SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
(Amendment No. )
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EQ ADVISORS TRUST
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AXA EQUITABLE FUNDS MANAGEMENT GROUP, LLC
1290 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10104
EQ ADVISORS TRUST
INFORMATION STATEMENT DATED FEBRUARY 15, 2017
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY
The purpose of this Information Statement is to provide you with information about a new investmentsub-adviser for the 1290 VT Socially Responsible Portfolio, formerly known as EQ/Calvert Socially Responsible Portfolio (“Portfolio”), a series of EQ Advisors Trust (“Trust”). The information in this document should be considered to be an Information Statement for purposes of Schedule 14C under the Securities Exchange Act of 1934, as amended. You may obtain an additional copy of the Trust’s Prospectus or Statement of Additional Information, or its most recent Annual Report, free of charge, by writing to the Trust at 1290 Avenue of the Americas, New York, New York 10104, by calling1-877-222-2144 or by visiting the Trust’s website atwww.axa-equitablefunds.com.
AXA Equitable Funds Management Group, LLC (“FMG LLC” or “Manager”) serves as the Investment Manager and Administrator of the Trust and is located at 1290 Avenue of the Americas, New York, New York 10104. AXA Distributors, LLC serves as the Distributor for the Trust’s shares and is located at 1290 Avenue of the Americas, New York, New York 10104. FMG LLC, in its capacity as the Investment Manager of the Trust, has received from the Securities and Exchange Commission (“SEC”) an exemptive order to permit FMG LLC, subject to approval of the Trust’s Board of Trustees (“Board”), to hire, terminate and replace investmentsub-advisers for the Trust(“Sub-Advisers”) and to amend thesub-advisory agreements between FMG LLC and theSub-Advisers without obtaining shareholder approval, subject to certain conditions. These conditions require, among other things, that shareholders be notified of the appointment of a newSub-Adviser within 90 days of the effective date of theSub-Adviser’s appointment. This Information Statement provides such notice of the appointment of a NewSub-Adviser (defined below) and the approval of a new Agreement (defined below).
At a November 10, 2016 special meeting of the Board, the Board, including the Trustees who are not “interested persons” (as that term is defined in the Investment Company Act of 1940, as amended (“1940 Act”)) of the Trust, the Manager, theSub-Advisers or the Distributor (“Independent Trustees”), considered and unanimously approved the Manager’s proposal to replace the Portfolio’s currentSub-Adviser, Calvert Investment Management, Inc. (“Calvert”), with BlackRock Investment Management, LLC (“BlackRock” or “NewSub-Adviser”) asSub-Adviser, and the related name change of the Portfolio from “EQ/Calvert Socially Responsible Portfolio” to “1290 VT Socially Responsible Portfolio.” The Manager’s proposal was based on its strategic outlook and operational concerns with respect to Calvert. Based on a review of Calvert’s operations and organizational changes as well as other factors, FMG LLC recommended, and the Board approved, the termination of thesub-advisory agreement between FMG LLC and Calvert.
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Factors Considered by the Board
In reaching its decision to approve the InvestmentSub-Advisory Agreement (“Agreement”) between FMG LLC and BlackRock, the Board considered the overall fairness of the Agreement and whether the Agreement was in the best interests of the Portfolio and its investors. The Board further considered all factors it deemed relevant with respect to the Portfolio and Agreement, including: (1) the nature, quality and extent of the overall services to be provided to the Portfolio by the NewSub-Adviser; (2) comparative performance information; (3) the level of the proposedsub-advisory fee; (4) economies of scale that may be realized by the Portfolio; and (5) “fall out” benefits that may accrue to the NewSub-Adviser and its affiliates (i.e., indirect benefits that the NewSub-Adviser would be unable to generate but for the existence of the Portfolio). In considering the Agreement, the Board did not identify any single factor or information asall-important or controlling and each Trustee may have attributed different weight to each factor.
In connection with its deliberations, the Board took into account information prepared by the Manager and the NewSub-Adviser, including memoranda and other materials addressing the factors set out above, which were provided to the Trustees prior to the meeting. The information provided to the Trustees described, among other things, the services to be provided by the NewSub-Adviser, as well as the NewSub-Adviser’s investment personnel, proposedsub-advisory fee, performance information, and other matters. The Board also took into account information provided to the Trustees at prior Board meetings. During the relevant meeting, the Trustees met with senior representatives of the Manager to discuss the Agreement and the information provided. The Independent Trustees met in an executive session during the meeting to review the information provided. The Independent Trustees were assisted by independent counsel prior to and during the meeting and during their deliberations regarding the Agreement, and also received materials discussing the legal standards applicable to their consideration of the Agreement. In approving the Agreement, each Trustee, including the Independent Trustees, on the basis of their business judgment after review of all information, determined that the proposedsub-advisory fee was fair and reasonable, and that the approval of the Agreement was in the best interests of the Portfolio and its investors. Although the Board gave attention to all information provided, the following discusses some of the primary factors that the Board deemed relevant to its decision to approve the Agreement.
The Board evaluated the nature, quality and extent of the overall services to be provided to the Portfolio and its investors by the NewSub-Adviser. In addition to the investment performance information discussed below, the Board considered the NewSub-Adviser’s responsibilities with respect to the Portfolio, and the NewSub-Adviser’s experience in serving as an investment adviser orsub-adviser for funds and/or accounts similar to the Portfolio. The Board considered that the NewSub-Adviser, subject to the oversight of the Manager, would be responsible for making investment decisions for the Portfolio; placing with brokers or dealers orders for the purchase and sale of investments for the Portfolio; and performing certain related administrative functions. The Board also reviewed information regarding the NewSub-Adviser’s process for selecting investments for the Portfolio, as well as information regarding the qualifications and experience of the NewSub-Adviser’s portfolio managers who would provide services to the Portfolio. The Board considered information regarding the NewSub-Adviser’s procedures for executing portfolio transactions for the Portfolio and the NewSub-Adviser’s policies and procedures for selecting brokers and dealers and obtaining research from those brokers and dealers. In addition, the Board received information regarding the NewSub-Adviser’s trading experience and how the NewSub-Adviser would seek to achieve “best execution” on behalf of the Portfolio. The Board’s conclusion regarding the nature, quality and extent of the overall services to be provided by the NewSub-Adviser also was based, in part, on the Trustees’ experience and familiarity with the NewSub-Adviser serving asSub-Adviser to several other portfolios of the Trust, and on periodic reports provided to the Trustees regarding the services provided by the NewSub-Adviser to those other portfolios. The Board also received and reviewed the NewSub-Adviser’s performance data in managing other funds and/or accounts with a similar investment strategy as the Portfolio, as compared to an appropriate benchmark. The Board generally considered long-term performance to be more important than short-term performance. The Board also considered the NewSub-Adviser’s expertise, resources, proposed investment strategy, and personnel for advising the Portfolio, again noting its familiarity with the NewSub-Adviser “passive (or “indexing”) approach”. Based on its review, the Board determined that the nature, quality and extent of the overall services to be provided by the NewSub-Adviser were appropriate for the Portfolio in light of its investment objective and, thus, supported a decision to approve the Agreement.
With respect to the Portfolio, the Board noted that the proposedsub-advisory fee for the NewSub-Adviser is comparable to thesub-advisory fee that the NewSub-Adviser currently charges to other portfolios of the Trust for
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which the NewSub-Adviser currently serves as an investmentsub-adviser using “a passive (or “indexing”) approach”. The Board further noted that the Manager, and not the Portfolio, would pay the NewSub-Adviser and that the proposedsub-advisory fee was negotiated between the NewSub-Adviser and the Manager. Moreover, the Board noted that the Manager generally is aware of the fees charged bysub-advisers to other clients and that the Manager believes that the fee agreed upon with the NewSub-Adviser is reasonable in light of the nature, quality and extent of the investmentsub-advisory services to be provided. Based on its review, the Board determined that the proposedsub-advisory fee for the NewSub-Adviser is fair and reasonable.
The Manager advised the Board that it does not regardSub-Adviser profitability as meaningful to its evaluation of the Agreement. The Board acknowledged the Manager’s view ofSub-Adviser profitability, noting the Board’s findings as to the reasonableness of thesub-advisory fee and that the fee to be paid to the NewSub-Adviser is the product of negotiations with the Manager and reflect levels of profitability acceptable to the Manager and the NewSub-Adviser based on the particular circumstances in each case for each of them. The Board further noted that the investment management fee paid by the Portfolio to the Manager would not change as a result of the Agreement.
The Board also considered whether economies of scale would be realized as the Portfolio grows larger and the extent to which this is reflected in the proposedsub-advisory fee with respect to the Portfolio. While recognizing that any precise determination is inherently subject to assumptions and subjective assessments, the Board noted that the proposed flatsub-advisory fee rate is competitive with the advisory fee rate charged by the NewSub-Adviser to comparable clients. The Board considered these factors, and the relationship they bear to the fee structure charged to the Portfolio by the Manager, and concluded that there would be a reasonable sharing of benefits from any economies of scale with the Portfolio.
The Board also considered possiblefall-out benefits that may accrue to the NewSub-Adviser, including the following. The Board considered that the NewSub-Adviser, through its position as aSub-Adviser to the Portfolio, may engage in soft dollar transactions. The Board also noted that the NewSub-Adviser currently serves as investmentsub-adviser for other portfolios advised by the Manager and receivessub-advisory fees with respect to those portfolios. In addition, the Board recognized that the NewSub-Adviser and its affiliates may sell, and earn sales commissions and/or other compensation with respect to, other investment products issued by the Manager or its affiliates. The Board also noted that the NewSub-Adviser may benefit from greater exposure in the marketplace with respect to the NewSub-Adviser’s investment process and from expanding its level of assets under management, and the NewSub-Adviser may derive benefits from its association with the Manager and otherSub-Advisers to the Portfolio. Based on its review, the Board determined that any“fall-out” benefits that may accrue to the NewSub-Adviser are fair and reasonable.
BlackRock became the NewSub-Adviser to the Portfolio, and the Portfolio’s name changed as indicated above, effective on December 9, 2016.
Information Regarding the InvestmentSub-Advisory Agreement
The terms of the Agreement between FMG LLC and BlackRock are substantially similar to those of the Agreements between FMG LLC and the otherSub-Advisers to the Trust, except as to the effective date and compensation. Pursuant to the Agreement, the NewSub-Adviser is appointed by FMG LLC to act as investmentsub-adviser for the Portfolio and to manage the investment and reinvestment of the portion of the Portfolio that has been allocated to the NewSub-Adviser from time to time, subject to the direction, control and oversight of FMG LLC and the Board. The Agreement will remain in effect for an initialtwo-year term and thereafter only so long as the Board, including a majority of the Independent Trustees, specifically approves its continuance at least annually. The Agreement can be terminated at any time, without the payment of any penalty, by the Board, including a majority of the Independent Trustees or by the vote of a majority of the outstanding voting securities of the Portfolio, on sixty days’ written notice to FMG LLC and the NewSub-Adviser, or by FMG LLC or the NewSub-Adviser on sixty days’ written notice to the Trust and the other party. The Agreement also terminates automatically in the event of its “assignment” (as defined in the 1940 Act) or in the event that the Investment Management Agreement between FMG LLC and the Trust is terminated for any other reason. FMG LLC (and not the Portfolio) is responsible for the payment of thesub-advisory fee to the NewSub-Adviser.The appointment of BlackRock as aSub-Adviser to the Portfolio did not result in a change to the investment management fee paid by the Portfolio to the Manager.
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The Agreement generally provides that the NewSub-Adviser will not be liable for any losses, claims, damages, liabilities or litigation incurred by FMG LLC or the Trust as a result of any error of judgment or mistake of law by the NewSub-Adviser with respect to the Portfolio, except that nothing in the Agreement limits the NewSub-Adviser’s liability for all losses, claims, damages, liabilities or litigation arising out of or based on (i) any willful misconduct, bad faith, reckless disregard or gross negligence of the NewSub-Adviser in the performance of any of its duties or obligations or (ii) any untrue statement of a material fact, or any omission thereof, in the Trust’s Prospectus, Statement of Additional Information, proxy materials, reports, advertisements, sales literature, or other materials pertaining to the Portfolio, if such statement or omission was made in reliance upon information furnished by the NewSub-Adviser to FMG LLC or the Trust.
Information Regarding BlackRock Investment Management, LLC
The following provides additional information about the NewSub-Adviser. Information with respect to advisory fees paid to the NewSub-Adviser by comparable funds subject to the 1940 Act that it advises is provided in Appendix A to this Information Statement.
BlackRock, Inc. is independent in ownership and governance, with no single majority stockholder and a majority of independent directors. As of September 30 2016, the PNC Financial Services Group, Inc. (“PNC”) owned 22.0% of BlackRock and institutional investors, employees and the public held economic interest of 78.0%. With regard to voting stock, PNC owned 21.3% and institutional investors, employees and the public owned 78.7% of voting shares.
Effective as of December 9, 2016, Alan Mason, Greg Savage, Jennifer Hsui, Creighton Jue and Rachel Aguirre are jointly and primarily responsible for the investment decisions for the Portfolio. Mr. Mason is a Managing Director and Portfolio Manager at BlackRock and has been employed at BlackRock or its subsidiary since 1996. Mr. Savage is a Managing Director and Portfolio Manager at BlackRock and has been employed at BlackRock or its subsidiary since 1999. Ms. Hsui is a Managing Director and Portfolio Manager at BlackRock and has been employed at BlackRock or its subsidiary since 2006. Mr. Jue is a Managing Director and Portfolio Manager at BlackRock and has been employed at BlackRock or its subsidiary since 2009. Ms. Aguirre is a Director and Portfolio Manager at BlackRock and has been employed at BlackRock or its subsidiary since 2009.
BlackRock’s office is 55 East 52nd Street, New York, NY 10055. BlackRock’s principal executive officers and directors include:
Name | Title/Responsibilities | |
Laurence Douglas Fink | Chairman and Director | |
James Ian Hamilton | Chief Operating Officer | |
Mathew J. Mallow | General Counsel | |
Saurabh P. Pathak | Chief Financial Officer | |
Abigail Tate Reynolds | Chief Executive Officer | |
Gregory Matthew Rosta | Chief Compliance Officer |
The address of each of these individuals is 55 East 52nd Street, New York, New York 10055.
For its services to the Portfolio, BlackRock receives asub-advisory fee of 0.02% of the average daily net assets of the Portfolio.
Portfolio Transactions
To the extent permitted by law and in accordance with procedures established by the Trust’s Board, each Portfolio of the Trust may engage in brokerage transactions with brokers that are affiliates of the Manager or theSub-Advisers, with brokers who are affiliates of such brokers, or with unaffiliated brokers who trade or clear through affiliates of the Manager or theSub-Advisers. For the fiscal year ended December 31, 2016, the Portfolio paid $1,178.44 in brokerage commissions to Sanford C. Bernstein, an affiliate of FMG LLC or its affiliates, representing 7.49% of the Portfolio’s total brokerage commissions.
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Control Persons and Principal Holders
AXA Equitable Life Insurance Company (“AXA Equitable”), the parent company of FMG LLC, may be deemed to be a control person with respect to the Trust by virtue of its ownership of more than 95% of the Trust’s shares as of December 31, 2016. FMG LLC is organized as a Delaware limited liability company and is a wholly owned subsidiary of AXA Equitable. AXA Equitable is a wholly owned subsidiary of AXA Financial, Inc., a subsidiary of AXA, a French insurance holding company. As a “series” type of mutual fund, the Trust issues separate series of shares of beneficial interest with respect to each Portfolio. As of December 31, 2016, the Trustees and Officers of the Trust owned, or were entitled to provide voting instructions in the aggregate with respect to, less than one percent of the shares of the Portfolio.
The following table sets forth information regarding the shareholders who owned beneficially or of record more than 5% of any class of shares of the Portfolio as of December 31, 2016:
| Shareholder | Class | Number of Shares Owned | Percentage of Class | |||
THE MARCUS FAMILY IRR TR EUGENIA MARCUS ELLEN PARKER, TTEE 1555 COMMONWEALTH AVE NEWTON, MA 02465
| A | 2,661.214 | 7.44 | |||
AXA/EQUITABLE LIFE INS CO C/O BARBARA GERSTEL 525 WASHINGTON BLVD 36TH FLOOR JERSEY CITY, NJ 07310
| A | 18,417.821 | 51.53 | |||
ROUBENI IRREV TRUST MAHNAZ ROUBENI AFSOUN NABAVIAN TTE 36 BAYVIEW AVE GREAT NECK, NY 11021 | A | 3,972.447 | 11.11 | |||
HAYDEN IRR CREDIT TR ANN L HAYDEN WILLIAM HAYDEN TTEE C/O JOLO HOLDINGS 4101 FOUNDERS BOULVARD STE 100 BATAVIA, OH 45103
| A | 2,213.458 | 6.19 | |||
JOSEPH D BERGER 2677 W 72ND ST NEWAYGO, MI 49337 | A | 1,799.633 | 5.03 |
A copy of the Trust’s 2016 Annual Report is enclosed.
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Appendix A
The chart below provides information regarding the advisory fee(s) charged by the NewSub-Adviser to comparable fund(s) subject to the 1940 Act that it advises.
| Name of Fund | Assets as of December 31, 2016 | Advisory Fee Rate (% of average daily net assets) | ||
iShares MSCI KLD 400 Social ETF | $748 million | 0.50% |
