<PAGE>
Filed Pursuant to Rule 497(c)
Registration File No.: 333-17217
EQ Advisors Trust
PROSPECTUS DATED AUGUST 30, 1999
1
- --------------------------------------------------------------------------------
This Prospectus describes the twelve (12) 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.
DOMESTIC EQUITY PORTFOLIOS
-------------------------------------------
Calvert Socially Responsible
Capital Guardian Research
Capital Guardian U.S. Equity
EQ/Alliance Premier Growth
EQ/Putnam Investors Growth
Lazard Large Cap Value
MFS Growth with Income
INTERNATIONAL PORTFOLIOS
-------------------------------------------
Capital Guardian International
EQ/Putnam International Equity
AGGRESSIVE EQUITY PORTFOLIOS
-------------------------------------------
EQ/Evergreen
Lazard Small Cap Value
ASSET ALLOCATION PORTFOLIO
-------------------------------------------
EQ/Evergreen Foundation
See Prospectus dated May 1, 1999 for additional investment alternatives.
- -------------------------------------------------------------------------------
YOU SHOULD BE AWARE THAT THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED OF THE INVESTMENT MERIT OF THESE PORTFOLIOS OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Version 20 (Supp)
<PAGE>
Overview
- ----------------
2
- --------------------------------------------------------------------------------
EQ ADVISORS TRUST
This Prospectus tells you about the twelve (12) current Portfolios of the EQ
Advisors Trust ("Trust") and the Class IB shares offered by the Trust on
behalf of each Portfolio. The Trust is an open-end management investment
company. Each Portfolio is a separate series of the Trust with its own
investment objective, investment strategies and risks, which are described in
this Prospectus. Each of the current Portfolios of the Trust, except for the
Lazard Small Cap Value Portfolio, are diversified for purposes of the
Investment Company Act of 1940, as amended ("1940 Act").
The Trust's shares are currently sold only to insurance company separate
accounts in connection with variable life insurance contracts and variable
annuity certificates and contracts (the "Contract" or collectively, the
"Contracts") issued by The Equitable Life Assurance Society of the United
States ("Equitable") and Equitable of Colorado, Inc. ("EOC") as well as
insurance companies that are not affiliated with Equitable or EOC
("non-affiliated insurance companies") and to The Equitable Investment Plan
for Employees, Managers and Agents ("Equitable Plan"). The prospectus is
designed to help you make informed decisions about the Portfolios that are
available under your Contract or under the Equitable Plan. You will find
information about your Contract and how it works in the accompanying
prospectus for the Contracts if you are a Contractholder or participant under
a Contract.
EQ Financial Consultants, Inc. ("EQFC") currently serves as the Manager of the
Trust. In such capacity, EQFC currently has overall responsibility for the
general management and administration of the Trust. The Board of Trustees of
the Trust have approved a transfer to Equitable, the indirect corporate parent
of EQFC, of the Trust's Investment Management Agreement with EQFC. This
transfer is expected to be completed in September 1999. Upon completion of the
transfer, Equitable will serve as the Manager of the Trust. However, until
completion of the transfer, EQFC will continue to serve in that capacity.
Each of the Portfolios has its own investment adviser ("Adviser"). The Calvert
Socially Responsible Portfolio ("Calvert Portfolio") has two Advisers, Calvert
Asset Management Company, Inc. ("Calvert") and Brown Capital Management, Inc.
("Brown Capital"). Information about the Advisers for each Portfolio is
contained in the description concerning that Portfolio in the section entitled
"About the Investment Portfolios." The Manager has the ultimate responsibility
to oversee each of the Advisers and to recommend their hiring, termination and
replacement. Subject to approval by the Board of Trustees, the Manager has
been granted relief by the Securities and Exchange Commission ("SEC")
("Multi-Manager Order") that enables the Manager without obtaining shareholder
approval to: (i) select 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.
<PAGE>
Table of contents
- ----------------
3
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1
- ---
SUMMARY INFORMATION CONCERNING EQ
ADVISORS TRUST 4
- ------------------------------------------------- -
2
- ---
ABOUT THE INVESTMENT PORTFOLIOS 12
- ------------------------------------------------- --
DOMESTIC EQUITY PORTFOLIOS 14
Calvert Socially Responsible Portfolio 14
Capital Guardian Research Portfolio 17
Capital Guardian U.S. Equity Portfolio 19
EQ/Alliance Premier Growth Portfolio 21
EQ/Putnam Investors Growth Portfolio 23
Lazard Large Capital Value Portfolio 26
MFS Growth with Income Portfolio 28
INTERNATIONAL PORTFOLIOS 30
Capital Guardian International Portfolio 30
EQ/Putnam International Equity Portfolio 33
AGGRESSIVE EQUITY PORTFOLIOS 36
EQ/Evergreen Portfolio 36
Lazard Small Cap Value Portfolio 38
ASSET ALLOCATION PORTFOLIO 40
EQ/Evergreen Foundation Portfolio 40
3
- ---
MORE INFORMATION ON PRINCIPAL RISKS 42
- ------------------------------------------------- --
4
- ---
MANAGEMENT OF THE TRUST 48
- ------------------------------------------------- --
The Trust 48
The Manager 48
Expense Limitation Agreement 49
The Advisers 50
The Administrator 50
The Transfer Agent 50
Brokerage Practices 50
Brokerage Transactions with Affiliates 50
5
- ---
FUND DISTRIBUTION ARRANGEMENTS 52
- ------------------------------------------------- --
6
- ---
PURCHASE AND REDEMPTION 53
- ------------------------------------------------- --
7
- ---
HOW ASSETS ARE VALUED 54
- ------------------------------------------------- --
8
- ---
TAX INFORMATION 55
- ------------------------------------------------- --
9
- ---
PRIOR PERFORMANCE OF EACH ADVISER 56
- ------------------------------------------------- --
10
- ---
FINANCIAL HIGHLIGHTS 59
- ------------------------------------------------- --
</TABLE>
<PAGE>
1
Summary information concerning
EQ Advisors Trust
- -------
4
- --------------------------------------------------------------------------------
The following chart highlights the twelve (12) 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 42.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST DOMESTIC EQUITY PORTFOLIOS
- ---------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
- ---------------------------------------------------------------------------------------------------
CALVERT SOCIALLY RESPONSIBLE Seeks long-term capital appreciation.
- ---------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN RESEARCH Seeks long-term growth of capital
- ---------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN U.S. EQUITY Seeks long-term growth of capital
- ---------------------------------------------------------------------------------------------------
EQ/ALLIANCE PREMIER GROWTH Seeks long-term growth of capital by primarily investing in
equity securities of a limited number of large, carefully
selected, high quality United States companies that are
judged, by the Adviser, likely to achieve superior earnings
growth
- ---------------------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH Seeks long-term growth of capital and any increased
income that results from this growth
- ---------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------
MFS GROWTH WITH INCOME Seeks to provide reasonable current income and long-term
growth of capital and income
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -----
5
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Common stocks of medium to large U.S. companies that General investment, growth investing, mid-cap company,
meet both investment and social criteria. liquidity, and derivatives risks.
- -------------------------------------------------------------------------------------------------------------------------
Equity securities primarily of United States issuers and General investment, growth investing, convertible
securities whose principal markets are in the United States securities, and foreign securities risks
- -------------------------------------------------------------------------------------------------------------------------
Equity securities primarily of United States companies with General investment, growth investing, convertible
market capitalization greater than $1 billion at the time of securities, and foreign securities risks
purchase
- -------------------------------------------------------------------------------------------------------------------------
Equity securities of a limited number of large, high-quality General investment, focused portfolio, growth investing,
companies that are likely to offer superior earnings growth convertible securities, derivatives, and foreign securities
risks
- -------------------------------------------------------------------------------------------------------------------------
Common stocks 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
- -------------------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------------
Equity securities (common stock, preferred stock, General investment, mid-cap company, foreign securities,
convertible securities, warrants and depositary receipts) and growth investing risks
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
6
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST INTERNATIONAL PORTFOLIOS
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN INTERNATIONAL Seeks long-term growth of capital by investing primarily in
non-United States equity securities
- -------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY Seeks capital appreciation
</TABLE>
<PAGE>
- -----
7
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Non-United States equity securities primarily of companies General investment, foreign securities, growth investing,
located in Europe, Canada, Australia, and the Far East convertible securities, and derivatives risks
- -------------------------------------------------------------------------------------------------------------------------
Equity securities of foreign companies General investment, foreign securities, small-cap and
mid-cap company, liquidity, and derivatives risks
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
8
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST AGGRESSIVE EQUITY PORTFOLIOS
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
EQ/EVERGREEN Seeks capital appreciation
- -------------------------------------------------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE Seeks capital appreciation by investing in equity securities
of U.S. companies with small market capitalizations (i.e.,
companies in the range of companies represented in the
Russell 2000 Index) that the Adviser considers
inexpensively priced relative to the return on total capital
or equity
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -----
9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Common stocks offering potential for capital growth (plus General investment, fixed income, small-cap and mid-cap
corporate bonds, notes and debentures, preferred stocks company, and value investing risks
and convertible securities)
- -------------------------------------------------------------------------------------------------------------------------
Equity securities of small-cap U.S. companies in the range General investment, small-cap and mid-cap company,
of companies included in the Russell 2000 Index that the value investing, non-diversification, and fixed income risks
Adviser believes are undervalued based on their return on
equity or capital
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
10
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST ASSET ALLOCATION PORTFOLIOS
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
EQ/EVERGREEN FOUNDATION Seeks to provide, in order of priority, reasonable income,
conservation of capital and capital appreciation
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -----
11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Common stocks, preferred stocks, securities convertible General investment and fixed income risks
into or exchangeable for common stocks, corporate debt
obligations, U.S. Government securities and short-term
debt instruments
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
2
About the investment portfolios
- ----------------
12
- --------------------------------------------------------------------------------
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:
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.
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
The performance of each of the Trust's Portfolios as shown on the following
pages compares each Portfolio's performance to that of a broad-based
securities market index, an index of funds with similar investment objectives
and/or a blended index. The performance shown below is from each Portfolio's
predecessor registered investment company managed by the Adviser using the
same investment objectives and strategies as the Portfolio. 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.
Broad-based securities indices are also not subject to contract and
insurance-related expenses and charges. Investments cannot be made directly in
a broad-based securities index. Comparisons with these benchmarks, therefore,
are of limited use. They are included because they are widely known and may
help you to understand the universe of securities from which each Portfolio is
likely to select its holdings. "Blended" performance numbers (e.g., 50% S&P
400/50% Russell 2000 or 60% S&P 500/40% Lehman Gov't/Corp) assume a static mix
of the two indices.
THE COMPOSITE MARKET BENCHMARK is made up of 36% S&P 500, 24% MSCI EAFE Index,
21% Salomon Brothers
<PAGE>
- ----------
13
- --------------------------------------------------------------------------------
U.S. Treasury Bond 1 year and, 14% Salomon Brothers World Government ex U.S.,
and 5% U.S. Treasury Bill.
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,
Colombia, 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.
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 STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500") is an
unmanaged index containing common stock of 500 industrial, transportation,
utility and financial companies, regarded as generally representative of the
larger capitalization portion of the United States stock market. The S&P 500
returns reflect the reinvestment of dividends, if any, but do not reflect fees,
brokerage commissions or other expenses of investing.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC EQUITY PORTFOLIOS
- ----------
14
- --------------------------------------------------------------------------------
CALVERT SOCIALLY RESPONSIBLE
PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term capital appreciation
THE INVESTMENT STRATEGY
The portfolio invests primarily in common stocks of medium to large U.S.
companies that meet both investment and social criteria. Brown Capital (and
Calvert) use a tandem investment process to select potential investments for
the Portfolio. Brown Capital creates a universe of potential investments from
which it and Calvert will ultimately select portfolio securities. Once Brown
Capital identifies a potential investment, Calvert promptly socially screens
each potential investment to assure that it meets Calvert's social criteria.
During that process, Brown Capital continues to evaluate each potential
investment based on whether that investment will satisfy Brown Capital's
investment criteria. The criteria of both Brown Capital and Calvert must be
satisfied before a security will be purchased for the Portfolio.
For purposes of this Portfolio, companies having market capitalizations
greater than $1 billion are considered medium to large companies.
INVESTMENT CRITERIA: Brown Capital's investment process balances the growth
potential of investments with the price or value of the investment in order to
identify stocks that offer above average growth potential at reasonable
prices. Brown Capital evaluates each stock in terms of its growth potential,
the return on risk-free investments, and the specific risk features of the
company to determine the reasonable price for the stock.
The Portfolio may invest up to 15% of its net assets in illiquid securities,
which are securities that cannot be readily sold because there is no active
market for them.
The Portfolio may invest in derivative instruments, such as foreign currency
contracts (up to 5% of its total assets), options on securities and indices
(up to 5% of its total assets), and futures contracts (up to 5% of its net
assets).
When market or financial conditions warrant, the Portfolio may invest a
substantial portion of its asets in short-term obligations for temporary or
defensive purposes. If such action is taken, it will detract from achievement
of the Portfolio's investment objective during such periods.
SOCIAL CRITERIA: Calvert analyzes investments from a social activist
perspective. Calvert's philosophy is that long-term rewards to investors will
come from those organizations whose products, services and methods enhance the
human condition and the traditional American values of individual initiative,
equility of opportunity and cooperative effort. These criteria represent
standards of behavior which few, if any, organizations totally satisfy. As a
matter of practice, evaluation of a particular organization in the context of
these criteria sill involve subjective judgment by Calvert.
The Portfolio seeks to invest in companies that:
o deliver safe products and services in ways that sustain our natural
environment. For example, the Portfolio looks for companies that produce
energy from renewable resources, while avoiding consistent polluters;
o manage with participation throughout the organization in defining and
achieving objectives. For example, the Portfolio looks for companies that
offer employee stock ownership or profit-sharing plans;
o negotiate fairly with their workers, provide an environment supportive of
their wellness, do not discriminate on the basis of race, gender,
religion, age, disability, ethnic origin, or sexual orientation, do not
consistently violate regulations of the U.S. Equal Employment Opportunity
Commission, and provide opportunities for women, disadvantaged minorities,
and others for whom equal opportunities have often been denied. For
example, the Portfolio considers both unionized and non-union firms with
good labor relations; and
o foster awareness of a commitment to human goals, such as creativity,
productivity, self-respect and responsibility, within the organization and
the world, and continually
<PAGE>
- ----------
15
- --------------------------------------------------------------------------------
recreates a context within which these goals can be realized. For example,
the Portfolio looks for companies with an above average commitment to
community affairs and charitable giving.
The Portfolio will not invest in companies that Calvert determines to be
significantly engaged in:
o production of or the manufacture of equipment to produce, nuclear energy;
o business activities in support of repressive regimes;
o manufacture of weapon systems;
o manufacture of alcoholic beverages or tobacco products; or
o operation of gambling casinos.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities markets.
MID-CAP COMPANY RISK: The Portfolio's investments in mid-cap companies may be
subject to more abrupt or erratic movements in price than are those of larger,
more established companies because: the securities of such companies are less
well-known and may trade less frequently and in lower volume; such companies
are more likely to experience greater or more unexpected changes in their
earnings and growth prospects; and the products of technologies of such
companies may be at a relatively early stage of development or not fully
tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is August 30, 1999. Therefore, no prior
performance information is available.
WHO MANAGES THE PORTFOLIO
CALVERT ASSET MANAGEMENT COMPANY, INC. ("Calvert"), 4550 Montgomery Avenue,
Suite 1000N, Bethesda, Maryland 20814, a subsidiary of Calvert Group Ltd.,
which is a subsidiary of Acacia Mutual Life Insurance Company of Washington,
DC ("Acacia Mutual"). On January 1, 1999, Acacia Mutual merged with and became
a controlled subsidiary of Ameritas Acacia Mutual Holding Company. Calvert has
been the Adviser to the Portfolio since it commenced operations. It has been
managing mutual funds since 1976. Calvert is the investment adviser for over
25 mutual funds, including the first and largest family of socially screened
funds. Calvert provides the social investment research and screening of the
Portfolio's investments. As of December 31, 1998, Calvert had $6 billion in
assets under management.
BROWN CAPITAL MANAGEMENT, INC. ("Brown Capital"), 809 Cathedral Street,
Baltimore, Maryland 21201. Brown Capital initially identifies potential
investments for the Portfolio, which are then promptly screened by Calvert
using the Portfolio's social criteria.
EDDIE C. BROWN, founder and President of Brown Capital, heads the management
team for the Portfolio. He has over
---------------------------------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC EQUITY PORTFOLIOS (CONTINUED)
- ----------
16
- --------------------------------------------------------------------------------
24 years of investment management experience, and has held positions with T.
Rowe Price and Irwing Management Company. Mr. Brown is a frequent panelist on
"Wall Street Week with Louis Rukeyser" and is a member of the Wall Street Week
Hall of Fame.
<PAGE>
- ----------
17
- --------------------------------------------------------------------------------
CAPITAL GUARDIAN RESEARCH
PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth
of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of United States issuers
and securities whose principal markets are in the United States, including
American Depositary Receipts and other United States registered foreign
securities. The Portfolio invests primarily in common stocks (or securities
convertible or exchangeable into common stocks) of companies with market
capitalization greater than $1 billion at the time of purchase.
The Portfolio may invest up to 10% of its total assets, at the time of
purchase, in securities of issuers domiciled outside the United States and not
included in the S&P 500 (i.e., foreign securities).
When market or financial conditions warrant, the Portfolio may invest a
substantial portion of its assets in high-quality debt securities, including
short-term obligations for temporary or defensive purposes. If such action is
taken, it will detract from achievement of the Portfolio's investment
objective during such periods.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in relation to changes in interest
rates and changes in the value of the underlying common stock.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
CAPITAL GUARDIAN TRUST COMPANY: ("Capital Guardian"), 333 South Hope Street,
Los Angeles, CA 90071. Capital Guardian is a wholly-owned subsidiary of
Capital Group International, Inc., which itself is a wholly owned subsidiary
of The Capital Group Companies, Inc. Capital Guardian has been providing
investment management services since 1968 and manages approximately $80
billion as of December 31, 1998.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC EQUITY PORTFOLIOS (CONTINUED)
- ----------
18
- --------------------------------------------------------------------------------
The Portfolio is managed by a group of investment research professionals, led
by the Research Portfolio Coordinator, each of whom has investment discretion
over a segment of the total Portfolio. The size of each segment will vary over
time and may be based upon: (1) the level of conviction of specific research
professionals as to their designated sectors; (2) industry weights within the
relevant benchmark for the Portfolio; and (3) the judgment of the Research
Portfolio Coordinator in assessing the level of conviction of research
professionals compared to industry weights within the relevant benchmark.
Sectors may be overweighted relative to their benchmark weighting if there is
a substantial number of stocks that are judged to be attractive based on the
research professionals research in that sector, or may be underweighted if
there are relatively fewer stocks viewed to be attractive in the sector. The
Research Portfolio Coordinator also coordinates the cash holdings
of the Portfolio.
<PAGE>
- ----------
19
- --------------------------------------------------------------------------------
CAPITAL GUARDIAN U.S. EQUITY PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio strives to accomplish its investment objectives through constant
supervision, careful securities selection and broad diversification.
The Portfolio invests primarily in equity securities of United States
companies with market capitalization greater than $1 billion at the time of
purchase. In selecting securities for investment, the Adviser focuses
primarily on the potential of capital appreciation.
The Portfolio may invest up to 10% of its total assets in securities of
issuers domiciled outside the United States and not included in the S&P 500
(i.e., foreign securities). These securities may include American Depositary
Receipts.
When market or financial conditions warrant, the Portfolio may invest a
substantial portion of its assets in high-quality debt securities, including
short-term obligations for temporary or defensive purposes. If such action is
taken, it will detract from achievement of the Portfolio's investment
objective during such periods.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in relation to changes in interest
rates and changes in the value of the underlying common stock.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
CAPITAL GUARDIAN TRUST COMPANY: ("Capital Guardian"), 333 South Hope Street,
Los Angeles, CA 90071. Capital Guardian is a wholly-owned subsidiary of
Capital Group International, Inc., which itself is a wholly owned subsidiary
of The Capital Group Companies, Inc. Capital Guardian has been providing
investment management services since 1968 and manages approximately $80
billion as of December 31, 1998.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC EQUITY PORTFOLIOS (CONTINUED)
- ----------
20
- --------------------------------------------------------------------------------
Capital Guardian uses a multiple portfolio manager system under which the
Portfolio is divided into several segments. Each segment is individually
managed with the portfolio manager free to decide on company and industry
selections as well as valuation and transaction assessment. An additional
portion of the Portfolio is managed by a group of investment research
analysts.
The individual portfolio managers of each segment of the Portfolio, other than
that managed by the group of research analysts, are as follows:
Donnalisa P. Barnum. Donnalisa Barnum is a Senior Vice President and a
portfolio manager for Capital Guardian. She joined the Capital Guardian
organization in 1986.
Michael R. Erickson. Michael Erickson is a Senior Vice President and portfolio
manager for Capital Guardian and a Senior Vice President and Director for
Capital International Limited. He joined the Capital Guardian organization
in 1987.
David I. Fisher. David Fisher is Chairman of the Board of Capital Group
International, Inc. and Capital Guardian. He joined the Capital Guardian
organization in 1969.
Theodore R. Samuels. Theodore Samuels is a Senior Vice President and a
Director for Capital Guardian, as well as a Director of Capital International
Research, Inc. He joined the Capital Guardian organization in 1981.
Eugene P. Stein. Eugene Stein is Executive Vice President, a Director, a
portfolio manager, and Chairman of the Investment Committee for Capital
Guardian. He joined the Capital Guardian organization in 1972.
<PAGE>
- ----------
21
- --------------------------------------------------------------------------------
EQ/ALLIANCE PREMIER GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth of capital by primarily
investing in equity securities of a limited number of large, carefully
selected, high-quality United States companies that are judged, by the
Adviser, likely to achieve superior earnings growth.
THE INVESTMENT STRATEGY
The Portfolio invests primarily (at least 85% of its total assets) in equity
securities of United States companies. The Portfolio is diversified for
purposes of the 1940 Act, however it is still highly concentrated. The
Portfolio focuses on a relatively small number of intensively researched
companies. The Adviser selects the Portfolio's investments from a research
universe of more than 600 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects. An emphasis is placed on identifying securities of companies whose
substantially above-average prospective earnings growth is not fully reflected
in current market valuations.
Normally, the Portfolio invests in about 40-50 companies, with the 25 most
highly regarded of these companies usually constituting approximately 70% of
the Portfolio's net assets. In managing the Portfolio, the Adviser seeks to
capitalize on apparently unwarranted price fluctuations both to purchase or
increase positions on weakness and to sell or reduce overpriced holdings. The
Portfolio normally remains nearly fully invested and does not take significant
cash positions for market timing purposes. During market declines, while
adding to positions in favored stocks, the Portfolio becomes somewhat more
aggressive, gradually reducing the number of companies represented in its
holdings. Conversely, in rising markets, while reducing or eliminating fully
valued positions, the Portfolio becomes somewhat more conservative, gradually
increasing the number of companies represented in its holdings. Through this
approach, the Adviser seeks to gain positive returns in good markets while
providing some measure of protection in poor markets.
The Adviser expects the average market capitalization of companies represented
in the Portfolio normally to be in the range, or in excess, of the average
market capitalization of companies included in the S&P 500.
The Portfolio may invest up to 20% of its net assets in convertible securities
and 15% of its total assets in securities of foreign issuers.
The Portfolio may write covered exchange-traded call options on its securities
of up to 15% of its total assets, and purchase and sell exchange-traded call
and put options on common stocks written by others of up to, for all options,
10% of its total assets.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOCUSED PORTFOLIO RISK: The Portfolio invests in the securities of a limited
number of companies. Consequently, the Portfolio may incur more risk because
changes in the value of a single security may have a more significant effect,
either positive or negative, on the Portfolio's net asset value.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in
---------------------------------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC EQUITY PORTFOLIOS (CONTINUED)
- ----------
22
- --------------------------------------------------------------------------------
relation to changes in interest rates and changes in the value of the
underlying common stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT L.P.: ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance's sole general partner is Alliance Capital
Management Corporation, which is an indirect wholly-owned subsidiary of
Equitable, one of the largest life insurance companies in the United States
and a wholly-owned subsidiary of The Equitable Companies Incorporated.
Therefore, the Manager and Alliance are affiliates of each other. Alliance, a
Delaware limited partnership, is a leading international investment manager.
ALFRED HARRISON is the Portfolio Manager and has been responsible for the
day-to-day management of the Portfolio since its inception. Mr. Harrison is
Vice Chairman of Alliance Capital Management Corporation and has been with
Alliance since 1978. Prior to 1978, Mr. Harrison was co-founder, President,
and Chief Executive Officer of IDS Advisory Corporation, the pension fund
investment management subsidiary of Investors Diversified Services, Inc.
<PAGE>
- ----------
23
- --------------------------------------------------------------------------------
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.
MID-CAP COMPANY RISK: The Portfolio's investments in mid-cap companies may be
subject to more abrupt or erratic movements in price than are those of larger,
more established companies because: the securities of such companies are less
well-known and may trade less frequently and in lower volume; such companies
are more likely to experience greater or more unexpected changes in their
earnings and growth prospects; and the products or technologies of such
companies may be at a relatively early stage of development or not fully
tested.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES 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
---------------------------------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC EQUITY PORTFOLIOS (CONTINUED)
- ----------
24
- --------------------------------------------------------------------------------
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 below illustrates the Portfolio's annual total return for 1998,
the Portfolio's first full year of operations. The table below shows the
Portfolio's average annual total returns for the Portfolio for one year and
since inception. The table also compares the Portfolio's performance to the
returns of a broad-based index. Both the bar chart and table assume
reinvestment of dividends and distributions. Past performance is not an
indication of future performance. The performance results presented below do
not reflect any insurance and Contract-related fees and expenses, which would
reduce the performance results and if reflected the results would be reduced.
The inception date for 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)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
EQ/Putnam Investors Growth Portfolio 36.27% 37.34%
S&P 500 Index* 28.58% 31.63%
- --------------------------------------------------------------------------------
* 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. ENGLAND, who
has been employed by Putnam Management as an investment professional* since
1992; and MANUAL WEISS HERRERRO, who has been employed by Putnam
<PAGE>
- ----------
25
- --------------------------------------------------------------------------------
Management as investment professional* since 1987. (*Investment professional
means that the manager was either a portfolio manager or analyst.)
---------------------------------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC EQUITY PORTFOLIOS (CONTINUED)
- ----------
26
- --------------------------------------------------------------------------------
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>
- ----------
27
- --------------------------------------------------------------------------------
rates fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
higher-rated obligations because BBB rated investment grade securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's average annual total return for
1998, the Portfolio's first year of existence. The table below shows the
Portfolio's average annual total returns for the Portfolio for one year and
since inception. The table also compares the Portfolio's performance to the
returns of a broad based index. Both the bar chart and table assume reinvestment
of dividends and distributions. Past performance is not an indication of future
performance. The performance results presented below do not reflect any
insurance and Contract-related fees and expenses, which would reduce the
performance results. The Portfolio's inception date was January 1, 1998.
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
20.01%
1998
Best quarter: Worst quarter:
23.34% (1998 4th Quarter) (13.43)% (1998 3rd Quarter)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
Lazard Large Cap Value Portfolio 20.01% 20.01%
- --------------------------------------------------------------------------------
S&P 500 Index* 25.58% 28.58%
- --------------------------------------------------------------------------------
* 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>
DOMESTIC EQUITY PORTFOLIOS (CONTINUED)
- ----------
28
- --------------------------------------------------------------------------------
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>
- ----------
29
- --------------------------------------------------------------------------------
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is December 31, 1998. 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>
INTERNATIONAL PORTFOLIOS
- ----------
30
- --------------------------------------------------------------------------------
CAPITAL GUARDIAN INTERNATIONAL PORTFOLIO
INVESTMENT OBJECTIVE: To achieve long-term growth of capital by investing
primarily in non-U.S. equity securities.
THE INVESTMENT STRATEGY
The Portfolio invests primarily (at least 80% of its net assets) in securities
of non-U.S. issuers (including American Depositary Receipts and U.S.
registered securities) and securities whose principal markets are outside of
the U.S. While the assets of the Portfolio can be invested with geographic
flexibility, the Portfolio will emphasize investment in securities of
companies located in Europe, Canada, Australia, and the Far East, giving due
consideration to economic, social, and political developments, currency risks
and the liquidity of various national markets. In addition, the Portfolio may
invest in securities of issuers domiciled in other countries including
developing countries. In determining the domicile of an issuer, the Adviser
takes into account where the company is legally organized, the location of its
principal corporate offices and where it conducts its principal operations.
The Portfolio primarily invests in common stocks (or securities convertible
into common stocks), warrants, rights, and non-convertible preferred stock.
However, when the Adviser believes that market and economic conditions
indicate that it is desirable to do so, the Portfolio may also purchase
high-quality debt securities rated, at the time of purchase, within the top
three quality categories by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") (or unrated securities of equivalent
quality), repurchase agreements, and short-term debt obligations denominated
in U.S. dollars or foreign currencies.
Although the Portfolio does not intend to seek short-term profits, securities
in the Portfolio will be sold whenever the Adviser believes it is appropriate
to do so without regard to the length of time a particular security may have
been held.
To the extent the Portfolio invests in non-U.S. dollar denominated securities
or holds non-U.S. dollar assets, the Portfolio may hedge against possible
variations in exchange rates between currencies by purchasing and selling
currency futures or put and call options and may also enter into forward
foreign currency exchange contracts to hedge against changes in currency
exchange rates. The Portfolio may also cross-hedge between two non-U.S.
currencies.
When market or financial conditions warrant, the Portfolio may invest a
substantial portion of its assets in short-term obligations for temporary or
defensive purposes. If such action is taken, it will detract from achievement
of the Portfolio's investment objective during such periods.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISK: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions. Other specific risks of investing in foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
<PAGE>
- ----------
31
- --------------------------------------------------------------------------------
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.
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities markets.
CONVERTIBLE SECURITIES RISK: Convertible securities enable the Portfolio to
benefit from increases in the market price of the underlying common stock and
provide higher yields than the underlying common stocks, but generally offer
lower yields than nonconvertible securities of similar quality. The value of
convertible securities fluctuates both in relation to changes in interest
rates and changes in the value of the underlying common stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is April 30, 1999. Therefore, no prior
performance is available.
WHO MANAGES THE PORTFOLIO
CAPITAL GUARDIAN TRUST COMPANY ("Capital Guardian"), 333 South Hope Street,
Los Angeles, CA 90071. Capital Guardian is a wholly-owned subsidiary of
Capital Group International, Inc., which itself is a wholly owned subsidiary
of The Capital Group Companies, Inc. Capital Guardian has been providing
investment management services since 1968 and manages approximately $80
billion as of December 31, 1998.
Capital Guardian uses a multiple portfolio manager system under which the
Portfolio is divided into several segments. Each segment is individually
managed with the portfolio manager free to decide on company and industry
selections as well as valuation and transaction assessment. An additional
portion of the Portfolio is managed by a group of investment research
analysts.
The individual portfolio managers of each segment of the Portfolio, other than
that managed by the group of research analysts, are as follows:
David I. Fisher. David Fisher is Chairman of the Board of Capital Group
International, Inc. and Capital Guardian. He joined the Capital Guardian
organization in 1969.
Hartmut Giesecke. Hartmut Giesecke is Chairman of the Board of Capital's
Japanese investment management
---------------------------------------------------- EQ Advisors Trust
<PAGE>
INTERNATIONAL PORTFOLIOS (CONTINUED)
- ----------
32
- --------------------------------------------------------------------------------
subsidiary, Capital International K.K., and Managing Director Asia-Pacific,
Capital Group International, Inc. He is also a Senior Vice President and a
Director of Capital International Research, Inc. and Capital International,
Inc. He joined the Capital Guardian organization in 1972.
Richard N. Havas. Richard Havas is a Senior Vice President and a portfolio
manager for Capital Guardian and Capital International Limited. He is also a
Senior Vice President and Director for Capital Guardian (Canada), Inc. and
Capital International Research, Inc. He joined the Capital Guardian
organization in 1986.
Nancy J. Kyle. Nancy Kyle is a Senior Vice President and a Director and member
of the Executive Committee of Capital Guardian. She is also President and a
Director of Capital Guardian (Canada), Inc. and a Vice President of Emerging
Markets Growth Fund. She is an international equity and emerging markets
portfolio manager. She joined the Capital Guardian organization in 1991.
John McIlwraith. John McIlwraith is a Senior Vice President-International and
a director of Capital Guardian, a Director and a Senior Vice President of
Capital International Limited, and an international equity portfolio manager.
He joined the Capital Guardian organization in 1984.
Robert Ronus. Robert Ronus is President and a Director of Capital Guardian. He
is also Chairman of the Board of Capital International Research, Inc. Chairman
of the Board and a Director of Capital Guardian (Canada), Inc., a Director of
The Capital Group Companies, Inc. and Capital Group International, Inc., and a
Senior Vice President of Capital International S.A. and Capital International
Limited. He joined the Capital Guardian organization in 1972.
Lionel M. Sauvage. Lionel Sauvage is a Senior Vice President and portfolio
manager for Capital Guardian and a Vice President and a Director for Capital
International Research, Inc. He joined the Capital Guardian organization in
1987.
Nilly Sikorsky. Nilly Sikorsky is President and Managing Director of Capital
International S.A., Chairman of Capital International Perspective S.A.,
Managing Director-Europe and a Director of Capital Group International, Inc.,
as well as a Director of The Capital Group Companies, Inc., Capital
International Limited, and Capital International K.K. She joined the Capital
Guardian organization in 1962.
Rudolf M. Staehelin. Rudolf Staehelin is a Senior Vice President and Director
of Capital International Research, Inc. and Capital International S.A. He is a
portfolio manager for Capital Guardian, Capital International S.A., and
Capital International Limited. He joined Capital Guardian in 1981.
<PAGE>
- ----------
33
- --------------------------------------------------------------------------------
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>
INTERNATIONAL PORTFOLIOS (CONTINUED)
- ----------
34
- --------------------------------------------------------------------------------
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 below illustrates the Portfolio's annual total return for 1998,
the Portfolio's first full year of operations. The table below shows the
Portfolio's average annual total returns for the Portfolio for one year and
since inception. The table also compares the Portfolio's performance to the
returns of a broad-based index. Both the bar chart and table assume reinvestment
of dividends and distributions. Past performance is not an indication of future
performance. The performance results presented below do not reflect any
insurance and Contract-related fees and expenses, which would reduce the
performance results . The inception date for 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)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
EQ/Putnam International Equity Portfolio 19.51% 17.52%
- --------------------------------------------------------------------------------
S&P 500 Index* 20.00% 13.43%
- --------------------------------------------------------------------------------
* 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.
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
<PAGE>
- ----------
35
- --------------------------------------------------------------------------------
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>
AGGRESSIVE EQUITY PORTFOLIOS
- ----------
36
- --------------------------------------------------------------------------------
EQ/EVERGREEN PORTFOLIO
INVESTMENT OBJECTIVE: Seeks capital appreciation.
THE INVESTMENT STRATEGY
The Evergreen Portfolio invests primarily in common stocks and convertible
securities of companies that are relatively small or little-known or represent
special situations which the Adviser believes offer potential for capital
appreciation. In addition, the Portfolio may invest in relatively well-known,
large company securities that have the potential for capital appreciation.
Securities are selected based on a combination of comparative undervaluation
relative to growth potential and/or merger/acquisition price.
For purposes of this Portfolio, a "little-known" company is one whose
business is limited to a regional market or whose securities are mainly
privately held. A "relatively small" company is one that has a small share
of the market for its products or services in comparison with other
companies in its field or that provides goods or services for a limited
market. A "special situation" company is one which offers potential for
capital appreciation because of a recent or anticipated change in
structure, management, products or services.
The Portfolio also may invest to a lesser extent in non-convertible debt
securities and preferred stocks that offer an opportunity for capital
appreciation.
When market or financial conditions warrant, the Portfolio may invest up to
100% of its assets in short-term obligations for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
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.
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged
to be undervalued may actually be appropriately priced.
FIXED INCOME 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.
<PAGE>
- ----------
37
- --------------------------------------------------------------------------------
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is December 31, 1998. Therefore, no
prior performance information is available.
WHO MANAGES THE PORTFOLIO
EVERGREEN ASSET MANAGEMENT CORP.: ("Evergreen"), 2500 Westchester Avenue,
Purchase, New York 10577. Evergreen has been the Adviser to the Portfolio
since it commenced operations. Evergreen is a registered investment adviser
and a wholly-owned subsidiary of First Union Corporation. Evergreen offers a
broad range of financial services to individuals and businesses throughout the
United States.
JEAN LEDFORD and RICHARD WELSH became co-managers of the Portfolio in August
1999. Jean Ledford, CFA, became President and Chief Executive Officer of
Evergreen in August 1999. From February 1997 until she joined Evergreen, Ms.
Ledford worked as a portfolio manager at American Century Investments
("American Century"). From 1980 until she joined American Century, Ms. Ledford
was the investment director at the State of Wisconsin Investment Board.
Mr. Welsh joined Evergreen as Senior Vice President and portfolio manager in
August 1999. Prior to joining Evergreen, he worked for five years as a
portfolio manager and analyst at American Century.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
AGGRESSIVE EQUITY PORTFOLIOS (CONTINUED)
- ----------
38
- --------------------------------------------------------------------------------
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>
- ----------
39
- --------------------------------------------------------------------------------
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 below illustrates the Portfolio's annual total return for 1998,
the Portfolio's first year of existence. The table below shows the Portfolio's
average annual total returns for the Portfolio for one year and since
inception. The table also compares the Portfolio's performance to the returns
of a broad based index. Both the bar chart and table assume reinvestment of
dividends and distributions. Past performance is not an indication of future
performance. The performance results presented below do not reflect any
insurance and Contract-related fees and expenses, which would reduce the
perfomance results. The Portfolio's inception date was January 1, 1998.
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
1998
(7.03)%
Best quarter: Worst quarter:
15.78% (1998 4th Quarter) (20.10)% (1998 3rd Quarter)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
Lazard Small Cap Value Portfolio (7.03)% (7.03)%
- --------------------------------------------------------------------------------
Russell 2000 Index* (2.54)% (2.54)%
- --------------------------------------------------------------------------------
* 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>
ASSET ALLOCATION PORTFOLIO
- ----------
40
- --------------------------------------------------------------------------------
EQ/EVERGREEN FOUNDATION PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide, in order of priority, reasonable income,
conservation of capital and capital appreciation.
For purposes of this Portfolio, the words "reasonable income" mean moderate
income.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a combination of common stocks, preferred
stocks, securities that are convertible into or exchangeable for common
stocks, investment grade corporate debt securities, securities of or
guaranteed by the U.S. Government, its agencies or instrumentalities, and
short-term debt instruments, such as high quality commercial paper, and
obligations of FDIC-member banks. Investments in common stocks focus on those
that pay dividends and have the potential for capital appreciation. Common
stocks are selected based on a combination of financial strength and estimated
growth potential. Bonds are selected based on the Adviser's projections of
interest rates, varying amounts and maturities in order to achieve capital
protection and, when possible, capital appreciation. The asset allocation of
the Portfolio will vary in accordance with changing economic and market
conditions.
Under normal market conditions, at least 25% of the Portfolio's net assets
will be invested in fixed income securities. In selecting debt securities, the
Adviser will emphasize securities that the Adviser believes will not be
subject to significant fluctuations in value. The corporate debt obligations
purchased by the Portfolio will be rated A or higher by S&P and Moody's. The
Fund is not managed with a targeted maturity.
When market or financial conditions warrant, the Portfolio may invest 100% of
its assets in short-term obligations for temporary or defensive purposes. Such
investment strategies are inconsistent with the Portfolio's investment
objectives and could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FIXED INCOME 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 Recognized Statistical Rating
Organization ("NRSRO"), it will be exposed to greater risk than higher-rated
obligations because BBB rated investment grade securities are regarded as
having only an adequate capacity to pay principal and interest, are considered
to lack outstanding investment characteristics, and may be speculative.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stocks, but generally offer lower yields than unconvertible securities
of similar quality. Convertible securities fluctuate both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
PORTFOLIO PERFORMANCE
The inception date for this Portfolio is December 31, 1998. Therefore, no
performance information is available.
<PAGE>
- ----------
41
- --------------------------------------------------------------------------------
WHO MANAGES THE PORTFOLIO
EVERGREEN ASSET MANAGEMENT CORP. ("Evergreen"), 2500 Westchester Avenue,
Purchase, New York 10577. Evergreen has been the Adviser to the Portfolio
since it commenced operations. Evergreen is a registered investment adviser
and a wholly-owned subsidiary of First Union Corporation. Evergreen offers a
broad range of financial services to individuals and businesses throughout the
United States.
JEAN LEDFORD and RICHARD WELSH became co-managers of the Portfolio in August
1999. Jean Ledford, CFA, became President and Chief Executive Officer of
Evergreen in August 1999. From February 1997 until she joined Evergreen, Ms.
Ledford worked as a portfolio manager at American Century Investments
("American Century"). From 1980 until she joined American Century, Ms. Ledford
was the investment director at the State of Wisconsin Investment Board.
Mr. Welsh joined Evergreen as Senior Vice President and portfolio manager in
August 1999. Prior to joining Evergreen, he worked for five years as a
portfolio manager and analyst at American Century.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
3
More information on principal risks
- ----------------
42
- --------------------------------------------------------------------------------
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>
- ----------
43
- --------------------------------------------------------------------------------
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. 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 or
repurchase agreements, which involve a promise by a third party to honor an
obligation to the Portfolio.
Credit risk is particularly significant for the Portfolios that invest a
material portion of their assets in "JUNK BONDS" or lower-rated securities
(i.e., rated BB or lower by S&P or an equivalent rating by any other NRSRO or
unrated securities of similar quality). These debt securities and similar
unrated securities have speculative elements or are predominantly
speculative. These portfolios may also be subject to greater credit risk
because they may invest in debt securities issued in connection with
corporate restructurings by highly leveraged issuers or in debt securities
not current in the payment of interest or principal, or in default.
INTEREST RATE RISK: The price of a bond or a fixed income security is
dependent upon interest rates. Therefore, the share price and total return of
a Portfolio investing a significant portion of its assets in bonds or fixed
income securities will vary in response to changes in interest rates. A rise
in interest rates
---------------------------------------------------- EQ Advisors Trust
<PAGE>
- ----------
44
- --------------------------------------------------------------------------------
causes the value of a bond to decrease, and vice versa. There is the
possibility that the value of a Portfolio's investment in bonds or fixed
income securities may fall because bonds or fixed income securities generally
fall in value when interest rates rise. The longer the term of a bond or
fixed income instrument, the more sensitive it will be to fluctuations in
value from interest rate changes. Changes in interest rates may have a
significant effect on Portfolios holding a significant portion of their
assets in fixed income securities with long term maturities.
MORTGAGE-BACKED SECURITIES RISK: In the case of mortgage-backed securities,
rising interest rates tend to extend the term to maturity of the securities,
making them even more susceptible to interest rate changes. When interest
rates drop, not only can the value of fixed income securities drop, but the
yield can drop, particularly where the yield on the fixed income securities
is tied to changes in interest rates, such as adjustable mortgages. Also when
interest rates drop, the holdings of mortgage-backed securities by a
Portfolio can reduce returns if the owners of the underlying mortgages pay
off their mortgages sooner than anticipated since the funds prepaid will have
to be reinvested at the then lower prevailing rates. This is known as
prepayment risk. When interest rates rise, the holdings of mortgage-backed
securities by a Portfolio can reduce returns if the owners of the underlying
mortgages pay off their mortgages later than anticipated. This is known as
extension risk.
INVESTMENT GRADE SECURITIES RISK: Debt securities are rated by national bond
ratings agencies. Securities rated BBB by S&P or Baa by Moody's are
considered investment grade securities, but are somewhat riskier than higher
rated obligations because they are regarded as having only an adequate
capacity to pay principal and interest, and are considered to lack
outstanding investment characteristics 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 market countries and/or their securities markets. Generally,
economic structures in these countries are less diverse and mature than those
in developed countries, and their
<PAGE>
- ----------
45
- --------------------------------------------------------------------------------
political systems are less stable. Investments in emerging market 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 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 invests 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
---------------------------------------------------- EQ Advisors Trust
<PAGE>
- ----------
46
- --------------------------------------------------------------------------------
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.
LEVERAGING RISK: When a Portfolio borrows money or otherwise leverages its
portfolio, the value of an investment in that Portfolio will be more volatile
and all other risks will tend to be compounded. All of the Portfolios may take
on leveraging risk by investing in collateral from securities loans and by
borrowing money to meet redemption requests.
LIQUIDITY RISK: Certain securities held by a Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like. A
Portfolio may have to hold these securities longer than it would like and may
forego other investment opportunities. There is the possibility that a
Portfolio may lose money or be prevented from earning capital gains if it can
not sell a security at the time and price that is most beneficial to the
Portfolio. Portfolios that invest in privately-placed securities, high-yield
bonds, mortgage-backed securities or foreign or emerging 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 Portfolio is classified
as a "non-diversified" investment company, which means that the proportion of
the 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 a
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 the 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, the 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. The
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.
SECURITIES LENDING RISK: For purposes of realizing additional income, each
Portfolio may lend securities to broker-dealers approved by the Board of
Trustees. In addition, the Alliance High Yield and Alliance Intermediate
Government Securities Portfolios may each make secured loans of its portfolio
securities without restriction. Any such loan of portfolio securities will be
continuously secured by
<PAGE>
- ----------
47
- --------------------------------------------------------------------------------
collateral at least equal to the value of the security loaned. Such collateral
will be in the form of cash, marketable securities issued or guaranteed by the
U.S. Government or its agencies, or a standby letter of credit issued by
qualified banks. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially. Loans will only
be made to firms deemed by the Adviser to be of good standing and will not be
made unless, in the judgment of the Adviser, the consideration to be earned
from such loans would justify the risk.
SMALL-CAP AND MID-CAP COMPANY RISK: A Portfolio's investments in small-cap and
mid-cap companies may involve greater risks than investments in larger, more
established issuers. Smaller companies may have narrower product lines, more
limited financial resources and more limited trading markets for their stock,
as compared with larger companies. Their securities may be less well-known and
trade less frequently and in more limited volume than the securities of
larger, more established companies. In addition, small-cap and mid-cap
companies are typically subject to greater changes in earnings and business
prospects than larger companies. Consequently, the prices of small company
stocks tend to rise and fall in value more frequently than the stocks of
larger companies. Although investing in small-cap and mid-cap companies offers
potential for above-average returns, the companies may not succeed and the
value of their stock could decline significantly.
VALUE INVESTING RISK: Value investing attempts to identify strong companies
selling at a discount from their perceived true worth. Advisers using this
approach generally select stocks at prices, in their view, that are
temporarily low relative to the company's earnings, assets, cash flow and
dividends. Value investing is subject to the risk that the stocks' intrinsic
value may never be fully recognized or realized by the market, or their prices
may go down. In addition, there is the risk that a stock judged to be
undervalued may actually be appropriately priced. Value investing generally
emphasizes companies that, considering their assets and earnings history, are
attractively priced and may provide dividend income.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
4
Management of the Trust
- ----------------
48
- --------------------------------------------------------------------------------
This section gives you information on the Trust, the Manager and the Advisers
for the Portfolios. More detailed information concerning each of the Advisers
and portfolio managers is included in the description for each Portfolio in
the section "About The Investment Portfolios."
THE TRUST
The Trust is organized as a Delaware business trust and is registered with the
Securities and Exchange Commission ("SEC") as an open-end management
investment company. The Trust issues shares of beneficial interest that are
currently divided among forty (40) Portfolios, each of which has authorized
Class IA and Class IB shares. Each Portfolio has its own objectives,
investment strategies and risks, which have been previously described in this
prospectus.
THE MANAGER
EQ Financial Consultants, Inc. ("EQFC"), 1290 Avenue of the Americas, New
York, New York 10104, currently serves as the Manager of the Trust. The Board
of Trustees of the Trust has approved a transfer to Equitable of the Trust's
Investment Management Agreement with EQFC. This transfer is expected to be
completed in September 1999. Upon completion of the transfer, Equitable will
serve as the Manager of the Trust. However, until completion of the transfer,
EQFC will continue to serve in that capacity. Equitable, 1290 Avenue of the
Americas, New York, New York 10104, is the indirect corporate parent of EQFC.
Both EQFC and Equitable are investment advisers registered under the
Investment Advisers Act of 1940, as amended, and EQFC is a broker-dealer
registered under the Securities Exchange Act of 1934, as amended.
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 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
- --------------------------------------------------------------------------------
ANNUAL RATE OF
RATE FEES
PORTFOLIOS RECEIVED WAIVED
- --------------------------------------------------------------------------------
EQ/Putnam International Equity 0.44% 0.26%
EQ/Putnam Investors Growth 0.31% 0.24%
Lazard Large Cap Value 0.21% 0.34%
Lazard Small Cap Value 0.62% 0.18%
- --------------------------------------------------------------------------------
The eight (8) Portfolios listed in the table below did not commence operations
during 1998. 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 is
entitled to receive in 1999 for managing each of these Portfolios. As
explained in the next section, the Portfolios listed below are subject to an
expense limitation agreement between the Trust and Manager, which affects the
rate of management fees to be received by the Manager on behalf of each
Portfolio.
<PAGE>
- ----------
49
- --------------------------------------------------------------------------------
ANNUAL RATE OF MANAGEMENT FEES
- --------------------------------------------------------------------------------
PORTFOLIOS ANNUAL RATE
- --------------------------------------------------------------------------------
Calvert Socially Responsible(3) 0.65%
Capital Guardian International(1) 0.75%
Capital Guardian Research(1) 0.65%
Capital Guardian U.S. Equity(1) 0.65%
EQ/Alliance Premier Growth(1) 0.90%
EQ/Evergreen(2) 0.75%
EQ/Evergreen Foundation(2) 0.63%
MFS Growth with Income(2) 0.55%
- --------------------------------------------------------------------------------
(1) The inception date for this Portfolio was April 30, 1999.
(2) The inception date for this Portfolio was December 31, 1998.
(3) The inception date for this Portfolio is August 30, 1999.
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:
EXPENSE LIMITATION RATES
- --------------------------------------------------------------------------------
AMOUNT EXPENSES
LIMITED TO (% OF
PORTFOLIOS DAILY NET ASSETS)
- --------------------------------------------------------------------------------
Calvert Socially Responsible 0.80%
- --------------------------------------------------------------------------------
Capital Guardian International 0.95%
- --------------------------------------------------------------------------------
Capital Guardian Research 0.70%
- --------------------------------------------------------------------------------
Capital Guardian U.S. Equity 0.70%
- --------------------------------------------------------------------------------
EQ/Alliance Premier Growth 0.90%
- --------------------------------------------------------------------------------
EQ/Evergreen 0.80%
- --------------------------------------------------------------------------------
EQ/Evergreen Foundation 0.70%
- --------------------------------------------------------------------------------
EQ/Putnam International Equity 0.95%
- --------------------------------------------------------------------------------
EQ/Putnam Investors Growth 0.70%
- --------------------------------------------------------------------------------
Lazard Large Cap Value 0.70%
- --------------------------------------------------------------------------------
Lazard Small Cap Value 0.95%
- --------------------------------------------------------------------------------
MFS Growth with Income 0.60%
- --------------------------------------------------------------------------------
Each Portfolio may at a later date reimburse to the Manager the management
fees waived or limited and other expenses assumed and paid by the Manager
pursuant to the Expense Limitation Agreement provided such Portfolio has
reached a sufficient asset size to permit such reimbursement to be made
without causing the total annual expense ratio of each Portfolio to exceed the
percentage limits stated above. Consequently, no reimbursement by a Portfolio
will be made unless: (i) the Portfolio's assets exceed $100 million;
(ii) the Portfolio's total annual expense ratio is less than the respective
percentages stated above; and (iii) the payment of such reimbursement has been
approved by the Trust's Board of Trustees on a quarterly basis.
The total amount of reimbursement to which the Manager may be entitled will
equal, at any time, the sum of (i) all investment management fees previously
waived or reduced by the Manager and (ii) all other payments previously
remitted by the Manager to the Portfolio during any of the previous five (5)
fiscal years, less any reimbursement that the Portfolio has previously paid to
the Manager with respect to (a) such investment management fees previously
waived or reduced and (b) such other payments previously remitted by the
Manager to the Portfolio.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
- ----------
50
- --------------------------------------------------------------------------------
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, the Multi-Manager Order, from the
SEC that permits the Manager, subject to board approval and without the
approval of shareholders to: (a) employ a new Adviser or 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 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, based upon advice
of counsel, that a broker-dealer affiliate of an Adviser to one Portfolio
should not be treated as an affiliate of the Adviser to another
<PAGE>
- ----------
51
- --------------------------------------------------------------------------------
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.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
5
Fund distribution arrangements
- ----------------
52
- --------------------------------------------------------------------------------
The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares and Class IB shares. EQ Financial Consultants, Inc., ("EQFC") serves as
one of the distributors for the Class IB shares of the Trust offered by this
Prospectus as well as one of the distributors for the Class IA shares.
Equitable Distributors, Inc. ("EDI") serves as the other distributor for the
Class IB shares of the Trust as well as the Class IA shares. Both classes of
shares are offered and redeemed at their net asset value without any sales
load. EQFC and EDI are affiliates of Equitable. Both EQFC and EDI are
registered as broker-dealers under the Securities Exchange Act of 1934 and are
members of the National Association of Securities Dealers, Inc.
The Trust has adopted a Distribution Plan under Rule 12b-1 under the 1940 Act
for the Trust's Class IB shares. Under the Class IB Distribution Plan the
Class IB shares of the Trust pay each of the distributors an annual fee to
compensate them for promoting, selling and servicing shares of the Portfolios.
The annual fees equal 0.25% of each Portfolio's average daily net assets. Over
time, the fees will increase your cost of investing and may cost you more than
other types of charges.
<PAGE>
6
Purchase and redemption
- ----------------
53
- --------------------------------------------------------------------------------
The price at which a purchase or redemption is effected is based on the next
calculation of net asset value after an order is placed by an insurance
company or qualified retirement plan investing in or redeeming from the Trust.
Net asset value per share is calculated for purchases and redemption of shares
of each Portfolio by dividing the value of total Portfolio assets, less
liabilities (including Trust expenses and class related expenses, which are
accrued daily), by the total number of outstanding shares of that Portfolio.
The net asset value per share of each Portfolio is determined each business
day at 4:00 p.m. Eastern time. Net asset value per share is not calculated on
days on which the New York Stock Exchange ("NYSE") is closed for trading.
Portfolios that invest a significant portion of their assets in foreign
securities, may experience changes in their net asset value on days when a
shareholder may not purchase or redeem shares of that Portfolio because
foreign securities (other than depositary receipts) are valued at the close of
business in the applicable foreign country.
All shares are purchased and redeemed in accordance with the Trust's Amended
and Restated Declaration of Trust and By-Laws. Sales and redemptions of shares
of the same class by the same shareholder on the same day will be netted for
each Portfolio. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders.
The Trust may suspend redemption, if permitted by the 1940 Act, for any period
during which the New York Stock Exchange is closed or during which trading is
restricted by the SEC or the SEC declares that an emergency exists. Redemption
may also be suspended during other periods permitted by the SEC for the
protection of the Trust's shareholders. If the Board of Trustees determines
that it would be detrimental to the best interest of the Trust's remaining
shareholders to make payment in cash, the Trust may pay redemption proceeds in
whole or in part by a distribution-in-kind of readily marketable securities.
<PAGE>
7
How assets are valued
- ----------------
54
- --------------------------------------------------------------------------------
Values are determined according to accepted practices and all laws and
regulations that apply. The assets of each Portfolio are generally valued as
follows:
o Stocks and debt securities which mature in more than 60 days are valued on
the basis of market quotations.
o Foreign securities not traded directly, or in American Depository Receipts or
similar form, in the United States are valued at representative quoted prices
in the currency in the country of origin. Foreign currency is converted into
United States dollar equivalents at current exchange rates. Because foreign
markets may be open at different times than the NYSE, the value of a
Portfolio's shares may change on days when shareholders are not able to buy
or sell them. If events materially affecting the values of the Portfolios'
foreign investments occur between the close of foreign markets and the close
of regular trading on the NYSE, these investments may be valued at their fair
value.
o Short-term debt securities in the Portfolios, other than the Alliance Money
Market Portfolio, which mature in 60 days or less are valued at amortized
cost, which approximates market value. Securities held in the Alliance
Money Market Portfolio are valued at prices based on equivalent yields or
yield spreads.
o Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided are valued in good
faith by the Valuation Committee of the Board of Trustees of the Trust
using its best judgment.
<PAGE>
8
Tax information
- ----------------
55
- --------------------------------------------------------------------------------
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
- ----------------
56
- --------------------------------------------------------------------------------
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 Capital Guardian U.S. Equity Research Portfolio
Diversified Composite, the Capital Guardian U.S. Equity Composite, and the
Capital Guardian Non-U.S Equity Composite (collectively, the "Composites").
The total returns for each Composite reflect the deduction of investment
advisory fees, brokerage commissions and execution costs paid by J.P. Morgan's
and Capital Guardian's institutional private accounts, without provision for
federal or state income taxes. Custodial fees, if any, were not included in
the calculation. Each Composite includes all actual, fee-paying, discretionary
institutional private accounts managed by J.P. Morgan and Capital Guardian
that have investment objectives, policies, strategies and risks substantially
similar to those of the relevant Portfolio. Securities transactions are
accounted for on the trade date and accrual accounting is utilized. Cash and
equivalents are included in performance returns. The institutional private
accounts that are included in the Composite are not subject to the same types
of expenses to which the relevant Portfolio is subject or to the
diversification requirements, specific tax restrictions and investment
limitations imposed on the Portfolio by the 1940 Act or Subchapter M of the
Internal Revenue Code. Consequently, the performance results for the Composite
could have been adversely affected if the institutional private accounts
included in the Composite had been regulated as investment companies under the
federal securities laws.
The major difference between the SEC prescribed calculation of average annual
total returns for registered investment companies or (series thereof) and
total returns for composite performance is that average annual total returns
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 somewhat lower fees and expenses than the
relevant Portfolios although in most instances the fees and expenses are
substantially similar. In addition, holders of Contracts representing
interests in the Portfolios below will be subject to charges and expenses
relating to such Contracts. The
<PAGE>
- -----
57
- --------------------------------------------------------------------------------
performance results presented below do not reflect any insurance related
expenses and would be reduced if such charges were reflected.
The investment results presented below are unaudited. For more information on
the specified market indices used below, see the section "The Benchmarks."
ANNUAL RATES OF RETURN OF OTHER FUNDS OR ACCOUNTS MANAGED BY ADVISERS
AS OF 12/31/98
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
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE PREMIER GROWTH FUND, INC. - ADVISOR CLASS5 (EQ/ALLIANCE PREMIER GROWTH PORTFOLIO)
49.85% N/A N/A 42.97% 10/1/96
- ----------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index3 28.57% N/A N/A 21.60%
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN NON-U.S. EQUITY COMPOSITE (CAPITAL GUARDIAN INTERNATIONAL PORTFOLIO)
17.21% 11.51% 10.76% 12/31/78
- ----------------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index4 20.33% 9.50% 5.85%
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN U.S. EQUITY COMPOSITE (CAPITAL GUARDIAN U.S. EQUITY PORTFOLIO)
22.76% 22.15% 17.95% 12/31/66
- ----------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index2 28.57% 24.06% 19.21%
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL GUARDIAN U.S. EQUITY RESEARCH PORTFOLIO - DIVERSIFIED COMPOSITE (CAPITAL GUARDIAN RESEARCH PORTFOLIO)
28.33% 24.41% N/A 21.62% 3/31/93
- ----------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index2 28.57% 24.06% N/A 21.68%
- ----------------------------------------------------------------------------------------------------------------------------------
EVERGREEN FUND - CLASS Y SHARES (EQ/EVERGREEN PORTFOLIO)
7.23% 17.82% 14.72% 10/15/71
- ----------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index3 (2.54)% 11.86% 12.94%
- ----------------------------------------------------------------------------------------------------------------------------------
EVERGREEN FOUNDATION FUND - CLASS Y SHARES (EQ/EVERGREEN FOUNDATION PORTFOLIO)
12.21% 15.06% N/A 16.89% 1/2/90
- ----------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index2 28.57% 24.06% N/A 18.82%
- ----------------------------------------------------------------------------------------------------------------------------------
THE LAZARD FUNDS, INC. - LAZARD EQUITY PORTFOLIO (LAZARD LARGE CAP VALUE PORTFOLIO)
17.31% 20.36% 16.83% 6/87
- ----------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index2 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 Index3 ( 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 Index2 28.57% 24.06% 19.21%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
58
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1 5 10 Since Inception
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT Portfolio) Year Years Years Inception Date
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PUTNAM INTERNATIONAL GROWTH FUND(1) (EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO)
18.95% 13.18% N/A 13.24% 2/28/91
- ----------------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(4) 20.33% 9.50% N/A 7.58%
- ----------------------------------------------------------------------------------------------------------------------------------
PUTNAM INVESTORS FUND(2) (EQ/PUTNAM INVESTORS GROWTH PORTFOLIO)
35.52% 24.12% 20.16% 12/1/25
- ----------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(2) 28.57% 24.06% 19.21%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 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.
2 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.
3 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.
4 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.
5 Annualized performance for the Advisor class shares. The Advisor class
shares had a total expense ratio of 1.26% of its average daily net assets
for the year ended December 31, 1998. Other share classes have different
expenses and their performance will vary.
<PAGE>
10
Financial Highlights
- --------
59
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the Trust's
financial performance since May 1, 1997. The financial information in the table
below is for the period May 1, 1997 to December 31, 1998 and 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) 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>
EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 10.89 $ 0.05 $ 2.07 $ 2.12 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 $ 10.00 $ 0.03 $ 0.93 $ 0.96 $ (0.02) - $(0.01)
- ----------------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 12.33 $ 0.01 $ 4.46 $ 4.47 $ (0.01) - -
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 $ 10.00 $ 0.02 $ 2.45 $ 2.47 $ (0.03) - $(0.04)
- ----------------------------------------------------------------------------------------------------------------------------------
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 - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -----
60
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
RATIO OF
EXPENSES TO
DISTRIBUTIONS TOTAL NET ASSET NET ASSETS, AVERAGE NET
IN EXCESS OF DIVIDENDS AND VALUE, END OF TOTAL RETURN END OF PERIOD ASSETS AFTER
REALIZED GAINS DISTRIBUTIONS PERIOD (B) (000'S) WAIVERS (A)(C)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EQ/PUTNAM INTERNATIONAL EQUITY PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 - - $ 13.01 19.51% $143,721 1.20%
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 $ (0.04) $ (0.07) $ 10.89 9.58% $ 55,178 1.20%
- ----------------------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 - $ (0.01) $ 16.79 36.27% $175,015 0.85%
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 $ (0.07) $ (0.14) $ 12.33 24.70% $ 39,695 0.85%
- ----------------------------------------------------------------------------------------------------------------------------------
LAZARD LARGE CAP VALUE PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 - $ (0.06) $ 11.94 20.01% $ 74,588 0.90%
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 - $ (0.03) $ 9.27 (7.03)% $ 51,046 1.20%
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -----
61
- --------------------------------------------------------------------------------
<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>
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%
- ----------------------------------------------------------------------------------------------------------------------------------
**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 - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*
** Commencement of operations for the Lazard Large Cap Value Portfolio, and
Lazard Small Cap Value Portfolio, was January 1, 1998. No financial
highlights are presented for EQ/Evergreen Foundation Portfolio,
EQ/Evergreen Portfolio and MFS Growth with Income Portfolio, each of
which received initial capital on December 31, 1998. In addition no
financial highlights are presented for Capital Guardian International,
Capital Guardian Research Portfolio, Capital Guardian U.S. Equity
Portfolio or EQ/Alliance Premier Growth Portfolio, each of which received
initial capital on April 30, 1999, or the Calvert Socially Responsible
Portfolio, which received initial capital on August 30, 1999.
+ 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>
- ----------------
62
- --------------------------------------------------------------------------------
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 August 30, 1999, is incorporated into this Prospectus by
reference and is available upon request free of charge by calling our toll
free number at 1-800-528-0204.
You may visit the SEC's website at www.sec.gov to view the SAI and other
information about the Trust. You can also review and copy information about
the Trust, including the SAI, at the SEC's Public Reference Room in
Washington, D.C. 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
