<PAGE>
Filed Pursuant to Rule 497(e)
Registration File No.: 333-17217
EQ Advisors Trust
PROSPECTUS DATED MAY 1, 1999
1
- --------------------------------------------------------------------------------
This Prospectus describes the five (5) 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.
BALANCED PORTFOLIO
- -------------------------------------
Merrill Lynch World Strategy
DOMESTIC EQUITY PORTFOLIOS
- -------------------------------------
BT Equity 500 Index
MFS Research
T. Rowe Price Equity Income
AGGRESSIVE EQUITY PORTFOLIO
- -------------------------------------
Warburg Pincus Small Company Value
- -------------------------------------------------------------------------------
YOU SHOULD BE AWARE THAT THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED OF THE INVESTMENT MERIT OF THESE PORTFOLIOS OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Ver 2
<PAGE>
Overview
2
- --------------------------------------------------------------------------------
EQ ADVISORS TRUST
This Prospectus tells you about the five (5) current Portfolios of the EQ
Advisors Trust ("Trust") and the Class IB shares offered by the Trust on
behalf of each Portfolio. The Trust is an open-end management investment
company. Each Portfolio is a separate series of the Trust with its own
investment objective, investment strategies and risks, which are described in
this Prospectus. Each of the current Portfolios of the Trust, except for the
Merrill Lynch World Strategy Portfolio, are diversified for purposes of the
Investment Company Act of 1940, as amended ("1940 Act").
The Trust's shares are currently sold only to insurance company separate
accounts in connection with variable life insurance contracts and variable
annuity certificates and contracts (the "Contract" or collectively, the
"Contracts") issued by The Equitable Life Assurance Society of the United
States ("Equitable") and Equitable of Colorado, Inc. ("EOC") and to The
Equitable Investment Plan for Employees, Managers and Agents ("Equitable
Plan"). The prospectus is designed to help you make informed decisions about
the Portfolios that are available under your Contract or under the Equitable
Plan. You will find information about your Contract and how it works in the
accompanying prospectus for the Contracts if you are a Contractholder or
participant under a Contract.
EQ Financial Consultants, Inc. ("Manager") serves as the Manager of the Trust,
subject to the supervision and direction of the Board of Trustees. The Manager
has overall responsibility for the general management and administration of
the Trust. During 1999, the Manager plans to change its name to AXA Advisors,
Inc.
Each of the Portfolios has its own investment adviser ("Adviser"). Information
about the Adviser for each Portfolio is contained in the description
concerning that Portfolio in the section entitled "About the Investment
Portfolios." The Manager has the ultimate responsibility to oversee each of
the Advisers and to recommend their hiring, termination and replacement.
Subject to approval by the Board of Trustees, the Manager may without
obtaining shareholder approval: (i) select Advisers for each of the Trust's
Portfolios; (ii) enter into and materially modify existing investment advisory
agreements; and (iii) terminate and replace the Advisers.
<PAGE>
Table of contents
3
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
1 SUMMARY INFORMATION CONCERNING EQ
ADVISORS TRUST 4
- ---------------------------------------------------- -
2 ABOUT THE INVESTMENT PORTFOLIOS 6
- ---------------------------------------------------- -
BALANCED PORTFOLIO 8
Merrill Lynch World Strategy Portfolio 8
DOMESTIC EQUITY PORTFOLIOS 11
BT Equity 500 Index Portfolio 11
MFS Research Portfolio 13
T. Rowe Price Equity Income Portfolio 16
AGGRESSIVE EQUITY PORTFOLIO 18
Warburg Pincus Small Company Value Portfolio 18
3 MORE INFORMATION ON PRINCIPAL RISKS 20
- ---------------------------------------------------- --
4 MANAGEMENT OF THE TRUST 26
- ---------------------------------------------------- --
The Trust 26
The Manager 26
Expense Limitation Agreement 27
The Advisers 27
The Administrator 28
The Transfer Agent 28
Brokerage Practices 28
Brokerage Transactions with Affiliates 28
</TABLE>
<TABLE>
<S> <C>
5 FUND DISTRIBUTION ARRANGEMENTS 29
- ---------------------------------------------------- --
6 PURCHASE AND REDEMPTION 30
- ---------------------------------------------------- --
7 HOW ASSETS ARE VALUED 31
- ---------------------------------------------------- --
8 TAX INFORMATION 32
- ---------------------------------------------------- --
9 PRIOR PERFORMANCE OF EACH ADVISER 33
- ---------------------------------------------------- --
10 FINANCIAL HIGHLIGHTS 36
- ---------------------------------------------------- --
</TABLE>
<PAGE>
1
Summary information concerning EQ Advisors Trust
4
- --------------------------------------------------------------------------------
The following chart highlights the five (5) Portfolios described in this
Prospectus that you can choose as investment alternatives under your Contracts
offered by Equitable or EOC. The chart and accompanying information identify
each Portfolio's investment objective(s), principal investment strategies, and
principal risks. "More Information on Principal Risks", which more fully
describes each of the principal risks, is provided beginning on page 20.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST BALANCED PORTFOLIO
- -----------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
<S> <C>
- -----------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST DOMESTIC EQUITY PORTFOLIOS
- -----------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
- -----------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------
MFS RESEARCH Seeks to provide long-term growth of capital and future
income
- -----------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------
EQ ADVISORS TRUST AGGRESSIVE EQUITY PORTFOLIO
- -----------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE(S)
- -----------------------------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE Seeks long-term capital appreciation
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
- ---------------------------------------------------------------------------------------------------------------------------
Common stocks of companies in the S&P 500 Index General investment, index-fund, and fixed income risks
- ---------------------------------------------------------------------------------------------------------------------------
Common stock or securities convertible into common stock General investment, small-cap and mid-cap company,
of companies with better than average prospects for foreign securities, fixed income, and growth investing risks
long-term growth
- ---------------------------------------------------------------------------------------------------------------------------
Dividend-paying common stocks of established companies General investment, value investing, foreign securities, and
fixed income risks
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS
- ---------------------------------------------------------------------------------------------------------------------------
Equity securities of U.S. small cap companies General investment, small-cap and mid-cap company,
foreign securities, fixed income, and value investing risks
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
-------------------------EQ Advisors Trust
<PAGE>
2
About the investment portfolios
6
- --------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
principal investment objectives, strategies, and risks of each of the
Portfolios. Of course, there can be no assurance that any Portfolio will
achieve its investment objective.
Please note that:
o A fuller description of each of the principal risks is included in the
section "More Information on Principal Risks," which follows the
description of each Portfolio in this section of the Prospectus.
o Additional information concerning each Portfolio's strategies, investments,
and risks can also be found in the Trust's Statement of Additional
Information.
GENERAL INVESTMENT RISKS
Each of the Portfolios is subject to the following risks:
ASSET CLASS RISK: The returns from the types of securities in which a
Portfolio invests may underperform returns from the various general securities
markets or different asset classes.
MARKET RISK: You could lose money over short periods due to fluctuation in a
Portfolio's share price in reaction to stock or bond market movements, and
over longer periods during extended market downturns.
SECURITY SELECTION RISK: There is the possibility that the specific securities
selected by a Portfolio's Adviser will underperform other funds in the same
asset class or benchmarks that are representative of the general performance
of the asset class.
YEAR 2000 RISK: A Portfolio could be adversely affected if the computer
systems used by the Trust, Adviser, other service providers, or persons with
whom they deal, do not properly process and calculate date-related information
and data dated on and after January 1, 2000 ("Year 2000 Problem"). The extent
of such impact cannot be predicted and there can be no assurances that the
Year 2000 Problem will not have an adverse effect on the issuers whose
securities are held by a Portfolio. This risk is greater for Portfolios that
make foreign investments, particularly in emerging market countries.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
THE BENCHMARKS
Performance of each of the Trust's Portfolios as shown on the following pages
compares each Portfolio's performance to that of a broad-based securities
index. Each of the Portfolios' annualized rates of return are net of: (i) its
investment management fees; and (ii) its other expenses. These rates are not
representative of the actual return you would receive under your Equitable
Contract.
Broad-based securities indices are unmanaged and are not subject to fees and
expenses typically associated with managed investment company portfolios.
Investments cannot be made directly in a broad-based securities index.
Comparisons with these benchmarks, therefore, are of limited use. They are
included because they are widely known and may help you to understand the
universe of securities from which each Portfolio is likely to select its
holdings. "Blended" performance numbers (e.g., 60% S&P 500/40% Lehman
Gov't/Corp) assume a static mix of the two indices.
THE COMPOSITE MARKET BENCHMARK is made up of 36% S&P 500, 24% MSCI EAFE Index,
21% Salomon Brothers U.S. Treasury Bond 1 year and, 14% Salomon Brothers World
Government ex U.S., and 5% U.S. Treasury Bill.
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
<PAGE>
7
- --------------------------------------------------------------------------------
market. The S&P 500 reflects the reinvestment of dividends, if any, but does
not reflect fees, brokerage commissions or other expenses of investing.
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.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
BALANCED PORTFOLIO
8
- --------------------------------------------------------------------------------
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.
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.
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.
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.
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.
<PAGE>
9
- --------------------------------------------------------------------------------
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:
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.
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
---------------------------------------------------- EQ Advisors Trust
<PAGE>
10
- --------------------------------------------------------------------------------
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 which follows illustrates the Portfolio's annual total return
for 1998, the Portfolio's first full year of operations. The table which
follows shows the Portfolio's average annual total returns for the Portfolio
for one year and since inception. The table also compares the Portfolio's
performance to the returns of a broad-based index. Both the bar chart and
table assume reinvestment of dividends and distributions. Past performance is
not an indication of future performance. In addition, holders of variable
insurance contracts representing interests in the Portfolio will be subject to
charges and expenses relating to such insurance contracts. The performance
results presented below do not reflect any insurance related expenses and if
reflected the results would be reduced. The inception date for the Portfolio
is May 1, 1997.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------
1998 6.81%
<TABLE>
<CAPTION>
<S> <C>
Best quarter: Worst quarter:
10.56% (1998 4th Quarter) (11.15)% (1998 3rd Quarter)
</TABLE>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
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.
<PAGE>
DOMESTIC EQUITY PORTFOLIOS
11
- --------------------------------------------------------------------------------
BT EQUITY 500 INDEX PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to replicate as closely as possible (before
deduction of Portfolio expenses) the total return of the S&P 500.
THE INVESTMENT STRATEGY
The Portfolio invests in equity securities of companies included in the S&P
500. The Adviser seeks to match the risk and return characteristics of the S&P
500 by investing in a statistically selected sample of the securities found in
the S&P 500, using a process known as "optimization". This process selects
stocks for the Portfolio so that industry weightings, market capitalizations
and fundamental characteristics (price to book ratios, price to earnings
ratios, debt to asset ratios and dividend yields) closely match those of the
securities included in the S&P 500. This approach helps to increase the
Portfolio's liquidity and reduce costs. The securities held by the Portfolio
are weighted to make the Portfolio's total investment characteristics similar
to those of the S&P 500 as a whole.
The Adviser generally will seek to match the composition of the S&P 500 but
usually will not invest the Portfolio's stock portfolio to mirror the S&P 500
exactly. Because of the difficulty and cost of executing relatively small
stock transactions, the Portfolio may not always be invested in the less
heavily weighted S&P 500 stocks, and may at times have its portfolio weighted
differently than the S&P 500, particularly if the Portfolio has a low level of
assets. In addition, the Portfolio may omit or remove any S&P 500 stock from
the Portfolio if, following objective criteria, the Adviser judges the stock
to be insufficiently liquid or believes the merit of the investment has been
substantially impaired by extraordinary events or financial conditions. The
Portfolio will not purchase the stock of Bankers Trust New York Corporation,
which is included in the S&P 500, and
instead will overweight its holdings of companies engaged
in similar businesses.
For more information on the S&P 500, see the preceding section "The
Benchmarks." The Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's Corporation ("S&P") and S&P makes no guarantee as to the
accuracy and/or completeness of the S&P 500 or any data included therein.
Over time, the correlation between the performance of the Portfolio and the
S&P is expected to be 95% or higher before deduction of Portfolio expenses.
The Portfolio's ability to track the S&P 500 may be affected by, among others,
transaction costs, administration and other expenses incurred by the
Portfolio, changes in either the composition of the S&P 500 or the assets of
the Portfolio, and the timing and amount of Portfolio investor contributions
and withdrawals, if any. The Portfolio seeks securities to track the S&P 500,
therefore, the Adviser generally will not attempt to judge the merits of any
particular security as an investment.
The Portfolio may also invest up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the S&P 500. Securities index
futures contracts and related options, warrants and convertible securities may
be used for a number of reasons, including: to simulate full investment in the
S&P 500 while retaining a cash balance for Portfolio management purposes; to
facilitate trading; to reduce transaction costs; or to seek higher investment
returns when a futures contract, option, warrant or convertible security is
priced more attractively than the underlying equity security or S&P 500. These
instruments are considered to be derivatives.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
---------------------------------------------------- EQ Advisors Trust
<PAGE>
12
- --------------------------------------------------------------------------------
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 which follows illustrates the Portfolio's annual total return
for 1998, the Portfolio's first year of existence. The table which follows
shows the Portfolio's average annual total returns for the Portfolio for one
year and since inception. The table also compares the Portfolio's performance
to the returns of a broad based index. Both the bar chart and table assume
reinvestment of dividends and distributions. Past performance is not an
indication of future performance. In addition, holders of variable insurance
contracts representing interests in the Portfolio will be subject to charges
and expenses relating to such insurance contracts. The performance results
presented below do not reflect any insurance related expenses and if reflected
the results would be reduced. The Portfolio's inception date was January 1,
1998.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------
1998 25.14%
<TABLE>
<CAPTION>
<S> <C>
Best quarter: Worst quarter:
21.26% (1998 4th Quarter) (10.03)% (1998 3rd Quarter)
</TABLE>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C>
BT Equity 500 Index Portfolio 25.14% 25.14%
- -------------------------------------------------------------------------------
S&P 500 Index* 28.58% 28.58%
- -------------------------------------------------------------------------------
</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.
<PAGE>
DOMESTIC EQUITY PORTFOLIOS (CONTINUED)
13
- --------------------------------------------------------------------------------
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 or 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
---------------------------------------------------- EQ Advisors Trust
<PAGE>
14
- --------------------------------------------------------------------------------
investment characteristics, and may be speculative. The risk that an issuer or
guarantor of a fixed income security or counterparty to the Portfolio's fixed
income transaction is unable to meets its financial obligations is
particularly significant for this Portfolio because this Portfolio invests a
portion of its assets in "junk bonds" (i.e., securities rated below investment
grade). Junk bonds are issued by companies with questionable credit strength
and, consequently, are considered to be speculative in nature and may be
subject to greater market fluctuations than investment grade fixed income
securities.
FOREIGN SECURITIES RISKS: The Portfolio's investments in foreign securities
involve risks not associated with investing in U.S. securities, which can
adversely affect the Portfolio's performance. Foreign markets, particularly
emerging markets, may be less liquid, more volatile, and subject to less
government supervision than domestic markets. There may be difficulties
enforcing contractual obligations, and it may take more time for trades to
clear and settle. In addition, the value of foreign investments can be
adversely affected by: unfavorable currency exchange rates (relative to the
U.S. dollar for securities denominated in foreign currencies); inadequate or
inaccurate information about foreign companies; higher transaction, brokerage
and custody costs; adverse changes in foreign economic and tax policies; and
foreign government instability, war or other adverse political or economic
actions.
PORTFOLIO PERFORMANCE
The bar chart which follows illustrates the Portfolio's annual total return
for 1998, the Portfolio's first full year of operations. The table which
follows shows the Portfolio's average annual total returns for the Portfolio
for one year and since inception. The table also compares the Portfolio's
performance to the returns of a broad-based index. Both the bar chart and
table assume reinvestment of dividends and distributions. Past performance is
not an indication of future performance. In addition, holders of variable
insurance contracts representing interests in the Portfolio will be subject to
charges and expenses relating to such insurance contracts. The performance
results presented below do not reflect any insurance related expenses and if
reflected the results would be reduced. The inception date for the Portfolio
is May 1, 1997.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------
1998 24.11%
<TABLE>
<CAPTION>
<S> <C>
Best quarter: Worst quarter:
21.36% (1998 4th Quarter) (17.35)% (1997 4th Quarter)
</TABLE>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
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
<PAGE>
15
- --------------------------------------------------------------------------------
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 what they view as the securities best suited
to achieve the Portfolio's investment objective within their assigned industry
responsibility.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
DOMESTIC EQUITY PORTFOLIOS (CONTINUED)
16
- --------------------------------------------------------------------------------
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.
Equity income investing involves finding common stocks that pay dividend
income. As an example, utility company stocks often provide dividend income
while a shareholder waits for the stock price to move. Dividends can help
reduce the Portfolio's volatility during turbulent markets and help offset
losses when stock prices are falling.
The Portfolio may invest up to 25% of its total assets in foreign securities.
These securities include non-dollar-denominated securities traded outside the
United States and dollar-denominated securities 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
<PAGE>
17
- --------------------------------------------------------------------------------
currencies); inadequate or inaccurate information about foreign companies;
higher transaction, brokerage and custody costs; adverse changes in foreign
economic and tax policies; and foreign government instability, war or other
adverse political or economic actions.
FIXED INCOME RISKS: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment grade securities which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
higher-rated obligations because BBB rated investment grade securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
PORTFOLIO PERFORMANCE
The bar chart which follows illustrates the Portfolio's annual total return
for 1998, the Portfolio's first full year of operations. The table which
follows shows the Portfolio's average annual total returns for the Portfolio
for one year and since inception. The table also compares the Portfolio's
performance to the returns of a broad-based index. Both the bar chart and
table assume reinvestment of dividends and distributions. Past performance is
not an indication of future performance. In addition, holders of variable
insurance contracts representing interests in the Portfolio will be subject to
charges and expenses relating to such insurance contracts. The performance
results presented below do not reflect any insurance related expenses and if
reflected the results would be reduced. The inception date for the Portfolio
is May 1, 1997.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------
1998 9.11%
<TABLE>
<CAPTION>
<S> <C>
Best quarter: Worst quarter:
11.16% (1998 4th Quarter) (7.66)% (1998 3rd Quarter)
</TABLE>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
AGGRESSIVE EQUITY PORTFOLIO
18
- -------------------------------------------------------------------------------
WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term capital
appreciation.
THE INVESTMENT STRATEGY
The Portfolio invests primarily in equity securities of U.S. small-cap
companies with above-average growth potential that the Adviser believes to be
undervalued. Typically, such investments may include common stocks, preferred
stocks, convertible securities, warrants and rights of small-cap companies.
Once 65% of the Portfolio's assets are invested in small-cap companies, the
Portfolio may also invest in companies with a market capitalization of any
size.
For purposes of this Portfolio, small-cap companies are companies having
market capitalizations within the range of capitalizations of companies
represented in the Russell 2000 Index.
In determining whether a company's stock is undervalued, the Adviser considers
all relevant factors which may include a company's:
o price/earnings ratio,
o price to book value ratio,
o price to cash flow ratio, and
o debt to capital ratio.
The Portfolio will invest primarily (at least 65% of its net assets) in the
securities of U.S. companies traded in the U.S. securities markets. The
Portfolio may invest to a lesser extent in foreign securities, investment
grade debt securities and high quality domestic and foreign short-term (one
year or less) and medium-term money-market securities.
When market or financial conditions warrant, the Portfolio may invest without
limitation in investment grade debt obligations and in domestic and foreign
obligations, including repurchase agreements for temporary or defensive
purposes. Such investment strategies are inconsistent with the Portfolio's
investment objectives and could result in the Portfolio not achieving its
investment objective.
THE PRINCIPAL RISKS
This Portfolio invests in common stocks, therefore, its performance may go up
or down depending on general market conditions. Other principal risks include:
VALUE INVESTING RISK: As noted above, the Portfolio uses a value-oriented
approach to stock selection. Value investing is subject to the risk that a
value stock's intrinsic value may never be fully recognized or realized by the
market, or its price may go down. There is also the risk that a stock judged
to be undervalued may actually be appropriately priced.
SMALL-CAP AND MID-CAP COMPANY RISK: The Portfolio's investments in small-cap
and mid-cap companies may be subject to more abrupt or erratic movements in
price than are those of larger, more established companies because: the
securities of such companies are less well-known and may trade less frequently
and in lower volume; such companies are more likely to experience greater or
more unexpected changes in their earnings and growth prospects; and the
products or technologies of such companies may be at a relatively early stage
of development or not fully tested.
PORTFOLIO TURNOVER RISK: The Portfolio's turnover rate has been over 100% per
year. Higher portfolio turnover (e.g., over 100% per year) will cause the
Portfolio to incur additional transaction costs 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>
19
- --------------------------------------------------------------------------------
affected by: unfavorable currency exchange rates (relative to the U.S. dollar
for securities denominated in foreign currencies); inadequate or inaccurate
information about foreign companies; higher transaction, brokerage and custody
costs; adverse changes in foreign economic and tax policies; and foreign
government instability, war or other adverse political or economic actions.
FIXED INCOME RISKS: To the extent that a substantial amount of the Portfolio's
assets are invested in fixed income securities, that portion of the
Portfolio's performance will be affected by changes in interest rates, the
credit risk of the issuer, the duration or maturity of the Portfolio's fixed
income holdings, and adverse market or economic conditions. When interest
rates rise, the value of the Portfolio's fixed income securities, particularly
those with longer durations or maturities, will go down. When interest rates
fall, the reverse is true. In addition, to the extent that the Portfolio
invests in investment grade securities, which are rated BBB by S&P or an
equivalent rating by any other NRSRO, it will be exposed to greater risk than
higher-rated obligations because BBB rated investment grade securities are
regarded as having only an adequate capacity to pay principal and interest,
are considered to lack outstanding investment characteristics, and may be
speculative.
PORTFOLIO PERFORMANCE
The bar chart which follows illustrates the Portfolio's annual total return
for 1998, the Portfolio's first full year of operations. The table which
follows shows the Portfolio's average annual total returns for the Portfolio
for one year and since inception. The table also compares the Portfolio's
performance to the returns of a broad-based index. Both the bar chart and
table assume reinvestment of dividends and distributions. Past performance is
not an indication of future performance. In addition, holders of variable
insurance contracts representing interests in the Portfolio will be subject to
charges and expenses relating to such insurance contracts. The performance
results presented below do not reflect any insurance related expenses and if
reflected the results would be reduced. The inception date for the Portfolio
is May 1, 1997.
- -------------------------------------------------------------------------------
CALENDAR YEAR ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------
1998 (10.02)%
<TABLE>
<CAPTION>
<S> <C>
Best quarter: Worst quarter:
15.49% (1997 3rd Quarter) (20.25)% (1998 3rd Quarter)
</TABLE>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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>
3
More information on principal risks
20
- --------------------------------------------------------------------------------
Risk is the chance that you will lose money on your investment or that it will
not earn as much as you expect. In general, the greater the risk, the more
money your investment can earn for you and the more you can lose. Like other
investment companies, the value of each Portfolio's shares may be affected by
the Portfolio's investment objective(s), principal investment strategies and
particular risk factors. Consequently, each Portfolio may be subject to
different principal risks. Some of the principal risks of investing in the
Portfolios are discussed below. However, other factors may also affect each
Portfolio's net asset value.
There is no guarantee that a Portfolio will achieve its investment
objective(s) or that it will not lose principal value.
GENERAL INVESTMENT RISKS: Each Portfolio is subject to
the following risks:
ASSET CLASS RISK: There is the possibility that the returns from the types of
securities in which a Portfolio invests will underperform returns from the
various general securities markets or different asset classes. Different types
of securities tend to go through cycles of outperformance and underperformance
in comparison to the general securities markets.
MARKET RISK: Each Portfolio's share price moves up and down over the short
term in reaction to stock or bond market movements. This means that you could
lose money over short periods, and perhaps over longer periods during extended
market downturns.
SECURITY SELECTION RISK: The Advisers for each Portfolio rely on the insights
of different specialists in making investment decisions based on each
Portfolio's particular investment objective(s) and investment strategies.
There is the possibility that the specific securities held by a Portfolio will
underperform other funds in the same asset class or benchmarks that are
representative of the general performance of the asset class because of the
Adviser's choice of portfolio securities.
YEAR 2000 RISK: Like other mutual funds, financial and business organizations
and individuals around the world, the Trust and its Portfolios could be
adversely affected if the computer systems used by the Advisers, other service
providers, or persons with whom they deal, do not properly process and
calculate date-related information and data dated on and after January 1,
2000. This possibility is commonly known as the "Year 2000 Problem." Virtually
all operations of the Trust and its Portfolios are computer reliant. The
Manager, Advisers, administrator, transfer agent, distributors and custodian
have informed the Trust that they are actively taking steps to address the
Year 2000 Problem with regard to their respective computer systems and the
interfaces between their respective computer systems. The Trust is also taking
measures to obtain assurances from necessary persons that comparable steps are
being taken by the key service providers to the Trust's Advisers,
administrator, transfer agent, distributors, and custodian. There can be no
assurance that the Trust and the Portfolios' key service providers will be
Year 2000 compliant. If not adequately addressed, the Year 2000 Problem could
result in the inability of the Trust to perform its mission critical
functions, including trading and settling trades of Portfolio securities,
pricing of portfolio securities and processing shareholder transactions, and
the net asset value of its Portfolios' shares may be materially affected.
In addition, because the Year 2000 Problem affects virtually all issuers, the
companies or entities in which the Portfolios may invest also could be
adversely impacted by the Year 2000 Problem. For example, issuers may incur
substantial costs to address the Year 2000 problem. The extent of such impact
cannot be predicted and there can be no assurances that the Year 2000 Problem
will not have an adverse effect on the issuers whose securities are held by
the Portfolios. The Advisers have assured the Trust that they consider such
issues in making investment decisions for the Portfolios. Furthermore, certain
of the Portfolios make international investments thereby exposing these
Portfolios to operations, custody and settlement processes outside the United
States.
<PAGE>
21
- --------------------------------------------------------------------------------
In many countries outside the United States the Year 2000 Problem has not been
adequately addressed and concerns have been raised that capital flight, among
other issues, may be triggered by full disclosure of the Year 2000 Problem on
countries outside the United States. Additional information on the impact of
the Year 2000 Problem on emerging market countries is provided in this
section, under "FOREIGN SECURITIES RISKS-EMERGING MARKET RISK."
As indicated in "Summary Information Concerning EQ Advisors Trust" and "About
the Investment Portfolios," a particular Portfolio may also be subject to the
following risks:
CONVERTIBLE SECURITIES RISK: Convertible securities may include both
convertible debt and convertible preferred stock. Such securities may be
converted into shares of the underlying common stock at either a stated price
or stated rate. Therefore, convertible securities enable you to benefit from
increases in the market price of the underlying common stock. Convertible
securities provide higher yields than the underlying common stocks, but
generally offer lower yields than nonconvertible securities of similar
quality. Like bonds, the value of convertible securities fluctuates in
relation to changes in interest rates and, in addition, fluctuates in relation
to the underlying common stock. Subsequent to purchase by a Portfolio,
convertible securities may cease to be rated or a rating may be reduced below
the minimum required for purchase by that Portfolio. Each Adviser will
consider such event in its determination of whether a Portfolio should
continue to hold the securities.
DERIVATIVES RISK: Derivatives are financial contracts whose value depends on,
or is derived from the value of an underlying asset, reference rate or index.
Derivatives include stock options, securities index options, currency options,
forward currency exchange contracts, futures contracts, swaps and options on
futures contracts. Certain Portfolios can use derivatives involving the U.S.
Government and foreign government securities and currencies. Investments in
derivatives can significantly increase your exposure to market risk, or credit
risk of the counterparty. Derivatives also involve the risk of mispricing or
improper valuation and the risk that changes in value of the derivative may
not correlate perfectly with the relevant assets, rates and indices.
FIXED INCOME RISKS: To the extent that any of the Portfolios invest a
substantial amount of its assets in fixed income securities, a Portfolio may
be subject to the following risks:
CREDIT RISK: Credit risk is the risk that the issuer or guarantor of a
debt security or counterparty to a Portfolio's transactions will be unable or
unwilling to make timely principal and/or interest payments, or otherwise
will be unable or unwilling to honor its financial obligations. Each of the
Portfolios may be subject to credit risk to the extent that it invests in debt
securities or engages in transactions, such as securities loans, which
involve a promise by a third party to honor an obligation to the Portfolio.
Credit risk is particularly significant for the Portfolios that invest a
portion of their assets in "junk bonds" or lower-rated securities.
INTEREST RATE RISK: The price of a bond or a fixed income security is
dependent upon interest rates. Therefore, the share price and total return of
a Portfolio investing a significant portion of its assets in bonds or fixed
income securities will vary in response to changes in interest rates. A rise
in interest rates causes the value of a bond to decrease, and vice versa.
There is the possibility that the value of a Portfolio's investment in bonds
or fixed income securities may fall because bonds or fixed income securities
generally fall in value when interest rates rise. The longer the term of a
bond or fixed income instrument, the more sensitive it will be to
fluctuations in value from interest rate changes. Changes in interest rates
may have a significant effect on Portfolios holding a significant portion of
their assets in fixed income securities with long term maturities.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
22
- --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES RISK: In the case of mortgage-backed
securities, rising interest rates tend to extend the term to maturity of the
securities, making them even more susceptible to interest rate changes. When
interest rates drop, not only can the value of fixed income securities drop,
but the yield can drop, particularly where the yield on the fixed income
securities is tied to changes in interest rates, such as adjustable mortgages.
Also when interest rates drop, the holdings of mortgage-backed securities by a
Portfolio can reduce returns if the owners of the underlying mortgages pay off
their mortgages sooner than anticipated since the funds prepaid will have to
be reinvested at the then lower prevailing rates. This is known as prepayment
risk. When interest rates rise, the holdings of mortgage-backed securities by
a Portfolio can reduce returns if the owners of the underlying mortgages pay
off their mortgages later than anticipated. This is known as extension risk.
INVESTMENT GRADE SECURITIES RISK: Debt securities are rated by national
bond ratings agencies. Securities rated BBB by S&P or Baa by Moody's are
considered investment grade securities, but are somewhat riskier than higher
rated obligations because they are regarded as having only an adequate
capacity to pay principal and interest, and are considered to lack outstanding
investment characteristics and may be speculative.
JUNK BONDS OR LOWER RATED SECURITIES RISK: Bonds rated below investment grade
by S&P and Moody's are speculative in nature, may be subject to certain risks
with respect to the issuing entity and to greater market fluctuations than
higher rated fixed income securities. They are usually issued by companies
without long track records of sales and earnings, or by those companies with
questionable credit strength. These bonds are considered "below investment
grade." The retail secondary market for these "junk bonds" may be less liquid
than that of higher rated securities and adverse conditions could make it
difficult at times to sell certain securities or could result in lower prices
than those used in calculating the Portfolio's net asset value.
FOREIGN SECURITIES RISKS: A Portfolio's investments in foreign securities,
including depositary receipts, involve risks not associated with investing in
U.S. securities and can affect a Portfolio's performance. Foreign markets,
particularly emerging markets, may be less liquid, more volatile and subject
to less government supervision than domestic markets. There may be
difficulties enforcing contractual obligations, and it may take more time for
trades to clear and settle. The specific risks of investing in foreign
securities, among others, include:
CURRENCY RISK: The risk that changes in currency exchange rates will
negatively affect securities denominated in, and/or receiving revenues in,
foreign currencies. Adverse changes in currency exchange rates (relative to
the U.S. dollar) may erode or reverse any potential gains from a Portfolio's
investment in securities denominated in a foreign currency or may widen
existing losses.
EMERGING MARKET RISK: There are greater risks involved in investing in
emerging markets countries and/or their securities markets. Generally,
economic structures in these countries are less diverse and mature than
those in developed countries, and their political systems are less stable.
Investments in emerging markets countries may be affected by national
policies that restrict foreign investment in certain issuers or industries.
The small size of their securities markets and low trading volumes can make
investments illiquid and more volatile than investments in developed
countries and such securities may be subject to abrupt and severe price
declines. As a result, a Portfolio investing in emerging markets countries
may be required to establish special custody or other arrangements before
investing.
<PAGE>
23
- --------------------------------------------------------------------------------
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 invest in securities issued by
European issuers. On January 1, 1999, 11 of the 15 member states of the
European Monetary Union ("EMU") introduced the "Euro" as a common currency.
During a three-year transitional period, the Euro will coexist with each
participating state's currency and, on July 1, 2002, the Euro is expected to
become the sole currency of the participating states. The introduction of the
Euro will result in the redenomination of European debt and equity securities
over a period of time, which may result in various legal and accounting
differences and/or tax treatments that otherwise would not likely occur.
During this period, the creation and implementation of suitable clearing and
settlement systems and other operational problems may cause market disruptions
that could adversely affect investments quoted in the Euro.
The consequences of the Euro conversion for foreign exchange rates,
interest rates and the value of European securities eligible for purchase by
the Portfolios are presently unclear and it is not possible to predict the
eventual impact of the Euro implementation plan on the Portfolios. There are a
number of significant risks associated with EMU. Monetary and economic union
on this scale has never been attempted before. There is a significant degree
of uncertainty as to whether participating countries will remain committed to
EMU in the face of changing economic conditions. The conversion may adversely
affect a Portfolio if the Euro does not take effect as planned or if a
participating state withdraws from the EMU. Such actions may adversely affect
the value and/or increase the volatility of securities held by the Portfolios.
POLITICAL/ECONOMIC RISK: Changes in economic and tax policies, government
instability, war or other political or economic actions or factors may have an
adverse effect on a Portfolio's foreign investments.
REGULATORY RISK: Less information may be available about foreign
companies. In general, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements as are U.S. companies.
TRANSACTION COSTS RISK: The costs of buying and selling foreign
securities, including tax, brokerage and custody costs, generally are higher
than those involving domestic transactions.
GROWTH INVESTING RISK: Growth investing generally focuses on companies that,
due to their strong earnings and revenue potential, offer above-average
prospects for capital growth, with less emphasis on dividend income. Earnings
predictability and confidence in earnings forecasts are an important part of
the selection process. As a result, the price of growth stocks may be more
sensitive to changes in current or expected earnings than the prices of other
stocks. Advisers using this approach generally seek out companies experiencing
some or all of the following: high sales growth, high unit growth, high or
improving returns on assets and equity, and a strong balance sheet. Such
Advisers also prefer companies with a competitive advantage such as unique
management, marketing or research and development. Growth investing is also
subject to the risk that the stock price of one or more companies
---------------------------------------------------- EQ Advisors Trust
<PAGE>
24
- --------------------------------------------------------------------------------
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 is not actively managed (which
involves buying and selling of securities based upon economic, financial and
market analysis and investment judgment). Rather, the 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 is borrowing money or otherwise leveraging
its portfolio, the value of an investment in that Portfolio will be more
volatile and all other risks will tend to be compounded. All of the Portfolios
may take on leveraging risk by investing in collateral from securities loans
and by borrowing money to meet redemption requests.
LIQUIDITY RISK: Certain securities held by a Portfolio may be difficult (or
impossible) to sell at the time and at the price the seller would like. A
Portfolio may have to hold these securities longer than it would like and may
forego other investment opportunities. There is the possibility that a
Portfolio may lose money or be prevented from earning capital gains if it can
not sell a security at the time and price that is most beneficial to the
Portfolio. Portfolios that invest in privately-placed securities, high-yield
bonds, mortgage-backed securities or foreign or emerging markets securities,
which have all experienced periods of illiquidity, are subject to liquidity
risks. A particular Portfolio may be more susceptible to some of these risks
than others, as noted in the description of each Portfolio.
NON-DIVERSIFICATION RISK: The 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 a non-diversified Portfolio's assets may be invested in the
securities of a limited number of issuers, some of which may be within the
same industry, the securities of the Portfolio may be more sensitive to
changes in the market value of a single issuer or industry. The use of such a
focused investment strategy may increase the volatility of 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 investment company ("RIC") under the Internal Revenue Code of
1986, as amended (the "Code") and receive pass through tax treatment, the
Portfolio at the close of each fiscal quarter, may not have more than 25% of
its total assets invested in the securities of any one issuer (excluding U.S.
Government obligations) and with respect to 50% of its assets, (i) may not
have more than 5% of its total assets invested in the securities of any one
issuer and (ii) may not own more than 10% of the outstanding voting securities
of any one issuer. The Portfolio intends to qualify as a RIC.
PORTFOLIO TURNOVER RISK: Consistent with their investment policies, the
Portfolios also will purchase and sell securities without regard to the effect
on portfolio turnover. Higher portfolio turnover (e.g., over 100% per year)
will cause a Portfolio to incur additional transaction costs and may result in
taxable gains being passed through to shareholders.
SMALL-CAP AND MID-CAP COMPANY RISK: A Portfolio's investments in small-cap and
mid-cap companies may involve greater risks than investments in larger, more
established issuers. Smaller companies may have narrower product lines, more
limited financial resources and more
<PAGE>
25
- --------------------------------------------------------------------------------
limited trading markets for their stock, as compared with larger companies.
Their securities may be less well-known and trade less frequently and in more
limited volume than the securities of larger, more established companies. In
addition, small-cap and mid-cap companies are typically subject to greater
changes in earnings and business prospects than are those of larger companies.
Consequently, the prices of small company stocks tend to rise and fall in
value more frequently than the stocks of larger companies. Although investing
in small-cap and mid-cap companies offers potential for above-average returns,
the companies may not succeed and the value of their stock could decline
significantly.
VALUE INVESTING RISK: Value investing attempts to identify strong companies
selling at a discount from their perceived true worth. Advisers using this
approach generally select stocks at prices, in their view, that are
temporarily low relative to the company's earnings, assets, cash flow and
dividends. Value investing is subject to the risk that the stocks' intrinsic
value may never be fully recognized or realized by the market, or their prices
may go down. In addition, there is the risk that a stock judged to be
undervalued may actually be appropriately priced. Value investing generally
emphasizes companies that, considering their assets and earnings history, are
attractively priced and may provide dividend income.
The Trust's Portfolios are not insured by the FDIC or any other government
agency. Each Portfolio is not a deposit or other obligation of any financial
institution or bank and is not guaranteed. Each Portfolio is subject to
investment risks and possible loss of principal invested.
---------------------------------------------------- EQ Advisors Trust
<PAGE>
4
Management of the Trust
26
- --------------------------------------------------------------------------------
This section gives you information on the Trust, the Manager and the Advisers
for the Portfolios. More detailed information concerning each of the Advisers
and portfolio managers is included in the description for each Portfolio in
the section "About The Investment Portfolios."
THE TRUST
The Trust is organized as a Delaware business trust and is registered with the
Securities and Exchange Commission ("SEC") as an open-end management
investment company. The Trust issues shares of beneficial interest that are
currently divided among twenty-five Portfolios, each of which has authorized
Class IA and Class IB shares. Each Portfolio has its own objectives,
investment strategies and risks, which have been previously described in this
prospectus.
THE MANAGER
EQ Financial Consultants, Inc., 1290 Avenue of the Americas, New York, New
York 10104, serves as the Manager of the Trust, subject to the supervision and
direction of the Board of Trustees. The Manager has overall responsibility for
the general management and administration of the Trust.
In the exercise of that responsibility, the Manager, without obtaining
shareholder approval but subject to the review and approval by the Board of
Trustees, may: (i) select the Advisers for the Portfolios; (ii) enter into and
materially modify existing investment advisory agreements; and
(iii) terminate and replace the Advisers. The Manager also monitors each
Adviser's investment program and results, reviews brokerage matters, oversees
compliance by the Trust with various federal and state statutes, and carries
out the directives of the Board of Trustees. The Manager also supervises the
provision of services by third parties such as the Trust's custodian and
administrator.
The Manager is an investment adviser registered under the 1940 Act and a
broker-dealer registered under the Securities Exchange Act of 1934, as
amended. EQ Financial Consultants, Inc. is a wholly-owned subsidiary of
Equitable. During 1999, the Manager plans to change its name to AXA Advisors,
Inc.
<PAGE>
27
- --------------------------------------------------------------------------------
The table below shows the annual rate of the management fees (as a percentage
of each Portfolio's average daily net assets) that the Manager received in
1998 for managing each of the Portfolios and the rate of the management fees
waived by the Manager in 1998 in accordance with the provisions of the Expense
Limitation Agreement, as defined directly below, between the Manager and the
Trust.
MANAGEMENT FEES PAID BY THE PORTFOLIOS TO EQ FINANCIAL CONSULTANTS, INC. IN
1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ANNUAL RATE OF
RATE FEES
PORTFOLIOS RECEIVED WAIVED
<S> <C> <C>
- -------------------------------------------------------------------------------
BT Equity 500 Index 0.00% 0.25%
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
- -------------------------------------------------------------------------------
</TABLE>
EXPENSE LIMITATION AGREEMENT
In the interest of limiting expenses of each Portfolio, the Manager has
entered into an expense limitation agreement with the Trust with respect to
each Portfolio ("Expense Limitation Agreement"). Pursuant to that Expense
Limitation Agreement, the Manager has agreed to waive or limit its fees and to
assume other expenses so that the total annual operating expenses of each
Portfolio other than interest, taxes, brokerage commissions, other
expenditures which are capitalized in accordance with generally accepted
accounting principles, other extraordinary expenses not incurred in the
ordinary course of each Portfolio's business and amounts payable pursuant to a
plan adopted in accordance with Rule 12b-1 under the 1940 Act, are limited to
the following fees:
MANAGEMENT EXPENSE LIMITATION FEES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AMOUNT EXPENSES
LIMITED TO (% OF
PORTFOLIOS DAILY NET ASSETS)
<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%
- -------------------------------------------------------------------------------
</TABLE>
Each Portfolio may at a later date reimburse to the Manager the management
fees waived or limited and other expenses assumed and paid by the Manager
pursuant to the Expense Limitation Agreement provided such Portfolio has
reached a sufficient asset size to permit such reimbursement to be made
without causing the total annual expense ratio of each Portfolio to exceed the
percentage limits stated above. Consequently, no reimbursement by a Portfolio
will be made unless: (i) the Portfolio's assets exceed $100 million;
(ii) the Portfolio's total annual expense ratio is less than the respective
percentages stated above; and (iii) the payment of such reimbursement has been
approved by the Trust's Board of Trustees on a quarterly basis.
THE ADVISERS
Each Portfolio has an Adviser that furnishes an investment program for the
Portfolio pursuant to an investment advisory agreement with the Manager. Each
Adviser makes investment decisions on behalf of the Portfolio, places all
orders for the purchase and sale of investments for the Portfolio's account
with brokers or dealers selected by such Adviser and may perform certain
limited related administrative functions in connection therewith.
The Manager has received an exemptive order from the SEC that permits the
Manager, subject to certain conditions, including board approval, and without
the approval of shareholders to: (a) employ a new Adviser or Advisers for any
Portfolio pursuant to the terms of a new Advisory Agreement, in each case
either as a replacement for an
---------------------------------------------------- EQ Advisors Trust
<PAGE>
28
- --------------------------------------------------------------------------------
existing Adviser or as an additional Adviser; (b) change the terms of any
Advisory Agreement; and (c) continue the employment of an existing Adviser on
the same advisory contract terms where a contract has been assigned because of
a change in control of the Adviser. In such circumstances, shareholders would
receive notice of such action, including the information concerning the
Adviser that normally is provided in the Prospectus.
The Manager pays each Adviser a fee based on the Portfolio's average daily net
assets. No Portfolio is responsible for the fees paid to each of the Advisers.
THE ADMINISTRATOR
Pursuant to an agreement, Chase Global Funds Services Company
("Administrator") assists the Manager in the performance of its administrative
responsibilities to the Trust and provides the Trust with other necessary
administrative, fund accounting and compliance services. In addition, the
Administrator makes available the office space, equipment, personnel and
facilities required to provide such services to the Trust. For these services,
the Trust pays the Administrator a monthly fee at the annual rate of .0525 of
1% of the total Trust assets, plus $25,000 for each Portfolio, until the total
Trust assets reach $2.0 billion, and when the total Trust assets exceed $2.0
billion: .0425 of 1% of the next $0.5 billion of the total Trust assets; .035
of 1% of the next $2.0 billion of the total Trust assets; .025 of 1% of the
next $1.0 billion of the total Trust assets; .015 of 1% of the next $2.5
billion of the total Trust assets; .01 of 1% of the total Trust assets in
excess of $8.0 billion; provided, however, that the annual fee payable to
Chase with respect to any Portfolio which commenced operations after July 1,
1997 and whose assets do not exceed $200 million shall be computed at the
annual rate of .0525% of 1% of the Portfolio's total assets plus $25,000.
THE TRANSFER AGENT
Equitable serves as the transfer agent and dividend disbursing agent of the
Trust and receives no compensation for serving in such capacity.
BROKERAGE PRACTICES
In selecting brokers and dealers, the Manager and each Adviser may consider
research and brokerage services furnished to either company and their
affiliates. Subject to seeking the most favorable net price and execution
available, the Manager and each Adviser may also consider sales of shares of
the Trust as a factor in the selection of brokers and dealers.
BROKERAGE TRANSACTIONS WITH AFFILIATES
To the extent permitted by law, the Trust may engage in securities and other
transactions with entities that may be affiliated with the Manager or the
Advisers. The 1940 Act generally prohibits the Trust from engaging in
principal securities transactions with an affiliate of the Manager or Advisers
unless pursuant to an exemptive order from the SEC. For these purposes,
however, the Trust has considered this issue and believes that a broker-dealer
affiliate of an Adviser to one Portfolio should not be treated as an affiliate
of the Adviser to another Portfolio for which such Adviser does not provide
investment advice. The Trust has adopted procedures that are reasonably
designed to provide that any commission it pays to affiliates of the Manager
or Advisers does not exceed the usual and customary broker's commission. The
Trust has also adopted procedures permitting it to purchase securities, under
certain restrictions prescribed by a rule under the 1940 Act, in a public
offering in which an affiliate of the Manager or Advisers is an underwriter.
<PAGE>
5
Fund distribution arrangements
29
- --------------------------------------------------------------------------------
The Trust offers two classes of shares on behalf of each Portfolio: Class IA
shares and Class IB shares. EQ Financial Consultants, Inc., the Trust's
Manager, serves as one of the distributors for the Class IB shares of the
Trust offered by this Prospectus as well as one of the distributors for the
Class IA shares. Equitable Distributors, Inc. serves as the other distributor
for the Class IB shares of the Trust as well as the Class IA shares. Both
classes of shares are offered and redeemed at their net asset value without
any sales load.
The Trust has adopted a Distribution Plan under Rule 12b-1 under the 1940 Act
for the Trust's Class IB shares. Under the Class IB Distribution Plan the
Class IB shares of the Trust pay each of the distributors an annual fee to
compensate them for promoting, selling and servicing shares of the Portfolios.
The annual fees equal 0.25% of each Portfolio's average daily net assets. Over
time, the fees will increase your cost of investing and may cost you more than
other types of charges.
<PAGE>
6
Purchase and redemption
30
- --------------------------------------------------------------------------------
The price at which a purchase or redemption is effected is based on the next
calculation of net asset value after an order is placed by an insurance
company or qualified retirement plan investing in or redeeming from the Trust.
Net asset value per share is calculated for purchases and redemption of shares
of each Portfolio by dividing the value of total Portfolio assets, less
liabilities (including Trust expenses and class related expenses, which are
accrued daily), by the total number of outstanding shares of that Portfolio.
The net asset value per share of each Portfolio is determined each business
day at 4:00 p.m. Eastern time. Net asset value per share is not calculated on
days on which the New York Stock Exchange is closed for trading.
Foreign securities (other than depositary receipts) are valued at the close of
business in the applicable foreign country. Consequently, Portfolios that
invest a significant portion of their assets in foreign securities, may
experience changes in their net asset value on days when a shareholder may not
purchase or redeem shares of that Portfolio.
All shares are purchased and redeemed in accordance with the Trust's Amended
and Restated Declaration of Trust and By-Laws. Sales and redemptions of shares
of the same class by the same shareholder on the same day will be netted for
each Portfolio. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders.
The Trust may suspend redemption, if permitted by the 1940 Act, for any period
during which the New York Stock Exchange is closed or during which trading is
restricted by the SEC or the SEC declares that an emergency exists. Redemption
may also be suspended during other periods permitted by the SEC for the
protection of the Trust's shareholders. If the Board of Trustees determines
that it would be detrimental to the best interest of the Trust's remaining
shareholders to make payment in cash, the Trust may pay redemption proceeds in
whole or in part by a distribution-in-kind of readily marketable securities.
<PAGE>
7
How assets are valued
31
- --------------------------------------------------------------------------------
Values are determined according to accepted practices and all laws and
regulations that apply. The assets of each Portfolio are generally valued as
follows:
o Stocks and debt securities which mature in more than 60 days are valued on
the basis of market quotations.
o Foreign securities not traded directly in the United States are valued at
representative quoted prices in the currency in the country of origin.
Foreign currency is converted into United States dollars equivalents at
current exchange rates.
o Short-term debt securities in the Portfolios which mature in 60 days or less
are valued at amortized cost, which approximates market value.
o Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided are valued in good
faith by the Valuation Committee of the Board of Trustees of the Trust
using its best judgment.
<PAGE>
8
Tax information
32
- --------------------------------------------------------------------------------
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
33
- --------------------------------------------------------------------------------
The following table provides information concerning the historical performance
of another registered investment company (or series) or other institutional
private accounts managed by each Adviser that has investment objectives,
policies, strategies and risks substantially similar to those of the
respective Portfolio(s) of the Trust for which it serves as Adviser. The data
is provided to illustrate the past performance of each Adviser in managing a
substantially similar investment vehicle as measured against specified market
indices. This data does not represent the past performance of any of the
Portfolios or the future performance of any Portfolio or its Adviser.
Consequently, potential investors should not consider this performance data as
an indication of the future performance of any Portfolio of the Trust or of
its Adviser and should not confuse this performance data with performance data
for each of the Trust's Portfolios, which is shown for each Portfolio under
the caption "ABOUT THE INVESTMENT PORTFOLIOS."
Each Adviser's performance data shown below for other registered investment
companies (or series thereof) was calculated in accordance with standards
prescribed by the SEC for the calculation of average annual total return
information for registered investment companies. Average annual total return
reflects changes in share prices and reinvestment of dividends and
distributions and is net of fund expenses. In each such instance, the share
prices and investment returns will fluctuate, reflecting market conditions as
well as changes in company-specific fundamentals of portfolio securities.
Composite performance data relating to the historical performance of
institutional private accounts managed by the relevant Adviser was calculated
on a total return basis and includes all losses. (As specified below, this
composite performance data is provided only for the J.P. Morgan Active Fixed
Income Composite). The total returns for the J.P. Morgan Active Fixed Income
Composite ("Composite") reflect the deduction of investment advisory fees,
brokerage commissions and execution costs paid by J.P. Morgan's institutional
private accounts, without provision for federal or state income taxes.
Custodial fees, if any, were not included in the calculation. The Composite
includes all actual, fee-paying, discretionary institutional private accounts
managed by J.P. Morgan that have investment objectives, policies, strategies
and risks substantially similar to those of the relevant Portfolio. Securities
transactions are accounted for on the trade date and accrual accounting is
utilized. Cash and equivalents are included in performance returns. The
institutional private accounts that are included in the Composite are not
subject to the same types of expenses to which the relevant Portfolio is
subject or to the diversification requirements, specific tax restrictions and
investment limitations imposed on the Portfolio by the 1940 Act or Subchapter
M of the Internal Revenue Code. Consequently, the performance results for the
Composite could have been adversely affected if the institutional private
accounts included in the Composite had been regulated as investment companies
under the federal securities laws.
The major difference between the SEC prescribed calculation of average annual
total returns for registered investment companies or (series thereof) and
total returns for composite performance is that average annual total returns
reflects all fees and charges applicable to the registered investment company
in question and the total return calculation for the Composite reflects only
those fees and charges described in the paragraph directly above.
The performance results for the registered investment companies or Composite
presented below are subject to lower fees and expenses than the relevant
Portfolios although in most instances the fees and expenses are substantially
similar. In addition, holders of Contracts representing interests in the
Portfolio below will be subject to charges and expenses relating to such
insurance contracts. The performance results presented above do not reflect
any insurance related expenses and would be reduced if such charges were
reflected.
The investment results presented below are unaudited. For more information on
the specified market indices used below, see the section "The Benchmarks."
<PAGE>
34
- --------------------------------------------------------------------------------
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>
- -------------------------------------------------------------------------------------------------------------------
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT PORTFOLIO) 1 5
--------------------------------------------------------- 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) 20.00% 9.19%
- -------------------------------------------------------------------------------------------------------------------
MFS RESEARCH FUND(2), (1) (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(7) (WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------
(14.88)% N/A
- -------------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4) (2.54)% N/A
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
OTHER FUND OR ACCOUNT MANAGED BY ADVISER (EQAT PORTFOLIO) 10 SINCE INCEPTION
--------------------------------------------------------- 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), (1) (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(7) (WARBURG PINCUS SMALL COMPANY VALUE PORTFOLIO)
- -------------------------------------------------------------------------------------------------------------------------------
N/A 16.51% 12/29/95
Russell 2000 Index(4) N/A 11.58%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The results for the MFS Research Fund (Class A shares) do not reflect sales
charges that may be imposed on the such shares.
(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.
<PAGE>
35
- --------------------------------------------------------------------------------
(Intentionally Left Blank)
<PAGE>
10
Financial Highlights
36
- --------------------------------------------------------------------------------
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>
37
- --------------------------------------------------------------------------------
<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>
38
- --------------------------------------------------------------------------------
<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% 2.49% 1.60% 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% 0.26% (0.44)% 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>
39
- --------------------------------------------------------------------------------
If you wish to know more, you will find additional information about the Trust
and its Portfolios in the following documents:
ANNUAL REPORTS
The Annual Report includes more information about the Trust's performance and
is available upon request free of charge. The reports usually include
performance information, a discussion of market conditions and the investment
strategies that affected the Portfolios' performance during the last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI, dated May 1, 1999, is incorporated into this Prospectus by reference
and is available upon request free of charge by calling our toll free number
at 1-800-526-2701.
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
