SEASONS SERIES TRUST, 485APOS, 1998-11-02

SEASONS SERIES TRUST
485APOS, 1998-11-02

Previous: FINANCIAL ASSET SECURITIES CORP, 8-K, 1998-11-02

Next: HOME CHOICE HOLDINGS INC, 10-Q/A, 1998-11-02

<PAGE>

As filed with the Securities and Exchange Commission on November 2, 1998
File Nos. 333-8653 and 811-07725

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933

Pre-Effective Amendment No. / /

POST-EFFECTIVE AMENDMENT NO. 3 /X/

AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 5 /X/

(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, Esq.
Senior Vice President and General Counsel
The SunAmerica Center
SunAmerica Asset Management Corp.
733 Third Avenue - 3rd Floor
New York, NY 10017
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO:

Susan L. Harris, Esq. Margery K. Neale, Esq.
SunAmerica Inc. Swidler Berlin Shereff Friedman, LLP
1 SunAmerica Center 919 Third Avenue
Los Angeles, CA 90067-6022 New York, New York 10022

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX)

/ / immediately upon filing pursuant to paragraph (b) of Rule 485

/ / on (date) pursuant to paragraph (b) of Rule 485

/ / 60 days after filing pursuant to paragraph (a) of Rule 485

/ / on (date) pursuant to paragraph (a) of Rule 485

/X/ 75 days after filing pursuant to paragraph (a)(ii)

/ / on (date) pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

1
<PAGE>

, 1998 PROSPECTUS
- -----------------

SEASONS SERIES TRUST

- MULTI-MANAGED GROWTH PORTFOLIO
- MULTI-MANAGED MODERATE GROWTH PORTFOLIO
- MULTI-MANAGED INCOME/EQUITY PORTFOLIO
- MULTI-MANAGED INCOME PORTFOLIO
- ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
- STOCK PORTFOLIO
- LARGE-CAP GROWTH PORTFOLIO
- LARGE-CAP COMPOSITE PORTFOLIO
- LARGE-CAP VALUE PORTFOLIO
- MID-CAP GROWTH PORTFOLIO
- MID-CAP VALUE PORTFOLIO
- SMALL-CAP PORTFOLIO
- INTERNATIONAL EQUITY PORTFOLIO
- DIVERSIFIED FIXED INCOME PORTFOLIO
- CASH MANAGEMENT PORTFOLIO

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
[Logo]

<PAGE>

TABLE OF CONTENTS

TRUST HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ACCOUNT INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

MORE INFORMATION ABOUT THE PORTFOLIOS . . . . . . . . . . . . . . . . . . 12
Investment Strategies . . . . . . . . . . . . . . . . . . . . . . . . 12
Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Investment Terminology . . . . . . . . . . . . . . . . . . . . . 20
Risk Terminology . . . . . . . . . . . . . . . . . . . . . . . . 23

MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

2
<PAGE>

TRUST HIGHLIGHTS

The following questions and answers are designed to give you an overview of the
Trust, and to provide you with information about the Trust's fifteen investment
Portfolios and their investment goals and principal strategies. More complete
investment information is provided in the chart, under "More Information About
the Portfolios," which is on page 12, and the glossary that follows on page 20.

Six of the Portfolios, which we call the Seasons Portfolios, are available
through the Seasons Variable Annuity Contract. The other nine Portfolios, which
we call the Seasons Select Portfolios, are available through the Seasons Select
Variable Annuity Contract.

Q: What are the Portfolios' investment goals and strategies?

A: Each Portfolio operates as a separate mutual fund, and has its own
investment goal and a strategy for pursuing it. There can be no assurance
that any Portfolio's investment goal will be met or that the net return on
an investment in a Portfolio will exceed what could have been obtained
through other investment or savings vehicles.

SEASONS PORTFOLIOS

PORTFOLIO INVESTMENT GOAL STRATEGY
--------- --------------- --------

Multi-Managed Growth long-term growth of asset allocation through
Portfolio capital Managed Components

Multi-Managed Moderate long-term growth of asset allocation through
Growth Portfolio capital, with capital Managed Components
preservation as a
secondary objective

Multi-Managed conservation of principal asset allocation through
Income/Equity Portfolio Managed Components

Multi-Managed Income capital preservation asset allocation through
Portfolio Managed Components

Asset Allocation: capital appreciation investment primarily
Diversified Growth through a strategic
Portfolio allocation of
approximately 80% (with a
range of 65-95%) of its
assets to equity
securities and
approximately 20% (with a
range of 5-35%) of its
assets to fixed income
securities

3
<PAGE>

PORTFOLIO INVESTMENT GOAL STRATEGY
--------- --------------- --------

Stock Portfolio long-term capital investment primarily in
appreciation, with a the stock of well-
secondary objective of established growth
increasing dividend companies
income

Each Multi-Managed Seasons Portfolio allocates all of its assets among
three or four distinct MANAGED COMPONENTS, each managed by a separate
Adviser. None of the Multi-Managed Seasons Portfolios contains an
unmanaged component. The four current Managed Components are
SunAmerica/Aggressive Growth, Janus/Growth, SunAmerica/Balanced and
WMC/Fixed Income. The Managed Components invest to varying degrees in a
diverse portfolio of common stocks, securities with equity characteristics
(such as preferred stocks, warrants or fixed income securities convertible
into common stock), corporate and U.S. government fixed income securities,
money market instruments and cash or cash equivalents. The assets of each
Managed Component that comprises a particular Multi-Managed Seasons
Portfolio belong to that Portfolio.

Although each Multi-Managed Seasons Portfolio has a distinct investment
objective and allocates its assets in varying percentages among the Managed
Components in furtherance of that objective, each Adviser intends to manage
its respective Managed Component(s) in the same general manner regardless
of the objective of the Multi-Managed Seasons Portfolio. However, the
equity/debt weightings of the SunAmerica/Balanced component under normal
market conditions will vary depending on the objective of the Multi-Managed
Seasons Portfolio. The following chart shows the allocation of the assets
of each Multi-Managed Seasons Portfolio among Managed Components.

<TABLE>
<CAPTION>
Portfolio SunAmerica/ Janus/Growth SunAmerica/ WMC/ Fixed
Aggressive component Balanced Income
Growth component component
component
<S> <C> <C> <C> <C>
Multi-Managed 20% 40% 20% 20%
Growth
Portfolio

Multi-Managed 18% 28% 18% 36%
Moderate
Growth
Portfolio

4
<PAGE>

Multi-Managed 0% 18% 28% 54%
Income/ Equity
Portfolio

Multi-Managed 0% 8% 17% 75%
Income
Portfolio
</TABLE>

Differences in investment returns among the Managed Components may cause the
actual percentages to vary over the course of a calendar quarter from the
targets listed in the chart.
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.

SEASONS SELECT PORTFOLIOS

All of the Seasons Select Portfolios except the Cash Management Portfolio are
managed by several Advisers, and we call them the Multi-Managed Seasons Select
Portfolios. Each Multi-Managed Seasons Select Portfolio offers you access to at
least three different professional Advisers, one of which may be SunAmerica, and
each of which advises a separate portion of the Portfolio. Each Multi-Managed
Seasons Select Portfolio will allocate one portion of its portfolio to a
passively-managed strategy, currently managed by Bankers Trust Company, that
seeks to replicate a relevant index, or the relevant subset of an index.

SunAmerica will initially allocate the assets of each Multi-Managed Seasons
Select Portfolio equally among the Advisers for that Portfolio. SunAmerica will
also allocate new cash from share purchases and redemption requests equally
among the Advisers, unless SunAmerica determines, subject to the review of the
Trustees, that a different allocation of assets would be in the best interests
of a Portfolio and its shareholders.

SunAmerica intends, on a quarterly basis, to review the asset allocation in each
Season Select Portfolio to determine the extent to which the portion of assets
managed by an Adviser differs from that portion managed by any other Adviser to
the Portfolio. If SunAmerica determines that the difference is significant,
SunAmerica will then re-allocate cash flows among the three Advisers,
differently from the manner described above, in an effort to effect a
re-balancing of the Portfolio's asset allocation. In general, SunAmerica will
not rebalance or reallocate the existing assets of a Seasons Select
Multi-Managed Portfolio among Advisers. However, SunAmerica reserves the right,
subject to the review of the Board, to reallocate assets from one Adviser to
another when it would be in the best interests of a Portfolio and its
shareholders to do so. In some instances, where a reallocation results in any
rebalancing of the Portfolio from a previous allocation, the effect of the
reallocation will be to shift assets from a better performing Adviser to a
portion of the Portfolio with a relatively lower total return.

5
<PAGE>

SEASONS SELECT
PORTFOLIO INVESTMENT GOAL STRATEGY
--------- --------------- --------

Large-Cap Growth long-term growth of investment primarily
Portfolio capital in equity securities
of large companies
(at least 65% of
total assets)
selected through a
growth strategy

Large-Cap Composite long-term growth of investment primarily
Portfolio capital and growth in equity securities
of dividend income of large companies
(at least 65% of
total assets) that
offer the potential
for long-term growth
of capital or
dividends

Large-Cap Value long-term growth of investment primarily
Portfolio capital [and in equity securities
substantial dividend of large companies
income] (at least 65% of
total assets)
selected through a
value strategy

Mid-Cap Growth long-term growth of investment primarily
Portfolio capital in equity securities
of medium-sized
companies (at least
65% of total assets)
selected through a
growth strategy

Mid-Cap Value long-term growth of investment primarily
Portfolio capital in equity securities
of medium-sized
companies (at least
65% of total assets)
selected through a
value strategy

Small-Cap Portfolio long-term growth of investment primarily
capital in equity securities
of small companies
(at least 65% of
total assets)

International Equity long-term growth of investment primarily
Portfolio capital in equity securities
of issuers in at
least three
countries other than
the United States

6
<PAGE>

SEASONS SELECT
PORTFOLIO INVESTMENT GOAL STRATEGY
--------- --------------- --------

Diversified Fixed relatively high investment primarily
Income Portfolio current income and in fixed income
secondarily capital securities,
appreciation including U.S.
government
securities,
investment grade
debt securities, and
higher yielding,
higher risk, lower
rated or unrated
corporate bonds
(junk bonds)

Cash Management high current yield investment in a
Portfolio while preserving diversified
capital selection of money
market instruments

To balance the risks of an actively traded portfolio, each Multi-Managed Seasons
Select Portfolio includes an unmanaged component that tracks a particular target
index or a subset of an index, and which will not sell stocks in its portfolio
and buy different stocks over the course of a year other than in conjunction
with changes in its index, even if there are adverse developments concerning a
particular stock, company or industry.

[Margin note: A "value" oriented philosophy - that of investing principally in
securities believed to be undervalued in the market - reflects a contrarian
approach, in that the potential for superior relative performance is believed to
be highest when stocks of fundamentally solid companies are out of favor. The
selection criteria is calculated to identify stocks of well-known companies with
solid financial strength and generous dividend yields that have low
price-earnings ratios and have been generally overlooked by the market.]

[Margin note: "growth" companies are considered to have a historical record of
above-average growth rate; to have significant growth potential; above-average
earnings growth or value or the ability to sustain earnings growth; to offer
proven or unusual products or services; or to operate in industries experiencing
increasing demand.]

Q: What are the principal risks of investing in the Portfolios?

A: Each of the Multi-Managed Growth Portfolio, the Multi-Managed Moderate
Growth Portfolio, the Asset Allocation: Diversified Growth Portfolio, the
Stock Portfolio, the Large-Cap Growth Portfolio, the Large-Cap Composite
Portfolio, the Large-Cap Value Portfolio, the Mid-Cap Growth Portfolio,
the Mid-Cap Value Portfolio, the Small-Cap Portfolio and the International
Equity Portfolio invest primarily in equity securities. In addition, the
Multi-Managed Income/Equity Portfolio and the Multi-Managed Income
Portfolio invest significantly in equities. As with any equity fund, the
value of your investment in any of these Portfolios may fluctuate in
response to stock market

7
<PAGE>

movements. In addition, individual stocks selected for any of these
Portfolios may underperform the market generally. Growth stocks are
historically volatile, which will particularly affect the Multi-Managed
Growth Portfolio, the Multi-Managed Moderate Growth Portfolio, the Asset
Allocation: Diversified Growth Portfolio, the Stock Portfolio, the
Large-Cap Composite Portfolio, the Large-Cap Growth Portfolio, the Mid-Cap
Growth Portfolio and the Small-Cap Portfolio.

The Multi-Managed Income/Equity Portfolio, the Multi-Managed Income
Portfolio and the Diversified Fixed Income Portfolio invest primarily in
fixed income securities. In addition, the Multi-Managed Growth Portfolio,
the Multi-Managed Moderate Growth Portfolio and the Asset Allocation:
Diversified Growth Portfolio each invests significantly in fixed income
securities. As a result, as with any bond fund, the value of your
investment in these Portfolios may go up or down in response to changes in
interest rates or defaults (or even the potential for future default) by
bond issuers. To the extent a Portfolio is invested in bonds, movements in
the bond market generally may affect its performance.

While an investment in the Cash Management Portfolio should present the
least market risk of any of the Portfolios, since it invests only in
high-quality short-term debt obligations, you should be aware that an
investment in the Cash Management Portfolio is subject to the risks that
the value of its investments may be subject to changes in interest rates.
You should also be aware that the return on an investment in the Cash
Management Portfolio should not be the same as a return on an investment in
a money market fund available directly to the public, even where gross
yields are equivalent, due to fees at the contract level.

All of the Portfolios except the Cash Management Portfolio may invest in
foreign securities. These securities may be denominated in currencies
other than U.S. dollars. Foreign investing presents special risks,
particularly in certain developing countries. While investing
internationally may reduce your risk by increasing the diversification of
your investment, the value of your investment may be affected by
fluctuating currency values, changing local and regional economic,
political and social conditions, and greater market volatility. In
addition, foreign securities may not be as liquid as domestic securities.
This will particularly affect the International Equity Portfolio.

Stocks of smaller companies may be more volatile than, and not as liquid
as, those of larger companies. This will particularly affect the
Multi-Managed Growth Portfolio, the Multi-Managed Moderate Growth
Portfolio, the Asset Allocation: Diversified Growth Portfolio and the
Small-Cap Portfolio.

Each of the Portfolios except the Stock Portfolio, the Large-Cap Value
Portfolio, the Mid-Cap Growth Portfolio and the Cash Management Portfolio
may invest in varying degrees in "junk bonds," which are considered
speculative. While SunAmerica and each

<PAGE>

other Adviser try to diversify the portfolio and to engage in a credit
analysis of each junk bond issuer in which a Portfolio invests, junk bonds
carry a substantial risk of default or changes in the issuer's
creditworthiness, or they may already be in default. A junk bond's market
price may fluctuate more than higher-quality securities and may decline
significantly. In addition, it may be more difficult for the Portfolio to
dispose of junk bonds or to determine their value. Junk bonds may contain
redemption or call provisions that, if exercised during a period of
declining interest rates, may force the Portfolio to replace the security
with a lower yielding security. If this occurs, it will result in a
decreased return for you.

Each Portfolio is non-diversified, which means that it can invest a larger
portion of its assets in the stock of a single company than can some other
mutual funds; by concentrating in a smaller number of stocks, the
Portfolio's risk is increased because the effect of each stock on the
Portfolio's performance is greater.

Finally, shares of Portfolios are not bank deposits and are not guaranteed
or insured by any bank, government entity or the Federal Deposit Insurance
Corporation. As with any mutual fund, there is no guarantee that a
Portfolio will be able to achieve its investment goals. If the value of
the assets of a Portfolio goes down, you could lose money.

FINANCIAL HIGHLIGHTS

The Financial Highlights table for each Seasons Portfolio is intended to help
you understand the Portfolio's financial performance since inception. Certain
information reflects financial results for a single Portfolio share. The total
returns in each table represent the rate that an investor would have earned on
an investment in the Portfolio (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with each Portfolio's financial statements, is included
in the Statement of Additional Information (SAI), which is available upon
request.

SEASONS SERIES TRUST
FINANCIAL HIGHLIGHTS

SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends
Net Asset Net Net realized & Dividends from net
Value investment unrealized gain Total from declared from realized
Period beginning of income (loss) on investment net investment gain on
ended period (1)(2) investments operations income investments
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Multi-Managed Growth Portfolio
4/15/97-
3/31/98 $10.00 $0.18 $2.95 $3.13 ($0.08) ($0.20)
Multi-Managed Moderate Growth Portfolio
4/15/97-
3/31/98 10.00 0.27 2.40 2.67 (0.13) (0.17)
Multi-Managed Income/Equity Portfolio
4/15/97-
3/31/98 10.00 0.41 1.68 2.09 (0.20) (0.10)
Multi-Managed Income Portfolio
4/15/97-
3/31/98 10.00 0.51 1.15 1.66 (0.27) (0.10)
Asset Allocation: Diversified Growth Portfolio
4/15/97-
3/31/98 10.00 0.23 1.76 1.99 (0.12) (0.16)
Stock Portfolio
4/15/97-
3/31/98 10.00 0.03 4.80 4.83 (0.02) (0.15)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

9
<PAGE>

- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of net
Net Assets expenses to investment Average
Net Asset Total end of average net income to commission
Period Value end Return period assets average net Portfolio per share
ended of period (3) (000's) (5)(6) assets (5)(6) Turnover (4)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Multi-Managed Growth Portfolio
4/15/97-
3/31/98 $12.85 31.55% $32,481.00 1.29% 1.52% 114% $0.0493
Multi-Managed Moderate Growth Portfolio
4/15/97-
3/31/98 12.37 26.86 32,622 1.21 2.36 101 0.0502
Multi-Managed Income/Equity Portfolio
4/15/97-
3/31/98 11.79 21.10 25,957 1.14 3.72 46 0.0474
Multi-Managed Income Portfolio
4/15/97-
3/31/98 11.29 16.81 18,378 1.06 4.69 0.47 0.0520
Asset Allocation: Diversified Growth Portfolio
4/15/97-
3/31/98 11.71 20.09 50,384 1.21 2.06 166 0.0358
Stock Portfolio
4/15/97-
3/31/98 14.66 48.59 42,085 1.21 0.24 46.00 0.0339
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Calculated based upon average shares outstanding
(2) After fee waivers and expense reimbursements by SunAmerica
(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
(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) Annualized
(6) During the period April 15, 1997 (commencement of operations) through
March 31, 1998, SunAmerica 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 (5) NET INVESTMENT INCOME (5)
<S> <C> <C>
Multi-Managed Growth Portfolio. . . 1.44% 1.37%

Multi-Managed Moderate Growth
Portfolio . . . . . . . . . . . . . 1.40 2.17

Multi-Managed Income/Equity
Portfolio . . . . . . . . . . . . . 1.43 3.43

Multi-Managed Income Portfolio. . . 1.50 4.25

Asset Allocation: Diversified
Growth Portfolio . . . . . . . . . 1.53 1.74

Stock Portfolio . . . . . . . . . . 1.26 .19

</TABLE>

ACCOUNT INFORMATION

Shares of the Portfolios are not offered directly to the public. Instead,
shares of the Portfolios are currently offered only to Variable Annuity Account
Five, a separate account of Anchor National Life Insurance Company. So if you
would like to invest in a Portfolio, you must purchase a Seasons Variable
Annuity Contract or a Seasons Select Variable Annuity Contract from Anchor
National. You should be aware that if you purchase Seasons Variable Annuity
Contract, you will not invest directly in one of the Seasons Portfolios.
Instead, the Seasons Variable Annuity offers four variable investment
"Strategies," each of which invests in three of the six Seasons Portfolios,
managed collectively by five different professional investment managers. The
allocation of assets among the Portfolios will vary depending on the objective
of the Strategy.

You should also be aware that the Contracts involve fees and expenses that are
not described in this Prospectus, and that the Contracts also may involve
certain restrictions and limitations. You will find information about
purchasing a Seasons Variable Annuity Contract or a Seasons Select

10
<PAGE>

Variable Annuity Contract in the prospectus that offers the Contracts, which
accompanies this Prospectus.

TRANSACTION POLICIES

VALUATION OF SHARES The net asset value per share (NAV) for each Portfolio is
determined each business day at the close of regular trading on the New York
Stock Exchange (generally 4:00 p.m., Eastern time) by dividing its net assets by
the number of its shares outstanding. Investments for which market quotations
are readily available are valued at market, except that short-term securities
with 60 days or less to maturity are valued on an amortized cost basis. All
other securities and assets are valued at "fair value" following procedures
approved by the Trustees.

The International Equity Portfolio may invest to a large extent in securities
that are primarily listed on foreign exchanges that trade on weekends or other
days when the Trust does not price its shares. As a result, the value of this
Portfolio's shares may change on days when the Trust is not open for purchases
or redemptions.

BUY AND SELL PRICES The Accounts buy and sell shares of a Portfolio at NAV,
without any sales or other charges.

EXECUTION OF REQUESTS The Trust is open on those days when the New York Stock
Exchange is open for regular trading. We execute buy and sell requests at the
next NAV to be calculated after the Trust accepts the request. If the Trust
receives the order before the Trust's close of business (generally 4:00 p.m.,
Eastern time), the order will receive that day's closing price. If the Trust
receives the order after that time, it will receive the next business day's
closing price.

In unusual circumstances, a Portfolio may temporarily suspend the processing of
sell requests or may postpone payment of proceeds for up to seven business days
or longer, or as allowed by federal securities laws.

DIVIDEND POLICIES AND TAXES

DISTRIBUTIONS Each Portfolio annually declares and distributes substantially
all of its net investment income in the form of dividends and capital gains
distributions.

DISTRIBUTION REINVESTMENT The dividends and distributions will be reinvested
automatically in additional shares of the same Portfolio on which they were
paid.

TAXABILITY OF A PORTFOLIO Each Portfolio intends to continue to qualify as a
regulated investment company under the Internal Revenue Code of 1986, as
amended. So long as each Portfolio is

11
<PAGE>

qualified as a regulated investment company, it will not be subject to federal
income tax on the earnings that it distributes to its shareholders.

MORE INFORMATION ABOUT THE PORTFOLIOS

INVESTMENT STRATEGIES

You should consider your ability to assume the risks involved before investing
in a Portfolio or a Strategy through one of the Contracts. The charts summarize
information about investment approaches that each Managed Component and
Portfolio uses. Except as specifically indicated, a Portfolio's investment
goals and strategies may be changed by the Board of Trustees without shareholder
approval. We have included a glossary to define the investment and risk
terminology that we have used in the charts and throughout this Prospectus.

SEASONS PORTFOLIOS

Four of the Seasons Portfolios are Multi-Managed Seasons Portfolios, which means
that they pursue their investment goals by allocating their assets among three
or four Managed Components, as indicated in the chart on page 4, above.

It's important for you to understand, if you invest in one of the Multi-Managed
Seasons Portfolios, how this chart applies specifically to your investment. You
should carefully review the investment objectives and policies of each
Multi-Managed Seasons Portfolio and understand how each Managed Component
applies to an investment in any of the Portfolios.

If, for example, you invest through your Seasons Variable Annuity Contract in a
Strategy that invests heavily in the Multi-Managed Income Portfolio, you should
be aware that your Portfolio distributes its assets among the Janus/Growth
component, the SunAmerica Balanced component and the WMC/Fixed Income component
in a ratio of 8%/17%/75%. As a result, in reviewing this chart, you should note
that the investment strategies and risks of each of those Managed Components
applies to your investment. You should also bear in mind when reviewing the
chart that the Multi-Managed Income Portfolio invests three quarters of its
assets in the WMC/Fixed Income component and pay close attention to that
Component's investment strategies and risks.

To summarize the allocation strategy, because the Multi-Managed Growth and the
Multi-Managed Moderate Growth Portfolios seek long-term growth of capital, each
therefore allocates a relatively larger percentage of its assets to the
SunAmerica/Aggressive Growth and Janus/Growth components than do the other two
Multi-Managed Seasons Portfolios. In contrast, the Multi-Managed Income/Equity
and the Multi-Managed Income Portfolios focus on preservation of principal or
capital and therefore allocate a relatively larger percentage of their assets to
the SunAmerica/Balanced and WMC/Fixed Income components. The Multi-Managed
Income/Equity and the Multi-Managed Income Portfolios do not allocate any
percentage of their assets to the SunAmerica/Aggressive Growth component.

12
<PAGE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------

SUNAMERICA/ SUNAMERICA/
AGGRESSIVE GROWTH JANUS/GROWTH BALANCED
COMPONENT COMPONENT COMPONENT
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
What are the equity securities common stocks equity securities
Portfolio or of small, lesser selected for of mid- to large-
Managed known or new their growth cap companies
Component's growth companies potential believed to be
principal or industries, undervalued, and
investments such as long-term bonds
(under normal telecommunications, and other debt
market media and securities;
conditions)? biotechnology neutral
equity/debt
weightings of
70%/30% for Multi-
Managed Growth and
Moderate Growth
Portfolios; 50%/50%
for Multi-Managed
Income/Equity and
Income Portfolios
- -------------------------------------------------------------------------------
What are the - stock market - stock market - stock and bond
Portfolio or volatility volatility market
Managed - securities - securities volatility
Component's selection selection - securities
principal - growth stocks - growth stocks selection
risks? - small market - junk bonds - interest rate
capitalization - small market fluctuations
- non- capitalization - non-
diversification - non- diversification
diversification

<CAPTION>
- -------------------------------------------------------------------------------
ASSET ALLOCATION:
DIVERSIFIED
WMC/FIXED INCOME GROWTH PORTFOLIO STOCK PORTFOLIO
COMPONENT
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
What are the fixed income strategic common stock of
Portfolio or securities of allocation of well-established
Managed varying approximately growth companies
Component's maturities and 80% (with a (at least 65% of
principal risk/return range of 65-95%) total assets)
investments characteristics of its assets to
(under normal equity securities
market and approximately
conditions)? 20% (with a range
of 5-35%) of its
assets to fixed
income securities
- -------------------------------------------------------------------------------
What are the - bond market - stock market - stock market
Portfolio or volatility volatility volatility
Managed - securities - securities - securities
Component's selection selection selection
principal - interest rate - growth stocks - growth stocks
risks? fluctuations - foreign - non-
- non- exposure diversification
diversification - small market
capitalization
- non-
diversification
- -------------------------------------------------------------------------------
</TABLE>

13
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------
- - Large Yes Yes see principal
company investments above
stocks
- -------------------------------------------------------------------------------------------------------
- - Medium-sized see principal Yes see principal
company investments above investments above
stocks
- -------------------------------------------------------------------------------------------------------
- - Small see principal Yes Yes (up to 20%)
company investments above
stocks
- -------------------------------------------------------------------------------------------------------
- - Active Yes Yes No
Trading
- -------------------------------------------------------------------------------------------------------
- - Fixed income Yes (up to 35%) Yes Yes
securities
- -------------------------------------------------------------------------------------------------------
Investment Yes Yes Yes
Grade
- -------------------------------------------------------------------------------------------------------
U.S. Yes Yes Yes
Government
Securities
- -------------------------------------------------------------------------------------------------------
Asset-backed Yes Yes (up to 25%) Yes
and
mortgage-
backed
securities
- -------------------------------------------------------------------------------------------------------
Junk bonds No Yes (up to 35%) No
- -------------------------------------------------------------------------------------------------------
Short-term Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
money market
instruments
- -------------------------------------------------------------------------------------------------------
- - Borrowing
- -------------------------------------------------------------------------------------------------------
<CAPTION>

- -------------------------------------------------------------------------------------------------------
WMC/Fixed Asset Allocation:
Income Diversified
component Growth Portfolio Stock Portfolio
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
What other
investment
strategies can
the Portfolio
or Managed
Component use?
- -------------------------------------------------------------------------------------------------------

- - Large No Yes Yes
company
stocks
- -------------------------------------------------------------------------------------------------------
- - Medium-sized No see principal Yes
company investments above
stocks
- -------------------------------------------------------------------------------------------------------
- - Small No see principal Yes
company investments above
stocks
- -------------------------------------------------------------------------------------------------------
- - Active No Yes No
Trading
- -------------------------------------------------------------------------------------------------------
- - Fixed income See principal Yes Yes
securities investments above (approximately
20%)
- -------------------------------------------------------------------------------------------------------
Investment Yes Yes Yes
Grade
- -------------------------------------------------------------------------------------------------------
U.S. Yes Yes Yes
Government
Securities
- -------------------------------------------------------------------------------------------------------
Asset-backed Yes Yes Yes
and
mortgage-
backed
securities
- -------------------------------------------------------------------------------------------------------
Junk bonds Yes (up to 10%) Yes (up to 20%) No
- -------------------------------------------------------------------------------------------------------
Short-term Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
money market
instruments
- -------------------------------------------------------------------------------------------------------
- - Borrowing
- -------------------------------------------------------------------------------------------------------

</TABLE>

14
<PAGE>

SUNAMERICA/ SUNAMERICA/ WMC/FIXED
AGGRESSIVE GROWTH JANUS/GROWTH BALANCED INCOME
COMPONENT COMPONENT COMPONENT COMPONENT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For temporary Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
emergency
purposes
- ---------------------------------------------------------------------------------------------------------------
- - Defensive Yes Yes Yes Yes
investments
- ---------------------------------------------------------------------------------------------------------------
- - Foreign securities Yes Yes Yes (up to 25%) Yes (up to 15%)
- ---------------------------------------------------------------------------------------------------------------
ADRs/EDRs/GDRs Yes Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
Currency Yes Yes Yes Yes
Transactions
- ---------------------------------------------------------------------------------------------------------------
Currency Baskets Yes Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
Emerging markets Yes Yes Yes Yes (up to 20%,
including investment
in junk bonds)
- ---------------------------------------------------------------------------------------------------------------
- - Illiquid securities Yes (up to 15%) Yes (up to 15%) Yes (up to 15%) Yes (up to 15%)
- ---------------------------------------------------------------------------------------------------------------
- - Options and futures Yes Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
- - Securities Lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
- ---------------------------------------------------------------------------------------------------------------
- - Special situations Yes Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------

ASSET ALLOCATION:
DIVERSIFIED
GROWTH PORTFOLIO STOCK PORTFOLIO
- -------------------------------------------------------------------
<S> <C> <C>
For temporary Yes (up to 33 1/3%) Yes (up to 33 1/3%)
emergency
purposes
- -------------------------------------------------------------------
- - Defensive Yes Yes
investments
- -------------------------------------------------------------------
- - Foreign securities Yes (up to 60%) Yes (up to 30%)
- -------------------------------------------------------------------
ADRs/EDRs/GDRs Yes Yes
- -------------------------------------------------------------------
Currency Yes Yes
Transactions
- -------------------------------------------------------------------
Currency Baskets Yes Yes
- -------------------------------------------------------------------
Emerging markets Yes Yes

- -------------------------------------------------------------------
- - Illiquid securities Yes (up to 15%) Yes (up to 15%)
- -------------------------------------------------------------------
- - Options and futures Yes Yes
- -------------------------------------------------------------------
- - Securities Lending Yes (up to 33 1/3%) Yes (up to 33 1/3%)
- -------------------------------------------------------------------
- - Special situations Yes Yes
- -------------------------------------------------------------------
</TABLE>

<PAGE>

- ---------------------------------------------------------------------------------------------------------------------------------
SUNAMERICA/ SUNAMERICA/ WMC/FIXED ASSET ALLOCATION:
AGGRESSIVE GROWTH JANUS/GROWTH BALANCED INCOME DIVERSIFIED
COMPONENT COMPONENT COMPONENT COMPONENT GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
What other potential - foreign exposure - foreign exposure - stock market - foreign exposure - emerging markets
risks can affect the - emerging markets - emerging markets volatility - emerging markets - euro conversion
Portfolio or Managed - euro conversion - euro conversion - foreign exposure - euro conversion - junk bonds
Component? - illiquidity - credit quality - emerging markets - junk bonds - credit quality
- prepayment - junk bonds - euro conversion - credit quality - illiquidity
- dollar rolls - illiquidity - illiquidity - illiquidity - prepayment
- derivatives - prepayment - prepayment - prepayment - dollar rolls
- hedging - dollar rolls - dollar rolls - dollar rolls - derivatives
- derivatives - derivatives - derivatives - hedging
- hedging - hedging - hedging
- small market - small market - small market
capitalization capitalization capitalization
- ---------------------------------------------------------------------------------------------------------------------------------

- -------------------------------------------

STOCK PORTFOLIO
- -------------------------------------------
<S> <C>
What other potential - foreign exposure
risks can affect the - emerging markets
Portfolio or Managed - euro conversion
Component? - illiquidity
- prepayment
- dollar rolls
- derivatives
- hedging
- small market
capitalization
- -------------------------------------------
</TABLE>

16
<PAGE>

SEASONS SELECT PORTFOLIOS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
LARGE-CAP LARGE-CAP COMPOSITE
GROWTH PORTFOLIO PORTFOLIO LARGE-CAP VALUE PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
What are the Portfolio's equity securities of large equity securities of large equity securities of
principal investments companies (at least 65% of companies (at least 65% of large companies (at least
(under normal market total assets) selected total assets) selected 65% of total assets)
conditions)? through a growth strategy through a growth strategy, selected through a value
that offer the potential strategy
for long-term growth of
capital or dividends
- ---------------------------------------------------------------------------------------------------------------
Which index or subset will S&P 500 Composite S&P 500 Composite S&P 500 Composite
a portion of the Portfolio (growth stocks only) (value stocks only)
seek to replicate?
- ---------------------------------------------------------------------------------------------------------------
What are the Portfolio's - stock market volatility - stock market volatility - stock market volatility
principal risks? - securities selection - securities selection - securities selection
- disciplined strategy - disciplined strategy - disciplined strategy
- growth stocks - interest rate fluctuations - non-diversification
- non-diversification - growth stocks
- credit quality
- non-diversification
- ---------------------------------------------------------------------------------------------------------------
What other investment
strategies can the
Portfolio use?
- ---------------------------------------------------------------------------------------------------------------
- - Large Company stocks
see principal see principal see principal investments
investments above investments above above
- ---------------------------------------------------------------------------------------------------------------
- - Medium-sized Company
stocks Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
- - Small Company stocks
Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
- - Active Trading Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
MID-CAP GROWTH
PORTFOLIO MID-CAP VALUE PORTFOLIO SMALL-CAP PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
What are the Portfolio's equity securities of equity securities of equity securities of
principal investments medium-sized companies (at medium-sized companies small companies (at least
(under normal market least 65% of total assets) (at least 65% of total 65% of total assets)
conditions)? selected through a growth assets) selected through
strategy a value strategy
- ---------------------------------------------------------------------------------------------------------------
Which index or subset will S&P 400 MidCap S&P 400 MidCap Russell 2000
a portion of the Portfolio (growth stocks only) (value stocks only)
seek to replicate?
- ---------------------------------------------------------------------------------------------------------------
What are the Portfolio's - stock market volatility - stock market volatility - stock market volatility
principal risks? - securities selection - securities selection - securities selection
- disciplined strategy - disciplined strategy - disciplined strategy
- growth stocks - non-diversification - growth stocks
- non-diversification - small market capitalization
- non-diversification
- ---------------------------------------------------------------------------------------------------------------
What other investment
strategies can the
Portfolio use?
- ---------------------------------------------------------------------------------------------------------------
- - Large Company stocks
Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
- - Medium-sized Company
stocks see principal see principal see principal
investments above investments above investments above
- ---------------------------------------------------------------------------------------------------------------
- - Small Company stocks
Yes Yes see principal
investments above
- ---------------------------------------------------------------------------------------------------------------
Active Trading Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
INTERNATIONAL DIVERSIFIED CASH MANAGEMENT
EQUITY PORTFOLIO FIXED INCOME PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
What are the Portfolio's equity securities of fixed income securities, a diversified selection of
principal investments issuers in at least 3 including U.S. government money market instruments
(under normal market countries other than the securities, investment
conditions)? United States grade debt securities,
and higher-yielding,
higher risk, lower rated
or unrated corporate
bonds (junk bonds)
- ---------------------------------------------------------------------------------------------------------------
Which index or subset will EAFE Lehman Government/ N/A
a portion of the Portfolio Corp.
seek to replicate?
- ---------------------------------------------------------------------------------------------------------------
What are the Portfolio's - stock market volatility - bond market volatility - securities selection
principal risks? - securities selection - securities selection - interest rate fluctuations
- disciplined strategy - disciplined strategy - non-diversification
- foreign exposure - interest rate
- emerging markets fluctuations
- euro conversion - credit quality
- non-diversification - junk bonds
- non-diversification
- ---------------------------------------------------------------------------------------------------------------
What other investment
strategies can the
Portfolio use?
- ---------------------------------------------------------------------------------------------------------------
- - Large Company stocks
Yes [ ] No
- ---------------------------------------------------------------------------------------------------------------
- - Medium-sized Company
stocks Yes [ ] No
- ---------------------------------------------------------------------------------------------------------------
- - Small Company stocks
Yes No No
- ---------------------------------------------------------------------------------------------------------------
- - Active Trading Yes Yes No
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
LARGE-CAP LARGE-CAP COMPOSITE
GROWTH PORTFOLIO PORTFOLIO LARGE-CAP VALUE PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - Fixed income securities
- ---------------------------------------------------------------------------------------------------------------
Investment grade Yes
Yes Yes
- ---------------------------------------------------------------------------------------------------------------
U.S. Government Securities Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
Senior Securities
- ---------------------------------------------------------------------------------------------------------------
Asset-backed and
mortgage-backed Securities Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
Junk bonds Yes Yes (up to 15%) No
- ---------------------------------------------------------------------------------------------------------------
Short-term money market Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
instruments
- ---------------------------------------------------------------------------------------------------------------
- - REITs No No Yes
- ---------------------------------------------------------------------------------------------------------------
- - Borrowing for emergencies Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
- ---------------------------------------------------------------------------------------------------------------
- - Defensive investments
Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
- - Foreign securities Yes (up to 30%) Yes (up to 30%) Yes (up to 30%)
- ---------------------------------------------------------------------------------------------------------------
ADRs/EDRs/ Yes Yes Yes
GDRs
- ---------------------------------------------------------------------------------------------------------------
Foreign Investment Yes (up to 10%) Yes (up to 10%) No
Companies
- ---------------------------------------------------------------------------------------------------------------
Currency Transactions Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
MID-CAP GROWTH
PORTFOLIO MID-CAP VALUE PORTFOLIO SMALL-CAP PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - Fixed income securities
- ---------------------------------------------------------------------------------------------------------------
Investment grade
Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
U.S. Government Securities Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
Senior Securities
- ---------------------------------------------------------------------------------------------------------------
Asset-backed and
mortgage-backed Securities Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
Junk bonds No Yes Yes
- ---------------------------------------------------------------------------------------------------------------
Short-term money market Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
instruments
- ---------------------------------------------------------------------------------------------------------------
- - REITs No Yes No
- ---------------------------------------------------------------------------------------------------------------
- - Borrowing for emergencies Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
- ---------------------------------------------------------------------------------------------------------------
- - Defensive investments
Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
- - Foreign securities Yes (up to 30%) Yes (up to 30%) Yes (up to 30%)
- ---------------------------------------------------------------------------------------------------------------
ADRs/EDRs/ Yes Yes Yes
GDRs
- ---------------------------------------------------------------------------------------------------------------
Foreign Investment No No Yes (up to 10%)
Companies
- ---------------------------------------------------------------------------------------------------------------
Currency Transactions Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
INTERNATIONAL DIVERSIFIED CASH MANAGEMENT
EQUITY PORTFOLIO FIXED INCOME PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - Fixed income securities see principal investments Yes
above
- ---------------------------------------------------------------------------------------------------------------
Investment grade see principal investments Yes
Yes above
- ---------------------------------------------------------------------------------------------------------------
U.S. Government Securities Yes see principal investments Yes
above
- ---------------------------------------------------------------------------------------------------------------
Senior Securities
- ---------------------------------------------------------------------------------------------------------------
Asset-backed and
mortgage-backed Securities Yes
- ---------------------------------------------------------------------------------------------------------------
Junk bonds Yes Yes (up to 20%) No
- ---------------------------------------------------------------------------------------------------------------
Short-term money market Yes (up to 25%) Yes see principal investments
instruments above
- ---------------------------------------------------------------------------------------------------------------
- - REITs No No No
- ---------------------------------------------------------------------------------------------------------------
- - Borrowing for emergencies Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 5%)
- ---------------------------------------------------------------------------------------------------------------
- - Defensive investments Yes Yes
- ---------------------------------------------------------------------------------------------------------------
- - Foreign securities See principal Yes (up to 30%) Yes (up to 30%)
investments above
- ---------------------------------------------------------------------------------------------------------------
ADRs/EDRs/ Yes Yes Yes (U.S. dollar
GDRs denominated only)
- ---------------------------------------------------------------------------------------------------------------
Foreign Investment Yes (up to 10%) Yes No
Companies
- ---------------------------------------------------------------------------------------------------------------
Currency Transactions Yes Yes No
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
LARGE-CAP LARGE-CAP COMPOSITE
GROWTH PORTFOLIO PORTFOLIO LARGE-CAP VALUE PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currency Baskets Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
Emerging
Markets Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
- - Illiquid securities Yes (up to 15%) Yes (up to 15%) Yes (up to 15%)
- ---------------------------------------------------------------------------------------------------------------
- - Securities lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
- ---------------------------------------------------------------------------------------------------------------
- - Options and futures Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
- - Hybrid Instruments Yes Yes Yes
(up to 10%) (up to 10%) (up to 10%)
- ---------------------------------------------------------------------------------------------------------------
Structured Securities Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
Indexed Securities Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
- - Special Situations Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
What other potential risks - interest rate - foreign exposure - interest rate
can affect a Portfolio? fluctuations - emerging markets fluctuations
- foreign exposure - euro conversion - growth stocks
- euro conversion - illiquidity - foreign exposure
- illiquidity - prepayment - emerging markets
- prepayment - derivatives - euro conversion
- derivatives - hedging - illiquidity
- hedging - small market - prepayment
- small market capitalization - derivatives
capitalization - hedging
- small market
capitalization
- ---------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
MID-CAP GROWTH
PORTFOLIO MID-CAP VALUE PORTFOLIO SMALL-CAP PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currency Baskets Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
Emerging
Markets Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
- - Illiquid securities Yes (up to 15%) Yes (up to 15%) Yes (up to 15%)
- ---------------------------------------------------------------------------------------------------------------
- - Securities lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
- ---------------------------------------------------------------------------------------------------------------
- - Options and futures Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
- - Hybrid Instruments Yes Yes Yes
(up to 10%) (up to 10%) (up to 10%)
- ---------------------------------------------------------------------------------------------------------------
Structured Securities Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
Indexed Securities Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
- - Special Situations Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
What other potential risks - interest rate - interest rate - interest rate
can affect a Portfolio? fluctuations fluctuations fluctuations
- foreign exposure - growth stocks - foreign exposure
- euro conversion - foreign exposure - euro conversion
- illiquidity - euro conversion - illiquidity
- prepayment - illiquidity - prepayment
- derivatives - prepayment - derivatives
- hedging - derivatives - hedging
- small market - hedging - small market
capitalization - small market capitalization
capitalization
- ---------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
INTERNATIONAL DIVERSIFIED CASH MANAGEMENT
EQUITY PORTFOLIO FIXED INCOME PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currency Baskets Yes Yes No
- ---------------------------------------------------------------------------------------------------------------
Emerging
Markets Yes Yes No
- ---------------------------------------------------------------------------------------------------------------
- - Illiquid securities Yes (up to 15%) Yes (up to 15%) Yes (up to 10%)
- ---------------------------------------------------------------------------------------------------------------
- - Securities lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) No
- ---------------------------------------------------------------------------------------------------------------
- - Options and futures Yes Yes No
- ---------------------------------------------------------------------------------------------------------------
- - Hybrid Instruments Yes Yes No
(up to 10%)
- ---------------------------------------------------------------------------------------------------------------
Structured Securities Yes Yes No
- ---------------------------------------------------------------------------------------------------------------
Indexed Securities Yes Yes No
- ---------------------------------------------------------------------------------------------------------------
- - Special Situations Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------
What other potential risks - interest rate - stock market volatility - foreign exposure
can affect a Portfolio? fluctuations - growth stocks - euro conversion
- growth stocks - foreign exposure - illiquidity
- illiquidity - emerging markets - leverage
- prepayment - euro conversion
- derivatives - illiquidity
- hedging - prepayment
- small market - derivatives
capitalization - hedging
- small market
capitalization
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

GLOSSARY

INVESTMENT TERMINOLOGY

LARGE COMPANIES have market capitalizations of over $5 billion, although there
may be some overlap among capitalization categories.

MEDIUM-SIZED COMPANIES have market capitalizations ranging from $1 billion
to $5 billion, although there may be some overlap among capitalization
categories. The Mid-Cap Growth and Mid-Cap Value Portfolios use the S&P 400
MidCap Index as its benchmark, which targets issuers with capitalizations
ranging from $500 million to $10 billion. Accordingly, these Portfolios will
consider companies within this larger capitalization range to be mid-cap, based
also on certain other relevant criteria.

SMALL COMPANIES generally have market capitalizations of $1 billion or less,
although there may be some overlap among capitalization categories. An Adviser
may consider an issuer that has a market capitalization in excess of $1 billion
to be "small-cap" if it meets certain relevant criteria.

ACTIVE TRADING means that a Portfolio may engage in frequent trading of
portfolio securities to achieve its investment goal. This may result in high
portfolio turnover and increased brokerage costs. In addition, because a
Portfolio may sell a security without regard to how long it has held the
security, active trading may have tax consequences for certain shareholders.

FIXED INCOME SECURITIES provide consistent interest or dividend payments. They
include corporate bonds, notes, debentures, preferred stocks, convertible
securities, U.S. Government securities and mortgage-backed and asset-backed
securities. The issuer of a SENIOR fixed income security is obligated to make
payments on this security ahead of other payments to security holders.

An INVESTMENT GRADE fixed income security is rated in one of the top four
ratings categories by a debt rating agency (or is considered of comparable
quality by the Adviser).

[Margin note: The two best-known debt rating agencies are Standard & Poor's
Ratings Services, a Division of The McGraw-Hill Companies, Inc. and Moody's
Investors Service, Inc. "Investment grade" refers to any security rated "BBB"
or above by Standard & Poor's or "Baa" or above by Moody's.]

U.S. GOVERNMENT SECURITIES are issued or guaranteed by the U.S. Government, its
agencies and instrumentalities. Some U.S. Government securities are issued or
unconditionally guaranteed by the U.S. Treasury. They are of the highest
possible credit quality. While these securities are subject to variations in
market value due to fluctuations in interest rates, they will be paid in full if
held to maturity. Other U.S. Government securities are neither direct
obligations of, nor guaranteed by, the U.S. Treasury. However, they involve
federal sponsorship in one way or another. For example some are backed by
specific types of collateral; some are supported by the issuer's right to borrow
from the Treasury; some are supported by the discretionary authority of the
Treasury to purchase certain

20
<PAGE>

obligations of the issuer; and others are supported only by the credit of the
issuing government agency or instrumentality.

ASSET-BACKED SECURITIES represent an interest in a pool of consumer or other
types of loans. Payments of principal and interest on the underlying loans are
passed through to the holders of asset-backed securities over the life of the
securities. MORTGAGE-BACKED SECURITIES represent an undivided ownership
interest in a pool of mortgages.

A "JUNK BOND" is a high yield, high risk bond that does not meet the credit
quality standards of investment grade securities.

SHORT-TERM MONEY MARKET INSTRUMENTS include money market securities such as
short-term U.S. Government obligations, repurchase agreements, commercial paper,
bankers' acceptances and certificates of deposit. These securities provide a
Portfolio with sufficient liquidity to meet redemptions and cover expenses.

REITs (real estate investment trusts) are trusts that invest primarily in
commercial real estate or real estate related loans. The value of an interest
in a REIT may be affected by the value and the cash flows of the properties
owned or the quality of the mortgages held by the trust.

DEFENSIVE INVESTMENTS include high quality fixed income securities and money
market instruments. A Portfolio will make temporary defensive investments in
response to adverse market, economic, political or other conditions. When a
Portfolio takes a defensive position, it may miss out on investment
opportunities that could have resulted from investing in accordance with its
principal investment strategy. As a result, a Portfolio may not achieve its
investment goal.

FOREIGN SECURITIES are issued by companies located outside of the United States,
including developing countries or emerging markets. Foreign securities may
include American Depositary Receipts (ADRs) or other similar securities that
convert into foreign securities, such as European Depositary Receipts (EDRs) and
Global Depositary Receipts (GDRs).

It may be necessary under certain foreign laws, less expensive, or more
expedient to invest in FOREIGN INVESTMENT COMPANIES, which invest in certain
foreign markets, including emerging markets. Investing through such vehicles
may involve frequent or layered fees or expenses, and the Managers will

21
<PAGE>

not invest in such investment companies unless, in their judgment, the potential
benefits justify the payment of any associated fees and expenses.

CURRENCY TRANSACTIONS These transactions include the purchase and sale of
currencies to facilitate securities transactions and forward currency contracts,
which are used to hedge against changes in currency exchange rates.

A CURRENCY BASKET consists of specified amounts of currencies of certain foreign
countries - for example, a European Currency Unit consists of currencies of the
twelve member states of the European Community.

An EMERGING MARKET country is a country that the World Bank, the International
Finance Corporation, the United Nations or its authorities has determined to
have a low or middle income economy [with a low per capita gross national
product].

ILLIQUID SECURITIES are subject to legal or contractual restrictions that may
make them difficult to sell. A security that cannot easily be sold within seven
days will generally be considered illiquid. Certain restricted securities (such
Rule 144A securities) are not generally considered illiquid because of their
established trading market.

SECURITIES LENDING involves a loan of securities by a Portfolio in exchange for
cash or collateral. A Portfolio earns interest on the loan while retaining
ownership of the security.

OPTIONS AND FUTURES are contracts involving the right to receive or obligation
to deliver assets or money depending on the performance of one or more
underlying assets or a market or economic index.

A SPECIAL SITUATION arises when, in the opinion of the Adviser, the securities
of a particular issuer will be recognized and appreciate in value due to a
specific development with respect to that issue. Developments creating a
special situation might include, among others, a new product or process, a
technological breakthrough, a management change or other extraordinary corporate
event, or differences in market supply of and demand for the security.
Investment in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not attract the
expected attention.

ABOUT THE INDEXES

As shown on the chart, below, each of the Seasons Select Portfolios except the
Cash Management Portfolio has one unmanaged portion, which seeks to replicate
all or a subset of one of five nationally-recognized market indexes.

- - THE S&P 500 COMPOSITE STOCK PRICE INDEX, commonly known as the S&P 500, is
an unmanaged index of 500 common stocks that are traded on the NYSE,
American Stock

22
<PAGE>

Exchange and the NASDAQ National Market, representing approximately 70% of
the total domestic U.S. equity market capitalization.

- - THE S&P 400 MIDCAP INDEX is an unmanaged index of common stocks of 400
mid-cap companies, with market capitalizations ranging from $500 million to
$10 billion.

- - THE RUSSELL 2000 INDEX tracks the performance of 2,000 common stocks of
corporations domiciled in the U.S. and its territories with small market
capitalizations. As of August 31, 1998, the market capitalization of the
issuers whose stocks comprise the Russell 2000 Index ranged from
approximately $222 million to $1.4 billion, with the average market
capitalization being $540 million.

- - THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX is an unmanaged index
that includes over 1,000 companies representing the stock markets of
Europe, Australia, New Zealand and the Far East. The Index is weighted by
market capitalization and therefore has a heavy representation in countries
with large stock markets, such as Japan.

- - THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX is a measure of the market value
of approximately 5,300 bonds, each with a face value currently in excess of
$1 million, which have at least one year to maturity and are rated "Baa" or
higher by a nationally recognized statistical rating agency.

Certain Portfolios invest in either the growth or value "subset" of an index.
These subsets are created by splitting an index according to "book-to-price"
ratio (that is, the difference between an issuer's "book value" and its market
capitalization). The value subset of an index contains securities of issuers
with higher book to price ratios, while a growth subset contains those of
issuers with lower book-to-price ratios.

RISK TERMINOLOGY

MARKET VOLATILITY: The stock and/or bond markets as a whole could go up or
down (sometimes dramatically). This could affect the value of the securities in
a Portfolio's portfolio.

DISCIPLINED STRATEGY: The passively-managed portion of each Seasons Select
Portfolio will not sell stocks in its portfolio and buy different stocks over
the course of a year other than in conjunction with changes in its target index,
even if there are adverse developments concerning a particular stock, company or
industry. There can be no assurance that the strategy will be successful.

SECURITIES SELECTION: A strategy used by a Portfolio, or securities selected by
its portfolio manager, may fail to produce the intended return.

23
<PAGE>

INTEREST RATE FLUCTUATIONS: Volatility of the bond market is due principally
to changes in interest rates. As interest rates rise, bond prices typically
fall; and as interest rates fall, bond prices typically rise. Longer-term and
lower coupon bonds tend to be more sensitive to changes in interest rates.

GROWTH STOCKS can be volatile for several reasons. Since the issuers usually
reinvest a high portion of earnings in their own businesses, growth stocks may
lack the comfortable dividend yield associated with value stocks that can
cushion total return in a bear market. Also, growth stocks normally carry a
higher price/earnings ratio than many other stocks. Consequently, if earnings
expectations are not met, the market price of growth stocks will often go down
more than other stocks. However, the market frequently rewards growth stocks
with price increases when expectations are met or exceeded.

FOREIGN EXPOSURE: Investors in foreign countries are subject to a number of
risks. A principal risk is that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment. In
addition, there may be less publicly available information about a foreign
company and it may not be subject to the same uniform accounting, auditing and
financial reporting standards as U.S. companies. Foreign governments may not
regulate securities markets and companies to the same degree as in the U.S.
Foreign investments will also be affected by local political or economic
developments and governmental actions. Consequently, foreign securities may be
less liquid, more volatile and more difficult to price than U.S. securities.
These risks are heightened when the issuer is in an EMERGING MARKET. Historical
experience indicates that the markets of EMERGING MARKET countries have been
more volatile than more developed markets; however, such markets can provide
higher rates of return to investors.

EURO CONVERSION: Effective January 1, 1999, several European countries
irrevocably fixed their existing national currencies to a new single European
currency unit, the "euro." Certain European investments may be subject to
additional risks as a result of this conversion. These risks include adverse
tax and accounting consequences, as well as difficulty in processing
transactions. SunAmerica is aware of such potential problems and is
coordinating efforts to prevent or alleviate their adverse impact on the
Portfolios. There can be no assurance that a Portfolio will not suffer any
adverse consequences as a result of the euro conversion.

CREDIT QUALITY: The creditworthiness of the issuer is always a factor in
analyzing fixed income securities. An issuer with a lower credit rating will be
more likely than a higher rated issuer to default or otherwise become unable to
honor its financial obligations. This type of issuer will typically issue JUNK
BONDS. In addition to the risk of default, junk bonds may be more volatile,
less liquid, more difficult to value and more susceptible to adverse economic
conditions or investor perceptions than other bonds.

ILLIQUIDITY: Certain securities may be difficult or impossible to sell at the
time and the price that the seller would like.

PREPAYMENT: Prepayment risk is the possibility that the principal of the loans
underlying mortgage-backed or other asset-backed securities may be retired in
advance of the maturity date. As a general rule, prepayments increase during a
period of falling interest rates and decrease during a period

24
<PAGE>

of rising interest rates. As a result of prepayments, in periods of declining
interest rates a Portfolio may be required to reinvest its assets in securities
with lower interest rates. In periods of increasing interest rates, prepayments
generally may decline, with the effect that the securities subject to prepayment
risk held by a Portfolio may exhibit price characteristics of longer-term debt
securities.

DERIVATIVES: In addition to general risks relating to market volatility,
interest rate fluctuations, credit quality and leverage, options and futures
contracts are subject to certain special risks. To the extent a contract is
used to hedge another position in the portfolio, there is a risk that changes in
the value of the contract will not match those of the hedged position.
Moreover, while hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. To the extent an option or futures contract is used to enhance
return, rather than as a hedge, a Portfolio will be directly exposed to the
risks of the contract. Gains or losses from non-hedging positions may be
substantially greater than the cost of the position.

HEDGING is a strategy in which an Adviser uses a derivative to offset the risk
that other instrument's in a Portfolio's holdings may decrease in value. Gains
on a derivative that reacts in an opposite manner to market movements may
substantially reduce losses on the other investment. While hedging can reduce
losses, it can also reduce or eliminate gains if the market moves in a different
manner than the Adviser anticipates or if the cost of the derivative outweighs
the benefit of the hedge. Hedging also involves the risk that changes in the
value of the derivative will not match those of the instruments being hedged as
expected, in which case any losses on the instruments being hedged may not be
reduced.

SMALL MARKET CAPITALIZATION: Companies with smaller market capitalizations
(particularly under $1 billion) tend to be at early stages of development with
limited product lines, market access for products, financial resources, access
to new capital, or depth in management. It may be difficult to obtain reliable
information and financial data about these companies. Consequently, the
securities of smaller companies may not be as readily marketable and may be
subject to more abrupt or erratic market movements.

NON-DIVERSIFICATION: Because it can invest a larger portion of its assets in
the stock of a single company - and thus concentrate in a smaller number of
stocks - than can diversified investment companies, a non-diversified investment
company's risk may increase because the effect of each stock on its performance
is greater.

MANAGEMENT

INVESTMENT ADVISER SunAmerica Asset Management Corp. serves as investment
adviser and manager for all the Portfolios of the Trust. SunAmerica selects the
other Advisers for the Portfolios, may manage certain portions of Portfolios,
provides various administrative services and supervises the daily business
affairs of each Portfolio.

For the period April 15, 1997 (commencement of operations) through March 31,
1998, each Seasons Portfolio paid SunAmerica a fee equal to the following
percentage of average daily net assets (on an annualized basis):

25
<PAGE>

<TABLE>
<CAPTION>
Portfolio Fee
--------- ---
<S> <C>
Multi-Managed Growth Portfolio 0.89%

Multi-Managed Moderate Growth Portfolio 0.85%

Multi-Managed Income/Equity Portfolio 0.81%

Multi-Managed Income Portfolio 0.77%

Asset Allocation: Diversified Growth Portfolio 0.85%

Stock Portfolio 0.85%
</TABLE>

In addition, the Seasons Select Portfolios will pay SunAmerica a fee equal
to the following percentage of average daily net assets:

<TABLE>
<CAPTION>
Portfolio Fee
--------- ---
(including breakpoints)
<S> <C>
Large-Cap Growth Portfolio First $250 million 0.800%
Next $250 million 0.750%
Over $500 million 0.700%

Large-Cap Composite Portfolio First $250 million 0.800%
Next $250 million 0.750%
Over $500 million 0.700%

Large-Cap Value Portfolio First $250 million 0.800%
Next $250 million 0.750%
Over $500 million 0.700%

Mid-Cap Growth Portfolio First $250 million 0.850%
Next $250 million 0.800%
Over $500 million 0.750%

Mid-Cap Value Portfolio First $250 million 0.850%
Next $250 million 0.800%
Over $500 million 0.750%

Small-Cap Portfolio First $250 million 0.850%
Next $250 million 0.800%
Over $500 million 0.750%

International Equity Portfolio 1.000%

26
<PAGE>

<CAPTION>
Portfolio Fee
--------- ---
(including breakpoints)
<S> <C>
Diversified Fixed Income Portfolio First $200 million 0.700%
Next $200 million 0.650%
Over $400 million 0.600%

Cash Management Portfolio First $100 million 0.55%
Next $200 million 0.50%
Thereafter 0.45%
</TABLE>

SunAmerica compensates the other Advisers out of the fees that it receives from
the Portfolios. SunAmerica may terminate any agreement with another Adviser
without shareholder approval. Moreover, SunAmerica has received an exemptive
order from the Securities and Exchange Commission that permits SunAmerica,
subject to certain conditions, to enter into agreements relating to the Trust
with Advisers approved by the Board of Trustees without obtaining shareholder
approval. The exemptive order also permits SunAmerica, subject to the approval
of the Board but without shareholder approval, to employ new Advisers for new or
existing Portfolios, change the terms of particular agreements with Advisers or
continue the employment of existing Advisers after events that would otherwise
cause an automatic termination of a Advisory agreement. Shareholders of a
Portfolio have the right to terminate an agreement with an Adviser for that
Portfolio at any time by a vote of the majority of the outstanding voting
securities of such Portfolio. Shareholders will be notified of any Adviser
changes. The order also permits the Trust to disclose to shareholders the
Advisers' fees only in the aggregate for each Portfolio. Each of the Advisers
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 Advisers' fees. These fees do not increase Portfolio expenses.

SunAmerica, located at The SunAmerica Center, 733 Third Avenue, New York, New
York 10017-3204, is a corporation organized in 1982 under the laws of the State
of Delaware. SunAmerica is engaged in providing investment advice and
management services to the Trust, other mutual funds and pension funds. In
addition to serving as adviser to the Trust, SunAmerica serves as adviser,
manager and/or administrator for Anchor Pathway Fund, Anchor Series Trust, Style
Select Series, Inc., SunAmerica Equity Funds, SunAmerica Income Funds,
SunAmerica Money Market Funds, Inc. and SunAmerica Series Trust. SunAmerica
managed, advised and/or administered assets of approximately $15 billion as of
September 30, 1998 for investment companies, individuals, pension accounts, and
corporate and trust accounts.

In addition to serving as the investment adviser and manager to the Trust and
each Portfolio and supervising activities of the other Advisers, SunAmerica
manages the Cash Management Portfolio, the Aggressive Growth and
SunAmerica/Balanced components of the Multi-Managed Seasons Portfolios, and
portions of the Large-Cap Composite Portfolio, the Small-Cap Portfolio and the
Diversified Fixed Income Portfolio.

The management of each Portfolio and Managed Component is summarized in the
following chart and described below.

27
<PAGE>

<TABLE>
<CAPTION>
Portfolio Portfolio management allocated among the
- ------------------ following advisers
-------------------------------------------
Seasons Portfolios
- ------------------
<S> <C>
Multi-Managed Growth Portfolio Janus Capital Corporation ("Janus")
(through Janus/Growth component)
SunAmerica (through
SunAmerica/Aggressive
Growth component and
SunAmerica/Balanced component)
Wellington Management Company, LLP
("Wellington") (through WMC/ Fixed
Income component)

Multi-Managed Moderate Growth Portfolio Janus (through Janus/Growth
component)
SunAmerica (through
SunAmerica/Aggressive
Growth component and
SunAmerica/Balanced component)
Wellington (through WMC/ Fixed Income
component)

Multi-Managed Income/Equity Portfolio Janus (through Janus/Growth component)
SunAmerica (through SunAmerica/Balanced
component)
Wellington (through WMC/ Fixed Income
component)

Multi-Managed Income Portfolio Janus (through Janus/Growth component)
SunAmerica (through SunAmerica/Balanced
component
Wellington (through WMC/ Fixed Income
component)

Asset Allocation: Diversified Growth Putnam Investment Management, Inc.
Portfolio ("Putnam")

Stock Portfolio T. Rowe Price Associates, Inc. ("T.
Rowe Price")

Seasons Select Portfolios
- ------------------
Large-Cap Growth Portfolio Bankers Trust Company ("Bankers Trust")
Goldman Sachs Asset Management ("Goldman
Sachs")
Janus

28
<PAGE>

Large-Cap Composite Portfolio Bankers Trust
SunAmerica
T. Rowe Price

Large-Cap Value Portfolio Bankers Trust
T. Rowe Price
Wellington

Mid-Cap Growth Portfolio Bankers Trust
T. Rowe Price
Wellington

Mid-Cap Value Portfolio Bankers Trust
Goldman Sachs
Lord Abbett & Co. ("Lord Abbett ")

Small-Cap Portfolio Bankers Trust
Lord Abbett
SunAmerica

International Equity Portfolio Bankers Trust
Goldman Sachs Asset Management
International ("Goldman Sachs
International")
Lord Abbett

Diversified Fixed Income Portfolio Bankers Trust
SunAmerica
Wellington

Cash Management Portfolio SunAmerica
</TABLE>

29
<PAGE>

INFORMATION ABOUT ADVISERS

DESCRIPTION OF THE ADVISERS

BANKERS TRUST COMPANY. BANKERS TRUST has principal offices at 130 Liberty
Street (One Bankers Trust Plaza), New York 10006. Bankers Trust is a worldwide
merchant bank that provides investment management services for the nation's
largest corporations and institutions. As of [March 31], 1998, Bankers Trust
managed approximately $[330] billion in assets globally.

GOLDMAN SACHS ASSET MANAGEMENT AND GOLDMAN SACHS ASSET MANAGEMENT
INTERNATIONAL. Goldman Sachs, One New York Plaza, New York, New York 10004,
a separate operating division of Goldman Sachs & Co., registered as an
investment adviser in 1981. Goldman Sachs International, 133 Peterborough
Court, London EC4A 2BB, England, an affiliate of Goldman Sachs & Co., became
a member of the Investment Management Regulatory Organisation Limited in 1990
and registered as an investment adviser in 1991. As of August 21, 1998,
Goldman Sachs and Goldman Sachs International, together with their
affiliates, acted as investment adviser or distributor for assets in excess
of $168 billion.

JANUS CAPITAL CORPORATION. JANUS is a Colorado corporation with principal
offices at 100 Fillmore Street, Denver, Colorado 80206-4923. Janus serves as
investment adviser to all of the Janus funds, as well as adviser or subadviser
to other mutual funds and individual, corporate, charitable and retirement
accounts, and, as of June 30, 1998, had assets under management of approximately
$89 billion.

LORD ABBETT & CO. LORD ABBETT, located in the General Motors Building, at 767
Fifth Avenue, New York, New York 10153, has been an investment manager for over
69 years and currently manages about $[27] billion in a family of mutual funds
and other advisory accounts. Lord Abbett provides similar services to twelve
other funds having various investment objectives and also advises other
investment clients.

PUTNAM INVESTMENT MANAGEMENT, INC. PUTNAM is a Massachusetts corporation with
principal offices at One Post Office Square, Boston, Massachusetts. Putnam has
been managing mutual funds since 1937 and serves as investment adviser to the
funds in the Putnam Family. Putnam and its affiliates managed assets of
approximately [$278] billion as of [June 30], 1998.

T. ROWE PRICE ASSOCIATES, INC. T. ROWE PRICE is a Maryland corporation with
principal offices at 100 East Pratt Street, Baltimore, Maryland 21202. Founded
in 1937 by the late Thomas Rowe Price, Jr., T. Rowe Price and its affiliates
managed assets in excess of [$140] billion as of [June 30], 1998. T. Rowe Price
is a publicly traded company.

WELLINGTON MANAGEMENT COMPANY, LLP. Wellington is a Massachusetts limited
liability partnership. The principal offices of Wellington are located at 75
State Street, Boston, Massachusetts 02109. Wellington is a professional
investment counseling firm which provides investment services to investment
companies, employee benefit plans, endowments, foundations, and

30
<PAGE>

other institutions and individuals. As of [June 30], 1998, Wellington had
discretionary management authority with respect to approximately [$200.8]
billion of assets.

<TABLE>
<CAPTION>
Portfolio or Component Name, Title and Affiliation of Experience
- ---------------------- Portfolio Manager ----------
------------------------------
<S> <C> <C>
Aggressive Growth Donna M. Calder (Domestic Ms. Calder has been a
component Equity Investment Team) portfolio manager with
Vice President and the firm since March
Portfolio Manager 1998. Prior to joining
(SunAmerica) SunAmerica, Ms. Calder
was the Founder and
General Partner of
Manhattan Capital
Partners, L.P.

SunAmerica/Balanced Francis D. Gannon Mr. Gannon has been a
components (equity (Domestic Equity portfolio manager with
portion) Investment Team) the firm since 1996. He
Vice President and joined SunAmerica as an
Portfolio Manager equity analyst in 1993.
(SunAmerica)

SunAmerica/Balanced P. Christopher Leary Mr. Leary has been a
component (fixed income (Fixed Income Investment portfolio manager with
portion) Team) the firm since 1990.
Executive Vice President,
Director of Fixed Income
and Portfolio Manager
(SunAmerica)

Janus/Growth component Warren B. Lammert Mr. Lammert first joined
Portfolio Manager (Janus) Janus in 1987 and has
been a portfolio manager
with the firm since 1993.
He is a Chartered
Financial Analyst.

The WMC/ Fixed Income Thomas L. Pappas Mr. Pappas joined the
component Senior Vice President and company in 1987.
Portfolio Manager (Wellington)

The Asset Allocation: Global Asset Allocation
Diversified Growth Committee (Putnam)
Portfolio

The Stock Portfolio Robert W. Smith (Investment Mr. Smith joined T. Rowe
Advisory Committee) Price in 1992 and is
Chairman, Vice President Equity Portfolio Manager
and Equity Portfolio Manager for T. Rowe Price and
(T. Rowe Price) Rowe Price-Fleming
International Inc.

31
<PAGE>

Larry J. Puglia (Investment
Advisory Committee)
(T. Rowe Price)

Daniel Theriault (Investment
Advisory Committee)
(T. Rowe Price)

Large-Cap Growth This portion of the
Portfolio Portfolio is unmanaged
and attempts to track the
S&P 500 Index (Bankers Trust)

George D. Adler Mr. Adler joined Goldman
Vice President and Senior Sachs in 1997. From 1990
Portfolio Manager to 1997, he was a
(Goldman Sachs) portfolio manager at
Liberty Investment
Management, Inc. From
1988 to 1990 he was a
director of portfolio
management at Banc One in
Ohio.

Robert G. Collins Mr. Collins joined
Vice President and Senior Goldman Sachs in 1997.
Portfolio Manager From 1991 to 1997, he was
(Goldman Sachs) a portfolio manager at
Liberty Investment
Management, Inc. His
past experiences include
work as a special
situations analyst with
Raymond James &
Associates for five years.

32
<PAGE>

<CAPTION>
Portfolio or Component Name, Title and Affiliation of Experience
- ---------------------- Portfolio Manager ----------
------------------------------
<S> <C> <C>
Herbert E. Ehlers Mr. Ehlers joined Goldman
Managing Director and Sachs in 1997. From 1994
Senior Portfolio Manager to 1997, he was the Chief
(Goldman Sachs) Investment Officer and
Chairman at Liberty
Investment Management,
Inc. He was a portfolio
manager and president at
Liberty's predecessor
firm, Eagle Asset
Management, from 1984 to
1994.

Gregory H. Ekizian Mr. Ekizian joined
Vice President and Senior Goldman Sachs in 1997.
Portfolio Manager From 1990 to 1997, he was
(Goldman Sachs) a portfolio manager at
Liberty Investment
Management, Inc. and its
predecessor firm, Eagle
Asset Management.

David G. Shell Mr. Shell joined Goldman
Vice President and Senior Sachs in 1997. From 1987
Portfolio Manager to 1997, he was a
(Goldman Sachs) portfolio manager at
Liberty Investment
Management, Inc. and its
predecessor firm, Eagle
Asset Management.

Ernest C. Segundo, Jr. Mr. Segundo joined
Vice President and Senior Goldman Sachs in 1997.
Portfolio Manager (Goldman Sachs) From 1992 to 1997, he was
a portfolio manager at
Liberty Investment
Management, Inc. From
1990 to 1992, he was an
equity research analyst
with Fidelity Management
& Research Company.

33
<PAGE>

<CAPTION>
Portfolio or Component Name, Title and Affiliation of Experience
- ---------------------- Portfolio Manager ----------
------------------------------
<S> <C> <C>
Marc Pinto Mr. Pinto has been the
Vice President of Vice President of
Portfolio Management and Portfolio Management of
Portfolio Manager (Janus) Janus since 1994. From
1993 to 1994, he was Co-President of
Creative
Retail Technology, a
producer of hardware for
retail clients. From
1991 to 1993, Mr. Pinto
was an equity analyst at
Priority Investments
Ltd., a family owned
business.

Warren B. Lammert Mr. Lammert joined Janus
Executive Vice President Capital in 1987. He holds
and Portfolio Manager a Bachelor of Arts in
(Janus) Economics from Yale
University and a Master
of Science in Economic
History from London
School of Economics. He
is a Chartered Financial
Analyst.

The Large-Cap Composite This portion of the
Portfolio Portfolio is unmanaged
and attempts to track the
S&P 500 Index (Bankers
Trust)

Francis D. Gannon See above.
(Domestic Equity Investment Team)
Vice President and
Portfolio Manager
(SunAmerica)

Robert W. Smith (Investment Advisory Mr. Smith was appointed
Committee) as the chairman in 1997.
Chairman (T. Rowe Price) He joined T. Rowe Price
in 1992 and has been
managing investments
since 1987.

34
<PAGE>

Robert N. Gensler (Investment
Advisory Committee)
Portfolio Manager (T. Rowe Price)

Thomas J. Huber (Investment
Advisory Committee)
Portfolio Manager (T. Rowe Price)

Charles A. Morris (Investment
Advisory Committee)
Portfolio Manager (T. Rowe Price)

Thomas O. Murtha (Investment
Advisory Committee)
Portfolio Manager (T. Rowe Price)

Larry J. Puglia (Investment
Advisory Committee)
Portfolio Manager (T. Rowe Price)

Large-Cap Value Portfolio This portion of the
Portfolio is unmanaged
and attempts to track the
S&P 500 Index (Bankers Trust)

Brian C. Rogers (Investment Mr. Rogers has been
Advisory Committee) chairman of the committee
Chairman (T. Rowe Price) since 1993. He joined T.
Rowe Price in 1982 and
has been managing
investments since 1983.

35
<PAGE>

Thomas H. Broadus Jr. (Investment
Advisory Committee)
Portfolio Manager (T. Rowe Price)

Arthur B. Cecil III (Investment
Advisory Committee)
Portfolio Manager (T. Rowe Price)

Giri Devulapally (Investment
Advisory Committee)
Portfolio Manager (T. Rowe Price)

Richard P. Howard (Investment
Advisory Committee)
Portfolio Manager (T. Rowe Price)

William J. Stromberg (Investment
Advisory Committee)
Portfolio Manager (T. Rowe Price)

John R. Ryan (Value/Yield Mr. Ryan has been with
Team) the firm for 17 years.
Senior Vice President and
Managing Partner
(Wellington)

Mid-Cap Growth Portfolio This portion of the
Portfolio is unmanaged
and attempts to track the
S&P 400 MidCap Index
(Bankers Trust)

36
<PAGE>

<CAPTION>
Portfolio or Component Name, Title and Affiliation of Experience
- ---------------------- Portfolio Manager ----------
------------------------------
<S> <C> <C>
Brian W. H. Berghuis (Investment Mr. Berghuis has been
Advisory Committee) managing investments
Chairman (T. Rowe Price) since joining T. Rowe
Price in 1985.

Marc L. Baylin (Investment
Advisory Committee)
Portfolio Manager (T. Rowe Price)

James A. C. Kennedy (Investment
Advisory Committee)
Portfolio Manager (T. Rowe Price)

John F. Wakeman (Investment
Advisory Committee)
Portfolio Manager (T. Rowe Price)

Robert D. Rands Mr. Rands joined the
Senior Vice President company in 1978.
(Wellington)

Mid-Cap Value Portfolio This portion of the
Portfolio is unmanaged
and attempts to track the
S&P 400 MidCap Index (Bankers Trust)

Eileen Aptman Ms. Aptman joined Goldman
Vice President and Senior Sachs in 1993. From 1990
Portfolio Manager to 1993, she worked at
(Goldman Sachs) Delphi Management as an
equity analyst, focusing
her research efforts on
value stocks.

37
<PAGE>

<CAPTION>
Portfolio or Component Name, Title and Affiliation of Experience
- ---------------------- Portfolio Manager ----------
------------------------------
<S> <C> <C>
Paul D. Ferrell Mr. Farrell joined
Vice President and Senior Goldman Sachs in 1991.
Portfolio Manager (Goldman Sachs) In 1998, he became
responsible for managing
Goldman Sachs Value
team. During 1991, he
served as a managing
director at Plaza
Investment Managers, the
investment subsidiary of
GEICO Corp., a major
insurance company. From
1986 to 1991, he was
employed by Goldman Sachs
as a vice president in
the investment research
department and was
responsible for the
formation of the firm s
Emerging Growth Research
Group.

Greg Gigliotti Mr. Gigliotti joined
Vice President and Senior Goldman Sachs in 1997.
Portfolio Manager (Goldman Sachs) From 1996 to 1997 he was
a Vice President and
senior analyst at
Franklin Mutual Advisors,
Inc., the asset
management division of
Franklin Resources, Inc.
From 1989 to 1996 he was
a Vice President and
senior analyst at Heine
Securities Corporation
which was purchased by
Franklin Resources, Inc.

Matthew B. McLennan Mr. McLennan joined
Vice President and Senior Goldman Sachs in 1995.
Portfolio Manager (Goldman Sachs) From 1994 to 1995, he
worked in the Investment
Banking Division of
Goldman Sachs in
Australia. From 1991 to
1994, Mr. McLennan worked
at Queensland Investment
Corporation in Australia.

38
<PAGE>

<CAPTION>
Portfolio or Component Name, Title and Affiliation of Experience
- ---------------------- Portfolio Manager ----------
------------------------------
<S> <C> <C>
Thomas S. Price Mr. Price joined Goldman
Vice President and Senior Sachs in 1997. From 1996
Portfolio Manager to 1997 he was a Vice
(Goldman Sachs) President and senior
analyst at Franklin
Mutual Advisors, Inc.,
the asset management
division of Franklin
Resources, Inc. From
1993 to 1996 he was a
Vice President and senior
analyst at Heine
Securities Corporation
which was purchased by
Franklin Resources, Inc.

Lawrence S. Sibley Mr. Sibley joined Goldman
Vice President and Senior Sachs in 1997. From 1994
Portfolio Manager (Goldman Sachs) to 1997, he headed
Institutional Equity
Sales at J.P. Morgan
Securities and from 1987
to 1994, he was a
principal at Sanford C.
Bernstein & Co. in its
Institutional Sales
Department.

Karma Wilson Ms. Wilson joined Goldman
Vice President and Senior Sachs in 1994. Prior to
Portfolio Manager (Goldman Sachs) 1994, she was an
investment analyst with
Bankers Trust Australia
Ltd. Before 1992 she was
employed at Arthur
Andersen L.L.P.

Edward K. von der Linde Mr. von der Linde has
Portfolio Manager (Lord been with Lord Abbett
Abbett) since 1988 and has over
12 years of investment
experience.

Howard E. Hansen
Portfolio Manager (Lord
Abbett)

39
<PAGE>

Stephen J. McGruder Mr. McGruder joined Lord
Senior Portfolio Manager Abbett in May 1995.
(Lord Abbett) Prior to joining Lord
Abbett, Mr. McGruder
served from October of
1988 as Vice President of
Wafra Investment Advisory
Group, a private
investment company. Mr.
McGruder has over 29
years of investment
experience.

Donna Calder (Domestic See above.
Equity Investment Team)
Portfolio Manager
(SunAmerica)

International Equity This portion of the
Portfolio Portfolio is unmanaged
and attempts to track the
Morgan Stanley Capital
International EAFE Index
(Bankers Trust)

Guy P. de C. Bennett Mr. Bennett joined
Vice President and Goldman Sachs as a
Portfolio Manager portfolio manager in 1996
(Goldman Sachs International) and is also co-head of
Goldman Sachs' Japanese
Equity Group in Tokyo.
From 1984 to 1996, he was
a portfolio manager and
an Executive Director at
CIN Management.

40
<PAGE>

<CAPTION>
Portfolio or Component Name, Title and Affiliation of Experience
- ---------------------- Portfolio Manager ----------
------------------------------
<S> <C> <C>
Ivor H. Farm Mr. Farm joined Goldman
Executive Director and Sachs as a senior
Portfolio Manager portfolio manager in
(Goldman Sachs International) 1996. From 1995 to 1996,
he was responsible for
originating and marketing
French equity ideas at
Exane in Paris. Prior to
1995, he spent five years
engaged in French equity
research and marketing at
Banque Nationale de Paris
and Schroders in London.

Shogo Maeda Mr. Maeda joined Goldman
Managing Director and Sachs as a portfolio
Portfolio Manager manager in 1994. From
(Goldman Sachs International) 1987 to 1994, he worked
at Nomura Investment
Management Incorporated
as a Senior Portfolio
Manager.

Warwick M. Negus Mr. Negus joined Goldman
Managing Director and Co-Head Sachs as a portfolio
of Emerging Market Equities manager in 1994. From
(Goldman Sachs International) 1987 to 1994, he was a Vice
President of Bankers
Trust Australia Ltd.
where he was the Chief
Investment Officer of
their Southeast Asian
investment team. He is
also a member of Goldman
Sachs' global asset
allocation committee.

41
<PAGE>

<CAPTION>
Portfolio or Component Name, Title and Affiliation of Experience
- ---------------------- Portfolio Manager ----------
------------------------------
<S> <C> <C>
Susan Noble Ms. Noble joined Goldman
Executive Director and Sachs as a senior
Senior Portfolio Manager portfolio manager and
(Goldman Sachs International) head of the European
Equity team in October
1997. From 1986 to 1997,
she worked at Fleming
Investment Management in
London, where she most
recently was Portfolio
Management Director for
the European equity
investment strategy and
process.

Christopher Taylor Mr. Taylor is Deputy
Portfolio Manager (Lord Managing Director of Fuji
Abbett) Investment Management Co.
(Europe), Ltd., where he
has worked since 1987.
He has sixteen years of
investment experience.

Diversified Fixed Income This portion of the
Portfolio Portfolio is unmanaged
and attempts to track the
Lehman
Government/Corporate Bond
Index (Bankers Trust)

P. Christopher Leary See above.
(Fixed Income Investment
Team)
Executive Vice President
and Portfolio Manager
(SunAmerica)

John W. Risner Mr. Risner joined the
Vice President and firm in February 1997.
Portfolio Manager Prior to joining
(SunAmerica) SunAmerica, Mr. Risner
served as Senior
Portfolio Manager of the
Value Line Aggressive
Income Trust and the
Value Line Convertible Fund.

42
<PAGE>

<CAPTION>
Portfolio or Component Name, Title and Affiliation of Experience
- ---------------------- Portfolio Manager ----------
------------------------------
<S> <C> <C>
John C. Keogh Mr. Keogh joined
Senior Vice President and Wellington in 1983. Mr.
Portfolio Manager Keogh also manages the
(Wellington) Core Bond Sub-Portfolio
of the Multi-Asset
Portfolio.

Cash Management Portfolio P. Christopher Leary (Fixed See above.
Income Investment Team)
(SunAmerica)
</TABLE>

YEAR 2000 Many computer and computer-based systems cannot distinguish the year
2000 from the year 1900 because of the way systems encode and calculate dates
(commonly known as the "Year 2000 Issue"). The Year 2000 Issue could
potentially have an adverse impact on the handling of security trades, the
payment of interest and dividends, pricing and account services. We recognize
the importance of the Year 2000 Issue and are taking appropriate steps necessary
in preparation for the year 2000. The Trust's management fully anticipates that
their systems will be adapted in time for the year 2000, and to further this
goal they have coordinated a plan to repair, adapt or replace their systems as
necessary. They have also obtained representations from their outside service
providers that they are doing the same. The Trust's management completed their
plan significantly by the end of the 1998 calendar year and expects to perform
appropriate systems testing during the 1999 calendar year. If the problem has
not been fully addressed, however, the Trust could be negatively impacted. The
Year 2000 Issue could also have a negative impact on the companies in which the
Trust invests, which could hurt the Trust's investment returns.

43
<PAGE>

(OUTSIDE BACK COVER)

FOR MORE INFORMATION

The following documents contain more information about the Portfolios and
are available free of charge upon request:

ANNUAL/SEMI-ANNUAL REPORTS. Contain financial statements, performance data
and information on portfolio holdings. The annual report also contains a
written analysis of market conditions and investment strategies that
significantly affected a Portfolio's performance for the most recently
completed fiscal year.

STATEMENT OF ADDITIONAL INFORMATION (SAI). Contains additional information
about the Portfolios' policies, investment restrictions and business
structure. This prospectus incorporates the SAI by reference.

You may obtain copies of these documents or ask questions about the
Portfolios by contacting:

Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
1-800-445-7862

Information about the Portfolios (including the SAI) can be reviewed and copied
at the Public Reference Room of the Securities and Exchange Commission,
Washington, D.C. Call (800) SEC-0330 for information on the operation of the
Public Reference Room. Information about the Portfolios is also available on the
SEC's web-site at http://www.sec.gov and copies may be obtained upon payment of
a duplicating fee by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.

You should rely only on the information contained in this prospectus. No one is
authorized to provide you with any different information.

[Logo]

Anchor National Life Insurance Company
1 SunAmerica Center
Los Angeles, California 90067-6022

INVESTMENT COMPANY ACT
File No. 811-07725

44
<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

[date]

<PAGE>

TABLE OF CONTENTS

TOPIC PAGE
<S> <C>
THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3

INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . B-4

DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS . . . . . . . . . . . . . B-41

INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . B-46

TRUST OFFICERS AND TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . B-48

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT . . . . . . . . . . . . . . . B-51

SUBADVISORY AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . B-54

DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES . . . . . . . . . . . . . . . . B-58

SHARES OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-59

PRICE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-60

EXECUTION OF PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . B-61

GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-63
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-63
Independent Accountants and Legal Counsel . . . . . . . . . . . . . . B-63
Reports to Shareholders . . . . . . . . . . . . . . . . . . . . . . . B-63
Shareholder and Trustee Responsibility . . . . . . . . . . . . . . . B-63
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . B-64
</TABLE>

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 fifteen separate series or portfolios
(each, a "Portfolio" and collectively, the "Portfolios") all of which are
non-diversified, as described in the Prospectus.

Six of the Portfolios, the Multi-Managed Growth Portfolio, the
Multi-Managed Moderate Growth Portfolio, the Multi-Managed Income/Equity
Portfolio, the Multi-Managed Income Portfolio (each, a "Multi-Managed Seasons
Portfolio," and collectively, the "Multi-Managed Seasons Portfolios"), the Asset
Allocation: Diversified Growth Portfolio and the Stock Portfolio (collectively,
the "Seasons Portfolios") are available through the Seasons Variable Annuity
Contract. The other nine Portfolios, the Large-Cap Growth Portfolio, the
Large-Cap Composite Portfolio, the Large-Cap Value Portfolio, the Mid-Cap Growth
Portfolio, the Mid-Cap Value Portfolio, the Small-Cap Portfolio, the
International Equity Portfolio, the Diversified Fixed Income Portfolio and the
Cash Management Portfolio (collectively, the "Seasons Select Portfolios") are
available through the Seasons Select Variable Annuity Contract. Certain of the
Seasons Select Portfolios (the "Multi-Managed Seasons Select Portfolios"), as
described more fully in the Prospectus, are managed by more than one investment
adviser. The Board of Trustees may establish additional series in the future.

Shares of the Portfolios 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. The Life Company may issue variable
life contracts that also will use the Trust as the underlying investment. The
offering of Trust shares to variable annuity and variable life separate accounts
is referred to as "mixed funding." It may be disadvantageous for variable
annuity separate accounts and variable life separate accounts to invest in the
Trust simultaneously. Although neither the Life Company nor the Trust currently
foresees such disadvantages either to variable annuity or variable life contract
owners, the Board of Trustees of the Trust would monitor events in order to
identify any material conflicts to determine what action, if any, should be
taken in response thereto. Shares of the Trust may be offered to separate
accounts of other life insurance companies that are affiliates of the Life
Company.

SunAmerica Asset Management Corp. ("SunAmerica"), 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, an
"Adviser" and together with SunAmerica, the "Advisers") to assist in management
of one or more Portfolios.

B-3
<PAGE>

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 the Portfolios may
employ, which are described under "More Information About the Portfolios" in the
Prospectus, are discussed more fully below. Unless otherwise specified, each
Portfolio, including each Managed Component of the Multi-Managed Seasons
Portfolios, may invest in the following securities. The stated percentage
limitations are applied to an investment at the time of purchase unless
indicated otherwise.

WARRANTS. Each Portfolio except the Cash Management 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, it risks the loss of its
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. Rights represent a preemptive
right of stockholders to purchase additional shares of a stock at the time of a
new issuance before the stock is offered to the general public, allowing the
stockholder to retain the same ownership percentage after the new stock
offering.

CONVERTIBLE SECURITIES AND PREFERRED STOCKS. Convertible securities may be
debt securities or preferred stock with a conversion feature. Traditionally,
convertible securities have paid dividends or interest at rates higher than
common stocks but lower than non-convertible securities. They generally
participate in the appreciation or depreciation of the underlying stock into
which they are convertible, but to a lesser degree. In recent years,
convertibles have been developed that combine higher or lower current income
with options and other features. Generally, preferred stock has a specified
dividend and ranks after bonds and before common stocks in its claim on income
for dividend payments and on assets should the company be liquidated. While most
preferred stocks pay a dividend, a Portfolio may purchase preferred stock where
the issuer has omitted, or is in danger of omitting, payment of its dividend.
Such investments would be made primarily for their capital appreciation
potential. The Cash Management Portfolio will not invest in Convertible
Securities and Preferred Stocks.

INVESTMENT IN SMALL, UNSEASONED COMPANIES. As described in the Prospectus,
each Portfolio except the WMC/Fixed Income component and the Cash Management
Portfolio may invest in the securities of small companies having market
capitalizations under $1 billion. While such companies may realize more
substantial growth than larger, more established companies, they may also be
subject to some additional risks. It may be difficult to obtain reliable
information and financial data on such companies and the securities of these
small companies may not be readily marketable, making it difficult to dispose of
shares when desirable. A risk of investing in smaller,

B-4
<PAGE>

emerging companies is that they often are at an earlier stage of development and
therefore have limited product lines, market access for such products, financial
resources and depth in management than larger, more established companies, and
their securities may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. In addition, certain smaller issuers may face difficulties in
obtaining the capital necessary to continue in operation and may go into
bankruptcy, which could result in a complete loss of an investment. Smaller
companies also may be less significant factors within their industries and may
have difficulty withstanding competition from larger companies. If other
investment companies and investors who invest in such issuers trade the same
securities when a Portfolio attempts to dispose of its holdings, the Portfolio
may receive lower prices than might otherwise be obtained.

Companies with a 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. The Asset Allocation: Diversified Growth Portfolio may
invest up to 60% of its total assets, the Stock Portfolio may invest up to 30%
of its total assets, the SunAmerica/Balanced component of each Multi-Managed
Portfolio may invest up to 25% of its total assets, the WMC/Fixed Income
component of each Multi-Managed Seasons Portfolio may invest up to 15% of its
total assets, the Large-Cap Growth Portfolio, the Large-Cap Composite Portfolio,
the Large-Cap Value Portfolio, the Mid-Cap Growth Portfolio, the Mid-Cap Value
Portfolio, the Small-Cap Portfolio and the Diversified Fixed Income Portfolio
may invest up to 30% of total assets, and the International Equity Portfolio and
the Janus/Growth and SunAmerica/ Aggressive Growth components of each
Multi-Managed Seasons Portfolio may invest without limitation in foreign
securities. The Cash Management Portfolio may invest in U.S. dollar denominated
securities of foreign issuers that meet the quality and maturity requirements
applicable to the Portfolio. 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 also 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 that
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

B-5
<PAGE>

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 that 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. Each Portfolio except the Cash Management Portfolio may
invest, and the WMC/Fixed Income component may invest without limitation, in
U.S. dollar denominated foreign debt securities. Each Portfolio also may
invest in securities denominated in European Currency Units (ECUs). An ECU is a
"basket" consisting of specified amounts of currencies of certain of the twelve
member states of the European Community. In addition, the Portfolios may invest
in securities denominated in other currency "baskets."

Investments in foreign securities, including securities of emerging market
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
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; the imposition of foreign taxes on investment income
derived from such countries and differences (which may be favorable or
unfavorable) between the U.S. economy and foreign economies. The Cash
Management Portfolio will not invest in emerging markets.

Each Portfolio except the Cash Management Portfolio may enter into currency
swaps. Currency swaps involve the exchange by a Portfolio with another party of
their respective rights to make or receive payments in specified currencies.
Currency swaps usually involve the delivery of the entire principal value of one
designated currency in exchange for the other designated currency. Therefore,
the entire principal value of a currency swap is subject to the risk that the
other party to

B-6
<PAGE>

the swap will default on its contractual delivery obligations. A Portfolio will
maintain in a segregated account with its custodian cash or liquid securities
equal to the net amount, if any, of the excess of the Portfolio's obligations
over its entitlements with respect to swap transactions. To the extent that the
net amount of a swap is held in a segregated account consisting of cash or
liquid securities, the Trust believes that swaps do not constitute senior
securities under the 1940 Act and, accordingly, they will not be treated as
being subject to the Portfolio's borrowing restrictions. The use of currency
swaps is a highly specialized activity, which involves investment techniques and
risks different from those associated with ordinary portfolio securities
transactions. If an Adviser is incorrect in its forecasts of market values and
currency exchange rates, the investment performance of a Portfolio would be less
favorable than it would have been if this investment technique were not used.

PASSIVE FOREIGN INVESTMENT COMPANIES ("PFICS"). The Asset Allocation:
Diversified Growth Portfolio, Large-Cap Growth Portfolio, Large-Cap Composite
Portfolio, Small-Cap Portfolio and International Equity Portfolio may invest,
and Janus Capital Corporation may invest the assets of the Janus/Growth
component of each Multi-Managed Seasons Portfolio, in PFICs, which are any
foreign corporations that 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, the tax laws may require the Portfolio to
recognize income associated with the PFIC prior to the actual receipt of any
such income in order to avoid the imposition of tax at the Portfolio level.

FIXED INCOME SECURITIES. Fixed income securities are broadly characterized
as those that provide for periodic payments to the holder of the security at a
stated rate. Most fixed income securities, such as bonds, represent
indebtedness of the issuer and provide for repayment of principal at a stated
time in the future. Others do not provide for repayment of a principal amount,
although they may represent a priority over common stockholders in the event of
the issuer's liquidation. Many fixed income securities are subject to scheduled
retirement, or may be retired or "called" by the issuer prior to their maturity
dates. The interest rate on certain fixed income securities, known as "variable
rate obligations," is determined by reference to or is a percentage of an
objective standard, such as a bank's prime rate, the 90-day Treasury bill rate,
or the rate of return on commercial paper or bank certificates of deposit, and
is periodically adjusted. Certain variable rate obligations may have a demand
feature entitling the holder to resell the securities at a predetermined amount.
The interest rate on certain fixed income securities, called "floating rate
instruments," changes whenever there is a change in a designated base rate.

The market values of fixed income securities tend to vary inversely with
the level of interest rates -- when interest rates rise, their values will tend
to decline; when interest rates decline, their values generally will tend to
rise. The potential for capital appreciation with respect to variable rate
obligations or floating rate instruments will be less than with respect to
fixed-rate obligations. Long-term instruments are generally more sensitive to
these changes than short-term instruments. The market value of fixed income
securities and therefore their yield are also affected by the perceived ability
of the issuer to make timely payments of principal and interest.

B-7
<PAGE>

The SunAmerica/Aggressive Growth component, the Stock Portfolio, the
Large-Cap Value Portfolio and the Mid-Cap Growth Portfolio may invest in debt
securities rated as low as "BBB" by Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc. ("Standard & Poor's"), "Baa" by
Moody's Investors Service, Inc. ("Moody's"), or unrated securities determined by
the Adviser to be of comparable quality.

The Janus/Growth component may invest up to 35% of net assets in
high-yield/high-risk securities rated below Baa by Moody's or BBB by Standard &
Poor's, or unrated bonds determined by the Adviser to be of comparable quality.

The SunAmerica/Balanced component may invest up to 10% of total assets
(measured at the time of investment) in securities rated as low as BBB (or
determined by the Adviser to be of equivalent quality if unrated).

The WMC/Fixed Income component may invest up to 20% of its assets in
securities rated below Baa by Moody's or BBB by Standard & Poor's and no more
than 10% of its assets in bonds rated as low as C by Moody's or D by Standard &
Poor's (or, in each case, if not rated, determined by the Adviser to be of
comparable quality).

The Large-Cap Composite Portfolio may invest in debt securities rated
below investment grade (I.E., below "BBB" by Standard & Poor's or below "Baa" by
Moody's) or, if unrated, determined by the Adviser to be of equivalent quality.

The Asset Allocation: Diversified Growth Portfolio may invest up to 20% of
its total assets in securities rated below Baa by Moody's or BBB by Standard &
Poor's, including no more than 5% of its total assets in bonds rated at the time
of purchase below Caa by Moody's or CCC by Standard & Poor's (or, in each case,
if not rated, determined by the Adviser to be of comparable quality).

The Large-Cap Growth Portfolio, the Small-Cap Portfolio, the Mid-Cap Value
Portfolio, the International Equity Portfolio and the Diversified Fixed Income
Portfolio may invest up to 20% of its assets in securities rated below Baa by
Moody's or BBB by Standard & Poor's and no more than 10% of its assets in bonds
rated as low as C by Moody's or D by Standard & Poor's (or, in each case, if not
rated, determined by the Adviser to be of comparable quality).

The Cash Management Portfolio currently invests only in instruments rated
in the highest rating category by Moody's and Standard & Poor's or in
instruments issued, guaranteed or insured by the U.S. government, its agencies
or instrumentalities.

U.S. GOVERNMENT SECURITIES. Each 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. For these securities, the payment
of principal and interest is unconditionally

B-8
<PAGE>

guaranteed by the U.S. government. They are of the highest possible credit
quality. These securities are subject to variations in market value due to
fluctuations in interest rates, but if held to maturity, are guaranteed by the
U.S. government to be paid in full.

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 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 Farmer's Home
Administration ("FMHA") and the Export-Import Bank are backed by the full faith
and credit of the United States.

Each Portfolio may also invest in securities issued by U.S. government
instrumentalities and certain federal agencies that are neither direct
obligations of, nor are they guaranteed by, the U.S. Treasury. However, they
involve federal sponsorship in one way or another. For example, some are backed
by specific types of collateral; some are supported by the issuer's right to
borrow from the Treasury; some are supported by the discretionary authority of
the Treasury to purchase certain obligations of the issuer; and others are
supported only by the credit of the issuing government agency or
instrumentality. These agencies and instrumentalities include, but are not
limited to, the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, Federal Land Banks, Central Bank for Cooperatives, Federal
Intermediate Credit Banks and Federal Home Loan Banks. 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. The U.S.
government or the issuing agency guarantees the payment of interest and
principal of these securities. However, the guarantees do not extend to the
securities' yield or value, which are likely to vary inversely with fluctuations
in interest rates. 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. Because the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life of a particular issue of pass-through certificates.
Mortgage-backed securities are often subject to more rapid repayment than their
stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying mortgage obligations. Thus, the
actual life of any particular pool will be shortened

B-9
<PAGE>

by any unscheduled or early payments of principal and interest. Principal
prepayments generally 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 are mortgage-backed
securities that 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 FMHA, or guaranteed by the
Veterans Administration. 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

B-10
<PAGE>

limitation from the U.S. Treasury if necessary to make any payments
required under its guarantee.

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.

B-11
<PAGE>

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 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.

The Asset Allocation: Diversified Growth Portfolio and the
SunAmerica/Balanced and WMC/Fixed Income components of the
Multi-Managed Seasons Portfolios and the Large-Cap Growth Portfolio,
the Large-Cap Composite Portfolio, the Large-Cap Value Portfolio, the
Mid-Cap Growth Portfolio, the Mid-Cap Value Portfolio, the Small-Cap
Portfolio, the International Equity Portfolio and the Diversified
Fixed Income Portfolio may invest in another type of mortgage-backed
security, a collateralized mortgage obligation ("CMO"). CMOs are
fully collateralized bonds that 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.

B-12
<PAGE>

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 that 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 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 that 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 Seasons Portfolios and each of the Season's Select
Portfolios except the Cash Management Portfolio 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 Portfolio 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

B-13
<PAGE>

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. As described above, the
WMC/Fixed Income and Janus/Growth components of the Multi-Managed Seasons
Portfolios and the Asset Allocation: Diversified Growth Portfolio, the Large-Cap
Growth Portfolio, the Large-Cap Composite Portfolio, the Mid-Cap Value
Portfolio, the Small-Cap Portfolio, the International Equity Portfolio and the
Diversified Fixed Income 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 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

B-14
<PAGE>

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, except that the Janus Growth component may invest only up to 25%
including its investments in mortgage-related 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 that 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 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.

ZERO COUPON BONDS, STEP-COUPON BONDS, DEFERRED INTEREST BONDS AND PIK
BONDS. Fixed income securities in which each Portfolio except the Cash
Management Portfolio may invest also include zero coupon bonds, step-coupon
bonds, deferred interest bonds and bonds on which the interest is payable in
kind ("PIK bonds"). Zero coupon and deferred interest bonds are debt
obligations issued or purchased at a significant discount from face value. A
step-coupon bond is one in which a change in interest rate is fixed
contractually in advance. PIK bonds are debt obligations

B-15
<PAGE>

that provide that the issuer thereof may, at its option, pay interest on such
bonds in cash or in the form of additional debt obligations. Such investments
may experience greater volatility in market value due to changes in interest
rates and other factors than debt obligations that make regular payments of
interest. A Portfolio will accrue income on such investments for tax and
accounting purposes, as required, which is distributable to shareholders and
which, because no cash is received at the time of accrual, may require the
liquidation of other portfolio securities under disadvantageous circumstances to
satisfy the Portfolio's distribution obligations. Janus will not cause the
Janus/Growth component of any Multi-Managed Seasons Portfolio to invest more
than 10% of its total assets in zero coupon bonds, step-coupon bonds, deferred
interest bonds and PIK bonds.

LOAN PARTICIPATIONS. The WMC/Fixed Income component and the Large-Cap
Growth Portfolio, the Large-Cap Composite Portfolio, the Large-Cap Value
Portfolio, the Mid-Cap Growth Portfolio, the Mid-Cap Value Portfolio, the
Small-Cap Portfolio and the International Equity Portfolio may invest in loan
participations. Loan participations are loans sold by the lending bank to an
investor. The loan participant borrower may be a company with highly-rated
commercial paper that finds it can obtain cheaper funding through a loan
participation than with commercial paper and can also increase the company's
name recognition in the capital markets. Loan participations often generate
greater yield than commercial paper.

The borrower of the underlying loan will be deemed to be the issuer except
to the extent the Portfolio derives its rights from the intermediary bank that
sold the loan participations. Because loan participations are undivided
interests in a loan made by the issuing bank, the Portfolio may not have the
right to proceed against the loan participations borrower without the consent of
other holders of the loan participations. In addition, loan participations will
be treated as illiquid if, in the judgment of the Adviser, they can not be sold
within seven days.

SHORT-TERM DEBT SECURITIES. In addition to its primary investments, each
Portfolio may also invest up to 25% of its total assets, except that the Cash
Management Portfolio may invest without limitation, in both U.S. and non-U.S.
dollar denominated money market instruments for reasons that may include (a)
liquidity purposes (to meet redemptions and expenses) or (b) to generate a
return on idle cash held by a Portfolio during periods when an Adviser is unable
to locate favorable investment opportunities. In order to facilitate quarterly
rebalancing of the Multi-Managed Seasons Portfolios as described in the
Prospectus and to adjust for the flow of investments into and out of the
Portfolios, each Portfolio may hold a greater percentage of its assets in cash
or cash equivalents at the end of each quarter than might otherwise be the case.
For temporary defensive purposes, each Portfolio may invest up to 100% of its
total assets in cash and short-term fixed income securities, including corporate
debt obligations and money market instruments rated in one of the two highest
categories by a nationally recognized statistical rating organization (or
determined by the Adviser to be of equivalent quality).

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

B-16
<PAGE>

certificates of deposit. In addition, Janus may invest idle cash of the
Janus/Growth component of each Multi-Managed Seasons Portfolio in money
market mutual funds that it manages. Such an investment may entail
additional fees for the Multi-Managed Seasons Portfolios.

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. The Cash Management Portfolio may
also invest in obligations issued by commercial banks with total
assets of less than $1 billion if the principal amount of these
obligations owned by the Cash Management Portfolio is fully insured by
the Federal Deposit Insurance Corporation ("FDIC").

SAVINGS ASSOCIATION OBLIGATIONS - Certificates of deposit
(interest-bearing time deposits) issued by mutual savings banks or
savings and loan associations. The Cash Management Portfolio may also
invest in obligations issued by mutual savings banks or savings and
loan associations with total assets of less than $1 billion if the
principal amount of these obligations owned by the Cash Management
Portfolio is fully insured by the FDIC.

COMMERCIAL PAPER - Short-term notes (up to 12 months) issued by
corporations or governmental bodies, including variable amount master
demand notes.

The Cash Management Portfolio may purchase commercial paper only if
judged by SunAmerica to be of suitable investment quality. This includes
commercial paper that is (a) rated in the two highest categories by Standard &
Poor's and by Moody's, or (b) other commercial paper deemed on the basis of the
issuer's creditworthiness to be of a quality appropriate for the Cash Management
Portfolio. (No more than 5% of the Cash Management Portfolio's assets may be
invested in commercial paper in the second highest rating category; no more than
the greater of 1% of the Cash Management Portfolio's assets or $1 million may
be invested in such securities of any one issuer.) See "Description of
Commercial Paper and Bond Ratings" for a description of the ratings. The Cash
Management Portfolio will not purchase commercial paper described in (b) above
if such paper would in the aggregate exceed 15% of its total assets after such
purchase. The commercial paper in which the Cash Management Portfolio (and
other Portfolios) may invest includes variable amount master demand notes.

Variable amount master demand notes permit each 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

B-17
<PAGE>

demand. The amounts of the instruments are subject to daily fluctuations as the
participants increase or decrease the extent of their participation. The Cash
Management Portfolio's investments in these instruments are limited to those
that have a demand feature enabling the Cash Management Portfolio
unconditionally to receive the amount invested from the issuer upon seven or
fewer days' notice. Generally, the Cash Management Portfolio attempts to invest
in instruments having a one-day notice provision. In connection with master
demand note arrangements, the Adviser, 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 Adviser 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 or 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 a Portfolio may invest. Master demand notes
are considered to have a maturity equal to the repayment notice period unless
the Adviser 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 (397 days
with respect to the Cash Management Portfolio) or less. These
obligations originally may have been issued with maturities in excess
of such period. The Cash Management Portfolio may invest only in
corporate bonds or notes of issuers having outstanding short-term
securities rated in the top two rating categories by Standard & Poor's
and Moody's. See "Description of Commercial Paper and Bond Ratings"
for description of investment-grade ratings by Standard & Poor's and
Moody's.

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," above.

REPURCHASE AGREEMENTS. A Portfolio will enter into repurchase agreements
involving only securities in which it could otherwise invest and with selected
banks and securities dealers whose financial condition is monitored by the
Adviser, subject to the guidance of the Board of Trustees. 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 that 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 under the repurchase agreement defaults,
the Portfolio may incur a loss if the value of the collateral securing the
repurchase agreement has declined, and may incur disposition costs in connection
with liquidating

B-18
<PAGE>

the collateral. 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 Advisers 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% (10% with respect to the Cash Management
Portfolio) 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.

DIVERSIFICATION. Each Portfolio is classified as "non-diversified" for
purposes of the 1940 Act, which means that they are not limited by the 1940 Act
with regard to the portion of assets that may be invested in the securities of a
single issuer. To the extent any such Portfolio makes investments in excess of
5% of its assets in the securities of a particular issuer, its exposure to the
risks associated with that issuer is increased.

DERIVATIVES STRATEGIES. Each Portfolio except the Cash Management
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.

In addition, the Portfolio could experience capital losses which might
cause previously distributed short-term capital gains to be re-characterized as
a non-taxable return of capital to shareholders.

Each Portfolio except the Cash Management Portfolio may also write put
options ("puts"), which give the holder of the option the right to sell the
underlying security to the Portfolio at the stated exercise price. A Portfolio
will receive a premium for writing a put option that increases the Portfolio's
return. A Portfolio writes only covered put options, which means that so long
as the Portfolio is obligated as the writer of the option it will, through its
custodian, have deposited and maintained cash or liquid securities denominated
in U.S. dollars or non-U.S. currencies with a securities depository with a value
equal to or greater than the exercise price of the underlying securities. Puts
on Futures (defined below) will be considered "covered" if the Portfolio owns an
option to sell that Futures contract having a strike price equal to or greater
than the strike price of the "covered" option, or if the Portfolio for the term
of the option cash or other liquid assets at all

B-19
<PAGE>

times equal in value to the exercise price of the put (less any initial margin
deposited by the Portfolio with its custodian with respect to such option).

Primarily for hedging purposes, and from time to time for income
enhancement, each Portfolio except the Cash Management 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
Seasons Portfolio and the Diversified Fixed Income 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). 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. All puts and calls on securities,
interest rate Futures or stock and bond index Futures or options on such Futures
purchased or sold by a Portfolio will normally either be listed on (1) a
national securities or commodities exchange or (2) over-the-counter markets.
However, each Portfolio except the Cash Management Portfolio may buy and sell
options and Futures on foreign equity indexes and foreign fixed income
securities. Because the markets for these instruments are relatively new and
still developing, the ability of such a Portfolio to engage in such transactions
may be limited. Derivatives 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 that 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.

Each Portfolio except the Cash Management Portfolio may enter into forward
foreign currency exchange contracts, currency options and currency swaps for
non-hedging purposes when an Adviser anticipates that a foreign currency will
appreciate or depreciate in value, but securities denominated in that currency
do not present attractive investment opportunities or are not included in such
portfolio. The Portfolio may use currency contracts and options to cross-hedge,
which involves selling or purchasing instruments in one currency to hedge
against changes in exchange rates for a different currency with a pattern of
correlation. To limit any leverage in connection with currency contract
transactions for non-hedging purposes, a Portfolio will segregate cash or liquid
securities in an amount sufficient to meet its payment obligations in these
transactions or otherwise "cover" the obligation. Initial margin deposits made
in connection with currency futures transactions or premiums paid for currency
options traded over-the-counter or on a commodities exchange may each not exceed
5% of a Portfolio's total assets in the case of non-bona fide hedging
transactions.

A Portfolio's use of 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 that
have appreciated, or to facilitate selling securities for investment reasons, a
Portfolio could: (i)

B-20
<PAGE>

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 derivatives the
Portfolios may use is provided below.

OPTIONS

OPTIONS ON SECURITIES. As noted above, each Portfolio except the Cash
Management Portfolio may write and purchase call and put options (including, in
the case of the Multi-Managed Seasons Portfolios and the Diversified Fixed
Income Portfolio, 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 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

B-21
<PAGE>

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).

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

B-22
<PAGE>

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.

Each Portfolio except the Cash Management Portfolio may use spread
transactions for any lawful purpose consistent with the Portfolio's investment
objective. A Portfolio may purchase covered spread options from securities
dealers. Such covered spread options are not presently exchange-listed or
exchange-traded. The purchase of a spread option gives a Portfolio the right to
put, or sell, a security that it owns at a fixed dollar spread or fixed yield
spread in relationship to another security that the Portfolio does not own, but
which is used as a benchmark. The risk to a Portfolio in purchasing covered
spread options is the cost of the premium paid for the spread option and any
transaction costs. In addition, there is no assurance that closing transactions
will be available. The purchase of spread options will be used to protect a
Portfolio against adverse changes in prevailing credit quality spreads, I.E.,
the yield spread between high quality and lower quality securities. Such
protection is only provided during the life of the spread option.

OPTIONS ON FOREIGN CURRENCIES. Each Portfolio except the Cash Management
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 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.

As with other kinds of option transactions, the writing of an option on
currency will constitute only a partial hedge, up to the amount of the premium
received. A Portfolio could be required to purchase or sell currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on currency may constitute an effective hedge against exchange rate
fluctuations; however, in the event of exchange rate movements adverse to a
Portfolio's position, the Portfolio may forfeit the entire amount of the premium
plus related transaction costs.

OPTIONS ON SECURITIES INDICES. As noted above, each Portfolio except the
Cash Management 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

B-23
<PAGE>

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 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 except the
Cash Management 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

B-24
<PAGE>

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 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 except the Cash Management 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 except the Cash Management 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, a 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, each Portfolio except the Cash
Management Portfolio 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

B-25
<PAGE>

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 that provides a
partial hedge against any increase in the price of securities 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 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 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. The Cash
Management Portfolio will not engage in Forward Contracts. 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

B-26
<PAGE>

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 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, except the Cash
Management 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

B-27
<PAGE>

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 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.

B-28
<PAGE>

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 DERIVATIVES 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.

An option position may be closed out only on a market that 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 result in 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 that 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 that 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 derivatives 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 DERIVATIVES

Each Portfolio that utilizes such instruments 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

B-29
<PAGE>

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
that 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 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 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.

POSSIBLE RISK FACTORS IN DERIVATIVES

Participation in the options or Futures markets and in currency exchange
transactions involves investment risks and transaction costs to which a
Portfolio would not be subject absent the use of these strategies. If the
Adviser's predictions of movements in the direction of the securities, foreign
currency and interest rate markets are inaccurate, the adverse consequences to a
Portfolio may leave the Portfolio in a worse position than if such strategies
were not used. There is also 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 establishes 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 Adviser then determines not
to invest in such securities at that time because of concerns as to possible
further

B-30
<PAGE>

market decline or for other reasons, the Portfolio will realize a loss 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 (with respect only to "restricted" securities, 10% in the
case of the Cash Management Portfolio), determined as of the date of purchase,
may be invested in illiquid securities including repurchase agreements that have
a maturity of longer than seven days, interest-rate swaps, 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 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 that have not
been registered under the Securities Act are referred to as private placements
or restricted securities and are purchased directly from the issuer or in the
secondary market. 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," as described below).

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.

For example, restricted securities that the Board of Trustees, or the
Adviser pursuant to guidelines established by the Board of Trustees, has
determined to be marketable, such as securities eligible for sale under Rule
144A promulgated under the Securities Act, or certain private placements of
commercial paper issued in reliance on an exemption from such Act pursuant to
Section 4(2) thereof, may be deemed to be liquid for purposes of this
restriction. This investment practice could have the effect of increasing the
level of illiquidity in the Portfolio to the extent that qualified institutional
buyers (as defined in Rule 144A) become for a time uninterested in purchasing
these restricted securities. In addition, a repurchase agreement that by its
terms can be liquidated

B-31
<PAGE>

before its nominal fixed-term on seven days or less notice is regarded as a
liquid instrument. The Adviser will monitor the liquidity of such restricted
securities subject to the supervision of the Trustees. In reaching liquidity
decisions the Adviser 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). Subject to the applicable limitation on
illiquid securities investments, a Portfolio may acquire securities issued by
the U.S. government, its agencies or instrumentalities in a private placement.

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 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 (10%, with respect to
restricted securities, in the case of the Cash Management Portfolio) includes
Section 4(2) paper other than Section 4(2) paper that the Adviser has determined
to be liquid pursuant to guidelines established by the Trustees. The Trustees
delegated to the Adviser 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 Adviser to take into account the same factors
described above for other restricted securities and require the Adviser to
perform the same monitoring and reporting functions.

SHORT SALES. Each of the Multi-Managed Growth and Moderate Growth
Portfolios, through the SunAmerica/Aggressive Growth component, and each of the
Seasons Select Portfolios except the Cash Management Portfolio may sell a
security it does not own in anticipation of a decline in the market value of
that security (short sales). To complete such a transaction, a Portfolio must
borrow the security to make delivery to the buyer. The Portfolio then is
obligated to replace the security borrowed by purchasing it at market price at
the time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Portfolio. Until the security is
replaced, the Portfolio is required to pay to the lender any dividends or
interest that accrue during the period of the loan. To borrow the security, the
Portfolio also may be required to pay a premium, which would increase the cost
of the security sold. The proceeds of the short sale will be retained by the
broker, to the extent necessary to meet margin requirements, until the short
position is closed out. Until the Portfolio replaces a borrowed security, the
Portfolio will maintain daily a segregated account, containing cash or liquid
securities, at such a level that (i) the amount deposited in the account plus
the amount deposited with the broker as collateral will equal the current value
of the

B-32
<PAGE>

security sold short and (ii) the amount deposited in the segregated account plus
the amount deposited with the broker as collateral will not be less than the
market value of the security at the time it was sold short. A Portfolio will
incur a loss as a result of the short sale if the price of the security
increases between the date of the short sale and the date on which the Portfolio
replaces the borrowed security. A Portfolio will realize a gain if the security
declines in price between those dates. This result is the opposite of what one
would expect from a cash purchase of a long position in a security. The amount
of any gain will be decreased, and the amount of any loss increased, by the
amount of any premium, dividends or interest the Portfolio may be required to
pay in connection with a short sale. Each Portfolio except the Cash Management
Portfolio may make "short sales against the box." A short sale is against the
box to the extent that the Portfolio contemporaneously owns, or has the right to
obtain without payment, the same securities or securities substantially similar
to those sold short. A Portfolio generally will recognize any gain (but not
loss) for federal income tax purposes at the time that it makes a short sale
against the box. A Portfolio may not enter into a short sale, including a short
sale against the box, if, as a result, more than 25% of its net assets would be
subject to such short sales.

HYBRID INSTRUMENTS; INDEXED/STRUCTURED SECURITIES. Hybrid Instruments,
including indexed or structured securities, combine the elements of futures
contracts or options with those of debt, preferred equity or a depository
instrument. The Cash Management Portfolio will not invest in these 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 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

B-33
<PAGE>

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 unrelated to the operations or credit quality of
the issuer of the Hybrid Instrument, 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.

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. Under certain conditions, the
redemption (or sale) value of such an investment could be zero. 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

B-34
<PAGE>

of the counter party or issuer of the Hybrid Instrument would be an
additional risk factor 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, a Portfolio that so invests 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 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

B-35
<PAGE>

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 Adviser 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. One form of when-issued
or delayed delivery security that the Asset Allocation: Diversified Growth
Portfolio, the WMC/Fixed Income component of each Multi-Managed Portfolio and
each Seasons Select Portfolio may purchase is a "to be announced" or "TBA"
mortgage-backed security. A TBA mortgage-backed security transaction arises
when a mortgage-backed security is purchased or sold with the specific pools to
be announced on a future settlement date, with no definitive maturity date. The
actual principal amount and maturity date will be determined upon settlement
date.

INVERSE FLOATERS are leveraged inverse floating rate debt instruments. The
interest rate on an inverse floater resets in the opposite direction from the
market rate of interest to which the inverse floater is indexed. An inverse
floater may be considered to be leveraged to the extent that its interest rate
varies by a magnitude that exceeds the magnitude of the change in the index rate
of interest. The higher degree of leverage inherent in inverse floaters is
associated with greater volatility in their market values. Accordingly, the
duration of an inverse floater may exceed its stated final maturity. Certain
inverse floaters may be deemed to be illiquid securities for purposes of a
Portfolio's 15% limitation on investments in such securities.

BORROWING. As a matter of fundamental policy each Portfolio is
authorized to borrow up to 33 1/3% (and the Cash Management Portfolio up to 5%)
of its total assets for temporary or emergency purposes.

In seeking to enhance investment performance, each of the Multi-Managed
Growth and Moderate Growth Portfolios, through its SunAmerica/Aggressive Growth
component, and the Large-Cap Growth Portfolio, the Large-Cap Composite
Portfolio, the Large-Cap Value Portfolio, the Mid-Cap Growth Portfolio, the
Mid-Cap Value Portfolio, the Small-Cap Portfolio, the International Equity
Portfolio and the Diversified Fixed Income Portfolio may borrow money for
investment purposes and may pledge assets to secure such borrowings. This is
the speculative factor known as leverage. This practice may help increase the
net asset value of the assets allocated to these Portfolios in an amount greater
than would otherwise be the case when the market values of the securities
purchased through borrowing increase. In the event the return on an investment
of borrowed monies does not fully recover the costs of such borrowing, the value
of the Portfolio's assets would be reduced by a greater amount than would
otherwise be the case. The effect of leverage will therefore tend to magnify
the gains or losses to the Portfolio as a result of investing the

B-36
<PAGE>

borrowed monies. During periods of substantial borrowings, the value of the
Portfolio's assets would be reduced due to the added expense of interest on
borrowed monies. Each of such Portfolios is authorized to borrow, and to
pledge assets to secure such borrowings, up to the maximum extent permissible
under the 1940 Act (I.E., presently 50% of net assets); provided that, with
respect to the Multi-Managed Seasons Portfolios such limitation will be
calculated with respect to the net assets allocated to the
SunAmerica/Aggressive Growth component of such Multi-Managed Seasons
Portfolio. The time and extent to which the component or Portfolios may
employ leverage will be determined by the respective Adviser in light of
changing facts and circumstances, including general economic and market
conditions, and will be subject to applicable lending regulations of the
Board of Governors of the Federal Reserve Board.

Any such borrowing will be made pursuant to the requirements of the 1940
Act and will be made only to the extent that the value of each Portfolio's
assets less its liabilities, other than borrowings, is equal to at least 300% of
all borrowings including the proposed borrowing. If the value of a Portfolio's
assets, so computed, should fail to meet the 300% asset coverage requirement,
the Portfolio is required, within three business days, to reduce its bank debt
to the extent necessary to meet such requirement and may have to sell a portion
of its investments at a time when independent investment judgment would not
dictate such sale. Interest on money borrowed is an expense the Portfolio would
not otherwise incur, so that it may have little or no net investment income
during periods of substantial borrowings. Since substantially all of a
Portfolio's assets fluctuate in value, but borrowing obligations are fixed when
the Portfolio has outstanding borrowings, the net asset value per share of a
Portfolio correspondingly will tend to increase and decrease more when the
Portfolio's assets increase or decrease in value than would otherwise be the
case. A Portfolio's policy regarding use of leverage is a fundamental policy,
which may not be changed without approval of the shareholders of the Portfolio.

LOANS OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, each Portfolio except the Cash Management 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
high-quality short-term debt securities, including repurchase agreements. 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 be made
only to firms deemed by the Adviser to be creditworthy. On termination of
the loan, the borrower is required to return the securities to a Portfolio;
and any gain or loss in the market price of the loaned security during the
loan would inure to the Portfolio. Each such Portfolio

B-37
<PAGE>

will pay reasonable finders', administrative and custodial fees in connection
with a loan of its securities or may share the interest earned on collateral
with the borrower.

Since voting or consent rights accompany loaned securities pass to the
borrower, each such 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 that 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 except the Cash Management 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 that matures on or before the forward settlement
date of the dollar roll transaction. A Portfolio will enter only 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.

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

B-38
<PAGE>

security subject to the dollar roll may be restricted and the instrument that
the Portfolio is required to repurchase may be worth less than an instrument
that 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 except the Cash Management
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
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 enter into interest-rate swaps only
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 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 that involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. All of these
investments may be deemed to be illiquid

B-39
<PAGE>

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, SunAmerica 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.

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.

SPECIAL SITUATIONS. Each Portfolio may invest, subject to its particular
investment limitations described above, up to 25% of its assets in "special
situations." A "special situation"

B-40
<PAGE>

arises when, in the opinion of an Adviser, the securities of a particular
issuer will be recognized and appreciated in value due to a specific
development with respect to that issuer. Developments creating a special
situation might include, among others, a new product or process, a
technological breakthrough, a management change or other extraordinary
corporate event, or differences in market supply of and demand for the
security. Investments in special situations may carry an additional risk of
loss in the event that the anticipated development does not occur or does not
attract the expected attention.

FUTURE DEVELOPMENTS. Each Portfolio may invest in securities and other
instruments that do not presently exist but may be developed in the future,
provided that each such investment is consistent with the Portfolio's investment
objectives, policies and restrictions and is otherwise legally permissible under
federal and state laws. The Prospectus and SAI, as appropriate, will be amended
or supplemented as appropriate to discuss any such new investments.

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,

B-41
<PAGE>

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 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 that 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 that exist with the issuer; and (8) recognition
by management of obligations that 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

B-42
<PAGE>

payment is expected. Duff 4 - Speculative investment characteristics.
Liquidity is not sufficient 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

B-43
<PAGE>

future. Baa - Medium grade obligations. Interest payments and principal
security appear adequate for the present but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and, in fact,
have speculative characteristics as well. Ba - 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

B-44
<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

All Portfolios effect portfolio transactions without regard to the length
of time particular investments have been held. Under certain market conditions,
the investment policies of the Portfolios may result in high portfolio turnover,
I.E., over 100%.

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 that 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 that 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 that would apply to direct purchases or sales of portfolio
securities.

The rebalancing of the Multi-Managed Seasons and Seasons Select Portfolios,
as described in the Prospectus, may also result in relatively higher portfolio
turnover. Because each particular Managed Component of the portfolio of each
Multi-Managed Seasons Portfolio, and each separate portion of each Multi-Managed
Seasons Select 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 Seasons Portfolio,
resulting in higher brokerage commissions for the Portfolio.

Notwithstanding the foregoing, however, the portfolio turnover rates for
the Portfolios are not expected to exceed 200%. High portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs that will be borne directly by a Portfolio. High portfolio turnover may
also involve a possible increase in short-term capital gains or losses, which
would normally affect the taxable income of the Portfolio's shareholders. Where
the shareholder is an insurance company separate account funding variable
annuity contracts, qualified as such under the Internal Revenue Code of 1986, as
amended (the "Code"), however, the contract owners are not currently charged
with such income or losses except to the extent provided under the Code
(normally when distributions under the contracts are made). Corporate bonds and
U.S. government securities are generally traded on a net basis and usually
neither brokerage commissions nor transfer taxes are involved.

B-45
<PAGE>

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,
the Stock Portfolio, the Diversified Fixed Income Portfolio and the Cash
Management Portfolio, invest more than 5% of the Portfolio's total assets
in the securities of any one issuer, 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,
the Stock Portfolio, and the Diversified Fixed Income Portfolio and the
Cash Management 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. In addition,
the Cash Management Portfolio may, if deemed advisable, invest more than
25% of its assets in the obligations of domestic commercial banks. The gas,
electric, water and telephone businesses will be considered separate
industries.

4. Invest in real estate (including limited partnership interests but
excluding securities of companies, such as real estate investment trusts,
that 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 each 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

B-46
<PAGE>

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; (c) the lending of its portfolio
securities; and (d) as otherwise permitted by exemptive order of the
Securities and Exchange Commission.

7. Borrow money, except that (i) each Portfolio may borrow in amounts up
to 33 % (5% in the case of the Cash Management Portfolio) 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, and the Large-Cap Growth Portfolio, the Large-Cap
Composite Portfolio, the Large-Cap Value Portfolio, the Mid-Cap Growth
Portfolio, the Mid-Cap Value Portfolio, the Small-Cap Portfolio, the
International Equity Portfolio and the Diversified Fixed Income Portfolio
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 Seasons 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.

8. Issue senior securities as defined in the 1940 Act, except that each
Portfolio may enter into repurchase agreements, reverse repurchase
agreements and 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

B-47
<PAGE>

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 Seasons 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%
(10% in the case of the Cash Management Portfolio) 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.

TRUST OFFICERS AND TRUSTEES

The trustees and executive officers of the Trust, their business addresses,
ages and principal occupations for the past five years are set forth below.
Unless otherwise noted, the address of each executive officer and trustee is 1
SunAmerica Center, Los Angeles, California 90067-6022.

B-48
<PAGE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
POSITION WITH THE PRINCIPAL OCCUPATIONS
NAME, AGE AND ADDRESS TRUST DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<S> <C> <C>
Monica C. Lozanto, 42 Trustee Associate Publisher, LA
3257 Purdue Avenue OPINION (newspaper publishing
Los Angeles, CA 90066 concern) since 1995,
Director, First Interstate
Bank of California from
199401996; Editor, LA OPINION
from 1991-1995.
- -------------------------------------------------------------------------------
Allan L. Sher, 66 Trustee Director, Board of Governors,
American Stock Exchange (1991
to Present); Trustee, Anchor
Pathway Fund and SunAmerica
Series Trust.
- -------------------------------------------------------------------------------
William M. Wardlaw, 51 Trustee Partner, Freeman Spogli &
Co., Incorporated (privately
owned merchant banking firm)
(1988 to Present); Trustee,
Anchor Pathway Fund and
SunAmerica Series Trust.
- -------------------------------------------------------------------------------
Scott L. Robinson, 52 Senior Vice Senior Vice President and
President, Controller, SunAmerica Inc.,
Treasurer and since 1991; Senior Vice
Controller President of Anchor National,
since 1988; Senior Vice
President, Treasurer and
Controller, Anchor Pathway
Fund and SunAmerica Series
Trust; Joined SunAmerica Inc.
in 1978.
- -------------------------------------------------------------------------------
Susan L. Harris, 41 Vice President, Senior Vice President, since
Counsel and November 1995, Secretary,
Secretary since 1989, 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.
- -------------------------------------------------------------------------------
</TABLE>

B-49
<PAGE>

* A trustee who may be deemed to be an "interested person" of the Trust as that
term is defined in the 1940 Act.

As of ________, 1998, the officers and Trustees as a group owned an
aggregate of less than 1% of the outstanding shares of the Trust.

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 for the period April 15, 1997
(commencement of operations) through March 31, 1998. Ms. Lozanto became a
Trustee as of December [30], 1998.

<TABLE>
<CAPTION>
COMPENSATION TABLE

- --------------------------------------------------------------------------------
PENSION OR
AGGREGATE RETIREMENT TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED FROM REGISTRANT
FROM AS PART OF FUND AND FUND COMPLEX
TRUSTEE REGISTRANT EXPENSES PAID TO TRUSTEES*
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Allan L. Sher $1,500 - $23,500
- --------------------------------------------------------------------------------
William M. Wardlaw $1,000 - $21,250
- --------------------------------------------------------------------------------
</TABLE>

* Information is for the three investment companies in the Complex that pay
fees to these Trustees. The Complex consists of Anchor Pathway Fund, SunAmerica
Series Trust and the Trust.

B-50
<PAGE>

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. SunAmerica is an indirect wholly owned subsidiary of SunAmerica Inc.,
an investment-grade financial services company that, as of [March 31], 1998,
held more than $55 billion in assets. SunAmerica Inc. has agreed to merge with
and into American International Group, Inc., the leading U.S.-based
international insurance organization.

The Investment Advisory and Management Agreement provides that SunAmerica
shall act as investment adviser to the Trust, manage the Trust's investments,
administer its business affairs, furnish offices, necessary facilities and
equipment, provide clerical, bookkeeping and administrative services, and permit
any of SunAmerica's officers or employees to serve without compensation as
Trustees or officers of the Trust if duly elected to such positions. Under the
Agreement, the Trust agrees to assume and pay certain charges and expenses of
its operations, including: direct charges relating to the purchase and sale of
portfolio securities, interest charges, fees and expenses of independent legal
counsel and independent accountants, cost of stock certificates and any other
expenses (including clerical expenses) of issue, sale, repurchase or redemption
of shares, expenses of registering and qualifying shares for sale, expenses of
printing and distributing reports, notices and proxy materials to shareholders,
expenses of data processing and related services, shareholder recordkeeping and
shareholder account service, expenses of printing and distributing prospectuses
and statements of additional information, expenses of annual and special
shareholders' meetings, fees and disbursements of transfer agents and
custodians, expenses of disbursing dividends and distributions, fees and
expenses of Trustees who are not employees of SunAmerica or its affiliates,
membership dues in the Investment Company Institute or any similar organization,
all taxes and fees to Federal, state or other governmental agencies, insurance
premiums and extraordinary expenses such as litigation expenses. SunAmerica is
also ultimately responsible for overseeing compliance with respect to percentage
limitations by each Multi-Managed Seasons Portfolio as a whole, and accordingly
it verifies that in the aggregate the investments of each Multi-Managed Seasons
Portfolio comply with applicable percentage limitations.

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 SunAmerica, or by SunAmerica upon the approval by

B-51
<PAGE>

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).

Pursuant to the Management Agreement entered into between SunAmerica and
the Trust on behalf of each Portfolio, each Portfolio pays SunAmerica a fee,
payable monthly, computed daily at the following annual rates:

<TABLE>
<CAPTION>
PORTFOLIO ADVISORY FEE (AS A PERCENTAGE OF
ASSETS)
- ---------------------------------------------------------------------------
<S> <C>
Multi-Managed Growth Portfolio 0.89%
- ---------------------------------------------------------------------------
Multi-Managed Moderate Growth Portfolio 0.85%
- ---------------------------------------------------------------------------
Multi-Managed Income/Equity Portfolio 0.81%
- ---------------------------------------------------------------------------
Multi-Managed Income Portfolio 0.77%
- ---------------------------------------------------------------------------
Asset Allocation: Diversified Growth 0.85%
Portfolio
- ---------------------------------------------------------------------------
Stock Portfolio 0.85%
- ---------------------------------------------------------------------------
Large-Cap Growth Portfolio First $250 million 0.800%
-----------------------------------
Next $250 million 0.750%
-----------------------------------
Over $500 million 0.700%
- ---------------------------------------------------------------------------
Large-Cap Composite Portfolio First $250 million 0.800%
-----------------------------------
Next $250 million 0.750%
-----------------------------------
Over $500 million 0.700%
- ---------------------------------------------------------------------------
Large-Cap Value Portfolio First $250 million 0.800%
-----------------------------------
Next $250 million 0.750%
-----------------------------------
Over $500 million 0.700%
- ---------------------------------------------------------------------------
Mid-Cap Growth Portfolio First $250 million 0.850%
-----------------------------------
next $250 million 0.800%
-----------------------------------
Over $500 million 0.750%
- ---------------------------------------------------------------------------
Mid-Cap Value Portfolio First $250 million 0.850%
-----------------------------------
next $250 million 0.800%
- ---------------------------------------------------------------------------
</TABLE>

B-52
<PAGE>

<TABLE>
<CAPTION>
PORTFOLIO ADVISORY FEE (AS A PERCENTAGE OF
ASSETS)
- ---------------------------------------------------------------------------
<S> <C>
Over $500 million 0.750%
- ---------------------------------------------------------------------------
Small-Cap Portfolio First $250 million 0.850%
-----------------------------------
Next $250 million 0.800%
-----------------------------------
Over $500 million 0.750%
- ---------------------------------------------------------------------------
International Equity Portfolio 1.00%
- ---------------------------------------------------------------------------
Diversified Fixed Income Portfolio First $200 million 0.700%
-----------------------------------
Next $200 million 0.650%
-----------------------------------
Over $400 million 0.600%
- ---------------------------------------------------------------------------
Cash Management Portfolio First $100 million 0.55%
-----------------------------------
Next $200 million 0.50%
-----------------------------------
Thereafter 0.45%
- ---------------------------------------------------------------------------
</TABLE>

SunAmerica 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 following Portfolios' average net 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%, Stock
Portfolio 1.21%, Large-Cap Growth Portfolio 1.10%, Large-Cap Composite Portfolio
1.10%, Large-Cap Value Portfolio 1.10%, Mid-Cap Growth Portfolio 1.15%, Mid-Cap
Value Portfolio 1.15%, Small-Cap Portfolio 1.15%, International Equity Portfolio
1.30%, Diversified Fixed Income Portfolio 1.00% and Cash Management Portfolio
0.85%. SunAmerica also may voluntarily waive or reimburse additional amounts to
increase the investment return to a Portfolio's investors. SunAmerica may
terminate all such waivers and/or reimbursements at any time. Further, any
waivers or reimbursements made by SunAmerica 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 SunAmerica and
remain in compliance with the foregoing expense limitations.

The term "Assets" means the average daily net assets of each Portfolio.

The following table sets forth the total advisory fees received by SunAmerica
from each Portfolio pursuant to the Investment Advisory and Management Agreement
for the period April 15, 1997 (commencement of operations) through March 31,
1998.

ADVISORY FEES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
PORTFOLIO ADVISORY FEE
- ------------------------------------------------------------------------
<S> <C>
Multi-Managed Growth Portfolio $137,424
- ------------------------------------------------------------------------
</TABLE>

B-53
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
<S> <C>
Multi-Managed Moderate Growth Portfolio $135,378
- ------------------------------------------------------------------------
Multi-Managed Income/Equity Portfolio $101,740
- ------------------------------------------------------------------------
Multi-Managed Income Portfolio $ 76,624
- ------------------------------------------------------------------------
Asset Allocation: Diversified Income $208,284
Portfolio
- ------------------------------------------------------------------------
Stock Portfolio $178,227
- ------------------------------------------------------------------------
</TABLE>

For the period April 15, 1997 (commencement of operations) through
March 31, 1998, SunAmerica voluntarily waived fees or reimbursed
expenses of each of the following Portfolios: Multi-Managed Growth
Portfolio - $23,646; Multi-Managed Moderate Growth Portfolio-$29,927;
Multi-Managed Income/Equity Portfolio - $36,590; Multi-Managed Income
Portfolio - $43,490; Asset Allocation: Diversified Growth Portfolio -
$77,724; and Stock Portfolio - $10,325.

SUBADVISORY AGREEMENTS

Bankers Trust Company ("Bankers Trust"), Goldman Sachs Asset Management
("Goldman Sachs"), Goldman Sachs Asset Management International ("Goldman Sachs
International") Janus Capital Corporation ("Janus"), Lord Abbett & Co. ("Lord
Abbett"), Putnam Investment Management, Inc. ("Putnam"), T. Rowe Price
Associates, Inc. ("T. Rowe Price"), and Wellington Management Company, LLP
("Wellington") act as Advisers to certain of the Portfolios pursuant to various
Subadvisory Agreements with SunAmerica.

SunAmerica manages the CASH MANAGEMENT PORTFOLIO, the AGGRESSIVE GROWTH and
SUNAMERICA/BALANCED COMPONENTS of the Multi-Managed Seasons Portfolios, and
portions of the LARGE-CAP COMPOSITE PORTFOLIO, the SMALL-CAP PORTFOLIO, and the
DIVERSIFIED FIXED INCOME PORTFOLIO.

The following chart shows the Advisers to each Portfolio and Managed
Component:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT ALLOCATED
PORTFOLIO AMONG THE FOLLOWING ADVISERS
- ------------------------------------------------------------------------------
<S> <C>
Multi-Managed Growth Portfolio Janus (through Janus/Growth component)
--------------------------------------
SunAmerica (through
SunAmerica/Aggressive Growth component
and SunAmerica/Balanced component)
--------------------------------------
Wellington (through WMC/Fixed Income
component)
- ------------------------------------------------------------------------------
Multi-Managed Moderate Growth Janus (through Janus/Growth component)
Portfolio --------------------------------------
SunAmerica (through
SunAmerica/Aggressive Growth component
and SunAmerica/Balanced component)
--------------------------------------
Wellington (through WMC/Fixed Income
component)
- -------------------------------------------------------------------------------
Multi-Managed Income/Equity Portfolio Janus (through Janus/Growth component)
--------------------------------------
</TABLE>

B-54
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------
SunAmerica (through
SunAmerica/Balanced component)
--------------------------------------
Wellington (through WMC/Fixed Income
component)
- ------------------------------------------------------------------------------
Multi-Managed Income Portfolio Janus (through Janus/Growth component)
--------------------------------------
SunAmerica (through
SunAmerica/Balanced component)
--------------------------------------
Wellington (through WMC/Fixed Income
component)
- ------------------------------------------------------------------------------
Asset Allocation: Diversified Income Putnam
Portfolio
- ------------------------------------------------------------------------------
Stock Portfolio T. Rowe Price
- ------------------------------------------------------------------------------
Large-Cap Growth Portfolio Bankers Trust
Goldman Sachs
Janus
- ------------------------------------------------------------------------------
Large-Cap Composite Portfolio Bankers Trust
SunAmerica
T. Rowe Price
- ------------------------------------------------------------------------------
Large-Cap Value Portfolio Bankers Trust
T. Rowe Price
Wellington
- ------------------------------------------------------------------------------
Mid-Cap Growth Portfolio Bankers Trust
T. Rowe Price
Wellington
- ------------------------------------------------------------------------------
Mid-Cap Value Portfolio Bankers Trust
Goldman Sachs
Lord Abbett
- ------------------------------------------------------------------------------
Small-Cap Portfolio Bankers Trust
Lord Abbett
SunAmerica
- ------------------------------------------------------------------------------
International Equity Portfolio Bankers Trust
Goldman Sachs International
Lord Abbett
- ------------------------------------------------------------------------------
Diversified Portfolio Bankers Trust
SunAmerica
Wellington
- ------------------------------------------------------------------------------
Cash Management Portfolio SunAmerica
- ------------------------------------------------------------------------------
</TABLE>

Each of the other Advisers 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 other Advisers' fees. Bankers Trust
is a wholly-owned subsidiary of Bankers Trust New York Corporation. Goldman
Sachs is a separate operating division of Goldman, Sachs & Co., a New York
limited partnership. The general partners of Lord Abbett are Stephan I. Allen,
Zane E. Brown,

B-55
<PAGE>

Daniel E. Carper, Robert S. Dow, Daria L. Foster, Paul A. Hilstad, W.
Thomas Hudson, Michael McLaughlin, Robert G. Morris, Robert J. Noelke, E.
Wayne Nordberg and John J. Walsh. Kansas City Southern Industries, Inc.
("KCSI"), is a publicly traded holding company with principal operations in rail
transportation through its subsidiary The Kansas City Southern Railway Company,
and financial asst management businesses, owns approximately 83% of the
outstanding voting stock of Janus. Thomas H. Bailey, President and Chairman of
the Board of Janus, owns approximately 12% of its voting stock and, by agreement
with KCSI, selects a majority of Janus' board. T. Rowe Price is a publicly
traded company. The following persons are managing partners of Wellington:
Robert W. Doran, Duncan M. McFarland and John R. Ryan.

SunAmerica will initially allocate the assets of each Multi-Managed
Seasons Select Portfolio equally among the Advisers for that Portfolio, and
subsequently, allocations of new cash flow and of redemption requests will be
made equally among the Advisers of each such Portfolio unless SunAmerica
determines, subject to the review of the Trustees, that a different allocation
of assets would be in the best interests of a Portfolio and its shareholders.
The Trust expects that differences in investment returns among the portions of a
Portfolio managed by different Advisers will cause the actual percentage of a
Portfolio's assets managed by each Adviser to vary over time. SunAmerica
intends, on a quarterly basis, to review the asset allocation in each Seasons
Select Portfolio to determine the extent to which the portion of assets managed
by an Adviser exceeds that portion managed by any other Adviser to the
Portfolio. If SunAmerica determines that the difference is significant,
SunAmerica will then re-allocate cash flows among the three Advisers,
differently from the manner described above, in an effort to effect a
re-balancing of the Portfolio's asset allocation. In general, a Portfolio's
assets once allocated to one Adviser will not be reallocated (or "rebalanced")
to another Adviser for the Portfolio. However, SunAmerica reserves the right,
subject to the review of the Board, to reallocate assets from one Adviser to
another when deemed in the best interests of a Portfolio and its shareholders.
In some instances, where a reallocation results in any rebalancing of the
Portfolio from a previous allocation, the effect of the reallocation will be to
shift assets from a better performing Adviser to a portion of the Portfolio with
a relatively lower total return.

SunAmerica pays each other Adviser to the Seasons Portfolios a monthly fee
with respect to each Portfolio for which such Adviser performs services,
computed on average daily net assets, at the following annual rates:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
ADVISER PORTFOLIO FEE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Janus Multi-Managed Growth Portfolio .60% on the first $200 million
Multi-Managed Moderate Growth
Portfolio .55% thereafter
Multi-Managed Income/Equity
Portfolio
Multi-Managed Income Portfolio
- ------------------------------------------------------------------------------------
Wellington Multi-Managed Growth Portfolio .225% on the first $100 million
Multi-Managed Moderate Growth
Portfolio .125% on the next $100 million
Multi-Managed Income/Equity
Portfolio .10% thereafter
Multi-Managed Income Portfolio
- ------------------------------------------------------------------------------------
</TABLE>

B-56
<PAGE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
<S> <C> <C>
Putnam Asset Allocation: Diversified .55% on the first $150 million
Growth Portfolio
.50% on the next $150 million
.40% thereafter
- ------------------------------------------------------------------------------------
T. Rowe Price Stock Portfolio .50% on the first $40 million
.40% thereafter
- ------------------------------------------------------------------------------------
</TABLE>

The following table sets forth the fees paid to the other Advisers to the
Seasons Portfolios by SunAmerica for the period April 15, 1997 (commencement of
operations) through March 31, 1998.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
ADVISER PORTFOLIO FEE
- ----------------------------------------------------------------------------
<S> <C> <C>
Janus Multi-Managed Growth Portfolio $ 37,947
--------------------------------------------------------
Multi-Managed Moderate Growth $ 27,549
Portfolio
--------------------------------------------------------
Multi-Managed Income/Equity Portfolio $ 14,021
--------------------------------------------------------
Multi-Managed Income Portfolio $ 4,971
- ----------------------------------------------------------------------------
Wellington Multi-Managed Growth Portfolio $ 6,813
--------------------------------------------------------
Multi-Managed Moderate Growth $ 12,720
Portfolio
--------------------------------------------------------
Multi-Managed Income/Equity Portfolio $ 15,084
--------------------------------------------------------
Multi-Managed Income Portfolio $ 16,688
- ----------------------------------------------------------------------------
Putnam Asset Allocation: Diversified Growth $134,772
Portfolio
- ----------------------------------------------------------------------------
T. Rowe Price Stock Portfolio $104,733
- ----------------------------------------------------------------------------
</TABLE>

SunAmerica has received an exemptive order that, among other things,
permits the Trust to disclose to shareholders the Advisers' fees only in the
aggregate for each Portfolio. With respect to the Multi-Managed Seasons Select
Portfolios, the highest possible aggregate annual rates of the fees payable by
SunAmerica to the Advisers for each Portfolio for the first year of operation -
I.E., the fee rate charged on the first dollar held by each Portfolio - will be
the following, expressed as a percentage of the average daily net assets of each
Portfolio: Large-Cap Growth Portfolio 0.400%, Large-Cap Composite Portfolio
0.233%, Large-Cap Value Portfolio 0.333%, Mid-Cap Growth Portfolio 0.325%,
Mid-Cap Value Portfolio 0.367%, Small-Cap Portfolio 0.240%, International Equity
Portfolio 0.500%, and Diversified Fixed Income Portfolio 0.165%. There can be
no assurance that the Portfolios will achieve a level of average daily net
assets in the amounts estimated.

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

B-57
<PAGE>

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 SunAmerica, on not less
than thirty (30) nor more than sixty (60) days' written notice to the Adviser,
or by the Adviser, on not less than ninety (90) days' written notice to
SunAmerica and the Trust; provided, that the Adviser 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 SunAmerica.

PERSONAL TRADING. The Trust and SunAmerica 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
SunAmerica. 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 SunAmerica, (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.
SunAmerica reports to the Board of Trustees on a quarterly basis as to whether
there were any violations of the Code by Access Persons of the Trust or
SunAmerica during the quarter.

The Advisers 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 other Advisers report to SunAmerica 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,
SunAmerica reports to the Board of Trustees as to whether there were any
violations of the Code by Access Persons of the Trust or SunAmerica.

DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES

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 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. Each Portfolio is
subject to asset diversification regulations prescribed by the U.S. Treasury
Department under the Code. In general, these regulations effectively provide
that, as of the end of each calendar quarter or within 30 days thereafter, no
more than 55% of the total assets of the Portfolio may be represented by any one
investment, no more than 70% by any two investments, no more than 80% by any
three investments,

B-58
<PAGE>

and no more than 90% by any four investments. For this purpose, all securities
of the same issuer are considered a single investment, but each U.S. agency or
instrumentality is treated as a separate issuer. There are also alternative
diversification tests which may be satisfied by the Portfolio under the
regulation. Each Portfolio intends to comply with the diversification
regulations. If a Portfolio fails to comply with these regulations, the
contracts invested in that Portfolio will not be treated as annuity, endowment
or life insurance contracts under the Code.

SHARES OF THE TRUST

The Trust consists of fifteen separate Portfolios, each of which offers a
single class of shares. All shares of the Trust have equal voting rights and
may be voted in the election of Trustees and on other matters submitted to the
vote of the shareholders. Shareholders' meetings ordinarily will not be held
unless required by the 1940 Act. As permitted by Massachusetts law, there
normally will be no shareholders' meetings for the purpose of electing Trustees
unless and until such time as fewer than a majority of the Trustees holding
office have been elected by shareholders. At that time, the Trustees then in
office will call a shareholders' meeting for the election of Trustees. The
Trustees must call a meeting of shareholders for the purpose of voting upon the
removal of any Trustee when requested to do so by the record holders of 10% of
the outstanding shares of the Trust. A Trustee may be removed after the holders
of record of not less than two-thirds of the outstanding shares have declared
that the Trustee be removed either by declaration in writing or by votes cast in
person or by proxy. Except as set forth above, the Trustees shall continue to
hold office and may appoint successor Trustees, provided that immediately after
the appointment of any successor Trustee, at least two-thirds of the Trustees
have been elected by the shareholders. Shares do not have cumulative voting
rights. Thus, holders of a majority of the shares voting for the election of
Trustees can elect all the Trustees. No amendment may be made to the
Declaration of Trust without the affirmative vote of a majority of the
outstanding shares of the Trust, except that amendments to conform the
Declaration to the requirements of applicable federal laws or regulations or the
regulated investment company provisions of the Code may be made by the Trustees
without the vote or consent of shareholders. If not terminated by the vote or
written consent of a majority of its outstanding shares, the Trust will continue
indefinitely.

In matters affecting only a particular Portfolio, the matter shall have
been effectively acted upon by a majority vote of that Portfolio even though:
(1) the matter has not been approved by a majority vote of any other Portfolio;
or (2) the matter has not been approved by a majority vote of the Trust.

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

B-59
<PAGE>

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.

PRICE OF SHARES

The Trust is open for business on any day the New York Stock Exchange
("NYSE") is open for regular trading. Shares are valued each day as of the
close of regular trading on the NYSE (generally 4:00 p.m., Eastern time). Each
Portfolio calculates the net asset value of its shares by dividing the total
value of its net assets by the shares outstanding.

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 sale 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 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.

Except in extraordinary circumstances and as permissible under the 1940
Act, the redemption proceeds are paid on or before the seventh day following the
request for redemption.

B-60
<PAGE>

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
Adviser.

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 Adviser places the
Trust's portfolio transactions, the Adviser may be relieved of expenses it might
otherwise bear. Research services furnished by broker-dealers could be useful
and of value to the Adviser in serving other clients as well as the Trust and
research services obtained by the Adviser 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
that 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 SEC, permitting the Trust to deal with securities dealers (that may be
deemed to be affiliated persons of 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, an Adviser may use broker-dealer
affiliates of an Adviser 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 that 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 reasonably designed to provide that any commissions, fees or other
remuneration paid to such

B-61
<PAGE>

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 following table sets
forth the brokerage commissions paid by the Portfolios and the amounts of the
brokerage commissions paid to affiliated broker-dealers of such Portfolios for
the period April 15, 1997 (commencement of operations) through March 31, 1998.

1998 BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
AGGREGATE AMOUNT PAID TO PERCENTAGE PAID
PORTFOLIO BROKERAGE AFFILIATED TO AFFILIATED
COMMISSIONS BROKER-DEALERS BROKER-DEALERS
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Multi-Managed Growth $36,894 -- --
- ----------------------------------------------------------------------------------------
Multi-Managed Moderate Growth $31,159 -- --
- ----------------------------------------------------------------------------------------
Multi-Managed Income/Equity $12,098 -- --
- ----------------------------------------------------------------------------------------
Multi-Managed Income $ 5,374 -- --
- ----------------------------------------------------------------------------------------
Asset Allocation: Diversified Growth $84,108 $635 0.75%
- ----------------------------------------------------------------------------------------
Stock $44,763 -- --
- ----------------------------------------------------------------------------------------
</TABLE>

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.

An Adviser 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 an Adviser to be beneficial to the interests of the Trust,
partners and/or employees of the Adviser may serve on investment advisory
committees, which will consult with the Adviser 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 that 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.

B-62
<PAGE>

It is possible that a Portfolio's holdings may include securities of
entities for which an Adviser or its affiliate performs investment banking
services as well as securities of entities in which the Adviser or its affiliate
makes a market. From time to time, such activities may limit a Portfolio's
flexibility in purchases and sales of securities. When an Adviser or its
affiliate is engaged in an underwriting or other distribution of securities of
an entity, the Adviser 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 Seasons Portfolio and
each separate portion of a Multi-Managed Seasons Select 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 or
separate portion, 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. PricewaterhouseCoopers LLP
(successor firm to Price Waterhouse LLP), 1177 Avenue of the Americas, New York,
New York 10036, has been selected as the Trust's independent accountants.
PricewaterhouseCoopers 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 Swidler Berlin Shereff
Friedman, LLP, 919 Third Avenue, New York, NY 10022, and Blazzard, Grodd &
Hasenauer, P.C., 943 Coast Road East, Westport, CT 06881, 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.

B-63
<PAGE>

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
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
SEC under the Securities Act 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 SEC, Washington, D.C., to all of which reference is hereby
made.

FINANCIAL STATEMENTS

Set forth following this Statement of Additional Information are the
audited financial statements of the Trust with respect to the period April 1,
1998 to September 30, 1998 and the unaudited financial statements of the
Trust with respect to the period April 1, 1998 to September 30, 1998.

B-64

<PAGE>
- ----------------

SEASONS SERIES TRUST
MULTI-MANAGED
GROWTH PORTFOLIO INVESTMENT PORTFOLIO -- MARCH 31, 1998

<TABLE>
<CAPTION>
COMMON STOCK -- 70.7% SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 3.4%
APPAREL & TEXTILES -- 0.5%
Oakley, Inc.+ .......................... 8,200 $ 94,813
R.P.M., Inc. ........................... 1,625 28,945
Sola International, Inc.+ .............. 800 33,150

AUTOMOTIVE -- 0.6%
Federal-Mogul Corp. .................... 2,775 147,595
Ford Motor Co. ......................... 700 45,369

HOUSING -- 0.0%
Krause's Furniture, Inc.+ .............. 3,900 14,625

RETAIL -- 2.3%
Abercrombie & Fitch Co., Class A+ ...... 1,300 54,681
Costco Cos., Inc.+ ..................... 2,450 130,769
CVS Corp. .............................. 400 30,200
Cybershop International, Inc.+ ......... 1,150 10,781
Duane Reade, Inc.+ ..................... 6,493 165,977
Federated Department Stores, Inc.+ ..... 900 46,631
Gap, Inc. .............................. 750 33,750
Office Depot, Inc.+ .................... 1,900 59,138
Pacific Sunwear of California+ ......... 500 20,750
Sunglass Hut International, Inc.+ ...... 8,400 88,200
U.S. Vision, Inc.+ ..................... 3,000 30,750
Wal-Mart Stores, Inc. .................. 1,000 50,813
Woolworth Corp.+ ....................... 1,000 25,000
-------------
1,111,937
-------------

CONSUMER STAPLES -- 1.2%
FOOD, BEVERAGE & TOBACCO -- 0.7%
DEKALB Genetics Corp., Class B ......... 1,780 119,037
Flowers Industries, Inc. ............... 1,000 23,437
Philip Morris Cos., Inc. ............... 1,300 54,194
RJR Nabisco Holdings Corp. ............. 700 21,919
UST, Inc. .............................. 600 19,350

HOUSEHOLD PRODUCTS -- 0.5%
Colgate-Palmolive Co. .................. 700 60,638
Gillette Co. ........................... 400 47,475
Procter & Gamble Co. ................... 600 50,625
-------------
396,675
-------------

ENERGY -- 1.5%
ENERGY SERVICES -- 0.3%
Baker Hughes, Inc. ..................... 600 24,150
Friede Goldman International, Inc.+ .... 900 25,987
</TABLE>

- ----------------
4
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
ENERGY SERVICES (CONTINUED)
Schlumberger Ltd. ...................... 300 $ 22,725
Smedvig ASA, Class B ................... 749 15,030
Transocean Offshore, Inc. .............. 500 25,719

ENERGY SOURCES -- 1.2%
Exxon Corp. ............................ 800 54,100
Global Marine, Inc.+ ................... 750 18,563
Mobil Corp. ............................ 500 38,312
Nabors Industries, Inc.+ ............... 750 17,766
Noble Affiliates, Inc. ................. 800 33,300
Ocean Rig ASA+ ......................... 57,031 58,343
Royal Dutch Petroleum Co. .............. 600 34,087
Smith International, Inc.+ ............. 1,593 87,715
Texaco, Inc. ........................... 800 48,200
-------------
503,997
-------------

FINANCE -- 10.5%
BANKS -- 4.5%
Ambanc Holding Co., Inc. ............... 325 6,175
Astoria Financial Corp. ................ 235 14,526
Banca Commerciale Italiana+ ............ 39,668 197,905
Bank of New York Co., Inc. ............. 2,125 133,477
BankAmerica Corp. ...................... 2,050 169,381
BankBoston Corp. ....................... 300 33,075
Chase Manhattan Corp. .................. 400 53,950
Citicorp ............................... 250 35,500
First American Corp. ................... 1,300 63,700
First Chicago NBD Corp. ................ 700 61,688
First Defiance Financial Corp. ......... 945 14,411
First Union Corp. ...................... 700 39,725
Golden State Bancorp, Inc.+ ............ 1,600 61,100
Hibernia Corp., Class A ................ 3,100 63,744
Klamath First Bancorp, Inc. ............ 710 16,330
Mellon Bank Corp. ...................... 500 31,750
North Central Bancshares, Inc. ......... 130 2,893
PNC Bank Corp. ......................... 1,800 107,887
Provident Financial Holdings, Inc.+ .... 525 12,338
Queens County Bancorp, Inc. ............ 400 17,600
Sovereign Bancorp, Inc. ................ 3,400 61,837
Star Banc Corp. ........................ 1,250 73,906
Summit Bancorp. ........................ 1,200 60,075
TF Financial Corp. ..................... 90 2,520
U.S. Bancorp ........................... 1,055 131,611

FINANCIAL SERVICES -- 3.7%
American Express Co. ................... 600 55,087
Associates First Capital Corp., Class
A .................................... 2,930 231,470
Beneficial Corp. ....................... 490 60,913
Capital One Financial Corp. ............ 1,000 78,875
Charles Schwab Corp. ................... 2,052 77,976
CIT Group, Inc., Class A+ .............. 1,300 42,413
</TABLE>

----------------
5
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
ContiFinancial Corp.+ .................. 800 $ 24,400
Federal Agricultural Mortgage Corp.+ ... 700 39,200
Federal National Mortgage
Association .......................... 800 50,600
FirstSpartan Financial Corp. ........... 265 11,958
Healthcare Financial Partners, Inc.+ ... 1,400 66,325
Household International, Inc. .......... 1,125 154,969
Jefferies Group, Inc. .................. 200 11,300
Legg Mason, Inc. ....................... 500 29,656
Lehman Brothers Holdings, Inc. ......... 500 37,438
SLM Holding Corp. ...................... 2,820 123,022
T&W Financial Corp.+ ................... 2,000 57,500
Waddell & Reed Financial, Inc., Class
A+ ................................... 1,050 27,300

INSURANCE -- 2.3%
Aetna, Inc. ............................ 300 25,031
Allstate Corp. ......................... 400 36,775
Chubb Corp. ............................ 300 23,513
Conseco, Inc. .......................... 900 50,962
Reliance Group Holdings, Inc. .......... 4,000 76,500
Stirling Cooke Brown Holdings Ltd.+ .... 500 13,250
Swiss Life Insurance & Pension Co. ..... 108 91,316
The Hartford Financial Services Group,
Inc. ................................. 400 43,400
UICI+ .................................. 2,375 82,086
UNUM Corp. ............................. 5,700 314,569
-------------
3,404,908
-------------

HEALTHCARE -- 9.2%
DRUGS -- 5.5%
Abbott Laboratories, Inc. .............. 400 30,125
Alkermes, Inc.+ ........................ 2,000 49,750
Alza Corp.+ ............................ 3,140 140,711
Bristol-Myers Squibb Co. ............... 700 73,019
Centocor, Inc.+ ........................ 500 22,313
Eli Lilly & Co. ........................ 2,835 169,037
ICN Pharmaceuticals, Inc. .............. 1,400 68,950
Inhale Therapeutic Systems ............. 1,000 27,125
Merck & Co., Inc. ...................... 500 64,187
Pfizer, Inc. ........................... 3,565 355,386
Sepracor, Inc.+ ........................ 1,000 42,625
Smithkline Beecham PLC ................. 12,026 151,490
Warner-Lambert Co. ..................... 3,475 591,836

HEALTH SERVICES -- 1.8%
Advance Paradigm, Inc.+ ................ 1,500 59,437
Assisted Living Concepts, Inc.+ ........ 1,000 21,625
Boron, LePore & Associates, Inc.+ ...... 1,700 56,313
Columbia/HCA Healthcare Corp. .......... 1,400 45,150
Novoste Corp.+ ......................... 2,400 62,250
Omnicare, Inc. ......................... 5,599 221,860
Sunrise Assisted Living, Inc.+ ......... 1,000 44,750
Tenet Healthcare Corp.+ ................ 1,100 39,944
</TABLE>

- ----------------
6
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
HEALTH SERVICES (CONTINUED)
United Healthcare Corp. ................ 300 $ 19,425
Vision Twenty-One, Inc.+ ............... 2,100 24,675

MEDICAL PRODUCTS -- 1.9%
Arterial Vascular Engineering, Inc.+ ... 2,000 73,250
Baxter International, Inc. ............. 500 27,563
Cardinal Health, Inc. .................. 765 67,463
Cytyc Corp.+ ........................... 2,500 62,500
Endocardial Solutions, Inc.+ ........... 500 7,000
Johnson & Johnson ...................... 600 43,988
Medaphis Corp.+ ........................ 5,700 59,494
Respironics, Inc.+ ..................... 3,000 86,812
Sofamor Danek Group, Inc.+ ............. 2,070 176,467
-------------
2,986,520
-------------

INDUSTRIAL & COMMERCIAL -- 8.1%
AEROSPACE & MILITARY TECHNOLOGY -- 0.1%
Boeing Co. ............................. 700 36,488

BUSINESS SERVICES -- 5.0%
Aavid Thermal Technologies, Inc.+ ...... 4,400 135,850
Billing Concepts Corp.+ ................ 200 5,188
Cendant Corp.+ ......................... 1,000 39,625
Cultural Access Worldwide, Inc.+ ....... 10,000 158,750
D.R. Horton, Inc. ...................... 1,500 31,875
Delta & Pine Land Co. .................. 3,640 189,280
DSET Corp.+ ............................ 3,400 63,537
Gartner Group, Inc., Class A+ .......... 700 26,163
GTECH Holdings Corp.+ .................. 400 15,550
Ha-Lo Industries, Inc.+ ................ 3,900 136,256
Metro One Telecommunications, Inc.+ .... 5,600 66,500
NCO Group, Inc.+ ....................... 1,000 25,000
Network Appliance, Inc. ................ 1,900 67,450
Owens-Illinois, Inc.+ .................. 500 21,625
Positron Fiber Systems Corp., Class
A+ ................................... 9,600 73,800
PSINet, Inc.+ .......................... 5,900 65,637
Ryland Group, Inc. ..................... 1,000 27,625
Sealed Air Corp.+ ...................... 2,440 159,820
Service Corp. International ............ 1,000 42,437
Sysco Corp. ............................ 800 20,500
Toll Brothers, Inc.+ ................... 1,500 42,188
Tomra Systems ASA ...................... 571 15,128
Transition Systems, Inc.+ .............. 3,300 67,237
Unisys Corp.+ .......................... 4,000 76,000
USA Waste Services, Inc.+ .............. 1,100 49,019

ELECTRICAL EQUIPMENT -- 0.4%
Aeroflex, Inc.+ ........................ 4,700 62,275
North American Scientific, Inc.+ ....... 2,200 79,200
</TABLE>

----------------
7
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
MACHINERY -- 0.2%
EVI, Inc.+ ............................. 1,100 $ 50,944
Varco International, Inc.+ ............. 750 19,312

MULTI-INDUSTRY -- 1.9%
Corning, Inc. .......................... 800 35,400
Raision Tehtaat Oy ..................... 1,755 251,945
Republic Industries, Inc.+ ............. 1,400 36,137
Siebe PLC .............................. 5,571 121,609
Tyco International Ltd. ................ 2,880 157,320

TRANSPORTATION -- 0.5%
Atlas Air, Inc.+ ....................... 1,600 52,100
Burlington Northern Santa Fe Corp. ..... 400 41,600
Comair Holdings, Inc. .................. 1,000 26,500
Trans World Airlines, Inc.+ ............ 2,500 30,781
-------------
2,623,651
-------------

INFORMATION & ENTERTAINMENT -- 5.6%
BROADCASTING & MEDIA -- 4.6%
CBS Corp. .............................. 6,385 216,691
Chancellor Media Corp.+ ................ 4,805 220,429
Cinar Films, Inc., Class B+ ............ 1,000 42,625
Clear Channel Communications, Inc.+ .... 400 39,200
DoubleClick, Inc.+ ..................... 2,000 70,250
Forrester Research, Inc.+ .............. 500 17,750
Jacor Communications, Inc.+ ............ 1,000 59,000
Lamar Advertising Co., Class A+ ........ 2,610 91,350
Outdoor Systems, Inc.+ ................. 2,960 103,785
The Petersen Companies, Inc., Class
A+ ................................... 2,000 50,000
Time Warner, Inc. ...................... 7,544 543,168
Univision Communications, Inc., Class
A+ ................................... 1,250 46,563

ENTERTAINMENT PRODUCTS -- 0.2%
Hasbro, Inc. ........................... 800 28,250
Mattel, Inc. ........................... 800 31,700

LEISURE & TOURISM -- 0.8%
Hilton Hotels Corp. .................... 900 28,688
McDonald's Corp. ....................... 800 48,000
Outback Steakhouse, Inc.+ .............. 1,900 74,337
Primadonna Resorts, Inc.+ .............. 6,000 94,500
-------------
1,806,286
-------------

INFORMATION TECHNOLOGY -- 25.4%
COMMUNICATION EQUIPMENT -- 2.1%
CIENA Corp.+ ........................... 1,500 63,937
Lucent Technologies, Inc. .............. 900 115,087
Nokia Corp., Class A ADR ............... 3,060 330,289
Tellabs, Inc.+ ......................... 500 33,563
U.S. West Media Group+ ................. 3,240 112,590
</TABLE>

- ----------------
8
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
COMPUTERS & BUSINESS EQUIPMENT -- 2.0%
Computer Sciences Corp. ................ 600 $ 33,000
Dell Computer Corp.+ ................... 1,930 130,758
EMC Corp.+ ............................. 3,470 131,209
HBO & Co. .............................. 3,905 235,764
Hewlett-Packard Co. .................... 700 44,363
Honeywell, Inc. ........................ 400 33,075
International Business Machines
Corp. ................................ 400 41,550

ELECTRONICS -- 4.2%
Analog Devices, Inc.+ .................. 10,300 342,475
Applied Materials, Inc.+ ............... 900 31,781
ASM Lithography Holdings NV+ ........... 2,705 250,043
ATMI, Inc.+ ............................ 2,100 63,525
Emerson Electric Co. ................... 700 45,631
General Electric Co. ................... 900 77,569
Hubbell, Inc., Class B ................. 600 30,225
Intel Corp. ............................ 500 39,031
Lam Research Corp.+ .................... 400 11,250
Maxim Integrated Products, Inc.+ ....... 2,180 79,434
Molex, Inc., Class A ................... 1,100 29,494
Motorola, Inc. ......................... 500 30,313
Pittway Corp., Class A ................. 3,840 276,480
Vitesse Semiconductor Corp.+ ........... 1,330 62,718

SOFTWARE -- 12.7%
America Online, Inc.+ .................. 7,344 501,687
Applied Voice Technology, Inc.+ ........ 1,000 39,000
Aspen Technology, Inc.+ ................ 5,375 221,719
At Home Corp., Series A+ ............... 3,710 125,444
Cadence Design Systems, Inc.+ .......... 6,680 231,295
Caere Corp.+ ........................... 5,000 54,375
Cambridge Technology Partners, Inc.+ ... 800 39,650
Cisco Systems, Inc.+ ................... 5,855 400,336
Computer Associates International,
Inc. ................................. 1,000 57,750
Computer Task Group, Inc. .............. 1,000 41,188
Compuware Corp.+ ....................... 2,500 123,437
CrossKeys Systems Corp.+ ............... 1,000 11,250
Intuit, Inc.+ .......................... 1,930 93,364
ISS Group, Inc.+ ....................... 600 23,325
J.D. Edwards & Co.+ .................... 3,800 124,212
Keane, Inc.+ ........................... 1,300 73,450
Microsoft Corp.+ ....................... 6,835 611,732
MindSpring Enterprises, Inc.+ .......... 1,000 64,250
Oracle Corp.+ .......................... 900 28,406
Parametric Technology Corp.+ ........... 18,415 613,450
Pegrine Systems, Inc.+ ................. 3,500 66,937
PeopleSoft, Inc.+ ...................... 3,155 166,229
Reynolds & Reynolds Co., Class A ....... 1,000 21,875
Sapient Corp.+ ......................... 1,810 85,749
Segue Software, Inc.+ .................. 700 9,100
Sterling Commerce, Inc.+ ............... 1,400 64,925
Storage Technology Corp.+ .............. 850 64,653
</TABLE>

----------------
9
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
SOFTWARE (CONTINUED)
VERITAS Software Corp.+ ................ 1,230 $ 72,724
VocalTec Communications Ltd.+ .......... 1,000 20,500
Wind River Systems+ .................... 1,865 74,134

TELECOMMUNICATIONS -- 4.4%
Alltel Corp. ........................... 1,000 43,687
Clearnet Communications, Inc., Class
A .................................... 4,500 63,844
Comcast Corp., Class A+ ................ 10,540 372,194
Frontier Corp. ......................... 3,500 113,969
GST Telecommunications, Inc+ ........... 3,900 58,744
Intermedia Communications, Inc.+ ....... 800 63,700
IWL Communications, Inc. ............... 1,000 17,875
Pacific Gateway Exchange, Inc.+ ........ 1,300 74,425
RELTEC Corp.+ .......................... 250 8,859
Saville Systems PLC ADR+ ............... 500 25,625
Star Telecommunications, Inc.+ ......... 900 50,062
STARTEC Global Communications Corp.+ ... 2,600 65,000
Tele-Communications, Inc., Series A+ ... 12,896 400,985
Teleport Communications Group Inc.,
Class A+ ............................. 1,200 70,500
-------------
8,230,769
-------------

MATERIALS -- 2.7%
CHEMICALS -- 2.4%
Cabot Corp. ............................ 1,985 73,197
du Pont (E.I.) de Nemours & Co. ........ 700 47,600
Monsanto Co. ........................... 10,845 563,940
Solutia, Inc. .......................... 3,195 95,051

FOREST PRODUCTS -- 0.2%
American Pad & Paper Co.+ .............. 900 6,525
Boise Cascade Corp. .................... 1,400 50,487
Sonoco Products Co. .................... 300 12,019

METALS & MINERALS -- 0.1%
EASCO, Inc. ............................ 1,000 15,250
Martin Marietta Materials, Inc. ........ 700 30,231
-------------
894,300
-------------

REAL ESTATE -- 0.3%
REAL ESTATE COMPANIES -- 0.1%
The Rouse Co. .......................... 500 15,750

REAL ESTATE INVESTMENT TRUSTS -- 0.2%
Crescent Real Estate Equities Co. ...... 700 25,200
ElderTrust+ ............................ 1,000 17,875
Equity Office Properties Trust ......... 400 12,250
-------------
71,075
-------------
</TABLE>

- ----------------
10
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
UTILITIES -- 2.8%
ELECTRIC UTILITIES -- 0.3%
Duke Energy Corp. ...................... 800 $ 47,650
GPU, Inc. .............................. 1,000 44,250

GAS & PIPELINE UTILITIES -- 0.3%
Consolidated Natural Gas Co. ........... 700 40,381
Enron Corp. ............................ 900 41,737
US Filter Corp.+ ....................... 900 31,613

TELEPHONE-- 2.2%
Ameritech Corp. ........................ 900 44,494
AT&T Corp. ............................. 800 52,500
Bell Atlantic Corp. .................... 407 41,718
Century Telephone Enterprises, Inc. .... 1,050 64,181
Cincinnati Bell, Inc. .................. 1,800 64,125
GTE Corp. .............................. 600 35,925
MCI Communications Corp. ............... 600 29,700
SBC Communications, Inc. ............... 1,200 52,350
Telecom Italia SpA ..................... 17,263 136,030
Winstar Communications, Inc.+ .......... 1,500 64,125
WorldCom, Inc.+ ........................ 3,114 134,097
-------------
924,876
-------------
TOTAL COMMON STOCK (cost $19,667,286)... 22,954,994
-------------

PRINCIPAL
BONDS & NOTES -- 23.6% AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.1%
RETAIL -- 0.1%
J.C. Penney Co., Inc. 7.40% 2037 ....... $ 20,000 21,578
Fred Meyer, Inc. 7.38% 2005 ............ 25,000 25,071
-------------
46,649
-------------

CONSUMER STAPLES -- 0.1%
FOOD, BEVERAGE & TOBACCO -- 0.1%
Panamerican Beverages, Inc. 8.13%
2003 ................................. 30,000 31,890
-------------

ENERGY -- 0.2%
ENERGY SOURCES-- 0.2%
Newfield Exploration Co., Series B 7.45%
2007* ................................ 10,000 9,956
Petroleos Mexicano 9.00% 2007 .......... 25,000 25,594
YPF Sociedad Anonima 8.00% 2004 ........ 15,000 15,238
-------------
50,788
-------------

FINANCE -- 4.5%
BANKS -- 1.2%
Banc One Corp. 8.00% 2027 .............. 18,000 20,365
Bank One Columbus 7.38% 2002 ........... 25,000 26,112
Banponce Financial Corp. 6.75% 2001 .... 20,000 20,230
Credit National 7.00% 2005 ............. 20,000 20,011
</TABLE>

----------------
11
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
BANKS (CONTINUED)
Export Import Bank of Korea 6.50%
2006 ................................. $ 35,000 $ 30,259
First Chicago NBD Corp. 7.25% 2004 ..... 60,000 62,790
First Republic Bancorp 7.75% 2012 ...... 25,000 25,615
First Union-Lehman Brothers Commercial
Mortgage Corp. 6.60% 2029 ............ 55,000 55,764
Korea Development Bank 7.13% 2001 ...... 15,000 14,105
NBD Bank SA 8.25% 2024 ................ 25,000 29,525
NCNB Co. 9.38% 2009 .................... 32,000 39,441
United States Bancorp 7.50% 2026 ....... 50,000 54,295

FINANCIAL SERVICES -- 3.2%
Allstate Financing II 7.83% 2045 ....... 24,000 24,571
Asset Securitization Corp. 6.66%
2041# ................................ 50,000 51,016
Associates Corp. of North America 7.63%
2004 ................................. 60,000 64,261
CS First Boston Mortgage Securities
Corp. 7.24% 2029 ..................... 70,000 73,587
Dime Capital Trust I, Series A 9.33%
2027 ................................. 20,000 22,556
Finova Capital Corp. 6.63% 2001 ........ 50,000 50,615
Finova Capital Corp., Series C 6.39%
2002 ................................. 30,000 30,146
Fleet Mortgage Group, Inc. 6.84%
2003 ................................. 30,000 30,507
Ford Motor Credit Company 7.02% 2000 ... 50,000 51,093
GE Capital Mortgage Services Inc. 6.25%
2023 ................................. 16,025 15,935
Lubermens Mutual Casualty Co. 8.30%
2037* ................................ 40,000 42,540
Morgan Stanley Capital I, Inc. 7.22%
2007* ................................ 60,000 63,337
Popular North America, Inc. 6.63%
2002 ................................. 35,000 35,502
Private Export Funding Corp. 6.31%
2004 ................................. 100,000 102,278
Private Export Funding Corp. 6.62%
2005 ................................. 120,000 124,617
Private Export Funding Corp. 7.03%
2003 ................................. 35,000 36,855
Private Export Funding Corp. 7.30%
2002 ................................. 125,000 131,171
Private Export Funding Corp. 7.90%
2000 ................................. 35,000 36,405
US West Capital Funding, Inc. 6.95%
2037 ................................. 40,000 41,701

INSURANCE -- 0.1%
Cigna Corp. 7.88% 2027 ................. 19,000 20,671
Jackson National Life Insurance Co.
8.15% 2027* .......................... 22,000 24,169
-------------
1,472,045
-------------

HEALTHCARE -- 0.4%
HEALTH SERVICES -- 0.3%
Allegiance Corp. 7.00% 2026 ............ 55,000 56,825
Tenet Healthcare Corp. 7.88% 2003 ...... 20,000 20,300

MEDICAL PRODUCTS -- 0.1%
Beckman Instruments, Inc. 7.10%
2003* ................................ 40,000 40,079
-------------
117,204
-------------

INDUSTRIAL & COMMERCIAL -- 0.3%
MACHINERY -- 0.1%
Cincinnati Milacron, Inc. 7.88% 2000 ... 35,000 35,814
</TABLE>

- ----------------
12
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
TRANSPORTATION -- 0.2%
AMR Corp. 9.88% 2020 ................... $ 30,000 $ 39,169
Continental Airlines 6.65% 2019 ........ 40,000 39,777
-------------
114,760
-------------

INFORMATION & ENTERTAINMENT -- 0.5%
BROADCASTING & MEDIA -- 0.5%
Comcast Cable Communications 8.50%
2027 ................................. 15,000 17,518
News America Holdings, Inc. 8.00%
2016 ................................. 65,000 70,044
Scholastic Corp. 7.00% 2003 ............ 35,000 35,877
Viacom, Inc. 7.75% 2005 ................ 40,000 41,950
-------------
165,389
-------------

INFORMATION TECHNOLOGY -- 0.2%
TELECOMMUNICATIONS -- 0.2%
Tele-Communications, Inc. 7.25% 2005 ... 25,000 25,585
Tele-Communications, Inc. 9.25% 2002 ... 25,000 27,362
-------------
52,947
-------------

MATERIALS -- 0.1%
CHEMICALS -- 0.1%
ICI Wilmington, Inc. 6.95% 2004 ........ 35,000 36,016
-------------

MUNICIPAL BONDS -- 0.5%
MUNICIPAL BONDS -- 0.5%
Hudson County New Jersey Improvement
Authority Facility 6.55% 2002 ........ 45,000 45,770
Huntsville Alabama Solid Waste Disposal
Authority 5.95% 2003 ................. 50,000 49,152
Miami Florida Revenue 7.25% 2003 ....... 60,000 62,906
-------------
157,828
-------------

NON-U.S. GOVERNMENT OBLIGATIONS -- 0.9%
FOREIGN GOVERNMENT -- 0.9%
Australian Government 6.75%
2006 ............................(AUD) 290,000 205,412
Republic of Argentina 11.00% 2006 ...... 25,000 27,813
Republic of Columbia 7.25% 2004 ........ 33,000 31,521
Republic of Columbia 7.63% 2007 ........ 17,000 16,022
Republic of Lithuania 7.13% 2002* ...... 19,000 18,620
-------------
299,388
-------------

REAL ESTATE -- 0.4%
REAL ESTATE COMPANIES -- 0.2%
Post Apartment Homes LP 7.02% 2001 ..... 60,000 61,045

REAL ESTATE INVESTMENT TRUSTS -- 0.2%
Equity Office Properties Operating LP
6.38% 2003* .......................... 60,000 59,399
-------------
120,444
-------------
</TABLE>

----------------
13
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES -- 14.9%
U.S. GOVERNMENT & AGENCIES -- 14.9%
Federal Home Loan Mortgage Corp. 6.00%
2006 ................................. $ 20,000 $ 19,868
Federal Home Loan Mortgage Corp. 6.50%
2022 ................................. 38,000 38,190
Federal Home Loan Mortgage Corp. 6.50%
2023 ................................. 10,000 9,962
Federal Home Loan Mortgage Corp. 6.55%
2022 ................................. 32,000 32,370
Federal Home Loan Mortgage Corp. 6.75%
2022 ................................. 105,000 106,241
Federal Home Loan Mortgage Corp. 7.00%
2023 ................................. 12,000 12,446
Federal Home Loan Mortgage Corp. 7.50%
2023 ................................. 17,552 18,002
Federal Home Loan Mortgage Corp. 7.75%
2022 ................................. 25,434 26,579
Federal Home Loan Mortgage Corp. 8.50%
2019 ................................. 31,741 33,496
Federal National Mortgage Association
5.65% 2005 ........................... 15,000 14,914
Federal National Mortgage Association
5.75% 2008 ........................... 230,000 225,455
Federal National Mortgage Association
7.00% 2006 ........................... 8,201 8,223
Federal National Mortgage Association
7.39% 2021 ........................... 27,948 28,894
Federal National Mortgage Association
9.35% 2020 ........................... 3,434 3,449
Government National Mortgage Association
7.00% 2022 ........................... 16,709 16,923
Government National Mortgage Association
7.25% 2027 ........................... 123,017 125,208
Government National Mortgage Association
7.50% 2023 ........................... 40,458 41,570
Government National Mortgage Association
8.50% 2017 ........................... 36,706 39,287
Government National Mortgage Association
9.00% 2021 ........................... 14,256 15,422
United States Treasury Bonds 6.38%
2027 ................................. 20,000 21,125
United States Treasury Bonds 6.63%
2027 ................................. 90,000 97,650
United States Treasury Bonds 7.13%
2023 ................................. 150,000 171,188
United States Treasury Bonds 7.50%
2016 ................................. 70,000 81,626
United States Treasury Bonds 8.13%
2021 ................................. 55,000 69,274
United States Treasury Bonds 8.50%
2020 ................................. 124,000 161,103
United States Treasury Bonds 11.88%
2003 ................................. 350,000 451,938
United States Treasury Bonds 12.00%
2013 ................................. 700,000 1,028,237
United States Treasury Notes 5.38%
2001 ................................. 100,000 99,406
United States Treasury Notes 5.50%
2008 ................................. 200,000 197,562
United States Treasury Notes 5.88%
2000 ................................. 245,000 246,149
United States Treasury Notes 6.25%
2002 ................................. 225,000 229,781
United States Treasury Notes 6.25%
2007 ................................. 185,000 191,388
United States Treasury Notes 6.63%
2001 ................................. 290,000 298,384
United States Treasury Notes 6.63%
2002 ................................. 50,000 51,664
United States Treasury Notes 6.63%
2007 ................................. 25,000 26,539
United States Treasury Notes 7.25%
2004 ................................. 285,000 307,578
United States Treasury Notes 8.50%
2000 ................................. 280,000 299,295
-------------
4,846,386
-------------

UTILITIES -- 0.5%
ELECTRIC UTILITIES -- 0.4%
Atlantic City Electric Co. 6.38%
2005 ................................. 20,000 20,251
Cleveland Electric Illuminating Co.
7.19% 2000* .......................... 15,000 15,226
Empresa Nacional de Electricidad SA
7.33% 2037 ........................... 25,000 24,921
Public Service Electric & Gas Co. 8.88%
2003 ................................. 11,000 12,305
UtiliCorp United, Inc. 6.88% 2004 ...... 40,000 41,231

GAS & PIPELINE UTILITIES -- 0.1%
KN Energy, Inc. 6.65% 2005 ............. 35,000 35,073
</TABLE>

- ----------------
14
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
TELEPHONE -- 0.0%
WorldCom, Inc. 7.55% 2004 .............. $ 15,000 $ 15,798
-------------
164,805
-------------
TOTAL BONDS & NOTES (cost $7,555,530)... 7,676,539
-------------
TOTAL INVESTMENT SECURITIES (cost
$27,222,816).......................... 30,631,533
-------------
<CAPTION>

SHORT-TERM SECURITIES -- 0.3%
<S> <C> <C>
- -----------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 0.1%
Chase Manhattan Corp. 8.77% due
2/19/99 .............................. 30,000 30,692
-------------

FOREIGN SHORT-TERM NOTES -- 0.2%
New Zealand Treasury Bill zero coupon
due 12/16/98 ....................(NZD) 150,000 78,069
-------------
TOTAL SHORT-TERM SECURITIES (cost
$110,260)............................. 108,761
-------------
<CAPTION>

REPURCHASE AGREEMENTS -- 7.7%
<S> <C> <C>
- -----------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 7.7%
PaineWebber, Inc. Joint Repurchase
Agreement (Note 3).................... 2,153,000 2,153,000
Swiss Bank Corp. Joint Repurchase
Agreement (Note 3).................... 350,000 350,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost
$2,503,000)........................... 2,503,000
-------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $29,836,076) 102.3% 33,243,294
Liabilities in excess of other assets -- (2.3) (762,733)
----- -------------
NET ASSETS -- 100.0% $ 32,480,561
----- -------------
----- -------------
</TABLE>

- ------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
# Fair valued security; see Note 2
ADR -- American Depository Receipt
AUD -- Australian Dollar
NZD -- New Zealand Dollar

----------------
15
<PAGE>
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
- --------------------------------------------------------------------------
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUD 309,000 USD 206,063 04/28/98 $ 1,599
*DEM 110,000 USD 61,312 04/28/98 1,736
FIM 300,000 USD 54,718 07/31/98 913
FIM 200,000 USD 36,308 07/31/98 439
FIM 770,000 USD 139,493 07/31/98 1,395
FIM 380,000 USD 69,834 08/07/98 1,656
ITL 45,000,000 USD 25,378 05/06/98 690
ITL 14,000,000 USD 7,821 05/06/98 140
ITL 14,000,000 USD 7,785 05/06/98 104
ITL 105,000,000 USD 58,761 05/06/98 1,157
ITL 111,000,000 USD 61,696 08/07/98 678
ITL 91,000,000 USD 51,146 08/07/98 1,122
ITL 34,500,000 USD 19,235 08/07/98 271
NLG 97,000 USD 47,271 07/02/98 487
NLG 25,000 USD 12,348 07/31/98 271
NLG 153,000 USD 75,683 08/07/98 1,741
*SEK 64,000 USD 8,073 08/07/98 37
*USD 5,598 SEK 45,000 08/07/98 52
*USD 3,737 SEK 30,000 08/07/98 29
-------
14,517
-------

GROSS
UNREALIZED
DEPRECIATION
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GBP 8,500 USD 13,862 05/06/98 (340)
GBP 10,000 USD 16,387 05/06/98 (321)
GBP 6,000 USD 9,856 05/06/98 (170)
GBP 11,000 USD 17,856 08/07/98 (444)
GBP 26,500 USD 43,382 08/07/98 (707)
*SEK 11,000 USD 1,375 08/07/98 (6)
USD 6,668 ITL 12,000,000 05/06/98 (84)
USD 7,335 NLG 15,000 08/07/98 (86)
USD 31,799 NLG 65,000 08/07/98 (386)
USD 14,689 NLG 30,000 08/07/98 (190)
*USD 61,274 DEM 110,000 04/28/98 (1,697)
-------
(4,431)
-------
Net Unrealized Appreciation............................ $ 10,086
-------
-------
</TABLE>

- ------------
* Represents fully offsetting forward foreign currency contracts that do not
have additional market risk but have continued counterparty settlement risk

<TABLE>
<S> <C> <C>
AUD -- Australian Dollar GBP -- Great British Pound SEK -- Swedish Krona
DEM -- Deutsche Mark ITL -- Italian Lira USD -- United States Dollar
FIM -- Finnish Markka NLG -- Netherlands Guilder
</TABLE>

See Notes to Financial Statements

- ----------------
16
<PAGE>
- ----------------

SEASONS SERIES TRUST
MULTI-MANAGED MODERATE
GROWTH PORTFOLIO INVESTMENT PORTFOLIO -- MARCH 31, 1998

<TABLE>
<CAPTION>
COMMON STOCK -- 56.5% SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 2.8%
APPAREL & TEXTILES -- 0.4%
Oakley, Inc.+ .......................... 5,100 $ 58,969
R.P.M., Inc. ........................... 1,625 28,945
Sola International, Inc.+ .............. 800 33,150

AUTOMOTIVE -- 0.5%
Federal-Mogul Corp. .................... 1,965 104,513
Ford Motor Co. ......................... 700 45,369

HOUSING -- 0.0%
Krause's Furniture, Inc.+ .............. 3,600 13,500

RETAIL -- 1.9%
Abercrombie & Fitch Co., Class A+ ...... 1,100 46,269
Costco Cos., Inc.+ ..................... 1,750 93,406
CVS Corp. .............................. 400 30,200
Cybershop International, Inc.+ ......... 1,150 10,781
Duane Reade, Inc.+ ..................... 4,654 118,968
Federated Department Stores, Inc.+ ..... 700 36,269
Gap, Inc. .............................. 750 33,750
Office Depot, Inc.+ .................... 1,900 59,137
Pacific Sunwear of California+ ......... 500 20,750
Sunglass Hut International, Inc.+ ...... 7,500 78,750
U.S. Vision, Inc.+ ..................... 3,000 30,750
Wal-Mart Stores, Inc. .................. 800 40,650
Woolworth Corp.+ ....................... 1,000 25,000
-------------
909,126
-------------

CONSUMER STAPLES -- 1.1%
FOOD, BEVERAGE & TOBACCO -- 0.6%
DEKALB Genetics Corp., Class B ......... 1,270 84,931
Flowers Industries, Inc. ............... 1,000 23,437
Philip Morris Cos., Inc. ............... 1,200 50,025
RJR Nabisco Holdings Corp. ............. 700 21,919
UST, Inc. .............................. 600 19,350

ENERGY -- 1.3%
ENERGY SERVICES -- 0.3%
Baker Hughes, Inc. ..................... 600 24,150
Friede Goldman International, Inc.+ .... 900 25,987
</TABLE>

----------------
17
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
ENERGY SERVICES (CONTINUED)
Schlumberger Ltd. ...................... 300 $ 22,725
Smedvig ASA, Class B.................... 557 11,177
Transocean Offshore, Inc. .............. 500 25,719

ENERGY SOURCES -- 1.0%
Exxon Corp. ............................ 800 54,100
Global Marine, Inc.+ ................... 750 18,563
Mobil Corp. ............................ 400 30,650
Nabors Industries, Inc.+ ............... 750 17,766
Noble Affiliates, Inc. ................. 800 33,300
Ocean Rig ASA+ ......................... 41,561 42,517
Royal Dutch Petroleum Co. .............. 600 34,087
Smith International, Inc.+ ............. 1,135 62,496
Texaco, Inc. ........................... 700 42,175
-------------
445,412
-------------

FINANCE -- 8.3%
BANKS -- 3.7%
Ambanc Holding Co., Inc. ............... 230 4,370
Astoria Financial Corp. ................ 165 10,199
Banca Commerciale Italiana + ........... 28,186 140,621
Bank of New York Co., Inc. ............. 1,520 95,475
BankAmerica Corp. ...................... 1,600 132,200
BankBoston Corp. ....................... 300 33,075
Chase Manhattan Corp. .................. 300 40,462
Citicorp................................ 250 35,500
First American Corp. ................... 1,200 58,800
First Chicago NBD Corp. ................ 600 52,875
First Defiance Financial Corp. ......... 675 10,294
First Union Corp. ...................... 700 39,725
Golden State Bancorp, Inc.+ ............ 1,500 57,281
Hibernia Corp., Class A................. 2,800 57,575
Klamath First Bancorp, Inc. ............ 505 11,615
Mellon Bank Corp. ...................... 400 25,400
North Central Bancshares, Inc. ......... 90 2,003
PNC Bank Corp. ......................... 1,800 107,887
Provident Financial Holdings, Inc.+ .... 375 8,813
Queens County Bancorp, Inc. ............ 287 12,628
Sovereign Bancorp, Inc. ................ 3,000 54,562
Star Banc Corp. ........................ 895 52,917
Summit Bancorp. ........................ 1,100 55,069
TF Financial Corp. ..................... 65 1,820
U.S. Bancorp............................ 755 94,186

FINANCIAL SERVICES -- 2.8%
American Express Co. ................... 600 55,087
Associates First Capital Corp., Class
A...................................... 2,075 163,925
Beneficial Corp. ....................... 355 44,131
Charles Schwab Corp. ................... 1,455 55,290
CIT Group, Inc., Class A+ .............. 1,300 42,413
ContiFinancial Corp.+ .................. 800 24,400
</TABLE>

- ----------------
18
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
Federal Agricultural Mortgage Corp.,
Class C+ .............................. 700 $ 39,200
Federal National Mortgage Association... 600 37,950
FirstSpartan Financial Corp. ........... 185 8,348
Healthcare Financial Partners, Inc.+ ... 1,200 56,850
Household International, Inc. .......... 865 119,154
Jefferies Group, Inc. .................. 200 11,300
Legg Mason, Inc. ....................... 500 29,656
Lehman Brothers Holdings, Inc. ......... 500 37,438
SLM Holding Corp. ...................... 2,015 87,904
T&W Financial Corp.+ ................... 2,000 57,500
Waddell & Reed Financial, Inc., Class
A+ .................................... 1,050 27,300

INSURANCE -- 1.8%
Aetna, Inc. ............................ 300 25,031
Allstate Corp. ......................... 300 27,581
Chubb Corp. ............................ 300 23,513
Conseco, Inc. .......................... 800 45,300
Reliance Group Holdings, Inc. .......... 4,000 76,500
Stirling Cooke Brown Holdings Ltd. ..... 500 13,250
Swiss Life Insurance & Pension Co. ..... 78 65,951
The Hartford Financial Services Group,
Inc. .................................. 400 43,400
UICI+ .................................. 1,690 58,411
UNUM Corp. ............................. 4,033 222,571
-------------
2,694,706
-------------

HEALTHCARE -- 7.5%
DRUGS -- 4.3%
Abbott Laboratories, Inc. .............. 400 30,125
Alkermes, Inc.+ ........................ 2,000 49,750
Alza Corp.+ ............................ 2,220 99,484
Bristol-Myers Squibb Co................. 700 73,019
Centocor, Inc.+ ........................ 500 22,313
Eli Lilly & Co. ........................ 2,185 130,281
ICN Pharmaceuticals, Inc. .............. 1,400 68,950
Inhale Therapeutic Systems.............. 1,000 27,125
Merck & Co., Inc. ...................... 500 64,187
Pfizer, Inc. ........................... 2,690 268,159
Sepracor, Inc.+ ........................ 1,000 42,625
Smithkline Beecham PLC.................. 8,569 107,942
Warner-Lambert Co. ..................... 2,460 418,969

HEALTH SERVICES -- 1.6%
Advance Paradigm, Inc.+ ................ 1,500 59,437
Assisted Living Concepts, Inc.+ ........ 1,000 21,625
Boron, LePore & Associates, Inc.+ ...... 1,700 56,313
Columbia/HCA Healthcare Corp. .......... 1,400 45,150
Novoste Corp.+ ......................... 2,200 57,063
Omnicare, Inc. ......................... 3,962 156,994
Sunrise Assisted Living, Inc.+ ......... 1,000 44,750
Tenet Healthcare Corp.+ ................ 1,100 39,944
United Healthcare Corp. ................ 300 19,425
</TABLE>

----------------
19
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
HEALTH SERVICES (CONTINUED)
Vision Twenty-One, Inc.+ ............... 1,900 $ 22,325

MEDICAL PRODUCTS -- 1.6%
Arterial Vascular Engineering, Inc.+ ... 2,000 73,250
Baxter International, Inc. ............. 500 27,563
Cardinal Health, Inc. .................. 550 48,503
Cytyc Corp.+ ........................... 2,500 62,500
Endocardial Solutions, Inc.+ ........... 500 7,000
Johnson & Johnson ...................... 600 43,987
Medaphis Corp.+ ........................ 5,500 57,406
Respironics, Inc.+ ..................... 3,000 86,812
Sofamor Danek Group, Inc.+ ............. 1,480 126,170
-------------
2,459,146
-------------

INDUSTRIAL & COMMERCIAL -- 6.9%
AEROSPACE & MILITARY TECHNOLOGY -- 0.1%
Boeing Co. ............................. 700 36,488

BUSINESS SERVICES -- 4.4%
Aavid Thermal Technologies, Inc.+ ...... 3,900 120,412
Billing Concepts Corp.+ ................ 200 5,188
Cultural Access Worldwide, Inc.+ ....... 10,000 158,750
D.R. Horton, Inc. ...................... 1,500 31,875
Delta & Pine Land Co. .................. 2,595 134,940
DSET Corp.+ ............................ 3,000 56,062
Gartner Group, Inc., Class A+ .......... 700 26,163
GTECH Holdings Corp.+ .................. 400 15,550
Ha-Lo Industries, Inc.+ ................ 3,900 136,256
Metro One Telecommunications, Inc.+ .... 5,400 64,125
NCO Group, Inc.+ ....................... 1,000 25,000
Network Appliance, Inc. ................ 1,700 60,350
Owens-Illinois, Inc.+ .................. 500 21,625
Positron Fiber Systems Corp., Class
A+ .................................... 9,200 70,725
PSINet, Inc.+ .......................... 5,700 63,412
Ryland Group, Inc. ..................... 1,000 27,625
Sealed Air Corp.+ ...................... 1,745 114,297
Service Corp. International............. 900 38,194
Sysco Corp. ............................ 800 20,500
Toll Brothers, Inc.+ ................... 1,500 42,188
Tomra Systems ASA ...................... 417 11,048
Transition Systems, Inc.+ .............. 2,900 59,087
Unisys Corp.+ .......................... 4,000 76,000
USA Waste Services, Inc.+ .............. 1,000 44,563

ELECTRICAL EQUIPMENT -- 0.4%
Aeroflex, Inc.+ ........................ 4,200 55,650
North American Scientific, Inc.+ ....... 2,000 72,000

MACHINERY -- 0.2%
EVI, Inc.+ ............................. 1,000 46,312
Varco International, Inc.+ ............. 750 19,313
</TABLE>

- ----------------
20
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
MULTI-INDUSTRY -- 1.4%
Corning, Inc. .......................... 800 $ 35,400
Raision Tehtaat Oy...................... 1,242 178,299
Republic Industries, Inc.+ ............. 1,100 28,394
Siebe PLC............................... 3,995 87,207
Tyco International Ltd.................. 2,040 111,435

TRANSPORTATION -- 0.4%
Atlas Air, Inc.+ ....................... 1,500 48,843
Burlington Northern Santa Fe Corp. ..... 400 41,600
Comair Holdings, Inc. .................. 900 23,850
Trans World Airlines, Inc. +............ 2,300 28,319
-------------
2,237,045
-------------

INFORMATION & ENTERTAINMENT -- 4.5%
BROADCASTING & MEDIA -- 3.6%
CBS Corp. .............................. 4,520 153,397
Chancellor Media Corp.+ ................ 3,845 176,389
Cinar Films, Inc., Class B+ ............ 1,000 42,625
Clear Channel Communications, Inc.+ .... 400 39,200
DoubleClick, Inc.+ ..................... 1,800 63,225
Forrester Research, Inc.+ .............. 500 17,750
Jacor Communications, Inc.+ ............ 1,000 59,000
Lamar Advertising Co., Class A+ ........ 1,868 65,363
Outdoor Systems, Inc.+ ................. 2,118 74,262
The Petersen Companies, Inc., Class
A+ .................................... 2,000 50,000
Time Warner, Inc. ...................... 5,342 384,624
Univision Communications, Inc., Class
A+ .................................... 1,250 46,563

ENTERTAINMENT PRODUCTS -- 0.2%
Hasbro, Inc. ........................... 700 24,719
Mattel, Inc. ........................... 800 31,700

LEISURE & TOURISM -- 0.7%
Hilton Hotels Corp. .................... 800 25,500
McDonald's Corp. ....................... 700 42,000
Outback Steakhouse, Inc.+ .............. 1,800 70,425
Primadonna Resorts, Inc.+ .............. 5,300 83,475
-------------
1,450,217
-------------

INFORMATION TECHNOLOGY -- 19.4%
COMMUNICATION EQUIPMENT -- 1.6%
CIENA Corp.+ ........................... 1,070 45,609
Lucent Technologies, Inc. .............. 900 115,087
Nokia Corp., Class A ADR................ 2,165 233,685
Tellabs, Inc.+ ......................... 500 33,563
U.S. West Media Group + ................ 2,310 80,272

COMPUTERS & BUSINESS EQUIPMENT -- 1.6%
Computer Sciences Corp. ................ 600 33,000
Dell Computer Corp.+ ................... 1,370 92,817
EMC Corp.+ ............................. 2,460 93,019
</TABLE>

----------------
21
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
COMPUTERS & BUSINESS
EQUIPMENT (CONTINUED)
HBO & Co. .............................. 3,005 $ 181,427
Hewlett-Packard Co. .................... 600 38,025
Honeywell, Inc. ........................ 400 33,075
International Business Machines
Corp. ................................. 400 41,550

ELECTRONICS -- 3.3%
Analog Devices, Inc.+ .................. 7,305 242,891
Applied Materials, Inc.+ ............... 900 31,781
ASM Lithography Holdings NV+ ........... 2,205 203,825
ATMI, Inc.+ ............................ 1,900 57,475
Emerson Electric Co. ................... 700 45,631
General Electric Co. ................... 900 77,569
Hubbell, Inc., Class B.................. 500 25,188
Intel Corp. ............................ 400 31,225
Lam Research Corp.+ .................... 600 11,250
Maxim Integrated Products, Inc.+ ....... 1,550 56,478
Molex, Inc., Class A.................... 1,000 26,813
Motorola, Inc. ......................... 500 30,312
Pittway Corp., Class A ................. 2,745 197,640
Vitesse Semiconductor Corp.+ ........... 945 44,563

SOFTWARE -- 9.5%
America Online, Inc.+ .................. 5,362 366,292
Applied Voice Technology, Inc.+ ........ 1,000 39,000
Aspen Technology, Inc.+ ................ 3,800 156,750
At Home Corp., Series A+ ............... 2,675 90,448
Cadence Design Systems, Inc.+ .......... 5,055 175,029
Caere Corp.+ ........................... 5,000 54,375
Cambridge Technology Partners, Inc.+ ... 800 39,650
Cisco Systems, Inc.+ ................... 4,365 298,457
Computer Associates International,
Inc. .................................. 800 46,200
Computer Task Group, Inc. .............. 1,000 41,188
Compuware Corp.+ ....................... 1,000 49,375
CrossKeys Systems Corp.+ ............... 1,000 11,250
Intuit, Inc.+ .......................... 1,375 66,516
ISS Group, Inc.+ ....................... 500 19,438
J.D. Edwards & Co.+ .................... 3,400 111,137
Keane, Inc.+ ........................... 1,100 62,150
Microsoft Corp.+ ....................... 5,015 448,842
MindSpring Enterprises, Inc.+ .......... 1,000 64,250
Oracle Corp.+ .......................... 900 28,406
Parametric Technology Corp.+ ........... 13,075 435,561
Pegrine Systems, Inc.+ ................. 3,200 61,200
PeopleSoft, Inc.+ ...................... 2,260 119,074
Reynolds & Reynolds Co., Class A........ 800 17,500
Sapient Corp.+ ......................... 1,310 62,061
Segue Software, Inc.+ .................. 700 9,100
Sterling Commerce, Inc.+ ............... 1,300 60,287
Storage Technology Corp.+ .............. 750 57,047
VERITAS Software Corp.+ ................ 870 51,439
VocalTec Communications Ltd.+ .......... 900 18,450
Wind River Systems+ .................... 1,320 52,470
</TABLE>

- ----------------
22
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
TELECOMMUNICATIONS -- 3.4%
Alltel Corp. ........................... 1,000 $ 43,688
Clearnet Communications, Inc., Class
A ..................................... 4,000 56,750
Comcast Corp., Class A+ ................ 7,460 263,431
Frontier Corp. ......................... 1,700 55,356
GST Telecommunications, Inc+ ........... 3,700 55,731
Intermedia Communications, Inc.+ ....... 700 55,737
IWL Communications, Inc. ............... 1,000 17,875
Pacific Gateway Exchange, Inc.+ ........ 1,200 68,700
RELTEC Corp.+ .......................... 250 8,859
Saville Systems PLC ADR+ ............... 500 25,625
Star Telecommunications, Inc.+ ......... 900 50,063
STARTEC Global Communications Corp.+ ... 2,400 60,000
Tele-Communications, Inc., Series A+ ... 9,127 283,793
Teleport Communications Group Inc.,
Class A+ .............................. 1,200 70,500
-------------
6,332,820
-------------

MATERIALS -- 2.1%
CHEMICALS -- 1.8%
Cabot Corp. ............................ 1,700 62,687
du Pont (E.I.) de Nemours & Co. ........ 700 47,600
Monsanto Co. ........................... 7,680 399,360
Solutia, Inc. .......................... 2,325 69,169

FOREST PRODUCTS -- 0.2%
American Pad & Paper Co.+ .............. 500 3,625
Boise Cascade Corp. .................... 1,400 50,487
Sonoco Products Co. .................... 300 12,019

METALS & MINERALS -- 0.1%
EASCO, Inc. ............................ 1,000 15,250
Martin Marietta Materials, Inc. ........ 600 25,913
-------------
686,110
-------------

REAL ESTATE -- 0.2%
REAL ESTATE COMPANIES -- 0.0%
The Rouse Co. .......................... 500 15,750

REAL ESTATE INVESTMENT TRUSTS -- 0.2%
Crescent Real Estate Equities Co. ...... 700 25,200
ElderTrust+ ............................ 1,000 17,875
Equity Office Properties Trust.......... 300 9,187
-------------
68,012
-------------

UTILITIES -- 2.4%
ELECTRIC UTILITIES -- 0.2%
Duke Energy Corp. ...................... 700 41,694
GPU, Inc. .............................. 900 39,825

GAS & PIPELINE UTILITIES -- 0.3%
Consolidated Natural Gas Co. ........... 700 40,381
Enron Corp. ............................ 700 32,463
</TABLE>

----------------
23
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
GAS & PIPELINE UTILITIES (CONTINUED)
US Filter Corp.+ ....................... 600 $ 21,075

TELEPHONE -- 1.9%
Ameritech Corp. ........................ 900 44,494
AT&T Corp. ............................. 800 52,500
Bell Atlantic Corp. .................... 330 33,825
Century Telephone Enterprises, Inc. .... 950 58,069
Cincinnati Bell, Inc. .................. 1,800 64,125
GTE Corp. .............................. 600 35,925
MCI Communications Corp. ............... 400 19,800
SBC Communications, Inc. ............... 1,200 52,350
Telecom Italia SpA...................... 12,331 97,166
Winstar Communications, Inc.+ .......... 1,500 64,125
WorldCom, Inc.+ ........................ 2,225 95,814
-------------
793,631
-------------
TOTAL COMMON STOCK (cost $15,811,458)... 18,434,625
-------------

PRINCIPAL
BONDS & NOTES -- 37.9% AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.3%
RETAIL -- 0.3%
J.C. Penney Co., Inc. 7.40% 2037 ....... $ 40,000 43,157
Fred Meyer, Inc. 7.38% 2005............. 40,000 40,113
-------------
83,270
-------------
CONSUMER STAPLES -- 0.2%
FOOD, BEVERAGE & TOBACCO -- 0.2%
Panamerican Beverages, Inc. 8.13%
2003 .................................. 60,000 63,781
-------------

ENERGY -- 0.3%
ENERGY SOURCES -- 0.3%
Newfield Exploration Co., Series B 7.45%
2007*.................................. 25,000 24,892
Petroleos Mexicano 9.00% 2007........... 47,000 48,116
YPF Sociedad Anonima 8.00% 2004......... 30,000 30,476
-------------
103,484
-------------

FINANCE -- 7.6%
BANKS -- 2.2%
Banc One Corp. 8.00% 2027............... 34,000 38,467
Bank One Columbus 7.38% 2002............ 45,000 47,002
Banponce Financial Corp. 6.75% 2001..... 35,000 35,402
Credit National 7.00% 2005.............. 30,000 30,017
Export Import Bank of Korea 6.50%
2006................................... 60,000 51,872
First Chicago NBD Corp. 7.25% 2004...... 110,000 115,115
First Republic Bancorp 7.75% 2012....... 45,000 46,107
First Union-Lehman Brothers Commercial
Mortgage Corp. 6.60% 2029.............. 105,000 106,458
Korea Development Bank 7.13% 2001....... 20,000 18,807
NBD Bank SA 8.25% 2024.................. 45,000 53,146
NCNB Co. 9.38% 2009..................... 48,000 59,161
</TABLE>

- ----------------
24
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
BANKS (CONTINUED)
United States Bancorp 7.50% 2026........ $ 95,000 $ 103,160

FINANCIAL SERVICES -- 5.2%
Allstate Financing II 7.83% 2045........ 44,000 45,046
Asset Securitization Corp. 6.66% 2041
#...................................... 75,000 76,523
Associates Corp. of North America 7.63%
2004................................... 110,000 117,812
CS First Boston Mortgage Securities
Corp. 7.24% 2029....................... 100,000 105,125
Dime Capital Trust I, Series A 9.33%
2027................................... 35,000 39,473
Finova Capital Corp. 6.63% 2001......... 100,000 101,229
Finova Capital Corp., Series C 6.39%
2002................................... 45,000 45,219
Fleet Mortgage Group, Inc. 6.84% 2003... 50,000 50,845
Ford Motor Credit Company 7.02% 2000.... 100,000 102,186
GE Capital Mortgage Services, Inc. 6.25%
2023................................... 32,050 31,870
Lubermens Mutual Casualty Co. 8.30%
2037*.................................. 70,000 74,446
Morgan Stanley Capital I, Inc. 7.22%
2007................................... 100,000 105,563
Popular North America, Inc. 6.63%
2002................................... 50,000 50,718
Private Export Funding Corp. 6.31%
2004................................... 100,000 102,278
Private Export Funding Corp. 6.62%
2005................................... 220,000 228,464
Private Export Funding Corp. 7.03%
2003................................... 45,000 47,385
Private Export Funding Corp. 7.30%
2002................................... 225,000 236,108
Private Export Funding Corp. 7.90%
2000................................... 55,000 57,208
US West Capital Funding, Inc. 6.95%
2037................................... 75,000 78,189

INSURANCE -- 0.2%
Cigna Corp. 7.88% 2027.................. 34,000 36,990
Jackson National Life Insurance Co.
8.15% 2027*............................ 40,000 43,944
-------------
2,481,335
-------------

HEALTHCARE -- 0.7%
HEALTH SERVICES -- 0.5%
Allegiance Corp. 7.00% 2026............. 110,000 113,650
Tenet Healthcare Corp. 7.88% 2003....... 40,000 40,600

MEDICAL PRODUCTS -- 0.2%
Beckman Instruments, Inc. 7.10% 2003*... 70,000 70,138
-------------
224,388
-------------

INDUSTRIAL & COMMERCIAL -- 0.6%
MACHINERY -- 0.2%
Cincinnati Milacron, Inc. 7.88% 2000.... 65,000 66,512

TRANSPORTATION -- 0.4%
AMR Corp 10.20% 2020.................... 50,000 66,460
Continental Airlines 6.65% 2019......... 75,000 74,581
-------------
207,553
-------------

INFORMATION & ENTERTAINMENT -- 0.9%
BROADCASTING & MEDIA -- 0.9%
Comcast Cable Communications 8.50%
2027................................... 35,000 40,876
News America Holdings, Inc. 8.00%
2016................................... 110,000 118,536
Scholastic Corp. 7.00% 2003............. 70,000 71,753
</TABLE>

----------------
25
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (CONTINUED)
BROADCASTING & MEDIA (CONTINUED)
Viacom, Inc. 7.75% 2005................. $ 65,000 $ 68,169
-------------
299,334
-------------

INFORMATION TECHNOLOGY -- 0.3%
TELECOMMUNICATIONS -- 0.3%
Tele-Communications, Inc. 7.25% 2005.... 50,000 51,170
Tele-Communications, Inc. 9.25% 2002.... 35,000 38,306
-------------
89,476
-------------

MATERIALS -- 0.2%
CHEMICALS -- 0.2%
ICI Wilmington, Inc. 6.95% 2004......... 65,000 66,886
-------------

MUNICIPAL BONDS -- 0.9%
MUNICIPAL BONDS -- 0.9%
Hudson County New Jersey Improvement
Authority Facility 6.55% 2002.......... 85,000 86,455
Huntsville Alabama Solid Waste Disposal
Authority 5.95% 2003................... 85,000 83,558
Miami Florida Revenue 7.25% 2003........ 110,000 115,328
-------------
285,341
-------------

NON-U.S. GOVERNMENT OBLIGATIONS -- 1.7%
FOREIGN GOVERNMENT -- 1.7%
Australian Government 6.75% 2006 .......
(AUD) 530,000 375,409
Republic of Argentina 11.00% 2006....... 50,000 55,625
Republic of Columbia 7.25% 2004......... 49,000 46,803
Republic of Columbia 7.63% 2007......... 33,000 31,103
Republic of Lithuania 7.13% 2002*....... 35,000 34,300
-------------
543,240
-------------

REAL ESTATE -- 0.6%
REAL ESTATE COMPANIES -- 0.3%
Post Apartment Homes LP 7.02% 2001...... 110,000 111,915

REAL ESTATE INVESTMENT TRUSTS -- 0.3%
Equity Office Properties Operating LP
6.38% 2003*............................ 100,000 98,998
-------------
210,913
-------------

U.S. GOVERNMENT & AGENCIES -- 22.7%
U.S. GOVERNMENT & AGENCIES -- 22.7%
Federal Home Loan Mortgage Corp. 6.00%
2006................................... 35,000 34,770
Federal Home Loan Mortgage Corp. 6.50%
2022................................... 122,000 122,610
Federal Home Loan Mortgage Corp. 6.50%
2023................................... 20,000 19,925
Federal Home Loan Mortgage Corp. 6.55%
2022................................... 32,000 32,370
Federal Home Loan Mortgage Corp. 6.75%
2022................................... 130,000 131,537
Federal Home Loan Mortgage Corp. 7.00%
2023................................... 25,000 25,930
Federal Home Loan Mortgage Corp. 7.50%
2023................................... 17,552 18,002
Federal Home Loan Mortgage Corp. 7.75%
2022................................... 39,741 41,529
</TABLE>

- ----------------
26
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (CONTINUED)
Federal Home Loan Mortgage Corp. 8.50%
2019................................... $ 58,948 $ 62,206
Federal National Mortgage Association
5.65% 2005............................. 30,000 29,828
Federal National Mortgage Association
5.75% 2008............................. 160,000 156,839
Federal National Mortgage Association
7.00% 2006............................. 16,401 16,447
Federal National Mortgage Association
7.39% 2021............................. 46,581 48,156
Federal National Mortgage Association
9.35% 2020............................. 6,868 6,897
Government National Mortgage Association
7.00% 2022............................. 17,254 17,475
Government National Mortgage Association
7.00% 2023............................. 17,006 17,219
Government National Mortgage Association
7.25% 2027............................. 242,569 246,889
Government National Mortgage Association
7.50% 2024............................. 63,227 64,886
Government National Mortgage Association
8.50% 2017............................. 67,295 72,026
Government National Mortgage Association
9.00% 2021............................. 21,098 22,825
United States Treasury Bonds 6.38%
2027................................... 15,000 15,844
United States Treasury Bonds 6.63%
2027................................... 90,000 97,650
United States Treasury Bonds 7.13%
2023................................... 265,000 302,431
United States Treasury Bonds 7.50%
2016................................... 75,000 87,457
United States Treasury Bonds 8.13%
2021................................... 75,000 94,465
United States Treasury Bonds 8.50%
2020................................... 300,000 389,766
United States Treasury Bonds 9.25%
2016................................... 40,000 54,193
United States Treasury Bonds 11.88%
2003................................... 625,000 807,031
United States Treasury Bonds 12.00%
2013................................... 1,200,000 1,762,692
United States Treasury Notes 5.38%
2001................................... 100,000 99,406
United States Treasury Notes 5.50%
2008................................... 200,000 197,562
United States Treasury Notes 5.75%
2002................................... 100,000 100,281
United States Treasury Notes 5.88%
2000................................... 245,000 246,149
United States Treasury Notes 6.13%
2007................................... 100,000 102,844
United States Treasury Notes 6.25%
2002................................... 150,000 153,187
United States Treasury Notes 6.25%
2007................................... 120,000 124,144
United States Treasury Notes 6.63%
2001................................... 565,000 581,334
United States Treasury Notes 6.63%
2002................................... 50,000 51,664
United States Treasury Notes 6.63%
2007................................... 25,000 26,539
United States Treasury Notes 7.25%
2004................................... 185,000 199,656
United States Treasury Notes 8.50%
2000................................... 670,000 716,170
-------------
7,398,831
-------------
UTILITIES -- 0.9%
ELECTRIC UTILITIES -- 0.6%
Atlantic City Electric Co. 6.38% 2005... 45,000 45,564
Cleveland Electric Illuminating Co.
7.19% 2000*............................ 20,000 20,302
Empresa Nacional de Electricidad SA
7.33% 2037............................. 45,000 44,857
Public Service Electric & Gas Co. 8.88%
2003................................... 21,000 23,492
UtiliCorp United, Inc. 6.88% 2004....... 70,000 72,154
GAS & PIPELINE UTILITIES -- 0.2%
KN Energy, Inc. 6.65% 2005.............. 65,000 65,134
TELEPHONE -- 0.1%
Worldcom, Inc. 7.55% 2004............... 35,000 36,863
-------------
308,366
-------------
TOTAL BONDS & NOTES (cost
$12,152,576)........................... 12,366,198
-------------
TOTAL INVESTMENT SECURITIES (cost
$27,964,034)........................... 30,800,823
-------------
</TABLE>

----------------
27
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 0.6% AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 0.2%
Chase Manhattan Corp. 8.77% due
2/19/99................................ $ 50,000 $ 51,153
-------------

FOREIGN SHORT-TERM NOTES -- 0.4%
New Zealand Treasury Bill zero coupon
due 12/16/98 .................... (NZD) 270,000 140,525
-------------
TOTAL SHORT-TERM SECURITIES (cost
$194,381).............................. 191,678
-------------

REPURCHASE AGREEMENTS -- 6.9%
<S> <C> <C>
- -----------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 6.9%
PaineWebber, Inc. Joint Repurchase
Agreement (Note 3) .................... 1,566,000 1,566,000
Swiss Bank Corp. Joint Repurchase
Agreement (Note 3) .................... 675,000 675,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost
$2,241,000)............................ 2,241,000
-------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $30,399,415) 101.9% 33,233,501
Liabilities in excess of other assets -- (1.9) (611,337)
--------- -------------
NET ASSETS -- 100.0% $ 32,622,164
--------- -------------
--------- -------------
</TABLE>

- ------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyer
# Fair valued security; see Note 2
ADR -- American Depository Receipt
AUD -- Australian Dollar
NZD -- New Zealand Dollar

- ----------------
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>
AUD 565,000 USD 376,782 04/28/98 $ 2,924
*DEM 193,000 USD 107,575 04/28/98 3,045
FIM 200,000 USD 36,478 07/31/98 609
FIM 145,000 USD 26,323 07/31/98 318
FIM 555,000 USD 100,543 07/31/98 1,006
FIM 280,000 USD 51,457 08/07/98 1,221
ITL 35,000,000 USD 19,738 05/06/98 537
ITL 8,000,000 USD 4,469 05/06/98 80
ITL 11,000,000 USD 6,117 05/06/98 82
ITL 72,000,000 USD 40,293 05/06/98 793
ITL 80,000,000 USD 44,466 08/07/98 488
ITL 66,000,000 USD 37,095 08/07/98 814
ITL 24,400,000 USD 13,604 08/07/98 191
NLG 65,000 USD 31,676 07/02/98 326
NLG 15,000 USD 7,409 07/31/98 163
NLG 115,000 USD 56,886 08/07/98 1,309
*SEK 47,000 USD 5,928 08/07/98 27
*USD 4,105 SEK 33,000 08/07/98 38
*USD 2,741 SEK 22,000 08/07/98 21
-------
13,992
-------

GROSS
UNREALIZED
DEPRECIATION
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
GBP 6,800 USD 11,090 05/06/98 (272)
GBP 7,000 USD 11,471 05/06/98 (225)
GBP 4,000 USD 6,571 05/06/98 (112)
GBP 8,000 USD 12,986 08/07/98 (323)
GBP 19,200 USD 31,431 08/07/98 (512)
*SEK 8,000 USD 1,000 08/07/98 (5)
USD 6,668 ITL 12,000,000 05/06/98 (84)
USD 5,379 NLG 11,000 08/07/98 (63)
USD 21,525 NLG 44,000 08/07/98 (261)
USD 9,792 NLG 20,000 08/07/98 (127)
*USD 107,507 DEM 193,000 04/28/98 (2,978)
-------
(4,962)
-------
Net Unrealized Appreciation................ $ 9,030
-------
-------
</TABLE>

- ------------
* Represents fully offsetting forward foreign currency contracts that do not
have additional market risk but have continued counterparty settlement risk

See Notes to Financial Statements

----------------
29
<PAGE>
- ----------------

SEASONS SERIES TRUST
MULTI-MANAGED INCOME/EQUITY
PORTFOLIO INVESTMENT PORTFOLIO -- MARCH 31, 1998

<TABLE>
<CAPTION>
COMMON STOCK -- 29.9% SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 1.6%
APPAREL & TEXTILES -- 0.3%
Oakley, Inc.+ .......................... 2,500 $ 28,906
R.P.M., Inc. ........................... 1,687 30,050
Sola International, Inc.+ .............. 600 24,862

AUTOMOTIVE -- 0.4%
Federal-Mogul Corp. .................... 1,015 53,985
Ford Motor Co. ......................... 700 45,369

RETAIL -- 0.9%
Costco Cos., Inc.+ ..................... 895 47,771
CVS Corp. .............................. 300 22,650
Duane Reade, Inc.+ ..................... 2,327 59,484
Federated Department Stores, Inc.+ ..... 800 41,450
Office Depot, Inc.+ .................... 1,000 31,125
Wal-Mart Stores, Inc. .................. 800 40,650
-------------
426,302
-------------

CONSUMER STAPLES -- 1.0%
FOOD, BEVERAGE & TOBACCO -- 0.5%
DEKALB Genetics Corp., Class B ......... 650 43,469
Flowers Industries, Inc. ............... 1,000 23,437
Philip Morris Cos., Inc. ............... 800 33,350
RJR Nabisco Holdings Corp. ............. 600 18,788
UST, Inc. .............................. 400 12,900

HOUSEHOLD PRODUCTS -- 0.5%
Colgate-Palmolive Co. .................. 500 43,312
Gillette Co. ........................... 400 47,475
Procter & Gamble Co. ................... 400 33,750
-------------
256,481
-------------

ENERGY -- 1.0%
ENERGY SERVICES -- 0.2%
Baker Hughes, Inc. ..................... 500 20,125
Schlumberger Ltd. ...................... 300 22,725
Smedvig ASA, Class B ................... 279 5,598

ENERGY SOURCES -- 0.8%
Exxon Corp. ............................ 500 33,812
Mobil Corp. ............................ 400 30,650
Noble Affiliates, Inc. ................. 700 29,138
Ocean Rig ASA+ ......................... 19,699 20,152
Royal Dutch Petroleum Co. .............. 300 17,044
</TABLE>

- ----------------
30
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
ENERGY SOURCES (CONTINUED)
Smith International, Inc.+ ............. 575 $ 31,661
Texaco, Inc. ........................... 600 36,150
-------------
247,055
-------------

FINANCE -- 4.6%
BANKS -- 1.7%
Ambanc Holding Co., Inc. ............... 115 2,185
Astoria Financial Corp. ................ 85 5,254
Banca Commerciale Italiana + ........... 14,192 70,804
Bank of New York Co., Inc. ............. 775 48,680
BankAmerica Corp. ...................... 865 71,471
BankBoston Corp. ....................... 200 22,050
Chase Manhattan Corp. .................. 300 40,463
Citicorp ............................... 250 35,500
First Defiance Financial Corp. ......... 345 5,261
First Union Corp. ...................... 500 28,375
Klamath First Bancorp, Inc. ............ 260 5,980
Mellon Bank Corp. ...................... 400 25,400
North Central Bancshares, Inc. ......... 50 1,112
Provident Financial Holdings, Inc. + ... 190 4,465
Queens County Bancorp, Inc. ............ 147 6,468
Star Banc Corp. ........................ 455 26,902
TF Financial Corp. ..................... 35 980
U.S. Bancorp ........................... 385 48,029

FINANCIAL SERVICES -- 1.7%
American Express Co. ................... 400 36,725
Associates First Capital Corp., Class
A ..................................... 1,070 84,530
Beneficial Corp. ....................... 175 21,754
Capital One Financial Corp. ............ 1,000 78,875
Charles Schwab Corp. ................... 750 28,500
CIT Group, Inc., Class A+ .............. 1,200 39,150
ContiFinancial Corp.+ .................. 700 21,350
Federal National Mortgage
Association ........................... 400 25,300
FirstSpartan Financial Corp. ........... 95 4,287
Household International, Inc. .......... 440 60,610
SLM Holding Corp. ...................... 1,027 44,803

INSURANCE -- 1.2%
Aetna, Inc. ............................ 400 33,375
Allstate Corp. ......................... 300 27,581
Chubb Corp. ............................ 300 23,513
Conseco, Inc. .......................... 500 28,313
Swiss Life Insurance & Pension Co. ..... 20 16,910
The Hartford Financial Services Group,
Inc. .................................. 300 32,550
UICI+ .................................. 750 25,922
UNUM Corp. ............................. 2,085 115,066
-------------
1,198,493
-------------
</TABLE>

----------------
31
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE -- 3.8%
DRUGS -- 2.6%
Abbott Laboratories, Inc. .............. 400 $ 30,125
Alza Corp.+ ............................ 1,140 51,086
Bristol-Myers Squibb Co. ............... 500 52,156
Eli Lilly & Co. ........................ 1,265 75,426
Merck & Co., Inc. ...................... 400 51,350
Pfizer, Inc. ........................... 1,520 151,525
Smithkline Beecham PLC ................. 4,378 55,149
Warner-Lambert Co. ..................... 1,270 216,297

HEALTH SERVICES -- 0.7%
Columbia/HCA Healthcare Corp. .......... 1,000 32,250
Omnicare, Inc. ......................... 2,049 81,192
Tenet Healthcare Corp.+ ................ 1,100 39,944
United Healthcare Corp. ................ 300 19,425

MEDICAL PRODUCTS -- 0.5%
Baxter International, Inc. ............. 400 22,050
Cardinal Health, Inc. .................. 280 24,692
Johnson & Johnson ...................... 400 29,325
Sofamor Danek Group, Inc.+ ............. 755 64,364
-------------
996,356
-------------

INDUSTRIAL & COMMERCIAL -- 2.3%
AEROSPACE & MILITARY TECHNOLOGY -- 0.1%
Boeing Co. ............................. 600 31,275

BUSINESS SERVICES -- 1.2%
Cendant Corp.+ ......................... 1,000 39,625
Delta & Pine Land Co. .................. 1,310 68,120
Gartner Group, Inc., Class A+ .......... 400 14,950
GTECH Holdings Corp.+ .................. 300 11,663
Owens-Illinois, Inc.+ .................. 500 21,625
Sealed Air Corp.+ ...................... 860 56,330
Service Corp. International ............ 800 33,950
Sysco Corp. ............................ 600 15,375
Tomra Systems ASA ...................... 215 5,696
USA Waste Services, Inc.+ .............. 600 26,737

MULTI-INDUSTRY -- 0.9%
Corning, Inc. .......................... 300 13,275
Raision Tehtaat Oy ..................... 642 92,164
Republic Industries, Inc.+ ............. 900 23,231
Siebe PLC .............................. 1,970 43,003
Tyco International Ltd. ................ 1,055 57,630

TRANSPORTATION -- 0.1%
Burlington Northern Santa Fe Corp. ..... 300 31,200
-------------
585,849
-------------
</TABLE>

- ----------------
32
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT -- 1.9%
BROADCASTING & MEDIA -- 1.5%
CBS Corp. .............................. 2,335 $ 79,244
Chancellor Media Corp.+ ................ 1,205 55,279
Lamar Advertising Co., Class A+ ........ 951 33,285
Outdoor Systems, Inc.+ ................. 1,080 37,868
Time Warner, Inc. ...................... 2,757 198,504

ENTERTAINMENT PRODUCTS -- 0.2%
Hasbro, Inc. ........................... 600 21,188
Mattel, Inc. ........................... 600 23,775

LEISURE & TOURISM -- 0.2%
Hilton Hotels Corp. .................... 500 15,937
McDonald's Corp. ....................... 500 30,000
-------------
495,080
-------------

INFORMATION TECHNOLOGY -- 10.3%
COMMUNICATION EQUIPMENT -- 1.0%
CIENA Corp.+ ........................... 550 23,444
Lucent Technologies, Inc. .............. 300 38,362
Nokia Corp., Class A ADR ............... 1,120 120,890
Tellabs, Inc.+ ......................... 400 26,850
U.S. West Media Group + ................ 1,180 41,005

COMPUTERS & BUSINESS EQUIPMENT -- 1.0%
Computer Sciences Corp. ................ 400 22,000
Dell Computer Corp.+ ................... 700 47,425
EMC Corp.+ ............................. 1,260 47,644
HBO & Co. .............................. 1,020 61,582
Hewlett-Packard Co. .................... 300 19,013
Honeywell, Inc. ........................ 400 33,075
International Business Machines
Corp. ................................. 300 31,162

ELECTRONICS -- 2.2%
Analog Devices, Inc.+ .................. 3,740 124,355
Applied Materials, Inc.+ ............... 900 31,781
ASM Lithography Holdings NV+ ........... 625 57,773
Emerson Electric Co. ................... 500 32,594
General Electric Co. ................... 900 77,569
Hubbell, Inc., Class B ................. 400 20,150
Intel Corp. ............................ 400 31,225
Maxim Integrated Products, Inc.+ ....... 790 28,786
Molex, Inc., Class A ................... 900 24,131
Motorola, Inc. ......................... 300 18,187
Pittway Corp. .......................... 1,380 99,360
Vitesse Semiconductor Corp.+ ........... 485 22,871

SOFTWARE -- 4.8%
America Online, Inc.+ .................. 2,355 160,876
Aspen Technology, Inc.+ ................ 1,950 80,437
At Home Corp., Series A+ ............... 1,275 43,111
Cadence Design Systems, Inc.+ .......... 1,785 61,806
Cisco Systems, Inc.+ ................... 2,517 172,100
</TABLE>

----------------
33
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
SOFTWARE (CONTINUED)
Computer Associates International,
Inc. .................................. 800 $ 46,200
Intuit, Inc.+ .......................... 705 34,104
Microsoft Corp.+ ....................... 2,680 239,860
Oracle Corp.+ .......................... 800 25,250
Parametric Technology Corp.+ ........... 6,690 222,861
PeopleSoft, Inc.+ ...................... 1,150 60,591
Reynolds & Reynolds Co., Class A ....... 800 17,500
Sapient Corp.+ ......................... 650 30,794
VERITAS Software Corp.+ ................ 450 26,606
Wind River Systems+ .................... 680 27,030

TELECOMMUNICATIONS -- 1.3%
Comcast Corp., Class A+ ................ 3,855 136,130
Frontier Corp. ......................... 1,500 48,844
Tele-Communications, Inc., Series A+ ... 4,715 146,607
Teleport Communications Group Inc.,
Class A+ .............................. 200 11,750
-------------
2,673,691
-------------

MATERIALS -- 1.5%
CHEMICALS -- 1.2%
Cabot Corp. ............................ 350 12,906
du Pont (E.I.) de Nemours & Co. ........ 800 54,400
Monsanto Co. ........................... 3,965 206,180
Solutia, Inc. .......................... 1,150 34,213

FOREST PRODUCTS -- 0.2%
American Pad & Paper Co.+ .............. 400 2,900
Boise Cascade Corp. .................... 1,200 43,275
Sonoco Products Co. .................... 200 8,013

METALS & MINERALS -- 0.1%
EASCO, Inc. ............................ 500 7,625
Martin Marietta Materials, Inc. ........ 300 12,956
-------------
382,468
-------------

REAL ESTATE -- 0.2%
REAL ESTATE COMPANIES -- 0.0%
The Rouse Co. .......................... 200 6,300

REAL ESTATE INVESTMENT TRUSTS -- 0.2%
Crescent Real Estate Equities Co. ...... 500 18,000
ElderTrust+ ............................ 1,000 17,875
Equity Office Properties Trust ......... 200 6,125
-------------
48,300
-------------

UTILITIES -- 1.7%
ELECTRIC UTILITIES -- 0.3%
Duke Energy Corp. ...................... 700 41,694
GPU, Inc. .............................. 800 35,400
</TABLE>

- ----------------
34
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
GAS & PIPELINE UTILITIES -- 0.3%
Consolidated Natural Gas Co. ........... 500 $ 28,844
Enron Corp. ............................ 500 23,187
US Filter Corp.+ ....................... 600 21,075

TELEPHONE -- 1.1%
Ameritech Corp. ........................ 800 39,550
AT&T Corp. ............................. 500 32,812
Bell Atlantic Corp. .................... 330 33,825
GTE Corp. .............................. 500 29,938
MCI Communications Corp. ............... 500 24,750
SBC Communications, Inc. ............... 800 34,900
Telecom Italia SpA ..................... 6,291 49,572
WorldCom, Inc.+ ........................ 1,135 48,876
-------------
444,423
-------------
TOTAL COMMON STOCK (cost $6,415,338).... 7,754,498
-------------

PRINCIPAL
BONDS & NOTES -- 61.7% AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.4%
RETAIL -- 0.4%
J.C. Penney Co., Inc. 7.40% 2037........ $ 50,000 53,946
Fred Meyer, Inc. 7.38% 2005............. 55,000 55,156
-------------
109,102
-------------

CONSUMER STAPLES -- 0.3%
FOOD, BEVERAGE & TOBACCO -- 0.3%
Panamerican Beverages, Inc. 8.13%
2003................................... 70,000 74,411
-------------

ENERGY -- 0.4%
ENERGY SOURCES -- 0.4%
Newfield Exploration Co., Series B 7.45%
2007*.................................. 20,000 19,913
Petroleos Mexicano 9.00% 2007........... 52,000 53,235
YPF Sociedad Anonima 8.00% 2004......... 40,000 40,635
-------------
113,783
-------------

FINANCE -- 10.8%
BANKS -- 3.3%
Banc One Corp. 8.00% 2027............... 43,000 48,650
Bank One Columbus 7.38% 2002............ 40,000 41,780
Banponce Financial Corp. 6.75% 2001..... 50,000 50,574
Credit National 7.00% 2005.............. 40,000 40,022
Export Import Bank of Korea 6.50%
2006................................... 65,000 56,194
First Chicago NBD Corp. 7.25% 2004...... 135,000 141,277
First Republic Bancorp 7.75% 2012....... 50,000 51,230
First Union-Lehman Brothers Commercial
Mortgage Corp. 6.60% 2029.............. 130,000 131,806
Korea Development Bank 7.13% 2001....... 35,000 32,912
NBD Bank SA 8.25% 2024.................. 50,000 59,051
NCNB Co. 9.38% 2009..................... 68,000 83,811
</TABLE>

----------------
35
<PAGE>

FINANCIAL SERVICES -- 7.2%
Allstate Financing II 7.83% 2045 ....... 49,000 50,165
Asset Securitization Corp. 6.66% 2041
# ..................................... 80,000 81,625
Associates Corp. of North America 7.63%
2004................................... 130,000 139,233
CS First Boston Mortgage Securities
Corp. 7.24% 2029....................... 110,000 115,638
Dime Capital Trust I, Series A 9.33%
2027................................... 40,000 45,112
Finova Capital Corp. 6.63% 2001......... 125,000 126,536
Finova Capital Corp., Series C 6.39%
2002................................... 60,000 60,292
Fleet Mortgage Group, Inc. 6.84% 2003... 50,000 50,845
Ford Motor Credit Company 7.02% 2000.... 125,000 127,732
GE Capital Mortgage Services, Inc. 6.25%
2023 .................................. 32,050 31,870
Lubermens Mutual Casualty Co. 8.30%
2037*.................................. 80,000 85,081
Morgan Stanley Capital I, Inc. 7.22%
2007*.................................. 120,000 126,675
Popular North America, Inc. 6.63%
2002................................... 50,000 50,718
Private Export Funding Corp. 6.31%
2004................................... 100,000 102,278
Private Export Funding Corp. 6.62%
2005................................... 160,000 166,155
Private Export Funding Corp. 7.03%
2003................................... 60,000 63,180
Private Export Funding Corp. 7.30%
2002................................... 270,000 283,330
Private Export Funding Corp. 7.90%
2000................................... 75,000 78,011
U.S. West Capital Funding, Inc. 6.95%
2037................................... 80,000 83,401

INSURANCE -- 0.3%
Cigna Corp. 7.88% 2027.................. 37,000 40,253
Jackson National Life Insurance Co.
8.15% 2027*............................ 44,000 48,339
-------------
2,813,225
-------------

HEALTHCARE -- 0.9%
HEALTH SERVICES -- 0.6%
Allegiance Corp. 7.00% 2026............. 105,000 108,484
Tenet Healthcare Corp. 7.88% 2003....... 50,000 50,750

MEDICAL PRODUCTS -- 0.3%
Beckman Instruments, Inc. 7.10% 2003*... 75,000 75,148
-------------
234,382
-------------

INDUSTRIAL & COMMERCIAL -- 0.9%
MACHINERY -- 0.3%
Cincinnati Milacron, Inc. 7.88% 2000.... 75,000 76,745

TRANSPORTATION -- 0.6%
AMR Corp. 9.88% 2020.................... 70,000 91,395
Continental Airlines 6.65% 2019......... 70,000 69,608
-------------
237,748
-------------

INFORMATION & ENTERTAINMENT -- 1.4%
BROADCASTING & MEDIA -- 1.4%
Comcast Cable Communications 8.50%
2027................................... 50,000 58,394
News America Holdings, Inc. 8.00%
2016................................... 125,000 134,700
Scholastic Corp. 7.00% 2003............. 80,000 82,004
</TABLE>

- ----------------
36
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (CONTINUED)
BROADCASTING & MEDIA (CONTINUED)
Viacom, Inc. 7.75% 2005................. $ 80,000 $ 83,900
-------------
358,998
-------------

INFORMATION TECHNOLOGY -- 0.4%
TELECOMMUNICATIONS -- 0.4%
Tele-Communications, Inc. 7.25% 2005.... 50,000 51,171
Tele-Communications, Inc. 9.25% 2002.... 50,000 54,722
-------------
105,893
-------------

MATERIALS -- 0.3%
CHEMICALS -- 0.3%
ICI Wilmington, Inc. 6.95% 2004......... 70,000 72,031
-------------

MUNICIPAL BONDS -- 1.5%
MUNICIPAL BONDS -- 1.5%
Hudson County New Jersey Improvement
Authority Facility 6.55% 2002.......... 135,000 137,311
Huntsville Alabama Solid Waste Disposal
Authority 5.95% 2003................... 100,000 98,303
Miami Florida Revenue 7.25% 2003........ 135,000 141,540
-------------
377,154
-------------

NON-U.S. GOVERNMENT OBLIGATIONS -- 2.5%
FOREIGN GOVERNMENT -- 2.5%
Australian Government 6.75% 2006 .......
(AUD) 625,000 442,699
Republic of Argentina 11.00% 2006....... 55,000 61,188
Republic of Columbia 7.25% 2004......... 73,000 69,727
Republic of Columbia 7.63% 2007......... 25,000 23,563
Republic of Lithuania 7.13% 2002*....... 43,000 42,140
-------------
639,317
-------------

REAL ESTATE -- 1.0%
REAL ESTATE COMPANIES -- 0.5%
Post Apartment Homes LP 7.02% 2001...... 130,000 132,263

REAL ESTATE INVESTMENT TRUSTS -- 0.5%
Equity Office Properties Operating LP
6.38% 2003*............................ 120,000 118,798
-------------
251,061
-------------

U.S. GOVERNMENT & AGENCIES -- 39.4%
U.S. GOVERNMENT & AGENCIES -- 39.4%
Federal Home Loan Mortgage Corp. 6.00%
2006................................... 45,000 44,704
Federal Home Loan Mortgage Corp. 6.50%
2022................................... 100,000 100,500
Federal Home Loan Mortgage Corp. 6.50%
2023................................... 30,000 29,888
Federal Home Loan Mortgage Corp. 6.75%
2022................................... 45,000 45,532
Federal Home Loan Mortgage Corp. 7.00%
2023................................... 32,000 33,190
Federal Home Loan Mortgage Corp. 7.50%
2023................................... 21,063 21,602
Federal Home Loan Mortgage Corp. 7.75%
2022................................... 55,637 58,141
Federal Home Loan Mortgage Corp. 8.50%
2019................................... 63,483 66,991
</TABLE>

----------------
37
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (CONTINUED)
Federal National Mortgage Association
5.65% 2005............................. $ 45,000 $ 44,742
Federal National Mortgage Association
5.75% 2008............................. 185,000 181,345
Federal National Mortgage Association
7.00% 2006............................. 20,501 20,559
Federal National Mortgage Association
7.39% 2021............................. 55,897 57,787
Federal National Mortgage Association
9.35% 2020............................. 8,776 8,813
Government National Mortgage Association
7.00% 2022............................. 20,373 20,634
Government National Mortgage Association
7.00% 2023............................. 18,794 19,029
Government National Mortgage Association
7.25% 2027............................. 361,379 367,815
Government National Mortgage Association
7.50% 2022............................. 49,649 51,030
Government National Mortgage Association
7.50% 2024............................. 20,376 20,910
Government National Mortgage Association
8.50% 2017............................. 85,650 91,671
Government National Mortgage Association
9.00% 2021............................. 22,809 24,676
United States Treasury Bonds 6.38%
2027................................... 50,000 52,813
United States Treasury Bonds 6.63%
2027................................... 140,000 151,900
United States Treasury Bonds 7.13%
2023................................... 330,000 376,612
United States Treasury Bonds 7.50%
2016................................... 110,000 128,270
United States Treasury Bonds 8.13%
2021................................... 230,000 289,692
United States Treasury Bonds 8.50%
2020................................... 275,000 357,286
United States Treasury Bonds 9.25%
2016................................... 160,000 216,774
United States Treasury Bonds 10.75%
2003................................... 150,000 181,968
United States Treasury Bonds 11.88%
2003................................... 810,000 1,045,912
United States Treasury Bonds 12.00%
2013................................... 1,400,000 2,056,474
United States Treasury Notes 5.38%
2001................................... 200,000 198,812
United States Treasury Notes 5.50%
2008................................... 600,000 592,686
United States Treasury Notes 5.75%
2002................................... 250,000 250,703
United States Treasury Notes 5.88%
2000................................... 375,000 376,759
United States Treasury Notes 6.00%
2000................................... 100,000 100,844
United States Treasury Notes 6.13%
2007................................... 150,000 154,266
United States Treasury Notes 6.25%
2002................................... 250,000 255,312
United States Treasury Notes 6.25%
2007................................... 300,000 310,359
United States Treasury Notes 6.63%
2001................................... 1,090,000 1,121,512
United States Treasury Notes 6.63%
2002................................... 100,000 103,328
United States Treasury Notes 6.63%
2007................................... 50,000 53,078
United States Treasury Notes 7.25%
2004................................... 335,000 361,539
United States Treasury Notes 8.50%
2000................................... 165,000 176,370
-------------
10,222,828
-------------

UTILITIES -- 1.5%
ELECTRIC UTILITIES -- 1.0%
Atlantic City Electric Co. 6.38% 2005... 60,000 60,752
Cleveland Electric Illuminating Co.
7.19% 2000*............................ 30,000 30,452
Empresa Nacional de Electricidad SA
7.33% 2037............................. 50,000 49,841
Public Service Electric & Gas Co. 8.88%
2003................................... 35,000 39,153
UtiliCorp United, Inc. 6.88% 2004....... 80,000 82,462

GAS & PIPELINE UTILITIES -- 0.3%
KN Energy, Inc. 6.65% 2005.............. 80,000 80,166
</TABLE>

- ----------------
38
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>

TELEPHONE -- 0.2%
WorldCom, Inc. 7.55% 2004............... $ 50,000 $ 52,661
-------------
395,487
-------------
TOTAL BONDS & NOTES (cost
$15,733,777)........................... 16,005,420
-------------
TOTAL INVESTMENT SECURITIES (cost
$22,149,115)........................... 23,759,918
-------------

SHORT-TERM SECURITIES -- 0.8%
<S> <C> <C>
- -----------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 0.2%
Chase Manhattan Corp. 8.77% due
2/19/99 ............................... 60,000 61,384
-------------

FOREIGN SHORT-TERM NOTES -- 0.6%
New Zealand Treasury Bill zero coupon
due 12/16/98 .................... (NZD) 320,000 166,548
-------------
TOTAL SHORT-TERM SECURITIES (cost
$231,134).............................. 227,932
-------------
<CAPTION>

REPURCHASE AGREEMENTS -- 7.2%
<S> <C> <C>
- -----------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 7.2%
PaineWebber, Inc. Joint Repurchase
Agreement (Note 3)..................... 1,011,000 1,011,000
Swiss Bank Corp. Joint Repurchase
Agreement (Note 3) .................... 860,000 860,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost
$1,871,000)............................ 1,871,000
-------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $24,251,249) 99.6% 25,858,850
Other assets less liabilities -- 0.4 97,892
------ -----------
NET ASSETS -- 100.0% $25,956,742
------ -----------
------ -----------
</TABLE>

----------------
39
<PAGE>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
AUD 666,000 USD 444,135 04/28/98 $ 3,446
*DEM 231,000 USD 128,755 04/28/98 3,645
FIM 100,000 USD 18,239 07/31/98 304
FIM 85,000 USD 15,431 07/31/98 186
FIM 290,000 USD 52,536 07/31/98 525
FIM 115,000 USD 21,134 08/07/98 501
ITL 15,000,000 USD 8,459 05/06/98 230
ITL 5,000,000 USD 2,793 05/06/98 50
ITL 4,000,000 USD 2,224 05/06/98 30
ITL 37,000,000 USD 20,706 05/06/98 408
ITL 38,000,000 USD 21,121 08/07/98 232
ITL 36,000,000 USD 20,234 08/07/98 444
ITL 14,400,000 USD 8,028 08/07/98 113
NLG 38,000 USD 18,518 07/02/98 191
NLG 12,000 USD 5,927 07/31/98 130
NLG 50,000 USD 24,733 08/07/98 569
*SEK 22,000 USD 2,775 08/07/98 13
*USD 1,990 SEK 16,000 08/07/98 18
*USD 1,246 SEK 10,000 08/07/98 10
-------
11,045
-------

GROSS
UNREALIZED
DEPRECIATION
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
GBP 3,000 USD 4,893 05/06/98 (120)
GBP 3,500 USD 5,735 05/06/98 (112)
GBP 2,000 USD 3,285 05/06/98 (56)
GBP 4,000 USD 6,493 08/07/98 (162)
GBP 9,500 USD 15,552 08/07/98 (253)
*SEK 4,000 USD 500 08/07/98 (2)
USD 2,778 ITL 5,000,000 05/06/98 (35)
USD 2,445 NLG 5,000 08/07/98 (29)
USD 12,230 NLG 25,000 08/07/98 (148)
USD 4,896 NLG 10,000 08/07/98 (63)
*USD 128,675 DEM 231,000 04/28/98 (3,565)
-------
(4,545)
-------
Net Unrealized Appreciation................... $ 6,500
-------
-------
</TABLE>

- -------------

* Represents fully offsetting forward foreign currency contracts that do not
have additional market risk but have continued counterparty settlement risk

See Notes to Financial Statements

- ----------------
40
<PAGE>
- ----------------

SEASONS SERIES TRUST
MULTI-MANAGED INCOME
PORTFOLIO INVESTMENT PORTFOLIO -- MARCH 31, 1998

<TABLE>
<CAPTION>
COMMON STOCK -- 16.0% SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 1.0%
APPAREL & TEXTILES -- 0.2%
R.P.M., Inc. ......................................... 912 $ 16,245
Sola International, Inc.+ ............................ 600 24,863

AUTOMOTIVE -- 0.3%
Federal-Mogul Corp. .................................. 325 17,286
Ford Motor Co. ....................................... 500 32,406

RETAIL -- 0.5%
Costco Cos., Inc.+ ................................... 285 15,212
CVS Corp. ............................................ 100 7,550
Duane Reade, Inc.+ ................................... 761 19,453
Federated Department Stores, Inc.+ ................... 300 15,543
Office Depot, Inc.+ .................................. 400 12,450
Wal-Mart Stores, Inc. ................................ 300 15,244
-------------
176,252
-------------

CONSUMER STAPLES -- 0.7%
FOOD, BEVERAGE & TOBACCO -- 0.3%
DEKALB Genetics Corp., Class B ....................... 205 13,709
Flowers Industries, Inc. ............................. 500 11,719
Philip Morris Cos., Inc. ............................. 500 20,844
UST, Inc. ............................................ 200 6,450

HOUSEHOLD PRODUCTS -- 0.4%
Colgate-Palmolive Co. ................................ 500 43,312
Gillette Co. ......................................... 200 23,738
Procter & Gamble Co. ................................. 200 16,875
-------------
136,647
-------------

ENERGY -- 0.7%
ENERGY SERVICES -- 0.2%
Baker Hughes, Inc. ................................... 300 12,075
Schlumberger Ltd. .................................... 200 15,150
Smedvig ASA, Class B ................................. 100 2,007

ENERGY SOURCES -- 0.5%
Exxon Corp. .......................................... 200 13,525
Mobil Corp. .......................................... 300 22,987
Noble Affiliates, Inc. ............................... 300 12,488
Ocean Rig ASA+ ....................................... 6,883 7,041
Smith International, Inc.+ ........................... 191 10,517
Texaco, Inc. ......................................... 500 30,125
-------------
125,915
-------------
</TABLE>

----------------
41
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 2.6%
BANKS -- 0.8%
Ambanc Holding Co., Inc. ............................. 35 $ 665
Astoria Financial Corp. .............................. 25 1,545
Banca Commerciale Italiana + ......................... 4,634 23,119
Bank of New York Co., Inc. ........................... 250 15,703
BankAmerica Corp. .................................... 380 31,397
Chase Manhattan Corp. ................................ 100 13,488
Citicorp ............................................. 50 7,100
First Defiance Financial Corp. ....................... 110 1,678
First Union Corp. .................................... 200 11,350
Klamath First Bancorp, Inc. .......................... 85 1,955
Mellon Bank Corp. .................................... 200 12,700
North Central Bancshares, Inc. ....................... 15 334
Provident Financial Holdings, Inc. +.................. 60 1,410
Queens County Bancorp, Inc. .......................... 47 2,068
Star Banc Corp. ...................................... 145 8,573
TF Financial Corp. ................................... 10 280
U.S. Bancorp ......................................... 125 15,594

FINANCIAL SERVICES -- 1.2%
American Express Co. ................................. 500 45,906
Associates First Capital Corp., Class A .............. 340 26,860
Beneficial Corp. ..................................... 60 7,459
Capital One Financial Corp. .......................... 500 39,438
Charles Schwab Corp. ................................. 242 9,196
CIT Group, Inc., Class A+ ............................ 800 26,100
ContiFinancial Corp.+ ................................ 500 15,250
Federal National Mortgage Association ................ 300 18,975
FirstSpartan Financial Corp. ......................... 10 451
Household International, Inc. ........................ 110 15,153
SLM Holding .......................................... 330 14,396

INSURANCE -- 0.6%
Aetna, Inc. .......................................... 100 8,344
Allstate Corp. ....................................... 100 9,194
Chubb Corp. .......................................... 100 7,837
Conseco, Inc. ........................................ 400 22,650
Swiss Life Insurance & Pension Co. ................... 8 6,764
The Hartford Financial Services Group, Inc. .......... 100 10,850
UICI+ ................................................ 225 7,776
UNUM Corp. ........................................... 665 36,700
-------------
478,258
-------------

HEALTHCARE -- 1.8%
DRUGS -- 1.1%
Alza Corp.+ .......................................... 365 16,357
Eli Lilly & Co. ...................................... 740 44,122
Merck & Co., Inc. .................................... 100 12,838
Pfizer, Inc. ......................................... 360 35,887
Smithkline Beecham PLC ............................... 1,403 17,673
Warner-Lambert Co. ................................... 405 68,977
</TABLE>

- ----------------
42
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
HEALTH SERVICES -- 0.5%
Columbia/HCA Healthcare Corp. ........................ 1,000 $ 32,250
Omnicare, Inc. ....................................... 652 25,835
Tenet Healthcare Corp.+ .............................. 700 25,419
United Healthcare Corp. .............................. 100 6,475

MEDICAL PRODUCTS -- 0.2%
Cardinal Health, Inc. ................................ 90 7,937
Johnson & Johnson .................................... 200 14,663
Sofamor Danek Group, Inc.+ ........................... 240 20,460
-------------
328,893
-------------

INDUSTRIAL & COMMERCIAL -- 1.1%
AEROSPACE & MILITARY TECHNOLOGY -- 0.0%
Boeing Co. ........................................... 200 10,425

BUSINESS SERVICES -- 0.7%
Cendant Corp.+ ....................................... 500 19,812
Delta & Pine Land Co. ................................ 430 22,360
GTECH Holdings Corp.+ ................................ 200 7,775
Owens-Illinois, Inc.+ ................................ 200 8,650
Sealed Air Corp.+ .................................... 285 18,668
Service Corp. International .......................... 100 4,244
Sysco Corp. .......................................... 600 15,375
Tomra Systems ASA+ ................................... 77 2,040
USA Waste Services, Inc.+ ............................ 500 22,281

MULTI-INDUSTRY -- 0.4%
Raision Tehtaat Oy ................................... 205 29,430
Republic Industries, Inc.+ ........................... 500 12,906
Siebe PLC ............................................ 653 14,254
Tyco International Ltd. .............................. 335 18,299
-------------
206,519
-------------

INFORMATION & ENTERTAINMENT -- 1.0%
BROADCASTING & MEDIA -- 0.7%
CBS Corp. ............................................ 745 25,283
Chancellor Media Corp.+ .............................. 385 17,662
Lamar Advertising Co., Class A+ ...................... 304 10,640
Outdoor Systems, Inc.+ ............................... 344 12,062
Time Warner, Inc. .................................... 882 63,504

ENTERTAINMENT PRODUCTS -- 0.1%
Hasbro, Inc. ......................................... 200 7,063
Mattel, Inc. ......................................... 300 11,887

LEISURE & TOURISM -- 0.2%
Hilton Hotels Corp. .................................. 400 12,750
McDonald's Corp. ..................................... 300 18,000
-------------
178,851
-------------
</TABLE>

----------------
43
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY -- 5.2%
COMMUNICATION EQUIPMENT -- 0.5%
CIENA Corp.+ ......................................... 175 $ 7,459
Lucent Technologies, Inc. ............................ 200 25,575
Nokia Corp., Class A ADR ............................. 355 38,318
Tellabs, Inc.+ ....................................... 200 13,425
U.S. West Media Group + .............................. 375 13,031

COMPUTERS & BUSINESS EQUIPMENT -- 0.6%
Computer Sciences Corp. .............................. 200 11,000
Dell Computer Corp.+ ................................. 225 15,244
EMC Corp.+ ........................................... 405 15,314
HBO & Co. ............................................ 325 19,622
Hewlett-Packard Co. .................................. 300 19,012
Honeywell, Inc. ...................................... 200 16,537
International Business Machines Corp. ................ 100 10,388

ELECTRONICS -- 1.1%
Analog Devices, Inc.+ ................................ 1,205 40,066
Applied Materials, Inc.+ ............................. 400 14,125
ASM Lithography Holdings NV+ ......................... 200 18,487
General Electric Co. ................................. 400 34,475
Intel Corp. .......................................... 200 15,613
Maxim Integrated Products, Inc.+ ..................... 255 9,292
Molex, Inc., Class A ................................. 500 13,406
Motorola, Inc. ....................................... 300 18,188
Pittway Corp., Class A ............................... 450 32,400
Vitesse Semiconductor Corp.+ ......................... 155 7,309

SOFTWARE -- 2.4%
America Online, Inc.+ ................................ 754 51,508
Aspen Technology, Inc.+ .............................. 625 25,781
At Home Corp., Series A+ ............................. 425 14,370
Cadence Design Systems, Inc.+ ........................ 570 19,736
Cisco Systems, Inc.+ ................................. 945 64,615
Computer Associates International, Inc. .............. 300 17,325
Intuit, Inc.+ ........................................ 225 10,885
Microsoft Corp.+ ..................................... 930 83,235
Oracle Corp.+ ........................................ 500 15,781
Parametric Technology Corp.+ ......................... 2,150 71,622
PeopleSoft, Inc.+ .................................... 365 19,231
Reynolds & Reynolds Co., Class A ..................... 400 8,750
Sapient Corp.+ ....................................... 200 9,475
VERITAS Software Corp.+ .............................. 145 8,573
Wind River Systems+ .................................. 219 8,705

TELECOMMUNICATIONS -- 0.6%
Comcast Corp., Class A+ .............................. 1,230 43,434
SBC Communications, Inc. ............................. 400 17,450
Tele-Communications, Inc., Series A+ ................. 1,503 46,734
Teleport Communications Group Inc., Class A+ ......... 100 5,875
-------------
951,371
-------------
</TABLE>

- ----------------
44
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
MATERIALS -- 0.7%
CHEMICALS -- 0.6%
Cabot Corp. .......................................... 115 $ 4,240
du Pont (E.I.) de Nemours & Co. ...................... 300 20,400
Monsanto Co. ......................................... 1,265 65,780
Solutia, Inc. ........................................ 385 11,454

FOREST PRODUCTS -- 0.1%
American Pad & Paper Co.+ ............................ 200 1,450
Boise Cascade Corp. .................................. 400 14,425
Sonoco Products Co. .................................. 200 8,012

METALS & MINERALS -- 0.0%
Martin Marietta Materials, Inc. ...................... 200 8,638
-------------
134,399
-------------

REAL ESTATE -- 0.0%
REAL ESTATE INVESTMENT TRUSTS -- 0.0%
Crescent Real Estate Equities Co. .................... 300 10,800
-------------

UTILITIES -- 1.2%
ELECTRIC UTILITIES -- 0.3%
Duke Energy Corp. .................................... 413 24,599
GPU, Inc. ............................................ 600 26,550

GAS & PIPELINE UTILITIES -- 0.3%
Consolidated Natural Gas Co. ......................... 600 34,612
Enron Corp. .......................................... 300 13,913
US Filter Corp.+ ..................................... 200 7,025

TELEPHONE -- 0.6%
Ameritech Corp. ...................................... 700 34,606
AT&T Corp. ........................................... 200 13,125
GTE Corp. ............................................ 300 17,963
MCI Communications Corp. ............................. 300 14,850
Telecom Italia SpA ................................... 2,014 15,870
WorldCom, Inc.+ ...................................... 364 15,675
-------------
218,788
-------------
TOTAL COMMON STOCK (cost $2,414,759).................. 2,946,693
-------------

PRINCIPAL
BONDS & NOTES -- 77.2% AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.7%
RETAIL -- 0.7%
J.C. Penney Co., Inc. 7.40% 2037...................... $ 60,000 64,736
Fred Meyer Inc. 7.38% 2005............................ 55,000 55,156
-------------
119,892
-------------

CONSUMER STAPLES -- 0.5%
FOOD, BEVERAGE & TOBACCO -- 0.5%
Panamerican Beverages, Inc. 8.13% 2003................ 80,000 85,041
-------------
</TABLE>

----------------
45
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY -- 0.8%
ENERGY SOURCES -- 0.8%
Newfield Exploration Co., Series B 7.45% 2007*........ $ 30,000 $ 29,870
Petroleos Mexicano 9.00% 2007......................... 56,000 57,330
YPF Sociedad Anonima 8.00% 2004....................... 60,000 60,952
-------------
148,152
-------------

FINANCE -- 15.5%
BANKS -- 5.1%
Banc One Corp. 8.00% 2027............................. 55,000 62,227
Bank One Columbus 7.38% 2002.......................... 40,000 41,780
Banponce Financial Corp. 6.75% 2001................... 65,000 65,747
Credit National 7.00% 2005............................ 60,000 60,033
Export Import Bank of Korea 6.50% 2006................ 80,000 69,162
First Chicago NBD Corp. 7.25% 2004.................... 135,000 141,277
First Republic Bancorp 7.75% 2012..................... 55,000 56,353
First Union-Lehman Brothers Commercial Mortgage Corp
6.60% 2029........................................... 125,000 126,736
Korea Development Bank 7.13% 2001..................... 30,000 28,210
NBD Bank SA 8.25% 2024................................ 55,000 64,956
NCNB Co. 9.38% 2009................................... 80,000 98,602
United States Bancorp 7.50% 2026...................... 110,000 119,449

FINANCIAL SERVICES -- 9.9%
Allstate Financing II 7.83% 2045 ..................... 53,000 54,260
Asset Securitization Corp. 6.66% 2041# ............... 85,000 86,727
Associates Corp. of North America 7.63% 2004.......... 130,000 139,233
CS First Boston Mortgage Securities Corp. 7.24%
2029................................................. 110,000 115,638
Dime Capital Trust I, Series A 9.33% 2027............. 45,000 50,751
Finova Capital Corp. 6.63% 2001....................... 125,000 126,536
Finova Capital Corp., Series C 6.39% 2002............. 65,000 65,316
Fleet Mortgage Group, Inc. 6.84% 2003................. 50,000 50,845
Ford Motor Credit Company 7.02% 2000.................. 125,000 127,733
GE Capital Mortgage Services, Inc. 6.25% 2023 ........ 48,076 47,805
Lubermens Mutual Casualty Co. 8.30% 2037*............. 85,000 90,398
Morgan Stanley Capital I, Inc. 7.22% 2007*............ 130,000 137,231
Popular North America, Inc. 6.63% 2002................ 40,000 40,574
Private Export Funding Corp. 6.31% 2004............... 100,000 102,278
Private Export Funding Corp. 7.03% 2003............... 100,000 105,300
Private Export Funding Corp. 7.30% 2002............... 265,000 278,083
Private Export Funding Corp. 7.90% 2000............... 100,000 104,015
U.S. West Capital Funding, Inc. 6.95% 2037............ 90,000 93,827

INSURANCE -- 0.5%
Cigna Corp. 7.88% 2027................................ 40,000 43,517
Jackson National Life Insurance Co. 8.15% 2027*....... 49,000 53,832
-------------
2,848,431
-------------
HEALTHCARE -- 1.4%
HEALTH SERVICES -- 1.0%
Allegiance Corp. 7.00% 2026........................... 120,000 123,981
Tenet Healthcare Corp. 7.88% 2003..................... 50,000 50,750
</TABLE>

- ----------------
46
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
MEDICAL PRODUCTS -- 0.4%
Beckman Instruments, Inc. 7.10% 2003*................. $ 75,000 $ 75,148
-------------
249,879
-------------
INDUSTRIAL & COMMERCIAL -- 1.2%
MACHINERY -- 0.4%
Cincinnati Milacron, Inc. 7.88% 2000.................. 75,000 76,744
TRANSPORTATION -- 0.8%
AMR Corp. 10.20% 2020................................. 50,000 66,460
Continental Airlines 6.65% 2019....................... 75,000 74,581
-------------
217,785
-------------
INFORMATION & ENTERTAINMENT -- 2.2%
BROADCASTING & MEDIA -- 2.2%
Comcast Cable Communications 8.50% 2027............... 80,000 93,431
News America Holdings, Inc. 8.00% 2016................ 130,000 140,088
Scholastic Corp. 7.00% 2003........................... 85,000 87,129
Viacom, Inc. 7.75% 2005............................... 80,000 83,900
-------------
404,548
-------------
INFORMATION TECHNOLOGY -- 0.6%
TELECOMMUNICATIONS -- 0.6%
Tele-Communications, Inc. 7.25% 2005.................. 40,000 40,936
Tele-Communications, Inc. 9.25% 2002.................. 60,000 65,667
-------------
106,603
-------------
MATERIALS -- 0.4%
CHEMICALS -- 0.4%
ICI Wilmington, Inc. 6.95% 2004....................... 80,000 82,322
-------------
MUNICIPAL BONDS -- 2.4%
MUNICIPAL BONDS -- 2.4%
Hudson County New Jersey Improvement Authority
Facility 6.55% 2002.................................. 200,000 203,424
Huntsville Alabama Solid Waste Disposal Authority
5.95% 2003........................................... 105,000 103,218
Miami Florida Revenue 7.25% 2003...................... 130,000 136,297
-------------
442,939
-------------

NON-U.S. GOVERNMENT OBLIGATIONS -- 3.7%
FOREIGN GOVERNMENT -- 3.7%
Australian Government 6.75% 2006 ............... (AUD) 665,000 471,032
Republic of Argentina 11.00% 2006..................... 60,000 66,750
Republic of Columbia 7.25% 2004....................... 70,000 66,937
Republic of Columbia 7.63% 2007....................... 25,000 23,563
Republic of Lithuania 7.13% 2002*..................... 53,000 51,940
-------------
680,222
-------------

REAL ESTATE -- 1.4%
REAL ESTATE COMPANIES -- 0.7%
Post Apartment Homes LP 7.02% 2001.................... 130,000 132,263
</TABLE>

----------------
47
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS -- 0.7%
Equity Office Properties Operating LP 6.38% 2003*..... $ 120,000 $ 118,798
-------------
251,061
-------------

U.S. GOVERNMENT & AGENCIES -- 43.8%
U.S. GOVERNMENT & AGENCIES -- 43.8%
Federal Home Loan Mortgage Corp. 6.50% 2022........... 60,000 60,300
Federal Home Loan Mortgage Corp. 6.50% 2023........... 40,000 39,850
Federal Home Loan Mortgage Corp. 7.00% 2023........... 45,000 46,673
Federal Home Loan Mortgage Corp. 7.50% 2023........... 35,104 36,004
Federal Home Loan Mortgage Corp. 7.75% 2022........... 79,482 83,058
Federal Home Loan Mortgage Corp. 8.50% 2019........... 72,552 76,562
Federal National Mortgage Association 5.65% 2005...... 60,000 59,656
Federal National Mortgage Association 5.75% 2008...... 425,000 416,602
Federal National Mortgage Association 7.00% 2006...... 28,702 28,783
Federal National Mortgage Association 7.39% 2021...... 55,897 57,787
Federal National Mortgage Association 9.35% 2020...... 19,078 19,159
Government National Mortgage Association 7.00% 2023... 58,401 59,131
Government National Mortgage Association 7.25% 2027... 549,494 559,280
Government National Mortgage Association 7.50% 2022... 25,002 25,697
Government National Mortgage Association 7.50% 2023... 84,696 87,024
Government National Mortgage Association 8.50% 2017... 89,316 95,596
Government National Mortgage Association 9.00% 2021... 25,660 27,760
United States Treasury Bonds 6.38% 2027............... 20,000 21,125
United States Treasury Bonds 6.63% 2027............... 110,000 119,350
United States Treasury Bonds 7.13% 2023............... 365,000 416,556
United States Treasury Bonds 7.50% 2016............... 150,000 174,913
United States Treasury Bonds 8.13% 2021............... 220,000 277,097
United States Treasury Bonds 8.50% 2020............... 180,000 233,860
United States Treasury Bonds 9.25% 2016............... 115,000 155,807
United States Treasury Bonds 10.75% 2003.............. 170,000 206,230
United States Treasury Bonds 11.88% 2003.............. 740,000 955,525
United States Treasury Bonds 12.00% 2013.............. 1,220,000 1,792,070
United States Treasury Notes 5.63% 1999............... 160,000 160,026
United States Treasury Notes 5.88% 2000............... 185,000 185,868
United States Treasury Notes 6.13% 2007............... 50,000 51,422
United States Treasury Notes 6.25% 2002............... 40,000 40,850
United States Treasury Notes 6.25% 2007............... 150,000 155,179
United States Treasury Notes 6.63% 2001............... 835,000 859,140
United States Treasury Notes 6.63% 2002............... 65,000 67,163
United States Treasury Notes 6.63% 2007............... 25,000 26,539
United States Treasury Notes 7.25% 2004............... 155,000 167,279
United States Treasury Notes 8.50% 2000............... 195,000 208,437
-------------
8,053,358
-------------

UTILITIES -- 2.6%
ELECTRIC UTILITIES -- 1.7%
Atlantic City Electric Co. 6.38% 2005................. 75,000 75,940
Cleveland Electric Illuminating Co., Series B 7.19%
2000*................................................ 40,000 40,603
Empresa Nacional de Electricidad SA 7.33% 2037........ 60,000 59,809
</TABLE>

- ----------------
48
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
Public Service Electric & Gas Co. 8.88% 2003.......... $ 47,000 $ 52,577
UtiliCorp United, Inc. 6.88% 2004..................... 90,000 92,770

GAS & PIPELINE UTILITIES -- 0.4%
KN Energy, Inc. 6.65% 2005............................ 80,000 80,165

TELEPHONE -- 0.5%
WorldCom, Inc. 7.55% 2004............................. 80,000 84,259
-------------
486,123
-------------
TOTAL BONDS & NOTES (cost $13,893,743)................ 14,176,356
-------------
TOTAL INVESTMENT SECURITIES (cost $16,308,502)........ 17,123,049
-------------

SHORT-TERM SECURITIES -- 1.2%
<S> <C> <C>
- -------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 0.3%
Chase Manhattan Corp. 8.77% due 2/19/99............... 60,000 61,384
-------------

FOREIGN SHORT-TERM NOTES -- 0.9%
New Zealand Treasury Bill coupon due 12/16/98 ........
(NZD) 300,000 156,139
-------------
TOTAL SHORT-TERM SECURITIES (cost $220,520)........... 217,523
-------------
<CAPTION>

REPURCHASE AGREEMENTS -- 5.4%
<S> <C> <C>
- -------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 5.4%
PaineWebber, Inc. Joint Repurchase Agreement (Note
3) .................................................. 256,000 256,000
Swiss Bank Corp. Joint Repurchase Agreement (Note
3) .................................................. 745,000 745,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost $1,001,000)......... 1,001,000
-------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $17,530,022) 99.8% 18,341,572
Other assets less liabilities -- 0.2 36,211
------- -------------
NET ASSETS -- 100.0% $ 18,377,783
------- -------------
------- -------------
</TABLE>

- ------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
# Fair valued security; See Note 2
ADR -- American Depository Receipt
AUD -- Australian Dollar
NZD -- New Zealand Dollar

----------------
49
<PAGE>
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
- ---------------------------------------------------------------------------
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUD 709,000 USD 472,811 04/28/98 $ 3,669
*DEM 253,000 USD 141,018 04/28/98 3,992
FIM 40,000 USD 7,296 07/31/98 122
FIM 20,000 USD 3,631 07/31/98 44
FIM 85,000 USD 15,398 07/31/98 154
FIM 45,000 USD 8,270 08/07/98 196
ITL 4,000,000 USD 2,256 05/06/98 61
ITL 1,500,000 USD 838 05/06/98 15
ITL 1,500,000 USD 834 05/06/98 11
ITL 12,000,000 USD 6,715 05/06/98 132
ITL 11,000,000 USD 6,114 08/07/98 67
ITL 14,500,000 USD 8,150 08/07/98 179
ITL 4,000,000 USD 2,230 08/07/98 31
NLG 12,000 USD 5,848 07/02/98 60
NLG 3,000 USD 1,482 07/31/98 33
NLG 18,000 USD 8,904 08/07/98 205
*SEK 6,000 USD 757 08/07/98 4
*USD 622 SEK 5,000 08/07/98 6
*USD 249 SEK 2,000 08/07/98 2
------
8,983
------

GROSS
UNREALIZED
DEPRECIATION
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GBP 1,200 USD 1,957 05/06/98 (48)
GBP 1,200 USD 1,966 05/06/98 (38)
GBP 500 USD 821 05/06/98 (14)
GBP 1,000 USD 1,623 08/07/98 (40)
GBP 3,100 USD 5,075 08/07/98 (83)
*SEK 1,000 USD 125 08/07/98 (1)
USD 833 ITL 1,500,000 05/06/98 (11)
USD 1,222 NLG 2,500 08/07/98 (14)
USD 3,180 NLG 6,500 08/07/98 (38)
USD 2,448 NLG 5,000 08/07/98 (32)
*USD 140,929 DEM 253,000 04/28/98 (3,904)
------
(4,223)
------
Net Unrealized Appreciation............................. $ 4,760
------
------
</TABLE>

- -------------

* Represents fully offsetting forward foreign currency contracts that do not
have additional market risk but have continued counterparty settlement risk

See Notes to Financial Statements

- ----------------
50
<PAGE>
- ----------------

SEASONS SERIES TRUST
ASSET ALLOCATION:
DIVERSIFIED GROWTH
PORTFOLIO INVESTMENT PORTFOLIO -- MARCH 31, 1998

<TABLE>
<CAPTION>
COMMON STOCK -- 77.0% SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 7.7%
APPAREL & TEXTILES -- 0.2%
Adidas-Salomon AG .................................... 307 $ 54,435
Jones Apparel Group, Inc.+ ........................... 700 38,544
Onward Kashiyama Co. Ltd. ............................ 3,000 37,155

AUTOMOTIVE -- 2.7%
Bayerische Motoren Werke AG .......................... 138 152,583
Bridgestone Corp. .................................... 2,000 45,337
Chrysler Corp. ....................................... 11,500 477,969
Michelin Corp., Class B .............................. 2,360 140,857
Lear Corp.+ .......................................... 8,800 496,100
Renault SA+ .......................................... 838 37,320

HOUSING -- 0.5%
CRH PLC .............................................. 10,202 153,296
Masco Corp. .......................................... 1,400 83,300

RETAIL -- 4.3%
CompUSA, Inc.+ ....................................... 1,700 44,200
Costco Cos., Inc.+ ................................... 2,600 138,775
CVS Corp. ............................................ 2,700 203,850
Dayton Hudson Corp. .................................. 1,300 114,400
Fred Meyer, Inc.+ .................................... 900 41,569
Home Depot, Inc. ..................................... 900 60,694
Ito-Yokado Co. Ltd. .................................. 1,000 54,194
Kmart Corp.+ ......................................... 35,700 595,744
Office Max, Inc.+ .................................... 22,100 395,037
Safeway, Inc.+ ....................................... 1,800 66,487
TJX Cos., Inc. ....................................... 2,000 90,500
Vendex International NV .............................. 1,435 90,851
Wal-Mart Stores, Inc. ................................ 3,600 182,925
Walgreen Co. ......................................... 2,500 87,969
-------------
3,884,091
-------------

CONSUMER STAPLES -- 5.0%
FOOD, BEVERAGE & TOBACCO -- 3.0%
B.A.T. Industries PLC ................................ 13,806 140,632
Coca-Cola Enterprises, Inc. .......................... 2,600 95,388
Goodman Fielder Ltd. ................................. 6,571 10,195
Nestle SA ............................................ 142 271,332
Quaker Oats Co. ...................................... 8,700 498,075
RJR Nabisco Holdings Corp. ........................... 13,700 428,981
Sara Lee Corp. ....................................... 1,100 67,788
</TABLE>

----------------
51
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES (CONTINUED)
HOUSEHOLD PRODUCTS -- 2.0%
Clorox Co. ........................................... 1,200 $ 102,825
Colgate-Palmolive Co. ................................ 1,000 86,625
Estee Lauder Cos., Inc., Class A ..................... 700 47,513
KAO Corp. ............................................ 6,000 78,814
Kimberly-Clark Corp. ................................. 8,700 436,087
Procter & Gamble Co. ................................. 1,900 160,312
Shiseido Co. Ltd. .................................... 3,000 34,453
Unilever PLC ......................................... 6,297 59,558
-------------
2,518,578
-------------

ENERGY -- 5.5%
ENERGY SERVICES -- 1.7%
Halliburton Co. ...................................... 14,600 732,737
Mobil Corp. .......................................... 600 45,975
VA Technologie AG .................................... 137 21,583
Western Atlas, Inc.+ ................................. 500 38,688

ENERGY SOURCES -- 3.8%
Amoco Corp. .......................................... 7,100 613,262
Atlantic Richfield Co. ............................... 7,700 605,412
British Petroleum Co. PLC ............................ 7,992 114,989
Burmah Castrol PLC ................................... 6,516 132,857
Elf Aquitaine SA ..................................... 977 128,007
ENI SpA .............................................. 7,570 51,574
Exxon Corp. .......................................... 1,500 101,438
Iberdrola SA ......................................... 3,022 45,931
Total SA, Class B .................................... 1,281 153,782
-------------
2,786,235
-------------

FINANCE -- 17.1%
BANKS -- 6.7%
ABN Amro Holdings NV ................................. 3,900 89,973
Allied Irish Banks ................................... 11,374 139,538
Asahi Bank Ltd. ...................................... 1,000 4,091
Banco Comercial Portugues SA+ ........................ 877 28,322
Banco Frances del Rio de la Plata+ ................... 2,022 20,223
Bank of Ireland ...................................... 7,795 154,095
Bank of Nova Scotia .................................. 4,991 135,444
BankAmerica Corp. .................................... 2,400 198,300
Bankers Trust New York Corp. ......................... 4,000 481,250
Banque Nationale de Paris+ ........................... 2,126 165,175
Charter One Financial, Inc. .......................... 200 13,388
Comerica, Inc. ....................................... 900 95,231
Commonwealth Bank of Australia ....................... 3,842 45,642
Credit Commerce France ............................... 610 50,099
Dao Heng Bank Group Ltd. ............................. 7,000 20,687
Deutsche Bank AG+ .................................... 1,543 116,087
Development Bank of Singapore Ltd. ................... 6,600 48,230
Fifth Third Bancorp .................................. 600 51,300
First Chicago NBD Corp. .............................. 1,400 123,375
</TABLE>

- ----------------
52
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
BANKS (CONTINUED)
Foreningsbanken AB+ .................................. 887 $ 29,232
Julius Baer Holdings AG .............................. 25 60,676
MBNA Corp. ........................................... 3,800 136,087
Nordbanken Holding+ .................................. 4,234 28,066
Overseas Chinese Banking Corp. Ltd. .................. 8,000 45,084
Overseas Union Bank Ltd. ............................. 13,000 50,720
Royal Bank of Canada ................................. 1,068 63,431
Schweizerische BankGesellschaft ...................... 110 179,665
Skandinaviska Enskilda Banken, Series A .............. 2,279 33,207
Societe Generale ..................................... 706 141,257
Southtrust Corp. ..................................... 550 23,031
Summit Bancorp. ...................................... 9,400 470,587
SunTrust Banks, Inc. ................................. 100 7,538
Svenska Handelsbank, Series A ........................ 640 29,617
United Overseas Bank Ltd. ............................ 12,000 66,512
Westpac Banking Corp. Ltd. ........................... 6,588 44,093

FINANCIAL SERVICES -- 8.3%
Acom Co. Ltd. ........................................ 1,000 49,916
American Express Co. ................................. 1,600 146,900
Associates First Capital Corp., Class A .............. 1,200 94,800
Assurance General de France+ ......................... 1,822 102,514
Federal Home Loan Mortgage Corp. ..................... 2,300 109,106
Guoco Group Ltd. ..................................... 4,000 9,808
HSBC Holdings PLC .................................... 5,200 159,044
Internatiionale Nedederlanden Groep NV ............... 2,602 147,637
KeyCorp.+ ............................................ 13,200 499,125
Lehman Brothers Holdings, Inc. ....................... 6,700 501,663
Morgan Stanley, Dean Witter, Discover & Co. .......... 1,200 87,450
Nikko Securities Co. Ltd. ............................ 18,000 58,097
P & O Finance BV ..................................... 3,979 59,148
Transamerica Corp. ................................... 3,900 454,350
Travelers Group, Inc. ................................ 3,000 180,000
Unidanmark A/S ....................................... 245 19,458
Union Planters Corp. ................................. 7,700 478,844
Washington Mutual, Inc. .............................. 7,470 535,739
Wells Fargo & Co. .................................... 1,500 496,875

INSURANCE -- 2.1%
Aetna, Inc. .......................................... 5,700 475,594
Allianz AG ........................................... 150 45,295
American International Group, Inc. ................... 1,000 125,937
Conseco, Inc. ........................................ 1,500 84,937
Munchener Ruckversicherungs........................... 94 40,658
Prudential Corp. PLC ................................. 7,054 103,737
QBE Insurance Group Ltd. ............................. 3,532 15,417
Royal & Sun Alliance Insurance Group PLC ............. 8,207 104,413
Zurich Versicherungs-Gesellschaft .................... 86 49,925
-------------
8,625,640
-------------
</TABLE>

----------------
53
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE -- 5.9%
DRUGS -- 3.5%
Astra AB ............................................. 1,799 $ 37,125
Bristol-Myers Squibb Co. ............................. 1,500 156,469
Eli Lilly & Co. ...................................... 800 47,700
Glaxo Wellcome PLC ................................... 2,869 77,035
Merck & Co., Inc. .................................... 1,000 128,375
Novartis AG .......................................... 76 134,502
Pfizer, Inc. ......................................... 1,600 159,500
Pharmacia & Upjohn, Inc. ............................. 11,600 507,500
Pharmacia & Upjohn, Inc. (SEK)........................ 2,177 93,936
Sankyo Co. Ltd. ...................................... 3,000 83,318
Schering-Plough Corp. ................................ 1,800 147,037
Warner-Lambert Co. ................................... 1,100 187,344

HEALTH SERVICES -- 1.4%
HEALTHSOUTH Corp.+ ................................... 2,800 78,575
Wellpoint Health Networks, Inc. ...................... 9,100 614,250

MEDICAL PRODUCTS -- 1.0%
Cardinal Health, Inc. ................................ 800 70,550
U.S. Surgical Corp. .................................. 13,900 458,700
-------------
2,981,916
-------------

INDUSTRIAL & COMMERCIAL -- 9.0%
AEROSPACE & MILITARY TECHNOLOGY -- 1.0%
Boeing Co. ........................................... 9,200 479,550
Rolls Royce PLC ...................................... 8,258 38,430

BUSINESS SERVICES -- 1.0%
Cendant Corp.+ ....................................... 4,600 182,275
Dai Nippon Printing Co. Ltd. ......................... 4,000 66,054
Franklin Resources, Inc. ............................. 1,200 63,600
Interpublic Group of Cos., Inc. ...................... 1,300 80,762
USA Waste Services, Inc.+ ............................ 1,400 62,387
Yamato Transport Co. Ltd. ............................ 4,000 47,439

ELECTRICAL EQUIPMENT -- 0.3%
Emerson Electric Co. ................................. 500 32,594
Premier Farnell PLC .................................. 1,300 8,313
Siebe PLC ............................................ 3,427 74,808

MACHINERY -- 1.7%
Caterpillar, Inc. .................................... 8,000 440,500
Cooper Cameron Corp.+ ................................ 800 48,300
Illinois Tool Works, Inc. ............................ 100 6,475
Ingersoll-Rand Co. ................................... 1,900 91,081
Mannesmann AG ........................................ 274 200,587
Molins PLC ........................................... 1,520 7,176
Rieter Holdings Ltd. AG .............................. 83 46,876
Sandvik AB, Class B .................................. 1,070 30,445

MULTI-INDUSTRY -- 3.4%
BTR PLC .............................................. 28,898 95,178
Compagnie Generale des Eaux .......................... 964 156,480
</TABLE>

- ----------------
54
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
MULTI-INDUSTRY (CONTINUED)
Cookson Group PLC .................................... 8,496 $ 32,854
Ogden Corp. .......................................... 15,100 434,125
Securicor Group PLC .................................. 7,653 52,397
Smiths Industries .................................... 5,224 76,606
Tomkins PLC .......................................... 20,294 124,083
Tyco International Ltd. .............................. 4,300 234,888
Whitman Corp. ........................................ 25,800 509,550

TRANSPORTATION -- 1.6%
AMR Corp.+ ........................................... 500 71,594
Bombardier, Inc., Class B ............................ 2,769 68,499
British Airways PLC .................................. 6,898 70,092
Burlington Northern Santa Fe Corp. ................... 4,800 499,200
Deutsche Lufthansa AG ................................ 2,169 45,677
Quintiles Transnational Corp.+ ....................... 900 43,369
-------------
4,522,244
-------------

INFORMATION & ENTERTAINMENT -- 3.5%
BROADCASTING & MEDIA -- 2.5%
CBS Corp. ............................................ 3,600 122,175
Gannett Co., Inc. .................................... 2,800 201,250
Time Warner, Inc. .................................... 6,700 482,400
Times Mirror Co., Series A ........................... 7,500 475,313

ENTERTAINMENT PRODUCTS -- 0.1%
Fuji Photo Film Co. Ltd. ............................. 1,000 37,230

LEISURE & TOURISM -- 0.9%
Bass PLC, Class B .................................... 500 820
Bass PLC ............................................. 7,300 140,166
Carnival Corp., Class A .............................. 1,400 97,650
Hutchison Whampoa Ltd. ............................... 13,000 91,433
Marriott International, Inc.+ ........................ 1,500 55,781
Marriott International, Inc., Class A+ ............... 1,500 53,719
-------------
1,757,937
-------------

INFORMATION TECHNOLOGY -- 14.5%
COMMUNICATION EQUIPMENT -- 0.7%
Lucent Technologies, Inc. ............................ 1,200 153,450
Newbridge Networks Corp. ADR+ ........................ 1,000 26,644
Nokia Corp., Class A ................................. 943 101,196
Tellabs, Inc.+ ....................................... 1,300 87,262

COMPUTERS & BUSINESS EQUIPMENT -- 5.2%
Canon, Inc. .......................................... 2,000 45,187
Dell Computer Corp.+ ................................. 900 60,975
EMC Corp.+ ........................................... 2,400 90,750
HBO & Co. ............................................ 2,000 120,750
International Business Machines Corp. ................ 4,900 508,987
NCR Corp.+ ........................................... 13,900 459,569
Pitney Bowes, Inc. ................................... 1,600 80,300
</TABLE>

----------------
55
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
COMPUTERS & BUSINESS EQUIPMENT (CONTINUED)
Ricoh Co. Ltd. ....................................... 2,000 $ 20,116
Seagate Technology, Inc.+ ............................ 10,000 252,500
Texas Instruments, Inc. .............................. 8,800 476,300
Xerox Corp. .......................................... 4,600 489,613

ELECTRONICS -- 3.1%
Dixons Group PLC ..................................... 7,277 64,076
General Electric Co. ................................. 3,300 284,419
General Electric Co. PLC+ ............................ 15,083 119,238
Linear Technology Corp. .............................. 800 55,200
Omron Corp. .......................................... 5,000 75,812
Philips Electronics NV ............................... 1,828 134,144
SGS Thomson Microelectronics NV + .................... 1,774 137,596
Sony Corp. ........................................... 1,400 118,746
Tokyo Electron Ltd. .................................. 2,000 67,405
Vishay Intertechnology, Inc. + ....................... 20,055 471,292

SOFTWARE -- 1.5%
America Online, Inc.+ ................................ 700 47,819
BMC Software, Inc.+ .................................. 1,400 117,337
Computer Associates International, Inc. .............. 2,700 155,925
Compuware Corp.+ ..................................... 1,500 74,062
Microsoft Corp.+ ..................................... 2,400 214,800
Parametric Technology Corp.+ ......................... 2,100 69,956
PeopleSoft, Inc.+ .................................... 1,400 73,763

TELECOMMUNICATIONS -- 4.0%
3Com Corp.+ .......................................... 13,200 474,375
AirTouch Communications, Inc.+ ....................... 1,300 63,619
China Telecom+ ....................................... 18,000 36,470
Deutsche Telekom AG .................................. 2,305 50,037
Ericsson (LM) Telecommunications Co., Series B ....... 1,814 86,214
Northern Telecom Ltd. ................................ 1,990 128,865
SBC Communications, Inc. ............................. 1,800 78,525
Tele-Communications TCI Ventures Group, Series A+ .... 4,100 72,006
Tele-Communications, Inc., Series A+ ................. 2,700 83,953
Telecom Italia SpA ................................... 13,100 103,226
Telecomunicacoes de Brasileiras SA ADR+ .............. 400 51,925
Telefonica de Espana SA .............................. 2,366 104,338
U.S. West Communications Group ....................... 8,700 476,325
Vodafone Group PLC ................................... 21,085 219,013
-------------
7,284,080
-------------

MATERIALS -- 4.0%
CHEMICALS -- 0.5%
Akzo Nobel NV ........................................ 738 149,905
Bayer AG ............................................. 2,708 123,866

FOREST PRODUCTS -- 2.5%
Boise Cascade Corp. .................................. 13,300 479,631
Svenska Cellulosa AB, Class B ........................ 3,133 86,206
Unisource Worldwide, Inc. ............................ 15,300 189,338
</TABLE>

- ----------------
56
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
MATERIALS (CONTINUED)
FOREST PRODUCTS (CONTINUED)
Weyerhaeuser Co. ..................................... 8,800 $ 497,200

METALS & MINERALS -- 1.0%
Aluminum Co. of America .............................. 3,800 261,487
Cimpor-Cimentos de Portugal SA ....................... 648 22,840
Lafarge Corp. ........................................ 1,190 101,191
Rio Tinto PLC+ ....................................... 7,532 101,184
-------------
2,012,848
-------------

REAL ESTATE -- 2.1%
REAL ESTATE COMPANIES -- 0.1%
Henderson Land Development Co. Ltd. .................. 10,000 50,718

REAL ESTATE INVESTMENT TRUSTS -- 2.0%
Equity Residential Properties Trust .................. 9,700 487,425
Starwood Hotels & Resorts ............................ 9,800 523,687
-------------
1,061,830
-------------

UTILITIES -- 2.7%
ELECTRIC UTILITIES -- 1.9%
Electricidad de Portugal SA .......................... 4,612 107,049
Hong Kong Electric Holdings Ltd. ..................... 7,000 24,029
Potomac Electric Power Co. ........................... 18,300 458,644
Scottish Power PLC ................................... 21,808 205,532
VEBA AG .............................................. 1,840 130,523

TELEPHONE -- 0.8%
AT&T Corp. ........................................... 2,100 137,813
Ote Greek Telecom .................................... 2,100 52,566
Portugal Telecom SA .................................. 1,382 71,899
Sprint Corp. ......................................... 2,200 148,912
-------------
1,336,967
-------------
TOTAL COMMON STOCK (cost $35,379,179)................. 38,772,366
-------------

PRINCIPAL
BONDS & NOTES -- 18.8% AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.3%
RETAIL -- 0.3%
Federated Department Stores, Inc. 8.50% 2003.......... $ 40,000 43,655
Rite Aid Corp. 6.70% 2001............................. 100,000 101,532
-------------
145,187
-------------

CONSUMER STAPLES -- 0.2%
FOOD, BEVERAGE & TOBACCO -- 0.2%
Philip Morris Cos, Inc. 6.80% 2003.................... 100,000 101,484
Philip Morris Cos, Inc. 7.50% 2004.................... 20,000 20,965
-------------
122,449
-------------
</TABLE>

----------------
57
<PAGE>

ENERGY SOURCES -- 0.2%
KN Energy, Inc. 6.45% 2003............................ 40,000 40,032
Saga Petroleum ASA 7.25% 2027......................... 40,000 39,851
-------------
185,801
-------------
FINANCE -- 4.6%
BANKS -- 1.0%
ABN Amro Bank Nv Chicago Branch 7.25% 2005............ 40,000 41,821
First Union Lehman Brothers Mortgage Trust 6.65%
2007................................................. 25,000 25,310
Merita Bank Ltd. 6.50% 2006........................... 40,000 39,721
Nationsbank Corp. 6.88% 2005.......................... 45,000 46,253
Popular, Inc., 6.40% 2000............................. 100,000 100,379
Provident Cos., Inc. 7.41% 2038....................... 50,000 50,032
St. Paul Bancorp 7.13% 2004........................... 100,000 101,952
Svenska Handelsbank 8.13% 2007........................ 65,000 71,768

FINANCIAL SERVICES -- 3.1%
Advanta Mortgage Loan Trust 6.69% 2017................ 25,000 25,200
Advanta Mortgage Loan Trust 7.05% 2021................ 25,000 25,347
Amresco Residential Securities 6.60% 2018............. 20,000 20,061
Associates Corp. of North America 6.50% 2002.......... 60,000 60,574
Commercial Mortgage Acceptance Corp. 6.53% 2007#...... 15,000 15,183
Commercial Mortgage Acceptance Corp. 6.57% 2030#...... 40,000 40,462
Ford Motor Credit Co. 7.00% 2001...................... 60,000 61,618
Ford Motor Credit Co. 8.00% 2002...................... 40,000 42,551
General Motors Acceptance Corp. 6.63% 2002............ 40,000 40,628
Green Tree Financial Corp. 6.24% 2016#................ 90,000 89,747
Green Tree Financial Corp. 6.93% 2028................. 55,000 56,339
Green Tree Recreational Equipment 6.18% 2019#......... 290,000 289,819
Green Tree Recreational Equipment 6.55% 2028.......... 36,395 36,612
Harley Davidson Eagle Motorcycle Trust 6.20% 2003..... 150,000 151,000
Lehman Brothers Holdings, Inc. 6.50% 2002............. 105,000 105,101
Merrill Lynch Mortgage Investors, Inc. 6.22% 2030#.... 105,000 106,378
Merrill Lynch Mortgage Investors, Inc. 6.54% 2029#.... 80,000 80,225
Money Store, Inc. 8.05% 2002.......................... 20,000 21,163
Morgan Stanley Capital I, Inc. 7.22% 2028#............ 55,000 57,836
PaineWebber Group, Inc., 6.65% 2002................... 135,000 135,652
PNC Mortgage Securities Corp. 6.60% 2027 ............. 21,041 21,158
United States West Capital Funding, Inc. 6.85% 2002... 100,000 101,873

INSURANCE -- 0.5%
Hartford Life, Inc. 7.10% 2007........................ 100,000 103,700
TIG Holdings, Inc. 8.13% 2005......................... 40,000 42,891
Travelers Capital II 7.75% 2036....................... 100,000 102,844
-------------
2,311,198
-------------
INDUSTRIAL & COMMERCIAL -- 0.9%
AEROSPACE & MILITARY TECHNOLOGY -- 0.3%
Lockheed Martin Corp. 7.25% 2006...................... 115,000 120,628
Raytheon Co. 6.45% 2002............................... 35,000 35,253
</TABLE>

- ----------------
58
<PAGE>

TRANSPORTATION -- 0.5%
Continental Airlines 6.54% 2009....................... 60,000 59,556
Continental Airlines 6.80% 2009....................... 30,000 30,117
CSX Corp. 7.95% 2027.................................. 100,000 111,853
Hertz Corp. 7.00% 2028................................ 65,000 63,478
-------------
460,496
-------------
INFORMATION & ENTERTAINMENT -- 0.2%
BROADCASTING & MEDIA -- 0.2%
News America Holdings, Inc. 7.70% 2025................ 70,000 73,283
Time Warner Entertainment Co LP 8.38% 2033............ 25,000 28,677
-------------
101,960
-------------
INFORMATION TECHNOLOGY -- 0.1%
TELECOMMUNICATIONS -- 0.1%
Compania de Telecomunicaciones 7.63% 2006............. 60,000 60,763
-------------
MATERIALS -- 0.1%
CHEMICALS -- 0.1%
Solutia, Inc. 6.72% 2037.............................. 45,000 45,645
-------------
MUNICIPAL BONDS -- 0.1%
MUNICIPAL BONDS -- 0.1%
New Jersey Economic Development Authority, Series A
7.43% 2029........................................... 40,000 43,813
-------------
U.S. GOVERNMENT & AGENCIES -- 11.3%
Federal Home Loan Mortgage Corp. 6.00% 2008........... 75,000 73,265
Federal National Mortgage Association 5.50% 2011...... 78,234 75,887
Federal National Mortgage Association 6.00% 2009...... 60,000 58,631
Federal National Mortgage Association 7.00% 2023...... 10,415 10,256
Federal National Mortgage Association 8.50% 2019...... 35,000 37,756
Federal National Mortgage Association 9.00% 2026...... 64,123 67,980
Government National Mortgage Association 5.50% TBA.... 60,000 60,319
Government National Mortgage Association 6.50% TBA.... 225,000 222,678
Government National Mortgage Association 7.00% 2023... 19,249 19,721
Government National Mortgage Association 7.00% 2025... 33,155 33,948
Government National Mortgage Association 7.00% 2012... 130,930 133,870
Government National Mortgage Association 7.00% 2024... 224,248 227,456
Government National Mortgage Association 7.00% 2025... 45,606 46,077
Government National Mortgage Association 7.00% 2026... 81,938 82,782
Government National Mortgage Association 7.00% 2025... 15,445 15,814
Government National Mortgage Association 7.00% 2028... 1,573,969 1,590,196
Government National Mortgage Association 7.38% 2026... 18,197 18,657
Government National Mortgage Association 7.50% 2023... 140,362 144,221
Government National Mortgage Association 7.50% 2026... 337,857 346,408
Government National Mortgage Association 7.50% 2027... 318,620 328,731
Government National Mortgage Association 8.00% 2026... 85,000 88,001
Government National Mortgage Association 8.00% 2027... 151,499 156,849
</TABLE>

----------------
59
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (CONTINUED)
United States Treasury Bonds 6.13% 2027............... $ 340,000 $ 348,660
United States Treasury Bonds 6.38% 2027............... 105,000 110,906
United States Treasury Notes 5.50% 2000............... 690,000 688,703
United States Treasury Notes 5.50% 2003............... 260,000 258,456
United States Treasury Notes 5.63% 1999............... 460,000 460,216
-------------
5,706,444
-------------
UTILITIES -- 0.6%
ELECTRIC UTILITIES -- 0.5%
Arizona Public Services Co. 6.75% 2006................ 160,000 162,950
Southern California Edison Co. 5.88% 2001............. 100,000 99,695

TELEPHONE -- 0.1%
WorldCom, Inc. 7.75% 2007............................. 50,000 53,902
-------------
316,547
-------------

TOTAL BONDS & NOTES (cost $9,441,170)................. 9,500,303
-------------

RIGHTS -- 0.0%+
<S> <C> <C>
- -------------------------------------------------------------------------------------
FINANCE -- 0.0%
BANKS -- 0.0%
Banco Comercial Portugues SA 4/20/98.................. 877 3,104
Development Bank of Singapore Ltd. 4/28/98 ........... 1,200 2,452

INSURANCE -- 0.0%
Allianz AG 4/1/98 .................................... 150 742
-------------
6,298
-------------
MATERIALS -- 0.0%
METALS & MINERAL -- 0.0%
LaFarge Corp. 4/8/98.................................. 1,190 1,555
-------------
TOTAL RIGHTS (cost $0)................................ 7,853
-------------
TOTAL INVESTMENT SECURITIES (cost $44,820,349)........ 48,280,522
-------------
</TABLE>

- ----------------
60
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENT -- 5.8% AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 5.8%
Agreement with Swiss Bank Corp.- Warburg, bearing
interest of 5.92% dated 3/31/98, to be repurchased
4/01/98 in the amount of $2,911,479 and
collateralized by $2,655,000 U.S. Treasury Notes
6.88% due 8/15/25, approximate aggregate value
$2,973,059
(cost $2,911,000).................................... $ 2,911,000 $ 2,911,000
-------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $47,731,349) 101.6% 51,191,522
Liabilities in excess of other assets -- (1.6) (807,118)
------ -------------
NET ASSETS -- 100.0% $ 50,384,404
------ -------------
------ -------------
</TABLE>

- -------------

+ Non-income producing securities

# Fair valued security; see Note 2

ADR -- American Depository Receipt

SEK -- Swedish Kroner

TBA -- Security purchased on a forward commitment basis 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 24,716,600 USD 195,386 06/12/98 $ 7,976
JPY 21,983,400 USD 174,868 06/12/98 8,182
-------
Net Unrealized Appreciation.......................................... $ 16,158
-------
-------
</TABLE>

- -------------

JPY -- Japanese Yen
USD -- United States Dollar

See Notes to Financial Statements

----------------
61
<PAGE>
- ------------------

SEASONS SERIES TRUST
STOCK PORTFOLIO INVESTMENT PORTFOLIO -- MARCH 31, 1998

<TABLE>
<CAPTION>
COMMON STOCK -- 94.4% SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 5.1%
HOUSING -- 0.9%
Masco Corp. .......................................... 6,600 $ 392,700

RETAIL -- 4.2%
AutoZone, Inc.+ ...................................... 4,800 162,600
Circuit City Stores, Inc. ............................ 1,500 64,125
CVS Corp. ............................................ 3,107 234,579
Home Depot, Inc. ..................................... 4,300 289,981
Safeway, Inc.+ ....................................... 12,700 469,106
Tag Heuer International SA ADR+ ...................... 17,400 202,275
Wal-Mart Stores, Inc. ................................ 6,500 330,281
-------------
2,145,647
-------------

CONSUMER STAPLES -- 4.8%
FOOD, BEVERAGE & TOBACCO -- 2.7%
PepsiCo, Inc. ........................................ 10,700 456,756
Philip Morris Cos., Inc. ............................. 16,000 667,000

HOUSEHOLD PRODUCTS -- 2.1%
Gillette Co. ......................................... 1,800 213,637
Kimberly-Clark Corp. ................................. 6,200 310,775
Kimberly-Clark de Mexico SA de CV, Class A ........... 24,400 126,069
Procter & Gamble Co. ................................. 2,800 236,250
-------------
2,010,487
-------------

ENERGY -- 3.3%
ENERGY SERVICES -- 0.8%
Halliburton Co. ...................................... 4,200 210,788
Schlumberger Ltd. .................................... 1,700 128,775

ENERGY SOURCES -- 2.5%
Mobil Corp. .......................................... 5,000 383,125
Petroleo Brasileiro SA ADR ........................... 5,600 132,976
Royal Dutch Petroleum Co. ............................ 9,000 511,312
-------------
1,366,976
-------------

FINANCE -- 20.2%
BANKS -- 7.5%
BCA Fideuram SpA ..................................... 35,500 247,117
Citicorp ............................................. 3,000 426,000
First Union Corp. .................................... 6,700 380,225
Mellon Bank Corp. .................................... 3,500 222,250
NationsBank Corp. .................................... 5,705 416,109
Northern Trust Corp. ................................. 2,100 156,975
Norwest Corp. ........................................ 14,400 598,500
Toronto Dominion Bank ................................ 7,000 303,625
Wells Fargo & Co. .................................... 1,200 397,500
</TABLE>

- ----------------
62
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
FINANCIAL SERVICES -- 7.5%
Federal Home Loan Mortgage Corp. ..................... 25,000 $ 1,185,937
Federal National Mortgage Association ................ 10,300 651,475
First Data Corp. ..................................... 12,300 399,750
H&R Block, Inc. ...................................... 6,100 290,131
SLM Holding .......................................... 5,300 231,213
Travelers Group, Inc. ................................ 6,800 408,000

INSURANCE -- 5.2%
Ace Co., Ltd. ........................................ 14,300 538,931
Aetna, Inc. .......................................... 1,200 100,125
Fairfax Financial Holdings Ltd.+ ..................... 815 280,132
Mutual Risk Management Ltd. .......................... 9,400 318,425
Partner Re Ltd. ...................................... 4,100 201,413
Travelers Property Casualty Corp., Class A ........... 5,900 259,600
UNUM Corp. ........................................... 8,900 491,169
-------------
8,504,602
-------------

HEALTHCARE -- 12.2%
DRUGS -- 8.3%
American Home Products Corp. ......................... 2,500 238,438
Amgen, Inc.+ ......................................... 1,900 115,663
Astra AB ............................................. 8,866 176,311
Biogen, Inc.+ ........................................ 5,900 284,306
Bristol-Myers Squibb Co. ............................. 4,400 458,975
Eli Lilly & Co. ...................................... 2,700 160,988
Genentech, Inc.+ ..................................... 5,000 352,187
Merck & Co., Inc. .................................... 4,100 526,337
Novartis AG .......................................... 199 352,182
Pfizer, Inc. ......................................... 5,200 518,375
Warner-Lambert Co. ................................... 1,800 306,562

HEALTH SERVICES -- 3.0%
HEALTHSOUTH Corp.+ ................................... 15,400 432,162
Pacificare Health Systems, Inc., Class B+ ............ 1,400 105,350
Tenet Healthcare Corp.+ .............................. 8,200 297,763
United Healthcare Corp. .............................. 6,300 407,925

MEDICAL PRODUCTS -- 0.9%
Baxter International, Inc. ........................... 1,800 99,225
Guidant Corp. ........................................ 1,000 73,375
Johnson & Johnson .................................... 3,100 227,269
-------------
5,133,393
-------------

INDUSTRIAL & COMMERCIAL -- 14.2%
AEROSPACE & MILITARY TECHNOLOGY -- 1.9%
AlliedSignal, Inc. ................................... 14,400 604,800
Raytheon Co. ......................................... 3,100 180,963

BUSINESS SERVICES -- 4.8%
Cendant Corp.+ ....................................... 13,600 538,900
Ikon Office Solutions, Inc. .......................... 7,700 266,131
</TABLE>

----------------
63
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
BUSINESS SERVICES (CONTINUED)
Newmont Mining Corp. ................................. 9,400 $ 287,288
Rentokil Initial PLC+ ................................ 55,900 337,811
Service Corp. International .......................... 4,100 173,994
USA Waste Services+ .................................. 9,200 409,975

ELECTRICAL EQUIPMENT -- 0.2%
Teradyne, Inc.+....................................... 2,400 96,150

MACHINERY -- 2.6%
Danaher Corp. ........................................ 10,200 774,562
Teleflex, Inc. ....................................... 7,800 327,600

MULTI-INDUSTRY -- 4.7%
Berkshire Hathaway, Inc. ............................. 6 403,200
Sara Lee Corp. ....................................... 5,200 320,450
Swire Pacific Ltd., Class A .......................... 11,000 58,203
Tomkins PLC .......................................... 68,100 416,382
Tyco International Ltd. .............................. 12,046 658,013
Unilever NV .......................................... 2,100 144,112
-------------
5,998,534
-------------

INFORMATION & ENTERTAINMENT -- 10.5%
BROADCASTING & MEDIA -- 5.0%
CBS Corp. ............................................ 9,700 329,194
Elsevier NV .......................................... 5,700 93,772
Omnicom Group, Inc. .................................. 8,300 390,619
Reuters Group PLC .................................... 1,326 85,610
Tribune Co. .......................................... 7,100 500,550
Vereenigde Ned Uitgevers ............................. 15,100 516,382
Vodafone Group PLC ................................... 18,900 196,317

COMMUNICATION EQUIPMENT -- 0.4%
Cox Communications, Inc., Class A+ ................... 4,300 180,600

ENTERTAINMENT PRODUCTS -- 1.0%
Hasbro, Inc. ......................................... 7,500 264,844
Mattel, Inc. ......................................... 3,700 146,612

LEISURE & TOURISM -- 4.1%
Carnival Corp., Class A .............................. 4,300 299,925
Disney (Walt) Co. .................................... 4,100 437,675
Granada Group PLC .................................... 14,100 253,500
Hilton Hotels Corp. .................................. 4,700 149,813
Hutchison Whampoa Ltd. ............................... 47,000 330,567
McDonald's Corp. ..................................... 2,500 150,000
Mirage Resorts, Inc.+ ................................ 3,100 75,369
-------------
4,401,349
-------------

INFORMATION TECHNOLOGY -- 18.0%
COMMUNICATION EQUIPMENT -- 3.2%
AirTouch Communications, Inc.+ ....................... 6,000 293,625
CIENA Corp.+ ......................................... 3,400 144,925
</TABLE>

- ----------------
64
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
COMMUNICATION EQUIPMENT (CONTINUED)
Nokia Corp., Class A ADR ............................. 3,900 $ 420,956
Telecomunicacoes de Brasileiras SA ADR+ .............. 1,600 207,700
Tellabs, Inc.+ ....................................... 4,300 288,638

COMPUTERS & BUSINESS EQUIPMENT -- 2.6%
Automatic Data Processing, Inc. ...................... 4,100 279,056
Compaq Computer Corp. ................................ 5,800 150,075
EMC Corp.+ ........................................... 5,600 211,750
Hewlett-Packard Co. .................................. 3,200 202,800
Honeywell, Inc. ...................................... 2,900 239,794

ELECTRONICS -- 6.0%
Analog Devices, Inc.+ ................................ 9,600 319,200
General Electric Co. ................................. 13,300 1,146,294
Getronics NV+ ........................................ 4,300 184,585
Intel Corp. .......................................... 1,900 148,319
Linear Technology Corp. .............................. 2,000 138,000
Maxim Integrated Products, Inc.+ ..................... 8,300 302,431
Molex, Inc., Class A ................................. 2,931 78,587
Philips Electronics NV ............................... 2,600 190,796

SOFTWARE -- 6.2%
Adobe Systems, Inc. .................................. 2,900 131,044
BMC Software, Inc.+ .................................. 5,700 477,731
Cadence Design Systems, Inc.+ ........................ 5,800 200,825
Cisco Systems, Inc.+ ................................. 3,400 232,475
Microsoft Corp.+ ..................................... 6,000 537,000
Networks Associates Inc.+ ............................ 3,500 231,875
Oracle Corp.+ ........................................ 10,050 317,203
Parametric Technology Corp.+ ......................... 15,100 503,019
-------------
7,578,703
-------------
MATERIALS -- 0.3%
CHEMICALS -- 0.3%
Rhone-Poulenc Ltd.+ .................................. 2,700 137,189
-------------
REAL ESTATE -- 2.3%
REAL ESTATE COMPANIES -- 0.6%
Security Capital U.S. Realty+ ........................ 19,600 258,720

REAL ESTATE INVESTMENT TRUSTS -- 1.7%
Crescent Real Estate Equities Co. .................... 7,300 262,800
Starwood Lodging Trust ............................... 8,300 443,531
-------------
965,051
-------------
UTILITIES -- 3.5%
TELEPHONE -- 3.5%
AT&T Corp. ........................................... 4,500 295,312
MCI Communications Corp. ............................. 7,900 391,050
Telecel-Comunicacaoes Pessoais, SA+ .................. 2,200 341,590
Telecom Italia SpA+ .................................. 18,239 111,755
</TABLE>

----------------
65
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
TELEPHONE (CONTINUED)
WorldCom, Inc.+ ...................................... 8,000 $ 344,500
-------------
1,484,207
-------------
TOTAL COMMON STOCK (cost $32,490,772) ................ 39,726,138
-------------

PRINCIPAL
SHORT-TERM SECURITIES -- 5.4% AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 3.2%
Northern Illinois Gas Company 5.53% due 4/13/98 ...... $ 426,000 425,215
Reed Elsevier 6.05% due 4/1/98 ....................... 939,000 939,000
-------------
1,364,215
-------------

FEDERAL AGENCY OBLIGATIONS -- 2.2%
Federal National Mortgage Association Discount Notes
5.50% due 4/13/98 ................................... 929,000 927,297
-------------
TOTAL SHORT-TERM SECURITIES (cost $2,291,512) ........ 2,291,512
-------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $34,782,284) 99.8 % 42,017,650
Other assets less liabilities -- 0.2 67,040
------ -----------
NET ASSETS -- 100.0 % $42,084,690
------ -----------
------ -----------
</TABLE>

- ------------
+ Non-income producing securities
ADR -- American Depository Receipt

See Notes to Financial Statements

- ----------------
66
<PAGE>
- ----------------

SEASONS SERIES TRUST
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998

<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*................. $30,631,533 $30,800,823 $23,759,918 $17,123,049 $ 48,280,522 $39,726,138
Short-term securities*........................... 108,761 191,678 227,932 217,523 -- 2,291,512
Repurchase agreements (cost equals market)....... 2,503,000 2,241,000 1,871,000 1,001,000 2,911,000 --
Cash............................................. 30,336 -- 24,536 5,947 94,520 1,012
Foreign currency................................. -- -- -- 10 12,372 3,650
Receivables for --
Dividends and accrued interest................. 133,340 212,385 252,721 228,417 164,076 40,668
Fund shares sold............................... 78,087 48,629 59,807 17,077 95,448 82,744
Foreign currency contracts..................... 78,034 140,462 166,473 156,068 146,055 37,171
Sales of investments........................... 74,354 59,187 22,168 8,157 758,887 96,221
Unrealized appreciation on forward foreign
currency
contracts...................................... 14,517 13,992 11,045 8,983 16,158 --
Deferred organizational expenses................. 12,994 12.994 12,994 12,994 12,994 12,994
Prepaid expenses................................. 218 229 171 138 338 284
-------------------------------------------------------------------------------
33,665,174 33,721,379 26,408,765 18,779,363 52,492,370 42,292,394
-------------------------------------------------------------------------------
LIABILITIES:
Payables for --
Purchases of investments....................... 1,037,833 807,844 228,876 198,454 1,860,383 99,238
Foreign currency contracts..................... 79,603 143,285 169,819 159,205 145,751 37,221
Management fees................................ 22,865 21,719 16,455 11,107 33,587 29,565
Fund shares redeemed........................... 5,504 2,071 1,333 1,000 4,716 4,239
Due to custodian bank............................ -- 84,620 -- -- -- --
Unrealized depreciation on forward foreign
currency
contracts...................................... 4,431 4,962 4,545 4,223 -- --
Other accrued expenses........................... 34,377 34,714 30,995 27,591 63,529 37,441
-------------------------------------------------------------------------------
1,184,613 1,099,215 452,023 401,580 2,107,966 207,704
-------------------------------------------------------------------------------
NET ASSETS....................................... $32,480,561 $32,622,164 $25,956,742 $18,377,783 $ 50,384,404 $42,084,690
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Shares of beneficial interest outstanding
(unlimited shares authorized).................. 2,528,174 2,636,697 2,202,350 1,627,196 4,301,676 2,871,299
Net asset value per share........................ $12.85 $12.37 $11.79 $11.29 $11.71 $14.66
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS:
Capital paid in.................................. $28,862,140 $29,576,002 $24,017,960 $17,301,664 $ 46,818,807 $33,890,379
Accumulated undistributed (distributions in
excess of) net investment income............... 103,862 152,216 181,493 170,487 169,315 (7,952)
Accumulated undistributed net realized gain
(loss) on investments.......................... 97,251 50,829 143,205 89,341 (80,064) 967,017
Unrealized appreciation on investments........... 3,407,218 2,834,086 1,607,601 811,550 3,460,173 7,235,366
Unrealized foreign exchange gain (loss) on other
assets and liabilities......................... 10,090 9,031 6,483 4,741 16,173 (120)
-------------------------------------------------------------------------------
$32,480,561 $32,622,164 $25,956,742 $18,377,783 $ 50,384,404 $42,084,690
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

- ---------------
* Cost
Investment securities.......................... $27,222,816 $27,964,034 $22,149,115 $16,308,502 $ 44,820,349 $32,490,772
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Short-term securities.......................... $ 110,260 $ 194,381 $ 231,134 $ 220,520 $ -- $ 2,291,512
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
</TABLE>

See Notes to Financial Statements

----------------
67
<PAGE>
- ----------------

SEASONS SERIES TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 1998#

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain on investments.................... 450,946 353,817 281,459 189,755 426,906 1,303,958
Net realized foreign exchange gain (loss) on
other assets and liabilities...................... 18,930 26,437 23,750 26,463 795 (13,405)
Net unrealized appreciation on investments.......... 3,407,218 2,834,086 1,607,601 811,550 3,460,173 7,235,366
Net unrealized foreign exchange gain (loss) on other
assets and liabilities............................ 10,090 9,031 6,483 4,741 16,173 (120)
--------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign exchange.................................. 3,887,184 3,223,371 1,919,293 1,032,509 3,904,047 8,525,799
--------------------------------------------------------------------------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS........................... $4,121,180 $3,598,921 $2,386,541 $1,498,878 $4,408,356 $8,577,070
--------------------------------------------------------------------------
--------------------------------------------------------------------------

- ---------------
* Net of foreign withholding taxes on interest and
dividends of........................................ $ 1,723 $ 1,792 $ 1,539 $ 1,284 $ 7,912 $ 5,646
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>

# Commenced operations April 15, 1997

See Notes to Financial Statements

- ----------------
68
<PAGE>
- ----------------

SEASONS SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED MARCH 31, 1998#

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income............ (145,000) (240,000) (295,000) (310,000) (350,000) (50,000)
Distributions from net realized gain on
investments................................... (360,000) (315,000) (155,000) (115,000) (495,000) (335,000)
------------------------------------------------------------------------------
Total dividends and distributions to
shareholders.................................... (505,000) (555,000) (450,000) (425,000) (845,000) (385,000)
------------------------------------------------------------------------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold......................... 35,042,648 36,053,150 30,442,119 24,213,091 58,480,233 47,040,730
Proceeds from shares issued for reinvestment of
dividends and distributions..................... 505,000 555,000 450,000 425,000 845,000 385,000
Cost of shares repurchased........................ (6,683,267) (7,029,907) (6,871,918) (7,334,186) (12,504,185) (13,533,110)
------------------------------------------------------------------------------
Net increase in net assets resulting from capital
share transactions.............................. 28,864,381 29,578,243 24,020,201 17,303,905 46,821,048 33,892,620
------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS...................... 32,480,561 32,622,164 25,956,742 18,377,783 50,384,404 42,084,690

NET ASSETS:
Beginning of period............................... 0 0 0 0 0 0
------------------------------------------------------------------------------
End of period..................................... $32,480,561 $32,622,164 $25,956,742 $18,377,783 $ 50,384,404 $42,084,690
------------------------------------------------------------------------------
------------------------------------------------------------------------------

- ---------------
Accumulated undistributed (distributions in excess
of) net investment income....................... $ 103,862 $ 152,216 $ 181,493 $ 170,487 $ 169,315 $ (7,952)
------------------------------------------------------------------------------
------------------------------------------------------------------------------

Shares issued and repurchased:
Sold.............................................. 3,051,992 3,193,790 2,768,731 2,243,277 5,347,715 3,890,293
Issued in reinvestment of dividends and
distributions................................... 43,395 48,593 40,581 39,192 77,457 30,323
Repurchased....................................... (567,213) (605,686) (606,962) (655,273) (1,123,496) (1,049,317)
------------------------------------------------------------------------------
Net increase...................................... 2,528,174 2,636,697 2,202,350 1,627,196 4,301,676 2,871,299
------------------------------------------------------------------------------
------------------------------------------------------------------------------
</TABLE>

# Commenced operations April 15, 1997

See Notes to Financial Statements

----------------
69
<PAGE>
- ----------------

SEASONS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS

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 manages 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 T. Rowe Price Associates, Inc. ("T.
Rowe Price") serves as subadviser for the Stock Portfolio, each 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 necessary for the fair presentation
of the financial position of

- ----------------
70
<PAGE>
the Trust at March 31, 1998, 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: 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.

The Portfolios record dividends and distributions to their shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined and presented in accordance
with federal income tax regulations, which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent
distributions exceed current and accumulated earnings and profits for federal
income tax purposes, they are reported as distributions of paid-in capital. Net
investment income/loss, net realized gain/loss, and net assets are not affected.

----------------
71
<PAGE>
For the period ended March 31, 1998, the reclassification arising from
"book/tax" differences resulted in increases (decreases) to the components of
net assets as follows:

<TABLE>
<CAPTION>
Accumulated Accumulated
Undistributed Undistributed
Net Investment Net Realized Paid-In
Income/(Loss) Gain/(Loss) Capital
-------------- ------------- ---------
<S> <C> <C> <C>
Multi-Managed Growth
Portfolio $ 14,866 $ (12,625) $ (2,241)
Multi-Managed Moderate
Growth Portfolio 16,666 (14,425) (2,241)
Multi-Managed Income/
Equity Portfolio 9,245 (7,004) (2,241)
Multi-Managed Income
Portfolio 14,118 (11,877) (2,241)
Asset Allocation:
Diversified Growth
Portfolio 15,006 (12,765) (2,241)
Stock Portfolio (9,223) 11,464 (2,241)
</TABLE>

ORGANIZATIONAL EXPENSES: Costs incurred by the Adviser in connection with the
organization and registration of the Trust amounted to $91,410. 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, 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.

At March 31, 1998, the Multi-Managed Growth, Multi-Managed Moderate Growth,
Multi-Managed Income/ Equity and Multi-Managed Income Portfolios had a 2.2%,
1.6%, 1.0% and 0.3%, respectively, undivided interest, representing $2,153,000,
$1,566,000, $1,011,000 and $256,000, respectively, in principal amount, in a
joint repo with PaineWebber, Inc., which is dated March 31, 1998, bears interest
at the rate of 5.75% per annum, has a principal amount of $97,641,000 and a
repurchase price of $97,656,595, matures April 1, 1998 and is collateralized by
$50,000,000 of U.S. Treasury Bonds (bearing interest at the rate of 6.375% per
annum and maturing January 15, 1999) and $47,885,000 of U.S. Treasury Notes
(bearing interest at the rate of 6.25% per annum and maturing June 30, 1998),
which together have an approximate value of $99,682,597.

In addition, at March 31, 1998, the above-mentioned Portfolios had a 0.4%, 0.7%,
0.9% and 0.8%, respectively, undivided interest, representing $350,000,
$675,000, $860,000 and $745,000, respectively, in principal amount, in a joint
repo with Swiss Bank Corp., which is dated March 31, 1998, bears interest at a
rate of 5.90% per annum, has a principal amount of $99,645,000 and a repurchase
price of $99,661,331, matures April 1, 1998 and is collateralized by $99,160,000
of U.S. Treasury Bonds, which bear interest at a rate of 5.875% per annum,
mature November 15, 1999 and have an approximate value of $101,705,597.

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.

- ----------------
72
<PAGE>
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities, including short-term securities at March 31, 1998, were as follows:

<TABLE>
<CAPTION>
MULTI- MULTI-
MULTI- MANAGED MANAGED
MANAGED MODERATE INCOME/
GROWTH GROWTH EQUITY
------------- ------------- -------------
<S> <C> <C> <C>
Cost............................... $ 29,856,314 $ 30,426,930 $ 24,256,123
------------- ------------- -------------
------------- ------------- -------------
Aggregate unrealized
gain............................. $ 3,554,293 $ 2,960,459 $ 1,667,071
Aggregate unrealized
(loss)........................... (167,313) (153,888) (64,344)
------------- ------------- -------------
Unrealized gain (loss), net........ $ 3,386,980 $ 2,806,571 $ 1,602,727
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

<TABLE>
<CAPTION>
ASSET
MULTI- ALLOCATION:
MANAGED DIVERSIFIED
INCOME GROWTH STOCK*
------------- ------------- -------------
<S> <C> <C> <C>
Cost............................... $ 17,531,121 $ 47,831,779 $ 34,831,336
------------- ------------- -------------
------------- ------------- -------------
Aggregate unrealized
gain............................. $ 863,083 $ 3,872,944 $ 7,443,311
Aggregate unrealized
(loss)........................... (52,632) (513,201) (256,997)
------------- ------------- -------------
Unrealized gain (loss), net........ $ 810,451 $ 3,359,743 $ 7,186,314
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

*Post 10/31/97 Currency Loss Deferrals: Stock Portfolio $7,952

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-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, with regard to the
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.

As of March 31, 1998 the Multi-Managed Growth, Multi-Managed Moderate Growth,
Multi-Managed Income/ Equity, Multi-Managed Income, Asset Allocation:
Diversified Growth and Stock Portfolios had $23,646, $29,927, $36,590, $43,490,
$77,724 and $10,325, respectively of expenses previously waived or reimbursed by
SunAmerica that are subject to recoupment.

----------------
73
<PAGE>
6. PURCHASES AND SALES OF SECURITIES: Information with respect to purchases and
sales of long-term securities for the period ended March 31, 1998 was as
follows:

<TABLE>
<CAPTION>
MULTI- MULTI-
MULTI- MANAGED MANAGED
MANAGED MODERATE INCOME/
GROWTH GROWTH EQUITY
------------- ------------- -------------
<S> <C> <C> <C>
Purchases of portfolio
securities....................... $ 35,894,408 $ 33,135,912 $ 14,168,748
Sales of portfolio
securities....................... 13,873,382 12,617,018 4,454,319
U.S. government securities excluded
above were as follows:
Purchases of U.S. government
securities....................... 5,960,693 8,680,405 10,726,571
Sales of U.S. government
securities....................... 1,161,775 1,345,525 623,050
</TABLE>

<TABLE>
<CAPTION>
ASSET
MULTI- ALLOCATION:
MANAGED DIVERSIFIED
INCOME GROWTH STOCK
------------- ------------- -------------
<S> <C> <C> <C>
Purchases of portfolio
securities....................... $ 12,987,914 $ 57,436,026 $ 40,350,278
Sales of portfolio securities...... 2,802,873 18,795,159 9,163,643
U.S. government securities excluded
above were as follows:
Purchases of U.S. government
securities....................... 7,730,456 24,929,084 --
Sales of U.S. government
securities....................... 1,450,852 18,958,186 --
</TABLE>

- ----------------
74
<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-
3/31/98 $10.00 $0.18 $2.95 $3.13 $(0.08) $(0.20) $12.85 31.55% $32,481

Multi-Managed Moderate Growth Portfolio
4/15/97-
3/31/98 10.00 0.27 2.40 2.67 (0.13) (0.17) 12.37 26.86 32,622

Multi-Managed Income/Equity Portfolio
4/15/97-
3/31/98 10.00 0.41 1.68 2.09 (0.20) (0.10) 11.79 21.10 25,957

Multi-Managed Income Portfolio
4/15/97-
3/31/98 10.00 0.51 1.15 1.66 (0.27) (0.10) 11.29 16.81 18,378

Asset Allocation: Diversified Growth Portfolio
4/15/97-
3/31/98 10.00 0.23 1.76 1.99 (0.12) (0.16) 11.71 20.09 50,384

Stock Portfolio
4/15/97-
3/31/98 10.00 0.03 4.80 4.83 (0.02) (0.15) 14.66 48.59 42,085

<CAPTION>
- ----------
----------------------------------------------------

RATIO OF NET
RATIO OF INVESTMENT AVERAGE
EXPENSES TO INCOME TO COMMISSION
PERIOD AVERAGE NET AVERAGE NET PORTFOLIO PER
ENDED ASSETS(5)(6) ASSETS(5)(6) TURNOVER SHARE(4)
- ----------
----------------------------------------------------
<S> <C> <C> <C> <C>

Multi-Managed Growth Portfolio
4/15/97-
3/31/98 1.29% 1.52% 114% $.0493

Multi-Managed Moderate Growth Portfolio
4/15/97-
3/31/98 1.21 2.36 101 .0502

Multi-Managed Income/Equity Portfolio
4/15/97-
3/31/98 1.14 3.72 46 .0474

Multi-Managed Income Portfolio
4/15/97-
3/31/98 1.06 4.69 47 .0520

Asset Allocation: Diversified Growth Portfolio
4/15/97-
3/31/98 1.21 2.06 166 .0358

Stock Portfolio
4/15/97-
3/31/98 1.21 0.24 46 .0339
</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.

(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) Annualized

(6) During the period April 15, 1997 (commencement of operations) through March
31, 1998, 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 (5) NET INVESTMENT INCOME (5)
------------ -------------------------
<S> <C> <C>
Multi-Managed Growth Portfolio.................... 1.44% 1.37%
Multi-Managed Moderate Growth Portfolio........... 1.40 2.17
Multi-Managed Income/Equity Portfolio............. 1.43 3.43
Multi-Managed Income Portfolio.................... 1.50 4.25
Asset Allocation: Diversified Growth Portfolio.... 1.53 1.74
Stock Portfolio................................... 1.26 0.19
</TABLE>

See Notes to Financial Statements

----------------
75
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees and Shareholders of Seasons Series Trust

In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolios, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Multi-Managed Growth Portfolio,
Multi-Managed Moderate Growth Portfolio, Multi-Managed Income/Equity Portfolio,
Multi-Managed Income Portfolio, Asset Allocation: Diversified Growth Portfolio,
and Stock Portfolio (constituting the six portfolios of Seasons Series Trust,
hereafter referred to as the "Trust") at March 31, 1998, and the results of each
of their operations, the changes in each of their net assets and the financial
highlights for the period April 15, 1997 (commencement of operations) through
March 31, 1998, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities at March
31, 1998 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provides a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

1177 Avenue of the Americas
New York, New York
May 12, 1998

- ----------------
76
<PAGE>
- ----------------

SEASONS SERIES TRUST
SHAREHOLDERS TAX INFORMATION (UNAUDITED)

Certain tax information regarding the Seasons Series Trust is required to be
provided to the shareholders based upon each Portfolio's income and
distributions for the year ended March 31, 1998.

During the year ended March 31, 1998 the Portfolios paid the following dividends
per share along with the percentage of ordinary income dividends that qualified
for the 70% dividends received deduction for corporations:

<TABLE>
<CAPTION>
QUALIFYING %
NET FOR THE
NET SHORT-TERM 70% DIVIDENDS
TOTAL INVESTMENT CAPITAL RECEIVED
DIVIDENDS INCOME GAINS DEDUCTION
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Multi-Managed Growth Portfolio............................. $ .28 $ .08 $ .20 7.08%
Multi-Managed Moderate Growth Portfolio.................... .30 .13 .17 5.70
Multi-Managed Income/Equity Portfolio...................... .30 .20 .10 3.75
Multi-Managed Income Portfolio............................. .37 .27 .10 2.07
Asset Allocation: Diversified Growth Portfolio............. .28 .12 .16 22.96
Stock Portfolio............................................ .17 .02 .15 10.14
</TABLE>

----------------
77

<PAGE>

PART C
OTHER INFORMATION

Item 23. Exhibits:

(a)(i) Declaration of Trust. Incorporated herein by reference to the
Registrant's Registration Statement on Form N-1A (File No. 333-8653)
filed on July 22, 1996.

(a)(ii) Amended Declaration of Trust, to be filed by amendment.

(b) By-Laws. Incorporated herein by reference to the Registrant's
Registration Statement on Form N-1A (File No. 333-8653) filed on July
22, 1996.

(d)(i) Investment Advisory and Management Agreement. Incorporated herein by
reference to Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No. 333-8653) filed on
February 11, 1997.

(d)(ii) Sub-Advisory Agreements. Incorporated herein by reference to
Pre-Effective Amendment No. 1 to the Registrant's Registration
Statement on Form N-1A (File No. 333-8653) filed on February 11, 1997.

(e) Inapplicable.

(f) Inapplicable.

(g) Custodian Contract. Incorporated herein by reference to Pre-Effective
Amendment No. 2 to the Registrant's Registration Statement on Form
N-1A (File No. 333-8653) filed on April 1, 1997.

(h) Fund Participation Agreement between Registrant and Anchor National
Life Insurance Company, on behalf of itself and Variable Annuity
Account Five. Incorporated herein by reference to Pre-Effective
Amendment No. 2 to the Registrant's Registration Statement on Form
N-1A (File No. 333-8653) filed on April 1, 1997.

(i) Opinion and Consent of Counsel. Incorporated herein by reference to
Pre-Effective Amendment No. 1 to the Registrant's.

(j) Consent of Independent Accountants. Inapplicable

(k) Inapplicable.

1
<PAGE>

(l) Inapplicable.

(m) Inapplicable.

(n) Financial Data Schedules, incorporated by reference to
Post-Effective Amendment No. 2, filed July 24, 1998.

(o) Powers of Attorney. Incorporated herein by reference to
Pre-Effective Amendment No. 2, filed April 1, 1997.

Item 24. Persons Controlled by or under Common Control with Registrant.

There are no persons controlled by or under common control with
Registrant.

Item 25. Indemnification.

Article VI of the Registrant's By-Laws relating to the indemnification of
officers and trustees is quoted below:

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 party or is

2
<PAGE>

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).

(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

3
<PAGE>

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.

* * * * * * * * * * * * * * *

The Investment Advisory and Management Agreement provides that in absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
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 shareholder of the Trust for any
act or omission in the course of, or connected with, rendering services,
including without limitation, any error of judgment or mistake or 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

4
<PAGE>

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 26. 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.

Bankers Trust Company, Goldman Sachs Asset Management, Janus Capital
Corporation, Lord Abbett & Co., Putnam Investment Management, Inc., T. Rowe
Price Associates, Inc., and Wellington Management Company, 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 Bankers Trust
Company, Goldman Sachs Asset Management, Janus Capital Corporation, Lord Abbett
& Co., Putnam Investment Management, Inc., T. Rowe Price Associates, Inc., and
Wellington Management Company, and other required information:

FILE NO.

Bankers Trust Company N/A

Goldman Sachs Asset Management 801-16048

Goldman Sachs Asset Management 801-38157
International

Janus Capital Corporation 801-3991

Lord Abbett & Co. 801-6997

5
<PAGE>

T. Rowe Price Associates, Inc. 801-856

Putnam Investment Management, Inc. 801-7974

Wellington Management Company 801-15908

Item 27. Principal Underwriters.

There is no Principal Underwriter for the Registrant.

Item 28. 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.

Bankers Trust Company has principal offices at 130 Liberty Street (One
Bankers Trust Plaza), New York, New York 10006.

Goldman Sachs Asset Management is located at One New York Plaza, New York,
New York 10004.

Goldman Sachs Asset Management International is located at 133 Peterborough
Court, London EC4A 2BB, England.

Janus Capital Corporation is located at 100 Fillmore Street, Suite 300, Denver,
Colorado 80296-4923.

Lord Abbett & Co. is located in the General Motors Building, at 767 Fifth
Avenue, New York, New York 10153.

Putnam Investment Management, Inc. is located at One Post Office Square, Boston,
Massachusetts 02109.

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.

Wellington Management Company is located at 75 State Street, Boston,
Massachusetts 02109.

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 29. Management Services.

None.

Item 30. Undertakings

N/A

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant has duly caused
this Post-Effective Amendment to the 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 2nd day of November, 1998.

SEASONS SERIES TRUST

By: /s/ Peter C. Sutton
--------------------------------
Peter C. Sutton
Vice President

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Post-Effective Amendment No. 3 to Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated:

* Trustee, Chairman and November 2, 1998
-------------------------- President
James K. Hunt (Principal Executive
Officer)

* Treasurer and Controller November 2, 1998
--------------------------- (Principal Financial and
Scott L. Robinson Accounting Officer)

* Trustee November 2, 1998
---------------------------
Richards D. Barger

* Trustee November 2, 1998
---------------------------
Norman J. Metcalfe

* Trustee November 2, 1998
---------------------------
Allan L. Sher

* Trustee November2, 1998
---------------------------
William M. Wardlaw

*By: /s/ Robert M. Zakem November 2, 1998
---------------------------
Robert M. Zakem,
Attorney-in-Fact