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Filed Pursuant to Rule 497(c)
Registration File No.: 333-17217
EQ Advisors Trust
PROSPECTUS DATED AUGUST 30, 1999
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This Prospectus describes the eight (8) 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. The Portfolios followed by an asterisk (*) below will not
be available for investment until October 18, 1999.
<TABLE>
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DOMESTIC EQUITY PORTFOLIOS AGGRESSIVE EQUITY PORTFOLIO
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BT Equity 500 Index Warburg Pincus Small Company Value
MFS Research
T. Rowe Price Equity Income
GLOBAL/INTERNATIONAL PORTFOLIO ASSET ALLOCATION PORTFOLIOS
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Alliance Global* Alliance Conservative Investors*
Alliance Growth Investors*
Merrill Lynch World Strategy
</TABLE>
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YOU SHOULD BE AWARE THAT THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED OF THE INVESTMENT MERIT OF THESE PORTFOLIOS OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Version END
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Overview
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EQ ADVISORS TRUST
This Prospectus tells you about the eight (8) current Portfolios of the EQ
Advisors Trust ("Trust") and the Class IA shares or 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 Merrill Lynch World Strategy Portfolio, is 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 has 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"). Information
about the Adviser for each Portfolio is contained in the description
concerning that Portfolio in the section entitled "About the Investment
Portfolios." The Manager has the ultimate responsibility to oversee each of
the Advisers and to recommend their hiring, termination and replacement.
Subject to approval by the Board of Trustees, the Manager 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.
The Manager and certain non-affiliated insurance companies and certain of
their separate accounts (collectively, "Applicants") have filed applications
requesting that the SEC approve the substitution of: (i) Class IA shares of
certain Portfolios for Class IA shares of corresponding portfolios of The
Hudson River Trust ("HRT"); and (ii) Class IB shares of certain Portfolios for
Class IB shares of corresponding HRT portfolios ("Substitution Application").
Alliance Capital Management, L.P. ("Alliance") serves as Adviser for each
Portfolio to be substituted for the corresponding HRT portfolio. Applicants
have included, as a term of each application, that with respect to those
Portfolios for which Alliance serves as Adviser, the Manager will not:
(i) terminate Alliance and select a new Adviser for those Portfolios or (ii)
materially modify the existing investment advisory agreement without first
either obtaining approval of shareholders for such actions or obtaining
approval of shareholders to utilize the Multi-Manager Order.
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Table of contents
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<TABLE>
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1
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SUMMARY INFORMATION CONCERNING EQ
ADVISORS TRUST 4
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2
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ABOUT THE INVESTMENT PORTFOLIOS 12
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DOMESTIC EQUITY PORTFOLIOS 14
BT Equity 500 Index Portfolio 14
MFS Research Portfolio 16
T. Rowe Price Equity Income Portfolio 19
GLOBAL/INTERNATIONAL PORTFOLIO 21
Alliance Global Portfolio 21
AGGRESSIVE EQUITY PORTFOLIO 24
Warburg Pincus Small Company Value Portfolio 24
ASSET ALLOCATION PORTFOLIOS 26
Alliance Conservative Investors Portfolio 27
Alliance Growth Investors Portfolio 30
Merrill Lynch World Strategy Portfolio 33
3
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MORE INFORMATION ON PRINCIPAL RISKS 36
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4
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MANAGEMENT OF THE TRUST 42
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The Trust 42
The Manager 42
Expense Limitation Agreement 43
The Advisers 44
The Administrator 44
The Transfer Agent 45
Brokerage Practices 45
Brokerage Transactions with Affiliates 45
5
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FUND DISTRIBUTION ARRANGEMENTS 46
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6
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PURCHASE AND REDEMPTION 47
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7
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HOW ASSETS ARE VALUED 48
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</TABLE>
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8
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TAX INFORMATION 49
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9
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PRIOR PERFORMANCE OF EACH ADVISER 50
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10
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FINANCIAL HIGHLIGHTS 52
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</TABLE>
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1
Summary information concerning
EQ Advisors Trust
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The following chart highlights the eight (8) Portfolios described in this
Prospectus that you can choose as investment alternatives under your Contracts
offered by Equitable or EOC and non-affiliated insurance companies. 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 36.
<TABLE>
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EQ ADVISORS TRUST DOMESTIC EQUITY PORTFOLIOS
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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BT EQUITY 500 INDEX Seeks to replicate as closely as possible (before deduction
of Portfolio expenses) the total return of the S&P 500 Index
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MFS RESEARCH Seeks to provide long-term growth of capital and future
income
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T. ROWE PRICE EQUITY INCOME Seeks to provide substantial dividend income and also
capital appreciation by investing primarily in
dividend-paying common stocks of established companies
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</TABLE>
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<TABLE>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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Common stocks of companies in the S&P 500 Index General investment, index-fund, and fixed income risks
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Common stock or securities convertible into common stock General investment, mid-cap company, foreign securities,
of companies with better than average prospects for fixed income, and growth investing risks
long-term growth
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Dividend-paying common stocks of established companies General investment, value investing, foreign securities, and
fixed income risks
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</TABLE>
------------------------- EQ Advisors Trust
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<TABLE>
<CAPTION>
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EQ ADVISORS TRUST GLOBAL/INTERNATIONAL PORTFOLIO
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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ALLIANCE GLOBAL Seeks long-term growth of capital
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</TABLE>
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<TABLE>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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Equity securities of U.S. and established foreign companies General investment, foreign securities, liquidity, derivatives,
(including shares of other mutual funds investing in foreign securities lending, and fixed income risks
securities), debt securities, derivatives, and securities
lending
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</TABLE>
------------------------- EQ Advisors Trust
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<TABLE>
<CAPTION>
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EQ ADVISORS TRUST AGGRESSIVE EQUITY PORTFOLIO
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PORTFOLIO INVESTMENT OBJECTIVE(S)
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WARBURG PINCUS SMALL COMPANY VALUE Seeks long-term capital appreciation
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</TABLE>
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<TABLE>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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Equity securities of U.S. small cap companies General investment, small-cap and mid-cap company,
portfolio turnover, foreign securities, fixed income, and
value investing risks
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</TABLE>
------------------------- EQ Advisors Trust
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<TABLE>
<CAPTION>
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EQ ADVISORS TRUST ASSET ALLOCATION PORTFOLIOS
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PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
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ALLIANCE CONSERVATIVE INVESTORS Seeks to achieve a high total return without, in the opinion
of the Adviser, undue risk to principal
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ALLIANCE GROWTH INVESTORS Seeks to achieve the highest total return consistent with
the Adviser's determination of reasonable risk
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MERRILL LYNCH WORLD STRATEGY Seeks high total investment return by investing primarily in
a portfolio of equity and fixed income securities, including
convertible securities, of U.S. and foreign issuers
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</TABLE>
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<TABLE>
<CAPTION>
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PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
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Investment grade debt securities and equity securities of General investment, asset allocation, fixed income,
U.S. and foreign issuers, derivatives, and securities lending derivatives, convertible securities, liquidity, leveraging,
securities lending, and foreign securities risks
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Equity securities (including foreign stocks, preferred stocks, General investment, asset allocation, fixed income,
convertible securities, securities of small and medium-sized leveraging, derivatives, liquidity, convertible securities,
companies) and debt securities (including foreign debt small-cap and mid-cap company, securities lending, junk
securities and junk bonds), derivatives, and securities bond, and foreign securities risks
lending
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Equity and fixed income securities of U.S. and foreign General investment, foreign securities, fixed income,
companies derivatives, non-diversification, liquidity, and portfolio
turnover risks
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</TABLE>
------------------------- EQ Advisors Trust
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2
About the investment portfolios
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This section of the Prospectus provides a more complete description of the
principal investment objectives, strategies, and risks of each of the
Portfolios. Of course, there can be no assurance that any Portfolio will
achieve its investment objective.
Please note that:
o A fuller description of each of the principal risks is included in the
section "More Information on Principal Risks," which follows the
description of each Portfolio in this section of the Prospectus.
o Additional information concerning each Portfolio's strategies, investments,
and risks can also be found in the Trust's Statement of Additional
Information.
GENERAL INVESTMENT RISKS
Each of the Portfolios is subject to the following risks:
ASSET CLASS RISK: The returns from the types of securities in which a
Portfolio invests may underperform returns from the various general securities
markets or different asset classes.
MARKET RISK: You could lose money over short periods due to fluctuation in a
Portfolio's share price in reaction to stock or bond market movements, and
over longer periods during extended market downturns.
SECURITY SELECTION RISK: There is the possibility that the specific securities
selected by a Portfolio's Adviser will underperform other funds in the same
asset class or benchmarks that are representative of the general performance
of the asset class.
YEAR 2000 RISK: A Portfolio could be adversely affected if the computer
systems used by the Trust, Adviser, other service providers, or persons with
whom they deal, do not properly process and calculate date-related information
and data dated on and after January 1, 2000 ("Year 2000 Problem"). The extent
of such impact cannot be predicted and there can be no assurances that the
Year 2000 Problem will not have an adverse effect on the issuers whose
securities are held by a Portfolio. This risk is greater for Portfolios that
make foreign investments, particularly in emerging market countries.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
THE BENCHMARKS
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
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U.S. Treasury Bond 1 year and, 14% Salomon Brothers World Government ex U.S.,
and 5% U.S. Treasury Bill.
THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX ("Lehman Gov't/Corp") represents an
unmanaged group of securities widely regarded by investors as representative of
the bond market.
THE LEHMAN TREASURY BOND INDEX ("Lehman Treasury") represents an unmanaged
group of securities consisting of all currently offered public obligations of
the U.S. Treasury intended for distribution in the domestic market.
THE LIPPER AVERAGES are contained in Lipper's survey of the performance of a
large number of mutual funds. This survey is published by Lipper Analytical
Services, Inc., a firm recognized for its reporting of performance of actively
managed funds. According to Lipper, performance data are presented net of
investment management fees and direct operating expenses. Performance data for
funds which assess sales charges in other ways do not reflect deductions for
sales charges. Performance data shown for the Portfolios does not reflect
deduction for sales charges (which are assessed at the contract level). This
means that to the extent that asset-based sales charges deducted by some funds
have lowered the Lipper averages, the performance data shown for the
Portfolios appears relatively more favorable than the performance data for the
Lipper averages.
THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX ("MSCI World") is an
arithmetic, market value-weighted average of the performance of over 1,300
securities listed on the stock exchanges of twenty foreign countries and the
United States.
THE RUSSELL 2000 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
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BT EQUITY 500 INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to replicate as closely as possible (before
deduction of Portfolio expenses) the total return of the S&P 500.
THE INVESTMENT STRATEGY
The Portfolio invests in equity securities of companies included in the S&P
500. The Adviser seeks to match the risk and return characteristics of the S&P
500 by investing in a statistically selected sample of the securities found in
the S&P 500, using a process known as "optimization". This process selects
stocks for the Portfolio so that industry weightings, market capitalizations
and fundamental characteristics (price to book ratios, price to earnings
ratios, debt to asset ratios and dividend yields) closely match those of the
securities included in the S&P 500. This approach helps to increase the
Portfolio's liquidity and reduce costs. The securities held by the Portfolio
are weighted to make the Portfolio's total investment characteristics similar
to those of the S&P 500 as a whole.
The Adviser generally will seek to match the composition of the S&P 500 but
usually will not invest the Portfolio's stock portfolio to mirror the S&P 500
exactly. Because of the difficulty and cost of executing relatively small stock
transactions, the Portfolio may not always be invested in the less heavily
weighted S&P 500 stocks, and may at times have its portfolio weighted
differently than the S&P 500, particularly if the Portfolio has a low level of
assets. In addition, the Portfolio may omit or remove any S&P 500 stock from
the Portfolio if, following objective criteria, the Adviser judges the stock to
be insufficiently liquid or believes the merit of the investment has been
substantially impaired by extraordinary events or financial conditions. The
Portfolio will not purchase the stock of Bankers Trust New York Corporation,
which is included in the S&P 500, and instead will overweight its holdings of
companies engaged in similar businesses.
[sidebar]
For more information on the S&P 500, see the preceding section "The
Benchmarks." The Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's Corporation ("S&P") and S&P makes no guarantee as to the
accuracy and/or completeness of the S&P 500 or any data included therein.
[end sidebar]
Over time, the correlation between the performance of the Portfolio and the
S&P is expected to be 95% or higher before deduction of Portfolio expenses.
The Portfolio's ability to track the S&P 500 may be affected by, among others,
transaction costs, administration and other expenses incurred by the
Portfolio, changes in either the composition of the S&P 500 or the assets of
the Portfolio, and the timing and amount of Portfolio investor contributions
and withdrawals, if any. The Portfolio seeks securities to track the S&P 500,
therefore, the Adviser generally will not attempt to judge the merits of any
particular security as an investment.
The Portfolio may also invest up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the S&P 500. Securities index
futures contracts and related options, warrants and convertible securities may
be used for a number of reasons, including: to simulate full investment in the
S&P 500 while retaining a cash balance for Portfolio management purposes; to
facilitate trading; to reduce transaction costs; or to seek higher investment
returns when a futures contract, option, warrant or convertible security is
priced more attractively than the underlying equity security or S&P 500. These
instruments are considered to be derivatives.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
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INDEX-FUND RISK: The Portfolio is not actively managed and invests in
securities included in the index regardless of their investment merit.
Therefore, the Portfolio cannot modify its investment strategies to respond to
changes in the economy and may be particularly susceptible to a general
decline in the U.S. or global stock market segment relating to the index.
FIXED INCOME RISKS: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment grade securities which are rated BBB by S&P or an
equivalent rating by any other Nationally 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.
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
performance results. The Portfolio's inception date was January 1, 1998.
<TABLE>
<CAPTION>
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CALENDAR YEAR ANNUAL TOTAL RETURN
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25.14%
1998
<S> <C>
Best quarter: Worst quarter:
21.26% (1998 4th Quarter) (10.03)% (1998 3rd Quarter)
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</TABLE>
<TABLE>
<CAPTION>
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AVERAGE ANNUAL TOTAL RETURNS
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SINCE
ONE YEAR INCEPTION
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<S> <C> <C>
BT Equity 500 Index Portfolio 25.14% 25.14%
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S&P 500 Index* 28.58% 28.58%
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</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
BANKERS TRUST COMPANY ("Bankers Trust"), 130 Liberty Street (One Bankers Trust
Plaza), New York, New York 10006. Bankers Trust has been the Adviser to the
Portfolio since it commenced operations. Bankers Trust is a wholly-owned
subsidiary of Bankers Trust Corporation. Bankers Trust conducts a variety of
general banking and trust activities and is a major wholesale supplier of
financial services, including investment management to the international and
domestic institutional markets. During 1999, Bankers Trust Corporation and a
wholly owned subsidiary of Deutsche Bank AG ("Deutsche Bank") expect to
finalize a merger in which Bankers Trust Corporation will be acquired by and
become a subsidiary of Deutsche Bank.
------------------ EQ Advisors Trust
<PAGE>
DOMESTIC EQUITY PORTFOLIOS (CONTINUED)
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MFS RESEARCH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide long-term growth of capital and future
income.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities, such as common stocks,
securities convertible into common stocks, preferred stocks and depositary
receipts of companies believed by the Adviser to have:
o favorable prospects for long-term growth;
o attractive valuations based on current and expected earnings or cash flow;
o dominant or growing market share; and
o superior management.
The Portfolio may invest in securities of companies of any size. The
Portfolio's investments may include securities traded on securities exchanges
or in the over-the-counter markets.
The Portfolio may invest in foreign equity securities, and may have exposure
to foreign currencies through its investment in these securities, its direct
holdings of foreign currencies or through its use of foreign currency exchange
contracts for the purchase or sale of a fixed quantity of foreign currency at
a future date.
When adverse market, financial or political conditions warrant, the Portfolio
may depart from its principal investment strategies for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
The Portfolio may invest up to 10% of its assets in high yielding debt
securities rated below investment grade ("junk bonds").
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
GROWTH INVESTING RISK: As noted above, this Portfolio uses a growth oriented
approach to stock selection. The price of growth stocks may be more sensitive
to changes in current or expected earnings than the prices of other stocks.
The price of growth stocks is also subject to the risk that the stock price of
one or more companies will fall or will fail to appreciate as anticipated by
the Adviser, regardless of movements in the securities market.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
FIXED INCOME RISKS: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
higher-rated obligations because BBB rated investment grade securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding
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investment characteristics, and may be speculative. The risk that an issuer or
guarantor of a fixed income security or counterparty to the Portfolio's fixed
income transaction is unable to meets its financial obligations is
particularly significant for this Portfolio because this Portfolio invests a
portion of its assets in "junk bonds" (i.e., securities rated below investment
grade). Junk bonds are issued by companies with questionable credit strength
and, consequently, are considered to be speculative in nature and may be
subject to greater market fluctuations than investment grade fixed-income
securities.
FOREIGN SECURITIES RISKS: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The bar chart 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.
<TABLE>
<CAPTION>
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CALENDAR YEAR ANNUAL TOTAL RETURN
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24.11%
1998
<S> <C>
Best quarter: Worst quarter:
21.36% (1998 4th Quarter) (17.35)% (1997 4th Quarter)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
MFS Research Portfolio 24.11% 24.41%
- --------------------------------------------------------------------------------
S&P 500 Index* 28.58% 31.63%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS"), 500 Boylston Street, Boston,
MA 02116. MFS has been the Adviser to the Portfolio since it commenced
operations. MFS is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States, Massachusetts
Investors Trust. MFS is a subsidiary of Sun Life of Canada (United States)
Financial Services Holdings Inc., which, in turn, is an indirect wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
A committee of investment research analysts selects portfolio securities for
the Portfolio. This committee includes investment analysts employed not only
by MFS, but also by MFS International (U.K.) Limited, a wholly owned
subsidiary of MFS. The committee allocates the Portfolio's assets among
various industries. Individual analysts then select
-------------------- EQ Advisors Trust
<PAGE>
DOMESTIC EQUITY PORTFOLIOS (CONTINUED)
- ----------
18
- --------------------------------------------------------------------------------
what they view as the securities best suited to achieve the Portfolio's
investment objective within their assigned industry responsibility.
<PAGE>
- ----------
19
- --------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to provide substantial dividend income and also
capital appreciation by investing primarily in dividend-paying common stocks
of established companies.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in dividend-paying common stocks of
established companies that have favorable prospects for increasing dividend
income and capital appreciation. The Portfolio's yield as a result of that
dividend income is expected to be significantly above the average yield of the
companies of the S&P 500.
The Adviser bases its investment decisions on three premises: (1) over time,
dividend income can account for a significant portion of the Portfolio's
return; (2) dividends are a more stable and predictable source of return; and
(3) prices of stocks that pay a high current income level tend to be less
volatile than those paying below average dividends.
The Adviser uses a "value" approach in choosing securities. It looks for
common stocks of companies that have:
o established operating histories;
o above-average dividend yields relative to the S&P 500;
o low price to earnings ratios relative to the S&P 500;
o sound balance sheets; and
o low stock price relative to the company's asset value, earnings and cash
flow.
[sidebar]
Equity income investing involves finding common stocks that pay dividend
income. As an example, utility company stocks often provide dividend income
while a shareholder waits for the stock price to move. Dividends can help
reduce the Portfolio's volatility during turbulent markets and help offset
losses when stock prices are falling.
[end sidebar]
The Portfolio may invest up to 25% of its total assets in foreign securities.
These securities include non-dollar-denominated securities traded outside the
United States and dollar-denominated securities such as American Depositary
Receipts. The Portfolio may also purchase preferred stocks, convertible
securities, warrants, U.S. Government securities, high-quality money market
securities, as well as investment grade debt securities and high yielding debt
securities ("junk bonds").
When market or financial conditions warrant, the Portfolio may invest without
limitation in high quality money market securities, and United States
Government debt securities for temporary or defensive purposes. Such
investment strategies are inconsistent with the Portfolio's investment
objectives and could result in the Portfolio not achieving its investment
objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged
to be undervalued may actually be appropriately priced.
FOREIGN SECURITIES RISKS: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign
------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC EQUITY PORTFOLIOS (CONTINUED)
- ----------
20
- --------------------------------------------------------------------------------
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. The risk that an issuer or guarantor of a fixed income security
or counterparty to the Portfolio's fixed income transaction is unable to meets
its financial obligations is particularly significant for this Portfolio
because this Portfolio invests a portion of its assets in "junk bonds" (i.e.,
securities rated below investment grade). Junk bonds are issued by companies
with questionable credit strength and, consequently, are considered to be
speculative in nature and may be subject to greater market fluctuations than
investment grade fixed-income securities.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total return for 1998,
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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
9.11%
1988
<S> <C>
Best quarter: Worst quarter:
11.16% (1998 4th Quarter) (7.66)% (1998 3rd Quarter)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
T. Rowe Price Equity Income Portfolio 9.11% 18.73%
- --------------------------------------------------------------------------------
S&P 500 Index* 28.58% 31.63%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
T. ROWE PRICE ASSOCIATES, INC. ("T. Rowe Price"), 100 East Pratt Street,
Baltimore, MD 21202. T. Rowe Price has been the Adviser to the Portfolio since
the Portfolio commenced operations. T. Rowe Price serves as investment manager
to a variety of individual and institutional investor accounts, including
limited partnerships and other mutual funds.
Investment decisions with respect to the Portfolio are made by an Investment
Advisory Committee. BRIAN C. ROGERS has been the Committee Chairman since the
inception of the Portfolio and has day-to-day responsibility for managing the
Portfolio. Mr. Rogers joined T. Rowe Price in 1982 and has been managing
investments since 1983.
<PAGE>
GLOBAL/INTERNATIONAL PORTFOLIO
- ----------
21
- --------------------------------------------------------------------------------
ALLIANCE GLOBAL PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in a diversified mix of equity securities of
U.S. and established foreign companies. The Adviser believes the equity
securities of these established non-U.S. companies have prospects for growth.
The Portfolio intends to make investments in several countries and to have
represented in the Portfolio business activities in not less than three
different countries (including the United States).
[sidebar]
These non-U.S. companies may have operations in the United States, in their
country of incorporation or in other countries.
[end sidebar]
The Portfolio may invest in any type of security including, but not limited
to, common and preferred stock, as well as shares of mutual funds that invest
in foreign securities, bonds and other evidences of indebtedness, and other
securities of issuers wherever organized and governments and their political
subdivisions. Although no particular proportion of stocks, bonds or other
securities is required to be maintained, the Portfolio intends under normal
conditions to invest in equity securities.
The Portfolio may also make use of various other investment strategies,
including making secured loans of up to 50% of its total assets. The Portfolio
may also use derivatives including: writing covered call and put options,
purchasing call and put options on individual equity securities, securities
indexes, and foreign currencies. The Portfolio may also purchase and sell
stock index, foreign currency and interest rate futures contracts and options
on such contracts, as well as forward foreign currency exchange contracts
When market or financial conditions warrant, the Portfolio may at times invest
substantially all of its assets in securities issued by U.S. companies or in
cash or cash equivalents, including money market instruments issued by foreign
entities for temporary or defensive purposes. Such investment strategies could
result in the Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
FOREIGN SECURITIES RISKS: Investing in foreign securities involves risks not
associated with investing in U.S. securities that can adversely affect the
Portfolio's performance. Foreign markets, particularly emerging markets, may
be less liquid, more volatile and subject to less government supervision than
domestic markets. There may be difficulties enforcing contractual obligations,
and it may take more time for trades to clear and settle. In addition, foreign
investments can be adversely affected by: unfavorable currency exchange rates
(relative to the U.S. dollar for securities denominated in a foreign
currencies); inadequate or inaccurate information about foreign companies;
higher transaction, brokerage and custody costs; expropriation or
nationalization; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions. Other specific risks of investing in foreign securities include:
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets, such as less
diverse and less mature economic structures, less stable political
systems, more restrictive foreign investment policies, smaller-sized
securities markets and low trading volumes. Such risks can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines.
EURO RISK: The Portfolio invests in securities issued by European
issuers that that may be adversely impacted by the recent introduction
of the "Euro" as a common currency in 11 European Monetary Union member
--------------------------- EQ Advisors Trust
<PAGE>
GLOBAL/INTERNATIONAL PORTFOLIO (CONTINUED)
- ----------
22
- --------------------------------------------------------------------------------
states. The Euro may result in various legal and accounting differences,
tax treatments, the creation and implementation of suitable clearing and
settlement systems and other operational problems, that may cause market
disruptions that could adversely affect investments quoted in the Euro.
REGULATORY RISK: In general, foreign companies are also not subject to
uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements as are U.S. companies, which
could adversely affect their value.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices. Leveraging
Risk. When the Portfolio is borrowing money or otherwise leveraging its
portfolio, the value of an investment in the Portfolio will be more volatile
and all other risk will tend to be compounded.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving
additional collateral, or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially.
FIXED INCOME 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
if it invested in higher-rated obligations because BBB-rated securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last ten calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one,
five and ten years and compares the Portfolio's performance to: (i) the
returns of a broad-based index and (ii) the returns of an index of funds with
similar investment objectives. Past performance is not an indication of future
performance.
The Portfolio's performance shown below is the performance of its predecessor
registered investment company (HRT/Alliance Global Portfolio) managed by the
Adviser using the same investment objectives and strategy as the Portfolio.
For these purposes, the Portfolio is considered to be the successor entity to
the predecessor registered investment company (HRT/Alliance Global Portfolio)
whose inception date is August 27, 1987. The assets of the predecessor will be
transferred to the Portfolio on October 18, 1999.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance.
<PAGE>
- ----------
23
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
26.7% -6.1% 30.5% -0.5% 32.1% 5.2% 18.8% 14.6% 11.7% 21.8%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
26.59% (1998 4th Quarter) -16.99% (1998 3rd Quarter)
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Global Portfolio -
Class IA Shares 21.80% 14.28% 14.81%
- --------------------------------------------------------------------------------
MSCI World Index* 24.34% 15.68% 10.66%
- --------------------------------------------------------------------------------
Lipper Global Mutual Funds
Average* 14.34% 11.98% 11.21%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor (registered investment company) since the predecessor
commenced operations. Alliance, a publicly traded limited partnership, is
indirectly majority-owned by Equitable. Alliance manages investment companies,
endowment funds, insurance companies, foreign entities, qualified and non-tax
qualified corporate funds, public and private pension and profit-sharing
plans, foundations and tax-exempt organizations.
SANDRA L. YEAGER has been responsible for the day-to-day management of the
Portfolio's and its predecessor's investment program since 1998. Ms. Yeager, a
Senior Vice President of Alliance, has been associated with Alliance since
1990.
----------------------------- EQ Advisors Trust
<PAGE>
AGGRESSIVE EQUITY PORTFOLIO
- ----------
24
- --------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY
VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term capital appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of U.S. small-cap
companies with above-average growth potential that the Adviser believes to be
undervalued. Typically, such investments may include common stocks, preferred
stocks, convertible securities, warrants and rights of small-cap companies.
Once 65% of the Portfolio's assets are invested in small-cap companies, the
Portfolio may also invest in companies with a market capitalization of any
size.
[sidebar]
For purposes of this Portfolio, small-cap companies are companies having
market capitalizations within the range of capitalizations of companies
represented in the Russell 2000 Index.
[end sidebar]
In determining whether a company's stock is undervalued, the Adviser considers
all relevant factors which may include a company's:
o price/earnings ratio;
o price to book value ratio;
o price to cash flow ratio; and
o debt to capital ratio.
The Portfolio will invest primarily (at least 65% of its net assets) in the
securities of U.S. companies traded in the U.S. securities markets. The
Portfolio may invest to a lesser extent in foreign securities, investment
grade debt securities and high quality domestic and foreign short-term (one
year or less) and medium-term money-market securities.
When market or financial conditions warrant, the Portfolio may invest without
limitation in investment grade debt obligations and in domestic and foreign
obligations, including repurchase agreements for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged
to be undervalued may actually be appropriately priced.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs and may result in higher
taxable gains that could be passed through to shareholders.
FOREIGN SECURITIES RISKS: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely
<PAGE>
- ----------
25
- --------------------------------------------------------------------------------
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. In addition, holders of variable insurance
contracts representing interests in the Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance and Contract-related fees and
expenses, which would reduce the performance results. The inception date for
the Portfolio is May 1, 1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
(10.02)%
1998
<S> <C>
Best quarter: Worst quarter:
15.49% (1997 3rd Quarter) (20.25)% (1998 3rd Quarter)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Warburg Pincus Small Company Value
Portfolio (10.02)% 4.25%
- --------------------------------------------------------------------------------
Russell 2000 Index* ( 2.54)% 14.53%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
WARBURG PINCUS ASSET MANAGEMENT, INC. ("WPAM"), 466 Lexington Avenue, New
York, New York 10017-3147. WPAM has been the Adviser to the Portfolio since it
commenced operations. WPAM is a professional investment advisory firm that
provides investment services to investment companies, employee benefit plans,
endowment funds, foundations and other institutions and individuals. WPAM is
indirectly controlled by Warburg, Pincus & Co., a New York partnership which
has no business other than being a holding company of WPAM and its affiliates.
During 1999, WPAM and Credit Suisse Group expect to finalize Credit Suisse
Group's acquisition of WPAM. WPAM will be combined with and into Credit Suisse
Group's global asset management subsidiary, Credit Suisse Asset Management,
LLC.
KYLE F. FREY is the Portfolio Manager and has been responsible for the
day-to-day management of the Portfolio since the Portfolio commenced
operations. Mr. Frey is a managing director of WPAM and has been with WPAM
since 1989.
----------------------- EQ Advisors Trust
<PAGE>
ASSET ALLOCATION PORTFOLIOS
- ----------
26
- --------------------------------------------------------------------------------
The Alliance Conservative Investors Portfolio and the Alliance Growth
Investors Portfolio together are called the Asset Allocation Portfolios. These
Portfolios invest in a variety of fixed income and equity securities, each
pursuant to a different asset allocation strategy, as described below. The
term "asset allocation" is used to describe the process of shifting assets
among discrete categories of investments in an effort to reduce risk while
producing desired return objectives. Portfolio management, therefore, will
consist not only of selecting specific securities but also of setting,
monitoring and changing, when necessary, the asset mix.
Each Portfolio has been designed with a view toward a different "investor
profile." The "conservative investor"' has a relatively short-term investment
bias, either because of a limited tolerance for market volatility or a short
investment horizon. This investor is averse to taking risks that may result in
principal loss, even though such aversion may reduce the potential for higher
long-term gains and result in lower performance during periods of equity
market strength. Consequently, the asset mix for the Alliance Conservative
Investors Portfolio attempts to reduce volatility while providing modest
upside potential. The "growth investor" has a longer-term investment horizon
and is therefore willing to take more risks in an attempt to achieve long-term
growth of principal. This investor wishes, in effect, to be risk conscious
without being risk averse. The asset mix for the Alliance Growth Investors
Portfolio attempts to provide for upside potential without excessive
volatility.
The Adviser has established an asset allocation committee (the "Committee"),
all the members of which are employees of the Adviser, which is responsible
for setting and continually reviewing the asset mix ranges of each Portfolio.
Under normal market conditions, the Committee is expected to change allocation
ranges approximately three to five times per year. However, the Committee has
broad latitude to establish the frequency, as well as the magnitude, of
allocation changes within the guidelines established for each Portfolio.
During periods of severe market disruption, allocation ranges may change
frequently. It is also possible that in periods of stable and consistent
outlook no change will be made. The Committee's decisions are based on a
variety of factors, including liquidity, portfolio size, tax consequences and
general market conditions, always within the context of the appropriate
investor profile for each Portfolio. Consequently, asset mix decisions for the
Alliance Conservative Investors Portfolio particularly emphasize risk
assessment of each asset class viewed over the shorter term, while decisions
for the Alliance Growth Investors Portfolio are principally based on the
longer term total return potential for each asset class.
When the Committee establishes a new allocation range for a Portfolio, it also
prescribes the length of time during which that Portfolio should achieve an
asset mix within the new range. To achieve a new asset mix, the Portfolios
look first to available cash flow. If the Adviser believes that cash flow will
be insufficient to achieve the desired asset mix, the Portfolios will sell
securities and reinvest the proceeds in the appropriate asset class.
The Asset Allocation Portfolios are permitted to use a variety of hedging
techniques to attempt to control stock market, interest rate and currency
risks. Each of the Portfolios in the Asset Allocation may make loans of up to
50% of its total portfolio securities. Each of the Portfolios in the Asset
Allocation Portfolios may write covered call and put options and may purchase
call and put options on all the types of securities in which it may invest, as
well as securities indexes and foreign currencies. Each Portfolio may also
purchase and sell stock index, interest rate and foreign currency futures
contracts and options thereon, as well as forward foreign currency exchange
contracts.
<PAGE>
- ----------
27
- --------------------------------------------------------------------------------
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve a high total return without, in the
opinion of the Adviser, undue risk to principal.
THE INVESTMENT STRATEGY
The Portfolio invests varying portions of its assets in high quality,
publicly-traded fixed income securities (including money market instruments
and cash) and publicly-traded common stocks and other equity securities of
U.S. and non-U.S. issuers.
The Portfolio will at all times hold at least 40% of its assets in investment
grade fixed income securities, each having a duration, as determined by the
Adviser, that is less than that of a 10-year Treasury bond (the "fixed income
core"). The Portfolio is generally expected to hold approximately 70% of its
assets in fixed income securities (including the fixed income core) and 30% in
equity securities. Actual asset mixes will be adjusted in response to economic
and credit market cycles. The fixed income asset class will always comprise at
least 50%, but never more than 90%, of the Portfolio's total assets. The
equity class will always comprise at least 10%, but never more than 50%, of
the Portfolio's total assets.
[sidebar]
Duration is a measure of the weighted average maturity of the bonds held by
the Portfolio and can be used by the Adviser as a measure of the
sensitivity of the market value of the Portfolio to changes in interest
rates. Generally, the longer the duration of the Portfolio, the more
sensitive its market value will be to changes in interest rates.
[end sidebar]
[sidebar]
In some cases, the Adviser's calculation of duration will be based on
certain assumptions (including assumptions regarding prepayment rates, in
the mortgage-backed or asset-backed securities, and foreign and domestic
interest rates). As of December 31, 1998, the Adviser considered the
duration of a 10-year Treasury bond to be 4.68 years. The Portfolio's
investments will generally have a final maturity of not more than ten years
or a duration not exceeding that of a 10-year Treasury note.
[end sidebar]
All debt securities held by the Portfolio will be of investment grade (i.e.,
rated at least BBB by S&P or Baa by Moody's) or unrated securities of
comparable quality as determined by the Adviser. The equity securities
invested in by the Portfolio will consist primarily of common stocks,
including convertible securities, common stocks that are listed on national
securities exchanges. The Portfolio may also invest in stocks that are traded
over-the-counter and in other equity-type securities. No more than 15% of the
Portfolio's assets will be invested in securities of non-U.S. issuers.
The Portfolio may also make use of various other investment strategies, and
derivatives. Up to 50% of its total assets may be used for securities lending
purposes.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that the
Adviser's allocation of the Portfolio's assets between debt and equity
securities may adversely affect the Portfolio's value.
FIXED INCOME RISKS: This Portfolio invests primarily in fixed income
securities, therefore, the Portfolio's performance will be affected by changes
in interest rates, credit risks of the issuer, the duration and maturity of
the Portfolio's fixed income holdings, and adverse market and
------------------------ EQ Advisors Trust
<PAGE>
ASSET ALLOCATION PORTFOLIOS (CONTINUED)
- ----------
28
- --------------------------------------------------------------------------------
economic conditions. Other risks that relate to the Portfolio's investment in
fixed income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price
and total return) of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true.
INVESTMENT GRADE SECURITIES RISK: The Portfolio could lose money if the
issuer or guarantor of a debt security or counterparty to a Portfolio's
transaction is unable or unwilling to make timely principal and/or interest
payments, or to honor its financial obligations. Investment grade securities
which are rated BBB by S&P or an equivalent rating by any other NRSRO, are
somewhat riskier than higher rated obligations because they are regarded as
having only an adequate capacity to pay principal and interest, are considered
to lack outstanding investment characteristics, and may be speculative.
MORTGAGE-BACKED SECURITIES RISK: Rising interest rates may cause the
duration of mortgage-backed securities to increase, making them even more
susceptible to interest rate changes. Falling interest rates may cause the
value and yield of mortgage-backed securities to fall. Falling interest rates
also may encourage borrowers to pay off their mortgages sooner than
anticipated (pre-payment). The Portfolio would need to reinvest the pre-paid
funds at the newer, lower interest rates.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. The value of convertible securities fluctuates both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving
additional collateral, or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES 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; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like, which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
LEVERAGING RISK: When the Portfolio is borrowing money or otherwise leveraging
its portfolio, the value of an investment in the Portfolio will be more
volatile and all other risk will tend to be compounded.
<PAGE>
- ----------
29
- --------------------------------------------------------------------------------
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last nine calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one
year, five years and since inception and compares the Portfolio's performance
to: (i) the returns of a broad-based index; (ii) the returns of a "blended"
index of fixed income and equity securities; and (iii) the returns of an index
of funds with similar investment objectives. Past performance is not an
indication of future performance.
The Portfolio's performance shown below is the performance of its predecessor
registered investment company (HRT/Alliance Conservative Investors Portfolio)
managed by the Adviser using the same investment objectives and strategy as
the Portfolio. For these purposes, the Portfolio is considered to be the
successor entity to the predecessor registered investment company
(HRT/Alliance Conservative Investors Portfolio) whose inception date is
October 2, 1989. The assets of the predecessor will be transferred to the
Portfolio on October 18, 1999.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
6.3% 19.8% 5.6% 10.8% -4.1% 20.4% 5.2% 13.3% 13.9%
1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
7.65% (1998 4th Quarter) -3.21% (1994 1st Quarter)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Conservative
Investors Portfolio -
Class IA Shares 13.88% 9.40% 9.99%
- --------------------------------------------------------------------------------
70% Lehman Treasury/30%
S&P 500 Index* 15.59% 13.37% 12.08%
- --------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 17.62%
- --------------------------------------------------------------------------------
Lipper Flexible Portfolio
Average 14.20% 14.31% 12.55%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor (registered investment company) since the predecessor
commenced operations. Alliance, a publicly traded limited partnership, is
indirectly majority-owned by Equitable. Alliance manages investment companies,
endowment funds, insurance companies, foreign entities, qualified and non-tax
qualified corporate funds, public and private pension and profit-sharing
plans, foundations and tax-exempt organizations.
ROBERT G. HEISTERBERG has been responsible for the day-to-day management of
the Portfolio and its predecessor since February 12, 1996. Mr. Heisterberg, a
Senior Vice President of Alliance and Global Economic Policy Analysis, has
been associated with Alliance since 1977.
----------------------- EQ Advisors Trust
<PAGE>
ASSET ALLOCATION PORTFOLIOS (CONTINUED)
- ----------
30
- --------------------------------------------------------------------------------
ALLIANCE GROWTH INVESTORS PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve the highest total return consistent
with the Adviser's determination of reasonable risk.
THE INVESTMENT STRATEGY
The Portfolio allocates varying portions of its assets to a number of asset
classes. The fixed income asset class will always comprise at least 10%, but
never more than 60%, of the Portfolio's total assets. The equity class will
always comprise at least 40%, but never more than 90%, of the Portfolio's
total assets. Over time, the Portfolio's holdings, on average, are expected to
be allocated 70% to equity securities and 30% to debt securities. Actual asset
mixes will be adjusted in response to economic and credit market cycles.
The Portfolio's investments in equity securities will include both
exchange-traded and over-the counter common stocks and other equity
securities, including foreign stocks, preferred stocks, convertible debt
instruments, as well as securities issued by small-and mid-sized companies
that have favorable growth prospects.
The Portfolio's debt securities may include foreign debt securities,
investment grade fixed income securities (including cash and money market
instruments) as well as lower quality, higher yielding debt securities (junk
bonds). The Portfolio may also make use of various other investment strategies
and derivatives. Up to 50% of its total assets may be used for securities
lending purposes. No more than 30% of the Portfolio's assets will be invested
in securities of foreign issuers.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
ASSET ALLOCATION RISK: In addition to the risks associated with the securities
in which the Portfolio invests, the Portfolio is subject to the risk that the
Adviser's allocation of the Portfolio's assets between debt and equity
securities may adversely affect the Portfolio's value.
FIXED INCOME 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
if it invested in higher-rated obligations because BBB-rated securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative. Other risks that relate to the Portfolio's investment in fixed
income securities include:
INTEREST RATE RISK: When interest rates rise, the value (i.e., share price
and total return) of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true.
JUNK BOND RISK: The Portfolio may invest a portion of its assets in "junk
bonds" or lower-rated securities rated BB or lower by S&P or an equivalent
rating by any other NRSRO or unrated securities of similar quality. Therefore,
credit risk is particularly significant for this Portfolio. Junk bonds have
speculative elements or are predominantly speculative credit risks. This
Portfolio may also be subject to greater credit risk because it may invest in
debt securities issued in connection with corporate
<PAGE>
- ----------
31
- --------------------------------------------------------------------------------
restructurings by highly leveraged issuers or in debt securities not
current in the payment of interest or principal, or in default.
LEVERAGING RISK: When the Portfolio is borrowing money or otherwise leveraging
its portfolio, the value of an investment in the Portfolio will be more
volatile and all other risk will tend to be compounded.
SMALL CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known, held primarily by insiders
or institutional investors and may trade less frequently and in lower volume;
such companies are more likely to experience greater or more unexpected
changes in their earnings and growth prospects; such companies have limited
financial resources or may depend on a few key employees; and the products of
technologies of such companies may be at a relatively early stage of
development or not fully tested.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stock and provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. The value of convertible securities fluctuates both in relation to
changes in interest rates and changes in the value of the underlying common
stock.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
FOREIGN SECURITIES 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; expropriation or nationalization; adverse changes in
foreign economic and tax policies; and foreign government instability, war or
other adverse political or economic actions.
SECURITIES LENDING RISK: This Portfolio may make secured loans of its
portfolio securities. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving
additional collateral, or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially.
PORTFOLIO PERFORMANCE
The bar chart below illustrates the Portfolio's annual total returns for each
of the last nine calendar years and some of the risks of investing in the
Portfolio by showing yearly changes in the Portfolio's performance. The table
below shows the Portfolio's average annual total returns for the past one
year, five years and since inception and compares the Portfolio's performance
to: (i) the returns of a broad-based index; (ii) the returns of a "blended"
index of equity and fixed income securities; and (iii) the returns of an index
of funds with similar investment objectives. Past performance is not an
indication of future performance.
------------------------ EQ Advisors Trust
<PAGE>
ASSET ALLOCATION PORTFOLIOS (CONTINUED)
- ----------
32
- --------------------------------------------------------------------------------
The Portfolio's performance shown below is the performance of its predecessor
registered investment company (HRT/Alliance Growth Investors Portfolio)
managed by the Adviser using the same investment objectives and strategy as
the Portfolio. For these purposes, the Portfolio is considered to be the
successor entity to the predecessor registered investment company
(HRT/Alliance Growth Investors Portfolio) whose inception date is October 2,
1989. The assets of the predecessor will be transferred to the Portfolio on
October 18, 1999.
Both the bar chart and table assume reinvestment of dividends and
distributions. The performance results do not reflect any insurance and
Contract-related fees and expenses, which would reduce the performance
results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
10.7% 48.8% 4.9% 15.3% -3.2% 26.4% 12.6% 16.9% 19.1%
1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C>
Best quarter (% and time period) Worst quarter (% and time period)
18.16% (1998 4th Quarter) -10.60% (1990 3rd Quarter)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Growth Investors
Portfolio - Class IA
Shares 19.13% 13.92% 16.09%
- --------------------------------------------------------------------------------
70% S&P 500 Index/30%
Lehman Gov't/Corp.* 22.85% 19.96% 15.55%
- --------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 17.62%
- --------------------------------------------------------------------------------
Lipper Flexible Portfolio
Average* 14.20% 14.31% 12.55%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
ALLIANCE CAPITAL MANAGEMENT, L.P. ("Alliance"), 1345 Avenue of the Americas,
New York, New York 10105. Alliance has been the Adviser to the Portfolio and
its predecessor (registered investment company) since the predecessor
commenced operations. Alliance, a publicly traded limited partnership, is
indirectly majority-owned by Equitable. Alliance manages investment companies,
endowment funds, insurance companies, foreign entities, qualified and non-tax
qualified corporate funds, public and private pension and profit-sharing
plans, foundations and tax-exempt organizations.
ROBERT G. HEISTERBERG has been responsible for the day-to-day management of
the Portfolio and its predecessor since February 12, 1996. Mr. Heisterberg, a
Senior Vice President of Alliance and Global Economic Policy Analysis, has
been associated with Alliance since 1977.
<PAGE>
- ----------
33
- --------------------------------------------------------------------------------
MERRILL LYNCH WORLD STRATEGY
PORTFOLIO
INVESTMENT OBJECTIVE: Seek high total investment return by investing primarily
in a portfolio of equity and fixed income securities, including convertible
securities, of U.S. and foreign issuers.
[sidebar]
For purposes of this Portfolio, "total investment return" consists of
interest, dividends, discount accruals and capital changes, including
changes in the value of non-dollar denominated securities and other assets
and liabilities resulting from currency fluctuations.
[end sidebar]
THE INVESTMENT STRATEGY
The Portfolio is a non-diversified Portfolio that invests in both equity
securities and fixed income securities. The Portfolio may invest entirely in
equity securities, entirely in fixed income securities, or partly in equity
securities and partly in fixed income securities.
[sidebar]
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.
[end sidebar]
The Portfolio will normally invest a significant portion of its assets in
equity securities of companies throughout the world. The equity securities in
which the Portfolio invests will primarily be common stocks of large
companies.
There are no limits on the Portfolio's ability to invest in any country or
geographic region. The Portfolio can invest primarily in U.S. securities,
primarily in foreign securities, or partly in both. It normally invests in at
least three countries at any given time. The Portfolio may invest in companies
in emerging markets, but the Adviser anticipates that a substantially greater
portion of the Portfolio's equity investments will be in companies in
developed countries. At the present time, the Portfolio focuses on investments
in Canada, Western Europe, the Far East, and Latin America, as well as in the
United States. The Adviser will select the percentage of the Portfolio's
assets that will be invested in equity securities and fixed income securities,
as well as the geographic allocation of the Portfolio's investments, based on
its view of general economic and financial trends in various countries and
industries, such as inflation, commodity prices, the direction of interest and
currency movements, estimates of growth in industry output and profits, and
government fiscal policies. For example, if the Adviser believes that falling
commodity prices and decreasing estimates of industrial output globally signal
low growth and limited returns from equity securities, the Portfolio may
emphasize fixed income investments. Similarly, if the Adviser believes that
low inflation, new technologies and improvements in economic productivity in a
country or region signal a promising environment for equity securities in that
country or region the Portfolio may emphasize equity investments in that
country or region.
The Portfolio may invest in fixed-income securities of any maturity, including
United States and foreign government securities and corporate debt securities.
The Portfolio will only invest in debt securities that are rated investment
grade by S&P or Moody's or unrated securities that are of comparable quality.
The Portfolio may also invest in securities denominated in currencies other
than the U.S. dollar. The Portfolio may also engage in currency transactions
to hedge against the risk of loss from changes in currency exchange rates. In
addition, the Portfolio may also employ a variety of instruments and
techniques to enhance income and to hedge against market and currency risk.
The Portfolio has no stated minimum holding period for investments, and will
buy or sell securities whenever the Adviser sees an appropriate opportunity.
-------------------------- EQ Advisors Trust
<PAGE>
ASSET ALLOCATION PORTFOLIOS (CONTINUED)
- ----------
34
- --------------------------------------------------------------------------------
When market or financial conditions warrant, the Portfolio may invest up to
100% of its assets in United States Government or Government agency
securities, money market securities, other fixed income securities, or cash
for temporary or defensive purposes. Such investment strategies are
inconsistent with the Portfolio's investment objective and could result in the
Portfolio not achieving its investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
CONVERTIBLE SECURITIES RISK: Convertible securities generally enable the
Portfolio to benefit from increases in the market price of the underlying
common stocks, but generally offer lower yields than unconvertible securities
of similar quality. 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 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:
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.
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.
DERIVATIVES RISK: The Portfolio's investments in derivatives can significantly
increase the Portfolio's exposure to market risk or credit risk of the
counterparty. Derivatives also involve the risk of mispricing or improper
valuation and the risk that changes in value of the derivative may not
correlate perfectly with the relevant assets, rates and indices.
<PAGE>
- ----------
35
- --------------------------------------------------------------------------------
NON-DIVERSIFICATION RISK: Since a relatively high percentage of the
Portfolio's assets may be invested in the securities of a limited number of
issuers, some of which may be within the same industry, the securities of the
Portfolio may be more sensitive to changes in the market value of a single
issuer or industry or to risks associated with a single economic, political or
regulatory event than a diversified portfolio.
LIQUIDITY RISK: Certain securities held by the Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like which
may cause the Portfolio to lose money or be prevented from earning capital
gains.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs and may result in higher
taxable gains that could be passed through to shareholders.
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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
6.81%
1998
<S> <C>
Best quarter: Worst quarter:
10.56% (1998 4th Quarter) (11.15)% (1998 3rd Quarter)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Merrill Lynch World Strategy Portfolio 6.81% 6.91%
Composite Market Benchmark Index* (25.34)% (28.92)%
- --------------------------------------------------------------------------------
</TABLE>
* For more information on this index, see the preceding section "The
Benchmarks."
WHO MANAGES THE PORTFOLIO
MERRILL LYNCH ASSET MANAGEMENT, L.P. ("MLAM"), 800 Scudders Mill Road,
Plainsboro, New Jersey 08543. MLAM has been the Adviser to the Portfolio since
it commenced operations. MLAM is an indirect wholly-owned subsidiary of
Merrill Lynch & Co., Inc., a financial services holding company. MLAM and its
affiliates act as the manager for more than 100 registered investment
companies. MLAM also offers portfolio management and portfolio analysis
services to individuals and institutions.
THOMAS R. ROBINSON is the Portfolio Manager primarily responsible for the
day-to-day management of the Portfolio since it commenced operations. Mr.
Robinson has served as a First Vice President of MLAM since 1997 and as a
Senior Portfolio Manager of MLAM since 1995. Prior to 1995, Mr. Robinson
served as Manager of International Strategy for Merrill Lynch & Co. Global
Securities Research and Economics Group.
----------------------- EQ Advisors Trust
<PAGE>
3
More information on principal risks
- ----------------
36
- --------------------------------------------------------------------------------
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.
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In many countries outside the United States the Year 2000 Problem has not been
adequately addressed and concerns have been raised that capital flight, among
other issues, may be triggered by full disclosure of the Year 2000 Problem on
countries outside the United States. Additional information on the impact of
the Year 2000 Problem on emerging market countries is provided in this
section, under "FOREIGN SECURITIES RISKS-EMERGING MARKET RISK."
As indicated in "Summary Information Concerning EQ Advisors Trust" and "About
the Investment Portfolios," a particular Portfolio may also be subject to the
following risks:
CONVERTIBLE SECURITIES RISK: Convertible securities may include both
convertible debt and convertible preferred stock. Such securities may be
converted into shares of the underlying common stock at either a stated price
or stated rate. Therefore, convertible securities enable you to benefit from
increases in the market price of the underlying common stock. Convertible
securities provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. 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, such as the
Alliance Growth Investors Portfolio, that invest a material portion of their
assets in "junk bonds" or lower-rated securities (i.e., rated BB or lower by
S&P or an equivalent rating by any other NRSRO or unrated securities of
similar quality). These debt securities and similar unrated securities have
speculative elements or are predominantly speculative. Portfolios such as the
Alliance Growth Investors Portfolio may also be subject to greater credit
risk because it may invest in debt securities issued in connection with
corporate restructurings by highly leveraged issuers or in debt securities
not current in the payment of interest or principal, or in default.
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
---------------------- EQ Advisors Trust
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to changes in interest rates. A rise in interest rates causes the value of a
bond to decrease, and vice versa. There is the possibility that the value of
a Portfolio's investment in bonds or fixed income securities may fall because
bonds or fixed income securities generally fall in value when interest rates
rise. The longer the term of a bond or fixed income instrument, the more
sensitive it will be to fluctuations in value from interest rate changes.
Changes in interest rates may have a significant effect on Portfolios holding
a significant portion of their assets in fixed income securities with long
term maturities.
MORTGAGE-BACKED SECURITIES RISK: In the case of mortgage-backed securities,
rising interest rates tend to extend the term to maturity of the securities,
making them even more susceptible to interest rate changes. When interest
rates drop, not only can the value of fixed income securities drop, but the
yield can drop, particularly where the yield on the fixed income securities
is tied to changes in interest rates, such as adjustable mortgages. Also when
interest rates drop, the holdings of mortgage-backed securities by a
Portfolio can reduce returns if the owners of the underlying mortgages pay
off their mortgages sooner than anticipated since the funds prepaid will have
to be reinvested at the then lower prevailing rates. This is known as
prepayment risk. When interest rates rise, the holdings of mortgage-backed
securities by a Portfolio can reduce returns if the owners of the underlying
mortgages pay off their mortgages later than anticipated. This is known as
extension risk.
INVESTMENT GRADE SECURITIES RISK: Debt securities are rated by national bond
ratings agencies. Securities rated BBB by S&P or Baa by Moody's are
considered investment grade securities, but are somewhat riskier than higher
rated obligations because they are regarded as having only an adequate
capacity to pay principal and interest, and are considered to lack
outstanding investment characteristics 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
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and/or their securities markets. Generally, economic structures in these
countries are less diverse and mature than those in developed countries, and
their political systems are less stable. Investments in emerging markets
countries may be affected by national policies that restrict foreign
investment in certain issuers or industries. The small size of their
securities markets and low trading volumes can make investments illiquid and
more volatile than investments in developed countries and such securities may
be subject to abrupt and severe price declines. As a result, a Portfolio
investing in emerging markets countries may be required to establish special
custody or other arrangements before investing.
The YEAR 2000 PROBLEM may also be especially acute in emerging market
countries. Many emerging market 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.
------------------------- EQ Advisors Trust
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GROWTH INVESTING RISK: Growth investing generally focuses on companies that,
due to their strong earnings and revenue potential, offer above-average
prospects for capital growth, with less emphasis on dividend income. Earnings
predictability and confidence in earnings forecasts are an important part of
the selection process. As a result, the price of growth stocks may be more
sensitive to changes in current or expected earnings than the prices of other
stocks. Advisers using this approach generally seek out companies experiencing
some or all of the following: high sales growth, high unit growth, high or
improving returns on assets and equity, and a strong balance sheet. Such
Advisers also prefer companies with a competitive advantage such as unique
management, marketing or research and development. Growth investing is also
subject to the risk that the stock price of one or more companies will fall or
will fail to appreciate as anticipated by the Advisers, regardless of
movements in the securities market.
INDEX-FUND RISK: The BT Equity 500 Index Portfolio is not actively managed
(which involves buying and selling of securities based upon economic,
financial and market analysis and investment judgment). Rather, the BT Equity
500 Index Portfolio utilizes a "passive" or "indexing" investment approach and
attempts to duplicate the investment performance of the particular index the
Portfolio is tracking (i.e., S&P 500 Index, Russell 2000 Index or MSCI EAFE
Index) through statistical procedures. Therefore, the Portfolio will invest in
the securities included in the relevant index or substantially identical
securities regardless of market trends. The Portfolio cannot modify its
investment strategies to respond to changes in the economy, which means it may
be particularly susceptible to a general decline in the U.S. or global stock
market segment relating to the relevant index.
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.
MONEY MARKET RISK: Although a money market fund is designed to be a relatively
low risk investment, it is not entirely free of risk.
NON-DIVERSIFICATION RISK: The Merrill Lynch World Strategy 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 the 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 the 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
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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. Each non-diversified Portfolio intends to qualify as a RIC.
PORTFOLIO TURNOVER RISK: Consistent with their investment policies, the
Portfolios also will purchase and sell securities without regard to the effect
on portfolio turnover. Higher portfolio turnover (e.g., over 100% per year)
will cause a Portfolio to incur additional transaction costs and may result in
taxable gains being passed through to shareholders.
SECURITIES LENDING RISK: For purposes of realizing additional income, each
Portfolio may lend securities to broker-dealers approved by the Board of
Trustees. Any such loan of portfolio securities will be continuously secured
by collateral at least equal to the value of the security loaned. Such
collateral will be in the form of cash, marketable securities issued or
guaranteed by the U.S. Government or its agencies, or a standby letter of
credit issued by qualified banks. The risks in lending portfolio securities,
as with other extensions of secured credit, consist of possible delay in
receiving additional collateral or in the recovery of the securities or
possible loss of rights in the collateral should the borrower fail
financially. Loans will only be made to firms deemed by the Adviser to be of
good standing and will not be made unless, in the judgment of the Adviser, the
consideration to be earned from such loans would justify the risk.
SMALL-CAP AND MID-CAP COMPANY RISK: A Portfolio's investments in small-cap and
mid-cap companies may involve greater risks than investments in larger, more
established issuers. Smaller companies may have narrower product lines, more
limited financial resources and more limited trading markets for their stock,
as compared with larger companies. Their securities may be less well-known and
trade less frequently and in more limited volume than the securities of
larger, more established companies. In addition, small-cap and mid-cap
companies are typically subject to greater changes in earnings and business
prospects than larger companies. Consequently, the prices of small company
stocks tend to rise and fall in value more frequently than the stocks of
larger companies. Although investing in small-cap and mid-cap companies offers
potential for above-average returns, the companies may not succeed and the
value of their stock could decline significantly.
VALUE INVESTING RISK: Value investing attempts to identify strong companies
selling at a discount from their perceived true worth. Advisers using this
approach generally select stocks at prices, in their view, that are
temporarily low relative to the company's earnings, assets, cash flow and
dividends. Value investing is subject to the risk that the stocks' intrinsic
value may never be fully recognized or realized by the market, or their prices
may go down. In addition, there is the risk that a stock judged to be
undervalued may actually be appropriately priced. Value investing generally
emphasizes companies that, considering their assets and earnings history, are
attractively priced and may provide dividend income.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
------------------------- EQ Advisors Trust
<PAGE>
4
Management of the Trust
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This section gives you information on the Trust, the Manager and the Advisers
for the Portfolios. More detailed information concerning each of the Advisers
and portfolio managers is included in the description for each Portfolio in
the section "About The Investment Portfolios."
THE TRUST
The Trust is organized as a Delaware business trust and is registered with the
Securities and Exchange Commission ("SEC") as an open-end management
investment company. The Trust issues shares of beneficial interest that are
currently divided among forty (40) Portfolios, each of which has authorized
Class IA and Class IB shares. Each Portfolio has its own objectives,
investment strategies and risks, which have been previously described in this
prospectus.
THE MANAGER
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 Manager has filed an application ("Substitution Application") requesting
that the SEC approve the substitution of Class IA and Class IB shares of 14
new Portfolios of the Trust for the same class of shares of corresponding
portfolios of The Hudson River Trust ("HRT"). Alliance Capital Management L.P.
("Alliance") will serve as Adviser for each of those 14 new Portfolios. The
Substitution Application states that, with respect to those 14 new Portfolios
advised by Alliance, the Manager will not use the powers granted to it under
the Multi-Manager Order (i) to terminate Alliance and select a new Adviser for
those Portfolios or (ii) to materially modify the Investment Advisory
Agreement between the Manager and Alliance without first obtaining
shareholders approval to utilize the powers granted under the Multi-Manager
Order or the approval of shareholders to materially modify the Investment
Advisory Agreement.
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The table below shows the annual rate of the management fees (as a percentage
of each Portfolio's average daily net assets) that the Manager received in
1998 for managing each of the Portfolios and the rate of the management fees
waived by the Manager in 1998 in accordance with the provisions of the Expense
Limitation Agreement, as defined directly below, between the Manager and the
Trust.
MANAGEMENT FEES PAID BY THE PORTFOLIOS TO EQ FINANCIAL CONSULTANTS, INC. IN
1998
<TABLE>
<CAPTION>
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ANNUAL RATE OF
RATE FEES
PORTFOLIOS RECEIVED WAIVED
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<S> <C> <C>
BT Equity 500 Index 0.00% 0.25%
Merrill Lynch World Strategy 0.26% 0.44%
MFS Research 0.35% 0.20%
T. Rowe Price Equity Income 0.36% 0.19%
Warburg Pincus Small Company 0.47% 0.18%
Value
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</TABLE>
The three (3) 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 (except for the
Portfolios for which Alliance serves as Investment Adviser) 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.
ANNUAL RATE OF MANAGEMENT FEES
<TABLE>
<CAPTION>
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PORTFOLIOS ANNUAL RATE
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<S> <C>
Alliance Conservative Investors(1) 0.48%
Alliance Global(1) 0.64%
Alliance Growth Investors(1) 0.51%
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</TABLE>
(1) The inception date for this Portfolio is October 18, 1999.
EXPENSE LIMITATION AGREEMENT
In the interest of limiting expenses of each Portfolio (except for the
Portfolios for which Alliance serves as Investment Adviser), 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 rates:
EXPENSE LIMITATION RATES
<TABLE>
<CAPTION>
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AMOUNT EXPENSES
LIMITED TO (% OF
PORTFOLIOS DAILY NET ASSETS)
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<S> <C>
BT Equity 500 Index 0.30%
Merrill Lynch World Strategy 0.95%
MFS Research 0.60%
T. Rowe Price Equity Income 0.60%
Warburg Pincus Small Company Value 0.75%
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</TABLE>
Each Portfolio may at a later date reimburse to the Manager the management
fees waived or limited and other expenses assumed and paid by the Manager
pursuant to the Expense Limitation Agreement provided such Portfolio has
reached a sufficient asset size to permit such reimbursement to be made
without causing the total annual expense ratio of each Portfolio to exceed the
percentage limits stated above. Consequently, no reimbursement by a Portfolio
will be made unless: (i) the Portfolio's assets exceed $100 million;
(ii) the Portfolio's total annual expense ratio is less than the respective
percentages stated above; and (iii) the payment of such reimbursement has been
approved by the Trust's Board of Trustees on a quarterly basis.
------------------------- EQ Advisors Trust
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The total amount of reimbursement to which the Manager may be entitled will
equal, at any time, the sum of (i) all investment management fees previously
waived or reduced by the Manager and (ii) all other payments previously
remitted by the Manager to the Portfolio during any of the previous five (5)
fiscal years, less any reimbursement that the Portfolio has previously paid to
the Manager with respect to (a) such investment management fees previously
waived or reduced and (b) such other payments previously remitted by the
Manager to the Portfolio.
THE ADVISERS
Each Portfolio has 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 and certain non-affiliated insurance companies (collectively,
"Applicants") have filed a Substitution Application with the SEC. Applicants
have included, as a term of the Substitution Application, that with respect to
those Portfolios for which Alliance serves as Adviser, the Manager will not:
(i) terminate Alliance and select a new Adviser for those Portfolios or (ii)
materially modify the existing investment advisory agreement without first
either obtaining approval of shareholders for such actions or obtaining
approval of shareholders to utilize the Multi-Manager Order.
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.
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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 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
- ----------------
46
- --------------------------------------------------------------------------------
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
- ----------------
47
- --------------------------------------------------------------------------------
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
- ----------------
48
- --------------------------------------------------------------------------------
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, which mature in 60 days or
less are valued at amortized cost, which approximates market value.
o Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided are valued in good
faith by the Valuation Committee of the Board of Trustees of the Trust
using its best judgment.
<PAGE>
8
Tax information
- ----------------
49
- --------------------------------------------------------------------------------
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
- ----------------
50
- --------------------------------------------------------------------------------
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.
The performance results for the registered investment companies 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 performance results presented below do not reflect any
insurance related expenses and would be reduced if such charges were
reflected.
The investment results presented below are unaudited. For more information on
the specified market indices used below, see the section "The Benchmarks."
<PAGE>
- -----
51
- --------------------------------------------------------------------------------
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
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT Portfolio) Year Years
=====================================================================================================================
<S> <C> <C>
Benchmark
=====================================================================================================================
BT INSTITUTIONAL FUNDS - EQUITY 500 INDEX FUND - INSTITUTIONAL CLASS (BT EQUITY 500 INDEX PORTFOLIO)
28.75% 24.05%
- ---------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 28.57% 24.06%
=====================================================================================================================
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. - MERRILL LYNCH GLOBAL STRATEGY FOCUS FUND (MERRILL LYNCH WORLD
STRATEGY PORTFOLIO)
8.88% 8.49%
- ---------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(5) 20.33% 9.50%
=====================================================================================================================
MFS RESEARCH FUND(2), (6) (MFS RESEARCH PORTFOLIO)
22.92% 20.65%
- ---------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 28.57% 24.06%
=====================================================================================================================
T. ROWE PRICE EQUITY INCOME FUND (T. ROWE PRICE EQUITY INCOME PORTFOLIO)
9.23% 18.75%
- ---------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 28.57% 24.06%
=====================================================================================================================
WARBURG PINCUS SMALL COMPANY VALUE FUND(1) (WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO)
(14.88)% N/A
- ---------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4) ( 2.54)% N/A
=====================================================================================================================
<CAPTION>
===============================================================================================================================
10 Since Inception
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT Portfolio) Years Inception Date
===============================================================================================================================
<S> <C> <C> <C>
Benchmark
===============================================================================================================================
BT INSTITUTIONAL FUNDS - EQUITY 500 INDEX FUND - INSTITUTIONAL CLASS (BT EQUITY 500 INDEX PORTFOLIO)
N/A 21.56% 12/31/92
- -------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) N/A 21.61%
===============================================================================================================================
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. - MERRILL LYNCH GLOBAL STRATEGY FOCUS FUND (MERRILL LYNCH WORLD
STRATEGY PORTFOLIO)
N/A 9.57% 2/28/92
- -------------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(5) N/A 9.98%
===============================================================================================================================
MFS RESEARCH FUND(2), (6) (MFS RESEARCH PORTFOLIO)
18.44% 10/13/71
- -------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 19.21%
===============================================================================================================================
T. ROWE PRICE EQUITY INCOME FUND (T. ROWE PRICE EQUITY INCOME PORTFOLIO)
15.18% 10/31/85
- -------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 19.21%
===============================================================================================================================
WARBURG PINCUS SMALL COMPANY VALUE FUND(1) (WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO)
N/A 16.51% 12/29/95
- -------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4) N/A 11.58%
===============================================================================================================================
</TABLE>
(1) Absent the waiver of fees in 1998 by the Warburg Pincus Small Company Value
Fund's investment adviser and co-administrator, management fees of the
Warburg Pincus Small Company Value Fund would equal 1.00%, other expenses
would equal 0.94% and total operating expenses would equal 2.19%. The
investment adviser and co-administrator of the Warburg Pincus Small Company
Value Fund are under no obligation to continue these waivers.
(2) Performance for the Class A shares. The Class A shares are in many instances
subject to a front-end sales charge of up to 5.75%. Other share classes
have different expenses and their performance will vary.
(3) The S&P 500 Index ("S&P 500") is an unmanaged index containing common stocks
of 500 industrial, transportation, utility and financial companies,
regarded as generally representative of the larger capitalization portion
of the United States stock market. The S&P 500 reflects the reinvestment of
income dividends and capital gain distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.
(4) The Russell 2000 Index is an unmanaged index (with no defined investment
objective) composed of approximately 2,000 small-capitalization stocks and
includes reinvestments of dividends. The index does not include fees or
operating expenses and is not available for actual investment. It is
compiled by the Frank Russell Company.
(5) The Morgan Stanley Capital International EAFE Index ("EAFE Index") is an
unmanaged capitalization-weighted measure of stock markets in Europe,
Australia and the Far East. The returns of the EAFE Index assume dividends
are reinvested net of withholding tax and do not reflect any fees or
operating expenses. The index is not available for actual investment.
(6) The results for the MFS Research Fund (Class A shares) and the MFS Emerging
Growth Fund (Class B shares) do not reflect sales charges that may be
imposed on the such shares.
---------------------- EQ Advisors Trust
<PAGE>
10
Financial Highlights
- -------
52
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the Trust's
financial performance since May 1, 1997. The Trust began to offer Class IA
shares for the T. Rowe Price Equity Income, and Warburg Pincus Small Company
Value Portfolios on November 24, 1998. Except for those two Portfolios, the
financial information in the table below for the period May 1, 1997 to December
31, 1998 relates only to the Class IB shares. The financial information
relating to both the Class IA shares and the Class IB shares has been derived
from the audited financial statements of the Trust. These financial statements
have been audited by PricewaterhouseCoopers LLP, independent public
accountants. PricewaterhouseCoopers LLP's report on the Trust's financial
statements as of December 31, 1998 appears in the Trust's Annual Report. The
information should be read in conjunction with the financial statements
contained in the Trust's Annual Report which are incorporated by reference into
the Trust's Statement of Additional Information (SAI) and available upon
request.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET
REALIZED
AND
UNREALIZED
GAIN (LOSS)
NET ASSET ON
VALUE, INVESTMENTS
BEGINNING NET AND FOREIGN
OF INVESTMENT CURRENCY
PERIOD INCOME TRANSACTIONS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
BT EQUITY 500 INDEX PORTFOLIO
- --------------------------------------------------------------------------------
Dec. 31, 1998 $ 10.00 $ 0.06 $ 2.45
- --------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- --------------------------------------------------------------------------------
MERRILL LYNCH WORLD STRATEGY PORTFOLIO
- --------------------------------------------------------------------------------
Dec. 31, 1998 $ 10.31 $ 0.15 $ 0.55
- --------------------------------------------------------------------------------
Dec. 31, 1997 $ 10.00 $ 0.08 $ 0.39
- --------------------------------------------------------------------------------
MFS RESEARCH PORTFOLIO
- --------------------------------------------------------------------------------
Dec. 31, 1998 $ 11.48 $ 0.04 $ 2.73
- --------------------------------------------------------------------------------
Dec. 31, 1997 $ 10.00 $ 0.02 $ 1.58
- --------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Class IB Dec. 31, 1998 $ 12.08 $ 0.22 $ 0.87
- --------------------------------------------------------------------------------
Class IB Dec. 31, 1997 $ 10.00 $ 0.10 $ 2.11
- --------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 $ 13.22 $ 0.06 $(0.09)+
- --------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
- --------------------------------------------------------------------------------
Class IB Dec. 31, 1998 $ 11.85 $ 0.05 $(1.24)
- --------------------------------------------------------------------------------
Class IB Dec. 31, 1997 $ 10.00 $ 0.01 $ 1.90
- --------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 $ 10.40 $ 0.03 $ 0.23+
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
DIVIDENDS IN
DIVIDENDS EXCESS OF DISTRIBUTIONS
TOTAL FROM FROM NET NET FROM
INVESTMENT INVESTMENT INVESTMENT REALIZED
OPERATIONS INCOME INCOME GAINS
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BT EQUITY 500 INDEX PORTFOLIO
- --------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 2.51 $ (0.06) - -
- --------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - -
- --------------------------------------------------------------------------------------------
MERRILL LYNCH WORLD STRATEGY PORTFOLIO
- --------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 0.70 $ (0.04) $ (0.04) -
- --------------------------------------------------------------------------------------------
Dec. 31, 1997 $ 0.47 $ (0.05) - -
- --------------------------------------------------------------------------------------------
MFS RESEARCH PORTFOLIO
- --------------------------------------------------------------------------------------------
Dec. 31, 1998 $ 2.77 $ (0.04) - -
- --------------------------------------------------------------------------------------------
Dec. 31, 1997 $ 1.60 $ (0.02) - $(0.01)
- --------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 $ 1.09 $ (0.22) - $(0.28)
- --------------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 $ 2.21 $ (0.09) - $(0.04)
- --------------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 $ (0.03) $ (0.24) - $(0.28)
- --------------------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
- --------------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 $ (1.19) $ (0.04) - -
- --------------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 $ 1.91 $ (0.01) - -
- --------------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 $ 0.26 $ (0.06) - -
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -----
53
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
DISTRIBUTIONS TOTAL NET ASSET
IN EXCESS OF DIVIDENDS AND VALUE, END OF
REALIZED GAINS DISTRIBUTIONS PERIOD
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
BT EQUITY 500 INDEX PORTFOLIO
- ----------------------------------------------------------------------------------
Dec. 31, 1998 - $ (0.06) $ 12.45
- ----------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- ----------------------------------------------------------------------------------
MERRILL LYNCH WORLD STRATEGY PORTFOLIO
- ----------------------------------------------------------------------------------
Dec. 31, 1998 - $ (0.08) $ 10.93
- ----------------------------------------------------------------------------------
Dec. 31, 1997 $ (0.11) $ (0.16) $ 10.31
- ----------------------------------------------------------------------------------
MFS RESEARCH PORTFOLIO
- ----------------------------------------------------------------------------------
Dec. 31, 1998 - $ (0.04) $ 14.21
- ----------------------------------------------------------------------------------
Dec. 31, 1997 $ (0.09) $ (0.12) $ 11.48
- ----------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO
- ----------------------------------------------------------------------------------
Class IB Dec. 31, 1998 - $ (0.50) $ 12.67
- ----------------------------------------------------------------------------------
Class IB Dec. 31, 1997 - $ (0.13) $ 12.08
- ----------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 - $ (0.52) $ 12.67
- ----------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
- ----------------------------------------------------------------------------------
Class IB Dec. 31, 1998 - $ (0.05) $ 10.61
- ----------------------------------------------------------------------------------
Class IB Dec. 31, 1997 $ (0.05) $ (0.06) $ 11.85
- ----------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 - $ (0.07) $ 10.59
- ----------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------
RATIO OF
EXPENSES TO
NET ASSETS, AVERAGE NET
TOTAL RETURN END OF PERIOD ASSETS AFTER
(B) (000'S) WAIVERS (A)(C)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BT EQUITY 500 INDEX PORTFOLIO
- ------------------------------------------------------------------------------------------
Dec. 31, 1998 25.14% $224,247 0.55%
- ------------------------------------------------------------------------------------------
Dec. 31, 1997 - - -
- ------------------------------------------------------------------------------------------
MERRILL LYNCH WORLD STRATEGY PORTFOLIO
- ------------------------------------------------------------------------------------------
Dec. 31, 1998 6.81% $ 30,631 1.20%
- ------------------------------------------------------------------------------------------
Dec. 31, 1997 4.70% $ 18,210 1.20%
- ------------------------------------------------------------------------------------------
MFS RESEARCH PORTFOLIO
- ------------------------------------------------------------------------------------------
Dec. 31, 1998 24.11% $407,619 0.85%
- ------------------------------------------------------------------------------------------
Dec. 31, 1997 16.07% $114,754 0.85%
- ------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO
- ------------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 9.11% $242,001 0.85%(1)
- ------------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 22.11% $ 99,947 0.85%(a)
- ------------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 ( 2.21)%(b) $ 2,415 0.60%(a)(1)
- ------------------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 (10.02)% $166,746 1.00%(1)
- ------------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 19.15% $120,880 1.00%(a)
- ------------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 2.63%(b) $ 747 0.75%(a)(1)
- ------------------------------------------------------------------------------------------
</TABLE>
------------------------- EQ Advisors Trust
<PAGE>
- -----
54
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
RATIO OF NET RATIO OF NET
RATIO OF EXPENSES TO INVESTMENT INCOME TO INVESTMENT INCOME TO
AVERAGE NET ASSETS AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO
BEFORE WAIVERS (A)(C) AFTER WAIVERS (A)(C) BEFORE WAIVERS (A)(C) TURNOVER RATE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
**BT EQUITY 500 INDEX PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 0.83% 1.22% 0.94% 2%
- ------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 - - - -
- ------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH WORLD STRATEGY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 1.61% 1.63% 1.22% 115%
- ------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 3.05% 1.89% 0.04% 58%
- ------------------------------------------------------------------------------------------------------------------------
MFS RESEARCH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1998 1.05% 0.44% 0.24% 73%
- ------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 1.78% 0.65% (0.28)% 51%
- ------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 1.04%(1) 2.20%(1) 2.01%(1) 17%
- ------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 1.74%(a) 2.49%(a) 1.60%(a) 9%
- ------------------------------------------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 0.79%(a)(1) 2.45%(a)(1) 2.26%(a)(1) 17%
- ------------------------------------------------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1998 1.17%(1) 0.47%(1) 0.30%(1) 111%
- ------------------------------------------------------------------------------------------------------------------------
Class IB Dec. 31, 1997 1.70%(a) 0.26%(a) (0.44)%(a) 44%
- ------------------------------------------------------------------------------------------------------------------------
Class IA Nov. 24-Dec. 31, 1998 0.92%(a)(1) 0.72%(a)(1) 0.55%(a)(1) 111%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
** Commencement of operations for the BT Equity 500 Index Portfolio was
January 1, 1998.
+ The amount shown for a share outstanding throughout the period does not
accord with the aggregate net gains on investments for that period because
of the timing of sales and repurchases of the Portfolio shares in relation
to fluctuating market value of the investments 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.
<PAGE>
SELECTED DATA FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD(A)
- ------
55
- --------------------------------------------------------------------------------
The financial highlights table below is intended to help you understand the
financial performance for three (3) of the Portfolios that are advised by
Alliance for the past five (5) years (or, if shorter, the period of the
Portfolio's operations). The financial information relating to both the Class A
shares and the Class IB shares for those three (3) Portfolios has been derived
from the audited financial statements of HRT for the year ended December 31,
1998. The Class IA shares and the Class IB shares of each HRT Portfolio listed
below will be substituted for Class IA and Class IB shares of the corresponding
Portfolio of the Trust and the assets and liabilities of the respective HRT
Portfolio will be transferred to its corresponding Portfolio of the Trust on or
about October 18, 1999. These financial statements have been audited by
PricewaterhouseCoopers LLP, independent accountants. PricewaterhouseCoopers
LLP's report on HRT's financial statements as of December 31, 1998 appears in
HRT's Annual Report. The information should be read in conjunction with the
financial statements contained in HRT's Annual Report which are incorporated by
reference into the Trust's Statement of Additional Information (SAI) and
available upon request.
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (b) .................................... $ 11.89 $ 11.29 $ 11.52 $ 10.15 $ 11.12
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.49 0.49 0.50 0.60 0.55
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions ................................. 1.12 0.97 0.07 1.43 ( 1.00)
------- ------- ------- ------- -------
Total from investment operations .............. 1.61 1.46 0.57 2.03 ( 0.45)
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... ( 0.48) ( 0.49) ( 0.51) ( 0.59) ( 0.52)
Distributions from realized gains ............. ( 0.70) ( 0.37) ( 0.27) ( 0.07) -
Distributions in excess of realized gains ..... - - ( 0.02) - -
------- ------- ------- ------- -------
Total dividends and distributions ............. ( 1.18) ( 0.86) ( 0.80) ( 0.66) ( 0.52)
------- ------- ------- ------- -------
Net asset value, end of period .................. $ 12.32 $ 11.89 $ 11.29 $ 11.52 $ 10.15
======= ======= ======= ======= =======
Total return (c) ................................ 13.88% 13.25% 5.21% 20.40% ( 4.10)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............... $355,441 $307,847 $282,402 $252,101 $173,691
Ratio of expenses to average net assets ......... 0.53% 0.57% 0.61% 0.59% 0.59%
Ratio of net investment income to average
net assets .................................... 3.99% 4.17% 4.48% 5.48% 5.22%
Portfolio turnover rate ......................... 103% 206% 181% 287% 228%
<CAPTION>
CLASS IB
-------------------------------
YEAR MAY 1,
ENDED 1997 TO
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- ----------------
<S> <C> <C>
Net asset value, beginning of
period (b) .................................... $ 11.88 $ 11.29
------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.46 0.31
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions ................................. 1.12 1.01
------- ---------
Total from investment operations .............. 1.58 1.32
------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... ( 0.45) ( 0.36)
Distributions from realized gains ............. ( 0.70) ( 0.37)
Distributions in excess of realized gains ..... - -
------- ---------
Total dividends and distributions ............. ( 1.15) ( 0.73)
------- ---------
Net asset value, end of period .................. $ 12.31 $ 11.88
======= =========
Total return (c) ................................ 13.60% 11.84%
======= =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............... $32,653 $ 5,694
Ratio of expenses to average net assets ......... 0.78% 0.80%(d)
Ratio of net investment income to average
net assets .................................... 3.68% 3.82%(d)
Portfolio turnover rate ......................... 103% 206%
</TABLE>
------------------- EQ Advisors Trust
<PAGE>
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56
- --------------------------------------------------------------------------------
ALLIANCE GLOBAL PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (b) .................................... $ 17.29 $ 16.92 $ 15.74 $ 13.87 $ 13.62
--------- --------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.14 0.17 0.21 0.26 0.20
Net realized and unrealized gain on
investments and foreign currency
transactions ................................. 3.56 1.75 2.05 2.32 0.52
--------- --------- ------- ------- -------
Total from investment operations .............. 3.70 1.92 2.26 2.58 0.72
--------- --------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... ( 0.22) ( 0.36) ( 0.21) ( 0.25) ( 0.17)
Dividends in excess of net investment
income ....................................... - - ( 0.08) - -
Distributions from realized gains ............. ( 1.31) ( 1.19) ( 0.79) ( 0.42) ( 0.28)
Distributions in excess of realized gains ..... - - - ( 0.03) ( 0.00)
Tax return of capital distributions ........... - - ( 0.00) ( 0.01) ( 0.02)
--------- ---------- -------- -------- --------
Total dividends and distributions ............. ( 1.53) ( 1.55) ( 1.08) ( 0.71) ( 0.47)
--------- ---------- -------- -------- --------
Net asset value, end of period .................. $ 19.46 $ 17.29 $ 16.92 $ 15.74 $ 13.87
========= ========= ======= ======= =======
Total return (c) ................................ 21.80% 11.66% 14.60% 18.81% 5.23%
========= ========= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............... $1,360,220 $1,203,867 $997,041 $686,140 $421,698
Ratio of expenses to average net assets ......... 0.71% 0.69% 0.60% 0.61% 0.69%
Ratio of net investment income to average
net assets .................................... 0.72% 0.97% 1.28% 1.76% 1.41%
Portfolio turnover rate ......................... 105% 57% 59% 67% 71%
<CAPTION>
CLASS IB
----------------------------------------
YEAR ENDED OCTOBER 2,
DECEMBER 31, 1996 TO
----------------------- DECEMBER 31,
1998 1997 1996
----------- ----------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of
period (b) .................................... $ 17.27 $ 16.91 $ 16.57
------- ------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.08 0.12 0.02
Net realized and unrealized gain on
investments and foreign currency
transactions ................................. 3.56 1.76 0.81
------- ------- ---------
Total from investment operations .............. 3.64 1.88 0.83
------- ------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... ( 0.19) ( 0.33) -
Dividends in excess of net investment
income ....................................... - - ( 0.11)
Distributions from realized gains ............. ( 1.31) ( 1.19) ( 0.10)
Distributions in excess of realized gains ..... - - ( 0.28)
Tax return of capital distributions ........... - - ( 0.00)
------- ------- ---------
Total dividends and distributions ............. ( 1.50) ( 1.52) ( 0.49)
------- ------- ---------
Net asset value, end of period .................. $ 19.41 $ 17.27 $ 16.91
======= ======= =========
Total return (c) ................................ 21.50% 11.38% 4.98%
======= ======= =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............... $47,982 $21,520 $ 290
Ratio of expenses to average net assets ......... 0.96% 0.97% 0.86%(d)
Ratio of net investment income to average
net assets .................................... 0.41% 0.67% 0.48%(d)
Portfolio turnover rate ......................... 105% 57% 59%
</TABLE>
<PAGE>
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57
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ALLIANCE GROWTH INVESTORS PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- -------------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (b) .................................... $ 18.55 $ 17.20 $ 17.68 $ 14.66 $ 15.61
--------- --------- --------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.41 0.41 0.40 0.57 0.50
Net realized and unrealized gain (loss) on
on investments and foreign currency
transactions ................................. 3.03 2.43 1.66 3.24 ( 0.98)
--------- --------- --------- ------- -------
Total from investment operations .............. 3.44 2.84 2.06 3.81 ( 0.48)
--------- --------- --------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... ( 0.41) ( 0.46) ( 0.40) ( 0.54) ( 0.46)
Dividends in excess of net investment
income ....................................... - - ( 0.03) ( 0.01) ( 0.01)
Distributions from realized gains ............. ( 1.71) ( 1.03) ( 2.10) ( 0.24) -
Distributions in excess of realized gains ..... - - ( 0.01) - -
--------- ---------- ---------- -------- -------
Total dividends and distributions ............. ( 2.12) ( 1.49) ( 2.54) ( 0.79) ( 0.47)
--------- ---------- ---------- -------- -------
Net asset value, end of period .................. $ 19.87 $ 18.55 $ 17.20 $ 17.68 $ 14.66
========= ========= ========= ======= =======
Total return (c) ................................ 19.13% 16.87% 12.61% 26.37% ( 3.15)%
========= ========= ========= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............... $1,963,074 $1,630,389 $1,301,643 $896,134 $492,478
Ratio of expenses to average net assets ......... 0.55% 0.57% 0.57% 0.56% 0.59%
Ratio of net investment income to average
net assets .................................... 2.10% 2.18% 2.31% 3.43% 3.32%
Portfolio turnover rate ......................... 102% 121% 190% 107% 131%
<CAPTION>
CLASS IB
------------------------------------------
YEAR ENDED OCTOBER 2,
DECEMBER 31, 1996 TO
----------------------- DECEMBER 31,
1998 1997 1996
----------- ----------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of
period (b) .................................... $ 18.52 $ 17.19 $ 16.78
------- ------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.36 0.36 0.07
Net realized and unrealized gain (loss) on
on investments and foreign currency
transactions ................................. 3.03 2.43 0.71
------- ------- ----------
Total from investment operations .............. 3.39 2.79 0.78
------- ------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... ( 0.36) ( 0.43) ( 0.02)
Dividends in excess of net investment
income ....................................... - - ( 0.09)
Distributions from realized gains ............. ( 1.71) ( 1.03) ( 0.02)
Distributions in excess of realized gains ..... - - ( 0.24)
------- ------- ----------
Total dividends and distributions ............. ( 2.07) ( 1.46) ( 0.37)
------- ------- ----------
Net asset value, end of period .................. $ 19.84 $ 18.52 $ 17.19
======= ======= ==========
Total return (c) ................................ 18.83% 16.58% 4.64%
======= ======= ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............... $92,027 $35,730 $ 472
Ratio of expenses to average net assets ......... 0.80% 0.82% 0.84%(d)
Ratio of net investment income to average
net assets .................................... 1.85% 1.88% 1.69%(d)
Portfolio turnover rate ......................... 102% 121% 190%
</TABLE>
------------------- EQ Advisors Trust
<PAGE>
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58
- --------------------------------------------------------------------------------
- ----------
(a) Net investment income and capital changes per share are based upon monthly
average shares outstanding.
(b) Date as of which funds were first allocated to the Portfolios are as
follows:
Class IA:
Alliance Global Portfolio-August 27, 1987
Alliance Conservative Investors Portfolio-October 2, 1989
Alliance Growth Investors Portfolio-October 2, 1989
Class IB:
Alliance Global and Alliance Growth Investors Portfolios-October 2, 1996.
Alliance Conservative Investors Portfolio-May 1, 1997.
(c) Total return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of
all dividends and distributions at net asset value during the
period, and redemption on the last day of the period. Total return
calculated for a period of less than one year is not annualized.
(d) Annualized.
<PAGE>
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59
- --------------------------------------------------------------------------------
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
