<PAGE>
As filed with the Securities and Exchange Commission on October 30, 1997
File Nos. 333-8653 and 811-07725
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No.
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Post-Effective Amendment No. /1/
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AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. /3/
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(Check appropriate box or boxes)
SEASONS SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
1 SunAmerica Center
Los Angeles, CA 90067-6022
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 858-8850
Robert M. Zakem
Senior Vice President and General Counsel
SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
(NAME and ADDRESS OF AGENT FOR SERVICE)
Copies to:
Susan L. Harris, Esq. Margery K. Neale, Esq.
SunAmerica Inc. Shereff, Friedman, Hoffman & Goodman, LLP
1 SunAmerica Center 919 Third Avenue
Los Angeles, CA 90067-6022 New York, NY 10022
--------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE
BOX)
/X/ immediately upon filing pursuant / / on (date) pursuant to paragraph (b)
to paragraph (b)
/ / 75 days after filing pursuant to / / on (date) pursuant to paragraph
paragraph (a) (a) of Rule 485
<PAGE>
SEASONS SERIES TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PART A
Item No. Caption in Prospectus
<S> <C>
Item 1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
Item 3. Condensed Financial Information. . . . . . . . . . . . . . . . . . . . . . . . .Financial Highlights
Item 4. General Description of Registrant. . . . . . . . . . .The Trust; Investment Objectives, Policies And
Restrictions; Investment Techniques And Risk Factors
Item 5. Management of the Fund . . . . . . . . . . . . . . . . .Management; Portfolio Turnover and Brokerage
Item 5A Management's Discussion of Fund Performance. . . . . . . . . . . . . . . . . . . . . .Not Applicable
Item 6. Capital Stock and Other Securities . . . . . .The Trust; Dividends, Distributions and Federal Taxes;
Purchases and Redemptions; Shareholder Voting Rights
Item 7. Purchase of Securities Being Offered . . . . . The Trust; Price of Shares; Purchases and Redemptions
Item 8. Redemption or Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . Purchases and Redemptions
Item 9. Pending Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
PART B
Item No. Caption in Statement of Additional Information
Item 10. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
Item 11. Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table of Contents
Item 12. General Information and History. . . . . . . . . . . . . . . . . . . .The Trust; General Information
Item 13. Investment Objectives and Policies . . . . . . . . . . . . . . . Investment Objectives and Policies;
Investment Restrictions; Portfolio Turnover
Item 14. Management of the Registrant . . . . . . . . . . . . . . . . . . . . . . Trust Officers and Trustees
Item 15. Control Persons and Principal Holders of Securities. . . . . . . . . . . Trust Officers and Trustees
Item 16. Investment Advisory and Other Services . . . . . . . . . . . Trust Officers and Trustees; Investment
Advisory and Management Agreement; Subadvisory Agreements;
General Information
Item 17. Brokerage Allocation and Other Practices . . . . . . . . . . . . Execution of Portfolio Transactions
Item 18. Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . Price of Shares
Item 19. Purchase, Redemption and Pricing of Securities Being Offered . . . . . . . . . . . . Price of Shares
Item 20. Tax Status . . . . . . . . . . . . . . . . . . . . . . . .Dividends, Distributions and Federal Taxes
Item 21. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
Item 22. Calculation of Performance Data. . . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
Item 23. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered in Part C to this Registration Statement.
<PAGE>
SEASONS SERIES TRUST
Supplement to the Prospectus dated April 3, 1997
The date of the Prospectus is hereby changed to October 30, 1997.
The following supplements the information contained in the Prospectus.
THE FINANCIAL HIGHLIGHTS
The following unaudited Financial Highlights are for the period April 15,
1997 (commencement of operations) through September 30, 1997. These
Financial Highlights should be read in conjunction with the unaudited
financial statements and notes thereto, which are included in the Statement
of Additional Information and are incorporated by reference herein.
<TABLE>
<CAPTION>
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DIVIDENDS
DECLARED DIVIDENDS NET NET
NET ASSET NET REALIZED & FROM NET FROM NET ASSET ASSETS
VALUE NET UNREALIZED TOTAL FROM INVEST- REALIZED VALUE END OF
PERIOD BEGINNING INVESTMENT GAIN(LOSS) ON INVESTMENT MENT GAIN ON END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(1)(2) INVESTMENTS OPERATIONS INCOME INVESTMENTS PERIOD RETURN(3) (000'S)
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Multi-Managed Growth Portfolio
4/15/97-
9/30/97(5) $10.00 $0.10 $2.00 $2.10 -- -- $12.10 21.00% $15,052
Multi-Managed Moderate Growth Portfolio
4/15/97-
9/30/97(5) 10.00 0.14 1.69 1.83 -- -- 11.83 18.30 16,108
Multi-Managed Income/Equity Portfolio
4/15/97-
9/30/97(5) 10.00 0.22 0.98 1.20 -- -- 11.20 12.00 11,970
Multi-Managed Income Portfolio
4/15/97-
9/30/97(5) 10.00 0.27 0.71 0.98 -- -- 10.98 9.80 9,412
Asset Allocation: Diversified Growth Portfolio
4/15/97-
9/30/97(5) 10.00 0.14 1.47 1.61 -- -- 11.61 16.10 24,233
Stock Portfolio
4/15/97-
9/30/97(5) 10.00 0.03 2.51 2.54 -- -- 12.54 25.40 20,116
<CAPTION>
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RATIO OF NET
RATIO OF INVESTMENT AVERAGE
EXPENSES TO INCOME TO COMMISSION
PERIOD AVERAGE NET AVERAGE NET PORTFOLIO PER
ENDED ASSETS ASSETS TURNOVER SHARE(4)
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<S> <C> <C> <C> <C>
Multi-Managed Growth Portfolio
4/15/97-
9/30/97(5) 1.29%(6)(7) 1.66%(6)(7) 63% $.0505
Multi-Managed Moderate Growth Portfolio
4/15/97-
9/30/97(5) 1.21(6)(7) 2.50(6)(7) 58 .0477
Multi-Managed Income/Equity Portfolio
4/15/97-
9/30/97(5) 1.14(6)(7) 3.96(6)(7) 29 .0482
Multi-Managed Income Portfolio
4/15/97-
9/30/97(5) 1.06(6)(7) 4.87(6)(7) 38 .0578
Asset Allocation: Diversified Growth Portfolio
4/15/97-
9/30/97(5) 1.21(6)(7) 2.52(6)(7) 113 .0306
Stock Portfolio
4/15/97-
9/30/97(5) 1.21(6)(7) 0.46(6)(7) 20 .0327
</TABLE>
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(1) Calculated based upon average shares outstanding
(2) After fee waivers and expense reimbursements by the investment adviser
(3) Total return is not annualized and does not reflect expenses that apply to
the separate account of Anchor National Life Insurance Company. If such
expenses had been included, total return would have been lower for each
period presented.
(4) The average commission per share is derived by dividing the agency
commissions paid on equity securities trades by the number of shares
purchased or sold.
(5) Unaudited
(6) Annualized
(7) During the period April 15, 1997 (commencement of operations) through
September 30, 1997, the investment adviser waived a portion of or all fees
and assumed a portion of or all expenses for the Portfolios. If all fees
and expenses had been incurred by the Portfolios, the ratio of expenses to
average net assets and the ratio of net investment income to average net
assets would have been as follows:
<TABLE>
<CAPTION>
EXPENSES (6) NET INVESTMENT INCOME (6)
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<S> <C> <C>
Multi-Managed Growth Portfolio.................... 1.69% 1.26%
Multi-Managed Moderate Growth Portfolio........... 1.61 2.10
Multi-Managed Income/Equity Portfolio............. 1.65 3.45
Multi-Managed Income Portfolio.................... 1.64 4.29
Asset Allocation: Diversified Growth Portfolio.... 1.53 2.20
Stock Portfolio................................... 1.44 0.23
</TABLE>
The second sentence in the first paragraph under the heading entitled
"THE TRUST" on page 3 of the Prospectus has been replaced with the following
sentence:
It was established to provide a funding medium for the Contract,
which is issued by Variable Annuity Account Five (the "Account"), a
separate account of Anchor National Life Insurance Company (the "Life
Company"), organized under the laws of the state of Arizona.
October 30, 1997
<PAGE>
Statement of Additional Information
SEASONS SERIES TRUST
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the current Prospectus of Seasons Series Trust
(the "Trust"). Capitalized terms used herein but not defined
have the meanings assigned to them in the Prospectus. The
Prospectus may be obtained by writing to the
Trust at the following address:
P.O. Box 54299
Los Angeles, California 90054-0299
October 30, 1997
<PAGE>
TABLE OF CONTENTS
TOPIC PAGE
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THE TRUST....................................................................B-3
INVESTMENT OBJECTIVES AND POLICIES...........................................B-3
DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS............................B-31
PORTFOLIO TURNOVER..........................................................B-35
INVESTMENT RESTRICTIONS.....................................................B-35
TRUST OFFICERS AND TRUSTEES.................................................B-38
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT................................B-39
SUBADVISORY AGREEMENTS......................................................B-41
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES..................................B-41
PRICE OF SHARES.............................................................B-42
EXECUTION OF PORTFOLIO TRANSACTIONS.........................................B-43
GENERAL INFORMATION.........................................................B-45
Custodian..............................................................B-45
Independent Accountants and Legal Counsel..............................B-45
Reports to Shareholders................................................B-45
Shareholder and Trustee Responsibility.................................B-45
Registration Statement.................................................B-46
FINANCIAL STATEMENTS........................................................B-46
B-2
<PAGE>
THE TRUST
The Trust, organized as a Massachusetts business trust on October 10, 1995,
is an open-end management investment company. Shares of the Trust are issued
and redeemed only in connection with investments in and payments under variable
annuity contracts, and may be sold to fund variable life contracts in the
future. The Trust currently consists of six separate series or portfolios
(each, a "Portfolio" and collectively the "Portfolios"), including four
multi-managed Portfolios (each, a "Multi-Managed Portfolio," and collectively,
the "Multi-Managed Portfolios"), the Asset Allocation: Diversified Growth
Portfolio and the Stock Portfolio, as described in the Prospectus.
Shares of the Trust are held by Variable Annuity Account Five, a
separate account of Anchor National Life Insurance Company ("Life Company"),
an Arizona life insurance company. The Life Company is a wholly owned
subsidiary of SunAmerica Life Insurance Company, an Arizona corporation
wholly owned by SunAmerica Inc., a Maryland corporation.
SunAmerica Asset Management Corp. ("SunAmerica" or the "Adviser"), an
indirect, wholly owned subsidiary of the Life Company, serves as investment
adviser for each Portfolio. As described in the Prospectus, SunAmerica may
retain subadvisers (each a "Subadviser" and collectively the "Subadvisers") to
assist in management of one or more Portfolios. The Adviser and Subadvisers
are sometimes referred to herein as the "Managers" or individually as a
"Manager."
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each of the Portfolios are
described in the Trust's Prospectus. Certain types of securities in which the
Portfolios may invest and certain investment practices which the Portfolios may
employ, which are described under "Investment Techniques and Risk Factors" in
the Prospectus, are discussed more fully below.
WARRANTS. A Portfolio may invest in warrants which give the holder of the
warrant a right to purchase a given number of shares of a particular issue at a
specified price until expiration. Such investments generally can provide a
greater potential for profit or loss than investments of equivalent amounts in
the underlying common stock. The prices of warrants do not necessarily move
with the prices of the underlying securities. If the holder does not sell the
warrant, he risks the loss of his entire investment if the market price of the
underlying stock does not, before the expiration date, exceed the exercise price
of the warrant plus the cost thereof. Investment in warrants is a speculative
activity. Warrants pay no dividends and confer no rights (other than the right
to purchase the underlying stock) with respect to the assets of the issuer.
INVESTMENT IN SMALL, UNSEASONED COMPANIES. As described in the
Prospectus, each Portfolio may invest in the securities of small companies
having market capitalizations under $1 billion. These securities may have a
limited trading market, which may adversely affect their disposition and can
result in their being priced lower than might otherwise be the case. If other
investment companies and investors who invest in such issuers trade the same
B-3
<PAGE>
securities when a Portfolio attempts to dispose of its holdings, the Portfolio
may receive lower prices than might otherwise be obtained.
Companies with market capitalization of $1 billion to $5 billion ("Mid-Cap
Companies") may also suffer more significant losses as well as realize more
substantial growth than larger, more established issuers. Thus, investments in
such companies tend to be more volatile and somewhat speculative.
FOREIGN SECURITIES. Investments in foreign securities offer potential
benefits not available from investments solely in securities of domestic issuers
by offering the opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or business
cycles different from those of the U.S., or to reduce fluctuations in portfolio
value by taking advantage of foreign stock markets that do not move in a manner
parallel to U.S. markets.
Each Portfolio may invest in securities of foreign issuers in the form of
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global
Depositary Receipts (GDRs) or other similar securities convertible into
securities of foreign issuers. ADRs are securities, typically issued by a U.S.
financial institution, that evidence ownership interests in a security or a pool
of securities issued by a foreign issuer and deposited with the depository. ADRs
may be sponsored or unsponsored. A sponsored ADR is issued by a depository
which has an exclusive relationship with the issuer of the underlying security.
An unsponsored ADR may be issued by any number of U.S. depositories. Holders of
unsponsored ADRs generally bear all the costs associated with establishing the
unsponsored ADR. The depository of an unsponsored ADR is under no obligation to
distribute shareholder communications received from the underlying issuer or to
pass through to the holders of the unsponsored ADR voting rights with respect to
the deposited securities or pool of securities. A Portfolio may invest in
either type of ADR. Although the U.S. investor holds a substitute receipt of
ownership rather than direct stock certificates, the use of the depository
receipts in the United States can reduce costs and delays as well as potential
currency exchange and other difficulties. The Portfolio may purchase securities
in local markets and direct delivery of these ordinary shares to the local
depository of an ADR agent bank in the foreign country. Simultaneously, the ADR
agents create a certificate which settles at the Trust's custodian in three
days. The Portfolio may also execute trades on the U.S. markets using existing
ADRs. A foreign issuer of the security underlying an ADR is generally not
subject to the same reporting requirements in the United States as a domestic
issuer. Accordingly the information available to a U.S. investor will be
limited to the information the foreign issuer is required to disclose in its own
country and the market value of an ADR may not reflect undisclosed material
information concerning the issuer of the underlying security. For purposes of a
Portfolio's investment policies, the Portfolio's investments in these types of
securities will be deemed to be investments in the underlying securities.
Generally ADRs, in registered form, are dollar-denominated securities designed
for use in the U.S. securities markets, which represent and may be converted
into the underlying foreign security. EDRs, in bearer form, are designed for
use in the European securities markets.
Investments in foreign securities, including securities of developing
countries, present special additional investment risks and considerations not
typically associated with investments in domestic securities, including
reduction of income by foreign taxes; fluctuation in value of foreign portfolio
B-4
<PAGE>
investments due to changes in currency rates and control regulations (e.g.,
currency blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
issuers; less volume on foreign exchanges than on U.S. exchanges; greater
volatility and less liquidity on foreign markets than in the U.S.; less
regulation of foreign issuers, stock exchanges and brokers than the U.S.;
greater difficulties in commencing lawsuits; higher brokerage commission rates
than the U.S.; increased possibilities in some countries of expropriation,
confiscatory taxation, political, financial or social instability or adverse
diplomatic developments; and differences (which may be favorable or unfavorable)
between the U.S. economy and foreign economies.
PASSIVE FOREIGN INVESTMENT COMPANIES ("PFICs") -- The Asset Allocation:
Diversified Growth Portfolio may invest, and Janus Capital Corporation may
invest the assets of the Janus/growth component of each Multi-Managed Portfolio,
in PFICs, which are any foreign corporations which generate certain amounts of
passive income or hold certain amounts of assets for the production of passive
income. Passive income includes dividends, interest, royalties, rents and
annuities. To the extent that a Portfolio invests in PFICs, income tax
regulations may require the Portfolio to recognize income associated with the
PFIC prior to the actual receipt of any such income.
U.S. GOVERNMENT SECURITIES. A Portfolio may invest in U.S. Treasury
securities, including bills, notes, bonds and other debt securities issued by
the U.S. Treasury. These instruments are direct obligations of the U.S.
government and, as such, are backed by the "full faith and credit" of the United
States. They differ primarily in their interest rates, the lengths of their
maturities and the dates of their issuances. A Portfolio may also invest in
securities issued by agencies of the U.S. government or instrumentalities of the
U.S. government. These obligations, including those which are guaranteed by
federal agencies or instrumentalities, may or may not be backed by the "full
faith and credit" of the United States. Obligations of the Government National
Mortgage Association ("GNMA"), the Farmers Home Administration and the
Export-Import Bank are backed by the full faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the United
States, a Portfolio must look principally to the agency issuing or guaranteeing
the obligation for ultimate repayment and may not be able to assert a claim
against the United States if the agency or instrumentality does not meet its
commitments.
MORTGAGE-RELATED SECURITIES. A Portfolio may also invest in
mortgage-related securities, including certain U.S. government securities
such as GNMA, FNMA or FHLMC certificates (as defined below), and private
mortgage-related securities, which represent an undivided ownership interest
in a pool of mortgages. The mortgages backing these securities include
conventional thirty-year fixed-rate mortgages, fifteen-year fixed-rate
mortgages, graduated payment mortgages and adjustable rate mortgages. These
certificates are in most cases pass-through instruments, through which the
holder receives a share of all interest and principal payments, including
prepayments, on the mortgages underlying the certificate, net of certain
fees.
The yield on mortgage-backed securities is based on the average expected
life of the underlying pool of mortgage loans. The actual life of any
particular pool will be shortened by any unscheduled or early payments of
principal and interest. Principal prepayments generally
B-5
<PAGE>
result from the sale of the underlying property or the refinancing or
foreclosure of underlying mortgages. The occurrence of prepayments is affected
by a wide range of economic, demographic and social factors and, accordingly, it
is not possible to predict accurately the average life of a particular pool.
Yield on such pools is usually computed by using the historical record of
prepayments for that pool, or, in the case of newly-issued mortgages, the
prepayment history of similar pools. The actual prepayment experience of a pool
of mortgage loans may cause the yield realized by the Portfolio to differ from
the yield calculated on the basis of the expected average life of the pool.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. When prevailing interest rates rise, the value of a pass-through
security may decrease as does the value of other debt securities, but, when
prevailing interest rates decline, the value of a pass-through security is not
likely to rise on a comparable basis with other debt securities because of the
prepayment feature of pass-through securities. The reinvestment of scheduled
principal payments and unscheduled prepayments that the Portfolio receives may
occur at higher or lower rates than the original investment, thus affecting the
yield of the Portfolio. Monthly interest payments received by the Portfolio
have a compounding effect which may increase the yield to shareholders more than
debt obligations that pay interest semi-annually. Because of those factors,
mortgage-backed securities may be less effective than U.S. Treasury bonds of
similar maturity at maintaining yields during periods of declining interest
rates. Accelerated prepayments adversely affect yields for pass-through
securities purchased at a premium (i.e., at a price in excess of principal
amount) and may involve additional risk of loss of principal because the premium
may not have been fully amortized at the time the obligation is repaid. The
opposite is true for pass-through securities purchased at a discount. A
Portfolio may purchase mortgage-backed securities at a premium or at a discount.
The following is a description of GNMA, FNMA and FHLMC certificates, the
most widely available mortgage-backed securities:
GNMA CERTIFICATES. GNMA certificates ("GNMA Certificates") are
mortgage-backed securities which evidence an undivided interest in a pool or
pools of mortgages. GNMA Certificates that a Portfolio may purchase are the
modified pass-through type, which entitle the holder to receive timely payment
of all interest and principal payments due on the mortgage pool, net of fees
paid to the issuer and GNMA, regardless of whether or not the mortgagor actually
makes the payment.
GNMA guarantees the timely payment of principal and interest on securities
backed by a pool of mortgages insured by the Federal Housing Administration
("FHA") or the Farmers' Home Administration ("FMHA"), or guaranteed by the
Veterans Administration ("VA"). The GNMA guarantee is authorized by the
National Housing Act and is backed by the full faith and credit of the United
States. The GNMA is also empowered to borrow without limitation from the U.S.
Treasury if necessary to make any payments required under its guarantee.
B-6
<PAGE>
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosure will usually
result in the return of the greater part of principal investment long before the
maturity of the mortgages in the pool. Foreclosures impose no risk to principal
investment because of the GNMA guarantee, except to the extent that a Portfolio
has purchased the certificates at a premium in the secondary market.
FHLMC CERTIFICATES. The Federal Home Loan Mortgage Corporation ("FHLMC")
issues two types of mortgage pass-through securities: mortgage participation
certificates ("PCS") and guaranteed mortgage certificates ("GMCs")
(collectively, "FHLMC Certificates"). PCS resemble GNMA Certificates in that
each PC represents a pro rata share of all interest and principal payments made
and owed on the underlying pool. The FHLMC guarantees timely monthly payment of
interest (and, under certain circumstances, principal) of PCS and the ultimate
payment of principal.
GMCs also represent a pro rata interest in a pool of mortgages. However,
these instruments pay interest semi-annually and return principal once a year in
guaranteed minimum payments. The expected average life of these securities is
approximately ten years. The FHLMC guarantee is not backed by the full faith
and credit of the U.S. Government.
FNMA CERTIFICATES. The Federal National Mortgage Association ("FNMA")
issues guaranteed mortgage pass-through certificates ("FNMA Certificates").
FNMA Certificates represent a pro rata share of all interest and principal
payments made and owed on the underlying pool. FNMA guarantees timely payment
of interest and principal on FNMA Certificates. The FNMA guarantee is not
backed by the full faith and credit of the U.S. Government.
Conventional mortgage pass-through securities ("Conventional Mortgage
Pass-Throughs") represent participation interests in pools of mortgage loans
that are issued by trusts formed by originators of the institutional investors
in mortgage loans (or represent custodial arrangements administered by such
institutions). These originators and institutions include commercial banks,
savings and loans associations, credit unions, savings banks, insurance
companies, investment banks or special purpose subsidiaries of the foregoing.
For federal income tax purposes, such trusts are generally treated as grantor
trusts or REMICs and, in either case, are generally not subject to any
significant amount of federal income tax at the entity level.
The mortgage pools underlying Conventional Mortgage Pass-Throughs consist
of conventional mortgage loans evidenced by promissory notes secured by first
mortgages or first deeds of trust or other similar security instruments creating
a first lien on residential or mixed residential and commercial properties.
Conventional Mortgage Pass-Throughs (whether fixed or adjustable rate) provide
for monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on the pooled mortgage loans, net of any fees or other amount paid to any
guarantor, administrator and/or servicer of the underlying mortgage loans. A
trust fund with
B-7
<PAGE>
respect to which a REMIC election has been made may include regular interests in
other REMICs which in turn will ultimately evidence interests in mortgage loans.
Conventional mortgage pools generally offer a higher rate of interest than
government and government-related pools because of the absence of any direct or
indirect government or agency payment guarantees. However, timely payment of
interest and principal of mortgage loans in these pools may be supported by
various forms of insurance or guarantees, including individual loans, title,
pool and hazard insurance and letters of credit. The insurance and guarantees
may be issued by private insurers and mortgage poolers. Although the market for
such securities is becoming increasingly liquid, mortgage-related securities
issued by private organizations may not be readily marketable.
Another type of mortgage-backed security in which the Asset Allocation:
Diversified Growth Portfolio and the SunAmerica/balanced and WMC/fixed income
components of the Multi-Managed Portfolios may invest is a collateralized
mortgage obligation ("CMO"). CMOs are fully collateralized bonds which are the
general obligations of the issuer thereof (e.g., the U.S. government, a U.S.
government instrumentality, or a private issuer). Such bonds generally are
secured by an assignment to a trustee (under the indenture pursuant to which the
bonds are issued) of collateral consisting of a pool of mortgages. Payments
with respect to the underlying mortgages generally are made to the Trustee under
the indenture. Payments of principal and interest on the underlying mortgages
are not passed through to the holders of the CMOs as such (i.e., the character
of payments of principal and interest is not passed through, and therefore
payments to holders of CMOs attributable to interest paid and principal repaid
on the underlying mortgages do not necessarily constitute income and return of
capital, respectively, to such holders), but such payments are dedicated to
payment of interest on and repayment of principal of the CMOs.
Principal and interest on the underlying mortgage assets may be allocated
among the several classes of CMOs in various ways. In certain structures (known
as "sequential pay" CMOs), payments of principal, including any principal
prepayments, on the mortgage assets generally are applied to the classes of CMOs
in the order of their respective final distribution dates. Thus, no payment of
principal will be made on any class of sequential pay CMOs until all other
classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs.
Parallel pay CMOs are those which are structured to apply principal payments and
prepayments of the mortgage assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final distribution date of each class.
A wide variety of CMOs may be issued in the parallel pay or sequential pay
structures. These securities include accrual certificates (also known as
"Z-Bonds"), which only accrue interest at a specified rate until all other
certificates having an earlier final distribution date have been retired and are
converted thereafter to an interest-paying security, and planned amortization
class ("PAC") certificates, which are parallel pay CMOs which generally require
that specified amounts of principal be applied on each payment date to one or
more classes of
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CMOs (the "PAC Certificates"), even though all other principal payments and
prepayments of the mortgage assets are then required to be applied to one or
more other classes of the certificates. The scheduled principal payments for
the PAC Certificates generally have the highest priority on each payment date
after interest due has been paid to all classes entitled to receive interest
currently. Shortfalls, if any, are added to the amount payable on the next
payment date. The PAC Certificate payment schedule is taken into account in
calculating the final distribution date of each class of PAC. In order to
create PAC tranches, one or more tranches generally must be created to absorb
most of the volatility in the underlying mortgage assets. These tranches tend
to have market prices and yields which are much more volatile than the PAC
classes.
The Asset Allocation: Diversified Growth Portfolio and the
SunAmerica/balanced and WMC/fixed income components of the Multi-Managed
Portfolios may also invest in stripped mortgage-backed securities. Stripped
mortgage-backed securities are often structured with two classes that receive
different proportions of the interest and principal distributions on a pool of
mortgage assets. Stripped mortgage-backed securities have greater market
volatility than other types of U.S. Government securities in which a component
invests. A common type of stripped mortgage-backed security has one class
receiving some of the interest and all or most of the principal (the "principal
only" class) from the mortgage pool, while the other class will receive all or
most of the interest (the "interest only" class). The yield to maturity on an
interest only class is extremely sensitive not only to changes in prevailing
interest rates, but also to the rate of principal payments, including principal
prepayments, on the underlying pool of mortgage assets, and a rapid rate of
principal payment may have a material adverse effect on a Portfolio's yield.
While interest-only and principal-only securities are generally regarded as
being illiquid, such securities may be deemed to be liquid if they can be
disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of a Portfolio's net asset value per
share. Only government interest-only and principal-only securities backed by
fixed-rate mortgages and determined to be liquid under guidelines and standards
established by the Trustees may be considered liquid securities not subject to a
Portfolio's limitation on investments in illiquid securities.
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD BONDS. The WMC/fixed income
and Janus/growth components of the Multi-Managed Portfolios and the Asset
Allocation: Diversified Growth Portfolio may invest in high-yield bonds. These
bonds present certain risks which are discussed below:
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - High-yield
bonds are very sensitive to adverse economic changes and corporate
developments. During an economic downturn or substantial period of
rising interest rates, highly leveraged issuers may experience
financial stress that would adversely affect their ability to service
their principal and interest payment obligations, to meet projected
business goals, and to obtain additional financing. If the issuer of
a bond defaults on its obligations to pay interest or principal or
enters into bankruptcy proceedings, a Portfolio may incur losses or
expenses in seeking recovery of amounts owed to it. In addition,
periods of economic uncertainty
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and changes can be expected to result in increased volatility of market
prices of high-yield bonds and the Portfolio's net asset value.
PAYMENT EXPECTATIONS - High-yield bonds may contain redemption or
call provisions. If an issuer exercises these provisions in a
declining interest rate market, a Portfolio would have to replace the
security with a lower yielding security, resulting in a decreased
return for investors. Conversely, a high-yield bond's value will
decrease in a rising interest rate market, as will the value of the
Portfolio's assets. If the Portfolio experiences unexpected net
redemptions, this may force it to sell high-yield bonds without regard
to their investment merits, thereby decreasing the asset base upon
which expenses can be spread and possibly reducing the Portfolio's
rate of return.
LIQUIDITY AND VALUATION - There may be little trading in the
secondary market for particular bonds, which may affect adversely a
Portfolio's ability to value accurately or dispose of such bonds.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of
high-yield bonds, especially in a thin market.
ASSET-BACKED SECURITIES. Each Portfolio may invest in asset-backed
securities. These securities, issued by trusts and special purpose
corporations, are backed by a pool of assets, such as credit card and automobile
loan receivables, representing the obligations of a number of different parties.
Asset-backed securities present certain risks. For instance, in the case
of credit card receivables, these securities may not have the benefit of any
security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicer to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there
is the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.
Asset-backed securities are often backed by a pool of assets representing
the obligations of a number of different parties. To lessen the effect of
failures by obligors to make payments on underlying assets, the securities may
contain elements of credit support which fall into two categories: (i)
liquidity protection and (ii) protection against losses resulting from ultimate
default by an obligor on the underlying assets. Liquidity protection refers to
the provision of advances, generally by the entity administering the pool of
assets, to ensure that the receipt of payments on the underlying pool occurs in
a timely fashion. Protection against
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losses resulting from ultimate default ensures payment through insurance
policies or letters of credit obtained by the issuer or sponsor from third
parties. A Portfolio will not pay any additional or separate fees for credit
support. The degree of credit support provided for each issue is generally
based on historical information respecting the level of credit risk associated
with the underlying assets. Delinquency or loss in excess of that anticipated
or failure of the credit support could adversely affect the return on an
investment in such a security.
SHORT-TERM DEBT SECURITIES. In addition to their primary investments, a
Portfolio may also invest in the following types of money market and
fixed-income securities:
MONEY MARKET SECURITIES - Money Market securities may include
securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities, repurchase agreements, commercial paper,
bankers' acceptances, time deposits and certificates of deposit.
COMMERCIAL BANK OBLIGATIONS - Certificates of deposit
(interest-bearing time deposits), bankers' acceptances (time drafts
drawn on a commercial bank where the bank accepts an irrevocable
obligation to pay at maturity) and documented discount notes
(corporate promissory discount notes accompanied by a commercial bank
guarantee to pay at maturity) representing direct or contingent
obligations of commercial banks.
SAVINGS ASSOCIATION OBLIGATIONS - Certificates of deposit
(interest-bearing time deposits) issued by mutual savings banks or
savings and loan associations.
COMMERCIAL PAPER - Short-term notes (up to 12 months) issued by
corporations or governmental bodies, including variable amount master
demand notes. Variable amount master demand notes permit a Portfolio to
invest varying amounts at fluctuating rates of interest pursuant to the
agreement in the master note. These are direct lending obligations
between the lender and borrower, they are generally not traded, and
there is no secondary market. Such instruments are payable with accrued
interest in whole or in part on demand. The amounts of the instruments
are subject to daily fluctuations as the participants increase or
decrease the extent of their participation. In connection with master
demand note arrangements, the Manager, subject to the direction of the
Trustees, monitors on an ongoing basis, the earning power, cash flow and
other liquidity ratios of the borrower, and its ability to pay principal
and interest on demand. The Manager also considers the extent to which
the variable amount master demand notes are backed by bank letters of
credit. These notes generally are not rated by Moody's Investors
Service ("Moody's") or Standard & Poor's Corporation ("Standard &
Poor's") and a Portfolio may invest in them only if it is determined
that at the time of investment the notes are of comparable quality to
the other commercial paper in which the Portfolio may invest. Master
demand notes are considered to have a maturity equal to
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the repayment notice period unless the Manager has reason to believe that
the borrower could not make timely repayment upon demand.
CORPORATE BONDS AND NOTES - A Portfolio may purchase corporate
obligations that mature or that may be redeemed in one year or less. These
obligations originally may have been issued with maturities in excess of
one year.
GOVERNMENT SECURITIES - Debt securities maturing within one year of
the date of purchase include adjustable-rate mortgage securities backed by
GNMA, FNMA, FHLMC and other non-agency issuers. Although certain floating
or variable rate obligations (securities whose coupon rate changes at least
annually and generally more frequently) have maturities in excess of one
year, they are also considered short-term debt securities. See "U.S.
Government Securities".
REPURCHASE AGREEMENTS. A Portfolio may enter into repurchase agreements
with banks, brokers or securities dealers. In such agreements, the seller
agrees to repurchase the security at a mutually agreed-upon time and price. The
period of maturity is usually quite short, either overnight or a few days,
although it may extend over a number of months. The repurchase price is in
excess of the purchase price by an amount which reflects an agreed-upon rate of
return effective for the period of time a Portfolio's money is invested in the
security. Whenever a Portfolio enters into a repurchase agreement, it obtains
appropriate collateral. The instruments held as collateral are valued daily and
if the value of the instruments declines, the Portfolio will require additional
collateral. If the seller defaults and the value of the collateral securing the
repurchase agreements declines, the Portfolio may incur a loss. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Portfolio may be delayed or limited. The
Trustees have established guidelines to be used by the Managers in connection
with transactions in repurchase agreements and will regularly monitor each
Portfolio's use of repurchase agreements. A Portfolio will not invest in
repurchase agreements maturing in more than seven days if the aggregate of such
investments along with other illiquid securities exceeds 15% of the value of its
net assets. However, there is no limit on the amount of a Portfolio's net
assets that may be subject to repurchase agreements having a maturity of seven
days or less for temporary defensive purposes.
HEDGING AND INCOME ENHANCEMENT STRATEGIES. Each Portfolio may write (I.E.,
sell) call options ("calls") on securities that are traded on U.S. and foreign
securities exchanges and over-the-counter markets to enhance income through the
receipt of premiums from expired calls and any net profits from closing purchase
transactions. After any such sale up to 25% of a Portfolio's total assets may
be subject to calls. All such calls written by a Portfolio must be "covered"
while the call is outstanding (I.E., the Portfolio must own the securities
subject to the call or other securities acceptable for applicable escrow
requirements). Calls on Futures (defined below) used to enhance income must be
covered by deliverable securities or by liquid assets segregated to satisfy the
Futures contract. If a call written by the Portfolio is exercised, the
Portfolio forgoes any profit from any increase in the market price above the
call price of the underlying investment on which the call was written.
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Primarily for hedging purposes, and from time to time for income
enhancement, each Portfolio may use interest rate futures contracts, foreign
currency futures contracts and stock and bond index futures contracts, including
futures on U.S. government securities (together, "Futures"); forward contracts
on foreign currencies ("Forward Contracts"); and call and put options on equity
and debt securities, Futures, stock and bond indices and foreign currencies; and
each Multi-Managed Portfolio may, through its WMC/fixed income component, invest
in yield curve options (up to 5% of total assets allocated to the WMC/fixed
income component) (all the foregoing referred to as "Hedging Instruments"). In
addition, the Asset Allocation: Diversified Growth Portfolio may use Futures in
order to adjust its exposure to various equity or fixed income markets or as a
substitute for investment in underlying cash markets.
Hedging Instruments may be used to attempt to: (i) protect against possible
declines in the market value of a Portfolio's portfolio resulting from downward
trends in the equity and debt securities markets (generally due to a rise in
interest rates); (ii) protect a Portfolio's unrealized gains in the value of its
equity and debt securities which have appreciated; (iii) facilitate selling
securities for investment reasons; (iv) establish a position in the equity and
debt securities markets as a temporary substitute for purchasing particular
equity and debt securities; or (v) reduce the risk of adverse currency
fluctuations.
A Portfolio's strategy of hedging with Futures and options on Futures will
be incidental to its activities in the underlying cash market. When hedging to
attempt to protect against declines in the market value of the portfolio, to
permit a Portfolio to retain unrealized gains in the value of portfolio
securities which have appreciated, or to facilitate selling securities for
investment reasons, a Portfolio could: (i) sell Futures; (ii) purchase puts on
such Futures or securities; or (iii) write calls on securities held by it or on
Futures. When hedging to attempt to protect against the possibility that
portfolio securities are not fully included in a rise in value of the debt
securities market, a Portfolio could: (i) purchase Futures, or (ii) purchase
calls on such Futures or on securities. When hedging to protect against
declines in the dollar value of a foreign currency-denominated security, a
Portfolio could: (i) purchase puts on that foreign currency and on foreign
currency Futures; (ii) write calls on that currency or on such Futures; or (iii)
enter into Forward Contracts at a lower rate than the spot ("cash") rate.
Additional information about the Hedging Instruments the Portfolios may use is
provided below.
OPTIONS
OPTIONS ON SECURITIES. As noted above, each Portfolio may write and
purchase call and put options (including, in the case of the Multi-Managed
Portfolios, yield curve options) on equity and debt securities.
When a Portfolio writes a call on a security it receives a premium and
agrees to sell the underlying security to a purchaser of a corresponding call on
the same security during the call period (usually not more than 9 months) at a
fixed price (which may differ from the market price of the underlying security),
regardless of market price changes during the call period. A Portfolio has
retained the risk of loss should the price of the underlying security decline
during the call period, which may be offset to some extent by the premium.
To terminate its obligation on a call it has written, a Portfolio may
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether
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the net of the amount of the option transaction costs and the premium received
on the call written was more or less than the price of the call subsequently
purchased. A profit may also be realized if the call expires unexercised,
because a Portfolio retains the underlying security and the premium received.
If a Portfolio could not effect a closing purchase transaction due to lack of a
market, it would hold the callable securities until the call expired or was
exercised.
When a Portfolio purchases a call (other than in a closing purchase
transaction), it pays a premium and has the right to buy the underlying
investment from a seller of a corresponding call on the same investment during
the call period at a fixed exercise price. A Portfolio benefits only if the
call is sold at a profit or if, during the call period, the market price of the
underlying investment is above the sum of the call price plus the transaction
costs and the premium paid and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become worthless at its
expiration date and a Portfolio will lose its premium payment and the right to
purchase the underlying investment.
A put option on securities gives the purchaser the right to sell, and the
writer the obligation to buy, the underlying investment at the exercise price
during the option period. Writing a put covered by segregated liquid assets
equal to the exercise price of the put has the same economic effect to a
Portfolio as writing a covered call. The premium a Portfolio receives from
writing a put option represents a profit as long as the price of the underlying
investment remains above the exercise price. However, a Portfolio has also
assumed the obligation during the option period to buy the underlying investment
from the buyer of the put at the exercise price, even though the value of the
investment may fall below the exercise price. If the put expires unexercised, a
Portfolio (as the writer of the put) realizes a gain in the amount of the
premium. If the put is exercised, a Portfolio must fulfill its obligation to
purchase the underlying investment at the exercise price, which will usually
exceed the market value of the investment at that time. In that case, a
Portfolio may incur a loss, equal to the sum of the sale price of the underlying
investment and the premium received minus the sum of the exercise price and any
transaction costs incurred.
A Portfolio may effect a closing purchase transaction to realize a profit
on an outstanding put option it has written or to prevent an underlying security
from being put. Furthermore, effecting such a closing purchase transaction will
permit a Portfolio to write another put option to the extent that the exercise
price thereof is secured by the deposited assets, or to utilize the proceeds
from the sale of such assets for other investments by the Portfolio. A
Portfolio will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more than the premium received from
writing the option.
When a Portfolio purchases a put, it pays a premium and has the right to
sell the underlying investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying a put on an
investment a Portfolio owns enables the Portfolio to protect itself during the
put period against a decline in the value of the underlying investment below the
exercise price by selling such underlying investment at the exercise price to a
seller of a corresponding put. If the market price of the underlying investment
is equal to or above the exercise price and as a result the put is not exercised
or resold, the put will become worthless at its expiration date, and the
Portfolio will lose its premium payment and the right to sell the underlying
investment pursuant to the put. The put may, however, be sold prior to
expiration (whether or not at a profit).
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Buying a put on an investment a Portfolio does not own permits the
Portfolio either to resell the put or buy the underlying investment and sell it
at the exercise price. The resale price of the put will vary inversely with the
price of the underlying investment. If the market price of the underlying
investment is above the exercise price and as a result the put is not exercised,
the put will become worthless on its expiration date. In the event of a decline
in the stock market, a Portfolio could exercise or sell the put at a profit to
attempt to offset some or all of its loss on its portfolio securities.
When writing put options on securities, to secure its obligation to pay for
the underlying security, a Portfolio will deposit in escrow liquid assets with a
value equal to or greater than the exercise price of the underlying securities.
A Portfolio therefore forgoes the opportunity of investing the segregated assets
or writing calls against those assets. As long as the obligation of a Portfolio
as the put writer continues, it may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring a Portfolio to take
delivery of the underlying security against payment of the exercise price. A
Portfolio has no control over when it may be required to purchase the underlying
security, since it may be assigned an exercise notice at any time prior to the
termination of its obligation as the writer of the put. This obligation
terminates upon expiration of the put, or such earlier time at which a Portfolio
effects a closing purchase transaction by purchasing a put of the same series as
that previously sold. Once a Portfolio has been assigned an exercise notice, it
is thereafter not allowed to effect a closing purchase transaction.
OPTIONS ON FOREIGN CURRENCIES. Each Portfolio may write and purchase puts
and calls on foreign currencies. A call written on a foreign currency by a
Portfolio is "covered" if the Portfolio owns the underlying foreign currency
covered by the call or has an absolute and immediate right to acquire that
foreign currency without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other foreign currency held in its portfolio. A put option is
"covered" if the Portfolio deposits with its custodian cash or liquid securities
with a value at least equal to the exercise price of the put option. A call
written by a Portfolio on a foreign currency is for cross-hedging purposes if it
is not covered, but is designed to provide a hedge against a decline in the U.S.
dollar value of a security which the Portfolio owns or has the right to acquire
and which is denominated in the currency underlying the option due to an adverse
change in the exchange rate. In such circumstances, a Portfolio collateralizes
the option by maintaining in a segregated account with the Trust's custodian,
cash or liquid securities in an amount not less than the value of the underlying
foreign currency in U.S. dollars marked-to-market daily.
OPTIONS ON SECURITIES INDICES. As noted above, each Portfolio may write
and purchase call and put options on securities indices. Puts and calls on
broadly-based securities indices are similar to puts and calls on securities
except that all settlements are in cash and gain or loss depends on changes in
the index in question (and thus on price movements in the securities market
generally) rather than on price movements in individual securities or Futures.
When a Portfolio buys a call on a securities index, it pays a premium. During
the call period, upon exercise of a call by a Portfolio, a seller of a
corresponding call on the same investment will pay the Portfolio an amount of
cash to settle the call if the closing level of the securities index upon which
the call is based is greater than the exercise price of the call. That cash
payment is equal to the difference between the closing price of the index and
the exercise price of the call times a specified multiple (the "multiplier")
which determines the total dollar value for each point of difference. When a
Portfolio buys a put on a
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securities index, it pays a premium and has the right during the put period to
require a seller of a corresponding put, upon the Portfolio's exercise of its
put, to deliver to the Portfolio an amount of cash to settle the put if the
closing level of the securities index upon which the put is based is less than
the exercise price of the put. That cash payment is determined by the
multiplier, in the same manner as described above as to calls.
FUTURES AND OPTIONS ON FUTURES
FUTURES. Upon entering into a Futures transaction, a Portfolio will be
required to deposit an initial margin payment with the futures commission
merchant (the "futures broker"). The initial margin will be deposited with the
Trust's custodian in an account registered in the futures broker's name; however
the futures broker can gain access to that account only under specified
conditions. As the Future is marked to market to reflect changes in its market
value, subsequent margin payments, called variation margin, will be paid to or
by the futures broker on a daily basis. Prior to expiration of the Future, if a
Portfolio elects to close out its position by taking an opposite position, a
final determination of variation margin is made, additional cash is required to
be paid by or released to the Portfolio, and any loss or gain is realized for
tax purposes. All Futures transactions are effected through a clearinghouse
associated with the exchange on which the Futures are traded.
Interest rate futures contracts are purchased or sold for hedging purposes
to attempt to protect against the effects of interest rate changes on a
Portfolio's current or intended investments in fixed-income securities. For
example, if a Portfolio owned long-term bonds and interest rates were expected
to increase, that Portfolio might sell interest rate futures contracts. Such a
sale would have much the same effect as selling some of the long-term bonds in
that Portfolio's portfolio. However, since the Futures market is more liquid
than the cash market, the use of interest rate futures contracts as a hedging
technique allows a Portfolio to hedge its interest rate risk without having to
sell its portfolio securities. If interest rates did increase, the value of the
debt securities in the portfolio would decline, but the value of that
Portfolio's interest rate futures contracts would be expected to increase at
approximately the same rate, thereby keeping the net asset value of that
Portfolio from declining as much as it otherwise would have. On the other hand,
if interest rates were expected to decline, interest rate futures contracts may
be purchased to hedge in anticipation of subsequent purchases of long-term bonds
at higher prices. Since the fluctuations in the value of the interest rate
futures contracts should be similar to that of long-term bonds, a Portfolio
could protect itself against the effects of the anticipated rise in the value of
long-term bonds without actually buying them until the necessary cash became
available or the market had stabilized. At that time, the interest rate futures
contracts could be liquidated and that Portfolio's cash reserves could then be
used to buy long-term bonds on the cash market.
Purchases or sales of stock or bond index futures contracts are used for
hedging purposes to attempt to protect a Portfolio's current or intended
investments from broad fluctuations in stock or bond prices. For example, a
Portfolio may sell stock or bond index futures contracts in anticipation of or
during a market decline to attempt to offset the decrease in market value of the
Portfolio's securities portfolio that might otherwise result. If such decline
occurs, the loss in value of portfolio securities may be offset, in whole or
part, by gains on the Futures position. When a Portfolio is not fully invested
in the securities market and anticipates a significant market advance, it may
purchase stock or bond index futures contracts in order to gain rapid market
exposure that may, in part or
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entirely, offset increases in the cost of securities that the Portfolio intends
to purchase. As such purchases are made, the corresponding positions in stock
or bond index futures contracts will be closed out.
As noted above, each Portfolio may purchase and sell foreign currency
futures contracts for hedging or income enhancement purposes to attempt to
protect its current or intended investments from fluctuations in currency
exchange rates. Such fluctuations could reduce the dollar value of portfolio
securities denominated in foreign currencies, or increase the cost of
foreign-denominated securities to be acquired, even if the value of such
securities in the currencies in which they are denominated remains constant.
Each Portfolio may sell futures contracts on a foreign currency, for example,
when it holds securities denominated in such currency and it anticipates a
decline in the value of such currency relative to the dollar. In the event such
decline occurs, the resulting adverse effect on the value of foreign-denominated
securities may be offset, in whole or in part, by gains on the Futures
contracts. However, if the value of the foreign currency increases relative to
the dollar, the Portfolio's loss on the foreign currency futures contract may or
may not be offset by an increase in the value of the securities since a decline
in the price of the security stated in terms of the foreign currency may be
greater than the increase in value as a result of the change in exchange rates.
Conversely, each Portfolio could protect against a rise in the dollar cost
of foreign-denominated securities to be acquired by purchasing Futures contracts
on the relevant currency, which could offset, in whole or in part, the increased
cost of such securities resulting from a rise in the dollar value of the
underlying currencies. When a Portfolio purchases futures contracts under such
circumstances, however, and the price of securities to be acquired instead
declines as a result of appreciation of the dollar, the Portfolio will sustain
losses on its futures position which could reduce or eliminate the benefits of
the reduced cost of portfolio securities to be acquired.
OPTIONS ON FUTURES. As noted above, the Portfolios may purchase and write
options on interest rate futures contracts, stock and bond index futures
contracts and foreign currency futures contracts. (Unless otherwise specified,
options on interest rate futures contracts, options on stock and bond index
futures contracts and options on foreign currency futures contracts are
collectively referred to as "Options on Futures.")
The writing of a call option on a Futures contract constitutes a partial
hedge against declining prices of the securities in the portfolio. If the
Futures price at expiration of the option is below the exercise price, the
Portfolio will retain the full amount of the option premium, which provides a
partial hedge against any decline that may have occurred in the portfolio
holdings. The writing of a put option on a Futures contract constitutes a
partial hedge against increasing prices of the securities or other instruments
required to be delivered under the terms of the Futures contract. If the
Futures price at expiration of the put option is higher than the exercise price,
a Portfolio will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which the
Portfolio intends to purchase. If a put or call option a Portfolio has written
is exercised, the Portfolio will incur a loss which will be reduced by the
amount of the
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premium it receives. Depending on the degree of correlation between changes in
the value of its portfolio securities and changes in the value of its Options on
Futures positions, a Portfolio's losses from exercised Options on Futures may to
some extent be reduced or increased by changes in the value of portfolio
securities.
A Portfolio may purchase Options on Futures for hedging purposes, instead
of purchasing or selling the underlying Futures contract. For example, where a
decrease in the value of portfolio securities is anticipated as a result of a
projected market-wide decline or changes in interest or exchange rates, a
Portfolio could, in lieu of selling a Futures contract, purchase put options
thereon. In the event that such decrease occurs, it may be offset, in whole or
part, by a profit on the option. If the market decline does not occur, the
Portfolio will suffer a loss equal to the price of the put. Where it is
projected that the value of securities to be acquired by a Portfolio will
increase prior to acquisition, due to a market advance or changes in interest or
exchange rates, a Portfolio could purchase call Options on Futures, rather than
purchasing the underlying Futures contract. If the market advances, the
increased cost of securities to be purchased may be offset by a profit on the
call. However, if the market declines, the Portfolio will suffer a loss equal
to the price of the call but the securities which the Portfolio intends to
purchase may be less expensive.
FORWARD CONTRACTS
A Forward Contract involves bilateral obligations of one party to purchase,
and another party to sell, a specific currency at a future date (which may be
any fixed number of days from the date of the contract agreed upon by the
parties), at a price set at the time the contract is entered into. These
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. No price is paid
or received upon the purchase or sale of a Forward Contract.
A Portfolio may use Forward Contracts to protect against uncertainty in the
level of future exchange rates. The use of Forward Contracts does not eliminate
fluctuations in the prices of the underlying securities a Portfolio owns or
intends to acquire, but it does fix a rate of exchange in advance. In addition,
although Forward Contracts limit the risk of loss due to a decline in the value
of the hedged currencies, at the same time they limit any potential gain that
might result should the value of the currencies increase.
A Portfolio may enter into Forward Contracts with respect to specific
transactions. For example, when a Portfolio enters into a contract for the
purchase or sale of a security denominated in (or affected by fluctuations
in, in the case of ADRs) a foreign currency, or when a Portfolio anticipates
receipt of dividend payments in a foreign currency, the Portfolio may desire
to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the purchase or sale
of the amount of foreign currency involved in the underlying transaction. A
Portfolio will thereby be able to protect itself against a possible loss
resulting from an adverse change in the relationship
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between the currency exchange rates during the period between the date on which
the security is purchased or sold, or on which the payment is declared, and the
date on which such payments are made or received.
A Portfolio may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when a Portfolio believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a Forward
Contract to sell an amount of that foreign currency approximating the value
of some or all of the portfolio securities denominated in (or affected by
fluctuations in, in the case of ADRs) such foreign currency, or when a
Portfolio believes that the U.S. dollar may suffer a substantial decline
against a foreign currency, it may enter into a Forward Contract to buy that
foreign currency for a fixed dollar amount. In this situation a Portfolio
may, in the alternative, enter into a Forward Contract to sell a different
foreign currency for a fixed U.S. dollar amount where the Portfolio believes
that the U.S. dollar value of the currency to be sold pursuant to the forward
contract will fall whenever there is a decline in the U.S. dollar value of
the currency in which portfolio securities of the Portfolio are denominated
("cross-hedged"). A Portfolio may also hedge investments denominated in a
foreign currency by entering into forward currency contracts with respect to
a foreign currency that is expected to correlate to the currency in which the
investments are denominated ("proxy hedging").
The Portfolios will cover outstanding forward currency contracts by
maintaining liquid portfolio securities denominated in the currency underlying
the forward contract or the currency being hedged. To the extent that a
Portfolio is not able to cover its forward currency positions with underlying
portfolio securities, the Trust's custodian will place cash or liquid securities
in a separate account of the Portfolio having a value equal to the aggregate
amount of the Portfolio's commitments under Forward Contracts entered into with
respect to position hedges and cross-hedges. If the value of the securities
placed in a separate account declines, additional cash or securities will be
placed in the account on a daily basis so that the value of the account will
equal the amount of the Portfolio's commitments with respect to such contracts.
As an alternative to maintaining all or part of the separate account, a
Portfolio may purchase a call option permitting the Portfolio to purchase the
amount of foreign currency being hedged by a forward sale contract at a price no
higher than the Forward Contract price or the Portfolio may purchase a put
option permitting the Portfolio to sell the amount of foreign currency subject
to a forward purchase contract at a price as high or higher than the Forward
Contract price. Unanticipated changes in currency prices may result in poorer
overall performance for a Portfolio than if it had not entered into such
contracts.
The precise matching of the Forward Contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the Forward Contract
is entered into and the date it is sold. Accordingly, it may be necessary for a
Portfolio to purchase additional foreign currency on the spot (I.E., cash)
market (and bear the expense of such purchase), if the market value of the
security is less than the amount of foreign currency a Portfolio is obligated to
deliver and if a decision is made to sell the security
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and make delivery of the foreign currency. Conversely, it may be necessary to
sell on the spot market some of the foreign currency received upon the sale of
the portfolio security if its market value exceeds the amount of foreign
currency a Portfolio is obligated to deliver. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain. Forward Contracts involve
the risk that anticipated currency movements will not be accurately predicted,
causing a Portfolio to sustain losses on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring a Portfolio to
sell a currency, the Portfolio may either sell a portfolio security and use the
sale proceeds to make delivery of the currency or retain the security and offset
its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Portfolio will obtain, on the same maturity date,
the same amount of the currency that it is obligated to deliver. Similarly, a
Portfolio may close out a Forward Contract requiring it to purchase a specified
currency by entering into a second contract entitling it to sell the same amount
of the same currency on the maturity date of the first contract. A Portfolio
would realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate or
rates between the currencies involved moved between the execution dates of the
first contract and offsetting contract.
The cost to a Portfolio of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because Forward Contracts are usually
entered into on a principal basis, no fees or commissions are involved. Because
such contracts are not traded on an exchange, a Portfolio must evaluate the
credit and performance risk of each particular counterparty under a Forward
Contract.
Although a Portfolio values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. A Portfolio may convert foreign currency from time to time,
and investors should be aware of the costs of currency conversion. Foreign
exchange dealers do not charge a fee for conversion, but they do seek to realize
a profit based on the difference between the prices at which they buy and sell
various currencies. Thus, a dealer may offer to sell a foreign currency to a
Portfolio at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer.
ADDITIONAL INFORMATION ABOUT HEDGING INSTRUMENTS AND THEIR USE
The Trust's custodian, or a securities depository acting for the custodian,
will act as the Portfolio's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the securities on which the Portfolio has
written options or as to other acceptable escrow securities, so that no margin
will be required for such transaction. OCC will release the securities on the
expiration of the option or upon a Portfolio's entering into a closing
transaction.
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An option position may be closed out only on a market which provides
secondary trading for options of the same series and there is no assurance that
a liquid secondary market will exist for any particular option. A Portfolio's
option activities may affect its turnover rate and brokerage commissions. The
exercise by a Portfolio of puts on securities will cause the sale of related
investments, increasing portfolio turnover. Although such exercise is within a
Portfolio's control, holding a put might cause the Portfolio to sell the related
investments for reasons which would not exist in the absence of the put. A
Portfolio will pay a brokerage commission each time it buys a put or call, sells
a call, or buys or sells an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher than those which
would apply to direct purchases or sales of such underlying investments.
Premiums paid for options are small in relation to the market value of the
related investments, and consequently, put and call options offer large amounts
of leverage. The leverage offered by trading in options could result in a
Portfolio's net asset value being more sensitive to changes in the value of the
underlying investments.
In the future, each Portfolio may employ Hedging Instruments and strategies
that are not presently contemplated but which may be developed, to the extent
such investment methods are consistent with a Portfolio's investment objectives,
legally permissible and adequately disclosed.
REGULATORY ASPECTS OF HEDGING INSTRUMENTS
Each Portfolio must operate within certain restrictions as to its long and
short positions in Futures and options thereon under a rule (the "CFTC Rule")
adopted by the Commodity Futures Trading Commission (the "CFTC") under the
Commodity Exchange Act (the "CEA"), which excludes the Portfolio from
registration with the CFTC as a "commodity pool operator" (as defined in the
CEA) if it complies with the CFTC Rule. In particular, the Portfolio may (i)
purchase and sell Futures and options thereon for bona fide hedging purposes, as
defined under CFTC regulations, without regard to the percentage of the
Portfolio's assets committed to margin and option premiums, and (ii) enter into
non-hedging transactions, provided that the Portfolio may not enter into such
non-hedging transactions if, immediately thereafter, the sum of the amount of
initial margin deposits on the Portfolio's existing Futures positions and option
premiums would exceed 5% of the fair value of its portfolio, after taking into
account unrealized profits and unrealized losses on any such transactions.
Margin deposits may consist of cash or securities acceptable to the broker and
the relevant contract market.
Transactions in options by a Portfolio are subject to limitations
established by each of the exchanges governing the maximum number of options
which may be written or held by a single investor or group of investors acting
in concert, regardless of whether the options were written or purchased on the
same or different exchanges or are held in one or more accounts or through one
or more exchanges or brokers. Thus, the number of options which a Portfolio may
write or hold may be affected by options written or held by other entities,
including other investment companies having the same or an affiliated investment
adviser. Position limits also apply to Futures. An exchange may order the
liquidation of positions found to be in violation of those limits and may impose
certain
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other sanctions. Due to requirements under the 1940 Act, when a Portfolio
purchases a Future, the Portfolio will maintain, in a segregated account or
accounts with its custodian bank, cash or liquid securities in an amount equal
to the market value of the securities underlying such Future, less the margin
deposit applicable to it.
TAX ASPECTS OF HEDGING INSTRUMENTS
Each Portfolio intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"). One of the tests
for such qualification is that less than 30% of its gross income must be derived
from gains realized on the sale of stock, securities and certain financial
instruments held for less than three months. This limitation may limit the
ability of a Portfolio to engage in options transactions and, in general, to
hedge investment risk or close out a hedge position.
POSSIBLE RISK FACTORS IN HEDGING
In addition to the risks discussed in the Prospectus and above, there is a
risk in using short hedging by selling Futures to attempt to protect against
decline in value of the portfolio securities (due to an increase in interest
rates) that the prices of such Futures will correlate imperfectly with the
behavior of the cash (I.E., market value) prices of the Portfolio's securities.
The ordinary spreads between prices in the cash and Futures markets are subject
to distortions due to differences in the natures of those markets. First, all
participants in the Futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close Futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
Futures markets. Second, the liquidity of the Futures markets depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the Futures markets could be reduced, thus producing distortion. Third, from
the point-of-view of speculators, the deposit requirements in the Futures
markets are less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the Futures markets may
cause temporary price distortions.
If a Portfolio uses Hedging Instruments to establish a position in the debt
securities markets as a temporary substitute for the purchase of individual debt
securities (long hedging) by buying Futures and/or calls on such Futures or on
debt securities, it is possible that the market may decline; if the Manager then
determines not to invest in such securities at that time because of concerns as
to possible further market decline or for other reasons, the Portfolio will
realize a loss on the Hedging Instruments that is not offset by a reduction in
the price of the debt securities purchased.
ILLIQUID AND RESTRICTED SECURITIES. No more than 15% of the value of a
Portfolio's net assets, determined as of the date of purchase, may be invested
in illiquid securities including repurchase agreements which have a maturity of
longer than seven days, interest-rate swaps,
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<PAGE>
currency swaps, caps, floors and collars, or in other securities that are
illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale. Historically, illiquid securities have
included securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Repurchase agreements subject to demand are deemed to have a maturity
equal to the notice period. Securities which have not been registered under the
Securities Act are referred to as private placements or restricted securities
and are purchased directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days. A mutual fund might also have to register such restricted
securities in order to dispose of them, resulting in additional expense and
delay. There will generally be a lapse of time between a mutual fund's decision
to sell an unregistered security and the registration of such security promoting
sale. Adverse market conditions could impede a public offering of such
securities. When purchasing unregistered securities, each of the Portfolios
will seek to obtain the right of registration at the expense of the issuer
(except in the case of Rule 144A securities).
In recent years, a large institutional market has developed for certain
securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act for which there is a readily available market may be deemed to be
liquid. The Manager will monitor the liquidity of such restricted securities
subject to the supervision of the Trustees. In reaching liquidity decisions the
Manager will consider, INTER ALIA, pursuant to guidelines and procedures
established by the Trustees, the following factors: (1) the frequency of trades
and quotes for the security; (2) the number of dealers wishing to purchase or
sell the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer).
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Commercial paper issues in which a Portfolio's net assets may be invested
include securities issued by major corporations without registration under the
Securities Act in reliance on the exemption from such registration afforded by
Section 3(a)(3) thereof, and commercial paper issued in reliance on the
so-called private placement exemption from registration which is afforded by
Section 4(2) of the Securities Act ("Section 4(2) paper"). Section 4(2) paper
is restricted as to disposition under the federal securities laws in that any
resale must similarly be made in an exempt transaction. Section 4(2) paper is
normally resold to other institutional investors through or with the assistance
of investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Section 4(2) paper that is issued by a company that files reports
under the Securities Exchange Act of 1934 is generally eligible to be sold in
reliance on the safe harbor of Rule 144A described above. A Portfolio's 15%
limitation on investments in illiquid securities includes Section 4(2) paper
other than Section 4(2) paper that the Manager has determined to be liquid
pursuant to guidelines established by the Trustees. The Trustees delegated to
the Manager the function of making day-to-day determinations of liquidity with
respect to Section 4(2) paper, pursuant to guidelines approved by the Trustees
that require the Manager to take into account the same factors described above
for other restricted securities and require the Manager to perform the same
monitoring and reporting functions.
HYBRID INSTRUMENTS; INDEXED/STRUCTURED SECURITIES. Hybrid Instruments,
including indexed or structured securities, have been developed and combine the
elements of futures contracts or options with those of debt, preferred equity or
a depository instrument (hereinafter "Hybrid Instruments"). Generally, a Hybrid
Instrument will be a debt security, preferred stock, depository share, trust
certificate, certificate of deposit or other evidence of indebtedness on which a
portion of or all interest payments, and/or the principal or stated amount
payable at maturity, redemption or retirement, is determined by reference to
prices, changes in prices, or differences between prices, of securities,
currencies, intangibles, goods, articles or commodities (collectively
"Underlying Assets") or by another objective index, economic factor or other
measure, such as interest rates, currency exchange rates, commodity indices, and
securities indices (collectively "Benchmarks"). Thus, Hybrid Instruments may
take a variety of forms, including, but not limited to, debt instruments with
interest or principal payments or redemption terms determined by reference to
the value of a currency or commodity or securities index at a future point in
time, preferred stock with dividend rates determined by reference to the value
of a currency, or convertible securities with the conversion terms related to a
particular commodity.
Hybrid Instruments can be an efficient means of creating exposure to a
particular market, or segment of a market, with the objective of enhancing total
return. For example, a Portfolio may wish to take advantage of expected
declines in interest rates in several European countries, but avoid the
transactions costs associated with buying and currency-hedging the foreign bond
positions. One solution would be to purchase a U.S. dollar-denominated Hybrid
Instrument whose redemption price is linked to the average three year
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interest rate in a designated group of countries. The redemption price formula
would provide for payoffs of greater than par if the average interest rate was
lower than a specified level, and payoffs of less than par if rates were above
the specified level. Furthermore, the Portfolio could limit the downside risk
of the security by establishing a minimum redemption price so that the principal
paid at maturity could not be below a predetermined minimum level if interest
rates were to rise significantly. The purpose of this arrangement, known as a
structured security with an embedded put option, would be to give the Portfolio
the desired European bond exposure while avoiding currency risk, limiting
downside market risk, and lowering transactions costs. Of course, there is no
guarantee that the strategy will be successful and the Portfolio could lose
money if, for example, interest rates do not move as anticipated or credit
problems develop with the issuer of the Hybrid.
The risks of investing in Hybrid Instruments reflect a combination of the
risks of investing in securities, options, futures and currencies. Thus, an
investment in a Hybrid Instrument may entail significant risks that are not
associated with a similar investment in a traditional debt instrument that has a
fixed principal amount, is denominated in U.S. dollars or bears interest either
at a fixed rate or a floating rate determined by reference to a common,
nationally published Benchmark. The risks of a particular Hybrid Instrument
will, of course, depend upon the terms of the instrument, but may include,
without limitation, the possibility of significant changes in the Benchmarks or
the prices of Underlying Assets to which the instrument is linked. Such risks
generally depend upon factors which are unrelated to the operations or credit
quality of the issuer of the Hybrid Instrument and which may not be readily
foreseen by the purchaser, such as economic and political events, the supply and
demand for the Underlying Assets and interest rate movements. In recent years,
various Benchmarks and prices for Underlying Assets have been highly volatile,
and such volatility may be expected in the future. Reference is also made to
the discussion of futures, options, and forward contracts herein for a
discussion of the risks associated with such investments.
Hybrid Instruments are potentially more volatile and carry greater market
risks than traditional debt instruments. Depending on the structure of the
particular Hybrid Instrument, changes in a Benchmark may be magnified by the
terms of the Hybrid Instrument and have an even more dramatic and substantial
effect upon the value of the Hybrid Instrument. Also, the prices of the Hybrid
Instrument and the Benchmark or Underlying Asset may not move in the same
direction or at the same time.
Hybrid Instruments may bear interest or pay preferred dividends at below
market (or even relatively nominal) rates. Alternatively, Hybrid Instruments
may bear interest at above market rates but bear an increased risk of principal
loss (or gain). The latter scenario may result if "leverage" is used to
structure the Hybrid Instrument. Leverage risk occurs when the Hybrid
Instrument is structured so that a given change in a Benchmark or Underlying
Asset is multiplied to produce a greater value change in the Hybrid Instrument,
thereby magnifying the risk of loss as well as the potential for gain.
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Hybrid Instruments may also carry liquidity risk since the instruments are
often "customized" to meet the portfolio needs of a particular investor, and
therefore, the number of investors that are willing and able to buy such
instruments in the secondary market may be smaller than that for more
traditional debt securities. In addition, because the purchase and sale of
Hybrid Instruments could take place in an over-the-counter market without the
guarantee of a central clearing organization or in a transaction between the
Portfolio and the issuer of the Hybrid Instrument, the creditworthiness of the
counter party or issuer of the Hybrid Instrument would be an additional risk
factor which the Portfolio would have to consider and monitor. Hybrid
Instruments also may not be subject to regulation of the CFTC, which generally
regulates the trading of commodity futures by U.S. persons, the Securities and
Exchange Commission (the "SEC"), which regulates the offer and sale of
securities by and to U.S. persons, or any other governmental regulatory
authority.
The various risks discussed above, particularly the market risk of such
instruments, may in turn cause significant fluctuations in the net asset value
of the Portfolio. Accordingly, each Portfolio will limit its investments in
Hybrid Instruments to 10% of total assets at the time of purchase. However,
because of their volatility, it is possible that a Portfolio's investment in
Hybrid Instruments will account for more than 10% of the Portfolio's return
(positive or negative).
When-Issued Securities and Firm Commitment Agreement. A Portfolio may
purchase or sell securities on a "when-issued" or "delayed delivery" basis and
may purchase securities on a firm commitment basis. Although a Portfolio will
enter into such transactions for the purpose of acquiring securities for its
portfolio or for delivery pursuant to options contracts it has entered into, the
Portfolio may dispose of a commitment prior to settlement. "When-issued" or
"delayed delivery" refers to securities whose terms and indenture are available
and for which a market exists, but which are not available for immediate
delivery. When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made, but
delivery and payment for the securities take place at a later date. During the
period between commitment by a Portfolio and settlement (generally within two
months but not to exceed 120 days), no payment is made for the securities
purchased by the purchaser, and no interest accrues to the purchaser from the
transaction. Such securities are subject to market fluctuation, and the value
at delivery may be less than the purchase price. A Portfolio will maintain a
segregated account with its custodian, consisting of cash or liquid securities
at least equal to the value of purchase commitments until payment is made. A
Portfolio will likewise segregate liquid assets in respect of securities sold on
a delayed delivery basis.
A Portfolio will engage in when-issued transactions in order to secure what
is considered to be an advantageous price and yield at the time of entering into
the obligation. When a Portfolio engages in when-issued or delayed delivery
transactions, it relies on the buyer or seller, as the case may be, to
consummate the transaction. Failure to do so may result
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in a Portfolio losing the opportunity to obtain a price and yield considered to
be advantageous. If a Portfolio chooses to (i) dispose of the right to acquire
a when-issued security prior to its acquisition or (ii) dispose of its right to
deliver or receive against a firm commitment, it may incur a gain or loss. (At
the time a Portfolio makes a commitment to purchase or sell a security on a
when-issued or firm commitment basis, it records the transaction and reflects
the value of the security purchased, or if a sale, the proceeds to be received
in determining its net asset value.)
To the extent a Portfolio engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling securities
consistent with its investment objectives and policies and not for the purposes
of investment leverage. A Portfolio enters into such transactions only with the
intention of actually receiving or delivering the securities, although (as noted
above) when-issued securities and firm commitments may be sold prior to the
settlement date. In addition, changes in interest rates in a direction other
than that expected by the Manager before settlement of a purchase will affect
the value of such securities and may cause a loss to a Portfolio.
When-issued transactions and firm commitments may be used to offset
anticipated changes in interest rates and prices. For instance, in periods of
rising interest rates and falling prices, a Portfolio might sell securities in
its portfolio on a forward commitment basis to attempt to limit its exposure to
anticipated falling prices. In periods of falling interest rates and rising
prices, a Portfolio might sell portfolio securities and purchase the same or
similar securities on a when-issued or forward commitment basis, thereby
obtaining the benefit of currently higher cash yields.
LOANS OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, each Portfolio may lend portfolio securities in amounts up to
33 1/3% of total assets to brokers, dealers and other financial institutions,
provided, that such loans are callable at any time by the Portfolio and are at
all times secured by cash or equivalent collateral . In lending its portfolio
securities, a Portfolio receives income while retaining the securities'
potential for capital appreciation. The advantage of such loans is that a
Portfolio continues to receive the interest and dividends on the loaned
securities while at the same time earning interest on the collateral, which will
be invested in short-term obligations. A loan may be terminated by the borrower
on one business day's notice or by a Portfolio at any time. If the borrower
fails to maintain the requisite amount of collateral, the loan automatically
terminates, and the Portfolio could use the collateral to replace the securities
while holding the borrower liable for any excess of replacement cost over
collateral. As with any extensions of credit, there are risks of delay in
recovery and in some cases even loss of rights in the collateral should the
borrower of the securities fail financially. However, these loans of portfolio
securities will only be made to firms deemed by the Manager to be creditworthy.
On termination of the loan, the borrower is required to return the securities to
a component; and any gain or loss in the market price of the loaned security
during the loan would inure to the Portfolio. Each Portfolio will pay
reasonable finders', administrative and custodial fees in connection with a loan
of its
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securities or may share the interest earned on collateral with the borrower.
Loans of portfolio securities will only be made to firms deemed by the Manager
to be creditworthy.
Since voting or consent rights which accompany loaned securities pass to
the borrower, each Portfolio will follow the policy of calling the loan, in
whole or in part as may be appropriate, to permit the exercise of such rights if
the matters involved would have a material effect on the Portfolio's investment
in the securities which are the subject of the loan.
REVERSE REPURCHASE AGREEMENTS. A Portfolio may enter into reverse
repurchase agreements with brokers, dealers, domestic and foreign banks or other
financial institutions that have been determined by the Manager to be
creditworthy. In a reverse repurchase agreement, the Portfolio sells a security
and agrees to repurchase it at a mutually agreed upon date and price, reflecting
the interest rate effective for the term of the agreement. It may also be
viewed as the borrowing of money by the Portfolio. The Portfolio's investment
of the proceeds of a reverse repurchase agreement is the speculative factor
known as leverage. A Portfolio will enter into a reverse repurchase agreement
only if the interest income from investment of the proceeds is expected to be
greater than the interest expense of the transaction and the proceeds are
invested for a period no longer than the term of the agreement. The Portfolio
will maintain with the Custodian a separate account with a segregated portfolio
of cash or liquid securities in an amount at least equal to its purchase
obligations under these agreements (including accrued interest). In the event
that the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, the buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Portfolio's
repurchase obligation, and the Portfolio's use of proceeds of the agreement may
effectively be restricted pending such decision. Reverse repurchase agreements
are considered to be borrowings and are subject to the percentage limitations on
borrowings. See "Investment Restrictions."
DOLLAR ROLLS. Each Portfolio may enter into "dollar rolls" in which the
Portfolio sells mortgage or other asset-backed securities ("Roll Securities")
for delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type, coupon and maturity) securities on a specified
future date. During the roll period, the Portfolio foregoes principal and
interest paid on the Roll Securities. The Portfolio is compensated by the
difference between the current sales price and the lower 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. The Portfolio also could be
compensated through the receipt of fee income equivalent to a lower forward
price. A "covered roll" is a specific type of dollar roll for which there is an
offsetting cash position or a cash equivalent security position which matures on
or before the forward settlement date of the dollar roll transaction. A
Portfolio will only enter into covered rolls. Because "roll" transactions
involve both the sale and purchase of a security, they may cause the reported
portfolio turnover rate to be higher than that reflecting typical portfolio
management activities.
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<PAGE>
Dollar rolls involve certain risks including the following: if the
broker-dealer to whom the Portfolio sells the security becomes insolvent, the
Portfolio's right to purchase or repurchase the security subject to the dollar
roll may be restricted and the instrument which the Portfolio is required to
repurchase may be worth less than an instrument which the Portfolio originally
held. Successful use of dollar rolls will depend upon the Manager's ability to
predict correctly interest rates and in the case of mortgage dollar rolls,
mortgage prepayments. For these reasons, there is no assurance that dollar
rolls can be successfully employed.
STANDBY COMMITMENTS -- Standby commitments are put options that entitle
holders to same day settlement at an exercise price equal to the amortized cost
of the underlying security plus accrued interest, if any, at the time of
exercise. A Portfolio may acquire standby commitments to enhance the liquidity
of portfolio securities, but only when the issuers of the commitments present
minimal risk of default. Ordinarily, the Portfolio may not transfer a standby
commitment to a third party, although it could sell the underlying municipal
security to a third party at any time. A Portfolio may purchase standby
commitments separate from or in conjunction with the purchase of securities
subject to such commitments. In the latter case, the Portfolio would pay a
higher price for the securities acquired, thus reducing their yield to maturity.
Standby commitments will not affect the dollar-weighted average maturity of the
Portfolio, or the valuation of the securities underlying the commitments.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. The Manager
may rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. Standby commitments are
subject to certain risks, including the ability of issuers of standby
commitments to pay for securities at the time the commitments are exercised; the
fact that standby commitments are not marketable by the Portfolios; and the
possibility that the maturities of the underlying securities may be different
from those of the commitments.
INTEREST-RATE SWAPS, MORTGAGE SWAPS, CAPS, COLLARS AND FLOORS. In order to
protect the value of the Portfolio from interest rate fluctuations and to hedge
against fluctuations in the fixed income market in which certain of the
Portfolio's investments are traded, each Portfolio may enter into interest-rate
swaps and mortgage swaps or purchase or sell interest-rate caps, floors or
collars. The Portfolio will enter into these hedging transactions primarily to
preserve a return or spread on a particular investment or portion of the
portfolio and to protect against any increase in the price of securities the
Portfolio anticipates purchasing at a later date. The Portfolio may also enter
into interest-rate swaps for non-hedging purposes. Interest-rate swaps are
individually negotiated, and the Portfolio expects to achieve an acceptable
degree of correlation between its portfolio investments and interest-rate
positions. A Portfolio will only enter into interest-rate swaps on a net basis,
which means that the two payment streams are netted out, with the Portfolio
receiving or paying, as the case may be, only the net amount of the two
payments. Interest-rate swaps do not involve the delivery of securities, other
underlying assets or principal. Accordingly, the risk of loss with respect to
B-29
<PAGE>
interest-rate swaps is limited to the net amount of interest payments that the
Portfolio is contractually obligated to make. If the other party to an
interest-rate swap defaults, the Portfolio's risk of loss consists of the net
amount of interest payments that the Portfolio is contractually entitled to
receive. The use of interest-rate swaps is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. All of these investments may be
deemed to be illiquid for purposes of the Portfolio's limitation on investment
in such securities. Inasmuch as these investments are entered into for good
faith hedging purposes, and inasmuch as segregated accounts will be established
with respect to such transactions, the Adviser believes such obligations do not
constitute senior securities and accordingly, will not treat them as being
subject to its borrowing restrictions. The net amount of the excess, if any, of
the Portfolio's obligations over its entitlements with respect to each
interest-rate swap will be accrued on a daily basis and an amount of cash or
liquid securities having an aggregate net asset value at least equal to the
accrued excess will be maintained in a segregated account by a custodian that
satisfies the requirements of the 1940 Act. The Portfolio will also establish
and maintain such segregated accounts with respect to its total obligations
under any interest-rate swaps that are not entered into on a net basis and with
respect to any interest-rate caps, collars and floors that are written by the
Portfolio.
A Portfolio will enter into these transactions only with banks and
recognized securities dealers believed by the Manager to present minimal credit
risk in accordance with guidelines established by the Board of Trustees. If
there is a default by the other party to such a transaction, the Portfolio will
have to rely on its contractual remedies (which may be limited by bankruptcy,
insolvency or similar laws) pursuant to the agreements related to the
transaction.
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Caps, collars and floors are more
recent innovations for which documentation is less standardized, and
accordingly, they are less liquid than swaps.
Mortgage swaps are similar to interest-rate swaps in that they represent
commitments to pay and receive interest. The notional principal amount, upon
which the value of the interest payments is based, is tied to reference pool or
pools of mortgages.
The purchase of an interest-rate cap entitles the purchaser, to the extent
that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a notional principal amount from the party selling such
interest-rate cap. The purchase of an interest-rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a notional principal amount
from the party selling such interest-rate floor.
B-30
<PAGE>
PORTFOLIO TRADING. A Portfolio may engage in portfolio trading when it is
believed by the Manager that the sale of a security owned and the purchase of
another security of better value can enhance principal and/or increase income.
A security may be sold to avoid any prospective decline in market value in light
of what is evaluated as an expected rise in prevailing yields, or a security may
be purchased in anticipation of a market rise (a decline in prevailing yields).
A security also may be sold and a comparable security purchased coincidentally
in order to take advantage of what is believed to be a disparity in the normal
yield and price relationship between the two securities.
DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS
COMMERCIAL PAPER RATINGS. Moody's employs the designations "Prime-1,"
"Prime-2" and "Prime-3" to indicate commercial paper having the highest capacity
for timely repayment. Issuers rated Prime-1 have a superior capacity for
repayment of short-term promissory obligations. Prime-1 repayment capacity will
normally be evidenced by the following characteristics: leading market positions
in well-established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on debt and ample
asset protection; broad margins in earnings coverage of fixed financial charges
and high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternate liquidity. Issues rated
Prime-2 have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
Issuers rated Prime-3 have an acceptable capacity for repayment of
short-term promissory obligations. The effect of industry characteristics and
market composition may be more pronounced. Variability in earning and
profitability may result in changes in level of debt protection measurements and
the requirement for relatively high financial leverage. Adequate alternate
liquidity is maintained.
Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.
If an issuer represents to Moody's that its commercial paper obligations
are supported by the credit of another entity or entities, then the name or
names of such supporting entity or entities are listed within parentheses
beneath the name of the issuer, or there is a footnote referring the reader to
another page for the name or names of the supporting entity or entities. In
assigning ratings to such issuers, Moody's evaluates the financial strength of
the indicated affiliated corporations, commercial banks, insurance companies,
foreign governments or other entities, but only as one factor in the total
rating assessment. Moody's makes no representation and gives no opinion on the
B-31
<PAGE>
legal validity or enforceability of any support arrangement. You are cautioned
to review with your counsel any questions regarding particular support
arrangements.
Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative type risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6) trend of
earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8)
recognition by management of obligations which may be present or may arise as
a result of public interest questions and preparations to meet such
obligations.
Standard and Poor's ratings of commercial paper are graded into four
categories ranging from A for the highest quality obligations to D for the
lowest. A - Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with numbers 1, 2, and 3 to indicate the relative degree of safety. A-1 -
This designation indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics will be denoted with a plus (+) sign
designation. A-2 - Capacity for timely payments on issues with this designation
is strong. However, the relative degree of safety is not as high as for issues
designated A-1. B - Issues in this category are regarded as having only
adequate capacity for timely payment. However, such capacity may be damaged by
changing conditions or short-term adversities. C - This rating is assigned to
short-term debt obligations with a doubtful capacity for payment. D - The
rating indicates that the issues are either in default or are expected to be in
default upon maturity.
Duff & Phelps, Inc. ("Duff & Phelps") commercial paper ratings are
consistent with the short-term rating criteria utilized by money market
participants. Duff & Phelps commercial paper ratings refine the traditional 1
category. The majority of commercial issuers carry the higher short-term rating
yet significant quality differences within that tier do exist. As a
consequence, Duff & Phelps has incorporated gradations of 1+ and 1- to assist
investors in recognizing those differences.
Duff 1+ - Highest certainty of time repayment. Short-term liquidity,
including internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations. Duff 1 - Very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor. Duff 1- - High certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small. Duff 2 - Good certainty of timely
payment. Liquidity factors and company fundamentals are sound. Although
ongoing funding needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small. Duff 3 - Satisfactory
liquidity and other protection factors, qualify issue as investment grade. Risk
factors are larger and subject to more variation. Nevertheless, timely payment
is expected. Duff 4 - Speculative investment characteristics. Liquidity is
not sufficient
B-32
<PAGE>
to insure against disruption in debt service. Operating factors and market
access may be subject to a high degree of variation. Duff 5 - Default.
The short-term ratings of Fitch Investor Services, Inc. ("Fitch") apply to
debt obligations that are payable on demand or have original maturities of
generally up to three years, including commercial paper, certificates of
deposit, medium-term notes, and municipal and investment notes. The short-term
rating places greater emphasis than a long-term rating on the existence of
liquidity necessary to meet the issuer's obligations in a timely manner. Fitch
short-term ratings are as follows: F-1+ Exceptionally Strong Credit Quality -
Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment. F-1 Very Strong Credit Quality - Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+. F-2 Good Credit Quality - Issues assigned this rating
have a satisfactory degree of assurance for timely payment, but the margin of
safety is not as good as it is for issues assigned F-1+ and F-1 ratings. F-3
Fair Credit Quality - Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could cause these securities to be rated below
investment grade. F-5 Weak Credit Quality - Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for timely payment and
are vulnerable to near-term adverse changes in financial and economic
conditions. D Default - Issues assigned this rating are in actual or imminent
payment default. LOC - The symbol LOC indicates that the rating is based on a
letter of credit issued by a commercial bank.
Thomson BankWatch, Inc. ("BankWatch") short-term ratings apply only to
unsecured instruments that have a maturity of one year or less. These
short-term ratings specifically assess the likelihood of an untimely payment of
principal and interest. TBW-1 is the highest category, which indicates a very
high degree of likelihood that principal and interest will be paid on a timely
basis. TBW-2 is the second highest category and, while the degree of safety
regarding timely repayment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated TBW-1.
CORPORATE DEBT SECURITIES. Moody's rates the long-term debt securities
issued by various entities from "Aaa" to "C." Aaa - Best quality. These
securities carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a larger, or by
an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
more unlikely to impair the fundamentally strong position of these issues. Aa -
High quality by all standards. They are rated lower than the best bond because
margins of protection may not be as large as in Aaa securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat greater. A - Upper medium
grade obligations. These bonds possess many favorable investment attributes.
Factors giving security to principal and interest are considered adequate, but
elements may be present that suggest a susceptibility to impairment sometime in
the future. Baa - Medium grade obligations. Interest payments and principal
security appear adequate for the present but certain protective elements may
B-33
<PAGE>
be lacking or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well. Ba - Have speculative elements; future
cannot be considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Bonds in this class are characterized by
uncertainty of position. B - Generally lack characteristics of the desirable
investment assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small. Caa -
Of poor standing. Issues may be in default or there may be present elements of
danger with respect to principal or interest. Ca - Speculative in a high
degree; often in default or have other marked shortcomings. C - Lowest rated
class of bonds; can be regarded as having extremely poor prospects of ever
attaining any real investment standings.
Moody's may apply numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of the generic rating
category.
Standard & Poor's rates the long-term securities debt of various entities
in categories ranging from "AAA" to "D" according to quality. AAA - Highest
rating. Capacity to pay interest and repay principal is extremely strong. AA
- - High grade. Very strong capacity to pay interest and repay principal.
Generally, these bonds differ from AAA issues only in a small degree. A -
Have a strong capacity to pay interest and repay principal, although they are
somewhat more susceptible to the adverse effects of change in circumstances and
economic conditions than debt in higher rated categories. BBB - Regarded as
having adequate capacity to pay interest and repay principal. These bonds
normally exhibit adequate protection parameters, but adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal than for debt in higher rated categories. BB, B,
CCC, CC, C - Regarded, on balance, as predominately speculative with respect
to capacity to pay interest and repay principal in accordance with the terms of
the obligation. BB indicated the lowest degree of speculation and C the highest
degree of speculation. While this debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions. C1 - Reserved for income bonds on which
no interest is being paid. D - In default and payment of interest and/or
repayment of principal is in arrears.
Plus (+) or minus (-): The ratings of AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within these ratings
categories.
BankWatch rates the long-term debt securities issued by various entities
either AAA or AA. AAA is the highest category, which indicates the ability to
repay principal and interest on a timely basis is very high. AA is the second
highest category, which indicates a superior ability to repay principal and
interest on a timely basis with limited incremental risk versus issues rated in
the
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<PAGE>
highest category. Ratings in the long-term debt categories may include a plus
(+) or minus (-) designation which indicates where within the respective
category the issue is placed.
PORTFOLIO TURNOVER
The portfolio turnover rate is calculated for each Portfolio by dividing
(a) the lesser of purchases or sales of portfolio securities for the fiscal year
by (b) the monthly average of the value of portfolio securities owned during the
fiscal year. For purposes of this calculation, securities which at the time of
purchase had a remaining maturity of one year or less are excluded from the
numerator and the denominator. Transactions in Futures or the exercise of calls
written by a Portfolio may cause the Portfolio to sell portfolio securities,
thus increasing its turnover rate. The exercise of puts also may cause a sale
of securities and increase turnover; although such exercise is within a
Portfolio's control, holding a protective put might cause the Portfolio to sell
the underlying securities for reasons which would not exist in the absence of
the put. A Portfolio will pay a brokerage commission each time it buys of sells
a security in connection with the exercise of a put or call. Some commissions
may be higher than those which would apply to direct purchases or sales of
portfolio securities.
The quarterly rebalancing of the Portfolios as described in the
Prospectus may also result in relatively higher portfolio turnover. Because
each particular component (each, a "Managed Component" or "component") of
the portfolio of each Multi-Managed Portfolio will be managed independently
of each other, it is possible that the same security may be purchased and
sold on the same day by two separate Managed Components of the same
Multi-Managed Portfolio, resulting in higher brokerage commissions for the
Portfolio.
High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs which will be borne directly by a
Portfolio. High portfolio turnover may also involve a possible increase in
short-term capital gains or losses.
INVESTMENT RESTRICTIONS
The Trust has adopted for each Portfolio certain investment restrictions
that are fundamental policies and cannot be changed without the approval of the
holders of a majority of that Portfolio's outstanding shares. Such majority is
defined as the vote of the lesser of (i) 67% or more of the outstanding shares
present at a meeting, if the holders of more than 50% of the outstanding shares
are present in person or by proxy or (ii) more than 50% of the outstanding
shares. All percentage limitations expressed in the following investment
restrictions are measured immediately after the relevant transaction is made.
Each Portfolio may not:
1. With respect to the Asset Allocation: Diversified Growth Portfolio and
the Stock Portfolio, invest more than 5% of the value of its total assets in the
securities of any one issuer,
B-35
<PAGE>
provided that this limitation shall apply only to 75% of the value of each such
Portfolio's total assets and, provided further, that the limitation shall not
apply to obligations issued or guaranteed by the government of the United States
or of any of its agencies or instrumentalities.
2. With respect to the Asset Allocation: Diversified Growth Portfolio and
the Stock Portfolio, as to 75% of its total assets, purchase more than 10% of
the outstanding voting securities of any one issuer.
3. Invest more than 25% of the Portfolio's total assets in the securities
of issuers in the same industry. (Industry shall be determined for this purpose
by reference to Standard Industrial Classification codes.) Obligations of the
U.S. government, its agencies and instrumentalities are not subject to this 25%
limitation on industry concentration.
4. Invest in real estate (including limited partnership interests but
excluding securities of companies, such as real estate investment trusts, which
deal in real estate or interests therein); provided that a Portfolio may hold or
sell real estate acquired as a result of the ownership of securities.
5. Purchase or sell commodities or commodity contracts, except to the
extent that the Portfolio may do so in accordance with applicable law and the
Portfolio's Prospectus and Statement of Additional Information, as they may be
amended from time to time, and without registering as a commodity pool operator
under the Commodity Exchange Act. Any Portfolio may engage in transactions in
put and call options on securities, indices and currencies, spread transactions,
forward and futures contracts on securities, indices and currencies, put and
call options on such futures contracts, forward commitment transactions, forward
foreign currency exchange contracts, interest rate, mortgage and currency swaps
and interest rate floors and caps and may purchase hybrid instruments.
6. Make loans to others except for (a) the purchase of debt securities;
(b) entering into repurchase agreements; and (c) the lending of its portfolio
securities.
7. Borrow money, except that (i) each Portfolio may borrow from banks in
amounts up to 33 1/3% of its total assets for temporary or emergency purposes,
(ii) each of the Multi-Managed Growth and Moderate Growth Portfolios, through
its SunAmerica/aggressive growth component, may borrow for investment purposes
to the maximum extent permissible under the 1940 Act (with any percentage
limitation calculated only with respect to the total assets allocated to the
SunAmerica/aggressive growth component of such Multi-Managed Portfolio), and
(iii) a Portfolio may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities. This policy shall
not prohibit a Portfolio's engaging in reverse repurchase agreements, dollar
rolls and similar investment strategies described in the Prospectus and
Statement of Additional Information, as they may be amended from time to time.
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<PAGE>
8. Issue senior securities as defined in the 1940 Act, except that each
Portfolio may enter into repurchase agreements, reverse repurchase agreements,
dollar rolls, lend its portfolio securities and borrow money from banks, as
described above, and engage in similar investment strategies described in the
Prospectus and Statement of Additional Information, as they may be amended from
time to time.
9. Engage in underwriting of securities issued by others, except to the
extent that the Portfolio may be deemed to be an underwriter in connection with
the disposition of portfolio securities of the Portfolio.
The following additional restrictions are not fundamental policies and may
be changed by the Trustees without a vote of shareholders. Each Portfolio may
not:
10. Purchase securities on margin.
11. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and, to the extent related to the
segregation of assets in connection with the writing of covered put and call
options and the purchase of securities or currencies on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to forward contracts, options, futures contracts and
options on futures contracts. In addition, a Portfolio may pledge assets in
reverse repurchase agreements, dollar rolls and similar investment strategies
described in the Prospectus and Statement of Additional Information, as they may
be amended from time to time.
12. Sell securities short, including short sales "against the box" (i.e.,
where a Portfolio contemporaneously owns, or has the right to acquire at no
additional cost, securities identical or substantially similar to those sold
short) if as a result more than 25% of its net assets would be subject to such
short sales.
13. Purchase or sell securities of other investment companies except (i)
to the extent permitted by applicable law and (ii) that Janus may invest
uninvested cash balances of the Janus/growth component of each Multi-Managed
Portfolio in money market mutual funds that it manages to the extent permitted
by applicable law.
14. Enter into any repurchase agreement maturing in more than seven days
or investing in any other illiquid security if, as a result, more than 15% of a
Portfolio's net assets would be so invested. Restricted securities eligible for
resale pursuant to Rule 144A under the Securities Act that have a readily
available market, and commercial paper exempted from registration under the
Securities Act pursuant to Section 4(2) of that Act that may be offered and sold
to "qualified institutional buyers" as defined in Rule 144A, which the Manager
has determined to be liquid pursuant to guidelines established by the Trustees,
will not be considered illiquid for purposes of this 15% limitation on illiquid
securities.
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<PAGE>
TRUST OFFICERS AND TRUSTEES
The trustees and executive officers of the Trust, their ages and their
principal occupations for the past five years are set forth below. Each Trustee
also serves as a trustee of Anchor Pathway Fund and SunAmerica Series Trust.
Unless otherwise noted, the address of each executive officer and trustee is 1
SunAmerica Center, Los Angeles, California 90067-6022.
<TABLE>
<CAPTION>
Name, Age and Position(s) Principal Occupation(s) During Past Five Years
Held with the Trust ----------------------------------------------
-------------------
<S> <C>
RICHARDS D. BARGER, 68, Trustee* Senior Partner, Law Firm of Barger
& Wolen; formerly, Director, Anchor
National Life Insurance Company
("Anchor National") (1980-1986).
NORMAN J. METCALFE, 54, Vice Chairman and Chief Financial
Trustee* Officer, The Irvine Company (March
1993 to Present); Executive Vice
President (1986-1992) and Director
(1984-1993), SunAmerica Inc.; formerly,
President, SunAmerica Investments,
Inc. (1988-1992); (joined
SunAmerica Inc. in 1970); Executive
Vice President and Director, Anchor
National (1986-1992).
ALLAN L. SHER, 65, Director, Board of Governors, American
Trustee Stock Exchange (1991 to present); formerly,
Chairman and Chief Executive Officer,
Bateman Eichler, Hill Richards (securities
firm) (1990-1992).
WILLIAM M. WARDLAW, 50, Partner, Freeman Spogli & Co., Incorporated
Trustee (privately owned merchant banking firm)
(1988-Present).
JAMES K. HUNT, 45, Trustee, Executive Vice President, SunAmerica
Chairman and President* Investments, Inc. (1993 to present); President,
SunAmerica Corporate Finance (since January
1994); Senior Vice President, SunAmerica
Investments Inc. (1990-1993); Trustee, Chairman
and President, Anchor Pathway Fund and
SunAmerica Series Trust.
SCOTT L. ROBINSON, 51, Senior Vice Senior Vice President and Controller,
President, Treasurer and Controller SunAmerica Inc. (since 1991); Senior
Vice President of Anchor National
(since 1988); Vice President and Controller,
SunAmerica Inc. (1986-1991); Senior Vice
President, Treasurer and Controller,
Anchor Pathway Fund and
</TABLE>
B-38
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SunAmerica Series Trust; Joined SunAmerica
Inc. in 1978.
SUSAN L. HARRIS, 39, Senior Vice President (since
Vice President, Counsel and Secretary November 1995), Secretary (since
1995) and General Counsel - Corporate
Affairs (since December 1994),
SunAmerica Inc.; Senior Vice President
and Secretary, Anchor National
(since 1990); Vice President, Counsel
and Secretary, Anchor Pathway Fund
and SunAmerica Series Trust; Joined
SunAmerica Inc. in 1985.
PETER C. SUTTON, 33, Vice President Senior Vice President, SAAMCo, since April
The SunAmerica Center 1997; Treasurer, SunAmerica Mutual Funds,
733 Third Avenue Anchor Series Trust and Style Select Series,
New York, NY 10017-3204 Inc., since 1996; Vice President, SunAmerica
Series Trust and Anchor Pathway Fund, since
1994; Joined SunAmerica Inc. in 1990.
</TABLE>
* A trustee who is an "interested person" within the meaning of the 1940 Act.
The Trust pays no salaries or compensation to any of its officers, all
of whom are officers or employees of the Life Company or its affiliates.
A fee of $500 for each meeting attended and expenses are paid to each
Trustee who is not an officer or employee of Anchor National Life
Insurance Company or its affiliates for attendance at meetings of the
Board of Trustees.
The following table sets forth information summarizing the
compensation of each of the Trustees for his services as Trustee. The
compensation received from the Trust is estimated for the fiscal year
ending March 31, 1998, and the compensation received from other mutual
funds in the same fund complex as the Trust is based on the fiscal year
ended November 30, 1996.
COMPENSATION TABLE
- --------------------------------------------------------------------------------
Total
Pension or Compensation
Retirement from Registrant
Aggregate Benefits Accrued and Fund
Compensation as Part of Fund Complex Paid to
Trustee from Registrant Expenses Trustees*
- --------------------------------------------------------------------------------
Richards D. Barger $1,500 - $22,000
- --------------------------------------------------------------------------------
Norman J. Metcalfe $1,500 $20,250
- --------------------------------------------------------------------------------
Allan L. Sher $1,500 $0
- --------------------------------------------------------------------------------
William M. Wardlaw $1,500 - $0
- --------------------------------------------------------------------------------
* In addition to the Trust, the Trustees served on the boards of two other
funds in the same mutual fund complex as the Trust. Messrs. Sher and Wardlaw
began serving on the boards of the Trust and such other two funds in
March of 1997.
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
The Trust, on behalf of each Portfolio, entered into an Investment Advisory
and Management Agreement with SunAmerica to handle the Trust's day-to-day
affairs.
The Investment Advisory and Management Agreement ("Management Agreement")
provides that it will continue in effect until two years from the date of its
approval by the Board of Trustees, unless terminated, and may be renewed from
year to year as to each Portfolio for so long as such renewal is specifically
approved at least annually by (i) the Board of Trustees, or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
each relevant Portfolio, and (ii) the vote of a majority of Trustees who are
not parties to the Management Agreement or interested persons (as defined in
the 1940 Act) of any such party, cast in person, at a meeting called for the
purpose of voting on such approval. The Management Agreement also provides
that it may be terminated by either party without penalty upon 60 days'
written notice to the other party. The Management Agreement may be
terminated with respect to a Portfolio at any time, without penalty, by the
Trustees or by the holders of a majority of the respective Portfolio's
outstanding voting securities on sixty (60) days written notice to the
Adviser, or by the Adviser upon the approval by the Trust of another
investment advisory agreement or on six months' written notice, whichever is
earlier. The Agreement provides for automatic termination with respect to
each Portfolio in the event of its assignment (as defined in the 1940 Act).
B-39
<PAGE>
As compensation for its services, the Adviser receives from the Trust a
fee, accrued daily and payable monthly, based on the net assets of each
Portfolio at the rates set forth in the Prospectus.
PERSONAL TRADING. The Trust and the Adviser have adopted a written Code of
Ethics (the "Code") which prescribes general rules of conduct and sets forth
guidelines with respect to personal securities trading by "Access Persons"
thereof. An Access Person as defined in the Code is an individual who is a
trustee, director, officer, general partner or advisory person of the Trust or
the Adviser. The guidelines on personal securities trading include: (i)
securities being considered for purchase or sale, or purchased or sold, by any
Investment Company advised by the Adviser, (ii) Initial Public Offerings, (iii)
private placements, (iv) blackout periods, (v) short-term trading profits, (vi)
gifts, and (vii) services as a Trustee. These guidelines are substantially
similar to those contained in the Report of the Advisory Group on Personal
Investing issued by the Investment Company Institute's Advisory Panel. The
Adviser reports to the Board of Trustees on a quarterly
B-40
<PAGE>
basis, as to whether there were any violations of the Code by Access Persons of
the Trust or the Adviser during the quarter.
The Subadvisers have each adopted a written Code of Ethics, and have
represented that the provisions of such Code of Ethics are substantially similar
to those in the Code. Further, the Subadvisers report to the Adviser on a
quarterly basis, as to whether there were any Code of Ethics violations by
employees thereof who may be deemed Access Persons of the Trust. In turn, the
Adviser reports to the Board of Trustees as to whether there were any violations
of the Code by Access Persons of the Trust or the Adviser.
SUBADVISORY AGREEMENTS
Janus Capital Corporation ("Janus"), T. Rowe Price Associates, Inc. ("T.
Rowe Price"), Putnam Investment Management, Inc. ("Putnam") and Wellington
Management Company, LLP ("WMC") act as Subadvisers to certain of the Portfolios
pursuant to various Subadvisory Agreements with SunAmerica. Under the
respective Subadvisory Agreements, T. Rowe Price manages the investment and
reinvestment of the Stock Portfolio, Putnam manages the investment and
reinvestment of the Asset Allocation: Diversified Growth Portfolio, and Janus
and WMC each manage the investment and reinvestment of the component of the
Multi-Managed Portfolios for which they are responsible. Each of the
Subadvisers is independent of SunAmerica and discharges its responsibilities
subject to the policies of the Trustees and the oversight of supervision of
SunAmerica, which pays the Subadvisers' fees.
The Adviser pays each Subadviser a monthly fee.
The Subadvisory Agreements will continue in effect for two years from the
dates thereof, unless terminated, and may be renewed from year to year
thereafter, so long as continuance is specifically approved at least annually
in accordance with the requirements of the 1940 Act. The Subadvisory
Agreements provide that they will terminate in the event of an assignment (as
defined in the 1940 Act) or upon termination of the Management Agreement.
Each Subadvisory Agreement may be terminated at any time, without penalty,
by the Portfolio or the Trust, by the Trustees, by the holders of a majority
of the respective Portfolio's outstanding voting securities, by the Adviser,
on not less than thirty (30) nor more than sixty (60) days' written notice to
the Subadviser, or by the Subadviser, on not less than ninety (90) days'
written notice to the Adviser and the Trust; provided, that the Subadviser
may not terminate the Subadvisory Agreement unless another subadvisory
agreement has been approved by the Trust in accordance with the 1940 Act, or
after six (6) months' written notice, whichever is earlier; provided,
further, that each may terminate its respective Subadvisory Agreement on
sixty (60) days' written notice in the event of a breach of such agreement by
the Adviser.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
B-41
<PAGE>
FEDERAL TAXES - Each Portfolio of the Trust intends to meet all the
requirements and to elect the tax status of a "regulated investment company"
under the provisions of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As such, a Portfolio will not be subject to federal
income tax on that portion of any income and net realized capital gains which it
distributes to its shareholders. Each Portfolio intends to distribute all
income and net realized capital gains to the Variable Separate Account. If a
Portfolio should fail to meet the requirements of Subchapter M, it would be
subject to income tax on its income and capital gains.
PRICE OF SHARES
Shares of the Trsut are currently offered only to the Variable Separate
Account. The price paid for shares, the offering price, is the net asset
value per share calculated once daily at the close of regular trading
(generally 4:00 p.m., Eastern time) each day the New York Stock Exchange is
open for business.
Stocks are stated at value based upon closing sales prices reported on
recognized securities exchanges or, for listed securities having no sales
reported and for unlisted securities, upon last reported bid prices.
Non-convertible bonds, debentures, other long-term debt securities and
short-term securities with original or remaining maturities in excess of 60
days, are normally valued at prices obtained for the day of valuation from a
bond pricing service of a major dealer in bonds, when such prices are
available; however, in circumstances in which the Manager deems it
appropriate to do so, an over-the-counter or exchange quotation at the mean
of representative bid or asked prices may be used. Securities traded
primarily on securities exchanges outside the United States are valued at the
last sale price on such exchanges on the day of valuation, or if there is no
sale on the day of valuation, at the last-reported bid price. If a
security's price is available from more than one foreign exchange, a portfolio
uses the exchange that is the primary market for the security. Short-term
securities with 60 days or less to maturity are amortized to maturity based
on their cost to the Trust if acquired within 60 days of maturity or, if
already held by the Trust on the 60th day, are amortized to maturity based on
the value determined on the 61st day. Options traded on national securities
exchanges are valued as of the close of the exchange on which they are
traded. Futures and options traded on commodities exchanges are valued at
their last sale price as of the close of such exchange. Other securities are
valued on the basis of last or bid price (if a last sale price is not
available) in what is, in the opinion of the Manager, the broadest and most
representative market, that may be either a securities exchange or the
over-the-counter market. Where quotations
B-42
<PAGE>
are not readily available, securities are valued at fair value as determined in
good faith in accordance with procedures adopted by the Board of Trustees. The
fair value of all other assets is added to the value of securities to arrive at
the respective Portfolio's total assets.
A Portfolio's liabilities, including proper accruals of expense items, are
deducted from total assets.
The net asset value of the respective Portfolio is divided by the total
number of shares outstanding to arrive at the net asset value per share.
EXECUTION OF PORTFOLIO TRANSACTIONS
It is the policy of the Trust, in effecting transactions in portfolio
securities, to seek the best execution at the most favorable prices. The
determination of what may constitute best execution involves a number of
considerations, including the economic result to the Trust (involving both price
paid or received and any commissions and other costs), the efficiency with which
the transaction is effected where a large block is involved, the availability of
the broker to stand ready to execute potentially difficult transactions and the
financial strength and stability of the broker. Such considerations are
judgmental and are considered in determining the overall reasonableness of
brokerage commissions paid.
A factor in the selection of brokers is the receipt of research services --
analyses and reports concerning issuers, industries, securities, economic
factors and trends -- and other statistical and factual information. Research
and other statistical and factual information provided by brokers is considered
to be in addition to and not in lieu of services required to be performed by the
Manager.
The extent to which commissions may reflect the value of research services
cannot be presently determined. To the extent that research services of value
are provided by broker-dealers with or through whom the Manager places the
Trust's portfolio transactions, the Manager may be relieved of expenses it might
otherwise bear. Research services furnished by broker-dealers could be useful
and of value to the Manager in serving other clients as well as the Trust and
research services obtained by the Manager as a result of the placement of
portfolio brokerage of other clients could be useful and of value in serving the
Trust.
In the over-the-counter market, securities are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission, although the price of a security usually includes a profit to the
dealer. In underwritten offerings, securities are purchased at a fixed price
which includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid. The Trust is subject to an exemptive order
from the Securities and Exchange Commission (the "SEC"), permitting the Trust to
deal with securities dealers (that may be deemed to be affiliated persons of
B-43
<PAGE>
affiliated persons of the Trust solely because of any subadvisory relationship)
as a principal in purchases and sales of certain securities.
Subject to the above considerations, a Manager may use broker-dealer
affiliates of a Manager, as a broker for any Portfolio. In order for such
broker-dealer to effect any portfolio transactions for a Portfolio, the
commissions, fees or other remuneration received by the broker-dealer must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time. This standard would allow such broker-dealer to receive no more
than the remuneration which would be expected to be received by an unaffiliated
broker in a commensurate arm's-length transaction. Furthermore, the Trustees of
the Trust, including a majority of the non-interested Trustees, have adopted
procedures which are reasonably designed to provide that any commissions, fees
or other remuneration paid to such broker-dealers are consistent with the
foregoing standard. These types of brokerage transactions are also subject to
such fiduciary standards as may be imposed upon the broker-dealers by applicable
law.
The policy of the Trust with respect to brokerage is reviewed by the Board
of Trustees from time-to-time. Because of the possibility of further regulatory
developments affecting the securities exchanges and brokerage practices
generally, the foregoing practices may be modified.
A Manager and its respective affiliates may manage, or have proprietary
interests in, accounts with similar or dissimilar or the same investment
objectives as one or more Portfolios of the Trust. Such account may or may not
be in competition with a Portfolio for investments. Investment decisions for
such accounts are based on criteria relevant to such accounts; portfolio
decisions and results of the Portfolio's investments may differ from those of
such other accounts. There is no obligation to make available for use in
managing the Portfolio any information or strategies used or developed in
managing such accounts. In addition, when two or more accounts seek to purchase
or sell the same assets, the assets actually purchased or sold may be allocated
among accounts on a good faith equitable basis at the discretion of the
account's adviser. In some cases, this system may adversely affect the price or
size of the position obtainable for a Portfolio.
If determined by a Manager to be beneficial to the interests of the Trust,
partners and/or employees of the Manager may serve on investment advisory
committees, which will consult with the subadviser regarding investment
objectives and strategies for the Trust. In connection with serving on such a
committee, such persons may receive information regarding a Portfolio's proposed
investment activities which is not generally available to unaffiliated market
participants, and there will be no obligation on the part of such persons to
make available for use in managing the Portfolio any information or strategies
known to them or developed in connection with their other activities.
It is possible that a Portfolio's holdings may include securities of
entities for which a Manager or its affiliate performs investment banking
services as well as securities of entities in which a subadviser or its
affiliate makes a market. From time to time, such activities may limit a
Portfolio's
B-44
<PAGE>
flexibility in purchases and sales of securities. When a Subadviser or its
affiliate is engaged in an underwriting or other distribution of securities of
an entity, the Subadviser may be prohibited from purchasing or recommending the
purchase of certain securities of that entity for the Portfolio.
Because each Managed Component of a Multi-Managed Portfolio will be managed
independently of each other, it is possible that the same security may be
purchased and sold on the same day by two separate Managed Components, resulting
in higher brokerage commissions for the Portfolio.
GENERAL INFORMATION
CUSTODIAN - State Street Bank and Trust Company ("State Street"), 225
Franklin Street, Boston, Massachusetts 02110, serves as the Trust's custodian.
In this capacity, State Street maintains the portfolio securities held by the
Trust, administers the purchase and sale of portfolio securities, and performs
certain other duties. State Street also serves as transfer agent and dividend
disbursing agent for the Trust.
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL - Price Waterhouse LLP, 1177
Avenue of the Americas, New York, New York 10036, has been selected as the
Trust's independent accountants. Price Waterhouse LLP performs an annual audit
of the Trust's financial statements and provides tax consulting, tax return
preparation and accounting services relating to filings with the SEC. The firms
of Shereff, Friedman, Hoffman & Goodman, LLP, 919 Third Avenue, New York, NY
10022, and Blazzard, Grodd & Hasenauer, P.C., Suite 213, Oceanwalk Mall, 101
North Ocean Drive, Hollywood, Florida 33019, have been selected to provide legal
counsel to the Trust.
REPORTS TO SHAREHOLDERS - Persons having a beneficial interest in the Trust
are provided at least semi-annually with reports showing the investments of the
Portfolios, financial statements and other information.
SHAREHOLDER AND TRUSTEE RESPONSIBILITY - Shareholders of a Massachusetts
business trust may, under certain circumstances, be held personally liable as
partners for the obligations of the Trust. The risk of a shareholder incurring
any financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations.
The Declaration of Trust contains an express disclaimer of shareholder liability
for acts or obligations of the Trust and provides that notice of the disclaimer
must be given in each agreement, obligation or instrument entered into or
executed by the Trust or Trustees. The Declaration of Trust provides for
indemnification of any shareholder held personally liable for the obligations of
the Trust and also provides for the Trust to reimburse the shareholder for all
legal and other expenses reasonably incurred in connection with any such claim
or liability.
Under the Declaration of Trust, the trustees or officers are not liable for
actions or failure to act; however, they are not protected from liability by
reason of their willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their office. The Trust
B-45
<PAGE>
provides indemnification to its trustees and officers as authorized by its
By-Laws and by the 1940 Act and the rules and regulations thereunder.
REGISTRATION STATEMENT - A registration statement has been filed with the
Securities and Exchange Commission under the Securities Act of 1933 and the
1940 Act. The Prospectus and this Statement of Additional Information do not
contain all information set forth in the registration statement, its amendments
and exhibits thereto, that the Trust has filed with the Securities and Exchange
Commission, Washington, D.C., to all of which reference is hereby made.
FINANCIAL STATEMENTS
Set forth are the unaudited financial statements of the Trust for the
period April 15, 1997 (commencement of operations) through September 30, 1997.
B-46
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- ----------------
SEASONS SERIES TRUST
MULTI-MANAGED
GROWTH PORTFOLIO INVESTMENT PORTFOLIO -- SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 67.5% SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 3.8%
APPAREL & TEXTILES -- 0.9%
Cutter & Buck, Inc.+ ................... 2,800 $ 57,750
Liz Claiborne, Inc. .................... 600 32,962
R.P.M. Inc. ............................ 900 18,450
Sola International, Inc.+ .............. 800 27,450
AUTOMOTIVE -- 0.5%
Ford Motor Co. ......................... 400 18,100
Volkswagen AG .......................... 83 57,637
HOUSING -- 0.6%
Electrolux AB, Series B ................ 311 24,306
Furniture Brands International,
Inc.+ ................................ 2,000 37,750
Industrie Natuzzi SpA ADR .............. 900 21,319
RETAIL -- 1.8%
Costco Cos., Inc.+ ..................... 2,075 78,072
CVS Corp. .............................. 700 39,812
Federated Department Stores, Inc.+ ..... 400 17,250
Linens 'N Things, Inc.+ ................ 750 25,125
Nordstrom, Inc. ........................ 925 58,969
Office Depot, Inc.+ .................... 1,375 27,758
Wal-Mart Stores, Inc. .................. 700 25,637
-------------
568,347
-------------
CONSUMER STAPLES -- 1.5%
FOOD, BEVERAGE & TOBACCO -- 1.1%
Philip Morris Cos., Inc. ............... 600 24,937
RJR Nabisco Holdings Corp. ............. 700 24,063
Sara Lee Corp. ......................... 2,300 118,450
HOUSEHOLD PRODUCTS -- 0.4%
Gillette Co. ........................... 300 25,894
Kimberly-Clark Corp. ................... 300 14,681
Procter & Gamble Co. ................... 400 27,625
-------------
235,650
-------------
ENERGY -- 6.0%
ENERGY SERVICES -- 2.9%
Baker Hughes, Inc. ..................... 600 26,250
Friede Goldman International, Inc.+ .... 1,000 60,000
Royal Dutch Petroleum Co. .............. 400 22,200
Santa Fe International Corp.+ .......... 2,800 130,200
Schlumberger Ltd. ...................... 700 58,931
Smedvig ASA, Class B ................... 1,391 41,299
</TABLE>
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1
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
ENERGY SERVICES (CONTINUED)
Transocean Offshore, Inc. .............. 2,100 $ 100,669
ENERGY SOURCES -- 3.1%
Diamond Offshore Drilling, Inc. ........ 2,475 136,589
Elf Aquitaine SA ....................... 446 59,540
Elf Aquitaine SA ADR ................... 775 51,683
ENSCO International, Inc. .............. 600 23,663
Exxon Corp. ............................ 500 32,031
Mobil Corp. ............................ 400 29,600
Noble Drilling Corp.+ .................. 2,300 74,175
Ocean Rig ASA+ ......................... 17,728 30,433
Texaco, Inc. ........................... 400 24,575
-------------
901,838
-------------
FINANCE -- 8.1%
BANKS -- 3.9%
Astoria Financial Corp. ................ 100 5,031
Banca Commerciale Italiana+ ............ 8,069 23,186
Bank of New York Cos., Inc. ............ 1,225 58,800
BankAmerica Corp. ...................... 2,425 177,783
Chase Manhattan Corp. .................. 400 47,200
Citicorp ............................... 450 60,272
Dime Bancorp, Inc. ..................... 250 5,234
First Union Corp. ...................... 700 35,044
Hibernia Corp., Class A ................ 1,000 17,000
Mellon Bank Corp. ...................... 400 21,900
PNC Bank Corp. ......................... 1,000 48,813
Queens County Bancorp, Inc. ............ 100 5,181
Star Banc Corp. ........................ 1,250 57,422
Wells Fargo & Co. ...................... 100 27,500
FINANCIAL SERVICES -- 2.2%
American Express Co. ................... 400 32,750
Associates First Capital Corp. ......... 1,700 105,825
Charles Schwab Corp. ................... 1,687 60,310
ContiFinancial Corp.+ .................. 500 16,250
Federal National Mortgage
Association .......................... 400 18,800
FirstSpartan Financial Corp. ........... 200 7,750
GSB Financial Corp.+ ................... 125 2,047
Household International, Inc. .......... 200 22,637
SLM Holding Corp. ...................... 300 46,350
Transamerica Corp. ..................... 100 9,950
Washington Mutual, Inc. ................ 250 17,438
INSURANCE -- 2.0%
Aetna, Inc. ............................ 200 16,288
Allstate Corp. ......................... 300 24,112
Chubb Corp. ............................ 300 21,319
Reliance Group Holdings, Inc. .......... 275 3,730
Skandia Forsakrings AB ................. 471 21,044
Swiss Life Insurance & Pension Co. ..... 108 64,381
UICI+ .................................. 2,375 68,281
</TABLE>
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2
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
INSURANCE (CONTINUED)
UNUM Corp. ............................. 1,700 $ 77,562
-------------
1,227,190
-------------
HEALTHCARE -- 7.9%
DRUGS -- 3.9%
Amgen, Inc.+ ........................... 300 14,381
Astra AB, Class A ...................... 819 15,112
Bergen Brunswig Corp., Class A ......... 825 33,309
Bristol-Myers Squibb Co. ............... 400 33,100
Cardinal Health, Inc. .................. 450 31,950
IDEC Pharmaceuticals Corp.+ ............ 1,000 41,875
Johnson & Johnson ...................... 600 34,575
LifeCell Corp.+ ........................ 1,800 14,175
Merck & Co., Inc. ...................... 200 19,988
Mylan Laboratories, Inc. ............... 4,000 89,750
Teva Pharmaceutical Industries Ltd.
ADR .................................. 275 15,331
Warner-Lambert Co. ..................... 1,825 246,261
HEALTH SERVICES -- 1.7%
Advance Paradigm, Inc.+ ................ 2,000 41,500
Columbia/HCA Healthcare Corp. .......... 500 14,375
Guidant Corp. .......................... 1,000 56,000
Humana, Inc. ........................... 700 16,669
NovaCare, Inc.+ ........................ 2,000 34,500
Omnicare, Inc. ......................... 1,475 47,937
Pacificare Health Systems, Inc., Class
B+ ................................... 350 23,844
United Healthcare Corp. ................ 300 15,000
MEDICAL PRODUCTS -- 2.3%
Andrx Corp.+ ........................... 1,000 45,500
Arterial Vascular Engineering, Inc.+ ... 1,000 55,500
Baxter International, Inc. ............. 700 36,575
Cyberonics, Inc.+ ...................... 3,000 48,375
ESC Medical Systems Ltd.+ .............. 950 35,744
Fresenius Medical AG ADR+ .............. 300 6,825
IDEXX Laboratories, Inc.+ .............. 675 11,306
Osteotech, Inc.+ ....................... 4,000 80,500
Sofamor Danek Group, Inc.+ ............. 425 24,278
-------------
1,184,235
-------------
INDUSTRIAL & COMMERCIAL -- 5.5%
AEROSPACE & MILITARY TECHNOLOGY -- 0.1%
Boeing Co. ............................. 300 16,331
BUSINESS SERVICES -- 3.2%
Assisted Living Concepts, Inc.+ ........ 3,000 48,000
Caliber System, Inc. ................... 675 36,619
Dal-Tile International, Inc.+ .......... 400 6,000
Eagle Geophysical, Inc.+ ............... 200 3,950
NCO Group, Inc.+ ....................... 1,000 37,000
Owens-Illinois, Inc.+ .................. 500 16,969
Rentokil Initial PLC+ .................. 7,083 29,239
</TABLE>
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3
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
BUSINESS SERVICES (CONTINUED)
Sealed Air Corp.+ ...................... 1,050 $ 57,684
Service Corp. International ............ 700 22,531
Suez Lyonnaise des Eaux+ ............... 425 47,424
Sysco Corp. ............................ 600 22,163
Technology Solutions Co. ............... 500 16,125
Tomra Systems ASA ...................... 701 16,127
USA Waste Services, Inc.+ .............. 400 15,950
Vestcom International, Inc.+ ........... 5,000 100,000
MACHINERY -- 0.3%
Metra Oy, Class B ...................... 1,751 50,965
MULTI-INDUSTRY -- 1.6%
Corning, Inc. .......................... 500 23,625
Raision Tehtaat Oy ..................... 514 58,677
Republic Industries, Inc.+ ............. 800 26,350
Siebe PLC .............................. 2,068 41,583
Westinghouse Electric Corp. ............ 3,350 90,659
TRANSPORTATION -- 0.3%
Burlington Northern Santa Fe Corp. ..... 300 28,987
KLM Royal Dutch Air Lines NV ........... 325 11,152
-------------
824,110
-------------
INFORMATION & ENTERTAINMENT -- 1.9%
BROADCASTING & MEDIA -- 1.0%
General Cable Corp.+ ................... 500 17,750
Iridium World Communications Ltd.+ ..... 400 16,500
New York Times Co., Class A ............ 400 21,000
Omnicom Group, Inc. .................... 300 21,825
Time Warner, Inc. ...................... 1,400 75,862
ENTERTAINMENT PRODUCTS -- 0.2%
Mattel, Inc. ........................... 700 23,188
LEISURE & TOURISM -- 0.7%
McDonald's Corp. ....................... 500 23,813
Ryan's Family Steak Houses, Inc.+ ...... 9,000 82,687
-------------
282,625
-------------
INFORMATION TECHNOLOGY -- 26.6%
BROADCASTING & MEDIA -- 0.3%
Tele-Communications TCI Group, Class
A+ ................................... 2,166 44,403
COMMUNICATION EQUIPMENT -- 3.2%
Lucent Technologies, Inc. .............. 800 65,100
Newbridge Networks Corp. ADR+ .......... 2,000 119,750
Nokia Corp., Class A ADR ............... 800 75,050
PairGain Technologies, Inc.+ ........... 2,000 57,000
RADCOM Ltd.+ ........................... 6,000 70,500
Telecomunicacoes Brasileras SA ADR ..... 375 48,282
Tellabs, Inc.+ ......................... 800 41,200
</TABLE>
- ----------------
4
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
COMPUTERS & BUSINESS EQUIPMENT -- 4.7%
Compaq Computer Corp.+ ................. 4,200 $ 313,950
Computer Sciences Corp.+ ............... 300 21,225
Dell Computer Corp.+ ................... 1,900 184,062
EMC Corp.+ ............................. 1,000 58,375
HBO & Co. .............................. 1,150 43,413
Hewlett-Packard Co. .................... 300 20,869
Honeywell, Inc. ........................ 300 20,156
International Business Machines
Corp. ................................ 200 21,200
Perkin-Elmer Corp. ..................... 300 21,919
ELECTRONICS -- 10.8%
Align-Rite International, Inc.+ ........ 2,000 47,750
ANADIGICS, Inc.+ ....................... 1,000 49,312
Analog Devices, Inc.+ .................. 3,575 119,762
ASM Lithography Holdings NV+ ........... 1,025 101,219
Cypress Semiconductor Corp.+ ........... 1,000 15,500
Emerson Electric Co. ................... 400 23,050
General Electric Co. ................... 500 34,031
Intel Corp. ............................ 1,250 115,391
KLA Instruments Corp.+ ................. 885 59,793
Kulicke & Soffa Industries, Inc.+ ...... 1,000 46,312
Lernout & Hauspie Speech Products
NV+ .................................. 1,000 43,750
Micrel, Inc.+ .......................... 1,000 42,313
Motorola, Inc. ......................... 500 35,938
Novellus Systems, Inc.+ ................ 500 63,000
Philips Electronics NV ................. 521 44,082
Philips Electronics NV ADR ............. 3,775 317,100
Pittway Corp. .......................... 1,600 103,900
QLogic Corp.+ .......................... 1,000 41,875
Rockwell International Corp. ........... 200 12,588
Sanmina Corp.+ ......................... 500 43,281
Teradyne, Inc.+ ........................ 2,000 107,625
Texas Instruments, Inc. ................ 800 108,100
Vitesse Semiconductor Corp.+ ........... 1,000 49,562
SOFTWARE -- 5.7%
Aspen Technologies, Inc.+ .............. 2,100 73,762
BEA Systems, Inc.+ ..................... 1,225 21,897
Ceridian Corp.+ ........................ 300 11,100
Cisco Systems, Inc.+ ................... 1,925 140,646
J.D. Edwards & Co.+ .................... 2,350 78,725
Keane, Inc.+ ........................... 3,000 95,250
Microsoft Corp.+ ....................... 625 82,695
Novell, Inc.+ .......................... 400 3,588
Object Design, Inc.+ ................... 5,000 41,250
Parametric Technology Corp.+ ........... 4,750 209,594
PeopleSoft, Inc.+ ...................... 250 14,937
Policy Management Systems Corp.+ ....... 125 7,773
Reynolds & Reynolds Co., Class A ....... 600 11,663
Sapient Corp.+ ......................... 100 5,088
Visio Corp.+ ........................... 1,000 41,750
Wind River Systems+ .................... 650 26,812
</TABLE>
----------------
5
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
TELECOMMUNICATIONS -- 1.9%
At Home Corp., Series A+ ............... 8,500 $ 196,562
Ericsson (L.M.) Telecommunications Co.,
Class B ADR .......................... 1,350 64,716
Tele-Communications, Inc. .............. 509 10,498
Teleport Communications Group, Class
A+ ................................... 200 8,975
-------------
3,998,969
-------------
MATERIALS -- 3.0%
CHEMICALS -- 2.4%
du Pont (E.I.) de Nemours & Co. ........ 1,750 107,734
IMC Global, Inc. ....................... 400 14,100
Monsanto Co. ........................... 5,450 212,550
Solutia, Inc.+ ......................... 1,280 25,600
FOREST PRODUCTS -- 0.4%
American Pad & Paper Co.+ .............. 900 11,194
Consolidated Papers, Inc. .............. 500 27,750
Fort James Corp. ....................... 550 25,197
Ivex Packaging Corp.+ .................. 300 4,800
METALS & MINERALS -- 0.2%
Crown, Cork & Seal Co., Inc. ........... 300 13,837
EASCO, Inc. ............................ 1,000 12,250
-------------
455,012
-------------
REAL ESTATE -- 2.0%
REAL ESTATE COMPANIES -- 0.1%
Security Capital Group, Inc., Class
B .................................... 500 17,187
REAL ESTATE INVESTMENT TRUSTS -- 1.9%
Crescent Real Estate Equities .......... 500 20,063
Equity Office Properties Trust ......... 5,975 202,777
Starwood Lodging Trust ................. 1,000 57,437
-------------
297,464
-------------
UTILITIES -- 1.2%
ELECTRIC UTILITIES -- 0.1%
Duke Energy Co. ........................ 400 19,775
GAS & PIPELINE UTILITIES -- 0.2%
US Filter Corp.+ ....................... 600 25,838
TELEPHONE -- 0.9%
Ameritech Corp. ........................ 300 19,950
AT&T Corp. ............................. 500 22,156
Bell Atlantic Corp. .................... 307 24,694
GTE Corp. .............................. 400 18,150
MCI Communications Corp. ............... 400 11,750
Telecom Italia SpA+ .................... 6,878 45,823
-------------
188,136
-------------
TOTAL COMMON STOCK (cost $8,944,110).... 10,163,576
-------------
</TABLE>
- ----------------
6
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 21.9% AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 0.2%
RETAIL -- 0.2%
J.C. Penney Co., Inc. 7.40% 2037 ....... $ 20,000 $ 21,320
-------------
ENERGY -- 0.3%
ENERGY SOURCES -- 0.3%
Petroliam Nasional Bhd. 7.13% 2005* .... 25,000 24,929
YPF Sociedad Anonima 8.00% 2004 ........ 15,000 15,281
-------------
40,210
-------------
FINANCE -- 2.0%
BANKS -- 1.3%
Banc One Corp. 8.00% 2027 .............. 18,000 19,528
Banponce Financial Corp. 6.75% 2001 .... 20,000 20,221
Credit National 7.00% 2005 ............. 20,000 19,675
Export Import Bank of Korea 6.50%
2006 ................................. 25,000 24,671
First Republic Bancorp 7.75% 2012 ...... 25,000 24,805
Korea Development Bank 7.13% 2001 ...... 15,000 15,080
NBD Bank SA 8.25% 2024 ................. 25,000 28,672
NCNB Co. 9.38% 2009 .................... 32,000 38,190
FINANCIAL SERVICES -- 0.7%
Dime Capital Trust I, Series A 9.33%
2027 ................................. 20,000 21,610
GE Capital Mortgage Services Inc. 6.25%
2023 ................................. 18,452 18,342
Private Export Funding Corp. 7.03%
2003 ................................. 35,000 36,298
Private Export Funding Corp. 7.90%
2000 ................................. 35,000 36,467
-------------
303,559
-------------
HEALTHCARE -- 0.2%
HEALTH SERVICES -- 0.2%
Allegiance Corp. 7.00% 2026 ............ 25,000 25,434
-------------
INDUSTRIAL & COMMERCIAL -- 0.1%
MACHINERY -- 0.1%
Mark IV Industries, Inc. 8.75% 2003 .... 20,000 20,800
-------------
INFORMATION & ENTERTAINMENT -- 0.4%
BROADCASTING & MEDIA -- 0.4%
Comcast Cable Communications 8.50%
2027* ................................ 15,000 16,722
News America Holdings, Inc. 8.00%
2016 ................................. 20,000 20,461
Scholastic Corp. 7.00% 2003 ............ 15,000 15,167
-------------
52,350
-------------
INFORMATION TECHNOLOGY -- 0.2%
TELECOMMUNICATIONS -- 0.2%
Tele-Communications, Inc. 9.25% 2002 ... 25,000 27,257
-------------
MATERIALS -- 0.2%
CHEMICALS -- 0.2%
ICI Wilmington, Inc. 6.95% 2004 ........ 35,000 35,525
-------------
</TABLE>
----------------
7
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- 0.3%
MUNICIPAL BONDS -- 0.3%
Hudson County New Jersey Improvement
Authority Facility 6.55% 2002 ........ $ 45,000 $ 45,288
-------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 0.9%
FOREIGN GOVERNMENT -- 0.9%
Republic of Argentina 11.00% 2006 ...... 25,000 28,500
Republic of Columbia 7.25% 2004 ........ 18,000 17,649
Republic of Germany 6.25% 2024 ....(DEM) 130,000 74,471
Republic of Lithuania 7.13% 2002* ...... 19,000 18,805
-------------
139,425
-------------
U.S. GOVERNMENT & AGENCIES -- 16.7%
U.S. GOVERNMENT & AGENCIES -- 16.7%
Federal Home Loan Mortgage Corp. 6.00%
2006 ................................. 20,000 19,675
Federal Home Loan Mortgage Corp. 6.50%
2022 ................................. 38,000 37,335
Federal Home Loan Mortgage Corp. 6.50%
2023 ................................. 10,000 9,684
Federal Home Loan Mortgage Corp. 6.55%
2022 ................................. 32,000 31,690
Federal Home Loan Mortgage Corp. 7.00%
2023 ................................. 12,000 12,173
Federal Home Loan Mortgage Corp. 7.50%
2023 ................................. 18,409 18,806
Federal Home Loan Mortgage Corp. 7.75%
2022 ................................. 24,312 24,715
Federal Home Loan Mortgage Corp. 8.50%
2019 ................................. 34,630 36,165
Federal National Mortgage Association
5.65% 2005 ........................... 15,000 14,853
Federal National Mortgage Association
7.00% 2006 ........................... 11,735 11,808
Federal National Mortgage Association
7.39% 2021 ........................... 28,785 29,721
Federal National Mortgage Association
9.35% 2020 ........................... 7,212 7,317
Government National Mortgage Association
7.00% 2022 ........................... 16,862 16,935
Government National Mortgage Association
7.25% 2027 ........................... 123,693 124,756
Government National Mortgage Association
7.50% 2023 ........................... 42,078 42,945
Government National Mortgage Association
8.50% 2017 ........................... 40,856 43,422
Government National Mortgage Association
9.00% 2021 ........................... 16,625 17,914
United States Treasury Bonds 6.63%
2027 ................................. 90,000 92,152
United States Treasury Bonds 8.50%
2020 ................................. 94,000 116,192
United States Treasury Bonds 9.25%
2016 ................................. 55,000 71,440
United States Treasury Bonds 12.00%
2013 ................................. 395,000 568,800
United States Treasury Notes 5.88%
2000 ................................. 245,000 245,039
United States Treasury Notes 6.25%
2002 ................................. 75,000 75,691
United States Treasury Notes 6.25%
2007 ................................. 60,000 60,310
United States Treasury Notes 6.63%
2001 ................................. 290,000 296,342
United States Treasury Notes 6.63%
2002 ................................. 50,000 51,188
United States Treasury Notes 6.63%
2007 ................................. 25,000 25,820
United States Treasury Notes 7.25%
2004 ................................. 135,000 143,353
United States Treasury Notes 8.50%
2000 ................................. 250,000 268,125
-------------
2,514,366
-------------
UTILITIES -- 0.4%
ELECTRIC UTILITIES -- 0.3%
Atlantic City Electric Co. 6.38%
2005 ................................. 20,000 19,821
Cleveland Electric Illuminating Co.
7.19% 2000* .......................... 15,000 15,176
Public Service Electric & Gas Co. 8.88%
2003 ................................. 11,000 12,143
</TABLE>
- ----------------
8
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
TELEPHONE -- 0.1%
WorldCom, Inc. 7.55% 2004 .............. $ 15,000 $ 15,555
-------------
62,695
-------------
TOTAL BONDS & NOTES (cost $3,221,038)... 3,288,229
-------------
TOTAL INVESTMENT SECURITIES (cost
$12,165,148).......................... 13,451,805
-------------
<CAPTION>
SHORT-TERM SECURITIES -- 8.0%
<S> <C> <C>
- -----------------------------------------------------------------------
FEDERAL AGENCY OBLIGATIONS -- 5.3%
Federal Home Loan Mortgage Corp. 6.05%
due 10/01/97.......................... 800,000 800,000
-------------
TIME DEPOSIT -- 2.7%
Cayman Island Time Deposit with State
Street Bank & Trust Co. 3.00% due
10/01/97.............................. 402,000 402,000
-------------
TOTAL SHORT-TERM SECURITIES (cost
$1,202,000)........................... 1,202,000
-------------
<CAPTION>
REPURCHASE AGREEMENTS -- 5.8%
<S> <C> <C>
- -----------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 5.8%
Lehman Brothers, Inc. Joint Repurchase
Agreement (Note 3).................... 385,000 385,000
PaineWebber, Inc. Joint Repurchase
Agreement (Note 3).................... 495,000 495,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost
$880,000)............................. 880,000
-------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $14,247,148) 103.2% 15,533,805
Liabilities in excess of other assets -- (3.2) (482,196)
----------- -------------
NET ASSETS -- 100.0% $ 15,051,609
----------- -------------
----------- -------------
</TABLE>
- ------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR -- American Depository Receipt
DEM -- Deutsche Mark
----------------
9
<PAGE>
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
- --------------------------------------------------------------------------
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
USD 11,366 DEM 20,000 03/11/98 $ 69
USD 14,267 DEM 25,000 03/11/98 26
-------
95
-------
<CAPTION>
GROSS
UNREALIZED
DEPRECIATION
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEM 129,000 USD 73,051 11/18/97 (197)
DEM 94,000 USD 52,708 03/11/98 (1,032)
FIM 420,000 USD 78,344 03/11/98 (1,776)
GBP 19,000 USD 30,425 03/11/98 (11)
ITL 113,000,000 USD 63,651 03/11/98 (1,664)
NLG 340,000 USD 169,104 03/11/98 (3,413)
*SEK 666,000 USD 82,939 10/27/97 (4,930)
*SEK 220,200 USD 28,087 10/27/97 (966)
SEK 165,000 USD 21,013 03/11/98 (854)
*USD 117,331 SEK 886,200 10/27/97 (409)
-------
(15,252)
-------
Net Unrealized Depreciation............................ $ (15,157)
-------
-------
</TABLE>
- ------------
* Represents open forward foreign currency and offsetting open forward foreign
currency contracts that do not have additional market risk but have continued
counterparty settlement risk
<TABLE>
<S> <C> <C>
DEM -- Deutsche Mark ITL -- Italian Lira USD -- United States Dollar
FIM -- Finnish Markka NGL -- Netherlands Guilder
GBP -- Great British Pound SEK -- Swedish Krona
</TABLE>
See Notes to Financial Statements
- ----------------
10
<PAGE>
- ----------------
SEASONS SERIES TRUST
MULTI-MANAGED MODERATE
GROWTH PORTFOLIO INVESTMENT PORTFOLIO -- SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 52.7% SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 3.0%
APPAREL & TEXTILES -- 0.8%
Cutter & Buck, Inc.+ ................... 2,800 $ 57,750
Liz Claiborne, Inc. .................... 600 32,962
R.P.M., Inc. ........................... 900 18,450
Sola International, Inc.+ .............. 800 27,450
AUTOMOTIVE -- 0.4%
Ford Motor Co. ......................... 400 18,100
Volkswagen AG........................... 62 43,054
HOUSING -- 0.5%
Electrolux AB, Series B................. 251 19,617
Furniture Brands International,
Inc.+ ................................. 2,000 37,750
Industrie Natuzzi SpA ADR............... 675 15,989
RETAIL -- 1.3%
Costco Cos., Inc.+ ..................... 1,525 57,378
CVS Corp. .............................. 600 34,125
Federated Department Stores, Inc.+ ..... 400 17,250
Linens' N Things, Inc.+ ................ 525 17,588
Nordstrom, Inc. ........................ 700 44,625
Office Depot, Inc.+ .................... 1,000 20,188
Wal-Mart Stores, Inc. .................. 700 25,637
-------------
487,913
-------------
CONSUMER STAPLES -- 1.3%
FOOD, BEVERAGE & TOBACCO -- 0.9%
Philip Morris Cos., Inc. ............... 600 24,937
RJR Nabisco Holdings Corp. ............. 700 24,063
Sara Lee Corp. ......................... 1,700 87,550
HOUSEHOLD PRODUCTS -- 0.4%
Gillette Co. ........................... 300 25,894
Kimberly-Clark Corp. ................... 300 14,681
Procter & Gamble Co. ................... 400 27,625
-------------
204,750
-------------
ENERGY -- 4.8%
ENERGY SERVICES -- 2.4%
Baker Hughes, Inc. ..................... 600 26,250
Friede Goldman International, Inc.+ .... 1,000 60,000
Royal Dutch Petroleum Co. .............. 400 22,200
Santa Fe International Corp.+ .......... 1,950 90,675
Schlumberger Ltd. ...................... 525 44,198
Smedvig ASA, Class B.................... 1,034 30,699
</TABLE>
----------------
11
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
ENERGY SERVICES (CONTINUED)
Transocean Offshore, Inc. .............. 1,550 $ 74,303
Veritas DGC, Inc.+ ..................... 1,000 42,563
ENERGY SOURCES -- 2.4%
Diamond Offshore Drilling, Inc. ........ 2,050 113,134
Elf Aquitaine SA........................ 330 44,055
Elf Aquitaine SA ADR.................... 550 36,678
ENSCO International, Inc. .............. 600 23,663
Exxon Corp. ............................ 500 32,031
Mobil Corp. ............................ 400 29,600
Noble Drilling Corp.+ .................. 1,625 52,406
Ocean Rig ASA+ ......................... 12,838 22,039
Texaco, Inc. ........................... 400 24,575
-------------
769,069
-------------
FINANCE -- 6.2%
BANKS -- 3.0%
Astoria Financial Corp. ................ 75 3,773
Banca Commerciale Italiana+ ............ 5,867 16,859
Bank of New York Cos., Inc. ............ 900 43,200
BankAmerica Corp. ...................... 1,800 131,962
Chase Manhattan Corp. .................. 300 35,400
Citicorp................................ 325 43,530
Dime Bancorp, Inc. ..................... 175 3,664
First Union Corp. ...................... 700 35,044
Hibernia Corp., Class A................. 1,000 17,000
Mellon Bank Corp. ...................... 400 21,900
PNC Bank Corp. ......................... 1,000 48,813
Queens County Bancorp, Inc. ............ 75 3,886
Star Banc Corp. ........................ 925 42,492
Wells Fargo & Co. ...................... 100 27,500
FINANCIAL SERVICES -- 1.8%
American Express Co. ................... 400 32,750
Associates First Capital Corp. ......... 1,350 84,037
Charles Schwab Corp. ................... 1,250 44,687
ContiFinancial Corp.+ .................. 500 16,250
Federal National Mortgage Association... 400 18,800
FirstSpartan Financial Corp. ........... 175 6,781
GSB Financial Corp.+ ................... 125 2,047
Household International, Inc. .......... 200 22,638
SLM Holding Corp. ...................... 225 34,763
Transamerica Corp. ..................... 100 9,950
Washington Mutual, Inc. ................ 180 12,555
INSURANCE -- 1.4%
Aetna, Inc. ............................ 200 16,287
Allstate Corp. ......................... 300 24,112
Chubb Corp. ............................ 300 21,319
Reliance Group Holdings, Inc. .......... 200 2,713
Skandia Forsakrings AB.................. 340 15,191
Swiss Life Insurance & Pension Co. ..... 78 46,498
</TABLE>
- ----------------
12
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
INSURANCE (CONTINUED)
UICI+ .................................. 1,690 $ 48,587
UNUM Corp. ............................. 1,250 57,031
-------------
992,019
-------------
HEALTHCARE -- 6.3%
DRUGS -- 3.2%
Amgen, Inc.+ ........................... 300 14,381
Astra AB, Class A....................... 609 11,236
Bergen Brunswig Corp., Class A.......... 625 25,234
Bristol-Myers Squibb Co. ............... 400 33,100
Cardinal Health, Inc. .................. 350 24,850
IDEC Pharmaceuticals Corp.+ ............ 1,000 41,875
Johnson & Johnson....................... 600 34,575
LifeCell Corp.+ ........................ 1,800 14,175
Merck & Co., Inc. ...................... 300 29,981
Mylan Laboratories, Inc. ............... 4,000 89,750
Teva Pharmaceutical Industries Ltd.
ADR.................................... 225 12,544
Warner-Lambert Co. ..................... 1,350 182,166
HEALTH SERVICES -- 1.4%
Advance Paradigm, Inc.+ ................ 2,000 41,500
Columbia/HCA Healthcare Corp. .......... 500 14,375
Guidant Corp. .......................... 1,000 56,000
Humana, Inc. ........................... 600 14,288
NovaCare, Inc.+ ........................ 2,000 34,500
Omnicare, Inc. ......................... 1,050 34,125
Pacificare Health Systems, Inc., Class
B+ .................................... 225 15,328
United Healthcare Corp. ................ 300 15,000
MEDICAL PRODUCTS -- 1.7%
Andrx Corp.+ ........................... 1,000 44,602
Arterial Vascular Engineering, Inc.+ ... 1,000 55,500
Baxter International, Inc. ............. 700 36,575
Cyberonics, Inc.+ ...................... 3,000 48,375
ESC Medical Systems Ltd.+ .............. 650 24,456
Fresenius Medical Care AG ADR+ ......... 225 5,119
IDEXX Laboratories, Inc.+ .............. 500 8,375
Osteotech, Inc.+ ....................... 2,000 40,250
Sofamor Danek Group, Inc.+ ............. 300 17,138
-------------
1,019,373
-------------
INDUSTRIAL & COMMERCIAL -- 4.3%
AEROSPACE & MILITARY TECHNOLOGY -- 0.1%
Boeing Co. ............................. 300 16,331
BUSINESS SERVICES -- 2.6%
Assisted Living Concepts, Inc.+ ........ 3,000 48,000
Caliber System, Inc. ................... 475 25,769
Dal-Tile International, Inc.+ .......... 400 6,000
Eagle Geophysical, Inc.+ ............... 200 3,950
NCO Group, Inc.+ ....................... 1,000 37,000
</TABLE>
----------------
13
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
BUSINESS SERVICES (CONTINUED)
Owens-Illinois, Inc.+ .................. 500 $ 16,969
Rentokil Initial PLC+ .................. 5,136 21,201
Sealed Air Corp.+ ...................... 775 42,577
Service Corp. International............. 600 19,312
Suez Lyonnaise des Eaux+ ............... 319 35,596
Sysco Corp. ............................ 600 22,162
Technology Solutions Co. ............... 375 12,094
Tomra Systems ASA....................... 512 11,779
USA Waste Services, Inc.+ .............. 400 15,950
Vestcom International, Inc.+ ........... 5,000 100,000
MACHINERY -- 0.2%
Metra Oy, Class B....................... 1,205 35,073
MULTI-INDUSTRY -- 1.2%
Corning, Inc. .......................... 500 23,625
Raision Tehtaat Oy...................... 366 41,782
Republic Industries, Inc.+ ............. 700 23,056
Siebe PLC............................... 1,549 31,147
Westinghouse Electric Corp. ............ 2,500 67,656
TRANSPORTATION -- 0.2%
Burlington Northern Santa Fe Corp. ..... 300 28,988
KLM Royal Dutch Air Lines NV............ 225 7,720
-------------
693,737
-------------
INFORMATION & ENTERTAINMENT -- 1.4%
BROADCASTING & MEDIA -- 0.9%
General Cable Corp.+ ................... 500 17,750
Iridium World Communications Ltd.+ ..... 400 16,500
New York Times Co., Class A............. 400 21,000
Omnicom Group, Inc. .................... 300 21,825
Time Warner, Inc. ...................... 1,125 60,961
ENTERTAINMENT PRODUCTS -- 0.1%
Mattel, Inc. ........................... 700 23,188
LEISURE & TOURISM -- 0.4%
McDonald's Corp. ....................... 400 19,050
Ryan's Family Steak Houses, Inc.+ ...... 5,000 45,937
-------------
226,211
-------------
INFORMATION TECHNOLOGY -- 20.5%
BROADCASTING & MEDIA -- 0.2%
Tele-Communications TCI Group, Class
A+ .................................... 1,602 32,841
COMMUNICATION EQUIPMENT -- 2.7%
Lucent Technologies, Inc. .............. 800 65,100
Newbridge Networks Corp. ADR+ .......... 2,000 119,750
Nokia Corp., Class A ADR................ 575 53,942
PairGain Technologies, Inc.+ ........... 2,000 57,000
RADCOM Ltd.+ ........................... 6,000 70,500
</TABLE>
- ----------------
14
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
COMMUNICATION EQUIPMENT (CONTINUED)
Telecomunicacoes Brasileras SA ADR...... 275 $ 35,406
Tellabs, Inc.+ ......................... 800 41,200
COMPUTERS & BUSINESS EQUIPMENT -- 3.7%
Compaq Computer Corp.+ ................. 3,400 254,150
Computer Sciences Corp.+ ............... 300 21,225
Dell Computer Corp.+ ................... 1,675 162,266
EMC Corp.+ ............................. 750 43,781
HBO & Co. .............................. 850 32,088
Hewlett-Packard Co. .................... 300 20,869
Honeywell, Inc. ........................ 300 20,156
International Business Machines
Corp. ................................. 200 21,200
Perkin-Elmer Corp. ..................... 225 16,439
ELECTRONICS -- 8.6%
Align-Rite International, Inc.+ ........ 2,000 47,750
ANADIGICS, Inc.+ ....................... 1,000 49,312
Analog Devices, Inc.+ .................. 2,900 97,150
ASM Lithography Holdings NV+ ........... 950 93,812
Cypress Semiconductor Corp.+ ........... 1,000 15,500
Emerson Electric Co. ................... 400 23,050
General Electric Co. ................... 500 34,031
Intel Corp. ............................ 1,050 96,928
KLA Instruments Corp.+ ................. 885 59,793
Kulicke & Soffa Industries, Inc.+ ...... 1,000 46,312
Micrel, Inc.+ .......................... 1,000 42,313
Motorola, Inc. ......................... 500 35,938
Novellus Systems, Inc.+ ................ 500 63,000
Philips Electronics NV.................. 373 31,560
Philips Electronics NV ADR.............. 2,800 235,200
Pittway Corp. .......................... 1,175 76,302
QLogic Corp.+ .......................... 1,000 41,875
Rockwell International Corp. ........... 200 12,588
Sanmina Corp.+ ......................... 500 43,281
Teradyne, Inc.+ ........................ 2,000 107,625
Texas Instruments, Inc. ................ 575 77,697
Vitesse Semiconductor Corp.+ ........... 1,000 49,562
SOFTWARE -- 4.0%
Aspen Technologies, Inc.+ .............. 1,525 53,566
BEA Systems, Inc.+ ..................... 825 14,747
Ceridian Corp.+ ........................ 225 8,325
Cisco Systems, Inc.+ ................... 1,500 109,594
J.D. Edwards & Co.+ .................... 1,750 58,625
Keane, Inc.+ ........................... 2,800 88,900
Microsoft Corp.+ ....................... 500 66,156
Novell, Inc.+ .......................... 400 3,588
Parametric Technology Corp.+ ........... 3,225 142,303
PeopleSoft, Inc.+ ...................... 175 10,456
Policy Management Systems Corp.+ ....... 75 4,664
Reynolds & Reynolds Co., Class A........ 600 11,662
Sapient Corp.+ ......................... 75 3,816
</TABLE>
----------------
15
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
SOFTWARE (CONTINUED)
Visio Corp.+ ........................... 1,000 $ 41,750
Wind River Systems+ .................... 450 18,562
TELECOMMUNICATIONS -- 1.3%
At Home Corp., Series A+ ............... 6,475 149,734
Ericsson (L.M.) Telecommunications Co.,
Class B ADR............................ 1,025 49,136
Tele-Communications, Inc. .............. 373 7,693
Teleport Communications Group, Class
A+ .................................... 200 8,975
-------------
3,300,744
-------------
MATERIALS -- 2.3%
CHEMICALS -- 1.7%
du Pont (E.I.) de Nemours & Co. ........ 1,375 84,648
IMC Global, Inc. ....................... 400 14,100
Monsanto Co. ........................... 4,050 157,950
Solutia, Inc.+ ......................... 945 18,900
FOREST PRODUCTS -- 0.4%
American Pad & Paper Co.+ .............. 500 6,219
Consolidated Papers, Inc. .............. 500 27,750
Fort James Corp. ....................... 687 31,473
Ivex Packaging Corp.+ .................. 300 4,800
METALS & MINERALS -- 0.2%
Crown, Cork & Seal Co., Inc. ........... 300 13,838
EASCO, Inc. ............................ 1,000 12,250
-------------
371,928
-------------
REAL ESTATE -- 1.7%
REAL ESTATE COMPANIES -- 0.1%
Security Capital Group, Inc., Class B... 500 17,188
REAL ESTATE INVESTMENT TRUSTS -- 1.6%
Crescent Real Estate Equities........... 500 20,063
Equity Office Properties Trust.......... 5,150 174,778
Starwood Lodging Trust.................. 1,000 57,437
-------------
269,466
-------------
UTILITIES -- 0.9%
ELECTRIC UTILITIES -- 0.1%
Duke Energy Co. ........................ 400 19,775
GAS & PIPELINE UTILITIES -- 0.1%
US Filter Corp.+ ....................... 300 12,919
TELEPHONE -- 0.7%
Ameritech Corp. ........................ 300 19,950
AT&T Corp. ............................. 500 22,156
Bell Atlantic Corp. .................... 230 18,501
GTE Corp. .............................. 400 18,150
MCI Communications Corp. ............... 300 8,812
</TABLE>
- ----------------
16
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
TELEPHONE (CONTINUED)
Telecom Italia SpA+ .................... 4,985 $ 33,211
-------------
153,474
-------------
TOTAL COMMON STOCK (cost $7,430,633).... 8,488,684
-------------
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 34.9% AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.3%
RETAIL -- 0.3%
J.C. Penney Co., Inc. 7.40% 2037........ $ 40,000 42,639
-------------
ENERGY -- 0.5%
ENERGY SOURCES -- 0.5%
Petroliam Nasional Bhd. 7.13% 2005*..... 50,000 49,857
YPF Sociedad Anonima 8.00% 2004......... 30,000 30,563
-------------
80,420
-------------
FINANCE -- 3.1%
BANKS -- 2.0%
Banc One Corp. 8.00% 2027............... 34,000 36,886
Banponce Financial Corp. 6.75% 2001..... 35,000 35,387
Credit National 7.00% 2005.............. 30,000 29,513
Export Import Bank of Korea 6.50%
2006................................... 40,000 39,474
First Republic Bancorp 7.75% 2012....... 45,000 44,649
Korea Development Bank 7.13% 2001....... 20,000 20,106
NBD Bank SA 8.25% 2024.................. 45,000 51,609
NCNB Co. 9.38% 2009..................... 48,000 57,285
FINANCIAL SERVICES -- 1.1%
Dime Capital Trust I, Series A 9.33%
2027................................... 35,000 37,818
GE Capital Mortgage Services, Inc. 6.25%
2023................................... 36,904 36,685
Private Export Funding Corp. 7.03%
2003................................... 45,000 46,669
Private Export Funding Corp. 7.90%
2000................................... 55,000 57,305
-------------
493,386
-------------
HEALTHCARE -- 0.3%
HEALTH SERVICES -- 0.3%
Allegiance Corp. 7.00% 2026............. 50,000 50,868
-------------
INDUSTRIAL & COMMERCIAL -- 0.2%
MACHINERY -- 0.2%
Mark IV Industries, Inc. 8.75% 2003..... 35,000 36,400
-------------
INFORMATION & ENTERTAINMENT -- 0.7%
BROADCASTING & MEDIA -- 0.7%
Comcast Cable Communications 8.50%
2027*.................................. 35,000 39,017
News America Holdings, Inc. 8.00%
2016................................... 40,000 40,923
</TABLE>
----------------
17
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (CONTINUED)
BROADCASTING & MEDIA (CONTINUED)
Scholastic Corp. 7.00% 2003............. $ 30,000 $ 30,335
-------------
110,275
-------------
INFORMATION TECHNOLOGY -- 0.2%
TELECOMMUNICATIONS -- 0.2%
Tele-Communications, Inc. 9.25% 2002.... 35,000 38,160
-------------
MATERIALS -- 0.4%
CHEMICALS -- 0.4%
ICI Wilmington, Inc. 6.95% 2004......... 65,000 65,974
-------------
MUNICIPAL BONDS -- 0.5%
MUNICIPAL BONDS -- 0.5%
Hudson County New Jersey Improvement
Authority Facility 6.55% 2002.......... 85,000 85,544
-------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 1.7%
FOREIGN GOVERNMENT -- 1.7%
Republic of Argentina 11.00% 2006....... 50,000 57,000
Republic of Columbia 7.25% 2004......... 34,000 33,337
Republic of Germany 6.25% 2024.... (DEM) 245,000 140,349
Republic of Lithuania 7.13% 2002*....... 35,000 34,641
-------------
265,327
-------------
U.S. GOVERNMENT & AGENCIES -- 26.2%
U.S. GOVERNMENT & AGENCIES -- 26.2%
Federal Home Loan Mortgage Corp. 6.00%
2006................................... 35,000 34,431
Federal Home Loan Mortgage Corp. 6.50%
2022................................... 50,000 49,125
Federal Home Loan Mortgage Corp. 6.50%
2023................................... 20,000 19,369
Federal Home Loan Mortgage Corp. 6.55%
2022................................... 32,000 31,690
Federal Home Loan Mortgage Corp. 7.00%
2023................................... 25,000 25,359
Federal Home Loan Mortgage Corp. 7.50%
2023................................... 18,409 18,806
Federal Home Loan Mortgage Corp. 7.75%
2022................................... 37,990 38,619
Federal Home Loan Mortgage Corp. 8.50%
2019................................... 64,313 67,164
Federal National Mortgage Association
5.65% 2005............................. 30,000 29,706
Federal National Mortgage Association
7.00% 2006............................. 23,470 23,617
Federal National Mortgage Association
7.39% 2021............................. 47,975 49,534
Federal National Mortgage Association
9.35% 2020............................. 14,424 14,634
Government National Mortgage Association
7.00% 2022............................. 17,375 17,451
Government National Mortgage Association
7.00% 2023............................. 18,974 19,039
Government National Mortgage Association
7.25% 2027............................. 243,902 245,997
Government National Mortgage Association
7.50% 2024............................. 63,615 64,888
Government National Mortgage Association
8.50% 2017............................. 74,903 79,607
Government National Mortgage Association
9.00% 2021............................. 24,606 26,512
United States Treasury Bonds 6.63%
2027................................... 90,000 92,152
United States Treasury Bonds 8.50%
2020................................... 230,000 284,301
United States Treasury Bonds 9.25%
2016................................... 140,000 181,847
United States Treasury Bonds 12.00%
2013................................... 680,000 979,200
United States Treasury Notes 5.88%
2000................................... 245,000 245,039
United States Treasury Notes 6.25%
2002................................... 75,000 75,691
</TABLE>
- ----------------
18
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (CONTINUED)
United States Treasury Notes 6.25%
2007................................... $ 60,000 $ 60,310
United States Treasury Notes 6.63%
2001................................... 565,000 577,357
United States Treasury Notes 6.63%
2002................................... 50,000 51,187
United States Treasury Notes 6.63%
2007................................... 25,000 25,820
United States Treasury Notes 7.25%
2004................................... 135,000 143,353
United States Treasury Notes 8.50%
2000................................... 610,000 654,225
-------------
4,226,030
-------------
UTILITIES -- 0.8%
ELECTRIC UTILITIES -- 0.6%
Atlantic City Electric Co. 6.38% 2005... 45,000 44,596
Cleveland Electric Illuminating Co.
7.19% 2000*............................ 20,000 20,235
Public Service Electric & Gas Co. 8.88%
2003................................... 21,000 23,182
TELEPHONE -- 0.2%
WorldCom, Inc. 7.55% 2004............... 35,000 36,297
-------------
124,310
-------------
TOTAL BONDS & NOTES (cost $5,496,806)... 5,619,333
-------------
TOTAL INVESTMENT SECURITIES (cost
$12,927,439)........................... 14,108,017
-------------
<CAPTION>
SHORT-TERM SECURITIES -- 7.0%
<S> <C> <C>
- -----------------------------------------------------------------------
FEDERAL AGENCY OBLIGATIONS -- 4.3%
Federal Home Loan Mortgage Corp. 6.05%
due 10/01/97........................... 700,000 700,000
-------------
TIME DEPOSIT -- 2.7%
Cayman Island Time Deposit with State
Street Bank & Trust Co. 3.00% due
10/01/97............................... 439,000 439,000
-------------
TOTAL SHORT-TERM SECURITIES (cost
$1,139,000)............................ 1,139,000
-------------
<CAPTION>
REPURCHASE AGREEMENTS -- 8.0%
<S> <C> <C>
- -----------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 8.0%
Lehman Brothers, Inc. Joint Repurchase
Agreement (Note 3)..................... 840,000 840,000
PaineWebber, Inc. Joint Repurchase
Agreement (Note 3)..................... 444,000 444,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost
$1,284,000)............................ 1,284,000
-------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $15,350,439) 102.6% 16,531,017
Liabilities in excess of other assets -- (2.6) (423,094)
--------- -------------
NET ASSETS -- 100.0% $ 16,107,923
--------- -------------
--------- -------------
</TABLE>
- ------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR -- American Depository Receipt
DEM -- Deutsche Mark
----------------
19
<PAGE>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
USD 7,956 DEM 14,000 03/11/98 $ 48
USD 9,702 DEM 17,000 03/11/98 17
-------
65
-------
<CAPTION>
GROSS
UNREALIZED
DEPRECIATION
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
DEM 243,000 USD 137,607 11/18/97 (372)
DEM 68,000 USD 38,129 03/11/98 (747)
FIM 300,000 USD 57,228 03/11/98 (1,269)
GBP 14,000 USD 22,418 03/11/98 (8)
ITL 83,000,000 USD 46,753 03/11/98 (1,222)
NLG 250,000 USD 124,341 03/11/98 (2,509)
*SEK 1,221,000 USD 152,055 10/27/97 (9,039)
*SEK 330,300 USD 42,130 10/27/97 (1,448)
SEK 125,000 USD 15,919 03/11/98 (647)
*USD 205,389 SEK 1,551,300 10/27/97 (717)
-------
(17,978)
-------
Net Unrealized Depreciation................ $(17,913)
-------
-------
</TABLE>
- ------------
* Represents open forward foreign currency and offsetting open forward foreign
currency contracts that do not have additional market risk but have continued
counterparty settlement risk
<TABLE>
<S> <C> <C>
DEM -- Deutsche Mark ITL -- Italian Lira USD -- United States Dollar
FIM -- Finnish Markka NGL -- Netherlands Guilder
GBP -- Great British Pound SEK -- Swedish Krona
</TABLE>
See Notes to Financial Statements
- ----------------
20
<PAGE>
- ----------------
SEASONS SERIES TRUST
MULTI-MANAGED INCOME/EQUITY
PORTFOLIO INVESTMENT PORTFOLIO -- SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 29.7% SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 2.0%
APPAREL & TEXTILES -- 0.3%
R.P.M., Inc. ........................... 950 $ 19,475
Sola International, Inc.+ .............. 600 20,587
AUTOMOTIVE -- 0.4%
Ford Motor Co. ......................... 500 22,625
Volkswagen AG........................... 31 21,527
HOUSING -- 0.1%
Electrolux AB, Series B................. 117 9,144
Industrie Natuzzi SpA ADR............... 350 8,291
RETAIL -- 1.2%
Costco Cos., Inc.+ ..................... 775 29,159
CVS Corp. .............................. 400 22,750
Federated Department Stores, Inc.+ ..... 500 21,563
Linens' N Things, Inc.+ ................ 275 9,213
Nordstrom, Inc. ........................ 350 22,312
Office Depot, Inc.+ .................... 500 10,094
Wal-Mart Stores, Inc. .................. 700 25,637
-------------
242,377
-------------
CONSUMER STAPLES -- 1.1%
FOOD, BEVERAGE & TOBACCO -- 0.7%
Philip Morris Cos., Inc. ............... 400 16,625
RJR Nabisco Holdings Corp. ............. 600 20,625
Sara Lee Corp. ......................... 850 43,775
HOUSEHOLD PRODUCTS -- 0.4%
Gillette Co. ........................... 300 25,894
Kimberly-Clark Corp. ................... 300 14,681
Procter & Gamble Co. ................... 200 13,813
-------------
135,413
-------------
ENERGY -- 3.1%
ENERGY SERVICES -- 1.2%
Baker Hughes, Inc. ..................... 500 21,875
Santa Fe International Corp.+ .......... 1,075 49,988
Schlumberger Ltd. ...................... 250 21,047
Smedvig ASA, Class B.................... 519 15,409
Transocean Offshore, Inc. .............. 800 38,350
ENERGY SOURCES -- 1.9%
Diamond Offshore Drilling, Inc. ........ 625 34,492
Elf Aquitaine SA........................ 165 22,027
Elf Aquitaine SA ADR.................... 300 20,006
</TABLE>
----------------
21
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
ENERGY SOURCES (CONTINUED)
ENSCO International, Inc. .............. 600 $ 23,663
Exxon Corp. ............................ 400 25,625
Mobil Corp. ............................ 400 29,600
Noble Drilling Corp.+ .................. 900 29,025
Ocean Rig ASA+ ......................... 6,589 11,311
Texaco, Inc. ........................... 400 24,575
-------------
366,993
-------------
FINANCE -- 4.3%
BANKS -- 1.7%
Astoria Financial Corp. ................ 25 1,258
Banca Commerciale Italiana+ ............ 3,314 9,523
Bank of New York Cos., Inc. ............ 250 12,000
BankAmerica Corp. ...................... 875 64,149
Chase Manhattan Corp. .................. 300 35,400
Citicorp................................ 75 10,045
Dime Bancorp, Inc. ..................... 100 2,094
First Union Corp. ...................... 500 25,031
Mellon Bank Corp. ...................... 400 21,900
Queens County Bancorp, Inc. ............ 25 1,295
Star Banc Corp. ........................ 475 21,820
FINANCIAL SERVICES -- 1.4%
American Express Co. ................... 300 24,562
Associates First Capital Corp. ......... 775 48,244
Charles Schwab Corp. ................... 600 21,450
ContiFinancial Corp.+ .................. 600 19,500
Federal National Mortgage Association... 300 14,100
FirstSpartan Financial Corp. ........... 75 2,906
GSB Financial Corp.+ ................... 75 1,228
Household International, Inc. .......... 100 11,319
SLM Holding Corp. ...................... 75 11,588
Transamerica Corp. ..................... 100 9,950
Washington Mutual, Inc. ................ 112 7,812
INSURANCE -- 1.2%
Aetna, Inc. ............................ 300 24,431
Allstate Corp. ......................... 300 24,113
Chubb Corp. ............................ 300 21,319
Reliance Group Holdings, Inc. .......... 100 1,356
Skandia Forsakrings AB.................. 198 8,846
Swiss Life Insurance & Pension Co. ..... 20 11,922
UICI+ .................................. 550 15,813
UNUM Corp. ............................. 725 33,078
-------------
518,052
-------------
HEALTHCARE -- 2.5%
DRUGS -- 1.6%
Amgen, Inc.+ ........................... 200 9,588
Astra AB, Class A....................... 294 5,424
</TABLE>
- ----------------
22
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
DRUGS (CONTINUED)
Bergen Brunswig Corp., Class A.......... 300 $ 12,112
Bristol-Myers Squibb Co. ............... 200 16,550
Cardinal Health, Inc. .................. 175 12,425
Johnson & Johnson....................... 400 23,050
Merck & Co., Inc. ...................... 100 9,994
Teva Pharmaceutical Industries Ltd.
ADR.................................... 100 5,575
Warner-Lambert Co. ..................... 700 94,456
HEALTH SERVICES -- 0.6%
Columbia/HCA Healthcare Corp. .......... 400 11,500
Humana, Inc. ........................... 700 16,669
Omnicare, Inc. ......................... 650 21,125
Pacificare Health Systems, Inc., Class
B+ .................................... 125 8,516
United Healthcare Corp. ................ 300 15,000
MEDICAL PRODUCTS -- 0.3%
Baxter International, Inc. ............. 200 10,450
ESC Medical Systems Ltd.+ .............. 350 13,169
Fresenius Medical Care AG ADR+ ......... 150 3,412
IDEXX Laboratories, Inc.+ .............. 275 4,606
Sofamor Danek Group, Inc.+ ............. 175 9,997
-------------
303,618
-------------
INDUSTRIAL & COMMERCIAL -- 2.7%
AEROSPACE & MILITARY TECHNOLOGY -- 0.2%
Boeing Co. ............................. 400 21,775
BUSINESS SERVICES -- 1.3%
Caliber System, Inc. ................... 250 13,562
Dal-Tile International, Inc.+ .......... 400 6,000
Owens-Illinois, Inc.+ .................. 500 16,969
Rentokil Initial PLC+ .................. 2,677 11,051
Sealed Air Corp.+ ...................... 400 21,975
Service Corp. International............. 400 12,875
Suez Lyonnaise des Eaux+ ............... 176 19,639
Sysco Corp. ............................ 600 22,162
Technology Solutions Co. ............... 175 5,644
Tomra Systems ASA....................... 265 6,097
USA Waste Services, Inc.+ .............. 400 15,950
MACHINERY -- 0.1%
Metra Oy, Class B....................... 656 19,094
MULTI-INDUSTRY -- 0.8%
Corning, Inc. .......................... 300 14,175
Raision Tehtaat Oy...................... 199 22,717
Republic Industries, Inc.+ ............. 500 16,469
Siebe PLC............................... 853 17,152
Westinghouse Electric Corp. ............ 800 21,650
</TABLE>
----------------
23
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
TRANSPORTATION -- 0.3%
Burlington Northern Santa Fe Corp. ..... 300 $ 28,987
KLM Royal Dutch Air Lines NV............ 125 4,289
-------------
318,232
-------------
INFORMATION & ENTERTAINMENT -- 1.2%
BROADCASTING & MEDIA -- 1.0%
General Cable Corp.+ ................... 500 17,750
Iridium World Communications Ltd.+ ..... 400 16,500
New York Times Co., Class A............. 400 21,000
Omnicom Group, Inc. .................... 300 21,825
Time Warner, Inc. ...................... 750 40,641
ENTERTAINMENT PRODUCTS -- 0.1%
Mattel, Inc. ........................... 400 13,250
LEISURE & TOURISM -- 0.1%
McDonald's Corp. ....................... 300 14,287
-------------
145,253
-------------
INFORMATION TECHNOLOGY -- 9.2%
BROADCASTING & MEDIA -- 0.1%
Tele-Communications TCI Group, Class
A+ .................................... 800 16,400
COMMUNICATION EQUIPMENT -- 0.5%
Lucent Technologies, Inc. .............. 200 16,275
Nokia Corp., Class A ADR................ 300 28,144
Telecomunicacoes Brasileras SA ADR...... 150 19,312
COMPUTERS & BUSINESS EQUIPMENT -- 1.8%
Compaq Computer Corp.+ ................. 1,200 89,700
Computer Sciences Corp.+ ............... 200 14,150
Dell Computer Corp.+ ................... 250 24,219
EMC Corp.+ ............................. 350 20,431
HBO & Co. .............................. 400 15,100
Hewlett-Packard Co. .................... 200 13,912
Honeywell, Inc. ........................ 300 20,156
International Business Machines
Corp. ................................. 100 10,600
Perkin-Elmer Corp. ..................... 125 9,133
ELECTRONICS -- 3.5%
Analog Devices, Inc.+ .................. 975 32,663
ASM Lithography Holdings NV+ ........... 100 9,875
Emerson Electric Co. ................... 300 17,288
General Electric Co. ................... 600 40,837
Intel Corp. ............................ 750 69,234
Motorola, Inc. ......................... 300 21,563
Philips Electronics NV.................. 174 14,722
Philips Electronics NV ADR.............. 1,400 117,600
Pittway Corp. .......................... 600 38,963
Rockwell International Corp. ........... 250 15,734
Texas Instruments, Inc. ................ 300 40,537
</TABLE>
- ----------------
24
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
SOFTWARE -- 2.4%
Aspen Technologies, Inc.+ .............. 775 $ 27,222
BEA Systems, Inc.+ ..................... 425 7,597
Ceridian Corp.+ ........................ 100 3,700
Cisco Systems, Inc.+ ................... 750 54,796
J.D. Edwards & Co.+ .................... 875 29,312
Microsoft Corp.+ ....................... 350 46,309
Novell, Inc.+ .......................... 200 1,794
Parametric Technology Corp.+ ........... 1,725 76,116
PeopleSoft, Inc.+ ...................... 100 5,975
Policy Management Systems Corp.+ ....... 25 1,555
Reynolds & Reynolds Co., Class A........ 700 13,606
Sapient Corp.+ ......................... 25 1,272
Wind River Systems+ .................... 325 13,406
TELECOMMUNICATIONS -- 0.9%
At Home Corp., Series A+ ............... 2,775 64,172
Ericsson (L.M.) Telecommunications Co.,
Class B ADR............................ 500 23,969
Tele-Communications, Inc................ 200 4,125
Teleport Communications Group, Class
A+ .................................... 200 8,975
-------------
1,100,449
-------------
MATERIALS -- 1.8%
CHEMICALS -- 1.3%
du Pont (E.I.) de Nemours & Co. ........ 925 56,946
IMC Global, Inc. ....................... 400 14,100
Monsanto Co. ........................... 2,050 79,950
Solutia, Inc.+ ......................... 480 9,600
FOREST PRODUCTS -- 0.4%
American Pad & Paper Co.+ .............. 400 4,975
Fort James Corp. ....................... 687 31,473
Ivex Packaging Corp.+ .................. 300 4,800
METALS & MINERALS -- 0.1%
Crown, Cork & Seal Co., Inc. ........... 200 9,225
EASCO, Inc. ............................ 500 6,125
-------------
217,194
-------------
REAL ESTATE -- 0.7%
REAL ESTATE INVESTMENT TRUSTS -- 0.7%
Crescent Real Estate Equities........... 400 16,050
Equity Office Properties Trust.......... 1,900 64,481
-------------
80,531
-------------
UTILITIES -- 1.1%
ELECTRIC UTILITIES -- 0.2%
Duke Energy Co. ........................ 400 19,775
GAS & PIPELINE UTILITIES -- 0.1%
US Filter Corp.+ ....................... 300 12,919
</TABLE>
----------------
25
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
TELEPHONE -- 0.8%
Ameritech Corp. ........................ 300 $ 19,950
AT&T Corp. ............................. 300 13,294
Bell Atlantic Corp. .................... 230 18,501
GTE Corp. .............................. 300 13,612
MCI Communications Corp. ............... 400 11,750
Telecom Italia SpA+ .................... 2,673 17,808
-------------
127,609
-------------
TOTAL COMMON STOCK (cost $3,109,988).... 3,555,721
-------------
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 56.7% AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.5%
RETAIL -- 0.5%
J.C. Penney Co., Inc. 7.40% 2037........ $ 50,000 53,299
-------------
ENERGY -- 0.8%
ENERGY SOURCES -- 0.8%
Petroliam Nasional Bhd. 7.13% 2005*..... 60,000 59,829
YPF Sociedad Anonima 8.00% 2004......... 40,000 40,750
-------------
100,579
-------------
FINANCE -- 5.2%
BANKS -- 3.4%
Banc One Corp. 8.00% 2027............... 43,000 46,650
Banponce Financial Corp. 6.75% 2001..... 50,000 50,553
Credit National 7.00% 2005.............. 40,000 39,350
Export Import Bank of Korea 6.50%
2006................................... 45,000 44,409
First Republic Bancorp 7.75% 2012....... 50,000 49,610
Korea Development Bank 7.13% 2001....... 35,000 35,186
NBD Bank SA 8.25% 2024.................. 50,000 57,343
NCNB Co. 9.38% 2009..................... 68,000 81,153
FINANCIAL SERVICES -- 1.8%
Dime Capital Trust I, Series A 9.33%
2027................................... 40,000 43,221
GE Capital Mortgage Services, Inc. 6.25%
2023................................... 36,904 36,685
Private Export Funding Corp. 7.03%
2003................................... 60,000 62,225
Private Export Funding Corp. 7.90%
2000................................... 75,000 78,143
-------------
624,528
-------------
HEALTHCARE -- 0.6%
HEALTH SERVICES -- 0.6%
Allegiance Corp. 7.00% 2026............. 75,000 76,302
-------------
INDUSTRIAL & COMMERCIAL -- 0.4%
MACHINERY -- 0.4%
Mark IV Industries, Inc. 8.75% 2003..... 40,000 41,600
-------------
</TABLE>
- ----------------
26
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT -- 1.2%
BROADCASTING & MEDIA -- 1.2%
Comcast Cable Communications 8.50%
2027*.................................. $ 50,000 $ 55,739
News America Holdings, Inc. 8.00%
2016................................... 50,000 51,154
Scholastic Corp. 7.00% 2003............. 40,000 40,446
-------------
147,339
-------------
INFORMATION TECHNOLOGY -- 0.5%
TELECOMMUNICATIONS -- 0.5%
Tele-Communications, Inc. 9.25% 2002.... 50,000 54,514
-------------
MATERIALS -- 0.6%
CHEMICALS -- 0.6%
ICI Wilmington, Inc. 6.95% 2004......... 70,000 71,049
-------------
MUNICIPAL BONDS -- 1.1%
MUNICIPAL BONDS -- 1.1%
Hudson County New Jersey Improvement
Authority Facility 6.55% 2002.......... 135,000 135,864
-------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 2.6%
FOREIGN GOVERNMENT -- 2.6%
Republic of Argentina 11.00% 2006....... 55,000 62,700
Republic of Columbia 7.25% 2004......... 43,000 42,162
Republic of Germany 6.25% 2024 ... (DEM) 285,000 163,263
Republic of Lithuania 7.13% 2002* ...... 43,000 42,559
-------------
310,684
-------------
U.S. GOVERNMENT & AGENCIES -- 41.7%
U.S. GOVERNMENT & AGENCIES -- 41.7%
Federal Home Loan Mortgage Corp. 6.00%
2006................................... 45,000 44,269
Federal Home Loan Mortgage Corp. 6.50%
2022................................... 100,000 98,250
Federal Home Loan Mortgage Corp. 6.50%
2023................................... 30,000 29,053
Federal Home Loan Mortgage Corp. 7.00%
2023................................... 32,000 32,460
Federal Home Loan Mortgage Corp. 7.50%
2023................................... 22,091 22,567
Federal Home Loan Mortgage Corp. 7.75%
2022................................... 53,186 54,066
Federal Home Loan Mortgage Corp. 8.50%
2019................................... 69,260 72,330
Federal National Mortgage Association
5.65% 2005............................. 45,000 44,560
Federal National Mortgage Association
7.00% 2006............................. 29,338 29,521
Federal National Mortgage Association
7.39% 2021............................. 57,570 59,441
Federal National Mortgage Association
9.35% 2020............................. 18,431 18,698
Government National Mortgage Association
7.00% 2022............................. 21,465 21,559
Government National Mortgage Association
7.00% 2023............................. 20,855 20,927
Government National Mortgage Association
7.25% 2027............................. 363,365 366,486
Government National Mortgage Association
7.50% 2022............................. 59,056 60,310
Government National Mortgage Association
7.50% 2024............................. 21,994 22,434
Government National Mortgage Association
8.50% 2017............................. 68,094 72,370
Government National Mortgage Association
8.50% 2017............................. 27,143 28,848
Government National Mortgage Association
9.00% 2021............................. 26,601 28,662
United States Treasury Bonds 6.63%
2027................................... 140,000 143,347
United States Treasury Bonds 8.50%
2020................................... 205,000 253,399
United States Treasury Bonds 9.25%
2016................................... 160,000 207,826
</TABLE>
----------------
27
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (CONTINUED)
United States Treasury Bonds 12.00%
2013................................... $ 700,000 $ 1,008,000
United States Treasury Notes 5.88%
2000................................... 375,000 375,060
United States Treasury Notes 6.25%
2002................................... 100,000 100,922
United States Treasury Notes 6.25%
2007................................... 150,000 150,774
United States Treasury Notes 6.63%
2001................................... 1,090,000 1,113,838
United States Treasury Notes 6.63%
2002................................... 100,000 102,375
United States Treasury Notes 6.63%
2007................................... 50,000 51,641
United States Treasury Notes 7.25%
2004................................... 235,000 249,539
United States Treasury Notes 8.50%
2000................................... 100,000 107,250
-------------
4,990,782
-------------
UTILITIES -- 1.5%
ELECTRIC UTILITIES -- 1.1%
Atlantic City Electric Co. 6.38% 2005... 60,000 59,461
Cleveland Electric Illuminating Co.
7.19% 2000*............................ 30,000 30,353
Public Service Electric & Gas Co. 8.88%
2003................................... 35,000 38,637
TELEPHONE -- 0.4%
WorldCom, Inc. 7.55% 2004............... 50,000 51,852
-------------
180,303
-------------
TOTAL BONDS & NOTES (cost $6,624,128)... 6,786,843
-------------
TOTAL INVESTMENT SECURITIES (cost
$9,734,116)............................ 10,342,564
-------------
<CAPTION>
SHORT-TERM SECURITIES -- 1.7%
<S> <C> <C>
- -----------------------------------------------------------------------
FEDERAL AGENCY OBLIGATIONS -- 1.7%
Federal Home Loan Mortgage Corp. 6.05%
due 10/01/97 (cost $200,000)........... 200,000 200,000
-------------
<CAPTION>
REPURCHASE AGREEMENTS -- 12.5%
<S> <C> <C>
- -----------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 12.5%
Lehman Brothers, Inc. Joint Repurchase
Agreement (Note 3)..................... 820,000 820,000
PaineWebber, Inc. Joint Repurchase
Agreement (Note 3)..................... 674,000 674,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost
$1,494,000)............................ 1,494,000
-------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $11,428,116) 100.6% 12,036,564
Liabilities in excess of other assets
-- (0.6) (66,092)
------ -----------
NET ASSETS -- 100.0% $11,970,472
------ -----------
------ -----------
</TABLE>
- ------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR -- American Depository Receipt
DEM -- Deutsche Mark
- ----------------
28
<PAGE>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
USD 6,819 DEM 12,000 03/11/98 $ 41
USD 5,136 DEM 9,000 03/11/98 9
-------
50
-------
<CAPTION>
GROSS
UNREALIZED
DEPRECIATION
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
DEM 283,000 USD 160,258 11/18/97 (433)
DEM 39,000 USD 21,868 03/11/98 (428)
FIM 160,000 USD 29,845 03/11/98 (677)
GBP 7,500 USD 12,010 03/11/98 (4)
ITL 44,000,000 USD 24,785 03/11/98 (648)
NLG 125,000 USD 62,171 03/11/98 (1,255)
*SEK 1,554,000 USD 193,524 10/27/97 (11,504)
*SEK 330,300 USD 42,130 10/27/97 (1,448)
SEK 65,000 USD 8,278 03/11/98 (336)
*USD 249,477 SEK 1,884,300 10/27/97 (870)
-------
(17,603)
-------
Net Unrealized Depreciation................. $(17,553)
-------
-------
</TABLE>
- -------------
* Represents open forward foreign currency and offsetting open forward foreign
currency contracts that do not have additional market risk but have continued
counterparty settlement risk
<TABLE>
<S> <C> <C>
DEM -- Deutsche Mark ITL -- Italian Lira USD -- United States Dollar
FIM -- Finnish Markka NGL -- Netherlands Guilder
GBP -- Great British Pound SEK -- Swedish Krona
</TABLE>
See Notes to Financial Statements
----------------
29
<PAGE>
- ----------------
SEASONS SERIES TRUST
MULTI-MANAGED INCOME
PORTFOLIO INVESTMENT PORTFOLIO -- SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 16.7% SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 1.3%
APPAREL & TEXTILES -- 0.3%
R.P.M., Inc. ......................................... 650 $ 13,325
Sola International, Inc.+ ............................ 600 20,587
AUTOMOTIVE -- 0.2%
Ford Motor Co. ....................................... 300 13,575
Volkswagen AG......................................... 11 7,639
HOUSING -- 0.1%
Electrolux AB, Series B............................... 45 3,517
Industrie Natuzzi SpA ADR............................. 125 2,961
RETAIL -- 0.7%
Costco Cos., Inc.+ ................................... 300 11,287
CVS Corp. ............................................ 100 5,688
Federated Department Stores, Inc.+ ................... 300 12,937
Linens' N Things, Inc.+ .............................. 125 4,188
Nordstrom, Inc. ...................................... 125 7,969
Office Depot, Inc.+ .................................. 200 4,038
Wal-Mart Stores, Inc. ................................ 500 18,312
-------------
126,023
-------------
CONSUMER STAPLES -- 0.7%
FOOD, BEVERAGE & TOBACCO -- 0.3%
Philip Morris Cos., Inc. ............................. 300 12,469
Sara Lee Corp. ....................................... 300 15,450
HOUSEHOLD PRODUCTS -- 0.4%
Gillette Co. ......................................... 200 17,262
Kimberly-Clark Corp. ................................. 200 9,788
Procter & Gamble Co. ................................. 200 13,812
-------------
68,781
-------------
ENERGY -- 1.8%
ENERGY SERVICES -- 0.6%
Baker Hughes, Inc. ................................... 300 13,125
Santa Fe International Corp.+ ........................ 425 19,763
Schlumberger Ltd. .................................... 100 8,419
Smedvig ASA, Class B.................................. 186 5,522
Transocean Offshore, Inc. ............................ 300 14,381
ENERGY SOURCES -- 1.2%
Diamond Offshore Drilling, Inc. ...................... 225 12,417
Elf Aquitaine SA...................................... 59 7,876
Elf Aquitaine SA ADR.................................. 125 8,336
ENSCO International, Inc. ............................ 200 7,888
</TABLE>
- ----------------
30
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
ENERGY SOURCES (CONTINUED)
Exxon Corp. .......................................... 200 $ 12,812
Mobil Corp. .......................................... 300 22,200
Noble Drilling Corp.+ ................................ 350 11,288
Ocean Rig ASA+ ....................................... 2,563 4,400
Texaco, Inc. ......................................... 400 24,575
-------------
173,002
-------------
FINANCE -- 2.3%
BANKS -- 0.6%
Astoria Financial Corp. .............................. 25 1,258
Banca Commerciale Italiana+ .......................... 1,249 3,589
Bank of New York Cos., Inc. .......................... 75 3,600
BankAmerica Corp. .................................... 200 14,663
Chase Manhattan Corp. ................................ 100 11,800
Citicorp.............................................. 25 3,349
Dime Bancorp, Inc. ................................... 25 523
Mellon Bank Corp. .................................... 200 10,950
Queens County Bancorp, Inc. .......................... 25 1,295
Star Banc Corp. ...................................... 175 8,039
FINANCIAL SERVICES -- 1.0%
American Express Co. ................................. 300 24,562
Associates First Capital Corp. ....................... 450 28,012
Charles Schwab Corp. ................................. 112 4,004
ContiFinancial Corp.+ ................................ 300 9,750
Federal National Mortgage Association................. 300 14,100
FirstSpartan Financial Corp. ......................... 25 969
GSB Financial Corp.+ ................................. 25 409
SLM Holding Corp. .................................... 25 3,863
Washington Mutual, Inc. .............................. 45 3,139
INSURANCE -- 0.7%
Aetna, Inc. .......................................... 100 8,144
Allstate Corp. ....................................... 100 8,037
Chubb Corp. .......................................... 300 21,319
Reliance Group Holdings, Inc. ........................ 50 678
Skandia Forsakrings AB................................ 82 3,663
Swiss Life Insurance & Pension Co. ................... 8 4,769
UICI+ ................................................ 225 6,469
UNUM Corp. ........................................... 350 15,969
-------------
216,922
-------------
HEALTHCARE -- 1.2%
DRUGS -- 0.8%
Amgen, Inc.+ ......................................... 200 9,587
Astra AB, Class A..................................... 102 1,882
Bergen Brunswig Corp., Class A........................ 100 4,038
Cardinal Health, Inc. ................................ 50 3,550
Johnson & Johnson..................................... 200 11,525
Merck & Co., Inc. .................................... 100 9,994
</TABLE>
----------------
31
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
DRUGS (CONTINUED)
Teva Pharmaceutical Industries Ltd. ADR............... 50 $ 2,788
Warner-Lambert Co. ................................... 250 33,734
HEALTH SERVICES -- 0.3%
Columbia/HCA Healthcare Corp. ........................ 300 8,625
Omnicare, Inc. ....................................... 250 8,125
Pacificare Health Systems, Inc., Class B+ ............ 50 3,406
United Healthcare Corp. .............................. 100 5,000
MEDICAL PRODUCTS -- 0.1%
ESC Medical Systems Ltd.+ ............................ 150 5,644
Fresenius Medical Care AG ADR+ ....................... 75 1,706
IDEXX Laboratories, Inc.+ ............................ 125 2,094
Sofamor Danek Group, Inc.+ ........................... 50 2,856
-------------
114,554
-------------
INDUSTRIAL & COMMERCIAL -- 1.4%
AEROSPACE & MILITARY TECHNOLOGY -- 0.1%
Boeing Co. ........................................... 200 10,887
BUSINESS SERVICES -- 0.8%
Caliber System, Inc. ................................. 75 4,069
Dal-Tile International, Inc.+ ........................ 200 3,000
Owens-Illinois, Inc.+ ................................ 300 10,181
Rentokil Initial PLC+ ................................ 982 4,054
Sealed Air Corp.+ .................................... 150 8,241
Suez Lyonnaise des Eaux+ ............................. 70 7,811
Sysco Corp. .......................................... 500 18,469
Technology Solutions Co. ............................. 75 2,419
Tomra Systems ASA..................................... 97 2,231
USA Waste Services, Inc.+ ............................ 300 11,962
MACHINERY -- 0.1%
Metra Oy, Class B..................................... 250 7,276
MULTI-INDUSTRY -- 0.2%
Raision Tehtaat Oy.................................... 78 8,904
Siebe PLC............................................. 338 6,797
Westinghouse Electric Corp. .......................... 175 4,736
TRANSPORTATION -- 0.2%
Burlington Northern Santa Fe Corp. ................... 200 19,325
KLM Royal Dutch Air Lines NV.......................... 50 1,716
-------------
132,078
-------------
INFORMATION & ENTERTAINMENT -- 0.9%
BROADCASTING & MEDIA -- 0.7%
General Cable Corp.+ ................................. 500 17,750
New York Times Co., Class A........................... 300 15,750
Omnicom Group, Inc. .................................. 200 14,550
Time Warner, Inc. .................................... 350 18,966
</TABLE>
- ----------------
32
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (CONTINUED)
ENTERTAINMENT PRODUCTS -- 0.2%
Mattel, Inc. ......................................... 400 $ 13,250
-------------
80,266
-------------
INFORMATION TECHNOLOGY -- 4.8%
BROADCASTING & MEDIA -- 0.0%
Tele-Communications TCI Group, Class A+ .............. 143 2,931
COMMUNICATION EQUIPMENT -- 0.4%
Lucent Technologies, Inc. ............................ 200 16,275
Nokia Corp., Class A ADR.............................. 100 9,381
Telecomunicacoes Brasileras SA ADR.................... 50 6,438
COMPUTERS & BUSINESS EQUIPMENT -- 0.9%
Compaq Computer Corp.+ ............................... 425 31,769
Computer Sciences Corp.+ ............................. 100 7,075
Dell Computer Corp.+ ................................. 100 9,687
EMC Corp.+ ........................................... 50 2,919
HBO & Co. ............................................ 150 5,663
Hewlett-Packard Co. .................................. 100 6,956
Honeywell, Inc. ...................................... 200 13,437
Perkin-Elmer Corp. ................................... 50 3,653
ELECTRONICS -- 2.0%
Analog Devices, Inc.+ ................................ 350 11,725
ASM Lithography Holdings NV+ ......................... 50 4,937
Emerson Electric Co. ................................. 200 11,525
General Electric Co. ................................. 300 20,419
Intel Corp. .......................................... 300 27,694
Motorola, Inc. ....................................... 300 21,562
Philips Electronics NV................................ 71 6,007
Philips Electronics NV ADR............................ 500 42,000
Pittway Corp. ........................................ 225 14,611
Rockwell International Corp. ......................... 150 9,441
Texas Instruments, Inc. .............................. 125 16,891
SOFTWARE -- 1.1%
Aspen Technologies, Inc.+ ............................ 275 9,659
BEA Systems, Inc.+ ................................... 125 2,234
Cisco Systems, Inc.+ ................................. 250 18,266
J.D. Edwards & Co.+ .................................. 300 10,050
Microsoft Corp.+ ..................................... 150 19,847
Parametric Technology Corp.+ ......................... 675 29,784
PeopleSoft, Inc.+ .................................... 50 2,988
Reynolds & Reynolds Co., Class A...................... 400 7,775
Sapient Corp.+ ....................................... 25 1,272
Wind River Systems+ .................................. 109 4,496
TELECOMMUNICATIONS -- 0.4%
At Home Corp., Series A+ ............................. 1,150 26,594
Ericsson (L.M.) Telecommunications Co., Class B ADR... 175 8,389
Tele-Communications TCI Venture Group, Class A+ ...... 82 1,691
</TABLE>
----------------
33
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
Teleport Communications Group, Class A+ .............. 100 $ 4,488
-------------
450,529
-------------
MATERIALS -- 1.1%
CHEMICALS -- 0.7%
du Pont (E.I.) de Nemours & Co. ...................... 350 21,547
IMC Global, Inc. ..................................... 300 10,575
Monsanto Co. ......................................... 725 28,275
Solutia, Inc.+ ....................................... 170 3,400
FOREST PRODUCTS -- 0.3%
American Pad & Paper Co.+ ............................ 200 2,487
Fort James Corp. ..................................... 550 25,197
Ivex Packaging Corp.+ ................................ 100 1,600
METALS & MINERALS -- 0.1%
Crown, Cork & Seal Co., Inc. ......................... 200 9,225
-------------
102,306
-------------
REAL ESTATE -- 0.4%
REAL ESTATE INVESTMENT TRUSTS -- 0.4%
Crescent Real Estate Equities......................... 300 12,037
Equity Office Properties Trust........................ 775 26,302
-------------
38,339
-------------
UTILITIES -- 0.8%
ELECTRIC UTILITIES -- 0.2%
Duke Energy Co. ...................................... 313 15,474
GAS & PIPELINE UTILITIES -- 0.0%
US Filter Corp.+ ..................................... 100 4,306
TELEPHONE -- 0.6%
Ameritech Corp. ...................................... 200 13,300
AT&T Corp. ........................................... 200 8,863
GTE Corp. ............................................ 300 13,612
MCI Communications Corp. ............................. 300 8,813
Telecom Italia SpA+ .................................. 1,041 6,935
-------------
71,303
-------------
TOTAL COMMON STOCK (cost $1,355,291).................. 1,574,103
-------------
</TABLE>
- ----------------
34
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 72.8% AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 0.7%
RETAIL -- 0.7%
J.C. Penney Co., Inc. 7.40% 2037...................... $ 60,000 $ 63,959
-------------
ENERGY -- 1.3%
ENERGY SOURCES -- 1.3%
Petroliam Nasional Bhd. 7.13% 2005*................... 65,000 64,815
YPF Sociedad Anonima 8.00% 2004....................... 60,000 61,125
-------------
125,940
-------------
FINANCE -- 8.5%
BANKS -- 5.2%
Banc One Corp. 8.00% 2027............................. 55,000 59,668
Banponce Financial Corp. 6.75% 2001................... 65,000 65,720
Credit National 7.00% 2005............................ 60,000 59,025
Export Import Bank of Korea 6.50% 2006................ 60,000 59,212
First Republic Bancorp 7.75% 2012..................... 55,000 54,570
Korea Development Bank 7.13% 2001..................... 30,000 30,160
NBD Bank SA 8.25% 2024................................ 55,000 63,078
NCNB Co. 9.38% 2009................................... 80,000 95,474
FINANCIAL SERVICES -- 3.3%
Dime Capital Trust I, Series A 9.33% 2027............. 45,000 48,623
GE Capital Mortgage Services, Inc. 6.25% 2023......... 55,356 55,027
Private Export Funding Corp. 7.03% 2003............... 100,000 103,708
Private Export Funding Corp. 7.90% 2000............... 100,000 104,191
-------------
798,456
-------------
HEALTHCARE -- 1.1%
MEDICAL PRODUCTS -- 1.1%
Allegiance Corp. 7.00% 2026........................... 100,000 101,736
-------------
INDUSTRIAL & COMMERCIAL -- 0.6%
MACHINERY -- 0.6%
Mark IV Industries, Inc. 8.75% 2003................... 50,000 52,000
-------------
INFORMATION & ENTERTAINMENT -- 2.5%
BROADCASTING & MEDIA -- 2.5%
Comcast Cable Communications 8.50% 2027*.............. 80,000 89,182
News America Holdings, Inc. 8.00% 2016................ 80,000 81,846
Scholastic Corp. 7.00% 2003........................... 60,000 60,669
-------------
231,697
-------------
INFORMATION TECHNOLOGY -- 0.7%
TELECOMMUNICATIONS -- 0.7%
Tele-Communications, Inc. 9.25% 2002.................. 60,000 65,417
-------------
MATERIALS -- 0.9%
CHEMICALS -- 0.9%
ICI Wilmington, Inc. 6.95% 2004....................... 80,000 81,199
-------------
</TABLE>
----------------
35
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- 2.1%
MUNICIPAL BONDS -- 2.1%
Hudson County New Jersey Improvement Authority
Facility 6.55% 2002.................................. $ 200,000 $ 201,280
-------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 3.8%
FOREIGN GOVERNMENT -- 3.8%
Republic of Argentina 11.00% 2006..................... 60,000 68,400
Republic of Columbia 7.25% 2004....................... 55,000 53,928
Republic of Germany 6.25% 2024.................. (DEM) 325,000 186,176
Republic of Lithuania 7.13% 2002*..................... 53,000 52,457
-------------
360,961
-------------
U.S. GOVERNMENT & AGENCIES -- 48.0%
U.S. GOVERNMENT & AGENCIES -- 48.0%
Federal Home Loan Mortgage Corp. 6.50% 2022........... 60,000 58,950
Federal Home Loan Mortgage Corp. 6.50% 2023........... 40,000 38,737
Federal Home Loan Mortgage Corp. 7.00% 2023........... 45,000 45,646
Federal Home Loan Mortgage Corp. 7.50% 2023........... 36,818 37,612
Federal Home Loan Mortgage Corp. 7.75% 2022........... 75,980 77,238
Federal Home Loan Mortgage Corp. 8.50% 2019........... 79,154 82,663
Federal National Mortgage Association 5.65% 2005...... 60,000 59,413
Federal National Mortgage Association 7.00% 2006...... 41,073 41,330
Federal National Mortgage Association 7.39% 2021...... 57,570 59,441
Federal National Mortgage Association 9.35% 2020...... 40,067 40,649
Government National Mortgage Association 7.00% 2023... 19,805 19,873
Government National Mortgage Association 7.00% 2023... 26,316 26,407
Government National Mortgage Association 7.00% 2023... 19,728 19,795
Government National Mortgage Association 7.25% 2027... 552,514 557,260
Government National Mortgage Association 7.50% 2022... 26,223 26,779
Government National Mortgage Association 7.50% 2023... 90,076 91,934
Government National Mortgage Association 8.50% 2017... 69,796 74,179
Government National Mortgage Association 8.50% 2017... 29,514 31,367
Government National Mortgage Association 9.00% 2021... 29,926 32,245
United States Treasury Bonds 6.63% 2027............... 110,000 112,630
United States Treasury Bonds 8.50% 2020............... 110,000 135,970
United States Treasury Bonds 9.25% 2016............... 115,000 149,375
United States Treasury Bonds 12.00% 2013.............. 805,000 1,159,200
United States Treasury Notes 5.88% 2000............... 185,000 185,030
United States Treasury Notes 6.25% 2007............... 110,000 110,568
United States Treasury Notes 6.63% 2001............... 835,000 853,261
United States Treasury Notes 6.63% 2002............... 65,000 66,544
United States Treasury Notes 6.63% 2007............... 25,000 25,820
United States Treasury Notes 7.25% 2004............... 155,000 164,590
United States Treasury Notes 8.50% 2000............... 125,000 134,062
-------------
4,518,568
-------------
</TABLE>
- ----------------
36
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES -- 2.6%
ELECTRIC UTILITIES -- 1.7%
Atlantic City Electric Co. 6.38% 2005................. $ 75,000 $ 74,327
Cleveland Electric Illuminating Co. 7.19% 2000*....... 40,000 40,470
Public Service Electric & Gas Co. 8.88% 2003.......... 47,000 51,884
TELEPHONE -- 0.9%
WorldCom, Inc. 7.55% 2004............................. 80,000 82,964
-------------
249,645
-------------
TOTAL BONDS & NOTES (cost $6,662,783)................. 6,850,858
-------------
TOTAL INVESTMENT SECURITIES (cost $8,018,074)......... 8,424,961
-------------
<CAPTION>
SHORT-TERM SECURITIES -- 0.3%
<S> <C> <C>
- -------------------------------------------------------------------------------------
FEDERAL AGENCY OBLIGATIONS -- 0.3%
Federal Home Loan Mortgage Corp. 6.05% due 10/01/97
(cost $25,000)....................................... 25,000 25,000
-------------
<CAPTION>
REPURCHASE AGREEMENTS -- 9.8%
<S> <C> <C>
- -------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 9.8%
Lehman Brothers, Inc. Joint Repurchase Agreement (Note
3)................................................... 835,000 835,000
PaineWebber, Inc. Joint Repurchase Agreement (Note
3)................................................... 91,000 91,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost $926,000)........... 926,000
-------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS -- (cost $8,969,074) 99.6% 9,375,961
Other assets less liabilities -- 0.4 35,900
------- -------------
NET ASSETS -- 100.0% $ 9,411,861
------- -------------
------- -------------
</TABLE>
- ------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR -- American Depository Receipt
DEM -- Deutsche Mark
----------------
37
<PAGE>
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
- ---------------------------------------------------------------------------
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
USD 4,546 DEM 8,000 03/11/98 $ 27
USD 1,712 DEM 3,000 03/11/98 3
-------
30
-------
<CAPTION>
GROSS
UNREALIZED
DEPRECIATION
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEM 322,000 USD 182,343 11/18/97 (492)
DEM 18,000 USD 10,093 03/11/98 (198)
FIM 60,000 USD 11,192 03/11/98 (254)
GBP 3,000 USD 4,804 03/11/98 (2)
ITL 17,000,000 USD 9,578 03/11/98 (250)
NLG 47,000 USD 23,376 03/11/98 (472)
*SEK 1,998,000 USD 248,817 10/27/97 (14,791)
*SEK 110,000 USD 14,031 10/27/97 (482)
SEK 26,000 USD 3,311 03/11/98 (134)
*USD 279,094 SEK 2,108,000 10/27/97 (974)
-------
(18,049)
-------
Net Unrealized Depreciation............................. $ (18,019)
-------
-------
</TABLE>
- -------------
* Represents open forward foreign currency and offsetting open forward foreign
currency contracts that do not have additional market risk but have continued
counterparty settlement risk
<TABLE>
<S> <C> <C>
DEM -- Deutsche Mark ITL -- Italian Lira SEK -- Swedish Krona
FIM -- Finnish Markka NGL -- Netherlands Guilder USD -- United States Dollar
GBP -- Great British Pound
</TABLE>
See Notes to Financial Statements
- ----------------
38
<PAGE>
- ----------------
SEASONS SERIES TRUST
ASSET ALLOCATION:
DIVERSIFIED GROWTH
PORTFOLIO INVESTMENT PORTFOLIO -- SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 69.6% SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 6.9%
APPAREL & TEXTILES -- 0.0%
Onward Kashiyama Co. Ltd. ............................ 1,000 $ 14,419
AUTOMOTIVE -- 2.1%
Bayerische Motoren Werke AG+ ......................... 101 85,998
Bridgestone Corp. .................................... 1,000 24,033
Cycle & Carriage Ltd. ................................ 1,000 6,048
Edaran Otomobil Nasional Bhd.......................... 2,000 8,014
Lear Corp.+ .......................................... 6,200 305,350
Magna International, Inc., Class A ADR................ 498 34,424
Michelin SA, Class B.................................. 659 37,434
HOUSING -- 0.8%
Cemex SA de CV........................................ 6,844 35,850
CRH PLC............................................... 4,826 55,041
Electrolux AB, Series B............................... 145 11,333
Lafarge SA............................................ 644 47,198
Matsushita Electric Works Ltd. ....................... 4,000 41,767
RETAIL -- 4.0%
Fuji Photo Film Co., Ltd. ............................ 1,000 41,270
Ito Yokado Co. Ltd. .................................. 1,000 54,197
Kmart Corp.+ ......................................... 19,900 278,600
Lowe's Cos., Inc. .................................... 8,100 314,887
Office Max, Inc.+ .................................... 15,000 227,813
Vendex International NV............................... 786 46,600
-------------
1,670,276
-------------
CONSUMER STAPLES -- 6.4%
FOOD, BEVERAGE & TOBACCO -- 6.0%
B.A.T. Industries PLC................................. 8,276 72,464
Bass PLC+ ............................................ 2,100 28,309
Dimon, Inc. .......................................... 13,100 327,500
Dole Food, Inc. ...................................... 6,500 293,719
Fomento Economico Mexicano SA de CV, Class B+ ........ 2,750 23,571
Goodman Fielder Ltd. ................................. 19,296 31,238
Nestle SA............................................. 52 72,437
Quaker Oats Co. ...................................... 5,900 297,212
RJR Nabisco Holdings Corp. ........................... 8,900 305,937
HOUSEHOLD PRODUCTS -- 0.4%
KAO Corp. ............................................ 4,000 58,010
Unilever PLC.......................................... 1,543 45,059
-------------
1,555,456
-------------
</TABLE>
----------------
39
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY -- 4.3%
ENERGY SERVICES -- 0.3%
Petroleo Brasileiro SA ADR* .......................... 200 $ 5,623
Petroleo Brasileiro SA ADR............................ 800 22,350
Shell Transport & Trading Co. PLC..................... 6,873 50,604
ENERGY SOURCES -- 4.0%
Amoco Corp. .......................................... 3,100 298,762
British Petroleum Co. PLC............................. 3,824 57,654
Burmah Castrol PLC.................................... 3,353 59,798
Elf Aquitaine SA...................................... 521 69,553
ENI SpA............................................... 15,290 96,285
Occidental Petroleum.................................. 11,300 293,094
Total SA, Class B..................................... 705 80,688
-------------
1,034,411
-------------
FINANCE -- 12.4%
BANKS -- 8.0%
ABN Amro Holdings NV.................................. 1,296 26,242
Allied Irish Banks.................................... 5,685 50,264
Banco Frances del Rio de la Plata SA.................. 1,126 12,197
Bank of Ireland PLC................................... 4,136 51,690
Bank of Nova Scotia................................... 748 35,856
Bankers Trust New York Corp. ......................... 3,000 367,500
Commonwealth Bank of Australia........................ 2,146 26,546
Dao Heng Holdings Ltd. ............................... 6,000 27,061
Deutsche Bank AG...................................... 726 51,113
Development Bank of Singapore Ltd. alien shares....... 2,000 20,399
First Union Corp. .................................... 6,500 325,406
HSBC Holdings PLC..................................... 2,000 66,942
Julius Baer Holdings AG............................... 6 9,220
Schweizerische Bank-Gesellschaft+ .................... 60 70,091
Societe Generale...................................... 250 36,198
Summit Bancorp........................................ 8,100 359,944
Uniao De Barncos Brasilieros SA GDR+ ................. 300 10,988
Union Planters Corp. ................................. 5,500 307,313
United Overseas Bank Ltd. alien shares................ 5,000 36,940
Westpac Banking Corp., Ltd. .......................... 8,693 54,903
FINANCIAL SERVICES -- 3.1%
Acom Co. Ltd.* ....................................... 200 10,425
Ahmanson (H.F.) & Co. ................................ 5,300 301,106
Cetelem+ ............................................. 218 24,840
Credit Local de France+ .............................. 402 38,081
Guoco Group Ltd. ..................................... 4,000 15,973
ING Groep NV.......................................... 1,234 56,669
Washington Mutual, Inc. .............................. 4,470 311,783
INSURANCE -- 1.3%
CIGNA Corp. .......................................... 600 111,750
Norwich Union PLC+.................................... 4,217 22,848
Schweizerische Rueckversicherungs-Gesellschaft........ 15 22,494
USF&G Corp. .......................................... 5,900 135,331
</TABLE>
- ----------------
40
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
INSURANCE (CONTINUED)
Zurich Versicherungs-Gesellschaft..................... 43 $ 18,715
-------------
3,016,828
-------------
HEALTHCARE -- 3.3%
DRUGS -- 2.0%
Astra AB, Class A..................................... 1,208 22,289
Glaxo Wellcome PLC.................................... 1,000 22,299
Novartis AG ADR....................................... 27 41,399
Pharmacia & Upjohn, Inc. ............................. 7,700 281,050
Pharmacia & Upjohn, Inc. (SEK)........................ 836 30,300
Sankyo Co. Ltd. ...................................... 2,000 69,280
Santen Pharmaceutical Co.+ ........................... 1,000 18,812
HEALTH SERVICES -- 1.3%
Wellpoint Health Networks, Inc., Class A.............. 5,500 318,656
-------------
804,085
-------------
INDUSTRIAL & COMMERCIAL -- 11.5%
AEROSPACE & MILITARY TECHNOLOGY -- 1.9%
Boeing Co. ........................................... 4,800 261,300
General Motors Corp., Class H......................... 300 19,838
Northrop Grumman Corp.+ .............................. 1,200 145,650
Rolls Royce Ltd. PLC.................................. 7,061 28,544
BUSINESS SERVICES -- 1.7%
Dai Nippon Printing Co., Ltd. ........................ 2,000 42,761
Kurita Water Industries Ltd. ......................... 1,000 19,972
Ogden Corp. .......................................... 13,300 314,212
VA Technologie AG..................................... 137 29,371
Yamato Transport Co. Ltd. ............................ 2,000 24,530
MACHINERY -- 0.6%
Mannesmann AG......................................... 108 51,465
Molins PLC............................................ 1,520 10,784
Rieter Holdings Ltd. AG............................... 67 31,049
Sandvik AB, Class B................................... 1,460 50,703
MULTI-INDUSTRY -- 3.5%
Alfa, SA de CV, Class A............................... 6,050 56,840
BTR Ltd. PLC.......................................... 8,492 34,507
Compagnie Generale des Eaux........................... 377 44,356
Cookson Group PLC..................................... 2,900 11,777
Hercules, Inc. ....................................... 5,500 273,625
Securicor Group PLC+ ................................. 4,497 19,506
Smiths Industries..................................... 2,766 41,043
Sungei Way Holdings Bhd. ............................. 9,000 8,267
Swire Pacific Ltd., Class A........................... 2,000 15,314
Tomkins PLC........................................... 8,275 46,435
Whitman Corp. ........................................ 10,900 297,025
TRANSPORTATION -- 3.8%
ABB AG+ .............................................. 8 11,782
Burlington Northern Santa Fe Corp. ................... 3,000 289,875
</TABLE>
----------------
41
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
TRANSPORTATION (CONTINUED)
Delta Air Lines, Inc. ................................ 3,400 $ 320,238
KLM Royal Dutch Air Lines NV.......................... 830 28,983
Norfolk Southern Corp. ............................... 2,600 268,450
-------------
2,798,202
-------------
INFORMATION & ENTERTAINMENT -- 2.5%
BROADCASTING & MEDIA -- 1.2%
Times Mirror Co., Series A............................ 5,300 291,169
ENTERTAINMENT PRODUCTS -- 1.1%
Polaroid Corp. ....................................... 5,000 255,937
LEISURE & TOURISM -- 0.2%
Hutchison Whampoa Ltd. ............................... 5,000 49,270
Resorts World Bhd. ................................... 2,000 4,377
-------------
600,753
-------------
INFORMATION TECHNOLOGY -- 11.5%
COMMUNICATION EQUIPMENT -- 0.3%
Newbridge Networks Corp. ADR+......................... 700 41,887
Nokia Corp., Class A ADR.............................. 470 44,682
COMPUTERS & BUSINESS EQUIPMENT -- 4.6%
Canon, Inc. .......................................... 3,000 87,760
Hewlett-Packard Co. .................................. 4,900 340,856
International Business Machines Corp. ................ 3,000 317,812
NCR Corp.+ ........................................... 10,000 349,375
Ricoh Co. Ltd. ....................................... 1,000 15,000
ELECTRONICS -- 2.6%
Dixons Group PLC...................................... 900 9,259
General Electric Co. PLC.............................. 7,905 49,713
Murata Manufacturing Co. Ltd. ........................ 1,000 43,258
Omron Corp............................................ 2,000 41,932
Philips Electronics NV................................ 877 74,203
SGS Thomson Microelectronics NV+ ..................... 738 69,280
Tokyo Electron Ltd. .................................. 1,000 61,076
Vishay Intertechnology, Inc.+ ........................ 10,655 281,692
SOFTWARE -- 1.4%
Computer Associates International, Inc. .............. 4,800 344,700
TELECOMMUNICATIONS -- 2.6%
Deutsche Telekom AG................................... 4,247 82,202
Ericsson (L.M.) Telecommunications Co., Series B
ADR.................................................. 971 46,647
Northern Telecom Ltd. ................................ 543 56,950
Portugal Telecom SA................................... 1,605 69,618
PT Telekomunikasi Indonesia ADR....................... 193 4,318
U.S. West Communications Group........................ 7,500 288,750
Vodafone Group PLC.................................... 14,227 76,394
-------------
2,797,364
-------------
</TABLE>
- ----------------
42
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
MATERIALS -- 6.2%
CHEMICALS -- 0.8%
Akzo-Nobel NV+ ....................................... 348 $ 59,466
Bayer AG+ ............................................ 1,559 62,071
Ciba Specialty Chemicals AG+ ......................... 488 47,142
Shin-Etsu Chemical Co. Ltd.+ ......................... 1,000 27,513
FOREST PRODUCTS -- 3.9%
Boise Cascade Corp. .................................. 7,400 311,262
International Paper Co. .............................. 4,700 258,794
Mayr-Melnhof Karton AG................................ 80 4,773
Svenska Cellulosa AB, Class B......................... 1,899 47,929
Unisource Worldwide, Inc. ............................ 16,900 321,100
METALS & MINERALS -- 1.5%
Freeport Copper & Gold, Inc., Class B................. 10,100 291,006
Kawasaki Steel Corp. ................................. 8,000 15,315
Rio Tinto Corp. PLC................................... 3,615 57,359
-------------
1,503,730
-------------
REAL ESTATE -- 2.7%
REAL ESTATE COMPANIES -- 0.7%
Amoy Properties Ltd. ................................. 19,500 21,294
Cheung Kong Holdings Ltd. ............................ 5,000 56,216
Security Capital Group, Inc., Class B................. 2,300 79,063
REAL ESTATE INVESTMENT TRUSTS -- 2.0%
Beacon Properties Corp. .............................. 3,700 169,506
Equity Residential Properties Trust................... 5,800 316,463
-------------
642,542
-------------
UTILITIES -- 1.9%
ELECTRIC UTILITIES -- 0.5%
Electricidad de Portugal SA........................... 200 3,434
Hong Kong Electric Holdings Ltd. ..................... 2,000 7,444
Scottish Power PLC.................................... 7,802 60,375
Veba AG............................................... 1,033 60,362
GAS & PIPELINE UTILITIES -- 0.1%
Hong Kong & China Gas Co. Ltd.+ ...................... 6,000 12,368
TELEPHONE -- 1.3%
Sprint Corp. ......................................... 6,200 310,000
-------------
453,983
-------------
TOTAL COMMON STOCK (cost $15,200,136)................. 16,877,630
-------------
</TABLE>
----------------
43
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 19.0% AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 0.4%
RETAIL -- 0.4%
Rite Aid Corp. 6.70% 2001............................. $ 100,000 $ 100,635
-------------
ENERGY -- 0.8%
ENERGY SERVICES -- 0.4%
Petroleum Geo Services ASA 7.50% 2007................. 100,000 103,332
ENERGY SOURCES -- 0.4%
Saga Petroleum ASA 7.25% 2027......................... 40,000 39,449
YPF Sociedad Anonima 7.75% 2007....................... 45,000 45,067
-------------
187,848
-------------
FINANCE -- 3.0%
BANKS -- 0.3%
Merita Bank Ltd 6.50% 2006............................ 40,000 38,960
Societe Generale New York 7.40% 2006.................. 30,000 31,074
FINANCIAL SERVICES -- 2.3%
Advanta Mortgage Loan Trust 6.69% 2017................ 25,000 25,223
Advanta Mortgage Loan Trust 7.05% 2021................ 25,000 25,343
Amresco Residential Securities 6.57% 2018............. 20,000 20,097
Carco Auto Loan Master Trust 6.69% 2004............... 20,000 20,034
Green Tree Financial Corp. 6.93% 2028................. 55,000 55,859
Greentree Recreational Equipment 6.55% 2028........... 42,103 42,478
Harley Davidson Eagle Motorcycle Trust 6.20% 2003..... 150,000 151,559
Money Store, Inc. 8.05% 2002.......................... 100,000 103,552
PNC Mortgage Securities Corp. 6.60% 2027.............. 25,000 25,037
Salomon, Inc. 7.00% 1999.............................. 100,000 101,196
INSURANCE -- 0.4%
Travelers Capital II 7.75% 2036....................... 100,000 100,163
-------------
740,575
-------------
INDUSTRIAL & COMMERCIAL -- 0.7%
AEROSPACE & MILITARY TECHNOLOGY -- 0.7%
Lockheed Martin Corp. 7.25% 2006...................... 115,000 119,054
Raytheon Co. 6.45% 2002............................... 35,000 34,952
Raytheon Co. 7.20% 2027............................... 5,000 5,011
-------------
159,017
-------------
INFORMATION & ENTERTAINMENT -- 0.5%
BROADCASTING & MEDIA -- 0.5%
News America Holdings, Inc. 7.70% 2025................ 100,000 98,115
Time Warner Entertainment Co. LP 8.38% 2033........... 20,000 21,460
-------------
119,575
-------------
</TABLE>
- ----------------
44
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY -- 0.8%
TELECOMMUNICATIONS -- 0.8%
Compania de Telecomunicaciones 7.63% 2006............. $ 100,000 $ 105,217
SK Telecom Ltd. 7.75% 2004............................ 100,000 101,745
-------------
206,962
-------------
MUNICIPAL BONDS -- 0.2%
MUNICIPAL BONDS -- 0.2%
New Jersey Economic Development Authority, Series A
7.43% 2029........................................... 40,000 42,037
-------------
U.S. GOVERNMENT & AGENCIES -- 11.9%
U.S. GOVERNMENT & AGENCIES -- 11.9%
Federal National Mortgage Association 5.50% 2011...... 86,057 82,533
Federal National Mortgage Association 7.00% 2023...... 10,000 9,387
Federal National Mortgage Association 7.00% 2027...... 49,500 49,299
Federal National Mortgage Association 8.50% 2019...... 35,000 38,019
Federal National Mortgage Association 9.00% 2026...... 37,947 40,413
Federal National Mortgage Association 9.00% 2026...... 39,590 42,065
Government National Mortgage Association 5.50% TBA.... 80,000 79,925
Government National Mortgage Association 6.88% 2023... 21,332 21,955
Government National Mortgage Association 6.88% 2025... 43,562 44,706
Government National Mortgage Association 7.13% 2025... 20,284 20,873
Government National Mortgage Association 7.38% 2026... 22,972 23,718
Government National Mortgage Association 7.50% 2026... 344,563 350,483
Government National Mortgage Association 7.50% 2026... 112,934 114,874
Government National Mortgage Association 7.50% 2027... 360,441 372,606
Government National Mortgage Association 8.50% 2026... 22,051 23,071
Government National Mortgage Association 8.50% 2026... 489,694 512,343
Government National Mortgage Association 8.50% 2026... 478,254 500,374
United States Treasury Bonds 6.38% 2027............... 220,000 219,036
United States Treasury Notes 5.88% 1999............... 255,000 255,199
United States Treasury Notes 6.13% 2007............... 25,000 25,012
United States Treasury Notes 6.25% 2002............... 55,000 55,507
-------------
2,881,398
-------------
UTILITIES -- 0.7%
ELECTRIC UTILITIES -- 0.7%
Arizona Public Services Co. 6.75% 2006................ 160,000 160,381
-------------
TOTAL BONDS & NOTES (cost $4,528,213)................. 4,598,428
-------------
<CAPTION>
WARRANTS -- 0.0% SHARES
<S> <C> <C>
- -------------------------------------------------------------------------------------
INDUSTRIAL & COMMERCIAL -- 0.0%
MULTI-INDUSTRY -- 0.0%
Compagnie Generale des Eaux (cost $0)................. 20 11
-------------
TOTAL INVESTMENT SECURITIES (cost $19,728,349)........ 21,476,069
-------------
</TABLE>
----------------
45
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENT -- 10.9% AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 10.9%
Agreement with Union Bank of Switzerland, bearing
interest of 6.05% dated 9/30/97, to be repurchased
10/01/97 in the amount of $2,641,444 and
collateralized by $1,849,000 U.S. Treasury Notes
12.00% due 8/15/13
(cost $2,641,000).................................... $ 2,641,000 $ 2,641,000
-------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS -- (cost $22,369,349) 99.50% 24,117,069
Other assets less liabilities -- 0.5 116,031
------- -------------
NET ASSETS -- 100.00% $ 24,233,100
------- -------------
------- -------------
</TABLE>
- -------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
SEK -- Swedish Krona
TBA -- Securities purchased on a forward commitment with an approximate
principal amount and no definitive maturity date. The actual principal
amount and maturity date will be determined upon settlement date.
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
- ----------------------------------------------------------------------------------------
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
*JPY 9,000,000 USD 81,213 11/20/97 $ 6,081
*JPY 5,475,000 USD 48,893 11/20/97 3,187
-------
9,268
-------
<CAPTION>
GROSS
UNREALIZED
DEPRECIATION
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
*USD 48,217 JPY 5,475,000 11/20/97 (2,511)
*USD 79,260 JPY 9,000,000 11/20/97 (4,127)
USD 87,237 FRF 540,000 02/11/98 (4,552)
USD 185,623 FRF 1,100,000 02/11/98 (1,356)
-------
(12,548)
-------
Net Unrealized Depreciation.......................................... $ (3,280)
-------
-------
</TABLE>
- -------------
* Represents open forward foreign currency and offsetting open forward foreign
currency contracts that do not have additional market risk but have continued
counterparty settlement risk
FRF -- French Franc
JPY -- Japanese Yen
USD -- United States Dollar
See Notes to Financial Statements
- ----------------
46
<PAGE>
- ------------------
SEASONS SERIES TRUST
STOCK PORTFOLIO INVESTMENT PORTFOLIO -- SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 94.4% SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
CONSUMER DISCRETIONARY -- 6.5%
APPAREL & TEXTILES -- 0.2%
Louis Vuitton........................... 210 $ 44,636
HOUSING -- 0.8%
Masco Corp. ............................ 3,300 151,181
RETAIL -- 5.5%
Circuit City Stores, Inc.+ ............. 700 28,219
Corporate Express, Inc.+ ............... 4,000 84,500
CVS Corp. .............................. 1,707 97,086
Dillards, Inc. ......................... 2,900 127,056
Hennes & Mauritz AB, Class B............ 2,000 87,381
Home Depot, Inc. ....................... 2,500 130,312
Kohl's Corp.+ .......................... 1,400 99,400
Safeway, Inc.+ ......................... 3,200 174,000
Tag Heuer International SA ADR+ ........ 11,600 153,700
Wal-Mart Stores, Inc. .................. 3,600 131,850
-----------
1,309,321
-----------
CONSUMER STAPLES -- 5.1%
FOOD, BEVERAGE & TOBACCO -- 3.4%
Hershey Foods Corp. .................... 700 39,550
PepsiCo, Inc. .......................... 5,100 206,869
Philip Morris Cos., Inc. ............... 6,900 286,781
Sara Lee Corp. ......................... 2,800 144,200
HOUSEHOLD PRODUCTS -- 1.7%
Kimberly-Clark Corp. ................... 3,200 156,600
Kimberly-Clark de Mexico SA de CV ADR... 14,800 77,429
Procter & Gamble Co. ................... 1,600 110,500
-----------
1,021,929
-----------
ENERGY -- 3.8%
ENERGY SERVICES -- 2.6%
Halliburton Co. ........................ 2,100 109,200
Royal Dutch Petroleum Co. .............. 6,000 333,000
Schlumberger Ltd. ...................... 1,100 92,606
ENERGY SOURCES -- 1.2%
Cooper Cameron Corp.+ .................. 800 57,450
Mobil Corp. ............................ 2,400 177,600
-----------
769,856
-----------
</TABLE>
----------------
47
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- ----------------------------------------------------------------
<S> <C> <C>
FINANCE -- 18.4%
BANKS -- 5.8%
Barnett Banks, Inc. .................... 1,200 $ 84,900
BCA Fideuram SpA........................ 24,000 100,107
Citicorp................................ 1,500 200,906
First Union Corp.+ ..................... 1,800 90,113
Mellon Bank Corp. ...................... 1,300 71,175
Northern Trust Corp. ................... 1,900 112,338
Norwest Corp. .......................... 2,900 177,625
Toronto Dominion Bank................... 3,900 133,087
Wells Fargo & Co. ...................... 700 192,500
FINANCIAL SERVICES -- 6.1%
Federal Home Loan Mortgage Corp. ....... 17,100 602,775
Federal National Mortgage Association... 6,200 291,400
H&R Block, Inc. ........................ 3,500 135,187
SLM Holding Corp. ...................... 300 46,350
Travelers Group, Inc. .................. 2,200 150,150
INSURANCE -- 6.5%
Ace Ltd. ............................... 4,500 423,000
Aetna, Inc. ............................ 700 57,006
Exel Ltd. ORD........................... 1,900 113,169
Fairfax Financial Holdings Ltd.+ ....... 460 127,477
Mutual Risk Management Ltd. ............ 3,100 157,519
Partner Residential Holding Corp. ...... 800 34,450
St. Paul Cos., Inc. .................... 1,600 130,500
UNUM Corp. ............................. 5,900 269,188
-----------
3,700,922
-----------
HEALTHCARE -- 11.4%
DRUGS -- 7.7%
American Home Products Corp. ........... 1,700 124,100
Amgen, Inc.+ ........................... 1,400 67,113
Astra AB, Class B....................... 5,966 105,363
Biogen, Inc.+ .......................... 2,100 68,119
Bristol-Myers Squibb Co. ............... 2,000 165,500
Genentech, Inc.+ ....................... 2,600 151,125
Johnson & Johnson....................... 1,400 80,675
Merck & Co., Inc. ...................... 2,300 229,856
Novartis AG ADR......................... 133 203,926
Pfizer, Inc. ........................... 3,800 228,237
Warner-Lambert Co. ..................... 1,000 134,938
HEALTH SERVICES -- 1.5%
HEALTHSOUTH Corp.+ ..................... 6,400 170,800
Pacificare Health Systems, Inc., Class
B+ .................................... 900 61,313
United Healthcare Corp. ................ 1,300 65,000
MEDICAL PRODUCTS -- 2.2%
Baxter International, Inc. ............. 2,400 125,400
Boston Scientific Corp.+ ............... 1,200 66,225
Medtronic, Inc. ........................ 2,600 122,200
</TABLE>
- ----------------
48
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- ----------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
MEDICAL PRODUCTS (CONTINUED)
Tenet Healthcare Corp.+ ................ 4,300 $ 125,237
-----------
2,295,127
-----------
INDUSTRIAL & COMMERCIAL -- 14.3%
AEROSPACE & MILITARY TECHNOLOGY -- 1.4%
AlliedSignal, Inc. ..................... 6,700 284,750
BUSINESS SERVICES -- 4.6%
CUC International, Inc.+ ............... 7,400 229,400
Hagemeyer NV............................ 1,000 50,997
Ikon Office Solutions, Inc. ............ 3,200 81,800
Newmont Mining Corp. ................... 3,600 161,775
Rentokil Initial PLC+ .................. 29,500 121,776
Service Corp. International............. 3,400 109,438
United Engineers Bhd. .................. 12,000 38,468
USA Waste Services, Inc.+ .............. 3,000 119,625
MACHINERY -- 3.3%
Danaher Corp. .......................... 6,700 388,600
Teleflex, Inc. ......................... 4,300 148,887
TriMas Corp. ........................... 3,600 109,800
MULTI-INDUSTRY -- 4.6%
Berkshire Hathaway, Inc. ............... 6 268,800
Swire Pacific Ltd., Class A............. 8,000 61,256
Tomkins PLC............................. 45,000 252,518
Tyco International Ltd. ................ 3,173 260,384
Unilever NV............................. 400 85,050
TRANSPORTATION -- 0.4%
Tranz Rail Holdings, Inc. .............. 5,000 82,500
-----------
2,855,824
-----------
INFORMATION & ENTERTAINMENT -- 8.3%
BROADCASTING & MEDIA -- 4.6%
Elsevier NV............................. 3,700 53,726
Interpublic Group of Cos., Inc. ........ 3,050 156,503
Modern Times Group AB+ ................. 1,500 11,862
Reuters Holdings PLC ADR................ 900 64,125
Tribune Co. ............................ 3,700 197,256
Ver Ned Uitgevers....................... 8,600 199,628
Vodafone Group PLC...................... 13,300 71,416
Vodafone Group PLC ADR.................. 3,300 177,375
ENTERTAINMENT PRODUCTS -- 0.7%
Mattel, Inc. ........................... 4,300 142,438
LEISURE & TOURISM -- 3.0%
Carnival Corp., Class A................. 2,900 134,125
Disney (Walt) Co. ...................... 2,600 209,625
Granada Group PLC....................... 7,500 105,881
Hutchison Whampoa Ltd. ................. 9,000 88,686
</TABLE>
----------------
49
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- ----------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (CONTINUED)
LEISURE & TOURISM (CONTINUED)
McDonald's Corp. ....................... 1,500 $ 71,437
-----------
1,684,083
-----------
INFORMATION TECHNOLOGY -- 22.2%
BROADCASTING & MEDIA -- 0.7%
Grupo Lusacell SA, Series D ADR+ ....... 11,200 140,000
COMMUNICATION EQUIPMENT -- 3.3%
3Com Corp.+ ............................ 4,000 205,000
Cisco Systems, Inc.+ ................... 2,400 175,350
Cox Communications, Inc., Class A+ ..... 3,300 90,956
Telecomunicacoes Brasileras SA ADR...... 1,000 128,750
WorldCom, Inc.+ ........................ 4,800 169,800
COMPUTERS & BUSINESS EQUIPMENT -- 2.2%
Automatic Data Processing, Inc. ........ 2,700 135,000
Compaq Computer Corp.+ ................. 300 22,425
Dell Computer Corp.+ ................... 800 77,500
EMC Corp.+ ............................. 800 46,700
Hewlett-Packard Co. .................... 2,300 159,994
ELECTRONICS -- 8.5%
Analog Devices, Inc.+ .................. 3,400 113,900
General Electric Co. ................... 8,400 571,725
Getronics NV+ .......................... 2,800 87,645
Intel Corp. ............................ 2,500 230,781
Linear Technology Corp. ................ 2,700 185,625
Maxim Integrated Products, Inc.+ ....... 2,900 207,169
Molex, Inc. Class A..................... 2,325 94,744
Motorola, Inc. ......................... 1,700 122,187
National Semiconductor Corp.+ .......... 1,700 69,700
Xilinx, Inc.+ .......................... 600 30,375
SOFTWARE -- 6.8%
BMC Software, Inc.+ .................... 4,000 259,000
First Data Corp. ....................... 6,900 259,181
McAfee Associates, Inc.+ ............... 2,800 148,400
Microsoft Corp.+ ....................... 2,100 277,856
Oracle Systems Corp.+ .................. 5,750 209,516
Parametric Technology Corp.+ ........... 4,800 211,800
TELECOMMUNICATIONS -- 0.2%
Ericsson (L.M.) Telecommunications Co.,
Class B ADR............................ 700 33,556
-----------
4,464,635
-----------
MATERIALS -- 1.1%
CHEMICALS -- 0.5%
Great Lakes Chemical Corp. ............. 2,000 98,625
METALS & MINERALS -- 0.6%
Anglo American Platinum Corp. Ltd. ..... 3,800 65,812
Pohang Iron & Steel Co., Ltd. ADR....... 300 7,725
</TABLE>
- ----------------
50
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- ----------------------------------------------------------------
<S> <C> <C>
MATERIALS (CONTINUED)
METALS & MINERALS (CONTINUED)
Rustenburg Platinum Holdings Ltd. ADR... 2,900 $ 50,247
-----------
222,409
-----------
REAL ESTATE -- 1.7%
REAL ESTATE COMPANIES -- 0.5%
Security Capital US Realty+ ............ 7,000 104,300
REAL ESTATE INVESTMENT TRUSTS -- 1.2%
Starwood Lodging Trust.................. 4,100 235,494
-----------
339,794
-----------
UTILITIES -- 1.6%
TELEPHONE -- 1.6%
AT&T Corp. ............................. 2,400 106,350
Telecel-Comunicacaoes Pessoais SA+ ..... 2,100 170,390
Telecom Italia Mobile SpA............... 6,200 24,604
Telecom Italia SpA...................... 4,139 16,101
-----------
317,445
-----------
TOTAL INVESTMENT SECURITIES (cost
$16,724,225)........................... 18,981,345
-----------
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 6.9% AMOUNT
<S> <C> <C>
- ----------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 3.7%
Ciesco L.P. 5.50% due 11/18/97.......... $ 350,000 347,433
Delaware Funding Corp. 5.52% due
10/15/97............................... 274,000 273,412
General Electric Capital Corp. 5.51% due
11/03/97............................... 125,000 124,369
-----------
745,214
-----------
FEDERAL AGENCY OBLIGATIONS -- 3.2%
Federal Home Loan Mortgage Discount
Notes 5.39% due 11/13/97............... 122,000 121,215
Federal Home Loan Mortgage Discount
Notes 5.41% due 10/14/97............... 34,000 33,934
Federal Home Loan Mortgage Discount
Notes 5.44% due 11/13/97............... 90,000 89,415
Federal National Mortgage Association
Discount Notes 5.41% due 10/14/97...... 110,000 109,785
Federal National Mortgage Association
Discount Notes 5.46% due 10/24/97...... 204,000 203,288
Federal National Mortgage Association
Discount Notes 5.46% due 10/29/97...... 69,000 68,707
United States Treasury Bills 4.95% due
11/13/97............................... 26,000 25,846
-----------
652,190
-----------
TOTAL SHORT-TERM SECURITIES (cost
$1,397,404)............................ 1,397,404
-----------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $18,121,629) 101.3 % 20,378,749
Liabilities in excess of other assets
-- (1.3) (263,170)
------ -----------
NET ASSETS -- 100.00% $20,115,579
------ -----------
------ -----------
</TABLE>
- ------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR -- American Depository Receipt
See Notes to Financial Statements
----------------
51
<PAGE>
- ----------------
SEASONS SERIES TRUST
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MULTI- MULTI- ASSET
MULTI- MANAGED MANAGED MULTI- ALLOCATION:
MANAGED MODERATE INCOME/ MANAGED DIVERSIFIED
GROWTH GROWTH EQUITY INCOME GROWTH STOCK
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment securities, at value*................. $13,451,805 $14,108,017 $10,342,564 $ 8,424,961 $ 21,476,069 $18,981,345
Short-term securities*........................... 1,202,000 1,139,000 200,000 25,000 -- 1,397,404
Repurchase agreements (cost equals market)....... 880,000 1,284,000 1,494,000 926,000 2,641,000 --
Cash............................................. 93,925 76,983 31,021 8,070 15,177 793
Foreign currency................................. 7,082 12,217 15,121 19,153 12,888 179
Receivables for --
Sales of investments........................... 158,504 240,572 271,879 293,540 356,489 39,162
Foreign currency contracts..................... 121,387 212,432 257,950 288,291 43,305 35,853
Fund shares sold............................... 84,917 42,333 45,288 34,172 96,525 82,864
Dividends and accrued interest................. 55,028 93,738 98,919 104,621 89,408 27,435
Deferred organizational expenses................. 14,596 14,596 14,596 14,596 14,596 14,596
Due from adviser................................. 6,189 6,183 7,330 7,924 10,661 4,341
Prepaid expenses................................. 125 131 121 78 197 165
Unrealized appreciation on forward foreign
currency
contracts...................................... 95 65 50 30 9,268 --
-------------------------------------------------------------------------------
16,075,653 17,230,267 12,778,839 10,146,436 24,765,583 20,584,137
-------------------------------------------------------------------------------
LIABILITIES:
Payables for --
Purchases of investments....................... 854,065 858,916 505,699 404,963 435,837 394,723
Foreign currency contracts..................... 120,961 211,688 257,045 287,280 43,491 36,086
Management fees................................ 10,159 10,201 7,413 5,545 15,408 12,812
Fund shares redeemed........................... 574 616 587 360 984 815
Other accrued expenses........................... 23,033 22,945 20,020 18,378 24,215 24,122
Unrealized depreciation on forward foreign
currency
contracts...................................... 15,252 17,978 17,603 18,049 12,548 --
-------------------------------------------------------------------------------
1,024,044 1,122,344 808,367 734,575 532,483 468,558
-------------------------------------------------------------------------------
NET ASSETS....................................... $15,051,609 $16,107,923 $11,970,472 $ 9,411,861 $ 24,233,100 $20,115,579
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Shares of beneficial interest outstanding
(unlimited shares authorized).................. 1,244,273 1,362,068 1,068,831 857,296 2,086,410 1,604,205
Net asset value per share........................ $12.10 $11.83 $11.20 $10.98 $11.61 $12.54
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS:
Capital paid in.................................. $13,414,951 $14,574,353 $11,105,743 $ 8,757,941 $ 21,997,138 $17,565,423
Accumulated undistributed net investment
income......................................... 72,266 114,646 151,137 164,736 185,026 28,458
Accumulated undistributed net realized gain on
investments.................................... 292,582 255,690 121,991 99,379 306,540 264,385
Unrealized appreciation on investments........... 1,286,657 1,180,578 608,448 406,887 1,747,720 2,257,120
Unrealized foreign exchange gain (loss) on other
assets and liabilities......................... (14,847) (17,344) (16,847) (17,082) (3,324) 193
-------------------------------------------------------------------------------
$15,051,609 $16,107,923 $11,970,472 $ 9,411,861 $ 24,233,100 $20,115,579
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
- ---------------
* Cost
Investment securities.......................... $12,165,148 $12,927,439 $ 9,734,116 $ 8,018,074 $ 19,728,349 $16,724,225
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Short-term securities.......................... $ 1,202,000 $ 1,139,000 $ 200,000 $ 25,000 $ -- $ 1,397,404
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- ----------------
52
<PAGE>
- ----------------
SEASONS SERIES TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MULTI- MULTI- ASSET
MULTI- MANAGED MANAGED MULTI- ALLOCATION:
MANAGED MODERATE INCOME/ MANAGED DIVERSIFIED
GROWTH GROWTH EQUITY INCOME GROWTH STOCK
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME:
Interest............................................ $ 109,832 $ 154,053 $ 183,977 $ 194,521 $ 150,681 $ 29,332
Dividends........................................... 18,541 16,064 10,625 6,053 123,357 73,605
--------------------------------------------------------------------------
Total income*..................................... 128,373 170,117 194,602 200,574 274,038 102,937
--------------------------------------------------------------------------
EXPENSES:
Management fees..................................... 38,709 38,967 30,899 26,033 62,529 52,320
Custodian fees...................................... 14,407 14,374 13,831 13,200 25,236 14,205
Auditing fees....................................... 11,205 11,205 10,175 9,145 12,860 11,830
Reports to investors................................ 4,665 4,725 3,820 2,975 6,855 5,950
Legal fees.......................................... 2,579 2,579 2,491 2,403 2,755 2,623
Amortization of organizational expenses............. 640 640 640 640 640 640
Trustees' fees...................................... 313 313 269 257 570 514
Other expenses...................................... 823 823 823 823 823 823
--------------------------------------------------------------------------
Total expenses before reimbursement............... 73,341 73,626 62,948 55,476 112,268 88,905
Expenses reimbursed by the investment adviser..... (17,234) (18,155) (19,483) (19,638) (23,256) (14,426)
--------------------------------------------------------------------------
Net investment income................................. 72,266 114,646 151,137 164,736 185,026 28,458
--------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain on investments.................... 289,667 248,776 114,736 89,716 301,569 268,785
Net realized foreign exchange gain (loss) on
other assets and liabilities...................... 2,915 6,914 7,255 9,663 4,971 (4,400)
Change in unrealized appreciation/depreciation
on investments.................................... 1,286,657 1,180,578 608,448 406,887 1,747,720 2,257,120
Change in unrealized foreign exchange gain/loss
on other assets and liabilities................... (14,847) (17,344) (16,847) (17,082) (3,324) 193
--------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currencies.............................. 1,564,392 1,418,924 713,592 489,184 2,050,936 2,521,698
--------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS........................... $1,636,658 $1,533,570 $ 864,729 $ 653,920 $2,235,962 $2,550,156
--------------------------------------------------------------------------
--------------------------------------------------------------------------
- ---------------
* Net of foreign withholding taxes on interest and
dividends of........................................ $ 327 $ 255 $ 146 $ 53 $ 3,622 $ 2,519
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
----------------
53
<PAGE>
- ----------------
SEASONS SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MULTI- MULTI- ASSET
MULTI- MANAGED MANAGED MULTI- ALLOCATION:
MANAGED MODERATE INCOME/ MANAGED DIVERSIFIED
GROWTH GROWTH EQUITY INCOME GROWTH STOCK
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income............................. $ 72,266 $ 114,646 $ 151,137 $ 164,736 $ 185,026 $ 28,458
Net realized gain on investments.................. 289,667 248,776 114,736 89,716 301,569 268,785
Net realized foreign exchange gain (loss) on
other assets and liabilities.................... 2,915 6,914 7,255 9,663 4,971 (4,400)
Change in unrealized appreciation/depreciation
on investments.................................. 1,286,657 1,180,578 608,448 406,887 1,747,720 2,257,120
Change in unrealized foreign exchange gain/loss
on other assets and liabilities................. (14,847) (17,344) (16,847) (17,082) (3,324) 193
------------------------------------------------------------------------------
Net increase in net assets resulting from
operations...................................... 1,636,658 1,533,570 864,729 653,920 2,235,962 2,550,156
------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold......................... 13,642,629 14,749,732 11,180,065 8,816,050 22,190,929 18,345,542
Cost of shares repurchased........................ (227,678) (175,379) (74,322) (58,109) (193,791) (780,119)
------------------------------------------------------------------------------
Net increase in net assets resulting from capital
share transactions.............................. 13,414,951 14,574,353 11,105,743 8,757,941 21,997,138 17,565,423
------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS...................... 15,051,609 16,107,923 11,970,472 9,411,861 24,233,100 20,115,579
NET ASSETS:
Beginning of period............................... 0 0 0 0 0 0
------------------------------------------------------------------------------
End of period..................................... $15,051,609 $16,107,923 $11,970,472 $9,411,861 $ 24,233,100 $20,115,579
------------------------------------------------------------------------------
------------------------------------------------------------------------------
- ---------------
Accumulated undistributed net investment income... $ 72,266 $ 114,646 $ 151,137 $ 164,736 $ 185,026 $ 28,458
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Shares issued and repurchased:
Sold.............................................. 1,263,766 1,377,322 1,075,680 862,751 2,103,707 1,670,466
Repurchased....................................... (19,493) (15,254) (6,849) (5,455) (17,297) (66,261)
------------------------------------------------------------------------------
Net increase...................................... 1,244,273 1,362,068 1,068,831 857,296 2,086,410 1,604,205
------------------------------------------------------------------------------
------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- ----------------
54
<PAGE>
- ----------------
SEASONS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. DESCRIPTION OF BUSINESS: Seasons Series Trust ("the Trust"), organized as a
Massachusetts business trust on October 10, 1995, is an open-end, management
investment company. It was established to provide a funding medium for certain
annuity contracts issued by Variable Annuity Account Five (the "Account"), a
separate account of Anchor National Life Insurance Company (the "Life Company"),
organized under the laws of the state of Arizona.
The Trust currently issues six separate series of shares ("Portfolios"), each of
which represents a separate managed portfolio of securities with its own
investment objective. All shares may be purchased or redeemed by the Account at
net asset value without any sales or redemption charge.
The investment objectives for each portfolio are as follows:
The MULTI-MANAGED GROWTH PORTFOLIO seeks long-term growth of capital.
The MULTI-MANAGED MODERATE GROWTH PORTFOLIO seeks long-term growth of capital,
with capital preservation as a secondary objective.
The MULTI-MANAGED INCOME/EQUITY PORTFOLIO seeks conservation of principal while
maintaining some potential for long-term growth of capital.
The MULTI-MANAGED INCOME PORTFOLIO seeks capital preservation.
The ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO seeks capital appreciation.
The STOCK PORTFOLIO seeks long-term capital appreciation, and secondarily,
increasing dividend income through investments primarily in well-established
growth companies.
SunAmerica Asset Management Corp. ("SunAmerica" or the "Adviser"), an indirect,
wholly owned subsidiary of the Life Company, serves as investment adviser for
all the Portfolios of the Trust. Janus Capital Corporation ("Janus") and
Wellington Management Company, LLP ("WMC") both serve as subadvisers for each of
the Multi-Managed Portfolios. Each of Janus and WMC is responsible for managing
one particular portion of the assets (each, a "Managed Component" or
"component") of each of the Multi-Managed Portfolios, subject to the supervision
of SunAmerica. Putnam Investment Management, Inc. ("Putnam") serves as
subadviser for the Asset Allocation: Diversified Growth Portfolio and will be
responsible for managing the Portfolio, subject to the supervision of
SunAmerica. T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as
subadviser for the Stock Portfolio and will be responsible for managing the
Portfolio, subject to the supervision of SunAmerica. (Janus, WMC, Putnam and T.
Rowe Price are referred to herein individually as a "Subadviser," and
collectively as the "Subadvisers.") In addition to being responsible for overall
supervision of each Portfolio, SunAmerica manages one or more particular
components of each of the Multi-Managed Portfolios.
Each Multi-Managed Portfolio is organized as a "non-diversified" Portfolio of
the Trust (as such term is defined under the Investment Company Act of 1940, as
amended), subject, however, to certain tax diversification requirements.
Investments in each Multi-Managed Portfolio (and redemption requests) will be
allocated among the Managed Components of such Portfolio as described in the
chart below. The Trust expects that differences in investment returns among the
Managed Components of a Multi-Managed Portfolio will cause the actual percentage
of the Portfolio's assets allocated to each component to vary from the target
allocation over the course of a calendar quarter. Accordingly, the assets of
each Multi-Managed Portfolio will be reallocated or "rebalanced" among the
Managed Components on at least a quarterly basis to restore the target
allocations for such Portfolio.
<TABLE>
<CAPTION>
Managed Components As a Target Percentage
of each Multi-Managed Portfolio
--------------------------------------------------------------
SunAmerica/ WMC/
Aggressive Janus/ SunAmerica/ Fixed
Growth Growth Balanced Income
PORTFOLIO component component component component
- --------------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Multi-Managed
Growth
Portfolio 20% 40% 20% 20%
Multi-Managed
Moderate
Growth
Portfolio 18% 28% 18% 36%
Multi-Managed
Income/
Equity
Portfolio 0% 18% 28% 54%
Multi-Managed
Income
Portfolio 0% 8% 17% 75%
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES: The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from these estimates.
In the opinion of management of the Trust, the accompanying financial statements
contain all normal and recurring adjustments
55
<PAGE>
necessary for the fair presentation of the financial position of the Trust at
September 30, 1997, and the results of its operations, the changes in its net
assets and its financial highlights for the period then ended. The following is
a summary of the significant accounting policies consistently followed by the
Trust in the preparation of its financial statements.
SECURITY VALUATIONS: Stocks are stated at value based upon closing sales prices
reported on recognized securities exchanges or, for listed securities having no
sales reported and for unlisted securities, upon last-reported bid prices.
Nonconvertible bonds, debentures, other long-term debt securities, and
short-term securities with original or remaining maturities in excess of 60 days
are valued at prices obtained for the day of valuation from a bond pricing
service of a major dealer in bonds when such prices are available; however, in
circumstances where the investment adviser deems it appropriate to do so, an
over-the-counter or exchange quotation at the mean of representative bid or
asked prices may be used. Securities traded primarily on securities exchanges
outside the United States are valued at the last sale price on such exchanges on
the day of valuation, or if there is no sale on the day of valuation, at the
last reported bid price. If a security's price is available from more than one
foreign exchange, a portfolio uses the exchange that is the primary market for
the security. Futures contracts are valued at the last sale price established
each day by the board of trade or exchange on which they are traded. Short-term
securities with 60 days or less to maturity are amortized to maturity based on
their cost to the Trust if acquired within 60 days of maturity or, if already
held by the Trust on the 60th day, are amortized to maturity based on the value
determined on the 61st day. Securities for which quotations are not readily
available are valued at fair value as determined in good faith under the
direction of the Trust's Trustees.
FOREIGN CURRENCY TRANSLATION: The books and records of the Trust are maintained
in U.S. dollars. Assets and liabilities denominated in foreign currencies and
commitments under forward foreign currency contracts are translated into U.S.
dollars at the mean of the quoted bid and asked prices of such currencies
against the U.S. dollar.
The Trust does not isolate that portion of the results of operations arising as
a result of changes in the foreign exchange rates from the changes in the market
prices of securities held at fiscal year-end. Similarly, the Trust does not
isolate the effect of changes in foreign exchange rates from the changes in the
market prices of portfolio securities sold during the year.
Realized foreign exchange gains and losses on other assets and liabilities and
change in unrealized foreign exchange gains and losses on other assets and
liabilities include realized foreign exchange gains and losses from currency
gains or losses between the trade and settlement dates of securities
transactions, the difference between the amounts of interest, dividends and
foreign withholding taxes recorded on the Trust's books and the U.S. dollar
equivalent amounts actually received or paid and changes in the unrealized
foreign exchange gains and losses relating to the other assets and liabilities
arising as a result of changes in the exchange rate.
SECURITIES TRANSACTIONS, INVESTMENT INCOME, EXPENSES, DIVIDENDS AND
DISTRIBUTIONS TO SHAREHOLDERS: As is customary in the mutual fund industry,
securities transactions are recorded on a trade date basis. Interest income is
accrued daily except when collection is not expected. Dividend income is
recorded on the ex-dividend date except for certain dividends from foreign
securities, which are recorded as soon as the Trust is informed after the
ex-dividend date. The Trust amortizes premiums and accretes discounts on fixed
income securities, as well as those original issue discounts for which
amortization is required for federal income tax purposes; gains and losses
realized upon the sale of such securities are based on their identified cost.
Portfolios which earn foreign income and capital gains may be subject to foreign
withholding taxes at various rates.
Common expenses incurred by the Trust are allocated among the Portfolios based
upon relative net assets or other appropriate allocation methods. In all other
respects, expenses are charged to each Portfolio as incurred on a specific
identification basis.
Dividends from net investment income and capital gain distributions, if any, are
paid annually.
ORGANIZATIONAL EXPENSES: Costs incurred by the Adviser in connection with the
organization and registration of the Trust amounted to $91,413. Organizational
expenses are amortized on a straight line basis by each applicable Portfolio of
the Trust over the period of benefit not to exceed 60 months from the date the
respective Portfolio commenced operations.
3. OPERATING POLICIES:
REPURCHASE AGREEMENTS: The Trust's custodian takes possession of the collateral
pledged for investments in repurchase agreements ("repo" or collectively
"repos"). The underlying collateral is valued daily on a mark-to-market basis to
assure that the value, including accrued interest, is at least equal to the
repurchase price. In the event of default of the obligation to repurchase, the
Trust has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. If the seller defaults and the value of the
collateral declines or if bankruptcy proceedings are commenced with respect to
the seller of the security,
56
<PAGE>
realization of the collateral by the Trust may be delayed or limited.
Pursuant to exemptive relief granted by the Securities and Exchange Commission,
the Portfolios are permitted to participate in joint repo transactions with
other affiliated investment companies.
As of September 30, 1997, the Multi-Managed Growth, Multi-Managed Moderate
Growth, Multi-Managed Income/Equity, and Multi-Managed Income Portfolios had a
.5%, .5%, .7%, and .1% undivided interest, respectively, which represented
$495,000, $444,000, $674,000, and $91,000, respectively, in principal amount in
a joint repo with PaineWebber, Inc. In addition, the Portfolios had .4%, .8%,
.8%, and .8% undivided interest, respectively, which represented $385,000,
$840,000, $820,000, and $835,000, respectively, in principal amount in a joint
repo with Lehman Brothers, Inc. As of such date the repos in the joint accounts
and the collateral therefore were as follows:
PaineWebber, Inc., bearing interest of 5.90% dated 9/30/97, in the principal
amount of $98,661,000 repurchase price $98,667,169 due 10/01/97 collateralized
by $50,000,000 U.S. Treasury Notes 6.25% due 4/30/01, $7,930,000 U.S. Treasury
Notes 7.375% due 11/15/97, $26,830,000 U.S. Treasury Bonds 11.25% due 2/15/15,
approximate aggregate value $100,662,448.
Lehman Brothers, Inc., bearing interest of 6.04% dated 9/30/97, in the principal
amount of $100,970,000 repurchase price $100,986,941 due 10/01/97 collateralized
by $222,305,000 U.S. Treasury Strip Bonds due 5/15/09, approximate aggregate
value $106,639,709.
FORWARD FOREIGN CURRENCY CONTRACTS: Certain portfolios may enter into forward
foreign currency contracts ("forward contracts") to attempt to protect
securities and related receivables and payables against changes in future
foreign exchange rates or to enhance return. A forward contract is an agreement
between two parties to buy or sell currency at a set price on a future date. The
market value of the contract will fluctuate with changes in currency exchange
rates. The contract is marked to market daily using the forward rate and the
change in market value is recorded by the Portfolio as unrealized gain or loss.
On settlement date, the Portfolio records either realized gains or losses when
the contract is closed equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Risks may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
Forward contracts involve elements of risk in excess of the amounts reflected in
the Statement of Assets and Liabilities. The Trust bears the risk of an
unfavorable change in the foreign exchange rate underlying the forward contract.
4. PORTFOLIO SECURITIES: The Trust intends to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
distribute all of its taxable income, including any net realized gains on
investments, to its shareholders. Therefore, no federal tax provision is
required.
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities, including short-term securities at September 30, 1997, were as
follows:
<TABLE>
<CAPTION>
MULTI- MULTI-
MULTI- MANAGED MANAGED
MANAGED MODERATE INCOME/
GROWTH GROWTH EQUITY
------------- ------------- -------------
<S> <C> <C> <C>
Cost............................... $ 14,247,148 $ 15,350,439 $ 11,428,116
------------- ------------- -------------
------------- ------------- -------------
Aggregate unrealized
gain............................. $ 1,382,656 $ 1,252,402 $ 647,630
Aggregate unrealized
(loss)........................... (95,999) (71,824) (39,182)
------------- ------------- -------------
Unrealized gain (loss), net........ $ 1,286,657 $ 1,180,578 $ 608,448
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
ASSET
MULTI- ALLOCATION:
MANAGED DIVERSIFIED
INCOME GROWTH STOCK
------------- ------------- -------------
<S> <C> <C> <C>
Cost............................... $ 8,969,074 $ 22,369,349 $ 18,121,629
------------- ------------- -------------
------------- ------------- -------------
Aggregate unrealized
gain............................. $ 429,601 $ 1,885,954 $ 2,400,819
Aggregate unrealized
(loss)........................... (22,714) (138,234) (143,699)
------------- ------------- -------------
Unrealized gain (loss), net........ $ 406,887 $ 1,747,720 $ 2,257,120
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
5. MANAGEMENT OF THE TRUST: The Trust, on behalf of each Portfolio, entered
into an Investment Advisory and Management Agreement (the "Management
Agreement") with SunAmerica to handle the Trust's day-to-day affairs, to provide
investment advisory services, office space, and other facilities for the
management of the affairs of the Trust, and to pay the compensation of certain
officers of the Trust who are affiliated persons of SunAmerica.
Pursuant to the Management Agreement entered into between the Adviser and the
Trust, on behalf of each Portfolio, each Portfolio pays the Adviser a fee,
payable monthly, computed daily at the annual rates of .89% of average daily net
assets ("Assets") for the Multi-Managed Growth Portfolio, .85% of Assets for the
Multi-Managed Moderate Growth Portfolio, .81% of Assets for the Multi-
57
<PAGE>
Managed Income/Equity Portfolio, .77% of Assets for the Multi-Managed Income
Portfolio, .85% of Assets for the Asset Allocation: Diversified Growth Portfolio
and .85% of Assets for the Stock Portfolio.
The Management Agreement authorizes SunAmerica to retain one or more subadvisers
to make the investment decisions for the Portfolios, and to place the purchase
and sale orders for portfolio transactions. The organizations below serve as
Subadvisers to the portfolios pursuant to Subadvisory Agreements with
SunAmerica. Each of the Subadvisers is independent of SunAmerica and discharges
its responsibilities subject to the policies of the Trustees and the oversight
and supervision of SunAmerica, which pays the Subadvisers' fees. All Subadvisory
fees are payable by the Adviser to the respective Subadviser and do not increase
Portfolio expenses.
Each Subadviser is paid monthly by SunAmerica a fee equal to a percentage of the
Assets of the Portfolio allocated to the Subadviser. SunAmerica has agreed to
pay Janus a composite fee of .60% on the first $200 million and .55% on Assets
over $200 million, and WMC a composite fee of .225% on the first $100 million,
.125% on the next $100 million and .10% on Assets over $200 million, in each
case based on the aggregate Assets it manages in the four Multi-Managed
Portfolios. In addition, SunAmerica has agreed to pay each of Putnam and T. Rowe
Price a fee at the following annual rates, expressed as a percentage of the
Assets of the respective Portfolio: with regard to the Asset Allocation:
Diversified Growth Portfolio, .55% on the first $150 million, .50% on the next
$150 million, and .40% on Assets over $300 million; and Stock Portfolio, .50% on
the first $40 million, and .40% on Assets over $40 million.
The Adviser has voluntarily agreed to waive fees or reimburse expenses, if
necessary, to keep annual operating expenses at or below the following
percentages of each of the Portfolio's Assets: Multi-Managed Growth Portfolio,
1.29%; Multi-Managed Moderate Growth Portfolio, 1.21%; Multi-Managed
Income/Equity Portfolio, 1.14%; Multi-Managed Income Portfolio, 1.06%; Asset
Allocation: Diversified Growth Portfolio, 1.21%; and Stock Portfolio, 1.21%. The
Adviser also may voluntarily waive or reimburse additional amounts to increase
the investment return to a Portfolio's investors. The Adviser may terminate all
such waivers and/or reimbursements at any time. Further, any waivers or
reimbursements made by the Adviser with respect to a Portfolio are subject to
recoupment from that Portfolio within the following two years, provided that the
Portfolio is able to effect such payment to the Adviser and remain in compliance
with the foregoing expense limitations.
6. PURCHASES AND SALES OF SECURITIES: Information with respect to purchases and
sales of long-term securities for the period ended September 30, 1997 was as
follows:
<TABLE>
<CAPTION>
MULTI- MULTI-
MULTI- MANAGED MANAGED
MANAGED MODERATE INCOME/
GROWTH GROWTH EQUITY
------------- ------------- -------------
<S> <C> <C> <C>
Purchases of portfolio
securities....................... $ 15,823,504 $ 16,544,203 $ 11,270,130
Sales of portfolio
securities....................... 4,518,540 4,316,550 1,731,006
U.S. government securities included
above were as follows:
Purchases of U.S. government
securities....................... 2,697,000 4,254,847 5,334,902
Sales of U.S. government
securities....................... 207,615 178,439 442,347
</TABLE>
<TABLE>
<CAPTION>
ASSET
MULTI- ALLOCATION:
MANAGED DIVERSIFIED
INCOME GROWTH STOCK
------------- ------------- -------------
<S> <C> <C> <C>
Purchases of portfolio
securities....................... $ 10,151,655 $ 34,210,203 $ 18,577,015
Sales of portfolio securities...... 2,182,278 14,730,474 2,282,000
U.S. government securities included
above were as follows:
Purchases of U.S. government
securities....................... 5,647,308 13,703,233 --
Sales of U.S. government
securities....................... 1,241,237 10,876,718 --
</TABLE>
58
<PAGE>
- ----------------
SEASONS SERIES TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
DIVIDENDS
DECLARED DIVIDENDS NET NET
NET ASSET NET REALIZED & FROM NET FROM NET ASSET ASSETS
VALUE NET UNREALIZED TOTAL FROM INVEST- REALIZED VALUE END OF
PERIOD BEGINNING INVESTMENT GAIN(LOSS) ON INVESTMENT MENT GAIN ON END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(1)(2) INVESTMENTS OPERATIONS INCOME INVESTMENTS PERIOD RETURN(3) (000'S)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Multi-Managed Growth Portfolio
4/15/97-
9/30/97(5) $10.00 $0.10 $2.00 $2.10 -- -- $12.10 21.00% $15,052
Multi-Managed Moderate Growth Portfolio
4/15/97-
9/30/97(5) 10.00 0.14 1.69 1.83 -- -- 11.83 18.30 16,108
Multi-Managed Income/Equity Portfolio
4/15/97-
9/30/97(5) 10.00 0.22 0.98 1.20 -- -- 11.20 12.00 11,970
Multi-Managed Income Portfolio
4/15/97-
9/30/97(5) 10.00 0.27 0.71 0.98 -- -- 10.98 9.80 9,412
Asset Allocation: Diversified Growth Portfolio
4/15/97-
9/30/97(5) 10.00 0.14 1.47 1.61 -- -- 11.61 16.10 24,233
Stock Portfolio
4/15/97-
9/30/97(5) 10.00 0.03 2.51 2.54 -- -- 12.54 25.40 20,116
<CAPTION>
- ----------
----------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT AVERAGE
EXPENSES TO INCOME TO COMMISSION
PERIOD AVERAGE NET AVERAGE NET PORTFOLIO PER
ENDED ASSETS ASSETS TURNOVER SHARE(4)
- ----------
----------------------------------------------------
<S> <C> <C> <C> <C>
Multi-Managed Growth Portfolio
4/15/97-
9/30/97(5) 1.29%(6)(7) 1.66%(6)(7) 63% $.0505
Multi-Managed Moderate Growth Portfolio
4/15/97-
9/30/97(5) 1.21(6)(7) 2.50(6)(7) 58 .0477
Multi-Managed Income/Equity Portfolio
4/15/97-
9/30/97(5) 1.14(6)(7) 3.96(6)(7) 29 .0482
Multi-Managed Income Portfolio
4/15/97-
9/30/97(5) 1.06(6)(7) 4.87(6)(7) 38 .0578
Asset Allocation: Diversified Growth Portfolio
4/15/97-
9/30/97(5) 1.21(6)(7) 2.52(6)(7) 113 .0306
Stock Portfolio
4/15/97-
9/30/97(5) 1.21(6)(7) 0.46(6)(7) 20 .0327
</TABLE>
- ----------------------------------
(1) Calculated based upon average shares outstanding
(2) After fee waivers and expense reimbursements by the investment adviser
(3) Total return is not annualized and does not reflect expenses that apply to
the separate accounts of Anchor National Life Insurance Company. If such
expenses had been included, total return would have been lower for each
period presented.
(4) The average commission per share is derived by dividing the agency
commissions paid on equity securities trades by the number of shares
purchased or sold.
(5) Unaudited
(6) Annualized
(7) During the period April 15, 1997 (commencement of operations) through
September 30, 1997, the investment adviser waived a portion of or all fees
and assumed a portion of or all expenses for the Portfolios. If all fees and
expenses had been incurred by the Portfolios, the ratio of expenses to
average net assets and the ratio of net investment income to average net
assets would have been as follows:
<TABLE>
<CAPTION>
EXPENSES (6) NET INVESTMENT INCOME (6)
------------ -------------------------
<S> <C> <C>
Multi-Managed Growth Portfolio.................... 1.69% 1.26%
Multi-Managed Moderate Growth Portfolio........... 1.61 2.10
Multi-Managed Income/Equity Portfolio............. 1.65 3.45
Multi-Managed Income Portfolio.................... 1.64 4.29
Asset Allocation: Diversified Growth Portfolio.... 1.53 2.20
Stock Portfolio................................... 1.44 0.23
</TABLE>
See Notes to Financial Statements
----------------
59
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
Contained in Part A, the Prospectus:
None
Contained in Part B, the Statement of Additional Information:
Unaudited financial statements
(b) EXHIBITS.
(1) Declaration of Trust. Incorporated by reference to Initial
Registration Statement of Registrant, filed on July 23, 1996.
(2) By-Laws. Incorporated by reference to Initial Registration
Statement of Registrant, filed on July 23, 1996.
(3) Voting Trust Agreement. Inapplicable.
(4) Instrument Defining Rights of Shareholders. Incorporated by
reference to Exhibits 1 and 2 to the Initial Registration
Statement of Registrant, filed on July 23, 1996.
(5)(a) Investment Advisory and Management Agreement between Registrant
and SunAmerica Asset Management Corp. ("SAAMCo"). Incorporated by
reference to Pre-Effective Amendment No. 1 to Registration
Statement of Registrant, filed on February 11, 1997.
(b) Subadvisory Agreement between SAAMCo and Janus Capital
Corporation. Incorporated by reference to Pre-Effective Amendment
No. 1 to Registration Statement of Registrant, filed on
February 11, 1997.
(c) Subadvisory Agreement between SAAMCo and Wellington Management
Company, LLP. Incorporated by reference to Pre-Effective Amendment
No. 1 to Registration Statement of Registrant, filed on
February 11, 1997.
(d) Form of Subadvisory Agreement between SAAMCo and Putnam
Investment Management, Inc. Incorporated by reference to
Pre-Effective Amendment No. 1 to Registration Statement of
Registrant, filed on February 11, 1997.
(e) Subadvisory Agreement between SAAMCo and T. Rowe Price
Associates, Inc. Incorporated by reference to Pre-Effective
Amendment No. 1 to Registration Statement of Registrant, filed on
February 11, 1997.
(6) Distribution Agreement. Inapplicable.
(7) Bonus, Profit Sharing, Pension or Similar Contracts.
Inapplicable.
(8) Custodian Agreement. Incorporated by reference to Pre-Effective
Amendment No. 2 to Registration Statement of Registrant, filed on
March 31, 1997.
<PAGE>
(9) Fund Participation Agreement between Registrant and Anchor
National Life Insurance Company, on behalf of itself and Variable
Annuity Account Five.
(10) Opinion and Consent of Counsel. Incorporated by reference to
the Initial Registration Statement of Registrant filed on
July 23, 1996.
(11) Consent of Independent Accountants. Inapplicable.
(12) Financial Statements. Omitted from Item 23. Inapplicable.
(13) Initial Capitalization Agreement. Inapplicable.
(14) Model Plan. Inapplicable.
(15) Rule 12b-1 Plan. Inapplicable.
(16) Performance Computations. Inapplicable.
(17) Powers of Attorney. Incorporated by reference to Pre-Effective
Amendment No. 2 to Registration Statement of Registrant, filed
on March 31, 1997.
(27) Financial Data Schedules (filed herewith)
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Anchor National Life Insurance Company, Anchor Pathway Fund, Anchor Series
Trust, SunAmerica Inc., SunAmerica Life Insurance Company and SunAmerica
Series Trust.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of September 30, 1997, the number of record holders of Seasons Series
Trust was as follows:
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest 2,370
ITEM 27. INDEMNIFICATION.
Article VI of the Registrant's By-Laws relating to the indemnification of
officers and trustees is quoted below:
<PAGE>
ARTICLE VI
INDEMNIFICATION
The Trust shall provide any indemnification required by applicable law
and shall indemnify trustees, officers, agents and employees as follows:
(a) the Trust shall indemnify any Trustee or officer of the Trust who was
or is a party or is threatened to be made a party of any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than action by or in the right of
the Trust) by reason of the fact that such Person is or was such Trustee or
officer or an employee or agent of the Trust, or is or was serving at the
request of the Trust as a director, officer, employee or agent of another
corporation, partnership, joint venture, Trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such Person in connection
with such action, suit or proceeding, provided such Person acted in good
faith and in a manner such Person reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such
Person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the Person did not reasonably believe his or her actions
to be in or not opposed to the best interests of the Trust, and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that such Person's conduct was unlawful.
(b) The Trust shall indemnify any Trustee or officer of the Trust who was
or is a part or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Trust to procure a
judgment in its favor by reason of the fact that such Person is or was such
Trustee or officer or an employee or agent of the Trust, or is or was
serving at the request of the Trust as a Trustee, officer, employee or
agent of another corporation, partnership, joint venture, Trust or other
enterprise, against expenses (including attorneys' fees), actually and
reasonably incurred by such Person in connection with the defense or
settlement of such action or suit if such Person acted in good faith and in
a manner such Person reasonably believed to be in or not opposed to the
best interests of the Trust, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such Person shall have
been adjudged to be liable for negligence or misconduct in the performance
of such Person's duty to the Trust unless and only to the extent that the
court in which such action or suit was brought, or any other court having
jurisdiction in the premises, shall determine upon application that,
despite the adjudication of liability but in view of all circumstances of
the case, such Person is fairly and reasonably entitled to indemnity for
such expenses which such court shall deem proper.
(c) To the extent that a Trustee or officer of the Trust has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subparagraphs (a) or (b) above or in defense of
any claim, issue or matter therein, such Person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by such Person in connection therewith, without the necessity for
the determination as to the standard of conduct as provided in subparagraph
(d).
C-3
<PAGE>
(d) Any indemnification under subparagraph (a) or (b) (unless ordered by a
court) shall be made by the Trust only as authorized in the specific case
upon a determination that indemnification of the Trustee or officer is
proper in view of the standard of conduct set forth in subparagraph (a) or
(b). Such determination shall be made (i) by the Board by a majority vote
of a quorum consisting of Trustees who were disinterested and not parties
to such action, suit or proceedings, or (ii) if such a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion, and any determination so made shall be conclusive and
binding upon all parties.
(e) Expenses incurred in defending a civil or criminal action, writ or
proceeding may be paid by the Trust in advance of the final disposition of
such action, suit or proceeding, as authorized in the particular case, upon
receipt of an undertaking by or on behalf of the Trustee or officer to
repay such amount unless it shall ultimately be determined that such Person
is entitled to be indemnified by the Trust as authorized herein. Such
determination must be made by disinterested Trustees or independent legal
counsel.
Prior to any payment being made pursuant to this paragraph, a majority of
quorum of disinterested, non-party Trustees of the Trust, or an independent
legal counsel in a written opinion, shall determine, based on a review of
readily available facts that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
(f) Agents and employees of the Trust who are not Trustees or officers of
the Trust may be indemnified under the same standards and procedures set
forth above, in the discretion of the Board.
(g) Any indemnification pursuant to this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
and shall continue as to a Person who has ceased to be a Trustee or officer
and shall inure to the benefit of the heirs, executors and administrators
of such a Person.
(h) Nothing in the Declaration or in these By-Laws shall be deemed to
protect any Trustee or officer of the Trust against any liability to the
Trust or to its Shareholders to which such Person would otherwise be
subject by reason of willful malfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Person's
office.
(i) The Trust shall have power to purchase and maintain insurance on
behalf of any Person against any liability asserted against or incurred by
such Person, whether or not the Trust would have the power to indemnify
such Person against such liability under the provisions of this Article.
Nevertheless, insurance will not be purchased or maintained by the Trust if
the purchase or maintenance of such insurance would result in the
indemnification of any Person in contravention of any rule or regulation
and/or interpretation of the Securities and Exchange Commission.
* * * * * * * * * * * * * *
C-4
<PAGE>
The Investment Advisory and Management Agreement provides that in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties involved in the conduct of office on the
part of the Adviser (and its officers, directors, agents, employees,
controlling persons, shareholders and any other person or entity affiliated
with the Adviser to perform or assist in the performance of its obligations
under each Agreement) the Adviser shall not be subject to liability to the
Trust or to any other person for any act or omission in the course of, or
connected with, rendering services, including without limitation, any error
of judgment or mistake of law or for any loss suffered by any of them in
connection with the matters to which each Agreement relates, except to the
extent specified in Section 36(b) of the Investment Company Act of 1940
concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Certain of the Subadvisory
Agreements provide for similar indemnification of the Subadviser by the
Adviser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF ADVISER.
SunAmerica Asset Management Corp. ("SAAMCo"), the Adviser of the Trust, is
primarily in the business of providing investment management, advisory and
administrative services. Reference is made to the most recent Form ADV and
schedules thereto of SAAMCo on file with the Commission (File No.
801-19813) for a description of the names and employment of the directors
and officers of SAAMCo and other required information.
C-5
<PAGE>
T. Rowe Price Associates, Inc., Janus Capital Corporation, Wellington
Management Company, and Putnam Investment Management, Inc., the
Subadvisers of certain of the Portfolios of the Trust, are primarily
engaged in the business of rendering investment advisory services.
Reference is made to the most recent Form ADV and schedules thereto on file
with the Commission for a description of the names and employment of the
directors and officers of T. Rowe Price Associates, Inc., Janus Capital
Corporation, Wellington Management Company, and Putnam Investment
Management, Inc. and other required information:
FILE NO.
T. Rowe Price Associates, Inc. 801-856
Janus Capital Corporation 80-13991
Wellington Management Company 801-15908
Putnam Investment Management, Inc. 801-7974
ITEM 29. PRINCIPAL UNDERWRITERS.
There is no Principal Underwriter for the Registrant.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, acts as custodian, transfer agent and dividend paying
agent. It maintains books, records and accounts pursuant to the
instructions of the Trust.
SunAmerica Asset Management Corp., is located at The SunAmerica Center, 733
Third Avenue, New York, New York 10017-3204. T. Rowe Price Associates,
Inc. is located at 100 East Pratt Street, Baltimore, Maryland 21202.
Janus Capital Corporation is located at 100 Fillmore Street, Suite 300,
Denver, Colorado 80296-4923. Wellington Management Company is located at
75 State Street, Boston, Massachusetts 02109. Putnam Investment
Management, Inc. is located at One Post Office Square, Boston,
Massachusetts. Each of the Adviser and Subadvisers maintain the books,
accounts and records required to be maintained pursuant to Section 31(a) of
the Investment Company Act of 1940 and the rules promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS
The Registrant will furnish each person to whom a Prospectus is delivered
with a copy of Registrant's latest annual report to shareholders, upon request
and without charge.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York, on
the 28th day of October, 1997.
SEASONS SERIES TRUST
REGISTRANT
By: /s/ Peter C. Sutton, Vice President
------------------------------------
(Peter C. Sutton, Vice President)
Pursuant to the requirement of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
* Trustee, Chairman and October 28, 1997
- ------------------------- President (Principal
James K. Hunt Executive Officer)
* Senior Vice President, October 28, 1997
- ------------------------- Treasurer and Controller
Scott L. Robinson Principal Financial and
Accounting Officer)
* Trustee October 28, 1997
- -------------------------
Richard S. Barger
* October 28, 1997
- ------------------------- Trustee
Norman J. Metcalfe
* October 28, 1997
- ------------------------- Trustee
Allan L. Sher
* October 28, 1997
- ------------------------- Trustee
William M. Wardlaw
By: /s/ Robert M. Zakem October 28, 1997
-----------------------------------
(Robert M. Zakem, Attorney-in-Fact)
C-7
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
(27) Financial Data Schedules
C-8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001003239
<NAME> SEASONS SERIES TRUST
<SERIES>
<NUMBER> 001
<NAME> MULTI-MANAGED GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-15-1997
<PERIOD-END> SEP-15-1997
<INVESTMENTS-AT-COST> 14,247,148
<INVESTMENTS-AT-VALUE> 15,533,805
<RECEIVABLES> 419,575
<ASSETS-OTHER> 21,266
<OTHER-ITEMS-ASSETS> 101,007
<TOTAL-ASSETS> 16,075,653
<PAYABLE-FOR-SECURITIES> 854,065
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 169,979
<TOTAL-LIABILITIES> 1,024,044
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,414,951
<SHARES-COMMON-STOCK> 1,244,273
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 72,266
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 292,582
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,271,810
<NET-ASSETS> 15,051,609
<DIVIDEND-INCOME> 18,541
<INTEREST-INCOME> 109,832
<OTHER-INCOME> 0
<EXPENSES-NET> 56,107
<NET-INVESTMENT-INCOME> 72,266
<REALIZED-GAINS-CURRENT> 292,582
<APPREC-INCREASE-CURRENT> 1,271,810
<NET-CHANGE-FROM-OPS> 1,636,658
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,263,766
<NUMBER-OF-SHARES-REDEEMED> (19,493)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 15,051,609
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 38,709
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 73,341
<AVERAGE-NET-ASSETS> 15,051,609
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> 2.00
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.10
<EXPENSE-RATIO> 1.29
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001003239
<NAME> SEASONS SERIES TRUST
<SERIES>
<NUMBER> 002
<NAME> MULTI-MANAGED MODERATE GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-15-1997
<PERIOD-END> SEP-15-1997
<INVESTMENTS-AT-COST> 15,350,439
<INVESTMENTS-AT-VALUE> 16,531,017
<RECEIVABLES> 588,873
<ASSETS-OTHER> 21,177
<OTHER-ITEMS-ASSETS> 89,200
<TOTAL-ASSETS> 17,230,267
<PAYABLE-FOR-SECURITIES> 858,916
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 263,428
<TOTAL-LIABILITIES> 1,122,344
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,574,353
<SHARES-COMMON-STOCK> 1,362,068
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 114,646
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 255,690
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,163,234
<NET-ASSETS> 16,107,923
<DIVIDEND-INCOME> 16,064
<INTEREST-INCOME> 154,053
<OTHER-INCOME> 0
<EXPENSES-NET> 55,471
<NET-INVESTMENT-INCOME> 114,646
<REALIZED-GAINS-CURRENT> 255,690
<APPREC-INCREASE-CURRENT> 1,163,234
<NET-CHANGE-FROM-OPS> 1,533,570
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,377,322
<NUMBER-OF-SHARES-REDEEMED> (15,254)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16,107,923
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 38,967
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 73,626
<AVERAGE-NET-ASSETS> 16,107,923
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.14
<PER-SHARE-GAIN-APPREC> 1.69
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.83
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001003239
<NAME> SEASONS SERIES TRUST
<SERIES>
<NUMBER> 003
<NAME> MULTI-MANAGED INCOME/EQUITY PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-15-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 11,428,116
<INVESTMENTS-AT-VALUE> 12,036,564
<RECEIVABLES> 673,910
<ASSETS-OTHER> 22,223
<OTHER-ITEMS-ASSETS> 46,142
<TOTAL-ASSETS> 12,778,839
<PAYABLE-FOR-SECURITIES> 505,699
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 302,668
<TOTAL-LIABILITIES> 808,367
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,105,743
<SHARES-COMMON-STOCK> 1,068,831
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 151,137
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 121,991
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 591,601
<NET-ASSETS> 11,970,472
<DIVIDEND-INCOME> 10,625
<INTEREST-INCOME> 183,977
<OTHER-INCOME> 0
<EXPENSES-NET> 43,465
<NET-INVESTMENT-INCOME> 151,137
<REALIZED-GAINS-CURRENT> 121,991
<APPREC-INCREASE-CURRENT> 591,601
<NET-CHANGE-FROM-OPS> 864,729
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,075,680
<NUMBER-OF-SHARES-REDEEMED> (6,849)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 11,970,472
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 30,899
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 62,948
<AVERAGE-NET-ASSETS> 11,970,472
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.22
<PER-SHARE-GAIN-APPREC> 0.98
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.20
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001003239
<NAME> SEASONS SERIES TRUST
<SERIES>
<NUMBER> 004
<NAME> MULTI-MANAGED INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-15-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 8,969,074
<INVESTMENTS-AT-VALUE> 9,375,961
<RECEIVABLES> 720,563
<ASSETS-OTHER> 22,689
<OTHER-ITEMS-ASSETS> 27,223
<TOTAL-ASSETS> 10,146,436
<PAYABLE-FOR-SECURITIES> 404,963
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 329,612
<TOTAL-LIABILITIES> 734,575
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,757,941
<SHARES-COMMON-STOCK> 857,296
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 164,736
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 99,379
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 389,805
<NET-ASSETS> 9,411,861
<DIVIDEND-INCOME> 6,053
<INTEREST-INCOME> 194,521
<OTHER-INCOME> 0
<EXPENSES-NET> 35,838
<NET-INVESTMENT-INCOME> 164,736
<REALIZED-GAINS-CURRENT> 99,379
<APPREC-INCREASE-CURRENT> 389,805
<NET-CHANGE-FROM-OPS> 653,920
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 862,751
<NUMBER-OF-SHARES-REDEEMED> (5,455)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9,411,861
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 26,033
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 55,476
<AVERAGE-NET-ASSETS> 9,411,861
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 0.71
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.98
<EXPENSE-RATIO> 1.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001003239
<NAME> SEASONS SERIES TRUST
<SERIES>
<NUMBER> 005
<NAME> ASSET ALLOCATION:DIVERSIFIED GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-15-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 22,369,349
<INVESTMENTS-AT-VALUE> 24,117,069
<RECEIVABLES> 585,727
<ASSETS-OTHER> 34,722
<OTHER-ITEMS-ASSETS> 28,065
<TOTAL-ASSETS> 24,765,583
<PAYABLE-FOR-SECURITIES> 435,837
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 96,646
<TOTAL-LIABILITIES> 532,483
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,997,138
<SHARES-COMMON-STOCK> 2,086,410
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 185,026
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 306,540
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,744,396
<NET-ASSETS> 24,233,100
<DIVIDEND-INCOME> 123,357
<INTEREST-INCOME> 150,681
<OTHER-INCOME> 0
<EXPENSES-NET> 89,012
<NET-INVESTMENT-INCOME> 185,026
<REALIZED-GAINS-CURRENT> 306,540
<APPREC-INCREASE-CURRENT> 1,744,396
<NET-CHANGE-FROM-OPS> 2,235,962
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,103,707
<NUMBER-OF-SHARES-REDEEMED> (17,297)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 24,233,100
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 62,529
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 112,268
<AVERAGE-NET-ASSETS> 24,233,100
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.14
<PER-SHARE-GAIN-APPREC> 1.47
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.61
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001003239
<NAME> SEASONS SERIES TRUST
<SERIES>
<NUMBER> 006
<NAME> STOCK PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-15-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 18,121,629
<INVESTMENTS-AT-VALUE> 20,378,749
<RECEIVABLES> 184,604
<ASSETS-OTHER> 19,812
<OTHER-ITEMS-ASSETS> 972
<TOTAL-ASSETS> 20,584,137
<PAYABLE-FOR-SECURITIES> 394,723
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73,835
<TOTAL-LIABILITIES> 468,558
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,565,423
<SHARES-COMMON-STOCK> 1,604,205
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 28,458
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 264,385
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,257,313
<NET-ASSETS> 20,115,579
<DIVIDEND-INCOME> 73,605
<INTEREST-INCOME> 29,332
<OTHER-INCOME> 0
<EXPENSES-NET> 74,479
<NET-INVESTMENT-INCOME> 28,458
<REALIZED-GAINS-CURRENT> 264,385
<APPREC-INCREASE-CURRENT> 2,257,313
<NET-CHANGE-FROM-OPS> 2,550,156
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,670,466
<NUMBER-OF-SHARES-REDEEMED> (66,261)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 20,115,579
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 52,320
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 88,905
<AVERAGE-NET-ASSETS> 20,115,579
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 2.51
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.54
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
