AST BlackRock Value Portfolio - Prudential Annuities

EARNEST expects to focus primarily on companies with a market capitalization between $1 billion and $20 billion at time of
purchase. This Subadviser normally employs a fundamental, bottom-up investment process. The first step in EARNEST’s investment
process is to screen the relevant universe to identify stocks that it believes are likely to outperform based on their financial
characteristics and the current environment. Using an approach called Return Pattern Recognition, the Subadviser seeks to identify
the financial and market characteristics that have been in place when an individual company has produced outstanding
performance. These characteristics include valuation measures, market trends, operating trends, growth measures, profitability
measures, and macroeconomics. The Subadviser screens companies and selects for an in-depth fundamental review those
exhibiting the set of characteristics that it believes indicate outperformance. The screening process allows the Subadviser to review
the relative universe of companies and focus on those it considers the best prospects.
Next, the approximately 150 best companies identified in the screening process are put through a second more rigorous review. In
this step, EARNEST develops and tests an investment thesis for each company. The test generally includes conversations with the
company’s management team and industry specialists, review of the company’s financial reports, analysis of industry and
company-specific studies, and independent field research. The Subadviser eliminates from consideration any company that does
not pass its fundamental analysis.
The final step in EARNEST’s investment process is to construct a portfolio that includes those stocks it expects to have the best
performance and that effectively manages the expected risk of meaningfully underperforming the assigned benchmark. The
Subadviser uses a statistical approach called downside deviation to measure and then seeks to constrain the likelihood of
significantly underperforming the benchmark. Using this information, the Subadviser seeks to select investments that blend
together to manage downside risk. The result is a client portfolio of approximately 60 stocks. This Subadviser expects to focus on
purchasing companies that have a market capitalization at the time of purchase between $1 and $20 billion, and expects to
typically sell holdings whose market capitalizations have grown to more than twice the upper limit for purchase (i.e., whose
market capitalization have grown to $40 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 mid-cap companies involves greater risk of loss than is customarily associated with
more established companies. Stocks of mid-cap companies may be subject to more abrupt or erratic price movements than larger
company stocks. Mid-cap 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 invests primarily in common stocks of U.S. mid-capitalization companies, 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 may also invest in warrants to purchase securities, and may engage in short sales “against the
box”.
As of January 31, 2012, WEDGE was responsible for managing approximately 52% of the Portfolio’s assets and EARNEST was
responsible for managing approximately 48% of the Portfolio’s assets.
AST MONEY MARKET PORTFOLIO
Investment Objective: high current income and maintain high levels of liquidity.
Principal Investment Policies:
As a money market fund, the Portfolio invests in high-quality money market instruments and 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 per share to fall below $1.00. In addition, the income earned by the Portfolio will fluctuate based on
market conditions, interest rates and other factors. In a low interest rate environment, the yield for the Portfolio, after deduction of
operating expenses, may be negative even though the yield before deducting such expenses is positive. A negative yield may also
320