PROSPECTUS October 23, 2000
AMERICAN SKANDIA TRUST
One Corporate Drive, Shelton, Connecticut 06484
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American Skandia Trust (the "Trust") is an investment company made up of the following 41 separate portfolios, 19 of which are offered through this Prospectus ("Portfolios"):
AST Janus Overseas Growth Portfolio
AST American Century International Growth Portfolio
AST American Century International Growth Portfolio II
AST Janus Small-Cap Growth Portfolio
AST Kemper Small-Cap Growth Portfolio
AST Lord Abbett Small Cap Value Portfolio
AST Gabelli Small-Cap Value Portfolio
AST Janus Mid-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Value Portfolio
AST MFS Growth Portfolio
AST Alger Growth Portfolio
AST Marsico Capital Growth Portfolio
AST JanCap Growth Portfolio
AST Cohen & Steers Realty Portfolio
AST American Century Income & Growth Portfolio
AST INVESCO Equity Income Portfolio
AST PIMCO Total Return Bond Portfolio
AST PIMCO Limited Maturity Bond Portfolio
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Trust is an investment vehicle for life insurance companies ("Participating Insurance Companies") writing variable annuity
contracts and variable life insurance policies. Shares of the Trust may also be sold directly to certain tax-deferred retirement
plans. Each variable annuity contract and variable life insurance policy involves fees and expenses not described in this
Prospectus. Please read the Prospectus for the variable annuity contract and variable life insurance policy for information
regarding the contract or policy, including its fees and expenses.
TABLE OF CONTENTS
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Caption Page
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Risk/Return Summary...............................................................................................3
Past Performance.................................................................................................12
Fees and Expenses of the Portfolios..............................................................................22
Investment Objectives and Policies...............................................................................24
AST Janus Overseas Growth Portfolio.........................................................................25
AST American Century International Growth Portfolio.........................................................27
AST American Century International Growth Portfolio II......................................................29
AST Janus Small-Cap Growth Portfolio........................................................................30
AST Kemper Small-Cap Growth Portfolio.......................................................................32
AST Lord Abbett Small Cap Value Portfolio...................................................................34
AST Gabelli Small-Cap Value Portfolio.......................................................................36
AST Janus Mid-Cap Growth Portfolio..........................................................................38
AST Neuberger Berman Mid-Cap Growth Portfolio...............................................................40
AST Neuberger Berman Mid-Cap Value Portfolio................................................................41
AST MFS Growth Portfolio....................................................................................43
AST Alger Growth Portfolio..................................................................................44
AST Marsico Capital Growth Portfolio........................................................................45
AST JanCap Growth Portfolio.................................................................................47
AST Cohen & Steers Realty Portfolio.........................................................................49
AST American Century Income & Growth Portfolio..............................................................51
AST INVESCO Equity Income Portfolio.........................................................................52
AST PIMCO Total Return Bond Portfolio.......................................................................53
AST PIMCO Limited Maturity Bond Portfolio...................................................................56
Portfolio Turnover...............................................................................................59
Net Asset Value..................................................................................................59
Purchase and Redemption of Shares................................................................................59
Management of the Trust..........................................................................................60
Tax Matters......................................................................................................64
Financial Highlights.............................................................................................66
Certain Risk Factors and Investment Methods......................................................................72
RISK/RETURN SUMMARY
American Skandia Trust (the "Trust") is comprised of forty-one investment portfolios, nineteen of which are offered
through this Prospectus (the "Portfolios"). The Portfolios are designed to provide a wide range of investment options. Each
Portfolio has its own investment goal and style (and, as a result, its own level of risk). Some of the Portfolios offer potential
for high returns with correspondingly higher risk, while others offer stable returns with relatively less risk. It is possible to
lose money when investing even in the most conservative of the Portfolios. Investments in the Portfolios are not bank deposits
and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
It is not possible to provide an exact measure of the risk to which a Portfolio is subject, and a Portfolio's risk will
vary based on the securities that it holds at a given time. Nonetheless, based on each Portfolio's investment style and the risks
typically associated with that style, it is possible to assess in a general manner the risks to which a Portfolio will be
subject. The following discussion highlights the investment strategies and risks of each Portfolio. Additional information about
each Portfolio's potential investments and its risks is included in this Prospectus under "Investment Objectives and Policies."
International Portfolios:
Portfolio: Investment Goal: Primary Investments:
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Janus Overseas Growth Long-term capital growth The Portfolio invests primarily in common stocks of foreign
companies.
American Century Int'l Capital growth The Portfolio invests primarily in equity securities of
Growth foreign companies.
American Century Int'l Capital growth The Portfolio invests primarily in equity securities of
Growth II foreign companies.
Principal Investment Strategies:
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The AST Janus Overseas Growth Portfolio pursues its objective primarily through investments in common stocks of issuers located
outside the United States. The Portfolio has the flexibility to invest on a worldwide basis in companies and organizations of any
size, regardless of country of organization or place of principal business activity. The Portfolio normally invests at least 65%
of its total assets in securities of issuers from at least five different countries, excluding the United States. Although the
Portfolio intends to invest substantially all of its assets in issuers located outside the United States, it may at times invest
in U.S. issuers and it may at times invest all of its assets in fewer than five countries or even a single country.
The Portfolio invests primarily in stocks selected for their growth potential. The Sub-advisor generally takes a "bottom up"
approach to choosing investments for the Portfolio. In other words, the Sub-advisor seeks to identify individual companies with
earnings growth potential that may not be recognized by the market at large, regardless of where the companies are organized or
where they primarily conduct business. Although themes may emerge in the Portfolio, securities are generally selected without
regard to any defined allocation among countries, geographic regions or industry sectors, or other similar selection procedure.
The AST American Century International Growth Portfolio will seek to achieve its investment objective by investing primarily in
equity securities of international companies that the Sub-advisor believes will increase in value over time. The Sub-advisor uses
a growth investment strategy it developed that looks for companies with earnings and revenue growth. Ideally, the Sub-advisor
looks for companies whose earnings and revenues are not only growing, but are growing at an accelerating pace. For purposes of
the Portfolio, equity securities include common stocks, preferred stocks and convertible securities.
The Sub-advisor tracks financial information for thousands of companies to research and select the stocks it believes will be able
to sustain accelerating growth. This strategy is based on the premise that, over the long term, the stocks of companies with
accelerating earnings and revenues have a greater-than-average chance to increase in value.
The Sub-advisor recognizes that, in addition to locating strong companies with accelerating earnings, the allocation of assets
among different countries and regions also is an important factor in managing an international portfolio. For this reason, the
Sub-advisor will consider a number of other factors in making investment selections, including the prospects for relative economic
growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and
tax considerations. Under normal conditions, the Portfolio will invest at least 65% of its assets in equity securities of issuers
from at least three countries outside of the United States. While the Portfolio's focus will be on issuers in developed markets,
the Sub-advisor expects to invest to some degree in issuers in developing countries.
The AST American Century International Growth Portfolio II (formerly, the AST T. Rowe Price International Equity Portfolio) will
seek to achieve its investment objective in the same manner as the AST American Century International Growth Portfolio as
described above.
Principal Risks:
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o All three of the international portfolios are equity funds, and the primary risk of each is that the value of the stocks
they hold will decline. Stocks can decline for many reasons, including reasons related to the particular company, the
industry of which it is a part, or the securities markets generally.
o The level of risk of the international portfolios will generally be higher than the level of risk associated with
domestic equity funds. Foreign investments involve risks such as fluctuations in currency exchange rates, less liquid and
more volatile securities markets, unstable political and economic structures, reduced availability of information, and lack of
uniform financial reporting and regulatory practices such as those that apply to U.S. issuers. While none of the
international portfolios invest primarily in companies located in developing countries, each may invest in those companies to
some degree, and the risks of foreign investment may be accentuated by investment in developing countries.
Capital Growth Portfolios:
Portfolio: Investment Goal: Primary Investments:
--------- --------------- -------------------
Janus Small-Cap Growth Capital growth The Portfolio invests primarily in common stocks of small
capitalization companies.
Kemper Small-Cap Growth Maximum capital growth The Portfolio invests primarily in equity securities of small
capitalization companies.
Lord Abbett Small Cap Value Long-term capital growth The Portfolio invests primarily in equity securities of small
capitalization companies that are believed to be undervalued.
Gabelli Small-Cap Value Long-term capital growth The Portfolio invests primarily in stocks and equity-related
securities of small capitalization companies that appear to
be undervalued.
Janus Mid-Cap Growth Long-term capital growth The Portfolio invests primarily in common stocks, with
normally at least 65% of the Portfolio's assets invested in
medium-sized companies.
Neuberger Berman Mid-Cap Capital growth The Portfolio invests primarily in common stocks of medium
Growth capitalization companies.
Neuberger Berman Mid-Cap Capital growth The Portfolio invests primarily in common stocks of medium
Value capitalization companies, using a value-oriented investment
approach.
MFS Growth Long-term capital growth The Portfolio invests primarily in common stocks and related
and future income securities.
Alger Growth Long-term capital growth The Portfolio invests primarily in equity securities that are
listed on U.S. exchanges or in the over-the-counter market.
Marsico Capital Growth Capital growth The Portfolio invests primarily in common stocks, with the
majority of the Portfolio's assets in large capitalization
stocks.
JanCap Growth Capital growth The Portfolio invests primarily in common stocks.
Principal Investment Strategies:
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The AST Janus Small-Cap Growth Portfolio pursues its objective by normally investing at least 65% of its total assets in the
common stocks of small-sized companies. For purposes of the Portfolio, small-sized companies are those that have market
capitalizations of less than $1.5 billion or annual gross revenues of less than $500 million. To a lesser extent, the Portfolio
may also invest in stocks of larger companies with potential for capital appreciation.
The Sub-advisor generally takes a "bottom up" approach to building the Portfolio. In other words, it seeks to identify individual
companies with earnings growth potential that may not be recognized by the market at large. Although themes may emerge in the
Portfolio, securities are generally selected without regard to any defined industry sector or other similar selection procedure.
At least 65% of the AST Kemper Small-Cap Growth Portfolio's total assets normally will be invested in the equity securities of
smaller companies, i.e., those having a market capitalization of $2 billion or less at the time of investment, many of which would
be in the early stages of their life cycle. Equity securities include common stocks and securities convertible into or
exchangeable for common stocks, including warrants and rights. The Portfolio intends to invest primarily in stocks of companies
whose earnings per share are expected by the Sub-advisor to grow faster than the market average ("growth stocks").
In managing the Portfolio, the Sub-advisor emphasizes stock selection and fundamental research. The Sub-advisor considers a
number of factors in considering whether to invest in a growth stock, including high return on equity and earnings growth rate,
low level of debt, strong balance sheet, good management and industry leadership. Other factors are patterns of increasing sales
growth, the development of new or improved products or services, favorable outlooks for growth in the industry, the probability of
increased operating efficiencies, emphasis on research and development, cyclical conditions, or other signs that a company may
grow rapidly. The Portfolio seeks attractive areas for investment that arise from factors such as technological advances, new
marketing methods, and changes in the economy and population.
The AST Lord Abbett Small Cap Value Portfolio will seek its objective through investments primarily in equity securities that are
believed to be undervalued in the marketplace. Typically, in choosing stocks, the Sub-advisor looks for companies using the
following process:
o Quantitative research is performed to evaluate various criteria, including the price of shares in relation to book value,
sales, asset value, earnings, dividends and cash flow;
o Fundamental research is conducted to assess the dynamics of each company within its industry and within the company. The
Sub-advisor evaluates the company's business strategies by assessing management's ability to execute the strategies, and
evaluating the adequacy of its financial resources.
Usually, at least 65% of the Portfolio's total assets will be invested in common stocks issued by smaller, less well-known
companies (with market capitalizations of less than $1 billion) selected on the basis of fundamental investment analysis. The
Portfolio may invest up to 35% of its assets in foreign securities.
The stocks in which the Portfolio generally invests are those which, in the Sub-advisor's judgment, are selling below their
intrinsic value and at prices that do not adequately reflect their long-term business potential. Selected smaller stocks may be
undervalued because they are often overlooked by many investors, or because the public is overly pessimistic about a company's
prospects. Accordingly, their prices can rise either as a result of improved business fundamentals, particularly when earnings
grow faster than general expectations, or as more investors come to recognize the company's underlying potential. The price of
shares in relation to book value, sales, asset value, earnings, dividends and cash flow, both historical and prospective, are key
determinants in the security selection process. These criteria are not rigid, and other stocks may be included in the Portfolio
if they are expected to help it attain its objective.
The AST Gabelli Small-Cap Value Portfolio (formerly, the AST T. Rowe Price Small Company Value Portfolio) will invest at least 65%
of its total assets in stocks and equity-related securities of small companies ($1 billion or less in market capitalization).
Reflecting a value approach to investing, the Portfolio will seek the stocks of companies whose current stock prices do not appear
to adequately reflect their underlying value as measured by assets, earnings, cash flow or business franchises. The Sub-advisor's
research team seeks to identify companies that appear to be undervalued by various measures, and may be temporarily out of favor,
but have good prospects for capital appreciation. In selecting investments, the Sub-advisor generally looks to the following:
(1) Low price/earnings, price/book value or price/cash flow ratios relative to the company's peers.
(2) Low stock price relative to a company's underlying asset values.
(3) A sound balance sheet and other positive financial characteristics.
The Sub-advisor then determines whether there is an emerging catalyst that will focus investor attention on the underlying assets
of the company, such as takeover efforts, a change in management, or a plan to improve the business through restructuring or other
means. The Portfolio may sell securities for a variety of reasons, such as to secure gains, limit losses or re-deploy assets into
more promising opportunities. The Portfolio will not sell a stock just because the company has grown to a market capitalization
of more than $1 billion, and it may on occasion purchase companies with a market cap of more than $1 billion.
The AST Janus Mid-Cap Growth Portfolio pursues its objective by investing primarily in common stocks selected for their growth
potential, and normally invests at least 65% of its equity assets in medium-sized companies. For purposes of the Portfolio,
medium-sized companies are those whose market capitalizations (measured at the time of investment) fall within the range of
companies in the Standard & Poor's MidCap 400 Index (the "S&P 400"). The Sub-advisor generally takes a "bottom up" approach to
choosing investments for the Portfolio. In other words, the Sub-advisor seeks to identify individual companies with earnings
growth potential that may not be recognized by the market at large. The Sub-advisor makes this assessment by looking at companies
one at a time, regardless of size, country of organization, place of principal business activity, or other similar selection
criteria.
To pursue its objective, the AST Neuberger Berman Mid-Cap Growth Portfolio primarily invests in the common stocks of mid-cap
companies. Companies with equity market capitalizations from $300 million to $10 billion at the time of investment are considered
mid-cap companies for purposes of the Portfolio. Some of the Portfolio's assets may be invested in the securities of large-cap
companies as well as in small-cap companies. The Portfolio seeks to reduce risk by diversifying among many companies and
industries.
The Portfolio is normally managed using a growth-oriented investment approach. The Sub-advisor looks for fast-growing companies
that are in new or rapidly evolving industries. Factors in identifying these companies may include above-average growth of
earnings or earnings that exceed analysts' expectations. The Sub-advisor may also look for other characteristics in a company,
such as financial strength, a strong position relative to competitors and a stock price that is reasonable in light of its growth
rate.
The Sub-advisor follows a disciplined selling strategy, and may sell a stock when it reaches a target price, fails to perform as
expected, or appears substantially less desirable than another stock.
To pursue its objective, the AST Neuberger Berman Mid-Cap Value Portfolio primarily invests in the common stocks of mid-cap
companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap
companies. The Portfolio seeks to reduce risk by diversifying among many companies and industries.
Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose stock prices are
undervalued and that may rise in price when other investors realize their worth. Factors that the Sub-advisor may use to identify
these companies include strong fundamentals, such as a low price-to-earnings ratio, consistent cash flow, and a sound track record
through all phases of the market cycle. The Sub-advisor may also look for other characteristics in a company, such as a strong
position relative to competitors, a high level of stock ownership among management, or a recent sharp decline in stock price that
appears to be the result of a short-term market overreaction to negative news.
The Sub-advisor generally considers selling a stock when it reaches a target price, when it fails to perform as expected, or when
other opportunities appear more attractive.
The AST MFS Growth Portfolio invests, under normal market conditions, at least 80% of its total assets in common stocks and
related securities, such as preferred stocks, convertible securities and depositary receipts, of companies that the Sub-advisor
believes offer better than average prospects for long-term growth. The Sub-advisor uses a "bottom up," as opposed to "top down,"
investment style in managing the Portfolio. This means that securities are selected based upon fundamental analysis of individual
companies by the Sub-advisor.
In managing the Portfolio, the Sub-advisor seeks to purchase securities of companies that it considers well-run and poised for
growth. The Sub-advisor looks particularly for companies with the following qualities:
o a strong franchise, strong cash flows and a recurring revenue stream
o a strong industry position, where there is potential for high profit margins or substantial barriers to new entry into
the industry
o a strong management with a clearly defined strategy
o new products or services.
The Portfolio may invest up to 35% of its net assets in foreign securities.
The AST Alger Growth Portfolio invests primarily in equity securities, such as common or preferred stocks, that are listed on U.S.
exchanges or in the over-the-counter market. The Portfolio invests primarily in growth stocks. The Sub-advisor believes that
these stocks are those of two types of companies:
o High Unit Volume Growth Companies. These are vital creative companies that offer goods or services to a rapidly
expanding marketplace. They include both established and emerging firms, offering new or improved products, or firms simply
fulfilling an increased demand for an existing product line.
o Positive Life Cycle Change Companies. These are companies experiencing a major change that is expected to produce
advantageous results. These changes may be as varied as new management, products or technologies, restructurings or
reorganizations, or mergers and acquisitions.
The Portfolio focuses on growing companies that generally have broad product lines, markets, financial resources and depth of
management. The Portfolio normally invests at least 65% of its total assets in equity securities of companies that, at the time
of purchase of the securities, have total market capitalizations of $1 billion or greater.
The AST Marsico Capital Growth Portfolio will pursue its objective by investing primarily in common stocks. The Sub-advisor
expects that the majority of the Portfolio's assets will be invested in the common stocks of larger, more established companies.
In selecting investments for the Portfolio, the Sub-advisor uses an approach that combines "top down" economic analysis with
"bottom up" stock selection. The "top-down" approach takes into consideration such macro-economic factors as interest rates,
inflation, the regulatory environment, and the global competitive landscape. In addition, the Sub-advisor examines such factors
as the most attractive global investment opportunities, industry consolidation, and the sustainability of economic trends. As a
result of this "top down" analysis, the Sub-advisor identifies sectors, industries and companies that should benefit from the
trends the Sub-advisor has observed.
The Sub-advisor then looks for individual companies with earnings growth potential that may not be recognized by the market at
large. In determining whether a particular company is appropriate for investment by the Portfolio, the Sub-advisor focuses on a
number of different attributes, including the company's specific market expertise or dominance, its franchise durability and
pricing power, solid fundamentals (e.g., a strong balance sheet, improving returns on equity, and the ability to generate free
cash flow), strong management, and reasonable valuations in the context of projected growth rates.
The AST JanCap Growth Portfolio will pursue its objective by investing primarily in common stocks. Common stock investments will
be in companies that the Sub-advisor believes are experiencing favorable demand for their products and services, and which operate
in a favorable competitive and regulatory environment. The Sub-advisor generally takes a "bottom up" approach to choosing
investments for the Portfolio. In other words, the Sub-advisor seeks to identify individual companies with earnings growth
potential that may not be recognized by the market at large.
Principal Risks:
---------------
o All of the capital growth portfolios are equity funds, and the primary risk of each is that the value of the stocks they
hold will decline. Stocks can decline for many reasons, including reasons related to the particular company, the industry of
which it is a part, or the securities markets generally. These declines can be substantial.
o The risk to which the capital growth portfolios are subject depends in part on the size of the companies in which the
particular portfolio invests. Securities of smaller companies tend to be subject to more abrupt and erratic price movements
than securities of larger companies, in part because they may have limited product lines, markets, or financial resources.
Market capitalization, which is the total market value of a company's outstanding stock, is often used to classify companies
based on size. Therefore, the AST Janus Small-Cap Growth Portfolio, the AST Kemper Small-Cap Growth Portfolio, the AST Lord
Abbett Small Cap Value Portfolio, and the AST Gabelli Small-Cap Value Portfolio can be expected to be subject to the highest
degree of risk relative to the other capital growth funds. The AST Janus Mid-Cap Growth Portfolio, the AST Neuberger Berman
Mid-Cap Growth Portfolio and the AST Neuberger Berman Mid-Cap Value Portfolio can be expected to be subject to somewhat less
risk, and the AST MFS Growth Portfolio, the AST Alger Growth Portfolio, the AST Marsico Capital Growth Portfolio and the AST
JanCap Growth Portfolio to somewhat less risk than the mid-cap funds.
o The AST Janus Small-Cap Growth Portfolio, the AST Kemper Small-Cap Growth Portfolio, the AST Janus Mid-Cap Growth
Portfolio, the AST Neuberger Berman Mid-Cap Growth Portfolio, the AST MFS Growth Portfolio, the AST Alger Growth Portfolio,
the AST Marsico Capital Growth Portfolio and the AST JanCap Growth Portfolio generally take a growth approach to investing,
while the AST Lord Abbett Small Cap Value Portfolio, the AST Gabelli Small-Cap Value Portfolio and the AST Neuberger Berman
Mid-Cap Value Portfolio generally take a value approach. Value stocks are believed to be selling at prices lower than what
they are actually worth, while growth stocks are those of companies that are expected to grow at above-average rates. A
portfolio investing primarily in growth stocks will tend to be subject to more risk than a value fund, although this will not
always be the case. Value stocks are subject to the risks that the market may not recognize the stock's actual value or that
the market actually valued the stock appropriately.
o The AST Janus Mid-Cap Growth Portfolio is a non-diversified fund in that it may hold larger positions in a smaller number
of securities. As a result, a single security's increase or decrease in value may have a greater impact on a Portfolio's
share price and total return.
Growth and Income Portfolios:
Portfolio: Investment Goal: Primary Investments:
--------- --------------- -------------------
Cohen & Steers Realty Maximize total return The Portfolio invests primarily in equity securities of real
estate companies.
American Century Income & Capital growth and, The Portfolio invests primarily in stocks of large U.S.
Growth secondarily, current income companies selected through quantitative investment techniques.
INVESCO Equity Income Capital growth and current The Portfolio invests primarily in dividend-paying common and
income preferred stocks, and to a lesser extent in fixed income
securities.
Principal Investment Strategies:
-------------------------------
The AST Cohen & Steers Realty Portfolio pursues its investment objective of maximizing total return by seeking, with approximately
equal emphasis, capital growth and current income. Under normal circumstances, the Portfolio will invest substantially all of its
assets in the equity securities of real estate companies. Such equity securities will consist of common stocks, rights or
warrants to purchase common stocks, securities convertible into common stocks where the conversion feature represents, in the
Sub-advisor's view, a significant element of the securities' value, and preferred stocks.
For purposes of the Portfolio's investment policies, a "real estate company" is one that derives at least 50% of its revenues from
the ownership, construction, financing, management or sale of real estate or that has at least 50% of its assets in real estate.
The Portfolio may invest up to 10% of its total assets in securities of foreign real estate companies. Real estate companies may
include real estate investment trusts ("REITs"). REITs pool investors' funds for investment primarily in income producing real
estate or real estate related loans or interests.
The AST American Century Income & Growth Portfolio's investment strategy utilizes quantitative management techniques in a two-step
process that draws heavily on computer technology. In the first step, the Sub-advisor ranks stocks, primarily the 1,500 largest
publicly traded U.S. companies (measured by market capitalization), from most attractive to least attractive. These rankings are
determined by using a computer model that combines measures of a stock's value and measures of its growth potential. To measure
value, the Sub-advisor uses ratios of stock price to book value and stock price to cash flow, among others. To measure growth,
the Sub-advisor uses, among others, the rate of growth in a company's earnings and changes in its earnings estimates.
In the second step, the Sub-advisor uses a technique called portfolio optimization. In portfolio optimization, the Sub-advisor
uses a computer to build a portfolio of stocks from the ranking described earlier that it thinks will provide the best balance
between risk and expected return. The goal is to create an equity portfolio that provides better returns than the S&P 500 Index
without taking on significant additional risk. The Sub-advisor attempts to create a dividend yield for the Portfolio that will be
greater than that of the S&P 500.
The AST INVESCO Equity Income Portfolio seeks to achieve its objective by investing in securities that are expected to produce
relatively high levels of income and consistent, stable returns. The Portfolio normally will invest at least 65% of its assets in
dividend-paying common and preferred stocks of domestic and foreign issuers. Up to 30% of the Portfolio's assets may be invested
in equity securities that do not pay regular dividends. In addition, the Portfolio normally will have some portion of its assets
invested in debt securities or convertible bonds.
Principal Risks:
---------------
o Both equity securities (e.g., stocks) and fixed income securities (e.g., bonds) can decline in value, and the primary
risk of each of the growth and income portfolios is that the value of the securities they hold will decline. The degree of
risk to which the growth and income portfolios are subject is likely to be somewhat less than a portfolio investing
exclusively for capital growth. Nonetheless, the share prices of the growth and income portfolios can decline substantially.
o The AST Cohen & Steers Realty Portfolio and the AST American Century Income & Growth Portfolio invest primarily in equity
securities. The AST INVESCO Equity Income Portfolio invests primarily in equity securities, but will normally invest some of
its assets in fixed income securities. The values of equity securities tend to fluctuate more widely than the values of fixed
income securities. Therefore, those growth and income portfolios that invest primarily in equity securities will likely be
subject to somewhat higher risk than those portfolios that invest in both equity and fixed income securities.
o The AST INVESCO Equity Income Portfolio may invest to some degree in lower-quality fixed income securities, which are
subject to greater risk that the issuer may fail to make interest and principal payments on the securities when due. The
Portfolio generally invests in intermediate- to long-term fixed income securities. Fixed income securities with longer
maturities are generally subject to greater risk than fixed income securities with shorter maturities, in that their values
will fluctuate more in response to changes in market interest rates.
o The AST Cohen & Steers Realty Portfolio is subject to an additional risk factor because it is less diversified than most
equity funds and could therefore experience sharp price declines when conditions are unfavorable in the real estate sector.
Real estate securities may be subject to risks similar to those associated with direct ownership of real estate. These
include risks related to economic conditions, heavy cash flow dependency, overbuilding, extended vacancies of properties,
changes in neighborhood values, and zoning, environmental and housing regulations.
Fixed Income Portfolios:
Portfolio: Investment Goal: Primary Investments:
--------- --------------- -------------------
PIMCO Total Return Bond Maximize total return, The Portfolio invests primarily in higher-quality fixed
consistent with income securities of varying maturities, so that the
preservation of capital Portfolio's expected average duration will be from three to
six years.
PIMCO Limited Maturity Bond Maximize total return, The Portfolio invests primarily in higher-quality fixed
consistent with income securities of varying maturities, so that the
preservation of capital Portfolio's expected average duration will be from one to
three years.
Principal Investment Strategies:
-------------------------------
The AST PIMCO Total Return Bond Portfolio will invest at least 65% of its assets in the following types of fixed income securities:
(1) securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities;
(2) corporate debt securities, including convertible securities and commercial paper;
(3) mortgage and other asset-backed securities;
(4) structured notes, including hybrid or "indexed" securities, and loan participations;
(5) delayed funding loans and revolving credit securities;
(6) bank certificates of deposit, fixed time deposits and bankers' acceptances;
(7) repurchase agreements and reverse repurchase agreements;
(8) obligations of foreign governments or their subdivisions, agencies and instrumentalities; and
(9) obligations of international agencies or supranational entities.
Portfolio holdings will be concentrated in areas of the bond market that the Sub-advisor believes to be relatively undervalued.
In selecting fixed income securities, the Sub-advisor uses economic forecasting, interest rate anticipation, credit and call risk
analysis, foreign currency exchange rate forecasting, and other securities selection techniques. The proportion of the
Portfolio's assets committed to investment in securities with particular characteristics (such as maturity, type and coupon rate)
will vary based on the Sub-advisor's outlook for the U.S. and foreign economies, the financial markets, and other factors. The
management of duration is one of the fundamental tools used by the Sub-advisor.
The Portfolio will invest in fixed-income securities of varying maturities. The average portfolio duration of the Portfolio
generally will vary within a three- to six-year time frame based on the Sub-advisor's forecast for interest rates. The Portfolio
can and routinely does invest in certain complex fixed income securities (including mortgage-backed and asset-backed securities)
and engage in a number of investment practices (including futures, swaps and dollar rolls) that many other fixed income funds do
not utilize. The Portfolio may invest up to 10% of its assets in fixed income securities that are rated below investment grade
("junk bonds") (or, if unrated, determined by the Sub-advisor to be of comparable quality).
The AST PIMCO Limited Maturity Bond Portfolio will invest at least 65% of its assets in the following types of fixed income
securities:
(1) securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities;
(2) corporate debt securities, including convertible securities and commercial paper;
(3) mortgage and other asset-backed securities;
(4) structured notes, including hybrid or "indexed" securities, and loan participations;
(5) delayed funding loans and revolving credit securities;
(6) bank certificates of deposit, fixed time deposits and bankers' acceptances;
(7) repurchase agreements and reverse repurchase agreements;
(8) obligations of foreign governments or their subdivisions, agencies and instrumentalities; and
(9) obligations of international agencies or supranational entities.
Portfolio holdings will be concentrated in areas of the bond market that the Sub-advisor believes to be relatively undervalued.
In selecting fixed income securities, the Sub-advisor uses economic forecasting, interest rate anticipation, credit and call risk
analysis, foreign currency exchange rate forecasting, and other securities selection techniques. The proportion of the
Portfolio's assets committed to investment in securities with particular characteristics (such as maturity, type and coupon rate)
will vary based on the Sub-advisor's outlook for the U.S. and foreign economies, the financial markets, and other factors. The
management of duration is one of the fundamental tools used by the Sub-advisor.
The Portfolio will invest in fixed-income securities of varying maturities. The average portfolio duration of the Portfolio
generally will vary within a one- to three-year time frame based on the Sub-advisor's forecast for interest rates. The Portfolio
can and routinely does invest in certain complex fixed income securities (including mortgage-backed and asset-backed securities)
and engage in a number of investment practices (including futures, swaps and dollar rolls) that many other fixed income funds do
not utilize. The Portfolio may invest up to 10% of its assets in fixed income securities that are rated below investment grade
("junk bonds") (or, if unrated, determined by the Sub-advisor to be of comparable quality).
Principal Risks:
---------------
o The risk of a fund or portfolio investing primarily in fixed income securities is determined largely by the quality and
maturity characteristics of its portfolio securities. Lower-quality fixed income securities are subject to greater risk that
the company may fail to make interest and principal payments on the securities when due. Fixed income securities with longer
maturities (or durations) are generally subject to greater risk than securities with shorter maturities, in that their values
will fluctuate more in response to changes in market interest rates.
o The average duration or maturity of the AST PIMCO Total Return Bond Portfolio generally will be longer than that of the
AST PIMCO Limited Maturity Bond Portfolio, and funds having longer average maturities or durations can be expected to be
subject to a greater level of risk than shorter-term funds. As funds that invest primarily in high-quality fixed income
securities, the level of risk to which the AST PIMCO Total Return Bond Portfolio and AST PIMCO Limited Maturity Bond Portfolio
are subject can be expected to be less than most equity funds. Nonetheless, the fixed income securities held by these
Portfolios can decline in value because of changes in their quality, in market interest rates, or for other reasons. While
the complex fixed income securities invested in and investment practices engaged in by the AST PIMCO Total Return Bond
Portfolio and AST PIMCO Limited Maturity Portfolio are designed to increase their return or hedge their investments, these
securities and practices may increase the risk to which the Portfolios are subject.
Past Performance
The bar charts show the performance of each Portfolio for each full calendar year the Portfolio has been in
operation. The tables below each bar chart show each such Portfolio's best and worst quarters during the periods included in the
bar chart, as well as average annual total returns for each Portfolio since inception. This information may help provide an
indication of each Portfolio's risks by showing changes in performance from year to year and by comparing the Portfolio's
performance with that of a broad-based securities index. The performance figures do not reflect any charges associated with the
variable insurance contracts through which Portfolio shares are purchased; and would be lower if they did. All figures assume
reinvestment of dividends. Past performance does not necessarily indicate how a Portfolio will perform in the future. The 1999
performance figures for some of the Portfolios reflect the substantial increases that occurred during 1999 in the markets for the
types of securities in which those Portfolios invest; it is unlikely that similarly large increases will continue in future
years. No performance information is included for those Portfolios that commenced operations after January, 1999 (the AST Janus
Mid-Cap Growth Portfolio, the AST MFS Growth Portfolio and the AST Alger Growth Portfolio).
AST Janus Overseas Growth Portfolio
-------------------------------
100.00%
82.68%
40.00%
18.70% 20.00%
16.22%
0.00%
_______________________________-20.00%
1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 59.16%, 4th quarter 1999 Down 18.54%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Morgan Stanley Capital
For periods ending International (MSCI) EAFE
12/31/99 Index
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 82.68% 26.96%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since inception 36.08% 16.11%
(1/2/97)
---------------------- --------------------- ----------------------------
AST American Century International Growth Portfolio
-------------------------
65.20% 60.00%
40.00%
18.68% 20.00%
15.10%
0.00%
_________________________-20.00%
1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 49.04%, 4th quarter 1999 Down 17.66%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Morgan Stanley Capital
For periods ending International (MSCI) EAFE
12/31/99 Index
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 65.20% 26.96%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 31.21% 16.11%
(1/2/97)
---------------------- --------------------- ----------------------------
AST American Century International Growth Portfolio II*
31.95% 30.00%
11.09% 14.17% 14.03% 20.00%
1.36% 0.00%
-3.80%____________________________________________-20.00%
1994 1995 1996 1997 1998 1999
-------------------------------------- --------------------------------------
Best Quarter Worst Quarter
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
Up 24.22%, 4th quarter 1999 Down 13.58%, 3rd quarter 1998
-------------------------------------- --------------------------------------
---------------------- -------------------- -----------------------------
Average annual total Portfolio Index:
returns Morgan Stanley Capital
For periods ending International (MSCI) EAFE
12/31/99 Index
---------------------- -------------------- -----------------------------
---------------------- -------------------- -----------------------------
1 year 31.95% 26.96%
---------------------- -------------------- -----------------------------
---------------------- -------------------- -----------------------------
5 year 14.10% 12.82%
---------------------- -------------------- -----------------------------
---------------------- -------------------- -----------------------------
Since Inception 10.91% 11.90%
(1/4/94)
---------------------- -------------------- -----------------------------
*Prior to May 1, 2000, the AST American Century International
Growth Portfolio II was known as the AST T. Rowe Price
International Equity Portfolio, and Row Price-Fleming
International, Inc. served as Sub-advisor to the Portfolio.
AST Janus Small-Cap Growth Portfolio*
----------------------------------------------
141.96%
100.00%
60.00%
32.65% 40.00%
20.05% 20.00%
8.40% 6.01% 3.49%
0.00%
______________________________________________ -20.00%
1994 1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 79.79%, 4th quarter 1999 Down 23.95%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/98
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 141.96% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
5 year 33.40% 28.52%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 28.84% 23.65%
(1/4/94)
---------------------- --------------------- ----------------------------
*Prior to January 1, 1999, the AST Janus Small-Cap Portfolio
was known as the Founders Capital Appreciation Portfolio, and
Founders Asset Management LLC served as Sub-advisor to the
Portfolio.
AST Kemper Small-Cap Growth Portfolio
-------------------------
55.90% 60.00%
40.00%
20.00%
0.00%
___________________________-20.00%
1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 47.63%, 4th quarter 1999 Down 8.39%, 2nd quarter 1999
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 55.90% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 55.90% 21.04%
(1/1/99)
---------------------- --------------------- ----------------------------
AST Lord Abbett Small Cap Value Portfolio
-------------------------
60.00%
40.00%
20.00%
8.81%
-0.10 0.00%
___________________________-20.00%
1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 22.89%, 2nd quarter 1999 Down 22.12%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 8.81% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 4.25% 24.53%
(1/2/98)
---------------------- --------------------- ----------------------------
AST Gabelli Small-Cap Value Portfolio*
-------------------------
60.00%
40.00%
28.80% 20.00%
-10.53 0.58% 0.00%
_________________________-20.00%
1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 19.09%, 2nd quarter 1999 Down 19.88%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 0.58% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 5.04% 27.83%
(1/2/97)
---------------------- --------------------- ----------------------------
*Prior to May 1, 1998, the AST Gabelli Small-Cap Value Portfolio was known
as the AST T. Rowe Price Small Company Value Portfolio, and T. Rowe Price
Associates, Inc. served as Sub-advisor to the Portfolio.
AST Neuberger Berman Mid-Cap Growth Portfolio*
-----------------------------------------
60.00%
51.37%
40.00%
24.42% 20.65% 20.00%
16.34% 16.68%
0.00%
________________________________________ -20.00%
1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 49.25%, 4th quarter 1999 Down 20.62%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 51.37% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
5 year 25.27% 28.54%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 24.10% 27.06%
(10/19/94)
---------------------- --------------------- ----------------------------
*Prior to May 1, 1998, the AST Neuberger Berman Mid-Cap Growth
Portfolio was known as the Berger Capital Growth Portfolio,
and Berger Associates, Inc. served as Sub-advisor to the
Portfolio.
AST Neuberger Berman Mid-Cap Value Portfolio*
----------------------------------------------
60.00%
40.00%
26.13% 26.42% 20.00%
11.53% 5.67%
-6.95% -2.33% 0.00%
_____________________________________________ -20.00%
1994 1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 15.95%, 4th quarter 1998 Down 14.37%, 3rd quarter 1999
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 5.67% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
5 year 12.91% 28.52%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 9.60% 22.22%
(5/3/93)
---------------------- --------------------- ----------------------------
*Prior to May 1, 1998, the AST Neuberger Berman Mid-Cap Value
Portfolio was known as the Federated Utility Income Portfolio,
and Federated Investment Counseling served as Sub-advisor to
the Portfolio.
AST Marsico Capital Growth Portfolio
-------------------------
52.58% 60.00%
41,59%
40.00%
20.00%
0.00%
_________________________-20.00%
1998 1999
---------------------------------------- -------------------------------------
Best Quarter Worst Quarter
---------------------------------------- -------------------------------------
---------------------------------------- -------------------------------------
Up 36.36%, 4th quarter 1999 Down 12.80%, 3rd quarter 1998
---------------------------------------- -------------------------------------
---------------------------- --------------------- -----------------------------
Average annual total Portfolio Index:
returns for periods ending Standard & Poors 500 Index
12/31/99
---------------------------- --------------------- -----------------------------
---------------------------- --------------------- -----------------------------
1 year 52.58% 21.04%
---------------------------- --------------------- -----------------------------
---------------------------- --------------------- -----------------------------
Since Inception 46.44% 25.52%
(12/22/97)
---------------------------- --------------------- -----------------------------
AST JanCap Growth Portfolio
----------------------------------------------------------------
68.26% 60.00%
55.01%
40.00%
11.87% 37.98% 28.66% 20.00%
28.36%
-4.51% 0.00%
______________________________________________________________-20.00%
1993 1994 1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 33.97%, 4th quarter 1999 Down 5.95%, 2nd quarter 1994
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 55.01% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
5 year 42.82% 28.52%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 30.41% 21.80%
(11/5/92)
---------------------- --------------------- ----------------------------
AST COHEN & STEERS REALTY PORTFOLIO
-------------------------
60.00%
40.00%
20.00%
2.26% 0.00%
-16.00%
_________________________-20.00%
1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 10.53%, 2nd quarter 1999 Down 10.76%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns NAREIT Equity REIT Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 2.26% -4.62%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception -7.31% -11.32%
(1/2/98)
---------------------- --------------------- ----------------------------
AST American Century Income & Growth Portfolio*
---------------------------
60.00%
40.00%
22.30% 22.98% 20.00%
12.27%
0.00%
_________________________-20.00%
1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 16.72%, 4th quarter 1998 Down 11.30%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 22.98% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 19.08% 27.83%
(1/2/97)
---------------------- --------------------- ----------------------------
*Prior to May 4, 1999, the AST American Century Income &
Growth Portfolio was known as the AST Putnam Value Growth and
Income Portfolio, and Putnam Investment Management, Inc.
served as Sub-advisor to the Portfolio.
AST INVESCO Equity Income Portfolio
-------------------------------------------------
60.00%
40.00%
30.07% 23.33% 20.00%
17.09% 13.34% 11.74%
-2.50% 0.00%
_______________________________________________________-20.00%
1994 1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 12.32%, 4th quarter 1998 Down 8.68%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 11.74% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
5 year 18.92% 28.52%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 15.07% 23.65%
(1/4/94)
---------------------- --------------------- ----------------------------
AST PIMCO Total Return Bond Portfolio
----------------------------------------------------------------
60.00%
40.00%
18.78% 9.87% 9.46% 20.00%
3.42%
-2.40% -1.09% 0.00%
_______________________________________________________________-20.00%
1994 1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 5.07%, 3rd quarter 1998 Down 2.54%, 1st quarter 1996
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns LB
For periods ending Aggregate Index
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year -1.09% -0.83%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
5 year 7.88% 7.73%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 6.08% 5.89%
(1/4/94)
---------------------- --------------------- ----------------------------
AST PIMCO Limited Maturity Bond Portfolio
----------------------------------------
60.00%
40.00%
20.00%
7.46% 5.72%
3.90% 3.37% 0.00%
________________________________________-20.00%
1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 2.95%, 4th quarter 1998 Down 0.52%, 1st quarter 1996
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Merrill Lynch 1-3 Year
For periods ending Index
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 3.37% 3.06%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 5.38% 5.99%
(5/2/95)
---------------------- --------------------- ----------------------------
This page has been intentionally left blank.
FEES AND EXPENSES OF THE PORTFOLIOS: The table below describes the fees and expenses that you may pay if you buy and hold shares
of the Portfolios. Unless otherwise indicated, the expenses shown below are for the year ending December 31, 1999.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases NONE*
Maximum Deferred Sales Charge (Load) NONE*
Maximum Sales Charge (Load) Imposed on Reinvested Dividends NONE*
Redemption Fees NONE*
Exchange Fee NONE*
* Because shares of the Portfolios may be purchased through variable insurance products, the prospectus of the relevant product
should be carefully reviewed for information on the charges and expenses of those products. This table does not reflect any such
charges.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Portfolio assets, in %):
Management Estimated Other Total Annual Fee Waivers Net Annual
Fees Distribution Expenses Portfolio and Expense Fund
and Operating Reimbursement(5)Operating
Portfolio: Service Expenses Expenses
(12b-1)
Fees(4)
------------------------------------ ------------ ------------- ------------- --------------- --------------- ---------------
AST Janus Overseas Growth 1.00 0.02 0.23 1.25 N/A 1.25
AST American Century International 1.00 0.00 0.50 1.50 N/A 1.50
Growth
AST American Century International 1.00 0.02 0.26 1.28 N/A 1.28
Growth II
AST Janus Small-Cap Growth 0.90 0.01 0.18 1.09 N/A 1.09
AST Kemper Small-Cap Growth 0.95 0.03 0.19 1.17 N/A 1.17
AST Lord Abbett Small Cap Value 0.95 0.00 0.29 1.24 N/A 1.24
AST Gabelli Small-Cap Value 0.90 0.00 0.21 1.11 N/A 1.11
AST Janus Mid-Cap Growth(1) 1.00 0.04 0.22 1.26 N/A 1.26
AST Neuberger Berman Mid-Cap Growth 0.90 0.04 0.23 1.17 N/A 1.17
AST Neuberger Berman Mid-Cap Value 0.90 0.12 0.23 1.25 N/A 1.25
AST MFS Growth(2) 0.90 0.00 0.12 1.02 N/A 1.02
AST Alger Growth(3) 0.75 0.00 0.23 0.98 0.19 0.79
AST Marsico Capital Growth 0.90 0.04 0.18 1.12 N/A 1.12
AST JanCap Growth 0.90 0.01 0.14 1.05 0.04 1.01
AST Cohen & Steers Realty 1.00 0.02 0.27 1.29 N/A 1.29
AST American Century Income & 0.75 0.00 0.23 0.98 N/A 0.98
Growth
AST INVESCO Equity Income 0.75 0.04 0.18 0.97 N/A 0.97
AST PIMCO Total Return Bond 0.65 0.00 0.17 0.82 N/A 0.82
AST PIMCO Limited Maturity Bond 0.65 0.00 0.21 0.86 N/A 0.86
(1) This Portfolio commenced operations in May 2000. "Other Expenses" and "Estimated Distribution and Service Fees" shown are
based on estimated amounts for the fiscal year ending December 31, 2000.
(2) This Portfolio commenced operations in October 1999. "Other Expenses" and "Estimated Distribution and Service Fees" shown
are based on actual amounts for the period from commencement of operations until June 30, 2000.
(3) This Portfolio commenced operations in October 2000. "Other Expenses" and "Estimated Distribution and Service Fees" shown
are based on estimated amounts for the fiscal year ending December 31, 2000.
(4) As discussed below under "Management of the Trust - Fees and Expenses, the Trustees adopted a Distribution Plan (the
"Distribution Plan") under Rule 12b-1 to permit an affiliate of the Trust's Investment Manager to receive brokerage commissions in
connection with purchases and sales of securities held by the Portfolios, and to use these commissions to promote the sale of
shares of the Portfolio. While the brokerage commission rates and amounts paid by the various Portfolios are not expected to
increase as a result of the Distribution Plan, the staff of the Securities and Exchange Commission recently takes the position
that commission amounts received under the Distribution Plan should be reflected as distribution expenses of the Funds. The
Distribution Fee estimates are derived and annualized from data regarding commission amounts directed to the affiliate under the
Distribution Plan from such Plan's commencement of operations for each Portfolio (in late July through early August 1999) until
December 31, 1999. Actual commission amounts directed under the Distribution Plan will vary and the amounts directed during the
first full fiscal year of the Plan's operations may differ substantially from the annualized amounts listed in the above chart.
(5) The Investment Manager has agreed to reimburse and/or waive fees for certain Portfolios until at least April 30, 2001. The
caption "Total Annual Fund Operating Expenses" reflects the Portfolios' fees and expenses before such waivers and reimbursements,
while the caption "Net Annual Fund Operating Expenses" reflects the effect of such waivers and reimbursements.
EXPENSE EXAMPLES:
This example is intended to help you compare the cost of investing in the Portfolios with the cost of investing in other
mutual funds.
The Example assumes that you invest $10,000 in a Portfolio for the time periods indicated. The Example also assumes that
your investment has a 5% return each year, that the Portfolios' total operating expenses remain the same, and that any expense
waivers and reimbursements remain in effect only for the periods during which they are binding. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
After:
Portfolio: 1 yr. 3 yrs. 5 yrs. 10 yrs.
--------- ------------------------------------------------------------
AST Janus Overseas Growth 127 397 686 1,511
AST American Century International Growth 153 474 818 1,791
AST American Century International Growth II 130 406 702 1,545
AST Janus Small-Cap Growth 111 347 601 1,329
AST Kemper Small-Cap Growth 119 372 644 1,420
AST Lord Abbett Small Cap Value 126 393 681 1,500
AST Gabelli Small-Cap Value 113 353 612 1,352
AST Janus Mid-Cap Growth 128 400 N/A N/A
AST Neuberger Berman Mid-Cap Growth 119 372 644 1,420
AST Neuberger Berman Mid-Cap Value 127 397 686 1,511
AST MFS Growth 104 325 563 1,248
AST Alger Growth 81 252 N/A N/A
AST Marsico Capital Growth 114 356 617 1,363
AST JanCap Growth 103 330 575 1,279
AST Cohen & Steers Realty 131 409 708 1,556
AST American Century Income & Growth 100 312 542 1,201
AST INVESCO Equity Income 99 309 536 1,190
AST PIMCO Total Return Bond 84 262 455 1,014
AST PIMCO Limited Maturity Bond 88 274 477 1,061
INVESTMENT OBJECTIVES AND POLICIES:
The investment objective, policies and limitations for each of the Portfolios are described below. While certain
policies apply to all Portfolios, generally each Portfolio has a different investment objective and investment focus. As a
result, the risks, opportunities and returns of investing in each Portfolio will differ. The investment objectives and policies
of the Portfolios generally are not fundamental policies and may be changed by the Trustees without shareholder approval.
There can be no assurance that the investment objective of any Portfolio will be achieved. Risks relating to certain
types of securities and instruments in which the Portfolios may invest are described in this Prospectus under "Certain Risk
Factors and Investment Methods."
If approved by the Trustees, the Trust may add more Portfolios and may cease to offer any existing Portfolios in the
future.
ASt JANUS OVERSEAS GROWTH Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek long-term growth of capital.
Principal Investment Policies and Risks:
The Portfolio pursues its objective primarily through investments in common stocks of issuers located outside the United
States. The Portfolio has the flexibility to invest on a worldwide basis in companies and organizations of any size, regardless
of country of organization or place of principal business activity.
The Portfolio normally invests at least 65% of its total assets in securities of issuers from at least five different
countries, excluding the United States. Although the Portfolio intends to invest substantially all of its assets in issuers
located outside the United States, it may at times invest in U.S. issuers and it may at times invest all of its assets in fewer
than five countries or even a single country.
The Portfolio invests primarily in stocks selected for their growth potential. The Sub-advisor generally takes a "bottom
up" approach to choosing investments for the Portfolio. In other words, the Sub-advisor seeks to identify individual companies
with earnings growth potential that may not be recognized by the market at large, regardless of where the companies are organized
or where they primarily conduct business. Although themes may emerge in the Portfolio, securities are generally selected without
regard to any defined allocation among countries, geographic regions or industry sectors, or other similar selection procedure.
Current income is not a significant factor in choosing investments, and any income realized by the Portfolio will be incidental to
its objective.
As with any common stock fund, the fundamental risk associated with the Portfolio is the risk that the value of the
stocks it holds might decrease. Stock values may fluctuate in response to the activities of an individual company or in response
to general market and/or economic conditions. As a fund that invests primarily in the securities of foreign issuers, the risk
associated with the Portfolio may be greater than a fund investing primarily in domestic securities. For a further discussion of
the risks involved in investing in foreign securities, see this Prospectus under "Certain Risk Factors and Investment Methods."
In addition, the Portfolio may invest to some degree in smaller or newer issuers, which are more likely to realize substantial
growth as well as suffer significant losses than larger or more established issuers.
The Portfolio generally intends to purchase securities for long-term investment rather than short-term gains. However,
short-term transactions may occur as the result of liquidity needs, securities having reached a desired price or yield,
anticipated changes in interest rates or the credit standing of an issuer, or by reason of economic or other developments not
foreseen at the time the investment was made. To a limited extent, the Portfolio may purchase securities in anticipation of
relatively short-term price gains. The Portfolio may also sell one security and simultaneously purchase the same or a comparable
security to take advantage of short-term differentials in bond yields or securities prices.
Special Situations. The Portfolio may invest in "special situations" from time to time. A special situation arises
when, in the opinion of the Sub-advisor, the securities of a particular issuer will be recognized and increase in value due to a
specific development with respect to that issuer. Developments creating a special situation might include a new product or
process, a technological breakthrough, a management change or other extraordinary corporate event, or differences in market supply
of and demand for the security. Investment in special situations may carry an additional risk of loss in the event that the
anticipated development does not occur or does not attract the expected attention.
Other Investments:
The Portfolio may invest to a lesser degree in types of securities other than common stocks, including preferred stocks,
warrants, convertible securities and debt securities. The Portfolio is subject to the following percentage limitations on
investing in certain types of debt securities:
-- 35% of its assets in bonds rated below investment grade ("junk" bonds).
-- 25% of its assets in mortgage- and asset-backed securities.
-- 10% of its assets in zero coupon, pay-in-kind and step coupon securities (securities that do not, or may not under
certain circumstances, make regular interest payments).
The Portfolio may make short sales "against the box." In addition, the Portfolio may invest in the following types of securities
and engage in the following investment techniques:
Futures, Options and Other Derivative Instruments. The Portfolio may enter into futures contracts on securities,
financial indices and foreign currencies and options on such contracts and may invest in options on securities, financial indices
and foreign currencies, forward contracts and interest rate swaps and swap-related products (collectively "derivative
instruments"). The Portfolio intends to use most derivative instruments primarily to hedge the value of its portfolio against
potential adverse movements in securities prices, foreign currency markets or interest rates. To a limited extent, the Portfolio
may also use derivative instruments for non-hedging purposes such as seeking to increase income. The Portfolio may also use a
variety of currency hedging techniques, including forward currency contracts, to manage exchange rate risk with respect to
investments exposed to foreign currency fluctuations.
Index/structured Securities. The Portfolio may invest in indexed/structured securities, which typically are short- to
intermediate-term debt securities whose value at maturity or interest rate is linked to currencies, interest rates, equity
securities, indices, commodity prices or other financial indicators. Such securities may offer growth potential because of
anticipated changes in interest rates, credit standing, currency relationships or other factors
For more information on the types of securities and instruments other than common stocks in which the Portfolio may
invest and their risks, see this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. When the Sub-advisor believes that market conditions are not favorable for profitable investing
or when the Sub-advisor is otherwise unable to locate favorable investment opportunities, the Portfolio's investments may be
hedged to a greater degree and/or its cash or similar investments may increase. In other words, the Portfolio does not always
stay fully invested in stocks and bonds. The Portfolio's cash and similar investments may include high-grade commercial paper,
certificates of deposit, repurchase agreements and money market funds managed by the Sub-advisor. While the Portfolio is in a
defensive position, the opportunity to achieve its investment objective of long-term growth of capital will be limited.
AST AMERICAN CENTURY INTERNATIONAL GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Principal Investment Policies and Risks:
The Portfolio will seek to achieve its investment objective by investing primarily in equity securities of international
companies that the Sub-advisor believes will increase in value over time. The Sub-advisor uses a growth investment strategy it
developed that looks for companies with earnings and revenue growth. Ideally, the Sub-advisor looks for companies whose earnings
and revenues are not only growing, but are growing at an accelerating pace. Accelerating growth is shown, for example, by growth
that is faster this quarter than last or faster this year than the year before. For purposes of the Portfolio, equity securities
include common stocks, preferred stocks and convertible securities.
The Sub-advisor tracks financial information for thousands of companies to research and select the stocks it believes
will be able to sustain accelerating growth. This strategy is based on the premise that, over the long term, the stocks of
companies with accelerating earnings and revenues have a greater-than-average chance to increase in value.
The Sub-advisor recognizes that, in addition to locating strong companies with accelerating earnings, the allocation of
assets among different countries and regions also is an important factor in managing an international portfolio. For this reason,
the Sub-advisor will consider a number of other factors in making investment selections, including the prospects for relative
economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange
fluctuations and tax considerations. Under normal conditions, the Portfolio will invest at least 65% of its assets in equity
securities of issuers from at least three countries outside of the United States. In order to maintain investment flexibility,
the Portfolio has not otherwise established geographic requirements for asset distribution.
While the Portfolio's focus will be on issuers in developed markets, the Sub-advisor expects to invest to some degree in
issuers in developing countries. The Portfolio may make foreign investments either directly in foreign securities, or indirectly
by purchasing depositary receipts. Securities purchased in foreign markets may either be traded on foreign securities exchanges
or in the over-the-counter markets.
As with all stocks, the value of the stocks held by the Portfolio can decrease as well as increase. As a fund investing
primarily in equity securities of foreign issuers, the Portfolio may be subject to a level of risk and share price fluctuation
higher than most funds that invest primarily in domestic equities. Foreign companies may be subject to greater economic risks
than domestic companies, and foreign securities are subject to certain risks relating to political, regulatory and market
structures and events that domestic securities are not subject to. To the extent the Portfolio invests in securities of issuers
in developing counties, the Portfolio may be subject to even greater levels of risk and share price fluctuation.
Other Investments:
Securities of U.S. issuers may be included in the Portfolio from time to time. The Portfolio also may invest in bonds,
notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The Portfolio will
limit its purchases of debt securities to investment grade obligations. The Portfolio may enter into non-leveraged stock index
futures contracts and may make short sales "against the box."
Derivative Securities. The Portfolio may invest in derivative securities. Certain of these derivative securities may be
described as "index/structured" securities, which are securities whose value or performance is linked to other equity securities
(as in the case of depositary receipts), currencies, interest rates, securities indices or other financial indicators ("reference
indices"). The Portfolio may not invest in a derivative security unless the reference index or the instrument to which it relates
is an eligible investment for the Portfolio. For example, a security whose underlying value is linked to the price of oil would
not be a permissible investment because the Portfolio may not invest in oil and gas leases or futures. The Portfolio may make
short sales "against the box."
Forward Currency Exchange Contracts. As a fund investing primarily in foreign securities, the value of the Portfolio
will be affected by changes in the exchange rates between foreign currencies and the U.S. dollar. To protect against adverse
movements in exchange rates, the Portfolio may, for hedging purposes only, enter into forward foreign currency exchange
contracts. The Portfolio may enter into a forward contract to "lock-in" an exchange rate for a specific purchase or sale of a
security. Less frequently, the Portfolio may enter into a forward contract to seek to protect its holdings in a particular
currency from a decline in that currency. Predicting the relative future values of currencies is very difficult, and there is no
assurance that any attempt to reduce the risk of adverse currency movements through the use of forward contracts will be
successful.
Indirect Foreign Investments. The Portfolio may invest up to 10% of its assets in certain foreign countries indirectly
through investment funds and registered investment companies that invest in those countries. If the Portfolio invests in
investment companies, it will bear its proportionate share of the costs incurred by such companies, including any investment
advisory fees.
Additional information about the securities that the Portfolio may invest in and their risks is included below under
"Certain Risk Factors and Investment Methods."
Temporary Investments. Under exceptional market or economic conditions, the Portfolio may temporarily invest all or a
substantial portion of its assets in cash or investment-grade short-term securities. While the Portfolio is in a defensive
position, the ability to achieve its investment objective of capital growth may be limited.
AST AMERICAN CENTURY INTERNATIONAL GROWTH PORTFOLIO II:
The investment objective, policies and risks of the Portfolio (formerly, the AST T. Rowe Price International Equity Portfolio) are
substantially identical to those of the AST American Century International Growth Portfolio as described immediately above.
AST JANUS SMALL-CAP GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is capital growth.
Principal Investment Policies and Risks:
The Portfolio pursues its objective by normally investing at least 65% of its total assets in the common stocks of
small-sized companies. For purposes of the Portfolio, small-sized companies are those that have market capitalizations of less
than $1.5 billion or annual gross revenues of less than $500 million. To a lesser extent, the Portfolio may also invest in stocks
of larger companies with potential for capital growth.
The Sub-advisor generally takes a "bottom up" approach to building the Portfolio. In other words, it seeks to identify
individual companies with earnings growth potential that may not be recognized by the market at large. Although themes may emerge
in the Portfolio, securities are generally selected without regard to any defined industry sector or other similar selection
procedure. Current income is not a significant factor in choosing investments.
Because the Portfolio invests primarily in common stocks, the fundamental risk of investing in the Portfolio is that the
value of the stocks it holds might decrease. Stock values may fluctuate in response to the activities of an individual company or
in response to general market or economic conditions. As a Portfolio that invests primarily in smaller or newer issuers, the
Portfolio may be subject to greater risk of loss and share price fluctuation than funds investing primarily in larger or more
established issuers. Smaller companies are more likely to realize substantial growth as well as suffer significant losses than
larger issuers. Smaller companies may lack depth of management, they may be unable to generate funds necessary for growth or
potential development internally or to generate such funds through external financing on favorable terms, or they may be
developing or marketing products or services for which there are not yet, and may never be, established markets. In addition,
such companies may be subject to intense competition from larger competitors, and may have more limited trading markets than the
markets for securities of larger issuers.
While the Sub-advisor tries to reduce the risk of the Portfolio by diversifying its assets among issuers (so that the
effect of any single holding is reduced), and by not concentrating its assets in any particular industry, there is no assurance
that these effort will be successful in reducing the risks to which the Portfolio is subject.
The Portfolio generally intends to purchase securities for long-term investment rather than short-term gains. However,
short-term transactions may occur as the result of liquidity needs, securities having reached a desired price or yield,
anticipated changes in interest rates or the credit standing of an issuer, or by reason of economic or other developments not
foreseen at the time the investment was made. To a limited extent, the Portfolio may purchase securities in anticipation of
relatively short-term price gains. The Portfolio may also sell one security and simultaneously purchase the same or a comparable
security to take advantage of short-term differentials in bond yields or securities prices.
Special Situations. The Portfolio may invest in "special situations" from time to time. A special situation arises
when, in the opinion of the Sub-advisor, the securities of a particular issuer will be recognized and increase in value due to a
specific development with respect to that issuer. Developments creating a special situation might include a new product or
process, a technological breakthrough, a management change or other extraordinary corporate event, or differences in market supply
of and demand for the security. Investment in special situations may carry an additional risk of loss in the event that the
anticipated development does not occur or does not attract the expected attention.
Other Investments:
The Portfolio may invest to a lesser degree in types of securities other than common stocks, including preferred stocks,
warrants, convertible securities and debt securities. The Portfolio is subject to the following percentage limitations on
investing in certain types of debt securities:
-- 35% of its assets in bonds rated below investment grade by the primary rating agencies ("junk" bonds).
-- 25% of its assets in mortgage- and asset-backed securities.
-- 10% of its assets in zero coupon, pay-in-kind and step coupon securities (securities that do not, or may not under
certain circumstances, make regular interest payments).
The Portfolio may make short sales "against the box." In addition, the Portfolio may invest in the following types of securities
and engage in the following investment techniques:
Index/structured Securities. The Portfolio may invest in indexed/structured securities, which typically are short- to
intermediate-term debt securities whose value at maturity or interest rate is linked to currencies, interest rates, equity
securities, indices, commodity prices or other financial indicators. Such securities may offer growth potential because of
anticipated changes in interest rates, credit standing, currency relationships or other factors.
Foreign Securities. The Portfolio may invest without limit in foreign equity and debt securities. The Portfolio may
invest directly in foreign securities denominated in foreign currencies, or may invest through depositary receipts or passive
foreign investment companies. Generally, the same criteria are used to select foreign securities as domestic securities. The
Sub-advisor seeks companies that meet these criteria regardless of country of organization or principal business activity.
However, certain factors such as expected inflation and currency exchange rates, government policies affecting businesses, and a
country's prospects for economic growth may warrant consideration in selecting foreign securities.
Futures, Options and Other Derivative Instruments. The Portfolio may enter into futures contracts on securities,
financial indices and foreign currencies and options on such contracts, and may invest in options on securities, financial indices
and foreign currencies, forward contracts and interest rate swaps and swap-related products (collectively "derivative
instruments"). The Portfolio intends to use most derivative instruments primarily to hedge the value of its portfolio against
potential adverse movements in securities prices, currency exchange rates or interest rates. To a limited extent, the Portfolio
may also use derivative instruments for non-hedging purposes such as seeking to increase income.
For more information on the types of securities other than common stocks in which the Portfolio may invest, see this
Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. When the Sub-advisor believes that market conditions are not favorable for profitable investing
or when the Sub-advisor is otherwise unable to locate favorable investment opportunities, the Portfolio's investments may be
hedged to a greater degree and/or its cash or similar investments may increase. In other words, the Portfolio does not always
stay fully invested in stocks and bonds. The Portfolio's cash and similar investments may include high-grade commercial paper,
certificates of deposit, repurchase agreements and money market funds managed by the Sub-advisor. While the Portfolio is in a
defensive position, the opportunity to achieve its investment objective of capital growth will be limited.
AST KEMPER SMALL-CAP GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek maximum growth of investors' capital from a portfolio
primarily of growth stocks of smaller companies.
Principal Investment Policies and Risks:
At least 65% of the Portfolio's total assets normally will be invested in the equity securities of smaller companies,
i.e., those having a market capitalization of $2 billion or less at the time of investment, many of which would be in the early
stages of their life cycle. Equity securities include common stocks and securities convertible into or exchangeable for common
stocks, including warrants and rights.
The Portfolio intends to invest primarily in stocks of companies whose earnings per share are expected by the Sub-advisor
to grow faster than the market average ("growth stocks"). Growth stocks tend to trade at higher price to earnings (P/E) ratios
than the general market, but the Sub-advisor believes that the potential for above average earnings of the stocks in which the
Portfolio invests more than justifies their price.
In managing the Portfolio, the Sub-advisor emphasizes stock selection and fundamental research. The Sub-advisor
considers a number of factors in considering whether to invest in a growth stock, including high return on equity and earnings
growth rate, low level of debt, strong balance sheet, good management and industry leadership. Other factors are patterns of
increasing sales growth, the development of new or improved products or services, favorable outlooks for growth in the industry,
the probability of increased operating efficiencies, emphasis on research and development, cyclical conditions, or other signs
that a company may grow rapidly.
The Portfolio seeks attractive areas for investment that arise from factors such as technological advances, new marketing
methods, and changes in the economy and population. Currently, the Sub-advisor believes that such investment opportunities may be
found among:
o companies engaged in high technology fields such as electronics, medical technology and computer software and specialty
retailing;
o companies whose earnings outlooks have improved as the result of changes in the economy, acquisitions, mergers, new
management, changes in corporate strategy or product innovation;
o companies supplying new or rapidly growing services to consumers and businesses in such fields as automation, data
processing, communications, and marketing and finance; and
o companies that have innovative concepts or ideas.
In the selection of investments, long-term capital appreciation will take precedence over short range market
fluctuations. However, the Portfolio may occasionally make investments for short-term capital appreciation. Current income will
not be a significant factor in selecting investments.
Like all common stocks, the market values of the common stocks held by the Portfolio can fluctuate significantly,
reflecting the business performance of the issuing company, investor perception or general economic or financial market
movements. Because of the Portfolio's focus on the stocks of smaller growth companies, investment in the Portfolio may involve
substantially greater than average share price fluctuation and investment risk. A fund focusing on growth stocks will generally
involve greater risk and share price fluctuation than a fund investing primarily in value stocks.
In addition, investments in securities of smaller companies are generally considered to offer greater opportunity for
appreciation and to involve greater risk of depreciation than securities of larger companies. Smaller companies often have
limited product lines, markets or financial resources, and they may be dependent upon one or a few key people for management.
Because the securities of small-cap companies are not as broadly traded as those of larger companies, they are often subject to
wider and more abrupt fluctuations in market price. Additional reasons for the greater price fluctuations of these securities
include the less certain growth prospects of smaller firms and the greater sensitivity of small companies to changing economic
conditions.
Other Investments:
In addition to investing in common stocks, the Portfolio may also invest to a limited degree in preferred stocks and debt
securities when they are believed by the Sub-advisor to offer opportunities for capital growth. Other types of securities in
which the Portfolio may invest include:
Foreign Securities. The Portfolio may invest in securities of foreign issuers in the form of depositary receipts or that
are denominated in U.S. dollars. Foreign securities in which the Portfolio may invest include any type of security consistent
with its investment objective and policies. The prices of foreign securities may be more volatile than those of domestic
securities.
Options, Financial Futures and Other Derivatives. The Portfolio may deal in options on securities and securities
indices, which options may be listed for trading on a national securities exchange or traded over-the-counter. Options
transactions may be used to pursue the Portfolio's investment objective and also to hedge against currency and market risks, but
are not intended for speculation. The Portfolio may engage in financial futures transactions on commodities exchanges or boards
of trade in an attempt to hedge against market risks.
In addition to options and financial futures, the Portfolio may invest in a broad array of other "derivative" instruments
in an effort to manage investment risk, to increase or decrease exposure to an asset class or benchmark (as a hedge or to enhance
return), or to create an investment position indirectly. The types of derivatives and techniques used by the Portfolio may change
over time as new derivatives and strategies are developed or as regulatory changes occur.
Additional information about the other investments that the Portfolio may make and their risks is included below under
"Certain Risk Factors and Investment Methods."
Temporary Investments. When a defensive position is deemed advisable because of prevailing market conditions, the
Portfolio may invest without limit in high grade debt securities, commercial paper, U.S. Government securities or cash or cash
equivalents, including repurchase agreements. While the Portfolio is in a defensive position, the opportunity to achieve its
investment objective of maximum capital growth will be limited.
AST LORD ABBETT SMALL CAP VALUE PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek long-term capital growth.
Principal Investment Policies and Risks:
The Portfolio will seek its objective through investments primarily in equity securities that are believed to be
undervalued in the marketplace. Typically, in choosing stocks, the Sub-advisor looks for companies the following process:
o Quantitative research is performed to evaluate various criteria, including the price of shares in relation to book value,
sales, asset value, earnings, dividends and cash flow;
o Fundamental research is conducted to assess the dynamics of each company within its industry and within the company. The
Sub-advisor evaluates the company's business strategies by assessing management's ability to execute the strategies, and
evaluating the adequacy of its financial resources.
Usually, at least 65% of the Portfolio's total assets will be invested in common stocks issued by smaller, less well-known
companies (with market capitalizations of less than $1 billion) selected on the basis of fundamental investment analysis. The
Portfolio may invest up to 35% of its assets in foreign securities.
The stocks in which the Portfolio generally invests are those which, in the Sub-advisor's judgment, are selling below
their intrinsic value and at prices that do not adequately reflect their long-term business potential. Selected smaller stocks
may be undervalued because they are often overlooked by many investors, or because the public is overly pessimistic about a
company's prospects. Accordingly, their prices can rise either as a result of improved business fundamentals, particularly when
earnings grow faster than general expectations, or as more investors come to recognize the company's underlying potential. The
price of shares in relation to book value, sales, asset value, earnings, dividends and cash flow, both historical and prospective,
are key determinants in the security selection process. These criteria are not rigid, and other stocks may be included in the
Portfolio if they are expected to help it attain its objective. Dividend and investment income is of incidental importance.
Although the Portfolio typically will hold a large number of securities and follow a relatively conservative value-driven
investment strategy, the Portfolio does entail above-average investment risk and share price fluctuation compared to the overall
U.S. stock market. The small capitalization companies in which the Portfolio primarily invests may offer significant appreciation
potential. However, smaller companies may carry more risk than larger companies. Generally, small companies rely on limited
product lines, markets and financial resources, and these and other factors may make them more susceptible to setbacks or economic
downturns. Smaller companies normally have fewer shares outstanding and trade less frequently than large companies. Therefore,
the securities of smaller companies may be subject to wider price fluctuations.
Other Investments:
The Portfolio may engage in various portfolio strategies to reduce certain risks of its investments and to enhance
income, but not for speculation. The Portfolio may purchase and write (sell) put and covered call options on equity securities or
stock indices that are traded on national securities exchanges. The Portfolio may purchase and sell stock index futures for
certain hedging and risk management purposes. New financial products and risk management techniques continue to be developed and
the Portfolio may use these new investments and techniques to the extent consistent with its investment objective and policies.
The Portfolio may invest up to 35% of its net assets (at the time of investment) in securities (of the type described
above) that are primarily traded in foreign countries. The Portfolio may enter into forward foreign currency exchange contracts
in connection with its investments in foreign securities. The Portfolio also may purchase foreign currency put options and write
foreign currency call options on U.S. exchanges or U.S. over-the-counter markets. The Portfolio may write a call option on a
foreign currency only in conjunction with a purchase of a put option on that currency.
The Portfolio also may invest in preferred stocks and bonds that either have attached warrants or are convertible into
common stocks.
Additional information about these investments and investment techniques and their risks is included below under "Certain
Risk Factors and Investment Methods."
Temporary Investments. For temporary defensive purposes or pending other investments, the Portfolio may invest in
high-quality, short-term debt obligations of banks, corporations or the U.S. Government. While the Portfolio is in a defensive
position, its ability to achieve its investment objective of long-term capital growth will be limited.
AST Gabelli SMALL-Cap Value PORTFOLIO:
Investment Objective: The investment objective of the Portfolio (formerly, the AST T. Rowe Price Small Company Value Portfolio)
is to provide long-term capital growth by investing primarily in small-capitalization stocks that appear to be undervalued.
Principal Investment Policies and Risks:
The Portfolio will normally invest at least 65% of its total assets in stocks and equity-related securities of small
companies ($1 billion or less in market capitalization). Reflecting a value approach to investing, the Portfolio will seek the
stocks of companies whose current stock prices do not appear to adequately reflect their underlying value as measured by assets,
earnings, cash flow or business franchises. The Sub-advisor's research team seeks to identify companies that appear to be
undervalued by various measures, and may be temporarily out of favor, but have good prospects for capital appreciation. In
selecting investments, the Sub-advisor generally looks to the following:
(1) Low price/earnings, price/book value or price/cash flow ratios relative to the company's peers.
(2) Low stock price relative to a company's underlying asset values.
(3) A sound balance sheet and other positive financial characteristics.
The Sub-advisor then determines whether there is an emerging catalyst that will focus investor attention on the underlying assets
of the company, such as takeover efforts, a change in management, or a plan to improve the business through restructuring or other
means.
The Portfolio may sell securities for a variety of reasons, such as to secure gains, limit losses or re-deploy assets
into more promising opportunities. The Portfolio will not sell a stock just because the company has grown to a market
capitalization of more than $1 billion, and it may on occasion purchase companies with a market cap of more than $1 billion.
As with all stock funds, the Portfolio's share price can fall because of weakness in the securities market as a whole, in
particular industries or in specific holdings. Investing in small companies involves greater risk of loss than is customarily
associated with more established companies. Stocks of small companies may be subject to more abrupt or erratic price movements
than larger company stocks. Small companies often have limited product lines, markets, or financial resources, and their
management may lack depth and experience. While a value approach to investing is generally considered to involve less risk than a
growth approach, investing in value stocks carries the risks that the market will not recognize the stock's intrinsic value for a
long time, or that a stock judged to be undervalued may actually be appropriately priced.
Other Investments:
Although the Portfolio will invest primarily in U.S. common stocks, it may also purchase other types of securities, for
example, preferred stocks, convertible securities, warrants and bonds when considered consistent with the Portfolio's investment
objective and policies. The Portfolio may purchase preferred stock for capital appreciation where the issuer has omitted, or is
in danger of omitting, payment of the dividend on the stock. Debt securities would be purchased in companies that meet the
investment criteria for the Portfolio.
The Portfolio may invest up to 20% of its total assets in foreign securities, including American Depositary Receipts and
securities of companies in developing countries, and may enter into forward foreign currency exchange contracts. (The Portfolio
may invest in foreign cash items as described below in excess of this 20% limit.) The Portfolio may enter into stock index or
currency futures contracts (or options thereon) for hedging purposes or to provide an efficient means of regulating the
Portfolio's exposure to the equity markets. The Portfolio may also write (sell) call and put options and purchase put and call
options on securities, financial indices, and currencies. The Portfolio may invest up to 10% of its total assets in hybrid
instruments, which combine the characteristics of futures, options and securities. For additional information about these
investments and their risks, see this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. The Portfolio may establish and maintain cash reserves without limitation for temporary defensive
purposes. The Portfolio's reserves may be invested in high-quality domestic and foreign money market instruments, including
repurchase agreements and money market mutual funds managed by the Sub-advisor. Cash reserves also provide flexibility in meeting
redemptions and paying expenses. While the Portfolio is in a defensive position, the opportunity to achieve its investment
objective of long-term capital growth may be limited.
AST JANUS MID-CAP GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek long-term growth of capital.
Principal Investment Policies and Risks:
The Portfolio pursues its objective by investing primarily in common stocks selected for their growth potential, and
normally invests at least 65% of its equity assets in medium-sized companies. For purposes of the Portfolio, medium-sized
companies are those whose market capitalizations (measured at the time of investment) fall within the range of companies in the
Standard & Poor's MidCap 400 Index (the "S&P 400"). The market capitalizations within the S&P 400 will vary, but as of December
31, 1999, they ranged from approximately $170 million to $37 billion. The Sub-advisor generally takes a "bottom up" approach to
choosing investments for the Portfolio. In other words, the Sub-advisor seeks to identify individual companies with earnings
growth potential that may not be recognized by the market at large. The Sub-advisor makes this assessment by looking at companies
one at a time, regardless of size, country of organization, place of principal business activity, or other similar selection
criteria.
Because the Portfolio may invest substantially all of its assets in common stocks, the main risk of investing in the
Portfolio is that the value of the stocks it holds might decrease. Stock values may fluctuate in response to the activities of an
individual company or in response to general market or economic conditions. As a fund that invests primarily in mid-cap
companies, the Portfolio's risk and share price fluctuation can be expected to be more than that of many funds investing primarily
in large-cap companies, but less than that of many funds investing primarily in small-cap companies. In general, the smaller the
company, the more likely it is to suffer significant losses as well as to realize substantial growth. Smaller companies may lack
depth of management, they may be unable to generate funds necessary for growth or potential development, or they may be developing
or marketing products or services for which there are not yet, and may never be, established markets. In addition, such companies
may be subject to intense competition from larger companies, and may have more limited trading markets than the markets for
securities of larger issuers.
The Portfolio is non-diversified. In other words, it may hold larger positions in a smaller number of securities than a
diversified fund. As a result, a single security's increase or decrease in value may have a greater impact on the Portfolio's
share price and total return. Because of this, the Portfolio's share price can be expected to fluctuate more than a comparable
diversified fund.
The Portfolio generally intends to purchase securities for long-term investment rather than short-term gains. However,
short-term transactions may occur as the result of liquidity needs, securities having reached a desired price or yield,
anticipated changes in interest rates or the credit standing of an issuer, or by reason of economic or other developments not
foreseen at the time the investment was made. To a limited extent, the Portfolio may purchase securities in anticipation of
relatively short-term price gains. The Portfolio may also sell one security and simultaneously purchase the same or a comparable
security to take advantage of short-term differentials in bond yields or securities prices.
Special Situations. The Portfolio may invest in "special situations". A "special situation" arises when, in the opinion
of the Sub-advisor, the securities of a particular company will be recognized and appreciate in value due to a specific
development, such as a technological breakthrough, management change or new product at that company. Investment in "special
situations" carries an additional risk of loss in the event that the anticipated development does not occur or does not attract
the expected attention.
Other Investments:
Although the Sub-advisor expects to invest primarily in domestic and foreign equity securities, which may include
preferred stocks, common stocks, warrants and securities convertible into common or preferred stocks, the Portfolio may also
invest to a lesser degree in other types of securities, such as debt securities. The Portfolio is subject to the following
percentage limitations on investing in certain types of debt securities:
-- 35% of its assets in bonds rated below investment grade ("junk" bonds).
-- 10% of its assets in zero coupon, pay-in-kind and step coupon securities (securities that do not, or may not under
certain circumstances, make regular interest payments).
The Portfolio may make short sales "against the box." In addition, the Portfolio may invest in the following types of securities
and engage in the following investment techniques:
Index/structured Securities. The Portfolio may invest in indexed/structured securities, which typically are short- to
intermediate-term debt securities whose value at maturity or interest rate is linked to currencies, interest rates, equity
securities, indices, commodity prices or other financial indicators. Such securities may be positively or negatively indexed
(i.e., their value increase or decrease if the reference index or instrument appreciates).
Foreign Securities. The Portfolio may invest up to 25% of its net assets in foreign securities denominated in foreign
currencies and not publicly traded in the United States. The Portfolio may invest directly in foreign securities denominated in a
foreign currency, or may invest through depository receipts or passive foreign investment companies. Generally, the same criteria
are used to select foreign securities as domestic securities. Foreign securities are generally selected on a stock-by-stock basis
without regard to any defined allocation among countries or geographic regions. However, certain factors such as expected levels
of inflation, government policies influencing business conditions, the outlook for currency relationships, and prospects for
economic growth among countries, regions or geographic areas may warrant greater consideration in selecting foreign securities.
For more information on foreign securities and their risks, see this Prospectus under "Certain Risk Factors and
Investment Methods."
Futures, Options and Other Derivative Instruments. The Portfolio may enter into futures contracts on securities,
financial indices and foreign currencies and options on such contracts and may invest in options on securities, financial indices
and foreign currencies, forward contracts and interest rate swaps and swap-related products (collectively "derivative
instruments"). The Portfolio may use derivative instruments to hedge or protect its portfolio from adverse movements in securities
prices, currency exchange rates, and interest rates. To a limited extent, the Portfolio may also use derivative instruments for
non-hedging purposes such as seeking to enhance return.
For more information on the types of securities other than common stocks in which the Portfolio may invest, see this
Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. When the Sub-advisor believes that market conditions are unfavorable for profitable investing, or
when the Sub-advisor is otherwise unable to locate attractive investment opportunities, the Portfolio's cash or similar
investments may increase. In other words, the Portfolio does not always stay fully invested in stocks. Even when the Portfolio
is essentially fully invested, some residual amount of Portfolio assets will remain in cash and similar investments. These
investments may include commercial paper, certificates of deposit, repurchase agreements, short-term debt obligations, and money
market funds (including funds managed by the Sub-advisor). When the Portfolio's investments in cash or similar investments
increase, the opportunity to achieve its investment objective of long-term growth of capital may be limited.
AST NEUBERGER BERMAN MID-CAP GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Principal Investment Policies and Risks:
To pursue its objective, the Portfolio primarily invests in the common stocks of mid-cap companies. Companies with
equity market capitalizations from $300 million to $10 billion at the time of investment are considered mid-cap companies for
purposes of the Portfolio. The Trust may revise this definition based on market conditions. Some of the Portfolio's assets may
be invested in the securities of large-cap companies as well as in small-cap companies. The Portfolio seeks to reduce risk by
diversifying among many companies and industries. The Portfolio does not seek to invest in securities that pay dividends or
interest, and any such income is incidental.
The Portfolio is normally managed using a growth-oriented investment approach. For growth investors, the aim is to
invest in companies that are already successful but could be even more so. The Sub-advisor looks for fast-growing companies that
are in new or rapidly evolving industries. Factors in identifying these companies may include above-average growth of earnings or
earnings that exceed analysts' expectations. The Sub-advisor may also look for other characteristics in a company, such as
financial strength, a strong position relative to competitors and a stock price that is reasonable in light of its growth rate.
The Sub-advisor follows a disciplined selling strategy, and may sell a stock when it reaches a target price, fails to
perform as expected, or appears substantially less desirable than another stock.
As a fund that invests primarily in mid-cap companies, the Portfolio's risk and share price fluctuation can be expected
to be more than that of many funds investing primarily in large-cap companies, but less than that of many funds investing
primarily in small-cap companies. Mid-cap stocks may fluctuate more widely in price than the market as a whole, may underperform
other types of stocks when the market or the economy is not robust, or fall in price or be difficult to sell during market
downturns. In addition, the Portfolio's growth investment program will generally involve greater risk and price fluctuation than
funds that invest in more undervalued securities. Because the prices of growth stocks tend to be based largely on future
expectations, these stocks historically have been more sensitive than value stocks to bad economic news and negative earnings
surprises.
Other Investments:
Although equity securities are normally the Portfolio's primary investments, it may invest in preferred stocks and
convertible securities, as well as the types of securities described below. Additional information about these investments and
the special risk factors that apply to them is included in this Prospectus under "Certain Risk Factors and Investment Methods."
Fixed Income Securities. The Portfolio may invest up to 35% of its total assets, measured at the time of investment, in
investment grade fixed income or debt securities. If the quality of any fixed income securities held by the Portfolio
deteriorates so that they are no longer investment grade, the Portfolio will sell such securities in an orderly manner so that its
holdings of such securities do not exceed 5% of its net assets.
Foreign Securities. The Portfolio may invest up to 10% of the value of its total assets, measured at the time of
investment, in equity and debt securities that are denominated in foreign currencies. There is no limitation on the percentage of
the Portfolio's assets that may be invested in securities of foreign companies that are denominated in U.S. dollars. In addition,
the Portfolio may enter into foreign currency transactions, including forward foreign currency contracts and options on foreign
currencies, to manage currency risks, to facilitate transactions in foreign securities, and to repatriate dividend or interest
income received in foreign currencies.
Covered Call Options. The Portfolio may try to reduce the risk of securities price or exchange rate changes (hedge) or
generate income by writing (selling) covered call options against securities held in its portfolio, and may purchase call options
in related closing transactions.
Temporary Investments. When the Portfolio anticipates unusual market or other conditions, it may temporarily depart from
its objective of capital growth and invest substantially in high-quality short-term investments. This could help the Portfolio
avoid losses but may mean lost opportunities.
AST NEUBERGER BERMAN MID-CAP VALUE PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Principal Investment Policies and Risks:
To pursue its objective, the Portfolio primarily invests in the common stocks of mid-cap companies. Some of the
Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. The Portfolio seeks
to reduce risk by diversifying among many companies and industries.
Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose stock
prices are undervalued and that may rise in price before other investors realize their worth. Fund managers may identify value
stocks in several ways, including based on earnings, book value or other financial measures. Factors that the Sub-advisor may use
to identify these companies include strong fundamentals, including a low price-to-earnings ratio, consistent cash flow, and a
sound track record through all phases of the market cycle.
The Sub-advisor may also look for other characteristics in a company, such as a strong position relative to competitors,
a high level of stock ownership among management, or a recent sharp decline in stock price that appears to be the result of a
short-term market overreaction to negative news.
The Sub-advisor generally considers selling a stock when it reaches a target price, when it fails to perform as expected,
or when other opportunities appear more attractive.
As a fund that invests primarily in mid-cap companies, the Portfolio's risk and share price fluctuation can be expected
to be more than that of many funds investing primarily in large-cap companies, but less than that of many funds investing
primarily in small-cap companies. Mid-cap stocks may fluctuate more widely in price than the market as a whole, may underperform
other types of stocks when the market or the economy is not robust, or fall in price or be difficult to sell during market
downturns. While value investing historically has involved less risk than investing in growth companies, the stocks purchased by
the Portfolio will remain undervalued during a short or extended period of time. This may happen because value stocks as a
category lose favor with investors compared to growth stocks, or because the Sub-advisor failed to anticipate which stocks or
industries would benefit from changing market or economic conditions.
Other Investments:
Although equity securities are normally the Portfolio's primary investment, it may invest in preferred stocks and
convertible securities, as well as the types of securities described below. Additional information about these investments and
the special risk factors that apply to them is included in this Prospectus under "Certain Risk Factors and Investment Methods."
Fixed Income Securities. The Portfolio may invest up to 35% of its total assets, measured at the time of investment, in
fixed income or debt securities. The Portfolio may invest up to 15% of its total assets, measured at the time of investment, in
debt securities that are rated below investment grade or comparable unrated securities. There is no minimum rating on the fixed
income securities in which the Portfolio may invest.
Foreign Securities. The Portfolio may invest up to 10% of the value of its total assets, measured at the time of
investment, in equity and debt securities that are denominated in foreign currencies. There is no limitation on the percentage of
the Portfolio's assets that may be invested in securities of foreign companies that are denominated in U.S. dollars. In addition,
the Portfolio may enter into foreign currency transactions, including forward foreign currency contracts and options on foreign
currencies, to manage currency risks, to facilitate transactions in foreign securities, and to repatriate dividend or interest
income received in foreign currencies.
Covered Call Options. The Portfolio may try to reduce the risk of securities price changes (hedge) or generate income by
writing (selling) covered call options against securities held in its portfolio, and may purchase call options in related closing
transactions. The value of securities against which options will be written will not exceed 10% of the Portfolio's net assets.
Temporary Investments. When the Portfolio anticipates unusual market or other conditions, it may temporarily depart from
its objective of capital growth and invest substantially in high-quality short-term investments. This could help the Portfolio
avoid losses but may mean lost opportunities.
AST MFS GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to provide long-term growth of capital and future, rather than
current, income.
Principal Investment Policies and Risks:
The Portfolio invests, under normal market conditions, at least 80% of its total assets in common stocks and related
securities, such as preferred stocks, convertible securities and depositary receipts, of companies that the Sub-advisor believes
offer better than average prospects for long-term growth.
The Sub-advisor uses a "bottom up," as opposed to "top down," investment style in managing the Portfolio. This means
that securities are selected based upon fundamental analysis of individual companies (such as analysis of the companies' earnings,
cash flows, competitive position and management abilities) by the Sub-advisor.
In managing the Portfolio, the Sub-advisor seeks to purchase securities of companies that it considers well-run and
poised for growth. The Sub-advisor looks particularly for companies with the following qualities:
o a strong franchise, strong cash flows and a recurring revenue stream
o a strong industry position, where there is potential for high profit margins or substantial barriers to new entry into
the industry
o a strong management with a clearly defined strategy
o new products or services.
The Portfolio may invest up to 35% of its net assets in foreign securities.
As with any fund investing primarily in common stocks, the value of the securities held by the Portfolio may decline in
value, either because of changing economic, political or market conditions or because of the economic condition of the company
that issued the security. These declines may be substantial. In addition, the prices of the growth company stocks in which the
Portfolio invests may fluctuate to a greater extent than other equity securities due to changing market conditions or
disappointing earnings results. The Portfolio may invest in foreign companies, including companies located in developing
countries, and it therefore will be subject to risks relating to political, social and economic conditions abroad, risks resulting
from differing regulatory standards in non-U.S. markets, and fluctuations in currency exchange rates.
Other Investments:
Although the Portfolio will invest primarily in common stocks and related securities, the Portfolio may also invest in
variable and floating rate debt securities. The Portfolio may purchase and sell futures contracts and related options on
securities indices, foreign currencies and interest rates for hedging and non-hedging purposes. The Portfolio may also enter into
forward contracts for the purchase or sale of foreign currencies for hedging and non-hedging purposes. The Portfolio may purchase
and write (sell) options on securities, stock indices and foreign currencies.
For more information on some of the types of securities other than common stocks in which the Portfolio may invest, see
this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. The Portfolio may depart from its principal investment strategy by temporarily investing for
defensive purposes when adverse market, economic or political conditions exist. When investing for defensive purposes, the
Portfolio may hold cash or invest in cash equivalents, such as short-term U.S. government securities, commercial paper and bank
instruments. While the Portfolio is in a defensive position, the opportunity to achieve its investment objective will be limited.
AST ALGER GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek long-term capital growth.
Principal Investment Policies and Risks:
The Portfolio invests primarily in equity securities, such as common or preferred stocks, that are listed on U.S.
exchanges or in the over-the-counter market.
The Portfolio invests primarily in growth stocks. The Sub-advisor believes that these stocks are those of two types of
companies:
High Unit Volume Growth Companies. These are vital, creative companies that offer goods or services to a rapidly
expanding marketplace. They include both established and emerging firms, offering new or improved products, or firms simply
fulfilling an increased demand for an existing product line.
Positive Life Cycle Change Companies. These are companies experiencing a major change that is expected to produce
advantageous results. These changes may be as varied as new management, products or technologies, restructurings or
reorganizations, or mergers and acquisitions.
The Portfolio focuses on growing companies that generally have broad product lines, markets, financial resources and
depth of management. Under normal circumstances, the portfolio invests primarily in the equity securities of large companies.
The Portfolio normally invests at least 65% of its total assets in equity securities of companies that, at the time of
purchase of the securities, have total market capitalizations of $1 billion or greater. The Portfolio also may invest up to 35%
of its total assets in equity securities of companies that, at the time of purchase, have total market capitalizations of less
than $1 billion.
As with any fund investing primarily in equity securities, the value of the securities held by the Portfolio may
decline. These declines can be substantial. In addition, the growth stocks in which the Portfolio invests primarily tend to
fluctuate in price more than other types of stocks. Prices of growth stocks tend to be higher in relation to their companies'
earnings, and may be more sensitive to market, political and economic developments than other stocks. The Portfolio's level of
risk will increase if it makes significant investments in securities of smaller companies.
Other Investments:
Foreign Securities. The Portfolio may invest up to 20% of the value of its total assets, measured at the time of
investment, in equity and debt securities that are denominated in foreign currencies. There is no limitation on the percentage of
the Portfolio's assets that may be invested in securities of foreign companies that are denominated in U.S. dollars. In addition,
the Portfolio may enter into foreign currency transactions, including forward foreign currency contracts and options on foreign
currencies, to manage currency risks, to facilitate transactions in foreign securities, and to repatriate dividend or interest
income received in foreign currencies.
Short sales "against the box." The Portfolio may from time to time makes short sales "against the box."
A discussion of these investments and their risks is included in this Prospectus under "Certain Risk Factors and
Investment Methods."
Temporary Investments. The Portfolio may invest up to 100% of its assets in cash, commercial paper, high-grade bonds or
cash equivalents for temporary defensive reasons if the Sub-advisor believes that adverse market or other conditions warrant.
This is to attempt to protect the Portfolio from a temporary unacceptable risk of loss. However, while the Portfolio is in a
defensive position, the opportunity to achieve its investment objective of long-term capital growth will be limited.
AST MARSICO CAPITAL GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth. Income is not an investment objective
and any income realized on the Portfolio's investments, therefore, will be incidental to the Portfolio's objective.
Principal Investment Policies and Risks:
The Portfolio will pursue its objective by investing primarily in common stocks. The Sub-advisor expects that the
majority of the Portfolio's assets will be invested in the common stocks of larger, more established companies.
In selecting investments for the Portfolio, the Sub-advisor uses an approach that combines "top down" economic analysis
with "bottom up" stock selection. The "top down" approach takes into consideration such macro-economic factors as interest rates,
inflation, the regulatory environment, and the global competitive landscape. In addition, the Sub-advisor examines such factors
as the most attractive global investment opportunities, industry consolidation, and the sustainability of economic trends. As a
result of this "top down" analysis, the Sub-advisor identifies sectors, industries and companies that should benefit from the
trends the Sub-advisor has observed.
The Sub-advisor then looks for individual companies with earnings growth potential that may not be recognized by the
market at large. In determining whether a particular company is appropriate for investment by the Portfolio, the Sub-advisor
focuses on a number of different attributes, including the company's specific market expertise or dominance, its franchise
durability and pricing power, solid fundamentals (e.g., a strong balance sheet, improving returns on equity, and the ability to
generate free cash flow), strong management, and reasonable valuations in the context of projected growth rates. This is called
"bottom up" stock selection.
The primary risk associated with investment in the Portfolio will be the risk that the equity securities held by the
Portfolio will decline in value. The risk of the Portfolio is expected to be commensurate with that of other funds using a growth
strategy to invest in the stocks of large and medium-sized companies.
Although it is the general policy of the Portfolio to purchase and hold securities for capital growth, changes in the
Portfolio will be made as the Sub-advisor deems advisable. For example, portfolio changes may result from liquidity needs,
securities having reached a desired price, or by reason of developments not foreseen at the time of the investment was made.
Special Situations. The Portfolio may invest in "special situations" from time to time. A "special situation" arises
when, in the opinion of the Sub-advisor, the securities of a particular company will be recognized and increase in value due to a
specific development, such as a technological breakthrough, management change or new product at that company. Investment in
"special situations" carries an additional risk of loss in the event that the anticipated development does not occur or does not
attract the expected attention.
Other Investments:
The Portfolio may also invest to a lesser degree in preferred stocks, convertible securities, warrants, and debt
securities when the Portfolio perceives an opportunity for capital growth from such securities. The Portfolio may invest up to
10% of its total assets in debt securities, which may include corporate bonds and debentures and government securities.
The Portfolio may also purchase securities of foreign issuers, including foreign equity and debt securities and
depositary receipts. Foreign securities are selected primarily on a stock-by-stock basis without regard to any defined allocation
among countries or geographic regions. The Portfolio may also use a variety of currency hedging techniques, including forward
currency contracts, to manage exchange rate risk with respect to investments exposed to foreign currency fluctuations.
Index/structured Securities. The Portfolio may invest without limit in index/structured securities, which are debt
securities whose value at maturity or interest rate is linked to currencies, interest rates, equity securities, indices, commodity
prices or other financial indicators. Such securities may be positively or negatively indexed (i.e., their value may increase or
decrease if the reference index or instrument appreciates). Index/structured securities may have return characteristics similar
to direct investments in the underlying instruments, but may be more volatile than the underlying instruments. The Portfolio
bears the market risk of an investment in the underlying instruments, as well as the credit risk of the issuer of the
index/structured security.
Futures, Options and Other Derivative Instruments. The Portfolio may purchase and write (sell) options on securities,
financial indices, and foreign currencies, and may invest in futures contracts on securities, financial indices, and foreign
currencies, options on futures contracts, forward contracts and swaps and swap-related products. These instruments will be used
primarily to hedge the Portfolio's positions against potential adverse movements in securities prices, foreign currency markets or
interest rates. To a limited extent, the Portfolio may also use derivative instruments for non-hedging purposes such as
increasing the Portfolio's income or otherwise enhancing return.
For an additional discussion of many of these types of securities and their risks, see this Prospectus under "Certain
Risk Factors and Investment Methods."
Temporary Investments. Although the Sub-advisor expects to invest primarily in equity securities, the Sub-advisor may
increase the Portfolio's cash position without limitation when the Sub-advisor believes that appropriate investment opportunities
for capital growth with desirable risk/reward characteristics are unavailable. Cash and similar investments (whether made for
defensive purposes or to receive a return on idle cash) will include high-grade commercial paper, certificates of deposit and
repurchase agreements. While the Portfolio is in a defensive position, the opportunity to achieve its investment objective of
capital growth will be limited.
AST JANCAP GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek growth of capital in a manner consistent with the
preservation of capital. Realization of income is not a significant investment consideration and any income realized on the
Portfolio's investments, therefore, will be incidental to the Portfolio's objective.
Principal Investment Policies and Risks:
The Portfolio will pursue its objective by investing primarily in common stocks. Common stock investments will be in
companies that the Sub-advisor believes are experiencing favorable demand for their products and services, and which operate in a
favorable competitive and regulatory environment. The Sub-advisor generally takes a "bottom up" approach to choosing investments
for the Portfolio. In other words, the Sub-advisor seeks to identify individual companies with earnings growth potential that may
not be recognized by the market at large.
Because the Portfolio invests a substantial portion (or all) of its assets in stocks, the Portfolio is subject to the
risks associated with stock investments, and the Portfolio's share price therefore may fluctuate substantially. This is true
despite the Portfolio's focus on the stocks of larger more-established companies. The Portfolio's share price will be affected by
changes in the stock markets generally, and factors specific to a company or an industry will affect the prices of particular
stocks held by the Portfolio (for example, poor earnings, loss of major customers, major litigation against an issuer, or changes
in government regulations affecting an industry). Because of the types of securities it invests in, the Portfolio is designed for
those who are investing for the long term.
The Portfolio generally intends to purchase securities for long-term investment rather than short-term gains. However,
short-term transactions may occur as the result of liquidity needs, securities having reached a desired price or yield,
anticipated changes in interest rates or the credit standing of an issuer, or by reason of economic or other developments not
foreseen at the time the investment was made.
Special Situations. The Portfolio may invest in "special situations" from time to time. A "special situation" arises
when, in the opinion of the Sub-advisor, the securities of a particular company will be recognized and appreciate in value due to
a specific development, such as a technological breakthrough, management change or new product at that company. Investment in
"special situations" carries an additional risk of loss in the event that the anticipated development does not occur or does not
attract the expected attention.
Other Investments:
Although the Sub-advisor expects to invest primarily in equity securities, the Portfolio may also invest to a lesser
degree in preferred stocks, convertible securities, warrants, and debt securities when the Portfolio perceives an opportunity for
capital growth from such securities. The Portfolio is subject to the following percentage limitations on investing in certain
types of debt securities:
-- 35% of its assets in bonds rated below investment grade ("junk" bonds).
-- 25% of its assets in mortgage- and asset-backed securities.
-- 10% of its assets in zero coupon, pay-in-kind and step coupon securities (securities that do not, or may not under
certain circumstances, make regular interest payments).
The Portfolio may make short sales "against the box." In addition, the Portfolio may invest in the following types of securities
and engage in the following investment techniques:
Foreign Securities. The Portfolio may also purchase securities of foreign issuers, including foreign equity and debt
securities and depositary receipts. Foreign securities are selected primarily on a stock-by-stock basis without regard to any
defined allocation among countries or geographic regions. No more than 25% of the Portfolio's assets may be invested in foreign
securities denominated in foreign currencies and not publicly traded in the United States.
Futures, Options and Other Derivative Instruments. The Portfolio may enter into futures contracts on securities,
financial indices and foreign currencies and options on such contracts and may invest in options on securities, financial indices
and foreign currencies, forward contracts and interest rate swaps and swap-related products (collectively "derivative
instruments"). The Portfolio intends to use most derivative instruments primarily to hedge the value of its portfolio against
potential adverse movements in securities prices, foreign currency markets or interest rates. To a limited extent, the Portfolio
may also use derivative instruments for non-hedging purposes such as seeking to increase income. The Portfolio may also use a
variety of currency hedging techniques, including forward foreign currency exchange contracts, to manage exchange rate risk with
respect to investments exposed to foreign currency fluctuations.
For more information on the types of securities other than common stocks in which the Portfolio may invest, see this
Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. The Sub-advisor may increase the Portfolio's cash position without limitation when the
Sub-advisor is of the opinion that appropriate investment opportunities for capital growth with desirable risk/reward
characteristics are unavailable. Cash and similar investments (whether made for defensive purposes or to receive a return on idle
cash) will include high-grade commercial paper, certificates of deposit, repurchase agreements and money market funds managed by
the Sub-advisor. While the Portfolio is in a defensive position, the opportunity to achieve its investment objective of capital
growth will be limited.
AST COHEN & STEERS REALTY PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to maximize total return through investment in real estate
securities.
Principal Investment Policies and Risks:
The Portfolio pursues its investment objective of maximizing total return by seeking, with approximately equal emphasis, capital
growth and current income. Under normal circumstances, the Portfolio will invest substantially all of its assets in the equity
securities of real estate companies. Such equity securities will consist of:
o common stocks (including shares in real estate investment trusts),
o rights or warrants to purchase common stocks,
o securities convertible into common stocks where the conversion feature represents, in the Sub-advisor's view, a
significant element of the securities' value, and
o preferred stocks.
For purposes of the Portfolio's investment policies, a "real estate company" is one that derives at least 50% of its
revenues from the ownership, construction, financing, management or sale of real estate or that has at least 50% of its assets in
real estate. The Portfolio may invest up to 10% of its total assets in securities of foreign real estate companies.
Real estate companies may include real estate investment trusts ("REITs"). REITs pool investors' funds for investment
primarily in income producing real estate or real estate related loans or interests. REITs can generally be classified as Equity
REITs, Mortgage REITs and Hybrid REITs. Equity REITs, which invest the majority of their assets directly in real property, derive
their income primarily from rents. Equity REITs can also realize capital gains or losses by selling properties. Mortgage REITs,
which invest the majority of their assets in real estate mortgages, derive their income primarily from interest payments. Hybrid
REITs combine the characteristics of both Equity REITs and Mortgage REITs.
As a fund that invests primarily in equity securities, the Portfolio will be subject to many of the same risks as other
equity funds. The Portfolio also will be subject to certain risks related specifically to real estate securities, and may be
subject to greater risk and share price fluctuation than other equity funds because of the concentration of its investments in a
single industry.
While the Portfolio will not invest in real estate directly, securities of real estate companies may be subject to risks
similar to those associated with the direct ownership of real estate. These include risks related to general and local economic
conditions, dependence on management skill, heavy cash flow dependency, possible lack of available mortgage funds, overbuilding,
extended vacancies of properties, increases in property taxes and operating expenses, changes in zoning laws, losses due to costs
resulting from environmental problems, casualty or condemnation losses, limitations on rents, and changes in neighborhood values,
the appeal of properties to tenants and interest rates.
In general, Equity REITs may be affected by changes in the value of the underlying property owned by the trusts, while
Mortgage REITs may be affected by the quality of any credit extended. In the event of a default by a borrower or lessee, a REIT
may experience delays and may incur substantial costs in enforcing its rights as a mortgagee or lessor.
Non-Diversified Status. The Portfolio is classified as a "non-diversified" investment company under the 1940 Act, which
means the Portfolio is not limited by the 1940 Act in the proportion of its assets that may be invested in the securities of a
single issuer. However, the Portfolio intends to meet certain diversification standards under the Internal Revenue Code that must
be met to relieve the Portfolio of liability for Federal income tax if its earnings are distributed to shareholders. As a
non-diversified fund, a price decline in any one of the Portfolio's holdings may have a greater effect on the Portfolio's value
than on the value of a fund that is more broadly diversified.
Other Investments:
The Portfolio may write (sell) put and covered call options and purchase put and call options on securities or stock
indices that are listed on a national securities or commodities exchange. The Portfolio may buy and sell financial futures
contracts, stock and bond index futures contracts, foreign currency futures contracts and options on the foregoing. The
Portfolio may enter into forward foreign currency exchange contracts in connection with its investments in foreign securities.
The Portfolio may also enter into short sales, which are transactions in which the Portfolio sells a security it does not own at
the time of the sale in anticipation that the market price of the security will decline. The Sub-advisor expects that the
Portfolio will use these techniques on a relatively infrequent basis.
Additional information about these techniques and their risks is included below under "Certain Risk Factors and
Investment Methods."
Temporary Investments. When the Sub-advisor believes that market or general economic conditions justify a temporary
defensive position, the Portfolio will invest all or a portion of its assets in high-grade debt securities, including corporate
debt securities, U.S. government securities, and short-term money market instruments, without regard to whether the issuer is a
real estate company. While the Portfolio is in a defensive position, the opportunity to achieve its investment objective of
maximum total return will be limited. The Portfolio may also invest funds awaiting investment or funds held to satisfy redemption
requests or to pay dividends and other distributions to shareholders in short-term money market instruments.
AST AMERICAN CENTURY INCOME & GROWTH PORTFOLIO:
Investment Objective: The primary investment objective of the Portfolio is to seek capital growth. Current income is a secondary
investment objective.
Principal Investment Policies and Risks:
The Portfolio's investment strategy utilizes quantitative management techniques in a two-step process that draws heavily
on computer technology. In the first step, the Sub-advisor ranks stocks, primarily the 1,500 largest publicly traded U.S.
companies (measured by market capitalization), from most attractive to least attractive. These rankings are determined by using a
computer model that combines measures of a stock's value and measures of its growth potential. To measure value, the Sub-advisor
uses ratios of stock price to book value and stock price to cash flow, among others. To measure growth, the Sub-advisor uses,
among others, the rate of growth in a company's earnings and changes in its earnings estimates.
In the second step, the Sub-advisor uses a technique called portfolio optimization. In portfolio optimization, the
Sub-advisor uses a computer to build a portfolio of stocks from the ranking described earlier that it thinks will provide the best
balance between risk and expected return. The goal is to create an equity portfolio that provides better returns than the S&P 500
Index without taking on significant additional risk. The Sub-advisor attempts to create a dividend yield for the Portfolio that
will be greater than that of the S&P 500.
The Sub-advisor does not attempt to time the market. Instead, it intends to keep the Portfolio essentially fully
invested in stocks regardless of the movement of stock prices generally.
Like any fund investing primarily in common stocks, the Portfolio is subject to the risk that the value of the stocks it
invests in will decline. These declines could be substantial.
Because the Portfolio is managed to an index (the S&P 500), its performance will be closely tied to the performance of
the index. If the S&P 500 goes down, it is likely that the Portfolio's share price will also go down. The Portfolio's
investments in income-producing stocks may reduce to some degree the Portfolio's level of risk and share price fluctuation (and
its potential for gain) relative to the S&P 500. However, if the stocks that make up the S&P 500 do not have a high dividend
yield at a given time, then the Portfolio's dividend yield also will not be high.
Other Investments:
When the Sub-advisor believes that it is prudent, the Portfolio may invest in securities other than stocks, such as
convertible securities, foreign securities, short-term instruments and non-leveraged stock index futures contracts. Stock index
futures contracts can help the Portfolio's cash assets remain liquid while performing more like stocks. The Portfolio also may
short sales "against the box." Additional information on these types of investments is included in this Prospectus under "Certain
Risk Factors and Investment Methods."
Derivative Securities. The Portfolio may invest in derivative securities. Certain of these derivative securities may be
described as "index/structured" securities, which are securities whose value or performance is linked to other equity securities
(as in the case of depositary receipts), currencies, interest rates, securities indices or other financial indicators ("reference
indices"). The Portfolio may not invest in a derivative security unless the reference index or the instrument to which it relates
is an eligible investment for the Portfolio. For example, a security whose underlying value is linked to the price of oil would
not be a permissible investment because the Portfolio may not invest in oil and gas leases or futures. The Portfolio may make
short sales "against the box."
AST INVESCO EQUITY INCOME PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth and current income while following
sound investment practices.
Principal Investment Policies and Risks:
The Portfolio seeks to achieve its objective by investing in securities that are expected to produce relatively high
levels of income and consistent, stable returns. The Portfolio normally will invest at least 65% of its assets in dividend-paying
common and preferred stocks of domestic and foreign issuers. Up to 30% of the Portfolio's assets may be invested in equity
securities that do not pay regular dividends. In addition, the Portfolio normally will have some portion of its assets invested
in debt securities or convertible bonds. The Portfolio may invest up to 25% of its total assets in foreign securities, including
securities of issuers in countries considered to be developing. These foreign investments may serve to increase the overall risks
of the Portfolio.
The Portfolio's investments in common stocks may, of course, decline in value, which will result in declines in the
Portfolio's share price. Such declines could be substantial. To minimize the risk this presents, the Sub-advisor will not invest
more than 5% of the Portfolio's assets in the securities of any one company or more than 25% of the Portfolio's assets in any one
industry. In light of the Portfolio's focus on income producing stocks, its risk and share price fluctuation (and potential for
gain) may be less than many other stock funds.
Debt Securities. The Portfolio's investments in debt securities will generally be subject to both credit risk and market
risk. Credit risk relates to the ability of the issuer to meet interest or principal payments, or both, as they come due. Market
risk relates to the fact that the market values of debt securities in which the Portfolio invests generally will be affected by
changes in the level of interest rates. An increase in interest rates will tend to reduce the market values of debt securities,
whereas a decline in interest rates will tend to increase their values. Although the Sub-advisor will limit the Portfolio's debt
security investments to securities it believes are not highly speculative, both kinds of risk are increased by investing in debt
securities rated below the top four grades by Standard & Poor's Corporation or Moody's Investors Services, Inc., or equivalent
unrated debt securities ("junk bonds").
In order to decrease its risk in investing in debt securities, the Portfolio will invest no more than 15% of its assets
in junk bonds, and in no event will the Portfolio ever invest in a debt security rated below Caa by Moody's or CCC by Standard &
Poor's. While the Sub-advisor will monitor all of the debt securities in the Portfolio for the issuers' ability to make required
principal and interest payments and other quality factors, the Sub-advisor may retain in the Portfolio a debt security whose
rating is changed to one below the minimum rating required for purchase of such a security. For a discussion of the special risks
involved in lower-rated bonds, see this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments:
In periods of uncertain market and economic conditions, the Portfolio may assume a defensive position with up to 100% of
its assets temporarily invested in high quality corporate bonds or notes or government securities, or held in cash. While the
Portfolio is in a defensive position, the opportunity to achieve its investment objective may be limited.
AST PIMCO TOTAL RETURN BOND PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek to maximize total return, consistent with preservation
of capital and prudent investment management.
Principal Investment Policies and Risks:
The Portfolio will invest at least 65% of its assets in the following types of fixed income securities;
o securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities;
o corporate debt securities, including convertible securities and commercial paper;
o mortgage and other asset-backed securities;
o structured notes, including hybrid or "indexed" securities, and loan participations;
o delayed funding loans and revolving credit securities;
o bank certificates of deposit, fixed time deposits and bankers' acceptances;
o repurchase agreements and reverse repurchase agreements;
o obligations of foreign governments or their subdivisions, agencies and instrumentalities; and
o obligations of international agencies or supranational entities.
Portfolio holdings will be concentrated in areas of the bond market (based on quality, sector, interest rate or maturity) that the
Sub-advisor believes to be relatively undervalued. In selecting fixed income securities, the Sub-advisor uses economic
forecasting, interest rate anticipation, credit and call risk analysis, foreign currency exchange rate forecasting, and other
securities selection techniques. The proportion of the Portfolio's assets committed to investment in securities with particular
characteristics (such as maturity, type and coupon rate) will vary based on the Sub-advisor's outlook for the U.S. and foreign
economies, the financial markets, and other factors. The management of duration (a measure of a fixed income security's expected
life that incorporates its yield, coupon interest payments, final maturity and call features into one measure) is one of the
fundamental tools used by the Sub-advisor.
The Portfolio will invest in fixed-income securities of varying maturities. The average portfolio duration of the
Portfolio generally will vary within a three- to six-year time frame based on the Sub-advisor's forecast for interest rates. The
Portfolio may invest up to 10% of its assets in fixed income securities that are rated below investment grade ("junk bonds") but
are rated B or higher by Moody's Investors Services, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") (or, if unrated,
determined by the Sub-advisor to be of comparable quality).
Generally, over the long term, the return obtained by a portfolio investing primarily in fixed income securities such as
the Portfolio is not expected to be as great as that obtained by a portfolio investing in equity securities. At the same time,
the risk and price fluctuation of a fixed income fund is expected to be less than that of an equity portfolio, so that a fixed
income portfolio is generally considered to be a more conservative investment. However, the Portfolio can and routinely does
invest in certain complex fixed income securities (including various types of mortgage-backed and asset-backed securities) and
engage in a number of investment practices (including futures, swaps and dollar rolls) as described below, that many other fixed
income funds do not utilize. These investments and practices are designed to increase the Portfolio's return or hedge its
investments, but may increase the risk to which the Portfolio is subject.
Like other fixed income funds, the Portfolio is subject to market risk. Bond values fluctuate based on changes in
interest rates, market conditions, investor confidence and announcements of economic, political or financial information.
Generally, the value of fixed income securities will change inversely with changes in market interest rates. As interest rates
rise, market value tends to decrease. This risk will be greater for long-term securities than for short-term securities. Certain
mortgage-backed and asset-backed securities and derivative instruments in which the Portfolio may invest may be particularly
sensitive to changes in interest rates. The Portfolio is also subject to credit risk, which is the possibility that an issuer of
a security (or a counterparty to a derivative contract) will default or become unable to meet its obligation. Generally, the
lower the rating of a security, the higher its degree of credit risk.
The following paragraphs describe some specific types of fixed-income investments that the Portfolio may invest in, and
some of the investment practices that the Portfolio will engage in. More information about some of these investments, including
futures, options and mortgage-backed and asset-backed securities, is included below under "Certain Risk Factors and Investment
Methods."
U.S. Government Securities. The Portfolio may invest in various types of U.S. Government securities, including those
that are supported by the full faith and credit of the United States; those that are supported by the right of the issuing agency
to borrow from the U.S. Treasury; those that are supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others that are supported only by the credit of the instrumentality.
Corporate Debt Securities. Corporate debt securities include corporate bonds, debentures, notes and other similar
instruments, including convertible securities and preferred stock. Debt securities may be acquired with warrants attached. The
rate of return or return of principal on some debt obligations may be linked or indexed to exchange rates between the U.S. dollar
and a foreign currency or currencies.
While the Sub-advisor may regard some countries or companies as favorable investments, pure fixed income opportunities
may be unattractive or limited due to insufficient supply or legal or technical restrictions. In such cases, the Portfolio may
consider equity securities or convertible bonds to gain exposure to such investments.
Variable and Floating Rate Securities. Variable and floating rate securities provide for a periodic adjustment in the
interest rate paid on the obligations. The interest rates on these securities are tied to other interest rates, such as
money-market indices or Treasury bill rates, and reset periodically. While these securities provide the Portfolio with a certain
degree of protection against losses caused by rising interest rates, they will cause the Portfolio's interest income to decline if
market interest rates decline.
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities whose principal value is periodically
adjusted according to the rate of inflation. The interest rate on these bonds is fixed at issuance, and is generally lower than
the interest rate on typical bonds. Over the life of the bond, however, this interest will be paid based on a principal value
that has been adjusted for inflation. Repayment of the adjusted principal upon maturity may be guaranteed, but the market value
of the bonds is not guaranteed, and will fluctuate. The Portfolio may invest in inflation-indexed bonds that do not provide a
repayment guarantee. While these securities are expected to be protected from long-term inflationary trends, short-term increases
in inflation may lead to losses.
Catastrophe Bonds. Catastrophe bonds are fixed income securities for which the return of principal and payment of
interest is contingent upon the non-occurrence of a specific "trigger" event. The trigger event may be, for example, a hurricane
or an earthquake in a specific geographic region that causes losses exceeding a specific amount. If the trigger event occurs, the
Portfolio may lose all or a portion of the amount it invested in the bond. Catastrophe bonds may also expose the Portfolio to
certain other risks, including default, adverse regulatory interpretation, and adverse tax consequences.
Mortgage-Related and Other Asset-Backed Securities. The Portfolio may invest all of its assets in mortgage-backed and
other asset-backed securities, including collateralized mortgage obligations. The value of some mortgage-backed and asset-backed
securities in which the Portfolio invests may be particularly sensitive to changes in market interest rates.
Reverse Repurchase Agreements and Dollar Rolls. In addition to entering into reverse repurchase agreements (as described
below under "Certain Risk Factors and Investment Methods"), the Portfolio may also enter into dollar rolls. In a dollar roll, the
Portfolio sells mortgage-backed or other securities for delivery in the current month and simultaneously contracts to purchase
substantially similar securities on a specified future date. The Portfolio forgoes principal and interest paid on the securities
sold in a dollar roll, but the Portfolio is compensated by the difference between the sales price and the lower price for the
future purchase, as well as by any interest earned on the proceeds of the securities sold. The Portfolio also could be
compensated through the receipt of fee income. Reverse repurchase agreements and dollar rolls can be viewed as collateralized
borrowings and, like other borrowings, will tend to exaggerate fluctuations in Portfolio's share price and may cause the Portfolio
to need to sell portfolio securities at times when it would otherwise not wish to do so.
Foreign Securities. The Portfolio may invest up to 20% of its assets in securities denominated in foreign currencies and
may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Portfolio may invest up to 10% of its
assets in securities of issuers based in developing countries (as determined by the Sub-advisor). The Portfolio may buy and sell
foreign currency futures contracts and options on foreign currencies and foreign currency futures contracts, and enter into
forward foreign currency exchange contracts for the purpose of hedging currency exchange risks arising from the Portfolio's
investment or anticipated investment in securities denominated in foreign currencies.
Short Sales "Against the Box." The Portfolio may sell securities short "against the box." For a discussion of this
practice, see this Prospectus under "Certain Risk Factors and Investment Methods."
Derivative Instruments. The Portfolio may purchase and write call and put options on securities, securities indices and
on foreign currencies. The Portfolio may invest in interest rate futures contracts, stock index futures contracts and foreign
currency futures contracts and options thereon that are traded on U.S. or foreign exchanges or boards of trade. The Portfolio may
also enter into swap agreements with respect to foreign currencies, interest rates and securities indices. The Portfolio may use
these techniques to hedge against changes in interest rates, currency exchange rates or securities prices or as part of its
overall investment strategy.
For a discussion of futures and options and their risks, see this Prospectus under "Certain Risk Factors and Investment
Methods." The Portfolio's investments in swap agreements are described directly below.
Swap Agreements. The Portfolio may enter into interest rate, index and currency exchange rate swap agreements for the
purposes of attempting to obtain a desired return at a lower cost than if the Portfolio had invested directly in an instrument
that yielded the desired return. Swap agreements are two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard "swap" transaction, the two parties agree to exchange the
returns (or differentials in rates of return) earned or realized on particular investments or instruments. The returns to be
exchanged between the parties are calculated with respect to a "notional amount," i.e., a specified dollar amount that is
hypothetically invested at a particular interest rate, in a particular foreign currency, or in a "basket" of securities
representing a particular index. Commonly used swap agreements include interest rate caps, under which, in return for a premium,
one party agrees to make payments to the other to the extent that interest rates exceed a specified rate or "cap"; interest
floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates
fall below a specified level or "floor"; and interest rate collars, under which a party sells a cap and purchases a floor or vice
versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.
Under most swap agreements entered into by the Portfolio, the parties' obligations are determined on a "net basis."
Consequently, the Portfolio's obligations (or rights) under a swap agreement will generally be equal only to a net amount based on
the relative values of the positions held by each party.
Whether the Portfolio's use of swap agreements will be successful will depend on the sub-advisor's ability to predict
that certain types of investments are likely to produce greater returns than other investments. Moreover, the Portfolio may not
receive the expected amount under a swap agreement if the other party to the agreement defaults or becomes bankrupt. The swaps
market is relatively new and is largely unregulated.
AST PIMCO LIMITED MATURITY BOND PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek to maximize total return, consistent with preservation
of capital and prudent investment management.
Principal Investment Policies and Risks:
The Portfolio will invest at least 65% of its assets in the following types of fixed income securities;
o securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities;
o corporate debt securities, including convertible securities and commercial paper;
o mortgage and other asset-backed securities;
o structured notes, including hybrid or "indexed" securities, and loan participations;
o delayed funding loans and revolving credit securities;
o bank certificates of deposit, fixed time deposits and bankers' acceptances;
o repurchase agreements and reverse repurchase agreements;
o obligations of foreign governments or their subdivisions, agencies and instrumentalities; and
o obligations of international agencies or supranational entities.
Portfolio holdings will be concentrated in areas of the bond market (based on quality, sector, interest rate or maturity)
that the Sub-advisor believes to be relatively undervalued. In selecting fixed income securities, the Sub-advisor uses economic
forecasting, interest rate anticipation, credit and call risk analysis, foreign currency exchange rate forecasting, and other
securities selection techniques. The proportion of the Portfolio's assets committed to investment in securities with particular
characteristics (such as maturity, type and coupon rate) will vary based on the Sub-advisor's outlook for the U.S. and foreign
economies, the financial markets, and other factors. The management of duration (a measure of a fixed income security's expected
life that incorporates its yield, coupon interest payments, final maturity and call features into one measure) is one of the
fundamental tools used by the Sub-advisor.
The Portfolio will invest in fixed-income securities of varying maturities. The average portfolio duration of the
Portfolio generally will vary within a one- to three-year time frame based on the Sub-advisor's forecast for interest rates. The
Portfolio may invest up to 10% of its assets in fixed income securities that are rated below investment grade ("junk bonds") but
are rated B or higher by Moody's Investors Services, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") (or, if unrated,
determined by the Sub-advisor to be of comparable quality).
Generally, over the long term, the return obtained by a portfolio investing primarily in fixed income securities such as
the Portfolio is not expected to be as great as that obtained by a portfolio investing in equity securities. At the same time,
the risk and price fluctuation of a fixed income fund is expected to be less than that of an equity portfolio, so that a fixed
income portfolio is generally considered to be a more conservative investment. However, the Portfolio can and routinely does
invest in certain complex fixed income securities (including various types of mortgage-backed and asset-backed securities) and
engage in a number of investment practices (including futures, swaps and dollar rolls) as described below, that many other fixed
income funds do not utilize. These investments and practices are designed to increase the Portfolio's return or hedge its
investments, but may increase the risk to which the Portfolio is subject.
Like other fixed income funds, the Portfolio is subject to market risk. Bond values fluctuate based on changes in
interest rates, market conditions, investor confidence and announcements of economic, political or financial information.
Generally, the value of fixed income securities will change inversely with changes in market interest rates. As interest rates
rise, market value tends to decrease. This risk will be greater for long-term securities than for short-term securities.
Therefore, the Portfolio's share price is expected to fluctuate less than the AST PIMCO Total Return Bond Portfolio, because its
average duration will be shorter. Certain mortgage-backed and asset-backed securities and derivative instruments in which the
Portfolio may invest may be particularly sensitive to changes in interest rates. The Portfolio is also subject to credit risk,
which is the possibility that an issuer of a security (or a counterparty to a derivative contract) will default or become unable
to meet its obligation. Generally, the lower the rating of a security, the higher its degree of credit risk.
The following paragraphs describe some specific types of fixed-income investments that the Portfolio may invest in, and
some of the investment practices that the Portfolio will engage in. More information about some of these investments, including
futures, options and mortgage-backed and asset-backed securities, is included below under "Certain Risk Factors and Investment
Methods."
U.S. Government Securities. The Portfolio may invest in various types of U.S. Government securities, including those
that are supported by the full faith and credit of the United States; those that are supported by the right of the issuing agency
to borrow from the U.S. Treasury; those that are supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others that are supported only by the credit of the instrumentality.
Corporate Debt Securities. Corporate debt securities include corporate bonds, debentures, notes and other similar
instruments, including convertible securities and preferred stock. Debt securities may be acquired with warrants attached. The
rate of return or return of principal on some debt obligations may be linked or indexed to exchange rates between the U.S. dollar
and a foreign currency or currencies.
While the Sub-advisor may regard some countries or companies as favorable investments, pure fixed income opportunities
may be unattractive or limited due to insufficient supply or legal or technical restrictions. In such cases, the Portfolio may
consider equity securities or convertible bonds to gain exposure to such investments.
Variable and Floating Rate Securities. Variable and floating rate securities provide for a periodic adjustment in the
interest rate paid on the obligations. The interest rates on these securities are tied to other interest rates, such as
money-market indices or Treasury bill rates, and reset periodically. While these securities provide the Portfolio with a certain
degree of protection against losses caused by rising interest rates, they will cause the Portfolio's interest income to decline if
market interest rates decline.
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities whose principal value is periodically
adjusted according to the rate of inflation. The interest rate on these bonds is fixed at issuance, and is generally lower than
the interest rate on typical bonds. Over the life of the bond, however, this interest will be paid based on a principal value
that has been adjusted for inflation. Repayment of the adjusted principal upon maturity may be guaranteed, but the market value
of the bonds is not guaranteed, and will fluctuate. The Portfolio may invest in inflation-indexed bonds that do not provide a
repayment guarantee. While these securities are expected to be protected from long-term inflationary trends, short-term increases
in inflation may lead to losses.
Catastrophe Bonds. Catastrophe bonds are fixed income securities for which the return of principal and payment of
interest is contingent upon the non-occurrence of a specific "trigger" event. The trigger event may be, for example, a hurricane
or an earthquake in a specific geographic region that causes losses exceeding a specific amount. If the trigger event occurs, the
Portfolio may lose all or a portion of the amount it invested in the bond. Catastrophe bonds may also expose the Portfolio to
certain other risks, including default, adverse regulatory interpretation, and adverse tax consequences.
Mortgage-Related and Other Asset-Backed Securities. The Portfolio may invest all of its assets in mortgage-backed and
other asset-backed securities, including collateralized mortgage obligations and stripped mortgage-backed securities. The value
of some mortgage-backed and asset-backed securities in which the Portfolio invests may be particularly sensitive to changes in
market interest rates.
Reverse Repurchase Agreements and Dollar Rolls. In addition to entering into reverse repurchase agreements (as described
below under "Certain Risk Factors and Investment Methods"), the Portfolio may also enter into dollar rolls. In a dollar roll, the
Portfolio sells mortgage-backed or other securities for delivery in the current month and simultaneously contracts to purchase
substantially similar securities on a specified future date. The Portfolio forgoes principal and interest paid on the securities
sold in a dollar roll, but the Portfolio is compensated by the difference between the sales price and the lower price for the
future purchase, as well as by any interest earned on the proceeds of the securities sold. The Portfolio also could be
compensated through the receipt of fee income. Reverse repurchase agreements and dollar rolls can be viewed as collateralized
borrowings and, like other borrowings, will tend to exaggerate fluctuations in Portfolio's share price and may cause the Portfolio
to need to sell portfolio securities at times when it would otherwise not wish to do so.
Foreign Securities. The Portfolio may invest up to 20% of its assets in securities denominated in foreign currencies and
may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Portfolio may buy and sell foreign
currency futures contracts and options on foreign currencies and foreign currency futures contracts, and enter into forward
foreign currency exchange contracts for the purpose of hedging currency exchange risks arising from the Portfolio's investment or
anticipated investment in securities denominated in foreign currencies.
Short Sales "Against the Box." The Portfolio may sell securities short "against the box." For a discussion of this
practice, see this Prospectus under "Certain Risk Factors and Investment Methods."
Derivative Instruments. The Portfolio may purchase and write call and put options on securities, securities indices and
on foreign currencies. The Portfolio may invest in interest rate futures contracts, stock index futures contracts and foreign
currency futures contracts and options thereon that are traded on U.S. or foreign exchanges or boards of trade. The Portfolio may
also enter into swap agreements with respect to foreign currencies, interest rates and securities indices. The Portfolio may use
these techniques to hedge against changes in interest rates, currency exchange rates or securities prices or as part of its
overall investment strategy.
For a discussion of futures and options and their risks, see this Prospectus under "Certain Risk Factors and Investment
Methods." The Portfolio's investments in swap agreements are described directly below.
Swap Agreements. The Portfolio may enter into interest rate, index and currency exchange rate swap agreements for the
purposes of attempting to obtain a desired return at a lower cost than if the Portfolio had invested directly in an instrument
that yielded the desired return. Swap agreements are two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard "swap" transaction, the two parties agree to exchange the
returns (or differentials in rates of return) earned or realized on particular investments or instruments. The returns to be
exchanged between the parties are calculated with respect to a "notional amount," i.e., a specified dollar amount that is
hypothetically invested at a particular interest rate, in a particular foreign currency, or in a "basket" of securities
representing a particular index. Commonly used swap agreements include interest rate caps, under which, in return for a premium,
one party agrees to make payments to the other to the extent that interest rates exceed a specified rate or "cap"; interest
floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates
fall below a specified level or "floor"; and interest rate collars, under which a party sells a cap and purchases a floor or vice
versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.
Under most swap agreements entered into by the Portfolio, the parties' obligations are determined on a "net basis."
Consequently, the Portfolio's obligations (or rights) under a swap agreement will generally be equal only to a net amount based on
the relative values of the positions held by each party.
Whether the Portfolio's use of swap agreements will be successful will depend on the sub-advisor's ability to predict
that certain types of investments are likely to produce greater returns than other investments. Moreover, the Portfolio may not
receive the expected amount under a swap agreement if the other party to the agreement defaults or becomes bankrupt. The swaps
market is relatively new and is largely unregulated.
PORTFOLIO TURNOVER:
Each Portfolio may sell its portfolio securities, regardless of the length of time that they have been held, if the
Sub-advisor and/or the Investment Manager determines that it would be in the Portfolio's best interest to do so. It may be
appropriate to buy or sell portfolio securities due to economic, market, or other factors that are not within the Sub-advisor's or
Investment Manager's control. Such transactions will increase a Fund's "portfolio turnover." A 100% portfolio turnover rate
would occur if all of the securities in a portfolio of investments were replaced during a given period.
Although turnover rates may vary substantially from year to year, it is anticipated that the following Portfolios may
regularly have annual rates of turnover exceeding 100%:
AST Janus Overseas Growth Portfolio
AST American Century International Growth Portfolio
AST American Century International Growth Portfolio II
AST Janus Small-Cap Growth Portfolio
AST Kemper Small-Cap Growth Portfolio
AST Janus Mid-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Value Portfolio
AST Alger Growth Portfolio
AST Marsico Capital Growth Portfolio
AST JanCap Growth Portfolio
AST Cohen & Steers Realty Portfolio
AST PIMCO Total Return Bond Portfolio
AST PIMCO Limited Maturity Bond Portfolio
A high rate of portfolio turnover involves correspondingly higher brokerage commission expenses and other transaction
costs, which are borne by a Portfolio and will reduce its performance.
NET ASSET VALUE:
The net asset value per share ("NAV") of each Portfolio is determined as of the close of the New York Stock Exchange (the
"NYSE") (normally 4:00 p.m. Eastern Time) on each day that the NYSE is open for business. NAV is determined by dividing the value
of a Portfolio's total assets, less any liabilities, by the number of total shares of that Portfolio outstanding. In general, the
assets of each Portfolio are valued on the basis of market quotations. However, in certain circumstances where market quotations
are not readily available or are believed to be inaccurate, assets are valued by methods that are believed to accurately reflect
their fair value. Because NAV is calculated and purchases may be made only on business days, and because securities traded on
foreign exchanges may trade on other days, the value of a Portfolio's investments may change on days when shares cannot be
purchased or redeemed.
PURCHASE AND REDEMPTION OF SHARES:
Purchases of shares of the Portfolios may be made only by separate accounts of Participating Insurance Companies for the
purpose of investing assets attributable to variable annuity contracts and variable life insurance policies ("contractholders"),
or by qualified plans. The separate accounts of the Participating Insurance Companies place orders to purchase and redeem shares
of the Trust based on, among other things, the amount of premium payments to be invested and the amount of surrender and transfer
requests to be effected on that day under the variable annuity contracts and variable life insurance policies. Orders are
effected on days on which the NYSE is open for trading. Orders received before 4:00 P.M. Eastern time are effected at the NAV
determined as of 4:00 P.M. Eastern Time on that same day. Orders received after 4:00 P.M. Eastern Time are effected at the NAV
calculated the next business day. Payment for redemptions will be made within seven days after the request is received. The
Trust does not assess any fees, either when it sells or when it redeems its securities. However, surrender charges, mortality and
expense risk fees and other charges may be assessed by Participating Insurance Companies under the variable annuity contracts or
variable life insurance policies. Please refer to the prospectuses for the variable annuity contracts and variable insurance
policies for further information on these fees.
As of the date of this Prospectus, American Skandia Life Assurance Corporation ("ASLAC") and Kemper Investors Life
Insurance Company are the only Participating Insurance Companies. The profit sharing plan covering employees of ASLAC and its
affiliates, which is a retirement plan qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended, also may
directly own shares of the Trust. Certain conflicts of interest may arise as a result of investment in the Trust by various
insurance companies for the benefit of their contractholders and by various qualified plans. These conflicts could arise because
of differences in the tax treatment of the various investors, because of actions of the Participating Insurance Companies and/or
the qualified plans, or other reasons. The Trust does not currently expect that any material conflicts of interest will arise.
Nevertheless, the Trustees intend to monitor events in order to identify any material irreconcilable conflicts and to determine
what action, if any, should be taken in response to such conflicts. Should any conflict arise that would require a substantial
amount of assets to be withdrawn from the Trust, orderly portfolio management could be disrupted.
MANAGEMENT OF THE TRUST:
Investment Manager: American Skandia Investment Services, Incorporated ("ASISI"), One Corporate Drive, Shelton, Connecticut, acts
as Investment Manager to the Trust. ASISI has served as Investment Manager since 1992, and currently serves as Investment Manager
to a total of 66 investment company portfolios (including the Portfolios of the Trust). ASISI is an indirect wholly-owned
subsidiary of Skandia Insurance Company Ltd. ("Skandia"). Skandia is a Swedish company that owns, directly or indirectly, a
number of insurance companies in many countries. The predecessor to Skandia commenced operations in 1855.
The Trust's Investment Management Agreements with ASISI (the "Management Agreements") provide that ASISI will furnish
each applicable Portfolio with investment advice and administrative services subject to the supervision of the Board of Trustees
and in conformity with the stated policies of the applicable Portfolio. The Investment Manager has engaged Sub-advisors to
conduct the investment programs of each Portfolio, including the purchase, retention and sale of portfolio securities. The
Investment Manager is responsible for monitoring the activities of the Sub-advisors and reporting on such activities to the
Trustees. The Investment Manager must also provide, or obtain and supervise, the executive, administrative, accounting, custody,
transfer agent and shareholder servicing services that are deemed advisable by the Trustees.
The Trust has obtained an exemption from the Securities and Exchange Commission that permits ASISI, subject to approval
by the Board of Trustees of the Trust, to change sub-advisors for a Portfolio and to enter into new sub-advisory agreements,
without obtaining shareholder approval of the changes. This exemption (which is similar to exemptions granted to other investment
companies that are organized in a similar manner as the Trust) is intended to facilitate the efficient supervision and management
of the sub-advisors by ASISI and the Trustees.
Sub-advisors:
Scudder Kemper Investments, Inc. ("Scudder Kemper"), 345 Park Avenue, New York, New York, serves as Sub-advisor of the
AST Kemper Small-Cap Growth Portfolio. Scudder Kemper is one of the largest investment managers in the country with more than
$298 billion under management as of June 30, 2000 and has been engaged in the management of investment funds for more than eighty
years.
Peter Chin, CFA is the lead portfolio manager for the AST Kemper Small-Cap Growth Portfolio, and Roy C. McKay, CFA is the
other portfolio manager. Both have managed the Portfolio since June 1999. Mr. Chin is a Managing Director of Scudder Kemper and
has been with the firm since 1973. Mr. McKay is a Manager Director of Scudder Kemper and has been with the firm since 1988.
Janus Capital Corporation ("Janus"), 100 Fillmore Street, Denver, Colorado 80206-4923, serves as Sub-advisor for the AST
Janus Overseas Growth Portfolio, the AST Janus Small-Cap Growth Portfolio, the AST Janus Mid-Cap Growth Portfolio and the AST
JanCap Growth Portfolio. Janus serves as investment advisor to the Janus Funds, as well as advisor or sub-advisor to several
other mutual funds and individual, corporate, charitable and retirement accounts. As of June 30, 2000, Janus managed assets worth
approximately $304 billion.
The portfolio managers responsible for management of the AST Janus Overseas Growth Portfolio are Helen Young Hayes, CFA
and Laurance Chang, CFA. Ms. Hayes has been managing the Portfolio since its inception, while Mr. Chang has been managing the
Portfolio since January 2000. Ms. Hayes is a Vice President of Janus and joined Janus in 1987. Mr. Chang is a Vice President of
Janus and joined Janus in 1993.
The AST Janus Small-Cap Growth Portfolio is managed by a management team consisting of William H. Bales and Jonathan D.
Coleman. Mr. Bales and Mr. Coleman have managed the Portfolio since Janus became the Portfolio's Sub-advisor in January 1999.
Mr. Bales has been a Portfolio Manager since 1997 and a research analyst since 1993. He joined Janus in 1991. Mr. Coleman has
been a Portfolio Manager with Janus since 1997 and a research analyst since joining Janus in 1994.
The portfolio manager responsible for management of the AST Janus Mid-Cap Growth Portfolio is Matthew A. Ankrum, CFA.
Mr. Ankrum, who has managed the Portfolio since its inception, joined Janus as an intern in June 1996 and became an equity
research analyst in August 1997. Prior to joining Janus, Mr. Ankrum worked as a corporate finance analyst at William Blair and
Company from 1993 to 1995.
The portfolio manager responsible for management of the AST JanCap Growth Portfolio is Scott W. Schoelzel. Mr.
Schoelzel, a Senior Portfolio Manager at Janus who has managed the Portfolio since August, 1997, joined Janus in January, 1994 as
Vice President of Investments.
American Century Investment Management, Inc. ("American Century") (formerly, Investors Research Corporation), American
Century Tower, 4500 Main Street, Kansas City, Missouri 64111, serves as Sub-advisor for the AST American Century International
Growth Portfolio, the AST American Century International Growth Portfolio II and the AST American Century Income & Growth
Portfolio. American Century has been providing investment advisory services to investment companies and institutional clients
since 1958. As of June 30, 2000, American Century and its affiliates managed assets totaling approximately $113 billion.
American Century utilizes a team of portfolio managers, assistant portfolio managers and analysts acting together to
manage the assets of the Portfolios.
The portfolio manager members of the portfolio team responsible for management of the AST American Century International
Growth Portfolio and AST American Century International Growth Portfolio II are Henrik Strabo and Mark S. Kopinski. Henrik Strabo
joined American Century in 1993 as an investment analyst, has been a portfolio manager member of the international team since 1994
and has managed the AST American Century International Growth Portfolio since its inception and the AST American Century
International Growth Portfolio II since American Century became the Portfolio's Sub-advisor in May 2000. Mark S. Kopinski, Vice
President and Portfolio Manager for American Century, rejoined American Century in April 1997 and has co-managed the AST American
Century International Growth Portfolio since that time and the AST American Century International Growth Portfolio II since
American Century became the Portfolio's Sub-advisor. From June 1995 to March 1997, Mr. Kopinski served as Vice President and
Portfolio Manager for Federated Investors, Inc. Prior to June 1995, Mr. Kopinski was a Vice President and Portfolio Manager for
American Century.
The portfolio manager members of the portfolio team responsible for the day-to-day management of the AST American Century
Income & Growth Portfolio are John Schniedwind, Kurt Borgwardt, Jeffrey R. Tyler and William Martin. Mr. Schniedwind is Senior
Vice President and Group Leader -- Quantitative Equity for American Century, and has been with American Century since 1982. Mr.
Borgwardt is Vice President, Portfolio Manager and Director of Quantitative Equity Research for American Century, and has been
with American Century since 1990. Mr. Tyler, Senior Vice President and Portfolio Manager, joined American Century in 1988.
William Martin, Vice President and Senior Portfolio Manager, joined American Century in 1989.
American Century became the Sub-advisor of the AST American Century Income & Growth Portfolio on May 4, 1999 upon the
resignation of Putnam Investment Management, Inc., the previous Sub-advisor for the Portfolio. (The AST American Century Income &
Growth Portfolio was known as the AST Putnam Value Growth & Income Portfolio.)
Massachusetts Financial Services Company ("MFS"), which is located at 500 Boylston Street, Boston, Massachusetts 02116,
serves as Sub-advisor for the AST MFS Growth Portfolio. MFS and its predecessor organizations have a history of money management
dating from 1924. As of June 30, 2000, the net assets under the management of the MFS organization were approximately $151.2
billion.
The portfolio managers responsible for the management of the AST MFS Growth Portfolio are Stephen Pesek and Thomas D.
Barrett. Mr. Pesek, a Vice President of MFS, has managed the Portfolio since its inception and has been employed by MFS as a
portfolio manager since 1994. Mr. Barrett has managed the Portfolio since May 2000 and has been employed by MFS in the investment
management area since 1996. Prior to joining MFS, Mr. Barrett had been an Assistant Vice President and Equity Research Analyst
with The Boston Company Asset Management, Inc.
Lord, Abbett & Co. ("Lord Abbett"), 90 Hudson Street, Jersey City, New Jersey 07302, serves as Sub-advisor for the AST
Lord Abbett Small Cap Value Portfolio. Lord Abbett has been an investment manager for over 68 years. As of June 30, 2000, Lord
Abbett managed over $33 billion in a family of mutual funds and other advisory accounts.
Lord Abbett uses a team of investment managers and analysts acting together to manage the investments of the AST Lord
Abbett Small Cap Value Portfolio. Christopher J. Towle, Partner of Lord Abbett, heads the management team for the AST Lord Abbett
Bond-Debenture Portfolio, the other senior members of which include Richard Szaro, Michael Goldstein and Thomas Baade, and all
have managed the Portfolio since its inception. Towle and Szaro have been with Lord Abbett since 1988 and 1983, respectively. Mr.
Goldstein has been with Lord Abbett since 1997. Before joining Lord Abbett, Mr. Goldstein was a bond trader for Credit Suisse BEA
Associates from August 1992 through April 1997. Mr. Baade joined Lord Abbett in 1998; prior to that he was a credit analyst with
Greenwich Street Advisors.
GAMCO Investors, Inc., ("GAMCO") with principal offices located at One Corporate Center, Rye, New York 10580-1434, serves
as Sub-advisor to the AST Gabelli Small-Cap Growth Portfolio. GAMCO managed approximately $9.6 billion in assets as of June 30,
2000 and is a wholly owned subsidiary of Gabelli Asset Management Inc.
Mario J. Gabelli, CFA, is primarily responsible for the day-to-day management of the AST Gabelli Small-Cap Value
Portfolio. Mr. Gabelli has been Chief Executive Officer and Chief Investment Officer of GAMCO and its predecessor since the
predecessor's inception in 1978.
Fred Alger Management, Inc. ("Alger"), One World Trade Center, Suite 9333, New York, New York 10048, serves as
Sub-advisor for the AST Alger Growth Portfolio. Alger has been an investment advisor since 1964, and as of June 30, 2000 managed
mutual fund and other assets totaling approximately $21.2 billion.
The portfolio managers responsible for the management of the AST Alger Growth Portfolio are David Alger and Ron Tartaro.
Both have managed this Portfolio since its inception. Mr. Alger has been employed by Alger since 1971 and served as Executive
Vice President and Director of Research prior to being named President in 1995. Mr. Tartaro has been employed by Alger since 1990
as a senior research analyst until 1995 and as a Senior Vice President since 1995.
Neuberger Berman Management Inc. ("NB Management"), 605 Third Avenue, New York, NY 10158, serves as sub-advisor for the
AST Neuberger Berman Mid-Cap Growth Portfolio and the AST Neuberger Berman Mid-Cap Value Portfolio. NB Management and its
predecessor firms have specialized in the management of mutual funds since 1950. Neuberger Berman, LLC, an affiliate of NB
Management, acts as a principal broker in the purchase and sale of portfolio securities for the Portfolios for which it serves as
Sub-advisor, and provides NB Management with certain assistance in the management of the Portfolios without added cost to the
Portfolios or ASISI. NB Management and its affiliates manage securities accounts, including mutual funds, that had approximately
$54.4 billion of assets as of June 30, 2000.
Jennifer K. Silver and Brooke A. Cobb have been primarily responsible for the day-to-day management of the AST Neuberger
Berman Mid-Cap Growth Portfolio since NB Management became the Portfolio's Sub-advisor in May 1998. Ms. Silver is Director of the
Neuberger Berman Growth Equity Group, and both she and Mr. Cobb are Vice Presidents of NB Management. Prior to joining NB
Management in 1997, Ms. Silver was a portfolio manager for several large mutual funds managed by a prominent investment adviser.
Prior to joining NB Management, Mr. Cobb was the chief investment officer for an investment advisory firm managing individual
accounts from 1995 to 1997 and, from 1992 to 1995, a portfolio manager of a large mutual fund managed by a prominent adviser.
The portfolio managers responsible for the day-to-day management of the AST Neuberger Berman Mid-Cap Value Portfolio are
Robert I. Gendelman and S. Basu Mullick. Mr. Gendelman has been managing the Portfolio since NB Management became the Portfolio's
Sub-advisor in May 1998, and Mr. Mullick has been managing the Portfolio since October 1998. Mr. Gendelman has been with NB
Management since 1994, where he is currently a Vice President. Mr. Mullick has been a Vice President of NB Management since
October 1998. From 1993 to 1998, Mr. Mullick was a portfolio manager for a prominent investment adviser.
Marsico Capital Management, LLC ("Marsico Capital"), 1200 17th Street, Suite 1300, Denver, CO 80202, serves as
Sub-advisor for the AST Marsico Capital Growth Portfolio. Thomas F. Marsico, Chairman and Chief Executive Officer of Marsico
Capital, has had primary responsibility for management of the Portfolio since its inception. Prior to forming Marsico Capital in
September, 1997, Mr. Marsico served as Executive Vice President and Portfolio Manager at Janus Capital Corporation ("Janus"). Mr.
Marsico joined Janus in March, 1986. As of June 30, 2000, Marsico Capital managed approximately $15.5 billion in assets.
Cohen & Steers Capital Management, Inc. ("Cohen & Steers"), 757 Third Avenue, New York, New York 10017, acts as the
Sub-advisor for the AST Cohen & Steers Realty Portfolio. Cohen & Steers is the leading U.S. manager of portfolios dedicated to
investments in real estate investment trusts ("REITS"). As of June 30, 2000, Cohen & Steers managed approximately $4.3 billion in
assets.
Robert H. Steers, Chairman, and Martin Cohen, President formed Cohen & Steers in 1986 and have been responsible for the
day-to-day management of the AST Cohen & Steers Realty Portfolio since its inception.
INVESCO Funds Group, Inc. ("INVESCO"), 7800 East Union Avenue, P.O. Box 173706, Denver, Colorado 80217-3706, serves as
Sub-advisor for the AST INVESCO Equity Income Portfolio. INVESCO was established in 1932. AMVESCAP PLC, the parent of INVESCO,
is one of the largest independent investment management businesses in the world and managed approximately $389 billion of assets
as of June 30, 2000.
The portfolio managers responsible for management of the Portfolio are Charles P. Mayer and Donovan J. (Jerry) Paul. Mr.
Mayer has served as Co-Manager of the Portfolio since April, 1993. Mr. Mayer began his investment career in 1969 and is now a
director and senior vice president of INVESCO. From 1993 to 1994, he was vice president of INVESCO. Mr. Paul has served as
Co-Manager of the Portfolio since May 1994. Mr. Paul entered the investment management industry in 1976, and has been a senior
vice president of INVESCO since 1994. From 1993 to 1994, he was president of Quixote Investment Management, Inc.
Pacific Investment Management Company LLC ("PIMCO"), 840 Newport Center Drive, Suite 300, Newport Beach, California 92660
serves as Sub-advisor for the AST PIMCO Total Return Bond Portfolio and the AST PIMCO Limited Maturity Bond Portfolio. PIMCO is
an investment counseling firm founded in 1971 and, as of June 30, 2000, had approximately $199 billion of assets under management.
The portfolio manager responsible for management of the AST PIMCO Total Return Bond Portfolio and the AST PIMCO Limited
Maturity Bond Portfolio is William H. Gross. Mr. Gross is managing director of PIMCO has been associated with the firm since
1971, and has managed each Portfolio since their respective commencement of operations.
Fees and Expenses:
Investment Management Fees. ASISI receives a fee, payable each month, for the performance of its services. ASISI pays
each Sub-advisor a portion of such fee for the performance of the Sub-advisory services at no additional cost to any Portfolio.
The Investment Management fee for each Portfolio will differ, reflecting the differing objectives, policies and restrictions of
each Portfolio. Each Portfolio's fee is accrued daily for the purposes of determining the sale and redemption price of the
Portfolio's shares. The fees paid to ASISI for the fiscal year ended December 31, 1999 by each Portfolio that was in operation
for that entire fiscal year, stated as a percentage of the Portfolio's average daily net assets, were as follows:
Portfolio: Annual Rate:
---------- ------------
AST Janus Overseas Growth Portfolio: 1.00%
AST American Century International Growth Portfolio: 1.00%
AST American Century International Growth Portfolio II: 1.00%
AST Janus Small-Cap Growth Portfolio: 0.90%
AST Kemper Small-Cap Growth Portfolio: 0.95%
AST Lord Abbett Small Cap Value Portfolio: 0.95%
AST Gabelli Small-Cap Value Portfolio: 0.90%
AST Neuberger Berman Mid-Cap Growth Portfolio: 0.85%
AST Neuberger Berman Mid-Cap Value Portfolio: 0.82%
AST Marsico Capital Growth Portfolio: 0.90%
AST JanCap Growth Portfolio: 0.87%
AST Cohen & Steers Realty Portfolio: 1.00%
AST American Century Income & Growth Portfolio: 0.75%
AST INVESCO Equity Income Portfolio: 0.75%
AST PIMCO Total Return Bond Portfolio: 0.65%
AST PIMCO Limited Maturity Bond Portfolio: 0.65%
The investment management fee rate for the AST Janus Mid-Cap Growth Portfolio, which commenced operations in May 2000, is
an annual rate of 1.00% of the average daily net assets of the Portfolio. The investment management fee rate for the AST MFS
Growth Portfolio, which commenced operations during 1999, is an annual rate of .90% of the average daily net assets of the
Portfolio. The investment management fee rate for the AST Alger Growth Portfolio, which had not commenced operations prior to the
date of this Prospectus, is an annual rate of .75% of the average daily net assets of the Portfolio.
For more information about investment management fees, including voluntary fee waivers and the fee rates applicable at
various asset levels, and the fees payable by ASISI to each of the Sub-advisors, please see the Trust's SAI under "Investment
Advisory and Other Services."
Other Expenses. In addition to Investment Management fees, each Portfolio pays other expenses, including costs incurred
in connection with the maintenance of its securities law registrations, printing and mailing prospectuses and statements of
additional information to shareholders, certain office and financial accounting services, taxes or governmental fees, brokerage
commissions, custodial, transfer and shareholder servicing agent costs, expenses of outside counsel and independent accountants,
preparation of shareholder reports and expenses of trustee and shareholder meetings. The Trust may also pay Participating
Insurance Companies for printing and delivery of certain documents (including prospectuses, semi-annual and annual reports and any
proxy materials) to holders of variable annuity contracts and variable life insurance policies whose assets are invested in the
Trust. Expenses not directly attributable to any specific Portfolio or Portfolios are allocated on the basis of the net assets of
the Portfolios.
Distribution Plan. The Trust has adopted a Distribution Plan (the "Distribution Plan") under Rule 12b-1 under the
Investment Company Act of 1940 to permit American Skandia Marketing, Inc. ("ASM"), an affiliate of ASISI, to receive brokerage
commissions in connection with purchases and sales of securities held by the Portfolios, and to use these commissions to promote
the sale of shares of the Portfolios. Under the Distribution Plan, transactions for the purchase and sale of securities for a
Portfolio may be directed to certain brokers for execution ("clearing brokers") who have agreed to pay part of the brokerage
commissions received on these transactions to ASM for "introducing" transactions to the clearing broker. In turn, ASM will use
the brokerage commissions received as an introducing broker to pay various distribution-related expenses, such as advertising,
printing of sales materials, and payments to dealers. No Portfolio will pay any new fees or charges resulting from the
Distribution Plan, nor is it expected that the brokerage commissions paid by a Portfolio will increase as the result of
implementation of the Distribution Plan.
TAX MATTERS:
Each Portfolio intends to distribute substantially all its net investment income. Dividends from investment income are
expected to be declared and distributed annually, although the Trustees of the Trust may decide to declare dividends at other
intervals. Similarly, any net realized long- and short-term capital gains of each Portfolio will be declared and distributed at
least annually either during or after the close of the Portfolio's fiscal year. Distributions will be made to the various
separate accounts of the Participating Insurance Companies and to qualified plans (not to holders of variable insurance contracts
or to plan participants) in the form of additional shares (not in cash). The result is that the investment performance of the
Portfolios, either in the form of dividends or capital gains, will be reflected in the value of the variable contracts or the
qualified plans.
Holders of variable annuity contracts or variable life insurance policies should consult the prospectuses of their
respective contracts or policies for information on the federal income tax consequences to such holders, and plan participants
should consult any applicable plan documents for information on the federal income tax consequences to such participants. In
addition, variable contract owners and qualified plan participants may wish to consult with their own tax advisors as to the tax
consequences of investments in the Trust, including the application of state and local taxes.
This page has been intentionally left blank.
FINANCIAL HIGHLIGHTS: The financial highlights table is intended to help you understand the Portfolios' financial
performance for the past five years (or, for Portfolios that have not been in operation for five years, since their
inceptions). Certain information reflects financial results for a single Portfolio share. The total returns in the
table represent the rate that an investor would have earned or lost in a Portfolio. Except for the financial information
for the period ended June 30, 2000, which is unaudited, the information has been audited by Deloitte & Touche LLP, the
Trust's independent auditors. The report of the independent auditors, along with the Portfolios' financial statements,
are included in the annual reports of the separate accounts funding the variable annuity contracts and variable life
insurance policies, which are available without charge upon request to the Trust at One Corporate Drive, Shelton,
Connecticut or by calling (800) 752-6342. No financial information is included for the AST Alger Growth Portfolio, which
had not commenced operations prior to October 23, 2000.
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
NET ASSET NET NET ASSET
VALUE INVESTMENT NET REALIZED TOTAL FROM FROM NET FROM NET VALUE
PERIOD BEGINNING INCOME & UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL END
PORTFOLIO ENDED OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD
AST JanCap Growth 06/30/00** $55.21 $(0.10) $(3.45) $(3.55) $(0.07) $(4.45) $(4.52) $47.14
12/31/99 37.00 0.05 19.65 19.70 -- (1.49) (1.49) 55.21
12/31/98 23.15 0.04 15.10 15.14 (0.08) (1.21) (1.29) 37.00
12/31/97 18.79 0.06 5.16 5.22 (0.05) (0.81) (0.86) 23.15
12/31/96 15.40 0.02 4.19 4.21 (0.02) (0.80) (0.82) 18.79
12/31/95 11.22 0.06 4.18 4.24 (0.06) -- (0.06) 15.40
AST Neuberger Berman 06/30/00** $13.32 $0.02 $0.62 $0.64 $(0.04) $(0.05) $(0.09) $13.87
Mid-Cap Value*** 12/31/99 13.16 0.10 0.60 0.70 (0.24) (0.30) (0.54) 13.32
12/31/98 15.15 0.21 (0.52) (0.31) (0.36) (1.32) (1.68) 13.16
12/31/97 12.83 0.32 2.87 3.19 (0.36) (0.51) (0.87) 15.15
12/31/96 11.94 0.36 0.97 1.33 (0.44) -- (0.44) 12.83
12/31/95 9.87 0.40 2.09 2.49 (0.42) -- (0.42) 11.94
AST PIMCO Total 06/30/00** $10.99 $0.32 $0.10 $0.42 $(0.60) $ -- $(0.60) $10.81
Return Bond 12/31/99 12.02 0.58 (0.71) (0.13) (0.52) (0.38) (0.90) 10.99
12/31/98 11.72 0.49 0.56 1.05 (0.51) (0.24) (0.75) 12.02
12/31/97 11.11 0.48 0.58 1.06 (0.45) -- (0.45) 11.72
12/31/96 11.34 0.46 (0.10) 0.36 (0.28) (0.31) (0.59) 11.11
12/31/95 9.75 0.25 1.55 1.80 (0.21) -- (0.21) 11.34
AST INVESCO Equity 06/30/00** $18.65 $0.18 $0.04 $0.22 $(0.36) $(1.40) $(1.76) $17.11
Income 12/31/99 17.50 0.36 1.61 1.97 (0.32) (0.50) (0.82) 18.65
12/31/98 16.51 0.31 1.81 2.12 (0.32) (0.81) (1.13) 17.50
12/31/97 13.99 0.31 2.84 3.15 (0.26) (0.37) (0.63) 16.51
12/31/96 12.50 0.27 1.79 2.06 (0.24) (0.33) (0.57) 13.99
12/31/95 9.75 0.25 2.65 2.90 (0.15) -- (0.15) 12.50
AST Janus Small-Cap 06/30/00** $42.61 $(0.10) $(6.41) $(6.51) $ -- $(4.01) $(4.01) $32.09
Growth+ 12/31/99 17.61 (0.03) 25.03 25.00 -- -- -- 42.61
12/31/98 17.81 (0.08) 0.73 0.65 -- (0.85) (0.85) 17.61
12/31/97 16.80 (0.05) 1.06 1.01 -- -- -- 17.81
12/31/96 14.25 (0.03) 2.85 2.82 -- (0.27) (0.27) 16.80
12/31/95 10.84 (0.04) 3.54 3.50 (0.09) -- (0.09) 14.25
AST American Century 06/30/00** $16.67 $(0.01) $(1.17) $(1.18) $(0.03) $(1.64) $(1.67) $13.82
International Growth II++12/31/9913.39 0.06 3.95 4.01 (0.09) (0.64) (0.73) 16.67
12/31/98 12.09 0.08 1.59 1.67 (0.14) (0.23) (0.37) 13.39
12/31/97 12.07 0.09 0.08 0.17 (0.07) (0.08) (0.15) 12.09
12/31/96 10.65 0.06 1.44 1.50 (0.08) -- (0.08) 12.07
12/31/95 9.62 0.07 0.99 1.06 (0.01) (0.02) (0.03) 10.65
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(1) Annualized.
* For 1999 and 2000, includes commissions received by American Skandia Marketing, Inc. under the Trust's Distribution
Plan, as described in this Prospectus under "Management of the Trust - Distribution Plan".
** Unaudited.
*** Prior to May 1, 1998, Federated Investment Counseling served as Sub-advisor to the AST Neuberger Berman Mid-Cap
Value Portfolio (formerly, the Federated Utility Income Portfolio). Neuberger Berman Management, Inc. has served as
Sub-advisor to the Portfolio since May 1, 1998.
+ Prior to January 1, 1999, Founders Asset Management LLC served as Sub-advisor to the AST Janus Small-Cap Growth Fund
(formerly, the Founders Capital Appreciation Portfolio). Janus Capital Corporation has served as Sub-advisor to the
Portfolio since January 1, 1999.
++ Prior to May 1, 2000, Rowe Price-Fleming International, Inc. served as Sub-advisor to the AST American Century
International Growth Portfolio II (formerly, the AST T. Rowe Price International Equity Portfolio). American Century
Investment Management, Inc. has served as Sub-advisor to the Portfolio since May 1, 2000.
RATIOS OF EXPENSES
SUPPLEMENTAL DATA TO AVERAGE NET ASSETS*
AFTER ADVISORY BEFORE ADVISORY RATIO OF NET
NET ASSETS AT PORTFOLIO FEE WAIVER FEE WAIVER INVESTMENT INCOME
TOTAL END OF PERIOD TURNOVER AND EXPENSE AND EXPENSE (LOSS) TO AVERAGE
RETURN (IN 000'S) RATE REIMBURSEMENT REIMBURSEMENT NET ASSETS
(7.24%) $5,905,963 16% 1.01%(1) 1.05%(1) (0.40%)(1)
55.01% 5,923,778 35% 1.00% 1.04% 0.12%
68.26% 3,255,658 42% 1.02% 1.04% 0.16%
28.66% 1,511,602 94% 1.07% 1.08% 0.24%
28.36% 892,324 79% 1.10% 1.10% 0.25%
37.98% 431,321 113% 1.12% 1.12% 0.51%
4.95% $677,747 92% 1.23%(1) 1.23%(1) 0.29%(1)
5.67% 664,383 176% 1.13% 1.13% 0.39%
(2.33%) 271,968 208% 1.05% 1.05% 1.83%
26.42% 201,143 91% 0.90% 0.90% 3.34%
11.53% 123,138 81% 0.93% 0.93% 3.14%
26.13% 107,399 71% 0.93% 0.93% 4.58%
3.97% $1,133,405 155% 0.82%(1) 0.82%(1) 6.17%(1)
(1.09%) 1,005,763 227% 0.82% 0.82% 5.46%
9.46% 896,497 231% 0.83% 0.83% 5.24%
9.87% 572,100 320% 0.86% 0.86% 5.56%
3.42% 360,010 403% 0.89% 0.89% 5.38%
18.78% 225,335 124% 0.89% 0.89% 5.95%
1.88% $1,145,436 33% 0.95%(1) 0.95%(1) 2.21%(1)
11.74% 1,048,064 76% 0.93% 0.93% 2.10%
13.34% 831,482 67% 0.93% 0.93% 2.17%
23.33% 602,105 73% 0.95% 0.95% 2.54%
17.09% 348,680 58% 0.98% 0.98% 2.83%
30.07% 176,716 89% 0.98% 0.98% 3.34%
(18.05%) $1,052,163 53% 1.05%(1) 1.05%(1) (0.50%)(1)
141.96% 1,443,211 116% 1.08% 1.08% (0.46%)
3.49% 285,847 100% 1.12% 1.12% (0.53%)
6.01% 278,258 77% 1.13% 1.13% (0.32%)
20.05% 220,068 69% 1.16% 1.16% (0.38%)
32.56% 90,460 68% 1.22% 1.22% (0.28%)
(7.95%) $453,284 102% 1.26%(1) 1.26%(1) 0.06%(1)
31.95% 516,824 29% 1.26% 1.26% 0.47%
14.03% 472,161 32% 1.25% 1.25% 0.60%
1.36% 464,456 19% 1.26% 1.26% 0.71%
14.17% 402,559 11% 1.30% 1.30% 0.84%
11.09% 195,667 17% 1.33% 1.33% 1.03%
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AMERICAN SKANDIA TRUST
FINANCIAL HIGHLIGHTS
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
NET ASSET NET NET ASSET
VALUE INVESTMENT NET REALIZED TOTAL FROM FROM NET FROM NET VALUE
PERIOD BEGINNING INCOME & UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL END
PORTFOLIO ENDED OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD
AST Neuberger Berman 06/30/00** $24.03 $0.01 $3.11 $3.12 $ -- $(0.62) $(0.62) $26.53
Mid-Cap Growth*** 12/31/99 17.26 (0.11) 8.21 8.10 -- (1.33) (1.33) 24.03
12/31/98 16.61 (0.05) 3.31 3.26 (0.01) (2.60) (2.61) 17.26
12/31/97 14.39 0.01 2.36 2.37 (0.02) (0.13) (0.15) 16.61
12/31/96 12.40 0.01 2.01 2.02 (0.03) -- (0.03) 14.39
12/31/95 9.97 0.04 2.40 2.44 (0.01) -- (0.01) 12.40
AST PIMCO Limited 06/30/00** $10.84 $0.36 $(0.05) $0.31 $(0.62) $ -- $(0.62) $10.53
Maturity Bond 12/31/99 11.08 0.59 (0.22) 0.37 (0.61) -- (0.61) 10.84
12/31/98 11.02 0.56 0.03 0.59 (0.53) -- (0.53) 11.08
12/31/97 10.81 0.55 0.22 0.77 (0.56) -- (0.56) 11.02
12/31/96 10.47 0.56 (0.15) 0.41 (0.05) (0.02) (0.07) 10.81
12/31/95(2) 10.00 0.05 0.42 0.47 -- -- -- 10.47
AST Janus Overseas 06/30/00** $25.10 $0.02 $(0.76) $(0.74) $(0.13) $(0.18) $(0.31) $24.05
Growth 12/31/99 13.74 (0.03) 11.39 11.36 -- -- -- 25.10
12/31/98 11.87 0.04 1.88 1.92 (0.05) -- (0.05) 13.74
12/31/97(3) 10.00 0.02 1.85 1.87 -- -- -- 11.87
AST American Century 06/30/00** $15.65 $0.03 $(0.67) $(0.64) $(0.08) $(0.88) $(0.96) $14.05
Income & Growth++ 12/31/99 13.47 0.09 2.84 2.93 (0.11) (0.64) (0.75) 15.65
12/31/98 12.23 0.11 1.38 1.49 (0.07) (0.18) (0.25) 13.47
12/31/97(3) 10.00 0.07 2.16 2.23 -- -- -- 12.23
AST American Century 06/30/00** $22.40 $0.04 $(1.36) $(1.32) $ -- $(0.82) $(0.82) $20.26
International Growth 12/31/99 13.66 (0.04) 8.88 8.84 -- (0.10) (0.10) 22.40
12/31/98 11.52 0.03 2.12 2.15 (0.01) -- (0.01) 13.66
12/31/97(3) 10.00 (0.03) 1.55 1.52 -- -- -- 11.52
AST Gabelli Small-Cap 06/30/00** $11.39 $0.05 $1.40 $1.45 $(0.07) $(0.63) $(0.70) $12.14
Value+++ 12/31/99 11.44 0.08 (0.03) 0.05 (0.10) -- (0.10) 11.39
12/31/98 12.88 0.09 (1.42) (1.33) (0.05) (0.06) (0.11) 11.44
12/31/97(3) 10.00 0.06 2.82 2.88 -- -- -- 12.88
AST Marsico Capital 06/30/00** $21.63 $(0.01) $(1.40) $(1.41) $ -- $(0.52) $(0.52) $19.70
12/31/99 14.20 (0.03) 7.48 7.45 (0.01) (0.01) (0.02) 21.63
12/31/98 10.03 -- 4.17 4.17 -- -- -- 14.20
12/31/97(4) 10.00 0.01 0.02 0.03 -- -- -- 10.03
---------------------------------------------------------------------------------------------------------------------------
(1) Annualized.
(2) Commenced operations on May 2, 1995.
(3) Commenced operations on January 2, 1997.
(4) Commenced operations on December 22, 1997.
* For 1999 and 2000, includes commissions received by American Skandia Marketing, Inc. under the Trust's Distribution
Plan, as described in this Prospectus under "Management of the Trust - Distribution Plan".
** Unaudited.
*** Prior to May 1, 1998, Berger Associates, Inc. served as Sub-advisor to the AST Neuberger Berman Mid-Cap Growth
Portfolio (formerly, the Berger Capital Growth Portfolio). Neuberger Berman Management Inc. has served as Sub-advisor to
the Portfolio since May 1, 1998.
++ Prior to May 4, 1999, Putnam Investment Management, Inc. served as Sub-advisor to the AST American Century Income &
Growth Portfolio (formerly, the AST Putnam Value Growth and Income Portfolio). American Century Investment Management,
Inc. has served as Sub-advisor to the Portfolio since May 4, 1999.
+++ Prior to October 23, 2000, T. Rowe Price Associates, Inc. served as Sub-advisor to the AST Gabelli Small-Cap Value
Portfolio (formerly, the AST T. Rowe Price Small Company Value Portfolio). GAMCO Investors, Inc. has served as
Sub-advisor to the Portfolio since October 23, 2000.
RATIOS OF EXPENSES
SUPPLEMENTAL DATA_ TO AVERAGE NET ASSETS*
AFTER ADVISORY BEFORE ADVISORY RATIO OF NET
NET ASSETS AT PORTFOLIO FEE WAIVER FEE WAIVER INVESTMENT INCOME
TOTAL END OF PERIOD TURNOVER AND EXPENSE AND EXPENSE (LOSS) TO AVERAGE
RETURN (IN 000'S) RATE REIMBURSEMENT REIMBURSEMENT NET ASSETS
12.75% $765,447 55% 1.08%(1) 1.08%(1) (0.55)%(1)
51.37% 394,325 148% 1.13% 1.13% (0.71%)
20.65% 261,792 228% 1.07% 1.07% (0.34%)
16.68% 185,050 305% 0.99% 0.99% 0.07%
16.34% 136,247 156% 1.01% 1.01% 0.24%
24.42% 45,979 84% 1.17% 1.17% 0.70%
3.04% $389,721 34% 0.86%(1) 0.86%(1) 5.96%(1)
3.37% 406,604 178% 0.86% 0.86% 5.51%
5.72% 349,707 263% 0.86% 0.86% 5.70%
7.46% 288,642 54% 0.88% 0.88% 5.71%
3.90% 209,013 247% 0.89% 0.89% 5.69%
4.70% 161,940 205% 0.89%(1) 0.89%(1) 4.87%(1)
(3.16%) $1,540,152 56% 1.17%(1) 1.18%(1) 0.33%(1)
82.68% 1,551,045 76% 1.23% 1.23% (0.18%)
16.22% 607,206 97% 1.27% 1.27% 0.32%
18.70% 255,705 94% 1.35%(1) 1.35%(1) 0.36%(1)
(3.71%) $478,761 29% 0.94%(1) 0.94%(1) 0.70%(1)
22.98% 360,630 125% 0.98% 0.98% 0.86%
12.27% 189,871 87% 1.00% 1.00% 1.05%
22.30% 117,438 81% 1.23%(1) 1.23%(1) 1.24%(1)
(6.40%) $301,870 54% 1.32%(1) 1.32%(1) 0.11%(1)
65.20% 154,226 112% 1.50% 1.50% (0.32%)
18.68% 77,733 220% 1.65% 1.65% 0.10%
15.10% 33,125 171% 1.75%(1) 1.75%(1) (0.58%)(1)
13.62% $302,755 15% 1.12%(1) 1.12%(1) 0.84%(1)
0.58% 261,493 26% 1.11% 1.11% 0.64%
(10.53%) 304,072 10% 1.11% 1.11% 0.93%
28.80% 199,896 7% 1.16%(1) 1.16%(1) 1.20%(1)
(6.67%) $1,908,574 61% 1.05%(1) 1.06%(1) (0.21)%(1)
52.58% 1,723,736 115% 1.08% 1.08% (0.25%)
41.59% 594,966 213% 1.11% 1.11% 0.16%
0.30% 7,299 -- 1.00%(1) 1.00%(1) 3.62%(1)
AMERICAN SKANDIA TRUST
FINANCIAL HIGHLIGHTS
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
NET ASSET NET NET ASSET
VALUE INVESTMENT NET REALIZED TOTAL FROM FROM NET FROM NET VALUE
PERIOD BEGINNING INCOME & UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL END
PORTFOLIO ENDED OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD
AST Cohen & Steers 06/30/00** $8.36 $0.14 $0.70 $0.84 $(0.28) $ -- $(0.28) $8.92
12/31/99 8.41 0.33 (0.15) 0.18 (0.23) -- (0.23) 8.36
12/31/98(2) 10.00 0.28 (1.87) (1.59) -- -- -- 8.41
AST Lord Abbett 06/30/00** $10.87 $ -- $1.29 $1.29 $1.29 $ -- $ -- $12.16
Small-Cap Value 12/31/99 9.99 (0.03) 0.91 0.88 -- -- -- 10.87
12/31/98(2) 10.00 (0.01) -- (0.01) -- -- -- 9.99
AST Kemper Small-Cap 06/30/00** $15.59 $(0.03) $0.79 $0.76$ -- $(0.89) $(0.89) $15.46
Growth 12/31/99(3) 10.00 (0.05) 5.64 5.59 -- -- -- 15.59
AST MFS Growth 06/30/00** $11.30 $0.01 $0.35 $0.36$ -- $ -- $ -- $11.66
12/31/99(4) 10.00 0.01 1.29 1.30 -- -- -- 11.30
AST Janus Mid-Cap 06/30/00(5) $10.00 $ 0.02 $0.15 $0.17$ -- $ -- $ -- $10.17
Growth
---------------------------------------------------------------------------------------------------------------------------
(1) Annualized.
(2) Commenced operations on January 2, 1998.
(3) Commenced operations on January 4, 1999.
(4) Commenced operations on October 18, 1999.
(5) Commenced operations on May 1, 2000.
* For 1999 and 2000, includes commissions received by American Skandia Marketing, Inc. under the Trust's Distribution
Plan, as described in this Prospectus under "Management of the Trust - Distribution Plan".
** Unaudited.
RATIOS OF EXPENSES
SUPPLEMENTAL DATA TO AVERAGE NET ASSETS*
AFTER ADVISORY BEFORE ADVISORY RATIO OF NET
NET ASSETS AT PORTFOLIO FEE WAIVER FEE WAIVER INVESTMENT INCOME
TOTAL END OF PERIOD TURNOVER AND EXPENSE AND EXPENSE (LOSS) TO AVERAGE
RETURN (IN 000'S) RATE REIMBURSEMENT REIMBURSEMENT NET ASSETS
10.57% $89,986 34% 1.31%(1) 1.31%(1) 4.97%(1)
2.26% 56,697 51% 1.27% 1.27% 4.95%
(16.00%) 33,025 18% 1.30%(1) 1.30%(1) 5.02%(1)
11.87% $123,878 36% 1.17%(1) 1.17%(1) (0.29)%(1)
8.81% 74,192 85% 1.24% 1.24% (0.36%)
(0.10%) 41,788 58% 1.31%(1) 1.31%(1) (0.21%)(1)
4.27% $1,084,319 65% 1.12%(1) 1.12%(1) (0.65%)(1)
55.90% 841,984 133% 1.14%(1) 1.14%(1) (0.67%)(1)
3.21% $38,168 102% 1.02%(1) 1.02%(1) 0.22%(1)
13.00% 4,868 60% 1.35%(1) 1.35%(1) 0.76%(1)
1.70% $33,664 5% 1.26%(1) 1.26%(1) 1.76%(1)
CERTAIN RISK FACTORS AND INVESTMENT METHODS:
The following is a description of certain securities and investment methods that the Portfolios may invest in or use, and
certain of the risks associated with such securities and investment methods. The primary investment focus of each Portfolio is
described above under "Investment Objective and Policies" and an investor should refer to that section to obtain information about
each Portfolio. In general, whether a particular Portfolio may invest in a specific type of security or use an investment method
is described above or in the Company's SAI under "Investment Programs of the Funds." As noted below, however, certain risk
factors and investment methods apply to all or most of the Portfolios.
DERIVATIVE INSTRUMENTS:
To the extent permitted by the investment objectives and policies of a Portfolio, a Portfolio may invest in securities
and other instruments that are commonly referred to as "derivatives." For instance, a Portfolio may purchase and write (sell)
call and put options on securities, securities indices and foreign currencies, enter into futures contracts and use options on
futures contracts, and enter into swap agreements with respect to foreign currencies, interest rates, and securities indices. In
general, derivative instruments are securities or other instruments whose value is derived from or related to the value of some
other instrument or asset.
There are many types of derivatives and many different ways to use them. Some derivatives and derivative strategies
involve very little risk, while others can be extremely risky and can lead to losses in excess of the amount invested in the
derivative. A Portfolio may use derivatives to hedge against changes in interest rates, foreign currency exchange rates or
securities prices, to generate income, as a low cost method of gaining exposure to a particular securities market without
investing directly in those securities, or for other reasons.
The use of these strategies involves certain special risks, including the risk that the price movements of derivative
instruments will not correspond exactly with those of the investments from which they are derived. In addition, strategies
involving derivative instruments that are intended to reduce the risk of loss can also reduce the opportunity for gain.
Furthermore, regulatory requirements for a Portfolio to set aside assets to meet its obligations with respect to derivatives may
result in a Portfolio being unable to purchase or sell securities when it would otherwise be favorable to do so, or in a Portfolio
needing to sell securities at a disadvantageous time. A Portfolio may also be unable to close out its derivatives positions when
desired. There is no assurance that a Portfolio will engage in derivative transactions. Certain derivative instruments and some
of their risks are described in more detail below.
Options. Most of the Portfolios may purchase or write (sell) call or put options on securities, financial indices or
currencies. The purchaser of an option on a security or currency obtains the right to purchase (in the case of a call option) or
sell (in the case of a put option) the security or currency at a specified price within a limited period of time. Upon exercise
by the purchaser, the writer (seller) of the option has the obligation to buy or sell the underlying security at the exercise
price. An option on a securities index is similar to an option on an individual security, except that the value of the option
depends on the value of the securities comprising the index, and all settlements are made in cash.
A Portfolio will pay a premium to the party writing the option when it purchases an option. In order for a call option
purchased by a Portfolio to be profitable, the market price of the underlying security must rise sufficiently above the exercise
price to cover the premium and other transaction costs. Similarly, in order for a put option to be profitable, the market price
of the underlying security must decline sufficiently below the exercise price to cover the premium and other transaction costs.
Generally, the Portfolios will write call options only if they are covered (i.e., the Fund owns the security subject to
the option or has the right to acquire it without additional cost). By writing a call option, a Portfolio assumes the risk that
it may be required to deliver a security for a price lower than its market value at the time the option is exercised.
Effectively, a Portfolio that writes a covered call option gives up the opportunity for gain above the exercise price should the
market price of the underlying security increase, but retains the risk of loss should the price of the underlying security
decline. A Portfolio will write call options in order to obtain a return from the premiums received and will retain the premiums
whether or not the options are exercised, which will help offset a decline in the market value of the underlying securities. A
Portfolio that writes a put option likewise receives a premium, but assumes the risk that it may be required to purchase the
underlying security at a price in excess of its current market value.
A Portfolio may sell an option that it has previously purchased prior to the purchase or sale of the underlying
security. Any such sale would result in a gain or loss depending on whether the amount received on the sale is more or less than
the premium and other transaction costs paid on the option. A Portfolio may terminate an option it has written by entering into a
closing purchase transaction in which it purchases an option of the same series as the option written.
Futures Contracts and Related Options. Each Portfolio (except the AST Neuberger Berman Mid-Cap Growth Portfolio, the AST
Neuberger Berman Mid-Cap Value Portfolio, the AST Alger Growth Portfolio and the AST INVESCO Equity Income Portfolio) may enter
into financial futures contracts and related options. The seller of a futures contract agrees to sell the securities or currency
called for in the contract and the buyer agrees to buy the securities or currency at a specified price at a specified future
time. Financial futures contracts may relate to securities indices, interest rates or foreign currencies. Futures contracts are
usually settled through net cash payments rather than through actual delivery of the securities underlying the contract. For
instance, in a stock index futures contract, the two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the stock index value when the contract expires and the price specified in
the contract. A Portfolio may use futures contracts to hedge against movements in securities prices, interest rates or currency
exchange rates, or as an efficient way to gain exposure to these markets.
An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in
the contract at the exercise price at any time during the life of the option. The writer of the option is required upon exercise
to assume the opposite position.
Under regulations of the Commodity Futures Trading Commission ("CFTC"), no Portfolio will:
(i) purchase or sell futures or options on futures contracts or stock indices for purposes other than bona fide
hedging transactions (as defined by the CFTC) if as a result the sum of the initial margin deposits and premiums required to
establish positions in futures contracts and related options that do not fall within the definition of bona fide hedging
transactions would exceed 5% of the fair market value of each Portfolio's net assets; and
(ii) enter into any futures contracts if the aggregate amount of that Portfolio's commitments under outstanding
futures contracts positions would exceed the market value of its total assets.
Risks of Options and Futures Contracts. Options and futures contracts can be highly volatile and their use can reduce a
Portfolio's performance. Successful use of these strategies requires the ability to predict future movements in securities
prices, interest rates, currency exchange rates, and other economic factors. If a Sub-advisor seeks to protect a Portfolio
against potential adverse movements in the relevant financial markets using these instruments, and such markets do not move in the
predicted direction, the Portfolio could be left in a less favorable position than if such strategies had not been used. A
Portfolio's potential losses from the use of futures extends beyond its initial investment in such contracts.
Among the other risks inherent in the use of options and futures are (a) the risk of imperfect correlation between the
price of options and futures and the prices of the securities or currencies to which they relate, (b) the fact that skills needed
to use these strategies are different from those needed to select portfolio securities and (c) the possible need to defer closing
out certain positions to avoid adverse tax consequences. With respect to options on stock indices and stock index futures, the
risk of imperfect correlation increases the more the holdings of the Portfolio differ from the composition of the relevant index.
These instruments may not have a liquid secondary market. Option positions established in the over-the-counter market may be
particularly illiquid and may also involve the risk that the other party to the transaction fails to meet its obligations.
FOREIGN SECURITIES:
Investments in securities of foreign issuers may involve risks that are not present with domestic investments. While
investments in foreign securities can reduce risk by providing further diversification, such investments involve "sovereign risks"
in addition to the credit and market risks to which securities generally are subject. Sovereign risks includes local political or
economic developments, potential nationalization, withholding taxes on dividend or interest payments, and currency blockage (which
would prevent cash from being brought back to the United States). Compared to United States issuers, there is generally less
publicly available information about foreign issuers and there may be less governmental regulation and supervision of foreign
stock exchanges, brokers and listed companies. Foreign issuers are not generally subject to uniform accounting and auditing and
financial reporting standards, practices and requirements comparable to those applicable to domestic issuers. In some countries,
there may also be the possibility of expropriation or confiscatory taxation, difficulty in enforcing contractual and other
obligations, political or social instability or revolution, or diplomatic developments that could affect investments in those
countries.
Securities of some foreign issuers are less liquid and their prices are more volatile than securities of comparable
domestic issuers. Further, it may be more difficult for the Trust's agents to keep currently informed about corporate actions and
decisions that may affect the price of portfolio securities. Brokerage commissions on foreign securities exchanges, which may be
fixed, may be higher than in the United States. Settlement of transactions in some foreign markets may be less frequent or less
reliable than in the United States, which could affect the liquidity of investments. For example, securities that are traded in
foreign markets may trade on days (such as Saturday or Holidays) when a Portfolio does not compute its price or accept purchase or
redemption orders. As a result, a shareholder may not be able to act on developments taking place in foreign countries as they
occur.
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs"), and
International Depositary Receipts ("IDRs"). ADRs are U.S. dollar-denominated receipts generally issued by a domestic bank
evidencing its ownership of a security of a foreign issuer. ADRs generally are publicly traded in the United States. ADRs are
subject to many of the same risks as direct investments in foreign securities, although ownership of ADRs may reduce or eliminate
certain risks associated with holding assets in foreign countries, such as the risk of expropriation. EDRs, GDRs and IDRs are
receipts similar to ADRs that typically trade in countries other than the United States.
Depositary receipts may be issued as sponsored or unsponsored programs. In sponsored programs, the issuer makes
arrangements to have its securities traded as depositary receipts. In unsponsored programs, the issuer may not be directly
involved in the program. Although regulatory requirements with respect to sponsored and unsponsored programs are generally
similar, the issuers of unsponsored depositary receipts are not obligated to disclose material information in the United States
and, therefore, the import of such information may not be reflected in the market value of such securities.
Developing Countries. Although none of the Portfolios invest primarily in securities of issuers in developing countries,
many of the Funds may invest in these securities to some degree. Many of the risks described above with respect to investing in
foreign issuers are accentuated when the issuers are located in developing countries. Developing countries may be politically
and/or economically unstable, and the securities markets in those countries may be less liquid or subject to inadequate government
regulation and supervision. Developing countries have often experienced high rates of inflation or sharply devalued their
currencies against the U.S. dollar, causing the value of investments in companies located in these countries to decline.
Securities of issuers in developing countries may be more volatile and, in the case of debt securities, more uncertain as to
payment of interest and principal. Investments in developing countries may include securities created through the Brady Plan,
under which certain heavily-indebted countries have restructured their bank debt into bonds.
Currency Fluctuations. Investments in foreign securities may be denominated in foreign currencies. The value of a
Portfolio's investments denominated in foreign currencies may be affected, favorably or unfavorably, by exchange rates and
exchange control regulations. A Portfolio's share price may, therefore, also be affected by changes in currency exchange rates.
Foreign currency exchange rates generally are determined by the forces of supply and demand in foreign exchange markets, including
perceptions of the relative merits of investment in different countries, actual or perceived changes in interest rates or other
complex factors. Currency exchange rates also can be affected unpredictably by the intervention or the failure to intervene by
U.S. or foreign governments or central banks, or by currency controls or political developments in the U.S. or abroad. In
addition, a Portfolio may incur costs in connection with conversions between various currencies.
Foreign Currency Transactions. A Portfolio that invests in securities denominated in foreign currencies will need to
engage in foreign currency exchange transactions. Such transactions may occur on a "spot" basis at the exchange rate prevailing
at the time of the transaction. Alternatively, a Portfolio may enter into forward foreign currency exchange contracts. A forward
contract involves an obligation to purchase or sell a specified currency at a specified future date at a price set at the time of
the contract. A Portfolio may enter into a forward contract when it wishes to "lock in" the U.S. dollar price of a security it
expects to or is obligated to purchase or sell in the future. This practice may be referred to as "transaction hedging." In
addition, when a Portfolio's Sub-advisor believes that the currency of a particular country may suffer or enjoy a significant
movement compared to another currency, the Portfolio may enter into a forward contract to sell or buy the first foreign currency
(or a currency that acts as a proxy for such currency). This practice may be referred to as "portfolio hedging." In any event,
the precise matching of the forward contract amounts and the value of the securities involved generally will not be possible. No
Portfolio will enter into a forward contract if it would be obligated to sell an amount of foreign currency in excess of the value
of the Fund's securities or other assets denominated in or exposed to that currency, or will sell an amount of proxy currency in
excess of the value of securities denominated in or exposed to the related currency. The effect of entering into a forward
contract on a Portfolio's share price will be similar to selling securities denominated in one currency and purchasing securities
denominated in another. Although a forward contract may reduce a Portfolio's losses on securities denominated in foreign
currency, it may also reduce the potential for gain on the securities if the currency's value moves in a direction not anticipated
by the Sub-advisor. In addition, foreign currency hedging may entail significant transaction costs.
COMMON AND PREFERRED STOCKS:
Stocks represent shares of ownership in a company. Generally, preferred stock has a specified dividend and ranks after
bonds and before common stocks in its claim on the company's income for purposes of receiving dividend payments and on the
company's assets in the event of liquidation. (Some of the Sub-advisors consider preferred stocks to be equity securities for
purposes of the various Portfolios' investment policies and restrictions, while others consider them fixed income securities.)
After other claims are satisfied, common stockholders participate in company profits on a pro rata basis; profits may be paid out
in dividends or reinvested in the company to help it grow. Increases and decreases in earnings are usually reflected in a
company's stock price, so common stocks generally have the greatest appreciation and depreciation potential of all corporate
securities.
FIXED INCOME SECURITIES:
Most of the Portfolios, including the Portfolios that invest primarily in equity securities, may invest to some degree in
bonds, notes, debentures and other obligations of corporations and governments. Fixed-income securities are generally subject to
two kinds of risk: credit risk and market risk. Credit risk relates to the ability of the issuer to meet interest and principal
payments as they come due. The ratings given a security by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Corporation ("S&P"), which are described in detail in the Appendix to the Company's SAI, provide a generally useful guide as to
such credit risk. The lower the rating, the greater the credit risk the rating service perceives to exist with respect to the
security. Increasing the amount of Portfolio assets invested in lower-rated securities generally will increase the Portfolio's
income, but also will increase the credit risk to which the Portfolio is subject. Market risk relates to the fact that the prices
of fixed income securities generally will be affected by changes in the level of interest rates in the markets generally. An
increase in interest rates will tend to reduce the prices of such securities, while a decline in interest rates will tend to
increase their prices. In general, the longer the maturity or duration of a fixed income security, the more its value will
fluctuate with changes in interest rates.
Lower-Rated Fixed Income Securities. Lower-rated high-yield bonds (commonly known as "junk bonds") are those that are
rated lower than the four highest categories by a nationally recognized statistical rating organization (for example, lower than
Baa by Moody's or BBB by S&P), or, if not rated, are of equivalent investment quality as determined by the Sub-advisor.
Lower-rated bonds are generally considered to be high risk investments as they are subject to greater credit risk than
higher-rated bonds. In addition, the market for lower-rated bonds may be thinner and less active than the market for higher-rated
bonds, and the prices of lower-rated high-yield bonds may fluctuate more than the prices of higher-rated bonds, particularly in
times of market stress. Because the risk of default is higher in lower-rated bonds, a Sub-advisor's research and analysis tend to
be very important ingredients in the selection of these bonds. In addition, the exercise by an issuer of redemption or call
provisions that are common in lower-rated bonds may result in their replacement by lower yielding bonds.
Bonds rated in the four highest ratings categories are frequently referred to as "investment grade." However, bonds
rated in the fourth category (Baa or BBB) are considered medium grade and may have speculative characteristics.
MORTGAGE-BACKED SECURITIES:
Mortgage-backed securities are securities representing interests in "pools" of mortgage loans on residential or
commercial real property and that generally provide for monthly payments of both interest and principal, in effect "passing
through" monthly payments made by the individual borrowers on the mortgage loans (net of fees paid to the issuer or guarantor of
the securities). Mortgage-backed securities are frequently issued by U.S. Government agencies or Government-sponsored
enterprises, and payments of interest and principal on these securities (but not their market prices) may be guaranteed by the
full faith and credit of the U.S. Government or by the agency only, or may be supported by the issuer's ability to borrow from the
U.S. Treasury. Mortgage-backed securities created by non-governmental issuers may be supported by various forms of insurance or
guarantees.
Like other fixed-income securities, the value of a mortgage-backed security will generally decline when interest rates
rise. However, when interest rates are declining, their value may not increase as much as other fixed-income securities, because
early repayments of principal on the underlying mortgages (arising, for example, from sale of the underlying property,
refinancing, or foreclosure) may serve to reduce the remaining life of the security. If a security has been purchased at a
premium, the value of the premium would be lost in the event of prepayment. Prepayments on some mortgage-backed securities may
necessitate that a Portfolio find other investments, which, because of intervening market changes, will often offer a lower rate
of return. In addition, the mortgage securities market may be particularly affected by changes in governmental regulation or tax
policies.
Collateralized Mortgage Obligations (CMOs). CMOs are a type of mortgage pass-through security that are typically issued
in multiple series with each series having a different maturity. Principal and interest payments from the underlying collateral
are first used to pay the principal on the series with the shortest maturity; in turn, the remaining series are paid in order of
their maturities. Therefore, depending on the type of CMOs in which a Portfolio invests, the investment may be subject to greater
or lesser risk than other types of mortgage-backed securities.
Stripped Mortgage-Backed Securities. Stripped mortgage-backed securities are mortgage pass-through securities that have
been divided into interest and principal components. "IOs" (interest only securities) receive the interest payments on the
underlying mortgages while "POs" (principal only securities) receive the principal payments. The cash flows and yields on IO and
PO classes are extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage loans. If
the underlying mortgages experience higher than anticipated prepayments, an investor in an IO class of a stripped mortgage-backed
security may fail to recoup fully its initial investment, even if the IO class is highly rated or is derived from a security
guaranteed by the U.S. Government. Conversely, if the underlying mortgage assets experience slower than anticipated prepayments,
the price on a PO class will be affected more severely than would be the case with a traditional mortgage-backed security. Unlike
other fixed-income and other mortgage-backed securities, the value of IOs tends to move in the same direction as interest rates.
ASSET-BACKED SECURITIES:
Asset-backed securities conceptually are similar to mortgage pass-through securities, but they are secured by and payable
from payments on assets such as credit card, automobile or trade loans, rather than mortgages. The credit quality of these
securities depends primarily upon the quality of the underlying assets and the level of credit support or enhancement provided.
In addition, asset-backed securities involve prepayment risks that are similar in nature to those of mortgage pass-through
securities.
CONVERTIBLE SECURITIES AND WARRANTS:
Certain of the Portfolios may invest in convertible securities. Convertible securities are bonds, notes, debentures and
preferred stocks that may be converted into or exchanged for shares of common stock. Many convertible securities are rated below
investment grade because they fall below ordinary debt securities in order of preference or priority on the issuer's balance
sheet. Convertible securities generally participate in the appreciation or depreciation of the underlying stock into which they
are convertible, but to a lesser degree. Frequently, convertible securities are callable by the issuer, meaning that the issuer
may force conversion before the holder would otherwise choose.
Warrants are options to buy a stated number of shares of common stock at a specified price any time during the life of
the warrants. The value of warrants may fluctuate more than the value of the securities underlying the warrants. A warrant will
expire without value if the rights under such warrant are not exercised prior to its expiration date.
WHEN-ISSUED, DELAYED-DELIVERY AND FORWARD COMMITMENT TRANSACTIONS:
The Portfolios (other than the AST Kemper Small-Cap Growth Portfolio and the AST Cohen & Steers Realty Portfolio) may
purchase securities on a when-issued, delayed-delivery or forward commitment basis. These transactions generally involve the
purchase of a security with payment and delivery due at some time in the future. A Portfolio does not earn interest on such
securities until settlement and bears the risk of market value fluctuations in between the purchase and settlement dates. If the
seller fails to complete the sale, the Fund may lose the opportunity to obtain a favorable price and yield. While the Portfolios
will generally engage in such when-issued, delayed-delivery and forward commitment transactions with the intent of actually
acquiring the securities, a Portfolio may sometimes sell such a security prior to the settlement date.
Certain Portfolios may also sell securities on a delayed-delivery or forward commitment basis. If the Portfolio
does so, it will not participate in future gains or losses on the security. If the other party to such a transaction fails to pay
for the securities, the Portfolio could suffer a loss.
ILLIQUID AND RESTRICTED SECURITIES:
Subject to guidelines adopted by the Trustees of the Trust, each Portfolio may invest up to 15% of its net assets in
illiquid securities (except for the AST Alger Growth Portfolio, which is limited to 10% of net assets). Illiquid securities are
those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, cannot be
sold within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the
investment. Therefore, a Portfolio may find it difficult to sell illiquid securities at the time considered most advantageous by
its Sub-advisor and may incur expenses that would not be incurred in the sale of securities that were freely marketable.
Certain securities that would otherwise be considered illiquid because of legal restrictions on resale to the general
public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. These Rule 144A
securities, and well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act, may be
deemed liquid by the Portfolio's Sub-advisor under the guidelines adopted by the Trustees of the Trust. However, the liquidity of
a Portfolio's investments in Rule 144A securities could be impaired if trading does not develop or declines.
REPURCHASE AGREEMENTS:
Each Portfolio may enter into repurchase agreements. Repurchase agreements are agreements by which a Portfolio purchases
a security and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The
resale price is in excess of the purchase price and reflects an agreed upon market rate unrelated to the coupon rate on the
purchased security. Repurchase agreements must be fully collateralized and can be entered into only with well-established banks
and broker-dealers that have been deemed creditworthy by the Sub-advisor. Repurchase transactions are intended to be short-term
transactions, usually with the seller repurchasing the securities within seven days. Repurchase agreements that mature in more
than seven days are subject to a Portfolio's limit on illiquid securities.
A Portfolio that enters into a repurchase agreement may lose money in the event that the other party defaults on its
obligation and the Portfolio is delayed or prevented from disposing of the collateral. A Portfolio also might incur a loss if the
value of the collateral declines, and it might incur costs in selling the collateral or asserting its legal rights under the
agreement. If a defaulting seller filed for bankruptcy or became insolvent, disposition of collateral might be delayed pending
court action.
The AST Neuberger Berman Mid-Cap Growth Portfolio will not invest more than 25% of its net assets in repurchase
agreements.
REVERSE REPURCHASE AGREEMENTS:
Certain Portfolios (specifically, the AST Janus Overseas Growth Portfolio, the AST Janus Small-Cap Growth Portfolio, the
AST Janus Mid-Cap Growth Portfolio, the AST Neuberger Berman Mid-Cap Growth Portfolio, the AST Neuberger Berman Mid-Cap Value
Portfolio, the AST Marsico Capital Growth Portfolio, the AST JanCap Growth Portfolio, the AST PIMCO Total Return Bond Portfolio
and the AST PIMCO Limited Maturity Bond Portfolio) may enter into reverse repurchase agreements. In a reverse repurchase
agreement, a Portfolio sells a portfolio instrument and agrees to repurchase it at an agreed upon date and price, which reflects
an effective interest rate. It may also be viewed as a borrowing of money by the Portfolio and, like borrowing money, may
increase fluctuations in a Portfolio's share price. When entering into a reverse repurchase agreement, a Portfolio must set aside
on its books cash or other liquid assets in an amount sufficient to meet its repurchase obligation.
BORROWING:
Each Portfolio may borrow money from banks. Each Portfolio's borrowings are limited so that immediately after such
borrowing the value of the Portfolio's assets (including borrowings) less its liabilities (not including borrowings) is at least
three times the amount of the borrowings. Should a Portfolio, for any reason, have borrowings that do not meet the above test,
such Portfolio must reduce such borrowings so as to meet the necessary test within three business days. Certain Portfolios (the
AST Gabelli Small-Cap Value Portfolio, the AST Neuberger Berman Mid-Cap Growth Portfolio, and the AST Neuberger Berman Mid-Cap
Value Portfolio) will not purchase securities when outstanding borrowings are greater than 5% of the Portfolio's total assets. If
a Portfolio borrows money, its share price may fluctuate more widely until the borrowing is repaid.
LENDING PORTFOLIO SECURITIES:
Each Portfolio may lend securities with a value of up to 33 1/3% of its total assets to broker-dealers, institutional
investors, or others for the purpose of realizing additional income. Voting rights on loaned securities typically pass to the
borrower, although a Portfolio has the right to terminate a securities loan, usually within three business days, in order to vote
on significant matters or for other reasons. All securities loans will be collateralized by cash or securities issued or
guaranteed by the U.S. Government or its agencies at least equal in value to the market value of the loaned securities.
Nonetheless, lending securities involves certain risks, including the risk that the Portfolio will be delayed or prevented from
recovering the collateral if the borrower fails to return a loaned security.
OTHER INVESTMENT COMPANIES:
The Company has made arrangements with certain money market mutual funds so that the Sub-advisors for the various
Portfolios can "sweep" excess cash balances of the Portfolios to those funds for temporary investment purposes. In addition,
certain Sub-advisors may invest Portfolio assets in money market funds that they advise or in other investment companies. Mutual
funds pay their own operating expenses, and the Portfolios, as shareholders in the money market funds, will indirectly pay their
proportionate share of such funds' expenses.
SHORT SALES "AGAINST THE BOX":
While none of the Portfolios will make short sales generally, the AST Janus Overseas Growth Portfolio, the AST American
Century International Growth Portfolio, the AST American Century International Growth Portfolio II, the AST Janus Small-Cap Growth
Portfolio, the AST Janus Mid-Cap Growth Portfolio, the AST Alger Growth Portfolio, the AST JanCap Growth Portfolio, the AST
American Century Income & Growth Portfolio, the AST INVESCO Equity Income Portfolio, the AST PIMCO Total Return Bond Portfolio and
the AST PIMCO Limited Maturity Bond Portfolio may make short sales "against the box." A short sale against the box involves
selling a security that the Portfolio owns, or has the right to obtain without additional costs, for delivery at a specified date
in the future. A Portfolio may make a short sale against the box to hedge against anticipated declines in the market price of a
portfolio security. If the value of the security sold short increases instead, the Portfolio loses the opportunity to participate
in the gain.
Mailing Address
American Skandia Trust
One Corporate Drive
Shelton, CT 06484
Investment Manager
American Skandia Investment Services, Incorporated
One Corporate Drive
Shelton, CT 06484
Sub-Advisors
American Century Investment Management, Inc.
Cohen & Steers Capital Management, Inc.
Fred Alger Management, Inc.
GAMCO Investors, Inc.
INVESCO Funds Group, Inc.
Janus Capital Corporation
Lord, Abbett & Co.
Marsico Capital Management, LLC
Massachusetts Financial Services Company
Neuberger Berman Management Inc.
Pacific Investment Management Company LLC
Scudder Kemper Investments, Inc.
Custodians
PFPC Trust Company
Airport Business Center, International Court 2
200 Stevens Drive
Philadelphia, PA 19113
The Chase Manhattan Bank
One Pierrepont Plaza
Brooklyn, NY 11201
Administrator
Transfer and Shareholder Servicing Agent
PFPC Inc.
103 Bellevue Parkway
Wilmington, DE 19809
Independent Accountants
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Stradley Ronon Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103
INVESTOR INFORMATION SERVICES:
Shareholder inquiries should be made by calling (800) 752-6342 or by writing to the American Skandia Trust at One
Corporate Drive, Shelton, Connecticut 06484.
Additional information about the Portfolios is included in a Statement of Additional Information, which is incorporated
by reference into this Prospectus. Additional information about the Portfolios' investments is available in the annual and
semi-annual reports to holders of variable annuity contracts and variable life insurance policies. In the annual reports, you
will find a discussion of the market conditions and investment strategies that significantly affected each Portfolio's performance
during its last fiscal year. The Statement of Additional Information and additional copies of annual and semi-annual reports are
available without charge by calling the above number.
The information in the Trust's filings with the Securities and Exchange Commission (including the Statement of Additional
Information) is available from the Commission. Copies of this information may be obtained, upon payment of duplicating fees, by
electronic request to [email protected] or by writing the Public Reference Section of the Commission, Washington, D.C.
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20549-0102. The information can also be reviewed and copied at the Commission's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-942-8090. Finally,
information about the Trust is available on the EDGAR database on the Commission's Internet site at HTTP://WWW.SEC.GOV.
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Investment Company Act File No. 811-5186
