AMERICAN SKANDIA TRUST, 497, 1999-01-04

AMERICAN SKANDIA TRUST
497, 1999-01-04

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PROSPECTUS December 31, 1998
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 investment objectives of its
Portfolios. The Portfolios as of the date of this Prospectus and their
respective investment objectives are as follows:

AST JanCap Growth Portfolio seeks growth of capital in a manner consistent with
preservation of capital. AST Janus Small-Cap Growth Portfolio seeks capital
appreciation. T. Rowe Price International Equity Portfolio seeks total return on
its assets from long-term growth of capital and income principally through
investments in common stocks of established, non-U.S. companies. AST T. Rowe
Price Small Company Value Portfolio seeks long-term capital appreciation by
investing primarily in small-capitalization stocks that appear to be
undervalued. AST INVESCO Equity Income Portfolio seeks high current income while
following sound investment practices. Capital growth potential is an additional,
but secondary, consideration in the selection of portfolio securities. AST PIMCO
Total Return Bond Portfolio seeks to maximize total return, consistent with
preservation of capital. AST PIMCO Limited Maturity Bond Portfolio seeks to
maximize total return, consistent with preservation of capital and prudent
investment management. AST Stein Roe Venture Portfolio seeks long-term capital
appreciation. AST Neuberger Berman Mid-Cap Value Portfolio seeks capital growth.
AST Neuberger Berman Mid-Cap Growth Portfolio seeks capital appreciation.

Investments in the Trust are neither insured nor guaranteed by the United States
Government. Such investments are not bank deposits, and are not insured by,
guaranteed by, obligations of, or otherwise supported by, any bank.

This Prospectus sets forth concisely the information that a prospective investor
should know before investing in shares of the Trust and should be retained for
future reference. A Statement of Additional Information, dated December 31, 1998
(the "SAI"), containing additional information about the Trust has been filed
with the Securities and Exchange Commission (the "Commission") and is hereby
incorporated by reference into this Prospectus. The Trust's SAI is available
without charge upon request to the Trust at the above address or by calling
(800) 752-6342. The Commission maintains a Web site (http:/ /www.sec.gov) that
contains the SAI, material incorporated by reference, and other information
regarding the Trust.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Shares of the Trust are available to, and are marketed as a pooled funding
vehicle for, life insurance companies ("Participating Insurance Companies")
writing variable annuity contracts and variable life insurance policies. As of
the date of this Prospectus, the only Participating Insurance Companies are
American Skandia Life Assurance Corporation and Kemper Investors Life Insurance
Company. From time to time, however, the Trust may enter into participation
agreements with other Participating Insurance Companies. The profit sharing plan
covering employees of American Skandia Life Assurance Corporation and its
affiliates (the "Skandia Qualified Plan"), which is a retirement plan qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended, may also
directly own shares of the Trust. The Trust sells and redeems its shares at net
asset value without any sales charges, commissions or redemption fees. Each
variable annuity contract and variable life insurance policy involves fees and
expenses not described in this Prospectus. Certain Portfolios may not be
available in connection with a particular variable annuity contract or variable
life insurance policy or the Qualified Plan. Please read the Prospectus of the
variable annuity contracts and variable life insurance policies issued by
Participating Insurance Companies for information regarding contract fees and
expenses and any restrictions on purchases.

<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS

Caption Page

<S> <C> <C>
Portfolio Annual Expenses.........................................................................................3
Financial Highlights..............................................................................................6
Investment Objectives and Policies...............................................................................10
AST JanCap Growth Portfolio.................................................................................10
AST Janus Small-Cap Growth Portfolio........................................................................12
AST T. Rowe Price International Equity Portfolio............................................................15
AST T. Rowe Price Small Company Value Portfolio.............................................................17
AST INVESCO Equity Income Portfolio.........................................................................19
AST PIMCO Total Return Bond Portfolio.......................................................................21
AST PIMCO Limited Maturity Bond Portfolio...................................................................27
AST Stein Roe Venture Portfolio.............................................................................34
AST Neuberger Berman Mid-Cap Value Portfolio................................................................36
AST Neuberger Berman Mid-Cap Growth Portfolio...............................................................40
Certain Risk Factors and Investment Methods......................................................................45
Regulatory Matters...............................................................................................52
Portfolio Turnover...............................................................................................52
Brokerage Allocation.............................................................................................53
Investment Restrictions..........................................................................................53
Net Asset Values.................................................................................................53
Purchase and Redemption of Shares................................................................................53
Organization and Management of the Trust.........................................................................54
Tax Matters......................................................................................................60
Description of Shares of the Trust...............................................................................61
Performance......................................................................................................61
Transfer and Shareholder Servicing Agent.........................................................................62
Custodian........................................................................................................62
Counsel and Auditors.............................................................................................62
Other Information................................................................................................63
</TABLE>

<PAGE>

PORTFOLIO ANNUAL EXPENSES (as a percentage of average net assets): Unless
otherwise indicated, the expenses shown below are for the year ending December
31, 1997. "N/A" indicates that no entity has agreed to reimburse the particular
expense indicated. The expenses of the portfolios either are currently being
partially reimbursed or may be partially reimbursed in the future. Management
Fees, Other Expenses and Total Annual Expenses are provided on both a reimbursed
and not reimbursed basis, if applicable.

Maximum Sales Load Imposed on Purchases (as a percentage of offering price)
NONE* Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price) NONE* Deferred Sales Load (as a percentage of original purchase
price or redemption proceeds, as applicable) NONE* Redemption Fees (as a
percentage of amount redeemed, if applicable) NONE* Exchange Fee NONE*

* 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. The table on the following page does not reflect any such charges.

<TABLE>
<CAPTION>
Annual Fund Operating Expenses (as a percentage of average net assets)

Total Total
Annual Annual
Management Management Other Other Expenses Expenses
Fee Fee Expenses Expenses after any without any
after any without any after any without any applicable applicable
Portfolio: voluntary voluntary applicable applicable waiver or waiver or
waiver waiver reimbursement reimbursement reimbursementreimbursement
- ---------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
AST JanCap Growth 0.88% 0.90% N/A 0.18% 1.06% 1.08%
AST Janus Small-Cap Growth N/A 0.90% N/A 0.23% N/A 1.13%
AST T. Rowe Price International EquityN/A 1.00% N/A 0.26% N/A 1.26%
AST T. Rowe Price Small Company Value N/A 0.90% N/A 0.26% N/A 1.16%
AST INVESCO Equity Income N/A 0.75% N/A 0.20% N/A 0.95%
AST PIMCO Total Return Bond N/A 0.65% N/A 0.21% N/A 0.86%
AST PIMCO Limited Maturity Bond N/A 0.65% N/A 0.23% N/A 0.88%
AST Stein Roe Venture(1) N/A 0.95% 0.40% 1.24% 1.35% 2.19%
AST Neuberger Berman Mid-Cap Value(2) N/A 0.90% N/A 0.25% N/A 1.15%
AST Neuberger Berman Mid-Cap Growth(3)N/A 0.90% N/A 0.24% N/A 1.14%
</TABLE>

(1) These Portfolios commenced operations in January 1998. "Other Expenses"
shown are based on estimated amounts for the fiscal year ending December 31,
1998.
(2) Prior to May 1, 1998, the Investment Manager had engaged Federated
Investment Counseling as Sub-advisor for the Portfolio, and the total Investment
Management fee was at the annual rate of .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. As of May 1, 1998, the Investment
Manager engaged Neuberger Berman Management Incorporated as Sub-advisor for the
Portfolio, and the Investment Management fee is payable at the annual rate of
0.90% of the average daily net assets of the Portfolio. The Management Fee in
the above chart reflects the current Investment Management fee payable to the
Investment Manager.
(3) Prior to May 1, 1998, the Investment Manager had engaged Berger Associates,
Inc. as Sub-advisor for the Portfolio, and the total Investment Management fee
was at the annual rate of .75% of the average daily net assets of the Portfolio.
As of May 1, 1998, the Investment Manager engaged Neuberger Berman Management
Incorporated as Sub-advisor for the Portfolio, and the Investment Management fee
is payable at the annual rate of 0.90% of the average daily net assets of the
Portfolio. The Management Fee in the above chart reflects the current Investment
Management fee payable to the Investment Manager.

<PAGE>

EXPENSE EXAMPLES:

The examples shown assume that the total annual expenses for the Portfolios
throughout the period specified will be the lower of the total annual expenses
without any applicable reimbursement or expenses after any applicable
reimbursement.

You would pay the following expenses rounded to the nearest dollar on a
$1,000 investment, assuming a 5% hypothetical annual return at the end of each
time period shown below:

After:
Portfolio: 1 yr. 3 yrs. 5 yrs. 10 yrs.
- --------- ------------------------------------------------------------

<S> <C> <C> <C> <C>
AST JanCap Growth 11 34 59 130
AST Janus Small-Cap Growth 12 36 62 137
AST T. Rowe Price International Equity 13 40 69 152
AST T. Rowe Price Small Company 12 37 64 141
AST INVESCO Equity Income 10 31 53 117
AST PIMCO Total Return Bond 9 28 48 107
AST PIMCO Limited Maturity Bond 9 28 49 108
AST Stein Roe Venture 14 43 N/A N/A
AST Neuberger Berman Mid-Cap Value 12 37 64 140
AST Neuberger Berman Mid-Cap Growth 12 37 64 140
</TABLE>

The above tables are provided to assist you in understanding the various costs
and expenses that you would bear directly or indirectly as an investor in the
Portfolio(s). THE ABOVE EXPENSE EXAMPLES ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED AS A REPRESENTATION OF THE PORTFOLIOS' PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

(This page has been intentionally left blank.)

<PAGE>

FINANCIAL HIGHLIGHTS (Selected Per Share Data for an Average Share Outstanding
and Ratios Throughout Each Period): The tables below contain unaudited financial
information and financial information which has been audited in conjunction with
the annual audits of the financial statements of American Skandia Trust by
Deloitte & Touche LLP, Independent Auditors. Audited Financial Statements for
the year ended December 31, 1997 and the Independent Auditors' Report thereon,
and unaudited Financial Statements for the period ended June 30, 1998, are
included in the Trust's SAI, which is available without charge upon request to
the Trust at One Corporate Drive, Shelton, Connecticut or by calling (800)
752-6342. Further information about the performance of the Portfolios is
contained in the annual reports of the separate accounts funding the variable
annuity contracts and variable life insurance policies, which also may be
obtained without charge upon request to the Trust at that address or phone
number. The information presented in these financial highlights is historical
and is not intended to indicate future performance of the Portfolios.

<TABLE>
<CAPTION>
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INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS

Net Asset Net Net Asset
Value Investment Net RealizedTotal 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
--------- ----- --------- ------ ----------- ---------- ------ ----- ------------- ---------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AST JanCap Growth 06/30/98* $23.15 $0.04 $7.53 $7.57 $(0.08) $(1.21) $(1.29) $29.43
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
12/31/94 11.78 0.06 (0.59) (0.53) (0.03) -- (0.03) 11.22
12/31/93 10.53 0.03 1.22 1.25 -- -- -- 11.78
12/31/92(2) 10.00 (0.01) 0.54 0.53 -- -- -- 10.52

AST Neuberger Berman 06/30/98* $15.15 $0.18 $(0.45) $(0.27) $(0.36) $(1.32) $(1.68) $13.20
Mid-Cap Value** 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
12/31/94 10.79 0.46 (1.20) (0.74) (0.16) (0.02) (0.18) 9.87
12/31/93(3) 10.00 0.17 0.62 0.79 -- -- -- 10.79

AST PIMCO Total 06/30/98* $11.72 $0.25 $0.21 $0.46 $(0.51) $(0.24) $(0.75) $11.43
Return Bond 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
12/31/94(4) 10.00 0.26 (0.51) (0.25) -- -- -- 9.75

AST INVESCO Equity 06/30/98* $16.51 $0.15 $1.53 $1.68 $(0.32) $(0.81) $(1.13) $17.06
Income 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
12/31/94(4) 10.00 0.16 (0.41) (0.25) -- -- -- 9.75

AST Janus 06/30/98* $17.81 $(0.05) $0.75 $0.70 $-- $(0.85) $(0.85) $17.66
Small-Cap Growth***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
12/31/94(4) 10.00 0.11 0.73 0.84 -- -- -- 10.84

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</TABLE>

(1) Annualized.
(2) Commenced operations on November 6, 1992.
(3) Commenced operations on May 4, 1993.
(4) Commenced operations on January 4, 1994.
* Unaudited.
** Prior to May 1, 1998, Federated Investment Counseling served as Sub-advisor
to the AST Neuberger Berman Mid-Cap Value Portfolio (formerly, the Federated
Utility Income Portfolio). Neuberger Berman Management, Incorporated has served
as Sub-advisor to the Portfolio since May 1, 1998.
*** Prior to January 1, 1999, Founders Asset Management LLC served as
Sub-advisor to the AST Janus Small-Cap Growth Portfolio (formerly, the Founders
Capital Appreciation Portfolio). Janus Capital Corporation has served as
Sub-advisor to the Portfolio since January 1, 1999.

<PAGE>

<TABLE>
<CAPTION>
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Ratios of Expenses Ratios of Net Investment Income
Supplemental Data to Average Net Assets ((Loss) to Average Net Assets

After Advisory Before Advisory After Advisory Before Advisory
Net Assets at Portfolio Fee Waiver Fee Waiver Fee Waiver Fee Waiver
Total End of Period Turnover and Expense and Expense and Expense and Expense
Return (in 000's) Rate Reimbursement Reimbursement Reimbursement Reimbursement
------ ---------- ---- ------------- ------------- ------------- -------------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
33.83% $2,241,721 21% 1.03%(1) 1.05%(1) 0.30%(1) 0.28%(1)
28.66% 1,511,563 94% 1.07% 1.08% 0.24% 0.23%
28.36% 892,324 79% 1.10% 1.10% 0.25% 0.25%
37.98% 431,321 113% 1.12% 1.12% 0.51% 0.51%
(4.51%) 245,645 94% 1.18% 1.18% 0.62% 0.62%
11.87% 157,852 92% 1.22% 1.22% 0.35% 0.35%
5.30% 15,218 2% 1.33%(1) 2.21%(1) (0.90%)(1) (1.78%)(1)

(2.03%) $215,366 143% 0.96%(1) 0.96%(1) 2.59%(1) 2.59%(1)
26.42% 201,143 91% 0.90% 0.90% 3.34% 3.34%
11.53% 123,138 73% 0.93% 0.93% 3.14% 3.14%
26.13% 107,399 71% 0.93% 0.93% 4.58% 4.58%
(6.95%) 71,205 54% 0.99% 0.99% 5.11% 5.11%
7.90% 57,643 5% 1.18%(1) 1.18%(1) 5.09%(1) 5.09%(1)

4.09% $697,088 130% 0.84%(1) 0.84%(1) 5.34%(1) 5.34%(1)
9.87% 572,100 320% 0.86% 0.86% 5.56% 5.56%
3.42% 360,010 403% 0.89% 0.89% 5.38% 5.38%
18.78% 225,335 124% 0.89% 0.89% 5.95% 5.95%
(2.50%) 46,493 139% 1.02%(1) 1.02%(1) 5.57%(1) 5.57%(1)

10.49% $747,227 34% 0.93%(1) 0.93%(1) 2.12%(1) 2.12%(1)
23.33% 602,105 73% 0.95% 0.95% 2.54% 2.54%
17.09% 348,680 58% 0.98% 0.98% 2.83% 2.83%
30.07% 176,716 89% 0.98% 0.98% 3.34% 3.34%
(2.50%) 65,201 63% 1.14%(1) 1.14%(1) 3.41%(1) 3.41%(1)

3.79% $269,622 59% 1.12%(1) 1.12%(1) (0.53%)(1) (0.53%)(1)
6.01% 278,258 77% 1.13% 1.13% (0.32%) (0.32%)
20.05% 220,068 69% 1.16% 1.16% (0.38%) (0.38%)
32.56% 90,460 68% 1.22% 1.22% (0.28%) (0.28%)
8.40% 28,559 198% 1.30%(1) 1.55%(1) 2.59%(1) 2.34%(1)

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</TABLE>

<PAGE>

<TABLE>
<CAPTION>
AMERICAN SKANDIA TRUST

FINANCIAL HIGHLIGHTS
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

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INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AST T. Rowe Price 06/30/98* $12.09 $0.08 $1.45 $1.53 $(0.14) $(0.23) $(0.37) $13.25
International Equity12/31/97 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
12/31/94(2) 10.00 0.02 (0.40) (0.38) -- -- -- 9.62

AST Neuberger Berman 06/30/98* $16.61 $(0.01) $2.98 $2.97 $(0.01) $(2.60) $(2.61) $16.97
Mid-Cap Growth** 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
12/31/94(3) 10.00 0.01 (0.04) (0.03) -- -- -- 9.97

AST PIMCO Limited 06/30/98* $11.02 $0.30 $(0.05) $0.25 $(0.53) $ -- $(0.53) $10.74
Maturity Bond 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(4) 10.00 0.05 0.42 0.47 -- -- -- 10.47

AST T. Rowe Price Small06/30/98* $12.88 $0.03 $0.28 $0.31 $(0.05) $(0.06) $(0.11) $13.08
Company Value 12/31/97(5) 10.00 0.06 2.82 2.88 -- -- -- 12.88

AST Stein Roe Venture06/30/98(6) $10.00 $(0.01) $(0.81) $(0.82) $ -- $ -- $ -- $9.18

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</TABLE>

(1) Annualized.
(2) Commenced operations on January 4, 1994.
(3) Commenced operations on October 20, 1994.
(4) Commenced operations on May 2, 1995.
(5) Commenced operations on January 2, 1997.
(6) Commenced operations on January 2, 1998 (Unaudited).
* 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, Incorporated has served as
Sub-advisor to the Portfolio since May 1, 1998.

<PAGE>

<TABLE>
<CAPTION>
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Ratios of Expenses Ratios of Net Investment Income
Supplemental Data to Average Net Assets ((Loss) to Average Net Assets

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12.84% $477,431 12% 1.25%(1) 1.25%(1) 1.25%(1) 1.25%(1)
1.36% 464,456 19% 1.26% 1.26% 0.71% 0.71%
14.17% 402,559 11% 1.30% 1.30% 0.84% 0.84%
11.09% 195,667 17% 1.33% 1.33% 1.03% 1.03%
(3.80%) 108,751 16% 1.75%(1) 1.77%(1) 0.45%(1) 0.43%(1)

18.63% $217,779 143% 1.02%(1) 1.02%(1) (0.10%)(1) (0.10%)(1)
16.68% 185,050 305% 0.99% 0.99% 0.07% 0.07%
16.34% 136,247 156% 1.01% 1.01% 0.24% 0.24%
24.42% 45,979 84% 1.17% 1.17% 0.70% 0.70%
(0.30%) 3,030 5% 1.25%(1) 1.70%(1) 1.41%(1) 0.97%(1)

2.39% $300,682 128% 0.87%(1) 0.87%(1) 5.84%(1) 5.84%(1)
7.46% 288,642 54% 0.88% 0.88% 5.71% 5.71%
3.90% 209,013 247% 0.89% 0.89% 5.69% 5.69%
4.70% 161,940 205% 0.89%(1) 0.89%(1) 4.87%(1) 4.87%(1)

2.38% $309,444 6% 1.11%(1) 1.11%(1) 0.72%(1) 0.72%(1)
28.80% 199,896 7% 1.16%(1) 1.16%(1) 1.20%(1) 1.20%(1)

(8.20%) $4,971 33% 1.35%(1) 2.13%(1) (0.46%)(1) (1.24%)(1)

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</TABLE>

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES: The investment objective and policies for
each of the Portfolios are described below, and should be considered separately.
While certain policies apply to all Portfolios, generally each Portfolio has a
different investment objective and certain policies may vary. As a result, the
risks, opportunities and returns in each Portfolio may differ. Those investment
policies specifically labeled as "fundamental" may not be changed without
approval of the shareholders of the affected Portfolio. Each Portfolio's
investment objective or investment policies, unless otherwise specified, is not
a fundamental policy and may be changed without shareholder approval. There can
be no assurance that any Portfolio's investment objective will be achieved. Risk
factors in relation to various securities and instruments in which the
Portfolios may invest are described in the sections of this Prospectus and the
Trust's SAI entitled "Certain Risk Factors and Investment Methods." Additional
information about the investment objectives and policies of each Portfolio may
be found in the Trust's SAI under "Investment Objectives and Policies."

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) Janus Capital Corporation: AST JanCap Growth
Portfolio, and AST Janus Small-Cap Growth Portfolio; (b) T. Rowe Price
Associates, Inc.: AST T. Rowe Price Small Company Value Portfolio; (c) Rowe
Price-Fleming International, Inc.: AST T. Rowe Price International Equity
Portfolio; (d) INVESCO Funds Group, Inc.: AST INVESCO Equity Income Portfolio;
(e) Pacific Investment Management Company: AST PIMCO Total Return Bond
Portfolio, and AST PIMCO Limited Maturity Bond Portfolio; (f) Stein Roe &
Farnham Incorporated: AST Stein Roe Venture Portfolio; (g) Neuberger Berman
Management Incorporated: AST Neuberger Berman Mid-Cap Value Portfolio, and AST
Neuberger Berman Mid-Cap Growth Portfolio.

Subject to approval of the Board of Trustees of the Trust, the Trust
may add one or more portfolios and may cease to offer one or more portfolios,
any such cessation to be subject to obtaining required regulatory approvals.

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. This is a fundamental objective of the Portfolio.

Investment Policies:

The Portfolio will pursue its objective by investing primarily in
common stocks. Common stock investments will be in industries and 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. 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 is of the opinion that appropriate investment
opportunities for capital growth with desirable risk/reward characteristics are
unavailable. 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 or so that the
Portfolio may receive a return on its idle cash. The Portfolio may also invest
in money market funds managed by the Sub-advisor as a means of receiving a
return on idle cash. Debt securities that the Portfolio may purchase include
corporate bonds and debentures (not to exceed 5% of net assets in bonds rated
below investment grade), government securities, mortgage- and asset-backed
securities, zero-coupon bonds, indexed/structured notes, high-grade commercial
paper, certificates of deposit and repurchase agreements. For a discussion of
other investment companies (including money market funds), lower-rated
securities, mortgage- and asset-backed securities and zero coupon bonds, see
this Prospectus and the Trust's SAI under "Certain Risk Factors and Investment
Methods."

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 price objective, or by reason of
developments not foreseen at the time of the original investment decision.
Portfolio changes may be effected for other reasons. In such circumstances,
investment income will increase and may constitute a large portion of the return
on the Portfolio and the Portfolio will not participate in the market advances
or declines to the extent that it would if it were fully invested.

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.

Foreign Securities. The Portfolio may also purchase securities of
foreign issuers, including foreign equity and debt securities and depositary
receipts. Foreign securities are 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 stocks. No more than 25% of
the Portfolio's assets may be invested in foreign securities denominated in
foreign currency and not publicly traded in the United States. For a discussion
of depositary receipts and the risks involved in investing in foreign
securities, including the risk of currency fluctuations, see this Prospectus and
the Trust's SAI under "Certain Risk Factors and Investment Methods."

Futures, Options and Other Derivative Instruments. Subject to certain
limitations, the Portfolio may purchase and write options on securities,
financial indices, and foreign currencies, and may invest in futures contracts
on securities, financial indices, and foreign currencies ("futures contracts"),
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. The Portfolio will not use
futures contracts and options for leveraging purposes. There can be no
assurance, however, that the use of these instruments by the Portfolio will
assist it in achieving its investment objective. The use of futures, options,
forward contracts and swaps involves investment risks and transaction costs to
which the Portfolio would not be subject absent the use of these strategies. The
Sub-advisor may, from time to time, at its own expense, call upon the experience
of experts to assist it in implementing these strategies. 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. For an additional discussion of futures and
options transactions and the risks involved therein, see this Prospectus and the
Trust's SAI under "Certain Risk Factors and Investment Methods."

Repurchase Agreements. Subject to guidelines promulgated by the Board
of Trustees of the Trust, the Portfolio may enter into repurchase agreements,
which involve the purchase of a security by the Portfolio and a simultaneous
agreement (generally with a bank or dealer) to repurchase the security from the
Portfolio at a specified date or upon demand. The Portfolio's repurchase
agreements will at all times be fully collateralized. Pursuant to an exemptive
order granted by the Securities and Exchange Commission, the Portfolio and other
funds advised by the Sub-advisor may invest in repurchase agreements and other
money market instruments through a joint trading account. For a discussion of
repurchase agreements and the risks involved therein, see this Prospectus under
"Certain Risk Factors and Investment Methods."

Reverse Repurchase Agreements. The Portfolio is permitted to enter into
reverse repurchase agreements. In a reverse repurchase agreement, the Portfolio
sells a security and agrees to repurchase it at a mutually agreed upon date and
price. For a discussion of reverse repurchase agreements and the risks involved
therein, see this Prospectus under "Certain Risk Factors and Investment
Methods."

When-Issued, Delayed Delivery and Forward Transactions. The Portfolio
may purchase securities on a when-issued or delayed delivery basis, which
generally involves the purchase of a security with payment and delivery due at
some time in the future. The Portfolio does not earn interest on such securities
until settlement and bears the risk of market value fluctuations between the
purchase and settlement dates. For an additional discussion of when-issued
securities and certain risks involved therein, see the Trust's SAI under
"Certain Risk Factors and Investment Methods."

Illiquid Securities. Subject to guidelines promulgated by the Board of
Trustees of the Trust, the Portfolio may also invest up to 15% of its net assets
in securities that are considered illiquid because of the absence of a readily
available market or due to legal or contractual restrictions. Securities
eligible for resale under Rule 144A of the Securities Act of 1933, and
commercial paper issued under Section 4(2) of the Securities Act of 1933, could
be deemed "liquid" when saleable in a readily available market. For a discussion
of illiquid securities and the risks involved therein, see this Prospectus under
"Certain Risk Factors and Investment Methods."

Lower-Rated High-Yield Bonds. The Portfolio may invest no more than 5%
of its net assets (at the time of investment) in lower-rated high-yield bonds.
For a discussion of these instruments and the risks involved therein, see this
Prospectus and the Trust's SAI under "Certain Risk Factors and Investment
Methods."

Borrowing. Subject to the Portfolio's restrictions on borrowing, the
Portfolio may also borrow money from banks. For a discussion of the Portfolio's
limitations on borrowing and certain risks involved in borrowing, see this
Prospectus under "Certain Risk Factors and Investment Methods" and the Trust's
SAI under "Investment Objectives and Policies."

Securities Lending. The Portfolio may lend its portfolio securities. For a
discussion of the limits on and risks of lending securities, see this Prospectus
under "Certain Risk Factors and Investment Methods."

Portfolio Turnover. Because investment changes usually will be made
without reference to the length of time a security has been held, a significant
number of short-term transactions may result. To a limited extent, the Portfolio
may also purchase individual securities in anticipation of relatively short-term
price gains, and the rate of portfolio turnover will not be a determining factor
in the sale of such securities. For a discussion of portfolio turnover and its
effects, see this Prospectus and the Trust's SAI under "Portfolio Turnover."

AST Janus Small-Cap Growth Portfolio:

Investment Objective: The investment objective of the Portfolio is capital
appreciation. The Portfolio pursues its objective by normally investing at least
65% of its total assets in securities issued by small-sized companies.

Investment Policies:

The Portfolio invests primarily in common stocks with an emphasis on
securities of small-sized companies. Small-sized companies are those that have
market capitalizations of less than $1.5 billion or annual gross revenues of
less than $500 billion. Companies whose capitalization or revenues fall outside
these ranges after the Portfolio's initial purchase continue to be considered
small-sized for the purposes of this policy. The Portfolio may also invest in
stocks of larger companies with potential for capital appreciation.

The Portfolio will invest substantially all of its assets in common
stocks to the extent the Sub-advisor believes that the relevant market
environment favors profitable investing in those securities. 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 similarly defined selection procedure. Realization of
income is not a significant investment consideration.

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. Historically, common stocks have provided greater long-term returns
and have entailed greater short-term risks than other investments. Smaller or
newer issuers, such as those in which the Portfolio invests, are more likely to
realize more substantial growth as well as suffer more significant losses than
larger or more established issuers. Investments in such companies can be both
more volatile and more speculative.

The Portfolio is designed for long-term investors who seek capital
appreciation and who can tolerate the greater risks associated with investments
in foreign and domestic common stocks. The Portfolio is not designed as a
short-term trading vehicle and should not be relied upon for short-term
financial needs.

The Sub-advisor tries to reduce the risk of the Portfolio through
diversification of the Portfolio's assets, so that the effect of any single
holding on its overall portfolio value is reduced. In addition, the Portfolio
will not invest 25% or more of its total assets in any particular industry
(excluding U.S. government securities). As described below, the Portfolio may
use futures, options and other derivative instruments to protect its portfolio
from movements in securities prices and interest rates. The Portfolio may use a
variety of currency hedging techniques, including forward currency contracts, to
manage exchange rate risk.

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 appreciate in value due to a
specific development with respect to that issuer. Developments creating a
special situation may include significant changes in a company's allocation of
its existing capital, a restructuring of assets, 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.

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 may invest up to 25% of its assets
in mortgage- and asset-backed securities. The Portfolio may invest up to 10% of
its assets in zero coupon, pay-in-kind and step coupon securities, which are
securities that do not, or may not under certain circumstances, make regular
interest payments. 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 certain of the other types of securities in which the Portfolio
may invest, see this Prospectus under "Certain Risk Factors and Investment
Methods."

When the Sub-advisor believes that market conditions are not favorable
for profitable investing or when it is otherwise unable to locate investment
opportunities with favorable risk/reward characteristics, 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 assets that remain after the Sub-advisor
has committed available assets to desirable investment opportunities are kept in
cash or similar investments, such as high-grade commercial paper, certificates
of deposit, repurchase agreements or other short-term debt obligations,
including money market funds managed by the Sub-advisor. When the Portfolio is
hedged or its cash position increases, it might not participate in market
advances or declines to the extent that it would if it was not hedged or it
remained more fully invested in common stocks.

Investing in Smaller Companies. The Portfolio may invest in companies
that have relatively small revenues, have a small share of the market for their
products or services, or have limited geographic or product markets. Smaller or
newer 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 new products or services for which markets are not yet
established and may never become established. In addition, such companies may be
or become subject to intense competition from larger competitors. Securities of
small companies held by the Portfolio may have more limited trading markets than
the markets for securities of larger or more established issuers, and may be
subject to wider price fluctuations.

The Portfolio measures the size of a company in part through its market
capitalization. Market capitalization is the most commonly used measure of the
size and value of a company. It is computed by multiplying the current market
price of a share of the company's stock by the total number of its shares
outstanding.

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 and not publicly traded in the
United States. Other ways of investing in foreign securities include depositary
receipts or shares, and passive foreign investment companies. Generally, the
same criteria are used to select foreign securities as domestic securities. The
Sub-advisor seeks companies that meet its selection criteria regardless of
country of organization or place of principal business activity. 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.

Investments in foreign securities, including those of foreign
governments, may involve greater risks than investing in comparable domestic
securities. The Portfolio may invest in emerging market or developing countries.
Emerging market countries involve greater risks than other foreign countries
such as immature economic structures, national policies restricting investments
by foreigners, and different legal systems. As long as the Portfolio holds a
foreign security, its value will be affected by the value of the local currency
relative to the U.S. dollar. When the Portfolio sells a foreign currency
denominated security, its value may be worth less in U.S. dollars even though
the security increases in value in its home country. U.S. dollar denominated
securities of foreign issuers (e.g., depositary receipts) are subject to many of
the same risks as other foreign securities, including currency risk, because
their values depend on the performance of a foreign security denominated in its
home currency. The risks of foreign investing, including currency risks and the
risks of investing in developing countries, are described in more detail in this
Prospectus and the Trust's SAI under "Certain Risk Factors and Investment
Methods."

Portfolio Turnover. The Portfolio generally intends to purchase
securities for long-term investment rather than short-term gains. However,
short-term transactions may 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 of the investment decision. Changes are made in the
Portfolio's investments whenever the Sub-advisor believes such changes are
desirable. Portfolio turnover rates are generally not a factor in making buy and
sell decisions.

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.
For a discussion of portfolio turnover and its effects, see this Prospectus and
the Trust's SAI under "Portfolio Turnover."

Illiquid Investments. The Portfolio may invest up to 15% of its net
assets in illiquid investments. If illiquid securities exceed 15% of net assets
after the time of purchase, the Portfolio will take steps to reduce in an
orderly fashion its holdings of illiquid securities. An illiquid investment is a
security or other position that cannot be disposed of quickly in the normal
course of business because of the absence of a readily available market for the
security, because of the terms of the security or because of legal restrictions.
The Sub-advisor will follow guidelines established by the Trust's Board of
Trustees in making liquidity determinations for certain types of securities,
including Rule 144A securities and privately placed commercial paper. Rule 144A
securities are securities that are not registered for sale to the general public
under the Securities Act of 1933, but that may be resold to certain
institutional investors.

Borrowing and Lending. The Portfolio may borrow money and lend securities
in accordance with the restrictions described below 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 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 the Portfolio's income or
otherwise seeking to enhance return. For a more detailed discussion of these
instruments and their risks, see this Prospectus under "Certain Risk Factors and
Investment Methods" and the Trust's SAI under "Investment Objectives and
Policies and "Certain Risk Factors and Investment Methods."

Although the Sub-advisor believes the use of derivative instruments
will benefit the Portfolio, the Portfolio's performance could be worse than if
the Portfolio had not used such instruments if the Sub-advisor's judgment proves
incorrect.

High-Yield/High-Risk Securities. The Portfolio may invest up to 35% of
its assets in 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 Ratings Services ("Standard &
Poor's") and Moody's Investors Service, Inc. ("Moody's").

Investments in high-yield securities are considered to be more
speculative than higher quality investments. The value of lower quality
securities generally is more dependent on the ability of the company to meet
interest and principal payments (i.e., credit risk) than is the case for higher
quality securities. In addition, issuers of high-yield securities are more
vulnerable to real or perceived economic changes (for instance, an economic
downturn or prolonged period of rising interest rates), and political changes.
For an additional discussion of high-yield securities and their risks, see this
Prospectus and the Trust's SAI under "Certain Risk Factors and Investment
Methods." Please refer to the SAI for a description of bond rating categories.

When-Issued, Delayed Delivery and Forward Commitment Transactions. The
Portfolio may purchase securities on a when-issued, delayed delivery or forward
commitment basis. These transactions typically involve the purchase of a
security with payment and delivery at some time in the future (i.e., beyond the
normal settlement period). The Portfolio earns no interest on such securities,
but bears the risk of fluctuations in their market value, between the purchase
and settlement dates.

Short Sales. The Fund may engage in "short sales against the box." This
technique involves selling either a security that the Portfolio owns, or a
security that the Portfolio has the right to obtain without additional cost, for
delivery at a specified date in the future. The Portfolio may enter into a short
sale against the box to hedge against anticipated declines in the market price
of portfolio securities. If the value of the securities sold short increases
prior to the scheduled delivery date, the Portfolio loses the opportunity to
participate in the gain.

AST T. Rowe Price International Equity Portfolio:

Investment Objective: The investment objective of the Portfolio is to seek a
total return on its assets from long-term growth of capital and income,
principally through investments in common stocks of established, non-U.S.
companies. Investments 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. Total return consists of capital appreciation or depreciation, dividend
income, and currency gains or losses. This is a fundamental objective of the
Portfolio.

Investment Policies:

The Portfolio intends to diversify investments broadly among countries
and to normally have at least three different countries represented in the
Portfolio. The Portfolio may invest in countries of the Far East and Western
Europe as well as South Africa, Australia, Canada and other areas (including
developing countries). Under unusual circumstances, the Portfolio may invest
substantially all of its assets in one or two countries.

In seeking its objective, the Portfolio will invest primarily in common
stocks of established foreign companies which have the potential for growth of
capital or income or both. However, the Portfolio may also invest in a variety
of other equity-related securities, such as preferred stocks, warrants and
convertible securities, as well as corporate and governmental debt securities,
when considered consistent with the Portfolio's investment objectives and
program. Under normal market conditions, the Portfolio's investment in
securities other than common stocks is limited to no more than 35% of total
assets. Under exceptional economic or market conditions abroad, the Portfolio
may temporarily invest all or a major portion of its assets in U.S. government
obligations or debt obligations of U.S. companies. The Portfolio will not
purchase any debt security which at the time of purchase is rated below
investment grade. This would not prevent the Portfolio from retaining a security
downgraded to below investment grade after purchase.

The Portfolio may also invest its reserves in domestic as well as
foreign money market instruments. Also, the Portfolio may enter into forward
foreign currency exchange contracts in order to protect against uncertainty in
the level of future foreign exchange rates.

In addition to the investments described below, the Portfolio's
investments may include, but are not limited to, American Depositary Receipts
(ADRs), bonds, notes, other debt securities of foreign issuers, and the
securities of foreign investment funds or trusts (including passive foreign
investment companies).

Cash Reserves. While the Portfolio will remain primarily invested in
common stocks, it may, for temporary defensive measures, invest in cash reserves
without limitation. The Portfolio may establish and maintain reserves as
Sub-advisor believes is advisable to facilitate the Portfolio's cash flow needs
(e.g., redemptions, expenses and purchases of portfolio securities) or for
temporary, defensive purposes. The Portfolio's reserves may be invested in
domestic and foreign money market instruments rated within the top two credit
categories by a national rating organization, or if unrated, of equivalent
investment quality as determined by the Sub-advisor.

Convertible Securities, Preferred Stocks, and Warrants. The Portfolio
may invest in debt or preferred equity securities convertible into or
exchangeable for equity securities. Preferred stocks are securities that
represent an ownership interest in a corporation providing the owner with claims
on the company's earnings and assets before common stock owners, but after bond
owners. 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 (generally, two or
more years).

Foreign Currency Transactions. The Portfolio will normally conduct 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 contracts to purchase or sell foreign currencies. The
Portfolio will generally not enter into a forward contract with a term of
greater than one year.

The Portfolio will generally enter into forward foreign currency
exchange contracts only 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, it may enter into a forward contract to sell or buy 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 securities denominated
in such foreign currency. Under certain circumstances, the Portfolio may commit
a substantial portion or the entire value of its portfolio to the consummation
of these contracts. The Sub-advisor will consider the effect such a commitment
of its portfolio to forward contracts would have on the investment program of
the Portfolio and the flexibility of the Portfolio to purchase additional
securities. For a discussion of foreign currency contracts and the risks
involved therein, see this Prospectus and the Trust's SAI under "Certain Risk
Factors and Investment Methods."

Futures Contracts and Options. The Portfolio may enter into stock index
or currency futures contracts (or options thereon) to hedge a portion of the
Portfolio, to provide an efficient means of regulating the Portfolio's exposure
to the equity markets, or as a hedge against changes in prevailing levels of
currency exchange rates. The Portfolio will not use futures contracts for
leveraging purposes. Such contracts may be traded on U.S. or foreign exchanges.
The Portfolio may write covered call options and purchase put and call options
on foreign currencies, securities, and stock indices. The aggregate market value
of the Portfolio's currencies or portfolio securities covering call or put
options will not exceed 25% of the Portfolio's total assets. The Portfolio will
not commit more than 5% of its total assets to premiums when purchasing call or
put options. For an additional discussion of futures contracts and options and
the risks involved therein, see this Prospectus and the Trust's SAI under
"Certain Risk Factors and Investment Methods" and the Trust's SAI under
"Investment Objectives and Policies."

Hybrid Investments. The Portfolio may invest up to 10% of its total
assets in hybrid instruments. As part of its investment program and to maintain
greater flexibility, the Portfolio may invest in these instruments, which have
the characteristics of futures, options and securities. Such instruments may
take a variety of forms, such as debt instruments with interest or principal
payments determined by reference to the value of a currency, security index or
commodity at a future point in time. The risks of such investments would reflect
both the risks of investing in futures, options, currencies, and securities,
including volatility and illiquidity. Under certain conditions, the redemption
value of a hybrid instrument could be zero. For a discussion of hybrid
investments and the risks involved therein, see the Trust's SAI under
"Investment Objectives and Policies" and "Certain Risk Factors and Investment
Methods."

Passive Foreign Investment Companies. 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
Portfolio's expenses (management fees and operating expenses), shareholders will
also indirectly bear similar expenses of such trusts.

Illiquid Securities. Subject to guidelines promulgated by the Board of
Trustees of the Trust, the Portfolio may acquire illiquid securities (no more
than 15% of net assets). The Portfolio will not invest more than 10% of its
total assets in restricted securities (other than securities eligible for resale
under Rule 144A of the Securities Act of 1933). For a discussion of illiquid and
restricted securities and the risks involved therein, see this Prospectus under
"Certain Risk Factors and Investment Methods" and the Trust's SAI under
"Investment Objectives and Policies."

Repurchase Agreements. Subject to guidelines promulgated by the Board
of Trustees of the Trust, the Portfolio may enter into repurchase agreements
with a well-established securities dealer or a bank which is a member of the
Federal Reserve System. For a discussion of repurchase agreements and certain
risks involved therein, see this Prospectus under "Certain Risk Factors and
Investment Methods" and the Trust's SAI under "Investment Objectives and
Policies."

Borrowing. For a discussion of the Portfolio's limitations on borrowing and
certain risks involved in borrowing, see this Prospectus under "Certain Risk
Factors and Investment Methods" and the Trust's SAI under "Investment
Restrictions."

AST T. Rowe Price Small Company 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. This is a fundamental
objective of the Portfolio.

Investment Policies:

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 Portfolio will invest at least 65% of its total assets
in companies with a market capitalization of $1 billion or less that appear
undervalued by various measures, such as price/earnings or price/book value
ratios.

Although the Portfolio will invest primarily in U.S. common stocks, it
may also purchase other types of securities, for example, foreign securities,
convertible stocks and bonds, and warrants when considered consistent with the
Portfolio's investment objective and policies. The Portfolio may also engage in
a variety of investment management practices, such as buying and selling futures
and options.

In managing the Portfolio, the Sub-advisor will apply a value
investment approach. Value investors seek to buy a stock (or other security)
when its price is low relative to its perceived worth. They hope to identify
companies whose stocks are currently out of favor or are not followed closely by
stock analysts. Often these stocks have above-average yields and offer the
potential for capital appreciation as other investors recognize their intrinsic
value and drive up their prices. Some of the principal measures used to identify
such stocks are:

(i) Price/Earnings Ratio. Dividing a stock's price by its
earnings per share generates a price/earnings or P/E ratio. A stock with a P/E
that is significantly below that of its peers, the market as a whole, or its own
historical norm may represent an attractive opportunity.

(ii) Price/Book Value Ratio. This ratio, calculated by
dividing a stock's price by its book value per share, indicates how a stock is
priced relative to the accounting (i.e., book) value of the company's assets. A
ratio below the market, that of its competitors, or its own historic norm could
indicate an undervalued situation.

(iii) Dividend Yield. Value investors look for undervalued
assets. A stock's dividend yield is found by dividing its annual dividend by its
share price. A yield significantly above a stock's own historic norm or that of
its peers may suggest an investment opportunity.

(iv) Price/Cash Flow. Dividing a stock's price by the
company's cash flow per share, rather than its earnings or book value, provides
a more useful measure of value in some cases. A ratio below that of the market
or of its peers suggests the market may be incorrectly valuing the company's
cash flow for reasons that may be temporary.

(v) Undervalued Assets. This analysis compares a company's
stock price with its underlying asset values, its projected value in the private
(as opposed to public) market, or its expected value if the company or parts of
it were sold or liquidated.

(vi) Restructuring Opportunities. The market can react
favorably to the announcement or the successful implementation of a corporate
restructuring, financial reengineering, or asset redeployment. Such events can
result in an increase in a company's stock price. A value investor may try to
anticipate these actions and invest before the market places an appropriate
value on any actual or expected changes.

Risks of a Value Approach to Small-Cap Investing. Small
companies--those with a capitalization (market value) of $1 billion or less--may
offer greater potential for capital appreciation since they are often overlooked
or undervalued by investors. Small-capitalization stocks are less actively
followed by stock analysts than are larger-capitalization stocks, and less
information is available to evaluate small-cap stock prices. As a result,
compared with larger-capitalization stocks, there may be greater variations
between the current stock price and the estimated underlying value, which could
represent greater opportunity for appreciation.

Investing in small companies involves greater risk as well as greater
opportunity 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 securities. Small companies often have limited
product lines, markets, or financial resources, and their management may lack
depth and experience. In addition, a value approach to investing includes the
risks that 1) the market will not recognize a security's intrinsic value for an
unexpectedly long time, and 2) a stock that is judged to be undervalued is
actually appropriately priced due to intractable or fundamental problems that
are not yet apparent.

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 income for dividend payments and
on assets should the company be liquidated. 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. While most preferred stocks
pay a dividend, the Portfolio may purchase preferred stock where the issuer has
omitted, or is in danger of omitting, payment of its dividend. Such investments
would be made primarily for their capital appreciation potential.

Convertible Securities and Warrants. The Portfolio may invest in debt
or preferred equity securities convertible into or exchangeable for equity
securities. Traditionally, convertible securities have paid dividends or
interest at rates higher than common stocks but lower than nonconvertible
securities. They generally participate in the appreciation or depreciation of
the underlying stock into which they are convertible, but to a lesser degree. In
recent years, convertibles have been developed which combine higher or lower
current income with options and other features. Warrants are options to buy a
stated number of shares of common stock at a specified price anytime during the
life of the warrants (generally, two or more years).

Foreign Securities. The Portfolio may invest up to 20% of its total
assets (excluding reserves) in foreign securities. These include
nondollar-denominated securities traded outside of the U.S. and
dollar-denominated securities of foreign issuers traded in the U.S. (such as
ADRs). Some of the countries in which the Portfolio may invest may be considered
to be developing and may involve special risks. For a discussion of these risks
as well as the risks involved in investing in foreign securities in general, see
this Prospectus and the Trust's SAI under "Certain Risk Factors and Investment
Methods."

Foreign Currency Transactions. Investors in foreign securities may
"hedge" their exposure to potentially unfavorable currency changes by purchasing
a contract to exchange one currency for another on some future date at a
specified exchange rate. In certain circumstances, a "proxy currency" may be
substituted for the currency in which the investment is denominated, a strategy
known as "proxy hedging." For a discussion of foreign currency contracts,
certain risks involved therein, and the risks of currency fluctuations
generally, see this Prospectus and the Trust's SAI under "Certain Risks Factors
and Investment Methods."

Fixed Income Securities. The Portfolio may invest in debt securities of
any type without regard to quality or rating. Such securities would be purchased
in companies that meet the investment criteria for the Portfolio. The price of a
bond fluctuates with changes in interest rates, rising when interest rates fall
and falling when interest rates rise.

High-Yield/High-Risk Investing. The Portfolio will not purchase a
noninvestment-grade debt security (or junk bond) if immediately after such
purchase the Portfolio would have more than 5% of its total assets invested in
such securities. For a discussion of the risks involved in investing in
high-yield lower-rated debt securities, see this Prospectus and the Trust's SAI
under "Certain Risk Factors and Investment Methods."

Hybrid Instruments. The Portfolio may invest up to 10% of its total
assets in hybrid instruments. Hybrids can have volatile prices and limited
liquidity and their use by the Portfolio may not be successful. These
instruments (a type of potentially high-risk derivative) can combine the
characteristics of securities, futures, and options. For example, the principal
amount, redemption, or conversion terms of a security could be related to the
market price of some commodity, currency, or securities index. Such securities
may bear interest or pay dividends at below market (or even relatively nominal)
rates. Under certain conditions, the redemption value of such an investment
could be zero. For a discussion of hybrid investments, see the Trust's SAI under
"Certain Risk Factors and Investment Methods."

Illiquid Securities. Subject to guidelines promulgated by the Board of
Trustees of the Trust, the Portfolio may acquire illiquid securities (no more
than 15% of net assets). For a discussion of illiquid securities and the risks
involved therein, see this Prospectus under "Certain Risk Factors and Investment
Methods" and the Trust's SAI under "Investment Objectives and Policies."

Private Placements (Restricted Securities). These securities are sold
directly to a small number of investors usually institutions. Unlike public
offerings, such securities are not registered with the SEC. Although certain of
these securities may be readily sold, for example under Rule 144A, the sale of
others may involve substantial delays and additional costs. Subject to
guidelines promulgated by the Board of Trustees of the Trust, the Portfolio will
not invest more than 15% of its net assets in illiquid securities, but not more
than 10% of its total assets in restricted securities (other than Rule 144A
securities). For a discussion of illiquid and restricted securities and the
risks involved therein, see this Prospectus and the Trust's SAI under "Certain
Risk Factors and Investment Methods."

Cash Position. The Portfolio will hold a certain portion of its assets
in U.S. and foreign dollar-denominated money market securities, including
repurchase agreements, in the two highest rating categories, maturing in one
year or less. For temporary, defensive purposes, the Portfolio may invest
without limitation in such securities. This reserve position provides
flexibility in meeting redemptions, expenses, and the timing of new investments
and serves as a short-term defense during periods of unusual market volatility.

Borrowing. The Portfolio can borrow money from banks as a temporary
measure for emergency purposes, to facilitate redemption requests, or for other
purposes consistent with the Portfolio's investment objective and program. Such
borrowings may be collateralized with Portfolio assets, subject to restrictions.
For an additional discussion of the Portfolio's limitations on borrowing and
certain risks involved in borrowing, see this Prospectus under "Certain Risk
Factors and Investment Methods" and the Trust's SAI under "Investment
Restrictions."

Futures and Options. The Portfolio may enter into futures contracts (or
options thereon) to hedge all or a portion of its portfolio, as a hedge against
changes in prevailing levels of interest rates or currency exchange rates, or as
an efficient means of adjusting its exposure to the bond, stock, and currency
markets. The Portfolio will not use futures contracts for leveraging purposes.
The Portfolio may also write call and put options and purchase put and call
options on securities, financial indices, and currencies. The aggregate market
value of the Portfolio's securities or currencies covering call or put options
will not exceed 25% of the Portfolio's net assets. For an additional discussion
of futures contracts and options and the risks involved therein, see this
Prospectus and the Trust's SAI under "Certain Risk Factors and Investment
Methods" and the Trust's SAI under "Investment Objectives and Policies."

AST INVESCO Equity Income Portfolio:

Investment Objective: The investment objective of the Portfolio is to seek high
current income while following sound investment practices. This is a fundamental
objective of the Portfolio. Capital growth potential is an additional, but
secondary, consideration in the selection of portfolio securities.

Investment Policies:

The Portfolio seeks to achieve its objective by investing in securities
which will provide a relatively high yield and stable return and which, over a
period of years, may also provide capital appreciation. The Portfolio normally
will invest at least 65% of its assets in dividend-paying, marketable common
stocks of domestic and foreign issuers. Up to 10% of the Portfolio's assets may
be invested in equity securities that do not pay regular dividends. The
Portfolio also will invest in convertible bonds, preferred stocks and debt
securities. In periods of uncertain market and economic conditions, as
determined by the Board of Trustees, the Portfolio may depart from the 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.

The Portfolio's investments in common stocks may, of course, decline in
value. To minimize the risk this presents, the Sub-advisor only invests in
common stocks and equity securities of domestic and foreign issuers which are
marketable; and 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.

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 ("Standard &
Poor's) or Moody's Investors Services, Inc. ("Moody's") and unrated debt
securities, other than Government National Mortgage Association modified
pass-through certificates.

In order to decrease its risk in investing in debt securities, the
Portfolio will invest no more than 15% of its assets in debt securities rated
below AAA, AA, A or BBB by Standard & Poor's, or Aaa, Aa, A or Baa by Moody's,
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. Lower rated bonds by Moody's
(categories Ba, B, Caa) are of poorer quality and may have speculative
characteristics. Bonds rated Caa may be in default or there may be present
elements of danger with respect to principal or interest. Lower rated bonds by
Standard & Poor's (categories BB, B, CCC) include those which are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with their terms; BB indicates
the lowest degree of speculation and CCC a high degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. For a description of securities ratings, see the Appendix to the
Trust's SAI.

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 and the Trust's SAI under "Certain
Risk Factors and Investment Methods."

Portfolio Turnover. There are no fixed limitations regarding portfolio
turnover. The rate of portfolio turnover may fluctuate as a result of constantly
changing economic conditions and market circumstances. Securities initially
satisfying the Portfolio's basic objectives and policies may be disposed of when
they are no longer suitable. As a result, the Portfolio's annual portfolio
turnover rate may be higher than that of other investment companies seeking
current income with capital growth as a secondary consideration. For a
discussion of portfolio turnover and its effects, see this Prospectus and the
Trust's SAI under "Portfolio Turnover."

Repurchase Agreements. Subject to guidelines promulgated by the Board
of Trustees of the Trust, the Portfolio may enter into repurchase agreements
with respect to debt instruments eligible for investment by the Portfolio. These
agreements are entered into with member banks of the Federal Reserve System,
registered broker-dealers, and registered government securities dealers which
are deemed creditworthy. A repurchase agreement is a means of investing moneys
for a short period. In a repurchase agreement, the Portfolio acquires a debt
instrument (generally a security issued by the U.S. Government or an agency
thereof, a banker's acceptance or a certificate of deposit) subject to resale to
the seller at an agreed upon price and date (normally, the next business day).
In the event that the original seller defaults on its obligation to repurchase
the security, the Portfolio could incur costs or delays in seeking to sell such
security. To minimize risk, the securities underlying each repurchase agreement
will be maintained with the Portfolio's custodian in an amount at least equal to
the repurchase price under the agreement (including accrued interest), and such
agreements will be effected only with parties that meet certain creditworthiness
standards established by the Trust's Board of Trustees. The Portfolio will not
enter into a repurchase agreement maturing in more than seven days if as a
result more than 15% of the Portfolio's net assets would be invested in such
repurchase agreements and other illiquid securities. The Portfolio has not
adopted any limit on the amount of its total assets that may be invested in
repurchase agreements maturing in seven days or less.

Foreign Securities. The Portfolio may invest up to 25% of its total
assets in foreign securities. Investments in securities of foreign companies and
in foreign markets involve certain additional risks not associated with
investments in domestic companies and markets. The Portfolio may invest in
countries considered to be developing which may involve special risks. For a
discussion of these risks and the risks of investing in foreign securities in
general, see this Prospectus and the Trust's SAI under "Certain Risk Factors and
Investment Methods."

Illiquid Securities. Subject to guidelines promulgated by the Board of
Trustees of the Trust, the Portfolio may invest up to 15% of its net assets in
securities that are illiquid by virtue of legal or contractual restrictions on
resale or the absence of a readily available market. The Board of Trustees, or
the Investment Manager or the Sub-advisor acting pursuant to authority delegated
by the Board of 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. For a discussion of restricted
securities and the risks involved therein, see this Prospectus under "Certain
Risk Factors and Investment Methods."

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:

In selecting securities for the Portfolio, the Sub-advisor will utilize
economic forecasting, interest rate anticipation, credit and call risk analysis,
foreign currency exchange rate forecasting, and other security 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 Portfolio will invest at
least 65% of its assets in the following types of securities which may be issued
by domestic or foreign entities and denominated in U.S. dollars or foreign
currencies: securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities; corporate debt securities, including convertible
securities and commercial paper; mortgage and other asset-backed securities;
inflation-indexed bonds issued by both governments and corporations; structured
notes, including hybrid or "indexed" securities, and loan participations;
variable and floating rate debt securities; bank certificates of deposit, fixed
time deposits and bankers' acceptances; repurchase agreements and reverse
repurchase agreements; obligations of foreign governments or their subdivisions,
agencies and instrumentalities, international agencies or supranational
entities; and foreign currency exchange-related securities, including foreign
currency warrants.

The Portfolio will invest in a diversified portfolio of fixed-income
securities of varying maturities. The average portfolio duration of the
Portfolio normally 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 but
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). The Portfolio will maintain an overall dollar-weighted
average quality of at least A (as rated by Moody's or S&P). 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.
Securities rated B are judged to be predominantly speculative with respect to
their capacity to pay interest and repay principal in accordance with the terms
of the obligations. The Sub-advisor will seek to reduce the risks associated
with investing in such securities by limiting the Portfolio's holdings in such
securities and by the depth of its own credit analysis. For a discussion of the
risks involved in lower-rated high-yield bonds, see this Prospectus and the
Trust's SAI under "Certain Risk Factors and Investment Methods." See the
Appendix to the Trust's SAI for a description of Moody's and S&P's ratings
applicable to fixed income 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. Portfolio holdings will be
concentrated in areas of the bond market (based on quality, sector, coupon or
maturity) which the Sub-advisor believes to be relatively undervalued.

The Portfolio may enter into swap agreements for the purposes of
attempting to obtain a particular investment return at a lower cost to the
Portfolio than if the Portfolio had invested directly in an instrument that
provided that desired return. In addition, the Portfolio may purchase and sell
securities on a when-issued and delayed delivery basis and enter into forward
commitments to purchase securities; lend its securities to brokers, dealers and
other financial institutions to earn income; and borrow money for investment
purposes.

The "total return" sought by the Portfolio will consist of interest and
dividends from underlying securities, capital appreciation reflected in
unrealized increases in value of portfolio securities or realized from the
purchase and sale of securities, and use of futures and options or gains from
favorable changes in foreign currency exchange rates. Generally, over the long
term, the total return obtained by a portfolio investing primarily in fixed
income securities is not expected to be as great as that obtained by a portfolio
investing in equity securities. At the same time, the market risk and volatility
of a fixed income portfolio 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. The change in the market value of fixed income
securities (and therefore their capital appreciation or depreciation) is largely
a function of changes in the current level of interest rates. When interest
rates are falling, a portfolio with a shorter duration generally will not
generate as high a level of total return as a portfolio with a longer duration.
Conversely, when interest rates are rising, a portfolio with a shorter duration
will generally outperform longer duration portfolios. When interest rates are
flat, shorter duration portfolios generally will not achieve as high a level of
return as longer duration portfolios (assuming that long-term interest rates are
higher than short-term interest rates, which is commonly the case). With respect
to the composition of any fixed income portfolio, the longer the duration of the
portfolio, the greater the potential for total return, with, however, greater
attendant market risk and price volatility than for a portfolio with a shorter
duration. The market value of securities denominated in currencies other than
U.S. dollars also may be affected by movements in foreign currency exchange
rates.

Unless otherwise indicated, all limitations applicable to Portfolio
investments (as stated in this Prospectus and in the Trust's SAI) apply only at
the time a transaction is entered into. Any subsequent change in a rating
assigned by any rating service to a security (or, if unrated, deemed to be of
comparable quality), or change in the percentage of Portfolio assets invested in
certain securities or other instruments, or change in the average duration of
the Portfolio's investment portfolio, resulting from market fluctuations or
other changes in the Portfolio's total assets will not require the Portfolio to
dispose of an investment until the Sub-advisor determines that it is practicable
to sell or close out the investment without undue market consequences to the
Portfolio.

The Portfolio's investments include, but are not limited to, the
following:

U.S. Government Securities. U.S. Government securities are obligations
of, or guaranteed by, the U.S. Government, its agencies or instrumentalities.
Some U.S. Government securities, such as Treasury bills, notes and bonds, and
securities guaranteed by the Government National Mortgage Association ("GNMA"),
are supported by the full faith and credit of the United States; others, such as
those of the Federal Home Loan Banks, are supported by the right of the issuer
to borrow from the U.S. Treasury; others, such as those of the Federal National
Mortgage Association ("FNMA"), are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; and still others, such
as the Student Loan Marketing Association, are supported only by the credit of
the instrumentality.

Corporate Debt Securities. Corporate debt securities include corporate
bonds, debentures, notes and other similar corporate debt instruments, including
convertible securities. Debt securities may be acquired with warrants attached.
Corporate income-producing securities may also include forms of preferred or
preference stock. 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. Investment in corporate debt
securities that are below investment grade (rated below Baa (Moody's) or BBB
(S&P)) are described as "speculative" both by Moody's and S&P. For a description
of the special risks involved with lower-rated high-yield bonds, see this
Prospectus and the Trust's SAI under "Certain Risk Factors and Investment
Methods." For a description of securities ratings, see the Appendix to the
Trust's SAI.

Convertible Securities. The Portfolio may invest in convertible
securities, which may offer higher income than the common stocks into which they
are convertible. Typically, convertible securities are callable by the issuing
company, which may, in effect, force conversion before the holder would
otherwise choose.

The convertible securities in which the Portfolio may invest consist of
bonds, notes, debentures and preferred stocks which may be converted or
exchanged at a stated or determinable exchange ratio into underlying shares of
common stock. The Portfolio may be required to permit the issuer of a
convertible security to redeem the security, convert it into the underlying
common stock, or sell it to a third party. Thus, the Portfolio may not be able
to control whether the issuer of a convertible security chooses to convert that
security. If the issuer chooses to do so, this action could have an adverse
effect on the Portfolio's ability to achieve its investment objective.

While some countries or companies may be regarded as favorable
investments, pure fixed income opportunities may be unattractive or limited due
to insufficient supply, legal or technical restrictions. In such cases, the
Portfolio may consider equity securities or convertible bonds to gain exposure
to such investments.

Loan Participation and Assignments. The Portfolio may invest in fixed-
and floating-rate loans arranged through private negotiations between an issuer
of debt instruments and one or more financial institutions ("lenders").
Generally, the Portfolio's investments in loans are expected to take the form of
loan participations and assignments of portions of loans from third parties.

Large loans to corporation or governments may be shared or syndicated
among several lenders, usually banks. The Portfolio may participate in such
syndicates, or can buy part of a loan, becoming a direct lender. Participations
and assignments involve special types of risk, including limited marketability
and the risks of being a lender. See "Illiquid Securities" below for a
discussion of the limits on the Portfolio's investments in loan participations
and assignments with limited marketability. If the Portfolio purchases a
participation, it may only be able to enforce its rights through the lender, and
may assume the credit risk of the lender in addition to the borrower. In
assignments, the Portfolio's rights against the borrower may be more limited
than those held by the original lender.

Variable and Floating Rate Securities. Variable and floating rate
securities provide for a periodic adjustment in the interest rate paid on the
obligations. The terms of such obligations must provide that interest rates are
adjusted periodically based upon an interest rate adjustment index as provided
in the respective obligations. The adjustment intervals may be regular, and
range from daily up to annually, or may be event based, such as based on a
change in the prime rate.

The Portfolio may invest in floating rate debt instruments
("floaters"). The interest rate on a floater is a variable rate which is tied to
another interest rate, such as a money-market index or Treasury bill rate. The
interest rate on a floater resets periodically, typically every six months.
While, because of the interest rate reset feature, floaters provide the
Portfolio with a certain degree of protection against rises in interest rates,
the Portfolio will participate in any declines in interest rates as well.

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.

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 generally fixed at issuance at
a rate lower than typical bonds. Over the life of an inflation-indexed bond,
however, interest will be paid based on a principal value which is adjusted for
inflation. For example, if the Portfolio purchased an inflation-indexed bond
with a par value of $1,000 and a 3% real rate of return coupon (payable 1.5%
semi-annually), and inflation over the first six months were 1%, the mid-year
par value of the bond would be $1,010 and the first semi-annual interest payment
would be $15.15 ($1,010 times 1.5%).

Repayment of the original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds,
even during a period of deflation. However, the current market value of the
bonds is not guaranteed, and will fluctuate. The Portfolio may also invest in
other inflation related bonds which may or may not provide a similar guarantee.
If a guarantee of principal is not provided, the adjusted principal value of the
bond repaid at maturity may be less than the original principal.

The value of inflation-indexed bonds is expected to change in response
to changes in real interest rates (which are nominal interest rates adjusted for
inflation). If inflation were to rise at a faster rate than nominal interest
rates, real interest rates would decline, leading to an increase in value of
inflation-indexed bonds. In contrast, if nominal interest rates increased at a
faster rate than inflation, real interest rates would rise, leading to a
decrease in value of inflation-indexed bonds.

While these securities are expected to be protected from long-term
inflationary trends, short-term increases in inflation may lead to a decline in
value. If interest rates rise due to reasons other than inflation (for example,
due to changes in currency exchange rates), investors in these securities may
not be protected to the extent that the increase is not reflected in the bond's
inflation measure.

The U.S. Treasury has only recently begun issuing inflation-indexed
bonds. As such, there is no trading history of these securities, and there can
be no assurance that a liquid market in these instruments will develop, although
one is expected. There also can be no assurance that the U.S. Treasury will
issue any particular amount of inflation-indexed bonds. Certain foreign
governments, such as the United Kingdom, Canada and Australia, have a longer
history of issuing inflation-indexed bonds, and there may be a more liquid
market in certain of these countries for these securities.

Mortgage-Related and Other Asset-Backed Securities. The Portfolio may
invest all of its assets in mortgage-related and other asset-backed securities,
including mortgage pass-through securities and collateralized mortgage
obligations. The value of some mortgage- or asset-backed securities in which the
Portfolio invests may be particularly sensitive to changes in prevailing
interest rates, and, like the other investments of the Portfolio, the ability of
the Portfolio to successfully utilize these instruments may depend in part upon
the ability of the Sub-advisor to forecast interest rates and other economic
factors correctly. For a description of these securities and the special risks
involved therein, see this Prospectus and the Trust's SAI under "Certain Risk
Factors and Investment Methods" and the Trust's SAI under "Investment Objectives
and Policies."

Repurchase Agreements. For the purpose of achieving income, the
Portfolio may enter into repurchase agreements, subject to guidelines
promulgated by the Board of Trustees of the Trust. The Portfolio will not invest
more than 15% of its net assets (taken at current market value) in repurchase
agreements maturing in more than seven days. For a discussion of repurchase
agreements and the risks involved therein, see this Prospectus under "Certain
Risk Factors and Investment Methods."

Reverse Repurchase Agreements, Dollar Rolls and Other Borrowings. A
reverse repurchase agreement involves the sale of a security by the Portfolio
and its agreement to repurchase the instrument at a specified time and price,
and for some purposes may be considered a borrowing. The Portfolio may also
enter into dollar rolls, in which 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. In the
case of dollar rolls involving mortgage-backed securities, the mortgage-backed
securities that are purchased will be of the same type and will have the same
interest rate as those sold, but will be supported by different pools of
mortgages. The Portfolio foregoes principal and interest paid during the roll
period on the securities sold in a dollar roll, but the Portfolio is compensated
by the difference between the current 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 equivalent to a lower forward price.

These practices will tend to exaggerate the effect on net asset value
of any increase or decrease in the value of the Portfolio and may cause the
Portfolio to liquidate portfolio positions when it would not be advantageous to
do so. The Portfolio will maintain a segregated account consisting of cash or
other liquid assets to cover its obligations under reverse repurchase agreements
and dollar rolls. Reverse repurchase agreements and dollar rolls will be subject
to the Portfolio's limitations on borrowing as discussed in the Trust's SAI
under "Investment Restrictions." Apart from transactions involving reverse
repurchase agreements and dollar rolls, the Portfolio will not borrow money,
except for temporary administrative purposes. For an additional discussion of
the risks of borrowing and of reverse repurchase agreements and the risks
involved therein, see this Prospectus and the Trust's SAI under "Certain Risk
Factors and Investment Methods."

When-Issued, Delayed-Delivery, and Forward Commitment Transactions. The
Portfolio may purchase or sell securities on a when-issued, delayed delivery, or
forward commitment basis. These transactions involve a commitment by the
Portfolio to purchase or sell securities for a predetermined price or yield,
with payment and delivery taking place more than seven days in the future, or
after a period longer than the customary settlement period for that type of
security. When such purchases are outstanding, the Portfolio will set aside and
maintain until the settlement date, in a segregated account, cash or other
liquid assets in an amount sufficient to meet the purchase price. Typically, no
income accrues on securities the Portfolio has committed to purchase prior to
the time delivery of the securities is made, although the Portfolio may earn
income on securities it has deposited in a segregated account. When purchasing a
security on a when-issued, delayed delivery, or forward commitment basis, the
Portfolio assumes the rights and risks of ownership of the security, including
the risk of price and yield fluctuations, and takes such fluctuations into
account when determining its net asset value. Because the Portfolio is not
required to pay for the security until the delivery date, these risks are in
addition to the risks associated with the Portfolio's other investments. If the
Portfolio remains substantially fully invested at a time when when-issued,
delayed delivery, or forward commitment purchases are outstanding, the purchases
may result in a form of leverage. When the Portfolio has sold a security on a
when-issued, delayed delivery, or forward commitment basis, the Portfolio does
not participate in future gains or losses with respect to the security. If the
other party to a transaction fails to deliver or pay for the securities, the
Portfolio could miss a favorable price or yield opportunity or could suffer a
loss. The Portfolio may dispose of or renegotiate a transaction after it is
entered into, and may sell when-issued or forward commitment securities before
they are delivered, which may result in a capital gain or loss. There is no
percentage limitation on the extent to which the Portfolio may purchase or sell
securities on a when-issued, delayed delivery, or forward commitment basis.

Short Sales. The Portfolio may from time to time effect short sales as
part of its overall portfolio management strategies, including the use of
derivative instruments, or to offset potential declines in value of long
positions in similar securities as those sold short. A short sale (other than a
short sale "against the box") is a transaction in which the Portfolio sells a
security it does not own at the time of the sale in anticipation that the market
price of that security will decline. To the extent that the Portfolio engages in
short sales, it must (except in the case of short sales against the box)
maintain asset coverage in the form of cash or other liquid assets in a
segregated account. 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.

Foreign Securities. The Portfolio may invest directly in fixed income
securities of non-U.S. issuers. The Portfolio will concentrate its foreign
investments to securities of issuers based in developed countries. The Portfolio
may invest up to 10% of its assets in securities of issuers based in countries
with emerging securities markets. The Sub-advisor has broad discretion to
identify and invest in countries that it considers to qualify as emerging
securities markets. Investing in the securities of issuers in any foreign
country involves special risks and considerations not typically associated with
investing in U.S. companies. For a discussion of the risks involved in investing
in foreign securities, in general, and the special risks of investing in
developing countries, as well as the risks of currency fluctuations, see this
Prospectus and the Trust's SAI under "Certain Risk Factors and Investment
Methods."

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. Brady Bonds have been issued only recently, and for
that reason do not have a long payment history. Brady Bonds may be
collateralized or uncollateralized, are issued in various currencies (but
primarily the U.S. dollar), and are actively traded in the over-the-counter
secondary market. Brady Bonds are not considered to be U.S. Government
Securities. In light of the residual risk of Brady Bonds and, among other
factors, the history of defaults with respect to commercial bank loans by public
and private entities in countries issuing Brady Bonds, investments in Brady
Bonds may be viewed as speculative. There can be no assurance that Brady Bonds
acquired by the Portfolio 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.

Foreign Currency Transactions. The Portfolio may buy and sell foreign
currency futures contracts and options on foreign currencies and foreign
currency futures contracts, enter into forward foreign currency exchange
contracts to reduce the risks of adverse changes in foreign exchange rates. The
Portfolio may enter into these contracts for the purpose of hedging against
foreign exchange risk arising from the Portfolio's investment or anticipated
investment in securities denominated in foreign currencies. For a discussion of
foreign currency transactions and the risks involved therein, see this
Prospectus and the Trust's SAI under "Certain Risk Factors and Investment
Methods."

Options on Securities, Securities Indexes and Currencies. The Portfolio
may purchase and write call and put options on securities, securities indexes
and on foreign currencies, and enter into futures contracts and use options on
futures contracts as further described below. The Portfolio may also enter into
swap agreements with respect to foreign currencies, interest rates and
securities indexes. The Portfolio may use these techniques to hedge against
changes in interest rates, foreign currency, exchange rates or securities prices
or as part of its overall investment strategy.

The Portfolio may purchase options on securities to protect holdings in
an underlying or related security against a substantial decline in market value.
A Portfolio may purchase call options on securities to protect against
substantial increases in prices of securities the Portfolio intends to purchase
pending its ability to invest in such securities in an orderly manner. The
Portfolio may sell put or call options it has previously purchased, which could
result in a net gain or loss depending on whether the amount realized on the
sale is more or less than the premium and other transaction costs paid on the
put or call option which is sold. The Portfolio may write a call or put option
only if it is "covered" by the Portfolio holding a position in the underlying
securities or by other means which would permit immediate satisfaction of the
Portfolio's obligation as writer of the option. Prior to exercise or expiration,
an option may be closed out by an offsetting purchase or sale of an option of
the same series.

The Portfolio may also invest in foreign-denominated securities and may
buy or sell put and call options on foreign currencies. 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. For
a discussion of options and the risks involved therein, as well as the risks
involved in investing in foreign currency, see this Prospectus and the Trust's
SAI under "Certain Risk Factors and Investment Methods."

Swap Agreements. The Portfolio may enter into interest rate, index and
currency exchange rate swap agreements for the 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 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, two parties agree to exchange the
returns (or differentials in rates of return) earned or realized on particular
predetermined investments or instruments. The gross returns to be exchanged or
"swapped" between the parties are calculated with respect to a "notional
amount," i.e., the return on or increase in value of a particular dollar amount
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.

The "notional amount" of a swap agreement is only a fictive basis on
which to calculate the obligations which the parties to a swap agreement have
agreed to exchange. Most swap agreements entered into by the Portfolio would
calculate the obligations of the parties to the agreement on a "net basis."
Consequently, 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 ("net amount"). The Portfolio's obligations under a swap agreement
will be accrued daily (offset against amounts owed to the Portfolio) and any
accrued 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. 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 total assets.

Risks of Swaps. Whether the Portfolio's use of swap agreements will be
successful in furthering its investment objective will depend on the Portfolio's
ability to predict correctly whether certain types of investment are likely to
produce greater returns than other investments. Because they are two-party
contracts and because they have terms of longer than seven days, swap agreements
may be considered illiquid. Moreover, the Portfolio bears the risk of loss of
the amount expected to be received under a swap agreement in the event of a
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 relatively new and is largely
unregulated. It is possible that developments in the swaps market, including
potential governmental regulation, could adversely affect the Portfolio's
ability to terminate existing swap agreements or to realize amounts to be
received under such agreements.

Futures Contracts and Options on Futures Contracts. 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 a U.S.
or foreign exchange or board of trade. The Portfolio will only enter into
futures contracts or futures options which are standardized and traded on a U.S.
or foreign exchange or board of trade, or similar entity, or quoted on an
automated quotation system. The Portfolio will use financial futures contracts
and related options only for "bona fide" hedging purposes, as such term is
defined in the applicable regulations of the CFTC, or, with respect to positions
in financial futures and related options that do not qualify as "bona fide
hedging" positions, will enter such non-hedging positions only to the extent
that aggregate initial margin deposit plus premiums paid by it for the open
futures options position, less the amount by which any such positions are
"in-the-money," would not exceed 5% of the Portfolio's total assets. For an
additional discussion of futures contracts and related options, and the risks
involved therein, see this Prospectus and the Trust's SAI under "Certain Risk
Factors and Investment Methods."

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 the Trust's SAI under
"Certain Risk Factors and Investment Methods."

Illiquid Securities. Subject to guidelines promulgated by the Board of
Trustees of the Trust, the Portfolio may invest up to 15% of its net assets in
illiquid securities. Certain illiquid securities may require pricing at fair
value as determined in good faith under the supervision of the Board of
Trustees. The term "illiquid securities" for this purpose means securities that
cannot be disposed of within seven days in the ordinary course of business at
approximately the amount at which the Portfolio has valued the securities.
Illiquid securities are considered to include, among other things, written
over-the-counter options, securities or other liquid assets being used as cover
for such options, repurchase agreements with maturities in excess of seven days,
certain loan participation interests, fixed time deposits which are not subject
to prepayment or provide for withdrawal penalties upon prepayment (other than
overnight deposits), securities that are subject to legal or contractual
restrictions on resale and other securities whose disposition is restricted
under the federal securities laws (other than securities issued pursuant to Rule
144A under the Securities Act of 1933 that the Sub-advisor has determined to be
liquid under procedures approved by the Board of Trustees). Illiquid securities
may include privately placed securities, which are sold directly to a small
number of investors, usually institutions. Unlike public offerings, such
securities are not registered under the federal securities laws. Although
certain of these securities may be readily sold, for example, under Rule 144A,
others may be illiquid, and their sale may involve substantial delays and
additional costs.

Portfolio Turnover. The Portfolio may have higher portfolio turnover than
other mutual funds with similar investment objectives. For a discussion of
portfolio turnover and its effects, see this Prospectus and the Trust's SAI
under "Portfolio Turnover."

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. This is a fundamental objective of the Portfolio.

Investment Policies:

In selecting securities for the Portfolio, the Sub-advisor utilizes
economic forecasting, interest rate anticipation, credit and call risk analysis,
foreign currency exchange rate forecasting, and other security selection
techniques. The proportion of each 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 Portfolio will invest at least 65% of its total assets in the
following types of securities, which may be issued by domestic or foreign
entities and denominated in U.S. dollars or foreign currencies: securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
("U.S. Government securities"); corporate debt securities, including convertible
securities and commercial paper; mortgage and other asset-backed securities;
inflation-indexed bonds issued by both governments and corporations; structured
notes, including hybrid or "indexed" securities, and loan participations;
variable and floating rate debt securities; bank certificates of deposit, fixed
time deposits and bankers' acceptances; repurchase agreements and reverse
repurchase agreements; obligations of foreign governments or their subdivisions,
agencies and instrumentalities, international agencies or supranational
entities; and foreign currency exchange-related securities, including foreign
currency warrants.

The Portfolio may hold different percentages of its assets in these
various types of securities, and may invest all of its assets in derivative
instruments or in mortgage- or asset-backed securities. There are special risks
involved in these instruments.

The Portfolio will invest in a diversified portfolio of 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 corporate debt securities that are rated below investment
grade but rated B or higher by Moody's or S&P (or, if unrated, determined by the
Sub-advisor to be of comparable quality). The Portfolio may also invest up to
20% of its assets in securities denominated in foreign currencies. The Portfolio
will make use of use of average portfolio credit quality standards to assist
institutional investors whose own investment guidelines limit its investments
accordingly. In determining the Portfolio's overall dollar-weighted average
quality, unrated securities are treated as if rated, based on the Sub-advisor's
view of their comparability to rated securities. 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
Portfolio's investments may range in quality from securities rated in the lowest
category in which the Portfolio is permitted to invest to securities rated in
the highest category (as rated by Moody's or S&P or, if unrated, determined by
the Sub-advisor to be of comparable quality). The percentage of a the
Portfolio's assets invested in securities in a particular rating category will
vary. See the Appendix to the Trust's SAI for a description of Moody's and S&P
ratings applicable to fixed income 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 or sell interest rate futures contracts, options
on interest rate futures contracts and options on debt securities for the
purpose of hedging against changes in the value of securities which the
Portfolio owns or anticipates purchasing due to anticipated changes in interest
rates. The Portfolio may invest in securities denominated in foreign currencies,
and also may engage in foreign currency exchange transactions by means of buying
or selling foreign currencies on a spot basis, entering into foreign currency
forward contracts, and buying and selling foreign currency options, foreign
currency futures, and options on foreign currency futures. Foreign currency
exchange transactions may be entered into for the purpose of hedging against
foreign currency exchange risk arising from the Portfolio's investment or
anticipated investment in securities denominated in foreign currencies. The
Portfolio also may enter into foreign currency forward contracts and buy or sell
foreign currencies or foreign currency options for purposes of increasing
exposure to a particular foreign currency or to shift exposure to foreign
currency fluctuations from one country to another.

The Portfolio may enter into swap agreements for purposes of attempting
to obtain a particular investment return at a lower cost to the Portfolio than
if the Portfolio had invested directly in an instrument that provided that
desired return. In addition, the Portfolio may purchase and sell securities on a
when-issued or delayed-delivery basis, sell securities short, and enter into
forward commitments to purchase securities; lend their securities to brokers,
dealers and other financial institutions to earn income; and borrow money for
investment purposes.

The "total return" sought by the Portfolio will consist of interest and
dividends from underlying securities, capital appreciation reflected in
unrealized increases in value of portfolio securities (realized by the
shareholder only upon selling shares) or realized from the purchase and sale of
securities, and use of futures and options, or gains from favorable changes in
foreign currency exchange rates. Generally, over the long term, the total return
obtained by a portfolio investing primarily in fixed income securities is not
expected to be as great as that obtained by a portfolio that invests primarily
in equity securities. At the same time, the market risk and price volatility of
a fixed income portfolio 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. The change in market value of fixed income securities
(and therefore their capital appreciation or depreciation) is largely a function
of changes in the current level of interest rates. When interest rates are
falling, a portfolio with a shorter duration generally will not generate as high
a level of total return as a portfolio with a longer duration. Conversely, when
interest rates are rising, a portfolio with a shorter duration will generally
outperform longer duration portfolios. When interest rates are flat, shorter
duration portfolios generally will not generate as high a level of total return
as longer duration portfolios (assuming that long-term interest rates are higher
than short-term rates, which is commonly the case). With respect to the
composition of any fixed income portfolio, the longer the duration of the
portfolio, the greater the anticipated potential for total return, with,
however, greater attendant market risk and price volatility than for a portfolio
with a shorter duration. The market value of securities denominated in
currencies other than the U.S. dollar also may be affected by movements in
foreign currency exchange rates.

The Portfolio's investments include, but are not limited to, the
following:

U.S. Government Securities. U.S. Government securities are obligations
of, or guaranteed by, the U.S. Government, its agencies or instrumentalities.
Some U.S. Government securities, such as Treasury bills, notes and bonds, and
securities guaranteed by the Government National Mortgage Association ("GNMA"),
are supported by the full faith and credit of the United States; others, such as
those of the Federal Home Loan Banks, are supported by the right of the issuer
to borrow from the U.S. Treasury; others, such as those of the Federal National
Mortgage Association ("FNMA"), are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; and still others, such
as those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality.

Corporate Debt Securities. Corporate debt securities include corporate
bonds, debentures, notes and other similar corporate debt instruments, including
convertible securities. Debt securities may be acquired with warrants attached.
Corporate income-producing securities may also include forms of preferred or
preference stock. 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. Investments in corporate debt
securities that are below investment grade (rated below Baa (Moody's) or BBB
(S&P)) are described as "speculative" both by Moody's and S&P. For a description
of the special risks involved with lower-rated high-yield bonds, see this
Prospectus and the Trust's SAI under "Certain Risk Factors and Investment
Methods." For a description of securities ratings, see the Appendix to the
Trust's SAI.

Mortgage-Related and Other Asset-Backed Securities. The Portfolio may
invest all of its assets in mortgage- or asset-backed securities. The value of
some mortgage- or asset-backed securities in which the Portfolio invests may be
particularly sensitive to changes in prevailing interest rates, and, like the
other investments of the Portfolio, the ability of the Portfolio to successfully
utilize these instruments may depend in part upon the ability of the Sub-advisor
to forecast interest rates and other economic factors correctly.

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, such as CMO
residuals or stripped mortgage-backed securities ("SMBS"), and may be structured
in classes with rights to receive varying proportions of principal and interest.

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
interest-only or "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. In addition, the Portfolio may invest in
other asset-backed securities that have been offered to investors. For an
additional discussion of mortgage-related and other asset-backed securities and
the risks involved therein, see this Prospectus and the Trust's SAI under
"Certain Risk Factors and Investment Methods" and the Trust's SAI under
"Investment Objectives and Policies."

Repurchase Agreements. Subject to guidelines promulgated by the Board
of Trustees of the Trust, for the purpose of achieving income, the Portfolio may
enter into repurchase agreements, which entail the purchase of a portfolio
eligible security from a bank or broker-dealer that agrees to repurchase the
security at the Portfolio's cost plus interest within a specified time (normally
one day). The Portfolio will not invest more than 15% of its net assets (taken
at current market value) in repurchase agreements maturing in more than seven
days. For a discussion of repurchase agreements and the risks involved therein,
see this Prospectus under "Certain Risk Factors and Investment Methods."

These practices will tend to exaggerate the effect on net asset value
of any increase or decrease in the value of the Portfolio's portfolio and may
cause the Portfolio to liquidate portfolio positions when it would not be
advantageous to do so. The Portfolio will maintain a segregated account
consisting of cash or other liquid assets to cover its obligations under reverse
repurchase agreements and dollar rolls. Reverse repurchase agreements and dollar
rolls will be subject to the Portfolio's limitations on borrowings as discussed
in the Trust's SAI under "Investment Restrictions." Apart from transactions
involving reverse repurchase agreements and dollar rolls, the Portfolio will not
borrow money, except for temporary administrative purposes. For an additional
discussion of the risks of borrowing, and of reverse repurchase agreements and
the risks involved therein, see this Prospectus and the Trust's SAI under
"Certain Risk Factors and Investment Methods."

Foreign Securities. The Portfolio may invest directly in fixed income
securities of non-U.S. issuers. The Portfolio will concentrate its foreign
investments to securities of issuers based in developed countries. The Portfolio
may invest up to 5% of its assets in securities of issuers based in countries
with emerging securities markets. The Sub-advisor has broad discretion to
identify and invest in countries that it considers to qualify as emerging
securities markets. Investing in the securities of issuers in any foreign
country involves special risks and considerations not typically associated with
investing in U.S. companies. For a discussion of the risks involved in investing
in foreign securities, in general, and the special risks of investing in
developing countries, as well as the risks of currency fluctuations, see this
Prospectus and the Trust's SAI under "Certain Risk Factors and Investment
Methods."

Options on Securities, Securities Indexes, and Currencies. The
Portfolio may purchase put options on securities. One purpose of purchasing put
options is to protect holdings in an underlying or related security against a
substantial decline in market value. The Portfolio may also purchase call
options on securities. One purpose of purchasing call options is to protect
against substantial increases in prices of securities the Portfolio intends to
purchase pending its ability to invest in such securities in an orderly manner.
The Portfolio may sell put or call options it has previously purchased, which
could result in a net gain or loss depending on whether the amount realized on
the sale is more or less than the premium and other transaction costs paid on
the put or call option which is sold. The Portfolio may write a call or put
option only if the option is "covered" by the Portfolio holding a position in
the underlying securities or by other means which would permit immediate
satisfaction of the Portfolio's obligation as writer of the option. Prior to
exercise or expiration, an option may be closed out by an offsetting purchase or
sale of an option of the same series.

The Portfolio may buy or sell put and call options on foreign
currencies. 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. For a discussion of options and the risks
involved therein, as well as the risks involved in investing in foreign
currency, see this Prospectus and the Trust's SAI under "Certain Risk 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. 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, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments. The gross returns to be exchanged or "swapped"
between the parties are calculated with respect to a "notional amount," i.e.,
the return on or increase in value of a particular dollar amount 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 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 in
an attempt to protect itself against interest rate movements exceeding given
minimum or maximum levels.

The "notional amount" of the swap agreement is only a fictive basis on
which to calculate the obligations which the parties to a swap agreement have
agreed to exchange. Most swap agreements entered into by the Portfolio would
calculate the obligations of the parties to the agreement on a "net basis."
Consequently, 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 amounts owed to the Portfolio)
and any accrued but unpaid net amounts owed to a swap counterparty will be
covered by the maintenance of segregated assets consisting of cash or other
liquid assets to avoid any potential leveraging of the Portfolio. A 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 will depend on the Sub-advisor's ability to
predict correctly 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 greater 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.

Futures Contracts and Options on Futures Contracts. The Portfolio may
invest in interest rate futures contracts, stock index futures contracts and
foreign currency futures contracts and options thereon ("futures options") that
are traded on a U.S. or foreign exchange or board of trade. The Portfolio will
only enter into futures contracts or futures options which are standardized and
traded on a U.S. or foreign exchange or board of trade, or similar entity, or
quoted on an automated quotation system. Each Portfolio will use financial
futures contracts and related options only for "bona fide hedging" purposes, as
such term is defined in applicable regulations of the CFTC, or, with respect to
positions in financial futures and related options that do not qualify as "bona
fide hedging" positions, will enter such non-hedging positions only to the
extent that aggregate initial margin deposits plus premiums paid by it for open
futures option positions, less the amount by which any such positions are
"in-the-money," would not exceed 5% of the Portfolio's total net assets. For an
additional discussion of futures contracts and related options, and the risks
involved therein, see this Prospectus and the Trust's SAI under "Certain Risk
Factors and Investment Methods."

Portfolio Turnover. The Portfolio may have portfolio turnover higher than
other mutual funds with similar investment objectives. For an additional
discussion of portfolio turnover and its effects, see this Prospectus and the
Trust's SAI under "Portfolio Turnover."

AST Stein Roe Venture Portfolio:

Investment Objective: The investment objective of the Portfolio is long-term
capital appreciation. The Portfolio emphasizes investments in financially strong
small and medium-sized companies, based principally on management appraisal and
stock valuation.

Investment Policies:

The Portfolio will pursue its objective by investing primarily in a
diversified portfolio of common stocks and other equity-type securities (such as
preferred stocks, securities convertible or exchangeable for common stocks, and
warrants or rights to purchase common stocks) of entrepreneurially managed
companies that the Sub-advisor believes represent special opportunities. The
Portfolio emphasizes investments in financially strong small and medium-sized
companies, based principally on appraisal of their management and stock
valuations. The Sub-advisor considers "small" and "medium-sized" companies to be
those with market capitalizations of less than $1 billion and $1 to $3 billion,
respectively.

In both its initial and ongoing appraisals of a company's management,
the Sub-advisor seeks to know both the principal owners and senior management
and to assess their business judgment and strategies through personal visits.
The Sub-advisor favors companies whose management has an owner/operator,
risk-averse orientation and a demonstrated ability to create wealth for
investors. Attractive company characteristics include unit growth, favorable
cost structures or competitive positions, and financial strength that enables
management to execute business strategies under difficult conditions. A company
is attractively valued when its stock can be purchased at a meaningful discount
to the value of the underlying business.

Portfolio Investments and Strategies.

Debt Securities. In pursuing its investment objective, the Portfolio
may invest in debt securities of corporate and governmental issuers. The
Portfolio may invest up to 35% of its net assets in debt securities, but does
not expect to invest more than 5% of its net assets in debt securities that are
rated below investment grade (i.e., below the four highest grades assigned by a
nationally recognized statistical rating organization). Securities in the fourth
highest grade may possess speculative characteristics, and changes in economic
conditions are more likely to affect the issuer's capacity to pay interest and
repay principal.

The risks inherent in debt securities depend primarily on the term and
quality of the obligation as well as on market conditions. A decline in the
prevailing levels of interest rates generally increases the value of debt
securities. Conversely, an increase in rates usually reduces the value of debt
securities. Securities that are rated below investment grade are considered
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal according to the terms of the obligation, and therefore
carry greater investment risk, including the possibility of issuer default and
bankruptcy. When the Sub-advisor determines that adverse market or economic
conditions exist and considers a temporary defensive position advisable, the
Portfolio may invest without limitation in high-quality fixed income securities
or hold assets in cash or cash equivalents.

Convertible Securities. By investing in convertible securities, the
Portfolio obtains the right to benefit from the capital appreciation potential
in the underlying stock upon exercise of the conversion right, while earning
higher current income than would be available if the stock were purchased
directly. In determining whether to purchase a convertible security, the
Sub-advisor will consider substantially the same criteria that would be
considered in purchasing the underlying stock.

Although convertible securities purchased by the Portfolio are
frequently rated investment grade, the Portfolio also may purchase unrated
securities or securities rated below investment grade if the securities meet the
Sub-advisor's other investment criteria. Convertible securities rated below
investment grade: (1) tend to be more sensitive to interest rate and economic
changes; (2) may be obligations of issuers who are less creditworthy than
issuers of higher quality convertible securities; and (3) may be more thinly
traded due to the fact that such securities are less well known to investors
than investment grade convertible securities, common stock or conventional debt
securities. As a result, the Sub-advisor's own investment research and analysis
tends to be more important than other factors in the purchase of such
securities.

Foreign Securities. The Portfolio may invest in foreign securities.
Other than American Depositary Receipts (ADRs), foreign debt securities
denominated in U.S. dollars, and securities guaranteed by a U.S. person, the
Portfolio is limited to investing no more than 25% of its total assets in
foreign securities. The Portfolio may invest in sponsored or unsponsored ADRs.
In addition to, or in lieu of, such direct investment, the Portfolio may
construct a synthetic foreign debt position by (a) purchasing a debt instrument
denominated in one currency, generally U.S. dollars; and (b) concurrently
entering into a forward contract to deliver a corresponding amount of that
currency in exchange for a different currency on a future date and at a
specified rate of exchange. Because of the availability of a variety of highly
liquid U.S. dollar debt instruments, a synthetic foreign debt position utilizing
such U.S. dollar instruments may offer greater liquidity than direct investment
in foreign currency debt instruments. In connection with the purchase of foreign
securities, the Portfolio may contract to purchase an amount of foreign currency
sufficient to pay the purchase price of the securities at the settlement date.
Such a contract involves the risk that the value of the foreign currency may
decline relative to the value of the dollar prior to the settlement date--this
risk is in addition to the risk that the value of the foreign security purchased
may decline. The Portfolio also may enter into foreign currency contracts as a
hedging technique to limit or reduce exposure to currency fluctuations. In
addition, the Portfolio may use options and futures contracts, as described
below, to limit or reduce exposure to currency fluctuations. For a further
discussion of the risks involved in investing in foreign securities, including
the risk of currency fluctuations, see this prospectus and the Trust's SAI under
"Certain Risk Factors and Investment Methods."

Interfund Lending; When-Issued and Delayed-Delivery Securities. The
Portfolio may participate in an interfund lending program, subject to certain
restrictions described in the SAI. The Portfolio may invest in securities
purchased on a when-issued or delayed-delivery basis. Although the payment terms
of these securities are established at the time the Portfolio enters into the
commitment, the securities may be delivered and paid for a month or more after
the date of purchase, when their value may have changed. The Portfolio will make
such commitments only with the intention of actually acquiring the securities,
but may sell the securities before settlement date if it is deemed advisable for
investment reasons.

Derivatives. Consistent with its objective, the Portfolio may invest in
a broad array of financial instruments and securities, including conventional
exchange-traded and non-exchange-traded options, futures contracts, futures
options, swaps, caps, floors, collars, securities collateralized by underlying
pools of mortgages or other receivables, floating rate instruments, and other
instruments that securitize assets of various types ("Derivatives"). In each
case, the value of the instrument or security is "derived" from the performance
of an underlying asset or a "benchmark" such as a security index, an interest
rate, or a currency. The Portfolio does not expect to invest more than 5% of its
net assets in any type of Derivative except for options, futures contracts, and
futures options.

Derivatives are most often used to manage investment risk or to create
an investment position indirectly because they are more efficient or less costly
than direct investment. They also may be used in an effort to enhance portfolio
returns.

The successful use of Derivatives depends on the Sub-advisor's ability
to correctly predict changes in the levels and directions of movements in
currency exchange rates, security prices, interest rates and other market
factors affecting the Derivative itself or the value of the underlying asset or
benchmark. In addition, correlations in the performance of an underlying asset
to a Derivative may not be well established. Finally, privately negotiated and
over-the-counter Derivatives may not be as well regulated and may be less
marketable than exchange-traded Derivatives. For an additional discussion of
certain risks involved in derivative securities, see this Prospectus under
"Certain Risk Factors and Investment Methods."

In seeking to achieve its desired investment objective, provide
additional revenue, or to hedge against changes in security prices, interest
rates or currency fluctuation, the Portfolio may: (1) purchase and write both
call options and put options on securities, indices and foreign currencies; (2)
enter into interest rate, index and foreign currency futures contracts; (3)
write options on such futures contracts; and (4) purchase other types of forward
or investment contracts linked to individual securities, indices or other
benchmarks. The Portfolio may write a call or put option only if the option is
covered. As the writer of a covered call option, the Portfolio foregoes, during
the option's life, the opportunity to profit from increases in market value of
the security covering the call option above the sum of the premium and the
exercise price of the call. Because futures positions may require low margin
deposits, the use of futures contracts involves a high degree of leverage and
may result in losses in excess of the amount of the margin deposit.

Short Sales Against the Box. The Portfolio may sell short securities it
owns or has the right to acquire without further consideration, a technique
called selling short "against the box." Short sales against the box may protect
the Portfolio against the risk of losses in the value of its portfolio
securities because any unrealized losses with respect to such securities should
be wholly or partly offset by a corresponding gain in the short position.
However, any potential gains in such securities should be wholly or partially
offset by a corresponding loss in the short position. Short sales against the
box may be used to lock in a profit on a security when, for tax reasons or
otherwise, the Sub-advisor does not want to sell the security.

Risks and Investment Considerations.

All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. The Portfolio is designed for
long-term investors who want greater return potential than is available from the
stock market in general, and who are willing to tolerate the greater investment
risk and market volatility associated with investments in small and medium-sized
companies. Of course, there can be no guarantee that the Portfolio will achieve
its objective.

The Portfolio's investment objective is not a fundamental policy and
may be changed by the Board of Trustees without shareholder approval. However,
shareholders of the Portfolio will receive at least 30 days written notice prior
to any change in the Portfolio's investment objective. If there is a change in
the Portfolio's investment objective, shareholders should consider whether the
Portfolio remains an appropriate investment.

Securities of small and medium-sized companies may be subject to
greater price volatility than securities of larger companies and tend to have a
lower degree of market liquidity. They also may be more sensitive to changes in
economic and business conditions, and may react differently than securities of
larger companies. In addition, such companies are less well known to the
investing public and may not be as widely followed by the investment community.

Although the Portfolio does not attempt to reduce or limit risk through
wide industry diversification of investment, it usually allocates its
investments among a number of different industries rather than concentrating in
a particular industry or group of industries. The Portfolio will not invest more
than 25% of the total value of its assets (at the time of investment) in the
securities of companies in any one industry.

AST Neuberger Berman Mid-Cap Value Portfolio:

Investment Objective: The investment objective of the Portfolio is to seek
capital growth.

Investment Policies:

The Portfolio seeks capital growth through an investment approach that
is designed to increase capital with reasonable risk. The Portfolio invests
principally in common stocks of medium to large capitalization established
companies, using the value-oriented investment approach. A value-oriented
portfolio manager buys stocks that are selling at a price that is lower than
what the manager believes they are worth. These include stocks that are
currently under-researched or are temporarily out of favor on Wall Street.

Portfolio managers identify value stocks in several ways. One of the
most common identifiers is a low price-to-earnings ratio -- that is, stocks
selling at multiples of earnings per share that are lower than that of the
market as a whole. Other criteria are high dividend yield, a strong balance
sheet and financial position, a recent company restructuring with the potential
to realize hidden values, strong management, and low price-to-book value (net
value of the company's assets). The Sub-advisor looks for securities believed to
be undervalued based on strong fundamentals, including a low price-to-earnings
ratio, consistent cash flow, and the company's track record through all parts of
the market cycle.

The Sub-advisor believes that, over time, securities that are
undervalued are more likely to appreciate in price and be subject to less risk
of price decline than securities whose market prices have already reached their
perceived economic value. This approach also contemplates selling portfolio
securities when they are considered to have reached their potential.

The Sub-advisor considers additional factors when selecting securities
for the Portfolio, including ownership by a company's management of the
company's stock and the dominance of a company in its particular field.

In addition to investing in the stocks of medium capitalization
companies ("mid-cap companies") and large capitalization companies ("large-cap
companies"), investments may be made in smaller, less well-known companies
("small-cap companies"). Investments in small- and mid-cap company stocks may
present greater opportunities for capital appreciation than investments in
stocks of large-cap companies. However, small- and mid-cap company stocks may
have higher risk and volatility. These stocks generally are not as broadly
traded as large-cap company stocks and their prices may fluctuate more widely
and abruptly. Any such movements in stocks held by the Portfolio would be
reflected in the Portfolio's net asset value. Small- and mid-cap company stocks
are also less researched than large-cap company stocks and are often overlooked
in the market.

An investment in the Portfolio involves certain risks, depending upon
the types of investments it makes. Although the Portfolio ordinarily invests
primarily in common stocks, when market conditions warrant it may invest in
preferred stocks, securities convertible into or exchangeable for common stocks,
U.S. Government and agency securities, debt securities, or money market
instruments, or may retain assets in cash or cash equivalents. The Portfolio may
not necessarily buy any or all of the types of securities or use any or all of
the techniques that are described below. As discussed in more detail below,
special risk factors apply to certain investments that may be made by the
Portfolio, including investments in foreign securities, options contracts, zero
coupon bonds, and debt securities rated below investment grade. Up to 15% of the
Portfolio's net assets, measured at the time of investment, may be invested in
corporate debt securities that are below investment grade or in comparable
unrated securities. The use of hedging or other techniques is discretionary and
no representation is made that the risk of the Portfolio will be reduced by the
techniques discussed below.

Short-Term Trading; Portfolio Turnover. While the Sub-advisor does not
purchase securities with the intention of profiting from short-term trading, the
Portfolio may sell portfolio securities when the Sub-advisor believes that such
action is advisable. Therefore, the Portfolio may have higher portfolio turnover
than other mutual funds with similar objectives. For a discussion of portfolio
turnover and its effects, see this Prospectus and the Trust's SAI under
"Portfolio Turnover."

Cash Investments. For temporary defensive purposes, the Portfolio may
invest up to 100% of its assets in cash or cash equivalents, U.S. Government and
agency securities, commercial paper and certain other money market instruments,
as well as repurchase agreements collateralized by the foregoing. To the extent
that the Portfolio is invested in these temporary defensive instruments, it will
not be pursuing its investment objective.

Fixed Income Securities. The Portfolio may invest in fixed income or
debt securities, the value of which are likely to decline in times of rising
interest rates and rise in times of falling interest rates. In general, the
longer the maturity of a fixed income security, the more pronounced is the
effect of a change in interest rates on the value of the security.

High quality debt securities are securities that have received a rating
from at least one nationally recognized statistical rating organization
("NRSRO"), such as Standard & Poor's Rating Group ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), Fitch Investors Services, or Duff & Phelps Credit
Rating Co. in one of the two highest rating categories (the highest category in
the case of commercial paper) or, if not rated by any NRSRO, such as U.S.
Government and Agency securities, have been determined by the Sub-advisor to be
of comparable quality. Investment grade debt securities are those receiving
ratings from at least one NRSRO in one of the four highest rating categories or,
if unrated by any NRSRO, deemed comparable by the Sub-advisor to such rated
securities. Securities rated by Moody's in its fourth highest category (Baa) may
have speculative characteristics; a change in economic factors could lead to a
weakened capacity of the issuer to repay.

Lower-Rated Fixed Income Securities. Debt securities rated below the
fourth highest category by all NRSROs that have rated them, and comparable
unrated securities, are considered to be below investment grade. The Portfolio
may invest up to 15% of its net assets, measured at the time of investment, in
debt securities that are below investment grade or comparable unrated
securities. Securities rated below investment grade ("junk bonds") are judged to
be predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligations.
While such securities may be considered predominantly speculative, as debt
securities, they generally have priority over equity securities of the same
issuer and are generally better secured.

Debt securities in the lowest rating categories may involve a
substantial risk of default or may be in default. 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. In the case of lower-rated 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 that pay interest periodically and in cash. The Sub-advisor will
invest in such securities only when it concludes that the anticipated return to
the Portfolio on such an investment warrants exposure to the additional level of
risk.

For an additional discussion of the risks involved in lower-rated
bonds, see this Prospectus and the Trust's SAI under "Certain Risk Factors and
Investment Methods." For an additional description of the ratings services'
securities ratings, see the Appendix the Trust's SAI.

Convertible Securities. The Portfolio may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock,
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. Many convertible securities are
rated below investment grade, or are unrated.

Zero Coupon Securities. Zero coupon securities do not pay interest
currently; instead, they are sold at a discount from their face value and are
redeemed at face value when they mature. Because zero coupon bonds do not pay
current income, their prices can be very volatile when interest rates change.

U.S. Government and Agency Securities. U.S. Government securities are
obligations of the U.S. Treasury backed by the full faith and credit of the
United States. U.S. Government agency securities are issued or guaranteed by
U.S. Government agencies, instrumentalities, or other U.S. Government-sponsored
enterprises, such as the Government National Mortgage Association (commonly
known as "Ginnie Mae"), Fannie Mae, formerly Federal National Mortgage
Association, Freddie Mac, formerly Federal Home Loan Mortgage Corporation,
Student Loan Marketing Association (commonly known as "Sallie Mae"), and
Tennessee Valley Authority. Agency securities may be backed by the full faith
and credit of the United States, the issuer's ability to borrow from the U.S.
Treasury, subject to the Treasury's discretion in certain cases, or only by the
credit of the issuer. U.S. Government and agency securities include U.S.
Government and agency mortgage-backed securities. The market prices of U.S.
Government and agency securities are not guaranteed by the government and
generally fluctuate inversely with changing interest rates.

Borrowings. As a non-fundamental policy, the Portfolio may not purchase
portfolio securities if its outstanding borrowings, including reverse repurchase
agreements, exceed 5% of its total assets. In addition, the Portfolio is subject
to the fundamental restriction on borrowing described in the Trust's SAI under
"Investment Restrictions."

Illiquid, Restricted and Rule 144A Securities. Subject to guidelines
established by the Board of Trustees of the Trust, the Portfolio may invest up
to 15% of its net assets in illiquid securities, which are securities that
cannot be expected to be sold within seven days at approximately the price at
which they are valued. These may include unregistered or other restricted
securities and repurchase agreements maturing in greater than seven days.
Illiquid securities may also include Rule 144A securities (restricted securities
that may be traded freely among qualified institutional buyers pursuant to an
exemption from the registration requirements of the securities laws); these
securities are considered illiquid unless the Sub-advisor, acting pursuant to
the guidelines established by the Board of Trustees, determines they are liquid.
Generally, foreign securities freely tradable in their principal market are not
considered restricted or illiquid. Illiquid securities may be difficult for a
Portfolio to value or dispose of due to the absence of an active trading market.
The sale of some illiquid securities by the Portfolio may be subject to legal
restrictions which could be costly to the Portfolio.

Foreign Securities. The Portfolio may invest in U.S. dollar-denominated
foreign securities. Foreign securities are those of issuers organized and doing
business principally outside the U.S., including non-U.S. governments, their
agencies, and instrumentalities. The Portfolio may invest in foreign securities
denominated in or indexed to foreign currencies, which may also be affected by
the fluctuation of the foreign currencies relative to the U.S. dollar,
irrespective of the performance of the underlying investment. The Sub-advisor
considers these factors in making investments for the Portfolio. The Portfolio
may invest in U.S. dollar-denominated and non-U.S. dollar-denominated corporate
and government debt securities of foreign issuers. In addition, the Portfolio
may enter into forward foreign currency contracts or futures contracts
(agreements to exchange one currency for another at a future date) and related
options to manage currency risks and to facilitate transactions in foreign
securities.

The Portfolio may only invest up to 10% of the value of its total
assets, measured at the time of investment, in foreign securities. The 10%
limitation does not apply with respect to foreign securities that are
denominated in U.S.
dollars.

The Portfolio may invest in ADRs, EDRs, GDRs, and IDRs. ADRs (sponsored or
unsponsored) are receipts typically issued by a U.S. bank or trust company
evidencing its ownership of the underlying foreign securities. Most ADRs are
denominated in U.S. dollars and are traded on a U.S. stock exchange. Issuers of
the securities underlying unsponsored ADRs are not contractually obligated to
disclose material information in the U.S. and, therefore, there may not be a
correlation between such information and the market value of the unsponsored
ADR. EDRs and IDRs are receipts typically issued by a European bank or trust
company evidencing its ownership of the underlying foreign securities. GDRs are
receipts issued by either a U.S. or non-U.S. banking institution evidencing its
ownership of the underlying foreign securities and are often denominated in U.S.
dollars.

Investments in foreign securities could be affected by factors
generally not thought to be present in the U.S. Such factors include, but are
not limited to, varying custody, brokerage and settlement practices; difficulty
in pricing some foreign securities; and potentially adverse local, political,
economic, social, or diplomatic developments, the investment significance of
which may be difficult to discern.

In addition, the risks of investing in securities of foreign companies
and governments include changes in currency exchange rates and currency exchange
control regulations or other foreign or U.S. laws or restrictions applicable to
such investments or devaluations of foreign currencies. A decline in the
exchange rate would reduce the value of certain portfolio securities
irrespective of the performance of the underlying investment. Investments in
depositary receipts (whether or not denominated in U.S. dollars) may be subject
to exchange controls and changes in rates of exchange with the U.S. dollar
because the underlying security is usually denominated in foreign currency. All
of the foregoing risks may be intensified in emerging industrialized and less
developed countries.

For an additional discussion of foreign securities and the risks
involved therein, including the risks of currency fluctuations, see this
Prospectus and the Trust's SAI under "Certain Risk Factors and Investment
Methods."

Foreign Currency Transactions. The Portfolio may enter into forward
contracts in order to protect against adverse changes in foreign currency
exchange rates, to facilitate transactions in foreign securities and to
repatriate dividend or interest income received in foreign currencies. The
Portfolio may enter into contracts to purchase foreign currencies to protect
against an anticipated rise in the U.S. dollar price of securities it intends to
purchase. The Portfolio may also enter into contracts to sell foreign currencies
to protect against a decline in value of its foreign currency denominated
portfolio securities due to a decline in the value of foreign currencies against
the U.S. dollar.

If the Portfolio enters into a forward contract to sell foreign
currency, it may be required to place cash, fixed income or equity securities in
a segregated account in an amount equal to the value of the Portfolio's total
assets committed to the consummation of the forward contract. Although these
contracts can protect the Portfolio from adverse exchange rates, they involve
risk of loss if the Sub-advisor fails to predict foreign currency values
correctly. For an additional discussion of forward contracts and their risks,
see this Prospectus and the Trust's SAI under "Certain Risk Factors and
Investment Methods."

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 having a market value not
exceeding 10% of its net assets and may purchase call options in related closing
transactions. When the Portfolio writes a covered call option against a
security, the Portfolio is obligated to sell that security to the purchaser of
the option at a fixed price at any time during a specified period if the
purchaser decides to exercise the option. The maximum price the seller may
realize on the security during the option period is the fixed price. The seller
continues to bear the risk of a decline in the security's price, although this
risk is reduced, at least in part, by the premium received for writing the
option.

The writing of options is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions including transactional expense, price
volatility and a high degree of leverage. The writing of options could result in
significant increases in the Portfolio's turnover rate. The writing of options
also could result in the inability of the Portfolio to purchase or sell a
security at a time that would otherwise be favorable for it to do so, or the
need for the Portfolio to sell a security at a disadvantageous time, due to its
need to maintain "cover" or to segregate securities in connection with its use
of options. Options are considered derivatives. For an additional discussion of
options and their risks, see this Prospectus and the Trust's SAI under "Certain
Risk Factors and Investment Methods."

When-Issued Securities. In a when-issued transaction, the Portfolio
commits to purchase securities in order to secure an advantageous price and
yield at the time of the commitment and pays for the securities when they are
delivered at a future date (generally within two months). If the seller fails to
complete the sale, the Portfolio may lose the opportunity to obtain a favorable
price and yield. When issued securities may decline or increase in value during
the period from the Portfolio's investment commitment to the settlement of the
purchase, which may magnify fluctuation in the Portfolio's net asset value.

Repurchase Agreements. Subject to guidelines established by the Board
of Trustees of the Trust, the Portfolio may enter into repurchase agreements. In
a repurchase agreement, the Portfolio buys a security from a Federal Reserve
member bank, or a securities dealer and simultaneously agrees to sell it back at
a higher price, at a specified date, usually less than a week later. The
underlying securities must fall within the Portfolio's investment policies and
limitations. Under the repurchase agreement guidelines, the Sub-advisor monitors
the creditworthiness of repurchase agreement sellers. For an additional
discussion of repurchase agreements and certain risks involved therein, see this
Prospectus under "Certain Risk Factors and Investment Methods" and the Trust's
SAI under "Investment Objectives and Policies."

Reverse Repurchase Agreements. In a reverse repurchase agreement, the
Portfolio sells securities to a bank or a securities dealer and at the same time
agrees to repurchase the same securities at a higher price on a specific date.
During the period before the repurchase, the Portfolio continues to receive
principal and interest payments on the securities. The Portfolio is compensated
by the difference between the current sales price and the forward price for the
future purchase (often referred to as the "drop"), as well as by the interest
earned on the cash proceeds of the initial sale. Reverse repurchase agreements
may increase fluctuations in the Portfolio's net asset value and may be viewed
as a form of leverage. The Sub-advisor monitors the creditworthiness of parties
to reverse repurchase agreements. For an additional discussion of reverse
repurchase agreements and certain risks involved therein, see this Prospectus
under "Certain Risk Factors and Investment Methods" and the Trust's SAI under
"Investment Objectives and Policies."

Short Sales Against-the-Box. The Portfolio may make short sales
against-the-box. To effect a short sale, the Portfolio will borrow a security
from a brokerage firm to make delivery to the buyer. The Portfolio then is
obligated to replace the security borrowed at a later date. A short sale is
"against-the-box" when, at all times during which a short position is open, the
Portfolio owns an equal amount of such securities, or owns securities giving it
the right, without payment of additional consideration, to obtain an equal
amount of securities sold short. Short sales against-the-box allow the Portfolio
to hedge against price fluctuations by locking in a sale price for securities it
does not wish to sell immediately.

AST Neuberger Berman Mid-Cap Growth Portfolio:

Investment Objective: The investment objective of the Portfolio is to seek
capital appreciation.

Investment Policies:

The Portfolio invests in a diversified portfolio of common stocks
believed to have the maximum potential for long-term above-average capital
appreciation. Under normal conditions, the Portfolio primarily invests in the
common stocks of medium capitalization companies ("mid-cap companies").
Companies with equity market capitalizations from $300 million to $10 billion at
the time of investment are considered mid-cap companies. The Trust may revise
this definition based on market conditions. Although the Portfolio will invest
primarily in the common stocks of mid-cap companies, investments may be made in
the securities of larger, widely traded companies ("large-cap companies") as
well as smaller, less well-known companies ("small-cap companies"). At times,
markets may favor the relative safety of larger capitalization securities and
the greater growth potential of smaller capitalization securities over medium
capitalization securities. The Portfolio does not seek to invest in securities
that pay dividends or interest, and any such income is incidental.

Investments in small- and mid-cap company stocks may present greater
opportunities for capital appreciation than investments in stocks of large-cap
companies. However, small- and mid-cap company stocks may have higher risk and
volatility. These stocks generally are not as broadly traded as large-cap
company stocks and their prices may fluctuate more widely and abruptly. Any such
movements in stocks held by the Portfolio would be reflected in the Portfolio's
net asset value. Small- and mid-cap company stocks are also less researched than
large-cap company stocks and are often overlooked in the market.

The Portfolio is normally managed using a growth-oriented investment
approach. A growth approach seeks stocks of companies that the Sub-advisor
projects will grow at above-average rates and faster than others expect. The
Portfolio's growth investment program involves greater risks and share price
volatility than programs that invest in more undervalued securities. When the
Sub-advisor believes that particular securities have greater potential for
long-term capital appreciation, the Portfolio may purchase such securities at
prices with higher multiples to measures of economic value (such as earnings or
cash flow) than an investor focusing primarily on current fundamental value.
These multiples, however, tend to be reasonable relative to the Sub-advisor's
expectation of the company's earnings growth rate.

In selecting equity securities for the Portfolio, the Sub-advisor will
consider, among other factors, an issuer's financial strength, competitive
position, projected future earnings, management strength and experience,
reasonable valuations, and other investment criteria. The Portfolio diversifies
its investments among companies and industries.

An investment in the Portfolio involves certain risks, depending upon
the types of investments it makes. Although equity securities are normally the
Portfolio's primary investment, when market conditions warrant it may invest in
preferred stocks, securities convertible into or exchangeable for common stocks,
U.S. Government and Agency Securities, investment grade and non-investment grade
debt securities, or money market instruments, or may retain assets in cash or
cash equivalents. The Portfolio may not necessarily buy any or all of the types
of securities or use any or all of the investment techniques that are described
below. As discussed in more detail below, special risk factors apply to certain
investments that may be made by the Portfolio, including investments in foreign
securities, options and futures contracts, zero coupon bonds and debt securities
rated below investment grade. As part of its strategy to achieve long-term
capital appreciation, the Portfolio may invest up to 20% of its net assets in
securities of issuers organized and doing business principally outside the
United States. Up to 10% of the Portfolio's net assets, measured at the time of
investment, may be invested in corporate debt securities that are below
investment grade, but rated at least C by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Rating Group ("S&P"), or comparable unrated
securities. The use of hedging or other techniques is discretionary and no
representation is made that the risk of the Portfolio will be reduced by the
techniques discussed below.

Lower-Rated Fixed Income Securities. Debt securities rated below the
fourth highest category by all NRSROs that have rated them, and comparable
unrated securities, are considered to be below investment grade. The Portfolio
may invest up to 10% of its net assets, measured at the time of investment, in
debt securities that are below investment grade or comparable unrated
securities, but may not invest in securities rated below C by Moody's or S&P at
the time of investment. Securities rated below investment grade ("junk bonds")
are judged to be predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms of the
obligations. While such securities may be considered predominantly speculative,
as debt securities, they generally have priority over equity securities of the
same issuer and are generally better secured.

If the quality of any fixed income securities held by the Portfolio
deteriorates so that they no longer are rated at least C by Moody's or S&P, or,
if unrated, are determined by the Sub-advisor to no longer be of comparable
quality, the Portfolio will engage in an orderly disposition of the securities
to the extent necessary to ensure that the Portfolio's holdings of such
securities will not exceed 5% of its net assets.

The Portfolio may only invest up to 20% of the value of its total
assets, measured at the time of investment, in foreign securities. The 20%
limitation does not apply with respect to foreign securities that are
denominated in U.S.
dollars.

Put and Call Options, Futures Contracts, Options on Futures Contracts.
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, may purchase call options in related
closing transactions, and may also purchase put options on portfolio securities
or foreign currencies. When the Portfolio writes a covered call option against a
security, the Portfolio is obligated to sell that security to the purchaser of
the option at a fixed price at any time during a specified period if the
purchaser decides to exercise the option. The maximum price the seller may
realize on the security during the option period is the fixed price. The seller
continues to bear the risk of a decline in the security's price, although this
risk is reduced, at least in part, by the premium received for writing the
option.

The Portfolio may enter into futures contracts on debt securities,
interest rates, and securities indices, and may purchase and sell options on
such contracts on both the U.S. and foreign exchanges for hedging and
non-hedging purposes.

The Portfolio may purchase and write put and call options on foreign
currencies to protect against declines in the dollar value of foreign portfolio
securities and against increases in the U.S. dollar cost of foreign securities
to be acquired. The Portfolio may also use options on foreign currencies to
cross-hedge. In addition, the Portfolio may purchase call or put options on
currencies for non-hedging purposes when the Sub-advisor expects that a currency
will appreciate or depreciate in value, but the securities denominated in that
currency do not present attractive investment opportunities and are not held by
the Portfolio. Options on foreign currencies may be traded on U.S. or foreign
exchanges or over-the-counter. Options on foreign currencies that are traded in
the over-the-counter market may be considered to be illiquid securities and
subject to the Portfolio's restrictions on illiquid securities.

The Portfolio may write call and put options on any securities in which
it may invest or options on any securities index based on securities in which
the Portfolio may invest. The Portfolio will not write a call option on a
security or currency unless it owns the underlying security or currency or has
the right to obtain it at no additional cost.

The use of futures contracts and the writing and purchasing of options
are highly specialized activities that involve investment techniques and risks
different from those associated with ordinary securities transactions, including
transactional expense, price volatility and a high degree of leverage. The
writing of options could result in significant increases in the Portfolio's
turnover rate. The use of futures and the writing of options also could result
in the inability of the Portfolio to purchase or sell a security at a time that
would otherwise be favorable for it to do so, or the need for the Portfolio to
sell a security at a disadvantageous time, due to its need to maintain "cover"
or to segregate securities in connection with these techniques. When the
Portfolio uses these techniques, the Portfolio will place cash, fixed income or
equity securities in a segregated account or will "cover" its position to the
extent required by SEC staff policy. Futures and options contracts are
considered derivatives.

For an additional discussion of options and their risks, see this
Prospectus and the Trust's SAI under "Certain Risk Factors and Investment
Methods."

Forward Commitments and When-Issued Securities. In a when-issued or
forward commitment transaction, the Portfolio commits to purchase securities in
order to secure an advantageous price and yield at the time of the commitment
and pays for the securities when they are delivered at a future date (generally
within two months). If the seller fails to complete the sale, the Portfolio may
lose the opportunity to obtain a favorable price and yield. When issued
securities or securities subject to a forward commitment may decline or increase
in value during the period from the Portfolio's investment commitment to the
settlement of the purchase, which may magnify fluctuation in the Portfolio's net
asset value.

Repurchase Agreements. Subject to guidelines established by the Board
of Trustees of the Trust, the Portfolio may enter into repurchase agreements.
The Portfolio may enter into repurchase agreements on up to 25% of its net
assets. In a repurchase agreement, the Portfolio buys a security from a Federal
Reserve member bank, or a securities dealer and simultaneously agrees to sell it
back at a higher price, at a specified date, usually less than a week later. The
underlying securities must fall within the Portfolio's investment policies and
limitations. Under the repurchase agreement guidelines, the Sub-advisor monitors
the creditworthiness of repurchase agreement sellers. For an additional
discussion of repurchase agreements and certain risks involved therein, see this
Prospectus under "Certain Risk Factors and Investment Methods" and the Trust's
SAI under "Investment Objectives and Policies."

<PAGE>

CERTAIN RISK FACTORS AND INVESTMENT METHODS:

Some of the risk factors related to certain securities, instruments and
techniques that may be used by one or more of the Portfolios are described in
the "Investment Objectives and Policies" section of this Prospectus and in the
"Investment Objectives and Policies" and "Certain Risk Factors and Investment
Methods" sections of the Trust's SAI. The following is a description of certain
additional risk factors related to various of these securities, instruments and
techniques. The risks so described only apply to those Portfolios which may
invest in such securities and instruments or use such techniques. Also included
is a general description of some of the investment instruments, techniques and
methods which may be used by one or more of the Portfolios. The methods
described only apply to those Portfolios which may use such methods.

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 call and put options on securities, securities indexes and foreign
currencies, and enter into futures contracts and use options on futures
contracts, and enter into swap agreements with respect to foreign currencies,
interest rates, and securities indexes. A Portfolio may use these techniques to
hedge against changes in interest rates, foreign currency exchange rates or
securities prices or as part of their overall investment strategies.

In general, derivative instruments are those securities or other
instruments whose value is derived from or related to the value of some other
instrument or asset, but not those securities whose payment of principal and/or
interest depend upon cash flows from underlying assets, such as mortgage or
asset-backed securities. The value of some derivative instruments in which a
Portfolio invests may be particularly sensitive to changes in prevailing
interest rates, and, like the other investments of a Portfolio, the ability of
the Portfolio to successfully utilize these instruments may depend in part upon
the ability of the Sub-advisor to forecast interest rates and other economic
factors correctly. If the Sub-advisor incorrectly forecasts such factors and has
taken positions in derivative instruments contrary to prevailing market trends,
the Portfolio could be exposed to the risk of a loss.

A Portfolio might not employ any of the derivative strategies described
below, and no assurance can be given that any strategy used will succeed. If a
Sub-advisor incorrectly forecasts interest rates, market values or other
economic factors in utilizing a derivatives strategy for a Portfolio, the
Portfolio might have been in a better position if it had not entered into the
transaction at all. The use of these strategies involves certain special risks,
including a possible imperfect correlation, or even no correlation, between
price movements of derivative instruments and price movements of related
investments. In addition, while some strategies involving derivative instruments
can reduce the risk of loss, they can also reduce the opportunity for gain, or
even result in losses, by offsetting favorable price movements in related
investments. Furthermore, a Portfolio may be unable to purchase or sell a
portfolio security at a time that otherwise would be favorable for it to do so,
or need to sell a portfolio security at a disadvantageous time, due to the need
to maintain asset coverage or offsetting positions in connection with
transactions in derivative instruments. Finally, a Portfolio may be unable to
close out or to liquidate its derivatives positions.

Options and Futures Contracts:

Call Options. A call option on a security gives the purchaser of the
option, in return for a premium paid to the writer (seller), the right to buy
the underlying security at the exercise price at any time during the option
period. Upon exercise by the purchaser, the writer (seller) of a call option has
the obligation to sell the underlying security at the exercise price. When a
Portfolio purchases a call option, it will pay a premium to the party writing
the option and a commission to the broker selling the option. If the option is
exercised by such Portfolio, the amount of the premium and the commission paid
may be greater than the amount of the brokerage commission that would be charged
if the security were to be purchased directly. By writing a call option, a
Portfolio assumes the risk that it may be required to deliver the security
having a market value higher than its market value at the time the option was
written. The Portfolio will write call options in order to obtain a return on
its investments from the premiums received and will retain the premiums whether
or not the options are exercised. Any decline in the market value of portfolio
securities will be offset to the extent of the premiums received (net of
transaction costs). If an option is exercised, the premium received on the
option will effectively increase the exercise price.

If a Portfolio writes a call option on a security it already owns, it
gives up the opportunity for capital appreciation above the exercise price
should market price of the underlying security increase, but retains the risk of
loss should the price of the underlying security decline.

A call option on a securities index is similar to a call option on an
individual security, except that the value of the option depends on the weighted
value of the group of securities comprising the index, and all settlements are
made in cash. A call option may be terminated by the writer (seller) by entering
into a closing purchase transaction in which it purchases an option of the same
series as the option previously written.

Put Options. A put option on a security gives the purchaser of the
option, in return for premium paid to the writer (seller), the right to sell the
underlying security at the exercise price at any time during the option period.
Upon exercise by the purchaser, the writer of a put option has the obligation to
purchase the underlying security at the exercise price. By writing a put option,
a Portfolio assumes the risk that it may be required to purchase the underlying
security at a price in excess of its current market value.

A put option on a securities index is similar to a put option on an
individual security, except that the value of the option depends on the weighted
value of the group of securities comprising the index, and all settlements are
made in cash.

A Portfolio may sell a call option or a put option which it has
previously purchased prior to the purchase (in the case of a call) or the sale
(in the case of a put) of the underlying security. Any such sale would result in
a net 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 call or put
which is sold.

Futures Contracts and Related Options. A financial futures contract
calls for delivery of a particular security at a specified price at a certain
time in the future. 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 time. A Portfolio may also write call options and
purchase put options on financial futures contracts as a hedge to attempt to
protect the Portfolio's securities from a decrease in value. When a Portfolio
writes a call option on a futures contract, it is undertaking the obligation of
selling a futures contract at a fixed price at any time during a specified
period if the option is exercised. Conversely, the purchaser of a put option on
a futures contract is entitled (but not obligated) to sell a futures contract at
a fixed price during the life of the option.

Financial futures contracts consist of interest rate futures contracts
and securities index futures contracts. An interest rate futures contract
obligates the seller of the contract to deliver, and the purchaser to take
delivery of, interest rate securities called for in a contract at a specified
future time at a specified price. A stock index assigns relative values to
common stocks included in the index and the index fluctuates with changes in the
market values of the common stocks included. A stock index futures contract is a
bilateral contract pursuant to which 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 at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. An
option on a financial futures contract gives the purchaser the right to assume a
position in the contract (a long position if the option is a call and a short
position if the option is a put) at a specified exercise price at any time
during the period of the option.

Risks of Options and Futures Contracts. Futures contracts and options
can be highly volatile and could result in reduction of a Portfolio's total
return, and a Portfolio's attempt to use such investments for hedging purposes
may not be successful. Successful futures strategies require the ability to
predict future movements in securities prices, interest rates and other economic
factors. A Portfolio's potential losses from the use of futures extends beyond
its initial investment in such contracts. Also, losses from options and futures
could be significant if a Portfolio is unable to close out its position due to
distortions in the market or lack of liquidity.

The use of futures and options involves investment risks and
transaction costs to which a Portfolio would not be subject absent the use of
these strategies. If a Sub-advisor seeks to protect a Portfolio against
potential adverse movements in the securities, foreign currency or interest rate
markets using these instruments, and such markets do not move in a direction
adverse to the Portfolio, the Portfolio could be left in a less favorable
position than if such strategies had not been used. The successful use of these
strategies therefore may depend on the ability of the Sub-advisor to correctly
forecast interest rate movements and general stock market price movements. Risks
inherent in the use of futures and options include: (a) the risk that interest
rates, securities prices and currency markets will not move in the directions
anticipated; (b) imperfect correlation between the price of futures and options
and movements in the prices of the securities or currencies being hedged; (c)
the fact that skills needed to use these strategies are different from those
needed to select portfolio securities; (d) the possible absence of a liquid
secondary market for any particular instrument at any time; and (e) the possible
need to defer closing out certain hedged positions to avoid adverse tax
consequences. A Portfolio's ability to terminate option positions established in
the over-the-counter market may be more limited than in the case of
exchange-traded options and may also involve the risk that securities dealers
participating in such transactions would fail to meet their obligations to such
Portfolio.

The use of options and futures involves the risk of imperfect
correlation between movements in options and futures prices and movements in the
price of securities which are the subject of a hedge. Particularly with respect
to options on stock indices and stock index futures, the risk of imperfect
correlation increases as the composition of the Portfolio diverges from the
composition of the relevant index.

Pursuant to regulations of the Commodity Futures Trading Commission,
the Trust has represented that:

(i) a Portfolio will not 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 the
Portfolio's net assets; and

(ii) a Portfolio will not 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 the Portfolio's total
assets.

Asset-Backed Securities:

Asset-backed securities represent a participation in, or are secured by
and payable from, a stream of payments generated by particular assets, for
example, credit card, automobile or trade receivables. Asset-backed commercial
paper, one type of asset-backed security, is issued by a special purpose entity,
organized solely to issue the commercial paper and to purchase interests in the
assets. The credit quality of these securities depends primarily upon the
quality of the underlying assets and the level of credit support and/or
enhancement provided.

The underlying assets (e.g., loans) are subject to prepayments which
shorten the securities' weighted average life and may lower their return. If the
credit support or enhancement is exhausted, losses or delays in payment may
result if the required payments of principal and interest are not made. The
value of these securities also may change because of changes in the market's
perception of the creditworthiness of the servicing agent for the pool, the
originator of the pool, or the financial institution providing the credit
support or enhancement.

Mortgage-Backed Securities:

Mortgage pass-through securities are securities representing interests
in "pools" of mortgage loans secured by residential or commercial real property
in which payments of both interest and principal on the securities are generally
made monthly, in effect "passing through" monthly payments made by the
individual borrowers on the mortgage loans which underlie the securities (net of
fees paid to the issuer or guarantor of the securities). Early repayment of
principal on some mortgage-related securities (arising from prepayments of
principal due to sale of the underlying property, refinancing, or foreclosure,
net of fees and costs which may be incurred) expose a Portfolio to a lower rate
of return upon reinvestment of principal. Also, if a security subject to
prepayment has been purchased at a premium, in the event of prepayment the value
of the premium would be lost. Like other fixed-income securities, when interest
rates rise, the value of a mortgage-related security will generally decline;
however, when interest rates are declining, the value of mortgage-related
securities with prepayment features may not increase as much as other
fixed-income securities. The value of these securities also may change because
of changes in the market's perception of the creditworthiness of the federal
agency or private institution that issued them. In addition, the mortgage
securities market in general may be adversely affected by changes in
governmental regulation or tax policies.

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. CMOs may also be less marketable than other
securities.

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. Unlike other debt instruments
and other mortgage-backed securities, the value of IOs tends to move in the same
direction as interest rates.

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.

Foreign Securities:

Investments in securities of foreign issuers may involve risks that are
not present with domestic investments. While investments in foreign securities
are intended to reduce risk by providing further diversification, such
investments involve sovereign risk in addition to credit and market risks.
Sovereign risk 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. Brokerage commissions on foreign securities exchanges, which
may be fixed, are generally higher than in the United States. 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. Securities of some foreign issuers are less liquid and
their prices are more volatile than securities of comparable domestic issuers.
In some countries, there may also be the possibility of expropriation or
confiscatory taxation, limitations on the removal of funds or other assets,
difficulty in enforcing contractual and other obligations, political or social
instability or revolution, or diplomatic developments which could affect
investments in those countries. Settlement of transactions in some foreign
markets may be delayed or less frequent than in the United States, which could
affect the liquidity of investments. For example, securities which are listed on
foreign exchanges or traded in foreign markets may trade on days (such as
Saturday or Holidays) when a Portfolio does not compute its price or accept
orders for the purchase, redemption or exchange of its shares. As a result, the
net asset value of a Portfolio may be significantly affected by trading on days
when shareholders cannot make transactions. Further, it may be more difficult
for the Trust's agents to keep currently informed about corporate actions which
may affect the price of portfolio securities. Communications between the U.S.
and foreign countries may be less reliable than within the U.S., increasing the
risk of delayed settlements or loss of certificates for portfolio securities.

Currency Fluctuations. Investments in foreign securities may be
denominated in foreign currencies. The value of Portfolio investments
denominated in foreign currencies may be affected, favorably or unfavorably, by
the relative strength of the U.S. dollar, changes in foreign currency and U.S.
dollar exchange rates and exchange control regulations. A Portfolio's net asset
value per share may, therefore, be affected by changes in currency exchange
rates. Changes in foreign currency exchange rates may also affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by a Portfolio. Foreign currency exchange rates generally are
determined by the forces of supply and demand in foreign exchange markets and
the relative merits of investment in different countries, actual or perceived
changes in interest rates or other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign governments or central banks or
the failure to intervene, 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. Investors should understand and consider
carefully the special risks involved in foreign investing. These risks are often
heightened for investments in emerging or developing countries.
The expected introduction of a single currency, the euro, on January 1,
1999 for participating nations in the European Economic and Monetary Union
presents unique uncertainties, including whether the payment and operational
systems of banks and other financial institutions will be ready by the scheduled
launch date; the legal treatment of certain outstanding financial contracts that
refer to existing currencies rather than the euro; the establishment of exchange
rates for existing currencies and the euro; and the creation of suitable
clearing and settlement payment systems for the new currency. Although the Trust
is taking steps intended to achieve readiness for the planned introduction of
the euro, these or other external factors could cause market disruptions before
or after the introduction of the euro, and could adversely affect the value of
securities held by the Portfolios.

Developing Countries. Investing in developing countries involves
certain risks not typically associated with investing in U.S. securities, and
imposes risks greater than, or in addition to, risks of investing in foreign,
developed countries. These risks include: the risk of nationalization or
expropriation of assets or confiscatory taxation; currency devaluations and
other currency exchange rate fluctuations; social, economic and political
uncertainty and instability (including the risk of war); more substantial
government involvement in the economy; higher rates of inflation; less
government supervision and regulation of the securities markets and participants
in those markets; controls on foreign investment and limitations on repatriation
of invested capital and on a Portfolio's ability to exchange local currencies
for U.S. dollars; unavailability of currency hedging techniques in certain
developing countries; the fact that companies in developing countries may be
smaller, less seasoned and newly organized companies; the difference in, or lack
of, auditing and financial reporting standards, which may result in
unavailability of material information about issuers; the risk that it may be
more difficult to obtain and/or enforce a judgment in a court outside the United
States; and greater price volatility, substantially less liquidity and
significantly smaller market capitalization of securities markets.

American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and
Global Depositary Receipts ("GDRs"):

ADRs are dollar-denominated receipts generally issued by a domestic
bank that represents the deposit of a security of a foreign issuer. ADRs may be
publicly traded on exchanges or over-the-counter in the United States. EDRs are
receipts similar to ADRs and are issued and traded in Europe. GDRs may be
offered privately in the United States and also trade in public or private
markets in other countries. Depositary Receipts may be issued as sponsored or
unsponsored programs. In sponsored programs, the issuer makes arrangements to
have its securities traded in the form of a Depositary Receipt. In unsponsored
programs, the issuer may not be directly involved in the creation of 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.

Forward Foreign Currency Exchange Contracts:

A forward foreign currency exchange contract involves an obligation to
purchase or sell a specified currency at a future date, which may be any fixed
number of days from the date the contract is agreed upon by the parties, at a
price set at the time of the contract. By entering into a forward foreign
currency contract, a Portfolio "locks in" the exchange rate between the currency
it will deliver and the currency it will receive for the duration of the
contract. As a result, a Portfolio reduces its exposure to changes in the value
of the currency it will deliver and increases its exposure to changes in the
value of the currency into which it will exchange. The effect on the value of a
Portfolio is similar to selling securities denominated in one currency and
purchasing securities denominated in another. The Portfolios may enter into
these contracts for the purposes of hedging against foreign exchange risk
arising from such Portfolio's investment or anticipated investment in securities
denominated in or exposed to foreign currencies. Although a Sub-advisor may,
from time to time, seek to protect a Portfolio by using forward contracts,
anticipated currency movements may not be accurately predicted and the Portfolio
may incur a gain or a loss on a forward contract. A forward contract may reduce
a Portfolio's losses on securities denominated in foreign currency, but it may
also reduce the potential gain on the securities depending on changes in the
currency's value relative to the U.S. dollar or other currencies.

<PAGE>

Lower-Rated High-Yield Bonds:

Lower-rated high-yield bonds (commonly known as "junk bonds") are
generally considered to be high risk investments, as they are subject to a
higher risk of default than higher-rated bonds. In addition, the market for
lower-rated high-yield bonds generally is more limited than the market for
higher-rated bonds, and because their markets may be thinner and less active,
the market prices of lower-rated high-yield bonds may fluctuate more than the
prices of higher-rated bonds, particularly in times of market stress. In
addition, while the market for high-yield corporate debt securities has been in
existence for many years, the market in recent years has experienced a dramatic
increase in the large-scale use of such securities to fund highly leveraged
corporate acquisitions and restructurings. Accordingly, past experience may not
provide an accurate indication of future performance of the high-yield bond
market, especially during periods of economic recession. Other risks which may
be associated with lower-rated high-yield bonds include: the exercise of any
redemption or call provisions in a declining market may result in their
replacement by lower yielding bonds; and legislation, from time to time, may
adversely affect their market. Since the risk of default is higher among
lower-rated high-yield bonds, a Sub-advisor's research and analysis are an
important ingredient in the selection of lower-rated high-yield bonds. Through
portfolio diversification, good credit analysis and attention to current
developments and trends in interest rates and economic conditions, investment
risk may be reduced, although there is no assurance that losses will not occur.

Illiquid and Restricted Securities:

The Board of Trustees of the Trust has promulgated guidelines with
respect to illiquid securities. Illiquid securities are deemed as such because
they are subject to restrictions on their resale ("restricted securities") or
because, based upon their nature or the market for such securities, they are not
readily marketable. Restricted securities are acquired through private placement
transactions, directly from the issuer or from security holders, generally at
higher yields or on terms more favorable to investors than comparable publicly
traded securities. However, the restrictions on resale may make it difficult for
a Portfolio to dispose of such securities at the time considered most
advantageous by its Sub-advisor, and/or may involve expenses that would not be
incurred in the sale of securities that were freely marketable. A Portfolio that
may purchase restricted securities may qualify for and trade restricted
securities in the "institutional trading market" pursuant to Rule 144A of the
Securities Act of 1933. Trading in the institutional trading market may enable a
Sub-advisor to dispose of restricted securities at a time the Sub-advisor
considers advantageous and/or at a more favorable price than would be available
if such securities were not traded in such market. However, the institutional
trading market is relatively new and liquidity of a Portfolio's investments in
such market could be impaired if trading does not develop or declines. Risks
associated with restricted securities include the potential obligation to pay
all or part of the registration expenses in order to sell certain restricted
securities. A considerable period of time may elapse between the time of the
decision to sell a security and the time a Portfolio may be permitted to sell it
under an effective registration statement. If, during such a period, adverse
conditions were to develop, a Portfolio might obtain a less favorable price than
prevailing when it decided to sell.

Repurchase Agreements:

The Board of Trustees of the Trust has promulgated guidelines with
respect to 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. A repurchase transaction
is usually accomplished either by crediting the amount of securities purchased
to the account of a Portfolio's custodian maintained in a central depository or
book-entry system or by physical delivery of the securities to a Portfolio's
custodian in return for delivery of the purchase price to the seller. Repurchase
transactions are intended to be short-term transactions with the seller
repurchasing the securities, usually within seven days.

A Portfolio which enters into a repurchase agreement bears a risk of
loss in the event that the other party to such an agreement defaults on its
obligation and such Portfolio is delayed or prevented from exercising its rights
to dispose of the collateral securities, including the risk of a possible
decline in value of the underlying securities during the period such Portfolio
seeks to assert these rights, as well as the risk of incurring expenses in
asserting these rights and the risk of losing all or part of the income from
such an agreement. If the seller institution defaults, a Portfolio might incur a
loss or delay in the realization of proceeds if the value of the collateral
securing the repurchase agreement declines and it might incur disposition costs
in liquidating the collateral. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by a
Portfolio might be delayed pending court action.

Reverse Repurchase Agreements:

In a reverse repurchase agreement, a Portfolio transfers possession of
a portfolio instrument to another person, such as a broker-dealer or financial
institution in return for a percentage of the instrument's market value in cash
and agrees that on a stipulated date in the future such Portfolio will
repurchase the portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate. When effecting reverse repurchase agreements,
assets of a Portfolio, in a dollar amount sufficient to make payment for the
obligations to be repurchased, are segregated on such Portfolio's records at the
trade date and are maintained until the transaction is settled. Reverse
repurchase agreements involve the risk that the market value of the securities
retained by the Portfolio may decline below the repurchase price of the
securities which it is obligated to repurchase.

Borrowing:

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 then, within three business days, such Portfolio must reduce such
borrowings so as to meet the necessary test. Under such a circumstance, such
Portfolio may have to liquidate securities at a time when it is disadvantageous
to do so. Gains made with additional funds borrowed will generally cause the net
asset value of such Portfolio's shares to rise faster than could be the case
without borrowings. Conversely, if investment results fail to cover the cost of
borrowings, the net asset value of such Portfolio could decrease faster than if
there had been no borrowings.

Convertible Securities and Warrants:

Convertible securities generally participate in the appreciation or
depreciation of the underlying stock into which they are convertible, but to a
lesser degree. 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 such
warrants. The value of a warrant detached from its underlying security will
expire without value if the rights under such warrant are not exercised prior to
its expiration date.

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 is able 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. For an additional
discussion of the Portfolios' limitations on lending, see "Fundamental
Investment Restrictions" in the Trust's SAI.

Other Investment Companies:

The Trust 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 of the Sub-advisors may use money market funds that they
advise for temporary investment purposes. 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. Investments in
other mutual funds and investment companies will be made subject to the
restrictions of the Investment Company Act of 1940, which, among other
restrictions, places certain limits on the proportion of a Portfolio's assets
that can be invested in other investment companies.

Year 2000 Risks:

Many services provided to the Trust and its Portfolios by the
Investment Manager, the Sub-advisors, and the Trust's other service providers
(collectively, the "Service Providers") rely on the functioning of their
respective computer systems. Many computer systems cannot distinguish the year
2000 from the year 1900, with resulting potential difficulty in performing
various systems functions (the "Year 2000 Issue"). The Year 2000 Issue could
potentially have an adverse impact on the handling of security trades, the
payment of interest and dividends, pricing, account services and other Trust
operations.

The Service Providers recognize the importance of the Year 2000 Issue
and have advised the Trust that they are taking appropriate steps necessary in
preparation for the year 2000. At this time, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the Portfolios,
nor can there be any assurance that the Year 2000 Issue will not have an adverse
effect on the Portfolios' investments or on global markets or economies
generally. In addition, it has been reported that foreign institutions have made
less progress in addressing the Year 2000 Issue than major U.S. entities, which
could adversely effect the Portfolio's foreign investments.

The Investment Manager and the Trust have been informed that all of the
Service Providers anticipate that their systems will be adapted in time for the
year 2000. The Investment Manager will continue to monitor the Year 2000 Issue
in an effort to confirm appropriate preparation by the Service Providers.

REGULATORY MATTERS:

The Trust currently does not foresee any disadvantages to the holders
of variable annuity contracts and variable life insurance policies of affiliated
or unaffiliated Participating Insurance Companies or participants of the Skandia
Qualified Plan (see page 2 of this Prospectus) or other plans qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended, arising from
the fact that the interests of the various holders of variable annuity contracts
and variable life insurance policies and participants of qualified plans may
differ due to differences of tax treatment or other considerations or due to
conflicts between the Participating Insurance Companies and/or qualified plans.
Nevertheless, the Trustees intend to monitor events in order to identify any
material irreconcilable conflicts which may possibly arise and to determine what
action, if any, should be taken in response to such conflicts. The variable
annuity contracts and variable life insurance policies are described in the
separate prospectuses issued by the Participating Insurance Companies. The Trust
assumes no responsibility for such prospectuses.

PORTFOLIO TURNOVER:

Each Portfolio may generally change its investments at any time in
accordance with its Sub-advisor's appraisal of factors affecting any particular
issuer or the market or economy in general. The frequency of the Portfolio's
transactions -- the Portfolio's turnover rate -- will vary from year to year
depending upon market conditions. High turnover (generally in excess of 100%)
involves correspondingly greater brokerage commissions and other transaction
costs. Trading in fixed income securities does not generally involve the payment
of brokerage commissions, but does involve indirect transaction costs. A 100%
portfolio turnover rate would occur if all the securities in a portfolio of
investments were replaced during a given period. The following Portfolios have
anticipated annual rates of turnover exceeding 100%.

AST JanCap Growth Portfolio (not to exceed 200% under normal market
conditions).

AST Janus Small-Cap Growth Portfolio (not to exceed 200% under normal
market conditions).

AST PIMCO Total Return Bond Portfolio (not to exceed 350% under normal
market conditions).

AST PIMCO Limited Maturity Bond Portfolio (not to exceed 350% under
normal market conditions).

AST Neuberger Berman Mid-Cap Value Portfolio (not to exceed 150% under
normal market conditions).

AST Neuberger Berman Mid-Cap Growth Portfolio (not to exceed 200% under
normal market conditions).

For further details regarding the portfolio turnover rates, see
"Portfolio Turnover" in the Trust's SAI.

<PAGE>

BROKERAGE ALLOCATION:

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. The Trust's brokerage allocation policy may permit a Portfolio to pay
a broker-dealer which furnishes research services a higher commission than that
which might be charged by another broker-dealer which does not furnish research
services, provided that such commission is deemed reasonable in relation to the
value of the services provided by such broker-dealer. Each Portfolio's
Sub-advisor may consider the use of broker-dealers that are, or might be deemed
to be, their affiliates or affiliatesof the Investment Manager. In addition, a
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 selection of broker-dealers to effect transactions,
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. For a complete discussion of
portfolio transactions and brokerage allocation, see "Brokerage Allocation" in
the Statement of Additional Information.

INVESTMENT RESTRICTIONS:

For each Portfolio the Trust has adopted a number of investment
restrictions which are fundamental policies and may not be changed without the
approval of the holders of a majority of the affected Portfolio's outstanding
voting securities as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"). The Trust's SAI describes all the restrictions on each
Portfolio's investment activities.

NET ASSET VALUES:

The net asset value per share of each Portfolio is determined by
dividing the market value of that Portfolio's securities as of the close of
trading plus any cash or other assets (including dividends and accrued interest)
less all liabilities (including accrued expenses) by the number of shares
outstanding in that Portfolio. Each Portfolio will determine the net asset value
of its shares as of 4:00 P.M. Eastern Time on each "business" day, which is each
day that the New York Stock Exchange (the "NYSE") is open for business. The
Trust's Board of Trustees has established procedures for valuing the Portfolios'
securities. In general, these valuations are based on market value. However, in
certain circumstances where market quotations are not readily available, assets
are valued by methods specified in the procedures that are believed to
accurately reflect the assets' fair value. With respect to all Portfolios,
short-term investments that will mature in 60 days or less are valued at
amortized cost, which is intended to approximate market value. See "Computation
of Net Asset Values" in the Trust's SAI.

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 funding
variable annuity contracts and variable life insurance policies 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 (as defined in the prospectus describing the variable annuity
contracts and variable life insurance policies) to be effected on that day
pursuant to variable annuity contracts and variable life insurance policies.
Orders received by the Trust or the Trust's transfer agent are effected on days
on which the NYSE is open for trading. For orders received before 4:00 P.M.
Eastern time, purchases and redemptions of the shares of the Trust are effected
at the net asset value per share 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 next
calculated net asset value. Payment for redemptions will be made by the Trust's
transfer agent on behalf of the Trust 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. 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.
These fees should be described in the Participating Insurance Companies'
prospectuses.

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. In the future, shares of the Trust may be
sold to and held by separate accounts that fund variable annuity and variable
life insurance contracts issued by other affiliated and unaffiliated
Participating Insurance Companies and also directly to the Skandia Qualified
Plan and other qualified plans. While it is not anticipated, should any conflict
arise between the holders of variable annuity contracts and variable life
insurance policies of Participating Insurance Companies and participants in
qualified plans which would require that a substantial amount of net assets be
withdrawn from the Trust, orderly portfolio management could be disrupted to the
potential detriment of such holders. As of December 3, 1998, more than 99% of
each Portfolio of the Trust was owned of record by ASLAC on behalf of the owners
of variable annuity contracts issued by ASLAC.

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, the Trust has
twenty-nine Portfolios, ten of which are offered through this Prospectus. 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.

The Trustees of the Trust have oversight responsibility for the operations
of each Portfolio. The Trustees are David E.A. Carson, Julian A. Lerner, Thomas
M. Mazzaferro, Thomas M. O'Brien, F. Don Schwartz, Jan R. Carendi and Gordon C.
Boronow. Additional information about the Trustees and the Trust's executive
officers may be found in the Trust's SAI under the section "Management."

Investment Manager: American Skandia Investment Services, Incorporated
("ASISI"), One Corporate Drive, Shelton, Connecticut, acts as Investment Manager
to the Trust. ASISI, a Connecticut corporation organized in 1991, is registered
as an investment adviser with the Securities and Exchange Commission. Prior to
April 7, 1995, ASISI was known as American Skandia Life Investment Management,
Inc. ASISI is a wholly-owned subsidiary of American Skandia Investment Holding
Corporation, whose indirect parent is 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.

American Skandia Life Assurance Corporation, a Participating Insurance
Company, is also a wholly-owned subsidiary of American Skandia Investment
Holding Corporation. 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 Investment Holding Corporation.

Sub-advisors:

Janus Capital Corporation ("Janus"), 100 Fillmore Street, Denver,
Colorado 80206-4923, serves as Sub-advisor for the AST JanCap Growth Portfolio,
and the AST Janus Small-Cap Growth Portfolio. Janus serves as investment advisor
to the Janus Funds, as well as advisor or sub-advisor to several other mutual
funds and individual, corporate, charitable and retirement accounts. As of June
30, 1998, Janus managed assets worth over $89 billion. Kansas City Southern
Industries, Inc. ("KCSI") owns approximately 83% of the outstanding voting stock
of Janus Capital, most of which it acquired in 1984. KCSI is a publicly traded
holding company whose primary subsidiaries are engaged in transportation,
information processing and financial services. Thomas H. Bailey, President and
Chairman of the Board of Janus, owns approximately 12% of its voting stock and,
by agreement with KCSI, selects a majority of Janus' Board.

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. From 1991 to 1993, Mr. Schoelzel was a
Portfolio Manager with Founders Asset Management.

The AST Janus Small-Cap Growth Portfolio is managed by a management
team consisting of James P. Craig, William Bales and Jonathan Coleman. The
management team has managed the Portfolio since Janus became the Portfolio's
sub-advisor in January 1999. James P. Craig, III is Chief Investment Officer of
Janus Capital. He joined Janus in May 1983. William H. Bales has been a research
analyst with Janus since 1993, focusing primarily on the transportation,
consumer products and restaurant industries. He joined Janus in September 1991.
Jonathan D. Coleman has been a research analyst with Janus since July 1994,
focusing primarily on the railroad, computer, healthcare and financial services
industries. Prior to joining Janus, Mr. Coleman was a Fulbright Fellow from
August 1993 until June 1994.
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 Small Company Value Portfolio. T. Rowe Price was founded in 1937 by the
late Thomas Rowe Price, Jr. As of June 30, 1998, the firm and its affiliates
managed approximately $140 billion for approximately 6 million individual and
institutional accounts.

The AST T. Rowe Price Small Company Value Portfolio is managed by an
Investment Advisory Committee composed of the following members: Preston G.
Athey, Chairman, Hugh M. Evans III and Gregory A. McCrickard. 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.
Mr. Athey joined T. Rowe Price in 1978, has been managing investments since 1982
and has been Chairman of the Investment Advisory Committee since the Portfolio's
inception in December, 1996.

Rowe Price-Fleming International, Inc. ("Price-Fleming"), 100 East Pratt
Street, Baltimore, Maryland 21202, serves as Sub-advisor for the AST T. Rowe
Price International Equity Portfolio. Price-Fleming was founded in 1979 as a
joint venture between T. Rowe Price Associates, Inc. and Robert Fleming Holdings
Limited. Price-Fleming is one of the world's largest international mutual fund
asset managers with approximately $33 billion under management as of June 30,
1998 in its offices in Baltimore, London, Tokyo, Hong Kong, Singapore and Buenos
Aires. Each 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 for the AST T. Rowe Price International Equity Portfolio
consists of Martin G. Wade, Mark C.J. Bickford-Smith, Robert W. Smith, John R.
Ford, James B.M. Seddon, and David J.L. Warren. Martin Wade joined Price-Fleming
in 1979 and has 27 years of experience with Fleming Group (Fleming Group
includes Robert Fleming Holdings Ltd. and/or Jardine Fleming International
Holdings Ltd.) in research, client service and investment management. Mark C.J.
Bickford-Smith joined Price-Fleming in 1995 has 14 years experience with the
Fleming Group in research and financial analysis. Robert W. Smith joined
Price-Fleming in 1996, and had been with T. Rowe Price since 1992. He has 12
years experience in financial analysis. John R. Ford joined Price-Fleming in
1982 and has 17 years of experience with Fleming Group in research and portfolio
management. James B.M. Seddon joined Price-Fleming in 1987 and has 12 years of
experience in investment management. David J.L. Warren joined Price-Fleming in
1984 and has 17 years experience in equity research, fixed income research and
portfolio management.

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 $261 billion of assets as of
June 30, 1998.

The portfolio managers responsible for management of the Portfolio are
Charles P. Mayer, Portfolio Co-Manager, and Donovan J. (Jerry) Paul, Portfolio
Co-Manager. 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 senior vice
president of INVESCO. From 1993 to 1994, he was vice president of INVESCO, and
from 1984 to 1993, he was a portfolio manager with Westinghouse Pension. Mr.
Paul has served as Co-Manager of the Portfolio since May 1994. Mr. Paul entered
the investment management industry in 1976, and has been a senior vice president
of INVESCO since 1994. From 1993 to 1994, he was president of Quixote Investment
Management, Inc.

Pacific Investment Management Company ("PIMCO"), 840 Newport Center
Drive, Suite 360, 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, 1998, had approximately $138 billion of assets under management. PIMCO
is a subsidiary general partnership of PIMCO Advisors L.P. ("PIMCO Advisors"). A
majority interest in PIMCO Advisors is held by PIMCO Partners, G.P., a general
partnership between Pacific Investment Management Corporation, a California
corporation, and an indirect wholly owned subsidiary of Pacific Life Insurance
Company, and PIMCO Partners, LLC, a California limited liability company
controlled by the managing directors of PIMCO.

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.

Stein Roe & Farnham Incorporated ("Stein Roe"), One South Wacker Drive,
Chicago, Illinois 60606 serves as Sub-advisor to the AST Stein Roe Venture
Portfolio. Stein Roe was organized in 1986 to succeed the business of Stein Roe
& Farnham, a partnership that had advised and managed mutual fund since 1949.
Stein Roe is a wholly owned subsidiary of Liberty Financial Companies, Inc.,
which in turn is a majority owned indirect subsidiary of Liberty Mutual
Insurance Company. As of June 30, 1998, Stein Roe managed approximately $29.1
billion in assets.

William M. Garrison and Steven M. Salopek have been co-portfolio managers
of the Portfolio since October 1998. Mr. Garrison is a vice president of Stein
Roe, which he joined in 1989. He has been an equity research analyst with Stein
Roe since 1993. Mr. Salopek is also a vice president of Stein Roe, which he
joined in 1996 as an analyst. From 1990 to 1996, Mr. Salopek was an analyst with
Banc One Investment Advisors.

Neuberger Berman Management Incorporated ("NB Management"), 605 Third
Avenue, New York, NY 10158, serves as sub-advisor for the AST Neuberger Berman
Mid-Cap Value Portfolio and the AST Neuberger Berman Mid-Cap Growth Portfolio.
NB Management and its predecessor firms have specialized in the management of
mutual funds since 1950. All of the voting stock of NB Management is owned by
individuals who are principals of Neuberger Berman, LLC ("Neuberger Berman").
Neuberger Berman is a member firm of the NYSE and other principal exchanges,
acts as the Portfolios' principal broker in the purchase and sale of portfolio
securities and the sale of covered call options, and provides NB Management with
certain assistance in the management of the Portfolios without added cost to the
Portfolios. Neuberger Berman and its affiliates, including NB Management, manage
securities accounts, including mutual funds, that had approximately $59 billion
of assets as of June 30, 1998.

The portfolio managers responsible for the day-to-day management of AST
Neuberger Berman Mid-Cap Value Portfolio are Michael M. Kassen, Robert I.
Gendelman and S. Basu Mullick. Mr. Kassen and Mr. Gendelman have 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.
Kassen has been a Vice President of NB Management and a principal of Neuberger
Berman since December 1992, and was an employee of NB Management from 1990 to
December 1992. Mr. Gendelman is a principal of Neuberger Berman and has been
with NB Management since 1994, where he is currently a Vice President. He was a
portfolio manager for another mutual fund manager from 1992 to 1993. 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.

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 N B 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. Ms. Silver is a principal of
Neuberger Berman. Previously, Ms. Silver was a portfolio manager for several
large mutual funds managed by a prominent investment adviser. Previously, 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.

Investment Management Agreements: The Trust has entered into Investment
Management Agreements with the Investment Manager (the "Management Agreements")
which provide that the Investment Manager will furnish each applicable Portfolio
with investment advice and investment management and administrative services
with respect to the applicable Portfolio 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 above to
conduct the investment programs of each Portfolio, including the purchase,
retention and disposition of securities. Such Sub-advisors are required to
provide research and statistical analysis and to keep books and records of
securities transactions. The Investment Manager is responsible for monitoring
the activities of the Sub-advisors and reporting on the activities of the
Sub-advisors to the Trustees. The Investment Manager must also provide or obtain
for the Trust, and thereafter supervise, such executive, administrative,
accounting, custody, transfer agent and shareholder servicing services as are
deemed advisable by the Trustees of the Trust.

Under the terms of the Management Agreements, each Portfolio pays all
of its expenses, including, but not limited to, the costs incurred in connection
with the maintenance of its registration under the Securities Act of 1933, as
amended, and the 1940 Act, printing and mailing prospectuses and statements of
additional information to shareholders, certain office and financial accounting
services, taxes or governmental fees, brokerage commissions, portfolio pricing,
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. 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.

The Investment Manager receives a fee, payable each month, for the
performance of its services. The Investment Manager pays each Sub-advisor a
portion of such fee for the performance of the Sub-advisory services. The
Investment Management fee payable differs from Portfolio to Portfolio,
reflecting the objective, policies and restrictions of each Portfolio and the
nature of each Investment Management Agreement and Sub-advisory Agreement. Each
Portfolio's fee is accrued daily for the purposes of determining the offering
and redemption price of the Portfolio's shares. The fees payable to the
Investment Manager are as follows:

AST JanCap Growth Portfolio: An annual rate of .90% 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 in excess of $1 billion. The Investment Manager may terminate this
voluntary agreement at any time.

AST Janus Small-Cap Growth Portfolio: An annual rate of .90% of the average
daily net assets of the Portfolio.

AST T. Rowe Price International Equity Portfolio: An annual rate of 1.0% of
the average daily net assets of the Portfolio.

AST T. Rowe Price Small Company Value 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 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 Stein Roe Venture Portfolio: An annual rate of .95% 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 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.

The Investment Manager has agreed, by the terms of the Management
Agreements for certain Portfolios of the Trust, and voluntarily for the other
Portfolios of the Trust, to reimburse the Portfolio for certain operating
expenses so that total expenses of the Portfolio do not exceed a specified
percentage of the Portfolio's average daily net assets. Such specified
percentage differs between the Portfolios, reflecting the objective, policies
and restrictions of each Portfolio and the expenses involved in conducting an
investment program for each Portfolio. For an additional discussion of Portfolio
expense limitations, see "Investment Advisory and Other Services" in the Trust's
SAI.

Sub-Advisory Agreements: The Investment Manager pays each Sub-advisor for the
performance of sub-advisory services. 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:

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 September 4, 1996, the Sub-advisor has voluntarily agreed to
waive a portion of its fee equal to .10% of the Portfolio's average daily net
assets over $500 million but not in excess of $1 billion; and .05% of the
portion of the Portfolio's average daily net assets over $1 billion. The
Sub-advisor may terminate this voluntary agreement at any time.

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.

Rowe Price-Fleming International, Inc. for the AST T. Rowe Price
International Equity Portfolio: An annual rate 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; and .50% of the portion in excess of $50 million. The Sub-advisor has
voluntarily agreed to waive a portion of its fee equal to .25% of the portion of
the Portfolio's average daily net assets not in excess of $20 million and .10%
of the portion of the net assets over $20 million but not in excess of $50
million, so long as the average daily net assets of the Portfolio equal or
exceed $200 million. Furthermore, the Sub-advisor has voluntarily agreed to
waive an additional portion of its fee equal to .05% of the Portfolio's average
daily net assets so long as the combined average daily net assets of the
Portfolio and the ASMT T. Rowe Price International Equity Portfolio of American
Skandia Master Trust equal or exceed $500 million. The Sub-advisor may terminate
these voluntary agreements at any time.

T. Rowe Price Associates, Inc. for the AST T. Rowe Price Small Company
Value 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.

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.

Pacific Investment Management Company 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.

Pacific Investment Management Company 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.

Stein Roe & Farnham Incorporated for the AST Stein Roe Venture
Portfolio: An annual rate of .50% of the average daily net assets of the
Portfolio.

Neuberger & Berman Management, Incorporated for the 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.

Neuberger & Berman Management, Incorporated for the 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.

Administrator: 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 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 provides certain fund accounting and
administrative services to the Trust, including, among other services,
accounting relating to the Trust and investment transactions of the Trust, and
computing daily net asset values. 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.

As compensation for the services and facilities provided by the
Administrator under the Administration Agreement, the Trust has agreed to pay to
the Administrator its "out-of-pocket" expenses plus the greater of certain
percentages of the average daily net assets of the Trust or certain specified
minimum annual amounts calculated for each 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) 0.0375% of the next $200 million; and (d) 0.03% of
average daily net assets over $600 million. The minimum amount is $75,000 for
each of the AST JanCap Growth Portfolio, the AST T. Rowe Price Small Company
Value Portfolio, the AST INVESCO Equity Income Portfolio, the AST PIMCO Total
Return Bond Portfolio, the AST PIMCO Limited Maturity Bond Portfolio, the AST
Neuberger Berman Mid-Cap Value Portfolio and the AST Neuberger Berman Mid-Cap
Growth Portfolio. The minimum amount is $100,000 for the AST T. Rowe Price
International Equity Portfolio. The minimum amount for the fiscal year ending
December 31, 1998 for the AST Stein Roe Venture Portfolio is $34,375. For an
additional discussion of the services provided by the Administrator under the
Administration Agreement, and the "out-of-pocket" expenses the Trust is to pay
the Administrator, see the Trust's SAI under "Management of the Trust: The
Administrator and Transfer and Shareholder Servicing Agent."

Sale of Shares: Shares are sold at net asset value to Participating Insurance
Companies and the Skandia Qualified Plan. 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. The Trust may enter into sales agreements
with other Participating Insurance Companies in the future. Owners of variable
annuity contracts and variable insurance policies will receive annual and
semi-annual reports including the financial statements of the Portfolios that
they have authorized for investment.

TAX MATTERS:

This discussion of federal income tax consequences applies to the
Participating Insurance Companies and qualified plans since the separate
accounts of the Participating Insurance Companies and the qualified plans will
be the shareholders of the Trust. Holders of variable annuity contracts or
variable life insurance policies must consult the prospectuses of their
respective contracts or policies for information on the federal income tax
consequences to such holders, and plan participants must consult with any
applicable plan documents for information on the federal income tax consequences
to such holders. 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 will be 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 Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, each prospective shareholder should
consult with his own tax advisor as to the tax consequences of investments in
the Trust, including the application of state and local taxes which may differ
from the federal income tax consequences described above. DESCRIPTION OF SHARES
OF THE TRUST:

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 Securities and Exchange Commission,
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 not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involving the conduct of
his office. 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 any such person did not act in good faith in the reasonable belief that
his action was in or not opposed to the best interests of the Trust. Such person
may not be indemnified against any liability to the Trust or the Trust's
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. The Declaration of Trust also authorizes
the purchase of liability insurance on behalf of Trustees and officers.

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.
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. Each Portfolio's 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. Total return figures are based on the overall change in value of a
hypothetical investment in each Portfolio. 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 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. To calculate yield,
the Portfolio takes the interest and dividend income it earned from its
investments for a 30-day period (net of expenses), divides it by the average
number of Portfolio shares entitled to receive dividends, and expresses the
result as an annualized percentage rate based on the Portfolio's net asset value
at the end of the 30-day 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 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. The AST T.
Rowe Price 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.

TRANSFER AND SHAREHOLDER SERVICING AGENT: PFPC Inc., 103 Bellevue Parkway,
Wilmington, Delaware 19809, serves as the Trust's transfer and shareholder
servicing agent.

CUSTODIAN: The custodian for all cash and securities holdings of the AST T. Rowe
Price International Equity Portfolio is The Chase Manhattan Bank, One
Pierrepont, Brooklyn, New York. The custodian for all cash and securities
holdings of the other Portfolios is PNC Bank, 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.

COUNSEL AND AUDITORS: The firm of Werner & Kennedy, 1633 Broadway, 46th Floor,
New York, New York 10019, is counsel for the Trust. Deloitte & Touche LLP, 117
Campus Drive, Princeton, New Jersey 08540, has been appointed independent
auditor for the Trust.

OTHER INFORMATION: This Prospectus omits certain information contained in the
registration statement filed with the Securities and Exchange Commission. Copies
of the registration statement, including items omitted herefrom, may be obtained
from the Commission by paying the charges prescribed under its rules and
regulations.

Shareholder inquiries should be made by telephone to (800) 752-6342 or,
if in writing, to the Trust's office at One Corporate Drive, Shelton,
Connecticut 06484. 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 semi-annual reports containing unaudited financial
statements and annual reports containing year-end financial statements audited
by the Trust's independent auditors. Participants in the Skandia Qualified Plan
may request such reports 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.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND INFORMATION
OR REPRESENTATIONS NOT HEREIN CONTAINED, IF GIVEN OR MADE, MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER OR SOLICITATION IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.