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, 9 of which are
offered through this Prospectus ("Portfolios"):
AST American Century International Growth Portfolio II
AST Janus Small-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Growth Portfolio
AST JanCap Growth Portfolio
AST Alliance Growth and Income Portfolio
AST INVESCO Equity Income Portfolio
AST T. Rowe Price Asset Allocation 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
-----------------
Caption Page
------- ----
Risk/Return Summary...............................................................................................3
Past Performance..................................................................................................8
Fees and Expenses of the Portfolios..............................................................................14
Investment Objectives and Policies...............................................................................16
AST American Century International Growth Portfolio II......................................................17
AST Janus Small-Cap Growth Portfolio........................................................................19
AST Neuberger Berman Mid-Cap Growth Portfolio...............................................................21
AST JanCap Growth Portfolio.................................................................................22
AST Alliance Growth and Income Portfolio....................................................................24
AST INVESCO Equity Income Portfolio.........................................................................25
AST T. Rowe Price Asset Allocation Portfolio................................................................26
AST PIMCO Total Return Bond Portfolio.......................................................................28
AST PIMCO Limited Maturity Bond Portfolio...................................................................31
Portfolio Turnover...............................................................................................34
Net Asset Value..................................................................................................34
Purchase and Redemption of Shares................................................................................34
Management of the Trust..........................................................................................35
Tax Matters......................................................................................................38
Financial Highlights.............................................................................................40
Certain Risk Factors and Investment Methods......................................................................44
RISK/RETURN SUMMARY
American Skandia Trust (the "Trust") is comprised of forty-one investment portfolios (the "Portfolios"), nine of which
are offered through this Prospectus. 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 Portfolio:
Portfolio: Investment Goal: Primary Investments:
--------- --------------- -------------------
American Century Int'l Capital growth The Portfolio invests primarily in equity securities of
Growth II foreign companies.
Principal Investment Strategies:
-------------------------------
The AST American Century International Growth Portfolio II (formerly, the AST T. Rowe Price International Equity 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.
Principal Risks:
---------------
o The Portfolio is an equity fund, and its primary risk 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 Portfolio 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 the Portfolio will not invest
primarily in companies located in developing countries, it 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.
Neuberger Berman Mid-Cap Capital growth The Portfolio invests primarily in common stocks of medium
Growth capitalization companies.
JanCap Growth Capital growth The Portfolio invests primarily in common stocks.
Principal Investment Strategies:
-------------------------------
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.
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.
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 can be expected to be subject to the highest degree of
risk relative to the other capital growth funds. The AST Neuberger Berman Mid-Cap Growth Portfolio can be expected to be
subject to somewhat less risk, and the AST JanCap Growth Portfolio to somewhat less risk than a mid-cap fund.
o The Portfolios generally take a growth approach to investing, as opposed to 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.
Growth and Income Portfolios:
Portfolio: Investment Goal: Primary Investments:
--------- --------------- -------------------
Alliance Growth and Income Long term capital growth The Portfolio invests primarily in common stocks that are
and income believed to be selling at reasonable prices in relation to
value.
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.
T. Rowe Price Asset A high level of total The Portfolio normally invests 50-70% of its total assets in
Allocation return equity securities and 30-50% in fixed income securities.
Principal Investment Strategies:
-------------------------------
The AST Alliance Growth and Income Portfolio (formerly, the AST Lord Abbett Growth and Income Portfolio) normally will invest in
common stocks (and securities convertible into common stocks). Typically, in choosing stocks, the Sub-advisor looks for companies
using the following process:
o Quantitative research is performed on a universe of large, seasoned, U.S. and multinational companies to identify which
stocks the Sub-advisor believes represent the best bargains; and
o Fundamental research is conducted to assess a company's operating environment, resources and strategic plans and to
determine its prospects for exceeding the earnings expectations reflected in its stock price.
The Sub-advisor will take a value-oriented approach, in that it will try to keep the Portfolio's assets invested in securities
that are selling at reasonable prices in relation to their value. In doing so, the Portfolio may forgo some opportunities for
gains when, in the judgment of the Sub-advisor, they are too risky.
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.
The AST T. Rowe Price Asset Allocation Portfolio normally invests approximately 60% of its total assets in equity securities and
40% in fixed income securities. This mix may vary over shorter time periods; the equity portion may range between 50-70% and the
fixed income portion between 30-50%.
The Sub-advisor concentrates common stock investments in larger, more established companies, but the Portfolio may include small
and medium-sized companies with good growth prospects. The Portfolio's exposure to smaller companies is not expected to be
substantial, and will not constitute more than 30% of the equity portion of the Portfolio. Up to 35% of the equity portion may be
invested in foreign (non-U.S. dollar denominated) equity securities. The fixed income portion of the Portfolio will be allocated
among investment grade securities (50-100% of the fixed income portion); high yield or "junk" bonds (up to 30%); foreign (non-U.S.
dollar denominated) high quality debt securities (up to 30%); and cash reserves (up to 20%).
Bond investments may include U.S. Treasury and agency issues, corporate debt securities, mortgage-backed securities (including
derivatives such as collateralized mortgage obligations and stripped mortgage-backed securities) and asset-backed securities.
While the weighted average maturities of each component of the fixed income portion (i.e., investment grade, high yield, etc.) of
the Portfolio will differ, the weighted average maturity of the fixed income portion as a whole (except for the cash reserves
component) is expected to be in the range of 7 to 12 years.
The precise mix of equity and fixed income investments will depend on the Sub-advisor's outlook for the markets. The Portfolio's
investments in foreign equity and debt securities are intended to provide additional diversification, and the Sub-advisor will
normally have at least three different countries represented in both the foreign equity and foreign debt portions of the
Portfolio.
Securities may be sold for a variety of reasons, such as to effect a change in asset allocation, to secure gains or limit losses,
or to re-deploy assets to more promising opportunities.
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 Alliance Growth and Income 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
AST T. Rowe Price Asset Allocation Portfolio generally invest in both equity and 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 Each of the Portfolios that makes significant investments in fixed income securities 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. Each of these Portfolios 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.
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 As portfolios 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. Because the average duration of the AST PIMCO Total Return
Bond Portfolio generally will be longer than that of the AST PIMCO Limited Maturity Bond Portfolio, it is expected that the
former portfolio will be subject to a greater level of risk. While the complex fixed income securities invested in and
investment practices engaged in by both portfolios are designed to increase their return or hedge their investments, these
securities and practices may increase the risk to which the Portfolios are subject to.
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.
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 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 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 Alliance Growth and Income Portfolio*
_______________________________________________________
60.00%
40.00%
13.69% 28.91% 23.92% 20.00%
18.56% 12.48% 16.09%
2.22% 0.00%
_______________________________________________________-20.00%
1993 1994 1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 16.94%, 4th quarter 1998 Down 12.26%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 16.09% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
5 year 19.85% 28.52%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 15.76% 20.56%
(4/30/92)
---------------------- --------------------- ----------------------------
*Prior to May 1, 2000, the AST Alliance Growth and Income
Portfolio was known as the AST Lord Abbett Growth and Income
Portfolio, and Lord, Abbett & Co. 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 T. Rowe Price Asset Allocation Portfolio
______________________________________________________________
60.00%
40.00%
23.36% 18.40% 18.36% 20.00%
12.14% 10.28%
-0.60% 0.00%
______________________________________________________________-20.00%
1994 1995 1996 1997 1998 1999
----------------------------------- -----------------------------
Best Quarter Worst Quarter
----------------------------------- -----------------------------
----------------------------------- -----------------------------
Up 11.92%, 4th quarter 1998 Down 4.58%, 3rd quarter 1998
----------------------------------- -----------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Blended Index (60%
For periods ending Standard & Poors 500, 40%
12/31/99 Lehman Brothers Government/
Corporate Index)
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 10.28% 11.40%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
5 year 16.62% 20.01%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 13.57% 16.34%
(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)
---------------------- --------------------- ----------------------------
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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(2)Operating
Portfolio: Service Expenses Expenses
(12b-1)
Fees(1)
------------------------------------ ------------ ------------- ------------- --------------- --------------- ---------------
AST American Century International
Growth II 1.00 0.02 0.26 1.28 N/A 1.28
AST Janus Small-Cap Growth 0.90 0.01 0.18 1.09 N/A 1.09
AST Neuberger Berman Mid-Cap Growth
0.90 0.04 0.23 1.17 N/A 1.17
AST JanCap Growth 0.90 0.01 0.14 1.05 0.04 1.01
AST Alliance Growth and Income 0.75 0.08 0.18 1.01 0.01 1.00
AST INVESCO Equity Income 0.75 0.04 0.18 0.97 N/A 0.97
AST T. Rowe Price Asset Allocation 0.85 0.00 0.22 1.07 N/A 1.07
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) 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.
(2) 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 American Century International Growth II 130 406 702 1,545
AST Janus Small-Cap Growth 111 347 601 1,329
AST Neuberger Berman Mid-Cap Growth 119 372 644 1,420
AST JanCap Growth 103 330 575 1,279
AST Alliance Growth and Income 102 321 557 1,235
AST INVESCO Equity Income 99 309 536 1,190
AST T. Rowe Price Asset Allocation 109 340 590 1,306
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 AMERICAN CENTURY INTERNATIONAL GROWTH PORTFOLIO II:
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 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 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 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 alliance GROWTH AND INCOME portfolio:
Investment Objective: The investment objective of the Portfolio (formerly, the AST Lord Abbett Growth and Income Portfolio) is
long-term growth of capital and income while attempting to avoid excessive fluctuations in market value.
Principal Investment Policies and Risks:
The Portfolio normally will invest in common stocks (and securities convertible into common stocks). Typically, in
choosing stocks, the Sub-advisor looks for companies using the following process:
o Quantitative research is performed on a universe of large, seasoned, U.S. and multinational companies to identify which
stocks the Sub-advisor believes represent the best bargains; and
o Fundamental research is conducted to assess a company's operating environment, resources and strategic plans and to
determine its prospects for exceeding the earnings expectations reflected in its stock price.
The Sub-advisor will take a value-oriented approach, in that it will try to keep the Portfolio's assets invested in
securities that are selling at reasonable prices in relation to their value. In doing so, the Portfolio may forgo some
opportunities for gains when, in the judgment of the Sub-advisor, they are too risky.
The prices of the common stocks that the Portfolio invests in will fluctuate. Therefore, the Portfolio's share price
will also fluctuate, and may decline substantially. While there is the risk that an investment will never reach what the
Sub-advisor believes is its full value, or may go down in value, the Portfolio's risk and share price fluctuation (and potential
for gain) may be less than many other stock funds because of the Portfolio's emphasis on large, seasoned company value stocks.
Other Investments:
The Portfolio, in addition to investing in common stocks and convertible securities, may write covered call options
listed on domestic securities exchanges with respect to securities in the Portfolio. It is not intended for the Portfolio to
write covered call options with respect to securities with an aggregate market value of more than 10% of the Portfolio's net
assets at the time an option is written. The Portfolio also may purchase and sell forward and futures contracts and related
options for hedging purposes. The Portfolio may also invest up to 10% of its net assets (at the time of investment) in foreign
securities, and invest in straight bonds and other debt securities.
Temporary Investments. The Portfolio may invest in short-term debt and other high quality fixed-income securities to
create reserve purchasing power and also for temporary defensive purposes. While the Portfolio is in a defensive position, the
opportunity to achieve its investment objective may be limited.
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 T. ROWE PRICE ASSET ALLOCATION PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek a high level of total return by investing primarily in
a diversified portfolio of fixed income and equity securities.
Principal Investment Policies and Risks:
The Portfolio normally invests approximately 60% of its total assets in equity securities and 40% in fixed income
securities. This mix may vary over shorter time periods; the equity portion may range between 50-70% and the fixed income portion
between 30-50%.
The Sub-advisor concentrates common stock investments in larger, more established companies, but the Portfolio may
include small and medium-sized companies with good growth prospects. The Portfolio's exposure to smaller companies is not
expected to be substantial, and will not constitute more than 30% of the equity portion of the Portfolio. Up to 35% of the equity
portion may be invested in foreign (non-U.S. dollar denominated) equity securities. The fixed income portion of the Portfolio
will be allocated among investment grade securities (50-100% of the fixed income portion); high yield or "junk" bonds (up to 30%);
foreign (non-U.S. dollar denominated) high quality debt securities (up to 30%); and cash reserves (up to 20%).
The precise mix of equity and fixed income investments will depend on the Sub-advisor's outlook for the markets. Shifts
between stocks and bonds will normally be done gradually and the Sub-advisor will not attempt to precisely "time" the market. The
Portfolio's investments in foreign equity and debt securities are intended to provide additional diversification, and the
Sub-advisor will normally have at least three different countries represented in both the foreign equity and foreign debt portions
of the Portfolio.
Securities may be sold for a variety of reasons, such as to effect a change in asset allocation, to secure gains or limit
losses, or to re-deploy assets to more promising opportunities.
As a fund that invests both in equity and fixed income securities, the Portfolio risk of loss and share price fluctuation
(and potential for gain) will tend to be less than funds investing primarily in equity securities and more than funds investing
primarily in fixed income securities. Of course, both equity and fixed income securities may decline in value.
Equity securities may decline because the stock market as a whole declines, or because of reasons specific to the
company, such as disappointing earnings or changes in its competitive environment. The Portfolio's level of risk will increase if
a significant portion of the Portfolio is invested in securities of small-cap companies. Like other fixed income funds, the fixed
income portion of the Portfolio is subject to changes in market interest rates and changes in the credit quality of specific
issuers. Because of the Portfolio's focus on fixed income securities with intermediate to long maturities, changes in market
interest rates may cause substantial declines in the Portfolio's share price. The Portfolio's level of risk will increase if a
significant portion of the Portfolio is invested in lower-rated high yield bonds or in foreign securities.
Equity Securities. Investments in non-U.S. dollar denominated stocks may be made solely for capital appreciation or
solely for income or any combination of both for the purpose of achieving a higher overall return. Stocks of companies in
developing countries may be included. The equity portion of the Portfolio also may include convertible securities, preferred
stocks and warrants.
Investments in small companies involve both higher risk and greater potential for appreciation. These companies may have
limited product lines, markets and financial resources, or they may be dependent on a small or inexperienced management group. In
addition, their securities may trade less frequently and move more abruptly than securities of larger companies.
Fixed Income Securities. Bond investments may include U.S. Treasury and agency issues, corporate debt securities
(including non-investment grade "junk" bonds), mortgage-backed securities (including derivatives such as collateralized mortgage
obligations and stripped mortgage-backed securities) and asset-backed securities. While the weighted average maturities of each
component of the fixed income portion (i.e., investment grade, high yield, etc.) of the Portfolio will differ based on the
Sub-advisor's view of market conditions, the weighted average maturity of the fixed income portion as a whole (except for the cash
reserves component) is expected to be in the range of 7 to 12 years. The cash reserves component will consist of liquid
short-term investments of one year or less rated within the top two credit categories by at least one established rating
organization or, if unrated, of equivalent investment quality as determined by the Sub-advisor. In addition, the Sub-advisor may
invest the Portfolio's cash reserves in money market mutual funds that it manages.
Other Investments:
The Portfolio may enter into stock index, interest rate or currency futures contracts (or options thereon) for hedging
purposes or to provide an efficient means of adjusting the Portfolio's exposure to the equity markets. The Portfolio may write
covered call options and purchase put and call options on foreign currencies, securities, and financial indices. The Portfolio
may invest up to 10% of its total assets in hybrid instruments, which combine the characteristics of futures, options and
securities. To the extent the Portfolio uses these investments, it will be exposed to additional volatility and potential
losses. The Portfolio may enter into forward foreign currency exchange contracts in connection with its foreign investments.
For an additional discussion of these other investments and their risks, see this Prospectus under "Certain Risk Factors
and Investment Methods."
Temporary Investments. As noted above, up to 20% of the fixed income portion of the Portfolio normally may consist of
cash reserves. In addition, the Portfolio may maintain cash reserves without limitation for temporary defensive purposes. While
the Portfolio is in a defensive position, the opportunity to achieve its investment objective of a high level of total return may
be limited. Cash reserves also provide flexibility in meeting redemptions and paying expenses.
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 American Century International Growth Portfolio II
AST Janus Small-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Growth Portfolio
AST JanCap Growth 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. 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:
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 II. 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 Portfolio.
The portfolio manager members of the portfolio team responsible for management of the AST American Century International
Growth Portfolio 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 II 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.
Janus Capital Corporation ("Janus"), 100 Fillmore Street, Denver, Colorado 80206-4923, serves as Sub-advisor for the AST
Janus Small-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 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 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.
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. 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.
T. Rowe Price Associates, Inc. ("T. Rowe Price"), 100 East Pratt Street, Baltimore, Maryland 21202, serves as Sub-advisor
for the AST T. Rowe Price Asset Allocation Portfolio. T. Rowe Price was founded in 1937 by the late Thomas Rowe Price, Jr. As of
June 30, 2000, the firm and its affiliates managed approximately $179 billion for approximately eight million individual and
institutional accounts.
T. Rowe Price manages the Portfolio through an Investment Advisory Committee. The Committee Chairman has day-to-day
responsibility for managing the Portfolio and works with the Committee in developing and executing the Portfolio's investment
program.
The Investment Advisory Committee for the AST T. Rowe Price Asset Allocation Portfolio is composed of the following
members: Edmund M. Notzon, Chairman, James M. McDonald, Jerome Clark, M. David Testa and Richard T. Whitney. Mr. Notzon joined T.
Rowe Price in 1989, has been managing investments since 1991 and has been Chairman of the Portfolio's Investment Advisory
Committee since the Portfolio's inception.
Alliance Capital Management L.P. ("Alliance"), 1345 Avenue of the Americas, New York, NY 10105, serves as Sub-advisor for
the AST Alliance Growth and Income Portfolio. Alliance is a leading international investment adviser supervising client accounts
with assets as of June 30, 2000 totaling more than $387.7 billion (of which more than $185 billion represented assets of
investment companies).
Paul Rissman and Frank Caruso have been primarily responsible for the management of the AST Alliance Growth and Income
Portfolio since Alliance became the Portfolio's Sub-advisor in May 2000. Mr. Rissman has been Senior Vice President of ACMC since
1994 and has been associated with Alliance since 1989. Mr. Caruso is a Senior Vice President of ACMC and has been associated with
Alliance since 1994.
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 American Century International Growth Portfolio II: 1.00%
AST Janus Small-Cap Growth Portfolio: 0.90%
AST Neuberger Berman Mid-Cap Growth Portfolio: 0.85%
AST JanCap Growth Portfolio: 0.87%
AST Alliance Growth and Income Portfolio: 0.75%
AST INVESCO Equity Income Portfolio: 0.75%
AST T. Rowe Price Asset Allocation Portfolio: 0.85%
AST PIMCO Total Return Bond Portfolio: 0.65%
AST PIMCO Limited Maturity Bond Portfolio: 0.65%
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.
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 Alliance 06/30/00** $23.50 $0.12 $(0.93) $(0.81) $(0.23) $(2.65) $(2.88) $19.81
Growth and Income+ 12/31/99 21.68 0.23 3.04 3.27 (0.25) (1.20) (1.45) 23.50
12/31/98 20.53 0.25 2.23 2.48 (0.25) (1.08) (1.33) 21.68
12/31/97 17.17 0.24 3.76 4.00 (0.23) (0.41) (0.64) 20.53
12/31/96 14.98 0.23 2.48 2.71 (0.17) (0.35) (0.52) 17.17
12/31/95 12.00 0.16 3.22 3.38 (0.20) (0.20) (0.40) 14.98
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 T. Rowe Price 06/30/00** $18.86 $0.24 $ -- $(0.45) $(0.18) $(0.63) $(0.63) $18.47
Asset Allocation 12/31/99 17.47 0.44 1.32 1.76 (0.36) (0.01) (0.37) 18.86
12/31/98 15.13 0.35 2.38 2.73 (0.33) (0.06) (0.39) 17.47
12/31/97 13.27 0.33 2.03 2.36 (0.26) (0.24) (0.50) 15.13
12/31/96 12.01 0.27 1.28 1.55 (0.25) (0.04) (0.29) 13.27
12/31/95 9.94 0.26 2.02 2.28 (0.21) -- (0.21) 12.01
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
---------------------------------------------------------------------------------------------------------------------------
(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, 2000, Lord, Abbett & Co. served as Sub-advisor to the AST Alliance Growth and Income Portfolio
(formerly, the AST Lord Abbett Growth and Income Portfolio). Alliance Capital Management L.P. 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
------ ---------- ---- ------------- ------------- ----------
(2.22%) $1,480,249 86% 1.10%(1) 1.12%(1) 1.18%(1)
16.09% 1,498,306 69% 0.92% 0.94% 1.09%
12.48% 1,181,909 78% 0.91% 0.91% 1.32%
23.92% 936,986 41% 0.93% 0.93% 1.60%
18.56% 530,497 43% 0.97% 0.97% 1.92%
28.91% 288,749 50% 0.99% 0.99% 2.50%
(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%
1.44% $438,344 17% 1.07%(1) 1.07%(1) 2.60%(1)
10.28% 447,542 17% 1.07% 1.07% 2.65%
18.36% 344,197 8% 1.09% 1.09% 2.70%
18.40% 213,075 10% 1.13% 1.13% 2.95%
13.14% 120,149 31% 1.20% 1.20% 3.02%
23.36% 59,399 18% 1.25% 1.29% 3.53%
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%
---------------------------------------------------------------------------------------------------------------------------
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 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+ 12/31/99 13.39 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
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
---------------------------------------------------------------------------------------------------------------------------
(1) Annualized.
(2) Commenced operations on May 2, 1995.
* 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 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.
+++ 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.
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
------ ---------- ---- ------------- ------------- ----------
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%)
(7.91%) $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%
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)
---------------------------------------------------------------------------------------------------------------------------
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 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 Alliance Growth and Income 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. 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 Small-Cap Growth Portfolio, the AST Neuberger Berman Mid-Cap 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 Neuberger Berman Mid-Cap Growth Portfolio and the AST T. Rowe Price Asset Allocation 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 American Century International Growth Portfolio II,
the AST Janus Small-Cap Growth Portfolio, the AST JanCap 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
Alliance Capital Management L.P.
American Century Investment Management, Inc.
INVESCO Funds Group, Inc.
Janus Capital Corporation
Neuberger Berman Management Inc.
Pacific Investment Management Company LLC
T. Rowe Price Associates, 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
