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Filed Pursuant to Rule 497(c)
Registration File No.: 333-17217
EQ ADVISORS TRUST(SM)
PROSPECTUS DATED MAY 1, 2000
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This Prospectus describes five (5) Portfolios offered by EQ Advisors Trust and
the Class IA shares offered by the Trust on behalf of each Portfolio to The
Equitable Investment Plan for Employees, Managers and Agents ("Equitable
Plan"). 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.
DOMESTIC PORTFOLIOS
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EQ/Alliance Premier Growth
MFS Emerging Growth Companies
T. Rowe Price Equity Income
Warburg Pincus Small Company Value
INTERNATIONAL STOCK PORTFOLIO
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BT International Equity Index
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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.
Version 19
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OVERVIEW
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EQ ADVISORS TRUST
This Prospectus tells you about five (5) current Portfolios of EQ Advisors
Trust ("Trust") and the Class IA shares offered by the Trust on behalf of each
Portfolio. The Trust is an open-end management investment company. Each
Portfolio is a separate series of the Trust with its own investment objective,
investment strategies and risks, which are described in this Prospectus. Each
of the current Portfolios of the Trust are diversified for purposes of the
Investment Company Act of 1940, as amended ("1940 Act").
The Trust's shares are currently sold only to insurance company separate
accounts in connection with variable life insurance contracts and variable
annuity certificates and contracts (the "Contract" or collectively, the
"Contracts") issued by The Equitable Life Assurance Society of the United
States ("Equitable") and Equitable of Colorado, Inc. ("EOC") as well as
insurance companies that are not affiliated with Equitable or EOC
("non-affiliated insurance companies") and to the Equitable Plan. The
Prospectus is designed to help you make informed decisions about the
Portfolios that are available to the Equitable Plan.
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.
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TABLE OF CONTENTS
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1
SUMMARY INFORMATION CONCERNING EQ
ADVISORS TRUST 4
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ABOUT THE INVESTMENT PORTFOLIOS 8
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DOMESTIC PORTFOLIOS 10
EQ/Alliance Premier Growth 10
MFS Emerging Growth Companies 12
T. Rowe Price Equity Income 14
Warburg Pincus Small Company Value 17
INTERNATIONAL STOCK PORTFOLIO 20
BT International Equity Index 20
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MORE INFORMATION ON PRINCIPAL RISKS 23
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MANAGEMENT OF THE TRUST 28
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The Trust 28
The Manager 28
Expense Limitation Agreement 30
The Advisers 30
The Administrator 31
The Transfer Agent 31
Brokerage Practices 31
Brokerage Transactions with Affiliates 31
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FUND DISTRIBUTION ARRANGEMENTS 33
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PURCHASE AND REDEMPTION 34
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HOW ASSETS ARE VALUED 35
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TAX INFORMATION 36
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FINANCIAL HIGHLIGHTS 37
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PRIOR PERFORMANCE OF EACH ADVISER 42
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SUMMARY INFORMATION CONCERNING EQ ADVISORS TRUST
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The following chart highlights the five (5) Portfolios described in this
Prospectus that you can choose as investment alternatives to the Equitable
Plan. 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 23.
<TABLE>
<CAPTION>
EQ ADVISORS TRUST DOMESTIC PORTFOLIOS
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
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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MFS EMERGING GROWTH COMPANIES Seeks to provide long-term capital growth
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T. ROWE PRICE EQUITY INCOME Seeks to provide substantial dividend income and also
capital appreciation by investing primarily in
dividend-paying common stocks of established companies
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WARBURG PINCUS SMALL COMPANY VALUE Seeks long-term capital appreciation
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</TABLE>
<TABLE>
<CAPTION>
EQ ADVISORS TRUST INTERNATIONAL STOCK PORTFOLIO
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
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>
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<TABLE>
<CAPTION>
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
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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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, portfolio turnover, and growth investing
enterprises whose rates of earnings growth are expected to risks
accelerate
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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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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>
<TABLE>
<CAPTION>
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
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Equity securities of companies in the MSCI EAFE Index General investment, index-fund, foreign securities, liquidity,
and derivatives risks
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</TABLE>
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SUMMARY OF EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Maximum initial sales charge imposed on purchases None
Maximum sales charge imposed on reinvested dividends None
Maximum contingent deferred sales charge ("CDSC") None
Exchange fee None
ANNUAL OPERATING EXPENSES AFTER FEE WAIVERS OR ASSUMPTION OF EXPENSES*
The table below shows the annual management fees and other expenses for each of
the Portfolios based upon amounts paid by the Portfolios during the year ended
December 31, 1999. Other expenses for each of the Portfolios may fluctuate from
year to year. The management fees and other expenses are expressed in the table
below as an annual percentage of each Portfolio's daily average net assets:
<TABLE>
<CAPTION>
T. ROWE MFS
EQ/ALLIANCE PRICE EMERGING WARBURG PINCUS BT
PREMIER EQUITY GROWTH SMALL COMPANY INTERNATIONAL
GROWTH INCOME COMPANIES VALUE EQUITY INDEX
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<S> <C> <C> <C> <C> <C>
Management Fees 0.90% 0.60% 0.65% 0.75% 0.35%
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12b-1 Fees None None None None None
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Other Expenses 0.23% 0.21% 0.17% 0.24% 0.49%
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Total Annual Portfolio Operating
Expenses* 1.13% 0.81% 0.82% 0.99% 0.84%
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Fee Waiver and/or Expense
Reimbursement (0.23)% (0.11)% (0.07)% (0.14)% (0.09)%
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Net Expenses* 0.90% 0.70% 0.75% 0.85% 0.75%
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</TABLE>
* The expense information has been restated to reflect the current fees and
expenses of each Portfolio.
** The Trust's Manager has entered into an Expense Limitation Agreement with the
Trust with respect to each Portfolio. Pursuant to that 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 certain
expenses described in the agreement) are limited as specified in the table
above. See "Management of the Trust" - "Expense Limitation Agreement" for
more detailed information.
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The following Examples are to help you compare the cost of investing in the
Portfolios with the cost of investing in other funds. They assume that you
invest $10,000 in each Portfolio for the time periods indicated and then you
redeem all of your shares at the end of those periods. The Examples also assume
that (i) your investment has a 5% return each year, (ii) the Portfolio's
operating expenses stay the same, and (iii) all dividends and distributions are
reinvested. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
EQ/Alliance Premier Growth $ 91.85 $ 286.99 $ 498.46 $ 1,107.83
BT International Equity Index $ 76.59 $ 239.69 $ 416.53 $ 930.32
MFS Emerging Growth Companies $ 76.59 $ 239.69 $ 416.93 $ 930.32
T. Rowe Price Equity Income $ 71.51 $ 223.87 $ 389.62 $ 870.54
Warburg Pincus Small Company Value $ 86.76 $ 271.24 $ 471.35 $ 1,048.97
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</TABLE>
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About the investment portfolios
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This section of the Prospectus provides a more complete description of the
principal investment objectives, strategies, and risks of each of the
Portfolios. Of course, there can be no assurance that any Portfolio will
achieve its investment objective.
Please note that:
o A fuller description of each of the principal risks is included in the
section "More Information on Principal Risks," which follows the
description of each Portfolio in this section of the Prospectus.
o Additional information concerning each Portfolio's strategies, investments,
and risks can also be found in the Trust's Statement of Additional
Information.
GENERAL INVESTMENT RISKS
Each of the Portfolios is subject to the following risks:
ASSET CLASS RISK: The returns from the types of securities in which a
Portfolio invests may underperform returns from the various general securities
markets or different asset classes.
MARKET RISK: You could lose money over short periods due to fluctuation in a
Portfolio's share price in reaction to stock or bond market movements, and
over longer periods during extended market downturns.
SECURITY SELECTION RISK: There is the possibility that the specific securities
selected by a Portfolio's Adviser will underperform other funds in the same
asset class or benchmarks that are representative of the general performance
of the asset class.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
THE BENCHMARKS
The performance of each of the Trust's Portfolios as shown on the following
pages compares each Portfolio's performance to that of a broad-based
securities market index, an index of funds with similar investment objectives
and/or a blended index. Each of the Portfolios' annualized rates of return are
net of: (i) its investment management fees; and (ii) its other expenses. These
rates are not representative of the actual return you would receive under your
Contract.
Broad-based securities indices are unmanaged and are not subject to fees and
expenses typically associated with managed investment company portfolios.
Broad-based securities indices are also not subject to contract and
insurance-related expenses and charges. Investments cannot be made directly in
a broad-based securities index. Comparisons with these benchmarks, therefore,
are of limited use. They are included because they are widely known and may
help you to understand the universe of securities from which each Portfolio is
likely to select its holdings.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX ("MSCI EAFE") is a market
capitalization weighted equity index composed of a sample of companies
representative of the market structure of Europe, Australasia and the Far East.
MSCI EAFE Index returns assume dividends reinvested net of withholding taxes
and do not reflect any fees or expenses.
THE RUSSELL 2000 INDEX ("Russell 2000") is an unmanaged index which tracks the
performance of 2,000 publicly-traded U.S stocks. It is often used to indicate
the performance of smaller company stocks. It is compiled by the Frank Russell
Company.
THE RUSSELL 2000 VALUE INDEX ("Russell 2000 Value") is an unmanaged index
which measures the performance of those Russell 2000 companies with lower
price-to-book ratios and lower forecasted growth values. It is compiled by the
Frank Russell Company.
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THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500") is an
unmanaged weighted index containing common stocks of 500 industrial,
transportation, utility and financial companies, regarded as generally
representative of the larger capitalization portion of the United States stock
market. The S&P 500 returns reflect the reinvestment of dividends, if any, but
do not reflect fees, brokerage commissions or other expenses of investing.
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DOMESTIC PORTFOLIOS
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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
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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.
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DOMESTIC PORTFOLIOS (CONTINUED)
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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
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addition, the value of foreign investments can be adversely affected by:
unfavorable currency exchange rates (relative to the U.S. dollar for
securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate was over 100% per year.
Higher portfolio turnover (e.g., over 100% per year) will cause the Portfolio
to incur additional transaction costs that could be passed through to
shareholders.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for the Portfolio for one year and since inception. The table also
compares the Portfolio's performance to the returns of a broad-based index.
Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results. The inception date for the Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
---------------------------------
[GRAPHIC OMITTED]
Year Percentage
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1998 34.57%
1999 74.43%
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Best quarter: Worst quarter:
53.47% (1999 4th Quarter) 0.72% (1999 3rd Quarter)
AVERAGE ANNUAL TOTAL RETURNS
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SINCE
ONE YEAR INCEPTION
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MFS Emerging Growth Companies
Portfolio 74.43% 97.31%**
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Russell 2000 Index* 21.26% 26.37%
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* For more information on this index, see the preceding section "The
Benchmarks."
** Investment operations commenced with respect to Class IA shares on
November 24, 1998
WHO MANAGES THE PORTFOLIO
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS has been the Adviser to the Portfolio since it commenced
operations. MFS is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States, Massachusetts
Investors Trust. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
The Portfolio Managers are TONI Y. SHIMURA, a Senior Vice President of MFS,
who has been employed by MFS as a portfolio manager for the Portfolio since
1995, and JOHN W. BALLEN, Chief Investment Officer and President of MFS, who
provides general oversight in the management of the Portfolio.
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DOMESTIC PORTFOLIOS (CONTINUED)
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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:
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VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged
to be undervalued may actually be appropriately priced.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. The risk that an issuer or guarantor of a fixed
income security or counterparty to the Portfolio's fixed income transaction is
unable to meet its financial obligations is particularly significant for this
Portfolio because this Portfolio may invest a portion of its assets in "junk
bonds" (i.e., securities rated below investment grade). Junk bonds are issued
by companies with questionable credit strength and, consequently, are
considered to be speculative in nature and may be subject to greater market
fluctuations than investment grade fixed-income securities.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total returns
for the Portfolio for one year and since inception. The table also compares the
Portfolio's performance to the returns of a broad-based index. Both the bar
chart and table assume reinvestment of dividends and distributions. Past
performance is not an indication of future performance. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses,which would reduce the perfomance results. The inception date for the
Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
---------------------------------
[GRAPHIC OMITTED]
Year Percentage
---------------------------------
1998 9.11%
1999 3.80%
---------------------------------
Best quarter: Worst quarter:
13.28% (1999 2nd Quarter) (8.48)% (1999 3rd Quarter)
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
--------------------------------------------------------------------
T. Rowe Price Equity Income Portfolio 3.80% 3.29%**
--------------------------------------------------------------------
S&P 500 Index* 21.03% 25.68%
--------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
** Investment operations commenced with respect to Class IA shares on
November 24, 1998
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
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16
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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>
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17
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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 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
<PAGE>
DOMESTIC PORTFOLIOS (CONTINUED)
- ----------
18
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addition, the value of foreign investments can be adversely affected by:
unfavorable currency exchange rates (relative to the U.S. dollar for
securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
FIXED INCOME RISK: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment grade securities, which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
higher-rated obligations because BBB rated investment grade securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998
and 1999, the Portfolio's first two years of operations, and some of the risks
of investing in the Portfolio by showing yearly changes in the Portfolio's
performance. The table below shows the Portfolio's average annual total
returns for the Portfolio for one year and since inception. The table also
compares the Portfolio's performance to the returns of a broad-based index.
Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce performance results.
The inception date for the Portfolio is May 1, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
---------------------------------
[GRAPHIC OMITTED]
Year Percentage
----------------------------------
1998 (10.02)%
1999 1.97%
----------------------------------
Best quarter: Worst quarter:
13.42% (1999 2nd Quarter) (10.75)% (1999 1st Quarter)
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------
Warburg Pincus Small Company Value
Portfolio 2.07 % 4.25 %**
- --------------------------------------------------------------------
Russell 2000 Value Index*, *** (1.49)% 1.47%
- --------------------------------------------------------------------
Russell 2000 Index* 21.26 % 26.37 %
- --------------------------------------------------------------------
* For more information on this index, see the preceding section "The
Benchmarks."
** Investment operations commenced with respect to Class IA shares on
November 24, 1998.
*** We believe that this index reflects more closely the market sectors in
which the Portfolio invests.
WHO MANAGES THE PORTFOLIO
CREDIT SUISSE ASSET MANAGEMENT, LLC. ("CSAM"), 466 Lexington Avenue, New York,
New York 10017-3147. CSAM is the successor to Warburg Pincus Asset Management,
Inc., which served as the Adviser to the Portfolio since it commenced
operations. CSAM is a professional investment advisory firm that provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. CSAM is indirectly
controlled by
<PAGE>
- ----------
19
- --------------------------------------------------------------------------------
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.
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
- ----------
20
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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);
<PAGE>
- ----------
21
- --------------------------------------------------------------------------------
inadequate or inaccurate information about foreign companies; higher
transaction, brokerage and custody costs; adverse changes in foreign economic
and tax policies; and foreign government instability, war or other adverse
political or economic actions. Other specific risks of investing in foreign
securities include:
EURO RISK: The Portfolio may invest in securities issued by European
issuers. On January 1, 1999, 11 of the 15 member states of the European
Monetary Union ("EMU") introduced the "Euro" as a common currency.
During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is
expected to become the sole currency of the participating states. The
introduction of the Euro will result in the redenomination of European
debt and equity securities over a period of time, which may result in
various legal and accounting differences and/or tax treatments that
otherwise would not likely occur. During this period, the creation and
implementation of suitable clearing and settlement systems and other
operational problems may cause market disruptions that could adversely
affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's average annual total return
for 1998 and 1999, the Portfolio's first two years of existence, and some of
the risks of investing in the Portfolio by showing yearly changes in the
Portfolio's performance. The table below shows the Portfolio's average annual
total returns for the Portfolio for one year and since inception. The table
also compares the Portfolio's performance to the returns of a broad based
index. Both the bar chart and table assume reinvestment of dividends and
distributions. Past performance is not an indication of future performance.
The performance results presented below do not reflect any insurance and
Contract-related fees and expenses, which would reduce the perfomance results.
The Portfolio's inception date was January 1, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
---------------------------------
[GRAPHIC OMITTED]
Year Percentage
---------------------------------
1998 20.07%
1999 27.75%
---------------------------------
Best quarter: Worst quarter:
17.97% (1999 4th Quarter) 1.35% (1999 1st Quarter)
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- ----------------------------------------------------------------------
BT International Equity Index Portfolio 27.75% 28.17%*
- ----------------------------------------------------------------------
MSCI EAFE Index** 26.96% 29.29%
- ----------------------------------------------------------------------
* 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."
<PAGE>
INTERNATIONAL STOCK PORTFOLIO (CONTINUED)
- ----------
22
- --------------------------------------------------------------------------------
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.
<PAGE>
3
MORE INFORMATION ON PRINCIPAL RISKS
- --------
23
- --------------------------------------------------------------------------------
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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24
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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.
INVESTMENT GRADE SECURITIES RISK: Debt securities are rated by national
bond ratings agencies. Securities rated BBB by S&P or Baa by Moody's are
considered investment grade securities, but are somewhat riskier than
higher rated obligations because they are regarded as having only an
adequate capacity to pay principal and interest, and are considered to
lack outstanding investment characteristics.
JUNK BONDS OR LOWER RATED SECURITIES RISK: Bonds rated below investment
grade by S&P and Moody's are speculative in nature, may be subject to
certain risks with respect to the issuing entity and to greater market
fluctuations than higher rated fixed income securities. They are usually
issued by companies without long track records of sales and earnings, or
by those companies with questionable credit strength. These bonds are
considered "below investment grade." The retail secondary market for
these "junk bonds" may be less liquid than that of higher rated
securities and adverse conditions could make it difficult at times to
sell certain securities or could result in lower prices than those used
in calculating the Portfolio's net asset value.
FOREIGN SECURITIES RISK: A Portfolio's investments in foreign securities,
including depositary receipts, involve risks not associated with investing in
U.S. securities and can affect a Portfolio's performance. Foreign markets,
particularly emerging markets, may be less liquid, more volatile and subject
to less government supervision than domestic markets. There may be
difficulties enforcing contractual obligations, and it may take more time for
trades to clear and settle. The specific risks of investing in foreign
securities, among others, include:
<PAGE>
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25
- --------------------------------------------------------------------------------
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.
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 BT International Equity Index Portfolio is not actively
managed (which involves buying
<PAGE>
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26
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and selling of securities based upon economic, financial and market analysis
and investment judgment). The BT International Equity Index Portfolio utilizes
a "passive" or "indexing" investment approach and attempts to duplicate the
investment performance of the particular index the Portfolio is tracking
(i.e., MSCI EAFE Index) through statistical procedures. Therefore, the
Portfolio will invest in the securities included in the relevant index or
substantially identical securities regardless of market trends. The Portfolio
cannot modify its investment strategies to respond to changes in the economy,
which means it may be particularly susceptible to a general decline in the
U.S. or global stock market segment relating to the relevant index.
LIQUIDITY RISK: Certain securities held by a Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like. A
Portfolio may have to hold these securities longer than it would like and may
forego other investment opportunities. There is the possibility that a
Portfolio may lose money or be prevented from earning capital gains if it can
not sell a security at the time and price that is most beneficial to the
Portfolio. Portfolios that invest in privately-placed securities, high-yield
bonds, mortgage-backed securities or foreign or emerging market securities,
which have all experienced periods of illiquidity, are subject to liquidity
risks. A particular Portfolio may be more susceptible to some of these risks
than others, as noted in the description of each Portfolio.
PORTFOLIO TURNOVER RISK: Consistent with their investment policies, the
Portfolios also will purchase and sell securities without regard to the effect
on portfolio turnover. Higher portfolio turnover (e.g., over 100% per year)
will cause a Portfolio to incur additional transaction costs that could be
passed through to shareholders.
SECURITIES LENDING RISK: For purposes of realizing additional income, each
Portfolio may lend securities to broker-dealers approved by the Board of
Trustees. 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.
<PAGE>
- ---------
27
- --------------------------------------------------------------------------------
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.
<PAGE>
- --------
4
MANAGEMENT OF THE TRUST
- ---------
28
- --------------------------------------------------------------------------------
This section gives you information on the Trust, the Manager and the Advisers
for the Portfolios. More detailed information concerning each of the Advisers
and portfolio managers is included in the description for each Portfolio in
the section "About The Investment Portfolios."
THE TRUST
The Trust is organized as a Delaware business trust and is registered with the
Securities and Exchange Commission ("SEC") as an open-end management
investment company. The Trust issues shares of beneficial interest that are
currently divided among forty-one (41) Portfolios, each of which has
authorized Class IA and Class IB shares. Each Portfolio has its own
objectives, investment strategies and risks, which have been previously
described in this prospectus.
THE MANAGER
The Equitable Life Assurance Society of the United States ("Equitable"), 1290
Avenue of the Americas, New York, New York 10104, currently serves as the
Manager of the Trust. EQ Financial Consultants, Inc. ("EQFC") previously
served as the Manager of the Trust, until September 17, 1999 when the Trust's
Investment Management Agreement was transferred to Equitable. Equitable is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended, and a wholly-owned subsidiary of AXA Financial, Inc. ("AXA
Financial"), a subsidiary of AXA, a French insurance holding company.
Subject to the supervision and direction of the Board of Trustees, the Manager
has overall responsibility for the general management of the Trust. In the
exercise of that responsibility and under the Multi-Manager Order, the
Manager, without obtaining shareholder approval but subject to the review and
approval by the Board of Trustees, may: (i) select new or additional Advisers
for the Portfolios; (ii) enter into new investment advisory agreements and
materially modify existing investment advisory agreements; and (iii) terminate
and replace the Advisers. The Manager also monitors each Adviser's investment
program and results, reviews brokerage matters, and carries out the directives
of the Board of Trustees. The Manager also supervises the provision of
services by third parties such as the Trust's custodian.
The contractual management fee rates payable by the Trust are at the following
annual percentages of the value of each Portfolio's average daily net assets:
CONTRACTUAL FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)(FEE ON ALL ASSETS)
INDEX PORTFOLIO
- ----------------------------------------------
BT International Equity Index 0.350%
- ----------------------------------------------
<PAGE>
- -----
29
- --------------------------------------------------------------------------------
CONTRACTUAL FEE UNDER MANAGEMENT AGREEMENT
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
FIRST NEXT NEXT NEXT
EQUITY PORTFOLIOS $1 BILLION $1 BILLION $3 BILLION $5 BILLION THEREAFTER
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EQ/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.
<PAGE>
- ----------
30
- --------------------------------------------------------------------------------
The table below shows the annual rate of the management fees (as a percentage
of each Portfolio's average daily net assets) that the Manager (or the
predecessor Manager for certain of the Portfolios) received in 1999 for
managing each of the Portfolios and the rate of the management fees waived by
the Manager (or the predecessor Manager for certain of the Portfolios) in 1999
in accordance with the provisions of the Expense Limitation Agreement, as
defined directly below, between the Manager and the Trust with respect to
certain of the Portfolios.
MANAGEMENT FEES PAID BY THE PORTFOLIOS IN 1999
ANNUAL RATE OF
RATE FEES
PORTFOLIOS RECEIVED WAIVED
- -------------------------------------------------------------
EQ/Alliance Premier Growth 0.90% 0.22%
BT International Equity Index 0.35% 0.11%
MFS Emerging Growth 0.55% 0.11%
Companies
T. Rowe Price Equity Income 0.55% 0.15%
Warburg Pincus Small Company 0.65% 0.13%
Value
- ------------------------------------------------------------
EXPENSE LIMITATION AGREEMENT
In the interest of limiting until April 30, 2001 expenses of each Portfolio,
the Manager has entered into an amended and restated expense limitation
agreement with the Trust with respect to those Portfolios ("Expense Limitation
Agreement"). Pursuant to that Expense Limitation Agreement, the Manager has
agreed to waive or limit its fees and to assume other expenses so that the
total annual operating expenses of each Portfolio other than interest, taxes,
brokerage commissions (other expenditures which are capitalized in accordance
with generally accepted accounting principles, other extraordinary expenses
not incurred in the ordinary course of each Portfolio's business and amounts
payable pursuant to a plan adopted in accordance with Rule 12b-1 under the
1940 Act) are limited to the following respective expense ratios:
EXPENSE LIMITATION PROVISIONS
TOTAL EXPENSES
LIMITED TO (% OF
PORTFOLIOS DAILY NET ASSETS)
- -----------------------------------------------------------
BT International Equity Index 0.75%
EQ/Alliance Premier Growth 0.90%
MFS Emerging Growth Companies 0.75%
T. Rowe Price Equity Income 0.70%
Warburg Pincus Small Company Value 0.85%
- -----------------------------------------------------------
Each Portfolio may at a later date reimburse to the Manager the management
fees waived or limited and other expenses assumed and paid by the Manager
pursuant to the Expense Limitation Agreement provided such Portfolio has
reached a sufficient asset size to permit such reimbursement to be made
without causing the total annual expense ratio of each Portfolio to exceed the
percentage limits stated above. Consequently, no reimbursement by a Portfolio
will be made unless: (i) the Portfolio's assets exceed $100 million;
(ii) the Portfolio's total annual expense ratio is less than the respective
percentages stated above; and (iii) the payment of such reimbursement has been
approved by the Trust's Board of Trustees on a quarterly basis.
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 (or three (3) fiscal years for the EQ/Alliance Premier Growth
Portfolio), 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
<PAGE>
- ----------
31
- --------------------------------------------------------------------------------
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 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
<PAGE>
- ----------
32
- --------------------------------------------------------------------------------
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
- --------
33
- --------------------------------------------------------------------------------
The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares and Class IB shares. AXA Advisors, LLC ("AXA Advisors") serves as one
of the distributors for the Class IA shares of the Trust offered by this
Prospectus as well as one of the distributors for the Class IB shares offered
by a Prospectus for that class of shares. Equitable Distributors, Inc. ("EDI")
serves as the other distributor for the Class IA shares of the Trust as well
as the Class IB shares. Both classes of shares are offered and redeemed at
their net asset value without any sales load. AXA Advisors and EDI are
affiliates of Equitable. Both AXA Advisors and EDI are registered as
broker-dealers under the 1934 Act and are members of the National Association
of Securities Dealers, Inc.
The Trust has adopted a Distribution Plan under Rule 12b-1 under the 1940 Act
for the Trust's Class IB shares. Under the Class IB Distribution Plan the
Class IB shares of the Trust pay each of the distributors an annual fee to
compensate them for promoting, selling and servicing shares of the Portfolios.
The annual fees equal 0.25% of each Portfolio's average daily net assets. Over
time, the fees will increase the cost of investing and may cost more than
other types of charges.
<PAGE>
6
PURCHASE AND REDEMPTION
- -----------
34
- --------------------------------------------------------------------------------
The price at which a purchase or redemption is effected is based on the next
calculation of net asset value after an order is placed by an insurance
company or qualified retirement plan investing in or redeeming from the Trust.
Net asset value per share is calculated for purchases and redemption of shares
of each Portfolio by dividing the value of total Portfolio assets, less
liabilities (including Trust expenses and class related expenses, which are
accrued daily), by the total number of outstanding shares of that Portfolio.
The net asset value per share of each Portfolio is determined each business
day at 4:00 p.m. Eastern time. Net asset value per share is not calculated on
days on which the New York Stock Exchange ("NYSE") is closed for trading.
Portfolios that invest a significant portion of their assets in foreign
securities may experience changes in their net asset value on days when a
shareholder may not purchase or redeem shares of that Portfolio because
foreign securities (other than depositary receipts) are valued at the close of
business in the applicable foreign country.
All shares are purchased and redeemed in accordance with the Trust's Amended
and Restated Declaration of Trust and By-Laws. Sales and redemptions of shares
of the same class by the same shareholder on the same day will be netted for
each Portfolio. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders.
The Trust may suspend redemption, if permitted by the 1940 Act, for any period
during which the New York Stock Exchange is closed or during which trading is
restricted by the SEC or the SEC declares that an emergency exists. Redemption
may also be suspended during other periods permitted by the SEC for the
protection of the Trust's shareholders. If the Board of Trustees determines
that it would be detrimental to the best interest of the Trust's remaining
shareholders to make payment in cash, the Trust may pay redemption proceeds in
whole or in part by a distribution-in-kind of readily marketable securities.
You should note that the Trust is not designed for professional "market
timing" organizations, or other organizations or individuals engaging in a
market timing strategy, making programmed transfers, frequent transfers or
transfers that are large in relation to the total assets of each of the
Trust's Portfolios. Market timing strategies are disruptive to the Trust's
Portfolios. If we determine that your transfer patterns among the Trust's
Portfolios reflect a market timing strategy, we reserve the right to take
action including, but not limited to: restricting the availability of
transfers through telephone requests, facsimile transmissions, automated
telephone services, internet services or any electronic transfer services. We
may also refuse to act on transfer instructions of an agent acting under a
power of attorney who is acting on behalf of more than one owner.
<PAGE>
7
HOW ASSETS ARE VALUED
- ---------
35
- --------------------------------------------------------------------------------
Values are determined according to accepted practices and all laws and
regulations that apply. The assets of each Portfolio are generally valued as
follows:
o Stocks and debt securities which mature in more than 60 days are valued on
the basis of market quotations.
o Foreign securities not traded directly, including depositary receipts, in
the United States are valued at representative quoted prices in the
currency in the country of origin. Foreign currency is converted into
United States dollar equivalents at current exchange rates. Because
foreign markets may be open at different times than the NYSE, the value of
a Portfolio's shares may change on days when shareholders are not able to
buy or sell them. If events materially affecting the values of the
Portfolios' foreign investments occur between the close of foreign markets
and the close of regular trading on the NYSE, these investments may be
valued at their fair value.
o Short-term debt securities in the Portfolios which mature in 60 days or less
are valued at amortized cost, which approximates market value.
o Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided are valued in good
faith by the Valuation Committee of the Board of Trustees of the Trust
using its best judgment.
<PAGE>
8
TAX INFORMATION
- ----------
36
- --------------------------------------------------------------------------------
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>
- ---------
37
9
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance for the Trust's Class IA and Class IB shares since May 1, 1997. The
information for the Class IA and Class IB shares have been derived from the
financial statements of the Trust, which have been audited by
PricewaterhouseCoopers LLP, independent public accountants.
PricewaterhouseCoopers LLP's report on the Trust's financial statements as of
December 31, 1999 appears in the Trust's Annual Report. The information should
be read in conjunction with the financial statements contained in the Trust's
Annual Report which are incorporated by reference into the Trust's Statement of
Additional Information (SAI) and available upon request.
- --------------------------------------------------------------------------------
EQ/ALLIANCE PREMIER GROWTH PORTFOLIO
<TABLE>
<CAPTION>
CLASS IA
----------------------
MAY 1, 1999*
TO
DECEMBER 31, 1999
----------------------
<S> <C>
Net asset value, beginning of period .................................................... $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................................................. 0.02
Net realized and unrealized gain on investments and foreign currency transactions ..... 1.89
-------
Total from investment operations ...................................................... 1.91
-------
LESS DISTRIBUTIONS:
Dividends from net investment income .................................................. (0.01)
Dividends in excess of net investment income .......................................... -
Distributions from realized gains ..................................................... (0.03)
Distributions in excess of realized gains ............................................. -
Tax return of capital distributions ................................................... -
-------
Total dividends and distributions ..................................................... (0.04)
-------
Net asset value, end of period .......................................................... $ 11.87
=======
Total return ............................................................................ 19.14%(b)
=======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ....................................................... $28,834
Ratio of expenses to average net assets after waivers ................................... 0.90%(a)(c)
Ratio of expenses to average net assets before waivers (d) .............................. 1.12%(a)(c)
Ratio of net investment income to average net assets after waivers ...................... 0.45%(a)(c)
Ratio of net investment income to average net assets before waivers (d) ................. 0.23%(a)(c)
Portfolio turnover rate ................................................................. 29%
Effect of voluntary expense limitation during the period: (d)
Per share benefit to net investment income ........................................... $ 0.01
<CAPTION>
CLASS IB
------------------------
MAY 1, 1999*
TO
DECEMBER 31, 1999
------------------------
<S> <C>
Net asset value, beginning of period .................................................... $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................................................. 0.01
Net realized and unrealized gain on investments and foreign currency transactions ..... 1.89
-------
Total from investment operations ...................................................... 1.90
-------
LESS DISTRIBUTIONS:
Dividends from net investment income .................................................. (0.01)
Dividends in excess of net investment income .......................................... -
Distributions from realized gains ..................................................... (0.03)
Distributions in excess of realized gains ............................................. -
Tax return of capital distributions ................................................... -
-------
Total dividends and distributions ..................................................... (0.04)
-------
Net asset value, end of period .......................................................... $ 11.86
=======
Total return ............................................................................ 18.97%(b)
=======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ....................................................... $451,323
Ratio of expenses to average net assets after waivers ................................... 1.15%(a)(c)
Ratio of expenses to average net assets before waivers (d) .............................. 1.37%(a)(c)
Ratio of net investment income to average net assets after waivers ...................... 0.20%(a)(c)
Ratio of net investment income to average net assets before waivers (d) ................. (0.02)%(a)(c)
Portfolio turnover rate ................................................................. 29%
Effect of voluntary expense limitation during the period: (d)
Per share benefit to net investment income ........................................... $ 0.01
</TABLE>
<PAGE>
- -----
38
- --------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX PORTFOLIO:**
<TABLE>
<CAPTION>
CLASS IA
------------------------------------------
NOVEMBER 24, 1998*
YEAR ENDED TO
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period ..................... $11.84 $11.67
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.16 0.03
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 3.10 0.31
------ ------
Total from investment operations ....................... 3.26 0.34
------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.13) (0.17)
Dividends in excess of net investment income ........... (0.01) -
Distributions from realized gains ........................ (0.11) -
------ ------
Total dividends and distributions ...................... (0.25) (0.17)
------ ------
Net asset value, end of period ........................... $14.85 $11.84
====== ======
Total return ............................................. 27.75% 2.94%(b)
====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $3,629 $735
Ratio of expenses to average net assets after waivers..... 0.69%(c) 0.59%(a)(c)
Ratio of expenses to average net assets before
waivers (d) ............................................ 0.80%(c) 1.24%(a)(c)
Ratio of net investment income to average net assets
after waivers .......................................... 1.21%(c) 1.36%(a)(c)
Ratio of net investment income to average net assets
before waivers (d) ..................................... 1.10%(c) 0.71%(a)(c)
Portfolio turnover rate .................................. 7% 3%
Average commission rate paid .............................
Effect of voluntary expense limitation during the
period: (d)
Per share benefit to net investment income ............ $ 0.03 $0.26
<CAPTION>
CLASS IB
--------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period ..................... $ 11.85 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.10 0.08
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 3.15 1.92
------- -------
Total from investment operations ....................... 3.25 2.00
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.10) (0.15)
Dividends in excess of net investment income ........... (0.02) -
Distributions from realized gains ........................ (0.11) -
------- -------
Total dividends and distributions ...................... (0.23) (0.15)
------- --------
Net asset value, end of period ........................... $ 14.87 $ 11.85
======= =======
Total return ............................................. 27.50% 20.07 %
======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $94,581 $48,075
Ratio of expenses to average net assets after waivers..... 0.94%(c) 0.84%(c)
Ratio of expenses to average net assets before
waivers (d) ............................................ 1.05%(c) 1.49%(c)
Ratio of net investment income to average net assets
after waivers .......................................... 0.96%(c) 1.11%(c)
Ratio of net investment income to average net assets
before waivers (d) ..................................... 0.85%(c) 0.46%(c)
Portfolio turnover rate .................................. 7% 3%
Average commission rate paid .............................
Effect of voluntary expense limitation during the
period: (d)
Per share benefit to net investment income ............ $ 0.03 $ 0.05
</TABLE>
<PAGE>
- -----
39
- --------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
--------------------------------------------
NOVEMBER 24, 1998*
YEAR ENDED TO
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------------
<S> <C> <C>
Net asset value, beginning of period ....... $ 16.04 $14.18
------- ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) ............. 0.01 -
Net realized and unrealized gain on
investments and foreign currency
transactions ............................ 11.83 1.86
------- ------
Total from investment operations ......... 11.84 1.86
------- ------
LESS DISTRIBUTIONS:
Dividends from net investment
income .................................. - -
Dividends in excess of net investment
income .................................. - -
Distributions from realized gains ........ (0.48) -
Distributions in excess of realized
gains ................................... - -
------- ------
Total dividends and distributions ........ (0.48) -
------- ------
Net asset value, end of period ............. $ 27.40 $16.04
======= ======
Total return ............................... 74.43% 13.12%(b)
======= ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) .......... $46,248 $5,978
Ratio of expenses to average net assets
after waivers ............................ 0.60%(c) 0.60%(a)(c)
Ratio of expenses to average net assets
before waivers (d) ....................... 0.70%(c) 0.79%(a)(c)
Ratio of net investment income to
average net assets after waivers ......... 0.09%(c) (0.05)%(a)(c)
Ratio of net investment income to
average net assets before
waivers (d) .............................. (0.01)%(c) (0.24)%(a)(c)
Portfolio turnover rate .................... 184% 79%
Effect of voluntary expense limitation
during the period: (d)
Per share benefit to net investment
income ................................. $ 0.01 $ -
<CAPTION>
CLASS IB
----------------------------------------------------------
MAY 1, 1997*
YEAR ENDED YEAR ENDED TO
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
------------------- ------------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period ....... $ 16.04 $ 11.92 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) ............. (0.02) (0.03) 0.02
Net realized and unrealized gain on
investments and foreign currency
transactions ............................ 11.79 4.15 2.21
------- ------- -------
Total from investment operations ......... 11.77 4.12 2.23
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment
income .................................. - - (0.02)
Dividends in excess of net investment
income .................................. - - -
Distributions from realized gains ........ (0.48) - (0.18)
Distributions in excess of realized
gains ................................... - - (0.11)
------- ------- -------
Total dividends and distributions ........ (0.48) - (0.31)
------- ------- -------
Net asset value, end of period ............. $ 27.33 $ 16.04 $ 11.92
======= ======= =======
Total return ............................... 73.62% 34.57% 22.42%(b)
======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) .......... $1,665,635 $461,307 $99,317
Ratio of expenses to average net assets
after waivers ............................ 0.85%(c) 0.85%(c) 0.85%(a)
Ratio of expenses to average net assets
before waivers (d) ....................... 0.95%(c) 1.04%(c) 1.82%(a)
Ratio of net investment income to
average net assets after waivers ......... (0.16)%(c) (0.30)%(c) 0.61%(a)
Ratio of net investment income to
average net assets before
waivers (d) .............................. (0.26)%(c) (0.49)%(c) (0.36)%(a)
Portfolio turnover rate .................... 184% 79 % 116%
Effect of voluntary expense limitation
during the period: (d)
Per share benefit to net investment
income ................................. $0.01 $ 0.02 $ 0.04
</TABLE>
<PAGE>
- -------
40
- --------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
-------------------------------------
NOVEMBER 24,
1998*
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1999 1998
-------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period ..................... $ 12.67 $ 13.22
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.28 0.06
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 0.20 (0.09)+
------- -------
Total from investment operations ....................... 0.48 (0.03)
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.29) (0.24)
Distributions from realized gains ...................... (0.52) (0.28)
------- -------
Total dividends and distributions ...................... (0.81) (0.52)
------- -------
Net asset value, end of period ........................... $ 12.34 $ 12.67
======= =======
Total return ............................................. 3.80% (0.15)%(b)
======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $5,181 $2,415
Ratio of expenses to average net assets after waivers..... 0.60% 0.60%(a)(c)
Ratio of expenses to average net assets before
waivers (d) ............................................ 0.72% 0.79%(a)(c)
Ratio of net investment income to average net assets
after waivers .......................................... 2.15% 2.45%(a)(c)
Ratio of net investment income to average net assets
before waivers (d) ..................................... 2.03% 2.26%(a)(c)
Portfolio turnover rate .................................. 31% 17%
Effect of voluntary expense limitation during the
period: (d)
Per share benefit to net investment income ............ $ 0.02 $ 0.03
<CAPTION>
CLASS IB
--------------------------------------------------
MAY 1, 1997*
YEAR ENDED YEAR ENDED TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
-------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $ 12.67 $ 12.08 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.24 0.22 0.10
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 0.20 0.87 2.11
------- ------- -------
Total from investment operations ....................... 0.44 1.09 2.21
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.25) (0.22) (0.09)
Distributions from realized gains ...................... (0.52) (0.28) (0.04)
------- -------- -------
Total dividends and distributions ...................... (0.77) (0.50) (0.13)
------- ------- -------
Net asset value, end of period ........................... $ 12.34 $ 12.67 $ 12.08
======= ======= =======
Total return ............................................. 3.54% 9.11% 22.11%(b)
======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $273,031 $242,001 $99,947
Ratio of expenses to average net assets after waivers..... 0.85% 0.85%(c) 0.85%(a)
Ratio of expenses to average net assets before
waivers (d) ............................................ 0.97% 1.04%(c) 1.74%(a)
Ratio of net investment income to average net assets
after waivers .......................................... 1.90% 2.20%(c) 2.49%(a)
Ratio of net investment income to average net assets
before waivers (d) ..................................... 1.78% 2.01%(c) 1.60%(a)
Portfolio turnover rate .................................. 31% 17% 9%
Effect of voluntary expense limitation during the
period: (d)
Per share benefit to net investment income ............ $ 0.02 $ 0.02 $ 0.03
</TABLE>
<PAGE>
- ------
41
- --------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
---------------------------------------
NOVEMBER 24,
1998*
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1999 1998
---------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period ..................... $10.59 $10.40
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.03 0.03
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 0.19 0.23+
------ ------
Total from investment operations ....................... 0.22 0.26
------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.05) (0.06)
Distributions in excess of realized gains .............. - -
Return of capital distributions ........................ - (0.01)
------ ------
Total dividends and distributions ...................... (0.05) (0.07)
------ ------
Net asset value, end of period ........................... $10.76 $10.59
====== ======
Total return ............................................. 2.07% 2.63%(b)
====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $2,339 $747
Ratio of expenses to average net assets after waivers..... 0.75%(c) 0.75%(a)(c)
Ratio of expenses to average net assets before
waivers (d) ............................................ 0.84%(c) 0.92%(a)(c)
Ratio of net investment income to average net assets
after waivers .......................................... 0.40%(c) 0.72%(a)(c)
Ratio of net investment income to average net assets
before waivers (d) ..................................... 0.32%(c) 0.55%(a)(c)
Portfolio turnover rate .................................. 192% 111%
Effect of voluntary expense limitation during the
period: (d)
Per share benefit to net investment income ........... $0.01 $0.17
<CAPTION>
CLASS IB
----------------------------------------------------
MAY 1, 1997*
YEAR ENDED YEAR ENDED TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
---------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $ 10.61 $ 11.85 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.02 0.05 0.01
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... 0.17 (1.24) 1.90
------- ------- -------
Total from investment operations ....................... 0.19 (1.19) 1.91
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.02) (0.04) (0.01)
Distributions in excess of realized gains .............. - - (0.05)
Return of capital distributions ........................ - (0.01) -
------- ------- -------
Total dividends and distributions ...................... (0.02) (0.05) (0.06)
------- ------- -------
Net asset value, end of period ........................... $ 10.78 $ 10.61 $ 11.85
======= ======= =======
Total return ............................................. 1.80% (10.02)% 19.15%(b)
======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........................ $149,618 $166,746 $120,880
Ratio of expenses to average net assets after waivers..... 1.00%(c) 1.00%(c) 1.00%(a)
Ratio of expenses to average net assets before
waivers (d) ............................................ 1.09%(c) 1.17%(c) 1.70%(a)
Ratio of net investment income to average net assets
after waivers .......................................... 0.21%(c) 0.47%(c) 0.26%(a)
Ratio of net investment income to average net assets
before waivers (d) ..................................... 0.12%(c) 0.30%(c) (0.44)%(a)
Portfolio turnover rate .................................. 192% 111% 44%
Effect of voluntary expense limitation during the
period: (d)
Per share benefit to net investment income ........... $0.02 $ 0.02 $ 0.03
</TABLE>
- ----------
* Commencement of Operations
** Commenced operations on January 1, 1998.
+ The amount shown for a share outstanding throughout the period does not
accord with the aggregate net gains on investments for that period
because of the timing of sales and repurchases of the Portfolio shares in
relation to fluctuating market value of the investments in the Portfolio.
(a) Annualized
(b) Total return is not annualized.
(c) Reflects overall Portfolio ratios for investment income and
non-class specific expense.
(d) For further information concerning fee waivers see the section
entitled "Expense Limitation Agreement" in this Prospectus.
<PAGE>
10
PRIOR PERFORMANCE OF EACH ADVISER
- ----------
42
- --------------------------------------------------------------------------------
The following table provides information concerning the historical performance
of another registered investment company (or series) and/or other
institutional private accounts managed by each Adviser that have investment
objectives, policies, strategies and risks substantially similar to those of
the respective Portfolio(s) of the Trust for which it serves as Adviser. The
data is provided to illustrate the past performance of the Advisers in
managing substantially similar investment vehicle as measured against
specified market indices. This data does not represent the past performance of
any of the Portfolios or the future performance of any Portfolio or its
Adviser. Consequently, potential investors should not consider this
performance data as an indication of the future performance of any Portfolio
of the Trust or of its Adviser and should not confuse this performance data
with performance data for each of the Trust's Portfolios, which is shown for
each Portfolio under the caption "ABOUT THE INVESTMENT PORTFOLIOS."
Each Adviser's performance data shown below for other registered investment
companies (or series thereof) was calculated in accordance with standards
prescribed by the SEC for the calculation of average annual total return
information for registered investment companies. Average annual total return
reflects changes in share prices and reinvestment of dividends and
distributions and is net of fund expenses. In each such instance, the share
prices and investment returns will fluctuate, reflecting market conditions as
well as changes in company-specific fundamentals of portfolio securities.
The performance results for the registered investment companies presented
below are generally subject to somewhat lower fees and expenses than the
relevant Portfolios although in most instances the fees and expenses are
substantially similar. In addition, holders of Contracts representing
interests in the Portfolios below will be subject to charges and expenses
relating to such Contracts. The performance results presented below do not
reflect any insurance related expenses and would be reduced if such charges
were reflected.
The investment results presented below are unaudited. For more information on
the specified market indices used below, see the section "The Benchmarks."
<PAGE>
- -----
43
- --------------------------------------------------------------------------------
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>
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT Portfolio) 1 5 10 Since Inception
----------------------------------------
Year Years Years Inception Date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Benchmark
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE PREMIER GROWTH FUND, INC. - ADVISOR CLASS(4),(7) (EQ/ALLIANCE PREMIER GROWTH PORTFOLIO)
29.42% N/A N/A 38.65% 10/1/96
- -----------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(1) 21.04% N/A N/A 21.60%
- -----------------------------------------------------------------------------------------------------------------------------------
BT ADVISORS FUNDS - EAFE EQUITY INDEX FUND - INSTITUTIONAL CLASS(6) (BT INTERNATIONAL EQUITY INDEX PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------------
27.95% N/A N/A 14.07% 1/24/96
- -----------------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(3) 26.96% N/A N/A 13.88%
- -----------------------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH FUND(7) (MFS EMERGING GROWTH COMPANIES PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------------
41.45% 28.05% 24.72% N/A 12/29/86
- -----------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(2) 21.26% 16.69% 13.40% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME FUND(6) (T. ROWE PRICE EQUITY INCOME PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------------
3.82% 18.59% 14.14% N/A 10/31/85
- -----------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(1) 21.04% 28.51% 18.21% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE FUND(7) (WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------------------
7.55% N/A N/A 14.21% 12/29/95
- -----------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Value Index(5) (1.49)% N/A N/A 10.19%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The S&P 500 Index ("S&P 500") is an unmanaged weighted index containing
common stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the larger
capitalization portion of the United States stock market. The S&P 500
returns reflect the reinvestment of dividends , if any, but do not reflect
fees, brokerage commissions, or other expenses of investing.
(2) The Russell 2000 Index is an unmanaged index that 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. 3 The Morgan Stanley Capital International EAFE Index ("EAFE
Index") is a market capitalization weighted equity index composed of a
sample of companies representative of the market structure of Europe,
Australasia and the Far East. MSCI EAFE Index returns assume dividends
reinvested net of withholding taxes and do no reflect any fees or expenses.
The index is not available for actual investment.
(4) Annualized performance for the Advisor Class shares. The Advisor Class
shares had a total expense ratio of 1.26% of its average daily net assets
for the year ended December 31, 1998. Other share classes have different
expenses and their performance will vary.
(5) The Russell 2000 Value Index ("Russell 2000 Value") is an unmanaged index
which measures the performance of those Russell 2000 companies with lower
price-to-book ratios and lower forecasted growth values. It is compiled by
the Frank Russell Company.
(6) The annual fees and expenses of the similar registered investment company
(or series thereof) (or composite) whose prior performance is shown in the
table above were less than those of the relevant Trust's Portfolio.
Consequently, if the Trust Portfolio's annual fees and expenses were used
in the calculation of the performance of the similar registered investment
company (or composite) that performance would be reduced.
(7) The annual fees and expenses of the similar registered investment company
(or series thereof) whose prior performance is shown in the table above
were higher than those of the relevant Trust's Portfolio. Consequently, if
the Trust Portfolio's annual fees and expenses were used in the calculation
of the performance of the similar registered investment company (or
composite) that performance would be increased.
<PAGE>
- ----------
44
- --------------------------------------------------------------------------------
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
