fixed income, leveraging, derivatives,
including repurchase agreements and forward and securities lending risks
commitments related to U.S. Government securities, debt
securities of non-governmental issuers that own
mortgages, short sales, the purchase or sale of securities
on a when-issued or delayed delivery basis, derivatives,
and securities lending
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Investment-grade debt securities rated at least BBB/Baa or General investment, fixed income, convertible securities,
unrated securities of comparable quality at the time of leveraging, derivatives, securities lending, and foreign
purchase, convertible debt securities, preferred stock, securities risks
dividend-paying common stocks, foreign securities, the
purchase or sale of securities on a when-issued,
delayed-delivery or forward commitment basis, derivatives,
and securities lending
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</TABLE>
------------------------- EQ Advisors Trust
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<TABLE>
<CAPTION>
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EQ ADVISORS TRUST HIGH YIELD BOND PORTFOLIO
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
ALLIANCE HIGH YIELD Seeks to achieve a high return by maximizing current
income and, to the extent consistent with that
objective, capital appreciation
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</TABLE>
<TABLE>
<CAPTION>
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EQ ADVISORS TRUST MONEY MARKET PORTFOLIO
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
ALLIANCE MONEY MARKET Seeks to obtain a high level of current income,
preserve its assets and maintain liquidity
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</TABLE>
<TABLE>
<CAPTION>
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EQ ADVISORS TRUST BALANCED HYBRID PORTFOLIOS
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PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
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EQ/BALANCED Seeks to achieve a high return through both
appreciation of capital and current income
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ALLIANCE CONSERVATIVE INVESTORS Seeks to achieve a high total return
without, in the opinion of the Adviser,
undue risk to principal
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ALLIANCE GROWTH INVESTORS Seeks to achieve the highest total return
consistent with the Adviser's determination
of reasonable risk
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</TABLE>
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<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
High yield debt securities rated below BBB/Baa or unrated General investment, fixed income, leveraging, loan
securities of comparable quality ("junk bonds"), common participation and assignment, derivatives, liquidity, junk
stocks and other equity securities, foreign securities, bond, foreign securities, small-cap and mid-cap company,
derivatives, and securities lending and securities lending risks
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</TABLE>
<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
High quality U.S. dollar-denominated money market General investment, money market, leveraging, foreign
instruments (including foreign securities) and securities securities, and securities lending risks
lending
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</TABLE>
<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
Debt and equity securities, money market instruments, General investment, asset allocation, fixed income,
foreign securities, derivatives, and securities lending derivatives, leveraging, liquidity, securities lending, and
foreign securities risks
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Investment grade debt securities and equity securities of General investment, asset allocation, fixed income,
U.S. and foreign issuers, derivatives, and securities lending derivatives, convertible securities, liquidity, leveraging,
securities lending, and foreign securities risks
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Equity securities (including foreign stocks, preferred stocks, General investment, asset allocation, fixed income,
convertible securities, securities of small and medium-sized leveraging, derivatives, liquidity, convertible securities,
companies) and debt securities (including foreign debt small-cap and mid-cap company, securities lending, junk
securities and junk bonds), derivatives, and securities bond, and foreign securities risks
lending
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</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
2
About the investment portfolios
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12
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This section of the Prospectus provides a more complete description of the
principal investment objectives, strategies, and risks of each of the
Portfolios. Of course, there can be no assurance that any Portfolio will achieve
its investment objective.
Please note that:
o A fuller description of each of the principal risks is included in the
section "More Information on Principal Risks," which follows the
description of each Portfolio in this section of the Prospectus.
o Additional information concerning each Portfolio's strategies, investments,
and risks can also be found in the Trust's Statement of Additional
Information.
GENERAL INVESTMENT RISKS
Each of the Portfolios is subject to the following risks:
ASSET CLASS RISK: The returns from the types of securities in which a Portfolio
invests may underperform returns from the various general securities markets or
different asset classes.
MARKET RISK: You could lose money over short periods due to fluctuation in a
Portfolio's share price in reaction to stock or bond market movements, and over
longer periods during extended market downturns.
SECURITY SELECTION RISK: There is the possibility that the specific securities
selected by a Portfolio's Adviser will underperform other funds in the same
asset class or benchmarks that are representative of the general performance of
the asset class.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
THE BENCHMARKS
The performance of each of the Trust's Portfolios as shown on the following
pages compares each Portfolio's performance to that of a broad-based securities
market index, an index of funds with similar investment objectives and/or a
blended index. Each of the Portfolios' annualized rates of return are net of:
(i) its investment management fees; and (ii) its other expenses. These rates are
not representative of the actual return you would receive under your Contract.
Broad-based securities indices are unmanaged and are not subject to fees and
expenses typically associated with managed investment company portfolios.
Broad-based securities indices are also not subject to contract and
insurance-related expenses and charges. Investments cannot be made directly in a
broad-based securities index. Comparisons with these benchmarks, therefore, are
of limited use. They are included because they are widely known and may help you
to understand the universe of securities from which each Portfolio is likely to
select its holdings. "Blended" performance numbers (e.g., 50% S&P 400/50%
Russell 2000 or 60% S&P 500/40% Lehman Gov't/Corp) assume a static mix of the
two indices.
THE COMPOSITE MARKET BENCHMARK is made up of 36% S&P 500, 24% MSCI EAFE Index,
21% Salomon Brothers U.S. Treasury Bond 1 year and, 14% Salomon Brothers World
Government ex U.S., and 5% U.S. Treasury Bill.
THE LEHMAN AGGREGATE BOND INDEX ("Lehman Aggregate Bond") is an index comprised
of investment grade fixed income securities, including U.S. Treasury,
mortgage-backed, corporate and "Yankee" bonds (U.S. dollar-denominated bonds
issued outside the United States).
THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX ("Lehman Gov't/Corp") represents an
unmanaged group of securities widely regarded by investors as representative of
the bond market.
<PAGE>
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13
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THE LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX ("Lehman Intermediate Government
Bonds") represents an unmanaged group of securities consisting of all U.S.
Treasury and agency securities with remaining maturities of from one to ten
years and issue amounts of at least $100 million outstanding.
THE LEHMAN TREASURY BOND INDEX ("Lehman Treasury") represents an unmanaged group
of securities consisting of all currently offered public obligations of the U.S.
Treasury intended for distribution in the domestic market.
THE MERRILL LYNCH HIGH YIELD MASTER INDEX ("ML Master") represents an unmanaged
group of securities widely regarded by investors as representative of the high
yield bond market.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX
("MSCI EAFE") is a market capitalization weighted equity index composed of a
sample of companies representative of the market structure of Europe, Australia
and the Far East. MSCI EAFE Index returns assume dividends reinvested net of
withholding taxes and do not reflect any fees or expenses.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE INDEX ("MSCI
EMF") is a market capitalization weighted equity index composed of companies
that are representative of the market structure of the following 25 countries:
Argentina, Brazil Free, Chile, China Free, Colombia, Czech Republic, Greece,
Hungary, India, Indonesia Free, Israel, Jordan, Korea, Mexico Free, Pakistan,
Peru, Philippines Free, Poland, Russia, South Africa, Sri Lanka, Taiwan,
Thailand Free, Turkey and Venezuela. "Free" MSCI indices exclude those shares
not purchasable by foreign investors.
THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX ("MSCI World") is an
arithmetic, market value-weighted average of the performance of over 1,300
securities listed on the stock exchanges of twenty foreign countries and the
United States.
THE RUSSELL 2000 GROWTH INDEX ("Russell 2000 Growth") is an unmanaged index
which measures the performance of those Russell 2,000 companies with higher
price-to-book ratios and higher forecasted growth. It is compiled by the Frank
Russell Company.
THE RUSSELL 2000 INDEX ("Russell 2000") is an unmanaged index which tracks the
performance of 2,000 publicly-traded U.S stocks. It is often used to indicate
the performance of smaller company stocks. It is compiled by the Frank Russell
Company.
SALOMON BROTHERS BROAD INVESTMENT BOND INDEX is an unmanaged weighted index that
contains approximately 4,700 individually priced investment grade bonds.
THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500") is an
unmanaged index containing common stock of 500 industrial, transportation,
utility and financial companies, regarded as generally representative of the
larger capitalization portion of the United States stock market. The S&P 500
returns reflect the reinvestment of dividends, if any, but do not reflect fees,
brokerage commissions or other expenses of investing.
THE STANDARD & POOR'S MIDCAP 400 INDEX ("S&P 400 MidCap") is an unmanaged
weighted index of 400 domestic stocks chosen for market size (median market
capitalization of about $610 million), liquidity, and industry group
representation. The S&P 400 returns reflect the reinvestment of dividends, if
any, but do not reflect fees, brokerage commissions or other expenses of
investing.
THE VALUE LINE CONVERTIBLE INDEX ("Value Line Convertible") is comprised of 585
of the most actively traded convertible bonds and preferred stocks on an
unweighted basis.
THE LIPPER AVERAGES are contained in Lipper's survey of the performance of funds
underlying a large universe of variable life and annuity contracts, where
performance averages are based on net asset values which reflect the deduction
of investment management fees and direct
-------------------------- EQ Advisors Trust
<PAGE>
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14
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operating expenses, and, for funds with Rule 12b-1 plans, asset-based sales
charges. This survey is published by Lipper Analytical Services, Inc., a firm
recognized for its reporting of performance of actively managed funds.
Performance data shown for the portfolios does not reflect the deduction of any
insurance-related expenses (which are assumed at the contract level).
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS
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15
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ALLIANCE COMMON STOCK PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of its capital and
increase income.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks and other equity-type
securities (such as preferred stocks or convertible debt) that the Adviser
believes will share in the growth of the nation's economy over a long period.
Most of the time, the Portfolio will invest primarily in common stocks that are
listed on national securities exchanges. Smaller amounts will be invested in
stocks that are traded over-the-counter and in other equity-type securities.
Current income is an incidental consideration. The Portfolio generally will not
invest more than 20% of its total assets in foreign securities.
The Portfolio may also make use of various other investment strategies,
including making secured loans of up to 50% of its total assets. The Portfolio
may also use derivatives, including: writing covered call and put options,
buying call and put options on individual common stocks and other equity-type
securities, securities indexes, and foreign currencies. The Portfolio may also
purchase and sell stock index and foreign currency futures contracts and options
thereon.
When market or financial conditions warrant or it appears that the Portfolio's
investment objective will not be achieved by purchasing equity securities, the
Portfolio may invest a portion of its assets in debt securities, including
nonparticipating and nonconvertible preferred stocks, investment grade debt
securities and junk bonds, e.g., rated BB or lower by Standard & Poor's ("S&P")
or Ba or lower by Moody's Investor Service, Inc. ("Moody's"). The Portfolio also
may make temporary investments in high-quality U.S. dollar-denominated money
market instruments. Such investment strategies could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; expropriation or nationalization; adverse changes in foreign economic and
tax policies; and foreign government instability, war or other adverse political
or economic actions.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying common
stock and provide higher yields than the underlying common stocks, but generally
offer lower yields than nonconvertible securities of similar quality. The value
of convertible securities fluctuates both in relation to changes in interest
rates and changes in the value of the underlying common stock.
------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
16
- --------------------------------------------------------------------------------
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less well-known, held primarily by insiders or institutional
investors and may trade less frequently and in lower volume; such companies are
more likely to experience greater or more unexpected changes in their earnings
and growth prospects; such companies have limited financial resources or may
depend on a few key employees; and the products of technologies of such
companies may be at a relatively early stage of development or not fully tested.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment-grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than if it invested in higher-rated
obligations because BBB-rated securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
JUNK BOND RISK: The Portfolio may invest a portion of its assets in "junk bonds"
or lower-rated securities rated BB or lower by S&P or an equivalent rating by
any other NRSRO or unrated securities of similar quality. Junk bonds have
speculative elements or are predominantly speculative credit risks, therefore,
credit risk is particularly significant for this Portfolio. This Portfolio may
also be subject to greater credit risk because it may invest in debt securities
issued in connection with corporate restructurings by highly leveraged issuers
or in debt securities not current in the payment of interest or principal, or in
default.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. The risks in lending portfolio securities, as with other extensions
of secured credit, consist of possible delay in receiving additional collateral,
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last ten calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one, five and ten
years and compares the Portfolio's performance to: (i) the returns of a
broad-based index and (ii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Common Stock Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance Common
Stock Portfolio) whose inception date is June 16, 1975. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the performance
results of the Portfolio and its predecessor registered investment company have
been linked.
<PAGE>
- ----------
17
- --------------------------------------------------------------------------------
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
<TABLE>
<CAPTION>
CALENDAR YEAR ANNUAL TOTAL RETURN
1990 ---------------------- -8.1%
1991 ---------------------- 37.9%
1992 ---------------------- 3.2%
1993 ---------------------- 24.8%
1994 ---------------------- -2.1%
1995 ---------------------- 32.5%
1996 ---------------------- 24.3%
1997 ---------------------- 29.4%
1998 ---------------------- 29.4%
1999 ---------------------- 25.19
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Common Stock Portfolio
- Class IA Shares 25.19% 28.11% 18.61%
- ------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index* 21.03% f28.56% 18.21%
- ------------------------------------------------------------------------------------------------------------------------------
Lipper Growth Equity Mutual
Funds Average* 31.48% 26.45% 17.79%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment compay since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
TYLER J. SMITH has been responsible for the day-to-day management of the
Portfolio and its predecessor since 1977. Mr. Smith, a Senior Vice President of
Alliance, has been associated with Alliance since 1970.
-------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
18
- --------------------------------------------------------------------------------
ALLIANCE EQUITY INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks a total return before expenses that approximates the
total return performance of the S&P 500 Index, including reinvestment of
dividends, at a risk level consistent with that of the S&P 500 Index.
THE INVESTMENT STRATEGY
The Adviser will not utilize customary economic, financial or market analyses or
other traditional investment techniques in managing the Portfolio. Rather, the
Adviser will use proprietary modeling techniques to construct a portfolio that
it believes will, in the aggregate, approximate the performance results of the
S&P 500 Index.
The Adviser will first select from the largest capitalization securities in the
S&P 500 on a capitalization-weighted basis. Generally, the largest
capitalization securities reasonably track the S&P 500 because the S&P 500 is
significantly influenced by a small number of securities. However, in the
Adviser's view, selecting securities on the basis of their capitalization alone
would distort the Portfolio's industry diversification, and therefore economic
events could potentially have a dramatically different impact on the performance
of the Portfolio from that of the S&P 500. Recognizing this fact, the modeling
techniques also consider industry diversification when selecting investments for
the Portfolio. The Adviser also seeks to diversify the Portfolio's assets with
respect to market capitalization. As a result, the Portfolio will include
securities of smaller and medium-sized capitalization companies in the S&P 500.
Cash may be accumulated in the Portfolio until it reaches approximately 1% of
the value of the Portfolio at which time such cash will be invested in common
stocks as described above. Accumulation of cash increases tracking error. The
Portfolio will, however, remain substantially fully invested in common stocks
even when common stock prices are generally falling. Similarly, adverse
performance of a stock will ordinarily not result in its elimination from the
Portfolio.
- --------------------------------------------------------------------------------
For more information on the S&P 500, see the preceding section "The Benchmarks."
The Portfolio is not sponsored, endorsed, sold or promoted by Standard & Poor's
Corporation ("S&P") and S&P makes no guarantee as to the accuracy and/or
completeness of the S&P 500 or any data included therein.
- --------------------------------------------------------------------------------
In order to reduce brokerage costs, maintain liquidity to meet shareholder
redemptions or minimize tracking error when the Portfolio holds cash, the
Portfolio may from time to time buy and hold futures contracts on the S&P 500
Index and options on such futures contracts. The contract value of futures
contracts purchased by the Portfolio plus the contract value of futures
contracts underlying call options purchased by the Portfolio will not exceed 20%
of the Portfolio's total assets. The Portfolio may seek to increase income by
lending its portfolio securities with a value of up to 50% of its total assets
to brokers-dealers.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
INDEX-FUND RISK: The Portfolio is not actively managed and invests in securities
included in the index regardless of their investment merit. Therefore, the
Portfolio cannot modify its investment strategies to respond to changes in the
economy and may be particularly susceptible to a general decline in the U.S. or
global stock market segment relating to the index. Although the Portfolio's
modeling techniques are intended to produce performance that approximates that
of the S&P 500 (before expenses), there can be no assurance that these
techniques will reduce "tracking error" (i.e., the difference between the
Portfolio's investment results (before expenses) and the S&P 500's). Tracking
error may arise as a result of brokerage costs, fees
<PAGE>
- ----------
19
- --------------------------------------------------------------------------------
and operating expenses and a lack of correlation between the Portfolio's
investments and the S&P 500.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving
additional collateral, or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last five calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one
year, five years and since inception and compares the Portfolio's performance
to: (i) the returns of a broad-based index and (ii) the returns of an index of
funds with similar investment objectives. Past performance is not an
indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Equity Index Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance Equity
Index Portfolio) whose inception date is March 1, 1994. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the performance
results of the Portfolio and its predecessor registered investment company have
been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1995 ----------------------- 36.5%
1996 ----------------------- 22.4%
1997 ----------------------- 32.6%
1998 ----------------------- 28.1%
1999 ----------------------- 20.38%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Equity Index Portfolio
- Class IA Shares 20.38% 27.84% 23.63%
S&P 500 Index* 21.03% 28.56% 23.43%
Lipper S&P 500 Index Funds
Average* 20.48% 28.07% 25.07%
</TABLE>
- --------------------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment company since the
------------------------ EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
20
- --------------------------------------------------------------------------------
predecessor commenced operations. Alliance, a publicly traded limited
partnership, is indirectly majority-owned by Equitable. Alliance manages
investment companies, endowment funds, insurance companies, foreign entities,
qualified and non-tax qualified corporate funds, public and private pension and
profit-sharing plans, foundations and tax-exempt organizations.
JUDITH A. DEVIVO has been responsible for the day-to-day management of the
Portfolio and its predecessor since its inception. Ms. DeVivo, a Vice President
of Alliance, has been associated with Alliance since 1970.
<PAGE>
- ----------
21
- --------------------------------------------------------------------------------
ALLIANCE GROWTH AND INCOME
PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide a high total return through a
combination of current income and capital appreciation by investing primarily
in income-producing common stocks and securities convertible into common
stocks.
THE INVESTMENT STRATEGY
The Portfolio seeks to maintain a portfolio yield above that of issuers
comprising the S&P 500 and to achieve (in the long run) a rate of growth in
Portfolio income that exceeds the rate of inflation. The Portfolio will
generally invest in common stocks of "blue chip" issuers, i.e., those:
o that have a total market capitalization of at least $1 billion;
o that pay periodic dividends; and
o whose common stock is in the highest four issuer ratings for S&P (i.e., A+,
A, B or B+) or Moody's (i.e., high grade, investment grade, upper medium
grade or medium grade) or, if unrated, is determined to be of comparable
quality by the Adviser.
It is expected that on average the dividend rate of these issuers will exceed
the average rate of issuers constituting the S&P 500.
The Portfolio may also invest without limit in securities convertible into
common stocks, which include convertible bonds, convertible preferred stocks
and convertible warrants. The Portfolio may also invest up to 30% of its total
assets in high yield, high risk convertible securities rated at the time of
purchase below investment grade (i.e., rated BB or lower by S&P or Ba or lower
by Moody's or determined by the Adviser to be of comparable quality).
The Portfolio does not expect to invest more than 25% of its total assets in
foreign securities, although it may do so without limit. It may enter into
foreign currency futures contracts (and related options), forward foreign
currency exchange contracts and options on currencies for hedging purposes.
The Portfolio may also write covered call and put options on securities and
securities indexes for hedging purposes or to enhance its return and may
purchase call and put options on securities and securities indexes for hedging
purposes. The Portfolio may also purchase and sell securities index futures
contracts and may write and purchase options thereon for hedging purposes.
When market or financial conditions warrant, the Portfolio may invest in
certain money market instruments for temporary or defensive purposes. Such
investment strategies could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. The value of convertible securities fluctuates both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income
-------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
22
- --------------------------------------------------------------------------------
securities, that portion of the Portfolio's performance will be affected by
changes in interest rates, the credit risk of the issuer, the duration or
maturity of the Portfolio's fixed income holdings, and adverse market or
economic conditions. When interest rates rise, the value of the Portfolio's
fixed income securities, particularly those with longer durations or
maturities, will go down. When interest rates fall, the reverse is true. In
addition, to the extent that the Portfolio invests in investment-grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than if it invested in higher-rated
obligations because BBB-rated securities are regarded as having only an
adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative.
JUNK BOND RISK: The Portfolio may invest a portion of its assets in "junk
bonds" or lower-rated securities rated BB or lower by S&P or an equivalent
rating by any other NRSRO or unrated securities of similar quality. Therefore,
credit risk is particularly significant for this Portfolio. Junk bonds have
speculative elements or are predominantly speculative credit risks. This
Portfolio may also be subject to greater credit risk because it may invest in
debt securities issued in connection with corporate restructurings by highly
leveraged issuers or in debt securities not current in the payment of interest
or principal, or in default.
FOREIGN SECURITIES RISK: To the extent the Portfolio invests in foreign
securities, it is subject to risks not associated with investing in U.S.
securities, which can adversely affect the Portfolio's performance. Foreign
markets, particularly emerging markets, may be less liquid, more volatile, and
subject to less government supervision than domestic markets. There may be
difficulties enforcing contractual obligations, and it may take more time for
trades to clear and settle. In addition, the value of foreign investments can
be adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last six calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one
year, five years and since inception and compares the Portfolio's performance
to: (i) the returns of a broad-based index; (ii) the returns of a "blended"
index of equity and fixed income securities; and (iii) the returns of an index
of funds with similar investment objectives. Past performance is not an
indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Growth and Income
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance and Growth Income Portfolio) whose inception date is October 1,
1993. The assets of the predecessor were transferred to the Portfolio on
October 18, 1999. Following that transfer, the performance shown (for the
period October 19, 1999 through December 31, 1999) is that of the Portfolio.
For these purposes, the performance results of the Portfolio and its
predecessor registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not
<PAGE>
- ----------
23
- --------------------------------------------------------------------------------
reflect any insurance and Contract-related fees and expenses, which would
reduce the performance results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
[GRAPHIC OMITTED]
1994 ------------------------ -0.6%
1995 ------------------------ 24.1%
1996 ------------------------ 20.1%
1997 ------------------------ 26.9%
1998 ------------------------ 20.9%
1999 ------------------------ 18.66%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Growth and Income
Portfolio - Class IA Shares 18.66% 22.08% 17.15%
- --------------------------------------------------------------------------------
S&P 500 Index** 21.03% 28.56% 23.43%
- --------------------------------------------------------------------------------
75% S&P 500 Index/25%
Value Line Convertible** 20.71% 25.01% 18.77%
- --------------------------------------------------------------------------------
Lipper Growth and Income Funds
Average** 14.51% 21.78% 17.57%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
PAUL RISSMAN and W. THEODORE KUCK have been the persons responsible for the
day-to-day management of the Portfolio, Mr. Rissman since 1996 and Mr. Kuck
since the Portfolio and its predecessor's inception. Mr. Rissman, a Senior
Vice President of Alliance, has been associated with Alliance since 1989. Mr.
Kuck, a Vice President of Alliance, has been associated with Alliance since
1971.
---------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
24
- --------------------------------------------------------------------------------
EQ/ALLIANCE PREMIER GROWTH
PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth of capital by primarily
investing in equity securities of a limited number of large, carefully
selected, high-quality United States companies that are judged, by the
Adviser, likely to achieve superior earnings growth.
THE INVESTMENT STRATEGY
The Portfolio invests primarily (at least 85% of its total assets) in equity
securities of United States companies. The Portfolio is diversified for
purposes of the 1940 Act, however it is still highly concentrated. The
Portfolio focuses on a relatively small number of intensively researched
companies. The Adviser selects the Portfolio's investments from a research
universe of more than 600 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects. An emphasis is placed on identifying securities of companies whose
substantially above-average prospective earnings growth is not fully reflected
in current market valuations.
Normally, the Portfolio invests in about 40-50 companies, with the 25 most
highly regarded of these companies usually constituting approximately 70% of
the Portfolio's net assets. In managing the Portfolio, the Adviser seeks to
capitalize on apparently unwarranted price fluctuations both to purchase or
increase positions on weakness and to sell or reduce overpriced holdings. The
Portfolio normally remains nearly fully invested and does not take significant
cash positions for market timing purposes. During market declines, while
adding to positions in favored stocks, the Portfolio becomes somewhat more
aggressive, gradually reducing the number of companies represented in its
holdings. Conversely, in rising markets, while reducing or eliminating fully
valued positions, the Portfolio becomes somewhat more conservative, gradually
increasing the number of companies represented in its holdings. Through this
approach, the Adviser seeks to gain positive returns in good markets while
providing some measure of protection in poor markets.
The Adviser expects the average market capitalization of companies represented
in the Portfolio normally to be in the range, or in excess, of the average
market capitalization of companies included in the S&P 500.
The Portfolio may invest up to 20% of its net assets in convertible securities
and 15% of its total assets in securities of foreign issuers.
The Portfolio may write covered exchange-traded call options on its securities
of up to 15% of its total assets, and purchase and sell exchange-traded call
and put options on common stocks written by others of up to, for all options,
10% of its total assets.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOCUSED PORTFOLIO RISK: The Portfolio invests in the securities of a limited
number of companies. Consequently, the Portfolio may incur more risk because
changes in the value of a single security may have a more significant effect,
either positive or negative, on the Portfolio's net asset value.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
25
- --------------------------------------------------------------------------------
relation to changes in interest rates and changes in the value of the
underlying common stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT L.P.: ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance's sole general partner is Alliance Capital
Management Corporation, which is an indirect wholly-owned subsidiary of
Equitable, one of the largest life insurance companies in the United States
and a wholly-owned subsidiary of The Equitable Companies Incorporated.
Therefore, the Manager and Alliance are affiliates of each other. Alliance, a
Delaware limited partnership, is a leading international investment manager.
ALFRED HARRISON is the Portfolio Manager and has been responsible for the
day-to-day management of the Portfolio since its inception. Mr. Harrison is
Vice Chairman of Alliance Capital Management Corporation and has been with
Alliance since 1978.
--------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
26
- --------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide substantial dividend income and also
capital appreciation by investing primarily in dividend-paying common stocks
of established companies.
THE INVESTMENT STRATEGY
The Portfolio invests primarily (at least 65%) in dividend-paying common
stocks of well established companies paying above-average dividends.
The Adviser bases its investment decisions on three premises: (1) over time,
dividend income can account for a significant portion of the Portfolio's
return; (2) dividends are a more stable and predictable source of return; and
(3) prices of stocks that pay a high current income tend to be less volatile
than those paying below average dividends.
The Adviser uses a "value" approach in choosing securities. The Adviser's
in-house research team seeks companies that appear to be undervalued by
various measures and may be temporarily out of favor, but have good prospects
for capital appreciation and dividend growth. It looks for common stocks of
companies that have:
o established operating histories;
o above-average dividend yields relative to the S&P 500;
o low price to earnings ratios relative to the S&P 500;
o sound balance sheets and other positive financial characteristics; and
o low stock price relative to the company's asset value, cash flow or
business franchises.
- --------------------------------------------------------------------------------
Equity income investing involves finding common stocks that pay dividend
income. As an example, utility company stocks often provide dividend income
while a shareholder waits for the stock price to move. Dividends can help
reduce the Portfolio's volatility during turbulent markets and help offset
losses when stock prices are falling.
- --------------------------------------------------------------------------------
The Portfolio may invest up to 25% of its total assets in foreign securities.
These securities include non-dollar-denominated securities traded outside the
United States and dollar-denominated securities of foreign issuers traded in
the U.S. such as American Depositary Receipts. The Portfolio may also purchase
preferred stocks, convertible securities, warrants, futures, options, U.S.
Government securities, high-quality money market securities, as well as
investment grade debt securities and high yielding debt securities ("junk
bonds").
When market or financial conditions warrant, the Portfolio may invest without
limitation in high quality money market securities, and United States
Government debt securities for temporary or defensive purposes. Such
investment strategies are inconsistent with the Portfolio's investment
objectives and could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. The Portfolio's emphasis on
stocks of established companies paying high dividends and its potential
investments in fixed income securities may limit its potential for
appreciation in a broad market advance. Such securities may also be hurt when
interest rates rise sharply. Also, a company may reduce or eliminate its
dividend. Other principal risks include:
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
27
- --------------------------------------------------------------------------------
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged
to be undervalued may actually be appropriately priced.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. The risk that an issuer or guarantor of a fixed
income security or counterparty to the Portfolio's fixed income transaction is
unable to meet its financial obligations is particularly significant for this
Portfolio because this Portfolio may invest a portion of its assets in "junk
bonds" (i.e., securities rated below investment grade). Junk bonds are issued
by companies with questionable credit strength and, consequently, are
considered to be speculative in nature and may be subject to greater market
fluctuations than investment grade fixed-income securities.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for the Portfolio for one year and since inception. The table also
compares the Portfolio's performance to the returns of a broad-based index.
Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses,which
would reduce the perfomance results. The inception date for
the Portfolio is May 1, 1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1998 ------------------------- 9.11%
1999 ------------------------- 3.80%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter: Worst quarter:
13.28% (1999 2nd Quarter) (-8.48)% (1999 3rd Quarter)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
T. Rowe Price Equity Income Portfolio 3.80% 3.29%
- --------------------------------------------------------------------------------
S&P 500 Index* 21.03% 25.68%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
---------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
28
- --------------------------------------------------------------------------------
WHO MANAGES THE PORTFOLIO
T. ROWE PRICE ASSOCIATES, INC. ("T. Rowe Price"), 100 East Pratt Street,
Baltimore, MD 21202. T. Rowe Price has been the Adviser to the Portfolio since
the Portfolio commenced operations. T. Rowe Price serves as investment manager
to a variety of individual and institutional investor accounts, including
limited partnerships and other
mutual funds.
Investment decisions with respect to the Portfolio are made by an Investment
Advisory Committee. BRIAN C. ROGERS has been the Committee Chairman since the
inception of the Portfolio and has day-to-day responsibility for managing the
Portfolio and works with the Committee in developing and executing the
Portfolio's investment program. Mr. Rogers joined T. Rowe Price in 1982 and
has been managing investments since 1983.
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS
- ----------------
29
- --------------------------------------------------------------------------------
EQ/AGGRESSIVE STOCK PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term
growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks and other equity securities
of small and medium-sized companies that, in the opinion of the Adviser, have
favorable growth prospects. The Portfolio may also invest in securities of
companies in cyclical industries, companies whose securities are temporarily
undervalued, companies in special situations (e.g., change in management, new
products or changes in customer demand) and less widely known companies.
The Portfolio may also invest up to 25% of its total assets in foreign
securities and may also make use of various other investment strategies,
including investments in debt securities and making secured loans of up to 50%
of its total portfolio securities. The Portfolio may also use derivatives,
including: writing covered call options and purchasing call and put options on
individual equity securities, securities indexes and foreign currencies. The
Portfolio may also purchase and sell stock index and foreign currency futures
contracts and options thereon.
When market or financial conditions warrant, or it appears that the
Portfolio's investment objective will not be achieved primarily through
investments in common stocks, the Portfolio may invest in other equity-type
securities (such as preferred stocks and convertible debt instruments) and
options for hedging purposes. The Portfolio may also make temporary
investments in corporate fixed income securities, which will generally be
investment grade, or invest part its assets in cash or cash equivalents,
including high-quality money market instruments for liquidity or defensive
purposes. Such investments could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
MULTIPLE-ADVISER RISK: The EQ/Aggressive Stock Portfolio employs multiple
Advisers. Each of the Advisers independently chooses and maintains a portfolio
of common stocks for the Portfolio and each is responsible for investing a
specific allocated portion of the Portfolio's assets. Because each Adviser will
be managing its allocated portion of the Portfolio independently from the other
Advisers, the same security may be held in two different portions of the
Portfolio, or may be acquired for one portion of the Portfolio at a time when
the Adviser of another portion deems it appropriate to dispose of the security
from that other portion. Similarly, under some market conditions, one Adviser
may believe that temporary, defensive investments in short-term instruments or
cash are appropriate when the other Adviser or Advisers believe continued
exposure to the equity markets is appropriate for their portions of the
Portfolio. Because each Adviser directs the trading for its own portion of the
Portfolio, and does not aggregate its transactions with those of the other
Advisers, the Portfolio may incur higher brokerage costs than would be the case
if a single Adviser were managing the entire Portfolio.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because:
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
30
- --------------------------------------------------------------------------------
the securities of such companies are less well-known, held primarily by
insiders or institutional investors and may trade less frequently and in lower
volume; such companies are more likely to experience greater or more
unexpected changes in their earnings and growth prospects; such companies have
limited financial resources or may depend on a few key employees; and the
products of technologies of such companies may be at a relatively early stage
of development or not fully tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one,
five and ten years and compares the Portfolio's performance to: (i) the
returns of a broad-based index; (ii) the returns of a "blended" index of two
broad-based indices; and (iii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Aggressive Stock
Portfolio) managed by Alliance using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Aggressive Stock Portfolio) whose inception date is January 27,
1986. The assets of the predecessor were transferred to the Portfolio on
October 18, 1999. Following that transfer, the performance shown (for the
period October 19, 1999 through December 31, 1999) is that of the Portfolio.
For these purposes, the performance results of the Portfolio and its
predecessor registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
<PAGE>
- ----------
31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1990 ------------------------ 8.2%
1991 ------------------------ 86.9%
1992 ------------------------ -3.2%
1993 ------------------------ 16.8%
1994 ------------------------ -3.8%
1995 ------------------------ 31.6%
1996 ------------------------ 22.2%
1997 ------------------------ 10.9%
1998 ------------------------ 0.3%
1999 ------------------------ 18.84%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
EQ/Aggressive Stock Portfolio
- Class IA Shares 18.84% 16.29% 16.68%
- --------------------------------------------------------------------------------
50% S&P 400 MidCap
Index/50% Russell 2000** 18.09% 19.92% 15.41%
- --------------------------------------------------------------------------------
Lipper MidCap Growth Funds
Average** 46.25% 22.54% 16.19%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
In accordance with the Multi-Manager Order, the Manager may, among other
things, select new or additional Advisers for the Portfolio and may allocate
and re-allocate the Portfolio's assets among Advisers. Currently, Alliance
Capital Management, L.P. and Massachusetts Financial Services Company have
been selected by the Manager to serve as Advisers for this Portfolio.
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance was the exclusive Adviser to the Portfolio
and its predecessor registered investment company since the predecessor
commenced operations. Alliance, a publicly traded limited partnership, is
indirectly majority-owned by Equitable. Alliance manages investment companies,
endowment funds, insurance companies, foreign entities, qualified and non-tax
qualified corporate funds, public and private pension and profit-sharing
plans, foundations and tax-exempt organizations.
ALDEN M. STEWART and RANDALL E. HAASE have been the persons principally
responsible for the day-to-day management of the Portfolio and its
predecessor since 1993. Mr. Stewart, an Executive Vice President of
Alliance, has been associated with Alliance since 1970. Mr. Haase, a
Senior Vice President of Alliance, has been associated with Alliance
since 1988.
-------------------- EQ Advisors Trust
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
32
- --------------------------------------------------------------------------------
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS was added as an Adviser to the Portfolio as of May 1, 2000. MFS
is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts
Investors Trust. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
The Portfolio Managers are TONI Y. SHIMURA, a Senior Vice President of
MFS, who has been employed by MFS as a portfolio manager since 1995 and
JOHN W. BALLEN, Chief Investment Officer and President of MFS, who
provides general oversight in the management of the Portfolio.
<PAGE>
- ----------
33
- --------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term
growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in U.S. common stocks and other equity-type
securities issued by smaller companies with favorable growth prospects. The
Portfolio may at times invest in companies in cyclical industries, companies
whose securities are temporarily undervalued, companies in special situations
(e.g., change in management, new products or changes in customer demand) and
less widely known companies.
Under normal market conditions, the Portfolio intends to invest at least 65%
of its total assets in securities of smaller capitalization companies
(currently considered by the Adviser to mean companies with market
capitalization at or below $2 billion).
The Portfolio may invest in foreign securities and may also make use of
various other investment strategies, including making secured loans of up to
50% of its total portfolio securities. The Portfolio may also use derivatives
including: writing covered call options and purchasing call and put options on
individual equity securities, securities indexes and foreign currencies. The
Portfolio may also purchase and sell stock index and foreign currency futures
contracts and options thereon.
The Portfolio will invest up to 20% of its net asset value, measured at the
time of investment, in securities principally traded on foreign securities
markets (other than commercial paper).
When market or financial conditions warrant, the Portfolio may invest in other
equity-type securities (such as preferred stocks and convertible debt
instruments) and investment-grade corporate fixed income securities. For
temporary or defensive purposes, the Portfolio may invest without limitation
in cash or cash equivalents or high-quality money market instruments. Such
investments could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known, held primarily by insiders
or institutional investors and may trade less frequently and in lower volume;
such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; such companies have limited
financial resources or may depend on a few key employees; and the products of
technologies of such companies may be at a relatively early stage of
development or not fully tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the
---------------------- EQ Advisors Trust
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
34
- --------------------------------------------------------------------------------
risk that changes in value of the derivative may not correlate perfectly with
the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for 1998
and 1999, the Portfolio's first two years of existence and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for one year and since inception and compares the Portfolio's
performance to: (i) the returns of a broad-based index and (ii) the returns of
an index of funds with similar investment objectives. Past performance is not
an indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Small Cap Growth
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Small Cap Growth Portfolio) whose inception date is May 1, 1997.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1998 ---------------- -4.4%
1999 ---------------- 27.91%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Alliance Small Cap Growth Portfolio -
Class IA Shares 27.91% 17.89%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index* 43.09% 25.88%
- --------------------------------------------------------------------------------
Lipper Small Company Growth Funds
Average* 38.28% 19.36%
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
- ----------
35
- --------------------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
MARK J. CUNNEEN has been responsible for the day-to-day management of
Portfolio and its predecessor since January 1999. Mr. Cunneen, a Senior Vice
President of Alliance, has been associated with Alliance since January 1999.
Prior to joining Alliance, Mr. Cunneen had been associated with INVESCO since
May 1998, and before that with Chancellor LGT Asset Management, Inc.
("Chancellor") since 1992. Mr. Cunneen had been the head of Chancellor's Small
Cap Equity Group since 1997.
------------------------------- EQ Advisors Trust
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
36
- --------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide long-term
capital growth.
THE INVESTMENT STRATEGY
The Portfolio invests, under normal market conditions, primarily (at least 65%
of its total assets) in common stocks and related securities, such as
preferred stock, convertible securities and depositary receipts of emerging
growth companies. Emerging growth companies that the Adviser believes are
either:
o early in their life cycle but have the potential to become major
enterprises; or
o are major enterprises whose rates of earnings growth are expected to
accelerate because of special factors such as rejuvenated management, new
products, changes in customer demand or basic changes in the economic
environment.
For purposes of this Portfolio, emerging growth companies may be of any size
and the Adviser would expect these companies to have products, technologies,
management, markets and opportunities that will facilitate earnings growth
over time that is well above the growth rate of the overall economy and rate
of inflation. The Portfolio's investments may include securities traded in the
over-the-counter markets.
The Adviser uses a "bottom-up" investment style in managing the Portfolio.
This means the securities are selected based upon fundamental analysis (such
as an analysis of earnings, cash flows, competitive position and management's
abilities) performed by the Adviser.
In addition, up to 25% of the Portfolio's assets may be invested in foreign
securities, including those in emerging markets, or in cash and cash
equivalents.
When adverse market, financial or political conditions warrant, the Portfolio
may depart from its principal strategies for temporary or defensive purposes.
Such investment strategies are inconsistent with the Portfolio's investment
objectives and could result in the Portfolio not achieving its investment
objective.
The Portfolio may engage in active and frequent trading to achieve its
principal investment strategies. Frequent trading increases transaction costs,
which could detract from the Portfolio's performance.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In
<PAGE>
- ----------
37
- --------------------------------------------------------------------------------
addition, the value of foreign investments can be adversely affected by:
unfavorable currency exchange rates (relative to the U.S. dollar for
securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for the Portfolio for one year and since inception. The table also
compares the Portfolio's performance to the returns of a broad-based index.
Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results. The inception date for the Portfolio is May 1, 1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1998 --------------------- 34.57%
1999 --------------------- 74.05%
<S> <C>
Best quarter: Worst quarter:
53.47% (1999 4th Quarter) .72% (1999 3rd Quarter)
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- --------------------------------------------------------------------------------
MFS Emerging Growth Companies
Portfolio 74.05% 84.70%
- --------------------------------------------------------------------------------
Russell 2000 Index* 21.26% 16.99%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS has been the Adviser to the Portfolio since it commenced
operations. MFS is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States, Massachusetts
Investors Trust. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
The Portfolio Managers are TONI Y. SHIMURA, a Senior Vice President of MFS,
who has been employed by MFS as a portfolio manager for the Portfolio since
1995, and JOHN W. BALLEN, Chief Investment Officer and President of MFS, who
provides general oversight in the management of the Portfolio.
----------------------- EQ Advisors Trust
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
38
- --------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY
VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term capital
appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of U.S. small-cap
companies with above-average growth potential that the Adviser believes to be
undervalued. Typically, such investments may include common stocks, preferred
stocks, convertible securities, warrants and rights of small-cap companies.
Once 65% of the Portfolio's assets are invested in small-cap companies, the
Portfolio may also invest in companies with a market capitalization of any
size.
- --------------------------------------------------------------------------------
For purposes of this Portfolio, small-cap companies are companies having
market capitalizations within the range of capitalizations of companies
represented in the Russell 2000 Index.
- --------------------------------------------------------------------------------
In determining whether a company's stock is undervalued, the Adviser considers
all relevant factors which may include a company's:
o price/earnings ratio;
o price to book value ratio;
o price to cash flow ratio; and
o debt to capital ratio.
The Portfolio will invest primarily (at least 65% of its net assets) in the
securities of U.S. companies traded in the U.S. securities markets. The
Portfolio may invest to a lesser extent in foreign securities, investment
grade debt securities and high quality domestic and foreign short-term (one
year or less) and medium-term money-market securities.
When market or financial conditions warrant, the Portfolio may invest without
limitation in investment grade debt obligations and in domestic and foreign
obligations, including repurchase agreements for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged
to be undervalued may actually be appropriately priced.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs and may result in higher
taxable gains that could be passed through to shareholders.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely
<PAGE>
- ----------
39
- --------------------------------------------------------------------------------
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment grade securities, which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
higher-rated obligations because BBB rated investment grade securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for the Portfolio for one year and since inception. The table also
compares the Portfolio's performance to the returns of a broad-based index.
Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce performance results.
The inception date for the Portfolio is May 1, 1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1998 ------------------------ -10.02%
1999 ------------------------ 1.97%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter: Worst quarter:
13.42% (1999 2nd Quarter) (-10.75)% (1999 1st Quarter)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Warburg Pincus Small Company Value
Portfolio 1.97% 4.25%
- --------------------------------------------------------------------------------
Russell 2000 Index* 21.26% 16.99%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
CREDIT SUISSE ASSET MANAGEMENT, LLC. ("CSAM"), 466 Lexington Avenue, New York,
New York 10017-3147. CSAM is the successor to Warburg Pincus Asset Management,
Inc., which served as the Adviser to the Portfolio since it commenced
operations. CSAM is a professional investment advisory firm that provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. CSAM is indirectly
controlled by Credit Suisse Group. CSAM manages over $60 billion in assets in
the U.S., and together with its global affiliates, over $168 billion
worldwide.
KYLE F. FREY is the Portfolio Manager and has been responsible for the
day-to-day management of the Portfolio since the Portfolio commenced
operations. Mr. Frey is a managing director of CSAM and has been with CSAM or
its predecessor since 1989.
--------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS
- ----------
40
- --------------------------------------------------------------------------------
ALLIANCE GLOBAL PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of
capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified mix of equity securities of
U.S. and established foreign companies. The Adviser believes the equity
securities of these established non-U.S. companies have prospects for growth.
The Portfolio intends to make investments in several countries and to have
represented in the Portfolio business activities in not less than three
different countries (including the United States).
- --------------------------------------------------------------------------------
These non-U.S. companies may have operations in the United States, in their
country of incorporation or in other countries.
- --------------------------------------------------------------------------------
The Portfolio may invest in any type of security including, but not limited
to, common and preferred stock, as well as shares of mutual funds that invest
in foreign securities, bonds and other evidences of indebtedness, and other
securities of issuers wherever organized and governments and their political
subdivisions. Although no particular proportion of stocks, bonds or other
securities is required to be maintained, the Portfolio intends under normal
conditions to invest in equity securities.
The Portfolio may also make use of various other investment strategies,
including making secured loans of up to 50% of its total assets. The Portfolio
may also use derivatives including: writing covered call and put options,
purchasing call and put options on individual equity securities, securities
indexes, and foreign currencies. The Portfolio may also purchase and sell
stock index, foreign currency and interest rate futures contracts and options
on such contracts, as well as forward foreign currency exchange contracts.
When market or financial conditions warrant, the Portfolio may at times invest
substantially all of its assets in securities issued by U.S. companies or in
cash or cash equivalents, including money market instruments issued by foreign
entities for temporary or defensive purposes. Such investment strategies could
result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISK: Investing in foreign securities involves risks not
associated with investing in U.S. securities that can adversely affect the
Portfolio's performance. Foreign markets, particularly emerging markets, may
be less liquid, more volatile and subject to less government supervision than
domestic markets. There may be difficulties enforcing contractual obligations,
and it may take more time for trades to clear and settle. In addition, foreign
investments can be adversely affected by: unfavorable currency exchange rates
(relative to the U.S. dollar for securities denominated in a foreign
currencies); inadequate or inaccurate information about foreign companies;
higher transaction, brokerage and custody costs; expropriation or
nationalization; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions. Other specific risks of investing in foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines.
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency.
<PAGE>
- ----------
41
- --------------------------------------------------------------------------------
During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is
expected to become the sole currency of the participating states. The
introduction of the Euro will result in the redenomination of European
debt and equity securities over a period of time, which may result in
various legal and accounting differences and/or tax treatments that
otherwise would not likely occur. During this period, the creation and
implementation of suitable clearing and settlement systems and other
operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving
additional collateral, or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment-grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
if it invested in higher-rated obligations because BBB-rated securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one,
five and ten years and compares the Portfolio's performance to: (i) the
returns of a broad-based index and (ii) the returns of an index of funds with
similar investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Global Portfolio)
managed by the Adviser using the same investment objectives and strategy as
the Portfolio. For these purposes, the Portfolio is considered to be the
successor entity to the predecessor registered investment company
(HRT/Alliance Global Portfolio) whose inception date is August 27, 1987. The
assets of the
---------------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
42
- --------------------------------------------------------------------------------
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the
performance results of the Portfolio and its predecessor registered investment
company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and
expenses, which would reduce the performance results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1990 ------------------------ -6.1%
1991 ------------------------ 30.5%
1992 ------------------------ -0.5%
1993 ------------------------ 32.1%
1994 ------------------------ 5.2%
1995 ------------------------ 18.8%
1996 ------------------------ 14.6%
1997 ------------------------ 11.7%
1998 ------------------------ 21.8%
1999 ------------------------ 38.53%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Global
Portfolio -
Class IA Shares 38.53% 20.74% 15.84%
- --------------------------------------------------------------------------------
MSCI World
Index* 44.18% 19.42% 10.55%
- --------------------------------------------------------------------------------
Lipper Global
Mutual Funds
Average* 24.93% 19.76% 10.74%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
SANDRA L. YEAGER has been responsible for the day-to-day management of the
Portfolio's and its predecessor's investment program since 1998. Ms. Yeager, a
Senior Vice President of Alliance, has been associated with Alliance since
1990.
<PAGE>
- ----------
43
- --------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of capital by
investing primarily in a diversified portfolio of equity securities selected
principally to permit participation in non-U.S. companies with prospects for
growth.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified portfolio of equity
securities selected principally to permit participation in non-U.S. companies
or foreign governmental enterprises that the Adviser believes have prospects
for growth. The Portfolio may invest anywhere in the world (including
developing countries or "emerging markets"), although it will not generally
invest in the United States. The Portfolio may purchase securities of
developing countries, which include, among others, Mexico, Brazil, Hong Kong,
India, Poland, Turkey and South Africa.
- --------------------------------------------------------------------------------
These non-U.S. companies may have operations in the United States, in their
country of incorporation and/or in other countries.
- --------------------------------------------------------------------------------
The Portfolio intends to have represented in the Portfolio business activities
in not less than three different countries.
The Portfolio may also invest in any type of investment grade, fixed income
security including, but not limited to, preferred stock, convertible
securities, bonds, notes and other evidences of indebtedness of foreign
issuers, including obligations of foreign governments. Although no particular
proportion of stocks, bonds or other securities is required to be maintained,
the Portfolio intends under normal market conditions to invest primarily in
equity securities.
The Portfolio may also make use of various other investment strategies,
including the purchase and sale of shares of other mutual funds investing in
foreign securities and making loans of up to 50% of its portfolio securities.
The Portfolio may also use derivatives, including: writing covered call and
put options, purchasing purchase call and put options on individual equity
securities, securities indexes, and foreign currencies. The Portfolio may also
purchase and sell stock index, foreign currency and interest rate futures
contracts and options on such contracts, as well as forward foreign currency
exchange contracts.
For temporary or defensive purposes, when market or financial conditions
warrant, the Portfolio may at times invest substantially all of its assets in
securities issued by a single major developed country (e.g., the United
States) or in cash or cash equivalents, including money market instruments
issued by that country. In addition, the Portfolio may establish and maintain
temporary cash balances in U.S. and foreign short-term high-grade money market
instruments for defensive purposes or to take advantage of buying
opportunities. Such investments could result in the Portfolio not achieving
its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISK: Investing in foreign securities involves risks not
associated with investing in U.S. securities that can adversely affect the
Portfolio's performance. Foreign markets, particularly emerging markets, may
be less liquid, more volatile and subject to less government supervision than
domestic markets. There may be difficulties enforcing contractual obligations,
and it may take more time for trades to clear and settle. In addition, foreign
investments can be adversely affected by: unfavorable currency exchange rates
(relative to the U.S. dollar for securities denominated in a foreign
currencies); inadequate or inaccurate information about foreign companies;
higher transaction, brokerage and custody costs; expropriation or
nationalization; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions. Other specific risks of investing in foreign securities include:
--------------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
44
- --------------------------------------------------------------------------------
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines.
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency.
During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is
expected to become the sole currency of the participating states. The
introduction of the Euro will result in the redenomination of European
debt and equity securities over a period of time, which may result in
various legal and accounting differences and/or tax treatments that
otherwise would not likely occur. During this period, the creation and
implementation of suitable clearing and settlement systems and other
operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities market.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment-grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
if it invested in higher-rated obligations because BBB-rated securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving
additional collateral, or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially.
<PAGE>
- ----------
45
- --------------------------------------------------------------------------------
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last four calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one year
and since inception and compares the Portfolio's performance to: (i) the
returns of a broad-based index and (ii) the returns of an index of funds with
similar investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance International
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance International Portfolio) whose inception date is April 3, 1995.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1996 ------------------------ 9.8%
1997 ------------------------ -2.98%
1998 ------------------------ 10.6%
1999 ------------------------ 37.78%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
- --------------------------------------------------------------------------------
Alliance International
Portfolio - Class IA
Shares 37.78% 13.26%*
- --------------------------------------------------------------------------------
MSCI EAFE Index** 26.96% 13.11%
- --------------------------------------------------------------------------------
Lipper International Mutual
Funds Average** 42.88% 17.58%
- --------------------------------------------------------------------------------
</TABLE>
* Since inception as of April 3, 1995.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
--------------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
46
- --------------------------------------------------------------------------------
SANDRA L. YEAGER has been responsible for the day-to-day management of the
Portfolio and its predecessor since January 1999. Ms. Yeager, a Senior Vice
President of Alliance, has been associated with Alliance since 1990.
<PAGE>
- ----------
47
- --------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to replicate as closely as possible (before
deduction of Portfolio expenses) the total return of the MSCI EAFE Index.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of companies included in
the MSCI EAFE Index. The Portfolio is constructed to have aggregate investment
characteristics similar to those of the MSCI EAFE Index. The Portfolio invests
in a statistically selected sample of the securities of companies included in
the MSCI EAFE Index, although not all companies within a country will be
represented in the Portfolio at the same time. Stocks are selected based on
country of origin, market capitalization, yield, volatility and industry
sector. The Adviser will manage the Portfolio using advanced statistical
techniques to determine which securities should be purchased or sold in order
to replicate the MSCI EAFE index.
- --------------------------------------------------------------------------------
For more information on the MSCI EAFE Index see the preceding section "The
Benchmarks." The MSCI EAFE Index is the exclusive property of Morgan
Stanley. The Portfolio is not sponsored, endorsed, sold or promoted by
Morgan Stanley and Morgan Stanley makes no guarantee as to the accuracy or
completeness of the MSCI EAFE Index or any data included therein.
- --------------------------------------------------------------------------------
Over time, the correlation between the performance of the Portfolio and the
MSCI EAFE Index is expected to be 95% or higher before deduction of Portfolio
expenses. The Portfolio's ability to track the MSCI EAFE Index may be affected
by, among others, transaction costs, administration and other expenses
incurred by the Portfolio, changes in either the composition of the MSCI EAFE
Index or the assets of the Portfolio, and the timing and amount of Portfolio
investor contributions and withdrawals, if any. The Portfolio seeks to track
the MSCI EAFE Index, therefore, the Adviser generally will not attempt to
judge the merits of any particular security as an investment.
The Portfolio may invest to a lesser extent in short-term debt securities and
money market instruments to meet redemption requests or to facilitate
investment in the securities of the MSCI EAFE Index. Securities index futures
contracts and related options, warrants and convertible securities may be used
for a number of reasons, including: to simulate full investment in the MSCI
EAFE Index while retaining a cash balance for Portfolio management purposes;
to facilitate trading; to reduce transaction costs; or to seek higher
investment returns when a futures contract, option, warrant or convertible
security is priced more attractively than the underlying equity security or
MSCI EAFE Index. These instruments are considered to be derivatives.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
INDEX FUND RISK: The Portfolio is not actively managed and invests in
securities included in the index regardless of their investment merit.
Therefore, the Portfolio cannot modify its investment strategies to respond to
changes in the economy and may be particularly susceptible to a general
decline in the U.S. or global stock market segment relating to the index.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities that can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, foreign investments can be adversely affected
by: unfavorable currency exchange rates (relative to the U.S. dollar for
securities denominated in a foreign currencies);
---------------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
48
- --------------------------------------------------------------------------------
inadequate or inaccurate information about foreign companies; higher
transaction, brokerage and custody costs; adverse changes in foreign economic
and tax policies; and foreign government instability, war or other adverse
political or economic actions. Other specific risks of investing in foreign
securities include:
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency. During a
three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is expected
to become the sole currency of the participating states. The introduction
of the Euro will result in the redenomination of European debt and equity
securities over a period of time, which may result in various legal and
accounting differences and/or tax treatments that otherwise would not
likely occur. During this period, the creation and implementation of
suitable clearing and settlement systems and other operational problems may
cause market disruptions that could adversely affect investments quoted in
the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory practices and requirements as are U.S. companies, which could
adversely affect their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's average annual total return
for 1998 and 1999, the Portfolio's first two years of existence, and some of
the risks of investing in the Portfolio by showing yearly changes in the
Portfolio's performance. The table below shows the Portfolio's average annual
total returns for the Portfolio for one year and since inception. The table
also compares the Portfolio's performance to the returns of a broad based
index. Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the perfomance results.
The Portfolio's inception date was January 1, 1998.
<PAGE>
- ----------
49
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1998 ----------------- 20.07%
1999 ----------------- 27.75%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter: Worst quarter:
17.97% (1999 4th Quarter) 1.35% (1999 1st Quarter)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
BT International Equity Index Portfolio 27.75% 28.17%*
- --------------------------------------------------------------------------------
MSCI EAFE Index** 26.96% 29.29%
- --------------------------------------------------------------------------------
</TABLE>
* Investment operations commenced with respect to Class IA shares on November
24, 1998.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
BANKERS TRUST COMPANY ("Bankers Trust"), 130 Liberty Street (One Bankers Trust
Plaza), New York, New York 10006. Bankers Trust has been the Adviser to the
Portfolio since it commenced operations. Bankers Trust is a wholly-owned
subsidiary of Bankers Trust Corporation. Bankers Trust conducts a variety of
general banking and trust activities and is a major wholesale supplier of
financial services to the international and domestic institutional markets,
including investment management. In 1999, Bankers Trust Corporation finalized a
merger in which Bankers Trust Corporation was acquired by and became a
subsidiary of Deutsche Bank AG.
---------------------- EQ Advisors Trust
<PAGE>
SHORT/INTERMEDIATE TERM BOND PORTFOLIOS
- ----------
50
- --------------------------------------------------------------------------------
ALLIANCE INTERMEDIATE GOVERNMENT
SECURITIES PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve high current income consistent with
relative stability of principal through investment primarily in debt
securities issued or guaranteed as to principal and interest by the U.S.
Government or its agencies or instrumentalities.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in U.S. Government securities. The Portfolio
may also invest in repurchase agreements and forward commitments related to
U.S. Government securities and may also purchase debt securities of
non-government issuers that own mortgages.
- --------------------------------------------------------------------------------
Duration is a measure of the weighted average maturity of the bonds held by
the Portfolio and can be used by the Adviser as a measure of the
sensitivity of the market value of the Portfolio to changes in interest
rates. Generally, the longer the duration of the Portfolio, the more
sensitive its market value will be to changes in interest rates.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In some cases, the Adviser's calculation of duration will be based on
certain assumptions (including assumptions regarding prepayment rates, in
the mortgage-backed or asset-backed securities, and foreign and domestic
interest rates). As of December 31, 1999, the Adviser considered the
duration of a 10-year Treasury bond to be [4.68] years. The Portfolio's
investments will generally have a final maturity of not more than ten years
or a duration not exceeding that of a 10-year Treasury note.
- --------------------------------------------------------------------------------
The Portfolio buys and sells securities with a view to maximizing current
return without, in the opinion of the Adviser, undue risk to principal.
Potential capital gains resulting from possible changes in interest rates will
not be a major consideration. The Portfolio may take full advantage of a wide
range of maturities of U.S. Government securities and may adjust the
dollar-weighted average maturity of its portfolio from time to time, depending
on the Adviser's assessment of relative yields on securities of different
maturities and the expected effect of future changes in interest rates on the
market value of the securities held by the Portfolio. The Portfolio may also
invest a substantial portion of its assets in money market instruments.
In order to enhance its current return, to reduce fluctuations in net asset
value, and to hedge against changes in interest rates, the Portfolio may write
covered call and put options on U.S. Government securities and may purchase
call and put options on U.S. Government securities. The Portfolio may also
enter into interest rate futures contracts with respect to U.S. Government
securities, and may write and purchase options thereon. The Portfolio may also
make secured loans of its portfolio securities without limitation and enter
into repurchase agreement with respect to U.S. Government securities with
commercial banks and registered broker-dealers.
The Portfolio may also make use of various other investment strategies,
including covered short sales, and the purchase or sale of securities on a
when-issued, delayed delivery or forward commitment basis.
Under normal market conditions, the Portfolio will invest at least 65%, and
expects to invest at least 80%, of its total assets in U.S. Government
securities and repurchase agreements and forward commitments relating to U.S.
Government securities. U.S. Government securities include:
o U.S. Treasury Bills: Direct obligations of the U.S. Treasury which are
issued in maturities of one year or less.
o U.S. Treasury Notes: Direct obligations of the U.S. Treasury issued in
maturities which vary between one and ten years, with interest payable
every six months.
<PAGE>
- ----------
51
- --------------------------------------------------------------------------------
o U.S. Treasury Bonds: Direct obligations of the U.S. Treasury which are
issued in maturities more than ten years from the date of issue, with
interest payable every six months.
o "Ginnie Maes": Debt securities issued by a mortgage banker or other
mortgagee and represent an interest in a pool of mortgages insured by the
Federal Housing Administration or the Farmer's Home Administration or
guaranteed by the Veteran's Administration. The Government National
Mortgage Association ("GNMA") guarantees the timely payment of principal
and interest. Ginnie Maes, although not direct obligations of the U.S.
Government, are guaranteed by the U.S. Treasury.
o "Fannie Maes": The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private stockholders
that purchases residential mortgages from a list of approved
seller/servicers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA and supported by FNMA's
right to borrow from the U.S. Treasury, at the discretion of the U.S.
Treasury. Fannie Maes are not backed by the full faith and credit of the
U.S. Government.
o "Freddie Macs": The Federal Home Loan Mortgage Corporation ("FHLMC"), a
corporate instrumentality of the U.S. Government, issues participation
certificates ("PCs") which represent an interest in residential mortgages
from FHLMC's National Portfolio. FHLMC guarantees the timely payment of
interest and ultimate collection of principal, but PCs are not backed by
the full faith and credit of the U.S. Government.
o Governmental Collateralized Mortgage Obligations: These are securities
issued by a U.S. Government instrumentality or agency which are backed by a
portfolio of mortgages or mortgage-backed securities held under an
indenture.
o "Sallie Maes": The Student Loan Marketing Association ("SLMA") is a
government-sponsored corporation owned entirely by private stockholders
that provides liquidity for banks and other institutions engaged in the
Guaranteed Student Loan Program. These loans are either directly guaranteed
by the U.S. Treasury or guaranteed by state agencies and reinsured by the
U.S. Government. SLMA issues both short term notes and longer term public
bonds to finance its activities.
The Portfolio may also invest in "zero coupon" U.S. Government securities
which have been stripped of their unmatured interest coupons and receipts or
in certificates representing undivided interests in such stripped U.S.
Government securities and coupons. These securities tend to be more volatile
than other types of U.S. Government securities.
- --------------------------------------------------------------------------------
Guarantees of the Portfolio's U.S. Government securities guarantee only the
payment of principal at maturity and interest when due on the guaranteed
securities, and do not guarantee the securities' yield or value or the
yield or value of the Portfolio's shares.
- --------------------------------------------------------------------------------
The Portfolio may also purchase collateralized mortgage obligations ("CMOs")
issued by non-governmental issuers and securities issued by a real estate
mortgage investment conduits ("REMICs"), but only if they are collateralized
by U.S. Government securities. However, CMOs issued by entities other than
U.S. Government agencies and instrumentalities and securities issued by REMICs
are not considered U.S. Government securities for purposes of the Portfolio
meeting its policy of investing at least 65% of its total assets in U.S.
Government securities.
THE PRINCIPAL RISKS
FIXED INCOME RISK: This Portfolio invests primarily in fixed income
securities, therefore, the Portfolio's performance will be affected by changes
in interest rates, the duration and maturity of the Portfolio's fixed income
holdings, and adverse market and economic conditions. Other risks that relate
to the Portfolio's investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price
and total return) of the Portfolio's fixed
------------------------------ EQ Advisors Trust
<PAGE>
SHORT/INTERMEDIATE TERM BOND PORTFOLIOS (CONTINUED)
- ----------
52
- --------------------------------------------------------------------------------
income securities, particularly those with longer durations or maturities,
will go down. When interest rates fall, the reverse is true.
INVESTMENT GRADE SECURITIES RISK: With respect to fixed income investments
of the Portfolio, other than U.S. Government securities, rated BBB by S&P
or an equivalent rating by any other nationally recognized statistical
rating organization ("NRSRO"), the Portfolio could lose money if the issuer
or guarantor of a debt security or counterparty to a Portfolio's
transaction is unable or unwilling to make timely principal and/or interest
payments, or to honor its financial obligations. Investment grade
securities which are rated BBB by S&P, or an equivalent rating by any other
NRSRO, are somewhat riskier than higher rated obligations because they are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase, making them even more
susceptible to interest rate changes. Falling interest rates may cause the
value and yield of mortgage-backed securities to fall. Falling interest
rates also may encourage borrowers to pay off their mortgages sooner than
anticipated (pre-payment). The Portfolio would need to reinvest the
pre-paid funds at the newer, lower interest rates.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities without restriction. The risk in lending portfolio
securities, as with other extensions of secured credit, consist of possible
delay in receiving additional collateral, or in the recovery of the securities
or possible loss of rights in the collateral should the borrower fail
financially.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last eight calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one
year, five years and since inception and compares the Portfolio's performance
to: (i) the returns of a broad-based index and (ii) the returns of an index of
funds with similar investment objectives. Past performance is not an
indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Intermediate
Government Securities Portfolio) managed by the Adviser using the same
investment objectives and strategy as the Portfolio. For these purposes, the
Portfolio is considered to be the successor entity to the predecessor
registered investment company (HRT/Alliance Intermediate Government Securities
Portfolio) whose inception date is April 1, 1991. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the
performance results of the Portfolio and its predecessor registered investment
company have been linked.
<PAGE>
- ----------
53
- --------------------------------------------------------------------------------
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN*
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1992 ------------------------ 5.5%
1993 ------------------------ 10.6%
1994 ------------------------ -4.4%
1995 ------------------------ 13.3%
1996 ------------------------ 3.8%
1997 ------------------------ 7.3%
1998 ------------------------ 7.7%
1999 ------------------------ 0.14%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Intermediate
Government Securities
Portfolio - Class IA Shares 0.14% 6.37% 6.28%
- --------------------------------------------------------------------------------
Lehman Intermediate
Government Bonds* 0.49% 6.93% 6.76%
- -------------------------------------------------------------------------------
Lipper Intermediate Government
Funds Average* (2.13)% 5.91% 6.84%
- --------------------------------------------------------------------------------
</TABLE>
*For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
JEFFREY S. PHLEGAR has been responsible for the day-to-day management of the
Portfolio and its predecessor since January 1999. Mr. Phlegar, a Senior Vice
President of Alliance, has been associated with Alliance for the past five
years.
----------------- EQ Advisors Trust
<PAGE>
SHORT/INTERMEDIATE TERM BOND PORTFOLIOS (CONTINUED)
- ----------
54
- --------------------------------------------------------------------------------
ALLIANCE QUALITY BOND PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve high current income consistent with
preservation of capital by investing primarily in investment grade fixed
income securities.
THE INVESTMENT STRATEGY
The Portfolio expects to invest in readily marketable securities with
relatively attractive yields that the Adviser believes do not involve undue
risk.
The Portfolio will follow a policy of investing at least 65% of its total
assets in securities which are rated at the time of purchase at least Baa by
Moody's or BBB by S&P, or in unrated fixed income securities that the Adviser
determines to be of comparable quality.
In the event that the credit rating of a security held by the Portfolio falls
below investment grade (or, in the case of unrated securities, the Adviser
determines that the quality of such security has deteriorated below investment
grade), the Portfolio will not be obligated to dispose of such security and
may continue to hold the obligation if the Adviser believes such an investment
is appropriate in the circumstances. The Portfolio will also seek to maintain
an average aggregate quality rating of its portfolio securities of at least A
(Moody's and S&P).
The Portfolio has complete flexibility as to the types of securities in which
it will invest and the relative proportions thereof. In this regard, the
Portfolio plans to vary the proportions of its holdings of long- and
short-term fixed income securities (including debt securities, convertible
debt securities and U.S. Government obligations), preferred stocks and
dividend-paying common stocks in order to reflect the Adviser's assessment of
prospective cyclical changes even if such action may adversely affect current
income.
The Portfolio may also invest in foreign securities, although it will not
invest more than 20% of its total assets in securities denominated in
currencies other than the U.S. dollar. The Portfolio may enter into foreign
currency futures contracts (and related options), forward foreign currency
exchange contracts and options on foreign currencies for hedging purposes.
The Portfolio may also make use of various other investment strategies,
including zero coupon pay-in-kind securities, collateralized mortgage
obligations, securities lending with a value of up to 50% of its total assets,
the purchase or sale of securities on a when-issued, delayed delivery or
forward commitment basis and repurchase agreements. The Portfolio may also use
derivatives, including: purchasing put and call options and writing covered
put and call options on securities it may purchase. The Portfolio also intends
to write covered call options for cross-hedging purposes, which are designed
to provide a hedge against a decline in value of another security which the
Portfolio owns or has the right to acquire.
The Portfolio may seek to protect the value of its investments from interest
rate fluctuations by entering into various hedging transactions, such as
interest rate swaps and the purchase or sale of interest rate caps and floors.
When market or financial conditions warrant, the Portfolio may invest in
certain money market instruments for temporary or defensive purposes. Such
investments could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
FIXED INCOME RISK: This Portfolio invests primarily in fixed income
securities, therefore, the Portfolio's performance will be affected by changes
in interest rates, credit risks of the issuer, the duration and maturity of
the Portfolio's fixed income holdings, and adverse market and economic
conditions. Other risks that relate to the Portfolio's investment in fixed
income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price
and total return) of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest
rates fall, the reverse is true.
<PAGE>
- ----------
55
- --------------------------------------------------------------------------------
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the
issuer or guarantor of a debt security or counterparty to a Portfolio's
transaction is unable or unwilling to make timely principal and/or interest
payments, or to honor its financial obligations. Investment grade
securities which are rated BBB or S&P or an equivalent rating by any other
nationally recognized statistical rating organization, are somewhat riskier
than higher rated obligations because they are regarded as having only an
adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase, making them even more
susceptible to interest rate changes. Falling interest rates may cause the
value and yield of mortgage-backed securities to fall. Falling interest
rates also may encourage borrowers to pay off their mortgages sooner than
anticipated (pre-payment). The Portfolio would need to reinvest the prepaid
funds at the newer, lower interest rates.
ZERO COUPON AND PAY-IN-KIND SECURITIES RISK: A zero coupon or pay-in-kind
security pays no interest in cash to its holder during its life.
Accordingly, zero coupon securities usually trade at a deep discount from
their face or par value and, together with pay-in-kind securities, will be
subject to greater fluctuations in market value in response to changing
interest rates than debt obligations of comparable maturities that make
current distributions of interest in cash.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. The value of convertible securities fluctuates both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving
additional collateral, or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
----------------------------- EQ Advisors Trust
<PAGE>
SHORT/INTERMEDIATE TERM BOND PORTFOLIOS (CONTINUED)
- ----------
56
- --------------------------------------------------------------------------------
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last six calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one and
five years and compares the Portfolio's performance to: (i) the returns of a
broad-based index and (ii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Quality Bond
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Quality Bond Portfolio) whose inception date is October 1, 1993.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN*
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1994 ------------------------ -5.1%
1995 ------------------------ 17.0%
1996 ------------------------ 5.4%
1997 ------------------------ 9.1%
1998 ------------------------ 8.7%
1999 ------------------------ 2.00%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Quality Bond Portfolio
- Class IA Shares (2.00)% 7.47% 4.96%*
- --------------------------------------------------------------------------------
Lehman Aggregate Bonds* (0.82)% 7.73% 5.64%
- --------------------------------------------------------------------------------
Lipper Corporate Debt Funds
BBB Rated Average* (1.62)% 7.83% 5.32%
- --------------------------------------------------------------------------------
</TABLE>
* Since inception as of October 1, 1993.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
<PAGE>
- ----------
57
- --------------------------------------------------------------------------------
MATTHEW BLOOM has been responsible for the day-to-day management of the
Portfolio and its predecessor since 1995. Mr. Bloom, a Senior Vice President
of Alliance, has been associated with Alliance since 1989.
---------------------------- EQ Advisors Trust
<PAGE>
HIGH YIELD BOND PORTFOLIO
- ----------
58
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ALLIANCE HIGH YIELD PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve a high return by maximizing current
income and, to the extent consistent with that objective, capital
appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in diversified mix of high yield, fixed income
securities (so-called "junk bonds"), which generally involve greater
volatility of price and risk of principal and income than high quality fixed
income securities. Junk bonds generally have a higher current yield but are
rated either in the lower categories by NRSROs (i.e., rated Baa or lower by
Moody's or BBB or lower by S&P) or are unrated securities of comparable
quality.
The Portfolio will attempt to maximize current income by taking advantage of
market developments, yield disparities and variations in the creditworthiness
of issuers. Substantially all of the Portfolio's investments will be income
producing.
The Portfolio may also make use of various other investment strategies,
including investments in common stocks and other equity-type securities (such
as convertible debt securities) and secured loans of its portfolio securities
without limitation in order to enhance its current return and to reduce
fluctuations in net asset value. The Portfolio may also use derivatives,
including: writing covered call and put options; purchasing call and put
options on individual fixed income securities, securities indexes and foreign
currencies; and purchasing and selling stock index, interest rate and foreign
currency futures contracts and options thereon. The Portfolio may also invest
in participations and assignments of loans originally made by institutional
lenders or lending syndicates.
The Portfolio will not invest more than 10% of its total assets in:
(i) fixed income securities which are rated lower than B3 or B- or their
equivalents by one NRSRO or if unrated are of equivalent quality as determined
by the Adviser; and
(ii) money market instruments of any entity which has an outstanding issue of
unsecured debt that is rated lower than B3 or B- or their equivalents by an
NRSRO or if unrated is of equivalent quality as determined by the Adviser;
however, this restriction will not apply to:
o fixed income securities which the Adviser believes have similar
characteristics to securities which are rated B3 or higher by Moody's or
B- or higher by S&P, or
o money market instruments of any entity that has an unsecured issue of
outstanding debt which the Adviser believes has similar characteristics to
securities which are so rated.
In the event that any securities held by the Portfolio fall below those
ratings, the Portfolio will not be obligated to dispose of such securities and
may continue to hold such securities if the Adviser believes that such
investments are considered appropriate under the circumstances.
The Portfolio may also invest in fixed income securities that are providing
high current yields because of risks other than credit, such as prepayment
risks, in the case of mortgage-backed securities, or currency risks, in the
case of non-U.S. dollar denominated foreign securities.
When market or financial conditions warrant, the Portfolio may also make
temporary investments in high-quality U.S. dollar-denominated money market
instruments. Such investment strategies could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
JUNK BOND RISK: The Portfolio invests primarily in "junk bonds" or lower-rated
securities rated BBB or lower by S&P or an equivalent rating by any other
NRSRO or unrated securities of similar quality. Junk bonds have speculative
elements or are predominantly speculative credit risks, therefore, credit risk
is particularly significant for this Portfolio. Although junk bonds generally
have higher yields than debt securities with higher credit ratings, they are
high-risk investments that may not pay interest or return principal as
scheduled. Junk bonds generally are also less liquid and experience more price
volatility than higher rated fixed income securities. This Portfolio may also
be subject to
<PAGE>
- ----------
59
- --------------------------------------------------------------------------------
greater credit risk because it may invest in debt securities issued in
connection with corporate restructurings by highly leveraged issuers or in
debt securities not current in the payment of interest or principal, or in
default.
FIXED INCOME RISK: This Portfolio invests primarily in fixed income
securities, therefore, the Portfolio's performance will be affected by changes
in interest rates, credit risks of the issuer, the duration and maturity of
the Portfolio's fixed income holdings, and adverse market and economic
conditions. Other risks that relate to the Portfolio's investment in fixed
income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price
and total return) of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest
rates fall, the reverse is true.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase, making them even more
susceptible to interest rate changes. Falling interest rates may cause the
value and yield of mortgage-backed securities to fall. Falling interest
rates also may encourage borrowers to pay off their mortgages sooner than
anticipated (pre-payment). The Portfolio would need to reinvest the
pre-paid funds at the newer, lower interest rates.
LOAN PARTICIPATION AND ASSIGNMENT RISK: In addition to the risks associated
with fixed income investments generally, the Portfolio's investments in loan
participations and assignments are subject to the risk that the financial
institution acting as agent for all interests in a loan, might fail
financially. It is also possible that, under emerging legal theories of lender
liability, the Portfolio could be held liable as a co-lender.
SMALL CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known; held primarily by insiders
or institutional investors and may trade less frequently and in lower volume;
such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; such companies have limited
financial resources or may depend on a few key employees; and the products of
technologies of such companies may be at a relatively early stage of
development or not fully tested.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
-------------------- EQ Advisors Trust
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
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60
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LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities without restriction. The risk in lending portfolio
securities, as with other extensions of secured credit, consist of possible
delay in receiving additional collateral, or in the recovery of the securities
or possible loss of rights in the collateral should the borrower fail
financially.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one,
five and ten years and compares the Portfolio's performance to: (i) the
returns of a broad-based index and (ii) the returns of an index of funds with
similar investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance High Yield Portfolio)
managed by the Adviser using the same investment objectives and strategy as
the Portfolio. For these purposes, the Portfolio is considered to be the
successor entity to the predecessor registered investment company
(HRT/Alliance High Yield Portfolio) whose inception date is January 2, 1987.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN*
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1990 ------------------------ -1.1%
1991 ------------------------ 24.5%
1992 ------------------------ 12.3%
1993 ------------------------ 23.2%
1994 ------------------------ -2.8%
1995 ------------------------ 19.9%
1996 ------------------------ 23.0%
1997 ------------------------ 18.5%
1998 ------------------------ -5.2%
1999 ------------------------ -3.35%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
Alliance High Yield Portfolio
- Class IA Shares (3.35)% 9.86% 10.23%
- -------------------------------------------------------------------------------
ML Master* 1.57% 9.61% 10.79%
- -------------------------------------------------------------------------------
Lipper High Current Yield Bond
Funds Average* 3.83% 9.48% 10.15%
- -------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
<PAGE>
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61
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NELSON JANTZEN has been responsible for the day-to-day management of the
Portfolio since January 2000. Mr. Jantzen is a Senior Vice President and
Portfolio Manager in the Global High Yield Group and is responsible for the
management of domestic high yield securities. Mr. Jantzen joined Alliance in
1993.
<PAGE>
MONEY MARKET PORTFOLIO
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62
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ALLIANCE MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to obtain a high level of current income, preserve
its assets and maintain liquidity.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified portfolio of high-quality
U.S. dollar-denominated money market instruments. The Portfolio will maintain
a dollar-weighted average portfolio maturity of 90 days or less.
The instruments in which the Portfolio invests include:
o marketable obligations of, or guaranteed as to the timely payment of
principal and interest by, the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities");
o certificates of deposit, bankers' acceptances, bank notes, time deposits
and interest bearing savings deposits issued or guaranteed by:
(a) domestic banks (including their foreign branches) or savings and loan
associations having total assets of more than $1 billion and which are FDIC
members in the case of banks, or insured by the FDIC, in the case of
savings and loan associations; or
(b) foreign banks (either by their foreign or U.S. branches) having total
assets of at least $5 billion and having an issue of either (i) commercial
paper rated at least A-1 by S&P or Prime-1 by Moody's or (ii) long term
debt rated at least AA by S&P or Aa by Moody's;
o commercial paper (rated at least A-1 by S&P or Prime-1 by Moody's or, if
not rated, issued by domestic or foreign companies having outstanding debt
securities rated at least AA by S&P or Aa by Moody's) and participation
interests in loans extended by banks to such companies;
o mortgage-backed and asset-backed securities that have remaining maturities
of less than one year;
o corporate debt obligations with remaining maturities of less than one year,
rated at least AA by S&P or Aa by Moody's, as well as corporate debt
obligations rated at least A by S&P or Moody's, provided the corporation
also has outstanding an issue of commercial paper rated at least A-1 by S&P
or Prime-1 by Moody's;
o floating rate or master demand notes; and
o repurchase agreements covering U.S. Government securities.
If the Adviser believes a security held by the Portfolio is no longer deemed
to present minimal credit risk, the Portfolio will dispose of the security as
soon as practicable unless the Board of Trustees determines that such action
would not be in the best interest of the Portfolio.
Purchases of securities that are unrated must be ratified by the Board of
Trustees. Because the market value of debt obligations fluctuates as an
inverse function of changing interest rates, the Portfolio seeks to minimize
the effect of such fluctuations by investing only in instruments with a
remaining maturity of 397 calendar days or less at the time of investment,
except for obligations of the U.S. Government, which may have a remaining
maturity of 762 calendar days or less. Time deposits with maturities greater
than seven days are considered to be illiquid securities.
The Portfolio may make use of various other investment strategies, including
investing up to 20% of its total assets in U.S. dollar-denominated money
market instruments of foreign issuers and making secured loans of up to 50% of
its total portfolio securities.
THE PRINCIPAL RISKS
MONEY MARKET RISK: While money market funds are designed to be relatively low
risk investments, they are not entirely free of risk. Despite the short
maturities and high credit quality of the Portfolio's investments, increases
in interest rates and deteriorations in the credit quality of the instruments
the Portfolio has purchased may reduce the Portfolio's net asset value. In
addition, the Portfolio is still subject to the risk that the value of an
investment may be eroded over time by inflation. An investment in the
Portfolio is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
<PAGE>
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63
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Although the Portfolio seeks to preserve the value of your investment, it is
possible to lose money by investing in the Portfolio.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risks will tend to be compounded.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: inadequate or inaccurate information about foreign
companies; higher transaction, brokerage and custody costs; expropriation or
nationalization; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving
additional collateral, or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one,
five and ten years and compares the Portfolio's performance to: (i) the
returns on three-month U.S. Treasury bills and (ii) the returns of an index of
funds with similar investment objectives. Past performance is not an
indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Money Market
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Money Market Portfolio) whose inception date is July 13, 1981.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN*
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1990 ------------------------ 8.2%
1991 ------------------------ 6.2%
1992 ------------------------ 3.6%
1993 ------------------------ 3.0%
1994 ------------------------ 4.0%
1995 ------------------------ 5.7%
1996 ------------------------ 5.3%
1997 ------------------------ 5.4%
1998 ------------------------ 5.3%
1999 ------------------------ 4.96%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
The Portfolio's 7-day yield for the quarter ended December 31, 1999 was
%.
</TABLE>
- --------------------------------------------------------------------------------
------------------------- EQ Advisors Trust
<PAGE>
MONEY MARKET PORTFOLIO (CONTINUED)
- ----------
64
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Money Market Portfolio
- Class IA Shares 4.96% 5.36% 5.16%
- -------------------------------------------------------------------------------
3-Month Treasury Bill 4.74% 5.20% 5.06%
- -------------------------------------------------------------------------------
Lipper Money Market Mutual
Fund Average* 4.75% 5.13% 4.87%
- -------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
RAYMOND J. PAPERA has been responsible for the day-to-day management of the
Portfolio and its predecessor since 1990. Mr. Papera, a Senior Vice President
of Alliance, has been associated with Alliance since 1990.
<PAGE>
BALANCED HYBRID PORTFOLIOS
- ----------
65
- --------------------------------------------------------------------------------
EQ/BALANCED PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve a high return through both appreciation
of capital and current income.
THE INVESTMENT STRATEGY
The Portfolio invests varying portions of its assets primarily in
publicly-traded equity and debt securities and money market instruments
depending on economic conditions, the general level of common stock prices,
interest rates and other relevant considerations, including the risks
associated with each investment medium.
The Portfolio attempts to achieve long-term growth of capital by investing in
common stock and other equity-type instruments. It will try to achieve a
competitive level of current income and capital appreciation through
investments in publicly traded debt securities and a high level of current
income through investments primarily in high-quality U.S. dollar denominated
money market instruments.
The Portfolio's investments in common stocks will primarily consist of common
stocks that are listed on national securities exchanges. Smaller amounts will
be invested in stocks that are traded over-the-counter and in other
equity-type securities.
The Portfolio at all times will hold at least 25% of its total assets in fixed
income securities (including, for these purposes, that portion of the value of
securities convertible into common stock which is attributable to the fixed
income characteristics of those securities, as well as money market
instruments). The Portfolio's equity securities will always comprise at least
25%, but never more than 75%, of the Portfolio's total assets. Consequently,
the Portfolio will have a minimum or "core holdings" of at least 25% fixed
income securities and 25% equity securities. Over time, holdings by the
Portfolio's holdings are currently expected to average approximately 50% in
fixed income securities and approximately 50% in equity securities. Actual
asset mixes will be adjusted in response to economic and credit market cycles.
The Portfolio may also invest up to 20% of its total assets in foreign
securities (which may include American depositary receipts and other
depositary arrangements) and may also make use of various other investment
strategies, including using up to 50% of its total portfolio assets for
securities lending purposes. The Portfolio may also use derivatives,
including: writing covered call and put options, purchasing call and put
options on all the types of securities in which it may invest, as well as
securities indexes and foreign currencies. The Portfolio may also purchase and
sell stock index, interest rate and foreign currency futures contracts and
options thereon.
The debt securities will consist principally of bonds, notes, debentures and
equipment trust certificates, as well as debt securities with equity features
such as conversion or exchange rights or warrants for the acquisition of stock
or participations based on revenues, rates or profits. These debt securities
will principally be investment grade securities rated at least Baa by Moody's
or BBB by S&P, or will be U.S. Government Securities. If such Baa or BBB debt
securities held by the Portfolio fall below those ratings, the Portfolio will
not be obligated to dispose of them and may continue to hold them if an
Adviser considers them appropriate investments under the circumstances. In
addition, the Portfolio may at times hold some of its assets in cash.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
MULTIPLE-ADVISER RISK: The EQ/Balanced Portfolio employs multiple Advisers.
Each of the Advisers independently chooses and maintains a portfolio of common
stocks for the Portfolio and each is responsible for investing a specific
allocated portion of the Portfolio's assets. Because each Adviser will be
managing its allocated portion of the Portfolio independently from the other
Advisers, the same security may be held in two different portions of the
Portfolio, or may be acquired for one portion
----------------------- EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS (CONTINUED)
- ----------
66
- --------------------------------------------------------------------------------
of the Portfolio at a time when the Adviser of another portion deems it
appropriate to dispose of the security from that other portion. Similarly,
under some market conditions, one Adviser may believe that temporary,
defensive investments in short-term instruments or cash are appropriate when
the other Adviser or Advisers believe continued exposure to the equity markets
is appropriate for their portions of the Portfolio. Because each Adviser
directs the trading for its own portion of the Portfolio, and does not
aggregate its transactions with those of the other Advisers, the Portfolio may
incur higher brokerage costs than would be the case if a single Adviser were
managing the entire Portfolio.
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that an
Adviser's allocation of the Portfolio's assets between debt and equity
securities may adversely affect the Portfolio's value.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
FIXED INCOME RISK: This Portfolio invests at least 25% of its total assets in
fixed income securities, therefore, the Portfolio's performance will be
affected by changes in interest rates, credit risks of the issuer, the
duration and maturity of the Portfolio's fixed income holdings, and adverse
market and economic conditions. Other risks that relate to the Portfolio's
investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price
and total return) of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest
rates fall, the reverse is true.
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the
issuer or guarantor of a debt security or counterparty to a Portfolio's
transaction is unable or unwilling to make timely principal and/or interest
payments, or to honor its financial obligations. Investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, are somewhat riskier than higher rated obligations because they are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
<PAGE>
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67
- --------------------------------------------------------------------------------
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving
additional collateral, or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one,
five and ten years and compares the Portfolio's performance to: (i) the
returns of a broad-based index; (ii) the returns of a "blended" index of
equity and fixed income securities; and (iii) the returns of an index of funds
with similar investment objectives. Past performance is not an indication of
future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Balanced Portfolio)
managed by the Adviser using the same investment objectives and strategy as
the Portfolio. For these purposes, the Portfolio is considered to be the
successor entity to the predecessor registered investment company
(HRT/Alliance Balanced Portfolio) whose inception date is January 27, 1986.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1990 ------------------------ 0.3%
1991 ------------------------ 41.3%
1992 ------------------------ -2.8%
1993 ------------------------ 12.3%
1994 ------------------------ -8.0%
1995 ------------------------ 19.8%
1996 ------------------------ 11.7%
1997 ------------------------ 15.1%
1998 ------------------------ 18.1%
1999 ------------------------ 17.79%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- -------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
EQ/Balanced Portfolio - Class
IA Shares 17.50% 15.88% 11.37%
- -------------------------------------------------------------------------------
50% S&P 500 Index/50%
Lehman Gov't/Corp.* 9.07% 17.93% 13.04%
- -------------------------------------------------------------------------------
Lipper Flex. Port. Average* 12.07% 17.11% 12.94%
- -------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
In accordance with the Multi-Manager Order, the Manager may, among other
things, select new or additional Advisers for the Portfolio and may allocate
and re-allocate the Portfolio's assets among Advisers. Currently, Alliance
Capital Management, L.P., Capital Guardian Trust Company and [Jennison
Securities, Inc.] have been selected by the Manager to serve as Advisers for
this Portfolio.
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance was the exclusive Adviser to the Portfolio
and its predecessor registered investment company since the predecessor
commenced operations. Alliance, a publicly traded limited partnership, is
indirectly majority-owned by Equitable. Alliance manages investment companies,
endowment funds, insurance companies, foreign entities,
----------------------- EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS (CONTINUED)
- ----------
68
- --------------------------------------------------------------------------------
qualified and non-tax qualified corporate funds, public and private pension
and profit-sharing plans, foundations and tax-exempt organizations.
ROBERT G. HEISTERBERG has been responsible for the day-to-day management of
the Portfolio and its predecessor since February 12, 1996. Mr. Heisterberg,
a Senior Vice President of Alliance and Global Economic Policy Analysis,
has been associated with Alliance since 1977.
CAPITAL GUARDIAN TRUST COMPANY: ("Capital Guardian"), 333 South Hope Street,
Los Angeles, CA 90071. Capital Guardian is a wholly-owned subsidiary of
Capital Group International, Inc., which itself is a wholly owned subsidiary
of The Capital Group Companies, Inc. Capital Guardian has been providing
investment management services since 1968 and manages approximately $123
billion as of December 31, 1999.
Capital Guardian uses a multiple portfolio manager system under which the
assets of the Portfolio for which Capital Guardian serves as Adviser are
divided into several segments. Each segment is individually managed with the
portfolio manager free to decide on company and industry selections as well as
valuation and transaction assessment. An additional portion of the Portfolio's
total assets allocated to Capital Guardian as Adviser is managed by a group of
investment research analysts.
The individual portfolio managers of each segment of the Portfolio's total
assets allocated to Capital Guardian as Adviser, other than that managed by
the group of research analysts, are as follows:
DONNALISA P. BARNUM. Donnalisa Barnum is a Senior Vice President and a
portfolio manager for Capital Guardian. She joined the Capital Guardian
organization in 1986.
MICHAEL R. ERICKSON. Michael Erickson is a Senior Vice President and
portfolio manager for Capital Guardian and a Senior Vice President and
Director for Capital International Limited. He joined the Capital Guardian
organization in 1987.
DAVID I. FISHER. David Fisher is Chairman of the Board of Capital Group
International, Inc. and Capital Guardian. He joined the Capital Guardian
organization in 1969.
THEODORE R. SAMUELS. Theodore Samuels is a Senior Vice President and a
Director for Capital Guardian, as well as a Director of Capital
International Research, Inc. He joined the Capital Guardian organization in
1981.
EUGENE P. STEIN. Eugene Stein is Executive Vice President, a Director, a
portfolio manager, and Chairman of the Investment Committee for Capital
Guardian. He joined the Capital Guardian organization in 1972.
TERRY BERKEMEIER. Terry Berkemeier is a Vice President of Capital
International Research, Inc. with U.S. equity portfolio management
responsibility in Capital Guardian Trust Company and research
responsibilities for the global metals and mining industries. He joined the
Capital Guardian organization in 1992.
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC ("PIFM"), Gateway Center Three,
100 Mulberry Street, Newark, New Jersey 07102 was added as an Adviser to the
Portfolio as of May 1, 2000. PIFM and its predecessors have served as manager or
administrator to investment companies since 1987. As of October 31, 1999, PIFM
served as either the manager or administrator to various investment companies,
with aggregate assets of approximately $72 billion.
<PAGE>
- ----------
69
- --------------------------------------------------------------------------------
JENNISON ASSOCIATES LLC ("Jennison"), 466 Lexington Avenue, New York, New York
10017 was added as an Adviser to the Portfolio as of May 1, 2000. PIFM
supervises Jennison. Jennison has served as an investment adviser to investment
companies since 1990 and manages approximately $48.4 billion in assets as of
September 30, 1999.
The Portfolio Manager for that portion of the Portfolio's total
assets that will be advised by PIFM and Jennison is SPIROS "SIG"
SEGALAS, who is a founding member, Director, President and Chief
Investment Officer of Jennison. Mr. Segalas has been in the
investment business for over 35 years and has managed equity
portfolios for investment companies since 1990.
PIFM and Jennison are wholly-owned subsidiaries of The Prudential Insurance
Company of America.
----------------------- EQ Advisors Trust
<PAGE>
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70
- --------------------------------------------------------------------------------
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve a high total return without, in the
opinion of the Adviser, undue risk to principal.
THE INVESTMENT STRATEGY
The Portfolio invests varying portions of its assets in high quality,
publicly-traded fixed income securities (including money market instruments
and cash) and publicly-traded common stocks and other equity securities of
U.S. and non-U.S. issuers.
The Portfolio will at all times hold at least 40% of its assets in investment
grade fixed income securities, each having a duration, as determined by the
Adviser, that is less than that of a 10-year Treasury bond (the "fixed income
core"). The Portfolio is generally expected to hold approximately 70% of its
assets in fixed income securities (including the fixed income core) and 30% in
equity securities. Actual asset mixes will be adjusted in response to economic
and credit market cycles. The fixed income asset class will always comprise at
least 50%, but never more than 90%, of the Portfolio's total assets. The
equity class will always comprise at least 10%, but never more than 50%, of
the Portfolio's total assets.
- -------------------------------------------------------------------------------
Duration is a measure of the weighted average maturity of the bonds held by
the Portfolio and can be used by the Adviser as a measure of the
sensitivity of the market value of the Portfolio to changes in interest
rates. Generally, the longer the duration of the Portfolio, the more
sensitive its market value will be to changes in interest rates.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
In some cases, the Adviser's calculation of duration will be based on
certain assumptions (including assumptions regarding prepayment rates, in
the mortgage-backed or asset-backed securities, and foreign and domestic
interest rates). As of December 31, 1999, the Adviser considered the
duration of a 10-year Treasury bond to be [4.68] years. The Portfolio's
investments will generally have a final maturity of not more than ten years
or a duration not exceeding that of a 10-year Treasury note.
- -------------------------------------------------------------------------------
All debt securities held by the Portfolio will be of investment grade (i.e.,
rated at least BBB by S&P or Baa by Moody's) or unrated securities of
comparable quality as determined by the Adviser. The equity securities
invested in by the Portfolio will consist primarily of common stock (including
convertible securities). The Portfolio may also invest in stocks that are
traded over-the-counter and in other equity-type securities. No more than 15%
of the Portfolio's assets will be invested in securities of non-U.S. issuers.
The Portfolio may also make use of various other investment strategies and
derivatives. Up to 50% of its total assets may be used for securities lending
purposes.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that the
Adviser's allocation of the Portfolio's assets between debt and equity
securities may adversely affect the Portfolio's value.
FIXED INCOME RISK: This Portfolio invests primarily in fixed income
securities, therefore, the Portfolio's performance will be affected by changes
in interest rates, credit risks of the issuer, the duration and maturity of
the Portfolio's fixed
----------------------- EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS (CONTINUED)
- ----------
71
- --------------------------------------------------------------------------------
income holdings, and adverse market and economic conditions. Other risks that
relate to the Portfolio's investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price
and total return) of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest
rates fall, the reverse is true.
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the
issuer or guarantor of a debt security or counterparty to a Portfolio's
transaction is unable or unwilling to make timely principal and/or interest
payments, or to honor its financial obligations. Investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, are somewhat riskier than higher rated obligations because they are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
MORTGAGE BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase, making them even more
susceptible to interest rate changes. Falling interest rates may cause the
value and yield of mortgage-backed securities to fall. Falling interest
rates also may encourage borrowers to pay off their mortgages sooner than
anticipated (pre-payment). The Portfolio would need to reinvest the
pre-paid funds at the newer, lower interest rates.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. The value of convertible securities fluctuates both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving
additional collateral, or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like, which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
<PAGE>
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72
- --------------------------------------------------------------------------------
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one
year, five years and since inception and compares the Portfolio's performance
to: (i) the returns of a broad-based index; (ii) the returns of a "blended"
index of fixed income and equity securities; and (iii) the returns of an index
of funds with similar investment objectives. Past performance is not an
indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Conservative Investors
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Conservative Investors Portfolio) whose inception date is
October 2, 1989. The assets of the predecessor were transferred to the
Portfolio on October 18, 1999. Following that transfer, the performance shown
(for the period October 19, 1999 through December 31, 1999) is that of the
Portfolio. For these purposes, the performance results of the Portfolio and
its predecessor registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN*
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1990 ------------------------ 6.3%
1991 ------------------------ 19.8%
1992 ------------------------ 5.6%
1993 ------------------------ 10.8%
1994 ------------------------ -4.1%
1995 ------------------------ 20.4%
1996 ------------------------ 5.2%
1997 ------------------------ 13.3%
1998 ------------------------ 13.9%
1999 ------------------------ 9.87%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
- ------------------------------------ -----------------------------------------
% ( ) % ( )
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- -------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Conservative
Investors Portfolio -
Class IA Shares 10.14% 12.47% 9.94%
- -------------------------------------------------------------------------------
70% Lehman Treasury/30%
S&P 500 Index* 4.19% 13.60% 10.75%
- -------------------------------------------------------------------------------
Lipper Income Average* 4.65% 14.57% 10.84%
- -------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
ROBERT G. HEISTERBERG has been responsible for the day-to-day management of
the Portfolio and its predecessor since February 12, 1996. Mr. Heisterberg, a
Senior Vice President of Alliance and Global Economic Policy Analysis, has
been associated with Alliance since 1977.
------------------------ EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS (CONTINUED)
- ----------
73
- --------------------------------------------------------------------------------
ALLIANCE GROWTH INVESTORS PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve the highest total return consistent
with the Adviser's determination of reasonable risk.
THE INVESTMENT STRATEGY
The Portfolio allocates varying portions of its assets to a number of asset
classes. The fixed income asset class will always comprise at least 10%, but
never more than 60%, of the Portfolio's total assets. The equity class will
always comprise at least 40%, but never more than 90%, of the Portfolio's
total assets. Over time, the Portfolio's holdings, on average, are expected to
be allocated 70% to equity securities and 30% to debt securities. Actual asset
mixes will be adjusted in response to economic and credit market cycles.
The Portfolio's investments in equity securities will include both
exchange-traded and over-the counter common stocks and other equity
securities, including foreign stocks, preferred stocks, convertible debt
instruments, as well as securities issued by small-and mid-sized companies
that have favorable growth prospects.
The Portfolio's debt securities may include foreign debt securities,
investment grade fixed income securities (including cash and money market
instruments) as well as lower quality, higher yielding debt securities (junk
bonds). The Portfolio may also make use of various other investment strategies
and derivatives. Up to 50% of its total assets may be used for securities
lending purposes. No more than 30% of the Portfolio's assets will be invested
in securities of foreign issuers.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that the
Adviser's allocation of the Portfolio's assets between debt and equity
securities may adversely affect the Portfolio's value.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment-grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
if it invested in higher-rated obligations because BBB- rated securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative. Other risks that relate to the Portfolio's investment in fixed
income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price
and total return) of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest
rates fall, the reverse is true.
JUNK BOND RISK: The Portfolio may invest a portion of its assets in "junk
bonds" or lower-rated securities rated BB or lower by S&P or an equivalent
rating by any other NRSRO or unrated securities of similar quality.
Therefore, credit risk is particularly significant for this Portfolio. Junk
bonds have speculative elements or are predominantly speculative credit
risks. This Portfolio may also be subject to greater credit risk because it
may invest in debt securities issued in connection with corporate
<PAGE>
- ----------
74
- --------------------------------------------------------------------------------
restructurings by highly leveraged issuers or in debt securities not
current in the payment of interest or principal, or in default.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
SMALL CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known, held primarily by insiders
or institutional investors and may trade less frequently and in lower volume;
such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; such companies have limited
financial resources or may depend on a few key employees; and the products of
technologies of such companies may be at a relatively early stage of
development or not fully tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. The value of convertible securities fluctuates both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving
additional collateral, or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one
year, five years and ten years and compares the Portfolio's performance to:
(i) the returns of a broad-based index; (ii) the returns of a "blended" index
of equity and fixed income securities; and (iii) the returns of an index of
funds with similar investment objectives. Past performance is not an
indication of future performance.
---------------------------- EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS (CONTINUED)
- ----------
75
- --------------------------------------------------------------------------------
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Growth Investors
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Growth Investors Portfolio) whose inception date is October 2,
1989. The assets of the predecessor were transferred to the Portfolio on
October 18, 1999. Following that transfer, the performance shown (for the
period October 19, 1999 through December 31, 1999) is that of the Portfolio.
For these purposes, the performance results of the Portfolio and its
predecessor registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN*
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1990 ------------------------ 10.7%
1991 ------------------------ 48.8%
1992 ------------------------ 4.9%
1993 ------------------------ 15.3%
1994 ------------------------ -3.2%
1995 ------------------------ 26.4%
1996 ------------------------ 12.6%
1997 ------------------------ 16.9%
1998 ------------------------ 19.1%
1999 ------------------------ 26.58%
- --------------------------------------------------------------------------------
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- -------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Growth Investors
Portfolio - Class IA Shares 26.58% 20.19% 17.08%
- -------------------------------------------------------------------------------
70% S&P 500 Index/30%
Lehman Gov't/Corp.** 13.77% 22.15% 15.13%
- -------------------------------------------------------------------------------
Lipper Flexible Portfolio
Average* 12.07% 17.11% 12.94%
- -------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (October 1, 1996),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
ROBERT G. HEISTERBERG has been responsible for the day-to-day management of
the Portfolio and its predecessor since February 12, 1996. Mr. Heisterberg, a
Senior Vice President of Alliance and Global Economic Policy Analysis, has
been associated with Alliance since 1977.
<PAGE>
3
More information on principal risks
- ----------------
76
- --------------------------------------------------------------------------------
Risk is the chance that you will lose money on your investment or that it will
not earn as much as you expect. In general, the greater the risk, the more
money your investment can earn for you and the more you can lose. Like other
investment companies, the value of each Portfolio's shares may be affected by
the Portfolio's investment objective(s), principal investment strategies and
particular risk factors. Consequently, each Portfolio may be subject to
different principal risks. Some of the principal risks of investing in the
Portfolios are discussed below. However, other factors may also affect each
Portfolio's net asset value.
There is no guarantee that a Portfolio will achieve its investment objective(s)
or that it will not lose principal value.
GENERAL INVESTMENT RISKS: Each Portfolio is subject to the following risks:
ASSET CLASS RISK: There is the possibility that the returns from the types of
securities in which a Portfolio invests will underperform returns from the
various general securities markets or different asset classes. Different types
of securities tend to go through cycles of outperformance and underperformance
in comparison to the general securities markets.
MARKET RISK: Each Portfolio's share price moves up and down over the short
term in reaction to stock or bond market movements. This means that you could
lose money over short periods, and perhaps over longer periods during extended
market downturns.
SECURITY SELECTION RISK: The Adviser(s) for each Portfolio rely on the
insights of different specialists in making investment decisions based on the
Portfolio's particular investment objective(s) and investment strategies.
There is the possibility that the specific securities held by a Portfolio will
underperform other funds in the same asset class or benchmarks that are
representative of the general performance of the asset class because of the
Adviser's choice of portfolio securities.
As indicated in "Summary Information Concerning EQ Advisors Trust" and "About
the Investment Portfolios," a particular Portfolio may also be subject to the
following risks:
CONVERTIBLE SECURITIES RISK: Convertible securities may include both
convertible debt and convertible preferred stock. Such securities may be
converted into shares of the underlying common stock at either a stated price
or stated rate. Therefore, convertible securities enable you to benefit from
increases in the market price of the underlying common stock. Convertible
securities provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. The value of convertible securities fluctuates in relation to changes
in interest rates and, in addition, fluctuates in relation to the underlying
common stock. Subsequent to purchase by a Portfolio, convertible securities
may cease to be rated or a rating may be reduced below the minimum required
for purchase by that Portfolio. Each Adviser will consider such event in its
determination of whether a Portfolio should continue to hold the securities.
DERIVATIVES RISK: Derivatives are financial contracts whose value depends on,
or is derived from the value of an underlying asset, reference rate or index.
Derivatives include stock options, securities index options, currency options,
forward currency exchange contracts, futures contracts, swaps and options on
futures contracts. Certain Portfolios can use derivatives involving the U.S.
Government and foreign government securities and currencies. Investments in
derivatives can significantly increase your exposure to market risk, or credit
risk of the counterparty. Derivatives also involve the risk of mispricing or
improper valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that any of the Portfolios invest a
substantial amount of its assets in fixed income securities, a Portfolio may
be subject to the following risks:
<PAGE>
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77
- --------------------------------------------------------------------------------
CREDIT RISK: Credit risk is the risk that the issuer or guarantor of a debt
security or counterparty to a Portfolio's transactions will be unable or
unwilling to make timely principal and/or interest payments, or otherwise
will be unable or unwilling to honor its financial obligations. Each of the
Portfolios may be subject to credit risk to the extent that it invests in
debt securities or engages in transactions, such as securities loans or
repurchase agreements, which involve a promise by a third party to honor an
obligation to the Portfolio.
Credit risk is particularly significant for the Portfolios, such as the
Alliance Growth Investors Portfolio and the Alliance High Yield Portfolio,
that invest a material portion of their assets in "JUNK BONDS" or
lower-rated securities (i.e., rated BB or lower by S&P or an equivalent
rating by any other NRSRO or unrated securities of similar quality). These
debt securities and similar unrated securities have speculative elements or
are predominantly speculative credit risks. Portfolios such as the Alliance
Growth Investors Portfolio and the Alliance High Yield Portfolio may also
be subject to greater credit risk because they may invest in debt
securities issued in connection with corporate restructurings by highly
leveraged issuers or in debt securities not current in the payment of
interest or principal, or in default.
INTEREST RATE RISK: The price of a bond or a fixed income security is
dependent upon interest rates. Therefore, the share price and total return
of a Portfolio investing a significant portion of its assets in bonds or
fixed income securities will vary in response to changes in interest rates.
A rise in interest rates causes the value of a bond to decrease, and vice
versa. There is the possibility that the value of a Portfolio's investment
in bonds or fixed income securities may fall because bonds or fixed income
securities generally fall in value when interest rates rise. The longer the
term of a bond or fixed income instrument, the more sensitive it will be to
fluctuations in value from interest rate changes. Changes in interest rates
may have a significant effect on Portfolios holding a significant portion
of their assets in fixed income securities with long term maturities.
MORTGAGE-BACKED SECURITIES RISK: In the case of mortgage-backed securities,
rising interest rates tend to extend the term to maturity of the
securities, making them even more susceptible to interest rate changes.
When interest rates drop, not only can the value of fixed income securities
drop, but the yield can drop, particularly where the yield on the fixed
income securities is tied to changes in interest rates, such as adjustable
mortgages. Also when interest rates drop, the holdings of mortgage-backed
securities by a Portfolio can reduce returns if the owners of the
underlying mortgages pay off their mortgages sooner than anticipated since
the funds prepaid will have to be reinvested at the then lower prevailing
rates. This is known as prepayment risk. When interest rates rise, the
holdings of mortgage-backed securities by a Portfolio can reduce returns if
the owners of the underlying mortgages pay off their mortgages later than
anticipated. This is known as extension risk.
INVESTMENT GRADE SECURITIES RISK: Debt securities are rated by national
bond ratings agencies. Securities rated BBB by S&P or Baa by Moody's are
considered investment grade securities, but are somewhat riskier than
higher rated obligations because they are regarded as having only an
adequate capacity to pay principal and interest, and are considered to lack
outstanding investment characteristics.
JUNK BONDS OR LOWER RATED SECURITIES RISK: Bonds rated below investment
grade by S&P and Moody's are speculative in nature, may be subject to
certain risks with respect to the issuing entity and to greater market
fluctuations than higher rated fixed income securities. They are usually
issued by
<PAGE>
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companies without long track records of sales and earnings, or by those
companies with questionable credit strength. These bonds are considered
"below investment grade." The retail secondary market for these "junk
bonds" may be less liquid than that of higher rated securities and adverse
conditions could make it difficult at times to sell certain securities or
could result in lower prices than those used in calculating the Portfolio's
net asset value.
FOREIGN SECURITIES RISK: A Portfolio's investments in foreign securities,
including depositary receipts, involve risks not associated with investing in
U.S. securities and can affect a Portfolio's performance. Foreign markets,
particularly emerging markets, may be less liquid, more volatile and subject
to less government supervision than domestic markets. There may be
difficulties enforcing contractual obligations, and it may take more time for
trades to clear and settle. The specific risks of investing in foreign
securities, among others, include:
CURRENCY RISK: The risk that changes in currency exchange rates will
negatively affect securities denominated in, and/or receiving revenues in,
foreign currencies. Adverse changes in currency exchange rates (relative to
the U.S. dollar) may erode or reverse any potential gains from a
Portfolio's investment in securities denominated in a foreign currency or
may widen existing losses.
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging market countries and/or their securities markets. Generally,
economic structures in these countries are less diverse and mature than
those in developed countries, and their political systems are less stable.
Investments in emerging markets countries may be affected by national
policies that restrict foreign investment in certain issuers or industries.
The small size of their securities markets and low trading volumes can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines. As a result, a Portfolio investing in emerging market countries
may be required to establish special custody or other arrangements before
investing.
EURO RISK: Certain of the Portfolios may invest in securities issued by
European issuers. On January 1, 1999, 11 of the 15 member states of the
European Monetary Union ("EMU") introduced the "Euro" as a common currency.
During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is expected
to become the sole currency of the participating states. The introduction
of the Euro will result in the redenomination of European debt and equity
securities over a period of time, which may result in various legal and
accounting differences and/or tax treatments that otherwise would not
likely occur. During this period, the creation and implementation of
suitable clearing and settlement systems and other operational problems may
cause market disruptions that could adversely affect investments quoted in
the Euro.
POLITICAL/ECONOMIC RISK: Changes in economic and tax policies, government
instability, war or other political or economic actions or factors may have
an adverse effect on a Portfolio's foreign investments.
REGULATORY RISK: Less information may be available about foreign companies.
In general, foreign companies are not subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices
and requirements as are U.S. companies.
TRANSACTION COSTS RISK: The costs of buying and selling foreign securities,
including tax, brokerage and custody costs, generally are higher than those
involving domestic transactions.
----------------------- EQ Advisors Trust
<PAGE>
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GROWTH INVESTING RISK: Growth investing generally focuses on companies that,
due to their strong earnings and revenue potential, offer above-average
prospects for capital growth, with less emphasis on dividend income. Earnings
predictability and confidence in earnings forecasts are an important part of
the selection process. As a result, the price of growth stocks may be more
sensitive to changes in current or expected earnings than the prices of other
stocks. Advisers using this approach generally seek out companies experiencing
some or all of the following: high sales growth, high unit growth, high or
improving returns on assets and equity, and a strong balance sheet. Such
Advisers also prefer companies with a competitive advantage such as unique
management, marketing or research and development. Growth investing is also
subject to the risk that the stock price of one or more companies will fall or
will fail to appreciate as anticipated by the Advisers, regardless of
movements in the securities market.
INDEX-FUND RISK: The Alliance Equity Index and BT International Equity Index
Portfolios are not actively managed (which involves buying and selling of
securities based upon economic, financial and market analysis and investment
judgment). Rather, the Alliance Equity Index Portfolio utilizes proprietary
modeling techniques to match the performance results of the S&P 500 Index. The
BT International Equity Index Portfolio utilizes a "passive" or "indexing"
investment approach and attempts to duplicate the investment performance of
the particular index the Portfolio is tracking (i.e., S&P 500 Index, Russell
2000 Index or MSCI EAFE Index) through statistical procedures. Therefore, the
Portfolio will invest in the securities included in the relevant index or
substantially identical securities regardless of market trends. The Portfolio
cannot modify their investment strategies to respond to changes in the
economy, which means they may be particularly susceptible to a general decline
in the U.S. or global stock market segment relating to the relevant index.
LEVERAGING RISK: When a Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in that Portfolio will be more volatile
and all other risks will tend to be compounded. All of the Portfolios may take
on leveraging risk by investing in collateral from securities loans and by
borrowing money to meet redemption requests.
LIQUIDITY RISK: Certain securities held by a Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like. A
Portfolio may have to hold these securities longer than it would like and may
forego other investment opportunities. There is the possibility that a
Portfolio may lose money or be prevented from earning capital gains if it can
not sell a security at the time and price that is most beneficial to the
Portfolio. Portfolios that invest in privately-placed securities, high-yield
bonds, mortgage-backed securities or foreign or emerging market securities,
which have all experienced periods of illiquidity, are subject to liquidity
risks. A particular Portfolio may be more susceptible to some of these risks
than others, as noted in the description of each Portfolio.
MONEY MARKET RISK: Although a money market fund is designed to be a relatively
low risk investment, it is not entirely free of risk. Despite the short
maturities and high credit quality of the Alliance Money Market Portfolio's
investments, increases in interest rates and deteriorations in the credit
quality of the instruments the Portfolio has purchased may reduce the
Portfolio's yield. In addition, the Portfolio is still subject to the risk
that the value of an investment may be eroded over time by inflation.
MULTIPLE-ADVISER RISK: The EQ/Aggressive Stock and EQ/Balanced Portolios
employ multiple Advisers. Each of the Advisers independently chooses and
maintains a portfolio of common stocks for the Portfolio and each is
responsible for investing a specific allocated portion of the Portfolio's
assets. Because each Adviser will be managing its allocated portion of the
Portfolio independently from the other Advisers, the same security may be held
in two different portions of the Portfolio, or may be acquired for one portion
of the Portfolio at a time when the Adviser of another
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portion deems it appropriate to dispose of the security from that other
portion. Similarly, under some market conditions, one Adviser may believe that
temporary, defensive investments in short-term instruments or cash are
appropriate when the other Adviser or Advisers believe continued exposure to
the equity markets is appropriate for their portions of the Portfolio. Because
each Adviser directs the trading for its own portion of the Portfolio, and
does not aggregate its transactions with those of the other Advisers, the
Portfolio may incur higher brokerage costs than would be the case if a single
Adviser were managing the entire Portfolio.
PORTFOLIO TURNOVER RISK: Consistent with their investment policies, the
Portfolios also will purchase and sell securities without regard to the effect
on portfolio turnover. Higher portfolio turnover (e.g., over 100% per year)
will cause a Portfolio to incur additional transaction costs that could be
passed through to shareholders.
SECURITIES LENDING RISK: For purposes of realizing additional income, each
Portfolio may lend securities to broker-dealers approved by the Board of
Trustees. In addition, the Alliance High Yield and Alliance Intermediate
Government Securities Portfolios may each make secured loans of its portfolio
securities without restriction. Any such loan of portfolio securities will be
continuously secured by collateral at least equal to the value of the security
loaned. Such collateral will be in the form of cash, marketable securities
issued or guaranteed by the U.S. Government or its agencies, or a standby
letter of credit issued by qualified banks. The risks in lending portfolio
securities, as with other extensions of secured credit, consist of possible
delay in receiving additional collateral or in the recovery of the securities
or possible loss of rights in the collateral should the borrower fail
financially. Loans will only be made to firms deemed by the Adviser to be of
good standing and will not be made unless, in the judgment of the Adviser, the
consideration to be earned from such loans would justify the risk.
SMALL-CAP AND MID-CAP COMPANY RISK: A Portfolio's investments in small-cap and
mid-cap companies may involve greater risks than investments in larger, more
established issuers. Smaller companies may have narrower product lines, more
limited financial resources and more limited trading markets for their stock,
as compared with larger companies. Their securities may be less well-known and
trade less frequently and in more limited volume than the securities of
larger, more established companies. In addition, small-cap and mid-cap
companies are typically subject to greater changes in earnings and business
prospects than larger companies. Consequently, the prices of small company
stocks tend to rise and fall in value more frequently than the stocks of
larger companies. Although investing in small-cap and mid-cap companies offers
potential for above-average returns, the companies may not succeed and the
value of their stock could decline significantly.
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
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This section gives you information on the Trust, the Manager and the Advisers
for the Portfolios. More detailed information concerning each of the Advisers
and portfolio managers is included in the description for each Portfolio in
the section "About The Investment Portfolios."
THE TRUST
The Trust is organized as a Delaware business trust and is registered with the
Securities and Exchange Commission ("SEC") as an open-end management
investment company. The Trust issues shares of beneficial interest that are
currently divided among forty (40) Portfolios, each of which has authorized
Class IA and Class IB shares. Each Portfolio has its own objectives,
investment strategies and risks, which have been previously described in this
prospectus.
THE MANAGER
The Equitable Life Assurance Society of the United States ("Equitable"), 1290
Avenue of the Americas, New York, New York 10104, currently serves as the
Manager of the Trust. EQ Financial Consultants, Inc. ("EQFC") previously
served as the Manager of the Trust, until September 17, 1999 when the Trust's
Investment Management Agreement was transferred to Equitable. Equitable is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended, and a wholly-owned subsidiary of AXA Financial, Inc. ("AXA
Financial"), a subsidiary of AXA, a French insurance holding company.
Subject to the supervision and direction of the Board of Trustees, the Manager
has overall responsibility for the general management of the Trust. In the
exercise of that responsibility and under the Multi-Manager Order, the
Manager, without obtaining shareholder approval but subject to the review and
approval by the Board of Trustees, may: (i) select new or additional Advisers
for the Portfolios; (ii) enter into new investment advisory agreements and
materially modify existing investment advisory agreements; and (iii) terminate
and replace the Advisers. The Manager also monitors each Adviser's investment
program and results, reviews brokerage matters, and carries out the directives
of the Board of Trustees. The Manager also supervises the provision of
services by third parties such as the Trust's custodian.
The contractual management fee rates payable by the Trust are at the following
annual percentages of the value of each Portfolio's average daily net assets:
CONTRACTUAL FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)(FEE ON ALL ASSETS)
INDEX PORTFOLIOS
- ---------------------------------------------
Alliance Equity Index 0.250%
BT International Equity Index 0.350%
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FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
FIRST NEXT NEXT NEXT
DEBT PORTFOLIOS $750 MILLION $750 MILLION $1 BILLION $2.5 BILLION THEREAFTER
- ---------------------------------------------- -------------- -------------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C>
Alliance High Yield 0.600% 0.575% 0.550% 0.530% 0.520%
Alliance Intermeddiate Government Securities 0.500% 0.475% 0.450% 0.430% 0.420%
Alliance Money Market 0.350% 0.325% 0.300% 0.280% 0.270%
Alliance Quality Bond 0.525% 0.500% 0.475% 0.455% 0.445%
</TABLE>
FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
FIRST NEXT NEXT NEXT
EQUITY PORTFOLIOS $1 BILLION $1 BILLION $3 BILLION $5 BILLION THEREAFTER
- ------------------------------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
EQ/Aggressive Stock 0.650% 0.600% 0.575% 0.550% 0.525%
EQ/Balanced 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance Common Stock 0.550% 0.500% 0.475% 0.450% 0.425%
Alliance Conservative Investors 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance Global 0.750% 0.700% 0.675% 0.650% 0.625%
Alliance Growth and Income 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance Growth Investors 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance International 0.850% 0.800% 0.775% 0.750% 0.725%
Alliance Small Cap Growth 0.750% 0.700% 0.675% 0.650% 0.625%
EQ/Alliance Premier Growth 0.900% 0.850% 0.825% 0.800% 0.775%
MFS Emerging Growth Companies 0.650% 0.600% 0.575% 0.550% 0.525%
T. Rowe Price Equity Income 0.600% 0.550% 0.525% 0.500% 0.475%
Warburg Pincus Small Company Value 0.750% 0.700% 0.675% 0.650% 0.625%
</TABLE>
For one Portfolio (i.e., Warburg Pincus Small Cap Value Portfolio) the Manager
has agreed not to implement any increase in the applicable management fee rate
(as approved by shareholders) until July 31, 2001, unless the Board agrees that
such a management fee increase should be put into operation earlier.
------------------------- EQ Advisors Trust
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The table below shows the annual rate of the management fees (as a percentage
of each Portfolio's average daily net assets) that the Manager (or the
predecessor Manager for certain of the Portfolios) received in 1999 for
managing each of the Portfolios and the rate of the management fees waived by
the Manager (or the predecessor Manager for certain of the Portfolios) in 1999
in accordance with the provisions of the Expense Limitation Agreement, as
defined directly below, between the Manager and the Trust with respect to
certain of the Portfolios.
MANAGEMENT FEES PAID BY THE PORTFOLIOS IN 1999
<TABLE>
<CAPTION>
ANNUAL RATE OF
RATE FEES
PORTFOLIOS RECEIVED WAIVED
<S> <C> <C>
- ---------------------------------------------------------------
EQ/Aggressive Stock 0.54% 0.00%
EQ/Balanced 0.41% 0.00%
Alliance Common Stock 0.36% 0.00%
Alliance Conservative Investors 0.48% 0.00%
Alliance Equity Index 0.31% 0.00%
Alliance Global 0.64% 0.00%
Alliance Growth & Income 0.54% 0.00%
Alliance Gowth Investors 0.50% 0.00%
Alliance High Yield 0.60% 0.00%
Alliance Intermediate 0.50% 0.00%
Government Securities
Alliance International 0.90% 0.00%
Alliance Money Market 0.34% 0.00%
EQ/Alliance Premier Growth 0.90% 2.22%
Alliance Quality Bond 0.53% 0.00%
Alliance Small Cap Growth 0.90% 0.00%
BT International Equity Index 0.35% 0.13%
MFS Emerging Growth 0.55% 0.11%
Companies
T. Rowe Price Equity Income 0.55% 0.15%
Warburg Pincus Small Company 0.65% 0.13%
- ----------------------------------------------------------------
Value
</TABLE>
EXPENSE LIMITATION AGREEMENT
In the interest of limiting until July 31, 2000 expenses of each Portfolio
(except for the Portfolios for which Alliance serves as Investment Adviser,
other than EQ/Alliance Premier Growth Portfolio), the Manager has entered into
an amended and restated expense limitation agreement with the Trust with
respect to those Portfolios ("Expense Limitation Agreement"). Pursuant to that
Expense Limitation Agreement, the Manager has agreed to waive or limit its
fees and to assume other expenses so that the total annual operating expenses
of each Portfolio other than interest, taxes, brokerage commissions (other
expenditures which are capitalized in accordance with generally accepted
accounting principles, other extraordinary expenses not incurred in the
ordinary course of each Portfolio's business and amounts payable pursuant to a
plan adopted in accordance with Rule 12b-1 under the 1940 Act) are limited to
the following respective expense ratios:
EXPENSE LIMITATION PROVISIONS
<TABLE>
<CAPTION>
TOTAL EXPENSES
LIMITED TO (% OF
PORTFOLIOS DAILY NET ASSETS)
- ---------------------------------------------------------------
<S> <C>
BT International Equity Index 0.75%
EQ/Alliance Premier Growth 0.90%
MFS Emerging Growth Companies 0.75%
T. Rowe Price Equity Income 0.70%
Warburg Pincus Small Company Value 0.85%
- ---------------------------------------------------------------
</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.
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The total amount of reimbursement to which the Manager may be entitled will
equal, at any time, the sum of (i) all investment management fees previously
waived or reduced by the Manager and (ii) all other payments previously
remitted by the Manager to the Portfolio during any of the previous five (5)
fiscal years, less any reimbursement that the Portfolio has previously paid to
the Manager with respect to (a) such investment management fees previously
waived or reduced and (b) such other payments previously remitted by the
Manager to the Portfolio.
THE ADVISERS
Each Portfolio has one or more Advisers that furnish an investment program for
the Portfolio (or portion thereof for which the entity serves as Adviser)
pursuant to an investment advisory agreement with the Manager. Each Adviser
makes investment decisions on behalf of the Portfolio (or portion thereof for
which the entity serves as Adviser), places all orders for the purchase and
sale of investments for the Portfolio's account with brokers or dealers
selected by such Adviser or the Manager and may perform certain limited
related administrative functions in connection therewith.
The Manager has received an exemptive order, the Multi-Manager Order, from the
SEC that permits the Manager, subject to board approval and without the
approval of shareholders to: (a) employ a new Adviser or additional Advisers
for any Portfolio; (b) enter into new investment advisory agreements and
materially modify existing investment advisory agreements; and (c) terminate
and replace the Advisers without obtaining approval of the relevant Portfolio'
s shareholders. However, the Manager may not enter into an investment advisory
agreement with an "affiliated person" of the Manager (as that term is defined
in Section 2(a)(3) of the 1940 Act) ("Affiliated Adviser"), such as Alliance,
unless the investment advisory agreement with the Affiliated Adviser,
including compensation, is approved by the affected Portfolio's shareholders,
including, in instances in which the investment advisory agreement pertains to
a newly formed Portfolio, the Portfolio's initial shareholder. In such
circumstances, shareholders would receive notice of such action, including the
information concerning the Adviser that normally is provided in an information
statement under Schedule 14C of the Securities Exchange Act of 1934 ("1934
Act").
The Manager pays each Adviser a fee based on the Portfolio's average daily net
assets. No Portfolio is responsible for the fees paid to each of the Advisers.
THE ADMINISTRATOR
Pursuant to an agreement, Equitable currently serves as the Administrator to
the Trust. As Administrator, Equitable provides the Trust with necessary
administrative, fund accounting and compliance services, and makes available
the office space, equipment, personnel and facilities required to provide such
services to the Trust.
Equitable may carry out its responsibilities either directly or through
sub-contracting with third party service providers. For these services, the
Trust pays Equitable $30,000 for each Portfolio, and a monthly fee at the
annual rate of 0.04 of 1% of the first $3 billion of total Trust assets, 0.03
of 1% of the next $3 billion of the total Trust assets; 0.025 of 1% of the
next $4 billion of the total Trust assets; and 0.0225% of 1% of the total
Trust assets in excess of $10 billion.
THE TRANSFER AGENT
Equitable serves as the transfer agent and dividend disbursing agent of the
Trust and receives no compensation for serving in such capacity.
BROKERAGE PRACTICES
In selecting brokers and dealers, in accordance with Section 28(e) of the 1934
Act, the Manager and each Adviser may consider research and brokerage services
received by the Manager, the Advisers, the Trust or any Portfolio. Subject to
seeking the most favorable net price and execution
----------------------- EQ Advisors Trust
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available, the Manager and each Adviser may also consider sales of shares of
the Trust as a factor in the selection of brokers and dealers. Finally, at the
discretion of the Board, the Trust may direct the Manager to cause Advisers to
effect securities transactions through broker-dealers in a manner that would
help to generate resources to (i) pay the cost of certain expenses which the
Trust is required to pay or for which the Trust is required to arrange payment
or (ii) finance activities that are primarily intended to result in the sale
of Trust shares.
BROKERAGE TRANSACTIONS WITH AFFILIATES
To the extent permitted by law, the Trust may engage in securities and other
transactions with entities that may be affiliated with the Manager or the
Advisers. The 1940 Act generally prohibits the Trust from engaging in
principal securities transactions with an affiliate of the Manager or the
Advisers unless pursuant to an exemptive order from the SEC. For these
purposes, however, the Trust has considered this issue and believes, based
upon advice of counsel, that a broker-dealer affiliate of an Adviser to one
Portfolio should not be treated as an affiliate of an Adviser to another
Portfolio for which such Adviser does not provide investment advice in whole
or in part. The Trust has adopted procedures that are reasonably designed to
provide that any commission it pays to affiliates of the Manager or Advisers
does not exceed the usual and customary broker's commission. The Trust has
also adopted procedures permitting it to purchase securities, under certain
restrictions prescribed by a rule under the 1940 Act, in a public offering in
which an affiliate of the Manager or Advisers is an underwriter.
<PAGE>
5
Fund distribution arrangements
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The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares and Class IB shares. AXA Advisors, LLC ("AXA Advisors") serves as one
of the distributors for the Class IB shares of the Trust offered by this
Prospectus as well as one of the distributors for the Class IA shares.
Equitable Distributors, Inc. ("EDI") serves as the other distributor for the
Class IB shares of the Trust as well as the Class IA shares. Both classes of
shares are offered and redeemed at their net asset value without any sales
load. AXA Advisors and EDI are affiliates of Equitable. Both AXA Advisors and
EDI are registered as broker-dealers under the 1934 Act and are members of the
National Association of Securities Dealers, Inc.
The Trust has adopted a Distribution Plan under Rule 12b-1 under the 1940 Act
for the Trust's Class IB shares. Under the Class IB Distribution Plan the
Class IB shares of the Trust pay each of the distributors an annual fee to
compensate them for promoting, selling and servicing shares of the Portfolios.
The annual fees equal 0.25% of each Portfolio's average daily net assets. Over
time, the fees will increase your cost of investing and may cost you more than
other types of charges.
<PAGE>
6
Purchase and redemption
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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.
<PAGE>
7
How assets are valued
- ----------------
88
- --------------------------------------------------------------------------------
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, or in American Depositary Receipts
or similar form, in the United States are valued at representative quoted
prices in the currency in the country of origin. Foreign currency is
converted into United States dollar equivalents at current exchange rates.
Because foreign markets may be open at different times than the NYSE, the
value of a Portfolio's shares may change on days when shareholders are not
able to buy or sell them. If events materially affecting the values of the
Portfolios' foreign investments occur between the close of foreign markets
and the close of regular trading on the NYSE, these investments may be
valued at their fair value.
o Short-term debt securities in the Portfolios, other than the Alliance Money
Market Portfolio, which mature in 60 days or less are valued at amortized
cost, which approximates market value. Securities held in the Alliance
Money Market Portfolio are valued at prices based on equivalent yields or
yield spreads.
o Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided are valued in good
faith by the Valuation Committee of the Board of Trustees of the Trust
using its best judgment.
<PAGE>
8
Tax information
- ----------------
89
- --------------------------------------------------------------------------------
Each Portfolio of the Trust is a separate regulated investment company for
federal income tax purposes. Regulated investment companies are usually not
taxed at the entity (Portfolio) level. They pass through their income and
gains to their shareholders by paying dividends. Their shareholders include
this income on their respective tax returns. A Portfolio will be treated as a
regulated investment company if it meets specified federal income tax rules,
including types of investments, limits on investments, calculation of income,
and dividend payment requirements. Although the Trust intends that it and each
Portfolio will be operated to have no federal tax liability, if they have any
federal tax liability, that could hurt the investment performance of the
Portfolio in question. Also, any Portfolio investing in foreign securities or
holding foreign currencies could be subject to foreign taxes which could
reduce the investment performance of the Portfolio.
It is important for each Portfolio to maintain its federal income tax
regulated investment company status because the shareholders of the Portfolio
that are insurance company separate accounts will then be able to use a
favorable federal income tax investment diversification testing rule in
determining whether the Contracts indirectly funded by the Portfolio meet tax
qualification rules for variable insurance contracts. If a Portfolio fails to
meet specified investment diversification requirements, owners of non-pension
plan Contracts funded through the Trust could be taxed immediately on the
accumulated investment earnings under their Contracts and could lose any
benefit of tax deferral. Equitable, in its capacity as Administrator therefore
carefully monitors compliance with all of the regulated investment company
rules and variable insurance contract investment diversification rules.
<PAGE>
9
Financial Highlights
- ----------------
90
- --------------------------------------------------------------------------------
To be inserted
<PAGE>
10
Prior performance of each adviser
- ----------------
91
- --------------------------------------------------------------------------------
The following table provides information concerning the historical performance
of another registered investment company (or series) and/or other
institutional private accounts managed by each Adviser that have investment
objectives, policies, strategies and risks substantially similar to those of
the respective Portfolio(s) of the Trust for which it serves as Adviser. The
data is provided to illustrate the past performance of the Advisers in
managing substantially similar investment vehicle as measured against
specified market indices. This data does not represent the past performance of
any of the Portfolios or the future performance of any Portfolio or its
Adviser. Consequently, potential investors should not consider this
performance data as an indication of the future performance of any Portfolio
of the Trust or of its Adviser and should not confuse this performance data
with performance data for each of the Trust's Portfolios, which is shown for
each Portfolio under the caption "ABOUT THE INVESTMENT PORTFOLIOS."
Each Adviser's performance data shown below for other registered investment
companies (or series thereof) was calculated in accordance with standards
prescribed by the SEC for the calculation of average annual total return
information for registered investment companies. Average annual total return
reflects changes in share prices and reinvestment of dividends and
distributions and is net of fund expenses. In each such instance, the share
prices and investment returns will fluctuate, reflecting market conditions as
well as changes in company-specific fundamentals of portfolio securities.
The major difference between the SEC prescribed calculation of average annual
total returns for registered investment companies or (series thereof) and
total returns for composite performance is that average annual total returns
reflect all fees and charges applicable to the registered investment company
in question and the total return calculation for the Composite reflects only
those fees and charges described in the paragraph directly above.
The performance results for the registered investment companies or Composite
presented below are generally subject to somewhat lower fees and expenses than
the relevant Portfolios although in most instances the fees and expenses are
substantially similar. In addition, holders of Contracts representing
interests in the Portfolios below will be subject to charges and expenses
relating to such Contracts. The performance results presented below do not
reflect any insurance related expenses and would be reduced if such charges
were reflected.
The investment results presented below are unaudited. For more information on
the specified market indices used below, see the section "The Benchmarks."
<PAGE>
- -----
92
- --------------------------------------------------------------------------------
ANNUAL RATES OF RETURN OF OTHER FUNDS OR ACCOUNTS MANAGED BY ADVISERS
AS OF 12/31/99
The name of the other fund or account managed by the Adviser is shown in BOLD.
The name of the Trust Portfolio is shown in (parentheses). The name of the
benchmark is shown in italics.
<TABLE>
<CAPTION>
- ----------------------------------------------------------- ----------- ----------- ----------- ----------- ------------
1 5 10 Since Inception
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT Portfolio) Year Years Years Inception Date
- ----------------------------------------------------------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Benchmark
- -----------------------------------------------------------
ALLIANCE PREMIER GROWTH FUND, INC. - ADVISOR CLASS9 (EQ/ALLIANCE PREMIER GROWTH PORTFOLIO)
29.42% N/A N/A 38.65% 10/1/96
- ----------------------------------------------------------- ----- ----- ----- -----
S&P 500 Index1 21.04% N/A N/A 21.60%
- ----------------------------------------------------------- ----- ----- ----- -----
BT ADVISORS FUNDS - EAFE EQUITY INDEX FUND - INSTITUTIONAL CLASS (BT INTERNATIONAL EQUITY INDEX PORTFOLIO)
27.95% N/A N/A 14.07% 1/24/96
- ----------------------------------------------------------- ----- ----- ----- -----
MSCI EAFE Index3 26.96% N/A N/A 13.88%
- ----------------------------------------------------------- ----- ----- ----- -----
MFS EMERGING GROWTH FUND4 (MFS EMERGING GROWTH COMPANIES PORTFOLIO)
41.45% 28.05% 24.72% 12/29/86
- ----------------------------------------------------------- ----- ----- -----
Russell 2000 Index2 21.26% 16.69% 13.40%
- ----------------------------------------------------------- ----- ----- -----
T. ROWE PRICE EQUITY INCOME FUND (T. ROWE PRICE EQUITY INCOME PORTFOLIO)
3.82% 18.59% 14.14% 15.67% 10/31/85
- ----------------------------------------------------------- ----- ----- ----- -----
S&P 500 Index1 21.04% 28.51% 18.21%
- ----------------------------------------------------------- ----- ----- -----
WARBURG PINCUS SMALL COMPANY VALUE FUND (WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO)
7.55% N/A N/A 14.21% 12/29/95
- ----------------------------------------------------------- ----- ----- ----- -----
Russell 2000 Index2 21.26% N/A N/A 10.19%
- ----------------------------------------------------------- ----------- ----------- ----------- ----------- ------------
</TABLE>
1 The S&P 500 Index ("S&P 500") is an unmanaged index containing common stocks
of 500 industrial, transportation, utility and financial companies,
regarded as generally representative of the larger capitalization portion
of the United States stock market. The S&P 500 reflects the reinvestment of
income dividends and capital gain distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.
2 The Russell 2000 Index is an unmanaged index (with no defined investment
objective) composed of approximately 2,000 small-capitalization stocks and
includes reinvestments of dividends. The index does not include fees or
operating expenses and is not available for actual investment. It is
compiled by the Frank Russell Company.
3 The Morgan Stanley Capital International EAFE Index ("EAFE Index") is an
unmanaged capitalization-weighted measure of stock markets in Europe,
Australia and the Far East. The returns of the EAFE Index assume dividends
are reinvested net of withholding tax and do not reflect any fees or
operating expenses. The index is not available for actual investment.
4 The results for the MFS Research Fund (Class A shares) and the MFS Emerging
Growth Fund (Class B shares) do not reflect sales charges that may be
imposed on the such shares.
------------------------- EQ Advisors Trust
<PAGE>
- ----------------
93
- --------------------------------------------------------------------------------
If you wish to know more, you will find additional information about the Trust
and its Portfolios in the following documents, which are available, free of
charge by calling our toll-free number at 1-800-528-0204:
ANNUAL AND SEMI-ANNUAL REPORTS
The Annual and Semi-Annual Reports include more information about the Trust's
performance and are available upon request free of charge. The Annual Reports
usually includes performance information, a discussion of market conditions
and the investment strategies that affected the Portfolios' performance during
the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI, dated May 1, 2000, is incorporated into this Prospectus by reference
and is available upon request free of charge by calling our toll free number
at 1-800-528-0204.
You may visit the SEC's website at www.sec.gov to view the SAI and other
information about the Trust. You can also review and copy information about
the Trust, including the SAI, at the SEC's Public Reference Room in
Washington, D.C. or by electronic request at [email protected] or by writing
the SEC's Public Reference Section, Washington, D.C. 20549-0102. You may have
to pay a duplicating fee. To find out more about the Public Reference Room,
call the SEC at 1-202-942-8090.
Investment Company Act File Number: 811-07953
<PAGE>
EQ Advisors Trust
PROSPECTUS DATED MAY 1, 2000
- --------
1
- --------------------------------------------------------------------------------
This Prospectus describes the forty (40) Portfolios offered by EQ Advisors Trust
and the Class IB shares offered by the Trust on behalf of each Portfolio that
you can choose as investment alternatives. Each Portfolio has its own investment
objective and strategies that are designed to meet different investment goals.
This Prospectus contains information you should know before investing. Please
read this Prospectus carefully before investing and keep it for future
reference.
<TABLE>
<S> <C>
LARGE COMPANY STOCK PORTFOLIOS INTERNATIONAL STOCK PORTFOLIOS
- -------------------------------------------- --------------------------------------------
Alliance Common Stock Alliance Global
Alliance Equity Index Alliance International
Alliance Growth and Income BT International Equity Index
EQ/Alliance Premier Growth Capital Guardian International
BT Equity 500 Index Morgan Stanley Emerging Markets Equity
Calvert Socially Responsible EQ/Putnam International Equity
Capital Guardian Research T. Rowe Price International Stock
Capital Guardian U.S. Equity
Lazard Large Cap Value LONG-TERM BOND PORTFOLIO
MFS Growth with Income --------------------------------------------
Mercury Basic Value Equity* JPM Core Bond
EQ/Putnam Growth & Income Value
EQ/Putnam Investors Growth SHORT/INTERMEDIATE TERM BOND PORTFOLIOS
T. Rowe Price Equity Income --------------------------------------------
Alliance Intermediate Government Securities
SMALL/MID CAP COMPANY STOCK PORTFOLIOS Alliance Quality Bond
- --------------------------------------------
EQ/Aggressive Stock* HIGH YIELD BOND PORTFOLIO
Alliance Small Cap Growth --------------------------------------------
BT Small Company Index Alliance High Yield
EQ/Evergreen
Lazard Small Cap Value MONEY MARKET PORTFOLIO
MFS Emerging Growth Companies --------------------------------------------
MFS Research Alliance Money Market
Warburg Pincus Small Company Value
BALANCED HYBRID PORTFOLIOS
--------------------------------------------
EQ/Balanced*
Alliance Conservative Investors
Alliance Growth Investors
EQ/Evergreen Foundation
Mercury World Strategy*
EQ/Putnam Balanced
</TABLE>
*Effective May 1, 2000, the name of the Alliance Aggressive Stock Portfolio was
changed to the "EQ/Aggressive Stock Portfolio," the Alliance Balanced
Portfolio was changed to the "EQ/Balanced Portfolio," the Merrill Lynch Basic
Value Equity Portfolio was changed to the "Mercury Basic Value Equity
Portfolio" and the Merrill Lynch World Strategy Portfolio was changed to the
"Mercury World Strategy Portfolio".
- -------------------------------------------------------------------------------
YOU SHOULD BE AWARE THAT THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED OF THE INVESTMENT MERIT OF THESE PORTFOLIOS OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
PEA 15-Class B
<PAGE>
Overview
- ----------------
2
- --------------------------------------------------------------------------------
EQ ADVISORS TRUST
This Prospectus tells you about the forty (40) current Portfolios of the EQ
Advisors Trust ("Trust") and the Class IB shares offered by the Trust on behalf
of each Portfolio. The Trust is an open-end management investment company. Each
Portfolio is a separate series of the Trust with its own investment objective,
investment strategies and risks, which are described in this Prospectus. Each
of the current Portfolios of the Trust, except for the Lazard Small Cap Value
Portfolio, the Morgan Stanley Emerging Markets Equity Portfolio and the Mercury
World Strategy Portfolio, are diversified for purposes of the Investment
Company Act of 1940, as amended ("1940 Act").
The Trust's shares are currently sold only to insurance company separate
accounts in connection with variable life insurance contracts and variable
annuity certificates and contracts (the "Contract" or collectively, the
"Contracts") issued by The Equitable Life Assurance Society of the United
States ("Equitable") and Equitable of Colorado, Inc. ("EOC") as well as
insurance companies that are not affiliated with Equitable or EOC
("non-affiliated insurance companies") and to The Equitable Investment Plan for
Employees, Managers and Agents ("Equitable Plan"). The prospectus is designed
to help you make informed decisions about the Portfolios that are available
under your Contract or under the Equitable Plan. You will find information
about your Contract and how it works in the accompanying prospectus for the
Contracts if you are a Contractholder or participant under a Contract.
Equitable currently serves as the Manager of the Trust. In such capacity,
Equitable currently has overall responsibility for the general management and
administration of the Trust.
Information about the Advisers for each Portfolio is contained in the
description concerning that Portfolio in the section entitled "About the
Investment Portfolios." The Manager has the ultimate responsibility to oversee
each of the Advisers and to recommend their hiring, termination and
replacement. Subject to approval by the Board of Trustees, the Manager has been
granted relief by the Securities and Exchange Commission ("SEC")
("Multi-Manager Order") that enables the Manager without obtaining shareholder
approval to: (i) select new or additional Advisers for each of the Trust's
Portfolios; (ii) enter into new investment advisory agreements and materially
modify existing investment advisory agreements; and (iii) terminate and replace
the Advisers.
<PAGE>
Table of contents
- ----------------
3
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ----------------------------------------------------------
1
- ---
SUMMARY INFORMATION CONCERNING EQ
ADVISORS TRUST 4
- ----------------------------------------------------------
- ----------------------------------------------------------
2
- ---
ABOUT THE INVESTMENT PORTFOLIOS 16
- ----------------------------------------------------------
LARGE COMPANY STOCK PORTFOLIOS 19
Alliance Common Stock 19
Alliance Equity Index 22
Alliance Growth and Income 25
EQ/Alliance Premier Growth 28
BT Equity 500 Index 30
Calvert Socially Responsible 32
Capital Guardian Research 34
Capital Guardian U.S. Equity 36
Lazard Large Cap Value 38
MFS Growth with Income 40
Mercury Basic Value Equity 42
EQ/Putnam Growth & Income Value 44
EQ/Putnam Investors Growth 47
T. Rowe Price Equity Income 49
SMALL/MID CAP COMPANY STOCK PORTFOLIOS 52
EQ/Aggressive Stock 52
Alliance Small Cap Growth 55
BT Small Company Index 58
EQ/Evergreen 60
Lazard Small Cap Value 62
MFS Emerging Growth Companies 64
MFS Research 66
Warburg Pincus Small Company Value 68
INTERNATIONAL STOCK PORTFOLIOS 70
Alliance Global 70
Alliance International 73
BT International Equity Index 77
Capital Guardian International 80
Morgan Stanley Emerging Markets Equity 83
EQ/Putnam International Equity 87
T. Rowe Price International Stock 90
LONG-TERM BOND PORTFOLIO 93
JPM Core Bond 93
SHORT/INTERMEDIATE TERM BOND PORTFOLIOS 96
Alliance Intermediate Government Securities 96
Alliance Quality Bond 100
HIGH YIELD BOND PORTFOLIO 103
Alliance High Yield 103
MONEY MARKET PORTFOLIO 107
Alliance Money Market 107
BALANCED HYBRID PORTFOLIOS 110
EQ/Balanced 110
Alliance Conservative Investors 114
Alliance Growth Investors 117
EQ/Evergreen Foundation 120
Mercury World Strategy 122
EQ/Putnam Balanced 125
3
- ---
MORE INFORMATION ON PRINCIPAL RISKS 128
- ----------------------------------------------------------
- ----------------------------------------------------------
4
- ---
MANAGEMENT OF THE TRUST 134
- ----------------------------------------------------------
The Trust 134
The Manager 134
Expense Limitation Agreement 136
The Advisers 137
The Administrator 138
The Transfer Agent 138
Brokerage Practices 138
Brokerage Transactions with Affiliates 138
- ----------------------------------------------------------
- ----------------------------------------------------------
5
- ---
FUND DISTRIBUTION ARRANGEMENTS 139
- ----------------------------------------------------------
- ----------------------------------------------------------
6
- ---
PURCHASE AND REDEMPTION 140
- ----------------------------------------------------------
- ----------------------------------------------------------
7
- ---
HOW ASSETS ARE VALUED 141
- ----------------------------------------------------------
- ----------------------------------------------------------
8
- ---
TAX INFORMATION 142
- ----------------------------------------------------------
- ----------------------------------------------------------
9
- ---
FINANCIAL HIGHLIGHTS 143
- ----------------------------------------------------------
- ----------------------------------------------------------
10
- ---
PRIOR PERFORMANCE OF EACH ADVISER 144
- ----------------------------------------------------------
</TABLE>
<PAGE>
4
- --------------------------------------------------------------------------------
1
Summary information concerning EQ Advisors Trust
- -------
The following chart highlights the forty (40) 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 29.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST LARGE COMPANY STOCK PORTFOLIOS
- --------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
- --------------------------------------------------------------------------------------------------
<S> <C>
ALLIANCE COMMON STOCK Seeks to achieve long-term growth of its capital and
increased income
- --------------------------------------------------------------------------------------------------
ALLIANCE EQUITY INDEX Seeks a total return before expenses that approximates the
total return performance of the S&P 500 Index, including
reinvestment of dividends, at a risk level consistent with
that of the S&P 500 Index
- --------------------------------------------------------------------------------------------------
ALLIANCE GROWTH AND INCOME Seeks to provide a high total return through a combination
of current income and capital appreciation by investing
primarily in income-producing common stocks and securities
convertible into common stocks
- --------------------------------------------------------------------------------------------------
EQ/ALLIANCE PREMIER GROWTH Seeks long-term growth of capital by primarily investing in
equity securities of a limited number of large, carefully
selected, high quality United States companies that are
judged, by the Adviser, likely to achieve superior earnings
growth
- --------------------------------------------------------------------------------------------------
BT EQUITY 500 INDEX Seeks to replicate as closely as possible (before deduction
of Portfolio expenses) the total return of the S&P 500 Index
- --------------------------------------------------------------------------------------------------
CALVERT SOCIALLY RESPONSIBLE Seeks long-term capital appreciation
- --------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN RESEARCH Seeks long-term growth of capital
- --------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN U.S. EQUITY Seeks long-term growth of capital
- --------------------------------------------------------------------------------------------------
LAZARD LARGE CAP VALUE Seeks capital appreciation by investing primarily in equity
securities of companies with relatively large capitalizations
(i.e., companies having market capitalizations of at least
$3 billion at the time of initial purchase) that appear to the
Adviser to be inexpensively priced relative to the return on
total capital or equity
</TABLE>
<PAGE>
- -----
5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Stocks and other equity securities (including preferred General investment, foreign securities, leveraging,
stocks or convertible debt) and fixed income securities derivatives, convertible securities, small-cap and mid-cap
(including junk bonds), foreign securities, derivatives, and company, junk bond, securities lending, and fixed income
securities lending risks
- -----------------------------------------------------------------------------------------------------------------------------
Securities in the S&P 500 Index, derivatives, and securities General investment, index-fund, derivatives, leveraging,
lending and securities lending risks
- -----------------------------------------------------------------------------------------------------------------------------
Stocks and securities convertible into stocks (including junk General investment, convertible securities, leveraging,
bonds) derivatives, foreign securities, junk bond, and fixed income
risks
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities of a limited number of large, high-quality General investment, focused portfolio, growth investing,
companies that are likely to offer superior earnings growth convertible securities, derivatives, and foreign securities
risks
- -----------------------------------------------------------------------------------------------------------------------------
Common stocks of companies in the S&P 500 Index General investment, index-fund, and fixed income risks
- -----------------------------------------------------------------------------------------------------------------------------
Common stocks of medium to large U.S. companies that General investment, growth investing, mid-cap company,
meet both investment and social criteria liquidity, and derivatives risks
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities primarily of United States issuers and General investment, growth investing, convertible
securities whose principal markets are in the United States securities, and foreign securities risks
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities primarily of United States companies with General investment, growth investing, convertible
market capitalization greater than $1 billion at the time of securities, and foreign securities risks
purchase
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities of companies with relatively large General investment, value investing, derivatives, and fixed
capitalizations that the Adviser believes are undervalued income risks
based on their return on equity or capital
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
6
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
EQ ADVISORS TRUST LARGE COMPANY STOCK PORTFOLIOS
- -----------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
- -----------------------------------------------------------------------------------------------
<S> <C>
MFS GROWTH WITH INCOME Seeks to provide reasonable current income and long-term
growth of capital and income
- -----------------------------------------------------------------------------------------------
MERCURY BASIC VALUE EQUITY Seeks capital appreciation and secondarily, income by
investing in securities, primarily equities, that the
Adviser believes are undervalued and therefore represent
basic investment value
- -----------------------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME VALUE Seeks capital growth. Current income is a secondary
objective
- -----------------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH Seeks long-term growth of capital and any increased
income that results from this growth
- -----------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME Seeks to provide substantial dividend income and also
capital appreciation by investing primarily in
dividend-paying common stocks of established companies
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -----
7
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Equity securities (common stock, preferred stock, General investment, mid-cap company, foreign securities,
convertible securities, warrants and depositary receipts) and growth investing risks
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities that the Adviser believes are undervalued General investment, small-cap and mid-cap company,
value investing, and foreign securities risks
- -----------------------------------------------------------------------------------------------------------------------------
Common stocks (plus convertible bonds, convertible General investment, derivatives, foreign securities, value
preferred stocks, preferred stocks and debt securities) investing, and fixed income risks
- -----------------------------------------------------------------------------------------------------------------------------
Common stocks and convertible securities of companies General investment, growth investing, small-cap and
whose earnings are believed likely to grow faster than the mid-cap company, derivatives, foreign securities, and fixed
economy as a whole income risks
- -----------------------------------------------------------------------------------------------------------------------------
Dividend-paying common stocks of established companies General investment, value investing, foreign securities, and
fixed income risks
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
8
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST SMALL/MID CAP STOCK PORTFOLIOS
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
EQ/AGGRESSIVE STOCK Seeks to achieve long-term growth of capital
- -----------------------------------------------------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH Seeks to achieve long-term growth of capital
- -----------------------------------------------------------------------------------------------------------------------------
BT SMALL COMPANY INDEX Seeks to replicate as closely as possible (before the
deduction of Portfolio expenses) the total return of the
Russell 2000 Index
- -----------------------------------------------------------------------------------------------------------------------------
EQ/EVERGREEN Seeks capital appreciation
- -----------------------------------------------------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE Seeks capital appreciation by investing in equity securities
of U.S. companies with small market capitalizations (i.e.,
companies in the range of companies represented in the
Russell 2000 Index) that the Adviser considers
inexpensively priced relative to the return on total capital
or equity
- -----------------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES Seeks to provide long-term capital growth
- -----------------------------------------------------------------------------------------------------------------------------
MFS RESEARCH Seeks to provide long-term growth of capital and future
income
- -----------------------------------------------------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE Seeks long-term capital appreciation
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -----
9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Stocks and other equity securities of small and General investment, small-cap and mid-cap company,
medium-sized companies (including securities of growth investing, leveraging, derivatives, liquidity,
companies in cyclical industries, companies whose securities lending, and foreign securities risks
securities are temporarily undervalued, companies in
special situations (e.g., change in management, new
products or changes in customer demand) and less widely
known companies)
- -----------------------------------------------------------------------------------------------------------------------------
Stocks and other equity securities of smaller companies General investment, small-cap and mid-cap company,
and undervalued securities (including securities of growth investing, leveraging, derivatives, liquidity,
companies in cyclical industries, companies whose securities lending, and foreign securities risks
securities are temporarily undervalued, companies in
special situations (e.g., change in management, new
products or changes in customer demand) and less widely
known companies)
- -----------------------------------------------------------------------------------------------------------------------------
Common stocks of small-cap companies in the Russell General investment, index-fund, small-cap and mid-cap
2000 Index company, derivatives, and fixed income risks
- -----------------------------------------------------------------------------------------------------------------------------
Common stocks offering potential for capital growth (plus General investment, fixed income, mid-cap company and
corporate bonds, notes and debentures, preferred stocks value investing risks
and convertible securities)
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities of small-cap U.S. companies in the range General investment, small-cap and mid-cap company,
of companies included in the Russell 2000 Index that the value investing, non-diversification, and fixed income risks
Adviser believes are undervalued based on their return on
equity or capital
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities of emerging growth companies with the General investment, small-cap and mid-cap company,
potential to become major enterprises or that are major foreign securities, and growth investing risks
enterprises whose rates of earnings growth are expected to
accelerate
- -----------------------------------------------------------------------------------------------------------------------------
Common stock or securities convertible into common stock General investment, small-cap and mid-cap company,
of companies with better than average prospects for foreign securities, fixed income, and growth investing
long-term growth risks
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities of U.S. small cap companies General investment, small-cap and mid-cap company,
portfolio turnover foreign securities, fixed income, and
value investing risks
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
10
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST INTERNATIONAL STOCK PORTFOLIOS
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
ALLIANCE GLOBAL Seeks long-term growth of capital
- -----------------------------------------------------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL Seeks to achieve long-term growth of capital by investing
primarily in a diversified portfolio of equity securities
selected principally to permit participation in non-U.S.
companies with prospects for growth
- -----------------------------------------------------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX Seeks to replicate as closely as possible (before deduction
of Portfolio expenses) the total return of the MSCI EAFE
Index
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN INTERNATIONAL Seeks long-term growth of capital by investing primarily in
non-United States equity securities
- -----------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY EMERGING MARKETS EQUITY Seeks long-term capital appreciation by investing primarily
in equity securities of issuers in emerging countries
- -----------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY Seeks capital appreciation
- -----------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL STOCK Seeks long-term growth of capital through investment
primarily in common stocks of established non-U.S.
companies
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -----
11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Equity securities of U.S. and established foreign companies General investment, foreign securities, liquidity, derivatives,
(including shares of other mutual funds investing in foreign securities lending, and fixed income risks
securities), debt securities, derivatives, and securities
lending
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities of non-U.S. companies (including those in General investment, foreign securities, liquidity, growth
emerging markets securities) or foreign government investing, leveraging, derivatives, securities lending, and
enterprises (including other mutual funds investing in fixed income risks
foreign securities), debt securities, derivatives, and
securities lending)
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities of companies in the MSCI EAFE Index General investment, index-fund, foreign securities, liquidity,
and derivatives risks
- -----------------------------------------------------------------------------------------------------------------------------
Non-United States equity securities primarily of companies General investment, foreign securities, growth investing,
located in Europe, Canada, Australia, and the Far East convertible securities, and derivatives risks
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities of emerging market country companies General investment, foreign securities, convertible
securities, liquidity, derivatives, portfolio turnover,
non-diversification, and fixed income risks
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities of foreign companies General investment, foreign securities, small-cap and
mid-cap company, liquidity, and derivatives risks
- -----------------------------------------------------------------------------------------------------------------------------
Common stocks of established foreign companies General investment, foreign securities, liquidity, and
derivatives risks
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
12
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST LONG-TERM BOND PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
PORTFOLIO INVESTMENT OBJECTIVE(S)
- -----------------------------------------------------------------------------------------------------------------------------
JPM CORE BOND Seeks to provide a high total return consistent with moderate
risk of capital and maintenance of liquidity
- -----------------------------------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST SHORT/INTERMEDIATE TERM BOND PORTFOLIOS
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
- -----------------------------------------------------------------------------------------------------------------------------
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES Seeks to achieve high current income consistent with relative
stability of principal through investment primarily in debt
securities issued or guaranteed as to principal and interest by
the U.S. Government or its agencies or instrumentalities
- -----------------------------------------------------------------------------------------------------------------------------
ALLIANCE QUALITY BOND Seeks to achieve high current income consistent with
preservation of capital by investing primarily in investment
grade fixed income securities
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST HIGH YIELD BOND PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
- -----------------------------------------------------------------------------------------------------------------------------
ALLIANCE HIGH YIELD Seeks to achieve a high return by maximizing current income and,
to the extent consistent with that objective, capital
appreciation
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST MONEY MARKET PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
- -----------------------------------------------------------------------------------------------------------------------------
ALLIANCE MONEY MARKET Seeks to obtain a high level of current income, preserve its
assets and maintain liquidity
</TABLE>
<PAGE>
- -----
13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment grade securities rated BBB/Baa or better at the General investment, fixed income, liquidity, portfolio
time of purchase (including foreign issuers) turnover, derivatives, and foreign securities risks
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
- -----------------------------------------------------------------------------------------------------------------------------
Securities issued or guaranteed by the U.S. Government, General investment, fixed income, leveraging, derivatives,
including repurchase agreements and forward and securities lending risks
commitments related to U.S. Government securities, debt
securities of non-governmental issuers that own
mortgages, short sales, the purchase or sale of securities
on a when-issued or delayed delivery basis, derivatives,
and securities lending
- -----------------------------------------------------------------------------------------------------------------------------
Investment-grade debt securities rated at least BBB/Baa or General investment, fixed income, convertible securities,
unrated securities of comparable quality at the time of leveraging, derivatives, securities lending, and foreign
purchase, convertible debt securities, preferred stock, securities risks
dividend-paying common stocks, foreign securities, the
purchase or sale of securities on a when-issued,
delayed-delivery or forward commitment basis, derivatives,
and securities lending
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
- -----------------------------------------------------------------------------------------------------------------------------
High yield debt securities rated below BB/Ba or unrated General investment, fixed income, leveraging, loan
securities of comparable quality ("junk bonds"), common participation and assignment, derivatives, liquidity, junk
stocks and other equity securities, foreign securities, bond, foreign securities, small-cap and mid-cap company,
derivatives, and securities lending and securities lending risks
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
- -----------------------------------------------------------------------------------------------------------------------------
High quality U.S. dollar-denominated money market General investment, money market, leveraging, foreign
instruments (including foreign securities) and securities securities, and securities lending risks
lending
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
14
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST BALANCED HYBRID PORTFOLIOS
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
EQ/BALANCED Seeks to achieve a high return through both appreciation
of capital and current income
- -----------------------------------------------------------------------------------------------------------------------------
ALLIANCE CONSERVATIVE INVESTORS Seeks to achieve a high total return without, in the opinion
of the Adviser, undue risk to principal
- -----------------------------------------------------------------------------------------------------------------------------
ALLIANCE GROWTH INVESTORS Seeks to achieve the highest total return consistent with
the Adviser's determination of reasonable risk
- -----------------------------------------------------------------------------------------------------------------------------
EQ/EVERGREEN FOUNDATION Seeks to provide, in order of priority, reasonable income,
conservation of capital and capital appreciation
- -----------------------------------------------------------------------------------------------------------------------------
MERCURY WORLD STRATEGY Seeks high total investment return by investing primarily in
a portfolio of equity and fixed income securities, including
convertible securities, of U.S. and foreign issuers
- -----------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM BALANCED Seeks to provide a balanced investment composed of a
well-diversified portfolio of stocks and bonds that will
produce both capital growth and current income
</TABLE>
<PAGE>
- -----
15
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Debt and equity securities, money market instruments, General investment, asset allocation, fixed income,
foreign securities, derivatives, and securities lending derivatives, leveraging, liquidity, securities lending, and
foreign securities risks
- -----------------------------------------------------------------------------------------------------------------------------
Investment grade debt securities and equity securities of General investment, asset allocation, fixed income,
U.S. and foreign issuers, derivatives, and securities lending derivatives, convertible securities, liquidity, leveraging,
securities lending, and foreign securities risks
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities (including foreign stocks, preferred stocks, General investment, asset allocation, fixed income,
convertible securities, securities of small and medium-sized leveraging, derivatives, liquidity, convertible securities,
companies) and debt securities (including foreign debt small-cap and mid-cap company, securities lending, junk
securities and junk bonds), derivatives, and securities bond, and foreign securities risks
lending
- -----------------------------------------------------------------------------------------------------------------------------
Common stocks, preferred stocks, securities convertible General investment, convertible securities and fixed income
into or exchangeable for common stocks, corporate debt risks
obligations, U.S. Government securities and short-term
debt instruments
- -----------------------------------------------------------------------------------------------------------------------------
Equity and fixed income securities of U.S. and foreign General investment, foreign securities, fixed income,
companies derivatives, non-diversification, liquidity, and portfolio
turnover risks
- -----------------------------------------------------------------------------------------------------------------------------
Well-diversified portfolio of stocks and bonds, and General investment, fixed income, derivatives, portfolio
negotiable instruments turnover and foreign securities risks
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
2
About the investment portfolios
- ----------------
16
- --------------------------------------------------------------------------------
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. "Blended" performance numbers (e.g., 50% S&P 400/50%
Russell 2000 or 60% S&P 500/40% Lehman Gov't/Corp) assume a static mix of the
two indices.
THE COMPOSITE MARKET BENCHMARK is made up of 36% S&P 500, 24% MSCI EAFE Index,
21% Salomon Brothers U.S. Treasury Bond 1 year and, 14% Salomon Brothers World
Government ex U.S., and 5% U.S. Treasury Bill.
THE LEHMAN AGGREGATE BOND INDEX ("Lehman Aggregate Bond") is an index comprised
of investment grade fixed income securities, including U.S. Treasury,
mortgage-backed, corporate and "Yankee" bonds (U.S. dollar-denominated bonds
issued outside the United States).
THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX
("Lehman Gov't/Corp") represents an unmanaged group of securities widely
regarded by investors as representative of the bond market.
<PAGE>
- ----------
17
- --------------------------------------------------------------------------------
THE LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX
("Lehman Intermediate Government Bonds") represents an unmanaged group of
securities consisting of all U.S. Treasury and agency securities with remaining
maturities of from one to ten years and issue amounts of at least $100 million
outstanding.
THE LEHMAN TREASURY BOND INDEX ("Lehman Treasury") represents an unmanaged group
of securities consisting of all currently offered public obligations of the U.S.
Treasury intended for distribution in the domestic market.
THE MERRILL LYNCH HIGH YIELD MASTER INDEX ("ML Master") represents an unmanaged
group of securities widely regarded by investors as representative of the high
yield bond market.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX ("MSCI EAFE") is a market
capitalization weighted equity index composed of a sample of companies
representative of the market structure of Europe, Australia and the Far East.
MSCI EAFE Index returns assume dividends reinvested net of withholding taxes and
do not reflect any fees or expenses.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE INDEX ("MSCI
EMF") is a market capitalization weighted equity index composed of companies
that are representative of the market structure of the following 25 countries:
Argentina, Brazil Free, Chile, China Free, Colombia, Czech Republic, Greece,
Hungary, India, Indonesia Free, Israel, Jordan, Korea, Mexico Free, Pakistan,
Peru, Philippines Free, Poland, Russia, South Africa, Sri Lanka, Taiwan,
Thailand Free, Turkey and Venezuela. "Free" MSCI indices excludes those shares
not purchasable by foreign investors.
THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX ("MSCI World") is an
arithmetic, market value-weighted average of the performance of over 1,300
securities listed on the stock exchanges of twenty foreign countries and the
United States.
THE RUSSELL 2000 GROWTH INDEX ("Russell 2000 Growth") is an unmanaged index
which measures the performance of those Russell 2,000 companies with higher
price-to-book ratios and higher forecasted growth. It is compiled by the Frank
Russell Company.
THE RUSSELL 2000 INDEX ("Russell 2000") is an unmanaged index which tracks the
performance of 2,000 publicly-traded U.S. stocks. It is often used to indicate
the performance of smaller company stocks. It is compiled by the Frank Russell
Company.
SALOMON BROTHERS BROAD INVESTMENT BOND INDEX ("SAL BIG") is an unmanaged
weighted index that contains approximately 4,700 individually priced investment
grade bonds.
THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500") is an
unmanaged index containing common stock of 500 industrial, transportation,
utility and financial companies, regarded as generally representative of the
larger capitalization portion of the United States stock market. The S&P 500
returns reflect the reinvestment of dividends, if any, but do not reflect fees,
brokerage commissions or other expenses of investing.
THE STANDARD & POOR'S MIDCAP 400 INDEX ("S&P 400 MidCap") is an unmanaged
weighted index of 400 domestic stocks chosen for market size (median market
capitalization of about $610 million), liquidity, and industry group
representation. The S&P 400 returns reflect the reinvestment of dividends, if
any, but do not reflect fees, brokerage commissions or other expenses of
investing.
THE VALUE LINE CONVERTIBLE INDEX ("Value Line Convertible") is comprised of 585
of the most actively traded convertible bonds and preferred stocks on an
unweighted basis.
THE LIPPER AVERAGES are contained in Lipper's survey of the performance of funds
underlying a large universe of variable life and annuity contracts, where
performance averages are based on net asset values which reflect the
----------------------- EQ Advisors Trust
<PAGE>
- ----------
18
- --------------------------------------------------------------------------------
deduction of investment management fees and direct operating expenses, and, for
funds with Rule 12b-1 plans, asset-based sales charges. This survey is published
by Lipper Analytical Services, Inc., a firm recognized for its reporting of
performance of actively managed funds. Performance data shown for the portfolios
does not reflect the deduction of any insurance-related expenses (which are
assessed at the contract-level).
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS
- ----------
19
- --------------------------------------------------------------------------------
ALLIANCE COMMON STOCK PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of its capital and
increase income.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks and other equity-type
securities (such as preferred stocks or convertible debt) that the Adviser
believes will share in the growth of the nation's economy over a long period.
Most of the time, the Portfolio will invest primarily in common stocks that are
listed on national securities exchanges. Smaller amounts will be invested in
stocks that are traded over-the-counter and in other equity-type securities.
Current income is an incidental consideration. The Portfolio generally will not
invest more than 20% of its total assets in foreign securities.
The Portfolio may also make use of various other investment strategies,
including making secured loans of up to 50% of its total assets. The Portfolio
may also use derivatives, including: writing covered call and put options,
buying call and put options on individual common stocks and other equity-type
securities, securities indexes, and foreign currencies. The Portfolio may also
purchase and sell stock index and foreign currency futures contracts and options
thereon.
When market or financial conditions warrant or it appears that the Portfolio's
investment objective will not be achieved by purchasing equity securities, the
Portfolio may invest a portion of its assets in debt securities, including
nonparticipating and nonconvertible preferred stocks, investment grade debt
securities and junk bonds, e.g., rated BB or lower by Standard & Poor's ("S&P")
or Ba or lower by Moody's Investor Service, Inc. ("Moody's"). The Portfolio also
may make temporary investments in high-quality U.S. dollar-denominated money
market instruments. Such investment strategies could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; expropriation or nationalization; adverse changes in foreign economic and
tax policies; and foreign government instability, war or other adverse political
or economic actions.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying common
stock and provide higher yields than the underlying common stocks, but generally
offer lower yields than nonconvertible securities of similar quality. The value
of convertible securities fluctuates both in relation to changes in interest
rates and changes in the value of the underlying common stock.
-------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
20
- --------------------------------------------------------------------------------
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less well-known, held primarily by insiders or institutional
investors and may trade less frequently and in lower volume; such companies are
more likely to experience greater or more unexpected changes in their earnings
and growth prospects; such companies have limited financial resources or may
depend on a few key employees; and the products of technologies of such
companies may be at a relatively early stage of development or not fully tested.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment-grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than if it invested in higher-rated
obligations because BBB-rated securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
JUNK BOND RISK: The Portfolio may invest a portion of its assets in "junk bonds"
or lower-rated securities rated BB or lower by S&P or an equivalent rating by
any other nationally recognized statistical rating organization ("NRSRO") or
unrated securities of similar quality. Junk bonds have speculative elements or
are predominantly speculative credit risks, therefore, credit risk is
particularly significant for this Portfolio. This Portfolio may also be subject
to greater credit risk because it may invest in debt securities issued in
connection with corporate restructurings by highly leveraged issuers or in debt
securities not current in the payment of interest or principal, or in default.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. The risks in lending portfolio securities, as with other extensions
of secured credit, consist of possible delay in receiving additional collateral,
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last ten calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one, five and ten
years and compares the Portfolio's performance to: (i) the returns of a
broad-based index and (ii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Common Stock Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance Common
Stock Portfolio) whose inception date is June 16, 1975. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these
<PAGE>
- ----------
21
- --------------------------------------------------------------------------------
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN
1990: -8.4%
1991: 37.6%
1992: 3.0%
1993: 24.6%
1994: -2.4%
1995: 32.2%
1996: 24.0%
1997: 29.1%
1998: 29.1%
1999: 24.88
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Common Stock Portfolio
- Class IB Shares 24.88% 27.74% 18.30%
S&P 500 Index** 21.03% 28.56% 18.21%
Lipper Growth Equity Mutual
Funds Average** 31.48% 26.45% 17.79%
- --------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (October 1, 1998),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
TYLER J. SMITH has been responsible for the day-to-day management of the
Portfolio and its predecessor since 1977. Mr. Smith, a Senior Vice President of
Alliance, has been associated with Alliance since 1970.
------------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
22
- --------------------------------------------------------------------------------
ALLIANCE EQUITY INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks a total return before expenses that approximates the
total return performance of the S&P 500 Index, including reinvestment of
dividends, at a risk level consistent with that of the S&P 500 Index.
THE INVESTMENT STRATEGY
The Adviser will not utilize customary economic, financial or market analyses or
other traditional investment techniques in managing the Portfolio. Rather, the
Adviser will use proprietary modeling techniques to construct a portfolio that
it believes will, in the aggregate, approximate the performance results of the
S&P 500 Index.
The Adviser will first select from the largest capitalization securities in the
S&P 500 on a capitalization-weighted basis. Generally, the largest
capitalization securities reasonably track the S&P 500 because the S&P 500 is
significantly influenced by a small number of securities. However, in the
Adviser's view, selecting securities on the basis of their capitalization alone
would distort the Portfolio's industry diversification, and therefore economic
events could potentially have a dramatically different impact on the performance
of the Portfolio from that of the S&P 500. Recognizing this fact, the modeling
techniques also consider industry diversification when selecting investments for
the Portfolio. The Adviser also seeks to diversify the Portfolio's assets with
respect to market capitalization. As a result, the Portfolio will include
securities of smaller and medium-sized capitalization companies in the S&P 500.
Cash may be accumulated in the Portfolio until it reaches approximately 1% of
the value of the Portfolio at which time such cash will be invested in common
stocks as described above. Accumulation of cash increases tracking error. The
Portfolio will, however, remain substantially fully invested in common stocks
even when common stock prices are generally falling. Similarly, adverse
performance of a stock will ordinarily not result in its elimination from the
Portfolio.
For more information on the S&P 500, see the preceding section
"The Benchmarks." The Portfolio is not sponsored, endorsed, sold
or promoted by Standard & Poor's Corporation ("S&P") and S&P
makes no guarantee as to the accuracy and/or completeness of the
S&P 500 or any data included therein.
In order to reduce brokerage costs, maintain liquidity to meet shareholder
redemptions or minimize tracking error when the Portfolio holds cash, the
Portfolio may from time to time buy and hold futures contracts on the S&P 500
Index and options on such futures contracts. The contract value of futures
contracts purchased by the Portfolio plus the contract value of futures
contracts underlying call options purchased by the Portfolio will not exceed 20%
of the Portfolio's total assets. The Portfolio may seek to increase income by
lending its portfolio securities with a value of up to 50% of its total assets
to brokers-dealers.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
INDEX-FUND RISK: The Portfolio is not actively managed and invests in securities
included in the index regardless of their investment merit. Therefore, the
Portfolio cannot modify its investment strategies to respond to changes in the
economy and may be particularly susceptible to a general decline in the U.S. or
global stock market segment relating to the index. Although the Portfolio's
modeling techniques are intended to produce performance that approximates that
of the S&P 500 (before expenses), there can be no assurance that these
techniques will reduce "tracking error" (i.e., the difference between the
Portfolio's investment results (before expenses) and the S&P 500's). Tracking
error may arise as a result of brokerage costs, fees
<PAGE>
- ----------
23
- --------------------------------------------------------------------------------
and operating expenses and a lack of correlation between the Portfolio's
investments and the S&P 500.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. The risks in lending portfolio securities, as with other extensions
of secured credit, consist of possible delay in receiving additional collateral,
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last five calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one year, five years
and since inception and compares the Portfolio's performance to: (i) the returns
of a broad-based index and (ii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Equity Index Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance Equity
Index Portfolio) whose inception date is March 1, 1994. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the performance
results of the Portfolio and its predecessor registered investment company have
been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN
1995: 36.2%
1996: 22.1%
1997: 32.3%
1998: 27.7%
1999: 20.08%
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Equity Index Portfolio
- Class IB Shares 20.08% 27.61% 23.63%
- --------------------------------------------------------------------------------
S&P 500 Index** 21.03% 28.56% 23.43%
- --------------------------------------------------------------------------------
Lipper S&P 500 Index Funds
Average** 20.48% 28.07% 25.07%
- --------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (May 2, 1997),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105.
------------------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
24
- --------------------------------------------------------------------------------
Alliance has been the Adviser to the Portfolio and its predecessor registered
investment company since the predecessor commenced operations. Alliance, a
publicly traded limited partnership, is indirectly majority-owned by Equitable.
Alliance manages investment companies, endowment funds, insurance companies,
foreign entities, qualified and non-tax qualified corporate funds, public and
private pension and profit-sharing plans, foundations and tax-exempt
organizations.
JUDITH A. DEVIVO has been responsible for the day-to-day management of the
Portfolio and its predecessor since its inception. Ms. DeVivo, a Vice President
of Alliance, has been associated with Alliance since 1970.
<PAGE>
- ----------
25
- --------------------------------------------------------------------------------
ALLIANCE GROWTH AND INCOME PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide a high total return through a combination
of current income and capital appreciation by investing primarily in
income-producing common stocks and securities convertible into common stocks.
THE INVESTMENT STRATEGY
The Portfolio seeks to maintain a portfolio yield above that of issuers
comprising the S&P 500 and to achieve (in the long run) a rate of growth in
Portfolio income that exceeds the rate of inflation. The Portfolio will
generally invest in common stocks of "blue chip" issuers, i.e., those:
o that have a total market capitalization of at least $1 billion;
o that pay periodic dividends; and
o whose common stock is in the highest four issuer ratings for S&P (i.e., A+,
A, B or B+) or Moody's (i.e., high grade, investment grade, upper medium
grade or medium grade) or, if unrated, is determined to be of comparable
quality by the Adviser.
It is expected that on average the dividend rate of these issuers will exceed
the average rate of issuers constituting the S&P 500.
The Portfolio may also invest without limit in securities convertible into
common stocks, which include convertible bonds, convertible preferred stocks and
convertible warrants. The Portfolio may also invest up to 30% of its total
assets in high yield, high risk convertible securities rated at the time of
purchase below investment grade (i.e., rated BB or lower by S&P or Ba or lower
by Moody's or determined by the Adviser to be of comparable quality).
The Portfolio does not expect to invest more than 25% of its total assets in
foreign securities, although it may do so without limit. It may enter into
foreign currency futures contracts (and related options), forward foreign
currency exchange contracts and options on currencies for hedging purposes.
The Portfolio may also write covered call and put options on securities and
securities indexes for hedging purposes or to enhance its return and may
purchase call and put options on securities and securities indexes for hedging
purposes. The Portfolio may also purchase and sell securities index futures
contracts and may write and purchase options thereon for hedging purposes.
When market or financial conditions warrant, the Portfolio may invest in certain
money market instruments for temporary or defensive purposes. Such investment
strategies could result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying common
stock and provide higher yields than the underlying common stocks, but generally
offer lower yields than nonconvertible securities of similar quality. The value
of convertible securities fluctuates both in relation to changes in interest
rates and changes in the value of the underlying common stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income
------------------------------------ EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
26
- --------------------------------------------------------------------------------
securities, that portion of the Portfolio's performance will be affected by
changes in interest rates, the credit risk of the issuer, the duration or
maturity of the Portfolio's fixed income holdings, and adverse market or
economic conditions. When interest rates rise, the value of the Portfolio's
fixed income securities, particularly those with longer durations or maturities,
will go down. When interest rates fall, the reverse is true. In addition, to the
extent that the Portfolio invests in investment-grade securities which are rated
BBB by S&P or an equivalent rating by any other NRSRO, it will be exposed to
greater risk than if it invested in higher-rated obligations because BBB-rated
securities are regarded as having only an adequate capacity to pay principal and
interest, are considered to lack outstanding investment characteristics, and may
be speculative.
JUNK BOND RISK: The Portfolio may invest a portion of its assets in "junk bonds"
or lower-rated securities rated BB or lower by S&P or an equivalent rating by
any other NRSRO or unrated securities of similar quality. Therefore, credit risk
is particularly significant for this Portfolio. Junk bonds have speculative
elements or are predominantly speculative credit risks. This Portfolio may also
be subject to greater credit risk because it may invest in debt securities
issued in connection with corporate restructurings by highly leveraged issuers
or in debt securities not current in the payment of interest or principal, or in
default.
FOREIGN SECURITIES RISK: To the extent the Portfolio invests in foreign
securities, it is subject to risks not associated with investing in U.S.
securities, which can adversely affect the Portfolio's performance. Foreign
markets, particularly emerging markets, may be less liquid, more volatile, and
subject to less government supervision than domestic markets. There may be
difficulties enforcing contractual obligations, and it may take more time for
trades to clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the U.S.
dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in foreign
economic and tax policies; and foreign government instability, war or other
adverse political or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last six calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one year, five years
and since inception and compares the Portfolio's performance to: (i) the returns
of a broad-based index; (ii) the returns of a "blended" index of equity and
fixed income securities; and (iii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Growth and Income
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to be
the successor entity to the predecessor registered investment company
(HRT/Alliance and Growth Income Portfolio) whose inception date is October 1,
1993. The assets of the predecessor were transferred to the Portfolio on October
18, 1999. Following that transfer, the performance shown (for the period October
19, 1999 through December 31, 1999) is that of the Portfolio. For these
purposes, the performance results of the Portfolio and its predecessor
registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not
<PAGE>
- ----------
27
- --------------------------------------------------------------------------------
reflect any insurance and Contract-related fees and expenses, which would reduce
the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN
1994: -0.8%
1995: 23.8%
1996: 19.8%
1997: 26.6%
1998: 20.6%
1999: 18.37%
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Growth and Income
Portfolio - Class IB Shares 18.37% 21.79% 16.87%
- --------------------------------------------------------------------------------
S&P 500 Index** 21.03% 28.56% 23.43%
- --------------------------------------------------------------------------------
75% S&P 500 Index/25%
Value Line Convertible** 20.71% 25.01% 18.77%
- --------------------------------------------------------------------------------
Lipper Growth and Income Funds
Average** 14.51% 21.78% 17.57%
- --------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (May 2, 1997),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
PAUL RISSMAN and W. THEODORE KUCK have been the persons responsible for the
day-to-day management of the Portfolio, Mr. Rissman since 1996 and Mr. Kuck
since the Portfolio and its predecessor's inception. Mr. Rissman, a Senior Vice
President of Alliance, has been associated with Alliance since 1989. Mr. Kuck, a
Vice President of Alliance, has been associated with Alliance since 1971.
------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
28
- --------------------------------------------------------------------------------
EQ/ALLIANCE PREMIER GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth of capital by primarily
investing in equity securities of a limited number of large, carefully selected,
high-quality United States companies that are judged, by the Adviser, likely to
achieve superior earnings growth.
THE INVESTMENT STRATEGY
The Portfolio invests primarily (at least 85% of its total assets) in equity
securities of United States companies. The Portfolio is diversified for purposes
of the 1940 Act, however it is still highly concentrated. The Portfolio focuses
on a relatively small number of intensively researched companies. The Adviser
selects the Portfolio's investments from a research universe of more than 600
companies that have strong management, superior industry positions, excellent
balance sheets and superior earnings growth prospects. An emphasis is placed on
identifying securities of companies whose substantially above-average
prospective earnings growth is not fully reflected in current market valuations.
Normally, the Portfolio invests in about 40-50 companies, with the 25 most
highly regarded of these companies usually constituting approximately 70% of the
Portfolio's net assets. In managing the Portfolio, the Adviser seeks to
capitalize on apparently unwarranted price fluctuations both to purchase or
increase positions on weakness and to sell or reduce overpriced holdings. The
Portfolio normally remains nearly fully invested and does not take significant
cash positions for market timing purposes. During market declines, while adding
to positions in favored stocks, the Portfolio becomes somewhat more aggressive,
gradually reducing the number of companies represented in its holdings.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Portfolio becomes somewhat more conservative, gradually
increasing the number of companies represented in its holdings. Through this
approach, the Adviser seeks to gain positive returns in good markets while
providing some measure of protection in poor markets.
The Adviser expects the average market capitalization of companies represented
in the Portfolio normally to be in the range, or in excess, of the average
market capitalization of companies included in the S&P 500.
The Portfolio may invest up to 20% of its net assets in convertible securities
and 15% of its total assets in securities of foreign issuers.
The Portfolio may write covered exchange-traded call options on its securities
of up to 15% of its total assets, and purchase and sell exchange-traded call and
put options on common stocks written by others of up to, for all options, 10% of
its total assets.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
FOCUSED PORTFOLIO RISK: The Portfolio invests in the securities of a limited
number of companies. Consequently, the Portfolio may incur more risk because
changes in the value of a single security may have a more significant effect,
either positive or negative, on the Portfolio's net asset value.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in
<PAGE>
- ----------
29
- --------------------------------------------------------------------------------
relation to changes in interest rates and changes in the value of the underlying
common stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT L.P.: ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance's sole general partner is Alliance Capital
Management Corporation, which is an indirect wholly-owned subsidiary of
Equitable, one of the largest life insurance companies in the United States and
a wholly-owned subsidiary of The Equitable Companies Incorporated. Therefore,
the Manager and Alliance are affiliates of each other. Alliance, a Delaware
limited partnership, is a leading international investment manager.
ALFRED HARRISON is the Portfolio Manager and has been responsible for the
day-to-day management of the Portfolio since its inception. Mr. Harrison is Vice
Chairman of Alliance Capital Management Corporation and has been with Alliance
since 1978.
-------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
30
- --------------------------------------------------------------------------------
BT EQUITY 500 INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to replicate as closely as possible (before
deduction of Portfolio expenses) the total return of the S&P 500.
THE INVESTMENT STRATEGY
The Portfolio invests in equity securities of companies included in the S&P 500.
The Adviser seeks to match the risk and return characteristics of the S&P 500 by
investing in a statistically selected sample of the securities found in the S&P
500, using a process known as "optimization". This process selects stocks for
the Portfolio so that industry weightings, market capitalizations and
fundamental characteristics (price to book ratios, price to earnings ratios,
debt to asset ratios and dividend yields) closely match those of the securities
included in the S&P 500. This approach helps to increase the Portfolio's
liquidity and reduce costs. The securities held by the Portfolio are weighted to
make the Portfolio's total investment characteristics similar to those of the
S&P 500 as a whole.
The Adviser generally will seek to match the composition of the S&P 500 but
usually will not invest the Portfolio's stock portfolio to mirror the S&P 500
exactly. Because of the difficulty and cost of executing relatively small stock
transactions, the Portfolio may not always be invested in the less heavily
weighted S&P 500 stocks, and may at times have its portfolio weighted
differently than the S&P 500, particularly if the Portfolio has a low level of
assets. In addition, the Portfolio may omit or remove any S&P 500 stock from the
Portfolio if, following objective criteria, the Adviser judges the stock to be
insufficiently liquid or believes the merit of the investment has been
substantially impaired by extraordinary events or financial conditions.
For more information on the S&P 500, see the preceding section "The Benchmarks."
The Portfolio is not sponsored, endorsed, sold or promoted by Standard & Poor's
Corporation ("S&P") and S&P makes no guarantee as to the accuracy and/or
completeness of the S&P 500 or any data included therein.
Over time, the correlation between the performance of the Portfolio and the S&P
is expected to be 95% or higher before deduction of Portfolio expenses. The
Portfolio's ability to track the S&P 500 may be affected by, among others,
transaction costs, administration and other expenses incurred by the Portfolio,
changes in either the composition of the S&P 500 or the assets of the Portfolio,
and the timing and amount of Portfolio investor contributions and withdrawals,
if any. The Portfolio seeks securities to track the S&P 500, therefore, the
Adviser generally will not attempt to judge the merits of any particular
security as an investment.
The Portfolio may also invest up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the S&P 500. Securities index futures
contracts and related options, warrants and convertible securities may be used
for a number of reasons, including: to simulate full investment in the S&P 500
while retaining a cash balance for Portfolio management purposes; to facilitate
trading; to reduce transaction costs; or to seek higher investment returns when
a futures contract, option, warrant or convertible security is priced more
attractively than the underlying equity security or S&P 500. These instruments
are considered to be derivatives.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
<PAGE>
- ----------
31
- --------------------------------------------------------------------------------
INDEX FUND RISK: The Portfolio is not actively managed and invests in securities
included in the index regardless of their investment merit. Therefore, the
Portfolio cannot modify its investment strategies to respond to changes in the
economy and may be particularly susceptible to a general decline in the U.S. or
global stock market segment relating to the index.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of existence, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The Portfolio's inception
date was January 1, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: 25.14%
1999: 20.30%
Best quarter: Worst quarter:
21.26% (1998 4th Quarter) (-10.03)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
BT Equity 500 Index Portfolio 20.30% 22.66%
S&P 500 Index* 21.03% 24.76%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
BANKERS TRUST COMPANY: ("Bankers Trust"), 130 Liberty Street (One Bankers Trust
Plaza), New York, New York 10006. Bankers Trust has been the Adviser to the
Portfolio since it commenced operations. Bankers Trust is a wholly-owned
subsidiary of Bankers Trust Corporation. Bankers Trust conducts a variety of
general banking and trust activities and is a major wholesale supplier of
financial services, including investment management to the international and
domestic institutional markets. In 1999, Bankers Trust Corporation finalized a
merger in which Bankers Trust Corporation was acquired by and became a
subsidiary of Deutsche Bank AG.
- ------------------------ EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
32
- --------------------------------------------------------------------------------
CALVERT SOCIALLY RESPONSIBLE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term capital appreciation
THE INVESTMENT STRATEGY
The portfolio invests primarily in common stocks of medium to large U.S.
companies that meet both investment and social criteria. Brown Capital (and
Calvert) use a tandem investment process to select potential investments for the
Portfolio. Brown Capital creates a universe of potential investments from which
it and Calvert will ultimately select portfolio securities. Once Brown Capital
identifies a potential investment, Calvert promptly socially screens each
potential investment to assure that it meets Calvert's social criteria. During
that process, Brown Capital continues to evaluate each potential investment
based on whether that investment will satisfy Brown Capital's investment
criteria. The criteria of both Brown Capital and Calvert must be satisfied
before a security will be purchased for the Portfolio.
For purposes of this Portfolio, companies having market capitalizations greater
than $1 billion are considered medium to large companies.
INVESTMENT CRITERIA: Brown Capital's investment process balances the growth
potential of investments with the price or value of the investment in order to
identify stocks that offer above average growth potential at reasonable prices.
Brown Capital evaluates each stock in terms of its growth potential, the return
on risk-free investments, and the specific risk features of the company to
determine the reasonable price for the stock.
The Portfolio may invest up to 15% of its net assets in illiquid securities,
which are securities that cannot be readily sold because there is no active
market for them.
The Portfolio may invest in derivative instruments, such as foreign currency
contracts (up to 5% of its total assets), options on securities and indices (up
to 5% of its total assets), and futures contracts (up to 5% of its net assets).
When market or financial conditions warrant, the Portfolio may invest a
substantial portion of its assets in short-term obligations for temporary or
defensive purposes. If such action is taken, it will detract from achievement of
the Portfolio's investment objective during such periods.
SOCIAL CRITERIA: Calvert analyzes investments from a social activist
perspective. Calvert's philosophy is that long-term rewards to investors will
come from those organizations whose products, services and methods enhance the
human condition and the traditional American values of individual initiative,
equility of opportunity and cooperative effort. These criteria represent
standards of behavior which few, if any, organizations totally satisfy. As a
matter of practice, evaluation of a particular organization in the context of
these criteria will involve subjective judgment by Calvert.
The Portfolio seeks to invest in companies that:
o deliver safe products and services in ways that sustain our natural
environment. For example, the Portfolio looks for companies that produce
energy from renewable resources, while avoiding consistent polluters;
o manage with participation throughout the organization in defining and
achieving objectives. For example, the Portfolio looks for companies that
offer employee stock ownership or profit-sharing plans;
o negotiate fairly with their workers, provide an environment supportive of
their wellness, do not discriminate on the basis of race, gender, religion,
age, disability, ethnic origin, or sexual orientation, do not consistently
violate regulations of the U.S. Equal Employment Opportunity Commission,
and provide opportunities for women, disadvantaged minorities, and others
for whom equal opportunities have often been denied. For example, the
Portfolio considers both unionized and non-union firms with good labor
relations; and
o foster awareness of a commitment to human goals, such as creativity,
productivity, self-respect and responsibility, within the organization and
the world, and continually recreates a context within which these goals can
be realized. For example, the Portfolio looks for companies with an above
average commitment to community affairs and charitable giving.
<PAGE>
- ----------
33
- --------------------------------------------------------------------------------
The Portfolio will not invest in companies that Calvert determines to be
significantly engaged in:
o production of or the manufacture of equipment to produce, nuclear energy;
o business activities in support of repressive regimes;
o manufacture of weapon systems;
o manufacture of alcoholic beverages or tobacco products; or
o operation of gambling casinos.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities markets.
MID-CAP COMPANY RISK: The Portfolio's investments in mid-cap companies may be
subject to more abrupt or erratic movements in price than are those of larger,
more established companies because: the securities of such companies are less
well-known and may trade less frequently and in lower volume; such companies are
more likely to experience greater or more unexpected changes in their earnings
and growth prospects; and the products of technologies of such companies may be
at a relatively early stage of development or not fully tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which may
cause the Portfolio to lose money or be prevented from earning capital gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is August 30, 1999. Therefore, no prior
performance information is available.
WHO MANAGES THE PORTFOLIO
CALVERT ASSET MANAGEMENT COMPANY, INC. ("Calvert"), 4550 Montgomery Avenue,
Suite 1000N, Bethesda, Maryland 20814, a subsidiary of Calvert Group Ltd., which
is a subsidiary of Acacia Mutual Life Insurance Company of Washington, DC
("Acacia Mutual"). On January 1, 1999, Acacia Mutual merged with and became a
controlled subsidiary of Ameritas Acacia Mutual Holding Company. Calvert has
been the Adviser to the Portfolio since it commenced operations. It has been
managing mutual funds since 1976. Calvert is the investment adviser for over 25
mutual fund portfolios, including the first and largest family of socially
screened funds. Calvert provides the social investment research and screening of
the Portfolio's investments. As of December 31, 1999, Calvert had $6.5 billion
in assets under management.
BROWN CAPITAL MANAGEMENT, INC. ("Brown Capital"), 1201 North Calvert Street,
Baltimore, Maryland 21201. Brown Capital initially identifies potential
investments for the Portfolio, which are then promptly screened by Calvert using
the Portfolio's social criteria.
EDDIE C. BROWN, founder and President of Brown Capital, heads the management
team for the Portfolio. He has over 24 years of investment management
experience, and has held positions with T. Rowe Price Associates, Inc. and
Irwing Management Company. Mr. Brown is a frequent panelist on "Wall Street Week
with Louis Rukeyser" and is a member of the Wall Street Week Hall of Fame.
-------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
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34
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CAPITAL GUARDIAN RESEARCH PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of United States issuers
and securities whose principal markets are in the United States, including
American Depositary Receipts and other United States registered foreign
securities. The Portfolio invests primarily in common stocks (or securities
convertible or exchangeable into common stocks) of companies with market
capitalization greater than $1 billion at the time of purchase.
The Portfolio may invest up to 15% of its total assets, at the time of purchase,
in securities of issuers domiciled outside the United States and not included in
the S&P 500 (i.e., foreign securities).
When market or financial conditions warrant, the Portfolio may invest a
substantial portion of its assets in high-quality debt securities, including
short-term obligations for temporary or defensive purposes. If such action is
taken, it will detract from achievement of the Portfolio's investment objective
during such periods.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: This Portfolio uses a growth oriented approach to stock
selection. The price of growth stocks may be more sensitive to changes in
current or expected earnings than the prices of other stocks. The price of
growth stocks is also subject to the risk that the stock price of one or more
companies will fall or will fail to appreciate as anticipated by the Adviser,
regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in relation to changes in interest rates
and changes in the value of the underlying common stock.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
CAPITAL GUARDIAN TRUST COMPANY: ("Capital Guardian"), 333 South Hope Street, Los
Angeles, CA 90071. Capital Guardian is a wholly-owned subsidiary of Capital
Group International, Inc., which itself is a wholly owned subsidiary of The
Capital Group Companies, Inc. Capital Guardian has been providing investment
management services since 1968 and manages approximately $123 billion as of
December 31, 1999.
<PAGE>
- ----------
35
- --------------------------------------------------------------------------------
The Portfolio is managed by a group of investment research professionals, led by
the Research Portfolio Coordinator, each of whom has investment discretion over
a segment of the total Portfolio. The size of each segment will vary over time
and may be based upon: (1) the level of conviction of specific research
professionals as to their designated sectors; (2) industry weights within the
relevant benchmark for the Portfolio; and (3) the judgment of the Research
Portfolio Coordinator in assessing the level of conviction of research
professionals compared to industry weights within the relevant benchmark.
Sectors may be overweighted relative to their benchmark weighting if there is a
substantial number of stocks that are judged to be attractive based on the
research professionals research in that sector, or may be underweighted if there
are relatively fewer stocks viewed to be attractive in the sector. The Research
Portfolio Coordinator also coordinates the cash holdings of the Portfolio.
-------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
36
- --------------------------------------------------------------------------------
CAPITAL GUARDIAN U.S. EQUITY PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio strives to accomplish its investment objectives through constant
supervision, careful securities selection and broad diversification.
The Portfolio invests primarily in equity securities of United States companies
with market capitalization greater than $1 billion at the time of purchase. In
selecting securities for investment, the Adviser focuses primarily on the
potential of capital appreciation.
The Portfolio may invest up to 15% of its total assets in securities of issuers
domiciled outside the United States and not included in the S&P 500 (i.e.,
foreign securities). These securities may include American Depositary Receipts.
When market or financial conditions warrant, the Portfolio may invest a
substantial portion of its assets in high-quality debt securities, including
short-term obligations for temporary or defensive purposes. If such action is
taken, it will detract from achievement of the Portfolio's investment objective
during such periods.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: This Portfolio uses a growth oriented approach to stock
selection. The price of growth stocks may be more sensitive to changes in
current or expected earnings than the prices of other stocks. The price of
growth stocks is also subject to the risk that the stock price of one or more
companies will fall or will fail to appreciate as anticipated by the Adviser,
regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in relation to changes in interest rates
and changes in the value of the underlying common stock.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
CAPITAL GUARDIAN TRUST COMPANY: ("Capital Guardian"), 333 South Hope Street, Los
Angeles, CA 90071. Capital Guardian is a wholly-owned subsidiary of Capital
Group International, Inc., which itself is a wholly owned subsidiary of The
Capital Group Companies, Inc. Capital Guardian has been providing investment
management services since 1968 and manages approximately $123 billion as of
December 31, 1999.
<PAGE>
- ----------
37
- --------------------------------------------------------------------------------
Capital Guardian uses a multiple portfolio manager system under which the
Portfolio is divided into several segments. Each segment is individually managed
with the portfolio manager free to decide on company and industry selections as
well as valuation and transaction assessment. An additional portion of the
Portfolio is managed by a group of investment research analysts.
The individual portfolio managers of each segment of the Portfolio, other than
that managed by the group of research analysts, are as follows:
DONNALISA P. BARNUM. Donnalisa Barnum is a Senior Vice President and a portfolio
manager for Capital Guardian. She joined the Capital Guardian organization in
1986.
MICHAEL R. ERICKSON. Michael Erickson is a Senior Vice President and portfolio
manager for Capital Guardian and a Senior Vice President and Director for
Capital International Limited. He joined the Capital Guardian organization in
1987.
DAVID I. FISHER. David Fisher is Chairman of the Board of Capital Group
International, Inc. and Capital Guardian. He joined the Capital Guardian
organization in 1969.
THEODORE R. SAMUELS. Theodore Samuels is a Senior Vice President and a Director
for Capital Guardian, as well as a Director of Capital International Research,
Inc. He joined the Capital Guardian organization in 1981.
EUGENE P. STEIN. Eugene Stein is Executive Vice President, a Director, a
portfolio manager, and Chairman of the Investment Committee for Capital
Guardian. He joined the Capital Guardian organization in 1972.
TERRY BERKEMEIER. Terry Berkemeier is a Vice President of Capital International
Research, Inc. with U.S. equity portfolio management responsibility in Capital
Guardian Trust Company and research responsibilities for the global metals and
mining industries. He joined the Capital Guardian organization in 1992.
---------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
38
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LAZARD LARGE CAP VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital appreciation by investing primarily in
equity securities of companies with relatively large capitalizations (i.e.,
companies having market capitalizations of at least $3 billion at the time of
initial purchase) that appear to the Adviser to be inexpensively priced relative
to the return on total capital or equity.
THE INVESTMENT STRATEGY
The Portfolio normally invests at least 80% of its total assets primarily in
equity securities of large capitalization companies. Equity securities include
common stocks, preferred stocks and securities convertible into or exchangeable
for common stocks.
The Portfolio uses a value-oriented approach in searching for securities. The
Adviser uses a "bottom-up" approach (individual stock selection) to find
companies that have:
o low price to earnings ratios;
o high yield;
o unrecognized assets;
o the possibility of management change; and/or
o the prospect of improved profitability.
The Portfolio may also invest up to 20% of its assets in U.S. Government
securities and investment grade debt securities of domestic corporations rated
BBB or better by S&P or Baa or better by Moody's.
The Portfolio may also invest up to 10% of its assets in foreign equity or debt
securities, or depositary receipts.
The Portfolio may also invest without limitation in high-quality short-term
money market instruments. The Portfolio may engage in options transactions,
including writing covered call options or foreign currencies to offset costs of
hedging and writing and purchasing put and call options on securities. Although
the Portfolio will engage in options transactions primarily to hedge its
Portfolio, it may use options to increase returns and there is the risk that
these transactions sometimes may reduce returns or increase volatility.
When market or financial conditions warrant, the Portfolio may invest, without
limit, in money market securities for temporary or defensive purposes. Such
investment strategies could have the effect of reducing the benefit of any
upswing in the market. Such investment strategies are inconsistent with the
Portfolio's investment objectives and could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a value
stock's intrinsic value may never be fully recognized or realized by the market,
or its price may go down. There is also the risk that a stock judged to be
undervalued may actually be appropriately priced.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest
<PAGE>
- ----------
39
- --------------------------------------------------------------------------------
rates fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
higher-rated obligations because BBB rated investment grade securities are
regarded as having only an adequate capacity to pay principal and interest, are
considered to lack outstanding investment characteristics, and may be
speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's average annual total return for
1998 and 1999, the Portfolio's first two years of existence, and some of the
risks of investing in the Portfolio by showing yearly changes in the Portfolio's
perfomance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The Portfolio's inception
date was January 1, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: 20.01%
1999: 3.55%
Best quarter: Worst quarter:
23.34% (1998 4th Quarter) (-13.43)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Lazard Large Cap Value Portfolio 3.55% 11.46%
- --------------------------------------------------------------------------------
S&P 500 Index* 21.03% 24.76%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
LAZARD ASSET MANAGEMENT: ("LAM"), 30 Rockefeller Plaza, New York, New York
10112. LAM has been the Adviser to the Portfolio since it commenced operations.
LAM is a division of Lazard Fr-res & Co. LLC ("Lazard Fr-res"), a New York
limited liability company, which is registered as an investment adviser with the
SEC. Lazard Fr-res provides its clients with a wide variety of investment
banking, brokerage and related services, including investment management.
The Portfolio Managers, responsible for the day to day management of the
Portfolio are HERBERT W. GULLQUIST, a Vice-Chairman, Managing Director and Chief
Investment Officer of LAM, who has been with LAM since 1982; and EILEEN D.
ALEXANDERSON, a Managing Director of LAM responsible for U.S./Global equity
management and overseeing the day-to-day operations of the U.S./Global equity
investment teams, who has been with LAM since 1979.
------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
40
- --------------------------------------------------------------------------------
MFS GROWTH WITH INCOME PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide reasonable current income and long-term
growth of capital and income.
For purposes of this Portfolio, the words "reasonable current income" mean
moderate income.
THE INVESTMENT STRATEGY
The Portfolio invests, under normal market conditions, primarily (at least 65%
of its total assets) in equity securities, including common stocks, preferred
stocks, convertible securities, warrants and depositary receipts for those
securities. Equity securities may be listed on a securities exchange or traded
in the over-the-counter markets. While the Portfolio may invest in companies of
any size, the Portfolio generally focuses on companies with larger market
capitalizations that the Adviser believes have sustainable growth prospects and
attractive valuations based on current and expected earnings or cash flow. The
Portfolio will also seek to provide income equal to approximately 90% of the
dividend yield on the Standard & Poor's 500 Index.
The Adviser uses a "bottom-up" investment style in managing the Portfolio. This
means that securities are selected based upon fundamental analysis (such as an
analysis of earnings, cash flows, competitive position and management's
abilities) performed by the Adviser's large group of equity research analysts.
The Portfolio may invest up to 25% of its net assets in foreign securities,
including those in emerging markets and depository receipts, through which it
may have exposure to foreign currencies.
When adverse market, financial or political conditions warrant, the Portfolio
may depart from its principal strategies for temporary or defensive purposes.
Such investment strategies are inconsistent with the Portfolio's investment
objective and could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less well-known and may trade less frequently and in lower
volume; such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; and the products or technologies
of such companies may be at a relatively early stage of development or not fully
tested.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and
<PAGE>
- ----------
41
- --------------------------------------------------------------------------------
custody costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1999,
the Portfolio's first full year of operations. The table below shows the
Portfolio's average annual total returns for the Portfolio for one year and
since inception. The table also compares the Portfolio's performance to the
returns of a broad-based index. Both the bar chart and table assume reinvestment
of dividends and distributions. Past performance is not an indication of future
performance. The performance results presented below do not reflect any
insurance and Contract-related fees and expenses, which would reduce the
performance results and if reflected the results would be reduced. The inception
date for this Portfolio is December 31, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
1999: 8.76%
Best quarter: Worst quarter:
10.87% (1999 4th Quarter) (-8.23)% (1999 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
MFS Growth with Income 8.76% 8.76%
- --------------------------------------------------------------------------------
S&P 500 Index* 21.03% 21.03%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS has been the Adviser to the Portfolio since it commenced
operations. MFS is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States, Massachusetts
Investors Trust. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
The Portfolio Managers are JOHN D. LAUPHEIMER, JR., Senior Vice President of
MFS, who has been employed as a portfolio manager by MFS since 1981; and
MITCHELL D. DYNAN, a Senior Vice President of MFS, who has been employed as a
portfolio manager by MFS since 1986.
-------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
42
- --------------------------------------------------------------------------------
MERCURY BASIC VALUE EQUITY PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital appreciation and secondarily, income by
investing in securities, primarily equities, that the Adviser of the Portfolio
believes are undervalued and therefore represent basic investment value.
THE INVESTMENT STRATEGY
The Portfolio chooses securities for capital appreciation that are expected to
increase in value. In selecting securities the Adviser emphasizes stocks that
are undervalued, are selling at a discount, or seem capable of recovering from
being temporarily out of favor. The Adviser places particular emphasis on
securities with statistical characteristics associated with undervaluation.
The Adviser follows a contrary opinion/out-of-favor investment style. The
Adviser believes that favorable changes in market prices are more likely to
occur when:
o stocks are out of favor;
o company earnings are depressed;
o price/earnings ratios are relatively low;
o investment expectations are limited; and/or
o there is no general interest in a security or industry.
On the other hand, the Adviser believes that negative developments are more
likely to occur when:
o investment expectations are high;
o stock prices are advancing or have advanced rapidly;
o price/earnings ratios have been inflated; and/or
o an industry or security continues to become popular among investors.
In other words, the Adviser believes that stocks with relatively high
price/earnings ratios are more vulnerable to price declines from unexpected
adverse developments. At the same time, stocks with relatively low
price/earnings ratios are more likely to benefit from favorable but generally
unanticipated events. Thus, the Portfolio may invest a large part of its net
assets in stocks that have weak research ratings.
The Portfolio invests primarily in common stocks of U.S. companies, but may buy
equity securities other than common stock and may also invest up to 10% of its
total assets in securities issued by foreign companies. The Portfolio may also
invest a substantial portion of its assets in companies with market
capitalizations below the largest companies. The Adviser believes that large
institutional investors may overlook these companies, making them undervalued.
The Portfolio has no minimum holding period for investments, and will buy or
sell securities whenever the Portfolio's management sees an appropriate
opportunity.
When market or financial conditions warrant, the Portfolio may invest in U.S.
Government and agency securities, money market securities and other fixed income
securities for temporary or defensive purposes. Such investment strategies are
inconsistent with the Portfolio's investment objectives and could result in the
Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a value
stock's intrinsic value may never be fully recognized or realized by the market,
or its price may go down. There is also the risk that a stock judged to be
undervalued may actually be appropriately priced.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because:
<PAGE>
- ----------
43
- --------------------------------------------------------------------------------
the securities of such companies are less well-known and may trade less
frequently and in lower volume; such companies are more likely to experience
greater or more unexpected changes in their earnings and growth prospects; and
the products or technologies of such companies may be at a relatively early
stage of development or not fully tested.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of existence, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results and if reflected the
results would be reduced. The inception date for the Portfolio is May 1, 1997.
<TABLE>
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: 11.59%
1999: 19.00%
Best quarter: Worst quarter:
13.57% (1999 2nd Quarter) (-10.91)% (1998 3rd Quarter)
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Mercury Basic Value Portfolio 19.00% 17.93%
- --------------------------------------------------------------------------------
S&P 500 Index* 21.03% 27.36%
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MERCURY ASSET MANAGEMENT, L.P. ("Mercury"), 800 Scudders Mill Road, Plainsboro,
NJ 08543. Mercury has been the Adviser to the Portfolio since it commenced
operations. Mercury is an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc., a financial services holding company. The general partner of Mercury
is Princeton Services, Inc., a wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. Mercury and its affiliates act as the manager for more than 100 registered
investment companies. Mercury also offers portfolio management and portfolio
analysis services to individuals and institutions.
KEVIN RENDINO, a First Vice President of Mercury since 1997, has been the
Portfolio Manager responsible for the day to day management of the Portfolio
since it commenced operations. Mr. Rendino was a Vice President of Mercury from
1993 to 1997.
-------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
44
- --------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital growth. Current income is a secondary
objective.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks that offer potential for
capital growth and may invest in stocks that offer potential for current income.
In analyzing companies for investment, the Adviser tries to identify common
stocks of companies that are significantly undervalued compared with their
underlying assets or earnings potential and offer growth and current income
potential.
The Portfolio may also invest in corporate bonds, notes and debentures,
preferred stocks or convertible securities (both debt securities and preferred
stocks) or U.S. Government securities.
It may also invest a portion of its assets in debt securities rated below
investment grade (commonly referred to as "junk bonds"), zero-coupon bonds and
payment-in-kind bonds, and high quality U.S. and foreign dollar-denominated
money market securities. The Portfolio may invest up to 20% of its total assets
in foreign securities, including transactions involving futures contracts,
forward contracts and options and foreign currency exchange transactions.
There may be times when the Adviser will use additional investment strategies to
achieve the Portfolio's investment objectives. For example, the Portfolio may
engage in a variety of investment management practices such as buying and
selling derivatives, including stock index futures contracts and call and put
options.
When market or financial conditions warrant, the Portfolio may invest up to 100%
of its assets in debt securities, preferred stocks or other securities for
temporary or defensive purposes. Such investment strategies are inconsistent
with the Portfolio's investment objectives and could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a value
stock's intrinsic value may never be fully recognized or realized by the market,
or its price may go down. There is also the risk that a stock judged to be
undervalued may actually be appropriately priced.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
<PAGE>
- ----------
45
- --------------------------------------------------------------------------------
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than higher-rated obligations because
BBB rated investment grade securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative. The risk that an issuer or
guarantor of a fixed income security or counterparty to the Portfolio's fixed
income transaction is unable to meets its financial obligations is particularly
significant for this Portfolio because this Portfolio invests a portion of its
assets in "junk bonds" (i.e., securities rated below investment grade). Junk
bonds are issued by companies with questionable credit strength and,
consequently, are considered to be speculative in nature and may be subject to
greater market fluctuations than investment grade fixed-income securities.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of operations, and in some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The inception date for the
Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: 12.75%
1999: -1.27%
Best quarter: Worst quarter:
16.49% (1998 4th Quarter) (-11.94)% (1999 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
EQ/Putnam Growth & Income Value
Portfolio (1.27)% 10.13%
- --------------------------------------------------------------------------------
S&P 500 Index* 21.03% 27.36%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC.: ("Putnam Management"), One Post Office
Square, Boston, MA 02109. Putnam Management has been the Adviser to the
Portfolio since the Portfolio commenced operations. Putnam Management has been
managing mutual funds since 1937. Putnam Management is a subsidiary of Putnam
Investments, Inc., which is itself a subsidiary of Marsh & McLennan Companies,
Inc.
----------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
46
- --------------------------------------------------------------------------------
DEBORAH KUENSTNER has been the Portfolio Manager responsible for the day-to-day
management of the Portfolio since January 2000. Ms. Kuenstner is Managing
Director, Chief Investment Officer of the Large Cap Value Equities Group and
jointed Putnam in 1997 as Senior Vice President and Senior Portfolio Manager in
the International Core and Value Equity Group. Prior to joining Putnam, Ms.
Kuenstner was the Senior Portfolio Manager, International Equities of the DuPont
Pension Fund Investment from 1989 to 1997.
<PAGE>
- ----------
47
- --------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital and any increased income
that results from this growth.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks of companies with market
capitalizations of $3 billion or more. The Adviser gives consideration to growth
potential rather than to dividend income. The Portfolio may purchase securities
of medium-sized companies having a proprietary product or profitable market
niches and the potential to grow very rapidly.
The Adviser invests mostly in "growth" stocks whose earnings the Adviser
believes are likely to grow faster than the economy as a whole. The Adviser
evaluates a company's future earnings potential and dividends, financial
strength, working assets and competitive position in its industry.
Although the Portfolio invests primarily in U.S. stocks, the Portfolio may
invest without limit in securities of foreign issuers that are traded in U.S.
public markets. It may also, to a lesser extent, invest in securities of foreign
issuers that are not traded in U.S. public markets.
The Portfolio may also engage in a variety of transactions involving
derivatives, such as futures, options, warrants and swaps and may also invest in
convertible securities, preferred stocks and debt securities.
When market or financial conditions warrant, the Portfolio may invest without
limit in debt securities, preferred stocks, United States Government and agency
obligations, cash or money market instruments, or any other securities for
temporary or defensive purposes. Such investment strategies are inconsistent
with the Portfolio's investment objectives and could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
MID-CAP COMPANY RISK: The Portfolio's investments in mid-cap companies may be
subject to more abrupt or erratic movements in price than are those of larger,
more established companies because: the securities of such companies are less
well-known and may trade less frequently and in lower volume; such companies are
more likely to experience greater or more unexpected changes in their earnings
and growth prospects; and the products or technologies of such companies may be
at a relatively early stage of development or not fully tested.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to
--------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
48
- --------------------------------------------------------------------------------
the U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than higher-rated obligations because
BBB rated investment grade securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of operations, and in some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results and if reflected the
results would be reduced. The inception date for the Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: 36.27%
1999: 30.24%
Best quarter: Worst quarter:
25.29% (1998 4th Quarter) (-11.25)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
EQ/Putnam Investors Growth Portfolio 30.24% 34.64%
- --------------------------------------------------------------------------------
S&P 500 Index* 21.03% 27.36%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC.: ("Putnam Management"), One Post Office
Square, Boston, MA 02109. Putnam Management has been the Adviser to the
Portfolio since the Portfolio commenced operations. Putnam Management has been
managing mutual funds since 1937. Putnam Management is a subsidiary of Putnam
Investments, Inc., which is itself a subsidiary of Marsh & McLennan Companies,
Inc.
The Portfolio Managers, responsible for the day to day management of the
Portfolio since its inception, are: C. BETH COTNER, who has been employed by
Putnam Management as an investment professional* since 1995; RICHARD B. ENGLAND,
who has been employed by Putnam Management as an investment professional* since
1992; and MANUAL WEISS HERRERRO, who has been employed by Putnam Management as
investment professional* since 1987. (*Investment professional means that the
manager was either a portfolio manager or analyst.)
<PAGE>
- ----------
49
- --------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide substantial dividend income and also
capital appreciation by investing primarily in dividend-paying common stocks of
established companies.
THE INVESTMENT STRATEGY
The Portfolio invests primarily (at least 65%) in dividend-paying common stocks
of well established companies paying above-average dividends.
The Adviser bases its investment decisions on three premises: (1) over time,
dividend income can account for a significant portion of the Portfolio's return;
(2) dividends are a more stable and predictable source of return; and (3) prices
of stocks that pay a high current income tend to be less volatile than those
paying below average dividends.
The Adviser uses a "value" approach in choosing securities. The Adviser's
in-house research team seeks companies that appear to be undervalued by various
measures and may be temporarily out of favor, but have good prospects for
capital appreciation and dividend growth. It looks for common stocks of
companies that have:
o established operating histories;
o above-average dividend yields relative to the S&P 500;
o low price to earnings ratios relative to the S&P 500;
o sound balance sheets and other positive financial characteristics; and
o low stock price relative to the company's asset value, cash flow or
business franchises.
Equity income investing involves finding common stocks that pay dividend income.
As an example, utility company stocks often provide dividend income while a
shareholder waits for the stock price to move. Dividends can help reduce the
Portfolio's volatility during turbulent markets and help offset losses when
stock prices are falling.
The Portfolio may invest up to 25% of its total assets in foreign securities.
These securities include non-dollar-denominated securities traded outside the
United States and dollar-denominated securities of foreign issuers traded in the
U.S. such as American Depositary Receipts. The Portfolio may also purchase
preferred stocks, convertible securities, warrants, futures, options, U.S.
Government securities, high-quality money market securities, as well as
investment grade debt securities and high yielding debt securities ("junk
bonds").
When market or financial conditions warrant, the Portfolio may invest without
limitation in high quality money market securities, and United States Government
debt securities for temporary or defensive purposes. Such investment strategies
are inconsistent with the Portfolio's investment objectives and could result in
the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. The Portfolio's emphasis on stocks
of established companies paying high dividends and its potential investments in
fixed income securities may limit its potential for appreciation in a broad
market advance. Such securities may also be hurt when interest rates rise
sharply. Also, a company may reduce or eliminate its dividend. Other principal
risks include:
------------------------- EQ Advisors Trust
<PAGE>
LARGE COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
50
- --------------------------------------------------------------------------------
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a value
stock's intrinsic value may never be fully recognized or realized by the market,
or its price may go down. There is also the risk that a stock judged to be
undervalued may actually be appropriately priced.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. The risk that an issuer or guarantor of a fixed income security or
counterparty to the Portfolio's fixed income transaction is unable to meet its
financial obligations is particularly significant for this Portfolio because
this Portfolio may invest a portion of its assets in "junk bonds" (i.e.,
securities rated below investment grade). Junk bonds are issued by companies
with questionable credit strength and, consequently, are considered to be
speculative in nature and may be subject to greater market fluctuations than
investment grade fixed-income securities.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of existence, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses,which would reduce the perfomance results. The inception date for the
Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: 9.11%
1999: 3.54%
Best quarter: Worst quarter:
13.29% (1999 2nd Quarter) (-8.56)% (1999 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
T. Rowe Price Equity Income Portfolio 3.54% 12.80%
- --------------------------------------------------------------------------------
S&P 500 Index* 21.03% 27.36%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
T. ROWE PRICE ASSOCIATES, INC. ("T. Rowe Price"), 100 East Pratt Street,
Baltimore, MD 21202. T. Rowe Price has been the Adviser to the Portfolio since
the Portfolio commenced operations. T. Rowe Price serves as investment
<PAGE>
- ----------
51
- --------------------------------------------------------------------------------
manager to a variety of individual and institutional investor accounts,
including limited partnerships and other mutual funds.
Investment decisions with respect to the Portfolio are made by an Investment
Advisory Committee. BRIAN C. ROGERS has been the Committee Chairman since the
inception of the Portfolio and has day-to-day responsibility for managing the
Portfolio and works with the Committee in developing and executing the
Portfolio's investment program. Mr. Rogers joined T. Rowe Price in 1982 and has
been managing investments since 1983.
------------------------- EQ Advisors Trust
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS
- ----------
52
- --------------------------------------------------------------------------------
EQ/AGGRESSIVE STOCK PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks and other equity securities of
small and medium-sized companies that, in the opinion of the Adviser, have
favorable growth prospects. The Portfolio may also invest in securities of
companies in cyclical industries, companies whose securities are temporarily
undervalued, companies in special situations (e.g., change in management, new
products or changes in customer demand) and less widely known companies.
The Portfolio may also invest up to 25% of its total assets in foreign
securities and may also make use of various other investment strategies,
including investments in debt securities and making secured loans of up to 50%
of its total portfolio securities. The Portfolio may also use derivatives,
including: writing covered call options and purchasing call and put options on
individual equity securities, securities indexes and foreign currencies. The
Portfolio may also purchase and sell stock index and foreign currency futures
contracts and options thereon.
When market or financial conditions warrant, or it appears that the Portfolio's
investment objective will not be achieved primarily through investments in
common stocks, the Portfolio may invest in other equity-type securities (such as
preferred stocks and convertible debt instruments) and options for hedging
purposes. The Portfolio may also make temporary investments in corporate fixed
income securities, which will generally be investment grade, or invest part its
assets in cash or cash equivalents, including high-quality money market
instruments for liquidity or defensive purposes. Such investments could result
in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
MULTIPLE-ADVISER RISK: The EQ/Aggressive Stock Portfolio employs multiple
Advisers. Each of the Advisers independently chooses and maintains a portfolio
of common stocks for the Portfolio and each is responsible for investing a
specific allocated portion of the Portfolio's assets. Because each Adviser will
be managing its allocated portion of the Portfolio independently from the other
Advisers, the same security may be held in two different portions of the
Portfolio, or may be acquired for one portion of the Portfolio at a time when
the Adviser of another portion deems it appropriate to dispose of the security
from that other portion. Similarly, under some market conditions, one Adviser
may believe that temporary, defensive investments in short-term instruments or
cash are appropriate when the other Adviser or Advisers believe continued
exposure to the equity markets is appropriate for their portions of the
Portfolio. Because each Adviser directs the trading for its own portion of the
Portfolio, and does not aggregate its transactions with those of the other
Advisers, the Portfolio may incur higher brokerage costs than would be the case
if a single Adviser were managing the entire Portfolio.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because:
<PAGE>
- ----------
53
- --------------------------------------------------------------------------------
the securities of such companies are less well-known, held primarily by insiders
or institutional investors and may trade less frequently and in lower volume;
such companies are more likely to experience greater or more unexpected changes
in their earnings and growth prospects; such companies have limited financial
resources or may depend on a few key employees; and the products of technologies
of such companies may be at a relatively early stage of development or not fully
tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which may
cause the Portfolio to lose money or be prevented from earning capital gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; expropriation or nationalization; adverse changes in foreign economic and
tax policies; and foreign government instability, war or other adverse political
or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last ten calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one, five and ten
years and compares the Portfolio's performance to: (i) the returns of a
broad-based index; (ii) the returns of a "blended" index of two broad-based
indices; and (iii) the returns of an index of funds with similar investment
objectives. Past performance is not an indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Aggressive Stock
Portfolio) managed by Alliance using the same investment objectives and strategy
as the Portfolio. For these purposes, the Portfolio is considered to be the
successor entity to the predecessor registered investment company (HRT/Alliance
Aggressive Stock Portfolio) whose inception date is January 27, 1986. The assets
of the predecessor were transferred to the Portfolio on October 18, 1999.
Following that transfer, the performance shown (for the period October 19, 1999
through December 31, 1999) is that of the Portfolio. For these purposes, the
performance results of the Portfolio and its predecessor registered investment
company have been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
------------------------- EQ Advisors Trust
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
54
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
1990: 7.9%
1991: 86.6%
1992: -3.4%
1993: 16.5%
1994: -4.1%
1995: 31.4%
1996: 22.1%
1997: 10.7%
1998: 0.1%
1999: 18.55%
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
EQ/Aggressive Stock Portfolio
- Class IB Shares 18.55% 16.05% 16.41%
- --------------------------------------------------------------------------------
50% S&P 400 MidCap
Index/50% Russell 2000** 18.09% 19.92% 15.41%
- --------------------------------------------------------------------------------
Lipper MidCap Growth Funds
Average** 46.25% 22.54% 16.19%
- --------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (October 1, 1996),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
In accordance with the Multi-Manager Order, the Manager may, among other things,
select new or additional Advisers for the Portfolio and may allocate and
re-allocate the Portfolio's assets among Advisers. Currently, Alliance Capital
Management, L.P. and Massachusetts Financial Services Company have been selected
by the Manager to serve as Advisers for this Portfolio.
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance was the exclusive Adviser to the Portfolio and
its predecessor (registered investment company) since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
ALDEN M. STEWART and RANDALL E. HAASE have been the persons principally
responsible for the day-to-day management of the Portfolio and its predecessor
since 1993. Mr. Stewart, an Executive Vice President of Alliance, has been
associated with Alliance since 1970. Mr. Haase, a Senior Vice President of
Alliance, has been associated with Alliance since 1988.
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS was added as an Adviser to the Portfolio as of May 1, 2000. MFS is
America's oldest mutual fund organization. MFS and its predecessor organizations
have a history of money management dating from 1924 and the founding of the
first mutual fund in the United States, Massachusetts Investors Trust. MFS is a
subsidiary of Sun Life of Canada (United States) Financial Services Holdings
Inc., which, in turn, is an indirect wholly-owned subsidiary of Sun Life
Assurance Company of Canada.
The Portfolio Managers are TONI Y. SHIMURA, a Senior Vice President of MFS, who
has been employed by MFS as a portfolio manager since 1995; and JOHN W. BALLEN,
Chief Investment Officer and President of MFS, who provides general oversight in
the management of the Portfolio.
<PAGE>
- ----------
55
- --------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in U.S. common stocks and other equity-type
securities issued by smaller companies with favorable growth prospects. The
Portfolio may at times invest in companies in cyclical industries, companies
whose securities are temporarily undervalued, companies in special situations
(e.g., change in management, new products or changes in customer demand) and
less widely known companies.
Under normal market conditions, the Portfolio intends to invest at least 65% of
its total assets in securities of smaller capitalization companies (currently
considered by the Adviser to mean companies with market capitalization at or
below $2 billion).
The Portfolio may invest in foreign securities and may also make use of various
other investment strategies, including making secured loans of up to 50% of its
total portfolio securities. The Portfolio may also use derivatives including:
writing covered call options and purchasing call and put options on individual
equity securities, securities indexes and foreign currencies. The Portfolio may
also purchase and sell stock index and foreign currency futures contracts and
options thereon.
The Portfolio will invest up to 20% of its net asset value, measured at the time
of investment, in securities principally traded on foreign securities markets
(other than commercial paper).
When market or financial conditions warrant, the Portfolio may invest in other
equity-type securities (such as preferred stocks and convertible debt
instruments) and investment-grade corporate fixed income securities. For
temporary or defensive purposes, the Portfolio may invest without limitation in
cash or cash equivalents or high-quality money market instruments. Such
investments could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less well-known, held primarily by insiders or institutional
investors and may trade less frequently and in lower volume; such companies are
more likely to experience greater or more unexpected changes in their earnings
and growth prospects; such companies have limited financial resources or may
depend on a few key employees; and the products of technologies of such
companies may be at a relatively early stage of development or not fully tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which may
cause the Portfolio to lose money or be prevented from earning capital gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the
---------------------------- EQ Advisors Trust
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
56
- --------------------------------------------------------------------------------
risk that changes in value of the derivative may not correlate perfectly with
the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; expropriation or nationalization; adverse changes in foreign economic and
tax policies; and foreign government instability, war or other adverse political
or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for 1998
and 1999, the Portfolio's first two years of existence and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for one year and since inception and compares the Portfolio's performance to:
(i) the returns of a broad-based index and (ii) the returns of an index of funds
with similar investment objectives. Past performance is not an indication of
future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Small Cap Growth
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to be
the successor entity to the predecessor registered investment company
(HRT/Alliance Small Cap Growth Portfolio) whose inception date is May 1, 1997.
The assets of the predecessor were transferred to the Portfolio on October 18,
1999. Following that transfer, the performance shown (for the period October 19,
1999 through December 31, 1999) is that of the Portfolio. For these purposes,
the performance results of the Portfolio and its predecessor registered
investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: -4.4%
1999: 27.62%
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Alliance Small Cap Growth Portfolio -
Class IB Shares 27.62% 17.66%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index* 43.09% 25.88%
- --------------------------------------------------------------------------------
Lipper Small Company Growth Funds
Average* 38.28% 19.36%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
<PAGE>
- ----------
57
- --------------------------------------------------------------------------------
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
MARK J. CUNNEEN has been responsible for the day-to-day management of Portfolio
and its predecessor since January 1999. Mr. Cunneen, a Senior Vice President of
Alliance, has been associated with Alliance since January 1999. Prior to joining
Alliance, Mr. Cunneen had been associated with INVESCO since May 1998, and
before that with Chancellor LGT Asset Management, Inc. ("Chancellor") since
1992. Mr. Cunneen had been the head of Chancellor's Small Cap Equity Group since
1997.
-------------------------- EQ Advisors Trust
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
58
- --------------------------------------------------------------------------------
BT SMALL COMPANY INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to replicate as closely as possible (before the
deduction of Portfolio expenses) the total return of the Russell 2000 Index
("Russell 2000").
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of small-cap companies
included in the Russell 2000. The Adviser seeks to match the returns of the
Russell 2000. The Portfolio invests in a statistically selected sample of the
securities found in the Russell 2000, using a process known as "optimization."
This process selects stocks for the Portfolio so that industry weightings,
market capitalizations and fundamental characteristics (price to book ratios,
price to earnings ratios, debt to asset ratios and dividend yields) closely
match those of the securities included in the Russell 2000. This approach helps
to increase the Portfolio's liquidity and reduce costs. The securities held by
the Portfolio are weighted to make the Portfolio's total investment
characteristics similar to those of the Russell 2000 as a whole.
For more information on The Russell 2000, see the preceding section "The
Benchmarks." The Portfolio is neither sponsored by nor affiliated with the Frank
Russell Company, which is the owner of the trademarks and copyrights relating to
the Russell indices.
Over time, the correlation between the performance of the Portfolio and the
Russell 2000 is expected to be 95% or higher before the deduction of Portfolio
expenses. The Portfolio's ability to track the Russell 2000 may be affected by,
among other things, transaction costs, administration and other expenses
incurred by the Portfolio, changes in either the composition of the Russell 2000
or the assets of the Portfolio, and the timing and amount of Portfolio investor
contributions and withdrawals, if any. The Portfolio seeks to track the Russell
2000, therefore, the Adviser generally will not attempt to judge the merits of
any particular security as an investment.
Securities index futures contracts and related options, warrants and convertible
securities may be used for a number of reasons, including: to simulate full
investment in the Russell 2000 while retaining a cash balance for fund
management purposes; to facilitate trading; to reduce transaction costs; or to
seek higher investment returns when a futures contract, option, warrant or
convertible security is priced more attractively than the underlying equity
security or Russell 2000. These instruments are considered to be derivatives.
The Portfolio may invest to a lesser extent in short-term debt securities and
money market securities to meet redemption requests or to facilitate investment
in the securities included in the Russell 2000.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
INDEX FUND RISK: The Portfolio is not actively managed and invests in securities
included in the index regardless of their investment merit. Therefore, the
Portfolio cannot modify its investment strategies to respond to changes in the
economy and may be particularly susceptible to a general decline in the U.S. or
global stock market segment relating to the index.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less known and may trade less frequently and in lower volume;
such companies are more likely to experience greater or more unexpected changes
in their earnings and growth prospects; and the products or technologies of such
companies may be at a relatively early stage of development or not fully tested.
<PAGE>
- ----------
59
- --------------------------------------------------------------------------------
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of existence, and in some of the risks of
investing in the Portfolio by showing the yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The Portfolio's inception
date was January 1, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: -2.27%
1999: 20.68%
Best quarter: Worst quarter:
18.52% (1999 4th Quarter) (-19.52)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
BT Small Company Index Portfolio 20.68% 8.59%
- --------------------------------------------------------------------------------
Russell 2000 Index* 21.26% 8.70%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
BANKERS TRUST COMPANY ("Bankers Trust"), 130 Liberty Street (One Bankers Trust
Plaza), New York, New York 10006. Bankers Trust has been the Adviser to the
Portfolio since it commenced operations. Bankers Trust is a wholly-owned
subsidiary of Bankers Trust New York Corporation. Bankers Trust conducts a
variety of general banking and trust activities and is a major wholesale
supplier of financial services to the international and domestic institutional
markets. Investment management is a core business of Bankers Trust built on a
tradition of excellence from its roots as a trust bank founded in 1903. In 1999,
Bankers Trust Corporation finalized a merger in which Bankers Trust Corporation
was acquired by and became a subsidiary of Deutsche Bank AG.
--------------------------- EQ Advisors Trust
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
60
- --------------------------------------------------------------------------------
EQ/EVERGREEN PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in the common stocks of large U.S. companies.
The Portfolio Managers select stocks using a "growth-at-a-reasonable-price"
method. This style of diversified equity management is best defined as a blend
between growth and value stocks. "Growth" stocks are stocks of companies which
the Portfolio Managers believe have anticipated earnings ranging from steady to
accelerated growth. "Value" stocks are stocks of companies that the Portfolio
Managers believe are undervalued.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
MID-CAP COMPANY RISK: The Portfolio's investments in mid-cap companies may be
subject to more abrupt or erratic movements in price than are those of larger,
more established companies because: the securities of such companies are less
well-known and may trade less frequently and in lower volume; such companies are
more likely to experience greater or more unexpected changes in their earnings
and growth prospects; and the products or technologies of such companies may be
at a relatively early stage of development or not fully tested.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than higher-rated obligations because
BBB rated investment grade securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1999,
the Portfolio's first full year of operations. The table below shows the
Portfolio's average annual total returns for the Portfolio for one year and
since inception. The table also compares the Portfolio's performance to the
returns of a broad-based index. Both the bar chart and table assume reinvestment
of dividends and distributions. Past performance is not an indication of future
performance. The performance results presented below do not reflect any
insurance and Contract-related fees and expenses, which would reduce the
performance results. The inception date for this Portfolio is December 31, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
1999: 9.70%
Best quarter: Worst quarter:
12.63% (1999 4th Quarter) (-8.54)% (1999 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
EQ/Evergreen Portfolio 9.70% 9.70%
- --------------------------------------------------------------------------------
Russell 2000 Index* 21.26%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
<PAGE>
- ----------
61
- --------------------------------------------------------------------------------
WHO MANAGES THE PORTFOLIO
EVERGREEN ASSET MANAGEMENT CORP.: ("Evergreen"), 1311 Mamaroneck Avenue, White
Plains, New York 10605. Evergreen has been the Adviser to the Portfolio since
it commenced operations. Evergreen is a registered investment adviser and a
wholly-owned subsidiary of First Union Corporation. Evergreen offers a broad
range of financial services to individuals and businesses throughout the
United States.
JEAN LEDFORD and RICHARD WELSH became co-managers of the Portfolio in August
1999. Jean Ledford, CFA, became President and Chief Executive Officer of
Evergreen in August 1999. From February 1997 until she joined Evergreen, Ms.
Ledford worked as a portfolio manager at American Century Investments
("American Century"). From 1980 until she joined American Century, Ms. Ledford
was the investment director at the State of Wisconsin Investment Board.
Mr. Welsh joined Evergreen as Senior Vice President and portfolio manager in
August 1999. Prior to joining Evergreen, he worked for five years as a
portfolio manager and analyst at American Century.
-------------------------- EQ Advisors Trust
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
62
- --------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital appreciation by investing in equity
securities of United States companies with small market capitalizations (i.e.,
companies in the range of companies represented in the Russell 2000 Index) that
the Adviser considers inexpensively priced relative to the return on total
capital or equity.
THE INVESTMENT STRATEGY
The Portfolio is a non-diversified Portfolio that invests primarily in equity
securities of U.S. companies with small market capitalizations that the Adviser
believes are undervalued based on their return on equity or capital. The
Portfolio will have characteristics similar to the Russell 2000 Index. The
equity securities that may be purchased by the Portfolio include common stocks,
preferred stocks, securities convertible into or exchangeable for common stocks,
rights and warrants.
For more information on The Russell 2000, see the preceding section "The
Benchmarks".
A Portfolio may be considered to be "non-diversified" for federal securities law
purposes because it invests in a limited number of securities. In all cases, the
Portfolio intends to be diversified for tax purposes so that it can qualify as a
regulated investment company.
In selecting investments for the Portfolio, the Adviser looks for equity
securities of companies that have one or more of the following characteristics:
(i) are undervalued relative to their earnings, cash flow or asset values; (ii)
have an attractive price/value relationship with expectations that some catalyst
will cause the perception of value to change within two years; (iii) are out of
favor due to circumstances which are unlikely to harm the company's franchise or
earnings power; (iv) have low projected price to earnings or price-to-cash flow
multiples; (v) have the potential to become a larger factor in the company's
business; (vi) have significant debt but have high levels of free cash flow; and
(vii) have a relatively short corporate history with the expectation that the
business may grow.
Although the Portfolio will principally invest at least 80% of its assets in
small capitalization securities, the Portfolio may also invest up to 20% of its
assets in larger capitalization equity securities or investment grade debt
securities.
When market or financial conditions warrant, the Portfolio may invest without
limitation in short-term money market instruments or hold its assets in cash for
temporary or defensive purposes. Such investment strategies could have the
effect of reducing the benefit of any upswing in the market. Such investment
strategies are inconsistent with the Portfolio's investment objectives and could
result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a value
stock's intrinsic value may never be fully recognized or realized by the market,
or its price may go down. There is also the risk that a stock judged to be
undervalued may actually be appropriately priced.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less-well known and may trade less frequently and in lower
volume; such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; and the products or technologies
of such companies may be at a relatively early stage of development or not fully
tested.
<PAGE>
- ----------
63
- --------------------------------------------------------------------------------
NON-DIVERSIFICATION RISK: Since a relatively high percentage of the Portfolio's
assets may be invested in the securities of a limited number of issuers, some of
which may be within the same industry, the securities of the Portfolio may be
more sensitive to changes in the market value of a single issuer or industry or
to risks associated with a single economic, political or regulatory event than a
diversified portfolio.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities, which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than higher-rated obligations because
BBB rated investment grade securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of existence, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the perfomance results. The Portfolio's inception
date was January 1, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: -7.03%
1999: 1.66%
Best quarter: Worst quarter:
19.39% (1999 2nd Quarter) (-20.10)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Lazard Small Cap Value Portfolio 1.66% (2.77)%
- --------------------------------------------------------------------------------
Russell 2000 Index* 21.26% 8.70%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
LAZARD ASSET MANAGEMENT ("LAM"), 30 Rockefeller Plaza, New York, New York 10112.
LAM has been the Adviser to the Portfolio since it commenced operations. LAM is
a division of Lazard Fr-res & Co. LLC ("Lazard Fr-res"), a New York limited
liability company, which is registered as an investment adviser with the SEC.
Lazard Freres provides its clients with a wide variety of investment banking and
related services, including investment management.
The Portfolio Managers, responsible for the day-to-day management since the
inception of the Portfolio, are: EILEEN D. ALEXANDERSON, a Managing Director
responsible for U.S./Global equity management and overseeing the day-to-day
operations of the U.S./Global equity teams, who has been with LAM since 1979,
and HERBERT W. GULLQUIST, a Vice-Chairman, Managing Director and Chief
Investment Officer of LAM, who has been with LAM since 1982.
--------------------------- EQ Advisors Trust
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
64
- --------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide long-term capital growth.
THE INVESTMENT STRATEGY
The Portfolio invests, under normal market conditions, primarily (at least 65%
of its total assets) in common stocks and related securities, such as preferred
stock, convertible securities and depositary receipts of emerging growth
companies. Emerging growth companies that the Adviser believes are either:
o early in their life cycle but have the potential to become major
enterprises; or
o are major enterprises whose rates of earnings growth are expected to
accelerate because of special factors such as rejuvenated management, new
products, changes in customer demand or basic changes in the economic
environment.
For purposes of this Portfolio, emerging growth companies may be of any size and
the Adviser would expect these companies to have products, technologies,
management, markets and opportunities that will facilitate earnings growth over
time that is well above the growth rate of the overall economy and rate of
inflation. The Portfolio's investments may include securities traded in the
over-the-counter markets.
The Adviser uses a "bottom-up" investment style in managing the Portfolio. This
means the securities are selected based upon fundamental analysis (such as an
analysis of earnings, cash flows, competitive position and management's
abilities) performed by the Adviser.
In addition, up to 25% of the Portfolio's assets may be invested in foreign
securities, including those in emerging markets, or in cash and cash
equivalents.
When adverse market, financial or political conditions warrant, the Portfolio
may depart from its principal strategies for temporary or defensive purposes.
Such investment strategies are inconsistent with the Portfolio's investment
objectives and could result in the Portfolio not achieving its investment
objective.
The Portfolio may engage in active and frequent trading to achieve its principal
investment strategies. Frequent trading increases transaction costs, which could
detract from the Portfolio's performance.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less well-known and may trade less frequently and in lower
volume; such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; and the products or technologies
of such companies may be at a relatively early stage of development or not fully
tested.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In
<PAGE>
- ----------
65
- --------------------------------------------------------------------------------
addition, the value of foreign investments can be adversely affected by:
unfavorable currency exchange rates (relative to the U.S. dollar for securities
denominated in foreign currencies); inadequate or inaccurate information about
foreign companies; higher transaction, brokerage and custody costs; adverse
changes in foreign economic and tax policies; and foreign government
instability, war or other adverse political or economic actions.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of operations, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The inception date for the
Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: 34.57%
1999: 73.62%
Best quarter: Worst quarter:
53.01% (1999 4th Quarter) (-12.69)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
MFS Emerging Growth Companies
Portfolio 73.62% 48.20%
- --------------------------------------------------------------------------------
Russell 2000 Index* 21.26% 16.99%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS has been the Adviser to the Portfolio since it commenced
operations. MFS is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States, Massachusetts
Investors Trust. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
The Portfolio Managers are TONI Y. SHIMURA, a Senior Vice President of MFS, who
has been employed by MFS as a portfolio manager for the Portfolio since 1995 and
JOHN W. BALLEN, Chief Investment Officer and President of MFS, who provides
general oversight in the management of the Portfolio.
-------------------------- EQ Advisors Trust
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS (CONTINUED)
- ----------
66
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MFS RESEARCH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide long-term growth of capital and future
income.
THE INVESTMENT STRATEGY
The Portfolio invests, at least 80% of its total assets in equity securities,
such as common stocks, securities convertible into common stocks, preferred
stocks and depositary receipts of companies believed by the Adviser to have:
o favorable prospects for long-term growth;
o attractive valuations based on current and expected earnings or cash flow;
o dominant or growing market share; and
o superior management.
The Portfolio may invest in securities of companies of any size. The Portfolio's
investments may include securities traded on securities exchanges or in the
over-the-counter markets.
The Portfolio may invest up to 20% of its net assets in foreign equity
securities, including those of emerging markets. The Portfolio may invest in
foreign equity securities, through which it may have exposure to foreign
currencies.
When adverse market, financial or political conditions warrant, the Portfolio
may depart from its principal investment strategies for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
The Portfolio may invest up to 10% of its assets in high yielding debt
securities rated below investment grade ("junk bonds").
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less well-known and may trade less frequently and in lower
volume; such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; and the products or technologies
of such companies may be at a relatively early stage of development or not fully
tested.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than higher-rated obligations because
BBB rated investment grade securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative. The risk that an issuer or
guarantor of a fixed income security or counterparty to the Portfolio's fixed
income transaction is unable to meets its financial obligations is particularly
significant for this Portfolio because this Portfolio invests a
<PAGE>
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67
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portion of its assets in "junk bonds" (i.e., securities rated below investment
grade). Junk bonds are issued by companies with questionable credit strength
and, consequently, are considered to be speculative in nature and may be subject
to greater market fluctuations than investment grade fixed-income securities.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of operations, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The inception date for the
Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: 24.11%
1999: 23.12%
Best quarter: Worst quarter:
21.36% (1998 4th Quarter) (-17.35)% (1997 4th Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
MFS Research Portfolio 23.12% 23.93%
- --------------------------------------------------------------------------------
S&P 500 Index* 21.03% 27.36%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS has been the Adviser to the Portfolio since it commenced
operations. MFS is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States, Massachusetts
Investors Trust. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
A committee of investment research analysts selects portfolio securities for the
Portfolio. This committee includes investment analysts employed not only by MFS,
but also by MFS International (U.K.) Limited, a wholly owned subsidiary of MFS.
The committee allocates the Portfolio's assets among various industries.
Individual analysts then select what they view as the securities best suited to
achieve the Portfolio's investment objective within their assigned industry
responsibility.
----------------------- EQ Advisors Trust
<PAGE>
SMALL/MID CAP COMPANY STOCK PORTFOLIOS (CONTINUED)
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68
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WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term capital appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of U.S. small-cap companies
with above-average growth potential that the Adviser believes to be undervalued.
Typically, such investments may include common stocks, preferred stocks,
convertible securities, warrants and rights of small-cap companies. Once 65% of
the Portfolio's assets are invested in small-cap companies, the Portfolio may
also invest in companies with a market capitalization of any size.
For purposes of this Portfolio, small-cap companies are companies having market
capitalizations within the range of capitalizations of companies represented in
the Russell 2000 Index.
In determining whether a company's stock is undervalued, the Adviser considers
all relevant factors which may include a company's:
o price/earnings ratio;
o price to book value ratio;
o price to cash flow ratio; and
o debt to capital ratio.
The Portfolio will invest primarily (at least 65% of its net assets) in the
securities of U.S. companies traded in the U.S. securities markets. The
Portfolio may invest to a lesser extent in foreign securities, investment grade
debt securities and high quality domestic and foreign short-term (one year or
less) and medium-term money-market securities.
When market or financial conditions warrant, the Portfolio may invest without
limitation in investment grade debt obligations and in domestic and foreign
obligations, including repurchase agreements for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a value
stock's intrinsic value may never be fully recognized or realized by the market,
or its price may go down. There is also the risk that a stock judged to be
undervalued may actually be appropriately priced.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less well-known and may trade less frequently and in lower
volume; such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; and the products or technologies
of such companies may be at a relatively early stage of development or not fully
tested.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs and may result in higher taxable
gains that could be passed through to shareholders.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
<PAGE>
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69
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affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities, which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than higher-rated obligations because
BBB rated investment grade securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of operations, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce performance results. The inception date for the
Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: -10.02%
1999: 1.80%
Best quarter: Worst quarter:
15.49% (1997 3rd Quarter) (-20.25)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Warburg Pincus Small Company Value
Portfolio 1.80% 3.33%
- --------------------------------------------------------------------------------
Russell 2000 Index* 21.26% 16.99%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
CREDIT SUISSE ASSET MANAGEMENT, LLC. ("CSAM"), 466 Lexington Avenue, New York,
New York 10017-3147. CSAM is the successor to Warburg Pincus Asset Management,
Inc., which served as the Adviser to the Portfolio since it commenced
operations. CSAM is a professional investment advisory firm that provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. CSAM is indirectly
controlled by Credit Suisse Group. CSAM manages over $60 billion in assets in
the U.S., and together with its global affiliates, over $168 billion worldwide.
KYLE F. FREY is the Portfolio Manager and has been responsible for the
day-to-day management of the Portfolio since the Portfolio commenced operations.
Mr. Frey is a managing director of CSAM and has been with CSAM or its
predecessor since 1989.
------------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS
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70
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ALLIANCE GLOBAL PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified mix of equity securities of
U.S. and established foreign companies. The Adviser believes the equity
securities of these established non-U.S. companies have prospects for growth.
The Portfolio intends to make investments in several countries and to have
represented in the Portfolio business activities in not less than three
different countries (including the United States).
These non-U.S. companies may have operations in the United States, in their
country of incorporation or in other countries.
The Portfolio may invest in any type of security including, but not limited to,
common and preferred stock, as well as shares of mutual funds that invest in
foreign securities, bonds and other evidences of indebtedness, and other
securities of issuers wherever organized and governments and their political
subdivisions. Although no particular proportion of stocks, bonds or other
securities is required to be maintained, the Portfolio intends under normal
conditions to invest in equity securities.
The Portfolio may also make use of various other investment strategies,
including making secured loans of up to 50% of its total assets. The Portfolio
may also use derivatives including: writing covered call and put options,
purchasing call and put options on individual equity securities, securities
indexes, and foreign currencies. The Portfolio may also purchase and sell stock
index, foreign currency and interest rate futures contracts and options on such
contracts, as well as forward foreign currency exchange contracts.
When market or financial conditions warrant, the Portfolio may at times invest
substantially all of its assets in securities issued by U.S. companies or in
cash or cash equivalents, including money market instruments issued by foreign
entities for temporary or defensive purposes. Such investment strategies could
result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISK: Investing in foreign securities involves risks not
associated with investing in U.S. securities that can adversely affect the
Portfolio's performance. Foreign markets, particularly emerging markets, may be
less liquid, more volatile and subject to less government supervision than
domestic markets. There may be difficulties enforcing contractual obligations,
and it may take more time for trades to clear and settle. In addition, foreign
investments can be adversely affected by: unfavorable currency exchange rates
(relative to the U.S. dollar for securities denominated in a foreign
currencies); inadequate or inaccurate information about foreign companies;
higher transaction, brokerage and custody costs; expropriation or
nationalization; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions. Other specific risks of investing in foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in emerging
markets countries and/or their securities markets, such as less diverse and less
mature economic structures, less stable political systems, more restrictive
foreign investment policies, smaller-sized securities markets and low trading
volumes. Such risks can make investments illiquid and more volatile than
investments in developed countries and such securities may be subject to abrupt
and severe price declines.
EURO RISK: The Portfolio may invest in securities issued by European issuers. On
January 1, 1999, 11 of the 15 member states of the European Monetary Union
("EMU") introduced the "Euro" as a common currency.
<PAGE>
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71
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During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is expected to
become the sole currency of the participating states. The introduction of the
Euro will result in the redenomination of European debt and equity securities
over a period of time, which may result in various legal and accounting
differences and/or tax treatments that otherwise would not likely occur. During
this period, the creation and implementation of suitable clearing and settlement
systems and other operational problems may cause market disruptions that could
adversely affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements as are U.S. companies, which could adversely affect
their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which may
cause the Portfolio to lose money or be prevented from earning capital gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. The risks in lending portfolio securities, as with other extensions
of secured credit, consist of possible delay in receiving additional collateral,
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment-grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than if it invested in higher-rated
obligations because BBB-rated securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last ten calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one, five and ten
years and compares the Portfolio's performance to: (i) the returns of a
broad-based index and (ii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Global Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance Global
Portfolio) whose inception date is August 27, 1987. The assets of the
--------------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
72
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predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the performance
results of the Portfolio and its predecessor registered investment company have
been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN
1990: -6.3%
1991: 30.2%
1992: -0.7%
1993: 31.9%
1994: 5.0%
1995: 18.6%
1996: 14.4%
1997: 11.4%
1998: 21.5%
1999: 38.17%
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Global
Portfolio -
Class IB Shares 38.17% 20.42% 14.20%
- --------------------------------------------------------------------------------
MSCI World
Index** 44.18% 19.42% 10.55%
- --------------------------------------------------------------------------------
Lipper Global
Mutual Funds
Average** 24.93% 19.76% 10.74%
- --------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (October 1, 1996),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
SANDRA L. YEAGER has been responsible for the day-to-day management of the
Portfolio's and its predecessor's investment program since 1998. Ms. Yeager, a
Senior Vice President of Alliance, has been associated with Alliance since 1990.
<PAGE>
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73
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ALLIANCE INTERNATIONAL PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve long-term growth of capital by investing
primarily in a diversified portfolio of equity securities selected principally
to permit participation in non-U.S. companies with prospects for growth.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified portfolio of equity securities
selected principally to permit participation in non-U.S. companies or foreign
governmental enterprises that the Adviser believes have prospects for growth.
The Portfolio may invest anywhere in the world (including developing countries
or "emerging markets"), although it will not generally invest in the United
States. The Portfolio may purchase securities of developing countries, which
include, among others, Mexico, Brazil, Hong Kong, India, Poland, Turkey and
South Africa.
These non-U.S. companies may have operations in the United States, in their
country of incorporation and/or in other countries.
The Portfolio intends to have represented in the Portfolio business activities
in not less than three different countries.
The Portfolio may also invest in any type of investment grade, fixed income
security including, but not limited to, preferred stock, convertible securities,
bonds, notes and other evidences of indebtedness of foreign issuers, including
obligations of foreign governments. Although no particular proportion of stocks,
bonds or other securities is required to be maintained, the Portfolio intends
under normal market conditions to invest primarily in equity securities.
The Portfolio may also make use of various other investment strategies,
including the purchase and sale of shares of other mutual funds investing in
foreign securities and making loans of up to 50% of its portfolio securities.
The Portfolio may also use derivatives, including: writing covered call and put
options, purchasing purchase call and put options on individual equity
securities, securities indexes, and foreign currencies. The Portfolio may also
purchase and sell stock index, foreign currency and interest rate futures
contracts and options on such contracts, as well as forward foreign currency
exchange contracts.
For temporary or defensive purposes, when market or financial conditions
warrant, the Portfolio may at times invest substantially all of its assets in
securities issued by a single major developed country (e.g., the United States)
or in cash or cash equivalents, including money market instruments issued by
that country. In addition, the Portfolio may establish and maintain temporary
cash balances in U.S. and foreign short-term high-grade money market instruments
for defensive purposes or to take advantage of buying opportunities. Such
investments could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISK: Investing in foreign securities involves risks not
associated with investing in U.S. securities that can adversely affect the
Portfolio's performance. Foreign markets, particularly emerging markets, may be
less liquid, more volatile and subject to less government supervision than
domestic markets. There may be difficulties enforcing contractual obligations,
and it may take more time for trades to clear and settle. In addition, foreign
investments can be adversely affected by: unfavorable currency exchange rates
(relative to the U.S. dollar for securities denominated in a foreign
currencies); inadequate or inaccurate information about foreign companies;
higher transaction, brokerage and custody costs; expropriation or
nationalization; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions. Other specific risks of investing in foreign securities include:
------------------------ EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
74
- --------------------------------------------------------------------------------
EMERGING MARKET RISK: There are greater risks involved in investing in emerging
markets countries and/or their securities markets, such as less diverse and less
mature economic structures, less stable political systems, more restrictive
foreign investment policies, smaller-sized securities markets and low trading
volumes. Such risks can make investments illiquid and more volatile than
investments in developed countries and such securities may be subject to abrupt
and severe price declines.
EURO RISK: The Portfolio may invest in securities issued by European issuers. On
January 1, 1999, 11 of the 15 member states of the European Monetary Union
("EMU") introduced the "Euro" as a common currency. During a three-year
transitional period, the Euro will coexist with each participating state's
currency and, on July 1, 2002, the Euro is expected to become the sole currency
of the participating states. The introduction of the Euro will result in the
redenomination of European debt and equity securities over a period of time,
which may result in various legal and accounting differences and/or tax
treatments that otherwise would not likely occur. During this period, the
creation and implementation of suitable clearing and settlement systems and
other operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements as are U.S. companies, which could adversely affect
their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which may
cause the Portfolio to lose money or be prevented from earning capital gains.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment-grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than if it invested in higher-rated
obligations because BBB-rated securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. The risks in lending portfolio securities, as with other extensions
of secured credit, consist of possible delay in receiving additional collateral,
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
<PAGE>
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75
- --------------------------------------------------------------------------------
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last four calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one year and since
inception and compares the Portfolio's performance to: (i) the returns of a
broad-based index and (ii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance International Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance
International Portfolio) whose inception date is April 3, 1995. The assets of
the predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the performance
results of the Portfolio and its predecessor registered investment company have
been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN
1996: 9.6%
1997: -3.2%
1998: 10.3%
1999: 37.44%
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Alliance International
Portfolio - Class IB
Shares 37.44% 12.87%
- --------------------------------------------------------------------------------
MSCI EAFE Index** 26.96% 13.11%
- --------------------------------------------------------------------------------
Lipper International Mutual
Funds Average** 42.88% 17.58%
- --------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (May 1, 1997),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
------------------------------ EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
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SANDRA L. YEAGER has been responsible for the day-to-day management of the
Portfolio and its predecessor since January 1999. Ms. Yeager, a Senior Vice
President of Alliance, has been associated with Alliance since 1990.
<PAGE>
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77
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BT INTERNATIONAL EQUITY INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to replicate as closely as possible (before
deduction of Portfolio expenses) the total return of the MSCI EAFE Index.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of companies included in
the MSCI EAFE Index. The Portfolio is constructed to have aggregate investment
characteristics similar to those of the MSCI EAFE Index. The Portfolio invests
in a statistically selected sample of the securities of companies included in
the MSCI EAFE Index, although not all companies within a country will be
represented in the Portfolio at the same time. Stocks are selected based on
country of origin, market capitalization, yield, volatility and industry sector.
The Adviser will manage the Portfolio using advanced statistical techniques to
determine which securities should be purchased or sold in order to replicate the
MSCI EAFE index.
For more information on the MSCI EAFE Index see the preceding section "The
Benchmarks." The MSCI EAFE Index is the exclusive property of Morgan Stanley.
The Portfolio is not sponsored, endorsed, sold or promoted by Morgan Stanley and
Morgan Stanley makes no guarantee as to the accuracy or completeness of the MSCI
EAFE Index or any data included therein.
Over time, the correlation between the performance of the Portfolio and the MSCI
EAFE Index is expected to be 95% or higher before deduction of Portfolio
expenses. The Portfolio's ability to track the MSCI EAFE Index may be affected
by, among others, transaction costs, administration and other expenses incurred
by the Portfolio, changes in either the composition of the MSCI EAFE Index or
the assets of the Portfolio, and the timing and amount of Portfolio investor
contributions and withdrawals, if any. The Portfolio seeks to track the MSCI
EAFE Index, therefore, the Adviser generally will not attempt to judge the
merits of any particular security as an investment.
The Portfolio may invest to a lesser extent in short-term debt securities and
money market instruments to meet redemption requests or to facilitate investment
in the securities of the MSCI EAFE Index. Securities index futures contracts and
related options, warrants and convertible securities may be used for a number of
reasons, including: to simulate full investment in the MSCI EAFE Index while
retaining a cash balance for Portfolio management purposes; to facilitate
trading; to reduce transaction costs; or to seek higher investment returns when
a futures contract, option, warrant or convertible security is priced more
attractively than the underlying equity security or MSCI EAFE Index. These
instruments are considered to be derivatives.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
INDEX FUND RISK: The Portfolio is not actively managed and invests in securities
included in the index regardless of their investment merit. Therefore, the
Portfolio cannot modify its investment strategies to respond to changes in the
economy and may be particularly susceptible to a general decline in the U.S. or
global stock market segment relating to the index.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities that can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, foreign investments can be adversely affected by:
unfavorable currency exchange rates (relative to the U.S. dollar for securities
denominated in a foreign currencies);
------------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
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78
- --------------------------------------------------------------------------------
inadequate or inaccurate information about foreign companies; higher
transaction, brokerage and custody costs; adverse changes in foreign economic
and tax policies; and foreign government instability, war or other adverse
political or economic actions. Other specific risks of investing in foreign
securities include:
EURO RISK: The Portfolio may invest in securities issued by European issuers. On
January 1, 1999, 11 of the 15 member states of the European Monetary Union
("EMU") introduced the "Euro" as a common currency. During a three-year
transitional period, the Euro will coexist with each participating state's
currency and, on July 1, 2002, the Euro is expected to become the sole currency
of the participating states. The introduction of the Euro will result in the
redenomination of European debt and equity securities over a period of time,
which may result in various legal and accounting differences and/or tax
treatments that otherwise would not likely occur. During this period, the
creation and implementation of suitable clearing and settlement systems and
other operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements as are U.S. companies, which could adversely affect
their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which may
cause the Portfolio to lose money or be prevented from earning capital gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's average annual total return for
1998 and 1999, the Portfolio's first two years of existence, and some of the
risks of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the perfomance results. The Portfolio's inception
date was January 1, 1998.
<PAGE>
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79
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: 20.07%
1999: 27.50%
Best quarter: Worst quarter:
20.43% (1998 4th Quarter) (-13.90)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
BT International Equity Index Portfolio 27.50% 23.69%
- --------------------------------------------------------------------------------
MSCI EAFE Index* 26.96% 23.43%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
BANKERS TRUST COMPANY ("Bankers Trust"), 130 Liberty Street (One Bankers Trust
Plaza), New York, New York 10006. Bankers Trust has been the Adviser to the
Portfolio since it commenced operations. Bankers Trust is a wholly-owned
subsidiary of Bankers Trust Corporation. Bankers Trust conducts a variety of
general banking and trust activities and is a major wholesale supplier of
financial services to the international and domestic institutional markets,
including investment management. In 1999, Bankers Trust Corporation finalized a
merger in which Bankers Trust Corporation was acquired by and became a
subsidiary of Deutsche Bank AG.
----------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
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- --------------------------------------------------------------------------------
CAPITAL GUARDIAN INTERNATIONAL PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth of capital by investing
primarily in non-U.S. equity securities.
THE INVESTMENT STRATEGY
The Portfolio invests primarily (at least 80% of its net assets) in securities
of non-U.S. issuers (including American Depositary Receipts and U.S. registered
securities) and securities whose principal markets are outside of the U.S. While
the assets of the Portfolio can be invested with geographic flexibility, the
Portfolio will emphasize investment in securities of companies located in
Europe, Canada, Australia, and the Far East, giving due consideration to
economic, social, and political developments, currency risks and the liquidity
of various national markets. In addition, the Portfolio may invest in securities
of issuers domiciled in other countries including developing countries. In
determining the domicile of an issuer, the Adviser takes into account where the
company is legally organized, the location of its principal corporate offices
and where it conducts its principal operations.
The Portfolio primarily invests in common stocks (or securities convertible into
common stocks), warrants, rights, and non-convertible preferred stock. However,
when the Adviser believes that market and economic conditions indicate that it
is desirable to do so, the Portfolio may also purchase high-quality debt
securities rated, at the time of purchase, within the top three quality
categories by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("S&P") (or unrated securities of equivalent quality), repurchase
agreements, and short-term debt obligations denominated in U.S. dollars or
foreign currencies.
Although the Portfolio does not intend to seek short-term profits, securities in
the Portfolio will be sold whenever the Adviser believes it is appropriate to do
so without regard to the length of time a particular security may have been
held.
To the extent the Portfolio invests in non-U.S. dollar denominated securities or
holds non-U.S. dollar assets, the Portfolio may hedge against possible
variations in exchange rates between currencies by purchasing and selling
currency futures or put and call options and may also enter into forward foreign
currency exchange contracts to hedge against changes in currency exchange rates.
The Portfolio may also cross-hedge between two non-U.S. currencies.
When market or financial conditions warrant, the Portfolio may invest a
substantial portion of its assets in short-term obligations for temporary or
defensive purposes. If such action is taken, it will detract from achievement of
the Portfolio's investment objective during such periods.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
Other specific risks of investing in foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in emerging
markets countries and/or their securities markets, such as less diverse and less
mature economic structures, less stable political
<PAGE>
- ----------
81
- --------------------------------------------------------------------------------
systems, more restrictive foreign investment policies, smaller-sized securities
markets and low trading volumes. Such risks can make investments illiquid and
more volatile than investments in developed countries and such securities may be
subject to abrupt and severe price declines.
EURO RISK: The Portfolio may invest in securities issued by European issuers. On
January 1, 1999, 11 of the 15 member states of the European Monetary Union
("EMU") introduced the "Euro" as a common currency. During a three-year
transitional period, the Euro will coexist with each participating state's
currency and, on July 1, 2002, the Euro is expected to become the sole currency
of the participating states. The introduction of the Euro will result in the
redenomination of European debt and equity securities over a period of time,
which may result in various legal and accounting differences and/or tax
treatments that otherwise would not likely occur. During this period, the
creation and implementation of suitable clearing and settlement systems and
other operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements as are U.S. companies, which could adversely affect
their value.
GROWTH INVESTING RISK: This Portfolio uses a growth oriented approach to stock
selection. The price of growth stocks may be more sensitive to changes in
current or expected earnings than the prices of other stocks. The price of
growth stocks is also subject to the risk that the stock price of one or more
companies will fall or will fail to appreciate as anticipated by the Adviser,
regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in relation to changes in interest rates
and changes in the value of the underlying common stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
CAPITAL GUARDIAN TRUST COMPANY ("Capital Guardian"), 333 South Hope Street, Los
Angeles, CA 90071. Capital Guardian is a wholly-owned subsidiary of Capital
Group International, Inc., which itself is a wholly owned subsidiary of The
Capital Group Companies, Inc. Capital Guardian has been providing investment
management services since 1968 and manages approximately $123 billion as of
December 31, 1999.
Capital Guardian uses a multiple portfolio manager system under which the
Portfolio is divided into several segments. Each segment is individually managed
with the portfolio manager free to decide on company and industry selections as
well as valuation and transaction assessment. An additional portion of the
Portfolio is managed by a group of investment research analysts.
The individual portfolio managers of each segment of the Portfolio, other than
that managed by the group of research analysts, are as follows:
DAVID I. FISHER. David Fisher is Chairman of the Board of Capital Group
International, Inc. and Capital Guardian. He joined the Capital Guardian
organization in 1969.
-------------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
- ----------
82
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HARTMUT GIESECKE. Hartmut Giesecke is Chairman of the Board of Capital's
Japanese investment management subsidiary, Capital International K.K., and
Managing Director Asia-Pacific, Capital Group International, Inc. He is also a
Senior Vice President and a Director of Capital International Research, Inc. and
Capital International, Inc. He joined the Capital Guardian organization in 1972.
RICHARD N. HAVAS. Richard Havas is a Senior Vice President and a portfolio
manager for Capital Guardian and Capital International Limited. He is also a
Senior Vice President and Director for Capital Guardian (Canada), Inc. and
Capital International Research, Inc. He joined the Capital Guardian organization
in 1986.
NANCY J. KYLE. Nancy Kyle is a Senior Vice President and a Director and member
of the Executive Committee of Capital Guardian. She is also President and a
Director of Capital Guardian (Canada), Inc. and a Vice President of Emerging
Markets Growth Fund. She is an international equity and emerging markets
portfolio manager. She joined the Capital Guardian organization in 1991.
ROBERT RONUS. Robert Ronus is President and a Director of Capital Guardian. He
is also Chairman of the Board of Capital International Research, Inc. Chairman
of the Board and a Director of Capital Guardian (Canada), Inc., a Director of
The Capital Group Companies, Inc. and Capital Group International, Inc., and a
Senior Vice President of Capital International S.A. and Capital International
Limited. He joined the Capital Guardian organization in 1972.
LIONEL M. SAUVAGE. Lionel Sauvage is a Senior Vice President and portfolio
manager for Capital Guardian and a Vice President and a Director for Capital
International Research, Inc. He joined the Capital Guardian organization in
1987.
NILLY SIKORSKY. Nilly Sikorsky is President and Managing Director of Capital
International S.A., Chairman of Capital International Perspective S.A., Managing
Director-Europe and a Director of Capital Group International, Inc., as well as
a Director of The Capital Group Companies, Inc., Capital International Limited,
and Capital International K.K. She joined the Capital Guardian organization in
1962.
RUDOLF M. STAEHELIN. Rudolf Staehelin is a Senior Vice President and Director of
Capital International Research, Inc. and Capital International S.A. He is a
portfolio manager for Capital Guardian, Capital International S.A., and Capital
International Limited. He joined the Capital Guardian organization in 1981.
<PAGE>
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83
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MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term capital appreciation by investing
primarily in equity securities of issuers in emerging market countries.
THE INVESTMENT STRATEGY
The Portfolio is a non-diversified Portfolio that invests primarily in equity
securities of companies located in emerging market countries. Such equity
securities may include common stocks, preferred stocks, convertible securities,
depositary receipts, rights and warrants. The Adviser focuses on growth-oriented
companies in emerging market countries that it believes have strong developing
economies and increasingly sophisticated markets. The Portfolio generally
invests only in emerging market countries whose currencies are freely
convertible into United States dollars.
A Portfolio may be considered to be "non-diversified" for federal securities law
purposes because it invests in a limited number of securities. In all cases, the
Portfolio intends to be diversified for tax purposes so that it can qualify as a
regulated investment company.
For purposes of this Portfolio, an emerging market country security is defined
as a security of an issuer having one or more of the following characteristics:
o Its principal securities trading market is in an emerging market country;
o alone or on a consolidated basis, at least 50% of its revenues are derived
from goods produced, sales made or services performed in an emerging market
country; and
o it is organized under the laws of or has a principal office in an emerging
market country.
The Adviser's investment approach combines top-down country allocation with
bottom-up stock selection.
In a "top-down" approach, country allocations are made based on relative
economic, political and social fundamentals, stock valuations and investor
sentiment. In a "bottom-up" approach, securities are reviewed and chosen
individually.
The Portfolio may invest to a lesser extent in corporate or government-issued or
guaranteed debt securities of issuers in emerging market countries, including
debt securities that are rated or considered to be below investment grade ("junk
bonds"). The Portfolio also may, to a lesser extent, invest in equity or debt
securities (including "junk bonds") of corporate or governmental issuers located
in industrialized countries, foreign currency or investment funds and
supranational entities such as the World Bank. In addition, the Portfolio may
utilize forward foreign currency contracts, options and futures contracts and
swap transactions.
When market or financial conditions warrant, the Portfolio may invest in certain
short- and medium-term fixed income securities of issuers other than emerging
market issuers and may invest without limitation in high quality money market
instruments for temporary or defensive purposes. Such investment strategies are
inconsistent with the Portfolio's investment objectives and could result in the
Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests primarily in equity securities, therefore, its
performance may go up or down depending on general market conditions. Other
principal risks include:
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities that can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile and subject to less
government supervision than domestic markets. There
------------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
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may be difficulties enforcing contractual obligations, and it may take more time
for trades to clear and settle. In addition, foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the U.S.
dollar for securities denominated in a foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions. Other specific risks of investing in foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in emerging
market countries and/or their securities markets, such as less diverse and less
mature economic structures, less stable political systems, more restrictive
foreign investment policies, smaller-sized securities markets and low trading
volumes. Such risks can make investments illiquid and more volatile than
investments in developed countries and such securities may be subject to abrupt
and severe price declines.
EURO RISK: The Portfolio may invest in securities issued by European issuers. On
January 1, 1999, 11 of the 15 member states of the European Monetary Union
("EMU") introduced the "Euro" as a common currency. During a three-year
transitional period, the Euro will coexist with each participating state's
currency and, on July 1, 2002, the Euro is expected to become the sole currency
of the participating states. The introduction of the Euro will result in the
redenomination of European debt and equity securities over a period of time,
which may result in various legal and accounting differences and/or tax
treatments that otherwise would not likely occur. During this period, the
creation and implementation of suitable clearing and settlement systems and
other operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements as are U.S. companies, which could adversely affect
their value.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which may
cause the Portfolio to lose money or be prevented from earning capital gains.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs that could be passed through to
shareholders.
NON-DIVERSIFICATION RISK: Since a relatively high percentage of the Portfolio's
assets may be invested in the securities of a limited number of issuers, some of
which may be within the same industry, the securities of the Portfolio may be
more sensitive to changes in the market value of a single issuer or industry or
to risks associated with a single economic, political or regulatory event than a
diversified portfolio.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with
<PAGE>
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85
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longer durations or maturities, will go down. When interest rates fall, the
reverse is true. In addition, to the extent that the Portfolio invests in
investment grade securities, that are rated BBB by S&P or an equivalent rating
by any other NRSRO, it will be exposed to greater risk than higher-rated
obligations because BBB rated investment grade securities are regarded as having
only an adequate capacity to pay principal and interest and are considered to
lack outstanding investment characteristics. The risk that an issuer or
guarantor of a fixed income security or counterparty to the Portfolio's fixed
income transaction is unable to meets its financial obligations may be is
particularly significant for this Portfolio because this Portfolio may invest a
portion of its assets in "junk bonds" (i.e., securities rated below investment
grade). Junk bonds are issued by companies with questionable credit strength
and, consequently, are considered to be speculative in nature and may be subject
to greater market fluctuations than investment grade fixed-income securities.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of operations, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The inception date for the
Portfolio is August 20, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: -27.10%
1999: 95.81%
Best quarter: Worst quarter:
49.70% (1999 4th Quarter) (-22.14)% (1998 2nd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Morgan Stanley Emerging Markets
Equity Portfolio 95.81% 5.68%
- --------------------------------------------------------------------------------
MSCI Emerging Markets Free* 66.41% (0.88)%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MORGAN STANLEY ASSET MANAGEMENT ("MSAM"), 1221 Avenue of the Americas, New York,
NY 10020. MSAM has been the Adviser to the Portfolio since the Portfolio
commenced operations. MSAM conducts a worldwide investment management business,
providing a broad range of portfolio management services to customers in the
United States and abroad. MSAM serves as an investment adviser to numerous
open-end and closed-end investment companies. On December 1, 1998, Morgan
Stanley Asset Management Inc. changed its name to Morgan Stanley Dean Witter
Investment Management Inc. but continues to do business in certain instances
using the name Morgan Stanley Asset Management.
The Portfolio Managers, responsible for the day to day management of the
Portfolio since the Portfolio commenced
-------------------------- EQ Advisors Trust
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INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
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operations, are: ROBERT MEYER, a Managing Director of MSAM and Morgan Stanley &
Co. Incorporated, who is head of MSAM's Emerging Markets Equity Group and who
joined MSAM in 1989; and ANDY SKOV, a Managing Director of MSAM and Morgan
Stanley & Co. Incorporated who joined MSAM in 1994.
<PAGE>
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EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of companies in a number of
different countries. Such equity securities normally include common stocks,
preferred stocks, securities convertible into common or preferred stocks and
warrants. Under normal market circumstances, a majority of the Portfolio's
assets will be invested in companies located in at least three different
countries outside the United States. The countries in which the Portfolio may
invest include emerging market countries.
The Portfolio considers the following to be an issuer of securities located in a
country other than the U.S.:
o companies organized under the laws of a country other than the U.S. with a
principal office outside the U.S.; or
o companies that earn 50% or more of their total revenues from business
outside the U.S.
The Portfolio may engage in a variety of transactions using "derivatives," such
as futures, options, warrants, forward and swap contracts on both securities and
currencies.
The Portfolio will not limit its investments to any particular type of company.
The Portfolio may invest in companies of any size whose earnings the Adviser
believes to be in a relatively strong growth trend or whose securities the
Adviser considers to be undervalued. The Adviser considers, among other things,
a company's financial strength, competitive position in its industry and
projected future earnings and dividends when deciding whether to buy or sell
investments.
When market or financial conditions warrant, the Portfolio may invest, without
limitation, in securities of any kind, including securities traded primarily in
U.S. markets, cash and money market instruments for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities that can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, foreign investments can be adversely affected by:
unfavorable currency exchange rates (relative to the U.S. dollar for securities
denominated in a foreign currencies); inadequate or inaccurate information about
foreign companies; higher transaction, brokerage and custody costs; adverse
changes in foreign economic and tax policies; and foreign government
instability, war or other adverse political or economic actions. Other specific
risks of investing in foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in emerging
markets countries and/or their securities markets, such as less diverse and less
mature economic structures, less stable political systems, more restrictive
foreign investment policies, smaller-sized securities markets and low trading
volumes. Such risks can make investments illiquid and more volatile than
investments in developed countries and such securities may be subject to abrupt
and severe price declines.
EURO RISK: The Portfolio may invest in securities issued by European issuers. On
January 1, 1999, 11 of the 15 member states of the European Monetary Union
("EMU") introduced the "Euro" as a common currency. During a three-year
transitional period, the Euro will coexist with
----------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
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each participating state's currency and, on July 1, 2002, the Euro is expected
to become the sole currency of the participating states. The introduction of the
Euro will result in the redenomination of European debt and equity securities
over a period of time, which may result in various legal and accounting
differences and/or tax treatments that otherwise would not likely occur. During
this period, the creation and implementation of suitable clearing and settlement
systems and other operational problems may cause market disruptions that could
adversely affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements as are U.S. companies, which could adversely affect
their value.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less well-known and may trade less frequently and in lower
volume; such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; and the products or technologies
of such companies may be at a relatively early stage of development or not fully
tested.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which may
cause the Portfolio to lose money or be prevented from earning capital gains.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of operations, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results . The inception date for
the Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: 19.51%
1999: 60.24%
Best quarter: Worst quarter:
36.26% (1999 4th Quarter) (-18.48)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
EQ/Putnam International Equity Portfolio 60.24% 31.98%
- --------------------------------------------------------------------------------
MSCI EAFE Index* 26.96% 18.32%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC. ("Putnam Management"), One Post Office
Square, Boston, MA 02109. Putnam Management has been the Adviser to the
<PAGE>
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Portfolio since the Portfolio commenced operations. Putnam Management has been
managing mutual funds since 1937. Putnam Management is a subsidiary of Putnam
Investments, Inc. which is itself a subsidiary of Marsh & McLennan Companies,
Inc.
The Portfolio Manager, responsible for the day to day management of the
Portfolio since the inception of the Portfolio, is OMID KAMSHAD, Managing
Director and Chief Investment Officer of Core International Equity, who has been
employed as an investment professional* by Putnam Management since 1996. Prior
to January 1996, he was a Director of Investments at Lombard Odier International
Portfolio Management Limited and prior to April 1995, he was Director at Baring
Asset Management Company. (*Investment professional means that the manager was
either a portfolio manager or analyst.)
------------------------ EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
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T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital through investment
primarily in common stocks of established non-United States companies.
THE INVESTMENT STRATEGY
The Portfolio invests substantially all of its assets in common stocks of
established companies outside of the United States. The Portfolio intends to
diversify broadly among countries throughout the world by having securities from
at least five different countries represented in the Portfolio. No more than 20%
of its assets will be invested in securities of any one country, except that up
to 35% can be invested in stocks of companies in Australia, Canada, France,
Japan, United Kingdom or Germany. In determining the appropriate distribution of
investments among various countries and geographic regions, the Adviser
ordinarily considers the following factors:
o prospects for relative economic growth between foreign countries;
o expected levels of inflation;
o government policies influencing business conditions;
o the outlook for currency relationships; and
o the range of individual investment opportunities available to international
investors.
Country allocation is driven largely by stock selection, though the Adviser may
limit investments in markets that appear to have poor overall prospects.
The Portfolio expects to invest substantially all of its assets in common stocks
of large and, to a lesser extent, medium-sized companies. Typically, however,
the Portfolio may also invest in a variety of other equity securities such as
preferred stocks, warrants and convertible securities as well as governmental
debt securities and investment grade debt securities. The Portfolio may also
invest in certain foreign investment funds, hybrid instruments and derivative
instruments in keeping with the Portfolio objective. Stock selection reflects a
growth style. In analyzing companies for investment, the Adviser uses a
"bottom-up" approach and looks for companies that have one or more of the
following characteristics:
o leading market position;
o attractive business niche;
o strong franchise or natural monopoly;
o technological leadership or proprietary advantages;
o seasoned management;
o earnings growth and cash flow sufficient to support growing dividends;
o healthy balance sheet with relatively low debt.
This means that the securities are selected based upon fundamental analysis
performed by the Adviser in an effort to identify companies capable of achieving
and sustaining above-average long-term earnings growth.
When market or financial conditions warrant, the Portfolio may invest without
limitation in high quality U.S. Government and corporate debt obligations for
temporary or defensive purposes. Such investment strategies are inconsistent
with the Portfolio's investment objectives and could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Funds that invest overseas
generally carry more risk than funds that invest strictly in U.S. stocks. Other
principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
<PAGE>
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FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities that can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, foreign investments can be adversely affected by:
unfavorable currency exchange rates (relative to the U.S. dollar for securities
denominated in a foreign currencies); inadequate or inaccurate information about
foreign companies; higher transaction, brokerage and custody costs; adverse
changes in foreign economic and tax policies; and foreign government
instability, war or other adverse political or economic actions. Other specific
risks of investing in foreign securities include:
CURRENCY RISK: The risk that changes in currency exchange rates will negatively
affect securities denominated in, and/or receiving revenues in, foreign
currencies. Adverse changes in currency exchange rates (relative to the U.S.
dollar) may erode or reverse any potential gains from a Portfolio's investment
in securities denominated in a foreign currency or may widen existing losses.
EMERGING MARKET RISK: There are greater risks involved in investing in emerging
markets countries and/or their securities markets, such as less diverse and less
mature economic structures, less stable political systems, more restrictive
foreign investment policies, smaller-sized securities markets and low trading
volumes. Such risks can make investments illiquid and more volatile than
investments in developed countries and such securities may be subject to abrupt
and severe price declines. Fund performance will likely be negatively affected
by portfolio exposure to nations suffering severe inflation or currency
devaluation.
EURO RISK: The Portfolio may invest in securities issued by European issuers. On
January 1, 1999, 11 of the 15 member states of the European Monetary Union
("EMU") introduced the "Euro" as a common currency. During a three-year
transitional period, the Euro will coexist with each participating state's
currency and, on July 1, 2002, the Euro is expected to become the sole currency
of the participating states. The introduction of the Euro will result in the
redenomination of European debt and equity securities over a period of time,
which may result in various legal and accounting differences and/or tax
treatments that otherwise would not likely occur. During this period, the
creation and implementation of suitable clearing and settlement systems and
other operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements as are U.S. companies, which could adversely affect
their value.
GEOGRAPHIC RISK: The economies and financial markets of certain regions, such as
Latin America and Asia, can be highly interdependent and may decline all at the
same time.
FUTURES/OPTIONS RISK: To the extent the Portfolio uses futures and options, it
is exposed to additional volatility and potential losses.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
---------------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL STOCK PORTFOLIOS (CONTINUED)
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LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which may
cause the Portfolio to lose money or be prevented from earning capital gains.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of operations, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The inception date for the
Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: 13.68%
1999: 31.83%
Best quarter: Worst quarter:
24.01% (1999 4th Quarter) (-13.68)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
T. Rowe Price International
Stock Portfolio 31.83% 15.70%
- --------------------------------------------------------------------------------
MSCI EAFE Index* 26.96% 18.32%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ROWE PRICE-FLEMING INTERNATIONAL, INC.
("Price-Fleming"), 100 East Pratt Street, Baltimore, MD 21202. Price-Fleming has
been the Adviser to the Portfolio since it commenced its operations.
Price-Fleming was incorporated in Maryland in 1979 as a joint venture between T.
Rowe Price and Robert Fleming Holdings Limited ("Flemings"). Flemings is a
diversified investment organization that participates in a global network of
regional investment offices. The common stock of Price-Fleming is 50% owned by a
wholly owned subsidiary of T. Rowe Price, 25% owned by a subsidiary of Flemings
and 25% owned by a subsidiary of Jardine Fleming Group Limited ("Jardine
Fleming"). Flemings owns 10% of Jardine Fleming.
Investment decisions with respect to the Portfolio are made by an Investment
Advisory Group. The Investment Advisory Group has day-to-day responsibility for
managing the Portfolio and developing and executing the Portfolio's investment
program.
<PAGE>
LONG-TERM BOND PORTFOLIO
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JPM CORE BOND PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity.
THE INVESTMENT STRATEGY
This Portfolio's total return will consist of income plus realized and
unrealized capital gains and losses. The Portfolio currently invests all of its
assets in investment grade debt securities rated BBB or better by Standard &
Poor's ("S&P") or Baa or better by Moody's Investors Services, Inc. ("Moody's")
or unrated securities of similar quality.
The Adviser actively manages the Portfolio's duration, the allocation of
securities across market sectors and the selection of specific securities within
market sectors. Based on fundamental, economic and capital markets research, the
Adviser adjusts the duration of the Portfolio based on the Adviser's view of the
market and interest rates. The Adviser also actively allocates the Portfolio's
assets among the broad sectors of the fixed income market. These securities
principally include U.S. Government and agency securities, corporate securities,
private placements, asset-backed securities, mortgage-related securities and
direct mortgage obligations. The securities can be of any duration but will
generally mature within one year of the Salomon Brothers Broad Investment Grade
Bond Index (currently about 5 years). The Portfolio may also use futures
contracts to change the duration of the Portfolio's bond holdings.
Duration is a measure of the weighted average maturity of the bonds held by the
Portfolio and can be used by the Adviser as a measure of the sensitivity of the
market value of the Portfolio to changes in interest rates. Generally, the
longer the duration of the Portfolio, the more sensitive its market value will
be to changes in interest rates.
The Portfolio may also invest up to 25% of its assets in securities of foreign
issuers, including up to 20% of its assets in debt securities denominated in
currencies of developed foreign countries.
Under normal market conditions, the Portfolio will be primarily invested in
bonds. When market or financial conditions warrant, the Portfolio may invest up
to 100% of its assets in money market securities for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objective and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
FIXED INCOME RISK: This Portfolio invests primarily in fixed income securities,
therefore, the Portfolio's performance will be affected by changes in interest
rates, credit risks of the issuer, the duration and maturity of the Portfolio's
fixed income holdings, and adverse market and economic conditions. Other
specific risks of investing in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price and
total return) of the Portfolio's fixed income securities, particularly those
with longer durations or maturities, will go down. When interest rates fall, the
reverse is true.
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the issuer
or guarantor of a debt security or counterparty to a Portfolio's transaction is
unable or unwilling to make timely principal and/or interest payments, or to
honor its financial obligations. Investment grade securities (rated, e.g., BBB
by S&P) are somewhat riskier than higher rated obligations because they are
regarded as having only an adequate capacity to pay principal and interest, are
considered to lack outstanding investment characteristics, and may be
speculative.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the duration of
mortgage-backed securities to increase. Falling interest rates may cause the
value and yield of mortgage-backed securities to fall. Falling interest rates
also may encourage borrowers to pay off their mortgages sooner than anticipated
--------------------------- EQ Advisors Trust
<PAGE>
LONG-TERM BOND PORTFOLIO (CONTINUED)
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(pre-payment). The Portfolio would need to reinvest the pre-paid funds at the
newer, lower interest rates.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which may
cause the Portfolio to lose money or be prevented from earning capital gains.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs that could be passed through to
shareholders.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998 and
1999, the Portfolio's first two years of existence, and some of the risks of
investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for one year and since inception. The table also compares the Portfolio's
performance to the returns of a broad-based index. Both the bar chart and table
assume reinvestment of dividends and distributions. Past performance is not an
indication of future performance. The performance results presented below do not
reflect any insurance and Contract-related fees and expenses, which would reduce
the performance results. The Portfolio commenced operations on January 1, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998: 9.02%
1999: -1.64%
Best quarter: Worst quarter:
4.72% (1998 3rd Quarter) (-1.62)% (1999 2nd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
JPM Core Bond Portfolio (1.64)% 3.56%
- --------------------------------------------------------------------------------
Salomon Brothers Broad Investment
Grade Bond Index* (0.83)% 4.19%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
J.P. MORGAN INVESTMENT MANAGEMENT INC.
("J.P. Morgan"), 522 Fifth Avenue, New York, New York 10036. J.P. Morgan has
been the Adviser to the Portfolio since it commenced operations. J.P. Morgan is
a registered investment adviser and is a wholly owned subsidiary of J.P. Morgan
& Co. Incorporated, a bank holding company. J.P. Morgan manages portfolios for
corporations, governments,
<PAGE>
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95
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endowments, as well as many of the largest corporate retirements plans in the
nation.
The Portfolio Managers, responsible for the day to day management of the
Portfolio since it commenced operations, are PAUL L. ZEMSKY, a Managing Director
of J.P. Morgan and a portfolio manager specializing in quantitative techniques,
who joined J.P. Morgan in 1985; and ROBERT J. TEATOM, a Managing Director of
J.P. Morgan and co-head of its U.S. Fixed Income Group, who joined J.P. Morgan
in 1975.
--------------------------- EQ Advisors Trust
<PAGE>
SHORT/INTERMEDIATE TERM BOND PORTFOLIOS
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ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve high current income consistent with
relative stability of principal through investment primarily in debt securities
issued or guaranteed as to principal and interest by the U.S. Government or its
agencies or instrumentalities.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in U.S. Government securities. The Portfolio may
also invest in repurchase agreements and forward commitments related to U.S.
Government securities and may also purchase debt securities of non-government
issuers that own mortgages.
Duration is a measure of the weighted average maturity of the bonds held by the
Portfolio and can be used by the Adviser as a measure of the sensitivity of the
market value of the Portfolio to changes in interest rates. Generally, the
longer the duration of the Portfolio, the more sensitive its market value will
be to changes in interest rates.
In some cases, the Adviser's calculation of duration will be based on certain
assumptions (including assumptions regarding prepayment rates, in the
mortgage-backed or asset-backed securities, and foreign and domestic interest
rates). As of December 31, 1999, the Adviser considered the duration of a
10-year Treasury bond to be [4.68] years. The Portfolio's investments will
generally have a final maturity of not more than ten years or a duration not
exceeding that of a 10-year Treasury note.
The Portfolio buys and sells securities with a view to maximizing current return
without, in the opinion of the Adviser, undue risk to principal. Potential
capital gains resulting from possible changes in interest rates will not be a
major consideration. The Portfolio may take full advantage of a wide range of
maturities of U.S. Government securities and may adjust the dollar-weighted
average maturity of its portfolio from time to time, depending on the Adviser's
assessment of relative yields on securities of different maturities and the
expected effect of future changes in interest rates on the market value of the
securities held by the Portfolio. The Portfolio may also invest a substantial
portion of its assets in money market instruments.
In order to enhance its current return, to reduce fluctuations in net asset
value, and to hedge against changes in interest rates, the Portfolio may write
covered call and put options on U.S. Government securities and may purchase call
and put options on U.S. Government securities. The Portfolio may also enter into
interest rate futures contracts with respect to U.S. Government securities, and
may write and purchase options thereon. The Portfolio may also make secured
loans of its portfolio securities without limitation and enter into repurchase
agreement with respect to U.S. Government securities with commercial banks and
registered broker-dealers.
The Portfolio may also make use of various other investment strategies,
including covered short sales, and the purchase or sale of securities on a
when-issued, delayed delivery or forward commitment basis.
Under normal market conditions, the Portfolio will invest at least 65%, and
expects to invest at least 80%, of its total assets in U.S. Government
securities and repurchase agreements and forward commitments relating to U.S.
Government Securities. U.S. Government securities include:
o U.S. Treasury Bills: Direct obligations of the U.S. Treasury which are
issued in maturities of one year or less.
o U.S. Treasury Notes: Direct obligations of the U.S. Treasury issued in
maturities which vary between one and ten years, with interest payable
every six months.
<PAGE>
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o U.S. Treasury Bonds: Direct obligations of the U.S. Treasury which are
issued in maturities more than ten years from the date of issue, with
interest payable every six months.
o "Ginnie Maes": Debt securities issued by a mortgage banker or other
mortgagee and represent an interest in a pool of mortgages insured by the
Federal Housing Administration or the Farmers Home Administration or
guaranteed by the Veterans Administration. The Government National Mortgage
Association ("GNMA") guarantees the timely payment of principal and
interest. Ginnie Maes, although not direct obligations of the U.S.
Government, are guaranteed by the U.S. Treasury.
o "Fannie Maes": The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private stockholders
that purchases residential mortgages from a list of approved
seller/servicers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA and supported by FNMA's
right to borrow from the U.S. Treasury, at the discretion of the U.S.
Treasury. Fannie Maes are not backed by the full faith and credit of the
U.S. Government.
o "Freddie Macs": The Federal Home Loan Mortgage Corporation ("FHLMC"), a
corporate instrumentality of the U.S. Government, issues participation
certificates ("PCs") which represent an interest in residential mortgages
from FHLMC's National Portfolio. FHLMC guarantees the timely payment of
interest and ultimate collection of principal, but PCs are not backed by
the full faith and credit of the U.S. Government.
o Governmental Collateralized Mortgage Obligations: These are securities
issued by a U.S. Government instrumentality or agency which are backed by a
portfolio of mortgages or mortgage-backed securities held under an
indenture.
o "Sallie Maes": The Student Loan Marketing Association ("SLMA") is a
government-sponsored corporation owned entirely by private stockholders
that provides liquidity for banks and other institutions engaged in the
Guaranteed Student Loan Program. These loans are either directly guaranteed
by the U.S. Treasury or guaranteed by state agencies and reinsured by the
U.S. Government. SLMA issues both short term notes and longer term public
bonds to finance its activities.
The Portfolio may also invest in "zero coupon" U.S. Government securities which
have been stripped of their unmatured interest coupons and receipts or in
certificates representing undivided interests in such stripped U.S. Government
securities and coupons. These securities tend to be more volatile than other
types of U.S. Government securities.
Guarantees of the Portfolio's U.S. Government Securities guarantee only the
payment of principal at maturity and interest when due on the guaranteed
securities, and do not guarantee the securities' yield or value or the yield or
value of the Portfolio's shares.
The Portfolio may also purchase collateralized mortgage obligations ("CMOs")
issued by non-governmental issuers and securities issued by a real estate
mortgage investment conduits ("REMICs"), but only if they are collateralized by
U.S. Government Securities. However, CMOs issued by entities other than U.S.
Government agencies and instrumentalities and securities issued by REMICs are
not considered U.S. Government securities for purposes of the Portfolio meeting
its policy of investing at least 65% of its total assets in U.S. Government
securities.
THE PRINCIPAL RISKS
FIXED INCOME RISK: This Portfolio invests primarily in fixed income securities,
therefore, the Portfolio's performance will be affected by changes in interest
rates, the duration and maturity of the Portfolio's fixed income holdings, and
adverse market and economic conditions. Other risks that relate to the
Portfolio's investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price and
total return) of the Portfolio's fixed
----------------------- EQ Advisors Trust
<PAGE>
SHORT/INTERMEDIATE TERM BOND PORTFOLIOS (CONTINUED)
- ----------
98
- --------------------------------------------------------------------------------
income securities, particularly those with longer durations or maturities, will
go down. When interest rates fall, the reverse is true.
INVESTMENT GRADE SECURITIES RISK: With respect to fixed income investments of
the Portfolio, other than U.S. Government securities, rated BBB by S&P or an
equivalent rating by any other nationally recognized statistical rating
organization ("NRSRO"), the Portfolio could lose money if the issuer or
guarantor of a debt security or counterparty to a Portfolio's transaction is
unable or unwilling to make timely principal and/or interest payments, or to
honor its financial obligations. Investment grade securities which are rated BBB
by S&P, or an equivalent rating by any other NRSRO, are somewhat riskier than
higher rated obligations because they are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the duration of
mortgage-backed securities to increase, making them even more susceptible to
interest rate changes. Falling interest rates may cause the value and yield of
mortgage-backed securities to fall. Falling interest rates also may encourage
borrowers to pay off their mortgages sooner than anticipated (pre-payment). The
Portfolio would need to reinvest the pre-paid funds at the newer, lower interest
rates.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities without restriction. The risk in lending portfolio securities, as
with other extensions of secured credit, consist of possible delay in receiving
additional collateral, or in the recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last eight calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one year,
five years and since inception and compares the Portfolio's performance to: (i)
the returns of a broad-based index and (ii) the returns of an index of funds
with similar investment objectives. Past performance is not an indication of
future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Intermediate Government
Securities Portfolio) managed by the Adviser using the same investment
objectives and strategy as the Portfolio. For these purposes, the Portfolio is
considered to be the successor entity to the predecessor registered investment
company (HRT/Alliance Intermediate Government Securities Portfolio) whose
inception date is April 1, 1991. The assets of the predecessor were transferred
to the Portfolio on October 18, 1999. Following that transfer, the performance
shown (for the period October 19, 1999 through December 31, 1999) is that of the
Portfolio. For these purposes, the performance results of the Portfolio and its
predecessor registered investment company have been linked.
<PAGE>
- ----------
99
- --------------------------------------------------------------------------------
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN*
1992: 5.4%
1993: 10.3%
1994: -4.6%
1995: 13.1%
1996: 3.5%
1997: 7.0%
1998: 7.5%
1999: -0.11%
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Intermediate
Government Securities
Portfolio - Class IB Shares (0.11)% 6.09% 6.01%
- --------------------------------------------------------------------------------
Lehman Intermediate
Government Bonds** 0.49% 6.93% 6.76%
- --------------------------------------------------------------------------------
Lipper Intermediate Government
Funds Average** (2.13)% 5.91% 6.84%
- --------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (May 2, 1997),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
JEFFREY S. PHLEGAR has been responsible for the day-to-day management of the
Portfolio and its predecessor since January 1999. Mr. Phlegar, a Senior Vice
President of Alliance, has been associated with Alliance for more than five
years.
-------------------------- EQ Advisors Trust
<PAGE>
SHORT/INTERMEDIATE TERM BOND PORTFOLIOS (CONTINUED)
- ----------
100
- --------------------------------------------------------------------------------
ALLIANCE QUALITY BOND PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve high current income consistent with
preservation of capital by investing primarily in investment grade fixed income
securities.
THE INVESTMENT STRATEGY
The Portfolio expects to invest in readily marketable securities with relatively
attractive yields that the Adviser believes do not involve undue risk.
The Portfolio will follow a policy of investing at least 65% of its total assets
in securities which are rated at the time of purchase at least Baa by Moody's or
BBB by S&P, or in unrated fixed income securities that the Adviser determines to
be of comparable quality.
In the event that the credit rating of a security held by the Portfolio falls
below investment grade (or, in the case of unrated securities, the Adviser
determines that the quality of such security has deteriorated below investment
grade), the Portfolio will not be obligated to dispose of such security and may
continue to hold the obligation if the Adviser believes such an investment is
appropriate in the circumstances. The Portfolio will also seek to maintain an
average aggregate quality rating of its portfolio securities of at least A
(Moody's and S&P).
The Portfolio has complete flexibility as to the types of securities in which it
will invest and the relative proportions thereof. In this regard, the Portfolio
plans to vary the proportions of its holdings of long- and short-term fixed
income securities (including debt securities, convertible debt securities and
U.S. Government obligations), preferred stocks and dividend-paying common stocks
in order to reflect the Adviser's assessment of prospective cyclical changes
even if such action may adversely affect current income.
The Portfolio may also invest in foreign securities, although it will not invest
more than 20% of its total assets in securities denominated in currencies other
than the U.S. dollar. The Portfolio may enter into foreign currency futures
contracts (and related options), forward foreign currency exchange contracts and
options on foreign currencies for hedging purposes.
The Portfolio may also make use of various other investment strategies,
including zero coupon pay-in-kind securities, collateralized mortgage
obligations, securities lending with a value of up to 50% of its total assets,
the purchase or sale of securities on a when-issued, delayed delivery or forward
commitment basis and repurchase agreements. The Portfolio may also use
derivatives, including: purchasing put and call options and writing covered put
and call options on securities it may purchase. The Portfolio also intends to
write covered call options for cross-hedging purposes, which are designed to
provide a hedge against a decline in value of another security which the
Portfolio owns or has the right to acquire.
The Portfolio may seek to protect the value of its investments from interest
rate fluctuations by entering into various hedging transactions, such as
interest rate swaps and the purchase or sale of interest rate caps and floors.
When market or financial conditions warrant, the Portfolio may invest in certain
money market instruments for temporary or defensive purposes. Such investments
could result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
FIXED INCOME RISK: This Portfolio invests primarily in fixed income securities,
therefore, the Portfolio's performance will be affected by changes in interest
rates, credit risks of the issuer, the duration and maturity of the Portfolio's
fixed income holdings, and adverse market and economic conditions. Other risks
that relate to the Portfolio's investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price and
total return) of the Portfolio's fixed income securities, particularly those
with longer durations or maturities, will go down. When interest rates fall, the
reverse is true.
<PAGE>
- ----------
101
- --------------------------------------------------------------------------------
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the issuer
or guarantor of a debt security or counterparty to a Portfolio's transaction is
unable or unwilling to make timely principal and/or interest payments, or to
honor its financial obligations. Investment grade securities which are rated BBB
or S&P or an equivalent rating by any other nationally recognized statistical
rating organization, are somewhat riskier than higher rated obligations because
they are regarded as having only an adequate capacity to pay principal and
interest, are considered to lack outstanding investment characteristics, and may
be speculative.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the duration of
mortgage-backed securities to increase, making them even more susceptible to
interest rate changes. Falling interest rates may cause the value and yield of
mortgage-backed securities to fall. Falling interest rates also may encourage
borrowers to pay off their mortgages sooner than anticipated (pre-payment). The
Portfolio would need to reinvest the prepaid funds at the newer, lower interest
rates.
ZERO COUPON AND PAY-IN-KIND SECURITIES RISK: A zero coupon or pay-in-kind
security pays no interest in cash to its holder during its life. Accordingly,
zero coupon securities usually trade at a deep discount from their face or par
value and, together with pay-in-kind securities, will be subject to greater
fluctuations in market value in response to changing interest rates than debt
obligations of comparable maturities that make current distributions of interest
in cash.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying common
stock and provide higher yields than the underlying common stocks, but generally
offer lower yields than nonconvertible securities of similar quality. The value
of convertible securities fluctuates both in relation to changes in interest
rates and changes in the value of the underlying common stock.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; expropriation or nationalization; adverse changes in foreign economic and
tax policies; and foreign government instability, war or other adverse political
or economic actions.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. The risks in lending portfolio securities, as with other extensions
of secured credit, consist of possible delay in receiving additional collateral,
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
------------------------------- EQ Advisors Trust
<PAGE>
SHORT/INTERMEDIATE TERM BOND PORTFOLIOS (CONTINUED)
- ----------
102
- --------------------------------------------------------------------------------
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last six calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one and five years and
compares the Portfolio's performance to: (i) the returns of a broad-based index
and (ii) the returns of an index of funds with similar investment objectives.
Past performance is not an indication of future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Quality Bond Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance Quality
Bond Portfolio) whose inception date is October 1, 1993. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the performance
results of the Portfolio and its predecessor registered investment company have
been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN*
1994: -5.4%
1995: 16.8%
1996: 5.1%
1997: 8.9%
1998: 8.4%
1999: -2.25%
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Quality Bond Portfolio
- Class IB Shares (2.25)% 7.15% 4.66%
- --------------------------------------------------------------------------------
Lehman Aggregate Bonds** (0.82)% 7.73% 5.64%
- --------------------------------------------------------------------------------
Lipper Corporate Debt Funds
BBB Rated Average** (1.62)% 7.83% 5.32%
- --------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (July 8, 1998),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
MATTHEW BLOOM has been responsible for the day-to-day management of the
Portfolio and its predecessor since 1995. Mr. Bloom, a Senior Vice President of
Alliance, has been associated with Alliance since 1989.
<PAGE>
HIGH YIELD BOND PORTFOLIO
- ----------
103
- --------------------------------------------------------------------------------
ALLIANCE HIGH YIELD PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve a high return by maximizing current
income and, to the extent consistent with that objective, capital appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in diversified mix of high yield, fixed income
securities (so-called "junk bonds"), which generally involve greater volatility
of price and risk of principal and income than high quality fixed income
securities. Junk bonds generally have a higher current yield but are rated
either in the lower categories by NRSROs (i.e., rated Ba or lower by Moody's or
BB or lower by S&P) or are unrated securities of comparable quality.
The Portfolio will attempt to maximize current income by taking advantage of
market developments, yield disparities and variations in the creditworthiness of
issuers. Substantially all of the Portfolio's investments will be income
producing.
The Portfolio may also make use of various other investment strategies,
including investments in common stocks and other equity-type securities (such as
convertible debt securities) and secured loans of its portfolio securities
without limitation in order to enhance its current return and to reduce
fluctuations in net asset value. The Portfolio may also use derivatives,
including: writing covered call and put options; purchasing call and put options
on individual fixed income securities, securities indexes and foreign
currencies; and purchasing and selling stock index, interest rate and foreign
currency futures contracts and options thereon. The Portfolio may also invest in
participations and assignments of loans originally made by institutional lenders
or lending syndicates.
The Portfolio will not invest more than 10% of its total assets in:
(i) fixed income securities which are rated lower than B3 or B- or their
equivalents by one NRSRO or if unrated are of equivalent quality as determined
by the Adviser; and
(ii) money market instruments of any entity which has an outstanding issue of
unsecured debt that is rated lower than B3 or B- or their equivalents by an
NRSRO or if unrated is of equivalent quality as determined by the Adviser;
however, this restriction will not apply to:
o fixed income securities which the Adviser believes have similar
characteristics to securities which are rated B3 or higher by Moody's or B-
or higher by S&P, or
o money market instruments of any entity that has an unsecured issue of
outstanding debt which the Adviser believes has similar characteristics to
securities which are so rated.
In the event that any securities held by the Portfolio fall below those ratings,
the Portfolio will not be obligated to dispose of such securities and may
continue to hold such securities if the Adviser believes that such investments
are considered appropriate under the circumstances.
The Portfolio may also invest in fixed income securities that are providing high
current yields because of risks other than credit, such as prepayment risks, in
the case of mortgage-backed securities, or currency risks, in the case of
non-U.S. dollar denominated foreign securities.
When market or financial conditions warrant, the Portfolio may also make
temporary investments in high-quality U.S. dollar-denominated money market
instruments. Such investment strategies could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
JUNK BOND RISK: The Portfolio invests primarily in "junk bonds" or lower-rated
securities rated BB or lower by S&P or an equivalent rating by any other NRSRO
or unrated securities of similar quality. Junk bonds have speculative elements
or are predominantly speculative credit risks, therefore, credit risk is
particularly significant for this Portfolio. Although junk bonds generally have
higher yields than debt securities with higher credit ratings, they are
high-risk investments that may not pay interest or return principal as
scheduled. Junk bonds generally are also less liquid and experience more price
volatility than higher rated fixed income securities. This Portfolio may also be
subject to
---------------------- EQ Advisors Trust
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
- ----------
104
- --------------------------------------------------------------------------------
greater credit risk because it may invest in debt securities issued in
connection with corporate restructurings by highly leveraged issuers or in debt
securities not current in the payment of interest or principal, or in default.
FIXED INCOME RISK: This Portfolio invests primarily in fixed income securities,
therefore, the Portfolio's performance will be affected by changes in interest
rates, credit risks of the issuer, the duration and maturity of the Portfolio's
fixed income holdings, and adverse market and economic conditions. Other risks
that relate to the Portfolio's investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price and
total return) of the Portfolio's fixed income securities, particularly those
with longer durations or maturities, will go down. When interest rates fall, the
reverse is true.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the duration of
mortgage-backed securities to increase, making them even more susceptible to
interest rate changes. Falling interest rates may cause the value and yield of
mortgage-backed securities to fall. Falling interest rates also may encourage
borrowers to pay off their mortgages sooner than anticipated (pre-payment). The
Portfolio would need to reinvest the pre-paid funds at the newer, lower interest
rates.
LOAN PARTICIPATION AND ASSIGNMENT RISK: In addition to the risks associated with
fixed income investments generally, the Portfolio's investments in loan
participations and assignments are subject to the risk that the financial
institution acting as agent for all interests in a loan, might fail financially.
It is also possible that, under emerging legal theories of lender liability, the
Portfolio could be held liable as a co-lender.
SMALL CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap and
mid-cap companies may be subject to more abrupt or erratic movements in price
than are those of larger, more established companies because: the securities of
such companies are less well-known; held primarily by insiders or institutional
investors and may trade less frequently and in lower volume; such companies are
more likely to experience greater or more unexpected changes in their earnings
and growth prospects; such companies have limited financial resources or may
depend on a few key employees; and the products of technologies of such
companies may be at a relatively early stage of development or not fully tested.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; expropriation or nationalization; adverse changes in foreign economic and
tax policies; and foreign government instability, war or other adverse political
or economic actions.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
<PAGE>
- ----------
105
- --------------------------------------------------------------------------------
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which may
cause the Portfolio to lose money or be prevented from earning capital gains.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities without restriction. The risk in lending portfolio securities, as
with other extensions of secured credit, consist of possible delay in receiving
additional collateral, or in the recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last ten calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one, five and ten
years and compares the Portfolio's performance to: (i) the returns of a
broad-based index and (ii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance High Yield Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance High Yield
Portfolio) whose inception date is January 2, 1987. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the performance
results of the Portfolio and its predecessor registered investment company have
been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN*
1990: -1.4%
1991: 24.2%
1992: 12.1%
1993: 22.9%
1994: -3.0%
1995: 19.7%
1996: 22.6%
1997: 18.2%
1998: -5.4%
1999: -3.58%
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance High Yield Portfolio
- Class IB Shares (3.58)% 9.58% 9.96%
- --------------------------------------------------------------------------------
ML Master** 1.57% 9.61% 10.79%
- --------------------------------------------------------------------------------
Lipper High Current Yield Bond
Funds Average** 3.83% 9.48% 10.15%
- --------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (October 1, 1996),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities,
----------------------- EQ Advisors Trust
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
- ----------
106
- --------------------------------------------------------------------------------
qualified and non-tax qualified corporate funds, public and private pension and
profit-sharing plans, foundations and tax-exempt organizations.
NELSON JANTZEN has been responsible for the day-to-day management of the
Portfolio since January 2000. Mr. Jantzen is a Senior Vice President and
Portfolio Manager in the Global High Yield Group and is responsible for the
management of domestic high yield securities. Mr. Jantzen joined Alliance in
1993.
<PAGE>
MONEY MARKET PORTFOLIO
- ----------
107
- --------------------------------------------------------------------------------
ALLIANCE MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to obtain a high level of current income, preserve
its assets and maintain liquidity.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified portfolio of high-quality U.S.
dollar-denominated money market instruments. The Portfolio will maintain a
dollar-weighted average portfolio maturity of 90 days or less.
The instruments in which the Portfolio invests include:
o marketable obligations of, or guaranteed as to the timely payment of
principal and interest by, the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities");
o certificates of deposit, bankers' acceptances, bank notes, time deposits
and interest bearing savings deposits issued or guaranteed by:
(a) domestic banks (including their foreign branches) or savings and loan
associations having total assets of more than $1 billion and which are
FDIC members in the case of banks, or insured by the FDIC, in the case
of savings and loan associations; or
(b) foreign banks (either by their foreign or U.S. branches) having total
assets of at least $5 billion and having an issue of either (i)
commercial paper rated at least A-1 by S&P or Prime-1 by Moody's or
(ii) long term debt rated at least AA by S&P or Aa by Moody's;
o commercial paper (rated at least A-1 by S&P or Prime-1 by Moody's or, if
not rated, issued by domestic or foreign companies having outstanding debt
securities rated at least AA by S&P or Aa by Moody's) and participation
interests in loans extended by banks to such companies;
o mortgage-backed and asset-backed securities that have remaining maturities
of less than one year;
o corporate debt obligations with remaining maturities of less than one year,
rated at least AA by S&P or Aa by Moody's, as well as corporate debt
obligations rated at least A by S&P or Moody's, provided the corporation
also has outstanding an issue of commercial paper rated at least A-1 by S&P
or Prime-1 by Moody's;
o floating rate or master demand notes; and
o repurchase agreements covering U.S. Government securities.
If the Adviser believes a security held by the Portfolio is no longer deemed to
present minimal credit risk, the Portfolio will dispose of the security as soon
as practicable unless the Board of Trustees determines that such action would
not be in the best interest of the Portfolio.
Purchases of securities that are unrated must be ratified by the Board of
Trustees. Because the market value of debt obligations fluctuates as an inverse
function of changing interest rates, the Portfolio seeks to minimize the effect
of such fluctuations by investing only in instruments with a remaining maturity
of 397 calendar days or less at the time of investment, except for obligations
of the U.S. Government, which may have a remaining maturity of 762 calendar days
or less. Time deposits with maturities greater than seven days are considered to
be illiquid securities.
The Portfolio may make use of various other investment strategies, including
investing up to 20% of its total assets in U.S. dollar-denominated money market
instruments of foreign issuers and making secured loans of up to 50% of its
total portfolio securities.
THE PRINCIPAL RISKS
MONEY MARKET RISK: While money market funds are designed to be relatively low
risk investments, they are not entirely free of risk. Despite the short
maturities and high credit quality of the Portfolio's investments, increases in
interest rates and deteriorations in the credit quality of the instruments the
Portfolio has purchased may reduce the Portfolio's net asset value. In addition,
the Portfolio is still subject to the risk that the value of an investment may
be eroded over time by inflation. An investment in the Portfolio is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
------------------------- EQ Advisors Trust
<PAGE>
MONEY MARKET PORTFOLIO (CONTINUED)
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108
- --------------------------------------------------------------------------------
Although the Portfolio seeks to preserve the value of your investment, it is
possible to lose money by investing in the Portfolio.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risks will tend to be compounded.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: inadequate or inaccurate information about foreign companies;
higher transaction, brokerage and custody costs; expropriation or
nationalization; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. The risks in lending portfolio securities, as with other extensions
of secured credit, consist of possible delay in receiving additional collateral,
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last ten calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one, five and ten
years and compares the Portfolio's performance to: (i) the returns on
three-month U.S. Treasury bills and (ii) the returns of an index of funds with
similar investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Money Market Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/Alliance Money
Market Portfolio) whose inception date is July 13, 1981. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the performance
results of the Portfolio and its predecessor registered investment company have
been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN*
1990: 8.0%
1991: 5.9%
1992: 3.3%
1993: 2.7%
1994: 3.8%
1995: 5.5%
1996: 5.1%
1997: 5.2%
1998: 5.1%
1999: 4.71%
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
The Portfolio's 7-day yield for the quarter ended December 31, 1999 was %.
<PAGE>
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109
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Money Market Portfolio
- Class IB Shares 4.71% 5.10% 4.92%
- --------------------------------------------------------------------------------
3-Month Treasury Bill 4.74% 5.20% 5.06%
- --------------------------------------------------------------------------------
Lipper Money Market Mutual
Fund Average** 4.75% 5.13% 4.87%
- --------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (October 10, 1996),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance has been the Adviser to the Portfolio and its
predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
RAYMOND J. PAPERA has been responsible for the day-to-day management of the
Portfolio and its predecessor since 1990. Mr. Papera, a Senior Vice President of
Alliance, has been associated with Alliance since 1990.
---------------------- EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS
- ----------
110
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EQ/BALANCED PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve a high return through both appreciation
of capital and current income.
THE INVESTMENT STRATEGY
The Portfolio invests varying portions of its assets primarily in
publicly-traded equity and debt securities and money market instruments
depending on economic conditions, the general level of common stock prices,
interest rates and other relevant considerations, including the risks associated
with each investment medium.
The Portfolio attempts to achieve long-term growth of capital by investing in
common stock and other equity-type instruments. It will try to achieve a
competitive level of current income and capital appreciation through investments
in publicly traded debt securities and a high level of current income through
investments primarily in high-quality U.S. dollar denominated money market
instruments.
The Portfolio's investments in common stocks will primarily consist of common
stocks that are listed on national securities exchanges. Smaller amounts will be
invested in stocks that are traded over-the-counter and in other equity-type
securities.
The Portfolio at all times will hold at least 25% of its total assets in fixed
income securities (including, for these purposes, that portion of the value of
securities convertible into common stock which is attributable to the fixed
income characteristics of those securities, as well as money market
instruments). The Portfolio's equity securities will always comprise at least
25%, but never more than 75%, of the Portfolio's total assets. Consequently, the
Portfolio will have a minimum or "core holdings" of at least 25% fixed income
securities and 25% equity securities. Over time, holdings by the Portfolio's
holdings are currently expected to average approximately 50% in fixed income
securities and approximately 50% in equity securities. Actual asset mixes will
be adjusted in response to economic and credit market cycles.
The Portfolio may also invest up to 20% of its total assets in foreign
securities (which may include American depositary receipts and other depositary
arrangements) and may also make use of various other investment strategies,
including using up to 50% of its total portfolio assets for securities lending
purposes. The Portfolio may also use derivatives, including: writing covered
call and put options, purchasing call and put options on all the types of
securities in which it may invest, as well as securities indexes and foreign
currencies. The Portfolio may also purchase and sell stock index, interest rate
and foreign currency futures contracts and options thereon.
The debt securities will consist principally of bonds, notes, debentures and
equipment trust certificates, as well as debt securities with equity features
such as conversion or exchange rights or warrants for the acquisition of stock
or participations based on revenues, rates or profits. These debt securities
will principally be investment grade securities rated at least Baa by Moody's or
BBB by S&P, or will be U.S. Government Securities. If such Baa or BBB debt
securities held by the Portfolio fall below those ratings, the Portfolio will
not be obligated to dispose of them and may continue to hold them if an Adviser
considers them appropriate investments under the circumstances. In addition, the
Portfolio may at times hold some of its assets in cash.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up or
down depending on general market conditions. Other principal risks include:
MULTIPLE-ADVISER RISK: The EQ/Balanced Portfolio employs multiple Advisers. Each
of the Advisers independently chooses and maintains a portfolio of common stocks
for the Portfolio and each is responsible for investing a specific allocated
portion of the Portfolio's assets. Because each Adviser will be managing its
allocated portion of the Portfolio independently from the other Advisers, the
same security may be held in two different portions of the Portfolio, or may be
acquired for one portion
<PAGE>
- ----------
111
- --------------------------------------------------------------------------------
of the Portfolio at a time when the Adviser of another portion deems it
appropriate to dispose of the security from that other portion. Similarly, under
some market conditions, one Adviser may believe that temporary, defensive
investments in short-term instruments or cash are appropriate when the other
Adviser or Advisers believe continued exposure to the equity markets is
appropriate for their portions of the Portfolio. Because each Adviser directs
the trading for its own portion of the Portfolio, and does not aggregate its
transactions with those of the other Advisers, the Portfolio may incur higher
brokerage costs than would be the case if a single Adviser were managing the
entire Portfolio.
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that an
Adviser's allocation of the Portfolio's assets between debt and equity
securities may adversely affect the Portfolio's value.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not correlate
perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to clear
and settle. In addition, the value of foreign investments can be adversely
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; expropriation or nationalization; adverse changes in foreign economic and
tax policies; and foreign government instability, war or other adverse political
or economic actions.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which may
cause the Portfolio to lose money or be prevented from earning capital gains.
FIXED INCOME RISK: This Portfolio invests at least 25% of its total assets in
fixed income securities, therefore, the Portfolio's performance will be affected
by changes in interest rates, credit risks of the issuer, the duration and
maturity of the Portfolio's fixed income holdings, and adverse market and
economic conditions. Other risks that relate to the Portfolio's investment in
fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price and
total return) of the Portfolio's fixed income securities, particularly those
with longer durations or maturities, will go down. When interest rates fall, the
reverse is true.
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the issuer
or guarantor of a debt security or counterparty to a Portfolio's transaction is
unable or unwilling to make timely principal and/or interest payments, or to
honor its financial obligations. Investment grade securities which are rated BBB
by S&P or an equivalent rating by any other NRSRO, are somewhat riskier than
higher rated obligations because they are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile and
all other risk will tend to be compounded.
------------------------- EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS (CONTINUED)
- ----------
112
- --------------------------------------------------------------------------------
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. The risks in lending portfolio securities, as with other extensions
of secured credit, consist of possible delay in receiving additional collateral,
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each of
the last ten calendar years and some of the risks of investing in the Portfolio
by showing yearly changes in the Portfolio's performance. The table below shows
the Portfolio's average annual total returns for the past one, five and ten
years and compares the Portfolio's performance to: (i) the returns of a
broad-based index; (ii) the returns of a "blended" index of equity and fixed
income securities; and (iii) the returns of an index of funds with similar
investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance/Balanced Portfolio)
managed by the Adviser using the same investment objectives and strategy as the
Portfolio. For these purposes, the Portfolio is considered to be the successor
entity to the predecessor registered investment company (HRT/EQ/Balanced
Portfolio) whose inception date is January 27, 1986. The assets of the
predecessor were transferred to the Portfolio on October 18, 1999. Following
that transfer, the performance shown (for the period October 19, 1999 through
December 31, 1999) is that of the Portfolio. For these purposes, the performance
results of the Portfolio and its predecessor registered investment company have
been linked.
Both the bar chart and table assume reinvestment of dividends and distributions.
The performance results do not reflect any insurance and Contract-related fees
and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN *
1990: 0.0%
1991: 41.0%
1992: -3.1%
1993: 12.0%
1994: -8.3%
1995: 19.5%
1996: 11.4%
1997: 14.8%
1998: 17.8%
1999: 17.50%
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
EQ/Balanced Portfolio - Class
IB Shares 17.50% 15.88% 11.37%
- --------------------------------------------------------------------------------
50% S&P 500 Index/50%
Lehman Gov't/Corp.** 9.07% 17.93% 13.04%
- --------------------------------------------------------------------------------
Lipper Flex. Port. Funds
Average** 13.48% 13.84% 12.94%
- --------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (July 8, 1998),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
In accordance with the Multi-Manager Order, the Manager may, among other things,
select new or additional Advisers for the Portfolio and may allocate and
re-allocate the Portfolio's assets among Advisers. Currently, Alliance Capital
Management, L.P., Capital Guardian Trust Company, Prudential Investments Fund
Management LLC and Jennison Associates, LLC have been selected by the Manager
to serve as Advisers for this Portfolio.
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, New York 10105. Alliance was the exclusive Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities,
<PAGE>
- ----------
113
- --------------------------------------------------------------------------------
qualified and non-tax qualified corporate funds, public and private pension and
profit-sharing plans, foundations and tax-exempt organizations.
ROBERT G. HEISTERBERG has been responsible for the day-to-day management of the
Portfolio and its predecessor since February 12, 1996. Mr. Heisterberg, a Senior
Vice President of Alliance and Global Economic Policy Analysis, has been
associated with Alliance since 1977.
CAPITAL GUARDIAN TRUST COMPANY. ("Capital Guardian"), 333 South Hope Street, Los
Angeles, CA 90071 Capital Guardian was added as an Adviser to the Portfolio as
of May 1, 2000. Capital Guardian is a wholly-owned subsidiary of Capital Group
International, Inc., which itself is a wholly owned subsidiary of The Capital
Group Companies, Inc. Capital Guardian has been providing investment management
services since 1968 and manages approximately $123 billion as of December 31,
1999.
Capital Guardian uses a multiple portfolio manager system under which assets of
the Portfolio for which Capital Guardian serves as Adviser are divided into
several segments. Each segment is individually managed with the portfolio
manager free to decide on company and industry selections as well as valuation
and transaction assessment. An additional portion of the Portfolio's total
assets allocated to Capital Guardian as Adviser is managed by a group of
investment research analysts.
The individual portfolio managers of each segment of the Portfolio's, assets
allocated to Capital Guardian as Adviser other than that managed by the group of
research analysts, are as follows:
DONNALISA P. BARNUM. Donnalisa Barnum is a Senior Vice President and a portfolio
manager for Capital Guardian. She joined the Capital Guardian organization in
1986.
MICHAEL R. ERICKSON. Michael Erickson is a Senior Vice President and portfolio
manager for Capital Guardian and a Senior Vice President and Director for
Capital International Limited. He joined the Capital Guardian organization in
1987.
DAVID I. FISHER. David Fisher is Chairman of the Board of Capital Group
International, Inc. and Capital Guardian. He joined the Capital Guardian
organization in 1969.
THEODORE R. SAMUELS. Theodore Samuels is a Senior Vice President and a Director
for Capital Guardian, as well as a Director of Capital International Research,
Inc. He joined the Capital Guardian organization in 1981.
EUGENE P. STEIN. Eugene Stein is Executive Vice President, a Director, a
portfolio manager, and Chairman of the Investment Committee for Capital
Guardian. He joined the Capital Guardian organization in 1972.
TERRY BERKEMEIER. Terry Berkemeier is a Vice President of Capital International
Research, Inc. with U.S. equity portfolio management responsibility in Capital
Guardian Trust Company and research responsibilities for the global metals and
mining industries. He joined the Capital Guardian organization in 1992.
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC ("PIFM"), Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102 was added as an Advisor to the
Portfolio as of May 1, 2000. PIFM and its predecessors have served as manager or
administrator to investment companies since 1987. As of October 31, 1999, PIFM
served as either the manager or administrator to various investment companies,
with aggregate assets of approximately $72 billion.
JENNISON ASSOCIATES LLC ("Jennison"), 466 Lexington Avenue, New York, New York
10017 was added as an Advisor to the Portfolio as of May 1, 2000. PIFM
supervises Jennison. Jennison has served as an investment advisor to investment
companies since 1990 and manages approximately $48.4 billion in assets as of
September 30, 1999.
The Portfolio Manager for that portion of the Portfolio's total assets that
will be advised by PIFM and Jennison is SPIROS "SIG" SEGALAS, who is a
founding member, Director, President and Chief Investment Officer of
Jennison. Mr Segalas has been in the investment business for over 35 years
and has managed equity portfolios for investment companies since 1990.
PIFM and Jennison are wholly-owned subsidiaries of The Prudential Insurance
Company of America.
--------------------- EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS (CONTINUED)
- ----------
114
- --------------------------------------------------------------------------------
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve a high total return without, in the
opinion of the Adviser, undue risk to principal.
THE INVESTMENT STRATEGY
The Portfolio invests varying portions of its assets in high quality,
publicly-traded fixed income securities (including money market instruments and
cash) and publicly-traded common stocks and other equity securities of U.S. and
non-U.S. issuers.
The Portfolio will at all times hold at least 40% of its assets in investment
grade fixed income securities, each having a duration, as determined by the
Adviser, that is less than that of a 10-year Treasury bond (the "fixed income
core"). The Portfolio is generally expected to hold approximately 70% of its
assets in fixed income securities (including the fixed income core) and 30% in
equity securities. Actual asset mixes will be adjusted in response to economic
and credit market cycles. The fixed income asset class will always comprise at
least 50%, but never more than 90%, of the Portfolio's total assets. The equity
class will always comprise at least 10%, but never more than 50%, of the
Portfolio's total assets.
Duration is a measure of the weighted average maturity of the bonds held by
the Portfolio and can be used by the Adviser as a measure of the sensitivity
of the market value of the Portfolio to changes in interest rates. Generally,
the longer the duration of the Portfolio, the more sensitive its market value
will be to changes in interest rates.
In some cases, the Adviser's calculation of duration will be based on certain
assumptions (including assumptions regarding prepayment rates, in the
mortgage-backed or asset-backed securities, and foreign and domestic interest
rates). As of December 31, 1999, the Adviser considered the duration of a
10-year Treasury bond to be [4.68 years.] The Portfolio's investments will
generally have a final maturity of not more than ten years or a duration not
exceeding that of a 10-year Treasury note.
All debt securities held by the Portfolio will be of investment grade (i.e.,
rated at least BBB by S&P or Baa by Moody's) or unrated securities of
comparable quality as determined by the Adviser. The equity securities invested
in by the Portfolio will consist primarily of common stocks (including
convertible securities). The Portfolio may also invest in stocks that are
traded over-the-counter and in other equity-type securities. No more than 15%
of the Portfolio's assets will be invested in securities of non-U.S. issuers.
The Portfolio may also make use of various other investment strategies and
derivatives. Up to 50% of its total assets may be used for securities lending
purposes.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that the
Adviser's allocation of the Portfolio's assets between debt and equity
securities may adversely affect the Portfolio's value.
FIXED INCOME RISK: This Portfolio invests primarily in fixed income
securities, therefore, the Portfolio's performance will be affected by changes
in interest rates, credit risks of the issuer, the duration and maturity of
the Portfolio's fixed
<PAGE>
- ----------
115
- --------------------------------------------------------------------------------
income holdings, and adverse market and economic conditions. Other risks that
relate to the Portfolio's investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price and
total return) of the Portfolio's fixed income securities, particularly those
with longer durations or maturities, will go down. When interest rates fall,
the reverse is true.
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the issuer
or guarantor of a debt security or counterparty to a Portfolio's transaction is
unable or unwilling to make timely principal and/or interest payments, or to
honor its financial obligations. Investment grade securities which are rated
BBB by S&P or an equivalent rating by any other NRSRO, are somewhat riskier
than higher rated obligations because they are regarded as having only an
adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative.
MORTGAGE BACKED SECURITIES RISK: Rising interest rates may cause the duration
of mortgage-backed securities to increase, making them even more susceptible to
interest rate changes. Falling interest rates may cause the value and yield of
mortgage-backed securities to fall. Falling interest rates also may encourage
borrowers to pay off their mortgages sooner than anticipated (pre-payment). The
Portfolio would need to reinvest the pre-paid funds at the newer, lower
interest rates.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar quality.
The value of convertible securities fluctuates both in relation to changes in
interest rates and changes in the value of the underlying common stock.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. The risks in lending portfolio securities, as with other extensions
of secured credit, consist of possible delay in receiving additional
collateral, or in the recovery of the securities or possible loss of rights in
the collateral should the borrower fail financially.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in foreign
economic and tax policies; and foreign government instability, war or other
adverse political or economic actions.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like, which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
---------------------- EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS (CONTINUED)
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116
- --------------------------------------------------------------------------------
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one year,
five years and since inception and compares the Portfolio's performance to: (i)
the returns of a broad-based index; (ii) the returns of a "blended" index of
fixed income and equity securities; and (iii) the returns of an index of funds
with similar investment objectives. Past performance is not an indication of
future performance.
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Conservative Investors
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Conservative Investors Portfolio) whose inception date is October
2, 1989. The assets of the predecessor were transferred to the Portfolio on
October 18, 1999. Following that transfer, the performance shown (for the
period October 19, 1999 through December 31, 1999) is that of the Portfolio.
For these purposes, the performance results of the Portfolio and its
predecessor registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN *
1990 6.2%
1991 19.6%
1992 5.5%
1993 10.5%
1994 -4.4%
1995 20.2%
1996 5.0%
1997 13.0%
1998 13.6%
1999 9.87%
Best quarter (% and time period) Worst quarter (% and time period)
- ------------------------------------ -----------------------------------------
% ( ) % ( )
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Conservative
Investors Portfolio -
Class IB Shares 9.87% 12.17% 9.66%
- --------------------------------------------------------------------------------
70% Lehman Treasury/30%
S&P 500 Index** 4.19% 13.60% 10.75%
- --------------------------------------------------------------------------------
Lipper Income Average** 4.65% 14.57% 10.84%
- --------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (May 2, 1997),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
ROBERT G. HEISTERBERG has been responsible for the day-to-day management of
the Portfolio and its predecessor since February 12, 1996. Mr. Heisterberg, a
Senior Vice President of Alliance and Global Economic Policy Analysis, has
been associated with Alliance since 1977.
<PAGE>
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117
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ALLIANCE GROWTH INVESTORS PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve the highest total return consistent
with the Adviser's determination of reasonable risk.
THE INVESTMENT STRATEGY
The Portfolio allocates varying portions of its assets to a number of asset
classes. The fixed income asset class will always comprise at least 10%, but
never more than 60%, of the Portfolio's total assets. The equity class will
always comprise at least 40%, but never more than 90%, of the Portfolio's total
assets. Over time, the Portfolio's holdings, on average, are expected to be
allocated 70% to equity securities and 30% to debt securities. Actual asset
mixes will be adjusted in response to economic and credit market cycles.
The Portfolio's investments in equity securities will include both
exchange-traded and over-the counter common stocks and other equity securities,
including foreign stocks, preferred stocks, convertible debt instruments, as
well as securities issued by small-and mid-sized companies that have favorable
growth prospects.
The Portfolio's debt securities may include foreign debt securities, investment
grade fixed income securities (including cash and money market instruments) as
well as lower quality, higher yielding debt securities (junk bonds). The
Portfolio may also make use of various other investment strategies and
derivatives. Up to 50% of its total assets may be used for securities lending
purposes. No more than 30% of the Portfolio's assets will be invested in
securities of foreign issuers.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that the
Adviser's allocation of the Portfolio's assets between debt and equity
securities may adversely affect the Portfolio's value.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment-grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than if it invested in higher-rated
obligations because BBB- rated securities are regarded as having only an
adequate capacity to pay principal and interest, are considered to lack
outstanding investment characteristics, and may be speculative. Other risks
that relate to the Portfolio's investment in fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price and
total return) of the Portfolio's fixed income securities, particularly those
with longer durations or maturities, will go down. When interest rates fall,
the reverse is true.
JUNK BOND RISK: The Portfolio may invest a portion of its assets in "junk
bonds" or lower-rated securities rated BB or lower by S&P or an equivalent
rating by any other NRSRO or unrated securities of similar quality. Therefore,
credit risk is particularly significant for this Portfolio. Junk bonds have
speculative elements or are predominantly speculative credit risks. This
Portfolio may also be subject to greater credit risk because it may invest in
debt securities issued in connection with corporate
--------------------------- EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS (CONTINUED)
- ----------
118
- --------------------------------------------------------------------------------
restructurings by highly leveraged issuers or in debt securities not current
in the payment of interest or principal, or in default.
LEVERAGING RISK: When the Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
SMALL CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known, held primarily by insiders or
institutional investors and may trade less frequently and in lower volume; such
companies are more likely to experience greater or more unexpected changes in
their earnings and growth prospects; such companies have limited financial
resources or may depend on a few key employees; and the products of
technologies of such companies may be at a relatively early stage of
development or not fully tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar quality.
The value of convertible securities fluctuates both in relation to changes in
interest rates and changes in the value of the underlying common stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; expropriation or nationalization; adverse changes in foreign
economic and tax policies; and foreign government instability, war or other
adverse political or economic actions.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its portfolio
securities. The risks in lending portfolio securities, as with other extensions
of secured credit, consist of possible delay in receiving additional
collateral, or in the recovery of the securities or possible loss of rights in
the collateral should the borrower fail financially.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one year,
five years and ten years and compares the Portfolio's performance to: (i) the
returns of a broad-based index; (ii) the returns of a "blended" index of equity
and fixed income securities; and (iii) the returns of an index of funds with
similar investment objectives. Past performance is not an indication of future
performance.
<PAGE>
- ----------
119
- --------------------------------------------------------------------------------
The Portfolio's performance shown below is principally the performance of its
predecessor registered investment company (HRT/Alliance Growth Investors
Portfolio) managed by the Adviser using the same investment objectives and
strategy as the Portfolio. For these purposes, the Portfolio is considered to
be the successor entity to the predecessor registered investment company
(HRT/Alliance Growth Investors Portfolio) whose inception date is October 2,
1989. The assets of the predecessor were transferred to the Portfolio on
October 18, 1999. Following that transfer, the performance shown (for the
period October 19, 1999 through December 31, 1999) is that of the Portfolio.
For these purposes, the performance results of the Portfolio and its
predecessor registered investment company have been linked.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
CALENDAR YEAR ANNUAL TOTAL RETURN *
1990 10.4%
1991 48.7%
1992 4.7%
1993 15.0%
1994 -3.4%
1995 26.1%
1996 12.4%
1997 16.6%
1998 18.8%
1999 26.27%
Best quarter (% and time period) Worst quarter (% and time period)
% ( ) % ( )
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Growth Investors
Portfolio - Class IB Shares 26.27% 19.86% 16.78%
- --------------------------------------------------------------------------------
70% S&P 500 Index/30%
Lehman Gov't/Corp.** 13.77% 22.15% 15.13%
- --------------------------------------------------------------------------------
Lipper Flexible Portfolio
Average* 12.07% 17.11% 12.94%
- --------------------------------------------------------------------------------
</TABLE>
* For periods prior to the inception of Class IB Shares (October 1, 1996),
performance information shown is the performance of Class IA shares
adjusted to reflect the 12b-1 fees paid by Class IB shares.
** For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor registered investment company since the predecessor commenced
operations. Alliance, a publicly traded limited partnership, is indirectly
majority-owned by Equitable. Alliance manages investment companies, endowment
funds, insurance companies, foreign entities, qualified and non-tax qualified
corporate funds, public and private pension and profit-sharing plans,
foundations and tax-exempt organizations.
ROBERT G. HEISTERBERG has been responsible for the day-to-day management of
the Portfolio and its predecessor since February 12, 1996. Mr. Heisterberg, a
Senior Vice President of Alliance and Global Economic Policy Analysis, has
been associated with Alliance since 1977.
----------------------------- EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS (CONTINUED)
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120
- --------------------------------------------------------------------------------
EQ/EVERGREEN FOUNDATION PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide, in order of priority, reasonable
income, conservation of capital and capital appreciation.
For purposes of this Portfolio, the words "reasonable income" mean moderate
income.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a combination of common stocks, preferred
stocks, securities that are convertible into or exchangeable for common stocks,
investment grade corporate debt securities, securities of or guaranteed by the
U.S. Government, its agencies or instrumentalities, and short-term debt
instruments, such as high quality commercial paper, and obligations of
FDIC-member banks. Investments in common stocks focus on those that pay
dividends and have the potential for capital appreciation. Common stocks are
selected based on a combination of financial strength and estimated growth
potential. Bonds are selected based on the Adviser's projections of interest
rates, varying amounts and maturities in order to achieve capital protection
and, when possible, capital appreciation. The asset allocation of the Portfolio
will vary in accordance with changing economic and market conditions.
Under normal market conditions, at least 25% of the Portfolio's net assets will
be invested in fixed income securities. In selecting debt securities, the
Adviser will emphasize securities that the Adviser believes will not be subject
to significant fluctuations in value. The corporate debt obligations purchased
by the Portfolio will be rated A or higher by S&P and Moody's. The Fund is not
managed with a targeted maturity.
When market or financial conditions warrant, the Portfolio may invest 100% of
its assets in short-term obligations for temporary or defensive purposes. Such
investment strategies are inconsistent with the Portfolio's investment
objectives and could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
Nationally Recognized Statistical Rating Organization ("NRSRO"), it will be
exposed to greater risk than higher-rated obligations because BBB rated
investment grade securities are regarded as having only an adequate capacity to
pay principal and interest, are considered to lack outstanding investment
characteristics, and may be speculative.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stocks, but generally offer lower yields than unconvertible securities
of similar quality. Convertible securities fluctuate both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1999,
the Portfolio's first full year of operations. The table below shows the
Portfolio's average annual total
<PAGE>
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121
- --------------------------------------------------------------------------------
returns for the Portfolio for one year and since inception. The table also
compares the Portfolio's performance to the returns of a broad-based index.
Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance. The
performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance results.
The inception date for this Portfolio is December 31, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
1999 7.38%
Best quarter: Worst quarter:
10.70% (1999 4th Quarter) (-7.27)% (1999 3rd Quarter)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
EQ/Evergreen Foundation Portfolio 7.38% 7.38%
- --------------------------------------------------------------------------------
60% S&P 500/40% Lehman Aggregate
Bond 11.15% 11.15%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
EVERGREEN ASSET MANAGEMENT CORP. ("Evergreen"), 1311 Mamaroneck Avenue, White
Plains, New York 10605. Evergreen has been the Adviser to the Portfolio since
it commenced operations. Evergreen is a registered investment adviser and a
wholly-owned subsidiary of First Union Corporation. Evergreen offers a broad
range of financial services to individuals and businesses throughout the
United States.
JEAN LEDFORD and RICHARD WELSH became co-managers of the Portfolio in August
1999. Jean Ledford, CFA, became President and Chief Executive Officer of
Evergreen in August 1999. From February 1997 until she joined Evergreen, Ms.
Ledford worked as a portfolio manager at American Century Investments
("American Century"). From 1980 until she joined American Century, Ms. Ledford
was the investment director at the State of Wisconsin Investment Board.
Mr. Welsh joined Evergreen as Senior Vice President and portfolio manager in
August 1999. Prior to joining Evergreen, he worked for five years as a
portfolio manager and analyst at American Century.
------------------------ EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS (CONTINUED)
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122
- --------------------------------------------------------------------------------
MERCURY WORLD STRATEGY
PORTFOLIO
INVESTMENT OBJECTIVE: Seeks high total investment return by investing
primarily in a portfolio of equity and fixed income securities, including
convertible securities, of U.S. and foreign issuers.
For purposes of this Portfolio, "total investment return" consists of
interest, dividends, discount accruals and capital changes, including changes
in the value of non-dollar denominated securities and other assets and
liabilities resulting from currency fluctuations.
THE INVESTMENT STRATEGY
The Portfolio is a non-diversified Portfolio that invests in both equity
securities and fixed income securities. The Portfolio may invest entirely in
equity securities, entirely in fixed income securities, or partly in equity
securities and partly in fixed income securities.
A Portfolio may be considered to be "non-diversified" for federal securities
law purposes because it invests in a limited number of securities. In all
cases, the Portfolio intends to be diversified for tax purposes so that it
can qualify as a regulated investment company.
The Portfolio will normally invest a significant portion of its assets in
equity securities of companies throughout the world. The equity securities in
which the Portfolio invests will primarily be common stocks of large companies.
There are no limits on the Portfolio's ability to invest in any country or
geographic region. The Portfolio can invest primarily in U.S. securities,
primarily in foreign securities, or partly in both. It normally invests in at
least three countries at any given time. The Portfolio may invest in companies
in emerging markets, but the Adviser anticipates that a substantially greater
portion of the Portfolio's equity investments will be in companies in developed
countries. At the present time, the Portfolio focuses on investments in Canada,
Western Europe, the Far East, and Latin America, as well as in the United
States. The Adviser will select the percentage of the Portfolio's assets that
will be invested in equity securities and fixed income securities, as well as
the geographic allocation of the Portfolio's investments, based on its view of
general economic and financial trends in various countries and industries, such
as inflation, commodity prices, the direction of interest and currency
movements, estimates of growth in industry output and profits, and government
fiscal policies. For example, if the Adviser believes that falling commodity
prices and decreasing estimates of industrial output globally signal low growth
and limited returns from equity securities, the Portfolio may emphasize fixed
income investments. Similarly, if the Adviser believes that low inflation, new
technologies and improvements in economic productivity in a country or region
signal a promising environment for equity securities in that country or region
the Portfolio may emphasize equity investments in that country or region.
The Portfolio may invest in fixed-income securities of any maturity, including
United States and foreign government securities and corporate debt securities.
The Portfolio will only invest in debt securities that are rated investment
grade by S&P or Moody's or unrated securities that are of comparable quality.
The Portfolio may also invest in securities denominated in currencies other
than the U.S. dollar. The Portfolio may also engage in currency transactions to
hedge against the risk of loss from changes in currency exchange rates. In
addition, the Portfolio may also employ a variety of instruments and techniques
to enhance income and to hedge against market and currency risk.
The Portfolio has no stated minimum holding period for investments, and will
buy or sell securities whenever the Adviser sees an appropriate opportunity.
<PAGE>
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123
- --------------------------------------------------------------------------------
When market or financial conditions warrant, the Portfolio may invest up to
100% of its assets in United States Government or Government agency securities,
money market securities, other fixed income securities, or cash for temporary
or defensive purposes. Such investment strategies are inconsistent with the
Portfolio's investment objective and could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stocks, but generally offer lower yields than unconvertible securities
of similar quality. Convertible securities fluctuate both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities that can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, foreign investments can be adversely affected
by: unfavorable currency exchange rates (relative to the U.S. dollar for
securities denominated in a foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
Other specific risks of investing in foreign securities include:
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory practices and requirements as are U.S. companies, which could
adversely affect their value.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than higher-rated obligations because
BBB rated investment grade securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
NON-DIVERSIFICATION RISK: Since a relatively high percentage of the Portfolio's
assets may be invested in the securities of a limited number of issuers, some
of which may be within the same industry, the securities of the Portfolio may
be more sensitive to changes in the market value of a single issuer or industry
or to risks associated with a single economic, political or regulatory event
than a diversified portfolio.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the
-------------------- EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS (CONTINUED)
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124
- --------------------------------------------------------------------------------
price the seller would like which may cause the Portfolio to lose money or be
prevented from earning capital gains.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs that could be passed through to
shareholders.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The inception date for
the Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998 6.81%
1999 21.35%
Best quarter: Worst quarter:
14.72% (1999 4th Quarter) (-11.15)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C>
Mercury World Strategy Portfolio 21.35% 12.11%
- -------------------------------------------------------------------------------
Composite Market Benchmark Index* 13.07% 16.18%
- -------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MERCURY ASSET MANAGEMENT, L.P. ("Mercury"), 800 Scudders Mill Road, Plainsboro,
New Jersey 08543. Mercury has been the Adviser to the Portfolio since it
commenced operations. Mercury is an indirect wholly-owned subsidiary of Merrill
Lynch & Co., Inc., a financial services holding company. Mercury and its
affiliates act as the manager for more than 100 registered investment
companies. Mercury also offers portfolio management and portfolio analysis
services to individuals and institutions.
THOMAS R. ROBINSON is the Portfolio Manager primarily responsible for the
day-to-day management of the Portfolio since it commenced operations. Mr.
Robinson has served as a First Vice President of Mercury since 1997 and as a
Senior Portfolio Manager of Mercury since 1995.
<PAGE>
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125
- --------------------------------------------------------------------------------
EQ/PUTNAM BALANCED PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide a balanced investment composed of a
well-diversified portfolio of stocks and bonds that will produce both capital
growth and current income.
THE INVESTMENT STRATEGY
The Portfolio may invest in almost any type of security or negotiable
instrument, including common stocks, corporate bonds, cash and money market
securities. Although the proportion invested in each type of security is not
fixed, generally, no more than 75% of the Portfolio's assets will be invested
in common stocks, securities that are convertible into common stocks and other
equity securities.
The Portfolio uses a value-oriented approach by investing in stocks the Adviser
believes are currently selling below their true worth.
Value-investing attempts to identify strong companies selling at a discount
from their perceived true worth. The Adviser selects stocks for the
Portfolio at prices which in its view are temporarily low relative to the
company's earnings, assets, cash flow and dividends.
The Portfolio may also invest in debt securities, issued by the U.S. Government
or by private companies. Most of the Portfolio's debt securities will be
investment grade (rated at least BBB) and are generally intermediate-to
long-term (with maturities of more than three (3) years). The Portfolio may
also invest in lower-rated debt securities (called "junk bonds").
The Portfolio may also invest up to 20% of its total assets in foreign
securities and may purchase Eurodollar certificates of deposit (i.e.,
short-term time deposits issued by European banks) without regard to this 20%
limit.
When market or financial conditions warrant, the Portfolio may invest up to
100% of its assets in short term obligations for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged to
be undervalued may actually be appropriately priced.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than higher-rated obligations because
BBB rated investment grade securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative. The risk that an issuer or
guarantor of a fixed income security or counterparty to the Portfolio's fixed
income transaction is unable to meet its financial obligations is particularly
significant for this Portfolio because this Portfolio invests a
------------------------- EQ Advisors Trust
<PAGE>
BALANCED HYBRID PORTFOLIOS (CONTINUED)
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portion of its assets in "junk bonds" (i.e., securities rated below investment
grade). Junk bonds are issued by companies with questionable credit strength
and, consequently, are considered to be speculative in nature and may be
subject to greater market fluctuations than investment grade fixed-income
securities.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio
to incur additional transaction costs that could be passed through to
shareholders.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of existence, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce performance results. The inception date for the
Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998 11.92%
1999 0.01%
Best quarter: Worst quarter:
% ( ) ( )% ( )
<TABLE>
<CAPTION>
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AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C>
EQ/Putnam Balanced Portfolio 0.01% 9.69%
- -------------------------------------------------------------------------------
60% S&P 500/40% Lehman Gov't/Corp.
Index* 11.39% 18.81%
- -------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC. ("Putnam Management"), One Post Office
Square, Boston, MA 02109. Putnam Management has been the Adviser to the
Portfolio since it commenced operations. Putnam Management has been managing
mutual funds since 1937. Putnam Management is a subsidiary of Putnam
Investments, Inc., which is itself a subsidiary of Marsh & McLennan Companies,
Inc.
The Portfolio Managers, responsible for the day-to-day management of the
Portfolio, are: DAVID L. WALDMAN, Managing Director, who has been employed by
Putnam Management as an investment professional* since 1997 and
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prior to 1997, Mr. Waldman was a senior Portfolio Manager at Lazard Freres
since 1995, and prior to 1995, he was a Vice President at Goldman Sachs; EDWARD
P. BOUSA, Senior Vice President, who has been employed by Putnam Management as
an investment professional* since October, 1992; JAMES M. PRUSKO, Senior Vice
President, who has been employed by Putnam Management as an investment
professional* since 1992; and KRISHNA K. MEMANI, MANAGING DIRECTOR, Senior Vice
President, who has been employed by Putnam Management as an investment
professional* since 1998. (*Investment professional means that the manager was
either a portfolio manager or analyst.)
----------------- EQ Advisors Trust
<PAGE>
3
More information on principal risks
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Risk is the chance that you will lose money on your investment or that it will
not earn as much as you expect. In general, the greater the risk, the more
money your investment can earn for you and the more you can lose. Like other
investment companies, the value of each Portfolio's shares may be affected by
the Portfolio's investment objective(s), principal investment strategies and
particular risk factors. Consequently, each Portfolio may be subject to
different principal risks. Some of the principal risks of investing in the
Portfolios are discussed below. However, other factors may also affect each
Portfolio's net asset value.
There is no guarantee that a Portfolio will achieve its investment objective(s)
or that it will not lose principal value.
GENERAL INVESTMENT RISKS: Each Portfolio is subject to the following risks:
ASSET CLASS RISK: There is the possibility that the returns from the types of
securities in which a Portfolio invests will underperform returns from the
various general securities markets or different asset classes. Different types
of securities tend to go through cycles of outperformance and underperformance
in comparison to the general securities markets.
MARKET RISK: Each Portfolio's share price moves up and down over the short term
in reaction to stock or bond market movements. This means that you could lose
money over short periods, and perhaps over longer periods during extended
market downturns.
SECURITY SELECTION RISK: The Adviser(s) for each Portfolio rely on the insights
of different specialists in making investment decisions based on the
Portfolio's particular investment objective(s) and investment strategies. There
is the possibility that the specific securities held by a Portfolio will
underperform other funds in the same asset class or benchmarks that are
representative of the general performance of the asset class because of the
Adviser's choice of portfolio securities.
As indicated in "Summary Information Concerning EQ Advisors Trust" and "About
the Investment Portfolios," a particular Portfolio may also be subject to the
following risks:
CONVERTIBLE SECURITIES RISK: Convertible securities may include both
convertible debt and convertible preferred stock. Such securities may be
converted into shares of the underlying common stock at either a stated price
or stated rate. Therefore, convertible securities enable you to benefit from
increases in the market price of the underlying common stock. Convertible
securities provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar quality.
The value of convertible securities fluctuates in relation to changes in
interest rates and, in addition, fluctuates in relation to the underlying
common stock. Subsequent to purchase by a Portfolio, convertible securities may
cease to be rated or a rating may be reduced below the minimum required for
purchase by that Portfolio. Each Adviser will consider such event in its
determination of whether a Portfolio should continue to hold the securities.
DERIVATIVES RISK: Derivatives are financial contracts whose value depends on,
or is derived from the value of an underlying asset, reference rate or index.
Derivatives include stock options, securities index options, currency options,
forward currency exchange contracts, futures contracts, swaps and options on
futures contracts. Certain Portfolios can use derivatives involving the U.S.
Government and foreign government securities and currencies. Investments in
derivatives can significantly increase your exposure to market risk, or credit
risk of the counterparty. Derivatives also involve the risk of mispricing or
improper valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISK: To the extent that any of the Portfolios invest a
substantial amount of its assets in fixed income securities, a Portfolio may be
subject to the following risks:
<PAGE>
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CREDIT RISK: Credit risk is the risk that the issuer or guarantor of a debt
security or counterparty to a Portfolio's transactions will be unable or
unwilling to make timely principal and/or interest payments, or otherwise will
be unable or unwilling to honor its financial obligations. Each of the
Portfolios may be subject to credit risk to the extent that it invests in debt
securities or engages in transactions, such as securities loans or repurchase
agreements, which involve a promise by a third party to honor an obligation to
the Portfolio.
Credit risk is particularly significant for the Portfolios, such as the
Alliance Growth Investors Portfolio and the Alliance High Yield Portfolio, that
invest a material portion of their assets in "JUNK BONDS" or lower-rated
securities (i.e., rated BB or lower by S&P or an equivalent rating by any other
NRSRO or unrated securities of similar quality). These debt securities and
similar unrated securities have speculative elements or are predominantly
speculative credit risks. Portfolios such as the Alliance Growth Investors
Portfolio and the Alliance High Yield Portfolio may also be subject to greater
credit risk because they may invest in debt securities issued in connection
with corporate restructurings by highly leveraged issuers or in debt securities
not current in the payment of interest or principal, or in default.
INTEREST RATE RISK: The price of a bond or a fixed income security is
dependent upon interest rates. Therefore, the share price and total return of a
Portfolio investing a significant portion of its assets in bonds or fixed
income securities will vary in response to changes in interest rates. A rise in
interest rates causes the value of a bond to decrease, and vice versa. There is
the possibility that the value of a Portfolio's investment in bonds or fixed
income securities may fall because bonds or fixed income securities generally
fall in value when interest rates rise. The longer the term of a bond or fixed
income instrument, the more sensitive it will be to fluctuations in value from
interest rate changes. Changes in interest rates may have a significant effect
on Portfolios holding a significant portion of their assets in fixed income
securities with long term maturities.
MORTGAGE-BACKED SECURITIES RISK: In the case of mortgage-backed securities,
rising interest rates tend to extend the term to maturity of the securities,
making them even more susceptible to interest rate changes. When interest rates
drop, not only can the value of fixed income securities drop, but the yield can
drop, particularly where the yield on the fixed income securities is tied to
changes in interest rates, such as adjustable mortgages. Also when interest
rates drop, the holdings of mortgage-backed securities by a Portfolio can
reduce returns if the owners of the underlying mortgages pay off their
mortgages sooner than anticipated since the funds prepaid will have to be
reinvested at the then lower prevailing rates. This is known as prepayment
risk. When interest rates rise, the holdings of mortgage-backed securities by a
Portfolio can reduce returns if the owners of the underlying mortgages pay off
their mortgages later than anticipated. This is known as extension risk.
INVESTMENT GRADE SECURITIES RISK: Debt securities are rated by national bond
ratings agencies. Securities rated BBB by S&P or Baa by Moody's are considered
investment grade securities, but are somewhat riskier than higher rated
obligations because they are regarded as having only an adequate capacity to
pay principal and interest, and are considered to lack outstanding investment
characteristics.
JUNK BONDS OR LOWER RATED SECURITIES RISK: Bonds rated below investment grade
by S&P and Moody's are speculative in nature, may be subject to certain risks
with respect to the issuing entity and to greater market fluctuations than
higher rated fixed income securities. They are usually issued by
------------------ EQ Advisors Trust
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companies without long track records of sales and earnings, or by those
companies with questionable credit strength. These bonds are considered
"below investment grade." The retail secondary market for these "junk
bonds" may be less liquid than that of higher rated securities and adverse
conditions could make it difficult at times to sell certain securities or
could result in lower prices than those used in calculating the Portfolio's
net asset value.
FOREIGN SECURITIES RISK: A Portfolio's investments in foreign securities,
including depositary receipts, involve risks not associated with investing in
U.S. securities and can affect a Portfolio's performance. Foreign markets,
particularly emerging markets, may be less liquid, more volatile and subject to
less government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. The specific risks of investing in foreign securities, among
others, include:
CURRENCY RISK: The risk that changes in currency exchange rates will
negatively affect securities denominated in, and/or receiving revenues in,
foreign currencies. Adverse changes in currency exchange rates (relative to
the U.S. dollar) may erode or reverse any potential gains from a
Portfolio's investment in securities denominated in a foreign currency or
may widen existing losses.
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging market countries and/or their securities markets. Generally,
economic structures in these countries are less diverse and mature than
those in developed countries, and their political systems are less stable.
Investments in emerging markets countries may be affected by national
policies that restrict foreign investment in certain issuers or industries.
The small size of their securities markets and low trading volumes can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines. As a result, a Portfolio investing in emerging market countries
may be required to establish special custody or other arrangements before
investing.
EURO RISK: Certain of the Portfolios may invest in securities issued by
European issuers. On January 1, 1999, 11 of the 15 member states of the
European Monetary Union ("EMU") introduced the "Euro" as a common currency.
During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is expected
to become the sole currency of the participating states. The introduction
of the Euro will result in the redenomination of European debt and equity
securities over a period of time, which may result in various legal and
accounting differences and/or tax treatments that otherwise would not
likely occur. During this period, the creation and implementation of
suitable clearing and settlement systems and other operational problems may
cause market disruptions that could adversely affect investments quoted in
the Euro.
POLITICAL/ECONOMIC RISK: Changes in economic and tax policies, government
instability, war or other political or economic actions or factors may have
an adverse effect on a Portfolio's foreign investments.
REGULATORY RISK: Less information may be available about foreign companies.
In general, foreign companies are not subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices
and requirements as are U.S. companies.
TRANSACTION COSTS RISK: The costs of buying and selling foreign securities,
including tax, brokerage and custody costs, generally are higher than those
involving domestic transactions.
<PAGE>
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GROWTH INVESTING RISK: Growth investing generally focuses on companies that,
due to their strong earnings and revenue potential, offer above-average
prospects for capital growth, with less emphasis on dividend income. Earnings
predictability and confidence in earnings forecasts are an important part of
the selection process. As a result, the price of growth stocks may be more
sensitive to changes in current or expected earnings than the prices of other
stocks. Advisers using this approach generally seek out companies experiencing
some or all of the following: high sales growth, high unit growth, high or
improving returns on assets and equity, and a strong balance sheet. Such
Advisers also prefer companies with a competitive advantage such as unique
management, marketing or research and development. Growth investing is also
subject to the risk that the stock price of one or more companies will fall or
will fail to appreciate as anticipated by the Advisers, regardless of movements
in the securities market.
INDEX-FUND RISK: The Alliance Equity Index, BT Equity 500 Index, BT Small
Company Index and BT International Equity Index Portfolios are not actively
managed (which involves buying and selling of securities based upon economic,
financial and market analysis and investment judgment). Rather, the Alliance
Equity Index Portfolio utilizes proprietary modeling techniques to match the
performance results of the S&P 500 Index. The BT Equity 500 Index, BT Small
Company Index and BT International Equity Index Portfolios utilize a "passive"
or "indexing" investment approach and attempt to duplicate the investment
performance of the particular index the Portfolio is tracking (i.e., S&P 500
Index, Russell 2000 Index or MSCI EAFE Index) through statistical procedures.
Therefore, the Portfolios will invest in the securities included in the
relevant index or substantially identical securities regardless of market
trends. The Portfolios cannot modify their investment strategies to respond to
changes in the economy, which means they may be particularly susceptible to a
general decline in the U.S. or global stock market segment relating to the
relevant index.
LEVERAGING RISK: When a Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in that Portfolio will be more volatile
and all other risks will tend to be compounded. All of the Portfolios may take
on leveraging risk by investing in collateral from securities loans and by
borrowing money to meet redemption requests.
LIQUIDITY RISK: Certain securities held by a Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like. A
Portfolio may have to hold these securities longer than it would like and may
forego other investment opportunities. There is the possibility that a
Portfolio may lose money or be prevented from earning capital gains if it can
not sell a security at the time and price that is most beneficial to the
Portfolio. Portfolios that invest in privately-placed securities, high-yield
bonds, mortgage-backed securities or foreign or emerging market securities,
which have all experienced periods of illiquidity, are subject to liquidity
risks. A particular Portfolio may be more susceptible to some of these risks
than others, as noted in the description of each Portfolio.
MONEY MARKET RISK: Although a money market fund is designed to be a relatively
low risk investment, it is not entirely free of risk. Despite the short
maturities and high credit quality of the Alliance Money Market Portfolio's
investments, increases in interest rates and deteriorations in the credit
quality of the instruments the Portfolio has purchased may reduce the
Portfolio's yield. In addition, the Portfolio is still subject to the risk that
the value of an investment may be eroded over time by inflation.
MULTIPLE-ADVISER RISK: The EQ/Aggressive Stock and EQ/Balanced Portfolios
employ multiple Advisers. Each of the Advisers independently chooses and
maintains a portfolio of common stocks for the Portfolio and each is
responsible for investing a specific allocated portion of the Portfolio's
assets. Because each Adviser will be managing its allocated portion of the
Portfolio independently from the other Advisers, the same security may be held
in two different portions of the
---------------------------------- EQ Advisors Trust
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Portfolio, or may be acquired for one portion of the Portfolio at a time when
the Adviser of another portion deems it appropriate to dispose of the security
from that other portion. Similarly, under some market conditions, one Adviser
may believe that temporary, defensive investments in short-term instruments or
cash are appropriate when the other Adviser or Advisers believe continued
exposure to the equity markets is appropriate for their portions of the
Portfolio. Because each Adviser directs the trading for its own portion of the
Portfolio, and does not aggregate its transactions with those of the other
Advisers, the Portfolio may incur higher brokerage costs than would be the case
if a single Adviser were managing the entire Portfolio.
NON-DIVERSIFICATION RISK: The Lazard Small Cap Value Portfolio, the Morgan
Stanley Emerging Markets Equity and Mercury World Strategy Portfolios are
classified as "non-diversified" investment companies, which means that the
proportion of each Portfolio's assets that may be invested in the securities of
a single issuer is not limited by the 1940 Act. Since a relatively high
percentage of each non-diversified Portfolio's assets may be invested in the
securities of a limited number of issuers, some of which may be within the same
industry, the securities of each Portfolio may be more sensitive to changes in
the market value of a single issuer or industry. The use of such a focused
investment strategy may increase the volatility of a Portfolio's investment
performance, as the Portfolio may be more susceptible to risks associated with
a single economic, political or regulatory event than a diversified portfolio.
If the securities in which the Portfolio invests perform poorly, the Portfolio
could incur greater losses than it would have had it been invested in a greater
number of securities. However to qualify as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended (the "Code") and
receive pass through tax treatment, each Portfolio at the close of each fiscal
quarter, may not have more than 25% of its total assets invested in the
securities of any one issuer (excluding U.S. Government obligations) and with
respect to 50% of its assets, (i) may not have more than 5% of its total assets
invested in the securities of any one issuer and (ii) may not own more than 10%
of the outstanding voting securities of any one issuer. Each non-diversified
Portfolio intends to qualify as a RIC.
PORTFOLIO TURNOVER RISK: Consistent with their investment policies, the
Portfolios also will purchase and sell securities without regard to the effect
on portfolio turnover. Higher portfolio turnover (e.g., over 100% per year)
will cause a Portfolio to incur additional transaction costs that could be
passed through to shareholders.
SECURITIES LENDING RISK: For purposes of realizing additional income, each
Portfolio may lend securities to broker-dealers approved by the Board of
Trustees. In addition, the Alliance High Yield and Alliance Intermediate
Government Securities Portfolios may each make secured loans of its portfolio
securities without restriction. Any such loan of portfolio securities will be
continuously secured by collateral at least equal to the value of the security
loaned. Such collateral will be in the form of cash, marketable securities
issued or guaranteed by the U.S. Government or its agencies, or a standby
letter of credit issued by qualified banks. The risks in lending portfolio
securities, as with other extensions of secured credit, consist of possible
delay in receiving additional collateral or in the recovery of the securities
or possible loss of rights in the collateral should the borrower fail
financially. Loans will only be made to firms deemed by the Adviser to be of
good standing and will not be made unless, in the judgment of the Adviser, the
consideration to be earned from such loans would justify the risk.
SMALL-CAP AND MID-CAP COMPANY RISK: A Portfolio's investments in small-cap and
mid-cap companies may involve greater risks than investments in larger, more
established issuers. Smaller companies may have narrower product lines, more
limited financial resources and more limited trading markets for their stock,
as compared with larger companies. Their securities may be less well-known and
trade less frequently and in more limited volume than
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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
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This section gives you information on the Trust, the Manager and the Advisers
for the Portfolios. More detailed information concerning each of the Advisers
and portfolio managers is included in the description for each Portfolio in the
section "About The Investment Portfolios."
THE TRUST
The Trust is organized as a Delaware business trust and is registered with the
Securities and Exchange Commission ("SEC") as an open-end management investment
company. The Trust issues shares of beneficial interest that are currently
divided among forty (40) Portfolios, each of which has authorized Class IA and
Class IB shares. Each Portfolio has its own objectives, investment strategies
and risks, which have been previously described in this prospectus.
THE MANAGER
The Equitable Life Assurance Society of the United States ("Equitable"), 1290
Avenue of the Americas, New York, New York 10104, currently serves as the
Manager of the Trust. EQ Financial Consultants, Inc. ("EQFC") previously served
as the Manager of the Trust, until September 17, 1999 when the Trust's
Investment Management Agreement was transferred to Equitable. Equitable is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended, and a wholly-owned subsidiary of AXA Financial, Inc. ("AXA
Financial"), a subsidiary of AXA, a French insurance holding company.
Subject to the supervision and direction of the Board of Trustees, the Manager
has overall responsibility for the general management of the Trust. In the
exercise of that responsibility, and under the Multi-Manager Order, the
Manager, without obtaining shareholder approval but subject to the review and
approval by the Board of Trustees, may: (i) select new or additional Advisers
for the Portfolios; (ii) enter into new investment advisory agreements and
materially modify existing investment advisory agreements; and (iii) terminate
and replace the Advisers. The Manager also monitors each Adviser's investment
program and results, reviews brokerage matters, and carries out the directives
of the Board of Trustees. The Manager also supervises the provision of services
by third parties such as the Trust's custodian.
The contractual management fee rates payable by the Trust are at the following
annual percentages of the value of each Portfolio's average daily net assets:
CONTRACTUAL FEE UNDER MANAGEMENT AGREEMENT (AS A PERCENTAGE OF AVERAGE DAILY
NET ASSETS)(FEE ON ALL ASSETS)
<TABLE>
<CAPTION>
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INDEX PORTFOLIOS
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<S> <C>
Alliance Equity Index 0.250%
BT Equity 500 Index 0.250%
BT International Equity Index 0.350%
BT Small Company Index 0.250%
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</TABLE>
<PAGE>
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135
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FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
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FIRST NEXT NEXT NEXT
DEBT PORTFOLIOS $750 MILLION $750 MILLION $1 BILLION $2.5 BILLION THEREAFTER
- ---------------------------------------------- -------------- -------------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C>
Alliance High Yield 0.600% 0.575% 0.550% 0.530% 0.520%
Alliance Intermeddiate Government Securities 0.500% 0.475% 0.450% 0.430% 0.420%
Alliance Money Market 0.350% 0.325% 0.300% 0.280% 0.270%
Alliance Quality Bond 0.525% 0.500% 0.475% 0.455% 0.445%
JPM Core Bond 0.450% 0.425% 0.400% 0.380% 0.370%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
FIRST NEXT NEXT NEXT
EQUITY PORTFOLIOS $1 BILLION $1 BILLION $3 BILLION $5 BILLION THEREAFTER
- ---------------------------------------- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
EQ/Aggressive Stock 0.650% 0.600% 0.575% 0.550% 0.525%
EQ/Balanced 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance Common Stock 0.550% 0.500% 0.475% 0.450% 0.425%
Alliance Conservative Investors 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance Global 0.750% 0.700% 0.675% 0.650% 0.625%
Alliance Growth and Income 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance Growth Investors 0.600% 0.550% 0.525% 0.500% 0.475%
Alliance International 0.850% 0.800% 0.775% 0.750% 0.725%
Alliance Small Cap Growth 0.750% 0.700% 0.675% 0.650% 0.625%
Calvert Socially Responsible 0.650% 0.600% 0.575% 0.550% 0.525%
Capital Guardian International 0.850% 0.800% 0.775% 0.750% 0.725%
Capital Guardian Research 0.650% 0.600% 0.575% 0.550% 0.525%
Capital Guardian U.S. Equity 0.650% 0.600% 0.575% 0.550% 0.525%
EQ/Alliance Premier Growth 0.900% 0.850% 0.825% 0.800% 0.775%
EQ/Evergreen Foundation 0.600% 0.550% 0.525% 0.500% 0.475%
EQ/Evergreen 0.650% 0.600% 0.575% 0.550% 0.525%
EQ/Putnam Balanced 0.600% 0.550% 0.525% 0.500% 0.475%
EQ/Putnam Growth & Income Value 0.600% 0.550% 0.525% 0.500% 0.475%
EQ/Putnam International Equity 0.850% 0.800% 0.775% 0.750% 0.725%
EQ/Putnam Investors Growth 0.650% 0.600% 0.575% 0.550% 0.525%
Lazard Large Cap Value 0.650% 0.600% 0.575% 0.550% 0.525%
Lazard Small Cap Value 0.750% 0.700% 0.675% 0.650% 0.625%
Mercury Basic Value Equity 0.600% 0.550% 0.525% 0.500% 0.475%
Mercury World Strategy 0.700% 0.650% 0.625% 0.600% 0.575%
MFS Emerging Growth Companies 0.650% 0.600% 0.575% 0.550% 0.525%
MFS Growth with Income 0.600% 0.550% 0.525% 0.500% 0.475%
MFS Research 0.650% 0.600% 0.575% 0.550% 0.525%
Morgan Stanley Emerging Markets Equity 1.150% 1.100% 1.075% 1.050% 1.025%
T. Rowe Price Equity Income 0.600% 0.550% 0.525% 0.500% 0.475%
T. Rowe Price International Stock 0.850% 0.800% 0.775% 0.750% 0.725%
Warburg Pincus Small Company Value 0.750% 0.700% 0.675% 0.650% 0.625%
- -------------------------------------------------------------------------------------------------------
</TABLE>
For five Portfolios (i.e., Lazard Large Cap Value, T. Rowe Price International
Stock, EQ/Putnam Growth and Income, EQ/Putnam Balanced, and Warburg Pincus Small
Cap Value Portfolios) the Manager has agreed not to implement any increase in
the applicable management fee rates (as approved by shareholders) until July 31,
2001, unless the Board agrees that such a management fee increase should be put
into operation earlier.
------------------------- EQ Advisors Trust
<PAGE>
- ----------
136
- --------------------------------------------------------------------------------
The table below shows the annual rate of the management fees (as a percentage
of each Portfolio's average daily net assets) that the Manager (or the
predecessor Manager for certain of the Portfolios) received in 1999 for
managing each of the Portfolios and the rate of the management fees waived by
the Manager (or the predecessor Manager for certain of the Portfolios) in 1999
in accordance with the provisions of the Expense Limitation Agreement, as
defined directly below, between the Manager and the Trust with respect to
certain of the Portfolios.
MANAGEMENT FEES PAID BY THE PORTFOLIOS IN 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------
ANNUAL RATE OF
RATE FEES
PORTFOLIOS RECEIVED WAIVED
- -----------------------------------------------------------
<S> <C> <C>
EQ/Aggressive Stock 0.54% 0.00%
EQ/Balanced 0.41% 0.00%
Alliance Common Stock 0.36% 0.00%
Alliance Conservative Investors 0.48% 0.00%
Alliance Equity Index 0.31% 0.00%
Alliance Global 0.64% 0.00%
Alliance Growth & Income 0.54% 0.00%
Alliance Gowth Investors 0.50% 0.00%
Alliance High Yield 0.60% 0.00%
Alliance Intermediate 0.50% 0.00%
Government Securities
Alliance International 0.90% 0.00%
Alliance Money Market 0.34% 0.00%
EQ/Alliance Premier Growth 0.90% 0.22%
Alliance Quality Bond 0.53% 0.00%
Alliance Small Cap Growth 0.90% 0.00%
BT Equity Index 500 0.25% 0.12%
BT International Equity Index 0.35% 0.13%
BT Small Company Index 0.25% 0.49%
Calvert Socially Responsible 0.65% 4.29%
Capital Guardian International 0.75% 0.45%
Capital Guardian Research 0.65% 0.41%
Capital Guardian U.S. Equity 0.65% 0.28%
Evergreen 0.75% 1.81%
Evergreen Foundation 0.63% 0.99%
JPM Core Bond 0.45% 0.09%
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
ANNUAL RATE OF
RATE FEES
PORTFOLIOS RECEIVED WAIVED
- -----------------------------------------------------------
<S> <C> <C>
Lazard Large Cap Value 0.55% 0.06%
Lazard Small Cap Value 0.80% 0.10%
Mercury Basic Value 0.55% 0.11%
Mercury World Strategy 0.70% 0.20%
MFS Emerging Growth 0.55% 0.11%
Companies
MFS Growth with Income 0.55% 0.31%
MFS Research 0.55% 0.11%
Morgan Stanley Emerging 1.15% 0.64%
Markets Equity
EQ/Putnam Balanced 0.55% 0.17%
EQ/Putnam Growth & Income 0.55% 0.10%
EQ/Putnam International Equity 0.70% 0.06%
EQ/Putnam Investors Growth 0.55% 0.05%
T. Rowe Price Equity Income 0.55% 0.15%
T. Rowe Price International 0.75% 0.09%
Warburg Pincus Small Company 0.65% 0.13%
Value
- -----------------------------------------------------------
</TABLE>
EXPENSE LIMITATION AGREEMENT
In the interest of limiting until July 31, 2000 the expenses of each Portfolio
(except for the Portfolios for which Alliance serves as Investment Adviser,
other than EQ/Alliance Premier Growth Portfolio, the Manager has entered into
an amended and restated expense limitation agreement with the Trust with
respect to those Portfolios ("Expense Limitation Agreement"). Pursuant to that
Expense Limitation Agreement, the Manager has agreed to waive or limit its fees
and to assume other expenses so that the total annual operating expenses of
each Portfolio (other than interest, taxes, brokerage commissions, other
expenditures which are capitalized in accordance with generally accepted
accounting principles, other extraordinary expenses not incurred in the
ordinary course of each Portfolio's business and amounts payable pursuant to a
plan adopted in accordance with Rule 12b-1 under the 1940 Act), are limited to
the following respective expense ratios:
<PAGE>
- ----------
137
- --------------------------------------------------------------------------------
EXPENSE LIMITATION PROVISIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------
TOTAL EXPENSES
LIMITED TO (% OF
PORTFOLIOS DAILY NET ASSETS)
- -----------------------------------------------------------
<S> <C>
BT Equity 500 Index 0.35%
BT International Equity Index 0.75%
BT Small Company Index 0.50%
Calvert Socially Responsible 0.80%
Capital Guardian International 0.95%
Capital Guardian Research 0.70%
Capital Guardian U.S. Equity 0.70%
EQ/Alliance Premier Growth 0.90%
EQ/Evergreen 0.70%
EQ/Evergreen Foundation 0.70%
EQ/Putnam Balanced 0.65%
EQ/Putnam Growth & Income Value 0.70%
EQ/Putnam International Equity 1.00%
EQ/Putnam Investors Growth 0.70%
JPM Core Bond 0.55%
Lazard Large Cap Value 0.70%
Lazard Small Cap Value 0.85%
Mercury Basic Value Equity 0.70%
Mercury World Strategy 0.95%
MFS Emerging Growth Companies 0.75%
MFS Growth with Income 0.70%
MFS Research 0.70%
Morgan Stanley Emerging Markets 1.50%
Equity
T. Rowe Price Equity Income 0.70%
T. Rowe Price International Stock 1.00%
Warburg Pincus Small Company Value 0.85%
- -----------------------------------------------------------
</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 in accordance with the Expense
Limitation Agreement during any of the previous five (5) fiscal years, (or
three (3) fiscal years for certain Portfolios) less any reimbursement that the
Portfolio has previously paid to the Manager with respect to (a) such
investment management fees previously waived or reduced and (b) such other
payments previously remitted by the Manager to the Portfolio.
THE ADVISERS
Each Portfolio has one or more Advisers that furnish an investment program for
the Portfolio (or portion thereof for which the entity serves as Adviser)
pursuant to an investment advisory agreement with the Manager. Each Adviser
makes investment decisions on behalf of the Portfolio (or portion thereof for
which the entity serves as Adviser), places all orders for the purchase and
sale of investments for the Portfolio's account with brokers or dealers
selected by such Adviser or the Manager and may perform certain limited related
administrative functions in connection therewith.
The Manager has received an exemptive order, the Multi-Manager Order, from the
SEC that permits the Manager, subject to board approval and without the
approval of shareholders to: (a) employ a new Adviser or additional Advisers
for any Portfolio; (b) enter into new investment advisory agreements and
materially modify existing investment advisory agreements; and (c) terminate
and replace the Advisers without obtaining approval of the relevant Portfolio's
shareholders. However, the Manager may
-------------------- EQ Advisors Trust
<PAGE>
- ----------
138
- --------------------------------------------------------------------------------
not enter into an investment advisory agreement with an "affiliated person" of
the Manager (as that term is defined in Section 2(a)(3) of the 1940 Act
("Affiliated Adviser"), such as Alliance, unless the investment advisory
agreement with the Affiliated Adviser, including compensation, is approved by
the affected Portfolio's shareholders, including, in instances in which the
investment advisory agreement pertains to a newly formed Portfolio, the
Portfolio's initial shareholder. In such circumstances, shareholders would
receive notice of such action, including the information concerning the Adviser
that normally is provided in an information statement under Schedule 14C of the
Securities Exchange Act of 1934, as amended ("1934 Act").
The Manager pays each Adviser a fee based on the Portfolio's average daily net
assets. No Portfolio is responsible for the fees paid to each of the Advisers.
THE ADMINISTRATOR
Pursuant to an agreement, Equitable currently serves as the Administrator to
the Trust. As Administrator, Equitable provides the Trust with necessary
administrative, fund accounting and compliance services, and makes available
the office space, equipment, personnel and facilities required to provide such
services to the Trust.
Equitable may carry out its responsibilities either directly or through
sub-contracting with third party service providers. For these services, the
Trust pays Equitable $30,000 for each Portfolio, and a monthly fee at the
annual rate of 0.04 of 1% of the first $3 billion of total Trust assets, 0.03
of 1% of the next $3 billion of the total Trust assets; 0.025 of 1% of the next
$4 billion of the total Trust assets; and 0.0225% of 1% of the total Trust
assets in excess of $10 billion.
THE TRANSFER AGENT
Equitable serves as the transfer agent and dividend disbursing agent of the
Trust and receives no compensation for serving in such capacity.
BROKERAGE PRACTICES
In selecting brokers and dealers in accordance with Section 28(e) of the 1934
Act, the Manager and each Adviser may consider research and brokerage services
received by the Manager, the Advisers, the Trust or any Portfolio. Subject to
seeking the most favorable net price and execution available, the Manager and
each Adviser may also consider sales of shares of the Trust as a factor in the
selection of brokers and dealers. Finally, at the discretion of the Board, the
Trust may to direct the Manager to cause Advisers to effect securities
transactions through broker-dealers in a manner that would help to generate
resources to (i) pay the cost of certain expenses which the Trust is required
to pay or for which the Trust is required to arrange payment or (ii) finance
activities that are primarily intended to result in the sale of Trust shares.
BROKERAGE TRANSACTIONS WITH AFFILIATES
To the extent permitted by law, the Trust may engage in securities and other
transactions with entities that may be affiliated with the Manager or the
Advisers. The 1940 Act generally prohibits the Trust from engaging in principal
securities transactions with an affiliate of the Manager or the Advisers unless
pursuant to an exemptive order from the SEC. For these purposes, however, the
Trust has considered this issue and believes, based upon advice of counsel,
that a broker-dealer affiliate of an Adviser to one Portfolio should not be
treated as an affiliate of an Adviser to another Portfolio for which such
Adviser does not provide investment advice in whole or in part. The Trust has
adopted procedures that are reasonably designed to provide that any commission
it pays to affiliates of the Manager or Advisers does not exceed the usual and
customary broker's commission. The Trust has also adopted procedures permitting
it to purchase securities, under certain restrictions prescribed by a rule
under the 1940 Act, in a public offering in which an affiliate of the Manager
or Advisers is an underwriter.
<PAGE>
5
Fund distribution arrangements
- ----------------
139
- --------------------------------------------------------------------------------
The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares and Class IB shares. AXA Advisors, LLC ("AXA Advisors") serves as one of
the distributors for the Class IB shares of the Trust offered by this
Prospectus as well as one of the distributors for the Class IA shares.
Equitable Distributors, Inc. ("EDI") serves as the other distributor for the
Class IB shares of the Trust as well as the Class IA shares. Both classes of
shares are offered and redeemed at their net asset value without any sales
load. AXA Advisors and EDI are affiliates of Equitable. Both AXA Advisors and
EDI are registered as broker-dealers under the 1934 Act and are members of the
National Association of Securities Dealers, Inc.
The Trust has adopted a Distribution Plan under Rule 12b-1 under the 1940 Act
for the Trust's Class IB shares. Under the Class IB Distribution Plan the Class
IB shares of the Trust pay each of the distributors an annual fee to compensate
them for promoting, selling and servicing shares of the Portfolios. The annual
fees equal 0.25% of each Portfolio's average daily net assets. Over time, the
fees will increase your cost of investing and may cost you more than other
types of charges.
<PAGE>
6
Purchase and redemption
- ----------------
140
- --------------------------------------------------------------------------------
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.
<PAGE>
7
How assets are valued
- ----------------
141
- --------------------------------------------------------------------------------
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, or in American Depositary Receipts
or similar form, in the United States are valued at representative quoted
prices in the currency in the country of origin. Foreign currency is
converted into United States dollar equivalents at current exchange rates.
Because foreign markets may be open at different times than the NYSE, the
value of a Portfolio's shares may change on days when shareholders are not
able to buy or sell them. If events materially affecting the values of the
Portfolios' foreign investments occur between the close of foreign markets
and the close of regular trading on the NYSE, these investments may be
valued at their fair value.
o Short-term debt securities in the Portfolios, other than the Alliance Money
Market Portfolio, which mature in 60 days or less are valued at amortized
cost, which approximates market value. Securities held in the Alliance Money
Market Portfolio are valued at prices based on equivalent yields or yield
spreads.
o Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided are valued in good faith
by the Valuation Committee of the Board of Trustees of the Trust using its
best judgment.
<PAGE>
8
Tax information
- ----------------
142
- --------------------------------------------------------------------------------
Each Portfolio of the Trust is a separate regulated investment company for
federal income tax purposes. Regulated investment companies are usually not
taxed at the entity (Portfolio) level. They pass through their income and gains
to their shareholders by paying dividends. Their shareholders include this
income on their respective tax returns. A Portfolio will be treated as a
regulated investment company if it meets specified federal income tax rules,
including types of investments, limits on investments, calculation of income,
and dividend payment requirements. Although the Trust intends that it and each
Portfolio will be operated to have no federal tax liability, if they have any
federal tax liability, that could hurt the investment performance of the
Portfolio in question. Also, any Portfolio investing in foreign securities or
holding foreign currencies could be subject to foreign taxes which could reduce
the investment performance of the Portfolio.
It is important for each Portfolio to maintain its federal income tax regulated
investment company status because the shareholders of the Portfolio that are
insurance company separate accounts will then be able to use a favorable
federal income tax investment diversification testing rule in determining
whether the Contracts indirectly funded by the Portfolio meet tax qualification
rules for variable insurance contracts. If a Portfolio fails to meet specified
investment diversification requirements, owners of non-pension plan Contracts
funded through the Trust could be taxed immediately on the accumulated
investment earnings under their Contracts and could lose any benefit of tax
deferral. Equitable, in its capacity as Administrator therefore carefully
monitors compliance with all of the regulated investment company rules and
variable insurance contract investment diversification rules.
<PAGE>
9
Financial Highlights
- ----------------
143
- --------------------------------------------------------------------------------
[To be inserted]
<PAGE>
10
Prior performance of each adviser
- ----------------
144
- --------------------------------------------------------------------------------
The following table provides information concerning the historical performance
of another registered investment company (or series) and/or other institutional
private accounts managed by each Adviser that have investment objectives,
policies, strategies and risks substantially similar to those of the respective
Portfolio(s) of the Trust for which it serves as Adviser. The data is provided
to illustrate the past performance of the Advisers in managing substantially
similar investment vehicles as measured against specified market indices. This
data does not represent the past performance of any of the Portfolios or the
future performance of any Portfolio or its Adviser. Consequently, potential
investors should not consider this performance data as an indication of the
future performance of any Portfolio of the Trust or of its Adviser and should
not confuse this performance data with performance data for each of the Trust's
Portfolios, which is shown for each Portfolio under the caption "ABOUT THE
INVESTMENT PORTFOLIOS."
Each Adviser's performance data shown below for other registered investment
companies (or series thereof) was calculated in accordance with standards
prescribed by the SEC for the calculation of average annual total return
information for registered investment companies. Average annual total return
reflects changes in share prices and reinvestment of dividends and
distributions and is net of fund expenses. In each such instance, the share
prices and investment returns will fluctuate, reflecting market conditions as
well as changes in company-specific fundamentals of portfolio securities.
Composite performance data relating to the historical performance of
institutional private accounts managed by the relevant Adviser was calculated
on a total return basis and includes all losses. As specified below, this
composite performance data is provided only for the J.P. Morgan Active Fixed
Income Composite, the Capital Guardian U.S. Equity Research Portfolio
Diversified Composite, the Capital Guardian U.S. Equity Composite, and the
Capital Guardian Non-U.S Equity Composite (collectively, the "Composites"). The
total returns for each Composite reflect the deduction of investment advisory
fees, brokerage commissions and execution costs paid by J.P. Morgan's and
Capital Guardian's institutional private accounts, without provision for
federal or state income taxes. Custodial fees, if any, were not included in the
calculation. Each Composite includes all actual, fee-paying, discretionary
institutional private accounts managed by J.P. Morgan and Capital Guardian that
have investment objectives, policies, strategies and risks substantially
similar to those of the relevant Portfolio. Securities transactions are
accounted for on the trade date and accrual accounting is utilized. Cash and
equivalents are included in performance returns. The institutional private
accounts that are included in the Composite are not subject to the same types
of expenses to which the relevant Portfolio is subject or to the
diversification requirements, specific tax restrictions and investment
limitations imposed on the Portfolio by the 1940 Act or Subchapter M of the
Internal Revenue Code. Consequently, the performance results for the Composite
could have been adversely affected if the institutional private accounts
included in the Composite had been regulated as investment companies under the
federal securities laws.
The major difference between the SEC prescribed calculation of average annual
total returns for registered investment companies or (series thereof) and total
returns for composite performance is that average annual total returns reflect
all fees and charges applicable to the registered investment company in
question and the total return calculation for the Composite reflects only those
fees and charges described in the paragraph directly above.
The performance results for the registered investment companies or Composite
presented below are generally subject to somewhat lower fees and expenses than
the relevant Portfolios although in most instances the fees and expenses are
substantially similar. In addition, holders of Contracts representing interests
in the Portfolios below will be subject to charges and expenses relating to
such
<PAGE>
- -----
145
- --------------------------------------------------------------------------------
Contracts. The performance results presented below do not reflect any
insurance related expenses and would be reduced if such charges were
reflected.
The investment results presented below are unaudited. For more information on
the specified market indices used below, see the section "The Benchmarks."
ANNUAL RATES OF RETURN OF OTHER FUNDS OR ACCOUNTS MANAGED BY ADVISERS
AS OF 12/31/99
The name of the other fund or account managed by the Adviser is shown in BOLD.
The name of the Trust Portfolio is shown in (parentheses). The name of the
benchmark is shown in italics.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1 5 10 Since Inception
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT Portfolio) Year Years Years Inception Date
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Benchmark
- ------------------------------------------------------------------------------------------------------------------------
ALLIANCE PREMIER GROWTH FUND, INC. - ADVISOR CLASS(9) (EQ/ALLIANCE PREMIER GROWTH PORTFOLIO)
- ------------------------------------------------------------------------------------------------------------------------
29.42% N/A N/A 38.65% 10/1/96
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% N/A N/A 21.60%
- ------------------------------------------------------------------------------------------------------------------------
BT ADVISORS FUNDS - EAFE EQUITY INDEX FUND - INSTITUTIONAL CLASS (BT INTERNATIONAL EQUITY INDEX PORTFOLIO)
- ------------------------------------------------------------------------------------------------------------------------
27.95% N/A N/A 14.07% 1/24/96
- ------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(5) 26.96% N/A N/A 13.88%
- ------------------------------------------------------------------------------------------------------------------------
BT ADVISORS FUNDS - SMALL CAP INDEX FUND-INSTITUTIONAL CLASS (BT SMALL COMPANY INDEX PORTFOLIO)
- ------------------------------------------------------------------------------------------------------------------------
21.70% N/A N/A 14.41% 7/10/96
- ------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4) 21.26% N/A N/A 14.52%
- ------------------------------------------------------------------------------------------------------------------------
BT INSTITUTIONAL FUNDS - EQUITY 500 INDEX FUND - INSTITUTIONAL CLASS (BT EQUITY 500 INDEX PORTFOLIO)
- ------------------------------------------------------------------------------------------------------------------------
20.75% 28.46% N/A 21.45% 12/31/92
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.56% N/A 21.53%
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN NON-U.S. EQUITY COMPOSITE (CAPITAL GUARDIAN INTERNATIONAL PORTFOLIO)
- ------------------------------------------------------------------------------------------------------------------------
70.77% 23.99% 15.31% 12/31/78
- ------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(5) 26.96% 12.83% 7.01%
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN U.S. EQUITY COMPOSITE (CAPITAL GUARDIAN U.S. EQUITY PORTFOLIO)
- ------------------------------------------------------------------------------------------------------------------------
23.83% 27.70% 17.97% 12/31/66
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.56% 18.19%
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN U.S. EQUITY RESEARCH PORTFOLIO - DIVERSIFIED COMPOSITE (CAPITAL GUARDIAN RESEARCH PORTFOLIO)
- ------------------------------------------------------------------------------------------------------------------------
24.23% 29.43% N/A 22.62% 3/31/93
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.56% N/A 21.58%
- ------------------------------------------------------------------------------------------------------------------------
EVERGREEN FUND - CLASS Y SHARES (EQ/EVERGREEN PORTFOLIO)
- ------------------------------------------------------------------------------------------------------------------------
16.05% 21.21% 14.17% 10/15/71
- ------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4) 21.26% 16.69% 13.40%
- ------------------------------------------------------------------------------------------------------------------------
EVERGREEN FOUNDATION FUND - CLASS Y SHARES (EQ/EVERGREEN FOUNDATION PORTFOLIO)
- ------------------------------------------------------------------------------------------------------------------------
13.69% 18.32% N/A 16.57% 1/2/90
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.56% N/A 16.16%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
146
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
1 5 10 Since Inception
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT Portfolio) Year Years Years Inception Date
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
J.P. MORGAN ACTIVE FIXED INCOME COMPOSITE (JPM CORE BOND PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
0.08% 8.29% 8.44% 9.91% 5/31/77
- -------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Broad Investment Grade Bond Index(1) (0.82)% 7.74% 7.75% N/A
- -------------------------------------------------------------------------------------------------------------------------
THE LAZARD FUNDS, INC. - LAZARD EQUITY PORTFOLIO (LAZARD LARGE CAP VALUE PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
4.23% 20.36% 14.83% 14.08% 6/87
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.55% 18.21% 16.85%
- -------------------------------------------------------------------------------------------------------------------------
THE LAZARD FUNDS, INC. - LAZARD SMALL CAP PORTFOLIO (LAZARD SMALL CAP VALUE PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
1.77% 11.39% N/A 14.24% 10/1/91
- -------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4) 21.26% 16.69% N/A 14.77%
- -------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS INVESTORS TRUST(2) (MFS GROWTH WITH INCOME PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
0.81% 23.42% 15.83% 7/15/24
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.55% 18.21%
- -------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. - MERRILL LYNCH BASIC VALUE FOCUS FUND (MERCURY BASIC VALUE
EQUITY PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
21.12% 19.35% N/A 16.60% 7/1/93
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.55% N/A 22.46%(2)
- -------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. - MERRILL LYNCH GLOBAL STRATEGY FOCUS FUND (MERCURY WORLD
STRATEGY PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
21.37% 13.11% N/A 11.00% 2/28/92
- -------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(5) 26.96% 12.83% N/A 12.00%
- -------------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH FUND(6) (MFS EMERGING GROWTH COMPANIES PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
41.45% 28.05% 24.72% 12/29/86
- -------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4) 21.26% 16.69% 13.40%
- -------------------------------------------------------------------------------------------------------------------------
MFS RESEARCH FUND(6) (MFS RESEARCH PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
16.70% 24.43% 17.53% 10/13/71
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.56% 18.21%
- -------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY INSTITUTIONAL FUND, INC. - EMERGING MARKETS PORTFOLIO(7) (MORGAN STANLEY EMERGING MARKETS
EQUITY PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
105.14% 9.20% N/A 16.40% 9/25/92
- -------------------------------------------------------------------------------------------------------------------------
IFC Global Total Return Composite Index(8) 62.69% 0.75% N/A 7.73%
- -------------------------------------------------------------------------------------------------------------------------
THE GEORGE PUTNAM FUND OF BOSTON (EQ/PUTNAM BALANCED PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
0.12% 15.18% 11.39% 11/5/37
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.56% 18.21%
- -------------------------------------------------------------------------------------------------------------------------
PUTNAM GROWTH & INCOME FUND II (EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
(0.91)% N/A N/A 17.65% 1/5/95
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% N/A N/A 28.58%
- -------------------------------------------------------------------------------------------------------------------------
PUTNAM INTERNATIONAL GROWTH FUND (EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
60.77% 24.41% N/A 17.82% 2/28/91
- -------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(5) 26.96% 12.83% N/A 9.62%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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147
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<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
1 5 10 Since Inception
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT Portfolio) Year Years Years Inception Date
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PUTNAM INVESTORS FUND (EQ/PUTNAM INVESTORS GROWTH PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
30.14% 31.69% 19.81% 12/1/25
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.51% 18.21%
- -------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME FUND (T. ROWE PRICE EQUITY INCOME PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
3.82% 18.59% 14.14% 15.67% 10/31/85
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 21.04% 28.51% 18.21%
- -------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL STOCK FUND (T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
34.60% 15.71% 11.38% 15.17% 5/9/80
- -------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(5) 27.30% 13.15% 7.33%
- -------------------------------------------------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE FUND (WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------
7.55% N/A N/A 14.21% 12/29/95
- -------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4) 21.26% N/A N/A 10.19%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 The Salomon Brothers Broad Investment Grade Bond Index is an unmanaged,
market-weighted index that contains approximately 4,700 individually priced
investment grade bonds. The index does not include fees or operating
expenses and is not available for actual investment.
2 Since inception percentage was calculated as of 6-30-93.
3 The S&P 500 Index ("S&P 500") is an unmanaged index containing common
stocks of 500 industrial, transportation, utility and financial companies,
regarded as generally representative of the larger capitalization portion
of the United States stock market. The S&P 500 reflects the reinvestment of
income dividends and capital gain distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.
4 The Russell 2000 Index is an unmanaged index (with no defined investment
objective) composed of approximately 2,000 small-capitalization stocks and
includes reinvestments of dividends. The index does not include fees or
operating expenses and is not available for actual investment. It is
compiled by the Frank Russell Company.
5 The Morgan Stanley Capital International EAFE Index ("EAFE Index") is an
unmanaged capitalization-weighted measure of stock markets in Europe,
Australia and the Far East. The returns of the EAFE Index assume dividends
are reinvested net of withholding tax and do not reflect any fees or
operating expenses. The index is not available for actual investment.
6 The results for the MFS Emerging Growth Fund (Class B shares) do not
reflect sales charges that may be imposed on the such shares.
7 The Class B shares of the Morgan Stanley Institutional Fund, Inc. -
Emerging Markets Portfolio are subject to a Rule 12b-1 fee equal to 0.25%
of the Portfolio's assets. The expense ratio of Morgan Stanley
Institutional Fund, Inc. - Emerging Markets Portfolio has been capped at
1.75% since inception.
8 The IFC Global Total Return Composite Index is an unmanaged index of common
stocks and includes developing countries in Latin America, East and South
Asia, Europe, the Middle East and Africa. The Index assumes dividends are
reinvested.
9 Annualized performance for the Advisor Class shares. The Advisor Class
shares had a total expense ratio of 1.26% of its average daily net assets
for the year ended December 31, 1998. Other share classes have different
expenses and their performance will vary.
10 Performance results as of June 30, 1999.
------------------------- EQ Advisors Trust
<PAGE>
- ----------------
148
- --------------------------------------------------------------------------------
If you wish to know more, you will find additional information about the Trust
and its Portfolios in the following documents, which are available, free of
charge by calling our toll-free number at 1-800-528-0204:
ANNUAL AND SEMI-ANNUAL REPORTS
The Annual and Semi-Annual Reports include more information about the Trust's
performance and are available upon request free of charge. The reports usually
include performance information, a discussion of market conditions and the
investment strategies that affected the Portfolios' performance during the last
fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI, dated May 1, 2000, is incorporated into this Prospectus by reference
and is available upon request free of charge by calling our toll free number at
1-800-528-0204.
You may visit the SEC's website at www.sec.gov to view the SAI and other
information about the Trust. You can also review and copy information about the
Trust, including the SAI, at the SEC's Public Reference Room in Washington,
D.C. or by electronic request at [email protected] or by writing the SEC's
Public Reference Section, Washington, D.C. 20549-0102 You may have to pay a
duplicating fee. To find out more about the Public Reference Room, call the SEC
at 1-202-942-8090.
Investment Company Act File Number: 811-07953
<PAGE>
EQ ADVISORS TRUST
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus for the EQ Advisors Trust ("Trust") dated
May 1, 2000, which may be obtained without charge by writing to the Trust at
1290 Avenue of the Americas, New York, New York 10104. Unless otherwise defined
herein, capitalized terms have the meanings given to them in the Prospectus.
TABLE OF CONTENTS
<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 ................................. 8
Management of the Trust ......................................... 37
Investment Management and Other Services ........................ 41
Brokerage Allocation and Other Strategies ....................... 55
Purchase and Pricing of Shares .................................. 62
Redemption of Shares ............................................ 63
Taxation ........................................................ 64
Portfolio Performance ........................................... 65
Code of Ethics .................................................. 66
Other Services .................................................. 66
Financial Statements ............................................ 66
</TABLE>
PEA 15
- --------------------------------------------------------------------------------
CAT. NO. 127997
<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 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 Money Market Portfolio, Alliance Quality Bond Portfolio,
and Alliance Small Cap Growth Portfolio (collectively referred to herein as the
"Alliance Portfolios"), T. Rowe Price International Stock Portfolio, T. Rowe
Price Equity Income Portfolio, EQ/Putnam Growth & Income Value Portfolio,
EQ/Putnam International Equity Portfolio, EQ/Putnam Investors Growth Portfolio,
EQ/Putnam Balanced Portfolio, MFS Research Portfolio, MFS Emerging Growth
Companies Portfolio, MFS Growth with Income Portfolio, Morgan Stanley Emerging
Markets Equity Portfolio, Warburg Pincus Small Company Value Portfolio, Mercury
World Strategy Portfolio, Mercury Basic Value Equity Portfolio, Lazard Large
Cap Value Portfolio, Lazard Small Cap Value Portfolio, JPM Core Bond Portfolio,
BT Small Company Index Portfolio, BT International Equity Index Portfolio, BT
Equity 500 Index Portfolio, EQ/Evergreen Foundation Portfolio, EQ/Evergreen
Portfolio, EQ/Alliance Premier Growth Portfolio, Capital Guardian Research
Portfolio, Capital Guardian U.S. Equity Portfolio, Capital Guardian
International Portfolio and Calvert Socially Responsible Portfolio
(collectively, together with the Alliance Portfolios, referred to herein as the
"Portfolios"). Class IA shares are offered at net asset value and are not
subject to distribution fees imposed pursuant to a distribution plan. Class IB
shares are offered at net asset value and are subject to distribution fees
imposed under a distribution plan ("Class IB Distribution Plan") adopted
pursuant to Rule 12b-1 under the 1940 Act.
Both classes of shares are offered under the Trust's multi-class distribution
system, which is designed to allow promotion of insurance products investing in
the Trust through alternative distribution channels. Under the Trust's
multi-class distribution system, shares of each class of a Portfolio represent
an equal pro rata interest in that Portfolio and, generally, will have
identical voting, dividend, liquidation, and other rights, preferences, powers,
restrictions, limitations, qualifications and terms and conditions, except
that: (a) each class shall have a different designation; (b) each class of
shares shall bear its "Class Expenses"; (c) each class shall have exclusive
voting rights on any matter submitted to shareholders that relates solely to
its distribution arrangements; (d) each class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class; (e) each class may have separate
exchange privileges, although exchange privileges are not currently
contemplated; and (f) each class may have different conversion features,
although a conversion feature is not currently contemplated. Expenses currently
designated as "Class Expenses" by the Trust's Board of Trustees under the plan
pursuant to Rule 18f-3 are currently limited to payments made to the
Distributors for the Class IB shares pursuant to the Class IB Distribution Plan
adopted pursuant to Rule 12b-1 under the 1940 Act.
The Trust's shares are currently sold to: (i) insurance company separate
accounts in connection with variable life insurance contracts and variable
annuity certificates and contracts ("Contract" or collectively, "Contracts")
issued by The Equitable Life Assurance Society of the United States
("Equitable") and Equitable of Colorado, Inc. ("EOC"), as well as insurance
company separate accounts of: Integrity Life Insurance Company, National
Integrity Life Insurance Company, The American Franklin Life Insurance Company,
and Transamerica Occidental Life Insurance Company, each of which is
unaffiliated with Equitable; and (ii) to The Equitable Investment Plan for
Employees, Managers and Agents ("Equitable Plan").
2
<PAGE>
The Trust does not currently foresee any disadvantage to Contract owners
arising from offering the Trust's shares to separate accounts of insurance
companies that are unaffiliated with each other. However, it is theoretically
possible that the interests of owners of various contracts participating in the
Trust through separate accounts might at some time be in conflict. In the case
of a material irreconcilable conflict, one or more separate accounts might
withdraw their investments in the Trust, which might force the Trust to sell
portfolio securities at disadvantageous prices.
LEGAL CONSIDERATIONS
Under Delaware law, annual election of Trustees is not required, and, in the
normal course, the Trust does not expect to hold annual meetings of
shareholders. There will normally be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as less than a majority
of the Trustees holding office have been elected by shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the election
of Trustees. Pursuant to the procedures set forth in Section 16(c) of the 1940
Act, shareholders of record of not less than two-thirds of the outstanding
shares of the Trust may remove a Trustee by a vote cast in person or by proxy
at any meeting.
Except as set forth above, the Trustees will continue to hold office and may
appoint successor Trustees. Voting rights are not cumulative, so that the
holders of more than 50% of the shares voting in the election of Trustees can,
if they choose to do so, elect all the Trustees of the Trust, in which event
the holders of the remaining shares will be unable to elect any person as a
Trustee. The Amended and Restated Declaration of Trust of the Trust requires
the affirmative vote of a majority of the outstanding shares of the Trust.
The shares of each Portfolio, when issued, will be fully paid and
non-assessable and will have no preference, preemptive, conversion, exchange or
similar rights.
TRUST POLICIES
FUNDAMENTAL RESTRICTIONS
Each Portfolio has also adopted certain investment restrictions that are
fundamental and may not be changed without approval by a "majority" vote of the
Portfolio's shareholders. Such majority is defined in the 1940 Act as the
lesser of: (i) 67% or more of the voting securities of such Portfolio present
in person or by proxy at a meeting, if the holders of more than 50% of the
outstanding voting securities are present or represented by proxy; or (ii) more
than 50% of the outstanding voting securities of such Portfolio. Set forth
below are each of the fundamental restrictions adopted by each of the
Portfolios. Fundamental policies (5) and (6) below shall not apply to the
Morgan Stanley Emerging Markets Equity Portfolio, the Mercury World Strategy
Portfolio and the Lazard Small Cap Value Portfolio. Certain non-fundamental
operating policies are also described in this section because of their direct
relevance to the fundamental restrictions adopted by the Portfolios.
Each Portfolio, except as described directly above, may not as a matter of
fundamental policy:
(1) Borrow money, except that:
a. each Portfolio may (i) borrow for non-leveraging, temporary or
emergency purposes (except the Lazard Large Cap Value Portfolio, which
may also borrow for leveraging purposes) and (ii) engage in reverse
repurchase agreements, make other investments or engage in other
transactions, which may involve a borrowing, in a manner consistent
with the Portfolios' respective investment objective and program,
provided that the combination of (i) and (ii) shall not exceed 33 1/3%
of the value of the Portfolios' respective total assets (including the
amount borrowed) less liabilities (other than borrowings) or such
other percentage permitted by law (except that the Mercury World
Strategy Portfolio and the Mercury Basic Value Equity Portfolio may
purchase securities on margin to the extent permitted by applicable
law. Any borrowings which come to exceed this amount will be reduced
in accordance with applicable law. Each Portfolio may borrow from
banks or other persons to the extent permitted by applicable law. In
addition, the Lazard Large Cap Value Portfolio may borrow
3
<PAGE>
for leveraging purposes (in order to increase its investment in
portfolio securities) to the extent that the amount so borrowed does
not exceed 33 1/3% of the Portfolio's total assets (including the
amount borrowed) less liabilities (other than borrowings);
b. as a matter of non-fundamental operating policy, no Portfolio, except
the Lazard Large Cap Value Portfolio, will purchase additional
securities when money borrowed exceeds 5% of its total assets;
c. the EQ/Putnam Growth & Income Value Portfolio, EQ/Putnam International
Equity Portfolio, EQ/Putnam Investors Growth Portfolio, EQ/Putnam
Balanced Portfolio, and Lazard Large Cap Value Portfolio each, as a
matter of non-fundamental operating policy, may borrow only from banks
(i) as a temporary measure to facilitate the meeting of redemption
requests (not for leverage) which might otherwise require the untimely
disposition of portfolio investments or (ii) for extraordinary or
emergency purposes, provided that the combination of (i) and (ii)
shall not exceed 10% of the applicable Portfolio's net assets (taken
at lower of cost or current value), not including the amount borrowed,
at the time the borrowing is made. Each Portfolio will repay
borrowings made for the purposes specified above before any additional
investments are purchased;
d. the Mercury World Strategy Portfolio, as a matter of fundamental
policy, and the Mercury Basic Value Equity Portfolio, as a matter of
non-fundamental operating policy, may, to the extent permitted by
applicable law, borrow up to an additional 5% of their respective
total assets for temporary purposes;
e. the Lazard Small Cap Value Portfolio, as a matter of non-fundamental
operating policy, may borrow only from banks (i) as a temporary
measure to facilitate the meeting of redemption requests (not for
leverage) which might otherwise require the untimely disposition of
portfolio investments or (ii) for extraordinary or emergency purposes,
provided that the combination of (i) and (ii) shall not exceed 15% of
the Portfolio's net assets, not including the amount borrowed, at the
time the borrowing is made. The Lazard Small Cap Value Portfolio will
repay borrowings before any additional investments are purchased;
f. the Warburg Pincus Small Company Value Portfolio and JPM Core Bond
Portfolio, each as a matter of non-fundamental operating policy, may
borrow only from banks for extraordinary or emergency purposes,
provided such amount shall not exceed 30% of the respective Portfolio's
total assets, not including the amount borrowed, at the time the
borrowing is made;
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 and Capital Guardian
International Portfolio, as a matter of non-fundamental operating
policy, may only borrow for temporary or emergency purposes, provided
such amount does not exceed 5% of the Portfolio's total assets at the
time the borrowing is made;
j. The Alliance Portfolios, as a matter of non-fundamental operating
policy, may borrow money only from banks: (i) for temporary purposes;
(ii) to pledge assets to banks in order to transfer funds for various
purposes as required without interfering with the orderly liquidation
of securities in a Portfolio (but not for leveraging purposes); (iii)
to make margin payments or pledges in connection with options, futures
contracts, options on futures contracts, forward contracts or options
on foreign currencies; or (iv) with respect to Alliance Quality Bond
Portfolio, in connection with transactions in interest rate swaps, caps
and floors.
4
<PAGE>
(2) Purchase or sell physical commodities, except that it may (i) enter into
futures contracts and options thereon in accordance with applicable law
and (ii) purchase or sell physical commodities if acquired as a result of
ownership of securities or other instruments. No Portfolio will consider
stock index futures contracts, currency contracts, hybrid investments,
swaps or other similar instruments to be commodities;
(3) Purchase the securities of any issuer if, as a result, more than 25% of the
value of the Portfolio's total assets would be invested in the securities
of issuers having their principal business activities in the same
industry. This restriction does not apply to investments by the Alliance
Money Market Portfolio in certificates of deposit or securities issued and
guaranteed by domestic banks. In addition, the United States, state or
local governments, or related agencies or instrumentalities are not
considered an industry. Industries are determined by reference to the
classifications of industries set forth in each Portfolio's semi-annual
and annual reports;
(4) Make loans, except that:
a. This restriction shall not apply to the Alliance High Yield Portfolio
and Alliance Intermediate Government Securities Portfolio and each may
make secured loans, including lending cash or portfolio securities
with limitation.
b. each other Portfolio may: (i) lend portfolio securities provided that
no such loan may be made if, as a result, the aggregate of such loans
would exceed 33 1/3% of the value of the Portfolio's total assets (50%
in the case of each of the other Alliance Portfolios); (ii) purchase
money market securities and enter into repurchase agreements; and
(iii) acquire publicly-distributed or privately-placed debt securities
and purchase debt securities. Each Portfolio will consider the
acquisition of a debt security to include the execution of a note or
other evidence of an extension of credit with a term of more than nine
months. For purposes of this restriction, each Portfolio will treat
purchases of loan participations and other direct indebtedness,
including investments in mortgages, as not subject to this limitation;
c. the EQ/Putnam Growth & Income Value Portfolio and EQ/Putnam
International Equity Portfolio, as a matter of non-fundamental
operating policy, may purchase debt obligations consistent with the
respective investment objectives and policies of each of those
Portfolios: (i) by entering into repurchase agreements with respect to
not more than 25% of the Portfolios' respective total assets (taken at
current value) or (ii) through the lending of the Portfolios'
portfolio securities with respect to not more than 25% of the
Portfolios' respective total assets (taken at current value);
d. the MFS Emerging Growth Companies Portfolio, BT Small Company Index
Portfolio, BT International Equity Index Portfolio, and BT Equity 500
Index Portfolio, as a matter of non-fundamental operating policy, may
each lend its portfolio securities provided that no such loan may be
made if, as a result, the aggregate of such loans would exceed 30% of
such Portfolio's total assets (taken at market value); and
e. the Warburg Pincus Small Company Value Portfolio, the Mercury World
Strategy Portfolio, and the Mercury Basic Value Equity Portfolio, as a
matter of non-fundamental policy, may each lend its portfolio
securities provided that no such loan may be made if, as a result, the
aggregate of such loans would exceed 20% of such Portfolio's total
assets (taken at market value);
f. the Lazard Large Cap Value Portfolio and the Lazard Small Cap Value
Portfolio, as a matter of non-fundamental policy, may each lend its
portfolio securities provided that no such loan may be made if, as a
result, the aggregate of such loans would exceed 10% of such
Portfolio's total assets (taken at market value);
g. MFS Growth with Income Portfolio, as a matter of non-fundamental
operating policy, may lend its portfolio securities provided that no
such loan may be made if, as a result, the aggregate of such loans
would exceed 25% of its net assets (taken at market value);
5
<PAGE>
h. the EQ/Alliance Premier Growth Portfolio, as a matter of
non-fundamental policy, 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 the 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, as a matter of non-fundamental policy, will
also treat this restriction as not preventing any such Portfolio from
purchasing debt obligations as consistent with its investment policies,
government obligations, short-term commercial paper, or publicly-traded
debt, including bonds, notes, debentures, certificates of deposit, and
equipment trust certificates and loans made under insurance policies;
(5) Purchase a security if, as a result, with respect to 75% of the value of
its total assets, more than 5% of the value of the Portfolio's total
assets would be invested in the securities of a single issuer, except (i)
securities issued or guaranteed by the United States Government, its
agencies or instrumentalities and (ii) securities of other investment
companies:*
a. As a matter of operating policy, each Portfolio will not consider
repurchase agreements to be subject to the above stated 5% limitation
if the collateral underlying the repurchase agreements consists
exclusively of obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities;
b. The Alliance Money Market Portfolio, as a matter of non-fundamental
policy, will not invest more than 5% of its total assets in securities
of any one issuer, other than U.S. Government securities, except that
it may invest up to 25% of its total assets in First Tier Securities
(as defined in Rule 2a-7 of the 1940 Act) of a single issuer for a
period of up to three business days after the purchase of such
security. Further, as a matter of operating policy, the Alliance Money
Market Portfolio will not invest more than (i) the greater of 1% of
its total assets or $1,000,000 in Second Tier Securities (as defined
in Rule 2a-7 under the 1940 Act) of a single issuer and (ii) 5% of its
total assets, at the time a Second Tier Security is acquired, in
Second Tier Securities;
(6) Purchase a security if, as a result, with respect to 75% of the value of
the Portfolio's total assets, more than 10% of the outstanding voting
securities of any issuer would be held by the Portfolio (other than (i)
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities and (ii) securities of other investment
companies);*
(7) Purchase or sell real estate, except that:
a. each Portfolio, except the JPM Core Bond Portfolio, may purchase
securities of issuers which deal in real estate, securities which are
directly or indirectly secured by interests in real estate, and
securities which represent interests in real estate, and each
Portfolio may acquire and dispose of real estate or interests in real
estate acquired through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein;
b. the JPM Core Bond Portfolio may (i) invest in securities of issuers
that invest in real estate or interests therein, (ii) invest in
securities that are secured by real estate or interests therein (iii)
make direct investments in mortgages, (iv) purchase and sell
mortgage-related securities and (v) hold and sell real estate acquired
by the Portfolio as a result of the ownership of securities including
mortgages;
(8) Issue senior securities except in compliance with the 1940 Act; or
- ----------
* The Morgan Stanley Emerging Markets Equity, Mercury World Strategy and
Lazard Small Cap Value Portfolios are classified as non-diversified
investment companies under the 1940 Act and therefore, these restrictions
are not applicable to these Portfolios.
6
<PAGE>
(9) Underwrite securities issued by other persons, except to the extent that
the Portfolio may be deemed to be an underwriter within the meaning of the
Securities Act of 1933, as amended (the "1933 Act"), in connection with
the purchase and sale of its portfolio securities in the ordinary course
of pursuing its investment objective, policies and program.
NON-FUNDAMENTAL RESTRICTIONS
The following investment restrictions apply to each Portfolio, but are not
fundamental. They may be changed for any Portfolio without a vote of that
Portfolio's shareholders.
Each Portfolio may not:
(1) Purchase a futures contract or an option thereon if, with respect to
positions in futures or options on futures which do not represent bona
fide hedging, the aggregate initial margin and premiums on such options
would exceed 5% of the Portfolio's net asset value. As a matter of
operating policy, the Alliance Money Market Portfolio, the MFS Research
Portfolio, the Lazard Large Cap Value Portfolio, the Lazard Small Cap
Portfolio, the Capital Guardian Research Portfolio, the Capital Guardian
U.S. Equity Portfolio and the Capital Guardian International Portfolio may
not invest in commodities or commodity contracts including futures
contracts. As a matter of operating policy, the EQ/Aggressive Stock
Portfolio, EQ/ Balanced Portfolio, Alliance Common Stock Portfolio,
Alliance Conservative Investors Portfolio, Alliance Equity Index
Portfolio, Alliance Global Portfolio, Alliance Growth and Income
Portfolio, Alliance Growth Investors Portfolio, Alliance High Yield
Portfolio, Alliance Intermediate Government Securities Portfolio, Alliance
International Portfolio, Alliance Quality Bond Portfolio, Alliance Small
Cap Growth Portfolio, EQ/Alliance Premier Growth Portfolio, T. Rowe Price
Equity Income Portfolio and the T. Rowe Price International Stock
Portfolio may purchase and sell exchange-traded index options and stock
index futures contracts;
(2) Purchase: (a) illiquid securities, (b) securities restricted as to resale
(excluding securities determined by the Board of Trustees to be readily
marketable), and (c) repurchase agreements maturing in more than seven
days if, as a result, more than 15% of each Portfolio's net assets (10%
for the Alliance Money Market Portfolio, the Warburg Pincus Small Company
Value Portfolio, Lazard Large Cap Value Portfolio and Lazard Small Cap
Value Portfolio) would be invested in such securities. Securities
purchased in accordance with Rule 144A under the 1933 Act and determined
to be liquid by the Trust's Board are not subject to the limitations set
forth in this investment restriction;
(3) Purchase securities on margin, except that each Portfolio may: (a) make use
of any short-term credit necessary for clearance of purchases and sales of
portfolio securities and (b) make initial or variation margin deposits in
connection with futures contracts, options, currencies, or other
permissible investments;
(4) Mortgage, pledge, hypothecate or, in any manner, transfer any security
owned by the Portfolio as security for indebtedness, except as may be
necessary in connection with permissible borrowings or investments; and
then such mortgaging, pledging or hypothecating may not exceed 33 1/3% of
the respective total assets of each Portfolio (except as specified below
for the EQ/Putnam International Equity Portfolio, Mercury World Strategy
Portfolio, Mercury Basic Value Equity Portfolio and MFS Investor
Portfolio). Such mortgaging, pledging or hypothecating may not exceed 15%
of EQ/Putnam International Equity Portfolio's total assets; 10% of each of
the Mercury World Strategy Portfolio's and Mercury Basic Value Equity
Portfolio's total assets, (taken at the lower of cost or market value);
and 15% of MFS Investor Portfolio's gross assets (taken at cost), each
taken at the time of the permissible borrowing or investment. The Alliance
Portfolios 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, JPM Core Bond Portfolio,
EQ/Evergreen Foundation
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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 and Capital Guardian International Portfolio will not effect
short sales of securities or property.
INVESTMENT STRATEGIES AND RISKS
In addition to the Portfolios' principal investment strategies discussed in the
Prospectus, each Portfolio may engage in other types of investment strategies
as further described in the descriptions below. Each Portfolio may invest in or
utilize any of these investment strategies and instruments or engage in any of
these practices except where otherwise prohibited by law or the Portfolio's own
investment restrictions. Portfolios that anticipate committing 5% or more of
their net assets to a particular type of investment strategy or instrument are
specifically referred to in the descriptions below of such investment strategy
or instrument.
ASSET-BACKED SECURITIES. As indicated in Appendix A, certain of the Portfolios
may invest in asset-backed securities. Asset-backed securities, issued by
trusts and special purpose corporations, are collateralized by a pool of
assets, such as credit card or automobile loans, home equity loans or computer
leases, and represent the obligations of a number of different parties.
Asset-backed securities present certain risks. For instance, in the case of
credit card receivables, these securities are generally unsecured and the
debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due. In
the case of automobile loans, most issuers of automobile receivables permit the
servicers to retain possession of the underlying obligations. If the servicer
were to sell these obligations to another party, there is a risk that the
purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in all of the obligations backing such receivables.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.
To lessen the effect of failures by obligors on underlying assets to make
payments, the securities may contain elements of credit support which fall into
two categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letters of credit obtained by the issuer or sponsor from third parties. A
Portfolio will not pay any additional or separate fees for credit support. The
degree of credit support provided for each issue is generally based on
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.
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Due to the possibility that prepayments (on automobile loans and other
collateral) will alter the cash flow on asset-backed securities, it is not
possible to determine in advance the actual final maturity date or average
life. Faster prepayment will shorten the average life and slower prepayments
will lengthen it. However, it is possible to determine what the range of that
movement could be and to calculate the effect that it will have on the price of
the security. In selecting these securities, the Adviser will look for those
securities that offer a higher yield to compensate for any variation in average
maturity.
BRADY BONDS. As indicated in Appendix A, certain of the Portfolios may invest
in Brady Bonds. Brady Bonds are fixed income securities created through the
exchange of existing commercial bank loans to foreign entities for new
obligations in connection with debt restructuring under a plan introduced by
Nicholas F. Brady when he was the United States Secretary of the Treasury.
Brady Bonds have been issued only recently, and, accordingly, do not have a
long payment history. They may be collateralized or uncollateralized and issued
in various currencies (although most are United States dollar-denominated) and
they are actively traded in the over-the-counter secondary market Each
Portfolio will invest in Brady Bonds only if they are consistent with quality
specifications established from time to time by the Adviser to that Portfolio.
CONVERTIBLE SECURITIES. As indicated in Appendix A, certain of the Portfolios
may invest in convertible securities, including both convertible debt and
convertible preferred stock. Such securities may be converted into shares of
the underlying common stock at either a stated price or stated rate, which
enable an investor to benefit from increases in the market price of the
underlying common stock. Convertible securities provide higher yields than the
underlying common stocks, but generally offer lower yields than nonconvertible
securities of similar quality. The value of convertible securities fluctuates
in relation to changes in interest rates and, in addition, fluctuates in
relation to the underlying common stock. Subsequent to purchase by a Portfolio,
convertible securities may cease to be rated or a rating may be reduced below
the minimum required for purchase by that Portfolio. Neither event will require
sale of such securities, although each Adviser will consider such event in its
determination of whether a Portfolio should continue to hold the securities.
DEPOSITARY RECEIPTS. As indicated in Appendix A, certain of the Portfolios may
invest in depositary receipts. Depositary receipts exist for many foreign
securities and are securities representing ownership interests in securities of
foreign companies (an "underlying issuer") and are deposited with a securities
depositary. Depositary receipts are not necessarily denominated in the same
currency as the underlying securities. Depositary receipts include American
Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and other
types of depositary receipts (which, together with ADRs and GDRs, are
hereinafter collectively referred to as "Depositary Receipts"). ADRs are
dollar-denominated depositary receipts typically issued by a United States
financial institution which evidence ownership interests in a security or pool
of securities issued by a foreign issuer. ADRs are listed and traded in the
United States. GDRs and other types of depositary receipts are typically issued
by foreign banks or trust companies, although they also may be issued by United
States financial institutions, and evidence ownership interests in a security
or pool of securities issued by either a foreign or a United States
corporation. Generally, depositary receipts in registered form are designed for
use in the United States securities market and depositary receipts in bearer
form are designed for use in securities markets outside the United States.
Although there may be more reliable information available regarding issuers of
certain ADRs that are issued under so-called "sponsored" programs and ADRs do
not involve foreign currency risks, ADRs and other depositary receipts are
subject to the risks of other investments in foreign securities, as described
below .
Depositary receipts may be "sponsored" or "unsponsored". Sponsored depositary
receipts are established jointly by a depositary and the underlying issuer,
whereas unsponsored depositary receipts may be established by a depositary
without participation by the underlying issuer. Holders of an unsponsored
depositary receipt generally bear all the costs associated with establishing
the unsponsored depositary 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.
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DERIVATIVES. Each Portfolio (except the MFS Research Portfolio and the Alliance
Money Market Portfolio) may invest in one or more types of derivatives.
Derivatives are financial products or instruments that derive their value from
the value of one or more underlying assets, reference rates or indices.
Derivatives include, but are not limited to, the following: asset-backed
securities, floaters and inverse floaters, hybrid instruments, mortgage-backed
securities, options and future transactions, stripped mortgage-backed
securities, structured notes and swaps. Further information about these
instruments and the risks involved in their use are contained under the
description of each of these instruments in this section.
EURODOLLAR AND YANKEE DOLLAR OBLIGATIONS. Eurodollar bank obligations are
United States dollar-denominated certificates of deposit and time deposits
issued outside the United States capital markets by foreign branches of United
States banks and by foreign banks. Yankee dollar bank obligations are United
States dollar-denominated obligations issued in the United States capital
markets by foreign banks.
Eurodollar and Yankee dollar obligations are subject to the same risks that
pertain to domestic issues, notably credit risk, market risk and liquidity
risk. Additionally, Eurodollar (and to a limited extent, Yankee dollar)
obligations are subject to certain sovereign risks. One such risk is the
possibility that a sovereign country might prevent capital, in the form of
dollars, from flowing across its borders. Other risks include adverse political
and economic developments; the extent and quality of government regulation of
financial markets and institutions; the imposition of foreign withholding
taxes; and the expropriation or nationalization of foreign issuers.
FLOATERS AND INVERSE FLOATERS. As indicated in Appendix A, certain of the
Portfolios may invest in floaters and inverse floaters, which are fixed income
securities with a floating or variable rate of interest, i.e., the rate of
interest varies with changes in specified market rates or indices, such as the
prime rate, or at specified intervals. Certain floaters may carry a demand
feature that permits the holder to tender them back to the issuer of the
underlying instrument, or to a third party, at par value prior to maturity.
When the demand feature of certain floaters represents an obligation of a
foreign entity, the demand feature will be subject to certain risks discussed
under "Foreign Securities".
In addition, the Morgan Stanley Emerging Markets Equity Portfolio may invest in
inverse floating rate obligations which are fixed income securities that have
coupon rates that vary inversely at a multiple of a designated floating rate,
such as London Inter-Bank Offered Rate ("LIBOR"). Any rise in the reference
rate of an inverse floater (as a consequence of an increase in interest rates)
causes a drop in the coupon rate while any drop in the reference rate of an
inverse floater causes an increase in the coupon rate. Inverse floaters may
exhibit substantially greater price volatility than fixed rate obligations
having similar credit quality, redemption provisions and maturity, and inverse
floater collateralized mortgage obligations ("CMOs") exhibit greater price
volatility than the majority of mortgage-related securities. In addition, some
inverse floater CMOs exhibit extreme sensitivity to changes in prepayments. As
a result, the yield to maturity of an inverse floater CMO is sensitive not only
to changes in interest rates but also to changes in prepayment rates on the
related underlying mortgage assets.
FOREIGN CURRENCY TRANSACTIONS. As indicated in Appendix A, certain of the
Portfolios may purchase securities denominated in foreign currencies, including
the purchase of foreign currency on a spot (or cash) basis. A change in the
value of any such currency against the United States dollar will result in a
change in the United States dollar value of a Portfolio's assets and income. In
addition, although a portion of a Portfolio's investment income may be received
or realized in such currencies, the Portfolio will be required to compute and
distribute its income in United States dollars. Therefore, if the exchange rate
for any such currency declines after a Portfolio's income has been earned and
computed in United States dollars but before conversion and payment, the
Portfolio could be required to liquidate portfolio securities to make such
distributions.
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
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securities denominated in local European currencies. These and other currencies
in which a Portfolio's assets are denominated may be devalued against the
United States dollar, resulting in a loss to the Portfolio. Certain Portfolios
may also invest in the following types of foreign currency transactions:
FORWARD FOREIGN CURRENCY TRANSACTIONS. As indicated in Appendix A, certain of
the Portfolios may engage in forward foreign currency exchange transactions. A
forward foreign currency exchange contract ("forward contract") involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are
principally traded in the interbank market conducted directly between currency
traders (usually large, commercial banks) and their customers. A forward
contract generally has no margin deposit requirement, and no commissions are
charged at any stage for trades.
A Portfolio may enter into forward contracts for a variety of purposes in
connection with the management of the foreign securities portion of its
portfolio. A Portfolio's use of such contracts will include, but not be limited
to, the following situations.
First, when the Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may desire to "lock in" the
United States dollar price of the security. By entering into a forward contract
for the purchase or sale, for a fixed amount of dollars, of the amount of
foreign currency involved in the underlying security transactions, the
Portfolio will be able to protect itself against a possible loss resulting from
an adverse change in the relationship between the United States dollar and the
subject foreign currency during the period between the date the security is
purchased or sold and the date on which payment is made or received.
Second, when a Portfolio's Adviser believes that one currency may experience a
substantial movement against another currency, including the United States
dollar, it may enter into a forward contract to sell or buy the amount of the
former foreign currency, approximating the value of some or all of the
Portfolio's portfolio securities denominated in such foreign currency.
Alternatively, where appropriate, the Portfolio may hedge all or part of its
foreign currency exposure through the use of a basket of currencies,
multinational currency units, or a proxy currency where such currency or
currencies act as an effective proxy for other currencies. In such a case, the
Portfolio may enter into a forward contract where the amount of the foreign
currency to be sold exceeds the value of the securities denominated in such
currency. The use of this basket hedging technique may be more efficient and
economical than entering into separate forward contracts for each currency held
in the Portfolio.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the diversification strategies. However, the Advisers to the
Portfolios believe that it is important to have the flexibility to enter into
such forward contracts when they determine that the best interests of the
Portfolios will be served.
A Portfolio may enter into forward contracts for any other purpose consistent
with the Portfolio's investment objective and program. However, the Portfolio
will not enter into a forward contract, or maintain exposure to any such
contract(s), if the amount of foreign currency required to be delivered
thereunder would exceed the Portfolio's holdings of liquid, securities and
currency available for cover of the forward contract(s). In determining the
amount to be delivered under a contract, the Portfolio may net offsetting
positions.
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
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security and engages in an offsetting transaction, the Portfolio will incur a
gain or a loss (as described below) to the extent that there has been movement
in forward contract prices. If the Portfolio engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
foreign currency.
Should forward prices decline during the period between the Portfolio's
entering into a forward contract for the sale of a foreign currency and the
date it enters into an offsetting contract for the purchase of the foreign
currency, the Portfolio will realize a gain to the extent the price of the
currency it has agreed to sell exceeds the price of the currency it has agreed
to purchase. Should forward prices increase, the Portfolio will suffer a loss
to the extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.
Although each Portfolio values its assets daily in terms of United States
dollars, it does not intend to convert its holdings of foreign currencies into
United States dollars on a daily basis. The Portfolio will do so from time to
time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference ("spread") between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to a Portfolio at one rate, while offering a lesser
rate of exchange should the Portfolio desire to resell that currency to the
dealer.
FOREIGN CURRENCY OPTIONS, FOREIGN CURRENCY FUTURES CONTRACTS AND OPTIONS ON
FUTURES. As indicated in Appendix A, certain of the Portfolios may also
purchase and sell foreign currency futures contracts and may purchase and write
exchange-traded call and put options on foreign currency futures contracts and
on foreign currencies. Those Portfolios may purchase or sell exchange-traded
foreign currency options, foreign currency futures contracts and related
options on foreign currency futures contracts as a hedge against possible
variations in foreign exchange rates. The Portfolios will write options on
foreign currency or on foreign currency futures contracts only if they are
"covered." A put on a foreign currency or on a foreign currency futures
contract written by a Portfolio will be considered "covered" if, so long as the
Portfolio is obligated as the writer of the put, it segregates with the
Portfolio's custodian cash, United States Government securities or other liquid
high-grade debt securities equal at all times to the aggregate exercise price
of the put. A call on a foreign currency or on a foreign currency futures
contract written by the Portfolio will be considered "covered" only if the
Portfolio owns short term debt securities with a value equal to the face amount
of the option contract and denominated in the currency upon which the call is
written. Option transactions may be effected to hedge the currency risk on
non-United States dollar-denominated securities owned by a Portfolio, sold by a
Portfolio but not yet delivered or anticipated to be purchased by a Portfolio.
As an illustration, a Portfolio may use such techniques to hedge the stated
value in United States dollars of an investment in a Japanese yen-denominated
security. In these circumstances, a Portfolio may purchase a foreign currency
put option enabling it to sell a specified amount of yen for dollars at a
specified price by a future date. To the extent the hedge is successful, a loss
in the value of the dollar relative to the yen will tend to be offset by an
increase in the value of the put option.
OVER THE COUNTER OPTIONS ON FOREIGN CURRENCY TRANSACTIONS. As indicated in
Appendix A, certain of the Portfolios may engage in over-the-counter options on
foreign currency transactions. Each Alliance Portfolio (other than Alliance
Equity Index Portfolio, Alliance Money Market Portfolio, and Alliance
Intermediate Government Securities Portfolio) 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
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standardized prices and expiration dates. Over-the-counter options are
two-party contracts and have negotiated prices and expiration dates. A futures
contract on a foreign currency is an agreement between two parties to buy and
sell a specified amount of the currency for a set price on a future date.
Futures contracts and listed options on futures contracts are traded on boards
of trade or futures exchanges. Options traded in the over-the-counter market
may not be as actively traded as those on an exchange, so it may be more
difficult to value such options. In addition, it may be difficult to enter into
closing transactions with respect to options traded over-the-counter.
Hedging transactions involve costs and may result in losses. As indicated in
Appendix A, certain of the Portfolios may also write covered call options on
foreign currencies to offset some of the costs of hedging those currencies. A
Portfolio will engage in over-the-counter options transactions on foreign
currencies only when appropriate exchange traded transactions are unavailable
and when, in the Adviser's opinion, the pricing mechanism and liquidity are
satisfactory and the participants are responsible parties likely to meet their
contractual obligations. A Portfolio's ability to engage in hedging and related
option transactions may be limited by tax considerations.
Transactions and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Portfolios own or intend to
purchase or sell. They simply establish a rate of exchange which one can
achieve at some future point in time. Additionally, although these techniques
tend to minimize the risk of loss due to a decline in the value of the hedged
currency, they tend to limit any potential gain which might result from the
increase in the value of such currency.
A Portfolio will not speculate in foreign currency options, futures or related
options. Accordingly, a Portfolio will not hedge a currency substantially in
excess of the market value of the securities denominated in that currency which
it owns or the expected acquisition price of securities which it anticipates
purchasing.
For additional information concerning the risks associated with utilizing
options, forward foreign currency exchange contracts, please see "Risks of
Transactions in Options, Futures Contracts and Forward Currency Contracts" in
this section.
FOREIGN SECURITIES. As indicated in Appendix A, certain of the Portfolios may
also invest in other types of foreign securities or engage in the certain types
of transactions related to foreign securities, such as Brady Bonds, Depositary
Receipts, Eurodollar and Yankee Dollar Obligations and Foreign Currency
Transactions, including forward foreign currency transactions, foreign currency
options and foreign currency futures contracts and options on futures. Further
information about these instruments and the risks involved in their use are
contained under the description of each of these instruments in this section.
Foreign investments involve certain risks that are not present in domestic
securities. For example, foreign securities may be subject to currency risks or
to foreign government taxes which reduce their attractiveness. There may be
less information publicly available about a foreign issuer than about a United
States issuer, and a foreign issuer is not generally subject to uniform
accounting, auditing and financial reporting standards and practices comparable
to those in the United States. Other risks of investing in such securities
include political or economic instability in the country involved, the
difficulty of predicting international trade patterns and the possibility of
imposition of exchange controls. The prices of such securities may be more
volatile than those of domestic securities. With respect to certain foreign
countries, there is a possibility of expropriation of assets or
nationalization, imposition of withholding taxes on dividend or interest
payments, difficulty in obtaining and enforcing judgments against foreign
entities or diplomatic developments which could affect investment in these
countries. Losses and other expenses may be incurred in converting between
various currencies in connection with purchases and sales of foreign
securities.
Foreign stock markets are generally not as developed or efficient as, and may
be more volatile than, those in the United States. While growing in volume,
they usually have substantially less volume than United 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
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be sustainable. There is generally less government supervision and regulation
of foreign stock exchanges, brokers, banks and listed companies abroad than in
the United States. Moreover, settlement practices for transactions in foreign
markets may differ from those in United States markets. Such differences may
include delays beyond periods customary in the United States and practices,
such as delivery of securities prior to receipt of payment, which increase the
likelihood of a "failed settlement", which can result in losses to a Portfolio.
The value of foreign investments and the investment income derived from them
may also be affected unfavorably by changes in currency exchange control
regulations. Although the Portfolios will invest only in securities denominated
in foreign currencies that are fully exchangeable into United States dollars
without legal restriction at the time of investment, there can be no assurance
that currency controls will not be imposed subsequently. In addition, the value
of foreign fixed income investments may fluctuate in response to changes in
United States and foreign interest rates.
Foreign brokerage commissions, custodial expenses and other fees are also
generally higher than for securities traded in the United States. Consequently,
the overall expense ratios of international or global funds are usually
somewhat higher than those of typical domestic stock funds.
Moreover, investments in foreign government debt securities, particularly those
of emerging market country governments, involve special risks. Certain emerging
market countries have historically experienced, and may continue to experience,
high rates of inflation, high interest rates, exchange rate fluctuations, large
amounts of external debt, balance of payments and trade difficulties and
extreme poverty and unemployment. See "Emerging Markets Securities" below for
additional risks.
Fluctuations in exchange rates may also affect the earning power and asset
value of the foreign entity issuing a security, even one denominated in United
States dollars. Dividend and interest payments will be repatriated based on the
exchange rate at the time of disbursement, and restrictions on capital flows
may be imposed.
In less liquid and well developed stock markets, such as those in some Eastern
European, Southeast Asian, and Latin American countries, volatility may be
heightened by actions of a few major investors. For example, substantial
increases or decreases in cash flows of mutual funds investing in these markets
could significantly affect stock prices and, therefore, share prices.
Additionally, investments in emerging market regions or the following
geographic regions are subject to more specific risks, as discussed below:
EMERGING MARKET SECURITIES. Investments in emerging market country securities
involve special risks. The economies, markets and political structures of a
number of the emerging market countries in which the Portfolios can invest do
not compare favorably with the United States and other mature economies in
terms of wealth and stability. Therefore, investments in these countries may be
riskier, and will be subject to erratic and abrupt price movements. Some
economies are less well developed and less diverse (for example, Latin America,
Eastern Europe and certain Asian countries), and more vulnerable to the ebb and
flow of international trade, trade barriers and other protectionist or
retaliatory measures. Similarly, many of these countries, particularly in
Southeast Asia, Latin America, and Eastern Europe, are grappling with severe
inflation or recession, high levels of national debt, currency exchange
problems and government instability. Investments in countries that have
recently begun moving away from central planning and state-owned industries
toward free markets, such as the Eastern European or Chinese economies, should
be regarded as speculative.
Certain emerging market countries have historically experienced, and may
continue to experience, high rates of inflation, high interest rates, exchange
rate fluctuations, large amounts of external debt, balance of payments and
trade difficulties and extreme poverty and unemployment. The issuer or
governmental authority that controls the repayment of an emerging market
country's debt may not be able or willing to repay the principal and/or
interest when due in accordance with the terms of such debt. A debtor's
willingness or ability to repay principal and interest due in a timely manner
may be affected by, among 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
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debtor may be subject. Government debtors may default on their debt and may
also be dependent on expected disbursements from foreign governments,
multilateral agencies and others abroad to reduce principal and interest
arrearages on their debt. Holders of government debt may be requested to
participate in the rescheduling of such debt and to extend further loans to
government debtors.
If such an event occurs, a Portfolio may have limited legal recourse against
the issuer and/or guarantor. Remedies must, in some cases, be pursued in the
courts of the defaulting party itself, and the ability of the holder of foreign
government fixed income securities to obtain recourse may be subject to the
political climate in the relevant country. In addition, no assurance can be
given that the holders of commercial bank debt will not contest payments to the
holders of other foreign government debt obligations in the event of default
under their commercial bank loan agreements.
The economies of individual emerging market countries may differ favorably or
unfavorably from the United States economy in such respects as growth of gross
domestic product, rate of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Further, the economies of developing countries generally are heavily dependent
upon international trade and, accordingly, have been, and may continue to be,
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been, and may
continue to be, adversely affected by economic conditions in the countries with
which they trade.
Investing in emerging market countries may entail purchasing securities issued
by or on behalf of entities that are insolvent, bankrupt, in default or
otherwise engaged in an attempt to reorganize or reschedule their obligations,
and in entities that have little or no proven credit rating or credit history.
In any such case, the issuer's poor or deteriorating financial condition may
increase the likelihood that the investing Portfolio will experience losses or
diminution in available gains due to bankruptcy, insolvency or fraud.
EASTERN EUROPEAN AND RUSSIAN SECURITIES. The economies of Eastern European
countries are currently suffering both from the stagnation resulting from
centralized economic planning and control and the higher prices and
unemployment associated with the transition to market economics. Unstable
economic and political conditions may adversely affect security values. Upon
the accession to power of Communist regimes approximately 40 years ago, the
governments of a number of Eastern European countries expropriated a large
amount of property. The claims of many property owners against those
governments were never finally settled. In the event of the return to power of
the Communist Party, there can be no assurance that a Portfolio's investments
in Eastern Europe would not be expropriated, nationalized or otherwise
confiscated.
The registration, clearing and settlement of securities transactions involving
Russian issuers are subject to significant risks not normally associated with
securities transactions in the United States and other more developed markets.
Ownership of equity securities in Russian companies is evidenced by entries in
a company's share register (except where shares are held through depositories
that meet the requirements of the 1940 Act) and the issuance of extracts from
the register or, in certain limited cases, by formal share certificates.
However, Russian share registers are frequently unreliable and a Portfolio
could possibly lose its registration through oversight, negligence or fraud.
Moreover, Russia lacks a centralized registry to record shares and companies
themselves maintain share registers. Registrars are under no obligation to
provide extracts to potential purchasers in a timely manner or at all and are
not necessarily subject to effective state supervision. In addition, while
registrars are liable under law for losses resulting from their errors, it may
be difficult for a Portfolio to enforce any rights it may have against the
registrar or issuer of the securities in the event of loss of share
registration. For example, Russian companies with more than 1,000 shareholders
are required by law to employ an independent company to maintain share
registers, in practice, such companies have not always followed this law.
Because of this lack of independence of registrars, management of a Russian
company may be able to exert considerable influence over who can 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.
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In light of the risks described above, the Board of Trustees of the Trust has
approved certain procedures concerning a Portfolio's investments in Russian
securities. Among these procedures is a requirement that a Portfolio will not
invest in the securities of a Russian company unless that issuer's registrar
has entered into a contract with a Portfolio's custodian containing certain
protective conditions, including, among other things, the custodian's right to
conduct regular share confirmations on behalf of a Portfolio. This requirement
will likely have the effect of precluding investments in certain Russian
companies that a Portfolio would otherwise make.
LATIN AMERICA
Inflation Most Latin American countries have experienced, at one time or
another, severe and persistent levels of inflation, including, in some cases,
hyperinflation. This has, in turn, led to high interest rates, extreme measures
by governments to keep inflation in check, and a generally debilitating effect
on economic growth. Although inflation in many countries has lessened, there is
no guarantee it will remain at lower levels.
Political Instability The political history of certain Latin American countries
has been characterized by political uncertainty, intervention by the military
in civilian and economic spheres, and political corruption. Such developments,
if they were to reoccur, could reverse favorable trends toward market and
economic reform, privatization, and removal of trade barriers, and result in
significant disruption in securities markets.
Foreign Currency Certain Latin American countries may have managed currencies
which are maintained at artificial levels to the U.S. dollar rather than at
levels determined by the market. This type of system can lead to sudden and
large adjustments in the currency which, in turn, can have a disruptive and
negative effect on foreign investors. For example, in late 1994 the value of
the Mexican peso lost more than one-third of its value relative to the dollar.
Certain Latin American countries also restrict the free conversion of their
currency into foreign currencies, including the U.S. dollar. There is no
significant foreign exchange market for many currencies and it would, as a
result, be difficult for the Fund to engage in foreign currency transactions
designed to protect the value of the Fund's interests in securities denominated
in such currencies.
Sovereign Debt A number of Latin American countries are among the largest
debtors of developing countries. There have been moratoria on, and
reschedulings of, repayment with respect to these debts. Such events can
restrict the flexibility of these debtor nations in the international markets
and result in the imposition of onerous conditions on their economies.
PACIFIC BASIN REGION. Many Asian countries may be subject to a greater degree
of social, political and economic instability than is the case in the United
States and European countries. Such instability may result from (i)
authoritarian governments or military involvement in political and economic
decision-making; (ii) popular unrest associated with demands for improved
political, economic and social conditions; (iii) internal insurgencies; (iv)
hostile relations with neighboring countries; and (v) ethnic, religious and
racial disaffection.
The economies of most of the Asian countries are heavily dependent on
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally, the United
States, Japan, China and the European Community. The enactment by the United
States or other principal trading partners of protectionist trade legislation,
reduction of foreign investment in the local economies and general declines in
the international securities markets could have a significant adverse effect
upon the securities markets of the Asian countries.
The securities markets in Asia are substantially smaller, less liquid and more
volatile than the major securities markets in the United States. A high
proportion of the shares of many issuers may be held by 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
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capitalization and trading value. The limited liquidity of securities markets
in Asia may also affect a Portfolio's ability to acquire or dispose of
securities at the price and time it wishes to do so. In addition, the Asian
securities markets are susceptible to being influenced by large investors
trading significant blocks of securities.
Many stock markets are undergoing a period of growth and change which may
result in trading volatility and difficulties in the settlement and recording
of transactions, and in interpreting and applying the relevant law and
regulations. With respect to investments in the currencies of Asian countries,
changes in the value of those currencies against the United States dollar will
result in corresponding changes in the United States dollar value of a
Portfolio's assets denominated in those currencies.
FORWARD COMMITMENTS, WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Forward
commitments, when-issued and delayed delivery transactions arise when
securities are purchased by a Portfolio with payment and delivery taking place
in the future in order to secure what is considered to be an advantageous price
or yield to the Portfolio at the time of entering into the transaction.
However, the price of or yield on a comparable security available when delivery
takes place may vary from the price of or yield on the security at the time
that the forward commitment or when-issued or delayed delivery transaction was
entered into. Agreements for such purchases might be entered into, for example,
when a Portfolio anticipates a decline in interest rates and is able to obtain
a more advantageous price or yield by committing currently to purchase
securities to be issued later. When a Portfolio purchases securities on a
forward commitment, when-issued or delayed delivery basis it does not pay for
the securities until they are received, and the Portfolio is required to create
a segregated account with the Trust's custodian and to maintain in that account
cash or other liquid securities in an amount equal to or greater than, on a
daily basis, the amount of the Portfolio's forward commitments, when-issued or
delayed delivery commitments.
Each Portfolio (except the Warburg Pincus Small Company Value Portfolio) may
make contracts to purchase forward commitments if it holds, and maintains until
the settlement date in a segregated account, cash or liquid securities in an
amount sufficient to meet the purchase price, or if it enters into offsetting
contracts for the forward sale of other securities it owns. Forward commitments
may be considered securities in themselves and involve a risk of loss if the
value of the security to be purchased declines prior to the settlement date,
which risk is in addition to the risk of decline in value of the Portfolio's
other assets. Where such purchases are made through dealers, a Portfolio relies
on the dealer to consummate the sale. The dealer's failure to do so may result
in the loss to a Portfolio of an advantageous yield or price.
A Portfolio will only enter into forward commitments and make commitments to
purchase securities on a when-issued or delayed delivery basis with the
intention of actually acquiring the securities. However, the Portfolio may sell
these securities before the settlement date if it is deemed advisable as a
matter of investment strategy. Forward commitments and when-issued and delayed
delivery transactions are generally expected to settle within three months from
the date the transactions are entered into, although the Portfolio may close
out its position prior to the settlement date by entering into a matching sales
transaction.
Although none of the Portfolios intends to make such purchases for speculative
purposes and each Portfolio intends to adhere to the policies of the Securities
and Exchange Commission ("SEC"), purchases of securities on such a basis may
involve more risk than other types of purchases. For example, by committing to
purchase securities in the future, a Portfolio subjects itself to a risk of
loss on such commitments as well as on its portfolio securities. Also, a
Portfolio may have to sell assets which have been set aside in order to meet
redemptions. In addition, if a Portfolio determines it is advisable as a matter
of investment strategy to sell the forward commitment or when-issued or delayed
delivery securities before delivery, that Portfolio may incur a gain or loss
because of market fluctuations since the time the commitment to purchase such
securities was made. Any such gain or loss would be treated as a 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).
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FUTURES TRANSACTIONS. For information on "Futures Transactions," see the
discussion in this section under "Options and Futures Transactions."
HYBRID INSTRUMENTS. As indicated in Appendix A, certain of the Portfolios may
invest in hybrid instruments (a type of potentially high-risk derivative).
Hybrid instruments have recently been developed and combine the elements of
futures contracts or options with those of debt, preferred equity or a
depositary instrument. Generally, a hybrid instrument will be a debt security,
preferred stock, depositary share, trust certificate, certificate of deposit or
other evidence of indebtedness on which a portion of or all interest payments,
and/or the principal or stated amount payable at maturity, redemption or
retirement, is determined by reference to prices, changes in prices, or
differences between prices, of securities, currencies, intangibles, goods,
articles or commodities (collectively "Underlying Assets") or by another
objective index, economic factor or other measure, such as interest rates,
currency exchange rates, commodity indices, and securities indices
(collectively "Benchmarks"). Thus, hybrid instruments may take a variety of
forms, including, but not limited to, debt instruments with interest or
principal payments or redemption terms determined by reference to the value of
a currency or commodity or securities index at a future point in time,
preferred stock with dividend rates determined by reference to the value of a
currency, or convertible securities with the conversion terms related to a
particular commodity rates. Under certain conditions, the redemption value of
such an instrument could be zero. Hybrid instruments can have volatile prices
and limited liquidity and their use by a Portfolio may not be successful.
Hybrid instruments may bear interest or pay preferred dividends at below market
(or even relatively nominal) rates. Alternatively, hybrid instruments may bear
interest at above market rates but bear an increased risk of principal loss (or
gain). The latter scenario may result if "leverage" is used to structure the
hybrid instrument. Leverage risk occurs when the hybrid instrument is
structured so that a given change in a Benchmark or Underlying Asset is
multiplied to produce a greater value change in the hybrid instrument, thereby
magnifying the risk of loss as well as the potential for gain.
Hybrid instruments can be an efficient means of creating exposure to a
particular market, or segment of a market, with the objective of enhancing
total return. For example, a Portfolio may wish to take advantage of expected
declines in interest rates in several European countries, but avoid the
transaction costs associated with buying and currency-hedging the foreign bond
positions. One solution would be to purchase a United States dollar-denominated
hybrid instrument whose redemption price is linked to the average three year
interest rate in a designated group of countries. The redemption price formula
would provide for payoffs of greater than par if the average interest rate was
lower than a specified level, and payoffs of less than par if rates were above
the specified level. Furthermore, a Portfolio could limit the downside risk of
the security by establishing a minimum redemption price so that the principal
paid at maturity could not be below a predetermined minimum level if interest
rates were to rise significantly. The purpose of this arrangement, known as a
structured security with an embedded put option, would be to give the Portfolio
the desired European bond exposure while avoiding currency risk, limiting
downside market risk, and lowering transaction costs. Of course, there is no
guarantee that the strategy will be successful and a Portfolio could lose money
if, for example, interest rates do not move as anticipated or credit problems
develop with the issuer of the hybrid instrument.
Although the risks of investing in hybrid instruments reflect a combination of
the risks of investing in securities, options, futures and currencies, hybrid
instruments are potentially more volatile and carry greater market risks than
traditional debt instruments. The risks of a particular hybrid instrument will,
of course, depend upon the terms of the instrument, but may include, without
limitation, the possibility of significant changes in the Benchmarks or the
prices of Underlying Assets to which the instrument is 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
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to buy such instruments in the secondary market may be smaller than that for
more traditional debt securities. In addition, because the purchase and sale of
hybrid instruments could take place in an over-the-counter market without the
guarantee of a central clearing organization or in a transaction between the
portfolio and the issuer of the hybrid instrument, the creditworthiness of the
counter party or issuer of the hybrid instrument would be an additional risk
factor which the Portfolio would have to consider and monitor. Hybrid
instruments also may not be subject to regulation of the CFTC, which generally
regulates the trading of commodity futures by persons in the United States, the
SEC, which regulates the offer and sale of securities by and to persons in the
United States, or any other governmental regulatory authority. The various
risks discussed above, particularly the market risk of such instruments, may in
turn cause significant fluctuations in the net asset value of the Portfolio.
ILLIQUID SECURITIES OR NON-PUBLICLY TRADED SECURITIES. As indicated in Appendix
A, certain of the Portfolios may invest in illiquid securities or non-publicly
traded securities. The inability of a Portfolio to dispose of illiquid or not
readily marketable investments readily or at a reasonable price could impair a
Portfolio's ability to raise cash for redemptions or other purposes. The
liquidity of securities purchased by a Portfolio which are eligible for resale
pursuant to Rule 144A will be monitored by each Portfolio's Adviser on an
ongoing basis, subject to the oversight of the Board of Trustees of the Trust.
In the event that such a security is deemed to be no longer liquid, a
Portfolio's holdings will be reviewed to determine what action, if any, is
required to ensure that the retention of such security does not result in a
Portfolio's having more than 10% or 15% of its assets invested in illiquid or
not readily marketable securities.
Rule 144A Securities will be considered illiquid and therefore subject to a
Portfolio's limit on the purchase of illiquid securities unless the Board or
its delegates determines that the Rule 144A Securities are liquid. In reaching
liquidity decisions, the Board of Trustees and its delegates may consider,
inter alia, the following factors: (i) the unregistered nature of the security;
(ii) the frequency of trades and quotes for the security; (iii) the number of
dealers wishing to purchase or sell the security and the number of other
potential purchasers; (iv) dealer undertakings to make a market in the
security; and (v) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the 1933 Act, securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the 1933 Act are referred
to as private placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not typically hold
a significant amount of these restricted or other illiquid securities because
of the potential for delays on resale and uncertainty in valuation. Limitations
on resale may have an adverse effect on the marketability of portfolio
securities and a mutual fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven days. A mutual fund
might also have to register such restricted securities in order to dispose of
them resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for repayment. The
fact that there are contractual or legal restrictions on resale to the general
public or to certain institutions may not be indicative of the liquidity of
such investments.
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.
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INVESTMENT GRADE AND LOWER QUALITY FIXED INCOME SECURITIES. As indicated in
Appendix A, certain of the Portfolios may invest in or hold investment grade
securities, but not lower quality fixed income securities. Investment grade
securities are securities rated Baa or higher by Moody's Investors Service Inc.
("Moody's") or Bbb or higher by Standard & Poor's Rating Services, a division
of McGraw-Hill Companies, Inc. ("Standard & Poor's") or comparable quality
unrated securities. Investment grade securities while normally exhibiting
adequate protection parameters, have speculative characteristics, and,
consequently, changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity of such issuers to make principal and
interest payments than is the case for higher grade fixed income securities.
Lower quality fixed income securities are securities that are rated in the
lower categories by nationally recognized statistical rating organizations
("NRSRO") (i.e., Ba or lower by Moody's and BB or lower by Standard & Poor's)
or comparable quality unrated securities. Such lower quality securities are
known as "junk bonds" and are regarded as predominantly speculative with
respect to the issuer's continuing ability to meet principal and interest
payments. (Each NRSRO's descriptions of these bond ratings are set forth in the
Appendix to this Statement of Additional Information.) Because investment in
lower quality securities involves greater investment risk, achievement of a
Portfolio's investment objective will be more dependent on the Adviser's
analysis than would be the case if that Portfolio were investing in higher
quality bonds. In addition, lower quality securities may be more susceptible to
real or perceived adverse economic and individual corporate developments than
would investment grade bonds. Moreover, the secondary trading market for lower
quality securities may be less liquid than the market for investment grade
bonds. This potential lack of liquidity may make it more difficult for an
Adviser to value accurately certain portfolio securities.
It is the policy of each Portfolio's Adviser to not rely exclusively on ratings
issued by credit rating agencies but to supplement such ratings with the
Adviser's own independent and ongoing review of credit quality. Junk bonds may
be issued as a consequence of corporate restructuring, such as leveraged
buyouts, mergers, acquisitions, debt recapitalizations, or similar events or by
smaller or highly leveraged companies. When economic conditions appear to be
deteriorating, junk bonds may decline in market value due to investors'
heightened concern over credit quality, regardless of prevailing interest
rates. Although the growth of the high yield securities market in the 1980s had
paralleled a long economic expansion, many issuers have been affected by
adverse economic and market conditions. It should be recognized that an
economic downturn or increase in interest rates is likely to have a negative
effect on: (i) the high yield bond market; (ii) the value of high yield
securities; and (iii) the ability of the securities' issuers to service their
principal and interest payment obligations, to meet their projected business
goals or to obtain additional financing. The market for junk bonds, especially
during periods of deteriorating economic conditions, may be less liquid than
the market for investment grade bonds. In periods of reduced market liquidity,
junk bond prices may become more volatile and may experience sudden and
substantial price declines. Also, there may be significant disparities in the
prices quoted for junk bonds by various dealers. Under such conditions, a
Portfolio may find it difficult to value its junk bonds accurately. Under such
conditions, a Portfolio may have to use subjective rather than objective
criteria to value its junk bond investments accurately and rely more heavily on
the judgment of the Trust's Board of Trustees. Prices for junk bonds also may
be affected by legislative and regulatory developments. For example, federal
rules require that savings and loans gradually reduce their holdings of
high-yield securities. Also, from time to time, Congress has considered
legislation to restrict or eliminate the corporate tax deduction for interest
payments or to regulate corporate restructuring such as takeovers, mergers or
leveraged buyouts. Such legislation, if enacted, could depress the prices of
outstanding junk bonds.
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
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loan in the event of non-payment of scheduled interest or principal. However,
there is no assurance that the liquidation of collateral from a secured loan or
other direct indebtedness would satisfy the corporate borrower's obligation, or
that the collateral can be liquidated.
Certain of the loans and other direct indebtedness acquired by the Portfolio
may involve revolving credit facilities or other standby financing commitments
which obligate the Portfolio to pay additional cash on a certain date or on
demand. The highly leveraged nature of many such loans and other direct
indebtedness may make such loans especially vulnerable to adverse changes in
economic or market conditions. Loans and other direct indebtedness may not be
in the form of securities or may be subject to restrictions on transfer, and
only limited opportunities may exist to resell such instruments. As a result,
the Portfolio may be unable to sell such investments at an opportune time or
may have to resell them at less than fair market value. These commitments may
have the effect of requiring a Portfolio to increase its investment in a
company at a time when a Portfolio might not otherwise decide to do so
(including at a time when the company's financial condition makes it unlikely
that such amounts will be repaid). To the extent that a Portfolio is committed
to advance additional funds, it will at all times hold and maintain in a
segregated account cash or assets in an amount sufficient to meet such
commitments.
Such loans and other direct indebtedness loans are typically made by a
syndicate of lending institutions, represented by an agent lending institution
which has negotiated and structured the loan and is responsible for collecting
interest, principal and other amounts due on its own behalf and on behalf of
the others in the syndicate, and for enforcing its rights and the rights of
other loan participants against the borrower. Alternatively, such loans and
other direct indebtedness may be structured as a "novation" (i.e., a new loan)
pursuant to which a Portfolio would assume all of the rights of the lending
institution in a loan, or as an assignment, pursuant to which a Portfolio would
purchase an assignment of a portion of a lender's interest in a loan or other
direct indebtedness either directly from the lender or through an intermediary.
A Portfolio may also purchase trade or other claims against companies, which
generally represent money owed by the company to a supplier of goods or
services. These claims may also be purchased at a time when the company is in
default.
A Portfolio's ability to receive payment of principal, interest and other
amounts due in connection with these investments will depend primarily on the
financial condition of the borrower. In selecting the loans and other direct
indebtedness that a Portfolio will purchase, the Adviser will rely upon its own
credit analysis of the borrower. As a Portfolio may be required to rely upon
another lending institution to collect and pass on to a Portfolio amounts
payable with respect to the loan and to enforce a Portfolio's rights under the
loan and other direct indebtedness, an insolvency, bankruptcy or reorganization
of the lending institution may delay or prevent a Portfolio from receiving such
amounts. In such cases, a Portfolio will also evaluate the creditworthiness of
the lending institution and will treat both the borrower and the lending
institutions as an "issuer" of the loan for purposes of certain investment
restrictions pertaining to the diversification of a Portfolio's portfolio
investments.
Investments in such loans and other direct indebtedness may involve additional
risks to a Portfolio. For example, if a loan or other direct indebtedness is
foreclosed, a Portfolio could become part owner of any collateral, and would
bear the costs and liabilities associated with owning and disposing of the
collateral. In addition, it is conceivable that under emerging legal theories
of lender liability, a Portfolio could be held liable. It is unclear whether
loans and other forms of direct indebtedness offer securities law protections
against fraud and misrepresentation. In the absence of definitive regulatory
guidance, a Portfolio relies on the Adviser's research in an attempt to avoid
situations where fraud and misrepresentation could adversely affect a
Portfolio. In addition, loans and other direct investments may not be in the
form of securities or may be subject to restrictions on transfer, and only
limited opportunities may 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
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may be an obligation of the issuer backed by a mortgage or pool of mortgages or
a direct interest in an underlying pool of mortgages. Certain Portfolios may
invest in collateralized mortgage obligations ("CMOs") and stripped
mortgage-backed securities that represent a participation in, or are secured
by, mortgage loans. Some mortgage-backed securities, such as CMOs, make
payments of both principal and interest at a variety of intervals; others make
semiannual interest payments at a predetermined rate and repay principal at
maturity (like a typical bond). Mortgage-backed securities are based on
different types of mortgages including those on commercial real estate or
residential properties.
CMOs may be issued by a United States Government agency or instrumentality or
by a private issuer. Although payment of the principal of, and interest on, the
underlying collateral securing privately issued CMOs may be guaranteed by the
United States Government or its agencies or instrumentalities, these CMOs
represent obligations solely of the private issuer and are not insured or
guaranteed by the United States Government, its agencies or instrumentalities
or any other person or entity. Prepayments could cause early retirement of
CMOs. CMOs are designed to reduce the risk of prepayment for investors by
issuing multiple classes of securities (or "tranches"), each having different
maturities, interest rates and payment schedules, and with the principal and
interest on the underlying mortgages allocated among the several classes in
various ways. Payment of interest or principal on some classes or series of
CMOs may be subject to contingencies or some classes or series may bear some or
all of the risk of default on the underlying mortgages. CMOs of different
classes or series are generally retired in sequence as the underlying mortgage
loans in the mortgage pool are repaid. If enough mortgages are repaid ahead of
schedule, the classes or series of a CMO with the earliest maturities generally
will be retired prior to their maturities. Thus, the early retirement of
particular classes or series of a CMO held by a Portfolio would have the same
effect as the prepayment of mortgages underlying other mortgage-backed
securities. Conversely, slower than anticipated prepayments can extend the
effective maturities of CMOs, subjecting them to a greater risk of decline in
market value in response to rising interest rates than traditional debt
securities, and, therefore, potentially increasing the volatility of a
Portfolio that invests in CMOs.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities have yield and maturity
characteristics corresponding to the underlying assets. Unlike traditional debt
securities, which may pay a fixed rate of interest until maturity, when the
entire principal amount comes due, payments on certain mortgage-backed
securities include both interest and a partial repayment of principal. Besides
the scheduled repayment of principal, repayments of principal may result from
the voluntary prepayment, refinancing, or foreclosure of the underlying
mortgage loans.
Mortgage-backed securities are subject to prepayment risk. Prepayment, which
occurs when unscheduled or early payments are made on the underlying mortgages,
may shorten the effective maturities of these securities and may lower their
returns. If property owners make unscheduled prepayments of their mortgage
loans, these prepayments will result in early payment of the applicable
mortgage-related securities. In that event, the Portfolios may be unable to
invest the proceeds from the early payment of the mortgage-related securities
in an investment that provides as high a yield as the mortgage-related
securities. Consequently, early payment associated with mortgage-related
securities may cause these securities to experience significantly greater price
and yield volatility than that experienced by traditional fixed-income
securities. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the
location and age of the mortgage and other social and demographic conditions.
During periods of falling interest rates, the rate of mortgage prepayments
tends to increase, thereby tending to decrease the life of mortgage-related
securities. During periods of rising 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.
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Prepayments may cause losses on securities purchased at a premium. At times,
some of the mortgage-backed securities in which a Portfolio may invest will
have higher than market interest rates and, therefore, will be purchased at a
premium above their par value. Unscheduled prepayments, which are made at par,
will cause a Portfolio to experience a loss equal to any unamortized premium.
Stripped mortgage-backed securities are created when a United States government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The securities may be issued by agencies or instrumentalities of
the United States Government and private originators of, or investors in,
mortgage loans, including savings and loan associations, mortgage banks,
commercial banks, investment banks and special purpose entities of the
foregoing. Stripped mortgage-backed securities are usually structured with two
classes that receive different portions of the interest and principal
distributions on a pool of mortgage loans. The holder of the "principal-only"
security ("PO") receives the principal payments made by the underlying
mortgage-backed security, while the holder of the "interest-only" security
("IO") receives interest payments from the same underlying security. The
Portfolios may invest in both the IO class and the PO class. The prices of
stripped mortgage-backed securities may be particularly affected by changes in
interest rates. The yield to maturity on an IO class of stripped
mortgage-backed securities is extremely sensitive not only to changes in
prevailing interest rates but also to the rate of principal payments (including
prepayments) on the underlying assets. As interest rates fall, prepayment rates
tend to increase, which tends to reduce prices of IOs and increase prices of
POs. Rising interest rates can have the opposite effect.
Prepayments may also result in losses on stripped mortgage-backed securities. A
rapid rate of principal prepayments may have a measurable adverse effect on a
Portfolio's yield to maturity to the extent it invests in IOs. If the assets
underlying the IO experience greater than anticipated prepayments of principal,
a Portfolio may fail to recoup fully its initial investments in these
securities. Conversely, POs tend to increase in value if prepayments are
greater than anticipated and decline if prepayments are slower than
anticipated. The secondary market for stripped mortgage-backed securities may
be more volatile and less liquid than that for other mortgage-backed
securities, potentially limiting the Portfolios' ability to buy or sell those
securities at any particular time.
The JPM Core Bond Portfolio may also invest in directly placed mortgages
including residential mortgages, multifamily mortgages, mortgages on
cooperative apartment buildings, commercial mortgages, and sale-leasebacks.
These investments are backed by assets such as office buildings, shopping
centers, retail stores, warehouses, apartment buildings and single-family
dwellings. In the event that the Portfolio forecloses on any non-performing
mortgage, it could end up acquiring a direct interest in the underlying real
property and the Portfolio would then be subject to the risks generally
associated with the ownership of real property. There may be fluctuations in
the market value of the foreclosed property and its occupancy rates, rent
schedules and operating expenses. Investment in direct mortgages involve many
of the same risks as investments in mortgage-related securities. There may also
be adverse changes in local, regional or general economic conditions,
deterioration of the real estate market and the financial circumstances of
tenants and sellers, unfavorable changes in zoning, building, environmental and
other laws, increased real property taxes, rising interest rates, reduced
availability and increased cost of mortgage borrowings, the need for
anticipated renovations, unexpected increases in the cost of energy,
environmental factors, acts of God and other factors which are beyond the
control of the Portfolio or the Adviser. Hazardous or toxic substances may be
present on, at or under the mortgaged property and adversely affect the value
of the property. In addition, the owners of the property containing such
substances may be held responsible, under various laws, for containing,
monitoring, removing or cleaning up such substances. The presence of such
substances may also provide a basis for other claims by third parties. Costs of
clean-up or of liabilities to third parties may exceed the value of the
property. In addition, these risks may be uninsurable. In light of these and
similar risks, it may be impossible to dispose profitably of properties in
foreclosure.
MORTGAGE DOLLAR ROLLS. The JPM Core Bond Portfolio may enter into mortgage
dollar rolls in which the Portfolio sells securities for delivery in the
current month and simultaneously contracts with the same counterparty to
repurchase similar (same type, coupon and maturity) but not identical
securities on a specified future date. During the roll period, the Portfolio
loses the right to receive principal (including
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prepayments of principal) and interest paid on the securities sold. However,
the Portfolio may benefit from the interest earned on the cash proceeds of the
securities sold until the settlement date of the forward purchase. The
Portfolio will hold and maintain in a segregated account until the settlement
date cash or liquid securities in an amount equal to the forward purchase
price. The benefits derived from the use of mortgage dollar rolls depend upon
the Adviser's ability to manage mortgage prepayments. There is no assurance
that mortgage dollar rolls can be successfully employed.
MUNICIPAL SECURITIES. As indicated in Appendix A, certain of the Portfolios may
invest in municipal securities ("municipals"), which are debt obligations
issued by local, state and regional governments that provide interest income
that is exempt from federal income taxes. Municipals include both municipal
bonds (those securities with maturities of five years or more) and municipal
notes (those with maturities of less than five years). Municipal bonds are
issued for a wide variety of reasons: to construct public facilities, such as
airports, highways, bridges, schools, hospitals, mass transportation, streets,
water and sewer works; to obtain funds for operating expenses; to refund
outstanding municipal obligations; and to loan funds to various public
institutions and facilities. Certain industrial development bonds are also
considered municipal bonds if their interest is exempt from federal income tax.
Industrial development bonds are issued by or on behalf of public authorities
to obtain funds for various privately-operated manufacturing facilities,
housing, sports arenas, convention centers, airports, mass transportation
systems and water, gas or sewer works. Industrial development bonds are
ordinarily dependent on the credit quality of a private user, not the public
issuer.
OPTIONS AND FUTURES TRANSACTIONS. As indicated in Appendix A, the BT Small
Company Index Portfolio, BT International Equity Index Portfolio and BT Equity
500 Index Portfolio each may not at any time commit more than 20% of its assets
to options and futures contracts. The MFS Emerging Growth Companies Portfolio
and Morgan Stanley Emerging Markets Equity Portfolio will not enter a futures
contract if the obligations underlying all such futures contracts would exceed
50% of the value of each such Portfolio's total assets.
Each Portfolio may buy and sell futures and options contracts for any number of
reasons, including: to manage its exposure to changes in securities prices and
foreign currencies; as an efficient means of adjusting its overall exposure to
certain markets; in an effort to enhance income; to protect the value of
portfolio securities and to adjust the duration of fixed income investments.
Each Portfolio may purchase, sell, or write call and put options and futures
contracts on securities, financial indices, and foreign currencies and options
on futures contracts.
The risk of loss in trading futures contracts can be substantial because of the
low margin deposits required and the extremely high degree of leveraging
involved in futures pricing. As a result, a relatively small price movement in
a futures contract may cause an immediate and substantial loss or gain. The
primary risks associated with the use of futures contracts and options are: (i)
imperfect correlation between the change in market value of the stocks held by
a Portfolio and the prices of futures contracts and options; and (ii) possible
lack of a liquid secondary market for a futures contract or an over-the-counter
option and the resulting inability to close a futures position or
over-the-counter option prior to its maturity date.
Following is a description of specific Options and Futures Transactions,
followed by a discussion concerning the risks associated with utilizing
options, futures contracts, and forward foreign currency exchange contracts.
FUTURES TRANSACTIONS. As indicated in Appendix A, certain of the Portfolios may
utilize futures contracts. Futures contracts (a type of potentially high-risk
security) enable the investor to buy or sell an asset in the future at an
agreed upon price. A futures contract is a bilateral agreement to buy or sell a
security (or deliver a cash settlement price, in the case of a contract
relating to an index or otherwise not calling for physical delivery at the end
of trading in the contracts) for a set price in the future. Futures contracts
are designated by boards of trade which have been designated "contracts
markets" by the Commodities Futures Trading Commission ("CFTC").
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
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required to deposit with its custodian in a segregated account in the name of
the futures broker an amount of cash, United States government securities,
suitable money market instruments, or liquid, high-grade debt securities, known
as "initial margin." The margin required for a particular futures contract is
set by the exchange on which the contract is traded, and may be significantly
modified from time to time by the exchange during the term of the contract.
Futures contracts are customarily purchased and sold on margin that may range
upward from less than 5% of the value of the contract being traded. By using
futures contracts as a risk management technique, given the greater liquidity
in the futures market than in the cash market, it may be possible to accomplish
certain results more quickly and with lower transaction costs.
If the price of an open futures contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the futures
contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if
the value of a position increases because of favorable price changes in the
futures contract so that the margin deposit exceeds the required margin, the
broker will pay the excess to the Portfolio. These subsequent payments called
"variation margin," to and from the futures broker, are made on a daily basis
as the price of the underlying assets fluctuate making the long and short
positions in the futures contract more or less valuable, a process known as
"marking to the market." The Portfolios expect to earn interest income on their
initial and variation margin deposits.
A Portfolio will incur brokerage fees when it purchases and sells futures
contracts. Positions taken in the futures markets are not normally held until
delivery or cash settlement is required, but are instead liquidated through
offsetting transactions which may result in a gain or a loss. While futures
positions taken by a Portfolio will usually be liquidated in this manner, the
Portfolio may instead make or take delivery of underlying securities whenever
it appears economically advantageous for the Portfolio to do so. A clearing
organization associated with the exchange on which futures are traded assumes
responsibility for closing out transactions and guarantees that as between the
clearing members of an exchange, the sale and purchase obligations will be
performed with regard to all positions that remain open at the termination of
the contract.
OPTIONS ON FUTURES CONTRACTS. As indicated in Appendix A, certain of the
Portfolios may purchase and write exchange-traded call and put options on
futures contracts of the type which the particular Portfolio is authorized to
enter into. These options are traded on exchanges that are licensed and
regulated by the CFTC for the purpose of options trading. A call option on a
futures contract gives the purchaser the right, in return for the premium paid,
to purchase a futures contract (assume a "long" position) at a specified
exercise price at any time before the option expires. A put option gives the
purchaser the right, in return for the premium paid, to sell a futures contract
(assume a "short" position), for a specified exercise price, at any time before
the option expires.
Options on futures contracts can be used by a Portfolio to hedge substantially
the same risks as might be addressed by the direct purchase or sale of the
underlying futures contracts. If the Portfolio purchases an option on a futures
contract, it may obtain benefits similar to those that would result if it held
the futures position itself. Purchases of options on futures contracts may
present less risk in hedging than the purchase and sale of the underlying
futures contracts since the potential loss is limited to the amount of the
premium plus related transaction costs.
The Portfolios will write only options on futures contracts which are
"covered." A Portfolio will be considered "covered" with respect to a put
option it has written if, so long as it is obligated as a writer of the put,
the Portfolio segregates with its custodian cash, United States Government
securities or liquid securities at all times equal to or greater than the
aggregate exercise price of the puts it has written (less any related margin
deposited with the futures broker). A Portfolio will be considered "covered"
with respect to a call option it has written on a debt security future if, so
long as it is obligated as a writer of the call, the Portfolio owns a security
deliverable under the futures contract. A Portfolio will be considered
"covered" with respect to a call option it has written on a securities index
future if the 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.
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Upon the exercise of a call option, the writer of the option is obligated to
sell the futures contract (to deliver a "long" position to the option holder)
at the option exercise price, which will presumably be lower than the current
market price of the contract in the futures market. Upon exercise of a put, the
writer of the option is obligated to purchase the futures contract (deliver a
"short" position to the option holder) at the option exercise price which will
presumably be higher than the current market price of the contract in the
futures market. When the holder of an option exercises it and assumes a long
futures position, in the case of a call, or a short futures position, in the
case of a put, its gain will be credited to its futures margin account, while
the loss suffered by the writer of the option will be debited to its account
and must be immediately paid by the writer. However, as with the trading of
futures, most participants in the options markets do not seek to realize their
gains or losses by exercise of their option rights. Instead, the holder of an
option will usually realize a gain or loss by buying or selling an offsetting
option at a market price that will reflect an increase or a decrease from the
premium originally paid.
If a Portfolio writes options on futures contracts, the Portfolio will receive
a premium but will assume a risk of adverse movement in the price of the
underlying futures contract comparable to that involved in holding a futures
position. If the option is not exercised, the Portfolio will realize a gain in
the amount of the premium, which may partially offset unfavorable changes in
the value of securities held in or to be acquired for the Portfolio. If the
option is exercised, the Portfolio will incur a loss in the option transaction,
which will be reduced by the amount of the premium it has received, but which
will offset any favorable changes in the value of its portfolio securities or,
in the case of a put, lower prices of securities it intends to acquire.
LIMITATIONS ON PURCHASE AND SALE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS. The Portfolios will not engage in transactions in futures contracts
and related options for speculation. In addition, the Portfolios will not
purchase or sell futures contracts or related options unless either (1) the
futures contracts or options thereon are purchased for "bona fide hedging"
purposes (as that term is defined under the CFTC regulations) or (2) if
purchased for other purposes, the sum of the amounts of initial margin deposits
on a Portfolio's existing futures and premiums required to establish
non-hedging positions would not exceed 5% of the liquidation value of the
Portfolio's total assets. In instances involving the purchase of futures
contracts or the writing of put options thereon by a Portfolio, an amount of
cash and cash equivalents, equal to the cost of such futures contracts or
options written (less any related margin deposits), will be deposited in a
segregated account with its custodian, thereby insuring that the use of such
futures contracts and options is unleveraged. In instances involving the sale
of futures contracts or the writing of call options thereon by a Portfolio, the
securities underlying such futures contracts or options will at all times be
maintained by the Portfolio or, in the case of index futures and related
options, the Portfolio will own securities the price changes of which are, in
the opinion of its Adviser, expected to replicate substantially the movement of
the index upon which the futures contract or option is based.
For information concerning the risks associated with utilizing options, futures
contracts, and forward foreign currency exchange contracts, please see "Risks
of Transactions in Options, Futures Contracts and Forward Currency Contracts"
on page 29.
As indicated in Appendix A, certain of the Portfolios may also write and
purchase put and call options. Options (another type of potentially high-risk
security) give the purchaser of an option the right, but not the obligation, to
buy or sell in the future an asset at a predetermined price during the term of
the option. (The writer of a put or call option would be obligated to buy or
sell the underlying asset at a predetermined price during the term of the
option.) Each Portfolio will write put and call options only if such options
are considered to be "covered". A call option on a security is covered, for
example, when the writer of the call option owns throughout the option period
the security on which the option is written (or a security convertible into
such a security without the payment of additional consideration). A put option
on a security is covered, for example, when the writer of the put has deposited
and maintained in a segregated account throughout the option period sufficient
cash or other liquid assets in an amount equal to or greater than the exercise
price of the put option.
Certain of the Portfolios will not commit more than 5% of their total assets to
premiums when purchasing call or put options. In addition, the total market
value of securities against which a Portfolio has written call or put options
generally will not exceed 25% of its total assets. However, the Warburg Pincus
Small Company Value Portfolio may commit up to 10% of its total assets to
premiums when purchasing put or call options.
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WRITING CALL OPTIONS. A call option is a contract which gives the purchaser of
the option (in return for a premium paid) the right to buy, and the writer of
the option (in return for a premium received) the obligation to sell, the
underlying security at the exercise price at any time prior to the expiration
of the option, regardless of the market price of the security during the option
period. A call option on a security is covered, for example, when the writer of
the call option owns the security on which the option is written (or on a
security convertible into such a security without additional consideration)
throughout the option period.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the underlying securities. If the futures price at
expiration is below the exercise price, the Portfolio will retain the full
amount of the option premium, which provides a partial hedge against any
decline that may have occurred in the value of the Portfolio's holdings of
securities. The writing of a put option on a futures contract is analogous to
the purchase of a futures contract in that it hedges against an increase in the
price of securities the Portfolio intends to acquire. However, the hedge is
limited to the amount of premium received for writing the put.
A Portfolio will write covered call options both to reduce the risks associated
with certain of its investments and to increase total investment return through
the receipt of premiums. In return for the premium income, the Portfolio will
give up the opportunity to profit from an increase in the market price of the
underlying security above the exercise price so long as its obligations under
the contract continue, except insofar as the premium represents a profit.
Moreover, in writing the call option, the Portfolio will retain the risk of
loss should the price of the security decline. The premium is intended to
offset that loss in whole or in part. Unlike the situation in which the
Portfolio owns securities not subject to a call option, the Portfolio, in
writing call options, must assume that the call may be exercised at any time
prior to the expiration of its obligation as a writer, and that in such
circumstances the net proceeds realized from the sale of the underlying
securities pursuant to the call may be substantially below the prevailing
market price.
A Portfolio may terminate its obligation under an option it has written by
buying an identical option. Such a transaction is called a "closing purchase
transaction." The Portfolio will realize a gain or loss from a closing purchase
transaction if the amount paid to purchase a call option is less or more than
the amount received from the sale of the corresponding call option. Also,
because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the exercise or closing out of a call option is likely to be offset in
whole or part by unrealized appreciation of the underlying security owned by
the Portfolio. When an underlying security is sold from the Portfolio's
securities portfolio, the Portfolio will effect a closing purchase transaction
so as to close out any existing covered call option on that underlying
security.
WRITING PUT OPTIONS. The writer of a put option becomes obligated to purchase
the underlying security at a specified price during the option period if the
buyer elects to exercise the option before its expiration date. A Portfolio
which writes a put option will be required to "cover" it, for example, by
depositing and maintaining in a segregated account with its custodian cash,
United States Government securities or other liquid securities having a value
equal to or greater than the exercise price of the option.
The Portfolios may write put options either to earn additional income in the
form of option premiums (anticipating that the price of the underlying security
will remain stable or rise during the option period and the option will
therefore not be exercised) or to acquire the underlying security at a net cost
below the current value (e.g., the option is exercised because of a decline in
the price of the underlying security, but the amount paid by the Portfolio,
offset by the option premium, is less than the current price). The risk of
either strategy is that the price of the underlying security may decline by an
amount greater than 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.
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PURCHASING PUT AND CALL OPTIONS. A Portfolio may purchase put options on
securities to protect their holdings against a substantial decline in market
value. The purchase of put options on securities will enable a Portfolio to
preserve, at least partially, unrealized gains in an appreciated security in
its portfolio without actually selling the security. In addition, the Portfolio
will continue to receive interest or dividend income on the security. The
Portfolios may also purchase call options on securities to protect against
substantial increases in prices of securities that Portfolios intend to
purchase pending their ability to invest in an orderly manner in those
securities. The Portfolios may sell put or call options they have previously
purchased, which could result in a net gain or loss depending on whether the
amount received on the sale is more or less than the premium and other
transaction costs paid on the put or call option which was bought.
SECURITIES INDEX FUTURES CONTRACTS. Purchases or sales of securities index
futures contracts may be used in an attempt to protect a Portfolio's current or
intended investments from broad fluctuations in securities prices. A securities
index futures contract does not require the physical delivery of securities,
but merely provides for profits and losses resulting from changes in the market
value of the contract to be credited or debited at the close of each trading
day to the respective accounts of the parties to the contract. On the
contract's expiration date a final cash settlement occurs and the futures
positions are simply closed out. Changes in the market value of a particular
index futures contract reflect changes in the specified index of securities on
which the future is based.
By establishing an appropriate "short" position in index futures, a Portfolio
may also seek to protect the value of its portfolio against an overall decline
in the market for such securities. Alternatively, in anticipation of a
generally rising market, a Portfolio can seek to avoid losing the benefit of
apparently low current prices by establishing a "long" position in securities
index futures and later liquidating that position as particular securities are
in fact acquired. To the extent that these hedging strategies are successful,
the Portfolio will be affected to a lesser degree by adverse overall market
price movements than would otherwise be the case.
SECURITIES INDEX OPTIONS. A Portfolio may write covered put and call options
and purchase call and put options on securities indexes for the purpose of
hedging against the risk of unfavorable price movements adversely affecting the
value of a Portfolio's securities or securities it intends to purchase. Each
Portfolio writes only "covered" options. A call option on a securities index is
considered covered, for example, if, so long as the Portfolio is obligated as
the writer of the call, it holds securities the price changes of which are, in
the opinion of a Portfolio's Adviser, expected to replicate substantially the
movement of the index or indexes upon which the options written by the
Portfolio are based. A put on a securities index written by a Portfolio will be
considered covered if, so long as it is obligated as the writer of the put, the
Portfolio segregates with its custodian cash, United States Government
securities or other liquid high-grade debt obligations having a value equal to
or greater than the exercise price of the option. Unlike a stock option, which
gives the holder the right to purchase or sell a specified stock at a specified
price, an option on a securities index gives the holder the right to receive a
cash "exercise settlement amount" equal to (i) the difference between the
exercise price of the option and the value of the underlying stock index on the
exercise date, multiplied by (ii) a fixed "index multiplier."
A securities index fluctuates with changes in the market value of the
securities so included. For example, some securities index options are based on
a broad market index such as the Standard & Poor's 500 or the NYSE Composite
Index, or a narrower market index such as the Standard & Poor's 100. Indexes
may also be based on an industry or market segment such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index.
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
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absolute right to repurchase an option it writes at any time at a repurchase
price which represents the fair market value, as determined in good faith
through negotiation between the parties, but which in no event will exceed a
price determined pursuant to a formula contained in the contract. Although the
specific details of the formula may vary between contracts with different
primary dealers, the formula will generally be based on a multiple of the
premium received by each Portfolio for writing the option, plus the amount, if
any, of the option's intrinsic value (i.e., the amount the option is
"in-the-money"). The formula will also include a factor to account for the
difference between the price of the security and the strike price of the option
if the option is written "out-of-the-money." Although the specific details of
the formula may vary with different primary dealers, each contract will provide
a formula to determine the maximum price at which each Portfolio can repurchase
the option at any time. The Portfolios have established standards of
creditworthiness for these primary dealers, although the Portfolios may still
be subject to the risk that firms participating in such transactions will fail
to meet their obligations. In instances in which a Portfolio has entered into
agreements with respect to the over-the-counter options it has written, and
such agreements would enable the Portfolio to have an absolute right to
repurchase at a pre-established formula price the over-the-counter option
written by it, the Portfolio would treat as illiquid only securities equal in
amount to the formula price described above less the amount by which the option
is "in-the-money," i.e., the amount by which the price of the option exceeds
the exercise price.
RISKS OF TRANSACTIONS IN OPTIONS, FUTURES CONTRACTS AND FORWARD CURRENCY
CONTRACTS
OPTIONS. A closing purchase transaction for exchange-traded options may be made
only on a national securities exchange ("exchange"). There is no assurance that
a liquid secondary market on an exchange will exist for any particular option,
or at any particular time, and for some options, such as over-the-counter
options, no secondary market on an exchange may exist. If a Portfolio is unable
to effect a closing purchase transaction, the Portfolio will not sell the
underlying security until the option expires or the Portfolio delivers the
underlying security upon exercise.
Options traded in the over-the-counter market may not be as actively traded as
those on an exchange. Accordingly, it may be more difficult to value such
options. In addition, it may be difficult to enter into closing transactions
with respect to options traded over-the-counter. The Portfolios will engage in
such transactions only with firms of sufficient credit so as to minimize these
risks. Such options and the securities used as "cover" for such options may be
considered illiquid securities.
The effectiveness of hedging through the purchase of securities index options
will depend upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements in the
selected securities index. Perfect correlation is not possible because the
securities held or to be acquired by a Portfolio will not exactly match the
composition of the securities indexes on which options are written. In the
purchase of securities index options the principal risk is that the premium and
transaction costs paid by a Portfolio in purchasing an option will be lost if
the changes (increase in the case of a call, decrease in the case of a put) in
the level of the index do not exceed the cost of the option.
FUTURES. The prices of futures contracts are volatile and are influenced, among
other things, by actual and anticipated changes in the market and interest
rates, which in turn are affected by fiscal and monetary policies and national
and international political and economic events.
Most United States futures exchanges limit the amount of fluctuation permitted
in futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
futures contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a 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
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substantial loss, as well as gain, to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit, if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract.
A decision of whether, when, and how to hedge involves skill and judgment, and
even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior, market trends or interest rate trends. There are
several risks in connection with the use by a Portfolio of futures contracts as
a hedging device. One risk arises because of the imperfect correlation between
movements in the prices of the futures contracts and movements in the prices of
the underlying instruments which are the subject of the hedge. A Portfolio's
Adviser will, however, attempt to reduce this risk by entering into futures
contracts whose movements, in its judgment, will have a significant correlation
with movements in the prices of the Portfolio's underlying instruments sought
to be hedged.
Successful use of futures contracts by a Portfolio for hedging purposes is also
subject to a Portfolio's ability to correctly predict movements in the
direction of the market. It is possible that, when a Portfolio has sold futures
to hedge its portfolio against a decline in the market, the index, indices, or
instruments underlying futures might advance and the value of the underlying
instruments held in the Portfolio's portfolio might decline. If this were to
occur, the Portfolio would lose money on the futures and also would experience
a decline in value in its underlying instruments.
Positions in futures contracts may be closed out only on an exchange or a board
of trade which provides the market for such futures. Although the Portfolios,
specified in the Prospectus, intend to purchase or sell futures only on
exchanges or boards of trade where there appears to be an active market, there
is no guarantee that such will exist for any particular contract or at any
particular time. If there is not a liquid market at a particular time, it may
not be possible to close a futures position at such time, and, in the event of
adverse price movements, a Portfolio would continue to be required to make
daily cash payments of variation margin. However, in the event futures
positions are used to hedge portfolio securities, the securities will not be
sold until the futures positions can be liquidated. In such circumstances, an
increase in the price of securities, if any, may partially or completely offset
losses on the futures contracts.
FOREIGN OPTIONS AND FUTURES. Participation in foreign futures and foreign
options transactions involves the execution and clearing of trades on or
subject to the rules of a foreign board of trade. Neither the National Futures
Association nor any domestic exchange regulates activities of any foreign
boards of trade, including the execution, delivery and clearing of
transactions, or has the power to compel enforcement of the rules of a foreign
board of trade or any applicable foreign law. This is true even if the exchange
is formally linked to a domestic market so that a position taken on the market
may be liquidated by a transaction on another market. Moreover, such laws or
regulations will vary depending on the foreign country in which the foreign
futures or foreign options transaction occurs. For these reasons, when a
Portfolio trades foreign futures or foreign options contracts, it may not be
afforded certain of the protective measures provided by the Commodity Exchange
Act, the CFTC's regulations and the rules of the National Futures Association
and any domestic exchange, including the right to use reparations proceedings
before the CFTC and arbitration proceedings provided by the National Futures
Association or any domestic futures exchange. In particular, funds received
from a Portfolio for foreign futures or foreign options transactions may not be
provided the same protections as funds received in respect of transactions on
United States futures exchanges. In addition, the price of any foreign futures
or foreign options contract and, therefore, the potential profit and loss
thereon, may be affected by any variance in the foreign exchange rate between
the time the Portfolio's order is placed and the time it is liquidated, offset
or exercised.
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.
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The writing of an option on foreign currency will constitute only a partial
hedge, up to the amount of the premium received, and a Portfolio could be
required to purchase or sell foreign currencies at disadvantageous exchange
rates, thereby incurring losses. The purchase of an option on foreign currency
may constitute an effective hedge against fluctuations in exchange rates
although, in the event of rate movements adverse to a Portfolio's position, it
may forfeit the entire amount of the premium plus related transaction costs.
PASSIVE FOREIGN INVESTMENT COMPANIES. As indicated in Appendix A, certain of
the Portfolios may purchase the securities of certain foreign investment funds
or trusts called passive foreign investment companies ("PFICs"). Such entities
have been the only or primary way to invest in certain countries because some
foreign countries limit, or prohibit, all direct foreign investment in the
securities of companies domiciled therein. However, the governments of some
countries have authorized the organization of investment funds to permit
indirect foreign investment in such securities. For tax purposes these funds
may be known as passive foreign investment companies.
The Portfolios are subject to certain percentage limitations under the 1940 Act
relating to the purchase of securities of investment companies, and,
consequently, each Portfolio may have to subject any of its investments in
other investment companies, including PFICs, to the limitation that no more
than 10% of the value of the Portfolio's total assets may be invested in such
securities. In addition to bearing their proportionate share of a Portfolio's
expenses (management fees and operating expenses), shareholders will also
indirectly bear similar expenses of such entities. Like other foreign
securities, interests in passive foreign investment companies also involve the
risk of foreign securities, as described above.
PAYMENT-IN-KIND BONDS. As indicated in Appendix A, certain of the Portfolios
may invest in payment-in-kind bonds. Payment-in-kind bonds allow the issuer, at
its option, to make current interest payments on the bonds either in cash or in
additional bonds. The value of payment-in-kind bonds is subject to greater
fluctuation in response to changes in market interest rates than bonds which
pay interest in cash currently. Payment-in-kind bonds allow an issuer to avoid
the need to generate cash to meet current interest payments. Accordingly, such
bonds may involve greater credit risks than bonds paying interest currently.
Even though such bonds do not pay current interest in cash, the Portfolios are
nonetheless required to accrue interest income on such investments and to
distribute such amounts at least annually to shareholders. Thus, the Portfolios
could be required, at times, to liquidate other investments in order to satisfy
its distribution requirements.
REPURCHASE AGREEMENTS. Each Portfolio, other than the Alliance Equity Index
Portfolio, may enter into repurchase agreements with qualified and Board
approved banks, broker-dealers or other financial institutions as a means of
earning a fixed rate of return on its cash reserves for periods as short as
overnight. A repurchase agreement is a contract pursuant to which a Portfolio,
against receipt of securities of at least equal value including accrued
interest, agrees to advance a specified sum to the financial institution which
agrees to reacquire the securities at a mutually agreed upon time (usually one
day) and price. Each repurchase agreement entered into by a Portfolio will
provide that the value of the collateral underlying the repurchase agreement
will always be at least equal to the repurchase price, including any accrued
interest. A Portfolio's right to liquidate such securities in the event of a
default by the seller could involve certain costs, losses or delays and, to the
extent that proceeds from any sale upon a default of the obligation to
repurchase are less than the repurchase price, the Portfolio could suffer a
loss.
Under a repurchase agreement, underlying debt instruments are acquired for a
relatively short period (usually not more than one week and never more than a
year) subject to an obligation of the seller to repurchase and the Portfolio to
resell the instrument at a fixed price and time, thereby determining the yield
during the Portfolio's holding period. This results in a fixed rate of return
insulated from market fluctuation during that holding period.
Repurchase agreements may have the characteristics of loans by a Portfolio.
During the term of the repurchase agreement, a Portfolio retains the security
subject to the repurchase agreement as collateral 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
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the resale amount provided under the repurchase agreement. A Portfolio will
enter into repurchase agreements (with respect to United States Government
obligations, certificates of deposit, or bankers' acceptances) with registered
brokers-dealers, United States Government securities dealers or domestic banks
whose creditworthiness is determined to be satisfactory by the Portfolio's
Adviser, pursuant to guidelines adopted by the Board of Trustees. Generally, a
Portfolio does not invest in repurchase agreements maturing in more than seven
days. The staff of the SEC currently takes the position that repurchase
agreements maturing in more than seven days are illiquid securities.
If a seller under a repurchase agreement were to default on the agreement and
be unable to repurchase the security subject to the repurchase agreement, the
Portfolio would look to the collateral underlying the seller's repurchase
agreement, including the security subject to the repurchase agreement, for
satisfaction of the seller's obligation to the Portfolio. In the event a
repurchase agreement is considered a loan and the seller defaults, the
Portfolio might incur a loss if the value of the collateral declines and may
incur disposition costs in liquidating the collateral. In addition, if
bankruptcy proceedings are commenced with respect to the seller, realization of
the collateral may be delayed or limited and a loss may be incurred.
REAL ESTATE INVESTMENT TRUSTS. As indicated in Appendix A, certain of the
Portfolios may each invest up to 15% of its respective net assets in
investments related to real estate, including real estate investment trusts
("REITs"). Risks associated with investments in securities of companies in the
real estate industry include: decline in the value of real estate; risks
related to general and local economic conditions; overbuilding and increased
competition; increases in property taxes and operating expenses; changes in
zoning laws; casualty or condemnation losses; variations in rental income;
changes in neighborhood values; the appeal of properties to tenants; and
increases in interest rates. In addition, equity REITs may be affected by
changes in the values of the underlying property owned by the trusts, while
mortgage real estate investment trusts may be affected by the quality of credit
extended. REITs are dependent upon management skills, may not be diversified
and are subject to the risks of financing projects. Such REITs are also subject
to heavy cash flow dependency, defaults by borrowers, self liquidation and the
possibility of failing to qualify for tax-free pass-through of income under the
Code and to maintain exemption from the 1940 Act. In the event an issuer of
debt securities collateralized by real estate defaults, it is conceivable that
the REITs could end up holding the underlying real estate.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. As indicated in Appendix A,
certain of the Portfolios may each enter into reverse repurchase agreements
with brokers, dealers, domestic and foreign banks or other financial
institutions. In a reverse repurchase agreement, the Portfolio sells a security
and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. It may
also be viewed as the borrowing of money by the Portfolio. The Portfolio's
investment of the proceeds of a reverse repurchase agreement is the speculative
factor known as leverage. The Portfolio may enter into a reverse repurchase
agreement only if the interest income from investment of the proceeds is
greater than the interest expense of the transaction and the proceeds are
invested for a period no longer than the term of the agreement. At the time a
Portfolio enters into a reverse repurchase agreement, it will establish and
maintain a segregated account with an approved custodian containing cash or
other liquid securities having a value not less than the repurchase price
(including accrued interest). If interest rates rise during a reverse
repurchase agreement, it may adversely affect the Portfolio's net asset value.
See "Fundamental Restrictions" for more information concerning restrictions on
borrowing by each Portfolio. Reverse repurchase agreements are considered to be
borrowings under the 1940 Act.
The assets contained in the segregated account will be marked-to-market daily
and additional assets will be placed in such account on any day in which the
assets fall below the repurchase price (plus accrued interest). A Portfolio's
liquidity and ability to manage its assets might be affected when it sets aside
cash or portfolio securities to cover such commitments. Reverse repurchase
agreements involve the risk that 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.
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In "dollar roll" transactions, a Portfolio sells fixed-income securities for
delivery in the current month and simultaneously contracts to repurchase
similar but not identical (same type, coupon and maturity) securities on a
specified future date. During the roll period, a Portfolio would forego
principal and interest paid on such securities. A Portfolio would be
compensated by the difference between the current sales price and the forward
price for the future purchase, as well as by the interest earned on the cash
proceeds of the initial sale. At the time a Portfolio enters into a dollar roll
transaction, it will place in a segregated account maintained with an approved
custodian cash or other liquid securities having a value not less than the
repurchase price (including accrued interest) and will subsequently monitor the
account to ensure that its value is maintained.
SECURITIES LOANS. All securities loans will be made pursuant to agreements
requiring the loans to be continuously secured by collateral in cash or high
grade debt obligations at least equal at all times to the market value of the
loaned securities. The borrower pays to the Portfolios an amount equal to any
dividends or interest received on loaned securities. The Portfolios retain all
or a portion of the interest received on investment of cash collateral or
receive a fee from the borrower. Lending portfolio securities involves risks of
delay in recovery of the loaned securities or in some cases loss of rights in
the collateral should the borrower fail financially.
Securities loans are made to broker-dealers or institutional investors or other
persons, pursuant to agreements requiring that the loans be continuously
secured by collateral at least equal at all times to the value of the loaned
securities marked to market on a daily basis. The collateral received will
consist of cash, United States Government securities, letters of credit or such
other collateral as may be permitted under a Portfolio's investment program.
While the securities are being loaned, a Portfolio will continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities,
as well as interest on the investment of the collateral or a fee from the
borrower. A Portfolio has a right to call each loan and obtain the securities
on five business days' notice or, in connection with securities trading on
foreign markets, within such longer period for purchases and sales of such
securities in such foreign markets. A Portfolio will generally not have the
right to vote securities while they are being loaned, but its Manager or
Adviser will call a loan in anticipation of any important vote. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in the recovery
of the securities or possible loss of rights in the collateral should the
borrower fail financially. Loans will only be made to firms deemed by a
Portfolio's Adviser to be of good standing and will not be made unless, in the
judgment of the Adviser, the consideration to be earned from such loans would
justify the risk.
SHORT SALES AGAINST THE BOX. As indicated in Appendix A, certain of the
Portfolios may enter into a "short sale" of securities in circumstances in
which, at the time the short position is open, the Portfolio owns an equal
amount of the securities sold short or owns preferred stocks or debt
securities, convertible or exchangeable without payment of further
consideration, into an equal number of securities sold short. This kind of
short sale, which is referred to as one "against the box," may be entered into
by each Portfolio to, for example, lock in a sale price for a security the
Portfolio does not wish to sell immediately. Each Portfolio will deposit, in a
segregated account with its custodian or a qualified subcustodian, the
securities sold short or convertible or exchangeable preferred stocks or debt
securities 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,
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more established companies. There is typically less publicly available
information concerning smaller companies than for larger, more established ones
and smaller companies may be dependent for management on one or a few key
persons. Therefore, an investment in these Portfolios may involve a greater
degree of risk than an investment in other Portfolios that seek capital
appreciation by investing in better known, larger companies.
STRUCTURED NOTES. The Alliance Portfolios and the Morgan Stanley Emerging
Markets Equity Portfolio may invest in structured notes, which are derivatives
on which the amount of principal repayment and/or interest payments is based
upon the movement of one or more factors. Structured notes are interests in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of debt obligations. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, of specified instruments (such as commercial bank loans) and the
issuance by that entity of one or more classes of securities and the issuance
by that entity of one or more classes of securities backed by, or representing
interests in, the underlying instruments. The cash flow on the underlying
instruments may be apportioned among the newly issued structured notes to
create securities with different investment characteristics such as varying
maturities, payment priorities and interest rate provisions, and the extent of
the payment made with respect to structured notes is dependent on the extent of
the cash flow on the underlying instruments. Because structured notes of the
type in which the Morgan Stanley Emerging Markets Equity Portfolio may invest
typically involve no credit enhancement, their credit risk generally will be
equivalent to that of the underlying instruments. The Morgan Stanley Emerging
Markets Equity Portfolio may invest in a class of structured notes that is
either subordinated or unsubordinated to the right of payment of another class.
Subordinated structured notes typically have higher yields and present greater
risks than unsubordinated structured notes. Certain issuers of structured notes
may be deemed to be "investment companies" as defined in the 1940 Act. As a
result, the Morgan Stanley Emerging Markets Equity Portfolio's investment in
these structured notes may be limited by restrictions contained in the 1940
Act. Structured notes are typically sold in private placement transactions, and
there currently is no active trading market for structured notes.
SWAPS. As indicated in Appendix A, certain of the Portfolios may each invest in
swap contracts, which are derivatives in the form of a contract or other
similar instrument which is an agreement to exchange the return generated by
one instrument for the return generated by another instrument. The payment
streams are calculated by reference to a specified index and agreed upon
notional amount. The term "specified index" includes, but is not limited to,
currencies, fixed interest rates, prices and total return on interest rate
indices, fixed income indices, stock indices and commodity indices (as well as
amounts derived from arithmetic operations on these indices). For example, a
Portfolio may agree to swap the return generated by a fixed income index for
the return generated by a second fixed income index. The currency swaps in
which a Portfolio may enter will generally involve an agreement to pay interest
streams in one currency based on a specified index in exchange for receiving
interest streams denominated in another currency. Such swaps may involve
initial and final exchanges that correspond to the agreed upon notional amount.
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.
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The Portfolio will usually enter into swaps on a net basis, i.e., the two
return streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Portfolio receiving or paying, as the
case may be, only the net amount of the two returns. The Portfolio's
obligations under a swap agreement will be accrued daily (offset against any
amounts owing to the Portfolio) and any accrued but unpaid net amounts owed to
a swap counterparty will be covered by the maintenance of a segregated account
consisting of cash, United States Government securities, or high grade debt
obligations. No Portfolio will enter into any swap agreement unless the
counterparty meets the rating requirements set forth in guidelines established
by the Trust's Board of Trustees. The swap market has grown substantially in
recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. As
a result, the swap market has become relatively liquid. Swaps that include more
recent innovations for which standardized documentation has not yet been fully
developed are less liquid than "traditional" swaps. The use of swaps is a
highly specialized activity that involves investment techniques and risks
different from those associated with ordinary portfolio securities
transactions. If an Adviser is incorrect in its forecasts of market values,
interest rates, and currency exchange rates, the investment performance of the
Portfolio would be less favorable than it would have been if this investment
technique were not used.
The swaps in which a Portfolio may engage may include instruments under which
one party pays a single or periodic fixed amount(s) (or premium), and the other
party pays periodic amounts based on the movement of a specified index. Swaps
do not involve the delivery of securities, other underlying assets, or
principal. Accordingly, the risk of loss with respect to swaps is limited to
the net amount of payments the Portfolio is contractually obligated to make. If
the other party to a swap defaults, the Portfolio's risk of loss consists of
the net amount of payments that the Portfolio contractually is entitled to
receive. Currency swaps usually involve the delivery of the entire principal
value of one designated currency in exchange for the other designated currency.
Therefore, the entire principal value of a currency swap is subject to the risk
that the other party to the swap will default on its contractual delivery
obligations. If there is a default by the counterparty, a Portfolio may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Certain swap transactions involve more recent
innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than traditional swap
transactions.
The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If an Adviser is incorrect in its forecasts of market
values, interest rates, and currency exchange rates, the investment performance
of the Portfolio would be less favorable than it would have been if this
investment technique were not used.
UNITED STATES GOVERNMENT SECURITIES. Each Portfolio may invest in debt
obligations of varying maturities issued or guaranteed by the United States
Government, its agencies or instrumentalities ("United States Government
securities"). Direct obligations of the United States Treasury include a
variety of securities that differ in their interest rates, maturities and dates
of issuance. United States Government securities also include securities issued
or guaranteed by government agencies that are supported by the full faith and
credit of the United States (e.g., securities issued by the Federal Housing
Administration, Export-Import Bank of the United States, Small Business
Administration, and Government National Mortgage Association); securities
issued or guaranteed by government agencies that are supported by the ability
to borrow from the United States Treasury (e.g., securities issued by the
Federal National Mortgage Association); and securities issued or guaranteed by
government agencies that are only supported by the credit of the particular
agency (e.g., Interamerican Development Bank, the International Bank for
Reconstruction and Development, and the Tennessee Valley Authority).
WARRANTS. All of the Alliance 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
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magnified in the price movements of the warrant. This effect enables the
investor to gain exposure to the underlying security with a relatively low
capital investment but increases an investor's risk in the event of a decline
in the value of the underlying security and can result in a complete loss of
the amount invested in the warrant. In addition, the price of a warrant tends
to be more volatile than, and may not correlate exactly to, the price of the
underlying security. If the market price of the underlying security is below
the exercise price of the warrant on its expiration date, the warrant will
generally expire without value.
The equity security underlying a warrant is authorized at the time the warrant
is issued or is issued together with the warrant. Investing in warrants can
provide a greater potential for profit or loss than an equivalent investment in
the underlying security, and, thus, can be a speculative investment. The value
of a warrant may decline because of a decline in the value of the underlying
security, the passage of time, changes in interest rates or in the dividend or
other policies of the company whose equity underlies the warrant or a change in
the perception as to the future price of the underlying security, or any
combination thereof. Warrants generally pay no dividends and confer no voting
or other rights other than to purchase the underlying security.
ZERO COUPON BONDS. As indicated in Appendix A, certain of the Portfolios may
invest in zero-coupon bonds. Zero-coupon bonds are issued at a significant
discount from their principal amount and pay interest only at maturity rather
than at intervals during the life of the security. The value of zero-coupon
bonds is subject to greater fluctuation in response to changes in market
interest rates than bonds which pay interest in cash currently. Zero-coupon
bonds allow an issuer to avoid the need to generate cash to meet current
interest payments. Accordingly, such bonds may involve greater credit risks
than bonds paying interest currently. Even though such bonds do not pay current
interest in cash, a Portfolio is nonetheless required to accrue interest income
on such investments and to distribute such amounts at least annually to
investors in such instruments. Thus, each Portfolio could be required, at
times, to liquidate other investments in order to satisfy its distribution
requirements.
PORTFOLIO TURNOVER. The length of time a Portfolio has held a particular
security is not generally a consideration in investment decisions. A change in
the securities held by a Portfolio is known as "portfolio turnover." A high
turnover rate (100% or more) increases transaction costs (e.g., brokerage
commissions) which must be born by the Portfolio and its shareholders and
increases realized gains and losses. See "Financial Highlights" in the
Prospectus for the actual portfolio turnover rates of the Portfolios through
December 31, 1999.
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MANAGEMENT OF THE TRUST
The Board has the responsibility for the overall management of the Trust and
its Portfolios, including general supervision and review of the investment
activities and the conformity with Delaware Law and the stated policies of the
Trust's Portfolios. The Board elects the officers of the Trust who are
responsible for administering the Trust's day-to-day operations. Trustees and
officers of the Trust, together with information as to their principal business
occupations during the last five years, and other information are shown below.
As of December 31, 1999 the Trustees and officers of the Trust, as a group,
owned Contracts entitling them to provide voting instructions in the aggregate
with respect to less than one percent of the Trust's shares of beneficial
interest.
THE TRUSTEES
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
- ---------------------------------------------- ----------------------------------------------------
<S> <C>
Peter D. Noris* (44) ......................... From May 1995 to present, Executive Vice
President and Trustee President and Chief Investment Officer, Equitable;
from 1992 to 1995, Vice President, Salomon
Brothers Inc.; from July 1995 to present, Director,
Alliance Capital Management, L.P.; from July 1995
to October 1999, Trustee, Hudson River Trust
(investment company); from November 1996 to
present, Executive Vice President, AXA Advisors
LLC.
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).
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.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
- ----------------------------------------------- ---------------------------------------------------
<S> <C>
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.
David W. Fox* (68) ............................ Present, Public Governor (1989 to present) and
Chairman (1996 to present) of the Chicago Stock
Exchange; Director of USG Corporation; from
1990-1995 (retired), Chairman and Chief Executive
Officer, Northern Trust Corporation.
Theodossios (Ted) Athanassiades* (60) ......... From 1994 to present, Director, Atlantic Bank of
New York; 1995-1996, Vice-Chairman,
Metropolitan Life Insurance Company (retired);
from 1993-1995, President and Chief Operating
Officer, Metropolitan Life Insurance Company.
</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 Byrne, Brian 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 Independent Trustee currently receives from the Trust an annual fee of
$40,000 plus (i) an additional fee of $4,000 for each regularly scheduled Board
meeting attended, (ii) $2,000 for each special Board meeting or special
committee meeting attended, and (iii) $1,000 for each telephone or other
committee meeting attended, plus reimbursement for expenses in attending
in-person meetings. Upon election by the Independent Trustees of a lead
Independent Trustee, a supplemental retainer of $10,000 per year will be paid
to the lead Independent Trustee. A supplemental retainer may also be paid on
occasion to each chair of the Trust's two committees for special services.
38
<PAGE>
TRUSTEE COMPENSATION TABLE
<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-
Jettie M. Edwards $ 39,271 $-0- $ 39,271
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
Michael Hegarty $ -0- $-0- $ -0-
</TABLE>
- ----------
* 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:
<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.
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH TRUST PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------ -------------------------------------------------------
<S> <C>
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.
Paul Roselli (34) ........................ From March 1997 to present, Vice President, Fund
Assistant Treasurer Administration, Chase Global; from July 1993 to March
1997, Assistant Manager of Fund Accounting, Brown
Brothers Harriman.
Helen A Robichand (47) ................... From 1994 to present, Vice President and Associate
Assistant Secretary General Counsel, Chase Global Funds Services
Company.
</TABLE>
CONTROL PERSON AND PRINCIPAL HOLDERS OF SECURITIES
The Trust continuously offers its shares to separate accounts of insurance
companies in connection with variable life insurance contracts and variable
annuity certificates and contracts (the "Contracts") and to participants in
tax-qualified retirement plans. The Trust's shares currently are sold to: (i)
insurance company separate accounts in connection with Contracts issued by
Equitable and EOC; (ii) to the Equitable Plan; and (iii) insurance company
separate accounts of: Integrity Life Insurance Company, National Integrity Life
Insurance Company, The American Franklin Life Insurance Company, and
Transamerica Occidental Life Insurance Company, each of which is unaffiliated
with Equitable. Equitable may be deemed to be a control person with respect to
the Trust by virtue of its ownership of more than
40
<PAGE>
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
to owners of the Contracts (the "Contract owners") the opportunity to instruct
them as to how shares allocable to their Contracts or to the Equitable Plan
will be voted with respect to certain matters, such as approval of investment
advisory agreements. To the Trust's knowledge, as of the date of this Statement
of Additional Information ("SAI"), the following owned Contracts entitling such
persons to give voting instructions regarding more than 5% of the outstanding
shares of any Portfolio:
<TABLE>
<CAPTION>
CONTRACT OWNER SHARES BENEFICIALLY PERCENTAGE
PORTFOLIO AND ADDRESS OWNED OF OWNERSHIP
- ----------- ---------------- --------------------- -------------
<S> <C> <C> <C>
[TO BE PROVIDED]
</TABLE>
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, L.P. ("Mercury"), Lazard Asset Management ("LAM"), a
division of Lazard Freres and Company, LLC, J.P. Morgan Investment Management
Inc. ("J.P. Morgan"), Bankers Trust Company ("Bankers Trust"), Evergreen Asset
Management Corp. ("Evergreen"), Alliance Capital Management, L.P. ("Alliance"),
Capital Guardian Trust Company ("Capital Guardian") Calvert Asset Management
Company, Inc. ("Calvert"), Brown Capital Management, Inc. ("Brown Capital"),
Prudential Investments Fund Management LLC ("PIFM") and Jennison Associates LLC
("Jennison") (each an "Adviser," and together the "Advisers") serve as
investment advisers to one or more of the Portfolios, as described more fully in
the Prospectus.
Equitable, which is a New York life insurance company and one of the largest
life insurance companies in the United States, is a 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
41
<PAGE>
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 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 Manager's responsibilities under the
Management Agreement, Manager will assess each Portfolio's investment focus and
will seek to implement decisions with respect to the allocation and
reallocation of each Portfolio's assets among one or more current or additional
Advisers from time to time, as the Manager deems appropriate, to enable each
Portfolio to achieve its investment goals. In addition, Manager will monitor
compliance of each Adviser with the investment objectives, policies and
restrictions of any Portfolio or Portfolios (or portions of any Portfolio)
under the management of such Adviser, and review and report to the Trustees of
the Trust on the performance of each Adviser. Manager will furnish, or cause
the appropriate Adviser(s) to furnish, to the Trust such statistical
information, with respect to the investments that a Portfolio (or portions of
any Portfolio) may hold or contemplate purchasing, as the Trust may reasonably
request. On Manager's own initiative, Manager will apprise, or cause the
appropriate Adviser(s) to apprise, the Trust of important developments
materially affecting each Portfolio (or any portion of a Portfolio that they
advise) and will furnish the Trust, from time to time, with such information as
may be appropriate for this purpose. Further, Manager agrees to furnish, or
cause the appropriate Adviser(s) to furnish, to the Trustees of the Trust such
periodic and special reports as the Trustees of the Trust may reasonably
request. In addition, Manager agrees to cause the appropriate Adviser(s) to
furnish to third-party data reporting services all currently available
standardized performance information and other customary data.
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.
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.
42
<PAGE>
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 Portfolios for which Alliance
serves as Investment Adviser, other than EQ/Alliance Premier Growth 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).
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.
43
<PAGE>
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, JPM Core Bond, Lazard Large Cap Value and Lazard Small Cap
Portfolios are not included in the above table because they had no
operations during the fiscal year ended December 31, 1997 except for the
issuance of Class IB shares.
CALENDAR YEAR ENDED DECEMBER 31, 1998*
<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
JPM Core Bond .................................. $ 172,507 $ 86,266 $ 86,241
Lazard Large Cap Value ......................... $ 160,570 $ 73,011 $ 87,559
Lazard Small Cap ............................... $ 194,797 $ 111,500 $ 83,297
</TABLE>
The 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 Portfolio, Alliance Inter-
44
<PAGE>
national, 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 $ 1,027,978 $262,571
Mercury World Strategy ................................ $ 214,078 $ 152,180 $ 61,897
MFS Emerging Growth Companies ......................... $ 4,668,243 $ 3,726,669 $941,574
MFS Research .......................................... $ 2,891,285 $ 2,318,049 $573,236
EQ/Putnam Balanced .................................... $ 526,199 $ 362,752 $163,547
EQ/Putnam Growth & Income Value ....................... $ 2,955,452 $ 2,393,031 $562,421
EQ/Putnam International Equity ........................ $ 1,352,745 $ 1,238,716 $114,030
EQ/Putnam Investors Growth ............................ $ 1,469,035 $ 1,328,348 $140,687
T. Rowe Price Equity Income ........................... $ 1,487,785 $ 1,086,822 $400,963
T. Rowe Price International Stock ..................... $ 1,186,330 $ 1,044,609 $141,721
Warburg Pincus Small Company Value .................... $ 974,661 $ 774,441 $200,220
Morgan Stanley Emerging Markets Equity ................ $ 960,297 $ 426,642 $533,655
BT Equity 500 Index ................................... $ 1,077,825 $ 571,134 $506,692
BT International Equity Index ......................... $ 230,274 $ 146,658 $ 83,616
BT Small Company Index ................................ $ 104,701 $ (102,605) $207,306
JPM Core Bond ......................................... $ 589,231 $ 466,067 $123,164
Lazard Large Cap Value ................................ $ 578,767 $ 513,394 $ 65,373
Lazard Small Cap ...................................... $ 480,925 $ 421,717 $ 59,208
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 $ (16,222) $ 44,492
EQ/Evergreen .......................................... $ 19,857 $ (28,007) $ 47,864
MFS Growth with Income ................................ $ 233,224 $ 103,187 $130,037
EQ/Alliance Premier Growth ............................ $ 968,447 $ 735,794 $232,653
Capital Guardian Research ............................. $ 79,240 $ 29,124 $ 50,116
Capital Guardian U.S. Equity .......................... $ 137,165 $ 77,738 $ 59,827
Capital Guardian International ........................ $ 110,978 $ 43,763 $ 67,214
Calvert Socially Responsible .......................... $ 4,861 $ (27,208) $ 32,068
</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,
45
<PAGE>
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.
** 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 JPM Core Bond Portfolio with J.P. Morgan. The
Manager has entered into an Advisory Agreement on behalf of BT Small Company
Index Portfolio, BT International Equity Index Portfolio and BT Equity 500
Index Portfolio with Bankers Trust. The Manager has entered into an Advisory
Agreement on behalf of 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 and the
EQ/Aggressive Stock Portfolio with Alliance. The Manager has entered into an
Advisory Agreement on behalf of Capital Guardian Research Portfolio, Capital
Guardian U.S. Equity Portfolio, Capital Guardian International Portfolio and
EQ/Balanced Portfolio with Capital Guardian. The Manager has entered into
Advisory Agreements on behalf of Calvert Socially Responsible Portfolio with
Calvert and Brown Capital. Finally, the Manager has entered into Advisory
Agreements on behalf of EQ/Balanced Portfolio with PIFM and Jennison. The
Advisory Agreements obligate T. Rowe Price, Price Fleming, Putnam Management,
MFS, CSAM, MSAM, Mercury, LAM, J.P. Morgan, Bankers Trust, Evergreen, Alliance,
Capital Guardian, Calvert, Brown Capital PIFM and Jennison to: (i) make
investment decisions on behalf of their respective Portfolios; (ii) place all
orders for the purchase and sale of investments for their respective Portfolios
with brokers or dealers selected by the Manager or an Adviser; and (iii)
perform certain limited related administrative functions in connection
therewith.
46
<PAGE>
During the years ended December 31, 1997, 1998 and 1999, respectively, the
Manager paid the following fees to each Adviser with respect to the Portfolios
listed below pursuant to the Investment Advisory Agreements:
FISCAL YEAR ENDED DECEMBER 31, 1997*
<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, JP 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
JPM 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 Portfolio, Alliance International,
Alliance Money Market, Alliance Quality Bond, Alliance Small Cap Growth,
EQ/
47
<PAGE>
Evergreen Foundation, EQ/Evergreen, MFS Growth with Income, EQ/Alliance
Premier Growth, Capital Guardian Research, Capital Guardian U.S. Equity,
Capital Guardian International and Calvert Socially Responsible Portfolios
are not included in the above tables because they had no operations before
the year ended December 31, 1998.
CALENDAR YEAR ENDED DECEMBER 31, 1999*
<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
JPM Core Bond ........................................ $ 388,531
Lazard Large Cap Value ............................... $ 433,489
Lazard Small Cap Value ............................... $ 390,856
EQ/Aggressive Stock .................................. $17,824,782
EQ/Balanced .......................................... $ 5,551,057
Alliance Common Stock ................................ $34,006,030
Alliance Conservative Investors ...................... $ 1,407,022
Alliance Equity Index ................................ $ 3,820,426
Alliance Global ...................................... $ 7,963,394
Alliance Growth and Income ........................... $ 5,040,401
Alliance Growth Investors ............................ $ 8,512,916
Alliance High Yield .................................. $ 2,714,429
Alliance Intermediate Government Securities .......... $ 706,450
Alliance International ............................... $ 1,711,969
Alliance Money Market ................................ $ 2,487,138
Alliance Quality Bond ................................ $ 1,263,047
Alliance Small Cap Growth ............................ $ 1,952,795
EQ/Evergreen Foundation .............................. $ 18,853
EQ/Evergreen ......................................... $ 14,832
MFS Growth with Income ............................... $ 577,857
EQ/Alliance Premier Growth ........................... $ 538,783
Capital Guardian Research ............................ $ 60,957
Capital Guardian U.S. Equity ......................... $ 105,500
Capital Guardian International ....................... $ 96,545
Calvert Socially Responsible ......................... $ 2,600
</TABLE>
- ----------
* The EQ/Alliance Premier Growth, Capital Guardian Research, Capital
Guardian U.S. Equity, and Capital Guardian International Portfolios
commenced operations on April 30, 1999. The Calvert
48
<PAGE>
Socially Responsible Portfolio commenced operations on August 30, 1999. The
EQ/Aggressive Stock, EQ/Balanced, Alliance Common Stock, Alliance
Conservative Investors, Alliance Equity Index, Alliance Global, Alliance
Growth and Income, Alliance Growth Investors, Alliance High Yield, Alliance
Intermediate Government Securities, Alliance International, Alliance Money
Market, Alliance Quality Bond, and Alliance Small Cap Growth Portfolios
commenced operations on October 18, 1999. The EQ/Alliance Technology
Portfolio is not included in the above table because it had no operations
during the fiscal year ended December 31, 1999.]
The Manager recommends Advisers for each Portfolio to the Trustees based upon
its continuing quantitative and qualitative evaluation of each Adviser's skills
in managing assets pursuant to specific investment styles and strategies.
Unlike many other mutual funds, the Portfolios are not associated with any one
portfolio manager, and benefit from independent specialists carefully selected
from the investment management industry. Short-term investment performance, by
itself, is not a significant factor in selecting or terminating an Adviser, and
the Manager does not expect to recommend frequent changes of Advisers. The
Trust has received an exemptive order from the SEC ("Multi-Manager Order"). The
Multi-Manager Order permits the Manager, subject to approval of the Board of
Trustees, to: (i) select new or additional Advisers for the of the Trust's
Portfolios; (ii) enter into new investment advisory agreements and materially
modify existing investment advisory agreements; and (iii) terminate and replace
the Advisers without obtaining approval of the relevant Portfolio's
shareholders. However, the Manager may not enter into an investment advisory
agreement with an "affiliated person" of the Manager (as that term is defined
in Section 2(a)(3) of the 1940 Act) ("Affiliated Adviser"), such as Alliance,
unless the investment advisory agreement with the Affiliated Adviser, including
compensation hereunder, is approved by the affected Portfolio's Shareholders,
including, in instances in which the investment advisory agreement pertains to
a newly formed Portfolio, the Portfolio's initial shareholder. Although
shareholder approval would not be required for the termination of Advisory
Agreements, shareholders of a Portfolio would continue to have the right to
terminate such agreements for the Portfolio at any time by a vote of a majority
of outstanding voting securities of the Portfolio.
When a Portfolio has more than one Adviser, the assets of each Portfolio are
allocated by the Manager among the Advisers selected for the Portfolio. Each
Adviser has discretion, subject to oversight by the Trustees, and the Manager,
to purchase and sell portfolio assets, consistent with each Portfolio's
investment objectives, policies and restrictions and specific investment
strategies developed by the Manager.
Generally, no Adviser provides any services to any Portfolio except asset
management and related recordkeeping services. However, an Adviser or its
affiliated broker-dealer may execute portfolio transactions for a Portfolio and
receive brokerage commissions in connection therewith as permitted by Section
17(e) of the 1940 Act.
THE ADMINISTRATOR
Pursuant to an administrative agreement ("Mutual Funds Services Agreement"),
Equitable ("Administrator") provides the Trust with necessary administrative
services. In addition, the Administrator makes available the office space,
equipment, personnel and facilities required to provide such administrative
services to the Trust. Chase Global Funds Services Company ("Chase Global")
served as the administrator for the Trust through April 30, 2000.
During the years ended December 31, 1997, 1998 and 1999, respectively, Chase
Global as the administrator was paid the following fees, by the Trust with
respect to each Portfolio:
49
<PAGE>
FISCAL YEAR ENDED DECEMBER 31, 1997*
<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, JPM Core Bond, Lazard Large Cap Value, Lazard Small Cap
Value Portfolios did not pay a fee to the Administrator during the fiscal
year ended December 31, 1997.
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
JPM 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.
50
<PAGE>
CALENDAR YEAR ENDED DECEMBER 31, 1999*
<TABLE>
<CAPTION>
PORTFOLIO ADMINISTRATION FEE
- ---------------------------------------------------------- -------------------
<S> <C>
Mercury Basic Value Equity ............................. $132,383
Mercury World Strategy ................................. $ 49,920
MFS Emerging Growth Companies .......................... $432,631
MFS Research ........................................... $259,717
EQ/Putnam Balanced ..................................... $ 84,637
EQ/Putnam Growth & Income Value ........................ $264,626
EQ/Putnam International Equity ......................... $129,023
EQ/Putnam Investors Growth ............................. $149,208
T. Rowe Price Equity Income ............................ $161,862
T. Rowe Price International Stock ...................... $148,409
Warburg Pincus Small Company Value ..................... $105,578
Morgan Stanley Emerging Markets Equity ................. $ 89,226
BT Equity 500 Index .................................... $245,934
BT International Equity Index .......................... $119,286
BT Small Company Index ................................. $135,672
JPM 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 ......................... $ 32,925
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.
** Amount paid to Administrator for the period October 18, 1999 to December
31, 1999.
51
<PAGE>
THE DISTRIBUTORS
The Trust has distribution agreements with AXA Advisors and EDI (each also
referred to as a "Distributor," and together "Distributors"), in which AXA
Advisors and EDI serve as Distributors for the Trust's Class IA shares and
Class IB shares. AXA Advisors and EDI are each an indirect wholly-owned
subsidiary of Equitable and the address for each is 1290 Avenue of the
Americas, New York, New York 10104.
The Trust's distribution agreements with respect to the Class IA shares and
Class IB shares ("Distribution Agreements") were reapproved by the Board of
Trustees at a Board meeting held on April 12, 1999. The Distribution Agreements
will remain in effect from year to year provided each Distribution Agreement's
continuance is approved annually by (i) a majority of the Trustees who are not
parties to such agreement or "interested persons" (as defined in the 1940 Act)
of the Trust or a Portfolio and, if applicable, who have no direct or indirect
financial interest in the operation of the Class IB Distribution Plan or any
such related agreement ("Independent Trustees") and (ii) either by vote of a
majority of the Trustees or a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Trust.
The Distributors or their affiliates for the Class IA shares will pay for
printing and distributing prospectuses or reports prepared for their use in
connection with the offering of the Class IA shares to prospective Contract
owners and preparing, printing and mailing any other literature or advertising
in connection with the offering of the Class IA shares to prospective Contract
owners.
Pursuant to the Class IB Distribution Plan the Trust compensates the
Distributors from assets attributable to the Class IB shares for services
rendered and expenses borne in connection with activities primarily intended to
result in the sale of the Trust's Class IB shares. It is anticipated that a
portion of the amounts received by the Distributors will be used to defray
various costs incurred or paid by the Distributors in connection with the
printing and mailing of Trust prospectuses, statements of additional
information, and any supplements thereto and shareholder reports, and holding
seminars and sales meetings with wholesale and retail sales personnel designed
to promote the distribution of Class IB shares. The Distributors may also use a
portion of the amounts received to provide compensation to financial
intermediaries and third-party broker-dealers for their services in connection
with the distribution of Class IB shares.
The Class IB Distribution Plan provides that the Trust, on behalf of each
Portfolio, may pay annually up to 0.50% of the average daily net assets of a
Portfolio attributable to its Class IB shares in respect of activities
primarily intended to result in the sale of Class IB shares. However, under the
Distribution Agreements, payments to the Distributors for activities pursuant
to the Class IB Distribution Plan are limited to payments at an annual rate
equal to 0.25% of average daily net assets of a Portfolio attributable to its
Class IB shares. Under terms of the Class IB Distribution Plan and the
Distribution Agreements, each Portfolio is authorized to make payments monthly
to the Distributors that may be used to pay or reimburse entities providing
distribution and shareholder servicing with respect to the Class IB shares for
such entities' fees or expenses incurred or paid in that regard.
The Class IB Distribution Plan is of a type known as a "compensation" plan
because payments are made for services rendered to the Trust with respect to
Class IB shares regardless of the level of expenditures by the Distributors.
The Trustees will, however, take into account such expenditures for purposes of
reviewing operations under either the Class IB Distribution Plan and in
connection with their annual consideration of the Class IB Distribution Plan's
renewal. The Distributors have indicated that they expect their expenditures to
include, without limitation: (a) the printing and mailing of Trust
prospectuses, statements of additional information, any supplements thereto and
shareholder reports for prospective Contract owners with respect to the Class
IB shares of the Trust; (b) those relating to the development, preparation,
printing and mailing of advertisements, sales literature and other promotional
materials describing and/or relating to the Class IB shares of the Trust; (c)
holding seminars and sales meetings designed to promote the distribution of
Trust Class IB shares; (d) obtaining information and providing explanations to
wholesale and retail distributors of Contracts regarding Trust investment
objectives and policies and other information about the Trust and its
Portfolios, including the performance of the Portfolios; (e) training sales
personnel regarding the Class IB shares of the Trust; and (f) financing any
other activity that the Distributors determine is primarily intended to result
in the sale of Class IB shares.
52
<PAGE>
The Distributors for each class of shares will pay all fees and expenses in
connection with their respective qualification and registration as a broker or
dealer under federal and state laws. In the capacity of agent, each Distributor
currently offers shares of each Portfolio on a continuous basis to the separate
accounts of insurance companies offering the Contracts in all states in which
the Portfolio or the Trust may from time to time be registered or where
permitted by applicable law. AXA Advisors also serves as the Distributor for
shares of the Trust to the Equitable Plan. Each Distribution Agreement provides
that the Distributors shall accept orders for shares at net asset value without
sales commission or load being charged. The Distributors have made no firm
commitment to acquire shares of any Portfolio.
A description of the Class IB Distribution Plan with respect to the Class IB
shares and related services and fees thereunder is provided in the Prospectus
for the Class IB 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.
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:
53
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION FEE DISTRIBUTION FEE TOTAL
PORTFOLIO PAID TO AXA ADVISORS PAID TO EDI DISTRIBUTION FEES
- ----------------------------------------------------- ---------------------- ------------------ ------------------
<S> <C> <C> <C>
Alliance Common Stock ............................... $1,479,937 $1,482,881 $2,962,818
Alliance Conservative Investors ..................... $ 140,856 $ 0 $ 140,856
Alliance Equity Index ............................... $ 18,163 $ 18 $ 18,181
Alliance Global ..................................... $ 142,582 $ 34,120 $ 176,702
Alliance Growth and Income .......................... $ 450,856 $ 0 $ 450,856
Alliance Growth Investors ........................... $ 288,343 $ 48,694 $ 337,037
Alliance High Yield ................................. $ 172,716 $ 381,059 $ 553,775
Alliance Intermediate Government Securities ......... $ 100,649 $ 0 $ 100,649
Alliance International .............................. $ 25,261 $ 0 $ 25,261
Alliance Money Market ............................... $ 381,905 $ 630,827 $1,012,732
Alliance Quality Bond ............................... $ 612 $ 0 $ 612
Alliance Small Cap Growth ........................... $ 86,581 $ 197,833 $ 284,414
BT Equity 500 Index ................................. $ 300,769 $ 780,411 $1,081,180
BT International Equity Index ....................... $ 24,691 $ 134,928 $ 159,619
BT Small Company Index .............................. $ 21,053 $ 83,854 $ 104,908
Calvert Socially Responsible ........................ $ 1,861 $ 0 $ 1,861
Capital Guardian U.S. Equity ........................ $ 12,761 $ 40,399 $ 53,160
Capital Guardian International ...................... $ 12,403 $ 24,886 $ 37,289
Capital Guardian Research ........................... $ 12,073 $ 18,569 $ 30,642
EQ/Aggressive Stock ................................. $ 220,153 $ 238,459 $ 458,612
EQ/Balanced ......................................... $ 17,802 $ 0 $ 17,802
EQ/Alliance Premier Growth .......................... $ 144,448 $ 103,105 $ 247,633
EQ/Evergreen ........................................ $ 3,114 $ 3,532 $ 6,647
EQ/Evergreen Foundation ............................. $ 2,225 $ 9,048 $ 11,272
EQ/Putnam Balanced .................................. $ 239,443 $ 0 $ 239,443
EQ/Putnam Growth & Income Value ..................... $ 390,116 $ 954,060 $1,344,176
EQ/Putnam International Equity ...................... $ 47 $ 484,191 $ 484,238
EQ/Putnam Investors Growth .......................... $ 81 $ 669,259 $ 669,339
JPM Core Bond ....................................... $ 0 $ 327,721 $ 327,721
Lazard Large Cap Value .............................. $ 1 $ 263,501 $ 263,502
Lazard Small Cap Value .............................. $ 248 $ 150,210 $ 150,457
Mercury Basic Value Equity .......................... $ 410,876 $ 176,675 $ 587,551
Mercury World Strategy .............................. $ 58,298 $ 18,203 $ 76,501
MFS Emerging Growth Companies ....................... $1,522,918 $ 557,262 $2,080,181
MFS Growth with Income .............................. $ 8,783 $ 98,062 $ 106,846
MFS Research ........................................ $ 632,018 $ 684,220 $1,316,238
Morgan Stanley Emerging Markets Equity .............. $ 153,012 $ 56,766 $ 209,779
T. Rowe Price Equity Income ......................... $ 663,673 $ 0 $ 663,673
T. Rowe Price International Stock ................... $ 396,064 $ 0 $ 396,064
Warburg Pincus Small Company Value .................. $ 370,016 $ 0 $ 370,016
</TABLE>
54
<PAGE>
BROKERAGE ALLOCATION AND OTHER STRATEGIES
BROKERAGE COMMISSIONS
The Portfolios are charged for securities brokers' commissions, transfer taxes
and similar fees relating to securities transactions. The Manager and each of
the Advisers, as appropriate, seek to obtain the best net price and execution
on all orders placed for the Portfolios, considering all the circumstances
except to the extent they may be permitted to pay higher commissions as
described below.
It is expected that securities will ordinarily be purchased in the primary
markets, whether over-the-counter or listed, and that listed securities may be
purchased in the over-the-counter market if that market is deemed the primary
market.
Transactions on stock exchanges involve the payment of brokerage commissions.
In transactions on stock exchanges in the United States, these commissions are
negotiated, whereas on many foreign stock exchanges these commissions are
fixed. However, brokerage commission rates in certain countries in which the
Portfolios may invest may be discounted for certain large domestic and foreign
investors such as the Portfolios. A number of foreign banks and brokers will be
used for execution of each Portfolio's portfolio transactions. In the case of
securities traded in the foreign and domestic over-the-counter markets, there
is generally no stated commission, but the price usually includes an
undisclosed commission or mark-up. In underwritten offerings, the price
generally includes a disclosed fixed commission or discount.
The Manager and Advisers may, as appropriate, in the allocation of brokerage
business, take into consideration research and other brokerage services
provided by brokers and dealers to Equitable, the Manager or Advisers. The
research services include economic, market, industry and company research
material. Based upon an assessment of the value of research and other brokerage
services provided, proposed allocations of brokerage for commission
transactions are periodically prepared internally. In addition, the Manager and
Advisers may allocate brokerage business to brokers and dealers that have made
or are expected to make significant efforts in facilitating the distribution of
the Trust's shares.
Commissions charged by brokers that provide research services may be somewhat
higher than commissions charged by brokers that do not provide research
services. As permitted by Section 28(e) of the 1934 Act and by policies adopted
by the Trustees, the Manager and Advisers may cause the Trust to pay a
broker-dealer that provides brokerage and research services to the Manager and
Advisers an amount of commission for effecting a securities transaction for the
Trust in excess of the commission another broker-dealer would have charged for
effecting that transaction.
The Manager and Advisers do not engage brokers and dealers whose commissions
are believed to be unreasonable in relation to brokerage and research services
provided. The overall reasonableness of commissions paid will be evaluated by
rating brokers on such general factors as execution capabilities, quality of
research (that is, quantity and quality of information provided, diversity of
sources utilized, nature and frequency of communication, professional
experience, analytical ability and professional stature of the broker) and
financial standing, as well as the net results of specific transactions, taking
into account such factors as price, promptness, size of order and difficulty of
execution. The research services obtained will, in general, be used by the
Manager and Advisers for the benefit of all accounts for which the responsible
party makes investment decisions. The receipt of research services from brokers
will tend to reduce the Manager's and Advisers' expenses in managing the
Portfolios.
The Manager, subject to seeking the most favorable price and best execution and
in compliance with the Conduct Rules of the National Association of Securities
Dealers, Inc., may consider sales of shares of the Trust as a factor in the
selection of broker-dealers. The Trust may direct the Manager to cause Advisers
to effect securities transactions through broker-dealers in a manner that would
help to generate resources to (i) pay the cost of certain expenses which the
Trust is required to pay or for which the Trust is required to arrange payment
pursuant to the Management Agreement ("Trust Expenses"); or (ii) finance
activities that are primarily intended to result in the sale of Trust shares.
At the discretion of the Board of Trustees, such resources may be used to pay
or cause the payment of Trust Expenses or may be used to finance activities
that are primarily intended to result in the sale of Trust shares.
55
<PAGE>
During the years ended December 31, 1997, 1998 and 1999, respectively, the
Portfolios paid the amounts indicated in brokerage commissions:
FISCAL YEAR ENDED DECEMBER 31, 1997*
<TABLE>
<CAPTION>
PORTFOLIO BROKERAGE COMMISSIONS PAID
- ---------------------------------------------------- ---------------------------
<S> <C>
Mercury Basic Value Equity ...................... $ 75,654
Mercury World Strategy .......................... $ 43,547
MFS Emerging Growth Companies ................... $146,321
MFS Research .................................... $146,977
EQ/Putnam Balanced .............................. $ 15,797
EQ/Putnam Growth & Income Value ................. $109,815
EQ/Putnam International Equity .................. $164,293
EQ/Putnam Investors Growth ...................... $ 25,284
T. Rowe Price Equity Income ..................... $ 67,627
T. Rowe Price International Stock ............... $244,072
Warburg Pincus Small Company Value .............. $220,138
Morgan Stanley Emerging Markets Equity .......... $ 64,176
</TABLE>
- ----------
* Except for Morgan Stanley Emerging Markets Equity Portfolio, each of the
Portfolios above commenced operations on May 1, 1998. Morgan Stanley
Emerging Markets Equity Portfolio commenced operations on August 20,
1997. The BT Equity 500 Index, BT International Equity Index, BT Small
Company Index, JPM Core Bond, Lazard Large Cap Value and Lazard Small Cap
Portfolios are not included in the above table because they had no
operations during the fiscal year ended December 31, 1997 except for the
issuance of Class IB shares.
CALENDAR YEAR ENDED DECEMBER 31, 1998*
<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
JPM Core Bond ................................... $ 7,380
Lazard Large Cap Value .......................... $ 95,425
Lazard Small Cap Value .......................... $ 79,393
</TABLE>
- ----------
* The EQ/Aggressive Stock Portfolio, EQ/Balanced Portfolio, Alliance Common
Stock Portfolio, Alliance Conservative Investors Portfolio, Alliance
Equity Index Portfolio, Alliance Global Portfolio, Alliance Growth and
Income Portfolio, Alliance Growth Investors Portfolio, Alliance High
Yield
56
<PAGE>
Portfolio, Alliance Intermediate Government Securities Portfolio, Alliance
International Portfolio, Alliance Money Market Portfolio, Alliance Quality
Bond Portfolio, Alliance Small Cap Growth Portfolio, EQ/Evergreen
Foundation, EQ/Evergreen, MFS Growth with Income, EQ/Alliance Premier
Growth, Capital Guardian Research, Capital Guardian U.S. Equity, Capital
Guardian International and Calvert Socially Responsible Portfolios did not
pay any brokerage commissions during the year ended December 31, 1998.
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
JPM 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 ...................... $ 4,063
Alliance Equity Index ................................ $ 1,811,114
Alliance Global ...................................... $ 5,738,044
Alliance Growth and Income ........................... $ 1,966,341
Alliance Growth Investors ............................ $ 4,400,655
Alliance High Yield .................................. $ 66,504
Alliance Intermediate Government Securities .......... $ 4,063
Alliance International ............................... $ 1,811,114
Alliance Money Market ................................ $ 0
Alliance Quality Bond ................................ $ 0
Alliance Small Cap Growth ............................ $ 2,143,273
EQ/Evergreen Foundation .............................. $ 33,763
EQ/Evergreen ......................................... $ 12,983
MFS Growth with Income ............................... $ 132,885
EQ/Alliance Premier Growth ........................... $ 426,324
Capital Guardian Research ............................ $ 39,924
Capital Guardian U.S. Equity ......................... $ 84,692
Capital Guardian International ....................... $ 70,257
Calvert Socially Responsible ......................... $ 2,113
</TABLE>
57
<PAGE>
- ----------
* The EQ/Alliance Premier Growth, Capital Guardian Research, Capital
Guardian U.S. Equity, and Capital Guardian International Portfolios
commenced operations on April 30, 1999. The Calvert Socially Responsible
Portfolio commenced operations on August 30, 1999. The EQ/Aggressive
Stock, EQ/Balanced, Alliance Common Stock, Alliance Conservative
Investors, Alliance Equity Index, Alliance Global, Alliance Growth and
Income, Alliance Growth Investors, Alliance High Yield, Alliance
Intermediate Government Securities, Alliance International, Alliance
Money Market, Alliance Quality Bond, and Alliance Small Cap Growth
Portfolios commenced operations on October 18, 1999.
BROKERAGE TRANSACTIONS WITH AFFILIATES
Equitable and its indirect corporate parent, AXA Financial, Inc., currently own
approximately 72% of Donaldson, Lufkin & Jenrette, Inc. ("DLJ"). As a result,
DLJ is considered to be an affiliate of Equitable under the 1940 Act. A DLJ
subsidiary, Donaldson, Lufkin & Jenrette Securities Corporation, is one of the
nation's largest investment banking and securities firms. Another DLJ
subsidiary, Autranet, Inc., is a securities broker that markets independently
originated research to institutions. Through the Pershing Division of
Donaldson, Lufkin & Jenrette Securities Corporation, DLJ supplies security
execution and clearance services to financial intermediaries including
broker-dealers and banks. To the extent permitted by law, the Trust may engage
in securities and other transactions with those entities or may invest in
shares of the investment companies with which those entities have affiliations.
T. Rowe Price and Price Fleming, the Advisers to the T. Rowe Price
International Stock and T. Rowe Price Equity Income Portfolios, may execute
portfolio transactions through certain affiliates of Price Fleming and Jardine
Fleming, which are persons indirectly related to the Advisers, acting as agent
in accordance with procedures established by the Trust's Board of Trustees.
Mercury, the Adviser to the Mercury World Strategy and Mercury Basic Value
Equity Portfolios, may execute portfolio transactions through certain
affiliates of Mercury. MSAM, the Adviser to the Morgan Stanley Emerging Markets
Equity Portfolio, may execute portfolio transactions through certain affiliates
of MSAM. LAM, the Adviser to the Lazard Large Cap Value and Lazard Small Cap
Value Portfolios, may execute portfolio transactions through certain affiliates
of LAM. J.P. Morgan, the Adviser to the JPM 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, Alliance Common Stock Portfolio, Alliance
Conservative Investors Portfolio, Alliance Equity Index Portfolio, Alliance
Global Portfolio, Alliance Growth and Income Portfolio, Alliance Growth
Investors Portfolio, Alliance High Yield Portfolio, Alliance Intermediate
Government Securities Portfolio, Alliance International Portfolio, Alliance
Money Market Portfolio, Alliance Quality Bond Portfolio, Alliance Small Cap
Growth Portfolio, and an Adviser to the EQ/Aggressive Stock Portfolio and
EQ/Balanced Portfolio, may execute portfolio transactions with certain
affiliates of Alliance, including DLJ and the Pershing Division of Donaldson,
Lufkin & Jenrette Securities Corporation. Capital Guardian, the Adviser to the
Capital Guardian Research Portfolio, the Capital Guardian U.S. Equity Portfolio
and the Capital Guardian International Portfolio, and an Adviser to the
EQ/Balanced Portfolio, does not have an affiliated broker through which it
would execute portfolio transactions. Calvert, an Adviser to the Calvert
Socially Responsible Portfolio, may execute portfolio transactions through
certain affiliates of Calvert, including Ameritas Investment Corporation and
The
58
<PAGE>
Advisors Group. Brown Capital, an Adviser to the Calvert Socially Responsible
Portfolio, does not have an affiliated broker through which it would execute
portfolio transactions.
To the extent permitted by law, the Trust may engage in brokerage transactions
with brokers that are affiliates of the Manager and Advisers, with brokers who
are affiliates of such brokers, or with unaffiliated brokers who trade or clear
through affiliates of the Manager and Advisers. The 1940 Act generally
prohibits the Trust from engaging in principal securities transactions with
brokers that are affiliates of the Manager and Advisers or affiliates of such
brokers, unless pursuant to an exemptive order from the SEC. The Trust may
apply for such exemptive relief. The Trust has adopted procedures, prescribed
by the 1940 Act, which are reasonably designed to provide that any commissions
or other remuneration it pays to brokers that are affiliates of the Manager and
brokers that are affiliates of an Adviser to a Portfolio for which that Adviser
provides investment advice do not exceed the usual and customary broker's
commission. In addition, the Trust will adhere to the requirements under the
1934 Act governing floor trading. Also, because of securities law limitations,
the Trust will limit purchases of securities in a public offering, if such
securities are underwritten by brokers that are affiliates of the Manager and
Advisers or their affiliates.
During the years ended December 31, 1997, 1998 and 1999, respectively, the
following Portfolios paid the amounts indicated to the affiliated
broker-dealers of the Manager or affiliates of the Advisers to each Portfolio.
FISCAL YEAR ENDED DECEMBER 31, 1997*
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF PERCENTAGE OF
AFFILIATED BROKERAGE TOTAL BROKERAGE TRANSACTIONS (BASED
PORTFOLIO BROKER-DEALER COMMISSIONS PAID COMMISSIONS ON DOLLAR AMOUNTS)
- ------------------------ --------------------------------- ------------------ ----------------- --------------------
<S> <C> <C> <C> <C>
Mercury Basic Value Donaldson, Lufkin & $1,444 1.91% 1.48%
Equity Jenrette Securities
Corporation ("DLJ")
Merrill Lynch, Pierce Fenner $7,984 10.55% 10.93%
& Smith Incorporated
("Merrill Lynch")
Mercury World Strategy DLJ $ 166 0.38% 0.74%
Merrill Lynch $2,622 6.02% 5.72%
MFS Emerging Growth Pershing Trading Company, $ 72 0.05% 0.05%
Companies L.P. ("Pershing")
EQ/Putnam Balanced Equico Securities Corp. $ 75 0.47% 0.33%
EQ/Putnam Growth & Equico Securities Corporation $ 363 0.33% 0.23%
Income Value
T. Rowe Price Equity DLJ $ 694 1.03% 0.55%
Income
T. Rowe Price Jardine Fleming Securities Ltd. $ 454 0.19% 0.18%
International Stock
Robert Fleming Securities Ltd. $2,210 0.91% 1.29%
Fleming Martin Limited $ 69 0.03% 0.04%
</TABLE>
- ----------
* Except for Morgan Stanley Emerging Markets Equity Portfolio, each of the
Portfolios above 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,
59
<PAGE>
BT Small Company Index, JPM Core Bond, Lazard Large Cap Value, Lazard Small
Cap Value, Portfolios did not pay any brokerage commissions during the
fiscal year ended December 31, 1997.
CALENDAR YEAR ENDED DECEMBER 31, 1998*
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF PERCENTAGE OF
AFFILIATED BROKERAGE TOTAL BROKERAGE TRANSACTIONS (BASED
PORTFOLIO BROKER-DEALER COMMISSIONS PAID COMMISSIONS ON DOLLAR AMOUNTS)
- ------------------------- ---------------------------- ------------------ ----------------- --------------------
<S> <C> <C> <C> <C>
Mercury Basic Value DLJ $14,104 3.55% 4.43%
Equity
Merrill Lynch and Co. $13,238 3.33% 3.15%
Mercury World Strategy DLJ $ 2,260 2.52% 3.40%
Merrill Lynch and Co. $ 5,171 5.76% 7.31%
MFS Research DLJ $ 408 .07% .07%
Pershing $ 48 .01% .01%
MFS Emerging Growth Pershing $ 600 .10% .12%
Companies
T. Rowe Price Equity DLJ $ 3,544 2.47% 1.53%
Income
T. Rowe Price Jardine Fleming Securities $ 1,978 1.10% .72%
International Stock Ltd.
Robert Fleming Co. $ 5,249 2.92% 3.41%
Ord Minnett -- New $ 326 .18% .13%
Zealand -- Ltd.
Ord Minnett Group, Ltd. $ 155 .09% .06%
DLJ $ 165 .09% .14%
Morgan Stanley Emerging Morgan Stanley & Co. $ 596 .24% .18%
Markets Equity
Lazard Small Cap Value DLJ $ 150 .19% .15%
</TABLE>
- ----------
* The EQ/Aggressive Stock, EQ/Balanced, Alliance Common Stock, Alliance
Conservative Investors, Alliance Equity Index, Alliance Global, Alliance
Growth and Income, Alliance Growth Investors, Alliance High Yield,
Alliance Intermediate Government Securities, Alliance International,
Alliance Money Market, Alliance Quality Bond, Alliance Small Cap Growth,
EQ/Evergreen Foundation, EQ/Evergreen, MFS Growth with Income,
EQ/Alliance Premier Growth, Capital Guardian Research, Capital Guardian
U.S. Equity, Capital Guardian International, and Calvert Socially
Responsible Portfolios did not pay any brokerage commissions during the
year ended December 31, 1998.
60
<PAGE>
CALENDAR YEAR ENDED DECEMBER 31, 1999*
<TABLE>
<CAPTION>
PERCENTAGE
AGGREGATE PERCENTAGE OF OF TRANSACTIONS
AFFILIATED BROKERAGE TOTAL BROKERAGE (BASED ON
PORTFOLIO BROKER-DEALER COMMISSIONS PAID COMMISSIONS DOLLAR AMOUNTS)
- ------------------------- ---------------------------- ------------------ ----------------- ----------------
<S> <C> <C> <C> <C>
Mercury Basic Value DLJ $19,906 3.15% .93%
Equity
Merrill Lynch $21,572 3.41% .93%
Mercury World Strategy DLJ $ 386 .67% .17%
Merrill Lynch $ 4,852 8.41% 1.65%
T. Rowe Price Equity DLJ $ 6,751 3.34% 1.12%
Income
T. Rowe Price Jardine Fleming Securities $ 1,972 1.73% 1.17%
International Stock Ltd.
Robert Fleming Co. $ 3,022 1.13% 1.77%
DLJ $ 1,132 .65% .77%
Morgan Stanley Emerging DLJ $ 6,812 .80% .76%
Markets Equity Morgan Stanley & Co. $11,109 1.30% .90%
DLJ $ 6,812 .80% .76%
EQ/Putnam Growth & DLJ $ 920 .10% .05%
Income
EQ/Putnam Balanced DLJ $ 1,145 .86% .25%
Evergreen Foundation DLJ $ 13 .04% .07%
Lieber & Company $12,510 37.05% 50.02%
Evergreen DLJ $ 8 .06% .06%
Lieber & Company $11,855 91.31% 47.75%
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.
61
<PAGE>
PURCHASE AND PRICING OF SHARES
The Trust will offer and sell its shares at each Portfolio's net asset value
per share, which will be determined in the manner set forth below.
The net asset value of the shares of each class of a Portfolio of the Trust
will be determined once daily, immediately after the declaration of dividends,
if any, at the close of business on each business day as defined below. The net
asset value per share of each class of a Portfolio will be computed by dividing
the sum of the investments held by that Portfolio applicable to that class,
plus any cash or other assets, minus all liabilities, by the total number of
outstanding shares of that class of the Portfolio at such time. All expenses
borne by the Trust and each of its Classes, will be accrued daily.
The net asset value per share of each Portfolio will be determined and computed
as follows, in accordance with generally accepted accounting principles, and
consistent with the 1940 Act:
o The assets belonging to each Portfolio will include (i) all
consideration received by the Trust for the issue or sale of shares of
that particular Portfolio, together with all assets in which such
consideration is invested or reinvested, (ii) all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, (iii) any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, and (iv) "General Items", if any, allocated to that Portfolio.
"General Items" include any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable
as belonging to any particular Portfolio. General Items will be allocated
as the Trust's Board of Trustees considers fair and equitable.
o The liabilities belonging to each Portfolio will include (i) the
liabilities of the Trust in respect of that Portfolio, (ii) all expenses,
costs, changes and reserves attributable to that Portfolio, and (iii) any
general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular
Portfolio which have been allocated as the Trust's Board of Trustees
considers fair and equitable.
The value of each Portfolio will be determined at the close of business on each
"business day." Normally, this would be each day that the New York Stock
Exchange is open and would include some federal holidays. For stocks and
options, the close of trading is 4:00 p.m. and 4:15 p.m. Eastern Time,
respectively; for bonds it is the close of business in New York City, and for
foreign securities (other than ADRs) it is the close of business in the
applicable foreign country, with exchange rates determined at 12:00 p.m.
Eastern Time.
Values are determined according to accepted accounting practices and all laws
and regulations that apply. The assets of each Portfolio are valued as follows:
o Stocks listed on national securities exchanges and certain
over-the-counter issues traded on the Nasdaq national market system are
valued at the last sale price, or, if there is no sale, at the latest
available bid price. Other unlisted stocks are valued at their last sale
price or, if there is no reported sale during the day, at a bid price
estimated by a broker.
o Foreign securities not traded directly, or in ADRs or similar form in
the United States, are valued at representative quoted prices in the
currency of the country of origin. Foreign currency is converted into
United States dollar equivalent at current exchange rates.
o United States Treasury securities and other obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities, are valued at representative quoted prices.
o Long-term corporate bonds may be valued on the basis of prices provided
by a pricing service when such prices are believed to reflect the fair
market value of such securities. The prices provided by a pricing service
take into account many factors, including institutional size, trading in
similar groups of securities and any developments related to specific
securities; however, when such prices are not available, such bonds are
valued at a bid price estimated by a broker.
62
<PAGE>
o Short-term debt securities in the Portfolios, other than the Alliance
Money Market Portfolio, which mature in 60 days or less are valued at
amortized cost, which approximates market value. Short-term debt
securities in such Portfolios which mature in more than 60 days are
valued at representative quoted prices. Securities held by the Alliance
Money Market Portfolio are valued at prices based on equivalent yields or
yield spreads.
o Convertible preferred stocks listed on national securities exchanges
are valued as of their last sale price or, if there is no sale, at the
latest available bid price.
o Convertible bonds, and unlisted convertible preferred stocks, are
valued at bid prices obtained from one or more of the major dealers in
such bonds or stocks. Where there is a discrepancy between dealers,
values may be adjusted based on recent premium spreads to the underlying
common stocks. Convertible bonds may be matrix-priced based upon the
conversion value to the underlying common stocks and market premiums.
o Mortgage-backed and asset-backed securities are valued at prices
obtained from a bond pricing service where available, or at a bid price
obtained from one or more of the major dealers in such securities. If a
quoted price is unavailable, an equivalent yield or yield spread quotes
will be obtained from a broker and converted to a price.
o Purchased options, including options on futures, are valued at their
last bid price. Written options are valued at their last asked price.
o Futures contracts are valued as of their last sale price or, if there
is no sale, at the latest available bid price.
o Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided are valued in good
faith by the valuation committee of the Board of Trustees using its best
judgment.
The market value of a put or call option will usually reflect, among other
factors, the market price of the underlying security.
When the Trust writes a call option, an amount equal to the premium received by
the Trust is included in the Trust's financial statements as an asset and an
equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option written.
When an option expires on its stipulated expiration date or the Trust enters
into a closing purchase or sale transaction, the Trust realizes a gain (or
loss) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is extinguished. When an option is
exercised, the Trust realizes a gain or loss from the sale of the underlying
security, and the proceeds of sale are increased by the premium originally
received, or reduced by the price paid for the option.
The Manager and Advisers may, from time to time, under the general supervision
of the Board of Trustees or its valuation committee, utilize the services of
one or more pricing services available in valuing the assets of the Trust. In
addition, there may be occasions when a different pricing provider or
methodology is used. In addition, there may be occasions where a different
pricing provider or methodology is used. The Manager and Advisers will
continuously monitor the performance of these services.
REDEMPTION OF SHARES
The Trust may suspend redemption privileges or postpone the date of payment on
shares of the Portfolios for more than seven days during any period (i) when
the New York Stock Exchange is closed or trading on the New York Stock Exchange
is restricted as determined by the SEC, (ii) when an emergency exists, as
defined by the SEC, which makes it not reasonably practicable for a Portfolio
to dispose of securities owned by it or fairly to determine the value of its
assets, or (iii) as the SEC may otherwise permit.
The value of the shares on redemption may be more or less than the
shareholder's cost, depending upon the market value of the portfolio securities
at the time of redemption.
63
<PAGE>
TAXATION
Each Portfolio is treated for federal income tax purposes as a separate
taxpayer. The Trust intends that each Portfolio shall qualify each year and
elect to be treated as a regulated investment company under Subchapter M of the
Code. Such qualification does not involve supervision of management or
investment practices or policies by any governmental agency or bureau.
As a regulated investment company, each Portfolio will not be subject to
federal income or excise tax on any of its net investment income or net
realized capital gains which are timely distributed to shareholders under the
Code. A number of technical rules are prescribed for computing net investment
income and net capital gains. For example, dividends are generally treated as
received on the ex-dividend date. Also, certain foreign currency losses and
capital losses arising after October 31 of a given year may be treated as if
they arise on the first day of the next taxable year.
A Portfolio investing in foreign securities or currencies may be subject to
foreign taxes which could reduce the investment performance of such Portfolio.
However, if foreign securities comprise more than 50% of the year-end value of
a Portfolio, the Portfolio may elect to pass through such foreign taxes as a
deemed dividend to shareholders. In such a case the shareholder and not the
Portfolio would be entitled to claim a federal tax deduction or credit for
foreign taxes, as appropriate. The deduction or credit will not necessarily
result in a direct or immediate benefit to Contract owners.
To qualify for treatment as a regulated investment company, a Portfolio must,
among other things, derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock or securities or foreign
currencies, or other income derived with respect to its business of investing.
For purposes of this test, gross income is determined without regard to losses
from the sale or other dispositions of stock or securities.
In addition, the Secretary of the Treasury has regulatory authority to exclude
from qualifying income described above foreign currency gains which are not
"directly related" to a regulated investment company's "principal business of
investing" in stock, securities or related options or futures. The Secretary of
the Treasury has not to date exercised this authority.
Generally, in order to avoid a 4% nondeductible excise tax, each Portfolio must
distribute to its shareholders during the calendar year the following amounts:
o 98% of the Portfolio's ordinary income for the calendar year;
o 98% of the Portfolio's capital gain net income (all capital gains, both
long-term and short-term, minus all such capital losses), all computed as
if the Portfolio were on a taxable year ending October 31 of the year in
question and beginning the previous November 1; and
o any undistributed ordinary income or capital gain net income for the
prior year.
The excise tax generally is inapplicable to any regulated investment company
whose sole shareholders are either tax-exempt pension trusts or separate
accounts of life insurance companies funding variable contracts. Although each
Portfolio believes that it is not subject to the excise tax, the Portfolios
intend to make the distributions required to avoid the imposition of such a
tax.
Because the Trust is used to fund non-qualified Contracts, each Portfolio must
meet the diversification requirements imposed by the Code or these Contracts
will fail to qualify as life insurance and annuities. In general, for a
Portfolio to meet the investment diversification requirements of Subchapter L
of the Code, Treasury regulations require that no more than 55% of the total
value of the assets of the Portfolio may be represented by any one investment,
no more than 70% by two investments, no more than 80% by three investments and
no more than 90% by four investments. Generally, for purposes of the
regulations, all securities of the same issuer are treated as a single
investment. In the context of United States Government securities (including
any security that is issued, guaranteed or insured by the United States or an
instrumentality of the United States) each United States Government agency or
instrumentality is treated as a separate issuer. Compliance with the
regulations is tested on the first day of each calendar year quarter. There is
a thirty (30) day period after the end of each calendar year quarter in which
to cure any non-compliance.
64
<PAGE>
PORTFOLIO PERFORMANCE
Returns and yields shown do not reflect insurance company charges and fees
applicable to the Contracts.
ALLIANCE MONEY MARKET PORTFOLIO YIELD
The Alliance Money Market Portfolio calculates yield information for seven-day
periods and may illustrate that information in advertisements or sales
materials. The seven-day current yield calculation is based on a hypothetical
shareholder account with one share at the beginning of the period. To determine
the seven-day rate of return, the net change in the share value is computed by
subtracting the share value at the beginning of the period from the share value
(exclusive of capital changes) at the end of the period. The net change is
divided by the share value at the beginning of the period to obtain the base
period rate of return. This seven-day base period return is then multiplied by
365/7 to produce an annualized current yield figure carried to the nearest
one-hundredth of one percent.
Realized capital gains or losses and unrealized appreciation or depreciation of
the Portfolio are excluded from this calculation. The net change in share
values also reflects all accrued expenses of the Alliance Money Market
Portfolio as well as the value of additional shares purchased with dividends
from the original shares and any additional shares.
The effective yield is obtained by adjusting the current yield to give effect
to the compounding nature of the Alliance Money Market Portfolio's investments,
as follows: The unannualized base period return is compounded by adding one to
the base period return, raising the sum to a power equal to 365 divided by 7,
and subtracting one from the result--i.e., effective yield = [(base period
return + 1)365/7]-1.
Alliance Money Market Portfolio yields will fluctuate daily. Accordingly,
yields for any given period are not necessarily representative of future
results. Yield is a function of the type and quality of the instruments in the
Alliance Money Market Portfolio, maturities and rates of return on investments,
among other factors. In addition, the value of shares of the Alliance Money
Market Portfolio will fluctuate and not remain constant.
The Alliance Money Market Portfolio yield may be compared with yields of other
investments. However, it should not be compared to the return of fixed rate
investments which guarantee rates of interest for specified periods. The yield
also should not be compared to the yield of money market funds made available
to the general public because their yields usually are calculated on the basis
of a constant $1 price per share and they pay out earnings in dividends which
accrue on a daily basis. Investment income of the Alliance Money Market
Portfolio, including any realized gains as well as accrued interest, is not
paid out in dividends but is reflected in the share value. The Alliance Money
Market Portfolio yield also does not reflect insurance company charges and fees
applicable to Contracts.
COMPUTATION OF TOTAL RETURN
Each Portfolio may provide average annual total return information calculated
according to a formula prescribed by the SEC. According to that formula,
average annual total return figures represent the average annual compounded
rate of return for the stated period. Average annual total return quotations
reflect the percentage change between the beginning value of a static account
in the Portfolio and the ending value of that account measured by the then
current net asset value of that Portfolio assuming that all dividends and
capital gains distributions during the stated period were invested in shares of
the Portfolio when paid. Total return is calculated by finding the average
annual compounded rates of return of a hypothetical investment that would
equate the initial amount invested to the ending redeemable value of such
investment, according to the following formula:
T = (ERV/P)(1/n)
where "T" equals average annual total return; where "ERV", the ending
redeemable value, is the value at the end of the applicable period of a
hypothetical $1,000 investment made at the beginning of the applicable period;
where "P" equals a hypothetical initial investment of $1,000; and where "n"
equals the number of years.
65
<PAGE>
Each Portfolio's total return will vary from time to time depending upon market
conditions, the composition of each Portfolio's investment portfolio and
operating expenses of the Trust allocated to each Portfolio. Total return
should also be considered relative to changes in the value of a Portfolio's
shares and to the relative risks associated with the investment objectives and
policies of the Portfolios. These total return figures do not reflect insurance
company expenses and fees applicable to the Contracts. At any time in the
future, total return may be higher or lower than in the past and there can be
no assurance that any historical results will continue.
NON-STANDARD PERFORMANCE
In addition to the performance information described above, each Portfolio may
provide total return information with respect to the Portfolios for designated
periods, such as for the most recent six months or most recent twelve months.
This total return information is computed as described under "Computation of
Total Return" above except that no annualization is made.
CODE OF ETHICS
The Trust, its Manager, its Distributors, and each of its Advisers, have
adopted Codes of Ethics pursuant to Rule 17j-1 under the Investment Company Act
of 1940 (as amended). Each of these Codes of Ethics permits the personnel of
their respective organizations to invest in securities for their own accounts.
A copy of each of the Codes of Ethics are on public file with, and are
available from, the SEC.
OTHER SERVICES
INDEPENDENT ACCOUNTANT
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, serves as the Trust's independent accountants. PricewaterhouseCoopers
LLP is responsible for auditing the annual financial statements of the Trust.
CUSTODIAN
The Chase Manhattan Bank, 1211 Avenue of the Americas, New York, New York 10036
serves as custodian of the Trust's portfolio securities and other assets. Under
the terms of the custody agreement between the Trust and The Chase Manhattan
Bank, The Chase Manhattan Bank maintains and deposits in separate accounts,
cash, securities and other assets of the Portfolios. The Chase Manhattan Bank
is also required, upon the order of the Trust, to deliver securities held by
The Chase Manhattan Bank, and to make payments for securities purchased by the
Trust. The Chase Manhattan Bank has also entered into sub-custodian agreements
with a number of foreign banks and clearing agencies, pursuant to which
portfolio securities purchased outside the United States are maintained in the
custody of these entities.
TRANSFER AGENT
Equitable serves as the transfer agent and dividend disbursing agent for the
Trust. Equitable receives no compensation for providing such services for the
Trust.
COUNSEL
Dechert Price & Rhoads, 1775 Eye Street, N.W. Washington, D.C. 20006, serves as
counsel to the Trust.
Sullivan & Worcester, LLP, 1025 Connecticut Avenue, N.W., Suite 1000,
Washington, D.C. 20036, serves as counsel to the Independent Trustees of the
Trust.
FINANCIAL STATEMENTS
The audited financial statements for the period ended December 31, 1999,
including the financial highlights, appearing in the Trust's Annual Report to
Shareholders, filed electronically with the SEC, are incorporated by reference
and made a part of this document.
66
<PAGE>
APPENDIX A
EQ ADVISORS TRUST
INVESTMENT STRATEGIES SUMMARY
<TABLE>
<CAPTION>
BORROWINGS BORROWINGS
ASSET-BACKED (EMERGENCIES, (LEVERAGING CONVERTIBLE
PORTFOLIO SECURITIES REDEMPTIONS) PURPOSES) SECURITIES FLOATERS(A)
- ----------------------------------- -------------- ----------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
EQ/Aggressive Stock ............... Y Y N Y Y
EQ/Balanced ....................... Y Y N Y Y
Alliance Common Stock ............. Y Y N Y Y
Alliance Conservative Investors ... Y Y N Y Y
Alliance Equity Index ............. N Y N Y Y
Alliance Global ................... Y Y N Y Y
Alliance Growth and Income ........ Y Y N Y Y
Alliance Growth Investors ......... Y Y N Y Y
Alliance High Yield ............... Y Y N Y Y
Alliance Intermediate
Government Securities ............ Y Y N Y Y
Alliance International ............ Y Y N Y Y
Alliance Money Market ............. Y Y N Y Y
Alliance Quality Bond ............. Y Y N Y Y
Alliance Small Cap Growth ......... Y Y N Y Y
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
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
JPM 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 Portfolio ............ N Y-33.3% N Y N
EQ/Evergreen Foundation
Portfolio ........................ N Y-33.3% N Y N
EQ/Alliance Premier Growth
Portfolio ........................ N Y-5.0% N Y N
<PAGE>
<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
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
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
JPM 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 Portfolio ............ N N Y N N N N
EQ/Evergreen Foundation
Portfolio ........................ N N Y Y Y Y Y
EQ/Alliance Premier Growth
Portfolio ........................ N N Y Y Y Y Y
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
BORROWINGS BORROWINGS
ASSET-BACKED (EMERGENCIES, (LEVERAGING CONVERTIBLE
PORTFOLIO SECURITIES REDEMPTIONS) PURPOSES) SECURITIES FLOATERS(A)
- ------------------------------ -------------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Capital Guardian Research
Portfolio ................... N Y-5.0% N Y N
Capital Guardian U.S. Equity
Portfolio ................... N Y-5.0% N Y N
Capital Guardian International
Portfolio ................... N Y-5.0% N Y N
Calvert Socially Responsible
Portfolio ................... Y Y-33.3% N Y Y
<CAPTION>
FOREIGN FOREIGN
FOREIGN CURRENCY CURRENCY OPTIONS
INVERSE BRADY DEPOSITORY CURRENCY FORWARD FUTURES (EXCHANGE
PORTFOLIO FLOATERS(A) BONDS(B) RECEIPTS(B) SPOT TRANS. TRANS. TRANS.(A) TRADED)
- ------------------------------ ------------- ---------- ------------- ------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Guardian Research
Portfolio ................... N N Y N N N N
Capital Guardian U.S. Equity
Portfolio ................... N N Y N N N N
Capital Guardian International
Portfolio ................... N N Y Y Y Y Y
Calvert Socially Responsible
Portfolio ................... Y Y Y Y Y Y Y
</TABLE>
- -------
(A) Considered a derivative security.
(B) Considered a foreign security.
(C) Written options must be "covered."
(D) Certain mortgages are considered derivatives.
(E) May not exceed 15% for temporary or emergency purposes, including to
meet redemptions (otherwise such borrowings may not exceed 5% of
total assets).
A-2
<PAGE>
EQ ADVISORS TRUST
INVESTMENT STRATEGIES SUMMARY (CONTINUED)
<TABLE>
<CAPTION>
FOREIGN CURRENCY
FOREIGN -----------------------------
OPTIONS (WRITTEN, CALL FOREIGN FORWARD HYBRID ILLIQUID
PORTFOLIO (OTC) OPTIONS) SECURITIES COMMITMENTS INSTRUMENTS(A) SECURITIES
- ----------------------------- --------- ---------------- ------------ ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
EQ/Aggressive Stock ......... Y Y Y-20% 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%
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%
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%
JPM Core Bond ............... Y Y Y Y N Y-15%
BT Small Company Index....... N N N Y N Y-15%
BT International Equity
Index ...................... Y Y Y Y N Y-15%
<PAGE>
<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 N 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
T. Rowe Price
International Stock ........ Y N N N N N Y Y
T. Rowe Price Equity
Income ..................... Y Y-10% N N N N Y Y
EQ/Putnam Growth &
Income Value ............... Y Y N N N N Y Y
EQ/Putnam International
Equity ..................... Y Y N N N N Y Y
EQ/Putnam Investors
Growth ..................... Y Y N N N N Y Y
EQ/Putnam Balanced .......... Y Y Y Y N N Y Y
MFS Research ................ Y Y-10% N N N N N N
MFS Emerging Growth
Companies .................. Y Y N N N N Y Y
MFS Growth with Income....... Y Y N N N N Y Y
Morgan Stanley Emerging
Market Equity .............. Y Y Y Y N Y Y Y
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
JPM Core Bond ............... Y N Y Y Y Y Y Y
BT Small Company Index....... Y N N Y N N Y Y
BT International Equity
Index ...................... Y N N Y N N Y Y
</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>
BT Equity 500 Index ........... N N Y Y N Y-15%
EQ/Evergreen Portfolio ........ Y Y Y Y N Y-15%
EQ/Evergreen Foundation
Portfolio .................... N Y Y Y N Y-15%
EQ/Alliance Premier
Growth Portfolio ............. Y Y Y Y N Y-15%
Capital Guardian
Research Portfolio ........... N N Y-15% Y Y-10% Y-15%
Capital Guardian U.S.
Equity Portfolio ............. N N Y Y Y-10% Y-15%
Capital Guardian
International Portfolio ...... Y Y Y Y Y-10% Y-15%
Calvert Socially
Responsible Portfolio ........ Y Y Y-10% Y Y-5% Y-15%
<CAPTION>
INVESTMENT NON-INV.
GRADE GRADE SECURITY
FIXED FIXED LOAN MORTGAGE DIRECT MUNICIPAL FUTURES
PORTFOLIO INCOME INCOME PARTICIPATIONS RELATED(D) MORTGAGES SECURITIES TRANS.(A)
- ------------------------------- ----------- ---------- ---------------- ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BT Equity 500 Index ........... Y N N Y N N Y
EQ/Evergreen Portfolio ........ Y N N N N N Y
EQ/Evergreen Foundation
Portfolio .................... Y Y N Y N N Y
EQ/Alliance Premier
Growth Portfolio ............. Y N N N N N Y
Capital Guardian
Research Portfolio ........... Y N N N N N Y
Capital Guardian U.S.
Equity Portfolio ............. Y N N N N N Y
Capital Guardian
International Portfolio ...... Y N N N N N Y
Calvert Socially
Responsible Portfolio ........ Y Y-20% N N N Y Y
<CAPTION>
SECURITY
OPTIONS
PORTFOLIO TRANS.(C)
- ------------------------------- ----------
<S> <C>
BT Equity 500 Index ........... Y
EQ/Evergreen Portfolio ........ Y
EQ/Evergreen Foundation
Portfolio .................... Y
EQ/Alliance Premier
Growth Portfolio ............. Y
Capital Guardian
Research Portfolio ........... Y
Capital Guardian U.S.
Equity Portfolio ............. Y
Capital Guardian
International Portfolio ...... Y
Calvert Socially
Responsible Portfolio ........ Y
</TABLE>
- -------
(A) Considered a derivative security.
(B) Considered a foreign security.
(C) Written options must be "covered."
(D) Certain mortgages are considered derivatives.
(E) May not exceed 15% for temporary or emergency purposes, including to
meet redemptions (otherwise such borrowings may not exceed 5% of
total assets).
A-4
<PAGE>
EQ ADVISORS TRUST
INVESTMENT STRATEGIES SUMMARY (CONCLUDED)
<TABLE>
<CAPTION>
PASSIVE PAYMENT REAL ESTATE REVERSE
FOREIGN IN-KIND INVESTMENT REPURCHASE REPURCHASE
PORTFOLIO INV. COMP. BONDS TRUSTS AGREEMENTS AGREEMENTS
- ------------------------------------- ------------ --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
EQ/Aggressive Stock ................. Y Y Y Y N
EQ/Balanced ......................... Y Y Y Y N
Alliance Common Stock ............... Y Y Y Y N
Alliance Conservative Investors ..... Y Y Y Y N
Alliance Equity Index ............... Y Y Y N N
Alliance Global ..................... Y Y Y Y N
Alliance Growth and Income .......... Y Y Y Y N
Alliance Growth Investors ........... Y Y Y Y N
Alliance High Yield ................. Y Y Y Y N
Alliance Intermediate
Government Securities .............. Y Y Y Y N
Alliance International .............. Y Y Y Y N
Alliance Money Market ............... Y Y Y Y N
Alliance Quality Bond ............... Y Y Y Y N
Alliance Small Cap Growth ........... Y Y Y Y N
T. Rowe Price International
Stock .............................. Y N N Y Y
T. Rowe Price Equity Income ......... N Y Y Y Y
EQ/Putnam Growth & Income
Value .............................. N Y N Y N
EQ/Putnam International Equity....... Y N N Y N
EQ/Putnam Investors Growth .......... N N N Y N
EQ/Putnam Balanced .................. N Y Y Y N
MFS Research ........................ N N N Y N
MFS Emerging Growth
Companies .......................... N Y N Y N
MFS Growth with Income .............. N N N Y N
Morgan Stanley Emerging
Markets Equity ..................... Y Y Y Y Y
Warburg Pincus Small Company
Value .............................. N N N Y N
Mercury World Strategy .............. N N N Y N
Mercury Basic Value Equity .......... N N N Y N
Lazard Large Cap Value .............. N N Y Y Y
Lazard Small Cap Value .............. N N Y Y N
JPM Core Bond ....................... N Y Y Y Y
BT Small Company Index .............. N N Y Y Y
BT International Equity Index ....... N N Y Y Y
BT Equity 500 Index ................. N N Y Y Y
EQ/Evergreen Portfolio .............. N N N Y Y
EQ/Evergreen Foundation
Portfolio .......................... N N Y Y Y
EQ/Alliance Premier Growth
Portfolio .......................... N N Y Y N
Capital Guardian Research
Portfolio .......................... N N Y Y N
<PAGE>
<CAPTION>
SHORT SALES SMALL ZERO
SECURITIES AGAINST- COMPANY STRUCTURED SWAP U.S. GOV'T COUPON
PORTFOLIO LENDING THE-BOX SECURITIES NOTES(A) TRANS.(A) SECURITIES BONDS
- ------------------------------------- ------------ ------------- ------------ ------------ ----------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
EQ/Aggressive Stock ................. Y-50% Y Y Y Y Y Y
EQ/Balanced ......................... Y-50.0% Y Y Y Y Y Y
Alliance Common Stock ............... Y-50.0% Y Y Y Y Y Y
Alliance Conservative Investors ..... Y-50.0% Y Y Y Y Y Y
Alliance Equity Index ............... Y-50.0% Y Y Y Y Y Y
Alliance Global ..................... Y-50.0% Y Y Y Y Y Y
Alliance Growth and Income .......... Y-50.0% Y Y Y Y Y Y
Alliance Growth Investors ........... Y-50.0% 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-50.0% Y Y Y Y Y Y
Alliance Money Market ............... Y-50.0% Y Y Y N Y Y
Alliance Quality Bond ............... Y-50.0% Y Y Y Y Y Y
Alliance Small Cap Growth ........... Y-50.0% Y Y Y Y Y Y
T. Rowe Price International
Stock .............................. Y - 33.3% Y N N N Y N
T. Rowe Price Equity Income ......... Y - 33.3% Y N N N Y Y
EQ/Putnam Growth & Income
Value .............................. Y - 25.0% N N N N Y Y
EQ/Putnam International Equity....... Y - 25.0% N Y N Y Y N
EQ/Putnam Investors Growth .......... Y - 25.0% N N N Y Y N
EQ/Putnam Balanced .................. Y - 25.0% N Y N N Y Y
MFS Research ........................ Y - 33.3% Y Y N N Y Y
MFS Emerging Growth
Companies .......................... Y - 30.0% N Y N N Y Y
MFS Growth with Income .............. Y - 25.0% N N N N Y Y
Morgan Stanley Emerging
Markets Equity ..................... Y - 33.3% Y Y Y Y Y Y
Warburg Pincus Small Company
Value .............................. Y - 20.0% Y Y N N Y N
Mercury World Strategy .............. Y - 20.0% N N N N Y N
Mercury Basic Value Equity .......... Y - 20.0% N N N N Y N
Lazard Large Cap Value .............. Y - 10.0% N N N N Y N
Lazard Small Cap Value .............. Y - 10.0% N Y N N Y N
JPM Core Bond ....................... Y - 33.3% Y N N Y Y Y
BT Small Company Index .............. Y - 30.0% N Y N N Y N
BT International Equity Index ....... Y - 30.0% N N N Y Y N
BT Equity 500 Index ................. Y - 30.0% N N N N Y N
EQ/Evergreen Portfolio .............. Y - 33.3% Y Y N N Y N
EQ/Evergreen Foundation
Portfolio .......................... Y - 33.3% N N N N Y N
EQ/Alliance Premier Growth
Portfolio .......................... Y - 25.0% N N N N Y N
Capital Guardian Research
Portfolio .......................... Y-33.3% N Y N N Y N
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
PASSIVE PAYMENT REAL ESTATE REVERSE
FOREIGN IN-KIND INVESTMENT REPURCHASE REPURCHASE
PORTFOLIO INV. COMP. BONDS TRUSTS AGREEMENTS AGREEMENTS
- ------------------------------ ------------ --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Capital Guardian U.S. Equity
Portfolio ................... N N Y Y N
Capital Guardian International
Portfolio ................... Y N Y Y N
Calvert Socially Responsible
Portfolio ................... N N Y Y Y
<CAPTION>
SHORT SALES SMALL ZERO
SECURITIES AGAINST- COMPANY STRUCTURED SWAP U.S. GOV'T COUPON
PORTFOLIO LENDING THE-BOX SECURITIES NOTES(A) TRANS.(A) SECURITIES BONDS
- ------------------------------ ------------ ------------- ------------ ------------ ----------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Guardian U.S. Equity
Portfolio ................... Y-33.3% N Y N N Y N
Capital Guardian International
Portfolio ................... Y-33.3% N Y N N Y N
Calvert Socially Responsible
Portfolio ................... Y-33.3% Y Y Y Y Y Y
</TABLE>
- -------
(A) Considered a derivative security.
(B) Considered a foreign security.
(C) Written options must be "covered."
(D) Certain mortgages are considered derivatives.
(E) May not exceed 15% for temporary or emergency purposes, including to
meet redemptions (otherwise such borrowings may not exceed 5% of
total assets).
A-6
<PAGE>
APPENDIX B
DESCRIPTION OF COMMERCIAL PAPER RATINGS
A-1 AND PRIME-1 COMMERCIAL PAPER RATINGS
The rating A-1 (including A-1+) is the highest commercial paper rating assigned
by Standard & Poor's. Commercial paper rated A-1 by Standard & Poor's has the
following characteristics:
o liquidity ratios are adequate to meet cash requirements;
o long-term senior debt is rated "A" or better;
o the issuer has access to at least two additional channels of
borrowing;
o basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances;
o typically, the issuer's industry is well established and the issuer has
a strong position within the industry; and
o the reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2 or A-3. Issues rated A-1 that are
determined by Standard & Poor's to have overwhelming safety characteristics are
designated A-1+.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
o evaluation of the management of the issuer;
o economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain
areas;
o evaluation of the issuer's products in relation to competition and
customer acceptance;
o liquidity;
o amount and quality of long-term debt;
o trend of earnings over a period of ten years;
o financial strength of parent company and the relationships which exist
with the issuer; and
o recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to
meet such obligations.
DESCRIPTION OF BOND RATINGS
Bonds are considered to be "investment grade" if they are in one of the top
four ratings.
Standard & Poor's ratings are as follows:
o Bonds rated AAA have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
o Bonds rated AA have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in
higher rated categories.
o Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in
higher rated categories.
o Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or
B-1
<PAGE>
changing circumstances are more likely to lead to a weakened capacity to
pay interest and repay principal for bonds in this category than in higher
rated categories.
o Debt rated BB, B, CCC, CC or C is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse debt conditions.
o The rating C1 is reserved for income bonds on which no interest is
being paid.
o Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
The ratings from AA to Ccc may be modified by the addition of a plus (+) or
minus (--) sign to show relative standing within the major rating categories.
Moody's ratings are as follows:
o Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
o Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities.
o Bonds which are rated A possess many favorably investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment some time in
the future.
o Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
o Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
o Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
o Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
o Bonds which are rated Ca represent obligations which are speculative to
a high degree. Such issues are often in default or have other marked
shortcomings.
o Bonds which are rated C are the lowest class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies modifiers to each rating classification from Aa through B to
indicate relative ranking within its rating categories. The modifier "1"
indicates that a security ranks in the higher end of its rating category; the
modifier "2" indicates a mid-range ranking and the modifier "3" indicates that
the issue ranks in the lower end of its rating category.
B-2
<PAGE>
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS
(a)(1) Agreement and Declaration of Trust.(1)
(a)(2) Amended and Restated Agreement and Declaration of Trust.(2)
(a)(3) Certificate of Trust.(1)
(a)(4) Certificate of Amendment.(2)
(b)(1)(i) By-Laws of the Trust.(1)
(c)(1)(ii) None other than Exhibit (a)(2) and (b)(1)(i).
(d) Investment Advisory Contracts
(d)(1)(i) Investment Management Agreement between EQ Advisors Trust
("Trust") and EQ Financial Consultants, Inc. ("EQFC") dated
April 14, 1997.(4)
(d)(1)(ii) Amendment No. 1, dated December 9, 1997 to Investment Management
Agreement between the Trust and EQFC dated April 14, 1997.(7)
(d)(1)(iii) Amendment No. 2, dated as of December 31, 1998 to Investment
Management Agreement between the Trust and EQFC dated April 14,
1997.(11)
(d)(1)(iv) Form of Amendment No. 3, dated as of April 30, 1999, to
Investment Management Agreement between the Trust and EQFC.(11)
(d)(1)(v) Form of Amendment No. 4, dated as of August 30, 1999, to
Investment Management Agreement between the Trust and EQFC.(12)
(d)(1)(vi) Amended and Restated Investment Management Agreement, dated as
of May 1, 2000, between the Trust and The Equitable Life
Assurance Society of the United States ("Equitable").
(d)(2) Investment Advisory Agreement between EQFC and T. Rowe Price
Associates, Inc. dated April 1997(4)
(d)(3) Investment Advisory Agreement between EQFC and Rowe
Price-Fleming International, Inc. dated April 1997.(4)
(d)(4) Investment Advisory Agreement between EQFC and Putnam Investment
Management, Inc. dated April 1997.(4)
(d)(5)(i) Investment Advisory Agreement between EQFC and Massachusetts
Financial Services Company ("MFS") dated April 1997.(4)
(d)(5)(ii) Amendment No. 1, dated as of December 31, 1998 to Investment
Advisory Agreement by and between EQFC and MFS dated April
1997.(11)
C-1
<PAGE>
(d)(5)(iii) Amendment No. 2, dated as of May 1, 2000 to Investment Advisory
Agreement by and between Equitable and MFS dated April 1997.
(d)(6) Investment Advisory Agreement between EQFC and Morgan Stanley
Asset Management Inc. dated April 1997.(4)
(d)(7) Investment Advisory Agreement between EQFC and Merrill Lynch
Asset Management, L.P. dated April 1997.(4)
(d)(8) Investment Advisory Agreement between EQFC and Lazard Freres &
Co. LLC dated December 9, 1997.(7)
(d)(9) Investment Advisory Agreement between EQFC and J.P. Morgan
Investment Management, Inc. dated December 9, 1997.(7)
(d)(10) Investment Advisory Agreement between EQFC and Credit Suisse
Asset Management, LLC, dated as of July 1, 1999.(12)
(d)(11) Investment Advisory Agreement by and between EQFC and Evergreen
Asset Management Corp., dated as of December 31, 1998.(11)
(d)(12)(i) Form of Investment Advisory Agreement between EQFC and Alliance
Capital Management L.P. ("Alliance") dated as of April 30,
1999.(11)
(d)(12)(ii) Amendment No. 1, dated as of October 1, 1999 to Investment
Advisory Agreement by and between EQFC and Alliance, dated as of
April 30, 1999.
(d)(12)(iii) Amendment No. 2, dated May 1, 2000 to Investment Advisory
Agreement by and between Equitable and Alliance, dated as of May
1, 2000.
(d)(13) Investment Advisory Agreement between EQFC and Capital Guardian
Trust Company, dated as of May 1, 1999.(11)
(d)(14) Investment Advisory Agreement between EQFC and Calvert Asset
Management Company, Inc., dated as of August 30, 1999.(12)
(d)(15) Investment Advisory Agreement between EQFC and Brown Capital
Management, dated as of August 30, 1999.(12)
(e) Underwriting Contracts
----------------------
(e)(1)(i) Distribution Agreement between the Trust and AXA Advisors LLC
("AXA Advisors") with respect to the Class IA shares dated April
14, 1997.(4)
(e)(1)(ii) Amendment No. 1 dated December 9, 1997 to the Distribution
Agreement between the Trust and AXA Advisors with respect to the
Class IA shares dated April 14, 1997.(7)
(e)(1)(iii) Amendment No. 2 dated as of December 31, 1998 to the
Distribution Agreement between the Trust and AXA Advisors with
respect to the Class 1A shares dated April 14, 1997.(11)
(e)(1)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Distribution Agreement between the Trust and AXA Advisors with
respect to the Class IA shares dated April 14, 1997.(11)
C-2
<PAGE>
(e)(1)(v) Amendment No. 4 dated as of August 30, 1999 to the Distribution
Agreement between the Trust and AXA Advisors with respect to the
Class IA shares dated April 14, 1997.
(e)(1)(vi) Amendment No. 5 dated as of May 1, 2000 to the Distribution
Agreement between the Trust and AXA Advisors with respect to the
Class IA shares dated April 14, 1997.
(e)(2)(i) Distribution Agreement between the Trust and AXA Advisors with
respect to the Class IB shares dated April 14, 1997.(4)
(e)(2)(ii) Amendment No. 1 dated December 9, 1997 to the Distribution
Agreement between the Trust and AXA Advisors with respect to the
Class IB shares dated April 14, 1997.(7)
(e)(2)(iii) Amendment No. 2 dated as of December 31, 1998 to the
Distribution Agreement between the Trust and AXA Advisors with
respect to the Class IB shares dated April 14, 1997.(11)
(e)(2)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Distribution Agreement between the Trust and AXA Advisors with
respect to the Class IB shares dated April 14, 1997.(11)
(e)(2)(v) Amendment No. 4 dated as of August 30, 1999 to the Distribution
Agreement between the Trust and AXA Advisors with respect to the
Class IB shares dated April 14, 1997.
(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.
(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.
(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.
(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)
C-3
<PAGE>
(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.
(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.
(f) Form of Deferred Compensation Plan.(3)
(g) Custodian Agreements
(g)(1)(i) Custodian Agreement between the Trust and The Chase Manhattan
Bank dated April 17, 1997 and Global Custody Rider.(4)
(g)(1)(ii) Amendment No. 1 dated December 9, 1997 to the Custodian
Agreement between the Trust and The Chase Manhattan Bank dated
April 17, 1997.(7)
(g)(1)(iii) Amendment No. 2 dated as of December 31, 1998 to the Custodian
Agreement between the Trust and The Chase Manhattan Bank dated
April 17, 1997.(11)
(g)(1)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Custodian Agreement between the Trust and The Chase Manhattan
Bank dated April 17, 1997.(11)
(g)(1)(v) Form of Amendment No. 4 dated as of August 30, 1999 to the
Custodian Agreement between the Trust and The Chase Manhattan
Bank dated April 17, 1997.
(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.
(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.
(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 April 30, 1999.(11)
(h)(2)(iv) Amended and Restated Expense Limitation Agreement between EQFC
and the Trust dated as of August 30, 1999.
C-4
<PAGE>
(h)(2)(v) Second Amended and Restated Expense Limitation Agreement between
Equitable and the Trust dated as of May 1, 2000.
(h)(3)(i) Organizational Expense Reimbursement Agreement by and between
AXA Advisors and the Trust, on behalf of each series of the
Trust except for the Lazard Large Cap Value Portfolio, Lazard
Small Cap Value Portfolio, the JPM Core Bond Portfolio, BT Small
Company Index Portfolio, BT International Equity Index Portfolio
and BT Equity 500 Index Portfolio and EQ Financial Consultants,
Inc. dated April 14, 1997.(4)
(h)(3)(ii) Organizational Expense Reimbursement Agreement by and between
AXA Advisors and the Trust, on behalf of the Lazard Large Cap
Value Portfolio, Lazard Small Cap Value Portfolio, JPM Core Bond
Portfolio, BT Small Company Index Portfolio, BT International
Equity Index Portfolio, and BT Equity 500 Index Portfolio and EQ
Financial Consultants, Inc. dated December 9, 1997.(7)
(h)(3)(iii) Organizational Expense Reimbursement Agreement by and between
AXA Advisors and the Trust, on behalf of the MFS Income with
Growth Portfolio, EQ/Evergreen Foundation Portfolio and
EQ/Evergreen Portfolio dated December 31, 1998.(11)
(h)(4)(i) Participation Agreement by and among the Trust, Equitable,
Equitable Distributors, Inc., and AXA Advisors dated April 14,
1997.(4)
(h)(4)(ii) Amendment No. 1 dated December 9, 1997 to the Participation
Agreement by and among the Trust, Equitable, Equitable
Distributors, Inc., and AXA Advisors dated April 14, 1997.(7)
(h)(4)(iii) Amendment No. 2 dated as of December 31, 1998 to the
Participation Agreement by and among the Trust, Equitable,
Equitable Distributors, Inc., and AXA Advisors dated April 14,
1997.(11)
(h)(4)(iv) Form of Amendment No. 3 dated as of April 30, 1999 to the
Participation Agreement among the Trust, Equitable, Equitable
Distributors, Inc., and AXA Advisors dated April 14, 1997.(11)
(h)(4)(v) Form of Amendment No. 4 dated as of October 18, 1999 to the
Participation Agreement among the Trust, Equitable, Equitable
Distributors, Inc., and AXA Advisors dated April 14, 1997.
(h)(5) Retirement Plan Participation Agreement dated December 1, 1998
among the Trust, AXA Advisors, 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, AXA Advisors,
with The Equitable Investment Plan for Employees, Managers and
Agents and Equitable.(11)
(h)(6) License Agreement Relating to Use of Name between Merrill Lynch
& Co., Inc., and the Trust dated April 28, 1997.(4)
(i)(1) Opinion and Consent of Katten Muchin & Zavis regarding the
legality of the securities being registered.(1)
C-5
<PAGE>
(i)(2) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
Lazard Large Cap Value Portfolio, Lazard Small Cap Value
Portfolio, and JPM Core Bond Portfolio.(5)
(i)(3) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
BT Small Company Index Portfolio, BT International Equity Index
Portfolio, and BT Equity 500 Index Portfolio.(6)
(i)(4) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
EQ/Evergreen Foundation Portfolio, EQ/Evergreen Portfolio, and
MFS Growth with Income Portfolio.(9)
(i)(5) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
EQ/Alliance Premier Growth Portfolio, EQ/Capital Research
Portfolio, EQ/Capital U.S. Equities Portfolio and EQ/Capital
International Equities Portfolio.(10)
(i)(6) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
Alliance Money Market Portfolio, Alliance Intermediate
Government Securities Portfolio, Alliance Quality Bond
Portfolio, Alliance High Yield Portfolio, Alliance Balanced
Portfolio, Alliance Conservative Investors Portfolio, Alliance
Growth Investors Portfolio, Alliance Common Stock Portfolio,
Alliance Equity Index Portfolio, Alliance Growth and Income
Portfolio, Alliance Aggressive Stock Portfolio, Alliance Small
Cap Growth Portfolio, Alliance Global Portfolio, Alliance
International Portfolio and the Calvert Socially Responsible
Portfolio.(12)
(i)(7) Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered with respect to the
EQ/Alliance Technology Portfolio (to be filed by amendment).
(j) Consent of PricewaterhouseCoopers LLP, Independent Public
Accountants (to be filed by amendment).
(k) None
(l) Stock Subscription Agreement between the Trust, on behalf of the
T. Rowe Price Equity Income Portfolio, and Separate Account FP.3
(m) Distribution Plan Pursuant to Rule 12b-1 for the Trust's Class
IB shares.(4)
(n) Plan Pursuant to Rule 18f-3 under the 1940 Act.(4)
(p) Codes of Ethics (to be filed by amendment).
Other Exhibits:
Power of Attorney.(3)
Power of Attorney for Michael Hegarty.(8)
Power of Attorney for Steven M. Joenk.(12)
C-6
<PAGE>
- ---------------
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).
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE TRUST
The Equitable Life Assurance Society of the United States ("Equitable")
controls the Trust by virtue of its ownership of more than 99% of the Trust's
shares as of January 25, 2000. All shareholders of the Trust are required to
solicit instructions from their respective contract owners as to certain
matters. The Trust may in the future offer its shares to insurance companies
unaffiliated with Equitable.
On July 22, 1992, Equitable converted from a New York mutual life
insurance company to a publicly-owned New York stock life insurance company. At
that time Equitable became a wholly-owned subsidiary of AXA Financial, Inc.
("AXA Financial"). AXA Financial continues to own 100% of Equitable's common
stock as well as approximately 72% of the common stock of Donaldson, Lufkin &
Jenrette, Inc., a registered broker-dealer.
C-7
<PAGE>
AXA is the largest shareholder of AXA Financial. On January 25, 2000, AXA
owned, directly or indirectly through its affiliates, 50% of the outstanding
common stock of AXA Financial. AXA is the holding company for an international
group of insurance and related financial services companies. AXA's insurance
operations include activities in life insurance, property and casualty
insurance and reinsurance. The insurance operations are diverse geographically,
with activities principally in Western Europe, North America, and the
Asia/Pacific area and, to a lesser extent, in Africa and South America. AXA is
also engaged in asset management, investing banking , securities trading,
brokerage, real estate and other financial services activities principally in
the United States, as well as in Western Europe and the Asia/Pacific area..
ITEM 25. INDEMNIFICATION
Amended and Restated Agreement and Declaration of Trust ("Declaration of
Trust") and By-Laws.
Article VII, Section 2 of the Trust's Declaration of Trust of the Trust
("Trust") states, in relevant part, that a "Trustee, when acting in such
capacity, shall not be personally liable to any Person, other than the Trust or
a Shareholder to the extent provided in this Article VII, for any act, omission
or obligation of the Trust, of such Trustee or of any other Trustee. The
Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, Manager, or Principal Underwriter
of the Trust. The Trust shall indemnify each Person who is serving or has
served at the Trust's request as a director, officer, trustee, employee, or
agent of another organization in which the Trust has any interest as a
shareholder, creditor, or otherwise to the extent and in the manner provided in
the By-Laws." Article VII, Section 4 of the Trust's Declaration of Trust
further states, in relevant part, that the "Trustees shall be entitled and
empowered to the fullest extent permitted by law to purchase with Trust assets
insurance for liability and for all expenses reasonably incurred or paid or
expected to be paid by a Trustee, officer, employee, or agent of the Trust in
connection with any claim, action, suit, or proceeding in which he or she may
become involved by virtue of his or her capacity or former capacity as a
Trustee of the Trust."
Article VI, Section 2 of the Trust's By-Laws states, in relevant part,
that "[s]ubject to the exceptions and limitations contained in Section 3 of
this Article VI, every [Trustee, officer, employee or other agent of the Trust]
shall be indemnified by the Trust to the fullest extent permitted by law
against all liabilities and against all expenses reasonably incurred or paid by
him or her in connection with any proceeding in which he or she becomes
involved as a party or otherwise by virtue of his or her being or having been
an agent." Article VI, Section 3 of the Trust's By-Laws further states, in
relevant part, that "[n]o indemnification shall be provided hereunder to [a
Trustee, officer, employee or other agent of the Trust]: (a) who shall have
been adjudicated, by the court or other body before which the proceeding was
brought, to be liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office (collectively, "disabling
conduct"); or (b) with respect to any proceeding disposed of (whether by
settlement, pursuant to a consent decree or otherwise) without an adjudication
by the court or other body before which the proceeding was brought that such
[Trustee, officer, employee or other agent of the Trust] was liable to the
Trust or its Shareholders by reason of disabling conduct, unless there has been
a determination that such [Trustee, officer, employee or other agent of the
Trust] did not engage in disabling conduct: (i) by the court or other body
before which the proceeding was brought; (ii) by at least a majority of those
Trustees who are neither Interested Persons of the Trust nor are parties to the
proceeding based upon a review of readily available facts (as opposed to a full
trial-type inquiry); or (iii) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a full trial-type
inquiry); provided, however, that indemnification shall be provided hereunder
to [a Trustee, officer, employee or other agent of the Trust] with respect to
any proceeding in the event of (1) a final decision on the merits by the court
or other body before which the proceeding was brought that the [Trustee,
officer, employee or other agent of the Trust] was not liable by reason of
disabling conduct, or (2) the dismissal of the proceeding by the court or other
body before which it was brought for
C-8
<PAGE>
insufficiency of evidence of any disabling conduct with which such [Trustee,
officer, employee or other agent of the Trust] has been charged." Article VI,
Section 4 of the Trust's By-Laws also states that the "rights of
indemnification herein provided (i) may be insured against by policies
maintained by the Trust on behalf of any [Trustee, officer, employee or other
agent of the Trust], (ii) shall be severable, (iii) shall not be exclusive of
or affect any other rights to which any [Trustee, officer, employee or other
agent of the Trust] may now or hereafter be entitled and (iv) shall inure to
the benefit of [such party's] heirs, executors and administrators."
UNDERTAKING
Insofar as indemnification for liability arising under the Securities
Act of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE MANAGER AND ADVISERS
The description of AXA Advisors under the caption of "Management of the
Trust" in the Prospectus and under the caption "Investment Management and Other
Services" in the Statement of Additional Information constituting Parts A and
B, respectively, of this Registration Statement are incorporated by reference
herein. The information as to the directors and officers of AXA Advisors is set
forth in AXA Advisors' Form ADV filed with the Securities and Exchange
Commission on July 1, 1996 (File No. 801-14065) and amended through the date
hereof, is incorporated by reference.
The information as to the directors and officers of T. Rowe Price
Associates, Inc., is set forth in T. Rowe Price Associates, Inc.'s Form ADV
filed with the Securities and Exchange Commission on March 31, 1997 (File No.
801-00856) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Rowe Price-Fleming
International, Inc. is set forth in Rowe Price-Fleming International, Inc.'s
Form ADV filed with the Securities and Exchange Commission on March 31, 1997
(File No. 801-14713) and amended through the date hereof, is incorporated by
reference.
The information as to the directors and officers of Putnam Investment
Management, Inc. is set forth in Putnam Investment Management, Inc.'s Form ADV
filed with the Securities and Exchange Commission on April 2, 1996 (File No.
801-07974) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Massachusetts
Financial Services Company is set forth in Massachusetts Financial Services
Company's Form ADV filed with the Securities and Exchange Commission on March
31, 1998 (File No. 801-17352) and amended through the date hereof, is
incorporated by reference.
C-9
<PAGE>
The information as to the directors and officers of Morgan Stanley Asset
Management Inc. is set forth in Morgan Stanley Asset Management Inc.'s Form ADV
filed with the Securities and Exchange Commission on August 1, 1997 (File No.
801-15757) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Warburg Pincus Asset
Management is set forth in Warburg Pincus Asset Management, Inc.'s Form ADV
filed with the Securities and Exchange Commission on March 31, 1997 (File No.
801-07321) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Merrill Lynch Asset
Management, L.P. is set forth in Merrill Lynch Asset Management, L.P.'s Form
ADV filed with the Securities and Exchange Commission on March 25, 1998 (File
No. 801-11583) and amended through the date hereof, is incorporated by
reference.
The information as to the directors and officers of Lazard Asset Management (a
division of Lazard Freres & Co. LLC) is set forth in Lazard Freres & Co. LLC's
Form ADV filed with the Securities and Exchange Commission on June 9, 1997
(File No. 801-6568) and amended through the date hereof, is incorporated by
reference.
The information as to the directors and officers of J. P. Morgan Investment
Management Inc. is set forth in J.P. Morgan Investment Management Inc.'s Form
ADV filed with the Securities and Exchange Commission on March 27, 1998 (File
No. 801-21011) and amended through the date hereof, is incorporated by
reference.
The information as to the directors and officers of Evergreen Asset Management
Corp. is set forth in Evergreen Asset Management Corp.'s Form ADV filed with
the Securities and Exchange Commission on March 31, 1998 (File No. 801-46522)
and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Alliance Capital Management
Corporation, the general partner of Alliance Capital Management L.P., is set
forth in Alliance Capital Management Corporation's Form ADV filed with the SEC
on April 21, 1998 (File No. 801-32361) and as amended through the date hereof,
is incorporated by reference.
The information as to the directors and officers of Calvert Asset Management
Company, Inc. is set forth in Calvert Asset Management Company's Form ADV filed
with the Securities and Exchange Commission on May 12, 1999 (File No.
801-17044) and amended through the date hereof, is incorporated by reference.
The information as to the directors and officers of Brown Capital Management is
set forth in Brown Capital Management's Form ADV filed with the Securities and
Exchange Commission on May 30, 1995 (File No. 801-19287) and amended through
the date hereof, is incorporated by reference.
THE INFORMATION AS TO THE DIRECTORS AND OFFICERS OF BANKERS TRUST COMPANY IS
SET FORTH BELOW. TO THE KNOWLEDGE OF THE TRUST, NONE OF THE DIRECTORS OR
OFFICERS OF BANKERS TRUST, EXCEPT THOSE SET FORTH BELOW, IS OR HAS BEEN AT
ANYTIME DURING THE PAST TWO FISCAL YEARS ENGAGED IN ANY OTHER BUSINESS,
PROFESSION, VOCATION OR EMPLOYMENT OF A SUBSTANTIAL NATURE, EXCEPT THAT CERTAIN
DIRECTORS AND OFFICERS ALSO HOLD VARIOUS POSITIONS WITH AND ENGAGE IN BUSINESS
FOR BANKERS TRUST NEW YORK CORPORATION. SET FORTH BELOW ARE THE NAMES AND
PRINCIPAL BUSINESSES OF THE DIRECTORS AND OFFICERS OF BANKERS TRUST WHO ARE OR
DURING THE PAST TWO FISCAL YEARS HAVE BEEN ENGAGED IN ANY OTHER BUSINESS,
PROFESSION, VOCATION OR EMPLOYMENT OF A SUBSTANTIAL NATURE.
These persons may be contacted c/o Bankers Trust Company, 130 Liberty Street,
New York, New York 10006.
C-10
<PAGE>
Josef Ackermann, Chairman of the Board, Chief Executive Officer and President
of Bankers Trust Company and Bankers Trust Corporation. Member of the Board,
Deutsche Bank AG. Chairman of the Supervisory Board, Deutsche Bank Luxembourg
S.A., and a Member Supervisory Board of the following organizations; Eurex
Frankfurt AG, Eurex Zurich AG, Linde AG, Stora Enso Oyj and Mannesmann AG.
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, Phillips Petroleum Company, TIG Holdings, Inc.; Chairman
Emeritus of Amherst College; and Chairman of The Colonial Williamburg
Foundation.
Mary Cirillo, Managing Director of Bankers Trust Company. Executive Vice
President of Bankers Trust Corporation. Director, Cisco Systems and Quest
Diagnostics. Beneficial Owner; Hudson Ventures and Lextra Int'l. Beneficial
Owner & Advisory Board of Opcenter.
Michael Fazio, Managing Director of Bankers Trust Company. Executive Vice
President of Bankers Trust Corporation.
William R. Howell, Director of Bankers Trust Company and Bankers Trust
Corporation. Chairman Emeritus, J.C. Penney Company, Inc. Also a director of
Exxon Corporation, Haliburton Company, Warner-Lambert Company, The Williams
Companies, Inc., the National Retail Federation, and National Organizational on
Disability. Member of the American Society of Corporation Executives, Beta
Gamma Sigma, Directors Table, the Business Council, Delta Sigma Pi, University
of Oklahoma, Dean's Advisory Board, College of Business Administration.
Chairman of Southern Methodist University Board of Trustees.
Hermann-Josef Lamberti, Vice Chairman of Bankers Trust Company and Bankers
Trust Corporation. Executive Vice President of Deutsche Bank AG; Board member
of Euroclear plc (London) and Euroclear sc. (Brussels); and a Supervisory Board
Member of GZS (Frankfurt) and European Transaction Bank (e.t.b.).
Troland S. Link, Managing Director and General Counsel of Bankers Trust
Company. General Counsel of Bankers Trust Corporation. Trustee of The American
University (Cairo) and The New York Downtown Hospital. Also a Director of The
French American Foundation.
Eugene A. Ludwig, Vice Chairman of Bankers Trust Company and Bankers Trust
Corporation. Director of the following organizations; Local Initiatives Support
Corp., Folio Trade and National Academy Foundation.
Rodney A. McLauchlan, Managing Director of Bankers Trust Company. Executive
Vice President of Bankers Trust Corporation. Trustee of Lyric Opera and the
Beneficial Owner & Director of Royal Opera House.
John A. Ross, Director of Bankers Trust Company and Bankers Trust Corporation.
Chief Executive Officer, Deutsche Bank Americas Holding Corp. and Taunus
Corporation; and a Board Member of the following; Deutsche Securities, Inc., DB
Alex. Brown LLC and The International Institute of Finance.
C-11
<PAGE>
Ronaldo H. Schmitz, Director of Bankers Trust Company and Bankers Trust
Corporation. Member of the Board, Deutsche Bank AG; and non-executive
- --------------------------------------------------------------------------------
Directorship of the following; Bertelsmann AG, Glaxo Wellcome plc and Rohm &
Haas Co.
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
- --------------------------------------------------------------------------------
Timothy D. Amour Director, Capital Guardian Trust Company, Capital Research
and Management Company and Capital Management Services,
Inc.; Chairman and Chief Executive Officer, Capital
Research Company.
- --------------------------------------------------------------------------------
Donnalisa Barnum Senior Vice President, Capital Guardian Trust Company; Vice
President, Capital International, Inc. and Capital
International Limited.
- --------------------------------------------------------------------------------
Andrew F. Barth Director, Capital Guardian Trust Company and ,Capital
Research and Management Company; Director and Research
Director, Capital International Research, Inc.; President,
Capital Guardian Research Company; Formerly Director and
Executive Vice President, Capital Guardian Research
Company.
- --------------------------------------------------------------------------------
Michael D. Beckman Senior Vice President, Treasurer and Director, Capital
Guardian Trust Company; Director, Capital Guardian Trust
Company of Nevada; Treasurer, Capital International
Research, Inc. and Capital Guardian Research Company;
Director and Treasurer, Capital Guardian (Canada), Inc.;
Formerly Chairman and Director, Capital International Asia
Pacific Management Company.
- --------------------------------------------------------------------------------
Michael A. Burik Senior Counsel, The Capital Group Companies, Inc.; Senior
Vice President, Capital Guardian Trust Company.
- --------------------------------------------------------------------------------
Elizabeth A. Burns Senior Vice President, Capital Guardian Trust Company.
- --------------------------------------------------------------------------------
Larry P. Clemmensen Director, Capital Guardian Trust Company and American Funds
Distributors, Inc.; Chairman and Director, American Funds
Service Company; Director and President, The Capital Group
Companies, Inc. and
- --------------------------------------------------------------------------------
C-12
<PAGE>
- --------------------------------------------------------------------------------
NAME AFFILIATIONS WITHIN LAST TWO YEARS
- --------------------------------------------------------------------------------
Capital Management Services, Inc.; Senior Vice President
and Director, Capital Research and Management Company,
Treasurer, Capital Strategy, Inc.
- --------------------------------------------------------------------------------
Kevin G. Clifford Director and President, American Funds Distributors, Inc.;
Director, Capital Guardian Trust Company
- --------------------------------------------------------------------------------
Roberta A. Conroy Senior Vice President, Director and Counsel, Capital
Guardian Trust Company; Senior Vice President and
Secretary, Capital International, Inc.; Assistant General
Counsel, The Capital Group Companies, Inc., Secretary,
Capital Guardian International, Inc.; Formerly, Secretary,
Capital Management Services, Inc.
- --------------------------------------------------------------------------------
John B. Emerson Senior Vice President, Capital Guardian Trust Company;
Director, Capital Guardian Trust Company, a Nevada
Corporation.
- --------------------------------------------------------------------------------
Michael Ericksen Senior Vice President, Capital Guardian Trust Company;
Director and Senior Vice President, Capital International
Limited.
- --------------------------------------------------------------------------------
David I. Fisher Vice Chairman and Director, Capital International, Inc.,
Capital International Limited and Capital International
K.K.; Chairman and Director, Capital International S. A.
and Capital Guardian Trust Company; Director and President,
Capital International Limited (Bermuda); Director, The
Capital Group Companies, Inc., Capital International
Research, Inc., Capital Group Research, Inc. and Capital
Research and Management Company.
- --------------------------------------------------------------------------------
Richard N. Havas Senior Vice President, Capital Guardian Trust Company,
Capital International, Inc. and Capital International
Limited; Director and Senior Vice President, Capital
International Research, Inc.; Director and Senior Vice
President Capital Guardian (Canada), Inc.
- --------------------------------------------------------------------------------
Frederick M. Hughes, Senior Vice President, Capital Guardian Trust Company.
Jr.
- --------------------------------------------------------------------------------
William H. Hurt Senior Vice President and Director, Capital Guardian Trust
Company; Chairman and Director, Capital Guardian Trust
Company, a Nevada Corporation and Capital Strategy
Research, Inc.; Formerly, Director,
- --------------------------------------------------------------------------------
C-13
<PAGE>
- --------------------------------------------------------------------------------
NAME AFFILIATIONS WITHIN LAST TWO YEARS
- --------------------------------------------------------------------------------
The Capital Group Companies, Inc.
- --------------------------------------------------------------------------------
Peter C. Kelly Senior Vice President, Capital Guardian Trust Company;
Assistant General Counsel, The Capital Group Companies,
Inc.; Director and Senior Vice President, Capital
International, Inc.
- --------------------------------------------------------------------------------
Robert G. Kirby Chairman Emeritus, Capital Guardian Trust Company; Senior
Partner, The Capital Group Companies, Inc.
- --------------------------------------------------------------------------------
Nancy J. Kyle Senior Vice President and Director, Capital Guardian Trust
Company; President and Director, Capital Guardian (Canada),
Inc.
- --------------------------------------------------------------------------------
Karin L. Larson Director, The Capital Group Companies, Inc., Capital Group
Research, Inc., Capital Guardian Trust Company, Director
and Chairman, Capital Guardian Research Company and Capital
International Research, Inc., Formerly, Director and Senior
Vice President , Capital Guardian Research Company.
- --------------------------------------------------------------------------------
James R. Mulally Senior Vice President and Director, Capital Guardian Trust
Company; Senior Vice President, Capital International
Limited; Vice President, Capital Research Company;
Formerly, Director, Capital Guardian Research Company.
- --------------------------------------------------------------------------------
Shelby Notkin Senior Vice President, Capital Guardian Trust Company;
Director, Capital Guardian Trust Company, a Nevada
Corporation.
- --------------------------------------------------------------------------------
Mary M. O'Hern Senior Vice President, Capital Guardian Trust Company and
Capital International Limited; Vice President, Capital
International, Inc.
- --------------------------------------------------------------------------------
Jeffrey C. Paster Senior Vice President, Capital Guardian Trust Company.
- --------------------------------------------------------------------------------
Robert V. Pennington Senior Vice President, Capital Guardian Trust Company;
President and Director Capital Guardian Trust Company, a
Nevada Corporation Company.
- --------------------------------------------------------------------------------
Jason M. Pilalas Director, Capital Guardian Trust Company; Senior Vice
President and Director, Capital International Research,
Inc.; Formerly, Director and Senior Vice President, Capital
Guardian Research Company.
- --------------------------------------------------------------------------------
C-14
<PAGE>
- --------------------------------------------------------------------------------
NAME AFFILIATIONS WITHIN LAST TWO YEARS
- --------------------------------------------------------------------------------
Robert Ronus President and Director, Capital Guardian Trust Company;
Chairman and Director, Capital Guardian (Canada), Inc.,
Director, Capital International, Inc. and Capital Guardian
Research Company; Senior Vice President, Capital
International, Inc.; Capital International Limited and
Capital International S.A.; Formerly, Chairman, Capital
Guardian International Research Company and Director,
Capital International, Inc.
- --------------------------------------------------------------------------------
James F. Rothenberg Director, American Funds Distributors, Inc., American Funds
Service Company, The Capital Group Companies, Inc., Capital
Group Research, Inc., Capital Guardian Trust Company and
Capital Management Services, Inc.; Director and President,
Capital Research and Management, Inc.; Formerly, Director
of Capital Guardian Trust Company, a Nevada Corporation,
and Capital Research Company.
- --------------------------------------------------------------------------------
Theodore R. Samuels Senior Vice President and Director, Capital Guardian Trust
Company; Director, Capital International Research, Inc.;
Formerly, Director, Capital Guardian Research Company
- --------------------------------------------------------------------------------
Lionel A. Sauvage Senior Vice President, Capital Guardian Trust Company; Vice
President, Capital International Research, Inc.; Formerly,
Director, Capital Guardian Research Company.
- --------------------------------------------------------------------------------
John H. Seiter Executive Vice President and Director, Capital Guardian
Trust Company; Senior Vice President, Capital Group
International, Inc.; and Vice President, The Capital Group
Companies, Inc.
- --------------------------------------------------------------------------------
Karen Skinner-Twoney Vice President, Capital Guardian Trust Company; Director,
Vice President and Treasurer, Capital Guardian Trust
Company, a Nevada Corporation.
- --------------------------------------------------------------------------------
Eugene P. Stein Executive Vice President and Director, Capital Guardian
Trust Company; Formerly, Director, Capital Guardian
Research Company.
- --------------------------------------------------------------------------------
Phil A. Swan Senior Vice President, Capital Guardian Trust Company.
- --------------------------------------------------------------------------------
Shaw B. Wagener Director, Capital Guardian Trust Company, Capital
International Asia Pacific Management Company S.A., Capital
Research and Management Company
- --------------------------------------------------------------------------------
C-15
<PAGE>
- --------------------------------------------------------------------------------
NAME AFFILIATIONS WITHIN LAST TWO YEARS
- --------------------------------------------------------------------------------
and Capital International Management Company S.A.;
President and Director, Capital International, Inc.; Senior
Vice President, Capital Group International, Inc.
- --------------------------------------------------------------------------------
Joanne Weckbacher Senior Vice President, Capital Guardian Trust Company.
- --------------------------------------------------------------------------------
Eugene M. Waldron Senior Vice President, Capital Guardian Trust Company.
- --------------------------------------------------------------------------------
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 also serves as the principal underwriter
for the Class IB shares of Separate Account No. 49 of Equitable.
(b) Set forth below is certain information regarding the
directors and officers of AXA Advisors and of EDI, the principal underwriters
of the Trust's Class IA and Class IB shares. The business address of the
persons whose names are preceded by a single asterisk is 1290 Avenue of the
Americas, New York, New York 10104. The business address of the persons whose
names are preceded by a double asterisk is 660 Newport Center Drive, Suite
1200, Newport Beach, CA 92660. Mr. Laughlin's business address is 1345 Avenue
of the Americas, 39th Floor, New York, New York 10105. Mr. Kornweiss's business
address is 4251 Crums Mill Road, Harrisburg, PA 17112. The business address of
Mr. Bullen and Ms. Fazio is 200 Plaza Drive, Secaucus, New Jersey 07096.
C-16
<PAGE>
AXA ADVISORS LLC
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH AXA ADVISORS POSITIONS AND OFFICES WITH THE TRUST
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DIRECTORS
* Derry E. Bishop Director
Harvey E. Blitz Director
Michael J. Laughlin Director Vice President
G. Patrick McGunagle Director
* Michael S. Martin Director
* Michael F. McNelis Director
* Richard V. Silver Director
* Mark R. Wutt Director
- --------------------------------------------------------------------------------------------------------
OFFICERS
* Michael S. Martin Chairman of the Board and Chief Executive Vice President
Officer
* Michael F. McNelis President and Chief Operating Officer
* Martin J. Telles Executive Vice President and Vice President
Chief Marketing Ovvicer
* 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 President
* Peter D. Noris
* Mark A. Silberman Senior Vice President and Chief
Financial Officer
Stephen T. Burnthall Senior Vice President
* Richard Magaldi Senior Vice President
Robert Schmidt Senior Vice President
Cindy Schreiner Senior Vice President
Catherine P. Earl Senior Vice President
James P. Bordovitz Senior Vice President and
General Counsel
* Donna M. Dazzo First Vice President
* John Bratten First Vice President
Amy Franceschini First Vice President
Anne Nussbaum First Vice President
Philomena Scamardella First Vice President First Vice President
* Michael Brzozowski Vice President and Compliance
Director
* Raymond T. Barry Vice President
* Claire A. Comerford Vice President
* Linda Funigiello Vice President
* Mark Generales Vice President
Mark D. Godofsky Vice President and Controller
* Rosemary Magee Vice President
* Michael McBryan Vice President
C-17
<PAGE>
* Bill Nestel Vice President
* Laura A. Pellegrini Vice President
* Dan Roebuck Vice President
* Sid Smith Vice President
* Don Wiley Vice President
Beth Andreozzi Vice President
* Mike Woodhead Vice President
Greg Andonian Vice President
Debra Brogan Vice President
Randall Brown Vice President
Louis Calabrese Vice President
Joseph Carew Vice President
Catherine Gentry Vice President
Robert Hatton Vice President
Michael Lanio Vice President
John Mapes Vice President
Frank Massa Vice President
Sandi Narvaez Vice President
Michael Ryniker Vice President
Teresa M. West Vice President
James Woodley Vice President
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>
EQUITABLE DISTRIBUTORS, INC.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND PRINCIPAL WITH EQUITABLE POSITIONS AND OFFICES
BUSINESS ADDRESS DISTRIBUTORS, INC. WITH THE TRUST
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DIRECTORS
** Greg Brakovich Director
* Edward J. Hayes Director
** James A. Shepherdson, III Director
* Jose S. Suquet Director
* Charles Wilder Director
- ----------------------------------------------------------------------------------------------------------------------------
OFFICERS
* Jose S. Suquet Chairman of the Board
** Greg Brakovich Co-President and Co-Chief
Executive Officer and
Managing Director
C-18
<PAGE>
POSITIONS AND OFFICES
NAME AND PRINCIPAL WITH EQUITABLE POSITIONS AND OFFICES
BUSINESS ADDRESS DISTRIBUTORS, INC. WITH THE TRUST
- --------------------------------------------------------------------------------------------------------------------------------
** James A. Shepherdson, III Co-President and Co-Chief
Executive Officer and Managing
Director
** Hunter Allen Senior Vice President
* Elizabeth Forget Senior Vice President
** Al Haworth Senior Vice President
** Stuart Hutchins Senior Vice President
** Ken Jaffe Senior Vice President
** Michael McDaniel Senior Vice President
** Michael Dougherty Senior Vice President
David Hughes Senior Vice President
Norman J. Abrams Vice President and Counsel
* Debora Buffington Vice President and Chief
Compliance Officer
Raymond T. Barry Vice President
** Mark Brandenberger Vice President
Anthony Llopis Vice President
Partick O'shea Vice President and Chief
Financial Officer
* Ronald R. Quist Treasurer
* Linda J. Galasso Secretary
Van Rubiano President
Michael Dibbert President
Alex MacGillivray President
Patrick Miller President
Francesca Divone Assistant Secretary
</TABLE>
(c) Inapplicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940, and the Rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6);
(8); (12); and 31a-1(d), the required books and records are maintained at
the offices of Registrant's Custodian:
1211 Avenue of the Americas
New York, New York 10036
(b) With respect to Rules 31a-1(a); 31a-1(b)(1), (4); (2)(C) and (D); (4);
(5); (6); (8); (9); (10); (11) and 31a-1(f), the required books and
records are currently maintained at the offices of the Registrant's
Administrator:
C-19
<PAGE>
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of the
Registrant's Manager or Advisers:
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 Prudential Investments Fund Management
500 Boylston Street LLC
Boston, MA 02116 Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102
Warburg Pincus Asset Management, Inc.
466 Lexington Avenue Jennison Associates LLC
New York, NY 10017-3147 466 Lexington Avenue
New York, New York 10017
Lazard Asset Management
30 Rockefeller Plaza Merrill Lynch Asset Management, L.P.
New York, NY 10020 800 Scudders Mill Road
Plainsboro, NJ 08543-9011
Bankers Trust Company
130 Liberty Street Morgan Stanley Asset Management Inc.
One Bankers Trust Plaza 1221 Avenue of the Americas
New York, NY 10006 New York, NY 10020
Alliance Capital Management L.P. J.P Morgan Investment Management Inc
1345 Avenue of the Americas 522 Fifth Avenue
New York, NY 10105 New York, NY 10036
Evergreen Asset Management Corp.
Calvert Asset Management Company, Inc. 2500 Westchester Avenue
4550 Montgomery Avenue Purchase, NY 10577
Suite 1000N
Bethesda, MD 20814
Capital Guardian Trust Company
11100 Santa Monica Boulevard
17th Floor
Los Angeles, CA 90025
Brown Capital Management, Inc.
809 Cathedral Street
Baltimore, MD 21201
ITEM 29. MANAGEMENT SERVICES: NONE.
ITEM 30. UNDERTAKINGS
Inapplicable.
C-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, ("1933
Act") and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Post-Effective Amendment No. 15 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of New York, and the State of New York on the ___ day of February,
2000.
EQ ADVISORS TRUST
By: /s/
------------------------------------
Peter D. Noris
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 15 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ President and Trustee February 16, 2000
- -------------------------------
Peter D. Noris
* Trustee February 16, 2000
- -------------------------------
Michael Hegarty
* Trustee February 16, 2000
- -------------------------------
Jettie M. Edwards
* Trustee February 16, 2000
- -------------------------------
William M. Kearns, Jr.
* Trustee February 16, 2000
- -------------------------------
Christopher P.A. Komisarjevsky
* Trustee February 16, 2000
- -------------------------------
Harvey Rosenthal
* Vice President and February 16, 2000
- ------------------------------- Chief Financial Officer
Steven M. Joenk
* By: /s/
---------------------------
Peter D. Noris
(Attorney-in-Fact)
</TABLE>
C-21
<PAGE>
EXHIBIT LIST TO PART C
(d)(1)(vi) Amended and Restated Investment Management Agreement, dated as
of May 1, 2000, between the Trust and The Equitable Life
Assurance Society of the United States ("Equitable").
(d)(5)(iii) Amendment No. 2, dated as of May 1, 2000 to Investment Advisory
Agreement by and between Equitable and MFS dated April 1997.
(d)(12)(ii) Amendment No. 1, dated as of October 18, 1999 to Investment
Advisory Agreement by and between EQFC and Alliance, dated as
of April 30, 1999.
(d)(12)(iii) Form of Amendment No. 2, dated May 1, 2000 to Investment
Advisory Agreement by and between Equitable and Alliance, dated
as of May 1, 2000.
(e)(1)(v) Amendment No. 4 dated as of August 30, 1999 to the Distribution
Agreement between the Trust and EQ Financial Consultants, Inc.
(currently known as "AXA Advisors, LLC") with respect to the
Class IA shares dated April 14, 1997.
(e)(1)(vi) Form of Amendment No. 5 dated as of May 1, 2000 to the
Distribution Agreement between the Trust and AXA Advisors, LLC
with respect to the Class IA Shares dated April 14, 1997.
(e)(2)(v) Amendment No. 4 dated as of August 30, 1999 to the Distribution
Agreement between the Trust and EQ Financial Consultants, Inc.
(currently known as "AXA Advisors, LLC") with respect to the
Class IB shares dated April 14, 1997.
(e)(2)(vi) Form of Amendment No. 5 dated as of May 1, 2000 to the
Distrubution Agreement between the Trust and AXA Advisors, LLC
with respect to the CLass IB Shares dated April 14, 1997.
(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.
(e)(3)(vi) Form of 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.
(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.
(e)(4)(vi) Form of 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.
(g)(1)(v) 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.
(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.
(h)(1)(ii) Form of Mutual Fund Services Agreement between the Trust and
Equitable dated May 1, 2000.
(h)(2)(iv) Amendment No. 1 to Amended and Restated Expense Limitation
Agreement between EQFC and the Trust dated as of August 30,
1999.
(h)(2)(v) Form of Second Amended and Restated Expense Limitation
Agreement between Equitable and the Trust dated as of May 1,
2000.
(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 LLC dated April 14, 1997.
<PAGE>
Exhibit (d)(1)(vi)
AMENDED AND RESTATED
INVESTMENT MANAGEMENT AGREEMENT
AMENDED AND RESTATED AGREEMENT ("AGREEMENT"), dated as of May 1, 2000,
between the EQ Advisors Trust, a Delaware business trust ("Trust"), and The
Equitable Life Assurance Society of the United States, a New York Stock life
insurance company ("Equitable" or "Manager").
WHEREAS, the Trust is registered as an investment company under the
Investment Company Act of 1940, as amended ("Investment Company Act");
WHEREAS, Equitable is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
WHEREAS, the Trust's shareholders are and will be primarily separate
accounts maintained by insurance companies for variable life insurance policies
and variable annuity contracts (the "Policies") under which income, gains, and
losses, whether or not realized, from assets allocated to such accounts are, in
accordance with the Policies, credited to or charged against such accounts
without regard to other income, gains, or losses of such insurance companies; as
well as other shareholders as permitted under Section 817(h) of the Internal
Revenue Code of 1986, as amended ("Code"), and the rules and regulations
thereunder with respect to the qualification of variable annuity contracts and
variable life insurance policies as insurance contracts under the Code.
WHEREAS, the Trust is and will continue to be a series fund having two
or more investment portfolios, each with its own investment objectives,
investment policies and restrictions;
WHEREAS, the Investment Company Act prohibits any person from acting as
an investment adviser to a registered investment company except pursuant to a
written contract; and
WHEREAS, the Board of Trustees of the Trust wishes to appoint Equitable
as the investment manager of the Trust;
NOW, THEREFORE, the Trust and Equitable hereby amend and restate this
Agreement as follows:
1. APPOINTMENT OF MANAGER
The Trust hereby appoints Equitable as the investment manager for each of the
portfolios of the Trust specified in Appendix A to this Agreement, as such
Appendix A may be amended by Manager and the Trust from time to time
("Portfolios"), subject to the supervision of the Trustees of the Trust and in
the manner and under the terms and conditions set forth in this Agreement.
Manager accepts such appointment and agrees to render the services and to assume
the obligations set forth in this Agreement commencing on its effective date.
Manager will be an independent contractor and will have no authority to act for
or represent the Trust in any way or otherwise be deemed an agent unless
expressly authorized in this Agreement or another writing by the Trust and
Manager.
<PAGE>
2. DUTIES OF THE MANAGER
A. Subject to the general supervision and control of the Trustees of the
Trust and under the terms and conditions set forth in this Agreement,
the Trust acknowledges and agrees that it is contemplated that Manager
will, at its own expense, select and contract with one or more
investment advisers ("Advisers") to manage the investment operations
and composition of each and every Portfolio of the Trust and render
investment advice for each Portfolio, including the purchase,
retention, and disposition of the investments, securities and cash
contained in each Portfolio, in accordance with each Portfolio's
investment objectives, policies and restrictions as stated in the
Trust's Amended and Restated Agreement and Declaration of Trust,
By-Laws, and such Portfolio's Prospectus and Statement of Additional
Information ("SAI"), as is from time to time in effect; provided, that
any contract with an Adviser (an "Advisory Agreement") shall be in
compliance with and approved as required by the Investment Company Act
or in accordance with exemptive relief granted by the Securities and
Exchange Commission ("SEC") under the Investment Company Act.
B. Subject always to the direction and control of the Trustees of the
Trust, Manager will have (i) overall supervisory responsibility for
the general management and investment of each Portfolio's assets; (ii)
full discretion to select new or additional Advisers for each
Portfolio; (iii) full discretion to enter into and materially modify
existing Advisory Agreements with Advisors; (iv) full discretion to
terminate and replace any Adviser; and (v) full investment discretion
to make all determinations with respect to the investment of a
Portfolio's assets not then managed by an Adviser. In connection with
Manager's responsibilities herein, Manager will assess each
Portfolio's investment focus and will seek to implement decisions with
respect to the allocation and reallocation of each Portfolio's assets
among one or more current or additional Advisers from time to time, as
the Manager deems appropriate, to enable each Portfolio to achieve its
investment goals. In addition, Manager will monitor compliance of each
Adviser with the investment objectives, policies and restrictions of
any Portfolio or Portfolios (or portions of any Portfolio) under the
management of such Adviser, and review and report to the Trustees of
the Trust on the performance of each Adviser. Manager will furnish, or
cause the appropriate Adviser(s) to furnish, to the Trust such
statistical information, with respect to the investments that a
Portfolio (or portions of any Portfolio) may hold or contemplate
purchasing, as the Trust may reasonably request. On Manager's own
initiative, Manager will apprise, or cause the appropriate Adviser(s)
to apprise, the Trust of important developments materially affecting
each Portfolio (or any portion of a Portfolio that they advise) and
will furnish the Trust, from time to time, with such information as
may be appropriate for this purpose. Further, Manager agrees to
furnish, or cause the appropriate Adviser(s) to furnish, to the
Trustees of the Trust such periodic and special reports as the
Trustees of the Trust may reasonably request. In addition, Manager
agrees to cause the appropriate Adviser(s) to furnish to third-party
data reporting services all currently available standardized
performance information and other customary data.
C. Manager will also furnish to the Trust, at its own expense and without
renumeration from or other cost to the Trust, the following:
<PAGE>
(i) Office Space. Manager will provide office space in the offices of the
Manager or in such other place as may be reasonably agreed upon by the parties
hereto from time to time, and all necessary office facilities and equipment;
(ii) Personnel. Manager will provide necessary executive and other
personnel, including personnel for the performance of clerical and other office
functions, exclusive of those functions: (a) related to and to be performed
under the Trust's contract or contracts for administration, custodial,
accounting, bookkeeping, transfer, and dividend disbursing agency or similar
services by any entity, including Manager or its affiliates, selected to perform
such services under such contracts; and (b) related to the services to be
provided by any Adviser pursuant to an Advisory Agreement; and
(iii) Preparation of Prospectus and Other Documents. Manager will provide
other information and services, other than services of outside counsel or
independent accountants or services to be provided by any Adviser under any
Advisory Agreement, required in connection with the preparation of all
registration statements and Prospectuses, prospectus supplements, SAIs, all
annual, semiannual, and periodic reports to shareholders of the Trust,
regulatory authorities, or others, and all notices and proxy solicitation
materials, furnished to shareholders of the Trust or regulatory authorities, and
all tax returns.
D. Limitations on Liability. Manager will exercise its best judgment in
rendering its services to the Trust, and the Trust agrees, as an
inducement to Manager's undertaking to do so, that the Manager will
not be liable for any error of judgment or mistake of law or for any
loss suffered by the Trust in connection with the matters to which
this Agreement relates, but will be liable only for willful
misconduct, bad faith, gross negligence, reckless disregard of its
duties or its failure to exercise due care in rendering its services
to the Trust as specified in this Agreement. Any person, even though
an officer, director, employee or agent of Manager, who may be or
become an officer, Trustee, employee or agent of the Trust, shall be
deemed, when rendering services to the Trust or when acting on any
business of the Trust, to be rendering such services to or to be
acting solely for the Trust and not as an officer, director, employee
or agent, or one under the control or direction of Manager, even
though paid by it.
E. Section 11 of the Securities Exchange Act of 1934, as amended. The
Trust hereby agrees that any entity or person associated with Manager
that is a member of a national securities exchange is authorized to
effect any transaction on such exchange for the account of a Portfolio
to the extent and as permitted by Section 11(a)(1)(H) of the
Securities Exchange Act of 1934, as amended ("1934 Act").
F. Section 28(e) of the 1934 Act. Subject to the appropriate policies and
procedures approved by the Board of Trustees, the Manager may, to the
extent authorized by Section 28(e) of the 1934 Act, cause a Portfolio
to pay a broker or dealer that provides brokerage or research services
to the Manager, the Adviser, the Trust and the Portfolio an amount of
commission for effecting a portfolio transaction in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction if the Manager determines, in good faith,
that such amount of commission is reasonable in relationship to the
value of such brokerage or research services provided in terms of that
particular transaction or the Manager's overall responsibilities to
the Portfolio, the Trust or its other investment advisory clients. To
the extent authorized by said Section 28(e) and the Board of Trustees,
the Manager shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by
reason of such action. In addition, subject to seeking the most
favorable price and best execution available and in compliance with
the Conduct Rules of the National Association of
<PAGE>
Securities Dealers, Inc., the Manager may also consider sales of
shares of the Trust as a factor in the selection of brokers and
dealers.
G. Directed Brokerage. Subject to the requirement to seek best price and
execution, and to the appropriate policies and procedures approved by
the Board of Trustees, the Trust reserves the right to direct the
Manager to cause Advisers to effect transactions in portfolio
securities through broker-dealers in a manner that will help generate
resources to: (i) pay the cost of certain expenses which the Trust is
required to pay or for which the Trust is required to arrange payment
pursuant to Section 3.B. of this 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.
3. ALLOCATION OF EXPENSES
A. Expenses Paid by the Manager:
(i) Salaries, Expenses and Fees of Certain Persons. Manager (or its
affiliates) shall pay all salaries, expenses, and fees of the Trustees and
officers of the Trust who are officers, directors/trustees, partners, or
employees of Manager or its affiliates; and
(ii) Assumption of Trust Expenses. The payment or assumption by
Manager of any expense of the Trust that Manager is not required by this
Agreement to pay or assume shall not obligate Manager to pay or assume the
same or any similar expense of the Trust on any subsequent occasion.
B. Expenses Paid by the Trust: The Trust will pay all expenses of its
organization, operations, and business not specifically assumed or
agreed to be paid by Manager, as provided in this Agreement, or by an
Adviser, as provided in an Advisory Agreement. Without limiting the
generality of the foregoing, the Trust shall pay or arrange for the
payment of the following:
(i) Preparing, Printing and Mailing of Certain Documents. The
costs of preparing, setting in type, printing and mailing of
Prospectuses, Prospectus supplements, SAIs, annual, semiannual and
periodic reports, and notices and proxy solicitation materials
required to be furnished to shareholders of the Trust or regulatory
authorities, and all tax returns;
(ii) Officers and Trustees. Compensation of the officers and
Trustees of the Trust who are not officers, directors/trustees,
partners or employees of Manager or its affiliates;
(iii) Registration Fees and Expenses. All legal and other fees
and expenses incurred in connection with the affairs of the Trust,
including those incurred with respect to registering its shares with
regulatory authorities and all fees and expenses incurred in
connection with the preparation, setting in type, printing, and filing
with necessary regulatory authorities of any registration statement
and Prospectus, and any amendments or supplements that may be made
from time to time, including registration, filing and other fees in
connection with requirements of regulatory authorities;
(iv) Custodian and Accounting Services. All expenses of the
transfer, receipt, safekeeping, servicing and accounting for the
Trust's cash, securities, and other property, including all charges of
depositories, custodians, and other agents, if any;
(v) Independent Legal and Accounting Fees and Expenses. The
charges for the services and expenses of the independent accountants
and legal counsel retained by the Trust, for itself or its Independent
Trustees (as defined herein);
(vi) Transfer Agent. The charges and expenses of maintaining
shareholder accounts, including all charges of transfer, bookkeeping,
and dividend disbursing agents appointed by the Trust;
<PAGE>
(vii) Brokerage Commissions. All brokers' commissions and issue
and transfer taxes chargeable to the Trust in connection with
securities transactions to which the Trust is a party;
(viii) Taxes. All taxes and corporate fees payable by or with
respect to the Trust to federal, state, or other governmental
agencies;
(ix) Trade Association Fees. Any membership fees, dues or
expenses incurred in connection with the Trust's membership in any
trade association or similar organizations;
(x) Bonding and Insurance. All insurance premiums for fidelity
and other coverage;
(xi) Shareholder and Board Meetings. All expenses incidental to
holding shareholders and Trustees meetings, including the printing of
notices and proxy materials and proxy solicitation fees and expenses;
(xii) Pricing. All expenses of pricing of the net asset value per
share of each Portfolio, including the cost of any equipment or
services to obtain price quotations; and
(xiii) Nonrecurring and Extraordinary Expenses. Such
extraordinary expenses, such as indemnification payments or damages
awarded in litigation or settlements made.
4. COMPENSATION OF MANAGER
For its services performed hereunder, the Trust will pay Manager with respect to
each Portfolio the compensation specified in Appendix B to this Agreement. Such
compensation shall be paid to Manager by the Trust on the first day of each
month; however, the Trust will calculate this charge on the daily average value
of the assets of each Portfolio and accrue it on a daily basis.
5. NON-EXCLUSIVITY
The services of Manager to the Trust are not to be deemed to be exclusive, and
Manager shall be free to render investment management, advisory or other
services to others (including other investment companies) and to engage in other
activities so long as the services provided hereunder by Manager are not
impaired. It is understood and agreed that the directors, officers and employees
of Manager are not prohibited from engaging in any other business activity or
from rendering services to any other person, or from serving as partners,
officers, directors/trustees, or employees of any other firm or corporation,
including other investment companies.
6. SUPPLEMENTAL ARRANGEMENTS
Manager may enter into arrangements with its parent or other persons affiliated
or unaffiliated with Manager for the provision of certain personnel and
facilities to Manager to enable Manager to fulfill its duties and obligations
under this Agreement.
7. REGULATION
Manager shall submit to all regulatory and administrative bodies having
jurisdiction over the services provided pursuant to this Agreement any
information, reports, or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
8. RECORDS
The records relating to the services provided under this Agreement shall be the
property of the Trust and shall be under its control; however, the Trust shall
furnish to Manager such records and
<PAGE>
permit it to retain such records (either in original or in duplicate form) as it
shall reasonably require in order to carry out its duties. In the event of the
termination of this Agreement, such records shall promptly be returned to the
Trust by Manager free from any claim or retention of rights therein. Manager
shall keep confidential any information obtained in connection with its duties
hereunder and disclose such information only if the Trust has authorized such
disclosure or if such disclosure is expressly required or lawfully requested by
applicable federal or state regulatory authorities.
9. DURATION OF AGREEMENT
This Agreement, as amended and restated, shall become effective for each
Portfolio on May 1, 2000, unless the requisite approval is not obtained by May
1, 2000, in which case the effective date for any such Portfolio will be the
date indicated in Appendix A. Further amendments to this Agreement shall become
effective on the later of the date specified in such amendment (after execution
by all parties) or the date of any meeting of the shareholders of the Trust
relating to such amendment, which for these purposes may be the sole initial
shareholder of the Trust, at which meeting this Agreement is approved by the
vote of a majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Portfolios. The Agreement will continue in effect
for a period more than one year from the date of its execution only so long as
such continuance is specifically approved at least annually either by (i) the
Trustees of the Trust or (ii) by the vote of either a majority of the
outstanding voting securities of the Trust or, as appropriate, a majority of the
outstanding voting securities of any affected Portfolio, provided that, in
either event, such continuance shall also be approved by the vote of a majority
of the Trustees of the Trust who are not "interested persons" ("Independent
Trustees") of any party to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval. The required shareholder approval of
the Agreement or of any continuance of the Agreement shall be effective with
respect to any affected Portfolio if a "majority of the outstanding voting
securities" (as defined in Rule 18f-2(h) under the Investment Company Act) of
the affected Portfolio votes to approve the Agreement or its continuance,
notwithstanding that the Agreement or its continuance may not have been approved
by a majority of the outstanding voting securities of (a) any other Portfolio
affected by the Agreement or (b) all the Portfolios of the Trust.
If the shareholders of any Portfolio fail to approve the Agreement or any
continuance of the Agreement, Manager will continue to act as investment manager
with respect to such Portfolio pending the required approval of the Agreement or
its continuance or of a new contract with Manager or a different investment
manager or other definitive action; provided, that the compensation received by
Manager in respect of such Portfolio during such period will be no more than its
actual costs incurred in furnishing investment advisory and management services
to such Portfolio or the amount it would have received under the Agreement in
respect of such Portfolio, whichever is less.
10. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees, including a majority of the Independent Trustees of
the Trust, by the vote of a majority of the outstanding voting securities of the
Trust, or with respect to any affected Portfolio, by the vote of a majority of
the outstanding voting securities of such Portfolio, on sixty (60) days' written
notice to Manager, or by Manager on sixty (60) days' written notice to the
Trust. This Agreement will automatically terminate, without payment of any
penalty, in the event of its assignment.
<PAGE>
11. PROVISION OF CERTAIN INFORMATION BY MANAGER
Manager will promptly notify the Trust in writing of the occurrence of any
of the following events:
A. Manager fails to be registered as an investment adviser under the
Advisers Act or under the laws of any jurisdiction in which Manager is
required to be registered as an investment adviser in order to perform
its obligations under this Agreement;
B. Manager is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or
by any court, public board or body, involving the affairs of the
Trust; and/or
C. the chief executive officer or controlling stockholder of Manager or
the portfolio manager of any Portfolio changes or there is otherwise
an actual change in control or management of Manager.
12. AMENDMENTS TO THE AGREEMENT
Except to the extent permitted by the Investment Company Act or the rules or
regulations thereunder or pursuant to any exemptive relief granted by the SEC,
this Agreement may be amended by the parties only if such amendment, if
material, is specifically approved by the vote of a majority of the outstanding
voting securities of each of the Portfolios affected by the amendment (unless
such approval is not required by Section 15 of the Investment Company Act as
interpreted by the SEC or its staff) and by the vote of a majority of the
Independent Trustees of the Trust cast in person at a meeting called for the
purpose of voting on such approval. The required shareholder approval shall be
effective with respect to any Portfolio if a majority of the outstanding voting
securities of the [series of] shares of that Portfolio vote to approve the
amendment, notwithstanding that the amendment may not have been approved by a
majority of the outstanding voting securities of (a) any other Portfolio
affected by the amendment or (b) all the Portfolios of the Trust.
13. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the parties.
14. HEADINGS
The headings in the sections of this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof.
15. NOTICES
All notices required to be given pursuant to this Agreement shall be delivered
or mailed to the last known business address of the Trust or Manager in person
or by registered mail or a private mail or delivery service providing the sender
with notice of receipt.
Notice shall be deemed given on the date delivered or mailed in accordance with
this section.
16. FORCE MAJEURE
Manager shall not be liable for delays or errors occurring by reason of
circumstances beyond its control, including but not limited to acts of civil or
military authority, national emergencies, work stoppages, fire, flood,
catastrophe, acts of God, insurrection, war, riot, or failure of communication
or power supply. In the event of equipment breakdowns beyond its control,
<PAGE>
Manager shall take reasonable steps to minimize service interruptions but shall
have no liability with respect thereto.
17. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in law or
in equity, the Agreement shall be construed, insofar as is possible, as if such
portion had never been contained herein.
18. INTERPRETATION
Nothing herein contained shall be deemed to require the Trust to take any action
contrary to its Amended and Restated Agreement and Declaration of Trust or
By-Laws, or any applicable statutory or regulatory requirements to which it is
subject or by which it is bound, or to relieve or deprive the Trustees of their
responsibility for and control of the conduct of the affairs of the Trust.
19. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of Delaware (without giving effect to its
conflict of laws principles), or any of the applicable provisions of the
Investment Company Act. To the extent that the laws of the State of Delaware, or
any of the provisions in this Agreement, conflict with applicable provisions of
the Investment Company Act, the latter shall control. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the Investment Company Act
shall be resolved by reference to such term or provision of the Investment
Company Act and to interpretations thereof, if any, by the United States courts
or, in the absence of any controlling decision of any such court, by rules,
regulations or orders of the SEC validly issued pursuant to the Investment
Company Act. Specifically, the terms "vote of a majority of the outstanding
voting securities," "interested persons," "assignment," and "affiliated
persons," as used herein shall have the meanings assigned to them by Section
2(a) of the Investment Company Act unless otherwise stated herein. In addition,
where the effect of a requirement of the Investment Company Act reflected in any
provision of this Agreement is relaxed by a rule, regulation or order of the
SEC, whether of special or of general application, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers as of the date first mentioned above.
EQ ADVISORS TRUST
By:
---------------------------------------------
Peter D. Noris
President and Trustee
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By:
---------------------------------------------
Michael Hegarty
Director, President and Chief Operating Officer
<PAGE>
APPENDIX A
TO THE
AMENDED AND RESTATED
INVESTMENT MANAGEMENT AGREEMENT
PORTFOLIOS
<TABLE>
<CAPTION>
<S> <C>
EQ/Putnam Balanced Portfolio MFS Growth with Income Portfolio
EQ/Putnam Growth & Income Value Portfolio EQ/Alliance Premier Growth Portfolio
EQ/Putnam International Equity Portfolio Capital Guardian Research Portfolio
EQ/Putnam Investors Growth Portfolio Capital Guardian U.S. Equity Portfolio
Merrill Lynch Basic Value Equity Portfolio Capital Guardian International Portfolio
Merrill Lynch World Strategy Portfolio Alliance Money Market Portfolio
MFS Emerging Growth Companies Portfolio Alliance Intermediate Government Securities Portfolio
MFS Research Portfolio Alliance Quality Bond Portfolio
Morgan Stanley Emerging Markets Equity Portfolio Alliance High Yield Portfolio
T. Rowe Price Equity Income Portfolio EQ/Balanced Portfolio
T. Rowe Price International Stock Portfolio Alliance Conservative Investors Portfolio
Warburg Pincus Small Company Value Portfolio Alliance Growth Investors Portfolio
BT Equity 500 Index Portfolio Alliance Common Stock Portfolio
BT International Equity Index Portfolio Alliance Equity Index Portfolio
BT Small Company Index Portfolio Alliance Growth And Income Portfolio
JPM Core Bond Portfolio EQ/Aggressive Stock Portfolio
Lazard Large Cap Value Portfolio Alliance Small Cap Growth Portfolio
Lazard Small Cap Value Portfolio Alliance Global Portfolio
EQ/Evergreen Foundation Portfolio Alliance International Portfolio
EQ/Evergreen Portfolio Calvert Socially Responsible Portfolio
</TABLE>
Date: May 1, 2000
<PAGE>
APPENDIX B
The Trust shall pay the Manager, at the end of each calendar month,
compensation computed daily at an annual rate equal to the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(as a percentage of average daily net assets) (fee on all assets)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Index Portfolios
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Equity Index 0.250%
- ------------------------------------------------------------------------------------------------------------------------------------
BT Equity 500 Index 0.250%
- ------------------------------------------------------------------------------------------------------------------------------------
BT International Equity Index 0.350%
- ------------------------------------------------------------------------------------------------------------------------------------
BT Small Company Index 0.250%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
(as a percentage of average daily net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
First Next Next Next
Debt Portfolios $750 Million $750 Million $1 Billion $2.5 Billion Thereafter
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance High Yield 0.600% 0.575% 0.550% 0.530% 0.520%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Intermediate Government Securities 0.500% 0.475% 0.450% 0.430% 0.420%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Money Market 0.350% 0.325% 0.300% 0.280% 0.270%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Quality Bond 0.525% 0.500% 0.475% 0.455% 0.445%
- ------------------------------------------------------------------------------------------------------------------------------------
JPM Core Bond 0.450% 0.425% 0.400% 0.380% 0.370%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
(as a percentage of average daily net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
First Next Next Next
Equity Portfolios $1 Billion $1 Billion $3 Billion $5 Billion Thereafter
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Common Stock 0.550% 0.500% 0.475% 0.450% 0.425%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Conservative Investors 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Global 0.750% 0.700% 0.675% 0.650% 0.625%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth and Income 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth Investors 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance International 0.850% 0.800% 0.775% 0.750% 0.725%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth 0.750% 0.700% 0.675% 0.650% 0.625%
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Socially Responsible 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Guardian International 0.850% 0.800% 0.775% 0.750% 0.725%
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Guardian Research 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Guardian U.S. Equity 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------------
EQ/Aggressive Stock 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------------
EQ/Alliance Premier Growth 0.900% 0.850% 0.825% 0.800% 0.775%
- ------------------------------------------------------------------------------------------------------------------------------------
EQ/Balanced 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------------
EQ/Evergreen Foundation 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------------
EQ/Evergreen Portfolio 0.650% 0.600% 0.575% 0.550% 0.525%`
- ------------------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Balanced 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
(as a percentage of average daily net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
First Next Next Next
Equity Portfolios $1 Billion $1 Billion $3 Billion $5 Billion Thereafter
- ------------------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Growth & Income Value 0.600% 0.550% .0525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------------
EQ/Putnam International Equity 0.850% 0.800% 0.775% 0.750% 0.725%
- ------------------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Investors Growth 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------------
Lazard Large Cap Value 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------------
Lazard Small Cap Value 0.750% 0.700% 0.675% 0.650% 0.625%
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Basic Value Equity 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch World Strategy 0.700% 0.650% 0.625% 0.600% 0.575%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Companies 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Research 0.650% 0.600% 0.575% 0.550% 0.525%
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Markets Equity 1.150% 1.100% 1.075% 1.050% 1.025%
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Income 0.600% 0.550% 0.525% 0.500% 0.475%
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock 0.850% 0.800% 0.775% 0.750% 0.725%
- ------------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Small Company Value 0.750% 0.700% 0.675% 0.650% 0.625%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Date: May 1, 2000
<PAGE>
Exhibit (d)(5)(iii)
AMENDMENT NO. 2
TO
INVESTMENT ADVISORY AGREEMENT
AMENDMENT NO. 2 to the Investment Advisory Agreement ("Amendment No.
2") dated as of May 1, 2000, between The Equitable Life Assurance Society of the
United States, a New York corporation ("Equitable") and Massachusetts Financial
Services Company, a Delaware corporation ("Adviser").
Equitable and the Adviser agree to modify and amend the Investment
Advisory Agreement ("Agreement") dated as of April 14, 1997, Investment Advisory
as amended by Amendment No. 1 to the Agreement dated as of December 31, 1998,
between them as follows:
1. New Portfolio. Equitable hereby appoints the Adviser as the investment
adviser of that portion of the total assets of the EQ/Aggressive Stock Portfolio
on the terms and conditions contained in the Agreement.
2. Duration. Section 9 of the Agreement is replaced in its entirety as follows:
(a) The Agreement became effective with respect to the MFS Emerging
Growth Companies Portfolio and the MFS Research Portfolio on April 14, 1997, the
MFS Growth with Income Portfolio on December 31, 1998 and will become effective
with respect to the New Portfolio on May 1, 2000.
(b) The Agreement will continue in effect with respect to the MFS
Emerging Growth Companies Portfolio and the MFS Research Portfolio until April
14, 1999 and may be continued thereafter pursuant to subsection (e) below.
(c) The Agreement will continue in effect with respect to the MFS
Growth with Income Portfolio until December 31, 2000 and may be continued
thereafter pursuant to subsection (e) below.
(d) The Agreement will continue in effect with respect to the New
Portfolio until May 1, 2002 and may be continued thereafter pursuant to
subsection (e) below.
(e) With respect to each Portfolio this Agreement shall continue in
effect annually after the date specified in subsection (b), (c) or (d), as the
case may be, only so long as such continuance is specifically approved at least
annually either by the Board of Trustees or by a majority of the outstanding
voting securities of the Portfolio, provided that in either event such
continuance shall also be approved by the vote of a majority of the Trustees of
the EQ Advisors Trust who are not "interested persons" (as defined in the
Investment Company Act of 1940) ("Independent Trustees") of any party to the
Agreement cast in person at a meeting called for the purpose of voting on such
approval. Any required shareholder approval of the Agreement or of any
continuance of the Agreement shall be effective with respect to a Portfolio if a
majority of the outstanding voting securities of the series (as defined in Rule
18f-2(h) under the Investment Company Act of 1940) of shares of such Portfolio
votes to approve the Agreement or its continuance, notwithstanding that the
Agreement or its continuance may not have been approved by a majority of the
outstanding voting securities of (a) any other portfolio affected by this
Agreement or (b) all the portfolios of the Trust.
<PAGE>
3. Appendix A. Appendix A to the Agreement, setting forth the Portfolios of the
Trust for which the Adviser is appointed as the investment adviser (or one of
the investment advisers) and the fees payable to the Adviser with respect to
each Portfolio (or portion thereof) for which the Adviser provides advisory
services under the Agreement, is hereby replaced in its entirety by Appendix A
attached hereto.
Except as modified and amended hereby, the Agreement is hereby ratified and
confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 2 as of the date first above set forth.
THE EQUITABLE LIFE ASSURANCE MASSACHUSETTS FINANCIAL
SOCIETY OF THE UNITED STATES SERVICES COMPANY
By:_______________________ By: _______________________
Peter D. Noris Name:
Executive Vice President Title:
<PAGE>
APPENDIX A
TO
AMENDMENT NO. 2
TO
INVESTMENT ADVISORY AGREEMENT
Portfolio Advisory Fee
--------- ------------
MFS Emerging Growth Companies Portfolio* .35% of the Portfolio's average
daily net assets up to and
including $500 million; .30% of the
Portfolio's average daily net
assets on the next $1 billion of
the Portfolio's average daily net
assets and .25% of the Portfolio's
average daily net assets over $1.5
billion.
MFS Research Portfolio .35% of the Portfolio's average
daily net assets up to and
including $500 million; .30% of the
Portfolio's average daily net
assets on the next $1 billion of
the Portfolio's average daily net
assets and .25% of the Portfolio's
average daily net assets over $1.5
billion.
MFS Growth with Income Portfolio .35% of the Portfolio's average
daily net assets up to and
including $500 million; .30% of the
Portfolio's average daily net
assets on the next $1 billion of
the Portfolio's average daily net
assets and .25% of the Portfolio's
average daily net assets over $1.5
billion.
EQ/ Aggressive Stock Portfolio* .35% of the MFS Allocated Portion's
average daily net assets, up to and
including $500 million; .30% of the
MFS Allocated Portion's average
daily net assets on the next $1
billion of the MFS Allocated
Portion's average daily net assets;
and .25% of the MFS Allocated
Portion's average daily net assets
over $1.5 billion.**
*For purposes of calculating the advisory fee for the MFS Emerging Growth
Companies Portfolio and the EQ/ Aggressive Stock Portfolio, the total assets of
each of these Portfolios will be aggregated.
**The "MFS Allocated Portion" is that portion of the EQ/Aggressive Stock
Portfolio's average daily net assets advised by the Adviser.
<PAGE>
Exhibit (d)(12)(ii)
AMENDMENT NO. 1
TO
INVESTMENT ADVISORY AGREEMENT
AMENDMENT NO. 1 to Investment Advisory Agreement ("Amendment No. 1"), dated
as of October 18, 1999 between The Equitable Life Assurance Society of the
United States, a New York corporation ("Equitable") and Alliance Capital
Management L.P., a Delaware limited partnership (the "Adviser").
Equitable and the Adviser agree to modify and amend the Investment Advisory
Agreement dated as of May 1, 1999 (the "Agreement"), between them as follows:
1. New Portfolio. Equitable hereby appoints the Adviser as the investment
adviser of 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 and the Alliance Small Cap Growth Portfolio, Alliance
Global Portfolio, Alliance International Portfolio, (the "New Portfolios") on
the terms and conditions contained in the Agreement.
2. Duration of Agreement. Section 9 of the Agreement is replaced in its entirety
as follows:
(a) The Agreement became effective with respect to the EQ/Alliance Premier
Growth Portfolio on May 1, 1999 and become effective with respect to the New
Portfolio on the date of this Amendment.
(b) The Agreement will continue in effect with respect to the EQ/Alliance
Premier Growth Portfolio until May 1, 2001 and may be continued thereafter
pursuant to subsection (d) below.
(c) The Agreement will continue in effect with respect to the New Portfolio
until October 18, 2001 and may be continued thereafter pursuant to subsection
(d) below.
(d) With respect to each Portfolio, this Agreement shall continue in effect
annually after the date specified in subsection (b) or (c), as the case may be,
only so long as such continuance is specifically approved at least annually
either by the Board of Trustees or by a majority of the outstanding voting
securities of the Portfolio, provided that in either event such continuance
shall also be approved by the vote of a majority of the Trustees of the EQ
Advisors Trust who are not "interested persons" (as defined in the Investment
Company Act of 1940) ("Independent Trustees") of any party to the Agreement cast
in person at a meeting called for the purpose of voting on such approval. The
required shareholder approval of the Agreement or of any continuance of the
Agreement shall be effective with respect to a Portfolio if a majority of the
outstanding voting securities of the series (as defined in Rule 18f-2(h) under
the Investment Company Act of 1940) of shares of such Portfolio votes to approve
the Agreement or its continuance, notwithstanding that the Agreement or its
continuance may not have been approved by a majority of the outstanding voting
securities of (a) any other portfolio affected by this Agreement or (b) all the
portfolios of the Trust.
<PAGE>
3. Appendix A. Appendix A to the Agreement, setting forth the Portfolios of the
Trust for which the Adviser is appointed as the investment adviser and the fees
payable to the Adviser with respect to each Portfolio, is hereby replaced in its
entirety by Appendix A attached hereto.
4. Ratification. Except as modified and amended hereby, the Agreement is hereby
ratified and confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
No. 1 as of the date first above set forth.
ALLIANCE CAPITAL MANAGEMENT L.P.
THE EQUITABLE LIFE ASSURANCE By: ALLIANCE CAPITAL MANAGEMENT CORPORATION,
SOCIETY OF THE UNITED STATES its General Partner
By:_____________________________ By:_____________________________
Peter D. Noris Mark R. Manley
Executive Vice President Assistant Secretary
<PAGE>
APPENDIX A
TO
AMENDMENT NO. 1
TO
INVESTMENT ADVISORY AGREEMENT
<TABLE>
<CAPTION>
ANNUAL
PORTFOLIO: ADVISORY FEE:
EQ/ALLIANCE PREMIER GROWTH PORTFOLIO .50% of the Portfolio's daily net assets
FIRST NEXT NEXT NEXT NEXT
PORTFOLIO: $350MM $400MM $750MM $1 BILLION $2.5 BILLION THEREAFTER
- ---------- ------ ------ ------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
ALLIANCE INTERNATIONAL PORTFOLIO 0.750% 0.765% 0.705% 0.680% 0.660% 0.650%
ALLIANCE GLOBAL PORTFOLIO 0.525% 0.540% 0.480% 0.430% 0.410% 0.400%
ALLIANCE AGGRESSIVE STOCK PORTFOLIO 0.475% 0.490% 0.455% 0.405% 0.380% 0.355%
ALLIANCE COMMON STOCK PORTFOLIO 0.325% 0.340% 0.305% 0.255% 0.235% 0.225%
ALLIANCE GROWTH & INCOME PORTFOLIO 0.400% 0.415% 0.405% 0.380% 0.360% 0.350%
ALLIANCE SMALL CAP GROWTH PORTFOLIO 0.650% 0.675% 0.650% 0.625% 0.600% 0.575%
ALLIANCE GROWTH INVESTORS PORTFOLIO 0.400% 0.415% 0.380% 0.330% 0.305% 0.280%
ALLIANCE BALANCED PORTFOLIO 0.300% .315% 0.280% 0.230% 0.205% 0.180%
ALLIANCE CONSERVATIVE INVESTORS 0.325% 0.340% 0.305% 0.255% 0.230% 0.205%
PORTFOLIO
ALLIANCE HIGH YIELD PORTFOLIO 0.450% 0.465% 0.455% 0.430% 0.410% 0.400%
ALLIANCE QUALITY BOND PORTFOLIO 0.375% 0.390% 0.380% 0.355% 0.335% 0.325%
ALLIANCE INTERMEDIATE GOV'T 0.350% 0.365% 0.355% 0.330% 0.310% 0.300%
SECURITIES PORTFOLIO
ALLIANCE EQUITY INDEX PORTFOLIO 0.175% 0.190% 0.180% 0.155% 0.135% 0.125%
ALLIANCE MONEY MARKET PORTFOLIO 0.200% 0.215% 0.205% 0.180% 0.160% 0.150%
</TABLE>
<PAGE>
EXHIBIT (d)(12)(iii)
AMENDMENT NO. 2
TO
INVESTMENT ADVISORY AGREEMENT
AMENDMENT NO. 2 to Investment Advisory Agreement ("Amendment No. 2"), dated
as of May 1, 2000, between The Equitable Life Assurance Society of the United
States, a New York corporation ("Equitable") and Alliance Capital Management
L.P., a Delaware limited partnership ("Adviser").
Equitable and the Adviser agree to modify and amend the Investment Advisory
Agreement dated as of May 1, 1999 ("Agreement"), as amended by Amendment No. 1
dated October 18, 1999 ("Amendment No. 1") as follows:
1. Portfolios. Equitable hereby reaffirms its appointment of the Adviser as the
investment adviser for EQ/Alliance Premier Growth Portfolio and each of the
Portfolios added to the Agreement by Amendment No. 1 on the terms and conditions
set forth in the Agreement and Amendment No. 1. With respect to the
EQ/Aggressive Stock Portfolio and the EQ/Balanced Portfolio, Equitable may from
time to time allocate and reallocate the assets of each of those Portfolios to
one or more investment advisers in addition to the Adviser.
2. Duration. Section 9 of the Agreement is replaced in its entirety as follows:
(a) The Agreement became effective with respect to the EQ/Alliance Premier
Growth Portfolio on May 1, 1999, and became effective on October 18, 1999 for
each of the Portfolios added to the Agreement by Amendment No. 1, including the
Alliance Aggressive Stock Portfolio (which is being renamed the "EQ/Aggressive
Stock Portfolio") and the Alliance Balanced Portfolio (which is being renamed
the "EQ/Balanced Portfolio').
(b) The Agreement will continue in effect with respect to the EQ/Alliance
Premier Growth Portfolio until April 30, 2001 and may be continued thereafter
pursuant to (d) below.
(c) The Agreement will continue in effect with respect to each of the
Portfolios specified in Amendment No. 1, including the EQ/Aggressive Stock
Portfolio, and EQ/Balanced Portfolio until October 17, 2001 and may be continued
thereafter pursuant to (d) below.
(d) With respect to each Portfolio this Agreement shall continue in effect
annually after the date specified in subsection (b), or (c), as the case may be,
only so long as such continuance is specifically approved at least annually
either by the Board of Trustees or by a majority of the outstanding voting
securities of the Portfolio, provided that in either event such continuance
shall also be approved by the vote of a majority of the Trustees of the EQ
Advisors Trust who are not "interested persons" (as defined in the Investment
Company Act of 1940) (the "Independent Trustees") of any party to the Agreement
cast in person at a meeting called for the purpose of voting on such approval.
Any required shareholder approval of the Agreement or of any continuance of the
Agreement shall be effective with respect to a Portfolio if a majority of the
outstanding voting securities of the series (as defined in Rule 18f-2(h) under
the Investment Company Act of 1940) of shares of such Portfolio votes to approve
the Agreement or its continuance, notwithstanding that the Agreement or its
continuance may not have been approved
<PAGE>
by a majority of the outstanding voting securities of (a) any other portfolio
affected by this Agreement or (b) all the portfolios of the Trust.
3. Appendix A. Appendix A to the Agreement, setting forth the Portfolios of the
Trust for which the Adviser is appointed as the investment adviser (or one of
the investment advisers) and the fees payable to the Adviser with respect to
each Portfolio (or portion thereof) for which the Adviser provides services
under the Agreement, as designated from time to time by Equitable, is hereby
replaced in its entirety by Appendix A attached hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 2 as of the date first above set forth.
ALLIANCE CAPITAL MANAGEMENT L.P.
THE EQUITABLE LIFE ASSURANCE By: ALLIANCE CAPITAL
SOCIETY OF THE UNITED STATES MANAGEMENT CORPORATION, its
General Partner
By:_____________________________ By:_____________________________
Peter D. Noris Mark R. Manley
Executive Vice President Assistant Secretary
<PAGE>
APPENDIX A
TO AMENDMENT NO. 2
TO INVESTMENT ADVISORY AGREEMENT
Portfolio Annual Advisory Fee:
EQ/Alliance Premier Growth Portfolio .50% of the Portfolio's daily net assets
<TABLE>
<CAPTION>
First Next Next Next Next
$350MM $400 MM $750MM $1 Billion $2.5 Billion Thereafter
------ ------- ------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Alliance International Portfolio 0.750% 0.765% 0.705% 0.680% 0.660% 0.650%
Alliance Global Portfolio 0.525% 0.540% 0.480% 0.430% 0.410% 0.400%
EQ/Aggressive Stock Portfolio* 0.475% 0.490% 0.455% 0.405% 0.380% 0.355%
Alliance Common Stock Portfolio 0.325% 0.340% 0.305% 0.255% 0.235% 0.225%
Alliance Growth & Income Portfolio 0.400% 0.415% 0.405% 0.380% 0.360% 0.350%
Alliance Small Cap Growth Portfolio 0.650% 0.675% 0.650% 0.625% 0.600% 0.575%
Alliance Growth Investors Portfolio 0.400% 0.415% 0.380% 0.330% 0.305% 0.280%
EQ/Balanced Portfolio* 0.300% 0.315% 0.280% 0.230% 0.205% 0.180%
Alliance Conservative Investors
Portfolio 0.325% 0.340% 0.305% 0.255% 0.230% 0.205%
Alliance High Yield Portfolio 0.450% 0.465% 0.455% 0.430% 0.410% 0.400%
Alliance Quality Bond Portfolio 0.375% 0.390% 0.380% 0.355% 0.335% 0.325%
Alliance Intermediate
Government Securities Portfolio 0.350% 0.365% 0.355% 0.330% 0.310% 0.300%
Alliance Equity Index Portfolio 0.175% 0.190% 0.180% 0.155% 0.135% 0.125%
Alliance Money Market Portfolio 0.200% 0.215% 0.205% 0.180% 0.160% 0.150%
</TABLE>
*Fee to be paid with respect to this Portfolio shall be based only on the
portion of the Portfolio's average daily net assets advised by the Adviser,
which may be referred to as the "Alliance Allocated Portion".
<PAGE>
EXHIBIT (e)(1)(v)
AMENDMENT NO. 4 TO
DISTRIBUTION AGREEMENT
EQ FINANCIAL CONSULTANTS, INC. / CLASS IA SHARES
AMENDMENT NO. 4 to Distribution Agreement ("Amendment No. 4"), dated as of
August 30, 1999, between EQ Advisors Trust, a Delaware business trust (the
"Trust") and EQ Financial Consultants, Inc., a Delaware corporation (the
"Distributor").
The Trust and the Distributor agree to modify and amend the Distribution
Agreement relating to Class IA Shares dated as of April 14, 1997 (the "Original
Agreement"), as amended by Amendment No. 1, dated as of December 9, 1997,
Amendment No. 2, dated as of December 31, 1998 and Amendment No. 3, dated as of
April 14, 1999 (the Original Agreement, together with such Amendments, the
"Agreement") as herein provided. All terms used in this Amendment No. 4, unless
defined herein to the contrary, shall have the meaning given such terms in the
Agreement.
1. New Portfolios. The Trust hereby authorizes the Distributor to participate in
the distribution of Class IA Shares of the following new portfolios (the "New
Portfolios") on the terms and conditions contained in the Agreement:
Calvert Socially Responsible Portfolio
Alliance Aggressive Stock Portfolio
Alliance Balanced Portfolio
Alliance Common Stock Portfolio
Alliance Conservative Investors Portfolio
Alliance Equity Index Portfolio
Alliance Growth and Income Portfolio
Alliance Global 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
2. Effective Date. The effective date of this Amendment No. 4 shall be August
30, 1999 with respect to the Calvert Socially Responsible Portfolio and October
18, 1999 with respect to all other New Portfolios.
3. Duration of Agreement. This Agreement shall continue in effect until August
30, 2000 with respect to the Calvert Socially Responsible Portfolio and until
October 18, 2000 with respect to all other New Portfolios and thereafter will
continue on a year to year basis with respect to each of such Portfolios only so
long as each such continuance is specifically approved at least annually either
by (a) the Board of Trustees of the Trust or (b) persons having voting rights in
respect of the Trust, by the vote stated in Section 11 of the Original
Agreement, voted in accordance with the provisions contained in the
Participation Agreement (as defined in the Original Agreement); provided,
however, that in either event such continuance shall also be
<PAGE>
approved by a vote of a majority of the Trustees of the Trust who are not
interested persons of any party to the Agreement, cast in person at a meeting
called for the purpose of voting on such approval.
4. Appendix A. Appendix A to the Agreement, setting forth the Portfolios of the
Trust for which the Distributor is authorized to distribute Class IA Shares, is
hereby replaced in its entirety by Appendix A attached hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 4 as of the date first above set forth.
EQ ADVISORS TRUST EQ FINANCIAL CONSULTANTS, INC.
By: /s/ Peter D. Noris By: /s/ Michael S. Martin
---------- --------------- ------------ -----------------
Peter D. Noris Michael S. Martin
President and Trustee Chairman of the Board and
Chief Executive Officer
<PAGE>
APPENDIX A
TO
AMENDMENT NO. 4
TO
DISTRIBUTION AGREEMENT
CLASS IA SHARES
PORTFOLIOS
<TABLE>
<CAPTION>
Portfolios In Original Agreement:
- ---------------------------------
<S> <C>
EQ/Putnam Growth & Income Value MFS Research Portfolio
Portfolio MFS Emerging Growth Companies Portfolio
EQ/Putnam International Equity Portfolio Morgan Stanley Emerging Markets Equity
EQ/Putnam Investors Growth Portfolio Portfolio
EQ/Putnam Balanced Portfolio T. Rowe Price International Stock Portfolio
Merrill Lynch World Strategy Portfolio T. Rowe Price Equity Income Portfolio
Merrill Lynch Basic Value Equity Warburg Pincus Small Company Value Portfolio
Portfolio
Portfolios Added by Amendment No. 1:
- ------------------------------------
BT Equity 500 Index Portfolio JPM Core Bond Portfolio
BT International Equity Index Portfolio Lazard Small Cap Value Portfolio
BT Small Company Index Portfolio Lazard Large Cap Value Portfolio
Portfolios Added by Amendment No. 2:
- ------------------------------------
EQ/Evergreen Foundation Portfolio MFS Growth with Income Portfolio
EQ/Evergreen Portfolio
Portfolios Added by Amendment No. 3:
- ------------------------------------
EQ/Alliance Premier Growth Portfolio Capital Guardian U.S. Equity Portfolio
Capital Guardian Research Portfolio Capital Guardian International Portfolio
Portfolios Added by Amendment No. 4:
- ------------------------------------
Calvert Socially Responsible Portfolio Alliance Growth Investors Portfolio
Alliance Aggressive Stock Portfolio Alliance High Yield Portfolio
Alliance Balanced Portfolio Alliance Intermediate Government
Alliance Common Stock Portfolio Securities Portfolio
Alliance Conservative Investors Portfolio Alliance International Portfolio
Alliance Equity Index Portfolio Alliance Money Market Portfolio
Alliance Growth and Income Portfolio Alliance Quality Bond Portfolio
Alliance Global Portfolio Alliance Small Cap Growth Portfolio
</TABLE>
<PAGE>
EXHIBIT (e)(1)(vi)
FORM OF AMENDMENT NO. 5
TO
DISTRIBUTION AGREEMENT
AXA ADVISORS, LLC/CLASS IA SHARES
AMENDMENT NO. 5 to Distribution Agreement ("Amendment No. 5"), dated as
of May 1, 2000, between EQ Advisors Trust, a Delaware business trust (the
"Trust") and AXA Advisors, LLC a Delaware Limited Liability Company (the
"Distributor").
The Trust and the Distributor agree to modify and amend the
Distribution Agreement relating to Class IA Shares dated as of April 14, 1997
(the "Original Agreement"), as amended by Amendment No. 1, dated as of December
9, 1997, Amendment No. 2, dated as of December 31, 1998, Amendment No. 3, dated
as of April 14, 1999 and Amendment No. 4 dated as of August 30, 1999 (the
Original Agreement, together with such Amendments, the "Agreement") as herein
provided. All terms used in this Amendment No. 5, unless defined herein to the
contrary, shall have the meaning given such terms in the Agreement.
1. New Portfolio. The Trust hereby authorizes the Distributor to
participate in the distribution of Class IA Shares of the following new
portfolio (the "New Portfolio") on the terms and conditions contained in the
Agreement:
EQ/Alliance Technology Portfolio
2. Effective Date. The effective date of this Amendment No. 5 shall be
May 1, 2000 with respect to the EQ/Alliance Technology Portfolio.
3. Duration of Agreement. This Agreement shall continue in effect until
May 1, 2001 with respect to the EQ/Alliance Technology Portfolio and thereafter
will continue on a year to year basis with respect to the Portfolio only so long
as the continuance is specifically approved at least annually either by (a) the
Board of Trustees of the Trust or (b) persons having voting rights in respect of
the Trust, by the vote stated in Section 11 of the Original Agreement, voted in
accordance with the provisions contained in the Participation Agreement (as
defined in the Original Agreement); provided, however, that in either event such
continuance shall also be approved by a vote of a majority of the Trustees of
the Trust who are not interested persons of any party to the Agreement, cast in
person at a meeting called for the purpose of voting on such approval.
4. Appendix A. Appendix A to the Agreement, setting forth the
Portfolios of the Trust for which the Distributor is authorized to distribute
Class IA Shares, is hereby replaced in its entirety by Appendix A attached
hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 5 as of the date first above set forth.
EQ ADVISORS TRUST EQ FINANCIAL CONSULTANTS, INC.
By:________________________ By:________________________________
Peter D. Noris Michael S. Martin
President and Trustee Chairman of the Board and
Chief Executive Officer
<PAGE>
APPENDIX A
TO
AMENDMENT NO. 5
DISTRIBUTION AGREEMENT
CLASS IA SHARES
<TABLE>
<S> <C>
Portfolios In Original Agreement:
- --------------------------------
EQ/Putnam Growth & Income Value MFS Research Portfolio
Portfolio MFS Emerging Growth Companies Portfolio
EQ/Putnam International Equity Portfolio Morgan Stanley Emerging Markets Equity
EQ/Putnam Investors Growth Portfolio Portfolio
EQ/Putnam Balanced Portfolio T. Rowe Price International Stock Portfolio
Merrill Lynch World Strategy Portfolio T. Rowe Price Equity Income Portfolio
Merrill Lynch Basic Value Equity Warburg Pincus Small Company Value Portfolio
Portfolio
Portfolios Added by Amendment No. 1:
- -----------------------------------
BT Equity 500 Index Portfolio JPM Core Bond Portfolio
BT International Equity Index Portfolio Lazard Small Cap Value Portfolio
BT Small Company Index Portfolio Lazard Large Cap Value Portfolio
Portfolios Added by Amendment No. 2:
- -----------------------------------
EQ/Evergreen Foundation Portfolio MFS Growth with Income Portfolio
EQ/Evergreen Portfolio
Portfolios Added by Amendment No. 3:
- -----------------------------------
EQ/Alliance Premier Growth Portfolio Capital Guardian U.S. Equity Portfolio
Capital Guardian Research Portfolio Capital Guardian International Portfolio
Portfolios Added by Amendment No. 4:
- -----------------------------------
Calvert Socially Responsible Portfolio Alliance Growth Investors Portfolio
Alliance Aggressive Stock Portfolio Alliance High Yield Portfolio
Alliance Balanced Portfolio Alliance Intermediate Government
Alliance Common Stock Portfolio Securities Portfolio
Alliance Conservative Investors Portfolio Alliance International Portfolio
Alliance Equity Index Portfolio Alliance Money Market Portfolio
Alliance Growth and Income Portfolio Alliance Quality Bond Portfolio
Alliance Global Portfolio Alliance Small Cap Growth Portfolio
Portfolio Added by Amendment No. 5:
- -----------------------------------
EQ/Alliance Technology Portfolio
</TABLE>
<PAGE>
EXHIBIT (e)(2)(v)
AMENDMENT NO. 4
DISTRIBUTION AGREEMENT
EQ FINANCIAL CONSULTANTS, INC. / CLASS IB SHARES
AMENDMENT NO. 4 to Distribution Agreement ("Amendment No. 4"), dated as of
August 30, 1999 between EQ Advisors Trust, a Delaware business trust (the
"Trust") and EQ Financial Consultants, Inc., a Delaware corporation (the
"Distributor").
The Trust and the Distributor agree to modify and amend the Distribution
Agreement relating to Class IB Shares dated as of April 14, 1997 (the "Original
Agreement"), as amended by Amendment No. 1, dated as of December 9, 1997,
Amendment No. 2, dated as of December 31, 1998 and Amendment No. 3, dated as of
April 14, 1999 (the Original Agreement, together with such Amendments, the
"Agreement") as herein provided. All terms used in this Amendment No. 4, unless
defined herein to the contrary, shall have the meaning given such terms in the
Agreement.
1. New Portfolios. The Trust hereby authorizes the Distributor to participate in
the distribution of Class IB Shares of the following new portfolios (the "New
Portfolios") on the terms and conditions contained in the Agreement:
Calvert Socially Responsible Portfolio
Alliance Aggressive Stock Portfolio
Alliance Balanced Portfolio
Alliance Common Stock Portfolio
Alliance Conservative Investors Portfolio
Alliance Equity Index Portfolio
Alliance Growth and Income Portfolio
Alliance Global 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
2. Effective Date. The effective date of this Amendment No. 4 shall be August
30, 1999 with respect to the Calvert Socially Responsible Portfolio and October
18, 1999 with respect to all other New Portfolios.
3. Duration of Agreement. This Agreement shall continue in effect until August
30, 2000 with respect to the Calvert Socially Responsible Portfolio and until
October 18, 2000 with respect to all other New Portfolios and thereafter will
continue on a year to year basis with respect to each of such Portfolios only so
long as each such continuance is specifically approved at least annually either
by (a) the Board of Trustees of the Trust or (b) persons having voting rights in
respect of the Trust, by the vote stated in Section 11 of the Original
Agreement, voted in accordance with the provisions contained in the
Participation Agreement (as defined in the Original Agreement); provided,
however, that in either event such continuance shall also be approved by a vote
of a majority of the Trustees of the Trust who are not interested persons of
<PAGE>
any party to the Agreement, cast in person at a meeting called for the purpose
of voting on such approval.
4. Appendix A. Appendix A to the Agreement, setting forth the Portfolios of the
Trust for which the Distributor is authorized to distribute Class IB Shares, is
hereby replaced in its entirety by Appendix A attached hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 4 as of the date first above set forth.
EQ ADVISORS TRUST EQ FINANCIAL CONSULTANTS, INC.
By: /s/ Peter D. Noris By: /s/ Michael S. Martin
------------ --------------- -------------- -----------------
Peter D. Noris Michael S. Martin
President and Trustee Chairman of the Board and
Chief Executive Officer
<PAGE>
APPENDIX A
TO
AMENDMENT NO. 4
TO
DISTRIBUTION AGREEMENT
CLASS IB SHARES
PORTFOLIOS
<TABLE>
<CAPTION>
Portfolios In Original Agreement:
- ---------------------------------
<S> <C>
EQ/Putnam Growth & Income Value MFS Research Portfolio
Portfolio MFS Emerging Growth Companies Portfolio
EQ/Putnam International Equity Portfolio Morgan Stanley Emerging Markets Equity
EQ/Putnam Investors Growth Portfolio Portfolio
EQ/Putnam Balanced Portfolio T. Rowe Price International Stock Portfolio
Merrill Lynch World Strategy Portfolio T. Rowe Price Equity Income Portfolio
Merrill Lynch Basic Value Equity Warburg Pincus Small Company Value Portfolio
Portfolio
Portfolios Added by Amendment No. 1:
- ------------------------------------
BT Equity 500 Index Portfolio JPM Core Bond Portfolio
BT International Equity Index Portfolio Lazard Small Cap Value Portfolio
BT Small Company Index Portfolio Lazard Large Cap Value Portfolio
Portfolios Added by Amendment No. 2:
- ------------------------------------
EQ/Evergreen Foundation Portfolio MFS Growth with Income Portfolio
EQ/Evergreen Portfolio
Portfolios Added by Amendment No. 3:
- ------------------------------------
EQ/Alliance Premier Growth Portfolio Capital Guardian U.S. Equity Portfolio
Capital Guardian Research Portfolio Capital Guardian International Portfolio
Portfolios Added by Amendment No. 4:
- ------------------------------------
Calvert Socially Responsible Portfolio Alliance Growth Investors Portfolio
Alliance Aggressive Stock Portfolio Alliance High Yield Portfolio
Alliance Balanced Portfolio Alliance Intermediate Government
Alliance Common Stock Portfolio Securities Portfolio
Alliance Conservative Investors Portfolio Alliance International Portfolio
Alliance Equity Index Portfolio Alliance Money Market Portfolio
Alliance Growth and Income Portfolio Alliance Quality Bond Portfolio
Alliance Global Portfolio Alliance Small Cap Growth Portfolio
</TABLE>
<PAGE>
EXHIBIT (e)(2)(vi)
FORM OF AMENDMENT NO. 5
TO
DISTRIBUTION AGREEMENT
AXA ADVISORS, LLC/CLASS IB SHARES
AMENDMENT NO. 5 to Distribution Agreement ("Amendment No. 5"), dated as
of May 1, 2000, between EQ Advisors Trust, a Delaware business trust (the
"Trust") and AXA Advisors, LLC a Delaware Limited Liability Company (the
"Distributor").
The Trust and the Distributor agree to modify and amend the
Distribution Agreement relating to Class IB Shares dated as of April 14, 1997
(the "Original Agreement"), as amended by Amendment No. 1, dated as of December
9, 1997, Amendment No. 2, dated as of December 31, 1998, Amendment No. 3, dated
as of April 14, 1999 and Amendment No. 4 dated as of August 30, 1999 (the
Original Agreement, together with such Amendments, the "Agreement") as herein
provided. All terms used in this Amendment No. 5, unless defined herein to the
contrary, shall have the meaning given such terms in the Agreement.
1. New Portfolio. The Trust hereby authorizes the Distributor to
participate in the distribution of Class IA Shares of the following new
portfolio (the "New Portfolio") on the terms and conditions contained in the
Agreement:
EQ/Alliance Technology Portfolio
2. Effective Date. The effective date of this Amendment No. 5 shall be
May 1, 2000 with respect to the EQ/Alliance Technology Portfolio.
3. Duration of Agreement. This Agreement shall continue in effect until
May 1, 2001 with respect to the EQ/Alliance Technology Portfolio and thereafter
will continue on a year to year basis with respect to the Portfolio only so long
as the continuance is specifically approved at least annually either by (a) the
Board of Trustees of the Trust or (b) persons having voting rights in respect of
the Trust, by the vote stated in Section 11 of the Original Agreement, voted in
accordance with the provisions contained in the Participation Agreement (as
defined in the Original Agreement); provided, however, that in either event such
continuance shall also be approved by a vote of a majority of the Trustees of
the Trust who are not interested persons of any party to the Agreement, cast in
person at a meeting called for the purpose of voting on such approval.
4. Appendix A. Appendix A to the Agreement, setting forth the
Portfolios of the Trust for which the Distributor is authorized to distribute
Class IB Shares, is hereby replaced in its entirety by Appendix A attached
hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 5 as of the date first above set forth.
EQ ADVISORS TRUST EQ FINANCIAL CONSULTANTS, INC.
By:___________________________ By:_________________________________
Peter D. Noris Michael S. Martin
President and Trustee Chairman of the Board and
Chief Executive Officer
<PAGE>
APPENDIX A
TO
AMENDMENT NO. 5
DISTRIBUTION AGREEMENT
CLASS IB SHARES
<TABLE>
<S> <C>
Portfolios In Original Agreement:
- --------------------------------
EQ/Putnam Growth & Income Value MFS Research Portfolio
Portfolio MFS Emerging Growth Companies Portfolio
EQ/Putnam International Equity Portfolio Morgan Stanley Emerging Markets Equity
EQ/Putnam Investors Growth Portfolio Portfolio
EQ/Putnam Balanced Portfolio T. Rowe Price International Stock Portfolio
Merrill Lynch World Strategy Portfolio T. Rowe Price Equity Income Portfolio
Merrill Lynch Basic Value Equity Warburg Pincus Small Company Value Portfolio
Portfolio
Portfolios Added by Amendment No. 1:
- -----------------------------------
BT Equity 500 Index Portfolio JPM Core Bond Portfolio
BT International Equity Index Portfolio Lazard Small Cap Value Portfolio
BT Small Company Index Portfolio Lazard Large Cap Value Portfolio
Portfolios Added by Amendment No. 2:
- -----------------------------------
EQ/Evergreen Foundation Portfolio MFS Growth with Income Portfolio
EQ/Evergreen Portfolio
Portfolios Added by Amendment No. 3:
- -----------------------------------
EQ/Alliance Premier Growth Portfolio Capital Guardian U.S. Equity Portfolio
Capital Guardian Research Portfolio Capital Guardian International Portfolio
Portfolios Added by Amendment No. 4:
- -----------------------------------
Calvert Socially Responsible Portfolio Alliance Growth Investors Portfolio
Alliance Aggressive Stock Portfolio Alliance High Yield Portfolio
Alliance Balanced Portfolio Alliance Intermediate Government
Alliance Common Stock Portfolio Securities Portfolio
Alliance Conservative Investors Portfolio Alliance International Portfolio
Alliance Equity Index Portfolio Alliance Money Market Portfolio
Alliance Growth and Income Portfolio Alliance Quality Bond Portfolio
Alliance Global Portfolio Alliance Small Cap Growth Portfolio
Portfolio Added by Amendment No. 5:
- -----------------------------------
EQ/Alliance Technology Portfolio
</TABLE>
<PAGE>
113468
EXHIBIT (e)(3)(v)
AMENDMENT NO. 4
DISTRIBUTION AGREEMENT
EQUITABLE DISTRIBUTORS, INC. / CLASS IA SHARES
AMENDMENT NO. 4 to Distribution Agreement ("Amendment No. 4"), dated as of
August 30, 1999, between EQ Advisors Trust, a Delaware business trust (the
"Trust") and Equitable Distributors, Inc., a Delaware corporation (the
"Distributor").
The Trust and the Distributor agree to modify and amend the Distribution
Agreement relating to Class IA Shares dated as of April 14, 1997 (the "Original
Agreement"), as amended by Amendment No. 1, dated as of December 9, 1997,
Amendment No. 2, dated as of December 31, 1998 and Amendment No. 3, dated as of
April 14, 1999 (the Original Agreement, together with such Amendments, the
"Agreement") as herein provided. All terms used in this Amendment No. 4, unless
defined herein to the contrary, shall have the meaning given such terms in the
Agreement.
1. New Portfolios. The Trust hereby authorizes the Distributor to participate in
the distribution of Class IA Shares of the following new portfolios (the "New
Portfolios") on the terms and conditions contained in the Agreement:
Calvert Socially Responsible Portfolio
Alliance Aggressive Stock Portfolio
Alliance Balanced Portfolio
Alliance Common Stock Portfolio
Alliance Conservative Investors Portfolio
Alliance Equity Index Portfolio
Alliance Growth and Income Portfolio
Alliance Global 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
2. Effective Date. The effective date of this Amendment No. 4 shall be August
30, 1999 with respect to the Calvert Socially Responsible Portfolio and October
18, 1999 with respect to all other New Portfolios.
3. Duration of Agreement. This Agreement shall continue in effect until
August 30, 2000 with respect to the Calvert Socially Responsible Portfolio and
until October 18, 2000 with respect to all other New Portfolios and thereafter
will continue on a year to year basis with respect to each of such Portfolios
only so long as each such continuance is specifically approved at least annually
either by (a) the Board of Trustees of the Trust or (b) persons having voting
rights in respect of the Trust, by the vote stated in Section 11 of the Original
Agreement, voted in accordance with the provisions contained in the
Participation Agreement (as defined in the Original Agreement); provided,
however, that in either event such continuance shall also be approved by a vote
of a majority of the Trustees of the Trust who are not interested persons of any
party to the Agreement, cast in person at a meeting called for the purpose of
voting on such approval.
<PAGE>
4. Appendix A. Appendix A to the Agreement, setting forth the Portfolios of the
Trust for which the Distributor is authorized to distribute Class IA Shares, is
hereby replaced in its entirety by Appendix A attached hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 4 as of the date first above set forth.
EQ ADVISORS TRUST EQUITABLE DISTRIBUTORS, INC.
By: /s/ Peter D. Noris By: /s/ James A. Shepherdson, III
--------- --------------- ---------- -------------------------
Peter D. Noris James A. Shepherdson, III
President and Trustee Co-President and
Co-Chief Executive Officer
<PAGE>
APPENDIX A
TO
AMENDMENT NO. 4
TO
DISTRIBUTION AGREEMENT
CLASS IA SHARES
Portfolios
<TABLE>
<CAPTION>
Portfolios In Original Agreement:
- ---------------------------------
<S> <C>
EQ/Putnam Growth & Income Value MFS Research Portfolio
Portfolio MFS Emerging Growth Companies Portfolio
EQ/Putnam International Equity Portfolio Morgan Stanley Emerging Markets Equity
EQ/Putnam Investors Growth Portfolio Portfolio
EQ/Putnam Balanced Portfolio T. Rowe Price International Stock Portfolio
Merrill Lynch World Strategy Portfolio T. Rowe Price Equity Income Portfolio
Merrill Lynch Basic Value Equity Warburg Pincus Small Company Value Portfolio
Portfolio
Portfolios Added by Amendment No. 1:
- ------------------------------------
BT Equity 500 Index Portfolio JPM Core Bond Portfolio
BT International Equity Index Portfolio Lazard Small Cap Value Portfolio
BT Small Company Index Portfolio Lazard Large Cap Value Portfolio
Portfolios Added by Amendment No. 2:
- ------------------------------------
EQ/Evergreen Foundation Portfolio MFS Growth with Income Portfolio
EQ/Evergreen Portfolio
Portfolios Added by Amendment No. 3:
- ------------------------------------
EQ/Alliance Premier Growth Portfolio Capital Guardian U.S. Equity Portfolio
Capital Guardian Research Portfolio Capital Guardian International Portfolio
Portfolios Added by Amendment No. 4:
- ------------------------------------
Calvert Socially Responsible Portfolio Alliance Growth Investors Portfolio
Alliance Aggressive Stock Portfolio Alliance High Yield Portfolio
Alliance Balanced Portfolio Alliance Intermediate Government
Alliance Common Stock Portfolio Securities Portfolio
Alliance Conservative Investors Portfolio Alliance International Portfolio
Alliance Equity Index Portfolio Alliance Money Market Portfolio
Alliance Growth and Income Portfolio Alliance Quality Bond Portfolio
Alliance Global Portfolio Alliance Small Cap Growth Portfolio
</TABLE>
<PAGE>
EXHIBIT (e)(3)(vi)
FORM OF
AMENDMENT NO. 5
TO
DISTRIBUTION AGREEMENT
EQUITABLE DISTRIBUTORS, INC./CLASS IA SHARES
AMENDMENT NO. 5 to Distribution Agreement ("Amendment No. 5"), dated as
of May 1, 2000, between EQ Advisors Trust, a Delaware business trust (the
"Trust") and Equitable Distributors, Inc., a Delaware corporation (the
"Distributor").
The Trust and the Distributor agree to modify and amend the
Distribution Agreement relating to Class IA Shares dated as of April 14, 1997
(the "Original Agreement"), as amended by Amendment No. 1, dated as of December
9, 1997, Amendment No. 2, dated as of December 31, 1998, Amendment No. 3, dated
as of April 14, 1999 and Amendment No. 4 dated as of August 30, 1999 (the
Original Agreement, together with such Amendments, the "Agreement") as herein
provided. All terms used in this Amendment No. 5, unless defined herein to the
contrary, shall have the meaning given such terms in the Agreement.
1. New Portfolios. The Trust hereby authorizes the Distributor to
participate in the distribution of Class IA Shares of the following new
portfolios (the "New Portfolios") on the terms and conditions contained in the
Agreement:
EQ/Alliance Technology Portfolio
2. Effective Date. The effective date of this Amendment No. 5 shall be
May 1, 2000 with respect to the EQ/Alliance Technology Portfolio.
3. Duration of Agreement. This Agreement shall continue in effect until
May 1, 2001 with respect to the EQ/Alliance Technology Portfolio and thereafter
will continue on a year to year basis with respect to the Portfolio only so long
as the continuance is specifically approved at least annually either by (a) the
Board of Trustees of the Trust or (b) persons having voting rights in respect of
the Trust, by the vote stated in Section 11 of the Original Agreement, voted in
accordance with the provisions contained in the Participation Agreement (as
defined in the Original Agreement); provided, however, that in either event such
continuance shall also be approved by a vote of a majority of the Trustees of
the Trust who are not interested persons of any party to the Agreement, cast in
person at a meeting called for the purpose of voting on such approval.
4. Appendix A. Appendix A to the Agreement, setting forth the Portfolio
of the Trust for which the Distributor is authorized to distribute Class IA
Shares, is hereby replaced in its entirety by Appendix A attached hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment No. 5
as of the date first above set forth.
EQ ADVISORS TRUST EQUITABLE DISTRIBUTORS, INC.
By:_________________________ By:_______________________________
Peter D. Noris James A. Shepherdson, III
President and Trustee Co-President and
Co-Chief Executive Officer
<PAGE>
APPENDIX A
TO
AMENDMENT NO. 5
DISTRIBUTION AGREEMENT
CLASS IA SHARES
<TABLE>
<S> <C>
Portfolios In Original Agreement:
- ---------------------------------
EQ/Putnam Growth & Income Value MFS Research Portfolio
Portfolio MFS Emerging Growth Companies Portfolio
EQ/Putnam International Equity Portfolio Morgan Stanley Emerging Markets Equity
EQ/Putnam Investors Growth Portfolio Portfolio
EQ/Putnam Balanced Portfolio T. Rowe Price International Stock Portfolio
Merrill Lynch World Strategy Portfolio T. Rowe Price Equity Income Portfolio
Merrill Lynch Basic Value Equity Warburg Pincus Small Company Value Portfolio
Portfolio
Portfolios Added by Amendment No. 1:
- -----------------------------------
BT Equity 500 Index Portfolio JPM Core Bond Portfolio
BT International Equity Index Portfolio Lazard Small Cap Value Portfolio
BT Small Company Index Portfolio Lazard Large Cap Value Portfolio
Portfolios Added by Amendment No. 2:
- -----------------------------------
EQ/Evergreen Foundation Portfolio MFS Growth with Income Portfolio
EQ/Evergreen Portfolio
Portfolios Added by Amendment No. 3:
- -----------------------------------
EQ/Alliance Premier Growth Portfolio Capital Guardian U.S. Equity Portfolio
Capital Guardian Research Portfolio Capital Guardian International Portfolio
Portfolios Added by Amendment No. 4:
- -----------------------------------
Calvert Socially Responsible Portfolio Alliance Growth Investors Portfolio
Alliance Aggressive Stock Portfolio Alliance High Yield Portfolio
Alliance Balanced Portfolio Alliance Intermediate Government
Alliance Common Stock Portfolio Securities Portfolio
Alliance Conservative Investors Portfolio Alliance International Portfolio
Alliance Equity Index Portfolio Alliance Money Market Portfolio
Alliance Growth and Income Portfolio Alliance Quality Bond Portfolio
Alliance Global Portfolio Alliance Small Cap Growth Portfolio
Portfolio Added by Amendment No. 5:
- -----------------------------------
EQ/Alliance Technology Portfolio
</TABLE>
<PAGE>
EXHIBIT (e)(4)(v)
AMENDMENT NO. 4
TO
DISTRIBUTION AGREEMENT
EQUITABLE DISTRIBUTORS, INC. / CLASS IB SHARES
AMENDMENT NO. 4 to Distribution Agreement ("Amendment No. 4"), dated as of
August 30, 1999, between EQ Advisors Trust, a Delaware business trust (the
"Trust") and Equitable Distributors, Inc., a Delaware corporation (the
"Distributor").
The Trust and the Distributor agree to modify and amend the Distribution
Agreement relating to Class IB Shares dated as of April 14, 1997 (the "Original
Agreement"), as amended by Amendment No. 1, dated as of December 9, 1997,
Amendment No. 2, dated as of December 31, 1998 and Amendment No. 3, dated as of
April 14, 1999 (the Original Agreement, together with such Amendments, the
"Agreement") as herein provided. All terms used in this Amendment No. 4, unless
defined herein to the contrary, shall have the meaning given such terms in the
Agreement.
1. New Portfolios. The Trust hereby authorizes the Distributor to participate in
the distribution of Class IB Shares of the following new portfolios (the "New
Portfolios") on the terms and conditions contained in the Agreement:
Calvert Socially Responsible Portfolio
Alliance Aggressive Stock Portfolio
Alliance Balanced Portfolio
Alliance Common Stock Portfolio
Alliance Conservative Investors Portfolio
Alliance Equity Index Portfolio
Alliance Growth and Income Portfolio
Alliance Global 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
2. Effective Date. The effective date of this Amendment No. 4 shall be August
30, 1999 with respect to the Calvert Socially Responsible Portfolio and October
18, 1999 with respect to all other New Portfolios.
3. Duration of Agreement. This Agreement shall continue in effect until August
30, 2000 with respect to the Calvert Socially Responsible Portfolio and until
October 18, 2000 with respect to all other New Portfolios and thereafter will
continue on a year to year basis with respect to each of such Portfolios only so
long as each such continuance is specifically approved at least annually either
by (a) the Board of Trustees of the Trust or (b) persons having voting rights in
respect of the Trust, by the vote stated in Section 11 of the Original
Agreement, voted in accordance with the provisions contained in the
Participation Agreement (as defined in the Original Agreement); provided,
however, that in either event such continuance shall also be approved by a vote
of a majority of the Trustees of the Trust who are not interested persons of
<PAGE>
any party to the Agreement, cast in person at a meeting called for the purpose
of voting on such approval.
4. Appendix A. Appendix A to the Agreement, setting forth the Portfolios of the
Trust for which the Distributor is authorized to distribute Class IB Shares, is
hereby replaced in its entirety by Appendix A attached hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 4 as of the date first above set forth.
EQ ADVISORS TRUST EQUITABLE DISTRIBUTORS, INC.
By: /s/ Peter D. Noris By: /s/ James A. Shepherdson, III
---------- --------------- -------------- -------------------------
Peter D. Noris James A. Shepherdson, III
President and Trustee Co-President and
Co-Chief Executive Officer
<PAGE>
APPENDIX A
TO
AMENDMENT NO. 4
TO
DISTRIBUTION AGREEMENT
CLASS IB SHARES
PORTFOLIOS
<TABLE>
<CAPTION>
Portfolios In Original Agreement:
- ---------------------------------
<S> <C>
EQ/Putnam Growth & Income Value MFS Research Portfolio
Portfolio MFS Emerging Growth Companies Portfolio
EQ/Putnam International Equity Portfolio Morgan Stanley Emerging Markets Equity
EQ/Putnam Investors Growth Portfolio Portfolio
EQ/Putnam Balanced Portfolio T. Rowe Price International Stock Portfolio
Merrill Lynch World Strategy Portfolio T. Rowe Price Equity Income Portfolio
Merrill Lynch Basic Value Equity Warburg Pincus Small Company Value Portfolio
Portfolio
Portfolios Added by Amendment No. 1:
- ------------------------------------
BT Equity 500 Index Portfolio JPM Core Bond Portfolio
BT International Equity Index Portfolio Lazard Small Cap Value Portfolio
BT Small Company Index Portfolio Lazard Large Cap Value Portfolio
Portfolios Added by Amendment No. 2:
- ------------------------------------
EQ/Evergreen Foundation Portfolio MFS Growth with Income Portfolio
EQ/Evergreen Portfolio
Portfolios Added by Amendment No. 3:
- ------------------------------------
EQ/Alliance Premier Growth Portfolio Capital Guardian U.S. Equity Portfolio
Capital Guardian Research Portfolio Capital Guardian International Portfolio
Portfolios Added by Amendment No. 4:
- ------------------------------------
Calvert Socially Responsible Portfolio Alliance Growth Investors Portfolio
Alliance Aggressive Stock Portfolio Alliance High Yield Portfolio
Alliance Balanced Portfolio Alliance Intermediate Government Securities
Alliance Common Stock Portfolio Portfolio
Alliance Conservative Investors Portfolio Alliance International Portfolio
Alliance Equity Index Portfolio Alliance Money Market Portfolio
Alliance Growth and Income Portfolio Alliance Quality Bond Portfolio
Alliance Global Portfolio Alliance Small Cap Growth Portfolio
</TABLE>
<PAGE>
EXHIBIT (e)(4)(vi)
FORM OF
AMENDMENT NO. 5
DISTRIBUTION AGREEMENT
EQUITABLE DISTIBUTORS, INC./CLASS IB SHARES
AMENDMENT NO. 5 to Distribution Agreement ("Amendment No. 5"), dated as
of May 1, 2000, between EQ Advisors Trust, a Delaware business trust (the
"Trust") and Equitable Distributors, Inc., a Delaware corporation (the
"Distributor").
The Trust and the Distributor agree to modify and amend the
Distribution Agreement relating to Class IB Shares dated as of April 14, 1997
(the "Original Agreement"), as amended by Amendment No. 1, dated as of December
9, 1997, Amendment No. 2, dated as of December 31, 1998, Amendment No. 3, dated
as of April 14, 1999 and Amendment No. 4 dated as of August 30, 1999 (the
Original Agreement, together with such Amendments, the "Agreement") as herein
provided. All terms used in this Amendment No. 5, unless defined herein to the
contrary, shall have the meaning given such terms in the Agreement.
1. New Portfolio. The Trust hereby authorizes the Distributor to
participate in the distribution of Class IB Shares of the following new
portfolio (the "New Portfolio") on the terms and conditions contained in the
Agreement:
EQ/Alliance Technology Portfolio
2. Effective Date. The effective date of this Amendment No. 5 shall be
May 1, 2000 with respect to the EQ/Alliance Technology Portfolio.
3. Duration of Agreement. This Agreement shall continue in effect until
May 1, 2001 with respect to the EQ/Alliance Technology Portfolio and thereafter
will continue on a year to year basis with respect to the Portfolio only so long
as the continuance is specifically approved at least annually either by (a) the
Board of Trustees of the Trust or (b) persons having voting rights in respect of
the Trust, by the vote stated in Section 11 of the Original Agreement, voted in
accordance with the provisions contained in the Participation Agreement (as
defined in the Original Agreement); provided, however, that in either event such
continuance shall also be approved by a vote of a majority of the Trustees of
the Trust who are not interested persons of any party to the Agreement, cast in
person at a meeting called for the purpose of voting on such approval.
4. Appendix A. Appendix A to the Agreement, setting forth the
Portfolios of the Trust for which the Distributor is authorized to distribute
Class IB Shares, is hereby replaced in its entirety by Appendix A attached
hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 5 as of the date first above set forth.
EQ ADVISORS TRUST EQUITABLE DISTRIBUTORS, INC.
By:_________________________ By:_____________________________
Peter D. Noris James A. Shepherdson, III
President and Trustee Co-President and
Co-Chief Executive Officer
<PAGE>
APPENDIX A
TO
AMENDMENT NO. 5
DISTRIBUTION AGREEMENT
CLASS IB SHARES
<TABLE>
<S> <C>
Portfolios In Original Agreement:
- --------------------------------
EQ/Putnam Growth & Income Value MFS Research Portfolio
Portfolio MFS Emerging Growth Companies Portfolio
EQ/Putnam International Equity Portfolio Morgan Stanley Emerging Markets Equity
EQ/Putnam Investors Growth Portfolio Portfolio
EQ/Putnam Balanced Portfolio T. Rowe Price International Stock Portfolio
Merrill Lynch World Strategy Portfolio T. Rowe Price Equity Income Portfolio
Merrill Lynch Basic Value Equity Warburg Pincus Small Company Value Portfolio
Portfolio
Portfolios Added by Amendment No. 1:
- -----------------------------------
BT Equity 500 Index Portfolio JPM Core Bond Portfolio
BT International Equity Index Portfolio Lazard Small Cap Value Portfolio
BT Small Company Index Portfolio Lazard Large Cap Value Portfolio
Portfolios Added by Amendment No. 2:
- -----------------------------------
EQ/Evergreen Foundation Portfolio MFS Growth with Income Portfolio
EQ/Evergreen Portfolio
Portfolios Added by Amendment No. 3:
- -----------------------------------
EQ/Alliance Premier Growth Portfolio Capital Guardian U.S. Equity Portfolio
Capital Guardian Research Portfolio Capital Guardian International Portfolio
Portfolios Added by Amendment No. 4:
- -----------------------------------
Calvert Socially Responsible Portfolio Alliance Growth Investors Portfolio
Alliance Aggressive Stock Portfolio Alliance High Yield Portfolio
Alliance Balanced Portfolio Alliance Intermediate Government
Alliance Common Stock Portfolio Securities Portfolio
Alliance Conservative Investors Portfolio Alliance International Portfolio
Alliance Equity Index Portfolio Alliance Money Market Portfolio
Alliance Growth and Income Portfolio Alliance Quality Bond Portfolio
Alliance Global Portfolio Alliance Small Cap Growth Portfolio
Portfolio Added by Amendment No. 5:
- -----------------------------------
EQ/Alliance Technology Portfolio
</TABLE>
<PAGE>
EXHIBIT (g)(1)(v)
AMENDMENT NO. 4
TO THE
CUSTODIAN AGREEMENT
Amendment, dated as of August 30, 1999 ("Amendment"), to the Custodian
Agreement dated as of April 14, 1997 ("Original Agreement"), as amended by
Amendment No. 1 dated as of December 9, 1997, Amendment No. 2, dated as of
December 31, 1998 and Amendment No. 3, dated as of April 30, 1999 (collective
the "Agreement") by and between EQ Advisors Trust and The Chase Manhattan Bank.
The parties hereto agree that Paragraph 17 of the Original Agreement
relating to Notices is hereby amended as follows:
Copies to: Mary Joan Hoene
c/o Equitable Life Assurance Society
1290 Avenue of the Americas
New York, New York 10104
Jane A. Kanter
Dechert Price & Rhoads
1775 Eye Street, N.W., Suite 1100
Washington, D.C. 20006
The parties further agree that Appendix A to the Agreement is hereby
replaced in its entirety by Appendix A attached hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 4 as of the date first above set forth.
EQ ADVISORS TRUST THE CHASE MANHATTAN BANK
By: /s/ Peter D. Noris By: /s/ John K. Breitweg
---------- --------------- ------------ ----------------
Name: Peter D. Noris Name: John K. Breitweg
Title: President and Trustee Title: Vice President
<PAGE>
APPENDIX A
AMENDMENT NO. 4
TO
CUSTODIAN AGREEMENT
PORTFOLIOS AND CLASSES COVERED BY CUSTODIAN AGREEMENT
Portfolios Classes
---------- -------
Alliance Money Market Portfolio Class IA and Class IB
Alliance Intermediate Government Securities Portfolio Class IA and Class IB
Alliance Quality Bond Portfolio Class IA and Class IB
Alliance High Yield Portfolio Class IA and Class IB
Alliance Common Stock Portfolio Class IA and Class IB
Alliance Equity Index Portfolio Class IA and Class IB
Alliance Growth and Income Portfolio Class IA and Class IB
Alliance Global Portfolio Class IA and Class IB
Alliance International Portfolio Class IA and Class IB
Alliance Balanced Portfolio Class IA and Class IB
Alliance Conservative Investors Portfolio Class IA and Class IB
Alliance Growth Investors Portfolio Class IA and Class IB
Alliance Aggressive Stock Portfolio Class IA and Class IB
Alliance Small Cap Growth Portfolio Class IA and Class IB
Calvert Socially Responsible Portfolio Class IA and Class IB
Capital Guardian Research Portfolio Class IA and Class IB
Capital Guardian U.S. Equities Portfolio Class IA and Class IB
Capital Guardian International Equities Portfolio Class IA and Class IB
BT Equity 500 Index Portfolio Class IA and Class IB
BT International Equity Index Portfolio Class IA and Class IB
BT Small Company Index Portfolio Class IA and Class IB
EQ/Alliance Premier Growth Portfolio Class IA and Class IB
EQ/Putnam Balanced Portfolio Class IA and Class IB
EQ/Putnam Growth & Income Value Portfolio Class IA and Class IB
EQ/Putnam International Equity Portfolio Class IA and Class IB
EQ/Putnam Investors Growth Portfolio Class IA and Class IB
EQ/Evergreen Foundation Portfolio Class IA and Class IB
EQ/Evergreen Portfolio Class IA and Class IB
JPM Core Bond Portfolio Class IA and Class IB
Lazard Large Cap Value Portfolio Class IA and Class IB
Lazard Small Cap Value Portfolio Class IA and Class IB
Merrill Lynch Basic Value Equity Portfolio Class IA and Class IB
Merrill Lynch World Strategy Portfolio Class IA and Class IB
Portfolios Classes
---------- -------
MFS Emerging Growth Companies Portfolio Class IA and Class IB
MFS Growth with Income Portfolio Class IA and Class IB
MFS Research Portfolio Class IA and Class IB
Morgan Stanley Emerging Markets Equity Portfolio Class IA and Class IB
T. Rowe Price Equity Income Portfolio Class IA and Class IB
T. Rowe Price International Stock Portfolio Class IA and Class IB
Warburg Pincus Small Company Value Portfolio Class IA and Class IB
<PAGE>
114926
EXHIBIT (g)(1)(vi)
FORM OF
AMENDMENT NO. 5
TO
CUSTODIAN AGREEMENT
Amendment, dated as of May 1, 2000 ("Amendment"), to the Custodian Agreement
dated as of April 14, 1997 ("Original Agreement"), as amended by Amendment No. 1
dated as of December 9, 1997, Amendment No. 2, dated as of December 31, 1998,
Amendment No. 3, dated as of April 30, 1999 and Amendment No. 4, dated as of
August 30, 1999 (collectively the "Agreement") by and between EQ Advisors Trust
and The Chase Manhattan Bank.
The parties hereto agree that Paragraph 17 of the Original Agreement relating to
Notices is hereby amended as follows:
Copies to: Patricia Louie
c/o Equitable Life Assurance Society
1290 Avenue of the Americas
New York, New York 10104
The parties further agree that Appendix A to the Agreement is hereby
replaced in its entirety by Appendix A attached hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 5 as of the date first above set forth.
EQ ADVISORS TRUST THE CHASE MANHATTAN BANK
By: ____________________________ By: _____________________________
Name: Peter D. Noris Name: John K. Breitweg
Title: President and Trustee Title: Vice President
<PAGE>
APPENDIX A
AMENDMENT NO. 5
CUSTODIAN AGREEMENT
PORTFOLIOS AND CLASSES COVERED BY CUSTODIAN AGREEMENT
Portfolios Classes
---------- -------
Alliance Money Market Portfolio Class IA and Class IB
Alliance Intermediate Government Securities Portfolio Class IA and Class IB
Alliance Quality Bond Portfolio Class IA and Class IB
Alliance High Yield Portfolio Class IA and Class IB
Alliance Common Stock Portfolio Class IA and Class IB
Alliance Equity Index Portfolio Class IA and Class IB
Alliance Growth and Income Portfolio Class IA and Class IB
Alliance Global Portfolio Class IA and Class IB
Alliance International Portfolio Class IA and Class IB
Alliance Conservative Investors Portfolio Class IA and Class IB
Alliance Growth Investors Portfolio Class IA and Class IB
Alliance Small Cap Growth Portfolio Class IA and Class IB
Calvert Socially Responsible Portfolio Class IA and Class IB
Capital Guardian Research Portfolio Class IA and Class IB
Capital Guardian U.S. Equities Portfolio Class IA and Class IB
Capital Guardian International Equities Portfolio Class IA and Class IB
BT Equity 500 Index Portfolio Class IA and Class IB
BT International Equity Index Portfolio Class IA and Class IB
BT Small Company Index Portfolio Class IA and Class IB
EQ/Aggressive Stock Portfolio Class IA and Class IB
EQ/Alliance Technology Portfolio Class IA and Class IB
EQ/Balanced Portfolio Class IA and Class IB
EQ/Putnam Balanced Portfolio Class IA and Class IB
EQ/Putnam Growth & Income Value Portfolio Class IA and Class IB
EQ/Putnam International Equity Portfolio Class IA and Class IB
EQ/Putnam Investors Growth Portfolio Class IA and Class IB
EQ/Evergreen Foundation Portfolio Class IA and Class IB
EQ/Evergreen Portfolio Class IA and Class IB
JPM Core Bond Portfolio Class IA and Class IB
Lazard Large Cap Value Portfolio Class IA and Class IB
Lazard Small Cap Value Portfolio Class IA and Class IB
Merrill Lynch Basic Value Equity Portfolio Class IA and Class IB
Merrill Lynch World Strategy Portfolio Class IA and Class IB
Portfolios Classes
---------- -------
MFS Emerging Growth Companies Portfolio Class IA and Class IB
MFS Growth with Income Portfolio Class IA and Class IB
MFS Research Portfolio Class IA and Class IB
Morgan Stanley Emerging Markets Equity Portfolio Class IA and Class IB
T. Rowe Price Equity Income Portfolio Class IA and Class IB
T. Rowe Price International Stock Portfolio Class IA and Class IB
Warburg Pincus Small Company Value Portfolio Class IA and Class IB
<PAGE>
EXHIBIT (h)(1)(ii)
MUTUAL FUNDS SERVICE AGREEMENT
TRUST ADMINISTRATION AND COMPLIANCE SERVICES
TRUST ACCOUNTING SERVICES
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
______________, 2000
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
TABLE OF CONTENTS
Section Page
- ------- ----
1. Appointment 1
2. Representations and Warranties 1
3. Delivery of Documents 2
4. Services Provided 3
5. Fees and Expenses 4
6. Limitation of Liability and Indemnification 6
7. Duration and Termination 8
8. Notices 8
9. Waiver 9
10. Force Majeure 9
11. Amendments 9
12. Severability 9
13. Governing Law 9
14. Miscellaneous 9
15. Confidentiality 10
16. Signatures 10
Schedule A - Fees and Expenses A-1
Schedule B - Trust Administration and Compliance Services Description B-1
Schedule C - Trust Accounting Services Description C-1
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
AGREEMENT made as of ________, 2000 by and between the EQ Advisors
Trust (the "Trust"), a business trust organized under Delaware law, and The
Equitable Life Assurance Society of the United States ("Equitable"), a New York
Stock Life Insurance Company.
WITNESSETH:
WHEREAS, the Trust is registered as an open-end management investment
company of the series type under the Investment Company Act of 1940, as amended
(the "1940 Act"); and
WHEREAS, the Trust wishes to contract with Equitable to provide certain
administrative, accounting and compliance services with respect to the Trust,
including its constituent portfolios (the "Portfolios" and, each, a
"Portfolio");
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints Equitable to provide
administrative, accounting and compliance services for the Trust, as described
hereinafter, subject to the supervision of the Board of Trustees of the Trust
(the "Board") and Equitable, the Trust's manager ("Manager"), for the period and
on the terms set forth in this Agreement. Equitable accepts such appointment and
agrees to furnish the services herein set forth in return for the compensation
as provided in Section 5 of, and Schedule A to, this Agreement.
2. REPRESENTATIONS AND WARRANTIES. (a) Equitable represents and
warrants to the Trust that:
(i) Equitable is a corporation, duly organized and existing
under the laws of the State of New York;
(ii) Equitable is duly qualified to carry on its business in
the Commonwealth of Massachusetts in performance of its duties under this
Agreement;
(iii) Equitable is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and perform this Agreement;
(iv) all requisite corporate proceedings have been taken to
authorize Equitable to enter into and perform this Agreement;
(v) Equitable has, and will continue to have, access to the
facilities, personnel and equipment required to fully perform its duties and
obligations hereunder;
(vi) no legal or administrative proceedings have been
instituted or threatened which would impair Equitable's ability to perform its
duties and obligations under this Agreement; and
(vii) Equitable's entrance into this Agreement shall not cause
a material breach or be in material conflict with any other agreement or
obligation of Equitable or any law or regulation applicable to Equitable.
<PAGE>
(b) The Trust represents and warrants to Equitable that:
(i) the Trust is a Delaware business trust, duly organized and
existing and in good standing under the laws of the State of Delaware;
(ii) the Trust is empowered under applicable laws and by its
Charter Document and By-Laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize
the Trust to enter into and perform this Agreement;
(iv) the Trust is an investment company properly registered
under the 1940 Act,
(v) a registration statement under the Securities Act of 1933,
as amended ("1933 Act") and the 1940 Act on Form N-1A has been filed and will be
effective and will remain effective during the term of this Agreement, and all
necessary filings under the laws of the states will have been made and will be
currant during the term of this Agreement;
(vi) no legal or administrative proceedings have been
instituted or threatened which would impair the Trust's ability to perform its
duties and obligations under this Agreement;
(vii) the Trust's registration statements comply in all
material respects with the 1933 Act and the 1940 Act (including the rules and
regulations thereunder) and none of the Trust's prospectuses and/or statements
of additional information contain any untrue statement of material fact or omit
to state a material fact necessary to make the statements therein not
misleading; and
(viii) the Trust's entrance into this Agreement shall not
cause a material breach or be in material conflict with any other agreement or
obligation of the Trust or any law or regulation applicable to it.
3. DELIVERY OF DOCUMENTS. The Trust will promptly furnish to Equitable
such copies, properly certified or authenticated, of contracts, documents and
other related information, other than confidential documents or information,
that Equitable may reasonably request or require to properly discharge its
duties. Such documents may include but are not limited to the following:
(a) Resolutions of the Board authorizing the appointment of
Equitable to provide certain services to the Trust and approving this Agreement;
(b) The Trust's Declaration of Trust;
(c) The Trust's By-Laws;
(d) The Trust's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission ("SEC");
(e) The Trust's registration statement including exhibits, as
amended, on Form N-1A (the "Registration Statement") under the 1933 Act and the
1940 Act, as filed with the SEC;
<PAGE>
(f) Copies of the Investment Management Agreement between the
Trust and the Manager (the "Management Agreement");
(g) Copies of each of the Investment Advisory Agreements
between the Manager and the investment advisers;
(h) Opinions of counsel and auditors' reports;
(i) The Trust's prospectus(es) and statement(s) of additional
information relating to all trusts, series, portfolios and classes, as
applicable, and all amendments and supplements thereto (such prospectus(es) and
statement(s) of additional information and supplements thereto, as presently in
effect and as from time to time hereafter amended and supplemented, herein
called the "Prospectuses"); and
(j) Such other material agreements as the Trust may enter into
from time to time including securities lending agreements, futures and
commodities account agreements, brokerage agreements and options agreements.
4. SERVICES PROVIDED. (a) Subject to the control, direction and
supervision of the Board and in compliance with the objectives, policies and
limitations set forth in the Trust's Registration Statement, Declaration of
Trust and By-Laws; applicable laws and regulations; and all resolutions and
policies implemented by the Board, Equitable shall have general responsibility
for the oversight of the Trust's administrative operations and will provide the
following services:
(i) Trust Administration,
(ii) Compliance Services , and
(iii) Trust Accounting.
A detailed description of each of the above services is contained in Schedules B
and C, respectively, to this Agreement.
(b) Equitable will also:
(i) provide, without additional cost to the Trust except for
out-of-pocket expenses, office facilities in an appropriate location with
respect to the provision of the services contemplated herein (which may be in
the offices of Equitable or a corporate affiliate of Equitable);
(ii) provide, without additional remuneration from or other
cost to the Trust except for out-of-pocket expenses, the services of individuals
to serve as officers of the Trust who will be designated by Equitable and
elected by the Board subject to reasonable Board approval;
(iii) provide or otherwise obtain, without additional
remuneration from or other cost to the Trust except for out-of-pocket expenses,
personnel sufficient for provision of the services contemplated HEREIN;
<PAGE>
(iv) furnish, at no additional cost to the Trust except for
out-of-pocket expenses, equipment and other materials, which are necessary or
desirable for provision of the services contemplated herein; and
(v) keep records, at no additional cost to the Trust except
for out-of-pocket expenses, relating to the services provided hereunder in such
form and manner as Equitable may deem appropriate or advisable. To the extent
required by Section 31 of the 1940 Act and the rules thereunder, Equitable
agrees that all such records prepared or maintained by Equitable relating to the
services provided hereunder are the property of the Trust and will be preserved
for the periods prescribed under Rule 3la-2 under the 1940 Act and made
available in accordance with such Section and rules.
(c) SUB-CONTRACTING. Equitable is hereby authorized to retain third
parties and is hereby separately authorized to delegate some or all of its
duties and obligations hereunder to such person or persons. The compensation of
such person or persons shall be paid by Equitable, as applicable, and no
obligation shall be incurred on behalf of the Trust in such respect. Equitable
shall be liable to the Trust for the acts of such third parties as set forth in
Section 6 hereunder. The division of Equitable's duties and obligations
hereunder between those to be delegated and those to be performed by Equitable
shall be in Equitable's sole discretion and may be changed from time to time by
Equitable.
5. FEES AND EXPENSES. (a) As compensation for the services rendered to
the Trust pursuant to this Agreement, as set forth in Section 4 and in Schedules
B and C hereof, the Trust shall pay Equitable monthly fees determined as set
forth in Schedule A to this Agreement. Such fees are to be billed monthly and
shall be due and payable upon receipt of the invoice. If this Agreement becomes
effective or the provision of services under this Agreement terminates before
the end of any month, the fee for the part of the month from the effective date
to the end of the month or from the beginning of the month to the date of such
termination shall be prorated according to the proportion which such part bears
to the full monthly period and shall be payable upon the date of such
termination.
(b) For the purpose of determining fees calculated as a function of the
Trust's net assets, the value of the Trust's net assets shall be computed as
required by its currently effective Prospectus, generally accepted accounting
principles, and resolutions of the Board.
(c) The Trust may request additional services, additional processing,
or special reports, with such specifications and requirements as may be
reasonably required by Equitable. If Equitable elects to provide such additional
services or arrange for their provision, it shall be entitled to additional fees
and expenses.
(d) Equitable will bear its own expenses, in connection with the
performance of the services under this Agreement, except as provided herein or
as agreed to by the parties. The Trust agrees to bear all expenses that are
incurred in its operation and not specifically assumed by Equitable. Such other
expenses to be incurred in the operation of the Trust and to be borne by the
Trust, include, but are not limited to: taxes; interest; brokerage fees and
commissions; salaries and fees of officers and trustees who are not officers,
directors, shareholders or employees of Equitable, or the Manager, the Trust's
investment advisers, transfer agent, or distributor, SEC and state registration
and qualification fees, levies, fines and other charges; EDGAR filing fees,
processing services and related fees; postage and mailing costs; costs of share
certificates; management, investment advisory, transfer agency, distribution,
shareholder service and administration fees; charges and expenses of data
services, independent public accountants and custodians; insurance premiums
including fidelity bond premiums; legal
<PAGE>
expenses; consulting fees; customary bank charges and fees; costs of maintenance
of trust existence; expenses of typesetting and printing of Trust prospectuses
for regulatory purposes and for distribution to current shareholders of the
Trust (for classes of shares of any of the Portfolios that have adopted a Rule
12b-1 plan, such classes of shares may bear the expense of all other printing,
production, and distribution of prospectuses, and marketing materials provided
to potential investors); expenses of printing and production costs of
shareholders' reports and proxy statements and materials; expenses of proxy
solicitation, proxy tabulation and Trust shareholder meetings; costs and
expenses of Trust stationery and forms; costs associated with Trust, shareholder
and Board meetings; trade association dues and expenses; charges and expenses
related to any computer system licensed to Equitable and used to produce Trust
shareholder reports under this Agreement, provided, however, that the Trust will
only be responsible for a pro-rata share of such charges and expenses based upon
the number of shareholder reports produced by Equitable utilizing this system;
and any extraordinary expenses and other customary Trust expenses. In addition,
Equitable may utilize one or more independent pricing services to obtain
securities prices and to act as backup to the primary pricing services, in
connection with determining the net asset values of the Trust. The Trust will
reimburse Equitable for the Trust's share of the cost of such services based
upon the actual usage, or a pro-rata estimate of the use, of the services for
the benefit of the Trust.
(e) All fees, approved out-of-pocket expenses, or additional
charges of Equitable shall be billed on a monthly basis and shall be due and
payable upon receipt of the invoice. Out-of-pocket expenses shall be considered
and approved in accordance with Expense Approval Guidelines as mutually agreed
upon by the parties hereto from time to time.
(f) Equitable will render, after the close of each month in
which services have been furnished, a statement reflecting all of the charges
for such month.
(g) The Trust must notify Equitable in writing of any
contested amounts within ninety (90) days of receipt of a billing for such
amounts. Disputed amounts are not due and payable while they are being
investigated.
6. LIMITATION OF LIABILITY AND INDEMNIFICATION.
(a) Equitable shall not be liable for any error of judgment or
mistake of law or for any loss or expense suffered by the Trust, in connection
with the matters to which this Agreement relates, except for a loss or expense
caused by or resulting from or attributable to willful misfeasance, bad faith or
negligence on Equitable's part (or on the part of any third party to whom
Equitable has delegated any of its duties and obligations pursuant to Section
4(c) hereunder) in the performance of its (or such third party's) duties or from
reckless disregard by Equitable (or by such third party) of its obligations and
duties under this Agreement (in the case of Equitable) or under an agreement
with Equitable (in the case of such third party) or, subject to Section 10
below, Equitable's (or such third party's) refusal or failure to comply with the
terms of this Agreement (in the case of Equitable) or an agreement with
Equitable (in the case of such third party) or its breach of any representation
or warranty under this Agreement (in the case of Equitable) or under an
agreement with Equitable (in the case of such third party). In no event shall
Equitable (or such third party) be liable for any indirect, incidental special
or consequential losses or damages of any kind whatsoever (including but not
limited to lost profits), even if Equitable (or such third party) has been
advised of the likelihood of such loss or damage and regardless of the form of
action.
(b) Except to the extent that Equitable may be held liable
pursuant to Section 6(a) above, Equitable shall not be responsible for, and the
Trust shall indemnify and hold
<PAGE>
Equitable harmless from and against any and all losses, damages, costs,
reasonable attorneys' fees and expenses, payments, expenses and liabilities,
including but not limited to those arising out of or attributable to:
(i) any and all actions of Equitable or its officers or agents
required to be taken pursuant to this Agreement;
(ii) the reliance on or use by Equitable or its officers or
agents of information, records, or documents which are received by Equitable or
its officers or agents and furnished to it or them by or on behalf of the Trust,
and which have been prepared or maintained by the Trust or any third party on
behalf of the Trust;
(iii) the Trust's refusal or failure to comply with the terms
of this Agreement or the Trust's lack of good faith, or its actions, or lack
thereof, involving negligence or willful misfeasance;
(iv) the breach of any representation or warranty of the Trust
hereunder;
(v) the reliance on or the carrying out by Equitable or its
officers or agents of any proper instructions reasonably believed to be duly
authorized, or requests of the Trust;
(vi) any delays, inaccuracies, errors in or omissions from
information or data provided to Equitable by data services, including data
services providing information in connection with any third party computer
system licensed to Equitable, and by any corporate action services, pricing
services or securities brokers and dealers;
(vii) the offer or sale of shares by the Trust in violation of
any requirement under the Federal securities laws or regulations or the
securities laws or regulations of any state, or in violation of any stop order
or other determination or ruling by any Federal agency or any state agency with
respect to the offer or sale of such shares in such state (1) resulting from
activities, actions, or omissions by the Trust or its other service providers
and agents, or (2) existing or arising out of activities, actions or omissions
by or on behalf of the Trust prior to the effective date of this Agreement;
(viii) any failure of the Trust's registration statement to
comply with the 1933 Act and the 1940 Act (including the rules and regulations
thereunder) and any other applicable laws, or any untrue statement of a material
fact or omission of a material fact necessary to make any statement therein not
misleading in a Trust's prospectus;
(ix) except as provided for in Schedule B.III., the actions
taken by the Trust, its Manager, its investment advisers, and its distributor in
compliance with applicable securities, tax, commodities and other laws, rules
and regulations, or the failure to so comply, and
(x) all actions, inactions, omissions, or errors caused by
third parties to whom Equitable or the Trust has assigned any rights and/or
delegated any duties under this Agreement at the specific request of or as
required by the Trust, its Portfolio, investment advisers, or Trust
distributors.
The Trust shall not be liable for any indirect, incidental, special or
consequential losses or damages of any kind whatsoever (including but not
limited to lost profits) even if the Trust has
<PAGE>
been advised of the likelihood of such loss or damage and regardless of the form
of action, except when the Trust is required to indemnify Equitable pursuant to
this Agreement.
7. DURATION AND TERMINATION. (a) This agreement shall become effective
on the date first written above. Unless sooner terminated as provided in this
Section 7(a), this Agreement shall continue in effect until one year after the
date first written above. Thereafter, if not terminated, this Agreement shall
continue automatically for successive terms of one year, provided that such
continuance is specifically approved at least annually (a) by a vote of a
majority of those members of the Trust's Board of Trustees who are not parties
to this Agreement or "interested persons" of such party, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the
Trust's Board of Trustees or by a vote of a "majority of the outstanding voting
securities" of the Trust; provided, however, that this Agreement may be
terminated by the Trust at any time, without the payment of any penalty, by vote
of a majority of the entire Board of Trustees or a vote of a "majority of the
outstanding voting securities" of the Trust, on sixty (60) days prior written
notice to Equitable or by Equitable at any time, without the payment of any
penalty, on sixty (60) days prior written notice to the Trust. (As used in this
Agreement, the terms "majority of the outstanding voting securities" and
"interested persons" shall have the same meaning as such terms have in the 1940
Act. Upon termination of this Agreement, the Trust shall pay to Equitable such
compensation and any documented and agreed upon out-of-pocket or other
reimbursable expenses which may become due or payable under the terms hereof as
of the date of termination or after the date that the provision of services
ceases, whichever is later.
8. NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be deemed effective on the date of personal delivery (by
private messenger, courier service or otherwise) or upon confirmed receipt of
telex or facsimile, whichever occurs first, or upon receipt, if by mail to the
parties at the following address (or such other address as a party may specify
by notice to the other):
If to the Trust:
EQ Advisors Trust
c/o The Equitable Life Assurance Society of the United States
1290 Avenue of the Americas
New York, NY 10104
Attention: Peter D. Noris
Fax: (212) 707-1550
If to Equitable:
The Equitable Life Assurance Society of the United States
1290 Avenue of the Americas
New York, NY 10104
Attention: Steven Joenk
Fax: (212) 707-7348
<PAGE>
9. WAIVER. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver nor
shall it deprive such party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver must be in
writing signed by the waiving party.
10. FORCE MAJEURE. In the event Equitable is unable to perform its
obligations or duties under the terms of this Agreement because of any act of
God, strike, riot, act of war, equipment failure, power failure or damage or
other causes reasonably beyond its control, Equitable shall not be liable for
any loss, damage, cost, charge, counsel fee, payment, expense or liability to
any other party (whether or not a party to this Agreement) resulting from such
failure to perform its obligations or duties under this Agreement or otherwise
from such causes. This provision, however, shall in no way excuse Equitable from
liability to the Trust for any and all losses, damages, costs, charges, counsel
fees, payments and expenses, except for any indirect, incidental, special or
consequential losses or damages of any kind whatsoever (including but not
limited to lost profits), incurred by the Trust due to the non-performance or
delay in performance by Equitable of its duties and obligations under this
Agreement if such non-performance or delay in performance could have been
reasonably prevented by Equitable through back-up systems and other procedures
commonly employed by other administrators in the mutual fund industry, provided
that Equitable shall have the right, at all times, to mitigate or cure any
losses.
11. AMENDMENTS. This Agreement may be modified or amended from time to
time by mutual written agreement between the parties, provided that any material
modification or amendment is approved as set forth in Section 7(a) of this
Agreement. No provision of this Agreement may be changed, discharged, or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, discharge or termination is sought.
12. SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance it shall nevertheless
remain applicable to all other persons and circumstances.
13. GOVERNING LAW. This Agreement shall be governed by the substantive
laws of the State of New York.
14. MISCELLANEOUS. In performing its services hereunder, Equitable
shall be entitled to rely on any oral or written instructions, notices or other
communications, including electronic transmissions, from the Trust and its
custodians, officers and directors, investors, agents and other service
providers which Equitable reasonably believes to be genuine, valid and
authorized. Equitable shall also be entitled to consult with and rely on the
advice and opinions of outside legal counsel retained by the Trust, as necessary
or appropriate.
<PAGE>
15. CONFIDENTIALITY. Equitable agrees that, except as otherwise
required by law or in connection with any required disclosure to an insurance or
other regulatory authority or for purposes of performing its obligations
hereunder, it will keep confidential all records and information in its
possession relating to the Trust or its shareholders and will not disclose any
confidential information except at the request or with the written consent of
the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
EQ ADVISORS TRUST
By:_________________________________
Name: Peter D. Noris
Title: President and Trustee
THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
By:_________________________________
Name: Steven Joenk
Title: Senior Vice President
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE A
FEES AND EXPENSES
TRUST ADMINISTRATION, ACCOUNTING AND COMPLIANCE FEES
A. For the services rendered under this Agreement, the Trust shall pay to
Equitable an annual fee in accordance with the following schedule:
(i) $30,000 for each Portfolio, and
(ii) With respect to the total Trust assets:
.04 of 1 % of the first $3 billion of the total Trust assets;
.03 of 1 % of the next $3 billion of the total Trust assets;
.025 of 1 % of the next $4 billion of the total Trust assets;
and .0225 of 1% of the total Trust assets in excess of $10
billion.
B. The foregoing calculations are based on the average daily net assets of
the Trust, as described. The fees will be computed, billed and payable
monthly.
C. Approved out-of-pocket expenses, as provided in Section 5, will be
computed, billed and payable monthly.
A-1
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE B
GENERAL DESCRIPTION OF TRUST ADMINISTRATION
AND COMPLIANCE SERVICES
I. GENERAL
A. Coordinate and manage the work relationships among all service
providers to the Trust.
B. Perform trust operational management, including development of
control procedures and monitor the performance of all service
vendors to the Trust.
C. Subject to the supervision of the Board of Trustees as
required, propose and carry out policies, particularly in the
area of operational problem inquiry and resolution, such as
potential/actual compliance violations, valuation of complex
securities or those trading in problematic markets, and trust
share valuation errors.
II. FINANCIAL AND TAX REPORTING
A. Prepare management reports and Board of Trustees materials,
such as unaudited financial statements and summaries of
dividends and distributions.
B. Report Trust performance to outside services as directed by
Trust management.
C. Calculate dividend and capital gain distributions in
accordance with distribution policies detailed in the Trust's
prospectus(es) or Board resolutions. Assist Trust management
in making final determinations of distribution amounts.
D. Estimate and recommend year-end dividend and capital gain
distributions necessary for each Portfolio to avoid the excise
tax on undistributed income of a regulated investment company
("RIC") under Section 4982 of the Internal Revenue Code of
1986, as amended (the "Code").
E. The Trust will advise Equitable of the declaration of any
dividend or distribution and the record and payable date
thereof at least five (5) days prior to the record date; and
Equitable will make appropriate credits to each shareholder's
account.
F. Working with the Trust's independent public accountants and
other appropriate persons, prepare and file the Trust's
Federal tax return on Form 1120-RIC (or any similar Form),
along with all state and local tax returns where applicable.
Prepare and file Federal Excise Tax Return (Form 8613) (or any
similar Form).
B-1
<PAGE>
Will obtain all information concerning foreign tax filings
prepared and filed in foreign jurisdictions necessary for
Equitable to perform its obligations under this Agreement.
G. Prepare for review by appropriate persons and file Trust's
Form N-SAR with the SEC.
H. Prepare and coordinate printing of Trust's semi-annual and
annual reports to shareholders and file such reports with the
appropriate regulatory agencies. Notwithstanding the
foregoing, Equitable shall not be responsible for preparing
the "President's Letters" or the "Management's discussion of
each Portfolio's performance" but shall review the text of the
"President's letters" and "Management's discussion of which
Portfolio's performance" (which shall also be subject to
review by the Trust's legal counsel).
I. Prepare for review and approval by the Trust's officers
financial information for the Trust's semi-annual and annual
reports, proxy statements and other communications required or
otherwise sent to the Trust's shareholders (and their
contractowners) and arrange, if requested, for the printing
and dissemination of such reports and communications.
J. Provide financial information for Trust proxies and
prospectuses including expense table.
K. File copies of financial reports to shareholders with the SEC
under Rule 30b2-1.
L. Notify the separate accounts as to what portion, if any, of
the distributions made by the Trust during the prior fiscal
year were exempt-interest dividends under Section 852(b)(5)(A)
of the Code.
M. Provide Form 1099-MISC to persons other than corporations
(i.e., Trustees) to whom the Trust paid more than $600 during
the year.
III. PORTFOLIO COMPLIANCE
Equitable shall provide the following compliance services in
conjunction with each Adviser's obligations pursuant to its Investment
Advisory Agreement with the Trust and all applicable laws.
A. Monitor and periodically test each Portfolio's compliance with
investment restrictions (e.g., issuer or industry
diversification, etc.) listed in the current prospectus(es)
and Statement(s) of Additional Information.
B. Monitor and periodically test, including on required quarterly
testing dates, each Portfolio's compliance with the
requirements of Section 851 of the Code and applicable
Treasury Regulations for qualification as a RIC.
B-2
<PAGE>
C. Monitor and periodically test, including on required quarterly
testing dates, each Portfolio's compliance with the
requirements of Section 817(h) of the Code and applicable
Treasury Regulations.
D. Monitor each investment adviser's compliance with Board
directives such as "Approved Issuers Listings for Repurchase
Agreements", Rule 17a-7, Rule 17e-1 and Rule 12d-3 procedures.
E. Mail quarterly requests for "Securities Transaction Reports"
to the Trust's Trustees and Officers and "access persons"
under the terms of the Trust's Code of Ethics and SEC
regulations.
F. Prepare, distribute, and utilize in compliance training
sessions, comprehensive compliance materials, including
compliance manuals and checklists, subject to review and
comment by the Trust's legal counsel and develop or assist in
developing guidelines and procedures to improve overall
compliance by the Trust and its various agents.
IV. REGULATORY AFFAIRS AND CORPORATE GOVERNANCE
A. Prepare, review and file post-effective amendments to the
Trust's registration statement and supplements as needed with
respect to the currently existing Portfolios only.
B. Prepare and file proxy materials and administer shareholder
meetings.
C. Prepare agenda, collect background information and prepare all
Board materials for Board meetings and distribute such
materials to all necessary parties.
D. Prepare minutes, and follow up on matters related to
Equitable's responsibilities under this Agreement that are
raised at all Board meetings.
E. In coordination with the Manager, make reports and
recommendations to the Board concerning the performance of
each of the investment advisers and other service providers
for the Trust, as the Board may reasonably request.
F. Prepare and file with the SEC Rule 24f-2 Notices (and all
similar state filings, if required by the states). Equitable
shall not be responsible for preparing any legal opinions
required in connection with Rule 24f-2 Notices.
G. Review and monitor the fidelity bond and errors and omissions
insurance coverage and the submission of any related
regulatory filings.
H. Prepare and update documents, such as charter document,
by-laws, and foreign qualification filings.
B-3
<PAGE>
I. Provide support and counsel with respect to routine regulatory
examinations or investigations of the Trust and work closely
with the Trust's legal counsel in response to any non-routine
regulatory matters. Also, coordinate all communications and
data collection with regard to any regulatory examinations and
yearly audits by independent accountants.
J. Maintain general corporate calendar.
K. Assist with preparations for, attend and prepare minutes of
shareholder meetings.
L. When requested provide consultation on regulatory matters
relating to portfolio management, Trust operations and any
potential changes in each Portfolio's investment policies,
operations or structure.
M. Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect each
Portfolio; update the Board and the Manager on those
developments and provide related planning assistance where
reasonably requested or appropriate.
V. ADMINISTRATION
A. Furnish appropriate officers for the Trust, subject to Board
approval.
B. Prepare, propose and monitor the Trust budget, including
prepare Trust, portfolio or class expense projections,
establish accruals and review on a periodic basis, including
expenses based on a percentage of average daily net assets
(e.g., management, advisory and administrative, fees) and
expenses based on actual charges annualized and accrued daily
(audit fees, registration fees, directors' fees, etc.).
C. For new Portfolios and classes, obtain Employer or Taxpayer
Identification Number and CUSIP numbers, as necessary.
Estimate organizational costs and expenses and monitor against
actual disbursements.
D. Arrange for and monitor, if directed by the appropriate Trust
officers, the payment of the Trust's and each Portfolio's or
class' expenses (pursuant to the Trust's Rule 18f-3 Plan).
B-4
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE C
DESCRIPTION OF TRUST ACCOUNTING SERVICES
I. GENERAL DESCRIPTION
Equitable shall provide the following accounting services to the Trust:
A. Maintenance of the books and records for the Trust's assets,
including records of all securities transactions.
B. Calculation of each Portfolio's or class' net asset value in
accordance with the Trust's prospectus, and after the Portfolio
or class meets eligibility requirements, transmission to NASDAQ
and to such other entities as directed by the Trust.
C. Accounting for dividends and interest received and
distributions made by the Trust.
D. Coordination with the Trust's independent auditors with respect
to the annual audit, and as otherwise requested by the Trust.
E. Consult with the Trust's officers, independent public
accountants and other appropriate persons in establishing the
accounting policies of the Trust.
F. As mutually agreed upon, Equitable will provide domestic
and/or international reports.
C-1
<PAGE>
EXHIBIT (h)(2)(iv)
AMENDMENT NO. 1 TO
AMENDED AND RESTATED EXPENSE LIMITATION AGREEMENT
AMENDMENT NO. 1 to the Amended and Restated Expense Limitation
Agreement, dated as of August 30, 1999, between EQ Financial Consultants, Inc.
(the "Manager") and EQ Advisors Trust (the "Trust).
The Manager and Trust hereby agree to modify and amend the Amended and
Restated Expense Limitation Agreement (the "Agreement"), dated as of May 1, 1999
between them as follows:
1. New Portfolio. The Manager and the Trust have determined add the
Calvert Socially Responsible Portfolio ("New Portfolio") to the
Agreement on the terms and conditions contained in the Agreement, and
at the level of the expense limitation applicable to the New Portfolio
as set forth in the attached schedule.
2. Schedule A. Schedule A to the Agreement, which sets forth the
Portfolios of the Trust, is hereby replaced in its entirety by
Amendment No. 1 to Schedule A attached hereto.
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 1 as of the date first above set forth.
EQ ADVISORS TRUST EQ FINANCIAL CONSULTANTS, INC.
By: /s/ Peter D. Noris By: /s/ Michael S. Martin
--------------------- -------------------------
Peter D. Noris Michael S. Martin
President and Trustee Chairman of the Board and
Chief Executive Officer
<PAGE>
AMENDMENT NO. 1 TO
SCHEDULE A
OPERATING EXPENSE LIMITS
This Agreement related to the following Portfolios of the Trust:
Maximum Annual
Operating
Name of Portfolio Expense Limit
- ----------------- -------------
Calvert Socially Responsible Portfolio .80%
BT Equity 500 Index Portfolio .30%
BT International Equity Index Portfolio .75%
BT Small Company Index Portfolio .50%
Capital Guardian International Portfolio .95%
Capital Guardian U.S. Equity Portfolio .70%
Capital Guardian Research Portfolio .70%
EQ/Alliance Premier Growth Portfolio .90%
EQ/Putnam Balanced Portfolio .65%
EQ/Putnam Growth & Income Value Portfolio .60%
EQ/Putnam International Equity Portfolio .95%
EQ/Putnam Investors Growth Portfolio .70%
EQ/Evergreen Foundation Portfolio .70%
EQ/Evergreen Portfolio .80%
JPM Core Bond Portfolio .55%
Lazard Large Cap Value Portfolio .70%
Lazard Small Cap Value Portfolio .95%
Merrill Lynch Basic Value Equity Portfolio .60%
Merrill Lynch World Strategy Portfolio .95%
MFS Emerging Growth Companies Portfolio .60%
MFS Growth with Income Portfolio .60%
MFS Research Portfolio .60%
Morgan Stanley Emerging Markets Equity Portfolio 1.50%
T. Rowe Price Equity Income Portfolio .60%
T. Rowe Price International Stock Portfolio .95%
Warburg Pincus Small Company Value Portfolio .75%
<PAGE>
EXHIBIT (h)(2)(v)
FORM OF SECOND AMENDED AND RESTATED EXPENSE
LIMITATION AGREEMENT
SECOND AMENDED AND RESTATED EXPENSE LIMITATION AGREEMENT, effective as
of May 1, 2000 by and between The Equitable Life Assurance Society of the United
States. (the "Manager") and EQ Advisors Trust (the "Trust"), on behalf of each
series of the Trust set forth in Schedule A attached hereto (each a "Portfolio,"
and collectively, the "Portfolios").
WHEREAS, the Trust is a Delaware business trust organized under the
Amended and Restated Agreement and Declaration of Trust ("Declaration of
Trust"), and is registered under the Investment Company Act of 1940, as amended
("1940 Act"), as an open-end management company of the series type, and each
Portfolio is a series of the Trust;
WHEREAS, the Trust and the Manager have entered into an Amended and
Restated Investment Management Agreement dated May 1, 2000, ("Management
Agreement"), pursuant to which the Manager provides investment management
services to each Portfolio for compensation based on the value of the average
daily net assets of each such Portfolio;
WHEREAS, the Trust and the Manager have determined that it is
appropriate and in the best interests of each Portfolio and its shareholders to
maintain the expenses of each Portfolio at a level below the level to which each
such Portfolio would normally be subject during its start-up period and,
therefore, initially entered into an Expense Limitation Agreement, dated as of
April 14, 1997, ("Expense Limitation Agreement") and subsequently amended on
December 9, 1997, March 3, 1998, December 31, 1998 and May 1, 1999, in order to
maintain each Portfolio's expense ratios at the Maximum Annual Operating Expense
Limit (as hereinafter defined) specified for such Portfolio in Schedule A
hereto;
WHEREAS, the Trust and the Manager desire to modify extend the term of
the Expense Limitation Agreement, with respect to each Portfolio, for an
additional one year period until May 1, 2001, regardless of the current
expiration date of the Expense Limitation Agreement as to each such Portfolios;
WHEREAS, the Trust and the Manager desire to modify the Maximum Annual
Operating Expense Limits for certain Portfolios.
NOW THEREFORE, the parties hereto agree that the Expense Limitation
Agreement is hereby modified, amended and restated in its entirety as of the
date hereof as follows:
Expense Limitation.
A. Applicable Expense Limit. To the extent that the aggregate
expenses of every character incurred by a Portfolio in any
fiscal year, including but not limited to investment
management fees of the Manager (but excluding 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 such Portfolio's business and amounts
payable pursuant to a plan adopted in accordance with Rule
12b-1 under the 1940 Act) ("Portfolio Operating Expenses"),
exceed the Maximum Annual Operating
<PAGE>
Expense Limit, as defined in Section 1.2 below, such excess
amount (the "Excess Amount") shall be the liability of the
Manager.
B. Maximum Annual Operating Expense Limit. The Maximum Annual
Operating Expense Limit with respect to each Portfolio shall
be the amount specified in Schedule A based on a percentage of
the average daily net assets of each Portfolio.
C. Method of Computation. To determine the Manager's liability
with respect to the Excess Amount, each month the Portfolio
Operating Expenses for each Portfolio shall be annualized as
of the last day of the month. If the annualized Portfolio
Operating Expenses for any month of a Portfolio exceed the
Maximum Annual Operating Expense Limit of such Portfolio, the
Manager shall first waive or reduce its investment management
fee for such month by an amount sufficient to reduce the
annualized Portfolio Operating Expenses to an amount no higher
than the Maximum Annual Operating Expense Limit. If the amount
of the waived or reduced investment management fee for any
such month is insufficient to pay the Excess Amount, the
Manager may also remit to the appropriate Portfolio or
Portfolios an amount that, together with the waived or reduced
investment management fee, is sufficient to pay such Excess
Amount.
D. Year-End Adjustment. If necessary, on or before the last day
of the first month of each fiscal year, an adjustment payment
shall be made by the appropriate party in order that the
amount of the investment management fees waived or reduced and
other payments remitted by the Manager to the Portfolio or
Portfolios with respect to the previous fiscal year shall
equal the Excess Amount.
Reimbursement of Fee Waivers and Expense Reimbursements.
E. Reimbursement. If in any year during which the total assets of
a Portfolio are greater than $100 million and in which the
Management Agreement is still in effect, the estimated
aggregate Portfolio Operating Expenses of such Portfolio for
the fiscal year are less than the Maximum Annual. Operating
Expense Limit for that year, subject to quarterly approval by
the Trust's Board of Trustees as provided in Section 2.2
below, the Manager shall be entitled to reimbursement by such
Portfolio, in whole or in part as provided below, of the
investment management fees waived or reduced and other
payments remitted by the Manager to such Portfolio pursuant to
Section 1 hereof. The total amount of reimbursement to which
the Manager may be entitled ("Reimbursement Amount") shall
equal, at any time, the sum of all investment management fees
previously waived or reduced by the Manager and all other
payments remitted by the Manager to the Portfolio, pursuant to
Section 1 hereof, during any of the previous five (5) fiscal
years (or previous three (3) fiscal years for the Capital
Guardian International Portfolio, Capital Guardian U.S. Equity
Portfolio, Capital Guardian Research Portfolio and Calvert
Socially Responsible Portfolio), less any reimbursement
previously paid by such Portfolio to the Manager, pursuant to
Sections 2.2 or 2.3 hereof, with respect to such waivers,
reductions, and payments. The Reimbursement Amount shall not
include any additional charges or fees whatsoever, including,
e.g., interest accruable on the Reimbursement Amount.
F. Board Approval. No reimbursement shall be paid to the Manager
with respect to any Portfolio pursuant to this provision in
any fiscal quarter, unless the Trust's Board of Trustees has
determined that the payment of such reimbursement is in the
best interests of such Portfolio and its shareholders. The
Trust's Board of Trustees shall determine quarterly in advance
whether any reimbursement may be paid to the Manager with
respect to any Portfolio in such quarter.
<PAGE>
G. Method of Computation. To determine each Portfolio's payments,
if any, to reimburse the Manager for the Reimbursement Amount,
each month the Portfolio Operating Expenses of each Portfolio
shall be annualized as of the last day of the month. If the
annualized Portfolio Operating Expenses of a Portfolio for any
month are less than the Maximum Annual Operating Expense Limit
of such Portfolio, such Portfolio, only with the prior
approval of the Trust's Board of Trustees, shall pay to the
Manager an amount sufficient to increase the annualized
Portfolio Operating Expenses of that Portfolio to an amount no
greater than the Maximum Annual Operating Expense Limit of
that Portfolio, provided that such amount paid to the Manager
will in no event exceed the total Reimbursement Amount.
H. Year-End Adjustment. If necessary, on or before the last day
of the first month of each fiscal year, an adjustment payment
shall be made by the appropriate party in order that the
actual Portfolio Operating Expenses of a Portfolio for the
prior fiscal year (including any reimbursement payments
hereunder with respect to such fiscal year) do not exceed the
Maximum Annual Operating Expense Limit.
Term and Termination of Agreement.
This Agreement shall continue in effect with respect to all Portfolios
until May 1, 2001 and shall thereafter continue in effect with respect to each
Portfolio from year to year provided such continuance is specifically approved
by a majority of the Trustees of the Trust who (i) are not "interested persons"
of the Trust or any other party to this Agreement, as defined in the 1940 Act,
and (ii) have no direct or indirect financial interest in the operation of this
Agreement ("Non-Interested Trustees"). Nevertheless, this Agreement may be
terminated by either party hereto, without payment of any penalty, upon ninety
(90) days' prior written notice to the other party at its principal place of
business; provided that, in the case of termination by the Trust, such action
shall be authorized by resolution of a majority of the Non-Interested Trustees
of the Trust or by a vote of a majority of the outstanding voting securities of
the Trust.
Miscellaneous.
I. Captions. The captions in this Agreement are included for
convenience of reference only and in no other way define or
delineate any of the provisions hereof or otherwise affect
their construction or effect.
J. Interpretation. Nothing herein contained shall be deemed to
require the Trust or the Portfolios to take any action
contrary to the Trust's Declaration of Trust or By-Laws, or
any applicable statutory or regulatory requirement to which it
is subject or by which it is bound, or to relieve or deprive
the Trust's Board of Trustees of its responsibility for and
control of the conduct of the affairs of the Trust or the
Portfolios.
K. Definitions. Any question of interpretation of any term or
provision of this Agreement, including but not limited to the
investment management fee, the computations of net asset
values, and the allocation of expenses, having a counterpart
in or otherwise derived from the terms and provisions of the
Management Agreement or the 1940 Act, shall have the same
meaning as and be resolved by reference to such Management
Agreement or the 1940 Act.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Second Amended and
Restated Expense Limitation Agreement to be signed by their respective officers
thereunto duly authorized and their respective corporate seals to be hereunto
affixed, as of the day and year first above written.
EQ ADVISORS TRUST
ON BEHALF OF
EACH OF ITS PORTFOLIOS
By: _______________________________
Peter D. Noris
President and Trustee
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: _______________________________
Brian S. O'Neil
Executive Vice President
<PAGE>
SCHEDULE A
MAXIMUM ANNUAL OPERATING EXPENSE LIMITS
This Agreement relates to the following Portfolios of the Trust:
Maximum Annual Operating
Name of Portfolio Expense Limit
- ----------------- ------------------------
BT Equity 500 Index Portfolio 0.35%
BT International Equity Index Portfolio 0.75%
BT Small Company Index Portfolio 0.50%
Calvert Socially Responsible Portfolio 0.80%
Capital Guardian International Portfolio 0.95%
Capital Guardian U.S. Equity Portfolio 0.70%
Capital Guardian Research Portfolio 0.70%
EQ/Alliance Premier Growth Portfolio 0.90%
EQ/Putnam Balanced Portfolio 0.65%
EQ/Putnam Growth & Income Value Portfolio 0.70%
EQ/Putnam International Equity Portfolio 1.00%
EQ/Putnam Investors Growth Portfolio 0.70%
EQ/Evergreen Foundation Portfolio 0.70%
EQ/Evergreen Portfolio 0.70%
JPM Core Bond Portfolio 0.55%
Lazard Large Cap Value Portfolio 0.70%
Lazard Small Cap Value Portfolio 0.85%
Merrill Lynch Basic Value Equity Portfolio 0.70%
Merrill Lynch World Strategy Portfolio 0.95%
MFS Emerging Growth Companies Portfolio 0.75%
MFS Growth with Income Portfolio 0.70%
MFS Research Portfolio 0.70%
Morgan Stanley Emerging Markets Equity Portfolio 1.50%
T. Rowe Price Equity Income Portfolio 0.70%
T. Rowe Price International Stock Portfolio 1.00%
Warburg Pincus Small Company Value Portfolio 0.85%
<PAGE>
(h)(4)(v)
FORM OF AMENDMENT NO. 4
TO
PARTICIPATION AGREEMENT
Amendment No. 4, dated as of October 18, 1999 ("Amendment"), to
Participation Agreement dated as of April 14, 1997 ("Original Agreement") as
amended by Amendment No. 1, dated as of December 9, 1997, Amendment No. 2, dated
as of December 31, 1998, and Amendment No. 3 dated as of April 30, 1999
(collectively the "Agreement") by and among EQ Advisors Trust, The Equitable
Life Assurance Society of the United States, Equitable Distributors, Inc. and EQ
Financial Consultants, Inc. (collectively, the "Parties").
The Parties hereby agree that Schedule B to the Agreement is replaced
in its entirety by the schedule attached hereto entitled "Schedule B".
Except as modified and amended hereby, the Agreement is hereby ratified
and confirmed in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed and delivered this Form
of Amendment No. 4 as of the date first above set
forth.
EQ ADVISORS TRUST THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: ___________________________________ By: ___________________________________
Name: Peter D. Noris Name: Peter D. Noris
Title: President and Trustee Title: Executive Vice President
and Chief Investment Officer
EQUITABLE DISTRIBUTORS, INC. AXA ADVISORS, LLC (formerly known as
"EQ FINANCIAL CONSULTANTS, INC.")
By: ___________________________________ By: ___________________________________
Name: James A. Sherperdson, III Name: Michael S. Martin
Title: Co-President and Co-Chief Title: Chairman of the Board and
Executive Officer Chief Executive Officer
<PAGE>
SCHEDULE B
TO
FORM OF AMENDMENT NO. 4 TO PARTICIPATION AGREEMENT
DESIGNATED PORTFOLIOS AND CLASSES
PORTFOLIOS OF
EQ ADVISORS TRUST
Portfolios Classes
- ---------- -------
BT Equity 500 Index Portfolio Class IA and Class IB
BT International Equity Index Portfolio Class IA and Class IB
BT Small Company Index Portfolio Class IA and Class IB
EQ/Alliance Premier Growth Portfolio Class IA and Class IB
EQ/Capital Guardian International Equities Portfolio Class IA and Class IB
EQ/Capital Guardian Research Portfolio Class IA and Class IB
EQ/Capital Guardian U.S. Equities Portfolio Class IA and Class IB
EQ/Putnam Balanced Portfolio Class IA and Class IB
EQ/Putnam Growth & Income Value Portfolio Class IA and Class IB
EQ/Putnam International Equity Portfolio Class IA and Class IB
EQ/Putnam Investors Growth Portfolio Class IA and Class IB
EQ/Evergreen Foundation Portfolio Class IA and Class IB
EQ/Evergreen Portfolio Class IA and Class IB
JPM Core Bond Portfolio Class IA and Class IB
Lazard Large Cap Value Portfolio Class IA and Class IB
Lazard Small Cap Value Portfolio Class IA and Class IB
Merrill Lynch Basic Value Equity Portfolio Class IA and Class IB
Merrill Lynch World Strategy Portfolio Class IA and Class IB
MFS Emerging Growth Companies Portfolio Class IA and Class IB
MFS Growth with Income Portfolio Class IA and Class IB
MFS Research Portfolio Class IA and Class IB
Morgan Stanley Emerging Markets Equity Portfolio Class IA and Class IB
T. Rowe Price Equity Income Portfolio Class IA and Class IB
T. Rowe Price International Stock Portfolio Class IA and Class IB
Warburg Pincus Small Company Value Portfolio Class IA and Class IB
Alliance Money Market Portfolio Class IA and Class IB
Alliance Intermediate Government Securities Portfolio Class IA and Class IB
Alliance Quality Bond Portfolio Class IA and Class IB
Alliance High Yield Portfolio Class IA and Class IB
Alliance Balanced Portfolio Class IA and Class IB
Alliance Conservative Investors Portfolio Class IA and Class IB
Alliance Growth Investors Portfolio Class IA and Class IB
Alliance Common Stock Portfolio Class IA and Class IB
Alliance Equity Index Portfolio Class IA and Class IB
Alliance Growth And Income Portfolio Class IA and Class IB
Alliance Aggressive Stock Portfolio Class IA and Class IB
Alliance Small Cap Growth Portfolio Class IA and Class IB
Alliance Global Portfolio Class IA and Class IB
Alliance International Portfolio Class IA and Class IB
Calvert Socially Responsibly Portfolio Class IA and Class IB
