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
("Portfolios"):
AST Founders Passport Portfolio
AST Scudder Japan Portfolio
AST AIM International Equity Portfolio
AST Janus Overseas Growth Portfolio
AST American Century International Growth Portfolio
AST American Century International Growth Portfolio II
AST MFS Global Equity Portfolio
AST Janus Small-Cap Growth Portfolio
AST Kemper Small-Cap Growth Portfolio
AST Federated Aggressive Growth Portfolio
AST Lord Abbett Small Cap Value Portfolio
AST Gabelli Small-Cap Value Portfolio
AST Janus Mid-Cap Growth Portfolio
AST Alger Mid-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Value Portfolio
AST Alger All-Cap Growth Portfolio
AST Gabelli All-Cap Value Portfolio
AST Kinetics Internet Portfolio
AST T. Rowe Price Natural Resources Portfolio
AST Alliance Growth Portfolio
AST MFS Growth Portfolio
AST Alger Growth Portfolio
AST Marsico Capital Growth Portfolio
AST JanCap Growth Portfolio
AST Janus Strategic Value Portfolio
AST Cohen & Steers Realty Portfolio
AST Sanford Bernstein Managed Index 500 Portfolio
AST American Century Income & Growth Portfolio
AST Alliance Growth and Income Portfolio
AST MFS Growth with Income Portfolio
AST INVESCO Equity Income Portfolio
AST AIM Balanced Portfolio
AST American Century Strategic Balanced Portfolio
AST T. Rowe Price Asset Allocation Portfolio
AST T. Rowe Price Global Bond Portfolio
AST Federated High Yield Portfolio
AST Lord Abbett Bond-Debenture Portfolio
AST PIMCO Total Return Bond Portfolio
AST PIMCO Limited Maturity Bond Portfolio
AST Money Market Portfolio
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Trust is an investment vehicle for life insurance companies ("Participating Insurance Companies") writing variable
annuity contracts and variable life insurance policies. Shares of the Trust may also be sold directly to certain
tax-deferred retirement plans. Each variable annuity contract and variable life insurance policy involves fees and
expenses not described in this Prospectus. Please read the Prospectus for the variable annuity contract and variable
life insurance policy for information regarding the contract or policy, including its fees and expenses.
TABLE OF CONTENTS
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Caption Page
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Risk/Return Summary...............................................................................................3
Past Performance.................................................................................................20
Fees and Expenses of the Portfolios..............................................................................36
Investment Objectives and Policies...............................................................................39
AST Founders Passport Portfolio.............................................................................40
AST Scudder Japan Portfolio.................................................................................42
AST AIM International Equity Portfolio......................................................................44
AST Janus Overseas Growth Portfolio.........................................................................45
AST American Century International Growth Portfolio.........................................................47
AST American Century International Growth Portfolio II......................................................49
AST MFS Global Equity Portfolio.............................................................................50
AST Janus Small-Cap Growth Portfolio........................................................................51
AST Kemper Small-Cap Growth Portfolio.......................................................................53
AST Federated Aggressive Growth Portfolio...................................................................55
AST Lord Abbett Small Cap Value Portfolio...................................................................56
AST Gabelli Small-Cap Value Portfolio.......................................................................58
AST Janus Mid-Cap Growth Portfolio..........................................................................60
AST Alger Mid-Cap Growth Portfolio..........................................................................62
AST Neuberger Berman Mid-Cap Growth Portfolio...............................................................63
AST Neuberger Berman Mid-Cap Value Portfolio................................................................64
AST Alger All-Cap Growth Portfolio..........................................................................66
AST Gabelli All-Cap Value Portfolio.........................................................................67
AST Kinetics Internet Portfolio.............................................................................68
AST T. Rowe Price Natural Resources Portfolio...............................................................70
AST Alliance Growth Portfolio...............................................................................71
AST MFS Growth Portfolio....................................................................................73
AST Alger Growth Portfolio..................................................................................74
AST Marsico Capital Growth Portfolio........................................................................75
AST JanCap Growth Portfolio.................................................................................77
AST Janus Strategic Value Portfolio.........................................................................79
AST Cohen & Steers Realty Portfolio.........................................................................81
AST Sanford Bernstein Managed Index 500 Portfolio...........................................................83
AST American Century Income & Growth Portfolio..............................................................85
AST Alliance Growth and Income Portfolio....................................................................86
AST MFS Growth with Income Portfolio........................................................................87
AST INVESCO Equity Income Portfolio.........................................................................88
AST AIM Balanced Portfolio..................................................................................89
AST American Century Strategic Balanced Portfolio...........................................................91
AST T. Rowe Price Asset Allocation Portfolio................................................................93
AST T. Rowe Price Global Bond Portfolio.....................................................................95
AST Federated High Yield Portfolio..........................................................................97
AST Lord Abbett Bond-Debenture Portfolio....................................................................99
AST PIMCO Total Return Bond Portfolio......................................................................100
AST PIMCO Limited Maturity Bond Portfolio..................................................................103
AST Money Market Portfolio.................................................................................106
Portfolio Turnover..............................................................................................108
Net Asset Value.................................................................................................108
Purchase and Redemption of Shares...............................................................................108
Management of the Trust.........................................................................................109
Tax Matters.....................................................................................................117
Financial Highlights............................................................................................118
Certain Risk Factors and Investment Methods.....................................................................126
RISK/RETURN SUMMARY
American Skandia Trust (the "Trust") is comprised of forty-one investment portfolios (the "Portfolios"). The
Portfolios are designed to provide a wide range of investment options. Each Portfolio has its own investment goal and
style (and, as a result, its own level of risk). Some of the Portfolios offer potential for high returns with
correspondingly higher risk, while others offer stable returns with relatively less risk. It is possible to lose money
when investing even in the most conservative of the Portfolios. Investments in the Portfolios are not bank deposits and
are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
It is not possible to provide an exact measure of the risk to which a Portfolio is subject, and a Portfolio's
risk will vary based on the securities that it holds at a given time. Nonetheless, based on each Portfolio's investment
style and the risks typically associated with that style, it is possible to assess in a general manner the risks to which
a Portfolio will be subject. The following discussion highlights the investment strategies and risks of each Portfolio.
Additional information about each Portfolio's potential investments and its risks is included in this Prospectus under
"Investment Objectives and Policies."
International and Global Portfolios:
Portfolio: Investment Goal: Primary Investments:
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Founders Passport Capital growth The Portfolio invests primarily in equity securities of small
capitalization foreign companies.
Scudder Japan Long-term capital growth The Portfolio invests primarily in securities issued by
Japan-based companies or their affiliates, or by companies
that derive more than half of their revenues from Japan.
AIM International Capital growth The Portfolio invests primarily in equity securities of
foreign companies.
Janus Overseas Growth Long-term capital growth The Portfolio invests primarily in common stocks of foreign
companies.
American Century Int'l Capital growth The Portfolio invests primarily in equity securities of
Growth foreign companies.
American Century Int'l Capital growth The Portfolio invests primarily in equity securities of
Growth II foreign companies.
MFS Global Equity Capital growth The Portfolio invests primarily in common stocks and related
securities of U.S. and foreign issuers.
Principal Investment Strategies:
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The AST Founders Passport Portfolio normally invests primarily in securities issued by foreign companies that have market
capitalizations of $1.5 billion or less. These securities may represent companies in both established and emerging
economies throughout the world. At least 65% of the Portfolio's total assets normally will be invested in foreign
securities representing a minimum of three countries. The Portfolio may invest in larger foreign companies or in
U.S.-based companies if, in the Sub-advisor's opinion, they represent better prospects for capital growth.
The Sub-advisor to the Portfolio looks for companies whose fundamental strengths indicate potential for growth in
earnings per share. The Sub-advisor generally takes a "bottom up" approach to building the Portfolio, which means that
the Sub-advisor will search for individual companies that demonstrate the best potential for significant earnings growth,
rather than choose investments based on broader economic characteristics of countries or industries.
The AST Scudder Japan Portfolio pursues its investment objective by investing at least 80% of net assets in Japanese
securities (those issued by Japan-based companies or their affiliates, or by any company that derives more than half of
its revenues from Japan). The Portfolio may invest in stocks of any size, including up to 30% of its net assets in
smaller companies that are traded over-the-counter.
In choosing stocks, the Sub-advisor uses a combination of three analytical disciplines:
Bottom-up research. The Sub-advisor looks for individual companies with effective management, strong competitive
positioning, active research and development, and sound balance sheets. The Sub-advisor also evaluates fundamentals such
as price-to-earnings ratios.
Growth orientation. The Sub-advisor prefers companies whose revenue or earnings seem likely to grow faster than
the average for their market and whose stock prices appear reasonable in light of their business prospects.
Top-down analysis. The Sub-advisor considers the economic outlooks for various sectors and industries.
The Sub-advisor may favor securities from different industries and companies at different times while still maintaining
variety in terms of the industries and companies represented.
The Portfolio will normally sell a security when it reaches a target price, its fundamentals have changed, the
Sub-advisor believes other investments offer better opportunities, or when adjusting its emphasis on a given industry.
The AST AIM International Equity Portfolio seeks to meet its investment objective by investing, normally, at least 70% of
its assets in marketable equity securities of foreign companies that are listed on a recognized foreign securities
exchange or traded in a foreign over-the-counter market. The Portfolio will normally invest in a diversified portfolio
that includes companies located in at least four countries outside the United States, emphasizing investment in companies
in the developed countries of Western Europe and the Pacific Basin. The Sub-advisor does not intend to invest more than
20% of the Portfolio's total assets in companies located in developing countries.
The Sub-advisor focuses on companies that have experienced above-average, long-term growth in earnings and have strong
prospects for future growth. In selecting countries in which the Portfolio will invest, the Sub-advisor also considers
such factors as the prospect for relative economic growth among countries or regions, economic or political conditions,
currency exchange fluctuations, tax considerations and the liquidity of a particular security. The Sub-advisor considers
whether to sell a particular security when any of those factors materially changes.
The AST Janus Overseas Growth Portfolio pursues its objective primarily through investments in common stocks of issuers
located outside the United States. The Portfolio has the flexibility to invest on a worldwide basis in companies and
organizations of any size, regardless of country of organization or place of principal business activity. The Portfolio
normally invests at least 65% of its total assets in securities of issuers from at least five different countries,
excluding the United States. Although the Portfolio intends to invest substantially all of its assets in issuers located
outside the United States, it may at times invest in U.S. issuers and it may at times invest all of its assets in fewer
than five countries or even a single country.
The Portfolio invests primarily in stocks selected for their growth potential. The Sub-advisor generally takes a "bottom
up" approach to choosing investments for the Portfolio. In other words, the Sub-advisor seeks to identify individual
companies with earnings growth potential that may not be recognized by the market at large, regardless of where the
companies are organized or where they primarily conduct business. Although themes may emerge in the Portfolio,
securities are generally selected without regard to any defined allocation among countries, geographic regions or
industry sectors, or other similar selection procedure.
The AST American Century International Growth Portfolio will seek to achieve its investment objective by investing
primarily in equity securities of international companies that the Sub-advisor believes will increase in value over
time. The Sub-advisor uses a growth investment strategy it developed that looks for companies with earnings and revenue
growth. Ideally, the Sub-advisor looks for companies whose earnings and revenues are not only growing, but are growing
at an accelerating pace. For purposes of the Portfolio, equity securities include common stocks, preferred stocks and
convertible securities.
The Sub-advisor tracks financial information for thousands of companies to research and select the stocks it believes
will be able to sustain accelerating growth. This strategy is based on the premise that, over the long term, the stocks
of companies with accelerating earnings and revenues have a greater-than-average chance to increase in value.
The Sub-advisor recognizes that, in addition to locating strong companies with accelerating earnings, the allocation of
assets among different countries and regions also is an important factor in managing an international portfolio. For
this reason, the Sub-advisor will consider a number of other factors in making investment selections, including the
prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation
rates, currency exchange fluctuations and tax considerations. Under normal conditions, the Portfolio will invest at
least 65% of its assets in equity securities of issuers from at least three countries outside of the United States.
While the Portfolio's focus will be on issuers in developed markets, the Sub-advisor expects to invest to some degree in
issuers in developing countries.
The AST American Century International Growth Portfolio II (formerly, the AST T. Rowe Price International Equity
Portfolio) will seek to achieve its investment objective in the same manner as the AST American Century International
Growth Portfolio as described above.
The AST MFS Global Equity Portfolio invests, under normal market conditions, at least 65% of its total assets in common
stocks and related securities, such as preferred stock, convertible securities and depositary receipts, of U.S. and
foreign issuers (including issuers in developing countries).
The Portfolio focuses on companies that the Sub-advisor believes have favorable growth prospects and attractive
valuations based on current and expected earnings or cash flow. The Portfolio generally seeks to purchase securities of
companies with relatively large market capitalizations relative to the market in which they are traded. The Portfolio's
investments may include securities traded in the over-the-counter markets, rather than on securities exchanges. The
Sub-advisor uses a "bottom up," as opposed to "top down," investment style in managing the Portfolio. This means that
securities are selected based upon fundamental analysis of individual companies by the Sub-advisor.
Principal Risks:
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o All seven of the international and global portfolios are equity funds, and the primary risk of each is that the
value of the stocks they hold will decline. Stocks can decline for many reasons, including reasons related to the
particular company, the industry of which it is a part, or the securities markets generally.
o The level of risk of the international portfolios will generally be higher than the level of risk associated with
domestic equity funds. Foreign investments involve risks such as fluctuations in currency exchange rates, less
liquid and more volatile securities markets, unstable political and economic structures, reduced availability of
information, and lack of uniform financial reporting and regulatory practices such as those that apply to U.S.
issuers. The level of risk of the AST MFS Global Equity Portfolio, as a global fund that invests in both U.S. and
foreign securities, may be lower than that of many international funds but higher than that of many domestic equity
funds. While none of the international and global portfolios invest primarily in companies located in developing
countries, each may invest in those companies to some degree, and the risks of foreign investment may be accentuated
by investment in developing countries.
o As a fund that invests primarily in the securities of smaller foreign issuers, the AST Founders Passport
Portfolio may be subject to a greater level of risk than the other international funds. 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.
o The AST Scudder Japan Portfolio's focus on a single country could give rise to increased risk, as the Portfolio's
investments will not be diversified among countries having varying characteristics and market performance. Also,
Japanese economic growth has weakened after the sharp collapse of the stock market in the 1990's and the current
economic condition remains uncertain.
Capital Growth Portfolios:
Portfolio: Investment Goal: Primary Investments:
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Janus Small-Cap Growth Capital growth The Portfolio invests primarily in common stocks of small
capitalization companies.
Kemper Small-Cap Growth Maximum capital growth The Portfolio invests primarily in equity securities of small
capitalization companies.
Federated Aggressive Growth Capital growth The Portfolio invests primarily in equity securities of
companies offering superior prospects for earnings growth.
Lord Abbett Small Cap Value Long-term capital growth The Portfolio invests primarily in equity securities of small
capitalization companies that are believed to be undervalued.
Gabelli Small-Cap Value Long-term capital growth The Portfolio invests primarily in stocks and equity-related
securities of small capitalization companies that appear to
be undervalued.
Janus Mid-Cap Growth Long-term capital growth The Portfolio invests primarily in common stocks, with
normally at least 65% of the Portfolio's assets invested in
medium-sized companies.
Alger Mid-Cap Growth Long-term capital growth The Portfolio invests primarily in the equity securities of
medium-sized companies.
Neuberger Berman Mid-Cap Capital growth The Portfolio invests primarily in common stocks of medium
Growth capitalization companies.
Neuberger Berman Mid-Cap Capital growth The Portfolio invests primarily in common stocks of medium
Value capitalization companies, using a value-oriented investment
approach.
Alger All-Cap Growth Long-term capital growth The Portfolio invests primarily in common and preferred
stocks.
Gabelli All-Cap Value Capital Growth The Portfolio invests primarily in readily marketable equity
securities.
Kinetics Internet Long-term capital growth The Portfolio invests primarily in the equity securities of
companies that are engaged in the Internet and
Internet-related activities.
T. Rowe Price Natural Long-term capital growth The Portfolio invests primarily in common stocks of companies
Resources that own or develop natural resources and other basic
commodities.
Alliance Growth Long-term capital growth The Portfolio invests predominantly in the equity securities of
a limited number of large, high-quality U.S. companies
MFS Growth Long-term capital growth The Portfolio invests primarily in common stocks and related
and future income securities.
Alger Growth Long-term capital growth The Portfolio invests primarily in equity securities that are
listed on U.S. exchanges or in the over-the-counter market.
Marsico Capital Growth Capital growth The Portfolio invests primarily in common stocks, with the
majority of the Portfolio's assets in large capitalization
stocks.
JanCap Growth Capital growth The Portfolio invests primarily in common stocks.
Janus Strategic Value Long-term capital growth The Portfolio invests primarily in common stocks using a
"value" approach.
Principal Investment Strategies:
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The AST Janus Small-Cap Growth Portfolio pursues its objective by normally investing at least 65% of its total assets in
the common stocks of small-sized companies. For purposes of the Portfolio, small-sized companies are those that have
market capitalizations of less than $1.5 billion or annual gross revenues of less than $500 million. To a lesser extent,
the Portfolio may also invest in stocks of larger companies with potential for capital appreciation.
The Sub-advisor generally takes a "bottom up" approach to building the Portfolio. In other words, it seeks to identify
individual companies with earnings growth potential that may not be recognized by the market at large. Although themes
may emerge in the Portfolio, securities are generally selected without regard to any defined industry sector or other
similar selection procedure.
At least 65% of the AST Kemper Small-Cap Growth Portfolio's total assets normally will be invested in the equity
securities of smaller companies, i.e., those having a market capitalization of $2 billion or less at the time of
investment, many of which would be in the early stages of their life cycle. Equity securities include common stocks and
securities convertible into or exchangeable for common stocks, including warrants and rights. The Portfolio intends to
invest primarily in stocks of companies whose earnings per share are expected by the Sub-advisor to grow faster than the
market average ("growth stocks").
In managing the Portfolio, the Sub-advisor emphasizes stock selection and fundamental research. The Sub-advisor
considers a number of factors in considering whether to invest in a growth stock, including high return on equity and
earnings growth rate, low level of debt, strong balance sheet, good management and industry leadership. Other factors
are patterns of increasing sales growth, the development of new or improved products or services, favorable outlooks for
growth in the industry, the probability of increased operating efficiencies, emphasis on research and development,
cyclical conditions, or other signs that a company may grow rapidly. The Portfolio seeks attractive areas for investment
that arise from factors such as technological advances, new marketing methods, and changes in the economy and
population.
The AST Federated Aggressive Growth Portfolio pursues its investment objective by investing in equity securities of
companies offering superior prospects for earnings growth. The Portfolio focuses its investments on the equity
securities of smaller companies, but it is not subject to any specific market capitalization requirements. The Portfolio
may invest in foreign issuers through American Depositary Receipts.
Using its own quantitative process, the Sub-advisor rates the future performance potential of companies. The Sub-advisor
evaluates each company's earnings quality in light of its current valuation to narrow the list of attractive companies.
The Sub-advisor then evaluates product positioning, management quality and sustainability of current growth trends of
those companies. Using this type of fundamental analysis, the Sub-advisor selects the most promising companies for the
Portfolio.
In determining the amount to invest in a security, the Sub-advisor limits the Portfolio's exposure to each business
sector that comprises the S& P 500 Index. The Portfolio's allocation to a sector will be no more than 300% of the Index's
allocation to that sector or 30% of the total portfolio, whichever is greater. The Portfolio's strategies with respect
to security analysis, market capitalization, and sector allocation are designed to produce a portfolio of stocks whose
long-term growth prospects are significantly above those of the S&P 500 Index.
The AST Lord Abbett Small Cap Value Portfolio will seek its objective through investments primarily in equity securities
that are believed to be undervalued in the marketplace. Typically, in choosing stocks, the Sub-advisor looks for
companies using the following process:
o Quantitative research is performed to evaluate various criteria, including the price of shares in relation to
book value, sales, asset value, earnings, dividends and cash flow;
o Fundamental research is conducted to assess the dynamics of each company within its industry and within the
company. The Sub-advisor evaluates the company's business strategies by assessing management's ability to execute
the strategies, and evaluating the adequacy of its financial resources.
Usually, at least 65% of the Portfolio's total assets will be invested in common stocks issued by smaller, less
well-known companies (with market capitalizations of less than $1 billion) selected on the basis of fundamental
investment analysis. The Portfolio may invest up to 35% of its assets in foreign securities.
The stocks in which the Portfolio generally invests are those which, in the Sub-advisor's judgment, are selling below
their intrinsic value and at prices that do not adequately reflect their long-term business potential. Selected smaller
stocks may be undervalued because they are often overlooked by many investors, or because the public is overly
pessimistic about a company's prospects. Accordingly, their prices can rise either as a result of improved business
fundamentals, particularly when earnings grow faster than general expectations, or as more investors come to recognize
the company's underlying potential. The price of shares in relation to book value, sales, asset value, earnings,
dividends and cash flow, both historical and prospective, are key determinants in the security selection process. These
criteria are not rigid, and other stocks may be included in the Portfolio if they are expected to help it attain its
objective.
The AST Gabelli Small-Cap Value Portfolio (formerly, the AST T. Rowe Price Small Company Value Portfolio) will invest at
least 65% of its total assets in stocks and equity-related securities of small companies ($1 billion or less in market
capitalization). Reflecting a value approach to investing, the Portfolio will seek the stocks of companies whose current
stock prices do not appear to adequately reflect their underlying value as measured by assets, earnings, cash flow or
business franchises. The Sub-advisor's research team seeks to identify companies that appear to be undervalued by
various measures, and may be temporarily out of favor, but have good prospects for capital appreciation. In selecting
investments, the Sub-advisor generally looks to the following:
(1) Low price/earnings, price/book value or price/cash flow ratios relative to the company's peers.
(2) Low stock price relative to a company's underlying asset values.
(3) A sound balance sheet and other positive financial characteristics.
The Sub-advisor then determines whether there is an emerging catalyst that will focus investor attention on the
underlying assets of the company, such as takeover efforts, a change in management, or a plan to improve the business
through restructuring or other means. The Portfolio may sell securities for a variety of reasons, such as to secure
gains, limit losses or re-deploy assets into more promising opportunities. The Portfolio will not sell a stock just
because the company has grown to a market capitalization of more than $1 billion, and it may on occasion purchase
companies with a market cap of more than $1 billion.
The AST Janus Mid-Cap Growth Portfolio pursues its objective by investing primarily in common stocks selected for their
growth potential, and normally invests at least 65% of its equity assets in medium-sized companies. For purposes of the
Portfolio, medium-sized companies are those whose market capitalizations (measured at the time of investment) fall within
the range of companies in the Standard & Poor's MidCap 400 Index (the "S&P 400"). The Sub-advisor generally takes a
"bottom up" approach to choosing investments for the Portfolio. In other words, the Sub-advisor seeks to identify
individual companies with earnings growth potential that may not be recognized by the market at large. The Sub-advisor
makes this assessment by looking at companies one at a time, regardless of size, country of organization, place of
principal business activity, or other similar selection criteria.
The AST Alger Mid-Cap Growth Portfolio invests primarily in equity securities, such as common or preferred stocks, that
are listed on U.S. exchanges or in the over-the-counter market. The Portfolio invests primarily in growth stocks. The
Sub-advisor believes that these stocks are those of two types of companies:
o High Unit Volume Growth Companies. These are vital creative companies that offer goods or services to a rapidly
expanding marketplace. They include both established and emerging firms, offering new or improved products, or firms
simply fulfilling an increased demand for an existing product line.
o Positive Life Cycle Change Companies. These are companies experiencing a major change that is expected to
produce advantageous results. These changes may be as varied as new management, products or technologies,
restructurings or reorganizations, or mergers and acquisitions.
The Portfolio focuses on midsize companies with promising potential. Under normal circumstances, the Portfolio invests
primarily in the equity securities of companies having a market capitalization within the range of companies in the S&P(R)
MidCap 400 Index.
To pursue its objective, the AST Neuberger Berman Mid-Cap Growth Portfolio primarily invests in the common stocks of
mid-cap companies. Companies with equity market capitalizations from $300 million to $10 billion at the time of
investment are considered mid-cap companies for purposes of the Portfolio. Some of the Portfolio's assets may be
invested in the securities of large-cap companies as well as in small-cap companies. The Portfolio seeks to reduce risk
by diversifying among many companies and industries.
The Portfolio is normally managed using a growth-oriented investment approach. The Sub-advisor looks for fast-growing
companies that are in new or rapidly evolving industries. Factors in identifying these companies may include
above-average growth of earnings or earnings that exceed analysts' expectations. The Sub-advisor may also look for other
characteristics in a company, such as financial strength, a strong position relative to competitors and a stock price
that is reasonable in light of its growth rate.
The Sub-advisor follows a disciplined selling strategy, and may sell a stock when it reaches a target price, fails to
perform as expected, or appears substantially less desirable than another stock.
To pursue its objective, the AST Neuberger Berman Mid-Cap Value Portfolio primarily invests in the common stocks of
mid-cap companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in
small-cap companies. The Portfolio seeks to reduce risk by diversifying among many companies and industries.
Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose stock
prices are undervalued and that may rise in price when other investors realize their worth. Factors that the Sub-advisor
may use to identify these companies include strong fundamentals, such as a low price-to-earnings ratio, consistent cash
flow, and a sound track record through all phases of the market cycle. The Sub-advisor may also look for other
characteristics in a company, such as a strong position relative to competitors, a high level of stock ownership among
management, or a recent sharp decline in stock price that appears to be the result of a short-term market overreaction to
negative news.
The Sub-advisor generally considers selling a stock when it reaches a target price, when it fails to perform as expected,
or when other opportunities appear more attractive.
The AST Alger All-Cap Growth Portfolio invests primarily in equity securities, such as common or preferred stocks, that
are listed on U.S. exchanges or in the over-the-counter market. The Portfolio may invest in the equity securities of
companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's
assessment of particular companies and market conditions.
The Portfolio invests primarily in growth stocks. The Sub-advisor believes that these stocks are those of two types of
companies:
o High Unit Volume Growth Companies. Vital creative companies that offer goods or services to a rapidly expanding
marketplace. They include both established and emerging firms, offering new or improved products, or firms simply
fulfilling an increased demand for an existing product line.
o Positive Life Cycle Change Companies. Companies experiencing a major change that is expected to produce
advantageous results. These changes may be as varied as new management, products or technologies, restructurings or
reorganizations, or mergers and acquisitions.
The AST Gabelli All-Cap Value Portfolio will primarily invest in readily marketable equity securities including common
stocks, preferred stocks and securities that may be converted at a later time into common stock. The Portfolio may
invest in the securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time
based on the Sub-advisor's assessment of particular companies and market conditions.
In making stock selections, the Portfolio strives to earn a 10% real rate of return. The Portfolio focuses on companies
that appear underpriced relative to the value that the Portfolio's Sub-Advisor believes informed investors would be
willing to pay for the company. The Sub-advisor considers factors such as price, earnings expectations, earnings and
price histories, balance sheet characteristics and perceived management skills. The Sub-advisor also considers changes
in economic and political outlooks as well as individual corporate developments. The Sub-Advisor will sell any Portfolio
investments that lose their perceived value relative to other investments.
Under normal circumstances, the AST Kinetics Internet Portfolio invests at least 65% of its total assets in common
stocks, convertible securities, warrants and other equity securities having the characteristics of common stocks, such as
American Depositary Receipts and International Depositary Receipts, of domestic and foreign companies that are engaged in
the Internet and Internet-related activities. The Internet is a collection of connected computers that allows commercial
and professional organizations, educational institutions, government agencies and consumers to communicate
electronically, access and share information and conduct business around the world.
Portfolio securities will be selected by the Sub-advisor from companies that are engaged in the development of hardware,
software and telecommunications solutions that enable the transaction of business on the Internet by individuals and
companies, as well as companies that offer products and services primarily via the Internet. Accordingly, the Portfolio
seeks to invest in the equity securities of companies whose research and development efforts may result in higher stock
values. These companies may be large, medium or small in size if, in the Sub-advisor's opinion, they meet the
Portfolio's investment criteria.
The Sub-advisor selects portfolio securities by evaluating a company's positioning and business model as well as its
ability to grow and expand its activities via the Internet or achieve a competitive advantage in cost/profitability and
brand image leveraging via use of the Internet. The Sub-advisor also considers a company's fundamentals by reviewing its
balance sheets, corporate revenues, earnings and dividends. Furthermore, the Sub-advisor looks at the amount of capital
a company currently expends on research and development.
The AST T. Rowe Price Natural Resources Portfolio normally invests at least 65% of its total assets in the common stocks
of natural resource companies whose earnings and tangible assets could benefit from accelerating inflation. The
Portfolio also may invest in non-resource companies with the potential for growth. When selecting stocks, we look for
companies that have the ability to expand production, to maintain superior exploration programs and production
facilities, and the potential to accumulate new resources. Natural resource companies in which the Portfolio invests
generally own or develop energy sources, precious metals, nonferrous metals, forest products, real estate, diversified
resources and other basic commodities that can be produced and marketed profitably when both labor costs and prices are
rising.
The Portfolio may sell securities for a variety of reasons, such as to secure gains, limit losses or re-deploy assets
into more promising opportunities.
The AST Alliance Growth Portfolio (formerly, the AST Oppenheimer Large-Cap Growth Portfolio) normally invests at least
85% of its total assets in the equity securities of U.S. companies. Normally, about 40-60 companies will be represented
in the Portfolio, with the 25 companies most highly regarded by the Sub-advisor usually constituting approximately 70% of
the Portfolio's net assets. The Portfolio is thus atypical from many equity mutual funds in its focus on a relatively
small number of intensively researched companies.
The Sub-advisor relies heavily upon the fundamental analysis and research of its internal research staff, which generally
follows a primary research universe of more than 500 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is placed on identifying companies whose
substantially above average prospective earnings growth is not fully reflected in current market valuations.
During market declines, while adding to positions in favored stocks, the Portfolio becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio. Conversely, in rising markets, while reducing
or eliminating fully valued positions, the Portfolio becomes somewhat more conservative, gradually increasing the number
of companies represented in its portfolio. The Sub-advisor therefore seeks to gain positive returns in good markets
while providing some measure of protection in poor markets.
The AST MFS Growth Portfolio invests, under normal market conditions, at least 80% of its total assets in common stocks
and related securities, such as preferred stocks, convertible securities and depositary receipts, of companies that the
Sub-advisor believes offer better than average prospects for long-term growth. The Sub-advisor uses a "bottom up," as
opposed to "top down," investment style in managing the Portfolio. This means that securities are selected based upon
fundamental analysis of individual companies by the Sub-advisor.
In managing the Portfolio, the Sub-advisor seeks to purchase securities of companies that it considers well-run and
poised for growth. The Sub-advisor looks particularly for companies with the following qualities:
o a strong franchise, strong cash flows and a recurring revenue stream
o a strong industry position, where there is potential for high profit margins or substantial barriers to new entry
into the industry
o a strong management with a clearly defined strategy
o new products or services.
The Portfolio may invest up to 35% of its net assets in foreign securities.
The AST Alger Growth Portfolio invests primarily in equity securities, such as common or preferred stocks, that are
listed on U.S. exchanges or in the over-the-counter market. The Portfolio invests primarily in growth stocks. The
Sub-advisor believes that these stocks are those of two types of companies:
o High Unit Volume Growth Companies. These are vital creative companies that offer goods or services to a rapidly
expanding marketplace. They include both established and emerging firms, offering new or improved products, or firms
simply fulfilling an increased demand for an existing product line.
o Positive Life Cycle Change Companies. These are companies experiencing a major change that is expected to
produce advantageous results. These changes may be as varied as new management, products or technologies,
restructurings or reorganizations, or mergers and acquisitions.
The Portfolio focuses on growing companies that generally have broad product lines, markets, financial resources and
depth of management. The Portfolio normally invests at least 65% of its total assets in equity securities of companies
that, at the time of purchase of the securities, have total market capitalizations of $1 billion or greater.
The AST Marsico Capital Growth Portfolio will pursue its objective by investing primarily in common stocks. The
Sub-advisor expects that the majority of the Portfolio's assets will be invested in the common stocks of larger, more
established companies.
In selecting investments for the Portfolio, the Sub-advisor uses an approach that combines "top down" economic analysis
with "bottom up" stock selection. The "top-down" approach takes into consideration such macro-economic factors as
interest rates, inflation, the regulatory environment, and the global competitive landscape. In addition, the
Sub-advisor examines such factors as the most attractive global investment opportunities, industry consolidation, and the
sustainability of economic trends. As a result of this "top down" analysis, the Sub-advisor identifies sectors,
industries and companies that should benefit from the trends the Sub-advisor has observed.
The Sub-advisor then looks for individual companies with earnings growth potential that may not be recognized by the
market at large. In determining whether a particular company is appropriate for investment by the Portfolio, the
Sub-advisor focuses on a number of different attributes, including the company's specific market expertise or dominance,
its franchise durability and pricing power, solid fundamentals (e.g., a strong balance sheet, improving returns on
equity, and the ability to generate free cash flow), strong management, and reasonable valuations in the context of
projected growth rates.
The AST JanCap Growth Portfolio will pursue its objective by investing primarily in common stocks. Common stock
investments will be in companies that the Sub-advisor believes are experiencing favorable demand for their products and
services, and which operate in a favorable competitive and regulatory environment. The Sub-advisor generally takes a
"bottom up" approach to choosing investments for the Portfolio. In other words, the Sub-advisor seeks to identify
individual companies with earnings growth potential that may not be recognized by the market at large.
The AST Janus Strategic Value Portfolio pursues its objective by investing primarily in common stocks with the potential
for long-term growth of capital using a "value" approach. The value approach the Sub-advisor uses emphasizes investments
in companies it believes are undervalued relative to their intrinsic worth. A company may be undervalued due to market
or economic conditions, temporary earnings declines, unfavorable developments affecting the company or other factors.
The Sub-advisor measures value as a function of price/earnings (P/E) ratios and price/free cash flow. A P/E ratio is the
relationship between the price of a stock and its earnings per share. This figure is determined by dividing a stock's
market price by the company's earnings per share amount. Price/free cash flow is the relationship between the price of a
stock and the company's available cash from operations minus capital expenditures. The Sub-advisor will typically seek
attractively valued companies that are improving their free cash flow and improving their returns on invested capital.
The Sub-advisor generally takes a "bottom up" approach in choosing investments for the Portfolio. In other words, the
Sub-advisor seeks to identify companies that are undervalued by looking at companies one at a time, regardless of size,
country of organization, place of principal business activity, or other similar selection criteria.
Principal Risks:
---------------
o All of the capital growth portfolios are equity funds, and the primary risk of each is that the value of the
stocks they hold will decline. Stocks can decline for many reasons, including reasons related to the particular
company, the industry of which it is a part, or the securities markets generally. These declines can be substantial.
o The risk to which the capital growth portfolios are subject depends in part on the size of the companies in which
the particular portfolio invests. Securities of smaller companies tend to be subject to more abrupt and erratic
price movements than securities of larger companies, in part because they may have limited product lines, markets, or
financial resources. Market capitalization, which is the total market value of a company's outstanding stock, is
often used to classify companies based on size. Therefore, the AST Janus Small-Cap Growth Portfolio, the AST Kemper
Small-Cap Growth Portfolio, the AST Federated Aggressive Growth Portfolio, the AST Lord Abbett Small Cap Value
Portfolio, and the AST Gabelli Small-Cap Value Portfolio can be expected to be subject to the highest degree of risk
relative to the other capital growth funds. The AST Janus Mid-Cap Growth Portfolio, the AST Alger Mid-Cap Growth
Portfolio, the AST Neuberger Berman Mid-Cap Growth Portfolio and the AST Neuberger Berman Mid-Cap Value Portfolio can
be expected to be subject to somewhat less risk, and the AST Alliance Growth Portfolio, the AST MFS Growth Portfolio,
the AST Alger Growth Portfolio, the AST Marsico Capital Growth Portfolio, the AST JanCap Growth Portfolio and the AST
Janus Strategic Value Portfolio to somewhat less risk than the mid-cap funds. The AST Alger All-Cap Growth Portfolio,
the Gabelli All-Cap Value Portfolio and the AST Kinetics Internet Portfolio may invest in equity securities of
companies without regard to capitalization, and may include large and small companies at the same time. The AST T.
Rowe Price Natural Resources Portfolio invests in companies of all sizes in order to take advantage of the
opportunities in the natural resources sector, but generally invests mostly in large and medium-sized companies.
o The AST Janus Small-Cap Growth Portfolio, the AST Kemper Small-Cap Growth Portfolio, the AST Federated Aggressive
Growth Portfolio, the AST Janus Mid-Cap Growth Portfolio, the AST Alger Mid-Cap Growth Portfolio, the AST Neuberger
Berman Mid-Cap Growth Portfolio, the AST Alger All-Cap Growth Portfolio, the AST Alliance Growth Portfolio, the AST
MFS Growth Portfolio, the AST Alger Growth Portfolio, the AST Marsico Capital Growth Portfolio and the AST JanCap
Growth Portfolio generally take a growth approach to investing, while the AST Lord Abbett Small Cap Value Portfolio,
the AST Gabelli Small-Cap Value Portfolio, the AST Neuberger Berman Mid-Cap Value Portfolio, the AST Gabelli All-Cap
Value Portfolio and the AST Janus Strategic Value Portfolio generally take a value approach. Value stocks are
believed to be selling at prices lower than what they are actually worth, while growth stocks are those of companies
that are expected to grow at above-average rates. A portfolio investing primarily in growth stocks will tend to be
subject to more risk than a value fund, although this will not always be the case. Value stocks are subject to the
risks that the market may not recognize the stock's actual value or that the market actually valued the stock
appropriately.
o The AST Kinetics Internet Portfolio and the AST T. Rowe Price Natural Resources Portfolio are subject to an
additional risk factor because they are less diversified than most equity funds and could therefore experience sharp
price declines when conditions are unfavorable in the sector in which they invest. Internet companies are
especially sensitive to the risk of product obsolescence, and may be affected by heightened regulatory scrutiny and
impending changes in government policies. The rate of earnings growth of natural resource companies may be
irregular because these companies are strongly affected by natural forces, global economic cycles and international
politics.
o The AST Janus Mid-Cap Growth Portfolio, the AST Kinetics Internet Portfolio and the AST Janus Strategic Value
Portfolio are non-diversified funds in that they may hold larger positions in a smaller number of securities. As a
result, a single security's increase or decrease in value may have a greater impact on a Portfolio's share price and
total return.
Growth and Income Portfolios:
Portfolio: Investment Goal: Primary Investments:
--------- --------------- -------------------
Cohen & Steers Realty Maximize total return The Portfolio invests primarily in equity securities of real
estate companies.
Sanford Bernstein Managed To outperform the S&P 500 The Portfolio invests primarily in common stocks included in
Index 500 Stock Index the S&P 500.
American Century Income & Capital growth and, The Portfolio invests primarily in stocks of large U.S.
Growth secondarily, current income companies selected through quantitative investment techniques.
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.
MFS Growth with Income Reasonable current income The Portfolio invests primarily in common stocks and related
and long-term capital securities.
growth and income.
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.
AIM Balanced Capital growth and current The Portfolio normally invests 30-70% of its total assets in
income equity securities and 30-70% in debt securities.
American Century Strategic Capital growth and current The Portfolio normally invests approximately 60% of its
Balanced income assets in equity securities and the remainder in bonds and
other 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 Cohen & Steers Realty Portfolio pursues its investment objective of maximizing total return by seeking, with
approximately equal emphasis, capital growth and current income. Under normal circumstances, the Portfolio will invest
substantially all of its assets in the equity securities of real estate companies. Such equity securities will consist
of common stocks, rights or warrants to purchase common stocks, securities convertible into common stocks where the
conversion feature represents, in the Sub-advisor's view, a significant element of the securities' value, and preferred
stocks.
For purposes of the Portfolio's investment policies, a "real estate company" is one that derives at least 50% of its
revenues from the ownership, construction, financing, management or sale of real estate or that has at least 50% of its
assets in real estate. The Portfolio may invest up to 10% of its total assets in securities of foreign real estate
companies. Real estate companies may include real estate investment trusts ("REITs"). REITs pool investors' funds for
investment primarily in income producing real estate or real estate related loans or interests.
The AST Sanford Bernstein Managed Index 500 Portfolio (formerly, the AST Bankers Trust Managed Index 500 Portfolio) seeks
to outperform the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500(R)") through stock selection resulting in
different weightings of common stocks relative to the index. The S& P 500 is an index of 500 common stocks, most of which
trade on the New York Stock Exchange Inc. (the "NYSE").
In seeking to outperform the S&P 500, the Sub-advisor starts with a portfolio of stocks representative of the holdings of
the index. It then uses a set of quantitative criteria that are designed to indicate whether a particular stock will
predictably perform better or worse than the S&P 500. Based on these criteria, the Sub-advisor determines whether the
Portfolio should over-weight, under-weight or hold a neutral position in the stock relative to the proportion of the S&P
500 that the stock represents. In addition, the Sub-advisor may determine based on the quantitative criteria that (1)
certain S&P 500 stocks should not be held by the Portfolio in any amount, and (2) certain equity securities that are not
included in the S&P 500 should be held by the Portfolio. The Portfolio may invest up to 15% of its total assets in
equity securities not included in the S&P 500.
While the Portfolio attempts to outperform the S&P 500, it is not expected that any outperformance will be substantial.
The Portfolio also may underperform the S&P 500 over short or extended periods.
The AST American Century Income & Growth Portfolio's investment strategy utilizes quantitative management techniques in a
two-step process that draws heavily on computer technology. In the first step, the Sub-advisor ranks stocks, primarily
the 1,500 largest publicly traded U.S. companies (measured by market capitalization), from most attractive to least
attractive. These rankings are determined by using a computer model that combines measures of a stock's value and
measures of its growth potential. To measure value, the Sub-advisor uses ratios of stock price to book value and stock
price to cash flow, among others. To measure growth, the Sub-advisor uses, among others, the rate of growth in a
company's earnings and changes in its earnings estimates.
In the second step, the Sub-advisor uses a technique called portfolio optimization. In portfolio optimization, the
Sub-advisor uses a computer to build a portfolio of stocks from the ranking described earlier that it thinks will provide
the best balance between risk and expected return. The goal is to create an equity portfolio that provides better
returns than the S&P 500 Index without taking on significant additional risk. The Sub-advisor attempts to create a
dividend yield for the Portfolio that will be greater than that of the S&P 500.
The AST 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 MFS Growth with Income Portfolio invests, under normal market conditions, at least 65% of its total assets in
common stocks and related securities, such as preferred stocks, convertible securities and depositary receipts. The
stocks in which the Portfolio invests generally will pay dividends. While the Portfolio may invest in companies of any
size, the Portfolio generally focuses on companies with larger market capitalizations that the Sub-advisor believes have
sustainable growth prospects and attractive valuations based on current and expected earnings or cash flow. The
Sub-advisor uses a "bottom up," as opposed to "top down," investment style in managing the Portfolio. This means that
securities are selected based upon fundamental analysis of individual companies by the Sub-advisor.
The Portfolio may invest up to 20% of its net assets in foreign securities.
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 AIM Balanced Portfolio attempts to meet its objective by investing, normally, a minimum of 30% and a maximum of
70% of its total assets in equity securities and a minimum of 30% and a maximum of 70% of its total assets in
non-convertible debt securities. The Portfolio may invest up to 25% of its total assets in convertible securities. The
Portfolio may invest up to 10% of its total assets in high-yield debt securities rated below investment grade or deemed
to be of comparable quality ("junk bonds"). The Portfolio may also invest up to 20% of its total assets in foreign
securities.
In selecting the percentages of assets to be invested in equity or debt securities, the Sub-advisor considers such
factors as general market and economic conditions, as well as market, economic and industry trends, yields, interest
rates and changes in fiscal and monetary policies. The Sub-advisor will primarily purchase equity securities for growth
of capital and debt securities for income purposes. However, the Sub-advisor will focus on companies whose securities
have the potential for both capital appreciation and income generation. The Sub-advisor considers whether to sell a
security when it believes that the security no longer has that potential.
The Sub-advisor to the AST American Century Strategic Balanced Portfolio intends to maintain approximately 60% of the
Portfolio's assets in equity securities and the remainder in bonds and other fixed income securities. With the equity
portion of the Portfolio, the Sub-advisor utilizes quantitative management techniques in a two-step process that draws
heavily on computer technology. In the first step, the Sub-advisor ranks stocks, primarily the 1,500 largest publicly
traded U.S. companies as measured by market capitalization. These rankings are determined by using a computer model that
combines measures of a stock's value and measures of its growth potential. To measure value, the Sub-advisor uses ratios
of stock price to book value and stock price to cash flow, among others. To measure growth, the Sub-advisor uses, among
others, the rate of growth in a company's earnings and changes in its earnings estimates.
In the second step, the Sub-advisor uses a technique called portfolio optimization. In portfolio optimization, the
Sub-advisor uses a computer to build a portfolio of stocks from the ranking described earlier that it thinks will provide
the best balance between risk and expected return. The goal is to create an equity portfolio that provides better
returns than the S&P 500 Index without taking on significant additional risk.
The Sub-advisor intends to maintain approximately 80% of the Portfolio's fixed income assets in domestic fixed income
securities and approximately 20% in foreign fixed income securities. This percentage will fluctuate and may be higher or
lower depending on the mix the Sub-advisor believes will be most appropriate for achieving the Portfolio's objectives.
The fixed income portion of the Portfolio is invested in a diversified portfolio of government securities, corporate
fixed income securities, mortgage-backed and asset-backed securities, and similar securities. The Sub-advisor's strategy
is to actively manage the Portfolio by investing the Portfolio's fixed income assets in sectors it believes are
undervalued (relative to the other sectors) and which represent better relative long-term investment opportunities.
The Sub-advisor will adjust weighted average portfolio maturity in response to expected changes in interest rates. Under
normal market conditions, the weighted average maturity of the fixed income portion of the Portfolio will range from 3 to
10 years.
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 Cohen & Steers Realty Portfolio, the AST Sanford Bernstein Managed Index 500 Fund, the AST MFS Growth
with Income Portfolio, the AST American Century Income & Growth Portfolio, and 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 AIM Balanced Portfolio,
the AST American Century Strategic Balanced Portfolio, and 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.
o The AST Cohen & Steers Realty Portfolio is subject to an additional risk factor because it is less diversified
than most equity funds and could therefore experience sharp price declines when conditions are unfavorable in the
real estate sector. Real estate securities may be subject to risks similar to those associated with direct ownership
of real estate. These include risks related to economic conditions, heavy cash flow dependency, overbuilding,
extended vacancies of properties, changes in neighborhood values, and zoning, environmental and housing regulations.
o Because the AST Sanford Bernstein Managed Index 500 Portfolio invests primarily in equity securities included in
the S&P 500, and some of these securities do not produce income, the Portfolio may be subject to a greater level of
risk than a fund that invests primarily in income-producing securities.
Fixed Income Portfolios:
Portfolio: Investment Goal: Primary Investments:
--------- --------------- -------------------
T. Rowe Price Global Bond High current income and The Portfolio invests primarily in high-quality foreign and
capital growth U.S. government bonds.
Lord Abbett Bond-Debenture High current income and The Portfolio invests primarily in high yield and investment
the opportunity for grade debt securities, securities convertible into common
capital appreciation to stock and preferred stocks.
produce a high total
return.
Federated High Yield High current income The Portfolio invests primarily in lower-quality fixed income
securities.
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.
Money Market Maximize current income The Portfolio invests in high-quality, short-term, U.S.
and maintain high levels dollar-denominated instruments.
of liquidity
Principal Investment Strategies:
-------------------------------
To achieve its objectives, the AST T. Rowe Price Global Bond Portfolio (formerly, the AST T. Rowe Price International
Bond Portfolio) will invest at least 65% of its total assets in bonds issued or guaranteed by the U.S. or foreign
governments or their agencies and by foreign authorities, provinces and municipalities. Corporate bonds may also be
purchased. The Portfolio seeks to moderate price fluctuation by actively managing its maturity structure and currency
exposure. The Sub-advisor bases its investment decisions on fundamental market factors, currency trends, and credit
quality. The Portfolio generally invests in countries where the combination of fixed-income returns and currency
exchange rates appears attractive, or, if the currency trend is unfavorable, where the Sub-advisor believes that the
currency risk can be minimized through hedging.
Although the Portfolio expects to maintain an intermediate-to-long weighted average maturity, there are no maturity
restrictions on the overall portfolio or on individual securities. The Portfolio may and frequently does engage in
foreign currency transactions such as forward foreign currency exchange contracts, hedging its foreign currency exposure
back to the dollar or against other foreign currencies ("cross-hedging"). The Sub-advisor also attempts to reduce
currency risks through diversification among foreign securities and active management of maturities and currency
exposures.
The Portfolio may also invest up to 20% of its assets in the aggregate in below investment-grade, high-risk bonds ("junk
bonds") and emerging market bonds. Some emerging market bonds, such as Brady Bonds, may be denominated in U.S. dollars.
The AST Federated High Yield Portfolio will invest at least 65% of its assets in lower-rated corporate fixed income
securities ("junk bonds"). These fixed income securities may include preferred stocks, convertible securities, bonds,
debentures, notes, equipment lease certificates and equipment trust certificates. The securities in which the Portfolio
invests usually will be rated below the three highest rating categories of a nationally recognized rating organization
(AAA, AA, or A for Standard & Poor's Corporation ("Standard & Poor's") and Aaa, Aa or A for Moody's Investors Service,
Inc. ("Moody's")) or, if unrated, are of comparable quality. There is no lower limit on the rating of securities in
which the Portfolio may invest.
Methods by which the Sub-advisor attempts to reduce the risks involved in lower-rated securities include:
Credit Research. The Sub-advisor will perform its own credit analysis in addition to using rating organizations
and other sources, and may have discussions with the issuer's management or other investment analysts regarding issuers.
The Sub-advisor's credit analysis will consider the issuer's financial soundness, its responsiveness to changing business
and market conditions, and its anticipated cash flow and earnings. In evaluating an issuer, the Sub-advisor places
special emphasis on the estimated current value of the issuer's assets rather than their historical cost.
Diversification. The Sub-advisor invests in securities of many different issuers, industries, and economic
sectors.
Economic Analysis. The Sub-advisor will analyze current developments and trends in the economy and in the
financial markets.
To pursue its objective, the AST Lord Abbett Bond-Debenture Portfolio normally invests in high yield and investment grade
debt securities, securities convertible into common stock and preferred stocks. Under normal circumstances, the
Portfolio invests at least 65% of its total assets in fixed income securities of various types. At least 20% of the
Portfolio's assets must be invested in any combination of investment grade securities, U.S. Government securities and
cash equivalents.
The Sub-advisor believes that a high total return (current income and capital growth) may be derived from an actively
managed, diversified portfolio of investments. Through portfolio diversification, credit analysis and attention to
current developments and trends in interest rates and economic conditions, the Sub-advisor attempts to reduce the
Portfolio's risks. The Sub-advisor seeks unusual values, using fundamental, "bottom-up" research (i.e., research on
individual companies rather than the economy as a whole) to identify undervalued securities. The Portfolio may find good
value in high yield securities, sometimes called "lower-rated bonds" or "junk bonds," and frequently may have more than
half of its assets invested in those securities. The Portfolio may also make significant investments in mortgage-backed
securities. Although the Portfolio expects to maintain a weighted average maturity in the range of seven to nine years,
there are no maturity restrictions on the overall portfolio or on individual securities.
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).
The AST Money Market Portfolio will invest in high-quality, short-term, U.S. dollar denominated corporate, bank and
government obligations. Under the regulatory requirements applicable to money market funds, the Portfolio must maintain
a weighted average portfolio maturity of not more than 90 days and invest in securities that have effective maturities of
not more than 397 days. In addition, the Portfolio will limit its investments to those securities that, in accordance
with guidelines adopted by the Directors of the Company, present minimal credit risks. The Portfolio will not purchase
any security (other than a United States Government security) unless:
(1) if rated by only one nationally recognized statistical rating organization (such as Moody's and Standard &
Poor's), such organization has rated it with the highest rating assigned to short-term debt securities;
(2) if rated by more than one nationally recognized statistical rating organization, at least two rating
organizations have rated it with the highest rating assigned to short-term debt securities; or
(3) it is not rated, but is determined to be of comparable quality in accordance with the guidelines noted
above.
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 While the AST T. Rowe Price Global Bond Portfolio invests primarily in high-quality fixed income securities, its
substantial investments in foreign fixed income securities and relatively long average maturity will tend to increase
its level of risk. Like foreign equity investments, foreign fixed income investments involve risks such as
fluctuations in currency exchange rates, 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. The AST T. Rowe Price Global Bond Portfolio can invest to some degree in securities of issuers in
developing countries and in lower-quality fixed income securities, and the risks of the Portfolio may be accentuated
by these holdings.
o As a fund that invests primarily in lower-quality fixed income securities, the AST Federated High Yield Portfolio
will be subject to a level of risk that is high relative to other fixed income funds, and which may be comparable to
or higher than some equity funds. The level of risk of the AST Lord Abbett Bond-Debenture Portfolio may be higher
than many other fixed income funds because it will often have significant investments in lower-quality fixed income
securities. Like equity securities, lower-quality fixed income securities tend to reflect short-term market
developments to a greater extent than higher-quality fixed income securities. An economic downturn may adversely
affect the value of lower-quality securities, and the trading market for such securities is generally less liquid
than the market for higher-quality securities.
o The average duration or maturity of the AST Lord Abbett Bond-Debenture Portfolio generally will be longer than
that of the AST PIMCO Total Return Bond Portfolio, which in turn will be longer than that of the AST PIMCO Limited
Maturity Bond Portfolio, and funds having longer average maturities or durations can be expected to be subject to a
greater level of risk than shorter-term funds. As funds that invest primarily in high-quality fixed income
securities, the level of risk to which the AST PIMCO Total Return Bond Portfolio and AST PIMCO Limited Maturity Bond
Portfolio are subject can be expected to be less than most equity funds. Nonetheless, the fixed income securities
held by these Portfolios can decline in value because of changes in their quality, in market interest rates, or for
other reasons. While the complex fixed income securities invested in and investment practices engaged in by the AST
PIMCO Total Return Bond Portfolio and AST PIMCO Limited Maturity Portfolio are designed to increase their return or
hedge their investments, these securities and practices may increase the risk to which the Portfolios are subject.
o The AST Money Market Portfolio seeks to preserve the value of your investment at $1.00 per share, but it is still
possible to lose money by investing in the Portfolio. An investment in the Portfolio is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency. In addition, the income earned by the
Portfolio will fluctuate based on market conditions and other factors.
Past Performance
The bar charts show the performance of each Portfolio for each full calendar year the Portfolio has been in
operation. The tables below each bar chart show each such Portfolio's best and worst quarters during the periods
included in the bar chart, as well as average annual total returns for each Portfolio since inception. This information
may help provide an indication of each Portfolio's risks by showing changes in performance from year to year and by
comparing the Portfolio's performance with that of a broad-based securities index. The performance figures do not
reflect any charges associated with the variable insurance contracts through which Portfolio shares are purchased; and
would be lower if they did. All figures assume reinvestment of dividends. Past performance does not necessarily
indicate how a Portfolio will perform in the future. The 1999 performance figures for some of the Portfolios reflect the
substantial increases that occurred during 1999 in the markets for the types of securities in which those Portfolios
invest; it is unlikely that similarly large increases will continue in future years. No performance information is
included for those Portfolios that commenced operations after January, 1999 (the AST Scudder Japan Portfolio, the AST MFS
Global Equity Portfolio, the AST Federated Aggressive Growth Portfolio, the AST Janus Mid-Cap Growth Portfolio, the AST
Alger Mid-Cap Growth Portfolio, the AST Gabelli All-Cap Value Portfolio, the AST Kinetics Internet Portfolio, the AST MFS
Growth Portfolio, the AST Alger Growth Portfolio, the AST Janus Strategic Value Portfolio, the AST MFS Growth with Income
Portfolio, and the AST Lord Abbett Bond-Debenture Portfolio).
AST Founders Passport Portfolio*
-------------------------
100.00%
89.71%
80.00%
60.00%
12.91% 10.92% 20.00%
_______2.03%______________________ 0.00%
1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 64.20%, 4th quarter 1999 Down 20.03%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Morgan Stanley Capital
For periods ending International (MSCI) EAFE
12/31/99 Index
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 89.71% 26.46%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since inception 21.72% 3.43%
(5/2/95)
---------------------- --------------------- ----------------------------
*Prior to October 15, 1996, the AST Founders Passport
Portfolio was known as the Seligman Henderson International
Small-Cap Portfolio, and Seligman Henderson Co. served as
Sub-advisor to the Portfolio.
AST AIM International Equity Portfolio*
---------------------------------------------------------------------
64.13% 60.00%
36.11% 40.00%
18.15% 20.10% 20.00%
7.01% 10.00% 9.65%
-2.97% -8.35% 2.64% 0.00%
_____________________________________________________________________-20.00%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 42.51%, 4th quarter 1999 Down 19.79%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Morgan Stanley Capital
For periods ending International (MSCI) EAFE
12/31/99 Index
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 64.13% 26.96%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
5 year 22.94% 12.82%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
10 year 16.50% 7.01%
---------------------- --------------------- ----------------------------
* From October 15, 1996 to May 4, 1999, the AST AIM International Equity
Portfolio was known as the AST Putnam International Equity Portfolio, and Putnam
Investment Management, Inc. served as Sub-advisor to the Portfolio. Prior to
October 15, 1996, Seligman Henderson Co. served as Sub-advisor to the Portfolio.
AST Janus Overseas Growth Portfolio
-------------------------------
100.00%
82.68%
40.00%
18.70% 20.00%
16.22%
0.00%
_______________________________-20.00%
1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 59.16%, 4th quarter 1999 Down 18.54%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Morgan Stanley Capital
For periods ending International (MSCI) EAFE
12/31/99 Index
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 82.68% 26.96%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since inception 36.08% 16.11%
(1/2/97)
---------------------- --------------------- ----------------------------
AST American Century International Growth Portfolio
-------------------------
65.20% 60.00%
40.00%
18.68% 20.00%
15.10%
0.00%
_________________________-20.00%
1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 49.04%, 4th quarter 1999 Down 17.66%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Morgan Stanley Capital
For periods ending International (MSCI) EAFE
12/31/99 Index
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 65.20% 26.96%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 31.21% 16.11%
(1/2/97)
---------------------- --------------------- ----------------------------
AST American Century International Growth Portfolio II*
31.95% 30.00%
11.09% 14.17% 14.03% 20.00%
1.36% 0.00%
-3.80%____________________________________________-20.00%
1994 1995 1996 1997 1998 1999
-------------------------------------- --------------------------------------
Best Quarter Worst Quarter
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
Up 24.22%, 4th quarter 1999 Down 13.58%, 3rd quarter 1998
-------------------------------------- --------------------------------------
---------------------- -------------------- -----------------------------
Average annual total Portfolio Index:
returns Morgan Stanley Capital
For periods ending International (MSCI) EAFE
12/31/99 Index
---------------------- -------------------- -----------------------------
---------------------- -------------------- -----------------------------
1 year 31.95% 26.96%
---------------------- -------------------- -----------------------------
---------------------- -------------------- -----------------------------
5 year 14.10% 12.82%
---------------------- -------------------- -----------------------------
---------------------- -------------------- -----------------------------
Since Inception 10.91% 11.90%
(1/4/94)
---------------------- -------------------- -----------------------------
*Prior to May 1, 2000, the AST American Century International
Growth Portfolio II was known as the AST T. Rowe Price
International Equity Portfolio, and Row Price-Fleming
International, Inc. served as Sub-advisor to the Portfolio.
AST Janus Small-Cap Growth Portfolio*
----------------------------------------------
141.96%
100.00%
60.00%
32.65% 40.00%
20.05% 20.00%
8.40% 6.01% 3.49%
0.00%
______________________________________________ -20.00%
1994 1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 79.79%, 4th quarter 1999 Down 23.95%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/98
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 141.96% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
5 year 33.40% 28.52%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 28.84% 23.65%
(1/4/94)
---------------------- --------------------- ----------------------------
*Prior to January 1, 1999, the AST Janus Small-Cap Portfolio
was known as the Founders Capital Appreciation Portfolio, and
Founders Asset Management LLC served as Sub-advisor to the
Portfolio.
AST Kemper Small-Cap Growth Portfolio
-------------------------
55.90% 60.00%
40.00%
20.00%
0.00%
___________________________-20.00%
1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 47.63%, 4th quarter 1999 Down 8.39%, 2nd quarter 1999
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 55.90% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 55.90% 21.04%
(1/1/99)
---------------------- --------------------- ----------------------------
AST Lord Abbett Small Cap Value Portfolio
-------------------------
60.00%
40.00%
20.00%
8.81%
-0.10 0.00%
___________________________-20.00%
1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 22.89%, 2nd quarter 1999 Down 22.12%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 8.81% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 4.25% 24.53%
(1/2/98)
---------------------- --------------------- ----------------------------
AST Gabelli Small-Cap Value Portfolio*
-------------------------
60.00%
40.00%
28.80% 20.00%
-10.53 0.58% 0.00%
_________________________-20.00%
1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 19.09%, 2nd quarter 1999 Down 19.88%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 0.58% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 5.04% 27.83%
(1/2/97)
---------------------- --------------------- ----------------------------
*Prior to May 1, 1998, the AST Gabelli Small-Cap Value Portfolio was known
as the AST T. Rowe Price Small Company Value Portfolio, and T. Rowe Price
Associates, Inc. served as Sub-advisor to the Portfolio.
AST Neuberger Berman Mid-Cap Growth Portfolio*
-----------------------------------------
60.00%
51.37%
40.00%
24.42% 20.65% 20.00%
16.34% 16.68%
0.00%
________________________________________ -20.00%
1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 49.25%, 4th quarter 1999 Down 20.62%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 51.37% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
5 year 25.27% 28.54%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 24.10% 27.06%
(10/19/94)
---------------------- --------------------- ----------------------------
*Prior to May 1, 1998, the AST Neuberger Berman Mid-Cap Growth
Portfolio was known as the Berger Capital Growth Portfolio,
and Berger Associates, Inc. served as Sub-advisor to the
Portfolio.
AST Neuberger Berman Mid-Cap Value Portfolio*
----------------------------------------------
60.00%
40.00%
26.13% 26.42% 20.00%
11.53% 5.67%
-6.95% -2.33% 0.00%
_____________________________________________ -20.00%
1994 1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 15.95%, 4th quarter 1998 Down 14.37%, 3rd quarter 1999
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 5.67% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
5 year 12.91% 28.52%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 9.60% 22.22%
(5/3/93)
---------------------- --------------------- ----------------------------
*Prior to May 1, 1998, the AST Neuberger Berman Mid-Cap Value
Portfolio was known as the Federated Utility Income Portfolio,
and Federated Investment Counseling served as Sub-advisor to
the Portfolio.
AST T. Rowe Price Natural Resources Portfolio
-----------------------------------
60.00%
30.74% 40.00%
28.11% 20.00%
11.83%
-3.39% 0.00%
____________________________________ -20.00%
1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 17.84%, 2nd quarter 1999 Down 14.04%, 4th quarter 1997
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 28.11% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 11.98% 27.47%
(5/2/95)
---------------------- --------------------- ----------------------------
AST Alliance Growth Portfolio*
---------------------------------------
60.00%
27.34% 33.91% 40.00%
20.00%
14.83%
0.00%
______________________________________-20.00%
1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 28.30%, 4th quarter 1999 Down 14.56%, 4th quarter 1997
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 33.91% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 23.23% 27.35%
(5/2/96)
---------------------- --------------------- ----------------------------
*Between December 31, 1998 and April 30, 2000, the AST
Alliance Growth Portfolio was known as the AST Oppenheimer
Large-Cap Growth Portfolio, and OppenheimerFunds, Inc. served
as Sub-advisor to the Portfolio. Prior to December 31, 1998,
the Portfolio was known as the Robertson Stephens Value +
Growth Portfolio, and Robertson Stephens & Company Investment
Management, L.P. served as Sub-advisor to the Portfolio.
AST Marsico Capital Growth Portfolio
-------------------------
52.58% 60.00%
41,59%
40.00%
20.00%
0.00%
_________________________-20.00%
1998 1999
---------------------------------------- -------------------------------------
Best Quarter Worst Quarter
---------------------------------------- -------------------------------------
---------------------------------------- -------------------------------------
Up 36.36%, 4th quarter 1999 Down 12.80%, 3rd quarter 1998
---------------------------------------- -------------------------------------
---------------------------- --------------------- -----------------------------
Average annual total Portfolio Index:
returns for periods ending Standard & Poors 500 Index
12/31/99
---------------------------- --------------------- -----------------------------
---------------------------- --------------------- -----------------------------
1 year 52.58% 21.04%
---------------------------- --------------------- -----------------------------
---------------------------- --------------------- -----------------------------
Since Inception 46.44% 25.52%
(12/22/97)
---------------------------- --------------------- -----------------------------
AST JanCap Growth Portfolio
----------------------------------------------------------------
68.26% 60.00%
55.01%
40.00%
11.87% 37.98% 28.66% 20.00%
28.36%
-4.51% 0.00%
______________________________________________________________-20.00%
1993 1994 1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 33.97%, 4th quarter 1999 Down 5.95%, 2nd quarter 1994
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 55.01% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
5 year 42.82% 28.52%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 30.41% 21.80%
(11/5/92)
---------------------- --------------------- ----------------------------
AST COHEN & STEERS REALTY PORTFOLIO
-------------------------
60.00%
40.00%
20.00%
2.26% 0.00%
-16.00%
_________________________-20.00%
1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 10.53%, 2nd quarter 1999 Down 10.76%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns NAREIT Equity REIT Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 2.26% -4.62%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception -7.31% -11.32%
(1/2/98)
---------------------- --------------------- ----------------------------
AST Sanford Bernstein Managed Index 500 Portfolio*
-------------------------
60.00%
40.00%
27.90% 21.23% 20.00%
0.00%
_________________________-20.00%
1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 21.58%, 4th quarter 1998 Down 10.09%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 21.23% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 24.48% 24.53%
(1/2/98)
---------------------- --------------------- ----------------------------
*Prior to May 1, 2000, the AST Sanford Bernstein Managed Index
500 Portfolio was known as the AST Bankers Trust Managed Index
500 Portfolio, and Bankers Trust Company served as Sub-advisor
to the Portfolio.
AST American Century Income & Growth Portfolio*
---------------------------
60.00%
40.00%
22.30% 22.98% 20.00%
12.27%
0.00%
_________________________-20.00%
1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 16.72%, 4th quarter 1998 Down 11.30%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns Standard & Poors 500 Index
For periods ending
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year 22.98% 21.04%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 19.08% 27.83%
(1/2/97)
---------------------- --------------------- ----------------------------
*Prior to May 4, 1999, the AST American Century Income &
Growth Portfolio was known as the AST Putnam Value Growth and
Income Portfolio, and Putnam Investment Management, Inc.
served as Sub-advisor to the Portfolio.
AST 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 AIM Balanced Portfolio*
--------------------------------------------------------
60.00%
40.00%
22.60% 18.28% 20.85% 20.00%
11.23% 12.86%
0.09% 0.00%
_______________________________________________________-20.00%
1994 1995 1996 1997 1998 1999
------------------------------------- --------------------------------------
Best Quarter Worst Quarter
------------------------------------- --------------------------------------
------------------------------------- --------------------------------------
Up 16.25%, 4th quarter 1999 Down 7.13%, 3rd quarter 1998
------------------------------------- --------------------------------------
---------------------- ---------------- ------------------------------------
Average annual total Portfolio Index:
returns Blended Index (60% Standard &
For periods ending Poors 500, 40% Lehman Brothers
12/31/99 Government/
Corporate Index)
---------------------- ---------------- ------------------------------------
---------------------- ---------------- ------------------------------------
1 year 20.85% 11.40%
---------------------- ---------------- ------------------------------------
---------------------- ---------------- ------------------------------------
5 year 17.08% 20.01%
---------------------- ---------------- ------------------------------------
---------------------- ---------------- ------------------------------------
Since Inception 13.51% 15.74%
(5/3/93)
---------------------- ---------------- ------------------------------------
*Between October 15, 1996 and May 3, 1999, the AST AIM
Balanced Portfolio was known as the AST Putnam Balanced
Portfolio, and Putnam Investment Management, Inc. served as
Sub-advisor to the Portfolio. Prior to October 15, 1996, the
Portfolio was known as the AST Phoenix Balanced Asset
Portfolio and Phoenix Investment Counsel, Inc. served as
Sub-advisor.
AST AMERICAN CENTURY STRATEGIC BALANCED PORTFOLIO
-------------------------
60.00%
40.00%
21.29% 20.00%
13.40% 12.97%
0.00%
_________________________-20.00%
1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 14.12%, 4th quarter 1998 Down 6.56%, 3rd quarter 1998
------------------------------------- -----------------------------------
---------------------- ------------ ----------------------------- -----------------------------
Average annual total Portfolio Blended Index (60% Standard Blended Index (60% Standard
returns & Poors 500, 40% Lehman & Poors 500, 40% Lehman
For periods ending Brothers Government/ Aggregate Bond Index)*
12/31/99 Corporate Index)
---------------------- ------------ ----------------------------- -----------------------------
---------------------- ------------ ----------------------------- -----------------------------
1 year 12.97% 11.40% 12.29%
---------------------- ------------ ----------------------------- -----------------------------
---------------------- ------------ ----------------------------- -----------------------------
Since Inception 15.82% 18.71% 18.33%
(1/2/97)
---------------------- ------------ ----------------------------- -----------------------------
*The Portfolio's benchmark index has been changed to the
Lehman Aggregate Bond Index. The Portfolio's Sub-advisor
believes that this index better represents the broad U.S.
taxable bond market. The Lehman Aggregate Bond index includes
mortgage-backed securities, while the Portfolio's previous
index did not.
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 T. Rowe Price Global Bond Portfolio*
-------------------------------------------------
60.00%
14.72% 40.00%
11.10% 20.00%
5.98%
-3.42% 0.00%
__________________________________-8.33%________-20.00%
1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 6.31%, 4th quarter 1998 Down 5.56%, 1st quarter 1999
------------------------------------- -----------------------------------
---------------------- --------------------- ----------------------------
Average annual total Portfolio Index:
returns J.P. Morgan Non-U.S.
For periods ending Government Bond Index
12/31/99
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
1 year -8.33% -6.17%
---------------------- --------------------- ----------------------------
---------------------- --------------------- ----------------------------
Since Inception 2.62% 6.14%
(5/3/94)
---------------------- --------------------- ----------------------------
*Prior to May 1, 1996, the AST T. Rowe Price Global Bond Portfolio was
known as the AST Scudder International Bond Portfolio, and Scudder, Stevens &
Clark, Inc. served as Sub-advisor to the Portfolio.
AST Federated High Yield Bond Portfolio
-----------------------------------------------------------
60.00%
40.00%
19.57% 20.00%
13.58% 13.58%
-3.10% 2.61% 2.00% 0.00%
___________________________________________________________-20.00%
1994 1995 1996 1997 1998 1999
-------------------------------------- ------------------------------------
Best Quarter Worst Quarter
-------------------------------------- ------------------------------------
-------------------------------------- ------------------------------------
Up 5.73%, 1st quarter 1995 Down 4.21%, 3rd quarter 1998
-------------------------------------- ------------------------------------
---------------------- --------------------- -------------------------------
Average annual total Portfolio Index:
returns Merrill Lynch High Yield Index
For periods ending
12/31/99
---------------------- --------------------- -------------------------------
---------------------- --------------------- -------------------------------
1 year 2.00% 1.57%
---------------------- --------------------- -------------------------------
---------------------- --------------------- -------------------------------
5 year 10.06% 9.60%
---------------------- --------------------- -------------------------------
---------------------- --------------------- -------------------------------
Since Inception 7.75% 7.75%
(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)
---------------------- --------------------- ----------------------------
AST Money Market Portfolio
---------------------------------------------------------------
15.00%
10.00%
3.75% 5.05% 5.08% 5.18% 5.14% 4.60%
2.55% 0.00%
________________________________________________________________-20.00%
1993 1994 1995 1996 1997 1998 1999
------------------------------------- -----------------------------------
Best Quarter Worst Quarter
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Up 1.38%, 2nd quarter 1995 Up 0.62%, 2nd quarter 1993
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
7-day yield (as of 12/31/99) 4.40%
------------------------------------- -----------------------------------
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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(6)Operating
Portfolio: Service Expenses Expenses
(12b-1)
Fees(5)
------------------------------------ ------------ ------------- ------------- --------------- --------------- ---------------
AST Founders Passport 1.00 0.00 0.29 1.29 N/A 1.29
AST Scudder Japan(1) 1.00 0.04 0.36 1.40 N/A 1.40
AST AIM International Equity 0.87 0.04 0.31 1.22 N/A 1.22
AST Janus Overseas Growth 1.00 0.02 0.23 1.25 N/A 1.25
AST American Century International 1.00 0.00 0.50 1.50 N/A 1.50
Growth
AST American Century International 1.00 0.02 0.26 1.28 N/A 1.28
Growth II
AST MFS Global Equity(2) 1.00 0.00 0.20 1.20 N/A 1.20
AST Janus Small-Cap Growth 0.90 0.01 0.18 1.09 N/A 1.09
AST Kemper Small-Cap Growth 0.95 0.03 0.19 1.17 N/A 1.17
AST Federated Aggressive Growth(1) 0.95 0.04 0.23 1.22 N/A 1.22
AST Lord Abbett Small Cap Value 0.95 0.00 0.29 1.24 N/A 1.24
AST Gabelli Small-Cap Value 0.90 0.00 0.21 1.11 N/A 1.11
AST Janus Mid-Cap Growth(3) 1.00 0.04 0.22 1.26 N/A 1.26
AST Alger Mid-Cap Growth(1) 0.80 0.00 0.23 1.03 0.18 0.85
AST Neuberger Berman Mid-Cap Growth 0.90 0.04 0.23 1.17 N/A 1.17
AST Neuberger Berman Mid-Cap Value 0.90 0.12 0.23 1.25 N/A 1.25
AST Alger All-Cap Growth(4) 0.95 0.00 0.28 1.23 N/A 1.23
AST Gabelli All-Cap Value(1) 0.95 0.04 0.23 1.22 N/A 1.22
AST Kinetics Internet Portfolio(1) 1.00 0.04 0.23 1.27 N/A 1.27
AST T. Rowe Price Natural 0.90 0.01 0.26 1.17 N/A 1.17
Resources
AST Alliance Growth 0.90 0.00 0.21 1.11 N/A 1.11
AST MFS Growth(2) 0.90 0.00 0.12 1.02 N/A 1.02
AST Alger Growth(1) 0.75 0.00 0.23 0.98 0.19 0.79
AST Marsico Capital Growth 0.90 0.04 0.18 1.12 N/A 1.12
AST JanCap Growth 0.90 0.01 0.14 1.05 0.04 1.01
AST Janus Strategic Value(1) 1.00 0.04 0.23 1.27 N/A 1.27
AST Cohen & Steers Realty 1.00 0.02 0.27 1.29 N/A 1.29
AST Sanford Bernstein Managed 0.60 0.00 0.19 0.79 N/A 0.79
Index 500
AST American Century Income & 0.75 0.00 0.23 0.98 N/A 0.98
Growth
AST Alliance Growth and Income 0.75 0.08 0.18 1.01 0.01 1.00
AST MFS Growth with Income(2) 0.90 0.00 0.14 1.04 N/A 1.04
AST INVESCO Equity Income 0.75 0.04 0.18 0.97 N/A 0.97
AST AIM Balanced 0.74 0.02 0.26 1.02 N/A 1.02
AST American Century Strategic 0.85 0.00 0.25 1.10 N/A 1.10
Balanced
AST T. Rowe Price Asset Allocation 0.85 0.00 0.22 1.07 N/A 1.07
AST T. Rowe Price Global Bond 0.80 0.00 0.31 1.11 N/A 1.11
AST Federated High Yield 0.75 0.00 0.19 0.94 N/A 0.94
AST Lord Abbett Bond-Debenture(1) 0.80 0.00 0.23 1.03 N/A 1.03
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
AST Money Market 0.50 0.00 0.15 0.65 0.05 0.60
(1) These Portfolios commenced operations in October 2000. "Other Expenses" and "Estimated Distribution and Service
Fees" shown are based on estimated amounts for the fiscal year ending December 31, 2000.
(2) These Portfolios commenced operations in October 1999. "Other Expenses" and "Estimated Distribution and Service
Fees" shown are based on actual amounts for the period from commencement of operations until June 30, 2000.
(3) This Portfolio commenced operations in May 2000. "Other Expenses" and "Estimated Distribution and Service Fees"
shown are based on estimated amounts for the fiscal year ending December 31, 2000.
(4) This Portfolio commenced operations in January 2000. "Other Expenses" and "Estimated Distribution and Service Fees"
shown are based on actual amounts for the semi-annual period ended June 30, 2000.
(5) 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.
(6) 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 Founders Passport 131 409 708 1,556
AST Scudder Japan 143 443 N/A N/A
AST AIM International Equity 124 387 670 1,477
AST Janus Overseas Growth 127 397 686 1,511
AST American Century International Growth 153 474 818 1,791
AST American Century International Growth II 130 406 702 1,545
AST MFS Global Equity 122 381 660 1,455
AST Janus Small-Cap Growth 111 347 601 1,329
AST Kemper Small-Cap Growth 119 372 644 1,420
AST Federated Aggressive Growth 124 387 N/A N/A
AST Lord Abbett Small Cap Value 126 393 681 1,500
AST Gabelli Small-Cap Value 113 353 612 1,352
AST Janus Mid-Cap Growth 128 400 N/A N/A
AST Alger Mid-Cap Growth 87 271 N/A N/A
AST Neuberger Berman Mid-Cap Growth 119 372 644 1,420
AST Neuberger Berman Mid-Cap Value 127 397 686 1,511
AST Alger All-Cap Growth 125 390 676 1,489
AST Gabelli All-Cap Value 124 387 N/A N/A
AST Kinetics Internet 129 403 N/A N/A
AST T. Rowe Price Natural Resources 119 372 644 1,420
AST Alliance Growth 113 353 612 1,352
AST MFS Growth 104 325 563 1,248
AST Alger Growth 81 252 N/A N/A
AST Marsico Capital Growth 114 356 617 1,363
AST JanCap Growth 103 330 575 1,279
AST Janus Strategic Value 129 403 N/A N/A
AST Cohen & Steers Realty 131 409 708 1,556
AST Sanford Bernstein Managed Index 500 81 252 439 978
AST American Century Income & Growth 100 312 542 1,201
AST Alliance Growth and Income 102 321 557 1,235
AST MFS Growth with Income 106 331 574 1,271
AST INVESCO Equity Income 99 309 536 1,190
AST AIM Balanced 104 325 563 1,248
AST American Century Strategic Balanced 112 350 606 1,340
AST T. Rowe Price Asset Allocation 109 340 590 1,306
AST T. Rowe Price Global Bond 113 353 612 1,352
AST Federated High Yield 96 300 520 1,155
AST Lord Abbett Bond-Debenture 105 328 N/A N/A
AST PIMCO Total Return Bond 84 262 455 1,014
AST PIMCO Limited Maturity Bond 88 274 477 1,061
AST Money Market 61 203 357 806
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 FOUNDERS PASSPORT PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Principal Investment Policies and Risks:
To achieve its objective, the Portfolio normally invests primarily in securities issued by foreign companies that
have market capitalizations of $1.5 billion or less (this maximum may be revised from time to time based on stock market
valuations and industry standards). These securities may represent companies in both established and emerging economies
throughout the world.
At least 65% of the Portfolio's total assets normally will be invested in foreign securities representing a
minimum of three countries. The Portfolio may invest in larger foreign companies or in U.S.-based companies if, in the
Sub-advisor's opinion, they represent better prospects for capital appreciation. The Sub-advisor looks for companies
whose fundamental strengths indicate potential for growth in earnings per share. The Sub-advisor generally takes a
"bottom up" approach to building the Portfolio, searching for individual companies that demonstrate the best potential for
significant earnings growth, rather than choose investments based on broader economic characteristics of countries or
industries.
As discussed below, foreign securities are generally considered to involve more risk than those of U.S.
companies, and securities of smaller companies are generally considered to be riskier than those of larger companies.
Therefore, because the Portfolio's investment focus is on securities of small and medium-sized foreign companies, the
risk of loss and share price fluctuation of this Portfolio likely will be high relative to most of the other Portfolios
of the Trust and popular market averages.
Foreign Securities. For purposes of the Portfolio, the term "foreign securities" refers to securities of
issuers, that, in the judgment of the Sub-advisor, have their principal business activities outside of the United States,
and may include American Depositary Receipts. The determination of whether an issuer's principal activities are outside
of the United States will be based on the location of the issuer's assets, personnel, sales, and earnings (specifically
on whether more than 50% of the issuer's assets are located, or more than 50% of the issuer's gross income is earned,
outside of the United States) or on whether the issuer's sole or principal stock exchange listing is outside of the
United States. The foreign securities in which the Portfolio will invest typically will be traded on the applicable
country's principal stock exchange but may also be traded on regional exchanges or over-the-counter.
Investments in foreign securities involve different risks than U.S. investments, including fluctuations in
currency exchange rates, unstable political and economic structures, reduced availability of public information, and lack
of uniform financial reporting and regulatory practices such as those that apply to U.S. issuers. Foreign investments of
the Portfolio may include securities issued by companies located in developing countries. Developing countries are
subject to more economic, political and business risk than major industrialized nations, and the securities they issue
are expected to be more volatile and more uncertain as to payment of interest and principal. The Portfolio is permitted
to use forward foreign currency contracts in connection with the purchase or sale of a specific security or for hedging
purposes.
For an additional discussion of the risks involved in foreign securities, see this Prospectus under "Certain Risk
Factors and Investment Methods."
Small and Medium-Sized Companies. Investments in small and medium-sized companies involve greater risk than is
customarily associated with more established companies. Generally, small and medium-sized companies are still in the
developing stages of their life cycles and are attempting to achieve rapid growth in both sales and earnings. While
these companies often have growth rates that exceed those of large companies, smaller companies often have limited
operating histories, product lines, markets, or financial resources, and they may be dependent upon one-person
management. These companies may be subject to intense competition from larger entities, and the securities of such
companies may have a limited market and may be subject to more abrupt or erratic movements in price.
Other Investments:
In addition to investing in common stocks, the Portfolio may invest in other types of securities and may engage
in certain investment practices. The Portfolio may invest in convertible securities, preferred stocks, bonds,
debentures, and other corporate obligations when the Sub-advisor believes that these investments offer opportunities for
capital appreciation. Current income will not be a substantial factor in the selection of these securities.
The Portfolio will only invest in bonds, debentures, and corporate obligations (other than convertible securities
and preferred stock) rated investment grade at the time of purchase. Convertible securities and preferred stocks
purchased by the Portfolio may be rated in medium and lower categories by Moody's or S&P, but will not be rated lower
than B. The Portfolio may also invest in unrated convertible securities and preferred stocks if the Sub-advisor believes
that the financial condition of the issuer or the terms of the securities limits risk to a level similar to that of
securities rated B or above.
In addition, the Portfolio may enter into stock index, interest rate and foreign currency futures contracts (or
options thereon) for hedging purposes. The Portfolio may write covered call options on any or all of its portfolio
securities as the Sub-advisor considers appropriate. The Portfolio also may purchase options on securities and stock
indices for hedging purposes. The Portfolio may buy and sell options on foreign currencies for hedging purposes in a
manner similar to that in which futures on foreign currencies would be utilized.
For more information on these securities and investment practices and their risks, see this Prospectus under
"Certain Risk Factors and Investment Methods."
Temporary Investments. Up to 100% of the assets of the Portfolio may be invested temporarily in cash or cash
equivalents if the Sub-advisor determines that it would be appropriate for purposes of increasing liquidity or preserving
capital in light of market or economic conditions. Temporary investments may include U.S. government obligations,
commercial paper, bank obligations, and repurchase agreements. While the Portfolio is in a defensive position, the
opportunity to achieve its investment objective of capital growth will be limited.
AST SCUDDER JAPAN PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek long-term capital growth.
Principal Investment Policies and Risks:
The Portfolio pursues its investment objective by investing at least 80% of net assets in Japanese securities
(those issued by Japan-based companies or their affiliates, or by any company that derives more than half of its revenues
from Japan). The Portfolio may invest in stocks of any size, including up to 30% of its net assets in smaller companies
that are traded over-the-counter.
In choosing stocks, the Sub-advisor uses a combination of three analytical disciplines:
Bottom-up research. The Sub-advisor looks for individual companies with effective management, strong competitive
positioning, active research and development, and sound balance sheets. The Sub-advisor also evaluates fundamentals such
as price-to-earnings ratios.
Growth orientation. The Sub-advisor prefers companies whose revenue or earnings seem likely to grow faster than
the average for their market and whose stock prices appear reasonable in light of their business prospects.
Top-down analysis. The Sub-advisor considers the economic outlooks for various sectors and industries in Japan.
The Sub-advisor may favor securities from different industries and companies at different times while still
maintaining variety in terms of the industries and companies represented.
The Portfolio will normally sell a security when it reaches a target price, its fundamentals have changed, the
Sub-advisor believes other investments offer better opportunities, or when adjusting its emphasis on a given industry.
As with any stock fund, the fundamental risk associated with the Portfolio is the risk that the value of the
stocks it holds might decrease. Stock values fluctuate in response to factors affecting particular companies (e.g., poor
management or shrinking product demand) or to overall stock market performance (in this case, the performance of the
Japanese market).
Because the Portfolio invests primarily in foreign securities, its level of risk and share price fluctuation may
be greater than a fund investing primarily in domestic securities. Japanese stocks tend to be more volatile than their
U.S. counterparts, for reasons ranging from political and economic uncertainties to a higher risk that essential
information may be incomplete or wrong. Japanese economic growth has weakened after the sharp collapse of the stock
market in the 1990's and the current economic condition remains uncertain. In addition, changing currency rates could
add to investment losses or reduce investment gains.
The Portfolio's focus on a single country could also give rise to increased risk, as the Portfolio's investments
will not be diversified among countries having varying characteristics and market performance. In addition, the
Portfolio level of risk will likely increase to the extent that it invests in the securities of smaller companies, which
may have limited business lines and financial resources, and therefore be especially vulnerable to business risks and
economic downturns. Also, the growth stocks in which the Portfolio generally invests may be out of favor for certain
periods.
Other Investments:
While most of the Portfolio's investments are common stocks, the Portfolio may also invest in other types of
equities, such as convertible securities, depositary receipts and preferred stocks. The Portfolio may also invest in
debt securities rated in the top four credit quality categories, including those issued by the Japanese government or
Japanese companies, if the Sub-advisor believes they offer greater potential for capital growth.
The Portfolio may invest in various types of derivatives (contracts whose value is based on, for example,
indices, currencies or securities), including futures contracts based on Japanese stock indices.
Additional information on the types of securities in which the Portfolio may invest is included in this
Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. As a temporary defensive measure, the Portfolio could shift up to 100% of its assets into
investments such as money market securities. While taking a defensive position could prevent losses, the opportunity for
the Portfolio to achieve its investment objective of capital growth may be limited.
AST AIM INTERNATIONAL EQUITY PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Principal Investment Objectives and Risks:
The Portfolio seeks to meet its investment objective by investing, normally, at least 70% of its assets in
marketable equity securities of foreign companies that are listed on a recognized foreign securities exchange or traded
in a foreign over-the-counter market. The Portfolio will normally invest in a diversified portfolio that includes
companies located in at least four countries outside the United States, emphasizing investment in companies in the
developed countries of Western Europe and the Pacific Basin. The Sub-advisor does not intend to invest more than 20% of
the Portfolio's total assets in companies located in developing countries (i.e., those that are in the initial stages of
their industrial cycles).
The Sub-advisor focuses on companies that have experienced above-average, long-term growth in earnings and have
strong prospects for future growth. In selecting countries in which the Portfolio will invest, the Sub-advisor also
considers such factors as the prospect for relative economic growth among countries or regions, economic or political
conditions, currency exchange fluctuations, tax considerations and the liquidity of a particular security. The
Sub-advisor considers whether to sell a particular security when any of those factors materially changes.
As with any equity fund, the fundamental risk associated with the Portfolio is the risk that the value of the
securities it holds might decrease. The prices of equity securities change in response to many factors, including the
historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates,
investor perceptions and market liquidity.
As a fund that invests primarily in the securities of foreign issuers, the risk and degree of share price
fluctuation of the Portfolio may be greater than a fund investing primarily in domestic securities. The risks of
investing in foreign securities, which are described in more detail below under "Certain Risk Factors and Investment
Methods," include political and economic conditions and instability in foreign countries, less available information
about foreign companies, lack of strict financial and accounting controls and standards, less liquid and more volatile
securities markets, and fluctuations in currency exchange rates. While the Portfolio may engage in transactions intended
to hedge its exposure to fluctuations in foreign currencies, it does not normally do so. To the extent the Portfolio
invests in securities of issuers in developing countries, the Portfolio may be subject to even greater levels of risk and
share price fluctuation. Transaction costs are often higher in developing countries and there may be delays in
settlement of transactions.
Other Investments:
The Portfolio may invest up to 20% of its total assets in debt or preferred equity securities exchangeable for or
convertible into marketable equity securities of foreign companies. In addition, the Portfolio may regularly invest up
to 20% of its total assets in high-grade short-term debt securities, including U.S. Government obligations, investment
grade corporate bonds or taxable municipal securities, whether denominated in U.S. dollars or foreign currencies. The
Portfolio also may purchase and write (sell) covered call and put options on securities and stock indices. The Portfolio
may also purchase and sell stock and interest rate futures contracts and options on these futures contracts. The purpose
of these transactions is to hedge against changes in the market value of the Portfolio's portfolio securities caused by
changing interest rates and market conditions, and to close out or offset existing positions in options or futures
contracts. The Portfolio may from time to time make short sales "against the box."
Additional information about convertible securities, options, futures contracts and other investments that the
Portfolio may make is included in this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. In addition to regularly investing up to 20% of its total assets in short-term debt
securities as noted above, the Portfolio may hold all or a significant portion of its assets in cash, money market
instruments, bonds or other debt securities in anticipation of or in response to adverse market conditions or for cash
management purposes. While the Portfolio is in such a defensive position, the opportunity to achieve its investment
objective of capital growth may be limited.
AST JANUS OVERSEAS GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek long-term growth of capital.
Principal Investment Policies and Risks:
The Portfolio pursues its objective primarily through investments in common stocks of issuers located outside the
United States. The Portfolio has the flexibility to invest on a worldwide basis in companies and organizations of any
size, regardless of country of organization or place of principal business activity.
The Portfolio normally invests at least 65% of its total assets in securities of issuers from at least five
different countries, excluding the United States. Although the Portfolio intends to invest substantially all of its
assets in issuers located outside the United States, it may at times invest in U.S. issuers and it may at times invest
all of its assets in fewer than five countries or even a single country.
The Portfolio invests primarily in stocks selected for their growth potential. The Sub-advisor generally takes a
"bottom up" approach to choosing investments for the Portfolio. In other words, the Sub-advisor seeks to identify
individual companies with earnings growth potential that may not be recognized by the market at large, regardless of
where the companies are organized or where they primarily conduct business. Although themes may emerge in the Portfolio,
securities are generally selected without regard to any defined allocation among countries, geographic regions or
industry sectors, or other similar selection procedure. Current income is not a significant factor in choosing
investments, and any income realized by the Portfolio will be incidental to its objective.
As with any common stock fund, the fundamental risk associated with the Portfolio is the risk that the value of
the stocks it holds might decrease. Stock values may fluctuate in response to the activities of an individual company or
in response to general market and/or economic conditions. As a fund that invests primarily in the securities of foreign
issuers, the risk associated with the Portfolio may be greater than a fund investing primarily in domestic securities.
For a further discussion of the risks involved in investing in foreign securities, see this Prospectus under "Certain
Risk Factors and Investment Methods." In addition, the Portfolio may invest to some degree in smaller or newer issuers,
which are more likely to realize substantial growth as well as suffer significant losses than larger or more established
issuers.
The Portfolio generally intends to purchase securities for long-term investment rather than short-term gains.
However, short-term transactions may occur as the result of liquidity needs, securities having reached a desired price or
yield, anticipated changes in interest rates or the credit standing of an issuer, or by reason of economic or other
developments not foreseen at the time the investment was made. To a limited extent, the Portfolio may purchase
securities in anticipation of relatively short-term price gains. The Portfolio may also sell one security and
simultaneously purchase the same or a comparable security to take advantage of short-term differentials in bond yields or
securities prices.
Special Situations. The Portfolio may invest in "special situations" from time to time. A special situation
arises when, in the opinion of the Sub-advisor, the securities of a particular issuer will be recognized and increase in
value due to a specific development with respect to that issuer. Developments creating a special situation might include
a new product or process, a technological breakthrough, a management change or other extraordinary corporate event, or
differences in market supply of and demand for the security. Investment in special situations may carry an additional
risk of loss in the event that the anticipated development does not occur or does not attract the expected attention.
Other Investments:
The Portfolio may invest to a lesser degree in types of securities other than common stocks, including preferred
stocks, warrants, convertible securities and debt securities. The Portfolio is subject to the following percentage
limitations on investing in certain types of debt securities:
-- 35% of its assets in bonds rated below investment grade ("junk" bonds).
-- 25% of its assets in mortgage- and asset-backed securities.
-- 10% of its assets in zero coupon, pay-in-kind and step coupon securities (securities that do not, or may not
under certain circumstances, make regular interest payments).
The Portfolio may make short sales "against the box." In addition, the Portfolio may invest in the following types of
securities and engage in the following investment techniques:
Futures, Options and Other Derivative Instruments. The Portfolio may enter into futures contracts on securities,
financial indices and foreign currencies and options on such contracts and may invest in options on securities, financial
indices and foreign currencies, forward contracts and interest rate swaps and swap-related products (collectively
"derivative instruments"). The Portfolio intends to use most derivative instruments primarily to hedge the value of its
portfolio against potential adverse movements in securities prices, foreign currency markets or interest rates. To a
limited extent, the Portfolio may also use derivative instruments for non-hedging purposes such as seeking to increase
income. The Portfolio may also use a variety of currency hedging techniques, including forward currency contracts, to
manage exchange rate risk with respect to investments exposed to foreign currency fluctuations.
Index/structured Securities. The Portfolio may invest in indexed/structured securities, which typically are
short- to intermediate-term debt securities whose value at maturity or interest rate is linked to currencies, interest
rates, equity securities, indices, commodity prices or other financial indicators. Such securities may offer growth
potential because of anticipated changes in interest rates, credit standing, currency relationships or other factors
For more information on the types of securities and instruments other than common stocks in which the Portfolio
may invest and their risks, see this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. When the Sub-advisor believes that market conditions are not favorable for profitable
investing or when the Sub-advisor is otherwise unable to locate favorable investment opportunities, the Portfolio's
investments may be hedged to a greater degree and/or its cash or similar investments may increase. In other words, the
Portfolio does not always stay fully invested in stocks and bonds. The Portfolio's cash and similar investments may
include high-grade commercial paper, certificates of deposit, repurchase agreements and money market funds managed by the
Sub-advisor. While the Portfolio is in a defensive position, the opportunity to achieve its investment objective of
long-term growth of capital will be limited.
AST AMERICAN CENTURY INTERNATIONAL GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Principal Investment Policies and Risks:
The Portfolio will seek to achieve its investment objective by investing primarily in equity securities of
international companies that the Sub-advisor believes will increase in value over time. The Sub-advisor uses a growth
investment strategy it developed that looks for companies with earnings and revenue growth. Ideally, the Sub-advisor
looks for companies whose earnings and revenues are not only growing, but are growing at an accelerating pace.
Accelerating growth is shown, for example, by growth that is faster this quarter than last or faster this year than the
year before. For purposes of the Portfolio, equity securities include common stocks, preferred stocks and convertible
securities.
The Sub-advisor tracks financial information for thousands of companies to research and select the stocks it
believes will be able to sustain accelerating growth. This strategy is based on the premise that, over the long term,
the stocks of companies with accelerating earnings and revenues have a greater-than-average chance to increase in value.
The Sub-advisor recognizes that, in addition to locating strong companies with accelerating earnings, the
allocation of assets among different countries and regions also is an important factor in managing an international
portfolio. For this reason, the Sub-advisor will consider a number of other factors in making investment selections,
including the prospects for relative economic growth among countries or regions, economic and political conditions,
expected inflation rates, currency exchange fluctuations and tax considerations. Under normal conditions, the Portfolio
will invest at least 65% of its assets in equity securities of issuers from at least three countries outside of the
United States. In order to maintain investment flexibility, the Portfolio has not otherwise established geographic
requirements for asset distribution.
While the Portfolio's focus will be on issuers in developed markets, the Sub-advisor expects to invest to some
degree in issuers in developing countries. The Portfolio may make foreign investments either directly in foreign
securities, or indirectly by purchasing depositary receipts. Securities purchased in foreign markets may either be
traded on foreign securities exchanges or in the over-the-counter markets.
As with all stocks, the value of the stocks held by the Portfolio can decrease as well as increase. As a fund
investing primarily in equity securities of foreign issuers, the Portfolio may be subject to a level of risk and share
price fluctuation higher than most funds that invest primarily in domestic equities. Foreign companies may be subject to
greater economic risks than domestic companies, and foreign securities are subject to certain risks relating to
political, regulatory and market structures and events that domestic securities are not subject to. To the extent the
Portfolio invests in securities of issuers in developing counties, the Portfolio may be subject to even greater levels of
risk and share price fluctuation.
Other Investments:
Securities of U.S. issuers may be included in the Portfolio from time to time. The Portfolio also may invest in
bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The
Portfolio will limit its purchases of debt securities to investment grade obligations. The Portfolio may enter into
non-leveraged stock index futures contracts and may make short sales "against the box."
Derivative Securities. The Portfolio may invest in derivative securities. Certain of these derivative
securities may be described as "index/structured" securities, which are securities whose value or performance is linked
to other equity securities (as in the case of depositary receipts), currencies, interest rates, securities indices or
other financial indicators ("reference indices"). The Portfolio may not invest in a derivative security unless the
reference index or the instrument to which it relates is an eligible investment for the Portfolio. For example, a
security whose underlying value is linked to the price of oil would not be a permissible investment because the Portfolio
may not invest in oil and gas leases or futures. The Portfolio may make short sales "against the box."
Forward Currency Exchange Contracts. As a fund investing primarily in foreign securities, the value of the
Portfolio will be affected by changes in the exchange rates between foreign currencies and the U.S. dollar. To protect
against adverse movements in exchange rates, the Portfolio may, for hedging purposes only, enter into forward foreign
currency exchange contracts. The Portfolio may enter into a forward contract to "lock-in" an exchange rate for a
specific purchase or sale of a security. Less frequently, the Portfolio may enter into a forward contract to seek to
protect its holdings in a particular currency from a decline in that currency. Predicting the relative future values of
currencies is very difficult, and there is no assurance that any attempt to reduce the risk of adverse currency movements
through the use of forward contracts will be successful.
Indirect Foreign Investments. The Portfolio may invest up to 10% of its assets in certain foreign countries
indirectly through investment funds and registered investment companies that invest in those countries. If the Portfolio
invests in investment companies, it will bear its proportionate share of the costs incurred by such companies, including
any investment advisory fees.
Additional information about the securities that the Portfolio may invest in and their risks is included below
under "Certain Risk Factors and Investment Methods."
Temporary Investments. Under exceptional market or economic conditions, the Portfolio may temporarily invest all
or a substantial portion of its assets in cash or investment-grade short-term securities. While the Portfolio is in a
defensive position, the ability to achieve its investment objective of capital growth may be limited.
AST AMERICAN CENTURY INTERNATIONAL GROWTH PORTFOLIO II:
The investment objective, policies and risks of the Portfolio (formerly, the AST T. Rowe Price International Equity
Portfolio) are substantially identical to those of the AST American Century International Growth Portfolio as described
immediately above.
AST MFS GLOBAL EQUITY PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Principal Investment Policies and Risks:
The Portfolio invests, under normal market conditions, at least 65% of its total assets in common stocks and
related securities, such as preferred stock, convertible securities and depositary receipts, of U.S. and foreign issuers
(including issuers in developing countries).
The Portfolio focuses on companies that the Sub-advisor believes have favorable growth prospects and attractive
valuations based on current and expected earnings or cash flow. The Portfolio generally seeks to purchase securities of
companies with relatively large market capitalizations relative to the market in which they are traded. The Portfolio's
investments may include securities traded in the over-the-counter markets, rather than on securities exchanges.
The Sub-advisor uses a "bottom up," as opposed to "top down," investment style in managing the Portfolio. This
means that securities are selected based upon fundamental analysis of individual companies (such as analysis of the
companies' earnings, cash flows, competitive position and management abilities) by the Sub-advisor.
As a fund that invests primarily in common stocks, the value of the securities held by the Portfolio may decline,
either because of changing economic, political or market conditions, or because of the economic condition of the company
that issued the security. As a global fund that invests in both U.S. and foreign securities, the Portfolio's level of
risk may be lower than that of many international funds but higher than that of many domestic equity funds. The
Portfolio's investments in foreign stocks may cause the risk and degree of share price fluctuation of the Portfolio to be
greater than a fund investing primarily in domestic securities. The risks of investing in foreign securities, which are
described in more detail below under "Certain Risk Factors and Investment Methods," include risks relating to political,
social and economic conditions abroad, risks resulting from differing regulatory standards in non-U.S. markets, and
fluctuations in currency exchange rates. To the extent the Portfolio invests in the securities of issuers in developing
countries, the risks relating to investing in foreign securities likely will be accentuated. The Portfolio may also be
subject to increased risk if it makes significant investments in securities traded over-the-counter, because such
securities are frequently those of smaller companies that generally trade less frequently and are more volatile than the
securities of larger companies.
Other Investments:
Although the Portfolio will invest primarily in common stocks and related securities, the Portfolio may purchase
and sell futures contracts and related options on securities indices, foreign currencies and interest rates for hedging
and non-hedging purposes. The Portfolio may also enter into forward contracts for the purchase or sale of foreign
currencies for hedging and non-hedging purposes. The Portfolio may purchase and write (sell) options on securities,
stock indices and foreign currencies. The Portfolio may also purchase warrants.
For more information on some of the types of securities other than common stocks in which the Portfolio may
invest, see this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. The Portfolio may depart from its principal investment strategy by temporarily investing
for defensive purposes when adverse market, economic or political conditions exist. When investing for defensive
purposes, the Portfolio may hold cash or invest in cash equivalents, such as short-term U.S. government securities,
commercial paper and bank instruments. While the Portfolio is in a defensive position, the opportunity to achieve its
investment objective will be limited.
AST JANUS SMALL-CAP GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is capital growth.
Principal Investment Policies and Risks:
The Portfolio pursues its objective by normally investing at least 65% of its total assets in the common stocks
of small-sized companies. For purposes of the Portfolio, small-sized companies are those that have market
capitalizations of less than $1.5 billion or annual gross revenues of less than $500 million. To a lesser extent, the
Portfolio may also invest in stocks of larger companies with potential for capital growth.
The Sub-advisor generally takes a "bottom up" approach to building the Portfolio. In other words, it seeks to
identify individual companies with earnings growth potential that may not be recognized by the market at large. Although
themes may emerge in the Portfolio, securities are generally selected without regard to any defined industry sector or
other similar selection procedure. Current income is not a significant factor in choosing investments.
Because the Portfolio invests primarily in common stocks, the fundamental risk of investing in the Portfolio is
that the value of the stocks it holds might decrease. Stock values may fluctuate in response to the activities of an
individual company or in response to general market or economic conditions. As a Portfolio that invests primarily in
smaller or newer issuers, the Portfolio may be subject to greater risk of loss and share price fluctuation than funds
investing primarily in larger or more established issuers. Smaller companies are more likely to realize substantial
growth as well as suffer significant losses than larger issuers. Smaller companies may lack depth of management, they
may be unable to generate funds necessary for growth or potential development internally or to generate such funds
through external financing on favorable terms, or they may be developing or marketing products or services for which
there are not yet, and may never be, established markets. In addition, such companies may be subject to intense
competition from larger competitors, and may have more limited trading markets than the markets for securities of larger
issuers.
While the Sub-advisor tries to reduce the risk of the Portfolio by diversifying its assets among issuers (so that
the effect of any single holding is reduced), and by not concentrating its assets in any particular industry, there is no
assurance that these effort will be successful in reducing the risks to which the Portfolio is subject.
The Portfolio generally intends to purchase securities for long-term investment rather than short-term gains.
However, short-term transactions may occur as the result of liquidity needs, securities having reached a desired price or
yield, anticipated changes in interest rates or the credit standing of an issuer, or by reason of economic or other
developments not foreseen at the time the investment was made. To a limited extent, the Portfolio may purchase
securities in anticipation of relatively short-term price gains. The Portfolio may also sell one security and
simultaneously purchase the same or a comparable security to take advantage of short-term differentials in bond yields or
securities prices.
Special Situations. The Portfolio may invest in "special situations" from time to time. A special situation
arises when, in the opinion of the Sub-advisor, the securities of a particular issuer will be recognized and increase in
value due to a specific development with respect to that issuer. Developments creating a special situation might include
a new product or process, a technological breakthrough, a management change or other extraordinary corporate event, or
differences in market supply of and demand for the security. Investment in special situations may carry an additional
risk of loss in the event that the anticipated development does not occur or does not attract the expected attention.
Other Investments:
The Portfolio may invest to a lesser degree in types of securities other than common stocks, including preferred
stocks, warrants, convertible securities and debt securities. The Portfolio is subject to the following percentage
limitations on investing in certain types of debt securities:
-- 35% of its assets in bonds rated below investment grade by the primary rating agencies ("junk" bonds).
-- 25% of its assets in mortgage- and asset-backed securities.
-- 10% of its assets in zero coupon, pay-in-kind and step coupon securities (securities that do not, or may not
under certain circumstances, make regular interest payments).
The Portfolio may make short sales "against the box." In addition, the Portfolio may invest in the following types of
securities and engage in the following investment techniques:
Index/structured Securities. The Portfolio may invest in indexed/structured securities, which typically are
short- to intermediate-term debt securities whose value at maturity or interest rate is linked to currencies, interest
rates, equity securities, indices, commodity prices or other financial indicators. Such securities may offer growth
potential because of anticipated changes in interest rates, credit standing, currency relationships or other factors.
Foreign Securities. The Portfolio may invest without limit in foreign equity and debt securities. The Portfolio
may invest directly in foreign securities denominated in foreign currencies, or may invest through depositary receipts or
passive foreign investment companies. Generally, the same criteria are used to select foreign securities as domestic
securities. The Sub-advisor seeks companies that meet these criteria regardless of country of organization or principal
business activity. However, certain factors such as expected inflation and currency exchange rates, government policies
affecting businesses, and a country's prospects for economic growth may warrant consideration in selecting foreign
securities.
Futures, Options and Other Derivative Instruments. The Portfolio may enter into futures contracts on securities,
financial indices and foreign currencies and options on such contracts, and may invest in options on securities,
financial indices and foreign currencies, forward contracts and interest rate swaps and swap-related products
(collectively "derivative instruments"). The Portfolio intends to use most derivative instruments primarily to hedge the
value of its portfolio against potential adverse movements in securities prices, currency exchange rates or interest
rates. To a limited extent, the Portfolio may also use derivative instruments for non-hedging purposes such as seeking
to increase income.
For more information on the types of securities other than common stocks in which the Portfolio may invest, see
this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. When the Sub-advisor believes that market conditions are not favorable for profitable
investing or when the Sub-advisor is otherwise unable to locate favorable investment opportunities, the Portfolio's
investments may be hedged to a greater degree and/or its cash or similar investments may increase. In other words, the
Portfolio does not always stay fully invested in stocks and bonds. The Portfolio's cash and similar investments may
include high-grade commercial paper, certificates of deposit, repurchase agreements and money market funds managed by the
Sub-advisor. While the Portfolio is in a defensive position, the opportunity to achieve its investment objective of
capital growth will be limited.
AST KEMPER SMALL-CAP GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek maximum growth of investors' capital from a
portfolio primarily of growth stocks of smaller companies.
Principal Investment Policies and Risks:
At least 65% of the Portfolio's total assets normally will be invested in the equity securities of smaller
companies, i.e., those having a market capitalization of $2 billion or less at the time of investment, many of which
would be in the early stages of their life cycle. Equity securities include common stocks and securities convertible
into or exchangeable for common stocks, including warrants and rights.
The Portfolio intends to invest primarily in stocks of companies whose earnings per share are expected by the
Sub-advisor to grow faster than the market average ("growth stocks"). Growth stocks tend to trade at higher price to
earnings (P/E) ratios than the general market, but the Sub-advisor believes that the potential for above average earnings
of the stocks in which the Portfolio invests more than justifies their price.
In managing the Portfolio, the Sub-advisor emphasizes stock selection and fundamental research. The Sub-advisor
considers a number of factors in considering whether to invest in a growth stock, including high return on equity and
earnings growth rate, low level of debt, strong balance sheet, good management and industry leadership. Other factors
are patterns of increasing sales growth, the development of new or improved products or services, favorable outlooks for
growth in the industry, the probability of increased operating efficiencies, emphasis on research and development,
cyclical conditions, or other signs that a company may grow rapidly.
The Portfolio seeks attractive areas for investment that arise from factors such as technological advances, new
marketing methods, and changes in the economy and population. Currently, the Sub-advisor believes that such investment
opportunities may be found among:
o companies engaged in high technology fields such as electronics, medical technology and computer software and
specialty retailing;
o companies whose earnings outlooks have improved as the result of changes in the economy, acquisitions, mergers,
new management, changes in corporate strategy or product innovation;
o companies supplying new or rapidly growing services to consumers and businesses in such fields as automation,
data processing, communications, and marketing and finance; and
o companies that have innovative concepts or ideas.
In the selection of investments, long-term capital appreciation will take precedence over short range market
fluctuations. However, the Portfolio may occasionally make investments for short-term capital appreciation. Current
income will not be a significant factor in selecting investments.
Like all common stocks, the market values of the common stocks held by the Portfolio can fluctuate significantly,
reflecting the business performance of the issuing company, investor perception or general economic or financial market
movements. Because of the Portfolio's focus on the stocks of smaller growth companies, investment in the Portfolio may
involve substantially greater than average share price fluctuation and investment risk. A fund focusing on growth stocks
will generally involve greater risk and share price fluctuation than a fund investing primarily in value stocks.
In addition, investments in securities of smaller companies are generally considered to offer greater opportunity
for appreciation and to involve greater risk of depreciation than securities of larger companies. Smaller companies
often have limited product lines, markets or financial resources, and they may be dependent upon one or a few key people
for management. Because the securities of small-cap companies are not as broadly traded as those of larger companies,
they are often subject to wider and more abrupt fluctuations in market price. Additional reasons for the greater price
fluctuations of these securities include the less certain growth prospects of smaller firms and the greater sensitivity
of small companies to changing economic conditions.
Other Investments:
In addition to investing in common stocks, the Portfolio may also invest to a limited degree in preferred stocks
and debt securities when they are believed by the Sub-advisor to offer opportunities for capital growth. Other types of
securities in which the Portfolio may invest include:
Foreign Securities. The Portfolio may invest in securities of foreign issuers in the form of depositary receipts
or that are denominated in U.S. dollars. Foreign securities in which the Portfolio may invest include any type of
security consistent with its investment objective and policies. The prices of foreign securities may be more volatile
than those of domestic securities.
Options, Financial Futures and Other Derivatives. The Portfolio may deal in options on securities and securities
indices, which options may be listed for trading on a national securities exchange or traded over-the-counter. Options
transactions may be used to pursue the Portfolio's investment objective and also to hedge against currency and market
risks, but are not intended for speculation. The Portfolio may engage in financial futures transactions on commodities
exchanges or boards of trade in an attempt to hedge against market risks.
In addition to options and financial futures, the Portfolio may invest in a broad array of other "derivative"
instruments in an effort to manage investment risk, to increase or decrease exposure to an asset class or benchmark (as a
hedge or to enhance return), or to create an investment position indirectly. The types of derivatives and techniques
used by the Portfolio may change over time as new derivatives and strategies are developed or as regulatory changes occur.
Additional information about the other investments that the Portfolio may make and their risks is included below
under "Certain Risk Factors and Investment Methods."
Temporary Investments. When a defensive position is deemed advisable because of prevailing market conditions,
the Portfolio may invest without limit in high grade debt securities, commercial paper, U.S. Government securities or
cash or cash equivalents, including repurchase agreements. While the Portfolio is in a defensive position, the
opportunity to achieve its investment objective of maximum capital growth will be limited.
AST FEDERATED AGGRESSIVE GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Principal Investment Policies and Risks:
The Portfolio pursues its investment objective by investing in equity securities of companies offering superior
prospects for earnings growth. The Portfolio focuses its investments on the equity securities of smaller companies, but
it is not subject to any specific market capitalization requirements. The Portfolio may invest in foreign issuers
through American Depositary Receipts.
Using its own quantitative process, the Sub-advisor rates the future performance potential of companies. The
Sub-advisor evaluates each company's earnings quality in light of its current valuation to narrow the list of attractive
companies. The Sub-advisor then evaluates product positioning, management quality and sustainability of current growth
trends of those companies. Using this type of fundamental analysis, the Sub-advisor selects the most promising companies
for the Portfolio.
Companies with similar characteristics may be grouped together in broad categories called sectors. In
determining the amount to invest in a security, the Sub-advisor limits the Portfolio's exposure to each business sector
that comprises the S&P 500 Index. The Portfolio's allocation to a sector will be no more than 300% of the Index's
allocation to that sector or 30% of the total portfolio, whichever is greater. As the Sub-advisor allocates more of the
Portfolio's holdings to a particular sector, the Portfolio's performance will be more susceptible to the economic,
business or other developments that generally affect that sector.
The Portfolio's strategies with respect to security analysis, market capitalization, and sector allocation are
designed to produce a portfolio of stocks whose long-term growth prospects are significantly above those of the S&P 500
Index.
As with any fund investing primarily in equity securities, the Portfolio is subject to the risk that the value of
equity securities in the Portfolio will decline. These declines may occur in the form of a sustained trend or a drastic
movement. The prices of individual portfolio stocks will fluctuate because of factors specific to that company or
because of changes in stock valuations generally.
Because of the Portfolio's emphasis on small company growth stocks, the Portfolio will likely be subject to a
degree of risk and share price fluctuation greater than that of many other equity funds. Generally, the smaller the
market capitalization of a company, the fewer the number of shares traded daily, the less liquid its stock and the more
volatile its price. Companies with smaller market capitalizations also tend to have unproven track records, a limited
product or service base and limited access to capital.
Due to their relatively high valuations, growth stocks are typically more volatile than value stocks. For
instance, the price of a growth stock may experience a larger decline on a forecast of lower earnings, a negative
fundamental development, or an adverse market development. Further, growth stocks may not pay dividends or may pay lower
dividends than value stocks. This means they depend more on price changes for returns and may be more adversely affected
in a down market compared to value stocks that pay higher dividends. In addition, the Portfolio's level of risk and
share price fluctuation may increase to the extent it emphasizes investments in the securities of foreign companies.
Other Investments:
The Portfolio may attempt to manage market risk by buying and selling financial futures contracts and options.
This may include the purchase of futures contracts as a substitute for direct investments in stocks. It may also include
the purchase and sale of options to protect against general declines in stock prices.
Additional information on the types of securities in which the Portfolio may invest, including futures contracts,
options and American Depositary Receipts, is included in this Prospectus under "Certain Risk Factors and Investment
Methods."
Temporary Investments. The Portfolio may temporarily depart from its principal investment strategies by
investing its assets in cash and short-term debt securities and similar obligations. It may do this to minimize
potential losses and maintain liquidity to meet shareholder redemptions during adverse market conditions. When the
Portfolio is in such a defensive position, the ability to achieve its investment objective of capital growth may be
limited.
AST LORD ABBETT SMALL CAP VALUE PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek long-term capital growth.
Principal Investment Policies and Risks:
The Portfolio will seek its objective through investments primarily in equity securities that are believed to be
undervalued in the marketplace. Typically, in choosing stocks, the Sub-advisor looks for companies the following process:
o Quantitative research is performed to evaluate various criteria, including the price of shares in relation to
book value, sales, asset value, earnings, dividends and cash flow;
o Fundamental research is conducted to assess the dynamics of each company within its industry and within the
company. The Sub-advisor evaluates the company's business strategies by assessing management's ability to execute
the strategies, and evaluating the adequacy of its financial resources.
Usually, at least 65% of the Portfolio's total assets will be invested in common stocks issued by smaller, less
well-known companies (with market capitalizations of less than $1 billion) selected on the basis of fundamental
investment analysis. The Portfolio may invest up to 35% of its assets in foreign securities.
The stocks in which the Portfolio generally invests are those which, in the Sub-advisor's judgment, are selling
below their intrinsic value and at prices that do not adequately reflect their long-term business potential. Selected
smaller stocks may be undervalued because they are often overlooked by many investors, or because the public is overly
pessimistic about a company's prospects. Accordingly, their prices can rise either as a result of improved business
fundamentals, particularly when earnings grow faster than general expectations, or as more investors come to recognize
the company's underlying potential. The price of shares in relation to book value, sales, asset value, earnings,
dividends and cash flow, both historical and prospective, are key determinants in the security selection process. These
criteria are not rigid, and other stocks may be included in the Portfolio if they are expected to help it attain its
objective. Dividend and investment income is of incidental importance.
Although the Portfolio typically will hold a large number of securities and follow a relatively conservative
value-driven investment strategy, the Portfolio does entail above-average investment risk and share price fluctuation
compared to the overall U.S. stock market. The small capitalization companies in which the Portfolio primarily invests
may offer significant appreciation potential. However, smaller companies may carry more risk than larger companies.
Generally, small companies rely on limited product lines, markets and financial resources, and these and other factors
may make them more susceptible to setbacks or economic downturns. Smaller companies normally have fewer shares
outstanding and trade less frequently than large companies. Therefore, the securities of smaller companies may be
subject to wider price fluctuations.
Other Investments:
The Portfolio may engage in various portfolio strategies to reduce certain risks of its investments and to
enhance income, but not for speculation. The Portfolio may purchase and write (sell) put and covered call options on
equity securities or stock indices that are traded on national securities exchanges. The Portfolio may purchase and sell
stock index futures for certain hedging and risk management purposes. New financial products and risk management
techniques continue to be developed and the Portfolio may use these new investments and techniques to the extent
consistent with its investment objective and policies.
The Portfolio may invest up to 35% of its net assets (at the time of investment) in securities (of the type
described above) that are primarily traded in foreign countries. The Portfolio may enter into forward foreign currency
exchange contracts in connection with its investments in foreign securities. The Portfolio also may purchase foreign
currency put options and write foreign currency call options on U.S. exchanges or U.S. over-the-counter markets. The
Portfolio may write a call option on a foreign currency only in conjunction with a purchase of a put option on that
currency.
The Portfolio also may invest in preferred stocks and bonds that either have attached warrants or are convertible
into common stocks.
Additional information about these investments and investment techniques and their risks is included below under
"Certain Risk Factors and Investment Methods."
Temporary Investments. For temporary defensive purposes or pending other investments, the Portfolio may invest
in high-quality, short-term debt obligations of banks, corporations or the U.S. Government. While the Portfolio is in a
defensive position, its ability to achieve its investment objective of long-term capital growth will be limited.
AST GABELLI SMALL-CAP VALUE PORTFOLIO:
Investment Objective: The investment objective of the Portfolio (formerly, the AST T. Rowe Price Small Company Value
Portfolio) is to provide long-term capital growth by investing primarily in small-capitalization stocks that appear to be
undervalued.
Principal Investment Policies and Risks:
The Portfolio will normally invest at least 65% of its total assets in stocks and equity-related securities of
small companies ($1 billion or less in market capitalization). Reflecting a value approach to investing, the Portfolio
will seek the stocks of companies whose current stock prices do not appear to adequately reflect their underlying value
as measured by assets, earnings, cash flow or business franchises. The Sub-advisor's research team seeks to identify
companies that appear to be undervalued by various measures, and may be temporarily out of favor, but have good prospects
for capital appreciation. In selecting investments, the Sub-advisor generally looks to the following:
(1) Low price/earnings, price/book value or price/cash flow ratios relative to the company's peers.
(2) Low stock price relative to a company's underlying asset values.
(3) A sound balance sheet and other positive financial characteristics.
The Sub-advisor then determines whether there is an emerging catalyst that will focus investor attention on the
underlying assets of the company, such as takeover efforts, a change in management, or a plan to improve the business
through restructuring or other means.
The Portfolio may sell securities for a variety of reasons, such as to secure gains, limit losses or re-deploy
assets into more promising opportunities. The Portfolio will not sell a stock just because the company has grown to a
market capitalization of more than $1 billion, and it may on occasion purchase companies with a market cap of more than
$1 billion.
As with all stock funds, the Portfolio's share price can fall because of weakness in the securities market as a
whole, in particular industries or in specific holdings. Investing in small companies involves greater risk of loss than
is customarily associated with more established companies. Stocks of small companies may be subject to more abrupt or
erratic price movements than larger company stocks. Small companies often have limited product lines, markets, or
financial resources, and their management may lack depth and experience. While a value approach to investing is
generally considered to involve less risk than a growth approach, investing in value stocks carries the risks that the
market will not recognize the stock's intrinsic value for a long time, or that a stock judged to be undervalued may
actually be appropriately priced.
Other Investments:
Although the Portfolio will invest primarily in U.S. common stocks, it may also purchase other types of
securities, for example, preferred stocks, convertible securities, warrants and bonds when considered consistent with the
Portfolio's investment objective and policies. The Portfolio may purchase preferred stock for capital appreciation where
the issuer has omitted, or is in danger of omitting, payment of the dividend on the stock. Debt securities would be
purchased in companies that meet the investment criteria for the Portfolio.
The Portfolio may invest up to 20% of its total assets in foreign securities, including American Depositary
Receipts and securities of companies in developing countries, and may enter into forward foreign currency exchange
contracts. (The Portfolio may invest in foreign cash items as described below in excess of this 20% limit.) The
Portfolio may enter into stock index or currency futures contracts (or options thereon) for hedging purposes or to
provide an efficient means of regulating the Portfolio's exposure to the equity markets. The Portfolio may also write
(sell) call and put options and purchase put and call options on securities, financial indices, and currencies. The
Portfolio may invest up to 10% of its total assets in hybrid instruments, which combine the characteristics of futures,
options and securities. For additional information about these investments and their risks, see this Prospectus under
"Certain Risk Factors and Investment Methods."
Temporary Investments. The Portfolio may establish and maintain cash reserves without limitation for temporary
defensive purposes. The Portfolio's reserves may be invested in high-quality domestic and foreign money market
instruments, including repurchase agreements and money market mutual funds managed by the Sub-advisor. Cash reserves
also provide flexibility in meeting redemptions and paying expenses. While the Portfolio is in a defensive position, the
opportunity to achieve its investment objective of long-term capital growth may be limited.
AST JANUS MID-CAP GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek long-term growth of capital.
Principal Investment Policies and Risks:
The Portfolio pursues its objective by investing primarily in common stocks selected for their growth potential,
and normally invests at least 65% of its equity assets in medium-sized companies. For purposes of the Portfolio,
medium-sized companies are those whose market capitalizations (measured at the time of investment) fall within the range
of companies in the Standard & Poor's MidCap 400 Index (the "S&P 400"). The market capitalizations within the S&P 400
will vary, but as of December 31, 1999, they ranged from approximately $170 million to $37 billion. The Sub-advisor
generally takes a "bottom up" approach to choosing investments for the Portfolio. In other words, the Sub-advisor seeks
to identify individual companies with earnings growth potential that may not be recognized by the market at large. The
Sub-advisor makes this assessment by looking at companies one at a time, regardless of size, country of organization,
place of principal business activity, or other similar selection criteria.
Because the Portfolio may invest substantially all of its assets in common stocks, the main risk of investing in
the Portfolio is that the value of the stocks it holds might decrease. Stock values may fluctuate in response to the
activities of an individual company or in response to general market or economic conditions. As a fund that invests
primarily in mid-cap companies, the Portfolio's risk and share price fluctuation can be expected to be more than that of
many funds investing primarily in large-cap companies, but less than that of many funds investing primarily in small-cap
companies. In general, the smaller the company, the more likely it is to suffer significant losses as well as to realize
substantial growth. Smaller companies may lack depth of management, they may be unable to generate funds necessary for
growth or potential development, or they may be developing or marketing products or services for which there are not yet,
and may never be, established markets. In addition, such companies may be subject to intense competition from larger
companies, and may have more limited trading markets than the markets for securities of larger issuers.
The Portfolio is non-diversified. In other words, it may hold larger positions in a smaller number of securities
than a diversified fund. As a result, a single security's increase or decrease in value may have a greater impact on the
Portfolio's share price and total return. Because of this, the Portfolio's share price can be expected to fluctuate more
than a comparable diversified fund.
The Portfolio generally intends to purchase securities for long-term investment rather than short-term gains.
However, short-term transactions may occur as the result of liquidity needs, securities having reached a desired price or
yield, anticipated changes in interest rates or the credit standing of an issuer, or by reason of economic or other
developments not foreseen at the time the investment was made. To a limited extent, the Portfolio may purchase
securities in anticipation of relatively short-term price gains. The Portfolio may also sell one security and
simultaneously purchase the same or a comparable security to take advantage of short-term differentials in bond yields or
securities prices.
Special Situations. The Portfolio may invest in "special situations". A "special situation" arises when, in the
opinion of the Sub-advisor, the securities of a particular company will be recognized and appreciate in value due to a
specific development, such as a technological breakthrough, management change or new product at that company. Investment
in "special situations" carries an additional risk of loss in the event that the anticipated development does not occur
or does not attract the expected attention.
Other Investments:
Although the Sub-advisor expects to invest primarily in domestic and foreign equity securities, which may include
preferred stocks, common stocks, warrants and securities convertible into common or preferred stocks, the Portfolio may
also invest to a lesser degree in other types of securities, such as debt securities. The Portfolio is subject to the
following percentage limitations on investing in certain types of debt securities:
-- 35% of its assets in bonds rated below investment grade ("junk" bonds).
-- 10% of its assets in zero coupon, pay-in-kind and step coupon securities (securities that do not, or may not
under certain circumstances, make regular interest payments).
The Portfolio may make short sales "against the box." In addition, the Portfolio may invest in the following types of
securities and engage in the following investment techniques:
Index/structured Securities. The Portfolio may invest in indexed/structured securities, which typically are
short- to intermediate-term debt securities whose value at maturity or interest rate is linked to currencies, interest
rates, equity securities, indices, commodity prices or other financial indicators. Such securities may be positively or
negatively indexed (i.e., their value increase or decrease if the reference index or instrument appreciates).
Foreign Securities. The Portfolio may invest up to 25% of its net assets in foreign securities denominated in
foreign currencies and not publicly traded in the United States. The Portfolio may invest directly in foreign securities
denominated in a foreign currency, or may invest through depository receipts or passive foreign investment companies.
Generally, the same criteria are used to select foreign securities as domestic securities. Foreign securities are
generally selected on a stock-by-stock basis without regard to any defined allocation among countries or geographic
regions. However, certain factors such as expected levels of inflation, government policies influencing business
conditions, the outlook for currency relationships, and prospects for economic growth among countries, regions or
geographic areas may warrant greater consideration in selecting foreign securities.
For more information on foreign securities and their risks, see this Prospectus under "Certain Risk Factors and
Investment Methods."
Futures, Options and Other Derivative Instruments. The Portfolio may enter into futures contracts on securities,
financial indices and foreign currencies and options on such contracts and may invest in options on securities, financial
indices and foreign currencies, forward contracts and interest rate swaps and swap-related products (collectively
"derivative instruments"). The Portfolio may use derivative instruments to hedge or protect its portfolio from adverse
movements in securities prices, currency exchange rates, and interest rates. To a limited extent, the Portfolio may also
use derivative instruments for non-hedging purposes such as seeking to enhance return.
For more information on the types of securities other than common stocks in which the Portfolio may invest, see
this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. When the Sub-advisor believes that market conditions are unfavorable for profitable
investing, or when the Sub-advisor is otherwise unable to locate attractive investment opportunities, the Portfolio's
cash or similar investments may increase. In other words, the Portfolio does not always stay fully invested in stocks.
Even when the Portfolio is essentially fully invested, some residual amount of Portfolio assets will remain in cash and
similar investments. These investments may include commercial paper, certificates of deposit, repurchase agreements,
short-term debt obligations, and money market funds (including funds managed by the Sub-advisor). When the Portfolio's
investments in cash or similar investments increase, the opportunity to achieve its investment objective of long-term
growth of capital may be limited.
AST ALGER MID-CAP GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek long-term capital growth.
Principal Investment Policies and Risks:
The Portfolio invests primarily in equity securities, such as common or preferred stocks, that are listed on U.S.
exchanges or in the over-the-counter market.
The Portfolio invests primarily in growth stocks. The Sub-advisor believes that these stocks are those of two
types of companies:
o High Unit Volume Growth Companies. These are vital, creative companies that offer goods or services to a rapidly
expanding marketplace. They include both established and emerging firms, offering new or improved products, or firms
simply fulfilling an increased demand for an existing product line.
o Positive Life Cycle Change Companies. These are companies experiencing a major change that is expected to
produce advantageous results. These changes may be as varied as new management, products or technologies,
restructurings or reorganizations, or mergers and acquisitions.
The Portfolio focuses on midsize companies with promising potential. Under normal circumstances, the Portfolio
invests primarily in the equity securities of companies having a market capitalization within the range of companies in
the S&P(R)MidCap 400 Index. The Portfolio may invest up to 35% of its total assets in equity security of companies that,
at the time of purchase, have total market capitalization outside the range of companies in the S&P MidCap 400 Index and
in excess of 35% (up to 100% of its assets) during temporary defensive periods.
As with any fund investing primarily in equity securities, the value of the securities held by the Portfolio may
decline. These declines can be substantial. In addition, the growth stocks in which the Portfolio invests primarily
tend to fluctuate in price more than other types of stocks. Prices of growth stocks tend to be higher in relation to
their companies' earnings, and may be more sensitive to market, political and economic developments than other stocks.
Because the Portfolio invests primarily in the securities of medium-sized companies, there is a possibility of
greater risk than a fund that invests in larger, more established companies. Increased risk may result from such factors
as inexperienced management and limited financial resources.
Other Investments:
Foreign Securities. The Portfolio may invest up to 20% of the value of its total assets, measured at the time of
investment, in equity and debt securities that are denominated in foreign currencies. There is no limitation on the
percentage of the Portfolio's assets that may be invested in securities of foreign companies that are denominated in U.S.
dollars. In addition, the Portfolio may enter into foreign currency transactions, including forward foreign currency
contracts and options on foreign currencies, to manage currency risks, to facilitate transactions in foreign securities,
and to repatriate dividend or interest income received in foreign currencies.
Short sales "against the box." The Portfolio may from time to time makes short sales "against the box."
A discussion of these investments and their risks is included in this Prospectus under "Certain Risk Factors and
Investment Methods."
Temporary Investments. The Portfolio may invest up to 100% of its assets in cash, commercial paper, high-grade
bonds or cash equivalents for temporary defensive reasons if the Sub-advisor believes that adverse market or other
conditions warrant. This is to attempt to protect the Portfolio from a temporary unacceptable risk of loss. However,
while the Portfolio is in a defensive position, the opportunity to achieve its investment objective of long-term capital
growth will be limited.
AST NEUBERGER BERMAN MID-CAP GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Principal Investment Policies and Risks:
To pursue its objective, the Portfolio primarily invests in the common stocks of mid-cap companies. Companies
with equity market capitalizations from $300 million to $10 billion at the time of investment are considered mid-cap
companies for purposes of the Portfolio. The Trust may revise this definition based on market conditions. Some of the
Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. The
Portfolio seeks to reduce risk by diversifying among many companies and industries. The Portfolio does not seek to
invest in securities that pay dividends or interest, and any such income is incidental.
The Portfolio is normally managed using a growth-oriented investment approach. For growth investors, the aim is
to invest in companies that are already successful but could be even more so. The Sub-advisor looks for fast-growing
companies that are in new or rapidly evolving industries. Factors in identifying these companies may include
above-average growth of earnings or earnings that exceed analysts' expectations. The Sub-advisor may also look for other
characteristics in a company, such as financial strength, a strong position relative to competitors and a stock price
that is reasonable in light of its growth rate.
The Sub-advisor follows a disciplined selling strategy, and may sell a stock when it reaches a target price,
fails to perform as expected, or appears substantially less desirable than another stock.
As a fund that invests primarily in mid-cap companies, the Portfolio's risk and share price fluctuation can be
expected to be more than that of many funds investing primarily in large-cap companies, but less than that of many funds
investing primarily in small-cap companies. Mid-cap stocks may fluctuate more widely in price than the market as a
whole, may underperform other types of stocks when the market or the economy is not robust, or fall in price or be
difficult to sell during market downturns. In addition, the Portfolio's growth investment program will generally involve
greater risk and price fluctuation than funds that invest in more undervalued securities. Because the prices of growth
stocks tend to be based largely on future expectations, these stocks historically have been more sensitive than value
stocks to bad economic news and negative earnings surprises.
Other Investments:
Although equity securities are normally the Portfolio's primary investments, it may invest in preferred stocks
and convertible securities, as well as the types of securities described below. Additional information about these
investments and the special risk factors that apply to them is included in this Prospectus under "Certain Risk Factors
and Investment Methods."
Fixed Income Securities. The Portfolio may invest up to 35% of its total assets, measured at the time of
investment, in investment grade fixed income or debt securities. If the quality of any fixed income securities held by
the Portfolio deteriorates so that they are no longer investment grade, the Portfolio will sell such securities in an
orderly manner so that its holdings of such securities do not exceed 5% of its net assets.
Foreign Securities. The Portfolio may invest up to 10% of the value of its total assets, measured at the time of
investment, in equity and debt securities that are denominated in foreign currencies. There is no limitation on the
percentage of the Portfolio's assets that may be invested in securities of foreign companies that are denominated in U.S.
dollars. In addition, the Portfolio may enter into foreign currency transactions, including forward foreign currency
contracts and options on foreign currencies, to manage currency risks, to facilitate transactions in foreign securities,
and to repatriate dividend or interest income received in foreign currencies.
Covered Call Options. The Portfolio may try to reduce the risk of securities price or exchange rate changes
(hedge) or generate income by writing (selling) covered call options against securities held in its portfolio, and may
purchase call options in related closing transactions.
Temporary Investments. When the Portfolio anticipates unusual market or other conditions, it may temporarily
depart from its objective of capital growth and invest substantially in high-quality short-term investments. This could
help the Portfolio avoid losses but may mean lost opportunities.
AST NEUBERGER BERMAN MID-CAP VALUE PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Principal Investment Policies and Risks:
To pursue its objective, the Portfolio primarily invests in the common stocks of mid-cap companies. Some of the
Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. The
Portfolio seeks to reduce risk by diversifying among many companies and industries.
Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose
stock prices are undervalued and that may rise in price before other investors realize their worth. Fund managers may
identify value stocks in several ways, including based on earnings, book value or other financial measures. Factors that
the Sub-advisor may use to identify these companies include strong fundamentals, including a low price-to-earnings ratio,
consistent cash flow, and a sound track record through all phases of the market cycle.
The Sub-advisor may also look for other characteristics in a company, such as a strong position relative to
competitors, a high level of stock ownership among management, or a recent sharp decline in stock price that appears to
be the result of a short-term market overreaction to negative news.
The Sub-advisor generally considers selling a stock when it reaches a target price, when it fails to perform as
expected, or when other opportunities appear more attractive.
As a fund that invests primarily in mid-cap companies, the Portfolio's risk and share price fluctuation can be
expected to be more than that of many funds investing primarily in large-cap companies, but less than that of many funds
investing primarily in small-cap companies. Mid-cap stocks may fluctuate more widely in price than the market as a
whole, may underperform other types of stocks when the market or the economy is not robust, or fall in price or be
difficult to sell during market downturns. While value investing historically has involved less risk than investing in
growth companies, the stocks purchased by the Portfolio will remain undervalued during a short or extended period of
time. This may happen because value stocks as a category lose favor with investors compared to growth stocks, or because
the Sub-advisor failed to anticipate which stocks or industries would benefit from changing market or economic conditions.
Other Investments:
Although equity securities are normally the Portfolio's primary investment, it may invest in preferred stocks and
convertible securities, as well as the types of securities described below. Additional information about these
investments and the special risk factors that apply to them is included in this Prospectus under "Certain Risk Factors
and Investment Methods."
Fixed Income Securities. The Portfolio may invest up to 35% of its total assets, measured at the time of
investment, in fixed income or debt securities. The Portfolio may invest up to 15% of its total assets, measured at the
time of investment, in debt securities that are rated below investment grade or comparable unrated securities. There is
no minimum rating on the fixed income securities in which the Portfolio may invest.
Foreign Securities. The Portfolio may invest up to 10% of the value of its total assets, measured at the time of
investment, in equity and debt securities that are denominated in foreign currencies. There is no limitation on the
percentage of the Portfolio's assets that may be invested in securities of foreign companies that are denominated in U.S.
dollars. In addition, the Portfolio may enter into foreign currency transactions, including forward foreign currency
contracts and options on foreign currencies, to manage currency risks, to facilitate transactions in foreign securities,
and to repatriate dividend or interest income received in foreign currencies.
Covered Call Options. The Portfolio may try to reduce the risk of securities price changes (hedge) or generate
income by writing (selling) covered call options against securities held in its portfolio, and may purchase call options
in related closing transactions. The value of securities against which options will be written will not exceed 10% of
the Portfolio's net assets.
Temporary Investments. When the Portfolio anticipates unusual market or other conditions, it may temporarily
depart from its objective of capital growth and invest substantially in high-quality short-term investments. This could
help the Portfolio avoid losses but may mean lost opportunities.
AST ALGER ALL-CAP GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek long-term capital growth.
Principal Investment Policies and Risks:
The Portfolio invests primarily in equity securities, such as common or preferred stocks, that are listed on U.S.
exchanges or in the over-the-counter market. The Portfolio may invest in the equity securities of companies of all
sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of
particular companies and market conditions.
The Portfolio invests primarily in growth stocks. The Sub-advisor believes that these stocks are those of two
types of companies:
High Unit Volume Growth Companies. These are vital, creative companies that offer goods or services to a rapidly
expanding marketplace. They include both established and emerging firms, offering new or improved products, or firms
simply fulfilling an increased demand for an existing product line.
Positive Life Cycle Change Companies. These are companies experiencing a major change that is expected to
produce advantageous results. These changes may be as varied as new management, products or technologies, restructurings
or reorganizations, or mergers and acquisitions.
As with any fund investing primarily in equity securities, the value of the securities held by the Portfolio may
decline. These declines can be substantial. In addition, the growth stocks in which the Portfolio invests primarily
tend to fluctuate in price more than other types of stocks. Prices of growth stocks tend to be higher in relation to
their companies' earnings, and may be more sensitive to market, political and economic developments than other stocks.
The Portfolio's level of risk will vary based upon the size of the companies it invests in at a given time. To the
extent that the Portfolio emphasizes small-cap stocks, it will be subject to a level of risk higher than a fund investing
primarily in more conservative "large-cap" stocks.
Other Investments:
In addition to investing in common and preferred stocks, the Portfolio may invest in securities convertible into
or exchangeable for equity securities, including warrants and rights. The Portfolio may invest up to 20% of its total
assets in foreign securities. (American Depositary Receipts or other U.S. dollar denominated securities of foreign
issuers are not subject to the 20% limitation.)
The Fund may purchase put and call options and write (sell) put and covered call options on securities and
securities indices to increase gain or to hedge against the risk of unfavorable price movements. However, the
Sub-advisor does not currently intend to rely on these option strategies extensively, if at all. The Portfolio may
purchase and sell stock index futures contracts and options on stock index futures contracts. The Portfolio may sell
securities "short against the box."
An additional discussion of these types of investments and their risks is included in this Prospectus under
"Certain Risk Factors and Investment Methods."
Temporary Investments. The Portfolio may invest up to 100% of its assets in cash, commercial paper, high-grade
bonds or cash equivalents for temporary defensive reasons if the Sub-advisor believes that adverse market or other
conditions warrant. This is to attempt to protect the Portfolio from a temporary unacceptable risk of loss. However,
while the Portfolio is in a defensive position, the opportunity to achieve its investment objective of long-term capital
growth will be limited.
AST GABELLI ALL-CAP VALUE PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Principal Investment Strategies and Risks:
The Portfolio will invest primarily in readily marketable equity securities including common stocks, preferred
stocks and securities that may be converted at a later time into common stock. The Portfolio may invest in the
securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the
Sub-advisor's assessment of particular companies and market conditions.
In making stock selections, the Portfolio strives to earn a 10% real rate of return. The Portfolio focuses on
companies that appear underpriced relative to their private market value ("PMV"). PMV is the value that the Portfolio's
Sub-advisor believes informed investors would be willing to pay for a company. The Sub-advisor considers factors such as
price, earnings expectations, earnings and price histories, balance sheet characteristics and perceived management
skills. The Sub-advisor also considers changes in economic and political outlooks as well as individual corporate
developments. The Sub-advisor will sell any Portfolio investments that lose their perceived value relative to other
investments.
Investments will be made based on the Sub-advisor's perception of their potential for capital growth. Current
income may also be considered. However, many of the common stocks the Portfolio will buy will not pay dividends.
As a Portfolio that invests primarily in equity securities, the principal risk to which the Portfolio is subject
is that the value of the securities held by the Portfolio will decline. The value of equity securities will fluctuate
due to many factors, including the past and predicted earnings of the issuer, the quality of the issuer's management,
general market conditions, the forecasts for the issuer's industry and the value of the issuer's assets. While value
investing historically has involved less risk that investing in growth companies, the Portfolio is subject to the risks
that the PMVs of the stocks purchased by the Portfolio may never be realized by the market, or that the Sub-advisor may
be incorrect in its assessment of the PMVs.
In addition, the Portfolio's level of risk will vary based upon the size of the companies it invests in at a
given time. To the extent the Portfolio emphasizes small-cap stocks, it will be subject to a level of risk higher than a
Portfolio investing primarily in more conservative "large-cap" stocks. The Portfolio may be subject to additional risks
as a result of its investments in foreign securities, including unfavorable foreign government actions, political
instability, the absence of accurate information about foreign issuers, and exposure to foreign currencies that may
decline in value relative to the U.S. dollar.
Other Investments:
The Portfolio may invest up to 25% of its total assets in securities of non-U.S. issuers. While the Portfolio
does not intend to do so to a significant degree, the Portfolio may enter into futures contracts and related options, and
may purchase and sell call and put options on securities and securities indices. The Portfolio also may invest in
warrants to purchase securities, and may engage in short sales "against the box". For additional information on the
types of securities in which the Portfolio may invest, see this Prospectus under "Certain Risk Factors and Investment
Methods."
Temporary Investments. When adverse market or economic conditions occur, the Portfolio may temporarily invest
all or a portion of its assets in defensive investments. Such investments may include high grade debt securities,
obligations of the U.S. Government and its agencies and instrumentalities, and short-term money market instruments.
While the Portfolio is in a defensive position, the opportunity to achieve its investment objective will be limited.
AST KINETICS INTERNET PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek long-term growth of capital.
Principal Investment Policies and Risks:
Under normal circumstances, the Portfolio invests at least 65% of its total assets in common stocks, convertible
securities, warrants and other equity securities having the characteristics of common stocks, such as American Depositary
Receipts and International Depositary Receipts, of domestic and foreign companies that are engaged in the Internet and
Internet-related activities. The Internet is a collection of connected computers that allows commercial and professional
organizations, educational institutions, government agencies and consumers to communicate electronically, access and
share information and conduct business around the world.
Portfolio securities will be selected by the Sub-advisor from companies that are engaged in the development of
hardware, software and telecommunications solutions that enable the transaction of business on the Internet by
individuals and companies, as well as companies that offer products and services primarily via the Internet.
Accordingly, the Portfolio seeks to invest in the equity securities of companies whose research and development efforts
may result in higher stock values. These companies may be large, medium or small in size if, in the Sub-advisor's
opinion, they meet the Portfolio's investment criteria. Such companies include, but are not limited to, the following:
Internet Service Providers: Companies that provide users with access to the Internet.
Computer Software Companies: Companies that produce, manufacture and develop tools to access the Internet, enable
Internet users to enhance the speed, integrity and storage of data on the Internet, facilitate information distribution
and gathering on the Internet, or secure Internet-based transactions.
Computer Hardware Companies: Companies that develop and produce computer and network hardware such as modems,
switchers and routers, and those that develop and manufacture workstations and personal communications systems used to
access the Internet and provide Internet services.
E-Commerce: Companies that derive a substantial portion of their revenue from sales of products and services
conducted via the Internet.
Content Developers: Companies that supply proprietary information and entertainment content, such as games,
music, video, graphics, news, etc. on the Internet.
The Sub-advisor selects portfolio securities by evaluating a company's positioning and business model as well as
its ability to grow and expand its activities via the Internet or achieve a competitive advantage in cost/profitability
and brand image leveraging via use of the Internet. The Sub-advisor also considers a company's fundamentals by reviewing
its balance sheets, corporate revenues, earnings and dividends. Furthermore, the Sub-advisor looks at the amount of
capital a company currently expends on research and development. The Sub-adviser believes that money invested in
research and development today frequently has significant bearing on future growth.
As with any fund that invests primarily in equity securities, fluctuations in the value of the securities held by
the Portfolio will cause the share price of the Portfolio to fluctuate. Market prices of the Portfolio's holdings may be
adversely affected by the issuer having experienced losses or by the issuer's lack of earnings or failure to meet the
market's expectations with respect to new products or services, or even by market factors wholly unrelated to the
condition of the issuer.
The Portfolio may be subject to greater risk and share price fluctuation than other equity funds because of the
concentration of its investments in a single industry. Securities of Internet companies tend to be more volatile than
securities of companies in other industries. These companies are especially sensitive to the risk of product
obsolescence, and may be affected by heightened regulatory scrutiny and impending changes in government policies. In
addition, the Portfolio's investments in the securities of small and medium-sized companies and in foreign securities may
increase the degree of risk to which the Portfolio is subject.
Non-Diversified Status. The Portfolio is classified as "non-diversified" under the 1940 Act, which means that
one-half of the Portfolio's assets may be invested in two or more stocks while the other half must be spread out among
various investments each not exceeding 5% of the Portfolio's total assets. As a result of this lesser diversification,
the value of the Portfolio's shares may be more susceptible to adverse changes in the value of a particular company's
securities than would be the shares of a diversified investment company.
Other Investments:
The Portfolio may purchase and write (sell) options on securities in which it invests and may buy and sell
financial futures contracts and related options for hedging purposes and/or as a substitute for direct investment.
Temporary Investments. To respond to adverse market, economic, political or other conditions, the Portfolio may
invest up to 100% of its assets in high quality U.S. short-term debt securities and money market instruments. The
Portfolio may invest up to 35% of its assets in these securities to maintain liquidity. Some of these short-term
instruments include commercial paper, certificates of deposit, demand and time deposits and banker's acceptances, U.S.
Government securities (e.g., U.S. Treasury obligations), and repurchase agreements. While the Portfolio is in a
defensive position, the opportunity to achieve its investment objective of long-term capital growth will be limited.
AST T. ROWE PRICE NATURAL RESOURCES PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek long-term capital growth primarily through
the common stocks of companies that own or develop natural resources (such as energy products, precious metals, and
forest products) and other basic commodities.
Principal Investment Policies and Risks:
The Portfolio normally invests primarily (at least 65% of its total assets) in the common stocks of natural
resource companies whose earnings and tangible assets could benefit from accelerating inflation. The Portfolio also may
invest in non-resource companies with the potential for growth. When selecting stocks, the Sub-advisor looks for
companies that have the ability to expand production, to maintain superior exploration programs and production
facilities, and the potential to accumulate new resources. Natural resource companies in which the Portfolio invests
generally own or develop energy sources, precious metals, nonferrous metals, forest products, real estate, diversified
resources and other basic commodities that can be produced and marketed profitably when both labor costs and prices are
rising.
The Portfolio may sell securities for a variety of reasons, such as to secure gains, limit losses or re-deploy
assets into more promising opportunities.
As with all stock funds, the Portfolio's share price can fall because of weakness in one or more securities
markets, particular industries or specific holdings. In addition, the Portfolio is less diversified than most stock
funds and could therefore experience sharp price declines when conditions are unfavorable in the natural resources
sector. For instance, while the Portfolio attempts to invest in companies that may benefit from accelerating inflation,
inflation has slowed considerably in recent years. The rate of earnings growth of natural resource companies may be
irregular because these companies are strongly affected by natural forces, global economic cycles and international
politics. For example, stock prices of energy companies can fall sharply when oil prices fall. Real estate companies
are influenced by interest rates and other factors.
Other Investments:
Although the Portfolio will invest primarily in U.S. common stocks, it may also purchase other types of
securities, for example, preferred stocks, convertible securities and warrants, when considered consistent with the
Portfolio's investment objective and policies. The Portfolio may purchase preferred stock for capital appreciation where
the issuer has omitted, or is in danger of omitting, payment of the dividend on the stock. The Portfolio may invest in
debt securities, including up to 10% of its total assets in debt securities rated below investment grade. The Portfolio
may invest in mortgage-backed securities, including stripped mortgage-backed securities. The Portfolio may invest up to
10% of its total assets in hybrid instruments, which combine the characteristics of futures, options and securities.
Foreign Securities. The Portfolio may invest up to 50% of its total assets in foreign securities, including
American Depositary Receipts and securities of companies in developing countries, which offer increasing opportunities
for natural resource-related growth. The Portfolio may enter into forward foreign currency exchange contracts in
connection with its foreign investments. The Portfolio's investments in foreign securities, or even in U.S. companies
with significant overseas investments, may decline in value because of declining foreign currencies or adverse political
and economic events overseas, although currency risk may be somewhat reduced because many commodities markets are dollar
based.
Futures and Options. The Portfolio may enter into stock index or currency futures contracts (or options thereon)
for hedging purposes or to provide an efficient means of regulating the Portfolio's exposure to the equity markets. The
Portfolio may write covered call options and purchase put and call options on foreign currencies, securities, and stock
indices.
For additional information about these investments and their risks, see this Prospectus under "Certain Risk
Factors and Investment Methods."
Temporary Investments. The Portfolio may establish and maintain cash reserves without limitation for temporary
defensive purposes. The Portfolio's reserves may be invested in high-quality domestic and foreign money market
instruments, including repurchase agreements and money market mutual funds managed by the Sub-advisor. Cash reserves
also provide flexibility in meeting redemptions and paying expenses. While the Portfolio is in a defensive position, the
opportunity to achieve its investment objective of long-term capital growth may be limited.
AST ALLIANCE GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio (formerly, the AST Oppenheimer Large-Cap Growth
Portfolio) is to seek long-term growth of capital by investing predominantly in the equity securities of a limited number
of large, carefully selected, high-quality U.S. companies that are judged likely to achieve superior earnings growth.
Principal Investment Policies and Risks:
The Portfolio normally invests at least 85% of its total assets in the equity securities of U.S. companies. A
U.S. company is a company that is organized under United States law, has its principal office in the United States and
issues equity securities that are traded principally in the United States. Normally, about 40-60 companies will be
represented in the Portfolio, with the 25 companies most highly regarded by the Sub-advisor usually constituting
approximately 70% of the Portfolio's net assets. The Portfolio is thus atypical from many equity mutual funds in its
focus on a relatively small number of intensively researched companies.
The Sub-advisor's investment strategy for the Portfolio emphasizes stock selection. The Sub-advisor relies
heavily upon the fundamental analysis and research of its internal research staff, which generally follows a primary
research universe of more than 500 companies that have strong management, superior industry positions, excellent balance
sheets and superior earnings growth prospects. An emphasis is placed on identifying companies whose substantially above
average prospective earnings growth is not fully reflected in current market valuations.
In managing the Portfolio, the Sub-advisor seeks to utilize market volatility judiciously (assuming no change in
company fundamentals), striving to capitalize on apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Portfolio normally remains nearly fully invested
and does not take significant cash positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Portfolio becomes somewhat more aggressive, gradually reducing the number of companies
represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued positions, the Portfolio becomes
somewhat more conservative, gradually increasing the number of companies represented in its portfolio. The Sub-advisor
therefore seeks to gain positive returns in good markets while providing some measure of protection in poor markets.
The Sub-advisor expects the average market capitalization of companies represented in the Portfolio normally to
be in the range, or in excess, of the average market capitalization of companies included in the S&P 500 Index.
Because the Portfolio invests primarily in stocks, the Portfolio is subject to the risks associated with stock
investments, and the Portfolio's share price therefore may fluctuate substantially. 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, availability of
basic resources or supplies, major litigation against a company, or changes in governmental regulation affecting an
industry). The Portfolio's focus on large, more-established companies may mean that its level of risk is lower than a
fund investing primarily in smaller companies. Because the Portfolio invests in a smaller number of securities than many
other funds, changes in the value of a single security may have a more significant effect, either negative or positive,
on the Portfolio's share price.
Other Investments:
In addition to investing in equity securities, the Portfolio also may:
-- invest up to 20% of its net assets in convertible securities;
-- invest up to 5% of its net assets in rights or warrants;
-- invest up to 15% of its total assets in foreign securities;
-- purchase and sell exchange-traded index options and stock index futures contracts; and
-- write covered exchange-traded call options on its securities up to 15% of its total assets, and purchase
exchange-traded call and put options on common stocks up to, for all options, 10% of its total assets.
For additional information on the types of investments other than common stocks in which the Portfolio may
invest, see this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. Although it does not expect to do so ordinarily, when business or financial conditions
warrant the Portfolio may assume a temporary defensive position and invest in high-grade, short-term, fixed-income
securities (which may include U.S. Government securities) or hold its assets in cash. While the Portfolio is in a
defensive position, the opportunity to achieve its investment objective will be limited.
AST MFS GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to provide long-term growth of capital and future,
rather than current, income.
Principal Investment Policies and Risks:
The Portfolio invests, under normal market conditions, at least 80% of its total assets in common stocks and
related securities, such as preferred stocks, convertible securities and depositary receipts, of companies that the
Sub-advisor believes offer better than average prospects for long-term growth.
The Sub-advisor uses a "bottom up," as opposed to "top down," investment style in managing the Portfolio. This
means that securities are selected based upon fundamental analysis of individual companies (such as analysis of the
companies' earnings, cash flows, competitive position and management abilities) by the Sub-advisor.
In managing the Portfolio, the Sub-advisor seeks to purchase securities of companies that it considers well-run
and poised for growth. The Sub-advisor looks particularly for companies with the following qualities:
o a strong franchise, strong cash flows and a recurring revenue stream
o a strong industry position, where there is potential for high profit margins or substantial barriers to new entry
into the industry
o a strong management with a clearly defined strategy
o new products or services.
The Portfolio may invest up to 35% of its net assets in foreign securities.
As with any fund investing primarily in common stocks, the value of the securities held by the Portfolio may
decline in value, either because of changing economic, political or market conditions or because of the economic
condition of the company that issued the security. These declines may be substantial. In addition, the prices of the
growth company stocks in which the Portfolio invests may fluctuate to a greater extent than other equity securities due
to changing market conditions or disappointing earnings results. The Portfolio may invest in foreign companies,
including companies located in developing countries, and it therefore will be subject to risks relating to political,
social and economic conditions abroad, risks resulting from differing regulatory standards in non-U.S. markets, and
fluctuations in currency exchange rates.
Other Investments:
Although the Portfolio will invest primarily in common stocks and related securities, the Portfolio may also
invest in variable and floating rate debt securities. The Portfolio may purchase and sell futures contracts and related
options on securities indices, foreign currencies and interest rates for hedging and non-hedging purposes. The Portfolio
may also enter into forward contracts for the purchase or sale of foreign currencies for hedging and non-hedging
purposes. The Portfolio may purchase and write (sell) options on securities, stock indices and foreign currencies.
For more information on some of the types of securities other than common stocks in which the Portfolio may
invest, see this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. The Portfolio may depart from its principal investment strategy by temporarily investing
for defensive purposes when adverse market, economic or political conditions exist. When investing for defensive
purposes, the Portfolio may hold cash or invest in cash equivalents, such as short-term U.S. government securities,
commercial paper and bank instruments. While the Portfolio is in a defensive position, the opportunity to achieve its
investment objective will be limited.
AST ALGER GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek long-term capital growth.
Principal Investment Policies and Risks:
The Portfolio invests primarily in equity securities, such as common or preferred stocks, that are listed on U.S.
exchanges or in the over-the-counter market.
The Portfolio invests primarily in growth stocks. The Sub-advisor believes that these stocks are those of two
types of companies:
High Unit Volume Growth Companies. These are vital, creative companies that offer goods or services to a rapidly
expanding marketplace. They include both established and emerging firms, offering new or improved products, or firms
simply fulfilling an increased demand for an existing product line.
Positive Life Cycle Change Companies. These are companies experiencing a major change that is expected to
produce advantageous results. These changes may be as varied as new management, products or technologies, restructurings
or reorganizations, or mergers and acquisitions.
The Portfolio focuses on growing companies that generally have broad product lines, markets, financial resources
and depth of management. Under normal circumstances, the portfolio invests primarily in the equity securities of large
companies.
The Portfolio normally invests at least 65% of its total assets in equity securities of companies that, at the
time of purchase of the securities, have total market capitalizations of $1 billion or greater. The Portfolio also may
invest up to 35% of its total assets in equity securities of companies that, at the time of purchase, have total market
capitalizations of less than $1 billion.
As with any fund investing primarily in equity securities, the value of the securities held by the Portfolio may
decline. These declines can be substantial. In addition, the growth stocks in which the Portfolio invests primarily
tend to fluctuate in price more than other types of stocks. Prices of growth stocks tend to be higher in relation to
their companies' earnings, and may be more sensitive to market, political and economic developments than other stocks.
The Portfolio's level of risk will increase if it makes significant investments in securities of smaller companies.
Other Investments:
Foreign Securities. The Portfolio may invest up to 20% of the value of its total assets, measured at the time of
investment, in equity and debt securities that are denominated in foreign currencies. There is no limitation on the
percentage of the Portfolio's assets that may be invested in securities of foreign companies that are denominated in U.S.
dollars. In addition, the Portfolio may enter into foreign currency transactions, including forward foreign currency
contracts and options on foreign currencies, to manage currency risks, to facilitate transactions in foreign securities,
and to repatriate dividend or interest income received in foreign currencies.
Short sales "against the box." The Portfolio may from time to time makes short sales "against the box."
A discussion of these investments and their risks is included in this Prospectus under "Certain Risk Factors and
Investment Methods."
Temporary Investments. The Portfolio may invest up to 100% of its assets in cash, commercial paper, high-grade
bonds or cash equivalents for temporary defensive reasons if the Sub-advisor believes that adverse market or other
conditions warrant. This is to attempt to protect the Portfolio from a temporary unacceptable risk of loss. However,
while the Portfolio is in a defensive position, the opportunity to achieve its investment objective of long-term capital
growth will be limited.
AST MARSICO CAPITAL GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth. Income is not an investment
objective and any income realized on the Portfolio's investments, therefore, will be incidental to the Portfolio's
objective.
Principal Investment Policies and Risks:
The Portfolio will pursue its objective by investing primarily in common stocks. The Sub-advisor expects that
the majority of the Portfolio's assets will be invested in the common stocks of larger, more established companies.
In selecting investments for the Portfolio, the Sub-advisor uses an approach that combines "top down" economic
analysis with "bottom up" stock selection. The "top down" approach takes into consideration such macro-economic factors
as interest rates, inflation, the regulatory environment, and the global competitive landscape. In addition, the
Sub-advisor examines such factors as the most attractive global investment opportunities, industry consolidation, and the
sustainability of economic trends. As a result of this "top down" analysis, the Sub-advisor identifies sectors,
industries and companies that should benefit from the trends the Sub-advisor has observed.
The Sub-advisor then looks for individual companies with earnings growth potential that may not be recognized by
the market at large. In determining whether a particular company is appropriate for investment by the Portfolio, the
Sub-advisor focuses on a number of different attributes, including the company's specific market expertise or dominance,
its franchise durability and pricing power, solid fundamentals (e.g., a strong balance sheet, improving returns on
equity, and the ability to generate free cash flow), strong management, and reasonable valuations in the context of
projected growth rates. This is called "bottom up" stock selection.
The primary risk associated with investment in the Portfolio will be the risk that the equity securities held by
the Portfolio will decline in value. The risk of the Portfolio is expected to be commensurate with that of other funds
using a growth strategy to invest in the stocks of large and medium-sized companies.
Although it is the general policy of the Portfolio to purchase and hold securities for capital growth, changes in
the Portfolio will be made as the Sub-advisor deems advisable. For example, portfolio changes may result from liquidity
needs, securities having reached a desired price, or by reason of developments not foreseen at the time of the investment
was made.
Special Situations. The Portfolio may invest in "special situations" from time to time. A "special situation"
arises when, in the opinion of the Sub-advisor, the securities of a particular company will be recognized and increase in
value due to a specific development, such as a technological breakthrough, management change or new product at that
company. Investment in "special situations" carries an additional risk of loss in the event that the anticipated
development does not occur or does not attract the expected attention.
Other Investments:
The Portfolio may also invest to a lesser degree in preferred stocks, convertible securities, warrants, and debt
securities when the Portfolio perceives an opportunity for capital growth from such securities. The Portfolio may invest
up to 10% of its total assets in debt securities, which may include corporate bonds and debentures and government
securities.
The Portfolio may also purchase securities of foreign issuers, including foreign equity and debt securities and
depositary receipts. Foreign securities are selected primarily on a stock-by-stock basis without regard to any defined
allocation among countries or geographic regions. The Portfolio may also use a variety of currency hedging techniques,
including forward currency contracts, to manage exchange rate risk with respect to investments exposed to foreign
currency fluctuations.
Index/structured Securities. The Portfolio may invest without limit in index/structured securities, which are
debt securities whose value at maturity or interest rate is linked to currencies, interest rates, equity securities,
indices, commodity prices or other financial indicators. Such securities may be positively or negatively indexed (i.e.,
their value may increase or decrease if the reference index or instrument appreciates). Index/structured securities may
have return characteristics similar to direct investments in the underlying instruments, but may be more volatile than
the underlying instruments. The Portfolio bears the market risk of an investment in the underlying instruments, as well
as the credit risk of the issuer of the index/structured security.
Futures, Options and Other Derivative Instruments. The Portfolio may purchase and write (sell) options on
securities, financial indices, and foreign currencies, and may invest in futures contracts on securities, financial
indices, and foreign currencies, options on futures contracts, forward contracts and swaps and swap-related products.
These instruments will be used primarily to hedge the Portfolio's positions against potential adverse movements in
securities prices, foreign currency markets or interest rates. To a limited extent, the Portfolio may also use
derivative instruments for non-hedging purposes such as increasing the Portfolio's income or otherwise enhancing return.
For an additional discussion of many of these types of securities and their risks, see this Prospectus under
"Certain Risk Factors and Investment Methods."
Temporary Investments. Although the Sub-advisor expects to invest primarily in equity securities, the
Sub-advisor may increase the Portfolio's cash position without limitation when the Sub-advisor believes that appropriate
investment opportunities for capital growth with desirable risk/reward characteristics are unavailable. Cash and similar
investments (whether made for defensive purposes or to receive a return on idle cash) will include high-grade commercial
paper, certificates of deposit and repurchase agreements. While the Portfolio is in a defensive position, the
opportunity to achieve its investment objective of capital growth will be limited.
AST JANCAP GROWTH PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek growth of capital in a manner consistent with
the preservation of capital. Realization of income is not a significant investment consideration and any income realized
on the Portfolio's investments, therefore, will be incidental to the Portfolio's objective.
Principal Investment Policies and Risks:
The Portfolio will pursue its objective by investing primarily in common stocks. Common stock investments will
be in companies that the Sub-advisor believes are experiencing favorable demand for their products and services, and
which operate in a favorable competitive and regulatory environment. The Sub-advisor generally takes a "bottom up"
approach to choosing investments for the Portfolio. In other words, the Sub-advisor seeks to identify individual
companies with earnings growth potential that may not be recognized by the market at large.
Because the Portfolio invests a substantial portion (or all) of its assets in stocks, the Portfolio is subject to
the risks associated with stock investments, and the Portfolio's share price therefore may fluctuate substantially. This
is true despite the Portfolio's focus on the stocks of larger more-established companies. The Portfolio's share price
will be affected by changes in the stock markets generally, and factors specific to a company or an industry will affect
the prices of particular stocks held by the Portfolio (for example, poor earnings, loss of major customers, major
litigation against an issuer, or changes in government regulations affecting an industry). Because of the types of
securities it invests in, the Portfolio is designed for those who are investing for the long term.
The Portfolio generally intends to purchase securities for long-term investment rather than short-term gains.
However, short-term transactions may occur as the result of liquidity needs, securities having reached a desired price or
yield, anticipated changes in interest rates or the credit standing of an issuer, or by reason of economic or other
developments not foreseen at the time the investment was made.
Special Situations. The Portfolio may invest in "special situations" from time to time. A "special situation"
arises when, in the opinion of the Sub-advisor, the securities of a particular company will be recognized and appreciate
in value due to a specific development, such as a technological breakthrough, management change or new product at that
company. Investment in "special situations" carries an additional risk of loss in the event that the anticipated
development does not occur or does not attract the expected attention.
Other Investments:
Although the Sub-advisor expects to invest primarily in equity securities, the Portfolio may also invest to a
lesser degree in preferred stocks, convertible securities, warrants, and debt securities when the Portfolio perceives an
opportunity for capital growth from such securities. The Portfolio is subject to the following percentage limitations on
investing in certain types of debt securities:
-- 35% of its assets in bonds rated below investment grade ("junk" bonds).
-- 25% of its assets in mortgage- and asset-backed securities.
-- 10% of its assets in zero coupon, pay-in-kind and step coupon securities (securities that do not, or may not
under certain circumstances, make regular interest payments).
The Portfolio may make short sales "against the box." In addition, the Portfolio may invest in the following types of
securities and engage in the following investment techniques:
Foreign Securities. The Portfolio may also purchase securities of foreign issuers, including foreign equity and
debt securities and depositary receipts. Foreign securities are selected primarily on a stock-by-stock basis without
regard to any defined allocation among countries or geographic regions. No more than 25% of the Portfolio's assets may
be invested in foreign securities denominated in foreign currencies and not publicly traded in the United States.
Futures, Options and Other Derivative Instruments. The Portfolio may enter into futures contracts on securities,
financial indices and foreign currencies and options on such contracts and may invest in options on securities, financial
indices and foreign currencies, forward contracts and interest rate swaps and swap-related products (collectively
"derivative instruments"). The Portfolio intends to use most derivative instruments primarily to hedge the value of its
portfolio against potential adverse movements in securities prices, foreign currency markets or interest rates. To a
limited extent, the Portfolio may also use derivative instruments for non-hedging purposes such as seeking to increase
income. The Portfolio may also use a variety of currency hedging techniques, including forward foreign currency exchange
contracts, to manage exchange rate risk with respect to investments exposed to foreign currency fluctuations.
For more information on the types of securities other than common stocks in which the Portfolio may invest, see
this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. The Sub-advisor may increase the Portfolio's cash position without limitation when the
Sub-advisor is of the opinion that appropriate investment opportunities for capital growth with desirable risk/reward
characteristics are unavailable. Cash and similar investments (whether made for defensive purposes or to receive a
return on idle cash) will include high-grade commercial paper, certificates of deposit, repurchase agreements and money
market funds managed by the Sub-advisor. While the Portfolio is in a defensive position, the opportunity to achieve its
investment objective of capital growth will be limited.
AST JANUS STRATEGIC VALUE PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek long-term growth of capital.
Principal Investment Policies and Risks:
The Portfolio pursues its objective by investing primarily in common stocks with the potential for long-term
growth of capital using a "value" approach. The value approach the Sub-advisor uses emphasizes investments in companies
it believes are undervalued relative to their intrinsic worth. A company may be undervalued due to market or economic
conditions, temporary earnings declines, unfavorable developments affecting the company or other factors.
The Sub-advisor measures value as a function of price/earnings (P/E) ratios and price/free cash flow. A P/E
ratio is the relationship between the price of a stock and its earnings per share. This figure is determined by dividing
a stock's market price by the company's earnings per share amount. Price/free cash flow is the relationship between the
price of a stock and the company's available cash from operations minus capital expenditures. The Sub-advisor will
typically seek attractively valued companies that are improving their free cash flow and improving their returns on
invested capital.
The Sub-advisor generally takes a "bottom up" approach in choosing investments for the Portfolio. In other
words, the Sub-advisor seeks to identify companies that are undervalued by looking at companies one at a time, regardless
of size, country of organization, place of principal business activity, or other similar selection criteria. Realization
of income is not a significant consideration when choosing investments for the Portfolios. Income realized on the
Portfolio's investments is incidental to its objective.
As a fund that invests primarily in common stocks, the main risk of the Portfolio is the risk that the value of
the stocks it holds might decrease, either in response to factors relating to an individual company or in response to
general market and/or economic conditions. If this occurs, the Portfolio's share price may also decrease. While a fund
that focuses on value stocks may be subject to less risk than a fund investing in stocks of growth companies, the
Portfolio is subject to the risk that the Sub-advisor's belief about a company's intrinsic worth will be incorrect or
will not be realized by the market in the time frame expected.
While the Portfolio will generally focus on the securities of larger companies, the Portfolio may invest in the
securities of smaller companies, including start-up companies offering emerging products or services. Smaller or newer
companies may suffer more significant losses as well as realize more substantial growth than larger or more established
issuers because they may lack depth of management, be unable to generate funds necessary for growth or potential
development, or be developing or marketing new products or services for which markets are not yet established and may
never become established. The Portfolio's level of risk may also be affected if it invests as described below in certain
types of investments other than domestic equities, such as foreign securities, derivative investments, non-investment
grade debt securities, and initial public offerings (IPOs).
The Portfolio generally intends to purchase securities for long-term investment although, to a limited extent,
the Portfolio may purchase securities in anticipation of relatively short-term price gains. Short-term transactions may
also result from liquidity needs, securities having reached a price or yield objective, 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. 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.
Non-Diversified Status. The Portfolio is classified as a non-diversified investment company. In other words, it
may hold larger positions in a smaller number of securities than a diversified fund. As a result, a single security's
increase or decrease in value may have a greater impact on the Portfolio's share price and total return. Because of
this, the Portfolio's share price can be expected to fluctuate more than a comparable diversified fund.
Special Situations. The Portfolio may invest in special situations. A special situation arises when the
Sub-advisor believes that the securities of an issuer will be recognized and appreciate in value due to a specific
development with respect to that issuer. Special situations may include significant changes in a company's allocation of
its existing capital, a restructuring of assets, or a redirection of free cash flows. For example, issuers undergoing
significant capital changes may include companies involved in spin-offs, sales of divisions, mergers or acquisitions,
companies emerging from bankruptcy, or companies initiating large changes in their debt to equity ratio. Companies that
are redirecting cash flows may be reducing debt, repurchasing shares or paying dividends. Special situations may also
result from (1) significant changes in industry structure through regulatory developments or shifts in competition, (2) a
new or improved product, service, operation or technological advance, (3) changes in senior management, or (4)
significant changes in cost structure. The Portfolio's performance could suffer if the anticipated development in a
"special situation" investment does not occur or does not attract the expected attention.
Other Investments:
While the Portfolio will invest primarily in common stocks, the Portfolio may also invest to a lesser degree in
other types of securities, such as preferred stocks, warrants, securities convertible into common or preferred stocks,
and debt securities. The Portfolio will not invest more than 35% of its assets in bonds rated below investment grade
("junk" bonds).
In addition, the Portfolio may invest in the following types of securities and engage in the following investment
techniques:
Indexed/Structured Securities. The Portfolio may invest in indexed/structured securities, which typically are
short- to intermediate-term debt securities whose value at maturity or interest rate is linked to currencies, interest
rates, equity securities, indices, commodity prices or other financial indicators. Such securities may be positively or
negatively indexed (i.e., their value may increase or decrease if the reference index or instrument appreciates).
Indexed/structured securities may have return characteristics similar to direct investments in the underlying
instruments, but may be more volatile than the underlying instruments.
Foreign Securities. The Portfolio may invest up to 25% of its net assets in foreign securities denominated in
foreign currencies and not publicly traded in the United States. The Portfolio may also invest in foreign companies
through depositary receipts or passive foreign investment companies. Generally, the same criteria are used to select
foreign securities as are used to select domestic securities. Foreign securities are generally selected on a
stock-by-stock basis without regard to any defined allocation among countries or geographic regions. However, certain
factors such as expected levels of inflation, government policies influencing business conditions, the outlook for
currency relationships, and prospects for economic growth among countries, regions or geographic areas may warrant
greater consideration in selecting foreign securities. There are no limitations on the countries in which the Portfolio
may invest and the Portfolio may at times have significant foreign exposure.
Futures, Options and Other Derivative Instruments. The Portfolio may buy and sell futures contracts on foreign
currencies, securities and financial indices and options on such contracts. The Portfolio may also purchase and write
put and call options on securities, securities indices and foreign currencies. The Portfolio may enter into forward
foreign currency exchange contracts, swaps and other derivative instruments. The Portfolio may use these instruments to
hedge or protect its portfolio from adverse movements in securities prices, currency exchange rates, and interest rates.
To a limited extent, the Portfolio may also use derivative instruments for non-hedging purposes such as seeking to
enhance return.
Additional information on the types of securities other than common stocks in which the Portfolio may invest is
included in this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. When the Sub-advisor believes that market conditions are unfavorable for profitable
investing, or when the Sub-advisor is otherwise unable to locate attractive investment opportunities, the Portfolio's
cash or similar investments may increase. In other words, the Portfolio does not always stay fully invested in stocks.
Even when the Portfolio is essentially fully invested, some residual amount of Portfolio assets will remain in cash or
similar investments. These investments may include commercial paper, certificates of deposit, repurchase agreements,
short-term debt obligations, and money market funds (including funds managed by the Sub-advisor). When the Portfolio's
investments in cash or similar investments increase, the opportunity to achieve its investment objective of long-term
capital growth may be limited.
AST COHEN & STEERS REALTY PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to maximize total return through investment in real
estate securities.
Principal Investment Policies and Risks:
The Portfolio pursues its investment objective of maximizing total return by seeking, with approximately equal emphasis,
capital growth and current income. Under normal circumstances, the Portfolio will invest substantially all of its assets
in the equity securities of real estate companies. Such equity securities will consist of:
o common stocks (including shares in real estate investment trusts),
o rights or warrants to purchase common stocks,
o securities convertible into common stocks where the conversion feature represents, in the Sub-advisor's view, a
significant element of the securities' value, and
o preferred stocks.
For purposes of the Portfolio's investment policies, a "real estate company" is one that derives at least 50% of
its revenues from the ownership, construction, financing, management or sale of real estate or that has at least 50% of
its assets in real estate. The Portfolio may invest up to 10% of its total assets in securities of foreign real estate
companies.
Real estate companies may include real estate investment trusts ("REITs"). REITs pool investors' funds for
investment primarily in income producing real estate or real estate related loans or interests. REITs can generally be
classified as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs, which invest the majority of their assets
directly in real property, derive their income primarily from rents. Equity REITs can also realize capital gains or
losses by selling properties. Mortgage REITs, which invest the majority of their assets in real estate mortgages, derive
their income primarily from interest payments. Hybrid REITs combine the characteristics of both Equity REITs and
Mortgage REITs.
As a fund that invests primarily in equity securities, the Portfolio will be subject to many of the same risks as
other equity funds. The Portfolio also will be subject to certain risks related specifically to real estate securities,
and may be subject to greater risk and share price fluctuation than other equity funds because of the concentration of
its investments in a single industry.
While the Portfolio will not invest in real estate directly, securities of real estate companies may be subject
to risks similar to those associated with the direct ownership of real estate. These include risks related to general
and local economic conditions, dependence on management skill, heavy cash flow dependency, possible lack of available
mortgage funds, overbuilding, extended vacancies of properties, increases in property taxes and operating expenses,
changes in zoning laws, losses due to costs resulting from environmental problems, casualty or condemnation losses,
limitations on rents, and changes in neighborhood values, the appeal of properties to tenants and interest rates.
In general, Equity REITs may be affected by changes in the value of the underlying property owned by the trusts,
while Mortgage REITs may be affected by the quality of any credit extended. In the event of a default by a borrower or
lessee, a REIT may experience delays and may incur substantial costs in enforcing its rights as a mortgagee or lessor.
Non-Diversified Status. The Portfolio is classified as a "non-diversified" investment company under the 1940
Act, which means the Portfolio is not limited by the 1940 Act in the proportion of its assets that may be invested in the
securities of a single issuer. However, the Portfolio intends to meet certain diversification standards under the
Internal Revenue Code that must be met to relieve the Portfolio of liability for Federal income tax if its earnings are
distributed to shareholders. As a non-diversified fund, a price decline in any one of the Portfolio's holdings may have
a greater effect on the Portfolio's value than on the value of a fund that is more broadly diversified.
Other Investments:
The Portfolio may write (sell) put and covered call options and purchase put and call options on securities or
stock indices that are listed on a national securities or commodities exchange. The Portfolio may buy and sell financial
futures contracts, stock and bond index futures contracts, foreign currency futures contracts and options on the
foregoing. The Portfolio may enter into forward foreign currency exchange contracts in connection with its investments
in foreign securities. The Portfolio may also enter into short sales, which are transactions in which the Portfolio
sells a security it does not own at the time of the sale in anticipation that the market price of the security will
decline. The Sub-advisor expects that the Portfolio will use these techniques on a relatively infrequent basis.
Additional information about these techniques and their risks is included below under "Certain Risk Factors and
Investment Methods."
Temporary Investments. When the Sub-advisor believes that market or general economic conditions justify a
temporary defensive position, the Portfolio will invest all or a portion of its assets in high-grade debt securities,
including corporate debt securities, U.S. government securities, and short-term money market instruments, without regard
to whether the issuer is a real estate company. While the Portfolio is in a defensive position, the opportunity to
achieve its investment objective of maximum total return will be limited. The Portfolio may also invest funds awaiting
investment or funds held to satisfy redemption requests or to pay dividends and other distributions to shareholders in
short-term money market instruments.
AST SANFORD BERNSTEIN MANAGED INDEX 500 PORTFOLIO:
Investment Objective: The investment objective of the Portfolio (formerly, the AST Bankers Trust Managed Index 500
Portfolio) is to outperform the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500(R)") through stock
selection resulting in different weightings of common stocks relative to the index.
Principal Investment Policies and Risks:
The Portfolio will invest primarily in the common stocks of companies included in the S&P 500. The S&P 500 is an
index of 500 common stocks, most of which trade on the New York Stock Exchange Inc. (the "NYSE"). The Sub-advisor
believes that the S&P 500 is representative of the performance of publicly traded common stocks in the U.S. in general.
In seeking to outperform the S&P 500, the Sub-advisor starts with a portfolio of stocks representative of the
holdings of the index. It then uses a set of fundamental, quantitative criteria that are designed to indicate whether a
particular stock will predictably perform better or worse than the S&P 500. Based on these criteria, the Sub-advisor
determines whether the Portfolio should over-weight, under-weight or hold a neutral position in the stock relative to the
proportion of the S&P 500 that the stock represents. In addition, the Sub-advisor may determine based on the
quantitative criteria that (1) certain S&P 500 stocks should not be held by the Portfolio in any amount, and (2) certain
equity securities that are not included in the S&P 500 should be held by the Portfolio. The Portfolio may invest up to
15% of its total assets in equity securities not included in the S&P 500.
As a mutual fund investing primarily in common stocks, the Portfolio is subject to the risk that common stock
prices will decline over short or even extended periods. The U.S. stock market tends to be cyclical, with periods when
stock prices generally rise and periods when prices generally decline. The Sub-advisor believes that the various
quantitative criteria used to determine which stocks to over- or under-weight will balance each other so that the overall
risk of the Portfolio is not likely to differ materially from the risk of the S&P 500 itself. While the Portfolio
attempts to outperform the S&P 500, it is not expected that any outperformance will be substantial. The Portfolio also
may underperform the S&P 500 over short or extended periods.
About the S&P 500. The S&P 500 is a well-known stock market index that includes common stocks of 500 companies
from several industrial sectors representing a significant portion of the market value of all common stocks publicly
traded in the United States. Stocks in the S&P 500 are weighted according to their market capitalization (the number of
shares outstanding multiplied by the stock's current price). The composition of the S&P 500 is determined by S&P based
on such factors as market capitalization, trading activity, and whether the stock is representative of stocks in a
particular industry group. The composition of the S&P 500 may be changed from time to time. "Standard & Poor's(R)", "S&P
500(R)", "Standard & Poor's 500", and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for
use by the Investment Manager.
The Portfolio is not sponsored, endorsed, sold or promoted by Standard &Poor's, a division of The McGraw-Hill
Companies, Inc. ("S&P"). S&P makes no representation or warranty, express or implied, to the shareholders of the
Portfolio or any member of the public regarding the advisability of investing in securities generally or in the Portfolio
particularly or the ability of the S&P 500 to track general stock market performance. S&P's only relationship to the
Investment Manager or the Sub-advisor is a license provided to the Investment Manager of certain trademarks and trade
names of S&P and of the S&P 500, which is determined, composed and calculated by S&P without regard to the Investment
Manager, Sub-advisor, or Portfolio. S&P has no obligation to take the needs of the Investment Manager, Sub-advisor or
the shareholders of the Portfolio into consideration in determining, composing or calculating the S&P 500. S&P is not
responsible for and has not participated in the determination of the prices and amount of the Portfolio or the timing of
the issuance or sale of the Portfolio, or in the determination or calculation of the Portfolio's net asset value. S&P
has no obligation or liability in connection with the administration, marketing or trading of the Portfolio.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500 or any data included therein and shall
have no liability for any errors, omissions, or interruptions therein. S&P makes no warranty, express or implied, as to
the results to be obtained by the Portfolio, shareholders of the Portfolio, or any other person or entity from the use of
the S&P 500 or any data included therein. S&P makes no express or implied warranties and expressly disclaims all
warranties of merchantability or fitness for a particular purpose or use with respect to the S&P 500 or any data included
therein. Without limiting any of the foregoing, in no event shall S&P have any liability for any special, punitive,
indirect or consequential damages (including lost profits), even if notified of the possibility of such damages.
Other Investments:
Derivatives. The Portfolio may invest in various instruments that are or may be considered derivatives,
including securities index futures contracts and related options, warrants and convertible securities. These instruments
may be used for several reasons: to simulate full investment in the S&P 500 while retaining cash for fund management
purposes, to facilitate trading, to reduce transaction costs or to seek higher investment returns when the futures
contract, option, warrant or convertible security is priced more attractively than the underlying equity security or the
S&P 500. The Portfolio will not use derivatives for speculative purposes or to leverage its assets. The Portfolio will
limit its use of securities index futures contracts and related options so that, at all times, margin deposits for
futures contracts and premiums on related options do not exceed 5% of the Portfolio's assets and provided that the
percentage of the Portfolio's assets being used to cover its obligations under futures and options does not exceed 50%.
Additional information about these derivative instruments and their risks is included in this Prospectus under
"Certain Risk Factors and Investment Methods."
Temporary Investments. The Portfolio may maintain up to 25% of its assets in short-term debt securities and
money market instruments to meet redemption requests or to facilitate investment in the securities of the S&P 500. These
securities include obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities or by any
of the states, repurchase agreements, commercial paper, and certain bank obligations. The Portfolio will not invest in
these securities as part of a temporary defensive strategy to protect against potential market declines.
AST AMERICAN CENTURY INCOME & GROWTH PORTFOLIO:
Investment Objective: The primary investment objective of the Portfolio is to seek capital growth. Current income is a
secondary investment objective.
Principal Investment Policies and Risks:
The Portfolio's investment strategy utilizes quantitative management techniques in a two-step process that draws
heavily on computer technology. In the first step, the Sub-advisor ranks stocks, primarily the 1,500 largest publicly
traded U.S. companies (measured by market capitalization), from most attractive to least attractive. These rankings are
determined by using a computer model that combines measures of a stock's value and measures of its growth potential. To
measure value, the Sub-advisor uses ratios of stock price to book value and stock price to cash flow, among others. To
measure growth, the Sub-advisor uses, among others, the rate of growth in a company's earnings and changes in its
earnings estimates.
In the second step, the Sub-advisor uses a technique called portfolio optimization. In portfolio optimization,
the Sub-advisor uses a computer to build a portfolio of stocks from the ranking described earlier that it thinks will
provide the best balance between risk and expected return. The goal is to create an equity portfolio that provides
better returns than the S&P 500 Index without taking on significant additional risk. The Sub-advisor attempts to create
a dividend yield for the Portfolio that will be greater than that of the S&P 500.
The Sub-advisor does not attempt to time the market. Instead, it intends to keep the Portfolio essentially fully
invested in stocks regardless of the movement of stock prices generally.
Like any fund investing primarily in common stocks, the Portfolio is subject to the risk that the value of the
stocks it invests in will decline. These declines could be substantial.
Because the Portfolio is managed to an index (the S&P 500), its performance will be closely tied to the
performance of the index. If the S&P 500 goes down, it is likely that the Portfolio's share price will also go down.
The Portfolio's investments in income-producing stocks may reduce to some degree the Portfolio's level of risk and share
price fluctuation (and its potential for gain) relative to the S&P 500. However, if the stocks that make up the S&P 500
do not have a high dividend yield at a given time, then the Portfolio's dividend yield also will not be high.
Other Investments:
When the Sub-advisor believes that it is prudent, the Portfolio may invest in securities other than stocks, such
as convertible securities, foreign securities, short-term instruments and non-leveraged stock index futures contracts.
Stock index futures contracts can help the Portfolio's cash assets remain liquid while performing more like stocks. The
Portfolio also may short sales "against the box." Additional information on these types of investments is included in
this Prospectus under "Certain Risk Factors and Investment Methods."
Derivative Securities. The Portfolio may invest in derivative securities. Certain of these derivative
securities may be described as "index/structured" securities, which are securities whose value or performance is linked
to other equity securities (as in the case of depositary receipts), currencies, interest rates, securities indices or
other financial indicators ("reference indices"). The Portfolio may not invest in a derivative security unless the
reference index or the instrument to which it relates is an eligible investment for the Portfolio. For example, a
security whose underlying value is linked to the price of oil would not be a permissible investment because the Portfolio
may not invest in oil and gas leases or futures. The Portfolio may make short sales "against the box."
AST 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 MFS GROWTH WITH INCOME PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek to provide reasonable current income and
long-term capital growth and income.
Principal Investment Policies and Risks:
The Portfolio invests, under normal market conditions, at least 65% of its total assets in common stocks and
related securities, such as preferred stocks, convertible securities and depositary receipts. The stocks in which the
Portfolio invests generally will pay dividends. While the Portfolio may invest in companies of any size, the Portfolio
generally focuses on companies with larger market capitalizations that the Sub-advisor believes have sustainable growth
prospects and attractive valuations based on current and expected earnings or cash flow.
The Sub-advisor uses a "bottom up," as opposed to "top down," investment style in managing the Portfolio. This
means that securities are selected based upon fundamental analysis of individual companies (such as analysis of the
companies' earnings, cash flows, competitive position and management abilities) by the Sub-advisor.
The Portfolio may invest up to 20% of its net assets in foreign securities.
As with any fund investing primarily in common stocks, the value of the securities held by the Portfolio may
decline in value, either because of changing economic, political or market conditions or because of the economic
condition of the company that issued the security. These declines may be substantial. In light of the Portfolio's focus
on income-producing large-cap stocks, the risk and share price fluctuations of the Portfolio (and its potential for gain)
may be less than many other stock funds. The Portfolio may invest in foreign companies, including companies located in
developing countries, and it therefore will be subject to risks relating to political, social and economic conditions
abroad, risks resulting from differing regulatory standards in non-U.S. markets, and fluctuations in currency exchange
rates.
Other Investments:
Although the Portfolio will invest primarily in common stocks and related securities, the Portfolio may also
invest in debt securities, including variable and floating rate securities and zero coupon, deferred interest and
pay-in-kind bonds. The Portfolio may also purchase warrants and make short sales "against the box."
Futures and Forward Contracts. The Portfolio may purchase and sell futures contracts on securities indices,
foreign currencies and interest rates for hedging and non-hedging purposes. The Portfolio may also enter into forward
contracts for the purchase or sale of foreign currencies for hedging and non-hedging purposes.
For more information on some of the types of securities other than common stocks in which the Portfolio may
invest, see this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. The Portfolio may depart from its principal investment strategy by temporarily investing
for defensive purposes when adverse market, economic or political conditions exist. When investing for defensive
purposes, the Portfolio may hold cash or invest in cash equivalents, such as short-term U.S. government securities,
commercial paper and bank instruments. While the Portfolio is in a defensive position, the opportunity to achieve its
investment objective will be limited.
AST 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 AIM BALANCED PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to provide a well-diversified portfolio of stocks
that will produce both capital growth and current income.
Principal Investment Policies and Risks:
The Portfolio attempts to meet its objective by investing, normally, a minimum of 30% and a maximum of 70% of its
total assets in equity securities and a minimum of 30% and a maximum of 70% of its total assets in non-convertible debt
securities. The Portfolio may invest up to 25% of its total assets in convertible securities (which, depending on the
nature of the convertible security, may be considered equity securities for purposes of the Portfolio's 30-70% range for
investments in equity securities). The Portfolio may invest up to 10% of its total assets in high-yield debt securities
rated below investment grade or non-rated debt securities deemed to be of comparable quality ("junk bonds"). The
Portfolio may also invest up to 20% of its total assets in foreign securities.
In selecting the percentages of assets to be invested in equity or debt securities, the Sub-advisor considers
such factors as general market and economic conditions, as well as market, economic, industry and company trends, yields,
interest rates and changes in fiscal and monetary policies. The Sub-advisor will primarily purchase equity securities
for growth of capital and debt securities for income purposes. However, the Sub-advisor will focus on companies whose
securities have the potential for both capital appreciation and income generation. The Sub-advisor considers whether to
sell a security when it believes that the security no longer has that potential.
As a fund that invests both in equity and debt securities, the Portfolio's risk of loss and share price
fluctuation (and potential for gain) may be less than funds investing primarily in equity securities and more than funds
investing in primarily in debt securities. Of course, both equity and debt securities may decline in value. Prices of
equity securities fluctuate in response to many factors, including the historical and prospective earnings of the issuer,
the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. Prices
of debt securities fluctuate in response to market factors such as changes in interest rates and in response to changes
in the credit quality of specific issuers. The Portfolio's level of risk will increase to the extent it invests more
heavily in long-term debt securities or lower-rated debt securities.
The values of the convertible securities in which the Portfolio may invest will be affected by market interest
rates, the risk that the issuer may default on interest or principal payments, and the value of the underlying common
stock into which these securities may be converted. Specifically, because the convertible securities the Portfolio
purchases typically pay fixed interest and dividends, their values may fall if market interest rates rise and rise if
market interest rates fall. Additionally, an issuer may have the right to buy back convertible securities at a time and
price that is unfavorable to the Portfolio.
Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, the
relative lace of information about these companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
Other Investments:
The Portfolio may write call options on securities, but only on a covered basis; that is, the Portfolio will own
the underlying security. In addition, the Portfolio may purchase put options or write call options on securities indices
for the purpose of providing a partial hedge against a decline in the value of its portfolio securities. The Portfolio
may purchase and sell stock index and interest rate futures contracts and related options in order to hedge the value of
its investments against changes in market conditions. The Portfolio may also engage in various types of foreign currency
hedging transactions in connection with its foreign investments. The Portfolio may from time to time make short sales
"against the box."
Additional information about options, futures contracts, convertible securities, lower-rated debt securities,
foreign securities and other investments that the Portfolio may make is included in this Prospectus under "Certain Risk
Factors and Investment Methods."
Temporary Investments. In anticipation of or in response to adverse market conditions or for cash management
purposes, the Portfolio may hold all or a portion of its assets in cash, money market instruments, bonds or other debt
securities. While the Portfolio is in such a defensive position, the opportunity to achieve its investment objective of
both capital growth and current income may be limited.
AST AMERICAN CENTURY STRATEGIC BALANCED PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek capital growth and current income.
Principal Investment Policies and Risks:
The Sub-advisor intends to maintain approximately 60% of the Portfolio's assets in equity securities and the
remainder in bonds and other fixed income securities. Both the Portfolio's equity and fixed income investments will
fluctuate in value. The equity securities will fluctuate depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence. The fixed income investments will be affected primarily
by rising or falling interest rates and the credit quality of the issuers. As a fund that invests both in equity and
fixed income securities, the Portfolio's risk of loss and share price fluctuation will tend to be less than funds
investing primarily in equity securities and more than funds investing primarily in fixed income securities.
Equity Investments. With the equity portion of the Portfolio, the Sub-advisor utilizes quantitative management
techniques in a two-step process that draws heavily on computer technology. In the first step, the Sub-advisor ranks
stocks, primarily the 1,500 largest publicly traded U.S. companies as measured by market capitalization. These rankings
are determined by using a computer model that combines measures of a stock's value and measures of its growth potential.
To measure value, the Sub-advisor uses ratios of stock price to book value and stock price to cash flow, among others.
To measure growth, the manager uses, among others, the rate of growth in a company's earnings and changes in its earnings
estimates.
In the second step, the Sub-advisor uses a technique called portfolio optimization. In portfolio optimization,
the Sub-advisor uses a computer to build a portfolio of stocks from the ranking described earlier that it thinks will
provide the best balance between risk and expected return. The goal is to create an equity portfolio that provides
better returns than the S&P 500 Index without taking on significant additional risk.
Fixed Income Investments. The Sub-advisor intends to maintain approximately 40% of the Portfolio's assets in
fixed income securities. Up to 20% of the Portfolio's fixed income securities will be invested in foreign fixed income
securities. These percentages will fluctuate and may be higher or lower depending on the mix the Sub-advisor believes
will be most appropriate for achieving the Portfolio's objectives. A minimum of 25% of the Portfolio's assets will be
invested in fixed income senior securities.
The fixed income portion of the Portfolio is invested in a diversified portfolio of government securities,
corporate fixed income securities, mortgage-backed and asset-backed securities, and similar securities. The
Sub-advisor's strategy is to actively manage the Portfolio by investing the Portfolio's fixed income assets in sectors it
believes are undervalued (relative to the other sectors) and which represent better relative long-term investment
opportunities.
The Sub-advisor will adjust the weighted average portfolio maturity in response to expected changes in interest
rates. Under normal market conditions, the weighted average maturity of the fixed income portion of the Portfolio will
range from 3 to 10 years. During periods of rising interest rates, the weighted average maturity may be reduced in order
to reduce the effect of bond price declines on the Portfolio's net asset value. When interest rates are falling and bond
prices are rising, the Portfolio may be moved toward the longer end of its maturity range.
Debt securities that comprise the Portfolio's fixed income portfolio will primarily be investment grade
obligations. However, the Portfolio may invest up to 10% of its fixed income assets in high-yield securities or "junk
bonds." Regardless of rating levels, all debt securities considered for purchase by the Portfolio are analyzed by the
Sub-advisor to determine, to the extent reasonably possible, that the planned investment is sound, given the investment
objective of the Portfolio. For an additional discussion of lower-rated securities and their risks, see this Prospectus
under "Certain Risk Factors and Investment Methods."
In determining the allocation of assets among U.S. and foreign capital markets, the Sub-advisor considers the
condition and growth potential of the various economies; the relative valuations of the markets; and social, political,
and economic factors that may affect the markets. The Sub-advisor also considers the impact of foreign exchange rates in
selecting securities denominated in foreign currencies.
Foreign Securities. The Portfolio may invest up to 25% of its total assets in equity and debt securities of
foreign issuers, including foreign governments and their agencies, when these securities meet its standards of
selection. (As noted above, approximately 20% of the fixed income portion of the Portfolio normally will be invested in
foreign securities.) These investments will be made primarily in issuers in developed markets. The Portfolio may make
such investments either directly in foreign securities, or by purchasing depositary receipts for foreign securities. To
protect against adverse movements in exchange rates between currencies, the Portfolio may, for hedging purposes only,
enter into forward currency exchange contracts and buy put and call options relating to currency futures contracts.
Other Investments:
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."
For further information on these securities and investment practices, see this Prospectus under "Certain Risk
Factors and Investment Methods."
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 T. ROWE PRICE GLOBAL BOND PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to provide high current income and capital growth by
investing in high-quality, foreign and U.S. government bonds.
Principal Investment Policies and Risks:
To achieve its objectives, the Portfolio will invest at least 65% of its total assets in bonds issued or
guaranteed by the U.S. or foreign governments or their agencies and by foreign authorities, provinces and
municipalities. Corporate bonds of U.S. and foreign issuers may also be purchased. The Portfolio seeks to moderate
price fluctuation by actively managing its maturity structure and currency exposure. The Sub-advisor bases its
investment decisions on fundamental market factors, currency trends, and credit quality. The Portfolio generally invests
in countries where the combination of fixed-income returns and currency exchange rates appears attractive, or, if the
currency trend is unfavorable, where the Sub-advisor believes that the currency risk can be minimized through hedging.
Although the Portfolio expects to maintain an intermediate-to-long weighted average maturity, there are no
maturity restrictions on the overall portfolio or on individual securities. The Portfolio may and frequently does engage
in foreign currency transactions such as forward foreign currency exchange contracts, hedging its foreign currency
exposure back to the dollar or against other foreign currencies ("cross-hedging"). The Sub-advisor also attempts to
reduce currency risks through diversification among foreign securities and active management of currency exposures.
The Portfolio may also invest up to 20% of its assets in the aggregate in below investment-grade, high-risk bonds
("junk bonds") and emerging market bonds. Some emerging market bonds, such as Brady Bonds, may be denominated in U.S.
dollars.
Like any fixed income fund, the value of the Portfolio will fluctuate in response to changes in market interest
rates and the credit quality of particular companies. International fixed income investing, however, involves additional
risks that can increase the potential for losses. These additional risks include varying stages of economic and
political development of foreign countries, differing regulatory and accounting standards in non-U.S. markets, and higher
transaction costs. Because a substantial portion of the Portfolio's investments are denominated in foreign currencies,
exchange rates are also likely to have a significant impact on total Portfolio performance. For example, a rise in the
U.S. dollar's value relative to the Japanese yen will decrease the U.S. dollar value of a Japanese bond held in the
Portfolio, even though the price of that bond in yen remains unchanged. Therefore, because of these currency risks and
the risks of investing in foreign securities generally, the Portfolio will involve a greater degree of risk and share
price fluctuation than a fund investing primarily in domestic fixed income securities, but ordinarily will involve less
risk than a fund investing exclusively in foreign fixed income securities. In addition, the Portfolio's focus on longer
maturity bonds will tend to cause greater fluctuations in value when interest rates change.
Types of Debt Securities. The Portfolio's investments in debt securities may include securities issued or
guaranteed by the U.S. and foreign governments, their agencies, instrumentalities or political subdivisions, securities
issued or guaranteed by supranational organizations (e.g., European Investment Bank, InterAmerican Development Bank or
the World Bank), bank or bank holding company securities, foreign and domestic corporate debt securities, and commercial
paper.
The Portfolio may invest in zero coupon securities, which are securities that are purchased at a discount from
their face value, but that do not make cash interest payments. Zero coupon securities are subject to greater fluctuation
in market value as a result of changing interest rates than debt obligations that make current cash interest payments.
The Portfolio may invest in Brady Bonds, which are used as a means of restructuring the external debt burden of
certain emerging countries. Even if the bonds are collateralized, they are often considered speculative investments
because of the country's credit history or other factors. The Portfolio may purchase the securities of certain foreign
investment funds or trusts called passive foreign investment companies. Such trusts have been the only or primary way to
invest in certain countries. In addition to bearing their proportionate share of the Trust's expenses, shareholders will
also indirectly bear similar expenses of such trusts.
The Portfolio from time to time may invest in collateralized mortgage obligations, asset-backed bonds and debt
securities convertible into equities.
Nondiversified Investment Company. The Portfolio intends to select its investments from a number of country and
market sectors, and intends to have investments in securities of issuers from a minimum of three different countries
(including the United States). However, the Portfolio is considered a "nondiversified" investment company for purposes
of the Investment Company Act of 1940. As such, the Portfolio may invest more than 5% of its assets in the fixed-income
securities of individual foreign governments. The Portfolio generally will not invest more than 5% of its assets in any
individual corporate issuer, except with respect to certain short-term investments. As a nondiversified fund, a price
decline in any one of the Portfolio's holdings may have a greater effect on the Portfolio's value than on the value of a
fund that is more broadly diversified.
Other Investments:
The Portfolio may buy and sell futures contracts (and related options) for a number of reasons including: to
manage exposure to changes in interest rates, securities prices and currency exchange rates; as an efficient means of
adjusting overall exposure to certain markets; to earn income; to protect the value of portfolio securities; and to
adjust the portfolio's duration. The Portfolio may purchase or write call and put options on securities, financial
indices, and foreign currencies. The Portfolio may invest up to 10% of its total assets in hybrid instruments, which
combine the characteristics of futures, options and securities.
Additional information on the securities in which the Portfolio may invest and their risks in included below
under "Certain Risk Factors and Investment Methods."
Temporary Investments. To protect against adverse movements of interest rates, the Portfolio may invest without
limit in short-term obligations denominated in U.S. and foreign currencies such as certain bank obligations, commercial
paper, short-term government and corporate obligations, repurchase agreements and money market mutual funds managed by
the Sub-advisor. Cash reserves also provide flexibility in meeting redemptions and paying expenses. While the Portfolio
is in a defensive position, the opportunity to achieve its investment objective of high current income and capital growth
may be limited.
AST FEDERATED HIGH YIELD PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek high current income by investing primarily in
a diversified portfolio of fixed income securities. The fixed income securities in which the Portfolio intends to invest
are lower-rated corporate debt obligations.
Principal Investment Policies and Risks:
The Portfolio will invest at least 65% of its assets in lower-rated corporate fixed income securities ("junk
bonds"). These fixed income securities may include preferred stocks, convertible securities, bonds, debentures, notes,
equipment lease certificates and equipment trust certificates. The securities in which the Portfolio invests usually
will be rated below the three highest rating categories of a nationally recognized rating organization (AAA, AA, or A for
Standard & Poor's Corporation ("Standard & Poor's") and Aaa, Aa or A for Moody's Investors Service, Inc. ("Moody's")) or,
if unrated, are of comparable quality. There is no lower limit on the rating of securities in which the Portfolio may
invest. The Portfolio may purchase or hold securities rated in the lowest rating category or securities in default.
A fund that invests primarily in lower-rated fixed income securities will be subject to greater risk and share
price fluctuation than a typical fixed income fund, and may be subject to an amount of risk that is comparable to or
greater than many equity funds. Lower-rated securities will usually offer higher yields than higher-rated securities,
but with more risk of loss of principal and interest. This is because of the reduced creditworthiness of the securities
and the increased risk of default. Like equity securities, lower-rated fixed income securities tend to reflect
short-term corporate and market developments to a greater extent than higher-rated fixed income securities, which tend to
react primarily to fluctuations in market interest rates.
An economic downturn may adversely affect the value of some lower-rated bonds. Such a downturn may especially
affect highly leveraged companies or companies in industries sensitive to market cycles, where deterioration in a
company's cash flow may impair its ability to meet its obligations under the bonds. From time to time, issuers of
lower-rated bonds may seek or may be required to restructure the terms and conditions of the securities they have
issued. As a result of these restructurings, the value of the securities may fall, and the Portfolio may bear legal or
administrative expenses in order to maximize recovery from an issuer.
The secondary trading market for lower-rated bonds is generally less liquid than the secondary trading market for
higher-rated bonds. Adverse publicity and the perception of investors relating to these securities and their issuers,
whether or not warranted, may also affect the price or liquidity of lower-rated bonds. For an additional discussion of
the risks involved in lower-rated securities, see this Prospectus under "Certain Risk Factors and Investment Methods."
Methods by which the Sub-advisor attempts to reduce the risks involved in lower-rated securities include:
Credit Research. The Sub-advisor will perform its own credit analysis in addition to using rating
organizations and other sources, and may have discussions with the issuer's management or other investment analysts
regarding issuers. The Sub-advisor's credit analysis will consider the issuer's financial soundness, its responsiveness
to changing business and market conditions, and its anticipated cash flow and earnings. In evaluating an issuer, the
Sub-advisor places special emphasis on the estimated current value of the issuer's assets rather than their historical
cost.
Diversification. The Sub-advisor invests in securities of many different issuers, industries, and
economic sectors to reduce portfolio risk.
Economic Analysis. The Sub-advisor will analyze current developments and trends in the economy and in
the financial markets.
Other Investments:
Under normal circumstances, the Portfolio will not invest more than 10% of its total assets in equity
securities. The Portfolio may own zero coupon bonds or pay-in-kind securities, which are fixed income securities that do
not make regular cash interest payments. The prices of these securities are generally more sensitive to changes in
market interest rates than are conventional bonds. Additionally, interest on zero coupon bonds and pay-in-kind
securities must be reported as taxable income to the Portfolio even though it receives no cash interest until the
maturity of such securities.
The Portfolio may invest in securities issued by real estate investment trusts, which are companies that hold
real estate or mortgage investments. Usually, real estate investment trusts are not diversified, and, therefore, are
subject to the risks of a single project or a small number of projects. They also may be heavily dependent on cash flows
from the property they own, may bear the risk of defaults on mortgages, and may be affected by changes in the value of
the underlying property.
Temporary Investments. The Portfolio may also invest all or a part of its assets temporarily in cash or cash
items for defensive purposes during times of unusual market conditions or to maintain liquidity. Cash items may include
certificates of deposit and other bank obligations; commercial paper (generally lower-rated); short-term notes;
obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities; and repurchase agreements.
While the Portfolio is in a defensive position, the opportunity to achieve its investment objective of high current
income will be limited.
AST LORD ABBETT BOND-DEBENTURE PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek high current income and the opportunity for
capital appreciation to produce a high total return.
Principal Investment Policies and Risks:
To pursue its objective, the Portfolio normally invests in high yield and investment grade debt securities,
securities convertible into common stock and preferred stocks. Under normal circumstances, the Portfolio invests at
least 65% of its total assets in fixed income securities of various types. At least 20% of the Portfolio's assets must
be invested in any combination of investment grade debt securities, U.S. Government securities and cash equivalents.
The Sub-advisor believes that a high total return (current income and capital growth) may be derived from an
actively managed, diversified portfolio of investments. Through portfolio diversification, credit analysis and attention
to current developments and trends in interest rates and economic conditions, the Sub-advisor attempts to reduce the
Portfolio's risks. The Sub-advisor seeks unusual values, using fundamental, "bottom-up" research (i.e., research on
individual companies rather than the economy as a whole) to identify undervalued securities. The Portfolio may find good
value in high yield securities, sometimes called "lower-rated bonds" or "junk bonds," and frequently may have more than
half of its assets invested in those securities. Higher yield on debt securities can occur during periods of high
inflation when the demand for borrowed money is high. Also, buying lower-rated bonds when the Sub-advisor believes their
credit risk is likely to decrease may generate higher returns.
The Portfolio may also make significant investments in mortgage-backed securities. Although the Portfolio
expects to maintain a weighted average maturity in the range of seven to nine years, there are no maturity restrictions
on the overall portfolio or on individual securities.
As a fund that invests primarily in fixed income securities, the Portfolio is subject to the general risks and
considerations associated with investing in such securities. The value of an investment in the Portfolio will change as
market interest rates fluctuate. When interest rates rise, the prices of debt securities are likely to decline, and when
interest rates fall, the prices of debt securities tend to rise. The Portfolio generally maintains a relatively long
average maturity, and longer-term debt securities are usually more sensitive to interest rate changes. Put another way,
the longer the maturity of a security, the greater the effect a change in interest rates is likely to have on its price.
There is also the risk that an issuer of a debt security will fail to make timely payments of principal or
interest to the Portfolio, a risk that will be relatively high because the Portfolio will likely have substantial junk
bond investments. The Portfolio may sustain losses if an issuer defaults as to principal and/or interest payments after
the Portfolio purchases its securities. In addition, the market for high yield securities generally is less liquid than
the market for higher-rated securities. In addition, the risk to which the Portfolio is subject may be high relative to
other fixed income funds because of the Portfolio's investment in convertible securities, which tend to be more volatile
than non-convertible debt securities. In addition to the risks associated with fixed income securities generally,
mortgage-backed securities are subject to the additional risk that early repayments will reduce the Portfolio's return on
such securities.
Other Investments:
The Portfolio may invest up to 20% of its net assets in foreign securities (securities primarily traded in
countries outside the United States), and may enter into forward foreign currency contracts in connection with these
foreign investments.
Additional information on the types of securities and instruments in which the Portfolio may invest and their
risks in included in this Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. While typically fully invested, the Portfolio may at times increase its investments in
cash and short-term debt securities for defensive purposes. The Portfolio may also invest in short-term fixed income
securities to invest uncommitted cash balances or to maintain liquidity to meet shareholder redemptions. Short-term
securities include obligations of the U.S. Government and its agencies and instrumentalities, commercial paper, and bank
certificates of deposit and bankers' acceptances. When the Portfolio increases its cash position, the opportunity to
achieve its investment objective of high total return will be limited.
AST PIMCO TOTAL RETURN BOND PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek to maximize total return, consistent with
preservation of capital and prudent investment management.
Principal Investment Policies and Risks:
The Portfolio will invest at least 65% of its assets in the following types of fixed income securities;
o securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities;
o corporate debt securities, including convertible securities and commercial paper;
o mortgage and other asset-backed securities;
o structured notes, including hybrid or "indexed" securities, and loan participations;
o delayed funding loans and revolving credit securities;
o bank certificates of deposit, fixed time deposits and bankers' acceptances;
o repurchase agreements and reverse repurchase agreements;
o obligations of foreign governments or their subdivisions, agencies and instrumentalities; and
o obligations of international agencies or supranational entities.
Portfolio holdings will be concentrated in areas of the bond market (based on quality, sector, interest rate or maturity)
that the Sub-advisor believes to be relatively undervalued. In selecting fixed income securities, the Sub-advisor uses
economic forecasting, interest rate anticipation, credit and call risk analysis, foreign currency exchange rate
forecasting, and other securities selection techniques. The proportion of the Portfolio's assets committed to investment
in securities with particular characteristics (such as maturity, type and coupon rate) will vary based on the
Sub-advisor's outlook for the U.S. and foreign economies, the financial markets, and other factors. The management of
duration (a measure of a fixed income security's expected life that incorporates its yield, coupon interest payments,
final maturity and call features into one measure) is one of the fundamental tools used by the Sub-advisor.
The Portfolio will invest in fixed-income securities of varying maturities. The average portfolio duration of
the Portfolio generally will vary within a three- to six-year time frame based on the Sub-advisor's forecast for interest
rates. The Portfolio may invest up to 10% of its assets in fixed income securities that are rated below investment grade
("junk bonds") but are rated B or higher by Moody's Investors Services, Inc. ("Moody's") or Standard & Poor's Corporation
("S&P") (or, if unrated, determined by the Sub-advisor to be of comparable quality).
Generally, over the long term, the return obtained by a portfolio investing primarily in fixed income securities
such as the Portfolio is not expected to be as great as that obtained by a portfolio investing in equity securities. At
the same time, the risk and price fluctuation of a fixed income fund is expected to be less than that of an equity
portfolio, so that a fixed income portfolio is generally considered to be a more conservative investment. However, the
Portfolio can and routinely does invest in certain complex fixed income securities (including various types of
mortgage-backed and asset-backed securities) and engage in a number of investment practices (including futures, swaps and
dollar rolls) as described below, that many other fixed income funds do not utilize. These investments and practices are
designed to increase the Portfolio's return or hedge its investments, but may increase the risk to which the Portfolio is
subject.
Like other fixed income funds, the Portfolio is subject to market risk. Bond values fluctuate based on changes
in interest rates, market conditions, investor confidence and announcements of economic, political or financial
information. Generally, the value of fixed income securities will change inversely with changes in market interest
rates. As interest rates rise, market value tends to decrease. This risk will be greater for long-term securities than
for short-term securities. Certain mortgage-backed and asset-backed securities and derivative instruments in which the
Portfolio may invest may be particularly sensitive to changes in interest rates. The Portfolio is also subject to credit
risk, which is the possibility that an issuer of a security (or a counterparty to a derivative contract) will default or
become unable to meet its obligation. Generally, the lower the rating of a security, the higher its degree of credit
risk.
The following paragraphs describe some specific types of fixed-income investments that the Portfolio may invest
in, and some of the investment practices that the Portfolio will engage in. More information about some of these
investments, including futures, options and mortgage-backed and asset-backed securities, is included below under "Certain
Risk Factors and Investment Methods."
U.S. Government Securities. The Portfolio may invest in various types of U.S. Government securities, including
those that are supported by the full faith and credit of the United States; those that are supported by the right of the
issuing agency to borrow from the U.S. Treasury; those that are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; and still others that are supported only by the credit of the
instrumentality.
Corporate Debt Securities. Corporate debt securities include corporate bonds, debentures, notes and other
similar instruments, including convertible securities and preferred stock. Debt securities may be acquired with warrants
attached. The rate of return or return of principal on some debt obligations may be linked or indexed to exchange rates
between the U.S. dollar and a foreign currency or currencies.
While the Sub-advisor may regard some countries or companies as favorable investments, pure fixed income
opportunities may be unattractive or limited due to insufficient supply or legal or technical restrictions. In such
cases, the Portfolio may consider equity securities or convertible bonds to gain exposure to such investments.
Variable and Floating Rate Securities. Variable and floating rate securities provide for a periodic adjustment
in the interest rate paid on the obligations. The interest rates on these securities are tied to other interest rates,
such as money-market indices or Treasury bill rates, and reset periodically. While these securities provide the
Portfolio with a certain degree of protection against losses caused by rising interest rates, they will cause the
Portfolio's interest income to decline if market interest rates decline.
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities whose principal value is
periodically adjusted according to the rate of inflation. The interest rate on these bonds is fixed at issuance, and is
generally lower than the interest rate on typical bonds. Over the life of the bond, however, this interest will be paid
based on a principal value that has been adjusted for inflation. Repayment of the adjusted principal upon maturity may
be guaranteed, but the market value of the bonds is not guaranteed, and will fluctuate. The Portfolio may invest in
inflation-indexed bonds that do not provide a repayment guarantee. While these securities are expected to be protected
from long-term inflationary trends, short-term increases in inflation may lead to losses.
Catastrophe Bonds. Catastrophe bonds are fixed income securities for which the return of principal and payment
of interest is contingent upon the non-occurrence of a specific "trigger" event. The trigger event may be, for example,
a hurricane or an earthquake in a specific geographic region that causes losses exceeding a specific amount. If the
trigger event occurs, the Portfolio may lose all or a portion of the amount it invested in the bond. Catastrophe bonds
may also expose the Portfolio to certain other risks, including default, adverse regulatory interpretation, and adverse
tax consequences.
Mortgage-Related and Other Asset-Backed Securities. The Portfolio may invest all of its assets in
mortgage-backed and other asset-backed securities, including collateralized mortgage obligations. The value of some
mortgage-backed and asset-backed securities in which the Portfolio invests may be particularly sensitive to changes in
market interest rates.
Reverse Repurchase Agreements and Dollar Rolls. In addition to entering into reverse repurchase agreements (as
described below under "Certain Risk Factors and Investment Methods"), the Portfolio may also enter into dollar rolls. In
a dollar roll, the Portfolio sells mortgage-backed or other securities for delivery in the current month and
simultaneously contracts to purchase substantially similar securities on a specified future date. The Portfolio forgoes
principal and interest paid on the securities sold in a dollar roll, but the Portfolio is compensated by the difference
between the sales price and the lower price for the future purchase, as well as by any interest earned on the proceeds of
the securities sold. The Portfolio also could be compensated through the receipt of fee income. Reverse repurchase
agreements and dollar rolls can be viewed as collateralized borrowings and, like other borrowings, will tend to
exaggerate fluctuations in Portfolio's share price and may cause the Portfolio to need to sell portfolio securities at
times when it would otherwise not wish to do so.
Foreign Securities. The Portfolio may invest up to 20% of its assets in securities denominated in foreign
currencies and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Portfolio may
invest up to 10% of its assets in securities of issuers based in developing countries (as determined by the
Sub-advisor). The Portfolio may buy and sell foreign currency futures contracts and options on foreign currencies and
foreign currency futures contracts, and enter into forward foreign currency exchange contracts for the purpose of hedging
currency exchange risks arising from the Portfolio's investment or anticipated investment in securities denominated in
foreign currencies.
Short Sales "Against the Box." The Portfolio may sell securities short "against the box." For a discussion of
this practice, see this Prospectus under "Certain Risk Factors and Investment Methods."
Derivative Instruments. The Portfolio may purchase and write call and put options on securities, securities
indices and on foreign currencies. The Portfolio may invest in interest rate futures contracts, stock index futures
contracts and foreign currency futures contracts and options thereon that are traded on U.S. or foreign exchanges or
boards of trade. The Portfolio may also enter into swap agreements with respect to foreign currencies, interest rates
and securities indices. The Portfolio may use these techniques to hedge against changes in interest rates, currency
exchange rates or securities prices or as part of its overall investment strategy.
For a discussion of futures and options and their risks, see this Prospectus under "Certain Risk Factors and
Investment Methods." The Portfolio's investments in swap agreements are described directly below.
Swap Agreements. The Portfolio may enter into interest rate, index and currency exchange rate swap agreements
for the purposes of attempting to obtain a desired return at a lower cost than if the Portfolio had invested directly in
an instrument that yielded the desired return. Swap agreements are two-party contracts entered into primarily by
institutional investors for periods ranging from a few weeks to more than one year. In a standard "swap" transaction,
the two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular
investments or instruments. The returns to be exchanged between the parties are calculated with respect to a "notional
amount," i.e., a specified dollar amount that is hypothetically invested at a particular interest rate, in a particular
foreign currency, or in a "basket" of securities representing a particular index. Commonly used swap agreements include
interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent
that interest rates exceed a specified rate or "cap"; interest floors, under which, in return for a premium, one party
agrees to make payments to the other to the extent that interest rates fall below a specified level or "floor"; and
interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect
itself against interest rate movements exceeding given minimum or maximum levels.
Under most swap agreements entered into by the Portfolio, the parties' obligations are determined on a "net
basis." Consequently, the Portfolio's obligations (or rights) under a swap agreement will generally be equal only to a
net amount based on the relative values of the positions held by each party.
Whether the Portfolio's use of swap agreements will be successful will depend on the sub-advisor's ability to
predict that certain types of investments are likely to produce greater returns than other investments. Moreover, the
Portfolio may not receive the expected amount under a swap agreement if the other party to the agreement defaults or
becomes bankrupt. The swaps market is relatively new and is largely unregulated.
AST PIMCO LIMITED MATURITY BOND PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek to maximize total return, consistent with
preservation of capital and prudent investment management.
Principal Investment Policies and Risks:
The Portfolio will invest at least 65% of its assets in the following types of fixed income securities;
o securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities;
o corporate debt securities, including convertible securities and commercial paper;
o mortgage and other asset-backed securities;
o structured notes, including hybrid or "indexed" securities, and loan participations;
o delayed funding loans and revolving credit securities;
o bank certificates of deposit, fixed time deposits and bankers' acceptances;
o repurchase agreements and reverse repurchase agreements;
o obligations of foreign governments or their subdivisions, agencies and instrumentalities; and
o obligations of international agencies or supranational entities.
Portfolio holdings will be concentrated in areas of the bond market (based on quality, sector, interest rate or
maturity) that the Sub-advisor believes to be relatively undervalued. In selecting fixed income securities, the
Sub-advisor uses economic forecasting, interest rate anticipation, credit and call risk analysis, foreign currency
exchange rate forecasting, and other securities selection techniques. The proportion of the Portfolio's assets committed
to investment in securities with particular characteristics (such as maturity, type and coupon rate) will vary based on
the Sub-advisor's outlook for the U.S. and foreign economies, the financial markets, and other factors. The management
of duration (a measure of a fixed income security's expected life that incorporates its yield, coupon interest payments,
final maturity and call features into one measure) is one of the fundamental tools used by the Sub-advisor.
The Portfolio will invest in fixed-income securities of varying maturities. The average portfolio duration of
the Portfolio generally will vary within a one- to three-year time frame based on the Sub-advisor's forecast for interest
rates. The Portfolio may invest up to 10% of its assets in fixed income securities that are rated below investment grade
("junk bonds") but are rated B or higher by Moody's Investors Services, Inc. ("Moody's") or Standard & Poor's Corporation
("S&P") (or, if unrated, determined by the Sub-advisor to be of comparable quality).
Generally, over the long term, the return obtained by a portfolio investing primarily in fixed income securities
such as the Portfolio is not expected to be as great as that obtained by a portfolio investing in equity securities. At
the same time, the risk and price fluctuation of a fixed income fund is expected to be less than that of an equity
portfolio, so that a fixed income portfolio is generally considered to be a more conservative investment. However, the
Portfolio can and routinely does invest in certain complex fixed income securities (including various types of
mortgage-backed and asset-backed securities) and engage in a number of investment practices (including futures, swaps and
dollar rolls) as described below, that many other fixed income funds do not utilize. These investments and practices are
designed to increase the Portfolio's return or hedge its investments, but may increase the risk to which the Portfolio is
subject.
Like other fixed income funds, the Portfolio is subject to market risk. Bond values fluctuate based on changes
in interest rates, market conditions, investor confidence and announcements of economic, political or financial
information. Generally, the value of fixed income securities will change inversely with changes in market interest
rates. As interest rates rise, market value tends to decrease. This risk will be greater for long-term securities than
for short-term securities. Therefore, the Portfolio's share price is expected to fluctuate less than the AST PIMCO Total
Return Bond Portfolio, because its average duration will be shorter. Certain mortgage-backed and asset-backed securities
and derivative instruments in which the Portfolio may invest may be particularly sensitive to changes in interest rates.
The Portfolio is also subject to credit risk, which is the possibility that an issuer of a security (or a counterparty to
a derivative contract) will default or become unable to meet its obligation. Generally, the lower the rating of a
security, the higher its degree of credit risk.
The following paragraphs describe some specific types of fixed-income investments that the Portfolio may invest
in, and some of the investment practices that the Portfolio will engage in. More information about some of these
investments, including futures, options and mortgage-backed and asset-backed securities, is included below under "Certain
Risk Factors and Investment Methods."
U.S. Government Securities. The Portfolio may invest in various types of U.S. Government securities, including
those that are supported by the full faith and credit of the United States; those that are supported by the right of the
issuing agency to borrow from the U.S. Treasury; those that are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; and still others that are supported only by the credit of the
instrumentality.
Corporate Debt Securities. Corporate debt securities include corporate bonds, debentures, notes and other
similar instruments, including convertible securities and preferred stock. Debt securities may be acquired with warrants
attached. The rate of return or return of principal on some debt obligations may be linked or indexed to exchange rates
between the U.S. dollar and a foreign currency or currencies.
While the Sub-advisor may regard some countries or companies as favorable investments, pure fixed income
opportunities may be unattractive or limited due to insufficient supply or legal or technical restrictions. In such
cases, the Portfolio may consider equity securities or convertible bonds to gain exposure to such investments.
Variable and Floating Rate Securities. Variable and floating rate securities provide for a periodic adjustment
in the interest rate paid on the obligations. The interest rates on these securities are tied to other interest rates,
such as money-market indices or Treasury bill rates, and reset periodically. While these securities provide the
Portfolio with a certain degree of protection against losses caused by rising interest rates, they will cause the
Portfolio's interest income to decline if market interest rates decline.
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities whose principal value is
periodically adjusted according to the rate of inflation. The interest rate on these bonds is fixed at issuance, and is
generally lower than the interest rate on typical bonds. Over the life of the bond, however, this interest will be paid
based on a principal value that has been adjusted for inflation. Repayment of the adjusted principal upon maturity may
be guaranteed, but the market value of the bonds is not guaranteed, and will fluctuate. The Portfolio may invest in
inflation-indexed bonds that do not provide a repayment guarantee. While these securities are expected to be protected
from long-term inflationary trends, short-term increases in inflation may lead to losses.
Catastrophe Bonds. Catastrophe bonds are fixed income securities for which the return of principal and payment
of interest is contingent upon the non-occurrence of a specific "trigger" event. The trigger event may be, for example,
a hurricane or an earthquake in a specific geographic region that causes losses exceeding a specific amount. If the
trigger event occurs, the Portfolio may lose all or a portion of the amount it invested in the bond. Catastrophe bonds
may also expose the Portfolio to certain other risks, including default, adverse regulatory interpretation, and adverse
tax consequences.
Mortgage-Related and Other Asset-Backed Securities. The Portfolio may invest all of its assets in
mortgage-backed and other asset-backed securities, including collateralized mortgage obligations and stripped
mortgage-backed securities. The value of some mortgage-backed and asset-backed securities in which the Portfolio invests
may be particularly sensitive to changes in market interest rates.
Reverse Repurchase Agreements and Dollar Rolls. In addition to entering into reverse repurchase agreements (as
described below under "Certain Risk Factors and Investment Methods"), the Portfolio may also enter into dollar rolls. In
a dollar roll, the Portfolio sells mortgage-backed or other securities for delivery in the current month and
simultaneously contracts to purchase substantially similar securities on a specified future date. The Portfolio forgoes
principal and interest paid on the securities sold in a dollar roll, but the Portfolio is compensated by the difference
between the sales price and the lower price for the future purchase, as well as by any interest earned on the proceeds of
the securities sold. The Portfolio also could be compensated through the receipt of fee income. Reverse repurchase
agreements and dollar rolls can be viewed as collateralized borrowings and, like other borrowings, will tend to
exaggerate fluctuations in Portfolio's share price and may cause the Portfolio to need to sell portfolio securities at
times when it would otherwise not wish to do so.
Foreign Securities. The Portfolio may invest up to 20% of its assets in securities denominated in foreign
currencies and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Portfolio may
buy and sell foreign currency futures contracts and options on foreign currencies and foreign currency futures contracts,
and enter into forward foreign currency exchange contracts for the purpose of hedging currency exchange risks arising
from the Portfolio's investment or anticipated investment in securities denominated in foreign currencies.
Short Sales "Against the Box." The Portfolio may sell securities short "against the box." For a discussion of
this practice, see this Prospectus under "Certain Risk Factors and Investment Methods."
Derivative Instruments. The Portfolio may purchase and write call and put options on securities, securities
indices and on foreign currencies. The Portfolio may invest in interest rate futures contracts, stock index futures
contracts and foreign currency futures contracts and options thereon that are traded on U.S. or foreign exchanges or
boards of trade. The Portfolio may also enter into swap agreements with respect to foreign currencies, interest rates
and securities indices. The Portfolio may use these techniques to hedge against changes in interest rates, currency
exchange rates or securities prices or as part of its overall investment strategy.
For a discussion of futures and options and their risks, see this Prospectus under "Certain Risk Factors and
Investment Methods." The Portfolio's investments in swap agreements are described directly below.
Swap Agreements. The Portfolio may enter into interest rate, index and currency exchange rate swap agreements
for the purposes of attempting to obtain a desired return at a lower cost than if the Portfolio had invested directly in
an instrument that yielded the desired return. Swap agreements are two-party contracts entered into primarily by
institutional investors for periods ranging from a few weeks to more than one year. In a standard "swap" transaction,
the two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular
investments or instruments. The returns to be exchanged between the parties are calculated with respect to a "notional
amount," i.e., a specified dollar amount that is hypothetically invested at a particular interest rate, in a particular
foreign currency, or in a "basket" of securities representing a particular index. Commonly used swap agreements include
interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent
that interest rates exceed a specified rate or "cap"; interest floors, under which, in return for a premium, one party
agrees to make payments to the other to the extent that interest rates fall below a specified level or "floor"; and
interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect
itself against interest rate movements exceeding given minimum or maximum levels.
Under most swap agreements entered into by the Portfolio, the parties' obligations are determined on a "net
basis." Consequently, the Portfolio's obligations (or rights) under a swap agreement will generally be equal only to a
net amount based on the relative values of the positions held by each party.
Whether the Portfolio's use of swap agreements will be successful will depend on the sub-advisor's ability to
predict that certain types of investments are likely to produce greater returns than other investments. Moreover, the
Portfolio may not receive the expected amount under a swap agreement if the other party to the agreement defaults or
becomes bankrupt. The swaps market is relatively new and is largely unregulated.
AST MONEY MARKET PORTFOLIO:
Investment Objective: The investment objective of the Portfolio is to seek high current income and maintain high levels
of liquidity.
Principal Investment Policies and Risks:
As a money market fund, the Portfolio seeks to maintain a stable net asset value of $1.00 per share. In other
words, the Portfolio attempts to operate so that shareholders do not lose any of the principal amount they invest in the
Portfolio. Of course, there can be no assurance that the Portfolio will achieve its goal of a stable net asset value,
and shares of the Portfolio are neither insured nor guaranteed by the U.S. government or any other entity. For instance,
the issuer or guarantor of a portfolio security or the other party to a contract could default on its obligation, and
this could cause the Portfolio's net asset value to fall below $1. In addition, the income earned by the Portfolio will
fluctuate based on market conditions and other factors.
Under the regulatory requirements applicable to money market funds, the Portfolio must maintain a weighted
average portfolio maturity of not more than 90 days and invest in high quality U.S. dollar-denominated securities that
have effective maturities of not more than 397 days. In addition, the Portfolio will limit its investments to those
securities that, in accordance with guidelines adopted by the Trustees of the Trust, present minimal credit risks. The
Portfolio will not purchase any security (other than a United States Government security) unless:
o if rated by only one nationally recognized statistical rating organization (such as Moody's and Standard &
Poor's), such organization has rated it with the highest rating assigned to short-term debt securities;
o if rated by more than one nationally recognized statistical rating organization, at least two rating
organizations have rated it with the highest rating assigned to short-term debt securities; or
o it is not rated, but is determined to be of comparable quality in accordance with procedures noted above.
These standards must be satisfied at the time an investment is made. If the quality of the investment later declines,
the Portfolio may continue to hold the investment, subject in certain circumstances to a finding by the Directors that
disposing of the investment would not be in the Portfolio's best interest.
Subject to the above requirements, the Portfolio will invest in one or more of the types of investments described
below.
United States Government Obligations. The Portfolio may invest in obligations of the U.S. Government and its
agencies and instrumentalities either directly or through repurchase agreements. U.S. Government obligations include:
(i) direct obligations issued by the United States Treasury such as Treasury bills, notes and bonds; and (ii) instruments
issued or guaranteed by government-sponsored agencies acting under authority of Congress. Some U.S. Government
Obligations are supported by the full faith and credit of the U.S. Treasury; others are supported by the right of the
issuer to borrow from the Treasury; others are supported by the discretionary authority of the U.S. Government to
purchase the agency's obligations; still others are supported only by the credit of the agency. There is no assurance
that the U.S. Government will provide financial support to one of its agencies if it is not obligated to do so by law.
Bank Obligations. The Portfolio may invest in high quality United States dollar-denominated negotiable
certificates of deposit, time deposits and bankers' acceptances of U.S. and foreign banks, savings and loan associations
and savings banks meeting certain total asset minimums. The Portfolio may also invest in obligations of international
banking institutions designated or supported by national governments to promote economic reconstruction, development or
trade between nations (e.g., the European Investment Bank, the Inter-American Development Bank, or the World Bank).
These obligations may be supported by commitments of their member countries, and there is no assurance these commitments
will be undertaken or met.
Commercial Paper; Bonds. The Portfolio may invest in high quality commercial paper and corporate bonds issued by
United States corporations. The Portfolio may also invest in bonds and commercial paper of foreign issuers if the
obligation is U.S. dollar-denominated and is not subject to foreign withholding tax.
Asset-Backed Securities. As may be permitted by current laws and regulations, the Portfolio may invest in
asset-backed securities up to 10% of its net assets.
Synthetic Instruments. As may be permitted by current laws and regulations and if expressly permitted by the
Directors of the Company, the Portfolio may invest in certain synthetic instruments. Such instruments generally involve
the deposit of asset-backed securities in a trust arrangement and the issuance of certificates evidencing interests in
the trust. The Sub-advisor will review the structure of synthetic instruments to identify credit and liquidity risks and
will monitor such risks.
Foreign Securities. Foreign investments must be denominated in U.S. dollars and may be made directly in
securities of foreign issuers or in the form of American Depositary Receipts and European Depositary Receipts.
For more information on certain of these investments, see this Prospectus under "Certain Risk Factors and
Investment Methods."
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 Founders Passport Portfolio
AST Scudder Japan Portfolio
AST Janus Overseas Growth Portfolio
AST American Century International Growth Portfolio
AST American Century International Growth Portfolio II
AST Janus Small-Cap Growth Portfolio
AST Kemper Small-Cap Growth Portfolio
AST Janus Mid-Cap Growth Portfolio
AST Alger Mid-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Value Portfolio
AST Alger Growth Portfolio
AST Marsico Capital Growth Portfolio
AST JanCap Growth Portfolio
AST Janus Strategic Value Portfolio
AST Cohen & Steers Realty Portfolio
AST T. Rowe Price Global Bond Portfolio
AST Lord Abbett Bond-Debenture Portfolio
AST PIMCO Total Return Bond Portfolio
AST PIMCO Limited Maturity Bond Portfolio
A high rate of portfolio turnover involves correspondingly higher brokerage commission expenses and other
transaction costs, which are borne by a Portfolio and will reduce its performance.
NET ASSET VALUE:
The net asset value per share ("NAV") of each Portfolio is determined as of the close of the New York Stock
Exchange (the "NYSE") (normally 4:00 p.m. Eastern Time) on each day that the NYSE is open for business. NAV is
determined by dividing the value of a Portfolio's total assets, less any liabilities, by the number of total shares of
that Portfolio outstanding. In general, the assets of each Portfolio (except the AST Money Market Portfolio) are valued
on the basis of market quotations. However, in certain circumstances where market quotations are not readily available
or are believed to be inaccurate, assets are valued by methods that are believed to accurately reflect their fair value.
The assets of the AST Money Market Portfolio are valued by the amortized cost method, which is intended to approximate
market 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:
Founders Asset Management LLC ("Founders"), Founders Financial Center, 2930 East Third Avenue, Denver, Colorado
80206, serves as Sub-advisor for the AST Founders Passport Portfolio. Founders and its predecessor companies have acted
as investment advisors since 1938, and serves as investment advisor to a number of other investment companies and private
accounts. Founders managed assets aggregating approximately $8.6 billion as of June 30, 2000.
Tracy P. Stouffer, a Vice President of Investments of Founders and a Chartered Financial Analyst, has been
responsible for the management of the AST Founders Passport Portfolio since July 1999. Before joining Founders, Ms.
Stouffer was a vice president and portfolio manager with Federated Global, Inc. from 1995 until July 1999, and a vice
president and portfolio manager with Clariden Asset Management from 1988 to 1995.
Scudder Kemper Investments, Inc. ("Scudder Kemper"), 345 Park Avenue, New York, New York, serves as Sub-advisor
of the AST Kemper Small-Cap Growth Portfolio and the AST Scudder Japan Portfolio. Scudder Kemper is one of the largest
investment managers in the country with more than $298 billion under management as of June 30, 2000 and has been engaged
in the management of investment funds for more than eighty years.
Peter Chin, CFA is the lead portfolio manager for the AST Kemper Small-Cap Growth Portfolio, and Roy C. McKay,
CFA is the other portfolio manager. Both have managed the Portfolio since June 1999. Mr. Chin is a Managing Director of
Scudder Kemper and has been with the firm since 1973. Mr. McKay is a Manager Director of Scudder Kemper and has been
with the firm since 1988.
The day-to-day management of the AST Scudder Japan Portfolio is handled by Seung Kwak, lead portfolio manager,
and Elizabeth J. Allan, both of whom have managed the Portfolio since its inception in October 2000. Mr. Kwak began his
investment career in 1985, has been with Scudder Kemper since 1988, and is a Managing Director of Scudder Kemper. Ms.
Allan began her investment career in 1982, joined Scudder Kemper in 1987, and is a Senior Vice President of Scudder
Kemper.
A I M Capital Management, Inc. ("AIM"), 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, serves as
Sub-advisor for the AST AIM International Equity Portfolio and the AST AIM Balanced Portfolio. AIM has acted as an
investment advisor since 1986 and, together with its parent, A I M Advisors, Inc., advises or manages over 120 investment
portfolios encompassing a broad range of investment objectives. As of June 30, 2000, AIM managed approximately $176.5
billion in assets.
AIM became the Sub-advisor of the Portfolios on May 4, 1999 upon the resignation of Putnam Investment Management,
Inc., the previous Sub-advisor for the Portfolios. (The AST AIM International Portfolio was known as the AST Putnam
International Equity Portfolio, and the AST AIM Balanced Portfolio was known as the AST Putnam Balanced Portfolio.)
AIM uses a team approach to investment management. The members of the team responsible for the management of the
AST AIM International Equity Portfolio are A. Dale Griffin, III, Clas G. Olsson, Barrett K. Sides, and Jason Holzer. The
members of the team have managed the Portfolio since AIM became the Portfolio's Sub-Advisor in May 1999 (except for Mr.
Holzer, who has been a manager of the Portfolio since October 1999), and all (except for Mr. Holzer) are officers of
AIM. Mr. Griffin, Senior Portfolio Manager, has been associated with AIM and/or its affiliates since 1989. Mr. Olsson,
Portfolio Manager, has been associated with AIM and/or its affiliates since 1994. Mr. Sides, Portfolio Manager, has been
associated with AIM and/or its affiliates since 1990. Mr. Holzer, Portfolio Manager, has been associated with AIM and/or
its affiliates since 1996. From 1994 to 1996, he was an associate with JMB Realty.
The members of the team responsible for the management of the AST AIM Balanced Portfolio are Claude C. Cody IV,
Robert G. Alley, Craig A. Smith, Meggan M. Walsh and Jan Friedli. The members of the team have managed the Portfolio
since AIM became the Portfolio's Sub-advisor in May 1999 (except for Mr. Friedli, who has been a manager of the Portfolio
since October 1999), and all (except for Mr. Friedli) are officers of AIM. Mr. Cody, Senior Portfolio Manager, has been
associated with AIM and/or its affiliates since 1992. Mr. Alley, Senior Portfolio Manager, has been associated with AIM
and/or its affiliates since 1992. Mr. Smith, Portfolio Manager, has been associated with AIM and/or its affiliates since
1989. Ms. Walsh, Portfolio Manager, has been associated with AIM and/or its affiliates since 1991. Mr. Friedli,
Portfolio Manager, has been associated with AIM and/or its affiliate since 1999. From 1997 to 1999, he was a global
fixed-income portfolio manager for Nicholas-Applegate Capital Management, and from 1994 to 1997, he was an international
fixed-income trader and analyst for Strong Capital Management.
Janus Capital Corporation ("Janus"), 100 Fillmore Street, Denver, Colorado 80206-4923, serves as Sub-advisor for
the AST Janus Overseas Growth Portfolio, the AST Janus Small-Cap Growth Portfolio, the AST Janus Mid-Cap Growth
Portfolio, the AST JanCap Growth Portfolio, and the AST Janus Strategic Value Portfolio. Janus serves as investment
advisor to the Janus Funds, as well as advisor or sub-advisor to several other mutual funds and individual, corporate,
charitable and retirement accounts. As of June 30, 2000, Janus managed assets worth approximately $304 billion.
The portfolio managers responsible for management of the AST Janus Overseas Growth Portfolio are Helen Young
Hayes, CFA and Laurance Chang, CFA. Ms. Hayes has been managing the Portfolio since its inception, while Mr. Chang has
been managing the Portfolio since January 2000. Ms. Hayes is a Vice President of Janus and joined Janus in 1987. Mr.
Chang is a Vice President of Janus and joined Janus in 1993.
The AST Janus Small-Cap Growth Portfolio is managed by a management team consisting of William H. Bales and
Jonathan D. Coleman. Mr. Bales and Mr. Coleman have managed the Portfolio since Janus became the Portfolio's Sub-advisor
in January 1999. Mr. Bales has been a Portfolio Manager since 1997 and a research analyst since 1993. He joined Janus
in 1991. Mr. Coleman has been a Portfolio Manager with Janus since 1997 and a research analyst since joining Janus in
1994.
The portfolio manager responsible for management of the AST Janus Mid-Cap Growth Portfolio is Matthew A. Ankrum,
CFA. Mr. Ankrum, who has managed the Portfolio since its inception, joined Janus as an intern in June 1996 and became an
equity research analyst in August 1997. Prior to joining Janus, Mr. Ankrum worked as a corporate finance analyst at
William Blair and Company from 1993 to 1995.
The portfolio manager responsible for management of the AST JanCap Growth Portfolio is Scott W. Schoelzel. Mr.
Schoelzel, a Senior Portfolio Manager at Janus who has managed the Portfolio since August, 1997, joined Janus in January,
1994 as Vice President of Investments.
The portfolio manager responsible for management of the AST Janus Strategic Value Portfolio is David C. Decker.
Mr. Decker has managed the Portfolio since its inception in October 2000. He joined Janus in 1992 as a research analyst
and focused on companies in the automotive and defense industries prior to becoming a portfolio manager in 1996.
American Century Investment Management, Inc. ("American Century") (formerly, Investors Research Corporation),
American Century Tower, 4500 Main Street, Kansas City, Missouri 64111, serves as Sub-advisor for the AST American Century
International Growth Portfolio, the AST American Century International Growth Portfolio II, the AST American Century
Income & Growth Portfolio and the AST American Century Strategic Balanced Portfolio. American Century has been providing
investment advisory services to investment companies and institutional clients since 1958. As of June 30, 2000, American
Century and its affiliates managed assets totaling approximately $113 billion.
American Century utilizes a team of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the Portfolios.
The portfolio manager members of the portfolio team responsible for management of the AST American Century
International Growth Portfolio and AST American Century International Growth Portfolio II are Henrik Strabo and Mark S.
Kopinski. Henrik Strabo joined American Century in 1993 as an investment analyst, has been a portfolio manager member of
the international team since 1994 and has managed the AST American Century International Growth Portfolio since its
inception and the AST American Century International Growth Portfolio II since American Century became the Portfolio's
Sub-advisor in May 2000. Mark S. Kopinski, Vice President and Portfolio Manager for American Century, rejoined American
Century in April 1997 and has co-managed the AST American Century International Growth Portfolio since that time and the
AST American Century International Growth Portfolio II since American Century became the Portfolio's Sub-advisor. From
June 1995 to March 1997, Mr. Kopinski served as Vice President and Portfolio Manager for Federated Investors, Inc. Prior
to June 1995, Mr. Kopinski was a Vice President and Portfolio Manager for American Century.
The portfolio manager members of the portfolio team responsible for the day-to-day management of the AST American
Century Income & Growth Portfolio are John Schniedwind, Kurt Borgwardt, Jeffrey R. Tyler and William Martin. Mr.
Schniedwind is Senior Vice President and Group Leader -- Quantitative Equity for American Century, and has been with
American Century since 1982. Mr. Borgwardt is Vice President, Portfolio Manager and Director of Quantitative Equity
Research for American Century, and has been with American Century since 1990. Mr. Tyler, Senior Vice President and
Portfolio Manager, joined American Century in 1988. William Martin, Vice President and Senior Portfolio Manager, joined
American Century in 1989.
American Century became the Sub-advisor of the AST American Century Income & Growth Portfolio on May 4, 1999 upon
the resignation of Putnam Investment Management, Inc., the previous Sub-advisor for the Portfolio. (The AST American
Century Income & Growth Portfolio was known as the AST Putnam Value Growth & Income Portfolio.)
The portfolio manager members of the team responsible for the day-to-day management of the equity portion of the
AST American Century Strategic Balanced Portfolio are the same as the individuals noted above who manage the AST American
Century Income & Growth Portfolio. The fixed income portion of the AST American Century Strategic Balanced Portfolio is
managed by a team of portfolio managers with expertise in different areas of fixed income investing. The portfolio
manager leader of the team responsible for the day-to-day management of the fixed income portion of the Portfolio is
Brian Howell. Mr. Howell joined American Century in 1987 as a research analyst and was promoted to his current position
as portfolio manager in January 1994.
Massachusetts Financial Services Company ("MFS"), which is located at 500 Boylston Street, Boston, Massachusetts
02116, serves as Sub-advisor for the AST MFS Global Equity Portfolio, the AST MFS Growth Portfolio, and the AST MFS
Growth with Income Portfolio. MFS and its predecessor organizations have a history of money management dating from
1924. As of June 30, 2000, the net assets under the management of the MFS organization were approximately $151.2 billion.
The portfolio manager responsible for the management of the AST MFS Global Equity Portfolio is David R.
Mannheim. Mr. Mannheim, a Senior Vice President of MFS, has managed the Portfolio since its inception and has been
employed by MFS in the investment management area since 1988.
The portfolio managers responsible for the management of the AST MFS Growth Portfolio are Stephen Pesek and
Thomas D. Barrett. Mr. Pesek, a Vice President of MFS, has managed the Portfolio since its inception and has been
employed by MFS as a portfolio manager since 1994. Mr. Barrett has managed the Portfolio since May 2000 and has been
employed by MFS in the investment management area since 1996. Prior to joining MFS, Mr. Barrett had been an Assistant
Vice President and Equity Research Analyst with The Boston Company Asset Management, Inc.
The AST MFS Growth with Income Portfolio is managed by John D. Laupheimer and Mitchell D. Dynan. Both have
managed the Portfolio since its inception. Mr. Laupheimer is a Senior Vice President of MFS, and has been employed by
MFS in the investment management area since 1981. Mr. Dynan is also a Senior Vice President of MFS, and has been
employed by MFS in the investment management area since 1986.
Federated Investment Counseling ("Federated Investment"), Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779, serves as Sub-advisor for the AST Federated Aggressive Growth Portfolio and the AST Federated High Yield
Portfolio. Federated was organized in 1989, and Federated and its affiliates serve as investment advisors to a number of
investment companies and private accounts. Total assets under management or administration by Federated and its
affiliates as of June 30, 2000 was approximately $170 billion.
Mark E. Durbiano is primarily responsible for the day-to-day management of the AST Federated High Yield
Portfolio. Mr. Durbiano, who has managed the Portfolio since it commenced operations in 1994, joined Federated
Investment's parent company in 1982 and has been a Senior Vice President of an affiliate of Federated Investment since
January 1996.
The portfolio managers responsible for management of the AST Federated Aggressive Growth Portfolio are Keith J.
Sabol, Aash M. Shah and James E. Grefenstette. Each has managed the Portfolio since its inception in October, 2000. Mr.
Sabol joined Federated Investment's parent company in 1994. He has been a Portfolio Manager since 1996 and served as an
Assistant Vice President of the parent company from January 1997 to July 1998. He has been a Vice President of the
parent company since July 1998. Mr. Shah joined Federated Investment's parent company in 1993, has been a Portfolio
Manager since 1995, and has been a Vice President of the parent company since January 1997. Mr. Shah served as an
Assistant Vice President of the parent company from 1995 through 1996, and as an Investment Analyst from 1993 to 1995.
Mr. Grefenstette has been a Senior Vice President of Federated Investment's parent company since January 2000. He served
as a Vice President from 1996 through 1999 and was an Assistant Vice President from 1994 until 1996.
Lord, Abbett & Co. ("Lord Abbett"), 90 Hudson Street, Jersey City, New Jersey 07302, serves as Sub-advisor for
the AST Lord Abbett Small Cap Value Portfolio and the AST Lord Abbett Bond-Debenture Portfolio. Lord Abbett has been an
investment manager for over 68 years. As of June 30, 2000, Lord Abbett managed over $33 billion in a family of mutual
funds and other advisory accounts.
Lord Abbett uses a team of investment managers and analysts acting together to manage the investments of the AST
Lord Abbett Small Cap Value Portfolio and the AST Lord Abbett Bond-Debenture Portfolio. Robert P. Fetch, Partner of Lord
Abbett, heads the team for the AST Lord Abbett Small Cap Value Portfolio, and Gregory M. Macosko is the other member of
the team. Mr. Fetch, who has managed the Portfolio since its inception, joined Lord Abbett as a Portfolio Manager in
August, 1995. Mr. Macosko joined Lord Abbett in 1996; before that, he was an Equity Analyst with Quest Advisory Services
from 1991 to 1996.
Christopher J. Towle, Partner of Lord Abbett, heads the management team for the AST Lord Abbett Bond-Debenture
Portfolio, the other senior members of which include Richard Szaro, Michael Goldstein and Thomas Baade, and all have
managed the Portfolio since its inception. Towle and Szaro have been with Lord Abbett since 1988 and 1983, respectively.
Mr. Goldstein has been with Lord Abbett since 1997. Before joining Lord Abbett, Mr. Goldstein was a bond trader for
Credit Suisse BEA Associates from August 1992 through April 1997. Mr. Baade joined Lord Abbett in 1998; prior to that he
was a credit analyst with Greenwich Street Advisors.
GAMCO Investors, Inc., ("GAMCO") with principal offices located at One Corporate Center, Rye, New York
10580-1434, serves as Sub-advisor to the AST Gabelli Small-Cap Growth Portfolio and the AST Gabelli All-Cap Value
Portfolio. GAMCO managed approximately $9.6 billion in assets as of June 30, 2000 and is a wholly owned subsidiary of
Gabelli Asset Management Inc.
Mario J. Gabelli, CFA, is primarily responsible for the day-to-day management of the AST Gabelli Small-Cap Value
Portfolio and the AST Gabelli All-Cap Value Portfolio. Mr. Gabelli has been Chief Executive Officer and Chief Investment
Officer of GAMCO and its predecessor since the predecessor's inception in 1978.
Fred Alger Management, Inc. ("Alger"), One World Trade Center, Suite 9333, New York, New York 10048, serves as
Sub-advisor for the AST Alger Mid-Cap Growth Portfolio, the AST Alger All-Cap Growth Portfolio and the AST Alger Growth
Portfolio. Alger has been an investment advisor since 1964, and as of June 30, 2000 managed mutual fund and other assets
totaling approximately $21.2 billion.
The portfolio managers responsible for the management of the AST Alger Mid-Cap Growth Portfolio and the AST Alger
Growth Portfolio are David Alger and Ron Tartaro. Both have managed these Portfolios since their inception. Mr. Alger
has been employed by Alger since 1971 and served as Executive Vice President and Director of Research prior to being
named President in 1995. Mr. Tartaro has been employed by Alger since 1990 as a senior research analyst until 1995 and
as a Senior Vice President since 1995.
The portfolio managers responsible for the management of the AST Alger All-Cap Growth Portfolio are David Alger
and Seilai Khoo. Mr. Alger has managed the Portfolio since its inception, while Ms. Khoo has been managing the Portfolio
since June 2000. Mr. Alger has been employed by Alger since 1971 and served as Executive Vice President and Director of
Research prior to being named President in 1995. Ms. Khoo has been employed by Alger since 1989, and has been a Senior
Vice President and Portfolio Manager since 1995.
Neuberger Berman Management Inc. ("NB Management"), 605 Third Avenue, New York, NY 10158, serves as sub-advisor
for the AST Neuberger Berman Mid-Cap Growth Portfolio and the AST Neuberger Berman Mid-Cap Value Portfolio. NB
Management and its predecessor firms have specialized in the management of mutual funds since 1950. Neuberger Berman,
LLC, an affiliate of NB Management, acts as a principal broker in the purchase and sale of portfolio securities for the
Portfolios for which it serves as Sub-advisor, and provides NB Management with certain assistance in the management of
the Portfolios without added cost to the Portfolios or ASISI. NB Management and its affiliates manage securities
accounts, including mutual funds, that had approximately $54.4 billion of assets as of June 30, 2000.
Jennifer K. Silver and Brooke A. Cobb have been primarily responsible for the day-to-day management of the AST
Neuberger Berman Mid-Cap Growth Portfolio since NB Management became the Portfolio's Sub-advisor in May 1998. Ms. Silver
is Director of the Neuberger Berman Growth Equity Group, and both she and Mr. Cobb are Vice Presidents of NB Management.
Prior to joining NB Management in 1997, Ms. Silver was a portfolio manager for several large mutual funds managed by a
prominent investment adviser. Prior to joining NB Management, Mr. Cobb was the chief investment officer for an
investment advisory firm managing individual accounts from 1995 to 1997 and, from 1992 to 1995, a portfolio manager of a
large mutual fund managed by a prominent adviser.
The portfolio managers responsible for the day-to-day management of the AST Neuberger Berman Mid-Cap Value
Portfolio are Robert I. Gendelman and S. Basu Mullick. Mr. Gendelman has been managing the Portfolio since NB Management
became the Portfolio's Sub-advisor in May 1998, and Mr. Mullick has been managing the Portfolio since October 1998. Mr.
Gendelman has been with NB Management since 1994, where he is currently a Vice President. Mr. Mullick has been a Vice
President of NB Management since October 1998. From 1993 to 1998, Mr. Mullick was a portfolio manager for a prominent
investment adviser.
Kinetics Asset Management, Inc. ("Kinetics"), 1311 Mamaroneck Avenue, Suite 130, White Plains, New York, 10605,
serves as Sub-advisor for the AST Kinetics Internet Portfolio. Kinetics was founded in 1996 and managed assets totaling
approximately $1.1 billion as of June 30, 2000.
The portfolio managers responsible for the management of the Portfolio are Peter B. Doyle and Steven Tuen, CFA.
Mr. Doyle, who is the Chief Investment Strategist for the Portfolio, co-founded Kinetics in early 1996 and is the
Chairman of its Board of Directors. Mr. Doyle also co-founded and has been a Managing Director of Horizon Asset
Management, Inc. since 1994. Mr. Tuen is Co-Portfolio Manager of and Executive Adviser to the Portfolio. Mr. Tuen's
primary duties include research and analysis of equity securities for investment. From 1996 to 1999, Mr. Tuen was an
Analyst and the Director of Research of IPO Value Monitor, a research service that focuses on initial public offerings.
From 1989 to 1996, Mr. Tuen was an Analyst at Bankers Trust Company where he became Portfolio Manager of the Private
Banking Group.
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 Natural Resources Portfolio and 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 each 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 Natural Resources Portfolio is composed of the
following members: David J. Wallack, Chairman, Charles M. Ober, David M. Lee, Hugh M. Evans III, Richard P. Howard and
James A.C. Kennedy. Mr. Wallack joined T. Rowe Price in 1990, is a Vice President of T. Rowe Price and an Investment
Analyst for the firm's Equity Research Division and has been Chairman of the Portfolio's Investment Advisory Committee
since March 1997.
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 Portfolio and 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).
Alfred Harrison and James G. Reilly have been the individuals primarily responsible for the management of the AST
Alliance Growth Portfolio since Alliance became the Portfolio's Sub-advisor in May 2000. Mr. Harrison is Vice Chairman
of Alliance Capital Management Corporation ("ACMC"), the sole general partner of Alliance, and has been associated with
Alliance since 1978. Mr. Reilly is Executive Vice President of ACMC and has been associated with Alliance since 1984.
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.
Marsico Capital Management, LLC ("Marsico Capital"), 1200 17th Street, Suite 1300, Denver, CO 80202, serves as
Sub-advisor for the AST Marsico Capital Growth Portfolio. Thomas F. Marsico, Chairman and Chief Executive Officer of
Marsico Capital, has had primary responsibility for management of the Portfolio since its inception. Prior to forming
Marsico Capital in September, 1997, Mr. Marsico served as Executive Vice President and Portfolio Manager at Janus Capital
Corporation ("Janus"). Mr. Marsico joined Janus in March, 1986. As of June 30, 2000, Marsico Capital managed
approximately $15.5 billion in assets.
Cohen & Steers Capital Management, Inc. ("Cohen & Steers"), 757 Third Avenue, New York, New York 10017, acts as
the Sub-advisor for the AST Cohen & Steers Realty Portfolio. Cohen & Steers is the leading U.S. manager of portfolios
dedicated to investments in real estate investment trusts ("REITS"). As of June 30, 2000, Cohen & Steers managed
approximately $4.3 billion in assets.
Robert H. Steers, Chairman, and Martin Cohen, President formed Cohen & Steers in 1986 and have been responsible
for the day-to-day management of the AST Cohen & Steers Realty Portfolio since its inception.
Sanford C. Bernstein & Co., Inc. ("Bernstein"), 767 Fifth Avenue, New York, New York 10153, serves as Sub-advisor
for the AST Sanford Bernstein Managed Index 500 Portfolio. Founded in 1967, Bernstein had approximately $81 billion in
assets under management as of June 30, 2000.
Day-to-day investment management decisions for the Portfolio will be made by Bernstein's Investment Policy Group
for Structured Equities, which is chaired by Steven Pisarkiewicz. Mr. Pisarkiewicz joined Bernstein in 1989 and assumed
his current position as Chief Investment Officer for Structured Equity Services in 1998. Mr. Pisarkiewicz and the
Investment Policy Group for Structured Equities have managed the Portfolio since Bernstein became the Portfolio's
Sub-advisor in May, 2000.
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.
T. Rowe Price International, Inc. ("T. Rowe International"), 100 East Pratt Street, Baltimore, Maryland 21202,
serves as Sub-advisor for the AST T. Rowe Price Global Bond Portfolio. T. Rowe International is a wholly-owned
subsidiary of T. Rowe Price and the successor of Rowe Price-Fleming International, Inc., a joint venture in which T. Rowe
Price was a participant that was founded in 1979. T. Rowe International is one of the world's largest international
mutual fund asset managers with approximately $39.2 billion under management as of June 30, 2000 in its offices in
Baltimore, London, Tokyo, Hong Kong, Singapore, Buenos Aires and Paris.
The Portfolio has an investment advisory group that has day-to-day responsibility for managing the Portfolio and
developing and executing the Portfolio's investment program. The advisory group consists of Christopher Rothery, William
T. Reynolds, Daniel O. Shackelford, and Michael Conelius. Christopher Rothery joined T. Rowe International in 1994 and
has 12 years of experience managing multi-currency fixed-income portfolios. William T. Reynolds, CFA, CIC, is Director
of T. Rowe Price's Fixed Income Division and joined the firm in 1981. Daniel O. Shackelford, CFA joined T. Rowe Price in
1999; prior to that he was the Principal and Head of Fixed Income for Investment Counselors of Maryland. Michael
Conelius joined T. Rowe International in 1995. Prior to that, he had been with T. Rowe Price since 1988.
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.
J.P. Morgan Investment Management Inc. ("J.P. Morgan"), with principal offices at 522 Fifth Avenue, New York, New
York 10036, serves as Sub-advisor for the AST Money Market Portfolio. J.P. Morgan and its affiliates offer a wide range
of services to governmental, institutional, corporate and individual customers, and act as investment advisor to
individual and institutional clients with combined assets under management of approximately $370 billion as of June 30,
2000. J.P. Morgan has managed investments for clients since 1913, and has managed short-term fixed income assets since
1969.
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 Founders Passport Portfolio: 1.00%
AST AIM International Equity Portfolio: 0.87%
AST Janus Overseas Growth Portfolio: 1.00%
AST American Century International Growth Portfolio: 1.00%
AST American Century International Growth Portfolio II: 1.00%
AST Janus Small-Cap Growth Portfolio: 0.90%
AST Kemper Small-Cap Growth Portfolio: 0.95%
AST Lord Abbett Small Cap Value Portfolio: 0.95%
AST Gabelli Small-Cap Value Portfolio: 0.90%
AST Neuberger Berman Mid-Cap Growth Portfolio: 0.85%
AST Neuberger Berman Mid-Cap Value Portfolio: 0.82%
AST Gabelli All-Cap Value Portfolio: 0.95%
AST T. Rowe Price Natural Resources Portfolio: 0.90%
AST Alliance Growth Portfolio: 1.00%
AST Marsico Capital Growth Portfolio: 0.90%
AST JanCap Growth Portfolio: 0.87%
AST Cohen & Steers Realty Portfolio: 1.00%
AST Sanford Bernstein Managed Index 500 Portfolio: 0.60%
AST American Century Income & Growth Portfolio: 0.75%
AST Alliance Growth and Income Portfolio: 0.75%
AST INVESCO Equity Income Portfolio: 0.75%
AST AIM Balanced Portfolio: 0.74%
AST American Century Strategic Balanced Portfolio: 0.85%
AST T. Rowe Price Asset Allocation Portfolio: 0.85%
AST T. Rowe Price Global Bond Portfolio: 0.80%
AST Federated High Yield Portfolio: 0.75%
AST PIMCO Total Return Bond Portfolio: 0.65%
AST PIMCO Limited Maturity Bond Portfolio: 0.65%
AST Money Market Portfolio: 0.45%
The investment management fee rate for the AST Scudder Japan Portfolio, which had not commenced operations prior
to the date of this Prospectus, is an annual rate of 1.00% of the average daily net assets of the Portfolio. The
investment management fee rate for the AST MFS Global Equity Portfolio, which commenced operations during 1999, is an
annual rate of 1.00% of the average daily net assets of the Portfolio. The investment management fee rate for the AST
Federated Aggressive Growth Portfolio, which had not commenced operations prior to the date of this Prospectus, is an
annual rate of .95% of the average daily net assets of the Portfolio. The investment management fee rate for the AST
Janus Mid-Cap Growth Portfolio, which commenced operations in May 2000, is an annual rate of 1.00% of the average daily
net assets of the Portfolio. The investment management fee rate for the AST Alger Mid-Cap Growth Portfolio, which had
not commenced operations prior to the date of this Prospectus, is an annual rate of .80% of the average daily net assets
of the Portfolio. The investment management fee rate for the AST Alger All-Cap Growth Portfolio, which commenced
operations in January 2000, is an annual rate of .95% of the average daily net assets of the Portfolio. The investment
management fee rate for the AST Gabelli All-Cap Value Portfolio, which had not commenced operations prior to the date of
this Prospectus, is an annual rate of .95% of the average daily net assets of the Portfolio. The investment management
fee rate for the AST Kinetics Internet Portfolio, which had not commenced operations prior to the date of this
Prospectus, is an annual rate of 1.00% of the average daily net assets of the Portfolio. The investment management fee
rate for the AST MFS Growth Portfolio, which commenced operations during 1999, is an annual rate of .90% of the average
daily net assets of the Portfolio. The investment management fee rate for the AST Alger Growth Portfolio, which had not
commenced operations prior to the date of this Prospectus, is an annual rate of .75% of the average daily net assets of
the Portfolio. The investment management fee rate for the AST Janus Strategic Value Portfolio, which had not commenced
operations prior to the date of this Prospectus, is an annual rate of 1.00% of the average daily net assets of the
Portfolio. The investment management fee rate for the AST MFS Growth with Income Portfolio, which commenced operations
during 1999, is an annual rate of .90% of the average daily net assets of the Portfolio. The investment management fee
rate for the AST Lord Abbett Bond-Debenture Portfolio, which had not commenced operations prior to the date of this
Prospectus, is an annual rate of .80% of the average daily net assets of the Portfolio.
For more information about investment management fees, including voluntary fee waivers and the fee rates
applicable at various asset levels, and the fees payable by ASISI to each of the Sub-advisors, please see the Trust's SAI
under "Investment Advisory and Other Services."
Other Expenses. In addition to Investment Management fees, each Portfolio pays other expenses, including costs
incurred in connection with the maintenance of its securities law registrations, printing and mailing prospectuses and
statements of additional information to shareholders, certain office and financial accounting services, taxes or
governmental fees, brokerage commissions, custodial, transfer and shareholder servicing agent costs, expenses of outside
counsel and independent accountants, preparation of shareholder reports and expenses of trustee and shareholder
meetings. The Trust may also pay Participating Insurance Companies for printing and delivery of certain documents
(including prospectuses, semi-annual and annual reports and any proxy materials) to holders of variable annuity contracts
and variable life insurance policies whose assets are invested in the Trust. Expenses not directly attributable to any
specific Portfolio or Portfolios are allocated on the basis of the net assets of the Portfolios.
Distribution Plan. The Trust has adopted a Distribution Plan (the "Distribution Plan") under Rule 12b-1 under
the Investment Company Act of 1940 to permit American Skandia Marketing, Inc. ("ASM"), an affiliate of ASISI, to receive
brokerage commissions in connection with purchases and sales of securities held by the Portfolios, and to use these
commissions to promote the sale of shares of the Portfolios. Under the Distribution Plan, transactions for the purchase
and sale of securities for a Portfolio may be directed to certain brokers for execution ("clearing brokers") who have
agreed to pay part of the brokerage commissions received on these transactions to ASM for "introducing" transactions to
the clearing broker. In turn, ASM will use the brokerage commissions received as an introducing broker to pay various
distribution-related expenses, such as advertising, printing of sales materials, and payments to dealers. No Portfolio
will pay any new fees or charges resulting from the Distribution Plan, nor is it expected that the brokerage commissions
paid by a Portfolio will increase as the result of implementation of the Distribution Plan.
TAX MATTERS:
Each Portfolio intends to distribute substantially all its net investment income. Dividends from investment
income are expected to be declared and distributed annually (except in the case of the AST Money Market Portfolio, where
dividends will be declared daily and paid monthly), 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.
FINANCIAL HIGHLIGHTS: The financial highlights table is intended to help you understand the Portfolios' financial
performance for the past five years (or, for Portfolios that have not been in operation for five years, since their
inceptions). Certain information reflects financial results for a single Portfolio share. The total returns in the
table represent the rate that an investor would have earned or lost in a Portfolio. Except for the financial information
for the period ended June 30, 2000, which is unaudited, the information has been audited by Deloitte & Touche LLP, the
Trust's independent auditors. The report of the independent auditors, along with the Portfolios' financial statements,
are included in the annual reports of the separate accounts funding the variable annuity contracts and variable life
insurance policies, which are available without charge upon request to the Trust at One Corporate Drive, Shelton,
Connecticut or by calling (800) 752-6342. No financial information is included for the AST Scudder Japan Portfolio, AST
Federated Aggressive Growth Portfolio, AST Alger Mid-Cap Growth Portfolio, AST Gabelli All-Cap Value Portfolio, AST
Kinetics Internet Portfolio, AST Alger Growth Portfolio, AST Janus Strategic Value Portfolio and the AST Lord Abbett
Bond-Debenture Portfolio, which had not commenced operations prior to October 23, 2000.
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
NET ASSET NET
NET ASSET
VALUE INVESTMENT NET REALIZED TOTAL FROM FROM NET FROM NET
VALUE
PERIOD BEGINNING INCOME & UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
END
PORTFOLIO ENDED OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
OF PERIOD
AST AIM 06/30/00** $34.23 $0.27 $(3.29) $(3.02) $(0.07) $(4.26) $(4.33) $26.88
International Equity*** 12/31/99 22.67 0.05 13.36 13.41 -- (1.85) (1.85)
34.23
12/31/98 21.29 0.20 3.81 4.01 (0.67) (1.96) (2.63) 22.67
12/31/97 19.22 0.36 2.96 3.32 (0.30) (0.95) (1.25) 21.29
12/3196 18.20 0.16 1.55 1.71 (0.32) (0.37) (0.69) 19.22
12/31/95 17.61 0.14 1.44 1.58 -- (0.99) (0.99) 18.20
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 Money Market 06/30/00** $1.00 $0.0263 $ -- $0.0263 $(0.0263)$ -- $(0.0263) $1.00
12/31/99 1.00 0.0449 0.0001 0.0450 (0.0449) (0.0001) (0.0450) 1.00
12/31/98 1.00 0.0502 0.0002 0.0504 (0.0502) (0.0002) (0.0504) 1.00
12/31/97 1.00 0.0507 0.0002 0.0509 (0.0507) (0.0002) (0.0509) 1.00
12/31/96 1.00 0.0492 0.0005 0.0497 (0.0492) (0.0005) (0.0497) 1.00
12/31/95 1.00 0.0494 -- 0.0494 (0.0494) -- (0.0494) 1.00
AST Neuberger Berman 06/30/00** $13.32 $0.02 $0.62 $0.64 $(0.04) $(0.05) $(0.09)
$13.87
Mid-Cap Value++ 12/31/99 13.16 0.10 0.60 0.70 (0.24) (0.30) (0.54) 13.32
12/31/98 15.15 0.21 (0.52) (0.31) (0.36) (1.32) (1.68) 13.16
12/31/97 12.83 0.32 2.87 3.19 (0.36) (0.51) (0.87) 15.15
12/31/96 11.94 0.36 0.97 1.33 (0.44) -- (0.44) 12.83
12/31/95 9.87 0.40 2.09 2.49 (0.42) -- (0.42) 11.94
AST AIM Balanced+++ 06/30/00** $15.24 $0.16 $0.18 $0.34 $(0.32) $(1.07) $(1.39)
$14.19
12/31/99 14.13 0.32 2.30 2.62 (0.35) (1.16) (1.51) 15.24
12/31/98 13.64 0.34 1.31 1.65 (0.35) (0.81) (1.16) 14.13
12/31/97 13.19 0.33 1.85 2.18 (0.31) (1.42) (1.73) 13.64
12/31/96 12.53 0.32 1.02 1.34 (0.25) (0.43) (0.68) 13.19
12/31/95 10.49 0.26 2.06 2.32 (0.28) -- (0.28) 12.53
---------------------------------------------------------------------------------------------------------------------------
(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.
*** From October 15, 1996 to May 4, 1999, Putnam Investment Management, Inc. served as Sub-advisor to the AST AIM
International Equity Portfolio (formerly, the AST Putnam International Equity Portfolio). Prior to October 15, 1996,
Seligman Henderson Co. served as Sub-advisor to the Portfolio. A I M Capital Management, Inc. has served as Sub-advisor
to the Portfolio since May 4, 1999.
+ 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.
++ Prior to May 1, 1998, Federated Investment Counseling served as Sub-advisor to the AST Neuberger Berman Mid-Cap Value
Portfolio (formerly, the Federated Utility Income Portfolio). Neuberger Berman Management, Inc. has served as
Sub-advisor to the Portfolio since May 1, 1998.
+++ From October 15, 1996 to May 4, 1999, Putnam Investment Management, Inc. served as Sub-advisor to the AST AIM
Balanced Portfolio (formerly, the AST Putnam Balanced Portfolio). Prior to October 15, 1996, Phoenix Investment Counsel,
Inc. served as Sub-advisor to the Portfolio. A I M Capital Management, Inc. has served as Sub-advisor to the Portfolio
since May 4, 1999.
RATIOS OF EXPENSES
SUPPLEMENTAL DATA TO AVERAGE NET ASSETS*
AFTER ADVISORY BEFORE ADVISORY RATIO OF NET
NET ASSETS AT PORTFOLIO FEE WAIVER FEE WAIVER INVESTMENT
INCOME
TOTAL END OF PERIOD TURNOVER AND EXPENSE AND EXPENSE (LOSS) TO
AVERAGE
RETURN (IN 000'S) RATE REIMBURSEMENT REIMBURSEMENT NET ASSETS
(10.35%) $755,595 44% 1.18%(1) 1.18%(1) 1.59%(1)
64.13% 770,512 159% 1.18% 1.18%
0.18%
20.10% 497,461 117% 1.13% 1.13%
0.69%
18.15% 412,270 116% 1.15% 1.15%
1.04%
9.65% 346,211 124% 1.16% 1.26%
0.88%
10.00% 268,056 59% 1.17% 1.27%
0.88%
(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%
2.66% $1,844,396 N/A 0.60%(1) 0.65%(1)
5.29%(1)
4.60% 2,409,157 N/A 0.60% 0.65%
4.52%
5.14% 967,733 N/A 0.60% 0.66%
4.99%
5.18% 759,888 N/A 0.60% 0.69%
5.06%
5.08% 549,470 N/A 0.60% 0.71%
4.87%
5.05% 344,225 N/A 0.60% 0.72%
5.38%
4.95% $677,747 92% 1.23%(1) 1.23%(1)
0.29%(1)
5.67% 664,383 176% 1.13% 1.13%
0.39%
(2.33%) 271,968 208% 1.05% 1.05% 1.83%
26.42% 201,143 91% 0.90% 0.90%
3.34%
11.53% 123,138 81% 0.93% 0.93%
3.14%
26.13% 107,399 71% 0.93% 0.93%
4.58%
2.03% $591,036 33% 0.97%(1) 0.97%(1)
2.49%(1)
20.85% 499,571 154% 1.00% 1.00% 2.37%
12.86% 409,335 139% 1.00% 1.00% 2.55%
18.28% 357,591 170% 1.03% 1.03% 2.81%
11.23% 286,479 276% 0.94% 0.94% 2.66%
22.60% 255,206 161% 0.94% 0.94% 3.28%
---------------------------------------------------------------------------------------------------------------------------
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 Federated High Yield 06/30/00** $11.92 $0.55 $(0.81) $(0.26) $(1.16) $ -- (1.16)
$10.50
12/31/99 12.65 1.03 (0.77) 0.26 (0.91) (0.08) (0.99) 11.92
12/31/98 13.11 0.91 (0.57) 0.34 (0.76) (0.04) (0.80) 12.65
12/31/97 12.13 0.75 0.83 1.58 (0.54) (0.06) (0.60) 13.11
12/31/96 11.14 0.56 0.90 1.46 (0.47) -- (0.47) 12.13
12/31/95 9.69 0.38 1.46 1.84 (0.39) -- (0.39) 11.14
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
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 T. Rowe Price 06/30/00** $9.60 $0.17 $(0.51) $(0.34) $(0.15) $ -- $(0.15) $9.11
Global Bond++ 12/31/99 11.46 0.33 (1.25) (0.92) (0.71) (0.23) (0.94) 9.60
12/31/98 10.11 0.52 0.94 1.46 (0.03) (0.08) (0.11) 11.46
12/31/97 10.90 0.20 (0.57) (0.37) (0.16) (0.26) (0.42) 10.11
12/31/96 10.60 0.23 0.38 0.61 (0.14) (0.17) (0.31) 10.90
12/31/95 9.68 0.31 0.75 1.06 (0.14) -- (0.14) 10.60
---------------------------------------------------------------------------------------------------------------------------
* 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, 2000, the AST T. Rowe Price Global Bond Portfolio was known as the AST T. Rowe Price International
Bond Portfolio.
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
(2.35%) $604,610 13% 0.95%(1) 0.95%(1) 10.14%(1)
2.00% 623,788 39% 0.94% 0.94%
9.09%
2.61% 595,680 36% 0.95% 0.95%
8.64%
13.59% 434,420 28% 0.98% 0.98%
8.83%
13.58% 205,262 43% 1.03% 1.03%
8.02%
19.57% 83,692 30% 1.11% 1.11%
8.72%
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%
1.88% $1,145,436 33% 0.95%(1) 0.95%(1) 2.21%(1)
11.74% 1,048,064 76% 0.93% 0.93% 2.10%
13.34% 831,482 67% 0.93% 0.93% 2.17%
23.33% 602,105 73% 0.95% 0.95% 2.54%
17.09% 348,680 58% 0.98% 0.98% 2.83%
30.07% 176,716 89% 0.98% 0.98% 3.34%
(18.05%) $1,052,163 53% 1.05%(1) 1.05%(1) (0.50%)(1)
141.96% 1,443,211 116% 1.08% 1.08% (0.46%)
3.49% 285,847 100% 1.12% 1.12% (0.53%)
6.01% 278,258 77% 1.13% 1.13% (0.32%)
20.05% 220,068 69% 1.16% 1.16% (0.38%)
32.56% 90,460 68% 1.22% 1.22% (0.28%)
(7.95%) $453,284 102% 1.26%(1) 1.26%(1) 0.06%(1)
31.95% 516,824 29% 1.26% 1.26% 0.47%
14.03% 472,161 32% 1.25% 1.25% 0.60%
1.36% 464,456 19% 1.26% 1.26% 0.71%
14.17% 402,559 11% 1.30% 1.30% 0.84%
11.09% 195,667 17% 1.33% 1.33% 1.03%
(3.53%) $136,272 108% 1.12%(1) 1.12%(1) 4.00%(1)
(8.33%) 138,144 106% 1.11% 1.11% 3.51%
14.72% 147,973 136% 1.11% 1.11% 4.78%
(3.42%) 130,408 173% 1.11% 1.11% 4.73%
5.98% 98,235 241% 1.21% 1.21% 5.02%
11.10% 45,602 325% 1.53% 1.53% 6.17%
---------------------------------------------------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
FINANCIAL HIGHLIGHTS
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
NET ASSET NET
NET ASSET
VALUE INVESTMENT NET REALIZED TOTAL FROM FROM NET FROM NET
VALUE
PERIOD BEGINNING INCOME & UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
END
PORTFOLIO ENDED OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
OF PERIOD
AST Neuberger Berman 06/30/00** $24.03 $0.01 $3.11 $3.12 $ -- $(0.62) $(0.62) $26.53
Mid-Cap Growth*** 12/31/99 17.26 (0.11) 8.21 8.10 -- (1.33) (1.33) 24.03
12/31/98 16.61 (0.05) 3.31 3.26 (0.01) (2.60) (2.61) 17.26
12/31/97 14.39 0.01 2.36 2.37 (0.02) (0.13) (0.15) 16.61
12/31/96 12.40 0.01 2.01 2.02 (0.03) -- (0.03) 14.39
12/31/95 9.97 0.04 2.40 2.44 (0.01) -- (0.01) 12.40
AST Founders Passport 06/30/00** $24.63 $(0.01) $(0.80) $(0.81) $ -- $(4.55) $(4.55) $19.27
12/31/99 13.04 (0.07) 11.72 11.65 (0.03) (0.03) (0.06) 24.63
12/31/98 11.78 0.05 1.24 1.29 (0.03) -- (0.03) 13.04
12/31/97 11.63 0.03 0.21 0.24 (0.08) (0.01) (0.09) 11.78
12/31/96 10.33 0.09 1.24 1.33 (0.03) -- (0.03) 11.63
12/31/95(2) 10.00 0.03 0.30 0.33 -- -- -- 10.33
AST T. Rowe Price 06/30/00** $13.16 $0.10 $0.87 $0.97 $(0.14) $ -- $(0.14) $13.99
Natural Resources 12/31/99 11.97 0.14 2.67 2.81 (0.18) (1.44) (1.62) 13.16
12/31/98 14.57 0.19 (1.78) (1.59) (0.14) (0.87) (1.01) 11.97
12/31/97 14.47 0.14 0.35 0.49 (0.07) (0.32) (0.39) 14.57
12/31/96 11.11 0.05 3.35 3.40 (0.02) (0.02) (0.04) 14.47
12/31/95(2) 10.00 0.04 1.07 1.11 -- -- -- 11.11
AST PIMCO Limited 06/30/00** $10.84 $0.36 $(0.05) $0.31 $(0.62) $ -- $(0.62) $10.53
Maturity Bond 12/31/99 11.08 0.59 (0.22) 0.37 (0.61) -- (0.61) 10.84
12/31/98 11.02 0.56 0.03 0.59 (0.53) -- (0.53) 11.08
12/31/97 10.81 0.55 0.22 0.77 (0.56) -- (0.56) 11.02
12/31/96 10.47 0.56 (0.15) 0.41 (0.05) (0.02) (0.07) 10.81
12/31/95(2) 10.00 0.05 0.42 0.47 -- -- -- 10.47
AST Alliance Growth+ 06/30/00** $18.95 $(0.02) $2.02 $2.00 $ -- $(1.56) $(1.56) $19.39
12/31/99 16.07 (0.07) 4.85 4.78 -- (1.90) (1.90) 18.95
12/31/98 12.62 (0.10) 3.55 3.45 -- -- -- 16.07
12/31/97 10.99 (0.05) 1.68 1.63 -- -- -- 12.62
12/31/96(3) 10.00 (0.01) 1.00 0.99 -- -- -- 10.99
AST Janus Overseas 06/30/00** $25.10 $0.02 $(0.76) $(0.74) $(0.13) $(0.18) $(0.31) $24.05
Growth 12/31/99 13.74 (0.03) 11.39 11.36 -- -- -- 25.10
12/31/98 11.87 0.04 1.88 1.92 (0.05) -- (0.05) 13.74
12/31/97(4) 10.00 0.02 1.85 1.87 -- -- -- 11.87
AST American Century 06/30/00** $15.65 $0.03 $(0.67) $(0.64) $(0.08) $(0.88) $(0.96) $14.05
Income & Growth++ 12/31/99 13.47 0.09 2.84 2.93 (0.11) (0.64) (0.75) 15.65
12/31/98 12.23 0.11 1.38 1.49 (0.07) (0.18) (0.25) 13.47
12/31/97(4) 10.00 0.07 2.16 2.23 -- -- -- 12.23
AST American Century 06/30/00** $15.30 $0.15 $(0.10) $0.05 $(0.23) $(0.88) $(1.11) $14.24
Strategic Balanced 12/31/99 13.66 0.20 1.56 1.76 (0.12) -- (0.12) 15.30
12/31/98 11.34 0.11 2.29 2.40 (0.08) -- (0.08) 13.66
12/31/97(4) 10.00 0.11 1.23 1.34 -- -- -- 11.34
---------------------------------------------------------------------------------------------------------------------------
(1) Annualized.
(2) Commenced operations on May 2, 1995.
(3) Commenced operations on May 2, 1996.
(4) Commenced operations on January 2, 1997.
* For 1999 and 2000, includes commissions received by American Skandia Marketing, Inc. under the Trust's Distribution
Plan, as described in this Prospectus under "Management of the Trust - Distribution Plan".
** Unaudited.
*** Prior to May 1, 1998, Berger Associates, Inc. served as Sub-advisor to the AST Neuberger Berman Mid-Cap Growth
Portfolio (formerly, the Berger Capital Growth Portfolio). Neuberger Berman Management Inc. has served as Sub-advisor to
the Portfolio since May 1, 1998.
+ From December 31, 1998 to April 30, 2000, OppenheimerFunds, Inc. served as Sub-advisor to the AST Alliance Growth
Portfolio (formerly, the AST Oppenheimer Large-Cap Growth Portfolio). Prior to December 31, 1998, Robertson Stephens &
Company Investment Management, L.P. served as Sub-advisor to the Portfolio. Alliance Capital Management L.P. has served
as Sub-advisor to the Portfolio since May 1, 2000.
++ Prior to May 4, 1999, Putnam Investment Management, Inc. served as Sub-advisor to the AST American Century Income &
Growth Portfolio (formerly, the AST Putnam Value Growth and Income Portfolio). American Century Investment Management,
Inc. has served as Sub-advisor to the Portfolio since May 4, 1999.
RATIOS OF EXPENSES
SUPPLEMENTAL DATA_ TO AVERAGE NET ASSETS*
AFTER ADVISORY BEFORE ADVISORY RATIO OF NET
NET ASSETS AT PORTFOLIO FEE WAIVER FEE WAIVER INVESTMENT
INCOME
TOTAL END OF PERIOD TURNOVER AND EXPENSE AND EXPENSE (LOSS) TO
AVERAGE
RETURN (IN 000'S) RATE REIMBURSEMENT REIMBURSEMENT NET ASSETS
12.75% $765,447 55% 1.08%(1) 1.08%(1)
(0.55)%(1)
51.37% 394,325 148% 1.13% 1.13% (0.71%)
20.65% 261,792 228% 1.07% 1.07% (0.34%)
16.68% 185,050 305% 0.99% 0.99% 0.07%
16.34% 136,247 156% 1.01% 1.01% 0.24%
24.42% 45,979 84% 1.17% 1.17% 0.70%
(9.83%) $340,163 264% 1.22%(1) 1.22%(1)
(0.16)%(1)
89.71% 217,397 309% 1.29% 1.29% (0.54%)
10.92% 119,997 46% 1.30% 1.30% 0.32%
2.03% 117,938 73% 1.35% 1.35% 0.43%
12.91% 117,643 133% 1.36% 1.36% 1.25%
3.30% 28,455 4% 1.46%(1) 1.46%(1) 0.94%(1)
7.50% $119,158 61% 1.25%(1) 1.25%(1) 1.35%(1)
28.11% 102,225 72% 1.16% 1.16% 1.11%
(11.83%) 74,126 55% 1.16% 1.16% 1.14%
3.39% 111,954 44% 1.16% 1.16% 0.98%
30.74% 88,534 31% 1.30% 1.30% 1.08%
11.10% 9,262 2% 1.35%(1) 1.80%(1) 1.28%(1)
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)
10.40% $444,107 91% 1.22%(1) 1.22%(1)
(0.50%)(1)
33.91% 364,454 316% 1.11% 1.11% (0.50%)
27.34% 300,924 252% 1.22% 1.22% (0.70%)
14.83% 235,648 219% 1.23% 1.23% (0.59%)
9.90% 48,790 77% 1.33%(1) 1.33%(1)
(0.56%)(1)
(3.16%) $1,540,152 56% 1.17%(1) 1.18%(1) 0.33%(1)
82.68% 1,551,045 76% 1.23% 1.23% (0.18%)
16.22% 607,206 97% 1.27% 1.27% 0.32%
18.70% 255,705 94% 1.35%(1) 1.35%(1) 0.36%(1)
(3.71%) $478,761 29% 0.94%(1) 0.94%(1) 0.70%(1)
22.98% 360,630 125% 0.98% 0.98% 0.86%
12.27% 189,871 87% 1.00% 1.00% 1.05%
22.30% 117,438 81% 1.23%(1) 1.23%(1) 1.24%(1)
0.71% $225,392 64% 1.09%(1) 1.09%(1) 2.22%(1)
12.97% 216,748 104% 1.10% 1.10% 1.93%
21.29% 91,043 95% 1.16% 1.13% 1.68%
13.40% 28,947 76% 1.25%(1) 1.35%(1) 2.02%(1)
---------------------------------------------------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
FINANCIAL HIGHLIGHTS
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
NET ASSET NET
NET ASSET
VALUE INVESTMENT NET REALIZED TOTAL FROM FROM NET FROM NET
VALUE
PERIOD BEGINNING INCOME & UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
END
PORTFOLIO ENDED OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
OF PERIOD
AST American Century 06/30/00**$22.40 $0.04 $(1.36) $(1.32)$ -- $(0.82) $(0.82) $20.26
International Growth 12/31/99 13.66 (0.04) 8.88 8.84 -- (0.10) (0.10) 22.40
12/31/98 11.52 0.03 2.12 2.15 (0.01) -- (0.01) 13.66
12/31/97(4)10.00 (0.03) 1.55 1.52 -- -- -- 11.52
AST Gabelli Small-Cap 06/30/00**$11.39 $0.05 $1.40 $1.45 $(0.07) $(0.63) $(0.70) $12.14
Value*** 12/31/99 11.44 0.08 (0.03) 0.05 (0.10) -- (0.10) 11.39
12/31/98 12.88 0.09 (1.42) (1.33) (0.05) (0.06) (0.11) 11.44
12/31/97(4)10.00 0.06 2.82 2.88 -- -- -- 12.88
AST Marsico Capital Growth 06/30/00** $21.63 $(0.01) $(1.40) $(1.41) $ -- $(0.52) $(0.52)
$19.70
12/31/99 14.20 (0.03) 7.48 7.45 (0.01) (0.01) (0.02) 21.63
12/31/98 10.03 -- 4.17 4.17 -- -- -- 14.20
12/31/97(5)10.00 0.01 0.02 0.03 -- -- -- 10.03
AST Cohen & Steers Realty 06/30/00** $8.36 $0.14 $0.70 $0.84 $(0.28) $ -- $(0.28)
$8.92
12/31/99 8.41 0.33 (0.15) 0.18 (0.23) -- (0.23) 8.36
12/31/98(6)10.00 0.28 (1.87) (1.59) -- -- -- 8.41
AST Lord Abbett 06/30/00**$10.87 $ -- $1.29 $1.29 $1.29 $ -- $ -- $12.16
Small Cap Value 12/31/99 9.99 (0.03) 0.91 0.88 -- -- -- 10.87
12/31/98(6)10.00 (0.01) -- (0.01) -- -- -- 9.99
AST Sanford Bernstein 06/30/00**$14.96 $0.05 $(0.47) $(0.42) $(0.08) $(0.95) $(1.03) $13.51
Managed Index 500+ 12/31/99 12.78 0.08 2.56 2.64 (0.06) (0.40) (0.46) 14.96
12/31/98(6)10.00 0.06 2.72 2.78 -- -- -- 12.78
AST Kemper Small-Cap 06/30/00**$15.59 $(0.03) $0.79 $0.76$ -- $(0.89) $(0.89) $15.46
Growth 12/31/99(7)10.00 (0.05) 5.64 5.59 -- -- -- 15.59
AST MFS Global Equity 06/30/00**$11.03 $0.04 $0.06 $0.10 $(0.01) $(0.01) $(0.02) $11.11
12/31/99(8)10.00 0.01 1.02 1.03 -- -- -- 11.03
AST MFS Growth 06/30/00**$11.30 $0.01 $0.35 $0.36$ -- $ -- $ -- $11.66
12/31/99(8)10.00 0.01 1.29 1.30 -- -- -- 11.30
AST MFS 06/30/00**$10.52 $0.03 $0.08 $0.11 $(0.01) $ -- $(0.01) $10.62
Growth with Income 12/31/99(8)10.00 0.01 0.51 0.52 -- -- -- 10.52
AST Alger All-Cap 06/30/00**(9)$10.00$ -- $(1.23) $(1.23)$ -- $ -- $ -- $8.77
Growth
AST Janus Mid-Cap 06/30/00(10)$10.00 $ 0.02 $0.15 $0.17$ -- $ -- $ -- $10.17
Growth
---------------------------------------------------------------------------------------------------------------------------
(1) Annualized.
(4) Commenced operations on January 2, 1997.
(5) Commenced operations on December 22, 1997.
(6) Commenced operations on January 2, 1998.
(7) Commenced operations on January 4, 1999.
(8) Commenced operations on October 18, 1999.
(9) Commenced operations on December 31, 1999.
(10) Commenced operations on May 1, 2000.
* For 1999 and 2000, includes commissions received by American Skandia Marketing, Inc. under the Trust's Distribution
Plan, as described in this Prospectus under "Management of the Trust - Distribution Plan".
** Unaudited.
*** Prior to October 23, 2000, T. Rowe Price Associates, Inc. served as Sub-advisor to the AST Gabelli Small-Cap Value
Portfolio (formerly, the AST T. Rowe Price Small Company Value Portfolio). GAMCO Investors, Inc. has served as
Sub-advisor to the Portfolio since October 23, 2000.
+ Prior to May 1, 2000, Bankers Trust Company served as Sub-advisor to the AST Sanford Bernstein Managed Index 500
Portfolio (formerly, the AST Bankers Trust Managed Index 500 Portfolio). Sanford C. Bernstein & Co. 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
(6.40%) $301,870 54% 1.32%(1) 1.32%(1)
0.11%(1)
65.20% 154,226 112% 1.50% 1.50%
(0.32%)
18.68% 77,733 220% 1.65% 1.65% 0.10%
15.10% 33,125 171% 1.75%(1) 1.75%(1)
(0.58%)(1)
13.62% $302,755 15% 1.12%(1) 1.12%(1)
0.84%(1)
0.58% 261,493 26% 1.11% 1.11% 0.64%
(10.53%) 304,072 10% 1.11% 1.11% 0.93%
28.80% 199,896 7% 1.16%(1) 1.16%(1)
1.20%(1)
(6.67%) $1,908,574 61% 1.05%(1) 1.06%(1)
(0.21)%(1)
52.58% 1,723,736 115% 1.08% 1.08%
(0.25%)
41.59% 594,966 213% 1.11% 1.11% 0.16%
0.30% 7,299 -- 1.00%(1) 1.00%(1)
3.62%(1)
10.57% $89,986 34% 1.31%(1) 1.31%(1)
4.97%(1)
2.26% 56,697 51% 1.27% 1.27% 4.95%
(16.00%) 33,025 18% 1.30%(1) 1.30%(1)
5.02%(1)
11.87% $123,878 36% 1.17%(1) 1.17%(1)
(0.29)%(1)
8.81% 74,192 85% 1.24% 1.24%
(0.36%)
(0.10%) 41,788 58% 1.31%(1) 1.31%(1)
(0.21%)(1)
(2.47%) $725,914 78% 0.73%(1) 0.73%(1)
0.78%(1)
21.23% 633,567 101% 0.79% 0.77% 0.74%
27.90% 289,551 162% 0.80%(1) 0.86%(1)
1.07%(1)
4.27% $1,084,319 65% 1.12%(1) 1.12%(1)
(0.65%)(1)
55.90% 841,984 133% 1.14%(1) 1.14%(1)
(0.67%)(1)
0.80% $12,203 35% 1.20%(1) 1.20%(1)
1.48%(1)
10.40% 1,291 142% 1.75%(1) 2.11%(1)
0.75%(1)
3.21% $38,168 102% 1.02%(1) 1.02%(1)
0.22%(1)
13.00% 4,868 60% 1.35%(1) 1.35%(1)
0.76%(1)
1.05% $34,668 28% 1.04%(1) 1.04%(1)
0.63%(1)
5.20% 8,757 6% 1.23%(1) 1.23%(1)
1.45%(1)
(12.30%) $238,798 53% 1.23%(1) 1.23%(1) 0.00%(1)
1.70% $33,664 5% 1.26%(1) 1.26%(1) 1.76%(1)
CERTAIN RISK FACTORS AND INVESTMENT METHODS:
The following is a description of certain securities and investment methods that the Portfolios may invest in or
use, and certain of the risks associated with such securities and investment methods. The primary investment focus of
each Portfolio is described above under "Investment Objective and Policies" and an investor should refer to that section
to obtain information about each Portfolio. In general, whether a particular Portfolio may invest in a specific type of
security or use an investment method is described above or in the Company's SAI under "Investment Programs of the
Funds." As noted below, however, certain risk factors and investment methods apply to all or most of the Portfolios.
DERIVATIVE INSTRUMENTS:
To the extent permitted by the investment objectives and policies of a Portfolio, a Portfolio may invest in
securities and other instruments that are commonly referred to as "derivatives." For instance, a Portfolio may purchase
and write (sell) call and put options on securities, securities indices and foreign currencies, enter into futures
contracts and use options on futures contracts, and enter into swap agreements with respect to foreign currencies,
interest rates, and securities indices. In general, derivative instruments are securities or other instruments whose
value is derived from or related to the value of some other instrument or asset.
There are many types of derivatives and many different ways to use them. Some derivatives and derivative
strategies involve very little risk, while others can be extremely risky and can lead to losses in excess of the amount
invested in the derivative. A Portfolio may use derivatives to hedge against changes in interest rates, foreign currency
exchange rates or securities prices, to generate income, as a low cost method of gaining exposure to a particular
securities market without investing directly in those securities, or for other reasons.
The use of these strategies involves certain special risks, including the risk that the price movements of
derivative instruments will not correspond exactly with those of the investments from which they are derived. In
addition, strategies involving derivative instruments that are intended to reduce the risk of loss can also reduce the
opportunity for gain. Furthermore, regulatory requirements for a Portfolio to set aside assets to meet its obligations
with respect to derivatives may result in a Portfolio being unable to purchase or sell securities when it would otherwise
be favorable to do so, or in a Portfolio needing to sell securities at a disadvantageous time. A Portfolio may also be
unable to close out its derivatives positions when desired. There is no assurance that a Portfolio will engage in
derivative transactions. Certain derivative instruments and some of their risks are described in more detail below.
Options. Most of the Portfolios may purchase or write (sell) call or put options on securities, financial
indices or currencies. The purchaser of an option on a security or currency obtains the right to purchase (in the case
of a call option) or sell (in the case of a put option) the security or currency at a specified price within a limited
period of time. Upon exercise by the purchaser, the writer (seller) of the option has the obligation to buy or sell the
underlying security at the exercise price. An option on a securities index is similar to an option on an individual
security, except that the value of the option depends on the value of the securities comprising the index, and all
settlements are made in cash.
A Portfolio will pay a premium to the party writing the option when it purchases an option. In order for a call
option purchased by a Portfolio to be profitable, the market price of the underlying security must rise sufficiently
above the exercise price to cover the premium and other transaction costs. Similarly, in order for a put option to be
profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the
premium and other transaction costs.
Generally, the Portfolios will write call options only if they are covered (i.e., the Fund owns the security
subject to the option or has the right to acquire it without additional cost). By writing a call option, a Portfolio
assumes the risk that it may be required to deliver a security for a price lower than its market value at the time the
option is exercised. Effectively, a Portfolio that writes a covered call option gives up the opportunity for gain above
the exercise price should the market price of the underlying security increase, but retains the risk of loss should the
price of the underlying security decline. A Portfolio will write call options in order to obtain a return from the
premiums received and will retain the premiums whether or not the options are exercised, which will help offset a decline
in the market value of the underlying securities. A Portfolio that writes a put option likewise receives a premium, but
assumes the risk that it may be required to purchase the underlying security at a price in excess of its current market
value.
A Portfolio may sell an option that it has previously purchased prior to the purchase or sale of the underlying
security. Any such sale would result in a gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the option. A Portfolio may terminate an option it has written
by entering into a closing purchase transaction in which it purchases an option of the same series as the option written.
Futures Contracts and Related Options. Each Portfolio (except the AST Alger Mid-Cap Growth Portfolio, the AST
Neuberger Berman Mid-Cap Growth Portfolio, the AST Neuberger Berman Mid-Cap Value Portfolio, the AST Alger Growth
Portfolio, the AST INVESCO Equity Income Portfolio, the AST Federated High Yield Portfolio, the AST Lord Abbett
Bond-Debenture Portfolio and the AST Money Market 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 Founders Passport Portfolio, the AST Scudder Japan Portfolio, the AST Kemper
Small-Cap Growth Portfolio, the Alger All-Cap Growth Portfolio, the AST Alliance Growth Portfolio, the AST Cohen & Steers
Realty Portfolio, the AST Sanford Bernstein Managed Index 500 Portfolio, the AST Alliance Growth and Income Portfolio and
the AST Lord Abbett Bond-Debenture 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. The AST Money Market Portfolio will not enter
into these commitments if they would exceed 15% of the value of the Fund's total assets less its liabilities other than
liabilities created by these commitments.
Certain Portfolios may also sell securities on a delayed-delivery or forward commitment basis. If the
Portfolio does so, it will not participate in future gains or losses on the security. If the other party to such a
transaction fails to pay for the securities, the Portfolio could suffer a loss.
ILLIQUID AND RESTRICTED SECURITIES:
Subject to guidelines adopted by the Trustees of the Trust, each Portfolio may invest up to 15% of its net assets
in illiquid securities (except for the AST Alger Mid-Cap Growth Portfolio, the AST Alger Growth Portfolio and the AST
Money Market Portfolio, which are limited to 10% of net assets, and the AST Sanford Bernstein Managed Index 500
Portfolio, which ordinarily will not invest 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 Overseas Growth Portfolio, the AST Janus Small-Cap Growth
Portfolio, the AST Janus Mid-Cap Growth Portfolio, the AST Neuberger Berman Mid-Cap Growth Portfolio, the AST Neuberger
Berman Mid-Cap Value Portfolio, the AST Marsico Capital Growth Portfolio, the AST JanCap Growth Portfolio, the AST Janus
Strategic Value Portfolio, the AST PIMCO Total Return Bond Portfolio, the AST PIMCO Limited Maturity Bond Portfolio and
the AST Money Market 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 Founders Passport Portfolio, the AST AIM International Equity Portfolio, the AST
Gabelli Small-Cap Value Portfolio, the AST Neuberger Berman Mid-Cap Growth Portfolio, the AST Neuberger Berman Mid-Cap
Value Portfolio, the AST Gabelli All-Cap Value Portfolio, the AST T. Rowe Price Natural Resources Portfolio, the AST T.
Rowe Price Asset Allocation Portfolio and the AST Money Market Portfolio) will not purchase securities when outstanding
borrowings are greater than 5% of the Portfolio's total assets, and the AST AIM Balanced Portfolio will not purchase
securities when any borrowings are outstanding. 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 AIM International Equity Portfolio, the AST
Janus Overseas Growth Portfolio, the AST American Century International Growth Portfolio, the AST American Century
International Growth Portfolio II, the AST Janus Small-Cap Growth Portfolio, the AST Janus Mid-Cap Growth Portfolio, the
AST Alger Mid-Cap Growth Portfolio, the AST Alger Growth Portfolio, the AST JanCap Growth Portfolio, the AST Janus
Strategic Value Portfolio, the AST American Century Income & Growth Portfolio, the AST MFS Growth with Income Portfolio,
the AST Gabelli All-Cap Value Portfolio, the AST INVESCO Equity Income Portfolio, the AST American Century Strategic
Balanced 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
A I M Capital Management, Inc.
Alliance Capital Management L.P.
American Century Investment Management, Inc.
Cohen & Steers Capital Management, Inc.
Federated Investment Counseling
Founders Asset Management LLC
Fred Alger Management, Inc.
GAMCO Investors, Inc.
Kinetics Asset Management, Inc.
INVESCO Funds Group, Inc.
Janus Capital Corporation
J.P. Morgan Investment Management Inc.
Lord, Abbett & Co.
Marsico Capital Management, LLC
Massachusetts Financial Services Company
Neuberger Berman Management Inc.
Pacific Investment Management Company LLC
Sanford C. Bernstein & Co., LLC
Scudder Kemper Investments, Inc.
T. Rowe Price Associates, Inc.
T. Rowe Price International, 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. 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.
------------------
Investment Company Act File No. 811-5186
STATEMENT OF ADDITIONAL INFORMATION October 23, 2000
AMERICAN SKANDIA TRUST
One Corporate Drive, Shelton, Connecticut 06484
------------------------------------------------------------------------------------------------------------------------------------
American Skandia Trust (the "Trust") is a managed, open-end investment company whose separate portfolios ("Portfolios") are
diversified, unless otherwise indicated. The Trust seeks to meet the differing objectives of its Portfolios. Currently, these
Portfolios are the AST Founders Passport Portfolio, the AST Scudder Japan Portfolio, the AST AIM International Equity Portfolio,
the AST Janus Overseas Growth Portfolio, the AST American Century International Growth Portfolio, the AST American Century
International Growth Portfolio II (formerly, the AST T. Rowe Price International Equity Portfolio), the AST MFS Global Equity
Portfolio, the AST Janus Small-Cap Growth Portfolio, the AST Kemper Small-Cap Growth Portfolio, the AST Federated Aggressive
Growth Portfolio, the AST Lord Abbett Small Cap Value Portfolio, the AST Gabelli Small-Cap Value Portfolio (formerly, the AST T.
Rowe Price Small Company Value Portfolio), the AST Janus Mid-Cap Growth Portfolio, the AST Alger Mid-Cap Growth Portfolio, the AST
Neuberger Berman Mid-Cap Growth Portfolio, the AST Neuberger Berman Mid-Cap Value Portfolio, the AST Alger All-Cap Growth
Portfolio, the AST Gabelli All-Cap Value Portfolio, the AST Kinetics Internet Portfolio, the AST T. Rowe Price Natural Resources
Portfolio, the AST Alliance Growth Portfolio (formerly, the AST Oppenheimer Large-Cap Growth Portfolio), the AST MFS Growth
Portfolio, the AST Alger Growth Portfolio, the AST Marsico Capital Growth Portfolio, the AST JanCap Growth Portfolio, the AST
Janus Strategic Value Portfolio, the AST Cohen & Steers Realty Portfolio, the AST Sanford Bernstein Managed Index 500 Portfolio
(formerly, the AST Bankers Trust Managed Index 500 Portfolio), the AST American Century Income & Growth Portfolio, the AST
Alliance Growth and Income Portfolio (formerly, the AST Lord Abbett Growth and Income Portfolio), the AST MFS Growth with Income
Portfolio, the AST INVESCO Equity Income Portfolio, the AST AIM Balanced Portfolio, the AST American Century Strategic Balanced
Portfolio, the AST T. Rowe Price Asset Allocation Portfolio, the AST T. Rowe Price Global Bond Portfolio (formerly, the AST T.
Rowe Price International Bond Portfolio), the AST Federated High Yield Portfolio, the AST Lord Abbett Bond-Debenture Portfolio,
the AST PIMCO Total Return Bond Portfolio, the AST PIMCO Limited Maturity Bond Portfolio and the AST Money Market Portfolio.
American Skandia Investment Services, Incorporated ("ASISI") is the investment manager ("Investment Manager") for the Trust.
Currently, ASISI engages a sub-advisor ("Sub-advisor") for each Portfolio. The Sub-advisor for each Portfolio is as follows: (a)
Founders Asset Management LLC: AST Founders Passport Portfolio; (b) Scudder Kemper Investments, Inc.: AST Scudder Japan Portfolio,
AST Kemper Small-Cap Growth Portfolio; (c) A I M Capital Management, Inc.: AST AIM International Equity Portfolio, AST AIM
Balanced Portfolio; (d) Janus Capital Corporation: AST Janus Overseas Growth Portfolio, AST Janus Small-Cap Growth Portfolio, AST
Janus Mid-Cap Growth Portfolio, AST JanCap Growth Portfolio, AST Janus Strategic Value Portfolio; (e) American Century Investment
Management, Inc.: AST American Century International Growth Portfolio, AST American Century Income & Growth Portfolio, AST
American Century International Growth Portfolio II, AST American Century Strategic Balanced Portfolio; (f) Massachusetts Financial
Services Company: AST MFS Global Equity Portfolio, AST MFS Growth Portfolio, AST MFS Growth with Income Portfolio; (g) Federated
Investment Counseling: AST Federated Aggressive Growth Portfolio, AST Federated High Yield Portfolio; (h) Lord, Abbett & Co.: AST
Lord Abbett Small Cap Value Portfolio, Lord Abbett Bond-Debenture Portfolio; (i) (j) GAMCO Investors, Inc.; AST Gabelli Small-Cap
Value Portfolio, AST Gabelli All-Cap Value Portfolio; (k) Fred Alger Management, Inc.: AST Alger All-Cap Growth Portfolio; (l)
Neuberger Berman Management Inc.: AST Neuberger Berman Mid-Cap Value Portfolio, AST Neuberger Berman Mid-Cap Growth Portfolio; (m)
Kinetics Asset Management, Inc.: AST Kinetics Internet Portfolio; (n) T. Rowe Price Associates, Inc.: AST T. Rowe Price Natural
Resources Portfolio, AST T. Rowe Price Asset Allocation Portfolio; (o) Alliance Capital Management L.P.: AST Alliance Growth
Portfolio, AST Alliance Growth and Income Portfolio; (p) Marsico Capital Management, LLC: AST Marsico Capital Growth Portfolio;
(q) Cohen & Steers Capital Management, Inc.: AST Cohen & Steers Realty Portfolio; (r) Sanford C. Bernstein & Co., LLC; : AST
Sanford Bernstein Managed Index 500 Portfolio; (s) INVESCO Funds Group, Inc.: AST INVESCO Equity Income Portfolio; (q) T. Rowe
Price International, Inc.: AST T. Rowe Price Global Bond Portfolio (t) Pacific Investment Management Company LLC: AST PIMCO Total
Return Bond Portfolio, AST PIMCO Limited Maturity Bond Portfolio; and (u) J.P. Morgan Investment Management Inc.: AST Money
Market Portfolio.
This Statement of Additional Information is not a prospectus. It should be read in conjunction with the Trust's current
Prospectus, a copy of which may be obtained by writing the Trust's administrative office at One Corporate Drive, Shelton,
Connecticut 06484 or by calling (203) 926-1888.
This Statement relates to the Trust's Prospectus dated October 23, 2000.
TABLE OF CONTENTS
-----------------
Caption Page
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General Information and History...................................................................................3
Investment Objectives and Policies................................................................................3
AST Founders Passport Portfolio..............................................................................3
AST Scudder Japan Portfolio...................................................................................
AST AIM International Equity Portfolio......................................................................11
AST Janus Overseas Growth Portfolio.........................................................................17
AST American Century International Growth Portfolio.........................................................21
AST American Century International Growth Portfolio II......................................................25
AST MFS Global Equity Portfolio.............................................................................25
AST Janus Small-Cap Growth Portfolio........................................................................34
AST Kemper Small-Cap Growth Portfolio.......................................................................38
AST Federated Aggressive Growth Portfolio.....................................................................
AST Lord Abbett Small Cap Value Portfolio...................................................................41
AST Gabelli Small-Cap Value Portfolio.......................................................................45
AST Janus Mid-Cap Growth Portfolio..........................................................................54
AST Alger Mid-Cap Growth Portfolio............................................................................
AST Neuberger Berman Mid-Cap Growth Portfolio...............................................................58
AST Neuberger Berman Mid-Cap Value Portfolio................................................................65
AST Alger All-Cap Growth Portfolio..........................................................................71
AST Gabelli All-Cap Value Portfolio...........................................................................
AST Kinetics Internet Portfolio...............................................................................
AST T. Rowe Price Natural Resources Portfolio...............................................................74
AST Alliance Growth Portfolio...............................................................................84
AST MFS Growth Portfolio....................................................................................88
AST Alger Growth Portfolio....................................................................................
AST Marsico Capital Growth Portfolio........................................................................97
AST JanCap Growth Portfolio................................................................................100
AST Janus Strategic Value Portfolio...........................................................................
AST Cohen & Steers Realty Portfolio........................................................................105
AST Sanford Bernstein Managed Index 500 Portfolio..........................................................102
AST American Century Income & Growth Portfolio.............................................................110
AST Alliance Growth and Income Portfolio...................................................................115
AST MFS Growth with Income Portfolio.......................................................................117
AST INVESCO Equity Income Portfolio........................................................................126
AST AIM Balanced Portfolio.................................................................................127
AST American Century Strategic Balanced Portfolio..........................................................134
AST T. Rowe Price Asset Allocation Portfolio...............................................................138
AST T. Rowe Price Global Bond Portfolio....................................................................147
AST Federated High Yield Portfolio.........................................................................157
AST Lord Abbett Bond-Debenture Portfolio......................................................................
AST PIMCO Total Return Bond Portfolio......................................................................159
AST PIMCO Limited Maturity Bond Portfolio..................................................................171
AST Money Market Portfolio.................................................................................184
Investment Restrictions.........................................................................................185
Certain Risk Factors and Investment Methods.....................................................................199
Portfolio Turnover..............................................................................................215
Organization and Management of the Trust........................................................................215
Investment Advisory and Other Services..........................................................................218
Brokerage Allocation............................................................................................230
Allocation of Investments.......................................................................................232
Computation of Net Asset Values.................................................................................232
Sale of Shares..................................................................................................233
Description of Shares of the Trust..............................................................................234
Underwriter.....................................................................................................234
Tax Matters.....................................................................................................235
Performance.....................................................................................................235
Custodian.......................................................................................................238
Other Information...............................................................................................238
Financial Statements............................................................................................239
Appendix A Financial Statements for American Skandia Trust......................................................A-1
Appendix B Definition of Certain Debt Securities Ratings........................................................B-1
GENERAL INFORMATION AND HISTORY:
.........Prior to May 1, 1992, the Trust was known as the Henderson International Growth Fund, which consisted of only one
portfolio. This Portfolio is now known as the AST AIM International Equity Portfolio (formerly, the AST Putnam International
Equity Portfolio and the Seligman Henderson International Equity Portfolio). The AST Alliance Growth and Income Portfolio
(formerly, the AST Lord Abbett Growth and Income Portfolio) was first offered as of May 1, 1992. The AST JanCap Growth Portfolio
and the AST Money Market Portfolio were first offered as of November 4, 1992. The AST Neuberger Berman Mid-Cap Value Portfolio
(formerly, the Federated Utility Income Portfolio) and the AST AIM Balanced Portfolio (formerly, the AST Putnam Balanced Portfolio
and the AST Phoenix Balanced Asset Portfolio) were first offered as of May 1, 1993. The AST Federated High Yield Portfolio, the
AST T. Rowe Price Asset Allocation Portfolio, the AST American Century International Growth Portfolio II (formerly, the AST T.
Rowe Price International Equity Portfolio), the AST Janus Small-Cap Growth Portfolio (formerly, the Founders Capital Appreciation
Portfolio), the AST INVESCO Equity Income Portfolio and the AST PIMCO Total Return Bond Portfolio were first offered as of
December 31, 1993. The AST T. Rowe Price Global Bond Portfolio (formerly, the AST Scudder International Bond Portfolio) was first
offered as of May 1, 1994. The AST Neuberger Berman Mid-Cap Growth Portfolio (formerly, the Berger Capital Growth Portfolio) was
first offered as of October 19, 1994. The AST Founders Passport Portfolio (formerly, the Seligman Henderson International Small
Cap Portfolio), the AST T. Rowe Price Natural Resources Portfolio and the AST PIMCO Limited Maturity Bond Portfolio were first
offered as of May 2, 1995. The AST Alliance Growth Portfolio (formerly, the AST Oppenheimer Large-Cap Growth Portfolio and the
Robertson Stephens Value + Growth Portfolio) was first offered as of May 2, 1996. The AST Janus Overseas Growth Portfolio, the
AST Gabelli Small-Cap Value Portfolio (formerly, the AST T. Rowe Price Small Company Value Portfolio), the AST American Century
International Growth Portfolio, the AST American Century Strategic Balanced Portfolio and the AST American Century Income & Growth
Portfolio (formerly, the AST Putnam Value Growth & Income Portfolio) were first offered as of January 2, 1997. The AST Marsico
Capital Growth Portfolio was first offered as of December 22, 1997. The AST Lord Abbett Small Cap Value Portfolio, the AST Cohen
& Steers Realty Portfolio, the AST Stein Roe Venture Portfolio, and the AST Sanford Bernstein Managed Index 500 Portfolio
(formerly, the AST Bankers Trust Managed Index 500 Portfolio) were first offered as of January 2, 1998. The AST Kemper Small-Cap
Growth Portfolio was first offered as of January 4, 1999. The AST MFS Global Equity Portfolio, the AST MFS Growth Portfolio and
the AST MFS Growth with Income Portfolio were first offered as of October 18, 1999. The AST Alger All-Cap Growth Portfolio was
first offered as of December 30, 1999. The AST Janus Mid-Cap Growth Portfolio was first offered as of May 1, 2000. The AST
Scudder Japan Portfolio, the AST Federated Aggressive Growth Portfolio, the AST Gabelli Small-Cap Value Portfolio, the AST Alger
Mid-Cap Growth Portfolio, AST Gabelli All-Cap Value Portfolio, the AST Kinetics Internet Portfolio, the AST Alger Growth
Portfolio, the AST Janus Strategic Value Portfolio and the AST Lord Abbett Bond-Debenture Portfolio had not been offered prior to
the date of this Prospectus.
INVESTMENT OBJECTIVES AND POLICIES:
.........The following information supplements, and should be read in conjunction with, the discussion in the Trust's Prospectus
of the investment objective and policies of each Portfolio. The investment objective and supplemental information regarding the
investment policies for each of the Portfolios are described below and should be considered separately. Each Portfolio has a
different investment objective and certain policies may vary. As a result, the risks, opportunities and return in each Portfolio
may differ. There can be no assurance that any Portfolio's investment objective will be achieved. Certain risk factors in
relation to various securities and instruments in which the Portfolios may invest are described in this Statement and the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
.........The investment objective and the investment policies and limitations of each Portfolio, unless otherwise specified, are
not "fundamental" policies and may be changed by the Board of Trustees of the Trust without approval of the shareholders of the
affected Portfolio. Those investment policies specifically labeled as fundamental, including those described in the "Investment
Restrictions" section of this Statement, may not be changed without shareholder approval. Fundamental investment policies of a
Portfolio may be changed only with the approval of at least the lesser of (1) 67% or more of the total shares of the Portfolio
represented at a meeting at which more than 50% of the outstanding shares of the Portfolio are represented, or (2) a majority of
the outstanding shares of the Portfolio.
AST Founders Passport Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek capital appreciation.
Investment Policies:
Options On Stock Indices and Stocks. An option is a right to buy or sell a security at a specified price within a
limited period of time. The Portfolio may write ("sell") covered call options on any or all of its portfolio securities. In
addition, the Portfolio may purchase options on securities. The Portfolio may also purchase put and call options on stock indices.
The Portfolio may write ("sell") options on any or all of its portfolio securities and at such time and from time to time
as the Sub-advisor shall determine to be appropriate. No specified percentage of the Portfolio's assets is invested in securities
with respect to which options may be written. The extent of the Portfolio's option writing activities will vary from time to time
depending upon the Sub-advisor's evaluation of market, economic and monetary conditions.
When the Portfolio purchases a security with respect to which it intends to write an option, it is likely that the option
will be written concurrently with or shortly after purchase. The Portfolio will write an option on a particular security only if
the Sub-advisor believes that a liquid secondary market will exist on an exchange for options of the same series, which will
permit the Portfolio to enter into a closing purchase transaction and close out its position. If the Portfolio desires to sell a
particular security on which it has written an option, it will effect a closing purchase transaction prior to or concurrently with
the sale of the security.
The Portfolio may enter into closing purchase transactions to reduce the percentage of its assets against which options
are written, to realize a profit on a previously written option, or to enable it to write another option on the underlying
security with either a different exercise price or expiration time or both.
Options written by the Portfolio will normally have expiration dates between three and nine months from the date
written. The exercise prices of options may be below, equal to or above the current market values of the underlying securities at
the times the options are written. From time to time for tax and other reasons, the Portfolio may purchase an underlying security
for delivery in accordance with an exercise notice assigned to it, rather than delivering such security from its portfolio.
A stock index measures the movement of a certain group of stocks by assigning relative values to the stocks included in
the index. The Portfolio purchases put options on stock indices to protect the portfolio against decline in value. The Portfolio
purchases call options on stock indices to establish a position in equities as a temporary substitute for purchasing individual
stocks that then may be acquired over the option period in a manner designed to minimize adverse price movements. Purchasing put
and call options on stock indices also permits greater time for evaluation of investment alternatives. When the Sub-advisor
believes that the trend of stock prices may be downward, particularly for a short period of time, the purchase of put options on
stock indices may eliminate the need to sell less liquid stocks and possibly repurchase them later. The purpose of these
transactions is not to generate gain, but to "hedge" against possible loss. Therefore, successful hedging activity will not
produce net gain to the Portfolio. Any gain in the price of a call option is likely to be offset by higher prices the Portfolio
must pay in rising markets, as cash reserves are invested. In declining markets, any increase in the price of a put option is
likely to be offset by lower prices of stocks owned by the Portfolio.
The Portfolio may purchase only those put and call options that are listed on a domestic exchange or quoted on the
automatic quotation system of the National Association of Securities Dealers, Inc. ("NASDAQ"). Options traded on stock exchanges
are either broadly based, such as the Standard & Poor's 500 Stock Index and 100 Stock Index, or involve stocks in a designated
industry or group of industries. The Portfolio may utilize either broadly based or market segment indices in seeking a better
correlation between the indices and the portfolio.
Transactions in options are subject to limitations, established by each of the exchanges upon which options are traded,
governing the maximum number of options which may be written or held by a single investor or group of investors acting in concert,
regardless of whether the options are held in one or more accounts. Thus, the number of options the Portfolio may hold may be
affected by options held by other advisory clients of the Sub-advisor. As of the date of this Statement, the Sub-advisor believes
that these limitations will not affect the purchase of stock index options by the Portfolio.
One risk of holding a put or a call option is that if the option is not sold or exercised prior to its expiration, it
becomes worthless. However, this risk is limited to the premium paid by the Portfolio. Other risks of purchasing options include
the possibility that a liquid secondary market may not exist at a time when the Portfolio may wish to close out an option
position. It is also possible that trading in options on stock indices might be halted at a time when the securities markets
generally were to remain open. In cases where the market value of an issue supporting a covered call option exceeds the strike
price plus the premium on the call, the Portfolio will lose the right to appreciation of the stock for the duration of the
option. For an additional discussion of options on stock indices and stocks and certain risks involved therein, see this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Futures Contracts. The Portfolio may enter into futures contracts (or options thereon) for hedging purposes. U.S.
futures contracts are traded on exchanges which have been designated "contract markets" by the Commodity Futures Trading
Commission ("CFTC") and must be executed through a futures commission merchant (an "FCM") or brokerage firm which is a member of
the relevant contract market. Although futures contracts by their terms call for the delivery or acquisition of the underlying
commodities or a cash payment based on the value of the underlying commodities, in most cases the contractual obligation is offset
before the delivery date of the contract by buying, in the case of a contractual obligation to sell, or selling, in the case of a
contractual obligation to buy, an identical futures contract on a commodities exchange. Such a transaction cancels the obligation
to make or take delivery of the commodities.
The acquisition or sale of a futures contract could occur, for example, if the Portfolio held or considered purchasing
equity securities and sought to protect itself from fluctuations in prices without buying or selling those securities. For
example, if prices were expected to decrease, the Portfolio could sell equity index futures contracts, thereby hoping to offset a
potential decline in the value of equity securities in the portfolio by a corresponding increase in the value of the futures
contract position held by the Portfolio and thereby prevent the Portfolio's net asset value from declining as much as it otherwise
would have. The Portfolio also could protect against potential price declines by selling portfolio securities and investing in
money market instruments. However, since the futures market is more liquid than the cash market, the use of futures contracts as
an investment technique would allow the Portfolio to maintain a defensive position without having to sell portfolio securities.
Similarly, when prices of equity securities are expected to increase, futures contracts could be bought to attempt to
hedge against the possibility of having to buy equity securities at higher prices. This technique is sometimes known as an
anticipatory hedge. Since the fluctuations in the value of futures contracts should be similar to those of equity securities, the
Portfolio could take advantage of the potential rise in the value of equity securities without buying them until the market had
stabilized. At that time, the futures contracts could be liquidated and the Portfolio could buy equity securities on the cash
market.
The Portfolio may also enter into interest rate and foreign currency futures contracts. Interest rate futures contracts
currently are traded on a variety of fixed-income securities, including long-term U.S. Treasury Bonds, Treasury Notes, Government
National Mortgage Association modified pass-through mortgage-backed securities, U.S. Treasury Bills, bank certificates of deposit
and commercial paper. Foreign currency futures contracts currently are traded on the British pound, Canadian dollar, Japanese
yen, Swiss franc, West German mark and on Eurodollar deposits.
The Portfolio will not, as to any positions, whether long, short or a combination thereof, enter into futures and options
thereon for which the aggregate initial margins and premiums exceed 5% of the fair market value of its total assets after taking
into account unrealized profits and losses on options entered into. In the case of an option that is "in-the-money," the
in-the-money amount may be excluded in computing such 5%. In general a call option on a future is "in-the-money" if the value of
the future exceeds the exercise ("strike") price of the call; a put option on a future is "in-the-money" if the value of the
future which is the subject of the put is exceeded by the strike price of the put. The Portfolio may use futures and options
thereon solely for bona fide hedging or for other non-speculative purposes. As to long positions which are used as part of the
Portfolio's strategies and are incidental to its activities in the underlying cash market, the "underlying commodity value" of the
Portfolio's futures and options thereon must not exceed the sum of (i) cash set aside in an identifiable manner, or short-term
U.S. debt obligations or other dollar-denominated high-quality, short-term money instruments so set aside, plus sums deposited on
margin; (ii) cash proceeds from existing investments due in 30 days; and (iii) accrued profits held at the futures commission
merchant. The "underlying commodity value" of a future is computed by multiplying the size of the future by the daily settlement
price of the future. For an option on a future, that value is the underlying commodity value of the future underlying the option.
Unlike the situation in which the Portfolio purchases or sells a security, no price is paid or received by the Portfolio
upon the purchase or sale of a futures contract. Instead, the Portfolio is required to deposit in a segregated asset account an
amount of cash or qualifying securities (currently U.S. Treasury bills), currently in a minimum amount of $15,000. This is called
"initial margin." Such initial margin is in the nature of a performance bond or good faith deposit on the contract. However,
since losses on open contracts are required to be reflected in cash in the form of variation margin payments, the Portfolio may be
required to make additional payments during the term of a contract to its broker. Such payments would be required, for example,
where, during the term of an interest rate futures contract purchased by the Portfolio, there was a general increase in interest
rates, thereby making the Portfolio's securities less valuable. In all instances involving the purchase of financial futures
contracts by the Portfolio, an amount of cash together with such other securities as permitted by applicable regulatory
authorities to be utilized for such purpose, at least equal to the market value of the future contracts, will be deposited in a
segregated account with the Portfolio's custodian to collateralize the position. At any time prior to the expiration of a futures
contract, the Portfolio may elect to close its position by taking an opposite position which will operate to terminate the
Portfolio's position in the futures contract.
Because futures contracts are generally settled within a day from the date they are closed out, compared with a
settlement period of three business days for most types of securities, the futures markets can provide superior liquidity to the
securities markets. Nevertheless, there is no assurance a liquid secondary market will exist for any particular futures contract
at any particular time. In addition, futures exchanges may establish daily price fluctuation limits for futures contracts and may
halt trading if a contract's price moves upward or downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached, it would be impossible for the Portfolio to enter into new positions or close out existing
positions. If the secondary market for a futures contract were not liquid because of price fluctuation limits or otherwise, the
Portfolio would not promptly be able to liquidate unfavorable futures positions and potentially could be required to continue to
hold a futures position until the delivery date, regardless of changes in its value. As a result, the Portfolio's access to other
assets held to cover its futures positions also could be impaired. For an additional discussion of futures contracts and certain
risks involved therein, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Options on Futures Contracts. The Portfolio may purchase put and call options on futures contracts. An option on a
futures contract provides the holder with the right to enter into a "long" position in the underlying futures contract, in the
case of a call option, or a "short" position in the underlying futures contract, in the case of a put option, at a fixed exercise
price to a stated expiration date. Upon exercise of the option by the holder, a contract market clearing house establishes a
corresponding short position for the writer of the option, in the case of a call option, or a corresponding long position, in the
case of a put option. In the event that an option is exercised, the parties will be subject to all the risks associated with the
trading of futures contracts, such as payment of variation margin deposits.
A position in an option on a futures contract may be terminated by the purchaser or seller prior to expiration by
effecting a closing purchase or sale transaction, subject to the availability of a liquid secondary market, which is the purchase
or sale of an option of the same series (i.e., the same exercise price and expiration date) as the option previously purchased or
sold. The difference between the premiums paid and received represents the trader's profit or loss on the transaction.
An option, whether based on a futures contract, a stock index or a security, becomes worthless to the holder when it
expires. Upon exercise of an option, the exchange or contract market clearing house assigns exercise notices on a random basis to
those of its members which have written options of the same series and with the same expiration date. A brokerage firm receiving
such notices then assigns them on a random basis to those of its customers which have written options of the same series and
expiration date. A writer therefore has no control over whether an option will be exercised against it, nor over the time of such
exercise.
The purchase of a call option on a futures contract is similar in some respects to the purchase of a call option on an
individual security. See "Options on Foreign Currencies" below. Depending on the pricing of the option compared to either the
price of the futures contract upon which it is based or the price of the underlying instrument, ownership of the option may or may
not be less risky than ownership of the futures contract or the underlying instrument. As with the purchase of futures contracts,
when the Portfolio is not fully invested it could buy a call option on a futures contract to hedge against a market advance. The
purchase of a put option on a futures contract is similar in some respects to the purchase of protective put options on portfolio
securities. For example, the Portfolio would be able to buy a put option on a futures contract to hedge the Portfolio against the
risk of falling prices. For an additional discussion of options on futures contracts and certain risks involved therein, see this
Statement and the Trust's Prospectus under "Certain Risks Factors and Investment Methods."
Options on Foreign Currencies. The Portfolio may buy and sell options on foreign currencies for hedging purposes in a
manner similar to that in which futures on foreign currencies would be utilized. For example, a decline in the U.S. dollar value
of a foreign currency in which portfolio securities are denominated would reduce the U.S. dollar value of such securities, even if
their value in the foreign currency remained constant. In order to protect against such diminutions in the value of portfolio
securities, the Portfolio could buy put options on the foreign currency. If the value of the currency declines, the Portfolio
would have the right to sell such currency for a fixed amount in U.S. dollars and would thereby offset, in whole or in part, the
adverse effect on the Portfolio which otherwise would have resulted. Conversely, when a rise is projected in the U.S. dollar
value of a currency in which securities to be acquired are denominated, thereby increasing the cost of such securities, the
Portfolio could buy call options thereon. The purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates.
Options on foreign currencies traded on national securities exchanges are within the jurisdiction of the Securities and
Exchange Commission (the "SEC"), as are other securities traded on such exchanges. As a result, many of the protections provided
to traders on organized exchanges will be available with respect to such transactions. In particular, all foreign currency option
positions entered into on a national securities exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on a national securities
exchange may be more readily available than in the over-the-counter market, potentially permitting the Portfolio to liquidate open
positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of the availability
of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options
written, the nature of the foreign currency market, possible intervention by governmental authorities, and the effects of other
political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by
the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which
has established banking relationships in applicable foreign countries for this purpose. As a result, the OCC may, if it
determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option
exercises, or would result in undue burdens on the OCC or its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices, or
prohibitions on exercise.
Risk Factors of Investing in Futures and Options. The successful use of the investment practices described above with
respect to futures contracts, options on futures contracts, and options on securities indices, securities, and foreign currencies
draws upon skills and experience which are different from those needed to select the other instruments in which the Portfolio
invests. Should interest or exchange rates or the prices of securities or financial indices move in an unexpected manner, the
Portfolio may not achieve the desired benefits of futures and options or may realize losses and thus be in a worse position than
if such strategies had not been used. Unlike many exchange-traded futures contracts and options on futures contracts, there are
no daily price fluctuation limits with respect to options on currencies and negotiated or over-the-counter instruments, and
adverse market movements could therefore continue to an unlimited extent over a period of time. In addition, the correlation
between movements in the price of the securities and currencies hedged or used for cover will not be perfect and could produce
unanticipated losses.
The Portfolio's ability to dispose of its positions in the foregoing instruments will depend on the availability of
liquid markets in the instruments. Markets in a number of the instruments are relatively new and still developing and it is
impossible to predict the amount of trading interest that may exist in those instruments in the future. Particular risks exist
with respect to the use of each of the foregoing instruments and could result in such adverse consequences to the Portfolio as the
possible loss of the entire premium paid for an option bought by the Portfolio and the possible need to defer closing out
positions in certain instruments to avoid adverse tax consequences. As a result, no assurance can be given that the Portfolio
will be able to use those instruments effectively for the purposes set forth above.
In addition, options on U.S. Government securities, futures contracts, options on futures contracts, forward contracts
and options on foreign currencies may be traded on foreign exchanges and over-the-counter in foreign countries. Such transactions
are subject to the risk of governmental actions affecting trading in or the prices of foreign currencies or securities. The value
of such positions also could be affected adversely by (i) other complex foreign political and economic factors, (ii) lesser
availability than in the United States of data on which to make trading decisions, (iii) delays in the Portfolio's ability to act
upon economic events occurring in foreign markets during nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the United States, and (v) low trading volume. For
an additional discussion of certain risks involved in investing in futures and options, see this Statement and the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
Foreign Securities. Investments in foreign countries involve certain risks which are not typically associated with U.S.
investments. For a discussion of certain risks involved in foreign investing, see this Statement and the Trust's Prospectus under
"Certain Risk Factors and Investment Methods."
Forward Contracts for Purchase or Sale of Foreign Currencies. The Portfolio generally conducts its foreign currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign exchange currency market. When the
Portfolio purchases or sells a security denominated in a foreign currency, it may enter into a forward foreign currency contract
("forward contract") for the purchase or sale, for a fixed amount of dollars, of the amount of foreign currency involved in the
underlying security transaction. A forward contract involves an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time
of the contract. The Portfolio generally will not enter into forward contracts with a term greater than one year. In this
manner, the Portfolio may obtain protection against a possible loss resulting from an adverse change in the relationship between
the U.S. dollar and the foreign currency during the period between the date the security is purchased or sold and the date upon
which payment is made or received. Although such contracts tend to minimize the risk of loss due to the decline in the value of
the hedged currency, at the same time they tend to limit any potential gain which might result should the value of such currency
increase. The Portfolio will not speculate in forward contracts.
Forward contracts are traded in the interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. Generally a forward contract has no deposit requirement, and no commissions are charged at
any stage for trades. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the
difference between the prices at which they buy and sell various currencies. When the Sub-advisor believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S. dollar (or sometimes against another currency), the
Portfolio may enter into a forward contract to sell, for a fixed dollar or other currency amount, foreign currency approximating
the value of some or all of the Portfolio's securities denominated in that currency. In addition, the Portfolio may engage in
"proxy-hedging," i.e., entering into forward contracts to sell a different foreign currency than the one in which the underlying
investments are denominated with the expectation that the value of the hedged currency will correlate with the value of the
underlying currency. The Portfolio will not enter into forward contracts or maintain a net exposure to such contracts where the
fulfillment of the contracts would require the Portfolio to deliver an amount of foreign currency or a proxy currency in excess of
the value of its portfolio securities or other assets denominated in the currency being hedged. Forward contracts may, from time
to time, be considered illiquid, in which case they would be subject to the Portfolio's limitation on investing in illiquid
securities.
At the consummation of a forward contract for delivery by the Portfolio of a foreign currency, the Portfolio may either
make delivery of the foreign currency or terminate its contractual obligation to deliver the foreign currency by purchasing an
offsetting contract obligating it to purchase, at the same maturity date, the same amount of the foreign currency. If the
Portfolio chooses to make delivery of the foreign currency, it may be required to obtain such currency through the sale of
portfolio securities denominated in such currency or through conversion of other Portfolio assets into such currency.
Dealings in forward contracts by the Portfolio will be limited to the transactions described above. Of course, the
Portfolio is not required to enter into such transactions with regard to its foreign currency-denominated securities and will not
do so unless deemed appropriate by the Sub-advisor. It also should be realized that this method of protecting the value of the
Portfolio's securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of
the securities. It simply establishes a rate of exchange which can be achieved at some future point in time. Additionally,
although such contracts tend to minimize the risk of loss due to the decline in the value of the hedged currency, at the same time
they tend to limit any potential gain which might result should the value of such currency increase. For an additional discussion
of forward foreign currency contracts and certain risks involved therein, see this Statement and the Trust's Prospectus under
"Certain Risk Factors and Investment Methods."
Lower-Rated or Unrated Fixed-Income Securities. The Portfolio may invest up to 5% of its total assets in fixed-income
securities which are unrated or are rated below investment grade either at the time of purchase or as a result of reduction in
rating after purchase. (This limitation does not apply to convertible securities and preferred stocks.) Investments in
lower-rated or unrated securities are generally considered to be of high risk. These debt securities, commonly referred to as
junk bonds, 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 or principal payments, or both, as they come due. The ratings given a security by Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's ("S&P") provide a generally useful guide as to such credit risk. For a
description of securities ratings, see the Appendix to this Statement. The lower the rating given a security by a rating service,
the greater the credit risk such rating service perceives to exist with respect to the security. Increasing the amount of the
Portfolio's assets invested in unrated or lower grade securities, while intended to increase the yield produced by those assets,
will also increase the risk to which those assets are subject.
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
such securities, whereas a decline in interest rates will tend to increase their values. Medium and lower-rated securities (Baa
or BBB and lower) and non-rated securities of comparable quality tend to be subject to wider fluctuations in yields and market
values than higher rated securities and may have speculative characteristics. In order to decrease the risk in investing in debt
securities, in no event will the Portfolio ever invest in a debt security rated below B by Moody's or by S&P. Of course, relying
in part on ratings assigned by credit agencies in making investments will not protect the Portfolio from the risk that the
securities in which they invest will decline in value, since credit ratings represent evaluations of the safety of principal,
dividend, and interest payments on debt securities, and not the market values of such securities, and such ratings may not be
changed on a timely basis to reflect subsequent events.
Because investment in medium and lower-rated securities involves greater credit risk, achievement of the Portfolio's
investment objective may be more dependent on the Sub-advisor's own credit analysis than is the case for funds that do not invest
in such securities. In addition, the share price and yield of the Portfolio may fluctuate more than in the case of funds
investing in higher quality, shorter term securities. Moreover, a significant economic downturn or major increase in interest
rates may result in issuers of lower-rated securities experiencing increased financial stress, which would adversely affect their
ability to service their principal, dividend, and interest obligations, meet projected business goals, and obtain additional
financing. In this regard, it should be noted that while the market for high yield debt securities has been in existence for many
years and from time to time has experienced economic downturns in recent years, this market has involved a significant increase in
the use of high yield debt securities to fund highly leveraged corporate acquisitions and restructurings. Past experience may
not, therefore, provide an accurate indication of future performance of the high yield debt securities market, particularly during
periods of economic recession. Furthermore, expenses incurred in recovering an investment in a defaulted security may adversely
affect the Portfolio's net asset value. Finally, while the Sub-advisor attempts to limit purchases of medium and lower-rated
securities to securities having an established secondary market, the secondary market for such securities may be less liquid than
the market for higher quality securities. The reduced liquidity of the secondary market for such securities may adversely affect
the market price of, and ability of the Portfolio to value, particular securities at certain times, thereby making it difficult to
make specific valuation determinations. The Portfolio does not invest in any medium and lower-rated securities which present
special tax consequences, such as zero-coupon bonds or pay-in-kind bonds. For an additional discussion of certain risks involved
in lower-rated securities, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
The Sub-advisor seeks to reduce the overall risks associated with the Portfolio's investments through diversification and
consideration of factors affecting the value of securities it considers relevant. No assurance can be given, however, regarding
the degree of success that will be achieved in this regard or that the Portfolio will achieve its investment objective.
Convertible Securities. The Portfolio may buy securities convertible into common stock if, for example, the Sub-advisor
believes that a company's convertible securities are undervalued in the market. Convertible securities eligible for purchase
include convertible bonds, convertible preferred stocks, and warrants. A warrant is an instrument issued by a corporation which
gives the holder the right to subscribe to a specific amount of the corporation's capital stock at a set price for a specified
period of time. Warrants do not represent ownership of the securities, but only the right to buy the securities. The prices of
warrants do not necessarily move parallel to the prices of underlying securities. Warrants may be considered speculative in that
they have no voting rights, pay no dividends, and have no rights with respect to the assets of a corporation issuing them.
Warrant positions will not be used to increase the leverage of the Portfolio; consequently, warrant positions are generally
accompanied by cash positions equivalent to the required exercise amount.
Temporary Defensive Investments. Up to 100% of the assets of the Portfolio may be invested temporarily in U.S.
government obligations, commercial paper, bank obligations, repurchase agreements, negotiable U.S. dollar-denominated obligations
of domestic and foreign branches of U.S. depository institutions, U.S. branches of foreign depository institutions, and foreign
depository institutions, in cash, or in other cash equivalents, if the Sub-advisor determines it to be appropriate for purposes of
enhancing liquidity or preserving capital in light of prevailing market or economic conditions. U.S. government obligations
include Treasury bills, notes and bonds, and issues of United States agencies, authorities and instrumentalities. Some government
obligations, such as Government National Mortgage Association pass-through certificates, are supported by the full faith and
credit of the United States Treasury. Other obligations, such as securities of the Federal Home Loan Banks, are supported by the
right of the issuer to borrow from the United States Treasury; and others, such as bonds issued by Federal National Mortgage
Association (a private corporation), are supported only by the credit of the agency, authority or instrumentality. The Portfolio
also may invest in obligations issued by the International Bank for Reconstruction and Development (IBRD or "World Bank"). For
more information on mortgage-backed securities, see this Statement and the Company's Prospectus under "Certain Risk Factors and
Investment Methods."
Investment Policies Which May be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Founders Passport Portfolio. These limitations are not "fundamental" restrictions, and may be changed by the Trustees without
shareholder approval. The Portfolio will not:
1. Invest more than 15% of the market value of its net assets in securities which are not readily marketable,
including repurchase agreements maturing in over seven days;
2. Purchase securities of other investment companies except in compliance with the 1940 Act;
3. Invest in companies for the purpose of exercising control or management.
4. Purchase any securities on margin except to obtain such short-term credits as may be necessary for the clearance
of transactions (and provided that margin payments and other deposits in connection with transactions in options, futures and
forward contracts shall not be deemed to constitute purchasing securities on margin); or
5. Sell securities short.
In addition, in periods of uncertain market and economic conditions, as determined by the Sub-advisor, the Portfolio may
depart from its basic investment objective and assume a defensive position with up to 100% of its assets temporarily invested in
high quality corporate bonds or notes and government issues, or held in cash.
If a percentage restriction is adhered to at the time of investment, a later increase or decrease in percentage beyond
the specified limit that results from a change in values or net assets will not be considered a violation.
AST Scudder Japan Portfolio:
Investment Objective: The Portfolio's investment objective is long-term capital appreciation, which it seeks to achieve by
investing primarily in the equity securities (including American Depositary Receipts) of Japanese companies, as described below.
Investment Policies:
Under normal conditions, the Portfolio will invest at least 80% of its net assets in Japanese securities -- that is,
securities issued by entities that are organized under the laws of Japan ("Japanese companies"), securities of affiliates of
Japanese companies, wherever organized or traded, and securities of issuers not organized under the laws of Japan but deriving 50%
or more of their revenues from Japan. In so doing, the Portfolio's investments in Japanese securities will be primarily in common
stocks of Japanese companies. However, the Portfolio may also invest in other equity securities issued by Japanese entities, such
as warrants and convertible debentures, and in debt securities, such as those of the Japanese government and of Japanese
companies, when the Portfolio's Sub-advisor believes that the potential for capital appreciation from investment in debt
securities equals or exceeds that available from investment in equity securities.
The Portfolio may invest up to 20% of its total assets in cash or in short-term government or other short-term prime
obligations in order to have funds readily available for general corporate purposes, including the payment of operating expenses,
dividends and redemptions, or for the investment in securities through exercise of rights or otherwise, or in repurchase
agreements in order to earn income for periods as short as overnight. When the Sub-advisor determines that market or economic
conditions so warrant, the Portfolio may, for temporary defensive purposes, invest more than 20% of its total assets in cash and
cash equivalents. For instance, there may be periods when changes in market or other economic conditions, or in political
conditions, will make advisable a reduction in equity positions and increased commitments in cash or corporate debt securities,
whether or not Japanese, or in the obligations of the government of the United States or of Japan or of other governments.
The Portfolio purchases and holds securities that the Sub-advisor believes have the potential for long-term capital
appreciation; investment income is a secondary consideration in the selection of portfolio securities.
The Portfolio may invest up to 30% of its net assets in the equity securities of Japanese companies that are traded in an
over-the-counter market rather than listed on a securities exchange. These are generally securities of relatively small or
little-known companies that the Sub-advisor believes have above-average earnings growth potential. Securities that are traded
over-the-counter may not be traded in the volumes typical on a national securities exchange. Consequently, in order to sell this
type of holding, the Portfolio may need to discount the securities from recent prices or dispose of the securities over a long
period of time. The prices of this type of security may be more volatile than those of larger companies, which are often traded
on a national securities exchange.
Foreign Currencies. Although the Portfolio values its assets daily in terms of U.S. dollars, it does not intend to
convert its holdings of foreign currencies into U.S. dollars on a daily basis. It will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange dealers do not charge a fee for conversion, they
do realize a profit based on the difference (the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Portfolio at one rate, while offering a lesser rate of
exchange should the Portfolio desire to resell that currency to the dealer. The Portfolio will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis, or through entering into forward or futures contracts to purchase or
sell foreign currencies.
Depositary Receipts. The Portfolio may invest indirectly in securities of emerging country issuers through sponsored or
unsponsored American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), International Depositary Receipts ("IDRs")
and other types of Depositary Receipts (which, together with ADRs, GDRs and IDRs are hereinafter referred to as "Depositary
Receipts"). Depositary Receipts may not necessarily be denominated in the same currency as the underlying securities into which
they may be converted. ADRs are Depositary Receipts typically issued by a United States bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. GDRs, IDRs and other types of Depositary Receipts are
typically issued by foreign banks or trust companies, although they also may be issued by United States banks or trust companies,
and evidence ownership of underlying securities issued by either a foreign or a United States corporation. Generally, Depositary
Receipts in registered form are designed for use in the United States securities markets and Depositary Receipts in bearer form
are designed for use in securities markets outside the United States. For purposes of the Portfolio's investment policies, the
Portfolio's investments in ADRs, GDRs and other types of Depositary Receipts will be deemed to be investments in the underlying
securities. Depositary Receipts other than those denominated in U.S. dollars will be subject to foreign currency exchange rate
risk. Certain Depositary Receipts may not be listed on an exchange and therefore may be illiquid securities. For additional
information on Depositary Receipts, see the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Debt Securities. When the Sub-advisor believes that it is appropriate to do so in order to achieve the Portfolio's
objective of long-term capital growth, the Portfolio may invest up to 20% of its total assets in debt securities of both foreign
and domestic issuers. Portfolio debt investments will be selected for their capital appreciation potential on the basis of, among
other things, yield, credit quality, and the fundamental outlooks for currency and interest rate rends, taking into account the
ability to hedge a degree of currency or local bond price risk. The Portfolio may purchase bonds rated Aaa, Aa, A or Baa by
Moody's Investors Service, Inc. ("Moody's") or AAA, AA, A or BBB by Standard & Poor's Corporation ("S&P") or, if unrated, judged
to be of equivalent quality as determined by the Sub-Advisor. Should the rating of a portfolio security be downgraded, the
Sub-advisor will determine whether it is in the best interest of the Portfolio to retain or dispose of such security. Additional
information about debt securities and their risks is included in this Statement and the Trust's Prospectus under "Certain Risk
Factors and Investment Methods." See Appendix B to this Statement of Additional Information for a more complete description of
the ratings assigned by ratings organizations and their respective characteristics.
Convertible Securities. The Portfolio may invest in convertible securities. Investments in convertible securities can
provide income through interest and dividend payments and/or an opportunity for capital appreciation by virtue of their conversion
or exchange features.
The convertible securities in which the Portfolio may invest may be converted or exchanged at a stated or determinable
exchange ratio into underlying shares of common stock. The exchange ratio for any particular convertible security may be
adjusted from time to time due to stock splits, dividends, spin-offs, other corporate distributions, or scheduled changes in the
exchange ratio. Convertible debt securities and convertible preferred stocks, until converted, have general characteristics
similar to both debt and equity securities. Although to a lesser extent than with debt securities generally, the market value of
convertible securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline.
In addition, because of the conversion or exchange feature, the market value of convertible securities typically changes as the
market value of the underlying common stocks changes, and, therefore, also tends to follow movements in the general market for
equity securities. A unique feature of convertible securities is that as the market price of the underlying common stock
declines, convertible securities tend to trade increasingly on a yield basis and so may not experience market value declines to
the same extent as the underlying common stock. While no securities investments are without risk, investments in convertible
securities generally entail less risk than investments in common stock of the same issuer.
As fixed income securities, convertible securities are investments that provide for a stream of income (or in the case of
zero coupon securities, accretion of income) with generally higher yields than common stocks. Of course, like all fixed income
securities, there can be no assurance of income or principal payments because the issuers of the convertible securities may
default on their obligations. Convertible securities generally offer lower yields than non-convertible securities of similar
quality because of their conversion or exchange features.
Convertible securities may be issued as fixed income obligations that pay current income or as zero coupon notes and
bonds, including Liquid Yield Option Notes ("LYONs"). Additional information about convertible securities, including convertible
zero-coupon securities, in included in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment
Methods."
Investment Company Securities. The Portfolio may purchase securities of other investment companies to the extent
consistent with its investment objective and policies and subject to the limitations of the 1940 Act. The Portfolio will
indirectly bear its proportionate share of any management fees and other expenses paid by such other investment companies.
For example, the Portfolio may invest in a variety of investment companies which seek to track the composition and
performance of specific indices or a specific portion of an index. These index-based investments hold substantially all of their
assets in securities representing their specific index. Accordingly, the main risk of investing in index-based investments is the
same as investing in a portfolio of equity securities comprising the index. The market prices of index-based investments will
fluctuate in accordance with both changes in the market value of their underlying portfolio securities and due to supply and
demand for the instruments on the exchanges on which they are traded (which may result in their trading at a discount or premium
to their net asset values). Index-based investments may not replicate exactly the performance of their specified index because of
transaction costs and because of the temporary unavailability of certain component securities of the index.
Examples of index-based investments include:
SPDRs(R): SPDRs, an acronym for "Standard & Poor's Depositary Receipts," are based on the S&P 500 Composite Stock Price
Index. They are issued by the SPDR Trust, a unit investment trust that holds shares of substantially all the companies in the S&P
500 in substantially the same weighting and seeks to closely track the price performance and dividend yield of the Index.
MidCap SPDRs(R): MidCap SPDRs are based on the S&P MidCap 400 Index. They are issued by the MidCap SPDR Trust, a unit
investment trust that holds a portfolio of securities consisting of substantially all of the common stocks in the S&P MidCap 400
Index in substantially the same weighting and seeks to closely track the price performance and dividend yield of the Index.
Select Sector SPDRs(R): Select Sector SPDRs are based on a particular sector or group of industries that are represented
by a specified Select Sector Index within the Standard & Poor's Composite Stock Price Index. They are issued by The Select Sector
SPDR Trust, an open-end management investment company with nine portfolios that each seeks to closely track the price performance
and dividend yield of a particular Select Sector Index.
DIAMONDS(SM): DIAMONDS are based on the Dow Jones Industrial Average(SM). They are issued by the DIAMONDS Trust, a unit
investment trust that holds a portfolio of all the component common stocks of the Dow Jones Industrial Average and seeks to
closely track the price performance and dividend yield of the Dow.
Nasdaq-100 Shares: Nasdaq-100 Shares are based on the Nasdaq 100 Index. They are issued by the Nasdaq-100 Trust, a unit
investment trust that holds a portfolio consisting of substantially all of the securities, in substantially the same weighting, as
the component stocks of the Nasdaq-100 Index and seeks to closely track the price performance and dividend yield of the Index.
WEBs(SM): WEBs, an acronym for "World Equity Benchmark Shares," are based on 17 country-specific Morgan Stanley Capital
International Indexes. They are issued by the WEBs Index Fund, Inc., an open-end management investment company that seeks to
generally correspond to the price and yield performance of a specific Morgan Stanley Capital International Index.
Strategic Transactions and Derivatives. The Portfolio may, but is not required to, utilize various other investment
strategies as described below for a variety of purposes, such as hedging various market risks, managing the effective maturity or
duration of the fixed-income securities in the Portfolio's portfolio, or enhancing potential gain. These strategies may be
executed through the use of derivative contracts. Such strategies are generally accepted as a part of modern portfolio management
and are regularly utilized by many mutual funds and other institutional investors.
In the course of pursuing these investment strategies, the Portfolio may purchase and sell exchange-listed and
over-the-counter put and call options on securities, equity and fixed-income indices and other instruments, purchase and sell
futures contracts and options thereon, enter into various transactions such as swaps, caps, floors, collars, currency forward
contracts, currency futures contracts, currency swaps, or options on currencies or currency futures and various other currency
transactions (collectively, all the above are called "Strategic Transactions"). In addition, Strategic Transactions may also
include new techniques, investments or strategies that are permitted as regulatory changes occur. Strategic Transactions may be
used without limit to attempt to protect against possible changes in the market value of securities held in or to be purchased
for the Portfolio resulting from securities markets or currency exchange rate fluctuations, to protect the Portfolio's unrealized
gains in the value of its portfolio securities, to facilitate the sale of such securities for investment purposes, to manage the
effective maturity or duration of the fixed-income securities in the Portfolio, or to establish a position in the derivatives
markets as a substitute for purchasing or selling particular securities. Some Strategic Transactions may also be used to enhance
potential gain, although no more than 5% of the Portfolio's assets will be committed to Strategic Transactions entered into to
enhance gain rather than for the purposes set forth in the preceding sentence. Any or all of these investment techniques may be
used at any time and in any combination, and there is no particular strategy that dictates the use of one technique rather than
another, as use of any Strategic Transaction is a function of numerous variables including market conditions. The ability of the
Portfolio to utilize these Strategic Transactions successfully will depend on the Sub-advisor's ability to predict pertinent
market movements, which cannot be assured. Strategic Transactions will not be used to alter the fundamental investment purposes
and characteristics of the Portfolio and the Portfolio will segregate assets (or as provided by applicable regulations, enter into
certain offsetting positions) to cover its obligations under options, futures and swaps to limit leveraging of the Portfolio.
Strategic Transactions, including derivative contracts, have risks associated with them, including possible default by
the other party to the transaction, illiquidity and, to the extent the Sub-advisor's view as to certain market movements is
incorrect, the risk that the use of such Strategic Transactions could result in losses greater than if they had not been used.
For instance, the use of currency transactions can result in the Portfolio incurring losses as a result of a number of factors
including the imposition of exchange controls, suspension of settlements, or the inability to deliver or receive a specified
currency. The daily variation margin requirements for futures contracts would create a greater ongoing potential financial risk
than would purchases of options, where the exposure is limited to the cost of the initial premium. Losses resulting from the use
of Strategic Transactions would reduce net asset value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.
General Characteristics of Options. Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying instrument on which they are purchased or sold. Thus, the
following general discussion relates to each of the particular types of options discussed in greater detail below. In addition,
many Strategic Transactions involving options require segregation of Portfolio assets in special accounts, as described below
under "Use of Segregated and Other Special Accounts."
The Portfolio is authorized to purchase and sell exchange listed options and over-the-counter options ("OTC options").
Exchange listed options are issued by a regulated intermediary such as the Options Clearing Corporation ("OCC"), which guarantees
the performance of the obligations of the parties to such options. The discussion below uses the OCC as an example, but is also
applicable to other financial intermediaries.
With certain exceptions, OCC issued and exchange listed options generally settle by physical delivery of the underlying
security or currency, although in the future cash settlement may become available. Index options and Eurodollar instruments are
cash settled for the net amount, if any, by which the option is "in-the-money" (i.e., where the value of the underlying
instrument exceeds, in the case of a call option, or is less than, in the case of a put option, the exercise price of the option)
at the time the option is exercised. Frequently, rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into offsetting purchase or sale transactions that do not
result in ownership of the new option.
The Portfolio's ability to close out its position as a purchaser or seller of an OCC or exchange listed put or call
option is dependent, in part, upon the liquidity of the option market. If one or more exchanges decide to discontinue the trading
of options (or a particular class or series of options), the relevant market for that option on that exchange would cease to
exist, although outstanding options on that exchange would generally continue to be exercisable in accordance with their terms.
OTC options are purchased from or sold to securities dealers, financial institutions or other parties ("Counterparties")
through direct bilateral agreement with the Counterparty. In contrast to exchange listed options, which generally have
standardized terms and performance mechanics, all the terms of an OTC option, including such terms as method of settlement, term,
exercise price, premium, guarantees and security, are set by negotiation of the parties. The Portfolio will only sell OTC options
(other than OTC currency options) that are subject to a buy-back provision permitting the Portfolio to require the Counterparty to
sell the option back to the Portfolio at a formula-based price within seven days. The Portfolio expects generally to enter into
OTC options that have cash settlement provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or guaranty function in an OTC option. As a result, if
the Counterparty fails to make or take delivery of the security, currency or other instrument underlying an OTC option it has
entered into with the Portfolio or fails to make a cash settlement payment due in accordance with the terms of that option, the
Portfolio will lose any premium it paid for the option as well as any anticipated benefit of the transaction. Accordingly, the
Sub-advisor must assess the creditworthiness of each such Counterparty or any guarantor or credit enhancement of the
Counterparty's credit to determine the likelihood that the terms of the OTC option will be satisfied. The Portfolio will engage
in OTC option transactions only with U.S. Government securities dealers recognized by the Federal Reserve Bank of New York as
"primary dealers" or broker/dealers, domestic or foreign banks or other financial institutions that have received (or the
guarantors of the obligation of which have received) a short-term credit rating of A-1 from S&P or P-1 from Moody's or an
equivalent rating from any nationally recognized statistical rating organization ("NRSRO") or, in the case of OTC currency
transactions, determined to be of equivalent credit quality by the Sub-advisor.
The Portfolio may purchase and sell call options on securities including U.S. Treasury and agency securities,
mortgage-backed securities, corporate debt securities, equity securities (including convertible securities) and Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the over-the-counter markets, and on securities
indices, currencies and futures contracts. All calls sold by the Portfolio must be "covered" (i.e., the Portfolio must own the
securities or futures contract subject to the call) or must meet the asset segregation requirements described below as long as the
call is outstanding.
The Portfolio may purchase and sell put options on securities including U.S. Treasury and agency securities,
mortgage-backed securities, foreign sovereign debt, corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments (whether or not it holds the above securities in its portfolio), and on securities indices,
currencies and futures contracts other than futures on individual corporate debt and individual equity securities. The Portfolio
will not sell put options if, as a result, more than 50% of the Portfolio's assets would be required to be segregated to cover its
potential obligations under such put options other than those with respect to futures and options thereon.
Additional information about options and their risks is included in this Statement and the Trust's Prospectus under
"Certain Risk Factors and Investment Methods."
General Characteristics of Futures. The Portfolio may enter into futures contracts or purchase or sell put and
call options on such futures as a hedge against anticipated interest rate, currency or equity market changes (including to protect
against increases in those markets by creating current exposure to the markets), and for duration management, risk management
purposes and return enhancements. Futures are generally bought and sold on the commodities exchanges where they are listed.
The Portfolio's use of futures and options thereon will be solely for bona fide hedging, risk management (including
duration management) or other portfolio management and return enhancement purposes. Initial margin in connection with maintaining
a futures contract or selling an option thereon typically ranges from 1% to 10% of the face amount of the contract (but may be
higher in some circumstances). If the Portfolio exercises an option on a futures contract it will be obligated to post initial
margin (and potential subsequent variation margin) for the resulting futures position just as it would for any position.
The Portfolio will not enter into a futures contract or related option (except for closing transactions) if, immediately
thereafter, the sum of the amount of its initial margin and premiums on open futures contracts and options thereon would exceed 5%
of the Portfolio's total assets (taken at current value); however, in the case of an option that is in-the-money at the time of
the purchase, the in-the-money amount may be excluded in calculating the 5% limitation. The segregation requirements with respect
to futures contracts and options thereon are described below.
Additional information about futures contracts, options thereon and their risks is included in this Statement and the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Options on Securities Indices and Other Financial Indices. The Portfolio also may purchase and sell call and put
options on securities indices and other financial indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other instruments. Additional information about options on
indices and their risks is included in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment
Methods."
Currency Transactions. The Portfolio may engage in currency transactions with Counterparties, primarily in order
to hedge, or manage the risk of, the value of portfolio holdings denominated in particular currencies against fluctuations in
relative value. Currency transactions include forward currency contracts, exchange listed currency futures, exchange listed and
OTC options on currencies, and currency swaps. A currency swap is an agreement to exchange cash flows based on the notional
difference among two or more currencies and operates in a manner similar to an interest rate swap, which is described below. The
Portfolio may enter into currency transactions with Counterparties that have received (or the guarantors of the obligations have
received) a credit rating of A-1 or P-1 by S&P or Moody's, respectively, or that have an equivalent rating from a NRSRO or are
determined to be of equivalent credit quality by the Sub-advisor.
The Portfolio's dealings in forward currency contracts and other currency transactions such as futures, options, options
on futures and swaps generally will be limited to hedging involving either specific transactions or portfolio positions.
Transaction hedging is entering into a currency transaction with respect to specific assets or liabilities of the Portfolio, which
will generally arise in connection with the purchase or sale of its portfolio securities or the receipt of income therefrom.
Position hedging is entering into a currency transaction with respect to portfolio security positions denominated or generally
quoted in that currency.
The Portfolio generally will not enter into a transaction to hedge currency exposure to an extent greater, after netting
all transactions intended wholly or partially to offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are denominated or generally quoted in or currently
convertible into such currency, other than with respect to proxy hedging as described below.
The Portfolio may also cross-hedge currencies by entering into transactions to purchase or sell one or more currencies
that are expected to decline in value relative to other currencies to which the Portfolio has, or in which the Portfolio expects
to have, portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or anticipated holdings of portfolio securities,
the Portfolio may also engage in "proxy hedging." Proxy hedging is often used when the currency to which the Portfolio is exposed
is difficult to hedge generally or against the dollar. Proxy hedging entails entering into a commitment or option to sell a
currency whose changes in value are generally considered to be correlated to a currency or currencies in which some or all of the
Portfolio's portfolio securities are or are expected to be denominated, in exchange for U.S. dollars. For example, if the
Sub-advisor considers that the Austrian schilling is correlated to the German deutschemark (the "D-mark"), the Portfolio holds
securities denominated in schillings, and the Sub-advisor believes that the value of schillings will decline against the U.S.
dollar, the Sub-advisor may enter into a contract to sell D-marks and buy dollars. Currency transactions can result in losses to
the Portfolio if the currency being hedged fluctuates in value to a degree or in a direction that is not anticipated. Further,
there is the risk that the perceived linkage between various currencies may not be present or may not be present during the
particular time that the Portfolio is engaging in proxy hedging. If the Portfolio enters into a currency hedging transaction, the
Portfolio will comply with the asset segregation requirements described below.
Additional information about forward foreign currency exchange contracts and their risks is included in this Statement
and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Risks of Currency Transactions. Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can be negatively affected by government exchange
controls, blockages, and manipulations or exchange restrictions imposed by governments. These can result in losses to the
Portfolio if it is unable to deliver or receive currency or funds in settlement of obligations and could also cause hedges it has
entered into to be rendered useless, resulting in full currency exposure as well as incurring transaction costs. Buyers and
sellers of currency futures are subject to the same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a bank based in the issuing nation. Trading options
on currency futures is relatively new, and the ability to establish and close out positions on such options is subject to the
maintenance of a liquid market, which may not always be available. Currency exchange rates may fluctuate based on factors
extrinsic to that country's economy.
Combined Transactions. The Portfolio may enter into multiple transactions, including multiple options
transactions, multiple futures transactions, multiple currency transactions (including forward currency contracts) and multiple
interest rate transactions and any combination of futures, options, currency and interest rate transactions ("component"
transactions), instead of a single Strategic Transaction, as part of a single or combined strategy. A combined transaction will
usually contain elements of risk that are present in each of its component transactions. Although combined transactions are
normally entered into based on the Sub-advisor's judgment that the combined strategies will reduce risk or otherwise more
effectively achieve the desired portfolio management goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions that the Portfolio may enter into are interest
rate, currency, index and other swaps and the purchase or sale of related caps, floors and collars. The Portfolio expects to
enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its portfolio, to
protect against currency fluctuations, as a duration management technique or to protect against an increase in the price of
securities the Portfolio anticipates purchasing at a later date. The Portfolio will not sell interest rate caps or floors where
it does not own securities or other instruments providing the income stream the Portfolio may be obligated to pay. Interest rate
swaps involve the exchange by the Portfolio with another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. A currency swap is
an agreement to exchange cash flows on a notional amount of two or more currencies based on the relative value differential among
them and an index swap is an agreement to swap cash flows on a notional amount based on changes in the values of the reference
indices. The purchase of a cap entitles the purchaser to receive payments on a notional principal amount from the party selling
such cap to the extent that a specified index exceeds a predetermined interest rate or amount. The purchase of a floor entitles
the purchaser to receive payments on a notional principal amount from the party selling such floor to the extent that a specified
index falls below a predetermined interest rate or amount. A collar is a combination of a cap and a floor that preserves a
certain return within a predetermined range of interest rates or values.
The Portfolio will usually enter into swaps on a net basis, i.e., the two payment streams are netted out in a cash
settlement on the payment date or dates specified in the instrument, with the Portfolio receiving or paying, as the case may be,
only the net amount of the two payments. Inasmuch as the Portfolio will segregate assets (or enter into offsetting positions) to
cover its obligations under swaps, the Sub-advisor and the Trust believe such obligations do not constitute senior securities
under the 1940 Act and, accordingly, will not treat them as being subject to the Portfolio's borrowing restrictions. The
Portfolio will not enter into any swap, cap, floor or collar transaction unless, at the time of entering into such transaction,
the unsecured long-term debt of the Counterparty, combined with any credit enhancements, is rated at least A by S&P or Moody's or
has an equivalent rating from another NRSRO. If there is a default by the Counterparty, the Portfolio may have contractual
remedies pursuant to the agreements related to the transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become relatively liquid. Caps, floors and collars are more recent innovations
for which standardized documentation has not yet been fully developed and, accordingly, they are less liquid than swaps.
Eurodollar Instruments. The Portfolio may make investments in Eurodollar instruments. Eurodollar instruments
are U.S. dollar-denominated futures contracts or options thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to time. Eurodollar futures contracts enable purchasers
to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. The Portfolio might use
Eurodollar futures contracts and options thereon to hedge against changes in LIBOR, to which many interest rate swaps and fixed
income instruments are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the U.S., Strategic Transactions may not
be regulated as rigorously as in the U.S., may not involve a clearing mechanism and related guarantees, and are subject to the
risk of governmental actions affecting trading in, or the prices of, foreign securities, currencies and other instruments. The
value of such positions also could be adversely affected by: (i) other complex foreign political, legal and economic factors,
(ii) lesser availability than in the U.S. of data on which to make trading decisions, (iii) delays in the Portfolio's ability to
act upon economic events occurring in foreign markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the U.S., and (v) lower trading volume and liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in addition to other requirements,
require that the Portfolio segregate any liquid assets to the extent Portfolio obligations are not otherwise "covered" through
ownership of the underlying security, financial instrument or currency. In general, either the full amount of any obligation by
the Portfolio to pay or deliver securities or assets must be covered at all times by the securities, instruments or currency
required to be delivered, or, subject to any regulatory restrictions, an amount of cash or other liquid assets at least equal to
the current amount of the obligation. The segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. For example, a call option written by the Portfolio
will require the Portfolio to hold the securities subject to the call (or securities convertible into the needed securities
without additional consideration) or to segregate any liquid assets sufficient to purchase and deliver the securities if the call
is exercised. A call option sold by the Portfolio on an index will require the Portfolio to own securities that correlate with
the index or to segregate any liquid assets equal to the excess of the index value over the exercise price on a current basis. A
put option written by the Portfolio requires the Portfolio to segregate any liquid assets equal to the exercise price.
A currency contract that obligates the Portfolio to buy or sell currency will generally require the Portfolio to hold an
amount of that currency or liquid securities denominated in that currency equal to the Portfolio's obligation or to segregate
liquid assets equal to the amount of the Portfolio's obligation.
OTC options entered into by the Portfolio, including those on securities, currency, financial instruments or indices, and
OCC issued and exchange listed index options will generally provide for cash settlement. As a result, when the Portfolio sells
these instruments it will only segregate an amount of assets equal to its accrued net obligations, as there is no requirement for
payment or delivery of amounts in excess of the net amount. These amounts will equal 100% of the exercise price in the case of a
non cash-settled put, the same as an OCC guaranteed listed option sold by the Portfolio, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition, when the Portfolio sells a call option on an
index at a time when the in-the-money amount exceeds the exercise price, the Portfolio will segregate, until the option expires or
is closed out, cash or cash equivalents equal in value to such excess. OCC issued and exchange listed options sold by the
Portfolio other than those above generally settle with physical delivery, and the Portfolio will segregate an amount of assets
equal to the full value of the option. OTC options settling with physical delivery or with an election of either physical
delivery or cash settlement will be treated the same as other options settling with physical delivery.
In the case of a futures contract or an option thereon, the Portfolio must deposit initial margin and possible daily
variation margin in addition to segregating assets sufficient to meet its obligation to purchase or provide securities or
currencies, or to pay the amount owed at the expiration of an index-based futures contract. Such assets may consist of cash, cash
equivalents, liquid debt or equity securities or other acceptable assets.
With respect to swaps, the Portfolio will accrue the net amount of the excess, if any, of its obligations over its
entitlements with respect to each swap on a daily basis and will segregate an amount of cash or other liquid assets having a value
equal to the accrued excess. Caps, floors and collars require segregation of assets with a value equal to the Portfolio's net
obligation, if any.
Strategic Transactions may be covered by other means when consistent with applicable regulatory policies. The Portfolio
may also enter into offsetting transactions so that its combined position, coupled with any segregated assets, equals its net
outstanding obligation in related options and Strategic Transactions. For example, the Portfolio could purchase a put option if
the strike price of that option is the same or higher than the strike price of a put option sold by the Portfolio. Moreover,
instead of segregating assets if the Portfolio held a futures or forward contract, it could purchase a put option on the same
futures or forward contract with a strike price as high or higher than the price of the contract held. Other Strategic
Transactions may also be offset in combinations. If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time, assets equal to any remaining obligation would
need to be segregated.
The Portfolio's activities involving Strategic Transactions may be limited by the requirements of Subchapter M of the
Internal Revenue Code of 1986 for qualification as a regulated investment company (see this Statement under "Tax Matters").
Japan and the Japanese Economy*
* WHERE FIGURES IN TABLES UNDER THIS CAPTION HAVE BEEN ROUNDED OFF, THE TOTALS MAY NOT NECESSARILY AGREE WITH THE SUM OF THE
FIGURES.
Because of distance, as well as differences in language, history, and culture, Japan remains relatively unfamiliar to
many investors. The archipelago of Japan stretches for 1300 miles in the western Pacific Ocean and comprises an area of
approximately 146,000 square miles. The four main islands, Hokkaido, Honshu, Kyushu and Shikoku, cover the same approximate range
of latitude and the same general range of climate as the east coast of the United States north of Florida. The archipelago has in
the past experienced earthquakes and tidal waves of varying degrees of severity, and the risks of such phenomena, and damage
resulting therefrom, continue to exist.
Japan has a total population of approximately 126 million. Life expectancy is one of the highest in the world. Literacy
in Japan approaches 100%. Nearly 90% of Japanese students graduate from high school. Approximately 37% go on to college or
university. Approximately 45% of the total population of Japan is concentrated in the metropolitan areas of Tokyo, Osaka and
Nagoya, cities with some of the world's highest population densities.
Over the post war period Japan has experienced significant economic development. Today Japan is the second largest
industrial nation in the world in terms of GDP, with the United States being the largest. During the era of high economic growth
in the 1960s and early 1970s the expansion was based on the development of heavy industries such as steel and shipbuilding. In the
1970s, Japan moved into assembly industries that employ high levels of technology and consume relatively low quantities of
resources, and since then has become a major producer of automobiles and electrical and electronic products. In the 1980s, as
Japan experienced a sharp appreciation of its currency, Japanese manufacturers increasingly moved their production offshore, while
domestic demand was driven by a boom in consumption, housing, construction, and private capital expenditures. After the sharp
collapse in the stock market, which began in 1990s, the Japanese economy has been in an adjustment phase, dealing with excess
capacity and lower growth.
Another development in the Japanese economy in the 1990s was a growing trend of deregulation and globalization. Import
restrictions on many products, ranging from meats to gasoline were gradually lifted, and deregulation proceeded in industries
ranging from retail, communication, transportation, finance, and many others.
In the 1990s, asset price declines and excess capacity in many sectors have continued to support a largely
disinflationary environment.
Japan's economy is a market economy in which industry and commerce are predominantly privately owned and operated.
However, the Government is involved in establishing and meeting objectives for developing the economy and improving the standard
of living of the Japanese people. In order to achieve its economic objectives, the Government has generally relied on providing
the prerequisite business environment and administrative guidance. The agencies of the Government primarily concerned with
economic policy and its implementation are the Economic Planning Agency, The Ministry of Finance (MOF) and the Ministry of
International Trade and Industry (MITI). The Bank of Japan, Japan's central bank, also acts in this field.
Economic Trends. During the ten and five-year periods ended December 31, 1999, Japan's real gross domestic product in
constant prices increased at an average annual compound growth rate of 2.13% and 1.29%, respectively. In 1996, the gross domestic
product grew at a high rate of 5.0% due to the front-loading of housing investment before the consumption tax hike scheduled on
April 1, 1997. In 1997, the growth rate of gross domestic product slowed to 1.6% mainly due to a drop off in consumer spending and
housing investment in reaction to the consumption tax hike. In 1998, the gross domestic product decreased by 2.5% affected by
reduced fixed investment in the private sector and continuous stagnation of consumer spending. In 1999, real GDP grew 0.3%
reflecting a slight improvement in consumer spending, the largest component.
Industrial Production. The following table sets forth indices of industrial production of Japan and other selected
industrial countries for the five years ending with calendar year 1999 (with 1995 as 100):
INDICES OF INDUSTRIAL PRODUCTION
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
--------------------- 1995 1996 1997 1998 1999
(1995=100)
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Japan 100.00 102.90 107.30 99.70 99.33
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
United States 100.00 104.50 110.70 114.80 117.57
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Germany 100.00 99.80 102.70 106.20 106.37
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
United Kingdom 100.00 101.10 101.90 102.50 102.80
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
France 100.00 100.30 104.10 108.80 N/A
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Italy 100.00 98.30 100.50 102.20 N/A
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Canada 100.00 100.10 104.00 109.10 113.67
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Source: IMF, International Financial Statistics
The following table sets forth the proportion of gross domestic product contributed by major industrial sectors of the
economy for 1995 to 1999:
GROSS DOMESTIC PRODUCT* BY INDUSTRIAL SECTORS
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
1995 1996 1997 1998 1999
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Manufacturing 95.7% 95.2% 95.2% 94.8% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Agriculture, Forestry and Fisheries 2.1% 2.0% 1.9% 1.9% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Mining 0.2% 0.2% 0.2% 0.2% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Construction 9.7% 9.4% 8.7% 8.2% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Manufacturing 27.4% 27.7% 28.4% 27.1% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Electricity, Gas and Water 2.7% 2.9% 2.8% 3.0% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Wholesale and Retail Trade 13.6% 12.9% 13.0% 12.8% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Finance and Insurance 5.4% 4.9% 5.2% 5.2% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Real Estate 11.8% 11.9% 12.0% 12.5% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Transportation & Communication 6.5% 6.6% 6.6% 6.6% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Services 16.4% 16.8% 16.5% 17.1% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Government Services 7.5% 7.3% 7.3% 7.5% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Private Non-Profit Institutions 2.2% 2.2% 2.2% 2.4% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Import Duty 0.9% 0.8% 0.8% 0.7% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
(Deduction) Others 0.4% 0.5% 0.5% 0.5% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
(Deduction) Imputed Interest 5.1% 4.5% 4.8% 4.8% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Statistical Discrepancy -0.7% -0.4% -0.2% -0.2% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Total GDP 100.0% 100.0% 100.0% 100.0% N/A
------------------------------------------------------------ ------------ ------------ ------------ ------------- ------------
Source: Economic Planning Agency, Annual Report on National Accounts
* Gross domestic product measures the value of original goods and services produced by a country's domestic economy. It is equal
to gross national product, minus the income that residents receive from abroad for factor services rendered abroad, plus similar
payments made to non-residents who contribute to the domestic economy.
Energy. Japan has historically depended on oil for most of its energy requirements. Virtually all of its oil is
imported, the majority from the Middle East. Oil price changes used to have a major impact on the domestic economy, but now their
influence is relatively diminished.
Japan has worked to reduce its dependence on oil by encouraging energy conservation and the use of alternative fuels. In
addition to conservation efforts, industrial restructuring, with emphasis on shifting from basic industries to processing and
assembly type industries, has also contributed to the reduction of oil consumption. Despite Japan's sustained economic growth,
crude oil imports have not increased materially since 1979.
Labor. In 1999, approximately 67.8 million persons, or approximately 63% of the Japanese population, were employed, of
which approximately 4.2% were employed in agriculture, forestry and fisheries, 32.7% in construction and manufacturing and 6.8% in
transportation and communications, 24.8% in wholesale and retail trade, 4.1% in finance, and 27.4% in other service-related
industries (including the government). Since 1980 an increasing proportion of the paid work force is female and an increasing
number of people have been employed in service industries.
Source: Ministry of Labor, Monthly Labor.
Prices. In 1999, the wholesale price index declined by 3.3% and the consumer price index also declined by 0.3%. The
tables below set forth the wholesale and consumer price indices for Japan and other selected industrial countries for which
comparable statistics are available:
COMPARATIVE WHOLESALE PRICE INDICES
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
(1995=100) 1995 1996 1997 1998 1999
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Japan 100.00 100.10 101.60 100.00 96.68
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
United States 100.00 102.30 102.30 99.70 100.58
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Germany 100.00 99.60 100.70 100.30 99.03
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
United Kingdom 100.00 102.60 103.60 104.20 105.13
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Italy 100.00 101.90 103.20 103.30 102.43
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Canada 100.00 100.40 101.30 101.30 102.23
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Source: IMF, International Financial Statistics
COMPARATIVE CONSUMER PRICE INDICES
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
(1995=100) 1995 1996 1997 1998 1999
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Japan 100.00 100.10 101.80 102.50 102.20
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
United States 100.00 102.90 105.30 107.00 109.30
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Germany 100.00 101.50 103.30 104.30 104.83
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
United Kingdom 100.00 102.40 105.70 109.30 110.63
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
France 100.00 102.00 103.20 103.90 104.48
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Italy 100.00 104.00 106.10 108.20 109.98
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Canada 100.00 100.10 104.00 109.10 113.67
---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Source: IMF, International Financial Statistics
Balance of Payments. In 1999, Japan registered a surplus of Y12,197 billion ($110.1 billion) in its current account.
This surplus was predominantly due to a surplus of Y14,054 billion ($127.7 billion) in its trade account. Japan also registered
an outflow of Y5,614.8 billion ($51.5 billion) in its capital and financial account.
Foreign Trade. Overseas trade is important to Japan's economy even though offshore production has eroded its
importance. Japan has few natural resources and must export to pay for its imports of these basic requirements. During the year
ended December 31, 1999, exports and imports represented approximately 10.4% and 8.7%, respectively, of Japan's nominal gross
domestic product. Roughly three quarters of Japan's exports are machinery and equipment including motor vehicles, machine tools
and electronic equipment. Japan's principal imports consist of raw materials, foodstuff and fuels, such as oil and coal.
Japan's principal export markets are the United States, Canada, the United Kingdom, Germany, Australia, Korea, Taiwan and
the People's Republic of China. The principal sources of its imports are the United States, South East Asia, the People's
Republic of China and the Middle East.
A country's terms of trade (the ratio of export to import prices) is an indicator of the country's comparative advantage
in trade. During 1994-95, the Japanese terms of trade improved as a result of the higher yen and generally declining world
commodity prices. The terms of trade fell slightly in 1996 and 1997 as a result of the rise in import prices reflecting the lower
yen rate. In 1998, the terms of trade improved slightly mainly because of lower import prices. In 1999, the terms of trade
improved to the 1995 level largely because of lower import prices as a result of the higher yen rate.
Source: Ministry of Finance, The Summary Report on Trade of Japan
Securities Markets in Japan
There are eight stock exchanges in Japan. Of these, the Tokyo Stock Exchange, the Osaka Stock Exchange and the Nagoya
Stock Exchange are the largest. The three main markets have two sections of stocks; generally, companies with smaller
capitalization are listed on the second section. In addition, The Japan Over-The-Counter Trading Co. acts as the intermediary
between securities companies wishing to trade shares on the over-the-counter (OTC) market. The primary role of the OTC market is
to facilitate the raising of funds from the investing public by unlisted, small and medium-sized companies. Equity securities of
Japanese companies that are traded in an over-the-counter market are generally securities of relatively small or little-known
companies. A new market, named "Mothers", was established in the Tokyo Stock Exchange on November 11, 1999. This market is
designed to facilitate the public listing of venture business-type small corporations. As of the end of March 2000, six companies
are listed on this market.
There are two widely followed price indices. The Nikkei Stock Average (NSA) is an arithmetic average of 225 selected
stocks computed by a private corporation. In addition, the Tokyo Stock Exchange publishes the TOPIX, formerly the TSE Index,
which is an index of all first section stocks. The second section has its own index. Nihon Keizai Shimbun, Inc., the publisher
of a leading Japanese economic newspaper, publishes the OTC Index.
In the five years ending December 1989, the Tokyo Stock Price Index (TOPIX) more than tripled, rising from 913.37 to
2884.80 on December 18, 1989. The TOPIX then declined heavily in 1990 and in 1992, and after showing a slight rebound in 1993 and
1994, the Index continued to decline throughout 1996, 1997 and 1998 to the latest low of 980.11 on October 15, 1998. From the
1989 peak to the 1998 bottom, the TOPIX registered a 66% drop. In 1999, the Tokyo stock market showed a strong upturn led by the
information service sector. The OTC index more than tripled in 1999.
Compared to the United States, the common stocks of many Japanese companies trade at a higher price-earnings ratio.
Historically, investments in the OTC market have been more volatile than the TSE.
In the past, the proportion of trading value by institutional investors has tended to increase at the expense of
individuals, but in the last three years of stock price declines, the share of trading value represented by financial institutions
and business corporations has fallen while the value of trading by foreigners has risen substantially. In 1999, the trading value
by individuals increased dramatically reflecting the stock market rally and brisk demand for stock investment trusts.
The following tables, compiled by Morgan Stanley Capital International, set forth the size of the Japanese equity market
in comparison with that of other major equity markets for the five years ending December 31, 1999.
EQUITY STOCK MARKETS OF THE WORLD
----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
(dollars in billion} December 1995 December 1996 December 1997 December 1998 December 1999
----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
$ % $ % $ % $ % $ %
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
United States $6,338.0 41.9% $7,835.9 45.1% 8,607.4 47.2% 11,721.5 50.7% $15,370.0 48.6%
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
Japan 3,582.7 23.7 3,071.0 17.7 2,287.8 12.5 2,447.5 10.6 4,692.8 14.9
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
United Kingdom 1,354.3 9.0 1,740.1 10.0 2,097.6 11.5 2,346.2 10.1 2,894.5 9.2
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
Germany 579.5 3.8 648.3 3.7 825.2 4.5 1,181.1 5.1 1.447.1 4.6
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
France 504.5 3.3 600.8 3.5 677.9 3.7 982.6 4.2 1,442.1 4.6
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
Canada 333.4 2.2 463.6 2.7 543.3 3.0 513.2 2.2 762.8 2.4
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
Netherlands 304.3 2.0 393.4 2.3 358.3 2.0 578.4 2.5 758.9 2.4
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
Switzerland 401.6 2.7 406.6 2.3 579.3 3.2 696.7 3.0 676.3 2.1
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
Hong Kong 274.4 1.8 393.4 2.3 340.7 1.9 347.9 1.5 583.4 1.8
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
Australia 245.4 1.6 306.4 1.8 284.7 1.6 326.5 1.4 27.5 0.1
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
Other 1,197.2 7.9 1,531.9 8.8 1,630.1 8.9 1,994.6 8.6 2,938.5 9.3
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
Total 15,115.3 100.00 17,391.4 100.0 18,232.3 100.00 23,136.2 100.00 31,593.9 100.00
----------------------- ----------- --------- ---------- --------- ----------- --------- ----------- --------- ----------- ---------
Source: Morgan Stanley Capital International, Quarterly Report
Investment Policies Which May Be Changed Without Shareholder Approval. The following restrictions are applicable to the
AST Scudder Japan Portfolio. These limitations are not "fundamental" restrictions and may be changed by the Trustees without
shareholder approval. The Portfolio will not:
1. enter into either of reverse repurchase agreements or dollar rolls in an amount greater than 5% of its total
assets;
2. purchase securities on margin or make short sales, except (i) short sales against the box, (ii) in connection
with arbitrage transactions, (iii) for margin deposits in connection with futures contracts, options or other permitted
investments, (iv) that transactions in futures contracts and options shall not be deemed to constitute selling securities short,
and (v) that the Portfolio may obtain such short-term credits as may be necessary for the clearance of securities transactions;
3. purchase options, unless the aggregate premiums paid on all such options held by the Portfolio at any time do not
exceed 20% of its total assets; or sell put options, if as a result, the aggregate value of the obligations underlying such put
options would exceed 50% of its total assets;
4. enter into futures contracts or purchase options thereon unless immediately after the purchase, the value of the
aggregate initial margin with respect to such futures contracts entered into on behalf of the Portfolio and the premiums paid for
such options on futures contracts does not exceed 5% of the fair market value of the Portfolio's total assets; provided that in
the case of an option that is in-the-money at the time of purchase, the in-the-money amount may be excluded in computing the 5%
limit; or
5. make investments for the purpose of exercising control over management or that would involve promotion or
business management or that would subject the Portfolio to unlimited liability.
If a percentage restriction is adhered to at the time of investment, a later increase or decrease in percentage beyond the
specified limit resulting from a change in values or net assets will not be considered a violation.
AST AIM International Equity Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Investment Policies:
In managing the Portfolio, the Sub-advisor seeks to apply to the Portfolio the same investment strategy that it applies
to several of its other managed portfolios that have similar investment objectives but that invest primarily in United States
equities markets. The Portfolio will utilize to the extent practicable a fully managed investment policy providing for the
selection of securities which meet certain quantitative standards determined by the Sub-advisor. The Sub-advisor reviews
carefully the earnings history and prospects for growth of each company considered for investment by the Portfolio. It is
anticipated that common stocks will be the principal form of investment of the Portfolio. The Portfolio is primarily comprised of
securities of two basic categories of companies: (a) "core" companies, which the Sub-advisor considers to have experienced
above-average and consistent long-term growth in earnings and to have excellent prospects for outstanding future growth, and (b)
"earnings acceleration" companies, which the Sub-advisor believes are currently enjoying a dramatic increase in earnings.
If a particular foreign company meets the quantitative standards determined by the Sub-advisor, its securities may be
acquired by the Portfolio regardless of the location of the company or the percentage of the Portfolio's investments in the
company's country or region. However, the Sub-advisor will also consider other factors in making investment decisions for the
Portfolio, including such factors as the prospects for relative economic growth among countries or regions, economic and political
conditions, currency exchange fluctuations, tax considerations and the liquidity of a particular security.
The Sub-advisor recognizes that often there is less public information about foreign companies than is available in
reports supplied by domestic companies, that foreign companies are not subject to uniform accounting and financial reporting
standards, and that there may be greater delays experienced by the Portfolio in receiving financial information supplied by
foreign companies than comparable information supplied by domestic companies. In addition, the value of the Portfolio's
investments that are denominated in a foreign currency may be affected by changes in currency exchange rates. For these and other
reasons, the Sub-advisor from time to time may encounter greater difficulty applying its disciplined stock selection strategy to
an international equity investment portfolio than to a portfolio of domestic equity securities.
Any income realized by the Portfolio will be incidental and will not be an important criterion in the selection of
portfolio securities.
Under normal market conditions the Portfolio will invest at least 70% of its total assets in marketable equity
securities, including common stock, preferred stock, and other securities having the characteristics of stock (such as an equity
or ownership interest in a company) of foreign companies that are listed on a recognized foreign securities exchange or traded on
a foreign over-the-counter market. The Portfolio may also satisfy the foregoing requirement in part by investing in the
securities of foreign issuers in the form of ADRs, EDRs, or other securities representing underlying securities of foreign
issuers.
The Portfolio will emphasize investment in foreign companies in the developed countries of Western Europe (such as
Germany, France, Switzerland, the Netherlands and the United Kingdom) and the Pacific Basin (such as Japan, Hong Kong and
Australia), but the Portfolio may also invest in the securities of companies located in developing countries (such as Turkey,
Malaysia and Mexico) in various regions of the world. The risks of investment in the equity markets of developing countries are
described in more detail immediately below and in this Statement under "Certain Risk Factors and Investment Methods."
Real Estate Investment Trusts ("REITs"). The Portfolio may invest in equity and/or debt securities issued by REITs.
Such investments will not exceed 5% of the total assets of the Portfolio.
REITs are trusts that sell equity or debt securities to investors and use the proceeds to invest in real estate or
interests therein. A REIT may focus on particular types of projects, such as apartment complexes, or geographic regions, such as
the Southeastern United States, or both.
To the extent that the Portfolio invests in REITs, it could conceivably own real estate directly as a result of a default
on the securities it owns. The Portfolio, therefore, may be subject to certain risks associated with the direct ownership of real
estate, including difficulties in valuing and trading real estate, declines in the value of real estate, environmental liability
risks, risks related to general and local economic conditions, adverse change in the climate for real estate, increases in
property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, limitations on rents, changes in
neighborhood values, the appeal of properties to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected by any changes in the value of the underlying
property owned by the trusts, while mortgage REITs may be affected by the quality of any credit extended. Equity and mortgage
REITs are dependent upon management skill, and are generally not diversified and therefore are subject to the risk of financing
single or a limited number of projects. Such trusts are also subject to heavy cash flow dependency, defaults by borrowers,
self-liquidation, and the possibility that the REIT will fail to maintain its exemption from the 1940 Act. Changes in interest
rates may also affect the value of debt securities of REITs held by the Portfolio. By investing in REITs indirectly through the
Portfolio, a shareholder will bear not only his/her proportionate share of the expenses of the Portfolio, but also, indirectly,
similar expenses of the REITs.
Lending of Portfolio Securities. While securities are being lent, the Portfolio will continue to receive the equivalent
of the interest or dividends paid by the issuer on the securities, as well as interest on the investment of the collateral or a
fee from the borrower. The Portfolio has the right to call its loans and obtain the securities on three business days' notice or,
in connection with securities trading on foreign markets, within such longer period of time that coincides with the normal
settlement period for purchases and sales of such securities in such foreign markets. The risks in lending portfolio securities,
as with other extensions of secured credit, consist of possible delay in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the borrower fail financially. Additional information about the
lending of portfolio securities is included in this Statement and the Trust's Prospectus under "Certain Risk Factors and
Investment Methods."
Borrowings. The Portfolio may borrow money to a limited extent from banks for temporary or emergency purposes subject to
the limitations under the 1940 Act. In addition, the Portfolio does not intend to engage in leverage; therefore, consistent with
current interpretations of the SEC, the Portfolio will not purchase additional securities while borrowings exceed 5% of the
Portfolio's total assets. Additional information about borrowing is included in the Trust's Prospectus under "Certain Risk
Factors and Investment Methods."
Securities Issued on a When-Issued or Delayed-Delivery Basis. The Portfolio may purchase securities on a "when-issued"
basis, that is, delivery of and payment for the securities is not fixed at the date of purchase, but is set after the securities
are issued (normally within forty-five days after the date of the transaction). The Portfolio also may purchase or sell
securities on a delayed-delivery basis. The payment obligation and the interest rate that will be received on the delayed
delivery-securities are fixed at the time the buyer enters into the commitment. If the Portfolio purchases a when-issued security
or enters into a delayed-delivery agreement, the Portfolio's custodian bank will segregate cash or other liquid assets in an
amount at least equal to the when-issued commitment or delayed-delivery agreement commitment. Additional information about
when-issued and delayed-delivery transactions and their risks is included in this Statement and in the Trust's Prospectus under
"Certain Risk Factors and Investment Methods."
Short Sales "Against the Box." As described in the Trust's Prospectus, the Portfolio may make short sales against the
box. To secure its obligation to deliver the securities sold short, the Portfolio will deposit in escrow in a separate account
with its custodian an equal amount of the securities sold short or securities convertible into or exchangeable for such
securities. Since the Portfolio ordinarily will want to continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short, the Portfolio will normally close out a short position covered by
convertible securities by purchasing and delivering an equal amount of the securities sold short, rather than by delivering
securities that it already holds.
The Portfolio will make a short sale, as a hedge, when it believes that the price of a security may decline, causing a
decline in the value of a security owned by the Portfolio or a security convertible into or exchangeable for such security. In
such case, any future losses in the Portfolio's long position should be reduced by a gain in the short position. Conversely, any
gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced
will depend upon the amount of the security sold short relative to the amount the Portfolio owns, either directly or indirectly,
and, in the case where the Portfolio owns convertible securities, changes in the conversion premium. In determining the number of
shares to be sold short against a Portfolio's position in a convertible security, the anticipated fluctuation in the conversion
premium is considered. The Portfolio may also make short sales to generate additional income from the investment of the cash
proceeds of short sales. In no event may more than 10% of the value of the Portfolio's total assets be deposited or pledged as
collateral for short sales at any time.
Foreign Securities. The Portfolio normally invests primarily in foreign securities, including American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs"). Generally, ADRs, in registered form, are designed for use in the
United States securities markets, and EDRs, in bearer form, are designed for use in European securities markets. ADRs and EDRs may
be listed on stock exchanges, or traded in OTC markets in the United States or Europe, as the case may be. ADRs, like other
securities traded in the United States, will be subject to negotiated commission rates.
To the extent the Portfolio invests in securities denominated in foreign currencies, the Portfolio bears the risk of
changes in the exchange rates between U.S. currency and the foreign currency, as well as the availability and status of foreign
securities markets. The Portfolio's investments in securities denominated in foreign currencies generally will be marketable
equity securities (including common and preferred stock, depositary receipts for stock and fixed income or equity securities
exchangeable for or convertible into stock) of foreign companies that generally are listed on a recognized foreign securities
exchange or traded in a foreign over-the-counter market. The Portfolio may also invest in foreign securities listed on recognized
U.S. securities exchanges or traded in the U.S. over-the-counter market.
Investments by the Portfolio in foreign securities, whether denominated in U.S. currencies or foreign currencies, may
entail risks that are greater than those associated with domestic investments. The risks of investing in foreign securities are
discussed in detail in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods." Investment
by the Portfolio in ADRs, EDRs and similar securities also may entail some or all or these risks. The Sub-advisor seeks to
mitigate the risks associated with foreign investment through diversification and active professional management.
Developing Countries. A developing country or emerging market country can be considered to be a country that is
in the initial stages of its industrialization cycle. Currently, emerging markets generally include every country in the world
other than the developed European countries (primarily in Western Europe), the United States, Canada, Japan, Australia, New
Zealand, Hong Kong and Singapore. The characteristics of markets can change over time. Currently, the Sub-advisor believes that
investing in many emerging markets is not desirable or feasible because of the lack of adequate custody arrangements for the
Portfolio's assets, overly burdensome repatriation and similar restrictions, the lack of organized and liquid securities markets,
unacceptable political risks or other reasons. As desirable opportunities to invest in securities in emerging markets develop,
the Portfolio may expand and further broaden the group of emerging markets in which it invests.
Many of the risks relating to foreign securities generally will be greater for emerging markets than for developed
countries. Many emerging markets have experienced substantial rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative effects on the economies and securities markets
for certain developing markets. Economies in emerging markets generally are heavily dependent upon international trade and
accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These
economies also have been and may continue to be affected adversely by economic conditions in the countries with which they trade.
There also may be a lower level of securities market monitoring and regulation of developing markets and the activities of
investors in such markets, and enforcement of existing regulations has been extremely limited. The possibility of revolution and
the dependence on foreign economic assistance may be greater in these countries than in developed countries.
In addition, brokerage commissions, custodial services and other costs relating to investment in foreign markets may be
particularly high with respect to emerging markets. Such markets have different settlement and clearance procedures. In certain
markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Such settlement problems may cause emerging market securities to be illiquid. The
inability of the Portfolio to make intended securities purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of a portfolio security caused by settlement problems could result in
losses to the Portfolio due to subsequent declines in value of the portfolio security or, if the Portfolio has entered into a
contract to sell the security, could result in liability to the purchaser. Certain emerging markets may lack clearing facilities
equivalent to those in developed countries. Accordingly, settlements can pose additional risks in such markets and ultimately can
expose the Portfolio to the risk of losses resulting from its inability to recover from a counterparty.
The risk also exists that an emergency situation may arise in one or more emerging markets as a result of which trading
of securities may cease or may be substantially curtailed and prices for the Portfolio's portfolio securities in such markets may
not be readily available. The Portfolio's portfolio securities in the affected markets will be valued at fair value determined in
good faith by or under the direction of the Trust's Board of Trustees.
Portfolio Turnover. Any particular security will be sold, and the proceeds reinvested, whenever such action is deemed
prudent from the viewpoint of the Portfolio's investment objectives, regardless of the holding period of that security.
Additional information about portfolio turnover is included in this Statement and the Trust's Prospectus under "Certain Risk
Factors and Investment Methods."
Options, Futures and Currency Strategies. The Portfolio may use forward contracts, futures contracts, options on
securities, options on indices, options on currencies, and options on futures contracts to attempt to hedge against the overall
level of investment and currency risk normally associated with the Portfolio's investments. These instruments are often referred
to as "derivatives," which may be defined as financial instruments whose performance is derived, at least in part, from the
performance of another asset (such as a security, currency or an index of securities).
General Risks of Options, Futures and Currency Strategies. The use by the Portfolio of options, futures contracts and
forward currency contracts involves special considerations and risks. For example, there might be imperfect correlation, or even
no correlation, between the price movements or an instrument (such as an option contract) and the price movements of the
investments being hedged. In these circumstances, if a "protective put" is used to hedge a potential decline in a security and
the security does decline in price, the put option's increased value may not completely offset the loss in the underlying
security. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as
changing interest rates, market liquidity, and speculative or other pressures on the markets in which the hedging instrument is
traded.
The Portfolio will not enter into a hedging transaction if the Sub-advisor determines that the cost of hedging will
exceed the potential benefit to the Portfolio.
Additional information on these instruments is included in this Statement and the Trust's Prospectus under "Certain Risk
Factors and Investment Methods." Certain risks pertaining to particular strategies are described in the sections that follow.
Cover. Transactions using forward contracts, futures contracts and options (other than options
purchased by a Portfolio) expose the Portfolio to an obligation to another party. A Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in securities, currencies, or other options, forward
contracts or futures contracts or (2) cash or liquid assets with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. The Portfolio will comply with SEC guidelines regarding cover for these
instruments and, if the guidelines so require, set aside cash or liquid securities.
Assets used as cover cannot be sold while the position in the corresponding forward contract, futures contract or
option is open, unless they are replaced with other appropriate assets. If a large portion of a Portfolio's assets is used for
cover or otherwise set aside, it could affect portfolio management or the Portfolio's ability to meet redemption requests or other
current obligations.
Writing Call Options. The Portfolio may write (sell) covered call options on securities, futures contracts,
forward contracts, indices and currencies. Writing call options can serve as a limited hedge because declines in the value of the
hedged investment would be offset to the extent of the premium received for writing the option.
Writing Put Options. The Portfolio may write (sell) put options on securities, futures contracts, forward
contracts, indices and currencies. The Portfolio would write a put option at an exercise price that, reduced by the premium
received on the option, reflects the lower price it is willing to pay for the underlying security, contract or currency. The risk
in such a transaction would be that the market price of the underlying security, contract or currency would decline below the
exercise price less the premium received.
Purchasing Put Options. The Portfolio may purchase put options on securities, futures contracts, forward
contracts, indices and currencies. The Portfolio may enter into closing sale transactions with respect to such options, exercise
such option or permit such option to expire.
The Portfolio may also purchase put options on underlying securities, contracts or currencies against which it has
written other put options. For example, where the Portfolio has written a put option on an underlying security, rather than
entering a closing transaction of the written option, it may purchase a put option with a different strike price and/or expiration
date that would eliminate some or all of the risk associated with the written put. Used in combinations, these strategies are
commonly referred to as "put spreads." Likewise, the Portfolio may write call options on underlying securities, contracts or
currencies against which it has purchased protective put options. This strategy is commonly referred to as a "collar."
Purchasing Call Options. The Portfolio may purchase covered call options on securities, futures contracts, forward
contracts, indices and currencies. The Portfolio may enter into closing sale transactions with respect to such options, exercise
such options or permit such options to expire.
The Portfolio may also purchase call options on underlying securities, contracts or currencies against which it has
written other call options. For example, where the Portfolio has written a call option on an underlying security, rather than
entering a closing transaction of the written option, it may purchase a call option with a different strike price and/or
expiration date that would eliminate some or all of the risk associated with the written call. Used in combinations, these
strategies are commonly referred to as "call spreads."
Options may be either listed on an exchange or traded in over-the-counter ("OTC") markets. Listed options are
third-party contracts (i.e., performance of the obligations of the purchaser and seller is guaranteed by the exchange or clearing
corporation) and have standardized strike prices and expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. The Portfolio will not purchase an OTC option unless it believes that daily valuations for such
options are readily obtainable. OTC options differ from exchange-traded options in that OTC options are transacted with dealers
directly and not through a clearing corporation (which would guarantee performance). Consequently, there is a risk of
non-performance by the dealer. Since no exchange is involved, OTC options are valued on the basis of an average of the last bid
prices obtained from dealers, unless a quotation from only one dealer is available, in which case only that dealer's price will be
used.
Index Options. The risks of investment in index options may be greater than options on securities. Because
index options are settled in cash, when the Portfolio writes a call on an index it cannot provide in advance for its potential
settlement obligations by acquiring and holding the underlying securities. The Portfolio can offset some of the risk of writing a
call index option position by holding a diversified portfolio of securities similar to those on which the underlying index is
based. However, the Portfolio cannot, as a practical matter, acquire and hold a portfolio containing exactly the same securities
as underlie the index and, as a result, bears a risk that the value of the securities held will not be perfectly correlated with
the value of the index.
Limitations on Options. The Portfolio will not write options it, immediately after such sale, the aggregate
value of securities or obligations underlying the outstanding options exceeds 20% of the Portfolio's total assets. The Portfolio
will not purchase options if, at the time of the investment, the aggregate premiums paid for the options will exceed 5% of the
Portfolio's total assets.
Interest Rate, Currency and Stock Index Futures Contracts. The Portfolio may enter into interest rate, currency
or stock index futures contracts (collectively, "Futures" or "Futures Contracts") and options on Futures as a hedge against
changes in prevailing levels of interest rates, currency exchange rates or stock price levels, respectively, in order to establish
more definitely the effective return on securities or currencies held or intended to be acquired by it. The Portfolio's hedging
may include sales of Futures as an offset against the effect of expected increases in interest rates, and decreases in currency
exchange rates and stock prices, and purchase of Futures as an offset against the effect of expected declines in interest rates,
and increases in currency exchange rates or stock prices.
A Futures Contract is a two party agreement to buy or sell a specified amount of a specified security or currency (or
deliver a cash settlement price, in the case of an index future) for a specified price at a designated date, time and place. A
stock index future provides for the delivery, at a designated date, time and place, of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the close of trading on the contract and the price agreed upon
in the Futures Contract; no physical delivery of stocks comprising the index is made.
The Portfolio will only enter into Futures Contracts that are traded on futures exchanges and are standardized as to
maturity date and underlying financial instrument. Futures exchanges and trading thereon in the United States are regulated under
the Commodity Exchange Act and by the CFTC.
The Portfolio's Futures transactions will be entered into for hedging purposes only; that is, Futures will be sold to
protect against a decline in the price of securities or currencies that the Portfolio owns, or Futures will be purchased to
protect the Portfolio against an increase in the price of securities or currencies it has committed to purchase or expects to
purchase.
If the Portfolio were unable to liquidate a Future or an option on Futures position due to the absence of a liquid
secondary market or the imposition of price limits, it could incur substantial losses. The Portfolio would continue to be subject
to market risk with respect to the position. In addition, except in the case of purchased options, the Portfolio might be
required to maintain the position being hedged by the Future or option or to maintain cash or securities in a segregated account.
Additional information on Futures, options on Futures, and their risks is included in this Statement and the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
Forward Contracts. A forward contract is an obligation, usually arranged with a commercial bank or other currency
dealer, to purchase or sell a currency against another currency at a future date and price as agreed upon by the parties. The
Portfolio either may accept or make delivery of the currency at the maturity of the forward contract. The Portfolio may also, if
its contra party agrees prior to maturity, enter into a closing transaction involving the purchase or sale of an offsetting
contract. Forward contracts are traded over-the-counter, and not on organized commodities or securities exchanges. As a result,
it may be more difficult to value such contracts, and it may be difficult to enter into closing transactions.
The cost to the Portfolio of engaging in forward contracts varies with factors such as the currencies involved, the
length of the contract period and the market conditions then prevailing. Because forward contracts are usually entered into on a
principal basis, no fees or commissions are involved. The use of forward contracts does not eliminate fluctuations in the prices
of the underlying securities the Portfolio owns or intends to acquire, but it does establish a rate of exchange in advance.
Additional information on forward contracts and their risks is included in this Statement and the Trust's Prospectus
under "Certain Risk Factors and Investment Methods."
Other Investment Companies. The Portfolio may invest in other investment companies to the extent permitted by the 1940
Act and rules and regulations thereunder, and, if applicable, exemptive orders granted by the SEC.
Investment Policy Which May Be Changed Without Shareholder Approval. The following limitation is applicable to the AST
AIM International Equity Portfolio. This limitation is not a "fundamental" restriction, and may be changed by the Trustees without
shareholder approval. The Portfolio will not:
1. Make investments for the purpose of gaining control of a company's management.
AST Janus Overseas Growth Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek long-term growth of capital.
Investment Policies:
The portfolio pursues its objective by investing primarily in common stocks of foreign issuers of any size. The
Portfolio normally invests at least 65% of its total assets in issuers from at least five different countries excluding the United
States. The Portfolio may invest all of its assets in the securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies and restrictions as the Portfolio subject to the prior approval
of the Investment Manager. The Investment Manager will not approve such investment unless: (a) the Investment Manager believes,
on the advice of counsel, that such investment will not have an adverse effect on the tax status of the annuity contracts and/or
life insurance policies supported by the separate accounts of the Participating Insurance Companies which purchase shares of the
Trust; (b) the Investment Manager has given prior notice to the Participating Insurance Companies that it intends to permit such
investment and has determined whether such Participating Insurance Companies intend to redeem any shares and/or discontinue the
purchase of shares because of such investment; (c) the Trustees have determined that the fees to be paid by the Trust for
administrative, accounting, custodial and transfer agency services for the Portfolio subsequent to such an investment are
appropriate, or the Trustees have approved changes to the agreements providing such services to reflect a reduction in fees; (d)
the Sub-advisor has agreed to reduce its fee by the amount of any investment advisory fees paid to the investment manager of such
open-end management investment company; and (e) shareholder approval is obtained if required by law. The Portfolio will apply for
such exemptive relief under the provisions of the 1940 Act, or other such relief as may be necessary under the then governing
rules and regulations of the 1940 Act, regarding investments in such investment companies.
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 swaps. The Portfolio will not enter into any futures contracts or options
on futures contracts if the aggregate amount of the Portfolio's commitments under outstanding futures contracts positions and
options on futures contracts written by the Portfolio would exceed the market value of the total assets of the Portfolio. The
Portfolio may invest in forward currency contracts with stated values of up to the value of the Portfolio's assets.
The Portfolio may buy or write options in privately negotiated transactions on the types of securities and indices based
on the types of securities in which the Portfolio is permitted to invest directly. The Portfolio will effect such transactions
only with investment dealers and other financial institutions (such as commercial banks or savings and loan institutions) deemed
creditworthy, and only pursuant to procedures adopted, by the Sub-advisor for monitoring the creditworthiness of those entities.
To the extent that an option bought or written by the Portfolio in a negotiated transaction is illiquid, the value of an option
bought or the amount of the Portfolio's obligations under an option written by the Portfolio, as the case may be, will be subject
to the Portfolio's limitation on illiquid investments. In the case of illiquid options, it may not be possible for the Portfolio
to effect an offsetting transaction at a time when the Sub-advisor believes it would be advantageous for the Portfolio to do so.
For a description of these strategies and instruments and certain risks involved therein, see this Statement and the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
Eurodollar Instruments. The Portfolio may make investments in Eurodollar instruments. Eurodollar instruments are U.S.
dollar-denominated futures contracts or options thereon which are linked to the London Interbank Offered Rate ("LIBOR"), although
foreign currency-denominated instruments are available from time to time. Eurodollar futures contracts enable purchasers to obtain
a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. The Portfolio might use Eurodollar
futures contracts and options thereon to hedge against changes in LIBOR, to which many interest rate swaps and fixed-income
instruments are linked.
Swaps and Swap-Related Products. The Portfolio may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its assets or its liabilities, and will usually enter
into interest rate swaps on a net basis (i.e., the two payment streams are netted out, with the Portfolio receiving or paying, as
the case may be, only the net amount of the two payments). The net amount of the excess, if any, of the Portfolio's obligations
over its entitlement with respect to each interest rate swap will be calculated on a daily basis and an amount of cash or
high-grade liquid assets having an aggregate net asset value at least equal to the accrued excess will be maintained in a
segregated account by the custodian of the Portfolio. If the Portfolio enters into an interest rate swap on other than a net
basis, it would maintain a segregated account in the full amount accrued on a daily basis of its obligations with respect to the
swap. The Portfolio will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the
claims-paying ability of the other party thereto is rated in one of the three highest rating categories of at least one nationally
recognized statistical rating organization at the time of entering into such transaction. The Sub-advisor will monitor the
creditworthiness of all counterparties on an ongoing basis. If there is a default by the other party to such a transaction, the
Portfolio will have contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. The Sub-advisor has determined that, as a result, the
swap market has become relatively liquid. Caps and floors are more recent innovations for which standardized documentation has not
yet been developed and, accordingly, they are less liquid than swaps. To the extent the Portfolio sells (i.e., writes) caps and
floors, it will segregate cash or high-grade liquid assets having an aggregate net asset value at least equal to the full amount,
accrued on a daily basis, of its obligations with respect to any caps or floors.
There is no limit on the amount of interest rate swap transactions that may be entered into by the Portfolio. These
transactions may in some instances involve the delivery of securities or other underlying assets by the Portfolio or its
counterparty to collateralize obligations under the swap. Under the documentation currently used in those markets, the risk of
loss with respect to interest rate swaps is limited to the net amount of the payments that the Portfolio is contractually
obligated to make. If the other party to an interest rate swap that is not collateralized defaults, the Portfolio would risk the
loss of the net amount of the payments that it contractually is entitled to receive. The Portfolio may buy and sell (i.e., write)
caps and floors without limitation, subject to the segregation requirement described above. For an additional discussion of these
strategies, see this Statement under "Certain Risk Factors and Investment Methods."
Investment Company Securities. From time to time, the Portfolio may invest in securities of other investment companies,
subject to the provisions of Section 12(d)(1) of the 1940 Act. The Portfolio may invest in securities of money market funds
managed by the Sub-advisor subject to the terms of an exemptive order obtained by the Sub-advisor and the funds that are advised
or sub-advised by the Sub-advisor. Under such order, the Portfolio will limit its aggregate investment in a money market fund
managed by the Sub-advisor to the greater of (i) 5% of its total assets or (ii) $2.5 million, although the Trust's Board of
Trustees may increase this limit up to 25% of the Trust's total assets.
Zero-Coupon, Pay-In-Kind and Step Coupon Securities. The Portfolio may invest up to 10% of its assets in zero-coupon,
pay-in-kind and step coupon securities. For a discussion of zero-coupon debt securities and the risks involved therein, see this
Statement under "Certain Risk Factors and Investment Methods."
Pass-Through Securities. The Portfolio may invest in various types of pass-through securities, such as mortgage-backed
securities, asset-backed securities and participation interests. A pass-through security is a share or certificate of interest in
a pool of debt obligations that have been repackaged by an intermediary, such as a bank or broker-dealer. The purchaser of a
pass-through security receives an undivided interest in the underlying pool of securities. The issuers of the underlying
securities make interest and principal payments to the intermediary which are passed through to purchasers, such as the
Portfolio. For an additional discussion of pass-through securities and certain risks involved therein, see this Statement and the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Depositary Receipts. The Portfolio may invest in sponsored and unsponsored American Depositary Receipts ("ADRs"), which
are receipts issued by an American bank or trust company evidencing ownership of underlying securities issued by a foreign issuer.
ADRs, in registered form, are designed for use in U.S. securities markets. Unsponsored ADRs may be created without the
participation of the foreign issuer. Holders of these ADRs generally bear all the costs of the ADR facility, whereas foreign
issuers typically bear certain costs in a sponsored ADR. The bank or trust company depositary of an unsponsored ADR may be under
no obligation to distribute shareholder communications received from the foreign issuer or to pass through voting rights. The
Portfolio may also invest in European Depositary Receipts ("EDRs"), receipts issued by a European financial institution evidencing
an arrangement similar to that of ADRs, Global Depositary Receipts ("GDRs") and in other similar instruments representing
securities of foreign companies. EDRs, in bearer form, are designed for use in European securities markets. GDRs are securities
convertible into equity securities of foreign issuers.
Other Income-Producing Securities. Other types of income producing securities that the Portfolio may purchase include,
but are not limited to, the following types of securities:
Variable and Floating Rate Obligations. These types of securities are relatively long-term instruments that often
carry demand features permitting the holder to demand payment of principal at any time or at specified intervals prior to maturity.
Standby Commitments. These instruments, which are similar to a put, give the Portfolio the option to obligate a
broker, dealer or bank to repurchase a security held by that Portfolio at a specified price.
Tender Option Bonds. Tender option bonds are relatively long-term bonds that are coupled with the agreement of a
third party (such as a broker, dealer or bank) to grant the holders of such securities the option to tender the securities to the
institution at periodic intervals.
Inverse Floaters. Inverse floaters are debt instruments whose interest bears an inverse relationship to the
interest rate on another security. The Portfolio will not invest more than 5% of its assets in inverse floaters. The Portfolio
will purchase standby commitments, tender option bonds and instruments with demand features primarily for the purpose of
increasing the liquidity of the Portfolio.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase agreements. The Portfolio will enter
into such agreements only to provide cash to satisfy unusually heavy redemption requests and for other temporary or emergency
purposes, rather than to obtain cash to make additional investments. While a reverse repurchase agreement is outstanding, the
Portfolio will maintain cash and appropriate liquid assets in a segregated custodial account to cover its obligation under the
agreement. The Portfolio will enter into reverse repurchase agreements only with parties that Sub-advisor deems creditworthy.
For an additional description of these investment techniques, see the Trust's Prospectus under "Certain Risk Factors and
Investment Methods."
Investment Policies Which May be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Janus Overseas Growth Portfolio. These limitations are not "fundamental" restrictions and may be changed by the Trustees
without shareholder approval:
1. The Portfolio will not (i) enter into any futures contracts and related options for purposes other than bona fide
hedging transactions within the meaning of CFTC regulations if the aggregate initial margin and premiums required to establish
positions in futures contracts and related options that do not fall within the definition of bona fide hedging transactions will
exceed 5% of the fair market value of the Portfolio's net assets, after taking into account unrealized profits and unrealized
losses on any such contracts it has entered into; and (ii) enter into any futures contracts if the aggregate amount of the
Portfolio's commitments under outstanding futures contracts positions would exceed the market value of its total assets.
2. The Portfolio does not currently intend to sell securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short without the payment of any additional consideration
therefor, and provided that transactions in futures, options, swaps and forward contracts are not deemed to constitute selling
securities short.
3. The Portfolio does not currently intend to purchase securities on margin, except that the Portfolio may obtain
such short-term credits as are necessary for the clearance of transactions, and provided that margin payments and other deposits
in connection with transactions in futures, options, swaps and forward contracts shall not be deemed to constitute purchasing
securities on margin.
4. The Portfolio does not currently intend to purchase securities of other investment companies, except in
compliance with the 1940 Act.
5. The Portfolio may not mortgage or pledge any securities owned or held by the Portfolio in amounts that exceed, in
the aggregate, 15% of the Portfolio's net asset value, provided that this limitation does not apply to reverse repurchase
agreements, deposits of assets to margin, guarantee positions in futures, options, swaps or forward contracts, or the segregation
of assets in connection with such contracts.
6. The Portfolio does not currently intend to purchase any security or enter into a repurchase agreement if, as a
result, more than 15% of its net assets would be invested in repurchase agreements not entitling the holder to payment of
principal and interest within seven days and in securities that are illiquid by virtue of legal or contractual restrictions on
resale or the absence of a readily available market. The Trustees, or the Sub-advisor acting pursuant to authority delegated by
the Trustees, may determine that a readily available market exists for securities eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 ("Rule 144A Securities"), or any successor to such rule, and Section 4(2) commercial paper.
Accordingly, such securities may not be subject to the foregoing limitation.
7. The Portfolio may not invest in companies for the purpose of exercising control of management.
AST American Century International Growth Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Investment Policies:
In general, within the restrictions outlined herein, the Portfolio has broad powers with respect to investing funds or
holding them uninvested. Investments are varied according to what is judged advantageous under changing economic conditions. It
will be the Sub-advisor's policy to retain maximum flexibility in management without restrictive provisions as to the proportion
of one or another class of securities that may be held, subject to the investment restrictions described below. It is the
Sub-advisor's intention that the Portfolio will generally consist of common stocks. However, the Sub-advisor may invest the assets
of the Portfolio in varying amounts in other instruments and in senior securities, such as bonds, debentures, preferred stocks and
convertible issues, when such a course is deemed appropriate in order to attempt to attain its financial objective.
Forward Currency Exchange Contracts. The Portfolio conducts its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward currency
exchange contracts to purchase or sell foreign currencies.
The Portfolio expects to use forward contracts under two circumstances: (1) when the Sub-advisor wishes to "lock in" the
U.S. dollar price of a security when the Portfolio is purchasing or selling a security denominated in a foreign currency, the
Portfolio would be able to enter into a forward contract to do so ("transaction hedging"); (2) when the Sub-advisor believes that
the currency of a particular foreign country may suffer a substantial decline against the U.S. dollar, the Portfolio would be able
to enter into a forward contract to sell foreign currency for a fixed U.S. dollar amount approximating the value of some or all of
the Portfolio's securities either denominated in, or whose value is tied to, such foreign currency ("portfolio hedging"). It's
anticipated that the Fund will enter into portfolio hedges much less frequently than transaction hedges.
As to transaction hedging, when the Portfolio enters into a trade for the purchase or sale of a security denominated in a
foreign currency, it may be desirable to establish (lock in) the U.S. dollar cost or proceeds. By entering into forward contracts
in U.S. dollars for the purchase or sale of a foreign currency involved in an underlying security transaction, the Portfolio will
be able to protect itself against a possible loss between trade and settlement dates resulting from the adverse change in the
relationship between the U.S. dollar and the subject foreign currency.
Under portfolio hedging, when the Sub-advisor believes that the currency of a particular country may suffer a substantial
decline relative to the U.S. dollar, the Portfolio could enter into a forward contract to sell for a fixed dollar amount the
amount in foreign currencies approximating the value of some or all of its portfolio securities either denominated in, or whose
value is tied to, such foreign currency. The Portfolio will place cash or high-grade liquid securities in a separate account with
its custodian in an amount sufficient to cover its obligation under the contract entered into under the second circumstance. If
the value of the securities placed in the separate account declines, additional cash or securities will be placed in the account
on a daily basis so that the value of the account equals the amount of the Portfolio's commitments with respect to such
contracts. At any given time, no more than 10% of the Portfolio's assets will be committed to a segregated account in connection
with portfolio hedging transactions.
The precise matching of forward contracts in the amounts and values of securities involved would not generally be
possible since the future values of such foreign currencies will change as a consequence of market movements in the values of
those securities between the date the forward contract is entered into and the date it matures. Predicting short-term currency
market movements is extremely difficult, and the successful execution of short-term hedging strategy is highly uncertain.
Normally, consideration of the prospect for currency parities will be incorporated into the long-term investment decisions made
with respect to overall diversification strategies. However, the Sub-advisor believes that it is important to have flexibility to
enter into such forward contracts when it determines that the Portfolio's best interests may be served.
Generally, the Portfolio will not enter into a forward contract with a term of greater than one year. At the maturity of
the forward contract, the Portfolio may either sell the portfolio security and make delivery of the foreign currency, or it may
retain the security and terminate the obligation to deliver the foreign currency by purchasing an "offsetting" forward contract
with the same currency trader obligating the Portfolio to purchase, on the same maturity date, the same amount of the foreign
currency.
It is impossible to forecast with absolute precision the market value of portfolio securities at the expiration of the
forward contract. Accordingly, it may be necessary for the Portfolio to purchase additional foreign currency on the spot market
(and bear the expense of such purchase) if the market value of the security is less than the amount of foreign currency the
Portfolio is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency the
Portfolio is obligated to deliver. For an additional discussion of forward currency exchange contracts and the risks involved
therein, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Derivative Securities. To the extent permitted by its investment objectives and policies discussed elsewhere herein, the
Portfolio may invest in securities that are commonly referred to as "derivative" securities. Certain derivative securities are
more accurately described as "index/structured" securities. Index/structured securities are derivative securities whose value or
performance is linked to other equity securities (such as depositary receipts), currencies, interest rates, indices or other
financial indicators ("reference indices").
Some "derivatives," such as mortgage-backed and other asset-backed securities, are in many respects like any other
investment, although they may be more volatile or less liquid than more traditional debt securities.
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 return on a derivative security may increase or decrease, depending upon changes in the reference index or instrument
to which it relates.
There is a range of risks associated with derivative investments, including:
o the risk that the underlying security, interest rate, market index or other financial asset will not move in the
direction the portfolio manager anticipates;
o the possibility that there may be no liquid secondary market, or the possibility that price fluctuation limits may be
imposed by the exchange, either of which may make it difficult or impossible to close out a position when desired; and
o the risk that the counterparty will fail to perform its obligations.
The Sub-advisor will report to the Investment Manager on activity in derivative securities, and the Investment Manager will report
to the Trust's Board of Trustees as necessary. For additional information on derivatives and their risks, see the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
Futures and Options. The Portfolio may enter into futures contracts, options or options on futures contracts. The
Portfolio may not, however, enter into a futures transaction for speculative purposes. Generally, futures transactions will be
used to:
o protect against a decline in market value of the Portfolio's securities (taking a short futures position), or
o protect against the risk of an increase in market value for securities in which the Portfolio generally invests at a time
when the Portfolio is not fully-invested (taking a long futures position), or
o provide a temporary substitute for the purchase of an individual security that may be purchased in an orderly fashion.
Some futures and options strategies, such as selling futures, buying puts and writing calls, hedge the Portfolio's investments
against price fluctuations. Other strategies, such as buying futures, writing puts and buying calls, tend to increase market
exposure.
Although other techniques may be used to control the Portfolio's exposure to market fluctuations, the use of futures
contracts may be a more effective means of hedging this exposure. While the Portfolio will pay brokerage commissions in
connection with opening and closing out futures positions, these costs are lower than the transaction costs incurred in the
purchase and sale of the underlying securities.
The Portfolio may engage in futures and options transactions based on securities indices that are consistent with the
Portfolio's investment objectives. Examples of indices that may be used include the Bond Buyer Index of Municipal Bonds for fixed
income funds, or the S&P 500 Index for equity funds. The Portfolio also may engage in futures and options transactions based on
specific securities, such as U.S. Treasury bonds or notes. Futures contracts are traded on national futures exchanges. Futures
exchanges and trading are regulated under the Commodity Exchange Act by the CFTC, a U.S. government agency.
Unlike when the Portfolio purchases or sells a bond, no price is paid or received by the Portfolio upon the purchase or
sale of the future. Initially, the Portfolio will be required to deposit an amount of cash or securities equal to a varying
specified percentage of the contract amount. This amount is known as initial margin. The margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security) if it is not terminated prior to the specified
delivery date. Minimum initial margin requirements are established by the futures exchanges and may be revised. In addition,
brokers may establish margin deposit requirements that are higher than the exchange minimums. Cash held in the margin account is
not income producing. Subsequent payments, called variation margin, to and from the broker, will be made on a daily basis as the
price of the underlying debt securities or index fluctuates, making the future more or less valuable, a process known as marking
the contract to market.
Futures and options prices can be volatile, and trading in these markets involves certain risks, which are described in
more detail in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods." The Sub-advisor
will seek to minimize these risks by limiting the contracts entered into on behalf of the Portfolio to those traded on national
futures exchanges and for which there appears to be a liquid secondary market.
Options on Futures. By purchasing an option on a futures contract, the Portfolio obtains the right, but not the
obligation, to sell the futures contract (a put option) or to buy the contract (a call option) at a fixed strike price. The
Portfolio can terminate its position in a put option by allowing it to expire or by exercising the option. If the option is
exercised, the Portfolio completes the sale of the underlying instrument at the strike price. Purchasing an option on a futures
contract does not require the Portfolio to make margin payments unless the option is exercised.
Although they do not currently intend to do so, the Portfolio may write (or sell) call options that obligate it to sell
(or deliver) the option's underlying instrument upon exercise of the option. While the receipt of option premiums would mitigate
the effects of price declines, the Portfolio would give up some ability to participate in a price increase on the underlying
instrument. If the Portfolio were to engage in options transactions, it would own the futures contract at the time a call were
written and would keep the contract open until the obligation to deliver it pursuant to the call expired.
Investments in Companies with Limited Operating History. The Portfolio may invest in the securities of issuers with
limiting operating history. The Sub-advisor considers an issuer to have a limited operating history if that issuer has a record
of less than three years of continuous operation.
Investments in securities of issuers with limited operating history may involve greater risks than investments in
securities of more mature issuers. By their nature, such issuers present limited operating history and financial information upon
which the manager may base its investment decision on behalf of the Portfolio. In addition, financial and other information
regarding such issuers, when available, may be incomplete or inaccurate.
The Portfolio will not invest more than 5% of its total assets in the securities of issuers with less than a three-year
operating history. The Sub-advisor will consider periods of capital formation, incubation, consolidation, and research and
development in determining whether a particular issuer has a record of three years of continuous operation.
Short Sales. The Portfolio may engage in short sales if, at the time of the short sale, the Portfolio owns or has the
right to acquire an equal amount of the security being sold short at no additional cost.
In a short sale, the seller does not immediately deliver the securities sold and is said to have a short position in
those securities until delivery occurs. To make delivery to the purchaser, the executing broker borrows the securities being sold
short on behalf of the seller. While the short position is maintained, the seller collateralizes its obligation to deliver the
securities sold short in an amount equal to the proceeds of the short sale plus an additional margin amount established by the
Board of Governors of the Federal Reserve. If the Portfolio engages in a short sale the collateral account will be maintained by
the Portfolio's custodian. While the short sale is open the Portfolio will maintain in a segregated custodial account an amount
of securities convertible into or exchangeable for such equivalent securities at no additional cost. These securities would
constitute the Portfolio's long position.
If the Portfolio sells short securities that it owns, any future gains or losses in the Portfolio's long position should
be reduced by a gain or loss in the short position. The extent to which such gains or losses are reduced would depend upon the
amount of the security sold short relative to the amount the Portfolio owns. There will be certain additional transaction costs
associated with short sales, but the Portfolio will endeavor to offset these costs with income from the investment of the cash
proceeds of short sales.
Sovereign Debt Obligations. The Portfolio may purchase sovereign debt instruments issued or guaranteed by foreign
governments or their agencies, including debt of emerging market countries. Sovereign debt may be in the form of conventional
securities or other types of debt instruments such as loans or loan participations. Sovereign debt of developing countries may
involve a high degree of risk and may present a risk of default or renegotiation or rescheduling of debt payments.
Portfolio Turnover. The Sub-advisor will purchase and sell securities without regard to the length of time the security
has been held and, accordingly, it can be expected that the rate of portfolio turnover may be substantial.
The Sub-advisor intends to purchase a given security whenever the Sub-advisor believes it will contribute to the stated
objective of the Portfolio, even if the same security has only recently been sold. The Portfolio will sell a given security, no
matter for how long or for how short a period it has been held, and no matter whether the sale is at a gain or at a loss, if the
Sub-advisor believes that such security is not fulfilling its purpose, either because, among other things, it did not live up to
the Sub-advisor's expectations, or because it may be replaced with another security holding greater promise, or because it has
reached its optimum potential, or because of a change in the circumstances of a particular company or industry or in general
economic conditions, or because of some combination of such reasons.
When a general decline in security prices is anticipated, the Portfolio may decrease or eliminate entirely its equity
position and increase its cash position, and when a rise in price levels is anticipated, the Portfolio may increase its equity
position and decrease its cash position. However, it should be expected that the Portfolio will, under most circumstances, be
essentially fully invested in equity securities.
Since investment decisions are based on the anticipated contribution of the security in question to the Portfolio's
objectives, the rate of portfolio turnover is irrelevant when the Sub-advisor believes a change is in order to achieve those
objectives, and the Portfolio's annual portfolio turnover rate cannot be anticipated and may be comparatively high. Since the
Sub-advisor does not take portfolio turnover rate into account in making investment decisions, (1) the Sub-advisor has no
intention of accomplishing any particular rate of portfolio turnover, whether high or low, and (2) the portfolio turnover rates
should not be considered as a representation of the rates that will be attained in the future.
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST American Century International Growth Portfolio. These limitations are not "fundamental" restrictions and may be changed by
the Trustees without shareholder approval. The Portfolio will not:
1. Invest more than 15% of its assets in illiquid investments;
2. Invest in the securities of other investment companies except in compliance with the 1940 Act;
3. Buy securities on margin or sell short (unless it owns or by virtue of its ownership of other securities has the
right to obtain securities equivalent in kind and amount to the securities sold); however, the Portfolio may make margin deposits
in connection with the use of any financial instrument or any transaction in securities permitted under its investment policies;
4. Invest in oil, gas or other mineral leases;
5. Invest for control or for management.
AST American Century International Growth Portfolio II:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Investment Policies:
The investment policies of the Portfolio are identical in all material respects to those of the AST American Century
International Growth Portfolio as described above.
AST MFS Global Equity Portfolio:
Investment Objective: The investment objective of the Portfolio is capital growth.
Investment Policies:
U.S. Government Securities. The Portfolio may invest in U.S. Government securities including (i) U.S. Treasury
obligations, all of which are backed by the full faith and credit of the U.S. Government and (ii) U.S. Government securities, some
of which are backed by the full faith and credit of the U.S. Treasury, e.g., direct pass-through certificates of the Government
National Mortgage Association ("GNMA"); some of which are backed only by the credit of the issuer itself, e.g., obligations of the
Student Loan Marketing Association; and some of which are supported by the discretionary authority of the U.S. Government to
purchase the agency's obligations, e.g., obligations of the Federal National Mortgage Association ("FNMA").
U.S. Government securities also include interest in trust or other entities representing interests in obligations that
are issued or guaranteed by the U.S. Government, its agencies, authorities or instrumentalities.
Equity Securities. The Portfolio may invest in all types of equity securities, including the following: common stocks,
preferred stocks and preference stocks; securities such as bonds, warrants or rights that are convertible into stocks; and
depository receipts for those securities. These securities may be listed on securities exchanges, traded in various
over-the-counter markets or have no organized market.
Foreign Securities. The Portfolio may invest in dollar-denominated and non-dollar denominated foreign securities.
Investing in securities of foreign issuers generally involves risks not ordinarily associated with investing in securities of
domestic issuers. For a discussion of the risks involved in foreign securities, see this Statement and the Trust's Prospectus
under "Certain Risk Factors and Investment Methods."
Depository Receipts. The Portfolio may invest in American Depository Receipts ("ADRs"), Global Depository Receipts
("GDRs") and other types of depository receipts. ADRs are certificates by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with a custodian bank as collateral. GDRs and other
types of depository receipts are typically issued by foreign banks or trust companies and evidence ownership of underlying
securities issued by either a foreign or a U.S. company. For the purposes of the Portfolio's policy to invest a certain
percentage of its assets in foreign securities, the investments of the Portfolio in ADRs, GDRs and other types of depository
receipts are deemed to be investments in the underlying securities.
ADRs may be sponsored or unsponsored. A sponsored ADR is issued by a depository which has an exclusive relationship with
the issuer of the underlying security. An unsponsored ADR may be issued by any number of U.S. depositories. Under the terms of
most sponsored arrangements, depositories agree to distribute notices of shareholder meetings and voting instructions, and to
provide shareholder communications and other information to the ADR holders at the request of the issuer of the deposited
securities. The depository of an unsponsored ADR, on the other hand, is under no obligation to distribute shareholder
communications received from the issuer of the deposited securities or to pass through voting rights to ADR holders in respect of
the deposited securities. The Portfolio may invest in either type of ADR. Although the U.S. investor holds a substitute receipt
of ownership rather than direct stock certificates, the use of the depository receipts in the United Sates can reduce costs and
delays as well as potential currency exchange and other difficulties. The Portfolio may purchase securities in local markets and
direct delivery of these shares to the local depositary of an ADR agent bank in the foreign country. Simultaneously, the ADR
agents create a certificate which settles at the Portfolio's custodian in five days. The Portfolio may also execute trades on the
U.S. markets using existing ADRs. A foreign issuer of the security underlying an ADR is generally not subject to the same
reporting requirements in the United States as a domestic issuer. Accordingly, information available to a U.S. investor will be
limited to the information the foreign issuer is required to disclose in its country and the market value of an ADR may not
reflect undisclosed material information concerning the issuer of the underlying security. ADRs may also be subject to exchange
rate risks if the underlying foreign securities are denominated in a foreign currency.
Emerging Markets. The Portfolio may invest in securities of government, government-related, supranational and corporate
issuers located in emerging markets. Such investments entail significant risks as described below.
Company Debt. Governments of many emerging market countries have exercised and continue to exercise substantial
influence over many aspects of the private sector through the ownership or control of many companies, including some of the
largest in any given country. As a result, government actions in the future could have a significant effect on economic
conditions in emerging markets, which in turn, may adversely affect companies in the private sector, general market conditions and
prices and yields of certain of the securities in the Portfolio's portfolio. Expropriation, confiscatory taxation,
nationalization, political, economic or social instability or other similar developments have occurred frequently over the history
of certain emerging markets and could adversely affect the Portfolio's assets should these conditions recur.
Foreign currencies. Some emerging market countries may have managed currencies, which are not free floating against the
U.S. dollar. In addition, there is risk that certain emerging market countries may restrict the free conversion of their
currencies into other currencies. Further, certain emerging market currencies may not be internationally traded. Certain of
these currencies have experienced a steep devaluation relative to the U.S. dollar. Any devaluations in the currencies in which a
Portfolio's portfolio securities are denominated may have a detrimental impact on the Portfolio's net asset value.
Inflation. Many emerging markets have experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have adverse effects on the
economies and securities markets of certain emerging market countries. In an attempt to control inflation, wage and price
controls have been imposed in certain countries. Of these countries, some, in recent years, have begun to control inflation
through prudent economic policies.
Liquidity; Trading Volume; Regulatory Oversight. The securities markets of emerging market countries are substantially
smaller, less developed, less liquid and more volatile than the major securities markets in the U.S. Disclosure and regulatory
standards are in many respects less stringent than U.S. standards. Furthermore , there is a lower level of monitoring and
regulation of the markets and the activities of investors in such markets.
The limited size of many emerging market securities markets and limited trading volume in the securities of emerging
market issuers compared to volume of trading in the securities of U.S. issuers could cause prices to be erratic for reasons apart
from factors that affect the soundness and competitiveness of the securities issuers. For example, limited market size may cause
prices to be unduly influenced by traders who control large positions. Adverse publicity and investors' perceptions, whether or
not based on in-depth fundamental analysis, may decrease the value and liquidity of portfolio securities.
The risk also exists that an emergency situations may arise in one or more emerging markets, as a result of which trading
of securities may cease or may be substantially curtailed and prices for the Portfolio's securities in such markets may not be
readily available. The Portfolio may suspend redemption of its shares for any period during which an emergency exists, as
determined by the SEC. If market prices are not readily available, the Portfolio's securities in the affected markets will be
valued at fair value determined in good faith by or under the direction of the Board of Directors.
Withholding. Income from securities held by the Portfolio could be reduced by a withholding tax on the source or other
taxes imposed by the emerging market countries in which the Portfolio makes its investments. The Portfolio's net asset value may
also be affected by changes in the rates or methods of taxation applicable to the Portfolio or to entities in which the Portfolio
has invested. The Sub-advisor will consider the cost of any taxes in determining whether to acquire any particular investments,
but can provide no assurance that the taxes will not be subject to change.
Forward Contracts. The Portfolio may enter into contracts for the purchase or sale of a specific currency at a future
date at a price at the time the contract is entered into (a "Forward Contract"), for hedging purposes (e.g., to protect its
current or intended investments from fluctuations in currency exchange rates) as well as for non-hedging purposes.
The Portfolio does not presently intend to hold Forward Contracts entered into until maturity, at which time it would be
required to deliver or accept delivery of the underlying currency, but will seek in most instances to close out positions in such
Contracts by entering into offsetting transactions, which will serve to fix the Portfolio's profit or loss based upon the value of
the Contracts at the time the offsetting transactions is executed.
The Portfolio will also enter into transactions in Forward Contracts for other than hedging purposes, which presents
greater profit potential but also involves increased risk. For example, the Portfolio may purchase a given foreign currency
through a Forward Contract if, in the judgement of the Sub-advisor, the value of such currency is expected to rise relative to the
U.S. dollar. Conversely, the Portfolio may sell the currency through a Forward Contract if the Sub-advisor believes that its
value will decline relative to the dollar.
For an additional discussion of Forward Contracts see this Statement and the Trust's Prospectus under "Certain Risk
Factors and Investment Methods."
Futures Contracts. The Portfolio may purchase and sell futures contracts ("Future Contracts") on stock indices, foreign
currencies, interest rates or interest-rate related instruments, indices or foreign currencies or commodities. The Portfolio also
may purchase and sell Futures Contracts on foreign or domestic fixed income securities or indices of such securities including
municipal bond indices and any other indices of foreign or domestic fixed income securities that may become available for
trading. Such investment strategies will be used for hedging purposes and for non-hedging purposes, subject to applicable law.
Futures Contracts differ from options in that they are bilateral agreements, with both the purchaser and the seller
equally obligated to complete the transaction. Futures Contracts call for settlement only on the expiration date and cannot be
exercised at any other time during their term.
Purchases or sales of stock index futures contracts are used to attempt to protect the Portfolio's current or intended
stock investments from broad fluctuations in stock prices. For example, the Portfolio may sell stock index futures contracts in
anticipations of or during market decline to attempt to offset the decrease in market value of the Portfolio's securities
portfolio that might otherwise result. If such decline occurs, the loss in value of portfolio securities may be offset, in whole
or in part, by gains on the futures position. When the Portfolio is not fully invested in the securities market and anticipates a
significant market advance, it may purchase stock index futures in order to gain rapid market exposure that may, in part or
entirely, offset increases in the cost of securities that the Portfolio intends to purchase. As such purchases are made, the
corresponding positions in stock index futures contracts will be closed out. In a substantial majority of these transactions, the
Portfolio will purchase such securities upon termination of the futures position, but under unusual market conditions, a long
futures position may be terminated without a related purchase of securities.
The Portfolio may purchase and sell foreign currency futures contracts for hedging purposes, to attempt to protect its
current or intended investments from fluctuations in currency exchange rates. Such fluctuations could reduce the dollar value of
portfolio securities denominated in foreign currencies, or increase the dollar cost of foreign-denominated securities, or increase
the dollar cost of foreign-denominated securities to be acquired, even if the value of such securities in the currencies in which
they are denominated remains constant. The Portfolio may sell futures contracts on a foreign currency, for example, where it
holds securities denominated in such currency and it anticipates a decline in the value of such currency relative to the dollar.
In the event such decline occurs, the resulting adverse effect on the value of foreign-denominated securities may be offset, in
whole or in part, by gains on the futures contracts.
Conversely, the Portfolio could protect against a rise in the dollar cost of foreign-denominated securities to be
acquired by purchasing futures contracts on the relevant security, which could offset, in whole or in part, the increased cost of
such securities resulting from the rise in the dollar value of the underlying currencies. Where the Portfolio purchases futures
contracts under such circumstances, however, and the prices of securities to be acquired instead decline, the Portfolio will
sustain losses on its futures position which could reduce or eliminate the benefits of the reduced cost of portfolio securities to
be acquired.
For further information on Futures Contracts, see this Statement under "Certain Risk Factors and Investment Methods."
Investment in Other Investment Companies. The Portfolio may invest in other investment companies, including both
open-end and closed-end companies. Investments in closed-end investment companies may involve the payment of substantial premiums
above the value of such investment companies' portfolio securities.
Options. The Portfolio may invest in the following types of options, which involves the risks described below under the
caption "Risk Factors."
Options on Foreign Currencies. The Portfolio may purchase and write options on foreign currencies for hedging and
non-hedging purposes in a manner similar to that in which Futures Contracts on foreign currencies, or Forward Contracts, will be
utilized. For example, where a rise in the dollar value of a currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the Portfolio may purchase call options thereon. The purchase of such
options could offset, at least partially, the effect of the adverse movements in exchange rates.
Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar cost of securities
to be acquired, the Portfolio could write a put option on the relevant currency which, if rates move in the manner projected, will
expire unexercised and allow the Portfolio to hedge such increased cost up to the amount of the premium. Foreign currency options
written by the Portfolio will generally be covered in a manner similar to the covering of other types of options.
Options on Futures Contracts. The Portfolio may also purchase and write options to buy or sell those Futures Contracts
in which it may invest as described above under "Futures Contracts." Such investment strategies will be used for hedging purposes
and for non-hedging purposes, subject to applicable law.
Options on Futures Contracts that are written or purchased by the Portfolio on U.S. Exchanges are traded on the same
contract market as the underlying Futures Contract, and, like Futures Contracts, are subject to the regulation by the CFTC and the
performance guarantee of the exchange clearinghouse. In addition, Options on Futures Contracts may be traded on foreign
exchanges. The Portfolio may cover the writing of call Options on Futures Contracts (a) through purchases of the underlying
Futures Contract, (b) through ownership of the instrument, or instruments included in the index, underlying the Futures Contract,
or (c) through the holding of a call on the same Futures Contract and in the same principal amount as the call written where the
exercise price of the call held (i) is equal to or less than the exercise price of the call written or (ii) is greater than the
exercise price of the call written if the Portfolio owns liquid and unencumbered assets equal to the difference. The Portfolio
may cover the writing of put Options on Futures Contracts (a) through sales of the underlying Futures Contract, (b) through the
ownership of liquid and unencumbered assets equal to the value of the security or index underlying the Futures Contract, or (c)
through the holding of a put on the same Futures Contract and in the same principal amount as the put written where the exercise
price of the put held (i) is equal to or greater than the exercise price of the put written or where the exercise price of the put
held (ii) is less than the exercise price of the put written if the Portfolio owns liquid and unencumbered assets equal to the
difference. Put and call Options on Futures Contracts may also be covered in such other manner as may be in accordance with the
rules of the exchange on which the option is traded and applicable laws and regulations. Upon the exercise of a call Option on a
Futures Contract written by the Portfolio, the Portfolio will be required to sell the underlying Futures Contract which, if the
Portfolio has covered its obligation through the purchase of such Contract, will serve to liquidate its futures position.
Similarly, where a put Option on a Futures Contract written by the Portfolio is exercised, the Portfolio will be required to
purchase the underlying Futures Contract which, if the Portfolio has covered its obligation through the sale of such Contract,
will close out its futures position.
Depending on the degree of correlation between changes in the value of its portfolio securities and the changes in the
value of its futures positions, the Portfolio's losses from existing Options on Futures Contracts may to some extent be reduced or
increased by changes in the value of portfolio securities.
Options on Securities. The Portfolio may write (sell) covered put and call options, and purchase put and call options,
on securities.
A call option written by the Portfolio is "covered" if the Portfolio owns the security underlying the call or has an
absolute and immediate right to acquire that security without additional cash consideration (or for additional cash consideration
if the Portfolio owns liquid and unencumbered assets equal to the amount of cash consideration) upon conversion or exchange of
other securities held in its portfolio. A call option is also covered if the Portfolio holds a call on the same security and in
the same principal amount as the call written where the exercise price of the call held (a) is equal to or less than the exercise
price of the call written or (b) is greater than the exercise price of the call written if the Portfolio owns liquid and
unencumbered assets equal to the difference. If the portfolio writes a put option it must segregate liquid and unencumbered
assets with a value equal to the exercise price, or else holds a put on the same security and in the same principal amount as the
put written where the exercise price of the put held is equal to or greater than the exercise price of the put written or where
the exercise price of the put held is less than the exercise price of the put written if the Portfolio owns liquid and
unencumbered assets equal to the difference. Put and call options written by the Portfolio may also be covered in such other
manner as may be in accordance with the requirements of the exchange on which, or the counterparty with which, the option is
traded, and applicable laws and regulations.
Effecting a closing transaction in the case of a written call option will permit the Portfolio to write another call
option on the underlying security with either a different exercise price or expiration date or both, or in the case of a written
put option will permit the Portfolio to write another put option to the extent that the Portfolio owns liquid and unencumbered
assets. Such transactions permit the Portfolio to generate additional premium income, which will partially offset declines in the
value of portfolio securities or increases in the cost of securities to be acquired. Also, effecting a closing transaction will
permit the cash or proceeds from the concurrent sale of any securities subject to the option to be used for other investments of
the Portfolio, provided that another option on such security is not written. If the Portfolio desires to sell a particular
security from its portfolio on which it has written a call option, it will effect a closing transaction in connection with the
option prior to or concurrent with the sale of the security.
The Portfolio may write options in connection with buy-and-write transactions; that is, the Portfolio may purchase a
security and then write a call option against that security. The exercise price of the call option the Portfolio determines to
write will depend upon the expected price movement of the underlying security. The exercise price of a call option may be below
("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the current value of the underlying security at the time
the option is written. Buy-and-write transactions using in-the-money call options may be used when it is expected that the price
of the underlying security will decline moderately during the option period. Buy-and-write transactions using out-of-the-money
call options may be used when it is expected that the premiums received from writing the call option plus the appreciation in the
market price of the underlying security up to the exercise price will be greater than the appreciation in the price of the
underlying security alone. If the call options are exercised in such transactions, the Portfolio's maximum gain will be the
premium received by it for writing the option, adjusted upwards or downwards by the difference between the Portfolio's purchase
price of the security and the exercise price, less related transaction costs. If the options are not exercised and the price of
the underlying security declines, the amount of such decline will be offset in part, or entirely, by the premium received.
The writing of covered put options is similar in terms of risk/return characteristics to buy-and-write transactions. If
the market price or the underlying security rises or otherwise is above the exercise price, the put option will expire worthless
and the Portfolio's gain will be limited to the premium received, less related transaction costs. If the market price of the
underlying security declines or otherwise is below the exercise price, the Portfolio may elect to close the position or retain the
option until it is exercised, at which time the Portfolio will be required to take delivery of the security at the exercise price;
the Portfolio's return will be the premium received from the put option minus the amount by which the market price of the security
is below the exercise price, which could result in a loss. Out-of-the-money, at-the-money and in-the-money put options may be
used by the Portfolio in the same market environments that call options are used in equivalent buy-and-write transactions.
The Portfolio may also write combinations of put and call options on the same security, known as "straddles" with the
same exercise price and expiration date. By writing a straddle, the Portfolio undertakes a simultaneous obligation to sell and
purchase the same security in the event that one of the options is exercised. If the price of the security subsequently rises
sufficiently above the exercise price to cover the amount of the premium and transaction costs, the call will likely be exercised
and the Portfolio will be required to sell the underlying security at a below market price. This loss may be offset, however, in
whole or in part, by the premiums received on the writing of the two options. Conversely, if the price of the security declines
by a sufficient amount, the put will likely be exercised. The writing of straddles will likely be effective, therefore, only
where the price of the security remains stable and neither the call nor the put is exercised. In those instances where one of the
options is exercised, the loss on the purchase or sale of the underlying security may exceed the amount of the premiums received.
The writing of options on securities will not be undertaken by the Portfolio solely for hedging purposes, and could
involve certain risks which are not present in the case of hedging transactions. Moreover, even where options are written for
hedging purposes, such transactions constitute only a partial hedge against declines in the value of portfolio securities or
against increases in the value of securities to be acquired, up to the amount of the premium. The Portfolio may also purchase
options for hedging purposes or to increase its return.
The Portfolio may also purchase call options to hedge against an increase in the price of securities that the Portfolio
anticipates purchasing in the future. If such increase occurs, the call option will permit the Portfolio to purchase the
securities at the exercise price, or to close out the options at a profit.
Options on Stock Indices. The Portfolio may write (sell) covered call and put options and purchase call and put options
on stock indices. The Portfolio may cover written call options on stock indices by owning securities whose price changes, in the
opinion of the Sub-advisor, are expected to be similar to those of the underlying index, or by having an absolute and immediate
right to acquire such securities without additional cash consideration (or for additional cash consideration if the Portfolio owns
liquid and unencumbered assets equal to the amount of cash consideration) upon conversion or exchange of other securities in its
portfolio. The Portfolio may also cover call options on stock indices by holding a call on the same index and in the same
principal amount as the call written where the exercise price of the call held (a) is equal to or less than the exercise price of
the call written or (b) is greater than the exercise price of the call written if the Portfolio own liquid and unencumbered assets
equal to the difference. If the Portfolio writes put options on stock indices, it must segregate liquid and unencumbered assets
with a value equal to the exercise price, or hold a put on the same stock index and in the same principal amount as the put
written where the exercise price of the put held (a) is equal to or greater than the exercise price of the put written or (b) is
less than the exercise price of the put written if the Portfolio owns liquid and unencumbered assets equal to the difference. Put
and call options on stock indices may also be covered in such other manner as may be in accordance with the rules of the exchange
on which, or the counterparty with which, the option is traded and applicable laws and regulations.
The purchase of call options on stock indices may be used by the Portfolio to attempt to reduce the risk of missing a
broad market advance, or an advance in an industry or market segment, at a time when the Portfolio holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options for this purpose, the Portfolio will also bear the
risk of losing all or a portion of the premium paid it the value of the index does not rise. The purchase of call options on
stock indices when the Portfolio is substantially fully invested is a form of leverage, up to the amount of the premium and
related transaction costs, and involves risks of loss and of increased volatility similar to those involved in purchasing calls on
securities the Portfolio owns.
The index underlying a stock index option may be a "broad-based" index, such as the Standard & Poor's 500 Index or the
New York Stock Exchange Composite Index, the changes in value of which ordinarily will reflect movements in the stock market in
general. In contrast, certain options may be based on narrower market indices, such as the Standard & Poor's 100 Index, or on
indices of securities of particular industry groups, such as those of oil and gas or technology companies. A stock index assigns
relative values to the stocks included in the index and the index fluctuates with changes in the market values of the stocks so
included. The composition of the index is changed periodically.
For an additional discussion of options, see this Statement under "Certain Risk Factors and Investment Methods."
Special Risk Factors.
Risk of Imperfect Correlation of Hedging Instruments with the Portfolio's Portfolio. The use of derivatives for "cross
hedging" purposes (such as a transaction in a Forward Contract on one currency to hedge exposure to a different currency) may
involve greater correlation risks. Consequently, the Portfolio bears the risk that the price of the portfolio securities being
hedged will not move in the same amount or direction as the underlying index or obligation.
It should be noted that stock index futures contracts or options based upon a narrower index of securities, such as those
of a particular industry group, may present greater risk than options or futures based on a broad market index. This is due to
the fact that a narrower index is more susceptible to rapid and extreme fluctuations as a result of changes in the value of a
small number of securities. Nevertheless, where the Portfolio enters into transactions in options or futures on narrowly-based
indices for hedging purposes, movements in the value of the index should, if the hedge is successful, correlate closely with the
portion of the Portfolio's portfolio or the intended acquisitions being hedged.
The trading of derivatives for hedging purposes entails the additional risk of imperfect correlation between movements in
the price of the derivative and the price of the underlying index or obligation. The anticipated spread between the prices may be
distorted due to the difference in the nature of the markets such as differences in margin requirements, the liquidity of such
markets and the participation of speculators in the derivatives markets. In this regard, trading by speculators in derivatives
has in the past occasionally resulted in market distortions, which may be difficult or impossible to predict, particularly near
the expiration of such instruments.
The trading of Options on Futures Contracts also entails the risk that changes in the value of the underlying Futures
Contracts will not be fully reflected in the value of the option. The risk of imperfect correlation, however, generally tends to
diminish as the maturity date of the Futures Contract or expiration date of the option approaches.
Further, with respect to options on securities, options on stock indices, options on currencies and Options on Futures
Contracts, the Portfolio is subject to the risk of market movements between the time that the option is exercised and the time of
performance thereunder. This could increase the extent of any loss suffered by the Portfolio in connection with such transactions.
In writing a covered call option on a security, index or futures contract, the Portfolio also incurs the risk that
changes in the value of the instruments used to cover the position will not correlate closely with changes in the value of the
option or underlying index or instrument. For example, where the Portfolio covers a call option written on a stock index through
segregation of securities, such securities may not match the composition of the index, and the Portfolio may not be fully
covered. As a result, the Portfolio could be subject to risk of loss in the event of adverse market movements.
Risks of Non-Hedging Transactions. The Portfolio may enter transactions in derivatives for non-hedging purposes as well
as hedging purposes. Non-hedging transactions in such instruments involve greater risks and may result in losses which may not be
offset by increases in the value of portfolio securities or declines in the cost of securities to be acquired. Nevertheless, the
method of covering an option employed by the Portfolio may not fully protect it against risk of loss and, in any event, the
Portfolio could suffer losses on the option position which might not be offset by corresponding portfolio gains. The Portfolio
may also enter into futures, Forward Contracts for non-hedging purposes. For example, the Portfolio may enter into such a
transaction as an alternative to purchasing or selling the underlying instrument or to obtain desired exposure to an index or
market. In such instances, the Portfolio will be exposed to the same economic risks incurred in purchasing or selling the
underlying instrument or instruments. However, transactions in futures, Forward Contracts may be leveraged, which could expose
the Portfolio to greater risk of loss than such purchases or sales. Entering into transactions in derivatives for other than
hedging purposes, therefore, could expose the Portfolio to significant risk of loss if the prices, rates or values of the
underlying instruments or indices do not move in the direction or to the extent anticipated.
With respect to the writing of straddles on securities, the Portfolio incurs the risk that the price of the underlying
security will not remain stable, that one of the options written will be exercised and that the resulting loss will not be offset
by the amount of the premiums received. Such transactions, therefore, create an opportunity for increased return by providing the
Portfolio with two simultaneous premiums on the same security, but involve additional risk, since the Portfolio may have an option
exercised against it regardless of whether the price of the security increases or decreases.
Risk of a Potential Lack of a Liquid Secondary Market. Prior to exercise or expiration, a futures or option position can
only be terminated by entering into a closing purchase or sale transaction. In that event, it may not be possible to close out a
position held by the Portfolio, and the Portfolio could be required to purchase or sell the instrument underlying an option, make
or receive a cash settlement or meet ongoing variation margin requirements. Under such circumstances, if the Portfolio has
insufficient cash available to meet margin requirements, it will be necessary to liquidate portfolio securities or other assets at
a time when it is disadvantageous to do so. The inability to close out options and futures positions, therefore, could have an
adverse impact on the Portfolio's ability effectively to hedge its portfolio, and could result in trading losses.
The trading of Futures Contracts and options is also subject to the risk of trading halts, suspensions, exchange or
clearinghouse equipment failures, government intervention, insolvency of a brokerage firm or clearinghouse or other disruptions of
normal trading activity, which could at times make it difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
Potential Bankruptcy of a Clearinghouse or Broker. When the Portfolio enters into transactions in exchange-traded
futures or options, it is exposed to the risk of the potential bankruptcy of the relevant exchange clearinghouse or the broker
through which the Portfolio has effected the transaction. In that event, the Portfolio might not be able to recover amounts
deposited as margin, or amounts owed to the Portfolio in connection with its transactions, for an indefinite period of time, and
could sustain losses of a portion or all of such amounts. Moreover, the performance guarantee of an exchange clearinghouse
generally extends only to its members and the Portfolio could sustain losses, notwithstanding such guarantee, in the event of the
bankruptcy of its broker.
Trading and Position Limits. The exchanges on which futures and options are traded may impose limitations governing the
maximum number of positions on the same side of the market and involving the same underlying instrument which may be held by a
single investor, whether acting alone or in concert with others (regardless of whether such contracts are held on the same or
different exchanges or held or written in one or more accounts or through one or more brokers.) Further, the CFTC and the various
contract markets have established limits referred to as "speculative position limits" on the maximum net long or net short
position which any person may hold or control in a particular futures or option contract. An exchange may order the liquidation
of positions found to be in violation of these limits and it may impose other sanctions or restrictions. The Sub-advisor does not
believe that these trading and position limits will have any adverse impact on the strategies for hedging the portfolios of the
Portfolio.
Risks of Options on Futures Contracts. The amount of risk the Portfolio assumes when it purchases an Option on a Futures
Contract is the premium paid for the option, plus related transaction costs. In order to profit from an option purchased,
however, it may be necessary to exercise the option and to liquidate the underlying Futures Contract, subject to the risks of the
availability of a liquid offset market described herein. The writer of an Option on a Futures Contract is subject to the risks of
commodity futures trading, including the requirement of initial and variation margin payments, as well as the additional risk that
movements in the price of the option may not correlate with movements in the price of the underlying security, index, currency or
Futures Contract.
Risks of Transactions in Foreign Currencies and Over-the-Counter Derivatives and Other Transactions Not Conducted on U.S.
Exchanges. Transactions in Forward Contracts on foreign currencies, as well as futures and options on foreign currencies and
transactions executed on foreign exchanges, are subject to all of the correlation, liquidity and other risks outlined above. In
addition, however, such transactions are subject to the risk of governmental actions affecting trading in or the prices of
currencies underlying such contracts, which could restrict or eliminate trading and could have a substantial adverse effect on the
value of positions held by the Portfolio. Further, the value of such positions could be adversely affected by a number of other
complex political and economic factors applicable to the countries issuing the underlying currencies.
Further, unlike trading in most other types of instruments, there is no systematic reporting of last sale information
with respect to the foreign currencies underlying contracts thereon. As a result, the available information on which trading
systems will be based may not be as complete as the comparable data on which the Portfolio makes investment and trading decisions
in connection with other transactions. Moreover, because the foreign currency market is a global, 24-hour market, events could
occur in that market which will not be reflected in the forward, futures or options market until the following day, thereby making
it more difficult for the Portfolio to respond to such events in a timely manner.
Settlements of exercises of over-the-counter Forward Contracts or foreign currency options generally must occur within
the country issuing the underlying currency, which in turn requires traders to accept or make delivery of such currencies in
conformity with any U.S. or foreign restrictions and regulations regarding the maintenance of foreign banking relationships, fees,
taxes or other charges.
Unlike transactions entered into by the Portfolio in Futures Contracts and exchange-traded options, on foreign
currencies, Forward Contracts, over-the-counter options on securities, swaps and other over-the-counter derivatives are not traded
on contract markets regulated by the CFTC or (with the exception of certain foreign currency options) the SEC. To the contrary,
such instruments are traded through financial institutions acting as market-makers, although foreign currency options are also
traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to SEC regulation. In an over-the-counter trading environment, many of the protections afforded to exchange participants
will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore
continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of
the premium plus related transaction costs, this entire amount could be lost. Moreover, the option writer and a trader of Forward
Contracts could lose amounts substantially in excess of their initial investments, due to the margin and collateral requirements
associated with such positions.
In addition, over-the-counter transactions can only be entered into with a financial institution willing to take the
opposite side, as principal, of the Portfolio's position unless the institution acts as broker and is able to find another
counterparty willing to enter into the transaction with the Portfolio. Where no such counterparty is available, it will not be
possible to enter into a desired transaction.
Further, over-the-counter transactions are not subject to the guarantee of an exchange clearinghouse, and the Portfolio
will therefore be subject to the risk of default by, or the bankruptcy of, the financial institution serving as its counterparty.
One or more of such institutions also may decide to discontinue their role as market-makers in a particular currency or security,
thereby restricting the Portfolio's ability to enter into desired hedging transactions.
Options on securities, options on stock indices, Futures Contracts, Options on Futures Contracts and options on foreign
currencies may be traded on exchanges located in foreign countries. Such transactions may not be conducted in the same manner as
those entered into on U.S. exchanges, and may be subject to different margin, exercise, settlement or expiration procedures. As a
result, many of the risks of over-the-counter trading may be present in connection with such transactions.
Options on foreign currencies traded on national securities exchanges are within the jurisdiction of the SEC, as are
other securities traded on such exchanges. As a result, many of the protections provided to traders on organized exchanges will
be available with respect to such transactions. In particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing Corporation (the "OCC"), thereby reducing the risk of
counterparty default.
The purchase and sale of exchange-traded foreign currency options, is subject to the risks regarding adverse market
movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental
authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies
involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be
made exclusively through the OCC, which has established banking relationships in applicable foreign countries for this purpose.
As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on the OCC or its clearing member, impose special procedures
on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement
prices or prohibitions on exercise.
Short Term Instruments. The Portfolio may hold cash and invest in cash equivalents, such as short-term U.S. Government
Securities, commercial paper and bank instruments.
Temporary Defensive Positions. During periods of unusual market conditions when the Sub-advisor believes that investing
for temporary defensive purposes is appropriate, or in order to meet anticipated redemption requests, a large portion or all of
the assets of the Portfolio may be invested in cash (including foreign currency) or cash equivalents, including, but not limited
to, obligations of banks (including certificates of deposit, bankers acceptances, time deposits and repurchase agreements),
commercial paper, short-term notes, U.S. Government securities and related repurchase agreements.
Warrants. The Portfolio may invest in warrants. The strike price of warrants typically is much lower than the current
market price of the underlying securities, yet they are subject to similar price fluctuations, in absolute terms. As a result,
warrants may be more volatile investments than the underlying securities and may offer greater potential for capital appreciation
as well as capital loss.
Additional information regarding warrants is included in this Statement and the Trust's Prospectus under "Certain Risk
factors and Investment Methods."
"When-Issued" Securities. The Portfolio may purchase securities on a "when-issued," "forward commitment," or "delayed
delivery basis." The commitment to purchase a security for which payment will be made on a future date may be deemed a separate
security. While awaiting delivery of securities purchased on such basis, the Portfolio will identify liquid and unencumbered
assets equal to its forward delivery commitment.
For more information about when-issued securities, please see this Statement under "Certain Risk Factors and Investment
Methods."
AST Janus Small-Cap Growth Portfolio:
Investment Objective: As stated in the Prospectus, the Portfolio's investment objective is capital appreciation. 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.
Investment Policies:
Investment Company Securities. From time to time, the Portfolio may invest in securities of other investment companies,
subject to the provisions of Section 12(d)(1) of the 1940 Act. The Portfolio may invest in securities of money market funds
managed by the Sub-advisor subject to the terms of an exemptive order obtained by the Sub-advisor and the funds that are advised
or sub-advised by the Sub-advisor. Under such order, the Portfolio will limit its aggregate investment in a money market fund
managed by the Sub-advisor to the greater of (i) 5% of its total assets or (ii) $2.5 million, although the Trust's Board of
Trustees may increase this limit up to 25% of the Trust's total assets.
Depositary Receipts. The Portfolio may invest in sponsored and unsponsored American Depositary Receipts ("ADRs"), which
are described in the Trust's Prospectus under "Certain Risk Factors and Investment Methods." Holders of unsponsored ADRs
generally bear all the costs of the ADR facility, whereas foreign issuers typically bear certain costs in a sponsored ADR. The
bank or trust company depositary of an unsponsored ADR may be under no obligation to distribute shareholder communications
received from the foreign issuer or to pass through voting rights. The Portfolio may also invest in European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") and in other similar instruments representing securities of foreign companies.
Income-Producing Securities. Types of income producing securities that the Portfolio may purchase include, but are not
limited to, (i) variable and floating rate obligations, which are securities having interest rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate index or market interest rate, (ii) standby
commitments, which are instruments similar to puts that give the holder the option to obligate a broker, dealer or bank to
repurchase a security at a specified price, and (iii) tender option bonds, which are securities that are coupled with the option
to tender the securities to a bank, broker-dealer or other financial institution at periodic intervals and receive the face value
of the bond. The Portfolio will purchase standby commitments, tender option bonds and instruments with demand features primarily
for the purpose of increasing the liquidity of its portfolio. The Portfolio may also invest in inverse floaters, which are debt
instruments the interest on which varies in an inverse relationship to the interest rate on another security. For example,
certain inverse floaters pay interest at a rate that varies inversely to prevailing short-term interest rates. Some inverse
floaters have an interest rate reset mechanism that multiplies the effects of changes in an underlying index. Such a mechanism
may increase fluctuations in the security's market value. The Portfolio will not invest more than 5% of its assets in inverse
floaters.
High-Yield/High-Risk Securities. The Portfolio intends to invest less than 35% of its net assets in debt securities that
are rated below investment grade (e.g., securities rated BB or lower by Standard & Poor's Ratings Services ("Standard & Poor's")
or Ba or lower by Moody's Investors Service, Inc. ("Moody's")). Lower rated securities involve a higher degree of credit risk,
which is the risk that the issuer will not make interest or principal payments when due. In the event of an unanticipated
default, the Portfolio would experience a reduction in its income, and could expect a decline in the market value of the
securities so affected.
The Portfolio may also invest in unrated debt securities of foreign and domestic issuers. Unrated debt, while not
necessarily of lower quality than rated securities, may not have as broad a market. Sovereign debt of foreign governments is
generally rated by country. Because these ratings do not take into account individual factors relevant to each issue and may not
be updated regularly, the Sub-advisor may treat such securities as unrated debt. Because of the size and perceived demand of the
issue, among other factors, certain municipalities may not incur the costs of obtaining a rating. The Sub-advisor will analyze
the creditworthiness of the issuer, as well as any financial institution or other party responsible for payments on the security,
in determining whether to purchase unrated municipal bonds. Unrated debt securities will be included in the 35% limit unless the
portfolio managers deem such securities to be the equivalent of investment grade securities.
The Portfolio may purchase defaulted securities subject to the above limits, but only when the Sub-advisor believes,
based upon its analysis of the financial condition, results of operations and economic outlook of an issuer, that there is
potential for resumption of income payments and that the securities offer an unusual opportunity for capital appreciation.
Notwithstanding the Sub-advisor's belief as to the resumption of income, however, the purchase of any security on which payment of
interest or dividends is suspended involves a high degree of risk. Such risk includes, among other things, the following:
Financial and Market Risks. Investments in securities that are in default involve a high degree of financial and
market risks that can result in substantial or, at times, even total losses. Issuers of defaulted securities may have substantial
capital needs and may become involved in bankruptcy or reorganization proceedings. Among the problems involved in investments in
such issuers is the fact that it may be difficult to obtain information about their condition. The market prices of securities of
such issuers also are subject to abrupt and erratic movements and above average price volatility, and the spread between the bid
and asked prices of such securities may be greater than normally expected.
Disposition of Portfolio Securities. Although the Portfolio generally will purchase securities for which the
Sub-advisor expects an active market to be maintained, defaulted securities may be less actively traded than other securities and
it may be difficult to dispose of substantial holdings of such securities at prevailing market prices. The Portfolio will limit
holdings of any such securities to amounts that the Sub-advisor believes could be readily sold, and holdings of such securities
would, in any event, be limited so as not to limit the Portfolio's ability to readily dispose of securities to meet redemptions.
Other. Defaulted securities require active monitoring and may, at times, require participation in bankruptcy or
receivership proceedings on behalf of the Portfolio.
Reverse Repurchase Agreements. The Portfolio may use reverse repurchase agreements to provide cash to satisfy unusually
heavy redemption requests or for other temporary or emergency purposes without the necessity of selling portfolio securities,
rather than to obtain cash to make additional investments. The Portfolio will enter into reverse repurchase agreements only with
parties that the Sub-advisor deems creditworthy. Using reverse repurchase agreements to earn additional income involves the risk
that the interest earned on the invested proceeds is less than the expense of the reverse repurchase agreement transaction. This
technique may also have a leveraging effect on the Portfolio, although the requirement for the Portfolio to segregate assets in
the amount of the reverse repurchase agreement minimizes this effect.
For an additional discussion of repurchase agreements and reverse repurchase agreements and their risks, see the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
Futures, Options and Forward Contracts. 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, and forward contracts. The Portfolio will not enter into any futures contracts or options on futures contracts if the
aggregate amount of the Portfolio's commitments under outstanding futures contract positions and options on futures contracts
written by the Portfolio would exceed the market value of the Portfolio's total assets. The Portfolio may invest in forward
currency contracts with stated values of up to the value of the Portfolio's assets.
The Portfolio may buy or write options in privately negotiated transactions on the types of securities, and on indices
based on the types of securities, in which the Portfolio is permitted to invest directly. The Portfolio will effect such
transactions only with investment dealers and other financial institutions (such as commercial banks or savings and loan
institutions) deemed creditworthy by the Sub-advisor pursuant to procedures adopted by the Sub-advisor for monitoring the
creditworthiness of those entities. To the extent that an option purchased or written by the Portfolio in a negotiated
transaction is illiquid, the value of the option purchased or the amount of the Portfolio's obligations under an option it has
written, as the case may be, will be subject to the Portfolio's limitation on illiquid investments. In the case of illiquid
options, it may not be possible for the Portfolio to effect an offsetting transaction when the Sub-advisor believes it would be
advantageous for the Portfolio to do so. For a description of these strategies and instruments and certain of their risks, see
this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Eurodollar Instruments. The Portfolio may make investments in Eurodollar instruments. Eurodollar instruments are U.S.
dollar-denominated futures contracts or options thereon that are linked to the London Interbank Offered Rate ("LIBOR"), although
foreign currency-denominated instruments are available from time to time. Eurodollar futures contracts enable purchasers to obtain
a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. The Portfolio might use Eurodollar
futures contracts and options thereon to hedge against changes in LIBOR, to which many interest rate swaps and fixed-income
instruments are linked.
Swaps and Swap-Related Products. The Portfolio may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its assets or its liabilities, and will usually enter
into interest rate swaps on a net basis (i.e., the two payment streams are netted out, with the Portfolio receiving or paying, as
the case may be, only the net amount of the two payments). The net amount of the excess, if any, of the Portfolio's obligations
over its entitlement with respect to each interest rate swap will be calculated on a daily basis and an amount of cash or other
liquid assets having an aggregate net asset value at least equal to the accrued excess will be maintained in a segregated account
by the Portfolio's custodian. If the Portfolio enters into an interest rate swap on other than a net basis, it would maintain a
segregated account in the full amount accrued on a daily basis of its obligations with respect to the swap. The Portfolio will
not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in one of the three highest rating categories of at least one NRSRO at the time of entering into
such transaction. The Sub-advisor will monitor the creditworthiness of all counterparties on an ongoing basis. If there is a
default by the other party to such a transaction, the Portfolio will have contractual remedies pursuant to the agreements related
to the transaction.
The swap market has grown substantially in recent years, with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. The Sub-advisor has determined that, as a result, the
swap market has become relatively liquid. Caps and floors are more recent innovations for which standardized documentation has
not yet been developed and, accordingly, are less liquid than swaps. To the extent the Portfolio sells (i.e., writes) caps and
floors, it will segregate cash or other liquid assets having an aggregate net asset value at least equal to the full amount,
accrued on a daily basis, of its obligations with respect to any caps or floors.
There is no limit on the amount of interest rate swap transactions that may be entered into by the Portfolio. These
transactions may in some instances involve the delivery of securities or other underlying assets by the Portfolio or its
counterparty to collateralize obligations under the swap. The Portfolio bears the risk of loss of any payments it is
contractually obligated to make in connection with interest rate swaps. In addition, if the other party to an interest rate swap
that is not collateralized defaults, the Portfolio would risk the loss of the payments that it contractually is entitled to
receive. The Portfolio may buy and sell (i.e., write) caps and floors without limitation, subject to the segregation requirement
described above.
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Janus Small-Cap Growth Portfolio. These limitations are not "fundamental" restrictions, and may be changed by the Trustees
without shareholder approval.
1. The Portfolio does not currently intend to sell securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short without the payment of any additional consideration
therefor, and provided that transactions in futures, options, swaps and forward contracts are not deemed to constitute selling
securities short.
2. The Portfolio does not currently intend to purchase securities on margin, except that the Portfolio may obtain
such short-term credits as are necessary for the clearance of transactions, and provided that margin payments and other deposits
in connection with transactions in futures, options, swaps and forward contracts shall not be deemed to constitute purchasing
securities on margin.
3. The Portfolio does not currently intend to purchase any security or enter into a repurchase agreement if, as a
result, more than 15% of its net assets would be invested in repurchase agreements not entitling the holder to payment of
principal and interest within seven days and in securities that are illiquid by virtue of legal or contractual restrictions on
resale or the absence of a readily available market. The Trustees, or the Portfolio's Sub-advisor acting pursuant to authority
delegated by the Trustees, may determine that a readily available market exists for securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933 ("Rule 144A Securities"), or any successor to such rule, Section 4(2) commercial paper
and municipal lease obligations. Accordingly, such securities may not be subject to the foregoing limitation.
4. The Portfolio may not invest in companies for the purpose of exercising control of management.
AST Kemper Small-Cap Growth Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek maximum appreciation of investors' capital from a
portfolio primarily of growth stocks of smaller companies.
Investment Policies:
Options. The Portfolio may write (sell) call options on securities as long as it owns the underlying securities subject
to the option, or an option to purchase the same underlying securities having an exercise price equal to or less than the exercise
price of the option, or will establish and maintain with the Portfolio's custodian for the term of the option a segregated account
consisting of cash or other liquid securities ("eligible securities") to the extent required by applicable regulation in
connection with the optioned securities. The Portfolio may write put options provided that, so long as the Portfolio is obligated
as the writer of the option, the Portfolio owns an option to sell the underlying securities subject to the option having an
exercise price equal to or greater than the exercise price of the option, or it deposits and maintains with the custodian in a
segregated account eligible securities having a value equal to or greater than the exercise price of the option. The premium
received for writing an option will reflect, among other things, the current market price of the underlying security, the
relationship of the exercise price to such market price, the price volatility of the underlying security, the option period,
supply and demand and interest rates. The Portfolio may write or purchase spread options, which are options for which the
exercise price may be a fixed dollar spread or yield spread between the security underlying the option and another security that
is used as a benchmark. The exercise price of an option may be below, equal to or above the current market value of the
underlying security at the time the option is written. The Portfolio may write (sell) call and put options on up to 25% of net
assets and may purchase put and call options provided that no more than 5% of its net assets may be invested in premiums on such
options.
If a secured put option expires unexercised, the writer realizes a gain from the amount of the premium, plus the interest
income on the securities in the segregated account. If the secured put writer has to buy the underlying security because of the
exercise of the put option, the secured put writer incurs an unrealized loss to the extent that the current market value of the
underlying security is less than the exercise price of the put option. However, this would be offset in whole or in part by gain
from the premium received and any interest income earned on the securities in the segregated account.
For an additional discussion of investing in options and the risks involved therein, see this Statement and the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
Over-the-Counter Options. The Portfolio may deal in over-the-counter traded options ("OTC options"). Unlike
exchange-traded options, OTC options are transacted directly with dealers and not with a clearing corporation. Since there is no
exchange, pricing is normally done by reference to information from market makers, which information is carefully monitored by the
Sub-advisor and verified in appropriate cases. In writing OTC options, the Portfolio receives the premium in advance from the
dealer. OTC options are available for a greater variety of securities or other assets, and for a wider range of expiration dates
and exercise prices, than exchange traded options.
The staff of the SEC takes the position that purchased OTC options and the assets used as "cover" for written OTC options
are illiquid securities. Accordingly, the Portfolio will only engage in OTC options transactions with dealers that have been
specifically approved by the Sub-advisor. The Sub-advisor believes that the approved dealers should be able to enter into closing
transactions if necessary and, therefore, present minimal credit risks to the Portfolio. The Sub-advisor will monitor the
creditworthiness of the approved dealers on an on-going basis. The Portfolio currently will not engage in OTC options
transactions if the amount invested by the Portfolio in OTC options, plus a "liquidity charge" related to OTC options written by
the Portfolio, plus the amount invested by the Portfolio in other illiquid securities, would exceed 15% of the Portfolio's net
assets. The "liquidity charge" referred to above is computed as described below.
The Portfolio anticipates entering into agreements with dealers to which the Portfolio sells OTC options. Under these
agreements the Portfolio would have the absolute right to repurchase the OTC options from the dealer at any time at a price no
greater than a price established under the agreements (the "Repurchase Price"). The "liquidity charge" referred to above for a
specific OTC option transaction will be the Repurchase Price related to the OTC option less the intrinsic value of the OTC
option. The intrinsic value of an OTC call option for such purposes will be the amount by which the current market value of the
underlying security exceeds the exercise price. In the case of an OTC put option, intrinsic value will be the amount by which the
exercise price exceeds the current market value of the underlying security. If there is no such agreement requiring a dealer to
allow the Portfolio to repurchase a specific OTC option written by the Portfolio, the "liquidity charge" will be the current
market value of the assets serving as "cover" for such OTC option.
Options on Securities Indices. The Portfolio, as part of its options transactions, may also use options on
securities indices in an attempt to hedge against market conditions affecting the value of securities that the Portfolio owns or
intends to purchase, and not for speculation. When the Portfolio writes an option on a securities index, it will be required to
deposit with its custodian and mark-to-market eligible securities to the extent required by applicable regulation. In addition,
where the Portfolio writes a call option on a securities index at a time when the contract value exceeds the exercise price, the
Portfolio will segregate and mark-to-market, until the option expires or is closed out, cash or cash equivalents equal in value to
such excess. The Portfolio may also purchase and sell options on indices other than securities indices, as available, such as
foreign currency indices. Because index options are settled in cash, a call writer cannot determine the amount of its settlement
obligations in advance and, unlike call writing on specific securities, cannot cover its potential settlement obligations by
acquiring and holding the underlying securities. Index options involve risks similar to those risks relating to transactions in
financial futures contracts described below.
For an additional discussion of investing in OTC options and options on securities indices, and the risks involved
therein, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Financial Futures Contracts and Related Options. The Portfolio may enter into financial futures contracts. This
investment technique is designed primarily to hedge (i.e. protect) against anticipated future changes in market conditions or
foreign exchange rates which otherwise might affect adversely the value of securities or other assets which the Portfolio holds or
intends to purchase. For example, when the near-term market view is bearish but the portfolio composition is judged satisfactory
for the longer term, exposure to temporary declines in the market may be reduced by entering into futures contracts to sell
securities or the cash value of an index. Conversely, where the near-term view is bullish, but the Portfolio is believed to be
well positioned for the longer term with a high cash position, the Portfolio can hedge against market increases by entering into
futures contracts to buy securities or the cash value of an index. In either case, the use of futures contracts would tend to
minimize portfolio turnover and facilitate the Portfolio's pursuit of its investment objective. Also, if the Portfolio owned
long-term bonds and interest rates were expected to rise, it could sell financial futures contracts. If interest rates did
increase, the value of the bonds held by the Portfolio would decline, but this decline would be offset in whole or in part by an
increase in the value of the Portfolio's futures contracts. If, on the other hand, long-term interest rates were expected to
decline, the Portfolio could hold short-term debt securities and benefit from the income earned by holding such securities, while
at the same time the Portfolio could purchase futures contracts on long-term bonds or the cash value of a securities index. Thus,
the Portfolio could take advantage of the anticipated rise in the value of long-term bonds without actually buying them. The
futures contracts and short-term debt securities could then be liquidated and the cash proceeds used to buy long-term bonds. At
the time of delivery, in the case of fixed income securities pursuant to the contract, adjustments are made to recognize
differences in value arising from the delivery of securities with a different interest rate than that specified in the contract.
In some cases, securities to be delivered under a futures contract may not have been issued at the time the contract was written.
The market prices of futures contracts may be affected by certain factors. If participants in the futures market elect
to close out their contracts through offsetting transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures market could result. Price distortions also could result if investors in futures
contracts decide to make or take delivery of underlying securities or other assets rather than engage in closing transactions
because of the resultant reduction in the liquidity of the futures market. In addition, because margin requirements in the
futures market are less onerous than margin requirements in the cash market, increased participation by speculators in the futures
market could cause temporary price distortions. Due to the possibility of these price distortions and because of the imperfect
correlation between movements in the prices of securities or other assets and movements in the prices of futures contracts, a
correct forecast of market trends by the Sub-advisor still may not result in a successful hedging transaction.
The Portfolio may purchase and write call and put options on financial futures contracts. Options on futures contracts
involve risks similar to those risks relating to transactions in financial futures contracts. The Portfolio will not enter into
any futures contracts or options on futures contracts if the aggregate of the contract value of the outstanding futures contracts
of the Portfolio and futures contracts subject to outstanding options written by the Portfolio would exceed 50% of the total
assets of the Portfolio. For an additional discussion of investing in financial futures contracts and options on financial
futures contracts and the risks involved therein, see this Statement and the Trust's Prospectus under "Certain Risk Factors and
Investment Methods."
Section 4(2) Paper. The Portfolio may invest in commercial paper issued by major corporations under the Securities Act
of 1933 in reliance on the exemption from registration afforded by Section 3(a)(3) thereof. Such commercial paper may be issued
only to finance current transactions and must mature in nine months or less. Such commercial paper is traded primarily by
institutional investors through investment dealers, and individual investor participation in the commercial paper market is very
limited. The Portfolio also may invest in commercial paper issued in reliance on the so-called "private placement" exemption from
registration afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2) paper"). Section 4(2) paper is restricted as
to disposition under the federal securities laws, and generally is sold to institutional investors, such as the Portfolio, who
agree that they are purchasing the paper for investment and not with a view to public distribution. Any resale by the purchaser
must be in an exempt transaction. Section 4(2) paper normally is resold to other institutional investors through or with the
assistance of the issuer or investment dealers who make a market in the Section 4(2) paper, thus providing liquidity. Section
4(2) paper will be considered illiquid, and subject to the Portfolio's limitation on investing in illiquid securities, unless the
Sub-advisor determines such Section 4(2) paper to be liquid under guidelines established by the Board of Trustees of the Trust.
Collateralized Obligations. The Portfolio may invest in asset-backed and mortgage-backed securities, including interest
only ("IO") and principal only ("PO") securities (collectively, "collateralized obligations"). A collateralized obligation is a
debt security issued by a corporation, trust or custodian, or by a U.S. Government agency or instrumentality, that is
collateralized by a portfolio or pool of mortgages, mortgage pass-through securities, U.S. Government securities or other assets.
Collateralized obligations, depending on their structure and the rate of prepayments, can be volatile.
The Portfolio will currently invest in only those collateralized obligations that are fully collateralized and
that meet the quality standards otherwise applicable to the Portfolio's investments. Fully collateralized means that the
collateral will generate cash flows sufficient to meet obligations to holders of the collateralized obligations under even the
most conservative prepayment and interest rate projections. Thus, the collateralized obligations are structured to anticipate a
worst case prepayment condition and to minimize the reinvestment rate risk for cash flows between coupon dates for the
collateralized obligations. A worst case prepayment condition generally assumes immediate prepayment of all securities purchased
at a premium and zero prepayment of all securities purchased at a discount. Reinvestment rate risk may be minimized by assuming
very conservative reinvestment rates and by other means such as by maintaining the flexibility to increase principal distributions
in a low interest rate environment. The effective credit quality of the collateralized obligations in such instances is the
credit quality of the issuer of the collateral. The requirements as to collateralization are determined by the issuer or sponsor
of the collateralized obligation in order to satisfy rating agencies, if rated. The Portfolio does not currently intend to invest
more than 5% of its total assets in collateralized obligations.
Because some collateralized obligations are issued in classes with varying maturities and interest rates, the investor
may obtain greater predictability of maturity through these collateralized obligations than through direct investments in mortgage
pass-through securities. Classes with shorter maturities may have lower volatility and lower yield while those with longer
maturities may have higher volatility and higher yield. Payments of principal and interest on the underlying collateral
securities are not passed through directly to the holders of these collateralized obligations. Rather, the payments on the
underlying portfolio or pool of obligations are used to pay interest on each class and to retire successive maturities in
sequence. These relationships may in effect "strip" the interest payments from principal payments of the underlying obligations
and allow for the separate purchase of either the interest or the principal payments, sometimes called interest only ("IO") and
principal only ("PO") securities. By investing in IOs and POs, an investor has the option to select from a pool of underlying
collateral the portion of the cash flows that most closely corresponds to the investor's forecast of interest rate movements.
Collateralized obligations are designed to be retired as the underlying obligations are repaid. In the event of
prepayment on or call of such securities, the class of collateralized obligation first to mature generally will be paid down
first. Although in most cases the issuer of collateralized obligations will not supply additional collateral in the event of such
prepayment, there generally will be sufficient collateral to secure collateralized obligations that remain outstanding.
Governmentally-issued and privately-issued IO's and PO's will be considered illiquid for purposes of the Portfolio's limitation on
illiquid securities unless they are determined to be liquid under guidelines established by the Board of Trustees.
In reliance on an interpretation by the SEC, the Portfolio's investments in certain qualifying collateralized obligations
are not subject to the limitations in the 1940 Act regarding investments by a registered investment company, such as the
Portfolio, in another investment company.
The Portfolio may also invest in "inverse floaters." These inverse floaters are more volatile than conventional fixed or
floating rate collateralized obligations, and their yield and value will fluctuate in inverse proportion to changes in the index
upon which rate adjustments are based. As a result, the yield on an inverse floater will generally increase when market yields
(as reflected by the index) decrease and decrease when market yields increase. The extent of the volatility of inverse floaters
depends on the extent of anticipated changes in market rates of interest. Generally, inverse floaters provide for interest rate
adjustments based upon a multiple of the specified interest index, which further increases their volatility. The degree of
additional volatility will be directly proportional to the size of the multiple used in determining interest rate adjustments.
Currently, the Portfolio does not intend to invest more than 5% of its net assets in inverse floaters.
For an additional discussion of investing in collateralized obligations and the risks involved therein, see this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the AST Kemper
Small-Cap Growth Portfolio. These limitations are not "fundamental" restrictions and may be changed without shareholder
approval. The Portfolio will not:
1. Invest for the purpose of exercising control or management of another issuer.
2. Purchase securities of other investment companies, except in compliance with the 1940 Act.
3. Invest more than 15% of its net assets in illiquid securities.
AST Federated Aggressive Growth Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Investment Policies:
In pursuing its investment strategy, the Fund may invest in the following securities for any purpose that is consistent with its investment
objective.
Equity Securities. The Portfolio cannot predict the income it will receive from equity securities because issuers
generally have discretion as to the payment of any dividends or distributions. However, equity securities offer greater potential
for appreciation than many other types of securities, because their value generally increases directly with any increase in the
value of the issuer's business. Types of equity securities in which the Portfolio may invest include common stocks, preferred
stocks, real estate investment trusts, and American Depositary Receipts.
Preferred Stocks. In addition to the right to receive specified dividends or distributions, some preferred
stocks also participate in dividends and distributions paid on common stock. Preferred stocks may also permit the issuer to
redeem the stock. The Portfolio may also treat such redeemable preferred stock as a fixed income security.
Real Estate Investment Trusts (REITs). REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax if they limit their operations and distribute most of
their income. Such tax requirements limit a REIT's ability to respond to changes in the commercial real estate market.
For additional information on equity securities and their risks, see the Trust's Prospectus under "Certain Risk Factors and
Investment Methods."
Fixed Income Securities. Fixed income securities pay interest, dividends or distributions at a specified rate. The rate
may be a fixed percentage of the principal or may be adjusted periodically. In addition, the issuer of a fixed income security
must repay the principal amount of the security, normally within a specified time. Fixed income securities provide more regular
income than equity securities. However, the returns on fixed income securities are limited and normally do not increase with the
issuer's earnings. This limits the potential appreciation of fixed income securities as compared to equity securities.
A security's yield measures the annual income earned on the security as a percentage of its price. A security's yield
will increase or decrease depending upon whether it costs less (a discount) or more (a premium) than the principal amount. If the
issuer may redeem the security before its scheduled maturity, the price and yield of the security may change based upon the
probability of an early redemption.
Market factors other than changes in interest rates, such as the demand for particular fixed income securities, may cause
the price of certain fixed income securities to fall while the prices of other securities rise or remain unchanged. Fixed income
securities are also subject to call risk. Call risk is the possibility that an issuer may redeem a fixed income security before
maturity (a call) at a price below its current market price. An increase in the likelihood of a call may reduce the security's
price. If a fixed income security is called, the Portfolio may have to reinvest the proceeds in other fixed income securities
with lower interest rates, higher credit risks, or other less favorable characteristics.
If a security is downgraded, the Sub-advisor will reevaluate the security, but will not be required to sell it. If the
Portfolio buys securities that have not received a rating, the Portfolio must rely entirely upon the Sub-advisor's credit
assessment. Trading opportunities are more limited for fixed income securities that are unrated, have received ratings below
investment grade or are not widely held.
Fixed income securities generally compensate for greater credit risk by paying interest at a higher rate. The difference
between the yield of a security and the yield of a U.S. Treasury security with a comparable maturity (the spread) measures the
additional interest paid for risk. Spreads may increase generally in response to adverse economic or market conditions. A
security's spread may also increase if the security's rating is lowered, or the security is perceived to have an increased credit
risk. An increase in the spread will cause the price of the security to decline.
Additional information on fixed income securities and their risks is included in this Statement and in the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
The following describes the types of fixed income securities in which the Portfolio may invest.
Treasury Securities. Treasury securities are direct obligations of the federal government of the United States.
Treasury securities are generally regarded as having the lowest credit risks.
Agency Securities. Agency securities are issued or guaranteed by a federal agency or other government sponsored
entity acting under federal authority (a "GSE"). The United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few GSEs have no explicit financial support, but are
regarded as having implied support because the federal government sponsors their activities. Agency securities are generally
regarded as having low credit risks, but not as low as treasury securities.
Mortgage-Backed Securities. Mortgage-backed securities represent interests in pools of mortgages. The mortgages
that comprise a pool normally have similar interest rates, maturities and other terms. Mortgages may have fixed or adjustable
interest rates. Interests in pools of adjustable rate mortgages are known as ARMs.
Mortgage-backed securities come in a variety of forms. Many have extremely complicated terms. The simplest form of
mortgage-backed securities are pass-through certificates. Holders of pass-through certificates receive a pro rata share of all
payments and pre-payments from the underlying mortgages. As a result, the holders assume all the prepayment risks of the
underlying mortgages.
Commercial Paper. Commercial paper is an issuer's obligation with a maturity of less than nine months. Companies
typically issue commercial paper to pay for current expenditures. Most issuers constantly reissue their commercial paper and use
the proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default. The short maturity of commercial paper reduces both the market and credit risks as compared to
other debt securities of the same issuer.
Corporate Debt Securities. Corporate debt securities are fixed income securities issued by businesses. Notes,
bonds, debentures and commercial paper are the most prevalent types of corporate debt securities. The Portfolio may also purchase
interests in bank loans to companies. The credit risks of corporate debt securities vary widely among issuers.
In addition, the credit risk of an issuer's debt security may vary based on its priority for repayment. For example,
higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means that the
issuer might not make payments on subordinated securities while continuing to make payments on senior securities. In addition, in
the event of bankruptcy, holders of senior securities will have priority over holders of subordinated securities in terms their
claims on the company's assets. Some subordinated securities, such as trust preferred and capital securities notes, also permit
the issuer to defer payments under certain circumstances. For example, insurance companies issue securities known as surplus
notes that permit the insurance company to defer any payment that would reduce its capital below regulatory requirements.
Bank Instruments. Bank instruments are unsecured interest-bearing deposits with banks. Bank instruments include
bank accounts, time deposits, certificates of deposit and banker's acceptances. Yankee instruments are denominated in U.S.
dollars and issued by U.S. branches of foreign banks. Eurodollar instruments are denominated in U.S. dollars and issued by
non-U.S. branches of U.S. or foreign banks.
Demand Instruments. Demand instruments are corporate debt securities that the issuer must repay upon demand.
Other demand instruments require a third party, such as a dealer or bank, to repurchase the security for its face value upon
demand. Because of the demand feature, the prices of demand instruments generally fluctuate as though they were short-term
securities, even though these instruments may have longer stated maturities.
Convertible Securities. Convertible securities are fixed income securities that the Portfolio has the option to exchange
for equity securities at a specified conversion price. The option allows the Portfolio to realize additional returns if the
market price of the equity securities exceeds the conversion price. For example, the Portfolio may hold fixed income securities
that are convertible into shares of common stock at a conversion price of $10 per share. If the market value of the shares of
common stock reached $12, the Portfolio could realize an additional $2 per share by converting its fixed income securities.
Convertible securities have lower yields than comparable fixed income securities. In addition, at the time a convertible
security is issued the conversion price exceeds the market value of the underlying equity securities. Thus, convertible
securities may provide lower returns than non-convertible fixed income securities or equity securities depending upon changes in
the price of the underlying equity securities. However, convertible securities permit the Portfolio to realize some of the
potential appreciation of the underlying equity securities with less risk of losing its initial investment.
The Portfolio treats convertible securities as both fixed income and equity securities for purposes of its investment
policies and limitations, because of their unique characteristics.
Derivative Contracts. For purposes of the Portfolio, derivative contracts are financial instruments that require
payments based upon changes in the values of designated (or underlying) securities, currencies, commodities, financial indices or
other assets. Some derivative contracts (such as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. The other party to a derivative contract is referred to as a counterparty.
Many derivative contracts are traded on securities or commodities exchanges. In this case, the exchange sets all the
terms of the contract except for the price. Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to cover their potential obligations to the
exchange. Parties to the contract make (or collect) daily payments to the margin accounts to reflect losses (or gains) in the
value of their contracts. This protects investors against potential defaults by the counterparty. Trading contracts on an
exchange also allows investors to close out their contracts by entering into offsetting contracts.
Exchanges may limit the amount of open contracts permitted at any one time. Such limits may prevent the Portfolio from
closing out a position. If this happens, the Portfolio will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it has to sell portfolio securities at unfavorable
prices to do so).
The Portfolio may also trade derivative contracts over-the-counter (OTC) in transactions negotiated directly between the
Portfolio and the counterparty. OTC contracts do not necessarily have standard terms, so they cannot be directly offset with
other OTC contracts. In addition, OTC contracts with more specialized terms may be more difficult to price than exchange traded
contracts.
Depending upon how the Portfolio uses derivative contracts and the relationships between the market value of a derivative
contract and the underlying asset, derivative contracts may increase or decrease the Portfolio's exposure to risks relating to
changes in security prices, interest rates and currency exchange rates. OTC contracts also expose the Fund to the risk that a
counterparty will default on the contract.
The Portfolio may trade in the following types of derivative contracts:
o The Portfolio may buy and sell futures contracts relating to financial instruments and indices.
o The Portfolio may buy call options on portfolio securities, indices and futures in anticipation of an increase in the
value of the underlying asset.
o The Portfolio may buy put options on portfolio securities, indices and futures in anticipation of a decrease in the value
of the underlying asset.
o The Fund may write call options on portfolio securities, indices and futures to generate income from premiums, and in
anticipation of a decrease or only limited increase in the value of the underlying asset.
o The Fund may also write put options on portfolio securities, indices and futures to generate income from premiums, and in
anticipation of an increase or only limited decrease in the value of the underlying asset.
For additional information on derivative contracts, including futures and options, see this Statement and the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
Foreign Securities. Foreign securities are securities of issuers based outside the United States. The Portfolio
considers an issuer to be based outside the United States if:
o it is organized under the laws of, or has a principal office located in, another country;
o the principal trading market for its securities is in another country; or
o it (or its subsidiaries) derived in its most current fiscal year at least 50% of its total assets, capitalization, gross
revenue or profit from goods produced, services performed, or sales made in another country.
Investment income on foreign securities may be subject to foreign withholding or other taxes that could reduce the return
on these securities. Tax treaties between the United States and foreign countries, however, may reduce or eliminate the amount of
foreign taxes to which the Portfolio would be subject. The effective rate of foreign tax cannot be predicted since the amount of
Portfolio assets to be invested within various countries is uncertain.
Additional Information about foreign securities and their risks is included in this Statement and the Trust's Prospectus
under "Certain Risk Factors and Investment Methods."
Foreign Government Securities. Foreign government securities generally consist of fixed income securities
supported by national, state or provincial governments or similar political subdivisions. Foreign government securities also
include debt obligations of supranational entities, such as international organizations designed or supported by governmental
entities to promote economic reconstruction or development, international banking institutions and related government agencies.
Examples of these include, but are not limited to, the International Bank for Reconstruction and Development (the World Bank), the
Asian Development Bank, the European Investment Bank and the Inter-American Development Bank.
Foreign government securities also include fixed income securities of quasi-governmental agencies (i.e., securities
issued by entities owned by a national, state or equivalent government or obligations of a political unit that are not backed by
the national government's full faith and credit). Further, foreign government securities include mortgage-related securities
issued or guaranteed by national, state or provincial governmental instrumentalities, including quasi-governmental agencies.
Delayed-Delivery Transactions. The Portfolio records a delayed-delivery or when-issued transaction when it agrees to buy
the securities and reflects their value in determining the price of its shares. Settlement dates may be a month or more after
entering into these transactions so that the market values of the securities bought may vary from the purchase prices. Additional
information on delayed-delivery and when-issued transactions is included in this Statement and the Trust's Prospectus under
"Certain Risk Factors and Investment Methods."
Securities Lending. The Portfolio may lend portfolio securities to borrowers that are deemed creditworthy by the
Investment Manager or Sub-advisor. The borrower must furnish additional collateral if the market value of the loaned securities
increases. Also, the borrower must pay the Portfolio the equivalent of any dividends or interest received on the loaned
securities. The Portfolio may pay administrative and custodial fees in connection with a loan and may pay a negotiated portion of
the interest earned on the cash collateral to a securities lending agent or broker. Additional information about securities
lending and its risks is included in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Federated Aggressive Growth Portfolio. These limitations are not "fundamental" restrictions and may be changed by the
Trustees without shareholder approval.
1. The Portfolio will not purchase securities on margin, provided that the Portfolio may obtain short-term credits
necessary for the clearance of purchases and sales of securities, and further provided that the Portfolio may make margin deposits
in connection with its use of financial options and futures, forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
2. The Portfolio will not mortgage, pledge, or hypothecate any of its assets, provided that this shall not apply to
the transfer of securities in connection with any permissible borrowing or to collateral arrangements in connection with
permissible activities.
3. The Portfolio will not purchase securities for which there is no readily available market, or enter into
repurchase agreements or purchase time deposits maturing in more than seven days, if immediately after and as a result, the value
of such securities would exceed, in the aggregate, 15% of the Portfolio's net assets.
AST Lord Abbett Small Cap Value Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek long-term capital appreciation.
Investment Policies:
Foreign Currency Hedging Techniques. The Portfolio expects to enter into forward foreign currency contracts in primarily
two circumstances. First, when the Portfolio enters into a contract for the purchase or sale of a security denominated in a
foreign currency, it may desire to "lock in" the U.S. dollar price of the security. Second, when management believes that the
currency of a particular foreign country may suffer a decline against the U.S. dollar, the Portfolio may enter into a forward
contract to sell the amount of foreign currency approximating the value of some or all of the Portfolio's securities denominated
in such foreign currency or, in the alternative, the Portfolio may use a cross-hedging technique whereby it sells another currency
which the Portfolio expects to decline in a similar way but which has a lower transaction cost. The Portfolio does not intend to
enter into forward contracts under this second circumstance on a continuous basis. For an additional discussion of forward
foreign currency contracts and certain risks involved therein, see this Statement and the Trust's Prospectus under "Certain Risk
Factors and Investment Methods."
The Portfolio also may purchase foreign currency put options and write foreign currency call options on U.S. exchanges or
U.S. over-the-counter markets. Exchange-listed options markets in the United States include several major currencies, and trading
may be thin and illiquid. A number of major investment firms trade unlisted options which are more flexible than exchange-listed
options with respect to strike price and maturity date. Unlisted options generally are available in a wider range of currencies.
Unlisted foreign currency options are generally less liquid than listed options and involve the credit risk associated with the
individual issuer. Unlisted options, together with other illiquid securities, are subject to a limit of 15% of the Portfolio's
net assets. The premiums paid for foreign currency put options will not exceed 5% of the net assets of the Portfolio.
The Portfolio may write a call option on a foreign currency only in conjunction with a purchase of a put option on that
currency. Such a strategy is designed to reduce the cost of downside currency protection by limiting currency appreciation
potential. The face value of such call writing may not exceed 90% of the value of the securities denominated in such currency
invested in by the Portfolio or in such cross currency (referred to above) to cover such call writing. For an additional
discussion of foreign currency options and certain risks involved therein, see this Statement under "Certain Risk Factors and
Investment Methods."
Call Options on Stock. The Portfolio may, from time to time, write call options on its portfolio securities. The
Portfolio may write only call options which are "covered," meaning that the Portfolio either owns the underlying security or has
an absolute and immediate right to acquire that security, without additional cash consideration, upon conversion or exchange of
other securities currently held in its portfolio. In addition, the Portfolio will not permit the call to become uncovered prior
to the expiration of the option or termination through a closing purchase transaction.
The Portfolio would not be able to effect a closing purchase transaction after it had received notice of exercise. In
order to write a call option, the Portfolio is required to comply with the rules of The Options Clearing Corporation and the
various exchanges with respect to collateral requirements. The Portfolio may not purchase call options except in connection with
a closing purchase transaction. It is possible that the cost of effecting a closing purchase transaction may be greater than the
premium received by the Portfolio for writing the option.
Generally, the Portfolio intends to write listed covered call options during periods when it anticipates declines in the
market values of portfolio securities because the premiums received may offset to some extent the decline in the Portfolio's net
asset value occasioned by such declines in market value. Except as part of the "sell discipline" described below, the Portfolio
will generally not write listed covered call options when it anticipates that the market values of its portfolio securities will
increase.
One reason for the Portfolio to write call options is as part of a "sell discipline." If the Portfolio decides that a
portfolio security would be overvalued and should be sold at a certain price higher than the current price, it could write an
option on the stock at the higher price. Should the stock subsequently reach that price and the option be exercised, the
Portfolio would, in effect, have increased the selling price of that stock, which it would have sold at that price in any event,
by the amount of the premium. In the event the market price of the stock declined and the option were not exercised, the premium
would offset all or some portion of the decline. It is possible that the price of the stock could increase beyond the exercise
price; in that event, the Portfolio would forego the opportunity to sell the stock at that higher price.
In addition, call options may be used as part of a different strategy in connection with sales of portfolio securities.
If, in the judgment of the Sub-advisor, the market price of a stock is overvalued and it should be sold, the Portfolio may elect
to write a call option with an exercise price below the current market price. As long as the value of the underlying security
remains above the exercise price during the term of the option, the option will, in all probability, be exercised, in which case
the Portfolio will be required to sell the stock at the exercise price. If the sum of the premium and the exercise price exceeds
the market price of the stock at the time the call option is written, the Portfolio would, in effect, have increased the selling
price of the stock. The Portfolio would not write a call option in these circumstances if the sum of the premium and the exercise
price were less than the current market price of the stock. For an additional discussion of call options and certain risks
involved therein, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Put Options on Stock. The Portfolio may also write listed put options. Writing listed put options is a useful portfolio
investment strategy when the Portfolio has cash or other reserves available for investment as a result of sales of Portfolio
shares or, more importantly, because the Sub-advisor believes a more defensive and less fully invested position is desirable in
light of market conditions. If the Sub-advisor wishes to invest its cash or reserves in a particular security at a price lower
than current market value, it may write a put option on that security at an exercise price which reflects the lower price it is
willing to pay. The buyer of the put option generally will not exercise the option unless the market price of the underlying
security declines to a price near or below the exercise price. If the Portfolio writes a listed put, the price of the underlying
stock declines and the option is exercised, the premium, net of transaction charges, will reduce the purchase price paid by the
Portfolio for the stock. The price of the stock may decline by an amount in excess of the premium, in which event the Portfolio
would have foregone an opportunity to purchase the stock at a lower price.
If, prior to the exercise of a put option, the Portfolio determines that it no longer wishes to invest in the stock on
which the put option had been written, the Portfolio may be able to effect a closing purchase transaction on an exchange by
purchasing a put option of the same series as the one which it has previously written. The cost of effecting a closing purchase
transaction may be greater than the premium received on writing the put option and there is no guarantee that a closing purchase
transaction can be effected. For an additional discussion of put options and certain risks involved therein, see this Statement
and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Stock Index Options. Except as describe below, the Portfolio will write call options on indices only if on such date it
holds a portfolio of stocks at least equal to the value of the index times the multiplier times the number of contracts. When the
Portfolio writes a call option on a broadly-based stock market index, the Portfolio will segregate or put into escrow with its
custodian, or pledge to a broker as collateral for the option, one or more "qualified securities" with a market value at the time
the option is written of not less than 100% of the current index value times the multiplier times the number of contracts.
Trading in index options commenced in April 1983 with the S&P 100 option (formerly called the CBOE 100). Since that time
a number of additional index option contracts have been introduced including options on industry indices. Although the markets
for certain index option contracts have developed rapidly, the markets for other index options are still relatively illiquid. The
ability to establish and close out positions on such options will be subject to the development and maintenance of a liquid
secondary market. It is not certain that this market will develop in all index option contracts. The Portfolio will not purchase
or sell any index option contract unless and until, in the Sub-advisor's opinion, the market for such options has developed
sufficiently that such risk in connection with such transactions in no greater than such risk in connection with options on
stocks. For an additional discussion of stock index options and certain risks involved therein, see this Statement under "Certain
Risk Factors and Investment Methods."
Segregated Accounts. If the Portfolio has written an option on an industry or market segment index, it will segregate or
put into escrow with its custodian, or pledge to a broker as collateral for the option, at least ten different "qualified
securities," which are securities of an issuer in such industry or market segment, with a market value at the time the option is
written of not less than 100% of the current index value times the multiplier times the number of contracts. A "qualified
security" is an equity security which is listed on a national securities exchange or listed on the National Association of
Securities Dealers Automated Quotation System against which the Portfolio has not written a stock call option and which has not
been hedged by the Portfolio by the sale of stock index futures. Such securities will include stocks which represent at least 50%
of the weighting of the industry or market segment index and will represent at least 50% of the Portfolio's holdings in that
industry or market segment. No individual security will represent more than 25% of the amount so segregated, pledged or
escrowed. If at the close of business on any day the market value of such qualified securities so segregated, escrowed or pledged
falls below 100% of the current index value times the multiplier times the number of contracts, the Portfolio will so segregate,
escrow or pledge an amount in cash or other liquid assets equal in value to the difference. In addition, when the Portfolio
writes a call on an index which is in-the-money at the time the call is written, the Portfolio will segregate with its custodian
or pledge to the broker as collateral cash or other liquid assets equal in value to the amount by which the call is in-the-money
times the multiplier times the number of contracts. Any amount segregated pursuant to the foregoing sentence may be applied to
the Portfolio's obligation to segregate additional amounts in the event that the market value of the qualified securities falls
below 100% of the current index value times the multiplier times the number of contracts. However, if the Portfolio holds a call
on the same index as the call written where the exercise price of the call held is equal to or less than the exercise price of the
call written or greater than the exercise price of the call written if the difference is maintained by the Portfolio in cash or
other liquid assets in a segregated account with its custodian, it will not be subject to the requirements describe in this
paragraph. In instances involving the purchase of stock index futures contracts by the Portfolio, an amount of cash or permitted
securities equal to the market value of the futures contracts will be deposited in a segregated account with the its custodian
and/or in a margin account with a broker to collateralize the position and thereby insure that the use of such futures are
unleveraged.
Stock Index Futures. The Portfolio will engage in transactions in stock index futures contracts as a hedge against
changes resulting from market conditions in the values of securities which are held in the Portfolio's portfolio or which it
intends to purchase. The Portfolio will engage in such transactions when they are economically appropriate for the reduction of
risks inherent in the ongoing management of the Portfolio. The Portfolio may not purchase or sell stock index futures if,
immediately thereafter, more than one-third of its net assets would be hedged and, in addition, except as described above in the
case of a call written and held on the same index, will write call options on indices or sell stock index futures only if the
amount resulting from the multiplication of the then current level of the index (or indices) upon which the option or future
contract(s) is based, the applicable multiplier(s), and the number of futures or options contracts which would be outstanding,
would not exceed one-third of the value of the Portfolio's net assets.
Limitations on Stock Options, Options on Stock Indices and Stock Index Futures Transactions. The Portfolio may write put
and call options on stocks only if they are covered, and such options must remain covered so long as the Portfolio is obligated as
a writer. The Portfolio does not currently intend to write covered call options with respect to securities with an aggregate
market value of more than 5% of its gross assets at the time an option is written. The Portfolio will not (a) write puts having
an aggregate exercise price greater than 25% of the Portfolio's net assets; or (b) purchase (i) put options on stocks not held in
the Portfolio's portfolio, (ii) put options on stock indices, or (iii) call options on stocks or stock indices if, after any such
purchase, the aggregate premiums paid for such options would exceed 20% of the Portfolio's net assets.
Special Risks of Writing Calls on Indices. Because exercises of index options are settled in cash, a call writer cannot
determine the amount of its settlement obligations in advance and, unlike call writing on specific stocks, cannot provide in
advance for, or cover, its potential settlement obligations by acquiring and holding the underlying securities. However, the
Portfolio will write call options on indices only under the circumstances described above under "Limitations on Stock Options,
Options on Stock Indices and Stock Index Futures Transactions."
Unless the Portfolio has other liquid assets that are sufficient to satisfy the exercise of a call, the Portfolio would
be required to liquidate portfolio securities in order to satisfy the exercise. Because an exercise must be settled within hours
after receiving the notice of exercise, if the Portfolio fails to anticipate an exercise, it may have to borrow (in amounts not
exceeding 20% of the Portfolio's total assets) pending settlement of the sale of securities in its portfolio and would incur
interest charges thereon.
When the Portfolio has written a call, there is also a risk that the market may decline between the time the call is
written and the time the Portfolio is able to sell stocks in its portfolio. As with stock options, the Portfolio will not learn
that an index option has been exercised until the day following the exercise date but, unlike a call on stock where the Portfolio
would be able to deliver the underlying securities in settlement, the Series may have to sell part of its stock portfolio in order
to make settlement in cash, and the price of such stocks might decline before they can be sold. This timing risk makes certain
strategies involving more than one option substantially more risky with index options than with stock options. For example, even
if an index call which the Portfolio has written is "covered" by an index call held by the Portfolio with the same strike price,
the Portfolio will bear the risk that the level of the index may decline between the close of trading on the date the exercise
notice is filed with the clearing corporation and the close of trading on the date the Portfolio exercises the call it holds or
the time the Portfolio sells the call which in either case would occur no earlier than the day following the day the exercise
notice was filed.
Short Sales. The Portfolio may make short sales of securities or maintain a short position, provided that at all times
when a short position is open the Portfolio owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for an equal amount of the securities of the same issuer as the
securities sold short (a "short sale against-the-box"), and that not more than 25% of the Portfolio's net assets (determined at
the time of the short sale) may be subject to such sales. Notwithstanding this 25% limitation, the Portfolio does not currently
intend to have more than 5% of its net assets (determined at the time of the short sale) subject to short sales against-the-box.
Debt Securities. The Portfolio may invest in straight bonds or other debt securities, including lower rated, high-yield
bonds. Neither an issuer's ceasing to be rated investment grade nor a rating reduction below that grade will require elimination
of a bond from the Portfolio's portfolio. The Portfolio has no present intention to commit more than 5% of gross assets to
investing in debt securities. For a discussion of debt securities, including lower rated, high-yield bonds, see this Statement
under "Certain Risk Factors and Investment Methods."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Lord Abbett Small Cap Value Portfolio. The limitations are not "fundamental" restrictions and may be changed by the Trustees
without shareholder approval. The Portfolio will not:
1. Pledge its assets (other than to secure borrowings or to the extent permitted by the Portfolio's investment
policies as permitted by applicable law);
2. Make short sales of securities or maintain a short position except to the extent permitted by applicable law;
3. Invest knowingly more than 15% of its net assets (at the time of investment) in illiquid securities, except for
securities qualifying for resale under Rule 144A of the Securities Act of 1933, deemed to be liquid by the Board of Trustees;
4. Invest in the securities of other investment companies except as permitted by applicable law;
5. Invest in real estate limited partnership interests or interests in oil, gas or other mineral leases, or
exploration or other development programs, except that the Portfolio may invest in securities issued by companies that engage in
oil, gas or other mineral exploration or other development activities; or
6. Write, purchase or sell puts, calls, straddles, spreads or combinations thereof, except to the extent permitted
in this Statement and the Trust's Prospectus, as they may be amended from time to time.
AST Gabelli Small-Cap Value Portfolio:
Investment Objective: The investment objective of the Portfolio is to provide long-term capital appreciation by investing
primarily in small-capitalization stocks that appear to be undervalued.
Investment Policies:
Although primarily all of the Portfolio's assets are invested in common stocks, the Portfolio may invest in convertible
securities, corporate debt securities and preferred stocks. The fixed-income securities in which the Portfolio may invest
include, but are not limited to, those described below. See this Statement under "Certain Risk Factors and Investment Methods,"
for an additional discussion of debt obligations.
U.S. Government Obligations. Bills, notes, bonds and other debt securities issued by the U.S. Treasury. These are
direct obligations of the U.S. Government and differ mainly in the length of their maturities.
U.S. Government Agency Securities. Issued or guaranteed by U.S. Government sponsored enterprises and federal agencies.
These include securities issued by the Federal National Mortgage Association, Government National Mortgage Association, Federal
Home Loan Bank, Federal Land Banks, Farmers Home Administration, Banks for Cooperatives, Federal Intermediate Credit Banks,
Federal Financing Bank, Farm Credit Banks, the Small Business Association, and the Tennessee Valley Authority. Some of these
securities are supported by the full faith and credit of the U.S. Treasury; and the remainder are supported only by the credit of
the instrumentality, which may or may not include the right of the issuer to borrow from the Treasury.
Bank Obligations. Certificates of deposit, bankers' acceptances, and other short-term debt obligations. Certificates of
deposit are short-term obligations of commercial banks. A bankers' acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with international commercial transactions. Certificates of deposit may have fixed or variable
rates. The Portfolio may invest in U.S. banks, foreign branches of U.S. banks, U.S. branches of foreign banks, and foreign
branches of foreign banks.
Short-Term Corporate Debt Securities. Outstanding nonconvertible corporate debt securities (e.g., bonds and debentures)
which have one year or less remaining to maturity. Corporate notes may have fixed, variable, or floating rates.
Commercial Paper. Short-term promissory notes issued by corporations primarily to finance short-term credit needs.
Certain notes may have floating or variable rates.
Foreign Government Securities. Issued or guaranteed by a foreign government, province, instrumentality, political
subdivision or similar unit thereof.
Savings and Loan Obligations. Negotiable certificates of deposit and other short-term debt obligations of savings and
loan associations.
Supranational Entities. The Portfolio may also invest in the securities of certain supranational entities, such as the
International Development Bank.
Lower-Rated Debt Securities. The Portfolio's investment program permits it to purchase below investment grade
securities, commonly referred to as "junk bonds." The Portfolio will not purchase a junk bond if immediately after such purchase
the Portfolio would have more than 5% of its total assets invested in such securities. Since investors generally perceive that
there are greater risks associated with investment in lower quality securities, the yields from such securities normally exceed
those obtainable from higher quality securities. However, the principal value of lower-rated securities generally will fluctuate
more widely than higher quality securities. Lower quality investments entail a higher risk of default -- that is, the nonpayment
of interest and principal by the issuer than higher quality investments. Such securities are also subject to special risks,
discussed below. Although the Portfolio seeks to reduce risk by portfolio diversification, credit analysis, and attention to
trends in the economy, industries and financial markets, such efforts will not eliminate all risk. There can, of course, be no
assurance that the Portfolio will achieve its investment objective.
After purchase by the Portfolio, a debt security may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Portfolio. Neither event will require a sale of such security by the Portfolio. However, the
Sub-advisor will consider such event in its determination of whether the Portfolio should continue to hold the security. To the
extent that the ratings given by Moody's or S&P may change as a result of changes in such organizations or their rating systems,
the Portfolio will attempt to use comparable ratings as standards for investments in accordance with the investment policies
contained in the Trust's Prospectus.
Junk bonds are regarded as predominantly speculative with respect to the issuer's continuing ability to meet principal
and interest payments. Because investment in low and lower-medium quality bonds involves greater investment risk, to the extent
the Portfolio invests in such bonds, achievement of its investment objective will be more dependent on the Sub-advisor's credit
analysis than would be the case if the Portfolio was investing in higher quality bonds. For a discussion of the special risks
involved in low-rated bonds, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Mortgage-Backed Securities. Mortgage-backed securities are securities representing interests in a pool of mortgages.
After purchase by the Portfolio, a security may cease to be rated or its rating may be reduced below the minimum required for
purchase by the Portfolio. Neither event will require a sale of such security by the Portfolio. However, the Sub-advisor will
consider such event in its determination of whether the Portfolio should continue to hold the security. To the extent that the
ratings given by Moody's or S&P may change as a result of changes in such organizations or their rating systems, the Portfolio
will attempt to use comparable ratings as standards for investments in accordance with the investment policies contained in the
Trust's Prospectus. For a discussion of mortgage-backed securities and certain risks involved therein, see this Statement and the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Collateralized Mortgage Obligations (CMOs). CMOs are obligations fully collateralized by a portfolio of mortgages or
mortgage-related securities. Payments of principal and interest on the mortgages are passed through to the holders of the CMOs on
the same schedule as they are received, although certain classes of CMOs have priority over others with respect to the receipt of
prepayments on the mortgages. Therefore, depending on the type of CMOs in which the Portfolio invests, the investment may be
subject to a greater or lesser risk of prepayment than other types of mortgage-related securities. For an additional discussion
of CMOs and certain risks involved therein, see the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Stripped Agency Mortgage-Backed Securities. Stripped Agency Mortgage-Backed securities represent interests in a pool of
mortgages, the cash flow of which has been separated into its interest and principal components. "IOs" (interest only securities)
receive the interest portion of the cash flow while "POs" (principal only securities) receive the principal portion. Stripped
Agency Mortgage-Backed Securities may be issued by U.S. Government Agencies or by private issuers similar to those described above
with respect to CMOs and privately-issued mortgage-backed certificates. As interest rates rise and fall, the value of IOs tends
to move in the same direction as interest rates. The value of the other mortgage-backed securities described herein, like other
debt instruments, will tend to move in the opposite direction compared to interest rates. Under the Internal Revenue Code of
1986, as amended, POs may generate taxable income from the current accrual of original issue discount, without a corresponding
distribution of cash to the Portfolio.
The cash flows and yields on IO and PO classes are extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets. For example, a rapid or slow rate of principal payments may have a
material adverse effect on the prices of IOs or POs, respectively. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, an investor may fail to recoup fully its initial investment in an IO class of a stripped
mortgage-backed security, even if the IO class is rated AAA or Aaa or is derived from a full faith and credit obligation.
Conversely, if the underlying mortgage assets experience slower than anticipated prepayments of principal, the price on a PO class
will be affected more severely than would be the case with a traditional mortgage-backed security.
The Portfolio will treat IOs and POs, other than government-issued IOs or POs backed by fixed rate mortgages, as illiquid
securities and, accordingly, limit its investments in such securities, together with all other illiquid securities, to 15% of the
Portfolio's net assets. The Sub-advisor will determine the liquidity of these investments based on the following guidelines: the
type of issuer; type of collateral, including age and prepayment characteristics; rate of interest on coupon relative to current
market rates and the effect of the rate on the potential for prepayments; complexity of the issue's structure, including the
number of tranches; size of the issue; and the number of dealers who make a market in the IO or PO. The Portfolio will treat
non-government-issued IOs and POs not backed by fixed or adjustable rate mortgages as illiquid unless and until the SEC modifies
its position.
Asset-Backed Securities. The Portfolio may invest a portion of its assets in debt obligations known as asset-backed
securities. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying
such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other
affiliated entities and the amount and quality of any credit support provided to the securities. The rate of principal payment on
asset-backed securities generally depends on the rate of principal payments received on the underlying assets which in turn may be
affected by a variety of economic and other factors. As a result, the yield on any asset-backed security is difficult to predict
with precision and actual yield to maturity may be more or less than the anticipated yield to maturity.
Automobile Receivable Securities. The Portfolio may invest in asset-backed securities which are backed by
receivables from motor vehicle installment sales contracts or installment loans secured by motor vehicles ("Automobile Receivable
Securities").
Credit Card Receivable Securities. The Portfolio may invest in asset-backed securities backed by receivables
from revolving credit card agreements ("Credit Card Receivable Securities").
Other Assets. The Sub-advisor anticipates that asset-backed securities backed by assets other than those
described above will be issued in the future. The Portfolio may invest in such securities in the future if such investment is
otherwise consistent with its investment objective and policies. For a discussion of these securities, see this Statement and the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Writing Covered Call Options. The Portfolio may write (sell) American or European style "covered" call options and
purchase options to close out options previously written by a Portfolio. In writing covered call options, the Portfolio expects
to generate additional premium income which should serve to enhance the Portfolio's total return and reduce the effect of any
price decline of the security or currency involved in the option. Covered call options will generally be written on securities or
currencies which, in the Sub-advisor's opinion, are not expected to have any major price increases or moves in the near future but
which, over the long term, are deemed to be attractive investments for the Portfolio.
The Portfolio will write only covered call options. This means that the Portfolio will own the security or currency
subject to the option or an option to purchase the same underlying security or currency, having an exercise price equal to or less
than the exercise price of the "covered" option, or will establish and maintain with its custodian for the term of the option, an
account consisting of cash or other liquid assets having a value equal to the fluctuating market value of the optioned securities
or currencies.
Portfolio securities or currencies on which call options may be written will be purchased solely on the basis of
investment considerations consistent with the Portfolio's investment objective. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk (in contrast to the writing of naked or uncovered
options, which the Portfolio will not do), but capable of enhancing the Portfolio's total return. When writing a covered call
option, the Portfolio, in return for the premium, gives up the opportunity for profit from a price increase in the underlying
security or currency above the exercise price, but conversely retains the risk of loss should the price of the security or
currency decline. Unlike one who owns securities or currencies not subject to an option, the Portfolio has no control over when
it may be required to sell the underlying securities or currencies, since it may be assigned an exercise notice at any time prior
to the expiration of its obligation as a writer. If a call option which the Portfolio has written expires, the Portfolio will
realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying
security or currency during the option period. If the call option is exercised, the Portfolio will realize a gain or loss from
the sale of the underlying security or currency. The Portfolio does not consider a security or currency covered by a call to be
"pledged" as that term is used in the Portfolio's policy which limits the pledging or mortgaging of its assets.
Call options written by the Portfolio will normally have expiration dates of less than nine months from the date
written. The exercise price of the options may be below, equal to, or above the current market values of the underlying
securities or currencies at the time the options are written. From time to time, the Portfolio may purchase an underlying
security or currency for delivery in accordance with an exercise notice of a call option assigned to it, rather than delivering
such security or currency from its portfolio. In such cases, additional costs may be incurred.
The premium received is the market value of an option. The premium the Portfolio will receive from writing a call option
will reflect, among other things, the current market price of the underlying security or currency, the relationship of the
exercise price to such market price, the historical price volatility of the underlying security or currency, and the length of the
option period. Once the decision to write a call option has been made, the Sub-advisor, in determining whether a particular call
option should be written on a particular security or currency, will consider the reasonableness of the anticipated premium and the
likelihood that a liquid secondary market will exist for those options. The premium received by the Portfolio for writing covered
call options will be recorded as a liability of the Portfolio. This liability will be adjusted daily to the option's current
market value, which will be the latest sale price at the time at which the net asset value per share of the Portfolio is computed
(close of the New York Stock Exchange), or, in the absence of such sale, the latest asked price. The option will be terminated
upon expiration of the option, the purchase of an identical option in a closing transaction, or delivery of the underlying
security or currency upon the exercise of the option.
The Portfolio will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or
more than the premium received from the writing of the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security or currency, any loss resulting from the repurchase of
a call option is likely to be offset in whole or in part by appreciation of the underlying security or currency owned by the
Portfolio.
The Portfolio will not write a covered call option if, as a result, the aggregate market value of all portfolio
securities or currencies covering call or put options exceeds 25% of the market value of the Portfolio's net assets. In
calculating the 25% limit, the Portfolio will offset, against the value of assets covering written calls and puts, the value of
purchased calls and puts on identical securities or currencies with identical maturity dates.
Writing Covered Put Options. The Portfolio may write American or European style covered put options and purchase options
to close out options previously written by the Portfolio.
The Portfolio would write put options only on a covered basis, which means that the Portfolio would maintain in a
segregated account cash, U.S. government securities or other liquid high-grade debt obligations in an amount not less than the
exercise price or the Portfolio will own an option to sell the underlying security or currency subject to the option having an
exercise price equal to or greater than the exercise price of the "covered" option at all times while the put option is
outstanding. (The rules of a clearing corporation currently require that such assets be deposited in escrow to secure payment of
the exercise price.) The Portfolio would generally write covered put options in circumstances where the Sub-advisor wishes to
purchase the underlying security or currency for the Portfolio at a price lower than the current market price of the security or
currency. In such event the Portfolio would write a put option at an exercise price which, reduced by the premium received on the
option, reflects the lower price it is willing to pay. Since the Portfolio would also receive interest on debt securities or
currencies maintained to cover the exercise price of the option, this technique could be used to enhance current return during
periods of market uncertainty. The risk in such a transaction would be that the market price of the underlying security or
currency would decline below the exercise price less the premiums received. Such a decline could be substantial and result in a
significant loss to the Portfolio. In addition, the Portfolio, because it does not own the specific securities or currencies
which it may be required to purchase in exercise of the put, cannot benefit from appreciation, if any, with respect to such
specific securities or currencies.
The Portfolio will not write a covered put option if, as a result, the aggregate market value of all portfolio securities
or currencies covering put or call options exceeds 25% of the market value of the Portfolio's net assets. In calculating the 25%
limit, the Portfolio will offset, against the value of assets covering written puts and calls, the value of purchased puts and
calls on identical securities or currencies with identical maturity dates.
Purchasing Put Options. The Portfolio may purchase American or European style put options. As the holder of a put
option, the Portfolio has the right to sell the underlying security or currency at the exercise price at any time during the
option period (American style) or at the expiration of the option (European style). The Portfolio may enter into closing sale
transactions with respect to such options, exercise them or permit them to expire. The Portfolio may purchase put options for
defensive purposes in order to protect against an anticipated decline in the value of its securities or currencies. An example of
such use of put options is provided in this Statement under "Certain Risk Factors and Investment Methods."
The premium paid by the Portfolio when purchasing a put option will be recorded as an asset of the Portfolio. This asset
will be adjusted daily to the option's current market value, which will be the latest sale price at the time at which the net
asset value per share of the Portfolio is computed (close of New York Stock Exchange), or, in the absence of such sale, the latest
bid price. This asset will be terminated upon expiration of the option, the selling (writing) of an identical option in a
closing transaction, or the delivery of the underlying security or currency upon the exercise of the option.
Purchasing Call Options. The Portfolio may purchase American or European style call options. As the holder of a call
option, the Portfolio has the right to purchase the underlying security or currency at the exercise price at any time during the
option period (American style) or at the expiration of the option (European style). The Portfolio may enter into closing sale
transactions with respect to such options, exercise them or permit them to expire. The Portfolio may purchase call options for
the purpose of increasing its current return or avoiding tax consequences which could reduce its current return. The Portfolio
may also purchase call options in order to acquire the underlying securities or currencies. Examples of such uses of call options
are provided in this Statement under "Certain Risk Factors and Investment Methods."
The Portfolio may also purchase call options on underlying securities or currencies it owns in order to protect
unrealized gains on call options previously written by it. A call option would be purchased for this purpose where tax
considerations make it inadvisable to realize such gains through a closing purchase transaction. Call options may also be
purchased at times to avoid realizing losses.
Dealer (Over-the-Counter) Options. The Portfolio may engage in transactions involving dealer options. Certain risks are
specific to dealer options. While the Portfolio would look to a clearing corporation to exercise exchange-traded options, if the
Portfolio were to purchase a dealer option, it would rely on the dealer from whom it purchased the option to perform if the option
were exercised. Failure by the dealer to do so would result in the loss of the premium paid by the Portfolio as well as loss of
the expected benefit of the transaction. For a discussion of dealer options, see this Statement under "Certain Risk Factors and
Investment Methods."
Futures Contracts.
Transactions in Futures. The Portfolio may enter into futures contracts, including stock index, interest rate
and currency futures ("futures" or "futures contracts"). The Portfolio may also enter into futures on commodities related to the
types of companies in which it invests, such as oil and gold futures. Otherwise the nature of such futures and the regulatory
limitations and risks to which they are subject are the same as those described below.
Stock index futures contracts may be used to attempt to hedge a portion of the Portfolio, as a cash management tool, or
as an efficient way for the Sub-advisor to implement either an increase or decrease in portfolio market exposure in response to
changing market conditions. The Portfolio may purchase or sell futures contracts with respect to any stock index. Nevertheless,
to hedge the Portfolio successfully, the Portfolio must sell futures contacts with respect to indices or subindices whose
movements will have a significant correlation with movements in the prices of the Portfolio's securities.
Interest rate or currency futures contracts may be used to attempt to hedge against changes in prevailing levels of
interest rates or currency exchange rates in order to establish more definitely the effective return on securities or currencies
held or intended to be acquired by the Portfolio. In this regard, the Portfolio could sell interest rate or currency futures as
an offset against the effect of expected increases in interest rates or currency exchange rates and purchase such futures as an
offset against the effect of expected declines in interest rates or currency exchange rates.
The Portfolio will enter into futures contracts which are traded on national or foreign futures exchanges, and are
standardized as to maturity date and underlying financial instrument. Futures exchanges and trading in the United States are
regulated under the Commodity Exchange Act by the CFTC. Although techniques other than the sale and purchase of futures contracts
could be used for the above-referenced purposes, futures contracts offer an effective and relatively low cost means of
implementing the Portfolio's objectives in these areas.
Regulatory Limitations. The Portfolio will engage in futures contracts and options thereon only for bona fide
hedging, yield enhancement, and risk management purposes, in each case in accordance with rules and regulations of the CFTC.
The Portfolio may not purchase or sell futures contracts or related options if, with respect to positions which do not
qualify as bona fide hedging under applicable CFTC rules, the sum of the amounts of initial margin deposits and premiums paid on
those positions would exceed 5% of the net asset value of the Portfolio after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into; provided, however, that in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount may be excluded in calculating the 5% limitation. For purposes of this policy
options on futures contracts and foreign currency options traded on a commodities exchange will be considered "related options."
This policy may be modified by the Board of Trustees of the Trust without a shareholder vote and does not limit the percentage of
the Portfolio's assets at risk to 5%.
In instances involving the purchase of futures contracts or the writing of call or put options thereon by the Portfolio,
an amount of cash or other liquid assets equal to the market value of the futures contracts and options thereon (less any related
margin deposits), will be identified by the Portfolio to cover the position, or alternative cover (such as owning an offsetting
position) will be employed. Assets used as cover or held in an identified account cannot be sold while the position in the
corresponding option or future is open, unless they are replaced with similar assets. As a result, the commitment of a large
portion of the Portfolio's assets to cover or identified accounts could impede portfolio management or the Portfolio's ability to
meet redemption requests or other current obligations.
Options on Futures Contracts. The Portfolio may purchase and sell options on the same types of futures in which it may
invest. As an alternative to writing or purchasing call and put options on stock index futures, the Portfolio may write or
purchase call and put options on financial indices. Such options would be used in a manner similar to the use of options on
futures contracts. From time to time, a single order to purchase or sell futures contracts (or options thereon) may be made on
behalf of the Portfolio and other mutual funds or portfolios of mutual funds managed by the Sub-advisor or its affiliates. Such
aggregated orders would be allocated among the Portfolio and such other portfolios in a fair and non-discriminatory manner. See
this Statement and Trust's Prospectus under "Certain Risk Factors and Investment Methods" for a description of certain risks in
options and future contracts.
Additional Futures and Options Contracts. Although the Portfolio has no current intention of engaging in futures or
options transactions other than those described above, it reserves the right to do so. Such futures and options trading might
involve risks which differ from those involved in the futures and options described above.
Foreign Futures and Options. The Portfolio is permitted to invest in foreign futures and options. For a description of
foreign futures and options and certain risks involved therein as well as certain risks involved in foreign investing, see this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Foreign Securities. The Portfolio may invest in U.S. dollar-denominated and non-U.S. dollar-denominated securities of
foreign issuers. There are special risks in foreign investing. Certain of these risks are inherent in any international mutual
fund while others relate more to the countries in which the Portfolio will invest. Many of the risks are more pronounced for
investments in developing or emerging countries, such as many of the countries of Southeast Asia, Latin America, Eastern Europe
and the Middle East. For an additional discussion of certain risks involved in investing in foreign securities, see this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Foreign Currency Transactions. A forward foreign currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are principally traded in the interbank market conducted
directly between currency traders (usually large, commercial banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for trades.
The Portfolio may enter into forward contracts for a variety of purposes in connection with the management of the foreign
securities portion of its portfolio. The Portfolio's use of such contracts would include, but not be limited to, the following.
First, when the Portfolio enters into a contract for the purchase or sale of a security denominated in a foreign currency, it may
desire to "lock in" the U.S. dollar price of the security. Second, when the Sub-advisor believes that one currency may experience
a substantial movement against another currency, including the U.S. dollar, it may enter into a forward contract to sell or buy
the amount of the former foreign currency, approximating the value of some or all of the Portfolio's securities denominated in
such foreign currency. Alternatively, where appropriate, the Portfolio may hedge all or part of its foreign currency exposure
through the use of a basket of currencies or a proxy currency where such currency or currencies act as an effective proxy for
other currencies. In such a case, the Portfolio may enter into a forward contract where the amount of the foreign currency to be
sold exceeds the value of the securities denominated in such currency. The use of this basket hedging technique may be more
efficient and economical than entering into separate forward contracts for each currency held in the Portfolio. The precise
matching of the forward contract amounts and the value of the securities involved will not generally be possible since the future
value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain. Under normal
circumstances, consideration of the prospect for currency parities will be incorporated into the longer term investment decisions
made with regard to overall diversification strategies. However, Sub-advisor believes that it is important to have the
flexibility to enter into such forward contracts when it determines that the best interests of the Portfolio will be served.
The Portfolio may enter into forward contracts for any other purpose consistent with the Portfolio's investment objective
and policies. However, the Portfolio will not enter into a forward contract, or maintain exposure to any such contract(s), if the
amount of foreign currency required to be delivered thereunder would exceed the Portfolio's holdings of liquid assets and currency
available for cover of the forward contract(s). In determining the amount to be delivered under a contract, the Portfolio may net
offsetting positions.
At the maturity of a forward contract, the Portfolio may sell the portfolio security and make delivery of the foreign
currency, or it may retain the security and either extend the maturity of the forward contract (by "rolling" that contract
forward) or may initiate a new forward contract.
If the Portfolio retains the portfolio security and engages in an offsetting transaction, the Portfolio will incur a gain
or a loss (as described below) to the extent that there has been movement in forward contract prices. If the Portfolio engages in
an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward
prices decline during the period between the Portfolio's entering into a forward contract for the sale of a foreign currency and
the date it enters into an offsetting contract for the purchase of the foreign currency, the Portfolio will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Portfolio will suffer a loss to the extent of the price of the currency it has agreed to purchase
exceeds the price of the currency it has agreed to sell.
The Portfolio's dealing in forward foreign currency exchange contracts will generally be limited to the transactions
described above. However, the Portfolio reserves the right to enter into forward foreign currency contracts for different
purposes and under different circumstances. Of course, the Portfolio is not required to enter into forward contracts with regard
to its foreign currency-denominated securities and will not do so unless deemed appropriate by the Sub-advisor. It also should
be realized that this method of hedging against a decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities. It simply establishes a rate of exchange at a future date. Additionally, although such
contracts tend to minimize the risk of loss due to a decline in the value of the hedged currency, at the same time, they tend to
limit any potential gain which might result from an increase in the value of that currency.
Although the Portfolio values its assets daily in terms of U.S. dollars, it does not intend to convert its holdings of
foreign currencies into U.S. dollars on a daily basis. It will do so from time to time, and investors should be aware of the
costs of currency conversion. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at which they are buying and selling various currencies. Thus, a dealer
may offer to sell a foreign currency to the Portfolio at one rate, while offering a lesser rate of exchange should the Portfolio
desire to resell that currency to the dealer. For a discussion of certain risk factors involved in foreign currency transactions,
see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Federal Tax Treatment of Options, Futures Contracts and Forward Foreign Exchange Contracts. The Portfolio may enter into
certain option, futures, and forward foreign exchange contracts, including options and futures on currencies, which will be
treated as Section 1256 contracts or straddles.
Transactions which are considered Section 1256 contracts will be considered to have been closed at the end of the
Portfolio's fiscal year and any gains or losses will be recognized for tax purposes at that time. Such gains or losses from the
normal closing or settlement of such transactions will be characterized as 60% long-term capital gain (taxable at a maximum rate
of 20%) or loss and 40% short-term capital gain or loss regardless of the holding period of the instrument (or, in the case of
foreign exchange contracts, entirely as ordinary income or loss). The Portfolio will be required to distribute net gains on such
transactions to shareholders even though it may not have closed the transaction and received cash to pay such distributions.
Options, futures and forward foreign exchange contracts, including options and futures on currencies, which offset a
foreign dollar denominated bond or currency position may be considered straddles for tax purposes in which case a loss on any
position in a straddle will be subject to deferral to the extent of unrealized gain in an offsetting position. The holding period
of the securities or currencies comprising the straddle will be deemed not to begin until the straddle is terminated. The holding
period of the security offsetting an "in-the-money qualified covered call" option on an equity security will not include the
period of time the option is outstanding.
Losses on written covered calls and purchased puts on securities, excluding certain "qualified covered call" options on
equity securities, may be long-term capital loss, if the security covering the option was held for more than twelve months prior
to the writing of the option.
In order for the Portfolio to continue to qualify for federal income tax treatment as a regulated investment company, at
least 90% of its gross income for a taxable year must be derived from qualifying income, i.e., dividends, interest, income derived
from loans of securities, and gains from the sale of securities or currencies. Tax regulations could be issued limiting the
extent that net gain realized from option, futures or foreign forward exchange contracts on currencies is qualifying income for
purposes of the 90% requirement.
As a result of the "Taxpayer Relief Act of 1997," entering into certain option, futures contracts, or forward contracts
may be deemed a "constructive sale" of offsetting securities, which could result in a taxable gain from the sale being distributed
to shareholders. The Portfolio would be required to distribute any such gain even though it would not receive proceeds from the
sale at the time the option, futures or forward position is entered into.
Hybrid Instruments. Hybrid Instruments have been developed and combine the elements of futures contracts, options or
other financial instruments with those of debt, preferred equity or a depository instrument (hereinafter "Hybrid Instruments).
Hybrid Instruments may take a variety of forms, including, but not limited to, debt instruments with interest or principal
payments or redemption terms determined by reference to the value of a currency or commodity or securities index at a future point
in time, preferred stock with dividend rates determined by reference to the value of a currency, or convertible securities with
the conversion terms related to a particular commodity. For a discussion of certain risks involved in investing in hybrid
instruments see this Statement under "Certain Risk Factors and Investment Methods."
Reverse Repurchase Agreements. Although the Portfolio has no current intention, in the foreseeable future, of engaging
in reverse repurchase agreements, the Portfolio reserves the right to do so. Reverse repurchase agreements are ordinary
repurchase agreements in which a fund is the seller of, rather than the investor in, securities, and agrees to repurchase them at
an agreed upon time and price. Use of a reverse repurchase agreement may be preferable to a regular sale and later repurchase of
the securities because it avoids certain market risks and transaction costs. A reverse repurchase agreement may be viewed as a
type of borrowing by the Portfolio.
Warrants. The Portfolio may acquire warrants. For a discussion of certain risks involved therein, see this Statement
under "Certain Risk Factor and Investment Methods."
Lending of Portfolio Securities. Securities loans are made to broker-dealers or institutional investors or other
persons, pursuant to agreements requiring that the loans be continuously secured by collateral at least equal at all times to the
value of the securities lent marked to market on a daily basis. The collateral received will consist of cash or U.S. government
securities. While the securities are being lent, the Portfolio will continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities, as well as interest on the investment of the collateral or a fee from the
borrower. The Portfolio has a right to call each loan and obtain the securities on three business days' notice or, in connection
with securities trading on foreign markets, within such longer period of time which coincides with the normal settlement period
for purchases and sales of such securities in such foreign markets. The Portfolio will not have the right to vote securities
while they are being lent, but it will call a loan in anticipation of any important vote. The risks in lending portfolio
securities, as with other extensions of secured credit, consist of possible delay in receiving additional collateral or in the
recovery of the securities or possible loss of rights in the collateral should the borrower fail financially.
When-Issued Securities and Forward Commitment Contracts. The Portfolio may purchase securities on a "when-issued" or
delayed delivery basis and may purchase securities on a forward commitment basis. Any or all of the Portfolio's investments in
debt securities may be in the form of when-issueds and forwards. The price of such securities, which may be expressed in yield
terms, is fixed at the time the commitment to purchase is made, but delivery and payment take place at a later date. Normally,
the settlement date occurs within 90 days of the purchase for when-issueds, but may be substantially longer for forwards. The
Portfolio will cover its commitments with respect to these securities by maintaining cash and/or other liquid assets with its
custodian bank equal in value to these commitments during the time between the purchase and the settlement. Such segregated
securities either will mature or, if necessary, be sold on or before the settlement date. For a discussion of these securities
and the risks involved therein, see this Statement under "Certain Risk Factors and Investment Methods."
Money Market Securities. The Portfolio will hold a certain portion of its assets in U.S. and foreign dollar-denominated
money market securities, including repurchase agreements, rated in the two highest rating categories, maturing in one year or less.
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Gabelli Small-Cap Value Portfolio. These limitations are not "fundamental" restrictions, and can be changed by the Trustees
without shareholder approval. The Portfolio will not:
1. Purchase additional securities when money borrowed exceeds 5% of its total assets;
2. Invest in companies for the purpose of exercising management or control;
3. Purchase a futures contract or an option thereon if, with respect to positions in futures or options on futures
which do not represent bona fide hedging, the aggregate initial margin and premiums on such options would exceed 5% of the
Portfolio's net asset value;
4. Purchase illiquid securities if, as a result, more than 15% of its net assets would be invested in such
securities. Securities eligible for resale under Rule 144A of the Securities Act of 1933 may be subject to this 15% limitation;
5. Purchase securities of open-end or closed-end investment companies except in compliance with the 1940 Act or the
conditions of any order of exemption from the SEC regarding the purchase of securities of money market funds managed by the
Sub-advisor or its affiliates;
6. Purchase securities on margin, except (i) for use of short-term credit necessary for clearance of purchases of
portfolio securities and (ii) the Portfolio may make margin deposits in connection with futures contracts or other permissible
investments;
7. Mortgage, pledge, hypothecate or, in any manner, transfer any security owned by the Portfolio as security for
indebtedness except as may be necessary in connection with permissible borrowings or investments and then such mortgaging,
pledging or hypothecating may not exceed 33 1/3% of the Portfolio's total assets at the time of borrowing or investment;
8. Invest in puts, calls, straddles, spreads, or any combination thereof, except to the extent permitted by the
Trust's Prospectus and this Statement;
9. Effect short sales of securities; or
10. Invest in warrants if, as a result thereof, more than 10% of the value of the net assets of the Portfolio would
be invested in warrants, except that this restriction does not apply to warrants acquired as a result of the purchase of another
security. For purposes of these percentage limitations, the warrants will be valued at the lower of cost or market.
AST Janus Mid-Cap Growth Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek long-term growth of capital.
Investment Policies:
Foreign Securities. The Portfolio may invest up to 25% of its net assets in foreign securities denominated in foreign
currencies and not publicly traded in the United States. Investing in securities of foreign issuers generally involves risks not
ordinarily associated with investing in securities of domestic issuers. For a discussion of the risks involved in foreign
securities, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Depositary Receipts. The Portfolio may invest in sponsored and unsponsored American Depositary Receipts ("ADRs"), which
are described in the Trust's Prospectus under "Certain Risk Factors and Investment Methods." Holders of unsponsored ADRs
generally bear all the costs of the ADR facility, whereas foreign issuers typically bear certain costs in a sponsored ADR. The
bank or trust company depositary of an unsponsored ADR may be under no obligation to distribute shareholder communications
received from the foreign issuer or to pass through voting rights. The Portfolio may also invest in European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") and in other similar instruments representing securities of foreign companies.
Investment Company Securities. From time to time, the Portfolio may invest in securities of other investment companies,
subject to the provisions of Section 12(d)(1) of the 1940 Act. The Portfolio may invest in securities of money market funds
managed by the Sub-advisor in excess of the limitations of Section 12(d)(1) under the terms of an SEC exemptive order obtained by
the Sub-advisor and the funds that are advised or sub-advised by the Sub-advisor.
Municipal Obligations. The Portfolio may invest in municipal obligations issued by states, territories and possessions
of the United States and the District of Columbia. The value of municipal obligations can be affected by changes in their actual
or perceived credit quality. The credit quality of municipal obligations can be affected by among other things the financial
condition of the issuer or guarantor, the issuer's future borrowing plans and sources of revenue, the economic feasibility of the
revenue bond project or general borrowing purpose, political or economic developments in the region where the security is issued,
and the liquidity of the security. Because municipal securities are generally traded over-the-counter, the liquidity of a
particular issue often depends on the willingness of dealers to make a market in the security. The liquidity of some municipal
obligations may be enhanced by demand features, which would enable the Portfolio to demand payment on short notice from the issuer
or a financial intermediary.
Income-Producing Securities. Types of income producing securities that the Portfolio may purchase include, but are not
limited to, (i) variable and floating rate obligations, which are securities having interest rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate index or market interest rate, (ii) standby
commitments, which are instruments similar to puts that give the holder the option to obligate a broker, dealer or bank to
repurchase a security at a specified price, and (iii) tender option bonds, which are relatively long-term bonds that are coupled
with the agreement of a third party (such as a broker, dealer or bank) to grant the holders of such securities the option to
tender the securities to the institution at periodic intervals. The Portfolio will purchase standby commitments, tender option
bonds and instruments with demand features primarily for the purpose of increasing the liquidity of its portfolio. The Portfolio
may also invest in inverse floaters, which are debt instruments the interest on which varies in an inverse relationship to the
interest rate on another security. If movements in interest rates are incorrectly anticipated, the Portfolio could lose money or
its net asset value could decline by the use of inverse floaters. The Portfolio will not invest more than 5% of its assets in
inverse floaters. The Portfolio may also invest in strip bonds, which are debt securities that are stripped of their interest
(usually by a financial intermediary) after the securities are issued. The market value of these securities generally fluctuates
more in response to changes in interest rates than interest-paying securities of comparable maturity.
Zero Coupon, Step Coupon and Pay-In-Kind Securities. The Portfolio may invest up to 10% of its assets in zero coupon,
pay-in-kind and step coupon securities. Zero coupon bonds are described in this Statement under "Certain Risk Factors and
Investment Methods." Step coupon bonds trade at a discount from their face value and pay coupon interest. The coupon rate is low
for an initial period and then increases to a higher coupon rate thereafter. The discount from the face amount or par value
depends on the time remaining until cash payments begin, prevailing interest rates, liquidity of the security and the perceived
credit quality of the issuer. Pay-in-kind bonds normally give the issuer an option to pay cash at a coupon payment date or give
the holder of the security a similar bond with the same coupon rate and a face value equal to the amount of the coupon payment
that would have been made. For the purposes of the Portfolio's restriction on investing in income-producing securities,
income-producing securities include securities that make periodic interest payments as well as those that make interest payments
on a deferred basis or pay interest only at maturity (e.g., Treasury bills or zero coupon bonds).
Generally, the market prices of zero coupon, step coupon and pay-in-kind securities are more volatile than the prices of
securities that pay interest periodically and in cash and are likely to respond to changes in interest rates to a greater degree
than other types of debt securities having similar maturities and credit quality.
High-Yield/High-Risk Securities. The Portfolio may invest up to 35% of its net assets in bonds that are rated below
investment grade. The Portfolio may also invest in unrated debt securities of foreign and domestic issuers. Unrated debt, while
not necessarily of lower quality than rated securities, may not have as broad a market. Because of the size and perceived demand
of the issue, among other factors, certain municipalities may not incur the costs of obtaining a rating. The Sub-advisor will
analyze the creditworthiness of the issuer, as well as any financial institution or other party responsible for payments on the
security, in determining whether to purchase unrated municipal bonds. Unrated bonds will be included in the 35% limit unless the
Sub-advisor deems such securities to be the equivalent of investment grade securities. For a description of these securities and
a discussion of the risks involved therein, see this Statement and the Trust's Prospectus under "Certain Risk Factors and
Investment Methods."
The Portfolio may purchase defaulted securities subject to the above limits, but only when the Sub-advisor believes,
based upon its analysis of the financial condition, results of operations and economic outlook of an issuer, that there is
potential for resumption of income payments and that the securities offer an unusual opportunity for capital appreciation.
Notwithstanding the Sub-advisor's belief as to the resumption of income, however, the purchase of any security on which payment of
interest or dividends is suspended involves a high degree of risk. Such risk includes, among other things, the following:
Financial and Market Risks. Investments in securities that are in default involve a high degree of financial and
market risks that can result in substantial or, at times, even total losses. Issuers of defaulted securities may have substantial
capital needs and may become involved in bankruptcy or reorganization proceedings. Among the problems involved in investments in
such issuers is the fact that it may be difficult to obtain information about their condition. The market prices of securities of
such issuers also are subject to abrupt and erratic movements and above average price volatility, and the spread between the bid
and asked prices of such securities may be greater than normally expected.
Disposition of Portfolio Securities. Although the Portfolio generally will purchase securities for which the
Sub-advisor expects an active market to be maintained, defaulted securities may be less actively traded than other securities and
it may be difficult to dispose of substantial holdings of such securities at prevailing market prices. The Portfolio will limit
holdings of any such securities to amounts that the Sub-advisor believes could be readily sold, and holdings of such securities
would, in any event, be limited so as not to limit the Portfolio's ability to readily dispose of securities to meet redemptions.
Other. Defaulted securities require active monitoring and may, at times, require participation in bankruptcy or
receivership proceedings on behalf of the Portfolio.
Reverse Repurchase Agreements. The Portfolio may use reverse repurchase agreements to provide cash to satisfy unusually
heavy redemption requests or for other temporary or emergency purposes without the necessity of selling portfolio securities, or
to earn additional income on portfolio securities, such as Treasury bills or notes. The Portfolio will enter into reverse
repurchase agreements only with parties that the Sub-advisor deems creditworthy. Using reverse repurchase agreements to earn
additional income involves the risk that the interest earned on the invested proceeds is less than the expense of the reverse
repurchase agreement transaction. This technique may also have a leveraging effect on the Portfolio, although the requirement for
the Portfolio to segregate assets in the amount of the reverse repurchase agreement minimizes this effect.
For an additional discussion of reverse repurchase agreements and their risks, see the Trust's Prospectus under "Certain
Risk Factors and Investment Methods."
Futures, Options and Forward Contracts. 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, and forward contracts. The Portfolio will not enter into any futures contracts or options on futures contracts if the
aggregate amount of the Portfolio's commitments under outstanding futures contract positions and options on futures contracts
written by the Portfolio would exceed the market value of the Portfolio's total assets. The Portfolio may invest in forward
currency contracts with stated values of up to the value of the Portfolio's assets.
The Portfolio may buy or write options in privately negotiated transactions on the types of securities, and on indices
based on the types of securities, in which the Portfolio is permitted to invest directly. The Portfolio will effect such
transactions only with investment dealers and other financial institutions (such as commercial banks or savings and loan
institutions) deemed creditworthy by the Sub-advisor pursuant to procedures adopted by the Sub-advisor for monitoring the
creditworthiness of those entities. To the extent that an option purchased or written by the Portfolio in a negotiated
transaction is illiquid, the value of the option purchased or the amount of the Portfolio's obligations under an option it has
written, as the case may be, will be subject to the Portfolio's limitation on illiquid investments. In the case of illiquid
options, it may not be possible for the Portfolio to effect an offsetting transaction when the Sub-advisor believes it would be
advantageous for the Portfolio to do so. For a description of these strategies and instruments and certain of their risks, see
this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Eurodollar Instruments. The Portfolio may make investments in Eurodollar instruments. Eurodollar instruments are U.S.
dollar-denominated futures contracts or options thereon that are linked to the London Interbank Offered Rate ("LIBOR"), although
foreign currency-denominated instruments are available from time to time. Eurodollar futures contracts enable purchasers to obtain
a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. The Portfolio might use Eurodollar
futures contracts and options thereon to hedge against changes in LIBOR, to which many interest rate swaps and fixed-income
instruments are linked.
Swaps and Swap-Related Products. The Portfolio may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its assets or its liabilities, and will usually enter
into interest rate swaps on a net basis (i.e., the two payment streams are netted out, with the Portfolio receiving or paying, as
the case may be, only the net amount of the two payments). The net amount of the excess, if any, of the Portfolio's obligations
over its entitlement with respect to each interest rate swap will be calculated on a daily basis and an amount of cash or other
liquid assets having an aggregate net asset value at least equal to the accrued excess will be maintained in a segregated account
by the Portfolio's custodian. If the Portfolio enters into an interest rate swap on other than a net basis, it would maintain a
segregated account in the full amount accrued on a daily basis of its obligations with respect to the swap. The Portfolio will
not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in one of the three highest rating categories of at least one NRSRO at the time of entering into
such transaction. The Sub-advisor will monitor the creditworthiness of all counterparties on an ongoing basis. If there is a
default by the other party to such a transaction, the Portfolio will have contractual remedies pursuant to the agreements related
to the transaction.
The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. The Sub-advisor has determined that, as a result, the
swap market has become relatively liquid. Caps and floors are more recent innovations for which standardized documentation has
not yet been developed and, accordingly, are less liquid than swaps. To the extent the Portfolio sells (i.e., writes) caps and
floors, it will segregate cash or other liquid assets having an aggregate net asset value at least equal to the full amount,
accrued on a daily basis, of its obligations with respect to any caps or floors.
There is no limit on the amount of interest rate swap transactions that may be entered into by the Portfolio. These
transactions may in some instances involve the delivery of securities or other underlying assets by the Portfolio or its
counterparty to collateralize obligations under the swap. Under the documentation currently used in those markets, the risk of
loss with respect to interest rate swaps is limited to the net amount of the payments that the Portfolio is contractually
obligated to make. If the other party to an interest rate swap that is not collateralized defaults, the Portfolio would risk the
loss of the payments that it contractually is entitled to receive. The Portfolio may buy and sell (i.e., write) caps and floors
without limitation, subject to the segregation requirement described above.
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Janus Mid-Cap Growth Portfolio. These limitations are not "fundamental" restrictions, and may be changed by the Trustees
without shareholder approval.
1. The Portfolio does not currently intend to sell securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short without the payment of any additional consideration
therefor, and provided that transactions in futures, options, swaps and forward contracts are not deemed to constitute selling
securities short.
2. The Portfolio does not currently intend to purchase securities on margin, except that the Portfolio may obtain
such short-term credits as are necessary for the clearance of transactions, and provided that margin payments and other deposits
in connection with transactions in futures, options, swaps and forward contracts shall not be deemed to constitute purchasing
securities on margin.
3. The Portfolio may not mortgage or pledge any securities owned or held by the Portfolio in amounts that exceed, in
the aggregate, 15% of the Portfolio's net asset value, provided that this limitation does not apply to reverse repurchase
agreements, deposits of assets to margin, guarantee positions in futures, options, swaps or forward contracts, or the segregation
of assets in connection with such contracts.
4. The Portfolio does not currently intend to purchase any security or enter into a repurchase agreement if, as a
result, more than 15% of its net assets would be invested in repurchase agreements not entitling the holder to payment of
principal and interest within seven days and in securities that are illiquid by virtue of legal or contractual restrictions on
resale or the absence of a readily available market. The Trustees, or the Portfolio's Sub-advisor acting pursuant to authority
delegated by the Trustees, may determine that a readily available market exists for securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933 ("Rule 144A Securities"), or any successor to such rule, Section 4(2) commercial paper
and municipal lease obligations. Accordingly, such securities may not be subject to the foregoing limitation.
5. The Portfolio may not invest in companies for the purpose of exercising control of management.
AST Alger Mid-Cap Growth Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek long-term capital growth.
Investment Policies:
Cash Position. In order to afford the Portfolio the flexibility to take advantage of new opportunities for investments
in accordance with its investment objective or to meet redemptions, it may, under normal circumstances, hold up to 15% of its
total assets in money market instruments including, but not limited to, certificates of deposit, time deposits and bankers'
acceptances issued by domestic bank and thrift institutions, U.S. Government securities, commercial paper and repurchase
agreements. In addition, when the Sub-advisor's analysis of economic and technical market factors suggests that common stock
prices will decline sufficiently so that a temporary defensive position is deemed advisable, the Portfolio may invest in these
instruments without limitation.
U.S. Government Obligations. Obligations, bills, notes, bonds, and other debt securities issued by the U.S. Treasury are
direct obligations of the U.S. Government and differ mainly in the length of their maturities.
U.S. Government Agency Obligations. These securities are issued or guaranteed by U.S. Government-sponsored enterprises
and federal agencies. These include securities issued by the Federal National Mortgage Association, Government National Mortgage
Association, Federal Home Loan Bank, Federal Land Banks, Farmers Home Administration, Banks for Cooperatives, Federal Intermediate
Credit Banks, Federal Financing Bank, Farm Credit Banks, the Small Business Administration, Federal Housing Administration and
Maritime Administration. Some of these securities are supported by the full faith and credit of the U.S. Treasury; and the
remainder are supported only by the credit of the instrumentality, which may or may not include the right of the issuer to borrow
from the Treasury. Certain of these securities may have volatility risks, prepayment risks and extension risk, which could have a
negative impact on the Portfolio's net asset value.
Bank Obligations. These are certificates of deposit, bankers' acceptances and other short-term debt obligations.
Certificates of deposit are short-term obligations of commercial banks. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower, usually in connection with international commercial transactions. Certificates of deposit may have
fixed or variable rates.
The Portfolio will not invest in any debt security issued by a commercial bank unless (i) the bank has total assets of at
least $1 billion, or the equivalent in other currencies, or, in the case of domestic banks which do not have total assets of at
least $1 billion, the aggregate investment made in any one such bank is limited to $100,000 and the principal amount of such
investment is insured in full by the Federal Deposit Insurance Corporation, (ii) in the case of U.S. banks, it is a member of the
Federal Deposit Insurance Corporation, and (iii) in the case of foreign banks, the security is, in the opinion of the Sub-advisor,
of an investment quality comparable to other debt securities which may be purchased by the Portfolios. These limitations do not
prohibit investments in securities issued by foreign branches of U.S. banks, provided such U.S. banks meet the foregoing
requirements.
Investments by the Portfolio in foreign bank obligations and obligations of foreign branches of domestic banks present
many of the same risks as investments in foreign securities generally. In view of these risks, the Sub-advisor will carefully
evaluate these investments on a case-by-case basis. For additional discussion of foreign securities and their risks, see this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Short-term Corporate Debt Securities. These are outstanding nonconvertible corporate debt securities (e.g., bonds and
debentures) which have one year or less remaining to maturity. Corporate debt securities may have fixed, variable, or floating
rates. For additional discussion on debt securities see this Statement under "Certain Risk Factors and Investment Methods."
Commercial Paper. These are short-term promissory notes issued by corporations primarily to finance short-term credit
needs.
Variable Rate Master Demand Notes. These are unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate. Because these notes are direct lending arrangements between the Portfolio
and the issuer, they are not normally traded. Although no active secondary market may exist for these notes, the Portfolio may
demand payment of principal and accrued interest at any time or may resell the note to a third party. While the notes are not
typically rated by credit rating agencies, issuers of variable rate master demand notes must satisfy the Sub-advisor that the same
criteria for issuers of commercial paper are met. In addition, when purchasing variable rate master demand notes for the
Portfolio, the Sub-advisor will consider the earning power, cash flows and other liquidity ratios of the issuers of the notes and
will continuously monitor their financial status and ability to meet payment on demand. In the event an issuer of a variable rate
master demand note were to default on its payment obligations, the Portfolio might be unable to dispose of the note because of the
absence of a secondary market and could, for this or other reasons, suffer a loss to the extent of the default.
Firm Commitment Agreements and When-Issued Transactions. Firm commitment agreements and when-issued transactions would
be used, for example, when a decline in the yield of securities of a given issuer is anticipated and a more advantageous yield may
be obtained by committing currently to purchase securities to be issued later. The Portfolio will not use these transactions for
leveraging purposes and, accordingly, will segregate cash or liquid securities in an amount sufficient at all times to meet its
purchase obligations under these agreements. Additional information about firm commitment agreements, when-issued transactions
and their risks is included in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Lending of Portfolio Securities. The Portfolio will not lend securities to the Investment Manager, the Sub-advisor or
their affiliates. By lending its securities, the Portfolio can increase its income by continuing to receive interest or dividends
on the loaned securities as well as by either investing the cash collateral or by earning income in the form of interest paid by
the borrower when U.S. Government securities are used as collateral. The Portfolio will adhere to the following conditions
whenever its securities are loaned: (a) the borrower will be obligated to deliver at least 100 percent cash collateral or
equivalent securities to the Portfolio, (b) the borrower must increase this collateral whenever the market value of the loaned
securities including accrued interest exceeds the value of the collateral, (c) the Portfolio must receive reasonable interest on
the loan, as well as any dividends, interest or other distributions on the loaned securities and any increase in market value, (d)
the Portfolio may pay only reasonable custodian fees in connection with the loan. For additional information on the lending of
Portfolio securities and its risks see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment
Methods."
Foreign Securities. The Portfolio may invest up to 20% of the value of its total assets in foreign securities (not
including American Depositary Receipts, American Depositary Shares or U.S. dollar-denominated securities of foreign issuers).
Foreign securities investments may be affected by, among other matters, changes in governmental administration or economic or
monetary policy (in the United States and abroad) or changed circumstances in dealing among nations. Securities purchased on a
foreign exchange may be held in custody by a bank or other depository located in that market. For additional discussion on
foreign securities see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Alger Mid-Cap Growth Portfolio. These limitations are not "fundamental" restrictions and may be changed by the Trustees
without shareholder approval. The Portfolio will not:
1. Purchase securities on margin, except (i) for use of short-term credit necessary for clearance of purchases of portfolio
securities and (ii) the Portfolio may make margin deposits in connection with futures contracts or other permissible investments;
2. Mortgage, pledge, hypothecate or, in any manner, transfer any security owned by the Portfolio as security for
indebtedness except as may be necessary in connection with permissible borrowings or investments and then such mortgaging,
pledging or hypothecating may not exceed 10% of the Portfolio's total assets at the time of borrowing or investment. These
restrictions shall not apply to transactions involving reverse repurchase agreements or the purchase of securities subject to firm
commitment agreements or on a when-issued basis;
3. Invest in oil, gas or mineral leases.
4. Purchase securities of open-end or closed-end investment companies except in compliance with the 1940 Act.
5. The Portfolio may not invest more than 15% of the assets of the Portfolio (taken at the time of the investments) in
"illiquid securities," illiquid securities being defined to include securities subject to legal or contractual restrictions on
resale (which may include private placements), repurchase agreements maturing in more than seven days, certain options traded over
the counter that the Portfolio has purchased, securities being used to cover options a Portfolio has written, securities for which
market quotations are not readily available, or other securities which legally or in the Sub-advisor's option may be deemed
illiquid.
6. Selling securities short, except that the Portfolio may sell securities "short against the box."
7. Writing or selling puts, calls, straddles, spreads or combinations thereof.
8. Making investments for the purpose of exercising control or management.
AST Neuberger Berman Mid-Cap Growth Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek capital appreciation.
Investment Policies:
Securities Loans. In order to realize income, the Portfolio may lend portfolio securities with a value not exceeding
33-1/3% of its total assets to banks, brokerage firms, or institutional investors. Borrowers are required continuously to secure
their obligations to return securities on loan from the Portfolio by depositing collateral, which will be marked to market daily,
in a form determined to be satisfactory by the Trustees and equal to at least 100% of the market value of the loaned securities,
which will also be marked to market daily. The Sub-advisor believes the risk of loss on these transactions is slight because, if
a borrower were to default for any reason, the collateral should satisfy the obligation. However, as with other extensions of
secured credit, loans of portfolio securities involve some risk of loss of rights in the collateral should the borrower fail
financially.
Reverse Repurchase Agreements. In a reverse repurchase agreement, the Portfolio sells portfolio securities subject to
its agreement to repurchase the securities at a later date for a fixed price reflecting a market rate of interest; these
agreements are considered borrowings for purposes of the Portfolio's investment limitations and policies concerning borrowings.
There is a risk that the counterparty to a reverse repurchase agreement will be unable or unwilling to complete the transaction as
scheduled, which may result in losses to the Portfolio.
Covered Call Options. The Portfolio may write covered call options on securities it owns. Generally, the purpose of
writing these options is to reduce the effect of price fluctuation of securities held by the Portfolio's net asset value.
Securities on which call options may be written by the Portfolio are purchased solely on the basis of investment considerations
consistent with the Portfolio's investment objectives.
When the Portfolio writes a call option, it is obligated to sell a security to a purchaser at a specified price at any
time until a certain date if the purchaser decides to exercise the option. The Portfolio receives a premium for writing the call
option. The Portfolio writes only "covered" call options on securities it owns. So long as the obligation of the writer of the
call option continues, the writer may be assigned an exercise notice, requiring it to deliver the underlying security against
payment of the exercise price. The Portfolio may be obligated to deliver securities underlying a call option at less than the
market price thereby giving up any additional gain on the security.
When the Portfolio purchases a call option, it pays a premium for the right to purchase a security from the writer at a
specified price until a specified date. A call option would be purchased by the Portfolio to offset a previously written call
option.
The writing of covered call options is a conservative investment technique believed to involve relatively little risk (in
contrast to the writing of "naked" or uncovered call options, which the Portfolio will not do), but is capable of enhancing the
Portfolio's total return. When writing a covered call option, the Portfolio, in return for the premium, gives up the opportunity
for profit from a price increase in the underlying security above the exercise price, but conversely retains the risk of loss
should the price of the security decline. If a call option that the Portfolio has written expires unexercised, the Portfolio will
realize a gain in the amount of the premium; however, in the case of a call option, that gain may be offset by a decline in the
market value of the underlying security during the option period. If the call option is exercised, the Portfolio will realize a
gain or loss from the sale or purchase of the underlying security.
The exercise price of an option may be below, equal to, or above the market value of the underlying security at the time
the option is written. Options normally have expiration dates between three and nine months from the date written. The
obligation under any option terminates upon expiration of the option or, at an earlier time, when the writer offsets the option by
entering into a "closing purchase transaction" to purchase an option of the same series.
Options are traded both on national securities exchanges and in the over-the-counter ("OTC") market. Exchange-traded
options are issued by a clearing organization affiliated with the exchange on which the option is listed; the clearing
organization in effect guarantees completion of, every exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and its counter-party with no clearing organization guarantee. Thus, when the Portfolio sells or purchases an OTC
option, it generally will be able to "close out" the option prior to its expiration only by entering into a "closing purchase
transaction" with the dealer to whom or from whom the Portfolio originally sold or purchased the option. The Sub-advisor monitors
the creditworthiness of dealers with which the Portfolio may engage in OTC options, and will limit counterparties in such
transactions to dealers with a net worth of at least $20 million as reported in their latest financial statements. For an
additional discussion of OTC options and their risks, see this Statement under "Certain Risk Factors and Investment Methods."
The premium received (or paid) by the Portfolio when it writes (or purchases) an option is the amount at which the
option is currently traded on the applicable exchange, less (or plus) a commission. The premium may reflect, among other things,
the current market price of the underlying security, the relationship of the exercise price to the market price, the historical
price volatility of the underlying security, the length of the option period, the general supply of and demand for credit, and the
general interest rate environment. The premium received by the Portfolio for writing an option is recorded as a liability on the
Portfolio's statement of assets and liabilities. This liability is adjusted daily to the option's current market value.
The Portfolio pays the brokerage commissions in connection with purchasing or writing options, including those used to
close out existing positions. These brokerage commissions normally are higher than those applicable to purchases and sales of
portfolio securities.
For an additional discussion of options and their risks, see this Statement and the Trust's Prospectus under "Certain
Risk Factors and Investment Methods."
Foreign Securities. The Portfolio may invest in U.S. dollar-denominated equity and debt securities issued by foreign
issuers (including governments, quasi-governments and foreign banks) and foreign branches of U.S. banks, including negotiable CDs
and commercial paper. These investments are subject to the Portfolio's quality standards. While investments in foreign
securities are intended to reduce risk by providing further diversification, such investments involve sovereign and other risks,
in addition to the credit and market risks normally associated with domestic securities.
The Portfolio may invest in equity, debt, or other income-producing securities that are denominated in or indexed to
foreign currencies, including, but not limited to (1) common and preferred stocks, (2) convertible securities, (3) warrants, (4)
CDs, commercial paper, fixed-time deposits, and bankers' acceptances issued by foreign banks, (5) obligations of other
corporations, and (6) obligations of foreign governments, or their subdivisions, agencies, and instrumentalities, international
agencies, and supranational entities. Risks of investing in foreign currency denominated securities include (1) nationalization,
expropriation, or confiscatory taxation, (2) adverse changes in investment or exchange control regulations (which could prevent
cash from being brought back to the U.S.), and (3) expropriation or nationalization of foreign portfolio companies. Mail service
between the U.S. and foreign countries may be slower or less reliable than within the United States, thus increasing the risk of
delayed settlements of portfolio transactions or loss of certificates for portfolio securities. For an additional discussion of
the risks associated with foreign securities, whether denominated in U.S. dollars or foreign currencies, see this Statement and
the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Prices of foreign securities and exchange rates for foreign currencies may be affected by the interest rates prevailing
in other countries. The interest rates in other countries are often affected by local factors, including the strength of the
local economy, the demand for borrowing, the government's fiscal and monetary policies, and the international balance of
payments. Individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as gross
national product, rate of inflation, capital reinvestment, resource self-sufficiency, and balance of payments position.
Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times
when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such
transactions. Such delays in settlement could result in temporary periods when a portion of the assets of the Portfolio is
uninvested and no return is earned thereon. The inability of the Portfolio to make intended security purchases due to settlement
problems could cause the Portfolio to miss attractive investment opportunities. Inability to dispose of portfolio securities due
to settlement problems could result either in losses to the Portfolio due to subsequent declines in value of the portfolio
securities, or, if the Portfolio has entered into a contract to sell the securities, could result in possible liability to the
purchaser.
The Portfolio may invest in foreign corporate bonds and debentures and sovereign debt instruments issued or guaranteed by
foreign governments, their agencies or instrumentalities. Foreign debt securities are subject to risks similar to those of other
foreign securities, as well as risks similar to those of other debt securities, as discussed in this Statement and in the Trust's
Prospectus under "Investment Objectives and Policies" and "Certain Risk Factors and Investment Methods."
In order to limit the risk inherent in investing in foreign currency-denominated securities, the Portfolio may not
purchase any such security if after such purchase more than 10% of its total assets (taken at market value) would be invested in
such securities. Within such limitation, however, the Portfolio is not restricted in the amount it may invest in securities
denominated in any one foreign currency.
Foreign Currency Transactions. The Portfolio may engage in foreign currency exchange transactions. Foreign currency
exchange transactions will be conducted either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
----
exchange market, or through entering into forward contracts to purchase or sell foreign currencies ("forward contracts"). The
Portfolio may enter into forward contracts in order to protect against uncertainty in the level of future foreign currency
exchange rates. The Portfolio may also use forward contracts for non-hedging purposes.
A forward contract involves an obligation to purchase or sell a specific currency at a future date, which may be any
fixed number of days (usually less than one year) from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded in the interbank market conducted directly between traders (usually large
commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the
difference (the spread) between the price at which they are buying and selling various currencies.
When the Portfolio enters into a contract for the purchase or sale of a security denominated in a foreign currency, it
may wish to "lock in" the U.S. dollar price of the security. By entering into a forward contract for the purchase or sale, for a
fixed amount of U.S. dollars, of the amount of foreign currency involved in the underlying security transactions, the Portfolio
will be able to protect itself against a possible loss. When the Sub-advisor believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, it may also enter into a forward contract to sell the amount of
foreign currency for a fixed amount of dollars which approximates the value of some or all of a Portfolio's securities denominated
in such foreign currency.
The Portfolio may also engage in cross-hedging by using forward contracts in one currency to hedge against fluctuations
in the value of securities denominated in a different currency, when the Sub-advisor believes that there is a pattern of
correlation between the two currencies. The Portfolio may also purchase and sell forward contracts for non-hedging purposes when
the Sub-advisor anticipates that the foreign currency will appreciate or depreciate in value, but securities in that currency do
not present attractive investment opportunities and are not held in the Portfolio's portfolio.
When the Portfolio engages in forward contracts for hedging purposes, it will not enter into forward contracts to sell
currency or maintain a net exposure to such contracts if their consummation would obligate the Portfolio to deliver an amount of
foreign currency in excess of the value of its portfolio securities or other assets denominated in that currency. At the
consummation of the forward contract, the Portfolio may either make delivery of the foreign currency or terminate its contractual
obligation to deliver by purchasing an offsetting contract obligating it to purchase the same amount of such foreign currency at
the same maturity date. If the Portfolio chooses to make delivery of the foreign currency, it may be required to obtain such
currency through the sale of portfolio securities denominated in such currency or through conversion of other assets into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a gain or a loss to the extent that there has been
a change in forward contract prices. Closing purchase transactions with respect to forward contracts are usually made with the
currency trader who is a party to the original forward contract.
The Portfolio is not required to enter into such transactions and will not do so unless deemed appropriate by the
Sub-advisor.
Using forward contracts to protect the value of the Portfolio's portfolio securities against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange
which can be achieved at some future point in time. The precise projection of short-term currency market movements is not
possible, and short-term hedging provides a means of fixing the dollar value of only a portion of the Portfolio's foreign assets.
While the Portfolio may enter forward contracts to reduce currency exchange rate risks, transactions in such contracts
involve certain other risks. Thus, while the Portfolio may benefit from such transactions, unanticipated changes in currency
prices may result in a poorer overall performance for the Portfolio than if it had not engaged in any such transactions.
Moreover, there may be imperfect correlation between the Portfolio's holdings of securities denominated in a particular currency
and forward contracts entered into by the Portfolio. Such imperfect correlation may cause the Portfolio to sustain losses which
will prevent it from achieving a complete hedge or expose it to risk of foreign exchange loss.
The Portfolio generally will not enter into a forward contract with a term of greater than one year. The Portfolio may
experience delays in the settlement of its foreign currency transactions.
When the Portfolio engages in forward contracts for the sale or purchase of currencies, the Portfolio will either cover
its position or establish a segregated account. The Portfolio will consider its position covered if it has securities in the
currency subject to the forward contract, or otherwise has the right to obtain that currency at no additional cost. In the
alternative, the Portfolio will place cash, fixed income, or equity securities (denominated in the foreign currency subject to the
forward contract) in a separate account. The amounts in such separate account will equal the value of the Portfolio's assets
which are committed to the consummation of foreign currency exchange contracts. If the value of the securities placed in the
separate account declines, the Portfolio will place additional cash or securities in the account on a daily basis so that the
value of the account will equal the amount of its commitments with respect to such contracts.
For an additional discussion of forward foreign currency exchange contracts and their risks, see this Statement and the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Options on Foreign Currencies. The Portfolio may write and purchase covered call and put options on foreign currencies
in amounts not exceeding 5% of its net assets for the purpose of protecting against declines in the U.S. dollar value of portfolio
securities or increases in the U.S.-dollar cost of securities to be acquired, or to protect the dollar equivalent of dividend,
interest, or other payment on those securities. A decline in the dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In
order to protect against such decreases in the value of portfolio securities, the Portfolio may purchase put options on the
foreign currency. If the value of the currency declines, the Portfolio will have the right to sell such currency for a fixed
amount of dollars which exceeds the market value of such currency. This would result in a gain that may offset, in whole or in
part, the negative effect of currency depreciation on the value of the Portfolio's securities denominated in that currency.
Conversely, if the dollar value of a currency in which securities to be acquired by the Portfolio are denominated rises,
thereby increasing the cost of such securities, the Portfolio may purchase call options on such currency. If the value of such
currency increases sufficiently, the Portfolio will have the right to purchase that currency for a fixed amount of dollars which
is less than the market value of that currency. Such a purchase would result in a gain that may offset, at least partially, the
effect of any currency-related increase in the price of securities the Portfolio intends to acquire.
As in the case of other types of options transactions, however, the benefit the Portfolio derives from purchasing foreign
currency options will be reduced by the amount of the premium and related transaction costs. In addition, if currency exchange
rates do not move in the direction or to the extent anticipated, the Portfolio could sustain losses on transactions in foreign
currency options which would deprive it of a portion or all of the benefits of advantageous changes in such rates.
The Portfolio may also write options on foreign currencies for hedging purposes. For example, if the Sub-advisor
anticipates a decline in the dollar value of foreign currency denominated securities because of declining exchange rates, it
could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the
option will most likely not be exercised, and the decrease in value of portfolio securities will be offset, at least in part, by
the amount of the premium received by the Portfolio.
Similarly, the Portfolio could write a put option on the relevant currency, instead of purchasing a call option, to hedge
against an anticipated increase in the dollar cost of securities to be acquired. If exchange rates move in the manner projected,
the put option most likely will not be exercised, and such increased cost will be offset, at least in part, by the amount of the
premium received. However, as in the case of other types of options transactions, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction.
If unanticipated exchange rate fluctuations occur, a put or call option may be exercised and the Portfolio could be
required to purchase or sell the underlying currency at a loss which may not be fully offset by the amount of the premium. As a
result of writing options on foreign currencies, the Portfolio also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements in currency exchange rates. Options on foreign currencies may
be traded on U.S. or foreign exchanges or over-the-counter options or foreign currencies that are traded on the OTC market and
involve liquidity and credit risks that may not be present in the case of exchange-traded currency options.
A call option written on foreign currency by the Portfolio is "covered" if the Portfolio owns the underlying foreign
currency subject to the call, or if it has an absolute and immediate right to acquire that foreign currency without additional
cash consideration. A call option is also covered if the Portfolio holds a call on the same foreign currency for the same
principal amount as the call written where the exercise price of the call held is (a) equal to or less than the exercise price of
the call written or (b) greater than the exercise price of the call written if the amount of the difference is maintained by the
Portfolio in cash, fixed income or equity securities in a segregated account with its custodian.
The risks of currency options are similar to the risks of other options, as discussed above and in this Statement under
"Certain Risk Factors and Investment Methods."
Cover for Options on Securities, Forward Contracts, and Options on Foreign Currencies ("Hedging Instruments"). The
Portfolio will comply with SEC staff guidelines regarding "cover" for Hedging Instruments and, if the guidelines so require, set
aside in a segregated account with its custodian the prescribed amount of cash, fixed income, or equity securities. Securities
held in a segregated account cannot be sold while the futures, option, or forward strategy covered by those securities is
outstanding, unless they are replaced with other suitable assets. As a result, segregation of a large percentage of the
Portfolio's assets could impede portfolio management or the Portfolio's ability to meet current obligations. The Portfolio may be
unable promptly to dispose of assets that cover, or are segregated with respect to, an illiquid options or forward position; this
inability may result in a loss to the Portfolio.
Preferred Stock. The Portfolio may invest in preferred stock. Unlike interest payments on debt securities, dividends on
preferred stock are generally payable at the discretion of the issuer's board of directors, although preferred shareholders may
have certain rights if dividends are not paid. Shareholders may suffer a loss of value if dividends are not paid, and generally
have no legal recourse against the issuer. The market prices of preferred stocks are generally more sensitive to changes in the
issuer's creditworthiness than are the prices of debt securities.
Fixed Income Securities. The Portfolio may invest in money market instruments, U.S. Government or Agency securities, and
corporate bonds and debentures receiving one of the four highest ratings from Standard & Poor's Ratings Group ("S&P"), Moody's
Investors Service, Inc. ("Moody's") or any other nationally recognized statistical rating organization ("NRSRO"), or, if not rated
by any NRSRO, deemed comparable by the Sub-advisor to such rated securities. The ratings of an NRSRO represent its opinion as to
the quality of securities it undertakes to rate. Ratings are not absolute standards of quality; consequently, securities with the
same maturity, coupon, and rating may have different yields. Although the Portfolio may rely on the ratings of any NRSRO, the
Portfolio mainly refers to ratings assigned by S&P and Moody's, which are described in Appendix A to this Statement.
Fixed income securities are subject to the risk of an issuer's inability to meet principal and interest payments on the
obligations ("credit risk") and also may be subject to price volatility due to such factors as interest rate sensitivity, market
perception of the creditworthiness of the issuer, and general market liquidity ("market risk"). Lower-rated securities are more
likely to react to developments affecting market and credit risk than are more highly rated securities, which react primarily to
movements in the general level of interest rates.
Changes in economic conditions or developments regarding the individual issuer are more likely to cause price volatility
and weaken the capacity of the issuer of such securities to make principal and interest payments than is the case for higher-grade
debt securities. An economic downturn affecting the issuer may result in an increased incidence of default. The market for
lower-rated securities may be thinner and less active than for higher-rated securities. Pricing of thinly traded securities
requires greater judgment than pricing of securities for which market transactions are regularly reported.
If the quality of any fixed income securities held by the Portfolio deteriorates so that they no longer would be eligible
for purchase by the Portfolio, the Portfolio will engage in an orderly disposition of the securities to the extent necessary to
ensure that the Portfolio's holding of such securities will not exceed 5% of its net assets.
Convertible Securities. The Portfolio may invest in convertible securities of any quality. A convertible security
entitles the holder to receive interest paid or accrued on debt or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Before conversion, convertible securities ordinarily provide a stream of
income with generally higher yields than those of common stocks of the same or similar issuers, but lower than the yield on
non-convertible debt. Convertible securities are usually subordinated to comparable-tier nonconvertible securities but rank
senior to common stock in a corporation's capital structure. The value of a convertible security is a function of (1) its yield
in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege, and
(2) its worth, at market value, if converted into the underlying common stock. Convertible debt securities are subject to the
Portfolio's investment policies and limitations concerning fixed-income investments.
Convertible securities are typically issued by smaller companies whose stock prices may be volatile. The price of a
convertible security often reflects such variations in the price of the underlying common stock in a way that nonconvertible debt
does not. A convertible security may be subject to redemption at the option of the issuer at a price established in the
security's governing instrument. If a convertible security held by the Portfolio is called for redemption, the Portfolio will be
required to convert it into the underlying common stock, sell it to a third party or permit the issuer to redeem the security.
Any of these actions could have an adverse effect on the Portfolio's ability to achieve its investment objective.
Commercial Paper. Commercial paper is a short-term debt security issued by a corporation, bank, municipality, or other
issuer, usually for purposes such as financing current operations. The Portfolio may invest only in commercial paper receiving
the highest rating from S&P (A-1) or Moody's (P-1), or deemed by the Sub-advisor to be of equivalent quality.
The Portfolio may invest in commercial paper that cannot be resold to the public because it was issued under the
exception for private offerings in Section 4(2) of the Securities Act of 1933. While such securities normally will be considered
illiquid and subject to the Portfolio's 15% limitation on investments in illiquid securities, the Sub-advisor may in certain cases
determine that such paper is liquid under guidelines established by the Board of Trustees.
Banking and Savings Institution Securities. The Portfolio may invest in banking and savings institution obligations,
which include CDs, time deposits, bankers' acceptances, and other short-term debt obligations issued by savings institutions. CDs
are receipts for funds deposited for a specified period of time at a specified rate of return; time deposits generally are similar
to CDs, but are uncertificated; and bankers' acceptances are time drafts drawn on commercial banks by borrowers, usually in
connection with international commercial transactions. The CDs, time deposits, and bankers' acceptances in which the Portfolio
invests typically are not covered by deposit insurance.
Investment Policies Which May be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Neuberger Berman Mid-Cap Growth Portfolio. These limitations are not fundamental restrictions and can be changed without
shareholder approval.
1. The Portfolio may not purchase securities if outstanding borrowings, including any reverse repurchase agreements,
exceed 5% of its total assets.
2. Except for the purchase of debt securities and engaging in repurchase agreements, the Portfolio may not make any
loans other than securities loans.
3. The Portfolio may not purchase securities on margin from brokers, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of securities transactions. Margin payments in connection with transactions
in futures contracts and options on futures contracts shall not constitute the purchase of securities on margin and shall not be
deemed to violate the foregoing limitation.
4. The Portfolio may not sell securities short, unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold without payment of additional consideration. Transactions in futures contracts and options
shall not constitute selling securities short.
5. The Portfolio may not purchase any security if, as a result, more than 15% of its net assets would be invested in
illiquid securities. Illiquid securities include securities that cannot be sold within seven days in the ordinary course of
business for approximately the amount at which the Portfolio has valued the securities, such as repurchase agreements maturing in
more than seven days.
AST Neuberger Berman Mid-Cap Value Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Investment Policies:
Securities Loans. In order to realize income, the Portfolio may lend portfolio securities with a value not exceeding
33-1/3% of its total assets to banks, brokerage firms, or institutional investors. Borrowers are required continuously to secure
their obligations to return securities on loan from the Portfolio by depositing collateral, which will be marked to market daily,
in a form determined to be satisfactory by the Trustees and equal to at least 100% of the market value of the loaned securities,
which will also be marked to market daily. The Sub-advisor believes the risk of loss on these transactions is slight because, if
a borrower were to default for any reason, the collateral should satisfy the obligation. However, as with other extensions of
secured credit, loans of portfolio securities involve some risk of loss of rights in the collateral should the borrower fail
financially.
Reverse Repurchase Agreements. In a reverse repurchase agreement, the Portfolio sells portfolio securities subject to
its agreement to repurchase the securities at a later date for a fixed price reflecting a market rate of interest; these
agreements are considered borrowings for purposes of the Portfolio's investment limitations and policies concerning borrowings.
There is a risk that the counterparty to a reverse repurchase agreement will be unable or unwilling to complete the transaction as
scheduled, which may result in losses to the Portfolio.
Covered Call Options. The Portfolio may write covered call options on securities it owns valued at up to 10% of its net
assets and may purchase call options in related closing transactions. Generally, the purpose of writing these options is to
reduce the effect of price fluctuations of securities held by the Portfolio on the Portfolio's net asset value. Securities on
which call options may be written by the Portfolio are purchased solely on the basis of investment considerations consistent with
the Portfolio's investment objectives.
When the Portfolio writes a call option, it is obligated to sell a security to a purchaser at a specified price at any
time until a certain date if the purchaser decides to exercise the option. The Portfolio receives a premium for writing the call
option. The Portfolio writes only "covered" call options on securities it owns. So long as the obligation of the writer of the
call option continues, the writer may be assigned an exercise notice, requiring it to deliver the underlying security against
payment of the exercise price. The Portfolio may be obligated to deliver securities underlying a call option at less than the
market price thereby giving up any additional gain on the security.
When the Portfolio purchases a call option, it pays a premium for the right to purchase a security from the writer at a
specified price until a specified date. A call option would be purchased by the Portfolio to offset a previously written call
option.
The writing of covered call options is a conservative investment technique believed to involve relatively little risk (in
contrast to the writing of "naked" or uncovered call options, which the Portfolio will not do), but is capable of enhancing the
Portfolio's total return. When writing a covered call option, the Portfolio, in return for the premium, gives up the opportunity
for profit from a price increase in the underlying security above the exercise price, but conversely retains the risk of loss
should the price of the security decline. If a call option that the Portfolio has written expires unexercised, the Portfolio will
realize a gain in the amount of the premium; however, that gain may be offset by a decline in the market value of the underlying
security during the option period. If the call option is exercised, the Portfolio will realize a gain or loss from the sale or
purchase of the underlying security.
The exercise price of an option may be below, equal to, or above the market value of the underlying security at the time
the option is written. Options normally have expiration dates between three and nine months from the date written. The
obligation under any option terminates upon expiration of the option or, at an earlier time, when the writer offsets the option by
entering into a "closing purchase transaction" to purchase an option of the same series. If an option is purchased by the
Portfolio and is never exercised, the Portfolio will lose the entire amount of the premium paid.
Options are traded both on national securities exchanges and in the over-the-counter ("OTC") market. Exchange-traded
options are issued by a clearing organization affiliated with the exchange on which the option is listed; the clearing
organization in effect guarantees completion of, every exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and its counter-party with no clearing organization guarantee. Thus, when the Portfolio sells or purchases an OTC
option, it generally will be able to "close out" the option prior to its expiration only by entering into a "closing purchase
transaction" with the dealer to whom or from whom the Portfolio originally sold or purchased the option. The Sub-advisor monitors
the creditworthiness of dealers with which the Portfolio may engage in OTC options, and will limit counterparties in such
transactions to dealers with a net worth of at least $20 million as reported in their latest financial statements. For an
additional discussion of OTC options and their risks, see this Statement under "Certain Risk Factors and Investment Methods."
The premium received (or paid) by the Portfolio when it writes (or purchases) an option is the amount at which the
option is currently traded on the applicable exchange, less (or plus) a commission. The premium may reflect, among other things,
the current market price of the underlying security, the relationship of the exercise price to the market price, the historical
price volatility of the underlying security, the length of the option period, the general supply of and demand for credit, and the
general interest rate environment. The premium received by the Portfolio for writing an option is recorded as a liability on the
Portfolio's statement of assets and liabilities. This liability is adjusted daily to the option's current market value.
The Portfolio pays the brokerage commissions in connection with purchasing or writing options, including those used to
close out existing positions. These brokerage commissions normally are higher than those applicable to purchases and sales of
portfolio securities.
For an additional discussion of options and their risks, see this Statement and the Trust's Prospectus under "Certain
Risk Factors and Investment Methods."
Foreign Securities. The Portfolio may invest in U.S. dollar-denominated securities issued by foreign issuers (including
governments and quasi-governments) and foreign branches of U.S. banks, including negotiable CDs and commercial paper. These
investments are subject to the Portfolio's quality standards. While investments in foreign securities are intended to reduce risk
by providing further diversification, such investments involve sovereign and other risks, in addition to the credit and market
risks normally associated with domestic securities.
The Portfolio may invest in equity, debt, or other income-producing securities that are denominated in or indexed to
foreign currencies, including, but not limited to (1) common and preferred stocks, (2) convertible securities, (3) CDs, commercial
paper, fixed-time deposits, and bankers' acceptances issued by foreign banks, (4) obligations of other corporations, and (5)
obligations of foreign governments, or their subdivisions, agencies, and instrumentalities, international agencies, and
supranational entities. Risks of investing in foreign currency denominated securities include (1) nationalization, expropriation,
or confiscatory taxation, (2) adverse changes in investment or exchange control regulations (which could prevent cash from being
brought back to the U.S.), and (3) expropriation or nationalization of foreign portfolio companies. Mail service between the U.S.
and foreign countries may be slower or less reliable than within the United States, thus increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio securities. For an additional discussion of the risks
associated with foreign securities, whether denominated in U.S. dollars or foreign currencies, see this Statement and the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
Prices of foreign securities and exchange rates for foreign currencies may be affected by the interest rates prevailing
in other countries. The interest rates in other countries are often affected by local factors, including the strength of the
local economy, the demand for borrowing, the government's fiscal and monetary policies, and the international balance of
payments. Individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as gross
national product, rate of inflation, capital reinvestment, resource self-sufficiency, and balance of payments position.
Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times
when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such
transactions. Such delays in settlement could result in temporary periods when a portion of the assets of the Portfolio is
uninvested and no return is earned thereon. The inability of the Portfolio to make intended security purchases due to settlement
problems could cause the Portfolio to miss attractive investment opportunities. Inability to dispose of portfolio securities due
to settlement problems could result either in losses to the Portfolio due to subsequent declines in value of the portfolio
securities, or, if the Portfolio has entered into a contract to sell the securities, could result in possible liability to the
purchaser.
The Portfolio may invest in foreign corporate bonds and debentures and sovereign debt instruments issued or guaranteed by
foreign governments, their agencies or instrumentalities. The Portfolio may invest in lower-rated foreign debt securities subject
to the Portfolio's 15% limitation on lower-rated debt securities. Foreign debt securities are subject to risks similar to those
of other foreign securities, as well as risks similar to those of other debt securities, as discussed in this Statement and in the
Trust's Prospectus under "Investment Objectives and Policies" and "Certain Risk Factors and Investment Methods."
In order to limit the risk inherent in investing in foreign currency-denominated securities, the Portfolio may not
purchase any such security if after such purchase more than 10% of its total assets (taken at market value) would be invested in
such securities. Within such limitation, however, the Portfolio is not restricted in the amount it may invest in securities
denominated in any one foreign currency.
Foreign Currency Transactions. The Portfolio may engage in foreign currency exchange transactions. Foreign currency
exchange transactions will be conducted either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
----
exchange market, or through entering into forward contracts to purchase or sell foreign currencies ("forward contracts"). The
Portfolio may enter into forward contracts in order to protect against uncertainty in the level of future foreign currency
exchange rates, and only in amounts not exceeding 5% of the Portfolio's net assets.
A forward contract involves an obligation to purchase or sell a specific currency at a future date, which may be any
fixed number of days (usually less than one year) from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded in the interbank market conducted directly between traders (usually large
commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the
difference (the spread) between the price at which they are buying and selling various currencies.
When the Portfolio enters into a contract for the purchase or sale of a security denominated in a foreign currency, it
may wish to "lock in" the U.S. dollar price of the security. By entering into a forward contract for the purchase or sale, for a
fixed amount of U.S. dollars, of the amount of foreign currency involved in the underlying security transactions, the Portfolio
will be able to protect itself against a possible loss. When the Sub-advisor believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, it may also enter into a forward contract to sell the amount of
foreign currency for a fixed amount of dollars which approximates the value of some or all of a Portfolio's securities denominated
in such foreign currency. The Portfolio may also engage in cross-hedging by using forward contracts in one currency to hedge
against fluctuations in the value of securities denominated in a different currency, when the Sub-advisor believes that there is a
pattern of correlation between the two currencies.
When the Portfolio engages in forward contracts for hedging purposes, it will not enter into forward contracts to sell
currency or maintain a net exposure to such contracts if their consummation would obligate the Portfolio to deliver an amount of
foreign currency in excess of the value of its portfolio securities or other assets denominated in that currency. At the
consummation of the forward contract, the Portfolio may either make delivery of the foreign currency or terminate its contractual
obligation to deliver by purchasing an offsetting contract obligating it to purchase the same amount of such foreign currency at
the same maturity date. If the Portfolio chooses to make delivery of the foreign currency, it may be required to obtain such
currency through the sale of portfolio securities denominated in such currency or through conversion of other assets into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a gain or a loss to the extent that there has been
a change in forward contract prices. Closing purchase transactions with respect to forward contracts are usually made with the
currency trader who is a party to the original forward contract.
The Portfolio is not required to enter into such transactions and will not do so unless deemed appropriate by the
Sub-advisor.
Using forward contracts to protect the value of the Portfolio's portfolio securities against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange
which can be achieved at some future point in time. The precise projection of short-term currency market movements is not
possible, and short-term hedging provides a means of fixing the dollar value of only a portion of the Portfolio's foreign assets.
While the Portfolio may enter forward contracts to reduce currency exchange rate risks, transactions in such contracts
involve certain other risks. Thus, while the Portfolio may benefit from such transactions, unanticipated changes in currency
prices may result in a poorer overall performance for the Portfolio than if it had not engaged in any such transactions.
Moreover, there may be imperfect correlation between the Portfolio's holdings of securities denominated in a particular currency
and forward contracts entered into by the Portfolio. Such imperfect correlation may cause the Portfolio to sustain losses which
will prevent it from achieving a complete hedge or expose it to risk of foreign exchange loss.
The Portfolio generally will not enter into a forward contract with a term of greater than one year. The Portfolio may
experience delays in the settlement of its foreign currency transactions.
When the Portfolio engages in forward contracts for the sale or purchase of currencies, the Portfolio will either cover
its position or establish a segregated account. The Portfolio will consider its position covered if it has securities in the
currency subject to the forward contract, or otherwise has the right to obtain that currency at no additional cost. In the
alternative, the Portfolio will place cash, fixed income, or equity securities (denominated in the foreign currency subject to the
forward contract) in a separate account. The amounts in such separate account will equal the value of the Portfolio's assets
which are committed to the consummation of foreign currency exchange contracts. If the value of the securities placed in the
separate account declines, the Portfolio will place additional cash or securities in the account on a daily basis so that the
value of the account will equal the amount of its commitments with respect to such contracts.
For an additional discussion of forward foreign currency exchange contracts and their risks, see this Statement and the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Options on Foreign Currencies. The Portfolio may write and purchase covered call and put options on foreign currencies
in amounts not exceeding 5% of its net assets for the purpose of protecting against declines in the U.S. dollar value of portfolio
securities or increases in the U.S.-dollar cost of securities to be acquired, or to protect the dollar equivalent of dividend,
interest, or other payment on those securities. A decline in the dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In
order to protect against such decreases in the value of portfolio securities, the Portfolio may purchase put options on the
foreign currency. If the value of the currency declines, the Portfolio will have the right to sell such currency for a fixed
amount of dollars which exceeds the market value of such currency. This would result in a gain that may offset, in whole or in
part, the negative effect of currency depreciation on the value of the Portfolio's securities denominated in that currency.
Conversely, if the dollar value of a currency in which securities to be acquired by the Portfolio are denominated rises,
thereby increasing the cost of such securities, the Portfolio may purchase call options on such currency. If the value of such
currency increases sufficiently, the Portfolio will have the right to purchase that currency for a fixed amount of dollars which
is less than the market value of that currency. Such a purchase would result in a gain that may offset, at least partially, the
effect of any currency-related increase in the price of securities the Portfolio intends to acquire.
As in the case of other types of options transactions, however, the benefit the Portfolio derives from purchasing foreign
currency options will be reduced by the amount of the premium and related transaction costs. In addition, if currency exchange
rates do not move in the direction or to the extent anticipated, the Portfolio could sustain losses on transactions in foreign
currency options which would deprive it of a portion or all of the benefits of advantageous changes in such rates.
The Portfolio may also write options on foreign currencies for hedging purposes. For example, if the Sub-advisor
anticipates a decline in the dollar value of foreign currency denominated securities because of declining exchange rates, it
could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the
option will most likely not be exercised, and the decrease in value of portfolio securities will be offset, at least in part, by
the amount of the premium received by the Portfolio.
Similarly, the Portfolio could write a put option on the relevant currency, instead of purchasing a call option, to hedge
against an anticipated increase in the dollar cost of securities to be acquired. If exchange rates move in the manner projected,
the put option most likely will not be exercised, and such increased cost will be offset, at least in part, by the amount of the
premium received. However, as in the case of other types of options transactions, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction.
If unanticipated exchange rate fluctuations occur, a put or call option may be exercised and the Portfolio could be
required to purchase or sell the underlying currency at a loss which may not be fully offset by the amount of the premium. As a
result of writing options on foreign currencies, the Portfolio also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements in currency exchange rates. Certain options on foreign
currencies are traded on the OTC market and involve liquidity and credit risks that may not be present in the case of
exchange-traded currency options.
A call option written on foreign currency by the Portfolio is "covered" if the Portfolio owns the underlying foreign
currency subject to the call, or if it has an absolute and immediate right to acquire that foreign currency without additional
cash consideration. A call option is also covered if the Portfolio holds a call on the same foreign currency for the same
principal amount as the call written where the exercise price of the call held is (a) equal to or less than the exercise price of
the call written or (b) greater than the exercise price of the call written if the amount of the difference is maintained by the
Portfolio in cash, fixed income or equity securities in a segregated account with its custodian.
The risks of currency options are similar to the risks of other options, as discussed above and in this Statement under
"Certain Risk Factors and Investment Methods."
Cover for Options on Securities, Forward Contracts, and Options on Foreign Currencies ("Hedging Instruments"). The
Portfolio will comply with SEC staff guidelines regarding "cover" for Hedging Instruments and, if the guidelines so require, set
aside in a segregated account with its custodian the prescribed amount of cash, fixed income, or equity securities. Securities
held in a segregated account cannot be sold while the futures, option, or forward strategy covered by those securities is
outstanding, unless they are replaced with other suitable assets. As a result, segregation of a large percentage of the
Portfolio's assets could impede portfolio management or the Portfolio's ability to meet current obligations. The Portfolio may be
unable promptly to dispose of assets that cover, or are segregated with respect to, an illiquid options or forward position; this
inability may result in a loss to the Portfolio.
Preferred Stock. The Portfolio may invest in preferred stock. Unlike interest payments on debt securities, dividends on
preferred stock are generally payable at the discretion of the issuer's board of directors, although preferred shareholders may
have certain rights if dividends are not paid. Shareholders may suffer a loss of value if dividends are not paid, and generally
have no legal recourse against the issuer. The market prices of preferred stocks are generally more sensitive to changes in the
issuer's creditworthiness than are the prices of debt securities.
Fixed Income Securities. The Portfolio may invest in money market instruments, U.S. Government or Agency securities, and
corporate bonds and debentures receiving one of the four highest ratings from Standard & Poor's Ratings Group ("S&P"), Moody's
Investors Service, Inc. ("Moody's") or any other nationally recognized statistical rating organization ("NRSRO"), or, if not rated
by any NRSRO, deemed comparable by the Sub-advisor to such rated securities ("Comparable Unrated Securities"). In addition, the
Portfolio may invest up to 15% of its net assets, measured at the time of investment, in corporate debt securities rated below
investment grade or Comparable Unrated Securities. The ratings of an NRSRO represent its opinion as to the quality of securities
it undertakes to rate. Ratings are not absolute standards of quality; consequently, securities with the same maturity, coupon,
and rating may have different yields. Although the Portfolio may rely on the ratings of any NRSRO, the Portfolio mainly refers to
ratings assigned by S&P and Moody's, which are described in Appendix A to this Statement.
Fixed income securities are subject to the risk of an issuer's inability to meet principal and interest payments on the
obligations ("credit risk") and also may be subject to price volatility due to such factors as interest rate sensitivity, market
perception of the creditworthiness of the issuer, and general market liquidity ("market risk"). Lower-rated securities are more
likely to react to developments affecting market and credit risk than are more highly rated securities, which react primarily to
movements in the general level of interest rates.
Changes in economic conditions or developments regarding the individual issuer are more likely to cause price volatility
and weaken the capacity of the issuer of such securities to make principal and interest payments than is the case for higher-grade
debt securities. An economic downturn affecting the issuer may result in an increased incidence of default. The market for
lower-rated securities may be thinner and less active than for higher-rated securities. Pricing of thinly traded securities
requires greater judgment than pricing of securities for which market transactions are regularly reported.
Convertible Securities. The Portfolio may invest in convertible securities. A convertible security entitles the holder
to receive interest paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, convertible securities ordinarily provide a stream of income with generally
higher yields than those of common stocks of the same or similar issuers, but lower than the yield on non-convertible debt.
Convertible securities are usually subordinated to comparable-tier nonconvertible securities but rank senior to common stock in a
corporation's capital structure. The value of a convertible security is a function of (1) its yield in comparison with the yields
of other securities of comparable maturity and quality that do not have a conversion privilege, and (2) its worth, at market
value, if converted into the underlying common stock. Convertible debt securities are subject to the Portfolio's investment
policies and limitations concerning fixed-income investments.
Convertible securities are typically issued by smaller companies whose stock prices may be volatile. The price of a
convertible security often reflects such variations in the price of the underlying common stock in a way that nonconvertible debt
does not. A convertible security may be subject to redemption at the option of the issuer at a price established in the
security's governing instrument. If a convertible security held by the Portfolio is called for redemption, the Portfolio will be
required to convert it into the underlying common stock, sell it to a third party or permit the issuer to redeem the security.
Any of these actions could have an adverse effect on the Portfolio's ability to achieve its investment objective.
Commercial Paper. Commercial paper is a short-term debt security issued by a corporation, bank, municipality, or other
issuer, usually for purposes such as financing current operations. The Portfolio may invest only in commercial paper receiving
the highest rating from S&P (A-1) or Moody's (P-1), or deemed by the Sub-advisor to be of equivalent quality.
The Portfolio may invest in commercial paper that cannot be resold to the public because it was issued under the
exception for private offerings in Section 4(2) of the Securities Act of 1933. While such securities normally will be considered
illiquid and subject to the Portfolio's 15% limitation on investments in illiquid securities, the Sub-advisor may in certain cases
determine that such paper is liquid under guidelines established by the Board of Trustees.
Zero Coupon Securities. The Portfolio may invest up to 5% of its net assets in zero coupon securities, which are debt
obligations that do not entitle the holder to any periodic payment of interest prior to maturity or specify a future date when the
securities begin paying current interest. Rather, they are issued and traded at a discount from their face amount or par value,
which discount varies depending on prevailing interest rates, the time remaining until cash payments begin, the liquidity of the
security, and the perceived credit quality of the issuer.
The market prices of zero coupon securities generally are more volatile than the prices of securities that pay interest
periodically and are likely to respond to changes in interest rates to a greater degree than do other types of debt securities
having similar maturities and credit quality.
Investment Policies Which May be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Neuberger Berman Mid-Cap Value Portfolio. These limitations are not fundamental restrictions, and can be changed without
shareholder approval.
1. The Portfolio may not purchase securities if outstanding borrowings, including any reverse repurchase agreements,
exceed 5% of its total assets.
2. Except for the purchase of debt securities and engaging in repurchase agreements, the Portfolio may not make any
loans other than securities loans.
3. The Portfolio may not purchase securities on margin from brokers, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of securities transactions. Margin payments in connection with transactions
in futures contracts and options on futures contracts shall not constitute the purchase of securities on margin and shall not be
deemed to violate the foregoing limitation.
4. The Portfolio may not sell securities short, unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold without payment of additional consideration. Transactions in futures contracts and options
shall not constitute selling securities short.
5. The Portfolio may not purchase any security if, as a result, more than 15% of its net assets would be invested in
illiquid securities. Illiquid securities include securities that cannot be sold within seven days in the ordinary course of
business for approximately the amount at which the Portfolio has valued the securities, such as repurchase agreements maturing in
more than seven days.
6. The Portfolio may not invest in puts, calls, straddles, spreads, or any combination thereof, except that the
Portfolio may (i) write (sell) covered call options against portfolio securities having a market value not exceeding 10% of its
net assets and (ii) purchase call options in related closing transactions. The Portfolio does not construe the foregoing
limitation to preclude it from purchasing or writing options on futures contracts.
7. The Portfolio may not invest more than 10% of the value of its total assets in securities of foreign issuers,
provided that this limitation shall not apply to foreign securities denominated in U.S. dollars.
AST Alger All-Cap Growth Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek long-term capital growth.
Investment Policies:
Cash Position. In order to afford the Portfolio the flexibility to take advantage of new opportunities for investments
in accordance with its investment objective or to meet redemptions, it may, under normal circumstances, hold up to 15% of its
total assets in money market instruments including, but not limited to, certificates of deposit, time deposits and bankers'
acceptances issued by domestic bank and thrift institutions, U.S. Government securities, commercial paper and repurchase
agreements. In addition, when the Sub-advisor's analysis of economic and technical market factors suggests that common stock
prices will decline sufficiently so that a temporary defensive position is deemed advisable, the Portfolio may invest in cash,
commercial paper, high-grade bonds or cash equivalents, all without limitation.
U.S. Government Obligations. Obligations, bills, notes, bonds, and other debt securities issued by the U.S. Treasury
are direct obligations of the U.S. Government and differ mainly in the length of their maturities.
Short-term Corporate Debt Securities. These are outstanding nonconvertible corporate debt securities (e.g., bonds and
debentures) which have one year or less remaining to maturity. Corporate debt securities may have fixed, variable, or floating
rates. For additional discussion on Short-term Corporate Debt Securities see this Statement under "Certain Risk Factors and
Investment Methods."
Commercial Paper. These are short-term promissory notes issued by corporations primarily to finance short-term credit
needs.
Repurchase Agreements. Under the terms of a repurchase agreement, the Portfolio would acquire a high quality money
market instrument for a relatively short period (usually not more than one week) subject to an obligation of the seller to
repurchase, and the Portfolio to resell, the instrument at an agreed price (including accrued interest) and time, thereby
determining the yield during the Portfolio's holding period. Repurchase agreements may be viewed as loans by the Portfolio
collateralized by the underlying instrument. This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Portfolio's holding period and not necessarily related to the rate of return on the underlying
instrument. The value of the sold securities, including accrued interest, will be at least equal at all times to the total amount
of the repurchase obligation, including interest. For additional information about repurchase agreements and their risks, see the
Trust's Prospectus under "Certain Risk factors and Investment Methods."
Small Capitalization and Related Investments. Certain companies in which the Portfolio will invest may still be in the
developmental stage. Investing in smaller, newer issuers generally involves greater risk than investing in larger, more
established issuers. Such companies may have limited product lines, markets or financial resources and may lack management
depth. Their securities may have limited marketability and may be subject to more abrupt or erratic price movements than
securities of larger, more established companies or the market averages in general. The Portfolio also may invest in older
companies that appear to be entering a new stage of growth progress owing to factors such as management changes or development of
new technology, products or markets, or companies providing products or services with a high unit volume growth rate. These
companies may be subject to many of the same risks as small-cap companies.
Convertible Securities, Warrants, and Rights. The Portfolio may invest in securities convertible into or exchangeable
for equity securities, including warrants and rights. A warrant is a type of security that entitles the holder to buy a
proportionate amount of common stock at a specified price, usually higher than the market price at the time of issuance, for a
period of years or to perpetuity. In contrast, rights, which also represent the right to buy common shares, normally have a
subscription price lower than the current market value of the common stock and a life of two to four weeks. Warrants may be
freely transferable and may be traded on the major securities exchanges. For additional discussion about Convertible Securities,
Warrants, and Rights and their risks, see this Statement under "Certain Risk Factors and Investment Methods."
Portfolio Depositary Receipts. To the extent otherwise consistent with applicable law, the Portfolio may invest up to 5%
of its total assets in Portfolio Depositary Receipts, exchange-traded shares issued by investment companies, typically unit
investment trusts, holding portfolios of common stocks designed to replicated and, therefore, track the performance of various
broadly-based securities indexes or sectors of such indexes. For example, the Portfolio may invest in Standard & Poor's
Depositary Receipts(R)(SPDRs), issued by a unit investment trust whose portfolio tracks the S&P 500 Composite Stock Price Index,
or Standard & Poor's MidCap 400 Depositary Receipts(R)(MidCap SPDRs), which are similarly linked to the S&P Midcap 400 Index.
Lending of Portfolio Securities. The Portfolio will not lend securities to the Sub-advisor or its affiliates. By
lending its securities, the Portfolio can increase its income by continuing to receive interest or dividends on the loaned
securities as well as by either investing the cash collateral or by earning income in the form of interest paid by the borrower
when U.S. Government securities are used as collateral. The Portfolio will adhere to the following conditions whenever its
securities are loaned: (a) the Portfolio must receive at least 100 percent cash collateral or equivalent securities from the
borrower, (b) the borrower must increase this collateral whenever the market value of the loaned securities including accrued
interest exceeds the value of the collateral, (c) the Portfolio must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities and any increase in market value, (d) the Portfolio may pay
only reasonable custodian fees in connection with the loan. For additional information on the lending of Portfolio securities and
its risks see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Options. The Portfolio may purchase put and call options and write (sell) put and covered call options on securities and
securities indexes to increase gain or to hedge against the risk of unfavorable price movements although, as in the past, it does
not currently intend to rely on these strategies extensively, if at all. The Portfolio will purchase or write options only if
such options are exchange-traded or traded on an automated quotation system of a national securities association.
The Portfolio will only sell options that are "covered." A call option written by the Portfolio on a security is
"covered" if the Portfolio owns the underlying security covered by the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash consideration held in a segregated account) upon
conversion or exchange of other securities held in its portfolio. A call option is also covered if the Portfolio holds a call on
the same security as the call written where the exercise price of the call held is (a) equal to or less than the exercise price of
the call written or (b) greater than the exercise price of the call written if the difference is maintained by the Portfolio in
cash or other liquid assets in a segregated account. A put option is considered to be "covered" if the Portfolio maintains cash
or other liquid assets with a value equal to the exercise price in a segregated account or else holds a put on the same security
as the put written where the exercise price of the put held is equal to or greater than the exercise price of the put written.
Although the Portfolio will generally not purchase or write options that appear to lack an active secondary market, there
is no assurance that a liquid secondary market on an exchange will exist for any particular option. In such event it might not be
possible to effect closing transactions in particular options, so that the Portfolio would have to exercise its option in order to
realize any profit and would incur brokerage commissions upon the exercise of the options. If the Portfolio, as a covered call
option writer, is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires, until it delivers the underlying security upon exercise, or until it otherwise
covers the position.
In addition to options on securities, the Portfolio may also purchase and sell call and put options on securities
indexes. The Portfolio may offset its position in stock index options prior to expiration by entering into a closing transaction
on an exchange or it may let the option expire unexercised. The Portfolio will not purchase these options unless the Sub-advisor
is satisfied with the development, depth and liquidity of the market and the Sub-advisor believes the options can be closed out.
The Portfolio will not purchase options if, as a result, the aggregate cost of all outstanding options exceeds 10% of the
Portfolio's total assets, although no more than 5% of the total assets will be committed to transactions entered into for
non-hedging (speculative) purposes.
Stock Index Futures and Options on Stock Index Futures. Futures are generally bought and sold on the commodities
exchanges where they are listed. A stock index future obligates the seller to deliver (and the purchaser to take)
an amount of cash equal to a specific dollar amount times the difference between the value of a specific stock index at the close
of the last trading day of the contract and the price at which the agreement is made. No physical delivery of the underlying
stocks in the index is made.
While incidental to its securities activities, the Portfolio may purchase index futures as a substitute for a comparable
market position in the underlying securities. Securities index futures might be sold to protect against a general decline in the
value of securities of the type that comprise the index. Put options on futures might be purchased to protect against declines in
the market values of securities occasioned by a decline in stock prices.
In an effort to compensate for the imperfect correlation of movements in the price of the securities being hedged and
movements in the price of the stock index futures, the Portfolio may buy or sell stock index futures contracts in a greater or
lesser dollar amount than the dollar amount of the securities being hedged if the historical volatility of the stock index futures
has been less or greater than that of the securities. Such "over hedging" or "under hedging" may adversely affect the Portfolio's
net investment results if market movements are not as anticipated when the hedge is established.
The Portfolio will sell options on stock index futures contracts only as part of closing transactions to terminate
options positions it has purchased. No assurance can be given that such closing transactions can be effected.
The Portfolio's use, if any, of stock index futures and options thereon will in all cases be consistent with applicable
regulatory requirements and in particular the rules and regulations of the CFTC and will be entered into only for bona fide
hedging, risk management or other portfolio management purposes. If the Portfolio exercises an option on a futures contract it
will be obligated to post initial margin (and potential subsequent variation margin) for the resulting futures position just as it
would for any position. In order to cover its potential obligations if the Portfolio enters into futures contracts or options
thereon, the Portfolio will maintain a segregated account which will contain only liquid assets in an amount equal to the total
market value of such futures contracts less the amount of initial margin on deposit for such contracts.
For additional information about futures contracts and related options, see this Statement and the Trust's Prospectus
under "Certain Risk Factors and Investment Methods."
Borrowing. The Portfolio may borrow from banks for temporary or emergency purposes. If asset coverage for such
borrowings should decline below the required 300% as a result of market fluctuations or other reasons, the Portfolio may be
required to sell some of its portfolio holdings to reduce the debt and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that time. Additional information about borrowings and its
risks is included in the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Alger All-Cap Growth Portfolio. These limitations are not "fundamental" restrictions and may be changed by the Trustees
without shareholder approval. The Portfolio will not:
1. Purchase securities on margin, except (I) for use of short-term credit necessary for clearance of purchases of portfolio
securities and (ii) the Portfolio may take margin deposits in connection with futures contracts or to her permissible investments;
2. Mortgage, pledge, hypothecate or, in any manner, transfer any security owned by the Portfolio as security for
indebtedness except as may be necessary in connection with permissible borrowings or investments and then such mortgaging,
pledging or hypothecating may not exceed 33 1/3% of the Portfolio's total assets at the time of borrowing or investment;
3. Invest in oil, gas or mineral leases.
4. Purchase securities of open-end or closed-end investment companies except in compliance with the 1940 Act.
5. The Portfolio may not invest more than 15% of the assets of the Portfolio (taken at the time of the investments) in
"illiquid securities," illiquid securities being defined to include securities subject to legal or contractual restrictions on
resale (which may include private placements), repurchase agreements maturing in more than seven days, certain options traded over
the counter that the Portfolio has purchased, securities being used to cover options a Portfolio has written, securities for which
market quotations are not readily available, or other securities which legally or in the Sub-advisor's option may be deemed
illiquid.
AST Gabelli All-Cap Value Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek capital growth.
Investment Policies:
Convertible Securities. The Portfolio may invest in convertible securities when it appears to the Portfolio's
Sub-advisor that it may not be prudent to be fully invested in common stocks. In evaluating a convertible security, the
Sub-advisor places primary emphasis on the attractiveness of the underlying common stock and the potential for capital growth
through conversion. The Portfolio will normally purchase only investment grade convertible debt securities having a rating of, or
equivalent to, at least "BBB" (which securities may have speculative characteristics) by Standard & Poor's Rating Service ("S&P")
or, if unrated, judged by the Sub-advisor to be of comparable quality. However, the Portfolio may also invest up to 25% of its
assets in more speculative convertible debt securities, provided such securities have a rating of, or equivalent to, at least B by
S&P.
Convertible securities may include corporate notes or preferred stock but are ordinarily a long-term debt obligation of
the issuer convertible at a stated exchange rate into common stock of the issuer. As with all debt securities, the market value
of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline.
Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality.
However, when the market price of the common stock underlying a convertible security exceeds the conversion price, the price of
the convertible security tends to reflect the value of the underlying common stock. As the market price of the underlying common
stock declines, the convertible security tends to trade increasingly on a yield basis, and thus may not depreciate to the same
extent as the underlying common stock. Convertible securities rank senior to common stocks in an issuer's capital structure and
consequently entail less risk than the issuer's common stock, although the extent to which such risk is reduced depends in large
measure upon the degree to which the convertible security sells above its value as a fixed income security.
In selecting convertible securities for the Portfolio, the Sub-advisor relies primarily on its own evaluation of the
issuer and the potential for capital growth through conversion. It does not rely on the rating of the security or sell the
security because of a change in rating absent a change in its own evaluation of the underlying common stock and the ability of the
issuer to pay principal and interest or dividends when due without disrupting its business goals. Interest or dividend yield is a
factor only to the extent it is reasonably consistent with prevailing rates for securities of similar quality and thereby provides
a support level for the market price of the security. The Portfolio will purchase the convertible securities of highly leveraged
issuers only when, in the judgment of the Sub-advisor, the risk of default is outweighed by the potential for capital growth.
The issuers of debt obligations having speculative characteristics may experience difficulty in paying principal and
interest when due in the event of a downturn in the economy or unanticipated corporate developments. The market prices of such
securities may become increasingly volatile in periods of economic uncertainty. Moreover, adverse publicity or the perceptions of
investors, over which the Sub-advisor has no control and whether or not based on Fundamental analysis, may decrease the market
price and liquidity of such investments. Although the Sub-advisor will attempt to avoid exposing the Portfolio to such risks,
there is no assurance that it will be successful or that a liquid secondary market will continue to be available for the
disposition of such securities.
Lower-rated Debt Securities. The Portfolio may invest up to 5% of its assets in low-rated and unrated corporate debt
securities (often referred to as "junk bonds"). Corporate debt securities that are either unrated or have a predominantly
speculative rating may present opportunities for significant long-term capital growth if the ability of the issuer to repay
principal and interest when due is underestimated by the market or the rating organizations. Because of its perceived credit
weakness, the issuer is generally required to pay a higher interest rate and/or its debt securities may be selling at a
significantly lower market price than the debt securities of other issuers. If the inherent value of such securities is higher
than was perceived and such value is eventually recognized, the market value of the securities may appreciate significantly. The
Sub-advisor believes that its research on the credit and balance sheet strength of certain issuers may enable it to select a
limited number of corporate debt securities that, in certain markets, will better serve the objective of capital growth than
alternative investments in common stocks. Of course, there can be no assurance that the Sub-advisor will be successful. In its
evaluation, the Sub-advisor will not rely exclusively on ratings and the receipt of income from these securities is only an
incidental consideration.
The ratings of Moody's Investors Service, Inc. ("Moody's") and S&P generally represent the opinions of those
organizations as to the quality of the securities that they rate. Such ratings, however, are relative and subjective, and are not
absolute standards of quality. Although the Sub-advisor uses these ratings as a criterion for the selection of securities for the
Portfolio, the Sub-advisor also relies on its independent analysis to evaluate potential investments for the Portfolio. The
Portfolio does not intend to purchase debt securities for which a liquid trading market does not exist, but there can be no
assurance that such a market will exist for the sale of such securities.
Additional information on lower-rated debt securities and their risks is included in this Statement and the Trust's
Prospectus under "Certain Risk Factors and Investment Methods." Additional information on corporate bond ratings is included in
the Appendix to this Statement.
Borrowing. The Portfolio may borrow subject to certain restrictions set forth in the Trust's Prospectus under "Certain
Risk Factors and Investment Methods" and in this Statement under "Investment Restrictions." The Portfolio may mortgage, pledge or
hypothecate up to 20% of its assets to secure permissible borrowings. Money borrowed will be subject to interest costs, which may
or may not be recovered by appreciation if securities are purchased with the proceeds of the borrowing.
Investments in Warrants and Rights. The Portfolio may invest in warrants and rights (in addition to those acquired in
units or attached to other securities), which entitle the holder to buy equity securities at a specific price for or at the end of
a specific period of time. The value of a right or warrant may decline because of a decline in the value of the underlying
security, the passage of time, changes in interest rates or in the dividend or other policies of the issuer whose equity underlies
the warrant, a change in the perception as to the future price of the underlying security, or any combination thereof. Additional
information about warrants and rights and their risks is included in this Statement and the Trust's Prospectus under "Certain Risk
Factors and Investment Methods."
Investment in Small, Unseasoned Companies. The Portfolio may invest in small, less well-known companies that have
operated for less than three years (including predecessors). The securities of such companies may have a limited trading market,
which may adversely affect their disposition and can result in their being priced lower than might otherwise be the case. If
other investment companies and investors who invest in such issuers trade the same securities when the Portfolio attempts to
dispose of its holdings, the Portfolio may receive lower prices than might otherwise be obtained.
Corporate Reorganizations. In general, securities of companies engaged in reorganization transactions sell at a premium
to their historic market price immediately prior to the announcement of the tender offer or reorganization proposal. However, the
increased market price of such securities may also discount what the stated or appraised value of the security would be if the
contemplated transaction were approved or consummated. Such investments may be advantageous when the discount significantly
overstates the risk of the contingencies involved, significantly undervalues the securities, assets or cash to be received by
shareholders of the issuer as a result of the contemplated transaction, or fails adequately to recognize the possibility that the
offer or proposal may be replaced or superseded by an offer or proposal of greater value. The evaluation of such contingencies
requires unusually broad knowledge and experience on the part of the Sub-advisor, which must appraise not only the value of the
issuer and its component businesses and the assets or securities to be received as a result of the contemplated transaction, but
also the financial resources and business motivation of the offeror as well as the dynamic of the business climate when the offer
or proposal is in progress.
In making such investments, the Portfolio will be subject to its diversification and other investment restrictions,
including the requirement that, except with respect to 25% of its assets, not more than 5% of its assets may be invested in the
securities of any issuer (see this Statement under "Investment Restrictions"). Because such investments are ordinarily short term
in nature, they will tend to increase the Portfolio's portfolio turnover rate, thereby increasing its brokerage and other
transaction expenses. The Sub-advisor intends to select investments of the type described that, in its view, have a reasonable
prospect of capital growth that is significant in relation to both the risk involved and the potential of available alternate
investments.
When-Issued, Delayed-Delivery and Forward Commitment Transactions. The Portfolio may enter into forward commitments for
the purchase or sale of securities, including on a "when issued" or "delayed delivery" basis, in excess of customary settlement
periods for the type of securities involved. In some cases, the obligations of the parties under a forward commitment may be
conditioned upon the occurrence of a subsequent event, such as approval and consummation of a merger, corporate reorganization or
debt restructuring (i.e., a when, as and if issued security). When such transactions are negotiated, the price is fixed at the
time of the commitment, with payment and delivery generally taking place a month or more after the date of the commitment. While
the Portfolio will only enter into a forward commitment with the intention of actually acquiring the security, the Portfolio may
sell the security before the settlement date if it is deemed advisable. The Portfolio will segregate with its custodian cash or
liquid securities in an aggregate amount at least equal to the amount of its outstanding forward commitments. Additional
information regarding when-issued, delayed-delivery and forward commitment transactions and their risks is included in this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Other Investment Companies. The Portfolio may invest up to 10% of its total assets in the securities of other investment
companies, including small business investment companies. (Not more than 5% of its total assets may be invested in any one
investment company, nor will the Portfolio purchase more than 3% of the securities of any other investment company.) To the
extent that the Portfolio invests in the securities of other investment companies, shareholders in the Portfolio may be subject to
duplicative management and administrative fees.
Short Sales. The Portfolio may, from time to time, make short sales of securities it owns or has the right to acquire
through conversion or exchange of other securities it owns (short sales "against the box"). In a short sale, the Portfolio does
not immediately deliver the securities sold or receive the proceeds from the sale. The Portfolio may make a short sale against
the box in order to hedge against market risks when it believes that the price of a security may decline, affecting the Portfolio
directly if it owns that security or causing a decline in the value of a security owned by the Portfolio that is convertible into
the security sold short.
To secure its obligations to deliver the securities sold short, the Portfolio will segregate assets with its custodian in
an amount at least equal to the value of the securities sold short or the securities convertible into, or exchangeable for, the
securities. The Portfolio may close out a short position by purchasing and delivering an equal amount of securities sold short,
rather than by delivering securities already held by the Portfolio, because the Portfolio may want to continue to receive interest
and dividend payments on securities in its portfolio that are convertible into the securities sold short.
Options. The Portfolio may purchase or sell listed call or put options on securities as a means of achieving additional
return or of hedging the value of the Portfolio's portfolio. In addition to changes in the price of an underlying security, other
principal factors affecting the market value of a put or a call option include supply and demand, interest rates, price volatility
of the underlying security and the time remaining until the expiration date.
The Portfolio will only write calls options if they are covered. A call option is covered if the Portfolio owns the
underlying security covered by the call or has an absolute and immediate right to acquire that security without additional cash
consideration (or for additional cash consideration if cash or other liquid assets with a value equal to such additional
consideration are segregated with the Portfolio's custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also covered if the Portfolio holds a call on the same security as the call written where the
exercise price of the call held is (1) equal to or less than the exercise price of the call written or (2) greater than the
exercise price of the call written if cash or other liquid assets equal to the difference are segregated with the custodian. If
the Portfolio writes a put option, the Portfolio will segregate cash or other assets with a value equal to the exercise price of
the option, or will hold a put on the same security as the put written where the exercise price of the put held is equal to or
greater than the exercise price of the put written.
If the Portfolio has written an option, it may terminate its obligation by effecting a closing purchase transaction.
However, once the Portfolio has been assigned an exercise notice, the Portfolio will be unable to effect a closing purchase
transaction. Similarly, if the Portfolio is the holder of an option it may liquidate its position by effecting a closing sale
transaction. This is accomplished by selling an option of the same series as the option previously purchased. There can be no
assurance that either a closing purchase or sale transaction can be effected when the Portfolio so desires. The Portfolio will
realize a profit from a closing sale transaction if the price of the transaction is more than the premium paid to purchase the
option; the Portfolio will realize a loss from a closing sale transaction if the price of the transaction is less than the premium
paid to purchase the option.
The Portfolio will generally purchase or write only those options for which there appears to be an active secondary
market. If, however, there is no liquid secondary market when the Sub-advisor wishes to close out an option the Portfolio has
purchased, it might not be possible to effect a closing sale transaction, so that the Portfolio would have to exercise its options
in order to realize any profit and would incur brokerage commissions upon the exercise of call options and upon the subsequent
disposition of underlying securities for the exercise of put options. If the Portfolio, as a covered call option writer, is
unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise or otherwise covers the position.
In addition to options on securities, the Portfolio may also purchase and sell call and put options on securities
indices. The Portfolio may offset its position in stock index options prior to expiration by entering into a closing transaction
on an exchange or it may let the option it has purchased expire unexercised. The Portfolio may write put and call options on
stock indices for the purposes of increasing its gross income, thereby partially protecting its portfolio against declines in the
value of the securities it owns or increases in the value of securities to be acquired. In addition, the Portfolio may purchase
put and call options on stock indices in order to hedge its investments against a decline in value or to attempt to reduce the
risk of missing a market or industry segment advance. While one purpose of writing such options is to generate additional income
for the Portfolio, the Portfolio recognizes that it may be required to deliver an amount of cash in excess of the market value of
a stock index at such time as an option written by the Portfolio is exercised by the holder. Because options on securities
indices require settlement in cash, the Sub-advisor may be forced to liquidate portfolio securities to meet settlement
obligations. The Portfolio will not purchase options on indexes unless the Sub-advisor is satisfied with the development, depth
and liquidity of the market and believes that the options can be closed out.
Although the Sub-advisor will attempt to take appropriate measures to minimize the risks relating to the Portfolio's
writing of put and call options, there can be no assurance that the Portfolio will succeed in any option-writing program it
undertakes.
Additional information about options on securities and securities indices and their risks is included in this Statement
and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Futures Contracts and Options on Futures. The Portfolio may enter into futures contracts that are traded on a U.S.
exchange or board of trade. Although the Portfolio has no current intention of using options on futures contracts, the Portfolio
may at some future date enter into such options. Investments in futures contracts and related options will be made by the
Portfolio solely for the purpose of hedging against changes in the value of its portfolio securities or in the value of securities
it intends to purchase. Such investments will only be made if they are economically appropriate to the reduction of risks
involved in the management of the Portfolio. In this regard, the Portfolio may enter into futures contracts or options on futures
relating to securities indices or other financial instruments, including but not limited to U.S. Government securities. Futures
exchanges and trading in the United States are regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission.
Initial margin payments required in connection with futures contracts will range from approximately 1% to 10% of the
contract amount. Initial margin amounts are subject to change by the exchange or board of trade on which the contract is traded,
and brokers or members of such board of trade may charge higher amounts. At any time prior to the expiration of a futures
contract, the portfolio may elect to close the position by taking an opposite position, which will operate to terminate the
Portfolio's existing position in the contract. At expiration, certain futures contracts, including stock and bond index futures,
are settled on a net cash payment basis rather than by the sale and delivery of the securities underlying the futures contracts.
The potential loss related to the purchase of an option on a futures contract is limited to the premium paid for the
option (plus transaction costs). There are no daily cash payments by the purchaser of an option on a futures contract to reflect
changes in the value of the underlying contract; however, the value of the option does change daily and that change would be
reflected in the net asset value of the Portfolio.
The Sub-advisor may use such instruments for the Portfolio depending upon market conditions prevailing at the time and
the perceived investment needs of the Portfolio. In the event the Portfolio enters into futures contracts or writes related
options, an amount of cash or other liquid assets equal to the market value of the contract will be segregated with the
Portfolio's custodian to collateralize the positions, thereby insuring that the use of the contract is unleveraged.
The Sub-advisor may have difficulty selling or buying futures contracts and options when it chooses. In addition,
hedging practices may not be available, may be too costly to be used effectively, or may be unable to be used for other reasons.
Additional information about futures contracts, options on futures contracts and their risks is included in this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Investment Opportunities and Related Limitations. Affiliates of the Sub-advisor may, in the ordinary course of their
business, acquire for their own account or for the accounts of their advisory clients, significant (and possibly controlling)
positions in the securities of companies that may also be suitable for investment by the Portfolio. The securities in which the
Portfolio might invest may thereby be limited to some extent. For instance, many companies in the past several years have adopted
so-called "poison pill" or other defensive measures designed to discourage or prevent the completion of non-negotiated offers for
control of the company. Such defensive measures may have the effect of limiting the shares of the company that might otherwise be
acquired by the Portfolio if the affiliates of the Sub-advisor or their advisory accounts have or acquire a significant position
in the same securities. However, the Sub-advisor does not believe that the investment activities of its affiliates will have a
material adverse effect upon the Portfolio in seeking to achieve its investment objectives. In addition, orders for the Portfolio
generally are accorded priority of execution over orders entered on behalf of accounts in which the Sub-advisor or its affiliates
have a substantial pecuniary interest. The Portfolio may invest in the securities of companies that are investment management
clients of the Sub-advisor's affiliates. In addition, portfolio companies or their officers or directors may be minority
shareholders of the Sub-advisor or its affiliates.
Investment Policies Which May be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Gabelli All-Cap Value Portfolio. These limitations are not Fundamental restrictions and can be changed without shareholder
approval. The Portfolio may not:
1. Purchase securities on margin, but it may obtain such short-term credits from banks as may be necessary for the
clearance of purchase and sales of securities;
2. Mortgage, pledge or hypothecate any of its assets except that, in connection with permissible borrowings, not
more than 20% of the assets of the Portfolio (not including amounts borrowed) may be used as collateral;
3. Invest in the securities of other investment companies except in compliance with the Investment Company Act of
1940;
4. Invest, in the aggregate, more than 15% of the value of its total assets in securities for which market
quotations are not readily available, securities that are restricted for public sale, or in repurchase agreements maturing or
terminable in more than seven days;
5. Sell securities short, except that the Portfolio may make short sales if it owns the securities sold short or has
the right to acquire such securities through conversion or exchange of other securities it owns; or
6. Invest in companies for the purpose of exercising control.
AST Kinetics Internet Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek long-term growth of capital.
Investment Policies:
The Portfolio is designed for long-term investors who understand and are willing to accept the risk of loss involved in
investing in a mutual fund seeking long-term capital growth. Except during temporary defensive periods, the Portfolio invests at
least 65% of its total assets in securities of companies that provide products or services designed for the Internet.
Preferred Stock. Some preferred stocks in which the Portfolio may invest may be convertible into common stock.
Convertible securities are securities that may be converted into or exchanged for a specified amount of common stock of the same
or different issuer within a particular period of time at a specified price or formula. Additional information on preferred stock
is included in the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Fixed-Income Securities. Debt purchased by the Portfolio will consist of obligations of medium-grade or higher, having
at least adequate capacity to pay interest and repay principal. Non-convertible debt obligations will be rated BBB or higher by
S&P, or Baa or higher by Moody's. Convertible debt obligations will be rated B or higher by S&P or Moody's. See Appendix B to
this Statement for a description of debt security ratings.
Medium- and lower-rated securities (BBB or Baa and lower) and non-rated securities of comparable quality tend to be
subject to wilder fluctuations in yields and market values than higher-rated securities. At no time will the Portfolio have more
than 5% of its total assets invested in fixed-income securities that are unrated or rated below investment grade either at the
time of purchase or as a result of a reduction in rating after purchase. Except to comply with this limitation, the Portfolio is
not required to dispose of debt securities whose ratings are downgraded below the Portfolio's minimum ratings subsequent to the
Portfolio's purchase of the securities.
Additional information on fixed-income or debt securities (including lower-rated fixed income securities) and their risks
is included in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Depositary Receipts. The Portfolio may invest in American Depositary Receipts ("ADRs") or other forms of depositary
receipts, such as International Depositary Receipts ("IDRs"). Investments in these types of securities involve certain inherent
risks generally associated with investments in foreign securities, including those relating to political and economic factors,
currency fluctuation, and foreign withholding taxes. A change in the value of any foreign currency against the U.S. dollar will
result in a corresponding change in the U.S. dollar value of portfolio securities underlying an ADR that are denominated in that
currency. For additional information on depositary receipts, foreign securities generally, and their risks, see this Statement
and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Futures Contracts. The Portfolio may purchase and sell financial futures contracts and related options for hedging
purposes and/or as a substitute for direct investment. For additional information on futures contracts and their risks, see this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Options Transactions: Most mutual funds that use option strategies to hedge portfolio positions do not depend solely on
the option profit or loss to justify the use of options, because such funds also take into account the profit or loss of the
underlying securities.
Purchasing Put and Call Options. The Portfolio may purchase put and call options on securities eligible for
purchase by the Portfolio and on securities indices. Prior to exercise or expiration, the Portfolio may sell an option through a
"closing sale transaction," which is accomplished by selling an option of the same series as the option previously purchased. The
Portfolio generally will purchase only those options for which the Sub-advisor believes there is an active secondary market to
facilitate closing transactions.
The Portfolio may purchase call options to hedge against an increase in the price of securities that the Portfolio wants
ultimately to buy. Such hedge protection is provided during the life of the call option since the Portfolio, as holder of the
call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's
market price. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently
above the exercise price to cover the premium and transaction costs.
Writing Call Options. The Portfolio may write covered call options on securities eligible for purchase by the
Portfolio. A call option is "covered" if the Portfolio owns the security underlying the call or has an absolute right to acquire
the security without additional cash consideration (or, if additional cash consideration is required, cash or cash equivalents in
such amount are segregated with the Portfolio's custodian).
Writing Put Options. The Portfolio may also write put options on securities eligible for purchase by the
Portfolio. If the Portfolio writes a put option, it will, at all times when the put option is outstanding, segregate cash or
other liquid assets in an amount equal to or exceeding its potential obligation under the option, or will own an option to sell
the underlying security at a price equal to or greater than the exercise price of the put option.
A writer of an option may not effect a closing purchase transaction after it has been notified of the exercise of the
option. Effecting a closing transaction in the case of a written call option allows the cash or proceeds from the concurrent sale
of any securities subject to the option to be used for other investments of the Portfolio.
The Portfolio realizes a gain from a closing transaction if the cost of the closing transaction is less than the premium
received from writing the option or if the proceeds from the closing transaction are more than the premium paid to purchase the
option. The Portfolio realizes a loss from a closing transaction if the cost of the closing transaction is more than the premium
received from writing the option or if the proceeds from the closing transaction are less than the premium paid to purchase the
option.
Risk Factors in Options Transactions. The successful use of options by the Portfolio depends on the ability of
the Sub-advisor to forecast correctly interest rate and market movements. For example, if the Portfolio were to write a call
option based on the Sub-advisor's expectation that the price of the underlying security would fall, but the price were to rise
instead, the Portfolio could be required to sell the security upon exercise at a price below the current market price. Similarly,
if the Portfolio were to write a put option based on the Sub-advisor's expectation that the price of the underlying security would
rise, but the price were to fall instead, the Portfolio could be required to purchase the security upon exercise at a price higher
than the current market price.
When the Portfolio purchases an option, it runs the risk that it will lose its entire investment in the option in a
relatively short period of time, unless the Portfolio exercises the option or enters into a closing sale transaction before the
option's expiration. If the price of the underlying security does not rise (in the case of a call) or fall (in the case of a put)
to an extent sufficient to cover the option premium and transaction costs, the Portfolio will lose part or all of its investment
in the option. This contrasts with an investment by the Portfolio in the underlying security, since the Portfolio will not
realize a loss if the security's price does not change.
The effective use of options also depends on the Portfolio's ability to terminate option positions at times when the
Sub-advisor deems it desirable to do so. There is no assurance that the Portfolio will be able to effect closing transactions at
any particular time or at an acceptable price.
A market may at times find it necessary to impose restrictions on particular types of options transactions, such as
opening transactions. For example, if an underlying security ceases to meet qualifications imposed by the market or an options
clearing corporation, new series of options on that security will no longer be opened to replace expiring series, and opening
transactions in existing series may be prohibited. If an options market were to become illiquid, the Portfolio as a holder of an
option would be able to realize profits or limit losses only by exercising the option, and the Portfolio, as option writer, would
remain obligated under the option until expiration or exercise.
Disruptions in the markets for the securities underlying options purchased or sold by the Portfolio could result in
losses on the options. If trading is interrupted in an underlying security, the trading of options on that security is normally
halted as well. As a result, the Portfolio as purchaser or writer of an option will be unable to close out its positions until
options trading resumes, and it may be faced with considerable losses if trading in the security reopens at a substantially
different price. In addition, an options clearing corporation or other options markets may impose exercise restrictions.
Dealer Options. The Portfolio may engage in transactions involving dealer options as well as exchange-traded
options. Certain risks are specific to dealer options. While the Portfolio might look to an exchange's clearing corporation to
exercise exchange-traded options, if the Portfolio purchases a dealer option it must rely on the selling dealer to perform if the
Portfolio exercises the option. Failure by the dealer to do so would result in the loss of the premium paid by the Portfolio as
well as loss of the expected benefit of the transaction.
Additional information about options transactions and their risks is included in this Statement and the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
Temporary Investments. Due to the changing nature of the Internet and related companies, the national economy and market
conditions, the Portfolio may, as a temporary defensive measure, invest without limitation in short-term debt securities and money
market securities with a rating of A2-P2 or higher.
In order to have funds available for redemption and investment opportunities, the Portfolio may also hold a portion of
its assets in cash or U.S. short-term money market instruments. Certificates of deposit purchased by the Portfolio will be those
of U.S. banks having total assets at the time of purchase in excess of $1 billion, and bankers' acceptances purchased by the
Portfolio will be guaranteed by U.S. or foreign banks having total assets at the time of purchase in excess of $1 billion. Under
normal market conditions, the Portfolio anticipates that not more than 10% of its total assets will be invested in these
short-term instruments or held in cash.
Portfolio Turnover. In order to qualify for the beneficial tax treatment afforded regulated investment companies, and to
be relieved of Federal tax liabilities, the Portfolio must distribute substantially all of its net income to shareholders
generally on an annual basis. Thus, the Portfolio may have to dispose of portfolio securities under disadvantageous circumstances
to generate cash or borrow cash in order to satisfy the distribution requirement. The Portfolio does not trade in securities for
short-term profits but, when circumstances warrant, securities may be sold without regard to the length of time they have been
held.
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Kinetics Internet Portfolio. The limitations are not "fundamental" restrictions and may be changed by the Trustees without
shareholder approval.
1. The Portfolio will not invest more than 15% of the value of its net assets in illiquid securities, restricted
securities, and other securities for which market quotations are not readily available.
2. The Portfolio will not purchase or sell commodities or commodity contracts, or invest in oil, gas or mineral
exploration or development programs or real estate, except that the Portfolio may purchase and sell securities of companies that
deal in oil, gas, or mineral exploration or development programs or interests therein.
AST T. Rowe Price Natural Resources Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek long-term growth of capital through investment
primarily in common stocks of companies which own or develop natural resources and other basic commodities. Current income is not
a factor in the selection of stocks for investment by the Portfolio. Total return will consist primarily of capital appreciation
(or depreciation).
Investment Policies: The Portfolio will normally have primarily all of its assets in equity securities (e.g., common stocks).
This portion of the Portfolio's assets will be subject to all of the risks of investing in the stock market. There is risk in all
investment. The value of the portfolio securities of the Portfolio will fluctuate based upon market conditions. Although the
Portfolio seeks to reduce risk by investing in a diversified portfolio, such diversification does not eliminate all risk. The
fixed-income securities in which the Portfolio may invest include, but are not limited to, those described below.
U.S. Government Obligations. Bills, notes, bonds and other debt securities issued by the U.S. Treasury. These are
direct obligations of the U.S. Government and differ mainly in the length of their maturities.
U.S. Government Agency Securities. Issued or guaranteed by U.S. Government sponsored enterprises and federal agencies.
These include securities issued by the Federal National Mortgage Association, Government National Mortgage Association, Federal
Home Loan Bank, Federal Land Banks, Farmers Home Administration, Banks for Cooperatives, Federal Intermediate Credit Banks,
Federal Financing Bank, Farm Credit Banks, the Small Business Association, and the Tennessee Valley Authority. Some of these
securities are supported by the full faith and credit of the U.S. Treasury; and the remainder are supported only by the credit of
the instrumentality, which may or may not include the right of the issuer to borrow from the Treasury.
Bank Obligations. Certificates of deposit, bankers' acceptances, and other short-term debt obligations. Certificates of
deposit are short-term obligations of commercial banks. A bankers' acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with international commercial transactions. Certificates of deposit may have fixed or variable
rates. The Portfolio may invest in U.S. banks, foreign branches of U.S. banks, U.S. branches of foreign banks, and foreign
branches of foreign banks.
Short-Term Corporate Debt Securities. Outstanding nonconvertible corporate debt securities (e.g., bonds and debentures)
which have one year or less remaining to maturity. Corporate notes may have fixed, variable, or floating rates.
Commercial Paper. Short-term promissory notes issued by corporations primarily to finance short-term credit needs.
Certain notes may have floating or variable rates.
Foreign Government Securities. Issued or guaranteed by a foreign government, province, instrumentality, political
subdivision or similar unit thereof.
Savings and Loan Obligations. Negotiable certificates of deposit and other short-term debt obligations of savings and
loan associations.
Supranational Entities. The Portfolio may also invest in the securities of certain supranational entities, such as the
International Development Bank.
Debt Obligations. Although primarily all of the Portfolio's assets are invested in common stocks, the Portfolio may
invest in convertible securities, corporate debt securities and preferred stocks. See this Statement under "Certain Risk Factors
and Investment Methods," for a discussion of debt obligations.
The Portfolio's investment program permits it to purchase below investment grade securities. Since investors generally
perceive that there are greater risks associated with investment in lower quality securities, the yields from such securities
normally exceed those obtainable from higher quality securities. However, the principal value of lower-rated securities generally
will fluctuate more widely than higher quality securities. Lower quality investments entail a higher risk of default -- that is,
the nonpayment of interest and principal by the issuer than higher quality investments. Such securities are also subject to
special risks, discussed below. Although the Portfolio seeks to reduce risk by portfolio diversification, credit analysis, and
attention to trends in the economy, industries and financial markets, such efforts will not eliminate all risk. There can, of
course, be no assurance that the Portfolio will achieve its investment objective.
After purchase by the Portfolio, a debt security may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Portfolio. Neither event will require a sale of such security by the Portfolio. However,
Sub-advisor will consider such event in its determination of whether the Portfolio should continue to hold the security. To the
extent that the ratings given by Moody's or S&P may change as a result of changes in such organizations or their rating systems,
the Portfolio will attempt to use comparable ratings as standards for investments in accordance with the investment policies
contained in the prospectus.
Risks of Low-Rated Debt Securities. The Portfolio may invest in low quality bonds commonly referred to as "junk bonds."
Junk bonds are regarded as predominantly speculative with respect to the issuer's continuing ability to meet principal and
interest payments. Because investment in low and lower-medium quality bonds involves greater investment risk, to the extent the
Portfolio invests in such bonds, achievement of its investment objective will be more dependent on Sub-advisor's credit analysis
than would be the case if the Portfolio was investing in higher quality bonds. For a discussion of the special risks involved in
low-rated bonds, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Mortgage-Backed Securities. Mortgage-backed securities are securities representing interest in a pool of mortgages.
After purchase by the Portfolio, a security may cease to be rated or its rating may be reduced below the minimum required for
purchase by the Portfolio. Neither event will require a sale of such security by the Portfolio. However, the Sub-advisor will
consider such event in its determination of whether the Portfolio should continue to hold the security. To the extent that the
ratings given by Moody's or S&P may change as a result of changes in such organizations or their rating systems, the Portfolio
will attempt to use comparable ratings as standards for investments in accordance with the investment policies continued in the
Trust's Prospectus. For a discussion of mortgage-backed securities and certain risks involved therein, see this Statement and the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Collateralized Mortgage Obligations (CMOs). CMOs are obligations fully collateralized by a portfolio of mortgages or
mortgage-related securities. Payments of principal and interest on the mortgages are passed through to the holders of the CMOs on
the same schedule as they are received, although certain classes of CMOs have priority over others with respect to the receipt of
prepayments on the mortgages. Therefore, depending on the type of CMOs in which a Portfolio invests, the investment may be
subject to a greater or lesser risk of prepayment than other types of mortgage-related securities. For an additional discussion
of CMOs and certain risks involved therein, see the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Asset-Backed Securities. The Portfolio may invest a portion of its assets in debt obligations known as asset-backed
securities. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying
such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other
affiliated entities and the amount and quality of any credit support provided to the securities. The rate of principal payment on
asset-backed securities generally depends on the rate of principal payments received on the underlying assets which in turn may be
affected by a variety of economic and other factors. As a result, the yield on any asset-backed security is difficult to predict
with precision and actual yield to maturity may be more or less than the anticipated yield to maturity.
Automobile Receivable Securities. The Portfolio may invest in asset-backed securities which are backed by
receivables from motor vehicle installment sales contracts or installment loans secured by motor vehicles ("Automobile Receivable
Securities").
Credit Card Receivable Securities. The Portfolio may invest in asset-backed securities backed by receivables
from revolving credit card agreements ("Credit Card Receivable Securities").
Other Assets. The Sub-advisor anticipates that asset-backed securities backed by assets other than those
described above will be issued in the future. The Portfolio may invest in such securities in the future if such investment is
otherwise consistent with its investment objective and policies. For a discussion of these securities, see this Statement and the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Stripped Agency Mortgage-Backed Securities. Stripped Agency Mortgage-Backed securities represent interests in a pool of
mortgages, the cash flow of which has been separated into its interest and principal components. "IOs" (interest only securities)
receive the interest portion of the cash flow while "POs" (principal only securities) receive the principal portion. Stripped
Agency Mortgage-Backed Securities may be issued by U.S. Government Agencies or by private issuers similar to those described above
with respect to CMOs and privately-issued mortgage-backed certificates. As interest rates rise and fall, the value of IOs tends
to move in the same direction as interest rates. The value of the other mortgage-backed securities described herein, like other
debt instruments, will tend to move in the opposite direction compared to interest rates. Under the Internal Revenue Code of
1986, as amended (the "Code"), POs may generate taxable income from the current accrual of original issue discount, without a
corresponding distribution of cash to the Portfolio.
The cash flows and yields on IO and PO classes are extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets. For example, a rapid or slow rate of principal payments may have a
material adverse effect on the prices of IOs or POs, respectively. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, an investor may fail to recoup fully its initial investment in an IO class of a stripped
mortgage-backed security, even if the IO class is rated AAA or Aaa or is derived from a full faith and credit obligation.
Conversely, if the underlying mortgage assets experience slower than anticipated prepayments of principal, the price on a PO class
will be affected more severely than would be the case with a traditional mortgage-backed security.
The Portfolio will treat IOs and POs, other than government-issued IOs or POs backed by fixed rate mortgages, as illiquid
securities and, accordingly, limit its investments in such securities, together with all other illiquid securities, to 15% of the
Portfolio's net assets. Sub-advisor will determine the liquidity of these investments based on the following guidelines: the type
of issuer; type of collateral, including age and prepayment characteristics; rate of interest on coupon relative to current market
rates and the effect of the rate on the potential for prepayments; complexity of the issue's structure, including the number of
tranches; size of the issue and the number of dealers who make a market in the IO or PO. The Portfolio will treat
non-government-issued IOs and POs not backed by fixed or adjustable rate mortgages as illiquid unless and until the SEC modifies
its position.
Writing Covered Call Options. The Portfolio may write (sell) American or European style "covered" call options and
purchase options to close out options previously written by a Portfolio. In writing covered call options, the Portfolio expects
to generate additional premium income which should serve to enhance the Portfolio's total return and reduce the effect of any
price decline of the security or currency involved in the option. Covered call options will generally be written on securities or
currencies which, in Sub-advisor is opinion, are not expected to have any major price increases or moves in the near future but
which, over the long term, are deemed to be attractive investments for the Portfolio.
The Portfolio will write only covered call options. This means that the Portfolio will own the security or currency
subject to the option or an option to purchase the same underlying security or currency, having an exercise price equal to or less
than the exercise price of the "covered" option, or will establish and maintain with its custodian for the term of the option, an
account consisting of cash, U.S. government securities or other liquid high-grade debt obligations having a value equal to the
fluctuating market value of the optioned securities or currencies.
Portfolio securities or currencies on which call options may be written will be purchased solely on the basis of
investment considerations consistent with the Portfolio's investment objective. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk (in contrast to the writing of naked or uncovered
options, which the Portfolio will not do), but capable of enhancing the Portfolio's total return. When writing a covered call
option, a Portfolio, in return for the premium, gives up the opportunity for profit from a price increase in the underlying
security or currency above the exercise price, but conversely retains the risk of loss should the price of the security or
currency decline. Unlike one who owns securities or currencies not subject to an option, the Portfolio has no control over when
it may be required to sell the underlying securities or currencies, since it may be assigned an exercise notice at any time prior
to the expiration of its obligation as a writer. If a call option which the Portfolio has written expires, the Portfolio will
realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying
security or currency during the option period. If the call option is exercised, the Portfolio will realize a gain or loss from
the sale of the underlying security or currency. The Portfolio does not consider a security or currency covered by a call to be
"pledged" as that term is used in the Portfolio's policy which limits the pledging or mortgaging of its assets.
Call options written by the Portfolio will normally have expiration dates of less than nine months from the date
written. The exercise price of the options may be below, equal to, or above the current market values of the underlying
securities or currencies at the time the options are written. From time to time, the Portfolio may purchase an underlying
security or currency for delivery in accordance with an exercise notice of a call option assigned to it, rather than delivering
such security or currency from its portfolio. In such cases, additional costs may be incurred.
The premium received is the market value of an option. The premium the Portfolio will receive from writing a call option
will reflect, among other things, the current market price of the underlying security or currency, the relationship of the
exercise price to such market price, the historical price volatility of the underlying security or currency, and the length of the
option period. Once the decision to write a call option has been made, Sub-advisor, in determining whether a particular call
option should be written on a particular security or currency, will consider the reasonableness of the anticipated premium and the
likelihood that a liquid secondary market will exist for those options. The premium received by the Portfolio for writing covered
call options will be recorded as a liability of the Portfolio. This liability will be adjusted daily to the option's current
market value, which will be the latest sale price at the time at which the net asset value per share of the Portfolio is computed
(close of the New York Stock Exchange), or, in the absence of such sale, the latest asked price. The option will be terminated
upon expiration of the option, the purchase of an identical option in a closing transaction, or delivery of the underlying
security or currency upon the exercise of the option.
The Portfolio will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or
more than the premium received from the writing of the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security or currency, any loss resulting from the repurchase of
a call option is likely to be offset in whole or in part by appreciation of the underlying security or currency owned by the
Portfolio.
The Portfolio will not write a covered call option if, as a result, the aggregate market value of all portfolio
securities or currencies covering call or put options exceeds 25% of the market value of the Portfolio's net assets. In
calculating the 25% limit, the Portfolio will offset, against the value of assets covering written calls and puts, the value of
purchased calls and puts on identical securities or currencies with identical maturity dates.
Writing Covered Put Options. The Portfolio may write American or European style covered put options and purchase options
to close out options previously written by the Portfolio.
The Portfolio would write put options only on a covered basis, which means that the Portfolio would maintain in a
segregated account cash, U.S. government securities or other liquid high-grade debt obligations in an amount not less than the
exercise price or the Portfolio will own an option to sell the underlying security or currency subject to the option having an
exercise price equal to or greater than the exercise price of the "covered" option at all times while the put option is
outstanding. (The rules of a clearing corporation currently require that such assets be deposited in escrow to secure payment of
the exercise price.) The Portfolio would generally write covered put options in circumstances where the Sub-advisor wishes to
purchase the underlying security or currency for the Portfolio at a price lower than the current market price of the security or
currency. In such event the Portfolio would write a put option at an exercise price which, reduced by the premium received on the
option, reflects the lower price it is willing to pay. Since the Portfolio would also receive interest on debt securities or
currencies maintained to cover the exercise price of the option, this technique could be used to enhance current return during
periods of market uncertainty. The risk in such a transaction would be that the market price of the underlying security or
currency would decline below the exercise price less the premiums received. Such a decline could be substantial and result in a
significant loss to the Portfolio. In addition, the Portfolio, because it does not own the specific securities or currencies
which it may be required to purchase in exercise of the put, cannot benefit from appreciation, if any, with respect to such
specific securities or currencies.
The Portfolio will not write a covered put option if, as a result, the aggregate market value of all portfolio securities
or currencies covering put or call options exceeds 25% of the market value of the Portfolio's net assets. In calculating the 25%
limit, the Portfolio will offset, against the value of assets covering written puts and calls, the value of purchased puts and
calls on identical securities or currencies with identical maturity dates.
Purchasing Put Options. The Portfolio may purchase American or European style put options. As the holder of a put
option, the Portfolio has the right to sell the underlying security or currency at the exercise price at any time during the
option period (American style) or at the expiration of the option (European style). The Portfolio may enter into closing sale
transactions with respect to such options, exercise them or permit them to expire. The Portfolio may purchase put options for
defensive purposes in order to protect against an anticipated decline in the value of its securities or currencies. An example of
such use of put options is provided in this Statement under "Certain Risk Factors and Investment Methods."
The premium paid by the Portfolio when purchasing a put option will be recorded as an asset of the Portfolio. This asset
will be adjusted daily to the option's current market value, which will be the latest sale price at the time at which the net
asset value per share of the Portfolio is computed (close of New York Stock Exchange), or, in the absence of such sale, the latest
bid price. This asset will be terminated upon expiration of the option, the selling (writing) of an identical option in a
closing transaction, or the delivery of the underlying security or currency upon the exercise of the option.
Purchasing Call Options. The Portfolio may purchase American or European style call options. As the holder of a call
option, the Portfolio has the right to purchase the underlying security or currency at the exercise price at any time during the
option period (American style) or at the expiration of the option (European style). The Portfolio may enter into closing sale
transactions with respect to such options, exercise them or permit them to expire. The Portfolio may purchase call options for
the purpose of increasing its current return or avoiding tax consequences which could reduce its current return. The Portfolio
may also purchase call options in order to acquire the underlying securities or currencies. Examples of such uses of call options
are provided in this Statement under "Certain Risk Factors and Investment Methods."
The Portfolio may also purchase call options on underlying securities or currencies it owns in order to protect
unrealized gains on call options previously written by it. A call option would be purchased for this purpose where tax
considerations make it inadvisable to realize such gains through a closing purchase transaction. Call options may also be
purchased at times to avoid realizing losses.
The Portfolio will not commit more than 5% of its total assets to premiums when purchasing call or put options.
Dealer (Over-the-Counter) Options. The Portfolio may engage in transactions involving dealer options. Certain risks are
specific to dealer options. While the Portfolio would look to a clearing corporation to exercise exchange-traded options, if the
Portfolio were to purchase a dealer option, it would rely on the dealer from whom it purchased the option to perform if the option
were exercised. Failure by the dealer to do so would result in the loss of the premium paid by the Portfolio as well as loss of
the expected benefit of the transaction. For a discussion of dealer options, see this Statement under "Certain Risk Factors and
Investment Methods."
Futures Contracts.
Transactions in Futures. The Portfolio may enter into futures contracts, including stock index, interest rate
and currency futures ("futures" or "futures contracts"). The Portfolio may also enter into futures on commodities related to the
types of companies in which it invests, such as oil and gold futures. Otherwise the nature of such futures and the regulatory
limitations and risks to which they are subject are the same as those described below.
Stock index futures contracts may be used to attempt to hedge a portion of the Portfolio, as a cash management tool, or
as an efficient way for the Sub-advisor to implement either an increase or decrease in portfolio market exposure in response to
changing market conditions. The Portfolio may purchase or sell futures contracts with respect to any stock index. Nevertheless,
to hedge the Portfolio successfully, the Portfolio must sell futures contacts with respect to indices or subindices whose
movements will have a significant correlation with movements in the prices of the Portfolio's securities.
Interest rate or currency futures contracts may be used to attempt to hedge against changes in prevailing levels of
interest rates or currency exchange rates in order to establish more definitely the effective return on securities or currencies
held or intended to be acquired by the Portfolio. In this regard, the Portfolio could sell interest rate or currency futures as
an offset against the effect of expected increases in interest rates or currency exchange rates and purchase such futures as an
offset against the effect of expected declines in interest rates or currency exchange rates.
The Portfolio will enter into futures contracts which are traded on national or foreign futures exchanges, and are
standardized as to maturity date and underlying financial instrument. Futures exchanges and trading in the United States are
regulated under the Commodity Exchange Act by the CFTC. Although techniques other than the sale and purchase of futures contracts
could be used for the above-referenced purposes, futures contracts offer an effective and relatively low cost means of
implementing the Portfolio's objectives in these areas.
Regulatory Limitations. The Portfolio will engage in futures contracts and options thereon only for bona fide
hedging, yield enhancement, and risk management purposes, in each case in accordance with rules and regulations of the CFTC.
The Portfolio may not purchase or sell futures contracts or related options if, with respect to positions which do not
qualify as bona fide hedging under applicable CFTC rules, the sum of the amounts of initial margin deposits and premiums paid on
those positions would exceed 5% of the net asset value of the Portfolio after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into; provided, however, that in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount may be excluded in calculating the 5% limitation. For purposes of this policy
options on futures contracts and foreign currency options traded on a commodities exchange will be considered "related options."
This policy may be modified by the Board of Trustees of the Trust without a shareholder vote and does not limit the percentage of
the Portfolio's assets at risk to 5%.
In instances involving the purchase of futures contracts or the writing of call or put options thereon by the Portfolio,
an amount of cash, U.S. government securities or other liquid, high-grade debt obligations, equal to the market value of the
futures contracts and options thereon (less any related margin deposits), will be identified by the Portfolio to cover the
position, or alternative cover (such as owning an offsetting position) will be employed. Assets used as cover or held in an
identified account cannot be sold while the position in the corresponding option or future is open, unless they are replaced with
similar assets. As a result, the commitment of a large portion of a Portfolio's assets to cover or identified accounts could
impede portfolio management or the Portfolio's ability to meet redemption requests or other current obligations.
Options on Futures Contracts. The Portfolio may purchase and sell options on the same types of futures in which it may
invest. As an alternative to writing or purchasing call and put options on stock index futures, the Portfolio may write or
purchase call and put options on financial indices. Such options would be used in a manner similar to the use of options on
futures contracts. From time to time, a single order to purchase or sell futures contracts (or options thereon) may be made on
behalf of the Portfolio and other mutual funds or portfolios of mutual funds managed by the Sub-advisor or Rowe Price-Fleming
International, Inc. Such aggregated orders would be allocated among such portfolios in a fair and non-discriminatory manner.
See this Statement and Trust's Prospectus under "Certain Risk Factors and Investment Methods" for a description of
certain risks in options and future contracts.
Additional Futures and Options Contracts. Although the Portfolio has no current intention of engaging in futures or
options transactions other than those described above, it reserves the right to do so. Such futures and options trading might
involve risks which differ from those involved in the futures and options described above.
Foreign Futures and Options. The Portfolio is permitted to invest in foreign futures and options. For a description of
foreign futures and options and certain risks involved therein as well as certain risks involved in foreign investing, see this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Foreign Securities. The Portfolio may invest in U.S. dollar-denominated and non-U.S. dollar-denominated securities of
foreign issuers. There are special risks in foreign investing. Certain of these risks are inherent in any international mutual
fund while others relate more to the countries in which the Portfolio will invest. Many of the risks are more pronounced for
investments in developing or emerging countries, such as many of the countries of Southeast Asia, Latin America, Eastern Europe
and the Middle East. For an additional discussion of certain risks involved in investing in foreign securities, see this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Foreign Currency Transactions. A forward foreign currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are principally traded in the interbank market conducted
directly between currency traders (usually large, commercial banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for trades.
The Portfolio may enter into forward contracts for a variety of purposes in connection with the management of the foreign
securities portion of its portfolio. The Portfolio's use of such contracts would include, but not be limited to, the following.
First, when the Portfolio enters into a contract for the purchase or sale of a security denominated in a foreign currency, it may
desire to "lock in" the U.S. dollar price of the security. Second, when the Sub-advisor believes that one currency may experience
a substantial movement against another currency, including the U.S. dollar, it may enter into a forward contract to sell or buy
the amount of the former foreign currency, approximating the value of some or all of the Portfolio's securities denominated in
such foreign currency. Alternatively, where appropriate, the Portfolio may hedge all or part of its foreign currency exposure
through the use of a basket of currencies or a proxy currency where such currency or currencies act as an effective proxy for
other currencies. In such a case, the Portfolio may enter into a forward contract where the amount of the foreign currency to be
sold exceeds the value of the securities denominated in such currency. The use of this basket hedging technique may be more
efficient and economical than entering into separate forward contracts for each currency held in the Portfolio. The precise
matching of the forward contract amounts and the value of the securities involved will not generally be possible since the future
value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain. Under normal
circumstances, consideration of the prospect for currency parities will be incorporated into the longer term investment decisions
made with regard to overall diversification strategies. However, Sub-advisor believes that it is important to have the
flexibility to enter into such forward contracts when it determines that the best interests of the Portfolio will be served. The
Portfolio will generally not enter into a forward contract with a term of greater than one year.
The Portfolio may enter into forward contracts for any other purpose consistent with the Portfolio's investment objective
and policies. However, the Portfolio will not enter into a forward contract, or maintain exposure to any such contract(s), if the
amount of foreign currency required to be delivered thereunder would exceed the Portfolio's holdings of liquid, high-grade debt
securities and currency available for cover of the forward contract(s). In determining the amount to be delivered under a
contract, the Portfolio may net offsetting positions.
At the maturity of a forward contract, the Portfolio may sell the portfolio security and make delivery of the foreign
currency, or it may retain the security and either extend the maturity of the forward contract (by "rolling" that contract
forward) or may initiate a new forward contract.
If the Portfolio retains the portfolio security and engages in an offsetting transaction, the Portfolio will incur a gain
or a loss (as described below) to the extent that there has been movement in forward contract prices. If the Portfolio engages in
an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward
prices decline during the period between the Portfolio's entering into a forward contract for the sale of a foreign currency and
the date it enters into an offsetting contract for the purchase of the foreign currency, the Portfolio will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Portfolio will suffer a loss to the extent of the price of the currency it has agreed to purchase
exceeds the price of the currency it has agreed to sell.
The Portfolio's dealing in forward foreign currency exchange contracts will generally be limited to the transactions
described above. However, the Portfolio reserves the right to enter into forward foreign currency contracts for different
purposes and under different circumstances. Of course, the Portfolio is not required to enter into forward contracts with regard
to its foreign currency-denominated securities and will not do so unless deemed appropriate by the Sub-advisor. It also should be
realized that this method of hedging against a decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities. It simply establishes a rate of exchange at a future date. Additionally, although such
contracts tend to minimize the risk of loss due to a decline in the value of the hedged currency, at the same time, they tend to
limit any potential gain which might result from an increase in the value of that currency.
Although the Portfolio values its assets daily in terms of U.S. dollars, it does not intend to convert its holdings of
foreign currencies into U.S. dollars on a daily basis. It will do so from time to time, and investors should be aware of the
costs of currency conversion. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at which they are buying and selling various currencies. Thus, a dealer
may offer to sell a foreign currency to the Portfolio at one rate, while offering a lesser rate of exchange should the Portfolio
desire to resell that currency to the dealer. For a discussion of certain risk factors involved in foreign currency transactions,
see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Federal Tax Treatment of Options, Futures Contracts and Forward Foreign Exchange Contracts. The Portfolio may enter into
certain option, futures, and forward foreign exchange contracts, including options and futures on currencies, which will be
treated as Section 1256 contracts or straddles.
Transactions which are considered Section 1256 contracts will be considered to have been closed at the end of the
Portfolio's fiscal year and any gains or losses will be recognized for tax purposes at that time. Such gains or losses from the
normal closing or settlement of such transactions will be characterized as 60% long-term capital gain (taxable at a maximum rate
of 20%) or loss and 40% short-term capital gain or loss regardless of the holding period of the instrument (or, in the case of
foreign exchange contracts, entirely as ordinary income or loss). The Portfolio will be required to distribute net gains on such
transactions to shareholders even though it may not have closed the transaction and received cash to pay such distributions.
Options, futures and forward foreign exchange contracts, including options and futures on currencies, which offset a
foreign dollar denominated bond or currency position may be considered straddles for tax purposes in which case a loss on any
position in a straddle will be subject to deferral to the extent of unrealized gain in an offsetting position. The holding period
of the securities or currencies comprising the straddle will be deemed not to begin until the straddle is terminated. The holding
period of the security offsetting an "in-the-money qualified covered call" option on an equity security will not include the
period of time the option is outstanding.
Losses on written covered calls and purchased puts on securities, excluding certain "qualified covered call" options on
equity securities, may be long-term capital loss, if the security covering the option was held for more than twelve months prior
to the writing of the option.
In order for the Portfolio to continue to qualify for federal income tax treatment as a regulated investment company, at
least 90% of its gross income for a taxable year must be derived from qualifying income, i.e., dividends, interest, income derived
from loans of securities, and gains from the sale of securities or currencies. Tax regulations could be issued limiting the
extent that net gain realized from option, futures or foreign forward exchange contracts on currencies is qualifying income for
purposes of the 90% requirement.
As a result of the "Taxpayer Relief Act of 1997," entering into certain option, futures contracts, or forward contracts
may be deemed a "constructive sale" of offsetting securities, which could result in a taxable gain from the sale being distributed
to shareholders. The Portfolio would be required to distribute any such gain even though it would not receive proceeds from the
sale at the time the option, futures or forward position is entered into.
Hybrid Instruments. Hybrid Instruments have been developed and combine the elements of futures contracts, options or
other financial instruments with those of debt, preferred equity or a depository instrument (hereinafter "Hybrid Instruments.
Hybrid Instruments may take a variety of forms, including, but not limited to, debt instruments with interest or principal
payments or redemption terms determined by reference to the value of a currency or commodity or securities index at a future point
in time, preferred stock with dividend rates determined by reference to the value of a currency, or convertible securities with
the conversion terms related to a particular commodity. For a discussion of certain risks involved in investing in hybrid
instruments see this statement under "Certain Risk Factors and Investment Methods."
Reverse Repurchase Agreements. Although the Portfolio has no current intention, in the foreseeable future, of engaging
in reverse repurchase agreements, the Portfolio reserves the right to do so. Reverse repurchase agreements are ordinary
repurchase agreements in which a Portfolio is the seller of, rather than the investor in, securities, and agrees to repurchase
them at an agreed upon time and price. Use of a reverse repurchase agreement may be preferable to a regular sale and later
repurchase of the securities because it avoids certain market risks and transaction costs. A reverse repurchase agreement may be
viewed as a type of borrowing by the Portfolio.
Warrants. The Portfolio may acquire warrants. For a discussion of certain risks involved therein, see this Statement
under "Certain Risk Factor and Investment Methods."
Lending of Portfolio Securities. Securities loans are made to broker-dealers or institutional investors or other
persons, pursuant to agreements requiring that the loans be continuously secured by collateral at least equal at all times to the
value of the securities lent, marked to market on a daily basis. The collateral received will consist of cash or U.S. government
securities. While the securities are being lent, the Portfolio will continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities, as well as interest on the investment of the collateral or a fee from the
borrower. The Portfolio has a right to call each loan and obtain the securities on three business days' notice or, in connection
with securities trading on foreign markets, within such longer period of time which coincides with the normal settlement period
for purchases and sales of such securities in such foreign markets. The Portfolio will not have the right to vote securities
while they are being lent, but it will call a loan in anticipation of any important vote. The risks in lending portfolio
securities, as with other extensions of secured credit, consist of possible delay in receiving additional collateral or in the
recovery of the securities or possible loss of rights in the collateral should the borrower fail financially.
Other Lending/Borrowing. Subject to approval by the SEC and certain state regulatory agencies, the Portfolio may make
loans to, or borrow funds from, other mutual funds sponsored or advised by the Sub-advisor or Rowe Price-Fleming International,
Inc. The Portfolio has no current intention of engaging in these practices at this time.
When-Issued Securities and Forward Commitment Contracts. The Portfolio may purchase securities on a "when-issued" or
delayed delivery basis and may purchase securities on a forward commitment basis. Any or all of the Portfolio's investments in
debt securities may be in the form of when-issueds and forwards. The price of such securities, which may be expressed in yield
terms, is fixed at the time the commitment to purchase is made, but delivery and payment take place at a later date. Normally,
the settlement date occurs within 90 days of the purchase for when-issueds, but may be substantially longer for forwards. The
Portfolio will cover its commitments with respect to these securities by maintaining cash and/or liquid, high-grade debt
securities with its custodian bank equal in value to these commitments during the time between the purchase and the settlement.
Such segregated securities either will mature or, if necessary, be sold on or before the settlement date. For a discussion of
these securities and the risks involved therein, see this Statement under "Certain Risk Factors and Investment Methods."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST T. Rowe Price Natural Resources Portfolio. These limitations are not "fundamental" restrictions and can be changed by the
Trustees without shareholder approval. The Portfolio will not:
1. Purchase additional securities when money borrowed exceeds 5% of its total assets;
2. Invest in companies for the purpose of exercising management or control;
3. Purchase a futures contract or an option thereon if, with respect to positions in futures or options on futures
which do not represent bona fide hedging, the aggregate initial margin and premiums on such options would exceed 5% of the
Portfolio's net asset value;
4. Purchase illiquid securities if, as a result, more than 15% of its net assets would be invested in such
securities. Securities eligible for resale under Rule 144A of the Securities Act of 1933 may be subject to this 15% limitation;
5. Purchase securities of open-end or closed-end investment companies except in compliance with the 1940 Act.
6. Purchase securities on margin, except (i) for use of short-term credit necessary for clearance of purchases of
portfolio securities and (ii) the Portfolio may make margin deposits in connection with futures contracts or other permissible
investments;
7. Mortgage, pledge, hypothecate or, in any manner, transfer any security owned by the Portfolio as security for
indebtedness except as may be necessary in connection with permissible borrowings or investments and then such mortgaging,
pledging or hypothecating may not exceed 33 1/3% of the Portfolio's total assets at the time of borrowing or investment;
8. Invest in puts, calls, straddles, spreads, or any combination thereof, except to the extent permitted by the
Trust's Prospectus and this Statement;
9. Effect short sales of securities; or
10. Invest in warrants if, as a result thereof, more than 10% of the value of the net assets of the Portfolio would
be invested in warrants, except that this restriction does not apply to warrants acquired as a result of the purchase of another
security. For purposes of these percentage limitations, the warrants will be valued at the lower of cost or market.
AST Alliance Growth Portfolio:
Investment Objective: The Portfolio's investment objective is to seek long-term growth of capital by investing predominantly in
the equity securities (common stocks, securities convertible into common stocks and rights and warrants to subscribe for or
purchase common stocks) of a limited number of large, carefully selected, high-quality U.S. companies that, in the judgment of the
Portfolio's Sub-advisor, are likely to achieve superior earnings growth.
Investment Policies:
The Sub-advisor's research staff generally follows a primary research universe of approximately 600 companies that are
considered by the Sub-advisor to have strong management, superior industry positions, excellent balance sheets and the ability to
demonstrate superior earnings growth. As one of the largest multi-national investment firms, the Sub-advisor has access to
considerable information concerning all of the companies followed, an in-depth understanding of the products, services, markets
and competition of these companies and a good knowledge of the managements of most of the companies in its research universe.
The Sub-advisor's analysts prepare their own earnings estimates and financial models for each company followed. While
each analyst has responsibility for following companies in one or more identified sectors and/or industries, the lateral structure
of the Sub-advisor's research organization and constant communication among the analysts result in decision-making based on the
relative attractiveness of stocks among industry sectors. The focus during this process is on the early recognition of change on
the premise that value is created through the dynamics of changing company, industry and economic fundamentals. Research emphasis
is placed on the identification of companies whose substantially above average prospective earnings growth is not fully reflected
in current market valuations.
The Sub-advisor continually reviews its primary research universe of approximately 600 companies to maintain a list of
favored securities, the "Alliance 100," considered by the Sub-advisor to have the most clearly superior earnings potential and
valuation attraction. The Sub-advisor's concentration on a limited universe of companies allows it to devote its extensive
resources to constant intensive research of these companies. Companies are constantly added to and deleted from the Alliance 100
as their fundamentals and valuations change. The Sub-advisor's Large Cap Growth Group, in turn, further refines, on a weekly
basis, the selection process for the Portfolio with each portfolio manager in the Group selecting 25 such companies that appear to
the manager most attractive at current prices. These individual ratings are then aggregated and ranked to produce a composite
list of the 25 most highly regarded stocks, the "Favored 25." Approximately 70% of the Portfolio's net assets will usually be
invested in the Favored 25 with the balance of the Portfolio's investment portfolio consisting principally of other stocks in the
Alliance 100. Portfolio emphasis upon particular industries or sectors is a by-product of the stock selection process rather than
the result of assigned targets or ranges.
The Sub-advisor expects the average weighted market capitalization of companies represented in the Portfolio (i.e., the
number of a company's shares outstanding multiplied by the price per share) to normally be in the range of or exceed the average
weighted market capitalization of companies comprising the Standard & Poor's 500 Composite Stock Price Index, a widely recognized
unmanaged index of market activity based upon the aggregate performance of a selected portfolio of publicly traded stocks,
including monthly adjustments to reflect the reinvestment of dividends and distributions. Investments will be made upon their
potential for capital appreciation.
Convertible Securities. The Portfolio may invest in convertible securities, which are convertible at a stated exchange
rate into common stock. Prior to their conversion, convertible securities have the same general characteristics as
non-convertible debt securities, as they provide a stable stream of income with generally higher yields than those of equity
securities of the same or similar issuers. As with all debt securities, the market value of convertible securities tends to
decline as interest rates increase and, conversely, to increase as interest rates decline. Convertible securities generally offer
lower interest or dividend yields than non-convertible debt securities of similar quality. However, when the market price of the
common stock underlying a convertible security increases, the price of the convertible security increasingly reflects the value of
the underlying common stock and may rise accordingly. As the market price of the underlying common stock declines, the
convertible security tends to trade increasingly on a yield basis, and thus may not depreciate to the same extent as the
underlying common stock. Convertible securities rank senior to common stocks on an issuer's capital structure. They are
consequently of higher quality and entail less risk than the issuer's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the convertible security sells above its value as a fixed income
security. The Portfolio may invest up to 20% of its net assets in the convertible securities of companies whose common stocks are
eligible for purchase by the Portfolio under the investment policies described above. Additional information about convertible
securities is included in the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Rights and Warrants. The Portfolio may invest up to 5% of its net assets in rights or warrants, but will do so only if
the equity securities themselves are deemed appropriate by the Sub-advisor for inclusion in the Portfolio. Rights and warrants
may be more speculative than certain other types of investments in that they do not entitle a holder to dividends or voting rights
with respect to the securities which may be purchased nor do they represent any rights in the assets of the issuing company.
Also, the value of a right or warrant does not necessarily change with the value of the underlying securities. Additional
information about warrants is included in the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Foreign Securities. The Portfolio may invest up to 15% of the value of its total assets in securities of foreign issuers
whose common stocks are eligible for purchase by the Portfolio under the investment policies described above. Additional
information about foreign securities and their risks is included in this Statement and the Trust's Prospectus under "Certain Risk
Factors and Investment Methods."
Options and Futures:
While the Portfolio does not anticipate utilizing them on a regular basis, the Portfolio may from time to time may engage
in options and futures transactions as described below. Additional information about option, futures and their risks is included
in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Options on Securities. The Portfolio may write exchange-traded call options on common stocks, and may purchase and sell
exchange-traded call and put options on common stocks written by others or combinations thereof. The Portfolio will not write put
options.
Generally, the opportunity for profit from the writing of options is higher, and consequently the risks are greater, when
the stocks involved are lower priced or volatile, or both. While an option that has been written is in force, the maximum profit
that may be derived from the optioned stock is the premium less brokerage commissions and fees. The Portfolio will not write a
call unless the Portfolio at all times during the option period owns either (a) the optioned securities or has an absolute and
immediate right to acquire that security without additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of other securities held in its portfolio or (b) a call option on
the same security and in the same principal amount as the call written where the exercise price of the call held (i) is equal to
or less than the exercise price of the call written or (ii) is greater than the exercise price of the call written if the
difference is maintained by the Portfolio in liquid assets in a segregated account with its Custodian.
Premiums received by the Portfolio in connection with writing call options will vary widely. Commissions, stock transfer
taxes and other expenses of the Portfolio must be deducted from such premium receipts. Calls written by the Portfolio will
ordinarily be sold either on a national securities exchange or through put and call dealers, most, if not all, of whom are members
of a national securities exchange on which options are traded, and will be endorsed or guaranteed by a member of a national
securities exchange or qualified broker-dealer, which may be Donaldson, Lufkin & Jenrette Securities Corporation, an affiliate of
the Sub-advisor. The endorsing or guaranteeing firm requires that the option writer (in this case the Portfolio) maintain a
margin account containing either corresponding stock or other equity as required by the endorsing or guaranteeing firm.
The Portfolio will not sell a call option written by it if, as a result of the sale, the aggregate of the Portfolio's
portfolio securities subject to outstanding call options (valued at the lower of the option price or market value of such
securities) would exceed 15% of the Portfolio's total assets.
The Portfolio may purchase or write options on securities of the types in which it is permitted to invest in privately
negotiated (i.e., over-the-counter) transactions. The Sub-advisor has adopted procedures for monitoring the creditworthiness of
financial institutions with which over-the-counter options transactions are effected.
In buying a call, the Portfolio would be in a position to realize a gain if, during the option period, the price of the
shares increased by an amount in excess of the premium paid and commissions payable on exercise. It would realize a loss if the
price of the security declined or remained the same or did not increase during the period by more than the amount of the premium
and commissions payable on exercise. In buying a put, the Portfolio would realize a loss if the price of the security increased
or remained the same or did not decrease during that period by more than the amount of the premium and commissions payable on
exercise. In addition, the Portfolio could realize a gain or loss on such options by selling them.
The aggregate cost of all outstanding options purchased and held by the Portfolio, including options on market indices as
described below, will at no time exceed 10% of the Portfolio's total assets.
Options on Market Indices. The Portfolio may purchase and sell exchange-traded index options. Through the purchase of
listed index options, the portfolio could achieve many of the same objectives as through the use of options on individual
securities. Price movements in the Portfolio's securities probably will not correlate perfectly with movements in the level of
the index and, therefore, the Portfolio would bear a risk of loss on index options purchased by it if favorable price movements of
the hedged portfolio securities do not equal or exceed losses on the options or if adverse price movements of the hedged portfolio
securities are greater than gains realized from the options.
Stock Index Futures. The Portfolio may purchase and sell stock index futures contracts. A stock index futures contract
is a bilateral agreement pursuant to which two parties agree to take or make delivery of an amount of liquid assets equal to a
specified dollar amount multiplied by the difference between the stock index value at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. No physical delivery of the underlying stocks in the
index is made. The Portfolio will not purchase or sell options on stock index futures contracts.
The Portfolio may not purchase or sell a stock index future if, immediately thereafter, more than 30% of its total assets
would be hedged by stock index futures. The Portfolio may not purchase or sell a stock index future if, immediately thereafter,
the sum of the amount of margin deposits on the Portfolio's existing futures positions would exceed 5% of the market value of the
Portfolio's total assets.
Currently, stock index futures contracts can be purchased or sold with respect to the Standard & Poor's 500 Stock Index
on the Chicago Mercantile Exchange, the New York Stock Exchange Composite Index on the New York Futures Exchange and the Value
Line Stock Index on the Kansas City Board of Trade. The Sub-advisor does not believe that differences in composition of the three
indices will create any differences in the price movements of the stock index futures contracts in relation to the movements in
such indices. However, such differences in the indices may result in differences in correlation of the futures contracts with
movements in the value of the securities being hedged. The Portfolio reserves the right to purchase or sell stock index futures
contracts that may be created in the future.
The nature of initial margin in futures transactions is different from that of margin in security transactions in that
futures contract margin does not involve the borrowing of funds to finance transactions. Rather, the initial margin is in the
nature of a performance bond or good faith deposit on the contract which is returned to the Portfolio upon termination of the
futures contract, assuming all contractual obligations have been satisfied.
There are several risks in connection with the use of stock index futures by the Portfolio as a hedging device. One risk
arises because of the imperfect correlation between movements in the price of the stock index futures and movements in the price
of the securities which are the subject of the hedge. The price of the stock index futures may move more than or less than the
price of the securities being hedged. If the price of the stock index futures moves less than the price of the securities which
are the subject of the hedge, the hedge will not be fully effective but, if the price of the securities being hedged has moved in
an unfavorable direction, the Portfolio would be in a better position than if it had not hedged at all. If the price of the
securities being hedged has moved in a favorable direction, this advantage will be partially offset by the loss on the index
future. If the price of the future moves more than the price of the stock, the Portfolio will experience either a loss or gain on
the future which will not be completely offset by movements in the price of the securities which are the subject of the hedge. To
compensate for the imperfect correlation of movements in the price of securities being hedged and movements in the price of the
stock index futures, the Portfolio may buy or sell stock index futures contracts in a greater dollar amount than the dollar amount
of securities being hedged if the volatility over a particular time period of the prices of such securities has been greater than
the volatility over such time period for the index, or if otherwise deemed to be appropriate by the Sub-advisor. Conversely, the
Portfolio may buy or sell fewer stock index futures contracts if the volatility over a particular time period of the prices of the
securities being hedged is less than the volatility over such time period of the stock index, or if otherwise deemed to be
appropriate by the Sub-advisor.
Where futures are purchased to hedge against a possible increase in the price of stock before the Portfolio is able to
invest its cash (or cash equivalents) in stocks (or options) in an orderly fashion, it is possible that the market may decline
instead. If the Sub-advisor then concludes not to invest in stock or options at that time because of concern as to possible
further market decline or for other reasons, the Portfolio will realize a loss on the futures contract that is not offset by a
reduction in the price of securities purchased.
The Portfolio's Sub-advisor intends to purchase and sell futures contracts on the stock index for which it can obtain the
best price with due consideration to liquidity.
Portfolio Turnover. The Portfolio's investment policies as described above are based on the Sub-advisor's assessment of
fundamentals in the context of changing market valuations. Therefore, they may under some conditions involve frequent purchases
and sales of shares of a particular issuer as well as the replacement of securities. The Sub-advisor expects that more of its
portfolio turnover will be attributable to increases and decreases in the size of particular portfolio positions rather than to
the complete elimination of a particular issuer's securities from the Portfolio. For more information on portfolio turnover, see
this Statement and the Trust's Prospectus under "Portfolio Turnover."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Alliance Growth Portfolio. These limitations are not "fundamental" restrictions and may be changed without shareholder
approval. The Portfolio will not:
1. Invest in companies for the purpose of exercising control;
2. Purchase the securities of any other investment company or investment trust, except in compliance with the 1940
Act;
3. Invest in interests in oil, gas or other mineral exploration or development programs, except that it may purchase
and sell securities of companies that deal in oil, gas or other mineral exploration or development programs;
4. Make short sales of securities or purchase securities on margin except for such short-term credits as may be
necessary for the clearance of transactions;
5. Purchase illiquid securities if immediately after such investment more than 15% of the Portfolio's net assets
(taken at market value) would be so invested;
Whenever any investment restriction states a maximum percentage of the Portfolio's assets which may be invested in any security or
other asset, it is intended that such percentage be determined immediately after and as a result of the Portfolio's acquisition of
such securities or other assets. Accordingly, any later increase or decrease in percentage beyond the specified limitation
resulting from changes in values or net assets will not be considered a violation of any such maximum.
AST MFS Growth Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek to provide long-term growth of capital and future
income rather than current income.
Investment Policies:
Variable and Floating Rate Obligations. The Portfolio may invest in floating or variable rate securities. Investments
in variable or floating rate securities normally will involve industrial development or revenue bonds which provide that the rate
of interest is set as a specific percentage of a designated base rate, such as rates on Treasury Bonds or Bills or the prime rate
at a major commercial bank, and that a bondholder can demand payment of the obligations on behalf of the Portfolio on short notice
at par plus accrued interest, which amount may be more or less than the amount of the bondholder paid for them. The maturity of
floating or variable rate obligations (including participation interests therein) is deemed to be the longer of (i) the notice
period required before the Portfolio is entitled to receive payment of the obligation upon demand or (ii) the period remaining
until the obligation's next interest rate adjustment. If not redeemed by the Portfolio through the demand feature, the
obligations mature on a specified date, which may range up to thirty years from the date of issuance.
Equity Securities. The Portfolio may invest in all types of equity securities, including the following: common stocks,
preferred stocks and preference stocks; securities such as bonds, warrants or rights that are convertible into stocks; and
depository receipts for those securities. These securities may be listed on securities exchanges, traded in various
over-the-counter markets or have no organized market.
Foreign Securities. The Portfolio may invest in dollar-denominated and non-dollar denominated foreign securities.
Investing in securities of foreign issuers generally involves risks not ordinarily associated with investing in securities of
domestic issuers. For a discussion of the risks involved in foreign securities, see this Statement and the Trust's Prospectus
under "Certain Risk Factors and Investment Methods."
Depository Receipts. The Portfolio may invest in American Depository Receipts ("ADRs"), Global Depository Receipts
("GDRs") and other types of depository receipts. ADRs are certificates by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with a custodian bank as collateral. GDRs and other
types of depository receipts are typically issued by foreign banks or trust companies and evidence ownership of underlying
securities issued by either a foreign or a U.S. company. For the purposes of the Portfolio's policy to invest a certain
percentage of its assets in foreign securities, the investments of the Portfolio in ADRs, GDRs and other types of depository
receipts are deemed to be investments in the underlying securities.
ADRs may be sponsored or unsponsored. A sponsored ADR is issued by a depository which has an exclusive relationship with
the issuer of the underlying security. An unsponsored ADR may be issued by any number of U.S. depositories. Under the terms of
most sponsored arrangements, depositories agree to distribute notices of shareholder meetings and voting instructions, and to
provide shareholder communications and other information to the ADR holders at the request of the issuer of the deposited
securities. The depository of an unsponsored ADR, on the other hand, is under no obligation to distribute shareholder
communications received from the issuer of the deposited securities or to pass through voting rights to ADR holders in respect of
the deposited securities. The Portfolio may invest in either type of ADR. Although the U.S. investor holds a substitute receipt
of ownership rather than direct stock certificates, the use of the depository receipts in the United Sates can reduce costs and
delays as well as potential currency exchange and other difficulties. The Portfolio may purchase securities in local markets and
direct delivery of these shares to the local depositary of an ADR agent bank in the foreign country. Simultaneously, the ADR
agents create a certificate which settles at the Portfolio's custodian in five days. The Portfolio may also execute trades on the
U.S. markets using existing ADRs. A foreign issuer of the security underlying an ADR is generally not subject to the same
reporting requirements in the United States as a domestic issuer. Accordingly, information available to a U.S. investor will be
limited to the information the foreign issuer is required to disclose in its country and the market value of an ADR may not
reflect undisclosed material information concerning the issuer of the underlying security. ADRs may also be subject to exchange
rate risks if the underlying foreign securities are denominated in a foreign currency.
Emerging Markets. The Portfolio may invest in securities of government, government-related, supranational and corporate
issuers located in emerging markets. Such investments entail significant risks as described below.
Company Debt. Governments of many emerging market countries have exercised and continue to exercise substantial
influence over many aspects of the private sector through the ownership or control of many companies, including some of the
largest in any given country. As a result, government actions in the future could have a significant effect on economic
conditions in emerging markets, which in turn, may adversely affect companies in the private sector, general market conditions and
prices and yields of certain of the securities in the Portfolio's portfolio. Expropriation, confiscatory taxation,
nationalization, political, economic or social instability or other similar developments have occurred frequently over the history
of certain emerging markets and could adversely affect the Portfolio's assets should these conditions recur.
Foreign currencies. Some emerging market countries may have managed currencies, which are not free floating against the
U.S. dollar. In addition, there is risk that certain emerging market countries may restrict the free conversion of their
currencies into other currencies. Further, certain emerging market currencies may not be internationally traded. Certain of
these currencies have experienced a steep devaluation relative to the U.S. dollar. Any devaluations in the currencies in which a
Portfolio's portfolio securities are denominated may have a detrimental impact on the Portfolio's net asset value.
Inflation. Many emerging markets have experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have adverse effects on the
economies and securities markets of certain emerging market countries. In an attempt to control inflation, wage and price
controls have been imposed in certain countries. Of these countries, some, in recent years, have begun to control inflation
through prudent economic policies.
Liquidity; Trading Volume; Regulatory Oversight. The securities markets of emerging market countries are substantially
smaller, less developed, less liquid and more volatile than the major securities markets in the U.S. Disclosure and regulatory
standards are in many respects less stringent than U.S. standards. Furthermore , there is a lower level of monitoring and
regulation of the markets and the activities of investors in such markets.
The limited size of many emerging market securities markets and limited trading volume in the securities of emerging
market issuers compared to volume of trading in the securities of U.S. issuers could cause prices to be erratic for reasons apart
from factors that affect the soundness and competitiveness of the securities issuers. For example, limited market size may cause
prices to be unduly influenced by traders who control large positions. Adverse publicity and investors' perceptions, whether or
not based on in-depth fundamental analysis, may decrease the value and liquidity of portfolio securities.
The risk also exists that an emergency situation may arise in one or more emerging markets, as a result of which trading
of securities may cease or may be substantially curtailed and prices for the Portfolio's securities in such markets may not be
readily available. The Portfolio may suspend redemption of its shares for any period during which an emergency exists, as
determined by the SEC. If market prices are not readily available, the Portfolio's securities in the affected markets will be
valued at fair value determined in good faith by or under the direction of the Board of Trustees.
Withholding. Income from securities held by the Portfolio could be reduced by a withholding tax on the source or other
taxes imposed by the emerging market countries in which the Portfolio makes its investments. The Portfolio's net asset value may
also be affected by changes in the rates or methods of taxation applicable to the Portfolio or to entities in which the Portfolio
has invested. The Sub-advisor will consider the cost of any taxes in determining whether to acquire any particular investments,
but can provide no assurance that the taxes will not be subject to change.
Forward Contracts. The Portfolio may enter into contracts for the purchase or sale of a specific currency at a future
date at a price at the time the contract is entered into (a "Forward Contract"), for hedging purposes (e.g., to protect its
current or intended investments from fluctuations in currency exchange rates) as well as for non-hedging purposes.
The Portfolio does not presently intend to hold Forward Contracts entered into until maturity, at which time it would be
required to deliver or accept delivery of the underlying currency, but will seek in most instances to close out positions in such
Contracts by entering into offsetting transactions, which will serve to fix the Portfolio's profit or loss based upon the value of
the Contracts at the time the offsetting transactions is executed.
The Portfolio will also enter into transactions in Forward Contracts for other than hedging purposes, which presents
greater profit potential but also involves increased risk. For example, the Portfolio may purchase a given foreign currency
through a Forward Contract if, in the judgement of the Sub-advisor, the value of such currency is expected to rise relative to the
U.S. dollar. Conversely, the Portfolio may sell the currency through a Forward Contract if the Sub-advisor believes that its
value will decline relative to the dollar.
For an additional discussion of Forward Contracts see this Statement and the Trust's Prospectus under "Certain Risk
Factors and Investment Methods."
Futures Contracts. The Portfolio may purchase and sell futures contracts ("Future Contracts") on stock indices, foreign
currencies, interest rates or interest-rate related instruments, indices of foreign currencies or commodities. The Portfolio also
may purchase and sell Futures Contracts on foreign or domestic fixed income securities or indices of such securities including
municipal bond indices and any other indices of foreign or domestic fixed income securities that may become available for
trading. Such investment strategies will be used for hedging purposes and for non-hedging purposes, subject to applicable law.
Futures Contracts differ from options in that they are bilateral agreements, with both the purchaser and the seller
equally obligated to complete the transaction. Futures Contracts call for settlement only on the expiration date and cannot be
exercised at any other time during their term.
Purchases or sales of stock index futures contracts are used to attempt to protect the Portfolio's current or intended
stock investments from broad fluctuations in stock prices. For example, the Portfolio may sell stock index futures contracts in
anticipations of or during market decline to attempt to offset the decrease in market value of the Portfolio's securities
portfolio that might otherwise result. If such decline occurs, the loss in value of portfolio securities may be offset, in whole
or in part, by gains on the futures position. When the Portfolio is not fully invested in the securities market and anticipates a
significant market advance, it may purchase stock index futures in order to gain rapid market exposure that may, in part or
entirely, offset increases in the cost of securities that the Portfolio intends to purchase. As such purchases are made, the
corresponding positions in stock index futures contracts will be closed out. In a substantial majority of these transactions, the
Portfolio will purchase such securities upon termination of the futures position, but under unusual market conditions, a long
futures position may be terminated without a related purchase of securities.
The Portfolio may purchase and sell foreign currency futures contracts for hedging purposes, to attempt to protect its
current or intended investments from fluctuations in currency exchange rates. Such fluctuations could reduce the dollar value of
portfolio securities denominated in foreign currencies, or increase the dollar cost of foreign-denominated securities, or increase
the dollar cost of foreign-denominated securities to be acquired, even if the value of such securities in the currencies in which
they are denominated remains constant. The Portfolio may sell futures contracts on a foreign currency, for example, where it
holds securities denominated in such currency and it anticipates a decline in the value of such currency relative to the dollar.
In the event such decline occurs, the resulting adverse effect on the value of foreign-denominated securities may be offset, in
whole or in part, by gains on the futures contracts.
Conversely, the Portfolio could protect against a rise in the dollar cost of foreign-denominated securities to be
acquired by purchasing futures contracts on the relevant security, which could offset, in whole or in part, the increased cost of
such securities resulting from the rise in the dollar value of the underlying currencies. Where the Portfolio purchases futures
contracts under such circumstances, however, and the prices of securities to be acquired instead decline, the Portfolio will
sustain losses on its futures position which could reduce or eliminate the benefits of the reduced cost of portfolio securities to
be acquired.
For further information on Futures Contracts, see this Statement under "Certain Risk Factors and Investment Methods."
Investment in Other Investment Companies. The Portfolio may invest in other investment companies, including both
open-end and closed-end companies. Investments in closed-end investment companies may involve the payment of substantial premiums
above the value of such investment companies' portfolio securities.
Options. The Portfolio may invest in the following types of options, which involves the risks described below under the
caption "Risk Factors."
Options on Foreign Currencies. The Portfolio may purchase and write options on foreign currencies for hedging and
non-hedging purposes in a manner similar to that in which Futures Contracts on foreign currencies, or Forward Contracts, will be
utilized. For example, where a rise in the dollar value of a currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the Portfolio may purchase call options thereon. The purchase of such
options could offset, at least partially, the effect of the adverse movements in exchange rates.
Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar cost of securities
to be acquired, the Portfolio could write a put option on the relevant currency which, if rates move in the manner projected, will
expire unexercised and allow the Portfolio to hedge such increased cost up to the amount of the premium. Foreign currency options
written by the Portfolio will generally be covered in a manner similar to the covering of other types of options.
Options of Futures Contracts. The Portfolio may also purchase and write options to buy or sell those Futures Contracts
in which it may invest as described above under "Futures Contracts." Such investment strategies will be used for hedging purposes
and for non-hedging purposes, subject to applicable law.
Options on Futures Contracts that are written or purchased by the Portfolio on U.S. Exchanges are traded on the same
contract market as the underlying Futures Contract, and, like Futures Contracts, are subject to the regulation by the CFTC and the
performance guarantee of the exchange clearinghouse. In addition, Options on Futures Contracts may be traded on foreign
exchanges. The Portfolio may cover the writing of call Options on Futures Contracts (a) through purchases of the underlying
Futures Contract, (b) through ownership of the instrument, or instruments included in the index, underlying the Futures Contract,
or (c) through the holding of a call on the same Futures Contract and in the same principal amount as the call written where the
exercise price of the call held (i) is equal to or less than the exercise price of the call written or (ii) is greater than the
exercise price of the call written if the Portfolio owns liquid and unencumbered assets equal to the difference. The Portfolio
may cover the writing of put Options on Futures Contracts (a) through sales of the underlying Futures Contract, (b) through the
ownership of liquid and unencumbered assets equal to the value of the security or index underlying the Futures Contract, or (c)
through the holding of a put on the same Futures Contract and in the same principal amount as the put written where the exercise
price of the put held (i) is equal to or greater than the exercise price of the put written or where the exercise price of the put
held (ii) is less than the exercise price of the put written if the Portfolio owns liquid and unencumbered assets equal to the
difference. Put and call Options on Futures Contracts may also be covered in such other manner as may be in accordance with the
rules of the exchange on which the option is traded and applicable laws and regulations. Upon the exercise of a call Option on a
Futures Contract written by the Portfolio, the Portfolio will be required to sell the underlying Futures Contract which, if the
Portfolio has covered its obligation through the purchase of such Contract, will serve to liquidate its futures position.
Similarly, where a put Option on a Futures Contract written by the Portfolio is exercised, the Portfolio will be required to
purchase the underlying Futures Contract which, if the Portfolio has covered its obligation through the sale of such Contract,
will close out its futures position.
Depending on the degree of correlation between changes in the value of its portfolio securities and the changes in the
value of its futures positions, the Portfolio's losses from existing Options on Futures Contracts may to some extent be reduced or
increased by changes in the value of portfolio securities.
Options on Securities. The Portfolio may write (sell) covered put and call options, and purchase put and call options,
on securities.
A call option written by the Portfolio is "covered" if the Portfolio owns the security underlying the call or has an
absolute and immediate right to acquire that security without additional cash consideration (or for additional cash consideration
if the Portfolio owns liquid and unencumbered assets equal to the amount of cash consideration) upon conversion or exchange of
other securities held in its portfolio. A call option is also covered if the Portfolio holds a call on the same security and in
the same principal amount as the call written where the exercise price of the call held (a) is equal to or less than the exercise
price of the call written or (b) is greater than the exercise price of the call written if the Portfolio owns liquid and
unencumbered assets equal to the difference. If the portfolio writes a put option it must segregate liquid and unencumbered
assets with a value equal to the exercise price, or else holds a put on the same security and in the same principal amount as the
put written where the exercise price of the put held is equal to or greater than the exercise price of the put written or where
the exercise price of the put held is less than the exercise price of the put written if the Portfolio owns liquid and
unencumbered assets equal to the difference. Put and call options written by the Portfolio may also be covered in such other
manner as may be in accordance with the requirements of the exchange on which, or the counterparty with which, the option is
traded, and applicable laws and regulations.
Effecting a closing transaction in the case of a written call option will permit the Portfolio to write another call
option on the underlying security with either a different exercise price or expiration date or both, or in the case of a written
put option will permit the Portfolio to write another put option to the extent that the Portfolio owns liquid and unencumbered
assets. Such transactions permit the Portfolio to generate additional premium income, which will partially offset declines in the
value of portfolio securities or increases in the cost of securities to be acquired. Also, effecting a closing transaction will
permit the cash or proceeds from the concurrent sale of any securities subject to the option to be used for other investments of
the Portfolio, provided that another option on such security is not written. If the Portfolio desires to sell a particular
security from its portfolio on which it has written a call option, it will effect a closing transaction in connection with the
option prior to or concurrent with the sale of the security.
The Portfolio may write options in connection with buy-and-write transactions; that is, the Portfolio may purchase a
security and then write a call option against that security. The exercise price of the call option the Portfolio determines to
write will depend upon the expected price movement of the underlying security. The exercise price of a call option may be below
("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the current value of the underlying security at the time
the option is written. Buy-and-write transactions using in-the-money call options may be used when it is expected that the price
of the underlying security will decline moderately during the option period. Buy-and-write transactions using out-of-the-money
call options may be used when it is expected that the premiums received from writing the call option plus the appreciation in the
market price of the underlying security up to the exercise price will be greater than the appreciation in the price of the
underlying security alone. If the call options are exercised in such transactions, the Portfolio's maximum gain will be the
premium received by it for writing the option, adjusted upwards or downwards by the difference between the Portfolio's purchase
price of the security and the exercise price, less related transaction costs. If the options are not exercised and the price of
the underlying security declines, the amount of such decline will be offset in part, or entirely, by the premium received.
The writing of covered put options is similar in terms of risk/return characteristics to buy-and-write transactions. If
the market price or the underlying security rises or otherwise is above the exercise price, the put option will expire worthless
and the Portfolio's gain will be limited to the premium received, less related transaction costs. If the market price of the
underlying security declines or otherwise is below the exercise price, the Portfolio may elect to close the position or retain the
option until it is exercised, at which time the Portfolio will be required to take delivery of the security at the exercise price;
the Portfolio's return will be the premium received from the put option minus the amount by which the market price of the security
is below the exercise price, which could result in a loss. Out-of-the-money, at-the-money and in-the-money put options may be
used by the Portfolio in the same market environments that call options are used in equivalent buy-and-write transactions.
The Portfolio may also write combinations of put and call options on the same security, known as "straddles" with the
same exercise price and expiration date. By writing a straddle, the Portfolio undertakes a simultaneous obligation to sell and
purchase the same security in the event that one of the options is exercised. If the price of the security subsequently rises
sufficiently above the exercise price to cover the amount of the premium and transaction costs, the call will likely be exercised
and the Portfolio will be required to sell the underlying security at a below market price. This loss may be offset, however, in
whole or in part, by the premiums received on the writing of the two options. Conversely, if the price of the security declines
by a sufficient amount, the put will likely be exercised. The writing of straddles will likely be effective, therefore, only
where the price of the security remains stable and neither the call nor the put is exercised. In those instances where one of the
options is exercised, the loss on the purchase or sale of the underlying security may exceed the amount of the premiums received.
The writing of options on securities will not be undertaken by the Portfolio solely for hedging purposes, and could
involve certain risks which are not present in the case of hedging transactions. Moreover, even where options are written for
hedging purposes, such transactions constitute only a partial hedge against declines in the value of portfolio securities or
against increases in the value of securities to be acquired, up to the amount of the premium. The Portfolio may also purchase
options for hedging purposes or to increase its return.
The Portfolio may also purchase call options to hedge against an increase in the price of securities that the Portfolio
anticipates purchasing in the future. If such increase occurs, the call option will permit the Portfolio to purchase the
securities at the exercise price, or to close out the options at a profit.
Options on Stock Indices. The Portfolio may write (sell) covered call and put options and purchase call and put options
on stock indices. The Portfolio may cover written call options on stock indices by owning securities whose price changes, in the
opinion of the Sub-advisor, are expected to be similar to those of the underlying index, or by having an absolute and immediate
right to acquire such securities without additional cash consideration (or for additional cash consideration if the Portfolio owns
liquid and unencumbered assets equal to the amount of cash consideration) upon conversion or exchange of other securities in its
portfolio. The Portfolio may also cover call options on stock indices by holding a call on the same index and in the same
principal amount as the call written where the exercise price of the call held (a) is equal to or less than the exercise price of
the call written or (b) is greater than the exercise price of the call written if the Portfolio own liquid and unencumbered assets
equal to the difference. If the Portfolio writes put options on stock indices, it must segregate liquid and unencumbered assets
with a value equal to the exercise price, or hold a put on the same stock index and in the same principal amount as the put
written where the exercise price of the put held (a) is equal to or greater than the exercise price of the put written or (b) is
less than the exercise price of the put written if the Portfolio owns liquid and unencumbered assets equal to the difference. Put
and call options on stock indices may also be covered in such other manner as may be in accordance with the rules of the exchange
on which, or the counterparty with which, the option is traded and applicable laws and regulations.
The purchase of call options on stock indices may be used by the Portfolio to attempt to reduce the risk of missing a
broad market advance, or an advance in an industry or market segment, at a time when the Portfolio holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options for this purpose, the Portfolio will also bear the
risk of losing all or a portion of the premium paid it the value of the index does not rise. The purchase of call options on
stock indices when the Portfolio is substantially fully invested is a form of leverage, up to the amount of the premium and
related transaction costs, and involves risks of loss and of increased volatility similar to those involved in purchasing calls on
securities the Portfolio owns.
The index underlying a stock index option may be a "broad-based" index, such as the Standard & Poor's 500 Index or the
New York Stock Exchange Composite Index, the changes in value of which ordinarily will reflect movements in the stock market in
general. In contrast, certain options may be based on narrower market indices, such as the Standard & Poor's 100 Index, or on
indices of securities of particular industry groups, such as those of oil and gas or technology companies. A stock index assigns
relative values to the stocks included in the index and the index fluctuates with changes in the market values of the stocks so
included. The composition of the index is changed periodically.
For an additional discussion of options, see this Statement under "Certain Risk Factors and Investment Methods."
Special Risk Factors.
Risk of Imperfect Correlation of Hedging Instruments with the Portfolio's Portfolio. The use of derivatives for "cross hedging"
purposes (such as a transaction in a Forward Contract on one currency to hedge exposure to a different currency) may involve
greater correlation risks. Consequently, the Portfolio bears the risk that the price of the portfolio securities being hedged
will not move in the same amount or direction as the underlying index or obligation.
It should be noted that stock index futures contracts or options based upon a narrower index of securities, such as those
of a particular industry group, may present greater risk than options or futures based on a broad market index. This is due to
the fact that a narrower index is more susceptible to rapid and extreme fluctuations as a result of changes in the value of a
small number of securities. Nevertheless, where the Portfolio enters into transactions in options or futures on narrowly-based
indices for hedging purposes, movements in the value of the index should, if the hedge is successful, correlate closely with the
portion of the Portfolio's portfolio or the intended acquisitions being hedged.
The trading of derivatives for hedging purposes entails the additional risk of imperfect correlation between movements in
the price of the derivative and the price of the underlying index or obligation. The anticipated spread between the prices may be
distorted due to the difference in the nature of the markets such as differences in margin requirements, the liquidity of such
markets and the participation of speculators in the derivatives markets. In this regard, trading by speculators in derivatives
has in the past occasionally resulted in market distortions, which may be difficult or impossible to predict, particularly near
the expiration of such instruments.
The trading of Options on Futures Contracts also entails the risk that changes in the value of the underlying Futures
Contracts will not be fully reflected in the value of the option. The risk of imperfect correlation, however, generally tends to
diminish as the maturity date of the Futures Contract or expiration date of the option approaches.
Further, with respect to options on securities, options on stock indices, options on currencies and Options on Futures
Contracts, the Portfolio is subject to the risk of market movements between the time that the option is exercised and the time of
performance thereunder. This could increase the extent of any loss suffered by the Portfolio in connection with such transactions.
In writing a covered call option on a security, index or futures contract, the Portfolio also incurs the risk that
changes in the value of the instruments used to cover the position will not correlate closely with changes in the value of the
option or underlying index or instrument. For example, where the Portfolio covers a call option written on a stock index through
segregation of securities, such securities may not match the composition of the index, and the Portfolio may not be fully
covered. As a result, the Portfolio could be subject to risk of loss in the event of adverse market movements.
Risks of Non-Hedging Transactions. The Portfolio may enter transactions in derivatives for non-hedging purposes as well
as hedging purposes. Non-hedging transactions in such instruments involve greater risks and may result in losses which may not be
offset by increases in the value of portfolio securities or declines in the cost of securities to be acquired. Nevertheless, the
method of covering an option employed by the Portfolio may not fully protect it against risk of loss and, in any event, the
Portfolio could suffer losses on the option position which might not be offset by corresponding portfolio gains. The Portfolio
may also enter into futures, Forward Contracts for non-hedging purposes. For example, the Portfolio may enter into such a
transaction as an alternative to purchasing or selling the underlying instrument or to obtain desired exposure to an index or
market. In such instances, the Portfolio will be exposed to the same economic risks incurred in purchasing or selling the
underlying instrument or instruments. However, transactions in futures, Forward Contracts may be leveraged, which could expose
the Portfolio to greater risk of loss than such purchases or sales. Entering into transactions in derivatives for other than
hedging purposes, therefore, could expose the Portfolio to significant risk of loss if the prices, rates or values of the
underlying instruments or indices do not move in the direction or to the extent anticipated.
With respect to the writing of straddles on securities, the Portfolio incurs the risk that the price of the underlying
security will not remain stable, that one of the options written will be exercised and that the resulting loss will not be offset
by the amount of the premiums received. Such transactions, therefore, create an opportunity for increased return by providing the
Portfolio with two simultaneous premiums on the same security, but involve additional risk, since the Portfolio may have an option
exercised against it regardless of whether the price of the security increases or decreases.
Risk of a Potential Lack of a Liquid Secondary Market. Prior to exercise or expiration, a futures or option position can
only be terminated by entering into a closing purchase or sale transaction. In that event, it may not be possible to close out a
position held by the Portfolio, and the Portfolio could be required to purchase or sell the instrument underlying an option, make
or receive a cash settlement or meet ongoing variation margin requirements. Under such circumstances, if the Portfolio has
insufficient cash available to meet margin requirements, it will be necessary to liquidate portfolio securities or other assets at
a time when it is disadvantageous to do so. The inability to close out options and futures positions, therefore, could have an
adverse impact on the Portfolio's ability effectively to hedge its portfolio, and could result in trading losses.
The trading of Futures Contracts and options is also subject to the risk of trading halts, suspensions, exchange or
clearinghouse equipment failures, government intervention, insolvency of a brokerage firm or clearinghouse or other disruptions of
normal trading activity, which could at times make it difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
Potential Bankruptcy of a Clearinghouse or Broker. When the Portfolio enters into transactions in exchange-traded
futures or options, it is exposed to the risk of the potential bankruptcy of the relevant exchange clearinghouse or the broker
through which the Portfolio has effected the transaction. In that event, the Portfolio might not be able to recover amounts
deposited as margin, or amounts owed to the Portfolio in connection with its transactions, for an indefinite period of time, and
could sustain losses of a portion or all of such amounts. Moreover, the performance guarantee of an exchange clearinghouse
generally extends only to its members and the Portfolio could sustain losses, notwithstanding such guarantee, in the event of the
bankruptcy of its broker.
Trading and Position Limits. The exchanges on which futures and options are traded may impose limitations governing the
maximum number of positions on the same side of the market and involving the same underlying instrument which may be held by a
single investor, whether acting alone or in concert with others (regardless of whether such contracts are held on the same or
different exchanges or held or written in one or more accounts or through one or more brokers.) Further, the CFTC and the various
contract markets have established limits referred to as "speculative position limits" on the maximum net long or net short
position which any person may hold or control in a particular futures or option contract. An exchange may order the liquidation
of positions found to be in violation of these limits and it may impose other sanctions or restrictions. The Sub-advisor does not
believe that these trading and position limits will have any adverse impact on the strategies for hedging the portfolios of the
Portfolio.
Risks of Options on Futures Contracts. The amount of risk the Portfolio assumes when it purchases an Option on a Futures
Contract is the premium paid for the option, plus related transaction costs. In order to profit from an option purchased,
however, it may be necessary to exercise the option and to liquidate the underlying Futures Contract, subject to the risks of the
availability of a liquid offset market described herein. The writer of an Option on a Futures Contract is subject to the risks of
commodity futures trading, including the requirement of initial and variation margin payments, as well as the additional risk that
movements in the price of the option may not correlate with movements in the price of the underlying security, index, currency or
Futures Contract.
Risks of Transactions in Foreign Currencies and Over-the-Counter Derivatives and Other Transactions Not Conducted on U.S.
Exchanges. Transactions in Forward Contracts on foreign currencies, as well as futures and options on foreign currencies and
transactions executed on foreign exchanges, are subject to all of the correlation, liquidity and other risks outlined above. In
addition, however, such transactions are subject to the risk of governmental actions affecting trading in or the prices of
currencies underlying such contracts, which could restrict or eliminate trading and could have a substantial adverse effect on the
value of positions held by the Portfolio. Further, the value of such positions could be adversely affected by a number of other
complex political and economic factors applicable to the countries issuing the underlying currencies.
Further, unlike trading in most other types of instruments, there is no systematic reporting of last sale information
with respect to the foreign currencies underlying contracts thereon. As a result, the available information on which trading
systems will be based may not be as complete as the comparable data on which the Portfolio makes investment and trading decisions
in connection with other transactions. Moreover, because the foreign currency market is a global, 24-hour market, events could
occur in that market which will not be reflected in the forward, futures or options market until the following day, thereby making
it more difficult for the Portfolio to respond to such events in a timely manner.
Settlements of exercises of over-the-counter Forward Contracts or foreign currency options generally must occur within
the country issuing the underlying currency, which in turn requires traders to accept or make delivery of such currencies in
conformity with any U.S. or foreign restrictions and regulations regarding the maintenance of foreign banking relationships, fees,
taxes or other charges.
Unlike transactions entered into by the Portfolio in Futures Contracts and exchange-traded options, on foreign
currencies, Forward Contracts, over-the-counter options on securities, swaps and other over-the-counter derivatives are not traded
on contract markets regulated by the CFTC or (with the exception of certain foreign currency options) the SEC. To the contrary,
such instruments are traded through financial institutions acting as market-makers, although foreign currency options are also
traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to SEC regulation. In an over-the-counter trading environment, many of the protections afforded to exchange participants
will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore
continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of
the premium plus related transaction costs, this entire amount could be lost. Moreover, the option writer and a trader of Forward
Contracts could lose amounts substantially in excess of their initial investments, due to the margin and collateral requirements
associated with such positions.
In addition, over-the-counter transactions can only be entered into with a financial institution willing to take the
opposite side, as principal, of the Portfolio's position unless the institution acts as broker and is able to find another
counterparty willing to enter into the transaction with the Portfolio. Where no such counterparty is available, it will not be
possible to enter into a desired transaction.
Further, over-the-counter transactions are not subject to the guarantee of an exchange clearinghouse, and the Portfolio
will therefore be subject to the risk of default by, or the bankruptcy of, the financial institution serving as its counterparty.
One or more of such institutions also may decide to discontinue their role as market-makers in a particular currency or security,
thereby restricting the Portfolio's ability to enter into desired hedging transactions.
Options on securities, options on stock indices, Futures Contracts, Options on Futures Contracts and options on foreign
currencies may be traded on exchanges located in foreign countries. Such transactions may not be conducted in the same manner as
those entered into on U.S. exchanges, and may be subject to different margin, exercise, settlement or expiration procedures. As a
result, many of the risks of over-the-counter trading may be present in connection with such transactions.
Options on foreign currencies traded on national securities exchanges are within the jurisdiction of the SEC, as are
other securities traded on such exchanges. As a result, many of the protections provided to traders on organized exchanges will
be available with respect to such transactions. In particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing Corporation (the "OCC"), thereby reducing the risk of
counterparty default.
The purchase and sale of exchange-traded foreign currency options, is subject to the risks regarding adverse market
movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental
authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies
involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be
made exclusively through the OCC, which has established banking relationships in applicable foreign countries for this purpose.
As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on the OCC or its clearing member, impose special procedures
on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement
prices or prohibitions on exercise.
Short Term Instruments. The Portfolio may hold cash and invest in cash equivalents, such as short-term U.S. Government
Securities, commercial paper and bank instruments.
Temporary Defensive Positions. During periods of unusual market conditions when the Sub-advisor believes that investing
for temporary defensive purposes is appropriate, or in order to meet anticipated redemption requests, a large portion or all of
the assets of the Portfolio may be invested in cash (including foreign currency) or cash equivalents, including, but not limited
to, obligations of banks (including certificates of deposit, bankers acceptances, time deposits and repurchase agreements),
commercial paper, short-term notes, U.S. Government securities and related repurchase agreements.
"When-Issued" Securities. The Portfolio may purchase securities on a "when-issued," "forward commitment," or "delayed
delivery basis." The commitment to purchase a security for which payment will be made on a future date may be deemed a separate
security. While awaiting delivery of securities purchased on such basis, the Portfolio will identify liquid and unencumbered
assets equal to its forward delivery commitment.
For more information about when-issued securities, please see this Statement under "Certain Risk Factors and Investment
Methods."
AST Alger Growth Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek long-term capital growth.
Investment Policies:
Cash Position. In order to afford the Portfolio the flexibility to take advantage of new opportunities for investments
in accordance with its investment objective or to meet redemptions, it may, under normal circumstances, hold up to 15% of its
total assets in money market instruments including, but not limited to, certificates of deposit, time deposits and bankers'
acceptances issued by domestic bank and thrift institutions, U.S. Government securities, commercial paper and repurchase
agreements. In addition, when the Sub-advisor's analysis of economic and technical market factors suggests that common stock
prices will decline sufficiently so that a temporary defensive position is deemed advisable, the Portfolio may invest in these
instruments without limitation.
U.S. Government Obligations. Obligations, bills, notes, bonds, and other debt securities issued by the U.S. Treasury are
direct obligations of the U.S. Government and differ mainly in the length of their maturities.
U.S. Government Agency Obligations. These securities are issued or guaranteed by U.S. Government-sponsored enterprises
and federal agencies. These include securities issued by the Federal National Mortgage Association, Government National Mortgage
Association, Federal Home Loan Bank, Federal Land Banks, Farmers Home Administration, Banks for Cooperatives, Federal Intermediate
Credit Banks, Federal Financing Bank, Farm Credit Banks, the Small Business Administration, Federal Housing Administration and
Maritime Administration. Some of these securities are supported by the full faith and credit of the U.S. Treasury; and the
remainder are supported only by the credit of the instrumentality, which may or may not include the right of the issuer to borrow
from the Treasury. Certain of these securities may have volatility risks, prepayment risks and extension risk, which could have a
negative impact on the Portfolio's net asset value.
Bank Obligations. These are certificates of deposit, bankers' acceptances and other short-term debt obligations.
Certificates of deposit are short-term obligations of commercial banks. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower, usually in connection with international commercial transactions. Certificates of deposit may have
fixed or variable rates.
The Portfolio will not invest in any debt security issued by a commercial bank unless (i) the bank has total assets of at
least $1 billion, or the equivalent in other currencies, or, in the case of domestic banks which do not have total assets of at
least $1 billion, the aggregate investment made in any one such bank is limited to $100,000 and the principal amount of such
investment is insured in full by the Federal Deposit Insurance Corporation, (ii) in the case of U.S. banks, it is a member of the
Federal Deposit Insurance Corporation, and (iii) in the case of foreign banks, the security is, in the opinion of the Sub-advisor,
of an investment quality comparable to other debt securities which may be purchased by the Portfolios. These limitations do not
prohibit investments in securities issued by foreign branches of U.S. banks, provided such U.S. banks meet the foregoing
requirements.
Investments by the Portfolio in foreign bank obligations and obligations of foreign branches of domestic banks present
many of the same risks as investments in foreign securities generally. In view of these risks, the Sub-advisor will carefully
evaluate these investments on a case-by-case basis. For additional discussion of foreign securities and their risks, see this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Short-term Corporate Debt Securities. These are outstanding nonconvertible corporate debt securities (e.g., bonds and
debentures) which have one year or less remaining to maturity. Corporate debt securities may have fixed, variable, or floating
rates. For additional discussion on debt securities see this Statement under "Certain Risk Factors and Investment Methods."
Commercial Paper. These are short-term promissory notes issued by corporations primarily to finance short-term credit
needs.
Variable Rate Master Demand Notes. These are unsecured instruments that permit the amount of indebtedness thereunder to
vary and provide for periodic adjustments in the interest rate. Because these notes are direct lending arrangements between the
Portfolio and the issuer, they are not normally traded. Although no active secondary market may exist for these notes, the
Portfolio may demand payment of principal and accrued interest at any time or may resell the note to a third party. While the
notes are not typically rated by credit rating agencies, issuers of variable rate master demand notes must satisfy the Sub-advisor
that the same criteria for issuers of commercial paper are met. In addition, when purchasing variable rate master demand notes
for the Portfolio, the Sub-advisor will consider the earning power, cash flows and other liquidity ratios of the issuers of the
notes and will continuously monitor their financial status and ability to meet payment on demand. In the event an issuer of a
variable rate master demand note were to default on its payment obligations, the Portfolio might be unable to dispose of the note
because of the absence of a secondary market and could, for this or other reasons, suffer a loss to the extent of the default.
Firm Commitment Agreements and When-Issued Transactions. Firm commitment agreements and when-issued transactions would
be used, for example, when a decline in the yield of securities of a given issuer is anticipated and a more advantageous yield may
be obtained by committing currently to purchase securities to be issued later. The Portfolio will not use these transactions for
leveraging purposes and, accordingly, will segregate cash or liquid securities in an amount sufficient at all times to meet its
purchase obligations under these agreements. Additional information about firm commitment agreements, when-issued transactions
and their risks is included in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Lending of Portfolio Securities. The Portfolio will not lend securities to the Investment Manager, the Sub-advisor or
their affiliates. By lending its securities, the Portfolio can increase its income by continuing to receive interest or dividends
on the loaned securities as well as by either investing the cash collateral or by earning income in the form of interest paid by
the borrower when U.S. Government securities are used as collateral. The Portfolio will adhere to the following conditions
whenever its securities are loaned: (a) the Portfolio must receive at least 100 percent cash collateral or equivalent securities
from the borrower, (b) the borrower must increase this collateral whenever the market value of the loaned securities including
accrued interest exceeds the value of the collateral, (c) the Portfolio must receive reasonable interest on the loan, as well as
any dividends, interest or other distributions on the loaned securities and any increase in market value, (d) the Portfolio may
pay only reasonable custodian fees in connection with the loan. For additional information on the lending of Portfolio securities
and its risks see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Foreign Securities. The Portfolio may invest up to 20% of the value of its total assets in foreign securities (not
including American Depositary Receipts, American Depositary Shares or U.S. dollar-denominated securities of foreign issuers).
Foreign securities investments may be affected by, among other matters, changes in governmental administration or economic or
monetary policy (in the United States and abroad) or changed circumstances in dealing among nations. Securities purchased on a
foreign exchange may be held in custody by a bank or other depository located in that market. For additional discussion on
foreign securities see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Alger Growth Portfolio. These limitations are not "fundamental" restrictions and may be changed by the Trustees without
shareholder approval. The Portfolio will not:
1. Purchase securities on margin, except (i) for use of short-term credit necessary for clearance of purchases of portfolio
securities and (ii) the Portfolio may make margin deposits in connection with futures contracts or other permissible investments;
2. Mortgage, pledge, hypothecate or, in any manner, transfer any security owned by the Portfolio as security for
indebtedness except as may be necessary in connection with permissible borrowings or investments and then such mortgaging,
pledging or hypothecating may not exceed 10% of the Portfolio's total assets at the time of borrowing or investment. These
restrictions shall not apply to transactions involving reverse repurchase agreements or the purchase of securities subject to firm
commitment agreements or on a when-issued basis;
3. Invest in oil, gas or mineral leases.
4. Purchase securities of open-end or closed-end investment companies except in compliance with the 1940 Act.
5. The Portfolio may not invest more than 15% of the assets of the Portfolio (taken at the time of the investments) in
"illiquid securities," illiquid securities being defined to include securities subject to legal or contractual restrictions on
resale (which may include private placements), repurchase agreements maturing in more than seven days, certain options traded over
the counter that the Portfolio has purchased, securities being used to cover options a Portfolio has written, securities for which
market quotations are not readily available, or other securities which legally or in the Sub-advisor's option may be deemed
illiquid.
6. Selling securities short, except that the Portfolio may sell securities "short against the box."
7. Writing or selling puts, calls, straddles, spreads or combinations thereof.
8. Making investments for the purpose of exercising control or management.
AST Marsico Capital Growth Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek capital growth. Realization of income is not an
investment objective and any income realized on the Portfolio's investments, therefore, will be incidental to the Portfolio's
objective.
Investment Policies:
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 swaps. The Portfolio will not enter into any futures contracts or options
on futures contracts if the aggregate amount of the Portfolio's commitments under outstanding futures contract positions and
options on futures contracts written by the Portfolio would exceed the market value of the total assets of the Portfolio. The
Portfolio may invest in forward currency contracts with stated values of up to the value of the Portfolio's assets.
The Portfolio may buy or write options in privately negotiated transactions on the types of securities and indices based
on the types of securities in which the Portfolio is permitted to invest directly. The Portfolio will effect such transactions
only with investment dealers and other financial institutions (such as commercial banks or savings and loan institutions) deemed
creditworthy by the Sub-advisor, and only pursuant to procedures adopted by the Sub-advisor for monitoring the creditworthiness of
those entities. To the extent that an option bought or written by the Portfolio in a negotiated transaction is illiquid, the
value of an option bought or the amount of the Portfolio's obligations under an option written by the Portfolio, as the case may
be, will be subject to the Portfolio's limitation on illiquid investments. In the case of illiquid options, it may not be
possible for the Portfolio to effect an offsetting transaction at a time when the Sub-advisor believes it would be advantageous
for the Portfolio to do so. For a description of these strategies and instruments and certain risks involved therein, see this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Interest Rate Swaps and Purchasing and Selling Interest Rate Caps and Floors. In addition to the strategies noted above,
the Portfolio, in order to attempt to protect the value of its investments from interest rate or currency exchange rate
fluctuations, may enter into interest rate swaps and may buy or sell interest rate caps and floors. The Portfolio expects to
enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its investments.
The Portfolio also may enter into these transactions to protect against any increase in the price of securities the Portfolio may
consider buying at a later date. The Portfolio does not intend to use these transactions as speculative investments. Interest
rate swaps involve the exchange by the Portfolio with another party of their respective commitments to pay or receive interest,
e.g., an exchange of floating rate payments for fixed rate payments. The exchange commitments can involve payments to be made in
the same currency or in different currencies. The purchase of an interest rate cap entitles the purchaser, to the extent that a
specified index exceeds a predetermined interest rate, to receive payments of interest on a contractually based principal amount
from the party selling the interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined interest rate, to receive payments of interest on a contractually based principal
amount from the party selling the interest rate floor.
The Portfolio may enter into interest rate swaps, caps and floors on either an asset-based or liability-based basis,
depending upon whether it is hedging its assets or its liabilities, and will usually enter into interest rate swaps on a net
basis, i.e., the two payment streams are netted out, with the Portfolio receiving or paying, as the case may be, only the net
amount of the two payments. The net amount of the excess, if any, of the Portfolio's obligations over its entitlements with
respect to each interest rate swap will be calculated on a daily basis and an amount of cash or other liquid assets having an
aggregate net asset value at least equal to the accrued excess will be maintained in a segregated account by the Portfolio's
custodian. If the Portfolio enters into an interest rate swap on other than a net asset basis, the Portfolio would maintain a
segregated account in the full amount accrued on a daily basis of the Portfolio's obligations with respect to the swap. The
Portfolio will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the
claims-paying ability of the other party thereto is rated in one of the three highest rating categories of at least one nationally
recognized statistical rating organization at the time of entering into such transaction. The Sub-advisor will monitor the
creditworthiness of all counterparties on an ongoing basis. If there is a default by the other party to such a transaction, the
Portfolio will have contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. The Sub-advisor has determined that, as a result, the
swap market has become relatively liquid. Caps and floors are more recent innovations for which standardized documentation has
not yet been developed and, accordingly, they are less liquid than swaps. To the extent the Portfolio sells (i.e., writes) caps
and floors, it will maintain in a segregated account cash or other liquid assets having an aggregate net asset value at least
equal to the full amount, accrued on a daily basis, of the Portfolio's obligations with respect to any caps or floors.
There is no limit on the amount of interest rate swap transactions that may be entered into by the Portfolio. These
transactions may in some instances involve the delivery of securities or other underlying assets by the Portfolio or its
counterparty to collateralize obligations under the swap. Under the documentation currently used in those markets, the risk of
loss with respect to interest rate swaps is limited to the net amount of the payments that the Portfolio is contractually
obligated to make. If the other party to an interest rate swap that is not collateralized defaults, the Portfolio would risk the
loss of the net amount of the payments that the Portfolio contractually is entitled to receive. The Portfolio may buy and sell
(i.e., write) caps and floors without limitation, subject to the segregated account requirement described above. For an
additional discussion of these strategies, see this Statement under "Certain Risk Factors and Investment Methods."
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase agreements. For a description of these
investment techniques, see the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
High-Yield/High-Risk Securities. High-yield/high-risk securities (or "junk" bonds) are debt securities rated below
investment grade by the primary rating agencies such as Standard & Poor's Rating Services ("Standard & Poor's") and Moody's
Investors Service, Inc. ("Moody's"). The Portfolio will not invest more than 5% of its total assets in high-yield/high-risk and
mortgage- and asset-backed securities.
The value of lower quality securities generally is more dependent on the ability of the issuer to meet interest and
principal payments (i.e. credit risk) than is the case for higher quality securities. Conversely, the value of higher quality
securities may be more sensitive to interest rate movements than lower quality securities. The Portfolio will not purchase debt
securities rated below "CCC-" by Standard & Poor's or "Caa" by Moody's. The Portfolio may also purchase unrated bonds of foreign
and domestic issuers. For an additional discussion of high-yield/high-risk and mortgage- and asset-backed securities, see this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Zero Coupon, Pay-in-Kind, and Step Coupon Bonds. The Portfolio may purchase zero coupon, pay-in-kind, and step coupon
bonds. Zero coupon bonds are debt securities that do not pay periodic interest, but are issued at a discount from their face
value. The discount approximates the total amount of interest the security will accrue from the date of issuance to maturity.
Pay-in-kind bonds normally give the issuer the option to pay cash at a coupon payment date or give the holder of the security a
similar bond with the same coupon rate and a face value equal to the amount of the coupon payment that would have been made. Step
coupon bonds begin to pay coupon interest, or pay an increased rate of interest, at some time after they are issued. The discount
at which step coupon bonds trade depends on the time remaining until cash payments begin, prevailing interest rates, the liquidity
of the security and the perceived credit quality of the issuer. The market value of zero coupon, pay-in-kind and step coupon
bonds generally will fluctuate more in response to changes in interest rates than will conventional interest-paying securities
with comparable maturities. For an additional discussion of zero coupon securities, see this SAI under "Certain Risk Factors and
Investment Methods."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Marsico Capital Growth Portfolio. These limitations are not "fundamental" restrictions, and may be changed by the Trustees
without shareholder approval.
1. The Portfolio does not currently intend to sell securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short without the payment of any additional consideration
therefor, and provided that transactions in futures, options, swaps and forward contracts are not deemed to constitute selling
securities short.
2. The Portfolio does not currently intend to purchase securities on margin, except that the Portfolio may obtain
such short-term credits as are necessary for the clearance of transactions, and provided that margin payments and other deposits
in connection with transactions in futures, options, swaps and forward contracts shall not be deemed to constitute purchasing
securities on margin.
3. The Portfolio may not mortgage or pledge any securities owned or held by the Portfolio in amounts that exceed, in
the aggregate, 15% of the Portfolio's net asset value, provided that this limitation does not apply to (i) reverse repurchase
agreements; (ii) deposits of assets on margin; (iii) guaranteed positions in futures, options, swaps or forward contracts; or (iv)
the segregation of assets in connection with such contracts.
4. The Portfolio does not currently intend to purchase any securities or enter into a repurchase agreement if, as a
result, more than 15% of its net assets would be invested in repurchase agreements not entitling the holder to payment of
principal and interest within seven days and in securities that are illiquid by virtue of legal or contractual restrictions on
resale or the absence of a readily available market. The Trustees of the Trust, or the Sub-advisor acting pursuant to authority
delegated by the Trustees, may determine that a readily available market exists for securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, as amended, or any successor to such rule, and Section 4(2) commercial paper.
Accordingly, such securities may not be subject to the foregoing limitation.
5. The Portfolio may not invest in companies for the purpose of exercising control or management.
AST JanCap Growth Portfolio:
Investment Objective: The investment objective of the Portfolio is 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.
Investment Policies:
The Portfolio may, as a fundamental policy, invest all of its assets in the securities of a single open-end management
investment company with substantially the same fundamental investment objectives, policies and restrictions as the Portfolio
subject to the prior approval of the Investment Manager. The Investment Manager will not approve such investment unless: (a) the
Investment Manager believes, on the advice of counsel, that such investment will not have an adverse effect on the tax status of
the annuity contracts and/or life insurance policies supported by the separate accounts of the Participating Insurance Companies
which purchase shares of the Trust; (b) the Investment Manager has given prior notice to the Participating Insurance Companies
that it intends to permit such investment and has determined whether such Participating Insurance Companies intend to redeem any
shares and/or discontinue the purchase of shares because of such investment; (c) the Trustees have determined that the fees to be
paid by the Trust for administrative, accounting, custodial and transfer agency services for the Portfolio subsequent to such an
investment are appropriate, or the Trustees have approved changes to the agreements providing such services to reflect a reduction
in fees; (d) the Sub-advisor for the Portfolio has agreed to reduce its fee by the amount of any investment advisory fees paid to
the investment manager of such open-end management investment company; and (e) shareholder approval is obtained if required by
law. The Portfolio will apply for such exemptive or other relief under the provisions of the Investment Company Act of 1940 (the
"1940 Act") and the rules thereunder as may be necessary regarding investments in such investment companies.
Corporate Bonds and Debentures. The Portfolio may purchase corporate bonds and debentures, including bonds rated below
investment grade by the primary rating agencies. The Portfolio will not invest more than 35% of its net assets in bonds rated
below investment grade. For a discussion of lower rated securities, see this Statement and the Trust's Prospectus under "Certain
Risk Factors and Investment Methods."
Futures, Options and Other Derivative Instruments. The Portfolio may enter into futures contracts on securities,
financial indices, and foreign currencies and options on such contracts, and may invest in options on securities, financial
indices and foreign currencies, forward contracts and swaps. The Portfolio will not enter into any futures contracts or options
on futures contracts if the aggregate amount of the Portfolio's commitments under outstanding futures contract positions and
options on futures contracts written by the Portfolio would exceed the market value of the total assets of the Portfolio. The
Portfolio may invest in forward currency contracts with stated values of up to the value of the Portfolio's assets.
The Portfolio may buy or write options in privately negotiated transactions on the types of securities and indices based
on the types of securities in which the Portfolio is permitted to invest directly. The Portfolio will effect such transactions
only with investment dealers and other financial institutions (such as commercial banks or savings and loan institutions) deemed
creditworthy by the Sub-advisor, and only pursuant to procedures adopted by the Sub-advisor for monitoring the creditworthiness of
those entities. To the extent that an option bought or written by the Portfolio in a negotiated transaction is illiquid, the
value of an option bought or the amount of the Portfolio's obligations under an option written by the Portfolio, as the case may
be, will be subject to the Portfolio's limitation on illiquid investments. In the case of illiquid options, it may not be
possible for the Portfolio to effect an offsetting transaction at a time when the Sub-advisor believes it would be advantageous
for the Portfolio to do so. For a description of these strategies and instruments and certain risks involved therein, see this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Interest Rate Swaps and Purchasing and Selling Interest Rate Caps and Floors. In addition to the strategies noted above,
the Portfolio, in order to attempt to protect the value of its investments from interest rate or currency exchange rate
fluctuations, may enter into interest rate swaps and may buy or sell interest rate caps and floors. The Portfolio expects to
enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its investments.
The Portfolio also may enter into these transactions to protect against any increase in the price of securities the Portfolio may
consider buying at a later date. The Portfolio does not intend to use these transactions as speculative investments. Interest
rate swaps involve the exchange by the Portfolio with another party of their respective commitments to pay or receive interest,
e.g., an exchange of floating rate payments for fixed rate payments. The exchange commitments can involve payments to be made in
the same currency or in different currencies. The purchase of an interest rate cap entitles the purchaser, to the extent that a
specified index exceeds a predetermined interest rate, to receive payments of interest on a contractually based principal amount
from the party selling the interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined interest rate, to receive payments of interest on a contractually based principal
amount from the party selling the interest rate floor.
The Portfolio may enter into interest rate swaps, caps and floors on either an asset-based or liability-based basis,
depending upon whether it is hedging its assets or its liabilities, and will usually enter into interest rate swaps on a net
basis, i.e., the two payment streams are netted out, with the Portfolio receiving or paying, as the case may be, only the net
amount of the two payments. The net amount of the excess, if any, of the Portfolio's obligations over its entitlements with
respect to each interest rate swap will be calculated on a daily basis and an amount of cash or other liquid assets having an
aggregate net asset value at least equal to the accrued excess will be maintained in a segregated account by the Portfolio's
custodian. If the Portfolio enters into an interest rate swap on other than a net basis, the Portfolio would maintain a
segregated account in the full amount accrued on a daily basis of the Portfolio's obligations with respect to the swap. The
Portfolio will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the
claims-paying ability of the other party thereto is rated in one of the three highest rating categories of at least one nationally
recognized statistical rating organization at the time of entering into such transaction. The Sub-advisor will monitor the
creditworthiness of all counterparties on an ongoing basis. If there is a default by the other party to such a transaction, the
Portfolio will have contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. The Sub-advisor has determined that, as a result, the
swap market has become relatively liquid. Caps and floors are more recent innovations for which standardized documentation has
not yet been developed and, accordingly, they are less liquid than swaps. To the extent the Portfolio sells (i.e., writes) caps
and floors, it will maintain in a segregated account cash or other liquid assets having an aggregate net asset value at least
equal to the full amount, accrued on a daily basis, of the Portfolio's obligations with respect to any caps or floors.
There is no limit on the amount of interest rate swap transactions that may be entered into by the Portfolio. These
transactions may in some instances involve the delivery of securities or other underlying assets by the Portfolio or its
counterparty to collateralize obligations under the swap. Under the documentation currently used in those markets, the risk of
loss with respect to interest rate swaps is limited to the net amount of the payments that the Portfolio is contractually
obligated to make. If the other party to an interest rate swap that is not collateralized defaults, the Portfolio would risk the
loss of the net amount of the payments that the Portfolio contractually is entitled to receive. The Portfolio may buy and sell
(i.e., write) caps and floors without limitation, subject to the segregated account requirement described above. For an
additional discussion of these strategies, see this Statement under "Certain Risk Factors and Investment Methods."
Investment Company Securities. From time to time, the Portfolio may invest in securities of other investment companies,
subject to the provisions of Section 12(d)(1) of the 1940 Act. The Portfolio may invest in securities of money market funds
managed by the Sub-advisor subject to the terms of an exemptive order obtained by the Sub-advisor and the funds that are advised
or sub-advised by the Sub-advisor. Under such order, the Portfolio will limit its aggregate investment in a money market fund
managed by the Sub-advisor to the greater of (i) 5% of its total assets or (ii) $2.5 million, although the Trust's Board of
Trustees may increase this limit up to 25% of the Trust's total assets.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase agreements. The Portfolio will enter
into such agreements only to provide cash to satisfy unusually heavy redemption requests and for other temporary or emergency
purposes, rather than to obtain cash to make additional investments. For a description of these investment techniques, see the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST JanCap Growth Portfolio. These limitations are not "fundamental" restrictions, and may be changed by the Trustees without
shareholder approval.
1. The Portfolio will not purchase a security if as a result, more than 15% of its net assets in the aggregate, at
market value, would be invested in securities which cannot be readily resold because of legal or contractual restrictions on
resale or for which there is no readily available market, or repurchase agreements maturing in more than seven days or securities
used as a cover for written over-the-counter options, if any. The Trustees, or the Investment Manager or the Sub-advisor acting
pursuant to authority delegated by the Trustees, may determine that a readily available market exists for securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933, or any successor to such rule, and therefore that such securities
are not subject to the foregoing limitation.
2. The Portfolio may borrow money for temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 25% of the value of its total assets (including the amount borrowed) less liabilities (other than
borrowings). Any borrowings that come to exceed 25% of the value of the Portfolio's total assets by reason of a decline in net
assets will be reduced within three business days to the extent necessary to comply with the 25% limitation. Under such a
circumstance, the Portfolio may have to liquidate securities at a time when it is disadvantageous to do so. This policy shall not
prohibit reverse repurchase agreements or deposits of assets to margin or guarantee positions in futures, options, swaps or
forward contracts, or the segregation of assets in connection with such contracts.
3. The Portfolio will not enter into any futures contracts or options on futures contracts 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 premium 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 the Portfolio's net assets.
4. The Portfolio will not enter into any futures contracts if the aggregate amount of the Portfolio's commitments
under outstanding futures contracts positions of the Portfolio would exceed the market value of the total assets of the Portfolio.
5. The Portfolio will not sell securities short, unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that transactions in options, swaps and forward futures contracts are
not deemed to constitute selling securities short.
6. The Portfolio will not mortgage or pledge any securities owned or held by the Portfolio in amounts that exceed,
in the aggregate, 15% of the Portfolio's net asset value, provided that this limitation does not apply to reverse repurchase
agreements or in the case of assets deposited to margin or guarantee positions in futures, options, swaps or forward contracts or
placed in a segregated account in connection with such contracts.
AST Janus Strategic Value Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek long-term growth of capital.
Investment Policies:
Foreign Securities. The Portfolio may invest up to 25% of its net assets in foreign securities denominated in foreign
currencies and not publicly traded in the United States. Investing in securities of foreign issuers generally involves risks not
ordinarily associated with investing in securities of domestic issuers. For a discussion of the risks involved in foreign
securities, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Depositary Receipts. The Portfolio may invest in sponsored and unsponsored American Depositary Receipts ("ADRs"), which
are described in the Trust's Prospectus under "Certain Risk Factors and Investment Methods." Holders of unsponsored ADRs
generally bear all the costs of the ADR facility, whereas foreign issuers typically bear certain costs in a sponsored ADR. The
bank or trust company depositary of an unsponsored ADR may be under no obligation to distribute shareholder communications
received from the foreign issuer or to pass through voting rights. The Portfolio may also invest in European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") and in other similar instruments representing securities of foreign companies.
Investment Company Securities. From time to time, the Portfolio may invest in securities of other investment companies,
subject to the provisions of Section 12(d)(1) of the 1940 Act. The Portfolio may invest in securities of money market funds
managed by the Sub-advisor in excess of the limitations of Section 12(d)(1) under the terms of an SEC exemptive order obtained by
the Sub-advisor and the funds that are advised or sub-advised by the Sub-advisor.
Municipal Obligations. The Portfolio may invest in municipal obligations issued by states, territories and possessions
of the United States and the District of Columbia. The value of municipal obligations can be affected by changes in their actual
or perceived credit quality. The credit quality of municipal obligations can be affected by among other things the financial
condition of the issuer or guarantor, the issuer's future borrowing plans and sources of revenue, the economic feasibility of the
revenue bond project or general borrowing purpose, political or economic developments in the region where the security is issued,
and the liquidity of the security. Because municipal securities are generally traded over-the-counter, the liquidity of a
particular issue often depends on the willingness of dealers to make a market in the security. The liquidity of some municipal
obligations may be enhanced by demand features, which would enable the Portfolio to demand payment on short notice from the issuer
or a financial intermediary.
Income-Producing Securities. Types of income producing securities that the Portfolio may purchase include, but are not
limited to, (i) variable and floating rate obligations, which are securities having interest rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate index or market interest rate, (ii) standby
commitments, which are instruments similar to puts that give the holder the option to obligate a broker, dealer or bank to
repurchase a security at a specified price, and (iii) tender option bonds, which are relatively long-term bonds that are coupled
with the agreement of a third party (such as a broker, dealer or bank) to grant the holders of such securities the option to
tender the securities to the institution at periodic intervals. The Portfolio will purchase standby commitments, tender option
bonds and instruments with demand features primarily for the purpose of increasing the liquidity of its portfolio. The Portfolio
may also invest in inverse floaters, which are debt instruments the interest on which varies in an inverse relationship to the
interest rate on another security. If movements in interest rates are incorrectly anticipated, the Portfolio could lose money or
its net asset value could decline by the use of inverse floaters. The Portfolio will not invest more than 5% of its assets in
inverse floaters. The Portfolio may also invest in strip bonds, which are debt securities that are stripped of their interest
(usually by a financial intermediary) after the securities are issued. The market value of these securities generally fluctuates
more in response to changes in interest rates than interest-paying securities of comparable maturity.
Zero Coupon, Step Coupon and Pay-In-Kind Securities. The Portfolio may invest up to 10% of its assets in zero coupon,
pay-in-kind and step coupon securities. Zero coupon bonds are described in this Statement under "Certain Risk Factors and
Investment Methods." Step coupon bonds trade at a discount from their face value and pay coupon interest. The coupon rate is low
for an initial period and then increases to a higher coupon rate thereafter. The discount from the face amount or par value
depends on the time remaining until cash payments begin, prevailing interest rates, liquidity of the security and the perceived
credit quality of the issuer. Pay-in-kind bonds normally give the issuer an option to pay cash at a coupon payment date or give
the holder of the security a similar bond with the same coupon rate and a face value equal to the amount of the coupon payment
that would have been made.
Generally, the market prices of zero coupon, step coupon and pay-in-kind securities are more volatile than the prices of
securities that pay interest periodically and in cash and are likely to respond to changes in interest rates to a greater degree
than other types of debt securities having similar maturities and credit quality.
High-Yield/High-Risk Securities. The Portfolio may invest up to 35% of its net assets in bonds that are rated below
investment grade. The Portfolio may also invest in unrated debt securities of foreign and domestic issuers. Unrated debt, while
not necessarily of lower quality than rated securities, may not have as broad a market. Because of the size and perceived demand
of the issue, among other factors, certain municipalities may elect not to incur the costs of obtaining a rating. The Sub-advisor
will analyze the creditworthiness of the issuer, as well as any financial institution or other party responsible for payments on
the security, in determining whether to purchase unrated municipal bonds. Unrated bonds will be included in the 35% limit unless
the Sub-advisor deems such securities to be the equivalent of investment grade securities. For a description of these securities
and a discussion of the risks involved therein, see this Statement and the Trust's Prospectus under "Certain Risk Factors and
Investment Methods."
The Portfolio may purchase defaulted securities subject to the above limits, but only when the Sub-advisor believes,
based upon its analysis of the financial condition, results of operations and economic outlook of an issuer, that there is
potential for resumption of income payments and that the securities offer an unusual opportunity for capital appreciation.
Notwithstanding the Sub-advisor's belief as to the resumption of income, however, the purchase of any security on which payment of
interest or dividends is suspended involves a high degree of risk. Such risk includes, among other things, the following:
Financial and Market Risks. Investments in securities that are in default involve a high degree of financial and
market risks that can result in substantial or, at times, even total losses. Issuers of defaulted securities may have substantial
capital needs and may become involved in bankruptcy or reorganization proceedings. Among the problems involved in investments in
such issuers is the fact that it may be difficult to obtain information about their condition. The market prices of securities of
such issuers also are subject to abrupt and erratic movements and above average price volatility, and the spread between the bid
and asked prices of such securities may be greater than normally expected.
Disposition of Portfolio Securities. Although the Portfolio generally will purchase securities for which the
Sub-advisor expects an active market to be maintained, defaulted securities may be less actively traded than other securities and
it may be difficult to dispose of substantial holdings of such securities at prevailing market prices. The Portfolio will limit
holdings of any such securities to amounts that the Sub-advisor believes could be readily sold, and holdings of such securities
would, in any event, be limited so as not to limit the Portfolio's ability to readily dispose of securities to meet redemptions.
Other. Defaulted securities require active monitoring and may, at times, require participation in bankruptcy or
receivership proceedings on behalf of the Portfolio at additional expense to the Portfolio, which expense could be substantial.
Reverse Repurchase Agreements. The Portfolio may use reverse repurchase agreements to provide cash to satisfy
unusually heavy redemption requests or for other temporary or emergency purposes without the necessity of selling portfolio
securities, or to earn additional income on portfolio securities, such as Treasury bills or notes. The Portfolio will enter into
reverse repurchase agreements only with parties that the Sub-advisor deems creditworthy. Using reverse repurchase agreements to
earn additional income involves the risk that the interest earned on the invested proceeds is less than the expense of the reverse
repurchase agreement transaction. This technique may also have a leveraging effect on the Portfolio, although the requirement for
the Portfolio to segregate assets in the amount of the reverse repurchase agreement minimizes this effect.
For an additional discussion of reverse repurchase agreements and their risks, see the Trust's Prospectus under "Certain
Risk Factors and Investment Methods."
Futures, Options and Forward Contracts. 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, and forward contracts. The Portfolio will not enter into any futures contracts or options on futures contracts if the
aggregate amount of the Portfolio's commitments under outstanding futures contract positions and options on futures contracts
written by the Portfolio would exceed the market value of the Portfolio's total assets. The Portfolio may invest in forward
currency contracts with stated values of up to the value of the Portfolio's assets.
The Portfolio may buy or write options in privately negotiated transactions on the types of securities, and on indices
based on the types of securities, in which the Portfolio is permitted to invest directly. The Portfolio will effect such
transactions only with investment dealers and other financial institutions (such as commercial banks or savings and loan
institutions) deemed creditworthy by the Sub-advisor pursuant to procedures adopted by the Sub-advisor for monitoring the
creditworthiness of those entities. To the extent that an option purchased or written by the Portfolio in a negotiated
transaction is illiquid, the value of the option purchased or the amount of the Portfolio's obligations under an option it has
written, as the case may be, will be subject to the Portfolio's limitation on illiquid investments. In the case of illiquid
options, it may not be possible for the Portfolio to effect an offsetting transaction when the Sub-advisor believes it would be
advantageous for the Portfolio to do so. For a description of these strategies and instruments and certain of their risks, see
this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Eurodollar Instruments. The Portfolio may make investments in Eurodollar instruments. Eurodollar instruments are U.S.
dollar-denominated futures contracts or options thereon that are linked to the London Interbank Offered Rate ("LIBOR"), although
foreign currency-denominated instruments are available from time to time. Eurodollar futures contracts enable purchasers to
obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. The Portfolio might use
Eurodollar futures contracts and options thereon to hedge against changes in LIBOR, to which many interest rate swaps and
fixed-income instruments are linked.
Swaps and Swap-Related Products. The Portfolio may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its assets or its liabilities, and will usually enter
into interest rate swaps on a net basis (i.e., the two payment streams are netted out, with the Portfolio receiving or paying, as
the case may be, only the net amount of the two payments). The net amount of the excess, if any, of the Portfolio's obligations
over its entitlement with respect to each interest rate swap will be calculated on a daily basis and an amount of cash or other
liquid assets having an aggregate net asset value at least equal to the accrued excess will be maintained in a segregated account
by the Portfolio's custodian. If the Portfolio enters into an interest rate swap on other than a net basis, it would maintain a
segregated account in the full amount accrued on a daily basis of its obligations with respect to the swap. The Portfolio will
not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in one of the three highest rating categories of at least one NRSRO at the time of entering into
such transaction. The Sub-advisor will monitor the creditworthiness of all counterparties on an ongoing basis. If there is a
default by the other party to such a transaction, the Portfolio will have contractual remedies pursuant to the agreements related
to the transaction.
The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. The Sub-advisor has determined that, as a result, the
swap market has become relatively liquid. Caps and floors are more recent innovations for which standardized documentation has
not yet been developed and, accordingly, are less liquid than swaps. To the extent the Portfolio sells (i.e., writes) caps and
floors, it will segregate cash or other liquid assets having an aggregate net asset value at least equal to the full amount,
accrued on a daily basis, of its obligations with respect to any caps or floors.
There is no limit on the amount of interest rate swap transactions that may be entered into by the Portfolio. These
transactions may in some instances involve the delivery of securities or other underlying assets by the Portfolio or its
counterparty to collateralize obligations under the swap. Under the documentation currently used in those markets, the risk of
loss with respect to interest rate swaps is limited to the net amount of the payments that the Portfolio is contractually
obligated to make. If the other party to an interest rate swap that is not collateralized defaults, the Portfolio would risk the
loss of the payments that it contractually is entitled to receive. The Portfolio may buy and sell (i.e., write) caps and floors
without limitation, subject to the segregation requirement described above.
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Janus Strategic Value Portfolio. The limitations are not "fundamental restrictions and may be changed by the Trustees without
shareholder approval.
1. The Portfolio does not currently intend to sell securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short without the payment of any additional consideration therefor, and
provided that transactions in futures, options, swaps and forward contracts are not deemed to constitute selling securities short.
2. The Portfolio does not currently intend to purchase securities on margin, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of transactions, and provided that margin payments and other deposits in
connection with transactions in futures, options, swaps and forward contracts shall not be deemed to constitute purchasing
securities on margin.
3. The Portfolio may not mortgage or pledge any securities owned or held by the Portfolio in amounts that exceed, in the
aggregate, 15% of the Portfolio's net asset value, provided that this limitation does not apply to reverse repurchase agreements,
margin and other deposits in connection with transactions in futures, options, swaps or forward contracts, or the segregation of
assets in connection with such contracts.
4. The Portfolio does not currently intend to purchase any security or enter into a repurchase agreement if, as a result,
more than 15% of its net assets would be invested in repurchase agreements not entitling the holder to payment of principal and
interest within seven days and in securities that are illiquid by virtue of legal or contractual restrictions on resale or the
absence of a readily available market. The Trustees, or the Portfoio's Sub-advisor acting pursuant to authority delegated by the
Trustees, may determine that a readily available market exists for securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 or any successor to such rule, Section 4(2) commercial paper, and municipal lease obligations.
Accordingly, such securities may not be subject to the foregoing limitation.
5. The Portfolio may not invest in companies for the purpose of exercising control of management.
AST Cohen & Steers Realty Portfolio:
Investment Objective: The investment objective of AST Cohen & Steers Realty Portfolio. (the "Portfolio") is to maximize total
return through investment in real estate securities.
Investment Policies:
Investment Techniques. The following sections provide expanded discussion of several of the types of investments and
investment techniques which may be used by the Portfolio.
Real Estate Investment Trusts. REITs are sometimes informally characterized as equity REITs, mortgage REITs and
hybrid REITs. An equity REIT invests primarily in the fee ownership or leasehold ownership of land and buildings and derives its
income primarily from rental income. An equity REIT may also realize capital gains (or losses) by selling real estate properties
in its portfolio that have appreciated (or depreciated) in value. A mortgage REIT invests primarily in mortgages on real estate,
which may secure construction, development or long-term loans. A mortgage REIT generally derives its income primarily from
interest payments on the credit it has extended. A hybrid REIT combines the characteristics of equity REITs and mortgage REITs,
generally by holding both ownership interests and mortgage interests in real estate. It is anticipated, although not required,
that under normal circumstances a majority of the Portfolio's investments in REITs will consist of equity REITs.
A REIT is not taxed on amounts distributed to shareholders if it complies with several requirements relating to its
organization, ownership, assets, and income and a requirement that it distribute to its shareholders at least 95% of its taxable
income (other than net capital gains) for each taxable year. Equity and Mortgage REITs are dependent upon the skills of their
managers and generally may not be diversified. Equity and Mortgage REITs are also subject to heavy cash flow dependency, defaults
by borrowers and self-liquidation. In addition, Equity and Mortgage REITs could possibly fail to qualify for tax free
pass-through of income under the Internal Revenue Code of 1986, as amended (the "Code"), or to maintain their exemptions from
registration under the Investment Company Act of 1940 (the "1940 Act").
Futures Contracts. The Portfolio may purchase and sell financial futures contracts. A futures contract is an
agreement to buy or sell a specific security or financial instrument at a particular price on a stipulated future date. Although
some financial futures contracts call for making or taking delivery of the underlying securities, in most cases these obligations
are closed out before the settlement date. The closing of a contractual obligation is accomplished by purchasing or selling an
identical offsetting futures contract. Other financial futures contracts by their terms call for cash settlements.
The Portfolio may also buy and sell index futures contracts with respect to any stock or bond index traded on a
recognized stock exchange or board of trade. An index futures contract is a contract to buy or sell units of an index at a
specified future date at a price agreed upon when the contract is made. The stock index futures contract specifies that no
delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of
the contract, with the settlement being the difference between the contract price and the actual level of the stock index at the
expiration of the contract.
At the time the Portfolio purchases a futures contract, an amount of cash or other liquid assets equal to the market
value of the futures contract will be deposited in a segregated account with the Portfolio's custodian. When writing a futures
contract, the Portfolio will maintain with its custodian similar liquid assets that, when added to the amounts deposited with a
futures commission merchant or broker as margin, are equal to the market value of the instruments underlying the contract.
Alternatively, the Portfolio may "cover" its position by owning the instruments underlying the contract (or, in the case of an
index futures contract, a portfolio with a volatility substantially similar to that of the index on which the futures contract is
based), or holding a call option permitting the Portfolio to purchase the same futures contract at a price no higher than the
price of the contract written by the Portfolio (or at a higher price if the difference is maintained in liquid assets with the
Portfolio's custodian). For an additional discussion of futures contracts and the risks associated with them, see this Statement
and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Options on Securities and Stock Indices. The Portfolio may write covered call and put options and purchase call
and put options on securities or stock indices that are traded on United States exchanges.
An option on a security is a contract that gives the purchaser of the option, in return for the premium paid, the right
to buy a specified security (in the case of a call option) or to sell a specified security (in the case of a put option) from or
to the writer of the option at a designated price during the term of the option. An option on a securities index gives the
purchaser of the option, in return for the premium paid, the right to receive from the seller cash equal to the difference between
the closing price of the index and the exercise price of the option. The value of the underlying securities on which options may
be written at any one time will not exceed 25% of the total assets of the Portfolio. The Portfolio will not purchase put or call
options if the aggregate premiums paid for such options would exceed 5% of its total assets at the time of purchase.
The Portfolio may write a call or put option only if the option is "covered." A call option on a security written by the
Portfolio is covered if the Portfolio owns the underlying security covered by the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or for additional cash consideration held in a segregated account by
its custodian) upon conversion or exchange of other securities held in its portfolio. A call option on a security is also covered
if the Portfolio holds a call on the same security and in the same principal amount as the call written where the exercise price
of the call held (a) is equal to or less than the exercise price of the call written or (b) is greater than the exercise price of
the call written if the difference is maintained by the Portfolio in cash or other liquid assets in a segregated account with its
custodian. A put option on a security written by the Portfolio is "covered" if the Portfolio maintains similar liquid assets with
a value equal to the exercise price in a segregated account with its custodian, or else holds a put on the same security and in
the same principal amount as the put written where the exercise price of the put held is equal to or greater than the exercise
price of the put written.
The Portfolio will cover call options on stock indices by owning securities whose price changes, in the opinion of the
Sub-advisor are expected to be similar to those of the index, or in such other manner as may be in accordance with the rules of
the exchange on which the option is traded and applicable laws and regulations. Nevertheless, where the Portfolio covers a call
option on a stock index through ownership of securities, such securities may not match the composition of the index. In that
event, the Portfolio will not be fully covered and could be subject to risk of loss in the event of adverse changes in the value
of the index. The Portfolio will cover put options on stock indices by segregating assets equal to the option's exercise price,
or in such other manner as may be in accordance with the rules of the exchange on which the option is traded and applicable laws
and regulations.
The Portfolio will receive a premium from writing a put or call option, which increases the Portfolio's gross income in
the event the option expires unexercised or is closed out at a profit. If the value of a security or an index on which the
Portfolio has written a call option falls or remains the same, the Portfolio will realize a profit in the form of the premium
received (less transaction costs) that could offset all or a portion of any decline in the value of the portfolio securities being
hedged. If the value of the underlying security or index rises, however, the Portfolio will realize a loss in its call option
position, which will reduce the benefit of any unrealized appreciation in the Portfolio's stock investments. By writing a put
option, the Portfolio assumes the risk of a decline in the underlying security or index. To the extent that the price changes of
the portfolio securities being hedged correlate with changes in the value of the underlying security or index, writing covered put
options on securities or indices will increase the Portfolio's losses in the event of a market decline, although such losses will
be offset in part by the premium received for writing the option.
The Portfolio may also purchase put options to hedge its investments against a decline in value. By purchasing a put
option, the Portfolio will seek to offset a decline in the value of the portfolio securities being hedged through appreciation of
the put option. If the value of the Portfolio's investments does not decline as anticipated, or if the value of the option does
not increase, the Portfolio's loss will be limited to the premium paid for the option plus related transaction costs. The success
of this strategy will depend, in part, on the accuracy of the correlation between the changes in value of the underlying security
or index and the changes in value of the Portfolio's security holdings being hedged.
The Portfolio may purchase call options on individual securities to hedge against an increase in the price of securities
that the Portfolio anticipates purchasing in the future. Similarly, the Portfolio may purchase call options to attempt to reduce
the risk of missing a broad market advance, or an advance in an industry or market segment, at a time when the Portfolio holds
uninvested cash or short-term debt securities awaiting investment. When purchasing call options, the Portfolio will bear the risk
of losing all or a portion of the premium paid if the value of the underlying security or index does not rise.
There can be no assurance that a liquid market will exist when the Portfolio seeks to close out an option position.
Trading could be interrupted, for example, because of supply and demand imbalances arising from a lack of either buyers or
sellers, or the options exchange could suspend trading after the price has risen or fallen more than the maximum specified by the
exchange. Although the Portfolio may be able to offset to some extent any adverse effects of being unable to liquidate an option
position, the Portfolio may experience losses in some cases as a result of such inability.
Foreign Currency Contracts and Currency Hedging Transaction. In order to hedge against foreign currency exchange rate
risks, the Portfolio may enter into forward foreign currency exchange contracts and foreign currency futures contracts, as well as
purchase put or call options on foreign currencies, as described below. The Portfolio may also conduct its foreign currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market. The
Portfolio will not enter into forward foreign currency contracts if, as a result, the Portfolio will have more than 15% of the
value of its net assets committed to the consummation of such contracts.
The Portfolio may enter into forward foreign currency exchange contracts ("forward contracts") to attempt to minimize the
risk to the Portfolio from adverse changes in the relationship between the U.S. dollar and foreign currencies. A forward contract
is an obligation to purchase or sell a specific currency for an agreed price at a future date which is individually negotiated and
privately traded by currency traders and their customers. The Portfolio may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of the security. In addition, for example, when the Portfolio believes that a foreign currency may suffer or enjoy a
substantial movement against another currency, it may enter into a forward contract to sell an amount of the former foreign
currency (or another currency which acts as a proxy for that currency) approximating the value of some or all of the Portfolio's
portfolio securities denominated in such foreign currency. This second investment practice is generally referred to as
"cross-hedging." Because in connection with the Portfolio's foreign currency forward transactions an amount of the Portfolio's
assets equal to the amount of the purchase will be held aside or segregated to be used to pay for the commitment, the Portfolio
will always have cash or other liquid assets available sufficient to cover any commitments under these contracts or to limit any
potential risk. The segregated account will be marked-to-market on a daily basis. In addition, the Portfolio will not enter into
such forward contracts if, as a result, the Portfolio will have more than 15% of the value of its total assets committed to such
contracts. While these contracts are not presently regulated by the CFTC, the CFTC may in the future assert authority to regulate
forward contracts. In such event, the Portfolio's ability to utilize forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from a positive change in the relationship between the U.S. dollar and
foreign currencies. Unanticipated changes in currency prices may result in poorer overall performance for the Portfolio than if
it had not engaged in such contracts.
The Portfolio may purchase and write put and call options on foreign currencies for the purpose of protecting against
declines in the dollar value of foreign portfolio securities and against increases in the dollar cost of foreign securities to be
acquired. As is the case with other kinds of options, however, the writing of an option on foreign currency will constitute only
a partial hedge, up to the amount of the premium received, and the Portfolio could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on foreign currency may
constitute an effective hedge against fluctuation in exchange rates although, in the event of rate movements adverse to the
Portfolio's position, the Portfolio may forfeit the entire amount of the premium plus related transaction costs.
The Portfolio may enter into exchange-traded contracts for the purchase or sale for future delivery of foreign currencies
("foreign currency futures"). This investment technique will be used only to hedge against anticipated future changes in exchange
rates which otherwise might adversely affect the value of the Portfolio's portfolio securities or adversely affect the prices of
securities that the Portfolio intends to purchase at a later date. The successful use of currency futures will usually depend on
the Sub-advisor's ability to forecast currency exchange rate movements correctly. Should exchange rates move in an unexpected
manner, the Portfolio may not achieve the anticipated benefits of foreign currency futures or may realize losses.
Short Sales. The Portfolio may enter into short sales, provided the dollar amount of short sales at any one time would
not exceed 25% of the net assets of the Portfolio, and the value of securities of any one issuer in which the Portfolio is short
would not exceed the lesser of 2% of the value of the Portfolio's net assets or 2% of the securities of any class of any issuer.
The Portfolio must maintain collateral in a segregated account consisting of cash or other liquid assets with a value equal to the
current market value of the shorted securities, which are marked to market daily. If the Portfolio owns an equal amount of such
securities or securities convertible into or exchangeable for, without payment of any further consideration, securities of the
same issuer as, and equal in amount to, the securities sold short (which sales are commonly referred to as "short sales against
the box"), the above requirements are not applicable.
Non-Diversified Status. The Portfolio is classified as a "non-diversified" investment company under the 1940 Act, which
means the Portfolio is not limited by the 1940 Act in the proportion of its assets that may be invested in the securities of a
single issuer. However, the Portfolio intends conduct its operations so as to qualify as a regulated investment company for
purposes of the Code, which generally will relieve the Portfolio of any liability for Federal income tax to the extent its
earnings are distributed to shareholders. To so qualify, among other requirements, the Portfolio will limit its investments so
that, at the close of each quarter of the taxable year, (i) not more than 25% of the market value of the Portfolio's total assets
will be invested in the securities of a single issuer, and (ii) with respect to 50% of the market value of its total assets, not
more than 5% of the market value of its total assets will be invested in the securities of a single issuer and the Portfolio will
not own more than 10% of the outstanding voting securities of a single issuer. The Portfolio's investments in securities issued
by the U.S. Government, its agencies and instrumentalities are not subject to these limitations.
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Cohen & Steers Realty Portfolio. These limitations are not "fundamental" restrictions and may be changed by the Trustees
without shareholder approval. The Portfolio will not:
1. Invest in illiquid securities, as defined in the prospectus under "Investment Objective and Policies, AST Cohen &
Steers Realty Portfolio" if immediately after such investment more than 15% of the Portfolio's net assets (taken at market value)
would be invested in such securities;
2. Pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure permitted borrowings;
3. Participate on a joint or joint and several basis in any securities trading account;
4. Invest in companies for the purpose of exercising control;
5. Purchase securities of investment companies except in compliance with the 1940 Act; or
6. (a) invest in interests in oil, gas, or other mineral exploration or development programs; or (b) purchase
securities on margin, except for such short-term credits as may be necessary for the clearance of transactions.
AST Sanford Bernstein Managed Index 500 Portfolio:
Investment Objective: The investment objective of the AST Sanford Bernstein Managed Index 500 Portfolio (the "Portfolio") is to
outperform the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500(R)Index") through stock selection resulting in
different weightings of common stocks relative to the index.
Investment Policies:
As a diversified fund, no more than 5% of the assets of the Portfolio may be invested in the securities of one issuer
(other than U.S. Government Securities), except that up to 25% of the Portfolio's assets may be invested without regard to this
limitation. The Portfolio will not invest more than 25% of its assets in the securities of issuers in any one industry. In the
unlikely event that the S&P 500 should concentrate to an extent greater than that amount, the Portfolio's ability to achieve its
objective may be impaired.
Certificates of Deposit and Bankers' Acceptances. Certificates of deposit are receipts issued by a depository
institution in exchange for the deposit of funds. The issuer agrees to pay the amount deposited plus interest to the bearer of
the receipt on the date specified on the certificate. The certificate usually can be traded in the secondary market prior to
maturity. Bankers' acceptances typically arise from short-term credit arrangements designed to enable businesses to obtain funds
to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance may then be held by the
accepting bank as an asset or it may be sold in the secondary market at the going rate of discount for a specific maturity.
Although maturities for acceptances can be as long as 270 days, most acceptances have maturities of six months or less.
Commercial Paper. Commercial paper consists of short-term (usually from 1 to 270 days) unsecured promissory notes issued
by corporations in order to finance their current operations. A variable amount master demand note (which is a type of commercial
paper) represents a direct borrowing arrangement involving periodically fluctuating rates of interest under a letter agreement
between a commercial paper issuer and an institutional lender pursuant to which the lender may determine to invest varying amounts.
Short-Term Instruments. When the Portfolio experiences large cash inflows through the sale of securities and desirable
equity securities that are consistent with the Portfolio's investment objective are unavailable in sufficient quantities or at
attractive prices, the Portfolio may hold short-term investments for a limited time pending availability of such equity
securities. Short-term instruments consist of: (i) short-term obligations issued or guaranteed by the U.S. government or any of
its agencies or instrumentalities or by any of the states; (ii) other short-term debt securities rated AA or higher by S&P or Aa
or higher by Moody's or, if unrated, of comparable quality in the opinion of the Sub-advisor; (iii) commercial paper; (iv) bank
obligations, including negotiable certificates of deposit, time deposits and bankers' acceptances; and (v) repurchase agreements.
At the time the Portfolio invests in commercial paper, bank obligations or repurchase agreements, the issuer of the issuer's
parent must have outstanding debt rated AA or higher by S&P or Aa or higher by Moody's or outstanding commercial paper or bank
obligations rated A-1 by S&P or Prime-1 by Moody's; or, if no such ratings are available, the instrument must be of comparable
quality in the opinion of the Sub-advisor.
Additional U.S. Government Obligations. The Portfolio may invest in obligations issued or guaranteed by U.S. Government
agencies or instrumentalities. These obligations may or may not be backed by the "full faith and credit" of the United States.
In the case of securities not backed by the full faith and credit of the United States, the Portfolio must look principally to the
federal agency issuing or guaranteeing the obligation for ultimate repayment, and may not be able to assert a claim against the
United States itself in the event the agency or instrumentality does not meet its commitments. Securities in which the Portfolio
may invest that are not backed by the full faith and credit of the United States include, but are not limited to, obligations of
the Tennessee Valley Authority, the Federal Home Loan Mortgage Corporation and the U.S. Postal Service, each of which has the
right to borrow from the U.S. Treasury to meet its obligations, and obligations of the Federal Farm Credit System and the Federal
Home Loan Banks, both of whose obligations may be satisfied only by the individual credits of each issuing agency. Securities
which are backed by the full faith and credit of the United States include obligations of the Government National Mortgage
Association, the Farmers Home Administration, and the Export-Import Bank.
Equity Investments. The Portfolio may invest in equity securities listed on any domestic securities exchange or traded
in the over-the-counter market as well as certain restricted or unlisted securities. They may or may not pay dividends or carry
voting rights. Common stock occupies the most junior position in a company's capital structure.
Warrants. Warrants entitle the holder to buy common stock from the issuer at a specific price (the strike price) for a
specific period of time. The strike price of warrants sometimes is much lower than the current market price of the underlying
securities, yet warrants are subject to similar price fluctuations. As a result, warrants may be more volatile investments than
the underlying securities.
Warrants do not entitle the holder to dividends or voting rights with respect to the underlying securities and do not
represent any rights in the assets of the issuing company. Also, the value of the warrant does not necessarily change with the
value of the underlying securities and a warrant ceases to have value if it is not exercised prior to the expiration date.
Convertible Securities. Convertible securities may be debt securities or preferred stocks that may be converted into
common stock or that carry the right to purchase common stock. Convertible securities entitle the holder to exchange the
securities for a specified number of shares of common stock, usually of the same company, at specified prices within a certain
period of time.
The terms of any convertible security determine its ranking in a company's capital structure. In the case of
subordinated convertible debentures, the holders' claims on assets and earnings are subordinated to the claims of other creditors,
and are senior to the claims of preferred and common shareholders. In the case of convertible preferred stock, the holders'
claims on assets and earnings are subordinated to the claims of all creditors and are senior to the claims of common shareholders.
Futures Contracts and Options on Futures Contracts.
Futures Contracts. The Portfolio may enter into securities index futures contracts. U.S. futures contracts have
been designed by exchanges which have been designated "contracts markets" by the CFTC, and must be executed through a futures
commission merchant, or brokerage firm, which is a member of the relevant contract market. Futures contracts trade on a number of
exchange markets, and, through their clearing corporations, the exchanges guarantee performance of the contracts as between the
clearing members of the exchange. These investments will be made by the Portfolio solely for hedging purposes. Such investments
will be made only if they are economically appropriate to the reduction of risks involved in the management of the Portfolio. In
this regard, the Portfolio may enter into futures contracts or options on futures related to the S&P 500.
At the same time a futures contract is purchased or sold, the Portfolio must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial deposit would be approximately 1 1/2% to 5% of a contract's face
value. Daily thereafter, the futures contract is valued and the payment of "variation margin" may be required, since each day the
Portfolio would provide or receive cash that reflects any decline or increase in the contract's value.
Although futures contracts by their terms call for the actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the contract without having to make or take delivery of the securities.
The offsetting of a contractual obligation is accomplished by buying (or selling, as the case may be) on a commodities exchange an
identical futures contract calling for delivery in the same month. Such a transaction, which is effected through a member of an
exchange, cancels the obligation to make or take delivery of the securities. Since all transactions in the futures market are
made, offset or fulfilled through a clearinghouse associated with the exchange on which the contracts are traded, the Portfolio
will incur brokerage fees when it purchases or sells futures contracts. The liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking delivery. To the extent participants decide to
make or take delivery, liquidity in the futures market could be reduced, thus producing distortion.
In addition, futures contracts entail other risks. The Sub-advisor believes that use of such contracts will benefit the
Portfolio. The successful use of futures contracts, however, depends on the degree of correlation between the futures and
securities markets. In addition, successful use of futures contracts is dependent on the Sub-advisor's ability to correctly
predict movements in the securities markets and no assurance can be given that its judgment will be correct. For an additional
discussion of futures contracts and the risks involved therein, see the Trust's Prospectus and this Statement under "Certain Risk
Factors and Investment Methods."
Options on Futures Contracts. The Portfolio may use stock index futures on a continual basis to equitize cash so
that the Portfolio may maintain 100% equity exposure. The Portfolio will not enter into any futures contracts or options on
futures contracts if immediately thereafter the amount of margin deposits on all the futures contracts of the Portfolio and
premiums paid on outstanding options on futures contracts owned by the Portfolio (other than those entered into for bona fide
hedging purposes) would exceed 5% of the market value of the total assets of the Portfolio.
A futures option gives the holder, in return for the premium paid, the right to buy (call) from or sell (put) to the
writer of the option a futures contract at a specified price at any time during the period of the option. Upon exercise, the
writer of the option is obligated to pay the difference between the cash value of the futures contract and the exercise price.
Like the buyer or seller of a futures contract, the holder, or writer, of an option has the right to terminate its position prior
to the scheduled expiration of the option by selling or purchasing an option of the same series, at which time the person entering
into the closing transaction will realize a gain or loss. The Portfolio will be required to deposit initial margin and variation
margin with respect to put and call options on futures contracts written by it pursuant to brokers' requirements similar to those
described above. Net option premiums received will be included as initial margin deposits. In anticipation of a decline in
interest rates, the Portfolio may purchase call options on futures contracts as a substitute for the purchase of futures contracts
to hedge against a possible increase in the price of securities that the Portfolio intends to purchase. Similarly, if the value
of the securities held by the Portfolio is expected to decline as a result of an increase in interest rates, the Portfolio might
purchase put options or sell call options on futures contracts rather than sell futures contracts.
Investments in futures options involve some of the same considerations that are involved in connection with investments
in futures contracts (for example, the existence of a liquid secondary market). In addition, the purchase or sale of an option
also entails the risk that changes in the value of the underlying futures contract will not correspond to changes in the value of
the option purchased. Depending on the pricing of the option compared to either the futures contract upon which it is based, or
upon the price of the securities being hedged, an option my or may not be less risky than ownership of the futures contract or
such securities. In general, the market prices of options can be expected to be more volatile than the market prices on the
underlying futures contract. Compared to the purchase or sale of futures contracts, however, the purchase of call or put options
on futures contracts may frequently involve less potential risk to the Portfolio because the maximum amount at risk is the premium
paid for the options (plus transaction costs). The writing of an option on a futures contact involves risks similar to those
risks relating to the sale of futures contracts.
Options on Securities Indices. The Portfolio may purchase and write (sell) call and put options on securities indices.
Such options give the holder the right to receive a cash settlement during the term of the option based upon the difference
between the exercise price and the value of the index.
Options on securities indices entail certain risks. The absence of a liquid secondary market to close out options
positions on securities indices may occur, although the Portfolio generally will only purchase or write such an option if the
Sub-advisor believes the option can be closed out.
Use of options on securities indices also entails the risk that trading in such options may be interrupted if trading in
certain securities included in the index is interrupted. The Portfolio will not purchase such options unless the Sub-advisor
believes the market is sufficiently developed such that the risk of trading in such options is no greater than the risk of trading
in options on securities.
For an additional discussion of options and the risks involved therein, see the Trust's Prospectus and this Statement
under "Certain Risk Factors and Investment Methods."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Sanford Bernstein Managed Index 500 Portfolio. These limitations are not "fundamental' restrictions and may be changed by the
Trustees without shareholder approval. The Portfolio will not:
1. Purchase any security or evidence of interest therein on margin, except that such short-term credit as may be
necessary for the clearance of purchases and sales of securities may be obtained and except that deposits of initial deposit and
variation margin may be made in connection with the purchase, ownership, holding or sale of futures;
2. Invest for the purpose of exercising control or management;
3. Purchase securities of other investment companies except in compliance with the 1940 Act; or
4. Invest more than 15% of the Portfolio's net assets (taken at the greater of cost or market value) in securities
that are illiquid or not readily marketable, not including Rule 144A securities and commercial paper that is sold under section
4(2) of the 1933 Act that have been determined to be liquid under procedures established by the Board of Trustees.
AST American Century Income & Growth Portfolio:
Investment Objective: The primary investment objective of the Portfolio is to seek capital growth. Current income is a secondary
investment objective.
Investment Policies:
In general, within the restrictions outlined here and in the Trust's Prospectus, the Sub-advisor has broad powers to
decide how to invest fund assets. Investments are varied according to what is judged advantageous under changing economic
conditions. It is the Sub-advisor's intention that the Portfolio will generally consist of domestic and foreign common stocks and
equity equivalent securities. However, subject to the specific limitations applicable to the Portfolio, the Sub-advisor may
invest the assets of the Portfolio in varying amounts in other instruments, such as those discussed below, when such a course is
deemed appropriate in order to attempt to attain its investment objective.
Senior securities that, in the opinion of the manager, are high-grade issues also may be purchased for defensive
purposes. However, so long as a sufficient number of such securities are available, the manager intends to keep the Portfolio
fully invested in stocks that meet the Portfolio's investment criteria, regardless of the movement of stock prices generally. In
most circumstances, the Portfolio's actual level of cash and cash equivalents will be less than 10%. As noted in the Prospectus,
the Sub-advisor may use S&P 500 Index futures as a way to expose the Portfolio's cash assets to the market, while maintaining
liquidity. The Sub-advisor may not leverage the Portfolio through investment in these futures, so there should be no greater
market risk to the Portfolio than if they purchased stocks.
As a diversified fund as defined in the 1940 Act, the Portfolio will not, with respect to 75% of its total assets, invest
more than 5% of its total assets in the securities of a single issuer or purchase more than 10% of the outstanding voting
securities of a single issuer. To meet federal tax requirements for qualification as a regulated investment company, the
Portfolio must limit its investments so that at the close of each quarter of its taxable year (1) no more than 25% of its total
assets are invested in the securities of a single issuer (other than the U.S government or a regulated investment company), and
(2) with respect to at least 50% of its total assets, no more than 5% of its total assets are invested in the securities of a
single issuer.
Foreign Securities. The Portfolio may invest an unlimited amount of its assets in the securities of foreign issuers,
including foreign governments, when these securities meet its standards of selection. Securities of foreign issuers may trade in
the U.S. or foreign securities markets.
Investments in foreign securities involve risks that are different from and generally greater than investments in U.S.
securities. These risks are discussed in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment
Methods." In addition, because most foreign securities are denominated in non-U.S. currencies, the investment performance of the
Portfolio could be affected by changes in foreign currency exchange rates. Currency exchange rates can be volatile at times in
response to supply and demand in the currency exchange markets, international balances of payments, governmental intervention,
speculation, and other political and economic conditions. As discussed below, the Portfolio may purchase and sell foreign
currency on a spot basis and may engage in forward currency contracts, currency options and futures transactions for hedging or
any other lawful purpose.
In certain countries one securities broker may represent all or a significant part of the trading volume, resulting in
higher trading costs and decreased liquidity due to a lack of alternative trading partners. In certain markets there have been
times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct
such transactions. Delays in clearance and settlement could result in temporary periods when assets of the Portfolio are
uninvested and no return is earned thereon. The inability of the Portfolio to make intended security purchases due to clearance
and settlement problems could cause the Portfolio to miss attractive investment opportunities. Inability to dispose of portfolio
securities due to clearance and settlement problems could result either in losses to the Portfolio due to subsequent due to
subsequent declines in the value of the portfolio security or, if the Portfolio has entered into a contract to sell the security,
liability to the purchaser.
Evidence of securities ownership may be uncertain in many foreign countries. In many of these countries, the most
notable of which is the Russian Federation, the ultimate evidence of securities ownership is the share register held by the
issuing company or its registrar. While some companies may issue share certificates or provide extracts of the company's share
register, these are not negotiable instruments and are not effective evidence of securities ownership. In an ownership dispute,
the company's share register is controlling. As a result, there is a risk that the Portfolio's trade details could be incorrectly
or fraudulently entered on the issuer's share register at the time of the transaction, or that the Portfolio's ownership could
thereafter be altered or deleted entirely, resulting in a loss to the Portfolio.
Depositary Receipts. The Portfolio may invest in foreign companies through American Depositary Receipts (ADRs), European
Depositary Receipts (EDRs), ordinary shares and New York shares. Additional information about ADRs and EDRs is included in the
Trust's prospectus under "Certain Risk Factors and Investment Methods." Ordinary shares are shares of foreign issuers that are
traded abroad and on a U.S. exchange. New York shares are shares that a foreign issuer has allocated for trading in the United
States. ADRs, ordinary shares, and New York shares all may be purchased with and sold for U.S. dollars, which protects the fund
from foreign settlement risks.
Forward Currency Exchange Contracts. The Portfolio may purchase and sell foreign currency either on a spot (i.e., cash)
basis and may engage in forward foreign currency exchange contracts, currency options and futures transactions for hedging or any
lawful purpose. The Portfolio will segregate on its records cash or other liquid assets in an amount sufficient to cover its
obligations under the contract.
The Sub-advisor does not intend to enter into such contracts on a regular basis. Normally, consideration of the prospect
for currency parties will be incorporated into the long-term investment decisions made with respect to overall diversification
strategies. However, the Sub-advisor believes that it is important to have flexibility to enter into such forward contracts when
it determines that the Portfolio's best interests may be served.
At the maturity of the forward contract, the Portfolio may either sell the portfolio security and make delivery of the
foreign currency, or it may retain the security and terminate the obligation to deliver the foreign currency by purchasing an
offsetting forward contract with the same currency trader obligating the fund to purchase, on the same maturity date, the same
amount of the foreign currency.
Convertible Securities. A convertible security is a fixed income security that offers the potential for capital
appreciation through a conversion feature that enables the holder to convert the fixed income security into a stated number of
shares of common stock. As fixed income securities, convertible securities provide a stable stream of income, with generally
higher yields than common stocks. Because convertible securities offer the potential to benefit from increases in the market
price of the underlying common stock, however, they generally offer lower yields than non-convertible securities of similar
quality. Of course, like all fixed income securities, there can be no assurance of current income because the issuers of the
convertible securities may default on their obligations. In addition, there can be no assurance of capital appreciation because
the value of the underlying common stock will fluctuate.
Unlike a convertible security that is a single security, a synthetic convertible security is comprised of two distinct
securities that together resemble convertible securities in certain respects. Synthetic convertible securities are created by
combining non-convertible bonds or preferred stocks with warrants or stock call options. The options that will form elements of
synthetic convertible securities will be listed on a securities exchange or on the National Association of Securities Dealers
Automated Quotation Systems. The two components of a synthetic convertible security, which will be issued with respect to the
same entity, generally are not offered as a unit, and may be purchased and sold by the Portfolio at different times. Synthetic
convertible securities differ from convertible securities in certain respects, including that each component of a synthetic
convertible security has a separate market value and responds differently to market fluctuations. Investing in synthetic
convertible securities involves the risk normally involved in holding the securities comprising the synthetic convertible security.
Additional information about convertible securities is included in the Trust's Prospectus under "Certain Risk Factors and
Investment Methods."
Short Sales "Against the Box." As discussed in the Trust's Prospectus, the Portfolio may engage in short sales if, at
the time of the short sale, the Portfolio owns or has the right to acquire securities equivalent in kind and amount to the
securities being sold short. While the short sale is maintained, the Portfolio will segregate assets to collateralize its
obligation to deliver the securities sold short in an amount equal to the proceeds of the short sale plus an additional margin
amount established by the Board of Governors of the Federal Reserve. There will be certain additional transaction costs
associated with short sales, but the Portfolio will endeavor to offset these costs with income from the investment of the cash
proceeds of short sales.
Derivative Securities. To the extent permitted by its investment objectives and policies discussed elsewhere herein, the
Portfolio may invest in securities that are commonly referred to as "derivative" securities. Certain derivative securities are
more accurately described as "index/structured" securities. Index/structured securities are derivative securities whose value or
performance is linked to other equity securities (such as depositary receipts), currencies, interest rates, indices or other
financial indicators ("reference indices").
Some "derivatives," such as mortgage-backed and other asset-backed securities, are in many respects like any other
investment, although they may be more volatile or less liquid than more traditional debt securities.
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 return on a derivative security may increase or decrease, depending upon changes in the reference index or instrument
to which it relates.
There is a range of risks associated with derivative investments, including:
o the risk that the underlying security, interest rate, market index or other financial asset will not move in the
direction the portfolio manager anticipates;
o the possibility that there may be no liquid secondary market, or the possibility that price fluctuation limits may be
imposed by the exchange, either of which may make it difficult or impossible to close out a position when desired; and
o the risk that the counterparty will fail to perform its obligations.
The Sub-advisor will report to the Investment Manager on activity in derivative securities, and the Investment Manager will report
to the Trust's Board of Trustees as necessary. For additional information on derivatives and their risks, see the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
Futures and Options. The Portfolio may enter into futures contracts, options or options on futures contracts. The
Portfolio may not, however, enter into a futures transaction for speculative purposes. Generally, futures transactions will be
used to:
o protect against a decline in market value of the Portfolio's securities (taking a short futures position), or
o protect against the risk of an increase in market value for securities in which the Portfolio generally invests at a
time when the Portfolio is not fully-invested (taking a long futures position), or
o provide a temporary substitute for the purchase of an individual security that may be purchased in an orderly fashion.
Some futures and options strategies, such as selling futures, buying puts and writing calls, hedge the Portfolio's investments
against price fluctuations. Other strategies, such as buying futures, writing puts and buying calls, tend to increase market
exposure.
Although other techniques may be used to control the Portfolio's exposure to market fluctuations, the use of futures
contracts may be a more effective means of hedging this exposure. While the Portfolio will pay brokerage commissions in
connection with opening and closing out futures positions, these costs are lower than the transaction costs incurred in the
purchase and sale of the underlying securities.
The Portfolio may engage in futures and options transactions based on securities indices that are consistent with the
Portfolio's investment objectives. Examples of indices that may be used include the Bond Buyer Index of Municipal Bonds for fixed
income funds, or the S&P 500 Index for equity funds. The Portfolio also may engage in futures and options transactions based on
specific securities, such as U.S. Treasury bonds or notes. Futures contracts are traded on national futures exchanges. Futures
exchanges and trading are regulated under the Commodity Exchange Act by the CFTC, a U.S. government agency.
Unlike when the Portfolio purchases or sells a bond, no price is paid or received by the Portfolio upon the purchase or
sale of the future. Initially, the Portfolio will be required to deposit an amount of cash or securities equal to a varying
specified percentage of the contract amount. This amount is known as initial margin. The margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security) if it is not terminated prior to the specified
delivery date. Minimum initial margin requirements are established by the futures exchanges and may be revised. In addition,
brokers may establish margin deposit requirements that are higher than the exchange minimums. Cash held in the margin account is
not income producing. Subsequent payments, called variation margin, to and from the broker, will be made on a daily basis as the
price of the underlying debt securities or index fluctuates, making the future more or less valuable, a process known as marking
the contract to market.
Futures and options prices can be volatile, and trading in these markets involves certain risks, which are described in
more detail in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods." The Sub-advisor
will seek to minimize these risks by limiting the contracts entered into on behalf of the Portfolio to those traded on national
futures exchanges and for which there appears to be a liquid secondary market.
Options on Futures. By purchasing an option on a futures contract, the Portfolio obtains the right, but not the
obligation, to sell the futures contract (a put option) or to buy the contract (a call option) at a fixed strike price. The
Portfolio can terminate its position in a put option by allowing it to expire or by exercising the option. If the option is
exercised, the Portfolio completes the sale of the underlying instrument at the strike price. Purchasing an option on a futures
contract does not require the Portfolio to make margin payments unless the option is exercised.
Although they do not currently intend to do so, the Portfolio may write (or sell) call options that obligate it to sell
(or deliver) the option's underlying instrument upon exercise of the option. While the receipt of option premiums would mitigate
the effects of price declines, the Portfolio would give up some ability to participate in a price increase on the underlying
instrument. If the Portfolio were to engage in options transactions, it would own the futures contract at the time a call were
written and would keep the contract open until the obligation to deliver it pursuant to the call expired.
When-Issued and Forward Commitment Agreements. The Portfolio may sometimes purchase new issues of securities on a
when-issued or forward commitment basis in which the transaction price and yield are each fixed at the time the commitment is
made, but payment and delivery occur at a future date (typically 15 to 45 days later).
In purchasing securities on a when-issued or forward commitment basis, the Portfolio will segregate until the settlement
date cash or other liquid assets in an amount sufficient to meet the purchase price. When the time comes to pay for the
when-issued securities, the Portfolio will meet its obligations with available cash, through the sale of securities, or, although
it would not normally expect to do so, by selling the when-issued securities themselves (which may have a market value greater or
less than the Portfolio's payment obligation). Additional information about when-issued and forward commitment transactions is
included in this Statement and in the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Investments in Companies with Limited Operating History. The Portfolio may invest in the securities of issuers with
limiting operating history. The Sub-advisor considers an issuer to have a limited operating history if that issuer has a record
of less than three years of continuous operation. The Sub-advisor will consider periods of capital formation, incubation,
consolidation, and research and development in determining whether a particular issuer has a record of three years of continuous
operation.
Investments in securities of issuers with limited operating history may involve greater risks than investments in
securities of more mature issuers. By their nature, such issuers present limited operating history and financial information upon
which the manager may base its investment decision on behalf of the Portfolio. In addition, financial and other information
regarding such issuers, when available, may be incomplete or inaccurate.
Other Investment Companies. The Portfolio may invest in other mutual funds, including those advised by the Sub-advisor,
provided that the investment is consistent with the fund's investment policies and restrictions and with the limitations of the
1940 Act. Under the 1940 Act, the Portfolio's investment in such securities, subject to certain exceptions, currently is limited
to (a) 3% of the total voting stock of any one investment company, (b) 5% of the Portfolio's total assets with respect to any one
investment company and (c) 10% of the Portfolio's total assets in the aggregate. Such purchases will be made in the open market
where no commission or profit to a sponsor or dealer results from the purchase other than the customary brokers' commissions.
Additional information about other investment companies is included in the Trust's Prospectus under "Certain Risk Factors and
Investment Methods."
Short-Term Securities. In order to meet anticipated redemptions, to hold assets pending the purchase of additional
securities for the Portfolio, or, in some cases, for temporary defensive purposes, the Portfolio may invest a portion of its
assets in money market and other short-term securities.
Examples of those securities include:
o Securities issued or guaranteed by the U.S. government and its agencies and instrumentalities;
o Commercial Paper;
o Certificates of Deposit and Eurodollar Certificates of Deposit;
o Bankers' Acceptances;
o Short-term notes, bonds, debentures, or other debt instruments; and
o Repurchase agreements.
U.S. Government Securities. The Portfolio may invest in U.S. government securities, including bills, notes, and bonds
issued by the U.S. Treasury and securities issued or guaranteed by agencies or instrumentalities of the U.S. government. Some
U.S. government securities are supported by the direct full faith and credit pledge of the U.S. government; others are supported
by the right of the issuer to borrow from the U.S. Treasury; others, such as securities issued by the Federal National Mortgage
Association, are supported by the discretionary authority of the U.S. government to purchase the agencies' obligations; and others
are supported only by assurance that the U.S. government will provide financial support to an instrumentality it sponsors when it
is not obligated by law to do so.
Lending of Securities. The Portfolio may lend its securities. Additional information on securities lending and its risk
is included in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
AST Alliance Growth and Income Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek capital growth and income through investments primarily
in dividend-paying common stocks of good quality.
Investment Policies:
It is the policy of the Portfolio to seek to balance the objectives of reasonable current income and reasonable
opportunity for capital growth through investments primarily in dividend-paying common stocks of good quality. However, it may
invest whenever the economic outlook is unfavorable for common stock investments in other types of securities, such as bonds,
convertible bonds, preferred stocks, and convertible preferred stocks.
Purchases and sales of portfolio securities are made at such times and in such amounts as deemed advisable in light of
market, economic and other conditions, irrespective of the degree of portfolio turnover. The Portfolio engages primarily in
holding securities for investment and not for trading purposes.
Covered Call Options. Subject to market conditions, the Portfolio may try to realize income by writing covered call
option contracts provided that the option is listed on a domestic securities exchange and that no option will be written if, as a
result, more than 25% of the Portfolio's assets are subject to call options. The Sub-advisor believes that the premiums the
Portfolio will receive for writing options can increase the Portfolio's income without subjecting it to substantial risks.
A security on which an option has been written will be held in escrow by the Portfolio's custodian until the option
expires, is exercised, or a closing purchase transaction is made. The Portfolio will purchase call options only to close out a
position in an option written by it. When a security is sold from the Portfolio against which a call option has been written, the
Portfolio will effect a closing purchase transaction so as to close out any existing call option on that security.
The premium received by the Portfolio upon writing a call option will increase the Portfolio's assets, and a
corresponding liability will be recorded and subsequently adjusted from day to day to the current value of the option written.
For example, if the current value of the option exceeds the premium received, the excess would be an unrealized loss and,
conversely, if the premium exceeds the current value, such excess would be an unrealized gain. The current value of the option
will be the last sales price on the principal exchange on which the option is traded or, in the absence of any transactions, the
mean between the closing bid and asked price.
Except as stated above, the Portfolio will not purchase or sell puts or calls or combinations thereof.
Additional information on covered call options and their risks is included in this Statement and the Trust's Prospectus
under "Certain Risk Factors and Investment Methods."
Stock Index Futures. The Portfolio may purchase and sell stock index futures contracts. A stock index futures contract
is a bilateral agreement pursuant to which two parties agree to take or make delivery of an amount of liquid assets equal to a
specified dollar amount multiplied by the difference between the stock index value at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. No physical delivery of the underlying stocks in the
index is made. The Portfolio will not purchase or sell options on stock index futures contracts.
The Portfolio may not purchase or sell a stock index future if, immediately thereafter, more than 30% of its total assets
would be hedged by stock index futures. The Portfolio may not purchase or sell a stock index future if, immediately thereafter,
the sum of the amount of margin deposits on the Portfolio's existing futures positions would exceed 5% of the market value of the
Portfolio's total assets.
Currently, stock index futures contracts can be purchased or sold with respect to the Standard & Poor's 500 Stock Index
on the Chicago Mercantile Exchange, the New York Stock Exchange Composite Index on the New York Futures Exchange and the Value
Line Stock Index on the Kansas City Board of Trade. The Sub-advisor does not believe that differences in composition of the three
indices will create any differences in the price movements of the stock index futures contracts in relation to the movements in
such indices. However, such differences in the indices may result in differences in correlation of the futures contracts with
movements in the value of the securities being hedged. The Portfolio reserves the right to purchase or sell stock index futures
contracts that may be created in the future.
The nature of initial margin in futures transactions is different from that of margin in security transactions in that
futures contract margin does not involve the borrowing of funds to finance transactions. Rather, the initial margin is in the
nature of a performance bond or good faith deposit on the contract which is returned to the Portfolio upon termination of the
futures contract, assuming all contractual obligations have been satisfied.
There are several risks in connection with the use of stock index futures by the Portfolio as a hedging device. One risk
arises because of the imperfect correlation between movements in the price of the stock index futures and movements in the price
of the securities which are the subject of the hedge. The price of the stock index futures may move more than or less than the
price of the securities being hedged. If the price of the stock index futures moves less than the price of the securities which
are the subject of the hedge, the hedge will not be fully effective but, if the price of the securities being hedged has moved in
an unfavorable direction, the Portfolio would be in a better position than if it had not hedged at all. If the price of the
securities being hedged has moved in a favorable direction, this advantage will be partially offset by the loss on the index
future. If the price of the future moves more than the price of the stock, the Portfolio will experience either a loss or gain on
the future which will not be completely offset by movements in the price of the securities which are the subject of the hedge. To
compensate for the imperfect correlation of movements in the price of securities being hedged and movements in the price of the
stock index futures, the Portfolio may buy or sell stock index futures contracts in a greater dollar amount than the dollar amount
of securities being hedged if the volatility over a particular time period of the prices of such securities has been greater than
the volatility over such time period for the index, or if otherwise deemed to be appropriate by the Sub-advisor. Conversely, the
Portfolio may buy or sell fewer stock index futures contracts if the volatility over a particular time period of the prices of the
securities being hedged is less than the volatility over such time period of the stock index, or if otherwise deemed to be
appropriate by the Sub-advisor.
Where futures are purchased to hedge against a possible increase in the price of stock before the Portfolio is able to
invest its cash (or cash equivalents) in stocks (or options) in an orderly fashion, it is possible that the market may decline
instead. If the Portfolio then concludes not to invest in stock or options at that time because of concern as to possible further
market decline or for other reasons, the Portfolio will realize a loss on the futures contract that is not offset by a reduction
in the price of securities purchased.
The Portfolio's Sub-advisor intends to purchase and sell futures contracts on the stock index for which it can obtain the
best price with due consideration to liquidity.
For additional information regarding futures contracts and their risks, see this Statement and the Trust's Prospectus
under "Certain Risk Factors and Investment Methods."
Foreign Securities. The Portfolio may invest in foreign securities, but will not make any such investments unless such
securities are listed on a national securities exchange. The purchase of foreign securities entails certain political and
economic risks, and accordingly, the Portfolio has restricted its investments in securities in this category to issues of high
quality. Evidences of ownership of foreign securities may be held outside of the U.S., and the Portfolio may be subject to the
risks associated with the holding of such property overseas. Additional information on foreign securities and their risks is
included in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Securities Ratings. The ratings of debt securities by S&P, Moody's, Duff & Phelps and Fitch are a generally accepted
barometer of credit risk. They are, however, subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect probable future conditions. There is frequently
a lag between the time a rating is assigned and the time it is updated. In addition, there may be varying degrees of difference
in credit risk of securities within each rating category.
A detailed description of the debt security ratings assigned by Moody's and S&P is included in Appendix B to this
Statement.
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Alliance Growth and Income Portfolio. These limitations are not "fundamental restrictions and may be changed by the Trustees
without shareholder approval. The Portfolio may not:
1. Purchase the securities of any other investment company except in compliance with the 1940 Act; and
2. Sell securities short.
AST MFS Growth with Income Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek to provide reasonable current income and long-term
capital growth and income.
Investment Policies:
Corporate Debt Securities. The Portfolio may invest in debt securities, such as convertible and non-convertible bonds,
notes and debentures, issued by corporations, limited partnerships and similar entities.
Variable and Floating Rate Obligations. The Portfolio may invest in floating or variable rate securities. Investments
in variable or floating rate securities normally will involve industrial development or revenue bonds which provide that the rate
of interest is set as a specific percentage of a designated base rate, such as rates on Treasury Bonds or Bills or the prime rate
at a major commercial bank, and that a bondholder can demand payment of the obligations on behalf of the Portfolio on short notice
at par plus accrued interest, which amount may be more or less than the amount of the bondholder paid for them. The maturity of
floating or variable rate obligations (including participation interests therein) is deemed to be the longer of (i) the notice
period required before the Portfolio is entitled to receive payment of the obligation upon demand or (ii) the period remaining
until the obligation's next interest rate adjustment. If not redeemed by the Portfolio through the demand feature, the
obligations mature on a specified date, which may range up to thirty years from the date of issuance.
Zero Coupon Bonds, Deferred Interest Bonds and PIK Bonds. The Portfolio may invest in zero coupon bonds, deferred bonds
and bonds on which the interest is payable in kind ("PIK bonds"). Zero coupon and deferred interest bonds are debt obligations,
which are issued at a significant discount from face value. The discount approximates the total amount of interest the bonds will
accrue and compound over the period until maturity or the first interest payment date at a rate of interest reflecting the market
rate of the security at the time of issuance. While zero coupon bonds do not require the periodic payment of interest, deferred
interest bonds do provide for a period of delay before the regular payment of interest begins. PIK bonds are debt obligations,
which provide that the issuer may, at its option, pay interest on such bonds in cash or in the form of additional debt
obligations. Such investments benefit the issuer by mitigating its need for cash to meet debt service, but also require a higher
rate of return to attract investors who are willing to defer receipt of such cash. Such investments may experience greater
volatility in market value than debt obligations, which make regular payments of interest. The Portfolio will accrue income on
such investments for tax and accounting purposes, which are distributable to shareholders and which, because no cash is received
at the time of accrual, may require the liquidation of other portfolio securities to satisfy the Portfolio's distribution
obligations.
Equity Securities. The Portfolio may invest in all types of equity securities, including the following: common stocks,
preferred stocks and preference stocks; securities such as bonds, warrants or rights that are convertible into stocks; and
depository receipts for those securities. These securities may be listed on securities exchanges, traded in various
over-the-counter markets or have no organized market.
Foreign Securities. The Portfolio may invest in dollar-denominated and non-dollar denominated foreign securities.
Investing in securities of foreign issuers generally involves risks not ordinarily associated with investing in securities of
domestic issuers. For a discussion of the risks involved in foreign securities, see this Statement and the Trust's Prospectus
under "Certain Risk Factors and Investment Methods."
Depository Receipts. The Portfolio may invest in American Depository Receipts ("ADRs"), Global Depository Receipts
("GDRs") and other types of depository receipts. ADRs are certificates by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with a custodian bank as collateral. GDRs and other
types of depository receipts are typically issued by foreign banks or trust companies and evidence ownership of underlying
securities issued by either a foreign or a U.S. company. For the purposes of the Portfolio's policy to invest a certain
percentage of its assets in foreign securities, the investments of the Portfolio in ADRs, GDRs and other types of depository
receipts are deemed to be investments in the underlying securities.
ADRs may be sponsored or unsponsored. A sponsored ADR is issued by a depository which has an exclusive relationship with
the issuer of the underlying security. An unsponsored ADR may be issued by any number of U.S. depositories. Under the terms of
most sponsored arrangements, depositories agree to distribute notices of shareholder meetings and voting instructions, and to
provide shareholder communications and other information to the ADR holders at the request of the issuer of the deposited
securities. The depository of an unsponsored ADR, on the other hand, is under no obligation to distribute shareholder
communications received from the issuer of the deposited securities or to pass through voting rights to ADR holders in respect of
the deposited securities. The Portfolio may invest in either type of ADR. Although the U.S. investor holds a substitute receipt
of ownership rather than direct stock certificates, the use of the depository receipts in the United Sates can reduce costs and
delays as well as potential currency exchange and other difficulties. The Portfolio may purchase securities in local markets and
direct delivery of these shares to the local depositary of an ADR agent bank in the foreign country. Simultaneously, the ADR
agents create a certificate which settles at the Portfolio's custodian in five days. The Portfolio may also execute trades on the
U.S. markets using existing ADRs. A foreign issuer of the security underlying an ADR is generally not subject to the same
reporting requirements in the United States as a domestic issuer. Accordingly, information available to a U.S. investor will be
limited to the information the foreign issuer is required to disclose in its country and the market value of an ADR may not
reflect undisclosed material information concerning the issuer of the underlying security. ADRs may also be subject to exchange
rate risks if the underlying foreign securities are denominated in a foreign currency.
Emerging Markets. The Portfolio may invest in securities of government, government-related, supranational and corporate
issuers located in emerging markets. Such investments entail significant risks as described below.
Company Debt. Governments of many emerging market countries have exercised and continue to exercise substantial
influence over many aspects of the private sector through the ownership or control of many companies, including some of the
largest in any given country. As a result, government actions in the future could have a significant effect on economic
conditions in emerging markets, which in turn, may adversely affect companies in the private sector, general market conditions and
prices and yields of certain of the securities in the Portfolio's portfolio. Expropriation, confiscatory taxation,
nationalization, political, economic or social instability or other similar developments have occurred frequently over the history
of certain emerging markets and could adversely affect the Portfolio's assets should these conditions recur.
Foreign currencies. Some emerging market countries may have managed currencies, which are not free floating against the
U.S. dollar. In addition, there is risk that certain emerging market countries may restrict the free conversion of their
currencies into other currencies. Further, certain emerging market currencies may not be internationally traded. Certain of
these currencies have experienced a steep devaluation relative to the U.S. dollar. Any devaluations in the currencies in which a
Portfolio's portfolio securities are denominated may have a detrimental impact on the Portfolio's net asset value.
Inflation. Many emerging markets have experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have adverse effects on the
economies and securities markets of certain emerging market countries. In an attempt to control inflation, wage and price
controls have been imposed in certain countries. Of these countries, some, in recent years, have begun to control inflation
through prudent economic policies.
Liquidity; Trading Volume; Regulatory Oversight. The securities markets of emerging market countries are substantially
smaller, less developed, less liquid and more volatile than the major securities markets in the U.S. Disclosure and regulatory
standards are in many respects less stringent than U.S. standards. Furthermore , there is a lower level of monitoring and
regulation of the markets and the activities of investors in such markets.
The limited size of many emerging market securities markets and limited trading volume in the securities of emerging
market issuers compared to volume of trading in the securities of U.S. issuers could cause prices to be erratic for reasons apart
from factors that affect the soundness and competitiveness of the securities issuers. For example, limited market size may cause
prices to be unduly influenced by traders who control large positions. Adverse publicity and investors' perceptions, whether or
not based on in-depth fundamental analysis, may decrease the value and liquidity of portfolio securities.
The risk also exists that an emergency situation may arise in one or more emerging markets, as a result of which trading
of securities may cease or may be substantially curtailed and prices for the Portfolio's securities in such markets may not be
readily available. The Portfolio may suspend redemption of its shares for any period during which an emergency exists, as
determined by the SEC. If market prices are not readily available, the Portfolio's securities in the affected markets will be
valued at fair value determined in good faith by or under the direction of the Board of Directors.
Withholding. Income from securities held by the Portfolio could be reduced by a withholding tax on the source or other
taxes imposed by the emerging market countries in which the Portfolio makes its investments. The Portfolio's net asset value may
also be affected by changes in the rates or methods of taxation applicable to the Portfolio or to entities in which the Portfolio
has invested. The Sub-advisor will consider the cost of any taxes in determining whether to acquire any particular investments,
but can provide no assurance that the taxes will not be subject to change.
Forward Contracts. The Portfolio may enter into contracts for the purchase or sale of a specific currency at a future
date at a price at the time the contract is entered into (a "Forward Contract"), for hedging purposes (e.g., to protect its
current or intended investments from fluctuations in currency exchange rates) as well as for non-hedging purposes.
The Portfolio does not presently intend to hold Forward Contracts entered into until maturity, at which time it would be
required to deliver or accept delivery of the underlying currency, but will seek in most instances to close out positions in such
Contracts by entering into offsetting transactions, which will serve to fix the Portfolio's profit or loss based upon the value of
the Contracts at the time the offsetting transactions is executed.
The Portfolio will also enter into transactions in Forward Contracts for other than hedging purposes, which presents
greater profit potential but also involves increased risk. For example, the Portfolio may purchase a given foreign currency
through a Forward Contract if, in the judgement of the Sub-advisor, the value of such currency is expected to rise relative to the
U.S. dollar. Conversely, the Portfolio may sell the currency through a Forward Contract if the Sub-advisor believes that its
value will decline relative to the dollar.
For an additional discussion of Forward Contracts see this Statement and the Trust's Prospectus under "certain Risk
Factors and Investment Methods."
Futures Contracts. The Portfolio may purchase and sell futures contracts ("Future Contracts") on stock indices, foreign
currencies, interest rates or interest-rate related instruments, indices of foreign currencies or commodities. The Portfolio also
may purchase and sell Futures Contracts on foreign or domestic fixed income securities or indices of such securities including
municipal bond indices and any other indices of foreign or domestic fixed income securities that may become available for
trading. Such investment strategies will be used for hedging purposes and for non-hedging purposes, subject to applicable law.
Futures Contracts differ from options in that they are bilateral agreements, with both the purchaser and the seller
equally obligated to complete the transaction. Futures Contracts call for settlement only on the expiration date and cannot be
exercised at any other time during their term.
Purchases or sales of stock index futures contracts are used to attempt to protect the Portfolio's current or intended
stock investments from broad fluctuations in stock prices. For example, the Portfolio may sell stock index futures contracts in
anticipations of or during market decline to attempt to offset the decrease in market value of the Portfolio's securities
portfolio that might otherwise result. If such decline occurs, the loss in value of portfolio securities may be offset, in whole
or in part, by gains on the futures position. When the Portfolio is not fully invested in the securities market and anticipates a
significant market advance, it may purchase stock index futures in order to gain rapid market exposure that may, in part or
entirely, offset increases in the cost of securities that the Portfolio intends to purchase. As such purchases are made, the
corresponding positions in stock index futures contracts will be closed out. In a substantial majority of these transactions, the
Portfolio will purchase such securities upon termination of the futures position, but under unusual market conditions, a long
futures position may be terminated without a related purchase of securities.
The Portfolio may purchase and sell foreign currency futures contracts for hedging purposes, to attempt to protect its
current or intended investments from fluctuations in currency exchange rates. Such fluctuations could reduce the dollar value of
portfolio securities denominated in foreign currencies, or increase the dollar cost of foreign-denominated securities, or increase
the dollar cost of foreign-denominated securities to be acquired, even if the value of such securities in the currencies in which
they are denominated remains constant. The Portfolio may sell futures contracts on a foreign currency, for example, where it
holds securities denominated in such currency and it anticipates a decline in the value of such currency relative to the dollar.
In the event such decline occurs, the resulting adverse effect on the value of foreign-denominated securities may be offset, in
whole or in part, by gains on the futures contracts.
Conversely, the Portfolio could protect against a rise in the dollar cost of foreign-denominated securities to be
acquired by purchasing futures contracts on the relevant security, which could offset, in whole or in part, the increased cost of
such securities resulting from the rise in the dollar value of the underlying currencies. Where the Portfolio purchases futures
contracts under such circumstances, however, and the prices of securities to be acquired instead decline, the Portfolio will
sustain losses on its futures position which could reduce or eliminate the benefits of the reduced cost of portfolio securities to
be acquired.
For further information on Futures Contracts, see this Statement under "Certain Risk Factors and Investment Methods."
Investment in Other Investment Companies. The Portfolio may invest in other investment companies, including both
open-end and closed-end companies. Investments in closed-end investment companies may involve the payment of substantial premiums
above the value of such investment companies' portfolio securities.
Options. The Portfolio may invest in the following types of options, which involves the risks described below under the
caption "Risk Factors."
Options on Foreign Currencies. The Portfolio may purchase and write options on foreign currencies for hedging and
non-hedging purposes in a manner similar to that in which Futures Contracts on foreign currencies, or Forward Contracts, will be
utilized. For example, where a rise in the dollar value of a currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the Portfolio may purchase call options thereon. The purchase of such
options could offset, at least partially, the effect of the adverse movements in exchange rates.
Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar cost of securities
to be acquired, the Portfolio could write a put option on the relevant currency which, if rates move in the manner projected, will
expire unexercised and allow the Portfolio to hedge such increased cost up to the amount of the premium. Foreign currency options
written by the Portfolio will generally be covered in a manner similar to the covering of other types of options.
Options of Futures Contracts. The Portfolio may also purchase and write options to buy or sell those Futures Contracts
in which it may invest as described above under "Futures Contracts." Such investment strategies will be used for hedging purposes
and for non-hedging purposes, subject to applicable law.
Options on Futures Contracts that are written or purchased by the Portfolio on U.S. Exchanges are traded on the same
contract market as the underlying Futures Contract, and, like Futures Contracts, are subject to the regulation by the CFTC and the
performance guarantee of the exchange clearinghouse. In addition, Options on Futures Contracts may be traded on foreign
exchanges. The Portfolio may cover the writing of call Options on Futures Contracts (a) through purchases of the underlying
Futures Contract, (b) through ownership of the instrument, or instruments included in the index, underlying the Futures Contract,
or (c) through the holding of a call on the same Futures Contract and in the same principal amount as the call written where the
exercise price of the call held (i) is equal to or less than the exercise price of the call written or (ii) is greater than the
exercise price of the call written if the Portfolio owns liquid and unencumbered assets equal to the difference. The Portfolio
may cover the writing of put Options on Futures Contracts (a) through sales of the underlying Futures Contract, (b) through the
ownership of liquid and unencumbered assets equal to the value of the security or index underlying the Futures Contract, or (c)
through the holding of a put on the same Futures Contract and in the same principal amount as the put written where the exercise
price of the put held (i) is equal to or greater than the exercise price of the put written or where the exercise price of the put
held (ii) is less than the exercise price of the put written if the Portfolio owns liquid and unencumbered assets equal to the
difference. Put and call Options on Futures Contracts may also be covered in such other manner as may be in accordance with the
rules of the exchange on which the option is traded and applicable laws and regulations. Upon the exercise of a call Option on a
Futures Contract written by the Portfolio, the Portfolio will be required to sell the underlying Futures Contract which, if the
Portfolio has covered its obligation through the purchase of such Contract, will serve to liquidate its futures position.
Similarly, where a put Option on a Futures Contract written by the Portfolio is exercised, the Portfolio will be required to
purchase the underlying Futures Contract which, if the Portfolio has covered its obligation through the sale of such Contract,
will close out its futures position.
Depending on the degree of correlation between changes in the value of its portfolio securities and the changes in the
value of its futures positions, the Portfolio's losses from existing Options on Futures Contracts may to some extent be reduced or
increased by changes in the value of portfolio securities.
Options on Securities. The Portfolio may write (sell) covered put and call options, and purchase put and call options,
on securities.
A call option written by the Portfolio is "covered" if the Portfolio owns the security underlying the call or has an
absolute and immediate right to acquire that security without additional cash consideration (or for additional cash consideration
if the Portfolio owns liquid and unencumbered assets equal to the amount of cash consideration) upon conversion or exchange of
other securities held in its portfolio. A call option is also covered if the Portfolio holds a call on the same security and in
the same principal amount as the call written where the exercise price of the call held (a) is equal to or less than the exercise
price of the call written or (b) is greater than the exercise price of the call written if the Portfolio owns liquid and
unencumbered assets equal to the difference. If the portfolio writes a put option it must segregate liquid and unencumbered
assets with a value equal to the exercise price, or else holds a put on the same security and in the same principal amount as the
put written where the exercise price of the put held is equal to or greater than the exercise price of the put written or where
the exercise price of the put held is less than the exercise price of the put written if the Portfolio owns liquid and
unencumbered assets equal to the difference. Put and call options written by the Portfolio may also be covered in such other
manner as may be in accordance with the requirements of the exchange on which, or the counterparty with which, the option is
traded, and applicable laws and regulations.
Effecting a closing transaction in the case of a written call option will permit the Portfolio to write another call
option on the underlying security with either a different exercise price or expiration date or both, or in the case of a written
put option will permit the Portfolio to write another put option to the extent that the Portfolio owns liquid and unencumbered
assets. Such transactions permit the Portfolio to generate additional premium income, which will partially offset declines in the
value of portfolio securities or increases in the cost of securities to be acquired. Also, effecting a closing transaction will
permit the cash or proceeds from the concurrent sale of any securities subject to the option to be used for other investments of
the Portfolio, provided that another option on such security is not written. If the Portfolio desires to sell a particular
security from its portfolio on which it has written a call option, it will effect a closing transaction in connection with the
option prior to or concurrent with the sale of the security.
The Portfolio may write options in connection with buy-and-write transactions; that is, the Portfolio may purchase a
security and then write a call option against that security. The exercise price of the call option the Portfolio determines to
write will depend upon the expected price movement of the underlying security. The exercise price of a call option may be below
("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the current value of the underlying security at the time
the option is written. Buy-and-write transactions using in-the-money call options may be used when it is expected that the price
of the underlying security will decline moderately during the option period. Buy-and-write transactions using out-of-the-money
call options may be used when it is expected that the premiums received from writing the call option plus the appreciation in the
market price of the underlying security up to the exercise price will be greater than the appreciation in the price of the
underlying security alone. If the call options are exercised in such transactions, the Portfolio's maximum gain will be the
premium received by it for writing the option, adjusted upwards or downwards by the difference between the Portfolio's purchase
price of the security and the exercise price, less related transaction costs. If the options are not exercised and the price of
the underlying security declines, the amount of such decline will be offset in part, or entirely, by the premium received.
The writing of covered put options is similar in terms of risk/return characteristics to buy-and-write transactions. If
the market price or the underlying security rises or otherwise is above the exercise price, the put option will expire worthless
and the Portfolio's gain will be limited to the premium received, less related transaction costs. If the market price of the
underlying security declines or otherwise is below the exercise price, the Portfolio may elect to close the position or retain the
option until it is exercised, at which time the Portfolio will be required to take delivery of the security at the exercise price;
the Portfolio's return will be the premium received from the put option minus the amount by which the market price of the security
is below the exercise price, which could result in a loss. Out-of-the-money, at-the-money and in-the-money put options may be
used by the Portfolio in the same market environments that call options are used in equivalent buy-and-write transactions.
The Portfolio may also write combinations of put and call options on the same security, known as "straddles" with the
same exercise price and expiration date. By writing a straddle, the Portfolio undertakes a simultaneous obligation to sell and
purchase the same security in the event that one of the options is exercised. If the price of the security subsequently rises
sufficiently above the exercise price to cover the amount of the premium and transaction costs, the call will likely be exercised
and the Portfolio will be required to sell the underlying security at a below market price. This loss may be offset, however, in
whole or in part, by the premiums received on the writing of the two options. Conversely, if the price of the security declines
by a sufficient amount, the put will likely be exercised. The writing of straddles will likely be effective, therefore, only
where the price of the security remains stable and neither the call nor the put is exercised. In those instances where one of the
options is exercised, the loss on the purchase or sale of the underlying security may exceed the amount of the premiums received.
The writing of options on securities will not be undertaken by the Portfolio solely for hedging purposes, and could
involve certain risks which are not present in the case of hedging transactions. Moreover, even where options are written for
hedging purposes, such transactions constitute only a partial hedge against declines in the value of portfolio securities or
against increases in the value of securities to be acquired, up to the amount of the premium. The Portfolio may also purchase
options for hedging purposes or to increase its return.
The Portfolio may also purchase call options to hedge against an increase in the price of securities that the Portfolio
anticipates purchasing in the future. If such increase occurs, the call option will permit the Portfolio to purchase the
securities at the exercise price, or to close out the options at a profit.
Options on Stock Indices. The Portfolio may write (sell) covered call and put options and purchase call and put options
on stock indices. The Portfolio may cover written call options on stock indices by owning securities whose price changes, in the
opinion of the Sub-advisor, are expected to be similar to those of the underlying index, or by having an absolute and immediate
right to acquire such securities without additional cash consideration (or for additional cash consideration if the Portfolio owns
liquid and unencumbered assets equal to the amount of cash consideration) upon conversion or exchange of other securities in its
portfolio. The Portfolio may also cover call options on stock indices by holding a call on the same index and in the same
principal amount as the call written where the exercise price of the call held (a) is equal to or less than the exercise price of
the call written or (b) is greater than the exercise price of the call written if the Portfolio own liquid and unencumbered assets
equal to the difference. If the Portfolio writes put options on stock indices, it must segregate liquid and unencumbered assets
with a value equal to the exercise price, or hold a put on the same stock index and in the same principal amount as the put
written where the exercise price of the put held (a) is equal to or greater than the exercise price of the put written or (b) is
less than the exercise price of the put written if the Portfolio owns liquid and unencumbered assets equal to the difference. Put
and call options on stock indices may also be covered in such other manner as may be in accordance with the rules of the exchange
on which, or the counterparty with which, the option is traded and applicable laws and regulations.
The purchase of call options on stock indices may be used by the Portfolio to attempt to reduce the risk of missing a
broad market advance, or an advance in an industry or market segment, at a time when the Portfolio holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options for this purpose, the Portfolio will also bear the
risk of losing all or a portion of the premium paid it the value of the index does not rise. The purchase of call options on
stock indices when the Portfolio is substantially fully invested is a form of leverage, up to the amount of the premium and
related transaction costs, and involves risks of loss and of increased volatility similar to those involved in purchasing calls on
securities the Portfolio owns.
The index underlying a stock index option may be a "broad-based" index, such as the Standard & Poor's 500 Index or the
New York Stock Exchange Composite Index, the changes in value of which ordinarily will reflect movements in the stock market in
general. In contrast, certain options may be based on narrower market indices, such as the Standard & Poor's 100 Index, or on
indices of securities of particular industry groups, such as those of oil and gas or technology companies. A stock index assigns
relative values to the stocks included in the index and the index fluctuates with changes in the market values of the stocks so
included. The composition of the index is changed periodically.
For an additional discussion of options, see this Statement under "Certain Risk Factors and Investment Methods."
Special Risk Factors.
Risk of Imperfect Correlation of Hedging Instruments with the Portfolio's Portfolio. The use of derivatives for "cross hedging"
purposes (such as a transaction in a Forward Contract on one currency to hedge exposure to a different currency) may involve
greater correlation risks. Consequently, the Portfolio bears the risk that the price of the portfolio securities being hedged
will not move in the same amount or direction as the underlying index or obligation.
It should be noted that stock index futures contracts or options based upon a narrower index of securities, such as those
of a particular industry group, may present greater risk than options or futures based on a broad market index. This is due to
the fact that a narrower index is more susceptible to rapid and extreme fluctuations as a result of changes in the value of a
small number of securities. Nevertheless, where the Portfolio enters into transactions in options or futures on narrowly-based
indices for hedging purposes, movements in the value of the index should, if the hedge is successful, correlate closely with the
portion of the Portfolio's portfolio or the intended acquisitions being hedged.
The trading of derivatives for hedging purposes entails the additional risk of imperfect correlation between movements in
the price of the derivative and the price of the underlying index or obligation. The anticipated spread between the prices may be
distorted due to the difference in the nature of the markets such as differences in margin requirements, the liquidity of such
markets and the participation of speculators in the derivatives markets. In this regard, trading by speculators in derivatives
has in the past occasionally resulted in market distortions, which may be difficult or impossible to predict, particularly near
the expiration of such instruments.
The trading of Options on Futures Contracts also entails the risk that changes in the value of the underlying Futures
Contracts will not be fully reflected in the value of the option. The risk of imperfect correlation, however, generally tends to
diminish as the maturity date of the Futures Contract or expiration date of the option approaches.
Further, with respect to options on securities, options on stock indices, options on currencies and Options on Futures
Contracts, the Portfolio is subject to the risk of market movements between the time that the option is exercised and the time of
performance thereunder. This could increase the extent of any loss suffered by the Portfolio in connection with such transactions.
In writing a covered call option on a security, index or futures contract, the Portfolio also incurs the risk that
changes in the value of the instruments used to cover the position will not correlate closely with changes in the value of the
option or underlying index or instrument. For example, where the Portfolio covers a call option written on a stock index through
segregation of securities, such securities may not match the composition of the index, and the Portfolio may not be fully
covered. As a result, the Portfolio could be subject to risk of loss in the event of adverse market movements.
Risks of Non-Hedging Transactions. The Portfolio may enter transactions in derivatives for non-hedging purposes as well
as hedging purposes. Non-hedging transactions in such instruments involve greater risks and may result in losses which may not be
offset by increases in the value of portfolio securities or declines in the cost of securities to be acquired. Nevertheless, the
method of covering an option employed by the Portfolio may not fully protect it against risk of loss and, in any event, the
Portfolio could suffer losses on the option position which might not be offset by corresponding portfolio gains. The Portfolio
may also enter into futures, Forward Contracts for non-hedging purposes. For example, the Portfolio may enter into such a
transaction as an alternative to purchasing or selling the underlying instrument or to obtain desired exposure to an index or
market. In such instances, the Portfolio will be exposed to the same economic risks incurred in purchasing or selling the
underlying instrument or instruments. However, transactions in futures, Forward Contracts may be leveraged, which could expose
the Portfolio to greater risk of loss than such purchases or sales. Entering into transactions in derivatives for other than
hedging purposes, therefore, could expose the Portfolio to significant risk of loss if the prices, rates or values of the
underlying instruments or indices do not move in the direction or to the extent anticipated.
With respect to the writing of straddles on securities, the Portfolio incurs the risk that the price of the underlying
security will not remain stable, that one of the options written will be exercised and that the resulting loss will not be offset
by the amount of the premiums received. Such transactions, therefore, create an opportunity for increased return by providing the
Portfolio with two simultaneous premiums on the same security, but involve additional risk, since the Portfolio may have an option
exercised against it regardless of whether the price of the security increases or decreases.
Risk of a Potential Lack of a Liquid Secondary Market. Prior to exercise or expiration, a futures or option position can
only be terminated by entering into a closing purchase or sale transaction. In that event, it may not be possible to close out a
position held by the Portfolio, and the Portfolio could be required to purchase or sell the instrument underlying an option, make
or receive a cash settlement or meet ongoing variation margin requirements. Under such circumstances, if the Portfolio has
insufficient cash available to meet margin requirements, it will be necessary to liquidate portfolio securities or other assets at
a time when it is disadvantageous to do so. The inability to close out options and futures positions, therefore, could have an
adverse impact on the Portfolio's ability effectively to hedge its portfolio, and could result in trading losses.
The trading of Futures Contracts and options is also subject to the risk of trading halts, suspensions, exchange or
clearinghouse equipment failures, government intervention, insolvency of a brokerage firm or clearinghouse or other disruptions of
normal trading activity, which could at times make it difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
Potential Bankruptcy of a Clearinghouse or Broker. When the Portfolio enters into transactions in exchange-traded
futures or options, it is exposed to the risk of the potential bankruptcy of the relevant exchange clearinghouse or the broker
through which the Portfolio has effected the transaction. In that event, the Portfolio might not be able to recover amounts
deposited as margin, or amounts owed to the Portfolio in connection with its transactions, for an indefinite period of time, and
could sustain losses of a portion or all of such amounts. Moreover, the performance guarantee of an exchange clearinghouse
generally extends only to its members and the Portfolio could sustain losses, notwithstanding such guarantee, in the event of the
bankruptcy of its broker.
Trading and Position Limits. The exchanges on which futures and options are traded may impose limitations governing the
maximum number of positions on the same side of the market and involving the same underlying instrument which may be held by a
single investor, whether acting alone or in concert with others (regardless of whether such contracts are held on the same or
different exchanges or held or written in one or more accounts or through one or more brokers.) Further, the CFTC and the various
contract markets have established limits referred to as "speculative position limits" on the maximum net long or net short
position which any person may hold or control in a particular futures or option contract. An exchange may order the liquidation
of positions found to be in violation of these limits and it may impose other sanctions or restrictions. The Sub-advisor does not
believe that these trading and position limits will have any adverse impact on the strategies for hedging the portfolios of the
Portfolio.
Risks of Options on Futures Contracts. The amount of risk the Portfolio assumes when it purchases an Option on a Futures
Contract is the premium paid for the option, plus related transaction costs. In order to profit from an option purchased,
however, it may be necessary to exercise the option and to liquidate the underlying Futures Contract, subject to the risks of the
availability of a liquid offset market described herein. The writer of an Option on a Futures Contract is subject to the risks of
commodity futures trading, including the requirement of initial and variation margin payments, as well as the additional risk that
movements in the price of the option may not correlate with movements in the price of the underlying security, index, currency or
Futures Contract.
Risks of Transactions in Foreign Currencies and Over-the-Counter Derivatives and Other Transactions Not Conducted on U.S.
Exchanges. Transactions in Forward Contracts on foreign currencies, as well as futures and options on foreign currencies and
transactions executed on foreign exchanges, are subject to all of the correlation, liquidity and other risks outlined above. In
addition, however, such transactions are subject to the risk of governmental actions affecting trading in or the prices of
currencies underlying such contracts, which could restrict or eliminate trading and could have a substantial adverse effect on the
value of positions held by the Portfolio. Further, the value of such positions could be adversely affected by a number of other
complex political and economic factors applicable to the countries issuing the underlying currencies.
Further, unlike trading in most other types of instruments, there is no systematic reporting of last sale information
with respect to the foreign currencies underlying contracts thereon. As a result, the available information on which trading
systems will be based may not be as complete as the comparable data on which the Portfolio makes investment and trading decisions
in connection with other transactions. Moreover, because the foreign currency market is a global, 24-hour market, events could
occur in that market which will not be reflected in the forward, futures or options market until the following day, thereby making
it more difficult for the Portfolio to respond to such events in a timely manner.
Settlements of exercises of over-the-counter Forward Contracts or foreign currency options generally must occur within
the country issuing the underlying currency, which in turn requires traders to accept or make delivery of such currencies in
conformity with any U.S. or foreign restrictions and regulations regarding the maintenance of foreign banking relationships, fees,
taxes or other charges.
Unlike transactions entered into by the Portfolio in Futures Contracts and exchange-traded options, on foreign
currencies, Forward Contracts, over-the-counter options on securities, swaps and other over-the-counter derivatives are not traded
on contract markets regulated by the CFTC or (with the exception of certain foreign currency options) the SEC. To the contrary,
such instruments are traded through financial institutions acting as market-makers, although foreign currency options are also
traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to SEC regulation. In an over-the-counter trading environment, many of the protections afforded to exchange participants
will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore
continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of
the premium plus related transaction costs, this entire amount could be lost. Moreover, the option writer and a trader of Forward
Contracts could lose amounts substantially in excess of their initial investments, due to the margin and collateral requirements
associated with such positions.
In addition, over-the-counter transactions can only be entered into with a financial institution willing to take the
opposite side, as principal, of the Portfolio's position unless the institution acts as broker and is able to find another
counterparty willing to enter into the transaction with the Portfolio. Where no such counterparty is available, it will not be
possible to enter into a desired transaction.
Further, over-the-counter transactions are not subject to the guarantee of an exchange clearinghouse, and the Portfolio
will therefore be subject to the risk of default by, or the bankruptcy of, the financial institution serving as its counterparty.
One or more of such institutions also may decide to discontinue their role as market-makers in a particular currency or security,
thereby restricting the Portfolio's ability to enter into desired hedging transactions.
Options on securities, options on stock indices, Futures Contracts, Options on Futures Contracts and options on foreign
currencies may be traded on exchanges located in foreign countries. Such transactions may not be conducted in the same manner as
those entered into on U.S. exchanges, and may be subject to different margin, exercise, settlement or expiration procedures. As a
result, many of the risks of over-the-counter trading may be present in connection with such transactions.
Options on foreign currencies traded on national securities exchanges are within the jurisdiction of the SEC, as are
other securities traded on such exchanges. As a result, many of the protections provided to traders on organized exchanges will
be available with respect to such transactions. In particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing Corporation (the "OCC"), thereby reducing the risk of
counterparty default.
The purchase and sale of exchange-traded foreign currency options, is subject to the risks regarding adverse market
movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental
authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies
involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be
made exclusively through the OCC, which has established banking relationships in applicable foreign countries for this purpose.
As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on the OCC or its clearing member, impose special procedures
on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement
prices or prohibitions on exercise.
Short Sales Against The Box. The Portfolio may make short sales "against the box." If the Portfolio enters into a short
sales against the box, it is required to segregate securities equivalent in kind and amount to the securities sold short (or
securities convertible or exchangeable into such securities) and is required to hold such securities while the short sale is
outstanding. The Portfolio will incur transaction costs, including interest, in connection with opening, maintaining, and closing
short sales against the box. For further information about this practice, please refer to the Trust's Prospectus under "Certain
Risk Factors and Investment Methods."
Short Term Instruments. The Portfolio may hold cash and invest in cash equivalents, such as short-term U.S. Government
Securities, commercial paper and bank instruments.
Temporary Defensive Positions. During periods of unusual market conditions when the Sub-advisor believes that investing
for temporary defensive purposes is appropriate, or in order to meet anticipated redemption requests, a large portion or all of
the assets of the Portfolio may be invested in cash (including foreign currency) or cash equivalents, including, but not limited
to, obligations of banks (including certificates of deposit, bankers acceptances, time deposits and repurchase agreements),
commercial paper, short-term notes, U.S. Government securities and related repurchase agreements.
Warrants. The Portfolio may invest in warrants. The strike price of warrants typically is much lower than the current
market price of the underlying securities, yet they are subject to similar price fluctuations, in absolute terms. As a result,
warrants may be more volatile investments than the underlying securities and may offer greater potential for capital appreciation
as well as capital loss. Additional information regarding warrants is included in this Statement and the Trust's Prospectus under
"Certain Risk factors and Investment Methods."
"When-Issued" Securities. The Portfolio may purchase securities on a "when-issued," "forward commitment," or "delayed
delivery basis." The commitment to purchase a security for which payment will be made on a future date may be deemed a separate
security. While awaiting delivery of securities purchased on such basis, the Portfolio will identify liquid and unencumbered
assets equal to its forward delivery commitment.
For more information about when-issued securities, please see this Statement under "Certain Risk Factors and Investment
Methods."
AST INVESCO Equity Income Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek capital growth and current income.
Investment Policies:
The Portfolio will pursue its objective by investing its assets in securities that are expected to produce high levels of
income and consistent, stable returns.
In pursuing its investment objective, the Portfolio normally invests at least 65% of its total assets in dividend paying
common and preferred stocks. Up to 30% of the Portfolio's assets may be invested in equity securities that do not pay regular
dividends. The remaining assets are invested in other income-producing securities, such as corporate bonds. Sometimes warrants
are acquired when offered with income-producing securities, but the warrants are disposed of at the first favorable opportunity.
Acquiring warrants involves a risk that the Portfolio will lose the premium it pays to acquire warrants if the Portfolio does not
exercise a warrant before it expires. The major portion of the investment portfolio normally consists of common stocks,
convertible bonds and debentures, and preferred stocks; however, there may also be substantial holdings of debt securities,
including non-investment grade and unrated debt securities.
Debt Securities. The debt securities in which the Portfolio invests are generally subject to two kinds of risk, credit
risk and market risk. The ratings given a debt security by Moody's and Standard & Poor's ("S&P") provide a generally useful
guide as to such credit risk. The lower the rating given a debt security by such rating service, the greater the credit risk such
rating service perceives to exist with respect to such security. Increasing the amount of Portfolio assets invested in unrated or
lower grade (Ba or less by Moody's, BB or less by S&P) debt securities, while intended to increase the yield produced by the
Portfolio's debt securities, will also increase the credit risk to which those debt securities are subject.
Lower-rated debt securities and non-rated securities of comparable quality tend to be subject to wider fluctuations in
yields and market values than higher rated debt securities and may have speculative characteristics. Although the Portfolio may
invest in debt securities assigned lower grade ratings by S&P or Moody's, the Portfolio's investments have generally been limited
to debt securities rated B or higher by either S&P or Moody's. Debt securities rated lower than B by either S&P or Moody's may be
highly speculative. The Sub-advisor intends to limit such portfolio investments to debt securities which are not believed by the
Sub-advisor to be highly speculative and which are rated at least CCC or Caa, respectively, by S&P or Moody's. In addition, a
significant economic downturn or major increase in interest rates may well result in issuers of lower-rated debt securities
experiencing increased financial stress which would adversely affect their ability to service their principal and interest
obligations, to meet projected business goals, and to obtain additional financing. While the Sub-advisor attempts to limit
purchases of lower-rated debt securities to securities having an established retail secondary market, the market for such
securities may not be as liquid as the market for higher rated debt securities. For an additional discussion of certain risks
involved in lower-rated or unrated securities, see this Statement and the Trust's Prospectus under "Certain Risk Factors and
Investment Methods."
Lending Portfolio Securities. The Portfolio may lend its securities to qualified brokers, dealers, banks, or other
financial institutions. While voting rights may pass with the loaned securities, if a material event (e.g., proposed merger, sale
of assets, or liquidation) is to occur affecting an investment on loan, the loan must be called and the securities voted. Loans
of securities made by the Portfolio will comply with all other applicable regulatory requirements, including the rules of the New
York Stock Exchange and the requirements of the 1940 Act and the rules of the SEC thereunder.
AST AIM Balanced Portfolio:
Investment Objective: The investment objective of the Portfolio is to provide a well-diversified portfolio of stocks that will
produce both capital growth and current income.
Investment Policies:
The Portfolio, investing in both equity and debt securities, acquires securities in the over-the-counter market and on
national securities exchanges, and acquires bonds in new offerings or in principal trades with broker-dealers. Ordinarily, the
Portfolio does not purchase securities with the intention of engaging in short-term trading. However, any particular security
will be sold, and the proceeds reinvested, whenever such action is deemed prudent from the viewpoint of the Portfolio's investment
objective, regardless of the holding period of that security.
Short-Term Investments. A portion of the Portfolio's assets may be held in cash and high quality, short-term money
market instruments such as certificates of deposit, commercial paper, bankers' acceptances, short-term U.S. Government
obligations, taxable municipal securities, master notes, and repurchase agreements, pending investment in portfolio securities, to
meet anticipated short-term cash needs such as dividend payments or redemptions of shares, or for temporary defensive purposes.
Such investments generally will be "Eligible Securities" within the meaning of Rule 2a-7 under the 1940 Act, will have maturities
of 90 days or less, and will be held to maturity. The Portfolio is not limited to investing in money market instruments that are
"First Tier" securities as defined in Rule 2a-7.
U.S. Government securities may take the form of participation interests in, and may be evidenced by, deposit or
safekeeping receipts. Participation interests are pro rata interests in U.S. Government securities. The Portfolio may acquire
participation interests in pools of mortgages sold by the Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Banks. Instruments evidencing deposit or safekeeping are documentary
receipts for such original securities held in custody by others.
U.S. Government securities, including those that are guaranteed by federal agencies or instrumentalities, may or may not
be backed by the "full faith and credit" of the United States. Some securities issued by federal agencies or instrumentalities
are only supported by the credit of the agency or instrumentality (such as the Federal Home Loan Banks) while others have an
additional line of credit with the U.S. Treasury (such as FNMA). In the case of securities not backed by the full faith and
credit of the United States, the Portfolio must look principally to the agency issuing or guaranteeing the obligation for ultimate
repayment and may not be able to assert a claim against the United States itself in the event the agency or instrumentality does
not meet its commitments.
Debt Securities. Most debt securities purchased by the Portfolio will be rated Baa or better by Moody's Investors
Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Ratings Services ("S&P") or, if unrated, deemed to be of
comparable quality by the Sub-advisor, although the Portfolio may invest to a limited extent in lower-rated securities. The fixed
income securities in which the Portfolio invests may include U.S. Government obligations, mortgage-backed securities, asset-backed
securities, bank obligations, corporate debt obligations and unrated obligations, including those of foreign issuers. The
Portfolio may, in pursuit of its objective, invest up to 10% of its total assets in debt securities rated lower than Baa by
Moody's or BBB by S&P (or a comparable rating of any other nationally recognized statistical rating organizations "NRSROs") or
unrated securities determined by the Sub-advisor to be of comparable quality ("junk bonds"). Junk bonds have speculative
characteristics that are likely to increase in number and significance with each successive lower rating category. Additional
information about lower-rated debt securities and their risks is included in this Statement and the Trust's Prospectus under
"Certain Risk Factors and Investment Methods."
Real Estate Investment Trusts ("REITs"). To the extent consistent with its investment objective and policies, the
Portfolio may invest up to 25% of its total assets and in equity and/or debt securities issued by REITs.
REITs are trusts that sell equity or debt securities to investors and use the proceeds to invest in real estate or
interests therein. A REIT may focus on particular types of projects, such as apartment complexes, or geographic regions, such as
the Southeastern United States, or both.
To the extent that the Portfolio invests in REITs, it could conceivably own real estate directly as a result of a default
on the securities it owns. The Portfolio, therefore, may be subject to certain risks associated with the direct ownership of real
estate, including difficulties in valuing and trading real estate, declines in the value of real estate, environmental liability
risks, risks related to general and local economic conditions, adverse change in the climate for real estate, increases in
property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, limitations on rents, changes in
neighborhood values, the appeal of properties to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected by any changes in the value of the underlying
property owned by the trusts, while mortgage REITs may be affected by the quality of any credit extended. Equity and mortgage
REITs are dependent upon management skill, and are generally not diversified and therefore are subject to the risk of financing
single or a limited number of projects. Such trusts are also subject to heavy cash flow dependency, defaults by borrowers,
self-liquidation, and the possibility that the REIT will fail to maintain its exemption from the 1940 Act. Changes in interest
rates may also affect the value of debt securities of REITs held by the Portfolio. By investing in REITs indirectly through the
Portfolio, a shareholder will bear not only his/her proportionate share of the expenses of the Portfolio, but also, indirectly,
similar expenses of the REITs.
Lending Portfolio Securities. Consistent with applicable regulatory requirements, the Portfolio may lend its portfolio
securities. The Portfolio would continue to receive the income on loaned securities and would, at the same time, earn interest on
the loan collateral or on the investment of the loan collateral if it were cash. Lending securities entails a risk of loss to the
Portfolio if and to the extent that the market value of the securities loaned were to increase and the lender did not increase the
collateral accordingly. Other risks and limitations of lending portfolio securities are discussed in this Statement and the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Short Sales "Against the Box." As described in the Trust's Prospectus, the Portfolio may make short sales against the
box. To secure its obligation to deliver the securities sold short, the Portfolio will deposit in escrow in a separate account
with its custodian an equal amount of the securities sold short or securities convertible into or exchangeable for such
securities. Since the Portfolio ordinarily will want to continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short, the Portfolio will normally close out a short position covered by
convertible securities by purchasing and delivering an equal amount of the securities sold short, rather than by delivering
securities that it already holds.
The Portfolio will make a short sale, as a hedge, when it believes that the price of a security may decline, causing a
decline in the value of a security owned by the Portfolio or a security convertible into or exchangeable for such security. In
such case, any future losses in the Portfolio's long position should be reduced by a gain in the short position. Conversely, any
gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced
will depend upon the amount of the security sold short relative to the amount the Portfolio owns, either directly or indirectly,
and, in the case where the Portfolio owns convertible securities, changes in the conversion premium. In determining the number of
shares to be sold short against a Portfolio's position in a convertible security, the anticipated fluctuation in the conversion
premium is considered. The Portfolio may also make short sales to generate additional income from the investment of the cash
proceeds of short sales.
Options, Futures and Currency Strategies. The Portfolio may use forward contracts, futures contracts, options on
securities, options on indices, options on currencies, and options on futures contracts to attempt to hedge against the overall
level of investment and currency risk normally associated with the Portfolio's investments. These instruments are often referred
to as "derivatives," which may be defined as financial instruments whose performance is derived, at least in part, from the
performance of another asset (such as a security, currency or an index of securities).
General Risks of Options, Futures and Currency Strategies. The use by the Portfolio of options, futures contracts and
forward currency contracts involves special considerations and risks. For example, there might be imperfect correlation, or even
no correlation, between the price movements or an instrument (such as an option contract) and the price movements of the
investments being hedged. In these circumstances, if a "protective put" is used to hedge a potential decline in a security and
the security does decline in price, the put option's increased value may not completely offset the loss in the underlying
security. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as
changing interest rates, market liquidity, and speculative or other pressures on the markets in which the hedging instrument is
traded.
The Portfolio will not enter into a hedging transaction if the Sub-advisor determines that the cost of hedging will
exceed the potential benefit to the Portfolio.
Additional information on these instruments is included in this Statement and the Trust's Prospectus under "Certain Risk
Factors and Investment Methods." Certain risks pertaining to particular strategies are described in the sections that follow.
Cover. Transactions using forward contracts, futures contracts and options (other than options purchased by a Portfolio)
expose the Portfolio to an obligation to another party. A Portfolio will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities, currencies, or other options, forward contracts or futures contracts
or (2) cash or liquid assets with a value sufficient at all times to cover its potential obligations not covered as provided in
(1) above. The Portfolio will comply with SEC guidelines regarding cover for these instruments and, if the guidelines so require,
set aside cash or liquid securities.
Assets used as cover cannot be sold while the position in the corresponding forward contract, futures contract or option
is open, unless they are replaced with other appropriate assets. If a large portion of a Portfolio's assets is used for cover or
otherwise set aside, it could affect portfolio management or the Portfolio's ability to meet redemption requests or other current
obligations.
Writing Call Options. The Portfolio may write (sell) covered call options on securities, futures contracts, forward
contracts, indices and currencies. Writing call options can serve as a limited hedge because declines in the value of the hedged
investment would be offset to the extent of the premium received for writing the option.
Writing Put Options. The Portfolio may write (sell) put options on securities, futures contracts, forward
contracts, indices and currencies. The Portfolio would write a put option at an exercise price that, reduced by the premium
received on the option, reflects the lower price it is willing to pay for the underlying security, contract or currency. The risk
in such a transaction would be that the market price of the underlying security, contract or currency would decline below the
exercise price less the premium received.
Purchasing Put Options. The Portfolio may purchase put options on securities, futures contracts, forward
contracts, indices and currencies. The Portfolio may enter into closing sale transactions with respect to such options, exercise
such option or permit such option to expire.
The Portfolio may also purchase put options on underlying securities, contracts or currencies against which it has
written other put options. For example, where the Portfolio has written a put option on an underlying security, rather than
entering a closing transaction of the written option, it may purchase a put option with a different strike price and/or expiration
date that would eliminate some or all of the risk associated with the written put. Used in combinations, these strategies are
commonly referred to as "put spreads." Likewise, the Portfolio may write call options on underlying securities, contracts or
currencies against which it has purchased protective put options. This strategy is commonly referred to as a "collar."
Purchasing Call Options. The Portfolio may purchase covered call options on securities, futures contracts,
forward contracts, indices and currencies. The Portfolio may enter into closing sale transactions with respect to such options,
exercise such options or permit such options to expire.
The Portfolio may also purchase call options on underlying securities, contracts or currencies against which it has
written other call options. For example, where the Portfolio has written a call option on an underlying security, rather than
entering a closing transaction of the written option, it may purchase a call option with a different strike price and/or
expiration date that would eliminate some or all of the risk associated with the written call. Used in combinations, these
strategies are commonly referred to as "call spreads."
Options may be either listed on an exchange or traded in over-the-counter ("OTC") markets. Listed options are
third-party contracts (i.e., performance of the obligations of the purchaser and seller is guaranteed by the exchange or clearing
corporation) and have standardized strike prices and expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. The Portfolio will not purchase an OTC option unless it believes that daily valuations for such
options are readily obtainable. OTC options differ from exchange-traded options in that OTC options are transacted with dealers
directly and not through a clearing corporation (which would guarantee performance). Consequently, there is a risk of
non-performance by the dealer. Since no exchange is involved, OTC options are valued on the basis of an average of the last bid
prices obtained from dealers, unless a quotation from only one dealer is available, in which case only that dealer's price will be
used.
Index Options. The risks of investment in index options may be greater than options on securities. Because index
options are settled in cash, when the Portfolio writes a call on an index it cannot provide in advance for its potential
settlement obligations by acquiring and holding the underlying securities. The Portfolio can offset some of the risk of writing a
call index option position by holding a diversified portfolio of securities similar to those on which the underlying index is
based. However, the Portfolio cannot, as a practical matter, acquire and hold a portfolio containing exactly the same securities
as underlie the index and, as a result, bears a risk that the value of the securities held will not be perfectly correlated with
the value of the index.
Limitations on Options. The Portfolio will not write options it, immediately after such sale, the aggregate value of
securities or obligations underlying the outstanding options exceeds 20% of the Portfolio's total assets. The Portfolio will not
purchase options if, at the time of the investment, the aggregate premiums paid for the options will exceed 5% of the Portfolio's
total assets.
Interest Rate, Currency and Stock Index Futures Contracts. The Portfolio may enter into interest rate, currency or stock
index futures contracts (collectively, "Futures" or "Futures Contracts") and options on Futures as a hedge against changes in
prevailing levels of interest rates, currency exchange rates or stock price levels, respectively, in order to establish more
definitely the effective return on securities or currencies held or intended to be acquired by it. The Portfolio's hedging may
include sales of Futures as an offset against the effect of expected increases in interest rates, and decreases in currency
exchange rates and stock prices, and purchase of Futures as an offset against the effect of expected declines in interest rates,
and increases in currency exchange rates or stock prices.
A Futures Contract is a two party agreement to buy or sell a specified amount of a specified security or currency (or
deliver a cash settlement price, in the case of an index future) for a specified price at a designated date, time and place. A
stock index future provides for the delivery, at a designated date, time and place, of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the close of trading on the contract and the price agreed upon
in the Futures Contract; no physical delivery of stocks comprising the index is made.
The Portfolio will only enter into Futures Contracts that are traded on futures exchanges and are standardized as to
maturity date and underlying financial instrument. Futures exchanges and trading thereon in the United States are regulated under
the Commodity Exchange Act and by the CFTC.
The Portfolio's Futures transactions will be entered into for hedging purposes only; that is, Futures will be sold to
protect against a decline in the price of securities or currencies that the Portfolio owns, or Futures will be purchased to
protect the Portfolio against an increase in the price of securities or currencies it has committed to purchase or expects to
purchase.
If the Portfolio were unable to liquidate a Future or an option on Futures position due to the absence of a liquid
secondary market or the imposition of price limits, it could incur substantial losses. The Portfolio would continue to be subject
to market risk with respect to the position. In addition, except in the case of purchased options, the Portfolio might be
required to maintain the position being hedged by the Future or option or to maintain cash or securities in a segregated account.
Additional information on Futures, options on Futures, and their risks is included in this Statement and the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
Forward Contracts. A forward contract is an obligation, usually arranged with a commercial bank or other currency
dealer, to purchase or sell a currency against another currency at a future date and price as agreed upon by the parties. The
Portfolio either may accept or make delivery of the currency at the maturity of the forward contract. The Portfolio may also, if
its contra party agrees prior to maturity, enter into a closing transaction involving the purchase or sale of an offsetting
contract. Forward contracts are traded over-the-counter, and not on organized commodities or securities exchanges. As a result,
it may be more difficult to value such contracts, and it may be difficult to enter into closing transactions.
The cost to the Portfolio of engaging in forward contracts varies with factors such as the currencies involved, the
length of the contract period and the market conditions then prevailing. Because forward contracts are usually entered into on a
principal basis, no fees or commissions are involved. The use of forward contracts does not eliminate fluctuations in the prices
of the underlying securities the Portfolio owns or intends to acquire, but it does establish a rate of exchange in advance.
Additional information on forward contracts and their risks is included in this Statement and the Trust's Prospectus
under "Certain Risk Factors and Investment Methods."
Delayed-Delivery Agreements. The Portfolio may purchase or sell securities on a delayed-delivery basis.
Delayed-delivery agreements involve commitments by the Portfolio to dealers or issuers to acquire securities or instruments at a
specified future date beyond the customary same-day settlement for such securities or instruments. These commitments may fix the
payment price and interest rate to be received on the investment. Delayed-delivery agreements will not be used as a speculative
or leverage technique. Rather, from time to time, the Sub-advisor can anticipate that cash for investment purposes will result
from, among other things, scheduled maturities of existing portfolio instruments or from net sales of shares of the Portfolio. To
assure that the Portfolio will be as fully invested as possible in instruments meeting its investment objective, the Portfolio may
enter into delayed-delivery agreements, but only to the extent of anticipated funds available for investment during a period of
not more than five business days. Until the settlement date, the Portfolio will segregate liquid assets of a dollar value
sufficient at all times to make payment for the delayed-delivery securities. No more than 25% of the Portfolio's total assets
will be committed to delayed-delivery agreements and when-issued securities, as described below. The delayed-delivery securities
will be recorded as an asset of the Portfolio. The purchase price of the delayed-delivery securities is a liability of the
Portfolio until settlement. If cash is not available to the Portfolio at the time of settlement, the Portfolio may be required to
dispose of portfolio securities that it would otherwise hold to maturity in order to meet its obligation to accept delivery under
a delayed-delivery agreement. Absent extraordinary circumstances, the Portfolio will not sell or otherwise transfer
delayed-delivery securities prior to settlement.
Additional information about delayed-delivery agreements and their risks is included in this Statement and in the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
When-Issued Securities. The Portfolio may purchase securities on a "when-issued" basis; that is, the date for delivery
of and payment for the securities is not fixed at the date of purchase, but is set after the securities are issued (normally
within forty-five days after the date of the transaction). The payment obligation and, if applicable, the interest rate that will
be received on the securities are fixed at the time the buyer enters into the commitment. No additional when-issued commitments
will be made if as a result more than 25% of a Portfolio's total assets would become committed to purchases of when-issued
securities and delayed delivery agreements.
If the Portfolio purchases a when-issued security, it will direct the its custodian bank to collateralize the when-issued
commitment by segregating liquid assets in the same fashion as required for a delayed-delivery agreement. Such segregated liquid
assets will likewise be marked-to-market, and the amount segregated will be increased if necessary to maintain adequate coverage
of the when-issued commitments. To the extent assets are segregated, they will not be available for new investments or to meet
redemptions.
Securities purchased on a when-issued basis and the securities held by the Portfolio are subject to changes in market
value based upon the public's perception of the creditworthiness of the issuer and, if applicable, changes in the level of
interest rates. Therefore, if the Portfolio is to remain substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a possibility that the market value of the Portfolio's assets will fluctuate to a
greater degree. Furthermore, when the time comes for the Portfolio to meet its obligations under when-issued commitments, the
Portfolio will do so by using then-available cash flow, by sale of the segregated liquid assets, by sale of other securities or,
although it would not normally expect to do so, by directing the sale of the when-issued securities themselves (which may have a
market value greater or less than the Portfolio's payment obligation).
Additional information about when-issued transactions and their risks is included in this Statement and in the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
Investments in Foreign Securities. The Portfolio may invest up to 20% of its total assets in foreign securities. To the
extent it invests in securities denominated in foreign currencies, the Portfolio bears the risks of changes in the exchange rates
between U.S. currency and the foreign currency, as well as the availability and status of foreign securities markets. The
Portfolio may invest in securities of foreign issuers that are in the form of American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs"), or other securities representing underlying securities of foreign issuers, and such investments are
treated as foreign securities for purposes of percentage limitations on investments in foreign securities.
Investments by the Portfolio in foreign securities, whether denominated in U.S. currencies or foreign currencies, may
entail risks that are greater than those associated with domestic investments. The risks of investing in foreign securities are
discussed in detail in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Foreign Exchange Transactions. The Portfolio has authority to deal in foreign exchange between currencies of the
different countries in which it will invest either for the settlement of transactions or as a hedge against possible variations in
the foreign exchange rates between those currencies. This may be accomplished through direct purchases or sales of foreign
currency, purchases of options on futures contracts with respect to foreign currency, and contractual agreements to purchase or
sell a specified currency at a specified future date (up to one year) at a price set at the time of the contract. Such
contractual commitments may be forward contracts entered into directly with another party or exchange traded futures contracts.
The Portfolio may purchase and sell options on futures contracts, forward contracts or futures contracts that are
denominated in a particular foreign currency to hedge the risk of fluctuations in the value of another currency. The Portfolio's
dealings in foreign exchange will be limited to hedging foreign currency exposure and may involve either specific transactions or
portfolio positions. Transaction hedging is the purchase or sale of foreign currency with respect to specific receivables or
payables of the Portfolio accruing in connection with the purchase or sale of its portfolio securities, the sale and redemption of
shares of the Portfolio, or the payment of dividends and distributions by the Portfolio. Position hedging is the purchase or sale
of foreign currency with respect to portfolio security positions (or underlying portfolio security positions, such as in an ADR)
denominated or quoted in a foreign currency. The Portfolio will not speculate in foreign exchange, and will not commit a larger
percentage of its total assets to foreign exchange hedges than the percentage of its total assets that it can invest in foreign
securities.
Additional information about the various foreign currency transactions that the Portfolio may enter into and their risks
is included in this Statement and in the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Borrowings. The Portfolio may borrow money to a limited extent from banks for temporary or emergency purposes subject to
the limitations under the 1940 Act. The Portfolio will not purchase additional securities while any borrowings are outstanding.
Additional information about borrowing is included in the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Other Investment Companies. The Portfolio may invest in other investment companies to the extent permitted by the 1940
Act and rules and regulations thereunder and exemptive orders granted by the SEC.
Investment Policy Which May Be Changed Without Shareholder Approval. The following limitation is applicable to the AST
AIM Balanced Portfolio. This limitation is not a "fundamental" restriction, and may be changed by the Trustees without
shareholder approval. The Portfolio will not:
1. Invest for the purpose of exercising control or management.
AST American Century Strategic Balanced Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek capital growth and current income.
Investment Policies:
In general, within the restrictions outlined herein, the Sub-advisor has broad powers with respect to investing funds or
holding them uninvested. Investments are varied according to what is judged advantageous under changing economic conditions. It
will be the policy of the Sub-advisor to retain maximum flexibility in management without restrictive provisions as to the
proportion of one or another class of securities that may be held subject to the investment restrictions described below.
However, the Sub-advisor may invest the assets of the Portfolio in varying amounts in other instruments and in senior securities,
such as bonds, debentures, preferred stocks and convertible issues, when such a course is deemed appropriate in order to attempt
to attain its financial objectives. Senior securities that, in the opinion of the Sub-advisor, are high-grade issues may also be
purchased for defensive purposes.
The above statement of investment policy gives the Sub-advisor authority to invest in securities other than common stocks
and traditional debt and convertible issues. The Sub-advisor may invest in master limited partnerships (other than real estate
partnerships) and royalty trusts which are traded on domestic stock exchanges when such investments are deemed appropriate for the
attainment of the Portfolio's investment objectives.
The Sub-advisor will invest approximately 60% of the Portfolio in common stocks and the balance in fixed income
securities. Common stock investments are described above. The fixed income assets will be invested primarily in investment grade
securities. The Portfolio may invest up to 10% of its fixed income assets in high yield securities. There are no credit or
maturity restrictions on the fixed income securities in which the high yield portion of the Portfolio may be invested. The
Portfolio may invest in securities of the United States government and its agencies and instrumentalities, corporate, sovereign
government, municipal, mortgage-backed, and other asset-backed securities. For purposes of determining the weighted average
maturity of the fixed income portion of the Portfolio, the Sub-advisor will use weighted average life as the measure of maturity
for all mortgage-backed and asset-backed securities. It can be expected that the Sub-advisor will invest from time to time in
bonds and preferred stock convertible into common stock.
Forward Currency Exchange Contracts. The Portfolio conducts its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward foreign
currency exchange contracts to purchase or sell foreign currencies.
The Portfolio expects to use forward contracts under two circumstances: (1) when the Sub-advisor wishes to "lock in" the
U.S. dollar price of a security when the Portfolio is purchasing or selling a security denominated in a foreign currency, the
Portfolio would be able to enter into a forward contract to do so ("transaction hedging"); (2) when the Sub-advisor believes that
the currency of a particular foreign country may suffer a substantial decline against the U.S. dollar, the Portfolio would be able
to enter into a forward contract to sell foreign currency for a fixed U.S. dollar amount approximating the value of some or all of
the Portfolio's securities either denominated in, or whose value is tied to, such foreign currency ("portfolio hedging"). It is
anticipated that the Portfolio will enter into portfolio hedges much less frequently than transaction hedges.
As to transaction hedging, when the Portfolio enters into a trade for the purchase or sale of a security denominated in a
foreign currency, it may be desirable to establish (lock in) the U.S. dollar cost or proceeds. By entering into forward contracts
in U.S. dollars for the purchase or sale of a foreign currency involved in an underlying security transaction, the Portfolio will
be able to protect itself against a possible loss between trade and settlement dates resulting from the adverse change in the
relationship between the U.S. dollar at the subject foreign currency.
Under portfolio hedging, when the Sub-advisor believes that the currency of a particular country may suffer a substantial
decline relative to the U.S. dollar, the Portfolio could enter into a foreign contract to sell for a fixed dollar amount the
amount in foreign currencies approximating the value of some or all of its portfolio securities either denominated in, or whose
value is tied to, such foreign currency. The Portfolio will place cash or high-grade liquid securities in a separate account with
its custodian in an amount sufficient to cover its obligation under the contract. If the value of the securities placed in the
separate account declines, additional cash or securities will be placed in the account on a daily basis so that the value of the
account equals the amount of the Portfolio's commitments with respect to such contracts. At any given time, no more than 10% of
the Portfolio's assets will be committed to a segregated account in connection with portfolio hedging transactions.
The precise matching of forward contracts in the amounts and values of securities involved would not generally be
possible since the future values of such foreign currencies will change as a consequence of market movements in the values of
those securities between the date the forward contract is entered into and the date it matures. Predicting short-term currency
market movements is extremely difficult, and the successful execution of short-term hedging strategy is highly uncertain. The
Sub-advisor does not intend to enter into such contracts on a regular basis. Normally, consideration of the prospect for currency
parities will be incorporated into the long-term investment decisions made with respect to overall diversification strategies.
However, the Sub-advisor believes that it is important to have flexibility to enter into such forward contracts when it determines
that the Portfolio 's best interests may be served.
Generally, the Portfolio will not enter into a forward contract with a term of greater than one year. At the maturity of
the forward contract, the Portfolio may either sell the portfolio security and make delivery of the foreign currency, or it may
retain the security and terminate the obligation to deliver the foreign currency by purchasing an "offsetting" forward contract
with the same currency trader obligating the Portfolio to purchase, on the same maturity date, the same amount of the foreign
currency.
It is impossible to forecast with absolute precision the market value of the Portfolio's securities at the expiration of
the forward contract. Accordingly, it may be necessary for the Portfolio to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign currency the
Portfolio is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency the
Portfolio is obligated to deliver. For an additional discussion of forward currency exchange contracts and certain risks involved
therein, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Derivative Securities. To the extent permitted by its investment objectives and policies discussed elsewhere herein, the
Portfolio may invest in securities that are commonly referred to as "derivative" securities. Certain derivative securities are
more accurately described as "index/structured" securities. Index/structured securities are derivative securities whose value or
performance is linked to other equity securities (such as depositary receipts), currencies, interest rates, indices or other
financial indicators ("reference indices").
Some "derivatives," such as mortgage-backed and other asset-backed securities, are in many respects like any other
investment, although they may be more volatile or less liquid than more traditional debt securities.
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 return on a derivative security may increase or decrease, depending upon changes in the reference index or instrument
to which it relates.
There is a range of risks associated with derivative investments, including:
o the risk that the underlying security, interest rate, market index or other financial asset will not move in the
direction the portfolio manager anticipates;
o the possibility that there may be no liquid secondary market, or the possibility that price fluctuation limits may be
imposed by the exchange, either of which may make it difficult or impossible to close out a position when desired; and
o the risk that the counterparty will fail to perform its obligations.
The Sub-advisor will report to the Investment Manager on activity in derivative securities, and the Investment Manager will report
to the Trust's Board of Trustees as necessary. For additional information on derivatives and their risks, see the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
Futures and Options. The Portfolio may enter into futures contracts, options or options on futures contracts. The
Portfolio may not, however, enter into a futures transaction for speculative purposes. Generally, futures transactions will be
used to:
o protect against a decline in market value of the Portfolio's securities (taking a short futures position), or
o protect against the risk of an increase in market value for securities in which the Portfolio generally invests at a
time when the Portfolio is not fully-invested (taking a long futures position), or
o provide a temporary substitute for the purchase of an individual security that may be purchased in an orderly fashion.
Some futures and options strategies, such as selling futures, buying puts and writing calls, hedge the Portfolio's investments
against price fluctuations. Other strategies, such as buying futures, writing puts and buying calls, tend to increase market
exposure.
Although other techniques may be used to control the Portfolio's exposure to market fluctuations, the use of futures
contracts may be a more effective means of hedging this exposure. While the Portfolio will pay brokerage commissions in
connection with opening and closing out futures positions, these costs are lower than the transaction costs incurred in the
purchase and sale of the underlying securities.
The Portfolio may engage in futures and options transactions based on securities indices that are consistent with the
Portfolio's investment objectives. Examples of indices that may be used include the Bond Buyer Index of Municipal Bonds for fixed
income funds, or the S&P 500 Index for equity funds. The Portfolio also may engage in futures and options transactions based on
specific securities, such as U.S. Treasury bonds or notes. Futures contracts are traded on national futures exchanges. Futures
exchanges and trading are regulated under the Commodity Exchange Act by the CFTC, a U.S. government agency.
Unlike when the Portfolio purchases or sells a bond, no price is paid or received by the Portfolio upon the purchase or
sale of the future. Initially, the Portfolio will be required to deposit an amount of cash or securities equal to a varying
specified percentage of the contract amount. This amount is known as initial margin. The margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security) if it is not terminated prior to the specified
delivery date. Minimum initial margin requirements are established by the futures exchanges and may be revised. In addition,
brokers may establish margin deposit requirements that are higher than the exchange minimums. Cash held in the margin account is
not income producing. Subsequent payments, called variation margin, to and from the broker, will be made on a daily basis as the
price of the underlying debt securities or index fluctuates, making the future more or less valuable, a process known as marking
the contract to market.
Futures and options prices can be volatile, and trading in these markets involves certain risks, which are described in
more detail in this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods." The Sub-advisor
will seek to minimize these risks by limiting the contracts entered into on behalf of the Portfolio to those traded on national
futures exchanges and for which there appears to be a liquid secondary market.
Options on Futures. By purchasing an option on a futures contract, the Portfolio obtains the right, but not the
obligation, to sell the futures contract (a put option) or to buy the contract (a call option) at a fixed strike price. The
Portfolio can terminate its position in a put option by allowing it to expire or by exercising the option. If the option is
exercised, the Portfolio completes the sale of the underlying instrument at the strike price. Purchasing an option on a futures
contract does not require the Portfolio to make margin payments unless the option is exercised.
Although they do not currently intend to do so, the Portfolio may write (or sell) call options that obligate it to sell
(or deliver) the option's underlying instrument upon exercise of the option. While the receipt of option premiums would mitigate
the effects of price declines, the Portfolio would give up some ability to participate in a price increase on the underlying
instrument. If the Portfolio were to engage in options transactions, it would own the futures contract at the time a call were
written and would keep the contract open until the obligation to deliver it pursuant to the call expired.
Investments in Companies with Limited Operating History. The Portfolio may invest in the securities of issuers with
limiting operating history. The Sub-advisor considers an issuer to have a limited operating history if that issuer has a record
of less than three years of continuous operation.
Investments in securities of issuers with limited operating history may involve greater risks than investments in
securities of more mature issuers. By their nature, such issuers present limited operating history and financial information upon
which the manager may base its investment decision on behalf of the Portfolio. In addition, financial and other information
regarding such issuers, when available, may be incomplete or inaccurate.
The Portfolio will not invest more than 5% of its total assets in the securities of issuers with less than a three-year
operating history. The Sub-advisor will consider periods of capital formation, incubation, consolidation, and research and
development in determining whether a particular issuer has a record of three years of continuous operation.
Short Sales. The Portfolio may engage in short sales if, at the time of the short sale, the Portfolio owns or has the
right to acquire an equal amount of the security being sold short at no additional cost.
In a short sale, the seller does not immediately deliver the securities sold and is said to have a short position in
those securities until delivery occurs. To make delivery to the purchaser, the executing broker borrows the securities being sold
short on behalf of the seller. While the short position is maintained, the seller collateralizes its obligation to deliver the
securities sold short in an amount equal to the proceeds of the short sale plus an additional margin amount established by the
Board of Governors of the Federal Reserve. If the Portfolio engages in a short sale, the collateral account will be maintained by
the Portfolio's custodian. While the short sale is open, the Portfolio will maintain in a segregated custodial account an amount
of securities convertible into, or exchangeable for, such equivalent securities at no additional cost. These securities would
constitute the Portfolio's long position.
If the Portfolio sells short securities that it owns, any future gains or losses in the Portfolio's long position should
be reduced by a gain or loss in the short position. The extent to which such gains or losses are reduced would depend upon the
amount of the security sold short relative to the amount the Portfolio owns. There will be certain additional transaction costs
associated with short sales, but the Portfolio will endeavor to offset these costs with income from the investment of the cash
proceeds of short sales.
Portfolio Turnover. The Sub-advisor will purchase and sell securities without regard to the length of time the security
has been held and, accordingly, it can be expected that the rate of portfolio turnover may be substantial.
The Sub-advisor intends to purchase a given security whenever the Sub-advisor believes it will contribute to the stated
objective of the Portfolio, even if the same security has only recently been sold. The Portfolio will sell a given security, no
matter for how long or for how short a period it has been held, and no matter whether the sale is at a gain or at a loss, if the
Sub-advisor believes that it is not fulfilling its purpose, either because, among other things, it did not live up to the
Sub-advisor's expectations, or because it may be replaced with another security holding greater promise, or because it has reached
its optimum potential, or because of a change in the circumstances of a particular company or industry or in general economic
conditions, or because of some combination of such reasons.
When a general decline in security prices is anticipated, the equity portion of the Portfolio may decrease or eliminate
entirely its equity position and increase its cash position, and when a rise in price levels is anticipated, it may increase its
equity position and decrease its cash position. However, it should be expected that the Portfolio will, under most circumstances,
be essentially fully invested in equity securities.
Since investment decisions are based on the anticipated contribution of the security in question to the Portfolio's
objectives, the rate of portfolio turnover is irrelevant when the Sub-advisor believes a change is in order to achieve those
objectives, and the Portfolio's annual portfolio turnover rate cannot be anticipated and may be comparatively high. Since the
Sub-advisor does not take portfolio turnover rate into account in making investment decisions, (1) the Sub-advisor has no
intention of accomplishing any particular rate of portfolio turnover, whether high or low, and (2) the portfolio turnover rates in
the past should not be considered as a representation of the rates which will be attained in the future.
Collateralized Mortgage Obligations. The Portfolio may buy collateralized mortgage obligations ("CMOs"). The Portfolio
may buy CMOs that are: (i) collateralized by pools of mortgages in which payment of principal and interest of each mortgage is
guaranteed by an agency or instrumentality of the U.S. government; (ii) collateralized by pools of mortgages in which payment of
principal and interest are guaranteed by the issuer, and the guarantee is collateralized by U.S. government securities; or (iii)
securities in which the proceeds of the issue are invested in mortgage securities and payments of principal and interest are
supported by the credit of an agency or instrumentality of the U.S. government. For a discussion of CMOs and the risks involved
therein, see the Company's Prospectus under "Certain Risk Factors and Investment Methods."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST American Century Strategic Balanced Portfolio. These limitations are not "fundamental" restrictions and may be changed by the
Trustees without shareholder approval. The Portfolio will not:
1. Invest more than 15% of its assets in illiquid investments;
2. Invest in the securities of other investment companies except in compliance with the 1940 Act;
3. Buy securities on margin or sell short (unless it owns, or by virtue of its ownership of, other securities has
the right to obtain securities equivalent in kind and amount to the securities sold); however, the Portfolio may make margin
deposits in connection with the use of any financial instrument or any transaction in securities permitted under its investment
policies; or
4. Invest for control or for management.
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 group of fixed-income and equity securities.
Investment Policies: The Portfolio's share price will fluctuate with changing market conditions and interest rate levels and your
investment may be worth more or less when redeemed than when purchased. The Portfolio should not be relied upon for short-term
financial needs, nor used to play short-term swings in the stock or bond markets. The Portfolio cannot guarantee that it will
achieve its investment objectives. Fixed income securities in which the Portfolio may invest include, but are not limited to,
those described below.
U.S. Government Obligations. Bills, notes, bonds and other debt securities issued by the U.S. Treasury. These are
direct obligations of the U.S. Government and differ mainly in the length of their maturities.
U.S. Government Agency Securities. Issued or guaranteed by U.S. Government sponsored enterprises and federal agencies.
These include securities issued by the Federal National Mortgage Association, Government National Mortgage Association, Federal
Home Loan Bank, Federal Land Banks, Farmers Home Administration, Banks for Cooperatives, Federal Intermediate Credit Banks,
Federal Financing Bank, Farm Credit Banks, the Small Business Association, and the Tennessee Valley Authority. Some of these
securities are supported by the full faith and credit of the U.S. Treasury, and the remainder are supported only by the credit of
the instrumentality, which may or may not include the right of the issuer to borrow from the Treasury.
Bank Obligations. Certificates of deposit, bankers' acceptances, and other short-term debt obligations. Certificates of
deposit are short-term obligations of commercial banks. A bankers' acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with international commercial transactions. Certificates of deposit may have fixed or variable
rates. The Portfolio may invest in U.S. banks, foreign branches of U.S. banks, U.S. branches of foreign banks and foreign
branches of foreign banks.
Savings and Loan Obligations. Negotiable certificates of deposit and other short-term debt obligations of savings and
loan associations.
Supranational Entities. The Portfolio may also invest in the securities of certain supranational entities, such as the
International Development Bank.
Mortgage-Backed Securities. Mortgage-backed securities are securities representing interest in a pool of mortgages.
After purchase by the Portfolio, a security may cease to be rated or its rating may be reduced below the minimum required for
purchase by the Portfolio. Neither event will require a sale of such security by the Portfolio. However, the Sub-advisor will
consider such event in its determination of whether the Portfolio should continue to hold the security. To the extent that the
ratings given by Moody's or S&P may change as a result of changes in such organizations or their rating systems, the Portfolio
will attempt to use comparable ratings as standards for investments in accordance with the investment policies continued in the
Trust's Prospectus. For a discussion of mortgage-backed securities and certain risks involved therein, see this Statement and the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Collateralized Mortgage Obligations (CMOs). CMOs are obligations fully collateralized by a portfolio of mortgages or
mortgage-related securities. Payments of principal and interest on the mortgages are passed through to the holders of the CMOs on
the same schedule as they are received, although certain classes of CMOs have priority over others with respect to the receipt of
prepayments on the mortgages. Therefore, depending on the type of CMOs in which a Portfolio invests, the investment may be
subject to a greater or lesser risk of prepayment than other types of mortgage-related securities. For an additional discussion
of CMOs and certain risks involved therein, see the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Asset-Backed Securities. The Portfolio may invest a portion of its assets in debt obligations known as asset-backed
securities. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying
such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other
affiliated entities and the amount and quality of any credit support provided to the securities. The rate of principal payment on
asset-backed securities generally depends on the rate of principal payments received on the underlying assets which in turn may be
affected by a variety of economic and other factors. As a result, the yield on any asset-backed security is difficult to predict
with precision and actual yield to maturity may be more or less than the anticipated yield to maturity.
Automobile Receivable Securities. The Portfolio may invest in asset-backed securities which are backed by
receivables from motor vehicle installment sales contracts or installment loans secured by motor vehicles ("Automobile Receivable
Securities").
Credit Card Receivable Securities. The Portfolio may invest in asset-backed securities backed by receivables
from revolving credit card agreements ("Credit Card Receivable Securities").
Other Assets. The Sub-advisor anticipates that asset-backed securities backed by assets other than those
described above will be issued in the future. The Portfolio may invest in such securities in the future if such investment is
otherwise consistent with its investment objective and policies. For a discussion of these securities, see this Statement and the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
In addition to the investments described in the Trust's Prospectus, the Portfolio may invest in the following:
Writing Covered Call Options. The Portfolio may write (sell) "covered" call options and purchase options to close out
options previously written by the Portfolio. In writing covered call options, the Portfolio expects to generate additional
premium income which should serve to enhance the Portfolio's total return and reduce the effect of any price decline of the
security or currency involved in the option. Covered call options will generally be written on securities or currencies which, in
the Sub-advisor's opinion, are not expected to have any major price increases or moves in the near future but which, over the long
term, are deemed to be attractive investments for the Portfolio.
The Portfolio will write only covered call options. This means that the Portfolio will own the security or currency
subject to the option or an option to purchase the same underlying security or currency, having an exercise price equal to or less
than the exercise price of the "covered" option, or will establish and maintain with its custodian for the term of the option, an
account consisting of cash or other liquid assets having a value equal to the fluctuating market value of the optioned securities
or currencies.
Portfolio securities or currencies on which call options may be written will be purchased solely on the basis of
investment considerations consistent with the Portfolio's investment objectives. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk (in contrast to the writing of naked or uncovered
options, which the Portfolio will not do), but capable of enhancing the Portfolio's total return. When writing a covered call
option, the Portfolio, in return for the premium, gives up the opportunity for profit from a price increase in the underlying
security or currency above the exercise price, but conversely, retains the risk of loss should the price of the security or
currency decline. Unlike one who owns securities or currencies not subject to an option, the Portfolio has no control over when
it may be required to sell the underlying securities or currencies, since it may be assigned an exercise notice at any time prior
to the expiration of its obligations as a writer. If a call option which the Portfolio has written expires, the Portfolio will
realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying
security or currency during the option period. If the call option is exercised, the Portfolio will realize a gain or loss from
the sale of the underlying security or currency. The Portfolio does not consider a security or currency covered by a call
"pledged" as that term is used in the Portfolio's policy which limits the pledging or mortgaging of its assets.
Call options written by the Portfolio will normally have expiration dates of less than nine months from the date
written. The exercise price of the options may be below, equal to, or above the current market values of the underlying
securities or currencies at the time the options are written. From time to time, the Portfolio may purchase an underlying
security or currency for delivery in accordance with an exercise notice of a call option assigned to it, rather than delivering
such security or currency from its portfolio. In such cases, additional costs may be incurred.
The premium received is the market value of an option. The premium the Portfolio will receive from writing a call option
will reflect, among other things, the current market price of the underlying security or currency, the relationship of the
exercise price to such market price, the historical price volatility of the underlying security or currency, and the length of the
option period. Once the decision to write a call option has been made, Sub-advisor, in determining whether a particular call
option should be written on a particular security or currency, will consider the reasonableness of the anticipated premium and the
likelihood that a liquid secondary market will exist for those options. The premium received by the Portfolio for writing covered
call options will be recorded as a liability of the Portfolio. This liability will be adjusted daily to the option's current
market value, which will be the latest sale price at the time at which the net asset value per share of the Portfolio is computed
(close of the New York Stock Exchange), or, in the absence of such sale, the latest asked price. The option will be terminated
upon expiration of the option, the purchase of an identical option in a closing transaction, or delivery of the underlying
security or currency upon the exercise of the option.
The Portfolio will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or
more than the premium received from the writing of the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security or currency, any loss resulting from the repurchase of
a call option is likely to be offset in whole or in part by appreciation of the underlying security or currency owned by the
Portfolio.
The Portfolio will not write a covered call option if, as a result, the aggregate market value of all portfolio
securities or currencies covering call or put options exceeds 25% of the market value of the Portfolio's net assets. In
calculating the 25% limit, the Portfolio will offset, against the value of assets covering written calls and puts, the value of
purchased calls and puts on identical securities or currencies with identical maturity dates.
Writing Covered Put Options. The Portfolio may write American or European style covered put options and purchase options
to close out options previously written by the Portfolio.
The Portfolio would write put options only on a covered basis, which means that the Portfolio would maintain in a
segregated account cash, U.S. government securities or other liquid high-grade debt obligations in an amount not less than the
exercise price or the Portfolio will own an option to sell the underlying security or currency subject to the option having an
exercise price equal to or greater than the exercise price of the "covered" option at all times while the put option is
outstanding. (The rules of a clearing corporation currently require that such assets be deposited in escrow to secure payment of
the exercise price.) The Portfolio would generally write covered put options in circumstances where Sub-advisor wishes to
purchase the underlying security or currency for the Portfolio's portfolio at a price lower than the current market price of the
security or currency. In such event the Portfolio would write a put option at an exercise price which, reduced by the premium
received on the option, reflects the lower price it is willing to pay. Since the Portfolio would also receive interest on debt
securities or currencies maintained to cover the exercise price of the option, this technique could be used to enhance current
return during periods of market uncertainty. The risk in such a transaction would be that the market price of the underlying
security or currency would decline below the exercise price less the premiums received. Such a decline could be substantial and
result in a significant loss to the Portfolio. In addition, the Portfolio, because it does not own the specific securities or
currencies which it may be required to purchase in the exercise of the put, can not benefit from appreciation, if any, with
respect to such specific securities or currencies.
The Portfolio will not write a covered put option if, as a result, the aggregate market value of all portfolio securities
or currencies covering put or call options exceeds 25% of the market value of the Portfolio's net assets. In calculating the 25%
limit, the Portfolio will offset, against the value of assets covering written puts and calls, the value of purchased puts and
calls on identical securities or currencies. For a discussion of options, see this Statement and the Trust's Prospectus under
"Certain Risk Factors and Investment Methods."
Purchasing Put Options. The Portfolio may purchase American or European style put options. The Portfolio may enter into
closing sale transactions with respect to such options, exercise them or permit them to expire. The Portfolio may purchase put
options for defensive purposes in order to protect against an anticipated decline in the value of its securities or currencies.
An example of such use of put options is provided in this Statement under "Certain Risk Factors and Investment Methods."
The Portfolio will not commit more than 5% of its assets to premiums when purchasing call and put options. The Portfolio
may also purchase call options on underlying securities or currencies it owns in order to protect unrealized gains on call options
previously written by it. A call option would be purchased for this purpose where tax considerations make it inadvisable to
realize such gains through a closing purchase transaction. Call options may also be purchased at times to avoid realizing losses.
Purchasing Call Options. The Portfolio may purchase American or European call options. The Portfolio may enter into
closing sale transactions with respect to such options, exercise them or permit them to expire. The Portfolio may purchase call
options for the purpose of increasing its current return or avoiding tax consequences which could reduce its current return. The
Portfolio may also purchase call options in order to acquire the underlying securities or currencies. Examples of such uses of
call options are provided this Statement under "Certain Risk Factors and Investment Methods."
The Portfolio will not commit more than 5% of its assets to premiums when purchasing call and put options. The Portfolio
may also purchase call options on underlying securities or currencies it owns in order to protect unrealized gains on call options
previously written by it. A call option would be purchased for this purpose where tax considerations make it inadvisable to
realize such gains through a closing purchase transaction. Call options may also be purchased at times to avoid realizing losses.
Dealer Options. The Portfolio may engage in transactions involving dealer options. Certain risks are specific to dealer
options. While the Portfolio would look to a clearing corporation to exercise exchange-traded options, if the Portfolio were to
purchase a dealer option, it would rely on the dealer from whom it purchased the option to perform if the option were exercised.
While the Portfolio will seek to enter into dealer options only with dealers who will agree to and which are expected to be
capable of entering into closing transactions with the Portfolio, there can be no assurance that the Portfolio will be able to
liquidate a dealer option at a favorable price at any time prior to expiration. Failure by the dealer to do so would result in
the loss of the premium paid by the Portfolio as well as loss of the expected benefit of the transaction. For a discussion of
dealer options, see this Statement under "Certain Risk Factors and Investment Methods."
Futures Contracts.
Transactions in Futures. The Portfolio may enter into financial futures contracts, including stock index,
interest rate and currency futures ("futures" or "futures contracts").
Stock index futures contracts may be used to attempt to provide a hedge for a portion of the Portfolio's portfolio, as a
cash management tool, or as an efficient way for the Sub-advisor to implement either an increase or decrease in portfolio market
exposure in response to changing market conditions. Stock index futures contracts are currently traded with respect to the S&P
500 Index and other broad stock market indices, such as the New York Stock Exchange Composite Stock Index and the Value Line
Composite Stock Index. The Portfolio may, however, purchase or sell futures contracts with respect to any stock index.
Nevertheless, to hedge the Portfolio's portfolio successfully, the Portfolio must sell futures contacts with respect to indices or
subindexes whose movements will have a significant correlation with movements in the prices of the Portfolio's securities.
Interest rate or currency futures contracts may be used to attempt to hedge against changes in prevailing levels of
interest rates or currency exchange rates in order to establish more definitely the effective return on securities or currencies
held or intended to be acquired by the Portfolio. In this regard, the Portfolio could sell interest rate or currency futures as
an offset against the effect of expected increases in interest rates or currency exchange rates and purchase such futures as an
offset against the effect of expected declines in interest rates or currency exchange rates.
The Portfolio will enter into futures contracts which are traded on national or foreign futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures exchanges and trading in the United States are
regulated under the Commodity Exchange Act by the CFTC. Although techniques other than the sale and purchase of futures contracts
could be used for the above-referenced purposes, futures contracts offer an effective and relatively low cost means of
implementing the Portfolio's objectives in these areas. For a discussion of futures transactions and certain risks involved
therein, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Regulatory Limitations. The Portfolio will engage in transactions in futures contracts and options thereon only
for bona fide hedging, yield enhancement and risk management purposes, in each case in accordance with the rules and regulations
of the CFTC.
The Portfolio may not enter into futures contracts or options thereon if, with respect to positions which do not qualify
as bona fide hedging under applicable CFTC rules, the sum of the amounts of initial margin deposits on the Portfolio's existing
futures and premiums paid for options on futures would exceed 5% of the net asset value of the Portfolio after taking into account
unrealized profits and unrealized losses on any such contracts it has entered into; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount may be excluded in calculating the 5% limitation.
In instances involving the purchase of futures contracts or call options thereon or the writing of put options thereon by
the Portfolio, an amount of cash, U.S. government securities or other liquid, high-grade debt obligations, equal to the market
value of the futures contracts and options thereon (less any related margin deposits), will be identified by the Portfolio to
cover the position, or alternative cover (such as owning an offsetting position) will be employed.
Risks of Transactions in Futures Contracts. See this Statement and the Trust's Prospectus under "Certain Risks
and Investment Methods" for an additional description of certain risks involved in futures contracts.
Options on Futures Contracts. As an alternative to writing or purchasing call and put options on stock index futures,
the Portfolio may write or purchase call and put options on financial indices. Such options would be used in a manner similar to
the use of options on futures contracts. From time to time, a single order to purchase or sell futures contracts (or options
thereon) may be made on behalf of the Portfolio and other mutual funds or portfolios of mutual funds managed by the Sub-advisor or
Rowe Price-Fleming International, Inc. Such aggregated orders would be allocated among the Portfolio and such other mutual funds
or portfolios of mutual funds in a fair and non-discriminatory manner. See this Statement and the Trust's Prospectus under
"Certain Risk Factors and Investment Methods" for a description of certain risks involved in options on futures contracts.
Additional Futures and Options Contracts. Although the Portfolio has no current intention of engaging in futures or
options transactions other than those described above, it reserves the right to do so. Such futures or options trading might
involve risks which differ from those involved in the futures and options described above.
Foreign Futures and Options. The Portfolio is permitted to enter into foreign futures and options transactions. See
this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods" for a description of certain risks
involved in foreign futures and options.
Foreign Securities. The Portfolio may invest in U.S. dollar-denominated and non-U.S. dollar-denominated securities of
foreign issuers in developed countries. Because the Portfolio may invest in foreign securities, investment in the Portfolio
involves risks that are different in some respects from an investment in a Portfolio which invests only in securities of U.S.
domestic issuers. Foreign investments may be affected favorably or unfavorably by changes in currency rates and exchange control
regulations. There may be less publicly available information about a foreign company than about a U.S. company, and foreign
companies may not be subject to accounting, auditing, and financial reporting standards and requirements comparable to those
applicable to U.S. companies. There may be less governmental supervision of securities markets, brokers and issuers of
securities. Securities of some foreign companies are less liquid or more volatile than securities of U.S. companies, and foreign
brokerage commissions and custodian fees are generally higher than in the United States. Settlement practices may include delays
and may differ from those customary in United States markets. Investments in foreign securities may also be subject to other
risks different from those affecting U.S. investments, including local political or economic developments, expropriation or
nationalization of assets, restrictions on foreign investment and repatriation of capital, imposition of withholding taxes on
dividend or interest payments, currency blockage (which would prevent cash from being brought back to the United States), and
difficulty in enforcing legal rights outside the U.S. For an additional discussion of certain risks involved in investing in
foreign securities, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Foreign Currency Transactions. The Portfolio will generally enter into forward foreign currency exchange contracts under
two circumstances. First, when the Portfolio enters into a contract for the purchase or sale of a security denominated in a
foreign currency, it may desire to "lock in" the U.S. dollar price of the security. Second, when the Sub-advisor believes that
the currency of a particular foreign country may suffer or enjoy a substantial movement against another currency, including the
U.S. dollar, it may enter into a forward contract to sell or buy the amount of the former foreign currency, approximating the
value of some or all of the Portfolio's securities denominated in such foreign currency. Alternatively, where appropriate, the
Portfolio may hedge all or part of its foreign currency exposure through the use of a basket of currencies or a proxy currency
where such currency or currencies act as an effective proxy for other currencies. In such a case, the Portfolio may enter into a
forward contract where the amount of the foreign currency to be sold exceeds the value of the securities denominated in such
currency. The use of this basket hedging technique may be more efficient and economical than entering into separate forward
contracts for each currency held in the Portfolio. The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of such securities in foreign currencies will change as
a consequence of market movements in the value of those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency market movement is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. Other than as set forth above, and immediately below, the Portfolio will also
not enter into such forward contracts or maintain a net exposure to such contracts where the consummation of the contracts would
obligate the Portfolio to deliver an amount of foreign currency in excess of the value of the Portfolio's securities or other
assets denominated in that currency. The Portfolio, however, in order to avoid excess transactions and transaction costs, may
maintain a net exposure to forward contracts in excess of the value of the Portfolio's securities or other assets to which the
forward contracts relate (including accrued interest to the maturity of the forward on such securities) provided the excess amount
is "covered" by liquid, high-grade debt securities, denominated in any currency, at least equal at all times to the amount of such
excess. For these purposes "the securities or other assets to which the forward contracts relate may be securities or assets
denominated in a single currency, or where proxy forwards are used, securities denominated in more than one currency. Under
normal circumstances, consideration of the prospect for currency parities will be incorporated into the longer term investment
decisions made with regard to overall diversification strategies. However, the Sub-advisor believes that it is important to have
the flexibility to enter into such forward contracts when it determines that the best interests of the Portfolio will be served.
At the maturity of a forward contract, the Portfolio may either sell the portfolio security and make delivery of the
foreign currency, or it may retain the security and terminate its contractual obligation to deliver the foreign currency by
purchasing an "offsetting" contract obligating it to purchase, on the same maturity date, the same amount of the foreign currency.
As indicated above, it is impossible to forecast with absolute precision the market value of portfolio securities at the
expiration of the forward contract. Accordingly, it may be necessary for the Portfolio to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign
currency the Portfolio is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency the Portfolio is obligated to deliver. However, as
noted, in order to avoid excessive transactions and transaction costs, the Portfolio may use liquid, high-grade debt securities
denominated in any currency, to cover the amount by which the value of a forward contract exceeds the value of the securities to
which it relates.
If the Portfolio retains the portfolio security and engages in an offsetting transaction, the Portfolio will incur a gain
or a loss (as described below) to the extent that there has been movement in forward contract prices. If the Portfolio engages in
an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward
prices decline during the period between the Portfolio's entering into a forward contract for the sale of a foreign currency and
the date it enters into an offsetting contract for the purchase of the foreign currency, the Portfolio will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Portfolio will suffer a loss to the extent of the price of the currency it has agreed to purchase
exceeds the price of the currency it has agreed to sell.
The Portfolio's dealing in forward foreign currency exchange contracts will generally be limited to the transactions
described above. However, the Portfolio reserves the right to enter into forward foreign currency contracts for different
purposes and under different circumstances. Of course, the Portfolio is not required to enter into forward contracts with regard
to its foreign currency-denominated securities and will not do so unless deemed appropriate by the Sub-advisor. It also should be
realized that this method of hedging against a decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities. It simply establishes a rate of exchange at a future date. Additionally, although such
contracts tend to minimize the risk of loss due to a decline in the value of the hedged currency, at the same time, they tend to
limit any potential gain which might result from an increase in the value of that currency.
Although the Portfolio values its assets daily in terms of U.S. dollars, it does not intend to convert its holdings of
foreign currencies into U.S. dollars on a daily basis. It will do so from time to time, and investors should be aware of the
costs of currency conversion. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at which they are buying and selling various currencies. Thus, a dealer
may offer to sell a foreign currency to the Portfolio at one rate, while offering a lesser rate of exchange should the Portfolio
desire to resell that currency to the dealer. For a discussion of certain risks involved in foreign currency transactions, see
this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Federal Tax Treatment of Options, Futures Contracts and Forward Foreign Exchange Contracts. The Portfolio may enter into
certain option, futures, and forward foreign exchange contracts, including options and futures on currencies, which will be
treated as Section 1256 contracts or straddles.
Transactions which are considered Section 1256 contracts will be considered to have been closed at the end of the
Portfolio's fiscal year and any gains or losses will be recognized for tax purposes at that time. Such gains or losses from the
normal closing or settlement of such transactions will be characterized as 60% long-term capital gain (taxable at a maximum rate
of 20%) or loss and 40% short-term capital gain or loss regardless of the holding period of the instrument (or, in the case of
foreign exchange contracts, entirely as ordinary income or loss). The Portfolio will be required to distribute net gains on such
transactions to shareholders even though it may not have closed the transaction and received cash to pay such distributions.
Options, futures and forward foreign exchange contracts, including options and futures on currencies, which offset a
foreign dollar denominated bond or currency position may be considered straddles for tax purposes in which case a loss on any
position in a straddle will be subject to deferral to the extent of unrealized gain in an offsetting position. The holding period
of the securities or currencies comprising the straddle will be deemed not to begin until the straddle is terminated. The holding
period of the security offsetting an "in-the-money qualified covered call" option on an equity security will not include the
period of time the option is outstanding.
Losses on written covered calls and purchased puts on securities, excluding certain "qualified covered call" options on
equity securities, may be long-term capital loss, if the security covering the option was held for more than twelve months prior
to the writing of the option.
In order for the Portfolio to continue to qualify for federal income tax treatment as a regulated investment company, at
least 90% of its gross income for a taxable year must be derived from qualifying income, i.e., dividends, interest, income derived
from loans of securities, and gains from the sale of securities or currencies. Tax regulations could be issued limiting the
extent that net gain realized from option, futures or foreign forward exchange contracts on currencies is qualifying income for
purposes of the 90% requirement.
As a result of the "Taxpayer Relief Act of 1997," entering into certain option, futures contracts, or forward contracts
may be deemed a "constructive sale" of offsetting securities, which could result in a taxable gain from the sale being distributed
to shareholders. The Portfolio would be required to distribute any such gain even though it would not receive proceeds from the
sale at the time the option, futures or forward position is entered into.
Hybrid Commodity and Security Instruments. Instruments have been developed which combine the elements of futures
contracts or options with those of debt, preferred equity or a depository instrument (hereinafter "Hybrid Instruments"). Often
these hybrid instruments are indexed to the price of a commodity or particular currency or a domestic or foreign debt or equity
securities index. Hybrid instruments may take a variety of forms, including, but not limited to, debt instruments with interest
or principal payments or redemption terms determined by reference to the value of a currency or commodity at a future point in
time, preferred stock with dividend rates determined by reference to the value of a currency, or convertible securities with the
conversion terms related to a particular commodity. For a discussion of certain risks involved in investing in hybrid
instruments, see this Statement under "Certain Risk Factors and Investment Methods."
Lending of Portfolio Securities. For the purpose of realizing additional income, the Portfolio may make secured loans of
Portfolio securities amounting to not more than 33 1/3% of its total assets. This policy is a fundamental policy. Securities
loans are made to broker-dealers, institutional investors, or other persons pursuant to agreements requiring that the loans be
continuously secured by collateral at least equal at all times to the value of the securities lent, marked to market on a daily
basis. The collateral received will consist of cash or U.S. government securities. While the securities are being lent, the
Portfolio will continue to receive the equivalent of the interest or dividends paid by the issuer on the securities, as well as
interest on the investment of the collateral or a fee from the borrower. The Portfolio has a right to call each loan and obtain
the securities on three business days' notice or, in connection with securities trading on foreign markets, within such longer
period of time which coincides with the normal settlement period for purchases and sales of such securities in such foreign
markets. The Portfolio will not have the right to vote securities while they are being lent, but it will call a loan in
anticipation of any important vote. The risks in lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in the recovery of the securities or possible loss of rights in
the collateral should the borrower fail financially.
Other Lending/Borrowing. Subject to approval by the SEC, the Portfolio may make loans to, or borrow Portfolios from,
other mutual funds or portfolios of mutual funds sponsored or advised by the Sub-advisor or Rowe Price-Fleming International,
Inc. The Portfolio has no current intention of engaging in these practices at this time.
When-Issued Securities. The Portfolio may from time to time purchase securities on a "when-issued" basis. At the time
the Portfolio makes the commitment to purchase a security on a when-issued basis, it will record the transaction and reflect the
value of the security in determining its net asset value. The Portfolio does not believe that its net asset value or income will
be adversely affected by its purchase of securities on a when-issued basis. The Portfolio will maintain cash and marketable
securities equal in value to commitments for when-issued securities. Such segregated securities either will mature or, if
necessary, be sold on or before the settlement date. For a discussion of when-issued securities, see this Statement under
"Certain Risk Factors and Investment Methods."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable only to
the AST T. Rowe Price Asset Allocation Portfolio. These limitations are not fundamental restrictions, and can be changed by the
Trustees without shareholder approval. The Portfolio will not:
1. Purchase additional securities when money borrowed exceeds 5% of the Portfolio's total assets;
2. Invest in companies for the purpose of exercising management or control;
3. Purchase illiquid securities if, as a result, more than 15% of its net assets would be invested in such
securities. Securities eligible for resale under Rule 144A of the Securities Act of 1933 may be subject to this 15% limitation;
4. Purchase securities of open-end or closed-end investment companies except in compliance with the 1940 Act;
5. Mortgage, pledge, hypothecate or, in any manner, transfer any security owned by the Portfolio as security for
indebtedness except as may be necessary in connection with permissible borrowings or investments and then such mortgaging,
pledging or hypothecating may not exceed 33 1/3% of the Portfolio's total assets at the time of borrowing or investment;
6. Invest in puts, calls, straddles, spreads, or any combination thereof to the extent permitted by the Trust's
Prospectus and this Statement;
7. Purchase securities on margin, except (i) for use of short-term credit necessary for clearance of purchases of
portfolio securities and (ii) the Portfolio may make margin deposits in connection with futures contracts or other permissible
investments;
8. Invest in warrants if, as a result thereof, more than 10% of the value of the total assets of the Portfolio would
be invested in warrants, provided that this restriction does not apply to warrants acquired as the result of the purchase of
another security. For purposes of these percentage limitations, the warrants will be valued at the lower of cost or market;
9. Effect short sales of securities; or
10. Purchase a futures contract or an option thereon if, with respect to positions in futures or options on futures
which do not represent bona fide hedging, the aggregate initial margin and premiums on such positions would exceed 5% of the
Portfolio's net assets.
Notwithstanding anything in the above fundamental and operating restrictions to the contrary, the Portfolio may, as a
fundamental policy, invest all of its assets in the securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies and restrictions as the Portfolio subject to the prior approval
of the Investment Manager. The Investment Manager will not approve such investment unless: (a) the Investment Manager believes,
on the advice of counsel, that such investment will not have an adverse effect on the tax status of the annuity contracts and/or
life insurance policies supported by the separate accounts of the Participating Insurance Companies which purchase shares of the
Trust; (b) the Investment Manager has given prior notice to the Participating Insurance Companies that it intends to permit such
investment and has determined whether such Participating Insurance Companies intend to redeem any shares and/or discontinue
purchase of shares because of such investment; (c) the Trustees have determined that the fees to be paid by the Trust for
administrative, accounting, custodial and transfer agency services for the Portfolio subsequent to such an investment are
appropriate, or the Trustees have approved changes to the agreements providing such services to reflect a reduction in fees; (d)
the Sub-advisor for the Portfolio has agreed to reduce its fee by the amount of any investment advisory fees paid to the
investment manager of such open-end management investment company; and (e) shareholder approval is obtained if required by law.
The Portfolio will apply for such exemptive relief under the provisions of the 1940 Act, or other such relief as may be necessary
under the then governing rules and regulations of the 1940 Act, regarding investments in such investment companies.
AST T. Rowe Price Global Bond Portfolio:
Investment Objective: The investment objective of the Portfolio is to provide high current income and capital growth by investing
in high-quality, foreign and U.S. government bonds.
Investment Policies: The Portfolio also seeks to moderate price fluctuation by actively managing its currency exposure. The
Portfolio's investments may include debt securities issued or guaranteed by a foreign national government, its agencies,
instrumentalities or political subdivisions, debt securities issued or guaranteed by supranational organizations, corporate debt
securities, bank or bank holding company debt securities and other debt securities including those convertible into common stock.
The Portfolio will invest at least 65% of its assets in high-quality bonds but may invest up to 20% of assets in the aggregate in
below investment-grade, high-risk bonds and emerging market bonds.
Sub-advisor regularly analyzes a broad range of international equity and fixed-income markets in order to assess the
degree of risk and level of return that can be expected from each market. Of course, there can be no assurance that Sub-advisor's
forecasts of expected return will be reflected in the actual returns achieved by the Portfolio.
The Portfolio's share price will fluctuate with market, economic and foreign exchange conditions, and your investment may
be worth more or less when redeemed than when purchased. The Portfolio should not be relied upon as a complete investment
program, nor used to play short-term swings in the global bond or foreign exchange markets. The Portfolio is subject to risks
unique to international investing.
It is contemplated that most foreign securities will be purchased in over-the-counter markets or on stock exchanges
located in the countries in which the respective principal offices of the issuers of the various securities are located, if that
is the best available market.
The Portfolio may invest in investment portfolios which have been authorized by the governments of certain countries
specifically to permit foreign investment in securities of companies listed and traded on the stock exchanges in these respective
countries. The Portfolio's investment in these portfolios is subject to the provisions of the 1940 Act discussed below. If the
Portfolio invests in such investment portfolios, the Portfolio's shareholders will bear not only their proportionate share of the
expenses of the Portfolio (including operating expenses and the fees of the Investment Manager), but also will bear indirectly
similar expenses of the underlying investment portfolios. In addition, the securities of these investment portfolios may trade at
a premium over their net asset value.
Apart from the matters described herein, the Portfolio is not aware at this time of the existence of any investment or
exchange control regulations which might substantially impair the operations of the Portfolio as described in the Trust's
Prospectus and this Statement. It should be noted, however, that this situation could change at any time.
The Portfolio may invest in companies located in Eastern Europe, Russia or certain Latin American countries. The
Portfolio will only invest in a company located in, or a government of, Eastern Europe, Russia or Latin America, if the
Sub-advisor believes the potential return justifies the risk.
Risk Factors of Foreign Investing. There are special risks in investing in the Portfolio. Certain of these risks are
inherent in any international mutual fund others relate more to the countries in which the Portfolio will invest. Many of the
risks are more pronounced for investments in developing or emerging countries. Although there is no universally accepted
definition, a developing country is generally considered to be a country which is in the initial stages of its industrialization
cycle with a per capita gross national product of less than $8,000.
Investors should understand that all investments have a risk factor. There can be no guarantee against loss resulting
from an investment in the Portfolio, and there can be no assurance that the Portfolio's investment policies will be successful, or
that its investment objective will be attained. The Portfolio is designed for individual and institutional investors seeking to
diversify beyond the United States in an actively researched and managed portfolio, and is intended for long-term investors who
can accept the risks entailed in investment in foreign securities. For a discussion of certain risks involved in foreign
investing see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
The Portfolio may invest in the following:
Brady Bonds. The Portfolio may invest in Brady Bonds. Brady Bonds, which are named after former U.S. Secretary of the
Treasury Nicholas Brady, are used as a means of restructuring the external debt burden of a government in certain emerging
markets. A Brady bond is created when an outstanding commercial bank loan to a government or private entity is exchanged for a
new bond in connection with a debt restructuring plan. Brady bonds may be collateralized or uncollateralized and issued in
various currencies (although typically in the U.S. dollar). They are often fully collateralized as to principal in U.S. Treasury
zero coupon bonds. However, even with this collateralization feature, Brady Bonds are often considered speculative, below
investment grade investments because the timely payment of interest is the responsibility of the issuing party (for example, a
Latin American country) and the value of the bonds can fluctuate significantly based on the issuer's ability or perceived ability
to make these payments. Finally, some Brady Bonds may be structured with floating rate or low fixed rate coupons. The Portfolio
does not expect to have more than 10% of its total assets invested in Brady Bonds.
Nondiversified Investment Company. Despite its nondiversified status under the Investment Company Act, the Portfolio
generally will not invest more than 5% of its assets in any individual corporate issuer. However, the Portfolio (1) may place
assets in bank deposits or other short-term bank instruments with a maturity of up to 30 days provided that (i) the bank has a
short-term credit rating of A1+ (or, if unrated, the equivalent as determined by the Sub-advisor) and (ii) the Portfolio may not
maintain more than 10% of its total assets with any single bank; and (2) may maintain more than 5% of its total assets, including
cash and currencies, in custodial accounts or deposits of the Trust's custodian or sub-custodians.
Writing Covered Call Options. The Portfolio may write (sell) "covered" call options and purchase options to close out
options previously written by the Portfolio. In writing covered call options, the Portfolio expects to generate additional
premium income which should serve to enhance the Portfolio's total return and reduce the effect of any price decline of the
security or currency involved in the option. Covered call options will generally be written on securities or currencies which, in
Sub-advisor's opinion, are not expected to have any major price increases or moves in the near future but which, over the long
term, are deemed to be attractive investments for the Portfolio.
The Portfolio will write only covered call options. This means that the Portfolio will own the security or currency
subject to the option or an option to purchase the same underlying security or currency, having an exercise price equal to or less
than the exercise price of the "covered" option, or will establish and maintain with its custodian for the term of the option, an
account consisting of cash or other liquid assets having a value equal to the fluctuating market value of the optioned securities
or currencies.
Portfolio securities or currencies on which call options may be written will be purchased solely on the basis of
investment considerations consistent with the Portfolio's investment objective. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk (in contrast to the writing of naked or uncovered
options, which the Portfolio will not do), but capable of enhancing the Portfolio's total return. When writing a covered call
option, the Portfolio, in return for the premium, gives up the opportunity for profit from a price increase in the underlying
security or currency above the exercise price, but conversely, retains the risk of loss should the price of the security or
currency decline. Unlike one who owns securities or currencies not subject to an option, the Portfolio has no control over when
it may be required to sell the underlying securities or currencies, since it may be assigned an exercise notice at any time prior
to the expiration of its obligations as a writer. If a call option which the Portfolio has written expires, the Portfolio will
realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying
security or currency during the option period. If the call option is exercised, the Portfolio will realize a gain or loss from
the sale of the underlying security or currency, The Portfolio does not consider a security or currency covered by a call
"pledged" as that term is used in the Portfolio's policy which limits the pledging or mortgaging of its assets.
The premium received is the market value of an option. The premium the Portfolio will receive from writing a call option
will reflect, among other things, the current market price of the underlying security or currency, the relationship of the
exercise price to such market price, the historical price volatility of the underlying security or currency, and the length of the
option period. Once the decision to write a call option has been made, Sub-advisor, in determining whether a particular call
option should be written on a particular security or currency, will consider the reasonableness of the anticipated premium and the
likelihood that a liquid secondary market will exist for those options. The premium received by the Portfolio for writing covered
call options will be recorded as a liability of the Portfolio. This liability will be adjusted daily to the option's current
market value, which will be the latest sale price at the time at which the net asset value per share of the Portfolio is computed
(close of the New York Stock Exchange), or, in the absence of such sale, the average of the latest bid and asked price. The
option will be terminated upon expiration of the option, the purchase of an identical option in a closing transaction, or delivery
of the underlying security or currency upon the exercise of the option.
Call options written by the Portfolio will normally have expiration dates of less than nine months from the date
written. The exercise price of the options may be below, equal to, or above the current market values of the underlying
securities or currencies at the time the options are written. From time to time, the Portfolio may purchase an underlying
security or currency for delivery in accordance with an exercise notice of a call option assigned to it, rather than delivering
such security or currency from its portfolio. In such cases, additional costs may be incurred.
The Portfolio will effect closing transactions in order to realize a profit on an outstanding call option, to prevent an
underlying security or currency from being called, or, to permit the sale of the underlying security or currency. The Portfolio
will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price of a call option will generally reflect increases
in the market price of the underlying security or currency, any loss resulting from the repurchase of a call option is likely to
be offset in whole or in part by appreciation of the underlying security or currency owned by the Portfolio.
The Portfolio will not write a covered call option if, as a result, the aggregate market value of all portfolio
securities or currencies covering call or put options exceeds 25% of the market value of the Portfolio's net assets. In
calculating the 25% limit, the Portfolio will offset, against the value of assets covering written calls and puts, the value of
purchased calls and puts on identical securities or currencies with identical maturity dates.
Writing Covered Put Options. Although the Portfolio has no current intention in the foreseeable future of writing
American or European style covered put options and purchasing put options to close out options previously written by the
Portfolio, the Portfolio reserves the right to do so.
The Portfolio would write put options only on a covered basis, which means that the Portfolio would maintain in a
segregated account cash, U.S. government securities or other liquid high-grade debt obligations in an amount not less than the
exercise price or the Portfolio will own an option to sell the underlying security or currency subject to the option having an
exercise price equal to or greater than the exercise price of the "covered" options at all times while the put option is
outstanding. (The rules of a clearing corporation currently require that such assets be deposited in escrow to secure payment of
the exercise price.) The Portfolio would generally write covered put options in circumstances where Sub-advisor wishes to
purchase the underlying security or currency for the Portfolio's portfolio at a price lower than the current market price of the
security or currency. In such event the Portfolio would write a put option at an exercise price which, reduced by the premium
received on the option, reflects the lower price it is willing to pay. Since the Portfolio would also receive interest on debt
securities or currencies maintained to cover the exercise price of the option, this technique could be used to enhance current
return during periods of market uncertainty. The risk in such a transaction would be that the market price of the underlying
security or currency would decline below the exercise price less the premiums received. Such a decline could be substantial and
result in a significant loss to the Portfolio. In addition, the Portfolio, because it does not own the specific securities or
currencies which it may be required to purchase in exercise of the put, cannot benefit from appreciation, if any, with respect to
such specific securities or currencies.
The Portfolio will not write a covered put option if, as a result, the aggregate market value of all portfolio securities
or currencies covering put or call options exceeds 25% of the market value of the Portfolio's net assets. In calculating the 25%
limit, the Portfolio will offset, against the value of assets covering written puts and calls, the value of purchased puts and
calls on identical securities or currencies with identical maturity dates. For a discussion of certain risks involved in options,
see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Purchasing Put Options. The Portfolio may purchase American or European style put options. As the holder of a put
option, the Portfolio has the right to sell the underlying security or currency at the exercise price at any time during the
option period. The Portfolio may enter into closing sale transactions with respect to such options, exercise them or permit them
to expire. The Portfolio may purchase put options for defensive purposes in order to protect against an anticipated decline in
the value of its securities or currencies. An example of such use of put options is provided in this Statement under "Certain
Risk Factors and Investment Methods."
The premium paid by the Portfolio when purchasing a put option will be recorded as an asset of the Portfolio. This asset
will be adjusted daily to the option's current market value, which will be the latest sale price at the time at which the net
asset value per share of the Portfolio is computed (close of New York Stock Exchange), or, in the absence of such sale, the latest
bid price. This asset will be terminated upon expiration of the option, the selling (writing) of an identical option in a closing
transaction, or the delivery of the underlying security or currency upon the exercise of the option.
Purchasing Call Options. The Portfolio may purchase American or European style call options. As the holder of a call
option, the Portfolio has the right to purchase the underlying security or currency at the exercise price at any time during the
option period (American style) or at the expiration of the option (European style). The Portfolio may enter into closing sale
transactions with respect to such options, exercise them or permit them to expire. The Portfolio may purchase call options for
the purpose of increasing its current return or avoiding tax consequences which could reduce its current return. The Portfolio
may also purchase call options in order to acquire the underlying securities or currencies. Examples of such uses of call options
are provided below.
The Portfolio may also purchase call options on underlying securities or currencies it owns in order to protect
unrealized gains on call options previously written by it. A call option would be purchased for this purpose where tax
considerations make it inadvisable to realize such gains through a closing purchase transaction. Call options may also be
purchased at times to avoid realizing losses.
The Portfolio will not commit more than 5% of its total assets to premiums when purchasing call or put options.
Dealer Options. The Portfolio may engage in transactions involving dealer options. Certain risks are specific to dealer
options. While the Portfolio would look to a clearing corporation to exercise exchange-traded options, if the Portfolio were to
purchase a dealer option, it would rely on the dealer from whom it purchased the option to perform if the option were exercised.
While the Portfolio will seek to enter into dealer options only with dealers who will agree to and which are expected to be
capable of entering into closing transactions with the Portfolio, there can be no assurance that the Portfolio will be able to
liquidate a dealer option at a favorable price at any time prior to expiration. Failure by the dealer to do so would result in
the loss of the premium paid by the Portfolio as well as loss of the expected benefit of the transaction.
Futures Contracts.
Transactions in Futures. The Portfolio may enter into financial futures contracts, including stock index,
interest rate and currency futures ("futures" or "futures contracts"); however, the Portfolio has no current intention of entering
into interest rate futures. The Portfolio, however, reserves the right to trade in financial futures of any kind.
Stock index futures contracts may be used to attempt to provide a hedge for a portion of the Portfolio's portfolio, as a
cash management tool, or as an efficient way for Sub-advisor to implement either an increase or decrease in portfolio market
exposure in response to changing market conditions. Stock index futures contracts are currently traded with respect to the S&P
500 Index and other broad stock market indices, such as the New York Stock Exchange Composite Stock Index and the Value Line
Composite Stock Index. The Portfolio may, however, purchase or sell futures contracts with respect to any stock index whose
movements will, in its judgment, have a significant correlation with movements in the prices of all or portions of the Portfolio's
portfolio securities.
Interest rate or currency futures contracts may be used to attempt to hedge against changes in prevailing levels of
interest rates or currency exchange rates in order to establish more definitely the effective return on securities or currencies
held or intended to be acquired by the Portfolio. In this regard, the Portfolio could sell interest rate or currency futures as
an offset against the effect of expected increases in interest rates or currency exchange rates and purchase such futures as an
offset against the effect of expected declines in interest rates or currency exchange rates.
The Portfolio will enter into futures contracts which are traded on national or foreign futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures exchanges and trading in the United States are
regulated under the Commodity Exchange Act by the CFTC. Although techniques other than the sale and purchase of futures contracts
could be used for the above-referenced purposes, futures contracts offer an effective and relatively low cost means of
implementing the Portfolio's objectives in these areas. For a discussion of futures transactions and certain risks involved
therein, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Regulatory Limitations. The Portfolio will engage in transactions in futures contracts and options thereon only
for bona fide hedging, yield enhancement and risk management purposes, in each case in accordance with the rules and regulations
of the CFTC.
The Portfolio may not enter into futures contracts or options thereon if, with respect to positions which do not qualify
as bona fide hedging under applicable CFTC rules, the sum of the amounts of initial margin deposits on the Portfolio's existing
futures and premiums paid for options on futures would exceed 5% of the net asset value of the Portfolio after taking into account
unrealized profits and unrealized losses on any such contracts it has entered into; provided however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount may be excluded in calculating the 5% limitation.
In instances involving the purchase of futures contracts or call options thereon or the writing of put options thereon by
the Portfolio, an amount of cash or other liquid assets equal to the market value of the futures contracts and options thereon
(less any related margin deposits), will be identified by the Portfolio to cover the position, or alternative cover (such as
owning an offsetting position) will be employed.
Options on Futures Contracts. As an alternative to writing or purchasing call and put options on stock index futures,
the Portfolio may write or purchase call and put options on financial indices. Such options would be used in a manner similar to
the use of options on futures contracts. From time to time, a single order to purchase or sell futures contracts (or options
thereon) may be made on behalf of the Portfolio and other mutual funds or portfolios of mutual funds managed by the Sub-advisor or
T. Rowe Price Associates, Inc. Such aggregated orders would be allocated among the Portfolio and such other portfolios in a fair
and non-discriminatory manner. See this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods"
for a description of certain risks involved in options and futures contracts.
Additional Futures and Options Contracts. Although the Portfolio has no current intention of engaging in futures or
options transactions other than those described above, it reserves the right to do so. Such futures or options trading might
involve risks which differ from those involved in the futures and options described above.
Foreign Futures and Options. The Portfolio is permitted to invest in foreign futures and options. For a description of
foreign futures and options and certain risks involved therein as well as certain risks involved in foreign investing, see this
Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Foreign Currency Transactions. The Portfolio will generally enter into forward foreign currency exchange contracts under
two circumstances. First, when the Portfolio enters into a contract for the purchase or sale of a security denominated in a
foreign currency, it may desire to "lock in" the U.S. dollar price of the security. Second, when the Sub-advisor believes that
the currency of a particular foreign country may suffer or enjoy a substantial movement against another currency, including the
U.S. dollar, it may enter into a forward contract to sell or buy the amount of the former foreign currency, approximating the
value of some or all of the Portfolio's securities denominated in such foreign currency. Alternatively, where appropriate, the
Portfolio may hedge all or part of its foreign currency exposure through the use of a basket of currencies or a proxy currency
where such currency or currencies act as an effective proxy for other currencies. In such a case, the Portfolio may enter into a
forward contract where the amount of the foreign currency to be sold exceeds the value of the securities denominated in such
currency. The use of this basket hedging technique may be more efficient and economical than entering into separate forward
contracts for each currency held in the Portfolio. The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of such securities in foreign currencies will change as
a consequence of market movements in the value of those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency market movement is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. Other than as set forth above, and immediately below, the Portfolio will also
not enter into such forward contracts or maintain a net exposure to such contracts where the consummation of the contracts would
obligate the Portfolio to deliver an amount of foreign currency in excess of the value of the Portfolio's securities or other
assets denominated in that currency. The Portfolio, however, in order to avoid excess transactions and transaction costs, may
maintain a net exposure to forward contracts in excess of the value of the Portfolio's securities or other assets to which the
forward contracts relate (including accrued interest to the maturity of the forward on such securities) provided the excess amount
is "covered" by liquid, high-grade debt securities, denominated in any currency, at least equal at all times to the amount of such
excess. For these purposes "the securities or other assets to which the forward contracts relate may be securities or assets
denominated in a single currency, or where proxy forwards are used, securities denominated in more than one currency. Under
normal circumstances, consideration of the prospect for currency parities will be incorporated into the longer term investment
decisions made with regard to overall diversification strategies. However, Sub-advisor believes that it is important to have the
flexibility to enter into such forward contracts when it determines that the best interests of the Portfolio will be served.
Forward foreign currency exchange contracts ("forwards") will generally have terms of less than one year.
At the maturity of a forward contract, the Portfolio may either sell the portfolio security and make delivery of the
foreign currency, or it may retain the security and terminate its contractual obligation to deliver the foreign currency by
purchasing an "offsetting" contract obligating it to purchase, on the same maturity date, the same amount of the foreign currency.
As indicated above, it is impossible to forecast with absolute precision the market value of portfolio securities at the
expiration of the forward contract. Accordingly, it may be necessary for the Portfolio to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign
currency the Portfolio is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency the Portfolio is obligated to deliver. However, as
noted, in order to avoid excessive transactions and transaction costs, the Portfolio may use liquid, high-grade debt securities
denominated in any currency, to cover the amount by which the value of a forward contract exceeds the value of the securities to
which it relates.
If the Portfolio retains the portfolio security and engages in an offsetting transaction, the Portfolio will incur a gain
or a loss (as described below) to the extent that there has been movement in forward contract prices. If the Portfolio engages in
an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward
prices decline during the period between the Portfolio's entering into a forward contract for the sale of a foreign currency and
the date it enters into an offsetting contract for the purchase of the foreign currency, the Portfolio will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Portfolio will suffer a loss to the extent of the price of the currency it has agreed to purchase
exceeds the price of the currency it has agreed to sell.
The Portfolio's dealing in forward foreign currency exchange contracts will generally be limited to the transactions
described above. However, the Portfolio reserves the right to enter into forward foreign currency contracts for different
purposes and under different circumstances. Of course, the Portfolio is not required to enter into forward contracts with regard
to its foreign currency-denominated securities and will not do so unless deemed appropriate by the Sub-advisor. It also should be
realized that this method of hedging against a decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities. It simply establishes a rate of exchange at a future date. Additionally, although such
contracts tend to minimize the risk of loss due to a decline in the value of the hedged currency, at the same time, they tend to
limit any potential gain which might result from an increase in the value of that currency.
Although the Portfolio values its assets daily in terms of U.S. dollars, it does not intend to convert its holdings of
foreign currencies into U.S. dollars on a daily basis. It will do so from time to time, and investors should be aware of the
costs of currency conversion. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at which they are buying and selling various currencies. Thus, a dealer
may offer to sell a foreign currency to the Portfolio at one rate, while offering a lesser rate of exchange should the Portfolio
desire to resell that currency to the dealer.
When the Portfolio purchases a foreign bond with a higher interest rate than is available on U.S. bonds of a similar
maturity, the additional yield on the foreign bond could be substantially lost if the Portfolio were to enter into a direct hedge
by selling the foreign currency and purchasing the U.S. dollar. This is what is known as the "cost" of hedging. Proxy hedging
attempts to reduce this cost through an indirect hedge back to the U.S. dollar. It is important to note that hedging costs are
treated as capital transactions and are not, therefore, deducted from the Portfolio's dividend distribution and are not reflected
in its yield. Instead such costs will, over time, be reflected in the Portfolio's net asset value per share. For an additional
discussion of certain risks involved in foreign investing, see this Statement and the Trust's Prospectus under "Certain Risk
Factors and Investment Methods."
Federal Tax Treatment of Options, Futures Contracts and Forward Foreign Exchange Contracts. The Portfolio may enter into
certain option, futures, and forward foreign exchange contracts, including options and futures on currencies, which will be
treated as Section 1256 contracts or straddles.
Transactions which are considered Section 1256 contracts will be considered to have been closed at the end of the
Portfolio's fiscal year and any gains or losses will be recognized for tax purposes at that time. Such gains or losses from the
normal closing or settlement of such transactions will be characterized as 60% long-term capital gain (taxable at a maximum rate
of 20%) or loss and 40% short-term capital gain or loss regardless of the holding period of the instrument (or, in the case of
foreign exchange contracts, entirely as ordinary income or loss). The Portfolio will be required to distribute net gains on such
transactions to shareholders even though it may not have closed the transaction and received cash to pay such distributions.
Options, futures and forward foreign exchange contracts, including options and futures on currencies, which offset a
foreign dollar denominated bond or currency position may be considered straddles for tax purposes in which case a loss on any
position in a straddle will be subject to deferral to the extent of unrealized gain in an offsetting position. The holding period
of the securities or currencies comprising the straddle will be deemed not to begin until the straddle is terminated. The holding
period of the security offsetting an "in-the-money qualified covered call" option on an equity security will not include the
period of time the option is outstanding.
Losses on written covered calls and purchased puts on securities, excluding certain "qualified covered call" options on
equity securities, may be long-term capital loss, if the security covering the option was held for more than twelve months prior
to the writing of the option.
In order for the Portfolio to continue to qualify for federal income tax treatment as a regulated investment company, at
least 90% of its gross income for a taxable year must be derived from qualifying income, i.e., dividends, interest, income derived
from loans of securities, and gains from the sale of securities or currencies. Tax regulations could be issued limiting the
extent that net gain realized from option, futures or foreign forward exchange contracts on currencies is qualifying income for
purposes of the 90% requirement.
As a result of the "Taxpayer Relief Act of 1997," entering into certain option, futures contracts, or forward contracts
may be deemed a "constructive sale" of offsetting securities, which could result in a taxable gain from the sale being distributed
to shareholders. The Portfolio would be required to distribute any such gain even though it would not receive proceeds from the
sale at the time the option, futures or forward position is entered into.
Hybrid Commodity and Security Instruments. Instruments have been developed which combine the elements of futures
contracts or options with those of debt, preferred equity or a depository instrument (hereinafter "Hybrid Instruments"). Often
these hybrid instruments are indexed to the price of a commodity or particular currency or a domestic or foreign debt or equity
securities index. Hybrid instruments may take a variety of forms, including, but not limited to, debt instruments with interest
or principal payments or redemption terms determined by reference to the value of a currency or commodity at a future point in
time, preferred stock with dividend rates determined by reference to the value of a currency, or convertible securities with the
conversion terms related to a particular commodity. For a discussion of certain risks involved in hybrid instruments, see this
Statement under "Certain Risk Factors and Investment Methods."
Debt Securities. The Portfolio's investment program permits it to purchase below investment grade securities. Since
investors generally perceive that there are greater risks associated with investment in lower quality securities, the yields from
such securities normally exceed those obtainable from higher quality securities. However, the principal value of lower-rated
securities generally will fluctuate more widely than higher quality securities. Lower quality investments entail a higher risk of
default -- that is, the nonpayment of interest and principal by the issuer than higher quality investments. Such securities are
also subject to special risks, discussed below. Although the Portfolio seeks to reduce risk by portfolio diversification, credit
analysis, and attention to trends in the economy, industries and financial markets, such efforts will not eliminate all risk.
There can, of course, be no assurance that the Portfolio will achieve its investment objective.
After purchase by the Portfolio, a debt security may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Portfolio. Neither event will require a sale of such security by the Portfolio. However,
Sub-advisor will consider such event in its determination of whether the Portfolio should continue to hold the security. To the
extent that the ratings given by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") may change
as a result of changes in such organizations or their rating systems, the Portfolio will attempt to use comparable ratings as
standards for investments in accordance with the investment policies contained in the prospectus. The Portfolio may invest up to
20% of its total assets in securities rated below BBB or Baa, including bonds in default or those with the lowest rating. See the
Appendix to this Statement for a more complete description of the ratings assigned by ratings organizations and their respective
characteristics.
High Yield, High Risk Securities. Below investment grade securities (rated below Baa by Moody's and below BBB by S&P) or
unrated securities of equivalent quality in the Sub-advisor's judgment, carry a high degree of risk (including the possibility of
default or bankruptcy of the issuers of such securities), generally involve greater volatility of price and risk of principal and
income, and may be less liquid, than securities in the higher rating categories and are considered speculative. The lower the
ratings of such debt securities, the greater their risks render them like equity securities. For an additional discussion of
certain risks involved in investing in lower-rated debt securities, see this Statement and the Trust's Prospectus under "Certain
Risk Factors and Investment Methods."
Zero-Coupon Securities. The Portfolio may invest in zero-coupon securities which pay no cash income and are sold at
substantial discounts from their value at maturity. For a discussion of zero-coupon securities and certain risks involved
therein, see this Statement under "Certain Risk Factors and Investment Methods."
Lending of Portfolio Securities. For the purpose of realizing additional income, the Portfolio may make secured loans of
portfolio securities amounting to not more than 33 1/3% of its total assets. This policy is a "fundamental policy." Securities
loans are made to broker-dealers, institutional investors, or other persons pursuant to agreements requiring that the loans be
continuously secured by collateral at least equal at all times to the value of the securities lent, marked to market on a daily
basis. The collateral received will consist of cash or U.S. government securities. While the securities are being lent, the
Portfolio will continue to receive the equivalent of the interest or dividends paid by the issuer on the securities, as well as
interest on the investment of the collateral or a fee from the borrower. The Portfolio has a right to call each loan and obtain
the securities on three business days' notice or, in connection with securities trading on foreign markets, within such longer
period of time which coincides with the normal settlement period for purchases and sales of such securities in such foreign
markets. The Portfolio will not have the right to vote securities while they are being lent, but it will call a loan in
anticipation of any important vote. The risks in lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in the recovery of the securities or possible loss of rights in
the collateral should the borrower fail financially.
Other Lending/Borrowing. Subject to approval by the SEC, the Portfolio may make loans to, or borrow funds from, other
mutual funds sponsored or advised by the Sub-advisor or T. Rowe Price Associates, Inc. The Portfolio has no current intention of
engaging in these practices at this time.
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST T. Rowe Price Global Bond Portfolio. These limitations are not "fundamental" restrictions and may be changed by the Trustees
without shareholder approval. The Portfolio will not:
1. Pledge, mortgage or hypothecate its assets in excess, together with permitted borrowings, of 1/3 of its total
assets;
2. Purchase securities on margin, unless, by virtue of its ownership of other securities, it has the right to obtain
securities equivalent in kind and amount to the securities sold and, if the right is conditional, the sale is made upon the same
conditions, except in connection with arbitrage transactions and except that the Portfolio may obtain such short-term credits as
may be necessary for the clearance of purchases and sales of securities;
3. Purchase illiquid securities if, as a result, more than 15% of its net assets would be invested in such
securities;
4. Buy options on securities or financial instruments, unless the aggregate premiums paid on all such options held
by the Portfolio at any time do not exceed 20% of its net assets; or sell put options on securities if, as a result, the aggregate
value of the obligations underlying such put options would exceed 50% of the Portfolio's net assets;
5. Enter into futures contracts or purchase options thereon which do not represent bona fide hedging unless
immediately after the purchase, the value of the aggregate initial margin with respect to all such futures contracts entered into
on behalf of the Portfolio and the premiums paid for such options on futures contracts does not exceed 5% of the Portfolio's total
assets, provided that in the case of an option that is in-the-money at the time of purchase, the in-the-money amount may be
excluded in computing the 5% limit;
6. Purchase warrants if as a result warrants taken at the lower of cost or market value would represent more than
10% of the value of the Portfolio's total net assets, except that this restriction does not apply to warrants acquired as a result
of the purchase of another security;
7. Make securities loans if the value of such securities loaned exceeds 30% of the value of the Portfolio's total
assets at the time any loan is made; all loans of portfolio securities will be fully collateralized and marked to market daily.
The Portfolio has no current intention of making loans of portfolio securities that would amount to greater than 5% of the
Portfolio's total assets; or
8. Purchase or sell real estate limited partnership interests.
9. Purchase securities which are not bonds denominated in foreign currency ("international bonds") if, immediately
after such purchase, less than 65% of its total assets would be invested in international bonds, except that for temporary
defensive purposes the Portfolio may purchase securities which are not international bonds without limitation;
10. Borrow money in excess of 5% of its total assets (taken at market value) or borrow other than from banks;
however, in the case of reverse repurchase agreements, the Portfolio may invest in such agreements with other than banks subject
to total asset coverage of 300% for such agreements and all borrowings;
11. Invest more than 20% of its total assets in below investment grade, high-risk bonds, including bonds in default
or those with the lowest rating;
12. Invest in companies for the purpose of exercising management or control;
13. Purchase securities of open-end or closed-end investment companies except in compliance with the 1940 Act; or
14. Effect short sales of securities.
In addition to the restrictions described above, some foreign countries limit, or prohibit, all direct foreign investment
in the securities of their companies. However, the governments of some countries have authorized the organization of investment
funds to permit indirect foreign investment in such securities. For tax purposes these funds may be known as Passive Foreign
Investment Companies. The Portfolio is subject to certain percentage limitations under the 1940 Act relating to the purchase of
securities of investment companies, and may be subject to the limitation that no more than 10% of the value of the Portfolio's
total assets may be invested in such securities.
Restrictions with respect to repurchase agreements shall be construed to be for repurchase agreements entered into for
the investment of available cash consistent with the Portfolio's repurchase agreement procedures, not repurchase commitments
entered into for general investment purposes.
If a percentage restriction on investment or utilization of assets as set forth under "Investment Restrictions" and
"Investment Policies" above is adhered to at the time an investment is made, a later change in percentage resulting from changes
in the value or the total cost of Portfolio's assets will not be considered a violation of the restriction.
AST Federated High Yield Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek high current income by investing primarily in a
diversified portfolio of fixed income securities. The fixed income securities in which the Portfolio intends to invest are
lower-rated corporate debt obligations.
Investment Policies:
Corporate Debt Securities. The Portfolio invests primarily in corporate debt securities. The corporate debt obligations
in which the Portfolio intends to invest are expected to be lower-rated. For a discussion of the special risks associated with
lower-rated securities, see the Trust's Prospectus and this Statement under "Certain Risk Factors and Investment Methods."
Corporate debt obligations in which the Portfolio invests may bear fixed, floating, floating and contingent, or increasing rates
of interest. They may involve equity features such as conversion or exchange rights, warrants for the acquisition of common stock
of the same or a different issuer, participations based on revenues, sales or profits, or the purchase of common stock in a unit
transaction (where corporate debt securities and common stock are offered as a unit).
U.S. Government Obligations. The types of U.S. government obligations in which the Portfolio may invest include, but are
not limited to, direct obligations of the U.S. Treasury (such as U.S. Treasury bills, notes, and bonds) and obligations issued or
guaranteed by U.S. government agencies or instrumentalities (such as the Federal Home Loan Banks, Federal National Mortgage
Association, Government National Mortgage Association, Federal Farm Credit Banks, Tennessee Valley Authority, Export-Import Bank
of the United States, Commodity Credit Corporation, Federal Financing Bank, Student Loan Marketing Association, Federal Home Loan
Mortgage Corporation, or National Credit Union Administration). These securities may be backed by: the full faith and credit of
the U.S. Treasury; the issuer's right to borrow from the U.S. Treasury; the discretionary authority of the U.S. government to
purchase certain obligations of agencies or instrumentalities; or the credit of the agency or instrumentality issuing the
obligations. For an additional discussion of the types of U.S. government obligations in which the Portfolio may invest, see the
Trust's Prospectus under "Investment Objectives and Policies."
Time and Savings Deposits and Bankers' Acceptances. The Portfolio may enter into time and savings deposits (including
certificates of deposit) and may purchase bankers' acceptances. The Portfolio may enter into time and savings deposits (including
certificates of deposit) in commercial or savings banks whose deposits are insured by the Bank Insurance Fund ("BIF"), or the
Savings Association Insurance Fund ("SAIF"), including certificates of deposit issued by and other time deposits in foreign
branches of BIF-insured banks. The Portfolio may also purchase bankers' acceptances issued by a BIF-insured bank, or issued by
the bank's Edge Act subsidiary and guaranteed by the bank, with remaining maturities of nine months or less. The total
acceptances of any bank held by the Portfolio cannot exceed 0.25 of 1% of such bank's total deposits according to the bank's last
published statement of condition preceding the date of acceptance; and general obligations of any state, territory, or possession
of the United States, or their political subdivisions, so long as they are either (1) rated in one of the four highest grades by
nationally recognized statistical rating organizations or (2) issued by a public housing agency and backed by the full faith and
credit of the United States.
When-Issued and Delayed Delivery Transactions. The Portfolio may purchase fixed-income securities on a when-issued or
delayed delivery basis. The Portfolio may engage in when-issued and delayed delivery transactions only for the purpose of
acquiring portfolio securities consistent with the Portfolio's investment objective and policies, not for investment leverage.
These transactions are arrangements in which the Portfolio purchases securities with payment and delivery scheduled for a future
time. Settlement dates may be a month or more after entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. These transactions are made to secure what is considered to be an advantageous price
and yield for the Portfolio.
No fees or other expenses, other than normal transaction costs, are incurred. However, liquid assets of the Portfolio
sufficient to make payment for the securities to be purchased are segregated at the trade date. These securities are marked to
market daily and will maintain until the transaction is settled. For an additional discussion of when-issued securities and
certain risks involved therein, see this Statement under "Certain Risk Factors and Investment Methods."
Lending Portfolio Securities. In order to generate additional income, the Portfolio may lend its securities to
brokers/dealers, banks, or other institutional borrowers of securities. The collateral received when the Portfolio lends
portfolio securities must be valued daily and, should the market value of the loaned securities increase, the borrower must
furnish additional collateral to the Portfolio. During the time portfolio securities are on loan, the borrower pays the Portfolio
any dividends or interest paid on such securities. Loans are subject to termination at the option of the Portfolio or the
borrower. The Portfolio may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated
portion of the interest earned on the cash or cash equivalent collateral to the borrower or placing broker. The Portfolio does not
have the right to vote securities on loan, but would terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
Reverse Repurchase Agreements. The Portfolio may also enter into reverse repurchase agreements. When effecting reverse
repurchase agreements, liquid assets of the Portfolio, in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to market daily and are maintained until the transaction
is settled. During the period any reverse repurchase agreements are outstanding, but only to the extent necessary to ensure
completion of the reverse repurchase agreements, the Portfolio will restrict the purchase of portfolio instruments to money market
instruments maturing on or before the expiration date of the reverse repurchase agreements. For a discussion of reverse
repurchase agreements and certain risks involved therein, see the Trust's Prospectus under "Certain Risk Factors and Investment
Methods."
Portfolio Turnover. The Portfolio may experience greater portfolio turnover than would be expected with a portfolio of
higher-rated securities. For an additional discussion of portfolio turnover, see this Statement and the Trust's Prospectus under
"Portfolio Turnover."
Adverse Legislation. In 1989, legislation was enacted that required federally insured savings and loan associations to
divest their holdings of lower-rated bonds by 1994. This legislation also created the Resolution Trust Corporation (the "RTC"),
which disposed of a substantial portion of lower-rated bonds held by failed savings and loan associations. The reduction of the
number of institutions empowered to purchase and hold lower-rated bonds, and the divestiture of bonds by these institutions and
the RTC, have had an adverse impact on the overall liquidity of the market for such bonds. Federal and state legislatures and
regulators have and may continue to propose new laws and regulations designed to limit the number or type of institutions that may
purchase lower-rated bonds, reduce the tax benefits to issuers of such bonds, or otherwise adversely impact the liquidity of such
bonds. The Portfolio cannot predict the likelihood that any of these proposals will be adopted, or their potential impact on the
liquidity of lower-rated bonds.
Foreign Securities. The Portfolio may invest up to 5% of its total assets in foreign securities that are not publicly
traded in the United States. For a discussion of certain risks involved with investing in foreign securities, including currency
risks, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Federated High Yield Portfolio. The limitations are not "fundamental" restrictions and may be changed by the Trustees without
shareholder approval.
1. The Portfolio will not invest more than 15% of the value of its net assets in securities that are not readily
marketable;
2. The Portfolio will not purchase the securities of any issuer (other than the U.S. government, its agencies, or
instrumentalities or instruments secured by securities of such issuers, such as repurchase agreements) if as a result more than 5%
of the value of its total assets would be invested in the securities of such issuer. For these purposes, the Portfolio takes all
common stock and all preferred stock of an issuer each as a single class, regardless of priorities, series designations or other
differences.
AST Lord Abbett Bond-Debenture Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek high current income and the opportunity for capital
appreciation to produce a high total return.
Investment Policies:
Convertible Securities. The Portfolio may invest in convertible bonds and convertible preferred stocks. These
investments tend to be more volatile than debt securities but tend to be less volatile and produce more income than their
underlying common stocks.
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST Lord Abbett Bond-Debenture Portfolio. These limitations are not "fundamental" restrictions and may be changed by the Trustees
without shareholder approval. The Portfolio will not:
1. Pledge its assets (other than to secure borrowings, or to the extent permitted by the Portfolio's investment policies);
2. Make short sales of securities;
3. Invest knowingly more than 15% of its net assets (at the time of investment) in illiquid securities;
4. Invest in the securities of other investment companies except in compliance with the 1940 Act;
5. Invest in real estate limited partnership interests or interests in oil, gas or other mineral leases, or exploration or
other development programs, except that the Portfolio may invest in securities issued by companies that engage in oil, gas or
other mineral exploration or other development activities;
6. Write, purchase or sell puts, calls, straddles, spreads or combinations thereof, except to the extent permitted in this
Statement and the Trust's Prospectus, as they may be amended from time to time;
7. Invest more than 10% of the market value of its gross assets at the time of investment in debt securities that are in
default as to interest or principal.
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. The Sub-advisor will seek to employ prudent investment management techniques, especially in light of the broad range
of investment instruments in which the Portfolio may invest.
Investment Policies:
Borrowing. The Portfolio may borrow for temporary administrative purposes. This borrowing may be unsecured. The 1940
Act requires the Portfolio to maintain continuous asset coverage (that is, total assets including borrowings, less liabilities
exclusive of borrowings) of 300% of the amount borrowed. If the 300% asset coverage should decline as a result of market
fluctuations or other reasons, the Portfolio may be required to sell some of its holdings within three days to reduce the debt and
restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell securities at that
time. Borrowing will tend to exaggerate the effect on net asset value of any increase or decrease in the market value of the
Portfolio. Money borrowed will be subject to interest costs which may or may not be recovered by appreciation of the securities
purchased. The Portfolio also may be required to maintain minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of these requirements would increase the cost of borrowing over the
stated interest rate.
In addition to the above, the Portfolio may enter into reverse repurchase agreements and "mortgage dollar rolls." A
reverse repurchase agreement involves the sale of a portfolio-eligible security by the Portfolio, coupled with its agreement to
repurchase the instrument at a specified time and price. In a "dollar roll" transaction the Portfolio sells a mortgage-related
security (such as a GNMA security) to a dealer and simultaneously agrees to repurchase a similar security (but not the same
security) in the future at a pre-determined price. A "dollar roll" can be viewed, like a reverse repurchase agreement, as a
collateralized borrowing in which the Portfolio pledges a mortgage-related security to a dealer to obtain cash. Unlike in the
case of reverse repurchase agreements, the dealer with which the Portfolio enters into a dollar roll transaction is not obligated
to return the same securities as those originally sold by the Portfolio, but only securities which are "substantially identical."
To be considered "substantially identical," the securities returned to the Portfolio generally must: (1) be collateralized by the
same types of underlying mortgages; (2) be issued by the same agency and be part of the same program; (3) have a similar original
stated maturity; (4) have identical net coupon rates; (5) have similar maturity: (4) have identical net coupon rates; (5) have
similar market yields (and therefore price); and (6) satisfy "good delivery" requirements, meaning that the aggregate principal
amounts of the securities delivered and received back must be within 2.5% of the initial amount delivered. The Portfolio's
obligations under a dollar roll agreement must be covered by cash or other liquid assets equal in value to the securities subject
to repurchase by the Portfolio, maintained in a segregated account.
Both dollar roll and reverse repurchase agreements will be subject to the 1940 Act's limitations on borrowing, as
discussed above. Furthermore, because dollar roll transactions may be for terms ranging between one and six months, dollar roll
transactions may be deemed "illiquid" and subject to the Portfolio's overall limitations on investments in illiquid securities.
Corporate Debt Securities. The Portfolio's investments in U.S. dollar- or foreign currency-denominated corporate debt
securities of domestic or foreign issuers are limited to corporate debt securities (corporate bonds, debentures, notes and other
similar corporate debt instruments, including convertible securities) which meet the minimum ratings criteria set forth for the
Portfolio, or, if unrated, are in the Sub-advisor's opinion comparable in quality to corporate debt securities in which the
Portfolio may invest. In the event that ratings services assign different ratings to the same security, the Sub-advisor will
determine which rating it believes best reflects the security's quality and risk at that time, which may be the higher of the
several assigned ratings. The rate of return or return of principal on some debt obligations may be linked or indexed to the
level of exchange rates between the U.S. dollar and a foreign currency or currencies.
Among the corporate bonds in which the Portfolio may invest are convertible securities. A convertible security is a
bond, debenture, note, or other security that entitles the holder to acquire common stock or other equity securities of the same
or a different issuer. A convertible security generally entitles the holder to receive interest paid or accrued until the
convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities have
characteristics similar to nonconvertible debt securities. Convertible securities rank senior to common stock in a corporation's
capital structure and, therefore, generally entail less risk than the corporation's common stock, although the extent to which
such risk is reduced depends in large measure upon the degree to which the convertible security sells above its value as a
fixed-income security.
A convertible security may be subject to redemption at the option of the issuer at a predetermined price. If a
convertible security held by the Portfolio is called for redemption, the Portfolio will be required to permit the issuer to redeem
the security and convert it to underlying common stock, or will sell the convertible security to a third party. The Portfolio
generally would invest in convertible securities for their favorable price characteristics and total return potential and would
normally not exercise an option to convert.
Investments in securities rated below investment grade that are eligible for purchase by the Portfolio (i.e., rated B or
better by Moody's or S&P) are described as "speculative" by both Moody's and S&P. Investment in lower-rated corporate debt
securities ("high yield securities") generally provides greater income and increased opportunity for capital appreciation than
investments in higher quality securities, but they also typically entail greater price volatility and principal and income risk.
These high yield securities are regarded as high risk and predominantly speculative with respect to the issuer's continuing
ability to meet principal and interest payments. The market for these securities is relatively new, and many of the outstanding
high yield securities have not endured a major business recession. A long-term track record on default rates, such as that for
investment grade corporate bonds, does not exist for this market. Analysis of the creditworthiness of issuers of debt securities
that are high yield may be more complex than for issuers of higher quality debt securities.
High yield, high risk securities may be more susceptible to real or perceived adverse economic and competitive industry
conditions than investment grade securities. The price of high yield securities have been found to be less sensitive to
interest-rate adverse economic downturns or individual corporate developments. A projection of an economic downturn or of a
period of rising interest rates, for example, could cause a decline in high yield security prices because the advent of a
recession could lessen the ability of a highly leveraged company to make principal and interest payments on its debt securities.
If an issuer of high yield securities defaults, in addition to risking payment of all or a portion of interest and principal, the
Portfolio may incur additional expenses to seek recovery. In the case of high yield securities structured as zero-coupon or
pay-in-kind securities, their market prices are affected to a greater extent by interest rate changes, and therefore tend to be
more volatile than securities which pay interest periodically and in cash.
The secondary market on which high yield, high risk securities are traded may be less liquid than the market for higher
grade securities. Less liquidity in the secondary trading market could adversely affect the price at which the Portfolio could
sell a high yield security, and could adversely affect the daily net asset value of the shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of high yield securities
especially in a thinly-traded market. When secondary markets for high yield securities are less liquid than the market for higher
grade securities, it may be more difficult to value the securities because such valuation may require more research, and elements
of judgment may play a greater role in the valuation because there is less reliable, objective data available. The Sub-advisor
seeks to minimize the risks of investing in all securities through diversification, in-depth credit analysis and attention to
current developments in interest rates and market conditions. For an additional discussion of certain risks involved in
lower-rated debt securities, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Objectives."
Participation on Creditors Committees. The Portfolio may from time to time participate on committees formed by creditors
to negotiate with the management of financially troubled issuers of securities held by the Portfolio. Such participation may
subject the Portfolio to expenses such as legal fees and may make the Portfolio an "insider" of the issuer for purposes of the
federal securities laws, and therefore may restrict the Portfolio's ability to trade in or acquire additional positions in a
particular security when it might otherwise desire to do so. Participation by the Portfolio on such committees also may expose
the Portfolio to potential liabilities under the federal bankruptcy laws or other laws governing the rights of creditors and
debtors. The Portfolio will participate on such committees only when the Sub-advisor believes that such participation is
necessary or desirable to enforce the Portfolio's rights as a creditor or to protect the value of securities held by the Portfolio.
Mortgage-Related Securities. The Portfolio may invest in mortgage-backed securities. Mortgage-related securities are
interests in pools of mortgage loans made to residential home buyers, including mortgage loans made by savings and loan
institutions, mortgage bankers, commercial banks and others. Pools of mortgage loans are assembled as securities for sale to
investors by various governmental, government-related and private organizations (see "Mortgage Pass-Through Securities"). The
Portfolio may also invest in debt securities which are secured with collateral consisting of mortgage-related securities (see
"Collateralized Mortgage Obligations"), and in other types of mortgage-related securities.
Interests in pools of mortgage-related securities differ from other forms of debt securities, which normally provide for
periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, these
securities provide a monthly payment which consists of both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on their residential or commercial mortgage loans, net of
any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting
from the sale of the underlying property, refinancing or foreclosure, net of fees or costs which may be incurred. Some
mortgage-related securities (such as securities issued by the Government National Mortgage Association) are described as "modified
pass-through." These securities entitle the holder to receive all interest and principal payments owned on the mortgage pool, net
of certain fees, at the scheduled payment dates regardless of whether or not the mortgagor actually makes the payment.
The principal governmental guarantor of mortgage-related securities is the Government National Mortgage Association
("GNMA"). GNMA is a wholly owned United States Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the United States Government, the timely payment of principal
and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and
mortgage bankers) and backed by pools of FHA-insured or VA-guaranteed mortgages.
Government-related guarantors (i.e., not backed by the full faith and credit of the United States Government) include the
Federal National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is subject to general regulation by the Secretary of
Housing and Urban Development. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) residential
mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations,
mutual savings banks, commercial banks and credit unions and mortgage bankers. Pass-though securities issued by FNMA are
guaranteed as to timely payment of principal and interest by FNMA but are not backed by the full faith and credit of the United
States Government.
FHLMC was created by Congress in 1970 for the purpose of increasing the availability of mortgage credit for residential
housing. It is a government-sponsored corporation formerly owned by the twelve Federal Home Loan Banks and now owned entirely by
private stockholders. FHLMC issues Participation Certificates ("PC's") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but PCs are not
backed by the full faith and credit of the United States Government.
Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers also create pass-though pools of conventional residential mortgage loans. Such issuers may, in addition,
be the originators and/or servicers of the underlying mortgage loans as well as the guarantors of the mortgage-related
securities. Pools created by such nongovernmental issuers generally offer a higher rate of interest than government and
government-related pools because there are no direct or indirect government or agency guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance and letters of credit. The insurance and guarantees are issued by
governmental entities, private insurers and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the
issuers thereof will be considered in determining whether a mortgage-related security meets the Trust's investment quality
standards. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance
policies or guarantee arrangements. The Portfolio may buy mortgage-related securities without insurance or guarantees if, through
an examination of the loan experience and practices of the originator/servicers and poolers, the Sub-advisor determines that the
securities meet the Trust's quality standards. Although the market for such securities is becoming increasingly liquid,
securities issued by certain private organizations may not be readily marketable. The Portfolio will not purchase
mortgage-related securities or any other assets which in the Sub-advisor's opinion are illiquid if, as a result, more than 15% of
the value of the Portfolio's total assets will be illiquid.
Mortgage-backed securities that are issued or guaranteed by the U.S. Government, its agencies or instrumentalities, are
not subject to the Portfolio's industry concentration restrictions, set forth in this Statement under "Investment Restrictions,"
by virtue of the exclusion from that test available to all U.S. Government securities. In the case of privately issued
mortgage-related securities, the Portfolio takes the position that mortgage-related securities do not represent interests in any
particular "industry" or group of industries. The assets underlying such securities may be represented by a portfolio of first
lien residential mortgages (including both whole mortgage loans and mortgage participation interests) or portfolios of mortgage
pass-through securities issued or guaranteed by GNMA, FNMA or FHLMC. Mortgage loans underlying a mortgage-related security may in
turn be insured or guaranteed by the Federal Housing Administration or the Department of Veterans Affairs. In the case of private
issue mortgage-related securities whose underlying assets are neither U.S. Government securities nor U.S. Government-insured
mortgages, to the extent that real properties securing such assets may be located in the same geographical region, the security
may be subject to a greater risk of default that other comparable securities in the event of adverse economic, political or
business developments that may affect such region and ultimately, the ability of residential homeowners to make payments of
principal and interest on the underlying mortgages.
Collateralized Mortgage Obligations (CMOs). A CMO is a hybrid between a mortgage-backed bond and a mortgage
pass-through security. Similar to a bond, interest and prepaid principal is paid, in most cases, semiannually. CMOs may be
collateralized by whole mortgage loans, but are more typically collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, FHLMC, or FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated maturity. Actual maturity and average life
will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de
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facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payment of principal
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received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest
maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. An
investor is partially guarded against a sooner than desired return or principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer") issues multiple series (e.g., A, B, C, Z) of the CMO bonds
("Bonds"). Proceeds of the Bond offering are used to purchase mortgages or mortgage pass-through certificates ("Collateral").
The Collateral is pledged to a third party trustee as security for the Bonds. Principal and interest payments from the Collateral
are used to pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds all bear current interest. Interest
on the Series Z Bond is accrued and added to principal and a like amount is paid as principal on the Series A, B, or C Bond
currently being paid off. When the Series A, B, and C Bonds are paid in full, interest and principal on the Series Z Bond begins
to be paid currently. With some CMOs, the issuer serves as a conduit to allow loan originators (primarily builders or savings and
loan associations) to borrow against their loan portfolios.
FHLMC Collateralized Mortgage Obligations. FHLMC CMOs are debt obligations of FHLMC issued in multiple classes
having different maturity dates which are secured by the pledge of a pool of conventional mortgage loans purchased by FHLMC.
Unlike FHLMC PCs, payments of principal and interest on the CMOs are made semiannually, as opposed to monthly. The amount of
principal payable on each semiannual payment date is determined in accordance with FHLMC's mandatory sinking fund schedule, which,
in turn, is equal to approximately 100% of FHA prepayment experience applied to the mortgage collateral pool. All sinking fund
payments in the CMOs are allocated to the retirement of the individual classes of bonds in the order of their stated maturities.
Payment of principal on the mortgage loans in the collateral pool in excess of the amount of FHLMC's minimum sinking fund
obligation for any payment date are paid to the holders of the CMOs as additional sinking fund payments. Because of the
"pass-through" nature of all principal payments received on the collateral pool in excess of FHLMC's minimum sinking fund
requirement, the rate at which principal of the CMOs is actually repaid is likely to be such that each class of bonds will be
retired in advance of its scheduled maturity date.
If collection of principal (including prepayments) on the mortgage loans during any semiannual payment period is not
sufficient to meet FHLMC's minimum sinking fund obligation on the next sinking fund payment date, FHLMC agrees to make up the
deficiency from its general funds.
Criteria for the mortgage loans in the pool backing the FHLMC CMOs are identical to those of FHLMC PCs. FHLMC has the
right to substitute collateral in the event of delinquencies and/or defaults.
For an additional discussion of mortgage-backed securities and certain risks involved therein, see this Statement and the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Other Mortgage-Related Securities. Other mortgage-related securities include securities other than those described above
that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property,
including CMO residuals or stripped mortgage-backed securities. Other mortgage-related securities may be equity or debt
securities issued by agencies or instrumentalities of the U.S. Government or by private originators of, or investors in, mortgage
loans, including savings and loan associations, homebuilders, mortgage banks, commercial banks, investment banks, partnerships,
trusts and special purpose entities of the foregoing.
CMO Residuals. CMO residuals are derivative mortgage securities issued by agencies or instrumentalities of the
U.S. Government or by private originators of, or investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks and special purpose entities of the foregoing.
The cash flow generated by the mortgage assets underlying a series of CMOs is applied first to make required payments of
principal and interest on the CMOs and second to pay the related administrative expenses of the issuer. The residual in a CMO
structure generally represents the interest in any excess cash flow remaining after making the foregoing payments. Each payment
of such excess cash flow to a holder of the related CMO residual represents income and/or a return of capital. The amount of
residual cash flow resulting from a CMO will depend on, among other things, the characteristics of the mortgage assets, the coupon
rate of each class of CMO, prevailing interest rates, the amount of administrative expenses and the prepayment experience on the
mortgage assets. In particular, the yield to maturity on CMO residuals is extremely sensitive to prepayments on the related
underlying mortgage assets, in the same manner as an interest-only ("IO") class of stripped mortgage-backed securities. See
"Other Mortgage-Related Securities -- Stripped Mortgage-Backed Securities." In addition, if a series of a CMO includes a class
that bears interest at an adjustable rate, the yield to maturity on the related CMO residual will also be extremely sensitive to
changes in the level of the index upon which interest rate adjustments are based. As described below with respect to stripped
mortgage-backed securities, in certain circumstances the Portfolio may fail to recoup fully its initial investment in a CMO
residual.
CMO residuals are generally purchased and sold by institutional investors through several investment banking firms acting
as brokers or dealers. The CMO residual market has only very recently developed and CMO residuals currently may not have the
liquidity of other more established securities trading in other markets. Transactions in CMO residuals are generally completed
only after careful review of the characteristics of the securities in question. In addition, CMO residuals may or, pursuant to an
exemption therefrom, may not have been registered under the Securities Act of 1933, as amended. CMO residuals, whether or not
registered under such Act, may be subject to certain restrictions on transferability, and may be deemed "illiquid" and subject to
the Portfolio's limitations on investment in illiquid securities.
Stripped Mortgage-Backed Securities. Stripped mortgage-backed securities ("SMBS") are derivative multi-class
mortgage securities. SMBS may be issued by agencies or instrumentalities of the U.S. Government, or by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and
special purpose entities of the foregoing.
SMBS are usually structured with two classes that receive different proportions of the interest and principal
distributions on a pool of mortgage assets. A common type of SMBS will have one class receiving some of the interest and most of
the principal from the mortgage assets, which the other class will receive most of the interest and the remainder of the
principal. In the most extreme case, one class will receive all of the interest (the IO class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yield to maturity on an IO class is extremely sensitive to
the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal
payments may have a material adverse effect on the Portfolio's yield to maturity from these securities. If the underlying
mortgage assets experience greater than anticipated prepayments of principal, the Portfolio may fail to fully recoup its initial
investment in these securities even if the security is in one of the highest rating categories.
Although SMBS are purchased and sold by institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result, established trading markets have not yet
developed and, accordingly, these securities may be deemed "illiquid" and subject to the Portfolio's limitations on investment in
illiquid securities.
Other Asset-Backed Securities. Similarly, the Sub-advisor expects that other asset-backed securities (unrelated to
mortgage loans) will be offered to investors in the future. Several types of asset-backed securities may be offered to investors,
including Certificates for Automobile Receivables. For a discussion of automobile receivables, see this Statement under "Certain
Risk Factors and Investment Methods." Consistent with the Portfolio's investment objectives and policies, the Sub-advisor also
may invest in other types of asset-backed securities.
Foreign Securities. The Portfolio may invest in corporate debt securities of foreign issuers (including preferred or
preference stock), certain foreign bank obligations (see "Bank Obligations") and U.S. dollar- or foreign currency-denominated
obligations of foreign governments or their subdivisions, agencies and instrumentalities, international agencies and supranational
entities. 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 emerging market countries. Investing in the securities of foreign issuers involves special risks
and considerations not typically associated with investing in U.S. companies. For a discussion of certain risks involved in
foreign investments, in general, and the special risks of investing in developing countries, see this Statement and the Trust's
Prospectus under "Certain Risk Factors and Investment Methods."
The Portfolio also may purchase and sell foreign currency options and foreign currency futures contracts and related
options (see ""Derivative Instruments"), and enter into forward foreign currency exchange contracts in order to protect against
uncertainty in the level of future foreign exchange rates in the purchase and sale of securities.
A forward foreign currency contract involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the tine of the
contract. These contracts may be bought or sold to protect the Portfolio against a possible loss resulting from an adverse change
in the relationship between foreign currencies and the U.S. dollar or to increase exposure to a particular foreign currency. Open
positions in forward contracts are covered by the segregation with the Trust's custodian of cash or other liquid assets and are
marked to market daily. Although such contracts are intended to minimize the risk of loss due to a decline on the value of the
hedged currencies, at the same time, they tend to limit any potential gain which might result should the value of such currencies
increase.
Brady Bonds. The Portfolio may invest in Brady Bonds. Brady Bonds are securities created through the exchange of
existing commercial bank loans to sovereign entities for new obligations in connection with debt restructurings under a debt
restructuring plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan debt
restructurings have been implemented in a number of countries, including in Argentina, Bolivia, Bulgaria, Costa Rica, the
Dominican Republic, Ecuador, Jordan, Mexico, Niger, Nigeria, the Philippines, Poland, Uruguay, and Venezuela. In addition, Brazil
has concluded a Brady-like plan. It is expected that other countries will undertake a Brady Plan in the future.
Brady Bonds have been issued only recently, and accordingly do not have a long payment history. Brady Bonds may be
collateralized or uncollateralized, are issued in various currencies (primarily the U.S. dollar) and are actively traded in the
over-the-counter secondary market. U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate par bonds or
floating rate discount bonds, are generally collateralized in full as to principal by U.S. Treasury zero-coupon bonds having the
same maturity as the Brady Bonds. Interest payments on these Brady Bonds generally are collateralized on a one-year or longer
rolling-forward basis by cash or securities in an amount that, in the case of fixed rate bonds, is equal to at least one year of
interest payments or, in the case of floating rate bonds, initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals thereafter. Certain Brady Bonds are entitled to "value
recovery payments" in certain circumstances, which in effect constitute supplemental interest payments but generally are not
collateralized. Brady Bonds are often viewed as having three or four valuation components: (i) the collateralized repayment of
principal at final maturity; (ii) the collateralized interest payments; (iii) the uncollateralized interest payments; and (iv) any
uncollateralized repayment of principal at maturity (these uncollateralized amounts constitute the "residual risk").
Most Mexican Brady Bonds issued to date have principal repayments at final maturity fully collateralized by U.S. Treasury
zero-coupon bonds (or comparable collateral denominated in other currencies) and interest coupon payments collateralized on an
18-month rolling-forward basis by funds held in escrow by an agent for the bondholders. A significant portion of the Venezuelan
Brady Bonds and the Argentine Brady Bonds issued to date have principal repayments at final maturity collateralized by U.S.
Treasury zero-coupon bonds (or comparable collateral denominated in other currencies) and/or interest coupon payments
collateralized on a 14-month (for Venezuela) or 12-month (for Argentina) rolling-forward basis by securities held by the Federal
Reserve Bank of New York as collateral agent.
Brady Bonds involve various risk factors including residual risk and the history of defaults with respect to commercial
bank loans by public and private entities of countries issuing Brady Bonds. There can be no assurance that Brady Bonds in which
the Portfolio may invest will not be subject to restructuring arrangements or to requests for new credit, which may cause the
Portfolio to suffer a loss of interest or principal on any of its holdings.
Bank Obligations. Bank obligations in which the Portfolios invest include certificates of deposit, bankers' acceptances,
and fixed time deposits. Certificates of deposit are negotiable certificates issued against funds deposited in a commercial bank
for a definite period of time and earning a specified return. Bankers' acceptances are negotiable drafts or bills of exchange,
normally drawn by an importer or exporter to pay for specific merchandise, which are "accepted" by a bank, meaning, in effect,
that the bank unconditionally agrees to pay the face value of the instrument on maturity. Fixed time deposits are bank
obligations payable at a stated maturity date and bearing interest at a fixed rate. Fixed time deposits may be withdrawn on
demand by the investor, but may be subject to early withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such deposits. The Portfolio will not invest in fixed time
deposits which (1) are not subject to prepayment or (2) provide for withdrawal penalties upon prepayment (other than overnight
deposits) if, in the aggregate, more than 15% of its assets would be invested in such deposits, repurchase agreements maturing in
more than seven days and other illiquid assets.
The Portfolio will limit its investments in United States bank obligations to obligations of United States bank
(including foreign branches) which have more than $1 billion in total assets at the time of investment and are member of the
Federal Reserve System, are examined by the Comptroller of the Currency or whose deposits are insured by the Federal Deposit
Insurance Corporation. The Portfolio also may invest in certificates of deposit of savings and loan associations (federally or
state chartered and federally insured) having total assets in excess $1 billion.
The Portfolio will limit its investments in foreign bank obligations to United States dollar- or foreign
currency-denominated obligations of foreign banks (including United States branches of foreign banks) which at the time of
investment (i) have more than $10 billion, or the equivalent in other currencies, in total assets; (ii) in terms of assets are
among the 75 largest foreign banks in the world; (iii) have branches or agencies (limited purpose offices which do not offer all
banking services) in the United States; and (iv) in the opinion of the Sub-advisor, are of an investment quality comparable to
obligations of United States banks in which the Portfolio may invest. Subject to the Portfolio's limitation on concentration of
no more than 25% of its assets in the securities of issuers in particular industry, there is no limitation on the amount of the
Portfolio's assets which may be invested in obligations of foreign banks which meet the conditions set forth herein.
Obligations of foreign banks involve somewhat different investment risks than those affecting obligations of United
States banks, including the possibilities that their liquidity could be impaired because of future political and economic
developments, that their obligations may be less marketable than comparable obligations of United States banks, that a foreign
jurisdiction might impose withholding taxes on interest income payable on those obligations, that foreign deposits may be seized
or nationalized, that foreign governmental restrictions such as exchange controls may be adopted which might adversely affect the
payment of principal and interest on those obligations and that the selection of those obligations may be more difficult because
there may be less publicly available information concerning foreign banks or the accounting, auditing and financial reporting
standards, practices and requirements applicable to foreign banks may differ from those applicable to United States banks.
Foreign banks are not generally subject to examination by any United States Government agency or instrumentality.
Short Sales. The Portfolio may make short sales of securities as part of their overall portfolio management strategies
involving the use of derivative instruments and to offset potential declines in long positions in similar securities. A short
sale is a transaction in which the Portfolio sells a security it does not own in anticipation that the market price of that
security will decline.
When the Portfolio makes a short sale, it must borrow the security sold short and deliver it to the broker-dealer through
which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the sale. The Portfolio
may have to pay a fee to borrow particular securities and is often obligated to pay over any accrued interest on such borrowed
securities.
If the price of the security sold short increases between the time of the short sale and the time and the Portfolio
replaces the borrowed security, the Portfolio will incur a loss; conversely, if the price declines, the Portfolio will realize a
capital gain. Any gain will be decreased, and any loss increased, by the transaction costs described above. The successful use
of short selling may be adversely affected by imperfect correlation between movements in the price of the security sold short and
the securities being hedged.
To the extent that the Portfolio engages in short sales, it will provide collateral to the broker-dealer and (except in
the case of short sales "against the box") will maintain additional asset coverage in the form of cash or other liquid assets in a
segregated account. The Portfolio does not intend to enter into short sales (other than those "against the box") if immediately
after such sale the aggregate of the value of all collateral plus the amount in such segregated account exceeds one-third of the
value of the Portfolio's net assets. This percentage may be varied by action of the Trust's Board of Trustees. A short sale is
"against the box" to the extent that the Portfolio contemporaneously owns, or has the right to obtain at no added cost, securities
identical to those sold short.
Derivative Instruments. In pursuing its individual objective, the Portfolio may, as described in the Prospectus,
purchase and sell (write) both put options and call options on securities, securities indexes, and foreign currencies, and enter
into interest rate, foreign currency and index futures contracts and purchase and sell options on such futures contracts ("future
options") for hedging purposes. The Portfolio also may enter into swap agreements with respect to foreign currencies, interest
rates and indexes of securities. If other types of financial instruments, including other types of options, futures contracts, or
futures options are traded in the future, the Portfolio may also use those instruments, provided that the Trust's Board of
Trustees determines that their use is consistent with the Portfolio's investment objective, and provided that their use is
consistent with restrictions applicable to options and futures contracts currently eligible for use by the Trust (i.e., that
written call or put options will be "covered" or "secured" and that futures and futures options will be used only for hedging
purposes).
Options on Securities and Indexes. The Portfolio may purchase and sell both put and call options on debt or other
securities or indexes in standardized contracts traded on foreign or national securities exchanges, boards of trade, or similar
entities, or quoted on NASDAQ or on a regulated foreign over-the-counter market, and agreements sometimes called cash puts, which
may accompany the purchase of a new issue of bonds from a dealer.
The Portfolio will write call options and put options only if they are "covered." In the case of a call option on a
security, the option is "covered" if the Portfolio owns the security underlying the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or, if additional cash consideration is required, cash or cash
equivalents in such amount are placed in a segregated account by its custodian) upon conversion or exchange of other securities
held by the Portfolio. For a call option on an index, the option is covered if the Portfolio maintains with its custodian cash or
cash equivalents equal to the contract value. A call option is also covered if the Portfolio holds a call on the same security or
index as the call written where the exercise price of the call held is (i) equal to or less than the exercise price of the call
written, or (ii) greater than the exercise price of the call written, provided the difference is maintained by the Portfolio in
cash or cash equivalents in a segregated account with its custodian. A put option on a security or an index is "covered" if the
Portfolio maintains cash or cash equivalents equal to the exercise price in a segregated account with its custodian. A put option
is also covered if the Portfolio holds a put on the same security or index as the put written where the exercise price of the put
held is (i) equal to or greater than the exercise price of the put written, or (ii) less than the exercise price of the put
written, provided the difference is maintained by the Portfolio in cash or cash equivalents in a segregated account with its
custodian.
If an option written by the Portfolio expires, the Portfolio realizes a capital gain equal to the premium received at the
time the option was written. If an option purchased by the Portfolio expires unexercised, the Portfolio realizes a capital loss
equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may be closed out by an offsetting purchase or sale of an
option of the same series (type, exchange, underlying security or index, exercise price, and expiration). There can be no
assurance, however, that a closing purchase or sale transaction can be effected when the Portfolio desires.
The Portfolio will realize a capital gain from a closing purchase transaction if the cost of the closing option is less
than the premium received from writing the option, or if it is more, the Portfolio will realize a capital loss. If the premium
received from a closing sale transaction is more than the premium paid to purchase the option, the Portfolio will realize a
capital gain or, if it is less, the Portfolio will realize a capital loss. The principal factors affecting the market value of a
put or a call option include supply and demand, interest rates, the current market price of the underlying security or index in
relation to the exercise price of the option, the volatility of the underlying security or index, and the time remaining until the
expiration date.
The premium paid for a put or call option purchased by the Portfolio is an asset of the Portfolio. The premium received
for a option written by the Portfolio is recorded as a deferred credit. The value of an option purchased or written is marked to
market daily and is valued at the closing price on the exchange on which it is traded or, if not traded on an exchange or no
closing price is available, at the mean between the last bid and asked prices. For a discussion of certain risks involved in
options, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Foreign Currency Options. The Portfolio may buy or sell put and call options on foreign currencies either on exchanges
or in the over-the-counter market. A put option on a foreign currency gives the purchaser of the option the right to sell a
foreign currency at the exercise price until the option expires. Currency options traded on U.S. or other exchanges may be
subject to position limits which may limit the ability of the Portfolio to reduce foreign currency risk using such options.
Over-the-counter options differ from traded options in that they are two-party contracts with price and other terms negotiated
between buyer and seller, and generally do not have as much market liquidity as exchange-traded options.
Futures Contracts and Options on Futures Contracts. The Portfolio may use interest rate, foreign currency or index
futures contracts, as specified in the Trust's Prospectus. An interest rate, foreign currency or index futures contract provides
for the future sale by one party and purchase by another party of a specified quantity of a financial instrument, foreign currency
or the cash value of an index at a specified price and time. A futures contract on an index is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of
the last trading day of the contract and the price at which the index contract was originally written. Although the value of an
index might be a function of the value of certain specified securities, no physical delivery of these securities is made.
The Portfolio may purchase and write call and put futures options. Futures options possess many of the same
characteristics as options on securities and indexes (discussed above). A futures option gives the holder the right, in return
for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price
at any time during the period of the option. Upon exercise of a call option, the holder acquires a long position in the futures
contract and the writer is assigned the opposite short position. In the case of a put option, the opposite is true.
To comply with applicable rules of the CFTC under which the Trust and the Portfolio avoid being deemed a "commodity pool"
or a "commodity pool operator," the Portfolio intends generally to limit its use of futures contracts and futures options to "bona
fide hedging" transactions, as such term is defined in applicable regulations, interpretations and practice. For example, the
Portfolio might use futures contracts to hedge against anticipated changes in interest rates that might adversely affect either
the value of the Portfolio's securities or the price of the securities which the Portfolio intends to purchase. The Portfolio's
hedging activities may include sales of futures contracts as an offset against the effect or expected increases in interest rates,
and purchases of futures contracts as an offset against the effect of expected declines in interest rates. Although other
techniques could be used to reduce that Portfolio's exposure to interest rate fluctuations, the Portfolio may be able to hedge its
exposure more effectively and perhaps at a lower cost by using futures contracts and futures options.
The Portfolio will only enter into futures contracts and futures options which are standardized and traded on a U.S. or
foreign exchange, board of trade, or similar entity, or quoted on an automated quotation system.
When a purchase or sale of a futures contract is made by the Portfolio, the Portfolio is required to deposit with its
custodian (or broker, if legally permitted) a specified amount of cash or U.S. Government securities ("initial margin"). The
margin required for a futures contract is set by the exchange on which the contract is traded and may be modified during the term
of the contract. The initial margin is in the nature of a performance bond or good faith deposit on the futures contract which is
returned to the Portfolio upon termination of the contract, assuming all contractual obligations have been satisfied. The
Portfolio expects to earn interest income on its initial margin deposits. A futures contract held by the Portfolio is valued
daily at the official settlement price of the exchange on which it is traded. Each day the Portfolio pays or receives cash,
called "variation margin," equal to the daily change in value of the futures contract. This process is known as "marking to
market." Variation margin does not represent a borrowing or loan by the Portfolio but is instead a settlement between the
Portfolio and the broker of the amount one would owe the other if the futures contract expired. In computing daily net asset
value, each Portfolio will mark to market its open futures positions.
The Portfolio is also required to deposit and maintain margin with respect to put and call options on futures contracts
written by it. Such margin deposits will vary depending on the nature of the underlying futures contract (and the related initial
margin requirements), the current market value of the option, and other futures positions held by the Portfolio.
Although some futures contracts call for making or taking delivery of the underlying securities, generally these
obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an offsetting purchase price is less than the original sale price, the
Portfolio realizes a capital gain, or if it is more, the Portfolio realizes a capital loss. Conversely, if an offsetting sale
price is more than the original purchase price, the Portfolio realizes a capital gain, or if it is less, the Portfolio realizes a
capital loss. The transaction costs must also be included in these calculations.
Limitations on Use of Futures and Futures Options. In general, the Portfolio intends to enter into positions in futures
contracts and related options only for "bona fide hedging" purposes. With respect to positions in futures and related options
that do not constitute bona fide hedging positions, the Portfolio will not enter into a futures contract or futures option
contract if, immediately thereafter, the aggregate initial margin deposits relating to such positions plus premiums paid by it for
open futures option positions, less the amount by which any such options are "in-the-money," would exceed 5% of the Portfolio's
total assets. A call option is "in-the-money" if the value of the futures contract that is the subject of the option exceeds the
exercise price. A put option is "in-the-money" if the exercise price exceeds the value of the futures contract that is the
subject of the option.
When purchasing a futures contract, the Portfolio will maintain with its custodian (and mark-to-market on a daily basis)
cash or other liquid assets that, when added to the amounts deposited with a futures commission merchant as margin, are equal to
the market value of the futures contract. Alternatively, the Portfolio may "cover" its position by purchasing a put option on the
same futures contract with a strike price as high or higher than the price of the contract held by the Portfolio.
When selling a futures contract, the Portfolio will maintain with its custodian (and mark-to-market on a daily basis)
liquid assets that, when added to the amount deposited with a futures commission merchant as margin, are equal to the market value
of the instruments underlying the contract. Alternatively, the Portfolio may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures contract, a portfolio with a volatility substantially similar to that
of the index on which the futures contract is based), or by holding a call option permitting the Portfolio to purchase the same
futures contract at a price no higher than the price of the contract written by the Portfolio (or at a higher price if the
difference is maintained in liquid assets with the Trust's custodian).
When selling a call option on a futures contract, the Portfolio will maintain with its custodian (and mark-to-market on a
daily basis) cash or other liquid assets that, when added to the amounts deposited with a futures commission merchant as margin,
equal the total market value of the futures contract underlying the call option. Alternatively, the Portfolio may cover its
position by entering into a long position in the same futures contract at a price no higher than the strike price of the call
option, by owning the instruments underlying the futures contract, or by holding a separate call option permitting the Portfolio
to purchase the same futures contract at a price not higher than the strike price of the call option sold by the Portfolio.
When selling a put option on a futures contract, the Portfolio will maintain with its custodian (and mark-to market on a
daily basis) cash or other liquid assets that equal the purchase price of the futures contract, less any margin on deposit.
Alternatively, the Portfolio may cover the position either by entering into a short position in the same futures contract, or by
owning a separate put option permitting it to sell the same futures contract so long as the strike price of the purchased put
option is the same or higher than the strike price of the put option sold by the Portfolio.
Swap Agreements. The Portfolio may enter into interest rate, index and currency exchange rate swap agreements for
purposes of attempting to obtain a particular desired return at a lower cost to the Portfolio than if the Portfolio had invested
directly in an instrument that yielded that desired return. For a discussion of swap agreements, see the Trust's Prospectus under
"Investment Objectives and Policies." The Portfolio's obligations under a swap agreement will be accrued daily (offset against
any amounts owing to the Portfolio) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of cash or other liquid assets to avoid any potential leveraging of the Portfolio's
portfolio. The Portfolio will not enter into a swap agreement with any single party if the net amount owned or to be received
under existing contracts with that party would exceed 5% of the Portfolio's assets.
Whether the Portfolio's use of swap agreements will be successful in furthering its investment objective of total return
will depend on the Sub-advisor's ability correctly to predict whether certain types of investments are likely to produce greater
returns than other investments. Because they are two party contracts and because they may have terms of longer than seven days,
swap agreements may be considered to be illiquid. Moreover, the Portfolio bears the risk of loss of the amount expected to be
received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. The Sub-advisor will
cause the Portfolio to enter into swap agreements only with counterparties that would be eligible for consideration as repurchase
agreement counterparties under the Portfolio's repurchase agreement guidelines. Certain restrictions imposed on the Portfolio by
the Internal Revenue Code may limit the Portfolio's ability to use swap agreements. The swaps market is a relatively new market
and is largely unregulated. It is possible that developments in the swaps market, including potential government regulation,
could adversely affect the Portfolio's ability to terminate existing swap agreements or to realize amounts to be received under
such agreements.
Certain swap agreements are exempt from most provisions of the Commodity Exchange Act ("CEA") and, therefore, are not
regulated as futures or commodity option transactions under the CEA, pursuant to regulations approved by the CFTC. To qualify for
this exemption, a swap agreement must be entered into by "eligible participants." To be eligible, natural persons and most other
entities must have total assets exceeding $10 million; commodity pools and employee benefit plans must have assets exceeding $5
million. In addition, an eligible swap transaction must meet three conditions. First, the swap agreement may not be part of a
fungible class of agreements that are standardized as to their material economic terms. Second, the creditworthiness of parties
with actual or potential obligations under the swap agreement must be a material consideration in entering into or determining the
terms of the swap agreement, including pricing, cost or credit enhancement terms. Third, swap agreements may not be entered into
and traded on or through a multilateral transaction execution facility.
This exemption is not exclusive, and partnerships may continue to rely on existing exclusions for swaps, such as the
Policy Statement issued in July 1989 which recognized a safe harbor for swap transactions from regulation as futures or commodity
option transactions under the CEA or its regulations. The Policy Statement applies to swap transactions settled in cash that (1)
have individual tailored terms, (2) lack exchange-style offset and the use of a clearing organization or margin system, (3) are
undertaken in conjunction with a line of business, and (4) are not marketed to the public.
Structured Notes. Structured notes are derivative debt securities, the interest rate or principal of which is related to
another economic indicator or financial market index. Indexed securities include structured notes as well as securities other
than debt securities, the interest rate or principal of which is determined by such an unrelated indicator. Indexed securities
may include a multiplier that multiplies the indexed element by a specified factor and, therefore, the value of such securities
may be very volatile. To the extent the Portfolio invests in these securities, however, the Sub-advisor analyzes these securities
in its overall assessment of the effective duration of the Portfolio's portfolio in an effort to monitor the Portfolio's interest
rate risk.
Foreign Currency Exchange-Related Securities. The Portfolio may invest in foreign currency warrants, principal exchange
rate linked securities and performance indexed paper. For a description of these instruments, see this Statement under "Certain
Risk Factor and Investment Methods."
Warrants to Purchase Securities. The Portfolio may invest in or acquire warrants to purchase equity or fixed-income
securities. Bonds with warrants attached to purchase equity securities have many characteristics of convertible bonds and their
prices may, to some degree, reflect the performance of the underlying stock. Bonds also may be issued with warrants attached to
purchase additional fixed-income securities at the same coupon rate. A decline in interest rates would permit the Portfolio to
buy additional bonds at the favorable rate or to sell the warrants at a profit. If interest rates rise, the warrants would
generally expire with no value.
Hybrid Instruments. The Portfolio may invest up to 5% of its assets in hybrid instruments. A hybrid instrument can
combine the characteristics of securities, futures, and options. Hybrids can be used as an efficient means of pursuing a variety
of investment goals, including currency hedging, duration management, and increased total return. For an additional discussion of
hybrid instruments and certain risks involved therein, see this Statement under "Certain Risk Factors and Investment Methods."
Inverse Floaters. The Portfolio may also invest in inverse floating rate debt instruments ("inverse floaters"). The
interest rate on an inverse floater resets in the opposite direction from the market rate of interest to which the inverse floater
is indexed. An inverse floating rate security may exhibit greater price volatility than a fixed rate obligation of similar credit
quality. The Portfolio will not invest more than 5% of its net assets in any combination of inverse floater, interest only, or
principal only securities.
Loan Participations. The Portfolio may purchase participations in commercial loans. Such indebtedness may be secured or
unsecured. Loan participations typically represent direct participation in a loan to a corporate borrower, and generally are
offered by banks or other financial institutions or lending syndicates. When purchasing loan participations, the Portfolio
assumes the credit risk associated with the corporate borrower and may assume the credit risk associated with an interposed bank
or other financial intermediary. The participation interests in which the Portfolio intends to invest may not be rated by any
nationally recognized rating service.
A loan is often administered by an agent bank acting as agent for all holders. The agent bank administers the terms of
the loan, as specified in the loan agreement. In addition, the agent bank is normally responsible for the collection of principal
and interest payments from the corporate borrower and the apportionment of these payments to the credit of all institutions which
are parties to the loan agreement. Unless, under the terms of the loan or other indebtedness, the Portfolio has direct recourse
against the corporate borrower, the Portfolio may have to rely on the agent bank or other financial intermediary to apply
appropriate credit remedies against a corporate borrower.
A financial institution's employment as agent bank might be terminated in the event that it fails to observe a requisite
standard of care or becomes insolvent. A successor agent bank would generally be appointed to replace the terminated agent bank,
and assets held by the agent bank under the loan agreement should remain available to holders of such indebtedness. However, if
assets held by the agent bank for the benefit of the Portfolio were determined to be subject to the claims of the agent bank's
general creditors, the Portfolio might incur certain costs and delays in realizing payment on a loan or loan participation and
could suffer a loss of principal and/or interest. In situations involving other interposed financial institutions (e.g., an
insurance company or governmental agency) similar risks may arise.
Purchasers of loans and other forms of direct indebtedness depend primarily upon the creditworthiness of the corporate
borrower for payment of principal and interest. If the Portfolio does not receive scheduled interest or principal payments on
such indebtedness, the Portfolio's share price and yield could be adversely affected. Loans that are fully secured offer the
Portfolio more protection than an unsecured loan in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower's obligation, or that
the collateral can be liquidated.
The Portfolio may invest in loan participations with credit quality comparable to that of issuers of its securities
investments. Indebtedness of companies whose creditworthiness is poor involves substantially greater risks, and may be highly
speculative. Some companies may never pay off their indebtedness, or may pay only a small fraction of the amount owed.
Consequently, when investing in indebtedness of companies with poor credit, the Portfolio bears a substantial risk of losing the
entire amount invested.
The Portfolio limits the amount of its total assets that it will invest in any one issuer or in issuers within the same
industry (see "Investment Restrictions"). For purposes of these limits, the Portfolio generally will treat the corporate borrower
as the "issuer" of indebtedness held by the Portfolio. In the case of loan participations where a bank or other lending
institution serves as a financial intermediary between the Portfolio and the corporate borrower, if the participation does not
shift to the Portfolio the direct debtor-creditor relationship with the corporate borrower, SEC interpretations require the
Portfolio to treat both the lending bank or other lending institution and the corporate borrower as "issuers" for the purposes of
determining whether the Portfolio has invested more than 5% of its total assets in a single issuer. Treating a financial
intermediary as an issuer of indebtedness may restrict the Portfolio's ability to invest in indebtedness related to a single
financial intermediary, or a group of intermediaries engaged in the same industry, even if the underlying borrowers represent many
different companies and industries.
Loan and other types of direct indebtedness may not be readily marketable and may be subject to restrictions on resale.
In some cases, negotiations involved in disposing of indebtedness may require weeks to complete. Consequently, some indebtedness
may be difficult or impossible to dispose of readily at what the Sub-advisor believes to be a fair price. In addition, valuation
of illiquid indebtedness involves a greater degree of judgment in determining the Portfolio's net asset value than if that value
were based on available market quotations, and could result in significant variations in the Portfolio's daily share price. At
the same time, some loan interests are traded among certain financial institutions and accordingly may be deemed liquid. As the
market for different types of indebtedness develops, the liquidity of these instruments is expected to improve. In addition, the
Portfolio currently intends to treat indebtedness for which there is no readily available market as illiquid for purposes of the
Portfolio's limitation on illiquid investments. Investments in loan participations are considered to be debt obligations for
purposes of the Company's investment restriction relating to the lending of funds or assets by the Portfolio.
Investments in loans through a direct assignment of the financial institution's interests with respect to the loan may
involve additional risks to the Portfolio. For example, if a loan is foreclosed, the Portfolio could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and disposing of the collateral. In addition, it is
conceivable that under emerging legal theories of lender liability, the Portfolio could be held liable as co-lender. It is
unclear whether loans and other forms of direct indebtedness offer securities law protections against fraud and
misrepresentation. In the absence of definitive regulatory guidance, the Portfolio relies on the Sub-advisor's research in an
attempt to avoid situations where fraud or misrepresentation could adversely affect the Portfolio.
Delayed Funding Loans and Revolving Credit Facilities. The Portfolio may enter into, or acquire participations in,
delayed funding loans and revolving credit facilities. Delayed funding loans and revolving credit facilities are borrowing
arrangements in which the lender agrees to make loans up to a maximum amount upon demand by the borrower during a specified term.
These commitments may have the effect of requiring the Portfolio to increase its investment in a company at a time when it might
not otherwise decide to do so (including at a time when the company's financial condition makes it unlikely that such amounts will
be repaid). To the extent that the Portfolio is committed to advance additional funds, it will at all times segregate liquid
assets, determined to be liquid by the Sub-advisor in accordance with procedures established by the Board of Directors, in an
amount sufficient to meet such commitments. The Portfolio may invest in delayed funding loans and revolving credit facilities
with credit quality comparable to that of issuers of its securities investments. Delayed funding loans and revolving credit
facilities may be subject to restrictions on transfer, and only limited opportunities may exist to resell such instruments. As a
result, the Portfolio may be unable to sell such investments at an opportune time or may have to resell them at less than fair
market value. The Portfolio currently intend to treat delayed funding loans and revolving credit facilities for which there is no
readily available market as illiquid for purposes of the Portfolio's limitation on illiquid investments. Participation interests
in revolving credit facilities will be subject to the limitations discussed above under "Loan Participations." Delayed funding
loans and revolving credit facilities are considered to be debt obligations for purposes of the Company's investment restriction
relating to the lending of funds or assets by the Portfolio.
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST PIMCO Total Return Bond Portfolio. These limitations are not "fundamental" restrictions, and may be changed by the Trustees
without shareholder approval.
1. The Portfolio will not invest more than 15% of the assets of the Portfolio (taken at market value at the time of
the investment) in "illiquid securities," illiquid securities being defined to include securities subject to legal or contractual
restrictions on resale (which may include private placements), repurchase agreements maturing in more than seven days, certain
options traded over the counter that the Portfolio has purchased, securities being used to cover options a Portfolio has written,
securities for which market quotations are not readily available, or other securities which legally or in the Sub-advisor's option
may be deemed illiquid.
2. The Portfolio will not purchase securities for the Portfolio from, or sell portfolio securities to, any of the
officers and directors or Trustees of the Trust or of the Investment Manager or of the Sub-advisor.
3. The Portfolio will not invest more than 5% of the assets of the Portfolio (taken at market value at the time of
investment) in any combination of interest only, principal only, or inverse floating rate securities.
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.
Investment Policies:
Borrowing. The Portfolio may borrow for temporary administrative purposes. This borrowing may be unsecured. The 1940
Act requires the Portfolio to maintain continuous asset coverage (that is, total assets including borrowings, less liabilities
exclusive of borrowings) of 300% of the amount borrowed. If the 300% asset coverage should decline as a result of market
fluctuations or other reasons, the Portfolio may be required to sell some of its portfolio holdings within three days to reduce
the debt and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell
securities at that time. Borrowing will tend to exaggerate the effect on net asset value of any increase or decrease in the
market value of the Portfolio's securities. Money borrowed will be subject to interest costs which may or may not be recovered by
appreciation of the securities purchased. The Portfolio also may be required to maintain minimum average balances in connection
with such borrowing or to pay a commitment or other fee to maintain a line of credit; either of these requirements would increase
the cost of borrowing over the stated interest rate.
Among the forms of borrowing in which the Portfolio may engage is the entry into reverse repurchase agreements. A
reverse repurchase agreement involves the sale of the Portfolio-eligible security by the Portfolio, coupled with its agreement to
repurchase the instrument at a specified time and price. The Portfolio will maintain a segregated account with its Custodian
consisting of cash or other liquid assets equal (on a daily mark-to-market basis) to its obligations under reverse repurchase
agreements with broker-dealers (but not banks). However, reverse repurchase agreements involve the risk that the market value of
securities retained by the Portfolio may decline below the repurchase price of the securities sold by the Portfolio which it is
obligated to repurchase. To the extent that the Portfolio collateralizes its obligations under a reverse repurchase agreement,
the asset coverage requirements of the 1940 Act will not apply.
In addition to the above, the Portfolio may enter into reverse repurchase agreements and "mortgage dollar rolls." A
reverse repurchase agreement involves the sale of a portfolio-eligible security by the Portfolio, coupled with its agreement to
repurchase the instrument at a specified time and price. In a "dollar roll" transaction the Portfolio sells a mortgage-related
security (such as a GNMA security) to a dealer and simultaneously agrees to repurchase a similar security (but not the same
security) in the future at a pre-determined price. A "dollar roll" can be viewed, like a reverse repurchase agreement, as a
collateralized borrowing in which the Portfolio pledges a mortgage-related security to a dealer to obtain cash. Unlike in the
case of reverse repurchase agreements, the dealer with which the Portfolio enters into a dollar roll transaction is not obligated
to return the same securities as those originally sold by the Portfolio, but only securities which are "substantially identical."
To be considered "substantially identical," the securities returned to the Portfolio generally must: (1) be collateralized by the
same types of underlying mortgages; (2) be issued by the same agency and be part of the same program; (3) have a similar original
stated maturity; (4) have identical net coupon rates; (5) have similar market yields (and therefore price); and (6) satisfy "good
delivery" requirements, meaning that the aggregate principal amounts of the securities delivered and received back must be within
2.5% of the initial amount delivered. The Portfolio's obligations under a dollar roll agreement must be covered by cash or other
liquid assets equal in value to the securities subject to repurchase by the Portfolio, maintained in a segregated account.
Both dollar roll and reverse repurchase agreements will be subject to the 1940 Act's limitations on borrowing, as
discussed above. Furthermore, because dollar roll transactions may be for terms ranging between one and six months, dollar roll
transactions may be deemed "illiquid" and subject to the Portfolio's overall limitations on investments in illiquid securities.
Corporate Debt Securities. The Portfolio's investments in U.S. dollar- or foreign currency-denominated corporate debt
securities of domestic or foreign issuers are limited to corporate debt securities (corporate bonds, debentures, notes and other
similar corporate debt instruments, including convertible securities) which meet the minimum ratings criteria set forth for the
Portfolio, or, if unrated, are in the Sub-advisor's opinion comparable in quality to corporate debt securities in which the
Portfolio may invest. The rate of return or return of principal on some debt obligations may be linked or indexed to the level of
exchange rates between the U.S. dollar and a foreign currency or currencies.
Among the corporate bonds in which the Portfolio may invest are convertible securities. A convertible security is a
bond, debenture, note, or other security that entitles the holder to acquire common stock or other equity securities of the same
or a different issuer. A convertible security generally entitles the holder to receive interest paid or accrued until the
convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities have
characteristics similar to nonconvertible debt securities. Convertible securities rank senior to common stock in a corporation's
capital structure and, therefore, generally entail less risk than the corporation's common stock, although the extent to which
such risk is reduced depends in large measure upon the degree to which the convertible security sells above its value as a
fixed-income security.
A convertible security may be subject to redemption at the option of the issuer at a predetermined price. If a
convertible security held by the Portfolio is called for redemption, the Portfolio would be required to permit the issuer to
redeem the security and convert it to underlying common stock, or would sell the convertible security to a third party. The
Portfolio generally would invest in convertible securities for their favorable price characteristics and total return potential
and would normally not exercise an option to convert.
Investments in securities rated below investment grade that are eligible for purchase by the Portfolio (i.e., rated B or
better by Moody's or S&P), are described as "speculative" by both Moody's and S&P. Investment in lower-rated corporate debt
securities ("high yield securities") generally provides greater income and increased opportunity for capital appreciation than
investments in higher quality securities, but they also typically entail greater price volatility and principal and income risk.
These high yield securities are regarded as predominantly speculative with respect to the issuer's continuing ability to meet
principal and interest payments. The market for these securities is relatively new, and many of the outstanding high yield
securities have not endured a major business recession. A long-term track record on default rates, such as that for investment
grade corporate bonds, does not exist for this market. Analysis of the creditworthiness of issuers of debt securities that are
high yield may be more complex than for issuers of higher quality debt securities.
High yield securities may be more susceptible to real or perceived adverse economic and competitive industry conditions
than investment grade securities. The prices of high yield securities have been found to be less sensitive to interest-rate
changes than higher-rated investments, but more sensitive to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for example, could cause a decline in high yield
security prices because the advent of a recession could lessen the ability of a highly leveraged company to make principal and
interest payments on its debt securities. If an issuer of high yield securities defaults, in addition to risking payment of all
or a portion of interest and principal, the Portfolio may incur additional expenses to seek recovery. In the case of high yield
securities structured as zero-coupon or pay-in-kind securities, their market prices are affected to a greater extent by interest
rate changes, and therefore tend to be more volatile than securities which pay interest periodically and in cash.
The secondary market on which high yield securities are traded may be less liquid than the market for higher grade
securities. Less liquidity in the secondary trading market could adversely affect the price at which the Portfolio could sell a
high yield security, and could adversely affect the daily net asset value of the shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of high yield securities
especially in a thinly-traded market. When secondary markets for high yield securities are less liquid than the market for higher
grade securities, it may be more difficult to value the securities because such valuation may require more research, and elements
of judgment may play a greater role in the valuation because there is less reliable, objective data available. The Sub-advisor
seeks to minimize the risks of investing in all securities through diversification, in-depth credit analysis and attention to
current developments in interest rates and market conditions. For a discussion of the risks involved in lower-rated debt
securities, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Participation on Creditors Committees. The Portfolio may from time to time participate on committees formed by creditors
to negotiate with the management of financially troubled issuers of securities held by the Portfolio. Such participation may
subject the Portfolio to expenses such as legal fees and may make the Portfolio an "insider" of the issuer for purposes of the
federal securities laws, and therefore may restrict the Portfolio's ability to trade in or acquire additional positions in a
particular security when it might otherwise desire to do so. Participation by the Portfolio on such committees also may expose
the Portfolio to potential liabilities under the federal bankruptcy laws or other laws governing the rights of creditors and
debtors. The Portfolio would participate on such committees only when the Adviser believed that such participation was necessary
or desirable to enforce the Portfolio's rights as a creditor or to protect the value of securities held by the Portfolio.
Mortgage-Related Securities. The Portfolio may invest in mortgage-backed securities. Mortgage-related securities are
interests in pools of residential or commercial mortgage loans, including mortgage loans made by savings and loan institutions,
mortgage bankers, commercial banks and others. Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations (see "Mortgage Pass-Through Securities"). The Portfolio may
also invest in debt securities which are secured with collateral consisting of mortgage-related securities (see "Collateralized
Mortgage Obligations"), and in other types of mortgage-related securities.
Interests in pools of mortgage-related securities differ from other forms of debt securities, which normally provide for
periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, these
securities provide a monthly payment which consists of both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on their residential or commercial mortgage loans, net of
any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting
from the sale of the underlying property, refinancing or foreclosure, net of fees or costs which may be incurred. Some
mortgage-related securities (such as securities issued by the Government National Mortgage Association) are described as "modified
pass-through." These securities entitle the holder to receive all interest and principal payments owed on the mortgage pool, net
of certain fees, at the scheduled payment dates regardless of whether or not the mortgagor actually makes the payment.
The principal governmental guarantor of mortgage-related securities is the Government National Mortgage Association
("GNMA"). GNMA is a wholly owned United States Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the United States Government, the timely payment of principal
and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and
mortgage bankers) and backed by pools of FHA-insured or VA-guaranteed mortgages.
Government-related guarantors (i.e., not backed by the full faith and credit of the United States Government) include the
Federal National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is subject to general regulation by the Secretary of
Housing and Urban Development. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) residential
mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations,
mutual savings banks, commercial banks and credit unions and mortgage bankers. Pass-through securities issued by FNMA are
guaranteed as to timely payment of principal and interest by FNMA but are not backed by the full faith and credit of the United
States Government.
FHLMC was created by Congress in 1970 for the purpose of increasing the availability of mortgage credit for residential
housing. It is a government-sponsored corporation formerly owned by the twelve Federal Home Loan Banks and now owned entirely by
private stockholders. FHLMC issues Participation Certificates ("PCs") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but PCs are not
backed by the full faith and credit of the United States Government.
Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers also create pass-through pools of conventional residential mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans as well as the guarantors of the mortgage-related
securities. Pools created by such non-governmental issuers generally offer a higher rate of interest than government and
government-related pools because there are no direct or indirect government or agency guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance and letters of credit. The insurance and guarantees are issued by
governmental entities, private insurers and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the
issuers thereof will be considered in determining whether a mortgage-related security meets the Trust's investment quality
standards. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance
policies or guarantee arrangements. The Fixed-Income Portfolio may buy mortgage-related securities without insurance or
guarantees if, through an examination of the loan experience and practices of the originator/servicers and poolers, the Adviser
determines that the securities meet the Trust's quality standards. Although the market for such securities is becoming
increasingly liquid, securities issued by certain private organizations may not be readily marketable. No Portfolio will purchase
mortgage-related securities or any other assets which in the Adviser's opinion are illiquid if, as a result, more than 15% of the
value of the Portfolio's total assets will be illiquid.
Mortgage-backed securities that are issued or guaranteed by the U.S. Government, its agencies or instrumentalities, are
not subject to the Portfolio' industry concentration restrictions, set forth in this Statement under "Investment Restrictions," by
virtue of the exclusion from that test available to all U.S. Government securities. In the case of privately issued
mortgage-related securities, the Portfolio takes the position that mortgage-related securities do not represent interests in any
particular "industry" or group of industries. The assets underlying such securities may be represented by the Portfolio of first
lien residential mortgages (including both whole mortgage loans and mortgage participation interests) or portfolios of mortgage
pass-through securities issued or guaranteed by GNMA, FNMA or FHLMC. Mortgage loans underlying a mortgage-related security may in
turn be insured or guaranteed by the Federal Housing Administration or the Department of Veterans Affairs. In the case of private
issue mortgage-related securities whose underlying assets are neither U.S. Government securities nor U.S. Government-insured
mortgages, to the extent that real properties securing such assets may be located in the same geographical region, the security
may be subject to a greater risk of default than other comparable securities in the event of adverse economic, political or
business developments that may affect such region and, ultimately, the ability of residential homeowners to make payments of
principal and interest on the underlying mortgages.
Collateralized Mortgage Obligations (CMOs). A CMO is a hybrid between a mortgage-backed bond and a mortgage
pass-through security. Similar to a bond, interest and prepaid principal is paid, in most cases, semiannually. CMOs may be
collateralized by whole mortgage loans, but are more typically collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, FHLMC, or FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated maturity. Actual maturity and average life
will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de
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facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payment of principal
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received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest
maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. An
investor is partially guarded against a sooner than desired return of principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer") issues multiple series (e.g., A, B, C, Z) of CMO bonds ("Bonds").
Proceeds of the Bond offering are used to purchase mortgages or mortgage pass-through certificates ("Collateral"). The Collateral
is pledged to a third party trustee as security for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds all bear current interest. Interest on the
Series Z Bond is accrued and added to principal and a like amount is paid as principal on the Series A, B, or C Bond currently
being paid off. When the Series A, B, and C Bonds are paid in full, interest and principal on the Series Z Bond begins to be paid
currently. With some CMOs, the issuer serves as a conduit to allow loan originators (primarily builders or savings and loan
associations) to borrow against their loan portfolios.
FHLMC Collateralized Mortgage Obligations. FHLMC CMOs are debt obligations of FHLMC issued in multiple classes
having different maturity dates which are secured by the pledge of a pool of conventional mortgage loans purchased by FHLMC.
Unlike FHLMC PCs, payments of principal and interest on the CMOs are made semiannually, as opposed to monthly. The amount of
principal payable on each semiannual payment date is determined in accordance with FHLMC's mandatory sinking fund schedule, which,
in turn, is equal to approximately 100% of FHA prepayment experience applied to the mortgage collateral pool. All sinking fund
payments in the CMOs are allocated to the retirement of the individual classes of bonds in the order of their stated maturities.
Payment of principal on the mortgage loans in the collateral pool in excess of the amount of FHLMC's minimum sinking fund
obligation for any payment date are paid to the holders of the CMOs as additional sinking fund payments. Because of the
"pass-through" nature of all principal payments received on the collateral pool in excess of FHLMC's minimum sinking fund
requirement, the rate at which principal of the CMOs is actually repaid is likely to be such that each class of bonds will be
retired in advance of its scheduled maturity date.
If collection of principal (including prepayments) on the mortgage loans during any semiannual payment period is not
sufficient to meet FHLMC's minimum sinking fund obligation on the next sinking fund payment date, FHLMC agrees to make up the
deficiency from its general funds.
Criteria for the mortgage loans in the pool backing the FHLMC CMOs are identical to those of FHLMC PCs. FHLMC has the
right to substitute collateral in the event of delinquencies and/or defaults. For an additional discussion of mortgage-backed
securities and certain risks involved therein, see this Statement and the Trust's Prospectus under "Certain Risk Factors and
Investment Methods."
Other Mortgage-Related Securities. Other mortgage-related securities include securities other than those described above
that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property,
including CMO residuals or stripped mortgage-backed securities. Other mortgage-related securities may be equity or debt
securities issued by agencies or instrumentalities of the U.S. Government or by private originators of, or investors in, mortgage
loans, including savings and loan associations, homebuilders, mortgage banks, commercial banks, investment banks, partnerships,
trusts and special purpose entities of the foregoing.
CMO Residuals. CMO residuals are derivative mortgage securities issued by agencies or instrumentalities of the
U.S. Government or by private originators of, or investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks and special purpose entities of the foregoing.
The cash flow generated by the mortgage assets underlying a series of CMOs is applied first to make required payments of
principal and interest on the CMOs and second to pay the related administrative expenses of the issuer. The residual in a CMO
structure generally represents the interest in any excess cash flow remaining after making the foregoing payments. Each payment
of such excess cash flow to a holder of the related CMO residual represents income and/or a return of capital. The amount of
residual cash flow resulting from a CMO will depend on, among other things, the characteristics of the mortgage assets, the coupon
rate of each class of CMO, prevailing interest rates, the amount of administrative expenses and the prepayment experience on the
mortgage assets. In particular, the yield to maturity on CMO residuals is extremely sensitive to prepayments on the related
underlying mortgage assets, in the same manner as an interest-only ("IO") class of stripped mortgage-backed securities. See
"Other Mortgage-Related Securities -- Stripped Mortgage-Backed Securities." In addition, if a series of a CMO includes a class
that bears interest at an adjustable rate, the yield to maturity on the related CMO residual will also be extremely sensitive to
changes in the level of the index upon which interest rate adjustments are based. As described below with respect to stripped
mortgage-backed securities, in certain circumstances the Portfolio may fail to recoup fully its initial investment in a CMO
residual.
CMO residuals are generally purchased and sold by institutional investors through several investment banking firms acting
as brokers or dealers. The CMO residual market has only very recently developed and CMO residuals currently may not have the
liquidity of other more established securities trading in other markets. Transactions in CMO residuals are generally completed
only after careful review of the characteristics of the securities in question. In addition, CMO residuals may or, pursuant to an
exemption therefrom, may not have been registered under the Securities Act of 1933, as amended. CMO residuals, whether or not
registered under such Act, may be subject to certain restrictions on transferability, and may be deemed "illiquid" and subject to
the Portfolio's limitations on investment in illiquid securities.
Stripped Mortgage-Backed Securities. Stripped mortgage-backed securities ("SMBS") are derivative multi-class
mortgage securities. SMBS may be issued by agencies or instrumentalities of the U.S. Government, or by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and
special purpose entities of the foregoing.
SMBS are usually structured with two classes that receive different proportions of the interest and principal
distributions on a pool of mortgage assets. A common type of SMBS will have one class receiving some of the interest and most of
the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the
principal. In the most extreme case, one class will receive all of the interest (the IO class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yield to maturity on an IO class is extremely sensitive to
the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal
payments may have a material adverse effect on the Portfolio's yield to maturity from these securities. If the underlying
mortgage assets experience greater than anticipated prepayments of principal, the Portfolio may fail to fully recoup its initial
investment in these securities even if the security is in one of the highest rating categories.
Although SMBS are purchased and sold by institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result, established trading markets have not
yet developed and, accordingly, these securities may be deemed "illiquid" and subject to the Portfolio's limitations on investment
in illiquid securities.
Other Asset-Backed Securities. Similarly, the Sub-advisor expects that other asset-backed securities (unrelated to
mortgage loans) will be offered to investors in the future. Several types of asset-backed securities maybe offered to investors,
including Certificates for Automobile Receivables. For a discussion of automobile receivables, see this Statement under "Certain
Risk Factors and Investment Methods."
Foreign Securities. The Portfolio may invest in corporate debt securities of foreign issuers (including preferred or
preference stock), certain foreign bank obligations (see "Bank Obligations") and U.S. dollar- or foreign currency-denominated
obligations of foreign governments or their subdivisions, agencies and instrumentalities, international agencies and supranational
entities. 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 will concentrate its foreign investments in
securities of issuers based in developed countries. The Portfolio may invest up to 5% of its assets in securities of issuers
based in emerging market countries. Investing in the securities of foreign issuers involves special risks and considerations not
typically associated with investing in U.S. companies. For a discussion of certain risks involved in foreign investments, in
general, and the special risks of investing in developing countries, see this Statement and the Trust's Prospectus under "Certain
Risk Factors and Investment Methods."
The Portfolio also may purchase and sell foreign currency options and foreign currency futures contracts and related
options (see "Derivative Instruments"), and enter into forward foreign currency exchange contracts in order to protect against
uncertainty in the level of future foreign exchange rates in the purchase and sale of securities.
A forward foreign currency contract involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the
contract. These contracts may be bought or sold to protect the Portfolio against a possible loss resulting from an adverse change
in the relationship between foreign currencies and the U.S. dollar or to increase exposure to a particular foreign currency. Open
positions in forward contracts are covered by the segregation with the Trust's custodian of cash or other liquid assets and are
marked to market daily. Although such contracts are intended to minimize the risk of loss due to a decline in the value of the
hedged currencies, at the same time, they tend to limit any potential gain which might result should the value of such currencies
increase.
Brady Bonds. The Portfolio may invest in Brady Bonds. Brady Bonds are securities created through the exchange of
existing commercial bank loans to sovereign entities for new obligations in connection with debt restructurings under a debt
restructuring plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan debt
restructurings have been implemented in a number of countries, including in Argentina, Bolivia, Bulgaria, Costa Rica, the
Dominican Republic, Ecuador, Jordan, Mexico, Niger, Nigeria, the Philippines, Poland, Uruguay, and Venezuela. In addition, Brazil
has concluded a Brady-like plan. It is expected that other countries will undertake a Brady Plan in the future.
Brady Bonds have been issued only recently, and accordingly do not have a long payment history. Brady Bonds may be
collateralized or uncollateralized, are issued in various currencies (primarily the U.S. dollar) and are actively traded in the
over-the-counter secondary market. U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate par bonds or
floating rate discount bonds, are generally collateralized in full as to principal by U.S. Treasury zero-coupon bonds having the
same maturity as the Brady Bonds. Interest payments on these Brady Bonds generally are collateralized on a one-year or longer
rolling-forward basis by cash or securities in an amount that, in the case of fixed rate bonds, is equal to at least one year of
interest payments or, in the case of floating rate bonds, initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals thereafter. Certain Brady Bonds are entitled to "value
recovery payments" in certain circumstances, which in effect constitute supplemental interest payments but generally are not
collateralized. Brady Bonds are often viewed as having three or four valuation components: (i) the collateralized repayment of
principal at final maturity; (ii) the collateralized interest payments; (iii) the uncollateralized interest payments; and (iv) any
uncollateralized repayment of principal at maturity (these uncollateralized amounts constitute the "residual risk").
Most Mexican Brady Bonds issued to date have principal repayments at final maturity fully collateralized by U.S. Treasury
zero-coupon bonds (or comparable collateral denominated in other currencies) and interest coupon payments collateralized on an
18-month rolling-forward basis by funds held in escrow by an agent for the bondholders. A significant portion of the Venezuelan
Brady Bonds and the Argentine Brady Bonds issued to date have principal repayments at final maturity collateralized by U.S.
Treasury zero-coupon bonds (or comparable collateral denominated in other currencies) and/or interest coupon payments
collateralized on a 14-month (for Venezuela) or 12-month (for Argentina) rolling-forward basis by securities held by the Federal
Reserve Bank of New York as collateral agent.
Brady Bonds involve various risk factors including residual risk and the history of defaults with respect to commercial
bank loans by public and private entities of countries issuing Brady Bonds. There can be no assurance that Brady Bonds in which
the Portfolio may invest will not be subject to restructuring arrangements or to requests for new credit, which may cause the
Portfolio to suffer a loss of interest or principal on any of its holdings.
Bank Obligations. Bank obligations in which the Portfolio invests include certificates of deposit, bankers' acceptances,
and fixed time deposits. Certificates of deposit are negotiable certificates issued against funds deposited in a commercial bank
for a definite period of time and earning a specified return. Bankers' acceptances are negotiable drafts or bills of exchange,
normally drawn by an importer or exporter to pay for specific merchandise, which are "accepted" by a bank, meaning, in effect,
that the bank unconditionally agrees to pay the face value of the instrument on maturity. Fixed time deposits are bank
obligations payable at a stated maturity date and bearing interest at a fixed rate. Fixed time deposits may be withdrawn on
demand by the investor, but may be subject to early withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such deposits. The Portfolio will not invest in fixed time
deposits which (1) are not subject to prepayment or (2) provide for withdrawal penalties upon prepayment (other than overnight
deposits) if, in the aggregate, more than 15% of its assets would be invested in such deposits, repurchase agreements maturing in
more than seven days and other illiquid assets.
The Portfolio will limit its investments in United States bank obligations to obligations of United States banks
(including foreign branches) which have more than $1 billion in total assets at the time of investment and are members of the
Federal Reserve System, are examined by the Comptroller of the Currency or whose deposits are insured by the Federal Deposit
Insurance Corporation. The Portfolio also may invest in certificates of deposit of savings and loan associations (federally or
state chartered and federally insured) having total assets in excess of $1 billion.
The Portfolio will limit its investments in foreign bank obligations to United States dollar- or foreign
currency-denominated obligations of foreign banks (including United States branches of foreign banks) which at the time of
investment (I) have more than $10 billion, or the equivalent in other currencies, in total assets; (ii) in terms of assets are
among the 75 largest foreign banks in the world; (iii) have branches or agencies (limited purpose offices which do not offer all
banking services) in the United States; and (iv) in the opinion of the Sub-advisor, are of an investment quality comparable to
obligations of United States banks in which the Portfolio may invest. Subject to the Trust's limitation on concentration of no
more than 25% of its assets in the securities of issuers in a particular industry, there is no limitation on the amount of the
Portfolio's assets which may be invested in obligations of foreign banks which meet the conditions set forth herein.
Obligations of foreign banks involve somewhat different investment risks than those affecting obligations of United
States banks, including the possibilities that their liquidity could be impaired because of future political and economic
developments, that their obligations may be less marketable than comparable obligations of United States banks, that a foreign
jurisdiction might impose withholding taxes on interest income payable on those obligations, that foreign deposits may be seized
or nationalized, that foreign governmental restrictions such as exchange controls may be adopted which might adversely affect the
payment of principal and interest on those obligations and that the selection of those obligations may be more difficult because
there may be less publicly available information concerning foreign banks or because the accounting, auditing and financial
reporting standards, practices and requirements applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not generally subject to examination by any United States Government agency or instrumentality.
Short Sales. The Portfolio may make short sales of securities as part of their overall portfolio management strategies
involving the use of derivative instruments and to offset potential declines in long positions in similar securities. A short
sale is a transaction in which the Portfolio sells a security it does not own in anticipation that the market price of that
security will decline.
When the Portfolio makes a short sale, it must borrow the security sold short and deliver it to the broker-dealer through
which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the sale. The Portfolio
may have to pay a fee to borrow particular securities and is often obligated to pay over any accrued interest on such borrowed
securities.
If the price of the security sold short increases between the time of the short sale and the time and the Portfolio
replaces the borrowed security, the Portfolio will incur a loss; conversely, if the price declines, the Portfolio will realize a
capital gain. Any gain will be decreased, and any loss increased, by the transaction costs described above. The successful use
of short selling may be adversely affected by imperfect correlation between movements in the price of the security sold short and
the securities being hedged.
To the extent that the Portfolio engages in short sales, it will provide collateral to the broker-dealer and (except in
the case of short sales "against the box") will maintain additional asset coverage in the form of cash or other liquid assets in a
segregated account. The Portfolio does not intend to enter into short sales (other than those "against the box") if immediately
after such sale the aggregate of the value of all collateral plus the amount in such segregated account exceeds one-third of the
value of the Portfolio's net assets. This percentage may be varied by action of the Trust's Board of Trustees. A short sale is
"against the box" to the extent that the Portfolio contemporaneously owns, or has the right to obtain at no added cost, securities
identical to those sold short.
Derivative Instruments. In pursuing its objective, the Portfolio may, as described in the Prospectus, purchase and sell
(write) both put options and call options on securities, securities indexes, and foreign currencies, and enter into interest rate,
foreign currency and index futures contracts and purchase and sell options on such futures contracts ("futures options") for
hedging purposes. The Portfolio also may purchase and sell foreign currency options for purposes of increasing exposure to a
foreign currency or to shift exposure to foreign currency fluctuations from one country to another. The Portfolio also may enter
into swap agreements with respect to foreign currencies, interest rates and indexes of securities. If other types of financial
instruments, including other types of options, futures contracts, or futures options are traded in the future, the Portfolio may
also use those instruments, provided that the Trust's Board of Trustees determines that their use is consistent with the
Portfolio's investment objective, and provided that their use is consistent with restrictions applicable to options and futures
contracts currently eligible for use by the Trust (i.e., that written call or put options will be "covered" or "secured" and that
futures and futures options will be used only for hedging purposes).
Options on Securities and Indexes. The Portfolio may purchase and sell both put and call options on debt or other
securities or indexes in standardized contracts traded on foreign or national securities exchanges, boards of trade, or similar
entities, or quoted on NASDAQ or on a regulated foreign over-the-counter market, and agreements, sometimes called cash puts, which
may accompany the purchase of a new issue of bonds from a dealer.
The Portfolio will write call options and put options only if they are "covered." In the case of a call option on a
security, the option is "covered" if the Portfolio owns the security underlying the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or, if additional cash consideration is required, cash or cash
equivalents in such amount are placed in a segregated account by its custodian) upon conversion or exchange of other securities
held by the Portfolio. For a call option on an index, the option is covered if the Portfolio maintains with its custodian cash or
cash equivalents equal to the contract value. A call option is also covered if the Portfolio holds a call on the same security or
index as the call written where the exercise price of the call held is (I) equal to or less than the exercise price of the call
written, or (ii) greater than the exercise price of the call written, provided the difference is maintained by the Portfolio in
cash or cash equivalents in a segregated account with its custodian. A put option on a security or an index is "covered" if the
Portfolio maintains cash or cash equivalents equal to the exercise price in a segregated account with its custodian. A put option
is also covered if the Portfolio holds a put on the same security or index as the put written where the exercise price of the put
held is (i) equal to or greater than the exercise price of the put written, or (ii) less than the exercise price of the put
written, provided the difference is maintained by the Portfolio in cash or cash equivalents in a segregated account with its
custodian.
If an option written by the Portfolio expires, the Portfolio realizes a capital gain equal to the premium received at the
time the option was written. If an option purchased by the Portfolio expires unexercised, the Portfolio realizes a capital loss
equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may be closed out by an offsetting purchase or sale of an
option of the same series (type, exchange, underlying security or index, exercise price, and expiration). There can be no
assurance, however, that a closing purchase or sale transaction can be effected when the Portfolio desires.
The Portfolio will realize a capital gain from a closing purchase transaction if the cost of the closing option is less
than the premium received from writing the option, or, if it is more, the Portfolio will realize a capital loss. If the premium
received from a closing sale transaction is more than the premium paid to purchase the option, the Portfolio will realize a
capital gain or, if it is less, the Portfolio will realize a capital loss. The principal factors affecting the market value of a
put or a call option include supply and demand, interest rates, the current market price of the underlying security or index in
relation to the exercise price of the option, the volatility of the underlying security or index, and the time remaining until the
expiration date.
The premium paid for a put or call option purchased by the Portfolio is an asset of the Portfolio. The premium received
for an option written by the Portfolio is recorded as a deferred credit. The value of an option purchased or written is marked to
market daily and is valued at the closing price on the exchange on which it is traded or, if not traded on an exchange or no
closing price is available, at the mean between the last bid and asked prices. For a discussion of certain risks involved in
options, see this Statement and the Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Foreign Currency Options. The Portfolio may buy or sell put and call options on foreign currencies either on exchanges
or in the over-the-counter market. A put option on a foreign currency gives the purchaser of the option the right to sell a
foreign currency at the exercise price until the option expires. Currency options traded on U.S. or other exchanges may be
subject to position limits which may limit the ability of the Portfolio to reduce foreign currency risk using such options.
Over-the-counter options differ from traded options in that they are two-party contracts with price and other terms negotiated
between buyer and seller, and generally do not have as much market liquidity as exchange-traded options.
Futures Contracts and Options on Futures Contracts. The Portfolio may use interest rate, foreign currency or index
futures contracts, as specified in the Trust's Prospectus. An interest rate, foreign currency or index futures contract provides
for the future sale by one party and purchase by another party of a specified quantity of a financial instrument, foreign currency
or the cash value of an index at a specified price and time. A futures contract on an index is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of
the last trading day of the contract and the price at which the index contract was originally written. Although the value of an
index might be a function of the value of certain specified securities, no physical delivery of these securities is made.
The Portfolio may purchase and write call and put futures options. Futures options possess many of the same
characteristics as options on securities and indexes (discussed above). A futures option gives the holder the right, in return for
the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price at
any time during the period of the option. Upon exercise of a call option, the holder acquires a long position in the futures
contract and the writer is assigned the opposite short position. In the case of a put option, the opposite is true.
To comply with applicable rules of the CFTC under which the Trust and the Portfolio avoid being deemed a "commodity pool"
or a "commodity pool operator," the Portfolio intends generally to limit its use of futures contracts and futures options to "bona
fide hedging" transactions, as such term is defined in applicable regulations, interpretations and practice. For example, the
Portfolio might use futures contracts to hedge against anticipated changes in interest rates that might adversely affect either
the value of the Portfolio's securities or the price of the securities which the Portfolio intends to purchase. The Portfolio's
hedging activities may include sales of futures contracts as an offset against the effect of expected increases in interest rates,
and purchases of futures contracts as an offset against the effect of expected declines in interest rates. Although other
techniques could be used to reduce that Portfolio's exposure to interest rate fluctuations, the Portfolio may be able to hedge its
exposure more effectively and perhaps at a lower cost by using futures contracts and futures options.
The Portfolio will only enter into futures contracts and futures options which are standardized and traded on a U.S. or
foreign exchange, board of trade, or similar entity, or quoted on an automated quotation system.
When a purchase or sale of a futures contract is made by the Portfolio, the Portfolio is required to deposit with its
custodian (or broker, if legally permitted) a specified amount of cash or U.S. Government securities ("initial margin"). The
margin required for a futures contract is set by the exchange on which the contract is traded and may be modified during the term
of the contract. The initial margin is in the nature of a performance bond or good faith deposit on the futures contract which is
returned to the Portfolio upon termination of the contract, assuming all contractual obligations have been satisfied. The
Portfolio expects to earn interest income on its initial margin deposits. A futures contract held by the Portfolio is valued
daily at the official settlement price of the exchange on which it is traded. Each day the Portfolio pays or receives cash,
called "variation margin," equal to the daily change in value of the futures contract. This process is known as "marking to
market." Variation margin does not represent a borrowing or loan by the Portfolio but is instead a settlement between the
Portfolio and the broker of the amount one would owe the other if the futures contract expired. In computing daily net asset
value, the Portfolio will mark to market its open futures positions.
The Portfolio is also required to deposit and maintain margin with respect to put and call options on futures contracts
written by it. Such margin deposits will vary depending on the nature of the underlying futures contract (and the related initial
margin requirements), the current market value of the option, and other futures positions held by the Portfolio.
Although some futures contracts call for making or taking delivery of the underlying securities, generally these
obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an offsetting purchase price is less than the original sale price, the
Portfolio realizes a capital gain, or if it is more, the Portfolio realizes a capital loss. Conversely, if an offsetting sale
price is more than the original purchase price, the Portfolio realizes a capital gain, or if it is less, the Portfolio realizes a
capital loss. The transaction costs must also be included in these calculations.
Limitations on Use of Futures and Futures Options. In general, the Portfolio intends to enter into positions in futures
contracts and related options only for "bona fide hedging" purposes. With respect to positions in futures and related options
that do not constitute bona fide hedging positions, the Portfolio will not enter into a futures contract or futures option
contract if, immediately thereafter, the aggregate initial margin deposits relating to such positions plus premiums paid by it for
open futures option positions, less the amount by which any such options are "in-the-money," would exceed 5% of the Portfolio's
total net assets. A call option is "in-the-money" if the value of the futures contract that is the subject of the option exceeds
the exercise price. A put option is "in-the-money" if the exercise price exceeds the value of the futures contract that is the
subject of the option.
When purchasing a futures contract, the Portfolio will maintain with its custodian (and mark-to-market on a daily basis)
cash or other liquid assets that, when added to the amounts deposited with a futures commission merchant as margin, are equal to
the market value of the futures contract. Alternatively, the Portfolio may "cover" its position by purchasing a put option on the
same futures contract with a strike price as high or higher than the price of the contract held by the Portfolio.
When selling a futures contract, the Portfolio will maintain with its custodian (and mark-to-market on a daily basis)
liquid assets that, when added to the amount deposited with a futures commission merchant as margin, are equal to the market value
of the instruments underlying the contract. Alternatively, the Portfolio may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures contract, a portfolio with a volatility substantially similar to that
of the index on which the futures contract is based), or by holding a call option permitting the Portfolio to purchase the same
futures contract at a price no higher than the price of the contract written by the Portfolio (or at a higher price if the
difference is maintained in liquid assets with the Trust's custodian).
When selling a call option on a futures contract, the Portfolio will maintain with its custodian (and mark-to-market on a
daily basis) cash or other liquid assets that, when added to the amounts deposited with a futures commission merchant as margin,
equal the total market value of the futures contract underlying the call option. Alternatively, the Portfolio may cover its
position by entering into a long position in the same futures contract at a price no higher than the strike price of the call
option, by owning the instruments underlying the futures contract, or by holding a separate call option permitting the Portfolio
to purchase the same futures contract at a price not higher than the strike price of the call option sold by the Portfolio.
When selling a put option on a futures contract, the Portfolio will maintain with its custodian (and mark-to-market on a
daily basis) cash or other liquid assets that equal the purchase price of the futures contract, less any margin on deposit.
Alternatively, the Portfolio may cover the position either by entering into a short position in the same futures contract, or by
owning a separate put option permitting it to sell the same futures contract so long as the strike price of the purchased put
option is the same or higher than the strike price of the put option sold by the Portfolio. For a discussion of the risks
involved in futures contracts and related options, see the Trust's Prospectus and this Statement under "Certain Factors and
Investment Methods."
Swap Agreements. The Portfolio may enter into interest rate, index and currency exchange rate swap agreements for
purposes of attempting to obtain a particular desired return at a lower cost to the Portfolio than if the Portfolio had invested
directly in an instrument that yielded that desired return. For a discussion of swap agreements, see the Trust's Prospectus under
"Investment Objectives and Policies." The Portfolio's obligations (or rights) under a swap agreement will generally be equal only
to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to
the agreement (the "net amount"). The Portfolio's obligations under a swap agreement will be accrued daily (offset against any
amounts owing to the Portfolio) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of cash or other liquid assets to avoid any potential leveraging of the Portfolio's
portfolio. The Portfolio will not enter into a swap agreement with any single party if the net amount owed or to be received
under existing contracts with that party would exceed 5% of the Portfolio's assets.
Whether the Portfolio's use of swap agreements will be successful in furthering its investment objective of total return
will depend on the Sub-advisor's ability correctly to predict whether certain types of investments are likely to produce greater
returns than other investments. Because they are two party contracts and because they may have terms of longer than seven days,
swap agreements may be considered to be illiquid. Moreover, the Portfolio bears the risk of loss of the amount expected to be
received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. The Sub-advisor will
cause the Portfolio to enter into swap agreements only with counterparties that would be eligible for consideration as repurchase
agreement counterparties under the Portfolio's repurchase agreement guidelines. Certain restrictions imposed on the Portfolio by
the Internal Revenue Code may limit the Portfolio's ability to use swap agreements. The swaps market is a relatively new market
and is largely unregulated. It is possible that developments in the swaps market, including potential government regulation,
could adversely affect the Portfolio's ability to terminate existing swap agreements or to realize amounts to be received under
such agreements.
Certain swap agreements are exempt from most provisions of the Commodity Exchange Act ("CEA") and, therefore, are not
regulated as futures or commodity option transactions under the CEA, pursuant to regulations approved by the CFTC. To qualify for
this exemption, a swap agreement must be entered into by "eligible participants," which includes the following, provided the
participants' total assets exceed established levels: a bank or trust company, savings association or credit union, insurance
company, investment company subject to regulation under the 1940 Act, commodity pool, corporation, partnership, proprietorship,
organization, trust or other entity, employee benefit plan, governmental entity, broker-dealer, futures commission merchant,
natural person, or regulated foreign person. To be eligible, natural persons and most other entities must have total assets
exceeding $10 million; commodity pools and employee benefit plans must have assets exceeding $5 million. In addition, an eligible
swap transaction must meet three conditions. First, the swap agreement may not be part of a fungible class of agreements that are
standardized as to their material economic terms. Second, the creditworthiness of parties with actual or potential obligations
under the swap agreement must be a material consideration in entering into or determining the terms of the swap agreement,
including pricing, cost or credit enhancement terms. Third, swap agreements may not be entered into and traded on or through a
multilateral transaction execution facility.
This exemption is not exclusive, and participants may continue to rely on existing exclusions for swaps, such as the
Policy Statement issued in July 1989 which recognized a safe harbor for swap transactions from regulation as futures or commodity
option transactions under the CEA or its regulations. The Policy Statement applies to swap transactions settled in cash that (1)
have individually tailored terms, (2) lack exchange-style offset and the use of a clearing organization or margin system, (3) are
undertaken in conjunction with a line of business, and (4) are not marketed to the public.
Structured Notes. Structured notes are derivative debt securities, the interest rate or principal of which is related to
another economic indicator or financial market index. Indexed securities include structured notes as well as securities other
than debt securities, the interest rate or principal of which is determined by such an unrelated indicator. Indexed securities
may include a multiplier that multiplies the indexed element by a specified factor and, therefore, the value of such securities
may be very volatile. To the extent the Portfolio invests in these securities, however, the Sub-advisor analyzes these securities
in its overall assessment of the effective duration of the Portfolio's portfolio in an effort to monitor the Portfolio's interest
rate risk.
Foreign Currency Exchange Related Securities. The Portfolio may also invest in foreign currency warrants, principal
exchange rate linked securities and performance indexed paper. For a discussion of these, see this Statement under "Certain Risk
Factors and Investment Methods."
Warrants to Purchase Securities. The Portfolio may invest in or acquire warrants to purchase equity or fixed-income
securities. Bonds with warrants attached to purchase equity securities have many characteristics of convertible bonds and their
prices may, to some degree, reflect the performance of the underlying stock. Bonds also may be issued with warrants attached to
purchase additional fixed-income securities at the same coupon rate. A decline in interest rates would permit the Portfolio to
buy additional bonds at the favorable rate or to sell the warrants at a profit. If interest rates rise, the warrants would
generally expire with no value.
Hybrid Instruments. The Portfolio may invest up to 5% of its assets in hybrid instruments. A hybrid instrument can
combine the characteristics of securities, futures, and options. Hybrids can be used as an efficient means of pursuing a variety
of investment goals, including currency hedging, duration management, and increased total return. For an additional discussion of
hybrid instruments and certain risks involved therein, see this Statement under "Certain Risk Factors and Investment Methods."
Inverse Floaters. The Portfolio may also invest in inverse floating rate debt instruments ("inverse floaters"). The
interest rate on an inverse floater resets in the opposite direction from the market rate of interest to which the inverse floater
is indexed. An inverse floating rate security may exhibit greater price volatility than a fixed rate obligation of similar credit
quality. The Portfolio will not invest more than 5% of its net assets in any combination of inverse floater, interest only, or
principal only securities.
Loan Participations. The Portfolio may purchase participations in commercial loans. Such indebtedness may be secured or
unsecured. Loan participations typically represent direct participation in a loan to a corporate borrower, and generally are
offered by banks or other financial institutions or lending syndicates. When purchasing loan participations, the Portfolio
assumes the credit risk associated with the corporate borrower and may assume the credit risk associated with an interposed bank
or other financial intermediary. The participation interests in which the Portfolio intends to invest may not be rated by any
nationally recognized rating service.
A loan is often administered by an agent bank acting as agent for all holders. The agent bank administers the terms of
the loan, as specified in the loan agreement. In addition, the agent bank is normally responsible for the collection of principal
and interest payments from the corporate borrower and the apportionment of these payments to the credit of all institutions which
are parties to the loan agreement. Unless, under the terms of the loan or other indebtedness, the Portfolio has direct recourse
against the corporate borrower, the Portfolio may have to rely on the agent bank or other financial intermediary to apply
appropriate credit remedies against a corporate borrower.
A financial institution's employment as agent bank might be terminated in the event that it fails to observe a requisite
standard of care or becomes insolvent. A successor agent bank would generally be appointed to replace the terminated agent bank,
and assets held by the agent bank under the loan agreement should remain available to holders of such indebtedness. However, if
assets held by the agent bank for the benefit of the Portfolio were determined to be subject to the claims of the agent bank's
general creditors, the Portfolio might incur certain costs and delays in realizing payment on a loan or loan participation and
could suffer a loss of principal and/or interest. In situations involving other interposed financial institutions (e.g., an
insurance company or governmental agency) similar risks may arise.
Purchasers of loans and other forms of direct indebtedness depend primarily upon the creditworthiness of the corporate
borrower for payment of principal and interest. If the Portfolio does not receive scheduled interest or principal payments on
such indebtedness, the Portfolio's share price and yield could be adversely affected. Loans that are fully secured offer the
Portfolio more protection than an unsecured loan in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower's obligation, or that
the collateral can be liquidated.
The Portfolio may invest in loan participations with credit quality comparable to that of issuers of its securities
investments. Indebtedness of companies whose creditworthiness is poor involves substantially greater risks, and may be highly
speculative. Some companies may never pay off their indebtedness, or may pay only a small fraction of the amount owed.
Consequently, when investing in indebtedness of companies with poor credit, the Portfolio bears a substantial risk of losing the
entire amount invested.
The Portfolio limits the amount of its total assets that it will invest in any one issuer or in issuers within the same
industry (see "Investment Restrictions"). For purposes of these limits, the Portfolio generally will treat the corporate borrower
as the "issuer" of indebtedness held by the Portfolio. In the case of loan participations where a bank or other lending
institution serves as a financial intermediary between the Portfolio and the corporate borrower, if the participation does not
shift to the Portfolio the direct debtor-creditor relationship with the corporate borrower, SEC interpretations require the
Portfolio to treat both the lending bank or other lending institution and the corporate borrower as "issuers" for the purposes of
determining whether the Portfolio has invested more than 5% of its total assets in a single issuer. Treating a financial
intermediary as an issuer of indebtedness may restrict the Portfolio's ability to invest in indebtedness related to a single
financial intermediary, or a group of intermediaries engaged in the same industry, even if the underlying borrowers represent many
different companies and industries.
Loan and other types of direct indebtedness may not be readily marketable and may be subject to restrictions on resale.
In some cases, negotiations involved in disposing of indebtedness may require weeks to complete. Consequently, some indebtedness
may be difficult or impossible to dispose of readily at what the Sub-advisor believes to be a fair price. In addition, valuation
of illiquid indebtedness involves a greater degree of judgment in determining the Portfolio's net asset value than if that value
were based on available market quotations, and could result in significant variations in the Portfolio's daily share price. At
the same time, some loan interests are traded among certain financial institutions and accordingly may be deemed liquid. As the
market for different types of indebtedness develops, the liquidity of these instruments is expected to improve. In addition, the
Portfolio currently intends to treat indebtedness for which there is no readily available market as illiquid for purposes of the
Portfolio's limitation on illiquid investments. Investments in loan participations are considered to be debt obligations for
purposes of the Company's investment restriction relating to the lending of funds or assets by the Portfolio.
Investments in loans through a direct assignment of the financial institution's interests with respect to the loan may
involve additional risks to the Portfolio. For example, if a loan is foreclosed, the Portfolio could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and disposing of the collateral. In addition, it is
conceivable that under emerging legal theories of lender liability, the Portfolio could be held liable as co-lender. It is
unclear whether loans and other forms of direct indebtedness offer securities law protections against fraud and
misrepresentation. In the absence of definitive regulatory guidance, the Portfolio relies on the Sub-advisor's research in an
attempt to avoid situations where fraud or misrepresentation could adversely affect the Portfolio.
Delayed Funding Loans and Revolving Credit Facilities. The Portfolio may enter into, or acquire participations in,
delayed funding loans and revolving credit facilities. Delayed funding loans and revolving credit facilities are borrowing
arrangements in which the lender agrees to make loans up to a maximum amount upon demand by the borrower during a specified term.
These commitments may have the effect of requiring the Portfolio to increase its investment in a company at a time when it might
not otherwise decide to do so (including at a time when the company's financial condition makes it unlikely that such amounts will
be repaid). To the extent that the Portfolio is committed to advance additional funds, it will at all times segregate liquid
assets, determined to be liquid by the Sub-advisor in accordance with procedures established by the Board of Directors, in an
amount sufficient to meet such commitments. The Portfolio may invest in delayed funding loans and revolving credit facilities
with credit quality comparable to that of issuers of its securities investments. Delayed funding loans and revolving credit
facilities may be subject to restrictions on transfer, and only limited opportunities may exist to resell such instruments. As a
result, the Portfolio may be unable to sell such investments at an opportune time or may have to resell them at less than fair
market value. The Portfolio currently intend to treat delayed funding loans and revolving credit facilities for which there is no
readily available market as illiquid for purposes of the Portfolio's limitation on illiquid investments. Participation interests
in revolving credit facilities will be subject to the limitations discussed above under "Loan Participations." Delayed funding
loans and revolving credit facilities are considered to be debt obligations for purposes of the Company's investment restriction
relating to the lending of funds or assets by the Portfolio.
Investment Policies Which May Be Changed Without Shareholder Approval. The following limitations are applicable to the
AST PIMCO Limited Maturity Bond Portfolio. These limitations are not "fundamental" restrictions and may be changed by the
Trustees without shareholder approval. The Portfolio will not:
1. Invest more than 15% of the assets of the Portfolio (taken at market value at the time of the investment) in
"illiquid securities," illiquid securities being defined to include securities subject to legal or contractual restrictions on
resale (which may include private placements), repurchase agreements maturing in more than seven days, certain options traded over
the counter that a Portfolio has purchased, securities being used to cover such options a Portfolio has written, securities for
which market quotations are not readily available, or other securities which legally or in the Sub-advisor's opinion may be deemed
illiquid.
2. Invest more than 5% of the assets of the Portfolio (taken at market value at the time of investment) in any
combination of interest only, principal only, or inverse floating rate securities.
The Staff of the SEC has taken the position that purchased OTC options and the assets used as cover for written OTC
options are illiquid securities. Therefore, the Portfolio has adopted an investment policy pursuant to which the Portfolio will
not purchase or sell OTC options if, as a result of such transactions, the sum of the market value of OTC options currently
outstanding which are held by the Portfolio, the market value of the underlying securities covered by OTC call options currently
outstanding which were sold by the Portfolio and margin deposits on the Portfolio's existing OTC options on futures contracts
exceeds 15% of the total assets of the Portfolio, taken at market value, together with all other assets of the Portfolio which are
illiquid or are otherwise not readily marketable. However, if an OTC option is sold by the Portfolio to a primary U.S. Government
securities dealer recognized by the Federal Reserve Bank of New York and if the Portfolio has the unconditional contractual right
to repurchase such OTC option from the dealer at a predetermined price, then the Portfolio will treat as illiquid such amount of
the underlying securities equal to the repurchase price less the amount by which the option is "in-the-money" (i.e., current
market value of the underlying securities minus the option's strike price). The repurchase price with the primary dealers is
typically a formula price which is generally based on a multiple of the premium received for the option, plus the amount by which
the option is "in-the-money."
AST Money Market Portfolio:
Investment Objective: The investment objective of the Portfolio is to seek high current income and maintain high levels of
liquidity.
Investment Policies:
Bank Obligations. The Portfolio will not invest in bank obligations for which any affiliate of the Sub-advisor is the
ultimate obligor or accepting bank.
Asset-Backed Securities. The asset-backed securities in which the Portfolio may invest are subject to the Portfolio's
overall credit requirements. However, asset-backed securities, in general, are subject to certain risks. Most of these risks are
related to limited interests in applicable collateral. For example, credit card receivables are generally unsecured and the
debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts on credit card debt thereby reducing the balance due. Additionally, if the letter of credit is
exhausted, holders of asset-backed securities may also experience delays in payments or losses if the full amounts due on
underlying sales contracts are not realized. Because asset-backed securities are relatively new, the market experience in these
securities is limited and the market's ability to sustain liquidity through all phases of the market cycle has not been tested.
For a discussion of asset-backed securities and the risks involved therein see the Trust's Prospectus and this Statement under
"Certain Risk Factors and Investment Methods."
Synthetic Instruments. As may be permitted by current laws and regulations and if expressly permitted by the Board of
Trustees of the Trust, the Portfolio may invest in certain synthetic instruments. Such instruments generally involve the deposit
of asset-backed securities in a trust arrangement and the issuance of certificates evidencing interests in the trust. The
certificates are generally sold in private placements in reliance on Rule 144A of the Securities Act of 1933 (without registering
the certificates under such Act).
Reverse Repurchase Agreements. The Portfolio invests the proceeds of borrowings under reverse repurchase agreements.
The Portfolio will enter into a reverse repurchase agreement only when the interest income to be earned from the investment of the
proceeds is greater than the interest expense of the transaction. The Portfolio will not invest the proceeds of a reverse
repurchase agreement for a period which exceeds the duration of the reverse repurchase agreement. The Portfolio may not enter
into reverse repurchase agreements exceeding in the aggregate one-third of the market value of its total assets, less liabilities
other than the obligations created by reverse repurchase agreements. The Portfolio will establish and maintain with its custodian
a separate account with a segregated portfolio of securities in an amount at least equal to its purchase obligations under its
reverse repurchase agreements. If interest rates rise during the term of a reverse repurchase agreement, such reverse repurchase
agreement may have a negative impact on the Portfolio's ability to maintain a net asset value of $1.00 per share.
Foreign Securities. The Portfolio may invest in U.S. dollar-denominated foreign securities. Any foreign commercial
paper must not be subject to foreign withholding tax at the time of purchase. Foreign investments may be made directly in
securities of foreign issuers or in the form of American Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs").
Generally, ADRs and EDRs are receipts issued by a bank or trust company that evidence ownership of underlying securities issued by
a foreign corporation and that are designed for use in the domestic, in the case of ADRs, or European, in the case of EDRs,
securities markets. For a discussion of depositary receipts and the risks involved in investing in foreign securities, see the
Trust's Prospectus under "Certain Risk Factors and Investment Methods."
Lending Portfolio Securities. Loans will be subject to termination by the Portfolio in the normal settlement time,
generally three business days after notice. Borrowed securities must be returned when the loan is terminated. The Portfolio may
pay reasonable finders' and custodial fees in connection with a loan. In making a loan, the Portfolio will consider the
creditworthiness of the borrowing financial institution.
Investment Objective and Policy Applicable to All Portfolios:
In order to permit the sale of shares of the Trust to separate accounts of Participating Insurance Companies in certain
states, the Trust may make commitments more restrictive than the restrictions described in the section of this Statement entitled
"Investment Restrictions." Should the Trust determine that any such commitment is no longer in the best interests of the Trust
and its shareholders it will revoke the commitment and terminate sales of its shares in the state(s) involved.
The Board of Trustees of the Trust may, from time to time, promulgate guidelines with respect to the investment policies
of the Portfolios.
INVESTMENT RESTRICTIONS:
The investment restrictions set forth below are "fundamental" policies. See the subsection of this Statement entitled
"Investment Objectives and Policies" for further discussion of "fundamental" policies of the Trust and the requirements for
changing such "fundamental" policies. Investment policies that are not "fundamental" may be found in the general description of
the investment policies of each Portfolio, as described in the section of this Statement and the Trust's Prospectus entitled
"Investment Objectives and Policies."
The investment restrictions below apply only to the Portfolio or Portfolios described in the text preceding the
restrictions.
Investment Restrictions Applicable Only to the AST Alliance Growth and Income Portfolio, the AST JanCap Growth Portfolio, the AST
INVESCO Equity Income Portfolio, the AST Federated High Yield Portfolio, the AST PIMCO Total Return Bond Portfolio, the AST PIMCO
Limited Maturity Bond Portfolio and the AST Money Market Portfolio.
1. A Portfolio will not buy any securities or other property on margin (except for such short-term credits as are necessary
for the clearance of transactions).
2. Portfolio will not invest in companies for the purpose of exercising control or management.
3. A Portfolio will not underwrite securities issued by others except to the extent that the Portfolio may be deemed an
underwriter when purchasing or selling securities.
4. A Portfolio will not issue senior securities.
Investment Restrictions Applicable Only to the AST Founders Passport Portfolio:
As a matter of fundamental policy, the Portfolio will not:
1. Make loans of money or securities other than (a) through the purchase of securities in accordance with the Portfolio's
investment objective, (b) through repurchase agreements, and (c) by lending portfolio securities in an amount not to exceed 33
1/3% of the Portfolio's total assets;
2. Underwrite securities issued by others except to the extent that the Portfolio may be deemed an underwriter when
purchasing or selling securities;
3. Issue senior securities;
4. Invest directly in physical commodities (other than foreign currencies), real estate or interests in real estate;
provided, that the Portfolio may invest in securities of issuers which invest in physical commodities, real estate or interests in
real estate; and, provided further, that this restriction shall not prevent the Portfolio from purchasing or selling options,
futures, swaps and forward contracts, or from investing in securities or other instruments backed by physical commodities, real
estate or interests in real estate;
5. Make any investment which would concentrate 25% or more of the Portfolio's total assets in the securities of issuers
having their principal business activities in the same industry, provided that this limitation does not apply to obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities;
6. Borrow money except from banks in amounts up to 33 1/3% of the Portfolio's total assets;
7. As to 75% of the value of its total assets, invest more than 5% of its total assets, at market value, in the securities
of any one issuer (except securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities); or
8. As to 75% of the value of its total assets, purchase more than 10% of any class of securities of any single issuer or
purchase more than 10% of the voting securities of any single issuer.
In applying the above restriction regarding investments in a single industry, the Portfolio uses industry classifications
based, where applicable, on Baseline, Bridge Information Systems, Reuters, the S&P Stock Guide published by Standard & Poor's,
-------- ---------------------------- ------- ---------------
information obtained from Bloomberg L.P. and Moody's International, and/or the prospectus of the issuing company. Selection of an
appropriate industry classification resource will be made by the Sub-advisor in the exercise of its reasonable discretion. (This
note is not a fundamental policy.)
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Investment Restrictions Applicable Only to the AST Janus Overseas Growth Portfolio:
1. The Portfolio may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). If
borrowings exceed 33 1/3% of the value of the Portfolio's total assets by reason of a decline in net assets, the Portfolio will
reduce its borrowings within three business days to the extent necessary to comply with the 33 1/3% limitation. This policy shall
not prohibit reverse repurchase agreements, deposits of assets to margin or guarantee positions in futures, options, swaps or
forward contracts, or the segregation of assets in connection with such contracts.
2. The Portfolio will not, as to 75% of the value of its total assets, own more than 10% of the outstanding voting
securities of any one issuer, or purchase the securities of any one issuer (except cash items and "government securities" as
defined under the 1940 Act as amended), if immediately after and as a result of such purchase, the value of the holdings of the
Portfolio in the securities of such issuer exceeds 5% of the value of its total assets.
3. The Portfolio will not invest more than 25% of the value of its assets in any particular industry (other than U.S.
government securities).
4. The Portfolio will not invest directly in real estate or interests in real estate; however, the Portfolio may own debt or
equity securities issued by companies engaged in those businesses.
5. The Portfolio will not purchase or sell physical commodities other than foreign currencies unless acquired as a result of
ownership of securities (but this limitation shall not prevent the Portfolio from purchasing or selling options, futures, swaps
and forward contracts or from investing in securities or other instruments backed by physical commodities).
6. The Portfolio may not make loans, except that the Portfolio may (i) lend portfolio securities in accordance with the
Portfolio's investment policies in amounts up to 33-1/3% of the total assets of the Portfolio taken at market value; (ii) purchase
money market securities and enter into repurchase agreements; and (iii) acquire publicly distributed or privately placed debt
securities.
7. The Portfolio will not act as an underwriter of securities issued by others, except to the extent that the Portfolio may
be deemed an underwriter in connection with the disposition of its securities.
8. The Portfolio will not issue senior securities except in compliance with the 1940 Act.
Investment Restrictions Applicable Only to the AST American Century International Growth Portfolio:
As a matter of fundamental policy, the Portfolio will not:
1. The Portfolio may not make loans, except that the Portfolio may (i) lend portfolio securities in accordance with the
Portfolio's investment policies in amounts up to 33-1/3% of the total assets of the Portfolio taken at market value; (ii) purchase
money market securities and enter into repurchase agreements; and (iii) acquire publicly distributed or privately placed debt
securities;
2. With respect to 75% of the value of its total assets, purchase the security of any one issuer if such purchase would
cause more than 5% of the Portfolio's assets at market to be invested in the securities of such issuer, except U.S. government
securities, or if the purchase would cause more than 10% of the outstanding voting securities of any one issuer to be held in the
Portfolio;
3. Invest more than 25% of the assets of the Portfolio, exclusive of cash and U.S. government securities, in securities of
any one industry;
4. Issue any senior security except in compliance with the 1940 Act;
5. Underwrite any securities except to the extent that the Portfolio may be deemed an underwriter when purchasing or selling
securities;
6. Purchase or sell real estate. (In the opinion of the Sub-advisor, this restriction will not preclude the Portfolio from
investing in securities of corporations that deal in real estate);
7. The Portfolio may not purchase or sell physical commodities unless acquired as a result of the ownership of securities or
instruments; provided that this restriction shall not prohibit a Portfolio from (i) engaging in permissable options and futures
transactions and forward foreign currency contracts in accordance with the Portfolio's investment policies or (ii) investing in
securities of any kind; or
8. Borrow any money, except in an amount not in excess of 33 1/3% of the total assets of the Portfolio, and then only for
emergency and extraordinary purposes; this does not prohibit the escrow and collateral arrangements in connection with investment
in interest rate futures contracts and related options by the Portfolio.
In determining industry groups for purposes of the above restriction regarding investments in a single industry, the SEC
ordinarily uses the Standard Industry Classification codes developed by the United States Office of Management and Budget. The
Sub-advisor monitors industry concentration using a more restrictive list of industry groups than that recommended by the SEC.
The Sub-advisor believes that these classifications are reasonable and are not so broad that the primary economic characteristics
of the companies in a single class are materially different. The use of these more restrictive industry classifications may,
however, cause the Portfolio to forego investment possibilities which may otherwise be available to it under the 1940 Act. (This
note is not a fundamental policy.)
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Investment Restrictions Applicable Only to the AST American Century International Growth Portfolio II:
The following fundamental policies should be read in connection with the notes set forth below. The notes are not
fundamental policies. As a matter of fundamental policy, the Portfolio may not:
1. Borrow money except that the Portfolio may (i) borrow for non-leveraging, temporary or emergency purposes and (ii) engage
in reverse repurchase agreements and make other investments or engage in other transactions, which may or may be deemed to involve
a borrowing, in a manner consistent with the Portfolio's investment objective and policies, provided that the combination of (i)
and (ii) shall not exceed 33 1/3% of the value of the Portfolio's total assets (including the amount borrowed) less liabilities
(other than borrowings) or such other percentage permitted by law. Any borrowings which come to exceed this amount will be
reduced in accordance with applicable law. The Portfolio may borrow from banks, other funds advised or sub-advised by the
Sub-advisor or other persons to the extent permitted by applicable law;
2. Purchase or sell physical commodities; except that the Portfolio may enter into futures contracts and options thereon;
3. Purchase the securities of any issuer if, as a result, more than 25% of the value of the Portfolio's total assets would
be invested in the securities of issuers having their principal business activities in the same industry;
4. Make loans, although the Portfolio may (i) purchase money market securities and enter into repurchase agreements; (ii)
acquire publicly-distributed or privately placed debt securities and purchase debt; (iii) lend portfolio securities; and (iv)
participate in an interfund lending program with other funds advised or sub-advised by the Sub-advisor provided that no such loan
may be made if, as a result, the aggregate of such loans would exceed 33 1/3% of the value of the Portfolio's total assets;
5. Purchase a security if, as a result, with respect to 75% of the value of the Portfolio's total assets, more than 5% of
the value of its total assets would be invested in the securities of any one issuer (other than obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities);
6. Purchase a security if, as a result, with respect to 75% of the value of the Portfolio's total assets, more than 10% of
the outstanding voting securities of any issuer would be held by the Portfolio (other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities);
7. Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall
not prevent the Portfolio from investing in securities or other instruments back by real estate or securities of companies engaged
in the real estate business);
8. Issue senior securities except in compliance with the 1940 Act; or
9. Underwrite securities issued by other persons, except to the extent that the Portfolio may be deemed to be an underwriter
within the meaning of the Securities Act of 1933 in connection with the purchase and sale of its portfolio securities in the
ordinary course of pursuing its investment program.
Notes: The following notes should be read in connection with the above described fundamental policies. The notes are not
---
fundamental policies.
With respect to investment restrictions (1) and (4), the Portfolio will not borrow or lend to any other fund unless it
applies for and receives an exemptive order from the SEC, if so required, or the SEC issues rules permitting such transactions.
The Portfolio has no current intention of engaging in any such activity and there is no assurance the SEC would grant any order
requested by the Portfolio or promulgate any rules allowing the transactions.
With respect to investment restriction (2), the Portfolio does not consider currency contracts or hybrid investments to
be commodities.
For the purposes of investment restriction (3), United States federal, state or local governments, or related agencies
and instrumentalities, are not considered an industry. Foreign governments are considered an industry.
For purposes of investment restriction (4), the Portfolio will consider the acquisition of a debt security to include the
execution of a note or other evidence of an extension of credit with a term of more than nine months.
Investment Restrictions Applicable Only to the AST Gabelli Small-Cap Value Portfolio:
The following fundamental policies should be read in connection with the notes set forth below. The notes are not
fundamental policies. As a matter of fundamental policy, the Portfolio may not:
1. Borrow money except that the Portfolio may (i) borrow for non-leveraging, temporary or emergency purposes and (ii) engage
in reverse repurchase agreements and make other investments or engage in other transactions, which may involve a borrowing, in a
manner consistent with the Portfolio's investment objective and program, provided that the combination of (i) and (ii) shall not
exceed 33 1/3% of the value of the Portfolio's total assets (including the amount borrowed) less liabilities (other than
borrowings) or such other percentage permitted by law. Any borrowings which come to exceed this amount will be reduced in
accordance with applicable law. The Portfolio may borrow from banks, and other funds or other persons to the extent permitted by
applicable law;
2. Purchase or sell physical commodities; except that it may enter into futures contracts and options thereon;
3. Purchase the securities of any issuer if, as a result, more than 25% of the value of the Portfolio's total assets would
be invested in the securities of issuers having their principal business activities in the same industry;
4. Make loans, although the Portfolio may (i) lend portfolio securities and participate in an interfund lending program to
the extent permitted by applicable law, provided that no such loan may be made if, as a result, the aggregate of such loans would
exceed 33 1/3% of the value of the Portfolio's total assets; (ii) purchase money market securities and enter into repurchase
agreements; and (iii) acquire publicly-distributed or privately-placed debt securities and purchase debt;
5. Purchase a security if, as a result, with respect to 75% of the value of its total assets, more than 5% of the value of
the Portfolio's total assets would be invested in the securities of a single issuer, except securities issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities;
6. Purchase a security if, as a result, with respect to 75% of the value of the Portfolio's total assets, more than 10% of
the outstanding voting securities of any issuer would be held by the Portfolio (other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities);
7. Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall
not prevent the Portfolio from investing in securities or other instruments backed by real estate or in securities of companies
engaged in the real estate business);
8. Issue senior securities except in compliance with the 1940 Act; or
9. Underwrite securities issued by other persons, except to the extent that the Portfolio may be deemed to be an underwriter
within the meaning of the Securities Act of 1933 in connection with the purchase and sale of its portfolio securities in the
ordinary course of pursuing its investment program.
Notes: The following notes should be read in connection with the above-described fundamental policies. The notes are
not fundamental policies.
With respect to investment restrictions (1) and (4), the Portfolio will not borrow from or lend to any other fund unless
it applies for and receives an exemptive order from the SEC, if so required, or the SEC issues rules permitting such
transactions. The Portfolio has no current intention of engaging in any such activity and there is no assurance the SEC would
grant any order requested by the Portfolio or promulgate any rules allowing the transactions.
With respect to investment restriction (2), the Portfolio does not consider currency contracts or hybrid investments to
be commodities.
For purposes of investment restriction (3), U.S., state or local governments, or related agencies or instrumentalities,
are not considered an industry.
For purposes of investment restriction (4), the Portfolio will consider the acquisition of a debt security to include the
execution of a note or other evidence of an extension of credit with a term of more than nine months.
Investment Restrictions Applicable Only to the AST T. Rowe Price Natural Resources Portfolio:
The following fundamental policies should be read in connection with the notes set forth below. The notes are not
fundamental policies. As a matter of fundamental policy, the Portfolio may not:
1. Borrow money except that the Portfolio may (i) borrow for non-leveraging, temporary or emergency purposes and (ii) engage
in reverse repurchase agreements and make other investments or engage in other transactions, which may involve a borrowing, in a
manner consistent with the Portfolio's investment objective and program, provided that the combination of (i) and (ii) shall not
exceed 33 1/3% of the value of the Portfolio's total assets (including the amount borrowed) less liabilities (other than
borrowings) or such other percentage permitted by law. Any borrowings which come to exceed this amount will be reduced in
accordance with applicable law. The Portfolio may borrow from banks, other Price Portfolios or other persons to the extent
permitted by applicable law;
2. Purchase or sell physical commodities; except that it may enter into futures contracts and options thereon;
3. Purchase the securities of any issuer if, as a result, more than 25% of the value of the Portfolio's total assets would
be invested in the securities of issuers having their principal business activities in the same industry;
4. Make loans, although the Portfolio may (i) lend portfolio securities and participate in an interfund lending program with
other Price Portfolios provided that no such loan may be made if, as a result, the aggregate of such loans would exceed 33 1/3% of
the value of the Portfolio's total assets; (ii) purchase money market securities and enter into repurchase agreements; and (iii)
acquire publicly-distributed or privately-placed debt securities and purchase debt;
5. Purchase a security if, as a result, with respect to 75% of the value of its total assets, more than 5% of the value of
the Portfolio's total assets would be invested in the securities of a single issuer, except securities issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities;
6. Purchase a security if, as a result, with respect to 75% of the value of the Portfolio's total assets, more than 10% of
the outstanding voting securities of any issuer would be held by the Portfolio (other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities);
7. Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall
not prevent the Portfolio from investing in securities or other instruments backed by real estate or in securities of companies
engaged in the real estate business);
8. Issue senior securities except in compliance with the 1940 Act; or
9. Underwrite securities issued by other persons, except to the extent that the Portfolio may be deemed to be an underwriter
within the meaning of the Securities Act of 1933 in connection with the purchase and sale of its portfolio securities in the
ordinary course of pursuing its investment program.
Notes: The following notes should be read in connection with the above-described fundamental policies. The notes are
not fundamental policies.
With respect to investment restrictions (1) and (4), the Portfolio will not borrow from or lend to any other fund unless
it applies for and receives an exemptive order from the SEC, if so required, or the SEC issues rules permitting such
transactions. The Portfolio has no current intention of engaging in any such activity and there is no assurance the SEC would
grant any order requested by the Portfolio or promulgate any rules allowing the transactions.
With respect to investment restriction (2), the Portfolio does not consider currency contracts or hybrid investments to
be commodities.
For purposes of investment restriction (3), U.S., state or local governments, or related agencies or instrumentalities,
are not considered an industry. Industries are determined by reference to the classifications of industries set forth in the
Portfolio's semi-annual and annual reports.
For purposes of investment restriction (4), the Portfolio will consider the acquisition of a debt security to include the
execution of a note or other evidence of an extension of credit with a term of more than nine months.
Investment Restrictions Applicable Only to the AST JanCap Growth Portfolio:
1. The Portfolio will not purchase a security if as a result, that Portfolio would own more than 10% of the outstanding
voting securities of any issuer.
2. As to 75% of the value of its total assets, the Portfolio will not invest more than 5% of its total assets, at market
value, in the securities of any one issuer (except cash items and securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities).
3. The Portfolio will not purchase a security if as a result, more than 25% of its total assets, at market value, would be
invested in the securities of issuers principally engaged in the same industry (except securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities).
4. The Portfolio will not purchase or sell real estate (although it may purchase securities secured by real estate interests
or interests therein, or issued by companies or investment trusts which invest in real estate or interests therein).
5. The Portfolio will not purchase or sell physical commodities other than foreign currencies unless acquired as a result of
ownership of securities (but this shall not prevent the Portfolio from purchasing or selling options, futures, swaps and forward
contracts or from investing in securities and other instruments backed by physical commodities).
6. The Portfolio may not make loans, except that the Portfolio may (i) lend portfolio securities in accordance with the
Portfolio's investment policies in amounts up to 33-1/3% of the total assets of the Portfolio taken at market value; (ii) purchase
money market securities and enter into repurchase agreements; and (iii) acquire publicly distributed or privately placed debt
securities.
Investment Restrictions Applicable Only to the AST Alliance Growth and Income Portfolio:
1. The Portfolio will not purchase a security if as a result, that Portfolio would own more than 10% of the outstanding
voting securities of any issuer.
2. The Portfolio may not make loans, except that the Portfolio may (i) lend portfolio securities in accordance with the
Portfolio's investment policies in amounts up to 33-1/3% of the total assets of the Portfolio taken at market value; (ii) purchase
money market securities and enter into repurchase agreements; and (iii) acquire publicly distributed or privately placed debt
securities.
3. The Portfolio will not pledge, mortgage, or hypothecate its assets -- however, this provision does not apply to the grant
of escrow receipts or the entry into other similar escrow arrangements arising out of the writing of covered call options.
4. The Portfolio will not purchase securities of any issuer unless it or its predecessor has a record of three years'
continuous operation, except that the Portfolio may purchase securities of such issuers through subscription offers or other
rights it receives as a security holder of companies offering such subscriptions or rights, and such purchases will then be
limited in the aggregate to 5% of the Portfolio's net assets at the time of investment.
5. The Portfolio will not concentrate its investments in any one industry (the Portfolio's investment policy of keeping its
assets in those securities which are selling at the most reasonable prices in relation to value normally results in
diversification among many industries -- consistent with this, the Portfolio does not intend to invest more than 25% of its assets
in any one industry classification used by the Sub-advisor for investment purposes, although such concentration could, under
unusual economic and market conditions, amount to 30% or conceivably somewhat more).
6. The Portfolio will not borrow money except from banks and then in amounts not in excess of 33 1/3% of its total assets.
The Portfolio may borrow at prevailing interest rates and invest the Portfolios in additional securities. The 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 the Portfolio, for any
reason, have borrowings that do not meet the above test then, within three business days, the Portfolio must reduce such
borrowings so as to meet the necessary test. Under such a circumstance, the Portfolio have to liquidate securities at a time when
it is disadvantageous to do so.
7. The Portfolio will not make short sales except short sales made "against the box" to defer recognition of taxable gains
or losses.
8. The Portfolio will not purchase or sell real estate (although it may purchase securities secured by real estate interests
or interests therein, or issued by companies or investment trusts which invest in real estate or interests therein).
9. The Portfolio will not invest directly in oil, gas, or other mineral exploration or development programs; however, the
Portfolio may purchase securities of issuers whose principal business activities fall within such areas.
10. The Portfolio will not purchase a security if as a result, more than 5% of the value of that Portfolio's assets, at
market value, would be invested in the securities of issuers which, with their predecessors, have been in business less than three
years.
Investment Restrictions Applicable Only to the AST INVESCO Equity Income Portfolio:
As a matter of fundamental policy, the Portfolio may not:
1. Issue preference shares or create any funded debt;
2. Sell short;
3. Borrow money except from banks in excess of 5% of the value of its total net assets, and when borrowing, it is a
temporary measure for emergency purposes;
4. Buy or sell real estate, commodities, commodity contracts (however, the Portfolio may purchase securities of companies
investing in real estate);
5. Purchase any security or enter into a repurchase agreement, if as a result, more than 15% of its net assets would be
invested in repurchase agreements not entitling the holder to payment of principal and interest within seven days and in
securities that are illiquid by virtue of legal or contractual restrictions on resale or the absence of a readily available
market. The Trustees or the Investment Manager or the Sub-advisor, acting pursuant to authority delegated by the Trustees, may
determine that a readily available market exists for securities eligible for resale pursuant to Rule 144A under the Securities Act
of 1933, or any successor to that rule, and therefore that such securities are not subject to the foregoing limitation;
6. Purchase securities if the purchase would cause the Portfolio, at the time, to have more than 5% of its total assets
invested in the securities of any one company or to own more than 10% of the voting securities of any one company (except
obligations issued or guaranteed by the U.S. Government);
7. The Portfolio may not make loans, except that the Portfolio may (i) lend portfolio securities in accordance with the
Portfolio's investment policies in amounts up to 33-1/3% of the total assets of the Portfolio taken at market value; (ii) purchase
money market securities and enter into repurchase agreements; and (iii) acquire publicly distributed or privately placed debt
securities; or
8. Invest more than 25% of the value of the Portfolio's assets in one particular industry.
Investment Restrictions Applicable Only to the AST American Century Strategic Balanced Portfolio:
As a matter of fundamental policy, the Portfolio will not:
1. The Portfolio may not make loans, except that the Portfolio may (i) lend portfolio securities in accordance with the
Portfolio's investment policies in amounts up to 33-1/3% of the total assets of the Portfolio taken at market value; (ii) purchase
money market securities and enter into repurchase agreements; and (iii) acquire publicly distributed or privately placed debt
securities.
2. With respect to 75% of the value of its total assets, purchase the security of any one issuer if such purchase would
cause more than 5% of the Portfolio's assets at market to be invested in the securities of such issuer, except United States
government securities, or if the purchase would cause more than 10% of the outstanding voting securities of any one issuer to be
held in the Portfolio;
3. Invest more than 25% of the assets of the Portfolio, exclusive of cash and U.S. government securities, in securities of
any one industry;
4. Issue any senior security except in compliance with the 1940 Act;
5. Underwrite any securities except to the extent that the Portfolio may be deemed an underwriter when purchasing or selling
securities;
6. Purchase or sell real estate. (In the opinion of the Sub-advisor, this restriction will not preclude the Portfolio from
investing in securities of corporations that deal in real estate.);
7. The Portfolio may not purchase or sell physical commodities unless acquired as a result of the ownership of securities or
instruments; provided that this restriction shall not prohibit a Portfolio from (i) engaging in permissable options and futures
transactions and forward foreign currency contracts in accordance with the Portfolio's investment policies or (ii) investing in
securities of any kind; or
8. Borrow any money, except in an amount not in excess of 33 1/3% of the total assets of the Portfolio, and then only for
emergency and extraordinary purposes; this does not prohibit the escrow and collateral arrangements in connection with investment
in interest rate futures contracts and related options by the Portfolio.
Investment Restrictions Only Applicable to the AST T. Rowe Price Asset Allocation Portfolio:
The following fundamental policies should be read in connection with the notes set forth below. The notes are not
fundamental policies. As a matter of fundamental policy, the Portfolio may not:
1. Borrow money except that the Portfolio may (i) borrow for non-leveraging, temporary or emergency purposes and (ii) engage
in reverse repurchase agreements and make other investments or engage in other transactions, which may or may be deemed to involve
a borrowing, in a manner consistent with the Portfolio's investment objective and policies, provided that the combination of (i)
and (ii) shall not exceed 33 1/3% of the value of the Portfolio's total assets (including the amount borrowed) less liabilities
(other than borrowings) or such other percentage permitted by law. Any borrowings which come to exceed this amount will be
reduced in accordance with applicable law. The Portfolio may borrow from banks, other Price Portfolios or other persons to the
extent permitted by applicable law;
2. Purchase or sell physical commodities; except that it may enter into futures contracts and options thereon;
3. Purchase the securities of any issuer if, as a result, more than 25% of the value of the Portfolio's total assets would
be invested in the securities of issuers having their principal business activities in the same industry;
4. Make loans, although the Portfolio may (i) purchase money market securities and enter into repurchase agreements; (ii)
acquire publicly- distributed or privately placed debt securities and purchase debt; (iii) lend portfolio securities; and (iv)
participate in an interfund lending program with other Price Portfolios provided that no such loan may be made if, as a result,
the aggregate of such loans would exceed 33 1/3% of the value of the Portfolio's total assets;
5. Purchase a security if, as a result, with respect to 75% of the value of its total assets, more than 5% of the value of
the Portfolio's total assets would be invested in the securities of a single issuer, except securities issued or guaranteed by the
U.S. government, or any of its agencies or instrumentalities;
6. Purchase a security if, as a result, with respect to 75% of the value of the Portfolio's total assets, more than 10% of
the outstanding voting securities of any issuer would be held by the Portfolio (other than obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities);
7. Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall
not prevent the Portfolio from investing in securities or other instruments backed by real estate or securities of companies
engaged in the real estate business);
8. Issue senior securities except in compliance with the 1940 Act; or
9. Underwrite securities issued by other persons, except to the extent that the Portfolio may be deemed to be an underwriter
within the meaning of the Securities Act of 1933 in connection with the purchase and sale of its portfolio securities in the
ordinary course of pursuing its investment program.
Notes: The following notes should be read in connection with the above described fundamental policies. The notes are not
---
fundamental policies.
With respect to investment restrictions (1) and (4), the Portfolio will not borrow or lend to any other fund unless it
applies for and receives an exemptive order from the SEC, if so required, or the SEC issues rules permitting such transactions.
The Portfolio has no current intention of engaging in any such activity and there is no assurance the SEC would grant any order
requested by the Portfolio or promulgate any rules allowing the transactions.
With respect to investment restriction (2), the Portfolio does not consider currency contracts on hybrid investments to
be commodities.
For the purposes of investment restriction (3), United States federal, state or local governments, or related agencies
and instrumentalities, are not considered an industry. Foreign governments are considered an industry.
For purposes of investment restriction (4), the Portfolio will consider the acquisition of a debt security to include the
execution of a note or other evidence of an extension of credit with a term of more than nine months.
Investment Restrictions Applicable Only to the AST T. Rowe Price Global Bond Portfolio:
As a matter of fundamental policy, the Portfolio may not:
1. Borrow money, except as a temporary measure for extraordinary or emergency purposes or except in connection with reverse
repurchase agreements provided that the Portfolio maintains asset coverage of 300% for all borrowings;
2. Purchase or sell real estate (except that the Portfolio may invest in (i) securities of companies which deal in real
estate or mortgages, and (ii) securities secured by real estate or interests therein, and that the Portfolio reserves freedom of
action to hold and to sell real estate acquired as a result of the Portfolio's ownership of securities) or purchase or sell
physical commodities or contracts relating to physical commodities;
3. Act as underwriter of securities issued by others, except to the extent that it may be deemed an underwriter in
connection with the disposition of portfolio securities of the Portfolio;
4. Make loans to other persons, except (a) loans of portfolio securities, and (b) to the extent the entry into repurchase
agreements and the purchase of debt securities in accordance with its investment objectives and investment policies may be deemed
to be loans;
5. Issue senior securities except in compliance with the 1940 Act; or
6. Purchase any securities which would cause more than 25% of the market value of its total assets at the time of such
purchase to be invested in the securities of one or more issuers having their principal business activities in the same industry,
provided that there is no limitation with respect to investments in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities (for the purposes of this restriction, telephone companies are considered to be in a separate
industry from gas and electric public utilities, and wholly-owned finance companies are considered to be in the industry of their
parents if their activities are primarily related to financing the activities of their parents).
Investment Restrictions Applicable Only to the AST Federated High Yield Portfolio:
1. The Portfolio will not purchase any securities on margin but may obtain such short-term credits as may be necessary for
the clearance of transactions.
2. The Portfolio will not borrow money except as a temporary measure for extraordinary or emergency purposes and then only
from banks and only in amounts not in excess of 5% of the value of its net assets, taken at the lower of cost or market. In
addition, to meet redemption requests without immediately selling portfolio securities, the Portfolio may borrow up to one-third
of the value of its total assets (including the amount borrowed) less its liabilities (not including borrowings, but including the
current fair market value of any securities carried in open short positions). This practice is not for investment leverage but
solely to facilitate management of the portfolio by enabling the Portfolio to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. If, due to market fluctuations or other reasons, the value
of the Portfolio's assets falls below 300% of its borrowings, it will reduce its borrowings within three business days. No more
than 10% of the value of the Portfolio's total assets at the time of providing such security may be used to secure borrowings.
3. The Portfolio will not invest more than 5% of its total assets in the securities of any one issuer (except cash and cash
instruments, securities issued or guaranteed by the U.S. government, its agencies, or instrumentalities, or instruments secured by
these money market instruments, such as repurchase agreements).
4. The Portfolio will not invest more than 5% of the value of its total assets in securities of companies, including their
predecessors, that have been in operation for less than three years.
5. The Portfolio will not invest more than 5% of the value of its total assets in foreign securities which are not publicly
traded in the United States.
6. The Portfolio will not purchase or sell real estate, although it may invest in marketable securities secured by real
estate or interests in real estate, and it may invest in the marketable securities of companies investing or dealing in real
estate.
7. The Portfolio will not purchase or sell commodities or commodity contracts or oil, gas, or other mineral exploration or
development programs. However, it may invest in the marketable securities of companies investing in or sponsoring such programs.
8. The Portfolio may not make loans, except that the Portfolio may (i) lend portfolio securities in accordance with the
Portfolio's investment policies in amounts up to 33-1/3% of the total assets of the Portfolio taken at market value; (ii) purchase
money market securities and enter into repurchase agreements; and (iii) acquire publicly distributed or privately placed debt
securities.
9. The Portfolio will not write, purchase, or sell puts, calls, or any combination thereof.
10. The Portfolio will not make short sales of securities or maintain short positions, unless: during the time the short
position is open, it owns an equal amount of the securities sold or securities readily and freely convertible into or
exchangeable, without payment of additional consideration, for securities of the same issue as, and equal in amount to, the
securities sold short; and not more than 10% of the Portfolio's net assets (taken at current value) is held as collateral for such
sales at any one time.
11. The Portfolio will not purchase securities of a company for the purpose of exercising control or management. However, the
Portfolio may invest in up to 10% of the voting securities of any one issuer and may exercise its voting powers consistent with
the best interests of the Portfolio. From time to time, the Portfolio, together with other investment companies advised by
subsidiaries or affiliates of Federated Investors, may together buy and hold substantial amounts of a company's voting stock. All
such stock may be voted together. In some such cases, the Portfolio and the other investment companies might collectively be
considered to be in control of the company in which they have invested. In some cases, Directors, agents, employees, officers, or
others affiliated with or acting for the Portfolio, its Sub-advisor, or affiliated companies might possibly become directors of
companies in which the Portfolio holds stock.
12. The Portfolio will not invest more than 25% of the value of its total assets in one industry. However, for temporary
defensive purposes, the Portfolio may at times invest more than that percentage in: cash and cash items; securities issued or
guaranteed by the U.S. government, its agencies, or instrumentalities; or instruments secured by these money market instruments,
such as repurchase agreements.
Investment Restrictions Applicable Only to the AST PIMCO Total Return Bond Portfolio:
1. The Portfolio will not invest in a security if, as a result of such investment, more than 25% of its total assets (taken
at market value at the time of investment) would be invested in securities of issuers of a particular industry, except that this
restriction does not apply to securities issued or guaranteed by the U.S. government or its agencies or instrumentalities (or
repurchase agreements with respect thereto);
2. The Portfolio will not, with respect to 75% of its total assets, invest in a security if, as a result of such investment,
more than 5% of its total assets (taken at market value at the time of investment) would be invested in the securities of any one
issuer, except that this restriction does not apply to securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities (or repurchase agreements with respect thereto);
3. The Portfolio will not, with respect to 75% of its assets, invest in a security if, as a result of such investment, it
would hold more than 10% (taken at the time of investment) of the outstanding voting securities of any one issuer;
4. The Portfolio will not purchase or sell real estate (although it may purchase securities secured by real estate or
interests therein, or securities issued by companies which invest in real estate, or interests therein);
5. The Portfolio will not purchase or sell commodities contracts or oil, gas or mineral programs. This restriction shall
not prohibit the Portfolio, subject to restrictions stated in the Trust's Prospectus and elsewhere in this Statement, from
purchasing, selling or entering into futures contracts, options on futures contracts, foreign currency forward contracts, foreign
currency options, or any interest rate, securities related or foreign currency-related hedging instrument, including swap
agreements and other derivative instruments, subject to compliance with any applicable provisions of the federal securities laws
or commodities laws;
6. The Portfolio will not borrow money, issue senior securities, pledge, mortgage, hypothecate its assets, except that the
Portfolio may (i) borrow from banks or enter into reverse repurchase agreements, or employ similar investment techniques, and
pledge its assets in connection therewith, but only if immediately after each borrowing there is an asset coverage of 300% and
(ii) enter into transactions in options, futures and options on futures and other derivative instruments as described in the
Trust's Prospectus and this Statement (the deposit of assets in escrow in connection with the writing of covered put and call
options and the purchase of securities on a when-issued or delayed delivery basis, collateral arrangements with respect to initial
or variation margin deposits for future contracts and commitments entered into under swap agreements or other derivative
instruments, will not be deemed to be pledges of the Portfolio's assets);
7. The Portfolio will not lend funds or other assets, except that the Portfolio may, consistent with its investment
objective and policies: (a) invest in debt obligations, including bonds, debentures or other debt securities, bankers'
acceptances and commercial paper, even though the purchase of such obligations may be deemed to be the making of a loan, (b) enter
into repurchase agreements, and (c) lend its Portfolio securities in an amount not to exceed one-third the value of its total
assets, provided such loans are and in accordance with applicable guidelines established by the SEC and the Trust's Board of
Trustees; or
8. The Portfolio will not maintain a short position, or purchase, write or sell puts, calls, straddles, spreads or
combinations thereof, except as set forth in the Trust's Prospectus and this Statement for transactions in options, futures, and
options on futures transactions arising under swap agreements or other derivative instruments.
Investment Restrictions Applicable Only to the AST PIMCO Limited Maturity Bond Portfolio:
As a matter of fundamental policy, the Portfolio may not:
1. Invest in a security if, as a result of such investment, more than 25% of its total assets (taken at market value at the
time of such investment) would be invested in the securities of issuers in any particular industry, except that this restriction
does not apply to securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities (or repurchase
agreements with respect thereto);
2. With respect to 75% of its assets, invest in a security if, as a result of such investment, more than 5% of its total
assets (taken at market value at the time of such investment) would be invested in securities of any one issuer, except that this
restriction does not apply to securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities;
3. With respect to 75% of its assets, invest in a security if, as a result of such investment, it would hold more than 10%
(taken at the time of such investment) of the outstanding voting securities of any one issuer;
4. Purchase or sell real estate (although it may purchase securities secured by real estate or interests therein, or
securities issued by companies which invest in real estate, or interests therein);
5. Purchase or sell commodities or commodities contracts or oil, gas or mineral programs. This restriction shall not
prohibit the Portfolio, subject to restrictions described in the Prospectus and elsewhere in this Statement, from purchasing,
selling or entering into futures contracts, options, or any interest rate, securities-related or foreign currency-related hedging
instrument, including swap agreements and other derivative instruments, subject to compliance with any applicable provisions of
the federal securities or commodities laws;
6. Borrow money, issue senior securities, or pledge, mortgage or hypothecate its assets, except that the Portfolio may (i)
borrow from banks or enter into reverse repurchase agreements, or employ similar investment techniques, and pledge its assets in
connection therewith, but only if immediately after each borrowing there is asset coverage of 300% and (ii) enter into
transactions in options, futures and options on futures and other derivative instruments as described in the Prospectus and in
this Statement (the deposit of assets in escrow in connection with the writing of covered put and call options and the purchase of
securities on a when-issued or delayed delivery basis, collateral arrangements with respect to initial or variation margin
deposits for futures contracts and commitments entered into under swap agreements or other derivative instruments, will not be
deemed to be pledges of the Portfolio assets);
7. Lend any funds or other assets, except that a Portfolio may, consistent with its investment objective and policies: (a)
invest in debt obligations, including bonds, debentures or other debt securities, banker' acceptance and commercial paper, even
though the purchase of such obligations may be deemed to be the making of loans, (b) enter into repurchase agreements, and (c)
lend its portfolio securities in an amount not to exceed one-third of the value of its total assets, provided such loans are made
in accordance with applicable guidelines established by the SEC and the Trust's Board of Trustees; or
8. Maintain a short position, or purchase, write or sell puts, calls, straddles, spreads or combinations thereof, except on
such conditions as may be set forth in the Prospectus and in this Statement.
Investment Restrictions Applicable Only to the AST Money Market Portfolio:
1. The Portfolio will not purchase a security if as a result, the Portfolio would own more than 10% of the outstanding
voting securities of any issuer.
2. As to 75% of the value of its total assets, the Portfolio will not invest more than 5% of its total assets, at market
value, in the securities of any one issuer (except securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities).
3. The Portfolio will not acquire any illiquid securities, such as repurchase agreements with more than seven days to
maturity or fixed time deposits with a duration of over seven calendar days, if as a result thereof, more than 10% of the market
value of the Portfolio's total assets would be in investments which are illiquid.
4. The Portfolio will not purchase a security if as a result, more than 25% of its total assets, at market value, would be
invested in the securities of issuers principally engaged in the same industry (except securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, negotiable certificates of deposit, time deposits, and bankers' acceptances of
United States branches of United States banks).
5. The Portfolio will not enter into reverse repurchase agreements exceeding in the aggregate one-third of the market value
of the Portfolio's total assets, less liabilities other than obligations created by reverse repurchase agreements.
6. The Portfolio will not borrow money, except from banks for extraordinary or emergency purposes and then only in amounts
not to exceed 10% of the value of the Portfolio's total assets, taken at cost, at the time of such borrowing. The Portfolio may
not mortgage, pledge or hypothecate any assets except in connection with any such borrowing and in amounts not to exceed 10% of
the value of the Portfolio's net assets at the time of such borrowing. The Portfolio will not purchase securities while
borrowings exceed 5% of the Portfolio's total assets. This borrowing provision is included to facilitate the orderly sale of
securities, for example, in the event of abnormally heavy redemption requests, and is not for investment purposes and shall not
apply to reverse repurchase agreements.
7. The Portfolio will not make loans, except through purchasing or holding debt obligations, or entering into repurchase
agreements, or loans of Portfolio securities in accordance with the Portfolio's investment objectives and policies.
8. The Portfolio will not purchase securities on margin, make short sales of securities, or maintain a short position,
provided that this restriction shall not be deemed to be applicable to the purchase or sale of when-issued securities or of
securities for delivery at a future date.
9. The Portfolio will not purchase or sell puts, calls, straddles, spreads, or any combination thereof; real estate;
commodities; or commodity contracts or interests in oil, gas or mineral exploration or development programs. However, the
Portfolio may purchase bonds or commercial paper issued by companies which invest in real estate or interests therein including
real estate investment trusts.
Investment Restrictions Applicable Only to the AST Scudder Japan Portfolio, AST AIM International Equity Portfolio, the AST MFS
Global Equity Portfolio, the AST Janus Small-Cap Growth Portfolio, the AST Kemper Small-Cap Growth Portfolio, the AST Federated
Aggressive Growth Portfolio, the AST Lord Abbett Small Cap Value Portfolio, the AST Janus Mid-Cap Growth Portfolio, the AST Alger
Mid-Cap Growth Portfolio, the AST Neuberger Berman Mid-Cap Growth Portfolio, the AST Neuberger Berman Mid-Cap Value Portfolio, the
AST Alger All-Cap Growth Portfolio, the AST Gabelli All-Cap Value Portfolio, the AST Kinetics Internet Portfolio, the AST Alliance
Growth Portfolio, the AST MFS Growth Portfolio, the AST Alger Growth Portfolio, the AST Marsico Capital Growth Portfolio, the AST
Janus Strategic Value Portfolio, the AST Cohen & Steers Realty Portfolio, the AST Sanford Bernstein Managed Index 500 Portfolio,
the AST American Century Income & Growth Portfolio, the AST MFS Growth with Income Portfolio, the AST AIM Balanced Portfolio and
the AST Lord Abbett Bond-Debenture Portfolio.
1. No Portfolio may issue senior securities, except as permitted under the 1940 Act.
2. No Portfolio may borrow money, except that a Portfolio may (i) borrow money for non-leveraging, temporary or
emergency purposes, and (ii) engage in reverse repurchase agreements and make other investments or engage in other transactions,
which may involve a borrowing, in a manner consistent with the Portfolio's investment objective and policies; provided that the
combination of (i) and (ii) shall not exceed 33 1/3% of the value of the Portfolio's assets (including the amount borrowed) less
liabilities (other than borrowings) or such other percentage permitted by law. Any borrowings which come to exceed this amount
will be reduced in accordance with applicable law. Subject to the above limitations, a Portfolio may borrow from banks or other
persons to the extent permitted by applicable law.
3. No Portfolio may underwrite securities issued by other persons, except to the extent that the Portfolio may be
deemed to be an underwriter (within the meaning of the Securities Act of 1933) in connection with the purchase and sale of
portfolio securities.
4. No Portfolio may purchase or sell real estate unless acquired as a result of the ownership of securities or other
instruments; provided that this restriction shall not prohibit a Portfolio from investing in securities or other instruments
backed by real estate or in securities of companies engaged in the real estate business.
5. No Portfolio may purchase or sell physical commodities unless acquired as a result of the ownership of securities
or instruments; provided that this restriction shall not prohibit a Portfolio from (i) engaging in permissible options and futures
transactions and forward foreign currency contracts in accordance with the Portfolio's investment policies, or (ii) investing in
securities of any kind.
6. No Portfolio may make loans, except that a Portfolio may (i) lend portfolio securities in accordance with the
Portfolio's investment policies in amounts up to 33 1/3% of the total assets of the Portfolio taken at market value, (ii) purchase
money market securities and enter into repurchase agreements, and (iii) acquire publicly distributed or privately placed debt
securities.
7. No Portfolio other than the AST Kinetics Internet Portfolio and the AST Cohen & Steers Realty Portfolio may
purchase any security if, as a result, more than 25% of the value of the Portfolio's assets would be invested in the securities of
issuers having their principal business activities in the same industry; provided that this restriction does not apply to
investments in obligations issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities (or repurchase
agreements with respect thereto). The AST Kinetics Internet Portfolio will invest at least 25% of its total assets in securities
of companies engaged in the Internet and Internet-related activities. The AST Cohen & Steers Realty Portfolio will invest at
least 25% of its total assets in securities of companies engaged in the real estate business.
8. No Portfolio other than the AST Janus Mid-Cap Growth Portfolio, the AST Kinetics Internet Portfolio, the AST
Janus Strategic Value Portfolio and the AST Cohen & Steers Realty Portfolio may, with respect to 75% of the value of its total
assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities) if, as a result, (i) more than 5% of the value of the Portfolio's total assets would be invested in
the securities of such issuer, or (ii) more than 10% of the outstanding voting securities of such issuer would be held by the
Portfolio. The AST Janus Mid-Cap Growth Portfolio, the AST Kinetics Internet Portfolio, the AST Janus Strategic Value Portfolio
and the AST Cohen & Steers Realty Portfolio may not, with respect to 50% of a Portfolio's total assets, invest in the securities
of any one issuer (other than the U.S. Government and its agencies and instrumentalities), if immediately after and as a result of
such investment more than 5% of the total assets of the Portfolio would be invested in such issuer.
If a restriction on a Portfolio's investments is adhered to at the time an investment is made, a subsequent change in the
percentage of Portfolio assets invested in certain securities or other instruments, or change in average duration of the
Portfolio's investment portfolio, resulting from changes in the value of the Portfolio's total assets, will not be considered a
violation of the restriction; provided, however, that the asset coverage requirement applicable to borrowings shall be maintained
in the manner contemplated by applicable law.
With respect to investment restrictions (2) and (6), a Portfolio will not borrow or lend to any other fund unless it
applies for and receives an exemptive order from the SEC, if so required, or the SEC issues rules permitting such transactions.
There is no assurance the SEC would grant any order requested by a Portfolio or promulgate any rules allowing the transactions.
With respect to investment restriction (6), the restriction on making loans is not considered to limit a Portfolio's
investments in loan participations and assignments.
With respect to investment restriction (7), the AST AIM International Equity Portfolio and the AST AIM Balanced Portfolio
will not consider a bank-issued guaranty or financial guaranty insurance as a separate security for purposes of determining the
percentage of the Portfolios' assets invested in the securities of issuers in a particular industry.
CERTAIN RISK FACTORS AND INVESTMENT METHODS:
Some of the investment instruments, techniques and methods which may be used by one or more of the Portfolios and the
risks attendant thereto are described below. Other risk factors and investment methods may be described in the "Investment
Objectives and Policies" and "Certain Risk Factors and Investment Methods" section in the Trust's Prospectus and in the
"Investment Objectives and Policies" section of this Statement. The risks and investment methods described below apply only to
those Portfolios which may invest in such instruments or use such techniques.
Debt Obligations:
Yields on short, intermediate, and long-term securities are dependent on a variety of factors, including, the general
conditions of the money and bond markets, the size of a particular offering, the maturity of the obligation, and the rating of the
issue. Debt securities with longer maturities tend to produce higher yields and are generally subject to potentially greater
capital appreciation and depreciation than obligations with shorter maturities and lower yields. The market prices of debt
securities usually vary, depending upon available yields. An increase in interest rates will generally reduce the value of
portfolio investments, and a decline in interest rates will generally increase the value of portfolio investments. The ability of
the Portfolio to achieve its investment objectives is also dependent on the continuing ability of the issuers of the debt
securities in which the Portfolio invests to meet their obligations for the payment of interest and principal when due.
Special Risks Associated with Low-Rated and Comparable Unrated Securities:
Low-rated and comparable unrated securities, while generally offering higher yields than investment-grade securities with
similar maturities, involve greater risks, including the possibility of default or bankruptcy. They are regarded as predominantly
speculative with respect to the issuer's capacity to pay interest and repay principal. The special risk considerations in
connection with such investments are discussed below. See the Appendix of this Statement for a discussion of securities ratings.
Effect of Interest Rates and Economic Changes. The low-rated and comparable unrated securities market is relatively new,
and its growth paralleled a long economic expansion. As a result, it is not clear how this market may withstand a prolonged
recession or economic downturn. Such a prolonged economic downturn could severely disrupt the market for and adversely affect the
value of such securities.
All interest-bearing securities typically experience appreciation when interest rates decline and depreciation when
interest rates rise. The market values of low-rated and comparable unrated securities tend to reflect individual corporate
developments to a greater extent than do higher-rated securities, which react primarily to fluctuations in the general level of
interest rates. Low-rated and comparable unrated securities also tend to be more sensitive to economic conditions than are
higher-rated securities. As a result, they generally involve more credit risks than securities in the higher-rated categories.
During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of low-rated and comparable
unrated securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The
issuer's ability to service its debt obligations may also be adversely affected by specific corporate developments, the issuer's
inability to meet specific projected business forecasts, or the unavailability of additional financing. The risk of loss due to
default by an issuer of low-rated and comparable unrated securities is significantly greater than issuers of higher-rated
securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer
of a low-rated and comparable unrated security defaulted, a Portfolio might incur additional expenses to seek recovery. Periods
of economic uncertainty and changes would also generally result in increased volatility in the market prices of low-rated and
comparable unrated securities and thus in a Portfolio's net asset value.
As previously stated, the value of such a security will decrease in a rising interest rate market and accordingly, so
will a Portfolio's net asset value. If a Portfolio experiences unexpected net redemptions in such a market, it may be forced to
liquidate a portion of its portfolio securities without regard to their investment merits. Due to the limited liquidity of
high-yield securities (discussed below) a Portfolio may be forced to liquidate these securities at a substantial discount. Any
such liquidation would reduce a Portfolio's asset base over which expenses could be allocated and could result in a reduced rate
of return for a Portfolio.
Payment Expectations. Low-rated and comparable unrated securities typically contain redemption, call, or prepayment
provisions which permit the issuer of such securities containing such provisions to, at their discretion, redeem the securities.
During periods of falling interest rates, issuers of high-yield securities are likely to redeem or prepay the securities and
refinance them with debt securities with a lower interest rate. To the extent an issuer is able to refinance the securities, or
otherwise redeem them, a Portfolio may have to replace the securities with a lower-yielding security, which would result in a
lower return for a Portfolio.
Issuers of lower-rated securities are often highly leveraged, so that their ability to service their debt obligations
during an economic downturn or during sustained periods of rising interest rates may be impaired. Such issuers may not have more
traditional methods of financing available to them and may be unable to repay outstanding obligations at maturity by refinancing.
The risk of loss due to default in payment of interest or repayment of principal by such issuers is significantly greater because
such securities frequently are unsecured and subordinated to the prior payment of senior indebtedness.
Credit Ratings. Credit ratings issued by credit-rating agencies evaluate the safety of principal and interest payments
of rated securities. They do not, however, evaluate the market value risk of low-rated and comparable unrated securities and,
therefore, may not fully reflect the true risks of an investment. In addition, credit-rating agencies may or may not make timely
changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the
security. Consequently, credit ratings are used only as a preliminary indicator of investment quality. Investments in low-rated
and comparable unrated securities will be more dependent on the Sub-advisor's credit analysis than would be the case with
investments in investment-grade debt securities. The Sub-advisor may employ its own credit research and analysis, which could
include a study of existing debt, capital structure, ability to service debt and to pay dividends, the issuer's sensitivity to
economic conditions, its operating history, and the current trend of earnings. The Sub-advisor continually monitors the
investments in a Portfolio and evaluates whether to dispose of or to retain low-rated and comparable unrated securities whose
credit ratings or credit quality may have changed.
Liquidity and Valuation. A Portfolio may have difficulty disposing of certain low-rated and comparable unrated
securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all
low-rated and comparable unrated securities, there is no established retail secondary market for many of these securities. A
Portfolio anticipates that such securities could be sold only to a limited number of dealers or institutional investors. To the
extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities.
The lack of a liquid secondary market may have an adverse impact on the market price of the security. As a result, a Portfolio's
asset value and a Portfolio's ability to dispose of particular securities, when necessary to meet a Portfolio's liquidity needs or
in response to a specific economic event, may be impacted. The lack of a liquid secondary market for certain securities may also
make it more difficult for the Portfolio to obtain accurate market quotations for purposes of valuing a Portfolio. Market
quotations are generally available on many low-rated and comparable unrated issues only from a limited number of dealers and may
not necessarily represent firm bids of such dealers or prices for actual sales. During periods of thin trading, the spread between
bid and asked prices is likely to increase significantly. In addition, adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and liquidity of low-rated and comparable unrated securities, especially in
a thinly-traded market.
Put and Call Options:
Writing (Selling) Call Options. A call option gives the holder (buyer) the "right to purchase" a security or currency at
a specified price (the exercise price), at expiration of the option (European style) or at any time until a certain date (the
expiration date) (American style). So long as the obligation of the writer of a call option continues, he may be assigned an
exercise notice by the broker-dealer through whom such option was sold, requiring him to deliver the underlying security or
currency against payment of the exercise price. This obligation terminates upon the expiration of the call option, or such
earlier time at which the writer effects a closing purchase transaction by repurchasing an option identical to that previously
sold.
When writing a call option, a Portfolio, in return for the premium, gives up the opportunity for profit from a price
increase in the underlying security or currency above the exercise price, but conversely retains the risk of loss should the price
of the security or currency decline. Unlike one who owns securities or currencies not subject to an option, the Portfolio has no
control over when it may be required to sell the underlying securities or currencies, since it may be assigned an exercise notice
at any time prior to the expiration of its obligation as a writer. If a call option which the Portfolio has written expires, the
Portfolio will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of
the underlying security or currency during the option period. If the call option is exercised, a Portfolio will realize a gain or
loss from the sale of the underlying security or currency.
Writing (Selling) Put Options. A put option gives the purchaser of the option the right to sell, and the writer (seller)
has the obligation to buy, the underlying security or currency at the exercise price during the option period (American style) or
at the expiration of the option (European style). So long as the obligation of the writer continues, he may be assigned an
exercise notice by the broker-dealer through whom such option was sold, requiring him to make payment of the exercise price
against delivery of the underlying security or currency. The operation of put options in other respects, including their related
risks and rewards, is substantially identical to that of call options.
Premium Received from Writing Call or Put Options. A Portfolio will receive a premium from writing a put or call option,
which increases such Portfolio's return in the event the option expires unexercised or is closed out at a profit. The amount of
the premium will reflect, among other things, the relationship of the market price of the underlying security to the exercise
price of the option, the term of the option and the volatility of the market price of the underlying security. By writing a call
option, a Portfolio limits its opportunity to profit from any increase in the market value of the underlying security above the
exercise price of the option. By writing a put option, a Portfolio assumes the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market value, resulting in a potential capital loss if the
purchase price exceeds the market value plus the amount of the premium received, unless the security subsequently appreciates in
value.
Closing Transactions. Closing transactions may be effected in order to realize a profit on an outstanding call option,
to prevent an underlying security or currency from being called, or, to permit the sale of the underlying security or currency. A
Portfolio may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in
which it purchases an option having the same terms as the option written. A Portfolio will realize a profit or loss from such
transaction if the cost of such transaction is less or more than the premium received from the writing of the option. In the case
of a put option, any loss so incurred may be partially or entirely offset by the premium received from a simultaneous or
subsequent sale of a different put option. Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be
offset in whole or in part by unrealized appreciation of the underlying security owned by such Portfolio.
Furthermore, effecting a closing transaction will permit the Portfolio to write another call option on the underlying
security or currency with either a different exercise price or expiration date or both. If the Portfolio desires to sell a
particular security or currency from its portfolio on which it has written a call option, or purchased a put option, it will seek
to effect a closing transaction prior to, or concurrently with, the sale of the security or currency. There is, of course, no
assurance that the Portfolio will be able to effect such closing transactions at a favorable price. If the Portfolio cannot enter
into such a transaction, it may be required to hold a security or currency that it might otherwise have sold. When the Portfolio
writes a covered call option, it runs the risk of not being able to participate in the appreciation of the underlying securities
or currencies above the exercise price, as well as the risk of being required to hold on to securities or currencies that are
depreciating in value. This could result in higher transaction costs. The Portfolio will pay transaction costs in connection with
the writing of options to close out previously written options. Such transaction costs are normally higher than those applicable
to purchases and sales of portfolio securities.
Purchasing Call Options. Call options may be purchased by a Portfolio for the purpose of acquiring the underlying
securities or currencies for its portfolio. Utilized in this fashion, the purchase of call options enables the Portfolio to
acquire the securities or currencies at the exercise price of the call option plus the premium paid. At times the net cost of
acquiring securities or currencies in this manner may be less than the cost of acquiring the securities or currencies directly.
This technique may also be useful to a Portfolio in purchasing a large block of securities or currencies that would be more
difficult to acquire by direct market purchases. So long as it holds such a call option rather than the underlying security or
currency itself, the Portfolio is partially protected from any unexpected decline in the market price of the underlying security
or currency and in such event could allow the call option to expire, incurring a loss only to the extent of the premium paid for
the option.
Purchasing Put Options. A Portfolio may purchase a put option on an underlying security or currency (a "protective put")
owned by the Portfolio as a defensive technique in order to protect against an anticipated decline in the value of the security or
currency. Such hedge protection is provided only during the life of the put option when the Portfolio, as the holder of the put
option, is able to sell the underlying security or currency at the put exercise price regardless of any decline in the underlying
security's market price or currency's exchange value. For example, a put option may be purchased in order to protect unrealized
appreciation of a security or currency where a Sub-advisor deems it desirable to continue to hold the security or currency because
of tax considerations. The premium paid for the put option and any transaction costs would reduce any capital gain otherwise
available for distribution when the security or currency is eventually sold.
By purchasing put options on a security or currency it does not own, the Portfolio seeks to benefit from a decline in the
market price of the underlying security or currency. If the put option is not sold when it has remaining value, and if the market
price of the underlying security or currency remains equal to or greater than the exercise price during the life of the put
option, the Portfolio will lose its entire investment in the put option. In order for the purchase of a put option to be
profitable, the market price of the underlying security or currency must decline sufficiently below the exercise price to cover
the premium and transaction costs, unless the put option is sold in a closing sale transaction.
Dealer Options. Exchange-traded options generally have a continuous liquid market while dealer options have none.
Consequently, the Portfolio will generally be able to realize the value of a dealer option it has purchased only by exercising it
or reselling it to the dealer who issued it. Similarly, when the Portfolio writes a dealer option, it generally will be able to
close out the option prior to its expiration only by entering into a closing purchase transaction with the dealer to which the
Portfolio originally wrote the option. While the Portfolio will seek to enter into dealer options only with dealers who will
agree to and which are expected to be capable of entering into closing transactions with the Portfolio, there can be no assurance
that the Portfolio will be able to liquidate a dealer option at a favorable price at any time prior to expiration. Until the
Portfolio, as a covered dealer call option writer, is able to effect a closing purchase transaction, it will not be able to
liquidate securities (or other assets) used as cover until the option expires or is exercised. In the event of insolvency of the
contra party, the Portfolio may be unable to liquidate a dealer option. With respect to options written by the Portfolio, the
inability to enter into a closing transaction may result in material losses to the Portfolio. For example, since the Portfolio
must maintain a secured position with respect to any call option on a security it writes, the Portfolio may not sell the assets
which it has segregated to secure the position while it is obligated under the option. This requirement may impair the
Portfolio's ability to sell portfolio securities at a time when such sale might be advantageous.
The Staff of the SEC has taken the position that purchased dealer options and the assets used to secure the written
dealer options are illiquid securities. The Portfolio may treat the cover used for written OTC options as liquid if the dealer
agrees that the Portfolio may repurchase the OTC option it has written for a maximum price to be calculated by a predetermined
formula. In such cases, the OTC option would be considered illiquid only to the extent the maximum repurchase price under the
formula exceeds the intrinsic value of the option. To this extent, the Portfolio will treat dealer options as subject to the
Portfolio's limitation on unmarketable securities. If the SEC changes its position on the liquidity of dealer options, the
Portfolio will change its treatment of such instruments accordingly.
Certain Risk Factors in Writing Call Options and in Purchasing Call and Put Options: During the option period, a
Portfolio, as writer of a call option has, in return for the premium received on the option, given up the opportunity for capital
appreciation above the exercise price should the market price of the underlying security increase, but has retained the risk of
loss should the price of the underlying security decline. The writer has no control over the time when it may be required to
fulfill its obligation as a writer of the option. The risk of purchasing a call or put option is that the Portfolio may lose the
premium it paid plus transaction costs. If the Portfolio does not exercise the option and is unable to close out the position
prior to expiration of the option, it will lose its entire investment.
An option position may be closed out only on an exchange which provides a secondary market. There can be no assurance
that a liquid secondary market will exist for a particular option at a particular time and that the Portfolio can close out its
position by effecting a closing transaction. If the Portfolio is unable to effect a closing purchase transaction, it cannot sell
the underlying security until the option expires or the option is exercised. Accordingly, the Portfolio may not be able to sell
the underlying security at a time when it might otherwise be advantageous to do so. Possible reasons for the absence of a liquid
secondary market include the following: (i) insufficient trading interest in certain options; (ii) restrictions on transactions
imposed by an exchange; (iii) trading halts, suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) inadequacy of the facilities of an exchange or the clearing corporation to handle
trading volume; and (v) a decision by one or more exchanges to discontinue the trading of options or impose restrictions on
orders. In addition, the hours of trading for options may not conform to the hours during which the underlying securities are
traded. To the extent that the options markets close before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be reflected in the options markets. The purchase of options is a
highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio
securities transactions.
Each exchange has established limitations governing the maximum number of call options, whether or not covered, which may
be written by a single investor acting alone or in concert with others (regardless of whether such options are written on the same
or different exchanges or are held or written on one or more accounts or through one or more brokers). An exchange may order the
liquidation of positions found to be in violation of these limits and it may impose other sanctions or restrictions.
Options on Stock Indices:
Options on stock indices are similar to options on specific securities except that, rather than the right to take or make
delivery of the specific security at a specific price, an option on a stock index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of that stock index is greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the option. This amount of cash is equal to such difference between the closing
price of the index and the exercise price of the option expressed in dollars multiplied by a specified multiple. The writer of
the option is obligated, in return for the premium received, to make delivery of this amount. Unlike options on specific
securities, all settlements of options on stock indices are in cash and gain or loss depends on general movements in the stocks
included in the index rather than price movements in particular stocks. A stock index futures contract is an agreement in which
one party agrees to deliver to the other an amount of cash equal to a specific amount multiplied by the difference between the
value of a specific stock index at the close of the last trading day of the contract and the price at which the agreement is
made. No physical delivery of securities is made.
Risk Factors in Options on Indices. Because the value of an index option depends upon the movements in the level of the
index rather than upon movements in the price of a particular security, whether the Portfolio will realize a gain or a loss on the
purchase or sale of an option on an index depends upon the movements in the level of prices in the market generally or in an
industry or market segment rather than upon movements in the price of the individual security. Accordingly, successful use of
positions will depend upon a Sub-advisor's ability to predict correctly movements in the direction of the market generally or in
the direction of a particular industry. This requires different skills and techniques than predicting changes in the prices of
individual securities.
Index prices may be distorted if trading of securities included in the index is interrupted. Trading in index options
also may be interrupted in certain circumstances, such as if trading were halted in a substantial number of securities in the
index. If this occurred, a Portfolio would not be able to close out options which it had written or purchased and, if
restrictions on exercise were imposed, might be unable to exercise an option it purchased, which would result in substantial
losses.
Price movements in Portfolio securities will not correlate perfectly with movements in the level of the index and
therefore, a Portfolio bears the risk that the price of the securities may not increase as much as the level of the index. In
this event, the Portfolio would bear a loss on the call which would not be completely offset by movements in the prices of the
securities. It is also possible that the index may rise when the value of the Portfolio's securities does not. If this occurred,
a Portfolio would experience a loss on the call which would not be offset by an increase in the value of its securities and might
also experience a loss in the market value of its securities.
Unless a Portfolio has other liquid assets which are sufficient to satisfy the exercise of a call on the index, the
Portfolio will be required to liquidate securities in order to satisfy the exercise.
When a Portfolio has written a call on an index, there is also the risk that the market may decline between the time the
Portfolio has the call exercised against it, at a price which is fixed as of the closing level of the index on the date of
exercise, and the time the Portfolio is able to sell securities. As with options on securities, the Sub-advisor will not learn
that a call has been exercised until the day following the exercise date, but, unlike a call on securities where the Portfolio
would be able to deliver the underlying security in settlement, the Portfolio may have to sell part of its securities in order to
make settlement in cash, and the price of such securities might decline before they could be sold.
If a Portfolio exercises a put option on an index which it has purchased before final determination of the closing index
value for the day, it runs the risk that the level of the underlying index may change before closing. If this change causes the
exercised option to fall "out-of-the-money" the Portfolio will be required to pay the difference between the closing index value
and the exercise price of the option (multiplied by the applicable multiplier) to the assigned writer. Although the Portfolio may
be able to minimize this risk by withholding exercise instructions until just before the daily cutoff time or by selling rather
than exercising an option when the index level is close to the exercise price, it may not be possible to eliminate this risk
entirely because the cutoff time for index options may be earlier than those fixed for other types of options and may occur before
definitive closing index values are announced.
Trading in Futures:
A futures contract provides for the future sale by one party and purchase by another party of a specified amount of a
specific financial instrument (e.g., units of a stock index) for a specified price, date, time and place designated at the time
the contract is made. Brokerage fees are incurred when a futures contract is bought or sold and margin deposits must be
maintained. Entering into a contract to buy is commonly referred to as buying or purchasing a contract or holding a long
position. Entering into a contract to sell is commonly referred to as selling a contract or holding a short position.
Unlike when the Portfolio purchases or sells a security, no price would be paid or received by the Portfolio upon the
purchase or sale of a futures contract. Upon entering into a futures contract, and to maintain the Portfolio's open positions in
futures contracts, the Portfolio would be required to deposit with its custodian in a segregated account in the name of the
futures broker an amount of cash, U.S. government securities, suitable money market instruments, or other liquid securities, known
as "initial margin." The margin required for a particular futures contract is set by the exchange on which the contract is
traded, and may be significantly modified from time to time by the exchange during the term of the contract. Futures contracts
are customarily purchased and sold on margins that may range upward from less than 5% of the value of the contract being traded.
If the price of an open futures contract changes (by increase in the case of a sale or by decrease in the case of a
purchase) so that the loss on the futures contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if the value of a position increases because of
favorable price changes in the futures contract so that the margin deposit exceeds the required margin, the broker will pay the
excess to the Portfolio.
These subsequent payments, called "variation margin," to and from the futures broker, are made on a daily basis as the
price of the underlying assets fluctuate making the long and short positions in the futures contract more or less valuable, a
process known as "marking to the market." A Portfolio may or may not earn interest income on its margin deposits. Although
certain futures contracts, by their terms, require actual future delivery of and payment for the underlying instruments, in
practice most futures contracts are usually closed out before the delivery date. Closing out an open futures contract purchase or
sale is effected by entering into an offsetting futures contract purchase or sale, respectively, for the same aggregate amount of
the identical securities and the same delivery date. If the offsetting purchase price is less than the original sale price, the
Portfolio realizes a gain; if it is more, the Portfolio realizes a loss. Conversely, if the offsetting sale price is more than
the original purchase price, the Portfolio realizes a gain; if it is less, the Portfolio realizes a loss. The transaction costs
must also be included in these calculations. There can be no assurance, however, that a Portfolio will be able to enter into an
offsetting transaction with respect to a particular futures contract at a particular time. If the Portfolio is not able to enter
into an offsetting transaction, the Portfolio will continue to be required to maintain the margin deposits on the futures contract.
For example, one contract in the Financial Times Stock Exchange 100 Index future is a contract to buy 25 pounds sterling
multiplied by the level of the UK Financial Times 100 Share Index on a given future date. Settlement of a stock index futures
contract may or may not be in the underlying security. If not in the underlying security, then settlement will be made in cash,
equivalent over time to the difference between the contract price and the actual price of the underlying asset at the time the
stock index futures contract expires.
Options on futures are similar to options on underlying instruments except that options on futures give the purchaser the
right, in return for the premium paid, to assume a position in a futures contract (a long position if the option is a call and a
short position if the option is a put), rather than to purchase or sell the futures contract, at a specified exercise price at any
time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the
option to the holder of the option will be accompanied by the delivery of the accumulated balance in the writer's futures margin
account which represents the amount by which the market price of the futures contract, at exercise, exceeds (in the case of a
call) or is less than (in the case of a put) the exercise price of the option on the futures contract. Alternatively, settlement
may be made totally in cash. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of
the premium paid.
The writer of an option on a futures contract is required to deposit margin pursuant to requirements similar to those
applicable to futures contracts. Upon exercise of an option on a futures contract, the delivery of the futures position by the
writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of the futures contract at the time of exercise
exceeds, in the case of a call, or is less than, in the case of a put, the exercise price of the option on the futures contract.
Although financial futures contracts by their terms call for actual delivery or acceptance of securities, in most cases
the contracts are closed out before the settlement date without the making or taking of delivery. Closing out is accomplished by
effecting an offsetting transaction. A futures contract sale is closed out by effecting a futures contract purchase for the same
aggregate amount of securities and the same delivery date. If the sale price exceeds the offsetting purchase price, the seller
immediately would be paid the difference and would realize a gain. If the offsetting purchase price exceeds the sale price, the
seller would immediately pay the difference and would realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same securities and the same delivery date. If the offsetting sale price exceeds the
purchase price, the purchaser would realize a gain, whereas if the purchase price exceeds the offsetting sale price, the purchaser
would realize a loss.
Commissions on financial futures contracts and related options transactions may be higher than those which would apply to
purchases and sales of securities directly.
A public market exists in interest rate futures contracts covering primarily the following financial instruments: U.S.
Treasury bonds; U.S. Treasury notes; Government National Mortgage Association ("GNMA") modified pass-through mortgage-backed
securities; three-month U.S. Treasury bills; 90-day commercial paper; bank certificates of deposit; and Eurodollar certificates of
deposit. It is expected that Futures contracts trading in additional financial instruments will be authorized. The standard
contract size is generally $100,000 for Futures contracts in U.S. Treasury bonds, U.S. Treasury notes, and GNMA pass-through
securities and $1,000,000 for the other designated Futures contracts. A public market exists in Futures contracts covering a
number of indexes, including, but not limited to, the Standard & Poor's 500 Index, the Standard & Poor's 100 Index, the NASDAQ 100
Index, the Value Line Composite Index and the New York Stock Exchange Composite Index.
Regulatory Matters. The Staff of SEC has taken the position that the purchase and sale of futures contracts and the
writing of related options may give rise to "senior securities" for the purposes of the restrictions contained in Section 18 of
the 1940 Act on investment companies' issuing senior securities. However, the Staff has taken the position that no senior
security will be created if a Portfolio maintains in a segregated account an amount of cash or other liquid assets at least equal
to the amount of the Portfolio's obligation under the futures contract or option. Similarly, no senior security will be created
if a Portfolio "covers" its futures and options positions by owning corresponding positions or securities underlying the positions
that enable the Portfolio to close out its futures and options positions without paying additional cash consideration. Each
Portfolio will conduct its purchases and sales of any futures contracts and writing of related options transactions in accordance
with these requirements.
Certain Risks Relating to Futures Contracts and Related Options. There are special risks involved in futures
transactions.
Volatility and Leverage. The prices of futures contracts are volatile and are influenced, among other things,
by actual and anticipated changes in the market and interest rates, which in turn are affected by fiscal and monetary policies and
national and international policies and economic events.
Most United States futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single
trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of a trading session. Once the daily limit has been reached in a particular type
of futures contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement
during a particular trading day and therefore does not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of futures positions and subjecting some futures traders to
substantial losses.
Because of the low margin deposits required, futures trading involves an extremely high degree of leverage. As a result,
a relatively small price movement in a futures contract may result in immediate and substantial loss, as well as gain, to the
investor. For example, if at the time of purchase, 10% of the value of the futures contract is deposited as margin, a subsequent
10% decrease in the value of the futures contract would result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would result in a loss equal to 150% of the original
margin deposit, if the contract were closed out. Thus, a purchase or sale of a futures contract may result in losses in excess of
the amount invested in the futures contract. However, the Portfolio would presumably have sustained comparable losses if, instead
of the futures contract, it had invested in the underlying instrument and sold it after the decline. Furthermore, in the case of a
futures contract purchase, in order to be certain that the Portfolio has sufficient assets to satisfy its obligations under a
futures contract, the Portfolio earmarks to the futures contract money market instruments equal in value to the current value of
the underlying instrument less the margin deposit.
Liquidity. The Portfolio may elect to close some or all of its futures positions at any time prior to their
expiration. The Portfolio would do so to reduce exposure represented by long futures positions or increase exposure represented
by short futures positions. The Portfolio may close its positions by taking opposite positions which would operate to terminate
the Portfolio's position in the futures contracts. Final determinations of variation margin would then be made, additional cash
would be required to be paid by or released to the Portfolio, and the Portfolio would realize a loss or a gain.
Futures contracts may be closed out only on the exchange or board of trade where the contracts were initially traded.
Although the Portfolio intends to purchase or sell futures contracts only on exchanges or boards of trade where there appears to
be an active market, there is no assurance that a liquid market on an exchange or board of trade will exist for any particular
contract at any particular time. In such event, it might not be possible to close a futures contract, and in the event of adverse
price movements, the Portfolio would continue to be required to make daily cash payments of variation margin. However, in the
event futures contracts have been used to hedge the underlying instruments, the Portfolio would continue to hold the underlying
instruments subject to the hedge until the futures contracts could be terminated. In such circumstances, an increase in the price
of the underlying instruments, if any, might partially or completely offset losses on the futures contract. However, as described
below, there is no guarantee that the price of the underlying instruments will, in fact, correlate with the price movements in the
futures contract and thus provide an offset to losses on a futures contract.
Hedging Risk. A decision of whether, when, and how to hedge involves skill and judgment, and even a
well-conceived hedge may be unsuccessful to some degree because of unexpected market behavior, market or interest rate trends.
There are several risks in connection with the use by the Portfolio of futures contracts as a hedging device. One risk arises
because of the imperfect correlation between movements in the prices of the futures contracts and movements in the prices of the
underlying instruments which are the subject of the hedge. Sub-advisor will, however, attempt to reduce this risk by entering
into futures contracts whose movements, in its judgment, will have a significant correlation with movements in the prices of the
Portfolio's underlying instruments sought to be hedged.
Successful use of futures contracts by the Portfolio for hedging purposes is also subject to a Sub-advisor's ability to
correctly predict movements in the direction of the market. It is possible that, when the Portfolio has sold futures to hedge its
portfolio against a decline in the market, the index, indices, or underlying instruments on which the futures are written might
advance and the value of the underlying instruments held in the Portfolio's portfolio might decline. If this were to occur, the
Portfolio would lose money on the futures and also would experience a decline in value in its underlying instruments. However,
while this might occur to a certain degree, Sub-advisor may believe that over time the value of the Portfolio's portfolio will
tend to move in the same direction as the market indices which are intended to correlate to the price movements of the underlying
instruments sought to be hedged. It is also possible that if the Portfolio were to hedge against the possibility of a decline in
the market (adversely affecting the underlying instruments held in its portfolio) and prices instead increased, the Portfolio
would lose part or all of the benefit of increased value of those underlying instruments that it has hedged, because it would have
offsetting losses in its futures positions. In addition, in such situations, if the Portfolio had insufficient cash, it might have
to sell underlying instruments to meet daily variation margin requirements. Such sales of underlying instruments might be, but
would not necessarily be, at increased prices (which would reflect the rising market). The Portfolio might have to sell
underlying instruments at a time when it would be disadvantageous to do so.
In addition to the possibility that there might be an imperfect correlation, or no correlation at all, between price
movements in the futures contracts and the portion of the portfolio being hedged, the price movements of futures contracts might
not correlate perfectly with price movements in the underlying instruments due to certain market distortions. First, all
participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors might close futures contracts through offsetting transactions which could distort the
normal relationship between the underlying instruments and futures markets. Second, the margin requirements in the futures market
are less onerous than margin requirements in the securities markets, and as a result the futures market might attract more
speculators than the securities markets do. Increased participation by speculators in the futures market might also cause
temporary price distortions. Due to the possibility of price distortion in the futures market and also because of the imperfect
correlation between price movements in the underlying instruments and movements in the prices of futures contracts, even a correct
forecast of general market trends by Sub-advisor might not result in a successful hedging transaction over a very short time
period.
Certain Risks of Options on Futures Contracts. The Portfolio may seek to close out an option position by writing or
buying an offsetting option covering the same index, underlying instruments, or contract and having the same exercise price and
expiration date. The ability to establish and close out positions on such options will be subject to the maintenance of a liquid
secondary market. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular
classes or series of options, or underlying instruments; (iv) unusual or unforeseen circumstances may interrupt normal operations
on an exchange; (v) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that
exchange (or in the class or series of options) would cease to exist, although outstanding options on the exchange that had been
issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their
terms. There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render
certain of the facilities of any of the clearing corporations inadequate, and thereby result in the institution by an exchange of
special procedures which may interfere with the timely execution of customers' orders.
Foreign Futures and Options:
Participation in foreign futures and foreign options transactions involves the execution and clearing of trades on or
subject to the rules of a foreign board of trade. Neither the National Futures Association nor any domestic exchange regulates
activities of any foreign boards of trade, including the execution, delivery and clearing of transactions, or has the power to
compel enforcement of the rules of a foreign board of trade or any applicable foreign law. This is true even if the exchange is
formally linked to a domestic market so that a position taken on the market may be liquidated by a transaction on another market.
Moreover, such laws or regulations will vary depending on the foreign country in which the foreign futures or foreign options
transaction occurs. For these reasons, customers who trade foreign futures or foreign options contracts may not be afforded
certain of the protective measures provided by the Commodity Exchange Act, the CFTC's regulations and the rules of the National
Futures Association and any domestic exchange, including the right to use reparations proceedings before the Commission and
arbitration proceedings provided by the National Futures Association or any domestic futures exchange. In particular, funds
received from customers for foreign futures or foreign options transactions may not be provided the same protections as funds
received in respect of transactions on United States futures exchanges. In addition, the price of any foreign futures or foreign
options contract and, therefore, the potential profit and loss thereon may be affected by any variance in the foreign exchange
rate between the time your order is placed and the time it is liquidated, offset or exercised.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed
upon by the parties, at a price set at the time of the contract. These contracts are principally traded in the interbank market
conducted directly between currency traders (usually large, commercial banks) and their customers. A forward contract generally
has no deposit requirement, and no commissions are charged at any stage for trades.
Depending on the applicable investment policies and restrictions applicable to a Portfolio, a Portfolio may generally
enter into forward foreign currency exchange contracts under two circumstances. First, when a Portfolio enters into a contract
for the purchase or sale of a security denominated in a foreign currency, it may desire to "lock in" the U.S. dollar price of the
security. By entering into a forward contract for the purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying security transactions, the Portfolio may be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and the subject foreign currency during the period
between the date the security is purchased or sold and the date on which payment is made or received.
Second, when a Sub-advisor believes that the currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, including the U.S. dollar, it may enter into a forward contract to sell or buy the amount of
the former foreign currency, approximating the value of some or all of the Portfolio's securities denominated in such foreign
currency. Alternatively, where appropriate, the Portfolio may hedge all or part of its foreign currency exposure through the use
of a basket of currencies or a proxy currency where such currencies or currency act as an effective proxy for other currencies.
In such a case, the Portfolio may enter into a forward contract where the amount of the foreign currency to be sold exceeds the
value of the securities denominated in such currency. The use of this basket hedging technique may be more efficient and
economical than entering into separate forward contracts for each currency held in the Portfolio. The precise matching of the
forward contract amounts and the value of the securities involved will not generally be possible since the future value of such
securities in foreign currencies will change as a consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The projection of short-term currency market movement is
extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain.
As indicated above, it is impossible to forecast with absolute precision the market value of portfolio securities at the
expiration of the forward contract. Accordingly, it may be necessary for a Portfolio to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign
currency the Portfolio is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency the Portfolio is obligated to deliver. However, as
noted, in order to avoid excessive transactions and transaction costs, the Portfolio may use liquid, high-grade debt securities,
denominated in any currency, to cover the amount by which the value of a forward contract exceeds the value of the securities to
which it relates.
If the Portfolio retains the portfolio security and engages in an offsetting transaction, the Portfolio will incur a gain
or a loss (as described below) to the extent that there has been movement in forward contract prices. If the Portfolio engages in
an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward
prices decline during the period between the Portfolio's entering into a forward contract for the sale of a foreign currency and
the date it enters into an offsetting contract for the purchase of the foreign currency, the Portfolio will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Portfolio will suffer a loss to the extent of the price of the currency it has agreed to purchase
exceeds the price of the currency it has agreed to sell.
Foreign Currency Contracts. A currency futures contract sale creates an obligation by a Portfolio, as seller, to deliver
the amount of currency called for in the contract at a specified future time for a special price. A currency futures contract
purchase creates an obligation by a Portfolio, as purchaser, to take delivery of an amount of currency at a specified future time
at a specified price. Unlike forward foreign currency exchange contracts, currency futures contracts and options on currency
futures contracts are standardized as to amount and delivery period and are traded on boards of trade and commodities exchanges.
Although the terms of currency futures contracts specify actual delivery or receipt, in most instances the contracts are closed
out before the settlement date without the making or taking of delivery of the currency. Closing out of a currency futures
contract is effected by entering into an offsetting purchase or sale transaction. Unlike a currency futures contract, which
requires the parties to buy and sell currency on a set date, an option on a currency futures contract entitles its holder to
decide on or before a future date whether to enter into such a contract. If the holder decides not to enter into the contract,
the premium paid for the option is fixed at the point of sale.
Interest Rate Swaps and Interest Rate Caps and Floors:
Interest rate swaps involve the exchange by the Portfolio with another party of their respective commitments to pay or
receive interest, e.g., an exchange of floating rate payments for fixed rate payments. The exchange commitments can involve
payments to be made in the same currency or in different currencies. The purchase of an interest rate cap entitles the purchaser,
to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest on a contractually
based principal amount from the party selling the interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a
contractually based principal amount from the party selling the interest rate floor.
Hybrid Instruments:
Hybrid instruments combine the elements of futures contracts or options with those of debt, preferred equity or a
depository instrument. The risks of investing in hybrid instruments reflect a combination of the risks from investing in
securities, futures and currencies, including volatility and lack of liquidity. Reference is made to the discussion of futures
and forward contracts in this Statement for a discussion of these risks. Further, the prices of the hybrid instrument and the
related commodity or currency may not move in the same direction or at the same time. Hybrid instruments may bear interest or pay
preferred dividends at below market (or even relatively nominal) rates. In addition, because the purchase and sale of hybrid
instruments could take place in an over-the-counter market or in a private transaction between the Portfolio and the seller of the
hybrid instrument, the creditworthiness of the contra party to the transaction would be a risk factor which the Portfolio would
have to consider. Hybrid instruments also may not be subject to regulation of the CFTC, which generally regulates the trading of
commodity futures by U.S. persons, the SEC, which regulates the offer and sale of securities by and to U.S. persons, or any other
governmental regulatory authority.
Zero-Coupon Securities:
Zero-coupon securities pay no cash income and are sold at substantial discounts from their value at maturity. When held
to maturity, their entire income, which consists of accretion of discount, comes from the difference between the issue price and
their value at maturity. Zero-coupon securities are subject to greater market value fluctuations from changing interest rates
than debt obligations of comparable maturities which make current distributions of interest (cash). Zero-coupon securities which
are convertible into common stock offer the opportunity for capital appreciation as increases (or decreases) in market value of
such securities closely follows the movements in the market value of the underlying common stock. Zero-coupon convertible
securities generally are expected to be less volatile than the underlying common stocks, as they usually are issued with
maturities of 15 years or less and are issued with options and/or redemption features exercisable by the holder of the obligation
entitling the holder to redeem the obligation and receive a defined cash payment.
Zero-coupon securities include securities issued directly by the U.S. Treasury, and U.S. Treasury bonds or notes and
their unmatured interest coupons and receipts for their underlying principal ("coupons") which have been separated by their
holder, typically a custodian bank or investment brokerage firm. A holder will separate the interest coupons from the underlying
principal (the "corpus") of the U.S. Treasury security. A number of securities firms and banks have stripped the interest coupons
and receipts and then resold them in custodial receipt programs with a number of different names, including "Treasury Income
Growth Receipts" (TIGRSTM) and Certificate of Accrual on Treasuries (CATSTM). The underlying U.S. Treasury bonds and notes
themselves are held in book-entry form at the Federal Reserve Bank or, in the case of bearer securities (i.e., unregistered
securities which are owned ostensibly by the bearer or holder thereof), in trust on behalf of the owners thereof. Counsel to the
underwriters of these certificates or other evidences of ownership of the U.S. Treasury securities have stated that, for federal
tax and securities purposes, in their opinion purchasers of such certificates, such as the Portfolio, most likely will be deemed
the beneficial holder of the underlying U.S. Government securities.
The U.S. Treasury has facilitated transfers of ownership of zero-coupon securities by accounting separately for the
beneficial ownership of particular interest coupon and corpus payments on Treasury securities through the Federal Reserve
book-entry record keeping system. The Federal Reserve program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the STRIPS program, the Portfolio will be able to
have its beneficial ownership of zero-coupon securities recorded directly in the book-entry record-keeping system in lieu of
having to hold certificates or other evidences of ownership of the underlying U.S. Treasury securities.
When U.S. Treasury obligations have been stripped of their unmatured interest coupons by the holder, the principal or
corpus is sold at a deep discount because the buyer receives only the right to receive a future fixed payment on the security and
does not receive any rights to periodic interest (cash) payments. Once stripped or separated, the corpus and coupons may be sold
separately. Typically, the coupons are sold separately or grouped with other coupons with like maturity dates and sold bundled in
such form. Purchasers of stripped obligations acquire, in effect, discount obligations that are economically identical to the
zero-coupon securities that the Treasury sells itself.
When-Issued Securities:
The price of when-issued securities, which may be expressed in yield terms, is fixed at the time the commitment to
purchase is made, but delivery and payment for the when-issued securities take place at a later date. Normally, the settlement
date occurs within 90 days of the purchase. During the period between purchase and settlement, no payment is made by a Portfolio
to the issuer and no interest accrues to the Portfolio. Forward commitments involve a risk of loss if the value of the security
to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in value of a Portfolio's
other assets. While when-issued securities may be sold prior to the settlement date, the Portfolios generally will purchase such
securities with the purpose of actually acquiring them unless a sale appears desirable for investment reasons.
Mortgage-Backed Securities:
When a Portfolio owns a mortgage-backed security, principal and interest payments made on the mortgages in an underlying
mortgage pool are passed through to the Portfolio. Unscheduled prepayments of principal shorten the securities' weighted average
life and may lower their total return. (When a mortgage in the underlying mortgage pool is prepaid, an unscheduled principal
prepayment is passed through to the Portfolio. This principal is returned to the Portfolio at par. As a result, if a mortgage
security were trading at a premium, its total return would be lowered by prepayments, and if a mortgage securities were trading at
a discount, its total return would be increased by prepayments.) The value of these securities also may change because of changes
in the market's perception of the creditworthiness of the federal agency that issued them. In addition, the mortgage securities
market in general may be adversely affected by changes in governmental regulation or tax policies.
Asset-Backed Securities:
Asset-backed securities directly or indirectly represent a participation interest in, or are secured by and payable from,
a stream of payments generated by particular assets such as motor vehicle or credit card receivables. Payments of principal and
interest may be guaranteed up to certain amounts and for a certain time period by a letter of credit issued by a financial
institution unaffiliated with the entities issuing the securities. Asset-backed securities may be classified as pass-through
certificates or collateralized obligations.
Pass-through certificates are asset-backed securities which represent an undivided fractional ownership interest in an
underlying pool of assets. Pass-through certificates usually provide for payments of principal and interest received to be passed
through to their holders, usually after deduction for certain costs and expenses incurred in administering the pool. Because
pass-through certificates represent an ownership interest in the underlying assets, the holders thereof bear directly the risk of
any defaults by the obligors on the underlying assets not covered by any credit support. See "Types of Credit Support."
Asset-backed securities issued in the form of debt instruments, also known as collateralized obligations, are generally
issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Such
assets are most often trade, credit card or automobile receivables. The assets collateralizing such asset-backed securities are
pledged to a trustee or custodian for the benefit of the holders thereof. Such issuers generally hold no assets other than those
underlying the asset-backed securities and any credit support provided. As a result, although payments on such asset-backed
securities are obligations of the issuers, in the event of defaults on the underlying assets not covered by any credit support
(see "Types of Credit Support"), the issuing entities are unlikely to have sufficient assets to satisfy their obligations on the
related asset-backed securities.
Methods of Allocating Cash Flows. While many asset-backed securities are issued with only one class of security, many
asset-backed securities are issued in more than one class, each with different payment terms. Multiple class asset-backed
securities are issued for two main reasons. First, multiple classes may be used as a method of providing credit support. This is
accomplished typically through creation of one or more classes whose right to payments on the asset-backed security is made
subordinate to the right to such payments of the remaining class or classes. See "Types of Credit Support." Second, multiple
classes may permit the issuance of securities with payment terms, interest rates or other characteristics differing both from
those of each other and from those of the underlying assets. Examples include so-called "strips" (asset-backed securities
entitling the holder to disproportionate interests with respect to the allocation of interest and principal of the assets backing
the security), and securities with a class or classes having characteristics which mimic the characteristics of non-asset-backed
securities, such as floating interest rates (i.e., interest rates which adjust as a specified benchmark changes) or scheduled
amortization of principal.
Asset-backed securities in which the payment streams on the underlying assets are allocated in a manner different than
those described above may be issued in the future. The Portfolio may invest in such asset-backed securities if such investment is
otherwise consistent with its investment objectives and policies and with the investment restrictions of the Portfolio.
Types of Credit Support. Asset-backed securities are often backed by a pool of assets representing the obligations of a
number of different parties. To lessen the effect of failures by obligors on underlying assets to make payments, such securities
may contain elements of credit support. Such credit support falls into two classes: liquidity protection and protection against
ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by
the entity administering the pool of assets, to ensure that scheduled payments on the underlying pool are made in a timely
fashion. Protection against ultimate default ensures ultimate payment of the obligations on at least a portion of the assets in
the pool. Such protection may be provided through guarantees, insurance policies or letters of credit obtained from third
parties, through various means of structuring the transaction or through a combination of such approaches. Examples of
asset-backed securities with credit support arising out of the structure of the transaction include "senior-subordinated
securities" (multiple class asset-backed securities with certain classes subordinate to other classes as to the payment of
principal thereon, with the result that defaults on the underlying assets are borne first by the holders of the subordinated
class) and asset-backed securities that have "reserve portfolios" (where cash or investments, sometimes funded from a portion of
the initial payments on the underlying assets, are held in reserve against future losses) or that have been "over collateralized"
(where the scheduled payments on, or the principal amount of, the underlying assets substantially exceeds that required to make
payment of the asset-backed securities and pay any servicing or other fees). The degree of credit support provided on each issue
is based generally on historical information respecting the level of credit risk associated with such payments. Delinquency or
loss in excess of that anticipated could adversely affect the return on an investment in an asset-backed security. Additionally,
if the letter of credit is exhausted, holders of asset-backed securities may also experience delays in payments or losses if the
full amounts due on underlying sales contracts are not realized.
Automobile Receivable Securities. Asset-backed securities may be backed by receivables from motor vehicle installment
sales contracts or installment loans secured by motor vehicles ("Automobile Receivable Securities"). Since installment sales
contracts for motor vehicles or installment loans related thereto ("Automobile Contracts") typically have shorter durations and
lower incidences of prepayment, Automobile Receivable Securities generally will exhibit a shorter average life and are less
susceptible to prepayment risk.
Most entities that issue Automobile Receivable Securities create an enforceable interest in their respective Automobile
Contracts only by filing a financing statement and by having the servicer of the Automobile Contracts, which is usually the
originator of the Automobile Contracts, take custody thereof. In such circumstances, if the servicer of the Automobile Contracts
were to sell the same Automobile Contracts to another party, in violation of its obligation not to do so, there is a risk that
such party could acquire an interest in the Automobile Contracts superior to that of the holders of Automobile Receivable
Securities. Also although most Automobile Contracts grant a security interest in the motor vehicle being financed, in most states
the security interest in a motor vehicle must be noted on the certificate of title to create an enforceable security interest
against competing claims of other parties. Due to the large number of vehicles involved, however, the certificate of title to
each vehicle financed, pursuant to the Automobile Contracts underlying the Automobile Receivable Security, usually is not amended
to reflect the assignment of the seller's security interest for the benefit of the holders of the Automobile Receivable
Securities. Therefore, there is the possibility that recoveries on repossessed collateral may not, in some cases, be available to
support payments on the securities. In addition, various state and federal securities laws give the motor vehicle owner the right
to assert against the holder of the owner's Automobile Contract certain defenses such owner would have against the seller of the
motor vehicle. The assertion of such defenses could reduce payments on the Automobile Receivable Securities.
Credit Card Receivable Securities. Asset-backed securities may be backed by receivables from revolving credit card
agreements ("Credit Card Receivable Securities"). Credit balances on revolving credit card agreements ("Accounts") are generally
paid down more rapidly than are Automobile Contracts. Most of the Credit Card Receivable Securities issued publicly to date have
been Pass-Through Certificates. In order to lengthen the maturity of Credit Card Receivable Securities, most such securities
provide for a fixed period during which only interest payments on the underlying Accounts are passed through to the security
holder and principal payments received on such Accounts are used to fund the transfer to the pool of assets supporting the related
Credit Card Receivable Securities of additional credit card charges made on an Account. The initial fixed period usually may be
shortened upon the occurrence of specified events which signal a potential deterioration in the quality of the assets backing the
security, such as the imposition of a cap on interest rates. The ability of the issuer to extend the life of an issue of Credit
Card Receivable Securities thus depends upon the continued generation of additional principal amounts in the underlying accounts
during the initial period and the non-occurrence of specified events. An acceleration in cardholders' payment rates or any other
event which shortens the period during which additional credit card charges on an Account may be transferred to the pool of assets
supporting the related Credit Card Receivable Security could shorten the weighted average life and yield of the Credit Card
Receivable Security.
Credit card holders are entitled to the protection of a number of state and federal consumer credit laws, many of which
give such holder the right to set off certain amounts against balances owed on the credit card, thereby reducing amounts paid on
Accounts. In addition, unlike most other asset-backed securities, Accounts are unsecured obligations of the cardholder.
Warrants:
Investments in warrants is speculative in that warrants have no voting rights, pay no dividends, and have no rights with
respect to the assets of the corporation issuing them. Warrants basically are options to purchase equity securities at a specific
price valid for a specific period of time. They do not represent ownership of the securities but only the right to buy them.
Warrants differ from call options in that warrants are issued by the issuer of the security which may be purchased on their
exercise, whereas call options may be written or issued by anyone. The prices of warrants do not necessarily move parallel to the
prices of the underlying securities.
Certain Risks of Foreign Investing:
Currency Fluctuations. Investment in securities denominated in foreign currencies involves certain risks. A change in
the value of any such currency against the U.S. dollar will result in a corresponding change in the U.S. dollar value of a
Portfolio's assets denominated in that currency. Such changes will also affect a Portfolio's income. Generally, when a given
currency appreciates against the dollar (the dollar weakens) the value of a Portfolio's securities denominated in that currency
will rise. When a given currency depreciates against the dollar (the dollar strengthens), the value of a Portfolio's securities
denominated in that currency would be expected to decline.
Investment and Repatriation Restrictions. Foreign investment in the securities markets of certain foreign countries is
restricted or controlled in varying degrees. These restrictions may at times limit or preclude investment in certain of such
countries and may increase the cost and expenses of a Portfolio. Investments by foreign investors are subject to a variety of
restrictions in many developing countries. These restrictions may take the form of prior governmental approval, limits on the
amount or type of securities held by foreigners, and limits on the types of companies in which foreigners may invest. Additional
or different restrictions may be imposed at any time by these or other countries in which a Portfolio invests. In addition, the
repatriation of both investment income and capital from several foreign countries is restricted and controlled under certain
regulations, including in some cases the need for certain government consents.
Market Characteristics. Foreign securities may be purchased in over-the-counter markets or on stock exchanges located in
the countries in which the respective principal offices of the issuers of the various securities are located, if that is the best
available market. Foreign stock markets are generally not as developed or efficient as, and may be more volatile than, those in
the United States. While growing in volume, they usually have substantially less volume than U.S. markets and a Portfolio's
securities may be less liquid and more volatile than securities of comparable U.S. companies. Equity securities may trade at
price/earnings multiples higher than comparable U.S. securities and such levels may not be sustainable. Fixed commissions on
foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges, although a Portfolio will endeavor to
achieve the most favorable net results on its portfolio transactions. There is generally less government supervision and
regulation of foreign stock exchanges, brokers and listed companies than in the United States. Moreover, settlement practices for
transactions in foreign markets may differ from those in U.S. markets, and may include delays beyond periods customary in the
United States.
Political and Economic Factors. Individual foreign economies of certain countries may differ favorably or unfavorably
from the United States' economy in such respects as growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. The internal politics of certain foreign countries are not as stable
as in the United States.
Governments in certain foreign countries continue to participate to a significant degree, through ownership interest or
regulation, in their respective economies. Action by these governments could have a significant effect on market prices of
securities and payment of dividends. The economies of many foreign countries are heavily dependent upon international trade and
are accordingly affected by protective trade barriers and economic conditions of their trading partners. The enactment by these
trading partners of protectionist trade legislation could have a significant adverse effect upon the securities markets of such
countries.
Information and Supervision. There is generally less publicly available information about foreign companies comparable
to reports and ratings that are published about companies in the United States. Foreign companies are also generally not subject
to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to
U.S. companies.
Taxes. The dividends and interest payable on certain of a Portfolio's foreign securities may be subject to foreign
withholding taxes, thus reducing the net amount of income available for distribution to the Portfolio's shareholders. A
shareholder otherwise subject to U.S. federal income taxes may, subject to certain limitations, be entitled to claim a credit or
deduction for U.S. federal income tax purposes for his or her proportionate share of such foreign taxes paid by the Portfolio.
Costs. Investors should understand that the expense ratio of the Portfolio can be expected to be higher than investment
companies investing in domestic securities since the cost of maintaining the custody of foreign securities and the rate of
advisory fees paid by the Portfolio are higher.
Other. With respect to certain foreign countries, especially developing and emerging ones, there is the possibility of
adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, limitations on the removal
of funds or other assets of the Portfolio, political or social instability, or diplomatic developments which could affect
investments by U.S. persons in those countries.
Eastern Europe. Changes occurring in Eastern Europe and Russia today could have long-term potential consequences. As
restrictions fall, this could result in rising standards of living, lower manufacturing costs, growing consumer spending, and
substantial economic growth. However, investment in the countries of Eastern Europe and Russia is highly speculative at this
time. Political and economic reforms are too recent to establish a definite trend away from centrally-planned economies and state
owned industries. In many of the countries of Eastern Europe and Russia, there is no stock exchange or formal market for
securities. Such countries may also have government exchange controls, currencies with no recognizable market value relative to
the established currencies of western market economies, little or no experience in trading in securities, no financial reporting
standards, a lack of a banking and securities infrastructure to handle such trading, and a legal tradition which does not
recognize rights in private property. In addition, these countries may have national policies which restrict investments in
companies deemed sensitive to the country's national interest. Further, the governments in such countries may require
governmental or quasi-governmental authorities to act as custodian of the Portfolio's assets invested in such countries and these
authorities may not qualify as a foreign custodian under the 1940 Act and exemptive relief from such Act may be required. All of
these considerations are among the factors which could cause significant risks and uncertainties to investment in Eastern Europe
and Russia.
Latin America. The political history of certain Latin American countries has been characterized by political
uncertainty, intervention by the military in civilian and economic spheres, and political corruption. Such developments, if they
were to reoccur, could reverse favorable trends toward market and economic reform, privatization and removal of trade barriers and
result in significant disruption in securities markets. Persistent levels of inflation or in some cases, hyperinflation, have led
to high interest rates, extreme measures by governments to keep inflation in check and a generally debilitating effect on economic
growth. Although inflation in many countries has lessened, there is no guarantee it will remain at lower levels. In addition, a
number of Latin American countries are also among the largest debtors of developing countries. There have been moratoria on, and
reschedulings of, repayment with respect to these debts. Such events can restrict the flexibility of these debtor nations in the
international markets and result in the imposition of onerous conditions on their economics.
Certain Latin American countries may have managed currencies which are maintained at artificial levels to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to sudden and large adjustments in the currency
which, in turn, can have a disruptive and negative effect on foreign investors. Certain Latin American countries also may
restrict the free conversion of their currency into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for certain currencies and it would, as a result, be difficult for the Portfolio to engage in foreign
currency transactions designed to protect the value of the Portfolio's interests in securities denominated in such currencies.
Illiquid and Restricted Securities:
Subject to limitations discussed in the Trust's Prospectus under "Certain Risk Factors and Investment Methods," the
Portfolios generally may invest in illiquid securities. Illiquid securities include securities subject to contractual or legal
restrictions on resale (e.g., because they have not been registered under the Securities Act of 1933, as amended (the "Securities
Act")) and securities that are otherwise not readily marketable (e.g., because trading in the security is suspended or because
market makers do not exist or will not entertain bids or offers). Securities that have not been registered under the Securities
Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary
market. Foreign securities that are freely tradable in their principal markets are not considered to be illiquid.
Restricted and other illiquid securities may be subject to the potential for delays on resale and uncertainty in
valuation. A Portfolio might be unable to dispose of illiquid securities promptly or at reasonable prices and might thereby
experience difficulty in satisfying redemption requests from shareholders. A Portfolio might have to register restricted
securities in order to dispose of them, resulting in additional expense and delay. Adverse market conditions could impede such a
public offering of securities.
A large institutional market exists for certain securities that are not registered under the Securities Act, including
foreign securities. The fact that there are contractual or legal restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such investments.
Rule 144A under the Securities Act allows such a broader institutional trading market for securities otherwise subject to
restrictions on resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the
Securities Act for resales of certain securities to qualified institutional buyers. Rule 144A has produced enhanced liquidity for
many restricted securities, and market liquidity for such securities may continue to expand as a result of this regulation and the
consequent existence of the PORTAL system, which is an automated system for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers sponsored by the National Association of Securities Dealers, Inc.
Under guidelines adopted by the Trust's Board of Trustees, a Portfolio's Sub-Advisor may determine that particular Rule
144A securities, and commercial paper issued in reliance on the private placement exemption from registration afforded by Section
4(2) of the Securities Act, are liquid even though they are not registered. A determination of whether such a security is liquid
or not is a question of fact. In making this determination, the Sub-Advisor will consider, as it deems appropriate under the
circumstances and among other factors: (1) the frequency of trades and quotes for the security; (2) the number of dealers willing
to purchase or sell the security; (3) the number of other potential purchasers of the security; (4) dealer undertakings to make a
market in the security; (5) the nature of the security (e.g., debt or equity, date of maturity, terms of dividend or interest
payments, and other material terms) and the nature of the marketplace trades (e.g., the time needed to dispose of the security,
the method of soliciting offers, and the mechanics of transfer); and (6) the rating of the security and the financial condition
and prospects of the issuer. In the case of commercial paper, the Sub-advisor will also determine that the paper (1) is not
traded flat or in default as to principal and interest, and (2) is rated in one of the two highest rating categories by at least
two Nationally Recognized Statistical Rating Organizations ("NRSROs") or, if only one NRSRO rates the security, by that NRSRO, or,
if the security is unrated, the Sub-advisor determines that it is of equivalent quality.
Rule 144A securities and Section 4(2) commercial paper that have been deemed liquid as described above will continue to
be monitored by the Sub-advisor to determine if the security is no longer liquid as the result of changed conditions. Investing
in Rule 144A securities or Section 4(2) commercial paper could have the effect of increasing the amount of a Portfolio's assets
invested in illiquid securities if institutional buyers are unwilling to purchase such securities.
Repurchase Agreements:
As stated in the Prospectus under "Certain Risk Factors and Investment Methods," certain of the Portfolios may enter into
repurchase agreements. In a repurchase agreement, an investor (such as the Portfolio) purchases a security (known as the
"underlying security") from a securities dealer or bank. Any such dealer or bank must be deemed creditworthy by the Sub-advisor.
At that time, the bank or securities dealer agrees to repurchase the underlying security at a mutually agreed upon price on a
designated future date. The repurchase price may be higher than the purchase price, the difference being income to the Portfolio,
or the purchase and repurchase prices may be the same, with interest at an agreed upon rate due to the Portfolio on repurchase.
In either case, the income to the Portfolio generally will be unrelated to the interest rate on the underlying securities.
Repurchase agreements must be "fully collateralized," in that the market value of the underlying securities (including accrued
interest) must at all times be equal to or greater than the repurchase price. Therefore, a repurchase agreement can be considered
a loan collateralized by the underlying securities.
Repurchase agreements are generally for a short period of time, often less than a week, and will generally be used by a
Portfolio to invest excess cash or as part of a temporary defensive strategy. Repurchase agreements that do not provide for
payment within seven days will be treated as illiquid securities. In the event of a bankruptcy or other default by the seller of
a repurchase agreement, the Portfolio could experience both delays in liquidating the underlying security and losses. These
losses could result from: (a) possible decline in the value of the underlying security while the Portfolio is seeking to enforce
its rights under the repurchase agreement; (b) possible reduced levels of income or lack of access to income during this period;
and (c) expenses of enforcing its rights.
Securities Lending:
The Trust has made arrangements for certain Portfolios to lend securities. While a Portfolio may earn additional income
from lending securities, such activity is incidental to the investment objective of the Portfolio. In addition to the
compensation payable by borrowers under securities loans, a Portfolio would also earn income from the investment of cash
collateral for such loans. Any cash collateral received by a Portfolio in connection with such loans normally will be invested in
high-quality money market securities. However, any losses resulting from the investment of cash collateral would be borne by the
lending Portfolio. There is no assurance that collateral for loaned securities will be sufficient to provide for recovery of
interest, dividends, or other distributions paid in respect of loaned securities and not received by a Portfolio or to pay all
expenses incurred by a Portfolio in arranging the loans or in exercising rights in the collateral in the event that loaned
securities are not returned.
PORTFOLIO TURNOVER: High turnover involves correspondingly greater brokerage commissions and other transaction costs. Portfolio
turnover information can be found in the Trust's Prospectus under "Financial Highlights" and "Portfolio Turnover."
Over the past two fiscal years the following Portfolios experienced significant variation in their portfolio turnover
rates. The turnover rates for the AST Founders Passport Portfolio for the years ended December 31, 1998 and 1999 were 46% and
309% respectively. The Portfolio's turnover rate increased in 1999 as the result of a change in its portfolio manager. The new
portfolio manager is expected to engage in more frequent trading for the Portfolio than the prior portfolio manager.
The policy of the AST Money Market Portfolio of investing only in securities maturing 397 days or less from the date of
acquisition or purchased pursuant to repurchase agreements that provide for repurchase by the seller within 397 days from the date
of acquisition will result in a high portfolio turnover rate.
ORGANIZATION AND MANAGEMENT OF THE TRUST: The Trust is a managed, open-end investment company organized as a Massachusetts
business trust, whose separate Portfolios are diversified, unless otherwise indicated. As of the date of this Prospectus,
thirty-one Portfolios are available. The Trust may offer additional Portfolios with a range of investment objectives that
Participating Insurance Companies may consider suitable for variable annuities and variable life insurance policies or that may be
considered suitable for Qualified Plans. The Trust's current approach to achieving this goal is to seek to have multiple
organizations unaffiliated with each other be responsible for conducting the investment programs for the Portfolios. Each such
organization would be responsible for the Portfolio or Portfolios to which such organization's expertise is best suited.
Formerly, the Trust was known as the Henderson International Growth Fund, which consisted of only one Portfolio. The
Investment Manager was Henderson International, Inc. Shareholders of what was, at the time, the Henderson International Growth
Fund, approved certain changes in a meeting held April 17, 1992. These changes included engagement of a new Investment Manager,
engagement of a Sub-advisor and election of new Trustees. Subsequent to that meeting, the new Trustees adopted a number of
resolutions, including, but not limited to, resolutions renaming the Trust. Since that time the Trustees have adopted a number of
resolutions, including, but not limited to, making new Portfolios available and adopting forms of Investment Management Agreements
and Sub-advisory Agreements between the Investment Manager and the Trust and the Investment Manager and each Sub-advisor,
respectively.
American Skandia Life Assurance Corporation, a Participating Insurance Company, is also a wholly-owned subsidiary of
American Skandia, Incorporated. Certain officers of the Trust are officers and/or directors of one or more of the following
companies: ASISI, American Skandia Life Assurance Corporation, American Skandia Marketing, Incorporated (the principal underwriter
for various annuities deemed to be securities for American Skandia Life Assurance Corporation) and American Skandia, Incorporated.
ASISI, a Connecticut corporation organized in 1991, is registered as an investment adviser with the SEC. Prior to April
7, 1995, ASISI was known as American Skandia Life Investment Management, Inc.
The overall management of the business and affairs of the Trust is vested with the Board of Trustees. The Board of
Trustees approves all significant agreements between the Trust and persons or companies furnishing services to the Trust,
including the Trust's agreements with the Investment Manager, Administrator, Custodian and Transfer and Shareholder Servicing
Agent and the agreements between the Investment Manager and each Sub-advisor. The day-to-day operations of the Trust are
delegated to the Trust's officers subject always to the investment objectives and policies of the Trust and to the general
supervision of the Board of Trustees.
The Trustees and officers of the Trust and their principal occupations are listed below. Unless otherwise indicated, the
address of each Trustee and executive officer is One Corporate Drive, Shelton, Connecticut 06484:
Name, Office and Age(1) Principal Occupation(2)
-------------------- --------------------
John Birch Chief Operating Officer:
Vice President (50) American Skandia Investment Services, Incorporated
December 1997 to present
Executive Vice President and
Chief Operating Officer
International Fund Administration
Bermuda
August 1996 to October 1997
Senior Vice President and
Chief Administrative Officer
Gabelli Funds, Inc.
Rye, New York
March 1995 to August 1996
Gordon C. Boronow President and Chief Operating Officer:
Vice President (47) American Skandia Life Assurance Corporation
June 1989 to present
Jan R. Carendi* Deputy Chief Executive Officer:
President, Principal Executive Officer Skandia Insurance Company Ltd.
and Trustee (55) September 1986 to present
David E. A. Carson Director
Trustee (66) People's Bank
850 Main Street
Bridgeport, Connecticut 06604
January 2000 to present
Chairman
People's Bank
January 1999 to December 1999
Chairman and Chief Executive Officer:
People's Bank
January 1998 to December 1998
President, Chairman and Chief Executive Officer:
People's Bank
1983 to December 1997
Richard G. Davy, Jr. Vice President
Treasurer (52) (June 1997 to present)
Controller (September 1994 to June 1997)
American Skandia Investment
Services, Incorporated
Eric. C. Freed Securities Counsel and Senior Counsel, Securities
Secretary (37) American Skandia, Incorporated
December 1996 to present;
Attorney, Senior Attorney and Special Counsel,
U.S. Securities and Exchange Commission
March 1991 to November 1996
Julian A. Lerner Semi-retired since 1995; Senior Vice President
Trustee (75) and Portfolio Manager of AIM Charter Fund
and AIM Summit Fund from 1986 to 1995:
12850 Spurling Road -- Suite 208
Dallas, Texas 75230
Thomas M. Mazzaferro Executive Vice President and
Trustee (47)* Chief Financial Officer
American Skandia Life Assurance Corporation
April 1988 to present
Thomas M. O'Brien President and Chief Executive Officer
Trustee (49) Atlantic Bank of New York
Two World Trade Center
New York, NY 10048
May 2000 to present
Vice Chairman
North Fork Bank
275 Broad Hollow Road
Melville, NY 11747;
January 1997 to April 2000
President and Chief Executive Officer:
North Side Savings Bank
170 Tulip Avenue
Floral Park, New York 11001
December 1984 to December 1996
F. Don Schwartz Management Consultant:
Trustee (65) 6 Sugan Close Drive
New Hope, PA 18938
April 1985 to present
* Indicates a Trustee of the Trust who is an "interested person" within the meaning set forth in the 1940 Act.
(1) All of the officers and Trustees of the Trust listed above serve in similar capacities for American Skandia Advisor Funds,
Inc., and/or American Skandia Master Trust, which are also investment companies managed by the Investment Manager.
(2) Unless otherwise indicated, each officer and Trustee listed above has held his/her principal occupation for at least the last
five years. In addition to the principal occupations noted above, the following officers and Trustees of the Trust hold various
positions with American Skandia Investment Services, Incorporated ("ASISI"), the Trust's Investment Manager, and its affiliates,
including American Skandia Life Assurance Corporation ("ASLAC"), American Skandia Fund Services, Inc. ("ASFS") American Skandia
Marketing, Incorporated ("ASM"), American Skandia Information Services and Technology Corporation ("ASIST") or American Skandia,
Incorporated ("ASI"): Mr. Boronow also serves as Deputy Chief Executive Officer and a Director of ASI, and a Director of ASLAC,
ASISI, ASM and ASIST; Mssrs. Birch and Davy also serve as Directors of ASISI. Mr. Mazzaferro also serves as a Director of ASI,
ASLAC, ASISI, ASM, ASIST and ASFS.
The Trustees and officers of the Trust who are affiliates of the Investment Manager do not receive compensation directly
from the Trust for serving in such capacities. However, those officers and Trustees of the Trust who are affiliated with the
Investment Manager may receive remuneration indirectly, as the Investment Manager will receive fees from the Trust for the
services it provides. Each of the other Trustees receives annual and per meeting fees paid by the Trust plus expenses for each
meeting of the Board and of shareholders which he attends. Compensation received during the year ended December 31, 1999 by the
Trustees who are not affiliates of the Investment Manager was as follows:
Aggregate Compensation from Total Compensation from Registrant and
Name of Trustee ---------------------------------------- Fund Complex Paid to Trustee(1)
Registrant
------------------------------------------- -----------------------------------------
David E. A. Carson $49,000 $84,600
Julian A. Lerner 49,000 87,900
Thomas M. O'Brien 49,000(2) 87,900(2)
F. Don Schwartz 49,000 87,900
(1) As of the date of this Statement, the "Fund Complex" consisted of the Trust, American Skandia Advisor Funds, Inc.
("ASAF"), and American Skandia Master Trust ("ASMT").
(2) Mr. O'Brien deferred a portion of this compensation from the Trust valued as of December 31, 1999 at $15,188 and from the Fund
Complex valued as of December 31, 1999 at $27,867.
The Trust does not offer pension or retirement benefits to its Trustees.
Under the terms of the Massachusetts General Corporation Law, the Trust may indemnify any person who was or is a Trustee,
officer or employee of the Trust to the maximum extent permitted by the Massachusetts General Corporation Law; provided, however,
that any such indemnification (unless ordered by a court) shall be made by the Trust only as authorized in the specific case upon
a determination that indemnification of such persons is proper in the circumstances. Such determination shall be made (i) by the
Board of Trustees, by a majority vote of a quorum which consists of Trustees who are neither "interested persons" of the Trust as
defined in Section 2(a)(19) of the 1940 Act (the "1940 Act"), nor parties to the proceeding, or (ii) if the required quorum is not
obtainable or if a quorum of such Trustees so directs by independent legal counsel in a written opinion. No indemnification will
be provided by the Trust to any Trustee or officer of the Trust for any liability to the Trust or its shareholders to which he or
she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
Codes of Ethics. The Trust and its Investment Manager and Distributor have adopted codes of ethics under rule 17j-1 of
the 1940 Act. While these codes contain provisions reasonably necessary to prevent personnel subject to the codes from engaging
in unlawful conduct, they do not prohibit investments in securities, including securities that may be purchased or held by the
Trust's Portfolios, by such personnel.
INVESTMENT ADVISORY AND OTHER SERVICES:
Investment Advisory Services: The Trust has entered into investment management agreements with the Investment Manager
(the "Management Agreements"). The Investment Manager furnishes each Portfolio with investment advice and certain administrative
services with respect to the applicable Portfolio's assets 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 the Sub-advisors noted on the cover of
this Statement to conduct the various investment programs of each Portfolio pursuant to separate sub-advisory agreements with the
Investment Manager.
Under the terms of the Management Agreements, the Investment Manager furnishes, at its expense, such personnel as is
required by each Portfolio for the proper conduct of its affairs and engages the Sub-advisors to conduct the investment programs
pursuant to the Investment Manager's obligations under the Management Agreements. The Investment Manager, not the Trust, is
responsible for the expenses of conducting the investment programs. The Sub-advisor is responsible for the expenses of conducting
the investment programs in relation to the applicable Portfolio pursuant to agreements between the Investment Manager and each
Sub-advisor. Each Portfolio pays all of its other expenses, including but not limited to, brokerage commissions, legal, auditing,
taxes or governmental fees, the cost of preparing share certificates, custodian, depository, transfer and shareholder servicing
agent costs, expenses of issue, sale, redemption and repurchase of shares, expenses of registering and qualifying shares for sale,
insurance premiums on property or personnel (including officers and Trustees if available) of the Trust which inure to its
benefit, expenses relating to Trustee and shareholder meetings, the cost of preparing and distributing reports and notices to
shareholders, the fees and other expenses incurred by the Trust in connection with membership in investment company organizations
and the cost of printing copies of prospectuses and statements of additional information distributed to shareholders. Expenses
incurred by the Trust not directly attributable to any specific Portfolio or Portfolios are allocated on the basis of the net
assets of the respective Portfolios.
Under the terms of the Management Agreements, the Investment Manager is permitted to render services to others. The
Management Agreements provide that neither the Investment Manager nor its personnel shall be liable for any error of judgment or
mistake of law or for any act or omission in the administration or management of the applicable Portfolios, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their duties or by reason of reckless disregard of its or
their obligations and duties under the Management Agreements.
The Investment Management fees payable by each Portfolio to the Investment Manager are as follows. Investment Management fees are
payable monthly and are accrued daily for purposes of determining the net asset values of the Portfolios.
AST Founders Passport Portfolio: An annual rate of 1.0% of the average daily net assets of the Portfolio.
AST Scudder Japan Portfolio: An annual rate of 1.0% of the average daily net assets of the Portfolio.
AST AIM International Equity Portfolio: An annual rate of 1.0% of the average daily net assets of the Portfolio not in
excess of $75 million; plus .85% of the Portfolio's average daily net assets over $75 million.
AST Janus Overseas Growth Portfolio: An annual rate of 1.0% of the average daily net assets of the Portfolio.
AST American Century International Growth Portfolio: An annual rate of 1.0% of the average daily net assets of the
Portfolio.
AST American Century International Growth Portfolio II: An annual rate of 1.0% of the average daily net assets of the
Portfolio.
AST MFS Global Equity Portfolio: An annual rate of 1.0% of the average daily net assets of the Portfolio.
AST Janus Small-Cap Growth Portfolio: An annual rate of .90% of the average daily net assets of the Portfolio.
AST Kemper Small-Cap Growth Portfolio: An annual rate of .95% of the portion of the average daily net assets of the
Portfolio not in excess of $1 billion; plus .90% of the portion of the net assets over $1 billion.
AST Federated Aggressive Growth Portfolio: An annual rate of .95% of the average daily net assets of the Portfolio.
AST Lord Abbett Small Cap Value Portfolio: An annual rate of .95% of the average daily net assets of the Portfolio.
AST Gabelli Small-Cap Value Portfolio: An annual rate of .90% of the average daily net assets of the Portfolio.
AST Janus Mid-Cap Growth Portfolio: An annual rate of 1.0% of the average daily net assets of the Portfolio.
AST Alger Mid-Cap Growth Portfolio: An annual rate of .80% of the average daily net assets of the Portfolio.
AST Neuberger Berman Mid-Cap Growth Portfolio: An annual rate of .90% of the portion of the average daily net assets of
the Portfolio not in excess of $1 billion; plus .85% of the portion of the net assets over $1 billion. Prior to May 1, 1998, the
Investment Manager had engaged Berger Associates, Inc. as Sub-advisor for the Portfolio (formerly, the Berger Capital Growth
Portfolio), for a total Investment Management fee of .75% of the average daily net assets of the Portfolio.
AST Neuberger Berman Mid-Cap Value Portfolio: An annual rate of .90% of the portion of the average daily net assets of
the Portfolio not in excess of $1 billion; plus .85% of the portion of the net assets over $1 billion. Prior to May 1, 1998, the
Investment Manager had engaged Federated Investment Counseling as Sub-advisor for the Portfolio (formerly, the Federated Utility
Income Portfolio), for a total Investment Management fee equal to .75% of the first $50 million of the average daily net assets of
the Portfolio; plus .60% of the Portfolio's average daily net assets in excess of $50 million.
AST Alger All-Cap Growth Portfolio: An annual rate of .95% of the average daily net assets of the Portfolio.
AST Gabelli All-Cap Value Fund: An annual rate of .95% of the average daily net assets of the Portfolio.
AST Kinetics Internet Portfolio: An annual rate of 1.0% of the average daily net assets of the Portfolio.
AST T. Rowe Price Natural Resources Portfolio: An annual rate of .90% of the average daily net assets of the Portfolio.
AST Alliance Growth Portfolio: An annual rate of .90% of the portion of the average daily net assets of the Portfolio
not in excess of $1 billion; plus .85% of the portion of the net assets over $1 billion. Prior to January 1, 1999, the Investment
Manager had engaged Robertson, Stephens & Company Investment Management, L.P. as Sub-advisor for the Portfolio, for a total
Investment Management fee of 1.0% of the average daily net assets of the Portfolio.
AST MFS Growth Portfolio: An annual rate of .90% of the average daily net assets of the Portfolio.
AST Alger Growth Portfolio: An annual rate of .75% of the average daily net assets of the Portfolio.
AST Marsico Capital Growth Portfolio: An annual rate of .90% of the average daily net assets of the Portfolio.
AST JanCap Growth Portfolio: An annual rate of .90% of the average daily net assets of the Portfolio.
AST Janus Strategic Value Portfolio: An annual rate of 1.0% of the average daily net assets of the Portfolio.
AST Cohen & Steers Realty Portfolio: An annual rate of 1.0% of the average daily net assets of the Portfolio.
AST Sanford Bernstein Managed Index 500 Portfolio: An annual rate of .60% of the average daily net assets of the
Portfolio.
AST American Century Income & Growth Portfolio: An annual rate of .75% of the average daily net assets of the Portfolio.
AST Alliance Growth and Income Portfolio: An annual rate of .75% of the average daily net assets of the Portfolio.
AST MFS Growth with Income Portfolio: An annual rate of .90% of the average daily net assets of the Portfolio.
AST INVESCO Equity Income Portfolio: An annual rate of .75% of the average daily net assets of the Portfolio.
AST AIM Balanced Portfolio: An annual rate of .75% of the average daily net assets of the Portfolio not in excess of
$300 million; plus .70% of the Portfolio's average daily net assets in excess of $300 million.
AST American Century Strategic Balanced Portfolio: An annual rate of .85% of the average daily net assets of the
Portfolio.
AST T. Rowe Price Asset Allocation Portfolio: An annual rate of .85% of the average daily net assets of the Portfolio.
AST T. Rowe Price Global Bond Portfolio: An annual rate of .80% of the average daily net assets of the Portfolio.
AST Federated High Yield Portfolio: An annual rate of .75% of the average daily net assets of the Portfolio.
AST Lord Abbett Bond-Debenture Portfolio: An annual rate of .80% of the average daily net assets of the Portfolio.
AST PIMCO Total Return Bond Portfolio: An annual rate of .65% of the average daily net assets of the Portfolio.
AST PIMCO Limited Maturity Bond Portfolio: An annual rate of .65% of the average daily net assets of the Portfolio.
AST Money Market Portfolio: An annual rate of .50% of the average daily net assets of the Portfolio. The Investment
Manager has voluntarily agreed to waive a portion of its fee equal to .05% of the average daily net assets of the Portfolio. The
Investment Manager may terminate this voluntary agreement at any time after April 30, 2001.
The Investment Manager has voluntarily agreed to waive a portion of its fee equal to .05% of the average daily net assets
in excess of $1 billion of the following Portfolios: AST Janus Overseas Growth Portfolio, AST Janus Small-Cap Growth Portfolio,
AST Marsico Capital Growth Portfolio, AST JanCap Growth Portfolio, AST Alliance Growth and Income Portfolio, AST INVESCO Equity
Income Portfolio, and AST PIMCO Total Return Bond Portfolio. The Investment Manager may terminate these voluntary agreements at
any time after April 30, 2001.
The investment management fee paid for each of the past three fiscal years by each Portfolio that was publicly offered prior to
January 2000 was as follows:
Investment Management Fees
---------------------------- --------------------------- ---------------------------
1997 1998 1999
---------------------------- --------------------------- ---------------------------
AST Founders Passport 1,257,908 1,219,424 1,222,849
AST AIM International Equity 3,428,762 4,130,785 4,695,735
AST Janus Overseas Growth 1,260,797 4,344,867 8,284,493
AST American Century International Growth 157,826 563,488 992,423
AST American Century International 4,640,262 4,652,136 4,492,741
Growth II
AST MFS Global Equity 0 0 1,645
AST Janus Small-Cap Growth 2,219,824 2,287,914 4,980,643
AST Kemper Small-Cap Growth 0 0 3,958,710
AST Lord Abbett Small-Cap Value 0 201,415 531,717
AST Gabelli Small-Cap Value 713,045 2,424,142 2,529,270
AST Neuberger Berman Mid-Cap Growth 1,259,790 1,781,639 2,440,843
AST Neuberger Berman Mid-Cap Value 886,649 1,715,060 4,969,319
AST T. Rowe Price Natural Resources 986,496 869,131 847,431
AST Alliance Growth 1,501,894 2,694,595 2,537,033
AST MFS Growth 0 0 3,675
AST Marsico Capital Growth 1,568 2,445,668 9,436,188
AST JanCap Growth 11,384,457 18,383,344 36,922,583
AST Cohen & Steers Realty 0 216,821 494,430
AST Sanford Bernstein Managed Index 500 0 765,065 2,856,541
AST American Century Income & Growth 416,420 1,164,962 1,854,825
AST Alliance Growth and Income 5,424,483 7,877,722 9,931,237
AST MFS Growth with Income 0 0 6,155
AST INVESCO Equity Income 3.565.372 5,340,931 7,204,789
AST AIM Balanced 2,387,734 2,860,309 3,145,086
AST American Century Strategic Balanced 115,602 431,573 1,399,707
AST T. Rowe Price Asset Allocation 1,413,730 2,280,871 3,419,374
AST T. Rowe Price Global Bond 941,760 1,125,770 1,178,024
AST Federated High Yield 2,345,042 4,021,190 4,761,157
AST PIMCO Total Return Bond 2,979,876 4,772,121 6,473,997
AST PIMCO Limited Maturity Bond 1,649,461 2,060,437 2,494,789
AST Money Market 2,941,160 4,190,913 7,174,127
The sub-advisory fee paid by the Investment Manager to the Sub-advisors for each such Portfolio for each of the past three fiscal
years was as follows:
Sub-advisory Fees
---------------------------- --------------------------- ---------------------------
1997 1998 1999
---------------------------- --------------------------- ---------------------------
AST Founders Passport 728,954 709,671 711,424
AST AIM International Equity(1) 2,205,668 2,557,327 2,876,419
AST Janus Overseas Growth 793,793 2,646,039 4,692,246
AST American Century International Growth 110,478 394,441 688,553
AST American Century International 2,230,131 2,221,182 2,133,458
Growth II(2)
AST Global Equity 0 0 699
AST Janus Small-Cap Growth(3) 1,469,059 1,510,669 2,427,349
AST Kemper Small-Cap Growth 0 0 1,842,324
AST Lord Abbett Small-Cap Value 0 105,944 279,851
AST Gabelli Small-Cap Value(4) 413,993 1,366,746 1,405,150
AST Neuberger Berman Mid-Cap Growth(5) 734,388 894,756 1,134,819
AST Neuberger Berman Mid-Cap Value(6) 425,687 915,253 2,754,647
AST T. Rowe Price Natural Resources 548,053 482,850 470,795
AST Alliance Growth(7) 892,079 1,547,298 985,165
AST MFS Growth 0 0 1,633
AST Marsico Capital Growth 784 1,222,834 4,718,094
AST JanCap Growth 6,261,619 10,017,653 19,832,544
AST Cohen & Steers Realty 0 130,090 296,658
AST Sanford Bernstein Managed Index 0 216,767 738,621
500(8)
AST American Century Income & Growth(9) 249,852 693,921 1,062,132
AST Alliance Growth and Income(10) 3,018,989 4,113,786 4,991,959
AST MFS Growth with Income 0 0 3,180
AST INVESCO Equity Income 1,763,840 2,592,435 3,462,235
AST AIM Balanced(11) 1,343,009 1,580,154 1,722,543
AST American Century Strategic Balanced 68,001 252,933 766,021
AST T. Rowe Price Asset Allocation 503,303 758,344 1,093,198
AST T. Rowe Price Global Bond 470,880 562,885 589,012
AST Federated High Yield 899,181 1,457,896 1,704,552
AST PIMCO Total Return Bond 1,221,106 1,910,431 2,564,999
AST PIMCO Limited Maturity Bond 709,408 867,476 1,034,534
AST Money Market 885,676 1,113,545 1,492,378
(1) For fiscal years 1997 and 1998, the entire fee noted was paid to Putnam Investment Management, Inc., the prior Sub-advisor for
the Portfolio. For fiscal year 1999, $921,003 was paid to Putnam and $1,955,416 was paid to A I M Capital Management, Inc.
(2) For fiscal years 1997, 1998 and 1999, the entire fee noted above was paid to Rowe-Price Fleming International, Inc., the prior
Sub-advisor for the Portfolio.
(3) For fiscal years 1997 and 1998, the entire fee noted above was paid to Founders Asset Management LLC, the prior Sub-advisor for
the Portfolio. For fiscal year 1999, the entire fee noted was paid to Janus Capital Corporation.
(4) For fiscal years 1997, 1998 and 1999, the entire fee noted above was paid to T. Rowe Price Associates, Inc., the prior
Sub-advisor for the Portfolio.
(5) For fiscal year 1997, the entire fee noted above was paid to Berger Associates, Inc. ("Berger"), the prior Sub-advisor for the
Portfolio. For fiscal year 1998, $313,389 was paid to Berger and $581,367 was paid to Neuberger Berman Management Inc.
("Neuberger Berman"), the current Sub-advisor for the Portfolio. For fiscal year 1999, the entire fee noted was paid to Neuberger
Berman.
(6) For fiscal year 1997, the entire fee noted above was paid to Federated Investment Counseling ("Federated"), the prior
Sub-advisor for the Portfolio. For fiscal year 1998, $186,645 was paid to Federated and $728,608 was paid to Neuberger Berman
Management Inc. ("Neuberger Berman"), the current Sub-advisor for the Portfolio. For fiscal year 1999, the entire fee noted was
paid to Neuberger Berman.
(7) For fiscal year 1997, the entire fee noted above was paid to Robertson, Stephens & Company Investment Management, L.P.
("Robertson Stephens"). For fiscal year 1998, $1,542,651 was paid to Robertson Stephens and $4,657 was paid to OppenheimerFunds,
Inc. ("Oppenheimer)." For fiscal year 1999, the entire fee was paid to Oppenheimer, the prior Sub-advisor for the Portfolio.
(8) For fiscal year 1999, the entire fee noted above was paid to Bankers Trust Company, the prior Sub-advisor for the
Portfolio.
(9) For fiscal years 1997 and 1998, the entire fee noted above was paid to Putnam, Investment Management, the prior Sub-advisor for
the Portfolio. For fiscal year 1999, $297,067 was paid to Putnam and $765,065 was paid to American Century Investment Management,
Inc., the current the Sub-advisor for the Portfolio.
(10) For the fiscal years ended 1997, 1998 and 1999, the entire fee noted above was paid to Lord, Abbett & Co., the prior
Sub-advisor for the Portfolio.
(11) For fiscal years 1997 and 1998, the entire fee noted above was paid to Putnam, Investment Management, Inc., the prior
Sub-advisor for the Portfolio. For fiscal year 1998, $559,542 was paid to Putnam and $1,163,001 was paid to A I M Capital
Management, the current the Sub-advisor for the Portfolio.
The Investment Manager has agreed by the terms of the Management Agreements for the following Portfolios of the Trust to reimburse
the Portfolio for any fiscal year in order to prevent Portfolio expenses (exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, determined by the Trust or the Investment Manager, but inclusive of the management fee) from exceeding a
specified percentage of the Portfolio's average daily net assets, as follows:
AST Founders Passport Portfolio: 1.75%
AST AIM International Equity Portfolio: 1.75%
AST Janus Small-Cap Growth Portfolio: 1.30%
AST T. Rowe Price Natural Resources Portfolio: 1.35%
AST Alliance Growth Portfolio: 1.45%
AST JanCap Growth Portfolio: 1.35%. Commencing September 4, 1996, the Investment Manager has voluntarily agreed to
reimburse certain operating expenses in excess of 1.33% for the AST JanCap Growth Portfolio. This voluntary agreement may be
terminated by the Investment Manager at any time.
AST Alliance Growth and Income Portfolio: 1.25%
AST INVESCO Equity Income Portfolio: 1.20%
AST AIM Balanced Portfolio: 1.25%
AST T. Rowe Price Asset Allocation Portfolio: 1.25%
AST T. Rowe Price Global Bond Portfolio: 1.75%
AST Federated High Yield Portfolio: 1.15%
AST PIMCO Total Return Bond Portfolio: 1.05%
AST PIMCO Limited Maturity Bond Portfolio: 1.05%
AST Money Market Portfolio: .65%. The Investment Manager has voluntarily agreed to reimburse certain operating expenses
in excess of .60% for the AST Money Market Portfolio. This voluntary agreement may be terminated by the Investment Manager at any
time after April 30, 2001.
The Investment Manager has also voluntarily agreed to reimburse the other Portfolios of the Trust for any fiscal year in
order to prevent Portfolio expenses (exclusive of taxes, interest, brokerage commissions and extraordinary expenses, determined by
the Trust or the Investment Manager, but inclusive of the management fee) from exceeding a specified percentage of each
Portfolio's average daily net assets, as follows:
AST Scudder Japan Portfolio: 1.75%
AST American Century International Growth Portfolio: 1.75%
AST American Century International Growth Portfolio II: 1.75%
AST Janus Overseas Growth Portfolio: 1.75%
AST MFS Global Equity Portfolio: 1.75%
AST Kemper Small-Cap Growth Portfolio: 1.35%
AST Federated Aggressive Growth Portfolio: 1.35%
AST Lord Abbett Small Cap Value Portfolio: 1.35%
AST Gabelli Small-Cap Value Portfolio: 1.30%
AST Janus Mid-Cap Growth Portfolio: 1.35%
AST Alger Mid-Cap Growth Portfolio: .85%
AST Neuberger Berman Mid-Cap Value Portfolio: 1.25%
AST Neuberger Berman Mid-Cap Growth Portfolio: 1.25%
AST Alger All-Cap Growth Portfolio: 1.45%
AST Gabelli All-Cap Value Portfolio: 1.45%
AST Kinetics Internet Portfolio: 1.40%
AST Marsico Capital Growth Portfolio: 1.35%
AST MFS Growth Portfolio: 1.35%
AST Alger Growth Portfolio: .79%
AST American Century Income & Growth Portfolio: 1.25%
AST MFS Growth with Income Portfolio: 1.35%
AST Janus Strategic Value Portfolio: 1.40%
AST Sanford Bernstein Managed Index 500 Portfolio: .80%
AST Cohen & Steers Realty Portfolio: 1.45%
AST American Century Strategic Balanced Portfolio: 1.25%
AST Lord Abbett Bond-Debenture Portfolio: 1.20%
Except with respect to the AST MFS Global Equity Portfolio, for which the Investment Manager has committed to keep the
above limitation in effect until at least April 30, 2001, and with respect to the AST Alger Mid-Cap Growth Portfolio and the AST
Alger Growth Portfolio, for which the Investment Manager has committed to keep the above limitations in effect until at least
October 23, 2001, the Investment Manager may terminate the above voluntary agreements at any time. Voluntary payments of
Portfolio expenses by the Investment Manager are subject to reimbursement by the Portfolio at the Investment Manager's discretion
within the two year period following such payment to the extent permissible under applicable law and provided that the Portfolio
is able to effect such reimbursement and remain in compliance with applicable expense limitations.
Each Management Agreement will continue in effect from year to year, provided it is approved, at least annually, in the
manner stipulated in the 1940 Act. This requires that each Management Agreement and any renewal be approved by a vote of the
majority of the Trustees who are not parties thereto or interested persons of any such party, cast in person at a meeting
specifically called for the purpose of voting on such approval. Each Management Agreement may be terminated without penalty on
sixty days' written notice by vote of a majority of the Board of Trustees or by the Investment Manager, or by holders of a
majority of the applicable Portfolio's outstanding shares, and will automatically terminate in the event of its "assignment" as
that term is defined in the 1940 Act.
Sub-advisory Agreements: The Investment Manager pays each Sub-advisor for the performance of sub-advisory services out
of its Investment Management fee and at no additional cost to any Portfolio. The fee paid to the Sub-advisors differs from
Portfolio to Portfolio, reflecting the objectives, policies and restrictions of each Portfolio and the nature of each Sub-advisory
Agreement. Each Sub-advisor's fee is accrued daily for purposes of determining the amount payable to the Sub-advisor. The fees
payable to the present Sub-advisors are as follows:
Founders Asset Management LLC for the AST Founders Passport Portfolio: An annual rate of .60% of the portion of the
average net assets of the Portfolio not in excess of $100 million; plus .50% of the portion of the average net assets of the
Portfolio in excess of $100 million.
Scudder Kemper Investments, Inc. for the AST Scudder Japan Portfolio: An annual rate of .45% of the portion of the
average daily net assets not in excess of $500 million; plus .40% of the portion of the net assets over $500 million but not in
excess of $1 billion; plus .35% of the portion of the net assets over $1 billion.
A I M Capital Management, Inc. for the AST AIM International Equity Portfolio: An annual rate equal to the following
percentages of the combined average daily net assets of the Portfolio and the series of American Skandia Advisor Funds, Inc. that
is managed by the Sub-advisor and identified by the Sub-advisor and the Investment Manager as being similar to the Portfolio :
.55% of the portion of the combined average daily net assets not in excess of $75 million; plus .45% of the portion in excess of
$75 million.
Janus Capital Corporation for the AST Janus Overseas Growth Portfolio: An annual rate of .65% of the portion of the
average daily net assets of the Portfolio not in excess of $100 million; plus .60% of the portion of the net assets over $100
million but not in excess of $500 million; and .50% of the portion of the net assets over $500 million.
American Century Investment Management, Inc. for the AST American Century International Growth Portfolio and the AST
American Century International Growth Portfolio II: Because of the large amount of assets being sub-advised for the Investment
Manager by American Century Investment Management, Inc., the Investment Manager was able to negotiate a reduction to American
Century's standard fee schedule. Such reduced fee schedule is an annual rate of .45% of the combined average daily net assets of
the Portfolios and the series of American Skandia Advisor Funds, Inc. that is managed by the Sub-advisor and identified by the
Sub-advisor and the Investment Manager as being similar to the Portfolios. Prior to May 1, 2000, the Investment Manager had
engaged Rowe Price-Fleming International, Inc. as Sub-advisor for the AST American Century International Growth Portfolio II
(formerly the AST T. Rowe Price International Equity Portfolio), for a total Sub-advisory fee of .75% of the portion of the
average daily net assets of the Portfolio not in excess of $20 million; plus .60% of the portion of the net assets over $20
million but not in excess of $50 million; plus .50% of the portion of the net assets over $50 million.
Massachusetts Financial Services for the AST MFS Global Equity Portfolio: An annual rate of .425% of average daily net
assets of the Portfolio.
Janus Capital Corporation for the AST Janus Small-Cap Growth Portfolio: An annual rate of .50% of the portion of the
average daily net assets of the Portfolio not in excess of $100 million; plus .45% of the portion of the net assets over $100
million but not in excess of $500 million; plus .40% of the portion of the net assets over $500 million but not in excess of $1
billion; plus .35% of the portion of the net assets over $1 billion. Commencing January 1, 1999, the Sub-advisor has voluntarily
agreed to waive a portion of its fee equal to .05% of the portions of the Portfolio's average daily net assets over $400 million
but not in excess of $500 million and over $900 million but not in excess of $1 billion. The Sub-advisor may terminate this
voluntary agreement at any time. Prior to January 1, 1999, the Investment Manager had engaged Founders Asset Management LLC as
Sub-advisor for the Portfolio (formerly the Founders Capital Appreciation Portfolio), for a total Sub-advisory fee of .65% of the
portion of the average daily net assets of the Portfolio not in excess of $75 million; plus .60% of the portion of the net assets
over $75 million but not in excess of $150 million; plus .55% of the portion of the net assets over $150 million.
Scudder Kemper Investments, Inc. for the AST Kemper Small-Cap Growth Portfolio: An annual rate of .50% of the average
daily net assets of the Portfolio not in excess of $100 million; plus .45% of the portion of the net assets over $100 million but
not in excess of $400 million; plus .40% of the portion of the net assets over $400 million but not in excess of $900 million;
plus .35% of the portion of the net assets over $900 million.
Federated Investment Counseling for the AST Federated Aggressive Growth Portfolio: An annual rate of .50% of the portion
of the average daily net assets not in excess of $100 million; plus .45% of the portion of the net assets over $100 million but
not in excess of $400 million; plus .40% of the portion of the net assets over $400 million but not in excess of $900 million;
plus .35% of the portion of the net assets over $900 million.
Lord, Abbett & Co. for the AST Lord Abbett Small Cap Value Portfolio: An annual rate of .50% of the average daily net
assets of the Portfolio.
GAMCO Investors, Inc. for the AST Gabelli Small-Cap Value Portfolio: An annual rate equal to the following percentages of
the combined average daily net assets of the Portfolio and the series of American Skandia Advisor Funds, Inc. that is managed by
the Sub-advisor and identified by the Sub-advisor and the Investment Manager as being similar to the Portfolio: .40% of the
portion of the combined average daily net assets not in excess of $1 billion; plus .30% of the portion of the net assets over $1
billion. Prior to October 13, 2000, the Investment Manager had engaged T. Rowe Price Associates, Inc. as Sub-advisor for the
Portfolio (formerly the AST T. Rowe Price Small Company Value Portfolio), for a total Sub-advisory fee of .60% of the portion of
the average daily net assets of the Portfolio not in excess of $20 million; plus .50% of the portion of the net assets over $20
million but not in excess of $50 million. When the net assets of the Portfolio exceeded $50 million, the fee was an annual rate of
.50% of the average daily net assets of the Portfolio.
Janus Capital Corporation for the AST Janus Mid-Cap Growth Portfolio: An annual rate equal to the following percentages
of the combined average daily net assets of the Portfolio and the series of American Skandia Advisor Funds, Inc. that is managed
by the Sub-advisor and identified by the Sub-advisor and the Investment Manager as being similar to the Portfolio: .55% of the
portion of the combined average daily net assets not in excess of $100 million; plus .50% of the portion of the net assets over
$100 million but not in excess of $500 million; plus .45% of the portion of the net assets over $500 million but not in excess of
$2 billion; plus .40% of the portion of the net assets over $2 billion but not in excess of $5 billion; plus .375% of the portion
of the net assets over $5 billion but not in excess of $10 billion; plus .35% of the portion of the net assets over $10 billion.
Fred Alger Management, Inc. for the AST Alger Mid-Cap Growth Portfolio: An annual rate equal to the following
percentages of the combined average daily net assets of all Portfolios of the Trust and all series of American Skandia Advisor
Funds, Inc. that are managed by the Sub-advisor: .40% of the portion of the combined average daily net assets not in excess of
$500 million; plus .35% of the portion of the net assets over $500 million but not in excess of $1 billion; plus .30% of the
portion of the net assets over $1 billion but not in excess of $1.5 billion; plus .25% of the portion of the net assets over $1.5
billion.
Neuberger Berman Management Inc. for the AST Neuberger Berman Mid-Cap Growth Portfolio: An annual rate of .45% of the
portion of the average daily net assets of the Portfolio not in excess of $100 million; plus .40% of the portion of the net assets
over $100 million. Prior to May 1, 1998, the Investment Manager had engaged Berger Associates, Inc. as Sub-advisor for the
Portfolio (formerly, the Berger Capital Growth Portfolio), for a total Sub-advisory fee of .55% of the average daily net assets of
the Portfolio not in excess of $25 million; plus .50% of the portion of average daily net assets over $25 million but not in
excess of $50 million; plus .40% of the portion of the average daily net assets over $50 million.
Neuberger Berman Management Inc. for the AST Neuberger Berman Mid-Cap Value Portfolio: An annual rate of .50% of the
portion of the average daily net assets of the Portfolio not in excess of $750 million; plus .45% of the portion of the net assets
over $750 million but not in excess of $1 billion; plus .40% of the portion in excess of $1 billion. Prior to May 1, 1998, the
Investment Manager had engaged Federated Investment Counseling as Sub-advisor for the Portfolio (formerly, the Federated Utility
Income Portfolio), for a total Sub-advisory fee of .50% of the portion of the average daily net assets of the Portfolio not in
excess $25 million; plus .35% of the portion in excess of $25 million but not in excess of $50 million; plus .25% of the portion
in excess of $50 million.
Fred Alger Management, Inc. for the AST Alger All-Cap Growth Portfolio: An annual rate equal to the following
percentages of the combined average daily net assets of all Portfolios of the Trust and all series of American Skandia Advisor
Funds, Inc. that are managed by the Sub-advisor: .40% of the portion of the combined average daily net assets not in excess of
$500 million; plus .35% of the portion of the net assets over $500 million but not in excess of $1 billion; plus .30% of the
portion of the net assets over $1 billion but not in excess of $1.5 billion; plus .25% of the portion of the net assets over $1.5
billion
GAMCO Investors, Inc. for the AST Gabelli All-Cap Value Portfolio: An annual rate equal to the following percentages of
the combined average daily net assets of the Portfolio and the series of American Skandia Advisor Funds, Inc. that is managed by
the Sub-advisor and identified by the Sub-advisor and the Investment Manager as being similar to the Portfolio: .50% of the
portion of the combined average daily net assets not in excess of $500 million; plus .40% of the portion of the net assets over
$500 million. Commencing October 23, 2000, GAMCO Investors, Inc. has voluntarily agreed to waive a portion of its fee equal to
the following percentages of the combined average daily net assets of the Portfolio and the corresponding series of American
Skandia Advisor Funds, Inc. referenced above: .10% of the portion of the combined average daily net assets not in excess of $500
million, .05% of the combined assets over $500 million but not in excess of $1 billion, and .10% of the combined assets over $1
billion. The Sub-advisor may terminate this voluntary agreement at any time.
Kinetics Asset Management, Inc. for the AST Kinetics Internet Portfolio: An annual rate of .40% of the portion of the
average daily net assets of the Portfolio not in excess of $250 million; plus .35% of the portion over $250 million but not in
excess of $500 million; plus .30% of the portion over $500 million but not in excess of $1.2 billion; plus .25% of the portion of
the net assets over $1.2 billion.
T. Rowe Price Associates, Inc. for the AST T. Rowe Price Natural Resources Portfolio: An annual rate of .60% of the
portion of the average daily net assets of the Portfolio not in excess of $20 million; plus .50% of the portion of the net assets
over $20 million but not in excess of $50 million. When the net assets of the Portfolio exceed $50 million, the fee is an annual
rate of .50% of the average daily net assets of the Portfolio.
Alliance Capital Management L.P. for the AST Alliance Growth Portfolio: An annual rate equal to .40% of the combined
average daily net assets of the Portfolio and the series of American Skandia Advisor Funds, Inc. that is managed by the
Sub-advisor and identified by the Sub-advisor and the Investment Manager as being similar to the Portfolio. Between December 31,
1998 and April 30, 2000 the Investment Manager had engaged OppenheimerFunds, Inc. as Sub-advisor for the Portfolio at a total
Sub-advisory fee of .35% of the portion of the average daily net assets of the Portfolio not in excess of $500 million; plus .30%
of the portion of the net assets over $500 million but not in excess of $1 billion; plus .25% of the portion of the net assets
over $1 billion. Prior to January 1, 1999, the Investment Manager had engaged Robertson, Stephens & Company Investment
Management, L.P. as Sub-advisor for the Portfolio, at a total Sub-advisory fee of .60% of the portion of the average daily net
assets of the Portfolio not in excess of $200 million; plus .50% of the portion of the net assets over $200 million.
Massachusetts Financial Services Company for the AST MFS Growth Portfolio: An annual rate equal to the following
percentages of the combined average daily net assets of the Portfolio, the AST MFS Growth with Income Portfolio and the domestic
equity series of American Skandia Advisor Funds, Inc. that is managed by Massachusetts Financial Services Company: .40% of the
portion of the combined average daily net assets not in excess of $300 million; plus .375% of the portion over $300 million but
not in excess of $600 million; plus .35% of the portion over $600 million but not in excess of $900 million; plus .325% of the
portion over $900 million, but not over $1.5 billion; plus .25% of the portion in excess of $1.5 billion.
Fred Alger Management, Inc. for the AST Alger Growth Portfolio: An annual rate equal to the following percentages of the
combined average daily net assets of all Portfolios of the Trust and all series of American Skandia Advisor Funds, Inc. that are
managed by the Sub-advisor: .40% of the portion of the combined average daily net assets not in excess of $500 million; plus .35%
of the portion of the net assets over $500 million but not in excess of $1 billion; plus .30% of the portion of the net assets
over $1 billion but not in excess of $1.5 billion; plus .25% of the portion of the net assets over $1.5 billion.
Marsico Capital Management, LLC for the AST Marsico Capital Growth Portfolio: An annual rate of 0.45% of the average
daily net assets of the Portfolio.
Janus Capital Corporation for the AST JanCap Growth Portfolio: An annual rate of .60% of the portion of the average
daily net assets of the Portfolio not in excess of $100 million; plus .55% of the portion over $100 million but not in excess of
$1 billion; plus .50% of the portion over $1 billion. Commencing March 1, 2000, Janus Capital Corporation, the Sub-advisor for
the AST JanCap Growth Portfolio, has voluntarily agreed to the following revised fee schedule based on the combined average daily
net assets of the Portfolio and the ASMT Janus Capital Growth Portfolio of American Skandia Master Trust: .55% of the portion of
the combined average daily net assets not in excess of $100 million; plus .50% of the portion over $100 million but not in excess
of $500 million; plus .45% of the portion over $500 million but not in excess of $2 billion; plus .40% of the portion over $2
billion but not in excess of $5 billion; plus.375% of the portion over $5 billion but not in excess of $10 billion; plus .35% of
the portion in excess of $10 billion.
Janus Capital Corporation for the AST Janus Strategic Value Portfolio: An annual rate of .55% of the portion of the
average daily net assets of the Portfolio not in excess of $100 million; plus .50% of the portion of the net assets over $100
million but not in excess of $500 million; plus .45% of the portion of the net assets over $500 million but not in excess of $2
billion; plus .40% of the portion of the net assets over $2 billion but not in excess of $5 billion; plus .375% of the portion of
the net assets over $5 billion but not in excess of $10 billion; plus .35% of the portion of the net assets over $10 billion.
Cohen & Steers Capital Management, Inc. for the AST Cohen & Steers Realty Portfolio: An annual rate of .60% of the
portion of the average daily net assets of the Portfolio not in excess of $100 million; plus .40% of the portion of the net assets
over $100 million but not in excess of $250 million; plus .30% of the portion of the net assets over $250 million.
Sanford C. Bernstein & Co., LLC for the AST Sanford Bernstein Managed Index 500 Portfolio: An annual rate equal to the
following percentages of the combined average daily net assets of the Portfolio and the series of American Skandia Advisor Funds,
Inc. that is managed by the Sub-advisor and identified by the Sub-advisor and the Investment Manager as being similar to the
Portfolio: .1533% of the portion of the combined average daily net assets not in excess of $300 million; plus .10% of the portion
of the net assets over $300 million. Notwithstanding the foregoing, the following annual rate will apply for each day that the
combined average daily net assets are not in excess of $300 million: .40% of the first $10 million of the combined average daily
net assets; plus .30% of the next $40 million of the combined average daily net assets; plus .20% of the next $50 million of the
combined average daily net assets; plus .10% of the next $200 million of the combined average daily net assets. Prior to May 1,
2000, the Investment Manager had engaged Bankers Trust Company as Sub-advisor for the Portfolio at a total Sub-advisory fee equal
to the following percentages of the combined average daily net assets of the Portfolio and the series of American Skandia Advisor
Funds, Inc. that is managed by the Sub-advisor and identified by the Sub-advisor and the Investment Manager as being similar to
the Portfolio: .17% of the portion of the combined average daily net assets not in excess of $300 million; plus .13% of the
portion of the net assets over $300 million but not in excess of $1 billion; plus .08% of the net assets over $1 billion.
American Century Investment Management, Inc. for the AST American Century Income & Growth Portfolio: Because of the
large amount of assets being sub-advised for the Investment Manager by American Century Investment Management, Inc., the
Investment Manager was able to negotiate a reduction to American Century's standard fee schedule. Such reduced fee schedule is an
annual rate of: .40% of the portion of the average daily net assets of the Portfolio not in excess of $100 million; plus .35% of
the portion of the net assets over $100 million but not in excess of $500 million; plus .30% of the portion of the net assets over
$500 million.
Alliance Capital Management L.P. for the AST Alliance Growth and Income Portfolio: An annual rate equal to the following
percentages of the combined average daily net assets of the Portfolio and the series of American Skandia Advisor Funds, Inc. that
is managed by the Sub-advisor and identified by the Sub-advisor and the Investment Manager as being similar to the Portfolio: .30%
of the portion of the combined average daily net assets not in excess of $1 billion; plus .25% of the portion over $1 billion but
not in excess of $1.5 billion; plus .20% of the portion in excess of $1.5 billion. Prior to May 1, 2000 the Investment Manager
had engaged Lord, Abbett & Co. as Sub-advisor for the Portfolio at a total Sub-advisory fee of .50% of the portion of the average
daily net assets of the Portfolio not in excess of $200 million; plus .40% of the portion over $200 million but not in excess of
$500 million; plus .375% of the portion over $500 million but not in excess of $700 million; plus .35% of the portion over $700
million but not in excess of $900 million; plus .30% of the portion in excess of $900 million.
Massachusetts Financial Services Company for the AST MFS Growth with Income Portfolio: An annual rate equal to the
following percentages of the combined average daily net assets of the Portfolio, the AST MFS Growth Portfolio and the domestic
equity series of American Skandia Advisor Funds, Inc. that is managed by Massachusetts Financial Services Company: .40% of the
portion of the combined average daily net assets not in excess of $300 million; plus .375% of the portion over $300 million but
not in excess of $600 million; plus .35% of the portion over $600 million but not in excess of $900 million; plus .325% of the
portion over $900 million but not over $1.5 billion; plus .25% of the portion in excess of $1.5 billion.
INVESCO Funds Group, Inc. for the AST INVESCO Equity Income Portfolio: An annual rate of .50% of the portion of the
average daily net assets of the Portfolio not in excess of $25 million; plus .45% of the portion of the net assets over $25
million but not in excess of $75 million; plus .40% of the portion of the net assets in excess of $75 million but not in excess of
$100 million; and .35% of the portion of the net assets over $100 million. Commencing May 1, 2000, INVESCO Funds Group, Inc.
has voluntarily agreed to waive a portion of its fee so that the following fee schedule based on the combined average daily net
assets of the Portfolio and the ASMT INVESCO Equity Income Portfolio is in effect: .35% of the portion of the combined average
daily net assets not in excess of $1 billion; plus .30% of the portion over $1 billion. The Sub-advisor may terminate this
voluntary agreement at any time.
A I M Capital Management, Inc. for the AST AIM Balanced Portfolio: An annual rate of .45% of the portion of the average
daily net assets of the Portfolio not in excess of $75 million; plus .40% of the portion of the average daily net assets of the
Portfolio over $75 million but not in excess of $150 million; plus .35% of the portion of the average daily net assets of the
Portfolio in excess of $150 million.
American Century Investment Management, Inc. for the AST American Century Strategic Balanced Portfolio: Because of the
large amount of assets being sub-advised for the Investment Manager by American Century Investment Management, Inc., the
Investment Manager was able to negotiate a reduction to American Century's standard fee schedule. Such reduced fee schedule is an
annual rate equal to the following percentages of the combined average daily net assets of the Portfolio and the series of
American Skandia Advisor Funds, Inc. that is managed by the Sub-advisor and identified by the Sub-advisor and the Investment
Manager as being similar to the Portfolio: .45% of the portion of the combined average daily net assets of the Portfolio not in
excess of $50 million; plus .40% of the portion over $50 million but not in excess of $100 million; plus .35% of the portion over
$100 million but not in excess of $500 million; plus .30% of the portion over $500 million.
T. Rowe Price Associates, Inc. for the AST T. Rowe Price Asset Allocation Portfolio: An annual rate of .50% of the
portion of the average daily net assets of the Portfolio not in excess of $25 million; plus .35% of the portion in excess of $25
million but not in excess of $50 million; and .25% of the portion in excess of $50 million.
T. Rowe Price International, Inc. for the AST T. Rowe Price Global Bond Portfolio: An annual rate of .40% of the average
daily net assets of the Portfolio.
Federated Investment Counseling for the AST Federated High Yield Portfolio: An annual rate of .50% of the portion of the
average daily net assets of the Portfolio under $30 million; plus .40% of the portion of the net assets equal to or in excess of
$30 million but under $50 million; plus .30% of the portion equal to or in excess of $50 million but under $75 million; and .25%
of the portion equal to or in excess of $75 million.
Lord, Abbett & Co. for the AST Lord Abbett Bond-Debenture Portfolio: An annual rate of .35% of the portion of the
average daily net assets of the Portfolio not in excess of $1 billion; plus .25% of the portion of the net assets over $1 billion
but not in excess of $1.5 billion; and .20% of the portion over $1.5 million. Commencing October 23, 2000, Lord, Abbett & Co. has
voluntarily agreed to waive a portion of its fee equal to: .10% of the portion of the Portfolio's average daily net assets not in
excess of $200 million, .15% of the portion over $200 million but not in excess of $1 billion, and .05% of the portion over $1
billion but not in excess of $1.5 billion. The Sub-advisor may terminate this voluntary agreement at any time.
Pacific Investment Management Company LLC for the AST PIMCO Total Return Bond Portfolio: An annual rate of .30% of the
average daily net assets of the Portfolio not in excess of $150 million; and .25% on the portion of the net assets over $150
million. Commencing March 31, 2000, the Sub-advisor has voluntarily agreed to waive a portion of its fee equal to .05% of the
portion of the Portfolio's average daily net assets not in excess of $150 million. The Sub-advisor may terminate this voluntary
agreement at any time.
Pacific Investment Management Company LLC for the AST PIMCO Limited Maturity Bond Portfolio: An annual rate of .30% of
the average daily net assets of the Portfolio not in excess of $150 million; and .25% on the portion of the net assets over $150
million. Commencing March 31, 2000, the Sub-advisor has voluntarily agreed to waive a portion of its fee equal to .05% of the
portion of the Portfolio's average daily net assets not in excess of $150 million. The Sub-advisor may terminate this voluntary
agreement at any time.
J.P. Morgan Investment Management Inc. for the AST Money Market Portfolio: An annual rate equal to the following
percentages of the combined average daily net assets of the Portfolio and the series of American Skandia Master Trust that is
managed by J.P. Morgan Investment Management, Inc. and identified by it and ASISI as being similar to the Portfolio: .09% of the
portion of the combined average daily net assets not in excess of $500 million; plus .06% of the portion over $500 million but not
in excess of $1.5 billion; plus .04% of the portion over $1.5 billion.
Corporate Structure. Several of the Sub-advisors are controlled by other parties as noted below:
Founders is a 90%-owned subsidiary of Mellon Bank, N.A., with the remaining 10% held by certain Founders executives and
portfolio managers. Mellon Bank is a wholly owned subsidiary of Mellon Bank Corporation, a publicly owned multibank holding
company which provides a comprehensive range of financial products and services in domestic and selected international markets.
A I M Capital Management, Inc. is a wholly-owned subsidiary of A I M Advisors, Inc., also a registered investment
adviser. A I M Advisors, Inc. is wholly owned by A I M Management Group Inc., a holding company engaged in the financial services
business and an indirect wholly-owned subsidiary of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are an independent investment
management group engaged in institutional investment management and retail mutual fund businesses in the United States, Europe and
the Pacific Region.
Stilwell Financial ("Stilwell") owns approximately 81.5% of the outstanding voting stock of Janus Capital Corporation.
Stilwell is a publicly traded holding company with principal operations in financial asset management businesses. Thomas H.
Bailey, President and Chairman of the Board of Janus Capital, owns approximately 12% of its voting stock and, by agreement with
Stilwell, selects a majority of Janus Capital's Board subject to the approval of Stilwell, which approval can not be unreasonably
withheld.
American Century Companies, Inc. ("ACC") is the parent of American Century Investment Management, Inc.
GAMCO Investors, Inc. ("GAMCO") is a New York corporation organized in 1999 as successor to the investment advisory
business of a New York corporation of the same name that was organized in 1978. GAMCO is a wholly-owned subsidiary of Gabelli
Asset Management Inc. ("GAMI"), a publicly held company listed on the New York Stock Exchange. Mr. Mario J. Gabelli may be deemed
a "controlling person" of GAMCO on the basis of his controlling interest in GAMI. GAMCO has several affiliates that also provide
investment advisory services.
Alliance Capital Management Corporation ("ACMC") is the general partner of Alliance Capital Management, L.P. ("Alliance")
and a wholly owned subsidiary of The Equitable Life Assurance Society of the United States ("Equitable"). Equitable is the
beneficial owner of an approximately 55.4% partnership interest in Alliance. Alliance Capital Management Holding L.P., a
publicly-traded company, owns an approximately 41.9% partnership interest in Alliance. Equitable is a wholly owned subsidiary of
AXA Financial, Inc., and AXA, a French insurance holding company, owned as of June 30, 1999 approximately 58.2% of the issued and
outstanding shares of common stock of AXA Financial, Inc.
Massachusetts Financial Services Company is a subsidiary of Sun Life of Canada (US) Financial Services Holdings, Inc.
whose ultimate parent is Sun Life Assurance Co. of Canada.
Zurich Insurance Company, a leading provider of insurance and financial services, owns approximately 70% of Scudder
Kemper, with the balance owned by Scudder Kemper's officers and employees.
Lord, Abbett & Co. ("Lord Abbett") is a general partnership with the following partners, all of whom are actively
involved in the management of Lord Abbett: Stephen I. Allen, Zane E. Brown, Daniel E. Carper, Robert S. Dow, John E. Erard,
Robert P. Fetch, Daria L. Foster, Robert I. Gerber, Paul A. Hilstad, W. Thomas Hudson, Stephen J. McGruder, Michael B. McLaughlin,
Robert G. Morris, Robert J. Noelke, R. Mark Pennington, Christopher Towle and John J. Walsh.
All of the voting stock of Neuberger Berman Management Inc. is owned by Neuberger Berman Inc., a publicly-traded company
listed on the NYSE.
Bank of America, N.A., a national bank subsidiary of Bank of America Corporation, indirectly owns 50% of the voting
control of Marsico Capital Management, LLC ("Marsico Capital"). Mr. Thomas F. Marsico and a company controlled by Mr. Marsico own
the remainder of Marsico Capital's voting interests. Bank of America, N.A. has agreed to purchase the Marsico Capital voting
interests that are currently owned or controlled by Mr. Marsico. It is expected that this purchase will occur in early 2001.
Martin Cohen and Robert H. Steers may be deemed "controlling persons" of Cohen & Steers Capital Management, Inc. on the
basis of their ownership of Cohen & Steers' stock.
Sanford C. Bernstein & Co., LLC is an indirect wholly owned subsidiary of Alliance.
INVESCO Funds Group, Inc. is a subsidiary of AMVESCAP PLC.
T. Rowe Price International, Inc. is a wholly owned subsidiary of T. Rowe Price Associates, Inc. ("T. Rowe Price").
Federated Investment Counseling, organized as a Delaware business trust in 1989 is a wholly owned subsidiary of Federated
Investors.
Pacific Investment Management Company LLC ("PIMCO") is a subsidiary general partnership of PIMCO Advisors L.P. ("PIMCO
Advisors"). Allianz AG ("Allianz") is the majority owner of PIMCO Advisors and its subsidiaries, including PIMCO. Allianz is the
world's second largest insurance company and is represented in 68 countries world-wide through subsidiaries, branch and
representative offices and other affiliated entities. Pacific Life Insurance Company holds an approximately 30% interest in PIMCO
Advisors.
J.P. Morgan Investment Management, Inc is a wholly-owned subsidiary of J.P. Morgan & Co. Incorporated, a bank holding
company organized under the laws of Delaware.
The Administrator and Transfer and Shareholder Servicing Agent: PFPC Inc. (the "Administrator"), 103 Bellevue Parkway,
Wilmington, Delaware 19809, a Delaware corporation that is an indirect wholly-owned subsidiary of PNC Financial Corp., serves as
the Administrator and Transfer and Shareholder Servicing Agent for the Trust. Pursuant to a Trust Accounting and Administration
Agreement between the Trust and the Administrator, dated May 1, 1992 (the "Administration Agreement"), the Administrator has
agreed to provide certain fund accounting and administrative services to the Trust, including, among other services, accounting
relating to the Trust and investment transactions of the Trust; computation of daily net asset values; maintaining the Trust's
books of account; assisting in monitoring, in conjunction with the Investment Manager, compliance with the Portfolios' investment
objectives, policies and restrictions; providing office space and equipment necessary for the proper administration and accounting
functions of the Trust; monitoring investment activity and income of the Trust for compliance with applicable tax laws; preparing
and filing Trust tax returns; preparing financial information in connection with the preparation of the Trust's annual and
semi-annual reports and making requisite filings thereof; preparing schedules of Trust share activity for footnotes to financial
statements; furnishing financial information necessary for the completion of certain items to the Trust's registration statement
and necessary to prepare and file Rule 24f-2 notices; providing an administrative interface between the Investment Manager and the
Trust's custodian; creating and maintaining all necessary records in accordance with applicable laws, rules and regulations,
including, but not limited to, those records required to be kept pursuant to the 1940 Act; and performing such other duties
related to the administration of the Trust as may be requested by the Board of Trustees of the Trust. The Administrator does not
have any responsibility or authority for the management of the assets of the Trust, the determination of its investment policies,
or for any matter pertaining to the distribution of securities issued by the Trust.
Under the terms of the Administration Agreement, the Administrator shall not be liable for any error of judgment or
mistake of law or for any loss or expense suffered by the Trust, in connection with the matters to which the Administration
Agreement relates, except for a loss or expense resulting from willful misfeasance, bad faith, or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its obligations and duties under the Agreement. Any person,
even though also an officer, director, partner, employee or agent of the Administrator, who may be or become an officer, Trustee,
employee or agent of the Trust, shall be deemed when rendering services to the Trust or acting on any business of the Trust (other
than services or business in connection with the Administrator's duties under the Administration Agreement) to be rendering such
services to or acting solely for the Trust and not as an officer, director, partner, employee or agent or one under the control or
direction of the Administrator even though paid by them.
As compensation for the services and facilities provided by the Administrator under the Administration Agreement, the
Trust has agreed to pay to the Administrator the greater of certain percentages of the average daily net assets of each Portfolio
or certain specified minimum annual amounts calculated for each Portfolio. Except for the AST Sanford Bernstein Managed Index 500
Portfolio, the percentages of the average daily net assets are: (a) 0.10% of the first $200 million; (b) 0.06% of the next $200
million; (c) 0.0275% of the next $200 million; (d) 0.02% of average daily net assets over $1 billion. The percentages for the AST
Sanford Bernstein Managed Index 500 Portfolio are: (a) 0.05% of the first $200 million; (b) 0.03% of the next $200 million; (c)
0.0275 of the next $200 million; (d) 0.02% of the next $400 million; and (e) 0.01% of average daily net assets over $1 billion.
The minimum amount is $75,000 for each of the AST Janus Small-Cap Growth Portfolio, the AST Lord Abbett Small Cap Value
Portfolio, the AST Gabelli Small-Cap Value Portfolio, the AST Neuberger Berman Mid-Cap Growth Portfolio, the AST Neuberger Berman
Mid-Cap Value Portfolio, the AST T. Rowe Price Natural Resources Portfolio, the AST Oppenheimer Large-Cap Growth Portfolio, the
AST Marsico Capital Growth Portfolio, the AST JanCap Growth Portfolio, the AST Cohen & Steers Realty Portfolio, the AST Sanford
Bernstein Managed Index 500 Portfolio, the AST American Century Income & Growth Portfolio, the AST Lord Abbett Growth and Income
Portfolio, the AST INVESCO Equity Income Portfolio, the AST AIM Balanced Portfolio, the AST American Century Strategic Balanced
Portfolio, the AST T. Rowe Price Asset Allocation Portfolio, the AST Federated High Yield Portfolio, the AST PIMCO Total Return
Bond Portfolio, the AST PIMCO Limited Maturity Bond Portfolio and the AST Money Market Portfolio. The minimum amount is $100,000
for the AST Founders Passport Portfolio, the AST AIM International Equity Portfolio, the AST Janus Overseas Growth Portfolio, the
AST American Century International Growth Portfolio, the AST American Century International Growth Portfolio II and the AST T.
Rowe Price Global Bond Portfolio. For all of these Portfolios, monthly fees have been frozen at the amounts paid for the month of
December 1999. Monthly fees for the AST MFS Global Equity Portfolio, the AST MFS Growth Portfolio and the MFS Growth with Income
Portfolio have been frozen at levels determined under the asset-based fee schedule set forth above based on December 1999 asset
levels, without regard to any minimum amounts. The fees payable to the Administrator for those Portfolios that commenced
operations during 2000 (the AST Scudder Japan Portfolio, the AST Federated Aggressive Growth Portfolio, the AST Janus Mid-Cap
Growth Portfolio, the AST Alger Mid-Cap Growth Portfolio, the AST Alger All-Cap Growth Portfolio, the AST Gabelli All-Cap Value
Portfolio, the AST Kinetics Internet Portfolio, the AST Alger Growth Portfolio, the AST Janus Strategic Value Portfolio, and the
AST Lord Abbett Bond-Debenture Portfolio) are not subject to any freeze and each such Portfolio will pay the Administrator the
greater of the asset based fee or a phased-in minimum amount equal to $34,375 for the first twelve months of the Portfolio's
operations. These fee arrangements will remain in effect until such time as the aggregate fee resulting from the application of
revised fee schedules based on the combined average daily net assets of each Portfolio and the corresponding series of American
Skandia Advisor Funds, Inc. or American Skandia Master Trust would result in a lower fee, at which point the revised fee schedules
will take effect.
Compensation for the services and facilities provided by the Administrator under the Administration Agreement includes
payment of the Administrator's "out-of-pocket" expenses. Such "out-of-pocket" expenses of the Administrator include, but are not
limited to, postage and mailing, forms, envelopes, checks, toll-free lines (if requested by the Trust), telephone, hardware and
telephone lines for remote terminals (if required by the Trust), wire fees, certificate issuance fees, microfiche and microfilm,
telex, federal express, outside independent pricing service charges, record retention/storage and proxy solicitation, mailing and
tabulation expenses (if required by the Trust). For the years ended December 31, 1997, 1998 and 1999, the Trust paid the
Administrator $4,902,309, $6,582,808 and $8,445,050 respectively.
The Administration Agreement provides that it will continue in effect from year to year. The Administration Agreement is
terminable, without penalty, by the Board of Trustees, by vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities, or by the Administrator, on not less than sixty days' notice. The Administration Agreement shall automatically
terminate upon its assignment by the Administrator without the prior written consent of the Trust, provided, however, that no such
assignment shall release Administrator from its obligations under the Agreement.
BROKERAGE ALLOCATION: Subject to the supervision of the Board of Trustees of the Trust, decisions to buy and sell securities for
the Trust are made for each Portfolio by its Sub-advisor. Generally, the primary consideration in placing Portfolio securities
transactions with broker-dealers is to obtain, and maintain the availability of, execution at the best net price available and in
the most effective manner possible. Each Sub-advisor is authorized to allocate the orders placed by it on behalf of the
applicable Portfolio to brokers who also provide research or statistical material, or other services to the Portfolio or the
Sub-advisor for the use of the applicable Portfolio or the Sub-advisor's other accounts. Such allocation shall be in such amounts
and proportions as the Sub-advisor shall determine and the Sub-advisor will report on said allocations either to the Investment
Manager, which will report on such allocations to the Board of Trustees, or, if requested, directly to the Board of Trustees.
Such reports will indicate the brokers to whom such allocations have been made and the basis therefor. The Sub-advisor may
consider sale of shares of the Portfolios or variable insurance products that use the Portfolios as investment vehicles, or may
consider or follow recommendations of the Investment Manager that take such sales into account, as factors in the selection of
brokers to effect portfolio transactions for a Portfolio, subject to the requirements of best net price available and most
favorable execution. In this regard, the Investment Manager has directed certain of the Sub-advisors to try to effect a portion
of their Portfolios' transactions through broker-dealers that give prominence to variable insurance products using the Portfolios
as investment vehicles, to the extent consistent with best net price available and most favorable execution.
Subject to the rules promulgated by the SEC, as well as other regulatory requirements, a Sub-advisor also may allocate
orders to brokers or dealers affiliated with the Sub-advisor or the Investment Manager. Such allocation shall be in such amounts
and proportions as the Sub-advisor shall determine and the Sub-advisor will report on said allocations either to the Investment
Manager, which will report on such allocations to the Board of Trustees, or, if requested, directly to the Board of Trustees.
In selecting a broker to execute each particular transaction, each Sub-advisor will take the following into
consideration: the best net price available; the reliability, integrity and financial condition of the broker; the size and
difficulty in executing the order; and the value of the expected contribution of the broker to the investment performance of the
Portfolio on a continuing basis. Accordingly, the cost of the brokerage commissions in any transaction may be greater than that
available from other brokers if the difference is reasonably justified by other aspects of the brokerage services offered.
Subject to such policies and procedures as the Board of Trustees may determine, a Sub-advisor shall not be deemed to have acted
unlawfully or to have breached any duty solely by reason of its having caused a Portfolio to pay a broker that provides research
services to the Sub-advisor an amount of commission for effecting an investment transaction in excess of the amount of commission
another broker would have charged for effecting that transaction, if the Sub-advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the research service provided by such broker viewed in terms of either that
particular transaction or the Sub-advisor's ongoing responsibilities with respect to a Portfolio or its managed accounts
generally. For the years ended December 31, 1997, 1998 and 1999, aggregate brokerage commissions of $7,265,436, $15,887,946 and
$24,608,079, respectively, were paid in relation to brokerage transactions for the Trust. The increase in commissions paid
corresponds roughly to the increase in the Trust's net assets during those periods.
During the years ended December 31, 1997, December 31, 1998 and December 31, 1999, brokerage commissions were paid to
certain affiliates of Rowe Price-Fleming International, Inc. by the AST American Century International Growth Portfolio II
(formerly, the AST T. Rowe Price International Equity Portfolio) in the amounts of $29,579, $26,497 and $15,833, respectively.
For the year ended December 31, 1999, 3.0% of the total brokerage commissions paid by this Portfolio were paid to the affiliated
brokers, with respect to transactions representing 3.1% of the Portfolio's total dollar amount of transactions involving the
payment of commissions. Similarly, brokerage commissions were paid to Robertson Stephens & Co., an affiliate of Robertson,
Stephens & Company Investment Management L.P., by the AST Alliance Growth Portfolio (formerly, the Robertson Stephens Value +
Growth Portfolio) in the aggregate amounts of $68,772 and $71,751 for the years ended December 31, 1997 and 1998 respectively.
Brokerage commissions in the amounts of $82,199 and $35,545 were paid to Neuberger Berman, LLC, an affiliate of Neuberger Berman
Management Inc., by the AST Neuberger Berman Mid-Cap Growth Portfolio for the period from May 1, 1998 (when Neuberger Berman
Management Inc. became the Portfolio's Sub-advisor) until December 31, 1998 and for the year ended December 31, 1999,
respectively. For the year ended December 31, 1999, 7.0% of the total brokerage commissions paid by this Portfolio were paid to
Neuberger Berman, LLC, with respect to transactions representing 8.7% of the total amount of the Portfolio's transactions
involving the payment of commissions. Brokerage commissions in the amounts of $277,961 and $652,436 were paid to Neuberger
Berman, LLC, by the AST Neuberger Berman Mid-Cap Value Portfolio for the period from May 1, 1998 (when Neuberger Berman Management
Inc. became the Portfolio's Sub-advisor) until December 31, 1998 and for the year ended December 31, 1999, respectively. For the
year ended December 31, 1999, 24.4% of the total brokerage commissions paid by this Portfolio were paid to Neuberger Berman, LLC,
with respect to transactions representing 26.0% of the total amount of the Portfolio's transactions involving the payment of
commissions. During the year ended December 31, 1998, brokerage commissions were paid to J.P. Morgan Securities Inc. and other
affiliates of American Century Investment Management, Inc. by the AST American Century International Growth Portfolio in the
amount of $91. During the years ended December 31, 1998 and December 31, 1999, brokerage commissions were paid to J.P. Morgan
Securities Inc. and other affiliates of American Century Investment Management, Inc. by the AST American Century Strategic
Balanced Portfolio in the amount of $3,265 and $1,355, respectively. For the year ended December 31, 1999, 0.9% of the total
brokerage commissions paid by this Portfolio were paid to the affiliated brokers, with respect to transactions representing 0.4%
of the total amount of the Portfolio's transactions involving the payment of commissions. During the year ended December 31,
1999, brokerage commissions were paid to J.P. Morgan Securities Inc. and other affiliates of American Century Investment
Management, Inc. by the AST American Century Income and Growth Portfolio in the amount of $5,455. For that year, 1.4% of the
total brokerage commissions paid by this Portfolio were paid to the affiliated brokers, with respect to transactions representing
0.8% of the total amount of the Portfolio's transactions involving the payment of commissions. For the fiscal year ended December
31, 1999, brokerage commissions were paid to NationsBanc Montgomery Services, LLC, an affiliate of Marsico Capital Management,
LLC, by the AST Marsico Capital Growth Portfolio in the amount of $37,919. For that period, 2.0% of the total brokerage
commissions paid by this Portfolio were paid to the affiliated broker, with respect to transactions representing 1.7% of the
Portfolio's total dollar amount of transactions involving the payment of commissions.
In addition, as described below under "Distribution Plan," certain Portfolios directed brokerage transactions to a
broker-dealer acting as the clearing firm for the Trust's Distributor, which acted as introducing broker in connection with the
transactions. The table below reflects the commission amounts directed to such clearing firm for each such Portfolio, the
percentage of the Portfolio's total commissions this represents, and the percentage of the Portfolio's total transaction value
involving the payment of commissions that was directed in this manner.
------------------------------------------------------------- --------------- ------------------------ ------------------------
Portfolio Name Commissions % of Total Portfolio % of Dollar Amount of
Commissions Portfolio Transactions
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST AIM International Equity Portfolio $121,855 3.4% 3.5%
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST Janus Overseas Growth Portfolio 64,399 3.0% 2.9%
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST American Century International Growth Portfolio II 61,162 11.6% 9.7%
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST Janus Small-Cap Growth Portfolio 18,169 2.3% 1.2%
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST Kemper Small-Cap Growth Portfolio 16,105 2.6% 1.7%
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST Neuberger Berman Mid-Cap Growth Portfolio 50,444 9.9% 8.1%
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST Neuberger Berman Mid-Cap Value Portfolio 307,456 11.5% 11.3%
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST T. Rowe Price Natural Resources Portfolio 3,822 1.2% 1.5%
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST Marsico Capital Growth Portfolio 205,216 10.6% 8.8%
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST JanCap Growth Portfolio 274,661 14.2% 13.6%
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST Alliance Growth and Income Portfolio 518,065 22.8% 16.8%
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST Cohen & Steers Realty Portfolio 3,624 2.1% 1.8%
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST INVESCO Equity Income Portfolio 178,194 19.9% 19.5%
------------------------------------------------------------- --------------- ------------------------ ------------------------
------------------------------------------------------------- --------------- ------------------------ ------------------------
AST AIM Balanced Portfolio 45,847 7.3% 5.5%
------------------------------------------------------------- --------------- ------------------------ ------------------------
ALLOCATION OF INVESTMENTS: The Sub-advisors have other advisory clients, some of which have similar investment objectives to one
or more Portfolios for which advisory services are being provided. In addition, a Sub-advisor may be engaged to provide advisory
services for more than one of the Trust's Portfolios. There will be times when a Sub-advisor may recommend purchases and/or sales
of the same securities for a Portfolio and such Sub-advisor's other clients. In such circumstances, it will be the policy of each
Sub-advisor to allocate purchases and sales among a Portfolio and its other clients, including other Trust Portfolios for which it
provides advisory services, in a manner which the Sub-advisor deems equitable, taking into consideration such factors as size of
account, concentration of holdings, investment objectives, tax status, cash availability, purchase costs, holding period and other
pertinent factors relative to each account.
COMPUTATION OF NET ASSET VALUES: The Trust determines the net asset values of a Portfolio's shares at the close of the New York
Stock Exchange (the "Exchange"), currently 4:00 p.m. Eastern time, on each day that the Exchange is open for business. Currently,
the Exchange is closed on Saturdays and Sundays and on New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
All Portfolios with the exception of the AST Money Market Portfolio: The net asset value per share of all of the
Portfolios with the exception of the AST Money Market Portfolio is determined by dividing the market value of its securities as of
the close of trading plus any cash or other assets (including dividends and accrued interest receivable) less all liabilities
(including accrued expenses), by the number of shares outstanding. Portfolio securities, including open short positions and
options written, are valued at the last sale price on the securities exchange or securities market on which such securities
primarily are traded. Securities not listed on an exchange or securities market, or securities in which there were not
transactions on that day, are valued at the average of the most recent bid and asked prices, except in the case of open short
positions where the asked price is available. Any securities or other assets for which recent market quotations are not readily
available are valued at fair market value as determined in good faith by or under procedures established by the Board of
Trustees. Short-term obligations with sixty days or less remaining to maturity are valued on an amortized cost basis. Expenses
and fees, including the investment management fees, are accrued daily and taken into account for the purpose of determining net
asset value of shares.
Generally, trading in foreign securities, as well as U.S. Government securities, money market instruments and repurchase
agreements, is substantially completed each day at various times prior to the close of the Exchange. The values of such
securities used in computing the net asset value of the shares of a Portfolio generally are determined as of such earlier times.
Foreign currency exchange rates are also generally determined prior to the close of the Exchange. Occasionally, events affecting
the value of such securities and such exchange rates may occur between the times at which they usually are determined and the
close of the Exchange. If such extraordinary events occur, their effects may not be reflected in the net asset value of a
Portfolio calculated as of the close of the Exchange on that day.
Foreign securities are valued on the basis of quotations from the primary market in which they are traded. All assets
and liabilities initially expressed in foreign currencies will be converted into U.S. dollars at an exchange rate quoted by a
major bank that is a regular participant in the foreign exchange market or on the basis of a pricing service that takes into
account the quotes provided by a number of such major banks.
AST Money Market Portfolio: For the AST Money Market Portfolio, all securities are valued by the amortized cost method.
The amortized cost method of valuation values a security at its cost at the time of purchase and thereafter assumes a constant
amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of
the instrument. The purpose of this method of calculation is to attempt to maintain a constant net asset value per share of
$1.00. No assurance can be given that this goal can be attained. If a difference of more than 1/2 of 1% occurs between valuation
based on the amortized cost method and valuation based on market value, the Trustees will take steps necessary to reduce such
deviation or any unfair results to shareholders, such as changing dividend policy, shortening the average maturity of the
investments in the Portfolio or valuing securities on the basis of current market prices if available or, if not, at fair market
value.
SALE OF SHARES: The Trust has entered into separate agreements for the sale of shares with American Skandia Life Assurance
Corporation ("ASLAC") and Kemper Investors Life Insurance Company ("Kemper"), respectively. Pursuant to these agreements, the
Trust will pay ASLAC and Kemper for printing and delivery of certain documents to the beneficial owners of Trust shares who are
holders of variable annuity and variable life insurance policies issued by ASLAC and Kemper. Such documents include prospectuses,
semi-annual and annual reports and any proxy materials. The Trust will pay ASLAC 0.1%, on an annualized basis, of the net asset
value of the shares legally owned by any separate account of ASLAC, and will pay Kemper 0.1%, on an annualized basis, of the net
asset value of the shares legally owned by the separate accounts of Kemper named in the sales agreement. A complete description
of the manner by which the Trust's shares may be purchased and redeemed appears in the Prospectus under the heading "Purchase and
Redemption of Shares."
Distribution Plan. The Trust has adopted a Distribution Plan (the "Distribution Plan") under Rule 12b-1 under the 1940
Act to permit American Skandia Marketing, Inc. ("ASM"), an affiliate of the 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 Portfolios. Under the Distribution Plan, ASM may use the brokerage commissions received to pay various
distribution-related expenses, such as advertising, printing of sales materials, training sales personnel, and paying marketing
fees requested by broker-dealers who sell variable annuity contracts and variable life insurance policies the premiums for which
are invested in Shares of the Trust ("variable contracts"). ASM may receive compensation under the Distribution Plan regardless
of whether it actually uses such compensation to pay distribution expenses. However, it is anticipated that amounts received by
ASM under the Distribution Plan will be used entirely to pay distribution expenses and administrative expenses relating to
implementation and operation of the Distribution Plan, and that ASM likely will not earn a profit directly from the compensation
received under the Distribution Plan. During the year ended December 31, 1999, ASM received $1,548,117 from the Portfolios under
the Distribution Plan, all of which was used by ASM to provide compensation to broker-dealers.
The Distribution Plan was adopted by a majority vote of the Trustees of the Trust, including at least a majority of
Trustees who are not "interested persons" of the Portfolios (as defined in the 1940 Act) and who do not have any direct or
indirect financial interest in the operation of the Distribution Plan, cast in person at a meeting called for the purpose of
voting on the Plan. In approving the Distribution Plan, the Trustees of the Trust considered, among other factors, that the
Distribution Plan could improve ASM's ability to attract new investments in the Portfolios by enabling it to compensate
broker-dealers selling variable products adequately and in the most effective manner, and that the resulting increase in the
Portfolios' assets should enable the Portfolios to achieve greater economies of scale and lower their per-share operating
expenses. The Trustees of the Trust believe that there is a reasonable likelihood that the Distribution Plan will benefit each
Portfolio and its current and future shareholders in the manner contemplated. The Distribution Plan was also approved by a
majority of the outstanding voting securities of each Portfolio.
The Distribution Plan, pursuant to its terms, remains in effect from year to year provided such continuance is approved
annually by vote of the Trustees in the manner described above. The Distribution Plan may not be amended to materially change the
source of monies from which distribution expenses are paid under the Plan without approval of the shareholders of each Portfolio
affected thereby entitled to vote thereon under the 1940 Act, and material amendments to the Distribution Plan must also be
approved by the Trustees of the Trust in the manner described above. The Distribution Plan may be terminated at any time, without
payment of a penalty, by vote of the majority of the Trustees of the Trust who are not interested persons of a Portfolio and have
no direct or indirect financial interest in the operations of the Plan, or by a vote of a "majority of the outstanding voting
securities" (as defined in the 1940 Act) of each Portfolio affected thereby entitled to vote thereon under the 1940 Act. The
Distribution Plan will automatically terminate in the event of its "assignment" (as defined in the 1940 Act).
Under the terms of the Distribution Plan, ASM provides to each Portfolio, for review by the Trustees of the Trust, a
quarterly written report of the amounts received by ASM under the Plan, the amounts expended under the Plan, and the purposes for
which such expenditures were made. The Trustees of the Trust will review such information on compensation and expenditures in
considering the continued appropriateness of the Distribution Plan.
The distribution expenses paid under the Distribution Plan will be intended to result in the sale of variable products,
the assets attributable to which may be invested in various Portfolios of the Trust. As a result, brokerage commissions incurred
by a Portfolio under the Distribution Plan may be used in a manner that promotes the sale of shares of other Portfolios. Certain
Portfolios of the Trust may not be available for new or additional investments. Distribution expenses will be allocated among the
Portfolios on different bases (e.g., relative asset size and relative new sales of the Portfolios) depending on the nature of the
expense and the manner in which the amount of such expense is determined.
DESCRIPTION OF SHARES OF THE TRUST: The amendment and restatement of the Trust's Declaration of Trust dated October 31, 1988,
which governs certain Trust matters, permits the Trust's Board of Trustees to issue multiple classes of shares, and within each
class, an unlimited number of shares of beneficial interest with a par value of $.001 per share. Each share entitles the holder
to one vote for the election of Trustees and on all other matters that are not specific to one class of shares, and to participate
equally in dividends, distributions of capital gains and net assets of each applicable Portfolio. Only shareholders of shares of
a specific Portfolio may vote on matters specific to that Portfolio. Shares of one class may not bear the same economic
relationship to the Trust as shares of another class. In the event of dissolution or liquidation, holders of shares of a
Portfolio will receive pro rata, subject to the rights of creditors, the proceeds of the sale of the assets held in such Portfolio
less the liabilities attributable to such Portfolio. Shareholders of a Portfolio will not be liable for the expenses, obligations
or debts of another Portfolio.
There are no preemptive or conversion rights applicable to any of the Trust's shares. The Trust's shares, when issued,
will be fully paid, non-assessable and transferable. The Trustees may at any time create additional series of shares without
shareholder approval.
Generally, there will not be annual meetings of shareholders. A Trustee may, in accordance with certain rules of the
SEC, be removed from office when the holders of record of not less than two-thirds of the outstanding shares either present a
written declaration to the Trust's custodian or vote in person or by proxy at a meeting called for this purpose. In addition, the
Trustees will promptly call a meeting of shareholders to remove a Trustee(s) when requested to do so in writing by record holders
of not less than 10% of the outstanding shares. Finally, the Trustees shall, in certain circumstances, give such shareholders
access to a list of the names and addresses of all other shareholders or inform them of the number of shareholders and the cost of
mailing their request.
Under Massachusetts law, shareholders could, under certain circumstances, be held liable for the obligations of the
Trust. However, the Declaration of Trust disclaims shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the
Trustees to all parties, and each party thereto must expressly waive all rights of action directly against shareholders. The
Declaration of Trust provides for indemnification out of the Trust's property for all loss and expense of any shareholder of the
Trust held liable on account of being or having been a shareholder. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust would be unable to meet its obligations wherein
the complaining party was held not to be bound by the disclaimer.
The Declaration of Trust further provides that the Trustees will have no personal liability to any person in connection
with the Trust property or affairs of the Trust except for that arising from his bad faith, willful misfeasance, gross negligence
or reckless disregard of his duty to that person. All persons must look solely to the Trust property for satisfaction of claims
of any nature arising in connection with the Trust's affairs. In general, the Declaration of Trust provides for indemnification
by the Trust of the Trustees and officers of the Trust except with respect to any matter as to which the Trustee or officer acted
in bad faith, or with willful misfeasance, gross negligence or reckless disregard of his duties.
UNDERWRITER: The Trust is presently used for funding variable annuities and variable life insurance. Pursuant to an exemptive
order of the SEC, the Trust may also sell its shares directly to qualified plans. If the Trust does sell its shares to qualified
plans other than the profit sharing plan covering employees of American Skandia Life Assurance Corporation and its affiliates, it
intends to use American Skandia Marketing, Incorporated ("ASM, Inc.") or another affiliated broker-dealer as underwriter, if so
required by applicable law. ASM, Inc. is registered as a broker-dealer with the SEC and the National Association of Securities
Dealers. It is an affiliate of American Skandia Life Assurance Corporation and the Investment Manager, being a wholly-owned
subsidiary of American Skandia, Incorporated. As of the date of this Statement, ASM, Inc. has not received payments from the
Trust in connection with any brokerage or underwriting services provided to the Trust.
TAX MATTERS: This discussion of federal income tax consequences applies to the Participating Insurance Companies and qualified
plans because these entities are the shareholders of the Trust. The Trust intends to qualify as a regulated investment company by
satisfying the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), including
requirements with respect to diversification of assets, distribution of income and sources of income. It is the Trust's policy to
distribute to shareholders all of its investment income (net of expenses) and any capital gains (net of capital losses) in
accordance with the timing requirements imposed by the Code so that the Trust will satisfy the distribution requirement of
Subchapter M and not be subject to federal income taxes or the 4% excise tax.
Distributions by the Trust of its net investment income and the excess, if any, of its net short-term capital gain over
its net long-term capital loss are taxable to shareholders as ordinary income. These distributions are treated as dividends for
federal income tax purposes, but will qualify for the 70% dividends-received deduction for corporate shareholders only to the
extent designated as attributable to dividends received by the Trust in a notice from the Trust. Distributions by the Trust of
the excess, if any, of its net long-term capital gain over its net short-term capital loss are designated as capital gain
dividends and are taxable to shareholders as long-term capital gains, regardless of the length of time the shareholder held his
shares.
Portions of certain Portfolio's investment income may be subject to foreign income taxes withheld at source. The Trust
may elect to "pass-through" to the shareholders of such Portfolios these foreign taxes, in which event each shareholder will be
required to include his pro rata portion thereof in his gross income, but will be able to deduct or (subject to various
limitations) claim a foreign tax credit for such amount.
Distributions to shareholders are treated in the same manner for federal income tax purposes whether received in cash or
reinvested in additional shares of the Trust. In general, distributions by the Trust are taken into account by the shareholders
in the year in which they are made. However, certain distributions made during January will be treated as having been paid by the
Trust and received by the shareholders on December 31 of the preceding year. A statement setting forth the federal income tax
status of all distributions made or deemed made during the year, including any amount of foreign taxes "passed through," will be
sent to shareholders promptly after the end of each year. Notwithstanding the foregoing, distributions by the Trust to certain
Qualified Plans may be exempt from federal income tax.
Under Code Section 817(h), a segregated asset account upon which a variable annuity contract or variable life insurance
policy is based must be "adequately diversified." A segregated asset account will be adequately diversified if it satisfies one
of two alternative tests set forth in Treasury regulations. For purposes of these alternative diversification tests, a segregated
asset account investing in shares of a regulated investment company will be entitled to "look-through" the regulated investment
company to its pro rata portion of the regulated investment company's assets, provided the regulated investment company satisfies
certain conditions relating to the ownership of its shares. The Trust intends to satisfy these ownership conditions. Further,
the Trust intends that each Portfolio separately will be adequately diversified. Accordingly, a segregated asset account
investing solely in shares of a Portfolio will be adequately diversified, and a segregated asset account investing in shares of
one or more Trust Portfolios and shares of other adequately diversified funds generally will be adequately diversified.
The foregoing discussion of federal income tax consequences is based on tax laws and regulations in effect on the date of
this Statement, and is subject to change by legislative or administrative action. A description of other tax considerations
generally affecting the Trust and its shareholders is found in the section of the Prospectus entitled "Tax Matters." No attempt
is made to present a detailed explanation of the tax treatment of the Trust or its shareholders. The discussion herein in the
Prospectus is not intended as a substitute for careful tax planning.
PERFORMANCE: The Portfolios may measure performance in terms of total return, which is calculated for any specified period of
time by assuming the purchase of shares of the Portfolio at the net asset value at the beginning of the period. Quotations of
average annual return for a Portfolio will be expressed in terms of the average annual compounded rate of return of a hypothetical
investment in such Portfolio over periods of 1, 5, and 10 years (up to the life of the Portfolio) and for such other periods as
deemed appropriate by the Investment Manager. These are the annual total rates of return that would equate the initial amount
invested to the ending redeemable value. These rates of return are calculated pursuant to the following formula: P(1+T)n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual total return, n = the number of years and ERV = the
ending redeemable value of a hypothetical $1,000 payment made at the beginning of the period). Each dividend or other
distribution paid by each Portfolio during such period is assumed to have been reinvested at the net asset value on the
reinvestment date. The shares then owned as a result of this process are valued at the net asset value at the end of the period.
The percentage increase is determined by subtracting the initial value of the investment from the ending value and dividing the
remainder by the initial value. All total return figures reflect the deduction of a proportional share of Portfolio expenses on
an annual basis.
Each Portfolio's cumulative total return shows a Portfolio's overall dollar or percentage change in value, including
changes in share price and assuming each Portfolio's dividends and capital gains distributions are reinvested. An average annual
total return reflects the hypothetical annually compounded return that would have produced the same cumulative return if a
Portfolio's performance had been constant over the entire period. Because average annual returns for more than one year tend to
smooth out variations in each Portfolio's return, investors should recognize that such figures are not the same as actual
year-by-year results. To illustrate the components of overall performance, a Portfolio may separate its cumulative and average
annual returns into income results and capital gains or losses. The average annual total return of each Portfolio that had
commenced operations as of June 30, 2000, computed as of that date, is shown in the table below. Such performance information is
historical and is not intended to indicate future performance of the Portfolio. The performance information does not reflect any
charges associated with the variable insurance contracts through which Portfolio shares are purchased, and would be lower if it
did.
Total Return
------------
Date Since
Available One Year Three Five Years Ten Inception
for Sale Years Years
------------------------------------------------ ------------- ------------ ----------- ------------ ----------- ------------
AST Founders Passport Portfolio(1) 05/02/95 58.18% 21.80% 17.30% N/A 17.06%
AST AIM Internat'l Equity Portfolio(2) 05/17/89 33.65% 21.36% 20.38% 12.43% 14.59%
AST Janus Overseas Growth Portfolio 01/02/97 60.76% 28.06% N/A N/A 29.05%
AST American Century Internat'l Growth 01/02/97 43.90% 22.26% N/A N/A 23.87%
Portfolio
AST American Century Internat'l Growth 01/04/94 18.08% 8.13% 11.34% N/A 8.65%
Portfolio II(3)
AST MFS Global Equity Portfolio* 10/18/99 N/A N/A N/A N/A 11.28%
AST Janus Small-Cap Growth Portfolio(4) 01/04/94 54.79% 30.07% 24.01% N/A 22.59%
AST Kemper Small-Cap Growth Portfolio 01/04/99 67.76% N/A N/A N/A 38.54%
AST Lord Abbett Small Cap Value Portfolio 01/02/98 9.95% N/A N/A N/A 8.13%
AST Gabelli Small-Cap Value Portfolio(5) 01/02/97 6.96% 4.99% N/A N/A 8.19%
AST Janus Mid-Cap Growth Portfolio* 05/01/00 N/A N/A N/A N/A 1.70%
AST Neuberger Berman Mid-Cap Growth 10/20/94 65.81% 31.24% 25.78% N/A 24.37%
Portfolio(6)
AST Neuberger Berman Mid-Cap Value Portfolio(7) 05/04/93 -1.15% 7.85% 11.67% N/A 9.64%
AST Alger All-Cap Growth Portfolio* 01/03/00 N/A N/A N/A N/A -12.30%
AST T. Rowe Price Natural Resources Portfolio 05/02/95 9.84% 5.80% 12.57% N/A 12.32%
AST Alliance Growth Portfolio(8) 05/02/96 38.00% 23.22% N/A N/A 23.08%
AST MFS Growth Portfolio* 10/18/99 N/A N/A N/A N/A 16.63%
AST Marsico Capital Growth Portfolio 12/22/97 25.21% N/A N/A N/A 32.15%
AST JanCap Growth Portfolio 11/06/92 21.02% 37.86% 35.30% N/A 26.92%
AST Cohen & Steers Realty Portfolio 01/02/98 4.80% N/A N/A N/A -2.04%
AST Sanford Bernstein Managed Index 500 01/02/98 6.04% N/A N/A N/A 17.98%
Portfolio(9)
AST American Century Income & Growth 01/02/97 3.49% 12.50% N/A N/A 14.90%
Portfolio(10)
AST Alliance Growth and Income Portfolio(11) 05/01/92 -0.83% 10.82% 15.62% N/A 14.42%
AST MFS Growth with Income Portfolio* 10/18/99 N/A N/A N/A N/A 6.31%
AST INVESCO Equity Income Portfolio 01/04/94 2.93% 11.79% 15.91% N/A 14.16%
AST AIM Balanced Portfolio(12) 05/04/93 15.53% 14.01% 15.50% N/A 12.83%
AST American Century Strategic Balanced 01/02/97 6.63% 13.65% N/A N/A 13.65%
Portfolio
AST T. Rowe Price Asset Allocation Portfolio 01/04/94 6.59% 12.13% 13.86% N/A 12.71%
AST T. Rowe Price Global Bond Portfolio(13) 05/03/94 -1.68% 0.19% 1.70% N/A 1.81%
AST Federated High Yield Portfolio 01/04/94 -2.92% 3.09% 7.23% N/A 6.75%
AST PIMCO Total Return Bond Portfolio 01/04/94 4.35% 6.28% 6.59% N/A 6.24%
AST PIMCO Limited Maturity Bond Portfolio 05/02/95 4.88% 5.43% 5.53% N/A 5.46%
* Returns for these Portfolios are not annualized.
(1) Prior to October 15, 1996, Seligman Henderson Co. served as Sub-advisor to the Portfolio. The performance information provided
in the above chart reflects that of the Portfolio for periods during part of which the Portfolio was sub-advised by the prior
Sub-advisor.
(2) Prior to October 15, 1996, Seligman Henderson Co. served as Sub-advisor to the Portfolio. From October 15, 1996 to May 3,
1999, Putnam Investment Management, Inc. served as Sub-advisor to the Portfolio. The performance information provided in the
above chart reflects that of the Portfolio for periods during part of which the Portfolio was sub-advised by the prior
Sub-advisors.
(3) Prior to May 1, 2000, Rowe Price-Fleming International, Inc. served as Sub-advisor to the Portfolio. The performance
information provided in the above chart reflects that of the Portfolio for periods during part of which the Portfolio was
sub-advised by the prior Sub-advisor.
(4) Prior to January 1, 1999, Founders Asset Management LLC served as Sub-advisor to the Portfolio. The performance information
provided in the above chart reflects that of the Portfolio for periods during part of which the Portfolio was sub-advised by the
prior Sub-advisor.
(5) Prior to October 13, 2000, T. Rowe Price Associates, Inc. served as Sub-advisor to the Portfolio. The performance information
provided in the above chart reflects that of the Portfolio for periods during which the Portfolio was sub-advised by the prior
Sub-advisor.
(6) Prior to May 1, 1998, Berger Associates, Inc. served as Sub-advisor to the Portfolio. The performance information provided in
the above chart reflects that of the Portfolio for periods during part of which the Portfolio was sub-advised by the prior
Sub-advisor.
(7) Prior to May 1, 1998, Federated Investment Counseling served as Sub-advisor to the Portfolio. The performance information
provided in the above chart reflects that of the Portfolio for periods during part of which the Portfolio was sub-advised by the
prior Sub-advisor.
(8) Prior to December 31, 1998, Robertson, Stephens & Company Investment Management L.P. served as Sub-advisor to the Portfolio.
From December 31, 1999 to April 30, 2000, OppenheimerFunds, Inc. served as Sub-advisor to the Portfolio. The performance
information provided in the above chart reflects that of the Portfolio for periods during part of which the Portfolio was
sub-advised by the prior Sub-advisors.
(9) Prior to May 1, 2000, Bankers Trust Company served as Sub-advisor to the Portfolio. The performance information provided in
the above chart reflects that of the Portfolio for periods during part of which the Portfolio was sub-advised by the prior
Sub-advisor.
(10) Prior to May 4, 1999, Putnam Investment Management, Inc. served as Sub-advisor to the Portfolio. The performance information
provided in the above chart reflects that of the Portfolio for periods during part of which the Portfolio was sub-advised by the
prior Sub-advisor.
(11) Prior to May 1, 2000, Lord, Abbett & Co., Inc. served as Sub-advisor to the Portfolio. The performance information provided
in the above chart reflects that of the Portfolio for periods during part of which the Portfolio was sub-advised by the prior
Sub-advisor.
(12) Prior to October 15, 1996, Phoenix Investment Counsel, Inc. served as Sub-advisor to the Portfolio. From October 15, 1996 to
May 3, 1999, Putnam Investment Management served as Sub-advisor to the Portfolio. The performance information provided in the
above chart reflects that of the Portfolio for periods during part of which the Portfolio was sub-advised by the prior
Sub-advisors.
(13) Prior to May 1, 1996, Scudder, Stevens & Clark, Inc. served as Sub-advisor to the Portfolio. The performance information
provided in the above chart reflects that of the Portfolio for periods during part of which the Portfolio was sub-advised by the
prior Sub-advisor.
The Portfolios may also measure performance in terms of yield. Each Portfolio's yield shows the rate of income the
Portfolio earns on its investments as a percentage of the Portfolio's share price. Quotations of a Portfolio's yield (other than
the AST Money Market Portfolio) are based on the investment income per share earned during a particular 30-day period (including
dividends, if any, and interest), less expenses accrued during the period ("net investment income"), and are computed by dividing
net investment income by the net asset value per share on the last day of the period, according to the following formula:
YIELD = 2[(a-b + 1)6 -1]
---
cd
where: a = dividend and interest income
b = expenses accrued for the period
c = average daily number of shares outstanding during the period that were entitled to receive dividends
d = maximum net asset value per share on the last day of the period
For the Portfolio's investments denominated in foreign currencies, income and expenses are calculated in their respective
currencies and then converted to U.S. dollars. Yields are calculated according to methods that are standardized for all stock and
bond funds. Because yield calculation methods differ from the method used for other accounting purposes (for instance, currency
gains and losses are not reflected in the yield calculation), a Portfolio's yield may not equal the income paid to shareholders'
accounts or the income reported in the Portfolio's financial statements.
The AST Money Market Portfolio yield refers to the income generated by an investment in the Portfolio over a seven-day
period expressed as an annual percentage rate. Such Portfolio also may calculate an effective yield by compounding the base
period return over a one-year period. The effective yield will be slightly higher than the yield because of the compounding
effect on this assumed reinvestment.
The current yield and effective yield calculations for shares of the AST Money Market Portfolio are illustrated for the
seven-day period ended June 30, 2000:
Current Yield Effective Yield
------------- ---------------
5.75% 5.92%
Such Portfolio's total return is based on the overall dollar or percentage change in value of a hypothetical investment
in the Portfolio assuming dividend distributions are reinvested.
The Portfolios impose no sales or other charges that would impact the total return or yield computations. Portfolio
performance figures are based upon historical results and are not intended to indicate future performance. The investment return
and principal value of an investment in any of the Portfolios will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
Yield and total returns quoted from the Portfolios include the effect of deducting each Portfolio's expenses, but may not
include charges and expenses attributable to any particular insurance product. Because shares of the Portfolios may be purchased
through variable insurance contracts, the prospectus of the Participating Insurance Company sponsoring such contract should be
carefully reviewed for information on relevant charges and expenses. Excluding these charges from quotations of each Portfolio's
performance has the effect of increasing the performance quoted. The effect of these charges should be considered when comparing
a Portfolio's performance to that of other mutual funds. In advertising and sales literature, these figures will be accompanied
by figures that reflect the applicable contract charges.
From time to time in advertisements or sales material, the Portfolios (or Participating Insurance Companies) may discuss
their performance ratings or other information as published by recognized mutual fund statistical or rating services, such as
Lipper Analytical Services, Inc., Morningstar or by publications of general interest, such as Forbes or Money. The Portfolios may
------ -----
also compare their performance to that of other selected mutual funds, mutual fund averages or recognized stock market indicators,
including the Standard & Poor's 500 Stock Index, the Standard & Poor Midcap Index, the Dow Jones Industrial Average, the Russell
2000 and the NASDAQ composite. In addition, the Portfolios may compare their total return or yield to the yield on U.S. Treasury
obligations and to the percentage change in the Consumer Price Index. Each of the AST Janus Overseas Growth Portfolio, AST T.
Rowe Price Global Bond Portfolio, AST Founders Passport Portfolio, AST American Century International Growth Portfolio, AST
American Century International Growth Portfolio II and AST AIM International Equity Portfolio may compare its performance to the
record of global market indicators such as Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE Index), an
unmanaged index of foreign common stock prices translated into U.S. dollars. Such performance ratings or comparisons may be made
with funds that may have different investment restrictions, objectives, policies or techniques than the Portfolios and such other
funds or market indicators may be comprised of securities that differ significantly from the Portfolios' investments.
CUSTODIAN:
The custodian for all cash and securities holdings of the AST Founders Passport Portfolio, AST Scudder Japan Portfolio,
AST AIM International Equity Portfolio, AST Janus Overseas Growth Portfolio, AST American Century International Growth Portfolio,
AST American Century International Growth Portfolio II, AST MFS Global Equity Portfolio and AST T. Rowe Price Global Bond
Portfolio is The Chase Manhattan Bank, One Pierrepont, Brooklyn, New York. The custodian for all cash and securities holdings of
the other Portfolios is PFPC Trust Company, Airport Business Center, International Court 2, 200 Stevens Drive, Philadelphia,
Pennsylvania 19113. For these Portfolios, The Chase Manhattan Bank will serve as co-custodian with respect to foreign securities
holdings.
OTHER INFORMATION:
Principal Holders: As of October 2, 2000, more than 99% of each Portfolio was owned of record by American Skandia Life
Assurance Corporation ("ASLAC") on behalf of the owners of variable insurance products issued by ASLAC. As of October 2, 2000,
the amount of shares of the Trust owned by the ten persons who were the officers and directors of the Trust at that time and who
are shown as such in the section of this Statement entitled "Management," was less than one percent of the shares. To the
knowledge of the Trust, no person owned beneficially more than 5% of any class of the Trust's outstanding shares as of October 2,
2000.
The Participating Insurance Companies are not obligated to continue to invest in shares of any Portfolio under all
circumstances. Variable annuity and variable life insurance policy holders should refer to the prospectuses for such products for
a description of the circumstances in which such a change might occur.
Reports to Holders: Holders of variable annuity contracts or variable life insurance policies issued by Participating
Insurance Companies for which shares of the Trust are the investment vehicle will receive from the Participating Insurance
Companies, unaudited semi-annual financial statements and audited year-end financial statements. Participants in the Skandia
Qualified Plan may request such information from the plan's trustees. Each report will show the investments owned by the Trust
and the market values of the investments and will provide other information about the Trust and its operations.
FINANCIAL STATEMENTS: The statements which follow in Appendix A of this Statement of Additional Information are Audited Financial
Statements for the Trust for the year ended December 31, 1999, as well as Unaudited Financial Statements for the period ending
June 30, 2000. To the extent and only to the extent that any statement in a document incorporated by reference into this
Statement is modified or superseded by a statement in this Statement or in a later-filed document, such statement is hereby deemed
so modified or superseded and not part of this Statement.
You may obtain, without charge, a copy of any or all the documents incorporated by reference in this Statement, including
any exhibits to such documents which have been specifically incorporated by reference. We send such documents upon receipt of
your written or oral request. Please address your request to American Skandia Trust, P.O. Box 883, Shelton, Connecticut, 06484 or
call (203) 926-1888.
APPENDIX A FINANCIAL STATEMENTS FOR AMERICAN SKANDIA TRUST
AMERICAN SKANDIA TRUST
SCHEDULES OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
AST AIM INTERNATIONAL EQUITY PORTFOLIO
AST ALLIANCE GROWTH AND INCOME PORTFOLIO
AST JANCAP GROWTH PORTFOLIO
AST MONEY MARKET PORTFOLIO
AST NEUBERGER BERMAN MID-CAP VALUE PORTFOLIO
AST AIM BALANCED PORTFOLIO
AST FEDERATED HIGH YIELD PORTFOLIO
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
AST PIMCO TOTAL RETURN BOND PORTFOLIO
AST INVESCO EQUITY INCOME PORTFOLIO
AST JANUS SMALL-CAP GROWTH PORTFOLIO
AST AMERICAN CENTURY INTERNATIONAL GROWTH
PORTFOLIO II
AST T. ROWE PRICE GLOBAL BOND PORTFOLIO
AST NEUBERGER BERMAN MID-CAP GROWTH PORTFOLIO
AST FOUNDERS PASSPORT PORTFOLIO
AST T. ROWE PRICE NATURAL RESOURCES PORTFOLIO
AST PIMCO LIMITED MATURITY BOND PORTFOLIO
AST ALLIANCE GROWTH PORTFOLIO
AST JANUS OVERSEAS GROWTH PORTFOLIO
AST AMERICAN CENTURY INCOME & GROWTH PORTFOLIO
AST AMERICAN CENTURY STRATEGIC BALANCED PORTFOLIO
AST AMERICAN CENTURY INTERNATIONAL GROWTH
PORTFOLIO
AST T. ROWE PRICE SMALL COMPANY VALUE PORTFOLIO
AST MARSICO CAPITAL GROWTH PORTFOLIO
AST COHEN & STEERS REALTY PORTFOLIO
AST LORD ABBETT SMALL CAP VALUE PORTFOLIO
AST SANFORD BERNSTEIN MANAGED INDEX 500 PORTFOLIO
AST KEMPER SMALL-CAP GROWTH PORTFOLIO
AST MFS GLOBAL EQUITY PORTFOLIO
AST MFS GROWTH PORTFOLIO
AST MFS GROWTH WITH INCOME PORTFOLIO
AST ALGER ALL-CAP GROWTH PORTFOLIO
AST JANUS MID-CAP GROWTH PORTFOLIO
AST AIM INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
FOREIGN STOCK -- 90.1%
AUSTRALIA -- 1.1%
AMP Ltd........................... 255,000 $ 2,602,822
Brambles Industries Ltd........... 73,400 2,262,421
Cable & Wireless Optus Ltd.*...... 580,000 1,734,254
Telstra Corp...................... 907,000 2,069,409
------------
8,668,906
------------
BELGIUM -- 0.2%
Tele Centro Sul Participacoes SA
[ADR]........................... 19,203 1,403,019
------------
BRAZIL -- 1.0%
Embartel Participacoes SA [ADR]... 90,500 2,138,063
Petroleo Brasileiro SA*........... 143,000 4,320,241
Telecomunicacoes de Sao Paulo SA
[ADR]........................... 54,000 999,000
------------
7,457,304
------------
CANADA -- 8.8%
Bombardier, Inc. Cl-B............. 425,065 11,532,672
C-Mac Industries, Inc.*........... 147,800 6,982,661
Celestica, Inc.*.................. 154,000 7,493,841
Mitel Corp.*...................... 156,100 3,255,441
Nortel Networks Corp. NY Reg.*.... 332,600 22,699,951
Rogers Communications, Inc.
Cl-B*........................... 266,000 7,531,164
Shaw Communications, Inc. Cl-B.... 277,400 6,833,573
------------
66,329,303
------------
DENMARK -- 1.5%
Novo-Nordisk AS Cl-B.............. 45,150 7,716,312
Vestas Wind Systems AS............ 99,900 3,684,239
------------
11,400,551
------------
FINLAND -- 3.0%
Nokia AB Oyj...................... 436,584 22,369,071
------------
FRANCE -- 14.0%
Alcatel Corp...................... 132,500 8,725,796
Altran Technologies SA............ 53,100 10,439,810
AXA SA............................ 74,447 11,775,072
Banque National de Paris.......... 133,627 12,911,811
Legrand SA........................ 32,525 7,326,855
M6 Metropole Television........... 28,800 1,755,828
Peugeot Citroen SA................ 26,600 5,359,778
Pinault-Printemps Redoute SA...... 32,500 7,249,569
Societe Generale.................. 121,200 7,319,402
Societe Television Francaise...... 115,170 8,059,250
STMicroelectronics NV............. 186,250 11,783,455
Total Fina SA Cl-B*............... 86,600 13,332,016
------------
106,038,642
------------
GERMANY -- 4.8%
Epcos AG*......................... 81,300 8,276,515
Infineon Technologies AG [ADR]*... 85,300 6,982,956
Intershop Communications AG....... 4,500 2,066,238
Marschollek, Lautenschlaeger und
Partner AG Pfd. ................ 3,400 1,693,156
Porsche AG Pfd. .................. 1,900 5,163,439
Siemens AG........................ 78,200 11,753,988
------------
35,936,292
------------
SHARES VALUE
------ -----
HONG KONG -- 3.5%
China Telecom Ltd................. 1,761,000 $ 15,531,531
Dao Heng Bank Group Ltd........... 728,000 3,222,053
Hutchison Whampoa Ltd............. 589,600 7,412,524
------------
26,166,108
------------
ITALY -- 1.1%
Gruppo Editoriale L'Espresso...... 97,000 1,245,044
Telecom Italia Mobile SPA......... 671,000 6,882,381
------------
8,127,425
------------
JAPAN -- 16.8%
Advantest Corp.................... 44,100 9,857,752
DDI Corp. ........................ 655 6,314,655
Hirose Electric Co. Ltd........... 44,500 6,944,088
Hoya Corp......................... 51,000 4,579,330
Matsushita Communication
Industrial Co. Ltd.............. 37,000 4,329,428
Mitsumi Electric Co. Ltd.......... 700 25,803
Murata Manufacturing Co. Ltd...... 47,000 6,761,151
NEC Corp.......................... 390,000 12,274,872
Nippon Telegraph & Telephone
Corp. .......................... 473 6,303,596
NTT Data Corp..................... 373 3,842,762
NTT Mobile Communication Network,
Inc............................. 273 7,405,471
Ricoh Co. Ltd..................... 217,000 4,604,518
Rohm Co. Ltd...................... 19,000 5,567,028
Sanix, Inc........................ 50,400 2,667,637
Sanyo Electric Co................. 1,355,000 12,217,879
Sharp Corp. ...................... 171,000 3,030,439
Sony Corp......................... 62,000 5,801,429
Takeda Chemical Industries Ltd.... 120,000 7,894,027
Tokyo Electron Ltd................ 69,000 9,469,430
Trend Micro, Inc.*................ 42,800 7,079,294
------------
126,970,589
------------
KOREA -- 2.5%
Korea Telecom Corp. [ADR]......... 86,200 4,169,925
LG Chemical Ltd................... 113,000 2,260,024
Pohang Iron & Steel Co. Ltd.
[ADR]........................... 140,600 3,374,400
Samsung Electronics Co. .......... 28,200 9,332,654
------------
19,137,003
------------
MEXICO -- 3.6%
Cifra SA de CV Cl-C*.............. 1,656,800 3,820,851
Coca-Cola Femsa SA [ADR].......... 148,503 2,802,994
Fomento Economico Mexicano
SA de CV [ADR].................. 126,400 5,443,100
Grupo Modelo SA de CV Cl-C*....... 830,000 1,926,764
Grupo Televisa SA [GDR]........... 100,100 6,900,644
Kimberly-Clark de Mexico SA
Cl-A*........................... 363,000 1,032,592
Telefonos de Mexico
SA Cl-L [ADR]................... 94,226 5,382,660
------------
27,309,605
------------
NETHERLANDS -- 3.6%
ASM Lithography Holding NV*....... 128,300 5,536,873
Koninklijke (Royal) Philips
Electronics NV.................. 315,536 14,941,984
VNU NV............................ 122,700 6,363,181
------------
26,842,038
------------
AST AIM INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
SINGAPORE -- 1.5%
Chartered Semiconductor
Manufacturing Ltd. [ADR]*....... 21,600 $ 1,944,000
Datadraft Asia Ltd................ 268,840 2,365,792
DBS Group Holdings Ltd............ 267,675 3,436,931
Keppel Corp. Ltd.................. 748,000 1,618,018
Singapore Press Holdings Ltd...... 141,000 2,201,876
------------
11,566,617
------------
SPAIN -- 1.5%
Telefonica SA*.................... 508,887 10,975,803
------------
SWEDEN -- 3.6%
Ericsson, (L.M.) Telephone Co.
Cl-B............................ 725,200 14,428,394
Netcom AB Cl-B.................... 128,500 9,537,814
OM Gruppen AB..................... 71,000 3,189,476
------------
27,155,684
------------
SWITZERLAND -- 6.9%
ABB AG............................ 96,870 11,631,644
Adecco SA......................... 13,825 11,783,902
Compagnie Financiere Richemont AG
Cl-A Units...................... 3,810 10,297,804
Kudelski SA*...................... 190 2,397,683
Serono SA Cl-B.................... 8,640 7,226,257
Zurich Allied AG.................. 18,400 9,120,395
------------
52,457,685
------------
TAIWAN -- 1.1%
Far Eastern Textile Ltd. [GDR]
144A............................ 165,000 2,070,750
Taiwan Semiconductor Manufacturing
Co. Ltd. [ADR]*................. 168,924 6,545,823
------------
8,616,573
------------
THAILAND -- 0.1%
Siam Commercial Bank.............. 1,860,000 948,405
------------
UNITED KINGDOM -- 9.9%
ARM Holdings PLC*................. 751,500 8,054,833
British Petroleum Co. PLC......... 548,000 5,259,738
Capita Group PLC.................. 352,800 8,636,403
CMG PLC........................... 413,200 5,862,117
Dialog Semiconductor PLC.......... 25,000 1,318,060
Logica PLC........................ 128,400 3,040,157
Marconi PLC....................... 607,400 7,908,016
Pace Micro Technology PLC......... 292,000 4,221,633
Shell Transport & Trading Co.
PLC............................. 1,345,700 11,235,389
Vodafone AirTouch PLC............. 2,589,812 10,468,243
WPP Group PLC..................... 617,338 9,018,714
------------
75,023,303
------------
TOTAL FOREIGN STOCK
(Cost $523,936,596)................. 680,899,926
------------
PAR
(000) VALUE
----- -----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 9.0%
Federal National Mortgage Assoc.
6.57%, 07/03/00
(Cost $68,117,128)................ $ 68,142 $ 68,117,128
------------
SHARES
------
U.S. STOCK -- 0.6%
INTERNET SERVICES -- 0.1%
Crayfish Co. Ltd.*................ 161,000 1,127,000
------------
OIL & GAS -- 0.3%
Gulf Indonesia Resources Ltd.*.... 216,000 1,728,000
------------
TELECOMMUNICATIONS -- 0.2%
360 Networks, Inc.*............... 91,000 1,387,750
------------
TOTAL U.S. STOCK
(Cost $10,795,050).................. 4,242,750
------------
TOTAL INVESTMENTS -- 99.7%
(Cost $602,848,774)................. 753,259,804
OTHER ASSETS LESS
LIABILITIES -- 0.3%................. 2,335,013
------------
NET ASSETS -- 100.0%.................. $755,594,817
============
The following is a breakdown of the foreign stock portion of the Portfolio, by
industry classification, as of June 30, 2000. Percentages are based on net
assets.
INDUSTRY
- --------
Advertising........................................ 1.2%
Automobile Manufacturers........................... 1.4%
Beverages.......................................... 0.6%
Broadcasting....................................... 5.4%
Building Materials................................. 0.4%
Business Services.................................. 9.0%
Chemicals.......................................... 0.3%
Computer Services & Software....................... 3.1%
Consumer Products & Services....................... 2.4%
Electronic Components & Equipment.................. 15.8%
Financial-Bank & Trust............................. 3.1%
Financial Services................................. 1.2%
Healthcare Services................................ 0.6%
Industrial Products................................ 1.6%
Insurance.......................................... 3.1%
Office Equipment................................... 0.6%
Oil & Gas.......................................... 4.5%
Paper & Forest Products............................ 0.1%
Pharmaceuticals.................................... 3.0%
Retail & Merchandising............................. 1.5%
Semiconductors..................................... 6.8%
Telecommunications................................. 24.4%
----
Total.............................................. 90.1%
====
- ------------------------------------------------------------------------------
Unless otherwise noted, all stocks are common stock.
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, this security amounted
to 0.3% of net assets.
See Notes to Financial Statements.
AST ALLIANCE GROWTH AND INCOME PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 97.8%
AEROSPACE -- 1.3%
Honeywell International,
Inc. ........................ 550,000 $ 18,528,125
--------------
AIRLINES -- 2.3%
Continental Airlines, Inc.
Cl-B*........................ 250,000 11,749,999
Delta Air Lines, Inc. ......... 225,000 11,376,563
UAL Corp. ..................... 175,000 10,182,813
--------------
33,309,375
--------------
BEVERAGES -- 2.5%
Pepsi Bottling Group, Inc. .... 1,250,000 36,484,375
--------------
BROADCASTING -- 1.0%
Clear Channel Communications,
Inc.*........................ 200,000 15,000,000
--------------
BUILDING MATERIALS -- 1.7%
Masco Corp. ................... 900,000 16,256,250
U.S. Industries, Inc. ......... 700,000 8,487,500
--------------
24,743,750
--------------
BUSINESS SERVICES -- 3.9%
First Data Corp. .............. 1,150,000 57,068,750
--------------
CHEMICALS -- 3.6%
Dow Chemical Co. .............. 675,000 20,376,563
Eastman Chemical Co. .......... 225,000 10,743,750
Lyondell Chemical Co. ......... 500,000 8,375,000
Solutia, Inc. ................. 1,000,000 13,750,000
--------------
53,245,313
--------------
CLOTHING & APPAREL -- 0.6%
Limited, Inc. ................. 400,000 8,650,000
--------------
COMPUTER HARDWARE -- 2.2%
Compaq Computer Corp. ......... 650,000 16,615,625
Gateway, Inc.*................. 275,000 15,606,250
--------------
32,221,875
--------------
COMPUTER SERVICES & SOFTWARE -- 2.5%
Computer Sciences Corp.*....... 211,300 15,781,469
Electronic Data Systems
Corp. ....................... 500,000 20,624,999
Unisys Corp.*.................. 1 15
--------------
36,406,483
--------------
CONGLOMERATES -- 10.0%
Philip Morris Companies,
Inc. ........................ 1,200,000 31,875,000
Tyco International Ltd. ....... 1,250,000 59,218,749
United Technologies Corp. ..... 1,000,000 58,875,000
--------------
149,968,749
--------------
ELECTRONIC COMPONENTS &
EQUIPMENT -- 1.5%
Solectron Corp.*............... 275,000 11,515,625
Texas Instruments, Inc. ....... 150,000 10,303,125
--------------
21,818,750
--------------
ENERGY SERVICES -- 0.8%
Dynegy, Inc. .................. 175,000 11,954,688
--------------
SHARES VALUE
------ -----
ENTERTAINMENT & LEISURE -- 3.4%
Mattel, Inc. .................. 600,000 $ 7,912,500
Royal Caribbean Cruises
Ltd. ........................ 400,000 7,400,000
Time Warner, Inc. ............. 280,976 21,354,176
Viacom, Inc. Cl-B*............. 200,000 13,637,500
--------------
50,304,176
--------------
FINANCIAL-BANK & TRUST -- 7.8%
Bank of America Corp. ......... 1,000,000 43,000,000
Bank One Corp. ................ 600,000 15,937,500
Chase Manhattan Corp. ......... 1,250,000 57,578,125
--------------
116,515,625
--------------
FINANCIAL SERVICES -- 8.2%
Associates First Capital Corp.
Cl-A......................... 1,650,000 36,815,625
CIT Group...................... 500,000 8,125,000
Fleet Financial Group, Inc. ... 250,000 8,500,000
Household International,
Inc. ........................ 1,150,000 47,796,875
Morgan Stanley Dean Witter &
Co. ......................... 125,000 10,406,250
Wells Fargo & Co. ............. 275,000 10,656,250
--------------
122,300,000
--------------
FOOD -- 4.7%
Archer Daniels Midland Co. .... 400,000 3,925,000
Kroger Co.*.................... 3,000,000 66,187,500
--------------
70,112,500
--------------
HEALTHCARE SERVICES -- 4.8%
HCA - The Healthcare Corp. .... 300,000 9,112,500
Tenet Healthcare Corp. ........ 2,000,000 54,000,000
United HealthGroup, Inc. ...... 100,000 8,575,000
--------------
71,687,500
--------------
INSURANCE -- 2.4%
Ace Ltd. ...................... 850,000 23,800,000
MGIC Investment Corp. ......... 250,000 11,375,000
--------------
35,175,000
--------------
MEDICAL SUPPLIES & EQUIPMENT -- 1.7%
Abbott Laboratories............ 550,000 24,509,375
--------------
METALS & MINING -- 1.5%
Alcoa, Inc. ................... 750,000 21,750,000
--------------
OIL & GAS -- 8.3%
BP Amoco PLC [ADR]............. 400,000 22,625,000
Coastal Corp. ................. 150,000 9,131,250
Exxon Mobil Corp. ............. 175,000 13,748,438
Kerr-McGee Corp. .............. 400,000 23,575,000
Repsol SA [ADR]................ 500,000 9,906,250
Total Fina Elf SA [ADR]........ 125,000 9,625,000
Transocean Sedco Forex,
Inc. ........................ 200,000 10,687,500
USX-Marathon Group, Inc. ...... 1,000,000 25,062,500
--------------
124,360,938
--------------
PAPER & FOREST PRODUCTS -- 0.6%
International Paper Co. ....... 300,000 8,943,750
--------------
AST ALLIANCE GROWTH AND INCOME PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
PHARMACEUTICALS -- 4.8%
Pharmacia Corp. ............... 700,000 $ 36,181,250
Schering-Plough Corp........... 700,000 35,350,000
--------------
71,531,250
--------------
PRINTING & PUBLISHING -- 2.8%
Belo, (A.H.) Corp. Cl-A........ 700,000 12,118,750
Gannett Co., Inc............... 500,000 29,906,250
--------------
42,025,000
--------------
RAILROADS -- 1.0%
Burlington Northern
Santa Fe Corp. .............. 300,000 6,881,250
Union Pacific Corp............. 200,000 7,437,500
--------------
14,318,750
--------------
RETAIL & MERCHANDISING -- 0.9%
Circuit City Stores, Inc....... 400,000 13,275,000
--------------
SEMICONDUCTORS -- 1.7%
Atmel Corp.*................... 150,000 5,531,250
Fairchild Semiconductor
Corp.*....................... 250,000 10,125,000
Micron Technology, Inc.*....... 100,000 8,806,250
--------------
24,462,500
--------------
TELECOMMUNICATIONS -- 7.3%
AT&T Corp...................... 660,000 20,872,500
Bell Atlantic Corp.*........... 200,000 10,162,500
Comcast Corp. Cl-A*............ 500,000 20,250,000
SBC Communications, Inc........ 225,000 9,731,250
Sprint Corp. (FON Group)....... 650,000 33,150,000
WorldCom, Inc.*................ 300,000 13,762,500
--------------
107,928,750
--------------
SHARES VALUE
------ -----
TRANSPORTATION -- 0.5%
United Parcel Service, Inc.
Cl-B......................... 125,000 $ 7,375,000
--------------
UTILITIES -- 1.5%
AES Corp.*..................... 250,000 11,406,250
Duke Energy Corp............... 200,000 11,275,000
--------------
22,681,250
--------------
TOTAL COMMON STOCK
(Cost $1,416,896,148)............ 1,448,656,597
--------------
SHORT-TERM INVESTMENTS -- 1.6%
Temporary Investment Cash
Fund......................... 11,638,089 11,638,089
Temporary Investment Fund...... 11,638,088 11,638,088
--------------
(Cost $23,276,177)............. 23,276,177
--------------
TOTAL INVESTMENTS -- 99.4%
(Cost $1,440,172,325)............ 1,471,932,774
OTHER ASSETS LESS
LIABILITIES -- 0.6%.............. 8,316,360
--------------
NET ASSETS -- 100.0%............... $1,480,249,134
==============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST JANCAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 91.7%
ADVERTISING -- 1.3%
DoubleClick, Inc.*............. 2,002,005 $ 76,326,441
--------------
AEROSPACE -- 1.6%
General Motors Corp. Cl-H*..... 1,094,835 96,071,771
--------------
BEVERAGES -- 1.4%
Coca-Cola Co. ................. 1,481,805 85,111,175
--------------
COMPUTER HARDWARE -- 7.9%
Apple Computer, Inc.*.......... 4,506,470 236,026,367
Dell Computer Corp.*........... 1,539,515 75,917,333
EMC Corp.*..................... 1,949,840 150,015,815
Handspring, Inc.*.............. 213,115 5,754,105
--------------
467,713,620
--------------
COMPUTER SERVICES & SOFTWARE -- 22.4%
3Com Corp.*.................... 2,352,325 135,552,728
Cisco Systems, Inc.*........... 7,209,080 458,227,148
Inktomi Corp.*................. 659,280 77,959,860
Intuit, Inc.*.................. 1,364,028 56,436,659
Microsoft Corp.*............... 1,305,140 104,411,200
Veritas Software Corp.*........ 4,332,408 489,629,797
--------------
1,322,217,392
--------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 12.3%
General Electric Co. .......... 4,225,425 215,496,675
Metromedia Fiber Network, Inc.
Cl-A*........................ 1,791,610 71,104,522
Texas Instruments, Inc. ....... 6,402,380 439,763,476
--------------
726,364,673
--------------
ENTERTAINMENT & LEISURE -- 4.5%
Time Warner, Inc. ............. 3,535,195 268,674,820
--------------
FINANCIAL SERVICES -- 3.9%
Schwab, (Charles) Corp. ....... 6,910,516 232,366,101
--------------
INSURANCE -- 2.1%
American International Group,
Inc. ........................ 1,054,320 123,882,600
--------------
INTERNET SERVICES -- 7.3%
America Online, Inc.*.......... 6,213,010 327,736,277
Yahoo!, Inc.*.................. 834,345 103,354,487
--------------
431,090,764
--------------
PHARMACEUTICALS -- 2.1%
Pfizer, Inc. .................. 2,529,245 121,403,760
--------------
RETAIL & MERCHANDISING -- 2.0%
Home Depot, Inc. .............. 2,340,220 116,864,736
--------------
TELECOMMUNICATIONS -- 22.9%
EchoStar Communications Corp.
Cl-A*........................ 901,640 29,852,737
Level 3 Communications,
Inc.*........................ 1,397,310 122,963,280
Nextel Communications, Inc.
Cl-A*........................ 1,804,525 110,414,373
Nokia Corp. Cl-A [ADR]......... 10,081,440 503,441,911
Nortel Networks Corp. NY
Reg.*........................ 1,490,220 101,707,515
Sprint Corp. (PCS Group)*...... 4,742,070 282,153,165
Telefonos de Mexico SA Cl-L
[ADR]........................ 791,555 45,217,579
SHARES VALUE
------ -----
Vodafone AirTouch PLC [ADR].... 3,148,050 $ 130,447,322
WinStar Communications,
Inc.*........................ 625,350 21,183,731
--------------
1,347,381,613
--------------
TOTAL COMMON STOCK
(Cost $2,875,881,767)............ 5,415,469,466
--------------
PAR
(000)
-----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 2.5%
Federal Home Loan Bank 6.04%,
10/16/00..................... $ 25,000 24,526,025
6.27%, 07/31/00.............. 50,000 49,738,750
--------------
74,264,775
--------------
Federal National Mortgage
Assoc. 6.41%, 08/21/00....... 50,000 49,545,958
6.44%, 07/28/00.............. 25,000 24,879,250
--------------
74,425,208
--------------
(Cost $148,715,153)............ 148,689,983
--------------
CORPORATE OBLIGATIONS -- 1.8%
ENTERTAINMENT & LEISURE -- 0.8%
Venetian Casino Resort LLC
12.25%, 11/15/04............. 49,725 50,470,874
--------------
RETAIL & MERCHANDISING -- 0.6%
Amazon.com, Inc.
4.75%, 02/01/09.............. 51,851 32,795,758
--------------
TELECOMMUNICATIONS -- 0.4%
Lenfest Communications, Inc.
7.625%, 02/15/08............. 11,295 11,026,744
8.25%, 02/15/08.............. 12,480 12,402,000
--------------
23,428,744
--------------
TOTAL CORPORATE OBLIGATIONS
(Cost $125,956,451).............. 106,695,376
--------------
SHARES
------
FOREIGN STOCK -- 1.0%
SEMICONDUCTORS -- 0.1%
Infineon Technologies
AG -- (DEM)*................. 97,820 8,007,887
--------------
TELECOMMUNICATIONS -- 0.9%
Vodafone AirTouch
PLC -- (GBP)................. 12,548,193 50,720,877
--------------
TOTAL FOREIGN STOCK
(Cost $65,758,884)................. 58,728,764
--------------
PAR
(000)
-----
COMMERCIAL PAPER -- 3.0%
Associates Corp. of North
America
6.85%, 07/03/00
(Cost $179,131,804)............ $ 179,200 179,131,804
--------------
AST JANCAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
SHORT-TERM INVESTMENTS -- 0.0%
Temporary Investment Cash
Fund......................... 46,620 $ 46,620
Temporary Investment Fund...... 46,619 46,619
--------------
(Cost $93,239)................. 93,239
--------------
TOTAL INVESTMENTS -- 100.0%
(Cost $3,395,537,298).......... 5,908,808,632
LIABILITIES IN EXCESS OF OTHER
ASSETS -- 0.0%................... (2,845,708)
--------------
NET ASSETS -- 100.0%............... $5,905,962,924
==============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
CORPORATE OBLIGATIONS -- 41.7%
FINANCIAL-BANK & TRUST -- 23.9%
Bank of America NA
6.75%, 08/15/00.............. $ 18,500 $ 18,516,350
6.65%, 09/06/00 [FRN]++...... 75,000 74,993,014
Bank of Austria [FRN]
6.45%, 07/16/00++............ 60,000 59,981,543
Bank of Scotland [FRN] 144A
6.079%, 09/06/00++........... 76,000 75,996,136
Citibank NA
7.41%, 05/30/01.............. 25,500 25,500,000
Comerica Bank [FRN]
6.564%, 07/14/00++........... 20,000 19,992,987
First Union National Bank [FRN]
6.17%, 08/16/00++............ 32,000 32,000,000
6.792%, 09/15/00++........... 31,000 30,998,159
Fleet Financial Group [FRN]
6.343%, 07/13/00++........... 36,500 36,450,069
National City Bank [FRN]
6.633%, 07/04/00++........... 11,000 11,000,000
SouthTrust Bank NA [FRN]
6.606%, 07/24/00++........... 39,000 38,996,476
US Bank of Minnesota NA [FRN]
6.17%, 07/04/00++............ 18,000 17,994,088
--------------
442,418,822
--------------
FINANCIAL SERVICES -- 12.1%
CIT Group, Inc. [FRN]
6.75%, 07/05/00++............ 24,500 24,497,129
6.16%, 07/19/00++............ 30,000 29,989,503
6.10%, 08/15/00++............ 17,000 16,990,653
Citigroup, Inc. [FRN]
6.622%, 07/04/00++........... 28,000 28,000,000
General Electric Capital Corp.
[FRN]
6.221%, 07/07/00++........... 75,000 75,000,000
PNC Financial Services Group,
Inc. [FRN]
6.445%, 07/01/00++........... 50,000 49,999,264
--------------
224,476,549
--------------
INDUSTRIAL -- 3.5%
Diageo Capital PLC [FRN]
6.815%, 08/24/00++........... 65,000 64,993,862
--------------
TELECOMMUNICATIONS -- 2.2%
AT&T Corp. [FRN] 144A
6.25%, 07/13/00++............ 40,000 39,960,186
--------------
TOTAL CORPORATE OBLIGATIONS
(Cost $771,849,419).............. 771,849,419
--------------
PAR
(000) VALUE
----- -----
CERTIFICATES OF DEPOSIT -- 25.2%
Abbey National Treasury
6.47%, 01/10/01.............. $ 31,500 $ 31,492,081
Bayerische Landesbank NY
6.576%, 07/17/00 [FRN]++..... 7,000 6,997,285
5.875%, 08/04/00............. 20,000 19,999,465
6.11%, 10/02/00.............. 50,000 49,977,735
Canadian Imperial Corp.
7.45%, 06/02/01.............. 25,000 24,993,458
Commerzbank AG NY
6.601%, 07/26/00 [FRN]++..... 25,000 24,995,986
6.585%, 07/28/00............. 47,000 46,984,739
Credit Commercial de Belgium
6.70%, 02/26/01.............. 29,000 28,990,956
Deutsche Bank
6.555%, 07/16/00 [FRN]++..... 31,000 30,989,918
6.19%, 12/01/00.............. 40,000 39,988,812
Landesbank Hessen - Thueringen
7.142%, 05/08/01............. 25,000 24,998,491
Rabobank Nederland NV
6.66%, 03/09/01.............. 9,000 8,997,062
Suntrust Bank Atlanta
6.24%, 07/06/00.............. 25,000 25,000,000
Union Bank of Switzerland
6.235%, 12/04/00............. 40,000 39,987,786
6.39%, 12/21/00.............. 30,000 29,993,235
Westdeutsche Landesbank NY
[FRN]
6.571%, 07/25/00++........... 30,000 29,944,908
--------------
(Cost $464,331,917)............ 464,331,917
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.7%
Federal Farm Credit Bank
6.57%, 07/03/00.............. 42,047 42,031,653
--------------
Federal Home Loan Bank
6.13%, 07/05/00 [FRN]++...... 25,000 24,995,537
6.48%, 07/03/00 - 07/07/00... 35,753 35,714,929
--------------
60,710,466
--------------
Student Loan Marketing Assoc.
6.20%, 07/03/00.............. 20,203 20,196,041
--------------
(Cost $122,938,160)............ 122,938,160
--------------
SOVEREIGN ISSUES -- 1.9%
Province of Manitoba
9.50%, 10/01/00
(Cost $34,728,653)............. 34,500 34,728,653
--------------
AST MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
z~
COMMERCIAL PAPER -- 24.3%
FINANCIAL SERVICES -- 4.6%
American Express Credit Corp.
6.88%, 07/03/00.............. $ 10,806 $ 10,801,870
6.54%, 07/06/00.............. 75,000 74,931,875
--------------
85,733,745
--------------
FOOD -- 1.6%
Nestle Co.
6.50%, 07/03/00.............. 30,000 29,989,167
--------------
INDUSTRIAL -- 3.3%
Ford Motor Co.
6.65%, 07/05/00.............. 60,000 59,955,667
--------------
REAL ESTATE -- 4.0%
HD Real Estate Funding+
6.80%, 11/21/00.............. 75,000 72,974,167
--------------
TELECOMMUNICATIONS -- 10.3%
AT&T Corp.
6.366%, 07/08/00............. 25,000 24,996,673
CDC Corp.
6.65%, 08/24/00.............. 75,000 74,251,875
PAR
(000) VALUE
----- -----
SBC Communications, Inc.+
6.56%, 07/20/00.............. $ 45,410 $ 45,252,780
6.63%, 08/17/00.............. 5,200 5,154,990
6.65%, 09/01/00.............. 24,612 24,330,124
6.68%, 09/01/00.............. 15,000 14,827,433
--------------
188,813,875
--------------
UTILITIES -- 0.5%
Wisconsin Energy Corp.+
6.60%, 08/03/00.............. 10,000 9,939,500
--------------
TOTAL COMMERCIAL PAPER
(Cost $447,406,121).............. 447,406,121
--------------
TOTAL INVESTMENTS -- 99.8%
(Cost $1,841,254,270)............ 1,841,254,270
OTHER ASSETS LESS
LIABILITIES -- 0.2%.............. 3,141,865
--------------
NET ASSETS -- 100.0%............... $1,844,396,135
==============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
+ Security is restricted as to resale and may not be resold except to qualified
institutional buyers. At the end of the period, these securities amounted to
9.4% of net assets.
++ Maturity date reflects the next interest rate change date.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 6.3% of net assets.
See Notes to Financial Statements.
AST NEUBERGER BERMAN MID-CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 100.4%
AEROSPACE -- 2.7%
General Dynamics Corp............. 246,000 $ 12,853,500
General Motors Corp. Cl-H*........ 62,900 5,519,475
------------
18,372,975
------------
AIRLINES -- 2.2%
Continental Airlines, Inc.
Cl-B*........................... 185,000 8,695,000
Southwest Airlines Co............. 345,600 6,544,800
------------
15,239,800
------------
AUTOMOTIVE PARTS -- 2.3%
Eaton Corp. ...................... 106,800 7,155,600
Lear Corp.*....................... 410,100 8,202,000
------------
15,357,600
------------
BROADCASTING -- 1.7%
Emmis Communications Corp. Cl-A*.. 79,200 3,276,900
Scripps, (E.W.) Co. Cl-A.......... 170,900 8,416,825
------------
11,693,725
------------
BUSINESS SERVICES -- 3.2%
ChoicePoint, Inc.*................ 188,200 7,880,875
Comdisco, Inc..................... 253,500 5,656,219
Iron Mountain, Inc.*.............. 240,100 7,878,281
------------
21,415,375
------------
CAPITAL GOODS -- 3.0%
American Standard Companies,
Inc.*........................... 192,200 7,880,200
SPX Corp.*........................ 101,700 12,299,344
------------
20,179,544
------------
CHEMICALS -- 3.1%
Engelhard Corp.................... 327,700 5,591,381
FMC Corp.*........................ 141,800 8,224,400
Praxair, Inc. .................... 194,100 7,266,619
------------
21,082,400
------------
CLOTHING & APPAREL -- 0.5%
AnnTaylor Stores Corp.*........... 96,200 3,186,625
------------
COMPUTER HARDWARE -- 2.9%
Apple Computer, Inc.*............. 87,000 4,556,625
Gateway, Inc.*.................... 109,900 6,236,825
Insight Enterprises, Inc.*........ 146,000 8,659,625
------------
19,453,075
------------
COMPUTER SERVICES & SOFTWARE -- 3.4%
Ceridian Corp.*................... 285,300 6,865,031
Compuware Corp.*.................. 359,900 3,733,963
Fiserv, Inc.*..................... 76,300 3,299,975
Intuit, Inc.*..................... 88,800 3,674,100
Storage Networks, Inc.*........... 1,100 99,275
SunGard Data Systems, Inc.*....... 174,800 5,418,800
------------
23,091,144
------------
CONSUMER PRODUCTS & SERVICES -- 0.6%
Energizer Holdings, Inc.*......... 228,400 4,168,300
------------
CONTAINERS & PACKAGING -- 1.0%
Sealed Air Corp.*................. 132,900 6,960,638
------------
SHARES VALUE
------ -----
ELECTRONIC COMPONENTS & EQUIPMENT -- 1.3%
Flextronics International Ltd.*... 70,400 $ 4,835,600
Gemstar International Group
Ltd.*........................... 67,900 4,172,667
------------
9,008,267
------------
ENERGY SERVICES -- 1.2%
Dynegy, Inc....................... 114,100 7,794,456
------------
FINANCIAL-BANK & TRUST -- 2.0%
M&T Bank Corp. ................... 16,200 7,290,000
Valley National Bancorp........... 242,970 5,937,579
------------
13,227,579
------------
FINANCIAL SERVICES -- 10.5%
AMBAC Financial Group, Inc........ 160,100 8,775,481
Bear Stearns Companies, Inc. ..... 133,200 5,544,450
Countrywide Credit Industries,
Inc. ........................... 293,300 8,890,656
Dun & Bradstreet Corp............. 327,800 9,383,275
Franklin Resources, Inc........... 228,100 6,928,538
Household International, Inc...... 223,000 9,268,438
Providian Financial Corp.......... 96,700 8,703,000
SLM Holding Corp. ................ 370,000 13,851,873
------------
71,345,711
------------
FOOD -- 3.8%
Hershey Foods Corp................ 156,300 7,609,856
Kroger Co.*....................... 447,000 9,861,938
Nabisco Holdings Corp. ........... 158,000 8,295,000
------------
25,766,794
------------
HEALTHCARE SERVICES -- 4.2%
Healthsouth Corp.*................ 948,000 6,813,750
Tenet Healthcare Corp. ........... 463,400 12,511,800
Wellpoint Health Networks,
Inc.*........................... 123,700 8,960,519
------------
28,286,069
------------
HOTELS & MOTELS -- 2.0%
Starwood Hotels & Resorts
Worldwide, Inc. [REIT].......... 428,900 13,858,831
------------
INDUSTRIAL PRODUCTS -- 1.0%
Crane Co.......................... 267,800 6,510,888
------------
INSURANCE -- 10.9%
Ace Ltd........................... 456,400 12,779,199
AON Corp.......................... 296,000 9,194,500
John Hancock Financial Services,
Inc.*........................... 90,900 2,153,194
MetLife, Inc.*.................... 823,700 17,349,180
Nationwide Financial Services,
Inc. ........................... 364,900 11,996,088
UNUM Corp......................... 436,200 8,751,263
Xl Capital Ltd.................... 219,400 11,875,025
------------
74,098,449
------------
MACHINERY & EQUIPMENT -- 1.8%
Danaher Corp...................... 124,900 6,174,743
Pall Corp......................... 315,300 5,951,288
------------
12,126,031
------------
AST NEUBERGER BERMAN MID-CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
MEDICAL SUPPLIES & EQUIPMENT -- 6.0%
Bard, (C.R.), Inc. ............... 205,700 $ 9,899,312
Becton Dickinson & Co. ........... 197,000 5,651,438
Charles River Laboratories
International, Inc.*............ 159,800 3,545,563
Genzyme Corp.*.................... 251,400 14,942,587
St. Jude Medical, Inc.*........... 149,800 6,872,074
------------
40,910,974
------------
METALS & MINING -- 1.1%
Homestake Mining Co. ............. 1,107,100 7,611,313
------------
OIL & GAS -- 9.9%
Anadarko Petroleum Corp. ......... 189,500 9,344,718
Apache Corp. ..................... 134,700 7,922,044
Coastal Corp. .................... 140,400 8,546,850
Kinder Morgan, Inc. .............. 168,600 5,827,238
Noble Drilling Corp.*............. 108,500 4,468,844
Santa Fe International Corp. ..... 148,300 5,181,231
Transocean Sedco Forex, Inc. ..... 171,000 9,137,812
USX-Marathon Group, Inc. ......... 308,100 7,721,756
Williams Companies, Inc. ......... 211,600 8,821,075
------------
66,971,568
------------
PAPER & FOREST PRODUCTS -- 0.8%
Bowater, Inc. .................... 115,400 5,092,025
------------
PHARMACEUTICALS -- 0.7%
Waters Corp.*..................... 35,900 4,480,769
------------
PRINTING & PUBLISHING -- 2.0%
Belo, (A.H.) Corp. Cl-A........... 796,700 13,792,869
------------
RAILROADS -- 1.5%
Kansas City Southern Industries,
Inc. ........................... 115,400 10,234,538
------------
REAL ESTATE -- 5.8%
Boston Properties, Inc. [REIT].... 281,000 10,730,687
Indymac Mortgage Holdings, Inc.
[REIT].......................... 735,900 9,980,644
Spieker Properties, Inc. [REIT]... 189,700 8,963,325
Vornado Realty Trust [REIT]....... 281,000 9,764,750
------------
39,439,406
------------
SHARES VALUE
------ -----
RETAIL & MERCHANDISING -- 1.3%
Consolidated Stores Corp.*........ 414,100 $ 5,357,419
Tiffany & Co. .................... 53,900 3,638,250
------------
8,995,669
------------
TELECOMMUNICATIONS -- 2.6%
American Tower Corp. Cl-A*........ 229,300 9,558,944
Exfo Electro-Optical Engineering,
Inc.*........................... 700 30,714
Loral Space & Communications
Ltd.*........................... 1,172,100 8,131,444
------------
17,721,102
------------
UTILITIES -- 3.4%
AES Corp.*........................ 296,000 13,505,000
Unicom Corp. ..................... 252,600 9,772,463
------------
23,277,463
------------
TOTAL COMMON STOCK
(Cost $652,086,001)................. 680,751,972
------------
SHORT-TERM INVESTMENTS -- 0.4%
Temporary Investment Cash Fund.... 1,290,838 1,290,838
Temporary Investment Fund......... 1,290,838 1,290,838
------------
(Cost $2,581,676)................. 2,581,676
------------
TOTAL INVESTMENTS -- 100.8%
(Cost $654,667,677)................. 683,333,648
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.8%).................... (5,586,726)
------------
NET ASSETS -- 100.0%.................. $677,746,922
============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST AIM BALANCED PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 48.2%
ADVERTISING -- 0.8%
Lamar Advertising Co.*............. 62,800 $ 2,720,025
Omnicom Group, Inc. ............... 25,300 2,253,281
------------
4,973,306
------------
AEROSPACE -- 0.5%
General Motors Corp. Cl-H*......... 30,700 2,693,925
------------
AUTOMOBILE MANUFACTURERS -- 0.2%
Ford Motor Co. .................... 28,900 1,242,700
------------
AUTOMOTIVE PARTS -- 0.0%
Visteon Corp.*..................... 3,784 45,881
------------
BROADCASTING -- 1.8%
Clear Channel Communications,
Inc.*............................ 41,100 3,082,500
Grupo Televisa SA [GDR]*........... 24,000 1,654,500
Hispanic Broadcasting Corp.*....... 72,600 2,404,875
Infinity Broadcasting Corp.*....... 85,250 3,106,297
UIH Australia Pacific, Inc.
Warrants 144A*................... 50 1,500
UnitedGlobalCom, Inc. Cl-A*........ 11,000 514,250
------------
10,763,922
------------
BUSINESS SERVICES -- 0.3%
Foundry Networks, Inc.*............ 10,600 1,171,300
Maximus, Inc.*..................... 31,300 692,513
------------
1,863,813
------------
COMPUTER HARDWARE -- 1.7%
EMC Corp.*......................... 96,600 7,432,163
Immersion Corp.*................... 29,000 870,000
International Business Machines
Corp. ........................... 16,128 1,767,024
------------
10,069,187
------------
COMPUTER SERVICES & SOFTWARE -- 7.9%
BEA Systems, Inc.*................. 59,900 2,961,306
Brocade Communications Systems,
Inc.*............................ 25,300 4,642,154
Cisco Systems, Inc.*............... 116,000 7,373,249
DST Systems, Inc.*................. 16,900 1,286,513
InfoSpace.com, Inc.*............... 115,600 6,386,899
ISS Group, Inc.*................... 34,200 3,376,716
MarchFirst, Inc.*.................. 69,200 1,262,900
Microsoft Corp.*................... 37,500 3,000,000
Oracle Corp.*...................... 32,200 2,706,813
Phone.com, Inc.*................... 40,700 2,650,588
Redback Networks, Inc.*............ 19,200 3,417,600
Sun Microsystems, Inc.*............ 69,000 6,274,687
Veritas Software Corp.*............ 9,650 1,090,601
------------
46,430,026
------------
CONGLOMERATES -- 0.9%
Corning, Inc. ..................... 11,000 2,968,625
Tyco International Ltd. ........... 45,400 2,150,825
------------
5,119,450
------------
SHARES VALUE
------ -----
CONSUMER PRODUCTS & SERVICES -- 0.4%
Critical Path, Inc.*............... 38,300 $ 2,233,369
Hedstrom Holdings, Inc. Warrants
144A*............................ 303 9
------------
2,233,378
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 1.7%
Analog Devices, Inc.*.............. 60,800 4,620,800
Comverse Technology, Inc.*......... 24,300 2,259,900
General Electric Co. .............. 60,600 3,090,600
------------
9,971,300
------------
ENTERTAINMENT & LEISURE -- 1.1%
Club Regina Resorts, Inc.
Warrants*........................ 20 20
Time Warner, Inc................... 26,800 2,036,800
Viacom, Inc. Cl-B*................. 64,015 4,365,023
------------
6,401,843
------------
EQUIPMENT SERVICES -- 0.9%
Quanta Services, Inc.*............. 94,500 5,197,500
------------
FINANCIAL-BANK & TRUST -- 0.6%
Chase Manhattan Corp. ............. 71,100 3,275,044
------------
FINANCIAL SERVICES -- 2.8%
American Express Co. .............. 35,955 1,874,154
AXA Financial, Inc. ............... 50,000 1,700,000
Citigroup, Inc. ................... 41,700 2,512,425
Merrill Lynch & Co., Inc. ......... 31,700 3,645,500
Morgan Stanley Dean Witter &
Co. ............................. 46,800 3,896,100
Schwab, (Charles) Corp. ........... 89,100 2,995,988
------------
16,624,167
------------
FOOD -- 0.3%
Safeway, Inc.*..................... 43,000 1,940,375
------------
INSURANCE -- 1.1%
American International Group,
Inc. ............................ 27,500 3,231,250
AXA [ADR].......................... 20,000 1,591,250
MGIC Investment Corp. ............. 33,200 1,510,600
------------
6,333,100
------------
INTERNET SERVICES -- 2.0%
America Online, Inc.*.............. 79,200 4,177,800
Juniper Networks, Inc.*............ 26,600 3,871,963
PSINet, Inc.*...................... 22,000 552,750
VeriSign, Inc.*.................... 16,700 2,947,550
------------
11,550,063
------------
MEDICAL SUPPLIES & EQUIPMENT -- 2.6%
Baxter International, Inc. ........ 46,600 3,276,563
Forest Laboratories, Inc.*......... 25,500 2,575,500
Genzyme Corp.*..................... 67,100 3,988,256
Guidant Corp.*..................... 35,000 1,732,500
Medtronic, Inc..................... 76,300 3,800,694
------------
15,373,513
------------
OIL & GAS -- 1.2%
Apache Corp. ...................... 16,500 970,406
Exxon Mobil Corp................... 15,762 1,238,302
Kerr-McGee Corp. .................. 38,700 2,280,881
AST AIM BALANCED PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
TCR Holding Corp. Cl-B*............ 2,898 $ 29
Williams Companies, Inc............ 58,300 2,430,382
------------
6,920,000
------------
PHARMACEUTICALS -- 2.3%
American Home Products Corp. ...... 55,500 3,260,625
Merck & Co., Inc. ................. 40,000 3,065,000
Pfizer, Inc. ...................... 156,475 7,510,800
------------
13,836,425
------------
RETAIL & MERCHANDISING -- 1.6%
Amazon.com, Inc.*.................. 18,100 657,256
Bed, Bath & Beyond, Inc.*.......... 61,200 2,218,500
Home Depot, Inc. .................. 48,400 2,416,975
Linens 'n Things, Inc.*............ 48,700 1,320,988
Target Corp. ...................... 54,000 3,132,000
------------
9,745,719
------------
SEMICONDUCTORS -- 4.1%
Applied Materials, Inc.*........... 39,600 3,588,750
Intel Corp......................... 36,900 4,933,068
JDS Uniphase Corp.*................ 21,000 2,517,375
Microchip Technology, Inc.*........ 32,850 1,914,026
SDL, Inc.*......................... 28,000 7,985,249
Vitesse Semiconductor Corp.*....... 45,900 3,376,519
------------
24,314,987
------------
TELECOMMUNICATIONS -- 10.4%
360 Networks, Inc.*................ 103,800 1,582,950
AT&T Canada, Inc. NY Reg.*......... 57,000 1,891,688
Bell Atlantic Corp.*............... 33,725 1,713,652
Birch Telecommunications
Warrants*........................ 10 550
BroadWing, Inc..................... 78,642 2,039,777
Cellnet Data System Warrants
144A*............................ 95 1
Comcast Corp. Cl-A*................ 49,000 1,984,500
Copper Mountain Networks, Inc.*.... 22,000 1,938,750
Global Crossing Ltd.*.............. 62,200 1,636,638
Korea Telecom Corp. [ADR].......... 29,659 1,434,754
Level 3 Communications, Inc.*...... 21,600 1,900,800
Lucent Technologies, Inc........... 74,500 4,414,124
McLeodUSA, Inc. Cl-A*.............. 155,800 3,223,113
Nextel International, Inc.*........ 4 0
NEXTLINK Communications, Inc.
Cl-A*............................ 88,000 3,338,500
Nokia Corp. Cl-A [ADR]............. 94,600 4,724,087
Nortel Networks Corp. NY Reg.*..... 49,700 3,392,024
Pathnet, Inc. Warrants 144A*....... 30 304
Powertel, Inc.*.................... 44 3,121
Qwest Communications International,
Inc.*............................ 105,000 5,217,187
SBC Communications, Inc. .......... 39,618 1,713,479
Sycamore Networks, Inc.*........... 41,000 4,525,374
Time Warner Telecom, Inc. Cl-A*.... 51,600 3,321,750
Univision Communications, Inc.*.... 48,700 5,040,449
Western Wireless Corp. Cl-A*....... 39,600 2,158,200
Williams Communications Group,
Inc.*............................ 52,900 1,755,619
SHARES VALUE
------ -----
WinStar Communications, Inc.*...... 2,467 $ 83,570
WorldCom, Inc.*.................... 50,100 2,298,338
------------
61,333,299
------------
UTILITIES -- 1.0%
AES Corp.*......................... 67,600 3,084,250
Enron Corp. ....................... 47,000 3,031,500
------------
6,115,750
------------
TOTAL COMMON STOCK
(Cost $203,046,961).................. 284,368,673
------------
PAR
(000)
-------
CORPORATE OBLIGATIONS -- 32.3%
AEROSPACE -- 0.1%
Boeing Co.
6.625%, 02/15/38................. $ 580 499,763
AIRLINES -- 0.9%
AMR Corp.
10.00%, 04/15/21................. 650 665,404
Calair Capital Corp. LLC
8.125%, 04/01/08................. 90 81,675
Continental Airlines Series 981C
6.541%, 09/15/09................. 841 787,513
Delta Air Lines, Inc.
7.90%, 12/15/09.................. 1,000 944,038
9.00%, 05/15/16.................. 900 859,660
10.375%, 12/15/22................ 750 821,357
United Air Lines, Inc.
9.75%, 08/15/21.................. 1,200 1,164,557
------------
5,324,204
------------
AUTOMOBILE MANUFACTURERS -- 0.5%
DaimlerChrysler NA Holding Co.
7.40%, 01/20/05.................. 1,250 1,248,141
8.00%, 06/15/10.................. 900 917,069
Ford Motor Co.
6.625%, 10/01/28................. 1,200 1,015,883
------------
3,181,093
------------
BEVERAGES -- 0.3%
Seagram, (J.) & Sons Co.
9.65%, 08/15/18.................. 1,350 1,499,191
BROADCASTING -- 1.3%
Continental Cablevision, Inc.
9.50%, 08/01/13.................. 4,450 4,824,699
Cox Communications, Inc.
7.75%, 08/15/06.................. 1,000 996,321
Liberty Media Group
7.875%, 07/15/09................. 580 559,294
8.25%, 02/01/30.................. 1,400 1,288,910
------------
7,669,224
------------
AST AIM BALANCED PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
------- ------------
CABLE TELEVISION -- 1.4%
British Sky Broadcasting
8.20%, 07/15/09.................. $ 1,750 $ 1,644,480
Comcast Cable Communications, Inc.
8.50%, 05/01/27.................. 2,000 2,039,647
Cox Enterprises, Inc. 144A
8.00%, 02/15/07.................. 1,400 1,389,319
CSC Holdings, Inc.
7.875%, 12/15/07................. 1,425 1,382,083
Lenfest Communications, Inc.
8.375%, 11/01/05................. 1,500 1,533,750
------------
7,989,279
------------
CHEMICALS -- 0.2%
Airgas, Inc.
7.14%, 03/08/04.................. 1,200 1,094,568
------------
COMPUTER SERVICES & SOFTWARE -- 0.9%
Veritas Software Corp. [CVT]
1.856%, 08/13/06................. 1,600 5,042,000
------------
CONSTRUCTION -- 0.0%
American Architectural Co.
11.75%, 12/01/07................. 10 1,750
------------
CONSUMER PRODUCTS & SERVICES -- 0.2%
Procter & Gamble Co.
8.00%, 09/01/24.................. 1,000 1,070,917
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 0.7%
Candescent Technologies Corp. [CVT]
144A
7.00%, 05/01/03.................. 2,050 1,486,249
7.00%, 05/01/03.................. 500 362,500
CSC Holdings, Inc.
7.875%, 02/15/18................. 750 691,432
Israel Electric Corp. Ltd. 144A
7.75%, 03/01/09.................. 800 775,614
7.75%, 12/15/27.................. 1,000 876,509
------------
4,192,304
------------
ENTERTAINMENT & LEISURE -- 1.8%
News America Holdings Co.
9.25%, 02/01/13.................. 1,700 1,807,013
8.45%, 08/01/34.................. 2,000 2,023,144
Time Warner, Inc.
9.125%, 01/15/13................. 3,000 3,261,951
9.15%, 02/01/23.................. 3,000 3,297,525
------------
10,389,633
------------
ENVIRONMENTAL SERVICES -- 0.3%
Browning-Ferris Industries, Inc.
7.40%, 09/15/35.................. 1,500 1,047,273
Waste Management, Inc.
7.125%, 12/15/17................. 170 139,158
7.10%, 08/01/26.................. 925 870,071
------------
2,056,502
------------
PAR
(000) VALUE
------- ------------
FINANCIAL-BANK & TRUST -- 4.6%
Bank of America Corp.
9.375%, 09/15/09................. $ 1,800 $ 1,959,620
Bank of Tokyo-Mitsubishi
8.40%, 04/15/10.................. 270 273,039
Banponce Trust I
8.327%, 02/01/27................. 1,635 1,379,636
BB&T Corp.
6.375%, 06/30/05................. 1,100 1,044,805
Dime Capital, Inc. Cl-A
9.33%, 05/06/27.................. 1,500 1,282,929
First Union Corp.
7.50%, 04/15/35.................. 3,000 2,996,880
6.55%, 10/15/35.................. 1,840 1,753,816
GreenPoint Capital Corp.
9.10%, 06/01/27.................. 10 8,176
Mercantile Bancorp
7.30%, 06/15/07.................. 3,000 2,883,330
Midland Bank PLC
7.65%, 05/01/25.................. 340 346,670
NBD Bank NA
8.25%, 11/01/24.................. 2,965 3,120,276
Provident Capital, Inc.
8.60%, 12/01/26.................. 20 16,749
Regions Financial Corp.
7.75%, 09/15/24.................. 1,000 1,003,250
Republic New York Corp.
9.70%, 02/01/09.................. 845 926,877
9.50%, 04/15/14.................. 880 976,677
Sanwa Finance Aruba
8.35%, 07/15/09.................. 400 398,985
Skandinaviska Enskilda
6.875%, 02/15/09................. 1,350 1,255,291
Sovereign Capital, Inc.
9.00%, 04/01/27.................. 15 11,635
St. Paul Bancorp, Inc.
7.125%, 02/15/04................. 1,220 1,182,084
Suntrust Banks, Inc.
8.75%, 11/15/04.................. 600 623,323
U.S. Bancorp
7.50%, 06/01/26.................. 1,500 1,506,131
Union Planters Bank NA
6.50%, 03/15/08.................. 2,385 2,091,495
------------
27,041,674
------------
FINANCIAL SERVICES -- 6.3%
AIG Sunamerica Global Financial
Services II 144A
7.60%, 06/15/05.................. 1,500 1,514,919
American General Finance
8.45%, 10/15/09.................. 1,650 1,692,540
Associates Corp.
6.95%, 11/01/18.................. 1,885 1,662,338
Bear Stearns Co., Inc.
7.625%, 12/07/09................. 1,270 1,216,049
Beaver Valley Funding Corp.
9.00%, 06/01/17.................. 1,930 1,930,000
AST AIM BALANCED PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
------- ------------
Capital One Financial Corp.
7.25%, 05/01/06.................. $ 1,765 $ 1,661,940
Citicorp Lease 144A
8.04%, 12/15/19.................. 900 897,372
Colonial Capital II Co. Cl-A
8.92%, 01/15/27.................. 15 12,587
Countrywide Home Loan Co.
6.25%, 04/15/09.................. 2,000 1,751,466
Dow Capital BV
9.20%, 06/01/10.................. 1,600 1,709,493
E*TRADE Group, Inc.
6.00%, 02/01/07.................. 650 593,158
6.00%, 02/01/07 144A............. 1,000 906,250
General Electric Capital Corp.
7.375%, 01/19/10................. 2,860 2,894,119
General Motors Acceptance Corp.
9.00%, 10/15/02.................. 725 750,867
5.75%, 11/10/03.................. 2,500 2,372,954
Heller Financial, Inc.
8.00%, 06/15/05.................. 1,750 1,746,173
7.375%, 11/01/09................. 1,970 1,856,916
Household Finance Corp.
8.00%, 05/09/05.................. 870 877,756
KN Capital Trust III
7.63%, 04/15/28.................. 1,595 1,339,902
Lehman Brothers Holdings, Inc.
7.375%, 01/15/07................. 700 671,253
8.80%, 03/01/15.................. 1,805 1,912,401
8.50%, 08/01/15.................. 1,850 1,847,473
MBNA Capital I Cl-A
8.278%, 12/01/26................. 1,415 1,160,248
Riggs Capital Trust II
8.875%, 03/15/27................. 1,535 1,253,281
Source One Mortgage Services Corp.
9.00%, 06/01/12.................. 890 945,627
Torchmark Corp.
7.875%, 05/15/23................. 1,400 1,237,428
Washington Mutual Capital I
8.375%, 06/01/27................. 685 611,299
Washington Mutual, Inc.
8.25%, 04/01/10.................. 875 864,775
Webster Capital Corp. 144A
9.36%, 01/29/27.................. 10 8,852
------------
37,899,436
------------
FOOD -- 0.4%
Conagra, Inc.
7.125%, 10/01/26................. 2,500 2,386,610
------------
HEALTHCARE SERVICES -- 0.0%
Healthsouth Corp. [CVT]
3.25%, 04/01/03.................. 10 7,900
------------
INDUSTRIAL PRODUCTS -- 0.0%
Safety Components International,
Inc. Cl-B
10.125%, 07/15/07................ 10 2,050
------------
PAR
(000) VALUE
------- ------------
INSURANCE -- 0.3%
General Electric Global Insurance
7.75%, 06/15/30.................. $ 1,000 $ 992,331
John Hancock Global Funding II 144A
7.90%, 07/02/10.................. 900 898,313
------------
1,890,644
------------
OIL & GAS -- 1.4%
Amerada Hess Corp.
7.875%, 10/01/29................. 700 688,865
Kinder Morgan Energy Partners
6.30%, 02/01/09.................. 1,400 1,261,352
Occidental Petroleum Corp.
7.375%, 11/15/08................. 1,000 968,503
9.25%, 08/01/19.................. 1,190 1,298,753
Oneok, Inc.
7.75%, 08/15/06.................. 500 498,008
Statoil 144A
7.375%, 05/01/16................. 900 851,670
Tosco Corp.
7.80%, 01/01/27.................. 900 859,839
Union Pacific Resources
7.50%, 10/15/26.................. 1,300 1,224,677
YPF SA
9.125%, 02/24/09................. 700 711,375
------------
8,363,042
------------
RAILROADS -- 0.3%
Norfolk Southern Corp.
7.05%, 05/01/37.................. 1,800 1,762,387
------------
REAL ESTATE -- 0.2%
ERP Operating L.P.
7.125%, 10/15/17................. 500 423,328
Spieker Properties, Inc. [REIT]
7.35%, 12/01/17.................. 1,000 870,917
------------
1,294,245
------------
TELECOMMUNICATIONS -- 3.9%
AT&T Canada, Inc.
7.625%, 03/15/05................. 1,700 1,694,591
7.65%, 09/15/06.................. 700 693,991
AT&T Corp.
8.625%, 12/01/31................. 2,100 2,125,780
Centel Capital Corp.
9.00%, 10/15/19.................. 3,000 3,308,348
Comverse Technology, Inc. [CVT]
4.50%, 07/01/05.................. 695 2,995,450
CSC Holdings, Inc.
7.25%, 07/15/08.................. 20 18,584
Deutsche Telekom Financial Corp.
8.00%, 06/15/10.................. 1,050 1,060,649
GTE Corp.
6.84%, 04/15/18.................. 400 359,277
Lenfest Communications, Inc.
8.25%, 02/15/08.................. 350 347,989
MCI WorldCom, Inc.
7.125%, 06/15/27................. 1,150 1,138,428
AST AIM BALANCED PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
------- ------------
NTL, Inc. 144A
5.75%, 12/15/09.................. $ 1,900 $ 1,501,000
Qwest Communications International,
Inc.
7.50%, 11/01/08.................. 1,450 1,409,474
Sprint Spectrum L.P.
9.658%, 08/15/06 [STEP].......... 20 19,250
11.00%, 08/15/06................. 10 10,767
TCI Communications, Inc.
8.75%, 08/01/15.................. 400 433,371
TeleCommunications, Inc.
9.80%, 02/01/12.................. 2,000 2,299,382
Vodafone Airtouch PLC 144A
7.75%, 02/15/10.................. 1,500 1,489,664
WorldCom, Inc.
8.00%, 05/15/06.................. 1,900 1,923,252
------------
22,829,247
------------
TRANSPORTATION -- 0.5%
CSX Corp.
9.00%, 08/15/06.................. 3,000 3,111,732
UTILITIES -- 5.8%
AES Corp.
8.00%, 12/31/08.................. 100 89,500
Cleveland Electric Illuminating Co.
Cl-B
9.50%, 05/15/05.................. 25 25,484
CMS Energy Corp.
8.125%, 05/15/02................. 4,000 3,915,487
CMS Energy Corp. Cl-B
6.75%, 01/15/04.................. 40 37,060
CMS Panhandle Holding Co.
6.125%, 03/15/04................. 3,000 2,812,137
Commonwealth Edison
7.50%, 07/01/13.................. 2,000 1,921,332
Duke Energy Corp.
7.875%, 08/15/04................. 1,500 1,510,325
El Paso Electric Co.
8.90%, 02/01/06.................. 1,750 1,806,875
El Paso Electric Co. Cl-E
9.40%, 05/01/11.................. 10 10,517
Empire District Electric Co.
7.70%, 11/15/04.................. 1,300 1,305,421
Enron Corp.
8.375%, 05/23/05................. 450 464,418
Hydro-Quebec
8.62%, 12/15/11.................. 2,000 2,192,752
KN Energy, Inc.
7.35%, 08/01/26.................. 2,000 1,976,642
Niagara Mohawk Power Corp. Cl-G
7.75%, 10/01/08.................. 4,000 3,905,288
Niagara Mohawk Power Corp. Cl-H
[STEP]
8.36%, 07/01/10.................. 2,500 1,923,735
Northeast Utilities System
8.38%, 03/01/05.................. 19 18,182
8.58%, 12/01/06.................. 7 7,275
NRG Energy, Inc.
7.50%, 06/01/09.................. 900 847,196
PAR
(000) VALUE
------- ------------
Public Service of New Mexico Cl-A
7.10%, 08/01/05.................. $ 1,200 $ 1,159,950
Sonat, Inc.
7.625%, 07/15/11................. 1,900 1,860,529
Southern Energy 144A
7.90%, 07/15/09.................. 2,500 2,289,443
Tennessee Gas Pipeline
7.50%, 04/01/17.................. 2,000 1,903,564
Texas-New Mexico Power Corp.
6.25%, 01/15/09.................. 1,000 865,593
UtiliCorp United, Inc.
6.70%, 10/15/06.................. 1,500 1,481,360
------------
34,330,065
------------
TOTAL CORPORATE OBLIGATIONS
(Cost $191,123,925).................. 190,929,460
------------
U.S. TREASURY OBLIGATIONS -- 10.1%
U.S. Treasury Notes
6.625%, 05/31/02................. 4,000 4,007,031
7.25%, 08/15/04.................. 2,500 2,584,375
5.875%, 11/15/04#................ 14,500 14,287,039
6.75%, 05/15/05.................. 5,000 5,090,234
6.50%, 08/15/05 - 02/15/10....... 23,000 23,301,334
6.875%, 05/15/06................. 10,000 10,293,750
------------
(Cost $59,712,317)................. 59,563,763
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 4.3%
Federal National Mortgage Assoc.
5.75%, 04/15/03.................. 1,775 1,721,047
6.57%, 07/03/00.................. 23,652 23,643,367
------------
(Cost $25,420,075)................. 25,364,414
------------
SHARES
-------
FOREIGN STOCK -- 1.8%
INSURANCE -- 0.0%
AXA SA -- (FRF)*................... 1,552 245,475
------------
TELECOMMUNICATIONS -- 1.8%
Libertel NV -- (NLG)*.............. 74,500 1,139,067
Nokia AB Oyj -- (FIM).............. 17,560 899,714
NTT Mobile Communications Network,
Inc. -- (JPY).................... 40 1,085,051
Sonera Oyj -- (FIM)................ 55,000 2,517,494
Telefonica SA -- (ESP)*............ 100,735 2,172,678
Vodafone AirTouch PLC -- (GBP)..... 661,995 2,675,842
------------
10,489,846
------------
TOTAL FOREIGN STOCK
(Cost $7,468,379).................... 10,735,321
------------
PREFERRED STOCK -- 1.6%
FINANCIAL SERVICES -- 0.5%
Calpine Capital Trust
5.75%............................ 26,400 3,162,983
------------
AST AIM BALANCED PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------- ------------
OIL & GAS -- 0.3%
Kerr-McGee Corp.
5.50%............................ 32,000 $ 1,592,000
------------
TELECOMMUNICATIONS -- 0.6%
Broadwing, Inc.
6.75% [CVT]...................... 10,400 488,800
Cablevision Systems Corp. Cl-M
11.125% [PIK].................... 10 1,063
NEXTLINK Communications, Inc.
6.50% [CVT]...................... 3,300 568,013
Winstar Communications, Inc.
7.25%............................ 2,680 2,639,799
------------
3,697,675
------------
UTILITIES -- 0.2%
AES Corp.
6.75% [CVT]...................... 15,000 1,072,500
Public Service Co. of New Hampshire
Cl-A
10.60%........................... 705 17,691
------------
1,090,191
------------
TOTAL PREFERRED STOCK
(Cost $7,793,807).................... 9,542,849
------------
PAR
(000)
-------
SOVEREIGN ISSUES -- 0.7%
CANADA
Province of British Columbia
5.375%, 10/29/08................. $ 500 443,110
Province of Manitoba
7.75%, 07/17/16.................. 1,750 1,787,716
Province of Newfoundland
9.00%, 06/01/19.................. 800 881,512
Province of Quebec
6.50%, 01/17/06.................. 1,000 961,770
------------
(Cost $4,047,402).................. 4,074,108
------------
PRINCIPAL
IN LOCAL
CURRENCY
(000) VALUE
--------- ------------
FOREIGN BONDS -- 0.3%
AUSTRALIA -- 0.0%
State Bank New South Wales
8.625%, 08/20/01................. 1,000 $ 613,341
NETHERLANDS -- 0.1%
Tecnost International NV
6.125%, 07/30/09................. 510 448,305
NEW ZEALAND -- 0.1%
Export Development Corp.
6.50%, 12/21/04.................. 950 428,881
UNITED KINGDOM -- 0.1%
British Sky Broadcasting
7.75%, 07/09/09.................. 320 457,161
------------
TOTAL FOREIGN BONDS
(Cost $2,184,223).................... 1,947,688
------------
PAR
(000)
---------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1%
Independent National Mortgage Corp.
Series 1994-V Cl-A1
8.841%, 12/25/24................. $ 45 46,368
Morgan Stanley Capital I Series
1996-WF1 Cl-A2
7.227%, 01/16/06................. 655 655,685
------------
(Cost $713,324).................... 702,053
------------
TOTAL INVESTMENTS -- 99.4%
(Cost $501,510,413).................. 587,228,329
------------
NUMBER
OF
CONTRACTS
---------
WRITTEN OPTIONS -- 0.0%
CALL OPTIONS
Analog Devices, Strike Price $105,
Expires 07/21/00
(Cost $(100,527)).................. 18 (3,375)
------------
OTHER ASSETS LESS LIABILITIES --0.6%... 3,810,921
------------
NET ASSETS -- 100.0%................... $591,035,875
============
# Securities with an aggregate market value of $2,147,982 have been segregated
with the custodian to cover margin requirements for the following open futures
contracts at June 30, 2000:
EXPIRATION NUMBER OF UNREALIZED
DESCRIPTION MONTH CONTRACTS DEPRECIATION
- ---------------------------------------------------------------------
NASDAQ 100................ 09/00 41 $ 51,250
S&P 500................... 09/00 14 67,550
----------
$ 118,800
==========
- ------------------------------------------------------------------------------
Unless otherwise noted, all stocks are common stock.
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 2.6% of net assets.
See Notes to Financial Statements.
AST FEDERATED HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
CORPORATE OBLIGATIONS -- 85.3%
AEROSPACE -- 0.3%
Anteon Corp.
12.00%, 05/15/09................. $ 1,900 $ 1,748,000
Condor Systems, Inc. 144A
11.875%, 05/01/09................ 600 294,000
------------
2,042,000
------------
AUTOMOTIVE PARTS -- 3.4%
Accuride Corp. Cl-B
9.25%, 02/01/08.................. 1,950 1,667,250
Aftermarket Technology, Inc.
12.00%, 08/01/04................. 1,938 1,947,690
Aftermarket Technology, Inc. Cl-D
12.00%, 08/01/04................. 350 351,750
American Axle & Manufacturing, Inc.
9.75%, 03/01/09.................. 5,100 4,806,750
French, (J.L.) Automotive Casting,
Inc. 144A
11.50%, 06/01/09................. 2,550 2,333,250
HDA Parts System, Inc.
12.00%, 08/01/05................. 2,275 1,649,375
Lear Corp.
9.50%, 07/15/06.................. 2,500 2,437,500
8.11%, 05/15/09.................. 3,800 3,479,812
Oxford Automotive, Inc.
10.125%, 06/15/07................ 2,000 1,850,000
------------
20,523,377
------------
BEVERAGES -- 0.6%
National Wine & Spirits
10.125%, 01/15/09................ 1,450 1,402,875
Triarc Consumer Beverage Co.
10.25%, 02/15/09................. 2,500 2,425,000
------------
3,827,875
------------
BROADCASTING -- 4.7%
Acme Television Co. Cl-B [STEP]
11.043%, 09/30/04................ 2,175 2,088,000
Australis Media Ltd. [STEP]
45.45%, 05/15/03................. 11 160
Australis Media Ltd. Units [STEP]
16.00%, 05/15/03................. 625 9,375
Big City Radio, Inc. [STEP]
12.937%, 03/15/05................ 2,950 1,666,750
Capstar Broadcasting Partners, Inc.
[PIK]
12.00%, 07/01/09................. 824 953,896
Chancellor Media Corp. L.A. Cl-B
8.75%, 06/15/07.................. 1,950 1,979,250
8.125%, 12/15/07................. 5,750 5,800,313
Fox/Liberty Networks LLC [STEP]
9.208%, 08/15/07................. 5,550 4,342,875
Sinclair Broadcast Group, Inc.
10.00%, 09/30/05................. 2,700 2,602,125
8.75%, 12/15/07.................. 1,650 1,460,250
PAR
(000) VALUE
----- -----
UIH Australia Pacific, Inc. Cl-B
[STEP]
11.248%, 05/15/06................ $ 2,725 $ 2,493,375
UnitedGlobalCom, Inc. Cl-B [STEP]
10.75%, 02/15/08................. 4,300 2,988,500
XM Satellite Radio, Inc. 144A
14.00%, 03/15/10................. 1,750 1,553,125
------------
27,937,994
------------
BUILDING MATERIALS -- 0.9%
American Builders & Contractors
Supply Co., Inc. Cl-B
10.625%, 05/15/07................ 1,625 1,340,625
ISG Resources, Inc.
10.00%, 04/15/08................. 1,650 1,513,875
Juno Lighting, Inc.
11.875%, 07/01/09................ 2,025 1,690,875
NCI Building Systems, Inc. Cl-B
9.25%, 05/01/09.................. 1,000 945,000
------------
5,490,375
------------
BUSINESS SERVICES -- 3.8%
e.spire Communications, Inc. [STEP]
13.748%, 04/01/06................ 1,400 605,500
Intermedia Communications, Inc.
[STEP]
10.749%, 05/15/06................ 4,850 4,631,750
12.25%, 03/01/09................. 4,500 2,677,500
Intermedia Communications, Inc.
Cl-B
8.875%, 11/01/07................. 1,000 942,500
8.60%, 06/01/08.................. 550 508,750
Orion Network Systems
11.25%, 01/15/07................. 2,750 1,608,750
Sitel Corp.
9.25%, 03/15/06.................. 2,800 2,562,000
Teligent, Inc.
11.50%, 12/01/07................. 3,475 2,762,625
Teligent, Inc. Cl-B [STEP]
14.981%, 03/01/08................ 3,000 1,455,000
U.S. Office Products Co.
9.75%, 06/15/08.................. 4,475 1,006,875
Winstar Communications, Inc. 144A
10.612%, 04/15/10 [STEP]......... 4,959 2,380,320
12.75%, 04/15/10................. 1,693 1,642,210
------------
22,783,780
------------
CABLE TELEVISION -- 7.0%
Charter Communications Holdings LLC
10.00%, 04/01/09................. 2,000 1,950,000
12.357%, 04/01/11 [STEP]......... 7,850 4,494,125
Comcast U.K. Cable Corp. [STEP]
10.997%, 11/15/07................ 2,900 2,726,000
CSC Holdings, Inc.
9.25%, 11/01/05.................. 4,525 4,547,625
7.875%, 12/15/07................. 1,700 1,648,201
9.875%, 02/15/13................. 500 507,500
AST FEDERATED HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
Diamond Cable Communications PLC
[STEP]
10.751%, 12/15/05................ $ 4,000 $ 3,820,000
Diamond Holdings Co. PLC
9.125%, 02/01/08................. 1,875 1,753,125
Echostar DBS Corp.
9.375%, 02/01/09................. 3,925 3,826,875
NTL, Inc. Cl-B [STEP]
10.408%, 02/01/06................ 5,100 4,717,499
Pegasus Communications Corp. Cl-B
9.625%, 10/15/05................. 1,725 1,673,250
9.75%, 12/01/06.................. 1,500 1,455,000
Rogers Cablesystems of America,
Inc.
11.00%, 12/01/15................. 750 806,250
TeleWest Communications PLC
11.25%, 11/01/08................. 525 535,500
9.25%, 04/15/09 [STEP]........... 3,450 1,880,250
United Pan-Europe Communication
Corp. [STEP]
13.221%, 04/15/08................ 3,125 1,546,875
12.475%, 08/01/09................ 7,400 3,663,000
------------
41,551,075
------------
CHEMICALS -- 3.9%
Foamex Capital Corp.
13.50%, 08/15/05................. 500 430,000
General Chemical Industry Products,
Inc.
10.625%, 05/01/09................ 2,000 1,750,000
Georgia Gulf Corp.
10.375%, 11/01/07................ 950 988,000
Huntsman Corp. 144A
9.50%, 07/01/07.................. 3,125 2,828,125
Huntsman ICI Chemicals Corp.
10.125%, 07/01/09................ 1,200 1,212,000
Lyondell Chemical Co.
10.875%, 05/01/09................ 6,500 6,467,500
Polymer Group, Inc. Cl-B
9.00%, 07/01/07.................. 3,475 2,971,125
8.75%, 03/01/08.................. 2,450 2,070,250
Sterling Chemicals Holdings, Inc.
[STEP]
11.077%, 08/15/08................ 2,150 806,250
Sterling Chemicals, Inc.
11.75%, 08/15/06................. 950 783,750
Texas Petrochemical Corp.
11.125%, 07/01/06................ 1,725 1,474,875
United Industries Corp. Cl-B
9.875%, 04/01/09................. 1,700 1,028,500
------------
22,810,375
------------
CLOTHING & APPAREL -- 0.6%
Boyds Collection Ltd.
9.00%, 05/15/08.................. 717 630,960
Dyersburg Corp. Cl-B
9.75%, 09/01/07.................. 1,725 181,125
GFSI, Inc. Cl-B
9.625%, 03/01/07................. 2,425 1,758,125
PAR
(000) VALUE
----- -----
Pillowtex Corp.
10.00%, 11/15/06................. $ 1,600 $ 584,000
Pillowtex Corp. Cl-B
9.00%, 12/15/07.................. 1,825 647,875
------------
3,802,085
------------
COMPUTER SERVICES & SOFTWARE -- 0.6%
Exodus Communications, Inc. 144A
11.625%, 07/15/10................ 2,000 2,020,000
Verio, Inc.
10.625%, 11/15/09................ 1,700 1,878,500
------------
3,898,500
------------
CONGLOMERATES -- 0.5%
Eagle-Picher Industries, Inc.
9.375%, 03/01/08................. 3,350 2,847,500
------------
CONSTRUCTION -- 0.7%
Formica Corp.
10.875%, 03/01/09................ 1,800 1,395,000
MMI Products, Inc. Cl-B
11.25%, 04/15/07................. 3,100 3,053,500
------------
4,448,500
------------
CONSUMER PRODUCTS & SERVICES -- 4.2%
Albecca, Inc.
10.75%, 08/15/08................. 4,000 3,380,000
American Safety Razor Co.
9.875%, 08/01/05................. 1,000 965,000
Amscan Holdings, Inc.
9.875%, 12/15/07................. 1,800 1,485,000
Cabot Safety Corp.
12.50%, 07/15/05................. 2,500 2,512,500
Chattem, Inc. Cl-B
8.875%, 04/01/08................. 2,500 2,012,500
Collins & Aikman Floor Coverings
Corp.
10.00%, 01/15/07................. 1,400 1,365,000
Collins & Aikman Products Corp.
11.50%, 04/15/06................. 1,000 962,500
Diamond Brands Operating, Inc.
[STEP]
12.83%, 04/15/09................. 1,500 142,500
Glenoit Corp.++
11.00%, 04/15/07................. 2,000 290,000
Jostens, Inc. 144A
12.75%, 05/01/10................. 1,800 1,791,000
NBTY, Inc. Cl-B
8.625%, 09/15/07................. 2,350 2,056,250
Revlon Consumer Products Corp.
8.125%, 02/01/06................. 2,000 1,450,000
8.625%, 02/01/08................. 5,000 2,550,000
Scotts Co. 144A
8.625%, 01/15/09................. 1,000 955,000
AST FEDERATED HIGH YIELD PORTFOLIO
- -----------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
Sleepmaster, Inc.
11.00%, 05/15/09................. $ 1,100 $ 1,039,500
Volume Services America, Inc.
11.25%, 03/01/09................. 2,200 2,024,000
------------
24,980,750
------------
CONTAINERS & PACKAGING -- 1.6%
Container Corp. of America
11.25%, 05/01/04................. 250 255,000
Huntsman Packaging Corp. 144A
13.00%, 06/01/10................. 1,000 1,030,000
Owens-Illinois, Inc.
7.15%, 05/15/05.................. 2,000 1,831,619
8.10%, 05/15/07.................. 1,000 939,840
7.35%, 05/15/08.................. 1,050 930,605
Russell Stanley Holdings, Inc.
10.875%, 02/15/09................ 1,950 1,335,750
Stone Container Corp.
12.25%, 04/01/02................. 125 127,188
11.50%, 10/01/04................. 1,350 1,404,000
12.58%, 08/01/16 [VR]............ 1,550 1,604,250
------------
9,458,252
------------
DIVERSIFIED -- 0.2%
Blount International, Inc.
13.00%, 08/01/09................. 950 973,750
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 1.2%
Amphenol Corp.
9.875%, 05/15/07................. 1,400 1,421,000
Electronic Retailing Systems, Inc.
[STEP]
13.25%, 02/01/04................. 875 185,938
Flextronics International Ltd. 144A
9.875%, 07/01/10................. 1,050 1,068,375
SCG Holdings Corp.
12.00%, 08/01/09................. 845 908,375
WESCO Distribution, Inc. Cl-B
9.125%, 06/01/08................. 4,200 3,864,000
------------
7,447,688
------------
ENTERTAINMENT & LEISURE -- 2.7%
AMF Group, Inc. [STEP]
9.822%, 03/15/06................. 3,462 709,710
Florida Panthers Holdings, Inc.
9.875%, 04/15/09................. 3,925 3,699,313
Premier Parks, Inc.
9.25%, 04/01/06.................. 2,275 2,166,938
9.75%, 06/15/07.................. 2,600 2,522,000
9.724%, 04/01/08 [STEP].......... 6,250 4,296,874
Regal Cinemas, Inc.
9.50%, 06/01/08.................. 5,125 1,255,625
True Temper Sports, Inc.
10.875%, 12/01/08................ 1,875 1,846,875
------------
16,497,335
------------
PAR
(000) VALUE
----- -----
ENVIRONMENTAL SERVICES -- 2.4%
Allied Waste North America Co.
10.00%, 08/01/09................. $17,450 $ 14,658,000
------------
EQUIPMENT SERVICES -- 0.2%
Coinmach Corp. Cl-D
11.75%, 11/15/05................. 1,100 1,061,500
------------
FARMING & AGRICULTURE -- 0.1%
Royster-Clark, Inc.
10.25%, 04/01/09................. 1,100 896,500
------------
FINANCIAL-BANK & TRUST -- 1.4%
GS Escrow Corp.
7.125%, 08/01/05................. 7,925 7,061,017
RBF Finance Co.
11.00%, 03/15/06................. 500 540,000
11.375%, 03/15/09................ 1,050 1,139,250
------------
8,740,267
------------
FINANCIAL SERVICES -- 0.3%
Unifrax Investment Corp.
10.50%, 11/01/03................. 2,125 1,986,875
------------
FOOD -- 1.6%
Agrilink Foods, Inc.
11.875%, 11/01/08................ 3,700 2,978,499
Del Monte Foods Co. [STEP]
12.139%, 12/15/07................ 1,100 838,750
Dominos, Inc. Cl-B
10.375%, 01/15/09................ 2,000 1,865,000
Eagle Family Foods, Inc. Cl-B
8.75%, 01/15/08.................. 2,200 1,309,000
International Home Foods, Inc.
10.375%, 11/01/06................ 2,600 2,795,000
Jitney-Jungle Stores, Inc.
10.375%, 09/15/07................ 2,725 34,063
Nebco Evans Holding Co. [STEP]
11.645%, 07/15/07................ 1,250 7,813
------------
9,828,125
------------
FURNITURE -- 0.2%
Sealy Mattress Co. Cl-B
9.875%, 12/15/07................. 775 751,750
10.875%, 12/15/07 [STEP]......... 1,000 725,000
------------
1,476,750
------------
HEALTHCARE SERVICES -- 3.7%
Everest Healthcare Services, Inc.
9.75%, 05/01/08.................. 1,575 1,330,875
Genesis Health Ventures, Inc.
9.25%, 10/01/06.................. 1,000 95,000
9.875%, 01/15/09................. 1,450 181,250
HCA-The Healthcare Co.
6.91%, 06/15/05.................. 2,950 2,697,893
AST FEDERATED HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
Hudson Respiratory Care, Inc.
9.125%, 04/15/08................. $ 850 $ 599,250
Tenet Healthcare Corp.
8.00%, 01/15/05.................. 4,000 3,870,000
8.625%, 01/15/07................. 3,500 3,368,750
8.125%, 12/01/08................. 5,000 4,625,000
9.25%, 09/01/10 144A............. 5,750 5,821,875
------------
22,589,893
------------
INDUSTRIAL PRODUCTS -- 0.5%
Continental Global Group, Inc. Cl-B
11.00%, 04/01/07................. 2,100 556,500
Hexcel Corp.
9.75%, 01/15/09.................. 750 686,250
URS Corp. Cl-B 144A
12.25%, 05/01/09................. 1,775 1,801,625
------------
3,044,375
------------
INTERNET SERVICES -- 2.4%
Call-Net Enterprises, Inc. [STEP]
8.522%, 08/15/07................. 4,100 1,962,670
9.573%, 08/15/08................. 3,800 1,497,846
10.826%, 05/15/09................ 4,800 1,848,000
Northpoint Communications Group,
Inc. 144A
12.875%, 02/15/10................ 2,500 1,812,500
PSINet, Inc.
11.50%, 11/01/08................. 800 764,000
11.00%, 08/01/09................. 3,000 2,820,000
PSINet, Inc. Cl-B
10.00%, 02/15/05................. 2,500 2,325,000
Rhythms Netconnections 144A
14.00%, 02/15/10................. 1,500 1,087,500
Verio, Inc.
11.25%, 12/01/08................. 575 641,125
------------
14,758,641
------------
MACHINERY & EQUIPMENT -- 2.4%
Clark Materials Handling Corp.
Cl-D++
10.75%, 11/15/06................. 2,625 406,875
Columbus McKinnon Corp.
8.50%, 04/01/08.................. 1,000 885,000
National Equipment Services, Inc.
Cl-B
10.00%, 11/30/04................. 975 814,125
National Equipment Services, Inc.
Cl-D
10.00%, 11/30/04................. 2,250 1,878,750
NationsRent, Inc.
10.375%, 12/15/08................ 3,100 1,999,500
Tekni-Plex, Inc. 144A
12.75%, 06/15/10................. 1,400 1,403,500
United Rentals, Inc.
9.25%, 01/15/09.................. 3,600 3,258,000
PAR
(000) VALUE
----- -----
United Rentals, Inc. Cl-B
9.00%, 04/01/09.................. $ 2,750 $ 2,447,500
Woods Equipment Co.
12.00%, 07/15/09................. 1,375 1,161,875
------------
14,255,125
------------
MEDICAL SUPPLIES & EQUIPMENT -- 2.6%
CONMED Corp.
9.00%, 03/15/08.................. 2,975 2,737,000
Dade International, Inc. Cl-B
11.125%, 05/01/06................ 2,575 1,454,875
Fisher Scientific International,
Inc.
9.00%, 02/01/08.................. 2,975 2,774,188
9.00%, 02/01/08.................. 4,200 3,916,500
Hanger Orthopedic Group, Inc.
11.25%, 06/15/09................. 1,775 1,553,125
Kinetic Concepts, Inc. Cl-B
9.625%, 11/01/07................. 4,050 3,017,250
------------
15,452,938
------------
METALS & MINING -- 1.1%
AEI Resources, Inc. 144A
10.50%, 12/15/05................. 2,800 574,000
11.50%, 12/15/06................. 3,375 354,375
Euramax International PLC
11.25%, 10/01/06................. 1,825 1,742,875
Murrin Murrin Holdings Pty. Ltd.
9.375%, 08/31/07................. 650 572,000
Neenah Corp. Cl-B
11.125%, 05/01/07................ 1,725 1,328,250
Neenah Corp. Cl-F
11.125%, 05/01/07................ 1,450 1,116,500
Republic Technologies, Inc.
13.75%, 07/15/09................. 1,700 221,000
Ryerson Tull, Inc.
9.125%, 07/15/06................. 900 859,347
------------
6,768,347
------------
OFFICE EQUIPMENT -- 0.4%
Buhrmann U.S., Inc.
12.25%, 11/01/09................. 2,425 2,534,125
------------
OIL & GAS -- 1.9%
Continental Resources, Inc.
10.25%, 08/01/08................. 3,075 2,767,500
DI Industries, Inc.
8.875%, 07/01/07................. 975 931,125
Pogo Producing Co. Cl-B
10.375%, 02/15/09................ 2,100 2,152,500
R&B Falcon Corp.
12.25%, 03/15/06................. 3,050 3,370,250
AST FEDERATED HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
R&B Falcon Corp. Cl-B
6.75%, 04/15/05.................. $ 1,600 $ 1,448,000
Triton Energy Ltd.
9.25%, 04/15/05.................. 850 845,750
------------
11,515,125
------------
PRINTING & PUBLISHING -- 0.5%
Garden State Newspapers, Inc. Cl-B
8.75%, 10/01/09.................. 2,575 2,356,125
K-III Communications Corp.
8.50%, 02/01/06.................. 1,000 960,000
------------
3,316,125
------------
RAILROADS -- 0.3%
Railworks Corp.
11.50%, 04/15/09................. 1,600 1,544,000
------------
REAL ESTATE -- 1.5%
HMH Properties, Inc. Cl-A
7.875%, 08/01/05................. 400 370,000
HMH Properties, Inc. Cl-B
7.875%, 08/01/08................. 6,000 5,422,500
HMH Properties, Inc. Cl-C
8.45%, 12/01/08.................. 3,250 3,006,250
------------
8,798,750
------------
RESTAURANTS -- 0.4%
Advantica Restaurant Group, Inc.
11.25%, 01/15/08................. 1,750 1,163,750
Carrols Corp.
9.50%, 12/01/08.................. 1,800 1,503,000
------------
2,666,750
------------
RETAIL & MERCHANDISING -- 0.1%
Community Distributors, Inc. Cl-B
10.25%, 10/15/04................. 1,000 795,000
------------
SEMICONDUCTORS -- 0.5%
Fairchild Semiconductor Corp.
10.375%, 10/01/07 144A........... 1,500 1,522,500
10.75%, 04/15/09................. 2,100 1,417,500
------------
2,940,000
------------
TELECOMMUNICATIONS -- 21.8%
Arch Communications, Inc.
12.75%, 07/01/07................. 1,400 1,127,000
Centennial Cellular Corp.
10.75%, 12/15/08................. 2,250 2,261,250
Crown Castle International Corp.
10.524%, 05/15/11 [STEP]......... 7,875 4,843,125
10.75%, 08/01/11................. 1,100 1,122,000
11.07%, 08/01/11 [STEP].......... 1,500 937,500
Dolphin Telecom PLC [STEP]
14.00%, 05/15/09................. 3,200 1,136,000
Global Crossing Holdings Ltd.
9.50%, 11/15/09.................. 8,900 8,588,499
PAR
(000) VALUE
----- -----
Hermes Europe Railtel BV, Inc.
11.50%, 08/15/07................. $ 3,975 $ 3,498,000
10.375%, 01/15/09................ 1,825 1,523,875
Intermedia Communications, Inc.
Cl-B [STEP]
10.458%, 07/15/07................ 1,050 834,750
Lenfest Communications, Inc.
8.25%, 02/15/08.................. 2,275 2,253,774
Level 3 Communications, Inc.
9.125%, 05/01/08................. 6,300 5,685,750
11.004%, 12/01/08 [STEP]......... 9,575 5,745,000
McLeodUSA, Inc.
9.732%, 03/01/07 [STEP].......... 6,175 5,125,250
9.25%, 07/15/07.................. 1,300 1,261,000
8.375%, 03/15/08................. 1,250 1,150,000
Metricom, Inc.
13.00%, 02/15/10................. 700 472,500
MetroMedia Fiber Network, Inc.
10.00%, 12/15/09................. 2,725 2,684,125
Millicom International Cellular SA
[STEP]
11.76%, 06/01/06................. 5,375 4,595,625
Nextel Communications, Inc.
10.213%, 02/15/08 [STEP]......... 6,500 4,793,750
9.375%, 11/15/09................. 8,050 7,768,249
Nextel International, Inc. [STEP]
12.125%, 04/15/08................ 1,750 1,149,278
Nextel Partners, Inc. [STEP]
6.885%, 02/01/09................. 1,235 864,500
NEXTLINK Communications, Inc.
9.00%, 03/15/08.................. 1,575 1,452,938
10.039%, 04/15/08 [STEP]......... 3,000 1,890,000
10.75%, 06/01/09................. 2,750 2,729,375
12.20%, 06/01/09 [STEP].......... 10,800 6,750,000
NTL, Inc. Cl-B [STEP]
9.316%, 04/01/08................. 7,825 4,929,750
10.822%, 10/01/08................ 550 357,500
Orius Capital Corp. 144A
12.75%, 02/01/10................. 1,675 1,733,625
Pegasus Media & Communications,
Inc.
12.50%, 07/01/05................. 975 1,018,875
Qwest Communications International,
Inc. [STEP]
8.54%, 10/15/07.................. 3,875 3,158,125
Qwest Communications International,
Inc. Cl-B [STEP]
8.29%, 02/01/08.................. 2,250 1,738,125
RCN Corp. [STEP]
11.939%, 10/15/07................ 950 584,250
12.606%, 07/01/08................ 1,100 599,500
RCN Corp. Cl-B [STEP]
12.361%, 02/15/08................ 1,700 926,500
Rogers Cantel, Inc.
8.80%, 10/01/07.................. 4,000 4,000,000
SpectraSite Holdings, Inc. [STEP]
144A
12.875%, 03/15/10................ 2,500 1,387,500
AST FEDERATED HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
Telecommunications Techniques Co.
9.75%, 05/15/08.................. $ 5,825 $ 5,388,125
Telesystem International Wireless,
Inc. Cl-B [STEP]
12.656%, 06/30/07................ 5,325 3,754,125
10.50%, 11/01/07................. 800 484,000
Tritel PCS, Inc. [STEP]
11.607%, 05/15/09................ 1,000 665,000
Triton PCS Holdings, Inc. [STEP]
11.291%, 05/01/08................ 4,850 3,564,750
U.S. Unwired, Inc. [STEP]
13.288%, 11/01/09................ 1,825 1,012,875
US Xchange LLC++
15.00%, 07/01/08................. 1,625 1,775,313
USA Mobile Communications Holdings,
Inc.
9.50%, 02/01/04.................. 650 484,250
Viatel, Inc.
11.25%, 04/15/08................. 2,525 1,906,375
12.374%, 04/15/08 [STEP]......... 2,250 1,046,250
11.50%, 03/15/09................. 1,250 956,250
Voicestream Wireless Holdings
10.375%, 11/15/09................ 1,600 1,672,000
11.732%, 11/15/09................ 5,625 3,796,875
Williams Communications Group, Inc.
10.875%, 10/01/09................ 1,900 1,862,000
------------
131,045,051
------------
TRANSPORTATION -- 1.8%
Allied Holdings, Inc. Cl-B
8.625%, 10/01/07................. 400 356,000
Ameritruck Distribution Corp.
Cl-B++
12.25%, 11/15/05................. 1,950 195
Gearbulk Holding Ltd.
11.25%, 12/01/04................. 2,400 2,430,000
Holt Group, Inc.
9.75%, 01/15/06.................. 1,350 141,750
Motor Coach Industries, Inc.
11.25%, 05/01/09................. 2,100 1,837,500
Stena AB
10.50%, 12/15/05................. 3,275 3,225,875
8.75%, 06/15/07.................. 2,775 2,442,000
Stena Line AB
10.625%, 06/01/08................ 1,250 737,500
------------
11,170,820
------------
UTILITIES -- 0.3%
CMS Energy Corp.
7.50%, 01/15/09.................. 1,100 986,084
El Paso Electric Co. Cl-E
9.40%, 05/01/11.................. 175 184,541
International Utility Structures,
Inc.
10.75%, 02/01/08................. 925 763,125
------------
1,933,750
------------
TOTAL CORPORATE OBLIGATIONS
(Cost $604,092,306).................. 515,098,043
------------
SHARES VALUE
------ -----
PREFERRED STOCK -- 3.3%
BROADCASTING -- 0.5%
Benedek Communications Corp.
11.50% [PIK]..................... 1,600 $ 1,048,000
Sinclair Capital Cl-A
11.625%.......................... 22,500 2,126,250
------------
3,174,250
------------
FINANCIAL SERVICES -- 0.1%
California Federal Capital Corp.
Cl-A
9.125% [PIK]..................... 30,000 656,250
------------
FOOD -- 0.0%
Nebco Evans Holding Co.
11.25% [PIK]..................... 8,483 5,302
------------
HEALTHCARE SERVICES -- 0.1%
River Holding Corp. Cl-B
11.50% [PIK]..................... 6,266 441,753
------------
INDUSTRIAL PRODUCTS -- 0.0%
International Utility Structures,
Inc.
$13.00 [PIK] 144A................ 125 106,875
International Utility Structures,
Inc.
13.00% [PIK] 144A................ 34 2,805
------------
109,680
------------
MACHINERY & EQUIPMENT -- 0.1%
Fairfield Manufacturing Co., Inc.
11.25%........................... 650 555,750
------------
OIL & GAS -- 0.3%
R&B Falcon Corp.
13.875% [PIK].................... 1,532 1,753,678
------------
PRINTING & PUBLISHING -- 1.2%
Primedia, Inc. Cl-D
10.00%........................... 23,750 2,303,750
Primedia, Inc. Cl-F
9.20%............................ 15,000 1,372,500
Primedia, Inc. Cl-H
8.625%........................... 43,100 3,685,049
------------
7,361,299
------------
TELECOMMUNICATIONS -- 1.0%
AMFM Operating, Inc.
12.625% [PIK].................... 967,500 1,117,463
Nextel Communications, Inc.
13.00% [PIK]..................... 1,200 1,284,000
Nextel Communications, Inc.
Cl-E 11.125% [PIK]............... 956 927,320
Pegasus Communications Corp. Cl-A
12.75% [PIK]..................... 2,758 2,785,658
------------
6,114,441
------------
TOTAL PREFERRED STOCK
(Cost $21,712,832)................... 20,172,403
------------
AST FEDERATED HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 0.1%
BROADCASTING -- 0.0%
Australis Holdings Warrants
144A*............................ 1,000 $ 10
------------
CHEMICALS -- 0.0%
Sterling Chemicals Holdings, Inc.
Warrants*........................ 1,075 9,406
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 0.0%
Electronic Retailing Systems, Inc.
Warrants 144A*................... 875 875
------------
METALS & MINING -- 0.0%
Bar Technologies, Inc. Warrants
144A*............................ 300 0
Republic Technologies Warrants*.... 1,700 0
Royal Oak Mines, Inc.++*........... 66,164 0
------------
OIL & GAS -- 0.1%
R&B Falcon Corp. Warrants 144A*.... 750 374,250
------------
PRINTING & PUBLISHING -- 0.0%
MediaNews Group, Inc.*............. 1,000 150,000
------------
TELECOMMUNICATIONS -- 0.0%
Metricom, Inc. Warrants*........... 1,350 2,734
MetroNet Communications Corp.
Warrants 144A*................... 1,525 167,750
Sullivan Broadcasting Holdings,
Inc.*............................ 2,400 0
UIH Australia Warrants*............ 3,100 93,000
Wireless One, Inc. Warrants*....... 1,500 15
------------
263,499
------------
TOTAL COMMON STOCK
(Cost $239,288)...................... 798,040
------------
PAR
(000)
-----
REPURCHASE AGREEMENTS -- 9.9%
Greenwich Capital Markets, Inc.
6.25% dated 06/30/00, maturing
07/03/00, repurchase price
$59,895,179 (Collateralized by U.S.
Treasury Notes, par value
$61,548,000, market value
$61,024,365 due 11/15/04)
(Cost $59,864,000)................... $59,864 $ 59,864,000
------------
TOTAL INVESTMENTS -- 98.6%
(Cost $685,908,426).................. 595,932,486
OTHER ASSETS LESS
LIABILITIES -- 1.4%.................. 8,677,573
------------
NET ASSETS -- 100.0%................... $604,610,059
============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
++ Illiquid security. At the end of the period, these securities amounted to
0.4% of net assets.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 6.0% of net assets.
See Notes to Financial Statements.
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 46.4%
ADVERTISING -- 0.1%
Omnicom Group, Inc. ............. 3,800 $ 338,438
------------
AEROSPACE -- 0.3%
Boeing Co. ...................... 10,768 450,237
General Dynamics Corp. .......... 2,500 130,625
General Motors Corp. Cl-H*....... 660 57,915
Honeywell International, Inc. ... 10,012 337,279
Litton Industries, Inc.*......... 1,700 71,400
Lockheed Martin Corp. ........... 5,600 138,950
Northrop Grumman Corp. .......... 1,500 99,375
Primex Technologies, Inc. ....... 840 18,480
Raytheon Co. Cl-B*............... 4,000 77,000
------------
1,381,261
------------
AIRLINES -- 0.1%
Alaska Air Group, Inc.*.......... 2,700 73,238
AMR Corp.*....................... 2,400 63,450
Delta Air Lines, Inc. ........... 2,000 101,125
Southwest Airlines Co. .......... 10,025 189,848
------------
427,661
------------
AUTOMOBILE MANUFACTURERS -- 0.3%
Ford Motor Co. .................. 16,000 688,000
General Motors Corp. ............ 8,080 469,145
Honda Motor Co. Ltd. [ADR]....... 3,700 254,375
------------
1,411,520
------------
AUTOMOTIVE PARTS -- 0.2%
Arvin Industries, Inc. .......... 1,800 31,275
Dana Corp. ...................... 2,880 61,020
Delphi Automotive Systems
Corp. ......................... 6,919 101,623
Eaton Corp. ..................... 1,600 107,199
Federal-Mogul Corp. ............. 2,600 24,863
Genuine Parts Co. ............... 4,050 81,000
Goodyear Tire & Rubber Co. ...... 2,400 48,000
Lear Corp.*...................... 3,700 74,000
Mark IV Industries, Inc. ........ 4,300 89,763
Superior Industries
International, Inc. ........... 2,500 64,375
TRW, Inc. ....................... 1,400 60,725
Visteon Corp.*................... 2,095 25,401
------------
769,244
------------
BEVERAGES -- 0.8%
Anheuser-Busch Companies,
Inc. .......................... 7,500 560,156
Cadbury Schweppes PLC [ADR]...... 4,246 111,458
Coca-Cola Co. ................... 29,400 1,688,662
Coca-Cola Enterprises, Inc. ..... 7,000 114,188
Compania Cervecerias Unidas SA
[ADR].......................... 3,900 88,481
PepsiCo, Inc. ................... 18,000 799,875
Whitman Corp. ................... 4,900 60,638
------------
3,423,458
------------
SHARES VALUE
------ -----
BROADCASTING -- 0.2%
Chris-Craft Industries, Inc.*.... 1,462 $ 96,583
Clear Channel Communications,
Inc.*.......................... 4,000 300,000
Hispanic Broadcasting Corp.*..... 3,800 125,875
News Corp. Ltd. ................. 5,400 294,300
------------
816,758
------------
BUILDING MATERIALS -- 0.2%
Armstrong Holdings, Inc. ........ 800 12,250
Clayton Homes, Inc. ............. 6,450 51,600
Fastenal Co. .................... 2,100 106,313
Martin Marietta Materials
Corp. ......................... 2,800 113,225
Masco Corp. ..................... 7,200 130,049
Modine Manufacturing Co. ........ 1,100 29,700
USG Corp. ....................... 1,800 54,675
Vulcan Materials Co. ............ 3,000 128,063
York International Corp. ........ 2,000 52,250
------------
678,125
------------
BUSINESS SERVICES -- 0.3%
Adecco SA [ADR]*................. 141 14,964
Avery Dennison Corp. ............ 2,500 167,813
Comdisco, Inc. .................. 5,700 127,181
Convergys Corp.*................. 4,300 223,063
Equifax, Inc. ................... 2,000 52,625
First Data Corp. ................ 7,200 357,299
Manpower, Inc. .................. 3,800 121,600
Navigant International, Inc.*.... 215 2,069
Nova Corp. ...................... 3,100 86,606
Parametric Technology Corp.*..... 5,000 55,000
Quintiles Transnational Corp.*... 4,300 60,738
Robert Half International,
Inc.*.......................... 7,700 219,450
------------
1,488,408
------------
CAPITAL GOODS -- 0.0%
Harsco Corp. .................... 2,600 66,300
------------
CHEMICALS -- 0.5%
AKZO Nobel NV [ADR].............. 100 4,206
Arch Chemicals, Inc. ............ 1,050 22,969
Cabot Corp. ..................... 4,100 111,725
Crompton Corp. .................. 9,451 115,775
Dexter Corp. .................... 1,500 72,000
Dow Chemical Co. ................ 9,000 271,687
DuPont, (E.I.) de Nemours &
Co. ........................... 15,059 658,830
FMC Corp.*....................... 1,600 92,800
Grace, (W.R.) & Co.*............. 2,000 24,250
Great Lakes Chemical Corp. ...... 2,500 78,750
Hanna, (M.A.) Co. ............... 3,400 30,600
IMC Global, Inc. ................ 6,000 78,000
Imperial Chemical Industries
PLC............................ 3,000 92,438
Lubrizol Corp. .................. 3,100 65,100
Olin Corp. ...................... 3,600 59,400
Omnova Solutions, Inc. .......... 2,800 17,500
PPG Industries, Inc. ............ 3,000 132,938
Rohm & Haas Co. ................. 2,459 84,836
Schulman, (A.), Inc. ............ 3,000 36,188
Solutia, Inc. ................... 5,560 76,450
------------
2,126,442
------------
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
CLOTHING & APPAREL -- 0.2%
Abercrombie & Fitch Co. Cl-A*.... 3,600 $ 43,875
AnnTaylor Stores Corp.*.......... 1,600 53,000
Cintas Corp. .................... 5,400 198,113
Jones Apparel Group, Inc.*....... 5,200 122,200
Nike, Inc. Cl-B.................. 5,500 218,968
Payless ShoeSource, Inc.*........ 1,181 61,633
Ross Stores, Inc. ............... 5,200 88,725
Springs Industries, Inc. Cl-A.... 2,100 67,594
Unifi, Inc.*..................... 4,800 59,400
------------
913,508
------------
COMPUTER HARDWARE -- 2.0%
Compaq Computer Corp. ........... 23,368 597,345
Dell Computer Corp.*............. 38,000 1,873,875
EMC Corp.*....................... 26,000 2,000,375
Hewlett-Packard Co. ............. 12,000 1,498,500
International Business Machines
Corp. ......................... 24,000 2,629,499
Quantum Corp. - DLT & Storage
Systems*....................... 6,500 62,969
Quantum Corp. - Hard Disk
Drive*......................... 2,650 29,316
Seagate Technology, Inc.*........ 4,500 247,500
Storage Technology Corp.*........ 3,700 40,469
------------
8,979,848
------------
COMPUTER SERVICES & SOFTWARE -- 5.2%
Adobe Systems, Inc. ............. 1,200 156,000
Automatic Data Processing,
Inc. .......................... 7,500 401,719
Aztec Technology Partners,
Inc.*.......................... 430 934
BMC Software, Inc.*.............. 6,200 226,203
Cadence Design Systems, Inc.*.... 9,500 193,563
Ceridian Corp.*.................. 5,200 125,125
Cisco Systems, Inc.*............. 84,000 5,339,249
Citrix Systems, Inc.*............ 6,200 117,413
Computer Associates
International, Inc. ........... 7,362 376,842
Computer Sciences Corp.*......... 2,000 149,375
Compuware Corp.*................. 11,400 118,275
DST Systems, Inc.*............... 900 68,513
Electronic Arts, Inc.*........... 2,800 204,225
Electronic Data Systems Corp. ... 7,500 309,375
Fiserv, Inc.*.................... 4,525 195,706
Informix Corp.*.................. 7,300 54,294
Intuit, Inc.*.................... 7,800 322,725
Legato Systems, Inc.*............ 3,100 46,888
Microsoft Corp.*................. 63,500 5,079,999
NCR Corp.*....................... 2,400 93,450
Networks Associates, Inc.*....... 6,350 129,381
Novell, Inc.*.................... 9,500 87,875
Oracle Corp.*.................... 39,250 3,299,452
Paychex, Inc. ................... 11,400 478,800
Policy Management Systems
Corp.*......................... 1,700 26,138
Siebel Systems, Inc.*............ 7,800 1,275,788
Structural Dynamics Research
Corp.*......................... 2,500 37,656
Sun Microsystems, Inc.*.......... 18,800 1,709,625
SunGard Data Systems, Inc.*...... 3,200 99,200
SHARES VALUE
------ -----
Symantec Corp.*.................. 3,500 $ 188,781
Synopsys, Inc.*.................. 2,300 79,494
Tech Data Corp.*................. 1,900 82,769
Veritas Software Corp.*.......... 14,400 1,627,425
------------
22,702,257
------------
CONGLOMERATES -- 1.0%
Berkshire Hathaway, Inc. Cl-B*... 136 239,360
Corning, Inc. ................... 5,200 1,403,350
Minnesota Mining & Manufacturing
Co. ........................... 5,300 437,250
Ogden Corp. ..................... 2,500 22,500
Philip Morris Companies, Inc. ... 29,300 778,281
Textron, Inc. ................... 1,500 81,469
Tyco International Ltd. ......... 20,800 985,400
United Technologies Corp. ....... 8,427 496,140
Viad Corp. ...................... 4,500 122,625
------------
4,566,375
------------
CONSTRUCTION -- 0.0%
Granite Construction, Inc. ...... 2,650 64,925
Jacobs Engineering Group,
Inc.*.......................... 2,400 78,450
------------
143,375
------------
CONSUMER PRODUCTS & SERVICES -- 0.7%
ACNielson Corp.*................. 3,100 68,200
Church and Dwight Co., Inc. ..... 2,000 36,000
Clorox Co. ...................... 3,256 145,910
Colgate-Palmolive Co. ........... 7,500 449,063
Cross, (A.T.) Co. Cl-A*.......... 1,400 6,825
Dial Corp. ...................... 3,600 37,350
Eastman Kodak Co. ............... 4,200 249,900
Energizer Holdings, Inc.*........ 2,000 36,500
Fortune Brands, Inc. ............ 4,100 94,556
Gillette Co. .................... 14,000 489,124
International Flavors &
Fragrances, Inc. .............. 2,000 60,375
Keane, Inc.*..................... 2,600 56,225
Lancaster Colony Corp. .......... 1,550 29,741
National Presto Industries,
Inc. .......................... 800 24,600
Pittston Brink's Group........... 1,300 17,794
Procter & Gamble Co. ............ 16,000 915,999
RJ Reynolds Tobacco Holdings..... 4,200 117,338
Shaw Industries, Inc. ........... 5,100 63,750
Sotheby's Holdings, Inc. Cl-A.... 3,400 59,500
Stewart Enterprises, Inc. ....... 8,900 31,428
Universal Corp. ................. 1,800 38,025
WestPoint Stevens, Inc. ......... 2,300 25,588
------------
3,053,791
------------
CONTAINERS & PACKAGING -- 0.1%
Bemis Co., Inc. ................. 2,700 90,788
Owens Illinois, Inc.*............ 3,700 43,244
Sealed Air Corp.*................ 2,400 125,700
Sonoco Products Co. ............. 3,910 80,399
------------
340,131
------------
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
ELECTRONIC COMPONENTS & EQUIPMENT -- 3.6%
Agilent Technologies, Inc.*...... 4,576 $ 337,480
American Power Conversion
Corp.*......................... 8,800 359,150
Analog Devices, Inc.*............ 19,266 1,464,215
Arrow Electronics, Inc.*......... 5,600 173,600
Comverse Technology, Inc.*....... 4,800 446,400
Diebold, Inc. ................... 2,700 75,263
Emerson Electric Co. ............ 5,500 332,063
General Electric Co. ............ 120,000 6,119,999
Hitachi Ltd. [ADR]............... 5,000 720,625
Hubbell, Inc. Cl-B*.............. 2,500 63,750
Koninklijke (Royal) Philips
Electronics NV NY Reg. ........ 8,752 415,720
Linear Technology Corp. ......... 12,000 767,250
Molex, Inc. ..................... 8,093 389,476
PerkinElmer, Inc. ............... 3,000 198,375
Rockwell International Corp. .... 3,000 94,500
Sanmina Corp.*................... 4,400 376,200
SCI Systems, Inc.*............... 4,400 172,975
Solectron Corp.*................. 12,200 510,875
Symbol Technologies, Inc. ....... 4,443 247,420
Teleflex, Inc. .................. 1,800 66,713
Teradyne, Inc.*.................. 6,200 455,700
Texas Instruments, Inc. ......... 22,000 1,511,124
TXU Corp. ....................... 4,000 118,000
Varian Medical Systems, Inc.*.... 1,900 74,338
Varian, Inc.*.................... 1,900 87,638
------------
15,578,849
------------
ENERGY SERVICES -- 0.1%
Dynegy, Inc. .................... 3,700 252,756
Halliburton Co. ................. 7,700 363,344
------------
616,100
------------
ENTERTAINMENT & LEISURE -- 1.1%
Brunswick Corp. ................. 2,000 33,125
Callaway Golf Co. ............... 2,200 35,888
Carnival Corp. .................. 7,700 150,150
Disney, (Walt) Co. .............. 26,592 1,032,102
Harley-Davidson, Inc. ........... 11,800 454,300
International Game Technology.... 5,900 156,350
Mandalay Resort Group*........... 5,000 100,000
Mattel, Inc. .................... 4,100 54,069
Premier Parks, Inc. ............. 3,000 68,250
Sabre Holdings Corp. ............ 1,734 49,419
Time Warner, Inc. ............... 15,200 1,155,200
Viacom, Inc. Cl-B*............... 19,765 1,347,725
------------
4,636,578
------------
ENVIRONMENTAL SERVICES -- 0.1%
Allied Waste Industries, Inc.*... 5,400 54,000
Tetra Tech, Inc.*................ 2,343 53,596
Waste Management, Inc. .......... 12,959 246,221
------------
353,817
------------
FINANCIAL-BANK & TRUST -- 1.9%
Astoria Financial Corp. ......... 3,200 82,400
Australia & New Zealand Banking
Group Ltd. [ADR]............... 3,600 137,025
SHARES VALUE
------ -----
Banco Bilbao Vizcaya Argentaria
SA [ADR]....................... 36,300 $ 535,424
Banco Bradesco SA [ADR].......... 14,500 126,195
Banco Frances SA [ADR]........... 5,060 109,423
Bank of America Corp. ........... 22,360 961,479
Bank of New York Co., Inc. ...... 9,400 437,099
Bank One Corp. .................. 14,134 375,434
CCB Financial Corp. ............. 2,000 76,500
Charter One Financial, Inc. ..... 6,237 143,451
Chase Manhattan Corp. ........... 15,018 691,766
City National Corp. ............. 1,800 63,900
Compass Bancshares, Inc. ........ 4,500 76,781
Dime Bancorp, Inc. .............. 5,100 80,325
Fifth Third Bancorp.............. 4,225 267,231
First Security Corp. ............ 8,287 112,392
First Tennessee National
Corp. ......................... 5,400 89,438
First Union Corp. ............... 12,608 312,836
First Virginia Banks, Inc. ...... 2,000 69,625
Firstar Corp. ................... 16,093 338,959
GreenPoint Financial Corp. ...... 3,000 56,250
Hibernia Corp. Cl-A.............. 5,500 59,813
Huntington Bancshares, Inc. ..... 4,066 64,294
KeyCorp.......................... 7,000 123,375
Marshall & Ilsley Corp. ......... 4,700 195,050
MBNA Corp. ...................... 9,500 257,688
Mellon Financial Corp. .......... 8,800 320,650
Mercantile Bankshares Corp. ..... 3,300 98,381
Morgan, (J.P.) & Co., Inc. ...... 2,100 231,263
National City Corp. ............. 7,520 128,310
North Fork Bancorporation,
Inc. .......................... 4,400 66,550
Northern Trust Corp. ............ 3,000 195,188
Old Kent Financial Corp. ........ 5,182 138,612
Pacific Century Financial
Corp. ......................... 3,900 58,013
Regions Financial Corp. ......... 2,700 53,663
Silicon Valley Bancshares*....... 2,800 119,350
Southtrust Corp. ................ 3,200 72,400
State Street Corp. .............. 2,000 212,125
Summit Bancorp................... 4,000 98,500
SunTrust Banks, Inc. ............ 3,648 166,668
TCF Financial Corp. ............. 4,700 120,731
U.S. Bancorp..................... 9,659 185,936
Uniao de Bancos Brasileiros SA
[GDR].......................... 3,300 94,875
Union Planters Corp. ............ 2,800 78,225
Wilmington Trust Corp. .......... 1,900 81,225
Zions Bancorp.................... 2,700 123,905
------------
8,488,723
------------
FINANCIAL SERVICES -- 2.4%
AMBAC Financial Group, Inc. ..... 2,400 131,550
American Express Co. ............ 15,300 797,512
Associates First Capital Corp.
Cl-A........................... 8,728 194,744
Bear Stearns Companies, Inc. .... 4,095 170,454
Block, (H&R), Inc. .............. 2,000 64,750
Capital One Financial Corp. ..... 2,500 111,563
Citigroup, Inc. ................. 43,005 2,591,050
Concord EFS, Inc.*............... 6,450 167,700
Dun & Bradstreet Corp. .......... 2,500 71,563
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
E*TRADE Group, Inc.*............. 9,000 $ 148,500
Edwards, (A.G.), Inc. ........... 3,350 130,650
Fannie Mae....................... 14,000 730,625
FINOVA Group, Inc. .............. 2,500 32,500
Fleet Financial Group, Inc. ..... 11,056 375,904
Franklin Resources, Inc. ........ 5,700 173,138
Freddie Mac...................... 10,600 429,300
Golden West Financial Corp. ..... 2,400 97,950
Grupo Financiero Bancomer [ADR]
144A*.......................... 1,400 14,223
Household International, Inc. ... 5,600 232,750
Merrill Lynch & Co., Inc. ....... 3,900 448,500
Morgan Stanley Dean Witter &
Co. ........................... 14,970 1,246,252
Paine Webber Group, Inc. ........ 5,800 263,900
PNC Financial Services Group,
Inc. .......................... 2,820 132,188
Providian Financial Corp. ....... 1,500 135,000
Schwab, (Charles) Corp. ......... 15,075 506,897
Waddell & Reed Financial, Inc.
Cl-A........................... 392 12,846
Waddell & Reed Financial, Inc.
Cl-B........................... 1,674 48,651
Washington Mutual, Inc. ......... 5,750 166,031
Wells Fargo & Co. ............... 20,000 775,000
------------
10,401,691
------------
FOOD -- 1.0%
Albertson's, Inc. ............... 6,024 200,298
Archer Daniels Midland Co. ...... 11,887 116,641
Bestfoods, Inc. ................. 3,300 228,525
Campbell Soup Co. ............... 6,000 174,750
ConAgra, Inc. ................... 6,900 131,531
Dean Foods Corp. ................ 1,400 44,363
Diageo PLC [ADR]................. 6,547 232,828
Dole Food Co. ................... 2,800 45,850
Flowers Industries, Inc. ........ 3,000 59,813
General Mills, Inc. ............. 5,000 191,250
Heinz, (H.J.) Co. ............... 6,250 273,438
Hershey Foods Corp. ............. 2,600 126,588
Hormel Foods Corp. .............. 6,000 100,875
IBP, Inc. ....................... 4,300 66,381
Interstate Bakeries Corp. ....... 3,000 44,250
Kellogg Co. ..................... 7,000 208,250
Kroger Co.*...................... 16,800 370,649
Lance, Inc. ..................... 3,200 28,800
McCormick & Co., Inc. ........... 4,100 133,250
Ralston Purina Group............. 5,000 99,688
Safeway, Inc.*................... 6,060 273,458
Sara Lee Corp. .................. 12,400 239,475
Smucker, (J.M.) Co.*............. 1,600 30,800
Starbucks Corp.*................. 7,500 286,405
The Earthgrains Co. ............. 592 11,507
Tyson Foods, Inc. ............... 7,300 63,875
Unilever NV NY Reg. ............. 13,407 576,500
Universal Foods Corp. ........... 3,700 68,450
Wrigley, (Wm., Jr.) Co. ......... 1,300 104,244
------------
4,532,732
------------
FURNITURE -- 0.0%
Leggett & Platt, Inc. ........... 8,700 143,550
------------
SHARES VALUE
------ -----
HEALTHCARE SERVICES -- 0.5%
Amgen, Inc.*..................... 12,500 $ 878,124
Apria Healthcare Group, Inc.*.... 7,500 91,875
Foundation Health Systems,
Inc.*.......................... 6,400 83,200
Gentiva Health Services, Inc.*... 500 4,063
HCA - The Healthcare Corp. ...... 9,096 276,291
Health Management Associates,
Inc. Cl-A*..................... 12,050 157,403
Healthsouth Corp.*............... 5,500 39,531
IMS Health, Inc. ................ 5,000 90,000
McKesson HBOC, Inc. ............. 2,600 54,438
Oxford Health Plans, Inc.*....... 1,300 30,956
PacifiCare Health Systems,
Inc.*.......................... 1,800 108,338
Quorum Health Group, Inc.*....... 3,600 37,125
Total Renal Care Holdings,
Inc.*.......................... 2,700 16,200
United HealthGroup, Inc. ........ 4,000 343,000
------------
2,210,544
------------
HOTELS & MOTELS -- 0.0%
Hilton Hotels Corp. ............. 2,945 27,609
Marriott International, Inc.
Cl-A........................... 3,000 108,188
------------
135,797
------------
INSURANCE -- 1.3%
Aetna, Inc. ..................... 2,502 160,597
AFLAC, Inc. ..................... 8,900 408,843
Allmerica Financial Corp. ....... 2,300 120,463
Allstate Corp. .................. 10,600 235,850
American Financial Group,
Inc. .......................... 3,200 79,400
American General Corp. .......... 3,500 213,500
American International Group,
Inc. .......................... 19,020 2,234,849
Chubb Corp. ..................... 3,300 202,950
CIGNA Corp. ..................... 3,900 364,650
Conseco, Inc. ................... 5,691 55,487
HSB Group, Inc. ................. 1,650 51,356
Lincoln National Corp. .......... 3,400 122,825
Loews Corp. ..................... 3,000 180,000
Marsh & McLennan Companies,
Inc. .......................... 3,500 365,531
Old Republic International
Corp. ......................... 7,300 120,450
Progressive Corp. ............... 1,400 103,688
ReliaStar Financial Corp. ....... 3,000 157,313
Selective Insurance Group,
Inc. .......................... 3,500 66,500
The Hartford Financial Services
Group, Inc. ................... 3,000 167,813
Torchmark Corp. ................. 4,600 113,563
Transatlantic Holdings, Inc. .... 1,050 87,938
Unitrin, Inc. ................... 2,800 82,250
UNUM Corp. ...................... 5,777 115,901
------------
5,811,717
------------
INTERNET SERVICES -- 0.5%
America Online, Inc.*............ 38,000 2,004,500
------------
LUMBER & WOOD PRODUCTS -- 0.0%
Deltic Timber Corp. ............. 342 7,161
Rayonier, Inc. .................. 1,600 57,400
------------
64,561
------------
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
MACHINERY & EQUIPMENT -- 0.5%
AGCO Corp. ...................... 2,100 $ 25,725
Black & Decker Corp. ............ 2,700 106,144
Caterpillar, Inc. ............... 5,000 169,375
Danaher Corp. ................... 4,500 222,468
Deere & Co. ..................... 4,000 148,000
Federal Signal Corp. ............ 3,600 61,200
Flowserve Corp. ................. 2,900 43,863
Gencorp, Inc. ................... 2,800 22,400
Grant Prideco, Inc.*............. 2,320 58,000
Illinois Tool Works, Inc. ....... 5,339 304,322
Ingersoll-Rand Co. .............. 2,000 80,500
Kaydon Corp. .................... 2,200 46,200
Kennametal, Inc. ................ 1,200 25,725
Nordson Corp. ................... 1,000 50,625
Pall Corp. ...................... 4,000 75,500
Precision Castparts Corp. ....... 1,400 63,350
Sequa Corp. Cl-A*................ 1,200 45,825
Smith International, Inc.*....... 2,000 145,625
Tecumseh Products Co. Cl-A....... 1,400 53,463
Thermo Electron Corp.*........... 6,300 133,088
Weatherford International,
Inc.*.......................... 2,320 92,365
------------
1,973,763
------------
MEDICAL SUPPLIES & EQUIPMENT -- 1.2%
Abbott Laboratories.............. 18,500 824,406
Baxter International, Inc. ...... 4,000 281,250
Beckman Coulter, Inc. ........... 2,100 122,588
Becton Dickinson & Co. .......... 4,000 114,750
Bergen Brunswig Corp. Cl-A....... 3,800 20,900
Boston Scientific Corp.*......... 6,000 131,625
Edwards Lifesciences Corp.*...... 960 18,360
Forest Laboratories, Inc.*....... 3,400 343,400
Genzyme Corp.*................... 2,100 124,819
Genzyme Surgical Products*....... 375 3,727
Genzyme Tissue Repair*........... 63 331
Guidant Corp.*................... 6,000 297,000
Hillenbrand Industries, Inc. .... 2,700 84,544
Johnson & Johnson Co. ........... 18,005 1,834,258
Medtronic, Inc. ................. 15,000 747,188
STERIS Corp.*.................... 4,000 35,500
Stryker Corp. ................... 6,800 297,500
Sybron International Corp.*...... 3,700 73,306
VISX, Inc.*...................... 2,400 67,350
------------
5,422,802
------------
METALS & MINING -- 0.2%
Alcoa, Inc. ..................... 15,600 452,399
Barrick Gold Corp. .............. 7,000 127,313
Brush Wellman, Inc. ............. 2,400 37,500
Carpenter Technology Corp. ...... 2,200 46,475
Nucor Corp. ..................... 2,800 92,925
Placer Dome, Inc. ............... 9,900 94,669
------------
851,281
------------
OFFICE EQUIPMENT -- 0.2%
Herman Miller, Inc. ............. 3,900 100,913
Ikon Office Solutions, Inc. ..... 6,800 26,350
Office Depot, Inc.*.............. 11,550 72,188
SHARES VALUE
------ -----
Pitney Bowes, Inc. .............. 4,900 $ 195,999
Standard Register Co. ........... 2,700 37,800
Staples, Inc.*................... 8,325 127,997
Wallace Computer Service,
Inc. .......................... 2,900 28,638
Xerox Corp. ..................... 10,400 207,999
------------
797,884
------------
OIL & GAS -- 3.2%
Amerada Hess Corp. .............. 3,500 216,125
Anadarko Petroleum Corp. ........ 1,600 78,900
Apache Corp. .................... 1,600 94,100
BJ Services Co.*................. 9,000 562,500
BP Amoco PLC [ADR]............... 12,400 701,374
Chevron Corp. ................... 7,400 627,612
Conoco, Inc. Cl-B*............... 8,670 212,957
Devon Energy Corp. .............. 2,800 157,325
El Paso Energy Corp. ............ 8,600 438,063
ENI Co. SPA [ADR]................ 5,500 320,031
Ensco International, Inc. ....... 5,500 196,969
Exxon Mobil Corp. ............... 41,033 3,223,654
Global Marine, Inc.*............. 8,700 245,231
Helmerich & Payne, Inc. ......... 1,800 63,900
Keyspan Corp. ................... 6,300 193,725
MCN Energy Group, Inc. .......... 3,600 78,750
Murphy Oil Corp. ................ 2,400 142,650
Nabors Industries, Inc.*......... 4,300 178,719
National Fuel Gas Co. ........... 2,600 126,750
Nicor, Inc. ..................... 3,000 97,875
Noble Affiliates, Inc. .......... 2,500 93,125
Noble Drilling Corp.*............ 3,300 135,919
Occidental Petroleum Corp. ...... 9,600 202,200
Phillips Petroleum Co. .......... 3,000 152,063
Ranger Oil Ltd.*................. 7,800 42,900
Repsol SA [ADR].................. 6,700 132,744
Royal Dutch Petroleum Co. ....... 40,300 2,480,968
Schlumberger Ltd. ............... 7,000 522,375
Shell Transport & Trading Co.
[ADR].......................... 6,700 334,581
Texaco, Inc. .................... 6,200 330,150
Tidewater, Inc. ................. 2,700 97,200
Tosco Corp. ..................... 5,900 168,888
Total Fina Elf SA [ADR].......... 2,407 185,339
Transocean Sedco Forex, Inc. .... 4,639 247,897
Ultramar Diamond Shamrock
Corp. ......................... 3,900 96,769
Union Pacific Resources Group,
Inc. .......................... 5,509 121,198
Unocal Corp. .................... 5,200 172,250
USX-Marathon Group, Inc. ........ 5,400 135,338
Valero Energy Corp. ............. 3,800 120,650
Washington Gas Light Co. ........ 3,100 74,594
Williams Companies, Inc. ........ 8,998 375,104
------------
14,179,462
------------
PAPER & FOREST PRODUCTS -- 0.3%
Bowater, Inc. ................... 2,200 97,075
Consolidated Papers, Inc. ....... 4,600 168,188
Fort James Corp. ................ 7,000 161,875
Georgia-Pacific Group............ 2,000 52,500
Georgia-Pacific Timber Group..... 3,100 67,038
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
Glatfelter, (P.H.) Co. .......... 2,600 $ 26,488
International Paper Co. ......... 5,000 149,063
Kimberly-Clark Corp. ............ 9,000 516,374
Wausau-Mosinee Paper Corp. ...... 3,700 31,681
Weyerhaeuser Co. ................ 4,500 193,499
------------
1,463,781
------------
PERSONAL SERVICES -- 0.0%
Cendant Corp.*................... 8,168 114,352
------------
PHARMACEUTICALS -- 3.5%
American Home Products Corp. .... 18,400 1,081,000
AstraZeneca Group PLC [ADR]...... 12,000 558,000
Biogen, Inc.*.................... 6,000 387,000
Bristol-Meyers Squibb Co. ....... 23,600 1,374,700
Carter-Wallace, Inc. ............ 3,900 78,488
Chiron Corp.*.................... 7,600 361,000
Genzyme-Molecular Oncology*...... 226 3,136
Gilead Sciences, Inc.*........... 1,700 120,913
Glaxo Wellcome PLC [ADR]......... 12,100 699,531
ICN Pharmaceuticals, Inc. ....... 2,700 75,094
Ivax Corp.*...................... 11,100 460,650
Lilly, (Eli) & Co. .............. 14,200 1,418,225
MedImmune, Inc.*................. 6,300 466,200
Merck & Co., Inc. ............... 28,000 2,145,500
Mylan Laboratories, Inc. ........ 5,100 93,075
Omnicare, Inc. .................. 3,800 34,438
Perrigo Co.*..................... 8,400 53,025
Pfizer, Inc. .................... 83,250 3,995,999
Pharmacia Corp. ................. 15,125 781,773
Schering-Plough Corp. ........... 17,500 883,750
Waters Corp.*.................... 2,400 299,550
Watson Pharmaceuticals, Inc.*.... 3,000 161,250
------------
15,532,297
------------
PRINTING & PUBLISHING -- 0.3%
Banta Corp. ..................... 2,900 54,919
Belo, (A.H.) Corp. Cl-A.......... 3,400 58,863
Donnelley, (R.R.) & Sons Co. .... 2,600 58,663
Gannett Co., Inc. ............... 3,500 209,344
Lexmark International Group, Inc.
Cl-A*.......................... 4,800 322,799
McGraw-Hill Co., Inc. ........... 5,800 313,200
Readers Digest Association,
Inc. .......................... 4,100 162,975
Tribune Co. ..................... 4,200 147,000
Washington Post Co. Cl-B......... 400 191,200
Workflow Management, Inc.*....... 286 3,378
------------
1,522,341
------------
RAILROADS -- 0.2%
Burlington Northern Santa Fe
Corp. ......................... 5,100 116,981
Kansas City Southern Industries,
Inc. .......................... 4,000 354,750
Norfolk Southern Corp. .......... 6,000 89,250
Trinity Industries, Inc. ........ 2,700 49,950
Union Pacific Corp. ............. 3,000 111,563
------------
722,494
------------
SHARES VALUE
------ -----
RESTAURANTS -- 0.2%
Brinker International, Inc.*..... 7,300 $ 213,525
CBRL Group, Inc. ................ 2,700 39,656
Darden Restaurants, Inc. ........ 6,500 105,625
McDonald's Corp. ................ 16,200 533,588
Outback Steakhouse, Inc.*........ 3,600 105,300
Tricon Global Restaurants,
Inc.*.......................... 1,480 41,810
------------
1,039,504
------------
RETAIL & MERCHANDISING -- 2.1%
Barnes & Noble, Inc.*............ 3,400 75,650
Bed, Bath & Beyond, Inc.*........ 5,200 188,500
Best Buy Co., Inc.*.............. 7,000 442,749
BJ's Wholesale Club, Inc.*....... 4,000 132,000
Circuit City Stores, Inc. ....... 4,000 132,750
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar [ADR]................... 6,200 199,175
Costco Companies, Inc.*.......... 6,000 198,000
CVS Corp. ....................... 6,500 260,000
Dollar General Corp. ............ 5,491 107,075
Family Dollar Stores, Inc. ...... 7,400 144,763
Federated Department Stores,
Inc.*.......................... 2,500 84,375
Gap, Inc. ....................... 12,037 376,156
Home Depot, Inc. ................ 28,800 1,438,199
Kohl's Corp.*.................... 5,000 278,125
Lands' End, Inc.*................ 3,000 100,125
May Department Stores Co. ....... 5,850 140,400
Nordstrom, Inc. ................. 1,900 45,838
Penney, (J.C.) Co., Inc. ........ 3,100 57,156
RadioShack Corp. ................ 3,000 142,125
Rite Aid Corp. .................. 2,600 17,063
Saks, Inc.*...................... 5,200 54,600
School Specialty, Inc.*.......... 238 4,418
Sears, Roebuck & Co. ............ 4,500 146,813
Target Corp. .................... 7,400 429,200
Tiffany & Co. ................... 4,000 270,000
TJX Companies, Inc. ............. 5,600 105,000
Toys 'R' Us, Inc.*............... 6,920 100,773
Wal-Mart Stores, Inc. ........... 55,200 3,180,899
Walgreen Co. .................... 13,000 418,438
Warnaco Group*................... 2,600 20,150
------------
9,290,515
------------
SEMICONDUCTORS -- 2.6%
Altera Corp.*.................... 12,000 1,223,250
Applied Materials, Inc.*......... 12,000 1,087,500
Atmel Corp.*..................... 9,200 339,250
Intel Corp. ..................... 44,800 5,989,199
LSI Logic Corp.*................. 4,000 216,500
Maxim Integrated Products,
Inc.*.......................... 9,000 611,438
Varian Semiconductor Equipment
Associates, Inc.*.............. 1,900 119,344
Xilinx, Inc.*.................... 19,600 1,618,225
------------
11,204,706
------------
TELECOMMUNICATIONS -- 5.9%
ADC Telecommunications, Inc.*.... 8,800 738,100
Alltel Corp. .................... 4,908 303,989
AT&T Canada, Inc. NY Reg.*....... 342 10,215
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
AT&T Corp. ...................... 37,631 $ 1,190,080
Bell Atlantic Corp.*............. 20,514 1,042,368
BellSouth Corp. ................. 22,400 954,800
British Telecommunications PLC
[ADR].......................... 3,000 396,750
BroadWing, Inc. ................. 4,300 111,531
Cable & Wireless
Communications................. 9,245 198,768
CenturyTel, Inc. ................ 4,000 115,000
Cia de Telecomunicaciones de
Chile SA [ADR]................. 7,800 141,375
Comcast Corp. Cl-A*.............. 12,000 486,000
Cox Communications, Inc. Cl-A*... 2,373 108,120
Ericsson, (L.M.) Telephone Co.
[ADR].......................... 50,800 1,016,000
France Telecom SA [ADR].......... 6,300 897,750
GTE Corp. ....................... 13,500 840,375
Leap Wireless International,
Inc.*.......................... 400 18,800
Lucent Technologies, Inc. ....... 38,565 2,284,976
MediaOne Group, Inc.*............ 10,000 666,250
Motorola, Inc. .................. 24,300 706,219
Nextel Communications, Inc.
Cl-A*.......................... 7,200 440,550
Nokia Corp. Cl-A [ADR]........... 27,600 1,378,275
Nortel Networks Corp. NY Reg.*... 33,920 2,315,039
QUALCOMM, Inc.*.................. 10,000 600,000
SBC Communications, Inc. ........ 40,533 1,753,052
Sprint Corp. (FON Group)......... 12,400 632,400
Sprint Corp. (PCS Group)*........ 10,200 606,900
Tele Norte Leste Participacoes SA
[ADR].......................... 503 11,883
Tele Sudeste Celular
Participacoes SA [ADR]......... 860 26,230
Telecom Corp. of New Zealand Ltd.
[ADR].......................... 1,700 47,813
Telecomunicacoes de Sao Paulo SA
[ADR].......................... 4,300 79,550
Telefonica SA [ADR]*............. 6,691 428,642
Telefonos de Mexico SA Cl-L
[ADR].......................... 13,200 754,050
Telephone & Data Systems,
Inc. .......................... 2,500 250,625
Tellabs, Inc.*................... 5,000 342,188
U.S. West, Inc. ................. 6,418 550,344
Univision Communications,
Inc.*.......................... 3,500 362,250
Vodafone AirTouch PLC [ADR]...... 18,400 762,450
WorldCom, Inc.*.................. 37,045 1,699,439
------------
25,269,146
------------
TRANSPORTATION -- 0.1%
Alexander & Baldwin, Inc. ....... 2,500 55,156
CNF Transportation, Inc. ........ 2,200 50,050
CSX Corp. ....................... 3,000 63,563
FedEx Corp.*..................... 3,500 133,000
------------
301,769
------------
UTILITIES -- 1.2%
AES Corp.*....................... 10,200 465,374
Allegheny Energy, Inc. .......... 5,200 142,350
SHARES VALUE
------ -----
American Electric Power Co.,
Inc. .......................... 4,800 $ 142,200
American Water Works Co.,
Inc. .......................... 3,400 85,000
CMS Energy Corp. ................ 3,900 86,288
Consolidated Edison, Inc. ....... 5,200 154,050
Constellation Energy Group....... 2,700 87,919
DPL, Inc. ....................... 5,600 122,850
Duke Energy Corp. ............... 6,100 343,887
Edison International Co. ........ 6,200 127,100
Empresa Nacional de Electridad SA
[ADR].......................... 9,930 109,851
Energy East Corp. ............... 6,800 129,625
Enersis SA [ADR]................. 2,600 51,838
Enron Corp. ..................... 9,500 612,749
Entergy Corp. ................... 6,200 168,563
FirstEnergy Corp. ............... 7,300 170,638
Florida Progress Corp. .......... 4,400 206,249
FPL Group, Inc. ................. 3,000 148,500
IDACORP, Inc. ................... 2,600 83,850
IPALCO Enterprises, Inc. ........ 4,800 96,600
Kansas City Power & Light Co. ... 4,000 90,000
LG&E Energy Corp. ............... 5,500 131,313
New Century Energies, Inc. ...... 3,895 119,528
Niagara Mohawk Holdings, Inc.*... 10,000 139,375
Nisource, Inc. .................. 4,600 85,675
Oklahoma Gas & Electric Co. ..... 2,900 53,650
PG&E Corp. ...................... 1,800 44,325
Pinnacle West Capital Co. ....... 3,000 101,625
Potomac Electric Power Co. ...... 4,900 122,500
Public Service Co. of New
Mexico......................... 1,900 29,331
SCANA Corp. ..................... 2,272 54,812
Sierra Pacific Resources......... 4,000 50,250
Southern Co. .................... 12,300 286,743
Teco Energy, Inc. ............... 6,000 120,375
Unicom Corp. .................... 4,200 162,488
UtiliCorp United, Inc. .......... 3,450 68,569
Wisconsin Energy Corp. .......... 5,200 103,025
------------
5,299,065
------------
TOTAL COMMON STOCK
(Cost $118,009,157)................ 203,591,221
------------
PAR
(000)
-----
U.S. TREASURY OBLIGATIONS -- 16.6%
U.S. Treasury Bonds
11.625%, 11/15/02.............. $ 100 111,219
7.125%, 02/15/23............... 240 266,325
7.625%, 02/15/25............... 300 353,906
6.875%, 08/15/25............... 300 326,250
6.00%, 02/15/26................ 100 97,781
6.75%, 08/15/26................ 9,325 10,024,375
6.625%, 02/15/27............... 3,250 3,447,031
------------
14,626,887
------------
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
U.S. Treasury Notes
6.125%, 09/30/00-08/15/07...... $ 2,150 $ 2,138,797
5.625%, 11/30/00-05/15/08...... 31,375 30,519,755
5.75%, 08/15/03................ 665 653,778
7.50%, 02/15/05................ 250 262,266
5.875%, 11/15/05............... 18,425 18,114,078
6.50%, 10/15/06................ 3,850 3,892,952
6.25%, 02/15/07................ 2,000 2,002,500
6.00%, 08/15/09................ 525 520,899
------------
58,105,025
------------
(Cost $73,081,396)............... 72,731,912
------------
CORPORATE OBLIGATIONS -- 12.4%
AEROSPACE -- 0.3%
Anteon Corp.
12.00%, 05/15/09 .............. 150 135,375
Boeing Co.
6.35%, 06/15/03 ............... 120 117,480
Dyncorp, Inc.
9.50%, 03/01/07 ............... 200 153,000
Raytheon Co.
6.50%, 07/15/05................ 1,000 948,502
------------
1,354,357
------------
AUTOMOTIVE PARTS -- 0.1%
Lear Corp.
8.11%, 05/15/09................ 300 273,246
Safelite Glass Corp. Cl-B
9.875%, 12/15/06............... 200 2,750
Venture Holdings Trust
9.50%, 07/01/05................ 200 153,000
------------
428,996
------------
BEVERAGES -- 0.2%
Anheuser-Busch Companies, Inc.
7.00%, 12/01/25................ 150 133,036
Seagram, (J.) & Sons Co.
7.60%, 12/15/28................ 1,000 948,401
------------
1,081,437
------------
BROADCASTING -- 0.4%
Chancellor Media Corp.
9.00%, 10/01/08................ 250 258,125
Charter Communications Holdings
LLC
8.25%, 04/01/07................ 600 532,500
Sinclair Broadcast Group, Inc.
8.75%, 12/15/07................ 275 243,375
Spanish Broadcasting System, Inc.
9.625%, 11/01/09............... 300 300,000
UnitedGlobalCom, Inc. Cl-B [STEP]
11.458%, 02/15/08.............. 575 405,375
------------
1,739,375
------------
PAR
(000) VALUE
----- -----
BUILDING MATERIALS -- 0.3%
American Builders & Contractors
Supply Co., Inc. Cl-B
10.625%, 05/15/07.............. $ 300 $ 248,250
American Standard, Inc.
9.25%, 12/01/16................ 15 15,056
Associated Materials, Inc.
9.25%, 03/01/08................ 350 329,000
Koppers Industry, Inc.
9.875%, 12/01/07............... 75 69,563
Lennar Corp. 144A
9.95%, 05/01/10................ 250 247,500
Nortek, Inc.
9.875%, 03/01/04............... 300 286,500
------------
1,195,869
------------
CABLE TELEVISION -- 0.5%
Classic Cable, Inc.
9.375%, 08/01/09............... 500 438,750
Mediacom LLC Capital Corp.
7.875%, 02/15/11............... 600 528,000
Northland Cable Television, Inc.
10.25%, 11/15/07............... 250 208,750
NTL, Inc. Cl-B [STEP]
10.514%, 02/01/06.............. 600 556,500
Pegasus Communications Corp. Cl-B
9.625%, 10/15/05............... 375 363,750
Rogers Cablesystems of America,
Inc. Cl-B
10.00%, 03/15/05............... 125 128,438
------------
2,224,188
------------
CHEMICALS -- 0.1%
American Pacific Corp. 144A
9.25%, 03/01/05................ 225 223,875
------------
CLOTHING & APPAREL -- 0.1%
Dan River, Inc.
10.125%, 12/15/03.............. 150 146,250
Delta Mills, Inc.
9.625%, 09/01/07............... 75 63,375
Dyersburg Corp. Cl-B
9.75%, 09/01/07................ 175 41,125
Westpoint Stevens, Inc.
7.875%, 06/15/05............... 225 189,000
------------
439,750
------------
COMPUTER SERVICES & SOFTWARE -- 0.2%
Exodus Communications, Inc.
10.75%, 12/15/09............... 400 388,000
Verio, Inc.
10.375%, 04/01/05.............. 150 158,250
10.625%, 11/15/09.............. 100 111,375
------------
657,625
------------
CONSTRUCTION -- 0.0%
Newport News Shipbuilding, Inc.
8.625%, 12/01/06............... 150 148,500
------------
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
CONSUMER PRODUCTS & SERVICES -- 0.2%
Chattem, Inc.
12.75%, 06/15/04............... $ 350 $ 355,250
Herff Jones, Inc.
11.00%, 08/15/05............... 250 261,250
Holmes Products Corp. Cl-D
9.875%, 11/15/07............... 250 176,250
------------
792,750
------------
CONTAINERS & PACKAGING -- 0.4%
BWAY Corp.
10.25%, 04/15/07............... 250 241,250
Consolidated Container Co.
10.125%, 07/15/09.............. 300 298,500
Container Corp. of America
9.75%, 04/01/03................ 150 150,563
11.25%, 05/01/04............... 100 101,500
Packaging Corp. of America, Inc.
9.625%, 04/01/09............... 600 598,500
Riverwood International Corp.
10.25%, 04/01/06............... 250 241,250
U.S. Can Corp.
10.125%, 10/15/06.............. 150 154,500
------------
1,786,063
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 0.2%
Amkor Technology, Inc.
10.50%, 05/01/09............... 200 201,250
Flextronics International Ltd.
144A
9.875%, 07/01/10............... 350 354,375
HCC Industries, Inc. 144A
10.75%, 05/15/07............... 250 106,250
L-3 Communications Holdings, Inc.
144A
10.375%, 05/01/07.............. 150 153,375
------------
815,250
------------
ENTERTAINMENT & LEISURE -- 0.8%
Argosy Gaming Co.
10.75%, 06/01/09............... 200 207,750
Bally Total Fitness Holdings
Corp. Cl-C
9.875%, 10/15/07............... 225 204,750
Cinemark USA, Inc. Cl-B
8.50%, 08/01/08................ 175 88,375
Harrahs Operating Co., Inc.
7.875%, 12/15/05............... 150 141,375
International Game Technology
8.375%, 05/15/09............... 300 285,000
Isle of Capri Casinos
8.75%, 04/15/09................ 300 279,000
Mohegan Tribal Gaming Authority
8.125%, 01/01/06............... 500 477,500
Premier Parks, Inc.
9.75%, 06/15/07................ 250 242,813
9.402%, 04/01/08 [STEP]........ 350 239,313
PAR
(000) VALUE
----- -----
Six Flags Entertainment Corp.
8.875%, 04/01/06............... $ 175 $ 168,000
Speedway Motorsports, Inc.
8.50%, 08/15/07................ 300 280,500
Station Casinos, Inc.
10.125%, 03/15/06.............. 300 305,250
Time Warner Entertainment Co.
7.25%, 09/01/08................ 500 483,664
YankeeNets LLC 144A
12.75%, 03/01/07............... 150 144,750
------------
3,548,040
------------
EQUIPMENT SERVICES -- 0.0%
Coinmach Corp. Cl-D
11.75%, 11/15/05............... 125 120,625
------------
FINANCIAL-BANK & TRUST -- 0.6%
Banesto Delaware
8.25%, 07/28/02................ 50 50,531
Bank of America Corp.
6.85%, 03/01/03................ 150 147,638
Bank of Nova Scotia
6.25%, 09/15/08................ 50 45,459
BankUnited Capital Trust Corp.
Cl-B 144A
10.25%, 12/31/26............... 250 212,500
Capital One Bank
8.25%, 06/15/05................ 750 749,262
CoreStates Home Equity Trust
Corp. Cl-A
6.65%, 05/15/09................ 27 26,513
MBNA Corp.
6.15%, 10/01/03................ 450 424,796
National Australia Bank
8.60%, 05/19/10................ 600 629,718
NationsBank Texas Corp.
6.75%, 08/15/00................ 150 150,002
Provident Bank Corp.
7.125%, 03/15/03............... 175 169,579
------------
2,605,998
------------
FINANCIAL SERVICES -- 1.3%
AIG Sunamerica Global Financial
Services II 144A
7.60%, 06/15/05................ 600 605,968
American Express Master Trust
7.60%, 08/15/02................ 500 501,195
Household Finance Corp.
8.00%, 05/09/05................ 400 403,566
Intertek Finance PLC Cl-B
10.25%, 11/01/06............... 250 206,250
Morgan Stanley Dean Witter & Co.
5.625%, 01/20/04............... 700 657,636
Orion Power Holdings, Inc. 144A
12.00%, 05/01/10............... 300 312,000
Salomon, Inc.
6.75%, 02/15/03................ 500 492,316
State Street Corp.
7.65%, 06/15/10................ 675 673,136
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
USF&G Capital II Cl-B
8.47%, 01/10/27................ $ 500 $ 449,703
Washington Mutual, Inc.
8.25%, 04/01/10................ 700 691,819
Wells Fargo & Co.
6.25%, 04/15/08................ 700 636,747
------------
5,630,336
------------
FOOD -- 0.3%
B&G Foods, Inc.
9.625%, 08/01/07............... 350 246,750
Doane Pet Care Co.
9.75%, 05/15/07................ 359 308,740
International Home Foods, Inc.
10.375%, 11/01/06.............. 200 215,000
Luigino's, Inc.
10.00%, 02/01/06............... 275 215,875
New World Pasta Co.
9.25%, 02/15/09................ 500 300,000
------------
1,286,365
------------
HEALTHCARE SERVICES -- 0.2%
Lifepoint Hospitals Holdings
10.75%, 05/15/09............... 300 310,500
Quest Diagnostic, Inc.
10.75%, 12/15/06............... 125 130,000
Tenet Healthcare Corp.
8.00%, 01/15/05................ 600 579,000
------------
1,019,500
------------
HOTELS & MOTELS -- 0.0%
Courtyard By Marriott II Cl-B
10.75%, 02/01/08............... 150 147,375
------------
INDUSTRIAL PRODUCTS -- 0.2%
Fico [ZCB]
13.226%, 04/06/03.............. 1,000 828,130
------------
INSURANCE -- 0.1%
New York Life Insurance Co. 144A
7.50%, 12/15/23................ 420 370,297
------------
INTERNET SERVICES -- 0.0%
PSINet, Inc. Cl-B
10.00%, 02/15/05............... 75 69,375
------------
MACHINERY & EQUIPMENT -- 0.2%
Hawk Corp.
10.25%, 12/01/03............... 450 434,250
Westinghouse Air Brake Co.
9.375%, 06/15/05............... 400 388,000
------------
822,250
------------
MEDICAL SUPPLIES & EQUIPMENT -- 0.0%
Dade International, Inc. Cl-B
11.125%, 05/01/06.............. 100 47,500
------------
PAR
(000) VALUE
----- -----
METALS & MINING -- 0.1%
Freeport-McMoRan Resource
Partners, Inc. L.P.
7.00%, 02/15/08................ $ 150 $ 135,641
P&L Coal Holdings Corp.
8.875%, 05/15/08............... 200 189,500
------------
325,141
------------
OFFICE EQUIPMENT -- 0.0%
Global Imaging Systems, Inc.
10.75%, 02/15/07............... 200 171,000
------------
OIL & GAS -- 0.4%
Frontier Oil Corp.
11.75%, 11/15/09............... 250 251,250
Nuevo Energy Co. Cl-B
9.50%, 06/01/08................ 600 595,500
Ocean Energy, Inc.
8.375%, 07/01/08............... 300 292,500
Pride Petroleum Services, Inc.
9.375%, 05/01/07............... 250 250,625
Universal Compression, Inc.
[STEP]
13.564%, 02/15/08.............. 400 290,000
------------
1,679,875
------------
PAPER & FOREST PRODUCTS -- 0.2%
International Paper Co.
6.875%, 04/15/29............... 1,000 838,164
Repap New Brunswick Corp.
11.50%, 06/01/04............... 150 151,500
------------
989,664
------------
PHARMACEUTICALS -- 0.0%
Owens & Minor, Inc.
10.875%, 06/01/06.............. 75 77,250
------------
PRINTING & PUBLISHING -- 0.1%
Hollinger International
Publishing Co.
9.25%, 03/15/07................ 400 396,000
Sun Media Corp.
9.50%, 05/15/07................ 163 158,925
------------
554,925
------------
RAILROADS -- 0.1%
Norfolk Southern Corp.
8.625%, 05/15/10............... 600 627,446
------------
RESTAURANTS -- 0.1%
Jack in the Box, Inc.
9.75%, 11/01/03................ 125 125,625
McDonald's Corp.
6.625%, 09/01/05............... 100 97,464
------------
223,089
------------
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
RETAIL & MERCHANDISING -- 0.5%
Dayton Hudson Corp.
5.875%, 11/01/08............... $ 1,500 $ 1,332,271
Kroger Co.
8.05%, 02/01/10................ 700 696,760
Wal-Mart Stores, Inc.
7.25%, 06/01/13................ 85 84,927
------------
2,113,958
------------
SEMICONDUCTORS -- 0.1%
Amkor Technologies, Inc.
9.25%, 05/01/06................ 300 297,375
------------
TELECOMMUNICATIONS -- 3.4%
Adelphia Communications
9.875%, 03/01/05............... 500 488,750
Alaska Communications Systems
9.375%, 05/15/09............... 250 231,875
AT&T Corp.
6.50%, 03/15/29................ 1,500 1,259,923
Clear Channel Communications,
Inc.
7.875%, 06/15/05............... 700 704,097
Comcast Cable Communication, Inc.
8.125%, 05/01/04............... 400 406,241
Communication & Power Industries,
Inc.
12.00%, 08/01/05............... 250 176,875
Deutsche Telekom Financial Corp.
8.00%, 06/15/10................ 700 707,099
Dobson Communications, Inc. 144A
10.875%, 07/01/10.............. 375 378,750
Energis PLC
9.75%, 06/15/09................ 600 591,000
Focal Communications Corp. 144A
11.875%, 01/15/10.............. 350 353,500
Frontiervision L.P.
11.00%, 10/15/06............... 350 355,250
Global Crossing Holdings Ltd.
9.50%, 11/15/09................ 375 363,750
Hermes Europe Railtel BV, Inc.
10.375%, 01/15/09.............. 100 82,000
Intermedia Communications, Inc.
Cl-B [STEP]
11.556%, 07/15/07.............. 500 395,000
International Wire Group, Inc.
Cl-B
11.75%, 06/01/05............... 350 353,500
Lucent Technologies, Inc.
6.90%, 07/15/01................ 500 501,173
Mastec, Inc.
7.75%, 02/01/08................ 250 231,250
McLeodUSA, Inc. [STEP]
10.464%, 03/01/07.............. 400 330,000
Metromedia Fiber Network, Inc.
Cl-B
10.00%, 11/15/08............... 300 297,000
PAR
(000) VALUE
----- -----
MetroNet Communications Corp.
[STEP]
8.759%, 06/15/08............... $ 800 $ 652,000
Millicom International Cellular
SA [STEP]
12.764%, 06/01/06.............. 250 213,750
Nextel Commmunications, Inc.
[STEP]
10.225%, 10/31/07.............. 575 429,813
NEXTLINK Communications, Inc.
12.50%, 04/15/06............... 125 131,250
12.25%, 06/01/09 [STEP]........ 300 186,000
NTL, Inc. Cl-B [STEP]
10.534%, 04/01/08.............. 300 188,250
Orange PLC
9.00%, 06/01/09................ 600 615,000
Price Communications Wireless,
Inc. Cl-B
9.125%, 12/15/06............... 350 355,250
Qwest Communications
International, Inc.
7.50%, 11/01/08................ 75 72,904
Sprint Capital Corp.
6.125%, 11/15/08............... 1,000 892,429
Telecorp PCS, Inc.
11.345%, 04/15/09.............. 300 197,250
Triton PCS Holdings, Inc. [STEP]
10.853%, 05/01/08.............. 400 292,000
Voicestream Wireless Holdings
10.375%, 11/15/09.............. 600 621,000
WorldCom, Inc.
7.75%, 04/01/07................ 1,500 1,501,727
------------
14,555,656
------------
TRANSPORTATION -- 0.1%
Allied Holdings, Inc. Cl-B
8.625%, 10/01/07............... 175 155,969
Avis Rent A Car, Inc.
11.00%, 05/01/09............... 300 314,250
Union Tank Car Co.
7.125%, 02/01/07............... 150 143,279
------------
613,498
------------
UTILITIES -- 0.6%
Citizens Utilities Co.
8.45%, 09/01/01................ 335 339,115
Energy Corp. of America Cl-A
9.50%, 05/15/07................ 250 161,250
Entergy Louisiana, Inc.
6.50%, 03/01/08................ 1,000 922,588
National Rural Utilities Corp.
5.70%, 01/15/10................ 1,000 864,735
Pacific Gas & Electric Co.
6.75%, 12/01/00................ 200 199,696
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
Public Service Electric & Gas Co.
7.00%, 09/01/24................ $ 300 $ 261,976
Southern California Edison Corp.
6.50%, 06/01/01................ 100 99,603
------------
2,848,963
------------
TOTAL CORPORATE OBLIGATIONS
(Cost $58,010,203)................. 54,461,666
------------
SHARES
------
FOREIGN STOCK -- 11.6%
ADVERTISING -- 0.2%
Asatsu-DK, Inc. -- (JPY)......... 11,000 452,262
Publicis SA -- (FRF)............. 667 262,785
------------
715,047
------------
AEROSPACE -- 0.0%
Mitsubishi Heavy Industries
Ltd. -- (JPY).................. 20,000 88,846
------------
AIRLINES -- 0.1%
Singapore Airlines
Ltd. -- (SGD).................. 27,000 267,036
------------
AUTOMOBILE MANUFACTURERS -- 0.2%
DaimlerChrysler AG -- (DEM)...... 3,600 191,871
Fiat SPA -- (ITL)................ 4,400 114,640
Rolls-Royce PLC -- (DEM)......... 63,600 225,784
Volkswagen AG -- (DEM)........... 5,700 220,197
Volvo AB Cl-B -- (SEK)........... 1,900 41,485
------------
793,977
------------
AUTOMOTIVE PARTS -- 0.1%
Bridgestone Corp. -- (JPY)....... 6,000 127,314
Sommer Allibert SA-- (FRF)....... 12,200 380,080
------------
507,394
------------
BEVERAGES -- 0.1%
Lion Nathan Ltd. -- (NZD)........ 50,000 111,804
Louis Vuitton Moet Hennessy --
(FRF).......................... 655 271,180
------------
382,984
------------
BROADCASTING -- 0.1%
EM.TV & Merchandising AG --
(DEM).......................... 1,400 83,206
Mediaset SPA -- (ITL)............ 13,700 210,123
Publishing & Broadcasting Ltd. --
(AUD).......................... 29,900 230,690
------------
524,019
------------
BUILDING MATERIALS -- 0.1%
Cemex SA de CV -- (MXP).......... 28,362 132,256
Lafarge SA -- (FRF).............. 1,100 85,832
Malayan Cement BHD -- (MYR)...... 30,750 10,115
RMC Group PLC -- (GBP)........... 8,800 113,505
------------
341,708
------------
SHARES VALUE
------ -----
BUSINESS SERVICES -- 0.1%
Adecco SA -- (CHF)............... 147 $ 125,298
Prosegur CIA de Seguridad SA --
(ESP).......................... 8,500 99,813
Securitas AB Cl-B -- (SEK)....... 4,300 91,680
Vedior NV -- (NLG)............... 4,900 60,827
------------
377,618
------------
CHEMICALS -- 0.3%
AKZO Nobel NV -- (NLG)........... 1,600 68,252
BASF AG -- (DEM)................. 8,300 338,142
SGL Carbon AG -- (DEM)........... 900 59,960
Sumitomo Chemical Co. -- (JPY)... 152,000 916,584
------------
1,382,938
------------
CLOTHING & APPAREL -- 0.1%
Kuraray Co. Ltd. -- (JPY)........ 8,000 91,946
Yue Yuen Industrial Holdings --
(HKD).......................... 95,000 210,839
------------
302,785
------------
COMPUTER SERVICES & SOFTWARE -- 0.2%
ASM Lithography Holding NV --
(NLG)*......................... 1,500 64,734
Cap Gemini SA -- (FRF)........... 800 141,488
Getronics NV -- (NLG)............ 3,600 55,732
SAP AG -- (DEM).................. 1,869 283,789
SEMA Group PLC -- (GBP).......... 5,600 79,691
Softbank Corp. -- (JPY).......... 900 122,494
------------
747,928
------------
CONGLOMERATES -- 0.6%
Cycle & Carriage Ltd. -- (SGD)... 15,000 35,223
Fomento Economico Mexicano SA de
CV -- (MEX)*................... 16,600 70,831
GKN PLC -- (GBP)................. 8,800 112,306
Granada Group PLC -- (GBP)....... 10,200 101,915
Hays PLC -- (GBP)................ 23,000 128,310
Hutchison Whampoa Ltd. -- (HKD).. 70,400 885,076
Mitsui & Co. Ltd. -- (JPY)....... 60,000 459,351
Norsk Hydro AS -- (NOK).......... 4,600 193,742
Rentokil Initial PLC -- (GBP).... 39,700 90,152
Sulzer AG -- (CHF)*.............. 181 120,773
Tomkins PLC -- (GBP)............. 70,500 227,333
------------
2,425,012
------------
CONSTRUCTION -- 0.0%
Bouyguesn SA -- (FRF)*........... 152 101,994
Matsushita Electric Works Ltd. --
(JPY).......................... 1,000 12,419
------------
114,413
------------
CONSUMER PRODUCTS & SERVICES -- 0.3%
Electrolux AB Cl-B -- (SEK)...... 5,300 82,485
JUSCO Co. -- (JPY)............... 18,000 341,961
Kao Corp. -- (JPY)............... 19,000 581,844
Orkla ASA Cl-A -- (NOK).......... 2,900 55,303
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
Societe BIC SA -- (FRF).......... 5,600 $ 275,383
Swatch Group AG -- (CHF)......... 224 58,615
------------
1,395,591
------------
CONTAINERS & PACKAGING -- 0.0%
Pechiney SA Cl-A -- (FRF)........ 2,000 83,781
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 1.5%
Bang & Olufsen Holding AS --
(DKK)*......................... 2,800 95,706
Epcos AG -- (DEM)*............... 300 30,541
Fujitsu Ltd. -- (JPY)............ 22,000 763,127
Iberdrola SA -- (ESP)............ 30,000 388,229
Johnson Electric Holdings Ltd. --
(HKD).......................... 96,200 910,163
Matsushita Electric Industrial
Co. Ltd. -- (JPY).............. 31,000 805,754
Mitsubishi Electric
Corp. -- (JPY)................. 60,000 651,030
Omron Corp. -- (JPY)............. 27,000 734,961
Sharp Corp. -- (JPY)............. 17,000 301,272
Siemens AG -- (DEM).............. 4,200 631,288
Sony Corp. -- (JPY).............. 10,000 935,714
Spirent PLC -- (GBP)............. 33,900 221,963
Thomson CSF -- (FRF)............. 400 15,821
------------
6,485,569
------------
ENTERTAINMENT & LEISURE -- 0.0%
Kuoni Reisen AG -- (CHF)......... 5 2,322
------------
FINANCIAL-BANK & TRUST -- 1.8%
Abbey National PLC -- (GBP)...... 39,400 471,213
ABN AMRO Holding NV -- (NLG)..... 9,700 238,595
Allied Irish Banks
PLC -- (IEP)................... 18,900 169,759
Australia & New Zealand Banking
Group Ltd. -- (AUD)............ 16,300 125,370
Banca Intesa SPA -- (ITL)........ 82,200 369,553
Banca Popolare di
Milano -- (ITL)................ 4,600 33,292
Bank of Scotland -- (GBP)........ 46,508 442,514
Bankgesellschaft Berlin AG --
(DEM).......................... 8,650 126,864
Barclays PLC -- (GBP)............ 17,191 427,595
BNP Paribas -- (FRF)............. 2,900 280,215
Commonwealth Bank of Australia --
(AUD).......................... 17,900 297,599
Credit Suisse Group -- (CHF)..... 3,600 718,420
Credito Italiano SPA -- (ITL).... 77,800 373,637
DBS Groupo Holdings -- (SGD)..... 20,236 259,829
Den Norske Bank -- (NOK)......... 6,700 27,905
Dresdner Bank AG -- (DEM)........ 13,300 540,567
Fuji Bank Ltd. -- (JPY).......... 38,000 289,485
HSBC Holdings PLC -- (GBP)....... 54,969 628,705
KBC Bancassurance Holdings NV --
(BEF).......................... 3,800 167,926
Nordic Baltic Holding AB --
(DKK)*......................... 45,734 334,980
Oversea-Chinese Banking Corp.
Ltd. -- (SGD).................. 26,250 180,670
Societe Generale -- (FRF)........ 1,528 92,278
SHARES VALUE
------ -----
Sumitomo Bank Ltd. -- (JPY)...... 34,000 $ 417,763
Svenska Handlesbanken Cl-A --
(SEK).......................... 17,400 253,936
The Industrial Bank of Japan
Ltd. -- (JPY).................. 43,000 326,763
------------
7,595,433
------------
FINANCIAL SERVICES -- 0.3%
Amvescap PLC -- (GBP)............ 18,700 300,083
Grupo Financiero Banamex Accival,
SA de CV -- (MXP)*............. 37,900 161,716
ING Groep NV -- (NLG)............ 7,453 505,821
Nomura Securities Co.
Ltd. -- (JPY).................. 10,000 245,271
------------
1,212,891
------------
FOOD -- 0.4%
Associated British Foods PLC --
(GBP).......................... 41,800 288,560
Cadbury Schweppes PLC -- (GBP)... 19,800 130,092
Compass Group PLC -- (GBP)....... 8,900 117,288
CSM NV -- (NLG).................. 3,400 67,140
Danisco AS -- (DKK).............. 700 23,477
Eridania Beghin-Say
SA -- (FRF).................... 1,500 147,527
Nestle SA -- (CHF)*.............. 237 475,873
Tesco PLC -- (GBP)*.............. 150,729 468,924
------------
1,718,881
------------
INSURANCE -- 0.7%
Aegon NV -- (NLG)................ 5,200 185,778
Allied Zurich PLC -- (CHF)....... 44,000 520,566
AMP Ltd. -- (AUD)................ 12,000 122,486
AXA SA -- (FRF)*................. 2,300 363,785
Instituto Nazionale delle
Assicurazioni -- (ITL)......... 60,800 150,368
Muenchener Rueckversicherungs-
Gesellschaft AG -- (DEM)....... 2,306 725,048
Schweizerische
Rueckversicherungs-
Gesellschaft -- (DEM)*......... 186 380,334
Sumitomo Marine & Fire Insurance
Co. -- (JPY)................... 86,000 501,524
------------
2,949,889
------------
MACHINERY & EQUIPMENT -- 0.0%
Deutz AG -- (DEM)*............... 23,900 105,387
Sandvik AB -- (SEK).............. 3,800 80,153
------------
185,540
------------
MEDICAL SUPPLIES & EQUIPMENT -- 0.2%
Radiometer AS -- (DKK)........... 2,300 72,705
Smith and Nephew PLC -- (GBP)*... 77,200 280,494
Terumo Corp. -- (JPY)............ 19,000 644,697
------------
997,896
------------
METALS & MINING -- 0.1%
Rio Tinto Ltd. -- (AUD).......... 20,700 343,269
Rio Tinto PLC -- (AUD)........... 5,800 94,830
Union Miniere SA -- (ATS)........ 3,000 109,250
------------
547,349
------------
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
OFFICE EQUIPMENT -- 0.3%
Canon, Inc. -- (JPY)............. 12,000 $ 598,857
Oce NV -- (NLG).................. 1,200 19,728
Ricoh Co. Ltd. -- (JPY).......... 25,000 530,474
------------
1,149,059
------------
OIL & GAS -- 0.1%
OMV AG -- (ATS)*................. 200 17,446
Santos Ltd. -- (AUD)............. 32,000 97,796
Total Fina SA Cl-B -- (FRF)...... 3,496 538,207
Tullow Oil PLC -- (IEP)*......... 200 164
------------
653,613
------------
PAPER & FOREST PRODUCTS -- 0.1%
Jefferson Smurfit Group PLC --
(IEP).......................... 450 760
Kimberly-Clark de Mexico SA
Cl-A -- (MXP)*................. 103,100 293,278
Svenska Cellulosa AB Cl-B --
(SEK).......................... 6,100 116,496
------------
410,534
------------
PHARMACEUTICALS -- 0.8%
AstraZeneca Group
PLC -- (GBP)*.................. 7,998 373,535
Daiichi Pharmaceutical Co.
Ltd. -- (JPY).................. 6,000 152,550
Merck KGAA -- (DEM).............. 4,600 141,104
Novartis AG -- (CHF)............. 853 1,355,510
Novo Nordisk AS Cl-B -- (DKK).... 100 17,090
Rhone-Poulenc Cl-A -- (FRF)*..... 8,100 593,601
Takeda Chemical Industries --
(JPY).......................... 15,000 986,753
------------
3,620,143
------------
PRINTING & PUBLISHING -- 0.3%
Dai Nippon Printing Co. Ltd. --
(JPY).......................... 23,000 406,299
Elsevier NV -- (NLG)............. 6,900 83,935
Pearson PLC -- (GBP)............. 11,300 359,246
Reed International
PLC -- (GBP)................... 42,200 367,345
Singapore Press Holdings Ltd. --
(SGD).......................... 11,000 171,778
------------
1,388,603
------------
RAILROADS -- 0.0%
Railtrack Group PLC -- (GBP)..... 9,800 152,293
------------
REAL ESTATE -- 0.2%
Cheung Kong Holdings Ltd. --
(HKD).......................... 38,000 420,460
City Developments
Ltd. -- (SGD).................. 11,000 42,626
DBS Land Ltd. -- (SGD)........... 33,000 42,754
Singapore Land Ltd. -- (SGD)..... 25,000 53,211
Slough Estates PLC -- (GBP)...... 33,400 185,317
Unibail -- (FRF)................. 600 83,397
Westfield Trust -- (AUD)......... 100,700 195,958
------------
1,023,723
------------
SHARES VALUE
------ -----
RETAIL & MERCHANDISING -- 0.3%
Carrefour Supermarche
SA -- (FRF).................... 9,200 $ 631,441
Mauri Co. Ltd. -- (JPY).......... 18,000 345,364
Metro AG -- (DEM)................ 1,600 54,448
Woolworths Ltd. -- (AUD)......... 80,200 296,868
------------
1,328,121
------------
SEMICONDUCTORS -- 0.2%
Rohm Co. Ltd. -- (JPY)........... 2,000 586,003
STMicroelectronics NV -- (FRF)... 5,100 322,661
------------
908,664
------------
TELECOMMUNICATIONS -- 1.2%
Alcatel -- (FRF)................. 7,295 480,413
Carso Global Telecom -- (MXP)*... 67,600 192,982
Deutsche Telekom AG -- (DEM)..... 18,500 1,071,128
eircom PLC -- (IEP).............. 19,300 51,802
KPN NV -- (NLG).................. 5,600 251,495
Marconi PLC -- (GBP)............. 13,600 177,065
Nippon Telegraph & Telephone
Corp. -- (JPY)................. 68 906,225
Portugal Telecom SA -- (PTE)..... 6,800 76,656
Singapore Telecommunications
Ltd. -- (SGD).................. 112,000 163,889
Sonera Oyj -- (FIM).............. 6,200 283,790
Swisscom AG -- (CHF)............. 548 190,410
Tele Danmark AS -- (DKK)......... 700 47,313
Telecom Corp. of New Zealand
Ltd. -- (NZD).................. 22,000 77,157
Telecom Italia Mobile
SPA -- (ITL)................... 55,900 573,361
Telecom Italia SPA -- (ITL)...... 30,566 421,923
Telekom Malaysia BHD -- (MYR).... 100 345
Telstra Corp. Ltd. -- (AUD)...... 45,000 183,188
------------
5,149,142
------------
TRANSPORTATION -- 0.2%
BAA PLC -- (GBP)................. 15,875 127,375
Bergesen d.y. ASA
Cl-A -- (NOK).................. 6,900 142,077
BG Group PLC -- (GBP)............ 35,877 231,920
Nippon Express Co.
Ltd. -- (JPY).................. 48,000 295,346
TNT Post Group NV -- (NLG)....... 2,600 70,408
------------
867,126
------------
UTILITIES -- 0.4%
ABB AG -- (CHF).................. 1,098 131,842
Electrabel SA -- (BEF)*.......... 389 96,542
Hong Kong Electric Holdings
Ltd. -- (HKD).................. 30,000 96,600
National Grid Group
PLC -- (GBP)................... 13,800 108,846
PowerGen PLC -- (GBP)............ 16,400 141,022
Suez Lyonnaise des Eaux SA --
(FRF).......................... 3,300 580,473
Tokyo Electric Power
Co. -- (JPY)................... 19,000 464,218
Veba AG -- (DEM)................. 7,000 338,861
------------
1,958,404
------------
TOTAL FOREIGN STOCK
(Cost $43,954,974)................. 50,756,272
------------
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 8.9%
Federal Farm Credit Bank
5.86%, 03/03/06................ $ 2,416 $ 2,279,672
------------
Federal National Mortgage Assoc.
7.00%, 04/18/22................ 1,000 995,894
7.125%, 02/15/05-01/15/30...... 2,000 2,008,876
------------
3,004,770
------------
Government National Mortgage
Assoc.
6.00%, 02/15/26-05/15/26....... 588 541,914
6.50%, 01/15/28-05/29/29....... 19,438 18,485,846
7.00%, 01/15/26-06/15/26....... 8,218 8,003,702
7.50%, 06/15/24-12/15/29....... 5,417 5,381,704
8.00%, 05/15/16-06/15/26....... 493 498,569
8.50%, 06/15/16-10/15/26....... 772 790,861
9.50%, 10/15/09-01/15/20....... 17 18,199
10.00%, 11/15/09............... 3 3,570
10.50%, 08/15/15............... 4 4,042
11.50%, 06/15/10-09/15/15...... 42 46,953
12.00%, 09/15/13-01/15/14...... 1 1,683
------------
33,777,043
------------
Tennessee Valley Authority
6.875%, 12/15/43............... 40 35,134
7.25%, 07/15/43................ 20 18,273
------------
53,407
------------
(Cost $40,349,342)............... 39,114,892
------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.2%
Advanta Home Equity Loan Trust
1993-1 Cl-A2
5.95%, 05/25/09
(Cost $1,000,835)................ 1,007 975,736
------------
SHARES VALUE
------ -----
PREFERRED STOCK -- 0.1%
TELECOMMUNICATIONS
Telecomunicacoes Brasileiras SA
1.55% [ADR]
(Cost $227,554).................. 4,300 $ 417,638
------------
PRINCIPAL
IN LOCAL
CURRENCY
(000)
---------
FOREIGN BONDS -- 0.0%
OIL & GAS
BG Transco Holdings PLC -- (GBP)
7.057%, 12/14/09............... 5 7,630
4.188%, 12/14/22............... 5 7,349
7.00%, 12/16/24................ 5 7,286
------------
(Cost $26,848)................... 22,265
------------
SHARES
------
SHORT-TERM INVESTMENTS -- 3.1%
Temporary Investment Cash Fund
(Cost $13,386,122)............... 13,386,122 13,386,122
------------
TOTAL INVESTMENTS -- 99.3%
(Cost $348,046,431)................ 435,457,724
OTHER ASSETS LESS
LIABILITIES -- 0.7%................ 2,885,899
------------
NET ASSETS -- 100.0%................. $438,343,623
============
- ------------------------------------------------------------------------------
Unless otherwise noted, all stocks are common stock.
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 0.8% of net assets.
See Notes to Financial Statements.
AST PIMCO TOTAL RETURN BOND PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 44.7%
Federal Home Loan Bank
6.40%, 07/05/00.............. $ 100 $ 99,929
--------------
Federal Home Loan Mortgage
Corp.
6.00%, 07/17/30.............. 8,600 7,878,374
7.00%, 04/25/19 [IO]++....... 64 3,565
7.00%, 07/17/30.............. 31,100 30,052,863
7.575%, 02/01/24 [VR]........ 609 631,203
8.25%, 08/01/17.............. 179 181,263
--------------
38,747,268
--------------
Federal National Mortgage
Assoc.
6.00%, 07/01/12-12/01/28..... 23,332 21,401,729
6.00%, 07/17/30 [TBA]........ 29,600 27,088,736
6.217%, 01/01/28 [VR]........ 613 596,887
6.25%, 05/25/08 [IO]++....... 236 41,699
6.50%, 05/18/23.............. 8,064 7,911,091
6.90%, 05/25/23.............. 244 216,498
7.00%, 07/17/30.............. 45,000 43,446,150
7.491%, 01/01/24 [VR]........ 100 103,888
9.40%, 07/25/03.............. 69 70,116
--------------
100,876,794
--------------
Government National Mortgage
Assoc.
6.00%, 07/25/30 [TBA]........ 33,910 33,183,987
6.125%, 12/20/26 [VR]........ 7,083 7,139,972
6.375%, 03/20/17-03/20/24
[VR]....................... 9,407 9,402,336
6.375%, 02/20/27............. 3,172 3,171,805
6.50%, 09/15/23-07/25/30..... 105,812 100,144,674
6.50%, 07/24/30 [TBA]........ 37,600 35,508,500
6.75%, 08/20/23-09/20/24..... 8,056 7,997,351
7.00%, 07/24/30.............. 68,300 66,366,999
7.125%, 10/20/23-11/20/26
[VR]....................... 11,045 11,048,348
7.375%, 01/20/26 [VR]........ 11,614 11,637,418
7.50%, 12/20/23-07/24/30..... 75,557 75,013,130
8.00%, 07/24/30.............. 5,200 5,255,276
--------------
365,869,796
--------------
Student Loan Marketing Assoc.
[FRN]
6.357%, 04/25/04............. 2,552 2,550,940
--------------
(Cost $510,963,649)............ 508,144,727
--------------
CORPORATE OBLIGATIONS -- 40.2%
AIRLINES -- 2.1%
American Airlines, Inc.
10.19%, 05/26/15............. 250 271,840
Continental Airlines, Inc.
6.954%, 02/02/11............. 14,488 13,818,489
United Air Lines, Inc.
10.36%, 11/13/12............. 6,925 7,180,325
10.36%, 11/27/12............. 500 581,115
10.02%, 03/22/14............. 2,000 1,999,440
--------------
23,851,209
--------------
PAR
(000) VALUE
----- -----
DIVERSIFIED -- 0.9%
Textron Financial Corp.
6.581%, 09/17/02............. $ 10,000 $ 10,003,910
--------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 1.3%
Sierra Pacific Resources Co.
144A
6.892%, 04/20/03............. 15,000 14,987,475
--------------
ENTERTAINMENT & LEISURE -- 0.0%
Time Warner, Inc.
7.975%, 08/15/04............. 262 266,999
--------------
FINANCIAL-BANK & TRUST -- 5.5%
Allied Irish Bank [FRN]
6.34%, 10/31/06.............. 8,000 8,011,136
Household Bank [FRN]
6.227%, 10/22/03............. 11,750 11,683,025
Korea Development Bank 144A
7.675%, 10/06/00............. 13,000 12,981,007
LG&E Capital Corp. 144A
6.205%, 05/01/04............. 5,000 4,789,380
Popular North America, Inc.
Cl-D
6.625%, 01/15/04............. 11,500 11,058,113
Westdeutsche Landesbank
6.05%, 01/15/09.............. 15,600 13,945,120
--------------
62,467,781
--------------
FINANCIAL SERVICES -- 17.8%
Avco Financial Services, Inc.
5.75%, 01/23/01.............. 7,850 7,794,885
Chrysler Financial Corp. [FRN]
6.60%, 06/11/01.............. 5,000 5,001,605
6.69%, 01/30/02.............. 10,000 9,999,590
Ford Motor Credit Co. [FRN]
7.052%, 06/20/03............. 16,900 16,877,929
6.563%, 04/28/05............. 19,970 19,893,096
General Motors Acceptance Corp.
6.13%, 02/01/02 [FRN]........ 18,400 18,396,522
5.55%, 09/15/03.............. 3,000 2,839,419
6.54%, 04/05/04 [FRN]........ 10,000 9,976,940
6.85%, 06/17/04.............. 2,000 1,957,304
Goldman Sachs Group, Inc. [FRN]
6.511%, 07/17/00............. 20,000 20,006,320
Household Finance Corp. [FRN]
5.607%, 06/17/05............. 30,500 30,386,601
Lehman Brothers Holdings, Inc.
Cl-E [FRN]
6.979%, 04/02/02............. 10,400 10,450,263
Merrill Lynch & Co., Inc. [FRN]
6.12%, 07/24/00.............. 2,650 2,653,207
New England Educational Loan
Marketing Assoc. Cl-B [FRN]
144A
5.681%, 09/11/00............. 10,000 10,000,930
AST PIMCO TOTAL RETURN BOND PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
Salomon Smith Barney Holdings
[FRN]
6.939%, 02/11/03............. $ 6,000 $ 5,999,286
St. George Holdings [FRN] 144A
5.25%, 07/01/01.............. 30,000 29,953,125
--------------
202,187,022
--------------
HEALTHCARE SERVICES -- 0.2%
Tenet Healthcare Corp.
8.00%, 01/15/05.............. 2,000 1,930,000
--------------
INSURANCE -- 0.9%
Gold Eagle Capital [FRN] 144A
11.453%, 07/17/00............ 10,000 10,001,000
--------------
OIL & GAS -- 2.6%
Conoco, Inc.
5.90%, 04/15/04.............. 20,000 19,067,600
Phillips Petroleum Co.
8.50%, 05/25/05.............. 10,000 10,358,830
--------------
29,426,430
--------------
RAILROADS -- 0.4%
Union Pacific Co.
7.875%, 02/15/02............. 5,000 5,038,925
--------------
REAL ESTATE -- 0.4%
Spieker Properties, Inc. L.P.
6.95%, 12/15/02.............. 5,000 4,886,565
--------------
TELECOMMUNICATIONS -- 5.2%
AT&T Capital Corp. Cl-F
6.25%, 05/15/01.............. 13,100 12,994,283
Sprint Corp.
9.50%, 04/01/03.............. 22,500 23,832,877
TCI Communications, Inc. [FRN]
5.985%, 09/11/00............. 10,000 10,010,900
US West Communications
7.20%, 11/10/26.............. 13,250 11,739,858
--------------
58,577,918
--------------
UTILITIES -- 2.9%
Alliant Energy Resources 144A
7.25%, 02/15/30.............. 50 34,500
Connecticut Light & Power Co.
144A
8.59%, 06/05/03.............. 5,000 4,870,550
Connecticut Light & Power Co.
Cl-C
7.75%, 06/01/02.............. 4,000 4,016,124
Entergy Louisiana, Inc.
8.50%, 06/01/03.............. 12,000 12,176,604
Louisiana Power & Light Corp.
7.74%, 07/01/02.............. 1,890 1,886,297
Petroleos Mexicanos Co. [FRN]
144A
9.437%, 07/15/05............. 10,000 10,000,000
--------------
32,984,075
--------------
TOTAL CORPORATE OBLIGATIONS
(Cost $461,315,808).............. 456,609,309
--------------
PAR
(000) VALUE
----- -----
COLLATERALIZED MORTGAGE OBLIGATIONS -- 28.0%
Chase Series 1999-S8 Cl-A1
6.35%, 06/25/29.............. $ 7,000 $ 6,860,175
Citicorp Mortgage Securities,
Inc. [VR]
7.263%, 10/25/22............. 238 243,477
CMC Securities Corp. III Series
1998-1 Cl-A19
6.75%, 05/25/28.............. 36,592 34,064,153
Conseco Finance Home
Improvement Series 1999-G
Cl-M1
8.88%, 06/15/24.............. 9,250 9,266,326
Contimortgage Home Equity Loan
Trust Cl-A2 [VR]
6.693%, 10/15/12............. 1,919 1,920,237
Countrywide Home Loans [VR]
7.896%, 03/25/24............. 115 114,747
8.643%, 11/25/24............. 15 14,834
Credit Suisse First Boston,
Inc. Series 1998-1 Cl-A5
6.75%, 09/25/28.............. 3,500 3,253,828
DLJ Mortgage Acceptance Corp.
Series 1999-1 Cl-1A3
6.625%, 01/25/29............. 18,800 17,246,086
First Plus Home Loan Trust
Series 1998-5 Cl-A3 [VR]
6.06%, 09/10/11.............. 3,781 3,773,510
Freddie Mac Series 2145 Cl-MZ
6.50%, 04/15/29.............. 10,840 8,608,049
Green Tree Financial Corp. 1999
Cl-A5
7.86%, 04/01/31.............. 10,400 9,747,556
Green Tree Recreational
Equipment Series 1999-A Cl-A4
6.43%, 04/17/06.............. 2,000 1,984,530
Mellon Bank Home Equity
Installment Loan Series
1999-1 Cl-A1
5.90%, 06/25/01.............. 15,605 15,451,085
Merrill Lynch Mortgage
Investors, Inc. 1998-C3 C1-A1
5.65%, 12/15/30.............. 7,686 7,256,768
Nationslink Funding Corp.
Series 1999-SL Cl-A4
6.654%, 02/10/06............. 500 481,793
PHH Mortgage Services Corp.
Series 1997-6 Cl-A4 144A
7.018%, 11/18/27............. 15,788 15,033,197
PNC Mortgage Securities Corp.
Series 1997-3 Cl-2A4
7.50%, 05/25/27.............. 14,475 14,186,658
PNC Mortgage Securities Corp.
Series 1998-1 Cl-5A4
6.98%, 02/25/28.............. 18,663 17,537,040
PNC Mortgage Securities Corp.
Series 1999-5 Cl-1A9
6.30%, 06/25/29.............. 66,610 63,633,198
AST PIMCO TOTAL RETURN BOND PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
Prudential-Bache Trust
8.40%, 03/20/21.............. $ 1,542 $ 1,568,941
Residential Funding Mortgage
Securities I Series 1997-S15
Cl-A1
7.00%, 10/25/27.............. 5,214 5,182,746
Residential Funding Mortgage
Securities Series 1998-S30
Cl-A6
6.50%, 12/25/28.............. 32,359 29,500,915
Residential Funding Mortgage
Securities Series 1999-16
Cl-A4
6.75%, 07/30/29.............. 10,000 9,231,450
Rothschild, (L.F.) Mortgage
Trust
9.95%, 08/01/17.............. 889 938,652
Salomon Brothers Mortgage
1999-3-A
6.99%, 05/25/29.............. 13,161 13,165,052
Structured Asset Mortgage
Investments, Inc.
6.30%, 04/25/29.............. 28,519 27,167,342
--------------
(Cost $331,611,367)............ 317,432,345
--------------
U.S. TREASURY OBLIGATIONS -- 4.8%
U.S. Treasury Bills
5.59%, 09/21/00#............. 50 49,373
5.65%, 09/21/00#............. 505 498,671
5.73%, 09/21/00#............. 815 804,785
--------------
1,352,829
--------------
U.S. Treasury Inflationary
Bonds
3.625%, 07/15/02-01/15/08#... 26,100 27,339,792
3.375%, 01/15/07............. 15,000 15,559,920
3.875%, 01/15/09-04/15/29.... 5,300 5,486,701
--------------
48,386,413
--------------
U.S. Treasury Notes
5.125%, 08/31/00#............ 4,135 4,128,541
--------------
(Cost $52,784,825)............. 53,867,783
--------------
BANK LOAN OBLIGATIONS -- 1.7%
Columbia HCA Healthcare Corp.++
8.25%, 07/12/00.............. 3,000 2,955,000
Flag Corp.++
8.422%, 08/31/00............. 1,500 1,492,500
Kansas City Southern Corp.++
8.563%, 07/15/00............. 2,000 2,000,000
Nextel, Inc.++
9.09%, 09/30/00.............. 1,000 992,600
Protective Life Fund [FRN]++
6.38%, 07/17/00.............. 10,000 9,985,000
Voicestream, Inc.++
8.837%, 08/23/00............. 2,000 1,974,600
--------------
(Cost $19,478,063)............. 19,399,700
--------------
PAR
(000) VALUE
----- -----
SOVEREIGN ISSUES -- 1.7%
ARGENTINA -- 0.2%
Republic of Argentina [BRB,
FRB]
11.595%, 04/10/05............ $ 3,000 $ 2,797,500
--------------
BRAZIL -- 1.1%
Republic of Brazil
6.938%, 04/15/06 [BRB,
FRN]....................... 6,580 6,000,302
12.25%, 03/06/30............. 6,250 5,750,000
--------------
11,750,302
--------------
PHILIPPINES -- 0.4%
Bangko Sentral Pilipinas
8.60%, 06/15/27.............. 6,000 4,275,000
--------------
TOTAL SOVEREIGN ISSUES
(Cost $19,451,801)............... 18,822,802
--------------
PRINCIPAL
IN LOCAL
CURRENCY
(000)
---------
FOREIGN BONDS -- 0.9%
GERMANY -- 0.6%
Bundesrepublic Germany
6.25%, 01/04/24.............. 920 955,717
6.25%, 01/04/30.............. 5,260 5,634,634
--------------
6,590,351
--------------
NEW ZEALAND -- 0.3%
Inter-American Development Bank
5.75%, 04/15/04.............. 5,700 2,535,719
International Bank
Reconstruction & Development
7.25%, 05/27/03.............. 1,500 700,115
--------------
3,235,834
--------------
TOTAL FOREIGN BONDS
(Cost $9,968,464)................ 9,826,185
--------------
PAR
(000)
-----
COMMERCIAL PAPER -- 9.9%
American Electric Power+
6.86%, 08/24/00.............. $ 16,300 16,132,273
Burlington Northern Corp.+
6.86%, 07/06/00.............. 13,700 13,686,947
Compaq Computer Corp.
6.85%, 08/09/00.............. 16,000 15,881,267
Conagra, Inc.
6.77%, 08/23/00.............. 900 890,922
Conoco, Inc.+
6.82%, 08/23/00.............. 12,400 12,275,497
CSX Corp.+
6.73%, 07/11/00.............. 20,800 20,761,115
Edison Midwest Co.+
6.86%, 08/22/00.............. 2,600 2,574,815
AST PIMCO TOTAL RETURN BOND PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
General Electric Capital Corp.
6.58%, 09/13/00.............. $ 6,000 $ 5,921,280
Texas Utilities Co.+
6.80%, 07/07/00.............. 3,500 3,496,033
Tyco International Ltd.+
6.86%, 07/26/00.............. 6,900 6,867,129
UBS Finance, Inc.
6.92%, 07/05/00.............. 13,300 13,289,774
--------------
(Cost $111,774,149)............ 111,777,052
--------------
SHARES
------
SHORT-TERM INVESTMENTS -- 0.9%
Temporary Investment Cash
Fund......................... 4,848,988 4,848,988
Temporary Investment Fund...... 4,848,987 4,848,987
--------------
(Cost $9,697,975).............. 9,697,975
--------------
TOTAL INVESTMENTS -- 132.8%
(Cost $1,527,046,101)............ 1,505,577,878
--------------
NUMBER
OF
CONTRACTS
---------
WRITTEN OPTIONS -- 0.0%
CALL OPTIONS
10 Year September U.S. Treasury
Note Futures,
Strike Price $100,
Expires 08/19/00............. 316 (118,500)
March 2001 Eurodollar Futures,
Strike Price 93.25,
Expires 03/19/01............. 524 (144,100)
Swap between Fixed Rate and 3
Month LIBOR-BBA,
Strike Price 7.00,
Expires 09/15/00............. 483 (42,842)
Swap between Fixed Rate and 3
Month LIBOR-BBA,
Strike Price 7.00,
Expires 09/22/00............. 209 (22,355)
Swap between Fixed Rate and 3
Month LIBOR-BBA,
Strike Price 7.00,
Expires 09/28/00............. 240 (45,936)
--------------
(373,733)
--------------
PUT OPTIONS
December Eurodollar Futures,
Strike Price 93.5,
Expires 12/18/00............. 99 (7,425)
March 2001 Eurodollar Futures,
Strike Price 92.25,
Expires 03/19/01............. 442 (77,350)
NUMBER
OF
CONTRACTS VALUE
--------- -----
March 2001 Eurodollar Futures,
Strike Price 92.75,
Expires 03/19/01............. 57 $ (27,075)
September 30 Year U.S. Treasury
Bond Futures,
Strike Price $94,
Expires 08/19/00............. 44 (15,812)
Swap between 6 Month LIBOR-BBA
and 10 Year Japanese
Government Bond Futures,
Strike Price 2.215,
Expires 08/31/00............. 103 (6,425)
--------------
(134,087)
--------------
TOTAL WRITTEN OPTIONS
(Cost $(711,312))................ (507,820)
--------------
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (32.8%)................ (371,665,091)
--------------
NET ASSETS -- 100.0%............... $1,133,404,967
==============
Foreign currency exchange contracts outstanding at June 30, 2000:
IN UNREALIZED
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS APPRECIATION/
MONTH TYPE TO DELIVER FOR AT VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------
07/00 Sell EUR 3,672,000 $3,491,762 $3,524,482 $(32,720)
08/00 Sell EUR 3,902,000 3,691,916 3,750,913 (58,997)
07/00 Sell NZD 5,691,000 2,726,387 2,679,000 47,387
---------- ---------- --------
$9,910,065 $9,954,395 $(44,330)
========== ========== ========
# Securities with an aggregate market value of $5,779,495 have been segregated
with the custodian to cover margin requirements for the following open
futures contracts at June 30, 2000:
NOTIONAL UNREALIZED
EXPIRATION AMOUNT APPRECIATION/
DESCRIPTION MONTH (000) (DEPRECIATION)
- ----------------------------------------------------------------------
Short U.S. Treasury 5
Year Note............. 09/00 $(60,600) $ (231,984)
Short 10 Year U.K.
Gilt.................. 09/00 GBP (37,000) 126,959
U.S. Treasury 10 Year
Note.................. 09/00 275,000 5,820,609
10 Year Euro Bond....... 09/00 EUR 3,900 12,436
Eurodollar.............. 03/01 EUR 99,250 259,850
----------
$5,987,870
==========
AST PIMCO TOTAL RETURN BOND PORTFOLIO
- ------------------------------------------------------------------------------
Interest rate swap agreements outstanding at June 30, 2000:
NOTIONAL UNREALIZED
EXPIRATION AMOUNT APPRECIATION/
DESCRIPTION MONTH (000) (DEPRECIATION)
- ----------------------------------------------------------------------
Receive variable rate
payments on the six
month LIBOR-BBA
floating rate +0.499%
and pay fixed rate
payments of 6.00%..... 01/09 EUR 4,250 $ 76,257
Receive variable rate
payments on the six
month LIBOR-BBA
floating rate -0.54%
and pay fixed rate
payments of 6.25%..... 01/24 EUR 920 (80,779)
Receive variable rate
payments on the three
month LIBOR-BBA
floating rate -0.59%
and pay fixed rate
payments of 6.01%..... 01/30 EUR 2,700 17,193
Receive variable rate
payments on the six
month LIBOR-BBA
floating rate and pay
fixed rate payments of
6.175%................ 05/30 EUR 3,210 (49,122)
Receive variable rate
payments on the six
month LIBOR-BBA
floating rate and pay
fixed rate payments of
2.295% on the Japanese
10 Year Government
Bond.................. 04/08 JPY 580,000 (220,199)
NOTIONAL UNREALIZED
EXPIRATION AMOUNT APPRECIATION/
DESCRIPTION MONTH (000) (DEPRECIATION)
- ----------------------------------------------------------------------
Receive variable rate
payments on the six
month LIBOR-BBA
floating rate and pay
fixed rate payments of
2.305% on the Japanese
10 Year Government
Bond.................. 04/08 JPY 377,000 $(145,485)
Receive fixed rate
payments of 7.47% and
pay variable rate
payments on the three
month LIBOR-BBA
floating rate......... 05/10 $ 10,000 346,660
---------
$ (55,475)
=========
Credit default swap agreements outstanding at June 30, 2000:
NOTIONAL
EXPIRATION AMOUNT UNREALIZED
DESCRIPTION MONTH (000) DEPRECIATION
- -----------------------------------------------------------------------
Pay fixed rate equal to
6.15% and the Portfolio
will receive from the
counterparty at par in
the event of default of
the Republic of
Argentina 9.25% due
02/23/01............... 03/01 $ 500 $26,654
Pay fixed rate equal to
5.70% and the Portfolio
will receive from the
counterparty at par in
the event of default of
the Republic of
Argentina 9.25% due
02/23/01............... 03/01 1,000 46,277
-------
$72,931
=======
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
+ Security is restricted as to resale and may not be resold except to qualified
institutional buyers. At the end of the period, these securities amounted to
6.7% of net assets.
++ Illiquid security. At the end of the period, these securities amounted to
1.7% of net assets.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 9.9% of net assets.
See Notes to Financial Statements.
AST INVESCO EQUITY INCOME PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 72.2%
ADVERTISING -- 0.6%
Omnicom Group, Inc. ........... 75,000 $ 6,679,688
--------------
AEROSPACE -- 3.4%
Boeing Co. .................... 290,000 12,125,625
General Motors Corp. Cl-H*..... 176,500 15,487,875
Honeywell International,
Inc. ........................ 163,400 5,504,538
Northrop Grumman Corp. ........ 86,700 5,743,882
--------------
38,861,920
--------------
AUTOMOBILE MANUFACTURERS -- 0.8%
Ford Motor Co. ................ 200,000 8,600,000
--------------
BEVERAGES -- 2.5%
Anheuser-Busch Companies,
Inc. ........................ 185,500 13,854,531
Coors, (Adolph) Co. Cl-B....... 240,000 14,520,000
--------------
28,374,531
--------------
BROADCASTING -- 0.8%
AT&T Corp. Liberty Media Group
Cl-A*........................ 391,000 9,481,750
--------------
CHEMICALS -- 0.5%
Lyondell Chemical Co. ......... 326,200 5,463,850
--------------
COMPUTER SERVICES & SOFTWARE -- 1.9%
Cisco Systems, Inc.*........... 286,000 18,178,875
SAP AG [ADR]................... 80,000 3,755,000
--------------
21,933,875
--------------
CONGLOMERATES -- 1.2%
Minnesota Mining &
Manufacturing Co. ........... 71,000 5,857,500
Textron, Inc................... 138,000 7,495,125
--------------
13,352,625
--------------
CONSUMER PRODUCTS & SERVICES -- 2.2%
Colgate-Palmolive Co. ......... 203,100 12,160,613
Gillette Co. .................. 360,000 12,577,500
--------------
24,738,113
--------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 3.5%
General Electric Co. .......... 480,000 24,480,000
Texas Instruments, Inc. ....... 229,400 15,756,913
--------------
40,236,913
--------------
ENERGY SERVICES -- 0.4%
Scottish Power PLC [ADR]....... 145,000 4,848,438
--------------
ENTERTAINMENT & LEISURE -- 0.5%
Harrah's Entertainment,
Inc.*........................ 220,000 4,606,250
Park Place Entertainment
Corp.*....................... 106,600 1,299,188
--------------
5,905,438
--------------
FINANCIAL-BANK & TRUST -- 5.9%
Bank of America Corp. ......... 210,000 9,030,000
Bank of New York Co., Inc. .... 500,000 23,249,999
Charter One Financial, Inc. ... 327,600 7,534,800
SHARES VALUE
------ -----
Chase Manhattan Corp. ......... 255,000 $ 11,745,938
Morgan, (J.P.) & Co., Inc. .... 100,000 11,012,500
Summit Bancorp................. 200,000 4,925,000
--------------
67,498,237
--------------
FINANCIAL SERVICES -- 3.8%
Citigroup, Inc. ............... 300,000 18,075,000
Morgan Stanley Dean Witter &
Co. ......................... 170,000 14,152,500
Wells Fargo & Co............... 285,000 11,043,750
--------------
43,271,250
--------------
FOOD -- 3.5%
General Mills, Inc. ........... 280,000 10,710,000
Heinz, (H.J.) Co. ............. 200,000 8,750,000
Kellogg Co. ................... 250,000 7,437,500
Quaker Oats Co. ............... 180,000 13,522,500
--------------
40,420,000
--------------
INSURANCE -- 4.2%
Allmerica Financial Corp. ..... 370,363 19,397,761
John Hancock Financial
Services, Inc.*.............. 600,000 14,212,500
MetLife, Inc.*................. 560,000 11,795,000
Ohio Casualty Corp. ........... 300,000 3,187,500
--------------
48,592,761
--------------
INTERNET SERVICES -- 0.7%
America Online, Inc.*.......... 160,000 8,440,000
--------------
MACHINERY & EQUIPMENT -- 0.6%
Illinois Tool Works, Inc. ..... 130,000 7,410,000
--------------
METALS & MINING -- 0.0%
Newmont Mining Corp. .......... 7,494 162,058
--------------
OIL & GAS -- 7.5%
Apache Corp. .................. 256,600 15,091,288
BP Amoco PLC [ADR]............. 250,000 14,140,625
Exxon Mobil Corp. ............. 240,000 18,854,999
Royal Dutch Petroleum Co. ..... 180,000 11,081,250
Schlumberger Ltd. ............. 220,000 16,417,500
Unocal Corp. .................. 320,000 10,600,000
--------------
86,185,662
--------------
PAPER & FOREST PRODUCTS -- 1.0%
Bowater, Inc. ................. 64,000 2,824,000
Temple-Inland, Inc. ........... 48,000 2,016,000
Weyerhaeuser Co. .............. 142,900 6,144,700
--------------
10,984,700
--------------
PHARMACEUTICALS -- 5.9%
American Home Products
Corp. ....................... 300,000 17,625,000
Merck & Co., Inc. ............. 182,000 13,945,750
Pfizer, Inc. .................. 475,750 22,835,999
Pharmacia Corp. ............... 250,000 12,921,875
--------------
67,328,624
--------------
AST INVESCO EQUITY INCOME PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
RAILROADS -- 3.6%
Kansas City Southern
Industries, Inc. ............ 390,000 $ 34,588,125
Norfolk Southern Corp. ........ 419,700 6,243,038
--------------
40,831,163
--------------
RETAIL & MERCHANDISING -- 3.1%
RadioShack Corp................ 380,000 18,002,500
Target Corp. .................. 300,000 17,400,000
--------------
35,402,500
--------------
SEMICONDUCTORS -- 3.3%
Intel Corp. ................... 145,500 19,451,531
Maxim Integrated Products,
Inc.*........................ 273,000 18,546,938
--------------
37,998,469
--------------
TELECOMMUNICATIONS -- 8.9%
AT&T Corp. .................... 150,000 4,743,750
Bell Atlantic Corp.*........... 200,000 10,162,500
BellSouth Corp. ............... 240,000 10,230,000
Cable & Wireless Communications
PLC.......................... 210,000 10,513,125
Cox Communications, Inc.
Cl-A*........................ 147,100 6,702,244
Crown Castle International
Corp.*....................... 155,000 5,657,500
EchoStar Communications Corp.
Cl-A*........................ 146,000 4,833,969
Nortel Networks Corp. NY
Reg.*........................ 258,000 17,608,499
SBC Communications, Inc. ...... 328,500 14,207,625
U.S. West, Inc. ............... 200,000 17,150,000
--------------
101,809,212
--------------
UTILITIES -- 1.9%
Alliant Energy Corp. .......... 88,400 2,298,400
Duke Energy Corp. ............. 129,000 7,272,375
Enron Corp. ................... 100,000 6,450,000
PG&E Corp. .................... 230,000 5,663,750
--------------
21,684,525
--------------
TOTAL COMMON STOCK
(Cost $653,787,131).............. 826,496,302
--------------
PAR
(000)
----------
CORPORATE OBLIGATIONS -- 20.6%
BROADCASTING -- 0.5%
Chancellor Media Corp.
8.00%, 11/01/08.............. $ 2,000 2,017,500
Chancellor Media Corp. L.A.
Cl-B
8.125%, 12/15/07............. 4,000 4,045,000
--------------
6,062,500
--------------
BUILDING MATERIALS -- 0.3%
USG Corp.
8.50%, 08/01/05.............. 3,500 3,607,835
--------------
BUSINESS SERVICES -- 0.1%
Intermedia Communications, Inc.
[STEP]
12.25%, 03/01/09............. 1,000 607,500
--------------
PAR
(000) VALUE
---------- --------------
CABLE TELEVISION -- 0.6%
Charter Communication Holdings
LLC
8.625%, 04/01/09............. $ 2,000 $ 1,767,500
Comcast U.K. Cable Corp. [STEP]
10.243%, 11/15/07............ 4,000 3,750,000
Diamond Cable Communications
PLC [STEP]
15.643%, 12/15/05............ 1,500 1,430,625
--------------
6,948,125
--------------
CHEMICALS -- 0.2%
Equistar Chemicals L.P.
7.55%, 02/15/26.............. 2,225 1,785,233
--------------
COMPUTER SERVICES & SOFTWARE -- 0.6%
Juniper Networks, Inc.
4.75%, 03/15/07.............. 6,300 6,890,625
--------------
ENTERTAINMENT & LEISURE -- 0.1%
Park Place Entertainment
9.375%, 02/15/07............. 1,500 1,507,500
--------------
FINANCIAL SERVICES -- 1.1%
Associates Corp. of North
America Cl-E
7.375%, 06/11/07............. 2,400 2,375,736
Resolution Funding Corp. [ZCB]
6.58%, 04/15/09.............. 18,000 10,159,902
--------------
12,535,638
--------------
HEALTHCARE SERVICES -- 0.1%
FHP International Corp.
7.00%, 09/15/03.............. 1,000 956,095
--------------
HOTELS & MOTELS -- 0.2%
Hilton Hotels Corp.
7.20%, 12/15/09.............. 2,000 1,754,614
--------------
INDUSTRIAL PRODUCTS -- 0.4%
Heritage Media Corp.
8.75%, 02/15/06.............. 1,500 1,477,500
Inland Steel Co. Cl-R
7.90%, 01/15/07.............. 2,000 1,790,000
National Steel Corp.
8.375%, 08/01/06............. 1,500 1,267,500
--------------
4,535,000
--------------
INSURANCE -- 0.4%
The Equitable Companies, Inc.
9.00%, 12/15/04.............. 4,035 4,243,807
--------------
INTERNET SERVICES -- 0.2%
Call-Net Enterprises, Inc.
[STEP]
10.80%, 05/15/09............. 2,000 730,000
PSINet, Inc. Cl-B
10.00%, 02/15/05............. 2,100 1,942,500
--------------
2,672,500
--------------
AST INVESCO EQUITY INCOME PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
---------- --------------
MACHINERY & EQUIPMENT -- 0.2%
NationsRent, Inc.
10.375%, 12/15/08............ $ 1,950 $ 1,257,750
United Rentals, Inc.
9.25%, 01/15/09.............. 750 680,625
--------------
1,938,375
--------------
OIL & GAS -- 1.1%
Atlantic Richfield Co.
10.875%, 07/15/05............ 3,000 3,463,740
Canadian Forest Oil Ltd.
8.75%, 09/15/07.............. 1,500 1,417,500
Cliffs Drilling Co. Cl-B
10.25%, 05/15/03............. 1,160 1,168,700
CMS Panhandle Holding Co.
6.50%, 07/15/09.............. 2,000 1,792,590
Gulf Canada Resources Ltd.
8.35%, 08/01/06.............. 1,000 995,000
8.25%, 03/15/17.............. 1,000 925,000
Noram Energy Corp. [CVT]
6.00%, 03/15/12.............. 1,929 1,687,875
Snyder Oil Corp.
8.75%, 06/15/07.............. 650 656,500
Sun Co., Inc.
9.375%, 06/01/16............. 1,000 1,041,472
--------------
13,148,377
--------------
PAPER & FOREST PRODUCTS -- 0.8%
Bowater, Inc.
9.00%, 08/01/09.............. 2,000 2,087,376
Chesapeake Corp.
7.20%, 03/15/05.............. 5,000 4,663,450
Quno Corp.
9.125%, 05/15/05............. 2,150 2,197,887
--------------
8,948,713
--------------
PHARMACEUTICALS -- 0.1%
Pharmerica, Inc.
8.375%, 04/01/08............. 2,000 1,110,000
--------------
PRINTING & PUBLISHING -- 0.3%
TV Guide, Inc.
8.125%, 03/01/09............. 500 501,250
World Color Press, Inc.
7.75%, 02/15/09.............. 3,000 2,782,500
--------------
3,283,750
--------------
TELECOMMUNICATIONS -- 5.5%
Allegiance Telecom, Inc. Cl-B
[STEP]
11.489%, 02/15/08............ 1,500 1,095,000
AT&T Corp.
6.00%, 03/15/09.............. 2,000 1,786,190
Centel Capital Corp.
9.00%, 10/15/19.............. 2,500 2,756,958
East Telecom Group PLC
10.089%, 02/01/07 [STEP]..... 2,000 1,900,000
11.875%, 12/01/08............ 1,000 1,182,500
GTE Corp.
7.90%, 02/01/27.............. 4,000 3,802,944
PAR
(000) VALUE
---------- --------------
Level 3 Communications, Inc.
11.826%, 12/01/08 [STEP]..... $ 6,250 $ 3,828,125
Lin Television Co.
8.375%, 03/01/08............. 2,000 1,830,000
McLeodUSA, Inc.
10.994%, 03/01/07 [STEP]..... 2,500 2,062,500
9.50%, 11/01/08.............. 1,000 982,500
MetroNet Communications Corp.
[STEP]
10.75%, 11/01/07............. 1,750 1,540,000
8.195%, 06/15/08............. 10,700 8,720,500
NEXTLINK Communications, Inc.
12.50%, 04/15/06............. 1,000 1,050,000
9.625%, 10/01/07............. 2,500 2,368,750
Paramount Communication 8.25%,
08/01/22..................... 4,250 4,118,271
Qwest Communications
International, Inc. Cl-B
[STEP]
8.174%, 02/01/08............. 6,000 4,740,000
RCN Corp.
10.125%, 01/15/10............ 1,500 1,256,250
Renaissance Media Group [STEP]
9.587%, 04/15/08............. 2,200 1,507,000
Rogers Cantel, Inc.
9.75%, 06/01/16.............. 5,500 5,953,750
TCI Telecommunications, Inc.
7.875%, 02/15/26............. 2,500 2,490,130
TeleCommunications, Inc.
9.80%, 02/01/12.............. 2,000 2,299,382
Time Warner Telecom LLC
9.75%, 07/15/08.............. 2,000 1,945,000
US West Communications
5.65%, 11/01/04.............. 5,000 4,619,995
--------------
63,835,745
--------------
UTILITIES -- 7.8%
Arizona Public Service Co.
8.00%, 02/01/25.............. 3,000 2,855,583
Cleveland Electric Illuminating
Co.
9.00%, 07/01/23.............. 1,000 995,840
Cleveland Electric Illuminating
Co. Cl-B
9.50%, 05/15/05.............. 3,000 3,058,089
Cleveland Electric Illuminating
Co. Cl-D
7.88%, 11/01/17.............. 2,500 2,394,010
Commonwealth Edison Co.
7.00%, 07/01/05.............. 2,500 2,432,893
8.25%, 10/01/06.............. 2,000 2,044,536
8.625%, 02/01/22............. 3,000 2,968,542
8.375%, 02/15/23............. 400 394,683
Consumers Energy Co.
7.375%, 09/15/23............. 2,500 2,235,963
Duquesne Light Co.
7.55%, 06/15/25.............. 4,500 4,120,542
El Paso Electric Co.
8.90%, 02/01/06.............. 4,950 5,110,874
AST INVESCO EQUITY INCOME PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
---------- --------------
El Paso Electric Co. Cl-C
8.25%, 02/01/03.............. $ 1,500 $ 1,510,077
Gulf Power Co.
6.875%, 01/01/26............. 3,000 2,596,158
Gulf States Utilities
8.70%, 04/01/24.............. 1,000 997,823
Indiana Michigan Power
8.50%, 12/15/22.............. 4,000 3,991,144
Jersey Central Power & Light
Co.
7.98%, 02/16/23.............. 1,500 1,417,364
7.50%, 05/01/23.............. 2,500 2,304,298
Kentucky Utility Energy Corp.
7.55%, 06/01/25.............. 1,500 1,401,380
Metropolitan Edison Co. Cl-B
8.15%, 01/30/23.............. 2,975 2,881,728
New York State Electric & Gas
Corp. 8.30%, 12/15/22........ 1,400 1,375,626
8.30%, 12/15/22.............. 475 471,813
Niagara Mohawk Power Corp.
8.75%, 04/01/22.............. 2,683 2,716,760
8.50%, 07/01/23.............. 1,000 1,000,576
Niagara Mohawk Power Corp. Cl-H
[STEP]
7.562%, 07/01/10............. 3,250 2,502,500
Penn Power Co.
8.50%, 07/15/22.............. 1,000 972,379
Potomac Edison Co.
8.00%, 06/01/24.............. 2,000 1,932,898
7.75%, 05/01/25.............. 3,400 3,227,171
Potomac Electric Power
8.50%, 05/15/27.............. 1,000 1,019,965
Public Service Electric & Gas
Co.
6.375%, 05/01/08............. 1,000 934,376
Public Service of Colorado
9.875%, 07/01/20............. 2,500 2,617,635
Public Service of New Mexico
7.50%, 08/01/18.............. 1,500 1,391,286
Public Service of New Mexico
Cl-A
7.10%, 08/01/05.............. 3,500 3,383,188
Texas Utilities
8.50%, 08/01/24.............. 5,000 4,951,109
TXU Corp.
7.875%, 04/01/24............. 4,000 3,778,368
TXU Electric Capital Corp.
8.175%, 01/30/37............. 2,000 2,004,218
Union Electric Co.
8.25%, 10/15/22.............. 4,750 4,697,573
Western Massachusetts Electric
Co. Cl-V
7.75%, 12/01/02.............. 941 934,241
Wisconsin Electric & Power
8.375%, 12/02/26............. 4,500 4,498,349
--------------
90,121,558
--------------
TOTAL CORPORATE OBLIGATIONS
(Cost $250,754,014).............. 236,493,490
--------------
PAR
(000) VALUE
---------- --------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 1.0%
Federal Home Loan Mortgage
Corp.
6.50%, 09/01/11-02/01/30
(Cost $12,018,382)............. $ 12,444 $ 12,023,202
--------------
U.S. TREASURY OBLIGATIONS -- 0.9%
U.S. Treasury Notes
5.875%, 11/15/04
(Cost $9,763,015).............. 10,000 9,850,242
--------------
SHARES
------
PREFERRED STOCK -- 0.4%
METALS & MINING -- 0.0%
Kinam Gold, Inc. $3.75 Cl-B.... 20,000 450,000
--------------
TELECOMMUNICATIONS -- 0.4%
Cincinnati Bell, Inc. Cl-B
12.50%....................... 3,500 3,543,750
Global Crossing Holdings Ltd.
10.50% [PIK]................. 10,000 967,500
--------------
4,511,250
--------------
TOTAL PREFERRED STOCK
(Cost $5,819,700)................ 4,961,250
--------------
PAR
(000)
----------
COMMERCIAL PAPER -- 2.3%
Chevron Corp.
6.72%, 07/06/00.............. $ 16,000 16,000,000
Ford Motor Credit Corp.
6.72%, 07/03/00.............. 10,000 10,000,000
--------------
(Cost $26,000,000)............. 26,000,000
--------------
SHARES
------
SHORT-TERM INVESTMENTS -- 3.3%
Temporary Investment Cash
Fund......................... 18,668,774 18,668,774
Temporary Investment Fund...... 18,668,774 18,668,774
--------------
(Cost $37,337,548)............. 37,337,548
--------------
TOTAL INVESTMENTS -- 100.7%
(Cost $995,479,790).............. 1,153,162,034
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.7%)................. (7,725,888)
--------------
NET ASSETS -- 100.0%............... $1,145,436,146
==============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST JANUS SMALL-CAP GROWTH PORTFOLIO
- -----------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 94.8%
ADVERTISING -- 3.7%
Getty Images, Inc.*............. 176,435 $ 6,539,122
Interep National Radio Sales,
Inc.*......................... 180,335 958,030
Lamar Advertising Co.*.......... 303,945 13,164,618
TMP Worldwide, Inc.*............ 250,535 18,492,614
--------------
39,154,384
--------------
BROADCASTING -- 8.4%
Acme Communications, Inc.*...... 166,100 3,031,325
ACTV, Inc.*..................... 97,890 1,462,232
Citadel Communications Corp.*... 418,630 14,625,885
Cox Radio, Inc.*................ 254,530 7,126,840
Cumulus Media, Inc.*............ 238,350 2,174,944
Entercom Communications
Corp.*........................ 172,715 8,419,856
NDS Group PLC*.................. 163,420 9,968,620
Radio One, Inc.*................ 301,475 8,912,355
Radio One, Inc. Cl-D*........... 602,950 13,302,584
Radio Unica Corp.*.............. 273,750 1,916,250
Regent Communications, Inc.*.... 775,600 6,665,313
Spanish Broadcasting Systems,
Inc.*......................... 434,580 8,936,051
Wink Communications, Inc.*...... 69,920 2,132,560
--------------
88,674,815
--------------
BUSINESS SERVICES -- 5.8%
Adelphia Business Solutions,
Inc.*......................... 349,925 8,113,886
AnswerThink Consulting Group,
Inc.*......................... 181,220 3,012,783
Avenue A, Inc.*................. 93,905 827,538
Brightpoint, Inc.*.............. 427,145 3,697,474
CIBER, Inc.*.................... 363,560 4,817,170
Eloyalty Corp.*................. 134,405 1,713,664
Informatica Corp.*.............. 250,180 20,499,123
Iron Mountain, Inc.*............ 137,980 4,527,469
PurchasePro.com, Inc.*.......... 274,915 11,271,514
Tanning Technology Corp.*....... 137,455 2,646,009
--------------
61,126,630
--------------
CABLE TELEVISION -- 0.2%
Classic Communications, Inc.*... 177,870 1,589,713
--------------
CAPITAL GOODS -- 0.7%
Mettler-Toledo International,
Inc.*......................... 177,270 7,057,562
--------------
CHEMICALS -- 0.6%
Lyondell Chemical Co. .......... 401,320 6,722,110
--------------
COMPUTER HARDWARE -- 2.3%
Insight Enterprises, Inc.*...... 405,082 24,026,426
--------------
COMPUTER SERVICES & SOFTWARE -- 8.1%
Brio Technology, Inc.*.......... 201,360 4,266,315
Broadbase Software, Inc.*....... 238,355 7,299,622
Exchange Applications, Inc.*.... 152,300 4,054,988
HNC Software, Inc.*............. 51,295 3,167,466
InterTrust Technologies
Corp.*........................ 209,940 4,316,891
JNI Corp.*...................... 19,380 612,893
Media 100, Inc.*................ 265,230 6,829,673
net.Genesis Corp.*.............. 103,625 1,871,727
NetIQ Corp.*.................... 180,985 10,791,230
Numerical Technologies, Inc.*... 89,430 4,348,534
SHARES VALUE
------ -----
OTG Software, Inc.*............. 146,325 $ 4,179,408
Pinnacle Systems, Inc.*......... 101,680 2,286,211
Quest Software, Inc.*........... 138,345 7,660,853
Razorfish, Inc.*................ 408,020 6,553,821
Scient Corp.*................... 205,645 9,074,085
Silverstream Software, Inc.*.... 99,505 5,746,414
Software.com, Inc.*............. 19,460 2,527,368
--------------
85,587,499
--------------
CONSUMER PRODUCTS & SERVICES -- 0.2%
Meade Instruments Corp.*........ 82,180 2,064,773
--------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 2.3%
Aeroflex, Inc.*................. 74,385 3,696,005
Capstone Turbine Corp.*......... 146,900 6,619,681
Dionex Corp.*................... 287,965 7,703,064
Methode Electronics, Inc.
Cl-A.......................... 128,035 4,945,352
Robotic Vision Systems, Inc.*... 89,410 1,609,380
--------------
24,573,482
--------------
ENTERTAINMENT & LEISURE -- 4.3%
Ackerley Group, Inc............. 38,865 456,664
Championship Auto Racing Teams,
Inc.*......................... 209,810 5,350,155
Park Place Entertainment
Corp.*........................ 559,480 6,818,663
Playboy Enterprises, Inc.
Cl-B*......................... 243,115 3,130,106
Premier Parks, Inc.*............ 296,635 6,748,446
SFX Entertainment, Inc. Cl-A*... 301,040 13,640,874
Station Casinos, Inc.*.......... 359,755 8,993,875
--------------
45,138,783
--------------
FINANCIAL SERVICES -- 0.8%
Investors Financial Service
Corp.......................... 219,670 8,718,153
--------------
HEALTHCARE SERVICES -- 2.2%
Accredo Health, Inc.*........... 253,690 8,768,161
Apria Healthcare Group, Inc.*... 1,140,510 13,971,247
--------------
22,739,408
--------------
HOTELS & MOTELS -- 0.3%
Hospitality Properties Trust.... 124,910 2,818,282
--------------
INSURANCE -- 0.5%
StanCorp Financial Group,
Inc. ......................... 173,315 5,567,744
--------------
INTERNET SERVICES -- 13.9%
724 Solutions, Inc.*............ 133,815 5,871,133
AppliedTheory Corp.*............ 190,375 2,855,625
AppNet Systems, Inc.*........... 354,220 12,751,920
Ask Jeeves, Inc.*............... 7,715 139,352
Digital Impact, Inc.*........... 149,650 2,113,806
eSoft, Inc.*.................... 110,850 775,950
Globix Corp.*................... 1,074,060 31,483,384
internet.com Corp.*............. 141,115 2,778,202
IntraNet Solutions, Inc.*....... 273,350 10,489,806
Lante Corp.*.................... 82,195 1,679,860
Liberate Technologies, Inc.*.... 348,165 10,205,587
NaviSite, Inc.*................. 273,150 11,421,084
PSINet, Inc.*................... 178,170 4,476,521
Rare Medium Group, Inc.*........ 112,710 1,782,227
Register.com, Inc.*............. 100,450 3,070,003
AST JANUS SMALL-CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
Retek, Inc.*.................... 66,690 $ 2,134,080
Selectica, Inc.*................ 81,905 5,738,469
Tumbleweed Communications
Corp.*........................ 38,690 1,968,354
Verio, Inc.*.................... 308,115 17,095,568
VerticalNet, Inc.*.............. 415,440 15,345,315
Vicinity Corp.*................. 103,645 2,034,033
--------------
146,210,279
--------------
MEDICAL SUPPLIES & EQUIPMENT -- 1.2%
Celera Genomics Group*.......... 64,590 6,039,165
Invitrogen Corp.*............... 87,205 6,558,089
--------------
12,597,254
--------------
OIL & GAS -- 0.3%
Core Laboratories NV*........... 119,880 3,476,520
--------------
PERSONAL SERVICES -- 0.6%
Career Education Corp.*......... 121,725 5,903,663
--------------
PHARMACEUTICALS -- 9.9%
Abgenix, Inc.*.................. 216,180 25,911,200
BioCryst Pharmaceuticals,
Inc.*......................... 316,190 9,070,701
Celgene Corp.*.................. 168,570 9,924,559
Cubist Pharmaceuticals, Inc.*... 150,580 7,416,065
Enzon, Inc.*.................... 627,560 26,671,299
Priority Healthcare Corp.
Cl-B*......................... 118,665 8,818,293
Professional Detailing, Inc.*... 193,930 6,605,741
QLT PhotoTherapeutics, Inc.*.... 119,540 9,241,936
--------------
103,659,794
--------------
PRINTING & PUBLISHING -- 1.6%
Valassis Communications,
Inc.*......................... 448,542 17,100,664
--------------
RESTAURANTS -- 0.2%
P.F. Chang's China Bistro,
Inc.*......................... 60,360 1,927,748
--------------
RETAIL & MERCHANDISING -- 1.7%
Ames Department Stores, Inc.*... 130,185 1,008,934
Linens 'n Things, Inc.*......... 152,560 4,138,190
pcOrder.com, Inc.*.............. 68,915 534,091
Rent-Way, Inc.*................. 172,165 5,089,628
School Specialty, Inc.*......... 398,055 7,388,896
--------------
18,159,739
--------------
SEMICONDUCTORS -- 13.2%
Alpha Industries, Inc.*......... 611,384 26,939,107
ATMI, Inc.*..................... 345,660 16,073,190
Marvell Technology Group
Ltd.*......................... 177,685 10,128,045
Mattson Technology, Inc.*....... 144,480 4,695,600
Pixelworks, Inc.*............... 123,445 2,808,374
Quicklogic Corp.*............... 81,720 1,818,270
SDL, Inc.*...................... 186,800 53,273,024
Silicon Image, Inc.*............ 39,740 1,982,033
TriQuint Semiconductor, Inc.*... 108,590 10,390,706
Virata Corp.*................... 184,670 11,010,949
--------------
139,119,298
--------------
TELECOMMUNICATIONS -- 11.0%
Accelerated Networks, Inc.*..... 34,185 1,442,180
Adaptive Broadband Corp.*....... 179,370 6,591,848
SHARES VALUE
------ -----
Alamosa PCS Holdings, Inc.*..... 125,455 $ 2,618,873
Avanex Corp.*................... 12,610 1,204,255
Caprock Communications Corp.*... 425,495 8,297,153
Centillium Commuications,
Inc.*......................... 50,765 3,502,785
CTC Communications Group,
Inc.*......................... 256,372 9,229,392
i3 Mobile, Inc.*................ 93,365 1,715,582
IDT Corp.*...................... 156,600 5,314,613
Interwave Communications
International Ltd.*........... 74,880 1,048,320
Natural MicroSystems Corp.*..... 161,960 18,210,377
Net2000 Communications, Inc.*... 159,240 2,607,555
Netro Corp.*.................... 53,205 3,052,637
New Focus, Inc.*................ 48,550 3,987,169
NorthEast Optic Network,
Inc.*......................... 255,630 15,753,198
Pac-West Telecomm, Inc.*........ 259,450 5,189,000
Price Communications Corp.*..... 88,300 2,080,569
Research in Motion Ltd.*........ 51,775 2,342,819
SBA Communications Corp.*....... 25,505 1,324,666
Terayon Communication Systems,
Inc.*......................... 50,585 3,249,296
Viatel, Inc.*................... 344,135 9,829,355
WinStar Communications, Inc.*... 204,270 6,919,646
--------------
115,511,288
--------------
UTILITIES -- 0.8%
Avista Corp..................... 464,955 8,107,653
--------------
TOTAL COMMON STOCK
(Cost $788,701,958)............... 997,333,664
--------------
PAR
(000)
-----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 3.3%
Federal Home Loan Bank
6.26%, 09/27/00............... $ 25,000 24,613,097
6.43%, 08/15/00............... 10,000 9,919,625
--------------
(Cost $34,537,069).............. 34,532,722
--------------
SHARES
------
FOREIGN STOCK -- 2.0%
AUTOMOBILE MANUFACTURERS - 0.0%
Ducati Motor Holding SPA --
(ITL)*........................ 187,726 524,560
--------------
ENTERTAINMENT & LEISURE -- 0.6%
Corporacion Interamericana de
Entretenimento -- (MXP)*...... 1,476,200 5,878,891
--------------
TELECOMMUNICATIONS -- 1.4%
Cogeco Cable, Inc. -- (CAD)..... 322,013 7,823,920
Moffat Communications Ltd. --
(CAD)......................... 370,130 6,744,761
--------------
14,568,681
--------------
TOTAL FOREIGN STOCK
(Cost $15,152,148)................ 20,972,132
--------------
AST JANUS SMALL-CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
CORPORATE OBLIGATIONS -- 0.3%
INTERNET SERVICES -- 0.2%
Globix Corp.
12.50%, 02/01/10.............. $ 877 $ 723,525
Verio, Inc.
11.25%, 12/01/08.............. 1,430 1,612,325
--------------
2,335,850
--------------
TELECOMMUNICATIONS -- 0.1%
Radio One, Inc. Cl-B
12.00%, 05/15/04.............. 1,174 1,273,790
--------------
TOTAL CORPORATE OBLIGATIONS
(Cost $3,653,142)................. 3,609,640
--------------
COMMERCIAL PAPER -- 0.9%
CIT Group Holdings, Inc.
6.84%, 07/03/00
(Cost $9,596,352)............... 9,600 9,596,352
--------------
SHARES VALUE
------ -----
SHORT-TERM INVESTMENTS -- 0.0%
Temporary Investment Cash
Fund.......................... 38,497 $ 38,497
Temporary Investment Fund....... 38,496 38,496
--------------
(Cost $76,993).................. 76,993
--------------
TOTAL INVESTMENTS -- 101.3%
(Cost $851,717,662)............... 1,066,121,503
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (1.3%).................. (13,958,858)
--------------
NET ASSETS -- 100.0%................ $1,052,162,645
==============
- ------------------------------------------------------------------------------
Unless otherwise noted, all stocks are common stock.
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST AMERICAN CENTURY INTERNATIONAL GROWTH PORTFOLIO II
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
FOREIGN STOCK -- 91.7%
AUSTRALIA -- 1.6%
News Corp. Ltd. [ADR]............. 132,500 $ 7,221,250
------------
BRAZIL -- 1.3%
Petroleo Brasileiro SA*........... 189,725 5,731,876
------------
CANADA -- 3.9%
Celestica, Inc. NY Reg.*.......... 107,954 5,357,217
Nortel Networks Corp. NY Reg.*.... 182,900 12,482,925
------------
17,840,142
------------
DENMARK -- 2.9%
Den Danske Bank................... 6,600 797,209
ISS AS............................ 44,400 3,394,692
Novo-Nordisk AS Cl-B.............. 38,445 6,570,402
Tele Danmark AS................... 32,740 2,212,915
------------
12,975,218
------------
FINLAND -- 3.5%
Nokia Corp. Cl-A [ADR]............ 176,000 8,789,000
Sonera Group Oyj.................. 127,806 5,850,016
Tieto Corp. Cl-B.................. 35,900 1,202,746
------------
15,841,762
------------
FRANCE -- 13.2%
Alcatel Corp...................... 126,608 8,337,777
Altran Technologies SA............ 12,515 2,460,532
Aventis SA........................ 51,700 3,788,789
AXA SA............................ 42,775 6,765,601
Business Objects SA*.............. 22,800 2,009,250
Pinault-Printemps Redoute SA...... 21,800 4,862,788
Sagem SA.......................... 2,100 2,472,009
Societe Generale.................. 65,976 3,984,363
Societe Television Francaise...... 69,100 4,835,410
STMicroelectronics NV NY Reg. .... 115,500 7,413,656
Suez Lyonnaise des Eaux........... 40,000 7,036,043
Total Fina SA Cl-B*............... 14,900 2,293,846
Vivendi........................... 39,130 3,467,761
------------
59,727,825
------------
GERMANY -- 3.9%
Intershop Communications AG....... 8,966 4,116,865
Marschollek, Lautenschlaeger Und
Partner AG...................... 7,179 3,014,189
SAP AG [ADR]...................... 22,000 1,032,625
Schering AG....................... 24,400 1,334,375
Siemens AG........................ 53,820 8,089,510
------------
17,587,564
------------
HONG KONG -- 3.6%
Cheung Kong Holdings Ltd. ........ 142,000 1,571,193
China Telecom Ltd. ............... 805,000 7,099,877
China Unicom Ltd. ................ 67,000 142,251
China Unicom Ltd. [ADR]*.......... 54,400 1,156,000
Citic Pacific Ltd. ............... 320,000 1,674,913
Hutchison Whampoa Ltd. ........... 382,000 4,802,547
------------
16,446,781
------------
SHARES VALUE
------ -----
ISRAEL -- 1.2%
Check Point Software Technologies
Ltd.*........................... 26,100 $ 5,526,675
------------
ITALY -- 4.6%
Alleanza Assicurazioni............ 234,900 3,141,157
Banco Intesa SPA.................. 1,112,722 5,002,555
Mediaset SPA...................... 177,942 2,729,172
Mediolanum SPA.................... 191,920 3,134,890
Mondadori, (Arnoldo) Editore
SPA............................. 147,800 3,386,139
Telecom Italia SPA................ 235,620 3,252,423
------------
20,646,336
------------
JAPAN -- 14.8%
Canon, Inc. ...................... 112,000 5,589,334
Fuji Television Network, Inc. .... 121 1,898,461
Hitachi Ltd. ..................... 422,000 6,102,559
Hoya Corp. ....................... 35,000 3,142,677
Japan Telecom Co. Ltd. ........... 59 2,565,181
Kao Corp. ........................ 64,000 1,959,896
Keyence Corp. .................... 3,100 1,025,505
Kyocera Corp. .................... 27,900 4,743,987
Nomura Securities Co. Ltd. ....... 150,000 3,679,059
NTT Mobile Communication Network,
Inc. ........................... 84 2,278,606
Orix Corp. ....................... 18,800 2,780,868
Pioneer Corp. .................... 53,000 2,068,874
Sharp Corp. ...................... 263,000 4,660,850
SoftBank Corp. ................... 5,400 734,961
Sony Corp. ....................... 31,800 2,975,572
Takeda Chemical Industries
Ltd. ........................... 34,000 2,236,641
Tokyo Electron Ltd. .............. 35,000 4,803,334
Toshiba Corp. .................... 579,000 6,550,597
Toyota Motor Corp. ............... 50,000 2,282,576
Tyco International Ltd. .......... 119,800 5,675,525
------------
67,755,063
------------
KOREA -- 2.7%
Hyundai Motor Co. Ltd. .......... 96,320 1,235,328
Samsung Electronics Co. .......... 27,670 9,157,254
SK Telecom Co. Ltd. .............. 5,100 1,669,524
------------
12,062,106
------------
MEXICO -- 1.4%
Grupo Televisa SA [GDR]........... 22,734 1,567,225
Telefonos de Mexico SA Cl-L
[ADR]........................... 81,828 4,674,425
------------
6,241,650
------------
NETHERLANDS -- 5.8%
ASM Lithography Holding NV NY
Reg. ........................... 26,500 1,169,313
Getronics NV...................... 162,300 2,512,601
ING Groep NV...................... 53,942 3,660,941
Koninklijke (Royal) Philips
Electronics NV NY Reg. ......... 193,200 9,176,999
Royal Dutch Petroleum Co. ........ 40,600 2,499,438
AST AMERICAN CENTURY INTERNATIONAL GROWTH PORTFOLIO II
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
United Pan-Europe Communications
NV.............................. 43,301 $ 1,136,900
VNU NV............................ 122,070 6,330,509
------------
26,486,701
------------
PORTUGAL -- 0.5%
Telecel-Comunicacoes Pessoais
SA.............................. 139,974 2,133,423
------------
SPAIN -- 1.7%
Banco Popular Espanol SA.......... 10,300 319,900
Sogecable SA...................... 39,808 1,420,297
Telefonica SA*.................... 281,195 6,064,885
------------
7,805,082
------------
SWEDEN -- 5.5%
Assa Abloy AB Cl-B................ 179,864 3,629,796
Atlas Copco AB.................... 24,460 474,100
Atlas Copco AB Cl-B............... 32,900 618,934
Ericsson, (L.M.) Telephone Co.
[ADR]........................... 369,600 7,392,001
Modern Times Group AB Cl-B........ 41,129 1,969,528
Netcom AB Cl-B.................... 39,129 2,904,320
Nordbanken Holding Co. AB......... 437,056 3,313,779
Securitas AB Cl-B................. 209,745 4,471,961
------------
24,774,419
------------
SWITZERLAND -- 6.6%
ABB AG............................ 56,290 6,759,009
Adecco SA......................... 3,891 3,316,540
Credit Suisse Group............... 33,440 6,673,317
Julius Baer Holdings AG Cl-B...... 1,027 4,073,718
Novartis AG....................... 3,856 6,127,598
Swatch Group AG................... 2,479 3,161,885
------------
30,112,067
------------
UNITED KINGDOM -- 13.0%
Amvescap PLC...................... 328,600 5,273,120
Barclays PLC...................... 46,800 1,164,066
Cable & Wireless PLC.............. 304,532 5,158,903
Capita Group PLC.................. 90,800 2,222,748
Centrica PLC...................... 1,175,861 3,925,174
CMG PLC........................... 161,000 2,281,372
Colt Telecom Group PLC............ 59,574 1,984,147
Compass Group PLC................. 153,300 2,020,251
Diageo PLC........................ 299,143 2,685,517
Energis PLC....................... 66,454 2,492,968
Hays PLC.......................... 332,700 1,856,028
Logica PLC........................ 77,200 1,827,883
Misys PLC......................... 277,100 2,340,804
Pearson PLC....................... 93,600 2,975,702
SEMA Group PLC.................... 144,381 2,054,623
Telewest Communications PLC....... 420,700 1,452,117
Vodafone AirTouch PLC............. 3,302,900 13,350,605
WPP Group PLC..................... 256,800 3,751,601
------------
58,817,629
------------
TOTAL FOREIGN STOCK
(Cost $389,677,972)................. 415,733,569
------------
PAR
(000) VALUE
----- -----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.5%
Federal Home Loan Bank
6.23%, 07/03/00
(Cost $29,289,859)................ $ 29,300 $ 29,289,859
------------
SHARES
------
U.S. STOCK -- 2.2%
COMPUTER SERVICES & SOFTWARE -- 0.7%
Comverse Technology, Inc. ........ 33,500 3,115,500
------------
SEMICONDUCTORS -- 0.9%
JDS Uniphase Corp. ............... 36,100 4,327,488
------------
TELECOMMUNICATIONS -- 0.6%
Amdocs Ltd. ...................... 35,400 2,716,950
------------
TOTAL U.S. STOCK
(Cost $9,303,208)................... 10,159,938
------------
TOTAL INVESTMENTS -- 100.4% (Cost
$428,271,039)....................... 455,183,366
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.4%).................... (1,899,015)
------------
NET ASSETS -- 100.0%.................. $453,284,351
============
Foreign currency exchange contracts outstanding at June 30, 2000:
IN UNREALIZED
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS APPRECIATION/
MONTH TYPE TO RECEIVE FOR AT VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------
07/00 Buy CHF 742,895 $ 452,130 $ 457,017 $ 4,887
07/00 Buy EUR 1,763,231 1,669,686 1,690,587 20,901
07/00 Buy JPY 201,695,471 1,919,954 1,907,225 (12,729)
---------- ---------- --------
$4,041,770 $4,054,829 $ 13,059
========== ========== ========
IN UNREALIZED
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS APPRECIATION/
MONTH TYPE TO DELIVER FOR AT VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------
07/00 Sell EUR 799,255 $ 759,999 $ 766,792 $(6,793)
07/00 Sell GBP 132,117 198,884 200,020 (1,136)
07/00 Sell JPY 1,150,678,000 10,968,642 10,927,409 41,233
----------- ----------- -------
$11,927,525 $11,894,221 $33,304
=========== =========== =======
AST AMERICAN CENTURY INTERNATIONAL GROWTH PORTFOLIO II
- ------------------------------------------------------------------------------
The following is a breakdown of the foreign stock portion of the Portfolio, by
industry classification, as of June 30, 2000. Percentages are based on net
assets.
INDUSTRY
- --------
Advertising......................................... 0.8%
Aerospace........................................... 0.5%
Automobile Manufacturers............................ 0.8%
Beverages........................................... 0.6%
Broadcasting........................................ 8.1%
Business Services................................... 7.6%
Computer Hardware................................... 3.9%
Computer Services & Software........................ 2.0%
Consumer Products & Services........................ 1.7%
Electronic Components & Equipment................... 11.4%
Financial -- Bank & Trust........................... 6.4%
Financial Services.................................. 3.3%
Food................................................ 0.4%
Healthcare Services................................. 0.7%
Industrial Products................................. 1.8%
Insurance........................................... 2.9%
Machinery & Equipment............................... 0.2%
Metals & Mining..................................... 0.8%
Office Equipment.................................... 1.2%
Oil & Gas........................................... 3.2%
Pharmaceuticals..................................... 4.4%
Real Estate......................................... 0.3%
Retail & Merchandising.............................. 1.8%
Semiconductors...................................... 2.7%
Telecommunications.................................. 22.6%
Utilities........................................... 1.6%
-----
Total............................................... 91.7%
=====
- ------------------------------------------------------------------------------
Unless otherwise noted, all stocks are common stock.
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST T. ROWE PRICE GLOBAL BOND PORTFOLIO
- ------------------------------------------------------------------------------
PRINCIPAL
IN LOCAL
CURRENCY
(000) VALUE
--------- -----
FOREIGN BONDS -- 50.5%
AUSTRALIA -- 0.4%
Publishing and Broadcasting
Finance Ltd.
6.25%, 11/01/06................. 600 $ 569,776
------------
CANADA -- 1.6%
Canadian Government
5.50%, 06/01/09................. 2,570 1,692,034
Province of Ontario
1.875%, 01/25/10................ 50,000 474,166
------------
2,166,200
------------
DENMARK -- 2.9%
Kingdom of Denmark
6.00%, 11/15/02................. 20,000 2,578,722
8.00%, 03/15/06................. 10,000 1,422,486
------------
4,001,208
------------
EUROPEAN CURRENCY UNIT -- 3.2%
American Standard Co., Inc.
7.125%, 06/01/06................ 340 320,054
Carrier 1
13.25%, 02/15/09................ 120 117,906
Dura Operating Corp.
9.00%, 05/01/09................. 131 121,808
Flextronics International Ltd.
144A
9.75%, 07/01/10................. 375 368,458
Hermes Europe Railtel
10.375%, 01/15/06............... 320 250,000
Huntsman ICI Chemicals
10.125%, 07/01/09............... 280 277,799
IFCO Systems NV 144A
10.625%, 03/15/10............... 219 219,378
Level 3 Communications 144A
11.25%, 03/15/10................ 211 193,160
Lloyds TSB Bank PLC
5.625%, 07/15/49................ 600 519,076
Metromedia Fiber Network
10.00%, 12/15/09................ 176 161,972
Orange PLC
7.625%, 08/01/08................ 320 319,018
Public Power Corp.
4.50%, 03/12/09................. 700 585,928
Slovenian Government
5.375%, 05/27/05................ 300 280,459
Standard Chartered Bank
5.375%, 05/06/09................ 700 609,782
------------
4,344,798
------------
FRANCE -- 9.0%
French Government
4.00%, 04/25/09................. 1,145 993,314
5.50%, 04/25/29................. 1,340 1,278,087
PRINCIPAL
IN LOCAL
CURRENCY
(000) VALUE
--------- -----
French Treasury Bill
4.50%, 07/12/02................. 9,642 $ 9,153,060
SunAmerica Institutional Funding
5.25%, 05/20/09................. 5,500 758,956
------------
12,183,417
------------
GERMANY -- 8.8%
Bank Nederlandse Gemeenten
6.25%, 08/10/00................. 1,000 490,952
5.25%, 10/01/01................. 2,100 1,029,404
Colt Telecom Group PLC
8.875%, 11/30/07................ 470 229,204
German Government
4.50%, 05/17/02................. 7 6,436,432
4.75%, 07/04/28................. 1,120 959,279
KFW International Finance, Inc.
6.75%, 06/20/05................. 2,301 2,323,641
Minnesota Mining & Manufacturing
Co.
5.00%, 10/15/01................. 900 439,320
------------
11,908,232
------------
GREECE -- 1.8%
Greek Government
6.50%, 01/11/14................. 850,000 2,478,778
------------
ITALY -- 4.6%
Italian Government
9.00%, 10/01/03................. 5,565 5,910,426
7.25%, 11/01/26................. 328 368,401
------------
6,278,827
------------
JAPAN -- 6.6%
Central Bank of Tunisia
4.95%, 09/27/11................. 65,000 698,832
Japanese Government
0.90%, 12/22/08................. 400,000 3,541,726
1.80%, 06/21/10................. 80,000 762,016
2.40%, 03/20/20................. 50,000 493,835
Korea Development Bank
2.56%, 06/26/01................. 100,000 956,717
1.875%, 02/13/02................ 60,000 571,026
Republic of Austria
4.50%, 09/28/05................. 170,000 1,881,221
------------
8,905,373
------------
KOREA -- 0.5%
Korea Industrial Leasing
2.20%, 08/07/02................. 70,000 668,232
------------
MEXICO -- 0.2%
United Mexican States
3.85%, 12/31/19................. 35,000 320,884
------------
AST T. ROWE PRICE GLOBAL BOND PORTFOLIO
- ------------------------------------------------------------------------------
PRINCIPAL
IN LOCAL
CURRENCY
(000) VALUE
--------- -----
NETHERLANDS -- 2.9%
Netherlands Government
5.75%, 01/15/04................. 2,541 $ 2,485,908
Tecnost International NV
5.375%, 07/30/04................ 1,300 1,189,652
United Pan-Europe Communications
10.875%, 08/01/09............... 400 335,506
------------
4,011,066
------------
PORTUGAL -- 0.4%
European Investment Bank
5.25%, 03/23/02................. 100,000 480,844
------------
RUSSIA -- 0.4%
Russia Ofz
30.00%, 07/14/00-09/25/00
[VR]++........................ 5,103 99,109
58.75%, 12/15/01 [ZCB]++........ 1,457 25,598
Russian Federation
11.75%, 06/10/03................ 400 371,760
------------
496,467
------------
SOUTH AFRICA -- 1.5%
Republic of South Africa
13.00%, 08/31/10................ 15,000 2,071,664
------------
SPAIN -- 0.5%
Spanish Government
6.00%, 01/31/29................. 662 655,361
------------
SWEDEN -- 0.6%
Swedish Government
5.00%, 01/28/09................. 7,400 827,294
------------
UNITED KINGDOM -- 4.6%
Abbey National Treasury
5.25%, 01/21/04................. 780 1,130,294
Alliance & Leicester BLD
8.75%, 12/07/06................. 1,300 2,119,697
Doncasters PLC
8.125%, 05/01/09................ 200 286,413
Energis PLC
9.50%, 06/15/09................. 100 150,776
Gallaher Group PLC
5.875%, 08/06/08................ 500 226,983
LCR Finance PLC 144A
4.75%, 12/31/10................. 540 737,999
NTL, Inc. [STEP]
10.75%, 04/01/08................ 340 316,554
TDL Infomedia Group Ltd.
10.125%, 10/15/09............... 145 221,160
Telewest Communications PLC [STEP]
9.256%, 04/15/09................ 263 205,049
United Kingdom Gilt
6.00%, 12/07/28................. 260 488,629
4.25%, 06/07/32................. 250 372,303
------------
6,255,857
------------
TOTAL FOREIGN BONDS
(Cost $73,893,755).................. 68,624,278
------------
PAR
(000) VALUE
----- -----
--------- -----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 18.5%
Federal National Mortgage Assoc.
5.75%, 04/15/03-06/15/05........ $ 3,500 $ 3,364,820
6.00%, 05/15/08................. 1,300 1,226,095
6.875%, 06/07/02................ 990 1,510,366
7.00%, 06/01/15................. 4,000 3,922,111
7.00%, 07/01/30 [TBA]........... 5,200 5,021,250
------------
15,044,642
------------
Government National Mortgage
Assoc.
7.50%, 09/15/29................. 5,199 5,158,860
8.00%, 06/15/30................. 5,000 5,051,563
------------
10,210,423
------------
(Cost $25,048,122)................ 25,255,065
------------
U.S. TREASURY OBLIGATIONS -- 12.1%
U.S. Treasury Bonds
6.375%, 08/15/27................ 3,620 3,722,591
------------
U.S. Treasury Notes
6.00%, 08/15/09................. 6,000 5,952,252
7.25%, 05/15/16................. 6,180 6,799,916
------------
12,752,168
------------
(Cost $16,114,822)................ 16,474,759
------------
CERTIFICATES OF DEPOSIT -- 7.3%
Chase Manhattan Bank
6.75%, 07/06/00
(Cost $10,012,882)................ 10,013 10,012,882
------------
CORPORATE OBLIGATIONS -- 3.3%
ENTERTAINMENT & LEISURE -- 0.7%
Comcast Cable Communications
8.125%, 05/01/04................ 1,000 1,013,460
------------
FINANCIAL SERVICES -- 1.9%
Ford Motor Credit Corp.
5.75%, 02/23/04................. 1,300 1,225,900
Heller Financial, Inc.
7.875%, 05/15/03................ 1,300 1,298,678
------------
2,524,578
------------
TELECOMMUNICATIONS -- 0.7%
SBC Communications Capital Corp.
5.875%, 06/01/03................ 1,000 962,253
------------
TOTAL CORPORATE OBLIGATIONS
(Cost $4,466,690)................... 4,500,291
------------
AST T. ROWE PRICE GLOBAL BOND PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
SOVEREIGN ISSUES -- 4.0%
BULGARIA -- 0.8%
National Republic of Bulgaria
6.50%, 07/28/11 [BRB, FRN]...... $ 355 $ 281,781
2.50%, 07/28/12................. 1,020 752,250
------------
1,034,031
------------
MEXICO -- 1.2%
United Mexican States
11.50%, 05/15/26................ 1,121 1,351,870
United Mexican States Cl-W-A [BRB]
6.25%, 12/31/19................. 250 206,525
United Mexican States Cl-W-B [BRB]
6.25%, 12/31/19................. 250 207,813
------------
1,766,208
------------
POLAND -- 1.3%
Government of Poland [BRB, STEP]
3.50%, 10/27/24................. 1,750 1,054,375
Government of Poland PDI [BRB]
6.00%, 10/27/14................. 125 112,109
6.00%, 10/27/14................. 600 538,125
------------
1,704,609
------------
REPUBLIC OF SLOVENIA -- 0.3%
Republic of Turkey
11.875%, 01/15/30............... 400 419,760
RUSSIA -- 0.4%
Russia -- IAN [FRN]
5.969%, 12/15/15................ 1,038 321,780
Russia Principal Loans [FRN]
2.984%, 12/15/20................ 810 249,075
------------
570,855
------------
TOTAL SOVEREIGN ISSUES
(Cost $5,911,624)................... 5,495,463
------------
FOREIGN STOCK -- 0.0%
MEXICO -- 0.0%
Mexican Value Recovery Rights*.... 233,000 $ 0
------------
NIGERIA -- 0.0%
Central Bank of Nigeria
Warrants*....................... 250 0
------------
SHARES VALUE
------ -----
----- -----
VENEZUELA -- 0.0%
Republic of Venezuela Warrants*... 1,250 $ 0
------------
TOTAL FOREIGN STOCK
(Cost $0)........................... 0
------------
TOTAL INVESTMENTS -- 95.7%
(Cost $135,447,895)................. 130,362,738
OTHER ASSETS LESS
LIABILITIES -- 4.3%................. 5,909,107
------------
NET ASSETS -- 100.0%.................. $136,271,845
============
Foreign currency exchange contracts outstanding at June 30, 2000:
IN UNREALIZED
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS APPRECIATION/
MONTH TYPE TO RECEIVE FOR AT VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------
07/00 Buy CAD 3,566,059 $ 2,403,005 $ 2,407,222 $ 4,217
09/00 Buy EUR 6,564,980 6,249,205 6,324,582 75,377
07/00 Buy GBP 4,939,408 7,439,112 7,479,419 40,307
07/00 Buy JPY 560,692,406 5,350,118 5,314,794 (35,324)
----------- ----------- --------
$21,441,440 $21,526,017 $ 84,577
=========== =========== ========
IN
SETTLEMENT CONTRACTS EXCHANGE UNREALIZED
MONTH TYPE TO RECEIVE FOR APPRECIATION
- ----------------------------------------------------------------------------
09/00 Buy DKK 10,458,348 SEK 11,500,000 $ 28,537
07/00 Buy EUR 2,455,258 GBP 1,484,915 107,688
07/00 Buy EUR 2,412,758 ZAR 15,389,777 48,757
--------
$184,982
========
IN UNREALIZED
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS APPRECIATION/
MONTH TYPE TO DELIVER FOR AT VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------
07/00 Sell CAD 2,251,600 $ 1,710,498 $ 1,702,173 $ 8,325
07/00 Sell DKK 10,135,710 1,300,000 1,303,469 (3,469)
09/00 Sell EUR 7,737,456 7,455,580 7,454,124 1,456
07/00 Sell GBP 4,285,490 6,437,578 6,489,235 (51,657)
07/00 Sell JPY 316,905,000 3,000,000 3,003,937 (3,937)
----------- ----------- --------
$19,903,656 $19,952,938 $(49,282)
=========== =========== ========
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
++ Illiquid security. At the end of the period, these securities amounted to
less than 0.1% of net assets.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 1.1% of net assets.
See Notes to Financial Statements.
AST NEUBERGER BERMAN MID-CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 91.6%
BROADCASTING -- 3.9%
Emmis Communications Corp.
Cl-A*.......................... 249,600 $ 10,327,200
Entercom Communications Corp.*... 91,100 4,441,125
USA Networks, Inc.*.............. 186,700 4,037,388
Westwood One, Inc.*.............. 314,200 10,722,075
------------
29,527,788
------------
BUILDING MATERIALS -- 0.3%
Fastenal Co...................... 51,100 2,586,938
------------
BUSINESS SERVICES -- 3.5%
CSG Systems International,
Inc.*.......................... 200,700 11,251,743
Micromuse, Inc.*................. 48,900 8,092,186
PurchasePro.com, Inc.*........... 64,900 2,660,900
Safeguard Scientifics, Inc.*..... 143,900 4,613,794
------------
26,618,623
------------
CLOTHING & APPAREL -- 0.8%
Limited, Inc. ................... 270,300 5,845,238
------------
COMPUTER SERVICES & SOFTWARE -- 11.6%
Adobe Systems, Inc............... 54,500 7,085,000
BEA Systems, Inc.*............... 220,300 10,891,080
Fiserv, Inc.*.................... 185,100 8,005,575
Intuit, Inc.*.................... 247,600 10,244,450
Network Appliance, Inc.*......... 76,800 6,182,400
Peregrine Systems, Inc.*......... 284,500 9,868,594
Phone.com, Inc.*................. 100,100 6,519,013
Precise Software Solutions*...... 900 21,600
Rational Software Corp.*......... 173,400 16,115,362
RealNetworks, Inc.*.............. 86,400 4,368,600
Redback Networks, Inc.*.......... 57,400 10,217,200
Storage Networks, Inc.*.......... 1,200 108,300
------------
89,627,174
------------
CONSUMER PRODUCTS & SERVICES -- 0.8%
Estee Lauder Companies, Inc.
Cl-A........................... 126,000 6,229,125
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 11.8%
Comverse Technology, Inc.*....... 126,000 11,718,000
Flextronics International
Ltd.*.......................... 158,000 10,852,625
Gemstar International Group
Ltd.*.......................... 186,000 11,430,281
Intersil Holding Corp.*.......... 137,400 7,428,188
Jabil Circuit*................... 158,800 7,880,450
KLA-Tencor Corp.*................ 172,300 10,090,319
Metromedia Fiber Network, Inc.
Cl-A*.......................... 171,200 6,794,500
Rambus, Inc.*.................... 23,600 2,430,800
Sanmina Corp.*................... 193,400 16,535,699
Tektronix, Inc................... 61,700 4,488,675
Vishay Intertechnology, Inc.*.... 39,200 1,487,150
------------
91,136,687
------------
ENERGY SERVICES -- 0.5%
Dynegy, Inc...................... 51,100 3,490,769
------------
ENTERTAINMENT & LEISURE -- 1.0%
Harley-Davidson, Inc............. 194,800 7,499,800
------------
EQUIPMENT SERVICES -- 1.0%
Millipore Corp. ................. 96,800 7,296,300
------------
SHARES VALUE
------ -----
FINANCIAL SERVICES -- 3.5%
Capital One Financial Corp. ..... 130,200 $ 5,810,175
Concord EFS, Inc.*............... 421,900 10,969,400
Lehman Brothers Holdings,
Inc. .......................... 47,900 4,529,544
Providian Financial Corp......... 58,200 5,238,000
------------
26,547,119
------------
FOOD -- 1.2%
Quaker Oats Co. ................. 28,700 2,156,088
Starbucks Corp.*................. 177,400 6,774,462
------------
8,930,550
------------
HEALTHCARE SERVICES -- 0.9%
Health Management Associates,
Inc. Cl-A*..................... 502,800 6,567,825
------------
INTERNET SERVICES -- 7.7%
Art Technology Group, Inc.*...... 76,700 7,741,906
BroadVision, Inc.*............... 88,700 4,507,069
Clarent Corp.*................... 50,800 3,632,200
Digex, Inc.*..................... 70,000 4,755,625
eSPEED, Inc.*.................... 57,400 2,493,313
Portal Software, Inc.*........... 283,100 18,083,012
VeriSign, Inc.*.................. 49,400 8,719,100
Vignette Corp.*.................. 166,300 8,650,198
------------
58,582,423
------------
MACHINERY & EQUIPMENT -- 1.6%
Cooper Cameron Corp.*............ 133,000 8,778,000
Weatherford International,
Inc.*.......................... 83,400 3,320,363
------------
12,098,363
------------
MEDICAL SUPPLIES & EQUIPMENT -- 3.6%
Forest Laboratories, Inc.*....... 111,300 11,241,300
MiniMed, Inc.*................... 71,400 8,425,200
PE Corp.-PE Biosystems Group..... 115,800 7,628,325
------------
27,294,825
------------
OIL & GAS -- 2.9%
Coastal Corp..................... 94,300 5,740,513
Rowan Companies, Inc.*........... 365,600 11,105,100
Union Pacific Resources Group,
Inc. .......................... 255,400 5,618,800
------------
22,464,413
------------
PHARMACEUTICALS -- 10.8%
Abgenix, Inc.*................... 15,200 1,821,863
ALZA Corp.*...................... 37,500 2,217,188
Human Genome Sciences, Inc.*..... 37,800 5,041,575
IDEC Pharmaceutical Corp.*....... 51,500 6,041,594
King Pharmaceuticals, Inc.*...... 91,300 4,005,788
MedImmune, Inc.*................. 284,600 21,060,399
Millennium Pharmaceuticals,
Inc.*.......................... 115,900 12,966,312
QLT PhotoTherapeutics, Inc.*..... 89,500 6,919,469
Sepracor, Inc.*.................. 86,300 10,409,937
Waters Corp.*.................... 101,600 12,680,949
------------
83,165,074
------------
AST NEUBERGER BERMAN MID-CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
RETAIL & MERCHANDISING -- 2.5%
Best Buy Co., Inc.*.............. 111,200 $ 7,033,400
Dollar Tree Stores, Inc.*........ 114,100 4,514,081
Tiffany & Co..................... 106,900 7,215,750
------------
18,763,231
------------
SEMICONDUCTORS -- 10.5%
Altera Corp.*.................... 56,500 5,759,469
Applied Micro Circuits Corp.*.... 113,400 11,198,249
Atmel Corp.*..................... 344,500 12,703,437
Conexant Systems, Inc.*.......... 209,700 10,196,663
E-Tek Dynamics, Inc.*............ 25,800 6,806,363
Globespan, Inc.*................. 70,600 8,618,716
Integrated Device Technology,
Inc.*.......................... 122,000 7,304,750
National Semiconductor Corp.*.... 91,100 5,169,925
QLogic Corp.*.................... 104,500 6,903,531
Vitesse Semiconductor Corp.*..... 88,200 6,488,213
------------
81,149,316
------------
TELECOMMUNICATIONS -- 9.2%
Amdocs Ltd.*..................... 128,500 9,862,375
American Tower Corp. Cl-A*....... 140,800 5,869,600
Efficient Networks, Inc.*........ 106,200 7,812,338
Exfo Electro-Optical Engineering,
Inc.*.......................... 700 30,713
Intermedia Communications,
Inc.*.......................... 182,100 5,417,475
McLeodUSA, Inc. Cl-A*............ 161,900 3,349,306
Next Level Communications,
Inc.*.......................... 28,000 2,401,000
NTL, Inc.*....................... 95,250 5,703,094
Univision Communications,
Inc.*.......................... 162,200 16,787,699
Voicestream Wireless Corp.*...... 53,800 6,256,772
WinStar Communications, Inc.*.... 213,000 7,215,375
------------
70,705,747
------------
SHARES VALUE
------ -----
UTILITIES -- 2.0%
Calpine Corp.*................... 230,600 $ 15,161,950
------------
TOTAL COMMON STOCK
(Cost $586,382,933)................ 701,289,278
------------
PAR
(000)
-----
COMMERCIAL PAPER -- 6.5%
American Express Credit Corp.
6.72%, 07/06/00................ $ 25,000 24,976,667
Ford Motor Credit Corp.
6.77%, 07/05/00................ 25,000 24,981,194
------------
(Cost $49,957,861)............... 49,957,861
------------
SHARES
------
SHORT-TERM INVESTMENTS -- 1.6%
Temporary Investment Cash
Fund .......................... 5,990,503 5,990,503
Temporary Investment Fund ....... 5,990,502 5,990,502
------------
(Cost $11,981,005)............... 11,981,005
------------
TOTAL INVESTMENTS -- 99.7%
(Cost $648,321,799)................ 763,228,144
OTHER ASSETS LESS
LIABILITIES -- 0.3%................ 2,218,398
------------
NET ASSETS -- 100.0%................. $765,446,542
============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST FOUNDERS PASSPORT PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
FOREIGN STOCK -- 90.7%
AUSTRALIA -- 1.1%
Aristocrat Leisure Ltd. ........ 292,161 $ 991,120
ERG Ltd......................... 211,085 1,643,813
Sausage Software Ltd.*.......... 36,925 56,047
Solutions Ltd.*................. 219,000 1,212,357
------------
3,903,337
------------
AUSTRIA -- 0.1%
DO & CO Restaurants & Catering.. 4,869 191,315
------------
BELGIUM -- 0.6%
Custom Silicon Configuration
Services*..................... 7,000 108,301
G.B.I. Group SA................. 11,800 435,374
Ubizen*......................... 44,000 1,560,583
------------
2,104,258
------------
CANADA -- 5.6%
Agrium, Inc.*................... 232,550 1,993,281
Canadian Hunter Exploration
Ltd.*......................... 118,725 2,520,063
Crestar Energy, Inc.*........... 72,700 1,106,444
Ensign Resource Service Group,
Inc. ......................... 55,125 1,815,586
Genesis Exploration Ltd.*....... 140,750 1,044,936
GT Group Telecom, Inc. Cl-B*.... 34,425 542,512
Hermosol, Inc.*................. 95,625 939,038
NHC Communications, Inc.++*..... 45,143 351,901
Precision Drilling Corp.*....... 80,450 3,105,779
Rio Alto Exploration Ltd.*...... 88,850 1,625,082
Sierra Wireless, Inc.*.......... 26,225 1,415,970
WestJet Airlines Ltd.*.......... 171,375 2,602,427
------------
19,063,019
------------
CHINA -- 2.4%
Beijing Yanhua Petrochemical Co.
Ltd........................... 8,946,000 1,044,365
China Shipping Development Co.
Ltd.*......................... 9,108,000 1,659,180
China Southern Airlines Co.
Ltd.*......................... 4,106,000 979,747
Shanghai Petrochemical Co.
Ltd........................... 19,596,000 2,664,745
Yanzhou Coal Mining Co. Ltd..... 9,034,000 1,865,899
------------
8,213,936
------------
DENMARK -- 0.2%
DSV, de Sammensluttede Vognmaend
AS Cl-B*...................... 29,675 667,312
------------
FINLAND -- 2.4%
Aldata Solutions Oyj*........... 87,950 598,586
Alma Media Corp................. 15,725 538,889
Comptel Oyj 144A................ 44,025 890,460
F-Secure Oyj 144A*.............. 91,425 1,061,308
Hartwall Oyj.................... 52,425 1,055,335
JOT Automation Group Oyj........ 243,950 1,634,596
Menire Oyj*..................... 23,100 110,717
Tecnomen Oyj*................... 53,625 462,639
Teleste Oyj..................... 75,900 1,855,300
------------
8,207,830
------------
SHARES VALUE
------ -----
FRANCE -- 8.3%
A Novo.......................... 7,427 $ 1,836,816
Carbone Lorraine SA............. 19,250 763,947
Cerep SA........................ 37,460 2,585,430
Christian Dalloz................ 6,572 439,729
Elior 144A*..................... 118,725 1,505,686
Faurecia........................ 29,193 1,157,142
Neopost SA*..................... 41,553 1,352,305
Net2S*.......................... 37,925 763,444
Netgem SA*...................... 50,350 1,926,254
Penauille Polyservices.......... 3,909 1,886,677
Pierre & Vacances............... 21,605 1,294,395
Pinguely-Haulotte............... 157,655 3,294,555
Remy Cointreau SA*.............. 40,125 1,309,678
Riber SA*....................... 95,838 1,975,189
Silicon-On-Insulator
Technologies.................. 6,075 1,426,740
Societe Manutan................. 1,698 148,526
Sommer Allibert SA.............. 30,175 940,076
SR Teleperformance.............. 21,296 814,523
Vallourec SA.................... 13,175 555,694
Wavecom SA...................... 8,850 1,077,406
Zodiac SA....................... 5,759 1,176,421
------------
28,230,633
------------
GERMANY -- 9.6%
ACG AG*......................... 3,950 825,441
Adcon Telemetry AG.............. 71,203 1,160,325
Amatech Holdings AG*............ 24,511 834,107
Articon Information Systems
AG*........................... 33,047 2,255,508
Austria Technologies &
Systemtechnik AG.............. 5,775 437,332
Balda AG*....................... 25,075 960,263
Comroad AG*..................... 10,293 1,598,414
COR Insurance Technologies AG*.. 121,050 2,065,462
Dis Deutscher Industrie Service
AG............................ 8,625 1,030,998
GPC Biotech AG 144A*............ 32,475 1,696,595
Grenke Leasing AG*.............. 46,650 1,471,228
Hugo Boss AG.................... 10,871 1,896,589
Kontron Embedded Computers AG*.. 16,675 1,502,540
Medigene AG*.................... 4,200 235,525
Ruecker AG*..................... 69,450 1,098,471
SAI Automotive AG............... 29,750 262,366
SZ Testsysteme AG*.............. 76,525 1,855,907
Tecis Holding AG................ 11,218 1,043,085
Thiel Logistik AG 144A*......... 44,850 4,256,280
U.C.A. Unternehmer Consulting... 11,500 584,260
Valor Computerized Systems AG
144A*......................... 88,200 811,656
Wedeco AG Water Technology*..... 53,500 2,025,738
Zapf Creation AG................ 46,500 2,852,762
------------
32,760,852
------------
GREECE -- 1.8%
Folli-Follie SA................. 6,120 135,316
M-Systems Flash Disk Pioneers
Ltd.*......................... 26,225 2,042,272
AST FOUNDERS PASSPORT PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
M.J. Maillis SA................. 80,380 $ 1,010,987
Metrolife SA*................... 7,710 72,620
Techem AG 144A*................. 118,805 2,847,129
------------
6,108,324
------------
HONG KONG -- 5.8%
Angang New Steel Co. Ltd. ...... 22,798,000 2,310,500
Beijing Datang Power Generation
Co. Ltd. 144A................. 5,376,000 1,206,923
Brilliance China Automotive
Holdings Ltd. [ADR]*.......... 28,970 503,354
China Eastern Airlines Corp.
Ltd.*......................... 19,972,000 2,536,524
China Everbright Ltd. .......... 442,000 345,887
China Pharmaceutical Enterprise
& Investment Corp. Ltd. ...... 8,492,000 1,034,941
China Resources Beijing Land
Ltd. ......................... 8,158,000 1,088,427
Cosco Pacific Ltd. ............. 3,314,000 2,614,627
Giordano International Ltd. .... 796,000 1,210,079
HKCB Bank Holding Co. Ltd. ..... 1,580,000 456,060
Huaneng Power International,
Inc. ......................... 5,562,000 1,819,506
Quality Healthcare Asia Ltd.*... 1,292,000 381,217
Shandong International Power
Development Co. Ltd. ......... 3,204,000 472,686
Shenzhen International Holdings
Ltd.*......................... 18,707,500 1,343,959
Vtech Holdings Ltd. ............ 86,000 325,464
Yuxing Infotech Holdings
Ltd.*......................... 322,000 176,593
Zhejiang Expressway Co. Ltd. ... 10,426,000 1,778,900
------------
19,605,647
------------
INDIA -- 0.0%
Silverline Technologies Ltd.
[ADR]*........................ 4,050 87,581
------------
IRELAND -- 1.0%
ITG Group PLC 144A*............. 165,329 1,738,554
Trinity Biotech PLC [ADR]*...... 180,300 529,631
Trintech Group PLC [ADR]*....... 49,300 971,364
------------
3,239,549
------------
ISRAEL -- 2.8%
BATM Advanced Communications
Ltd. ......................... 38,250 3,339,745
BreezeCom Ltd.*................. 93,700 4,075,951
RT-SET Ltd. 144A*............... 89,925 1,413,698
TTI Team Telecom International
Ltd.*......................... 15,700 565,200
------------
9,394,594
------------
ITALY -- 1.0%
Buzzi Unicem SPA................ 62,250 566,289
ERG SPA......................... 409,885 1,233,741
Ericsson SPA.................... 24,600 1,440,817
------------
3,240,847
------------
JAPAN -- 10.0%
Aderans Co. Ltd. ............... 33,500 1,554,656
Aica Koygo Co. Ltd. ............ 13,000 103,458
SHARES VALUE
------ -----
Amada Co........................ 274,000 $ 2,330,780
Central Glass Co. Ltd. ......... 262,000 1,394,177
Fuji Oil Co. Ltd. .............. 135,000 1,205,796
Hisamitsu Pharmaceutical Co.,
Inc.*......................... 44,000 678,289
Hunet, Inc. .................... 292,000 2,246,546
Ichiyoshi Securities Co.
Ltd. ......................... 47,000 395,807
Idec Izumi Corp. ............... 130,500 1,843,995
Joint Corp. .................... 29,500 1,006,555
Katokichi Co. Ltd. ............. 55,000 1,395,774
Kinseki Ltd. ................... 130,000 2,205,545
Koa Corp. ...................... 45,000 1,399,318
Micronics Japan Co. Ltd. ....... 27,000 632,883
Moritex Corp. .................. 15,000 1,368,128
Nippon Thompson Co. Ltd. ....... 247,000 3,758,642
Ryoyo Electro Corp. ............ 102,000 2,043,827
Shimachu Co. Ltd. .............. 133,600 2,841,169
Sumisho Lease Co. Ltd. ......... 7,000 105,197
Toko, Inc. ..................... 93,000 704,083
Toky Individualized Educational
Institute, Inc. .............. 12,000 657,836
Toshiba Tungaloy Co. Ltd. ...... 288,000 2,027,948
Tsubaki Nakashima Co. Ltd. ..... 137,000 2,020,009
Xebio Co. Ltd. ................. 7,500 176,510
------------
34,096,928
------------
KOREA -- 1.1%
Daum Communications Corp.*...... 11,825 1,124,182
Mirae Co. ...................... 145,100 591,468
Samsung Heavy Industry Co.
Ltd.*......................... 299,040 1,397,323
Shin Sung ENG................... 102,400 551,037
------------
3,664,010
------------
NETHERLANDS -- 3.2%
AOT NV*......................... 149,225 858,273
ASM International NV............ 36,200 959,300
BE Semiconductor Industries
NV*........................... 73,050 1,144,907
Beter Bed Holding NV............ 28,750 865,366
IFCO Systems NV*................ 49,125 1,299,703
IHC Caland NV................... 41,325 2,020,298
PinkRoccade NV*................. 14,700 767,974
Unique International NV......... 28,675 689,937
Van der Moolen Holdings NV...... 43,075 2,427,924
------------
11,033,682
------------
NEW ZEALAND -- 0.1%
Advantage Group Ltd.*........... 137,042 178,701
------------
NORWAY -- 3.7%
Bergesen d.y. ASA Cl-A.......... 109,600 2,256,764
C.Rel ASA 144A*................. 392,800 505,507
Frontline Ltd. 144A*............ 117,525 1,443,718
ProSafe ASA*.................... 118,550 1,761,441
Smedvig ASA Cl-B................ 187,125 3,064,946
TGS Nopec Geophysical Co. ASA*.. 270,125 3,586,936
------------
12,619,312
------------
AST FOUNDERS PASSPORT PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
SPAIN -- 0.4%
Abengoa SA...................... 10,766 $ 290,513
Cortefiel SA.................... 33,620 732,215
Prosegur Cia de Seguridad SA.... 42,625 500,533
------------
1,523,261
------------
SWEDEN -- 2.1%
Biacaore International AB*...... 36,575 1,567,967
Glocalnet AB*................... 23,310 33,487
Karo Bio AB*.................... 50,675 1,895,102
Kipling Holding AB*............. 1,075 15,198
Perbio Science AB*.............. 202,600 1,593,871
Sifo Group AB Cl-B.............. 80,485 1,128,716
SwitchCore AB*.................. 79,535 834,278
------------
7,068,619
------------
SWITZERLAND -- 7.9%
Card-Guard Scientific Survival
Ltd.*......................... 44,475 2,119,720
ESEC Holdings AG................ 1,160 2,867,773
Kudelski SA*.................... 137 1,728,855
Logitech International SA*...... 4,600 3,284,360
Oridion Systems Ltd.*........... 18,529 491,123
Rieter Holdings AG.............. 10,450 3,534,596
Sarna Kunststoff Holding AG..... 1,750 2,152,429
Saurer AG Reg................... 6,250 3,912,809
Straumann AG.................... 1,434 2,160,608
Swisslog Holding AG............. 2,100 1,033,166
Swisslog Holding AG Rights*..... 2,100 0
Tecan AG........................ 1,300 1,247,978
Think Tools AG*................. 4,002 2,325,785
------------
26,859,202
------------
UNITED KINGDOM -- 19.5%
Abacus Polar PLC................ 27,325 191,323
Actinic PLC 144A*............... 679,225 1,007,706
Advanced Power Components PLC... 56,275 345,036
AIT Group PLC................... 85,775 1,603,696
Alphameric PLC*................. 114,675 587,654
Anite Group PLC................. 553,600 1,319,991
Arena Leisure PLC*.............. 312,525 891,847
Axis-Shield PLC*................ 83,900 895,458
Berisford PLC................... 450,875 2,214,956
Cedar Group PLC................. 72,600 730,891
Chloride Group PLC.............. 1,155,620 3,341,510
Debenhams PLC................... 741,600 2,430,647
Dialog Semiconductor PLC........ 27,250 1,436,685
Easynet Group PLC*.............. 79,270 1,209,061
Eyretel PLC*.................... 1,227,575 3,809,747
Fibernet Group PLC*............. 28,225 793,701
SHARES VALUE
------ -----
Future Integrated Telephony
PLC*.......................... 31,894 $ 112,260
GEO Interactive Media Group
PLC*.......................... 83,400 1,590,856
HIT Entertainment PLC 144A...... 575,500 3,789,910
Imagination Tech Group PLC*..... 468,775 2,040,312
Incepta Group PLC............... 693,650 1,396,646
Intermediate Capital Group
PLC........................... 234,375 2,478,403
International Quantum Epitaxy
PLC*.......................... 23,525 1,929,050
ITE Group PLC................... 255,675 282,557
Lex Service PLC................. 123,525 621,786
Man (E D & F) Group PLC......... 468,750 3,739,781
Mayflower Corp. PLC............. 464,025 1,001,038
Menmore Abbey PLC............... 201,800 621,699
Mitie Group PLC................. 159,325 876,764
Nestor Healthcare Group PLC..... 269,475 1,947,987
NSB Retail Systems PLC.......... 18,325 71,436
Orchestream Holdings PLC*....... 660,800 3,161,196
Oxford Asymmetry International
PLC*.......................... 211,875 1,578,117
Oxford GlycoSciences PLC*....... 76,336 2,166,831
Pace Micro Technology PLC....... 111,200 1,607,691
Parthus Technologies PLC*....... 902,625 2,548,476
QXL Ltd.*....................... 1,019,700 1,520,558
Redstone Telecom PLC*........... 268,700 1,057,634
Redstone Telecom PLC Rights*.... 40,936 37,184
Robotic Tech Systems PLC*....... 135,500 1,388,744
Scipher PLC*.................... 80,150 615,792
Shaftesbury PLC................. 208,125 805,025
Staffware PLC................... 22,350 697,856
Superscape VR PLC*.............. 309,975 950,268
Ted Baker PLC................... 169,000 1,350,874
Telemetrix PLC.................. 310,225 1,561,575
Xenova Group PLC*............... 286,125 340,032
------------
66,698,247
------------
TOTAL FOREIGN STOCK
(Cost $301,321,794)............... 308,760,996
------------
U.S. STOCK -- 1.6%
COMPUTER SERVICES & SOFTWARE -- 0.5%
Comtouch Software*.............. 47,450 1,542,125
------------
INTERNET SERVICES -- 0.9%
RADVision Ltd.*................. 113,350 3,166,715
------------
OIL & GAS - 0.1%
Gulf Indonesia Resources
Ltd.*......................... 36,500 292,000
------------
AST FOUNDERS PASSPORT PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
TELECOMMUNICATIONS -- 0.1%
Exfo Electro-Optical
Engineering, Inc.*............ 7,875 $ 345,516
------------
TOTAL U.S. STOCK
(Cost $5,461,655)................. 5,346,356
------------
PAR
(000)
----------
COMMERCIAL PAPER -- 7.2%
Ciesco L.P.
6.95%, 07/03/00............... $ 17,245 17,238,341
Morgan Stanley Dean Witter & Co.
6.85%, 07/03/00............... 7,177 7,172,448
------------
(Cost $24,410,789).............. 24,410,789
------------
TOTAL INVESTMENTS -- 99.5%
(Cost $331,194,238)............... 338,518,141
OTHER ASSETS LESS
LIABILITIES -- 0.5%............... 1,645,117
------------
NET ASSETS -- 100.0%................ $340,163,258
============
Foreign currency exchange contracts outstanding at June 30, 2000:
IN UNREALIZED
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS APPRECIATION/
MONTH TYPE TO RECEIVE FOR AT VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------
07/00 Buy AUD 2,113,424 $ 1,271,885 $ 1,268,943 $ (2,942)
07/00 Buy CAD 268,000 181,025 180,877 (148)
07/00 Buy CHF 2,665,672 1,637,757 1,639,334 1,577
07/00 Buy EUR 1,995,024 1,892,758 1,912,408 19,650
07/00 Buy GBP 2,570,395 3,889,205 3,891,296 2,091
07/00 Buy HKD 8,825,026 1,132,142 1,132,135 (7)
07/00 Buy JPY 172,786,566 1,634,717 1,633,120 (1,597)
07/00 Buy KOR 2,560,241,882 2,296,636 2,296,205 (431)
----------- ----------- --------
$13,936,125 $13,954,318 $ 18,193
=========== =========== ========
IN UNREALIZED
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS APPRECIATION/
MONTH TYPE TO DELIVER FOR AT VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------
07/00 Sell CAD 701,671 $ 473,011 $ 473,568 $ (557)
07/00 Sell DKK 1,165,242 148,823 149,733 (910)
07/00 Sell EUR 5,854,622 5,588,446 5,612,176 (23,730)
07/00 Sell GBP 1,182,728 1,787,717 1,790,521 (2,804)
07/00 Sell GRD 255,092,670 720,796 725,894 (5,098)
07/00 Sell HKD 691,794 88,748 88,748 --
07/00 Sell JPY 136,937,330 1,297,836 1,294,285 3,551
07/00 Sell MYR 505,040 132,905 132,908 (3)
07/00 Sell NOK 10,967 1,269 1,283 (14)
07/00 Sell NZD 299,372 140,663 140,931 (268)
07/00 Sell SEK 8,458,222 958,748 964,370 (5,622)
----------- ----------- --------
$11,338,962 $11,374,417 $(35,455)
=========== =========== ========
The following is a breakdown of the foreign stock portion of the Portfolio, by
industry classification, as of June 30, 2000. Percentages are based on net
assets.
INDUSTRY
- --------
Advertising......................................... 0.6%
Airlines............................................ 1.8%
Automobile Manufacturers............................ 0.1%
Automotive Parts.................................... 1.0%
Beverages........................................... 0.7%
Broadcasting........................................ 2.4%
Building Materials.................................. 1.6%
Business Services................................... 7.3%
Chemicals........................................... 2.2%
Clothing & Apparel.................................. 1.0%
Computer Hardware................................... 6.6%
Computer Services & Software........................ 7.1%
Construction........................................ 0.7%
Consumer Products & Services........................ 1.1%
Containers & Packaging.............................. 0.7%
Electronic Components & Equipment................... 9.9%
Entertainment & Leisure............................. 1.8%
Environmental Services.............................. 0.6%
Financial -- Bank & Trust........................... 0.1%
Financial Services.................................. 4.0%
Food................................................ 1.3%
Healthcare Services................................. 2.1%
Machinery & Equipment............................... 7.1%
Metals & Mining..................................... 1.4%
Oil & Gas........................................... 6.1%
Pharmaceuticals..................................... 3.9%
Real Estate......................................... 1.2%
Retail & Merchandising.............................. 3.6%
Semiconductors...................................... 4.8%
Telecommunications.................................. 6.0%
Transportation...................................... 1.9%
-----
Total............................................... 90.7%
=====
- ------------------------------------------------------------------------------
Unless otherwise noted, all stocks are common stock.
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
++ Illiquid security. At the end of the period, this security amounted to 0.1%
of net assets.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 7.1% of net assets.
See Notes to Financial Statements.
AST T. ROWE PRICE NATURAL RESOURCES PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 90.0%
BUILDING & REAL ESTATE -- 4.1%
Camden Property Trust............ 48,100 $ 1,412,937
Kilroy Realty Corp............... 32,000 830,000
Post Properties, Inc. [REIT]..... 25,800 1,135,200
Security Capital U.S. Realty
[ADR]*......................... 27,200 488,750
Weeks Corp....................... 46,330 1,036,634
------------
4,903,521
------------
BUILDING MATERIALS -- 0.9%
Johns Manville Corp.............. 25,300 333,644
Southdown, Inc................... 12,700 733,425
------------
1,067,069
------------
CHEMICALS -- 4.5%
Bush Boake Allen, Inc.*.......... 22,600 988,750
FMC Corp.*....................... 11,700 678,600
Hercules, Inc.................... 73,900 1,039,219
Millennium Chemicals, Inc........ 47,600 877,625
Octel Corp.*..................... 68,875 538,086
Olin Corp........................ 34,200 564,300
Union Carbide Corp............... 13,000 643,500
------------
5,330,080
------------
CONTAINERS & PACKAGING -- 0.9%
Longview Fibre Co................ 30,000 331,875
Smurfit-Stone Container Corp.*... 59,200 762,200
------------
1,094,075
------------
DIVERSIFIED RESOURCES -- 1.3%
IMC Global, Inc.................. 117,000 1,521,000
------------
ENERGY SERVICES -- 3.3%
CMS Energy Corp.................. 17,400 384,975
Coflexip SA [ADR]................ 25,700 1,554,850
Layne Christensen Co.*........... 44,500 200,250
Niagara Mohawk Holdings, Inc.*... 124,700 1,738,006
------------
3,878,081
------------
ENVIRONMENTAL SERVICES -- 0.6%
Waste Management, Inc............ 36,400 691,600
------------
FARMING & AGRICULTURE -- 1.3%
Delta & Pine Land Co............. 60,900 1,526,306
------------
HOTELS & MOTELS -- 0.5%
Hilton Hotels Corp............... 68,400 641,250
------------
INTEGRATED PETROLEUM -- 17.0%
Amerada Hess Corp................ 46,000 2,840,500
Chevron Corp..................... 20,052 1,700,660
Norsk Hydro AS [ADR]............. 39,600 1,665,675
Royal Dutch Petroleum Co......... 71,800 4,420,188
Texaco, Inc...................... 111,600 5,942,699
USX-Marathon Group, Inc.......... 147,400 3,694,213
------------
20,263,935
------------
LUMBER & WOOD PRODUCTS -- 1.4%
Georgia-Pacific Corp. (Timber
Group)........................... 75,700 1,637,013
------------
SHARES VALUE
------ -----
MACHINERY & EQUIPMENT -- 4.0%
Baker Hughes, Inc.................. 132,200 $ 4,230,400
Carbo Ceramics, Inc................ 15,200 533,900
------------
4,764,300
------------
METALS & MINING -- 8.9%
Aber Resources Ltd.*............... 128,400 802,500
Alcoa, Inc......................... 51,684 1,498,836
Allegheny Technologies, Inc........ 74,800 1,346,400
Arch Coal, Inc..................... 123,000 945,563
Cleveland-Cliffs, Inc.............. 55,600 1,435,175
Harmony Gold Mining Co. Ltd........ 75,000 417,188
Inco Ltd.*......................... 44,600 685,725
Inco Ltd. Cl-VBN*.................. 202,800 887,250
Lihir Gold Ltd. [ADR]*............. 45,000 365,625
Placer Dome, Inc................... 158,000 1,510,874
USX-U.S. Steel Group, Inc.......... 40,000 742,500
------------
10,637,636
------------
NON-FERROUS METALS -- 1.3%
Phelps Dodge Corp.................. 43,250 1,608,359
------------
OIL & GAS -- 24.4%
Anadarko Petroleum Corp............ 4,300 212,044
BJ Services Co.*................... 26,000 1,625,000
BP Amoco PLC [ADR]................. 30,440 1,721,763
Burlington Resources, Inc.......... 51,900 1,985,175
Cabot Oil & Gas Corp............... 42,600 902,588
Devon Energy Corp.................. 10,535 591,935
Diamond Offshore Drilling, Inc..... 40,800 1,433,100
Exxon Mobil Corp................... 47,909 3,763,850
Helmerich & Payne, Inc............. 58,000 2,058,999
Key Energy Services, Inc.*......... 56,100 539,963
Mitchell Energy & Development Corp.
Cl-A............................. 31,900 1,024,788
Murphy Oil Corp.................... 11,600 689,475
Nicor, Inc......................... 17,500 570,938
Questar Corp....................... 34,600 670,375
Santa Fe Energy Resources, Inc.*... 61,600 700,700
Schlumberger Ltd................... 14,388 1,073,705
Seacor Smit, Inc.*................. 64,050 2,477,933
Tidewater, Inc..................... 53,100 1,911,600
Total SA [ADR]..................... 23,874 1,838,298
Union Pacific Resources Group,
Inc.............................. 41,100 904,200
Unocal Corp........................ 44,200 1,464,125
Vastar Resources, Inc.............. 12,700 1,043,781
------------
29,204,335
------------
PAPER & FOREST PRODUCTS -- 6.0%
Abitibi-Consolidated, Inc.......... 72,200 676,875
Fort James Corp.................... 70,900 1,639,562
International Paper Co............. 24,400 727,425
Jefferson Smurfit Group [ADR]...... 41,600 733,200
Kimberly-Clark Corp................ 7,700 441,788
Packaging Corp. of America*........ 67,800 686,475
Wausau-Mosinee Paper Corp.......... 117,400 1,005,238
Weyerhaeuser Co.................... 28,300 1,216,900
------------
7,127,463
------------
AST T. ROWE PRICE NATURAL RESOURCES PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
PETROLEUM EXPLORATION & PRODUCTION -- 3.6%
Barrett Resources Corp.*........... 11,300 $ 343,944
Companie Generale de Geophysique SA
[ADR]*........................... 60,800 828,400
Forcenergy, Inc.*.................. 63,500 1,277,938
Ocean Energy, Inc.*................ 128,480 1,822,809
------------
4,273,091
------------
PRECIOUS METALS -- 4.4%
Battle Mountain Gold Co.*.......... 475,400 1,039,938
Newmont Mining Corp................ 192,024 4,152,519
------------
5,192,457
------------
TRANSPORTATION -- 0.8%
Norfolk Southern Corp.............. 64,400 957,950
------------
UTILITIES -- 0.8%
Unisource Energy Corp.............. 61,900 928,500
------------
TOTAL COMMON STOCK
(Cost $105,417,144)................ 107,248,021
------------
FOREIGN STOCK -- 4.7%
METALS & MINING -- 3.4%
Lihir Gold Ltd. -- (AUD)*.......... 6,530,500 2,587,890
Lonrho Africa PLC -- (GBP)......... 203,159 58,436
Rio Tinto PLC -- (GBP)*............ 39,500 645,825
WMC Ltd. -- (AUD).................. 180,000 807,649
------------
4,099,800
------------
NON-FERROUS METALS -- 0.1%
Bougainville Copper
Ltd. -- (AUD)*................... 1,321,892 123,022
------------
PETROLEUM EXPLORATION & PRODUCTION -- 1.1%
Compagnie Generale de Geophysique
SA -- (FRF)*..................... 19,100 1,307,266
------------
SHARES VALUE
------ -----
PRECIOUS METALS -- 0.1%
Goldfields Ltd. -- (AUD)........... 131,062 $ 107,966
------------
TOTAL FOREIGN STOCK
(Cost $6,035,860).................. 5,638,054
------------
PREFERRED STOCK -- 2.2%
BUILDING & REAL ESTATE -- 1.1%
Rouse Co. $3.00 Cl-B............... 34,100 1,219,075
------------
METALS & MINING -- 0.5%
Kinam Gold, Inc. $3.75 Cl-B........ 28,500 641,250
------------
PRECIOUS METALS -- 0.6%
Battle Mountain Gold $3.25......... 25,900 764,050
------------
TOTAL PREFERRED STOCK
(Cost $3,234,868).................. 2,624,375
------------
PAR
(000)
-----
CORPORATE OBLIGATIONS -- 0.5%
METALS & MINING
Teck Corp.
3.75%, 07/15/06
(Cost $574,480).................. $ 750 570,000
------------
TOTAL INVESTMENTS -- 97.4%
(Cost $115,262,352)................ 116,080,450
OTHER ASSETS LESS
LIABILITIES -- 2.6%................ 3,077,510
------------
NET ASSETS -- 100.0%................. $119,157,960
============
- ------------------------------------------------------------------------------
Unless otherwise noted, all stocks are common stock.
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST PIMCO LIMITED MATURITY BOND PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
CORPORATE OBLIGATIONS -- 56.3%
AEROSPACE -- 3.8%
Lockheed Martin Corp.
6.85%, 05/15/01................ $ 15,000 $ 14,934,435
------------
BUILDING MATERIALS -- 0.8%
Cemex SA 144A
8.50%, 08/31/00................ 3,000 3,005,400
------------
BUSINESS SERVICES -- 2.5%
Cox Enterprises 144A
6.625%, 06/14/02............... 10,000 9,815,750
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 2.1%
Arizona Public Service [FRN]
6.816%, 11/15/01............... 8,000 7,996,408
------------
ENTERTAINMENT & LEISURE -- 0.3%
Time Warner, Inc. 144A
6.10%, 12/30/01................ 1,250 1,227,726
------------
FINANCIAL -- BANK & TRUST -- 2.7%
Bank of America Corp.
8.625%, 11/15/03............... 1,000 1,034,223
Beneficial Corp. Cl-H [FRN]
6.28%, 01/09/02................ 5,000 5,003,855
First Union Corp. [FRN]
6.165%, 07/22/03............... 4,550 4,544,349
------------
10,582,427
------------
FINANCIAL SERVICES -- 21.7%
Bear Stearns Co.
6.596%, 03/28/03............... 700 699,282
Chrysler Financial Corp. [FRN]
6.69%, 01/30/02................ 4,000 3,999,836
General Motors Acceptance Corp.
[FRN]
6.13%, 02/01/02................ 500 499,906
Golden State Holdings Corp.
7.00%, 08/01/03................ 4,000 3,711,600
Goldman Sachs Group 144A
7.125%, 03/01/03............... 4,000 3,711,600
Household Finance Corp.
7.625%, 12/27/00............... 15,000 14,980,349
6.302%, 05/24/02 [VR].......... 30,000 30,009,689
Lehman Brothers Holdings, Inc.
6.375%, 05/07/02 [FRN]......... 1,200 1,175,142
6.84%, 07/15/02................ 500 502,149
7.00%, 05/15/03................ 2,500 2,441,783
Merrill Lynch & Co., Inc. [FRN]
6.40%, 05/30/03................ 5,000 5,006,500
Nacional Financiera [FRN] 144A
8.693%, 12/01/00............... 4,875 4,850,625
New England Educational Loan
Marketing Assoc. Cl-B [FRN]
144A
6.29%, 09/11/00................ 5,000 5,000,465
PAR
(000) VALUE
----- -----
Salomon, Inc.
7.50%, 02/01/03................ $ 1,000 $ 1,002,254
Transamerica Financial Corp.
7.25%, 08/15/02................ 10,000 9,978,010
------------
84,844,352
------------
INDUSTRIAL PRODUCTS -- 1.2%
Amerco
7.20%, 04/01/02................ 5,000 4,785,650
------------
INSURANCE -- 2.8%
Gold Eagle Capital [FRN] 144A
11.453%, 08/16/00.............. 3,000 3,000,300
Marsh & McLennan Companies, Inc.
6.625%, 06/15/04............... 8,000 7,759,464
------------
10,759,764
------------
OIL & GAS -- 1.0%
Gulf Canada Resources Ltd.
9.25%, 01/15/04................ 3,000 3,030,000
Occidental Petroleum Corp.
6.40%, 04/01/03................ 1,000 959,093
------------
3,989,093
------------
PAPER & FOREST PRODUCTS -- 0.9%
International Paper Co.
7.597%, 07/08/02 [FRN] 144A.... 2,000 1,999,526
6.125%, 11/01/03............... 1,500 1,431,425
------------
3,430,951
------------
RETAIL & MERCHANDISING -- 0.8%
Kmart Corp.
8.00%, 12/13/01................ 3,150 3,090,739
------------
TELECOMMUNICATIONS -- 5.1%
AT&T Capital Corp. Cl-F
6.25%, 05/15/01................ 10,000 9,919,300
Deutsche Telekom International
Finance
7.75%, 06/15/05................ 5,000 5,037,000
TCI Communications, Inc. [FRN]
6.855%, 09/11/00............... 5,000 5,005,450
------------
19,961,750
------------
UTILITIES -- 10.6%
Alliant Energy Resources 144A
7.25%, 02/15/30................ 20 13,800
Cleveland Electric Illuminating
Co.
7.625%, 08/01/02............... 2,100 2,081,856
Connecticut Light & Power Co.
7.875%, 06/01/01............... 2,000 2,004,856
Connecticut Light & Power Co.
Cl-C
7.75%, 06/01/02................ 10,000 10,040,310
Detroit Edison Co.
6.75%, 03/17/03................ 5,000 4,889,515
KN Energy, Inc.
6.45%, 11/30/01................ 10,000 9,824,500
Nevada Power Co.
6.20%, 04/15/04................ 4,500 4,282,434
AST PIMCO LIMITED MATURITY BOND PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
Texas Utilities Co.
6.62%, 07/01/01................ $ 3,411 $ 3,408,091
United Illuminating Co.
6.25%, 12/15/02................ 5,000 4,831,920
------------
41,377,282
------------
TOTAL CORPORATE OBLIGATIONS
(Cost $222,365,398)................ 219,801,727
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 24.0%
Federal Home Loan Mortgage Corp.
8.50%, 01/01/25................ 5,574 5,688,728
8.75%, 10/01/01................ 438 443,349
------------
6,132,077
------------
Federal National Mortgage Assoc.
6.225%, 03/01/17 [VR].......... 1,983 1,905,984
6.50%, 05/18/23................ 4,032 3,955,545
6.664%, 05/01/25 [VR].......... 734 734,835
7.185%, 01/01/25 [VR].......... 118 119,504
7.50%, 01/25/22................ 4,000 3,943,750
------------
10,659,618
------------
Government National Mortgage
Assoc.
6.375%, 03/20/24-02/20/28
[VR]........................... 12,577 12,580,367
6.50%, 06/20/28-07/24/30....... 10,600 9,339,718
6.75%, 07/20/17-07/20/24
[VR]......................... 768 765,334
7.00%, 01/15/24-08/15/25
[VR]......................... 1,669 1,624,080
7.125%, 11/20/26 [VR].......... 8,542 8,520,952
7.50%, 07/24/30................ 2,100 2,085,563
8.00%, 07/24/30................ 20,000 20,125,000
8.50%, 07/24/30................ 20,200 20,686,062
------------
75,727,076
------------
Student Loan Marketing Assoc.
[FRN]
5.26%, 04/25/04................ 1,276 1,275,470
------------
(Cost $95,364,027)............... 93,794,241
------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 23.8%
Chase Credit Card Master Trust
Series 1997-3 Cl-A
6.777%, 05/15/07............... 5,739 5,700,107
Chase Series 1999-S8 Cl-A1
6.35%, 06/25/29................ 13,000 12,740,325
Countrywide Home Loans Series
1999-3 C1-A2
6.05%, 04/25/29................ 11,700 10,948,158
Delta Funding Home Equity Loan
Trust Series 1998-1 Cl-A1A
6.28%, 05/25/30................ 883 867,390
Duck Auto Grantor Trust 1999-A
144A
5.65%, 03/15/04................ 2,013 1,978,869
PAR
(000) VALUE
----- -----
Federal Home Loan Mortgage Corp.
Series 1371 Cl-PG
5.80%, 08/15/19................ $ 1,777 $ 1,767,823
Federal Home Loan Mortgage Corp.
Series 1725 Cl-B
7.00%, 10/15/20................ 7,995 7,941,855
Federal National Mortgage Assoc.
Series 1996-39 Cl-H
8.00%, 11/25/23................ 1,757 1,776,805
First Plus Home Loan Trust Series
1998-5 Cl-A3 [VR]
6.06%, 11/10/11................ 3,025 3,018,806
Government National Mortgage
Assoc. Series 1997-1 Cl-A
7.25%, 12/16/23................ 3,290 3,269,148
Green Tree Financial Corp. 1999-5
Cl-A2
6.77%, 04/01/31................ 10,600 10,502,957
Green Tree Financial Corp. 1999-5
Cl-A3
6.97%, 04/01/31................ 6,000 5,936,490
Green Tree Home Equity Loan Trust
Series 1999-A Cl-A1
5.59%, 02/15/13................ 954 952,438
Green Tree Home Equity Loan Trust
Series 1999-C Cl-A4
7.18%, 07/15/30................ 10,700 10,361,452
Green Tree Home Improvement Loan
Trust Series 1998-D
Cl-HIA2
5.94%, 06/15/29................ 481 481,013
Merrill Lynch Mortgage Investors,
Inc. Cl-B
7.069%, 06/15/21............... 627 607,410
PP&L Transition Bonds Series
1999-1 Cl-A1
6.08%, 03/25/03................ 1,925 1,915,170
Residential Accredit Loans, Inc.
Series 1997-QS8 Cl-A9
7.375%, 08/25/27............... 2,000 1,988,181
Residential Funding Mortgage
Securities II Series 1993-S20
Cl-A8
6.982%, 06/25/08............... 2,800 2,772,350
Residential Funding Mortgage
Securities II Series 1997-S6
Cl-A5
7.00%, 05/25/12................ 2,687 2,576,188
Residential Reinsurance [FRN]
144A
10.926%, 09/01/00.............. 1,300 1,300,000
The Money Store Residential Trust
Series 1998-I Cl-A3
6.215%, 02/15/11............... 1,755 1,749,271
AST PIMCO LIMITED MATURITY BOND PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
Travelers Mortgage Securities
Corp. Series 1984-1 Cl-Z2
12.00%, 03/01/14............... $ 1,554 $ 1,652,057
------------
(Cost $93,991,498)............... 92,804,263
------------
U.S. TREASURY OBLIGATIONS -- 4.1%
U.S. Treasury Inflationary Bonds
3.625%, 07/15/02-01/15/08
(Cost $15,909,030)............... 15,000 15,933,887
------------
SOVEREIGN ISSUES -- 3.5%
ARGENTINA -- 1.0%
Republic of Argentina [BRB, FRB]
11.595%, 04/10/05.............. 4,000 3,730,000
------------
CANADA -- 0.3%
Hydro-Quebec
9.00%, 03/07/01................ 1,000 1,009,000
------------
KOREA -- 2.2%
Korea Development Bank
7.125%, 09/17/01............... 8,902 8,827,143
------------
TOTAL SOVEREIGN ISSUES
(Cost $13,891,945)................. 13,566,143
------------
BANK LOAN OBLIGATIONS -- 2.2%
Alpha Wind Reinsurance [FRN]
11.321%, 05/23/01.............. 1,500 1,500,000
AMFM Operating, Inc.++
7.438%, 12/27/01............... 1,000 996,900
Kansas City Southern Co.++
8.605%, 01/15/07............... 1,500 1,504,219
MGM Grand Corp.++
8.059%, 07/06/00............... 3,000 2,927,399
Starwood Hotel Trust II [FRN]++
8.573%, 02/23/03............... 1,500 1,500,938
------------
(Cost $8,498,957)................ 8,429,456
------------
PRINCIPAL
IN LOCAL
CURRENCY
(000)
---------
FOREIGN BONDS -- 0.6%
NEW ZEALAND
Inter-American Development Bank
5.75%, 04/15/04
(Cost $2,641,657)................ 4,900 2,179,828
------------
PAR
(000) VALUE
----- -----
COMMERCIAL PAPER -- 1.2%
Daimler-Chrysler
6.63%, 09/21/00................ $ 400 $ 393,886
Edison Midwest+
6.78%, 07/19/00................ 900 896,949
General Electric Capital Corp.
6.61%, 09/06/00................ 100 98,751
Norfolk Southern Corp.+
6.83%, 08/28/00................ 800 791,359
Pearson, Inc.+
6.87%, 08/24/00................ 600 593,743
Texas Utilities Co.+
6.80%, 07/07/00................ 900 898,980
UBS Finance, Inc.
6.92%, 07/05/00................ 900 899,308
------------
(Cost $4,572,980)................ 4,572,976
------------
SHARES
------
SHORT-TERM INVESTMENTS -- 0.4%
Temporary Investment Cash Fund... 748,250 748,250
Temporary Investment Fund........ 748,250 748,250
------------
(Cost $1,496,500)................ 1,496,500
------------
TOTAL INVESTMENTS -- 116.1% (Cost
$458,731,992)...................... 452,579,021
------------
NUMBER
OF
CONTRACTS
---------
WRITTEN OPTIONS -- 0.0%
CALL OPTIONS
March 2001 Euro Dollar Futures,
Strike Price 93.25, Expires
03/19/01....................... 9 (2,475)
Swap between Fixed Rate and 3
Month LIBOR-BBA, Strike Price
7.00, Expires 09/15/00......... 84 (7,039)
Swap between Fixed Rate and 3
Month LIBOR-BBA, Strike Price
7.00, Expires 09/22/00......... 78 (8,343)
Swap between Fixed Rate and 3
Month LIBOR-BBA, Strike Price
7.00, Expires 09/28/00......... 70 (13,398)
------------
TOTAL WRITTEN OPTIONS
(Cost $(30,952))................... (31,255)
------------
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (16.1%).................. (62,826,907)
------------
NET ASSETS -- 100.0%................. $389,720,859
============
AST PIMCO LIMITED MATURITY BOND PORTFOLIO
- ------------------------------------------------------------------------------
Foreign currency exchange contracts outstanding at June 30, 2000:
IN
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS UNREALIZED
MONTH TYPE TO DELIVER FOR AT VALUE APPRECIATION
- ---------------------------------------------------------------------------------------
07/00 Sell NZD 4,855,000 $2,325,885 $2,285,459 $40,426
========== ========== =======
Credit default swap agreements outstanding at June 30, 2000:
NOTIONAL
EXPIRATION AMOUNT UNREALIZED
DESCRIPTION MONTH (000) DEPRECIATION
- --------------------------------------------------------------------
Pay fixed rate equal to 6.15%
and the Portfolio will
receive from the
counterparty at par in the
event of default of the
Republic of Argentina 9.25%
due 02/23/01................ 03/01 $ 900 $ 47,978
Pay fixed rate equal to 5.70%
and the Portfolio will
receive from the
counterparty at par in the
event of default of the
Republic of Argentina 9.25%
due 02/23/01................ 03/01 2,100 97,182
--------
$145,160
========
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
+ Security is restricted as to resale and may not be resold except to qualified
institutional buyers. At the end of the period, these securities amounted to
0.8% of net assets.
++ Illiquid security. At the end of the period, these securities amounted to
1.8% of net assets.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 9.2% of net assets.
See Notes to Financial Statements.
AST ALLIANCE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 99.2%
BROADCASTING -- 5.4%
AMFM, Inc.*...................... 83,800 $ 5,782,200
AT&T Corp. Liberty Media Group
Cl-A*.......................... 748,400 18,148,700
------------
23,930,900
------------
BUSINESS SERVICES -- 0.3%
Foundry Networks, Inc.*.......... 13,900 1,535,950
------------
COMPUTER HARDWARE -- 4.8%
Dell Computer Corp.*............. 196,200 9,675,113
EMC Corp.*....................... 152,800 11,756,050
------------
21,431,163
------------
COMPUTER SERVICES & SOFTWARE -- 11.1%
Cisco Systems, Inc.*............. 316,700 20,130,243
Microsoft Corp.*................. 171,200 13,696,000
Oracle Corp.*.................... 135,400 11,382,063
Sun Microsystems, Inc.*.......... 30,700 2,791,781
Veritas Software Corp.*.......... 10,300 1,164,061
------------
49,164,148
------------
CONGLOMERATES -- 9.3%
Corning, Inc. ................... 34,300 9,256,713
Tyco International Ltd. ......... 525,800 24,909,775
United Technologies Corp. ....... 117,600 6,923,700
------------
41,090,188
------------
CONSUMER PRODUCTS & SERVICES -- 1.1%
Colgate-Palmolive Co. ........... 81,800 4,897,775
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 3.2%
AT&T Wireless Group*............. 291,200 8,117,200
Texas Instruments, Inc. ......... 89,000 6,113,188
------------
14,230,388
------------
ENTERTAINMENT & LEISURE -- 5.7%
Disney, (Walt) Co. .............. 101,800 3,951,113
Time Warner, Inc. ............... 169,800 12,904,799
Viacom, Inc. Cl-B*............... 121,311 8,271,894
------------
25,127,806
------------
FINANCIAL-BANK & TRUST -- 1.6%
Chase Manhattan Corp. ........... 83,600 3,850,825
MBNA Corp. ...................... 114,700 3,111,238
------------
6,962,063
------------
FINANCIAL SERVICES -- 9.4%
Associates First Capital Corp.
Cl-A........................... 421,400 9,402,488
Citigroup, Inc. ................. 262,400 15,809,599
Freddie Mac...................... 96,500 3,908,250
Goldman Sachs Group, Inc. ....... 19,700 1,869,038
Morgan Stanley Dean Witter &
Co. ........................... 116,100 9,665,325
Wells Fargo & Co. ............... 26,500 1,026,875
------------
41,681,575
------------
SHARES VALUE
------ -----
INSURANCE -- 0.6%
American International Group,
Inc. .......................... 22,900 $ 2,690,750
------------
INTERNET SERVICES -- 0.8%
eBay, Inc.*...................... 10,600 575,713
VeriSign, Inc.*.................. 17,773 3,136,846
------------
3,712,559
------------
MEDICAL SUPPLIES & EQUIPMENT -- 1.2%
Medtronic, Inc. ................. 90,900 4,527,956
PE Corp. - PE Biosystems Group... 9,200 606,050
------------
5,134,006
------------
PHARMACEUTICALS -- 10.9%
Pfizer, Inc. .................... 577,375 27,714,000
Pharmacia Corp. ................. 47,900 2,475,831
Schering-Plough Corp. ........... 356,900 18,023,450
------------
48,213,281
------------
PRINTING & PUBLISHING -- 0.5%
Lexmark International Group, Inc.
Cl-A*.......................... 33,300 2,239,425
------------
RETAIL & MERCHANDISING -- 6.5%
Gap, Inc. ....................... 86,800 2,712,500
Home Depot, Inc. ................ 239,200 11,945,049
Kohl's Corp.*.................... 81,500 4,533,438
Lowe's Companies, Inc. .......... 85,500 3,510,844
Target Corp. .................... 21,600 1,252,800
Walgreen Co. .................... 150,400 4,841,000
------------
28,795,631
------------
SEMICONDUCTORS -- 13.4%
Applied Materials, Inc.*......... 217,000 19,665,625
E-Tek Dynamics, Inc.*............ 11,800 3,112,988
Intel Corp. ..................... 193,800 25,908,637
JDS Uniphase Corp.*.............. 40,800 4,890,900
Micron Technology, Inc.*......... 34,400 3,029,350
PMC-Sierra, Inc.*................ 17,600 3,127,300
------------
59,734,800
------------
TELECOMMUNICATIONS -- 13.4%
Ericsson, (L.M.) Telephone Co.
[ADR].......................... 117,200 2,344,000
MediaOne Group, Inc.++........... 111,900 7,455,338
Nokia Corp. Cl-A [ADR]........... 529,900 26,461,880
Nortel Networks Corp. NY Reg.*... 174,800 11,930,100
QUALCOMM, Inc.*.................. 22,000 1,320,000
Sprint Corp. (FON Group)......... 62,800 3,202,800
Sycamore Networks, Inc.*......... 8,400 927,150
Vodafone AirTouch PLC [ADR]...... 151,800 6,290,213
------------
59,931,481
------------
TOTAL COMMON STOCK
(Cost $412,777,181)................ 440,503,889
------------
AST ALLIANCE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
SHORT-TERM INVESTMENTS -- 0.7%
Temporary Investment Cash Fund... 1,640,523 $ 1,640,523
Temporary Investment Fund........ 1,640,522 1,640,522
------------
(Cost $3,281,045)................ 3,281,045
------------
TOTAL INVESTMENTS -- 99.9%
(Cost $416,058,226)................ 443,784,934
OTHER ASSETS LESS
LIABILITIES -- 0.1%................ 322,454
------------
NET ASSETS -- 100.0%................. $444,107,388
============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
++ Illiquid security. At the end of the period, this security amounted to 1.7%
of net assets.
See Notes to Financial Statements.
AST JANUS OVERSEAS GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
FOREIGN STOCK -- 88.8%
ARGENTINA -- 0.1%
Telefonica SA [ADR]*.......... 25,451 $ 1,630,455
--------------
AUSTRALIA -- 0.1%
Melbourne It Ltd.*............ 322,112 1,622,067
--------------
BRAZIL -- 2.5%
Petroleo Brasileiro SA
[ADR]*...................... 421,550 12,735,657
Tele Sudeste Celular
Participacoes SA [ADR]*..... 25,027 763,324
Telecomunicacoes Brasileiras
SA Pfd. [ADR]............... 125,135 12,153,737
Telecomunicacoes de Sao Paulo
SA [ADR].................... 125,135 2,314,998
Telesp Celular Participacoes
SA [ADR].................... 233,320 10,470,235
--------------
38,437,951
--------------
CANADA -- 6.7%
Bombardier, Inc. Cl-B......... 331,900 9,004,961
Celestica, Inc.*.............. 10,946 532,647
Celestica, Inc. NY Reg.*...... 215,355 10,686,992
Corus Entertainment, Inc.*.... 186,694 4,977,095
Le Groupe Videotron Ltee...... 609,975 14,161,817
Nortel Networks Corp. ........ 80,377 5,571,226
Nortel Networks Corp. NY
Reg.*....................... 352,230 24,039,697
Rogers Communications, Inc.
Cl-B*....................... 647,416 18,330,061
Shaw Communications, Inc.
Cl-B........................ 638,161 15,720,691
--------------
103,025,187
--------------
EGYPT -- 0.4%
MobiNil*...................... 181,096 5,893,813
--------------
FINLAND -- 6.3%
Nokia AB Oyj.................. 1,083,067 55,492,648
Nokia Corp. Cl-A [ADR]........ 767,460 38,325,034
Tieto Corp. Cl-B.............. 73,145 2,450,554
--------------
96,268,236
--------------
FRANCE -- 5.5%
Alcatel Corp. ................ 261,560 17,225,050
Canal Plus.................... 20,506 3,459,601
Cap Gemini SA................. 27,126 4,797,495
Havas Advertising SA.......... 543,064 12,467,775
Schneider SA.................. 71,682 5,016,091
STMicroelectronics NV......... 238,953 15,117,809
STMicroelectronics NV NY Reg.. 5,985 384,162
Total Fina SA Cl-B*........... 171,356 26,380,151
--------------
84,848,134
--------------
GERMANY -- 3.1%
EM.TV & Merchandising AG...... 112,168 6,666,426
Intershop Communications AG... 4,801 2,204,447
Marschollek, Lautenschlaeger
und Partner AG Pfd. ........ 29,790 14,835,032
Pharmacia Corp. .............. 183,563 9,487,913
Porsche AG Pfd. .............. 5,345 14,525,570
--------------
47,719,388
--------------
SHARES VALUE
------ -----
HONG KONG -- 9.5%
China Telecom Ltd. ........... 3,052,000 $ 26,917,791
China Telecom Ltd. [ADR]*..... 469,560 83,493,637
China Unicom Ltd. [ADR]*...... 175,070 3,720,238
Citic Pacific Ltd. ........... 2,566,000 13,430,712
Legend Holdings Ltd. ......... 18,850,000 18,257,467
--------------
145,819,845
--------------
INDIA -- 0.9%
Reliance Industries [GDR]
144A........................ 693,998 14,573,958
--------------
ISRAEL -- 2.1%
Check Point Software
Technologies Ltd.*.......... 153,370 32,476,098
--------------
ITALY -- 0.1%
Finmeccanica SPA*............. 1,335,000 1,842,791
--------------
JAPAN -- 13.5%
Fujitsu Ltd.*................. 164,000 5,688,766
Furukawa Electric Co. ........ 887,000 18,569,726
Ito-Yokado Co. Ltd. .......... 61,000 3,678,397
Murata Manufacturing Co.
Ltd. ....................... 67,000 9,638,237
NEC Corp. .................... 600,000 18,884,419
Nippon Telegraph & Telephone
Corp. ...................... 363 4,837,644
NTT Mobile Communication
Network, Inc. .............. 2,680 72,698,394
Rohm Co. Ltd. ................ 8,100 2,373,312
Shionogi & Co. Ltd. .......... 413,000 7,865,625
SoftBank Corp. ............... 98,800 13,447,067
Sony Corp. ................... 279,600 26,162,575
Sony Corp. [ADR]*............. 34,490 3,252,838
Takeda Chemical Industries
Ltd. ....................... 232,000 15,261,786
Yamanouchi Pharmaceutical Co.
Ltd. ....................... 68,000 3,721,308
--------------
206,080,094
--------------
KOREA -- 5.1%
Dacom Corp. .................. 29,520 4,275,812
Samsung Electronics Co. ...... 105,300 34,848,529
Samsung Electronics Co. [GDR]
144A*....................... 108,020 9,870,328
SK Telecom Co. Ltd. [ADR]..... 797,681 28,965,791
--------------
77,960,460
--------------
MEXICO -- 4.6%
Grupo Televisa SA [GDR]....... 341,460 23,539,399
Telefonos de Mexico SA Cl-L
[ADR]....................... 830,790 47,458,879
--------------
70,998,278
--------------
NETHERLANDS -- 3.8%
ASM Lithography Holding NV*... 113,126 4,882,029
ASM Lithography Holding NV NY
Reg. ....................... 50,835 2,243,094
Getronics NV.................. 221,940 3,435,900
IFCO Systems NV*.............. 7,691 203,481
IFCO Systems NV NY Reg.*...... 9,395 239,573
Koninklijke (Royal) Philips
Electronics NV.............. 636,671 30,149,106
AST JANUS OVERSEAS GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
Koninklijke Numico NV......... 45,219 $ 2,154,318
Unilever NV................... 68,628 3,161,019
Versatel Telecom International
NV*......................... 297,744 12,558,221
--------------
59,026,741
--------------
SINGAPORE -- 1.6%
Chartered Semiconductor
Manufacturing Ltd. [ADR]*... 66,930 6,023,700
Datadraft Asia Ltd. .......... 923,520 8,126,977
Flextronics International
Ltd. ....................... 44,370 3,047,664
Singapore Press Holdings
Ltd. ....................... 323,000 5,044,014
ST Assembly Test Services
Ltd.*....................... 99,595 2,564,571
--------------
24,806,926
--------------
SOUTH AFRICA -- 0.8%
Dimension Data Holdings
Ltd. ....................... 1,536,200 12,711,467
--------------
SPAIN -- 4.2%
Banco Bilbao Vizcaya SA....... 1,817,369 27,264,019
Telefonica SA*................ 1,760,589 37,972,827
--------------
65,236,846
--------------
SWEDEN -- 3.5%
Adcore AB..................... 151,164 1,171,985
Assa Abloy AB Cl-B............ 661,689 13,353,402
Ericsson, (L.M.) Telephone Co.
[ADR]....................... 599,704 11,994,080
Ericsson, (L.M.) Telephone Co.
Cl-B........................ 749,488 14,911,622
Securitas AB Cl-B............. 589,296 12,564,345
--------------
53,995,434
--------------
SWITZERLAND -- 0.5%
Serono SA Cl-B................ 9,556 7,992,374
--------------
TAIWAN -- 2.6%
Taiwan Semiconductor
Manufacturing Co. Ltd.*..... 793,290 30,789,568
Taiwan Semiconductor
Manufacturing Co. Ltd.
[ADR]*...................... 236,054 9,147,083
--------------
39,936,651
--------------
UNITED KINGDOM -- 11.3%
AstraZeneca Group PLC......... 286,619 13,386,112
AstraZeneca Group PLC
[ADR]*...................... 3,495 162,518
Autonomy Corp. PLC*........... 12,717 1,564,191
Baltimore Technologies PLC*... 517,530 3,956,591
Cambridge Antibody Technology
Group PLC*.................. 309,631 14,015,543
Capita Group PLC.............. 279,706 6,847,091
Colt Telecom Group PLC........ 533,397 17,765,096
Compass Group PLC............. 455,486 6,002,582
Egg PLC 144A*................. 710,601 1,844,948
Energis PLC................... 134,214 5,034,930
GEO Interactive Media Group
PLC++*...................... 119,036 2,270,613
SHARES VALUE
------ -----
Logica PLC.................... 196,112 $ 4,643,391
Oxford GlycoSciences PLC*..... 238,514 6,770,324
Prudential Corp. PLC.......... 793,411 11,627,005
SEMA Group PLC................ 199,352 2,836,892
Telewest Communications PLC... 679,361 2,344,929
The Sage Group PLC............ 684,277 5,542,172
Vodafone AirTouch PLC......... 15,292,251 61,812,596
Williams PLC*................. 858,972 4,973,988
--------------
173,401,512
--------------
TOTAL FOREIGN STOCK
(Cost $941,754,783)............. 1,366,304,706
--------------
PAR
(000)
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 5.1%
Federal Home Loan Bank 5.87%,
08/25/00........................ $30,000 29,723,625
5.90%, 07/24/00................. 25,000 24,905,285
5.92%, 09/27/00................. 25,000 24,634,111
------------
(Cost $79,246,354)................ 79,263,021
------------
SHARES
------
U.S. STOCK -- 4.6%
BUSINESS SERVICES -- 0.1%
Autonomy Corp.*.................. 11,625 1,429,875
------------
COMPUTER SERVICES & SOFTWARE -- 0.5%
Comverse Technology, Inc. ....... 81,270 7,558,110
------------
SEMICONDUCTORS -- 1.4%
JDS Uniphase Corp. .............. 176,630 21,173,521
------------
TELECOMMUNICATIONS -- 2.6%
Amdocs Ltd. ..................... 437,380 33,568,915
NTL, Inc.*....................... 123,785 7,411,627
------------
40,980,542
------------
TOTAL U.S. STOCK
(Cost $29,294,621)................. 71,142,048
------------
PRINCIPAL
IN LOCAL
CURRENCY
(000)
---------
FOREIGN BONDS -- 0.0%
NETHERLANDS
United Pan-Europe Communications
11.25%, 02/01/10
(Cost $650,243).................. 655 586,225
------------
AST JANUS OVERSEAS GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000)
-------
COMMERCIAL PAPER -- 1.8%
CIT Group Holdings, Inc.
6.84%, 07/03/00
(Cost $28,189,284)................. $28,200 $ 28,189,284
--------------
TOTAL INVESTMENTS -- 100.3%
(Cost $1,079,135,285).............. 1,545,485,284
LIABILITIES IN EXCESS OF OTHER
ASSETS --(0.3%).................... (5,333,437)
--------------
NET ASSETS -- 100.0%................. $1,540,151,847
==============
Foreign currency exchange contracts outstanding at June 30, 2000:
IN UNREALIZED
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS APPRECIATION/
MONTH TYPE TO RECEIVE FOR AT VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------------
10/00 Buy CHF 9,300,000 $ 5,539,735 $ 5,773,170 $ 233,435
07/00 Buy EUR 4,002,830 3,791,529 3,837,069 45,540
09/00 Buy EUR 93,900,000 88,055,149 90,441,544 2,386,395
10/00 Buy EUR 31,800,000 29,740,508 30,675,142 934,634
01/01 Buy EUR 9,200,000 8,747,666 8,934,033 186,367
07/00 Buy GBP 1,551,569 2,332,443 2,348,905 16,462
09/00 Buy GBP 12,000,000 18,073,420 18,193,167 119,747
07/00 Buy JPY 144,589,512 1,373,300 1,366,611 (6,689)
09/00 Buy JPY 6,720,000,000 65,263,723 64,307,567 (956,156)
10/00 Buy JPY 1,725,000,000 16,553,592 16,574,887 21,295
07/00 Buy HKD 575,895 73,879 73,880 1
03/01 Buy HKD 181,000,000 23,214,369 23,232,382 18,013
05/01 Buy HKD 152,000,000 19,399,105 19,508,827 109,722
07/00 Buy KOR 7,015,137,360 6,304,608 6,291,669 (12,939)
------------ ------------ ----------
$288,463,026 $291,558,853 $3,095,827
============ ============ ==========
IN UNREALIZED
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS APPRECIATION/
MONTH TYPE TO DELIVER FOR AT VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------------
09/00
Sell CAD 17,600,000 $ 12,126,891 $ 11,906,050 $ 220,841
10/00
Sell CAD 11,600,000 7,845,790 7,859,398 (13,608)
07/00
Sell CHF 12,450,000 7,642,726 7,728,599 (85,873)
09/00
Sell CHF 147,700,000 141,198,824 142,310,921 (1,112,097)
10/00
Sell CHF 46,550,000 44,734,550 44,903,393 (168,843)
11/00
Sell CHF 27,500,000 25,161,950 26,594,716 (1,432,766)
01/01
Sell CHF 21,800,000 20,907,175 21,165,382 (258,207)
07/00
Sell EUR 2,494,722 2,354,680 2,391,413 (36,733)
07/00
Sell GBP 96,675 145,411 146,355 (944)
09/00
Sell GBP 42,300,000 67,148,668 64,139,103 3,009,565
10/00
Sell GBP 700,000 1,107,820 1,061,716 46,104
IN UNREALIZED
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS APPRECIATION/
MONTH TYPE TO DELIVER FOR AT VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------------
01/01
Sell GBP 11,200,000 $ 17,141,600 $ 17,023,088 $ 118,512
03/01
Sell HKD 454,900,000 58,387,681 58,389,008 (1,327)
05/01
Sell HKD 787,000,000 100,159,009 101,009,428 (850,419)
06/01
Sell HKD 96,400,000 12,373,901 12,371,932 1,969
07/00
Sell JPY 259,409,216 2,464,056 2,451,848 12,208
09/00
Sell JPY 15,265,000,000 146,226,950 145,979,287 247,663
10/00
Sell JPY 2,050,000,000 20,256,917 19,697,691 559,226
11/00
Sell JPY 1,490,000,000 14,064,565 14,433,478 (368,913)
01/01
Sell JPY 560,000,000 5,455,431 5,490,183 (34,752)
01/01
Sell KOR 600,000,000 534,759 538,104 (3,345)
02/01
Sell KOR 4,180,000,000 3,734,737 3,748,796 (14,059)
07/01
Sell SGD 4,600,000 2,844,253 2,938,489 (94,236)
------------ ------------ -----------
$714,018,344 $714,278,378 $ (260,034)
============ ============ ===========
The following is a breakdown of the foreign stock portion of the Portfolio, by
industry classification, as of June 30, 2000. Percentages are based on net
assets.
INDUSTRY
--------
Advertising......................................... 0.8%
Aerospace........................................... 0.1%
Automobile Manufacturers............................ 0.9%
Broadcasting........................................ 6.1%
Business Services................................... 1.9%
Chemicals........................................... 0.9%
Computer Hardware................................... 4.2%
Computer Services & Software........................ 4.0%
Consumer Products & Services........................ 0.8%
Electronic Components & Equipment................... 11.1%
Financial-Bank & Trust.............................. 1.8%
Financial Services.................................. 1.1%
Food................................................ 0.7%
Insurance........................................... 0.8%
Internet Services................................... 15.4%
Machinery & Equipment............................... 0.3%
Metals & Mining..................................... 0.9%
Oil & Gas........................................... 2.5%
Pharmaceuticals..................................... 5.1%
Retail & Merchandising.............................. 0.2%
Semiconductors...................................... 4.3%
Telecommunications.................................. 24.9%
-----
Total............................................... 88.8%
=====
- ------------------------------------------------------------------------------
Unless otherwise noted, all stocks are common stock.
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
++ Illiquid security. At the end of the period, this security amounted to 0.1%
of net assets.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 1.7% of net assets.
See Notes to Financial Statements.
AST AMERICAN CENTURY INCOME & GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 98.6%
ADVERTISING -- 0.4%
Omnicom Group, Inc. .............. 5,300 $ 472,031
TMP Worldwide, Inc.*.............. 7,300 538,831
True North Communications,
Inc. ........................... 21,900 932,119
------------
1,942,981
------------
AEROSPACE -- 1.4%
Boeing Co. ....................... 65,800 2,751,263
Northrop Grumman Corp. ........... 57,900 3,835,875
------------
6,587,138
------------
AIRLINES -- 0.1%
AMR Corp.*........................ 4,600 121,613
Delta Air Lines, Inc. ............ 4,700 237,643
------------
359,256
------------
AUTOMOBILE MANUFACTURERS -- 1.1%
Ford Motor Co. ................... 83,100 3,573,300
General Motors Corp. ............. 31,300 1,817,356
------------
5,390,656
------------
AUTOMOTIVE PARTS -- 0.4%
Eaton Corp. ...................... 23,200 1,554,400
Visteon Corp.*.................... 10,881 131,926
------------
1,686,326
------------
BEVERAGES -- 0.9%
Anheuser-Busch Companies, Inc. ... 23,400 1,747,688
Coca-Cola Co. .................... 3,900 224,006
PepsiCo, Inc. .................... 54,200 2,408,512
------------
4,380,206
------------
BROADCASTING -- 0.0%
Hispanic Broadcasting Corp.*...... 7,200 238,500
------------
BUILDING MATERIALS -- 0.3%
Sherwin Williams Co. ............. 44,300 938,606
USG Corp. ........................ 11,200 340,200
------------
1,278,806
------------
BUSINESS SERVICES -- 0.1%
Diamond Technology Partners
Cl-A*........................... 2,600 228,800
Galileo International, Inc. ...... 8,400 175,350
Manpower, Inc. ................... 8,500 272,000
------------
676,150
------------
CAPITAL GOODS -- 0.4%
Briggs & Stratton Corp. .......... 14,600 500,050
Cummins Engine Co., Inc. ......... 47,800 1,302,550
------------
1,802,600
------------
CHEMICALS -- 0.9%
Dow Chemical Co. ................. 112,200 3,387,037
DuPont, (E.I.) de Nemours &
Co. ............................ 6,800 297,500
Engelhard Corp. .................. 25,400 433,388
------------
4,117,925
------------
SHARES VALUE
------ -----
CLOTHING & APPAREL -- 0.5%
Limited, Inc. .................... 84,900 $ 1,835,962
Liz Claiborne, Inc. .............. 15,300 539,325
Reebok International Ltd.*........ 6,200 98,813
------------
2,474,100
------------
COMPUTER HARDWARE -- 4.8%
Adaptec, Inc.*.................... 16,200 368,550
Apple Computer, Inc.*............. 55,000 2,880,625
Compaq Computer Corp. ............ 2,800 71,575
Dell Computer Corp.*.............. 83,400 4,112,663
EMC Corp.*........................ 47,600 3,662,225
Gateway, Inc.*.................... 3,600 204,300
Hewlett-Packard Co. .............. 42,600 5,319,675
Insight Enterprises, Inc.*........ 1,400 83,038
International Business Machines
Corp. .......................... 54,000 5,916,374
Sandisk Corp.*.................... 4,500 275,344
Seagate Technology, Inc.*......... 5,000 275,000
------------
23,169,369
------------
COMPUTER SERVICES & SOFTWARE -- 11.2%
Adobe Systems, Inc. .............. 5,800 754,000
Advanced Digital Information
Corp.*.......................... 9,400 149,813
Automatic Data Processing,
Inc. ........................... 5,400 289,238
BEA Systems, Inc.*................ 2,100 103,819
Cisco Systems, Inc.*.............. 255,200 16,221,149
Computer Associates International,
Inc. ........................... 29,300 1,499,794
Electronic Data Systems Corp. .... 41,200 1,699,500
InfoSpace.com, Inc.*.............. 2,100 116,025
MarchFirst, Inc.*................. 43,300 790,225
Microsoft Corp.*.................. 173,800 13,903,999
Network Appliance, Inc.*.......... 10,600 853,300
Oracle Corp.*..................... 109,100 9,171,218
Siebel Systems, Inc.*............. 3,900 637,894
Sun Microsystems, Inc.*........... 66,800 6,074,625
Sybase, Inc.*..................... 15,100 347,300
Veritas Software Corp.*........... 10,400 1,175,363
------------
53,787,262
------------
CONGLOMERATES -- 2.5%
Corning, Inc. .................... 9,200 2,482,850
ITT Industries, Inc. ............. 14,300 434,363
Johnson Controls, Inc. ........... 5,400 277,088
Minnesota Mining & Manufacturing
Co. ............................ 35,600 2,936,999
National Service Industries,
Inc. ........................... 32,700 637,650
Philip Morris Companies, Inc. .... 81,100 2,154,219
Tyco International Ltd. .......... 37,800 1,790,775
Viad Corp. ....................... 37,700 1,027,325
------------
11,741,269
------------
CONSTRUCTION -- 0.1%
Centex Corp. ..................... 2,500 58,750
Dycom Industries, Inc.*........... 6,000 276,000
------------
334,750
------------
AST AMERICAN CENTURY INCOME & GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
CONSUMER PRODUCTS & SERVICES -- 2.3%
Alberto-Culver Co. Cl-B........... 4,400 $ 134,475
Avon Products, Inc. .............. 8,800 391,600
Bausch & Lomb, Inc. .............. 21,300 1,648,088
Church and Dwight Co., Inc. ...... 12,400 223,200
Colgate-Palmolive Co. ............ 26,400 1,580,700
Eastman Kodak Co. ................ 20,100 1,195,950
Fortune Brands, Inc. ............. 8,100 186,806
International Flavors &
Fragrances, Inc. ............... 11,200 338,100
Procter & Gamble Co. ............. 43,500 2,490,375
Tupperware Corp. ................. 57,600 1,267,200
UST, Inc. ........................ 36,400 534,625
Whirlpool Corp. .................. 26,400 1,230,900
------------
11,222,019
------------
CONTAINERS & PACKAGING -- 0.1%
Ball Corp. ....................... 15,800 508,563
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 7.1%
Agilent Technologies, Inc.*....... 11,842 873,348
Analog Devices, Inc.*............. 12,400 942,400
AVX Corp. ........................ 32,000 734,000
Cabletron Systems, Inc.*.......... 6,300 159,075
Credence Systems Corp.*........... 19,700 1,087,194
Cypress Semiconductor Corp.*...... 9,600 405,600
Diebold, Inc. .................... 15,300 426,488
Electronics for Imaging, Inc.*.... 7,900 199,969
General Electric Co. ............. 380,100 19,385,099
KEMET Corp.*...................... 45,300 1,135,331
KLA-Tencor Corp.*................. 22,500 1,317,656
PerkinElmer, Inc. ................ 7,000 462,875
Proxicom, Inc.*................... 2,000 95,750
Rockwell International Corp. ..... 12,700 400,050
Sensormatic Electronics Corp.*.... 22,000 347,875
Technitrol, Inc. ................. 1,000 96,875
Teradyne, Inc.*................... 16,000 1,176,000
Texas Instruments, Inc. .......... 43,100 2,960,430
TXU Corp. ........................ 24,000 708,000
Vishay Intertechnology, Inc.*..... 23,800 902,913
------------
33,816,928
------------
ENTERTAINMENT & LEISURE -- 1.9%
Anchor Gaming*.................... 2,800 134,225
Brunswick Corp. .................. 36,700 607,844
Disney, (Walt) Co. ............... 139,300 5,406,581
Pixar, Inc.*...................... 10,000 352,500
Time Warner, Inc. ................ 16,100 1,223,600
Viacom, Inc. Cl-B*................ 20,000 1,363,750
------------
9,088,500
------------
EQUIPMENT SERVICES -- 0.2%
Hertz Corp. Cl-A.................. 30,100 844,681
------------
FINANCIAL-BANK & TRUST -- 2.7%
Bank of America Corp. ............ 135,900 5,843,699
Chase Manhattan Corp. ............ 83,850 3,862,341
City National Corp. .............. 2,600 92,300
First Union Corp. ................ 14,400 357,300
GreenPoint Financial Corp. ....... 39,900 748,125
SHARES VALUE
------ -----
MBNA Corp. ....................... 8,700 $ 235,988
Silicon Valley Bancshares*........ 18,200 775,775
UnionBanCal Corp. ................ 43,200 801,900
------------
12,717,428
------------
FINANCIAL SERVICES -- 7.3%
AMBAC Financial Group, Inc. ...... 18,400 1,008,550
Americredit Corp.*................ 7,300 124,100
AXA Financial, Inc. .............. 4,300 146,200
Block, (H&R), Inc. ............... 10,600 343,175
Citigroup, Inc. .................. 196,800 11,857,199
Deluxe Corp. ..................... 44,500 1,048,531
Dun & Bradstreet Corp. ........... 2,800 80,150
Fannie Mae........................ 75,000 3,914,063
Fleet Financial Group, Inc. ...... 160,200 5,446,800
Lehman Brothers Holdings, Inc. ... 21,000 1,985,813
Merrill Lynch & Co., Inc. ........ 10,000 1,150,000
Metris Companies, Inc. ........... 35,550 893,194
Morgan Stanley Dean Witter &
Co. ............................ 66,900 5,569,424
PNC Financial Services Group,
Inc. ........................... 15,900 745,313
Providian Financial Corp. ........ 7,900 711,000
------------
35,023,512
------------
FOOD -- 2.7%
Archer Daniels Midland Co. ....... 7,900 77,519
Bestfoods, Inc. .................. 1,700 117,725
ConAgra, Inc. .................... 140,800 2,683,999
Great Atlantic & Pacific Tea Co.,
Inc. ........................... 13,300 221,113
Heinz, (H.J.) Co. ................ 2,800 122,500
Hormel Foods Corp. ............... 15,800 265,638
IBP, Inc. ........................ 36,300 560,381
Keebler Foods Co. ................ 10,300 382,388
Kellogg Co. ...................... 28,600 850,850
Quaker Oats Co. .................. 50,300 3,778,787
Ralston Purina Group.............. 22,000 438,625
Safeway, Inc.*.................... 16,100 726,513
Supervalu, Inc. .................. 113,900 2,171,218
Sysco Corp. ...................... 4,300 181,138
Unilever NV NY Reg................ 6,600 283,800
------------
12,862,194
------------
HEALTHCARE SERVICES -- 0.6%
Oxford Health Plans, Inc.*........ 32,400 771,525
PacifiCare Health Systems,
Inc.*........................... 2,800 168,525
United HealthGroup, Inc. ......... 22,700 1,946,525
------------
2,886,575
------------
INSURANCE -- 2.9%
American General Corp. ........... 2,000 122,000
American International Group,
Inc. ........................... 12,925 1,518,688
Arthur J. Gallagher & Co. ........ 12,700 533,400
CIGNA Corp. ...................... 40,300 3,768,049
Lincoln National Corp. ........... 80,300 2,900,837
Marsh & McLennan Companies,
Inc. ........................... 6,500 678,844
MetLife, Inc.*.................... 25,800 543,413
MGIC Investment Corp. ............ 21,800 991,900
PMI Group, Inc. .................. 29,600 1,406,000
Radian Group, Inc. ............... 27,400 1,417,950
AST AMERICAN CENTURY INCOME & GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
The Hartford Financial Services
Group, Inc. .................... 1,900 $ 106,281
Torchmark Corp. .................. 3,000 74,063
------------
14,061,425
------------
INTERNET SERVICES -- 1.5%
America Online, Inc.*............. 87,400 4,610,350
Yahoo!, Inc.*..................... 19,500 2,415,563
------------
7,025,913
------------
MACHINERY & EQUIPMENT -- 1.5%
Advanced Energy Industries*....... 3,534 208,314
Asyst Technologies, Inc.*......... 13,300 455,525
Caterpillar, Inc. ................ 5,000 169,375
Cooper Industries, Inc. .......... 10,400 338,650
Dover Corp. ...................... 68,400 2,774,474
Illinois Tool Works, Inc. ........ 15,500 883,500
Kulicke & Soffa Industries,
Inc.*........................... 20,900 1,240,938
Pall Corp. ....................... 36,700 692,713
Stanley Works, Inc. .............. 16,900 401,375
------------
7,164,864
------------
MEDICAL SUPPLIES & EQUIPMENT -- 2.7%
Bard, (C.R.), Inc. ............... 17,700 851,813
Baxter International, Inc. ....... 16,900 1,188,281
Beckman Coulter, Inc. ............ 2,300 134,263
Cytyc Corp.*...................... 6,200 330,925
Johnson & Johnson Co. ............ 81,800 8,333,375
Mallinckrodt, Inc. ............... 42,700 1,854,781
------------
12,693,438
------------
METALS & MINING -- 0.4%
Alcan Aluminum Ltd. .............. 12,400 384,400
Alcoa, Inc. ...................... 2,200 63,800
Barrick Gold Corp. ............... 17,600 320,100
Nucor Corp. ...................... 16,200 537,637
Placer Dome, Inc. ................ 19,900 190,294
USX-U.S. Steel Group, Inc. ....... 3,900 72,394
Worthington Industries, Inc. ..... 24,200 254,100
------------
1,822,725
------------
OFFICE EQUIPMENT -- 0.2%
Pitney Bowes, Inc. ............... 19,900 796,000
Xerox Corp. ...................... 5,900 118,000
------------
914,000
------------
OIL & GAS -- 7.0%
Amerada Hess Corp. ............... 7,100 438,425
BJ Services Co.*.................. 14,000 875,000
Chevron Corp. .................... 61,800 5,241,413
Ensco International, Inc. ........ 8,100 290,081
Exxon Mobil Corp. ................ 99,100 7,785,543
Kerr-McGee Corp. ................. 84,000 4,950,750
Keyspan Corp. .................... 12,500 384,375
Noble Drilling Corp.*............. 9,000 370,688
Occidental Petroleum Corp. ....... 243,800 5,135,038
Phillips Petroleum Co. ........... 14,400 729,900
Royal Dutch Petroleum Co. ........ 56,900 3,502,906
SHARES VALUE
------ -----
Texaco, Inc. ..................... 6,300 $ 335,475
Tidewater, Inc. .................. 25,800 928,800
Ultramar Diamond Shamrock
Corp. .......................... 103,900 2,578,019
------------
33,546,413
------------
PAPER & FOREST PRODUCTS -- 0.7%
International Paper Co. .......... 29,068 866,590
Temple-Inland, Inc. .............. 19,500 819,000
Westvaco Corp. ................... 30,500 756,781
Weyerhaeuser Co. ................. 22,100 950,300
------------
3,392,671
------------
PHARMACEUTICALS -- 8.0%
Allergan, Inc. ................... 7,400 551,300
Andrx Corp.*...................... 1,900 121,452
Bristol-Meyers Squibb Co. ........ 81,000 4,718,250
Cardinal Health, Inc. ............ 5,300 392,200
Elan Corp. PLC [ADR]*............. 5,300 256,719
Jones Pharma, Inc. ............... 15,600 623,025
Lilly, (Eli) & Co. ............... 29,400 2,936,325
Merck & Co., Inc. ................ 107,200 8,214,199
Pfizer, Inc. ..................... 323,150 15,511,199
Schering-Plough Corp. ............ 96,700 4,883,350
------------
38,208,019
------------
PRINTING & PUBLISHING -- 0.6%
Gannett Co., Inc. ................ 17,800 1,064,663
Knight-Ridder, Inc. .............. 8,400 446,775
Tribune Co. ...................... 40,300 1,410,500
------------
2,921,938
------------
RAILROADS -- 0.1%
Burlington Northern Santa Fe
Corp. .......................... 15,300 350,943
Union Pacific Corp. .............. 7,400 275,188
------------
626,131
------------
REAL ESTATE -- 0.2%
CarrAmerica Realty Corp. [REIT]... 27,600 731,400
Spieker Properties, Inc. [REIT]... 4,000 189,000
------------
920,400
------------
RESTAURANTS -- 0.3%
Brinker International, Inc.*...... 8,900 260,325
Darden Restaurants, Inc. ......... 46,900 762,125
Tricon Global Restaurants,
Inc.*........................... 21,600 610,200
------------
1,632,650
------------
RETAIL & MERCHANDISING -- 4.7%
Best Buy Co., Inc.*............... 9,600 607,200
Circuit City Stores, Inc. ........ 22,200 736,763
Federated Department Stores,
Inc.*........................... 74,200 2,504,250
Home Depot, Inc. ................. 72,200 3,605,488
Lowe's Companies, Inc. ........... 14,700 603,619
Michael's Stores, Inc.*........... 10,100 462,706
RadioShack Corp. ................. 6,400 303,200
Sears, Roebuck & Co. ............. 161,400 5,265,675
Talbots, Inc. .................... 9,200 498,525
Tiffany & Co. .................... 11,700 789,750
AST AMERICAN CENTURY INCOME & GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
Wal-Mart Stores, Inc. ............ 108,500 $ 6,252,312
Zale Corp.*....................... 27,300 996,450
------------
22,625,938
------------
SEMICONDUCTORS -- 4.8%
Advanced Micro Devices, Inc.*..... 9,100 702,975
Applied Materials, Inc.*.......... 36,400 3,298,750
Conexant Systems, Inc.*........... 12,200 593,225
Integrated Device Technology,
Inc.*........................... 27,200 1,628,600
Intel Corp. ...................... 109,800 14,678,888
International Rectifier Corp.*.... 4,700 263,200
Lam Research Corp.*............... 23,500 881,250
LTX Corp.*........................ 10,700 373,831
National Semiconductor Corp.*..... 9,200 522,100
Varian Semiconductor Equipment
Associates, Inc.*............... 1,100 69,094
------------
23,011,913
------------
TELECOMMUNICATIONS -- 10.3%
Alltel Corp. ..................... 9,900 613,181
AT&T Corp. ....................... 82,800 2,618,550
Bell Atlantic Corp.*.............. 84,400 4,288,575
BellSouth Corp. .................. 131,500 5,605,188
Comcast Corp. Cl-A*............... 57,000 2,308,500
GTE Corp. ........................ 44,200 2,751,450
Lucent Technologies, Inc. ........ 9,400 556,950
MasTec, Inc.*..................... 2,500 95,469
MediaOne Group, Inc.*............. 17,700 1,181,475
Motorola, Inc. ................... 60,900 1,769,906
Nextel Communications, Inc.
Cl-A*........................... 34,300 2,098,731
Nokia Corp. Cl-A [ADR]............ 4,500 224,719
Nortel Networks Corp. NY Reg.*.... 92,900 6,340,424
QUALCOMM, Inc.*................... 28,200 1,692,000
SBC Communications, Inc. ......... 131,500 5,687,375
Scientific-Atlanta, Inc. ......... 17,600 1,311,200
Sprint Corp. (FON Group).......... 56,500 2,881,500
Sprint Corp. (PCS Group)*......... 20,100 1,195,950
Telephone & Data Systems, Inc. ... 2,700 270,675
U.S. West, Inc. .................. 18,600 1,594,950
WorldCom, Inc.*................... 94,800 4,348,950
------------
49,435,718
------------
TRANSPORTATION -- 0.2%
FedEx Corp.*...................... 5,800 220,400
Paccar, Inc. ..................... 12,000 476,250
United Parcel Service, Inc.
Cl-B............................ 3,100 182,900
------------
879,550
------------
SHARES VALUE
------ -----
UTILITIES -- 2.5%
Ameren Corp. ..................... 18,000 $ 607,500
Calpine Corp.*.................... 7,900 519,425
Conectiv, Inc. Cl-A............... 1,600 39,000
Consolidated Edison, Inc. ........ 1,500 44,438
Constellation Energy Group........ 7,300 237,706
Duke Energy Corp. ................ 22,400 1,262,800
Edison International Co. ......... 14,000 287,000
GPU, Inc. ........................ 25,500 690,094
Minnesota Power, Inc. ............ 38,200 737,738
PG&E Corp. ....................... 63,200 1,556,300
PPL Corp. ........................ 5,900 129,431
Public Service Enterprise Group,
Inc. ........................... 53,600 1,855,900
Reliant Energy, Inc. ............. 95,100 2,811,393
Sempra Energy..................... 18,400 312,800
Unicom Corp. ..................... 23,000 889,813
------------
11,981,338
------------
TOTAL COMMON STOCK
(Cost $445,891,261)................. 471,802,738
------------
PAR
(000)
-----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 1.2%
Federal Home Loan Bank
6.23%, 07/03/00
(Cost $5,797,993)............... $ 5,800 5,797,993
------------
SHARES
------
PREFERRED STOCK -- 0.1%
COMPUTER SERVICES & SOFTWARE -- 0.0%
Morgan Stanley (EMC Perqs) 8.00%
[CVT]........................... 5,272 134,436
------------
RETAIL & MERCHANDISING -- 0.1%
Morgan Stanley (Home Depot Perqs)
6.00% [CVT]*.................... 24,200 308,550
------------
TOTAL PREFERRED STOCK
(Cost $461,380)..................... 442,986
------------
TOTAL INVESTMENTS -- 99.9%
(Cost $452,150,634)................. 478,043,717
OTHER ASSETS LESS
LIABILITIES -- 0.1%................. 717,572
------------
NET ASSETS -- 100.0%.................. $478,761,289
============
$187,500 has been segregated with the custodian to cover margin requirements for
the following open futures contracts at June 30, 2000:
EXPIRATION NUMBER OF UNREALIZED
DESCRIPTION MONTH CONTRACTS DEPRECIATION
- ----------------------------------------------------------------
S&P 500.................. 09/00 10 $41,655
=======
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST AMERICAN CENTURY STRATEGIC BALANCED PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 58.5%
AEROSPACE -- 0.5%
Boeing Co. ....................... 22,400 $ 936,600
Northrop Grumman Corp. ........... 4,400 291,500
------------
1,228,100
------------
AIRLINES -- 0.0%
AMR Corp.*........................ 800 21,150
Delta Air Lines, Inc. ............ 1,300 65,731
------------
86,881
------------
AUTOMOBILE MANUFACTURERS -- 0.5%
Ford Motor Co. ................... 19,600 842,800
General Motors Corp. ............. 4,500 261,281
------------
1,104,081
------------
AUTOMOTIVE PARTS -- 0.0%
Visteon Corp.*.................... 2,566 31,116
------------
BEVERAGES -- 0.5%
Anheuser-Busch Companies, Inc. ... 5,400 403,313
Coors, (Adolph) Co. Cl-B.......... 3,900 235,950
PepsiCo, Inc. .................... 10,800 479,925
------------
1,119,188
------------
CAPITAL GOODS -- 0.1%
Cummins Engine Co., Inc. ......... 8,900 242,525
------------
CHEMICALS -- 0.7%
Dow Chemical Co. ................. 39,900 1,204,481
DuPont, (E.I.) de Nemours &
Co. ............................ 9,800 428,750
------------
1,633,231
------------
COMPUTER HARDWARE -- 2.8%
Apple Computer, Inc.*............. 9,800 513,275
Dell Computer Corp.*.............. 18,200 897,488
EMC Corp.*........................ 21,800 1,677,238
Hewlett-Packard Co. .............. 15,400 1,923,074
International Business Machines
Corp. .......................... 12,200 1,336,663
------------
6,347,738
------------
COMPUTER SERVICES & SOFTWARE -- 7.5%
Automatic Data Processing,
Inc. ........................... 8,800 471,350
Cisco Systems, Inc.*.............. 82,900 5,269,330
Computer Associates International,
Inc. ........................... 9,300 476,044
Electronic Data Systems Corp. .... 11,000 453,750
MarchFirst, Inc.*................. 15,200 277,400
Microsoft Corp.*.................. 49,000 3,919,999
Network Appliance, Inc.*.......... 3,500 281,750
Oracle Corp.*..................... 32,100 2,698,406
Siebel Systems, Inc.*............. 1,200 196,275
Sun Microsystems, Inc.*........... 24,000 2,182,500
Sybase, Inc.*..................... 9,600 220,800
Symantec Corp.*................... 3,800 204,963
Veritas Software Corp.*........... 4,000 452,063
------------
17,104,630
------------
SHARES VALUE
------ -----
CONGLOMERATES -- 1.3%
Corning, Inc. .................... 6,600 $ 1,781,175
Tyco International Ltd. .......... 16,900 800,638
United Technologies Corp. ........ 4,000 235,500
------------
2,817,313
------------
CONSUMER PRODUCTS & SERVICES -- 1.2%
Avon Products, Inc. .............. 9,400 418,300
Colgate-Palmolive Co. ............ 9,800 586,775
Fortune Brands, Inc. ............. 6,300 145,294
Procter & Gamble Co. ............. 9,900 566,775
Tupperware Corp. ................. 14,400 316,800
Universal Corp. .................. 8,000 169,000
Whirlpool Corp. .................. 9,600 447,600
------------
2,650,544
------------
CONTAINERS & PACKAGING -- 0.0%
Ball Corp. ....................... 2,400 77,250
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 4.0%
Analog Devices, Inc.*............. 5,500 418,000
AVX Corp. ........................ 17,400 399,113
Comverse Technology, Inc.*........ 3,000 279,000
Credence Systems Corp.*........... 9,600 529,800
Cypress Semiconductor Corp.*...... 5,000 211,250
General Electric Co. ............. 82,900 4,227,899
KEMET Corp.*...................... 23,000 576,438
KLA-Tencor Corp.*................. 6,900 404,081
Rockwell International Corp. ..... 4,100 129,150
Teradyne, Inc.*................... 8,200 602,700
Texas Instruments, Inc. .......... 5,400 370,913
TXU Corp. ........................ 5,500 162,250
Vishay Intertechnology, Inc.*..... 19,950 756,853
------------
9,067,447
------------
ENTERTAINMENT & LEISURE -- 1.6%
Disney, (Walt) Co. ............... 29,600 1,148,850
Viacom, Inc. Cl-B*................ 35,359 2,411,042
------------
3,559,892
------------
EQUIPMENT SERVICES -- 0.1%
Hertz Corp. Cl-A.................. 10,700 300,269
------------
FINANCIAL-BANK & TRUST -- 1.9%
Bank of America Corp. ............ 25,500 1,096,500
Chase Manhattan Corp. ............ 56,300 2,593,318
Old Kent Financial Corp. ......... 5,670 151,673
Silicon Valley Bancshares*........ 5,300 225,913
UnionBanCal Corp. ................ 16,400 304,425
------------
4,371,829
------------
FINANCIAL SERVICES -- 4.4%
AMBAC Financial Group, Inc. ...... 10,100 553,606
Citigroup, Inc. .................. 43,000 2,590,750
Deluxe Corp. ..................... 19,200 452,400
Fannie Mae........................ 28,900 1,508,219
Fleet Financial Group, Inc. ...... 26,000 884,000
Freddie Mac....................... 13,200 534,600
Merrill Lynch & Co., Inc. ........ 1,900 218,500
Morgan Stanley Dean Witter &
Co. ............................ 27,800 2,314,350
AST AMERICAN CENTURY STRATEGIC BALANCED PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
Providian Financial Corp. ........ 6,100 $ 549,000
Wells Fargo & Co. ................ 8,000 310,000
------------
9,915,425
------------
FOOD -- 2.0%
General Mills, Inc. .............. 4,800 183,600
Hormel Foods Corp. ............... 14,500 243,781
IBP, Inc. ........................ 27,600 426,075
Quaker Oats Co. .................. 26,700 2,005,837
Ralston Purina Group.............. 14,900 297,069
Safeway, Inc.*.................... 13,600 613,700
Suiza Foods Corp.*................ 12,400 606,050
Sysco Corp. ...................... 5,100 214,838
------------
4,590,950
------------
HEALTHCARE SERVICES -- 1.1%
Amgen, Inc.*...................... 15,200 1,067,800
Oxford Health Plans, Inc.*........ 21,900 521,494
PacifiCare Health Systems,
Inc.*........................... 4,400 264,825
United HealthGroup, Inc. ......... 8,500 728,875
------------
2,582,994
------------
HOTELS & MOTELS -- 0.1%
MGM Grand, Inc. .................. 5,200 167,050
------------
INSURANCE -- 1.4%
American International Group,
Inc. ........................... 1,950 229,125
Arthur J. Gallagher & Co. ........ 1,900 79,800
CIGNA Corp. ...................... 6,900 645,150
Lincoln National Corp. ........... 33,400 1,206,575
MGIC Investment Corp. ............ 10,200 464,100
Radian Group, Inc. ............... 8,500 439,875
------------
3,064,625
------------
INTERNET SERVICES -- 1.1%
America Online, Inc.*............. 30,900 1,629,975
Yahoo!, Inc.*..................... 6,800 842,350
------------
2,472,325
------------
MACHINERY & EQUIPMENT -- 0.7%
Illinois Tool Works, Inc. ........ 19,100 1,088,700
Ingersoll-Rand Co. ............... 3,500 140,875
Kulicke & Soffa Industries,
Inc.*........................... 5,900 350,313
------------
1,579,888
------------
MEDICAL SUPPLIES & EQUIPMENT -- 1.4%
Bard, (C.R.), Inc. ............... 11,800 567,875
Johnson & Johnson Co. ............ 21,000 2,139,375
Mallinckrodt, Inc. ............... 6,600 286,688
PE Corp.-PE Biosystems Group...... 2,600 171,275
------------
3,165,213
------------
METALS & MINING -- 0.3%
Alcan Aluminum Ltd. .............. 5,700 176,700
Alcoa, Inc. ...................... 14,200 411,800
------------
588,500
------------
OIL & GAS -- 3.6%
Amerada Hess Corp. ............... 36,400 2,247,699
Apache Corp. ..................... 20,800 1,223,300
BJ Services Co.*.................. 3,300 206,250
SHARES VALUE
------ -----
BP Amoco PLC [ADR]................ 11,900 $ 673,094
Ensco International, Inc. ........ 14,500 519,281
Exxon Mobil Corp. ................ 13,601 1,068,529
Kerr-McGee Corp. ................. 22,100 1,302,519
Occidental Petroleum Corp. ....... 9,600 202,200
Texaco, Inc. ..................... 2,500 133,125
Union Pacific Resources Group,
Inc. ........................... 23,100 508,200
------------
8,084,197
------------
PAPER & FOREST PRODUCTS -- 0.5%
International Paper Co. .......... 7,600 226,575
Temple-Inland, Inc. .............. 5,600 235,200
Westvaco Corp. ................... 900 22,331
Weyerhaeuser Co. ................. 13,300 571,900
------------
1,056,006
------------
PHARMACEUTICALS -- 4.6%
Allergan, Inc. ................... 4,000 298,000
Andrx Corp.*...................... 2,600 166,197
Biogen, Inc.*..................... 5,100 328,950
Bristol-Meyers Squibb Co. ........ 17,100 996,075
Elan Corp. PLC [ADR]*............. 5,400 261,563
Ivax Corp.*....................... 8,800 365,200
Jones Pharma, Inc. ............... 9,850 393,384
MedImmune, Inc.*.................. 4,900 362,600
Merck & Co., Inc. ................ 11,200 858,200
Pfizer, Inc. ..................... 81,300 3,902,399
Pharmacia Corp. .................. 8,000 413,500
Schering-Plough Corp. ............ 33,500 1,691,750
Vertex Pharmaceuticals*........... 2,300 242,363
------------
10,280,181
------------
PRINTING & PUBLISHING -- 0.6%
Dow Jones & Co., Inc. ............ 9,400 688,550
Valassis Communications, Inc.*.... 14,800 564,250
------------
1,252,800
------------
RAILROADS -- 0.1%
Union Pacific Corp. .............. 4,400 163,625
------------
RESTAURANTS -- 0.3%
Brinker International, Inc.*...... 12,900 377,325
Jack in the Box, Inc.*............ 15,800 391,050
------------
768,375
------------
RETAIL & MERCHANDISING -- 3.1%
Best Buy Co., Inc.*............... 5,400 341,550
Federated Department Stores,
Inc.*........................... 5,900 199,125
Home Depot, Inc. ................. 35,900 1,792,756
Sears, Roebuck & Co. ............. 10,600 345,825
Tiffany & Co. .................... 2,800 189,000
TJX Companies, Inc. .............. 7,300 136,875
Wal-Mart Stores, Inc. ............ 61,300 3,532,413
Zale Corp.*....................... 10,300 375,950
------------
6,913,494
------------
SEMICONDUCTORS -- 3.5%
Applied Materials, Inc.*.......... 14,600 1,323,125
Integrated Device Technology,
Inc.*........................... 16,200 969,975
Intel Corp. ...................... 28,500 3,810,093
AST AMERICAN CENTURY STRATEGIC BALANCED PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
International Rectifier Corp.*.... 8,500 $ 476,000
Lam Research Corp.*............... 15,800 592,500
LSI Logic Corp.*.................. 3,500 189,438
National Semiconductor Corp.*..... 9,500 539,125
------------
7,900,256
------------
TELECOMMUNICATIONS -- 5.9%
Adtran, Inc.*..................... 3,400 203,575
AT&T Corp. ....................... 32,100 1,015,163
Bell Atlantic Corp.*.............. 8,900 452,231
BellSouth Corp. .................. 35,000 1,491,875
Comcast Corp. Cl-A*............... 23,700 959,850
Commscope, Inc.*.................. 14,600 598,600
Cox Communications, Inc. Cl-A*.... 8,400 382,725
Digital Lightwave, Inc.*.......... 1,500 150,750
GTE Corp. ........................ 15,900 989,775
Nextel Communications, Inc.
Cl-A*........................... 7,400 452,788
Nortel Networks Corp. NY Reg.*.... 22,200 1,515,150
QUALCOMM, Inc.*................... 8,300 498,000
SBC Communications, Inc. ......... 42,000 1,816,499
Scientific-Atlanta, Inc. ......... 5,200 387,400
Sprint Corp. (FON Group).......... 15,800 805,800
Sprint Corp. (PCS Group)*......... 6,600 392,700
U.S. West, Inc. .................. 2,900 248,675
WorldCom, Inc.*................... 18,600 853,275
------------
13,214,831
------------
UTILITIES -- 1.1%
AES Corp.*........................ 8,400 383,250
Calpine Corp.*.................... 6,400 420,800
Minnesota Power, Inc. ............ 9,600 185,400
Public Service Enterprise Group,
Inc. ........................... 21,000 727,125
Reliant Energy, Inc. ............. 16,800 496,650
Southern Co. ..................... 12,700 296,069
------------
2,509,294
------------
TOTAL COMMON STOCK
(Cost $119,328,484)................. 132,012,063
------------
PAR
(000)
-----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 19.4%
Federal Home Loan Bank
6.50%, 07/03/00................. $ 5,800 5,797,905
------------
Federal Home Loan Mortgage Corp.
7.00%, 06/01/14-08/01/29........ 2,770 2,707,324
7.50%, 08/01/29................. 1,710 1,688,234
------------
4,395,558
------------
Federal National Conventional Loan
7.00%, 03/01/28................. 629 607,043
------------
Federal National Mortgage Assoc.
5.25%, 01/15/03................. 2,100 2,020,423
6.00%, 07/20/13 [TBA]........... 1,000 945,935
6.00%, 12/01/13-10/01/28........ 3,170 2,924,037
6.23%, 07/21/08................. 200 186,453
6.50%, 04/29/09-07/01/29........ 9,411 8,597,202
PAR
(000) VALUE
----- -----
7.00%, 05/01/11-05/01/30........ $ 3,022 $ 2,929,330
7.125%, 02/15/05-01/15/30....... 2,900 2,913,542
7.25%, 01/15/10................. 2,150 2,171,248
7.50%, 06/01/15-11/01/29........ 4,212 4,173,561
8.00%, 07/01/30 [TBA]........... 900 903,654
------------
27,765,385
------------
Government National Mortgage
Assoc.
6.00%, 04/15/28-05/15/28........ 561 517,230
6.50%, 03/15/28-04/15/28........ 1,538 1,460,616
7.00%, 12/15/27-08/15/29........ 1,745 1,696,690
7.50%, 05/15/30................. 1,299 1,289,754
8.00%, 03/15/27................. 68 69,014
8.75%, 01/15/27-04/15/27........ 104 106,917
------------
5,140,221
------------
(Cost $44,468,101)................ 43,706,112
------------
CORPORATE OBLIGATIONS -- 12.8%
AEROSPACE -- 0.3%
Raytheon Corp. 144A
8.20%, 03/01/06................. 700 711,660
------------
AUTOMOBILE MANUFACTURERS -- 0.3%
DaimlerChrysler
7.125%, 03/01/02................ 700 699,894
------------
BEVERAGES -- 0.1%
Pepsi Bottling Group, Inc. 144A
7.00%, 03/01/29................. 300 269,933
------------
BROADCASTING -- 0.2%
Liberty Media Group
8.25%, 02/01/30................. 400 368,260
------------
CABLE TELEVISION -- 0.2%
British Sky Broadcasting
8.20%, 07/15/09................. 550 516,837
------------
CONGLOMERATES -- 0.4%
Tyco International Group SA 144A
6.875%, 09/05/02................ 1,000 990,230
------------
CONSUMER PRODUCTS & SERVICES -- 0.1%
Fort James Corp.
6.625%, 09/15/04................ 250 239,121
------------
FINANCIAL-BANK & TRUST -- 1.0%
Bank of America Corp.
6.125%, 07/15/04................ 300 286,132
7.80%, 02/15/10................. 1,300 1,295,280
First Bank System, Inc.
7.625%, 05/01/05................ 100 100,368
Fleet National Bank
5.75%, 01/15/09................. 450 393,278
Southern Investments UK
6.80%, 12/01/06................. 300 277,304
------------
2,352,362
------------
AST AMERICAN CENTURY STRATEGIC BALANCED PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
FINANCIAL SERVICES -- 3.7%
BMW Vehicle Owner Trust
6.41%, 04/25/03................. $ 600 $ 595,071
Cilcorp, Inc.
8.70%, 10/15/09................. 700 706,552
Ford Motor Credit Co.
7.50%, 03/15/05................. 3,400 3,384,665
General Motors Acceptance Corp.
6.95%, 03/10/03................. 900 898,732
7.125%, 05/01/03................ 100 99,259
Hutchison Whampoa Financial Corp.
144A
7.45%, 08/01/17................. 700 612,788
Lehman Brothers Holdings, Inc.
8.25%, 06/15/07................. 1,100 1,102,397
Morgan Stanley Dean Witter & Co.
7.125%, 01/15/03................ 650 646,042
------------
8,045,506
------------
INSURANCE -- 0.1%
Conseco, Inc.
6.40%, 06/15/01................. 200 159,000
------------
OIL & GAS -- 1.7%
Enron Corp.
6.70%, 11/15/06................. 700 663,777
Gulf Canada Resources Ltd.
8.35%, 08/01/06................. 900 895,500
Kerr-McGee Corp.
7.125%, 10/15/27................ 1,000 890,814
Petro Geo-Services ASA
6.625%, 03/30/08................ 900 797,354
USX Corp.
6.65%, 02/01/06................. 600 570,700
------------
3,818,145
------------
PAPER & FOREST PRODUCTS -- 0.4%
International Paper Co.
8.125%, 07/08/05................ 900 908,861
------------
REAL ESTATE -- 0.4%
Chelsea GCA Realty, Inc. [REIT]
7.25%, 10/21/07................. 200 182,266
EOP Operating LP
6.75%, 02/15/08................. 900 820,732
------------
1,002,998
------------
RETAIL & MERCHANDISING -- 0.3%
Home Depot, Inc.
6.50%, 09/15/04................. 600 594,923
Sears, Roebuck & Co.
6.25%, 01/15/04................. 200 192,856
------------
787,779
------------
TELECOMMUNICATIONS -- 3.0%
CSC Holdings, Inc.
8.125%, 07/15/09................ 1,000 974,694
GTE North, Inc.
5.65%, 11/15/08................. 500 434,986
KPNQwest NV
8.125%, 06/01/09................ 500 472,500
PAR
(000) VALUE
----- -----
MCI Worldcom, Inc. [FRN] 144A
6.72%, 06/30/00................. $ 800 $ 800,045
Sprint Capital Corp.
7.625%, 06/10/02................ 1,000 1,004,158
TCI Communications, Inc.
8.75%, 08/01/15................. 300 325,028
Vodafone Airtouch PLC 144A
7.75%, 02/15/10................. 1,350 1,340,697
WorldCom, Inc.
7.875%, 05/15/03................ 700 706,412
8.25%, 05/15/10................. 650 666,428
------------
6,724,948
------------
UTILITIES -- 0.6%
Alliant Energy Resources
7.375%, 11/09/09................ 600 585,288
Valero Energy Corp.
8.375%, 06/15/05................ 650 660,804
------------
1,246,092
------------
TOTAL CORPORATE OBLIGATIONS
(Cost $29,138,833).................. 28,841,626
------------
U.S. TREASURY OBLIGATIONS -- 8.2%
U.S. Treasury Bonds
9.25%, 02/15/16................. 2,550 3,304,639
7.875%, 02/15/21................ 700 831,469
6.25%, 05/15/30................. 1,100 1,155,000
------------
5,291,108
------------
U.S. Treasury Notes
4.875%, 03/31/01................ 4,700 4,644,188
6.625%, 07/31/01................ 1,900 1,903,563
6.00%, 08/15/04................. 350 346,828
5.875%, 11/15/04................ 6,300 6,205,652
------------
13,100,231
------------
(Cost $18,201,188)................ 18,391,339
------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.4%
AmeriCredit Automobile Receivables
Trust Series 1999-D C1-A3
7.02%, 12/12/05................. 700 695,229
Case Equipment Loan Trust Series
1998-B Cl-A4
5.92%, 10/15/05................. 300 294,515
CIT RV Trust Series 1998-A Cl-A4
6.09%, 02/15/12................. 300 291,842
Comed Transitional Funding Trust
Series 1998-1 Cl-A6
5.63%, 06/25/09................. 100 92,239
General Motors Acceptance Corp.
Series 1999-Cl Cl-A2
6.175%, 05/15/33................ 450 412,843
Morgan Stanley Capital I Series
1998-WF1 Cl-A1
6.25%, 07/15/07................. 176 170,733
Morgan Stanley Capital I Series
1998-WF1 Cl-A2
6.55%, 12/15/07................. 800 762,915
AST AMERICAN CENTURY STRATEGIC BALANCED PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
----- -----
Nationslink Funding Corp. Series
1998-2 Cl-A1
6.00%, 11/20/07................. $ 180 $ 171,551
Nationslink Funding Corp. Series
1999-1 Cl-A2
6.316%, 11/20/08................ 250 233,080
------------
(Cost $3,225,244)............... 3,124,947
------------
SOVEREIGN ISSUES -- 0.6%
CANADA
Province of Quebec
5.75%, 02/15/09................. 800 715,865
7.50%, 09/15/29................. 600 588,473
------------
(Cost $1,287,215)................. 1,304,338
------------
SHARES VALUE
------ -----
SHORT-TERM INVESTMENTS -- 0.0%
Temporary Investment Cash Fund.... 29,809 $ 29,809
Temporary Investment Fund......... 29,808 29,808
------------
(Cost $59,617).................... 59,617
------------
TOTAL INVESTMENTS -- 100.9%
(Cost $215,708,682)................. 227,440,042
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.9%).................... (2,048,343)
------------
NET ASSETS -- 100.0%.................. $225,391,699
============
$112,500 has been segregated with the custodian to cover margin requirements for
the following open futures contracts at June 30, 2000:
EXPIRATION NUMBER OF UNREALIZED
DESCRIPTION MONTH CONTRACTS DEPRECIATION
- ----------------------------------------------------------------
S&P 500.................. 09/00 6 $29,070
=======
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 2.1% of net assets.
See Notes to Financial Statements.
AST AMERICAN CENTURY INTERNATIONAL GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
FOREIGN STOCK -- 90.0%
AUSTRALIA -- 1.6%
News Corp. Ltd. [ADR]............ 88,400 $ 4,817,800
------------
BRAZIL -- 1.1%
Petroleo Brasileiro SA*.......... 113,900 3,441,088
------------
CANADA -- 3.9%
Celestica, Inc. NY Reg.*......... 71,500 3,548,188
Nortel Networks Corp. NY Reg.*... 121,000 8,258,250
------------
11,806,438
------------
DENMARK -- 2.6%
Den Danske Bank.................. 700 84,552
ISS AS........................... 25,900 1,980,237
Novo-Nordisk AS Cl-B............. 24,831 4,243,716
Tele Danmark AS.................. 20,900 1,412,643
------------
7,721,148
------------
FINLAND -- 3.4%
Nokia Corp. Cl-A [ADR]........... 112,900 5,637,944
Sonera Group Oyj................. 84,374 3,862,019
Tieto Corp. Cl-B................. 23,300 780,613
------------
10,280,576
------------
FRANCE -- 12.8%
Alcatel Corp. ................... 86,753 5,713,124
Altran Technologies SA........... 8,087 1,589,958
Aventis SA....................... 34,200 2,506,317
AXA SA........................... 27,060 4,280,004
Business Objects SA*............. 13,900 1,224,938
Pinault-Printemps Redoute SA..... 13,300 2,966,747
Sagem SA......................... 1,300 1,530,291
Societe Generale................. 40,100 2,421,683
Societe Television Francaise..... 48,600 3,400,882
STMicroelectronics NV NY Reg..... 75,600 4,852,575
Suez Lyonnaise des Eaux.......... 25,600 4,503,067
Total Fina SA Cl-B*.............. 9,400 1,447,124
Vivendi.......................... 24,890 2,205,790
------------
38,642,500
------------
GERMANY -- 3.8%
Intershop Communications AG...... 5,564 2,554,789
Marschollek, Lautenschlaeger Und
Partner AG..................... 4,802 2,016,177
SAP AG [ADR]..................... 13,800 647,738
Schering AG...................... 15,600 853,125
Siemens AG....................... 35,800 5,380,981
------------
11,452,810
------------
HONG KONG -- 3.6%
Cheung Kong Holdings Ltd. ....... 94,000 1,040,086
China Telecom Ltd. .............. 532,000 4,692,091
China Unicom Ltd. ............... 45,000 95,542
China Unicom Ltd. [ADR]*......... 35,400 752,250
Citic Pacific Ltd. .............. 200,000 1,046,821
Hutchison Whampoa Ltd. .......... 254,000 3,193,317
------------
10,820,107
------------
SHARES VALUE
------ -----
ISRAEL -- 1.2%
Check Point Software Technologies
Ltd.*.......................... 17,600 $ 3,726,800
------------
ITALY -- 4.7%
Alleanza Assicurazioni........... 193,000 2,580,857
Banco Intesa SPA................. 737,850 3,317,212
Mediaset SPA..................... 119,609 1,834,494
Mediolanum SPA................... 128,500 2,098,965
Mondadori, (Arnoldo) Editore
SPA............................ 98,500 2,256,662
Telecom Italia SPA............... 152,300 2,102,301
------------
14,190,491
------------
JAPAN -- 14.4%
Canon, Inc. ..................... 72,000 3,593,143
Fuji Television Network, Inc. ... 78 1,223,801
Hitachi Ltd. .................... 276,000 3,991,247
Hoya Corp. ...................... 24,000 2,154,979
Japan Telecom Co. Ltd. .......... 38 1,652,150
Kao Corp. ....................... 35,000 1,071,818
Keyence Corp. ................... 1,600 529,293
Kyocera Corp. ................... 18,400 3,128,651
Nomura Securities Co. Ltd. ...... 97,000 2,379,125
NTT Mobile Communication Network,
Inc. .......................... 50 1,356,313
Orix Corp. ...................... 12,200 1,804,606
Pioneer Corp. ................... 31,000 1,210,096
Sharp Corp. ..................... 174,000 3,083,604
Sony Corp. ...................... 20,800 1,946,286
Takeda Chemical Industries
Ltd. .......................... 26,000 1,710,373
Tokyo Electron Ltd. ............. 21,000 2,882,000
Toshiba Corp. ................... 397,000 4,491,515
Toyota Motor Corp. .............. 32,000 1,460,849
Tyco International Ltd. ......... 79,700 3,775,788
------------
43,445,637
------------
KOREA -- 2.8%
Hyundai Motor Co. Ltd. .......... 62,200 797,730
Samsung Electronics Co. ......... 19,612 6,490,498
SK Telecom Co. Ltd. ............. 3,400 1,113,016
------------
8,401,244
------------
MEXICO -- 1.4%
Grupo Televisa SA [GDR].......... 14,500 999,594
Telefonos de Mexico SA Cl-L
[ADR].......................... 55,300 3,159,012
------------
4,158,606
------------
NETHERLANDS -- 5.8%
ASM Lithography Holding NV NY
Reg. .......................... 17,000 750,125
Getronics NV..................... 109,500 1,695,193
ING Groep NV..................... 37,477 2,543,493
Koninklijke (Royal) Philips
Electronics NV NY Reg. ........ 126,420 6,004,950
AST AMERICAN CENTURY INTERNATIONAL GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
Royal Dutch Petroleum Co. ....... 26,200 $ 1,612,938
United Pan-Europe Communications
NV............................. 26,683 700,582
VNU NV........................... 81,700 4,236,934
------------
17,544,215
------------
PORTUGAL -- 0.4%
Telecel-Comunicacoes Pessoais
SA............................. 84,060 1,281,206
------------
SPAIN -- 1.7%
Banco Popular Espanol SA......... 6,600 204,985
Sogecable SA..................... 26,867 958,579
Telefonica SA*................... 189,982 4,097,579
------------
5,261,143
------------
SWEDEN -- 5.4%
Assa Abloy AB Cl-B............... 123,744 2,497,251
Atlas Copco AB................... 14,342 277,986
Atlas Copco AB Cl-B.............. 25,100 472,196
Ericsson, (L.M.) Telephone Co.
[ADR].......................... 237,000 4,740,000
Modern Times Group AB Cl-B....... 27,210 1,302,995
Netcom AB Cl-B................... 25,723 1,909,270
Nordbanken Holding Co. AB........ 282,877 2,144,786
Securitas AB Cl-B................ 140,600 2,997,724
------------
16,342,208
------------
SWITZERLAND -- 6.4%
ABB AG........................... 37,664 4,522,496
Adecco SA........................ 1,840 1,568,346
Credit Suisse Group.............. 22,300 4,450,208
Julius Baer Holdings AG Cl-B..... 706 2,800,433
Novartis AG...................... 2,439 3,875,833
Swatch Group AG.................. 1,585 2,021,617
------------
19,238,933
------------
UNITED KINGDOM -- 13.0%
Amvescap PLC..................... 248,900 3,994,156
Barclays PLC..................... 29,900 743,709
Cable & Wireless PLC............. 196,336 3,326,016
Capita Group PLC................. 61,600 1,507,943
Centrica PLC..................... 746,817 2,492,970
CMG PLC.......................... 104,600 1,482,183
Colt Telecom Group PLC........... 38,496 1,282,132
Compass Group PLC................ 87,200 1,149,158
Diageo PLC....................... 191,811 1,721,958
Energis PLC...................... 45,565 1,709,334
Hays PLC......................... 206,800 1,153,672
Logica PLC....................... 48,800 1,155,449
Misys PLC........................ 175,200 1,480,003
Pearson PLC...................... 60,300 1,917,039
SEMA Group PLC................... 94,620 1,346,496
Shire Pharmaceuticals Group
PLC............................ 27,700 479,734
Telewest Communications PLC...... 280,645 968,694
Vodafone AirTouch PLC............ 2,180,502 8,813,776
SHARES VALUE
------ -----
WPP Group PLC.................... 162,400 $ 2,372,508
------------
39,096,930
------------
TOTAL FOREIGN STOCK
(Cost $246,480,463)................ 271,669,880
------------
PAR
(000)
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 7.8%
Federal Home Loan Bank
6.23%, 07/03/00................ $ 3,600 3,598,754
6.50%, 07/03/00................ 20,000 19,992,778
------------
(Cost $23,591,532)............... 23,591,532
------------
SHARES
------
U.S. STOCK -- 2.2%
COMPUTER SERVICES & SOFTWARE -- 0.7%
Comverse Technology, Inc. ....... 22,400 2,083,200
------------
SEMICONDUCTORS -- 0.9%
JDS Uniphase Corp. .............. 22,160 2,656,430
------------
TELECOMMUNICATIONS -- 0.6%
Amdocs Ltd....................... 23,600 1,811,300
------------
TOTAL U.S. STOCK
(Cost $3,653,002).................. 6,550,930
------------
TOTAL INVESTMENTS -- 100.0%
(Cost $273,724,997)................ 301,812,342
OTHER ASSETS LESS
LIABILITIES -- 0.0%................ 57,606
------------
NET ASSETS -- 100.0%................. $301,869,948
============
Foreign currency exchange contracts outstanding at June 30, 2000:
IN UNREALIZED
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS APPRECIATION/
MONTH TYPE TO RECEIVE FOR AT VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------
07/00 Buy CHF 469,735 $ 285,883 $ 288,973 $ 3,090
07/00 Buy EUR 1,127,781 1,067,949 1,081,316 13,367
07/00 Buy JPY 118,765,140 1,130,534 1,123,039 (7,495)
---------- ---------- -------
$2,484,366 $2,493,328 $ 8,962
========== ========== =======
IN UNREALIZED
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS APPRECIATION/
MONTH TYPE TO DELIVER FOR AT VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------
07/00 Sell EUR 490,525 $ 466,401 $ 470,617 $(4,216)
07/00 Sell GBP 84,684 127,480 128,208 (728)
07/00 Sell JPY 737,935,200 7,034,242 7,007,799 26,443
---------- ---------- -------
$7,628,123 $7,606,624 $21,499
========== ========== =======
AST AMERICAN CENTURY INTERNATIONAL GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
The following is a breakdown of the foreign stock portion of the Portfolio, by
industry classification, as of June 30, 2000. Percentages are based on net
assets.
INDUSTRY
- --------
Advertising......................................... 0.8%
Aerospace........................................... 0.5%
Automobile Manufacturers............................ 0.7%
Beverages........................................... 0.6%
Broadcasting........................................ 8.2%
Business Services................................... 7.2%
Computer Hardware................................... 3.9%
Computer Services & Software........................ 1.7%
Consumer Products & Services........................ 1.6%
Electronic Components & Equipment................... 11.4%
Financial-Bank & Trust.............................. 6.2%
Financial Services.................................. 3.4%
Food................................................ 0.4%
Healthcare Services................................. 0.7%
Industrial Products................................. 1.8%
Insurance........................................... 3.0%
Machinery & Equipment............................... 0.2%
Metals & Mining..................................... 0.8%
Office Equipment.................................... 1.2%
Oil & Gas........................................... 3.0%
Pharmaceuticals..................................... 4.5%
Real Estate......................................... 0.3%
Retail & Merchandising.............................. 1.7%
Semiconductors...................................... 2.6%
Telecommunications.................................. 22.1%
Utilities........................................... 1.5%
-----
Total............................................... 90.0%
=====
- ------------------------------------------------------------------------------
Unless otherwise noted, all stocks are common stock.
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST T. ROWE PRICE SMALL COMPANY VALUE PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 96.3%
AIRLINES -- 1.0%
Midwest Express Holdings,
Inc.*.......................... 136,000 $ 2,924,000
------------
AUTOMOTIVE PARTS -- 0.7%
Myers Industries, Inc. .......... 125,000 1,429,688
TBC Corp.*....................... 177,000 818,625
------------
2,248,313
------------
BROADCASTING -- 1.5%
Saga Communications, Inc.
Cl-A*.......................... 100,000 2,200,000
Sinclair Broadcast Group,
Inc.*.......................... 200,000 2,200,000
------------
4,400,000
------------
BUILDING MATERIALS -- 9.8%
Ameron International Corp. ...... 40,000 1,430,000
Florida Rock Industries, Inc. ... 60,000 2,137,500
Genlyte Group, Inc.*............. 3,400 71,613
Gibraltar Steel Corp. ........... 113,000 1,582,000
Insituform Technologies, Inc.*... 160,000 4,340,000
Lone Star Technologies, Inc.*.... 128,000 5,919,999
Modine Manufacturing Co. ........ 80,000 2,160,000
Republic Group, Inc. ............ 189,000 1,701,000
SCP Pool Corp.*.................. 127,500 2,996,250
Skyline Corp. ................... 115,000 2,472,500
Thomas Industries, Inc. ......... 140,000 2,476,250
U.S. Aggregates, Inc. ........... 150,000 2,718,750
------------
30,005,862
------------
BUSINESS SERVICES -- 1.3%
G & K Services, Inc. ............ 10,700 268,169
IT Group, Inc.*.................. 330,000 1,608,750
StaffMark, Inc.*................. 300,000 2,006,250
------------
3,883,169
------------
CHEMICALS -- 2.8%
Arch Chemicals, Inc. ............ 170,000 3,718,750
Schulman, (A.), Inc. ............ 105,000 1,266,563
TETRA Technologies, Inc.*........ 240,000 3,405,000
------------
8,390,313
------------
CLOTHING & APPAREL -- 1.0%
Dan River, Inc. Cl-A*............ 236,000 1,121,000
Unifi, Inc.*..................... 160,000 1,980,000
------------
3,101,000
------------
COMPUTER HARDWARE -- 1.0%
Analogic Corp. .................. 74,000 2,960,000
------------
COMPUTER SERVICES & SOFTWARE -- 3.5%
Analysts International Corp. .... 175,000 1,629,688
CompuCom Systems, Inc.*.......... 250,000 406,250
Metro Information Services,
Inc.*.......................... 55,000 550,000
Progress Software*............... 188,000 3,372,250
SPSS, Inc.*...................... 155,000 4,514,375
------------
10,472,563
------------
CONSUMER PRODUCTS & SERVICES -- 0.7%
Culp, Inc. ...................... 132,000 676,500
Packaged Ice, Inc.*.............. 350,000 1,443,750
------------
2,120,250
------------
CONTAINERS & PACKAGING -- 3.4%
Aptargroup, Inc. ................ 155,000 4,185,000
SHARES VALUE
------ -----
Ivex Packaging Corp.*............ 253,200 $ 2,816,850
Liqui-Box Corp. ................. 68,000 3,366,000
------------
10,367,850
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 8.3%
Electro Rental Corp.*............ 290,000 3,552,500
FLIR Systems, Inc.*.............. 180,000 1,170,000
Franklin Electric Co., Inc. ..... 45,000 3,048,750
Landauer, Inc. .................. 62,000 964,875
Littelfuse, Inc.*................ 163,000 7,986,999
Methode Electronics, Inc. Cl-A... 180,000 6,952,500
Pioneer-Standard Electronics,
Inc. .......................... 120,000 1,770,000
------------
25,445,624
------------
ENVIRONMENTAL SERVICES -- 1.2%
Newpark Resources, Inc.*......... 315,000 2,972,813
Waste Connections, Inc.*......... 6,900 136,275
Waterlink, Inc.*................. 150,000 375,000
------------
3,484,088
------------
EQUIPMENT SERVICES -- 0.2%
Unifirst Corp. .................. 60,000 472,500
------------
FINANCIAL-BANK & TRUST -- 7.4%
Community First Bankshares,
Inc. .......................... 235,000 3,833,438
First Republic Bank*............. 142,000 2,831,125
Silicon Valley Bancshares*....... 300,000 12,787,499
Southwest Bancorporation of
Texas, Inc.*................... 146,000 3,029,500
------------
22,481,562
------------
FINANCIAL SERVICES -- 4.6%
Allied Capital Corp. ............ 270,000 4,589,999
American Capital Strategies
Ltd. .......................... 140,000 3,342,500
First Financial Fund, Inc.**..... 280,000 2,292,500
Medallion Financial Corp. ....... 20,000 308,750
Triad Guaranty, Inc.*............ 153,000 3,509,438
------------
14,043,187
------------
FOOD -- 0.7%
International Multifoods
Corp. ......................... 120,000 2,077,500
------------
FURNITURE -- 1.1%
Stanley Furniture Co., Inc.*..... 145,000 3,190,000
------------
INSURANCE -- 5.1%
Brown & Brown, Inc. ............. 150,000 7,799,999
Hilb, Rogal & Hamilton Co. ...... 40,000 1,387,500
Markel Corp.*.................... 22,000 3,115,750
Medical Assurance, Inc.*......... 160,000 1,800,000
Presidential Life Corp. ......... 90,000 1,248,750
------------
15,351,999
------------
LUMBER & WOOD PRODUCTS -- 0.6%
Deltic Timber Corp. ............. 80,000 1,675,000
------------
MACHINERY & EQUIPMENT -- 3.6%
Alamo Group, Inc. ............... 56,600 707,500
Carbo Ceramics, Inc. ............ 88,000 3,091,000
Smith, (A.O.) Corp. ............. 130,000 2,721,875
TransTechnology Corp. ........... 132,000 1,452,000
Woodward Governor Co. ........... 107,500 3,043,594
------------
11,015,969
------------
AST T. ROWE PRICE SMALL COMPANY VALUE PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
MEDICAL SUPPLIES & EQUIPMENT -- 2.1%
Ocular Sciences, Inc.*........... 60,000 $ 705,000
Owens & Minor, Inc. ............. 335,000 5,757,813
------------
6,462,813
------------
METALS & MINING -- 1.9%
Homestake Mining Co. ............ 120,000 825,000
Layne Christensen Co.*........... 113,000 508,500
Material Sciences Corp.*......... 161,000 1,610,000
Penn Virginia Corp. ............. 120,000 2,955,000
------------
5,898,500
------------
OFFICE EQUIPMENT -- 4.1%
Aaron Rents, Inc. Cl-A........... 49,900 779,688
Aaron Rents, Inc. Cl-B........... 190,100 2,388,131
CompX International, Inc. ....... 165,000 3,351,563
IDEX Corp. ...................... 125,000 3,945,312
McGrath Rentcorp................. 106,000 1,802,000
------------
12,266,694
------------
OIL & GAS -- 5.1%
Chieftan International, Inc.*.... 185,000 3,526,563
Cross Timbers Oil Co. ........... 232,000 5,132,999
Devon Energy Corp. .............. 40,000 2,247,500
Forest Oil Corp.*................ 290,000 4,621,875
------------
15,528,937
------------
PAPER & FOREST PRODUCTS -- 0.8%
CSS Industries, Inc.*............ 40,000 817,500
Wausau-Mosinee Paper Corp. ...... 170,000 1,455,625
------------
2,273,125
------------
PERSONAL SERVICES -- 1.5%
Matthews International Corp.
Cl-A........................... 161,000 4,669,000
------------
PETROLEUM EXPLORATION & PRODUCTION -- 0.5%
Companie Generale de Geophysique
SA [ADR]....................... 100,000 1,362,500
------------
PHARMACEUTICALS -- 1.0%
Bone Care International, Inc.*... 75,000 1,767,188
Coulter Pharmaceutical, Inc.*.... 60,000 1,230,000
------------
2,997,188
------------
REAL ESTATE -- 5.6%
Apartment Investment & Management
Co. Cl-A [REIT]................ 50,000 2,162,500
Glenborough Realty Trust, Inc.
[REIT]......................... 260,000 4,533,749
Innkeepers USA Trust [REIT]...... 220,000 2,007,500
Pacific Gulf Properties, Inc.
[REIT]......................... 130,000 3,258,125
Parkway Co. [REIT]............... 58,000 1,769,000
Sun Communities, Inc. [REIT]..... 95,000 3,176,563
------------
16,907,437
------------
SHARES VALUE
------ -----
RESTAURANTS -- 4.4%
Consolidated Products, Inc.*..... 190,000 $ 1,710,000
RARE Hospitality International,
Inc.*.......................... 165,000 4,661,250
Ruby Tuesday, Inc. .............. 545,000 6,846,563
------------
13,217,813
------------
RETAIL & MERCHANDISING -- 4.3%
Bon-Ton Stores, Inc.*............ 130,000 300,625
Casey's General Stores, Inc. .... 245,000 2,541,875
Fred's, Inc. .................... 153,000 2,754,000
Goody's Family Clothing*......... 250,000 1,375,000
Hancock Fabrics, Inc. ........... 190,000 807,500
Jo-Ann Stores, Inc. Cl-B*........ 122,000 930,250
Stein Mart, Inc.*................ 425,000 4,356,250
------------
13,065,500
------------
TRANSPORTATION -- 2.2%
Hub Group, Inc. Cl-A*............ 105,000 1,568,438
Landstar Systems, Inc.*.......... 87,000 5,181,937
------------
6,750,375
------------
UTILITIES -- 3.3%
Black Hills Corp. ............... 160,000 3,610,000
Cleco Corp. ..................... 105,000 3,517,500
United Water Resources, Inc. .... 70,000 2,441,250
Vectran Corp.*................... 30,000 521,250
------------
10,090,000
------------
TOTAL COMMON STOCK (Cost
$298,578,387)...................... 291,600,631
------------
PREFERRED STOCK -- 0.5%
OIL & GAS
Cross Timbers Oil Co. $1.5625
Cl-A
(Cost $1,188,022)................ 33,000 1,551,000
------------
PAR
(000)
---------
COMMERCIAL PAPER -- 1.3%
UBS Finance, Inc.
7.05%, 07/05/00
(Cost $3,996,867)................ $ 4,000 3,996,867
------------
SHARES
---------
SHORT-TERM INVESTMENTS -- 1.5%
Temporary Investment Cash Fund
(Cost $4,447,075)................ 4,447,075 4,447,075
------------
TOTAL INVESTMENTS -- 99.6%
(Cost $308,210,351)................ 301,595,573
OTHER ASSETS LESS
LIABILITIES -- 0.4%................ 1,159,208
------------
NET ASSETS -- 100.0%................. $302,754,781
============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
** Closed-end fund.
See Notes to Financial Statements.
AST MARSICO CAPITAL GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 96.1%
ADVERTISING -- 1.0%
Omnicom Group, Inc. ........... 213,277 $ 18,994,983
--------------
AEROSPACE -- 3.2%
General Dynamics Corp. ........ 497,224 25,979,954
General Motors Corp. Cl-H*..... 390,878 34,299,545
--------------
60,279,499
--------------
AUTOMOBILE MANUFACTURERS -- 1.0%
Ford Motor Co. ................ 458,158 19,700,794
--------------
AUTOMOTIVE PARTS -- 0.3%
Delphi Automotive Systems
Corp. ....................... 342,332 5,028,001
Visteon Corp.*................. 59,988 727,355
--------------
5,755,356
--------------
BEVERAGES -- 3.2%
Anheuser-Busch Companies,
Inc. ........................ 341,766 25,525,648
Coca-Cola Co. ................. 339,310 19,489,118
Coca-Cola Enterprises, Inc. ... 434,193 7,082,773
Pepsi Bottling Group, Inc. .... 284,968 8,317,504
--------------
60,415,043
--------------
BROADCASTING -- 2.0%
Clear Channel Communications,
Inc.*........................ 400,978 30,073,350
UnitedGlobalCom, Inc. Cl-A*.... 185,678 8,680,447
--------------
38,753,797
--------------
COMPUTER HARDWARE -- 5.6%
EMC Corp.*..................... 1,378,554 106,062,498
--------------
COMPUTER SERVICES & SOFTWARE -- 13.3%
Adobe Systems, Inc. ........... 342,166 44,481,580
Cisco Systems, Inc.*........... 566,601 36,014,576
Microsoft Corp.*............... 237,903 19,032,240
Oracle Corp.*.................. 1,127,853 94,810,142
Sun Microsystems, Inc.*........ 597,101 54,298,872
Veritas Software Corp.*........ 30,648 3,463,703
--------------
252,101,113
--------------
CONGLOMERATES -- 4.0%
Corning, Inc. ................. 280,061 75,581,462
--------------
CONSTRUCTION -- 0.2%
M.D.C. Holdings, Inc. ......... 165,770 3,087,466
--------------
CONSUMER PRODUCTS & SERVICES -- 0.2%
Estee Lauder Companies, Inc.
Cl-A......................... 94,698 4,681,632
--------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 9.5%
Agilent Technologies, Inc.*.... 332,807 24,544,516
Flextronics International
Ltd.*........................ 259,925 17,853,598
General Electric Co. .......... 1,163,994 59,363,694
Sony Corp. .................... 296,405 27,954,697
Texas Instruments, Inc. ....... 706,210 48,507,799
The Titan Corp.*............... 61,789 2,765,058
--------------
180,989,362
--------------
SHARES VALUE
------ -----
ENERGY SERVICES -- 0.7%
Halliburton Co. ............... 276,133 $ 13,030,026
--------------
ENTERTAINMENT & LEISURE -- 2.8%
Time Warner, Inc. ............. 699,009 53,124,684
--------------
FINANCIAL-BANK & TRUST -- 0.7%
Northern Trust Corp. .......... 219,523 14,282,715
--------------
FINANCIAL SERVICES -- 9.6%
American Express Co. .......... 156,816 8,174,034
Citigroup, Inc. ............... 984,629 59,323,897
Fannie Mae..................... 1,128,893 58,914,103
Morgan Stanley Dean Witter &
Co. ......................... 684,495 56,984,209
--------------
183,396,243
--------------
HOTELS & MOTELS -- 1.8%
Four Seasons Hotels, Inc. ..... 561,121 34,894,712
--------------
INTERNET SERVICES -- 2.1%
America Online, Inc.*.......... 763,882 40,294,776
--------------
OIL & GAS -- 3.7%
BP Amoco PLC [ADR]............. 636,425 35,997,789
Schlumberger Ltd. ............. 464,033 34,628,463
--------------
70,626,252
--------------
PAPER & FOREST PRODUCTS -- 1.0%
Kimberly-Clark Corp. .......... 337,375 19,356,891
--------------
PHARMACEUTICALS -- 7.8%
Genentech, Inc.*............... 615,743 105,907,796
Priority Healthcare Corp.
Cl-B*........................ 585,336 43,497,782
--------------
149,405,578
--------------
RETAIL & MERCHANDISING -- 8.7%
Costco Companies, Inc.*........ 587,618 19,391,394
Home Depot, Inc. .............. 1,074,682 53,666,932
Tiffany & Co. ................. 471,817 31,847,648
Wal-Mart Stores, Inc. ......... 1,070,490 61,686,986
--------------
166,592,960
--------------
SEMICONDUCTORS -- 3.1%
Applied Materials, Inc.*....... 607,368 55,042,725
Chartered Semiconductor
Manufacturing [ADR]*......... 50,000 4,500,000
--------------
59,542,725
--------------
TELECOMMUNICATIONS -- 10.3%
Comcast Corp. Cl-A*............ 981,079 39,733,700
Ericsson, (L.M.) Telephone Co.
[ADR]........................ 855,446 17,108,920
Nortel Networks Corp. NY
Reg.*........................ 540,859 36,913,627
SBC Communications, Inc. ...... 212,513 9,191,187
Sprint Corp. (PCS Group)*...... 998,244 59,395,518
Vodafone AirTouch PLC [ADR].... 812,645 33,673,977
--------------
196,016,929
--------------
AST MARSICO CAPITAL GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
TRANSPORTATION -- 0.3%
United Parcel Service, Inc.
Cl-B......................... 108,280 $ 6,388,520
--------------
TOTAL COMMON STOCK
(Cost $1,440,866,221)............ 1,833,356,016
--------------
PAR
(000)
-----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 3.9%
Federal Home Loan Bank 6.48%,
07/03/00
(Cost $74,773,072)............. $ 74,800 74,773,072
--------------
TOTAL INVESTMENTS -- 100.0%
(Cost $1,515,639,293)............ 1,908,129,088
OTHER ASSETS LESS
LIABILITIES -- 0.0%.............. 445,347
--------------
NET ASSETS -- 100.0%............... $1,908,574,435
==============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST COHEN & STEERS REALTY PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 95.8%
APARTMENT/RESIDENTIAL -- 18.9%
Apartment Investment & Management
Co. Cl-A [REIT]................. 66,500 $ 2,876,125
Archstone Communities Trust
[REIT].......................... 142,000 3,274,875
Avalonbay Communities, Inc.
[REIT].......................... 75,900 3,168,825
Equity Residential Properties
Trust [REIT].................... 80,500 3,702,999
Essex Property Trust, Inc.
[REIT].......................... 31,900 1,339,800
Smith, (Charles E.) Residential
Realty, Inc. ................... 25,600 972,800
United Dominion Realty Trust, Inc.
[REIT] ......................... 144,900 1,593,900
-----------
16,929,324
-----------
COMMUNITY CENTER -- 2.5%
Kimco Realty Corp. [REIT]......... 54,600 2,238,600
-----------
DIVERSIFIED -- 13.5%
Brookfield Properties Corp........ 178,300 2,364,626
Cresent Real Estate Equities
Co.............................. 156,800 3,214,400
Vornado Realty Trust [REIT]....... 189,600 6,588,600
-----------
12,167,626
-----------
HEALTH CARE -- 5.7%
Health Care Property Investors,
Inc. [REIT]..................... 118,300 3,223,675
Nationwide Health Properties,
Inc............................. 138,600 1,931,738
-----------
5,155,413
-----------
HEALTHCARE SERVICES -- 0.6%
Manor Care, Inc.*................. 80,100 560,700
-----------
HOTELS & MOTELS -- 6.7%
Host Marriott Corp. .............. 231,600 2,171,250
MeriStar Hospitality Corp. ....... 40,000 840,000
Starwood Hotels & Resorts
Worldwide, Inc. [REIT].......... 94,300 3,047,069
-----------
6,058,319
-----------
INDUSTRIAL -- 8.2%
AMB Property Corp. [REIT]......... 165,500 3,775,469
First Industrial Realty Trust,
Inc. [REIT]..................... 5,600 165,200
Prologis Trust [REIT]............. 162,400 3,461,150
-----------
7,401,819
-----------
SHARES VALUE
------ -----
INTERNET SERVICES -- 2.4%
Frontline Capital Group*.......... 99,600 $ 2,122,725
-----------
OFFICE -- 16.6%
Arden Realty, Inc. [REIT]......... 146,400 3,440,400
Equity Office Properties Trust
[REIT].......................... 151,200 4,167,450
Highwoods Properties, Inc.
[REIT].......................... 38,300 919,200
Mack-Cali Realty Corp. [REIT]..... 195,600 5,024,474
SL Green Realty Corp. [REIT]...... 50,600 1,353,550
-----------
14,905,074
-----------
OFFICE/INDUSTRIAL -- 9.6%
Boston Properties, Inc. [REIT].... 77,800 2,970,988
PS Business Parks, Inc. [REIT].... 33,800 811,200
Reckson Associates Realty Corp.
[REIT].......................... 67,500 1,603,125
Spieker Properties, Inc. [REIT]... 69,700 3,293,325
-----------
8,678,638
-----------
REGIONAL MALL -- 11.1%
General Growth Properties, Inc.
[REIT].......................... 79,300 2,517,775
Macerich Co. [REIT]............... 55,200 1,217,850
Rouse Co. [REIT].................. 86,200 2,133,450
Simon Property Group, Inc.
[REIT].......................... 83,200 1,846,000
Taubman Centers, Inc. [REIT]...... 43,400 477,400
Weingarten Realty Investors
[REIT].......................... 44,000 1,776,500
-----------
9,968,975
-----------
TOTAL COMMON STOCK
(Cost $85,432,507).................. 86,187,213
-----------
SHORT-TERM INVESTMENTS -- 2.4%
Temporary Investment Cash Fund.... 1,069,613 1,069,613
Temporary Investment Fund......... 1,069,612 1,069,612
-----------
(Cost $2,139,225)................. 2,139,225
-----------
TOTAL INVESTMENTS -- 98.2%
(Cost $87,571,732).................. 88,326,438
OTHER ASSETS LESS
LIABILITIES -- 1.8%................. 1,659,416
-----------
NET ASSETS -- 100.0%.................. $89,985,854
===========
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST LORD ABBETT SMALL CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 92.6%
AEROSPACE -- 2.6%
AAR Corp. ....................... 123,600 $ 1,483,200
Alliant Techsystems, Inc.*....... 25,000 1,685,938
------------
3,169,138
------------
AUTOMOBILE MANUFACTURERS -- 2.5%
Oshkosh Truck Corp. ............. 85,000 3,038,750
------------
AUTOMOTIVE PARTS -- 2.3%
American Axle & Manufacturing
Holdings, Inc.*................ 45,000 638,438
Superior Industries
International, Inc............. 85,000 2,188,750
------------
2,827,188
------------
BEVERAGES -- 1.5%
Robert Mondavi Corp. Cl-A*....... 62,500 1,917,969
------------
BROADCASTING -- 0.3%
Salem Communications Corp.
Cl-A*.......................... 45,700 424,153
------------
BUILDING MATERIALS -- 3.6%
American Woodmark Corp. ......... 13,000 266,500
Florida Rock Industries, Inc. ... 23,000 819,375
Hughes Supply, Inc. ............. 65,000 1,283,750
Simpson Manufacturing Co.,
Inc.*.......................... 45,000 2,151,563
------------
4,521,188
------------
BUSINESS SERVICES -- 2.4%
American Management Systems,
Inc.*.......................... 52,000 1,707,063
Baker, (Michael) Corp.*.......... 40,000 260,000
CIBER, Inc.*..................... 75,000 993,750
------------
2,960,813
------------
CHEMICALS -- 1.5%
Fuller, (H.B.) Co. .............. 41,000 1,868,063
------------
CLOTHING & APPAREL -- 3.1%
AnnTaylor Stores Corp.*.......... 36,700 1,215,688
Cutter & Buck, Inc.*............. 42,900 340,519
Pacific Sunwear of California,
Inc.*.......................... 50,000 937,500
Phillips-Van Heusen Corp......... 145,000 1,377,499
------------
3,871,206
------------
COMPUTER HARDWARE -- 0.4%
Analogic Corp. .................. 10,900 436,000
------------
COMPUTER SERVICES & SOFTWARE -- 6.3%
Analysts International Corp. .... 38,700 360,394
Datastream Systems, Inc.*........ 145,400 1,817,499
Kronos, Inc.*.................... 44,500 1,157,000
Metro Information Services,
Inc.*.......................... 38,000 380,000
Micros Systems, Inc.*............ 46,200 857,588
Systems & Computer Technology
Corp.*......................... 165,000 3,299,999
------------
7,872,480
------------
CONSTRUCTION -- 0.8%
Granite Construction, Inc........ 40,000 980,000
------------
SHARES VALUE
------ -----
CONSUMER PRODUCTS & SERVICES -- 1.2%
Church and Dwight Co., Inc....... 80,000 $ 1,440,000
------------
CONTAINERS & PACKAGING -- 1.9%
Ivex Packaging Corp.*............ 215,000 2,391,875
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 12.8%
Anixter International, Inc.*..... 22,600 598,900
Kent Electronics Corp.*.......... 85,000 2,534,063
Moog, Inc. Cl-A*................. 75,900 2,001,863
Rogers Corp.*.................... 140,000 4,899,999
Sensormatic Electronics Corp.*... 220,000 3,478,749
Teleflex, Inc.................... 35,000 1,297,188
Woodhead Industries, Inc......... 60,900 1,111,425
------------
15,922,187
------------
FINANCIAL-BANK & TRUST -- 2.7%
Doral Financial Corp............. 180,000 2,058,749
East West Bancorp, Inc........... 62,900 904,188
UCBH Holdings, Inc............... 14,600 389,638
------------
3,352,575
------------
FINANCIAL SERVICES -- 1.3%
Financial Federal Corp.*......... 90,000 1,563,750
------------
FOOD -- 3.9%
Dreyer's Grand Ice Cream, Inc.... 134,400 2,822,400
Smithfield Foods, Inc.*.......... 70,000 1,964,375
------------
4,786,775
------------
FURNITURE -- 0.8%
Furniture Brands International,
Inc.*.......................... 65,000 983,125
------------
INDUSTRIAL PRODUCTS -- 4.9%
Carlisle Companies, Inc.......... 65,000 2,925,000
Lydall, Inc.*.................... 61,400 652,375
MSC Industrial Direct Co.,
Inc.*.......................... 65,000 1,360,938
Robbins & Myers, Inc............. 50,000 1,140,625
------------
6,078,938
------------
MACHINERY & EQUIPMENT -- 11.0%
Astec Industries, Inc.*.......... 11,600 294,350
BEI Technologies, Inc............ 70,500 1,802,156
Gardner Denver, Inc.*............ 49,700 888,388
National-Oilwell, Inc.*.......... 120,000 3,944,999
Nordson Corp..................... 30,200 1,528,875
Precision Castparts Corp......... 42,000 1,900,499
SPS Technologies, Inc.*.......... 43,000 1,765,688
Universal Compression Holdings,
Inc.*.......................... 47,700 1,597,950
------------
13,722,905
------------
MEDICAL SUPPLIES & EQUIPMENT -- 5.1%
ICU Medical, Inc.*............... 53,000 1,431,000
Invacare Corp.................... 120,000 3,150,000
Mentor Corp...................... 62,800 1,707,375
------------
6,288,375
------------
AST LORD ABBETT SMALL CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
METALS & MINING -- 1.7%
Carpenter Technology Corp........ 36,000 $ 760,500
RTI International Metals,
Inc.*.......................... 40,000 455,000
Shaw Group, Inc.*................ 18,300 862,388
------------
2,077,888
------------
OIL & GAS -- 7.1%
Basin Exploration, Inc.*......... 95,000 1,698,125
Forest Oil Corp.*................ 65,000 1,035,938
Helmerich & Payne, Inc........... 100,300 3,560,649
Marine Drilling Co., Inc.*....... 68,400 1,825,425
Oceaneering International,
Inc.*.......................... 40,000 760,000
------------
8,880,137
------------
PHARMACEUTICALS -- 1.0%
ChiRex, Inc.*.................... 59,300 1,186,000
------------
PRINTING & PUBLISHING -- 4.5%
Houghton Mifflin Co.*............ 32,000 1,494,000
Scholastic Corp.*................ 67,200 4,107,600
------------
5,601,600
------------
RESTAURANTS -- 0.5%
BUCA, Inc.*...................... 37,600 587,500
------------
RETAIL & MERCHANDISING -- 2.5%
Coldwater Creek, Inc.*........... 42,100 1,268,263
Good Guys, Inc.*................. 131,900 478,138
Shopko Stores, Inc.*............. 85,000 1,306,874
------------
3,053,275
------------
SHARES VALUE
------ -----
TELECOMMUNICATIONS -- 1.3%
Commscope, Inc.*................. 39,600 $ 1,623,600
------------
TRANSPORTATION -- 1.1%
Heartland Express, Inc.*......... 28,100 468,919
Swift Transportation Co.,
Inc.*.......................... 60,200 842,800
------------
1,311,719
------------
TOTAL COMMON STOCK
(Cost $99,388,550)................. 114,739,172
------------
SHORT-TERM INVESTMENTS -- 7.7%
Temporary Investment Cash Fund... 4,743,118 4,743,118
Temporary Investment Fund........ 4,743,117 4,743,117
------------
(Cost $9,486,235)................ 9,486,235
------------
TOTAL INVESTMENTS -- 100.3%
(Cost $108,874,785)................ 124,225,407
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.3%)................... (347,031)
------------
NET ASSETS -- 100.0%................. $123,878,376
============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST SANFORD BERNSTEIN MANAGED INDEX 500 PORTFOLIO
--------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 98.0%
AEROSPACE -- 1.2%
Boeing Co. ...................... 125,800 $ 5,260,013
Honeywell International, Inc. ... 44,800 1,509,200
Northrop Grumman Corp. .......... 31,600 2,093,500
------------
8,862,713
------------
AIRLINES -- 0.1%
AMR Corp.*....................... 38,596 1,020,382
------------
AUTOMOBILE MANUFACTURERS -- 0.8%
Ford Motor Co. .................. 89,700 3,857,100
General Motors Corp. ............ 38,582 2,240,167
------------
6,097,267
------------
AUTOMOTIVE PARTS -- 0.3%
Genuine Parts Co. ............... 60,119 1,202,380
Goodyear Tire & Rubber Co. ...... 35,700 714,000
Visteon Corp.*................... 11,745 142,404
------------
2,058,784
------------
BEVERAGES -- 0.9%
Anheuser-Busch Companies,
Inc. .......................... 10,700 799,156
Coca-Cola Co. ................... 68,500 3,934,469
PepsiCo, Inc. ................... 44,100 1,959,694
------------
6,693,319
------------
CHEMICALS -- 1.5%
Dow Chemical Co. ................ 145,500 4,392,281
Eastman Chemical Co. ............ 89,800 4,287,950
Union Carbide Corp. ............. 46,400 2,296,800
------------
10,977,031
------------
CLOTHING & APPAREL -- 0.3%
V.F. Corp. ...................... 95,375 2,283,039
------------
COMPUTER HARDWARE -- 6.9%
Apple Computer, Inc.*............ 55,600 2,912,050
Compaq Computer Corp. ........... 120,400 3,077,725
Dell Computer Corp.*............. 138,000 6,805,125
EMC Corp.*....................... 135,800 10,448,113
Gateway, Inc.*................... 56,900 3,229,075
Hewlett-Packard Co............... 95,200 11,888,100
International Business Machines
Corp........................... 88,000 9,641,500
Seagate Technology, Inc.*........ 33,800 1,859,000
------------
49,860,688
------------
COMPUTER SERVICES & SOFTWARE -- 11.0%
Autodesk, Inc. .................. 53,700 1,862,719
Cisco Systems, Inc.*............. 416,000 26,441,999
Computer Associates
International, Inc. ........... 60,400 3,091,725
Computer Sciences Corp.*......... 10,100 754,344
Microsoft Corp.*................. 248,600 19,887,999
Oracle Corp.*.................... 172,800 14,526,000
Sun Microsystems, Inc.*.......... 111,400 10,130,438
Veritas Software Corp.*.......... 19,100 2,158,598
------------
78,853,822
------------
SHARES VALUE
------ -----
CONGLOMERATES -- 2.6%
Corning, Inc. ................... 11,700 $ 3,157,538
Minnesota Mining & Manufacturing
Co. ........................... 49,000 4,042,500
Philip Morris Companies, Inc. ... 295,700 7,854,530
Tyco International Ltd. ......... 75,500 3,576,813
------------
18,631,381
------------
CONSUMER PRODUCTS & SERVICES -- 0.4%
Procter & Gamble Co. ............ 19,700 1,127,825
Whirlpool Corp. ................. 42,500 1,981,563
------------
3,109,388
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 6.2%
General Electric Co. ............ 596,600 30,426,600
KLA-Tencor Corp.*................ 40,000 2,342,500
Tektronix, Inc. ................. 8,500 618,375
Teradyne, Inc.*.................. 24,500 1,800,750
Texas Instruments, Inc. ......... 139,600 9,588,775
------------
44,777,000
------------
ENTERTAINMENT & LEISURE -- 2.8%
Disney, (Walt) Co. .............. 154,900 6,012,056
Time Warner, Inc. ............... 66,400 5,046,400
Viacom, Inc. Cl-B*............... 140,200 9,559,888
------------
20,618,344
------------
EQUIPMENT SERVICES -- 0.1%
Polaroid Corp.*.................. 55,000 993,438
------------
FINANCIAL-BANK & TRUST -- 3.5%
Bank of America Corp. ........... 165,700 7,125,099
Bank One Corp. .................. 158,200 4,202,188
Chase Manhattan Corp. ........... 23,400 1,077,863
First Union Corp. ............... 174,100 4,319,856
KeyCorp.......................... 61,600 1,085,700
MBNA Corp. ...................... 30,600 830,025
Morgan, (J.P.) & Co., Inc. ...... 30,000 3,303,750
National City Corp. ............. 144,700 2,468,944
Union Planters Corp. ............ 39,800 1,111,913
------------
25,525,338
------------
FINANCIAL SERVICES -- 7.9%
American Express Co. ............ 91,500 4,769,438
Citigroup, Inc. ................. 251,700 15,164,924
Fannie Mae....................... 81,900 4,274,156
Fleet Financial Group, Inc. ..... 151,100 5,137,400
Freddie Mac...................... 26,600 1,077,300
Golden West Financial Corp. ..... 70,700 2,885,444
Lehman Brothers Holdings,
Inc. .......................... 56,600 5,352,238
MBIA, Inc. ...................... 15,600 751,725
Merrill Lynch & Co., Inc. ....... 65,400 7,521,000
Morgan Stanley Dean Witter &
Co. ........................... 65,800 5,477,850
Paine Webber Group, Inc. ........ 11,600 527,800
Wells Fargo & Co. ............... 118,600 4,595,750
------------
57,535,025
------------
AST SANFORD BERNSTEIN MANAGED INDEX 500 PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
FOOD -- 1.6%
Archer Daniels Midland Co. ...... 383,500 $ 3,763,093
ConAgra, Inc. ................... 125,000 2,382,813
Great Atlantic & Pacific Tea Co.,
Inc. .......................... 85,700 1,424,763
Heinz, (H.J.) Co. ............... 37,800 1,653,750
Supervalu, Inc. ................. 126,900 2,419,031
------------
11,643,450
------------
HEALTHCARE SERVICES -- 0.7%
Amgen, Inc.*..................... 67,200 4,720,800
------------
INSURANCE -- 2.5%
Aetna, Inc. ..................... 49,100 3,151,606
American General Corp. .......... 9,100 555,100
American International Group,
Inc. .......................... 64,300 7,555,251
Chubb Corp. ..................... 34,900 2,146,350
MGIC Investment Corp. ........... 35,600 1,619,800
St. Paul Companies, Inc. ........ 89,035 3,038,319
------------
18,066,426
------------
INTERNET SERVICES -- 1.0%
America Online, Inc.*............ 72,000 3,798,000
Yahoo!, Inc.*.................... 27,600 3,418,950
------------
7,216,950
------------
MACHINERY & EQUIPMENT -- 0.5%
Black & Decker Corp. ............ 43,000 1,690,438
Deere & Co. ..................... 52,900 1,957,300
------------
3,647,738
------------
MEDICAL SUPPLIES & EQUIPMENT -- 2.2%
Abbott Laboratories.............. 149,400 6,657,638
Johnson & Johnson Co. ........... 72,800 7,416,499
Medtronic, Inc. ................. 43,800 2,181,788
------------
16,255,925
------------
METALS & MINING -- 0.2%
Alcan Aluminum Ltd. ............. 30,500 945,500
Alcoa, Inc. ..................... 15,200 440,800
------------
1,386,300
------------
OIL & GAS -- 9.0%
Amerada Hess Corp. .............. 61,000 3,766,750
Ashland, Inc. ................... 85,100 2,983,819
Chevron Corp. ................... 75,300 6,386,380
Conoco, Inc. Cl-B*............... 165,300 4,060,181
Exxon Mobil Corp. ............... 218,200 17,142,337
Kerr-McGee Corp. ................ 72,200 4,255,288
Occidental Petroleum Corp. ...... 184,600 3,888,138
Phillips Petroleum Co. .......... 85,400 4,328,713
Royal Dutch Petroleum Co. ....... 121,400 7,473,687
Sunoco, Inc. .................... 125,000 3,679,688
Texaco, Inc. .................... 100,400 5,346,300
Tosco Corp. ..................... 65,500 1,874,938
------------
65,186,219
------------
SHARES VALUE
------ -----
PAPER & FOREST PRODUCTS -- 0.6%
International Paper Co. ......... 43,855 $ 1,307,427
Westvaco Corp. .................. 135,200 3,354,650
------------
4,662,077
------------
PHARMACEUTICALS -- 9.0%
American Home Products Corp. .... 57,900 3,401,625
Bristol-Meyers Squibb Co. ....... 127,800 7,444,350
Lilly, (Eli) & Co. .............. 84,400 8,429,450
Merck & Co., Inc. ............... 174,700 13,386,387
Pfizer, Inc. .................... 523,550 25,130,399
Pharmacia Corp. ................. 89,800 4,641,538
Schering-Plough Corp. ........... 59,300 2,994,650
------------
65,428,399
------------
PRINTING & PUBLISHING -- 0.4%
Dow Jones & Co., Inc. ........... 36,600 2,680,950
------------
RAILROADS -- 0.3%
Norfolk Southern Corp. .......... 135,900 2,021,513
Union Pacific Corp. ............. 13,600 505,750
------------
2,527,263
------------
RETAIL & MERCHANDISING -- 4.0%
Dillard's, Inc. Cl-A............. 95,900 1,174,775
Federated Department Stores,
Inc.*.......................... 66,900 2,257,875
Home Depot, Inc. ................ 134,200 6,701,613
May Department Stores Co. ....... 47,600 1,142,400
Sears, Roebuck & Co. ............ 116,900 3,813,863
Wal-Mart Stores, Inc. ........... 239,900 13,824,237
------------
28,914,763
------------
SEMICONDUCTORS -- 6.1%
Advanced Micro Devices, Inc.*.... 32,400 2,502,900
Applied Materials, Inc.*......... 68,800 6,235,000
Intel Corp. ..................... 225,400 30,133,162
LSI Logic Corp.*................. 41,300 2,235,363
Micron Technology, Inc.*......... 33,500 2,950,094
------------
44,056,519
------------
TELECOMMUNICATIONS -- 9.7%
Andrew Corp.*.................... 57,100 1,916,419
AT&T Corp. ...................... 160,700 5,082,138
Bell Atlantic Corp.*............. 113,100 5,746,894
BellSouth Corp. ................. 59,000 2,514,875
GTE Corp. ....................... 119,800 7,457,549
Lucent Technologies, Inc. ....... 147,500 8,739,374
Motorola, Inc. .................. 162,271 4,716,001
Nortel Networks Corp. NY Reg.*... 187,600 12,803,699
QUALCOMM, Inc.*.................. 65,500 3,930,000
SBC Communications, Inc. ........ 112,300 4,856,975
Scientific-Atlanta, Inc. ........ 11,700 871,650
Sprint Corp. (FON Group)......... 25,700 1,310,700
U.S. West, Inc. ................. 79,700 6,834,275
WorldCom, Inc.*.................. 85,700 3,931,488
------------
70,712,037
------------
TRANSPORTATION -- 0.2%
CSX Corp. ....................... 61,200 1,296,675
------------
AST SANFORD BERNSTEIN MANAGED INDEX 500 PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
UTILITIES -- 3.5%
AES Corp.*....................... 72,800 $ 3,321,500
Ameren Corp. .................... 103,900 3,506,625
American Electric Power Co.,
Inc. .......................... 162,160 4,803,989
Cinergy Corp. ................... 3,600 91,575
FirstEnergy Corp. ............... 50,000 1,168,750
GPU, Inc. ....................... 120,200 3,252,913
New Century Energies, Inc. ...... 108,900 3,341,869
PG&E Corp. ...................... 148,129 3,647,677
Southern Co. .................... 112,100 2,613,331
------------
25,748,229
------------
TOTAL COMMON STOCK
(Cost $687,938,259)................ 712,047,679
------------
SHARES VALUE
------ -----
SHORT-TERM INVESTMENTS -- 1.7%
Temporary Investment Cash Fund... 6,025,141 $ 6,025,141
Temporary Investment Fund........ 6,025,140 6,025,140
------------
(Cost $12,050,281)............... 12,050,281
------------
TOTAL INVESTMENTS -- 99.7%
(Cost $699,988,540)................ 724,097,960
OTHER ASSETS LESS
LIABILITIES -- 0.3%................ 1,816,504
------------
NET ASSETS -- 100.0%................. $725,914,464
============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST KEMPER SMALL-CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 95.2%
AEROSPACE -- 0.3%
Remec, Inc.*................... 76,400 $ 3,199,250
--------------
AUTOMOTIVE PARTS -- 1.2%
Copart, Inc.*.................. 795,400 12,726,400
--------------
BROADCASTING -- 0.7%
Cumulus Media, Inc.*........... 858,900 7,837,463
--------------
BUILDING MATERIALS -- 2.7%
Simpson Manufacturing Co.,
Inc.*........................ 115,200 5,508,000
Trex Co., Inc.*................ 467,100 23,355,000
--------------
28,863,000
--------------
BUSINESS SERVICES -- 5.4%
AnswerThink Consulting Group,
Inc.*........................ 357,300 5,940,113
Digital Courier Technologies,
Inc.*........................ 993,200 6,331,650
ITXC Corp.*.................... 67,300 2,382,841
Korn/Ferry International*...... 345,200 10,960,100
Micromuse, Inc.*............... 137,400 22,737,552
Newgen Results Corp.*.......... 306,800 5,062,200
RSA Security, Inc.*............ 68,600 4,750,550
--------------
58,165,006
--------------
CHEMICALS -- 1.4%
Cabot Microelectronics
Corp.*....................... 325,400 14,887,050
--------------
CLOTHING & APPAREL -- 2.1%
David's Bridal, Inc.*.......... 296,300 3,425,969
Gildan Activewear, Inc.
Cl-A*........................ 405,200 14,891,099
Pacific Sunwear of California,
Inc.*........................ 218,350 4,094,063
--------------
22,411,131
--------------
COMPUTER HARDWARE -- 5.0%
Cobalt Networks, Inc.*......... 272,700 15,782,513
Mercury Computer Systems,
Inc.*........................ 238,300 7,700,069
Silicon Storage Technology,
Inc.*........................ 347,100 30,653,268
--------------
54,135,850
--------------
COMPUTER SERVICES & SOFTWARE -- 20.9%
Advent Software, Inc.*......... 341,400 22,020,300
Braun Consulting, Inc.*........ 359,000 7,583,875
Brooks Automation, Inc.*....... 188,400 12,045,825
BSQUARE Corp.*................. 571,800 12,829,763
Information Architects
Corp.*....................... 653,500 4,533,656
ISS Group, Inc.*............... 315,600 31,160,568
Mercator Software, Inc.*....... 401,800 27,623,749
Mercury Interactive Corp.*..... 283,600 27,438,300
National Computer Systems,
Inc. ........................ 184,500 9,086,625
National Information
Consortium, Inc. ............ 1,090,200 12,401,025
Numerical Technologies,
Inc.*........................ 43,000 2,090,875
Pinnacle Systems, Inc.*........ 1,182,900 26,596,767
Precise Software Solutions
Ltd.*........................ 8,400 201,600
Quintus Corp.*................. 493,300 9,796,630
SHARES VALUE
------ -----
Radisys Corp.*................. 227,700 $ 12,921,975
Viador, Inc.*.................. 598,500 9,501,188
--------------
227,832,721
--------------
CONSUMER PRODUCTS & SERVICES -- 2.0%
JAKKS Pacific, Inc.*........... 462,700 6,824,825
Rent-A-Center, Inc.*........... 470,700 10,590,750
Steiner Leisure Ltd.*.......... 175,700 3,975,213
--------------
21,390,788
--------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 6.9%
Burr-Brown Corp.*.............. 214,950 18,633,478
Power-One, Inc.*............... 414,750 47,255,578
SonoSight, Inc.*............... 315,500 9,090,344
--------------
74,979,400
--------------
FINANCIAL-BANK & TRUST -- 1.0%
Hudson United Bankcorp......... 493,700 11,077,394
--------------
FINANCIAL SERVICES -- 0.7%
Multex.com, Inc.*.............. 311,200 7,838,350
--------------
FOOD -- 2.0%
Hain Celestial Group, Inc.*.... 423,505 15,537,339
Wild Oats Markets, Inc.*....... 474,300 5,958,394
--------------
21,495,733
--------------
FURNITURE -- 1.0%
Cost Plus, Inc.*............... 394,600 11,320,088
--------------
HEALTHCARE SERVICES -- 3.0%
Albany Molecular Research,
Inc.*........................ 246,500 13,418,844
Gene Logic, Inc.*.............. 293,600 10,477,850
MedQuist, Inc.*................ 244,700 8,319,800
--------------
32,216,494
--------------
INTERNET SERVICES -- 3.3%
Firstworld Communications,
Inc.*........................ 286,800 3,011,400
Netopia, Inc.*................. 179,200 7,212,800
Vicinity Corp.*................ 204,700 4,017,238
VocalTec Communications
Ltd.*........................ 313,900 7,219,700
Watchguard Technologies,
Inc.*........................ 257,100 14,124,431
--------------
35,585,569
--------------
MACHINERY & EQUIPMENT -- 3.4%
Asyst Technologies, Inc.*...... 90,100 3,085,925
National-Oilwell, Inc.*........ 353,900 11,634,463
SpeedFam-IPEC, Inc.*........... 473,000 8,602,688
Universal Compression Holdings,
Inc.*........................ 409,400 13,714,899
--------------
37,037,975
--------------
MEDICAL SUPPLIES & EQUIPMENT -- 2.5%
Aclara Biosciences, Inc.*...... 123,100 6,270,406
Charles River Laboratories
International, Inc.*......... 263,600 5,848,625
Cytyc Corp.*................... 273,800 14,614,075
--------------
26,733,106
--------------
AST KEMPER SMALL-CAP GROWTH PORTFOLIO
--------------------------------------------------------------------------------
SHARES VALUE
------ -----
OIL & GAS -- 6.9%
3Tec Energy Corp.*............. 299,000 $ 2,990,000
Barrett Resources Corp.*....... 358,600 10,914,888
Key Production Co., Inc.*...... 807,800 14,843,325
Newfield Exploration Co.*...... 206,500 8,079,313
Precision Drilling Corp.*...... 295,200 11,402,100
Stone Energy Corp.*............ 268,700 16,054,824
Swift Energy Co.*.............. 400,000 11,350,000
--------------
75,634,450
--------------
PERSONAL SERVICES -- 0.1%
Cornell Corrections, Inc.*..... 87,900 703,200
--------------
PHARMACEUTICALS -- 3.7%
Alexion Pharmaceuticals,
Inc.*........................ 305,400 21,836,100
QLT PhotoTherapeutics, Inc.*... 231,900 17,928,769
--------------
39,764,869
--------------
REAL ESTATE -- 0.5%
Costar Group, Inc.*............ 215,000 5,388,438
--------------
RESTAURANTS -- 0.5%
The Cheesecake Factory,
Inc.*........................ 186,700 5,134,250
--------------
RETAIL & MERCHANDISING -- 0.9%
Duane Reade, Inc.*............. 362,500 9,334,375
--------------
SCIENCE & TECHNOLOGY -- 1.1%
Molecular Devices Corp.*....... 165,700 11,464,369
--------------
SEMICONDUCTORS -- 5.0%
Alpha Industries, Inc.*........ 282,500 12,447,656
ATMI, Inc.*.................... 273,700 12,727,050
Pixelworks, Inc.*.............. 41,200 937,300
Silicon Image, Inc.*........... 168,600 8,408,925
Therma-Wave, Inc.*............. 289,500 6,459,469
TranSwitch Corp.*.............. 170,775 13,181,695
--------------
54,162,095
--------------
SHARES VALUE
------ -----
TELECOMMUNICATIONS -- 11.0%
ANTEC Corp.*................... 510,800 $ 21,230,124
Com21, Inc.*................... 341,700 8,542,500
Insight Communications Co.,
Inc.*........................ 664,900 10,389,063
Lightbridge, Inc.*............. 548,100 13,085,888
Polycom, Inc.*................. 282,400 26,572,074
Proxim, Inc.*.................. 46,400 4,592,150
Research in Motion Ltd.*....... 221,100 10,004,775
SBA Communications Corp.*...... 238,000 12,361,125
Spectrasite Holdings, Inc.*.... 494,300 14,025,763
--------------
120,803,462
--------------
TOTAL COMMON STOCK
(Cost $803,936,651).............. 1,032,122,276
--------------
PAR
(000)
-----
COMMERCIAL PAPER -- 4.8%
Countrywide Home Loans, Inc.
6.88%, 07/06/00.............. $ 9,500 9,490,922
6.90%, 07/07/00.............. 8,000 7,990,800
CSW Credit, Inc.
6.72%, 07/10/00.............. 11,500 11,480,680
Ford Motor Credit Corp.
6.60%, 07/11/00.............. 11,500 11,478,917
Renaissance Energy Co.
6.90%, 07/05/00.............. 12,000 11,990,800
--------------
(Cost $52,432,119)............. 52,432,119
--------------
TOTAL INVESTMENTS -- 100.0%
(Cost $856,368,770).............. 1,084,554,395
LIABILITIES IN EXCESS OF OTHER
ASSETS -- 0.0%................... (235,814)
--------------
NET ASSETS -- 100.0%............... $1,084,318,581
==============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST MFS GLOBAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
FOREIGN STOCK -- 53.4%
AUSTRALIA -- 1.7%
Publishing & Broadcasting Ltd. ..... 7,050 $ 54,394
QBE Insurance Group Ltd. ........... 30,330 148,840
-----------
203,234
-----------
CANADA -- 1.7%
Anderson Exploration Ltd.*.......... 3,710 67,606
AT&T Canada, Inc.*.................. 950 31,738
BCE, Inc. .......................... 2,260 53,920
Nortel Networks Corp. .............. 794 55,544
-----------
208,808
-----------
FINLAND -- 1.6%
Helsingin Puhelin Oyj............... 1,920 188,834
Tecnomen Oyj*....................... 270 2,200
-----------
191,034
-----------
FRANCE -- 6.8%
Aventis SA.......................... 970 71,086
Banque National de Paris............ 1,080 104,356
Bouygues SA......................... 200 134,201
Castorama Dubois.................... 91 22,593
Compagnie Francaise d'Etudes et de
Construction Technip*............. 755 91,697
Sanofi SA........................... 3,000 143,500
Societe Television Francaise........ 563 39,397
Total Fina SA Cl-B*................. 800 123,160
Vivendi............................. 1,140 101,029
-----------
831,019
-----------
GERMANY -- 2.7%
Pharmacia Corp. .................... 2,340 120,949
ProSieben Media AG Pfd. ............ 1,780 213,286
-----------
334,235
-----------
GREECE -- 0.2%
Antenna TV SA [ADR]*................ 1,578 24,459
-----------
HONG KONG -- 0.0%
China Unicom Ltd. [ADR]*............ 170 3,613
-----------
ISRAEL -- 0.2%
Partner Communications Co. Ltd.
[ADR]*............................ 2,130 20,235
-----------
ITALY -- 0.9%
Telecom Italia Mobile SPA........... 21,010 106,138
-----------
JAPAN -- 12.0%
Canon, Inc. ........................ 4,000 199,619
Chugai Pharmaceutical Co. Ltd. ..... 9,000 170,555
Fast Retailing Co. Ltd. ............ 300 125,896
Fuji Heavy Industries Ltd. ......... 8,000 58,222
Fujitsu Ltd.*....................... 3,000 104,063
Hitachi Ltd. ....................... 14,000 202,455
Mitsubishi Electric Corp.*.......... 6,000 65,103
Mitsubishi Motors Corp. ............ 11,000 47,098
Nippon Telegraph & Telephone
Corp. ............................ 7 93,288
NTT Mobile Communication Network,
Inc. ............................. 9 244,135
SHARES VALUE
------ -----
Sony Corp. ......................... 400 $ 37,429
Tokyo Broadcasting System, Inc. .... 2,000 86,577
Toshiba Corp. ...................... 3,000 33,941
-----------
1,468,381
-----------
MEXICO -- 0.5%
Grupo Televisa SA [GDR]............. 970 66,869
-----------
NETHERLANDS -- 6.2%
AKZO Nobel NV....................... 4,580 195,371
Completel Europe NV*................ 40 498
ING Groep NV........................ 1,870 126,913
Koninklijke (Royal) Philips
Electronics NV.................... 2,940 139,222
KPN NV.............................. 2,940 132,035
Libertel NV*........................ 2,390 36,542
Royal Dutch Petroleum Co. .......... 2,000 124,808
-----------
755,389
-----------
NORWAY -- 0.5%
Schibsted ASA....................... 2,100 39,064
Sparebanken NOR..................... 780 17,567
-----------
56,631
-----------
PORTUGAL -- 0.4%
Telecel-Comunicacoes Pessoais SA.... 3,560 54,260
-----------
SINGAPORE -- 1.7%
OverSea-Chinese Banking Corp.
Ltd. ............................. 10,000 68,827
Overseas Union Bank Ltd. ........... 25,000 96,878
Singapore Press Holdings Ltd. ...... 3,000 46,848
-----------
212,553
-----------
SPAIN -- 0.6%
Repsol SA........................... 3,560 71,152
-----------
SWEDEN -- 2.1%
Netcom AB Cl-B...................... 865 64,204
Saab AB*............................ 22,030 185,871
Tele1 Europe Holding AB*............ 20 246
-----------
250,321
-----------
SWITZERLAND -- 1.3%
Novartis AG......................... 101 160,500
-----------
UNITED KINGDOM -- 12.3%
Anglo Irish Bank Corp. PLC.......... 6,460 14,132
AstraZeneca Group PLC............... 2,600 121,541
British Aerospace PLC*.............. 14,332 89,392
British Petroleum Co. PLC........... 12,140 116,520
Cable & Wireless PLC................ 7,520 127,392
Capital Radio PLC................... 1,890 44,135
Carlton Communications PLC.......... 9,450 121,603
CGU PLC*............................ 8,079 134,538
Diageo PLC.......................... 10,482 94,101
NDS Group PLC [ADR]*................ 10 610
Next PLC............................ 9,000 79,093
Reckitt Benckiser PLC*.............. 6,760 75,731
Royal Bank of Scotland NY Reg. ..... 5,964 99,859
AST MFS GLOBAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
United News & Media PLC............. 10,550 $ 151,730
Vodafone AirTouch PLC............... 54,565 220,555
-----------
1,490,932
-----------
TOTAL FOREIGN STOCK
(Cost $6,234,672)..................... 6,509,763
-----------
U.S. STOCK -- 39.6%
AEROSPACE -- 0.9%
Boeing Co. ......................... 2,610 109,131
-----------
AUTOMOTIVE PARTS -- 0.3%
TRW, Inc. .......................... 800 34,700
-----------
BROADCASTING -- 0.1%
Hearst-Argyle Television, Inc.*..... 750 14,625
-----------
COMPUTER HARDWARE -- 1.7%
Hewlett-Packard Co. ................ 790 98,651
International Business Machines
Corp. ............................ 1,000 109,563
Mirae Corp. ........................ 80 620
-----------
208,834
-----------
COMPUTER SERVICES & SOFTWARE -- 4.3%
BMC Software, Inc.*................. 2,070 75,523
Computer Associates International,
Inc. ............................. 5,570 285,114
Computer Sciences Corp.*............ 1,650 123,234
Compuware Corp.*.................... 3,450 35,794
Electronic Data Systems Corp. ...... 230 9,488
-----------
529,153
-----------
CONGLOMERATES -- 0.5%
Corning, Inc. ...................... 205 55,324
-----------
CONSUMER PRODUCTS & SERVICES -- 2.6%
Bausch & Lomb, Inc. ................ 3,000 232,125
Polaroid Corp. ..................... 4,390 79,294
-----------
311,419
-----------
ELECTRONIC COMPONENTS & EQUIPMENT -- 0.6%
Agilent Technologies, Inc.*......... 282 20,798
AT&T Wireless Group*................ 1,780 49,617
-----------
70,415
-----------
ENERGY SERVICES -- 1.0%
Halliburton Co. .................... 1,680 79,275
NRG Energy, Inc.*................... 2,470 45,078
-----------
124,353
-----------
ENTERTAINMENT & LEISURE -- 2.2%
Time Warner, Inc. .................. 1,730 131,480
Walt Disney Co. .................... 3,510 136,232
-----------
267,712
-----------
FOOD -- 1.9%
Keebler Foods Co. .................. 3,340 123,997
Safeway, Inc.*...................... 2,420 109,203
-----------
233,200
-----------
INSURANCE -- 4.0%
CIGNA Corp. ........................ 1,170 109,395
SHARES VALUE
------ -----
Marsh & McLennan Companies, Inc. ... 880 $ 91,905
Metlife, Inc. ...................... 970 20,431
ReliaStar Financial Corp. .......... 2,000 104,875
The Hartford Financial Services
Group, Inc. ...................... 2,960 165,575
-----------
492,181
-----------
MACHINERY & EQUIPMENT -- 1.8%
Deere & Co. ........................ 3,610 133,570
Ingersoll-Rand Co. ................. 2,090 84,123
-----------
217,693
-----------
MEDICAL SUPPLIES & EQUIPMENT -- 0.0%
Synthes-Stratec*.................... 5 2,275
-----------
OIL & GAS -- 4.9%
Apache Corp. ....................... 1,270 74,692
Coastal Corp. ...................... 2,370 144,273
Conoco, Inc. ....................... 5,370 118,140
EOG Resources, Inc. ................ 5,770 193,294
Santa Fe International Corp. ....... 1,800 62,888
-----------
593,287
-----------
PHARMACEUTICALS -- 1.4%
Bristol-Meyers Squibb Co. .......... 850 49,513
Pfizer, Inc. ....................... 2,582 123,936
-----------
173,449
-----------
RETAIL & MERCHANDISING -- 2.0%
BJ's Wholesale Club, Inc.*.......... 3,550 117,150
CVS Corp. .......................... 3,090 123,600
-----------
240,750
-----------
SEMICONDUCTORS -- 0.9%
Motorola, Inc. ..................... 3,780 109,856
-----------
TELECOMMUNICATIONS -- 7.3%
Adelphia Business Solutions,
Inc.*............................. 1,450 33,622
AT&T Canada, Inc. NY Reg.*.......... 1,290 42,812
Bell Atlantic Corp.*................ 1,630 82,824
BroadWing, Inc. .................... 1,695 43,964
Flag Telecom Holdings Ltd.*......... 2,040 30,345
GTE Corp. .......................... 1,250 77,813
Lucent Technologies, Inc. .......... 740 43,845
NTL, Inc.*.......................... 2,552 152,801
Sprint Corp. (FON Group)............ 1,110 56,610
Sprint Corp. (PCS Group)*........... 2,620 155,889
Tellabs, Inc.*...................... 1,950 133,453
Time Warner Telecom, Inc.*.......... 710 45,706
-----------
899,684
-----------
TRANSPORTATION -- 1.2%
Canadian National Railway Co.
NY Reg. .......................... 4,670 136,306
United Parcel Service, Inc. Cl-B.... 230 13,570
-----------
149,876
-----------
TOTAL U.S. STOCK
(Cost $4,798,985)..................... 4,837,917
-----------
AST MFS GLOBAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------
PAR
(000) VALUE
-------- -----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 12.3%
Federal Home Loan Mortgage Corp.
6.57%, 07/03/00
(Cost $1,499,453)................... $1,500 $ 1,499,453
-----------
TOTAL INVESTMENTS -- 105.3%
(Cost $12,533,110).................... 12,847,133
LIABILITIES IN EXCESS OF OTHER ASSETS --
(5.3%)................................ (644,303)
-----------
NET ASSETS -- 100.0%.................... $12,202,830
===========
Foreign currency exchange contracts outstanding at June 30, 2000:
IN UNREALIZED
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS APPRECIATION/
MONTH TYPE TO RECEIVE FOR AT VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------
07/00 Buy CAD 29,387 $ 19,830 $ 19,834 $ 4
07/00 Buy EUR 149,250 142,161 143,180 1,019
07/00 Buy GBP 56,740 86,131 85,907 (224)
07/00 Buy SEK 151,750 17,157 17,307 150
-------- -------- ------
$265,279 $266,228 $ 949
======== ======== ======
IN
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS UNREALIZED
MONTH TYPE TO DELIVER FOR AT VALUE DEPRECIATION
- -----------------------------------------------------------------------------
07/00 Sell EUR 1,874 $ 1,768 $ 1,797 $ 29
07/00 Sell NOK 95,462 11,103 11,168 65
-------- -------- ------
$ 12,871 $ 12,965 $ 94
======== ======== ======
The following is a breakdown of the foreign stock portion of the Portfolio, by
industry classification, as of June 30, 2000. Percentages are based on net
assets.
INDUSTRY
- --------
Aerospace........................................... 2.3%
Automobile Manufacturers............................ 0.9%
Beverages........................................... 0.8%
Broadcasting........................................ 7.3%
Business Services................................... 1.9%
Chemicals........................................... 1.6%
Consumer Products & Services........................ 0.6%
Electronic Components & Equipment................... 3.9%
Financial-Bank & Trust.............................. 4.3%
Industrial Products................................. 0.8%
Insurance........................................... 2.3%
Office Equipment.................................... 1.6%
Oil & Gas........................................... 4.1%
Pharmaceuticals..................................... 6.5%
Retail & Merchandising.............................. 1.9%
Semiconductors...................................... 0.9%
Telecommunications.................................. 11.7%
-----
TOTAL............................................... 53.4%
=====
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST MFS GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 83.5%
ADVERTISING -- 0.0%
Interpublic Group of Companies,
Inc. ........................... 230 $ 9,890
-----------
BEVERAGES -- 1.8%
Anheuser-Busch Companies, Inc. ... 4,480 334,600
Coca-Cola Co. .................... 6,300 361,856
-----------
696,456
-----------
BROADCASTING -- 1.7%
AT&T Corp. Liberty Media Group
Cl-A*........................... 8,060 195,455
Infinity Broadcasting Corp.*...... 4,535 165,244
UnitedGlobalCom, Inc. Cl-A*....... 1,710 79,943
USA Networks, Inc.*............... 9,200 198,950
-----------
639,592
-----------
BUSINESS SERVICES -- 0.9%
Commerce One, Inc.*............... 800 36,313
First Data Corp. ................. 5,770 286,336
Foundry Networks, Inc.*........... 300 33,150
-----------
355,799
-----------
COMPUTER HARDWARE -- 3.6%
Compaq Computer Corp. ............ 3,920 100,205
Dell Computer Corp.*.............. 10,050 495,591
EMC Corp.*........................ 6,700 515,481
Seagate Technology, Inc.*......... 4,800 264,000
-----------
1,375,277
-----------
COMPUTER SERVICES & SOFTWARE -- 14.1%
Automatic Data Processing,
Inc. ........................... 8,310 445,104
BEA Systems, Inc.*................ 1,000 49,438
BISYS Group, Inc.*................ 1,590 97,785
BMC Software, Inc.*............... 4,870 177,679
Cadence Design Systems, Inc.*..... 11,660 237,573
Cisco Systems, Inc.*.............. 16,160 1,027,169
Computer Associates International,
Inc. ........................... 5,860 299,959
Computer Sciences Corp.*.......... 5,630 420,491
Fiserv, Inc.*..................... 1,430 61,848
I2 Technologies, Inc.*............ 100 10,427
Mercury Interactive Corp.*........ 900 87,075
Microsoft Corp.*.................. 13,950 1,115,999
Oracle Corp.*..................... 5,550 466,546
Rational Software Corp.*.......... 3,600 334,575
Siebel Systems, Inc.*............. 710 116,129
Sun Microsystems, Inc.*........... 4,200 381,938
Veritas Software Corp.*........... 200 22,603
-----------
5,352,338
-----------
CONGLOMERATES -- 4.5%
Corning, Inc. .................... 2,670 720,566
Philip Morris Companies, Inc. .... 4,600 122,188
Tyco International Ltd. .......... 18,800 890,650
-----------
1,733,404
-----------
SHARES VALUE
------ -----
CONSUMER PRODUCTS & SERVICES -- 0.8%
Bausch & Lomb, Inc. .............. 2,660 $ 205,818
Clorox Co. ....................... 2,100 94,106
-----------
299,924
-----------
ELECTRONIC COMPONENTS & EQUIPMENT -- 5.1%
Analog Devices, Inc.*............. 2,240 170,240
Cabletron Systems, Inc.*.......... 2,660 67,165
Capstone Turbine Corp.*........... 40 1,803
Comverse Technology, Inc.*........ 2,500 232,500
Emerson Electric Co. ............. 2,480 149,730
Flextronics International Ltd.*... 5,715 392,549
General Electric Co. ............. 10,020 511,020
Metromedia Fiber Network, Inc.
Cl-A*........................... 10,780 427,831
-----------
1,952,838
-----------
ENERGY SERVICES -- 0.9%
Dynegy, Inc. ..................... 1,600 109,300
Halliburton Co. .................. 5,230 246,791
-----------
356,091
-----------
ENTERTAINMENT & LEISURE -- 1.9%
Time Warner, Inc. ................ 3,740 284,240
Viacom, Inc. Cl-B*................ 6,531 445,333
-----------
729,573
-----------
FINANCIAL-BANK & TRUST -- 0.6%
State Street Corp. ............... 2,130 225,913
-----------
FINANCIAL SERVICES -- 3.6%
American Express Co. ............. 1,760 91,740
Associates First Capital Corp.
Cl-A............................ 7,420 165,559
AXA Financial, Inc. .............. 7,900 268,600
Citigroup, Inc. .................. 5,970 359,692
Freddie Mac....................... 7,460 302,130
Providian Financial Corp. ........ 2,150 193,500
-----------
1,381,221
-----------
FOOD -- 2.1%
Kroger Co.*....................... 7,000 154,438
Safeway, Inc.*.................... 14,080 635,360
-----------
789,798
-----------
HEALTHCARE SERVICES -- 0.5%
HCA -- The Healthcare Corp. ...... 6,300 191,363
-----------
INSURANCE -- 2.9%
American International Group,
Inc. ........................... 4,370 513,474
Lincoln National Corp. ........... 1,900 68,638
Marsh & McLennan Companies,
Inc. ........................... 1,540 160,834
Nationwide Financial Services,
Inc. ........................... 140 4,603
The Hartford Financial Services
Group, Inc. .................... 6,400 358,000
-----------
1,105,549
-----------
AST MFS GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
INTERNET SERVICES -- 3.2%
Art Technology Group, Inc.*....... 400 $ 40,375
Check Point Software Technologies
Ltd.*........................... 1,400 296,450
E.Piphany, Inc.*.................. 700 75,031
Juniper Networks, Inc.*........... 400 58,225
VeriSign, Inc.*................... 4,215 743,948
Vignette Corp.*................... 400 20,806
-----------
1,234,835
-----------
MACHINERY & EQUIPMENT -- 1.2%
Baker Hughes, Inc. ............... 10,130 324,160
Deere & Co. ...................... 3,560 131,720
-----------
455,880
-----------
MEDICAL SUPPLIES & EQUIPMENT -- 1.8%
Abbott Laboratories............... 9,300 414,431
Genzyme Corp.*.................... 500 29,719
PE Corp. -- PE Biosystems Group... 3,500 230,563
-----------
674,713
-----------
OFFICE EQUIPMENT -- 0.0%
Office Depot, Inc.*............... 2,770 17,313
-----------
OIL & GAS -- 2.2%
Apache Corp. ..................... 830 48,814
Coastal Corp. .................... 3,700 225,238
Global Marine, Inc.*.............. 5,300 149,394
Noble Drilling Corp.*............. 3,420 140,861
Transocean Sedco Forex, Inc. ..... 4,940 263,981
-----------
828,288
-----------
PHARMACEUTICALS -- 7.2%
ALZA Corp.*....................... 1,600 94,600
American Home Products Corp. ..... 10,750 631,562
Bristol-Meyers Squibb Co. ........ 6,040 351,830
Pfizer, Inc. ..................... 14,872 713,855
Pharmacia Corp. .................. 11,518 595,337
Sepracor, Inc.*................... 900 108,563
Waters Corp.*..................... 2,090 260,858
-----------
2,756,605
-----------
RETAIL & MERCHANDISING -- 2.1%
CVS Corp. ........................ 12,700 507,999
RadioShack Corp. ................. 4,660 220,768
Wal-Mart Stores, Inc. ............ 1,510 87,014
-----------
815,781
-----------
SEMICONDUCTORS -- 8.1%
Altera Corp.*..................... 1,820 185,526
Applied Materials, Inc.*.......... 900 81,563
Atmel Corp.*...................... 2,470 91,081
Intel Corp. ...................... 6,700 895,706
Lam Research Corp.*............... 6,300 236,250
LSI Logic Corp.*.................. 6,490 351,271
Micron Technology, Inc.*.......... 10,500 924,655
National Semiconductor Corp.*..... 5,450 309,288
Stratos Lightwave, Inc.*.......... 40 1,115
-----------
3,076,455
-----------
SHARES VALUE
------ -----
TELECOMMUNICATIONS -- 10.9%
Alltel Corp. ..................... 1,300 $ 80,519
Amdocs Ltd.*...................... 1,330 102,078
American Tower Corp. Cl-A*........ 7,360 306,820
China Unicom Ltd. [ADR]*.......... 30 638
Comcast Corp. Cl-A*............... 8,400 340,199
Global Crossing Ltd.*............. 13,250 348,640
Motorola, Inc. ................... 6,297 183,007
Nextel Communications, Inc.
Cl-A*........................... 3,500 214,156
NEXTLINK Communications, Inc.
Cl-A*........................... 5,100 193,481
Nortel Networks Corp. NY Reg.*.... 14,400 982,799
NTL, Inc.*........................ 3,865 231,417
Sprint Corp. (PCS Group)*......... 7,920 471,239
Tellabs, Inc.*.................... 2,800 191,625
Univision Communications, Inc.*... 1,120 115,920
Voicestream Wireless Corp.*....... 800 93,038
WorldCom, Inc.*................... 6,500 298,188
-----------
4,153,764
-----------
UTILITIES -- 1.8%
AES Corp.*........................ 13,480 615,025
Enron Corp. ...................... 1,100 70,950
-----------
685,975
-----------
TOTAL COMMON STOCK
(Cost $30,128,014).................. 31,894,635
-----------
PAR
(000)
-----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 13.4%
Federal Home Loan Mortgage Corp.
6.57%, 07/03/00
(Cost $5,098,139)................. $ 5,100 5,098,139
-----------
SHARES
------
FOREIGN STOCK -- 3.3%
FINANCIAL-BANK & TRUST -- 0.2%
HSBC Holdings PLC -- (GBP)........ 7,300 83,493
-----------
OIL & GAS -- 1.2%
Royal Dutch Petroleum
Co. -- (NLG).................... 7,600 474,271
-----------
RETAIL & MERCHANDISING -- 0.3%
Fast Retailing Co.
Ltd. -- (JPY)................... 300 125,896
-----------
TELECOMMUNICATIONS -- 1.6%
Ericsson, (L.M.) Telephone Co.
CL-B -- (SEK)................... 3,220 64,065
Nokia AB Oyj -- (FIM)............. 40 2,049
Vodafone AirTouch PLC -- (GBP).... 122,753 496,179
-----------
562,293
-----------
TOTAL FOREIGN STOCK
(Cost $1,337,561)................... 1,245,953
-----------
AST MFS GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
SHORT-TERM INVESTMENTS -- 0.5%
Temporary Investment Cash Fund.... 96,624 $ 96,624
Temporary Investment Fund......... 96,623 96,623
-----------
(Cost $193,247)................... 193,247
-----------
TOTAL INVESTMENTS -- 100.7%
(Cost $36,756,961).................. 38,431,974
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.7%).................... (263,790)
-----------
NET ASSETS -- 100.0%.................. $38,168,184
===========
Foreign currency exchange contracts outstanding at June 30, 2000:
IN
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS UNREALIZED
MONTH TYPE TO RECEIVE FOR AT VALUE APPRECIATION
- ---------------------------------------------------------------------------
07/00 Buy EUR 39,385 $37,507 $ 37,761 $254
======= ========= ====
IN
SETTLEMENT CONTRACTS EXCHANGE CONTRACTS UNREALIZED
MONTH TYPE TO DELIVER FOR AT VALUE DEPRECIATION
- ---------------------------------------------------------------------------
07/00 Sell SEK 334,363 $37,807 $ 38,137 $330
======= ========= ====
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST MFS GROWTH WITH INCOME PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 89.3%
AEROSPACE -- 1.4%
Boeing Co. ...................... 5,960 $ 249,203
General Dynamics Corp. .......... 3,680 192,280
Honeywell International, Inc. ... 1,810 60,974
------------
502,457
------------
AUTOMOBILE MANUFACTURERS -- 0.1%
Ford Motor Co. .................. 1,070 46,010
------------
AUTOMOTIVE PARTS -- 0.4%
Delphi Automotive Systems
Corp. ......................... 4,240 62,275
TRW, Inc. ....................... 1,950 84,581
Visteon Corp.*................... 140 1,698
------------
148,554
------------
BEVERAGES -- 1.6%
Anheuser-Busch Companies,
Inc. .......................... 3,270 244,228
Coca-Cola Co. ................... 4,000 229,750
PepsiCo, Inc. ................... 1,440 63,990
------------
537,968
------------
BUSINESS SERVICES -- 0.8%
First Data Corp. ................ 5,860 290,803
------------
CHEMICALS -- 0.9%
Air Products & Chemicals,
Inc. .......................... 5,010 154,371
DuPont, (E.I.) de Nemours &
Co. ........................... 190 8,313
Rohm & Haas Co. ................. 4,800 165,599
------------
328,283
------------
CLOTHING & APPAREL -- 0.2%
Cintas Corp. .................... 2,115 77,594
------------
COMPUTER HARDWARE -- 4.4%
Compaq Computer Corp. ........... 3,740 95,604
Dell Computer Corp.*............. 5,120 252,480
EMC Corp.*....................... 2,760 212,348
Hewlett-Packard Co. ............. 6,230 777,970
International Business Machines
Corp. ......................... 1,630 178,587
------------
1,516,989
------------
COMPUTER SERVICES & SOFTWARE -- 9.9%
Automatic Data Processing,
Inc. .......................... 7,380 395,291
BMC Software, Inc.*.............. 1,530 55,821
Cisco Systems, Inc.*............. 11,400 724,613
Computer Associates
International, Inc. ........... 3,920 200,655
Computer Sciences Corp.*......... 2,460 183,731
DST Systems, Inc.*............... 2,530 192,596
Electronic Data Systems Corp. ... 100 4,125
Microsoft Corp.*................. 10,210 816,799
Oracle Corp.*.................... 3,580 300,944
Rational Software Corp.*......... 1,110 103,161
Sun Microsystems, Inc.*.......... 4,190 381,028
Veritas Software Corp.*.......... 340 38,425
------------
3,397,189
------------
SHARES VALUE
------ -----
CONGLOMERATES -- 5.1%
Corning, Inc. ................... 2,530 $ 682,783
Philip Morris Companies, Inc. ... 2,300 61,094
Tyco International Ltd. ......... 8,900 421,638
United Technologies Corp. ....... 10,420 613,478
------------
1,778,993
------------
CONSUMER PRODUCTS & SERVICES -- 1.8%
Bausch & Lomb, Inc. ............. 1,960 151,655
Clorox Co. ...................... 2,880 129,060
Colgate-Palmolive Co. ........... 3,650 218,543
Energizer Holdings, Inc.*........ 416 7,592
Gillette Co. .................... 2,760 96,428
Procter & Gamble Co. ............ 170 9,733
------------
613,011
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 5.1%
Agilent Technologies, Inc.*...... 351 25,886
Cabletron Systems, Inc.*......... 4,950 124,988
Emerson Electric Co. ............ 3,530 213,124
General Electric Co. ............ 22,840 1,164,840
Texas Instruments, Inc. ......... 300 20,606
TXU Corp. ....................... 7,350 216,825
------------
1,766,269
------------
ENTERTAINMENT & LEISURE -- 1.5%
Time Warner, Inc. ............... 5,070 385,320
Viacom, Inc. Cl-B*............... 1,900 129,556
------------
514,876
------------
FINANCIAL-BANK & TRUST -- 2.2%
Comerica, Inc. .................. 1,460 65,518
Northern Trust Corp. ............ 210 13,663
State Street Corp. .............. 4,610 488,948
U.S. Bancorp..................... 10,400 200,200
------------
768,329
------------
FINANCIAL SERVICES -- 4.8%
American Express Co. ............ 3,830 199,639
Associates First Capital Corp.
Cl-A........................... 1,430 31,907
AXA Financial, Inc. ............. 5,620 191,080
Citigroup, Inc. ................. 3,550 213,888
Fannie Mae....................... 3,380 176,394
Freddie Mac...................... 9,570 387,584
MBIA, Inc. ...................... 1,660 79,991
Merrill Lynch & Co., Inc. ....... 180 20,700
Providian Financial Corp. ....... 540 48,600
Reuters Group PLC [ADR].......... 1,040 103,935
Wells Fargo & Co. ............... 5,620 217,775
------------
1,671,493
------------
FOOD -- 3.8%
Bestfoods, Inc. ................. 1,480 102,490
Kroger Co.*...................... 6,780 149,584
Quaker Oats Co. ................. 3,530 265,191
Ralston Purina Group............. 1,970 39,277
Safeway, Inc.*................... 17,180 775,247
------------
1,331,789
------------
AST MFS GROWTH WITH INCOME PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
HEALTHCARE SERVICES -- 0.5%
United HealthGroup, Inc. ........ 1,970 $ 168,928
------------
INSURANCE -- 3.5%
Allstate Corp. .................. 2,000 44,500
American International Group,
Inc. .......................... 2,810 330,175
Lincoln National Corp. .......... 1,700 61,413
Marsh & McLennan Companies,
Inc. .......................... 1,500 156,656
St. Paul Companies, Inc. ........ 1,780 60,743
The Hartford Financial Services
Group, Inc. ................... 9,070 507,352
Torchmark Corp. ................. 2,760 68,138
------------
1,228,977
------------
MACHINERY & EQUIPMENT -- 2.0%
Baker Hughes, Inc. .............. 6,450 206,400
Deere & Co. ..................... 7,500 277,500
Grainger, (W.W.), Inc. .......... 2,420 74,566
Ingersoll-Rand Co. .............. 3,450 138,863
------------
697,329
------------
MEDICAL SUPPLIES & EQUIPMENT -- 1.4%
Johnson & Johnson Co. ........... 1,650 168,094
Medtronic, Inc. ................. 6,180 307,841
PE Corp. -- PE Biosystems
Group.......................... 320 21,080
------------
497,015
------------
OIL & GAS -- 8.3%
BP Amoco PLC [ADR]............... 14,849 839,896
Chevron Corp. ................... 1,570 133,156
Coastal Corp. ................... 7,430 452,301
Conoco, Inc. Cl-B*............... 12,200 299,663
Exxon Mobil Corp. ............... 10,112 794,423
Global Marine, Inc.* ............ 1,700 47,919
Transocean Sedco Forex, Inc. .... 2,510 134,128
Williams Companies, Inc. ........ 4,100 170,919
------------
2,872,405
------------
PAPER & FOREST PRODUCTS -- 0.1%
Weyerhaeuser Co. ................ 590 25,370
------------
PHARMACEUTICALS -- 8.3%
American Home Products Corp. .... 3,560 209,150
Bristol-Meyers Squibb Co. ....... 10,250 597,063
Pfizer, Inc. .................... 23,522 1,129,055
Pharmacia Corp. ................. 14,382 743,370
Schering-Plough Corp. ........... 3,630 183,315
------------
2,861,953
------------
PRINTING & PUBLISHING -- 2.0%
Gannett Co., Inc. ............... 4,270 255,399
New York Times Co. .............. 6,800 268,600
Tribune Co. ..................... 4,820 168,700
------------
692,699
------------
RESTAURANTS -- 0.2%
McDonald's Corp. ................ 2,180 71,804
------------
SHARES VALUE
------ -----
RETAIL & MERCHANDISING -- 2.8%
CVS Corp. ....................... 10,640 $ 425,600
Target Corp. .................... 160 9,280
Wal-Mart Stores, Inc. ........... 9,120 525,540
------------
960,420
------------
SEMICONDUCTORS -- 3.9%
Intel Corp. ..................... 8,640 1,155,060
National Semiconductor Corp.* ... 3,480 197,490
------------
1,352,550
------------
TELECOMMUNICATIONS -- 10.3%
Alltel Corp. .................... 4,770 295,442
Bell Atlantic Corp.*............. 9,870 501,519
BellSouth Corp. ................. 1,610 68,626
BroadWing, Inc. ................. 3,640 94,413
Global Crossing Ltd.*............ 2,020 53,151
Motorola, Inc. .................. 12,705 369,239
Nokia Corp. Cl-A [ADR]........... 2,510 125,343
Nortel Networks Corp. NY Reg.*... 10,990 750,067
Qwest Communications
International, Inc.*........... 960 47,700
SBC Communications, Inc. ........ 6,980 301,885
Sprint Corp. (FON Group)......... 4,670 238,170
Sprint Corp. (PCS Group)*........ 2,830 168,385
Tellabs, Inc.*................... 3,190 218,316
WorldCom, Inc.*.................. 6,445 295,664
------------
3,527,920
------------
TRANSPORTATION -- 0.2%
Canadian National Railway Co. ... 2,307 67,336
------------
UTILITIES -- 1.8%
CMS Energy Corp. ................ 2,610 57,746
Enron Corp. ..................... 1,410 90,945
Nisource, Inc. .................. 3,630 67,609
PECO Energy Co. ................. 5,560 224,137
Pinnacle West Capital Co. ....... 3,430 116,191
Unicom Corp. .................... 1,480 57,258
------------
613,886
------------
TOTAL COMMON STOCK (Cost
$30,029,856)....................... 30,929,199
------------
PAR
(000)
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 5.2%
Federal Home Loan Mortgage Corp.
6.57%, 07/03/00
(Cost $1,799,343)................ $ 1,800 1,799,343
------------
SHARES
------
FOREIGN STOCK -- 2.8%
CHEMICALS -- 0.3%
AKZO Nobel NV -- (NLG)........... 2,540 108,349
------------
FINANCIAL -- BANK & TRUST -- 0.2%
HSBC Holdings PLC -- (GBP)....... 5,600 64,050
------------
AST MFS GROWTH WITH INCOME PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
FINANCIAL SERVICES -- 0.3%
ING Groep NV -- (NLG)............ 1,433 $ 97,255
------------
OIL & GAS -- 1.1%
Royal Dutch Petroleum Co. --
(NLG).......................... 6,280 391,898
------------
PHARMACEUTICALS -- 0.3%
AstraZeneca Group
PLC -- (GBP)*.................. 2,590 120,962
------------
TELECOMMUNICATIONS -- 0.6%
KPN NV -- (NLG).................. 1,792 80,479
Vodafone AirTouch PLC -- (GBP)... 30,797 124,484
------------
204,963
------------
TOTAL FOREIGN STOCK (Cost
$1,007,325)........................ 987,477
------------
PAR
(000)
-----
CORPORATE OBLIGATIONS -- 0.4%
FINANCIAL SERVICES -- 0.2%
Bell Atlantic Financial Services
144A 4.25%, 09/15/05........... $ 42 54,705
OIL & GAS -- 0.1%
Transocean Sedco Forex, Inc.
[ZCB] 2.75%, 05/24/03.......... 30 18,000
PAR
(000) VALUE
----- -----
TELECOMMUNICATIONS -- 0.1%
NTL, Inc. 144A 5.75%, 12/15/09... $ 103 $ 81,370
TOTAL CORPORATE OBLIGATIONS (Cost
$167,357).......................... 154,075
------------
SHARES
------
PREFERRED STOCK -- 0.2%
TELECOMMUNICATIONS
Global Crossing Ltd. 6.75% [CVT]
(Cost $75,000)................... 300 66,788
------------
SHORT-TERM INVESTMENTS -- 2.1%
Temporary Investment Cash Fund... 367,015 367,015
Temporary Investment Fund........ 367,015 367,015
------------
(Cost $734,030).................. 734,030
------------
TOTAL INVESTMENTS -- 100.0% (Cost
$33,812,911)....................... 34,670,912
LIABILITIES IN EXCESS OF OTHER
ASSETS -- 0.0%..................... (2,707)
------------
NET ASSETS -- 100.0%................. $ 34,668,205
============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 0.4% of net assets.
See Notes to Financial Statements.
AST ALGER ALL-CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 90.3%
ADVERTISING -- 0.4%
Omnicom Group, Inc. ........... 11,000 $ 979,688
--------------
BROADCASTING -- 2.7%
AT&T Corp. Liberty Media Group
Cl-A*........................ 73,000 1,770,250
Clear Channel Communications,
Inc.*........................ 60,800 4,560,000
--------------
6,330,250
--------------
BUSINESS SERVICES -- 1.2%
Commerce One, Inc.*............ 45,400 2,060,734
Foundry Networks, Inc.*........ 6,500 718,250
--------------
2,778,984
--------------
COMPUTER HARDWARE -- 4.2%
ASM Lithography Holding NV NY
Reg.*........................ 46,400 2,047,400
Dell Computer Corp.*........... 86,900 4,285,256
Hewlett-Packard Co............. 29,500 3,683,813
--------------
10,016,469
--------------
COMPUTER SERVICES & SOFTWARE -- 16.8%
Ariba, Inc.*................... 34,900 3,421,836
Brocade Communications Systems,
Inc.*........................ 5,800 1,064,209
Cisco Systems, Inc.*........... 119,600 7,602,074
I2 Technologies, Inc.*......... 24,165 2,519,579
Mercury Interactive Corp.*..... 30,000 2,902,500
Microsoft Corp.*............... 95,900 7,671,999
Oracle Corp.*.................. 53,800 4,522,563
Phone.com, Inc.*............... 29,400 1,914,675
RealNetworks, Inc.*............ 13,000 657,313
Sun Microsystems, Inc.*........ 49,600 4,510,500
Veritas Software Corp.*........ 30,000 3,390,469
--------------
40,177,717
--------------
CONGLOMERATES -- 1.8%
Corning, Inc. ................. 15,700 4,237,038
--------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 3.9%
Agilent Technologies, Inc.*.... 11,251 829,761
Linear Technology Corp......... 37,100 2,372,081
Teradyne, Inc.*................ 29,300 2,153,550
Texas Instruments, Inc......... 56,600 3,887,713
--------------
9,243,105
--------------
ENERGY SERVICES -- 0.7%
Halliburton Co. ............... 36,700 1,731,781
--------------
FINANCIAL SERVICES -- 3.0%
American Express Co. .......... 11,100 578,588
Citigroup, Inc. ............... 91,000 5,482,750
Morgan Stanley Dean Witter & Co. 14,500 1,207,125
--------------
7,268,463
--------------
FOOD -- 2.0%
Safeway, Inc.*................. 107,100 4,832,888
--------------
SHARES VALUE
------ -----
HEALTHCARE SERVICES -- 3.0%
Amgen, Inc.*................... 100,400 $ 7,053,100
--------------
INTERNET SERVICES -- 8.9%
America Online, Inc.*.......... 77,900 4,109,225
eBay, Inc.*.................... 87,600 4,757,776
Exodus Communications, Inc.*... 64,000 2,948,000
VeriSign, Inc.*................ 15,500 2,735,750
Vignette Corp.*................ 62,800 3,266,581
Yahoo!, Inc.*.................. 28,150 3,487,081
--------------
21,304,413
--------------
MEDICAL SUPPLIES & EQUIPMENT -- 1.5%
Affymetrix, Inc.*.............. 10,000 1,651,250
Medtronic, Inc. ............... 37,800 1,882,913
--------------
3,534,163
--------------
OIL & GAS -- 1.0%
BJ Services Co.*............... 21,400 1,337,500
Nabors Industries, Inc.*....... 24,700 1,026,594
--------------
2,364,094
--------------
PHARMACEUTICALS -- 3.1%
Celgene Corp.*................. 16,800 989,100
Genentech, Inc.*............... 14,200 2,442,400
Lilly, (Eli) & Co.............. 11,500 1,148,563
Waters Corp.*.................. 21,800 2,720,912
--------------
7,300,975
--------------
RETAIL & MERCHANDISING -- 3.6%
Home Depot, Inc. .............. 73,800 3,685,388
Wal-Mart Stores, Inc. ......... 83,200 4,794,400
--------------
8,479,788
--------------
SEMICONDUCTORS -- 20.4%
Altera Corp.*.................. 40,400 4,118,275
Applied Materials, Inc.*....... 48,700 4,413,438
Applied Micro Circuits
Corp.*....................... 28,400 2,804,500
Broadcom Corp. Cl-A*........... 16,100 3,524,894
Conexant Systems, Inc.*........ 18,600 904,425
E-Tek Dynamics, Inc.*.......... 8,300 2,189,644
Intel Corp..................... 38,800 5,187,074
JDS Uniphase Corp.*............ 55,800 6,689,024
LSI Logic Corp.*............... 56,500 3,058,063
Micron Technology, Inc.*....... 60,700 5,345,393
PMC-Sierra, Inc.*.............. 20,000 3,553,750
SDL, Inc.*..................... 8,800 2,509,650
Vitesse Semiconductor Corp.*... 50,400 3,707,550
Xilinx, Inc.*.................. 12,400 1,023,775
--------------
49,029,455
--------------
TELECOMMUNICATIONS -- 12.1%
Allegiance Telecom, Inc.*...... 29,100 1,862,400
Amdocs Ltd.*................... 26,000 1,995,500
Comcast Corp. Cl-A*............ 24,400 988,200
Cox Communications, Inc.
Cl-A*........................ 23,000 1,047,938
Efficient Networks, Inc.*...... 13,600 1,000,450
Ericsson, (L.M.) Telephone Co.
[ADR]........................ 112,000 2,240,000
McLeodUSA, Inc. Cl-A*.......... 29,400 608,213
AST ALGER ALL-CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
Motorola, Inc.................. 123,000 $ 3,574,688
Nextel Communications, Inc.
Cl-A*........................ 31,600 1,933,525
Nokia Corp. Cl-A [ADR]......... 70,350 3,513,103
Nortel Networks Corp. NY
Reg.*........................ 63,000 4,299,749
Sprint Corp. (PCS Group)*...... 99,700 5,932,149
--------------
28,995,915
--------------
TOTAL COMMON STOCK
(Cost $224,301,442).............. 215,658,286
--------------
PAR
(000)
-----
SOVEREIGN ISSUES -- 2.5%
AUSTRIA
Bank of Austria
6.58%, 07/14/00
(Cost $5,985,743).............. $ 6,000 5,985,743
--------------
COMMERCIAL PAPER -- 6.7%
Fayette Funding
6.65%, 07/21/00.............. 5,000 4,981,528
PAR
(000) VALUE
----- -----
Nestle Capital
6.66%, 07/07/00.............. $ 7,000 $ 6,992,230
Salomon SB Holdings
6.53%, 07/03/00.............. 4,000 3,998,549
--------------
(Cost $15,972,307)............. 15,972,307
--------------
SHARES
------
SHORT-TERM INVESTMENTS -- 0.3%
Temporary Investment Cash
Fund......................... 318,245 318,245
Temporary Investment Fund...... 318,244 318,244
--------------
(Cost $636,489)................ 636,489
--------------
TOTAL INVESTMENTS -- 99.8%
(Cost $246,895,981).............. 238,252,825
OTHER ASSETS LESS
LIABILITIES -- 0.2%.............. 545,073
--------------
NET ASSETS -- 100.0%............... $ 238,797,898
==============
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
See Notes to Financial Statements.
AST JANUS MID-CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCK -- 73.8%
COMPUTER HARDWARE -- 1.3%
ASM Lithography Holding NV NY
Reg.*............................ 10,205 $ 450,296
-----------
COMPUTER SERVICES & SOFTWARE -- 10.6%
Be Free, Inc.*..................... 61,245 551,205
DigitalThink, Inc.*................ 16,850 604,852
InfoSpace.com, Inc.*............... 5,195 287,024
Inktomi Corp.*..................... 3,940 465,905
Media 100, Inc.*................... 2,165 55,749
National Computer Systems, Inc..... 10,640 524,020
Pinnacle Systems, Inc.*............ 21,375 480,604
RealNetworks, Inc.*................ 11,235 568,069
StorageNetworks, Inc.*............. 355 32,039
-----------
3,569,467
-----------
ELECTRONIC COMPONENTS & EQUIPMENT -- 9.6%
Metromedia Fiber Network, Inc.
CI-A*............................ 33,520 1,330,325
SCI Systems, Inc.*................. 17,475 686,986
Symbol Technologies, Inc. ......... 21,600 1,202,850
-----------
3,220,151
-----------
ENTERTAINMENT & LEISURE -- 1.2%
Royal Caribbean Cruises Ltd. ...... 21,855 404,318
-----------
FINANCIAL SERVICES -- 1.9%
E*TRADE Group, Inc.*............... 37,935 625,928
-----------
HEALTH CARE -- 0.9%
Medarex, Inc.*..................... 3,450 292,370
-----------
INTERNET SERVICES -- 16.2%
Digex, Inc.*....................... 9,240 627,743
Exodus Communications, Inc.*....... 10,570 486,881
PSINet, Inc.*...................... 86,497 2,173,236
Skillsoft Corp.*................... 83,565 1,180,355
Verio, Inc.*....................... 17,675 980,686
-----------
5,448,901
-----------
MEDICAL SUPPLIES & EQUIPMENT -- 4.1%
Genzyme Corp.*..................... 5,285 314,127
Maxygen, Inc.*..................... 10,055 570,778
PE Corp. -- PE Biosystems Group.... 7,435 489,781
-----------
1,374,686
-----------
PHARMACEUTICALS -- 3.7%
King Pharmaceuticals, Inc.*........ 18,540 813,442
Millennium Pharmaceuticals,
Inc.*............................ 3,995 446,941
-----------
1,260,383
-----------
SHARES VALUE
------ -----
SEMICONDUCTORS -- 2.5%
Integrated Device Technology,
Inc.*............................ 5,005 $ 299,674
Marvell Technology Group Ltd.*..... 3,275 186,675
Vitesse Semiconductor Corp.*....... 4,995 367,445
-----------
853,794
-----------
TELECOMMUNICATIONS -- 21.8%
Adaptive Broadband Corp.*.......... 7,905 290,509
AT&T Canada, Inc. NY Reg.*......... 35,950 1,193,090
Caprock Communications Corp.*...... 33,565 654,518
Carrier 1 International SA*........ 26,685 310,213
Clearnet Communications, Inc.*..... 27,240 756,336
CTC Communications Group, Inc.*.... 13,440 483,840
EchoStar Communications Corp.
CI-A*............................ 20,945 693,476
Infonet Services Corp. CI-B*....... 38,395 458,340
McLeodUSA, Inc. CI-A*.............. 49,610 1,026,306
Research in Motion Ltd.*........... 14,750 667,438
Western Wireless Corp. CI-A*....... 15,315 834,667
-----------
7,368,733
-----------
TOTAL COMMON STOCK
(Cost $24,758,683)................... 24,869,037
-----------
PAR
(000)
-----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 31.2%
Federal Home Loan Mortgage Corp.
6.57%, 07/03/00
(Cost $10,496,168)................. $10,500 10,496,168
-----------
CORPORATE OBLIGATIONS -- 0.9%
COMPUTER SERVICES & SOFTWARE
Mercury Interactive Corp. 144A
4.75%, 07/01/07
(Cost $280,000).................... 280 301,168
-----------
SHARES
------
SHORT-TERM INVESTMENTS -- 0.1%
Temporary Investment Cash Fund..... 8,625 8,625
Temporary Investment Fund.......... 8,625 8,625
-----------
(Cost $17,250)..................... 17,250
-----------
TOTAL INVESTMENTS -- 106.0%
(Cost $35,552,101)................... 35,683,623
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (6.0%)..................... (2,019,513)
-----------
NET ASSETS -- 100.0%................... $33,664,110
===========
- ------------------------------------------------------------------------------
Definitions of abbreviations are included following the Schedules of
Investments.
* Non-income producing security.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, this security amounted
to 0.9% of net assets.
See Notes to Financial Statements.
DEFINITION OF ABBREVIATIONS
- ------------------------------------------------------------------------------
THE FOLLOWING ABBREVIATIONS ARE USED THROUGHOUT THE SCHEDULES OF INVESTMENTS:
SECURITY DESCRIPTIONS:
- -----------------------
ADR-American Depositary Receipt
BRB-Brady Bond
CVT-Convertible Security
FRB-Floating Rate Bond (1)
FRN-Floating Rate Note (1)
GDR-Global Depositary Receipt
IO-Interest Only Security
PIK-Payment in Kind Security
REIT-Real Estate Investment Trust
STEP-Stepped Coupon Bond (2)
TBA-To be Announced Security
VR-Variable Rate Bond (1)
ZCB-Zero Coupon Bond (2)
(1)- Rates shown for variable and floating rate securities are the coupon rates
as of June 30, 2000.
(2)- Rates shown are the effective yields at purchase date.
COUNTRIES/CURRENCIES:
---------------------------
ATS-Austria/Austrian Schilling
AUD-Australia/Australian Dollar
BEF-Belgium/Belgian Franc
CAD-Canada/Canadian Dollar
CHF-Switzerland/Swiss Franc
DEM-Germany/German Deutschemark
DKK-Denmark/Danish Krone
ESP-Spain/Spanish Peseta
EUR-Europe/Euro Currency
FIM-Finland/Finnish Markka
FRF-France/French Franc
GBP-United Kingdom/British Pound
GRD-Greece/Greek Drachma
HKD-Hong Kong/Hong Kong Dollar
IEP-Ireland/Irish Punt
ITL-Italy/Italian Lira
JPY-Japan/Japanese Yen
KOR-Korea/Korean Won
MXP-Mexico/Mexican Peso
MYR-Malaysia/Malaysian Ringgit
NLG-Netherlands/Netherland Guilder
NOK-Norway/Norwegian Krone
NZD-New Zealand/New Zealand Dollar
PTE-Portugal/Portuguese Escudo
SEK-Sweden/Swedish Krona
SGD-Singapore/Singapore Dollar
(This page intentionally left blank)
AMERICAN SKANDIA TRUST
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
---------------------------------------------------------------------------
PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
AST
AST AST NEUBERGER
AIM ALLIANCE AST AST BERMAN AST
INTERNATIONAL GROWTH AND JANCAP MONEY MID-CAP AIM
EQUITY INCOME GROWTH MARKET VALUE BALANCED
------------- ---------- ---------- ---------- --------- --------
ASSETS
Investments in securities at value (A)........... $753,260 $1,471,933 $5,908,809 $1,841,254 $683,334 $587,228
Collateral received for securities lent.......... -- 122,685 1,320,084 -- 73,153 89,761
Cash............................................. 38 7,498 146 1 -- 13
Foreign currency at value (B).................... 2,987 -- -- -- -- --
Unrealized appreciation on foreign currency
exchange contracts............................. -- -- -- -- -- --
Receivable for:
Securities sold................................ 1,101 21,311 -- -- 2,606 2,018
Dividends and interest......................... 1,628 2,820 3,458 13,185 945 5,008
Futures variation margin....................... -- -- -- -- -- 388
Unrealized appreciation on interest rate swap
agreements................................... -- -- -- -- -- --
Other assets..................................... 14 10 -- 11 -- 4
-------- ---------- ---------- ---------- -------- --------
TOTAL ASSETS................................. 759,028 1,626,257 7,232,497 1,854,451 760,038 684,420
-------- ---------- ---------- ---------- -------- --------
LIABILITIES
Cash overdraft................................... -- -- -- -- -- --
Unrealized depreciation on foreign currency
exchange contracts............................. -- -- -- -- -- --
Written options outstanding, at value............ -- -- -- -- -- 3
Unrealized depreciation on interest rate swap
agreements..................................... -- -- -- -- -- --
Payable upon return of securities lent........... -- 122,685 1,320,084 -- 73,153 89,761
Payable for:
Securities purchased........................... 2,341 22,416 3,522 -- 8,698 3,076
Futures variation margin....................... -- -- -- -- -- --
Advisory fees.................................. 503 626 2,141 697 298 182
Shareholder servicing fees..................... 62 135 497 159 58 48
Accrued dividends.............................. -- -- -- 9,068 -- --
Accrued expenses and other liabilities......... 527 146 290 131 84 314
-------- ---------- ---------- ---------- -------- --------
TOTAL LIABILITIES............................ 3,433 146,008 1,326,534 10,055 82,291 93,384
-------- ---------- ---------- ---------- -------- --------
NET ASSETS.......................................... $755,595 $1,480,249 $5,905,963 $1,844,396 $677,747 $591,036
======== ========== ========== ========== ======== ========
COMPONENTS OF NET ASSETS
Common stock (unlimited number of shares authorized,
$.001 par value per share)......................... $ 28 $ 75 $ 125 $ 1,844 $ 49 $ 42
Additional paid-in capital.......................... 548,679 1,309,036 3,468,385 1,842,573 641,732 509,732
Undistributed net investment income (loss).......... (379) 8,654 (13,302) -- 1,071 5,690
Accumulated net realized gain (loss) on
investments........................................ 56,913 130,723 (62,511) (21) 6,228 (10,117)
Accumulated net unrealized appreciation
(depreciation) on investments...................... 150,354 31,761 2,513,266 -- 28,667 85,689
-------- ---------- ---------- ---------- -------- --------
NET ASSETS.......................................... $755,595 $1,480,249 $5,905,963 $1,844,396 $677,747 $591,036
======== ========== ========== ========== ======== ========
Shares of common stock outstanding.................. 28,107 74,725 125,275 1,844,417 48,874 41,658
Net asset value, offering and redemption price per
share.............................................. $ 26.88 $ 19.81 $ 47.14 $ 1.00 $ 13.87 $ 14.19
======== ========== ========== ========== ======== ========
(A) Investments at cost............................. $602,849 $1,440,172 $3,395,537 $1,841,254 $654,667 $501,510
======== ========== ========== ========== ======== ========
(B) Foreign currency at cost........................ $ 2,974 $ -- $ -- $ -- $ -- $ --
======== ========== ========== ========== ======== ========
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
----------------------------------------------------------------------------------------------------------
PORTFOLIO
----------------------------------------------------------------------------------------------------------
AST AST AST
AST AST PIMCO AST AST AMERICAN AST NEUBERGER
FEDERATED T. ROWE TOTAL INVESCO JANUS CENTURY T. ROWE BERMAN
HIGH PRICE ASSET RETURN EQUITY SMALL-CAP INTERNATIONAL PRICE GLOBAL MID-CAP
YIELD ALLOCATION BOND INCOME GROWTH GROWTH II BOND GROWTH
--------- ----------- ---------- ---------- ---------- ------------- ------------- ---------
$595,932 $435,458 $1,505,578 $1,153,162 $1,066,122 $455,183 $130,363 $763,228
14,739 81,926 -- 80,267 127,085 -- -- 177,178
-- 420 14,161 3,578 -- 65 5,197 --
-- -- 3,074 -- -- -- 17 --
-- -- 47 -- -- 67 315 --
425 626 1,031 1,341 1,708 4,894 5,240 2,940
11,316 2,893 12,051 5,286 146 1,048 2,245 328
-- -- -- -- -- -- -- --
-- -- 440 -- -- -- -- --
6 3 10 14 -- 4 -- --
-------- -------- ---------- ---------- ---------- -------- -------- --------
622,418 521,326 1,536,392 1,243,648 1,195,061 461,261 143,377 943,674
-------- -------- ---------- ---------- ---------- -------- -------- --------
-- -- -- -- -- -- -- --
-- -- 91 -- -- 21 95 --
-- -- 508 -- -- -- -- --
-- -- 568 -- -- -- -- --
14,739 81,926 -- 80,267 127,085 -- -- 177,178
2,585 825 401,287 17,021 15,265 7,473 6,680 685
-- -- 69 -- -- -- -- --
368 102 250 721 363 153 46 238
47 35 93 95 83 37 11 56
-- -- -- -- -- -- -- --
69 94 121 108 102 293 273 70
-------- -------- ---------- ---------- ---------- -------- -------- --------
17,808 82,982 402,987 98,212 142,898 7,977 7,105 178,227
-------- -------- ---------- ---------- ---------- -------- -------- --------
$604,610 $438,344 $1,133,405 $1,145,436 $1,052,163 $453,284 $136,272 $765,447
======== ======== ========== ========== ========== ======== ======== ========
$ 58 $ 24 $ 105 $ 67 $ 33 $ 33 $ 15 $ 29
682,967 336,060 1,154,192 977,651 675,976 327,567 151,589 563,999
28,820 5,724 29,736 11,908 (7,153) (1,273) 8,210 (4,296)
(17,258) 9,127 (34,574) (1,873) 168,903 100,025 (18,670) 90,809
(89,977) 87,409 (16,054) 157,683 214,404 26,932 (4,872) 114,906
-------- -------- ---------- ---------- ---------- -------- -------- --------
$604,610 $438,344 $1,133,405 $1,145,436 $1,052,163 $453,284 $136,272 $765,447
======== ======== ========== ========== ========== ======== ======== ========
57,565 23,733 104,870 66,945 32,783 32,797 14,956 28,854
$10.50 $ 18.47 $ 10.81 $ 17.11 $ 32.09 $ 13.82 $ 9.11 $ 26.53
======== ======== ========== ========== ========== ======== ======== ========
$685,908 $348,046 $1,527,046 $ 995,479 $ 851,718 $428,271 $135,448 $648,322
======== ======== ========== ========== ========== ======== ======== ========
$ -- $ -- $ 3,063 $ -- $ -- $ -- $ 17 $ --
======== ======== ========== ========== ========== ======== ======== ========
----------------------------------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
------------------------------------------------------------------
PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------------
AST AST AST
T. ROWE PIMCO AST AMERICAN
AST PRICE LIMITED AST JANUS CENTURY
FOUNDERS NATURAL MATURITY ALLIANCE OVERSEAS INCOME &
PASSPORT RESOURCES BOND GROWTH GROWTH GROWTH
-------- --------- -------- -------- ---------- --------
ASSETS
Investments in securities at value (A)................... $338,518 $116,080 $452,579 $443,785 $1,545,485 $478,044
Collateral received for securities lent.................. -- 9,099 -- 103,202 -- 53,158
Cash..................................................... -- 2,379 -- -- 21 282
Foreign currency at value (B)............................ 764 -- 335 -- 2 --
Unrealized appreciation on foreign currency exchange
contracts.............................................. 27 -- 40 -- 8,288 --
Receivable for:
Securities sold........................................ 10,034 596 31 3,862 6,266 606
Dividends and interest................................. 536 219 4,214 66 1,468 499
Futures variation margin............................... -- -- -- -- -- 25
Unrealized appreciation on interest rate swap
agreements........................................... -- -- -- -- -- --
Other assets............................................. 1 1 4 2 -- 2
-------- -------- -------- -------- ---------- --------
TOTAL ASSETS......................................... 349,880 128,374 457,203 550,917 1,561,530 532,616
-------- -------- -------- -------- ---------- --------
LIABILITIES
Cash overdraft........................................... -- -- -- -- -- --
Unrealized depreciation on foreign currency exchange
contracts.............................................. 44 -- -- -- 5,452 --
Written options outstanding, at value.................... -- -- 31 -- -- --
Unrealized depreciation on interest rate swap
agreements............................................. -- -- 145 -- -- --
Payable upon return of securities lent................... -- 9,099 -- 103,202 -- 53,158
Payable for:
Securities purchased................................... 9,398 2 67,101 3,379 14,602 449
Futures variation margin............................... -- -- -- -- -- --
Advisory fees.......................................... 153 54 84 102 704 122
Shareholder servicing fees............................. 95 10 32 36 218 64
Accrued dividends...................................... -- -- -- -- -- --
Accrued expenses and other liabilities................. 27 51 89 91 402 62
-------- -------- -------- -------- ---------- --------
TOTAL LIABILITIES.................................... 9,717 9,216 67,482 106,810 21,378 53,855
-------- -------- -------- -------- ---------- --------
NET ASSETS.................................................. $340,163 $119,158 $389,721 $444,107 $1,540,152 $478,761
======== ======== ======== ======== ========== ========
COMPONENTS OF NET ASSETS
Common stock (unlimited number of shares authorized, $.001
par value per share)....................................... $ 18 $ 9 $ 37 $ 23 $ 64 $ 34
Additional paid-in capital.................................. 342,445 112,432 386,087 313,934 858,591 452,340
Undistributed net investment income (loss).................. (474) 915 10,742 (4,326) (7,594) 1,474
Accumulated net realized gain (loss) on investments......... (9,099) 4,987 (878) 106,749 219,939 (938)
Accumulated net unrealized appreciation (depreciation) on
investments................................................ 7,273 815 (6,267) 27,727 469,152 25,851
-------- -------- -------- -------- ---------- --------
NET ASSETS.................................................. $340,163 $119,158 $389,721 $444,107 $1,540,152 $478,761
======== ======== ======== ======== ========== ========
Shares of common stock outstanding.......................... 17,656 8,520 36,997 22,901 64,044 34,081
Net asset value, offering and redemption price per share.... $ 19.27 $ 13.99 $ 10.53 $ 19.39 $ 24.05 $ 14.05
======== ======== ======== ======== ========== ========
(A) Investments at cost..................................... $331,194 $115,262 $458,732 $416,058 $1,079,135 $452,151
======== ======== ======== ======== ========== ========
(B) Foreign currency at cost................................ $ 799 $ -- $ 340 $ -- $ 2 $ --
======== ======== ======== ======== ========== ========
--------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------------------------------
PORTFOLIO
- --------------------------------------------------------------------------------------------------------
AST AST AST AST AST
AMERICAN AMERICAN T. ROWE AST AST LORD SANFORD AST
CENTURY CENTURY PRICE SMALL MARSICO COHEN & ABBETT BERNSTEIN KEMPER
STRATEGIC INTERNATIONAL COMPANY CAPITAL STEERS SMALL CAP MANAGED SMALL-CAP
BALANCED GROWTH VALUE GROWTH REALTY VALUE INDEX 500 GROWTH
--------- ------------- ----------- ---------- ------- --------- --------- ----------
$227,440 $301,812 $301,596 $1,908,129 $88,326 $124,225 $724,098 $1,084,554
21,907 -- 14,139 250,406 10,372 6,946 55,725 103,728
112 12 -- -- 1,056 -- 719 698
-- -- -- -- -- -- -- --
-- 43 -- -- -- -- -- --
1,110 3,173 960 1,330 159 558 416 524
1,465 360 411 664 514 58 894 85
15 -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
1 -- 2 6 -- -- 3 2
-------- -------- -------- ---------- ------- -------- -------- ----------
252,050 305,400 317,108 2,160,535 100,427 131,787 781,855 1,189,591
-------- -------- -------- ---------- ------- -------- -------- ----------
-- -- -- 564 -- -- -- --
-- 13 -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
21,907 -- 14,139 250,406 10,372 6,946 55,725 103,728
4,613 3,241 -- -- -- 901 -- 1,017
-- -- -- -- -- -- -- --
70 111 126 706 46 36 90 352
18 33 24 159 11 10 61 80
-- -- -- -- -- -- -- --
50 132 64 126 12 16 65 95
-------- -------- -------- ---------- ------- -------- -------- ----------
26,658 3,530 14,353 251,961 10,441 7,909 55,941 105,272
-------- -------- -------- ---------- ------- -------- -------- ----------
$225,392 $301,870 $302,755 $1,908,574 $89,986 $123,878 $725,914 $1,084,319
======== ======== ======== ========== ======= ======== ======== ==========
$ 16 $ 15 $ 25 $ 97 $ 10 $ 10 $ 54 $ 70
206,791 254,707 304,661 1,468,126 90,316 109,272 678,179 716,555
2,332 (306) 1,405 (4,434) 2,361 (383) 2,697 (5,823)
4,549 19,329 3,279 52,295 (3,456) (372) 20,875 145,332
11,704 28,125 (6,615) 392,490 755 15,351 24,109 228,185
-------- -------- -------- ---------- ------- -------- -------- ----------
$225,392 $301,870 $302,755 $1,908,574 $89,986 $123,878 $725,914 $1,084,319
======== ======== ======== ========== ======= ======== ======== ==========
15,827 14,900 24,943 96,864 10,087 10,185 53,744 70,130
$ 14.24 $ 20.26 $ 12.14 $ 19.70 $ 8.92 $ 12.16 $ 13.51 $ 15.46
======== ======== ======== ========== ======= ======== ======== ==========
$215,709 $273,725 $308,210 $1,515,639 $87,572 $108,875 $699,989 $ 856,369
======== ======== ======== ========== ======= ======== ======== ==========
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
======== ======== ======== ========== ======= ======== ======== ==========
- --------------------------------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
----------------------------------------------------
PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
AST
AST MFS AST AST
MFS AST GROWTH ALGER JANUS
GLOBAL MFS WITH ALL-CAP MID-CAP
EQUITY GROWTH INCOME GROWTH GROWTH
------- ------- ------- -------- -------
ASSETS
Investments in securities at value (A)................... $12,847 $38,432 $34,671 $238,253 $35,684
Collateral received for securities lent.................. -- 5,999 3,365 63,294 6,505
Cash..................................................... 58 24 59 3,552 --
Foreign currency at value (B)............................ 1 -- -- -- --
Unrealized appreciation on foreign currency exchange
contracts.............................................. 1 -- -- -- --
Receivable for:
Securities sold........................................ 60 253 155 2,503 --
Dividends and interest................................. 3 15 29 48 2
Futures variation margin............................... -- -- -- -- --
Unrealized appreciation on interest rate swap
agreements........................................... -- -- -- -- --
Other assets............................................. -- -- -- -- --
------- ------- ------- -------- -------
TOTAL ASSETS......................................... 12,970 44,723 38,279 307,650 42,191
------- ------- ------- -------- -------
LIABILITIES
Cash overdraft........................................... -- -- -- -- --
Unrealized depreciation on foreign currency exchange
contracts.............................................. -- -- -- -- --
Written options outstanding, at value.................... -- -- -- -- --
Unrealized depreciation on interest rate swap
agreements............................................. -- -- -- -- --
Payable upon return of securities lent................... -- 5,999 3,365 63,294 6,505
Payable for:
Securities purchased................................... 759 541 234 5,272 2,002
Futures variation margin............................... -- -- -- -- --
Advisory fees.......................................... 7 12 10 208 12
Shareholder servicing fees............................. 1 3 2 19 2
Accrued dividends...................................... -- -- -- -- --
Accrued expenses and other liabilities................. -- -- -- 59 6
------- ------- ------- -------- -------
TOTAL LIABILITIES.................................... 767 6,555 3,611 68,852 8,527
------- ------- ------- -------- -------
NET ASSETS.................................................. $12,203 $38,168 $34,668 $238,798 $33,664
======= ======= ======= ======== =======
COMPONENTS OF NET ASSETS
Common stock (unlimited number of shares authorized, $.001
par value per share)....................................... $ 1 $ 3 $ 3 $ 27 $ 3
Additional paid-in capital.................................. 11,763 37,174 33,925 284,589 33,331
Undistributed net investment income (loss).................. 35 23 58 1 54
Accumulated net realized gain (loss) on investments......... 96 (706) (176) (37,176) 144
Accumulated net unrealized appreciation (depreciation) on
investments................................................ 308 1,674 858 (8,643) 132
------- ------- ------- -------- -------
NET ASSETS.................................................. $12,203 $38,168 $34,668 $238,798 $33,664
======= ======= ======= ======== =======
Shares of common stock outstanding.......................... 1,098 3,274 3,264 27,215 3,310
Net asset value, offering and redemption price per share.... $ 11.11 $ 11.66 $ 10.62 $ 8.77 $ 10.17
======= ======= ======= ======== =======
(A) Investments at cost..................................... $12,533 $36,757 $33,813 $246,896 $35,552
======= ======= ======= ======== =======
(B) Foreign currency at cost................................ $ 1 $ -- $ -- $ -- $ --
======= ======= ======= ======== =======
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
(This page intentionally left blank)
AMERICAN SKANDIA TRUST
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
(AMOUNTS IN THOUSANDS)
------------------------------------------------------------------------
PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
AST
AST AST NEUBERGER
AIM ALLIANCE AST AST BERMAN AST
INTERNATIONAL GROWTH AND JANCAP MONEY MID-CAP AIM
EQUITY INCOME GROWTH MARKET VALUE BALANCED
------------- ---------- --------- ------- --------- ---------
INVESTMENT INCOME
Interest............................................ $ 1,005 $ 1,532 $ 13,180 $58,618 $ 964 $ 8,613
Dividends........................................... 9,129 13,657 5,514 -- 3,585 766
Foreign taxes withheld.............................. (117) (13) (333) -- (3) (6)
--------- --------- --------- ------- ------- -------
Total Investment Income......................... 10,017 15,176 18,361 58,618 4,546 9,373
--------- --------- --------- ------- ------- -------
EXPENSES
Investment advisory fees............................ 3,205 5,505 27,811 4,974 2,994 1,972
Shareholder servicing fees.......................... 370 734 3,037 995 333 271
Administration and accounting fees.................. 198 250 463 284 191 171
Custodian fees...................................... 324 128 404 142 60 156
Distribution fees................................... 245 1,562 66 -- 493 8
Audit and legal fees................................ 5 9 38 12 4 3
Trustees' fees...................................... 3 5 22 7 2 2
Insurance expenses.................................. 2 3 13 4 1 1
Miscellaneous expenses.............................. 5 6 14 6 4 35
--------- --------- --------- ------- ------- -------
Total Expenses.................................. 4,357 8,202 31,868 6,424 4,082 2,619
Less: Advisory fee waivers and expense
reimbursements................................ -- (118) (1,270) (497) -- --
Less: Fees paid indirectly...................... (245) (1,562) (66) -- (493) (8)
--------- --------- --------- ------- ------- -------
Net Expenses.................................... 4,112 6,522 30,532 5,927 3,589 2,611
--------- --------- --------- ------- ------- -------
Net Investment Income (Loss)........................... 5,905 8,654 (12,171) 52,691 957 6,762
--------- --------- --------- ------- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Securities...................................... 54,728 131,196 (43,653) (21) 11,510 (9,116)
Foreign currency transactions................... (1,871) -- 13 -- -- (1,158)
Futures contracts............................... -- -- -- -- -- 348
Written options contracts....................... -- -- -- -- -- 153
Swap agreements................................. -- -- -- -- -- --
--------- --------- --------- ------- ------- -------
Net realized gain (loss)............................ 52,857 131,196 (43,640) (21) 11,510 (9,773)
--------- --------- --------- ------- ------- -------
Net change in unrealized appreciation (depreciation)
on:
Securities...................................... (136,251) (177,106) (404,103) -- 18,496 14,969
Futures contracts............................... -- -- -- -- -- (840)
Written option contracts........................ -- -- -- -- -- (320)
Swap agreements................................. -- -- -- -- -- --
Translation of assets and liabilities
denominated in foreign currencies............. (40) -- (971) -- -- (4)
--------- --------- --------- ------- ------- -------
Net change in unrealized appreciation
(depreciation).................................... (136,291) (177,106) (405,074) -- 18,496 13,805
--------- --------- --------- ------- ------- -------
Net gain (loss) on investments...................... (83,434) (45,910) (448,714) (21) 30,006 4,032
--------- --------- --------- ------- ------- -------
Net Increase (Decrease) in Net Assets Resulting from
Operations........................................ $ (77,529) $ (37,256) $(460,885) $52,670 $30,963 $10,794
========= ========= ========= ======= ======= =======
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
----------------------------------------------------------------------------------------------
PORTFOLIO
----------------------------------------------------------------------------------------------
AST AST AST AST
AST AST PIMCO AST AST AMERICAN T. ROWE NEUBERGER
FEDERATED T. ROWE TOTAL INVESCO JANUS CENTURY PRICE BERMAN
HIGH PRICE ASSET RETURN EQUITY SMALL-CAP INTERNATIONAL GLOBAL MID-CAP
YIELD ALLOCATION BOND INCOME GROWTH GROWTH II BOND GROWTH
--------- ----------- ------- ------- --------- ------------- -------- ---------
$ 30,376 $ 6,142 $36,816 $10,952 $ 3,345 $ 452 $ 3,398 $ 1,382
1,157 1,762 -- 5,979 295 2,894 -- 147
-- (44) -- -- (7) (224) (1) --
-------- ------- ------- ------- --------- --------- -------- --------
31,533 7,860 36,816 16,931 3,633 3,122 3,397 1,529
-------- ------- ------- ------- --------- --------- -------- --------
2,131 1,821 3,421 4,071 5,895 2,409 530 2,669
284 214 526 543 655 237 66 296
189 165 227 229 240 172 67 148
58 57 135 95 91 141 65 49
-- -- -- 179 6 -- -- 43
4 3 7 7 8 3 1 4
2 2 4 4 5 2 1 2
1 1 2 2 3 1 1 1
45 33 11 9 6 24 10 4
-------- ------- ------- ------- --------- --------- -------- --------
2,714 2,296 4,333 5,139 6,909 2,989 741 3,216
-- -- (13) (18) (6) -- -- --
-- -- -- (179) (6) -- -- (43)
-------- ------- ------- ------- --------- --------- -------- --------
2,714 2,296 4,320 4,942 6,897 2,989 741 3,173
-------- ------- ------- ------- --------- --------- -------- --------
28,819 5,564 32,496 11,989 (3,264) 133 2,656 (1,644)
-------- ------- ------- ------- --------- --------- -------- --------
(10,119) 9,422 (3,444) (1,866) 166,452 102,253 (1,541) 91,858
-- (58) (35) -- 3 (1,374) (9,646) --
-- -- (4,633) -- -- -- -- --
-- -- 368 -- -- -- -- --
-- -- (1,704) -- -- -- -- --
-------- ------- ------- ------- --------- --------- -------- --------
(10,119) 9,364 (9,448) (1,866) 166,455 100,879 (11,187) 91,858
-------- ------- ------- ------- --------- --------- -------- --------
(32,589) (9,794) 6,831 10,016 (400,468) (139,048) 3,406 (36,038)
-- -- 10,431 -- -- -- -- --
-- -- 485 -- -- -- -- --
-- -- 119 -- -- -- -- --
-- (1) 78 -- (1) 41 289 --
-------- ------- ------- ------- --------- --------- -------- --------
(32,589) (9,795) 17,944 10,016 (400,469) (139,007) 3,695 (36,038)
-------- ------- ------- ------- --------- --------- -------- --------
(42,708) (431) 8,496 8,150 (234,014) (38,128) (7,492) 55,820
-------- ------- ------- ------- --------- --------- -------- --------
$(13,889) $ 5,133 $40,992 $20,139 $(237,278) $ (37,995) $ (4,836) $ 54,176
======== ======= ======= ======= ========= ========= ======== ========
- ------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
(AMOUNTS IN THOUSANDS)
-----------------------------------------------------------------
PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
AST AST AST
T. ROWE PIMCO AST AMERICAN
AST PRICE LIMITED AST JANUS CENTURY
FOUNDERS NATURAL MATURITY ALLIANCE OVERSEAS INCOME &
PASSPORT RESOURCES BOND GROWTH GROWTH GROWTH
-------- --------- -------- -------- --------- --------
INVESTMENT INCOME
Interest................................................. $ 528 $ 182 $13,146 $ 804 $ 4,615 $ 519
Dividends................................................ 1,405 1,182 -- 426 8,592 2,950
Foreign taxes withheld................................... (92) (18) -- (4) (193) (8)
-------- ------- ------- -------- --------- --------
Total Investment Income.............................. 1,841 1,346 13,146 1,226 13,014 3,461
-------- ------- ------- -------- --------- --------
EXPENSES
Investment advisory fees................................. 1,738 486 1,241 1,860 8,751 1,576
Shareholder servicing fees............................... 174 54 192 207 875 210
Administration and accounting fees....................... 96 48 160 141 246 140
Custodian fees........................................... 107 25 55 46 256 51
Distribution fees........................................ -- 56 -- 251 140 --
Audit and legal fees..................................... 2 1 2 3 11 3
Trustees' fees........................................... 1 -- 1 1 6 2
Insurance expenses....................................... 1 -- 1 1 4 1
Miscellaneous expenses................................... 5 5 9 3 17 4
-------- ------- ------- -------- --------- --------
Total Expenses....................................... 2,124 675 1,661 2,513 10,306 1,987
Less: Advisory fee waivers and expense
reimbursements..................................... -- -- -- -- (72) --
Less: Fees paid indirectly........................... -- (56) -- (251) (140) --
-------- ------- ------- -------- --------- --------
Net Expenses......................................... 2,124 619 1,661 2,262 10,094 1,987
-------- ------- ------- -------- --------- --------
Net Investment Income (Loss)................................ (283) 727 11,485 (1,036) 2,920 1,474
-------- ------- ------- -------- --------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Securities........................................... (7,091) 6,564 1,105 104,882 207,448 1,595
Foreign currency transactions........................ (2,003) (36) 222 -- 22,962 --
Futures contracts.................................... -- -- (402) -- -- (357)
Written options contracts............................ -- -- -- -- -- --
Swap agreements...................................... -- -- -- -- -- --
-------- ------- ------- -------- --------- --------
Net realized gain (loss)................................. (9,094) 6,528 925 104,882 230,410 1,238
-------- ------- ------- -------- --------- --------
Net change in unrealized appreciation (depreciation) on:
Securities........................................... (52,551) (1,523) (1,110) (68,243) (250,627) (17,021)
Futures contracts.................................... -- -- 217 -- -- (456)
Written option contracts............................. -- -- (113) -- -- --
Swap agreements...................................... -- -- (47) -- -- --
Translation of assets and liabilities denominated in
foreign currencies................................. 47 (2) (16) -- 427 --
-------- ------- ------- -------- --------- --------
Net change in unrealized appreciation (depreciation)..... (52,504) (1,525) (1,069) (68,243) (250,200) (17,477)
-------- ------- ------- -------- --------- --------
Net gain (loss) on investments........................... (61,598) 5,003 (144) 36,639 (19,790) (16,239)
-------- ------- ------- -------- --------- --------
Net Increase (Decrease) in Net Assets Resulting from
Operations............................................. $(61,881) $ 5,730 $11,341 $ 35,603 $ (16,870) $(14,765)
======== ======= ======= ======== ========= ========
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
-------------------------------------------------------------------------------------------------
PORTFOLIO
-------------------------------------------------------------------------------------------------
AST AST AST AST AST
AMERICAN AMERICAN T. ROWE AST AST LORD SANFORD AST
CENTURY CENTURY PRICE SMALL MARSICO COHEN & ABBETT BERNSTEIN KEMPER
STRATEGIC INTERNATIONAL COMPANY CAPITAL STEERS SMALL CAP MANAGED SMALL-CAP
BALANCED GROWTH VALUE GROWTH REALTY VALUE INDEX 500 GROWTH
--------- ------------- ----------- --------- ------- --------- --------- ---------
$ 2,935 $ 578 $ 349 $ 4,090 $ 111 $ 190 $ 1,257 $ 1,956
662 932 2,293 3,240 2,122 231 4,073 207
(1) (47) -- (8) -- (2) (2) --
------- -------- ------- --------- ------ ------- -------- ---------
3,596 1,463 2,642 7,322 2,233 419 5,328 2,163
------- -------- ------- --------- ------ ------- -------- ---------
922 1,030 1,218 8,072 360 451 2,069 4,436
109 103 135 897 36 47 345 468
103 71 117 256 37 37 109 205
44 134 33 122 9 17 89 78
-- 4 -- 124 28 -- 128 22
1 1 2 11 -- 1 4 6
1 1 1 6 -- -- 2 3
-- -- 1 4 -- -- 2 2
3 12 3 7 2 2 11 2
------- -------- ------- --------- ------ ------- -------- ---------
1,183 1,356 1,510 9,499 472 555 2,759 5,222
-- -- -- (200) -- -- -- (1)
-- (4) -- (124) (28) -- (128) (22)
------- -------- ------- --------- ------ ------- -------- ---------
1,183 1,352 1,510 9,175 444 555 2,631 5,199
------- -------- ------- --------- ------ ------- -------- ---------
2,413 111 1,132 (1,853) 1,789 (136) 2,697 (3,036)
------- -------- ------- --------- ------ ------- -------- ---------
5,879 19,990 3,423 50,978 (263) 1,912 23,251 142,614
(1,249) (20) -- (62) -- -- -- --
145 -- -- -- -- -- 4,346 --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
------- -------- ------- --------- ------ ------- -------- ---------
4,775 19,970 3,423 50,916 (263) 1,912 27,597 142,614
------- -------- ------- --------- ------ ------- -------- ---------
(5,501) (34,075) 30,918 (173,148) 5,533 9,197 (51,748) (107,716)
(75) -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
(1) 41 -- (2) -- -- -- --
------- -------- ------- --------- ------ ------- -------- ---------
(5,577) (34,034) 30,918 (173,150) 5,533 9,197 (51,748) (107,716)
------- -------- ------- --------- ------ ------- -------- ---------
(802) (14,064) 34,341 (122,234) 5,270 11,109 (24,151) 34,898
------- -------- ------- --------- ------ ------- -------- ---------
$ 1,611 $(13,953) $35,473 $(124,087) $7,059 $10,973 $(21,454) $ 31,862
======= ======== ======= ========= ====== ======= ======== =========
- ------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
(AMOUNTS IN THOUSANDS)
--------------------------------------------------
PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
AST AST AST AST
MFS AST MFS ALGER JANUS
GLOBAL MFS GROWTH WITH ALL-CAP MID-CAP
EQUITY GROWTH INCOME GROWTH GROWTH
------ ------ ----------- -------- -------
INVESTMENT INCOME
Interest................................................. $ 20 $ 89 $ 55 $ 866 $ 92
Dividends................................................ 46 41 101 68 2
Foreign taxes withheld................................... (1) -- (1) (2) --
---- ------ ----- -------- ----
Total Investment Income.............................. 65 130 155 932 94
---- ------ ----- -------- ----
EXPENSES
Investment advisory fees................................. 24 95 92 739 31
Shareholder servicing fees............................... 2 11 9 76 3
Administration and accounting fees....................... 1 1 3 75 3
Custodian fees........................................... 2 -- 1 37 --
Distribution fees........................................ -- -- -- -- 1
Audit and legal fees..................................... -- -- -- 1 --
Trustees' fees........................................... -- -- -- -- --
Insurance expenses....................................... -- -- -- -- --
Miscellaneous expenses................................... -- -- -- 3 3
---- ------ ----- -------- ----
Total Expenses....................................... 29 107 105 931 41
Less: Advisory fee waivers and expense
reimbursements..................................... -- -- (8) -- --
Less: Fees paid indirectly........................... -- -- -- -- (1)
---- ------ ----- -------- ----
Net Expenses......................................... 29 107 97 931 40
---- ------ ----- -------- ----
Net Investment Income (Loss)................................ 36 23 58 1 54
---- ------ ----- -------- ----
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Securities........................................... 95 (692) (170) (37,176) 144
Foreign currency transactions........................ 1 (8) (3) -- --
Futures contracts.................................... -- -- -- -- --
Written options contracts............................ -- -- -- -- --
Swap agreements...................................... -- -- -- -- --
---- ------ ----- -------- ----
Net realized gain (loss)................................. 96 (700) (173) (37,176) 144
---- ------ ----- -------- ----
Net change in unrealized appreciation (depreciation) on:
Securities........................................... 210 1,305 584 (8,643) 132
Futures contracts.................................... -- -- -- -- --
Written option contracts............................. -- -- -- -- --
Swap agreements...................................... -- -- -- -- --
Translation of assets and liabilities denominated in
foreign currencies................................. (7) -- -- -- --
---- ------ ----- -------- ----
Net change in unrealized appreciation (depreciation)..... 203 1,305 584 (8,643) 132
---- ------ ----- -------- ----
Net gain (loss) on investments........................... 299 605 411 (45,819) 276
---- ------ ----- -------- ----
Net Increase (Decrease) in Net Assets Resulting from
Operations............................................. $335 $ 628 $ 469 $(45,818) $330
==== ====== ===== ======== ====
--------------------------------------------------------------------------------
See Notes to Financial Statements.
(This page intentionally left blank)
AMERICAN SKANDIA TRUST
STATEMENTS OF CHANGES IN NET ASSETS
(AMOUNTS IN THOUSANDS)
---------------------------------------------------------------------------------------------------
PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
AST AIM AST ALLIANCE
INTERNATIONAL EQUITY GROWTH AND INCOME AST JANCAP GROWTH
------------------------------- ------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999
---------------- ------------ ---------------- ------------ ---------------- ------------
FROM OPERATIONS
Net investment income
(loss)................. $ 5,905 $ 970 $ 8,654 $ 14,653 $ (12,171) $ 5,220
Net realized gain (loss)
on investments......... 52,857 94,950 131,196 171,133 (43,640) 477,448
Net change in unrealized
appreciation
(depreciation) on
investments............ (136,291) 209,949 (177,106) 9,189 (405,074) 1,482,720
--------- --------- ---------- ---------- ---------- -----------
Net Increase (Decrease)
in Net Assets from
Operations........... (77,529) 305,869 (37,256) 194,975 (460,885) 1,965,388
--------- --------- ---------- ---------- ---------- -----------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS
Dividends to shareholders
from net investment
income................. (1,501) -- (14,653) (13,889) (7,572) --
Distributions to
shareholders from
capital gains.......... (96,849) (40,173) (169,612) (65,834) (492,826) (130,343)
--------- --------- ---------- ---------- ---------- -----------
Total Dividends and
Distributions to
Shareholders......... (98,350) (40,173) (184,265) (79,723) (500,398) (130,343)
--------- --------- ---------- ---------- ---------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares
sold................... 385,348 466,738 251,361 593,376 1,290,700 2,869,466
Net asset value of shares
issued in reinvestment
of dividends and
distributions.......... 98,350 40,173 184,265 79,723 500,398 130,343
Cost of shares
redeemed............... (322,736) (499,556) (232,162) (471,954) (847,630) (2,166,734)
--------- --------- ---------- ---------- ---------- -----------
Increase (Decrease) in
Net Assets from
Capital Share
Transactions......... 160,962 7,355 203,464 201,145 943,468 833,075
--------- --------- ---------- ---------- ---------- -----------
Total Increase
(Decrease) in Net
Assets............. (14,917) 273,051 (18,057) 316,397 (17,815) 2,668,120)
NET ASSETS
Beginning of Period...... 770,512 497,461 1,498,306 1,181,909 5,923,778 3,255,658
--------- --------- ---------- ---------- ---------- -----------
End of Period............ $ 755,595 $ 770,512 $1,480,249 $1,498,306 $5,905,963 $ 5,923,778
========= ========= ========== ========== ========== ===========
SHARES ISSUED AND REDEEMED
Shares sold.............. 13,788 19,802 12,279 26,751 24,844 68,510
Shares issued in
reinvestment of
dividends and
distributions.......... 3,216 1,887 10,214 3,891 9,573 3,397
Shares redeemed.......... (11,407) (21,118) (11,518) (21,409) (16,433) (52,595)
--------- --------- ---------- ---------- ---------- -----------
Net Increase (Decrease)
in Shares
Outstanding.......... 5,597 571 10,975 9,233 17,984 19,312
========= ========= ========== ========== ========== ===========
--------------------------------------------------------------------------------
See Notes to Financial Statements.
- -------------------------------------------------------------------------------------------------------
PORTFOLIO
- -------------------------------------------------------------------------------------------------------
AST NEUBERGER BERMAN
AST MONEY MARKET MID-CAP VALUE AST AIM BALANCED
------------------------------- ------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999
---------------- ------------ ---------------- ------------ ---------------- ------------
$ 52,691 $ 71,758 $ 957 $ 2,177 $ 6,762 $ 10,135
(21) 8 11,510 (1,550) (9,773) 37,486
-- -- 18,496 (4,592) 13,805 37,287
----------- ----------- --------- --------- -------- --------
52,670 71,766 30,963 (3,965) 10,794 84,908
----------- ----------- --------- --------- -------- --------
(52,691) (71,758) (2,176) (3,830) (10,797) (9,982)
(8) (106) (2,619) (8,712) (36,372) (33,245)
----------- ----------- --------- --------- -------- --------
(52,699) (71,864) (4,795) (12,542) (47,169) (43,227)
----------- ----------- --------- --------- -------- --------
5,722,386 9,162,968 137,452 648,383 95,348 58,331
51,958 67,429 4,795 12,542 47,169 43,228
(6,339,076) (7,788,875) (155,051) (252,003) (14,677) (53,004)
----------- ----------- --------- --------- -------- --------
(564,732) 1,441,522 (12,804) 408,922 127,840 48,555
----------- ----------- --------- --------- -------- --------
(564,761) 1,441,424 13,364 392,415 91,465 90,236
2,409,157 967,733 664,383 271,968 499,571 409,335
----------- ----------- --------- --------- -------- --------
$ 1,844,396 $ 2,409,157 $ 677,747 $ 664,383 $591,036 $499,571
=========== =========== ========= ========= ======== ========
5,722,386 9,162,968 10,064 47,274 6,614 4,301
51,958 67,429 379 999 3,271 3,442
(6,339,075) (7,788,875) (11,448) (19,055) (1,007) (3,934)
----------- ----------- --------- --------- -------- --------
(564,731) 1,441,522 (1,005) 29,218 8,878 3,809
=========== =========== ========= ========= ======== ========
- --- -----------------------------------------------------------------
PORTFOLIO
- --- -----------------------------------------------------------------
AST FEDERATED AST T. ROWE PRICE
HIGH YIELD ASSET ALLOCATION
------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999
---------------- ------------ ---------------- ------------
$ 28,819 $ 57,676 $ 5,564 $ 10,648
(10,119) (7,097) 9,364 3,891
(32,589) (38,643) (9,795) 25,492
--------- --------- -------- --------
(13,889) 11,936 5,133 40,031
--------- --------- -------- --------
(57,675) (46,298) (10,446) (7,355)
-- (4,074) (4,195) (104)
--------- --------- -------- --------
(57,675) (50,372) (14,641) (7,459)
--------- --------- -------- --------
147,207 351,076 42,979 127,050
57,675 50,372 14,641 7,459
(152,496) (334,904) (57,310) (63,736)
--------- --------- -------- --------
52,386 66,544 310 70,773
--------- --------- -------- --------
(19,178) 28,108 (9,198) 103,345
623,788 595,680 447,542 344,197
--------- --------- -------- --------
$ 604,610 $ 623,788 $438,344 $447,542
========= ========= ======== ========
13,932 28,958 2,320 7,183
5,415 4,212 831 438
(14,101) (27,931) (3,153) (3,583)
--------- --------- -------- --------
5,246 5,239 (2) 4,038
========= ========= ======== ========
- ------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
STATEMENTS OF CHANGES IN NET ASSETS
(AMOUNTS IN THOUSANDS)
---------------------------------------------------------------------------------------------------
PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
AST PIMCO TOTAL AST INVESCO AST JANUS
RETURN BOND EQUITY INCOME SMALL-CAP GROWTH
------------------------------- ------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999
---------------- ------------ ---------------- ------------ ---------------- ------------
FROM OPERATIONS
Net investment income
(loss)................. $ 32,496 $ 54,418 $ 11,989 $ 20,214 $ (3,264) $ (2,537)
Net realized gain (loss)
on investments......... (9,448) (28,885) (1,866) 78,862 166,455 145,207
Net change in unrealized
appreciation
(depreciation) on
investments............ 17,944 (35,986) 10,016 2,582 (400,469) 550,645
---------- ---------- ---------- ---------- ---------- ----------
Net Increase (Decrease)
in Net Assets from
Operations........... 40,992 (10,453) 20,139 101,658 (237,278) 693,315
---------- ---------- ---------- ---------- ---------- ----------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS
Dividends to shareholders
from net investment
income................. (54,224) (40,382) (20,214) (15,474) -- --
Distributions to
shareholders from
capital gains.......... -- (29,828) (78,949) (23,985) (136,801) --
---------- ---------- ---------- ---------- ---------- ----------
Total Dividends and
Distributions to
Shareholders......... (54,224) (70,210) (99,163) (39,459) (136,801) --
---------- ---------- ---------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares
sold................... 253,911 406,569 221,629 375,408 135,992 917,746
Net asset value of shares
issued in reinvestment
of dividends and
distributions.......... 54,224 70,210 99,163 39,458 136,801 --
Cost of shares
redeemed............... (167,261) (286,850) (144,396) (260,483) (289,762) (453,697)
---------- ---------- ---------- ---------- ---------- ----------
Increase (Decrease) in
Net Assets from
Capital Share
Transactions......... 140,874 189,929 176,396 154,383 (16,969) 464,049
---------- ---------- ---------- ---------- ---------- ----------
Total Increase
(Decrease) in Net
Assets............. 127,642 109,266 97,372 216,582 (391,048) 1,157,364
NET ASSETS
Beginning of Period...... 1,005,763 896,497 1,048,064 831,482 1,443,211 285,847
---------- ---------- ---------- ---------- ---------- ----------
End of Period............ $1,133,405 $1,005,763 $1,145,436 $1,048,064 $1,052,163 $1,443,211
========== ========== ========== ========== ========== ==========
SHARES ISSUED AND REDEEMED
Shares sold.............. 23,766 36,437 12,945 20,846 3,217 37,569
Shares issued in
reinvestment of
dividends and
distributions.......... 5,154 6,394 6,225 2,329 3,008 --
Shares redeemed.......... (15,593) (25,872) (8,411) (14,501) (7,312) (19,931)
---------- ---------- ---------- ---------- ---------- ----------
Net Increase (Decrease)
in Shares
Outstanding.......... 13,327 16,959 10,759 8,674 (1,087) 17,638
========== ========== ========== ========== ========== ==========
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
- ---------------------------------------------------------------------------------------------------
PORTFOLIO
- ---------------------------------------------------------------------------------------------------
AST AMERICAN CENTURY AST T. ROWE PRICE AST NEUBERGER BERMAN
INTERNATIONAL GROWTH II GLOBAL BOND MID-CAP GROWTH
- ------------------------------- ------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999
- ---------------- ------------ ---------------- ------------ ---------------- ------------
$ 133 $ 2,133 $ 2,656 $ 5,163 $ (1,644) $ (1,935)
100,879 47,755 (11,187) (3,742) 91,858 13,781
(139,007) 83,119 3,695 (14,013) (36,038) 118,263
--------- --------- -------- -------- --------- ---------
(37,995) 133,007 (4,836) (12,592) 54,176 130,109
--------- --------- -------- -------- --------- ---------
(1,024) (3,236) (2,181) (9,278) -- --
(49,071) (21,765) -- (2,979) (13,633) (19,893)
--------- --------- -------- -------- --------- ---------
(50,095) (25,001) (2,181) (12,257) (13,633) (19,893)
--------- --------- -------- -------- --------- ---------
178,381 603,613 13,911 48,898 719,950 202,094
50,095 25,001 2,181 12,257 13,633 19,893
(203,926) (691,957) (10,947) (46,135) (403,004) (199,670)
--------- --------- -------- -------- --------- ---------
24,550 (63,343) 5,145 15,020 330,579 22,317
--------- --------- -------- -------- --------- ---------
(63,540) 44,663 (1,872) (9,829) 371,122 132,533
516,824 472,161 138,144 147,973 394,325 261,792
--------- --------- -------- -------- --------- ---------
$ 453,284 $ 516,824 $136,272 $138,144 $ 765,447 $ 394,325
========= ========= ======== ======== ========= =========
12,307 46,058 1,524 4,970 27,668 11,881
3,309 2,034 237 1,233 468 1,303
(13,817) (52,356) (1,198) (4,723) (15,690) (11,944)
--------- --------- -------- -------- --------- ---------
1,799 (4,264) 563 1,480 12,446 1,240
========= ========= ======== ======== ========= =========
- -----------------------------------------------------------------
PORTFOLIO
- -----------------------------------------------------------------
AST T. ROWE PRICE
AST FOUNDERS PASSPORT NATURAL RESOURCES
- ------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999
- ---------------- ------------ ---------------- ------------
$ (283) $ (654) $ 727 $ 1,045
(9,094) 60,896 6,528 (1,413)
(52,504) 36,077 (1,525) 20,106
--------- --------- -------- --------
(61,881) 96,319 5,730 19,738
--------- --------- -------- --------
-- (228) (945) (1,049)
(57,250) (256) -- (8,637)
--------- --------- -------- --------
(57,250) (484) (945) (9,686)
--------- --------- -------- --------
466,333 141,040 76,376 98,060
57,251 484 945 9,685
(281,687) (139,959) (65,173) (89,698)
--------- --------- -------- --------
241,897 1,565 12,148 18,047
--------- --------- -------- --------
122,766 97,400 16,933 28,099
217,397 119,997 102,225 74,126
--------- --------- -------- --------
$ 340,163 $ 217,397 $119,158 $102,225
========= ========= ======== ========
19,108 8,649 5,487 7,786
1,921 38 78 988
(12,200) (9,064) (4,813) (7,197)
--------- --------- -------- --------
8,829 (377) 752 1,577
========= ========= ======== ========
- ------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
STATEMENTS OF CHANGES IN NET ASSETS
(AMOUNTS IN THOUSANDS)
---------------------------------------------------------------------------------------------------
PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
AST PIMCO LIMITED AST JANUS
MATURITY BOND AST ALLIANCE GROWTH OVERSEAS GROWTH
------------------------------- ------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999
---------------- ------------ ---------------- ------------ ---------------- ------------
FROM OPERATIONS
Net investment income
(loss)................. $ 11,485 $ 21,139 $ (1,036) $ (1,417) $ 2,920 $ (1,485)
Net realized gain (loss)
on investments......... 925 (1,892) 104,882 32,038 230,410 30,229
Net change in unrealized
appreciation
(depreciation) on
investments............ (1,069) (5,992) (68,243) 60,401 (250,200) 629,896
-------- --------- -------- --------- ---------- ----------
Net Increase (Decrease)
in Net Assets from
Operations........... 11,341 13,255 35,603 91,022 (16,870) 658,640
-------- --------- -------- --------- ---------- ----------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS
Dividends to shareholders
from net investment
income................. (21,367) (18,691) -- -- (9,620) --
Distributions to
shareholders from
capital gains.......... -- -- (30,894) (33,503) (13,477) --
-------- --------- -------- --------- ---------- ----------
Total Dividends and
Distributions to
Shareholders......... (21,367) (18,691) (30,894) (33,503) (23,097) --
-------- --------- -------- --------- ---------- ----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares
sold................... 61,013 176,908 111,788 82,279 752,575 1,127,067
Net asset value of shares
issued in reinvestment
of dividends and
distributions.......... 21,367 18,691 30,894 33,504 23,097 --
Cost of shares
redeemed............... (89,237) (133,266) (67,738) (109,772) (746,598) (841,868)
-------- --------- -------- --------- ---------- ----------
Increase (Decrease) in
Net Assets from
Capital Share
Transactions......... (6,857) 62,333 74,944 6,011 29,074 285,199
-------- --------- -------- --------- ---------- ----------
Total Increase
(Decrease) in Net
Assets............. (16,883) 56,897 79,653 63,530 (10,893) 943,839
NET ASSETS
Beginning of Period...... 406,604 349,707 364,454 300,924 1,551,045 607,206
-------- --------- -------- --------- ---------- ----------
End of Period............ $389,721 $ 406,604 $444,107 $ 364,454 $1,540,152 $1,551,045
======== ========= ======== ========= ========== ==========
SHARES ISSUED AND REDEEMED
Shares sold.............. 5,853 16,533 5,690 5,458 29,674 73,126
Shares issued in
reinvestment of
dividends and
distributions.......... 2,075 1,783 1,561 2,396 801 --
Shares redeemed.......... (8,449) (12,347) (3,580) (7,346) (28,227) (55,526)
-------- --------- -------- --------- ---------- ----------
Net Increase (Decrease)
in Shares
Outstanding.......... (521) 5,969 3,671 508 2,248 17,600
======== ========= ======== ========= ========== ==========
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
- ---------------------------------------------------------------------------------------------------
PORTFOLIO
- ---------------------------------------------------------------------------------------------------
AST AMERICAN CENTURY AST AMERICAN CENTURY AST AMERICAN CENTURY
INCOME & GROWTH STRATEGIC BALANCED INTERNATIONAL GROWTH
- ------------------------------- ------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999
- ---------------- ------------ ---------------- ------------ ---------------- ------------
$ 1,474 $ 2,121 $ 2,413 $ 3,184 $ 111 $ (318)
1,238 20,971 4,775 12,632 19,970 7,972
(17,477) 31,045 (5,577) 4,767 (34,034) 53,802
-------- -------- -------- --------- --------- --------
(14,765) 54,137 1,611 20,583 (13,953) 61,456
-------- -------- -------- --------- --------- --------
(2,121) (1,630) (3,230) (936) -- --
(22,771) (9,176) (12,672) (24) (6,118) (596)
-------- -------- -------- --------- --------- --------
(24,892) (10,806) (15,902) (960) (6,118) (596)
-------- -------- -------- --------- --------- --------
164,373 146,857 21,144 117,755 302,088 98,779
24,892 10,806 15,902 960 6,118 596
(31,477) (30,235) (14,111) (12,633) (140,491) (83,742)
-------- -------- -------- --------- --------- --------
157,788 127,428 22,935 106,082 167,715 15,633
-------- -------- -------- --------- --------- --------
118,131 170,759 8,644 125,705 147,644 76,493
360,630 189,871 216,748 91,043 154,226 77,733
-------- -------- -------- --------- --------- --------
$478,761 $360,630 $225,392 $ 216,748 $ 301,870 $154,226
======== ======== ======== ========= ========= ========
11,385 10,285 1,473 8,308 14,498 6,699
1,883 844 1,176 69 261 44
(2,232) (2,180) (988) (875) (6,743) (5,549)
-------- -------- -------- --------- --------- --------
11,036 8,949 1,661 7,502 8,016 1,194
======== ======== ======== ========= ========= ========
- -----------------------------------------------------------------
PORTFOLIO
- -----------------------------------------------------------------
AST T. ROWE PRICE AST MARSICO
SMALL COMPANY VALUE CAPITAL GROWTH
- ------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999
- ---------------- ------------ ---------------- ------------
$ 1,132 $ 1,805 $ (1,853) $ (2,610)
3,423 14,768 50,916 53,167
30,918 (16,127) (173,150) 478,644
--------- --------- ---------- ----------
35,473 446 (124,087) 529,201
--------- --------- ---------- ----------
(1,649) (2,399) -- (400)
(14,365) -- (45,101) (476)
--------- --------- ---------- ----------
(16,014) (2,399) (45,101) (876)
--------- --------- ---------- ----------
123,777 129,871 479,131 922,808
16,014 2,399 45,101 876
(117,988) (172,896) (170,206) (323,239)
--------- --------- ---------- ----------
21,803 (40,626) 354,026 600,445
--------- --------- ---------- ----------
41,262 (42,579) 184,838 1,128,770
261,493 304,072 1,723,736 594,966
--------- --------- ---------- ----------
$ 302,755 $ 261,493 $1,908,574 $1,723,736
========= ========= ========== ==========
10,869 11,553 23,394 57,115
1,497 233 2,168 59
(10,373) (15,422) (8,373) (19,397)
--------- --------- ---------- ----------
1,993 (3,636) 17,189 37,777
========= ========= ========== ==========
- ------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
STATEMENTS OF CHANGES IN NET ASSETS
(AMOUNTS IN THOUSANDS)
---------------------------------------------------------------------------------------------------
PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
AST COHEN & STEERS AST LORD ABBETT AST SANFORD BERNSTEIN
REALTY SMALL CAP VALUE MANAGED INDEX 500
------------------------------- ------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999
---------------- ------------ ---------------- ------------ ---------------- ------------
FROM OPERATIONS
Net investment income
(loss)................. $ 1,789 $ 2,446 $ (136) $ (202) $ 2,697 $ 3,516
Net realized gain (loss)
on investments......... (263) (2,514) 1,912 255 27,597 40,358
Net change in unrealized
appreciation
(depreciation) on
investments............ 5,533 (181) 9,197 5,624 (51,748) 47,244
--------- --------- ---------- ---------- --------- ---------
Net Increase (Decrease)
in Net Assets from
Operations........... 7,059 (249) 10,973 5,677 (21,454) 91,118
--------- --------- ---------- ---------- --------- ---------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS
Dividends to shareholders
from net investment
income................. (2,005) (956) -- -- (3,516) (1,358)
Distributions to
shareholders from
capital gains.......... -- -- -- -- (41,829) (9,219)
--------- --------- ---------- ---------- --------- ---------
Total Dividends and
Distributions to
Shareholders......... (2,005) (956) -- -- (45,345) (10,577)
--------- --------- ---------- ---------- --------- ---------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares
sold................... 68,236 55,613 59,074 70,629 373,470 624,369
Net asset value of shares
issued in reinvestment
of dividends and
distributions.......... 2,005 956 -- -- 45,345 10,577
Cost of shares
redeemed............... (42,006) (31,692) (20,361) (43,902) (259,669) (371,471)
--------- --------- ---------- ---------- --------- ---------
Increase (Decrease) in
Net Assets from
Capital Share
Transactions......... 28,235 24,877 38,713 26,727 159,146 263,475
--------- --------- ---------- ---------- --------- ---------
Total Increase
(Decrease) in Net
Assets............. 33,289 23,672 49,686 32,404 92,347 344,016
NET ASSETS
Beginning of Period...... 56,697 33,025 74,192 41,788 633,567 289,551
--------- --------- ---------- ---------- --------- ---------
End of Period............ $ 89,986 $ 56,697 $ 123,878 $ 74,192 $ 725,914 $ 633,567
========= ========= ========== ========== ========= =========
SHARES ISSUED AND REDEEMED
Shares sold.............. 7,925 6,510 5,164 6,842 26,579 46,867
Shares issued in
reinvestment of
dividends and
distributions.......... 257 117 -- -- 3,531 847
Shares redeemed.......... (4,878) (3,773) (1,803) (4,199) (18,724) (28,014)
--------- --------- ---------- ---------- --------- ---------
Net Increase (Decrease)
in Shares
Outstanding.......... 3,304 2,854 3,361 2,643 11,386 19,700
========= ========= ========== ========== ========= =========
--------------------------------------------------------------------------------
(1) Commenced operations on January 4, 1999.
(2) Commenced operations on October 18, 1999.
(3) Commenced operations on December 31, 1999.
(4) Commenced operations on May 1, 2000.
See Notes to Financial Statements.
---------------------------------------------------------------------------------------------------
PORTFOLIO
---------------------------------------------------------------------------------------------------
AST KEMPER AST MFS
SMALL-CAP GROWTH GLOBAL EQUITY AST MFS GROWTH
------------------------------- ------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999(1) (UNAUDITED) 1999(2) (UNAUDITED) 1999(2)
---------------- ------------ ---------------- ------------ ---------------- ------------
$ (3,036) $ (2,787) $ 36 $ 1 $ 23 $ 3
142,614 51,910 96 2 (700) (6)
(107,716) 335,901 203 105 1,305 370
---------- --------- ------- ------ ------- ------
31,862 385,024 335 108 628 367
---------- --------- ------- ------ ------- ------
-- -- (2) -- (3) --
(49,192) -- (2) -- -- --
---------- --------- ------- ------ ------- ------
(49,192) -- (4) -- (3) --
---------- --------- ------- ------ ------- ------
396,149 876,431 17,495 1,309 34,585 5,575
49,192 -- 4 -- 3 --
(185,676) (419,471) (6,918) (126) (1,913) (1,074)
---------- --------- ------- ------ ------- ------
259,665 456,960 10,581 1,183 32,675 4,501
---------- --------- ------- ------ ------- ------
242,335 841,984 10,912 1,291 33,300 4,868
841,984 -- 1,291 -- 4,868 --
---------- --------- ------- ------ ------- ------
$1,084,319 $ 841,984 $12,203 $1,291 $38,168 $4,868
========== ========= ======= ====== ======= ======
25,165 95,259 1,622 129 3,012 535
2,839 -- -- -- -- --
(11,893) (41,240) (641) (12) (169) (104)
---------- --------- ------- ------ ------- ------
16,111 54,019 981 117 2,843 431
========== ========= ======= ====== ======= ======
- ---------------------------------------------------------------------
PORTFOLIO
- ---------------------------------------------------------------------
AST MFS AST ALGER AST JANUS
GROWTH WITH INCOME ALL-CAP GROWTH MID-CAP GROWTH
- ------------------------------- ---------------- ----------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 DECEMBER 31, JUNE 30, 2000 JUNE 30, 2000
(UNAUDITED) 1999(2) (UNAUDITED)(3) (UNAUDITED)(4)
- ---------------- ------------ ---------------- ----------------
$ 58 $ 11 $ 1 $ 54
(173) (3) (37,176) 144
584 274 (8,643) 132
------- ------ -------- -------
469 282 (45,818) 330
------- ------ -------- -------
(11) -- -- --
-- -- -- --
------- ------ -------- -------
(11) -- -- --
------- ------ -------- -------
29,467 8,585 319,213 35,613
11 -- -- --
(4,025) (110) (34,597) (2,279)
------- ------ -------- -------
25,453 8,475 284,616 33,334
------- ------ -------- -------
25,911 8,757 238,798 33,664
8,757 -- -- --
------- ------ -------- -------
$34,668 $8,757 $238,798 $33,664
======= ====== ======== =======
2,823 843 30,678 3,555
1 -- -- --
(392) (11) (3,463) (245)
2,432 832 27,215 3,310
======= ====== ======== =======
--------------------------------------------------------------------------------
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
VALUE INVESTMENT NET REALIZED TOTAL FROM FROM NET FROM NET
PERIOD BEGINNING INCOME & UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
PORTFOLIO ENDED OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
- -------------------------- -------- --------- ---------- ------------ ---------- ---------- -------- -------------
AST AIM 06/30/00** $34.23 $ 0.27 $ (3.29) $ (3.02) $ (0.07) $ (4.26) $ (4.33)
International Equity 12/31/99 22.67 0.05 13.36 13.41 -- (1.85) (1.85)
12/31/98 21.29 0.20 3.81 4.01 (0.67) (1.96) (2.63)
12/31/97 19.22 0.36 2.96 3.32 (0.30) (0.95) (1.25)
12/31/96 18.20 0.16 1.55 1.71 (0.32) (0.37) (0.69)
12/31/95 17.61 0.14 1.44 1.58 -- (0.99) (0.99)
AST Alliance 06/30/00** $23.50 $ 0.12 $ (0.93) $ (0.81) $ (0.23) $ (2.65) $ (2.88)
Growth and Income 12/31/99 21.68 0.23 3.04 3.27 (0.25) (1.20) (1.45)
12/31/98 20.53 0.25 2.23 2.48 (0.25) (1.08) (1.33)
12/31/97 17.17 0.24 3.76 4.00 (0.23) (0.41) (0.64)
12/31/96 14.98 0.23 2.48 2.71 (0.17) (0.35) (0.52)
12/31/95 12.00 0.16 3.22 3.38 (0.20) (0.20) (0.40)
AST JanCap Growth 06/30/00** $55.21 $ (0.10) $ (3.45) $ (3.55) $ (0.07) $ (4.45) $ (4.52)
12/31/99 37.00 0.05 19.65 19.70 -- (1.49) (1.49)
12/31/98 23.15 0.04 15.10 15.14 (0.08) (1.21) (1.29)
12/31/97 18.79 0.06 5.16 5.22 (0.05) (0.81) (0.86)
12/31/96 15.40 0.02 4.19 4.21 (0.02) (0.80) (0.82)
12/31/95 11.22 0.06 4.18 4.24 (0.06) -- (0.06)
AST Money Market 06/30/00** $ 1.00 $0.0263 $ -- $0.0263 $(0.0263) $ -- $(0.0263)
12/31/99 1.00 0.0449 0.0001 0.0450 (0.0449) (0.0001) (0.0450)
12/31/98 1.00 0.0502 0.0002 0.0504 (0.0502) (0.0002) (0.0504)
12/31/97 1.00 0.0507 0.0002 0.0509 (0.0507) (0.0002) (0.0509)
12/31/96 1.00 0.0492 0.0005 0.0497 (0.0492) (0.0005) (0.0497)
12/31/95 1.00 0.0494 -- 0.0494 (0.0494) -- (0.0494)
AST Neuberger Berman 06/30/00** $13.32 $ 0.02 $ 0.62 $ 0.64 $ (0.04) $ (0.05) $ (0.09)
Mid-Cap Value 12/31/99 13.16 0.10 0.60 0.70 (0.24) (0.30) (0.54)
12/31/98 15.15 0.21 (0.52) (0.31) (0.36) (1.32) (1.68)
12/31/97 12.83 0.32 2.87 3.19 (0.36) (0.51) (0.87)
12/31/96 11.94 0.36 0.97 1.33 (0.44) -- (0.44)
12/31/95 9.87 0.40 2.09 2.49 (0.42) -- (0.42)
AST AIM Balanced 06/30/00** $15.24 $ 0.16 $ 0.18 $ 0.34 $ (0.32) $ (1.07) $ (1.39)
12/31/99 14.13 0.32 2.30 2.62 (0.35) (1.16) (1.51)
12/31/98 13.64 0.34 1.31 1.65 (0.35) (0.81) (1.16)
12/31/97 13.19 0.33 1.85 2.18 (0.31) (1.42) (1.73)
12/31/96 12.53 0.32 1.02 1.34 (0.25) (0.43) (0.68)
12/31/95 10.49 0.26 2.06 2.32 (0.28) -- (0.28)
--------------------------------------------------------------------------------
(1) Annualized.
* For 1999 and 2000, includes commissions received by American
Skandia Marketing, Inc. under the Portfolio's Distribution
Plan, as described in Note 3 to the Financial Statements.
** Unaudited.
See Notes to Financial Statements.
- ----------------------------------------------------------------------------------------------------------
RATIO OF EXPENSES
SUPPLEMENTAL DATA TO AVERAGE NET ASSETS*
----------------------------------- --------------------------------
NET ASSET AFTER ADVISORY BEFORE ADVISORY RATIO OF NET
VALUE NET ASSETS AT PORTFOLIO FEE WAIVER FEE WAIVER INVESTMENT INCOME
END TOTAL END OF PERIOD TURNOVER AND EXPENSE AND EXPENSE (LOSS) TO AVERAGE
OF PERIOD RETURN (IN 000'S) RATE REIMBURSEMENT REIMBURSEMENT NET ASSETS
--------- ------- ------------- --------- -------------- --------------- -----------------
$26.88 (10.35%) $ 755,595 44% 1.18%(1) 1.18%(1) 1.59%(1)
34.23 64.13% 770,512 159% 1.18% 1.18% 0.18%
22.67 20.10% 497,461 117% 1.13% 1.13% 0.69%
21.29 18.15% 412,270 116% 1.15% 1.15% 1.04%
19.22 9.65% 346,211 124% 1.16% 1.26% 0.88%
18.20 10.00% 268,056 59% 1.17% 1.27% 0.88%
$19.81 (2.22%) $1,480,249 86% 1.10%(1) 1.12%(1) 1.18%(1)
23.50 16.09% 1,498,306 69% 0.92% 0.94% 1.09%
21.68 12.48% 1,181,909 78% 0.91% 0.91% 1.32%
20.53 23.92% 936,986 41% 0.93% 0.93% 1.60%
17.17 18.56% 530,497 43% 0.97% 0.97% 1.92%
14.98 28.91% 288,749 50% 0.99% 0.99% 2.50%
$47.14 (7.24%) $5,905,963 16% 1.01%(1) 1.05%(1) (0.40%)(1)
55.21 55.01% 5,923,778 35% 1.00% 1.04% 0.12%
37.00 68.26% 3,255,658 42% 1.02% 1.04% 0.16%
23.15 28.66% 1,511,602 94% 1.07% 1.08% 0.24%
18.79 28.36% 892,324 79% 1.10% 1.10% 0.25%
15.40 37.98% 431,321 113% 1.12% 1.12% 0.51%
$ 1.00 2.66% $1,844,396 N/A 0.60%(1) 0.65%(1) 5.29%(1)
1.00 4.60% 2,409,157 N/A 0.60% 0.65% 4.52%
1.00 5.14% 967,733 N/A 0.60% 0.66% 4.99%
1.00 5.18% 759,888 N/A 0.60% 0.69% 5.06%
1.00 5.08% 549,470 N/A 0.60% 0.71% 4.87%
1.00 5.05% 344,225 N/A 0.60% 0.72% 5.38%
$13.87 4.95% $ 677,747 92% 1.23%(1) 1.23%(1) 0.29%(1)
13.32 5.67% 664,383 176% 1.13% 1.13% 0.39%
13.16 (2.33%) 271,968 208% 1.05% 1.05% 1.83%
15.15 26.42% 201,143 91% 0.90% 0.90% 3.34%
12.83 11.53% 123,138 81% 0.93% 0.93% 3.14%
11.94 26.13% 107,399 71% 0.93% 0.93% 4.58%
$14.19 2.03% $ 591,036 33% 0.97%(1) 0.97%(1) 2.49%(1)
15.24 20.85% 499,571 154% 1.00% 1.00% 2.37%
14.13 12.86% 409,335 139% 1.00% 1.00% 2.55%
13.64 18.28% 357,591 170% 1.03% 1.03% 2.81%
13.19 11.23% 286,479 276% 0.94% 0.94% 2.66%
12.53 22.60% 255,206 161% 0.94% 0.94% 3.28%
--------------------------------------------------------------------------------
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
VALUE INVESTMENT NET REALIZED TOTAL FROM FROM NET FROM NET
PERIOD BEGINNING INCOME & UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
PORTFOLIO ENDED OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
- ------------------------- -------- --------- ---------- ------------ ---------- ---------- -------- -------------
AST Federated 06/30/00** $11.92 $ 0.55 $(0.81) $(0.26) $(1.16) $ -- $(1.16)
High Yield 12/31/99 12.65 1.03 (0.77) 0.26 (0.91) (0.08) (0.99)
12/31/98 13.11 0.91 (0.57) 0.34 (0.76) (0.04) (0.80)
12/31/97 12.13 0.75 0.83 1.58 (0.54) (0.06) (0.60)
12/31/96 11.14 0.56 0.90 1.46 (0.47) -- (0.47)
12/31/95 9.69 0.38 1.46 1.84 (0.39) -- (0.39)
AST T. Rowe Price 06/30/00** $18.86 $ 0.24 $ -- $ 0.24 $(0.45) $(0.18) $(0.63)
Asset Allocation 12/31/99 17.47 0.44 1.32 1.76 (0.36) (0.01) (0.37)
12/31/98 15.13 0.35 2.38 2.73 (0.33) (0.06) (0.39)
12/31/97 13.27 0.33 2.03 2.36 (0.26) (0.24) (0.50)
12/31/96 12.01 0.27 1.28 1.55 (0.25) (0.04) (0.29)
12/31/95 9.94 0.26 2.02 2.28 (0.21) -- (0.21)
AST PIMCO Total 06/30/00** $10.99 $ 0.32 $ 0.10 $ 0.42 $(0.60) $ -- $(0.60)
Return Bond 12/31/99 12.02 0.58 (0.71) (0.13) (0.52) (0.38) (0.90)
12/31/98 11.72 0.49 0.56 1.05 (0.51) (0.24) (0.75)
12/31/97 11.11 0.48 0.58 1.06 (0.45) -- (0.45)
12/31/96 11.34 0.46 (0.10) 0.36 (0.28) (0.31) (0.59)
12/31/95 9.75 0.25 1.55 1.80 (0.21) -- (0.21)
AST INVESCO 06/30/00** $18.65 $ 0.18 $ 0.04 $ 0.22 $(0.36) $(1.40) $(1.76)
Equity Income 12/31/99 17.50 0.36 1.61 1.97 (0.32) (0.50) (0.82)
12/31/98 16.51 0.31 1.81 2.12 (0.32) (0.81) (1.13)
12/31/97 13.99 0.31 2.84 3.15 (0.26) (0.37) (0.63)
12/31/96 12.50 0.27 1.79 2.06 (0.24) (0.33) (0.57)
12/31/95 9.75 0.25 2.65 2.90 (0.15) -- (0.15)
AST Janus 06/30/00** $42.61 $(0.10) $(6.41) $(6.51) $ -- $(4.01) $(4.01)
Small-Cap Growth 12/31/99 17.61 (0.03) 25.03 25.00 -- -- --
12/31/98 17.81 (0.08) 0.73 0.65 -- (0.85) (0.85)
12/31/97 16.80 (0.05) 1.06 1.01 -- -- --
12/31/96 14.25 (0.03) 2.85 2.82 -- (0.27) (0.27)
12/31/95 10.84 (0.04) 3.54 3.50 (0.09) -- (0.09)
AST American Century 06/30/00** $16.67 $(0.01) $(1.17) $(1.18) $(0.03) $(1.64) $(1.67)
International Growth II 12/31/99 13.39 0.06 3.95 4.01 (0.09) (0.64) (0.73)
12/31/98 12.09 0.08 1.59 1.67 (0.14) (0.23) (0.37)
12/31/97 12.07 0.09 0.08 0.17 (0.07) (0.08) (0.15)
12/31/96 10.65 0.06 1.44 1.50 (0.08) -- (0.08)
12/31/95 9.62 0.07 0.99 1.06 (0.01) (0.02) (0.03)
--------------------------------------------------------------------------------
(1) Annualized.
* For 1999 and 2000, includes commissions received by American
Skandia Marketing, Inc. under the Portfolio's Distribution
Plan, as described in Note 3 to the Financial Statements.
** Unaudited.
See Notes to Financial Statements.
- ---------------------------------------------------------------------------------------------------------
RATIOS OF EXPENSES
SUPPLEMENTAL DATA TO AVERAGE NET ASSETS*
---------------------------------- --------------------------------
NET ASSET AFTER ADVISORY BEFORE ADVISORY RATIO OF NET
VALUE NET ASSETS AT PORTFOLIO FEE WAIVER FEE WAIVER INVESTMENT INCOME
END TOTAL END OF PERIOD TURNOVER AND EXPENSE AND EXPENSE (LOSS) TO AVERAGE
OF PERIOD RETURN (IN 000'S) RATE REIMBURSEMENT REIMBURSEMENT NET ASSETS
--------- ------ ------------- --------- -------------- --------------- -----------------
$10.50 (2.35%) $ 604,610 13% 0.95%(1) 0.95%(1) 10.14%(1)
11.92 2.00% 623,788 39% 0.94% 0.94% 9.09%
12.65 2.61% 595,680 36% 0.95% 0.95% 8.64%
13.11 13.59% 434,420 28% 0.98% 0.98% 8.83%
12.13 13.58% 205,262 43% 1.03% 1.03% 8.02%
11.14 19.57% 83,692 30% 1.11% 1.11% 8.72%
$18.47 1.44% $ 438,344 17% 1.07%(1) 1.07%(1) 2.60%(1)
18.86 10.28% 447,542 17% 1.07% 1.07% 2.65%
17.47 18.36% 344,197 8% 1.09% 1.09% 2.70%
15.13 18.40% 213,075 10% 1.13% 1.13% 2.95%
13.27 13.14% 120,149 31% 1.20% 1.20% 3.02%
12.01 23.36% 59,399 18% 1.25% 1.29% 3.53%
$10.81 3.97% $1,133,405 155% 0.82%(1) 0.82%(1) 6.17%(1)
10.99 (1.09%) 1,005,763 227% 0.82% 0.82% 5.46%
12.02 9.46% 896,497 231% 0.83% 0.83% 5.24%
11.72 9.87% 572,100 320% 0.86% 0.86% 5.56%
11.11 3.42% 360,010 403% 0.89% 0.89% 5.38%
11.34 18.78% 225,335 124% 0.89% 0.89% 5.95%
$17.11 1.88% $1,145,436 33% 0.95%(1) 0.95%(1) 2.21%(1)
18.65 11.74% 1,048,064 76% 0.93% 0.93% 2.10%
17.50 13.34% 831,482 67% 0.93% 0.93% 2.17%
16.51 23.33% 602,105 73% 0.95% 0.95% 2.54%
13.99 17.09% 348,680 58% 0.98% 0.98% 2.83%
12.50 30.07% 176,716 89% 0.98% 0.98% 3.34%
$32.09 (18.05%) $1,052,163 53% 1.05%(1) 1.05%(1) (0.50%)(1)
42.61 141.96% 1,443,211 116% 1.08% 1.08% (0.46%)
17.61 3.49% 285,847 100% 1.12% 1.12% (0.53%)
17.81 6.01% 278,258 77% 1.13% 1.13% (0.32%)
16.80 20.05% 220,068 69% 1.16% 1.16% (0.38%)
14.25 32.56% 90,460 68% 1.22% 1.22% (0.28%)
$13.82 (7.91%) $ 453,284 102% 1.26%(1) 1.26%(1) 0.06%(1)
16.67 31.95% 516,824 29% 1.26% 1.26% 0.47%
13.39 14.03% 472,161 32% 1.25% 1.25% 0.60%
12.09 1.36% 464,456 19% 1.26% 1.26% 0.71%
12.07 14.17% 402,559 11% 1.30% 1.30% 0.84%
10.65 11.09% 195,667 17% 1.33% 1.33% 1.03%
--------------------------------------------------------------------------------
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
VALUE INVESTMENT NET REALIZED TOTAL FROM FROM NET FROM NET
PERIOD BEGINNING INCOME & UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
PORTFOLIO ENDED OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
- ------------------------- -------- --------- ---------- ------------ ---------- ---------- -------- -------------
AST T. Rowe Price 06/30/00** $ 9.60 $ 0.17 $(0.51) $(0.34) $(0.15) $ -- $(0.15)
Global Bond 12/31/99 11.46 0.33 (1.25) (0.92) (0.71) (0.23) (0.94)
12/31/98 10.11 0.52 0.94 1.46 (0.03) (0.08) (0.11)
12/31/97 10.90 0.20 (0.57) (0.37) (0.16) (0.26) (0.42)
12/31/96 10.60 0.23 0.38 0.61 (0.14) (0.17) (0.31)
12/31/95 9.68 0.31 0.75 1.06 (0.14) -- (0.14)
AST Neuberger Berman 06/30/00** $24.03 $ 0.01 $ 3.11 $ 3.12 $ -- $(0.62) $(0.62)
Mid-Cap Growth 12/31/99 17.26 (0.11) 8.21 8.10 -- (1.33) (1.33)
12/31/98 16.61 (0.05) 3.31 3.26 (0.01) (2.60) (2.61)
12/31/97 14.39 0.01 2.36 2.37 (0.02) (0.13) (0.15)
12/31/96 12.40 0.01 2.01 2.02 (0.03) -- (0.03)
12/31/95 9.97 0.04 2.40 2.44 (0.01) -- (0.01)
AST Founders Passport 06/30/00** $24.63 $(0.01) $(0.80) $(0.81) $ -- $(4.55) $(4.55)
12/31/99 13.04 (0.07) 11.72 11.65 (0.03) (0.03) (0.06)
12/31/98 11.78 0.05 1.24 1.29 (0.03) -- (0.03)
12/31/97 11.63 0.03 0.21 0.24 (0.08) (0.01) (0.09)
12/31/96 10.33 0.09 1.24 1.33 (0.03) -- (0.03)
12/31/95(2) 10.00 0.03 0.30 0.33 -- -- --
AST T. Rowe Price 06/30/00** $13.16 $ 0.10 $ 0.87 $ 0.97 $(0.14) $ -- $(0.14)
Natural Resources 12/31/99 11.97 0.14 2.67 2.81 (0.18) (1.44) (1.62)
12/31/98 14.57 0.19 (1.78) (1.59) (0.14) (0.87) (1.01)
12/31/97 14.47 0.14 0.35 0.49 (0.07) (0.32) (0.39)
12/31/96 11.11 0.05 3.35 3.40 (0.02) (0.02) (0.04)
12/31/95(2) 10.00 0.04 1.07 1.11 -- -- --
AST PIMCO Limited 06/30/00** $10.84 $ 0.36 $(0.05) $ 0.31 $(0.62) $ -- $(0.62)
Maturity Bond 12/31/99 11.08 0.59 (0.22) 0.37 (0.61) -- (0.61)
12/31/98 11.02 0.56 0.03 0.59 (0.53) -- (0.53)
12/31/97 10.81 0.55 0.22 0.77 (0.56) -- (0.56)
12/31/96 10.47 0.56 (0.15) 0.41 (0.05) (0.02) (0.07)
12/31/95(2) 10.00 0.05 0.42 0.47 -- -- --
AST Alliance Growth 06/30/00** $18.95 $(0.02) $ 2.02 $ 2.00 $ -- $(1.56) $(1.56)
12/31/99 16.07 (0.07) 4.85 4.78 -- (1.90) (1.90)
12/31/98 12.62 (0.10) 3.55 3.45 -- -- --
12/31/97 10.99 (0.05) 1.68 1.63 -- -- --
12/31/96(3) 10.00 (0.01) 1.00 0.99 -- -- --
--------------------------------------------------------------------------------
(1) Annualized.
(2) Commenced operations on May 2, 1995.
(3) Commenced operations on May 2, 1996.
* For 1999 and 2000, includes commissions received by American Skandia
Marketing, Inc. under the Portfolio's Distribution Plan, as described in Note
3 to the Financial Statements.
** Unaudited.
See Notes to Financial Statements.
138
- ----------------------------------------------------------------------------------------------------------
RATIOS OF EXPENSES
SUPPLEMENTAL DATA TO AVERAGE NET ASSETS*
----------------------------------------------- --------------------------------
NET ASSET NET ASSETS AT AFTER ADVISORY BEFORE ADVISORY RATIO OF NET
VALUE END OF PORTFOLIO FEE WAIVER FEE WAIVER INVESTMENT INCOME
END TOTAL PERIOD TURNOVER AND EXPENSE AND EXPENSE (LOSS) TO AVERAGE
OF PERIOD RETURN (IN 000'S) RATE REIMBURSEMENT REIMBURSEMENT NET ASSETS
--------- ------- ------------- --------- -------------- --------------- -----------------
$ 9.11 (3.53%) $ 136,272 108% 1.12%(1) 1.12%(1) 4.00%(1)
9.60 (8.33%) 138,144 106% 1.11% 1.11% 3.51%
11.46 14.72% 147,973 136% 1.11% 1.11% 4.78%
10.11 (3.42%) 130,408 173% 1.11% 1.11% 4.73%
10.90 5.98% 98,235 241% 1.21% 1.21% 5.02%
10.60 11.10% 45,602 325% 1.53% 1.53% 6.17%
$26.53 12.75% $ 765,447 55% 1.08%(1) 1.08%(1) (0.55%)(1)
24.03 51.37% 394,325 148% 1.13% 1.13% (0.71%)
17.26 20.65% 261,792 228% 1.07% 1.07% (0.34%)
16.61 16.68% 185,050 305% 0.99% 0.99% 0.07%
14.39 16.34% 136,247 156% 1.01% 1.01% 0.24%
12.40 24.42% 45,979 84% 1.17% 1.17% 0.70%
$19.27 (9.83%) $ 340,163 264% 1.22%(1) 1.22%(1) (0.16%)(1)
24.63 89.71% 217,397 309% 1.29% 1.29% (0.54%)
13.04 10.92% 119,997 46% 1.30% 1.30% 0.32%
11.78 2.03% 117,938 73% 1.35% 1.35% 0.43%
11.63 12.91% 117,643 133% 1.36% 1.36% 1.25%
10.33 3.30% 28,455 4% 1.46%(1) 1.46%(1) 0.94%(1)
$13.99 7.50% $ 119,158 61% 1.25%(1) 1.25%(1) 1.35%(1)
13.16 28.11% 102,225 72% 1.16% 1.16% 1.11%
11.97 (11.83%) 74,126 55% 1.16% 1.16% 1.14%
14.57 3.39% 111,954 44% 1.16% 1.16% 0.98%
14.47 30.74% 88,534 31% 1.30% 1.30% 1.08%
11.11 11.10% 9,262 2% 1.35%(1) 1.80%(1) 1.28%(1)
$10.53 3.04% $ 389,721 34% 0.86%(1) 0.86%(1) 5.96%(1)
10.84 3.37% 406,604 178% 0.86% 0.86% 5.51%
11.08 5.72% 349,707 263% 0.86% 0.86% 5.70%
11.02 7.46% 288,642 54% 0.88% 0.88% 5.71%
10.81 3.90% 209,013 247% 0.89% 0.89% 5.69%
10.47 4.70% 161,940 205% 0.89%(1) 0.89%(1) 4.87%(1)
$19.39 10.40% $ 444,107 91% 1.22%(1) 1.22%(1) (0.50%)(1)
18.95 33.91% 364,454 316% 1.11% 1.11% (0.50%)
16.07 27.34% 300,924 252% 1.22% 1.22% (0.70%)
12.62 14.83% 235,648 219% 1.23% 1.23% (0.59%)
10.99 9.90% 48,790 77% 1.33%(1) 1.33%(1) (0.56%)(1)
- ----------------------------------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
FINANCIAL HIGHLIGHTS
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------- -------------------------------------
NET ASSET NET
VALUE INVESTMENT NET REALIZED TOTAL FROM FROM NET FROM NET
PERIOD BEGINNING INCOME & UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
PORTFOLIO ENDED OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
- --------------------------- -------- --------- ---------- ------------ ---------- ---------- -------- ----------
AST Janus Overseas 06/30/00** $25.10 $ 0.02 $(0.76) $(0.74) $(0.13) $(0.18) $(0.31)
Growth 12/31/99 13.74 (0.03) 11.39 11.36 -- -- --
12/31/98 11.87 0.04 1.88 1.92 (0.05) -- (0.05)
12/31/97(4) 10.00 0.02 1.85 1.87 -- -- --
AST American Century 06/30/00** $15.65 $ 0.03 $(0.67) $(0.64) $(0.08) $(0.88) $(0.96)
Income & Growth 12/31/99 13.47 0.09 2.84 2.93 (0.11) (0.64) (0.75)
12/31/98 12.23 0.11 1.38 1.49 (0.07) (0.18) (0.25)
12/31/97(4) 10.00 0.07 2.16 2.23 -- -- --
AST American Century 06/30/00** $15.30 $ 0.15 $(0.10) $ 0.05 $(0.23) $(0.88) $(1.11)
Strategic Balanced 12/31/99 13.66 0.20 1.56 1.76 (0.12) -- (0.12)
12/31/98 11.34 0.11 2.29 2.40 (0.08) -- (0.08)
12/31/97(4) 10.00 0.11 1.23 1.34 -- -- --
AST American Century 06/30/00** $22.40 $ 0.04 $(1.36) $(1.32) $ -- $(0.82) $(0.82)
International Growth 12/31/99 13.66 (0.04) 8.88 8.84 -- (0.10) (0.10)
12/31/98 11.52 0.03 2.12 2.15 (0.01) -- (0.01)
12/31/97(4) 10.00 (0.03) 1.55 1.52 -- -- --
AST T. Rowe Price 06/30/00** $11.39 $ 0.05 $ 1.40 $ 1.45 $(0.07) $(0.63) $(0.70)
Small Company Value 12/31/99 11.44 0.08 (0.03) 0.05 (0.10) -- (0.10)
12/31/98 12.88 0.09 (1.42) (1.33) (0.05) (0.06) (0.11)
12/31/97(4) 10.00 0.06 2.82 2.88 -- -- --
AST Marsico Capital 06/30/00** $21.63 $(0.01) $(1.40) $(1.41) $ -- $(0.52) $(0.52)
Growth 12/31/99 14.20 (0.03) 7.48 7.45 (0.01) (0.01) (0.02)
12/31/98 10.03 -- 4.17 4.17 -- -- --
12/31/97(5) 10.00 0.01 0.02 0.03 -- -- --
AST Cohen & Steers 06/30/00** $ 8.36 $ 0.14 $ 0.70 $ 0.84 $(0.28) $ -- $(0.28)
Realty 12/31/99 8.41 0.33 (0.15) 0.18 (0.23) -- (0.23)
12/31/98(6) 10.00 0.28 (1.87) (1.59) -- -- --
AST Lord Abbett 06/30/00** $10.87 $ -- $ 1.29 $ 1.29 $ -- $ -- $ --
Small Cap Value 12/31/99 9.99 (0.03) 0.91 0.88 -- -- --
12/31/98(6) 10.00 (0.01) -- (0.01) -- -- --
AST Sanford Bernstein 06/30/00** $14.96 $ 0.05 $(0.47) $(0.42) $(0.08) $(0.95) $(1.03)
Managed Index 500 12/31/99 12.78 0.08 2.56 2.64 (0.06) (0.40) (0.46)
12/31/98(6) 10.00 0.06 2.72 2.78 -- -- --
- ------------------------------------------------------------------------------
(1) Annualized.
(4) Commenced operations on January 2, 1997.
(5) Commenced operations on December 22, 1997.
(6) Commenced operations on January 2, 1998.
* For 1999 and 2000, includes commissions received by American Skandia
Marketing, Inc. under the Portfolio's Distribution Plan, as described in Note
3 to the Financial Statements.
** Unaudited.
See Notes to Financial Statements.
- ----------------------------------------------------------------------------------------------------------
RATIOS OF EXPENSES
SUPPLEMENTAL DATA TO AVERAGE NET ASSETS*
----------------------------------------------- --------------------------------
NET ASSET NET ASSETS AT AFTER ADVISORY BEFORE ADVISORY RATIO OF NET
VALUE END OF PORTFOLIO FEE WAIVER FEE WAIVER INVESTMENT INCOME
END TOTAL PERIOD TURNOVER AND EXPENSE AND EXPENSE (LOSS) TO AVERAGE
OF PERIOD RETURN (IN 000'S) RATE REIMBURSEMENT REIMBURSEMENT NET ASSETS
--------- ------- ------------- --------- -------------- --------------- -----------------
$24.05 (3.16%) $1,540,152 56% 1.17%(1) 1.18%(1) 0.33%(1)
25.10 82.68% 1,551,045 76% 1.23% 1.23% (0.18%)
13.74 16.22% 607,206 97% 1.27% 1.27% 0.32%
11.87 18.70% 255,705 94% 1.35%(1) 1.35%(1) 0.36%(1)
$14.05 (3.71%) $ 478,761 29% 0.94%(1) 0.94%(1) 0.70%(1)
15.65 22.98% 360,630 125% 0.98% 0.98% 0.86%
13.47 12.27% 189,871 87% 1.00% 1.00% 1.05%
12.23 22.30% 117,438 81% 1.23%(1) 1.23%(1) 1.24%(1)
$14.24 0.71% $ 225,392 64% 1.09%(1) 1.09%(1) 2.22%(1)
15.30 12.97% 216,748 104% 1.10% 1.10% 1.93%
13.66 21.29% 91,043 95% 1.16% 1.13% 1.68%
11.34 13.40% 28,947 76% 1.25%(1) 1.35%(1) 2.02%(1)
$20.26 (6.40%) $ 301,870 54% 1.32%(1) 1.32%(1) 0.11%(1)
22.40 65.20% 154,226 112% 1.50% 1.50% (0.32%)
13.66 18.68% 77,733 220% 1.65% 1.65% 0.10%
11.52 15.10% 33,125 171% 1.75%(1) 1.75%(1) (0.58%)(1)
$12.14 13.62% $ 302,755 15% 1.12%(1) 1.12%(1) 0.84%(1)
11.39 0.58% 261,493 26% 1.11% 1.11% 0.64%
11.44 (10.53%) 304,072 10% 1.11% 1.11% 0.93%
12.88 28.80% 199,896 7% 1.16%(1) 1.16% 1.20%(1)
$19.70 (6.67%) $1,908,574 61% 1.05%(1) 1.06%(1) (0.21%)(1)
21.63 52.58% 1,723,736 115% 1.08% 1.08% (0.25%)
14.20 41.59% 594,966 213% 1.11% 1.11% 0.16%
10.03 0.30% 7,299 -- 1.00%(1) 1.00%(1) 3.62%(1)
$ 8.92 10.57% $ 89,986 34% 1.31%(1) 1.31%(1) 4.97%(1)
8.36 2.26% 56,697 51% 1.27% 1.27% 4.95%
8.41 (16.00%) 33,025 18% 1.30%(1) 1.30%(1) 5.02%(1)
$12.16 11.87% $ 123,878 36% 1.17%(1) 1.17%(1) (0.29%)(1)
10.87 8.81% 74,192 85% 1.24% 1.24% (0.36%)
9.99 (0.10%) 41,788 58% 1.31%(1) 1.31%(1) (0.21%)(1)
$13.51 (2.47%) $ 725,914 78% 0.73%(1) 0.73%(1) 0.78%(1)
14.96 21.23% 633,567 101% 0.79% 0.77% 0.74%
12.78 27.90% 289,551 162% 0.80%(1) 0.86%(1) 1.07%(1)
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AMERICAN SKANDIA TRUST
FINANCIAL HIGHLIGHTS
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
- ----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------- -------------------------------------
NET ASSET NET
VALUE INVESTMENT NET REALIZED TOTAL FROM FROM NET FROM NET
PERIOD BEGINNING INCOME & UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
PORTFOLIO ENDED OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
- --------------------------- -------- --------- ---------- ------------ ---------- ---------- -------- -----------
AST Kemper 06/30/00** $15.59 $(0.03) $ 0.79 $ 0.76 $ -- $(0.89) $(0.89)
Small-Cap Growth 12/31/99(7) 10.00 (0.05) 5.64 5.59 -- -- --
AST MFS Global Equity 06/30/00** $11.03 $ 0.04 $ 0.06 $ 0.10 $(0.01) $(0.01) $(0.02)
12/31/99(8) 10.00 0.01 1.02 1.03 -- -- --
AST MFS Growth 06/30/00** $11.30 $ 0.01 $ 0.35 $ 0.36 $ -- $ -- $ --
12/31/99(8) 10.00 0.01 1.29 1.30 -- -- --
AST MFS Growth 06/30/00** $10.52 $ 0.03 $ 0.08 $ 0.11 $(0.01) $ -- $(0.01)
with Income 12/31/99(8) 10.00 0.01 0.51 0.52 -- -- --
AST Alger 06/30/00**(9) $10.00 $ -- $(1.23) $(1.23) $ -- $ -- $ --
All-Cap Growth
AST Janus Mid-Cap Growth 06/30/00**(10) $10.00 $ 0.02 $ 0.15 $ 0.17 $ -- $ -- $ --
- ------------------------------------------------------------------------------
(1) Annualized.
(7) Commenced operations on January 4, 1999.
(8) Commenced operations on October 18, 1999.
(9) Commenced operations on December 31, 1999.
(10) Commenced operations on May 1, 2000.
* For 1999 and 2000, includes commissions received by American
Skandia Marketing, Inc. under the Portfolio's Distribution
Plan, as described in Note 3 to the Financial Statements.
** Unaudited.
See Notes to Financial Statements.
- ----------------------------------------------------------------------------------------------------------
RATIOS OF EXPENSES
SUPPLEMENTAL DATA TO AVERAGE NET ASSETS*
----------------------------------------------- --------------------------------
NET ASSET NET ASSETS AT AFTER ADVISORY BEFORE ADVISORY RATIO OF NET
VALUE END OF PORTFOLIO FEE WAIVER FEE WAIVER INVESTMENT INCOME
END TOTAL PERIOD TURNOVER AND EXPENSE AND EXPENSE (LOSS) TO AVERAGE
OF PERIOD RETURN (IN 000'S) RATE REIMBURSEMENT REIMBURSEMENT NET ASSETS
--------- ------- ------------- --------- -------------- --------------- -----------------
$15.46 4.27% $1,084,319 65% 1.12%(1) 1.12%(1) (0.65%)(1)
15.59 55.90% 841,984 133% 1.14%(1) 1.14%(1) (0.67%)(1)
$11.11 0.80% $ 12,203 35% 1.20%(1) 1.20%(1) 1.48%(1)
11.03 10.40% 1,291 142% 1.75%(1) 2.11%(1) 0.75%(1)
$11.66 3.21% $ 38,168 102% 1.02%(1) 1.02%(1) 0.22%(1)
11.30 13.00% 4,868 60% 1.35%(1) 1.35%(1) 0.76%(1)
$10.62 1.05% $ 34,668 28% 1.04%(1) 1.04%(1) 0.63%(1)
10.52 5.20% 8,757 6% 1.23%(1) 1.23%(1) 1.45%(1)
$ 8.77 (12.30%) $ 238,798 53% 1.23%(1) 1.23%(1) 0.00%(1)
$10.17 1.70% $ 33,664 5% 1.26%(1) 1.26%(1) 1.76%(1)
- ------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 (UNAUDITED)
- ------------------------------------------------------------------------------
1. ORGANIZATION
American Skandia Trust (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940, as amended. The
Trust was organized on October 31, 1988 as a Massachusetts business trust. The
Trust operates as a series company and, at June 30, 2000, issued 33 classes of
shares of beneficial interest: AST AIM International Equity Portfolio
("International Equity"), AST Alliance Growth and Income Portfolio ("Growth and
Income"), AST JanCap Growth Portfolio ("JanCap Growth"), AST Money Market
Portfolio ("Money Market"), AST Neuberger Berman Mid-Cap Value Portfolio
("Mid-Cap Value"), AST AIM Balanced Portfolio ("Balanced"), AST Federated High
Yield Portfolio ("High Yield"), AST T. Rowe Price Asset Allocation Portfolio
("Asset Allocation"), AST PIMCO Total Return Bond Portfolio ("Total Return
Bond"), AST INVESCO Equity Income Portfolio ("Equity Income"), AST Janus
Small-Cap Growth Portfolio ("Janus Small-Cap Growth"), AST American Century
International Growth Portfolio II ("International Growth II") (formerly, AST T.
Rowe Price International Equity Portfolio), AST T. Rowe Price Global Bond
Portfolio ("Global Bond") (formerly, AST T. Rowe Price International Bond
Portfolio), AST Neuberger Berman Mid-Cap Growth Portfolio ("Neuberger Mid-Cap
Growth"), AST Founders Passport Portfolio ("Passport"), AST T. Rowe Price
Natural Resources Portfolio ("Natural Resources"), AST PIMCO Limited Maturity
Bond Portfolio ("Limited Maturity Bond"), AST Alliance Growth Portfolio
("Alliance Growth") (formerly, AST Oppenheimer Large-Cap Growth Portfolio), AST
Janus Overseas Growth Portfolio ("Overseas Growth"), AST American Century Income
& Growth Portfolio ("Income & Growth"), AST American Century Strategic Balanced
Portfolio ("Strategic Balanced"), AST American Century International Growth
Portfolio ("International Growth"), AST T. Rowe Price Small Company Value
Portfolio ("Small Company Value"), AST Marsico Capital Growth Portfolio
("Capital Growth"), AST Cohen & Steers Realty Portfolio ("Realty"), AST Lord
Abbett Small Cap Value Portfolio ("Small Cap Value"), AST Sanford Bernstein
Managed Index 500 Portfolio ("Managed Index 500") (formerly, AST Bankers Trust
Managed Index 500 Portfolio), AST Kemper Small-Cap Growth Portfolio ("Kemper
Small-Cap Growth"), AST MFS Global Equity Portfolio ("Global Equity"), AST MFS
Growth Portfolio ("MFS Growth"), AST MFS Growth with Income Portfolio ("Growth
with Income"), AST Alger All-Cap Growth Portfolio ("All-Cap Growth"), and AST
Janus Mid-Cap Growth Portfolio ("Janus Mid-Cap Growth") (collectively the
"Portfolios").
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Trust, in conformity with generally accepted accounting principles, in the
preparation of its financial statements. The preparation of financial statements
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation
Portfolio securities are valued at the close of trading on the New York Stock
Exchange. Equity securities are valued generally at the last reported sales
price on the securities exchange on which they are primarily traded, or at the
last reported sales price on the NASDAQ National Securities Market. Securities
not listed on an exchange or securities market, or securities in which there
were no transactions, are valued at the average of the most recent bid and asked
prices.
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Debt securities are generally traded in the over-the-counter market and are
valued at a price deemed best to reflect fair value as quoted by dealers who
make markets in these securities or by an independent pricing service. Debt
securities of Money Market are valued at amortized cost, which approximates
market value. The amortized cost method values a security at its cost at the
time of purchase and thereafter assumes a constant amortization to maturity of
any discount or premium. For Portfolios other than Money Market, debt securities
which mature in 60 days or less are valued at cost (or market value 60 days
prior to maturity), adjusted for amortization to maturity of any premium or
discount.
Securities for which market quotations are not readily available are valued at
fair value as determined in accordance with procedures adopted by the Board of
Trustees. At June 30, 2000, there were no securities valued in accordance with
such procedures.
Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign
currencies are converted each business day into U.S. dollars based on the
prevailing rates of exchange. Purchases and sales of portfolio securities and
income and expenses are converted into U.S. dollars on the respective dates of
such transactions.
Gains and losses resulting from changes in exchange rates applicable to foreign
securities are not reported separately from gains and losses arising from
movements in securities prices.
Net realized foreign exchange gains and losses include gains and losses from
sales and maturities of foreign currency exchange contracts, gains and losses
realized between the trade and settlement dates of foreign securities
transactions, and the difference between the amount of net investment income
accrued on foreign securities and the U.S. dollar amount actually received. Net
unrealized foreign exchange gains and losses include gains and losses from
changes in the value of assets and liabilities other than portfolio securities,
resulting from changes in exchange rates.
Foreign Currency Exchange Contracts
A foreign currency exchange contract ("FCEC") is a commitment to purchase or
sell a specified amount of a foreign currency at a specified future date, in
exchange for either a specified amount of another foreign currency or U.S.
dollars.
FCECs are valued at the forward exchange rates applicable to the underlying
currencies, and changes in market value are recorded as unrealized gains and
losses until the contract settlement date.
Risks could arise from entering into FCECs if the counterparties to the
contracts were unable to meet the terms of their contracts. In addition, the use
of FCECs may not only hedge against losses on securities denominated in foreign
currency, but may also reduce potential gains on securities from favorable
movements in exchange rates.
Futures Contracts and Options
A financial futures contract calls for delivery of a particular security at a
specified price and future date. The seller of the contract agrees to make
delivery of the type of security called for in the contract and the buyer agrees
to take delivery at a specified future date. Such contracts require an initial
margin deposit, in cash or cash equivalents, equal to
- ------------------------------------------------------------------------------
a certain percentage of the contract amount. Subsequent payments (variation
margin) are made or received by the Portfolio each day, depending on the daily
change in the value of the contract. Futures contracts are valued based on their
quoted daily settlement prices. Fluctuations in value are recorded as unrealized
gains and losses until such time that the contracts are terminated.
An option is a right to buy or sell a particular security at a specified price
within a limited period of time. The buyer of the option, in return for a
premium paid to the seller, has the right to buy (in the case of a call option)
or sell (in the case of a put option) the underlying security of the contract.
The premium received in cash from writing options is recorded as an asset with
an equal liability that is adjusted to reflect the option's value. The premium
received from writing options which expire is recorded as realized gains. The
premium received from writing options which are exercised or closed is offset
against the proceeds or amount paid on the transaction to determine the realized
gain or loss. If a put option is exercised, the premium reduces the cost basis
of the security or currency purchased. Options are valued based on their quoted
daily settlement prices.
Risks could arise from entering into futures and written options transactions
from the potential inability of counterparties to meet the terms of their
contracts, the potential inability to enter into a closing transaction because
of an illiquid secondary market, and from unexpected movements in interest or
exchange rates or securities values.
Repurchase Agreements
A repurchase agreement is a commitment to purchase government securities from a
seller who agrees to repurchase the securities at an agreed-upon price and date.
The excess of the resale price over the purchase price determines the yield on
the transaction. Under the terms of the agreement, the market value, including
accrued interest, of the government securities will be at least equal to their
repurchase price. Repurchase agreements are recorded at cost, which, combined
with accrued interest, approximates market value.
Repurchase agreements entail a risk of loss in the event that the seller
defaults on its obligation to repurchase the securities. In such case, the
Portfolio may be delayed or prevented from exercising its right to dispose of
the securities.
Swap Agreements
A swap agreement is a two-party contract under which an agreement is made to
exchange returns from predetermined investments or instruments, including a
particular interest rate, foreign currency, or "basket" of securities
representing a particular index. The gross returns to be exchanged or "swapped"
between the parties are calculated based on a "notional amount", which, each
business day, is valued to determine each party's obligation under the contract.
Fluctuations in value are recorded as unrealized gains and losses during the
term of the contract.
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 rate 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.
- ------------------------------------------------------------------------------
Risks could arise from entering into swap agreements from the potential
inability of counterparties to meet the terms of their contracts, and from the
potential inability to enter into a closing transaction. It is possible that
developments in the swaps market, including potential governmental regulation,
could affect the Portfolio's ability to terminate existing swap agreements or to
realize amounts to be received under such agreements.
Securities Loans
Each Portfolio may lend securities for the purpose of realizing additional
income. All securities loans are collateralized by cash or securities issued or
guaranteed by the U.S. Government or its agencies. The value of the collateral
is at least equal to the market value of the securities lent. However, due to
market fluctuations, the value of the securities lent may exceed the value of
the collateral. On the next business day the collateral is adjusted based on the
prior day's market fluctuations and the current day's lending activity.
Interest income from lending activity is determined by the amount of interest
earned on collateral, less any amounts payable to the borrowers of the
securities and the lending agent.
Lending securities involves certain risks, including the risk that the Portfolio
may be delayed or prevented from recovering the collateral if the borrower fails
to return the securities.
- ------------------------------------------------------------------------------
At June 30, 2000, securities lending activities are summarized as follows:
MARKET VALUE
OF SECURITIES MARKET VALUE INCOME FROM
PORTFOLIO ON LOAN OF COLLATERAL LENDING*
- --------- -------------- -------------- -----------
Growth and Income.................................... $ 125,845,725 $ 122,685,018 $133,153
JanCap Growth........................................ 1,328,757,881 1,320,083,926 957,941
Mid-Cap Value........................................ 71,402,577 73,153,329 91,084
Balanced............................................. 93,547,476 89,761,339 100,788
High Yield........................................... 13,944,113 14,738,880 146,841
Asset Allocation..................................... 80,204,302 81,925,710 58,560
Equity Income........................................ 80,451,924 80,267,262 99,818
Janus Small-Cap Growth............................... 125,755,174 127,084,647 606,543
Neuberger Mid-Cap Growth............................. 177,696,911 177,177,541 134,464
Natural Resources.................................... 8,686,275 9,099,015 19,458
Alliance Growth...................................... 102,445,914 103,201,689 56,322
Income & Growth...................................... 55,728,328 53,157,945 43,204
Strategic Balanced................................... 24,407,661 21,906,911 24,838
Small Company Value.................................. 13,659,851 14,139,060 38,088
Capital Growth....................................... 247,388,008 250,406,392 282,269
Realty............................................... 11,019,725 10,372,500 18,479
Small Cap Value...................................... 2,821,406 6,945,900 30,125
Managed Index 500.................................... 54,432,979 55,724,782 56,580
Kemper Small-Cap Growth.............................. 116,049,865 103,727,828 491,744
MFS Growth........................................... 5,945,463 5,999,125 314
Growth with Income................................... 3,325,058 3,365,172 141
All-Cap Growth....................................... 62,951,747 63,294,427 35,846
Janus Mid-Cap Growth................................. 6,383,737 6,504,590 1,687
* Income earned for the period is included in interest income on the Statements
of Operations.
Investment Transactions and Investment Income
Securities transactions are accounted for on the trade date. Realized gains and
losses from securities sold are recognized on the specific identification basis.
Dividend income is recorded on the ex-dividend date. Corporate actions,
including dividends, on foreign securities are recorded on the ex-dividend date
or, if such information is not available, as soon as reliable information is
available from the Trust's sources. Interest income is recorded on the accrual
basis and includes the accretion of discount and amortization of premium.
Expenses
Each Portfolio is charged for expenses that are directly attributable to it.
Common expenses of the Trust are allocated to the Portfolios in proportion to
their net assets.
- ------------------------------------------------------------------------------
Distributions to Shareholders
Dividends, if any, from net investment income are declared and paid at least
annually by all Portfolios other than Money Market. In the case of Money Market,
dividends are declared daily and paid monthly. Net realized gains from
investment transactions, if any, are distributed at least annually.
Distributions to shareholders are recorded on the ex-dividend date.
3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolios have entered into investment management agreements with American
Skandia Investment Services, Inc. (the "Investment Manager") which provide that
the Investment Manager will furnish each Portfolio with investment advice and
investment management and administrative services. The Investment Manager has
engaged the following firms as Sub-advisors for their respective Portfolios: A I
M Capital Management, Inc. for International Equity and Balanced; Lord Abbett &
Co. for Small Cap Value; Janus Capital Corporation for JanCap Growth, Janus
Small-Cap Growth, Overseas Growth, and Janus Mid-Cap Growth; J. P. Morgan
Investment Management, Inc. for Money Market; Federated Investment Counseling
for High Yield; T. Rowe Price Associates, Inc. for Asset Allocation, Natural
Resources, and Small Company Value; Pacific Investment Management Co. for Total
Return Bond and Limited Maturity Bond; INVESCO Funds Group, Inc. for Equity
Income; Founders Asset Management, Inc. for Passport; Rowe Price-Fleming
International, Inc., a United Kingdom Corporation, for Global Bond; Neuberger
Berman Management, Inc. for Mid-Cap Value and Neuberger Mid-Cap Growth; American
Century Investment Management, Inc. for Income & Growth, Strategic Balanced,
International Growth, and International Growth II; Marsico Capital Management,
LLC for Capital Growth; Cohen & Steers Capital Management, Inc. for Realty;
Sanford C. Bernstein & Co., Inc. for Managed Index 500; Scudder Kemper
Investments, Inc. for Kemper Small-Cap Growth; Massachusetts Financial Services
Co. for Global Equity, MFS Growth, and Growth with Income; Alliance Capital
Management L.P. for Growth and Income and Alliance Growth; and Fred Alger
Management, Inc. for All-Cap Growth.
The Investment Manager receives a fee, computed daily and paid monthly, based on
an annual rate of 1.00%, .75%, .90%, .50%, .90%, .75%, .75%, .85%, .65%, .75%,
.90%, 1.00%, .80%, .90%, 1.00%, .90%, .65%, .90%, 1.00%, .75%, .85%, 1.00%,
.90%, .90%, 1.00%, .95%, .60%, .95%, 1.00%, .90%, .90%, .95%, and 1.00% of the
average daily net assets of the International Equity, Growth and Income, JanCap
Growth, Money Market, Mid-Cap Value, Balanced, High Yield, Asset Allocation,
Total Return Bond, Equity Income, Janus Small-Cap Growth, International Growth
II, Global Bond, Neuberger Mid-Cap Growth, Passport, Natural Resources, Limited
Maturity Bond, Alliance Growth, Overseas Growth, Income & Growth, Strategic
Balanced, International Growth, Small Company Value, Capital Growth, Realty,
Small Cap Value, Managed Index 500, Kemper Small-Cap Growth, Global Equity, MFS
Growth, Growth with Income, All-Cap Growth, and Janus Mid-Cap Growth Portfolios,
respectively. The fees for International Equity are at the rate of .85% for
average daily net assets in excess of $75 million, for Mid-Cap Value, Neuberger
Mid-Cap Growth, and Alliance Growth are at the rate of .85% for average daily
net assets in excess of $1 billion, for Balanced are at the rate of .70% for
average daily net assets in excess of $300 million, and for Kemper Small-Cap
Growth are at the rate of .90% for average daily net assets in excess of $1
billion. During the six months ended June 30, 2000, the Investment Manager
voluntarily waived .05% from its fee for the Money Market Portfolio and .05%
from its fee on average daily net assets in excess of $1 billion for the JanCap
Growth, Growth and Income, and Capital Growth
- ------------------------------------------------------------------------------
Portfolios. From March 31, 2000 to June 30, 2000, the Investment Manager
voluntarily waived .05% from its fee on average daily net assets in excess of $1
billion for the Total Return Bond, Equity Income, Janus Small-Cap Growth, and
Overseas Growth Portfolios. The Investment Manager pays each Sub-advisor a fee
as compensation for advisory services provided to the Portfolios.
On May 1, 2000, Alliance Capital Management L.P. became Sub-advisor to AST
Alliance Growth and Income Portfolio (formerly, AST Lord Abbett Growth and
Income Portfolio, sub-advised by Lord Abbett & Co.) and AST Alliance Growth
Portfolio (formerly, AST Oppenheimer Large-Cap Growth Portfolio, sub-advised by
OppenheimerFunds, Inc.).
On May 1, 2000, Sanford C. Bernstein & Co, Inc. became Sub-advisor to AST
Sanford Bernstein Managed Index 500 Portfolio (formerly, AST Bankers Trust
Managed Index 500 Portfolio, sub-advised by Bankers Trust Co.).
On May 1, 2000, American Century Investment Management, Inc. became Sub-advisor
to AST American Century International Growth II Portfolio (formerly, AST T. Rowe
Price International Equity Portfolio, sub-advised by Rowe Price-Fleming
International, Inc.).
The Trust has adopted a Distribution Plan (the "Plan") under Rule 12b-1 of the
Investment Company Act of 1940. The Plan permits American Skandia Marketing,
Incorporated ("ASMI") to receive brokerage commissions in connection with
purchases and sales of securities by the Portfolios, and to use these
commissions to promote the sale of variable contracts, the premiums for which
are invested in shares of the Trust. Under the Plan, securities transactions 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 ASMI for "introducing" transactions to the clearing
broker. In turn, ASMI uses 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.
Commissions received by ASMI under the Plan are reflected in the cost of
securities purchased and the proceeds from the sale of securities. These
commissions are shown in the Statements of Operations as "Distribution Fees" and
a corresponding reduction "Fees Paid Indirectly". Net expenses of the Portfolios
are unaffected by these commissions. For the six months ended June 30, 2000,
commissions received by ASMI totaled $3,356,739.
The Trust has entered into an agreement with American Skandia Life Assurance
Corporation ("ASLAC") pursuant to which it pays ASLAC a shareholder servicing
fee at an annual rate of .10% of each Portfolio's average daily net assets.
Certain officers and Trustees of the Trust are officers or directors of the
Investment Manager. The Trust pays no compensation directly to its officers or
interested Trustees.
4. TAX MATTERS
Each Portfolio intends to qualify as a regulated investment company under the
Internal Revenue Code and to distribute all of its taxable income, including any
net realized gains on investments, to shareholders. Accordingly, no provision
for federal income or excise tax has been made.
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Income and capital gains of the Portfolios are determined in accordance with
both tax regulations and generally accepted accounting principles. Such may
result in temporary and permanent differences between tax basis earnings and
earnings reported for financial statement purposes. Temporary differences that
result in over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains. Permanent differences in the recognition of earnings are reclassified to
additional paid-in capital. Distributions in excess of tax-basis earnings are
recorded as a return of capital.
Capital Loss Carryforwards
At December 31, 1999, the following Portfolios had, for federal income tax
purposes, capital loss carryforwards available to offset future net realized
capital gains.
EXPIRATION
DECEMBER 31,
---------------------------------------------------
AMOUNT 2004 2005 2006 2007
----------- -------- ---------- ---------- -----------
High Yield....................... $ 3,504,698 $ -- $ -- $ -- $ 3,504,698
Total Return Bond................ 23,034,821 -- -- -- 23,034,821
Global Bond...................... 1,753,510 -- -- -- 1,753,510
Limited Maturity Bond............ 1,947,158 496,087 -- -- 1,451,071
Realty........................... 2,479,752 -- -- 569,675 1,910,077
Small Cap Value.................. 1,275,730 -- -- 1,275,730 --
MFS Growth....................... 1,705 -- -- -- 1,705
Growth with Income............... 1,855 -- -- -- 1,855
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5. PORTFOLIO SECURITIES
Purchases and sales of securities, other than short-term obligations, during the
six months ended June 30, 2000, were as follows ($ in thousands):
U.S. GOVERNMENT SECURITIES OTHER SECURITIES
-------------------------- ------------------------
PURCHASES SALES PURCHASES SALES
----------- ----------- ---------- ----------
AIM International Equity....................... $ -- $ -- $ 342,529 $ 309,865
Growth and Income.............................. -- -- 1,285,974 1,234,205
JanCap Growth.................................. -- -- 1,262,124 921,672
Mid-Cap Value.................................. -- -- 604,782 590,373
Balanced....................................... 32,322 30,758 238,443 138,600
High Yield..................................... 82 856 70,276 75,334
Asset Allocation............................... 23,342 17,881 45,249 59,955
Total Return Bond.............................. 1,949,619 1,649,794 214,444 162,911
Equity Income.................................. 11,082 9,658 408,827 329,150
Janus Small-Cap Growth......................... -- -- 633,892 645,185
International Growth II........................ -- -- 466,186 515,242
Global Bond.................................... 43,362 7,180 90,780 134,682
Neuberger Mid-Cap Growth....................... -- -- 571,818 303,141
Passport....................................... -- -- 992,048 841,873
Natural Resources.............................. -- -- 73,383 61,952
Limited Maturity Bond.......................... 39,680 29,578 276,387 126,089
Alliance Growth................................ -- -- 413,451 341,574
Overseas Growth................................ -- -- 775,815 717,180
Income & Growth................................ -- -- 268,106 118,939
Strategic Balanced............................. 1,730 3,033 147,978 132,278
International Growth........................... -- -- 240,194 104,760
Small Company Value............................ -- -- 46,258 41,377
Capital Growth................................. -- -- 1,365,175 1,041,083
Realty......................................... -- -- 50,787 23,462
Small Cap Value................................ -- -- 70,098 31,558
Managed Index 500.............................. 2,617 6,749 654,804 496,234
Kemper Small-Cap Growth........................ -- -- 783,522 584,953
Global Equity.................................. -- -- 11,848 1,657
MFS Growth..................................... -- -- 49,904 19,024
Growth with Income............................. -- -- 29,523 4,967
All-Cap Growth................................. -- -- 315,262 63,988
Janus Mid-Cap Growth........................... -- -- 25,607 792
- ------------------------------------------------------------------------------
At June 30, 2000, the cost and unrealized appreciation or depreciation in value
of the investments owned by the Portfolios, for federal income tax purposes,
were as follows ($ in thousands):
GROSS GROSS NET UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
---------- ------------ ------------ --------------
AIM International Equity...................... $ 602,849 $ 171,540 $ (21,116) $ 150,424
Growth and Income............................. 1,440,172 112,254 (80,493) 31,761
JanCap Growth................................. 3,395,537 2,770,202 (256,930) 2,513,272
Mid-Cap Value................................. 654,667 64,086 (35,420) 28,666
Balanced...................................... 501,510 100,247 (14,529) 85,718
High Yield.................................... 685,908 5,564 (95,540) (89,976)
Asset Allocation.............................. 348,046 108,331 (20,919) 87,412
Total Return Bond............................. 1,527,046 4,017 (25,474) (21,457)
Equity Income................................. 995,479 207,181 (49,498) 157,683
Janus Small-Cap Growth........................ 851,718 339,776 (125,372) 214,404
International Growth II....................... 428,271 47,060 (20,148) 26,912
Global Bond................................... 135,448 3,459 (8,544) (5,085)
Neuberger Mid-Cap Growth...................... 648,322 134,971 (20,065) 114,906
Passport...................................... 331,194 28,991 (21,702) 7,289
Natural Resources............................. 115,262 11,734 (10,916) 818
Limited Maturity Bond......................... 458,732 248 (6,405) (6,157)
Alliance Growth............................... 416,058 45,798 (18,071) 27,727
Overseas Growth............................... 1,079,135 493,709 (27,359) 466,350
Income & Growth............................... 452,151 58,748 (32,855) 25,893
Strategic Balanced............................ 215,709 22,336 (10,605) 11,731
International Growth.......................... 273,725 35,271 (7,184) 28,087
Small Company Value........................... 308,210 50,646 (57,261) (6,615)
Capital Growth................................ 1,515,639 462,140 (69,650) 392,490
Realty........................................ 87,572 4,658 (3,903) 755
Small Cap Value............................... 108,875 20,481 (5,130) 15,351
Managed Index 500............................. 699,989 66,743 (42,634) 24,109
Kemper Small-Cap Growth....................... 856,369 326,866 (98,681) 228,185
Global Equity................................. 12,533 758 (444) 314
MFS Growth.................................... 36,757 2,594 (920) 1,674
Growth with Income............................ 33,813 2,106 (1,248) 858
All-Cap Growth................................ 246,896 13,707 (22,350) (8,643)
Janus Mid-Cap Growth.......................... 35,552 1,518 (1,386) 132
- ------------------------------------------------------------------------------
6. WRITTEN OPTIONS TRANSACTIONS
Written options transactions, during the six months ended June 30, 2000, were as
follows:
BALANCED TOTAL RETURN BOND
---------------------- -----------------------
NUMBER OF NUMBER OF
CONTRACTS PREMIUM CONTRACTS PREMIUM
--------- --------- --------- ----------
Balance at beginning of year...................... 540 $ 231,037 16,970 $ 862,050
Written........................................... 18 100,527 4,737 1,396,621
Expired........................................... (390) (165,864) (15,086) (989,060)
Exercised......................................... -- -- -- --
Closed............................................ (150) (65,173) (4,104) (558,299)
---- --------- ------- ----------
Balance at end of year............................ 18 $ 100,527 2,517 $ 711,312
==== ========= ======= ==========
LIMITED MATURITY BOND
----------------------
NUMBER OF
CONTRACTS PREMIUM
--------- ---------
Balance at beginning of year........................ -- $ --
Written............................................. 490 206,957
Expired............................................. -- --
Exercised........................................... -- --
Closed.............................................. (249) (176,005)
------- ---------
Balance at end of year.............................. 241 $ 30,952
======= =========
At June 30, 2000, Balanced, Total Return Bond and Limited Maturity Bond had
sufficient cash and/or securities at least equal to the value of written
options.
7. LINE OF CREDIT
The Portfolios and other affiliated funds participate in a $100 million
unsecured, committed line of credit, provided by a syndication of banks, under a
line of credit agreement. Borrowings may be made for temporary or emergency
purposes, including the meeting of redemption requests that otherwise might
require the untimely disposition of securities. Any borrowings must be repaid
within 30 days of their receipt. Interest is charged to each Portfolio, based on
its borrowings, at a premium above the Federal Funds Rate. In addition, a
commitment fee, equal to an annual rate of .09% of the average daily unused
portion of the line of credit, is allocated among the participants at the end of
each quarter. At June 30, 2000, there were no borrowings under the agreement.
APPENDIX B
Description of Certain Debt Securities Ratings
----------------------------------------------
Moody's Investors Service, Inc. ("Moody's")
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest payments are protected by a large, or exceptionally stable, margin, and
principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat larger than the Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations (i.e., they are neither highly protected nor
poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of a desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Standard & Poor's Corporation ("Standard & Poor's")
AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA -- Debt rated AA has a strong capacity to pay interest and repay principal, and differs from the highest rated issues
only in a small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories.
BB, B, CCC, CC, C -- Debt rated BB, B, CCC, CC and C is regarded as having predominantly speculative characteristics with
respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties of major risk
exposures to adverse conditions.
BB -- Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity
to meet timely interest and principal payments. The BB rating is also used for debt subordinated to senior debt that is assigned
an actual or implied BBB rating.
B -- Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB-rating.
CCC -- Debt rated CCC has a currently identifiable vulnerability to default, and is dependent upon favorable business,
financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse
business, economic or financial conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC
rating category is also used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating.
CC -- The rating CC typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC
rating.
C -- The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments
are continued.
CI -- The rating CI is reserved for income bonds on which no interest is being paid.
D -- Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are
not made on the date due, even if the applicable grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace period. The D rating also will be used upon the filing of bankruptcy petition if debt
service payments are jeopardized.
Plus (+) or minus (-) -- Ratings from AA to CCC may be modified by the addition of a plus of minus sign to show relative
standing within the major rating categories.
Description of Certain Commercial Paper Ratings
-----------------------------------------------
Moody's
Prime-1 -- Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term
debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics: leading market
positions in well-established industries; high rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial charges and high
internal cash generation; and well-established access to a range of financial markets and assured sources of alternate liquidity.
Prime-2 -- Issuers rated Prime-2 (or related supporting institutions) have a strong ability for repayment of senior
short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
Prime-3 -- Issuers rated Prime-3 (or related supporting institutions) have an acceptable ability for repayment of senior
short-term debt obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability
in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
Not Prime - Issuers rated Not Prime do not fall within any of the Prime rating categories.
Standard & Poor's
A-1 -- This highest category indicates that the degree of safety regarding time payment is strong. Those issues
determined to possess extremely strong safety characteristics are denoted with a plus sign designation.
A-2 -- Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of
safety is not as high as for issues designated "A-1".
A-3 -- Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to
the adverse effects of the changes in circumstances than obligations carrying the higher designations.
B -- Issues rated B are regarded as having only speculative capacity for timely payment.
C -- This rating is assigned to short-term debt obligations with a doubtful capacity for payment.
D - Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are
not made on the date due, even if the applicable grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace period.
