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Filed Pursuant to Rule 497 (e)
Registration File No.: 333-17217
EQ Advisors Trust
PROSPECTUS DATED MAY 1, 1999
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This Prospectus describes the thirteen (13) Portfolios offered by EQ Advisors
Trust that you can choose as investment alternatives. Each Portfolio has its
own investment objective and strategies that are designed to meet different
investment goals. This Prospectus contains information you should know before
investing. Please read this Prospectus carefully before investing and keep it
for future reference.
BT Equity 500 Index
BT International Equity Index
BT Small Company Index
EQ/Putnam Growth & Income Value
EQ/Putnam International Equity
EQ/Putnam Investors Growth
JPM Core Bond
Lazard Large Cap Value
Lazard Small Cap Value
MFS Emerging Growth Companies
MFS Growth with Income
MFS Research
Morgan Stanley Emerging Markets Equity
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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.
Ver. 5A
<PAGE>
Overview
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EQ ADVISORS TRUST
This Prospectus tells you about the thirteen (13) current Portfolios of the EQ
Advisors Trust ("Trust") and the Class IB shares offered by the Trust on behalf
of each Portfolio. The Trust is an open-end management investment company. Each
Portfolio is a separate series of the Trust with its own investment objective,
investment strategies and risks, which are described in this Prospectus. Each
of the current Portfolios of the Trust, except for the Morgan Stanley Emerging
Markets Equity Portfolio and the Lazard Small Cap Value Portfolio, are
diversified for purposes of the Investment Company Act of 1940, as amended
("1940 Act").
The Trust's shares are currently sold only to insurance company separate
accounts in connection with variable life insurance contracts and variable
annuity certificates and contracts (the "Contract" or collectively, the
"Contracts") issued by The Equitable Life Assurance Society of the United
States ("Equitable") and Equitable of Colorado, Inc. ("EOC") and to The
Equitable Investment Plan for Employees, Managers and Agents ("Equitable
Plan"). The prospectus is designed to help you make informed decisions about
the Portfolios that are available under your Contract or under the Equitable
Plan. You will find information about your Contract and how it works in the
accompanying prospectus for the Contracts if you are a Contractholder or
participant under a Contract.
EQ Financial Consultants, Inc. ("Manager") serves as the Manager of the Trust,
subject to the supervision and direction of the Board of Trustees. The Manager
has overall responsibility for the general management and administration of the
Trust. During 1999, the Manager plans to change its name to AXA Advisors, Inc.
Each of the Portfolios has its own investment adviser ("Adviser"). Information
about the Adviser 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 may without obtaining shareholder approval: (i)
select Advisers for each of the Trust's Portfolios; (ii) enter into 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
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SUMMARY INFORMATION CONCERNING EQ ADVISORS
TRUST 4
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2
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ABOUT THE INVESTMENT PORTFOLIOS 8
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BT Equity 500 Index Portfolio 10
BT International Equity Index Portfolio 12
BT Small Company Index Portfolio 15
EQ/Putnam Growth & Income Value Portfolio 17
EQ/Putnam International Equity Portfolio 19
EQ/Putnam Investors Growth Portfolio 22
JPM Core Bond Portfolio 25
Lazard Large Cap Value Portfolio 28
Lazard Small Cap Value Portfolio 30
MFS Emerging Growth Companies Portfolio 32
MFS Growth with Income Portfolio 34
MFS Research Portfolio 36
Morgan Stanley Emerging Markets Equity Portfolio 39
3
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MORE INFORMATION ON PRINCIPAL RISKS 43
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4
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MANAGEMENT OF THE TRUST 49
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The Trust 49
The Manager 49
Expense Limitation Agreement 50
The Advisers 51
The Administrator 51
The Transfer Agent 52
Brokerage Practices 52
Brokerage Transactions with Affiliates 52
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5
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FUND DISTRIBUTION ARRANGEMENTS 53
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6
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PURCHASE AND REDEMPTION 54
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7
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HOW ASSETS ARE VALUED 55
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8
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TAX INFORMATION 56
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9
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PRIOR PERFORMANCE OF EACH ADVISER 57
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10
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FINANCIAL HIGHLIGHTS 60
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1
Summary information concerning EQ Advisors Trust
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The following chart highlights the thirteen (13) Portfolios described in this
Prospectus that you can choose as investment alternatives under your Contracts
offered by Equitable or EOC. The chart and accompanying information identify
each Portfolio's investment objective(s), principal investment strategies, and
principal risks. "More Information on Principal Risks", which more fully
describes each of the principal risks, is provided beginning on page 43.
<TABLE>
<CAPTION>
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
BT EQUITY 500 INDEX Seeks to replicate as closely as possible (before deduction
of Portfolio expenses) the total return of the S&P 500 Index
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BT INTERNATIONAL EQUITY INDEX Seeks to replicate as closely as possible (before deduction
of Portfolio expenses) the total return of the MSCI EAFE
Index
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BT SMALL COMPANY INDEX Seeks to replicate as closely as possible (before the
deduction of Portfolio expenses) the total return of the
Russell 2000 Index
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EQ/PUTNAM GROWTH & INCOME VALUE Seeks capital growth. Current income is a secondary
objective
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EQ/PUTNAM INTERNATIONAL EQUITY Seeks capital appreciation
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EQ/PUTNAM INVESTORS GROWTH Seeks long-term growth of capital and any increased
income that results from this growth
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JPM CORE BOND Seeks to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity
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LAZARD LARGE CAP VALUE Seeks capital appreciation by investing primarily in equity
securities of companies with relatively large capitalizations
(i.e., companies having market capitalizations of at least
$3 billion at the time of initial purchase) that appear to the
Adviser to be inexpensively priced relative to the return on
total capital or equity
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LAZARD SMALL CAP VALUE Seeks capital appreciation by investing in equity securities
of U.S. companies with small market capitalizations (i.e.,
companies in the range of companies represented in the
Russell 2000 Index) that the Adviser considers
inexpensively priced relative to the return on total capital
or equity
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</TABLE>
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<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
Common stocks of companies in the S&P 500 Index General investment, index-fund, and fixed income risks
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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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Common stocks of small-cap companies in the Russell General investment, index-fund, small-cap and mid-cap
2000 Index company, derivatives, and fixed income risks
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Common stocks (plus convertible bonds, convertible General investment, derivatives, foreign securities, value
preferred stocks, preferred stocks and debt securities) investing, and fixed income risks
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Equity securities of foreign companies General investment, foreign securities, small-cap and
mid-cap company, liquidity, and derivatives risks
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Common stocks and convertible securities of companies General investment, growth investing, small-cap and
whose earnings are believed likely to grow faster than the mid-cap company, derivatives, foreign securities, and fixed
economy as a whole income risks
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Investment-grade securities rated BBB/Baa or better at the General investment, fixed income liquidity, portfolio
time of purchase (including foreign issuers) turnover, derivatives, and foreign securities risks
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Equity securities of companies with relatively large General investment, value investing, derivatives, and fixed
capitalizations that the Adviser believes are undervalued income risks
based on their return on equity or capital
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Equity securities of small-cap U.S. companies in the range General investment, small-cap and mid-cap company,
of companies included in the Russell 2000 Index that the value investing, non-diversification, and fixed income risks
Adviser believes are undervalued based on their return on
equity or capital
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</TABLE>
------------------------- EQ Advisors Trust
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<TABLE>
<CAPTION>
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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<S> <C>
MFS EMERGING GROWTH COMPANIES Seeks to provide long-term capital growth
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MFS GROWTH WITH INCOME Seeks to provide reasonable current income and long-term
growth of capital and income
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MFS RESEARCH Seeks to provide long-term growth of capital and future
income
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MORGAN STANLEY EMERGING MARKETS Seeks long-term capital appreciation by investing primarily
in equity securities of emerging country issuers
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</TABLE>
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<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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<S> <C>
Equity securities of emerging growth companies with the General investment, small-cap and mid-cap company,
potential to become major enterprises foreign securities, and growth investing risks
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Equity securities (common stock, preferred stock, General investment, small-cap and mid-cap company,
preference stock, convertible securities, warrants and foreign securities, fixed income, and growth investing risks
depositary receipts)
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Common stock or securities convertible into common stock General investment, small-cap and mid-cap company,
of companies with better than average prospects for foreign securities, fixed income, and growth investing risks
long-term growth
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Equity securities of emerging market country companies General investment, foreign securities, convertible
securities, liquidity, derivatives, portfolio turnover,
non-diversification, and fixed income risks
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</TABLE>
------------------------- EQ Advisors Trust
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2
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.
YEAR 2000 RISK: A Portfolio could be adversely affected if the computer systems
used by the Trust, Adviser, other service providers, or persons with whom they
deal, do not properly process and calculate date-related information and data
dated on and after January 1, 2000 ("Year 2000 Problem"). The extent of such
impact cannot be predicted and there can be no assurances that the Year 2000
Problem will not have an adverse effect on the issuers whose securities are
held by a Portfolio. This risk is greater for Portfolios that make foreign
investments, particularly in emerging market countries.
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
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
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 Equitable
Contract.
Broad-based securities indices are unmanaged and are not subject to fees and
expenses typically associated with managed investment company portfolios.
Investments cannot be made directly in a broad-based securities index.
Comparisons with these benchmarks, therefore, are of limited use. They are
included because they are widely known and may help you to understand the
universe of securities from which each Portfolio is likely to select its
holdings. "Blended" performance numbers (e.g., 60% S&P 500/40% Lehman
Gov't/Corp) assume a static mix of the two indices.
THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500") is an
unmanaged index containing common stock of 500 industrial, transportation,
utility and financial companies, regarded as generally representative of the
larger capitalization portion of the United States stock market. The S&P 500
reflects the reinvestment of dividends, if any, but does not reflect fees,
brokerage commissions or other expenses of investing.
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THE RUSSELL 2000 INDEX ("Russell 2000") is an unmanaged index (with no defined
investment objective) of 2000 small-cap stocks and reflects reinvestment of
dividends. It is compiled by the Frank Russell Company.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX ("MSCI EAFE") is a market
capitalization weighted equity index composed of a sample of companies
representative of the market structure of Europe, Australia and the Far East.
MSCI EAFE Index returns assume dividends reinvested net of withholding tax and
do not reflect any fees or expenses.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE PRICE RETURN
INDEX ("MSCI Emerging Markets Free") is a market capitalization weighted equity
index composed of companies that are representative of the market structure of
the following countries: Argentina, Brazil, Chile, China Free, Columbia, Czech
Republic, Greece, Hungary, India, Indonesia, Israel, Jordan, Korea (@ 50%),
Mexico Free, Pakistan, Peru, Philippines Free, Poland, Russia, South Africa,
Sri Lanka, Taiwan (@50%), Thailand, Turkey and Venezuela Free. The base date
for the index is December 31, 1987. "Free" MSCI indices exclude those shares
not purchasable by foreign investors. The average size of the emerging market
companies within this index is US $800 million.
SALOMON BROTHERS BROAD INVESTMENT GRADE BOND INDEX is an unmanaged market
weighted index that contains approximately 4,700 individually priced investment
grade bonds.
---------------------------------------------------- EQ Advisors Trust
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BT EQUITY 500 INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to replicate as closely as possible (before
deduction of Portfolio expenses) the total return of the S&P 500.
THE INVESTMENT STRATEGY
The Portfolio invests in equity securities of companies included in the S&P
500. The Adviser seeks to match the risk and return characteristics of the S&P
500 by investing in a statistically selected sample of the securities found in
the S&P 500, using a process known as "optimization". This process selects
stocks for the Portfolio so that industry weightings, market capitalizations
and fundamental characteristics (price to book ratios, price to earnings
ratios, debt to asset ratios and dividend yields) closely match those of the
securities included in the S&P 500. This approach helps to increase the
Portfolio's liquidity and reduce costs. The securities held by the Portfolio
are weighted to make the Portfolio's total investment characteristics similar
to those of the S&P 500 as a whole.
The Adviser generally will seek to match the composition of the S&P 500 but
usually will not invest the Portfolio's stock portfolio to mirror the S&P 500
exactly. Because of the difficulty and cost of executing relatively small stock
transactions, the Portfolio may not always be invested in the less heavily
weighted S&P 500 stocks, and may at times have its portfolio weighted
differently than the S&P 500, particularly if the Portfolio has a low level of
assets. In addition, the Portfolio may omit or remove any S&P 500 stock from
the Portfolio if, following objective criteria, the Adviser judges the stock to
be insufficiently liquid or believes the merit of the investment has been
substantially impaired by extraordinary events or financial conditions. The
Portfolio will not purchase the stock of Bankers Trust New York Corporation,
which is included in the S&P 500, and instead will overweight its holdings of
companies engaged in similar businesses.
For more information on the S&P 500, see the preceding section "The
Benchmarks." The Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's Corporation ("S&P") and S&P makes no guarantee as to the
accuracy and/or completeness of the S&P 500 or any data included therein.
Over time, the correlation between the performance of the Portfolio and the S&P
is expected to be 95% or higher before deduction of Portfolio expenses. The
Portfolio's ability to track the S&P 500 may be affected by, among others,
transaction costs, administration and other expenses incurred by the Portfolio,
changes in either the composition of the S&P 500 or the assets of the
Portfolio, and the timing and amount of Portfolio investor contributions and
withdrawals, if any. The Portfolio seeks securities to track the S&P 500,
therefore, the Adviser generally will not attempt to judge the merits of any
particular security as an investment.
The Portfolio may also invest up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the S&P 500. Securities index
futures contracts and related options, warrants and convertible securities may
be used for a number of reasons, including: to simulate full investment in the
S&P 500 while retaining a cash balance for Portfolio management purposes; to
facilitate trading; to reduce transaction costs; or to seek higher investment
returns when a futures contract, option, warrant or convertible security is
priced more attractively than the underlying equity security or S&P 500. These
instruments are considered to be derivatives.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
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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.
FIXED INCOME RISKS: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
Nationally Rated Statistical Rating Organization ("NRSRO"), it will be exposed
to greater risk than higher-rated obligations because BBB rated investment
grade securities are regarded as having only an adequate capacity to pay
principal and interest, are considered to lack outstanding investment
characteristics, and may be speculative.
PORTFOLIO PERFORMANCE
The bar chart which follows illustrates the Portfolio's annual total return for
1998, the Portfolio's first year of existence. The table which follows 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. In addition, holders of variable insurance
contracts representing interests in the Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses and if reflected
the results would be reduced. The Portfolio's inception date was January 1,
1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
25.14%
1998
Best quarter: Worst quarter:
21.26% (1998 4th Quarter) (10.03)% (1998 3rd Quarter)
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE YEAR INCEPTION
BT Equity 500 Index Portfolio 25.14% 25.14%
S&P 500 Index* 28.58% 28.58%
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
BANKERS TRUST COMPANY: ("Bankers Trust"), 130 Liberty Street (One Bankers Trust
Plaza), New York, New York 10006. Bankers Trust has been the Adviser to the
Portfolio since it commenced operations. Bankers Trust is a wholly-owned
subsidiary of Bankers Trust Corporation. Bankers Trust conducts a variety of
general banking and trust activities and is a major wholesale supplier of
financial services, including investment management to the international and
domestic institutional markets. During 1999, Bankers Trust Corporation and a
wholly owned subsidiary of Deutsche Bank AG ("Deutsche Bank") expect to
finalize a merger in which Bankers Trust Corporation will be acquired by and
become a subsidiary of Deutsche Bank.
---------------------------------------------------- EQ Advisors Trust
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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 RISKS: 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);
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inadequate or inaccurate information about foreign companies; higher
transaction, brokerage and custody costs; adverse changes in foreign economic
and tax policies; and foreign government instability, war or other adverse
political or economic actions. Other specific risks of investing in foreign
securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines. The Year 2000 problem may also be especially acute in emerging
market countries, which also may adversely affect the value of the
Portfolio's investments.
EURO RISK: The Portfolio invests in securities issued by European issuers
that that may be adversely impacted by the introduction of the "Euro" as a
common currency in 11 European Monetary Union member states. The Euro may
result in various legal and accounting differences, tax treatments, the
creation and implementation of suitable clearing and settlement systems
and other operational problems, that 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 which follows illustrates the Portfolio's average annual total
return for 1998, the Portfolio's first year of existence. The table which
follows 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. In addition, holders of variable insurance
contracts representing interests in the Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses and if reflected
the results would be reduced. The Portfolio's inception date was January 1,
1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
20.07%
1998
Best quarter: Worst quarter:
20.43% (1998 4th Quarter) (13.90)% (1998 3rd Quarter)
---------------------------------------------------- EQ Advisors Trust
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<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
BT International Equity Index Portfolio 20.07% 20.07%
MSCI EAFE Index* 20.00% 20.00%
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
BANKERS TRUST COMPANY ("Bankers Trust"), 130 Liberty Street (One Bankers Trust
Plaza), New York, New York 10006. Bankers Trust has been the Adviser to the
Portfolio since it commenced operations. Bankers Trust is a wholly-owned
subsidiary of Bankers Trust New York Corporation. Bankers Trust conducts a
variety of general banking and trust activities and is a major wholesale
supplier of financial services to the international and domestic institutional
markets, including investment management. During 1999, Bankers Trust
Corporation and a wholly owned subsidiary of Deutsche Bank AG ("Deutsche Bank")
expect to finalize a merger in which Bankers Trust Corporation will be acquired
by and become a subsidiary of Deutsche Bank.
<PAGE>
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BT SMALL COMPANY INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to replicate as closely as possible (before the
deduction of Portfolio expenses) the total return of the Russell 2000 Index
("Russell 2000").
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of small-cap companies
included in the Russell 2000. The Adviser seeks to match the returns of the
Russell 2000. The Portfolio invests in a statistically selected sample of the
securities found in the Russell 2000, using a process known as "optimization."
This process selects stocks for the Portfolio so that industry weightings,
market capitalizations and fundamental characteristics (price to book ratios,
price to earnings ratios, debt to asset ratios and dividend yields) closely
match those of the securities included in the Russell 2000. This approach helps
to increase the Portfolio's liquidity and reduce costs. The securities held by
the Portfolio are weighted to make the Portfolio's total investment
characteristics similar to those of the Russell 2000 as a whole.
For more information on The Russell 2000, see the preceding section "The
Benchmarks." The Portfolio is neither sponsored by nor affiliated with the
Frank Russell Company, which is the owner of the trademarks and copyrights
relating to the Russell indices.
Over time, the correlation between the performance of the Portfolio and the
Russell 2000 is expected to be 95% or higher before the deduction of Portfolio
expenses. The Portfolio's ability to track the Russell 2000 may be affected by,
among other things, transaction costs, administration and other expenses
incurred by the Portfolio, changes in either the composition of the Russell
2000 or the assets of the Portfolio, and the timing and amount of Portfolio
investor contributions and withdrawals, if any. The Portfolio seeks to track
the Russell 2000, therefore, the Adviser generally will not attempt to judge
the merits of any particular security as an investment.
Securities index futures contracts and related options, warrants and
convertible securities may be used for a number of reasons, including: to
simulate full investment in the Russell 2000 while retaining a cash balance for
fund management purposes; to facilitate trading; to reduce transaction costs;
or to seek higher investment returns when a futures contract, option, warrant
or convertible security is priced more attractively than the underlying equity
security or Russell 2000. These instruments are considered to be derivatives.
The Portfolio may invest to a lesser extent in short-term debt securities and
money market securities to meet redemption requests or to facilitate investment
in the securities included in the Russell 2000.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
INDEX-FUND RISK: The Portfolio is not actively managed and invests in
securities included in the index regardless of their investment merit.
Therefore, the Portfolio cannot modify its investment strategies to respond to
changes in the economy and may be particularly susceptible to a general decline
in the U.S. or global stock market segment relating to the index.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less known and may trade less frequently and
in lower volume; such companies are more likely to experience greater or more
unexpected changes in their earnings and growth prospects; and the products or
technologies of such companies may be at a relatively early stage of
development or not fully tested.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISKS: 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 which follows illustrates the Portfolio's annual total return for
1998, the Portfolio's first year of existence. The table which follows 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. In addition, holders of variable insurance
contracts representing interests in the Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses and if reflected
the results would be reduced. The Portfolio's inception date was January 1,
1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998
(2.27)%
Best quarter: Worst quarter:
16.21% (1998 4th Quarter) (19.52)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
BT Small Company Index Portfolio (2.27)% (2.27)%
Russell 2000 Index* (2.54)% (2.54)%
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
BANKERS TRUST COMPANY Bankers Trust"), 130 Liberty Street (One Bankers Trust
Plaza), New York, New York 10006. Bankers Trust has been the Adviser to the
Portfolio since it commenced operations. Bankers Trust is a wholly-owned
subsidiary of Bankers Trust New York Corporation. Bankers Trust conducts a
variety of general banking and trust activities and is a major wholesale
supplier of financial services to the international and domestic institutional
markets. Investment management is a core business of Bankers Trust built on a
tradition of excellence from its roots as a trust bank founded in 1903. During
1999, Bankers Trust Corporation and a wholly owned subsidiary of Deutsche Bank
AG ("Deutsche Bank") expect to finalize a merger in which Bankers Trust
Corporation will be acquired by and become a subsidiary of Deutsche Bank.
<PAGE>
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17
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EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital growth. Current income is a secondary
objective.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks that offer potential for
capital growth and may invest in stocks that offer potential for current
income. In analyzing companies for investment, the Adviser tries to identify
common stocks of companies that are significantly undervalued compared with
their underlying assets or earnings potential and offer growth and current
income potential.
The Portfolio may also invest in corporate bonds, notes and debentures,
preferred stocks or convertible securities (both debt securities and preferred
stocks) or U.S. Government securities.
It may also invest a portion of its assets in debt securities rated below
investment grade (commonly referred to as "junk bonds"), zero-coupon bonds and
payment-in-kind bonds, and high quality U.S. and foreign dollar-denominated
money market securities. The Portfolio may invest up to 20% of its total assets
in foreign securities, including transactions involving futures contracts,
forward contracts and options and foreign currency exchange transactions.
There may be times when the Adviser will use additional investment strategies
to achieve the Portfolio's investment objectives. For example, the Portfolio
may engage in a variety of investment management practices such as buying and
selling derivatives, including stock index futures contracts and call and put
options.
When market or financial conditions warrant, the Portfolio may invest up to
100% of its assets in debt securities, preferred stocks or other securities for
temporary or defensive purposes. Such investment strategies are inconsistent
with the Portfolio's investment objectives and could result in the Portfolio
not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged to
be undervalued may actually be appropriately priced.
FOREIGN SECURITIES RISKS: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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FIXED INCOME RISKS: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest rates fall, the reverse is
true. In addition, to the extent that the Portfolio invests in investment grade
securities which are rated BBB by S&P or an equivalent rating by any other
NRSRO, it will be exposed to greater risk than higher-rated obligations because
BBB rated investment grade securities are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative. The risk that an issuer or
guarantor of a fixed income security or counterparty to the Portfolio's fixed
income transaction is unable to meets its financial obligations is particularly
significant for this Portfolio because this Portfolio invests a portion of its
assets in "junk bonds" (i.e., securities rated below investment grade). Junk
bonds are issued by companies with questionable credit strength and,
consequently, are considered to be speculative in nature and may be subject to
greater market fluctuations than investment grade fixed-income securities.
PORTFOLIO PERFORMANCE
The bar chart which follows illustrates the Portfolio's annual total return for
1998, the Portfolio's first full year of operations. The table which follows
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. In addition, holders of variable insurance
contracts representing interests in the Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses and if reflected
the results would be reduced. The inception date for the Portfolio is May 1,
1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
12.75%
1998
Best quarter: Worst quarter:
16.49% (1998 4th Quarter) (10.58)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
EQ/Putnam Growth & Income Value
Portfolio 12.75% 17.56%
S&P 500 Index* 28.58% 31.63%
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC.: ("Putnam Management"), One Post Office
Square, Boston, MA 02109. Putnam Management has been the Adviser to the
Portfolio since the Portfolio commenced operations. Putnam Management has been
managing mutual funds since 1937. Putnam Management is a subsidiary of Putnam
Investments, Inc., which is itself a subsidiary of Marsh & McLennan Companies,
Inc.
ANTHONY I. KREISEL: is the Portfolio Manager responsible for the day to day
management of the Portfolio since it commenced operations. Mr. Kreisel has been
employed by Putnam Management as either a portfolio manager or analyst since
1986.
<PAGE>
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19
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EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of companies in a number
of different countries. Such equity securities normally include common stocks,
preferred stocks, securities convertible into common or preferred stocks and
warrants. Under normal market circumstances, a majority of the Portfolio's
assets will be invested in companies located in at least three different
countries outside the United States. The countries in which the Portfolio may
invest include emerging market countries.
The Portfolio considers the following to be an issuer of securities located in
a country other than the U.S.:
o companies organized under the laws of a country other than the U.S. with a
principal office outside the U.S., or
o companies that earn 50% or more of their total revenues from business
outside the U.S.
The Portfolio may engage in a variety of transactions using "derivatives," such
as futures, options, warrants, forward and swap contracts on both securities
and currencies.
The Portfolio will not limit its investments to any particular type of company.
The Portfolio may invest in companies of any size whose earnings the Adviser
believes to be in a relatively strong growth trend or whose securities the
Adviser considers to be undervalued.
The Adviser considers, among other things, a company's financial strength,
competitive position in its industry and projected future earnings and
dividends when deciding whether to buy or sell investments. When market or
financial conditions warrant, the Portfolio may invest, without limitation, in
securities of any kind, including securities traded primarily in U.S. markets,
cash and money market instruments for temporary or defensive purposes. Such
investment strategies are inconsistent with the Portfolio's investment
objectives and could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISKS: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities that can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, foreign investments can be adversely affected
by: unfavorable currency exchange rates (relative to the U.S. dollar for
securities denominated in a foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
Other specific risks of investing in foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines. The Year 2000 problem may also be especially acute in emerging
market countries, which also may adversely affect the value of the
Portfolio's investments.
EURO RISK: The Portfolio invests in securities issued by European issuers
that that may be adversely impacted by the introduction of the "Euro" as a
common currency in
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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20
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11 European Monetary Union member states. The Euro may result in various
legal and accounting differences, tax treatments, the creation and
implementation of suitable clearing and settlement systems and other
operational problems, that may cause market disruptions that could
adversely affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory practices and requirements as are U.S. companies, which could
adversely affect their value.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
PORTFOLIO PERFORMANCE
The bar chart which follows illustrates the Portfolio's annual total return for
1998, the Portfolio's first full year of operations. The table which follows
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. In addition, holders of variable insurance
contracts representing interests in the Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses and if reflected
the results would be reduced. The inception date for the Portfolio is May 1,
1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
19.51%
1998
Best quarter: Worst quarter:
22.16% (1998 4th Quarter) (18.48)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
EQ/Putnam International Equity Portfolio 19.51% 17.52%
S&P 500 Index* 20.00% 13.43%
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC. ("Putnam Management"), One Post Office
Square, Boston, MA 02109. Putnam Management has been the Adviser to the
Portfolio since the Portfolio commenced operations. Putnam Management has been
managing mutual funds since 1937. Putnam Management is a subsidiary of Putnam
Investments, Inc.
<PAGE>
----------
21
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The Portfolio Managers, responsible for the day to day management of the
Portfolio since the inception of the Portfolio, are JUSTIN SCOTT, a Managing
Director, who has been with Putnam Management as an investment professional*
since 1988 and OMID KAMSHAD, a Managing Director, who has been employed as an
investment professional* by Putnam Management since 1996. Prior to January
1996, he was a Director of Investments at Lombard Odier International Portfolio
Management Limited and prior to April 1995, he was Director at Baring Asset
Management Company. (*Investment professional means that the manager was either
a portfolio manager or analyst.)
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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EQ/PUTNAM INVESTORS GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital and any increased
income that results from this growth.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks of companies with market
capitalizations of $2 billion or more. The Adviser gives consideration to
growth potential rather than to dividend income. The Portfolio may purchase
securities of medium-sized companies having a proprietary product or profitable
market niches and the potential to grow very rapidly.
The Adviser invests mostly in "growth" stocks whose earnings the Adviser
believes are likely to grow faster than the economy as a whole. The Adviser
evaluates a company's future earnings potential and dividends, financial
strength, working assets and competitive position in its industry.
Although the Portfolio invests primarily in U.S. stocks, the Portfolio may
invest without limit in securities of foreign issuers that are traded in U.S.
public markets. It may also, to a lesser extent, invest in securities of
foreign issuers that are not traded in U.S. public markets.
The Portfolio may also engage in a variety of transactions involving
derivatives, such as futures, options, warrants and swaps and may also invest
in convertible securities, preferred stocks and debt securities.
When market or financial conditions warrant, the Portfolio may invest without
limit in debt securities, preferred stocks, United States Government and agency
obligations, cash or money market instruments, or any other securities for
temporary or defensive purposes. Such investment strategies are inconsistent
with the Portfolio's investment objectives and could result in the Portfolio
not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISKS: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely
<PAGE>
----------
23
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affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
FIXED INCOME RISKS: 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 which follows illustrates the Portfolio's annual total return for
1998, the Portfolio's first full year of operations. The table which follows
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. In addition, holders of variable insurance
contracts representing interests in the Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses and if reflected
the results would be reduced. The inception date for the Portfolio is May 1,
1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
36.27%
1998
Best quarter: Worst quarter:
25.29% (1998 4th Quarter) (11.25)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
EQ/Putnam Investors Growth Portfolio 36.27% 37.34%
S&P 500 Index* 28.58% 31.63%
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC.: ("Putnam Management"), One Post Office
Square, Boston, MA 02109. Putnam Management has been the Adviser to the
Portfolio since the Portfolio commenced operations. Putnam Management has been
managing mutual funds since 1937. Putnam Management is a subsidiary of Putnam
Investments, Inc., which is itself a subsidiary of Marsh & McLennan Companies,
Inc.
The Portfolio Managers, responsible for the day to day management of the
Portfolio since its inception, are: C. BETH COTNER, who has been employed by
Putnam Management as an investment professional* since 1995, and prior to 1995,
was a Portfolio Manager and Executive Vice President of Kemper Financial
Services; RICHARD B.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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24
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ENGLAND, who has been employed by Putnam Management as an investment
professional* since 1992; and MANUAL WEISS HERRERRO, who has been employed by
Putnam Management as investment professional* since 1987. (*Investment
professional means that the manager was either a portfolio manager or analyst.)
<PAGE>
----------
25
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JPM CORE BOND PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity.
THE INVESTMENT STRATEGY
This Portfolio's total return will consist of income plus realized and
unrealized capital gains and losses. The Portfolio currently invests all of its
assets in investment grade debt securities rated BBB or better by Standard &
Poor's ("S&P") or Baa or better by Moody's Investors Services, Inc. ("Moody's")
or unrated securities of similar quality.
The Adviser actively manages the Portfolio's duration, the allocation of
securities across market sectors and the selection of specific securities
within market sectors. Based on fundamental, economic and capital markets
research, the Adviser adjusts the duration of the Portfolio based on the
Adviser's view of the market and interest rates. The Adviser also actively
allocates the Portfolio's assets among the broad sectors of the fixed income
market. These securities principally include U.S. Government and agency
securities, corporate securities, private placements, asset-backed securities,
mortgage-related securities and direct mortgage obligations. The securities can
be of any duration but will generally mature within one year of the Salomon
Brothers Broad Investment Grade Bond Index (currently about 5 years). The
Portfolio may also use futures contracts to change the duration of the
Portfolio's bond holdings.
Duration is a measure of the weighted average maturity of the bonds held by the
Portfolio and can be used by the Adviser as a measure of the sensitivity of the
market value of the Portfolio to changes in interest rates. Generally, the
longer the duration of the Portfolio, the more sensitive its market value will
be to changes in interest rates.
The Portfolio may also invest up to 25% of its assets in securities of foreign
issuers, including up to 20% of its assets in debt securities denominated in
currencies of developed foreign countries.
Under normal market conditions, the Portfolio will be primarily invested in
bonds. When market or financial conditions warrant, the Portfolio may invest up
to 100% of its assets in money market securities for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objective and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
FIXED INCOME RISKS: This Portfolio invests primarily in fixed income
securities, therefore, the Portfolio's performance will be affected by
changes in interest rates, credit risks of the issuer, the duration and
maturity of the Portfolio's fixed income holdings, and adverse market and
economic conditions. Other specific risks of investing in fixed income
securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price
and total return) of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest
rates fall, the reverse is true.
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the
issuer or guarantor of a debt security or counterparty to a Portfolio's
transaction is unable or unwilling to make timely principal and/or
interest payments, or to honor its financial obligations. Investment grade
securities (rated, e.g., BBB by S&P) are somewhat riskier than higher
rated obligations because they are regarded as having only an adequate
capacity to pay principal and interest, are considered to lack outstanding
investment characteristics, and may be speculative.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase. Falling interest rates
may cause the value and yield of mortgage-backed securities to fall.
Falling interest rates also may encourage borrowers to pay off their
mortgages sooner than anticipated
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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26
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(pre-payment). The Portfolio would need to reinvest the pre-paid funds at
the newer, lower interest rates.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs and may result in higher
taxable gains that could be passed through to shareholders.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISKS: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The bar chart which follows illustrates the Portfolio's annual total return for
1998, the Portfolio's first year of existence. The table which follows shows
the Portfolio's average annual total returns for one year and since inception.
The table also compares the Portfolio's performance to the returns of a
broad-based index. Both the bar chart and table assume reinvestment of
dividends and distributions. Past performance is not an indication of future
performance. In addition, holders of variable insurance contracts representing
interests in the Portfolio will be subject to charges and expenses relating to
such insurance contracts. The performance results presented below do not
reflect any insurance related expenses and if reflected the results would be
reduced. The Portfolio commenced operations on January 1, 1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
9.02%
1998
Best quarter: Worst quarter:
4.72% (1998 3rd Quarter) 0.21% (1998 4th Quarter)
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE YEAR INCEPTION
JPM Core Bond Portfolio 9.02% 9.02%
Salomon Brothers Broad Investment
Grade Bond Index* 8.72% 8.72%
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
J.P. MORGAN INVESTMENT MANAGEMENT INC. ("J.P. Morgan"), 522 Fifth Avenue, New
York, New York 10036. J.P. Morgan has been the Adviser to the Portfolio since
it commenced operations. J.P. Morgan is a registered investment adviser and is
a wholly owned subsidiary of J.P. Morgan & Co. Incorporated, a bank holding
company. J.P. Morgan manages portfolios for corporations, governments,
<PAGE>
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27
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endowments, as well as many of the largest corporate retirements plans in the
nation.
The Portfolio Managers, responsible for the day to day management of the
Portfolio since it commenced operations, are PAUL L. ZEMSKY, a Managing
Director of J.P. Morgan and a portfolio manager specializing in quantitative
techniques, who joined J.P. Morgan in 1985; and ROBERT J. TEATOM, a Managing
Director of J.P. Morgan and co-head of its U.S. Fixed Income Group, who joined
J.P. Morgan in 1975.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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LAZARD LARGE CAP VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital appreciation by investing primarily in
equity securities of companies with relatively large capitalizations (i.e.,
companies having market capitalizations of at least $3 billion at the time of
initial purchase) that appear to the Adviser to be inexpensively priced
relative to the return on total capital or equity.
THE INVESTMENT STRATEGY
The Portfolio normally invests at least 80% of its total [net assets] assets
primarily in equity securities of large capitalization companies. Equity
securities include common stocks, preferred stocks and securities convertible
into or exchangeable for common stocks.
The Portfolio uses a value-oriented approach in searching for securities. The
Adviser uses a "bottom-up" approach (individual stock selection) to find
companies that have:
o low price to earnings ratios
o high yield
o unrecognized assets
o the possibility of management change, and/or
o the prospect of improved profitability.
The Portfolio may also invest up to 20% of its assets in U.S. Government
securities and investment grade debt securities of domestic corporations rated
BBB or better by S&P or Baa or better by Moody's.
The Portfolio may also invest up to 10% of its assets in foreign equity or debt
securities, or depositary receipts.
The Portfolio may also invest without limitation in high-quality short-term
money market instruments. The Portfolio may engage in options transactions,
including writing covered call options or foreign currencies to offset costs of
hedging and writing and purchasing put and call options on securities. Although
the Portfolio will engage in options transactions primarily to hedge its
Portfolio, it may use options to increase returns and there is the risk that
these transactions sometimes may reduce returns or increase volatility.
When market or financial conditions warrant, the Portfolio may invest, without
limit, in money market securities for temporary or defensive purposes. Such
investment strategies could have the effect of reducing the benefit of any
upswing in the market. Such investment strategies are inconsistent with the
Portfolio's investment objectives and could result in the Portfolio not
achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged to
be undervalued may actually be appropriately priced.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISKS: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the Portfolio's
performance will be affected by changes in interest rates, the credit risk of
the issuer, the duration or maturity of the Portfolio's fixed income holdings,
and adverse market or economic conditions. When interest rates rise, the value
of the Portfolio's fixed income securities, particularly those with longer
durations or maturities, will go down. When interest
<PAGE>
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29
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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 which follows illustrates the Portfolio's average annual total
return for 1998, the Portfolio's first year of existence. The table which
follows 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. In addition, holders of variable insurance
contracts representing interests in the Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses and if reflected
the results would be reduced. The Portfolio's inception date was January 1,
1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
20.01%
1998
Best quarter: Worst quarter:
23.34% (1998 4th Quarter) (13.43)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
Lazard Large Cap Value Portfolio 20.01% 20.01%
S&P 500 Index* 25.58% 28.58%
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
LAZARD ASSET MANAGEMENT: ("LAM"), 30 Rockefeller Plaza, New York, New York
10112. LAM has been the Adviser to the Portfolio since it commenced operations.
LAM is a division of Lazard Fr-res & Co. LLC ("Lazard Fr-res"), a New York
limited liability company, which is registered as an investment adviser with
the SEC. Lazard Fr-res provides its clients with a wide variety of investment
banking, brokerage and related services, including investment management.
The Portfolio Managers, responsible for the day to day management since the
inception of the Portfolio are HERBERT W. GULLQUIST, a Vice-Chairman, Managing
Director and Chief Investment Officer of LAM, who has been with LAM since 1982;
and MICHAEL S. ROME, a Managing Director of LAM and a U.S./Global Equity
Portfolio Manager since 1991.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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LAZARD SMALL CAP VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital appreciation by investing in equity
securities of United States companies with small market capitalizations (i.e.,
companies in the range of companies represented in the Russell 2000 Index) that
the Adviser considers inexpensively priced relative to the return on total
capital or equity.
THE INVESTMENT STRATEGY
The Portfolio is a non-diversified Portfolio that invests primarily in equity
securities of U.S. companies with small market capitalizations that the Adviser
believes are undervalued based on their return on equity or capital. The
Portfolio will have characteristics similar to the Russell 2000 Index. The
equity securities that may be purchased by the Portfolio include common stocks,
preferred stocks, securities convertible into or exchangeable for common
stocks, rights and warrants.
For more information on The Russell 2000, see the preceding section "The
Benchmarks".
A Portfolio may be considered to be "non-diversified" for federal securities
law purposes because it invests in a limited number of securities. In all
cases, the Portfolio intends to be diversified for tax purposes so that it can
qualify as a regulated investment company.
In selecting investments for the Portfolio, the Adviser looks for equity
securities of companies that have one or more of the following characteristics:
(i) are undervalued relative to their earnings, cash flow or asset values; (ii)
have an attractive price/value relationship with expectations that some
catalyst will cause the perception of value to change within two years; (iii)
are out of favor due to circumstances which are unlikely to harm the company's
franchise or earnings power; (iv) have low projected price to earnings or
price-to-cash flow multiples; (v) have the potential to become a larger factor
in the company's business; (vi) have significant debt but have high levels of
free cash flow; and (vii) have a relatively short corporate history with the
expectation that the business may grow.
Although the Portfolio will principally invest at least 80% of its assets in
small capitalization securities, the Portfolio may also invest up to 20% of its
assets in larger capitalization equity securities or investment grade debt
securities.
When market or financial conditions warrant, the Portfolio may invest without
limitation in short-term money market instruments or hold its assets in cash
for temporary or defensive purposes. Such investment strategies could have the
effect of reducing the benefit of any upswing in the market. Such investment
strategies are inconsistent with the Portfolio's investment objectives and
could result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged to
be undervalued may actually be appropriately priced.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less-well known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
<PAGE>
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31
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NON-DIVERSIFICATION RISK: Since a relatively high percentage of the Portfolio's
assets may be invested in the securities of a limited number of issuers, some
of which may be within the same industry, the securities of the Portfolio may
be more sensitive to changes in the market value of a single issuer or industry
or to risks associated with a single economic, political or regulatory event
than a diversified portfolio.
FIXED INCOME RISKS: 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 which follows illustrates the Portfolio's annual total return for
1998, the Portfolio's first year of existence. The table which follows 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. In addition, holders of variable insurance
contracts representing interests in the Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses and if reflected
the results would be reduced. The Portfolio's inception date was January 1,
1998.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998
(7.03)%
Best quarter: Worst quarter:
15.78% (1998 4th Quarter) (20.10)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
Lazard Small Cap Value Portfolio (7.03)% (7.03)%
Russell 2000 Index* (2.54)% (2.54)%
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
LAZARD ASSET MANAGEMENT ("LAM"), 30 Rockefeller Plaza, New York, New York
10112. LAM has been the Adviser to the Portfolio since it commenced operations.
LAM is a division of Lazard Fr-res & Co. LLC ("Lazard Fr-res"), a New York
limited liability company, which is registered as an investment adviser with
the SEC. Lazard Freres provides its clients with a wide variety of investment
banking and related services, including investment management.
The Portfolio Managers, responsible for the day to day management since the
inception of the Portfolio, are: EILEEN D. ALEXANDERSON, a Managing Director of
LAM who has been with LAM since 1979 and HERBERT W. GULLQUIST, a Vice-Chairman,
Managing Director and Chief Investment Officer of LAM, who has been with LAM
since 1982.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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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 performed by
the Adviser.
In addition, up to 15% 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 RISKS: 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>
----------
33
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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 PERFORMANCE
The bar chart which follows illustrates the Portfolio's annual total return for
1998, the Portfolio's first full year of operations. The table which follows
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. In addition, holders of variable insurance
contracts representing interests in the Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses and if reflected
the results would be reduced. The inception date for the Portfolio is May 1,
1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
34.57%
1998
Best quarter: Worst quarter:
26.70% (1998 4th Quarter) (12.69)% (1998 3rd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
MFS Emerging Growth Companies
Portfolio 34.57% 34.81%
Russell 2000 Index* (2.54)% (14.53)%
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS has been the Adviser to the Portfolio since it commenced
operations. MFS is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States, Massachusetts
Investors Trust. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
The Portfolio Managers are JOHN W. BALLEN, President of MFS, who has been
employed by MFS as a portfolio manager of the Portfolio since 1984, and TONI Y.
SHIMURA, a Vice President of MFS, who has been employed by MFS as a portfolio
manager for the Portfolio since 1995.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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34
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MFS GROWTH WITH INCOME PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide reasonable current income and long-term
growth of capital and income.
For purposes of this Portfolio, the words "reasonable current income" mean
moderate income.
THE INVESTMENT STRATEGY
The Portfolio invests, under normal market conditions, primarily (at least 65%
of its total assets) in equity securities, including common stocks, preferred
stocks, convertible securities, warrants and depositary receipts for those
securities. Equity securities may be listed on a securities exchange or traded
in the over-the-counter markets. While the Portfolio may invest in companies of
any size, the Portfolio generally focuses on companies with larger market
capitalizations that the Adviser believes have sustainable growth prospects and
attractive valuations based on current and expected earnings or cash flow.
The Adviser uses a "bottom-up" investment style in managing the Portfolio. This
means that securities are selected based upon fundamental analysis performed by
the Adviser's large group of equity research analysts.
The Portfolio may invest in foreign securities and may have exposure to foreign
currencies through its investment in these securities, its direct holdings of
foreign currencies or through its use of forward foreign currency exchange
contracts for the purchase or sale of a fixed quantity of foreign currency at a
future date.
When adverse market, financial or political conditions warrant, the Portfolio
may depart from its principal strategies for temporary or defensive purposes.
Such investment strategies are inconsistent with the Portfolio's investment
objective and could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
FOREIGN SECURITIES RISKS: 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.
<PAGE>
----------
35
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PORTFOLIO PERFORMANCE
The inception date for this Portfolio is January 1, 1999. Therefore, no prior
performance information is available.
WHO MANAGES THE PORTFOLIO
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS has been the Adviser to the Portfolio since it commenced
operations. MFS is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States, Massachusetts
Investors Trust. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
The Portfolio Managers are JOHN D. LAUPHEIMER, JR., Senior Vice President of
MFS, who has been employed as a portfolio manager by MFS since 1986; and
MITCHELL D. DYNAN, a Vice President of MFS, who has been employed as a
portfolio manager by MFS since 1981.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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MFS RESEARCH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide long-term growth of capital and future
income.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities, such as common stocks,
securities convertible into common stocks, preferred stocks and depositary
receipts of companies believed by the Adviser to have:
o favorable prospects for long-term growth,
o attractive valuations based on current and expected earnings or cash flow,
o dominant or growing market share, and
o superior management.
The Portfolio may invest in securities of companies of any size. The
Portfolio's investments may include securities traded on securities exchanges
or in the over-the-counter markets.
The Portfolio may invest in foreign equity securities, and may have exposure to
foreign currencies through its investment in these securities, its direct
holdings of foreign currencies or through its use of foreign currency exchange
contracts for the purchase or sale of a fixed quantity of foreign currency at a
future date.
When adverse market, financial or political conditions warrant, the Portfolio
may depart from its principal investment strategies for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
The Portfolio may invest up to 10% of its assets in high yielding debt
securities rated below investment grade ("junk bonds").
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks. The
price of growth stocks is also subject to the risk that the stock price of one
or more companies will fall or will fail to appreciate as anticipated by the
Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
FIXED INCOME RISKS: 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
<PAGE>
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investment characteristics, and may be speculative. The risk that an issuer or
guarantor of a fixed income security or counterparty to the Portfolio's fixed
income transaction is unable to meets its financial obligations is particularly
significant for this Portfolio because this Portfolio invests a portion of its
assets in "junk bonds" (i.e., securities rated below investment grade). Junk
bonds are issued by companies with questionable credit strength and,
consequently, are considered to be speculative in nature and may be subject to
greater market fluctuations than investment grade fixed-income securities.
FOREIGN SECURITIES RISKS: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The bar chart which follows illustrates the Portfolio's annual total return for
1998, the Portfolio's first full year of operations. The table which follows
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. In addition, holders of variable insurance
contracts representing interests in the Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses and if reflected
the results would be reduced. The inception date for the Portfolio is May 1,
1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
24.11%
1998
Best quarter: Worst quarter:
21.36% (1998 4th Quarter) (17.35)% (1997 4th Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
MFS Research Portfolio 24.11% 24.41%
S&P 500 Index* 28.58% 31.63%
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS has been the Adviser to the Portfolio since it commenced
operations. MFS is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States, Massachusetts
Investors Trust. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
A committee of investment research analysts selects portfolio securities for
the Portfolio. This committee includes investment analysts employed not only by
MFS, but also by MFS International (U.K.) Limited, a wholly owned subsidiary
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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of MFS. The committee allocates the Portfolio's assets among various
industries. Individual analysts then select what they view as the securities
best suited to achieve the Portfolio's investment objective within their
assigned industry responsibility.
<PAGE>
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MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term capital appreciation by investing
primarily in equity securities of emerging country issuers.
THE INVESTMENT STRATEGY
The Portfolio is a non-diversified Portfolio that invests primarily in equity
securities of companies located in emerging markets countries. Such equity
securities may include common stocks, preferred stocks, convertible securities,
depositary receipts, rights and warrants. The Adviser focuses on
growth-oriented companies in emerging market countries that it believes have
strong developing economies and increasingly sophisticated markets. The
Portfolio generally invests only in emerging markets countries whose currencies
are freely convertible into United States dollars.
A Portfolio may be considered to be "non-diversified" for federal securities
law purposes because it invests in a limited number of securities. In all
cases, the Portfolio intends to be diversified for tax purposes so that it can
qualify as a regulated investment company.
For purposes of this Portfolio, an emerging market country security is defined
as a security of an issuer having one or more of the following characteristics:
o Its principal securities trading market is in an emerging market country;
o alone or on a consolidated basis, at least 50% of its revenues are derived
from goods produced, sales made or services performed in emerging market
countries; and
o it is organized under the laws of or has a principal office in an emerging
market country.
The Adviser's investment approach combines top-down country allocation with
bottom-up stock selection.
In a "top-down" approach, country allocations are made based on forecasts of
stock market trends. In a "bottom-up" approach, securities are reviewed and
chosen individually.
The Portfolio may invest to a lesser extent in corporate or government-issued
or guaranteed debt securities of emerging markets countries, including debt
securities that are rated or considered to be below investment grade ("junk
bonds"). The Portfolio also may, to a lesser extent, invest in equity or debt
securities (including "junk bonds") of corporate or governmental issuers
located in industrialized countries, foreign currency or investment funds and
supranational entities such as the World Bank. In addition, the Portfolio may
utilize forward foreign currency contracts, options and futures contracts and
swap transactions.
When market or financial conditions warrant, the Portfolio may invest in
certain short- and medium-term fixed income securities of issuers other than
emerging market issuers and may invest without limitation in high quality money
market instruments for temporary or defensive purposes. Such investment
strategies are inconsistent with the Portfolio's investment objectives and
could result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISKS: 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
---------------------------------------------------- EQ Advisors Trust
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may take more time for trades to clear and settle. In addition, foreign
investments can be adversely affected by: unfavorable currency exchange rates
(relative to the U.S. dollar for securities denominated in a foreign
currencies); inadequate or inaccurate information about foreign companies;
higher transaction, brokerage and custody costs; adverse changes in foreign
economic and tax policies; and foreign government instability, war or other
adverse political or economic actions. Other specific risks of investing in
foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines. The Year 2000 problem may also be especially acute in emerging
market countries, which also may adversely affect the value of the
Portfolio's investments.
EURO RISK: The Portfolio invests in securities issued by European issuers
that that may be adversely impacted by the introduction of the "Euro" as a
common currency in 11 European Monetary Union member states. The Euro may
result in various legal and accounting differences, tax treatments, the
creation and implementation of suitable clearing and settlement systems
and other operational problems, that may cause market disruptions that
could adversely affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory practices and requirements as are U.S. companies, which could
adversely affect their value.
DERIVATIVES RISK: The Portfolio's investments in derivatives can
significantly increase the Portfolio's exposure to market risk or credit
risk of the counterparty. Derivatives also involve the risk of mispricing
or improper valuation and the risk that changes in value of the derivative
may not correlate perfectly with the relevant assets, rates and indices.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult
(or impossible) to sell at the time and at the price the seller would like
which may cause the Portfolio to lose money or be prevented from earning
capital gains.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100%
per year. Higher portfolio turnover (e.g., over 100% per year) will cause
the Portfolio to incur additional transaction costs and may result in
higher taxable gains that could be passed through to shareholders.
NON-DIVERSIFICATION RISK: Since a relatively high percentage of the
Portfolio's assets may be invested in the securities of a limited number
of issuers, some of which may be within the same industry, the securities
of the Portfolio may be more sensitive to changes in the market value of a
single issuer or industry or to risks associated with a single economic,
political or regulatory event than a diversified portfolio.
FIXED INCOME RISKS: 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
<PAGE>
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are regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative. The risk that an issuer or guarantor of a fixed income security or
counterparty to the Portfolio's fixed income transaction is unable to meets its
financial obligations is particularly significant for this Portfolio because
this Portfolio invests a portion of its assets in "junk bonds" (i.e.,
securities rated below investment grade). Junk bonds are issued by companies
with questionable credit strength and, consequently, are considered to be
speculative in nature and may be subject to greater market fluctuations than
investment grade fixed-income securities.
PORTFOLIO PERFORMANCE
The bar chart which follows illustrates the Portfolio's annual total return for
1998, the Portfolio's first full year of operations. The table which follows
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. In addition, holders of variable insurance
contracts representing interests in the Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses and if reflected
the results would be reduced. The inception date for the Portfolio is August
20, 1997.
CALENDAR YEAR ANNUAL TOTAL RETURN
1998
(27.10)%
Best quarter: Worst quarter:
14.56% (1998 4th Quarter) (22.14)% (1998 2nd Quarter)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE YEAR INCEPTION
<S> <C> <C>
Morgan Stanley Emerging Markets
Equity Portfolio (27.10)% (32.69)%
MSCI Emerging Markets Free* (25.34)% (28.92)%
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MORGAN STANLEY ASSET MANAGEMENT ("MSAM"), 1221 Avenue of the Americas, New
York, NY 10020. MSAM has been the Adviser to the Portfolio since the Portfolio
commenced operations. MSAM conducts a worldwide investment management business,
providing a broad range of portfolio management services to customers in the
United States and abroad. MSAM serves as an investment adviser to numerous
open-end and closed-end investment companies. On December 1, 1998, Morgan
Stanley Asset Management Inc. changed its name to Morgan Stanley Dean Witter
Investment Management Inc. but continues to do business in certain instances
using the name Morgan Stanley Asset Management.
---------------------------------------------------- EQ Advisors Trust
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The Portfolio Managers, responsible for the day to day management of the
Portfolio since the Portfolio commenced operations, are: ROBERT MEYER, a
Managing Director of MSAM and Morgan Stanley & Co. Incorporated, who is head of
MSAM's Emerging Markets Equity Group and who joined MSAM in 1989; and ANDY
SKOV, a Principal of MSAM and Morgan Stanley & Co. Incorporated who joined MSAM
in 1994.
<PAGE>
3
More information on principal risks
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43
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Risk is the chance that you will lose money on your investment or that it will
not earn as much as you expect. In general, the greater the risk, the more
money your investment can earn for you and the more you can lose. Like other
investment companies, the value of each Portfolio's shares may be affected by
the Portfolio's investment objective(s), principal investment strategies and
particular risk factors. Consequently, each Portfolio may be subject to
different principal risks. Some of the principal risks of investing in the
Portfolios are discussed below. However, other factors may also affect each
Portfolio's net asset value.
There is no guarantee that a Portfolio will achieve its investment objective(s)
or that it will not lose principal value.
GENERAL INVESTMENT RISKS: Each Portfolio is subject to the following risks:
ASSET CLASS RISK: There is the possibility that the returns from the types of
securities in which a Portfolio invests will underperform returns from the
various general securities markets or different asset classes. Different types
of securities tend to go through cycles of outperformance and underperformance
in comparison to the general securities markets.
MARKET RISK: Each Portfolio's share price moves up and down over the short term
in reaction to stock or bond market movements. This means that you could lose
money over short periods, and perhaps over longer periods during extended
market downturns.
SECURITY SELECTION RISK: The Advisers for each Portfolio rely on the insights
of different specialists in making investment decisions based on each
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.
YEAR 2000 RISK: Like other mutual funds, financial and business organizations
and individuals around the world, the Trust and its Portfolios could be
adversely affected if the computer systems used by the Advisers, other service
providers, or persons with whom they deal, do not properly process and
calculate date-related information and data dated on and after January 1, 2000.
This possibility is commonly known as the "Year 2000 Problem." Virtually all
operations of the Trust and its Portfolios are computer reliant. The Manager,
Advisers, administrator, transfer agent, distributors and custodian have
informed the Trust that they are actively taking steps to address the Year 2000
Problem with regard to their respective computer systems and the interfaces
between their respective computer systems. The Trust is also taking measures to
obtain assurances from necessary persons that comparable steps are being taken
by the key service providers to the Trust's Advisers, administrator, transfer
agent, distributors, and custodian. There can be no assurance that the Trust
and the Portfolios' key service providers will be Year 2000 compliant. If not
adequately addressed, the Year 2000 Problem could result in the inability of
the Trust to perform its mission critical functions, including trading and
settling trades of Portfolio securities, pricing of portfolio securities and
processing shareholder transactions, and the net asset value of its Portfolios'
shares may be materially affected.
In addition, because the Year 2000 Problem affects virtually all issuers, the
companies or entities in which the Portfolios may invest also could be
adversely impacted by the Year 2000 Problem. For example, issuers may incur
substantial costs to address the Year 2000 problem. The extent of such impact
cannot be predicted and there can be no assurances that the Year 2000 Problem
will not have an adverse effect on the issuers whose securities are held by the
Portfolios. The Advisers have assured the Trust that they consider such issues
in making investment decisions for the Portfolios. Furthermore, certain of the
Portfolios make international investments thereby exposing these Portfolios to
operations, custody and settlement processes outside the United States.
<PAGE>
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In many countries outside the United States the Year 2000 Problem has not been
adequately addressed and concerns have been raised that capital flight, among
other issues, may be triggered by full disclosure of the Year 2000 Problem on
countries outside the United States. Additional information on the impact of
the Year 2000 Problem on emerging market countries is provided in this section,
under "FOREIGN SECURITIES RISKS-EMERGING MARKET RISK."
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.
Like bonds, 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 RISKS: 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:
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, which involve a promise by a third party to honor an obligation to
the Portfolio. Credit risk is particularly significant for the Portfolios
that invest a portion of their assets in "junk bonds" or lower-rated
securities.
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.
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MORTGAGE-BACKED SECURITIES RISK: In the case of mortgage-backed
securities, rising interest rates tend to extend the term to maturity of
the securities, making them even more susceptible to interest rate
changes. When interest rates drop, not only can the value of fixed income
securities drop, but the yield can drop, particularly where the yield on
the fixed income securities is tied to changes in interest rates, such as
adjustable mortgages. Also when interest rates drop, the holdings of
mortgage-backed securities by a Portfolio can reduce returns if the owners
of the underlying mortgages pay off their mortgages sooner than
anticipated since the funds prepaid will have to be reinvested at the then
lower prevailing rates. This is known as prepayment risk. When interest
rates rise, the holdings of mortgage-backed securities by a Portfolio can
reduce returns if the owners of the underlying mortgages pay off their
mortgages later than anticipated. This is known as extension risk.
INVESTMENT GRADE SECURITIES RISK: Debt securities are rated by national
bond ratings agencies. Securities rated BBB by S&P or Baa by Moody's are
considered investment grade securities, but are somewhat riskier than
higher rated obligations because they are regarded as having only an
adequate capacity to pay principal and interest, and are considered to
lack outstanding investment characteristics and may be speculative.
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 RISKS: A Portfolio's investments in foreign securities,
including depositary receipts, involve risks not associated with investing in
U.S. securities and can affect a Portfolio's performance. Foreign markets,
particularly emerging markets, may be less liquid, more volatile and subject to
less government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. The specific risks of investing in foreign securities, among
others, include:
CURRENCY RISK: The risk that changes in currency exchange rates will
negatively affect securities denominated in, and/or receiving revenues in,
foreign currencies. Adverse changes in currency exchange rates (relative
to the U.S. dollar) may erode or reverse any potential gains from a
Portfolio's investment in securities denominated in a foreign currency or
may widen existing losses.
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets 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
markets countries may be required to establish special custody or other
arrangements before investing.
The YEAR 2000 PROBLEM may also be especially acute in emerging market
countries. Many emerging market
---------------------------------------------------- EQ Advisors Trust
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countries are currently lagging behind more developed countries in their
Year 2000 preparedness because they lack the financial resources to
undertake the necessary remedial actions. A lack of Year 2000 preparedness
may adversely affect the health, security and economic well-being of
emerging market countries and could, obviously, adversely affect the value
of a Portfolio's investments in emerging market countries. More
information on the Year 2000 Problem is provided in this section, under
"GENERAL INVESTMENT RISKS-YEAR 2000 RISK."
EURO RISK: Certain of the Portfolios 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.
The consequences of the Euro conversion for foreign exchange rates,
interest rates and the value of European securities eligible for purchase
by the Portfolios are presently unclear and it is not possible to predict
the eventual impact of the Euro implementation plan on the Portfolios.
There are a number of significant risks associated with EMU. Monetary and
economic union on this scale has never been attempted before. There is a
significant degree of uncertainty as to whether participating countries
will remain committed to EMU in the face of changing economic conditions.
The conversion may adversely affect a Portfolio if the Euro does not take
effect as planned or if a participating state withdraws from the EMU. Such
actions may adversely affect the value and/or increase the volatility of
securities held by the Portfolios.
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.
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INDEX-FUND RISK: The BT Equity 500 Index, BT Small Company Index and BT
International Equity Index Portfolios are not actively managed (which involves
buying and selling of securities based upon economic, financial and market
analysis and investment judgment). Rather, the Portfolios utilize a "passive"
or "indexing" investment approach and attempt to duplicate the investment
performance of the particular index the Portfolio is tracking (i.e., S&P 500
Index, Russell 2000 Index or MSCI EAFE Index) through statistical procedures.
Therefore, the Portfolios will invest in the securities included in the
relevant index or substantially identical securities regardless of market
trends. The Portfolios cannot modify their investment strategies to respond to
changes in the economy, which means they may be particularly susceptible to a
general decline in the U.S. or global stock market segment relating to the
relevant index.
LEVERAGING RISK: When a Portfolio is borrowing money or otherwise leveraging
its portfolio, the value of an investment in that Portfolio will be more
volatile and all other risks will tend to be compounded. All of the Portfolios
may take on leveraging risk by investing in collateral from securities loans
and by borrowing money to meet redemption requests.
LIQUIDITY RISK: Certain securities held by a Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like. A
Portfolio may have to hold these securities longer than it would like and may
forego other investment opportunities. There is the possibility that a
Portfolio may lose money or be prevented from earning capital gains if it can
not sell a security at the time and price that is most beneficial to the
Portfolio. Portfolios that invest in privately-placed securities, high-yield
bonds, mortgage-backed securities or foreign or emerging markets 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.
NON-DIVERSIFICATION RISK: The Lazard Small Cap Value and Morgan Stanley
Emerging Markets Equity are classified as "non-diversified" investment
companies, which means that the proportion of each Portfolio's assets that may
be invested in the securities of a single issuer is not limited by the 1940
Act. Since a relatively high percentage of each non-diversified Portfolio's
assets may be invested in the securities of a limited number of issuers, some
of which may be within the same industry, the securities of each Portfolio may
be more sensitive to changes in the market value of a single issuer or
industry. The use of such a focused investment strategy may increase the
volatility of a Portfolio's investment performance, as the Portfolio may be
more susceptible to risks associated with a single economic, political or
regulatory event than a diversified portfolio. If the securities in which the
Portfolio invests perform poorly, the Portfolio could incur greater losses than
it would have had it been invested in a greater number of securities. However
to qualify as a regulated investment company ("RIC") under the Internal Revenue
Code of 1986, as amended (the "Code") and receive pass through tax treatment,
each Portfolio at the close of each fiscal quarter, may not have more than 25%
of its total assets invested in the securities of any one issuer (excluding
U.S. Government obligations) and with respect to 50% of its assets, (i) may not
have more than 5% of its total assets invested in the securities of any one
issuer and (ii) may not own more than 10% of the outstanding voting securities
of any one issuer. Each non-diversified Portfolio intends to qualify as a RIC.
PORTFOLIO TURNOVER RISK: Consistent with their investment policies, the
Portfolios also will purchase and sell securities without regard to the effect
on portfolio turnover. Higher portfolio turnover (e.g., over 100% per year)
will cause a Portfolio to incur additional transaction costs and may result in
taxable gains being passed through to shareholders.
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
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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48
- --------------------------------------------------------------------------------
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 are those of larger companies.
Consequently, the prices of small company stocks tend to rise and fall in value
more frequently than the stocks of larger companies. Although investing in
small-cap and mid-cap companies offers potential for above-average returns, the
companies may not succeed and the value of their stock could decline
significantly.
VALUE INVESTING RISK: Value investing attempts to identify strong companies
selling at a discount from their perceived true worth. Advisers using this
approach generally select stocks at prices, in their view, that are temporarily
low relative to the company's earnings, assets, cash flow and dividends. Value
investing is subject to the risk that the stocks' intrinsic value may never be
fully recognized or realized by the market, or their prices may go down. In
addition, there is the risk that a stock judged to be undervalued may actually
be appropriately priced. Value investing generally emphasizes companies that,
considering their assets and earnings history, are attractively priced and may
provide dividend income.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
<PAGE>
4
Management of the Trust
----------
49
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This section gives you information on the Trust, the Manager and the Advisers
for the Portfolios. More detailed information concerning each of the Advisers
and portfolio managers is included in the description for each Portfolio in the
section "About The Investment Portfolios."
THE TRUST
The Trust is organized as a Delaware business trust and is registered with the
Securities and Exchange Commission ("SEC") as an open-end management investment
company. The Trust issues shares of beneficial interest that are currently
divided among twenty-five 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
EQ Financial Consultants, Inc., 1290 Avenue of the Americas, New York, New York
10104, serves as the Manager of the Trust, subject to the supervision and
direction of the Board of Trustees. The Manager has overall responsibility for
the general management and administration of the Trust.
In the exercise of that responsibility, the Manager, without obtaining
shareholder approval but subject to the review and approval by the Board of
Trustees, may: (i) select the Advisers for the Portfolios; (ii) enter into 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, oversees compliance by the
Trust with various federal and state statutes, 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 and administrator.
The Manager is an investment adviser registered under the 1940 Act and a
broker-dealer registered under the Securities Exchange Act of 1934, as amended.
EQ Financial Consultants, Inc. is a wholly-owned subsidiary of Equitable.
During 1999, the Manager plans to change its name to AXA Advisors, Inc.
<PAGE>
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50
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The table below shows the annual rate of the management fees (as a percentage
of each Portfolio's average daily net assets) that the Manager received in
1998 for managing each of the Portfolios and the rate of the management fees
waived by the Manager in 1998 in accordance with the provisions of the Expense
Limitation Agreement, as defined directly below, between the Manager and the
Trust.
MANAGEMENT FEES PAID BY THE PORTFOLIOS TO EQ FINANCIAL CONSULTANTS, INC. IN
1998
<TABLE>
<CAPTION>
ANNUAL RATE OF
RATE FEES
PORTFOLIOS RECEIVED WAIVED
<S> <C> <C>
BT Equity 500 Index 0.00% 0.25%
BT International Equity Index 0.00% 0.35%
BT Small Company Index 0.00% 0.25%
EQ/Putnam Growth & Income 0.36% 0.19%
Value
EQ/Putnam International Equity 0.44% 0.26%
EQ/Putnam Investors Growth 0.31% 0.24%
JPM Core Bond 0.05% 0.40%
Lazard Large Cap Value 0.21% 0.34%
Lazard Small Cap Value 0.62% 0.18%
MFS Emerging Growth 0.36% 0.19%
Companies
MFS Research 0.35% 0.20%
Morgan Stanley Emerging 0.33% 0.82%
Markets Equity
</TABLE>
MFS Growth with Income did not commence operations during 1998. The table below
shows the annual rate of the management fee (as a percentage of the Portfolio's
average daily net assets) that the Manager is entitled to receive in 1999 for
managing MFS Growth with Income.
ANNUAL RATE OF MANAGEMENT FEE
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL RATE
<S> <C>
MFS Growth with Income 0.55%
</TABLE>
EXPENSE LIMITATION AGREEMENT
In the interest of limiting expenses of each Portfolio, the Manager has entered
into an expense limitation agreement with the Trust with respect to each
Portfolio ("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 fees:
<PAGE>
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51
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MANAGEMENT EXPENSE LIMITATION FEES
<TABLE>
<CAPTION>
AMOUNT EXPENSES
LIMITED TO (% OF
PORTFOLIOS DAILY NET ASSETS)
<S> <C>
BT Equity 500 Index 0.30%
BT International Equity Index 0.55%
BT Small Company Index 0.35%
EQ/Putnam Growth & Income Value 0.60%
EQ/Putnam International Equity 0.95%
EQ/Putnam Investors Growth 0.60%
JPM Core Bond 0.55%
Lazard Large Cap Value 0.65%
Lazard Small Cap Value 0.95%
MFS Emerging Growth Companies 0.60%
MFS Growth with Income 0.60%
MFS Research 0.60%
Morgan Stanley Emerging Markets 1.50%
Equity Portfolio
</TABLE>
Each Portfolio may at a later date reimburse to the Manager the management fees
waived or limited and other expenses assumed and paid by the Manager pursuant
to the Expense Limitation Agreement provided such Portfolio has reached a
sufficient asset size to permit such reimbursement to be made without causing
the total annual expense ratio of each Portfolio to exceed the percentage
limits stated above. Consequently, no reimbursement by a Portfolio will be made
unless: (i) the Portfolio's assets exceed $100 million; (ii) the Portfolio's
total annual expense ratio is less than the respective percentages stated
above; and (iii) the payment of such reimbursement has been approved by the
Trust's Board of Trustees on a quarterly basis.
THE ADVISERS
Each Portfolio has an Adviser that furnishes an investment program for the
Portfolio pursuant to an investment advisory agreement with the Manager. Each
Adviser makes investment decisions on behalf of the Portfolio, places all
orders for the purchase and sale of investments for the Portfolio's account
with brokers or dealers selected by such Adviser and may perform certain
limited related administrative functions in connection therewith.
The Manager has received an exemptive order from the SEC that permits the
Manager, subject to certain conditions, including board approval, and without
the approval of shareholders to: (a) employ a new Adviser or Advisers for any
Portfolio pursuant to the terms of a new Advisory Agreement, in each case
either as a replacement for an existing Adviser or as an additional Adviser;
(b) change the terms of any Advisory Agreement; and (c) continue the employment
of an existing Adviser on the same advisory contract terms where a contract has
been assigned because of a change in control of the Adviser. In such
circumstances, shareholders would receive notice of such action, including the
information concerning the Adviser that normally is provided in the Prospectus.
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, Chase Global Funds Services Company ("Administrator")
assists the Manager in the performance of its administrative responsibilities
to the Trust and provides the Trust with other necessary administrative, fund
accounting and compliance services. In addition, the Administrator makes
available the office space, equipment, personnel and facilities required to
provide such services to the Trust. For these services, the Trust pays the
Administrator a monthly fee at the annual rate of .0525 of 1% of the total
Trust assets, plus $25,000 for each Portfolio, until the total Trust assets
reach $2.0 billion, and when the total Trust assets exceed $2.0 billion: .0425
of 1% of the next $0.5 billion of the total Trust assets; .035 of 1% of the
next $2.0 billion of the total Trust assets; .025 of 1% of the next $1.0
billion of the total Trust assets; .015 of 1% of the next $2.5 billion of the
total Trust assets; .01 of 1% of
---------------------------------------------------- EQ Advisors Trust
<PAGE>
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52
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the total Trust assets in excess of $8.0 billion; provided, however, that the
annual fee payable to Chase with respect to any Portfolio which commenced
operations after July 1, 1997 and whose assets do not exceed $200 million shall
be computed at the annual rate of .0525% of 1% of the Portfolio's total assets
plus $25,000.
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, the Manager and each Adviser may consider
research and brokerage services furnished to either company and their
affiliates. 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.
BROKERAGE TRANSACTIONS WITH AFFILIATES
To the extent permitted by law, the Trust may engage in securities and other
transactions with entities that may be affiliated with the Manager or the
Advisers. The 1940 Act generally prohibits the Trust from engaging in principal
securities transactions with an affiliate of the Manager or Advisers unless
pursuant to an exemptive order from the SEC. For these purposes, however, the
Trust has considered this issue and believes that a broker-dealer affiliate of
an Adviser to one Portfolio should not be treated as an affiliate of the
Adviser to another Portfolio for which such Adviser does not provide investment
advice. 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
----------
53
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The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares and Class IB shares. EQ Financial Consultants, Inc., the Trust's
Manager, serves as one of the distributors for the Class IB shares of the Trust
offered by this Prospectus as well as one of the distributors for the Class IA
shares. Equitable Distributors, Inc. serves as the other distributor for the
Class IB shares of the Trust as well as the Class IA shares. Both classes of
shares are offered and redeemed at their net asset value without any sales
load.
The Trust has adopted a Distribution Plan under Rule 12b-1 under the 1940 Act
for the Trust's Class IB shares. Under the Class IB Distribution Plan the Class
IB shares of the Trust pay each of the distributors an annual fee to compensate
them for promoting, selling and servicing shares of the Portfolios. The annual
fees equal 0.25% of each Portfolio's average daily net assets. Over time, the
fees will increase your cost of investing and may cost you more than other
types of charges.
<PAGE>
6
Purchase and redemption
- ----------
54
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The price at which a purchase or redemption is effected is based on the next
calculation of net asset value after an order is placed by an insurance
company or qualified retirement plan investing in or redeeming from the Trust.
Net asset value per share is calculated for purchases and redemption of shares
of each Portfolio by dividing the value of total Portfolio assets, less
liabilities (including Trust expenses and class related expenses, which are
accrued daily), by the total number of outstanding shares of that Portfolio.
The net asset value per share of each Portfolio is determined each business
day at 4:00 p.m. Eastern time. Net asset value per share is not calculated on
days on which the New York Stock Exchange is closed for trading.
Foreign securities depositary receipts are valued at the close of business in
the applicable foreign country. Consequently, 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.
All shares are purchased and redeemed in accordance with the Trust's Amended
and Restated Declaration of Trust and By-Laws. Sales and redemptions of shares
of the same class by the same shareholder on the same day will be netted for
each Portfolio. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders.
The Trust may suspend redemption, if permitted by the 1940 Act, for any period
during which the New York Stock Exchange is closed or during which trading is
restricted by the SEC or the SEC declares that an emergency exists. Redemption
may also be suspended during other periods permitted by the SEC for the
protection of the Trust's shareholders. If the Board of Trustees determines
that it would be detrimental to the best interest of the Trust's remaining
shareholders to make payment in cash, the Trust may pay redemption proceeds in
whole or in part by a distribution-in-kind of readily marketable securities.
<PAGE>
7
How assets are valued
----------
55
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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 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 dollars equivalents at
current exchange rates.
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
- ----------
56
- --------------------------------------------------------------------------------
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
figuring out 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. The Administrator and the Manager therefore carefully
monitor compliance with all of the regulated investment company rules and
variable insurance contract investment diversification rules.
<PAGE>
9
Prior performance of each adviser
----------
57
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The following table provides information concerning the historical performance
of another registered investment company (or series) or other institutional
private accounts managed by each Adviser that has investment objectives,
policies, strategies and risks substantially similar to those of the
respective Portfolio(s) of the Trust for which it serves as Adviser. The data
is provided to illustrate the past performance of each Adviser in managing a
substantially similar investment vehicle as measured against specified market
indices. This data does not represent the past performance of any of the
Portfolios or the future performance of any Portfolio or its Adviser.
Consequently, potential investors should not consider this performance data as
an indication of the future performance of any Portfolio of the Trust or of
its Adviser and should not confuse this performance data with performance data
for each of the Trust's Portfolios, which is shown for each Portfolio under
the caption "ABOUT THE INVESTMENT PORTFOLIOS."
Each Adviser's performance data shown below for other registered investment
companies (or series thereof) was calculated in accordance with standards
prescribed by the SEC for the calculation of average annual total return
information for registered investment companies. Average annual total return
reflects changes in share prices and reinvestment of dividends and
distributions and is net of fund expenses. In each such instance, the share
prices and investment returns will fluctuate, reflecting market conditions as
well as changes in company-specific fundamentals of portfolio securities.
Composite performance data relating to the historical performance of
institutional private accounts managed by the relevant Adviser was calculated
on a total return basis and includes all losses. (As specified below, this
composite performance data is provided only for the J.P. Morgan Active Fixed
Income Composite). The total returns for the J.P. Morgan Active Fixed Income
Composite ("Composite") reflect the deduction of investment advisory fees,
brokerage commissions and execution costs paid by J.P. Morgan's institutional
private accounts, without provision for federal or state income taxes.
Custodial fees, if any, were not included in the calculation. The Composite
includes all actual, fee-paying, discretionary institutional private accounts
managed by J.P. Morgan that have investment objectives, policies, strategies
and risks substantially similar to those of the relevant Portfolio. Securities
transactions are accounted for on the trade date and accrual accounting is
utilized. Cash and equivalents are included in performance returns. The
institutional private accounts that are included in the Composite are not
subject to the same types of expenses to which the relevant Portfolio is
subject or to the diversification requirements, specific tax restrictions and
investment limitations imposed on the Portfolio by the 1940 Act or Subchapter
M of the Internal Revenue Code. Consequently, the performance results for the
Composite could have been adversely affected if the institutional private
accounts included in the Composite had been regulated as investment companies
under the federal securities laws.
The major difference between the SEC prescribed calculation of average annual
total returns for registered investment companies or (series thereof) and
total returns for composite performance is that average annual total returns
reflects all fees and charges applicable to the registered investment company
in question and the total return calculation for the Composite reflects only
those fees and charges described in the paragraph directly above.
The performance results for the registered investment companies or Composite
presented below are subject to 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
Portfolio below will be subject to charges and expenses relating to such
insurance contracts. The performance results presented above 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>
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58
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ANNUAL RATES OF RETURN OF OTHER FUNDS OR ACCOUNTS MANAGED BY ADVISERS
AS OF 12/31/98
The name of the other fund or account managed by the Adviser is shown in BOLD.
The name of the Trust Portfolio is shown in (parentheses). The name of the
benchmark is shown in italics.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
1 5 10 SINCE INCEPTION
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT PORTFOLIO) YEAR YEARS YEARS INCEPTION DATE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Benchmark
- ----------------------------------------------------------------------------------------------------------------------------
BT ADVISORS FUNDS - EAFE EQUITY INDEX FUND - INSTITUTIONAL CLASS (BT INTERNATIONAL EQUITY INDEX PORTFOLIO)
19.81% N/A N/A 9.69% 1/24/96
- ----------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index5 20.00% N/A N/A 9.70%
- ----------------------------------------------------------------------------------------------------------------------------
BT ADVISORS FUNDS - SMALL CAP INDEX FUND-INSTITUTIONAL CLASS (BT SMALL COMPANY INDEX PORTFOLIO)
(2.60)% N/A N/A 11.58% 7/10/96
- ----------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index4 (2.54)% N/A N/A 11.85%
- ----------------------------------------------------------------------------------------------------------------------------
BT INSTITUTIONAL FUNDS - EQUITY 500 INDEX FUND - INSTITUTIONAL CLASS (BT EQUITY 500 INDEX PORTFOLIO)
28.75% 24.05% N/A 21.56% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index3 28.57% 24.06% N/A 21.61%
- ----------------------------------------------------------------------------------------------------------------------------
J.P. MORGAN ACTIVE FIXED INCOME COMPOSITE (JPM CORE BOND PORTFOLIO)
6.90% 7.20% 9.40% 5/31/77
- ----------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Broad Investment Grade Bond Index1 8.70% 7.30% 9.30%
- ----------------------------------------------------------------------------------------------------------------------------
THE LAZARD FUNDS, INC. - LAZARD EQUITY PORTFOLIO (LAZARD LARGE CAP VALUE PORTFOLIO)
17.31% 20.36% 16.83% 6/87
- ----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index3 28.57% 24.06% 19.21%
- ----------------------------------------------------------------------------------------------------------------------------
THE LAZARD FUNDS, INC. - LAZARD SMALL CAP PORTFOLIO (LAZARD SMALL CAP VALUE PORTFOLIO)
(12.62)% 11.45% N/A 16.10% 10/1/91
- ----------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index4 ( 2.54)% 11.86% N/A 13.89%
- ----------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS INVESTORS TRUST2 (MFS GROWTH WITH INCOME PORTFOLIO)
22.95% 22.97% 19.15% 7/15/24
- ----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index3 28.57% 24.06% 19.21%
- ----------------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH FUND6 (MFS EMERGING GROWTH COMPANIES PORTFOLIO)
23.56% 19.66% 22.94% 12/29/86
- ----------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index4 ( 2.54)% 11.86% 12.94%
- ----------------------------------------------------------------------------------------------------------------------------
MFS RESEARCH FUND2, 6 (MFS RESEARCH PORTFOLIO)
22.92% 20.65% 18.44% 10/13/71
- ----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index3 28.57% 24.06% 19.21%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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59
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<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
1 5
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT PORTFOLIO) YEAR YEARS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MORGAN STANLEY INSTITUTIONAL FUND, INC. - EMERGING MARKETS PORTFOLIO7 (MORGAN STANLEY EMERGING MARKETS
EQUITY PORTFOLIO)
(25.40)% (8.20)%
- ----------------------------------------------------------------------------------------------------------------------------
IFC Global Total Return Composite Index8 (21.10)% (8.70)%
- ----------------------------------------------------------------------------------------------------------------------------
PUTNAM GROWTH & INCOME FUND II2 (EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO)
12.46% N/A
- ----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index3 28.57% N/A
- ----------------------------------------------------------------------------------------------------------------------------
PUTNAM INTERNATIONAL GROWTH FUND2 (EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO)
18.95% 13.18%
- ----------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index5 20.00% 9.19%
- ----------------------------------------------------------------------------------------------------------------------------
PUTNAM INVESTORS FUND2 (EQ/PUTNAM INVESTORS GROWTH PORTFOLIO)
35.52% 24.12%
- ----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index3 28.57% 24.06%
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
10 SINCE INCEPTION
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT PORTFOLIO) YEARS INCEPTION DATE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MORGAN STANLEY INSTITUTIONAL FUND, INC. - EMERGING MARKETS PORTFOLIO7 (MORGAN STANLEY EMERGING MARKETS
EQUITY PORTFOLIO)
N/A 3.50% 9/25/92
- ----------------------------------------------------------------------------------------------------------------------------
IFC Global Total Return Composite Index8 N/A 1.90%
- ----------------------------------------------------------------------------------------------------------------------------
PUTNAM GROWTH & INCOME FUND II2 (EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO)
N/A N/A 1/5/95
- ----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index3 N/A 30.51%
- ----------------------------------------------------------------------------------------------------------------------------
PUTNAM INTERNATIONAL GROWTH FUND2 (EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO)
N/A N/A 2/28/91
- ----------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index5 N/A 7.58%
- ----------------------------------------------------------------------------------------------------------------------------
PUTNAM INVESTORS FUND2 (EQ/PUTNAM INVESTORS GROWTH PORTFOLIO)
20.16% 12/1/25
- ----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index3 19.21%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 The Salomon Brothers Broad Investment Grade Bond Index is an unmanaged,
market-weighted index that contains approximately 4,700 individually priced
investment grade bonds. The index does not include fees or operating
expenses and is not available for actual investment. 2 Performance for the
Class A shares. The Class A shares are in many instances subject to a
front-end sales charge of up to 5.75%. Other share classes have different
expenses and their performance will vary.
3 The S&P 500 Index ("S&P 500") is an unmanaged index containing common stocks
of 500 industrial, transportation, utility and financial companies,
regarded as generally representative of the larger capitalization portion
of the United States stock market. The S&P 500 reflects the reinvestment of
income dividends and capital gain distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.
4 The Russell 2000 Index is an unmanaged index (with no defined investment
objective) composed of approximately 2,000 small-capitalization stocks and
includes reinvestments of dividends. The index does not include fees or
operating expenses and is not available for actual investment. It is
compiled by the Frank Russell Company.
5 The Morgan Stanley Capital International EAFE Index ("EAFE Index") is an
unmanaged capitalization-weighted measure of stock markets in Europe,
Australia and the Far East. The returns of the EAFE Index assume dividends
are reinvested net of withholding tax and do not reflect any fees or
operating expenses. The index is not available for actual investment.
6 The results for the MFS Research Fund (Class A shares) and the MFS Emerging
Growth Fund (Class B shares) do not reflect sales charges that may be
imposed on the such shares.
7 Performance for the Class A shares of the Morgan Stanley Institutional
Fund, Inc. - Emerging Markets Portfolio. The Class B shares of the Morgan
Stanley Institutional Fund, Inc. - Emerging Markets Portfolio are subject
to a Rule 12b-1 fee equal to 0.25% of the Portfolio's assets. The expense
ratio of Morgan Stanley Institutional Fund, Inc. - Emerging Markets
Portfolio has been capped at 1.75% since inception.
8 The IFC Global Total Return Composite Index is an unmanaged index of common
stocks and includes developing countries in Latin America, East and South
Asia, Europe, the Middle East and Africa. The Index assumes dividends are
reinvested.
------------------------- EQ Advisors Trust
<PAGE>
10
Financial Highlights
- ----
60
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The financial highlights table is intended to help you understand the Trust's
financial performance since May 1, 1997. The Trust began to offer Class IA
shares for the MFS Emerging Growth Companies and BT International Equity
Portfolios on November 24, 1998. Except for those two Portfolios, the financial
information in the table below for the period May 1, 1997 to December 31, 1998
relates only to the Class IB shares. The financial information relating to both
the Class IA shares and the Class IB shares has been derived from the audited
financial statements of the Trust. These financial statements have been audited
by PricewaterhouseCoopers LLP, independent public accountants.
PricewaterhouseCoopers LLP's report on the Trust's financial statements as of
December 31, 1998 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.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
NET
REALIZED
AND
UNREALIZED
GAIN (LOSS)
NET ASSET ON
VALUE, INVESTMENTS
BEGINNING NET AND FOREIGN
OF INVESTMENT CURRENCY
PERIOD INCOME TRANSACTIONS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BT EQUITY 500 INDEX PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 10.00 $ 0.06 $ 2.45
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- ----------------------------------------------------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 $ 10.00 $ 0.08 $ 1.92
- ----------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 - - -
- ----------------------------------------------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 $ 11.67 $ 0.03 $ 0.31
- ----------------------------------------------------------------------------------------------------------------------------
BT SMALL COMPANY INDEX PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 10.00 $ 0.07 $ (0.30)
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- ----------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 11.52 $ 0.11 $ 1.35
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 $ 10.00 $ 0.06 $ 1.56
- ----------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 10.89 $ 0.05 $ 2.07
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 $ 10.00 $ 0.03 $ 0.93
- ----------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 12.33 $ 0.01 $ 4.46
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 $ 10.00 $ 0.02 $ 2.45
- ----------------------------------------------------------------------------------------------------------------------------
JPM CORE BOND PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 10.00 $ 0.21 $ 0.70
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
DIVIDENDS IN
DIVIDENDS EXCESS OF DISTRIBUTIONS
TOTAL FROM FROM NET NET FROM
INVESTMENT INVESTMENT INVESTMENT REALIZED
OPERATIONS INCOME INCOME GAINS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BT EQUITY 500 INDEX PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 2.51 $ (0.06) - -
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - -
- ----------------------------------------------------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 $ 2.00 $ (0.15) - -
- ----------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 - - - -
- ----------------------------------------------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 $ 0.34 $ (0.17) - -
- ----------------------------------------------------------------------------------------------------------------------------
BT SMALL COMPANY INDEX PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ (0.23) $ (0.07) - $(0.13)
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - -
- ----------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 1.46 $ (0.11) - -
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 $ 1.62 $ (0.06) - $(0.01)
- ----------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 2.12 - - -
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 $ 0.96 $ (0.02) - $(0.01)
- ----------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 4.47 $ (0.01) - -
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 $ 2.47 $ (0.03) - $(0.04)
- ----------------------------------------------------------------------------------------------------------------------------
JPM CORE BOND PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 0.91 $ (0.21) $ (0.01) $(0.11)
- ----------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-----
61
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
DISTRIBUTIONS TOTAL NET ASSET
IN EXCESS OF DIVIDENDS AND VALUE, END OF
REALIZED GAINS DISTRIBUTIONS PERIOD
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
BT EQUITY 500 INDEX PORTFOLIO
- -----------------------------------------------------------------------------------------
Dec. 31, 1998 - $ (0.06) $ 12.45
- -----------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- -----------------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX PORTFOLIO
- -----------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 - $ (0.15) $ 11.85
- -----------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 - - -
- -----------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 - $ (0.17) $ 11.84
- -----------------------------------------------------------------------------------------
BT SMALL COMPANY INDEX PORTFOLIO
- -----------------------------------------------------------------------------------------
Dec. 31, 1998 $ (0.01) $ (0.21) $ 9.56
- -----------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- -----------------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO
- -----------------------------------------------------------------------------------------
Dec. 31, 1998 $ (0.10) $ (0.21) $ 12.77
- -----------------------------------------------------------------------------------------
Dec. 31, 1997 $ (0.03) $ (0.10) $ 11.52
- -----------------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO
- -----------------------------------------------------------------------------------------
Dec. 31, 1998 - - $ 13.01
- -----------------------------------------------------------------------------------------
Dec. 31, 1997 $ (0.04) $ (0.07) $ 10.89
- -----------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH PORTFOLIO
- -----------------------------------------------------------------------------------------
Dec. 31, 1998 - $ (0.01) $ 16.79
- -----------------------------------------------------------------------------------------
Dec. 31, 1997 $ (0.07) $ (0.14) $ 12.33
- -----------------------------------------------------------------------------------------
JPM CORE BOND PORTFOLIO
- -----------------------------------------------------------------------------------------
Dec. 31, 1998 $ (0.01) $ (0.34) $ 10.57
- -----------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- -----------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------
RATIO OF
EXPENSES TO
NET ASSETS, AVERAGE NET
TOTAL RETURN END OF PERIOD ASSETS AFTER
(B) (000'S) WAIVERS (A)(C)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
BT EQUITY 500 INDEX PORTFOLIO
- -----------------------------------------------------------------------------------------
Dec. 31, 1998 25.14% $224,247 0.55%
- -----------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- -----------------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX PORTFOLIO
- -----------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 20.07% $ 48,075 0.84%(1)
- -----------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 - - -
- -----------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 2.94%(b) $ 735 0.59%(a)(1)
- -----------------------------------------------------------------------------------------
BT SMALL COMPANY INDEX PORTFOLIO
- -----------------------------------------------------------------------------------------
Dec. 31, 1998 (2.27)% $ 32,609 0.60%
- -----------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- -----------------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO
- -----------------------------------------------------------------------------------------
Dec. 31, 1998 12.75% $460,744 0.85%
- -----------------------------------------------------------------------------------------
Dec. 31, 1997 16.23% $150,260 0.85%
- -----------------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO
- -----------------------------------------------------------------------------------------
Dec. 31, 1998 19.51% $143,721 1.20%
- -----------------------------------------------------------------------------------------
Dec. 31, 1997 9.58% $ 55,178 1.20%
- -----------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH PORTFOLIO
- -----------------------------------------------------------------------------------------
Dec. 31, 1998 36.27% $175,015 0.85%
- -----------------------------------------------------------------------------------------
Dec. 31, 1997 24.70% $ 39,695 0.85%
- -----------------------------------------------------------------------------------------
JPM CORE BOND PORTFOLIO
- -----------------------------------------------------------------------------------------
Dec. 31, 1998 9.02% $103,326 0.80%
- -----------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- -----------------------------------------------------------------------------------------
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
62
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NET
REALIZED
AND
UNREALIZED
GAIN (LOSS) DIVIDENDS
NET ASSET ON IN
VALUE, INVESTMENTS DIVIDENDS EXCESS OF DISTRIBUTIONS
BEGINNING NET AND FOREIGN TOTAL FROM FROM NET NET FROM
OF INVESTMENT CURRENCY INVESTMENT INVESTMENT INVESTMENT REALIZED
PERIOD INCOME TRANSACTIONS OPERATIONS INCOME INCOME GAINS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
LAZARD LARGE CAP VALUE PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 10.00 $ 0.06 $ 1.94 $ 2.00 $ (0.06) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 10.00 $ 0.02 $ (0.72) $ (0.70) $ (0.03) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES PO TFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 $ 11.92 $ (0.03) $ 4.15 $ 4.12 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 $ 10.00 $ 0.02 $ 2.21 $ 2.23 $ (0.02) - $(0.18)
- -----------------------------------------------------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 $ 14.18 - $ 1.86 $ 1.86 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
MFS RESEARCH PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 11.48 $ 0.04 $ 2.73 $ 2.77 $ (0.04) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 $ 10.00 $ 0.02 $ 1.58 $ 1.60 $ (0.02) - $(0.01)
- -----------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY EMERGING MARKETS QUITY PORTFO IO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 7.96 $ 0.03 $ (2.18) $ (2.15) $ (0.02) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 $ 10.00 $ 0.04 $ (2.06) $ (2.02) $ (0.02) - -
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -----
63
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
DISTRIBUTIONS TOTAL NET ASSET
IN EXCESS OF DIVIDENDS AND VALUE, END OF
REALIZED GAINS DISTRIBUTIONS PERIOD
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LAZARD LARGE CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------
Dec. 31, 1998 - $ (0.06) $ 11.94
- ------------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- ------------------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------
Dec. 31, 1998 - $ (0.03) $ 9.27
- ------------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- ------------------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES PORTFOLIO
- ------------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 - - $ 16.04
- ------------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 $ (0.11) $ (0.31) $ 11.92
- ------------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 - - $ 16.04
- ------------------------------------------------------------------------------------------
MFS RESEARCH PORTFOLIO
- ------------------------------------------------------------------------------------------
Dec. 31, 1998 - $ (0.04) $ 14.21
- ------------------------------------------------------------------------------------------
Dec. 31, 1997 $ (0.09) $ (0.12) $ 11.48
- ------------------------------------------------------------------------------------------
MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------
Dec. 31, 1998 - $ (0.02) $ 5.79
- ------------------------------------------------------------------------------------------
Dec. 31, 1997 - $ (0.02) $ 7.96
- ------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------
RATIO OF
EXPENSES TO
NET ASSETS, AVERAGE NET
TOTAL RETURN END OF PERIOD ASSETS AFTER
(B) (000'S) WAIVERS (A)(C)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LAZARD LARGE CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------
Dec. 31, 1998 20.01% $ 74,588 0.90%
- ------------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- ------------------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------
Dec. 31, 1998 ( 7.03)% $ 51,046 1.20%
- ------------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- ------------------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES PORTFOLIO
- ------------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 34.57% $461,307 0.85%(1)
- ------------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 22.42% $ 99,317 0.85%(a)
- ------------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 13.12% $ 5,978 0.60%(a)(1)
- ------------------------------------------------------------------------------------------
MFS RESEARCH PORTFOLIO
- ------------------------------------------------------------------------------------------
Dec. 31, 1998 24.11% $407,619 0.85%
- ------------------------------------------------------------------------------------------
Dec. 31, 1997 16.07% $114,754 0.85%
- ------------------------------------------------------------------------------------------
MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------
Dec. 31, 1998 (27.10)% $ 41,359 1.81%
- ------------------------------------------------------------------------------------------
Dec. 31, 1997 (20.16)% $ 21,433 1.75%
- ------------------------------------------------------------------------------------------
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
64
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET RATIO OF NET
RATIO OF EXPENSES TO INVESTMENT INCOME TO INVESTMENT INCOME TO
AVERAGE NET ASSETS AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO
BEFORE WAIVERS (A)(C) AFTER WAIVERS (A)(C) BEFORE WAIVERS (A)(C) TURNOVER RATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
**BT EQUITY 500 INDEX PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 0.83% 1.22% 0.94% 2%
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
**BT INTERNATIONAL EQUITY INDEX PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 1.49%(1) 1.11%(1) 0.46%(1) 3%
- -----------------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 1.24%(a)(1) 1.36%(a)(1) 0.71%(a)(1) 3%
- -----------------------------------------------------------------------------------------------------------------------------------
**BT SMALL COMPANY INDEX PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 1.81% 1.18% (0.03)% 35%
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME VALUE PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 1.04% 1.30% 1.11% 74%
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 1.75% 1.67% 0.77% 61%
- -----------------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 1.46% 0.64% 0.38% 94%
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 2.53% 0.74% (0.59)% 43%
- -----------------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 1.09% 0.14% (0.10)% 64%
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 2.13% 0.58% (0.70)% 47%
- -----------------------------------------------------------------------------------------------------------------------------------
**JPM CORE BOND PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 1.03% 4.95% 4.72% 428%
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-----
65
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET RATIO OF NET
RATIO OF EXPENSES TO INVESTMENT INCOME TO INVESTMENT INCOME TO
AVERAGE NET ASSETS AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO
BEFORE WAIVERS (A)(C) AFTER WAIVERS (A)(C) BEFORE WAIVERS (A)(C) TURNOVER RATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
**LAZARD LARGE CAP VALUE PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 1.20% 1.19% 0.89% 37%
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
**LAZARD SMALL CAP VALUE PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 1.54% 0.52% 0.18% 21%
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 1.04%(1) (0.30)%(1) (0.49)%(1) 79%
- -----------------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 1.82%(a) 0.61%(a) (0.36)%(a) 116%
- -----------------------------------------------------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 79%(a)(1) 0.05%(a)(1) (0.24)%(a)(1) 79%
- -----------------------------------------------------------------------------------------------------------------------------------
MFS RESEARCH PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 1.05 % 0.44% 0.24% 73%
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 1.78% 0.65% (0.28)% 51%
- -----------------------------------------------------------------------------------------------------------------------------------
*MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 2.63% 0.73% (0.09)% 114%
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 2.61% 1.96% 1.10% 25%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Morgan Stanley Emerging Markets Equity Portfolio commenced operations
on August 20, 1997.
** Commencement of operations for the Lazard Large Cap Value Portfolio,
Lazard Small Cap Value Portfolio, JPM Core Bond Portfolio, BT Small
Company Index Portfolio, BT International Equity Index Portfolio and BT
Equity 500 Index Portfolio was January 1, 1998. No financial highlights
are presented for MFS Growth with Income Portfolio, each of which received
initial capital on December 31, 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 of the Portfolio.
(a) Annualized.
(b) Total return calculated for a period of less than one year is not
annualized.
(c) For further information concerning fee waivers, see the section entitled
"Expense Limitation Agreement" in the Prospectus.
(1) Reflects overall fund ratios for investment income and non-class specific
expense.
------------------------- EQ Advisors Trust
<PAGE>
----------
66
- --------------------------------------------------------------------------------
If you wish to know more, you will find additional information about the Trust
and its Portfolios in the following documents:
ANNUAL REPORTS
The Annual Report includes more information about the Trust's performance and
is available upon request free of charge. The reports usually include
performance information, a discussion of market conditions and the investment
strategies that affected the Portfolios' performance during the last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI, dated May 1, 1999, is incorporated into this Prospectus by reference
and is available upon request free of charge by calling our toll free number at
1-800-789-7771.
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. You may have to pay a duplicating fee. To find out more about the Public
Reference Room, call the SEC at 800-SEC-0330.
Investment Company Act File Number: 811-07953
