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PROSPECTUS
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FEBRUARY 1, 1999
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[LOGO]
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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
TRUST HIGHLIGHTS.................................. 3
MORE INFORMATION ABOUT THE PORTFOLIOS............. 12
Investment Strategies..................... 12
GLOSSARY.......................................... 20
Investment Terminology.................... 20
Risk Terminology.......................... 23
MANAGEMENT........................................ 25
ACCOUNT INFORMATION............................... 38
OTHER INFORMATION................................. 39
FINANCIAL HIGHLIGHTS.............................. 40
FOR MORE INFORMATION.............................. 41
</TABLE>
2
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TRUST HIGHLIGHTS
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The following questions and answers are designed to provide you with information
about Seasons Series Trust (the "Trust"), and to give you an overview of the
Trust's fifteen separate investment series ("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 in addition to the
Seasons Portfolios, 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. A Portfolio's investment goal may be
changed by the Board of Trustees without shareholder approval, but you will
be notified of any change. 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
<TABLE>
<CAPTION>
<S> <C> <C>
PORTFOLIO INVESTMENT GOAL STRATEGY
MULTI-MANAGED GROWTH PORTFOLIO long-term growth of capital asset allocation through Managed
Components
MULTI-MANAGED MODERATE GROWTH PORTFOLIO long-term growth of capital, with asset allocation through Managed
capital preservation as a secondary Components
objective
MULTI-MANAGED INCOME/EQUITY PORTFOLIO conservation of principal while asset allocation through Managed
maintaining some potential for long-term Components
growth of capital
MULTI-MANAGED INCOME PORTFOLIO capital preservation asset allocation through Managed
Components
ASSET ALLOCATION: DIVERSIFIED GROWTH capital appreciation investment primarily 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
STOCK PORTFOLIO long-term capital appreciation, with a investment primarily in the stock of
secondary objective of increasing well-established growth companies
dividend income
</TABLE>
3
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Each of the Seasons MULTI-MANAGED GROWTH, MULTI-MANAGED MODERATE GROWTH,
MULTI-MANAGED INCOME/EQUITY and MULTI-MANAGED INCOME PORTFOLIOS (referred to
hereinafter as the "Multi-Managed Seasons Portfolio(s)") allocates all of its
assets among three or four distinct MANAGED COMPONENTS, each managed by a
separate Manager. The three Managers of the Multi-Managed Seasons Portfolios are
SunAmerica Asset Management Corp. ("SunAmerica"), Janus Capital Corporation
("Janus") and Wellington Management Company, LLP ("WMC"). None of the Multi-
Managed Seasons Portfolios contains a passively managed 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. The term "Manager" as used herein shall mean
either SunAmerica, the Investment Adviser to the Trust, or the other registered
investment advisers that serve as Subadvisers to the Trust, as the case may be.
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 Manager 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>
<S> <C> <C> <C> <C>
SUNAMERICA/ JANUS/
AGGRESSIVE GROWTH GROWTH SUNAMERICA/ WMC/FIXED INCOME
PORTFOLIO COMPONENT COMPONENT BALANCED COMPONENT COMPONENT
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>
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.
4
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SEASONS SELECT PORTFOLIOS
Each Seasons Select Portfolio except the Cash Management Portfolio is managed by
several separate Managers, and we call them the "Multi-Managed Seasons Select
Portfolio(s)." Each Multi-Managed Seasons Select Portfolio offers you access to
at least three different professional Managers, 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 market index, or the relevant subset
of an index.
SunAmerica will initially allocate the assets of each Multi-Managed Seasons
Select Portfolio among the Managers for a Portfolio in a manner designed to
maximize investment efficiency. SunAmerica will then allocate new cash from
share purchases and redemption requests equally among the Managers, 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 Seasons Select Portfolio to determine the extent to which the
portion of assets managed by a Manager differs from that portion managed by any
other Manager to the Portfolio. If SunAmerica determines that the difference is
significant, SunAmerica will then re-allocate cash flows among the three
Managers, 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 Managers. However, SunAmerica reserves the right,
subject to the review of the Board, to reallocate assets from one Manager 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 may be to shift assets from a better performing Manager to a
portion of the Portfolio with a relatively lower total return.
SEASONS SELECT PORTFOLIOS
<TABLE>
<CAPTION>
<S> <C> <C>
PORTFOLIO INVESTMENT GOAL STRATEGY
LARGE-CAP GROWTH PORTFOLIO long-term growth of capital investment primarily in equity
securities of large companies (at least
65% of total assets) selected through a
growth strategy
LARGE-CAP COMPOSITE PORTFOLIO long-term growth of capital and growth investment primarily in equity
of dividend income securities of large companies (at least
65% of total assets) that offer the
potential for long-term growth of
capital or dividends
LARGE-CAP VALUE PORTFOLIO long-term growth of capital investment primarily in equity
securities of large companies (at least
65% of total assets) selected through a
value strategy
</TABLE>
5
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<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT GOAL STRATEGY
<S> <C> <C>
MID-CAP GROWTH PORTFOLIO long-term growth of capital investment primarily in equity
securities of medium-sized companies (at
least 65% of total assets) selected
through a growth strategy
MID-CAP VALUE PORTFOLIO long-term growth of capital investment primarily 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 capital investment primarily in equity
securities of small companies (at least
65% of total assets)
INTERNATIONAL EQUITY PORTFOLIO long-term growth of capital investment primarily in equity
securities of issuers in at least three
countries other than the U.S.
DIVERSIFIED FIXED INCOME PORTFOLIO relatively high current income and investment primarily in fixed income
secondarily capital appreciation securities, including U.S. and foreign
government securities, mortgaged-backed
securities, investment grade debt
securities, and high yield/ high risk
bonds ("junk bonds")
CASH MANAGEMENT PORTFOLIO high current yield while preserving investment in a diversified selection of
capital money market instruments
</TABLE>
To balance the risks of an actively traded portfolio, each Multi-Managed Seasons
Select Portfolio includes a passively-managed component that tracks a particular
target index or a subset of an index and which will not sell stocks in its
portfolio or 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.
6
<PAGE>
A "VALUE" ORIENTED PHILOSOPHY -- that of investing principally in securities
believed to be undervalued in the market -- reflects a belief in that the
potential for superior relative performance is highest when stocks of
fundamentally solid companies are out of favor. The selection criteria are
calculated to identify stocks of well-known companies with solid financial
strength that have low price-earnings ratios and have been generally overlooked
by the market.
"GROWTH" COMPANIES are considered to have a historical record of above-average
growth rate; to have significant growth potential; to have 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.
"HIGH-QUALITY" INSTRUMENTS have a very strong capacity to pay interest and repay
principal; they reflect the issuers' high creditworthiness and low risk of
default.
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 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. You should be aware
that the performance of different types of equity
stocks may rise or decline under varying market
conditions -- for example, "value" stocks may
perform well under circumstances in which
"growth" stocks in general have fallen. In
addition, individual stocks selected for any of
these Portfolios may underperform the market
generally.
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
affected by changes in interest rates. You
should also be aware that your return on an
investment in the Cash Management Portfolio will
be affected by fees at the contract level. The
Cash Management Portfolio does not seek to
maintain a stable net asset value of $1.00.
7
<PAGE>
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 emerging market 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 high yield/high risk securities, also known
as "junk bonds," which are considered speculative. While the Managers try to
diversify a 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 a 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 a Portfolio
to replace the security with a lower yielding security. If this occurs, it
will result in a decreased return for you.
Each Multi-Managed Seasons and Multi-Managed Seasons Select Portfolio is
non-diversified, which means that each 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, a 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.
Q: HOW HAVE THE SEASONS PORTFOLIOS PERFORMED HISTORICALLY?
A: The following Risk/Return Bar Charts and Tables provide some indication of
the risks of investing in the Seasons Portfolios by comparing the Seasons
Portfolios' performance with those of an appropriate market index. Fees and
expenses incurred at the contract level are not reflected in the bar chart.
If these amounts were reflected, returns would be less than those shown. Of
course, past performance is not necessarily an indication of how a Seasons
Portfolio will perform in the future.
8
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MULTI-MANAGED GROWTH PORTFOLIO
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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1998 31.45%
</TABLE>
During the one year period shown in the bar chart, the highest return for a
quarter was 21.27% (quarter ended 12/31/98) and the lowest return for a quarter
was -6.23% (quarter ended 09/30/98).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE CALENDAR YEAR PAST ONE RETURN SINCE
ENDED DECEMBER 31, 1998) YEAR INCEPTION***
<S> <C> <C>
----------------------------------------------------------------------------------
Multi-Managed Growth Portfolio 31.45% 30.16%
----------------------------------------------------------------------------------
Blended Benchmark Index* 16.59% 23.98%
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S&P 500-Registered Trademark- Index** 28.58% 36.28%
----------------------------------------------------------------------------------
</TABLE>
* The Blended Benchmark Index consists of 51% Standard & Poor's
500-Registered Trademark- Composite Stock Price Index (S&P
500-Registered Trademark- Index), 27% Lehman Brothers Aggregate Index, 20%
Russell 2000-Registered Trademark- Index and 2% Treasury Bills. The Russell
2000-Registered Trademark- Index comprises the smallest 2000 companies in
the Russell 3000-Registered Trademark- Index and is widely recognized as
representative of small-cap growth stocks. Treasury Bills are short-term
securities with maturities of one year or less issued by the U.S.
government.
** The Standard & Poor's 500-Registered Trademark- Composite Stock Price Index
(S&P 500 Index) tracks the performance of 500 stocks representing a sampling
of the largest foreign and domestic stocks traded publicly in the United
States.
*** Inception date is April 15, 1997.
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MULTI-MANAGED MODERATE GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1998 25.07%
</TABLE>
During the one year period shown in the bar chart, the highest return for a
quarter was 16.24% (quarter ended 12/31/98) and the lowest return for a quarter
was -4.20% (quarter ended 09/30/98).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS PAST RETURN SINCE
(AS OF THE CALENDAR YEAR ENDED DECEMBER 31, 1998) ONE YEAR INCEPTION***
<S> <C> <C>
----------------------------------------------------------------------------------
Multi-Managed Moderate Growth Portfolio 25.07% 25.23%
----------------------------------------------------------------------------------
Blended Benchmark Index* 14.43% 20.83%
----------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index** 28.58% 36.28%
----------------------------------------------------------------------------------
</TABLE>
* The Blended Benchmark Index consists of 51% Standard & Poor's
500-Registered Trademark- Composite Stock Price Index (S&P
500-Registered Trademark- Index), 27% Lehman Brothers Aggregate Index, 20%
Russell 2000-Registered Trademark- Index and 2% Treasury Bills. The Russell
2000-Registered Trademark- Index comprises the smallest 2000 companies in
the Russell 3000-Registered Trademark- Index and is widely recognized as
representative of small-cap growth stocks. Treasury Bills are short-term
securities with maturities of one year or less issued by the U.S.
government.
** The Standard & Poor's 500-Registered Trademark- Composite Stock Price Index
(S&P 500-Registered Trademark- Index) tracks the performance of 500 stocks
representing a sampling of the largest foreign and domestic stocks traded
publicly in the United States.
*** Inception date is April 15, 1997.
9
<PAGE>
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MULTI-MANAGED INCOME/EQUITY PORTFOLIO
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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1998 19.13%
</TABLE>
During the one year period shown in the bar chart, the highest return for a
quarter was 7.95% (quarter ended 12/31/98) and the lowest return for a quarter
was 0.49% (quarter ended 09/30/98).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS PAST RETURN SINCE
(AS OF THE CALENDAR YEAR ENDED DECEMBER 31, 1998) ONE YEAR INCEPTION****
<S> <C> <C>
----------------------------------------------------------------------------------
Multi-Managed Income/Equity Portfolio 19.13% 19.64%
----------------------------------------------------------------------------------
Blended Benchmark Index* 15.51% 18.79%
----------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index** 28.58% 36.28%
----------------------------------------------------------------------------------
Lehman Brothers Aggregate Index*** 8.69% 10.87%
----------------------------------------------------------------------------------
</TABLE>
* The Blended Benchmark Index consists of 51% Standard & Poor's
500-Registered Trademark- Composite Stock Price Index (S&P
500-Registered Trademark- Index), 27% Lehman Brothers Aggregate Index, 20%
Russell 2000-Registered Trademark- Index and 2% Treasury Bills. The Russell
2000-Registered Trademark- Index comprises the smallest 2000 companies in
the Russell 3000-Registered Trademark- Index and is widely recognized as
representative of small-cap growth stocks. Treasury Bills are short-term
securities with maturities of one year or less issued by the U.S.
government.
** The Standard & Poor's 500-Registered Trademark- Composite Stock Price Index
(S&P 500-Registered Trademark- Index) tracks the performance of 500 stocks
representing a sampling of the largest foreign and domestic stocks traded
publicly in the United States.
*** The Lehman Brothers Aggregate Index provides a broad view of the
performance of the U.S. fixed income market.
**** Inception date is April 15, 1997.
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MULTI-MANAGED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1998 13.58%
</TABLE>
During the one year period shown in the bar chart, the highest return for a
quarter was 4.10% (quarter ended 12/31/98) and the lowest return for a quarter
was 2.07% (quarter ended 09/30/98).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS PAST RETURN SINCE
(AS OF THE CALENDAR YEAR ENDED DECEMBER 31, 1998) ONE YEAR INCEPTION***
<S> <C> <C>
----------------------------------------------------------------------------------
Multi-Managed Income Portfolio 13.58% 15.31%
----------------------------------------------------------------------------------
Blended Benchmark Index* 12.24% 14.96%
----------------------------------------------------------------------------------
Lehman Brothers Aggregate Index** 8.69% 10.87%
----------------------------------------------------------------------------------
</TABLE>
* The Blended Benchmark Index consists of 51% Standard & Poor's
500-Registered Trademark- Composite Stock Price Index (S&P
500-Registered Trademark- Index), 27% Lehman Brothers Aggregate Index, 20%
Russell 2000-Registered Trademark- Index and 2% Treasury Bills. The Russell
2000-Registered Trademark- Index comprises the smallest 2000 companies in
the Russell 3000-Registered Trademark- Index and is widely recognized as
representative of small-cap growth stocks. Treasury Bills are short-term
securities with maturities of one year or less issued by the U.S.
government.
** The Lehman Brothers Aggregate Index provides a broad view of the performance
of the U.S. fixed income market.
*** Inception date is April 15, 1997.
10
<PAGE>
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ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1998 13.43%
</TABLE>
During the one year period shown in the bar chart, the highest return for a
quarter was 15.54% (quarter ended 12/31/98) and the lowest return for a quarter
was -9.81% (quarter ended 09/30/98).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS PAST RETURN SINCE
(AS OF THE CALENDAR YEAR ENDED DECEMBER 31, 1998) ONE YEAR INCEPTION***
<S> <C> <C>
- -----------------------------------------------------------------------------------
Asset Allocation: Diversified Growth Portfolio 13.43% 15.24%
----------------------------------------------------------------------------------
Blended Benchmark Index* 23.30% 26.46%
----------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index** 28.58% 36.28%
----------------------------------------------------------------------------------
</TABLE>
* The Blended Benchmark Index consists of 51% Standard & Poor's
500-Registered Trademark- Composite Stock Price Index (S&P
500-Registered Trademark- Index), 27% Lehman Brothers Aggregate Index, 20%
Russell 2000-Registered Trademark- Index and 2% Treasury Bills. The Russell
2000-Registered Trademark- Index comprises the smallest 2000 companies in
the Russell 3000-Registered Trademark- Index and is widely recognized as
representative of small-cap growth stocks. Treasury Bills are short-term
securities with maturities of one year or less issued by the U.S.
government.
** The Standard & Poor's 500-Registered Trademark- Composite Stock Price Index
(S&P 500-Registered Trademark- Index) tracks the performance of 500 stocks
representing a sampling of the largest foreign and domestic stocks traded
publicly in the United States.
*** Inception date is April 15, 1997.
- --------------------------------------------------------------------------------
STOCK PORTFOLIO
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1998 27.24%
</TABLE>
During the one year period shown in the bar chart, the highest return for a
quarter was 22.80% (quarter ended 12/31/98) and the lowest return for a quarter
was -11.25% (quarter ended 09/30/98).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS PAST RETURN SINCE
(AS OF THE CALENDAR YEAR ENDED DECEMBER 31, 1998) ONE YEAR INCEPTION**
<S> <C> <C>
----------------------------------------------------------------------------------
Stock Portfolio 27.24% 33.52%
----------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index* 28.58% 36.28%
----------------------------------------------------------------------------------
</TABLE>
* The Standard & Poor's 500-Registered Trademark- Composite Stock Price Index
(S&P 500-Registered Trademark- Index) tracks the performance of 500 stocks
representing a sampling of the largest foreign and domestic stocks traded
publicly in the United States.
** Inception date is April 15, 1997.
11
<PAGE>
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MORE INFORMATION ABOUT THE PORTFOLIOS
- --------------------------------------------------------------------------------
INVESTMENT STRATEGIES
The charts provided below summarize information about the investment strategies
that each Managed Component and Portfolio uses. We have included a glossary to
define the investment and risk terminology that we have used in the charts and
throughout this Prospectus. You should consider your ability to assume the risks
involved before investing in a Portfolio through the Seasons or Seasons Select
Variable Annuity Contract.
The Seasons and Seasons Select Variable Annuity Contracts offer four variable
investment "Strategies." You should be aware that if you select a Strategy you
will not invest directly in one of the Portfolios. Instead, each Strategy
invests in three of the six Seasons Portfolios. The allocation of assets among
the Portfolios will vary depending on the objective of the Strategy.
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. If you
invest in one of the Multi-Managed Seasons Portfolios, it's important for you to
understand how the chart provided below applies specifically to your investment.
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.
You should carefully review the investment objectives and policies of each
Multi-Managed Seasons Portfolios to understand how each Managed Component
applies to an investment in any of the Multi-Managed Season Portfolios. For
example, if you invest in a Strategy that invests heavily in the Multi-Managed
Income Portfolio, you should be aware that this 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%. When reviewing the charts
provided below, please keep in mind how the investment strategies and risks of
each of the 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.
12
<PAGE>
SEASONS PORTFOLIOS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SUNAMERICA/ SUNAMERICA/
AGGRESSIVE GROWTH JANUS/GROWTH BALANCED
COMPONENT COMPONENT COMPONENT
What are the Portfolio's equity securities of common stocks selected equity securities of mid-
or Managed Component's small, lesser known or for their growth to large-cap companies
principal investments new growth companies or potential believed to be
(under normal market industries, such as undervalued, and
conditions)? technology, long-term bonds and other
telecommunications, media debt securities; neutral
and healthcare equity/debt weightings of
70%/30% for Multi-Managed
Growth and Moderate
Growth Portfolios;
50%/50% for Multi-Managed
Income/ Equity and Income
Portfolios (actual
weighting may differ)
What are the Portfolio's - stock market volatility - stock market volatility - stock and bond market
or Managed Component's - securities selection - securities selection volatility
principal risks? - growth stocks - growth stocks - securities selection
- small and mid-market - junk bonds - interest rate
capitalization - small and mid- market fluctuations
- non-diversification capitalization - non-diversification
- non-diversification
What other investment
strategies can the
Portfolio or Managed
Component use?
- - Large company stocks Yes See principal investments See principal investments
section above section above
- - Medium-sized company See principal investments See principal investments See principal investments
stocks section above section above section above
<CAPTION>
WMC/FIXED ASSET ALLOCATION:
INCOME DIVERSIFIED
COMPONENT GROWTH PORTFOLIO STOCK PORTFOLIO
What are the Portfolio's U.S. and foreign fixed strategic allocation of common stock of well-
or Managed Component's income securities of approximately 80% (with a established growth
principal investments varying maturities and range of 65-95%) of its companies (at least 65%
(under normal market risk/return assets to equity of total assets)
conditions)? characteristics (at least securities and
80% investment grade approximately 20% (with a
securities and at least range of 5-35%) of its
85% U.S. dollar assets to fixed income
denominated) securities
What are the Portfolio's - bond market volatility - stock market volatility - stock market volatility
or Managed Component's - securities selection - securities selection - securities selection
principal risks? - interest rate - growth stocks - growth stocks
fluctuations - foreign exposure
- non-diversification - small and mid- market
capitalization
What other investment
strategies can the
Portfolio or Managed
Component use?
- - Large company stocks No See principal investments See principal investments
section above section above
- - Medium-sized company No See principal investments Yes
stocks section above
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
SUNAMERICA/ SUNAMERICA/
AGGRESSIVE GROWTH JANUS/GROWTH BALANCED
COMPONENT COMPONENT COMPONENT
<S> <C> <C> <C>
What other investment
strategies can the
Portfolio or Managed
Component use?
- - Small company stocks See principal investments See principal investments Yes (up to 20%)
section above section above
- - Active Trading Yes Yes No
What other investments
can the Portfolio or
Managed Components use?
- - Types of fixed income
securities:
Investment grade Yes Yes Yes
U.S. government Yes Yes Yes
securities
Asset-backed and Yes Yes Yes
mortgage-backed
securities
Junk bonds No Yes (up to 35%) No
- - Short-term money market Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
instruments
- - Temporary defensive Yes (up to 100%) Yes (up to 100%) Yes (up to 100%)
investments
- - Foreign securities Yes Yes Yes (up to 25%)
<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?
- - Small company stocks No See principal investments Yes
section above
- - Active Trading Yes Yes No
What other investments
can the Portfolio or
Managed Components use?
- - Types of fixed income
securities:
Investment grade Yes Yes Yes
U.S. government Yes Yes Yes
securities
Asset-backed and Yes Yes Yes
mortgage-backed
securities
Junk bonds Yes (up to 20%) Yes (up to 20%) No
- - Short-term money market Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
instruments
- - Temporary defensive Yes (up to 100%) Yes (up to 100%) Yes (up to 100%)
investments
- - Foreign securities Yes (up to 15% Yes (up to 60%) Yes (up to 30%)
denominated in foreign
currencies; up to 100%
denominated in U.S.
dollars)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
SUNAMERICA/ SUNAMERICA/
AGGRESSIVE GROWTH JANUS/GROWTH BALANCED
COMPONENT COMPONENT COMPONENT
<S> <C> <C> <C>
What other investments
can the Portfolio or
Managed Components use?
- - ADRs/EDRs/GDRs Yes Yes Yes
- - Currency transactions Yes Yes Yes
- - Currency baskets Yes Yes Yes
- - Emerging markets Yes Yes Yes
- - Illiquid securities Yes (up to 15%) Yes (up to 15%) Yes (up to 15%)
- - Options and futures Yes Yes Yes
- - Securities lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
- - Special situations Yes Yes Yes
- - Borrowing for temporary Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
or emergency purposes
What other potential - foreign exposure - foreign exposure - stock market volatility
risks can affect the - emerging markets - emerging markets - foreign exposure
Portfolio or Managed - euro conversion - euro conversion - emerging markets
Component? - illiquidity - credit quality - euro conversion
- prepayment - junk bonds - illiquidity
- derivatives - illiquidity - prepayment
- hedging - prepayment - derivatives
- derivatives - hedging
- hedging - small and mid- market
- small and mid-market capitalization
capitalization
<CAPTION>
WMC/FIXED ASSET ALLOCATION:
INCOME DIVERSIFIED
COMPONENT GROWTH PORTFOLIO STOCK PORTFOLIO
<S> <C> <C> <C>
What other investments
can the Portfolio or
Managed Components use?
- - ADRs/EDRs/GDRs No Yes Yes
- - Currency transactions Yes Yes Yes
- - Currency baskets Yes Yes Yes
- - Emerging markets Yes (up to 20%, including Yes Yes
investments in foreign
and domestic junk bonds)
- - Illiquid securities Yes (up to 15%) Yes (up to 15%) Yes (up to 15%)
- - Options and futures Yes Yes Yes
- - Securities lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
- - Special situations Yes Yes Yes
- - Borrowing for temporary Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
or emergency purposes
What other potential - foreign exposure - emerging markets - foreign exposure
risks can affect the - emerging markets - euro conversion - emerging markets
Portfolio or Managed - euro conversion - credit quality - euro conversion
Component? - credit quality - junk bonds - illiquidity
- junk bonds - illiquidity - prepayment
- illiquidity - prepayment - derivatives
- prepayment - derivatives - hedging
- derivatives - hedging - small and mid- market
- hedging capitalization
</TABLE>
15
<PAGE>
SEASONS SELECT PORTFOLIOS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
LARGE-CAP LARGE-CAP COMPOSITE
GROWTH PORTFOLIO PORTFOLIO LARGE-CAP VALUE PORTFOLIO
What are the Portfolio's equity securities of equity securities of equity securities of
principal investments large companies (at least large companies (at least large companies (at least
(under normal market 65% of total assets) 65% of total assets) 65% of total assets)
conditions)? selected through a growth selected through a growth selected through a value
strategy strategy, that offer the strategy
potential for long-term
growth of capital or
dividends
Which index or subset of S&P S&P S&P
an index will the 500-Registered Trademark-/ 500-Registered Trademark- 500-Registered Trademark-/
Portfolio's index BARRA Composite BARRA
component seek to Growth Index Stock Index Value Index
replicate?
What are the Portfolio's - stock market volatility - stock market volatility - stock market volatility
principal risks? - indexing - indexing - indexing
- securities selection - securities selection - securities selection
- growth stocks - growth stocks - non- diversification
- non-diversification - non- diversification
<CAPTION>
MID-CAP GROWTH
PORTFOLIO MID-CAP VALUE PORTFOLIO SMALL-CAP PORTFOLIO
What are the Portfolio's equity securities of equity securities of equity securities of
principal investments medium-sized companies medium-sized companies small companies (at least
(under normal market (at least 65% of total (at least 65% of total 65% of total assets)
conditions)? assets) selected through assets) selected through
a growth strategy a value strategy
Which index or subset of Russell MidCap-TM- Russell MidCap-TM- Russell
an index will the Growth Index Value Index 2000-Registered Trademark-
Portfolio's index Index
component seek to
replicate?
What are the Portfolio's - stock market volatility - stock market volatility - stock market volatility
principal risks? - indexing - indexing - indexing
- securities selection - securities selection - securities selection
- growth stocks - non- diversification - growth stocks
- non- diversification - mid-market - small market
- mid-market capitalization capitalization
capitalization - non- diversification
<CAPTION>
INTERNATIONAL DIVERSIFIED FIXED INCOME
EQUITY PORTFOLIO PORTFOLIO CASH MANAGEMENT PORTFOLIO
What are the Portfolio's equity securities of fixed income securities, a diversified selection
principal investments issuers in at least 3 including U.S. and of money market
(under normal market countries other than the foreign government instruments
conditions)? United States securities, mortgaged-
backed securities,
investment grade debt
securities, and high
yield/high risk bonds
(junk bonds)
Which index or subset of MSCI EAFE Lehman Government/ Corp. N/A
an index will the Index Index
Portfolio's index
component seek to
replicate?
What are the Portfolio's - stock market volatility - bond market volatility - securities selection
principal risks? - indexing - indexing - interest rate
- securities selection - securities selection fluctuations
- foreign exposure - interest rate
- emerging markets fluctuations
- euro conversion - credit quality
- non-diversification - issuer default
- non- diversification
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
LARGE-CAP LARGE-CAP COMPOSITE
GROWTH PORTFOLIO PORTFOLIO LARGE-CAP VALUE PORTFOLIO
<S> <C> <C> <C>
What other investment
strategies can the
Portfolio use?
- - Large company stocks a principal investment a principal investment a principal investment
(see above) (see above) (see above)
- - Medium-sized company Yes Yes Yes
stocks
- - Small company stocks Yes Yes Yes
- - Active trading Yes Yes Yes
- - Types of fixed income
securities:
Investment Yes Yes Yes
grade
U.S. Yes Yes Yes
government securities
Asset-backed and Yes Yes Yes
mortgage-backed
securities
Junk bonds Yes Yes (up to 15%) Yes (up to 10%)
- - Short-term Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
money market
instruments
- - REITs Yes Yes Yes
<CAPTION>
MID-CAP GROWTH
PORTFOLIO MID-CAP VALUE PORTFOLIO SMALL-CAP PORTFOLIO
<S> <C> <C> <C>
What other investment
strategies can the
Portfolio use?
- - Large company stocks Yes Yes Yes
- - Medium-sized company a principal investment a principal investment Yes
stocks (see above) (see above)
- - Small company stocks Yes Yes a principal investment
(see above)
- - Active trading Yes Yes Yes
- - Types of fixed income
securities:
Investment Yes Yes Yes
grade
U.S. Yes Yes Yes
government securities
Asset-backed and Yes Yes Yes
mortgage-backed
securities
Junk bonds No Yes Yes
- - Short-term Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
money market
instruments
- - REITs Yes Yes No
<CAPTION>
INTERNATIONAL DIVERSIFIED FIXED INCOME
EQUITY PORTFOLIO PORTFOLIO CASH MANAGEMENT PORTFOLIO
What other investment
strategies can the
Portfolio use?
- - Large company stocks Yes No No
- - Medium-sized company Yes No No
stocks
- - Small company stocks Yes No No
- - Active trading Yes Yes No
- - Types of fixed income
securities:
Investment Yes a principal investment Yes
grade (see above)
U.S. Yes a principal investment Yes
government securities (see above)
Asset-backed and Yes Yes Yes
mortgage-backed
securities
Junk bonds Yes Yes (up to 20%) No
- - Short-term Yes (up to 25%) Yes a principal investment
money market (see above)
instruments
- - REITs Yes No No
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
LARGE-CAP LARGE-CAP COMPOSITE
GROWTH PORTFOLIO PORTFOLIO LARGE-CAP VALUE PORTFOLIO
<S> <C> <C> <C>
What other investment
strategies can the
Portfolio use?
- - Borrowing for temporary Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
or emergency purposes
- - Defensive investments Yes Yes Yes
- - Foreign Yes Yes (up to 30%) Yes (up to 30%)
securities
- - ADRs/ EDRs/GDRs Yes Yes Yes
- - Foreign Yes Yes (up to 10%) No
investment companies
- - Currency transactions Yes Yes Yes
- - Currency Yes Yes Yes
baskets
- - Emerging Yes Yes Yes
markets
- - Illiquid securities Yes (up to 15%) Yes (up to 15%) Yes (up to 15%)
- - Options and futures Yes Yes Yes
- - Securities lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
- - Hybrid instruments Yes Yes Yes
(up to 10%) (up to 10%) (up to 10%)
Structured securities Yes Yes Yes
Indexed securities Yes Yes Yes
<CAPTION>
MID-CAP GROWTH
PORTFOLIO MID-CAP VALUE PORTFOLIO SMALL-CAP PORTFOLIO
<S> <C> <C> <C>
What other investment
strategies can the
Portfolio use?
- - Borrowing for temporary Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
or emergency purposes
- - Defensive investments Yes Yes Yes
- - Foreign Yes (up to 30%) Yes (up to 30%) Yes (up to 30%)
securities
- - ADRs/ EDRs/GDRs Yes Yes Yes
- - Foreign No Yes (up to 10%) Yes (up to 10%)
investment companies
- - Currency transactions Yes Yes Yes
- - Currency Yes Yes Yes
baskets
- - Emerging Yes Yes Yes
markets
- - Illiquid securities Yes (up to 15%) Yes (up to 15%) Yes (up to 15%)
- - Options and futures Yes Yes Yes
- - Securities lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
- - Hybrid instruments Yes Yes Yes
(up to 10%) (up to 10%) (up to 10%)
Structured securities Yes Yes Yes
Indexed securities Yes Yes Yes
<CAPTION>
INTERNATIONAL DIVERSIFIED FIXED INCOME
EQUITY PORTFOLIO PORTFOLIO CASH MANAGEMENT PORTFOLIO
What other investment
strategies can the
Portfolio use?
- - Borrowing for temporary Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 5%)
or emergency purposes
- - Defensive investments Yes Yes Yes
- - Foreign a principal investment Yes (up to 30%) Yes (up to 30%)
securities (see above)
- - ADRs/ EDRs/GDRs Yes Yes Yes (U.S. dollar
denominated only)
- - Foreign Yes (up to 10%) Yes No
investment companies
- - Currency transactions Yes Yes No
- - Currency Yes Yes No
baskets
- - Emerging Yes Yes No
markets
- - Illiquid securities Yes (up to 15%) Yes (up to 15%) Yes (up to 10%)
- - Options and futures Yes Yes No
- - Securities lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) No
- - Hybrid instruments Yes Yes No
(up to 10%)
Structured securities Yes Yes No
Indexed securities Yes Yes No
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
LARGE-CAP LARGE-CAP COMPOSITE
GROWTH PORTFOLIO PORTFOLIO LARGE-CAP VALUE PORTFOLIO
<S> <C> <C> <C>
What other investment
strategies can the
Portfolio use?
- - Special situations Yes Yes Yes
What other potential - interest rate - interest rate - interest rate
risks can affect a fluctuations fluctuations fluctuations
Portfolio? - credit quality - credit quality - credit quality
- foreign exposure - foreign exposure - foreign exposure
- euro conversion - emerging markets - emerging markets
- illiquidity - euro conversion - euro conversion
- prepayment - illiquidity - illiquidity
- derivatives - prepayment - prepayment
- hedging - derivatives - derivatives
- small and mid-market - hedging - hedging
capitalization - small and mid-market - small and mid-market
capitalization capitalization
<CAPTION>
MID-CAP GROWTH
PORTFOLIO MID-CAP VALUE PORTFOLIO SMALL-CAP PORTFOLIO
<S> <C> <C> <C>
What other investment
strategies can the
Portfolio use?
- - Special situations Yes Yes Yes
What other potential - interest rate - interest rate - interest rate
risks can affect a fluctuations fluctuations fluctuations
Portfolio? - credit quality - credit quality - credit quality
- 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 and mid-market - hedging - small and mid-market
capitalization - small and mid-market capitalization
capitalization
<CAPTION>
INTERNATIONAL DIVERSIFIED FIXED INCOME
EQUITY PORTFOLIO PORTFOLIO CASH MANAGEMENT PORTFOLIO
What other investment
strategies can the
Portfolio use?
- - Special situations Yes Yes Yes
What other potential - interest rate - stock market volatility - foreign exposure
risks can affect a fluctuations - growth stocks - euro conversion
Portfolio? - credit quality - foreign exposure - illiquidity
- illiquidity - emerging markets - prepayment
- prepayment - euro conversion
- derivatives - illiquidity
- hedging - prepayment
- derivatives
- hedging
- small and mid-market
capitalization
</TABLE>
19
<PAGE>
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
INVESTMENT TERMINOLOGY
LARGE COMPANIES generally, have market capitalizations of over $5 billion,
although there may be some overlap among capitalization categories.
MEDIUM-SIZED COMPANIES generally have market capitalizations ranging from $1
billion to $5 billion, although there may be some overlap among capitalization
categories. Benchmark indices such as the S&P 400-Registered Trademark- MidCap
Index include issuers with capitalizations ranging from $500 million to $10
billion. Accordingly, Portfolios will consider companies within this
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. A Manager
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. 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,
involving a possible increase in short-term capital gains or losses. Active
trading may result in high portfolio turnover and correspondingly greater
brokerage commissions and other transaction costs, which will be borne directly
by a Portfolio. During periods of increased market volatility, active trading
may be more pronounced.
FIXED INCOME SECURITIES provide consistent interest or dividend payments. They
include corporate bonds, notes, debentures, preferred stocks, convertible
securities, Yankee bonds, 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 Manager).
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 obligations of the issuer; and others are supported
only by the credit of the issuing government agency or instrumentality.
20
<PAGE>
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.
A Portfolio may BORROW for temporary or emergency purposes including to meet
redemptions. Borrowing may exaggerate changes in a Portfolio's net asset value
and yield. Borrowing will cost the Portfolio interest expense and other fees.
The cost of borrowing may reduce the Portfolio's return.
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 U.S.,
including emerging markets. Foreign securities may include foreign corporate and
government bonds, foreign equity securities, American Depositary Receipts (ADRs)
or other similar securities that represents interests in foreign equity
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 not invest
in such investment companies unless, in their judgment, the potential benefits
justify the payment of any associated fees and expenses.
CURRENCY TRANSACTIONS include the purchase and sale of currencies to facilitate
securities transactions and forward currency contracts, which are generally used
to hedge against changes in currency exchange rates.
A CURRENCY BASKET consists of specified amounts of currencies of certain foreign
countries.
An EMERGING MARKET country is generally considered to be a country in the
initial stages of its industrialization cycle with a lower 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
21
<PAGE>
restricted securities (such as Rule 144A securities) are not generally
considered illiquid because of their established institutional trading markets.
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.
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.
HYBRID INSTRUMENTS, such as indexed securities (for example Standard and Poor's
Depositary Receipts) and structured securities, can combine the characteristics
of securities, futures, and options. For example, the principal amount,
redemption, or conversion terms of a security could be related to the market
price of some commodity, currency, or securities index. Such securities may bear
interest or pay dividends at below market (or even relatively nominal) rates.
Under certain conditions, the redemption value of such an investment could be
zero.
A SPECIAL SITUATION arises when, in the opinion of the Manager, the securities
of a particular issuer will be recognized and appreciate in value due to a
specific development with respect to that issuer. Developments creating a
special situation 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 passively managed portion, which seeks to
replicate all or a subset of a nationally-recognized market index.
- - THE S&P 500-REGISTERED TRADEMARK- COMPOSITE STOCK PRICE INDEX, commonly
known as the S&P 500-Registered Trademark-, is an unmanaged index of 500
common stocks that are traded on the New York Stock Exchange, American
Stock Exchange and the NASDAQ National Market, representing approximately
70% of the total domestic U.S. equity market capitalization.
- - THE S&P 400-REGISTERED TRADEMARK- MIDCAP INDEX is an unmanaged index of
common stocks of 400 mid-cap companies, with market capitalizations ranging
from $500 million to $10 billion.
- - RUSSELL 2000-REGISTERED TRADEMARK- INDEX measures the performance of the
2,000 smallest companies in the Russell 3000-Registered Trademark- Index,
which represents approximately 11% of the total market capitalization of
the Russell 3000-Registered Trademark- Index. As of the latest
reconstitution, the average market capitalization was approximately $592.0
million; the median market capitalization was approximately $500.0 million.
The largest company in the index had an approximate market capitalization
of $1,402.7 million.
- - RUSSELL MIDCAP-TM- GROWTH INDEX measures the performance of those Russell
Midcap companies with higher price-to-book ratios and higher forecasted
growth values. The stocks are also members of the Russell
1000-Registered Trademark- Growth index.
22
<PAGE>
- - RUSSELL MIDCAP-TM- VALUE INDEX measures the performance of those Russell
Midcap companies with lower price-to-book ratios and lower forecasted
growth values. The stocks are also members of the Russell
1000-Registered Trademark- Value index.
- - RUSSELL 1000-REGISTERED TRADEMARK- INDEX measures the performance of the
1,000 largest companies in the Russell 3000-Registered Trademark- Index,
which represents approximately 89% of the total market capitalization of
the Russell 3000-Registered Trademark- Index. As of the latest
reconstitution, the average market capitalization was approximately $9.9
billion; the median market capitalization was approximately $3.7 billion.
The smallest company in the index had an approximate market capitalization
of $1,404.7 million.
- - THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) 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 organization.
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.
The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks in
an index according to a single attribute: book-to-price ratio. This splits the
index into two mutually exclusive groups designed to track two of the
predominant investment styles in the U.S. equity market. The value index
contains firms with higher book-to-price ratios; conversely, the growth index
has firms with lower book-to-price ratios. Each company in the index is assigned
to either the value or growth index so that the two style indices "add up" to
the full index. Like the full S&P indexes, the value and growth indexes are
capitalization-weighted, meaning that each stock is weighted in proportion to
its market value.
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 held by
a Portfolio.
INDEXING: 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.
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
quality bonds tend to be more sensitive to changes in interest rates.
23
<PAGE>
GROWTH STOCKS: 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 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, 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.
24
<PAGE>
HEDGING: A strategy in which a Manager uses a derivative to offset the risk
that other instruments 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 Manager 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 AND MID-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. Consequently, the
securities of smaller companies may not be as readily marketable and may be
subject to more abrupt or erratic market movements. Securities of medium sized
companies are usually more volatile than shares of large companies and entail
greater risks.
NON-DIVERSIFICATION: Non-diversified investment companies can invest a larger
portion of their assets in the stock of a single company than can diversified
investment companies, and thus they can concentrate in a smaller number of
stocks. 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
Subadvisers for the Portfolios, serves as Manager for certain Portfolios or
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):
<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>
25
<PAGE>
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
- -------------------------------------------------- -------------------------------------------------
<S> <C> <C>
(INCLUDING BREAKPOINTS)
Large-Cap Growth Portfolio First $250 million 0.80%
Next $250 million 0.75%
Over $500 million 0.70%
Large-Cap Composite Portfolio First $250 million 0.80%
Next $250 million 0.75%
Over $500 million 0.70%
Large-Cap Value Portfolio First $250 million 0.80%
Next $250 million 0.75%
Over $500 million 0.70%
Mid-Cap Growth Portfolio First $250 million 0.85%
Next $250 million 0.80%
Over $500 million 0.75%
Mid-Cap Value Portfolio First $250 million 0.85%
Next $250 million 0.80%
Over $500 million 0.75%
Small-Cap Portfolio First $250 million 0.85%
Next $250 million 0.80%
Over $500 million 0.75%
International Equity Portfolio 1.00%
Diversified Fixed Income Portfolio First $200 million 0.70%
Next $200 million 0.65%
Over $400 million 0.60%
Cash Management Portfolio First $100 million 0.55%
Next $200 million 0.50%
Thereafter 0.45%
</TABLE>
SunAmerica compensates the Subadviser(s) out of the fees that it receives from
the Portfolios. SunAmerica may terminate any agreement with a Subadviser(s)
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 Subadviser(s) 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
Subadviser(s) for new or existing Portfolios, change the terms of particular
agreements with Subadviser(s) or continue the employment of existing
Subadviser(s) after events that would otherwise cause an automatic termination
of a Subadviser(s) agreement. Shareholders of a Portfolio have the right to
terminate an agreement with a Subadviser(s) 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 Subadviser(s) changes. The order also
permits the Trust to disclose to shareholders the Subadviser(s) fees only in the
aggregate for each Portfolio. Each of the Subadviser(s) is independent of
26
<PAGE>
SunAmerica and discharges its responsibilities subject to the policies of the
Trustees and the oversight and supervision of SunAmerica, which pays the
Subadviser(s) 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 $17 billion as of December 31, 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 Subadviser(s), 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.
<TABLE>
<CAPTION>
PORTFOLIO MANAGEMENT ALLOCATED AMONG
PORTFOLIO THE FOLLOWING MANAGERS
<S> <C>
- -------------------------------------------------------------------------------------------
Multi-Managed Growth Portfolio - Janus (through Janus/Growth component)
- SunAmerica (through
SunAmerica/Aggressive Growth component
and SunAmerica/Balanced component)
- WMC (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) WMC
(through WMC/Fixed Income component)
- -------------------------------------------------------------------------------------------
Multi-Managed Income/Equity Portfolio - Janus (through Janus/Growth component)
- SunAmerica (through
SunAmerica/Balanced component)
- WMC (through WMC/Fixed Income
component)
- -------------------------------------------------------------------------------------------
Multi-Managed Income Portfolio - Janus (through Janus/Growth component)
- SunAmerica (through
SunAmerica/Balanced component
- WMC (through WMC/Fixed Income
component)
- -------------------------------------------------------------------------------------------
Asset Allocation: Diversified Growth Portfolio - Putnam Investment Management, Inc.
("Putnam")
- -------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO MANAGEMENT ALLOCATED AMONG
PORTFOLIO THE FOLLOWING MANAGERS
<S> <C>
- -------------------------------------------------------------------------------------------
Stock Portfolio - T. Rowe Price Associates, Inc. ("T.
Rowe Price")
- -------------------------------------------------------------------------------------------
Large-Cap Growth Portfolio - Bankers Trust Company ("Bankers
Trust")
- Goldman Sachs Asset Management
("GSAM")
- Janus
- -------------------------------------------------------------------------------------------
Large-Cap Composite Portfolio - Bankers Trust
- SunAmerica
- T. Rowe Price
- -------------------------------------------------------------------------------------------
Large-Cap Value Portfolio - Bankers Trust
- T. Rowe Price
- WMC
- -------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio - Bankers Trust
- T. Rowe Price
- WMC
- -------------------------------------------------------------------------------------------
Mid-Cap Value Portfolio - Bankers Trust
- GSAM
- Lord, Abbett & Co. ("Lord Abbett")
- -------------------------------------------------------------------------------------------
Small-Cap Portfolio - Bankers Trust
- Lord Abbett
- SunAmerica
- -------------------------------------------------------------------------------------------
International Equity Portfolio - Bankers Trust
- Goldman Sachs Asset Management
International ("GSAM-International")
- Lord Abbett
- -------------------------------------------------------------------------------------------
Diversified Fixed Income Portfolio - Bankers Trust
- SunAmerica
- WMC
- -------------------------------------------------------------------------------------------
Cash Management Portfolio - SunAmerica
- -------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
INFORMATION ABOUT THE SUBADVISERS:
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 September 30, 1998, Bankers Trust
managed approximately $338 billion in assets.
GOLDMAN SACHS ASSET MANAGEMENT AND GOLDMAN SACHS ASSET MANAGEMENT
INTERNATIONAL. GSAM, One New York Plaza, New York, New York 10004, a separate
operating division of Goldman Sachs & Co., registered as an investment adviser
in 1981. GSAM-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 November 30, 1998, GSAM and
GSAM-International, together with their affiliates, acted as investment adviser
or distributor for assets in excess of $192 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 December 31, 1998, had assets under management of
approximately $108 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 as of December 31, 1998 managed about $29.4 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 $294 billion as of December 31, 1998.
T. ROWE PRICE ASSOCIATES, INC. T. ROWE PRICE is a Maryland corporation with
principal offices at 100 East Pratt Street, Baltimore, Maryland 21202. T. Rowe
Price serves as investment adviser to the T. Rowe Price family of no-load mutual
funds and to individual and institutional clients. T. Rowe Price and its
affiliates managed assets in excess of $148 billion as of December 31, 1998.
WELLINGTON MANAGEMENT COMPANY, LLP. WMC is a Massachusetts limited liability
partnership. The principal offices of WMC are located at 75 State Street,
Boston, Massachusetts 02109. WMC is a professional investment counseling firm
which provides investment services to investment companies, employee benefit
plans, endowments, foundations, and other institutions and individuals. As of
December 31, 1998, WMC had discretionary management authority with respect to
approximately $211.3 billion of assets.
29
<PAGE>
PORTFOLIO MANAGEMENT: The primary investment manager(s) and/or the management
team(s) for each Portfolio and Managed Component is set forth in the following
table.
<TABLE>
<CAPTION>
NAME AND TITLE OF PORTFOLIO
PORTFOLIO OR MANAGER(S) MANAGER(S) (AND/OR EXPERIENCE
MANAGED COMPONENT MANAGEMENT TEAM(S))
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
SunAmerica SunAmerica - Donna M. Calder Ms. Calder has been a
Aggressive Growth Vice President and portfolio manager since
component (Multi- Portfolio Manager joining the firm in March
Managed Seasons (Domestic Equity 1998. Prior to joining
Portfolio) Investment Team) SunAmerica, Ms. Calder was
the Founder and General
Partner of Manhattan Capital
Partners, L.P. (1991-1995)
- -------------------------------------------------------------------------------------------
SunAmerica/ SunAmerica - Francis D. Gannon Mr. Gannon has been a
Balanced component Vice President and portfolio manager with the
(Multi-Managed Portfolio Manager firm since 1996. He joined
Seasons Portfolio) (Domestic Equity SunAmerica as an equity
Investment Team) analyst in 1993.
- Fixed Income Investment
Team
- -------------------------------------------------------------------------------------------
Janus/Growth Janus - Warren B. Lammert Mr. Lammert first joined
component (Multi- Executive Vice President Janus in 1987 and has been a
Managed Seasons Portfolio Manager portfolio manager with the
Portfolio) firm since 1993. He is a
Chartered Financial Analyst.
- -------------------------------------------------------------------------------------------
WMC/Fixed Income WMC - Thomas L. Pappas Senior Mr. Pappas has been a
component (Multi- Senior Vice President and portfolio manager with WMC
Managed Seasons Partner since joining the firm in
Portfolio) 1987. He is a Chartered
Financial Analyst.
- -------------------------------------------------------------------------------------------
Asset Allocation: Putnam - Global Asset Allocation N/A
Diversified Growth Committee
Portfolio
- -------------------------------------------------------------------------------------------
Stock Portfolio T. Rowe Price - Robert W. Smith Mr. Smith has been managing
Managing Director, investments with T. Rowe
Chairman, Vice President Price since joining the firm
and Equity Portfolio in 1992.
Manager
(Investment Advisory
Committee)
- -------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
NAME AND TITLE OF PORTFOLIO
PORTFOLIO OR MANAGER MANAGER(S) (AND/OR MANAGE- EXPERIENCE
MANAGED COMPONENT MENT TEAM(S))
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
LARGE-CAP GROWTH BANKERS TRUST - Frank Salerno Mr. Salerno has been an
PORTFOLIO Managing Director and investment officer since
Chief Investment Officer joining Bankers Trust in
of Structured Investments 1981.
(passively managed
portion)
----------------------------------------------------------------------
GSAM - George D. Adler Mr. Adler joined GSAM in
Vice President and Senior 1997. From 1990 to 1997, he
Portfolio Manager was a portfolio manager at
Liberty Investment Manage-
ment, Inc. ("Liberty").
- Robert G. Collins Mr. Collins joined GSAM in
Vice President and Senior 1997. From 1991 to 1997, he
Portfolio Manager was a portfolio manager at
Liberty. His past experiences
include work as a special
situations analyst with
Raymond James & Associates
for five years.
- Herbert E. Ehlers Mr. Ehlers joined GSAM in
Managing Director and 1997. From 1994 to 1997, he
Senior Portfolio Manager was the Chief Investment
Officer and Chairman at Lib-
erty. He was a portfolio man-
ager and president at
Liberty's predecessor firm,
Eagle Asset Management, from
1984 to 1994.
- Gregory H. Ekizian Mr. Ekizian joined GSAM in
Vice President and Senior 1997. From 1990 to 1997, he
Portfolio Manager was a portfolio manager at
Liberty and its predecessor
firm, Eagle Asset Management.
- David G. Shell Mr. Shell joined GSAM in
Vice President and Senior 1997. From 1987 to 1997, he
Portfolio Manager was a portfolio manager at
Liberty and its predecessor
firm, Eagle Asset Management.
- -------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
NAME AND TITLE OF PORTFOLIO
PORTFOLIO OR MANAGER MANAGER(S) (AND/OR MANAGE- EXPERIENCE
MANAGED COMPONENT MENT TEAM(S))
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
- Ernest C. Segundo, Jr. Mr. Segundo joined GSAM in
Vice President and Senior 1997. From 1992 to 1997, he
Portfolio Manager was a portfolio manager at
Liberty.
----------------------------------------------------------------------
Janus - Marc Pinto Mr. Pinto has been the Vice
Vice President of President of Portfolio
Portfolio Management and Management of Janus since
Portfolio Manager 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 See above.
Executive Vice President
and Portfolio Manager
- -------------------------------------------------------------------------------------------
Large-Cap Bankers Trust - Frank Salerno See above.
Composite Portfolio Managing Director and
Chief Investment Officer
of Structured Investments
(passively managed
portion)
----------------------------------------------------------------------
SunAmerica - Francis D. Gannon See above.
Vice President and
Portfolio Manager
(Domestic Equity
Investment Team)
----------------------------------------------------------------------
T. Rowe Price - Robert W. Smith See above.
Chairman, Managing
Director, Vice President
and Equity Portfolio
Manager (Investment
Advisory Committee)
- -------------------------------------------------------------------------------------------
Large-Cap Value Bankers Trust - Frank Salerno See above.
Portfolio Managing Director and
Chief Investment Officer
of Structured Investments
(passively managed
portion)
- -------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
NAME AND TITLE OF PORTFOLIO
PORTFOLIO OR MANAGER MANAGER(S) (AND/OR MANAGE- EXPERIENCE
MANAGED COMPONENT MENT TEAM(S))
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
T. ROWE PRICE - Brian C. Rogers Mr. Rogers has been managing
Chairman investments at T. Rowe Price
(Investment Advisory since 1983.
Committee)
----------------------------------------------------------------------
WMC - John R. Ryan Mr. Ryan joined WMC in 1981
Senior Vice President and as a portfolio manager on the
Managing Partner firm's Value Yield Team.
(Value/Yield Team)
- Steven T. Irons Mr. Irons joined WMC in 1993
Vice President and Equity as a research analyst on the
Research Analyst firm's Value Yield Team.
- -------------------------------------------------------------------------------------------
Mid-Cap Growth Bankers Trust - Frank Salerno See above.
Portfolio Managing Director and
Chief Investment Officer
of Structured Investments
(passively managed
portion)
----------------------------------------------------------------------
T. Rowe Price - Donald J. Peters Mr. Peters has been a
Vice President, Portfolio portfolio manager and
Manager & Quantitative quantitative investment
Investment Analyst analyst for T. Rowe Price's
Equity Research Division
since joining the firm in
1993.
----------------------------------------------------------------------
WMC - Robert D. Rands Mr. Rands joined WMC in 1978
Senior Vice President and as a special situations
Partner analyst and became a
portfolio manager in 1983.
- Steven Angeli Mr. Angeli joined WMC as a
Vice President and Portfo- research analyst in 1997
lio Manager after receiving his MBA from
Darden Graduate School of
Business Administration at
the University of Virginia.
Prior to joining WMC, Mr.
Angeli worked at Fidelity
Management and Research
Company from 1990-1992.
- -------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
NAME AND TITLE OF PORTFOLIO
PORTFOLIO OR MANAGER MANAGER(S) (AND/OR MANAGE- EXPERIENCE
MANAGED COMPONENT MENT TEAM(S))
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Mid-Cap Value Bankers Trust - Frank Salerno See above.
Portfolio Managing Director and
Chief Investment Officer
of Structured Investments
(passively managed
portion)
----------------------------------------------------------------------
GSAM - Eileen Aptman Ms. Aptman joined GSAM in
Vice President and Senior 1993 and has been a portfolio
Portfolio Manager manager for GSAM funds since
1996.
- Paul D. Farrell Mr. Farrell has been a
Vice President and Senior portfolio manager for GSAM
Portfolio Manager funds since 1992.
- Matthew B. McLennan Mr. McLennan joined GSAM in
Vice President and Senior 1995. From 1994 to 1995, he
Portfolio Manager worked in the Investment
Banking Division of GSAM in
Australia. From 1991 to 1994,
Mr. McLennan worked at
Queensland Investment Corpo-
ration in Australia.
- Karma Wilson Ms. Wilson joined GSAM in
Vice President and Senior 1994. Prior to 1994, she was
Portfolio Manager an investment analyst with
Bankers Trust Australia Ltd.
----------------------------------------------------------------------
Lord Abbett - Edward K. von der Linde Mr. von der Linde has been a
Portfolio Manager portfolio manager with Lord
Abbett since 1995. He joined
the firm as an equity analyst
in 1988.
- Howard E. Hansen Mr. Hansen joined Lord Abbett
Associate Portfolio Man- as an equity analyst in 1995.
ager He has been an associate
portfolio manager since 1997.
From 1990-1994, he was an
equity analyst at Alfred Berg
Inc.
- -------------------------------------------------------------------------------------------
Small-Cap Portfolio Bankers Trust - Frank Salerno See above.
Managing Director and
Chief Investment Officer
of Structured Investments
(passively managed
portion)
- -------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
NAME AND TITLE OF PORTFOLIO
PORTFOLIO OR MANAGER MANAGER(S) (AND/OR MANAGE- EXPERIENCE
MANAGED COMPONENT MENT TEAM(S))
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Lord Abbett - Stephen J. McGruder Mr. McGruder has been a port-
Senior Portfolio Manager folio manager with Lord
Abbett since joining the firm
in May 1995. Prior to joining
Lord Abbett, Mr. McGruder
served from October 1988 as
Vice President of Wafra
Investment Advisory Group, a
private investment company.
----------------------------------------------------------------------
SunAmerica - Donna Calder See above.
Portfolio Manager
(Domestic Equity
Investment Team)
- -------------------------------------------------------------------------------------------
International Bankers Trust - Frank Salerno See above.
Equity Portfolio Managing Director and
Chief Investment Officer
of Structured Investments
(passively managed
portion)
----------------------------------------------------------------------
GSAM- - Guy P. de C. Bennet Mr. Bennet joined GSAM as a
International Vice President and portfolio manager in 1996 and
Portfolio Manager is also co-head of GSAM's
Japanese Equity Group in
Tokyo. From 1984 to 1996, he
was a portfolio manager and
an Executive Director at CIN
Management.
- Ivor H. Farman Mr. Farman joined GSAM as a
Executive Director and senior portfolio manager in
Portfolio Manager 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.
- -------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
NAME AND TITLE OF PORTFOLIO
PORTFOLIO OR MANAGER MANAGER(S) (AND/OR MANAGE- EXPERIENCE
MANAGED COMPONENT MENT TEAM(S))
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
- Shogo Maeda Mr. Maeda joined GSAM as a
Managing Director and portfolio manager in 1994.
Portfolio Manager From 1987 to 1994, he worked
at Nomura Investment Manage-
ment Incorporated as a Senior
Portfolio Manager.
- Warwick M. Negus Mr. Negus joined GSAM as a
Managing Director and Co- portfolio manager in 1994.
Head of Emerging Market From 1987 to 1994, he was a
Equities 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 GSAM's
global asset allocation
committee.
- Susan Noble Ms. Noble joined GSAM as a
Executive Director and senior portfolio manager and
Senior Portfolio Manager head of the European Equity
team in October 1997. From
1986 to 1997, she worked at
Fleming Investment Manage-
ment in London, where she
most recently was Portfolio
Management Director for the
European equity investment
strategy and process.
----------------------------------------------------------------------
Lord Abbett - Christopher Taylor Mr. Taylor is Managing Direc-
Portfolio Manager tor of Fuji -Lord Abbett
International, Limited, where
he has worked since 1987.
- -------------------------------------------------------------------------------------------
Diversified Fixed Bankers Trust - Frank Salerno See above.
Income Portfolio Managing Director and
Chief Investment Officer
of Structured Investments
(passively managed
portion)
- -------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
NAME AND TITLE OF PORTFOLIO
PORTFOLIO OR MANAGER MANAGER(S) (AND/OR MANAGE- EXPERIENCE
MANAGED COMPONENT MENT TEAM(S))
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
SunAmerica - John W. Risner Mr. Risner joined SunAmerica
Vice President and as portfolio manager in 1997.
Portfolio Manager From 1992 to 1997, Mr. Risner
(Fixed Income Investment managed the High-Yield and
Team) Convertible Bond portfolios
for Value Line Asset
Management.
----------------------------------------------------------------------
WMC - John C. Keogh Mr. Keogh joined WMC as a
Senior Vice President and portfolio manager in 1985.
Partner
- -------------------------------------------------------------------------------------------
Cash Management SunAmerica - Fixed Income Investment N/A
Portfolio Team
- -------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
- --------------------------------------------------------------------------------
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.
The Seasons and Seasons Select Variable Annuity Contracts offer four
variable investment "Strategies." You should be aware that if you select a
Strategy you will not invest directly in one of the Portfolios. Instead, each
Strategy 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 Seasons and Seasons Select Variable Annuity
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 Variable Annuity Contract in the prospectus that offers the
Contract, 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 Variable Annuity Account Five buys and sells 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.
During periods of extreme volatility or market crisis, 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.
38
<PAGE>
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 qualified as a regulated investment
company, it will not be subject to federal income tax on the earnings that it
distributes to its shareholders.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
YEAR 2000 Many computer and computer-based systems cannot distinguish the year
2000 from the year 1900 because of the way they 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.
39
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD)
- --------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Net
realized & Dividends Dividends
Net Asset Net unrealized declared from net
Value investment gain (loss) Total from from net realized
beginning of income on investment investment gain on
Period 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)
- -----------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------- ------------------------------------------------------
Ratio of Ratio of
expenses net
to investment
Net Assets average income to
Net Asset Total end of net average
Value end Return period assets net assets Portfolio
Period ended of period (3) (000's) (4)(5) (4)(5) Turnover
- -------------------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
4/15/97-3/31/98 $12.85 31.55% $ 32,481 1.29% 1.52% 114%
4/15/97-3/31/98 12.37 26.86 32,622 1.21 2.36 101
4/15/97-3/31/98 11.79 21.10 25,957 1.14 3.72 46
4/15/97-3/31/98 11.29 16.81 18,378 1.06 4.69 47
4/15/97-3/31/98 11.71 20.09 50,384 1.21 2.06 166
4/15/97-3/31/98 14.66 48.59 42,085 1.21 0.24 46
- -------------------- ------------------------------------------------------
</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) Annualized
(5) 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 (4) Net Investment Income (4)
<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>
40
<PAGE>
- --------------------------------------------------------------------------------
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
Securities and Exchange Commission'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 Securities and Exchange Commission, 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
41
<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") dated February 1, 1999. This Statement of Additional
Information incorporates the Prospectus by reference. Capitalized terms used
herein but not defined, have the meanings assigned to them in the Prospectus.
The Prospectus may be obtained without charge by calling (800) 445-7862 or
writing to the Trust at the following address:
P.O. Box 54299
Los Angeles, California 90054-0299
February 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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-55
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES...........................................B-60
SHARES OF THE TRUST..................................................................B-60
PRICE OF SHARES......................................................................B-61
EXECUTION OF PORTFOLIO TRANSACTIONS..................................................B-62
GENERAL INFORMATION..................................................................B-65
Custodian...................................................................B-65
Independent Accountants and Legal Counsel...................................B-65
Reports to Shareholders.....................................................B-65
Shareholder and Trustee Responsibility......................................B-65
Registration Statement......................................................B-65
Financial Statements........................................................B-66
</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") .
On October 30, 1998, the Board of Trustees approved the creation of
the Large-Cap Growth, Large-Cap Composite, Large-Cap Value, Mid-Cap Growth,
Mid-Cap Value, Small-Cap, International Equity, Diversified Fixed Income and
Cash Management Portfolios. The Board of Trustees may establish additional
series in the future.
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, with the Multi-Managed Seasons Portfolios, 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 (each,
a "Multi-Managed Seasons Select Portfolio," and collectively, the
"Multi-Managed Seasons Select Portfolios") and the Cash Management Portfolio
(collectively, with the Multi-Managed Seasons Select Portfolios, the "Seasons
Select Portfolios") are available in addition to the Seasons Portfolios
through the Seasons Select Variable Annuity Contract. The Multi-Managed
Seasons and the Multi-Managed Seasons Select Portfolios, as described more
fully in the Prospectus, are managed by more than one investment adviser.
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
American International Group, Inc. ("AIG"), a Delaware 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, a "Manager" and together with SunAmerica, the "Managers") to assist in
management of one or more Portfolios.
B-3
<PAGE>
Under Massachusetts law, shareholders of a trust, such as the Trust, in
certain circumstances may beheld personally liable as partners for the
obligations of the trust. However the Declaration of Trust, pursuant to which
the Trust was organized, contains an express disclaimer of shareholder liability
for acts or obligations of the Trust. The Declaration of Trust also provides for
indemnification out of the Trust's property for any shareholder held personally
liable for any Trust obligation. Thus the risk of a shareholder being personally
liable as a partner for obligations of the Trust, is limited to the unlikely
circumstance in which the Trust itself would be unable to meet its obligations.
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
B-4
<PAGE>
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, 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.
B-5
<PAGE>
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 or other similar securities representing
interests in 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 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. 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,
B-6
<PAGE>
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 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 a Manager 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
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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.
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 Manager to be of comparable quality.
The Janus/Growth component, the Large-Cap Growth Portfolio and the
International Equity Portfolio 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 Manager to be of comparable quality.
The SunAmerica/Balanced component may invest up to 10% of total assets
in securities rated as low as BBB (or determined by the Manager 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 Manager 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 Manager 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 Manager to be of comparable quality).
The Small-Cap Portfolio, the Mid-Cap Value Portfolio, and
the Diversified Fixed Income Portfolio may invest up to 20% of their
respective assets in securities rated below Baa by Moody's or BBB by Standard
& Poor's and no more than 10% of their respective assets in bonds rated as
low as C by Moody's or D by Standard & Poor's. In addition, the portion of the
Large-Cap Portfolio managed by Janus Capital Corporation ("Janus") may invest
up to 35% of the assets allocated to it
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in securities rated below Baa by Moody's or BBB by Standard & Poors; and the
portion of the Large-Cap Growth and Mid-Cap Value Portfolios allocated to
Goldman Sachs Asset Management and the portion of the International Equity
Portfolio allocated to Goldman Sachs Asset Management-International may
invest no more than 10% of the assets allocated to it in bonds rated as low as
C by Moody's or D By Standard & Poors. In each case, securities that are not
rated will be subject to the percentage limitations of securities determined
by the Manager to be of comparable quality as stated herein.
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 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. Each Portfolio may also invest in
mortgage-related securities, including certain U.S. government securities
such as GNMA, Federal National Mortgage Association ("FNMA") or Federal Home
Loan Mortgage Corporation ("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
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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 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
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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 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 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 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
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(or represent custodial arrangements administered by such
institutions). These originators and institutions include commercial
banks, savings and loans associations, credit unions, savings banks,
insurance companies, investment banks or special purpose subsidiaries
of the foregoing. For federal income tax purposes, such trusts are
generally treated as grantor trusts or REMICs and, in either case, are
generally not subject to any significant amount of federal income tax
at the entity level.
The mortgage pools underlying Conventional Mortgage Pass-Throughs
consist of conventional mortgage loans evidenced by promissory notes
secured by first mortgages or first deeds of trust or other similar
security instruments creating a first lien on residential or mixed
residential and commercial properties. Conventional Mortgage
Pass-Throughs (whether fixed or adjustable rate) provide for monthly
payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual
borrowers on the pooled mortgage loans, net of any fees or other amount
paid to any guarantor, administrator and/or servicer of the underlying
mortgage loans. A trust fund with 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 , 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
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underlying mortgages are not passed through to the holders of the CMOs
as such (I.E., the character of payments of principal and interest is
not passed through, and therefore payments to holders of CMOs
attributable to interest paid and principal repaid on the underlying
mortgages do not necessarily constitute income and return of capital,
respectively, to such holders), but such payments are dedicated to
payment of interest on and repayment of principal of the CMOs.
Principal and interest on the underlying mortgage assets may be
allocated among the several classes of CMOs in various ways. In certain
structures (known as "sequential pay" CMOs), payments of principal,
including any principal prepayments, on the mortgage assets generally
are applied to the classes of CMOs in the order of their respective
final distribution dates. Thus, no payment of principal will be made on
any class of sequential pay CMOs until all other classes having an
earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel
pay" CMOs. Parallel pay CMOs are those 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 accrue interest at a
specified rate only 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.
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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 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.
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If the Portfolio experiences unexpected net redemptions, this may
force it to sell high-yield bonds without regard to their investment
merits, thereby decreasing the asset base upon which expenses can be
spread and possibly reducing the Portfolio's rate of return.
LIQUIDITY AND VALUATION - There may be little trading in the
secondary market for particular bonds, which may affect adversely a
Portfolio's ability to value accurately or dispose of such bonds.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of
high-yield bonds, especially in a thin market.
ASSET-BACKED SECURITIES. Each Portfolio may invest in asset-backed
securities. These securities, issued by trusts and special purpose
corporations, are backed by a pool of assets, such as credit card and
automobile loan receivables, representing the obligations of a number of
different parties.
Asset-backed securities present certain risks. For instance, in the
case of credit card receivables, these securities may not have the benefit of
any security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicer to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.
Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors to make payments on underlying assets, the
securities may contain elements of credit support 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.
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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 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.
LOAN PARTICIPATIONS. The WMC/Fixed Income component, the Janus/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 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 Manager, 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 a
Manager 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,
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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 Manager 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 certificates of
deposit. In addition, Janus may invest idle cash of the
Janus/Growth component of each Multi-Managed Seasons Portfolio and
their portion of the Large-Cap Growth Portfolio in money market
mutual funds that it manages.
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, the Janus/Growth
Component of each Multi-Managed Seasons Portfolio and Janus' portion
of the Large-Cap Growth 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, the
Janus/Growth Component of each Multi-Managed Seasons Portfolio and
Janus' portion of the Large-Cap Growth 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
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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 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 Manager,
subject to the direction of the Trustees, monitors on an ongoing basis, the
earning power, cash flow and other liquidity ratios of the borrower, and its
ability to pay principal and interest on demand. The Manager also considers
the extent to which the variable amount master demand notes are backed by
bank letters of credit. These notes generally are not rated by Moody's 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 Manager has reason to believe that the borrower could not make timely
repayment upon demand.
CORPORATE BONDS AND NOTES - A Portfolio may purchase corporate
obligations that mature or that may be redeemed in one year (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 Manager, 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
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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 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 Managers in connection
with transactions in repurchase agreements and will regularly monitor each
Portfolio's use of repurchase agreements. A Portfolio will not invest in
repurchase agreements maturing in more than seven days if the aggregate of
such investments along with other illiquid securities exceeds 15% (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 Multi-Managed Seasons and Multi-Managed
Seasons Select 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
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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 segregates cash or other liquid assets at all 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 be listed on either (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 a Manager 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
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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) 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
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exercised. If the call is not exercised or sold (whether or not at a
profit), it will become worthless at its expiration date and a Portfolio will
lose its premium payment and the right to purchase the underlying investment.
A put option on securities gives the purchaser the right to sell,
and the writer the obligation to buy, the underlying investment at the
exercise price during the option period. Writing a put covered by segregated
liquid assets equal to the exercise price of the put has the same economic
effect to a Portfolio as writing a covered call. The premium a Portfolio
receives from writing a put option represents a profit as long as the price
of the underlying investment remains above the exercise price. However, a
Portfolio has also assumed the obligation during the option period to buy the
underlying investment from the buyer of the put at the exercise price, even
though the value of the investment may fall below the exercise price. If the
put expires unexercised, a Portfolio (as the writer of the put) realizes a
gain in the amount of the premium. If the put is exercised, a Portfolio must
fulfill its obligation to purchase the underlying investment at the exercise
price, which will usually exceed the market value of the investment at that
time. In that case, a Portfolio may incur a loss, equal to the sum of the
sale price of the underlying investment and the premium received minus the
sum of the exercise price and any transaction costs incurred.
A Portfolio may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an underlying
security from being put. Furthermore, effecting such a closing purchase
transaction will permit a Portfolio to write another put option to the extent
that the exercise price thereof is secured by the deposited assets, or to
utilize the proceeds from the sale of such assets for other investments by the
Portfolio. A Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the option.
When a Portfolio purchases a put, it pays a premium and has the right
to sell the underlying investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying a put on an
investment a Portfolio owns enables the Portfolio to protect itself during the
put period against a decline in the value of the underlying investment below the
exercise price by selling such underlying investment at the exercise price to a
seller of a corresponding put. If the market price of the underlying investment
is equal to or above the exercise price and as a result the put is not exercised
or resold, the put will become worthless at its expiration date, and the
Portfolio will lose its premium payment and the right to sell the underlying
investment pursuant to the put. The put may, however, be sold prior to
expiration (whether or not at a profit).
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.
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When writing put options on securities, to secure its obligation to pay
for the underlying security, a Portfolio will deposit in escrow liquid assets
with a value equal to or greater than the exercise price of the underlying
securities. A Portfolio therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of a Portfolio as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring a Portfolio to take delivery of the underlying security against
payment of the exercise price. A Portfolio has no control over when it may be
required to purchase the underlying security, since it may be assigned an
exercise notice at any time prior to the termination of its obligation as the
writer of the put. This obligation terminates upon expiration of the put, or
such earlier time at which a Portfolio effects a closing purchase transaction by
purchasing a put of the same series as that previously sold. Once a Portfolio
has been assigned an exercise notice, it is thereafter not allowed to effect a
closing purchase transaction.
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 provided only 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.
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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 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
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would decline, but the value of that Portfolio's interest rate futures
contracts would be expected to increase at approximately the same rate,
thereby keeping the net asset value of that Portfolio from declining as much
as it otherwise would have. On the other hand, if interest rates were
expected to decline, interest rate futures contracts may be purchased to
hedge in anticipation of subsequent purchases of long-term bonds at higher
prices. Since the fluctuations in the value of the interest rate futures
contracts should be similar to that of long-term bonds, a Portfolio could
protect itself against the effects of the anticipated rise in the value of
long-term bonds without actually buying them until the necessary cash became
available or the market had stabilized. At that time, the interest rate
futures contracts could be liquidated and that Portfolio's cash reserves
could then be used to buy long-term bonds on the cash market.
Purchases or sales of stock or bond index futures contracts are used
for hedging purposes to attempt to protect a Portfolio's current or intended
investments from broad fluctuations in stock or bond prices. For example, a
Portfolio may sell stock or bond index futures contracts in anticipation of
or during a market decline to attempt to offset the decrease in market value
of the Portfolio's securities portfolio that might otherwise result. If such
decline occurs, the loss in value of portfolio securities may be offset, in
whole or part, by gains on the Futures position. When a Portfolio is not
fully invested in the securities market and anticipates a significant market
advance, it may purchase stock or bond index futures contracts in order to
gain rapid market exposure that may, in part or 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
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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 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
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interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. No price is paid or
received upon the purchase or sale of a Forward Contract.
A Portfolio may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities a Portfolio
owns or intends to acquire, but it does fix a rate of exchange in advance. In
addition, although Forward Contracts limit the risk of loss due to a decline in
the value of the hedged currencies, at the same time they limit any potential
gain that might result should the value of the currencies increase.
A Portfolio may enter into Forward Contracts with respect to
specific transactions. For example, when a Portfolio enters into a contract
for the purchase or sale of a security denominated in (or affected by
fluctuations in, in the case of ADRs) a foreign currency, or when a Portfolio
anticipates receipt of dividend payments in a foreign currency, the Portfolio
may desire to "lock-in" the U.S. dollar price of the security or the U.S.
dollar equivalent of such payment by entering into a Forward Contract, for a
fixed amount of U.S. dollars per unit of foreign currency, for the purchase
or sale of the amount of foreign currency involved in the underlying
transaction. A Portfolio will thereby be able to protect itself against a
possible loss resulting from an adverse change in the relationship 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
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under Forward Contracts entered into with respect to position hedges and
cross-hedges. If the value of the securities placed in a separate account
declines, additional cash or securities will be placed in the account on a
daily basis so that the value of the account will equal the amount of the
Portfolio's commitments with respect to such contracts. As an alternative to
maintaining all or part of the separate account, a Portfolio may purchase a
call option permitting the Portfolio to purchase the amount of foreign
currency being hedged by a forward sale contract at a price no higher than
the Forward Contract price or the Portfolio may purchase a put option
permitting the Portfolio to sell the amount of foreign currency subject to a
forward purchase contract at a price as high or higher than the Forward
Contract price. Unanticipated changes in currency prices may result in poorer
overall performance for a Portfolio than if it had not entered into such
contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the future
value of such securities in foreign currencies will change as a consequence
of market movements in the value of these securities between the date the
Forward Contract is entered into and the date it is sold. Accordingly, it may
be necessary for a Portfolio to purchase additional foreign currency on the
spot (I.E., cash) market (and bear the expense of such purchase), if the
market value of the security is less than the amount of foreign currency a
Portfolio is obligated to deliver and if a decision is made to sell the
security 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.
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Although a Portfolio values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. A Portfolio may convert foreign currency from time
to time, and investors should be aware of the costs of currency conversion.
Foreign exchange dealers do not charge a fee for conversion, but they do seek
to realize a profit based on the difference between the prices at which they
buy and sell various currencies. Thus, a dealer may offer to sell a foreign
currency to a Portfolio at one rate, while offering a lesser rate of exchange
should the Portfolio desire to resell that currency to the dealer.
ADDITIONAL INFORMATION ABOUT 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
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margin and option premiums, and (ii) enter into non-hedging transactions,
provided that the Portfolio may not enter into such non-hedging transactions
if, immediately thereafter, the sum of the amount of initial margin deposits
on the Portfolio's existing Futures positions and option premiums would
exceed 5% of the fair value of its portfolio, after taking into account
unrealized profits and unrealized losses on any such transactions. Margin
deposits may consist of cash or securities acceptable to the broker and the
relevant contract market.
Transactions in options by a Portfolio are subject to limitations
established by each of the exchanges governing the maximum number of options
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 Manager'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.
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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 Manager then
determines not to invest in such securities at that time because of concerns
as to possible further market decline or for other reasons, the Portfolio
will realize a loss 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
Manager 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
B-31
<PAGE>
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 before its nominal fixed-term on seven days or less
notice is regarded as a liquid instrument. The Manager will monitor the
liquidity of such restricted securities subject to the supervision of the
Trustees. In reaching liquidity decisions the Manager will consider, INTER ALIA,
pursuant to guidelines and procedures established by the Trustees, the following
factors: (1) the frequency of trades and quotes for the security; (2) the number
of dealers wishing to purchase or sell the security and the number of other
potential purchasers; (3) dealer undertakings to make a market in the security;
and (4) the nature of the security and the nature of the marketplace trades
(E.G., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer). 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
Manager has determined to be liquid pursuant to guidelines established by the
Trustees. The Trustees delegated to the Manager the function of making
day-to-day determinations of liquidity with respect to Section 4(2) paper,
pursuant to guidelines approved by the Trustees that require the Manager to
take into account the same factors described above for other restricted
securities and require the Manager to perform the same monitoring and
reporting functions.
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
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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 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
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than a specified level, and payoffs of less than par if rates were above the
specified level. Furthermore, the Portfolio could limit the downside risk of
the security by establishing a minimum redemption price so that the principal
paid at maturity could not be below a predetermined minimum level if interest
rates were to rise significantly. The purpose of this arrangement, known as a
structured security with an embedded put option, would be to give the
Portfolio the desired European bond exposure while avoiding currency risk,
limiting downside market risk, and lowering transactions costs. Of course,
there is no guarantee that the strategy will be successful and the Portfolio
could lose money if, for example, interest rates do not move as anticipated
or credit problems develop with the issuer of the Hybrid.
The risks of investing in Hybrid Instruments reflect a combination of
the risks of investing in securities, options, futures and currencies. Thus, an
investment in a Hybrid Instrument may entail significant risks that are not
associated with a similar investment in a traditional debt instrument that has a
fixed principal amount, is denominated in U.S. dollars or bears interest either
at a fixed rate or a floating rate determined by reference to a common,
nationally published Benchmark. The risks of a particular Hybrid Instrument
will, of course, depend upon the terms of the instrument, but may include,
without limitation, the possibility of significant changes in the Benchmarks or
the prices of Underlying Assets to which the instrument is linked. Such risks
generally depend upon factors 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
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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 of the counterparty 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.)
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To the extent a Portfolio engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling securities
consistent with its investment objectives and policies and not for the purposes
of investment leverage. A Portfolio enters into such transactions only with the
intention of actually receiving or delivering the securities, although (as noted
above) when-issued securities and firm commitments may be sold prior to the
settlement date. In addition, changes in interest rates in a direction other
than that expected by the Manager before settlement of a purchase will affect
the value of such securities and may cause a loss to a Portfolio.
When-issued transactions and firm commitments may be used to offset
anticipated changes in interest rates and prices. For instance, in periods of
rising interest rates and falling prices, a Portfolio might sell securities in
its portfolio on a forward commitment basis to attempt to limit its exposure to
anticipated falling prices. In periods of falling interest rates and rising
prices, a Portfolio might sell portfolio securities and purchase the same or
similar securities on a when-issued or forward commitment basis, thereby
obtaining the benefit of currently higher cash yields. 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 331/3% (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
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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 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 Manager 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 331/3% 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
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securities will be made only to firms deemed by the Manager 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 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.
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Dollar rolls involve certain risks, including the following: if the
broker-dealer to whom the Portfolio sells the security becomes insolvent, the
Portfolio's right to purchase or repurchase the security subject to the dollar
roll may be restricted and the instrument 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
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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 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. Such Portfolios may also engage
in equity swaps, which are exchanges of the total return on a stock for the
total return on another asset, usually a diversified equity or fixed income
index.
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.
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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" arises when, in the opinion of a
Manager, 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
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to another page for the name or names of the supporting entity or
entities. In assigning ratings to such issuers, Moody's evaluates the financial
strength of the indicated affiliated corporations, commercial banks, insurance
companies, foreign governments or other entities, but only as one factor in the
total rating assessment. Moody's makes no representation and gives no opinion on
the 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.
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Risk factors are small. Duff 3 - Satisfactory liquidity and other
protection factors, qualify issue as investment grade. Risk factors are larger
and subject to more variation. Nevertheless, timely payment is expected. Duff 4
- - Speculative investment characteristics. Liquidity is not sufficient 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
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many
favorable investment attributes. Factors giving security to principal and
interest are considered adequate, but elements may be present that suggest a
susceptibility to impairment sometime in the future. Baa - Medium grade
obligations. Interest payments and principal security appear adequate for the
present but certain protective elements may 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
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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 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.
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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, 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. 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 currencies, spread transactions, forward and
futures contracts on securities, indices and currencies, put and call
options on such futures contracts, forward commitment transactions,
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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 SEC.
7. Borrow money, except that (i) each Portfolio may borrow in
amounts up to 331/3% (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 , as described above, and engage in similar investment strategies
described in the Prospectus and Statement of Additional Information, as
they may be amended from time to time.
9. Engage in underwriting of securities issued by others, except to
the extent that the Portfolio may be deemed to be an underwriter in
connection with the disposition of portfolio securities of the
Portfolio.
The following additional restrictions are not fundamental policies and
may be changed by the Trustees without a vote of shareholders. Each Portfolio
may not:
10. Purchase securities on margin.
11. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and, to the extent related to
the segregation of assets in connection with the writing of covered put
and call options and the purchase of securities or currencies on a
forward commitment or delayed-delivery basis and collateral and initial
or variation margin arrangements with respect to forward contracts,
options, futures contracts and options
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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 ; (ii) that Janus and T.
Rowe Price may invest uninvested cash balances of their respective
component of each 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.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATIONS
NAME, AGE AND ADDRESS POSITION WITH THE TRUST DURING PAST FIVE YEARS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
James K. Hunt, *47 Trustee, Chairman and Executive Vice President,
President SunAmerica Investments, Inc.
(1993 to Present); President,
SunAmerica Corporate Finance,
(since January 1994); Trustee,
Chairman and President,
SunAmerica Series Trust (since
1994).
- ---------------------------------------------------------------------------------------------------
</TABLE>
B-48
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATIONS
NAME, AGE AND ADDRESS POSITION WITH THE TRUST DURING PAST FIVE YEARS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
Monica C. Lozano, 42 Trustee Associate Publisher, LA OPINION
3257 Purdue Avenue (newspaper publishing concern)
Los Angeles, CA 90066 (since 1995), Director, First
Interstate Bank of California
(1994-1996); Editor, LA OPINION
(1991-1995); Trustee, Anchor
Pathway Fund and SunAmerica
Series Trust (since 1998).
- ---------------------------------------------------------------------------------------------------
Allan L. Sher, 67 Trustee Retired; Trustee, Anchor
Pathway Fund and SunAmerica
Series Trust.
- ---------------------------------------------------------------------------------------------------
William M. Wardlaw, 52 Trustee Principal, Freeman Spogli &
Co. (investment banking) (1988
to Present); Vice President and
Director, MCC International
Holdings (cable) (since April
1996); Trustee, Anchor Pathway
Fund and SunAmerica Series Trust.
- ---------------------------------------------------------------------------------------------------
Scott L. Robinson, 52 Senior Vice President, Senior Vice President and
Treasurer and Controller, SunAmerica Inc.
Controller (since 1991); Senior Vice 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 November
Counsel and Secretary 1995), 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>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATIONS
NAME, AGE AND ADDRESS POSITION WITH THE TRUST DURING PAST FIVE YEARS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Peter C. Sutton, 34 Vice President and Senior Vice President, SunAmerica
The SunAmerica Center Assistant Treasurer (since April 1997); Treasurer,
733 Third Avenue SunAmerica Mutual Funds, Anchor
New York, NY 10017-3204 Series Trust and Style Select Series,
Inc. (since 1996); Vice President and
Assistant Treasurer, SunAmerica
Series Trust and Anchor Pathway Fund
(since 1994); formerly, Vice
President, SunAmerica (1994-1997);
Controller, SunAmerica Mutual Funds
and Anchor Series Trust (March 1993
to February 1996); Assistant
Controller, SunAmerica Mutual Funds
and Anchor Series Trust (1990-1993).
- ---------------------------------------------------------------------------------------------------
Robert M. Zakem, 41 Vice President and Vice President and Assistant
The SunAmerica Center Assistant Secretary Secretary, SunAmerica Series
733 Third Avenue Trust (since April 1993) and
New York, New York Anchor Pathway Fund (since
10017-3204 1993); Secretary and Chief
Compliance Officer, SunAmerica Mutual
Funds and Anchor Series Trust (since
1993) and Style Select Series (since
1996) Senior Vice President and
General Counsel, SunAmerica (since
April 1993); Executive Vice
President, General Counsel and
Director, SunAmerica Capital
Services, Inc. (since February 1993);
Vice President, General Counsel and
Assistant Secretary, SunAmerica Fund
Services, Inc. (since January 1994).
- ---------------------------------------------------------------------------------------------------
</TABLE>
* A trustee who may be deemed to be an "interested person" of the Trust as
that term is defined in the 1940 Act.
B-50
<PAGE>
The Trustees of the Trust are responsible for the overall supervision
of the operation of the Trust and each Fund and perform various duties imposed
on trustees of investment companies by the 1940 Act and under the Trust's
Declaration of Trust.
As of January 4, 1999, the officers and Trustees as a group owned an
aggregate of less than 1% of the outstanding shares of each Portfolio 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. Lozano became a
Trustee as of January 1, 1999.
COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
PENSION OR
RETIREMENT TOTAL COMPENSATION
AGGREGATE BENEFITS ACCRUED FROM REGISTRANT AND
COMPENSATION AS PART OF FUND FUND COMPLEX PAID
TRUSTEE FROM REGISTRANT EXPENSES 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.
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 a wholly-owned subsidiary of SunAmerica,
Inc., a wholly-owned subsidiary of AIG, the leading U.S.-based international
insurance organization.
AIG, a Delaware corporation, is a holding company that through its
subsidiaries is primarily engaged in a broad range of insurance and insurance
related activities and financial services in the United States and abroad. AIG,
through its subsidiaries, is also engaged in a range of financial services
activities. AIG's asset management operations are carried out primarily by AIG
Global Investment Group, Inc., a direct wholly owned subsidiary of AIG, and its
affiliates (collectively, "AIG Global"). AIG Global manages the investment
portfolios of various AIG subsidiaries, as well as third party assets, and is
responsible for product design and origination, marketing and distribution
B-51
<PAGE>
of third party asset management products, including offshore and private
investment funds and direct investment. As of June 30, 1998, AIG Global
managed more than $86 billion of assets, of which approximately $10.8 billion
represented assets of unaffiliated third parties. AIG Capital Management
Corp., an indirect wholly-owned subsidiary of AIG Global Investment Group,
Inc., serves as investment adviser to The AIG Money Market Fund, a separate
series of The Advisors' Inner Circle Fund, a registered investment company.
In addition, AIG Global Investment Corp., an AIG Global group company, serves
as the sub-investment adviser to an unaffiliated registered investment
company. AIG companies do not otherwise provide investment advice to any
registered investment companies.
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 and
Multi-Managed Seasons Select 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
B-52
<PAGE>
securities on sixty (60) days written notice to SunAmerica, or by SunAmerica
upon the approval by the Trust of another investment advisory agreement or on
six months' written notice, whichever is earlier. The Agreement provides for
automatic termination with respect to each Portfolio in the event of its
assignment (as defined in the 1940 Act).
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 Portfolio 0.85%
- ----------------------------------------------------------------------------------------------
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%
----------------------------------------
</TABLE>
B-53
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
PORTFOLIO ADVISORY FEE (AS A PERCENTAGE OF ASSETS)
- ----------------------------------------------------------------------------------------------
<S> <C>
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 1.00%
- ----------------------------------------------------------------------------------------------
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 0.550%
- ----------------------------------------------------------------------------------------------
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.
B-54
<PAGE>
ADVISORY FEES
<TABLE>
<CAPTION>
-----------------------------------------------------------------
PORTFOLIO ADVISORY FEE
-----------------------------------------------------------------
<S> <C>
Multi-Managed Growth Portfolio $137,424
-----------------------------------------------------------------
Multi-Managed Moderate Growth Portfolio $135,378
-----------------------------------------------------------------
Multi-Managed Income/Equity Portfolio $101,740
-----------------------------------------------------------------
Multi-Managed Income Portfolio $ 76,624
-----------------------------------------------------------------
Asset Allocation: Diversified Income Portfolio $208,284
-----------------------------------------------------------------
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
("GSAM"), Goldman Sachs Asset Management International ("GSAM-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
Managers 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. SunAmerica may terminate any agreement with
a Manager 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 Funds with Managers approved by the Board of Directors without obtaining
shareholder approval. The exemptive order also permits SunAmerica, subject to
the approval of the Board but without shareholder approval, to employ new
Managers for new or existing Funds, change the terms of particular agreements
with Managers or continue the employment of existing Managers after events that
would otherwise cause an automatic termination of a subadvisory agreement.
Shareholders will be notified of any Manager changes.
The following chart shows the Managers to each Portfolio and Managed
Component:
B-55
<PAGE>
<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)
--------------------------------------------------
WMC (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)
--------------------------------------------------
WMC (through WMC/Fixed Income component)
- -------------------------------------------------------------------------------------------
Multi-Managed Income/Equity Portfolio Janus (through Janus/Growth component)
- -------------------------------------------------------------------------------------------
SunAmerica (through SunAmerica/Balanced
component)
--------------------------------------------------
WMC (through WMC/Fixed Income component)
- -------------------------------------------------------------------------------------------
Multi-Managed Income Portfolio Janus (through Janus/Growth component)
- -------------------------------------------------------------------------------------------
SunAmerica (through SunAmerica/Balanced
component)
--------------------------------------------------
WMC (through WMC/Fixed Income component)
- -------------------------------------------------------------------------------------------
Asset Allocation: Diversified Income
Portfolio Putnam
- -------------------------------------------------------------------------------------------
Stock Portfolio T. Rowe Price
- -------------------------------------------------------------------------------------------
Large-Cap Growth Portfolio Bankers Trust
GSAM
Janus
- -------------------------------------------------------------------------------------------
Large-Cap Composite Portfolio Bankers Trust
SunAmerica
T. Rowe Price
- -------------------------------------------------------------------------------------------
Large-Cap Value Portfolio Bankers Trust
T. Rowe Price
WMC
- -------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio Bankers Trust
T. Rowe Price
WMC
- -------------------------------------------------------------------------------------------
Mid-Cap Value Portfolio Bankers Trust
GSAM
Lord Abbett
- -------------------------------------------------------------------------------------------
</TABLE>
B-56
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT ALLOCATED
PORTFOLIO AMONG THE FOLLOWING ADVISERS
- -------------------------------------------------------------------------------------------
<S> <C>
Small-Cap Portfolio Bankers Trust
Lord Abbett
SunAmerica
- -------------------------------------------------------------------------------------------
International Equity Portfolio Bankers Trust
GSAM-International
Lord Abbett
- -------------------------------------------------------------------------------------------
Diversified Fixed Income Portfolio Bankers Trust
SunAmerica
WMC
- -------------------------------------------------------------------------------------------
Cash Management Portfolio SunAmerica
- -------------------------------------------------------------------------------------------
</TABLE>
Each of the other Managers 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 Managers'
fees. Bankers Trust is a wholly-owned subsidiary of Bankers Trust New York
Corporation. GSAM is a separate operating division of Goldman, Sachs
& Co., a New York limited partnership. GSAM-International, London, England,
is an affiliate of Goldman, Sachs & Co. The general partners of Lord Abbett
are Stephan I. Allen, Zane E. Brown, 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"), owns approximately 83% of the outstanding
voting stock of Janus, and is publicly traded holding company with principal
operations in rail transportation through its subsidiary The Kansas City
Southern Railway Company and financial asset management businesses. 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 WMC: Robert W. Doran, Duncan M. McFarland and John R.
Ryan.
SunAmerica will initially allocate the assets of each Multi-Managed
Seasons Select Portfolio among the Managers for that Portfolio, in a manner
designed to maximize investment efficiency. SunAmerica will then allocate new
cash from share purchases over redemption requests equally among the Managers
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 Managers will cause the actual percentage of a Portfolio's
assets managed by each Manager 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 a
Manager exceeds that portion managed by any other Manager to the Portfolio.
If SunAmerica determines that the difference is significant, SunAmerica will
then re-allocate cash flows among the three Managers, 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 Manager will not be reallocated (or "rebalanced") to another Manager
for the Portfolio. However, SunAmerica reserves the right,
B-57
<PAGE>
subject to the review of the Board, to reallocate assets from one Manager 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 may be to
shift assets from a better performing Manager to a portion of the Portfolio with
a relatively lower total return.
Each Multi-Managed Seasons Portfolio allocates its assets among the
Managed Components as described in the Prospectus. 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.
SunAmerica pays each other Manager to the Seasons Portfolios a
monthly fee with respect to each Portfolio for which such Manager performs
services, computed on average daily net assets. SunAmerica has received an
exemptive order that, among other things, permits the Trust to disclose to
shareholders the Managers' 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
Managers 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 0.40%, Large-Cap Composite Portfolio
0.183%, Large-Cap Value Portfolio 0.333%, Mid-Cap Growth Portfolio 0.325%,
Mid-Cap Value Portfolio 0.367%, Small-Cap Portfolio 0.19%, International
Equity Portfolio 0.50%, and Diversified Fixed Income Portfolio 0.115%. There
can be no assurance that the Portfolios will achieve a level of average daily
net assets in the amounts estimated.
The following table sets forth the aggregate fees paid to the other
Managers to the Seasons Portfolios by SunAmerica for the period April 15, 1997
(commencement of operations) through March 31, 1998.
<TABLE>
<CAPTION>
- -------------------------------------------------------------
PORTFOLIO FEE
- -------------------------------------------------------------
<S> <C>
Multi-Managed Growth Portfolio $ 44,760
Multi-Managed Moderate Growth Portfolio $ 40,269
Multi-Managed Income/Equity Portfolio $ 29,105
Multi-Managed Income Portfolio $ 21,659
- -------------------------------------------------------------
</TABLE>
B-58
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
ADVISER PORTFOLIO FEE
- ----------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------
Putnam Asset Allocation: Diversified Growth Portfolio $134,772
- ----------------------------------------------------------------------------------
T. Rowe Price Stock Portfolio $104,733
- ----------------------------------------------------------------------------------
</TABLE>
The Subadvisory Agreements will continue in effect for two years
from the dates thereof, unless terminated, and may be renewed from year to
year thereafter, so long as continuance is specifically approved at least
annually in accordance with the requirements of the 1940 Act. The Subadvisory
Agreements provide that they will terminate in the event of an assignment (as
defined in the 1940 Act) or upon termination of the Management Agreement.
Each Subadvisory Agreement may be terminated at any time, without penalty, by
the Portfolio or the Trust, by the Trustees, by the holders of a majority of
the respective Portfolio's outstanding voting securities, by SunAmerica, on
not less than thirty (30) nor more than sixty (60) days' written notice to
the Manager, or by the Manager, on not less than ninety (90) days' written
notice to SunAmerica and the Trust; provided, that the Manager 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 "SunAmerica Code of Ethics"), 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 SunAmerica Code of
Ethics 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 SunAmerica Code
of Ethics by Access Persons of the Trust or SunAmerica during the quarter.
B-59
<PAGE>
The Managers 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 SunAmerica Code of Ethics. Further, the other Managers 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 SunAmerica Code of Ethics 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 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, 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
B-60
<PAGE>
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 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
B-61
<PAGE>
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.
EXECUTION OF PORTFOLIO TRANSACTIONS
It is the policy of the Trust, in effecting transactions in portfolio
securities, to seek the best execution at the most favorable prices. The
determination of what may constitute best execution involves a number of
considerations, including the economic result to the Trust (involving both price
paid or received and any commissions and other costs), the efficiency with which
the transaction is effected where a large block is involved, the availability of
the broker to stand ready to execute potentially difficult transactions and the
financial strength and stability of the broker. Such considerations are
judgmental and are considered in determining the overall reasonableness of
brokerage commissions paid.
A factor in the selection of brokers is the receipt of research
services -- analyses and reports concerning issuers, industries, securities,
economic factors and trends -- and other statistical and factual information.
Research and other statistical and factual information provided by brokers is
considered to be in addition to and not in lieu of services required to be
performed by the Manager.
A Manager may cause a Portfolio to pay such broker-dealers
commissions that exceed what other broker-dealers may have charged, if in its
view the commissions are reasonable in relation to the value of the brokerage
and/or research services provided by the broker-dealer. The extent to which
commissions may reflect the value of research services cannot be presently
determined. To the extent that research services of value are provided by
broker-dealers with or through whom the Manager places the Trust's portfolio
transactions, the Manager may be relieved of expenses it might otherwise
bear. Research services furnished by broker-dealers may not be used by the
Manager in connection with the Trust and could be useful and of value to the
Manager in serving other clients as well as the Trust. Research services
obtained by the Manager as a result of the placement of portfolio brokerage
of other clients could also be useful and of value in serving the Trust.
B-62
<PAGE>
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, a Manager 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 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 such period.
1998 BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
PORTFOLIO AMOUNT PAID PERCENTAGE OF
TO COMMISSIONS
AGGREGATE AFFILIATED PAID
BROKERAGE BROKER-DEALER TO AFFILIATED
COMMISSIONS S 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 -- --
- ---------------------------------------------------------------------------------------
</TABLE>
B-63
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
PORTFOLIO AMOUNT PAID PERCENTAGE OF
TO COMMISSIONS
AGGREGATE AFFILIATED PAID
BROKERAGE BROKER-DEALER TO AFFILIATED
COMMISSIONS S BROKER-DEALERS
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
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.
A Manager and its respective affiliates may manage, or have
proprietary interests in, accounts with similar or dissimilar or the same
investment objectives as one or more Portfolios of the Trust. Such account
may or may not be in competition with a Portfolio for investments. Investment
decisions for such accounts are based on criteria relevant to such accounts;
portfolio decisions and results of the Portfolio's investments may differ
from those of such other accounts. There is no obligation to make available
for use in managing the Portfolio any information or strategies used or
developed in managing such accounts. In addition, when two or more accounts
seek to purchase or sell the same assets, the assets actually purchased or
sold may be allocated among accounts on a good faith equitable basis at the
discretion of the account's adviser. In some cases, this system may adversely
affect the price or size of the position obtainable for a Portfolio.
If determined by a Manager to be beneficial to the interests of the
Trust, partners and/or employees of the Manager may serve on investment advisory
committees, which will consult with the Manager 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.
It is possible that a Portfolio's holdings may include securities of
entities for which a Manager or its affiliate performs investment banking
services as well as securities of entities in which the Manager 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 a Manager or its
affiliate is engaged in an underwriting or other distribution of securities of
an entity, the Manager 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.
B-64
<PAGE>
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
firm of Swidler Berlin Shereff Friedman, LLP, 919 Third Avenue, New York, NY
10022, has been selected to provide legal counsel to the Trust.
REPORTS TO SHAREHOLDERS. Persons having a beneficial interest in the
Trust are provided at least semi-annually with reports showing the investments
of the Portfolios, financial statements and other information.
SHAREHOLDER AND TRUSTEE RESPONSIBILITY. Shareholders of a Massachusetts
business trust may, under certain circumstances, be held personally liable as
partners for the obligations of the Trust. The risk of a shareholder incurring
any financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations.
The Declaration of Trust contains an express disclaimer of shareholder liability
for acts or obligations of the Trust and provides that notice of the disclaimer
must be given in each agreement, obligation or instrument entered into or
executed by the Trust or Trustees. The Declaration of Trust provides for
indemnification of any shareholder held personally liable for the obligations of
the Trust and also provides for the Trust to reimburse the shareholder for all
legal and other expenses reasonably incurred in connection with any such claim
or liability.
Under the Declaration of Trust, the trustees or officers are not liable
for actions or failure to act; however, they are not protected from liability by
reason of their willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their office. The Trust
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.
B-65
<PAGE>
FINANCIAL STATEMENTS
Set forth following this Statement of Additional Information are the
audited financial statements of the Trust with respect to the period April
15, 1997 (commencement of operations) to March 31, 1998 and the unaudited
financial statements of the Trust with respect to the period April 1, 1998 to
September 30, 1998.
B-66
<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
-------------
<CAPTION>
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
-------
<CAPTION>
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
HOUSEHOLD PRODUCTS -- 0.5%
Colgate-Palmolive Co. .................. 700 60,638
Gillette Co. ........................... 400 47,475
Procter & Gamble Co. ................... 600 50,625
-------------
358,400
-------------
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>
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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>
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19
<PAGE>
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<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>
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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>
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21
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<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>
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22
<PAGE>
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<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
-------------
<CAPTION>
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>
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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>
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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>
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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
-------------
<CAPTION>
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
-------
<CAPTION>
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
<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
----------------
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
-------------
<CAPTION>
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>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
BANKS (CONTINUED)
United States Bancorp 7.50% 2026........ $ 110,000 $ 119,449
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
-------------
<CAPTION>
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>
- ------------
+ 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
----------------
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
-------
<CAPTION>
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
<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
- ----------------
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
-------------
<CAPTION>
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
-------------
<CAPTION>
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
------
<CAPTION>
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
<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
- ----------------
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
-------------
<CAPTION>
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>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY -- 0.4%
ENERGY SERVICES -- 0.2%
Petroleum Geo Services ASA 7.50% 2007................. $ 100,000 $ 105,918
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>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
MULTI-INDUSTRY -- 0.1%
Williams Cos, Inc. 6.13% 2002......................... $ 40,000 $ 39,611
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
-------------
<CAPTION>
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
-------------
<CAPTION>
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#
<TABLE>
<CAPTION>
MULTI- MULTI- ASSET
MULTI- MANAGED MANAGED MULTI- ALLOCATION:
MANAGED MODERATE INCOME/ MANAGED DIVERSIFIED
GROWTH GROWTH EQUITY INCOME GROWTH STOCK
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME:
Interest............................................ $ 365,941 $ 510,705 $ 576,100 $ 555,748 $ 453,579 $ 84,456
Dividends........................................... 67,242 57,559 34,338 16,104 347,227 220,527
--------------------------------------------------------------------------
Total income*..................................... 433,183 568,264 610,438 571,852 800,806 304,983
--------------------------------------------------------------------------
EXPENSES:
Management fees..................................... 137,424 135,378 101,740 76,624 208,284 178,227
Custodian fees...................................... 52,639 54,445 48,027 45,115 129,107 50,617
Auditing fees....................................... 14,255 14,355 14,250 14,195 11,335 11,230
Reports to investors................................ 11,380 11,320 9,000 6,527 17,530 15,405
Legal fees.......................................... 2,415 2,403 2,289 2,251 2,491 3,384
Amortization of organizational expenses............. 2,241 2,241 2,241 2,241 2,241 2,241
Trustees' fees...................................... 1,183 1,199 957 763 1,881 1,606
Other expenses...................................... 1,296 1,300 1,276 1,257 1,352 1,327
--------------------------------------------------------------------------
Total expenses before reimbursement............... 222,833 222,641 179,780 148,973 374,221 264,037
Expenses reimbursed by the investment adviser..... (23,646) (29,927) (36,590) (43,490) (77,724) (10,325)
--------------------------------------------------------------------------
Net investment income................................. 233,996 375,550 467,248 466,369 504,309 51,271
--------------------------------------------------------------------------
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#
<TABLE>
<CAPTION>
MULTI- MULTI- ASSET
MULTI- MANAGED MANAGED MULTI- ALLOCATION:
MANAGED MODERATE INCOME/ MANAGED DIVERSIFIED
GROWTH GROWTH EQUITY INCOME GROWTH STOCK
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income............................. $ 233,996 $ 375,550 $ 467,248 $ 466,369 $ 504,309 $ 51,271
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/depreciation 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 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
------------------------------------------------------------------------------
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>
- ----------------
SEASONS SERIES TRUST
MULTI-MANAGED
GROWTH PORTFOLIO INVESTMENT PORTFOLIO -- SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 63.1% SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 4.2%
APPAREL & TEXTILES -- 0.6%
Gerber Childrenswear, Inc.+ ............ 2,100 $ 16,669
Mohawk Industries, Inc.+ ............... 4,800 131,400
Movado Group, Inc. ..................... 3,000 63,000
Oakley, Inc.+ .......................... 7,000 67,375
AUTOMOTIVE -- 0.6%
Federal-Mogul Corp. .................... 3,225 150,769
Ford Motor Co. ......................... 1,000 46,938
General Motors Corp. ................... 1,000 54,687
HOUSING -- 0.0%
Krause's Furniture, Inc.+ .............. 3,600 4,275
RETAIL -- 3.0%
Abercrombie & Fitch Co.+@ .............. 3,300 145,200
Amazon.com, Inc.+ ...................... 995 111,067
CDnow, Inc.+ ........................... 2,600 23,400
Costco Cos., Inc.+ ..................... 3,155 149,468
CVS Corp. .............................. 2,700 118,294
Dayton Hudson Corp. .................... 1,700 60,775
Elder-Beerman Stores Corp.+ ............ 4,100 71,237
Federated Department Stores, Inc.+ ..... 900 32,738
Gap, Inc. .............................. 2,900 152,975
Home Depot, Inc. ....................... 4,600 181,700
Mac-Gray Corp.+ ........................ 4,500 40,500
Office Depot, Inc.+ .................... 2,200 49,362
Restoration Hardware, Inc.+ ............ 1,300 26,813
Sunglass Hut International, Inc.+ ...... 5,000 28,750
U.S. Vision, Inc.+ ..................... 3,000 25,125
Wal-Mart Stores, Inc. .................. 2,900 158,412
-------------
1,910,929
-------------
CONSUMER STAPLES -- 0.3%
FOOD, BEVERAGE & TOBACCO -- 0.2%
Philip Morris Cos., Inc. ............... 1,700 78,306
UST, Inc. .............................. 600 17,738
HOUSEHOLD PRODUCTS -- 0.1%
Colgate-Palmolive Co. .................. 700 47,950
-------------
143,994
-------------
</TABLE>
----------------
1
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
ENERGY -- 1.6%
ENERGY SERVICES -- 0.6%
Schlumberger Ltd. ...................... 1,000 $ 50,312
Transocean Offshore, Inc. .............. 6,145 213,155
ENERGY SOURCES -- 1.0%
Chevron Corp. .......................... 1,000 84,062
Enron Corp. ............................ 900 47,531
Exxon Corp. ............................ 800 56,150
Mobil Corp. ............................ 500 37,969
Ocean Rig ASA+ ....................(NOK) 117,089 46,399
Royal Dutch Petroleum Co. .............. 1,400 66,675
Smith International, Inc.+ ............. 3,600 98,775
Texaco, Inc. ........................... 800 50,150
-------------
751,178
-------------
FINANCE -- 5.9%
BANKS -- 2.3%
Ambanc Holding Co., Inc. ............... 325 4,225
Bank of New York Co., Inc. ............. 10,390 284,426
Chase Manhattan Corp. .................. 800 34,600
Citicorp ............................... 250 23,234
Crestar Financial Corp. ................ 675 38,306
First Union Corp. ...................... 700 35,831
Firstar Corp. .......................... 1,575 79,734
Golden State Bancorp, Inc.+ ............ 1,600 31,900
Hamilton Bancorp, Inc.+ ................ 1,600 41,700
Hibernia Corp., Class A ................ 2,500 36,094
Mellon Bank Corp. ...................... 1,000 55,063
NationsBank Corp. ...................... 680 36,380
Star Banc Corp. ........................ 2,245 148,451
Summit Bancorp. ........................ 1,350 50,625
U.S. Bancorp ........................... 4,170 148,296
FINANCIAL SERVICES -- 2.4%
American Express Co. ................... 900 69,862
American General Corp. ................. 700 44,713
Associates First Capital Corp., Class
A .................................... 4,140 270,135
Capital One Financial Corp. ............ 1,000 103,500
Equitable Cos., Inc. ................... 700 28,963
Federal National Mortgage
Association .......................... 800 51,400
Fleet Financial Group, Inc. ............ 2,100 154,219
HealthCare Financial Partners, Inc.+ ... 1,800 75,600
Household International, Inc. .......... 1,000 37,500
Morgan Stanley, Dean Witter & Co. ...... 400 17,225
Newcourt Credit Group, Inc. ............ 2,475 64,659
PaineWebber Group, Inc. ................ 900 27,000
Providian Financial Corp. .............. 1,000 84,812
Raymond James Financial, Inc. .......... 1,300 27,300
Travelers Group, Inc. .................. 900 33,750
INSURANCE -- 1.2%
Aetna, Inc. ............................ 300 20,850
Allstate Corp. ......................... 1,400 58,362
</TABLE>
- ----------------
2
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
INSURANCE (CONTINUED)
Annuity & Life Re Holdings Ltd.+ ....... 2,100 $ 41,475
Chubb Corp. ............................ 300 18,900
Reliance Group Holdings, Inc. .......... 4,000 56,250
The Hartford Financial Services Group,
Inc. ................................. 800 37,950
UNUM Corp. ............................. 6,715 333,652
-------------
2,706,942
-------------
HEALTHCARE -- 10.6%
DRUGS -- 7.7%
Abbott Laboratories, Inc. .............. 800 34,750
ALZA Corp.+ ............................ 9,935 430,931
Amgen, Inc.+ ........................... 900 68,006
Biogen, Inc.+ .......................... 1,100 72,394
Bristol-Myers Squibb Co. ............... 500 51,938
Centocor, Inc.+ ........................ 8,245 326,708
Eli Lilly & Co. ........................ 6,675 522,736
Merck & Co., Inc. ...................... 600 77,737
Pfizer, Inc. ........................... 6,050 640,922
Pharmacia & Upjohn, Inc. ............... 4,085 205,016
Sepracor, Inc.+@ ....................... 1,000 65,750
Warner-Lambert Co. ..................... 13,865 1,046,807
HEALTH SERVICES -- 1.2%
IMS Health, Inc. ....................... 5,490 340,037
Omnicare, Inc. ......................... 3,904 137,616
Sunrise Assisted Living, Inc.+ ......... 1,000 34,312
Vision Twenty-One, Inc.+ ............... 500 3,469
MEDICAL PRODUCTS -- 1.7%
ADAC Laboratories ...................... 1,400 33,600
Allegiance Corp. ....................... 1,000 29,750
Baxter International, Inc. ............. 1,000 59,500
Johnson & Johnson ...................... 800 62,600
Medaphis Corp.+ ........................ 8,200 36,900
MedImmune, Inc.+ ....................... 1,800 116,550
Nanogen, Inc.+ ......................... 4,500 16,453
Schering-Plough Corp. .................. 600 62,138
Sofamor Danek Group, Inc.+ ............. 4,140 368,460
United States Surgical Corp. ........... 125 5,211
-------------
4,850,291
-------------
INDUSTRIAL & COMMERCIAL -- 4.2%
AEROSPACE & MILITARY TECHNOLOGY -- 0.2%
Orbital Sciences Corp.+ ................ 2,855 80,118
BUSINESS SERVICES -- 2.4%
Apollo Group, Inc., Class A+ ........... 2,490 69,409
Caliber Learning Network, Inc.+ ........ 3,050 18,491
D.R. Horton, Inc. ...................... 2,700 43,200
Delta & Pine Land Co. .................. 3,640 160,160
DSET Corp.+ ............................ 6,600 56,100
</TABLE>
----------------
3
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
BUSINESS SERVICES (CONTINUED)
HA-LO Industries, Inc.+ ................ 4,100 $ 119,925
ITT Educational Services, Inc.+ ........ 3,100 99,200
Paychex, Inc. .......................... 2,200 113,437
RCM Technologies, Inc.+ ................ 4,700 69,325
Service Corp. International ............ 1,000 31,875
Storage Technology Corp.+ .............. 1,700 43,244
Sylvan Learning Systems, Inc.+ ......... 3,500 81,813
Technology Solutions Co.+ .............. 3,805 42,806
The Kroll O'Gara Co.+ .................. 3,900 91,162
Waste Management, Inc.+ ................ 1,100 52,869
MACHINERY -- 0.1%
United Technologies Corp. .............. 900 68,794
MULTI-INDUSTRY -- 1.3%
Raisio Group PLC ....................... 9,708 141,291
Republic Industries, Inc.+ ............. 1,400 20,387
Tyco International Ltd. ................ 8,360 461,890
TRANSPORTATION -- 0.2%
Atlas Air, Inc.+ ....................... 1,200 34,425
Burlington Northern Santa Fe Corp. ..... 1,200 38,400
-------------
1,938,321
-------------
INFORMATION & ENTERTAINMENT -- 8.4%
BROADCASTING & MEDIA -- 7.2%
Cablevision Systems Corp., Class A+ .... 2,900 125,244
Capstar Broadcasting Corp., ClassA+ .... 635 9,803
Chancellor Media Corp.+ ................ 4,860 162,203
Cinar Films, Inc., Class B+ ............ 3,600 64,575
Cox Communications, Inc., Class A+ ..... 4,695 256,464
DoubleClick, Inc.+ ..................... 1,800 42,975
Jacor Communications, Inc.+ ............ 1,200 60,750
Lamar Advertising Co.+ ................. 3,875 108,500
Liberty Media Group, Series A+ ......... 6,420 235,534
MediaOne Group, Inc. + ................. 17,960 798,097
Outdoor Systems, Inc.+ ................. 7,220 140,790
Penton Media, Inc. ..................... 3,975 54,159
Scientific-Atlanta, Inc. ............... 5,300 111,963
Snyder Communications, Inc.+ ........... 2,900 97,150
Source Media, Inc.+ .................... 800 6,300
Time Warner, Inc. ...................... 11,549 1,011,259
United International Holdings, Inc.+ ... 2,230 21,603
ENTERTAINMENT PRODUCTS -- 0.1%
Lumen Technologies, Inc.+ .............. 10,500 52,500
SportsLine USA, Inc.+ .................. 1,000 17,437
LEISURE & TOURISM -- 1.1%
Carnival Corp., Class A ................ 3,440 109,435
Family Golf Centers, Inc.+ ............. 900 15,975
McDonald's Corp. ....................... 800 47,750
</TABLE>
- ----------------
4
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (CONTINUED)
LEISURE & TOURISM (CONTINUED)
Outback Steakhouse, Inc.+ .............. 3,050 $ 80,444
Preview Travel, Inc.+ .................. 1,300 23,725
Primadonna Resorts, Inc. ............... 4,500 34,594
Royal Caribbean Cruises Ltd. ........... 3,200 85,000
Steiner Leisure Ltd.+ .................. 4,100 64,062
Travel Services International, Inc.+ ... 3,200 43,400
-------------
3,881,691
-------------
INFORMATION TECHNOLOGY -- 25.2%
COMMUNICATION EQUIPMENT -- 2.3%
Ascend Communications, Inc.+ ........... 4,200 191,100
General Instrument Corp.+ .............. 3,615 78,175
Lucent Technologies, Inc. .............. 2,400 165,750
Nokia Corp., Class A ADR ............... 7,710 604,753
COMPUTERS & BUSINESS EQUIPMENT -- 3.0%
Apple Computer, Inc.+ .................. 5,500 209,687
AVT Corp.+ ............................. 1,400 31,675
Compaq Computer Corp. .................. 1,000 31,625
Dell Computer Corp.+ ................... 6,625 435,594
EMC Corp.+ ............................. 2,500 142,969
FORE Systems, Inc.+ .................... 5,000 83,125
HBO & Co. .............................. 3,700 106,838
Hewlett-Packard Co. .................... 400 21,175
Honeywell, Inc. ........................ 400 25,625
International Business Machines
Corp. ................................ 1,000 128,000
Micron Technology, Inc.+ ............... 1,150 35,003
Network Appliance, Inc.+ ............... 2,300 116,437
ELECTRONICS -- 2.0%
General Electric Co. ................... 2,225 177,027
Intel Corp. ............................ 1,000 85,750
Maxim Integrated Products, Inc.+ ....... 4,725 131,709
Motorola, Inc. ......................... 800 34,150
Pittway Corp., Class A ................. 8,610 205,564
Rambus, Inc.+ .......................... 1,600 102,400
Texas Instruments, Inc. ................ 1,000 52,750
Vitesse Semiconductor Corp.+ ........... 5,765 136,198
SOFTWARE -- 10.5%
America Online, Inc.+@ ................. 6,414 713,557
AnswerThink Consulting Group+ .......... 3,400 61,413
Aspect Development, Inc.+ .............. 1,110 43,706
Aspen Technology, Inc.+ ................ 6,450 172,538
At Home Corp., Series A+ ............... 5,235 250,626
BMC Software, Inc.+ .................... 900 54,056
Broadcast.com, Inc.+ ................... 60 2,423
BroadVision, Inc.+ ..................... 2,400 25,350
Cadence Design Systems, Inc.+ .......... 9,190 234,919
Cisco Systems, Inc.+ ................... 14,260 881,446
CMG Information Services, Inc.+ ........ 1,500 79,875
Compuware Corp.+ ....................... 3,300 194,287
</TABLE>
----------------
5
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
SOFTWARE (CONTINUED)
Entrust Technologies, Inc.+ ............ 3,800 $ 56,288
Excite, Inc.+ .......................... 1,300 53,056
Icon CMT Corp.+ ........................ 3,300 36,713
Intuit, Inc.+ .......................... 3,370 156,916
J.D. Edwards & Co.+ .................... 2,700 129,600
Keane, Inc.+ ........................... 1,450 50,931
Legato Systems, Inc.+ .................. 1,000 51,375
Lycos, Inc.+ ........................... 2,100 71,006
Microsoft Corp.+ ....................... 8,305 914,069
Mobius Management Systems, Inc.+ ....... 2,600 15,600
Pegrine Systems, Inc.+ ................. 2,500 100,625
Sapient Corp.+ ......................... 6,160 210,210
Sun Microsystems, Inc.+ ................ 500 24,906
Wind River Systems+ .................... 2,945 139,151
Yahoo!, Inc.+@ ......................... 700 90,650
TELECOMMUNICATIONS -- 7.4%
Comcast Corp., Class A ................. 23,380 1,097,399
Frontier Corp. ......................... 5,200 142,350
Global Crossing Ltd.+ .................. 505 10,542
GST Telecommunications, Inc+ ........... 11,600 72,500
ICG Communications, Inc.+ .............. 4,600 77,625
Intermedia Communications, Inc.+ ....... 1,900 46,669
Primus Telecommunications Group,
Inc.+ ................................ 2,200 19,112
Qwest Communications International,
Inc.+ ................................ 4,600 144,037
Saville Systems PLC ADR+ ............... 900 13,050
STARTEC Global Communications Corp.+ ... 1,550 10,656
Tele-Communications, Inc., TCI Ventures
Group, Series A+ ..................... 37,715 676,513
Tele-Communications, Inc., Series A+ ... 25,321 990,684
Western Wireless Corp., Class A+ ....... 6,825 121,997
-------------
11,571,505
-------------
MATERIALS -- 1.0%
CHEMICALS -- 0.9%
du Pont (E.I.) de Nemours & Co. ........ 1,000 56,125
Monsanto Co. ........................... 6,120 345,015
North American Scientific, Inc.+ ....... 2,400 11,400
METALS & MINERALS -- 0.1%
Martin Marietta Materials, Inc. ........ 700 30,231
-------------
442,771
-------------
UTILITIES -- 1.7%
ELECTRIC UTILITIES -- 0.4%
GPU, Inc. .............................. 1,000 42,500
Niagara Mohawk Power Corp.+ ............ 10,100 155,288
GAS & PIPELINE UTILITIES -- 0.1%
Consolidated Natural Gas Co. ........... 700 38,150
</TABLE>
- ----------------
6
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
TELEPHONE -- 1.2%
AT&T Corp. ............................. 2,400 $ 140,250
Century Telephone Enterprises, Inc. .... 2,075 98,044
GTE Corp. .............................. 600 33,000
MCI WorldCom, Inc.+ .................... 2,000 97,750
SBC Communications, Inc. ............... 1,200 53,325
Telecom Italia SpA ..................... 19,632 135,288
-------------
793,595
-------------
TOTAL COMMON STOCK (cost $27,389,591)... 28,991,217
-------------
<CAPTION>
PREFERRED STOCK -- 0.0%
<S> <C> <C>
- -----------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 0.0%
TELECOMMUNICATIONS -- 0.0%
Viatel, Inc., Series A 10.00%(1) (cost
$166)................................. 2 149
-------------
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 25.4% AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.4%
APPAREL & TEXTILES -- 0.0%
Galey & Lord, Inc. 9.13% 2008 .......... $ 5,000 4,300
AUTOMOTIVE -- 0.0%
Accuride Corp., Series B 9.25% 2008* ... 5,000 4,787
HOUSING -- 0.0%
Engle Homes, Inc., Series C 9.25%
2008 ................................. 5,000 4,800
Falcon Building Products, Inc. 9.50%
2007 ................................. 5,000 4,250
Standard Pacific Corp. 8.50% 2007 ...... 10,000 9,550
RETAIL -- 0.4%
Amazon.com, Inc. zero coupon 2008(2) ... 188,000 103,400
Duane Reade, Inc. 9.25% 2008 ........... 5,000 4,850
Fred Meyer, Inc. 7.38% 2005 ............ 25,000 25,953
J.C. Penney Co., Inc. 7.40% 2037 ....... 20,000 22,020
-------------
183,910
-------------
CONSUMER STAPLES -- 0.1%
FOOD, BEVERAGE & TOBACCO -- 0.1%
Aurora Foods, Inc., Series B 8.75%
2008 ................................. 5,000 5,063
Nash Finch Co. 8.50% 2008 .............. 5,000 4,700
Panamerican Beverages, Inc. 8.13%
2003 ................................. 30,000 30,883
HOUSEHOLD PRODUCTS -- 0.0%
Revlon Worldwide Corp. zero coupon
2001 ................................. 10,000 7,650
-------------
48,296
-------------
</TABLE>
----------------
7
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
ENERGY -- 0.3%
ENERGY SERVICES -- 0.0%
Dailey International, Inc. 9.50%
2008 ................................. $ 5,000 $ 3,000
ENERGY SOURCES -- 0.3%
Abraxas Petroleum Corp. 11.50% 2004 .... 5,000 3,900
Cross Timbers Oil Co., Class B 8.75%
2009 ................................. 5,000 4,500
Newfield Exploration Co., Series B 7.45%
2007 ................................. 10,000 9,930
P&L Coal Holdings Corp. 9.63% 2008* .... 10,000 9,825
Petroleos Mexicano 9.00% 2007 .......... 25,000 20,312
Sonat, Inc. 6.88% 2005 ................. 65,000 69,560
Tesoro Petroleum Corp., Series B 9.00%
2008 ................................. 5,000 4,813
YPF Sociedad Anonima 8.00% 2004 ........ 15,000 13,613
-------------
139,453
-------------
FINANCE -- 5.3%
BANKS -- 1.2%
Banc One Corp. 8.00% 2027 .............. 18,000 21,043
Bank One Columbus 7.38% 2002 ........... 25,000 26,817
Banponce Financial Corp. 6.75% 2001 .... 20,000 20,713
Credit National 7.00% 2005 ............. 20,000 21,064
Export Import Bank of Korea 6.50%
2006 ................................. 35,000 26,853
First Chicago NBD Corp. 7.25% 2004 ..... 60,000 64,776
First Republic Bancorp 7.75% 2012 ...... 25,000 27,846
First Union-Lehman Brothers Commercial
Mortgage Corp. 6.60% 2007 ............ 115,000 118,717
Korea Development Bank 7.13% 2001 ...... 15,000 13,095
National City Corp. 7.20% 2005 ......... 80,000 86,701
NBD Bank SA 8.25% 2024 ................. 25,000 29,857
NCNB Co. 9.38% 2009 .................... 32,000 41,101
United States Bancorp 7.50% 2026 ....... 50,000 55,798
Western Financial Savings Bank 8.88%
2007 ................................. 5,000 4,200
FINANCIAL SERVICES -- 3.7%
Aesop Funding Corp. 6.14% 2006* ........ 60,000 61,762
Allstate Financing II 7.83% 2045 ....... 24,000 25,443
AMRESCO, Inc. 9.88% 2005 ............... 5,000 4,000
Arcadia Financial Ltd. 11.50%
2007(3) .............................. 5,000 3,638
Asset Securitization Corp. 6.66%
2041 ................................. 50,000 52,228
Associates Corp. of North America 7.63%
2004 ................................. 60,000 66,781
ContiFinancial Corp. 8.13% 2008 ........ 5,000 4,697
CS First Boston Mortgage Securities
Corp. 7.24% 2029 ..................... 70,000 75,537
Dime Capital Trust I, Series A 9.33%
2027 ................................. 20,000 22,677
Equitable Cos., Inc. 7.00% 2028 ........ 60,000 60,982
Finova Capital Corp. 6.63% 2001 ........ 50,000 51,512
Finova Capital Corp., Series C 6.39%
2002 ................................. 30,000 31,290
Fleet Mortgage Group, Inc. 6.84%
2003 ................................. 30,000 31,991
Ford Motor Credit Corp. 7.02% 2000 ..... 50,000 51,900
GE Capital Mortgage Services, Inc. 6.25%
2023 ................................. 12,740 12,748
General Motors Acceptance Corp. 7.63%
2003 ................................. 60,000 66,101
Morgan Stanley Capital I, Inc. 7.22%
2007*# ............................... 60,000 64,894
Popular North America, Inc. 6.63%
2002 ................................. 35,000 35,632
Private Export Funding Corp. 5.87%
2008 ................................. 350,000 371,710
Private Export Funding Corp. 6.31%
2004 ................................. 100,000 107,126
Private Export Funding Corp. 6.62%
2005 ................................. 120,000 133,112
</TABLE>
- ----------------
8
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
Private Export Funding Corp. 7.03%
2003 ................................. $ 35,000 $ 38,485
Private Export Funding Corp. 7.30%
2002 ................................. 125,000 134,785
Private Export Funding Corp. 7.90%
2000 ................................. 35,000 36,644
U.S. West Capital Funding, Inc. 6.25%
2005 ................................. 90,000 95,578
U.S. West Capital Funding, Inc. 6.88%
2028 ................................. 45,000 47,703
INSURANCE -- 0.4%
Cigna Corp. 7.40% 2007 ................. 40,000 43,838
Cigna Corp. 7.88% 2027 ................. 19,000 20,622
Jackson National Life Insurance Co.
8.15% 2027* .......................... 22,000 26,619
Lumbermens Mutual Casualty Co. 8.30%
2037* ................................ 40,000 44,814
Metropolitan Life Insurance Co. 7.70%
2015* ................................ 60,000 70,346
-------------
2,453,776
-------------
HEALTHCARE -- 0.5%
HEALTH SERVICES -- 0.2%
HEALTHSOUTH Corp. 6.88% 2005*(3) ....... 60,000 62,871
Tenet Healthcare Corp. 7.88% 2003 ...... 20,000 20,300
Tenet Healthcare Corp. 8.13%
2008*(3) ............................. 10,000 10,241
MEDICAL PRODUCTS -- 0.3%
Allegiance Corp. 7.00% 2026 ............ 65,000 68,678
Beckman Instruments, Inc. 7.10% 2003 ... 40,000 41,080
Owens & Minor, Inc. 10.88% 2006 ........ 5,000 5,300
-------------
208,470
-------------
INDUSTRIAL & COMMERCIAL -- 0.8%
AEROSPACE & MILITARY TECHNOLOGY -- 0.0%
K & F Industries, Inc. 9.25% 2007 ...... 5,000 4,900
BUSINESS SERVICES -- 0.4%
Boise Cascade Office Products Co. 7.05%
2005 ................................. 105,000 111,025
Federal Express Corp. 6.72% 2022# ...... 80,000 82,400
MACHINERY -- 0.1%
Cincinnati Milacron, Inc. 7.88% 2000 ... 35,000 36,105
Grove Worldwide LLC 9.25% 2008*(3) ..... 5,000 4,400
Johnstown America Industries, Inc.
11.75% 2005 .......................... 5,000 5,244
Numatics, Inc., Series B 9.63% 2008 .... 5,000 4,881
TRANSPORTATION -- 0.3%
AMR Corp. 9.88% 2020 ................... 30,000 41,803
Continental Airlines, Inc. 6.47%
2004 ................................. 40,000 42,523
Continental Airlines, Inc. 6.65%
2017 ................................. 40,000 42,473
MTL, Inc. 10.00% 2006* ................. 5,000 4,800
-------------
380,554
-------------
INFORMATION & ENTERTAINMENT -- 0.5%
BROADCASTING & MEDIA -- 0.5%
Allbritton Communications Co. 8.88%
2008 ................................. 5,000 4,950
Century Communications Corp., Series B
zero coupon 2008 ..................... 10,000 4,700
Comcast Cable Communications 8.50%
2027 ................................. 15,000 18,376
</TABLE>
----------------
9
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (CONTINUED)
BROADCASTING & MEDIA (CONTINUED)
EchoStar DBS Corp. 12.50% 2002 ......... $ 5,000 $ 5,213
Granite Broadcasting Corp. 8.88%
2008* ................................ 10,000 9,337
LIN Holdings Corp. zero coupon
2008*(2) ............................. 10,000 6,550
News America Holdings, Inc. 8.00%
2016 ................................. 65,000 71,833
Scholastic Corp. 7.00% 2003 ............ 35,000 36,953
Viacom, Inc. 7.75% 2005 ................ 40,000 43,194
LEISURE & TOURISM -- 0.0%
Argosy Gaming Co. 13.25% 2004 .......... 5,000 5,313
Fitzgeralds Gaming Corp., Series B
12.25% 2004 .......................... 5,000 3,500
Loews Cineplex Entertainment Corp. 8.88%
2008* ................................ 5,000 4,950
-------------
214,869
-------------
INFORMATION TECHNOLOGY -- 0.5%
ELECTRONICS -- 0.0%
Advanced Micro Devices, Inc. 11.00%
2003 ................................. 5,000 5,050
Amphenol Corp. 9.88% 2007 .............. 5,000 4,675
SOFTWARE -- 0.0%
Concentric Network Corp. 12.75% 2007 ... 5,000 4,613
PSINet, Inc. 10.00% 2005 ............... 5,000 5,000
TELECOMMUNICATIONS -- 0.5%
AMSC Acquisition, Inc. 12.25% 2008 ..... 5,000 3,088
BTI Telecom Corp. 10.50% 2007 .......... 5,000 4,150
Compania de Telecomunicaciones 7.63%
2006 ................................. 30,000 28,910
e.spire Communications, Inc. zero coupon
2008*(2) ............................. 10,000 5,137
GCI, Inc. 9.75% 2007 ................... 5,000 4,650
Globalstar LP 10.75% 2004 .............. 5,000 3,200
GST Telecommunications, Inc. zero coupon
2008*(2)(3) .......................... 10,000 4,962
Intermedia Communications, Inc. 8.88%
2007 ................................. 10,000 10,050
Iridium LLC 10.88% 2005 ................ 5,000 4,038
ITC Deltacom, Inc. 8.88% 2008 .......... 5,000 4,900
IXC Communications, Inc. 9.00% 2008 .... 5,000 4,950
KMC Telecom Holdings, Inc. zero coupon
2008(2) .............................. 10,000 4,788
Level 3 Communications, Inc. 9.13%
2008 ................................. 5,000 4,738
McleodUSA, Inc. 8.38% 2008 ............. 5,000 4,925
MJD Communications, Inc. 9.50% 2008* ... 5,000 5,025
Nextel Communications, Inc. zero coupon
2007(2) .............................. 10,000 6,000
Paging Network, Inc. 10.13% 2007 ....... 5,000 4,950
Tele-Communications, Inc. 7.25% 2005 ... 25,000 27,506
Tele-Communications, Inc. 8.00% 2005 ... 25,000 28,570
Tele-Communications, Inc. 9.25% 2002 ... 25,000 28,057
Telecommunications Tech Co. LLC 9.75%
2008* ................................ 10,000 9,137
Time Warner Telecom, Inc. 9.75% 2008 ... 5,000 5,025
Viatel, Inc. 11.25% 2008*(3) ........... 5,000 4,500
-------------
230,594
-------------
MATERIALS -- 0.3%
CHEMICALS -- 0.1%
Huntsman Corp. 9.50% 2007* ............. 5,000 4,800
ICI Wilmington, Inc. 6.95% 2004 ........ 35,000 36,599
</TABLE>
- ----------------
10
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
MATERIALS (CONTINUED)
CHEMICALS (CONTINUED)
LaRoche Industries, Inc. 9.50% 2007 .... $ 5,000 $ 4,250
Sovereign Speciality Chemicals 9.50%
2007 ................................. 5,000 4,775
FOREST PRODUCTS -- 0.1%
American Pad & Paper Co. 13.00% 2005 ... 5,000 2,700
Boise Cascade Corp. 9.90% 2001 ......... 40,000 44,027
Gaylord Container Corp. 9.38% 2007 ..... 5,000 4,000
Grupo Industrial Durango SA de CV 12.63%
2003 ................................. 5,000 3,550
Repap New Brunswick, Inc. 9.00% 2004 ... 5,000 4,563
METALS & MINERALS -- 0.1%
A.K. Steel Holding Corp. 9.13% 2006 .... 5,000 5,000
Armco, Inc. 9.00% 2007 ................. 5,000 4,900
Bayou Steel Corp. 9.50% 2008* .......... 10,000 8,987
-------------
128,151
-------------
MUNICIPAL BONDS -- 0.6%
MUNICIPAL BONDS -- 0.6%
Allentown Pennsylvania 6.20% 2005 ...... 120,000 127,207
Hudson County New Jersey Improvement
Authority Facility 6.55% 2002 ........ 45,000 47,367
Huntsville Alabama Solid Waste Disposal
Authority 5.95% 2003 ................. 50,000 51,346
Miami Florida Revenue 7.25% 2003 ....... 60,000 65,422
-------------
291,342
-------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 0.9%
FOREIGN GOVERNMENT -- 0.9%
Australian Government 10.00%
2006 ............................(AUD) 440,000 340,091
Republic of Argentina 11.00% 2006 ...... 25,000 23,313
Republic of Columbia 7.25% 2004 ........ 33,000 25,822
Republic of Columbia 7.63% 2007 ........ 17,000 11,858
Republic of Lithuania 7.13% 2002* ...... 19,000 16,435
-------------
417,519
-------------
REAL ESTATE -- 0.3%
REAL ESTATE COMPANIES -- 0.3%
Equity Office Properties Operating LP
6.38% 2003 ........................... 60,000 59,963
Post Apartment Homes LP 7.02% 2001 ..... 60,000 62,721
-------------
122,684
-------------
U.S. GOVERNMENT & AGENCIES -- 13.6%
U.S. GOVERNMENT & AGENCIES -- 13.6%
Federal Home Loan Mortgage Corp. 6.00%
2006 ................................. 19,738 19,849
Federal Home Loan Mortgage Corp. 6.50%
2022 ................................. 38,000 39,793
Federal Home Loan Mortgage Corp. 6.50%
2023 ................................. 20,000 21,425
Federal Home Loan Mortgage Corp. 6.55%
2022 ................................. 32,000 33,610
Federal Home Loan Mortgage Corp. 6.75%
2022 ................................. 105,000 108,842
Federal Home Loan Mortgage Corp. 7.00%
2023 ................................. 12,000 13,117
Federal Home Loan Mortgage Corp. 7.50%
2023 ................................. 16,236 16,749
Federal Home Loan Mortgage Corp. 7.75%
2022 ................................. 26,436 28,435
Federal Home Loan Mortgage Corp. 8.50%
2019 ................................. 24,505 25,749
Federal National Mortgage Association
5.25% 2003 ........................... 590,000 602,443
</TABLE>
----------------
11
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (CONTINUED)
Federal National Mortgage Association
5.63% 2001 ........................... $ 410,000 $ 419,865
Federal National Mortgage Association
5.65% 2005 ........................... 14,906 14,879
Federal National Mortgage Association
5.75% 2008 ........................... 955,000 1,009,473
Federal National Mortgage Association
6.13% 2028(4) ........................ 138,671 140,231
Federal National Mortgage Association
7.00% 2006 ........................... 3,819 3,823
Federal National Mortgage Association
7.39% 2021 ........................... 27,632 30,168
Federal National Mortgage Association
7.75% 2021 ........................... 50,000 52,781
Federal National Mortgage Association
8.00% 2006 ........................... 16,200 17,156
Government National Mortgage Association
7.00% 2022 ........................... 15,120 15,621
Government National Mortgage Association
7.25% 2027 ........................... 114,972 118,924
Government National Mortgage Association
7.50% 2023 ........................... 30,697 31,838
Government National Mortgage Association
8.50% 2017 ........................... 30,903 32,950
Government National Mortgage Association
9.00% 2021 ........................... 11,806 12,691
United States Treasury Bonds 7.50%
2016 ................................. 120,000 152,756
United States Treasury Bonds 9.25%
2016 ................................. 70,000 103,108
United States Treasury Bonds 11.88%
2003 ................................. 295,000 394,377
United States Treasury Bonds 12.00%
2013 ................................. 1,700,000 2,659,174
United States Treasury Bonds Strip zero
coupon 2012 .......................... 275,000 140,420
-------------
6,260,247
-------------
UTILITIES -- 1.3%
ELECTRIC UTILITIES -- 0.5%
Atlantic City Electric Co. 6.38%
2005 ................................. 20,000 21,284
Cleveland Electric Illuminating Co.,
Series B 7.19% 2000 .................. 15,000 15,359
Empresa Nacional de Electricidad SA
7.33% 2037 ........................... 25,000 22,348
PacifiCorp 6.38% 2008# ................. 100,000 104,450
Public Service Electric & Gas Co. 8.88%
2003 ................................. 11,000 12,777
UtiliCorp United, Inc. 6.88% 2004 ...... 40,000 42,510
WESCO Distribution, Inc., Series B 9.13%
2008 ................................. 10,000 9,525
GAS & PIPELINE UTILITIES -- 0.3%
HNG Internorth, Inc. 9.63% 2006 ........ 65,000 78,217
KN Energy, Inc. 6.65% 2005 ............. 50,000 51,347
TELEPHONE -- 0.5%
GTE Corp. 6.36% 2006 ................... 95,000 101,184
MCI Communications Corp. 6.13%
2002(4) .............................. 30,000 30,752
MGC Communications, Inc., Series B
13.00% 2004 .......................... 5,000 3,750
WorldCom, Inc. 7.55% 2004 .............. 85,000 92,574
-------------
586,077
-------------
TOTAL BONDS & NOTES (cost
$11,211,944).......................... 11,665,942
-------------
<CAPTION>
WARRANTS -- 0.0%+ SHARES
<S> <C> <C>
- -----------------------------------------------------------------------
FINANCE -- 0.0%
BANKS -- 0.0%
Golden State Bancorp, Inc. ............. 1,600 6,750
INFORMATION TECHNOLOGY -- 0.0%
TELECOMMUNICATIONS -- 0.0%
KMC Telecom Holdings, Inc. 4/15/08
*# ................................... 10 25
-------------
TOTAL WARRANTS (cost $9,409)............ 6,775
-------------
</TABLE>
- ----------------
12
<PAGE>
<TABLE>
<CAPTION>
PUT OPTIONS -- 0.1% CONTRACTS VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
America Online, Inc., exp. 11/98 ....... 15 $ 19,125
At Home Corp., exp. 10/98 .............. 6 37
CMG Information Services, Inc., exp.
11/98 ................................ 14 8,225
Excite, Inc., exp. 11/98 ............... 10 6,000
Lycos, Inc., exp. 11/98 ................ 19 11,163
Yahoo!, Inc., exp. 11/98 ............... 7 11,637
-------------
TOTAL PUT OPTIONS (cost $61,182)........ 56,187
-------------
TOTAL INVESTMENT SECURITIES (cost
$38,672,292).......................... 40,720,270
-------------
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 2.6% AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 0.1%
Chase Manhattan Corp. 8.77% due
2/19/99............................... $ 30,000 30,308
-------------
FEDERAL AGENCY OBLIGATIONS -- 2.4%
Federal Home Loan Mortgage Corp. 5.40%
due 10/1/98........................... 1,125,000 1,125,000
-------------
FOREIGN SHORT-TERM NOTES -- 0.1%
New Zealand Treasury Bill zero coupon
due 12/16/98.....................(NZD) 70,000 34,662
-------------
TOTAL SHORT-TERM SECURITIES (cost
$1,193,958)........................... 1,189,970
-------------
<CAPTION>
REPURCHASE AGREEMENTS -- 9.1%
<S> <C> <C>
- -----------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 9.1%
J.P. Morgan & Co., Inc. Joint Repurchase
Agreement (Note 3).................... 310,000 310,000
PaineWebber, Inc. Joint Repurchase
Agreement (Note 3).................... 2,873,000 2,873,000
State Street Bank & Trust Co. Joint
Repurchase Agreement (Note 3)......... 1,000,000 1,000,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost
$4,183,000)........................... 4,183,000
-------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $44,049,250) 100.3% 46,093,240
Total written call options (0.1) (29,707)
Liabilities in excess of other assets -- (0.2) (92,301)
----- -------------
NET ASSETS -- 100% $ 45,971,232
----- -------------
----- -------------
</TABLE>
- -------------
+ Non-income producing securities
# Fair valued security; see Note 2
* Resale restricted to qualified institutional buyers
@ The security or a portion thereof has been segregated as collateral for the
written option contracts
(1) PIK ("Payment in Kind") payment made with additional securities in lieu of
cash
(2) Represents a zero coupon bond which will convert to an interest-bearing
security at a later date
(3) Bond issued as part of a unit which includes an equity component
(4) Variable rate security; rate as of September 30, 1998
ADR -- American Depository Receipt
AUD -- Australian Dollar
NOK -- Norwegian Krone
NZD -- New Zealand Dollar
----------------
13
<PAGE>
OPEN COVERED WRITTEN CALL OPTIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
EXPIRATION STRIKE
CALL OPTIONS CONTRACTS DATE PRICE VALUE
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Abercrombie & Fitch Co. 3 10/98 $ 50 $ (244)
America Online, Inc. 15 11/98 120 (11,812)
Sepracor, Inc. 10 10/98 60 (7,501)
Yahoo!, Inc. 7 11/98 135 (10,150)
---------
Total Open Covered Written Call Options (proceeds $27,329)...... $ (29,707)
---------
---------
</TABLE>
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
- --------------------------------------------------------------------------
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------
AUD 14,000 USD 8,332 10/27/98 $ 34
USD 55,730 FIM 300,000 11/12/98 3,403
*USD 10,591 GBP 6,500 10/07/98 455
*USD 8,135 GBP 5,000 10/07/98 362
*USD 4,875 GBP 3,000 10/07/98 224
*USD 16,217 GBP 10,000 10/07/98 778
USD 9,361 ITL 16,000,000 10/19/98 335
USD 38,613 ITL 68,000,000 11/12/98 2,604
USD 10,250 ITL 18,000,000 11/12/98 660
USD 8,565 ITL 15,000,000 11/12/98 527
USD 9,036 ITL 15,000,000 11/12/98 55
-------
9,437
-------
<CAPTION>
GROSS
UNREALIZED
DEPRECIATION
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUD 491,000 USD 290,957 10/27/98 (82)
AUD 61,000 USD 35,490 10/27/98 (668)
FIM 605,000 USD 112,930 11/06/98 (6,287)
FIM 750,000 USD 136,369 11/12/98 (11,464)
FIM 795,000 USD 149,321 11/12/98 (8,382)
*GBP 24,500 USD 40,621 10/07/98 (1,016)
ITL 15,000,000 USD 8,526 10/19/98 (564)
ITL 107,000,000 USD 61,367 10/19/98 (3,470)
ITL 14,000,000 USD 7,922 10/19/98 (560)
ITL 166,000,000 USD 94,014 11/12/98 (6,604)
-------
(39,097)
-------
Net Unrealized Depreciation............................ $ (29,660)
-------
-------
</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 USD -- United States Dollar
FIM -- Finnish Markka ITL -- Italian Lira
</TABLE>
See Notes to Financial Statements
- ----------------
14
<PAGE>
- ----------------
SEASONS SERIES TRUST
MULTI-MANAGED MODERATE
GROWTH PORTFOLIO INVESTMENT PORTFOLIO -- SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 48.6% SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 3.5%
APPAREL & TEXTILES -- 0.5%
Gerber Childrenswear, Inc.+ ...................... 1,700 $ 13,494
Mohawk Industries, Inc.+ ......................... 4,500 123,187
Movado Group, Inc. ............................... 2,400 50,400
Oakley, Inc.+ .................................... 6,400 61,600
AUTOMOTIVE -- 0.5%
Federal-Mogul Corp. .............................. 2,375 111,031
Ford Motor Co. ................................... 1,000 46,937
General Motors Corp. ............................. 1,300 71,094
HOUSING -- 0.0%
Krause's Furniture, Inc.+ ........................ 3,300 3,919
RETAIL -- 2.5%
Abercrombie & Fitch Co.+@ ........................ 3,100 136,400
Amazon.com, Inc.+ ................................ 735 82,044
CDnow, Inc.+ ..................................... 2,300 20,700
Costco Cos., Inc.+ ............................... 2,350 111,331
CVS Corp. ........................................ 2,700 118,294
Dayton Hudson Corp. .............................. 1,600 57,200
Elder-Beerman Stores Corp.+ ...................... 3,900 67,763
Federated Department Stores, Inc.+ ............... 700 25,463
Gap, Inc. ........................................ 2,700 142,425
Home Depot, Inc. ................................. 4,700 185,650
Mac-Gray Corp.+ .................................. 4,200 37,800
Office Depot, Inc.+ .............................. 1,900 42,631
Restoration Hardware, Inc.+ ...................... 1,300 26,813
Sunglass Hut International, Inc.+ ................ 5,000 28,750
U.S. Vision, Inc.+ ............................... 3,000 25,125
Wal-Mart Stores, Inc. ............................ 2,700 147,487
------------
1,737,538
------------
CONSUMER STAPLES -- 0.3%
FOOD, BEVERAGE & TOBACCO -- 0.2%
Philip Morris Cos., Inc. ......................... 1,600 73,700
UST, Inc. ........................................ 600 17,737
HOUSEHOLD PRODUCTS -- 0.1%
Colgate-Palmolive Co. ............................ 700 47,950
------------
139,387
------------
ENERGY -- 1.3%
ENERGY SERVICES -- 0.4%
Schlumberger Ltd. ................................ 1,000 50,313
Transocean Offshore, Inc. ........................ 4,530 157,134
</TABLE>
----------------
15
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
ENERGY SOURCES -- 0.9%
Chevron Corp. .................................... 900 $ 75,656
Enron Corp. ...................................... 700 36,969
Exxon Corp. ...................................... 800 56,150
Mobil Corp. ...................................... 400 30,375
Ocean Rig ASA+ ............................. (NOK) 86,095 34,117
Royal Dutch Petroleum Co. ........................ 1,300 61,913
Smith International, Inc.+ ....................... 3,400 93,287
Texaco, Inc. ..................................... 700 43,881
------------
639,795
------------
FINANCE -- 4.6%
BANKS -- 1.7%
Ambanc Holding Co., Inc. ......................... 235 3,055
Bank of New York Co., Inc. ....................... 7,660 209,693
Chase Manhattan Corp. ............................ 600 25,950
Citicorp.......................................... 250 23,234
Crestar Financial Corp. .......................... 625 35,469
First Union Corp. ................................ 700 35,831
Firstar Corp. .................................... 1,135 57,459
Golden State Bancorp, Inc.+ ...................... 1,500 29,906
Hamilton Bancorp, Inc.+ .......................... 1,500 39,094
Hibernia Corp., Class A........................... 2,300 33,206
Mellon Bank Corp. ................................ 800 44,050
NationsBank Corp. ................................ 340 18,190
Star Banc Corp. .................................. 1,660 109,768
Summit Bancorp. .................................. 1,300 48,750
U.S. Bancorp...................................... 3,100 110,244
FINANCIAL SERVICES -- 2.0%
American Express Co. ............................. 900 69,862
American General Corp. ........................... 700 44,713
Associates First Capital Corp., Class A........... 3,270 213,367
Capital One Financial Corp. ...................... 1,000 103,500
Equitable Cos., Inc. ............................. 700 28,963
Federal National Mortgage Association............. 600 38,550
Fleet Financial Group, Inc. ...................... 1,950 143,203
HealthCare Financial Partners, Inc.+ ............. 1,600 67,200
Household International, Inc. .................... 1,000 37,500
Morgan Stanley, Dean Witter & Co. ................ 400 17,225
Newcourt Credit Group, Inc. ...................... 1,825 47,678
PaineWebber Group, Inc. .......................... 900 27,000
Providian Financial Corp. ........................ 900 76,331
Raymond James Financial, Inc. .................... 1,200 25,200
Travelers Group, Inc. ............................ 900 33,750
INSURANCE -- 0.9%
Aetna, Inc. ...................................... 300 20,850
Allstate Corp. ................................... 1,200 50,025
Annuity & Life Re Holdings Ltd.+ ................. 1,900 37,525
Chubb Corp. ...................................... 300 18,900
Reliance Group Holdings, Inc. .................... 3,500 49,219
</TABLE>
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16
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
INSURANCE (CONTINUED)
The Hartford Financial Services Group, Inc. ...... 800 $ 37,950
UNUM Corp. ....................................... 4,968 246,847
------------
2,259,257
------------
HEALTHCARE -- 7.8%
DRUGS -- 5.6%
Abbott Laboratories, Inc. ........................ 800 34,750
ALZA Corp.+ ...................................... 7,355 319,023
Amgen, Inc.+ ..................................... 800 60,450
Biogen, Inc.+ .................................... 1,000 65,813
Bristol-Myers Squibb Co. ......................... 500 51,938
Centocor, Inc.+ .................................. 6,095 241,514
Eli Lilly & Co. .................................. 5,200 407,225
Merck & Co., Inc. ................................ 600 77,737
Pfizer, Inc. ..................................... 4,630 490,491
Pharmacia & Upjohn, Inc. ......................... 3,030 152,068
Sepracor, Inc.+@ ................................. 1,000 65,750
Warner-Lambert Co. ............................... 10,570 798,035
HEALTH SERVICES -- 0.8%
IMS Health, Inc. ................................. 4,060 251,466
Omnicare, Inc. ................................... 2,882 101,590
Sunrise Assisted Living, Inc.+ ................... 1,000 34,313
Vision Twenty-One, Inc.+ ......................... 500 3,469
MEDICAL PRODUCTS -- 1.4%
ADAC Laboratories................................. 1,300 31,200
Allegiance Corp. ................................. 1,000 29,750
Baxter International, Inc. ....................... 1,000 59,500
Johnson & Johnson................................. 700 54,775
Medaphis Corp.+ .................................. 7,500 33,750
MedImmune, Inc.+ ................................. 1,800 116,550
Nanogen, Inc.+ ................................... 4,200 15,356
Schering-Plough Corp. ............................ 550 56,959
Sofamor Danek Group, Inc.+ ....................... 3,075 273,675
United States Surgical Corp. ..................... 85 3,544
------------
3,830,691
------------
INDUSTRIAL & COMMERCIAL -- 3.3%
AEROSPACE & MILITARY TECHNOLOGY -- 0.1%
Orbital Sciences Corp.+ .......................... 2,110 59,212
BUSINESS SERVICES -- 2.0%
Apollo Group, Inc., Class A+ ..................... 1,845 51,429
Caliber Learning Network, Inc.+ .................. 2,700 16,369
D.R. Horton, Inc. ................................ 2,700 43,200
Delta & Pine Land Co. ............................ 2,630 115,720
DSET Corp.+ ...................................... 6,300 53,550
HA-LO Industries, Inc.+ .......................... 3,800 111,150
ITT Educational Services, Inc.+ .................. 3,000 96,000
Paychex, Inc. .................................... 1,800 92,812
</TABLE>
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<PAGE>
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<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
BUSINESS SERVICES (CONTINUED)
RCM Technologies, Inc.+ .......................... 4,400 $ 64,900
Service Corp. International....................... 900 28,688
Storage Technology Corp.+ ........................ 1,500 38,156
Sylvan Learning Systems, Inc.+ ................... 3,500 81,813
Technology Solutions Co.+ ........................ 2,800 31,500
The Kroll O'Gara Co.+ ............................ 3,700 86,487
Waste Management, Inc.+ .......................... 1,000 48,063
MACHINERY -- 0.1%
United Technologies Corp. ........................ 800 61,150
MULTI-INDUSTRY -- 1.0%
Raisio Group PLC.................................. 6,862 99,870
Republic Industries, Inc.+ ....................... 1,100 16,019
Tyco International Ltd. .......................... 6,710 370,727
TRANSPORTATION -- 0.1%
Atlas Air, Inc.+ ................................. 1,100 31,556
Burlington Northern Santa Fe Corp. ............... 1,200 38,400
------------
1,636,771
------------
INFORMATION & ENTERTAINMENT -- 6.3%
BROADCASTING & MEDIA -- 5.3%
Cablevision Systems Corp., Class A+ .............. 2,800 120,925
Capstar Broadcasting Corp., Class A+ ............. 470 7,256
Chancellor Media Corp.+ .......................... 3,595 119,983
Cinar Films, Inc., Class B+ ...................... 3,500 62,781
Cox Communications, Inc., Class A+ ............... 3,575 195,284
DoubleClick, Inc.+ ............................... 1,800 42,975
Jacor Communications, Inc.+ ...................... 1,200 60,750
Lamar Advertising Co.+ ........................... 2,867 80,276
Liberty Media Group, Series A+ ................... 5,210 191,142
MediaOne Group, Inc.+ ............................ 13,370 594,129
Outdoor Systems, Inc.+ ........................... 5,339 104,111
Penton Media, Inc. ............................... 2,815 38,354
Scientific-Atlanta, Inc. ......................... 5,100 107,737
Snyder Communications, Inc.+ ..................... 2,700 90,450
Source Media, Inc.+ .............................. 700 5,513
Time Warner, Inc. ................................ 8,542 747,959
United International Holdings, Inc.+ ............. 1,645 15,936
ENTERTAINMENT PRODUCTS -- 0.1%
Lumen Technologies, Inc.+ ........................ 9,600 48,000
SportsLine USA, Inc.+ ............................ 1,000 17,438
LEISURE & TOURISM -- 0.9%
Carnival Corp., Class A........................... 3,220 102,436
Family Golf Centers, Inc.+ ....................... 800 14,200
McDonald's Corp. ................................. 700 41,781
Outback Steakhouse, Inc.+ ........................ 2,820 74,377
Preview Travel, Inc.+ ............................ 1,300 23,725
Primadonna Resorts, Inc. ......................... 4,000 30,750
Royal Caribbean Cruises Ltd. ..................... 2,600 69,063
</TABLE>
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18
<PAGE>
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<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (CONTINUED)
LEISURE & TOURISM (CONTINUED)
Steiner Leisure Ltd.+ ............................ 3,900 $ 60,938
Travel Services International, Inc.+ ............. 3,100 42,044
------------
3,110,313
------------
INFORMATION TECHNOLOGY -- 19.3%
COMMUNICATION EQUIPMENT -- 1.7%
Ascend Communications, Inc.+ ..................... 4,100 186,550
General Instrument Corp.+ ........................ 2,660 57,523
Lucent Technologies, Inc. ........................ 2,300 158,844
Nokia Corp., Class A ADR.......................... 5,710 447,878
COMPUTERS & BUSINESS EQUIPMENT -- 2.5%
Apple Computer, Inc.+ ............................ 5,100 194,437
AVT Corp.+ ....................................... 1,500 33,938
Compaq Computer Corp. ............................ 900 28,463
Dell Computer Corp.+ ............................. 5,210 342,557
EMC Corp.+ ....................................... 2,500 142,969
FORE Systems, Inc.+ .............................. 4,600 76,475
HBO & Co. ........................................ 3,500 101,062
Hewlett-Packard Co. .............................. 300 15,881
Honeywell, Inc. .................................. 400 25,625
International Business Machines Corp. ............ 1,000 128,000
Micron Technology, Inc.+ ......................... 900 27,394
Network Appliance, Inc.+ ......................... 2,200 111,375
ELECTRONICS -- 1.6%
General Electric Co. ............................. 2,145 170,662
Intel Corp. ...................................... 960 82,320
Maxim Integrated Products, Inc.+ ................. 3,500 97,562
Motorola, Inc. ................................... 700 29,881
Pittway Corp., Class A............................ 6,240 148,980
Rambus, Inc.+ .................................... 1,400 89,600
Texas Instruments, Inc. .......................... 1,000 52,750
Vitesse Semiconductor Corp.+ ..................... 4,280 101,115
SOFTWARE -- 8.0%
America Online, Inc.+@ ........................... 5,067 563,704
AnswerThink Consulting Group+ .................... 3,300 59,606
Aspect Development, Inc.+ ........................ 805 31,697
Aspen Technology, Inc.+ .......................... 4,740 126,795
At Home Corp., Series A+ ......................... 4,280 204,905
BMC Software, Inc.+ .............................. 800 48,050
Broadcast.com, Inc.+ ............................. 45 1,817
BroadVision, Inc.+ ............................... 2,000 21,125
Cadence Design Systems, Inc.+ .................... 6,740 172,291
Cisco Systems, Inc.+ ............................. 11,035 682,101
CMG Information Services, Inc.+ .................. 1,400 74,550
Compuware Corp.+ ................................. 3,200 188,400
Entrust Technologies, Inc.+ ...................... 3,500 51,844
Excite, Inc.+ .................................... 1,200 48,975
Icon CMT Corp.+ .................................. 2,900 32,262
Intuit, Inc.+ .................................... 2,440 113,612
</TABLE>
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19
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
SOFTWARE (CONTINUED)
J.D. Edwards & Co.+ .............................. 2,600 $ 124,800
JDA Software Group, Inc. ......................... 20 276
Keane, Inc.+ ..................................... 1,400 49,175
Legato Systems, Inc.+ ............................ 1,000 51,375
Lycos, Inc.+ ..................................... 2,000 67,625
Microsoft Corp.+ ................................. 6,475 712,655
Mobius Management Systems, Inc.+ ................. 2,500 15,000
Pegrine Systems, Inc.+ ........................... 2,200 88,550
Policy Management Systems Corp.+ ................. 5 203
Sapient Corp.+ ................................... 4,560 155,610
Sun Microsystems, Inc.+ .......................... 500 24,906
Wind River Systems+ .............................. 2,180 103,005
Yahoo!, Inc.+@ ................................... 700 90,650
TELECOMMUNICATIONS -- 5.5%
Comcast Corp., Class A............................ 18,045 846,987
Frontier Corp. ................................... 4,800 131,400
Global Crossing Ltd.+ ............................ 385 8,037
GST Telecommunications, Inc+ ..................... 11,000 68,750
ICG Communications, Inc.+ ........................ 4,400 74,250
Intermedia Communications, Inc.+ ................. 1,800 44,213
Primus Telecommunications Group, Inc.+ ........... 2,000 17,375
Qwest Communications International, Inc.+ ........ 4,400 137,775
Saville Systems PLC ADR+ ......................... 800 11,600
STARTEC Global Communications Corp.+ ............. 1,500 10,313
Tele-Communications, Inc., TCI Ventures Group,
Series A+ ....................................... 27,835 499,290
Tele-Communications, Inc., Series A+ ............. 19,722 771,623
Western Wireless Corp., Class A+ ................. 5,020 89,732
------------
9,468,750
------------
MATERIALS -- 0.7%
CHEMICALS -- 0.6%
du Pont (E.I.) de Nemours & Co. .................. 900 50,512
Monsanto Co. ..................................... 4,530 255,379
North American Scientific, Inc.+ ................. 2,000 9,500
METALS & MINERALS -- 0.1%
Martin Marietta Materials, Inc. .................. 600 25,913
------------
341,304
------------
UTILITIES -- 1.5%
ELECTRIC UTILITIES -- 0.4%
GPU, Inc. ........................................ 900 38,250
Niagara Mohawk Power Corp.+ ...................... 9,300 142,987
GAS & PIPELINE UTILITIES -- 0.1%
Consolidated Natural Gas Co. ..................... 700 38,150
TELEPHONE -- 1.0%
AT&T Corp. ....................................... 2,300 134,407
Century Telephone Enterprises, Inc. .............. 1,925 90,956
</TABLE>
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20
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
TELEPHONE (CONTINUED)
GTE Corp. ........................................ 600 $ 33,000
MCI WorldCom, Inc.+ .............................. 2,000 97,750
SBC Communications, Inc. ......................... 1,200 53,325
Telecom Italia SpA................................ 14,018 96,601
------------
725,426
------------
TOTAL COMMON STOCK (cost $22,883,230)............. 23,889,232
------------
<CAPTION>
PREFERRED STOCK -- 0.0%
<S> <C> <C>
- ----------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 0.0%
TELECOMMUNICATIONS -- 0.0%
Viatel, Inc., Series A 10.00%(1) (cost $332)...... 5 298
------------
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 40.2% AMOUNT
<S> <C> <C>
- ----------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.4%
APPAREL & TEXTILES -- 0.0%
Galey & Lord, Inc. 9.13% 2008..................... $ 5,000 4,300
AUTOMOTIVE -- 0.0%
Accuride Corp., Series B 9.25% 2008*.............. 10,000 9,575
HOUSING -- 0.1%
Engle Homes, Inc., Series C 9.25% 2008............ 10,000 9,600
Falcon Building Products, Inc. 9.50% 2007......... 10,000 8,500
Standard Pacific Corp. 8.50% 2007................. 15,000 14,325
RETAIL -- 0.3%
Amazon.com, Inc. zero coupon 2008(2).............. 137,000 75,350
Duane Reade, Inc. 9.25% 2008...................... 10,000 9,700
Fred Meyer, Inc. 7.38% 2005....................... 40,000 41,524
J.C. Penney Co., Inc. 7.40% 2037.................. 40,000 44,040
------------
216,914
------------
CONSUMER STAPLES -- 0.2%
FOOD, BEVERAGE & TOBACCO -- 0.2%
Aurora Foods, Inc., Series B 8.75% 2008........... 5,000 5,063
Nash Finch Co. 8.50% 2008......................... 10,000 9,400
Panamerican Beverages, Inc. 8.13% 2003............ 60,000 61,767
HOUSEHOLD PRODUCTS -- 0.0%
Revlon Worldwide Corp. zero coupon 2001........... 15,000 11,475
------------
87,705
------------
ENERGY -- 0.5%
ENERGY SERVICES -- 0.0%
Dailey International, Inc. 9.50% 2008............. 10,000 6,000
</TABLE>
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21
<PAGE>
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<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
ENERGY SOURCES -- 0.5%
Abraxas Petroleum Corp. 11.50% 2004............... $ 10,000 $ 7,800
Cross Timbers Oil Co., Class B 8.75% 2009......... 10,000 9,000
Newfield Exploration Co., Series B 7.45% 2007..... 25,000 24,824
P&L Coal Holdings Corp. 9.63% 2008* .............. 15,000 14,738
Petroleos Mexicano 9.00% 2007..................... 47,000 38,187
Sonat, Inc. 6.88% 2005............................ 110,000 117,718
Tesoro Petroleum Corp., Series B 9.00% 2008....... 10,000 9,625
YPF Sociedad Anonima 8.00% 2004................... 30,000 27,225
------------
255,117
------------
FINANCE -- 7.9%
BANKS -- 2.0%
Banc One Corp. 8.00% 2027......................... 34,000 39,748
Bank One Columbus 7.38% 2002...................... 45,000 48,271
Banponce Financial Corp. 6.75% 2001............... 35,000 36,247
Credit National 7.00% 2005........................ 30,000 31,595
Export Import Bank of Korea 6.50% 2006............ 60,000 46,033
First Chicago NBD Corp. 7.25% 2004................ 110,000 118,756
First Republic Bancorp 7.75% 2012................. 45,000 50,124
First Union-Lehman Brothers Commercial Mortgage
Corp. 6.60% 2007................................. 205,000 211,626
Korea Development Bank 7.13% 2001................. 20,000 17,460
National City Corp. 7.20% 2005.................... 170,000 184,239
NBD Bank SA 8.25% 2024............................ 45,000 53,743
NCNB Co. 9.38% 2009............................... 48,000 61,652
United States Bancorp 7.50% 2026.................. 95,000 106,016
Western Financial Savings Bank 8.88% 2007......... 10,000 8,400
FINANCIAL SERVICES -- 5.1%
Aesop Funding Corp. 6.14% 2006*................... 100,000 102,937
Allstate Financing II 7.83% 2045.................. 44,000 46,646
AMRESCO, Inc. 9.88% 2005.......................... 10,000 8,000
Arcadia Financial Ltd. 11.50% 2007(3)............. 10,000 7,275
Asset Securitization Corp. 6.66% 2041............. 75,000 78,342
Associates Corp. of North America 7.63% 2004...... 110,000 122,431
ContiFinancial Corp. 8.13% 2008................... 10,000 9,394
CS First Boston Mortgage Securities Corp. 7.24%
2029............................................. 100,000 107,910
Dime Capital Trust I, Series A 9.33% 2027......... 35,000 39,684
Equitable Cos., Inc. 7.00% 2028................... 110,000 111,801
Finova Capital Corp. 6.63% 2001................... 100,000 103,024
Finova Capital Corp., Series C 6.39% 2002......... 45,000 46,935
Fleet Mortgage Group, Inc. 6.84% 2003............. 50,000 53,319
Ford Motor Credit Corp. 7.02% 2000................ 100,000 103,801
GE Capital Mortgage Services, Inc. 6.25% 2023..... 25,480 25,496
General Motors Acceptance Corp. 7.63% 2003........ 105,000 115,677
Morgan Stanley Capital I, Inc. 7.22% 2007*#....... 100,000 108,156
Popular North America, Inc. 6.63% 2002............ 50,000 50,903
Private Export Funding Corp. 5.87% 2008........... 325,000 345,160
Private Export Funding Corp. 6.31% 2004........... 100,000 107,126
Private Export Funding Corp. 6.62% 2005........... 220,000 244,039
Private Export Funding Corp. 7.03% 2003........... 45,000 49,480
Private Export Funding Corp. 7.30% 2002........... 225,000 242,613
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
Private Export Funding Corp. 7.90% 2000........... $ 55,000 $ 57,583
U.S. West Capital Funding, Inc. 6.25% 2005........ 130,000 138,057
U.S. West Capital Funding, Inc. 6.88% 2028........ 80,000 84,806
INSURANCE -- 0.8%
Cigna Corp. 7.40% 2007............................ 70,000 76,716
Cigna Corp. 7.88% 2027............................ 34,000 36,903
Jackson National Life Insurance Co. 8.15% 2027*... 40,000 48,399
Lumbermens Mutual Casualty Co. 8.30% 2037*........ 70,000 78,424
Metropolitan Life Insurance Co. 7.70% 2015*....... 120,000 140,692
------------
3,905,639
------------
HEALTHCARE -- 0.8%
HEALTH SERVICES -- 0.4%
HEALTHSOUTH Corp. 6.88% 2005*(3).................. 100,000 104,785
Tenet Healthcare Corp. 7.88% 2003................. 40,000 40,600
Tenet Healthcare Corp. 8.13% 2008*(3)............. 15,000 15,361
MEDICAL PRODUCTS -- 0.4%
Allegiance Corp. 7.00% 2026....................... 120,000 126,791
Beckman Instruments, Inc. 7.10% 2003.............. 70,000 71,889
Owens & Minor, Inc. 10.88% 2006................... 10,000 10,600
------------
370,026
------------
INDUSTRIAL & COMMERCIAL -- 1.4%
AEROSPACE & MILITARY TECHNOLOGY -- 0.0%
K & F Industries, Inc. 9.25% 2007................. 10,000 9,800
BUSINESS SERVICES -- 0.7%
Boise Cascade Office Products Co. 7.05% 2005...... 190,000 200,903
Federal Express Corp. 6.72% 2022 #................ 150,000 154,500
MACHINERY -- 0.2%
Cincinnati Milacron, Inc. 7.88% 2000.............. 65,000 67,052
Grove Worldwide LLC 9.25% 2008*(3)................ 5,000 4,400
Johnstown America Industries, Inc. 11.75% 2005.... 10,000 10,487
Numatics, Inc., Series B 9.63% 2008............... 10,000 9,763
MULTI-INDUSTRY -- 0.0%
Nortek, Inc. 8.88% 2008........................... 5,000 4,825
TRANSPORTATION -- 0.5%
AMR Corp. 10.20% 2020............................. 50,000 65,698
Continental Airlines, Inc. 6.47% 2004............. 80,000 85,047
Continental Airlines, Inc. 6.65% 2017............. 75,000 79,637
MTL, Inc. 10.00% 2006* ........................... 10,000 9,600
------------
701,712
------------
INFORMATION & ENTERTAINMENT -- 0.8%
BROADCASTING & MEDIA -- 0.7%
Allbritton Communications Co. 8.88% 2008.......... 5,000 4,950
Century Communications Corp., Series B zero coupon
2008............................................. 20,000 9,400
</TABLE>
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23
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (CONTINUED)
BROADCASTING & MEDIA (CONTINUED)
Classic Cable, Inc. 9.88% 2008.................... $ 5,000 $ 5,087
Comcast Cable Communications 8.50% 2027........... 35,000 42,877
EchoStar DBS Corp. 12.50% 2002.................... 10,000 10,425
Granite Broadcasting Corp. 8.88% 2008*............ 15,000 14,006
LIN Holdings Corp. zero coupon 2008*(2)........... 15,000 9,825
News America Holdings, Inc. 8.00% 2016............ 110,000 121,563
Scholastic Corp. 7.00% 2003....................... 70,000 73,907
Viacom, Inc. 7.75% 2005........................... 65,000 70,191
LEISURE & TOURISM -- 0.1%
Argosy Gaming Co. 13.25% 2004..................... 10,000 10,625
Fitzgeralds Gaming Corp., Series B 12.25% 2004.... 5,000 3,500
Loews Cineplex Entertainment Corp. 8.88% 2008*.... 5,000 4,950
------------
381,306
------------
INFORMATION TECHNOLOGY -- 0.8%
ELECTRONICS -- 0.1%
Advanced Micro Devices, Inc. 11.00% 2003.......... 10,000 10,100
Amphenol Corp. 9.88% 2007......................... 10,000 9,350
SOFTWARE -- 0.0%
Concentric Network Corp. 12.75% 2007.............. 10,000 9,225
PSINet, Inc. 10.00% 2005.......................... 10,000 10,000
TELECOMMUNICATIONS -- 0.7%
AMSC Acquisition, Inc. 12.25% 2008................ 5,000 3,088
BTI Telecom Corp. 10.50% 2007..................... 10,000 8,300
Compania de Telecomunicaciones 7.63% 2006......... 40,000 38,547
e.spire Communications, Inc. zero coupon
2008*(2)......................................... 20,000 10,275
GCI, Inc. 9.75% 2007.............................. 10,000 9,300
Globalstar LP 10.75% 2004......................... 10,000 6,400
GST Telecommunications, Inc. zero coupon
2008*(2)(3)...................................... 20,000 9,925
Intermedia Communications, Inc. 8.88% 2007........ 15,000 15,075
Iridium LLC 10.88% 2005........................... 10,000 8,075
Iridium LLC 11.25% 2005........................... 5,000 4,100
ITC Deltacom, Inc. 8.88% 2008..................... 5,000 4,900
IXC Communications, Inc. 9.00% 2008............... 10,000 9,900
KMC Telecom Holdings, Inc. zero coupon 2008(2).... 20,000 9,575
Level 3 Communications, Inc. 9.13% 2008........... 10,000 9,475
McleodUSA, Inc. 8.38% 2008........................ 10,000 9,850
MJD Communications, Inc. 9.50% 2008*.............. 5,000 5,025
Nextel Communications, Inc. zero coupon
2007(2) ......................................... 20,000 12,000
Paging Network, Inc. 10.13% 2007.................. 10,000 9,900
Tele-Communications, Inc. 7.25% 2005.............. 50,000 55,013
Tele-Communications, Inc. 8.00% 2005.............. 35,000 39,999
Tele-Communications, Inc. 9.25% 2002.............. 35,000 39,279
Telecommunications Tech Co. LLC 9.75% 2008*....... 10,000 9,137
Time Warner Telecom, Inc. 9.75% 2008.............. 10,000 10,050
Viatel, Inc. 11.25% 2008*(3)...................... 10,000 9,000
------------
384,863
------------
</TABLE>
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24
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
MATERIALS -- 0.5%
CHEMICALS -- 0.2%
Huntsman Corp. 9.50% 2007*........................ $ 15,000 $ 14,400
ICI Wilmington, Inc. 6.95% 2004................... 65,000 67,970
LaRoche Industries, Inc. 9.50% 2007............... 5,000 4,250
Sovereign Speciality Chemicals 9.50% 2007......... 10,000 9,550
FOREST PRODUCTS -- 0.2%
American Pad & Paper Co. 13.00% 2005.............. 10,000 5,400
Boise Cascade Corp. 9.90% 2001.................... 70,000 77,048
Gaylord Container Corp. 9.38% 2007................ 10,000 8,000
Grupo Industrial Durango SA de CV 12.63% 2003..... 10,000 7,100
Repap New Brunswick, Inc. 9.00% 2004.............. 10,000 9,125
METALS & MINERALS -- 0.1%
A.K. Steel Holding Corp. 9.13% 2006............... 10,000 10,000
Armco, Inc. 9.00% 2007............................ 10,000 9,800
Bayou Steel Corp. 9.50% 2008*..................... 10,000 8,987
------------
231,630
------------
MUNICIPAL BONDS -- 1.1%
MUNICIPAL BONDS -- 1.1%
Allentown Pennsylvania 6.20% 2005................. 225,000 238,513
Hudson County New Jersey Improvement Authority
Facility 6.55% 2002.............................. 85,000 89,472
Huntsville Alabama Solid Waste Disposal Authority
5.95% 2003....................................... 85,000 87,287
Miami Florida Revenue 7.25% 2003.................. 110,000 119,941
------------
535,213
------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 1.5%
FOREIGN GOVERNMENT -- 1.5%
Australian Government 10.00% 2006........... (AUD) 755,000 583,565
Republic of Argentina 11.00% 2006................. 50,000 46,625
Republic of Columbia 7.25% 2004................... 49,000 38,342
Republic of Columbia 7.63% 2007................... 33,000 23,018
Republic of Lithuania 7.13% 2002*................. 35,000 30,275
------------
721,825
------------
REAL ESTATE -- 0.4%
REAL ESTATE COMPANIES -- 0.4%
Equity Office Properties Operating LP 6.38%
2003............................................. 100,000 99,938
Post Apartment Homes LP 7.02% 2001................ 110,000 114,989
------------
214,927
------------
U.S. GOVERNMENT & AGENCIES -- 21.8%
U.S. GOVERNMENT & AGENCIES -- 21.8%
Federal Home Loan Mortgage Corp. 6.00% 2006....... 34,541 34,735
Federal Home Loan Mortgage Corp. 6.50% 2022....... 122,000 127,756
Federal Home Loan Mortgage Corp. 6.50% 2023....... 40,000 42,850
Federal Home Loan Mortgage Corp. 6.55% 2022....... 32,000 33,610
Federal Home Loan Mortgage Corp. 6.75% 2022....... 130,000 134,757
Federal Home Loan Mortgage Corp. 7.00% 2023....... 25,000 27,328
</TABLE>
----------------
25
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (CONTINUED)
Federal Home Loan Mortgage Corp. 7.50% 2023....... $ 16,236 $ 16,749
Federal Home Loan Mortgage Corp. 7.75% 2022....... 41,306 44,429
Federal Home Loan Mortgage Corp. 8.50% 2019....... 45,510 47,820
Federal National Mortgage Association 5.25%
2003............................................. 825,000 842,399
Federal National Mortgage Association 5.63%
2001............................................. 320,000 327,699
Federal National Mortgage Association 5.65%
2005............................................. 29,812 29,757
Federal National Mortgage Association 5.75%
2008............................................. 760,000 803,350
Federal National Mortgage Association 6.13%
2028(4).......................................... 231,118 233,718
Federal National Mortgage Association 7.00%
2006............................................. 7,639 7,646
Federal National Mortgage Association 7.39%
2021............................................. 46,053 50,281
Federal National Mortgage Association 7.75%
2021............................................. 184,000 194,234
Federal National Mortgage Association 8.00%
2006............................................. 64,798 68,625
Government National Mortgage Association 7.00%
2022............................................. 17,128 17,695
Government National Mortgage Association 7.00%
2023............................................. 15,007 15,499
Government National Mortgage Association 7.25%
2027............................................. 226,706 234,498
Government National Mortgage Association 7.50%
2024............................................. 59,971 62,182
Government National Mortgage Association 8.50%
2017............................................. 56,655 60,408
Government National Mortgage Association 9.00%
2021............................................. 17,472 18,783
United States Treasury Bonds 7.50% 2016........... 230,000 292,783
United States Treasury Bonds 8.50% 2020........... 200,000 284,468
United States Treasury Bonds 9.25% 2016........... 160,000 235,675
United States Treasury Bonds 11.88% 2003.......... 520,000 695,172
United States Treasury Bonds 12.00% 2013.......... 3,330,000 5,208,853
United States Treasury Bonds Strip zero coupon
2012............................................. 260,000 132,761
United States Treasury Notes 6.63% 2001........... 365,000 386,444
------------
10,712,964
------------
UTILITIES -- 2.1%
ELECTRIC UTILITIES -- 0.8%
Atlantic City Electric Co. 6.38% 2005............. 45,000 47,889
Cleveland Electric Illuminating Co., Series B
7.19% 2000....................................... 20,000 20,479
Empresa Nacional de Electricidad SA 7.33% 2037.... 45,000 40,226
PacifiCorp 6.38% 2008#............................ 150,000 156,675
Public Service Electric & Gas Co. 8.88% 2003...... 21,000 24,392
UtiliCorp United, Inc. 6.88% 2004................. 70,000 74,393
WESCO Distribution, Inc., Series B 9.13% 2008..... 15,000 14,288
GAS & PIPELINE UTILITIES -- 0.5%
HNG Internorth, Inc. 9.63% 2006................... 110,000 132,367
KN Energy, Inc. 6.65% 2005........................ 90,000 92,425
TELEPHONE -- 0.8%
GTE Corp. 6.36% 2006.............................. 175,000 186,392
MCI Communications Corp. 6.13% 2002(4)............ 45,000 46,128
MGC Communications, Inc., Series B 13.00% 2004.... 5,000 3,750
WorldCom, Inc. 7.55% 2004......................... 165,000 179,702
------------
1,019,106
------------
TOTAL BONDS & NOTES (cost $18,918,155)............ 19,738,947
------------
</TABLE>
- ----------------
26
<PAGE>
<TABLE>
<CAPTION>
WARRANTS -- 0.0%+ SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 0.0%
BANKS -- 0.0%
Golden State Bancorp, Inc......................... 1,500 $ 6,328
------------
INFORMATION TECHNOLOGY -- 0.0%
TELECOMMUNICATIONS -- 0.0%
KMC Telecom Holdings, Inc. 4/15/08*#.............. 20 50
------------
TOTAL WARRANTS (cost $8,851)...................... 6,378
------------
<CAPTION>
PUT OPTIONS -- 0.1% CONTRACTS
<S> <C> <C>
- ----------------------------------------------------------------------------
America Online, Inc., exp 11/98................... 15 19,125
At Home Corp., exp 10/98.......................... 5 31
CMG Information Services, Inc., exp 11/98......... 14 8,225
Excite, Inc., exp 11/98........................... 10 6,000
Lycos, Inc., exp 11/98............................ 19 11,163
Yahoo, Inc., exp 11/98............................ 7 11,638
------------
TOTAL PUT OPTIONS (cost $60,781).................. 56,182
------------
TOTAL INVESTMENT SECURITIES (cost $41,871,349).... 43,691,037
------------
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 2.1% AMOUNT
<S> <C> <C>
- ----------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 0.1%
Chase Manhattan Corp. 8.77% due 2/19/99........... $ 50,000 50,513
------------
FEDERAL AGENCY OBLIGATIONS -- 1.9%
Federal Home Loan Mortgage Corp. 5.40% due
10/1/98.......................................... 925,000 925,000
------------
FOREIGN SHORT-TERM NOTES -- 0.1%
New Zealand Treasury Bill zero coupon due
12/16/98................................... (NZD) 130,000 64,374
------------
TOTAL SHORT-TERM SECURITIES (cost $1,047,296)..... 1,039,887
------------
<CAPTION>
REPURCHASE AGREEMENTS -- 9.2%
<S> <C> <C>
- ----------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 9.2%
J.P. Morgan & Co., Inc. Joint Repurchase Agreement
(Note 3)......................................... 640,000 640,000
PaineWebber, Inc. Joint Repurchase Agreement (Note
3)............................................... 2,872,000 2,872,000
State Street Bank & Trust Co. Joint Repurchase
Agreement (Note 3)............................... 1,000,000 1,000,000
------------
TOTAL REPURCHASE AGREEMENTS (cost $4,512,000)..... 4,512,000
------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $47,430,645) 100.2% 49,242,924
Total written call options (0.1) (29,707)
Liabilities in excess of other assets -- (0.1) (52,100)
--------- -------------
NET ASSETS -- 100.0% $ 49,161,117
--------- -------------
--------- -------------
</TABLE>
- -------------
+ Non-income producing securities
# Fair valued security; see Note 2
* Resale restricted to qualified institutional buyers
@ The security or a portion thereof has been segregated as collateral for the
written option contracts
----------------
27
<PAGE>
(1) PIK ("Payment-in-Kind") payment made with additional securities in lieu of
cash
(2) Represents a zero coupon bond which will convert to an interest-bearing
security at a later date
(3) Bond issued as part of a unit which includes an equity component
(4) Variable rate security; rate as of September 30, 1998
ADR -- American Depository Receipt
AUD -- Australian Dollar
NOK -- Norwegian Krone
NZD -- New Zealand Dollar
OPEN COVERED WRITTEN CALL OPTIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
EXPIRATION STRIKE
CALL OPTIONS CONTRACTS DATE PRICE VALUE
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Abercrombie & Fitch Co. 3 10/98 $ 50 $ (244)
America Online, Inc. 15 11/98 120 (11,812)
Sepracor, Inc. 10 10/98 60 (7,501)
Yahoo!, Inc. 7 11/98 135 (10,150)
---------
Total Open Covered Written Call Options (proceeds $27,329)...... $ (29,707)
---------
---------
</TABLE>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
AUD 24,000 USD 14,284 10/27/98 $ 58
USD 37,153 FIM 200,000 11/12/98 2,269
*USD 9,450 GBP 5,800 10/07/98 406
*USD 3,254 GBP 2,000 10/07/98 145
*USD 4,875 GBP 3,000 10/07/98 224
*USD 11,352 GBP 7,000 10/07/98 544
USD 7,606 ITL 13,000,000 10/19/98 272
USD 28,960 ITL 51,000,000 11/12/98 1,953
USD 6,264 ITL 11,000,000 11/12/98 403
USD 8,565 ITL 15,000,000 11/12/98 527
USD 4,819 ITL 8,000,000 11/12/98 30
-------
6,831
-------
<CAPTION>
GROSS
UNREALIZED
DEPRECIATION
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
AUD 845,000 USD 500,730 10/27/98 (140)
AUD 103,000 USD 59,925 10/27/98 (1,127)
FIM 430,000 USD 80,264 11/06/98 (4,469)
FIM 500,000 USD 90,912 11/12/98 (7,643)
FIM 570,000 USD 106,343 11/12/98 (6,010)
*GBP 17,800 USD 29,512 10/07/98 (738)
ITL 10,000,000 USD 5,684 10/19/98 (376)
ITL 82,000,000 USD 47,029 10/19/98 (2,659)
ITL 14,000,000 USD 7,922 10/19/98 (561)
ITL 114,000,000 USD 64,564 11/12/98 (4,535)
-------
(28,258)
-------
Net Unrealized Depreciation................... $(21,427)
-------
-------
</TABLE>
- -------------
* Represents fully offsetting forward foreign currency contracts that do not
have additional market risk but have continued counter party settlement risk
<TABLE>
<S> <C> <C>
AUD -- Australian Dollar GBP -- Great British Pound USD -- United States Dollar
FIM -- Finnish Markka ITL -- Italian Lira
</TABLE>
See Notes to Financial Statements
- ----------------
28
<PAGE>
- ----------------
SEASONS SERIES TRUST
MULTI-MANAGED
INCOME/EQUITY PORTFOLIO INVESTMENT PORTFOLIO -- SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 26.3% SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 1.7%
APPAREL & TEXTILES -- 0.1%
Oakley, Inc.+ .......................... 3,100 $ 29,837
AUTOMOTIVE -- 0.3%
Federal-Mogul Corp. .................... 1,245 58,204
Ford Motor Co. ......................... 1,000 46,937
General Motors Corp. ................... 500 27,344
RETAIL -- 1.3%
Amazon.com, Inc.+ ...................... 380 42,418
Costco Cos., Inc.+ ..................... 1,165 55,192
CVS Corp. .............................. 2,500 109,531
Dayton Hudson Corp. .................... 1,500 53,625
Federated Department Stores, Inc.+ ..... 800 29,100
Gap, Inc. .............................. 1,000 52,750
Home Depot, Inc. ....................... 1,300 51,350
Office Depot, Inc.+ .................... 1,000 22,438
Wal-Mart Stores, Inc. .................. 1,900 103,787
-------------
682,513
-------------
CONSUMER STAPLES -- 0.2%
FOOD, BEVERAGE & TOBACCO -- 0.1%
Philip Morris Cos., Inc. ............... 1,100 50,669
UST, Inc. .............................. 400 11,825
HOUSEHOLD PRODUCTS -- 0.1%
Colgate-Palmolive Co. .................. 500 34,250
-------------
96,744
-------------
ENERGY -- 0.9%
ENERGY SERVICES -- 0.3%
Schlumberger Ltd. ...................... 800 40,250
Transocean Offshore, Inc. .............. 2,355 81,689
ENERGY SOURCES -- 0.6%
Chevron Corp. .......................... 800 67,250
Enron Corp. ............................ 500 26,406
Exxon Corp. ............................ 500 35,094
Mobil Corp. ............................ 400 30,375
Ocean Rig ASA+ ....................(NOK) 44,992 17,829
Royal Dutch Petroleum Co. .............. 1,000 47,625
Texaco, Inc. ........................... 600 37,612
-------------
384,130
-------------
</TABLE>
----------------
29
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 3.3%
BANKS -- 1.1%
Ambanc Holding Co., Inc. ............... 115 $ 1,495
Bank of New York Co., Inc. ............. 4,000 109,500
Chase Manhattan Corp. .................. 600 25,950
Citicorp................................ 250 23,234
First Union Corp. ...................... 500 25,594
Firstar Corp. .......................... 575 29,109
Mellon Bank Corp. ...................... 800 44,050
NationsBank Corp. ...................... 590 31,565
Star Banc Corp. ........................ 860 56,867
Summit Bancorp. ........................ 1,200 45,000
U.S. Bancorp............................ 1,555 55,300
FINANCIAL SERVICES -- 1.6%
American Express Co. ................... 800 62,100
American General Corp. ................. 700 44,712
Associates First Capital Corp., Class
A..................................... 2,255 147,139
Capital One Financial Corp. ............ 1,000 103,500
Equitable Cos., Inc. ................... 600 24,825
Federal National Mortgage Association... 400 25,700
Fleet Financial Group, Inc. ............ 800 58,750
Household International, Inc. .......... 1,400 52,500
Morgan Stanley, Dean Witter & Co. ...... 500 21,531
Newcourt Credit Group, Inc. ............ 940 24,558
PaineWebber Group, Inc. ................ 900 27,000
Providian Financial Corp. .............. 800 67,850
Travelers Group, Inc. .................. 750 28,125
INSURANCE -- 0.6%
Aetna, Inc. ............................ 400 27,800
Allstate Corp. ......................... 1,000 41,687
Chubb Corp. ............................ 300 18,900
The Hartford Financial Services Group,
Inc. ................................. 600 28,463
UNUM Corp. ............................. 2,570 127,697
-------------
1,380,501
-------------
HEALTHCARE -- 5.1%
DRUGS -- 3.9%
Abbott Laboratories, Inc. .............. 800 34,750
ALZA Corp.+ ............................ 3,785 164,174
Amgen, Inc.+ ........................... 700 52,894
Biogen, Inc.+ .......................... 900 59,231
Bristol-Myers Squibb Co. ............... 400 41,550
Centocor, Inc.+ ........................ 3,155 125,017
Eli Lilly & Co. ........................ 3,070 240,419
Merck & Co., Inc. ...................... 300 38,869
Pfizer, Inc. ........................... 2,885 305,630
Pharmacia & Upjohn, Inc. ............... 1,545 77,540
Warner-Lambert Co. ..................... 6,085 459,417
HEALTH SERVICES -- 0.4%
IMS Health, Inc. ....................... 2,120 131,308
Omnicare, Inc. ......................... 1,499 52,840
</TABLE>
- ----------------
30
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
MEDICAL PRODUCTS -- 0.8%
Allegiance Corp. ....................... 800 $ 23,800
Baxter International, Inc. ............. 800 47,600
Johnson & Johnson....................... 500 39,125
Schering-Plough Corp. .................. 500 51,781
Sofamor Danek Group, Inc.+ ............. 1,625 144,625
United States Surgical Corp. ........... 45 1,876
-------------
2,092,446
-------------
INDUSTRIAL & COMMERCIAL -- 1.4%
AEROSPACE & MILITARY TECHNOLOGY -- 0.1%
Orbital Sciences Corp.+ ................ 1,080 30,308
BUSINESS SERVICES -- 0.4%
Apollo Group, Inc., Class A+............ 975 27,178
Delta & Pine Land Co. .................. 1,310 57,640
Service Corp. International............. 800 25,500
Technology Solutions Co.+ .............. 1,460 16,425
Waste Management, Inc.+ ................ 600 28,838
MACHINERY -- 0.1%
United Technologies Corp. .............. 700 53,506
MULTI-INDUSTRY -- 0.7%
Raisio Group PLC........................ 3,507 51,041
Republic Industries, Inc.+ ............. 900 13,106
Tyco International Ltd. ................ 4,320 238,680
TRANSPORTATION -- 0.1%
Burlington Northern Santa Fe Corp. ..... 900 28,800
-------------
571,022
-------------
INFORMATION & ENTERTAINMENT -- 2.8%
BROADCASTING & MEDIA -- 2.7%
Capstar Broadcasting Corp., Class A+.... 240 3,705
Chancellor Media Corp.+ ................ 1,860 62,077
Cox Communications, Inc., Class A+...... 1,765 96,413
Lamar Advertising Co.,+ ................ 1,476 41,328
Liberty Media Group, Series A+.......... 3,620 132,809
MediaOne Group, Inc.+ .................. 6,825 303,286
Outdoor Systems, Inc.+ ................. 2,757 53,762
Penton Media, Inc. ..................... 1,445 19,688
Time Warner, Inc. ...................... 4,417 386,764
United International Holdings, Inc.+ ... 850 8,234
LEISURE & TOURISM -- 0.1%
Carnival Corp., Class A................. 960 30,540
McDonald's Corp. ....................... 500 29,844
-------------
1,168,450
-------------
</TABLE>
----------------
31
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY -- 9.5%
COMMUNICATION EQUIPMENT -- 0.9%
General Instrument Corp.+ .............. 1,340 $ 28,978
Lucent Technologies, Inc. .............. 1,400 96,687
Nokia Corp., Class A ADR................ 2,935 230,214
COMPUTERS & BUSINESS EQUIPMENT -- 1.3%
Compaq Computer Corp. .................. 700 22,137
Dell Computer Corp.+ ................... 3,415 224,536
EMC Corp.+ ............................. 2,500 142,969
Hewlett-Packard Co. .................... 200 10,588
Honeywell, Inc. ........................ 400 25,625
International Business Machines
Corp. ................................ 700 89,600
Micron Technology, Inc.+ ............... 800 24,350
ELECTRONICS -- 1.1%
General Electric Co. ................... 2,060 163,899
Intel Corp. ............................ 810 69,457
Maxim Integrated Products, Inc.+ ....... 1,800 50,175
Motorola, Inc. ......................... 500 21,344
Pittway Corp., Class A.................. 3,180 75,922
Texas Instruments, Inc. ................ 800 42,200
Vitesse Semiconductor Corp.+ ........... 2,270 53,629
SOFTWARE -- 3.7%
America Online, Inc.+ .................. 1,850 205,812
Aspect Development, Inc.+ .............. 410 16,144
Aspen Technology, Inc.+ ................ 2,375 63,531
At Home Corp., Series A+................ 1,600 76,600
BMC Software, Inc.+ .................... 600 36,038
Broadcast.com, Inc.+ ................... 25 1,009
Cadence Design Systems, Inc.+ .......... 3,835 98,032
Cisco Systems, Inc.+ ................... 6,813 421,129
Intuit, Inc.+ .......................... 1,220 56,806
Microsoft Corp.+ ....................... 3,760 413,835
Sapient Corp.+ ......................... 2,400 81,900
Sun Microsystems, Inc.+ ................ 300 14,944
Wind River Systems+ .................... 1,155 54,574
TELECOMMUNICATIONS -- 2.5%
Comcast Corp., Class A.................. 7,800 366,112
Frontier Corp. ......................... 1,500 41,063
Global Crossing Ltd.+ .................. 190 3,966
Tele-Communications, Inc., TCI Ventures
Group, Series A+...................... 14,520 260,453
Tele-Communications, Inc., Series A+.... 8,080 316,130
Western Wireless Corp., Class A+........ 2,565 45,849
-------------
3,946,237
-------------
MATERIALS -- 0.5%
CHEMICALS -- 0.4%
du Pont (E.I.) de Nemours & Co. ........ 800 44,900
Monsanto Co. ........................... 2,330 131,354
</TABLE>
- ----------------
32
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
MATERIALS (CONTINUED)
METALS & MINERALS -- 0.1%
Martin Marietta Materials, Inc. ........ 300 $ 12,956
-------------
189,210
-------------
UTILITIES -- 0.9%
ELECTRIC UTILITIES -- 0.1%
GPU, Inc. .............................. 800 34,000
GAS & PIPELINE UTILITIES -- 0.0%
Consolidated Natural Gas Co. ........... 500 27,250
TELEPHONE -- 0.8%
AT&T Corp. ............................. 2,000 116,875
GTE Corp. .............................. 500 27,500
MCI WorldCom, Inc.+ .................... 1,800 87,975
SBC Communications, Inc. ............... 800 35,550
Telecom Italia SpA...................... 7,115 49,031
-------------
378,181
-------------
TOTAL COMMON STOCK (cost $9,973,373).... 10,889,434
-------------
<CAPTION>
PREFERRED STOCK -- 0.0%
<S> <C> <C>
- -----------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 0.0%
TELECOMMUNICATIONS -- 0.0%
Viatel, Inc., Series A 10.00%(1) (cost
$332)................................. 5 298
-------------
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 65.6% AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.5%
APPAREL & TEXTILES -- 0.0%
Galey & Lord, Inc. 9.13% 2008........... $ 5,000 4,300
AUTOMOTIVE -- 0.0%
Accuride Corp., Series B 9.25% 2008*.... 10,000 9,575
HOUSING -- 0.1%
Engle Homes, Inc., Series C 9.25%
2008.................................. 10,000 9,600
Falcon Building Products, Inc. 9.50%
2007.................................. 10,000 8,500
Standard Pacific Corp. 8.50% 2007....... 20,000 19,100
RETAIL -- 0.4%
Amazon.com, Inc. zero coupon 2008(2).... 65,000 35,750
Duane Reade, Inc. 9.25% 2008............ 10,000 9,700
Fred Meyer, Inc. 7.38% 2005............. 55,000 57,095
J.C. Penney Co., Inc. 7.40% 2037........ 50,000 55,051
-------------
208,671
-------------
</TABLE>
----------------
33
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES -- 0.2%
FOOD, BEVERAGE & TOBACCO -- 0.2%
Aurora Foods, Inc., Series B 8.75%
2008.................................. $ 5,000 $ 5,063
Nash Finch Co. 8.50% 2008............... 10,000 9,400
Panamerican Beverages, Inc. 8.13%
2003.................................. 70,000 72,061
HOUSEHOLD PRODUCTS -- 0.0%
Revlon Worldwide Corp. zero coupon
2001.................................. 20,000 15,300
-------------
101,824
-------------
ENERGY -- 0.8%
ENERGY SERVICES -- 0.0%
Dailey International, Inc. 9.50% 2008... 15,000 9,000
ENERGY SOURCES -- 0.8%
Abraxas Petroleum Corp. 11.50% 2004..... 15,000 11,700
Cross Timbers Oil Co., Class B 8.75%
2009.................................. 15,000 13,500
Newfield Exploration Co., Series B 7.45%
2007.................................. 20,000 19,860
P&L Coal Holdings Corp. 9.63% 2008*..... 25,000 24,562
Petroleos Mexicano 9.00% 2007........... 52,000 42,250
Sonat, Inc. 6.88% 2005.................. 140,000 149,822
Tesoro Petroleum Corp., Series B 9.00%
2008.................................. 10,000 9,625
YPF Sociedad Anonima 8.00% 2004......... 40,000 36,300
-------------
316,619
-------------
FINANCE -- 11.0%
BANKS -- 3.0%
Banc One Corp. 8.00% 2027............... 43,000 50,269
Bank One Columbus 7.38% 2002............ 40,000 42,907
Banponce Financial Corp. 6.75% 2001..... 50,000 51,782
Credit National 7.00% 2005.............. 40,000 42,127
Export Import Bank of Korea 6.50%
2006.................................. 65,000 49,869
First Chicago NBD Corp. 7.25% 2004...... 135,000 145,746
First Republic Bancorp 7.75% 2012....... 50,000 55,693
First Union-Lehman Brothers Commercial
Mortgage Corp. 6.60% 2007............. 250,000 258,080
Korea Development Bank 7.13% 2001....... 35,000 30,555
National City Corp. 7.20% 2005.......... 200,000 216,752
NBD Bank SA 8.25% 2024.................. 50,000 59,715
NCNB Co. 9.38% 2009..................... 68,000 87,341
United States Bancorp 7.50% 2026........ 110,000 122,756
Western Financial Savings Bank 8.88%
2007.................................. 10,000 8,400
FINANCIAL SERVICES -- 7.0%
Aesop Funding Corp. 6.14% 2006.......... 120,000 123,525
Allstate Financing II 7.83% 2045........ 49,000 51,946
AMRESCO, Inc. 9.88% 2005*............... 10,000 8,000
Arcadia Financial Ltd. 11.50% 2007
(3)................................... 10,000 7,275
Asset Securitization Corp. 6.66% 2041... 80,000 83,565
Associates Corp. of North America 7.63%
2004.................................. 130,000 144,691
ContiFinancial Corp. 8.13% 2008......... 5,000 4,697
CS First Boston Mortgage Securities
Corp. 7.24% 2029...................... 110,000 118,701
Dime Capital Trust I, Series A 9.33%
2027.................................. 40,000 45,354
Equitable Cos., Inc. 7.00% 2028......... 130,000 132,128
</TABLE>
- ----------------
34
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
Finova Capital Corp. 6.63% 2001......... $ 125,000 $ 128,780
Finova Capital Corp., Series C 6.39%
2002.................................. 60,000 62,579
Fleet Mortgage Group, Inc. 6.84% 2003... 50,000 53,319
Ford Motor Credit Corp. 7.02% 2000...... 125,000 129,751
GE Capital Mortgage Services, Inc. 6.25%
2023.................................. 25,480 25,496
General Motors Acceptance Corp. 7.63%
2003.................................. 135,000 148,728
Morgan Stanley Capital I, Inc. 7.22%
2007*#................................ 120,000 129,788
Popular North America, Inc. 6.63%
2002.................................. 50,000 50,903
Private Export Funding Corp. 5.87%
2008.................................. 400,000 424,812
Private Export Funding Corp. 6.31%
2004.................................. 100,000 107,126
Private Export Funding Corp. 6.62%
2005.................................. 160,000 177,483
Private Export Funding Corp. 7.03%
2003.................................. 60,000 65,974
Private Export Funding Corp. 7.30%
2002.................................. 270,000 291,135
Private Export Funding Corp. 7.90%
2000.................................. 75,000 78,522
U.S. West Capital Funding, Inc. 6.25%
2005.................................. 165,000 175,227
U.S. West Capital Funding, Inc. 6.88%
2028.................................. 100,000 106,007
INSURANCE -- 1.0%
Cigna Corp. 7.40% 2007.................. 80,000 87,675
Cigna Corp. 7.88% 2027.................. 37,000 40,159
Jackson National Life Insurance Co.
8.15% 2027*........................... 44,000 53,239
Lumbermens Mutual Casualty Co. 8.30%
2037*................................. 80,000 89,628
Metropolitan Life Insurance Co. 7.70%
2015*................................. 140,000 164,140
-------------
4,532,345
-------------
HEALTHCARE -- 1.0%
HEALTH SERVICES -- 0.5%
HEALTHSOUTH Corp. 6.88% 2005*(3)........ 120,000 125,742
Tenet Healthcare Corp. 7.88% 2003....... 50,000 50,750
Tenet Healthcare Corp. 8.13% 2008*(3)... 20,000 20,481
MEDICAL PRODUCTS -- 0.5%
Allegiance Corp. 7.00% 2026............. 130,000 137,357
Beckman Instruments, Inc. 7.10% 2003.... 75,000 77,024
Owens & Minor, Inc. 10.88% 2006......... 10,000 10,600
-------------
421,954
-------------
INDUSTRIAL & COMMERCIAL -- 2.1%
AEROSPACE & MILITARY TECHNOLOGY -- 0.0%
K & F Industries, Inc. 9.25% 2007....... 15,000 14,700
BUSINESS SERVICES -- 1.1%
Boise Cascade Office Products Co. 7.05%
2005.................................. 230,000 243,197
Federal Express Corp. 6.72% 2022#....... 190,000 195,700
MACHINERY -- 0.3%
Cincinnati Milacron, Inc. 7.88% 2000.... 75,000 77,368
Grove Worldwide LLC 9.25% 2008*(3)...... 5,000 4,400
Johnstown America Industries, Inc.
11.75% 2005........................... 10,000 10,487
Numatics, Inc., Series B 9.63% 2008..... 10,000 9,763
</TABLE>
----------------
35
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
MULTI-INDUSTRY -- 0.0%
Nortek, Inc. 8.88% 2008................. $ 5,000 $ 4,825
TRANSPORTATION -- 0.7%
AMR Corp. 9.88% 2020.................... 70,000 97,541
Continental Airlines, Inc. 6.47% 2004... 95,000 100,994
Continental Airlines, Inc. 6.65% 2017... 70,000 74,327
MTL, Inc. 10.00% 2006*.................. 15,000 14,400
-------------
847,702
-------------
INFORMATION & ENTERTAINMENT -- 1.3%
BROADCASTING & MEDIA -- 1.2%
Allbritton Communications Co. 8.88%
2008.................................. 10,000 9,900
Century Communications Corp., Series B
zero coupon 2008...................... 25,000 11,750
Classic Cable, Inc. 9.88% 2008.......... 5,000 5,088
Comcast Cable Communications 8.50%
2027.................................. 50,000 61,252
EchoStar DBS Corp. 12.50% 2002.......... 15,000 15,637
Granite Broadcasting Corp. 8.88%
2008*................................. 20,000 18,675
LIN Holdings Corp. zero coupon
2008*(2).............................. 20,000 13,100
News America Holdings, Inc. 8.00%
2016.................................. 125,000 138,140
Scholastic Corp. 7.00% 2003............. 80,000 84,465
Tele-Communications, Inc. 8.00% 2005.... 50,000 57,141
Viacom, Inc. 7.75% 2005................. 80,000 86,389
LEISURE & TOURISM -- 0.1%
Argosy Gaming Co. 13.25% 2004........... 10,000 10,625
Fitzgeralds Gaming Corp., Series B
12.25% 2004........................... 5,000 3,500
Loews Cineplex Entertainment Corp. 8.88%
2008*................................. 5,000 4,950
-------------
520,612
-------------
INFORMATION TECHNOLOGY -- 1.0%
ELECTRONICS -- 0.0%
Advanced Micro Devices, Inc. 11.00%
2003.................................. 10,000 10,100
Amphenol Corp. 9.88% 2007............... 5,000 4,675
SOFTWARE -- 0.1%
Concentric Network Corp. 12.75% 2007.... 10,000 9,225
PSINet, Inc. 10.00% 2005................ 10,000 10,000
TELECOMMUNICATIONS -- 0.9%
AMSC Acquisition, Inc. 12.25% 2008...... 5,000 3,088
BTI Telecom Corp. 10.50% 2007........... 10,000 8,300
Compania de Telecomunicaciones 7.63%
2006.................................. 50,000 48,184
e.spire Communications, Inc. zero coupon
2008*(2).............................. 25,000 12,844
GCI, Inc. 9.75% 2007.................... 10,000 9,300
Globalstar LP 10.75% 2004............... 15,000 9,600
GST Telecommunications, Inc. zero coupon
2008*(2)(3)........................... 20,000 9,925
Intermedia Communications, Inc. 8.88%
2007.................................. 20,000 20,100
Iridium LLC 10.88% 2005................. 10,000 8,075
Iridium LLC 11.25% 2005................. 5,000 4,100
ITC Deltacom, Inc. 8.88% 2008........... 10,000 9,800
IXC Communications, Inc. 9.00% 2008..... 10,000 9,900
</TABLE>
- ----------------
36
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
KMC Telecom Holdings, Inc. zero coupon
2008(2)............................... $ 20,000 $ 9,575
Level 3 Communications, Inc. 9.13%
2008.................................. 15,000 14,212
McleodUSA, Inc. 8.38% 2008.............. 15,000 14,775
MJD Communications, Inc. 9.50% 2008*.... 5,000 5,025
Nextel Communications, Inc. zero coupon
2007(2)............................... 20,000 12,000
Paging Network, Inc. 10.13% 2007........ 15,000 14,850
Tele-Communications, Inc. 7.25% 2005.... 50,000 55,013
Tele-Communications, Inc. 9.25% 2002.... 50,000 56,113
Telecommunications Tech Co. LLC 9.75%
2008*................................. 15,000 13,706
Time Warner Telecom, Inc. 9.75% 2008.... 10,000 10,050
Viatel, Inc. 11.25% 2008* (3)........... 10,000 9,000
-------------
401,535
-------------
MATERIALS -- 0.6%
CHEMICALS -- 0.2%
Huntsman Corp. 9.50% 2007*.............. 15,000 14,400
ICI Wilmington, Inc. 6.95% 2004......... 70,000 73,199
LaRoche Industries, Inc. 9.50% 2007..... 10,000 8,500
Sovereign Speciality Chemicals 9.50%
2007.................................. 10,000 9,550
FOREST PRODUCTS -- 0.3%
American Pad & Paper Co. 13.00% 2005.... 10,000 5,400
Boise Cascade Corp. 9.90% 2001.......... 90,000 99,061
Gaylord Container Corp. 9.38% 2007...... 10,000 8,000
Grupo Industrial Durango SA de CV 12.63%
2003.................................. 10,000 7,100
Repap New Brunswick, Inc. 9.00% 2004.... 10,000 9,125
METALS & MINERALS -- 0.1%
A.K. Steel Holding Corp. 9.13% 2006..... 10,000 10,000
Armco, Inc. 9.00% 2007.................. 10,000 9,800
Bayou Steel Corp. 9.50% 2008*........... 15,000 13,481
-------------
267,616
-------------
MUNICIPAL BONDS -- 1.7%
MUNICIPAL BONDS -- 1.7%
Allentown Pennsylvania 6.20% 2005....... 280,000 296,817
Hudson County New Jersey Improvement
Authority Facility 6.55% 2002......... 135,000 142,102
Huntsville Alabama Solid Waste Disposal
Authority 5.95% 2003.................. 100,000 102,691
Miami Florida Revenue 7.25% 2003........ 135,000 147,200
-------------
688,810
-------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 2.1%
FOREIGN GOVERNMENT -- 2.1%
Australian Government 10.00%
2006.............................(AUD) 935,000 722,693
Republic of Argentina 11.00% 2006....... 55,000 51,288
Republic of Columbia 7.25% 2004......... 73,000 57,122
Republic of Columbia 7.63% 2007......... 25,000 17,438
Republic of Lithuania 7.13% 2002*....... 43,000 37,195
-------------
885,736
-------------
</TABLE>
----------------
37
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE -- 0.6%
REAL ESTATE COMPANIES -- 0.6%
Equity Office Properties Operating LP
6.38% 2003............................ $ 120,000 $ 119,926
Post Apartment Homes LP 7.02% 2001...... 130,000 135,895
-------------
255,821
-------------
U.S. GOVERNMENT & AGENCIES -- 39.5%
U.S. GOVERNMENT & AGENCIES -- 39.5%
Federal Home Loan Mortgage Corp. 6.00%
2006.................................. 44,410 44,659
Federal Home Loan Mortgage Corp. 6.50%
2022.................................. 100,000 104,718
Federal Home Loan Mortgage Corp. 6.50%
2023.................................. 60,000 64,275
Federal Home Loan Mortgage Corp. 6.75%
2022.................................. 45,000 46,647
Federal Home Loan Mortgage Corp. 7.00%
2023.................................. 32,000 34,980
Federal Home Loan Mortgage Corp. 7.50%
2023.................................. 19,484 20,099
Federal Home Loan Mortgage Corp. 7.75%
2022.................................. 57,828 62,201
Federal Home Loan Mortgage Corp. 8.50%
2008.................................. 202,215 209,895
Federal Home Loan Mortgage Corp. 8.50%
2019.................................. 49,011 51,498
Federal National Mortgage Association
5.25% 2003............................ 1,635,000 1,669,482
Federal National Mortgage Association
5.63% 2001............................ 710,000 727,083
Federal National Mortgage Association
5.65% 2005............................ 44,718 44,635
Federal National Mortgage Association
5.75% 2008............................ 1,715,000 1,812,824
Federal National Mortgage Association
6.13% 2028(4)......................... 323,565 327,205
Federal National Mortgage Association
6.59% 2007............................ 99,181 105,690
Federal National Mortgage Association
7.00% 2006............................ 9,548 9,557
Federal National Mortgage Association
7.39% 2021............................ 55,263 60,337
Federal National Mortgage Association
7.75% 2021............................ 200,000 211,124
Federal National Mortgage Association
8.00% 2006............................ 134,996 142,969
Government National Mortgage Association
7.00% 2022............................ 18,747 19,368
Government National Mortgage Association
7.00% 2023............................ 18,262 18,861
Government National Mortgage Association
7.25% 2027............................ 337,745 349,354
Government National Mortgage Association
7.50% 2022............................ 45,806 47,509
Government National Mortgage Association
7.50% 2024............................ 19,303 20,015
Government National Mortgage Association
8.50% 2017............................ 72,435 77,233
Government National Mortgage Association
9.00% 2021............................ 18,889 20,305
United States Treasury Bonds 5.25%
2003.................................. 200,000 208,938
United States Treasury Bonds 7.50%
2016.................................. 275,000 350,067
United States Treasury Bonds 8.13%
2021.................................. 130,000 179,989
United States Treasury Bonds 8.50%
2020.................................. 275,000 391,143
United States Treasury Bonds 9.25%
2016.................................. 320,000 471,350
United States Treasury Bonds 10.75%
2003.................................. 150,000 187,337
United States Treasury Bonds 11.88%
2003.................................. 690,000 922,440
United States Treasury Bonds 12.00%
2013.................................. 3,740,000 5,850,183
United States Treasury Bonds Strip zero
coupon 2012........................... 475,000 242,545
United States Treasury Notes 5.63%
2008.................................. 200,000 218,750
United States Treasury Notes 6.63%
2001.................................. 950,000 1,005,812
-------------
16,331,077
-------------
</TABLE>
- ----------------
38
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
UTILITIES -- 3.2%
ELECTRIC UTILITIES -- 1.3%
Atlantic City Electric Co. 6.38% 2005... $ 60,000 $ 63,852
Cleveland Electric Illuminating Co.,
Series B 7.19% 2000................... 30,000 30,719
Empresa Nacional de Electricidad SA
7.33% 2037............................ 50,000 44,695
PacifiCorp 6.38% 2008#.................. 250,000 261,125
Public Service Electric & Gas Co. 8.88%
2003.................................. 35,000 40,654
UtiliCorp United, Inc. 6.88% 2004....... 80,000 85,020
WESCO Distribution, Inc., Series B 9.13%
2008.................................. 20,000 19,050
GAS & PIPELINE UTILITIES -- 0.7%
HNG Internorth, Inc. 9.63% 2006......... 140,000 168,468
KN Energy, Inc. 6.65% 2005.............. 105,000 107,829
TELEPHONE -- 1.2%
GTE Corp. 6.36% 2006.................... 210,000 223,671
MCI Communications Corp. 6.13%
2002(4)............................... 60,000 61,504
MGC Communications, Inc., Series B
13.00% 2004........................... 5,000 3,750
WorldCom, Inc. 7.55% 2004............... 200,000 217,820
-------------
1,328,157
-------------
TOTAL BONDS & NOTES (cost
$25,925,427).......................... 27,108,479
-------------
</TABLE>
<TABLE>
<CAPTION>
WARRANTS -- 0.0%+ SHARES
<S> <C> <C>
- -----------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 0.0%
TELECOMMUNICATIONS -- 0.0%
KMC Telecom Holdings, Inc. 4/15/08*#
(cost $55)............................ 20 50
-------------
TOTAL INVESTMENT SECURITIES (cost
$35,899,187).......................... 37,998,261
-------------
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 2.0% AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 0.2%
Chase Manhattan Corp. 8.77% due
2/19/99............................... $ 60,000 60,616
-------------
FEDERAL AGENCY OBLIGATIONS -- 1.6%
Federal Home Loan Mortgage Corp. 5.40%
due 10/1/98........................... 675,000 675,000
-------------
FOREIGN SHORT-TERM NOTES -- 0.2%
New Zealand Treasury Bill zero coupon
due 12/16/98.....................(NZD) 160,000 79,228
-------------
TOTAL SHORT-TERM SECURITIES (cost
$823,970)............................. 814,844
-------------
<CAPTION>
REPURCHASE AGREEMENTS -- 5.2%
<S> <C> <C>
- -----------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 5.2%
J.P. Morgan & Co., Inc. Joint Repurchase
Agreement (See Note 3)................ 380,000 380,000
PaineWebber, Inc. Joint Repurchase
Agreement (See Note 3)................ 1,767,000 1,767,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost
$2,147,000)........................... 2,147,000
-------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $38,870,157) 99.1% 40,960,105
Other assets less liabilities -- 0.9 363,687
------ -----------
NET ASSETS -- 100.0% $41,323,792
------ -----------
------ -----------
</TABLE>
----------------
39
<PAGE>
- -------------
+ Non-income producing securities
# Fair valued security; see Note 2
* Resale restricted to qualified institutional buyers
(1) PIK ("Payment-In-Kind") payment made with additional securities in lieu of
cash
(2) Represents a zero coupon bond which will convert to an interest-bearing
security at a later date
(3) Bond issued as part of a unit which includes an equity component
(4) Variable rate security; rate as of September 30, 1998
ADR -- American Depository Receipt
AUD -- Australian Dollar
NOK -- Norwegian Krone
NZD -- New Zealand Dollar
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
AUD 30,000 USD 17,855 10/27/98 $ 72
USD 27,865 FIM 150,000 11/12/98 1,702
*USD 2,444 GBP 1,500 10/07/98 105
*USD 3,254 GBP 2,000 10/07/98 145
*USD 1,625 GBP 1,000 10/07/98 75
*USD 6,487 GBP 4,000 10/07/98 311
USD 4,680 ITL 8,000,000 10/19/98 167
USD 15,332 ITL 27,000,000 11/12/98 1,034
USD 3,986 ITL 7,000,000 11/12/98 257
USD 3,997 ITL 7,000,000 11/12/98 246
USD 1,928 ITL 3,200,000 11/12/98 11
-------
4,125
-------
<CAPTION>
GROSS
UNREALIZED
DEPRECIATION
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
AUD 1,048,000 USD 621,024 10/27/98 (174)
AUD 125,000 USD 72,725 10/27/98 (1,368)
FIM 190,000 USD 35,466 11/06/98 (1,974)
FIM 300,000 USD 54,547 11/12/98 (4,586)
FIM 310,000 USD 57,836 11/12/98 (3,269)
FIM 50,000 USD 9,389 11/12/98 (466)
*GBP 8,500 USD 14,093 10/07/98 (352)
ITL 7,000,000 USD 3,979 10/19/98 (263)
ITL 44,000,000 USD 25,235 10/19/98 (1,427)
ITL 7,000,000 USD 3,961 10/19/98 (281)
ITL 56,000,000 USD 31,715 11/12/98 (2,228)
-------
(16,388)
-------
Net Unrealized Depreciation................... $(12,263)
-------
-------
</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 USD -- United States Dollar
FIM -- Finnish Markka ITL -- Italian Lira
</TABLE>
See Notes to Financial Statements
- ------------------
40
<PAGE>
- ----------------
SEASONS SERIES TRUST
MULTI-MANAGED INCOME
PORTFOLIO INVESTMENT PORTFOLIO -- SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 13.4% SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.9%
APPAREL & TEXTILES -- 0.0%
Oakley, Inc.+ ........................................ 1,400 $ 13,475
AUTOMOTIVE -- 0.2%
Federal-Mogul Corp. .................................. 430 20,102
Ford Motor Co. ....................................... 700 32,856
General Motors Corp. ................................. 500 27,344
RETAIL -- 0.7%
Amazon.com, Inc.+ .................................... 130 14,511
Costco Cos., Inc.+ ................................... 385 18,239
CVS Corp. ............................................ 700 30,669
Dayton Hudson Corp. .................................. 480 17,160
Federated Department Stores, Inc.+ ................... 300 10,913
Gap, Inc. ............................................ 600 31,650
Home Depot, Inc. ..................................... 700 27,650
Office Depot, Inc. + ................................. 400 8,975
Wal-Mart Stores, Inc. ................................ 1,000 54,625
-------------
308,169
-------------
CONSUMER STAPLES -- 0.2%
FOOD, BEVERAGE & TOBACCO -- 0.1%
Philip Morris Cos., Inc. ............................. 700 32,244
UST, Inc. ............................................ 200 5,912
HOUSEHOLD PRODUCTS -- 0.1%
Colgate-Palmolive Co. ................................ 500 34,250
-------------
72,406
-------------
ENERGY -- 0.6%
ENERGY SERVICES -- 0.1%
Schlumberger Ltd. .................................... 300 15,094
Transocean Offshore, Inc. ............................ 820 28,444
ENERGY SOURCES -- 0.5%
Chevron Corp. ........................................ 500 42,031
Enron Corp. .......................................... 300 15,844
Exxon Corp. .......................................... 200 14,037
Mobil Corp. .......................................... 300 22,781
Ocean Rig ASA+ ................................. (NOK) 15,501 6,143
Royal Dutch Petroleum Co. ............................ 650 30,956
Texaco, Inc. ......................................... 500 31,344
-------------
206,674
-------------
</TABLE>
----------------
41
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 1.9%
BANKS -- 0.5%
Ambanc Holding Co., Inc. ............................. 35 $ 455
Bank of New York Co., Inc. ........................... 1,380 37,777
Chase Manhattan Corp. ................................ 200 8,650
Citicorp.............................................. 50 4,647
First Union Corp. .................................... 200 10,238
Firstar Corp. ........................................ 185 9,366
Mellon Bank Corp. .................................... 400 22,025
NationsBank Corp. .................................... 260 13,910
Star Banc Corp. ...................................... 295 19,507
Summit Bancorp. ...................................... 600 22,500
U.S. Bancorp.......................................... 525 18,670
FINANCIAL SERVICES -- 1.1%
American Express Co. ................................. 400 31,050
American General Corp. ............................... 400 25,550
Associates First Capital Corp., Class A............... 990 64,597
Capital One Financial Corp. .......................... 500 51,750
Equitable Cos., Inc. ................................. 300 12,413
Federal National Mortgage Association................. 300 19,275
Fleet Financial Group, Inc. .......................... 400 29,375
Household International, Inc. ........................ 1,000 37,500
Morgan Stanley, Dean Witter & Co. .................... 400 17,225
Newcourt Credit Group, Inc. .......................... 320 8,360
PaineWebber Group, Inc. .............................. 900 27,000
Providian Financial Corp. ............................ 400 33,925
Travelers Group, Inc. ................................ 300 11,250
INSURANCE -- 0.3%
Aetna, Inc. .......................................... 100 6,950
Allstate Corp. ....................................... 600 25,012
Chubb Corp. .......................................... 100 6,300
The Hartford Financial Services Group, Inc. .......... 200 9,488
UNUM Corp. ........................................... 880 43,725
-------------
628,490
-------------
HEALTHCARE -- 2.6%
DRUGS -- 2.0%
ALZA Corp.+ .......................................... 1,285 55,737
Amgen, Inc.+ ......................................... 300 22,669
Biogen, Inc.+ ........................................ 400 26,325
Bristol-Myers Squibb Co. ............................. 200 20,775
Centocor, Inc.+ ...................................... 1,080 42,795
Eli Lilly & Co. ...................................... 1,245 97,499
Merck & Co., Inc. .................................... 300 38,869
Pfizer, Inc. ......................................... 1,115 118,120
Pharmacia & Upjohn, Inc. ............................. 520 26,098
Warner-Lambert Co. ................................... 2,615 197,432
HEALTH SERVICES -- 0.2%
IMS Health, Inc. ..................................... 720 44,595
Omnicare, Inc. ....................................... 517 18,224
</TABLE>
- ----------------
42
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
MEDICAL PRODUCTS -- 0.4%
Allegiance Corp. ..................................... 300 $ 8,925
Baxter International, Inc. ........................... 500 29,750
Johnson & Johnson..................................... 300 23,475
Schering-Plough Corp. ................................ 230 23,819
Sofamor Danek Group, Inc.+ ........................... 565 50,285
United States Surgical Corp. ......................... 10 417
-------------
845,809
-------------
INDUSTRIAL & COMMERCIAL -- 0.6%
AEROSPACE & MILITARY TECHNOLOGY -- 0.0%
Orbital Sciences Corp.+ .............................. 365 10,243
BUSINESS SERVICES -- 0.2%
Apollo Group, Inc., Class A+ ......................... 340 9,478
Delta & Pine Land Co. ................................ 430 18,920
Service Corp. International........................... 100 3,188
Technology Solutions Co.+ ............................ 505 5,681
Waste Management, Inc. + ............................. 500 24,031
MACHINERY -- 0.1%
United Technologies Corp. ............................ 300 22,931
MULTI-INDUSTRY -- 0.3%
Raisio Group PLC...................................... 1,084 15,777
Republic Industries, Inc.+ ........................... 500 7,281
Tyco International Ltd. .............................. 1,220 67,405
TRANSPORTATION -- 0.0%
Burlington Northern Santa Fe Corp. ................... 450 14,400
-------------
199,335
-------------
INFORMATION & ENTERTAINMENT -- 1.2%
BROADCASTING & MEDIA -- 1.1%
Capstar Broadcasting Corp., Class A+ ................. 85 1,312
Chancellor Media Corp.+ .............................. 635 21,193
Cox Communications, Inc., Class A+ ................... 590 32,229
Lamar Advertising Co.+ ............................... 504 14,112
Liberty Media Group, Series A+ ....................... 515 18,894
MediaOne Group, Inc. + ............................... 2,300 102,206
Outdoor Systems, Inc.+ ............................... 946 18,447
Penton Media, Inc. ................................... 455 6,199
Time Warner, Inc. .................................... 1,512 132,395
United International Holdings, Inc.+ ................. 295 2,858
LEISURE & TOURISM -- 0.1%
Carnival Corp., Class A............................... 460 14,634
McDonald's Corp. ..................................... 300 17,906
-------------
382,385
-------------
INFORMATION TECHNOLOGY -- 4.6%
COMMUNICATION EQUIPMENT -- 0.4%
General Instrument Corp.+ ............................ 430 9,299
Lucent Technologies, Inc. ............................ 600 41,438
</TABLE>
----------------
43
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
COMMUNICATION EQUIPMENT (CONTINUED)
Nokia Corp., Class A ADR.............................. 995 $ 78,045
COMPUTERS & BUSINESS EQUIPMENT -- 0.7%
Compaq Computer Corp. ................................ 350 11,069
Dell Computer Corp.+ ................................. 1,325 87,119
EMC Corp.+ ........................................... 1,000 57,187
Hewlett-Packard Co. .................................. 200 10,588
Honeywell, Inc. ...................................... 200 12,812
International Business Machines Corp. ................ 350 44,800
Micron Technology, Inc.+ ............................. 450 13,697
ELECTRONICS -- 0.6%
General Electric Co. ................................. 860 68,424
Intel Corp. .......................................... 425 36,444
Maxim Integrated Products, Inc.+ ..................... 610 17,004
Motorola, Inc. ....................................... 500 21,344
Pittway Corp., Class A................................ 1,020 24,352
Texas Instruments, Inc. .............................. 400 21,100
Vitesse Semiconductor Corp.+ ......................... 785 18,545
SOFTWARE -- 1.8%
America Online, Inc.+ ................................ 634 70,532
Aspect Development, Inc.+ ............................ 135 5,316
Aspen Technology, Inc.+ .............................. 790 21,132
At Home Corp., Series A+ ............................. 515 24,656
BMC Software, Inc.+ .................................. 500 30,031
Broadcast.com, Inc.+ ................................. 5 202
Cadence Design Systems, Inc.+ ........................ 1,250 31,953
Cisco Systems, Inc.+ ................................. 2,528 156,231
Intuit, Inc.+ ........................................ 390 18,159
Microsoft Corp.+ ..................................... 1,425 156,839
Sapient Corp.+ ....................................... 830 28,324
Sun Microsystems, Inc.+ .............................. 200 9,963
Wind River Systems+ .................................. 384 18,144
TELECOMMUNICATIONS -- 1.1%
Comcast Corp., Class A................................ 2,645 124,150
Frontier Corp. ....................................... 600 16,425
Global Crossing Ltd.+ ................................ 65 1,357
Tele-Communications, Inc., TCI Ventures Group, Series
A+ .................................................. 5,000 89,687
Tele-Communications, Inc., Series A+ ................. 2,768 108,298
Western Wireless Corp., Class A+ ..................... 855 15,283
-------------
1,499,949
-------------
MATERIALS -- 0.2%
CHEMICALS -- 0.2%
du Pont (E.I.) de Nemours & Co. ...................... 300 16,838
Monsanto Co. ......................................... 790 44,536
METALS & MINERALS -- 0.0%
Martin Marietta Materials, Inc. ...................... 200 8,637
-------------
70,011
-------------
</TABLE>
- ----------------
44
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES -- 0.6%
ELECTRIC UTILITIES -- 0.1%
GPU, Inc. ............................................ 600 $ 25,500
GAS & PIPELINE UTILITIES -- 0.1%
Consolidated Natural Gas Co. ......................... 600 32,700
TELEPHONE -- 0.4%
AT&T Corp. ........................................... 700 40,906
GTE Corp. ............................................ 300 16,500
MCI WorldCom, Inc.+ .................................. 1,000 48,875
SBC Communications, Inc. ............................. 400 17,775
Telecom Italia SpA.................................... 2,262 15,588
-------------
197,844
-------------
TOTAL COMMON STOCK (cost $4,103,702) 4,411,072
-------------
<CAPTION>
PREFERRED STOCK -- 0.0%
<S> <C> <C>
- -------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 0.0%
TELECOMMUNICATIONS -- 0.0%
Viatel, Inc., Series A 10.00%(1) (cost $332).......... 5 298
-------------
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 79.0% AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.6%
APPAREL & TEXTILES -- 0.0%
Galey & Lord, Inc. 9.13% 2008......................... $ 5,000 4,300
AUTOMOTIVE -- 0.0%
Accuride Corp., Series B 9.25% 2008* ................. 10,000 9,575
HOUSING -- 0.1%
Engle Homes, Inc., Series C 9.25% 2008................ 10,000 9,600
Falcon Building Products, Inc. 9.50% 2007............. 10,000 8,500
Standard Pacific Corp. 8.50% 2007..................... 20,000 19,100
RETAIL -- 0.5%
Amazon.com, Inc. zero coupon 2008(2).................. 27,000 14,850
Duane Reade, Inc. 9.25% 2008.......................... 10,000 9,700
Fred Meyer, Inc. 7.38% 2005........................... 55,000 57,095
J.C. Penney Co., Inc. 7.40% 2037...................... 60,000 66,061
-------------
198,781
-------------
CONSUMER STAPLES -- 0.4%
FOOD, BEVERAGE & TOBACCO -- 0.3%
Aurora Foods, Inc., Series B 8.75% 2008............... 5,000 5,063
Nash Finch Co. 8.50% 2008............................. 10,000 9,400
Panamerican Beverages, Inc. 8.13% 2003................ 80,000 82,356
HOUSEHOLD PRODUCTS -- 0.1%
Revlon Worldwide Corp. zero coupon 2001............... 20,000 15,300
-------------
112,119
-------------
</TABLE>
----------------
45
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY -- 1.0%
ENERGY SERVICES -- 0.0%
Dailey International, Inc. 9.50% 2008................. $ 15,000 $ 9,000
ENERGY SOURCES -- 1.0%
Abraxas Petroleum Corp. 11.50% 2004................... 15,000 11,700
Cross Timbers Oil Co., Class B 8.75% 2009............. 15,000 13,500
Newfield Exploration Co., Series B 7.45% 2007......... 30,000 29,789
P&L Coal Holdings Corp. 9.63% 2008*................... 25,000 24,562
Petroleos Mexicanos 9.00% 2007........................ 56,000 45,500
Sonat, Inc. 6.88% 2005................................ 135,000 144,472
Tesoro Petroleum Corp., Series B 9.00% 2008........... 10,000 9,625
YPF Sociedad Anonima 8.00% 2004....................... 60,000 54,450
-------------
342,598
-------------
FINANCE -- 12.9%
BANKS -- 3.9%
Banc One Corp. 8.00% 2027............................. 55,000 64,298
Bank One Columbus 7.38% 2002.......................... 40,000 42,907
Banponce Financial Corp. 6.75% 2001................... 65,000 67,316
Credit National 7.00% 2005............................ 60,000 63,191
Export Import Bank of Korea 6.50% 2006................ 80,000 61,378
First Chicago NBD Corp. 7.25% 2004.................... 135,000 145,746
First Republic Bancorp 7.75% 2012..................... 55,000 61,262
First Union-Lehman Brothers Commercial Mortgage Corp.
6.60% 2007........................................... 245,000 252,918
Korea Development Bank 7.13% 2001..................... 30,000 26,190
National City Corp. 7.20% 2005........................ 200,000 216,752
NBD Bank SA 8.25% 2024................................ 55,000 65,686
NCNB Co. 9.38% 2009................................... 80,000 102,754
United States Bancorp 7.50% 2026...................... 110,000 122,756
Western Financial Savings Bank 8.88% 2007............. 10,000 8,400
FINANCIAL SERVICES -- 7.6%
Aesop Funding Corp. 6.14% 2006*....................... 120,000 123,525
Allstate Financing II 7.83% 2045...................... 53,000 56,187
AMRESCO, Inc. 9.88% 2005.............................. 10,000 8,000
Arcadia Financial Ltd. 11.50% 2007 (3)................ 10,000 7,275
Asset Securitization Corp. 6.66% 2041................. 85,000 88,788
Associates Corp. of North America 7.63% 2004.......... 130,000 144,691
ContiFinancial Corp. 8.13% 2008....................... 10,000 9,394
CS First Boston Mortgage Securities Corp. 7.24%
2029................................................. 110,000 118,701
Dime Capital Trust I, Series A 9.33% 2027............. 45,000 51,023
Equitable Cos., Inc. 7.00% 2028....................... 130,000 132,128
Finova Capital Corp. 6.63% 2001....................... 125,000 128,780
Finova Capital Corp., Series C 6.39% 2002............. 65,000 67,794
Fleet Mortgage Group, Inc. 6.84% 2003................. 50,000 53,319
Ford Motor Credit Corp. 7.02% 2000.................... 125,000 129,751
GE Capital Mortgage Services, Inc. 6.25% 2023......... 38,220 38,243
General Motors Acceptance Corp. 7.63% 2003............ 130,000 143,220
Morgan Stanley Capital I, Inc. 7.22% 2007*# .......... 130,000 140,603
Popular North America, Inc. 6.63% 2002................ 40,000 40,722
Private Export Funding Corp. 5.87% 2008............... 125,000 132,754
Private Export Funding Corp. 6.31% 2004............... 100,000 107,126
</TABLE>
- ----------------
46
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
Private Export Funding Corp. 7.03% 2003............... $ 100,000 $ 109,956
Private Export Funding Corp. 7.30% 2002............... 265,000 285,744
Private Export Funding Corp. 7.90% 2000............... 100,000 104,696
U.S. West Capital Funding, Inc. 6.25% 2005............ 165,000 175,227
U.S. West Capital Funding, Inc. 6.88% 2028............ 100,000 106,007
INSURANCE -- 1.4%
Cigna Corp. 7.40% 2007................................ 80,000 87,675
Cigna Corp. 7.88% 2027................................ 40,000 43,416
Jackson National Life Insurance Co. 8.15% 2027* ...... 49,000 59,288
Lumbermens Mutual Casualty Co. 8.30% 2037* ........... 85,000 95,230
Metropolitan Life Insurance Co. 7.70% 2015* .......... 140,000 164,140
-------------
4,254,957
-------------
HEALTHCARE -- 1.3%
HEALTH SERVICES -- 0.6%
HEALTHSOUTH Corp. 6.88% 2005*(3)...................... 120,000 125,742
Tenet Healthcare Corp. 7.88% 2003..................... 50,000 50,750
Tenet Healthcare Corp. 8.13% 2008*(3)................. 20,000 20,481
MEDICAL PRODUCTS -- 0.7%
Allegiance Corp. 7.00% 2026........................... 135,000 142,640
Beckman Instruments, Inc. 7.10% 2003.................. 75,000 77,024
Owens & Minor, Inc. 10.88% 2006....................... 10,000 10,600
-------------
427,237
-------------
INDUSTRIAL & COMMERCIAL -- 2.4%
AEROSPACE & MILITARY TECHNOLOGY -- 0.0%
K & F Industries, Inc. 9.25% 2007..................... 15,000 14,700
BUSINESS SERVICES -- 1.3%
Boise Cascade Office Products Co. 7.05% 2005.......... 225,000 237,910
Federal Express Corp. 6.72% 2022# .................... 180,000 185,400
MACHINERY -- 0.3%
Cincinnati Milacron, Inc. 7.88% 2000.................. 75,000 77,368
Grove Worldwide LLC 9.25% 2008*(3).................... 5,000 4,400
Johnstown America Industries, Inc. 11.75% 2005 10,000 10,487
Numatics, Inc., Series B 9.63% 2008................... 10,000 9,763
MULTI-INDUSTRY -- 0.0%
Nortek, Inc. 8.88% 2008............................... 5,000 4,825
TRANSPORTATION -- 0.8%
AMR Corp. 10.20% 2020................................. 50,000 65,699
Continental Airlines, Inc. 6.47% 2004................. 95,000 100,994
Continental Airlines, Inc. 6.65% 2017................. 75,000 79,636
MTL, Inc. 10.00% 2006* ............................... 15,000 14,400
-------------
805,582
-------------
</TABLE>
----------------
47
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT -- 1.7%
BROADCASTING & MEDIA -- 1.7%
Allbritton Communications Co. 8.88% 2008.............. $ 10,000 $ 9,900
Century Communications Corp., Series B zero coupon
2008 ................................................ 25,000 11,750
Classic Cable, Inc. 9.88% 2008........................ 5,000 5,087
Comcast Cable Communications 8.50% 2027............... 80,000 98,004
EchoStar DBS Corp. 12.50% 2002........................ 15,000 15,637
Granite Broadcasting Corp. 8.88% 2008* ............... 20,000 18,675
LIN Holdings Corp. zero coupon 2008*(2)............... 20,000 13,100
News America Holdings, Inc. 8.00% 2016................ 130,000 143,666
Scholastic Corp. 7.00% 2003........................... 85,000 89,744
Tele-Communications, Inc. 8.00% 2005.................. 50,000 57,141
Viacom, Inc. 7.75% 2005............................... 80,000 86,389
LEISURE & TOURISM -- 0.0%
Argosy Gaming Co. 13.25% 2004......................... 10,000 10,625
Fitzgeralds Gaming Corp., Series B 12.25% 2004........ 5,000 3,500
Loews Cineplex Entertainment Corp. 8.88% 2008* ....... 5,000 4,950
-------------
568,168
-------------
INFORMATION TECHNOLOGY -- 1.2%
ELECTRONICS -- 0.0%
Advanced Micro Devices, Inc. 11.00% 2003.............. 10,000 10,100
Amphenol Corp. 9.88% 2007............................. 5,000 4,675
SOFTWARE -- 0.1%
Concentric Network Corp. 12.75% 2007.................. 10,000 9,225
PSINet, Inc. 10.00% 2005.............................. 10,000 10,000
TELECOMMUNICATIONS -- 1.1%
AMSC Acquisition, Inc. 12.25% 2008.................... 5,000 3,088
BTI Telecom Corp. 10.50% 2007......................... 10,000 8,300
Compania de Telecomunicaciones 7.63% 2006............. 50,000 48,184
e.spire Communications, Inc. zero coupon 2008*(2)..... 25,000 12,844
GCI, Inc. 9.75% 2007.................................. 10,000 9,300
Globalstar LP 10.75% 2004............................. 15,000 9,600
GST Telecommunications, Inc. zero coupon
2008*(2)(3).......................................... 20,000 9,925
Intermedia Communications, Inc. 8.88% 2007............ 20,000 20,100
Iridium LLC 10.88% 2005............................... 10,000 8,075
Iridium LLC 11.25% 2005............................... 5,000 4,100
ITC Deltacom, Inc. 8.88% 2008......................... 10,000 9,800
IXC Communications, Inc. 9.00% 2008................... 10,000 9,900
KMC Telecom Holdings, Inc. zero coupon 2008(2)........ 20,000 9,575
Level 3 Communications, Inc. 9.13% 2008............... 15,000 14,212
McleodUSA, Inc. 8.38% 2008............................ 15,000 14,775
MJD Communications, Inc. 9.50% 2008* ................. 5,000 5,025
Nextel Communications, Inc. zero coupon 2007(2)....... 20,000 12,000
Paging Network, Inc. 10.13% 2007...................... 15,000 14,850
Tele-Communications, Inc. 7.25% 2005.................. 40,000 44,010
Tele-Communications, Inc. 9.25% 2002.................. 60,000 67,336
Telecommunications Tech Co. LLC 9.75% 2008* .......... 15,000 13,706
Time Warner Telecom, Inc. 9.75% 2008.................. 10,000 10,050
Viatel, Inc. 11.25% 2008*(3).......................... 10,000 9,000
-------------
401,755
-------------
</TABLE>
- ----------------
48
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
MATERIALS -- 0.8%
CHEMICALS -- 0.3%
Huntsman Corp. 9.50% 2007* ........................... $ 15,000 $ 14,400
ICI Wilmington, Inc. 6.95% 2004....................... 80,000 83,655
LaRoche Industries, Inc. 9.50% 2007................... 10,000 8,500
Sovereign Speciality Chemicals 9.50% 2007............. 10,000 9,550
FOREST PRODUCTS -- 0.4%
American Pad & Paper Co. 13.00% 2005.................. 10,000 5,400
Boise Cascade Corp. 9.90% 2001........................ 80,000 88,055
Gaylord Container Corp. 9.38% 2007.................... 10,000 8,000
Grupo Industrial Durango SA de CV 12.63% 2003......... 10,000 7,100
Repap New Brunswick, Inc. 9.00% 2004.................. 10,000 9,125
METALS & MINERALS -- 0.1%
A.K. Steel Holding Corp. 9.13% 2006................... 10,000 10,000
Armco, Inc. 9.00% 2007................................ 10,000 9,800
Bayou Steel Corp. 9.50% 2008* ........................ 15,000 13,481
-------------
267,066
-------------
MUNICIPAL BONDS -- 2.3%
MUNICIPAL BONDS -- 2.3%
Allentown Pennsylvania 6.20% 2005..................... 290,000 307,417
Hudson County New Jersey Improvement Authority
Facility 6.55% 2002.................................. 200,000 210,522
Huntsville Alabama Solid Waste Disposal Authority
5.95% 2003........................................... 105,000 107,826
Miami Florida Revenue 7.25% 2003...................... 130,000 141,748
-------------
767,513
-------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 2.7%
FOREIGN GOVERNMENT -- 2.7%
Australian Government 10.00% 2006............... (AUD) 940,000 726,558
Republic of Argentina 11.00% 2006..................... 60,000 55,950
Republic of Columbia 7.25% 2004....................... 70,000 54,775
Republic of Columbia 7.63% 2007....................... 25,000 17,438
Republic of Lithuania 7.13% 2002* .................... 53,000 45,845
-------------
900,566
-------------
REAL ESTATE -- 0.8%
REAL ESTATE COMPANIES -- 0.8%
Equity Office Properties Operating LP 6.38% 2003...... 120,000 119,926
Post Apartment Homes LP 7.02% 2001.................... 130,000 135,895
-------------
255,821
-------------
U.S. GOVERNMENT & AGENCIES -- 46.6%
U.S. GOVERNMENT & AGENCIES -- 46.6%
Federal Home Loan Mortgage Corp. 6.50% 2022........... 60,000 62,831
Federal Home Loan Mortgage Corp. 6.50% 2023........... 96,000 102,840
Federal Home Loan Mortgage Corp. 7.00% 2023........... 45,000 49,190
Federal Home Loan Mortgage Corp. 7.50% 2023........... 32,473 33,498
Federal Home Loan Mortgage Corp. 7.75% 2022........... 82,612 88,859
Federal Home Loan Mortgage Corp. 8.50% 2019........... 56,012 58,855
</TABLE>
----------------
49
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (CONTINUED)
Federal Home Loan Mortgage Corp. 8.50% 2008........... $ 217,262 $ 225,513
Federal National Mortgage Association 5.25% 2003...... 510,000 520,756
Federal National Mortgage Association 5.63% 2001...... 515,000 527,391
Federal National Mortgage Association 5.65% 2005...... 59,624 59,514
Federal National Mortgage Association 5.75% 2008...... 740,000 782,898
Federal National Mortgage Association 6.13% 2028(4)... 231,118 233,718
Federal National Mortgage Association 6.59% 2007...... 99,181 105,690
Federal National Mortgage Association 7.00% 2006...... 13,367 13,380
Federal National Mortgage Association 7.39% 2021...... 55,263 60,336
Federal National Mortgage Association 7.75% 2021...... 200,000 211,124
Federal National Mortgage Association 8.00% 2006...... 53,999 57,187
Government National Mortgage Association 7.00% 2023... 54,829 56,628
Government National Mortgage Association 7.25% 2027... 513,558 531,209
Government National Mortgage Association 7.50% 2022... 23,810 24,695
Government National Mortgage Association 7.50% 2023... 76,879 79,737
Government National Mortgage Association 8.50% 2017... 75,551 80,555
Government National Mortgage Association 9.00% 2021... 21,250 22,844
United States Treasury Bonds 5.25% 2003............... 200,000 208,938
United States Treasury Bonds 5.63% 2008............... 200,000 218,750
United States Treasury Bonds 7.50% 2001............... 220,000 239,765
United States Treasury Bonds 7.50% 2016............... 430,000 547,377
United States Treasury Bonds 8.13% 2021............... 120,000 166,144
United States Treasury Bonds 8.50% 2020............... 180,000 256,021
United States Treasury Bonds 9.25% 2016............... 275,000 405,067
United States Treasury Bonds 10.75% 2003.............. 170,000 212,315
United States Treasury Bonds 11.88% 2003.............. 620,000 828,859
United States Treasury Bonds 12.00% 2013.............. 4,650,000 7,273,623
United States Treasury Bonds Strip zero coupon 2012... 325,000 165,952
United States Treasury Notes 6.63% 2001............... 835,000 884,056
-------------
15,396,115
-------------
UTILITIES -- 4.3%
ELECTRIC UTILITIES -- 1.8%
Atlantic City Electric Co. 6.38% 2005................. 75,000 79,815
Cleveland Electric Illuminating Co., Series B 7.19%
2000................................................. 40,000 40,959
Empresa Nacional de Electricidad SA 7.33% 2037........ 60,000 53,635
PacifiCorp 6.38% 2008# ............................... 250,000 261,125
Public Service Electric & Gas Co. 8.88% 2003.......... 47,000 54,592
UtiliCorp United, Inc. 6.88% 2004..................... 90,000 95,647
WESCO Distribution, Inc., Series B 9.13% 2008......... 20,000 19,050
GAS & PIPELINE UTILITIES -- 0.8%
HNG Internorth, Inc. 9.63% 2006....................... 135,000 162,451
KN Energy, Inc. 6.65% 2005............................ 100,000 102,694
TELEPHONE -- 1.7%
GTE Corp. 6.36% 2006.................................. 220,000 234,322
MCI Communications Corp. 6.13% 2002(4)................ 55,000 56,379
MGC Communications, Inc., Series B 13.00% 2004........ 5,000 3,750
</TABLE>
- ----------------
50
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
TELEPHONE (CONTINUED)
WorldCom, Inc. 7.55% 2004............................. $ 230,000 $ 250,493
-------------
1,414,912
-------------
TOTAL BONDS & NOTES (cost $24,987,772)................ 26,113,190
-------------
<CAPTION>
WARRANTS -- 0.0%+ SHARES
<S> <C> <C>
- -------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 0.0%
TELECOMMUNICATIONS -- 0.0%
KMC Telecom Holdings, Inc. 4/15/08*# (cost $55)....... 20 50
-------------
TOTAL INVESTMENT SECURITIES (cost $29,091,861)........ 30,524,610
-------------
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 1.4% AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 0.2%
Chase Manhattan Corp. 8.77% due 2/19/99............... $ 60,000 60,616
-------------
FEDERAL AGENCY OBLIGATIONS -- 1.0%
Federal Home Loan Mortgage Corp. 5.40% due 10/1/98.... 325,000 325,000
-------------
FOREIGN SHORT-TERM NOTES -- 0.2%
New Zealand Treasury Bill zero coupon due 12/16/98....
(NZD) 150,000 74,276
-------------
TOTAL SHORT-TERM SECURITIES (cost $468,440)........... 459,892
-------------
<CAPTION>
REPURCHASE AGREEMENTS -- 5.0%
<S> <C> <C>
- -------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 5.0%
J.P. Morgan & Co., Inc. Joint Repurchase Agreement
(See Note 3)......................................... 905,000 905,000
PaineWebber, Inc. Joint Repurchase Agreement (See Note
3)................................................... 753,000 753,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost $1,658,000)......... 1,658,000
-------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $31,218,301) 98.8% 32,642,502
Other assets less liabilities -- 1.2 409,295
------- -------------
NET ASSETS -- 100.0% $ 33,051,797
------- -------------
------- -------------
</TABLE>
- -------------
+ Non-income producing securities
# Fair Value Security; see Note 2
* Resale restricted to qualified institutional buyers
(1) PIK ("Payment-in-kind") payment made with additional securities in lieu of
cash
(2) Represent a zero coupon bond which will convert to an interest-bearing
security at a later date
(3) Bond issued as part of a unit which includes an equity component
(4) Variable rate security; rate as of September 30, 1998
ADR -- American Depository Receipt
AUD -- Australian Dollar
NOK -- Norwegian Krone
NZD -- New Zealand Dollar
----------------
51
<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 30,000 USD 17,855 10/27/98 $ 72
USD 6,502 FIM 35,000 11/12/98 397
*USD 1,466 GBP 900 10/07/98 63
*USD 1,625 GBP 1,000 10/07/98 74
*USD 1,622 GBP 1,000 10/07/98 78
*USD 1,287 ITL 2,200,000 10/19/98 46
USD 4,579 ITL 8,000,000 11/12/98 270
USD 1,708 ITL 3,000,000 11/12/98 110
USD 1,142 ITL 2,000,000 11/12/98 70
USD 904 ITL 1,500,000 11/12/98 6
------
1,186
------
<CAPTION>
GROSS
UNREALIZED
DEPRECIATION
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUD 1,055,000 USD 625,172 10/27/98 (175)
AUD 125,000 USD 72,725 10/27/98 (1,368)
FIM 70,000 USD 13,066 11/06/98 (728)
FIM 75,000 USD 13,637 11/12/98 (1,147)
FIM 100,000 USD 18,657 11/12/98 (1,054)
FIM 20,000 USD 3,756 11/12/98 (187)
*GBP 2,900 USD 4,808 10/07/98 (120)
ITL 2,000,000 USD 1,137 10/19/98 (75)
ITL 14,500,000 USD 8,316 10/19/98 (470)
*ITL 2,200,000 USD 1,245 10/19/98 (88)
ITL 17,500,000 USD 9,911 11/12/98 (696)
------
(6,108)
------
Net Unrealized Depreciation............................. $ (4,922)
------
------
</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 USD -- United States Dollar
FIM -- Finnish Markka ITL -- Italian Lira
</TABLE>
See Notes to Financial Statements
- ----------------
52
<PAGE>
- ----------------
SEASONS SERIES TRUST
ASSET ALLOCATION:
DIVERSIFIED GROWTH
PORTFOLIO INVESTMENT PORTFOLIO -- SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 73.8% SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 8.8%
APPAREL & TEXTILES -- 0.2%
Jones Apparel Group, Inc.+ ........................... 7,200 $ 165,150
Onward Kashiyama Co Ltd. ............................. 2,000 24,552
AUTOMOTIVE -- 1.7%
Bayerische Motoren Werke AG........................... 166 106,859
Bayerische Motoren Werke AG New....................... 39 24,522
Bridgestone Corp. .................................... 3,000 60,393
Chrysler Corp. ....................................... 1,300 62,238
Ford Motor Co. ....................................... 5,900 276,931
Fuji Heavy Industries Ltd. ........................... 6,000 31,273
General Motors Corp. ................................. 1,900 103,906
Goodyear Tire & Rubber Co. ........................... 2,900 148,988
Honda Motor Co., Ltd. ................................ 4,000 121,518
Michelin Corp., Class B............................... 3,821 150,116
Renault SA............................................ 567 22,681
Volkswagen AG......................................... 1,825 131,688
Volvo AB, Class B..................................... 2,852 69,867
HOUSING -- 0.5%
Cemex SA.............................................. 3,693 8,130
CRH PLC............................................... 16,316 206,047
Masco Corp. .......................................... 5,400 132,975
RETAIL -- 6.4%
Aoyama Trading Co., Ltd. ............................. 100 2,130
Costco Cos., Inc.+ ................................... 9,200 435,850
CVS Corp. ............................................ 16,700 731,669
Dayton Hudson Corp. .................................. 15,235 544,651
Federated Department Stores, Inc.+ ................... 400 14,550
Gucci Group NV........................................ 100 3,613
Home Depot, Inc. ..................................... 10,200 402,900
Koninklijke Ahold NV ................................. 4,572 136,673
J.C. Penney, Inc. .................................... 900 40,444
Kmart Corp.+ ......................................... 9,900 118,181
Marks & Spencer PLC................................... 2,900 22,285
May Department Stores Co. ............................ 2,100 108,150
Office Depot, Inc.+ .................................. 6,400 143,600
Safeway, Inc.+ ....................................... 10,000 463,750
Sears, Roebuck & Co. ................................. 2,500 110,469
TJX Cos., Inc. ....................................... 14,500 258,281
Toys "R" Us, Inc.+ ................................... 5,100 82,556
Vendex NV............................................. 2,183 81,137
Wal-Mart Stores, Inc. ................................ 13,400 731,975
Walgreen Co. ......................................... 9,600 423,000
-------------
6,703,698
-------------
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COMMON STOCK (CONTINUED) SHARES VALUE
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CONSUMER STAPLES -- 4.6%
FOOD, BEVERAGE & TOBACCO -- 3.2%
Anheuser-Busch Cos., Inc. ............................ 4,100 $ 221,400
British America Tobacco Holdings Ltd. ................ 8,765 65,305
Coca-Cola Femsa SA ADR+ .............................. 935 11,395
ConAgra, Inc. ........................................ 2,500 67,344
General Mills, Inc. .................................. 900 63,000
Greencore Group PLC................................... 14,240 52,140
H.J. Heinz & Co. ..................................... 3,700 189,162
Nabisco Holdings Corp., Class A....................... 1,066 38,309
Nestle SA+ ........................................... 189 377,069
PepsiCo, Inc. ........................................ 200 5,888
Philip Morris Cos., Inc. ............................. 18,400 847,550
Quaker Oats Co. ...................................... 2,416 142,544
RJR Nabisco Holdings Corp. ........................... 6,200 156,163
Sara Lee Corp. ....................................... 3,800 205,200
HOUSEHOLD PRODUCTS -- 1.4%
Clorox Co. ........................................... 2,805 231,413
Colgate-Palmolive Co. ................................ 6,510 445,935
Estee Lauder Cos., Inc., Class A...................... 3,800 194,750
KAO Corp. ............................................ 8,000 127,667
Kimberly-Clark Corp. ................................. 2,600 105,300
-------------
3,547,534
-------------
ENERGY -- 4.5%
ENERGY SERVICES -- 0.4%
Halliburton Co. ...................................... 1,800 51,413
Schlumberger Ltd. .................................... 2,090 105,153
Tosco Corp. .......................................... 2,405 51,707
VA Technologies AG.................................... 582 52,803
ENERGY SOURCES -- 4.1%
Amoco Corp. .......................................... 4,666 251,381
Atlantic Richfield Co. ............................... 2,965 210,330
British Petroleum Co. PLC............................. 11,890 181,928
Burlington Resources, Inc. ........................... 700 26,163
Burmah Castrol PLC.................................... 9,656 137,239
Chevron Corp. ........................................ 1,300 109,281
ENI SpA+ ............................................. 22,146 135,775
Enron Corp. .......................................... 1,400 73,938
Exxon Corp. .......................................... 14,500 1,017,719
Iberdrola SA.......................................... 4,267 71,099
Mobil Corp. .......................................... 3,200 243,000
Occidental Petroleum Corp. ........................... 2,600 55,900
Societe Nationale Elf Aquitaine SA.................... 1,589 196,078
Sonat, Inc. .......................................... 3,300 98,587
Texaco, Inc. ......................................... 1,650 103,434
Total SA, Class B..................................... 1,848 232,988
-------------
3,405,916
-------------
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COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 13.6%
BANKS -- 6.4%
ABN Amro Holdings NV.................................. 6,492 $ 110,650
Allied Irish Banks PLC................................ 17,269 252,924
Banc One Corp. ....................................... 900 38,363
Banca Popolare di Bergamo Credito Varesino SpA........ 1,300 26,344
Banca Popolare di Brescia............................. 1,287 24,209
Banca Popolare di Milano.............................. 3,660 26,386
Banco Frances SA...................................... 3,828 24,503
Bank of Ireland....................................... 12,143 215,958
Bank of Nova Scotia................................... 8,135 133,321
BankAmerica Corp. .................................... 8,800 529,100
BankBoston Corp. ..................................... 4,395 145,035
Bankers Trust New York Corp. ......................... 2,380 140,420
Banque Nationale de Paris............................. 3,263 174,810
Bayerische Vereinsbank AG............................. 893 65,774
Chase Manhattan Corp. ................................ 2,552 110,374
Citicorp.............................................. 2,030 188,663
Comerica, Inc. ....................................... 4,000 219,250
Commonwealth Bank of Australia........................ 5,793 68,546
Credit Commerce France................................ 630 40,501
Deutsche Bank AG+ .................................... 2,309 119,325
Fifth Third Bancorp................................... 3,800 218,500
First Chicago NBD Corp. .............................. 3,390 232,215
First Tennessee National Corp. ....................... 465 12,700
First Union Corp. .................................... 2,495 127,713
Firstar Corp. ........................................ 3,900 197,438
Foreningsbanken AB, Class A........................... 1,423 32,681
Huntington Bancshares, Inc. .......................... 500 12,563
Istituto Nazionale delle Assicurazioni................ 24,349 61,955
Julius Baer Holdings AG............................... 50 117,720
MBNA Corp. ........................................... 9,900 283,387
Mercantile Bancorp, Inc. ............................. 1,500 72,563
National City Corp. .................................. 800 52,750
National Westminster Bank PLC......................... 6,394 85,876
NationsBank Corp. .................................... 2,410 128,935
Nordbanken AB+ ....................................... 6,876 39,479
PNC Bank Corp. ....................................... 2,600 117,000
Royal Bank of Canada.................................. 620 25,158
Societe Generale Enterprises+ ........................ 1,029 113,929
Southtrust Corp. ..................................... 2,400 83,850
Star Banc Corp. ...................................... 1,900 125,638
Summit Bancorp. ...................................... 500 18,750
Svenska Handelsbank, Series A......................... 2,126 79,750
FINANCIAL SERVICES -- 5.0%
Allied Zurich AG+ .................................... 10,065 103,011
American Express Co. ................................. 4,100 318,262
American General Corp. ............................... 3,400 217,175
Associates First Capital Corp., Class A............... 2,100 137,025
Assurances Generales de France+ ...................... 1,306 72,066
Compagnie Financiere Richemont AG+ ................... 53 67,959
Equitable Cos., Inc. ................................. 2,668 110,389
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COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
Federal Home Loan Mortgage Corp. ..................... 9,900 $ 489,431
Federal National Mortgage Association................. 3,700 237,725
Fleet Financial Group, Inc. .......................... 1,500 110,156
H.F. Ahmanson & Co. .................................. 200 11,100
ING Groep NV.......................................... 4,160 187,530
J.P. Morgan & Co., Inc. .............................. 1,800 152,325
KeyCorp. ............................................. 3,464 100,023
Lehman Brothers Holdings, Inc. ....................... 1,400 39,550
Merrill Lynch & Co., Inc. ............................ 800 37,900
Morgan Stanley, Dean Witter & Co. .................... 1,005 43,278
Nikko Securities Co. Ltd. ............................ 36,000 77,215
Norwest Corp. ........................................ 5,940 212,726
P & O Finance BV+ .................................... 6,351 60,465
Promise Co. .......................................... 1,700 76,535
Travelers Group, Inc. ................................ 11,555 433,312
UBS AG+ .............................................. 1,024 200,290
Unidanmark A/S, Class A............................... 602 43,606
Washington Mutual, Inc. .............................. 3,134 105,773
Wells Fargo & Co. .................................... 500 177,500
INSURANCE -- 2.2%
Aetna, Inc. .......................................... 700 48,650
Allianz AG............................................ 236 73,205
Allstate Corp. ....................................... 2,600 108,388
American International Group, Inc. ................... 5,150 396,550
Aon Corp. ............................................ 2,995 193,177
Axa SA+ .............................................. 577 52,859
CIGNA Corp. .......................................... 3,100 204,987
Conseco, Inc. ........................................ 8,700 265,894
Munchener Ruckversicherungs AG+ ...................... 164 72,378
Royal & Sun Alliance Insurance Group PLC.............. 12,266 106,352
The Hartford Financial Services Group, Inc. .......... 1,400 66,413
Zurich Allied AG+ .................................... 119 59,224
-------------
10,365,410
-------------
HEALTHCARE -- 9.6%
DRUGS -- 5.8%
Bristol-Myers Squibb Co. ............................. 8,360 868,395
Glaxo Wellcome PLC.................................... 2,844 83,985
Eli Lilly & Co. ...................................... 5,900 462,044
Merck & Co., Inc. .................................... 2,960 383,505
Novartis AG........................................... 139 223,443
Pfizer, Inc. ......................................... 7,400 783,937
Pharmacia & Upjohn, Inc. ............................. 10,800 542,025
Pharmacia & Upjohn, Inc. ....................... (SEK) 5,511 277,044
Sankyo Co. Ltd. ...................................... 3,000 66,323
Warner-Lambert Co. ................................... 10,300 777,650
HEALTH SERVICES -- 1.0%
Columbia/HCA Healthcare Corp. ........................ 2,500 50,156
HEALTHSOUTH Corp.+ ................................... 7,300 77,106
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COMMON STOCK (CONTINUED) SHARES VALUE
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HEALTHCARE (CONTINUED)
HEALTH SERVICES (CONTINUED)
IMS Health, Inc. ..................................... 3,800 $ 235,363
Quintiles Transnational Corp.+ ....................... 3,200 140,000
Tenet Healthcare Corp.+ .............................. 4,700 135,125
United HealthCare Corp. .............................. 1,000 35,000
Wellpoint Health Networks, Inc., Class A+ ............ 1,068 59,875
MEDICAL PRODUCTS -- 2.8%
Akzo Nobel NV......................................... 4,315 153,506
American Home Products Corp. ......................... 6,200 324,725
Baxter International, Inc. ........................... 6,135 365,032
Cardinal Health, Inc. ................................ 3,300 340,725
McKesson Corp. ....................................... 1,500 137,438
Schering-Plough Corp. ................................ 7,600 787,075
-------------
7,309,477
-------------
INDUSTRIAL & COMMERCIAL -- 5.7%
AEROSPACE & MILITARY TECHNOLOGY -- 0.2%
Lockheed Martin Corp. ................................ 1,090 109,886
BUSINESS SERVICES -- 1.4%
Dai Nippon Printing Co. Ltd. ......................... 5,000 64,126
Interpublic Group of Cos., Inc. ...................... 6,100 329,019
Owens-Illinois, Inc.+ ................................ 1,568 39,200
TNT Post Group NV+ ................................... 4,428 112,854
Vedior NV+ ........................................... 2,431 60,022
Waste Management, Inc.+ .............................. 9,300 446,981
ELECTRICAL EQUIPMENT -- 0.5%
Emerson Electric Co. ................................. 3,400 211,650
Premier Farnell PLC................................... 600 1,530
Raytheon Co., Class B................................. 600 32,363
Rohm Co. Ltd. ........................................ 1,000 95,165
Siebe PLC............................................. 22,605 73,018
MACHINERY -- 0.7%
Bombardie, Inc., Class B+ ............................ 9,149 100,759
Cooper Industries, Inc. .............................. 2,300 93,725
Deere & Co. .......................................... 2,400 72,600
Ingersoll-Rand Co. ................................... 5,200 197,275
Molins PLC............................................ 1,920 3,917
Sandvik AB, Class B................................... 2,085 43,629
United Technologies Corp. ............................ 345 26,371
MULTI-INDUSTRY -- 2.3%
Avery Dennison Corp. ................................. 1,000 43,687
BTR PLC............................................... 35,350 63,855
Cookson Group PLC..................................... 10,936 20,266
Minnesota Mining & Manufacturing Co. ................. 1,575 116,058
Ogden Corp. .......................................... 800 22,750
Securicor Group PLC................................... 13,785 89,349
Smiths Industries..................................... 7,876 89,311
Tomkins PLC........................................... 33,913 159,129
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COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
MULTI-INDUSTRY (CONTINUED)
Tyco International Ltd. .............................. 16,400 $ 906,100
Vivendi SA............................................ 1,319 262,867
TRANSPORTATION -- 0.6%
British Airways PLC................................... 15,297 93,623
Burlington Northern Santa Fe Corp. ................... 6,000 192,000
Delta Air Lines, Inc. ................................ 600 58,350
Deutsche Lufthansa AG................................. 4,403 87,034
Norfolk Southern Corp. ............................... 1,900 55,219
-------------
4,373,688
-------------
INFORMATION & ENTERTAINMENT -- 3.2%
BROADCASTING & MEDIA -- 1.9%
Gannett, Inc. ........................................ 2,700 144,619
Grupo Televisa SA GDR+ ............................... 383 7,397
McGraw-Hill Cos., Inc. ............................... 1,300 103,025
Time Warner, Inc. .................................... 7,039 616,352
Times Mirror Co., Series A............................ 2,134 113,369
Viacom, Inc., Class B+ ............................... 8,316 482,328
ENTERTAINMENT PRODUCTS -- 0.4%
Eastman Kodak Co. .................................... 2,487 192,276
Fuji Photo Film Co., Ltd. ............................ 3,000 103,217
LEISURE & TOURISM -- 0.9%
Bass PLC.............................................. 12,613 151,176
Carnival Corp., Class A+ ............................. 9,700 308,581
Granada Group PLC..................................... 10,596 133,306
McDonald's Corp. ..................................... 1,900 113,406
-------------
2,469,052
-------------
INFORMATION TECHNOLOGY -- 17.0%
COMMUNICATION EQUIPMENT -- 1.1%
3Com Corp.+ .......................................... 4,065 122,204
Alcatel Alsthom, Inc. ................................ 412 36,640
Ascend Communications, Inc.+ ......................... 3,500 159,250
Lucent Technologies, Inc. ............................ 5,000 345,313
Nokia Corp., Class A ADR+ ............................ 2,610 207,383
COMPUTERS & BUSINESS EQUIPMENT -- 5.6%
Canon, Inc. .......................................... 5,000 101,387
Cisco Systems, Inc.+ ................................. 6,900 426,506
Compaq Computer Corp. ................................ 10,600 335,225
Computer Sciences Corp.+ ............................. 3,700 201,650
Dell Computer Corp.+ ................................. 5,400 355,050
EMC Corp.+ ........................................... 7,500 428,906
Fujitsu Ltd. ......................................... 18,000 155,485
HBO & Co. ............................................ 13,000 375,375
International Business Machines Corp. ................ 7,900 1,011,200
NCR Corp.+ ........................................... 2,268 65,205
Pitney Bowes, Inc. ................................... 6,200 325,887
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COMMON STOCK (CONTINUED) SHARES VALUE
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<S> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
COMPUTERS & BUSINESS EQUIPMENT (CONTINUED)
Ricoh Co. Ltd. ....................................... 9,000 $ 83,013
Seagate Technology, Inc.+ ............................ 5,800 145,363
Xerox Corp. .......................................... 3,000 254,250
ELECTRONICS -- 3.6%
Dixons Group PLC...................................... 9,472 97,103
General Electric Co. ................................. 16,325 1,298,858
Intel Corp. .......................................... 7,025 602,394
Motorola, Inc. ....................................... 2,700 115,256
Omron Corp. .......................................... 6,000 59,515
Philips Electronics NV................................ 2,758 148,638
Sony Corp. ........................................... 1,700 118,099
STMicroelectronics NV+ ............................... 2,384 107,131
Texas Instruments, Inc. .............................. 3,700 195,175
SOFTWARE -- 2.9%
America Online, Inc.+ ................................ 1,600 178,000
BMC Software, Inc.+ .................................. 8,800 528,550
Computer Associates International, Inc. .............. 2,434 90,058
Compuware Corp.+ ..................................... 3,900 229,612
Microsoft Corp.+ ..................................... 9,300 1,023,581
PeopleSoft, Inc.+ .................................... 3,300 107,663
Sun Microsystems, Inc.+ .............................. 1,600 79,700
TELECOMMUNICATIONS -- 3.8%
AirTouch Communications, Inc.+ ....................... 5,600 319,200
Ameritech Corp. ...................................... 3,800 180,025
Cable & Wireless PLC.................................. 14,007 136,093
Comcast Corp., Class A................................ 1,600 75,100
Deutsche Telekom AG................................... 4,114 127,858
Ericsson (LM) Telecommunications Co., Series B........ 2,307 43,564
Mannesmann AG......................................... 2,491 228,224
MediaOne Group, Inc.+ ................................ 10,033 445,842
Northern Telecom Ltd. ................................ 3,083 99,219
Tele-Communications, Inc., TCI Ventures Group, Series
A+ .................................................. 14,100 252,919
Tele-Communications, Inc., Series A+ ................. 10,400 406,900
Telecomunicacoes de Brasileiras SA ADR+ .............. 1,723 118,887
Telefonica SA......................................... 5,695 207,842
U.S. West, Inc. ...................................... 3,800 199,263
Vodafone Group PLC.................................... 5,470 63,516
-------------
13,019,077
-------------
MATERIALS -- 1.6%
CHEMICALS -- 0.7%
Bayer AG.............................................. 3,343 126,317
Dow Chemical Co. ..................................... 200 17,088
du Pont (E.I.) de Nemours & Co. ...................... 4,700 263,787
Eastman Chemical Co. ................................. 2,000 100,875
Hoechst AG+ .......................................... 700 28,923
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COMMON STOCK (CONTINUED) SHARES VALUE
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MATERIALS (CONTINUED)
FOREST PRODUCTS -- 0.4%
Fort James Corp. ..................................... 1,100 $ 36,094
Svenska Cellulosa AB, Class B......................... 5,167 102,186
Temple-Inland, Inc. .................................. 900 43,088
Weyerhaeuser Co. ..................................... 3,610 152,297
METALS & MINERALS -- 0.5%
Aluminum Co. of America............................... 800 56,800
Cimpor-Cimentos de Portugal SA........................ 1,622 45,268
Freeport-McMoRan Copper & Gold, Inc., Class A......... 2,200 25,712
Freeport-McMoRan Copper & Gold, Inc., Class B......... 1,500 17,813
Lafarge Corp. ........................................ 1,086 96,192
Rio Tinto PLC......................................... 8,322 99,250
-------------
1,211,690
-------------
REAL ESTATE -- 0.2%
REAL ESTATE INVESTMENT TRUSTS -- 0.2%
Equity Residential Properties Trust................... 1,534 64,716
Starwood Hotels & Resorts Trust....................... 2,700 82,350
-------------
147,066
-------------
UTILITIES -- 5.0%
ELECTRIC UTILITIES -- 1.9%
Consolidated Edison, Inc.+ ........................... 1,300 67,763
Duke Energy Corp. .................................... 3,400 225,037
Electricidad de Portugal SA........................... 4,412 101,594
Entergy Corp. ........................................ 3,066 94,280
Public Service Enterprise Group, Inc. ................ 200 7,863
Scottish Power PLC.................................... 25,401 246,150
Sempra Energy+ ....................................... 2,300 59,944
Southern Co. ......................................... 3,300 97,144
Telecom Italia SpA.................................... 32,183 221,780
Texas Utilities Co. .................................. 3,234 150,583
VEBA AG............................................... 2,786 145,143
TELEPHONE -- 3.1%
AT&T Corp. ........................................... 5,700 333,094
Bell Atlantic Corp. .................................. 3,450 167,109
BellSouth Corp. ...................................... 1,080 81,270
GTE Corp. ............................................ 2,934 161,370
MCI WorldCom, Inc.+ .................................. 9,300 454,538
OTE Greek Telecommunications.......................... 3,541 84,904
Portugal Telecom SA................................... 1,000 36,424
Royal Koninklijke KPN NV.............................. 1,655 51,143
SBC Communications, Inc. ............................. 8,400 373,275
Sprint Corp. ......................................... 8,500 612,000
Telefonos de Mexico SA ADR+ .......................... 959 42,436
-------------
3,814,844
-------------
TOTAL COMMON STOCK (cost $59,658,694)................. 56,367,452
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PREFERRED STOCK -- 0.1% SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 0.1%
RETAIL -- 0.1%
Kmart Financing I 7.75% (cost $53,897)................ 800 $ 40,000
-------------
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 21.1% AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.1%
AUTOMOTIVE -- 0.0%
Chrysler Corp. 7.45% 2097............................. $ 15,000 16,532
RETAIL -- 0.1%
Federated Department Stores, Inc. 8.50% 2003.......... 40,000 44,939
-------------
61,471
-------------
CONSUMER STAPLES -- 0.1%
FOOD, BEVERAGE & TOBACCO -- 0.1%
Philip Morris Cos, Inc. 6.80% 2003.................... 100,000 105,646
Philip Morris Cos, Inc. 7.50% 2004.................... 20,000 21,784
-------------
127,430
-------------
ENERGY -- 0.6%
ENERGY SERVICES -- 0.2%
Global Marine, Inc. 7.00% 2028........................ 85,000 80,734
Petroleum Geo Services ASA 7.50% 2007................. 100,000 106,672
ENERGY SOURCES -- 0.4%
Coastal Corp. 6.50% 2008.............................. 50,000 51,218
Coastal Corp. 6.95% 2028.............................. 60,000 58,517
Enron Corp. 6.40% 2006................................ 20,000 20,471
Enron Corp. 6.95% 2028................................ 40,000 39,652
KN Energy, Inc. 6.45% 2003............................ 60,000 61,670
KN Energy, Inc. 7.25% 2028............................ 15,000 14,841
Saga Peteroleum ASA 7.25% 2027........................ 40,000 36,149
-------------
469,924
-------------
FINANCE -- 4.1%
BANKS -- 1.0%
ABN-Amro Bank NV Chicago Branch 7.25% 2005............ 40,000 43,149
First Union-Lehman Brothers Mortgage Trust 6.65%
2007................................................. 25,000 25,855
First Union-Lehman Brothers-Bank of America 6.28%
2007................................................. 88,583 91,301
Greenpoint Bank Brooklyn New York 6.70% 2002.......... 65,000 66,425
Merita Bank Ltd. 6.50% 2006........................... 40,000 40,536
Nationsbank Corp. 6.88% 2005.......................... 45,000 48,072
Popular, Inc. 6.40% 2000.............................. 100,000 101,062
Provident Cos., Inc. 7.41% 2038....................... 50,000 53,711
St. Paul Bancorp 7.13% 2004........................... 100,000 107,737
Svenska Handelsbank 8.13% 2007........................ 65,000 73,332
Wilmington Trust Corp. 6.63% 2008..................... 105,000 111,194
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PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
FINANCIAL SERVICES -- 2.9%
Advanta Mortgage Loan Trust 6.69% 2017................ $ 25,000 $ 25,829
Advanta Mortgage Loan Trust 7.05% 2021................ 25,000 25,733
AFC Capital Trust I 8.21% 2027........................ 20,000 22,646
AMRESCO Commercial Mortgage Funding I Corp. 6.73%
2029................................................. 188,796 197,471
AMRESCO Residential Securities Corp. 6.60% 2018....... 20,000 20,141
Amvescap PLC 6.60% 2005............................... 100,000 105,600
Associates Corp. of North America 6.50% 2002.......... 60,000 62,531
AT&T Capital Corp. 6.25% 2001......................... 50,000 50,791
Commercial Mortgage Acceptance Corp. 5.80% 2006....... 85,000 85,876
Commercial Mortgage Acceptance Corp. 6.53% 2007#...... 15,000 15,823
Commercial Mortgage Acceptance Corp. 6.57% 2007#...... 40,000 42,350
Fleet Financial Group, Inc. 6.88% 2028................ 50,000 51,124
Ford Motor Credit Co. 7.00% 2001...................... 60,000 62,776
Ford Motor Credit Co. 8.00% 2002...................... 40,000 43,657
General Motors Acceptance Corp. 6.63% 2002............ 40,000 42,057
GMAC Commercial Mortgage Security, Inc. 6.15% 2007.... 44,819 45,949
GMAC Commercial Mortgage Security, Inc. 6.42% 2008.... 65,000 67,708
Green Tree Financial Corp. 6.24% 2016#................ 90,000 92,081
Green Tree Financial Corp. 6.93% 2028................. 55,000 57,200
Green Tree Recreational Equipment 6.18% 2019#......... 250,311 255,708
Green Tree Recreational Equipment 6.55% 2028.......... 29,750 30,511
GS Mortgage Securities Corp. II 6.56% 2031#........... 45,000 47,222
Harley Davidson Eagle Motorcycle Trust 6.20% 2003..... 150,000 156,425
Independent National Mortgage Corp. zero coupon
2024................................................. 18,911 20,044
Lehman Brothers Holdings, Inc. 6.50% 2002............. 105,000 105,546
Merrill Lynch Mortgage Investors, Inc. 6.22% 2030#.... 58,301 61,753
Merrill Lynch Mortgage Investors, Inc. 6.54% 2029#.... 80,000 82,525
Money Store, Inc. 8.05% 2002.......................... 20,000 21,788
Morgan Stanley Capital I, Inc. 7.22% 2028#............ 55,000 59,047
Mortgage Capital Funding, Inc. 6.66% 2008............. 40,000 42,337
Norwest Corp. 6.75% 2027.............................. 25,000 25,751
PaineWebber Group, Inc. 6.65% 2002.................... 135,000 141,242
PNC Mortgage Securities Corp. 6.60% 2027.............. 16,757 17,045
INSURANCE -- 0.2%
Hartford Life, Inc. 7.10% 2007........................ 100,000 109,066
Hartford Life, Inc. 7.65% 2027........................ 20,000 21,681
TIG Holdings, Inc. 8.13% 2005......................... 40,000 44,058
-------------
3,121,466
-------------
INDUSTRIAL & COMMERCIAL -- 1.1%
AEROSPACE & MILITARY TECHNOLOGY -- 0.2%
Lockheed Martin Corp. 7.25% 2006...................... 115,000 126,501
Raytheon Co. 6.45% 2002............................... 35,000 36,423
BUSINESS SERVICES -- 0.1%
United States Filter Corp. 6.50% 2003*(1)............. 55,000 55,908
MACHINERY -- 0.1%
Prologis Trust 7.05% 2006............................. 85,000 89,557
</TABLE>
- ----------------
62
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (CONTINUED)
MULTI-INDUSTRY -- 0.1%
Tyco International Group SA 6.25% 2003(1)............. $ 45,000 $ 46,595
Tyco International Group SA 6.38% 2005................ 45,000 47,080
TRANSPORTATION -- 0.6%
Continental Airlines, Inc. 6.54% 2009................. 60,000 63,948
Continental Airlines, Inc. 6.80% 2009................. 30,000 31,141
CSX Corp. 7.95% 2027.................................. 230,000 260,960
Hertz Corp. 7.00% 2028................................ 65,000 65,658
-------------
823,771
-------------
INFORMATION & ENTERTAINMENT -- 0.1%
BROADCASTING & MEDIA -- 0.1%
News America Holdings, Inc. 7.70% 2025................ 65,000 69,511
-------------
INFORMATION TECHNOLOGY -- 0.3%
COMPUTERS & BUSINESS EQUIPMENT -- 0.1%
Apple Computer, Inc. 6.00% 2001....................... 35,000 46,113
Dell Computer Corp. 7.10% 2028........................ 45,000 46,887
TELECOMMUNICATIONS -- 0.2%
Airtouch Communications, Inc. 6.65% 2008.............. 50,000 53,993
TCI Communciations, Inc. 8.65% 2004................... 55,000 63,452
-------------
210,445
-------------
MATERIALS -- 0.0%
CHEMICALS -- 0.0%
Solutia, Inc. 6.72% 2037.............................. 45,000 48,556
-------------
MUNICIPAL BONDS -- 0.2%
MUNICIPAL BONDS -- 0.2%
Province of Ontario 5.50% 2008........................ 160,000 160,291
-------------
REAL ESTATE -- 0.1%
REAL ESTATE COMPANIES -- 0.1%
Equity Office Properties Operating LP 6.76% 2007* .... 55,000 54,969
-------------
U.S. GOVERNMENT & AGENCIES -- 13.8%
U.S. GOVERNMENT & AGENCIES -- 13.8%
Federal Home Loan Mortgage Corp. 7.50% 2022........... 45,000 50,667
Federal National Mortgage Association 5.50% 2011...... 75,895 75,586
Federal National Mortgage Association 5.75% 2003...... 105,000 109,528
Federal National Mortgage Association 6.00% 2008...... 230,000 247,968
Federal National Mortgage Association 6.00% TBA....... 640,000 646,598
Federal National Mortgage Association 6.50% 2010...... 381,150 389,368
Federal National Mortgage Association 6.50% 2012...... 111,910 114,253
Federal National Mortgage Association 6.50% 2013...... 890,315 908,949
Federal National Mortgage Association 6.50% 2028...... 885,733 900,675
Federal National Mortgage Association 7.00% 2011...... 128,700 132,118
Federal National Mortgage Association 7.00% 2023...... 10,723 11,180
</TABLE>
----------------
63
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (CONTINUED)
Federal National Mortgage Association 7.00% TBA....... $ 335,000 $ 343,897
Federal National Mortgage Association 8.50% 2019...... 35,000 38,226
Federal National Mortgage Association 9.00% 2026...... 49,778 52,617
Government National Mortgage Association 6.50% 2028... 221,817 226,737
Government National Mortgage Association 6.50% TBA.... 175,000 178,881
Government National Mortgage Association 7.00%
2024(1).............................................. 238,709 242,999
Government National Mortgage Association 7.00% 2024... 178,758 184,568
Government National Mortgage Association 7.00% 2025... 33,745 34,842
Government National Mortgage Association 7.00% 2028... 1,095,493 1,130,745
Government National Mortgage Association 7.50% 2023... 49,064 50,888
Government National Mortgage Association 7.50% 2027... 70,000 77,153
Government National Mortgage Association 8.00% 2025... 120,767 125,825
Government National Mortgage Association 8.00% 2026... 353,025 367,805
Government National Mortgage Association 8.00% 2027... 23,869 24,869
United States Treasury Bonds 5.25% 2003............... 685,000 715,613
United States Treasury Bonds 5.50% 2028............... 425,000 459,399
United States Treasury Bonds 6.13% 2027............... 665,000 766,619
United States Treasury Notes 4.50% 2000............... 435,000 436,701
United States Treasury Notes 5.50% 2003............... 1,450,000 1,521,137
-------------
10,566,411
-------------
UTILITIES -- 0.6%
ELECTRIC UTILITIES -- 0.4%
Arizona Public Services Co. 6.75% 2006................ 160,000 169,565
Southern California Edison Co. 5.88% 2001............. 100,000 101,753
TELEPHONE -- 0.2%
MCI Communications Corp. 6.13% 2002(1)................ 40,000 41,003
Worldcom, Inc. 6.40% 2005............................. 70,000 73,870
Worldcom, Inc. 7.75% 2007............................. 50,000 57,127
-------------
443,318
-------------
TOTAL BONDS & NOTES (cost $15,733,280)................ 16,157,563
-------------
<CAPTION>
WARRANTS -- 0.0%+ SHARES
<S> <C> <C>
- -------------------------------------------------------------------------------------
FINANCE -- 0.0%
INSURANCE -- 0.0%
Allianz AG 6/15/00.................................... 1 12
-------------
REAL ESTATE -- 0.0%
REAL ESTATE COMPANIES -- 0.0%
EOP Operating LP 12/15/99#............................ 55 297
-------------
TOTAL WARRANTS (cost $440)............................ 309
-------------
TOTAL INVESTMENT SECURITIES (cost $75,446,311)........ 72,565,324
-------------
</TABLE>
- ----------------
64
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENT -- 8.0% AMOUNT VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 8.0%
Agreement with Swiss Bank Corp.-Warburg, bearing
interest of 5.50% dated 9/30/98,
to be repurchased 10/01/98 in the amount of
$6,130,937 and collateralized by $3,657,000 U.S.
Treasury Bonds 11.25% due 2/15/15, approximate
aggregate value $6,265,056 (cost $6,130,000)......... $ 6,130,000 $ 6,130,000
-------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $81,576,311) 103.0% 78,695,324
Liabilities in excess of other assets -- (3.0) (2,297,242)
------ -------------
NET ASSETS -- 100.0% $ 76,398,082
------ -------------
------ -------------
</TABLE>
- -------------
+ Non-income producing securities
# Fair valued securities; see Note 2
* Resale restricted to qualified institutional buyers
(1) Variable rate security; rate as of September 30, 1998
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 on settlement date.
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
SEK -- Swedish Krona
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
- ----------------------------------------------------------------------------------------
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
*USD 422,949 GBP 260,000 10/28/98 $ 18,407
JPY 80,700,000 USD 616,972 03/15/99 12,394
-------
30,801
-------
<CAPTION>
GROSS
UNREALIZED
DEPRECIATION
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
*GBP 260,000 USD 429,439 10/28/98 (11,916)
GBP 324,000 USD 541,242 03/22/99 (4,610)
-------
(16,526)
-------
Net Unrealized Appreciation.......................................... $ 14,275
-------
-------
</TABLE>
- -------------
* Represents fully offsetting forward foreign currency contracts that do not
have additional market risk but have continued counterparty settlement risk
GBP -- Great Britain Pound
JPY -- Japanese Yen
USD -- United States Dollar
See Notes to Financial Statements
----------------
65
<PAGE>
- ------------------
SEASONS SERIES TRUST
STOCK PORTFOLIO INVESTMENT PORTFOLIO -- SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 94.5% SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 6.7%
HOUSING -- 0.8%
Masco Corp. .......................................... 20,900 $ 514,662
RETAIL -- 5.9%
AutoZone, Inc.+ ...................................... 4,900 120,663
CVS Corp. ............................................ 11,714 513,220
Fred Meyer, Inc.+ .................................... 10,700 415,963
Home Depot, Inc. ..................................... 11,800 466,100
Koninklijke Ahold NV ................................. 4,900 146,478
Rite Aid Corp. ....................................... 8,300 294,650
Safeway, Inc.+ ....................................... 19,900 922,862
Saks, Inc.+ .......................................... 12,000 269,250
Tag Heuer International SA ADR+ ...................... 18,800 110,450
Wal-Mart Stores, Inc. ................................ 8,300 453,387
-------------
4,227,685
-------------
CONSUMER STAPLES -- 4.9%
FOOD, BEVERAGE & TOBACCO -- 3.2%
Campbell Soup Co. .................................... 3,300 165,619
Coca-Cola Co. ........................................ 4,700 270,837
PepsiCo, Inc. ........................................ 18,100 532,819
Philip Morris Cos., Inc. ............................. 21,600 994,950
HOUSEHOLD PRODUCTS -- 1.7%
Gillette Co. ......................................... 6,200 237,150
Kimberly-Clark Corp. ................................. 12,100 490,050
Kimberly-Clark de Mexico SA de CV, Class A............ 37,500 92,849
Procter & Gamble Co. ................................. 3,700 262,469
-------------
3,046,743
-------------
ENERGY -- 4.1%
ENERGY SERVICES -- 0.6%
Halliburton Co. ...................................... 13,100 374,169
ENERGY SOURCES -- 3.5%
Chevron Corp. ........................................ 6,000 504,375
Mobil Corp. .......................................... 9,400 713,812
Petroleo Brasileiro SA ADR+ .......................... 1,700 17,427
Petroleo Brasileiro SA ADR* .......................... 2,600 26,653
Royal Dutch Petroleum Co. ............................ 19,700 938,212
-------------
2,574,648
-------------
FINANCE -- 19.6%
BANKS -- 7.4%
Bank of New York Co., Inc. ........................... 20,200 552,975
BCA Fideuram SpA...................................... 14,500 61,842
</TABLE>
- ----------------
66
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
BANKS (CONTINUED)
Citicorp.............................................. 4,700 $ 436,806
First Union Corp. .................................... 13,700 701,269
HSBC Holdings PLC..................................... 4,200 76,967
Mellon Bank Corp. .................................... 4,300 236,769
NationsBank Corp. .................................... 12,405 663,667
Northern Trust Corp. ................................. 2,800 191,100
Norwest Corp. ........................................ 26,000 931,125
Societe Generale Enterprises+ ........................ 700 77,503
Toronto Dominion Bank................................. 7,000 186,375
Wells Fargo & Co. .................................... 1,400 497,000
FINANCIAL SERVICES -- 6.5%
Federal Home Loan Mortgage Corp. ..................... 38,000 1,878,625
Federal National Mortgage Association................. 14,800 950,900
First Data Corp. ..................................... 12,200 286,700
H&R Block, Inc. ...................................... 5,700 235,838
Morgan Stanley, Dean Witter & Co. .................... 2,000 86,125
Travelers Group, Inc. ................................ 16,200 607,500
INSURANCE -- 5.7%
Ace Co., Ltd. ........................................ 24,400 732,000
Fairfax Financial Holdings Ltd.+ ..................... 1,565 452,434
Mutual Risk Management Ltd. .......................... 18,300 647,363
PartnerRe Ltd. ....................................... 15,700 628,981
Travelers Property Casualty Corp., Class A............ 10,800 344,925
UNUM Corp. ........................................... 15,400 765,187
-------------
12,229,976
-------------
HEALTHCARE -- 14.1%
DRUGS -- 10.3%
American Home Products Corp. ......................... 12,600 659,925
Biogen, Inc.+ ........................................ 9,700 638,381
Bristol-Myers Squibb Co. ............................. 9,000 934,875
Genentech, Inc.+ ..................................... 7,500 539,063
Lilly (Eli) & Co. .................................... 8,200 642,163
Merck & Co., Inc. .................................... 7,000 906,937
Novartis AG........................................... 181 290,958
Pfizer, Inc. ......................................... 7,300 773,344
Warner-Lambert Co. ................................... 10,500 792,750
Zeneca Group PLC+ .................................... 7,300 258,143
HEALTH SERVICES -- 2.0%
Gehe AG............................................... 3,500 220,066
HEALTHSOUTH Corp.+ ................................... 30,900 326,381
Tenet Healthcare Corp.+ .............................. 7,000 201,250
United HealthCare Corp. .............................. 15,000 525,000
MEDICAL PRODUCTS -- 1.8%
Guidant Corp. ........................................ 3,300 245,025
Johnson & Johnson..................................... 7,500 586,875
</TABLE>
----------------
67
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
MEDICAL PRODUCTS (CONTINUED)
Schering-Plough Corp. ................................ 2,700 $ 279,619
-------------
8,820,755
-------------
INDUSTRIAL & COMMERCIAL -- 12.3%
AEROSPACE & MILITARY TECHNOLOGY -- 1.7%
AlliedSignal, Inc. ................................... 20,900 739,338
Raytheon Co. ......................................... 5,500 296,656
BUSINESS SERVICES -- 3.6%
Cendant Corp.+ ....................................... 7,100 82,538
Gartner Group, Inc., Class A+ ........................ 9,400 196,225
Newmont Mining Corp. ................................. 12,100 293,425
Rentokil Initial PLC+ ................................ 66,400 409,778
Waste Management, Inc.+ .............................. 17,900 860,319
Wolters Kluwer NV+ ................................... 2,300 441,718
MACHINERY -- 2.0%
Danaher Corp. ........................................ 25,300 759,000
Teleflex, Inc. ....................................... 13,300 465,500
MULTI-INDUSTRY -- 5.0%
Berkshire Hathaway, Inc. ............................. 10 596,000
Sara Lee Corp. ....................................... 9,400 507,600
Tomkins PLC........................................... 180,200 845,548
Tyco International Ltd. .............................. 18,946 1,046,766
Unilever NV........................................... 2,300 140,875
-------------
7,681,286
-------------
INFORMATION & ENTERTAINMENT -- 8.6%
BROADCASTING & MEDIA -- 5.1%
CBS Corp. ............................................ 21,400 518,950
Cox Communications, Inc., Class A+ ................... 6,400 349,600
Elsevier NV........................................... 11,700 173,945
Omnicom Group, Inc. .................................. 12,700 571,500
Schibsted ASA......................................... 5,500 68,434
Time Warner, Inc. .................................... 5,000 437,813
Tribune Co. .......................................... 8,500 427,656
Vereenigde Ned Uitgevers.............................. 13,900 574,200
Vodafone Group PLC.................................... 5,300 61,542
ENTERTAINMENT PRODUCTS -- 0.5%
Hasbro, Inc. ......................................... 10,300 303,850
LEISURE & TOURISM -- 3.0%
Carnival Corp., Class A............................... 11,700 372,206
Disney (Walt) Co. .................................... 9,400 237,938
Granada Group PLC..................................... 16,000 201,292
Hilton Hotels Corp. .................................. 14,000 238,875
Hutchison Whampoa Ltd. ............................... 64,700 340,667
McDonald's Corp. ..................................... 4,300 256,656
</TABLE>
- ----------------
68
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (CONTINUED)
LEISURE & TOURISM (CONTINUED)
Mirage Resorts, Inc.+ ................................ 14,100 $ 236,175
-------------
5,371,299
-------------
INFORMATION TECHNOLOGY -- 17.4%
COMMUNICATION EQUIPMENT -- 1.7%
AirTouch Communications, Inc.+ ....................... 9,200 524,400
Ascend Communications, Inc.+ ......................... 5,800 263,900
Northern Telecom Ltd. ................................ 7,700 246,400
COMPUTERS & BUSINESS EQUIPMENT -- 3.0%
Automatic Data Processing, Inc. ...................... 6,000 448,500
Dell Computer Corp.+ ................................. 6,200 407,650
EMC Corp.+ ........................................... 8,600 491,813
HBO & Co. ............................................ 5,400 155,925
Hewlett-Packard Co. .................................. 6,700 354,681
ELECTRONICS -- 5.0%
Analog Devices, Inc.+ ................................ 20,200 324,463
General Electric Co. ................................. 17,200 1,368,475
Getronics NV+ ........................................ 5,619 255,090
Intel Corp. .......................................... 7,900 677,425
Linear Technology Corp. .............................. 1,500 75,000
Maxim Integrated Products, Inc.+ ..................... 12,900 359,588
Philips Electronics NV................................ 700 37,725
Texas Instruments, Inc. .............................. 900 47,475
SOFTWARE -- 7.4%
America Online, Inc.+ ................................ 3,600 400,500
BMC Software, Inc.+ .................................. 14,400 864,900
Cisco Systems, Inc.+ ................................. 8,400 519,225
Microsoft Corp.+ ..................................... 9,100 1,001,569
Networks Associates, Inc.+ ........................... 17,850 633,675
Oracle Corp.+ ........................................ 8,350 243,194
Parametric Technology Corp.+ ......................... 42,500 427,656
Platinum Technology, Inc.+ ........................... 13,400 241,200
Sterling Commerce, Inc.+ ............................. 9,300 322,012
TELECOMMUNICATIONS -- 0.3%
GTE Corp. ............................................ 3,000 165,000
-------------
10,857,441
-------------
MATERIALS -- 0.2%
CHEMICALS -- 0.2%
Rhone-Poulenc Ltd.+ .................................. 3,300 138,487
-------------
REAL ESTATE -- 1.9%
REAL ESTATE INVESTMENT TRUSTS -- 1.9%
Crescent Real Estate Equities Co. .................... 19,900 502,475
Security Capital U.S. Realty+ ........................ 29,900 304,980
</TABLE>
----------------
69
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Starwood Hotels & Resorts Trust....................... 12,600 $ 384,300
-------------
1,191,755
-------------
UTILITIES -- 4.7%
TELEPHONE -- 4.7%
MCI Worldcom, Inc.+ .................................. 27,107 1,324,869
Philips Electronics NV................................ 1,500 80,063
SBC Communications, Inc. ............................. 10,000 444,375
Telecel-Comunicacaoes Pessoais SA+* .................. 2,400 310,437
Telecom Italia Mobile SpA............................. 33,200 193,490
Telecom Italia SpA+ .................................. 20,239 96,802
Telecomunicacoes de Brasileiras SA ADR+ .............. 7,000 493,062
-------------
2,943,098
-------------
TOTAL INVESTMENT SECURITIES (cost $59,259,002) 59,083,173
-------------
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 5.9% AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 5.6%
du Pont (E.I.) de Nemours & Co. 5.53% due 10/9/98..... $ 1,525,000 1,523,126
Falcon Asset Securitization Corp. 5.52% due
10/13/98............................................. 2,000,000 1,996,320
-------------
3,519,446
-------------
FEDERAL AGENCY OBLIGATIONS -- 0.3%
Federal National Mortgage Association Discount Notes
5.42% due 10/19/98................................... 85,000 84,769
United States Treasury Bills 4.15% due 1/7/99......... 75,000 74,153
-------------
TOTAL SHORT-TERM SECURITIES (cost $3,678,368)......... 3,678,368
-------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS --
(cost $62,937,370) 100.4 % 62,761,541
Liabilities in excess of other assets
-- (0.4) (270,609)
------ -----------
NET ASSETS -- 100.0 % $62,490,932
------ -----------
------ -----------
</TABLE>
- -------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR -- American Depository Receipt
See Notes to Financial Statements
- ----------------
70
<PAGE>
- ----------------
SEASONS SERIES TRUST
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MULTI- MULTI- ASSET
MULTI- MANAGED MANAGED MULTI- ALLOCATION:
MANAGED MODERATE INCOME/ MANAGED DIVERSIFIED
GROWTH GROWTH EQUITY INCOME GROWTH STOCK
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment securities, at value*........ $ 40,720,270 $ 43,691,037 $ 37,998,261 $ 30,524,610 $ 72,565,324 $ 59,083,173
Short-term securities*.................. 1,189,970 1,039,887 814,844 459,892 -- 3,678,368
Repurchase agreements (cost equals
market)............................... 4,183,000 4,512,000 2,147,000 1,658,000 6,130,000 --
Cash.................................... 13,577 14,647 15,575 8,711 172 --
Foreign currency........................ 18 13 6 13 8,537 1,430
Receivables for --
Sales of investments.................. 391,632 314,894 59,599 15,658 1,838,024 478,387
Dividends and accrued interest........ 168,976 291,908 379,363 379,047 278,729 79,078
Fund shares sold...................... 96,608 92,758 100,027 99,339 177,325 143,243
Foreign currency contracts............ 8,226 6,017 3,464 1,181 70,661 77,522
Deferred organizational expenses........ 11,384 11,384 11,384 11,384 11,384 11,384
Unrealized appreciation on forward
foreign currency
contracts............................. 9,437 6,831 4,125 1,186 30,801 --
Prepaid expenses........................ 253 269 212 168 408 334
Due from adviser........................ -- -- -- 884 4,855 --
----------------------------------------------------------------------------------------
46,793,351 49,981,645 41,533,860 33,160,073 81,116,220 63,552,919
----------------------------------------------------------------------------------------
LIABILITIES:
Payables for --
Purchases of investments.............. 651,561 612,294 119,988 44,892 4,487,764 867,436
Management fees....................... 51,710 46,024 28,490 41,042 50,732 41,042
Foreign currency contracts............ 8,214 6,008 3,459 1,179 70,496 77,289
Fund shares redeemed.................. 3,157 58,676 4,614 1,599 31,013 24,993
Unrealized depreciation on forward
foreign currency
contracts............................. 39,097 28,258 16,388 6,108 16,526 --
Other accrued expenses.................. 38,673 39,561 37,129 13,456 61,607 42,903
Written call options at value (proceeds
$27,329, $27,329, $0, $0, $0 and $0,
respectively)......................... 29,707 29,707 -- -- -- --
Due to custodian bank................... -- -- -- -- -- 8,324
----------------------------------------------------------------------------------------
822,119 820,528 210,068 108,276 4,718,138 1,061,987
----------------------------------------------------------------------------------------
NET ASSETS.............................. $ 45,971,232 $ 49,161,117 $ 41,323,792 $ 33,051,797 $ 76,398,082 $ 62,490,932
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Shares of beneficial interest
outstanding
(unlimited shares authorized)......... 3,635,148 3,988,705 3,370,089 2,788,461 7,100,752 4,739,796
Net asset value per share............... $12.65 $12.33 $12.26 $11.85 $10.76 $13.18
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS:
Capital paid in......................... $ 43,305,204 $ 46,573,472 $ 38,084,694 $ 30,714,515 $ 79,310,443 $ 60,731,032
Accumulated undistributed net investment
income................................ 346,895 612,848 787,378 743,172 658,463 77,305
Accumulated undistributed net realized
gain (loss) on investments............ 307,142 183,154 373,963 174,761 (706,327) 1,857,042
Unrealized appreciation (depreciation)
on investments........................ 2,043,990 1,812,279 2,089,948 1,424,201 (2,880,987) (175,829)
Unrealized foreign exchange gain (loss)
on other assets and liabilities....... (29,621) (18,258) (12,191) (4,852) 16,490 1,382
Unrealized depreciation on written
options contracts..................... (2,378) (2,378) -- -- -- --
----------------------------------------------------------------------------------------
$ 45,971,232 $ 49,161,117 $ 41,323,792 $ 33,051,797 $ 76,398,082 $ 62,490,932
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
- ---------------
* Cost
Investment securities................. $ 38,672,292 $ 41,871,349 $ 35,899,187 $ 29,091,861 $ 75,446,311 $ 59,259,002
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Short-term securities................. $ 1,193,958 $ 1,047,296 $ 823,970 $ 468,440 $ -- $ 3,678,368
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
----------------
71
<PAGE>
- ----------------
SEASONS SERIES TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MULTI- MULTI- ASSET
MULTI- MANAGED MANAGED MULTI- ALLOCATION:
MANAGED MODERATE INCOME/ MANAGED DIVERSIFIED
GROWTH GROWTH EQUITY INCOME GROWTH STOCK
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME:
Interest.................................. $ 439,510 $ 659,709 $ 764,599 $ 690,018 $ 487,344 $ 96,708
Dividends................................. 66,515 56,650 34,878 16,132 393,886 293,541
-------------------------------------------------------------------------------------
Total income*........................... 506,025 716,359 799,477 706,150 881,230 390,249
-------------------------------------------------------------------------------------
EXPENSES:
Management fees........................... 200,664 192,296 137,729 96,951 275,429 236,878
Custodian fees............................ 42,243 42,842 36,990 30,829 118,722 45,398
Auditing fees............................. 11,893 11,862 11,495 11,247 12,386 12,019
Reports to investors...................... 4,988 5,436 4,326 3,351 8,291 6,838
Amortization of organizational expenses... 1,610 1,610 1,610 1,610 1,610 1,610
Legal fees................................ 792 812 761 680 1,096 1,178
Trustees' fees............................ 610 671 518 366 915 844
Other expenses............................ 192 198 163 142 260 227
-------------------------------------------------------------------------------------
Total expenses before reimbursement..... 262,992 255,727 193,592 145,176 418,709 304,992
Expenses reimbursed by the investment
adviser............................... -- -- -- (11,711) (26,627) --
-------------------------------------------------------------------------------------
Net investment income....................... 243,033 460,632 605,885 572,685 489,148 85,257
-------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments... 187,865 69,023 159,233 10,225 (633,607) 898,424
Net realized foreign exchange gain (loss)
on other assets and liabilities......... 23,984 53,282 71,525 75,195 7,344 (8,399)
Net realized gain (loss) on options
contracts............................... (1,958) 10,020 -- -- -- --
Change in unrealized
appreciation/depreciation on
investments............................. (1,363,228) (1,021,807) 482,347 612,651 (6,341,160) (7,411,195)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. (39,711) (27,289) (18,674) (9,593) 317 1,502
Change in unrealized
appreciation/depreciation on written
options contracts....................... (2,378) (2,378) -- -- -- --
-------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign exchange........ (1,195,426) (919,149) 694,431 688,478 (6,967,106) (6,519,668)
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................. $ (952,393) $ (458,517) $ 1,300,316 $ 1,261,163 $(6,477,958) $ (6,434,411)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
- ---------------
* Net of foreign withholding taxes on
interest and dividends of................. $ 83 $ 385 $ 83 $ -- $ 20,353 $ 10,491
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- ----------------
72
<PAGE>
- ----------------
SEASONS SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MULTI- MULTI- ASSET
MULTI- MANAGED MANAGED MULTI- ALLOCATION:
MANAGED MODERATE INCOME/ MANAGED DIVERSIFIED
GROWTH GROWTH EQUITY INCOME GROWTH STOCK
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income............................. $ 243,033 $ 460,632 $ 605,885 $ 572,685 $ 489,148 $ 85,257
Net realized gain (loss) on investments........... 187,865 69,023 159,233 10,225 (633,607) 898,424
Net realized foreign exchange gain (loss) on other
assets and liabilities.......................... 23,984 53,282 71,525 75,195 7,344 (8,399)
Net realized gain (loss) on options contracts..... (1,958) 10,020 -- -- -- --
Change in unrealized appreciation/depreciation on
investments..................................... (1,363,228) (1,021,807) 482,347 612,651 (6,341,160) (7,411,195)
Change in unrealized foreign exchange gain/loss on
other assets and liabilities.................... (39,711) (27,289) (18,674) (9,593) 317 1,502
Change in unrealized appreciation/depreciation on
written options contracts....................... (2,378) (2,378) -- -- -- --
------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations................................. (952,393) (458,517) 1,300,316 1,261,163 (6,477,958) (6,434,411)
------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold......................... 17,373,551 20,426,782 17,033,893 15,398,146 35,058,784 28,966,705
Cost of shares repurchased........................ (2,930,487) (3,429,312) (2,967,159) (1,985,295) (2,567,148) (2,126,052)
------------------------------------------------------------------------------
Net increase in net assets resulting from capital
share transactions.............................. 14,443,064 16,997,470 14,066,734 13,412,851 32,491,636 26,840,653
------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS...................... 13,490,671 16,538,953 15,367,050 14,674,014 26,013,678 20,406,242
NET ASSETS:
Beginning of period............................... 32,480,561 32,622,164 25,956,742 18,377,783 50,384,404 42,084,690
------------------------------------------------------------------------------
End of period..................................... $45,971,232 $49,161,117 $41,323,792 $33,051,797 $ 76,398,082 $62,490,932
------------------------------------------------------------------------------
------------------------------------------------------------------------------
- ---------------
Accumulated undistributed net investment income... $ 346,895 $ 612,848 $ 787,378 $ 743,172 $ 658,463 $ 77,305
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Shares issued and repurchased:
Sold.............................................. 1,330,862 1,626,767 1,411,856 1,331,426 3,023,960 2,019,557
Repurchased....................................... (223,888) (274,759) (244,117) (170,161) (224,884) (151,060)
------------------------------------------------------------------------------
Net increase...................................... 1,106,974 1,352,008 1,167,739 1,161,265 2,799,076 1,868,497
------------------------------------------------------------------------------
------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
----------------
73
<PAGE>
- ----------------
SEASONS SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED 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>
OPERATIONS:
Net investment income............................. $ 233,996 $ 375,550 $ 467,248 $ 466,369 $ 504,309 $ 51,271
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/depreciation 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 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
------------------------------------------------------------------------------
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
- ----------------
74
<PAGE>
- ----------------
SEASONS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. DESCRIPTION OF BUSINESS: Seasons Series Trust ("the Trust"), organized as a
Massachusetts business trust on October 10, 1995, is an open-end, management
investment company. It was established to provide a funding medium for certain
annuity contracts issued by Variable Annuity Account Five (the "Account"), a
separate account of Anchor National Life Insurance Company (the "Life Company"),
organized under the laws of the state of Arizona.
The Trust currently issues six separate series of shares ("Portfolios"), each of
which represents a separate managed portfolio of securities with its own
investment objective. All shares may be purchased or redeemed by the Account at
net asset value without any sales or redemption charge.
The investment objectives for each portfolio are as follows:
The MULTI-MANAGED GROWTH PORTFOLIO seeks long-term growth of capital.
The MULTI-MANAGED MODERATE GROWTH PORTFOLIO seeks long-term growth of capital,
with capital preservation as a secondary objective.
The MULTI-MANAGED INCOME/EQUITY PORTFOLIO seeks conservation of principal while
maintaining some potential for long-term growth of capital.
The MULTI-MANAGED INCOME PORTFOLIO seeks capital preservation.
The ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO seeks capital appreciation.
The STOCK PORTFOLIO seeks long-term capital appreciation, and secondarily,
increasing dividend income through investments primarily in well-established
growth companies.
SunAmerica Asset Management Corp. ("SunAmerica" or the "Adviser"), an indirect,
wholly owned subsidiary of the Life Company, serves as investment adviser for
all the Portfolios of the Trust. Janus Capital Corporation ("Janus") and
Wellington Management Company, LLP ("WMC") both serve as subadvisers for each of
the Multi-Managed Portfolios. Each of Janus and WMC 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 the Trust at September 30, 1998, and the results of
its
----------------
75
<PAGE>
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.
- ----------------
76
<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 September 30, 1998, The Multi-Managed Growth, Multi-Managed Moderate Growth,
Multi-Managed Income/Equity and Multi-Managed Income Portfolios had a 2.2%,
2.2%, 1.3% and 0.6%, respectively, undivided interest, representing $2,873,000,
$2,872,000, $1,767,000 and $753,000, respectively, in principal amount, in a
joint repo with PaineWebber, Inc. which is dated September 30, 1998, bears
interest at the rate of 5.20% per annum, has a principal amount of $131,433,000
and a repurchase price of $131,451,985, matures October 1, 1998 and is
collateralized by $50,000,000 of U.S. Treasury Bonds (bearing interest at the
rate of 5.25% per annum and maturing August 15, 2003), $40,000,000 of U.S.
Treasury Bonds (bearing interest at the rate of 6.13% per annum and maturing
November 15, 2027) and $32,400,000 of U.S. Treasury Bonds (bearing interest at
the rate of 6.25% per annum and maturing February 15, 2003), which together have
an approximate value of $134,487,192.
In addition at September 30, 1998, the above-mentioned Portfolios had a 0.3%,
0.5%, 0.3% and 0.7%, respectively, undivided interest, representing $310,000,
$640,000, $380,000 and $905,000, respectively, in principal amount, in a joint
repo with J.P. Morgan Securities, Inc., which is dated September 30, 1998, bears
interest at a rate of 5.40% per annum, has a principal amount of $121,325,000
and a repurchase price of $121,343,199, matures October 1, 1998 and is
collateralized by $52,907,000 of U.S. Treasury Bonds (bearing interest at the
rate of 6.38% per annum and maturing January 15, 2000) and $64,769,000 of U.S.
Treasury Notes (bearing interest at the rate of 6.25% per annum and maturing
April 30, 2001), which together have an approximate value of $124,307,234.
At September 30, 1998, the Multi-Managed Growth and Multi-Managed Moderate
Growth also had a 0.8%, respectively, undivided interest, representing
$1,000,000, respectively, in principal amount, in a joint repo with State Street
Bank and Trust Co., which is dated September 30, 1998, bears interest at the
rate of 5.33% per annum, has a principal amount of $130,000,000 and a repurchase
price of $130,019,247, matures October 1, 1998 and is collateralized by
$39,430,000 of U.S. Treasury Notes (bearing interest at the rate of 5.50% per
annum and maturing December 31, 2000), $19,180,000 of U.S. Treasury Notes
(bearing interest at the rate of 6.13% per annum and maturing December 31,
2001), $16,490,000 of U.S. Treasury Bonds (bearing interest at the rate of 6.88%
per annum and maturing August 15, 2025), $9,620,000 of U.S. Treasury Notes
(bearing interest at the rate of 7.75% per annum and maturing November 30,
1999), $19,155,000 of U.S. Treasury Notes (bearing interest at the rate of 6.25%
per annum and maturing August 31, 2002) and $13,340,000 of U.S. Treasury Bonds
(bearing interest at the rate of 12.75% per annum and maturing November 15,
2010), which together have an approximate value of $132,620,236.
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
----------------
77
<PAGE>
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.
OPTIONS: An option is a contract conveying a right to buy or sell a financial
instrument at a specified price during a stipulated period. The premium paid by
a Portfolio for the purchase of a call or a put option is included in the
Portfolio's Statement of Assets and Liabilities as an investment and
subsequently marked to market to reflect the current market value of the option.
When a Portfolio writes a call or a put option, an amount equal to the premium
received by the Portfolio is included in the Portfolio's Statement of Assets and
Liabilities as a liability and is subsequently marked to market to reflect the
current market value of the option written. If an option which the Portfolio has
written either expires on its stipulated expiration date, or if the Portfolio
enters into a closing purchase transaction, the Portfolio realizes a gain (or
loss if the cost of a closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such options is
extinguished. If a call option which the Portfolio has written is exercised, the
Portfolio realizes a capital gain or loss from the sale of the underlying
security and the proceeds from such sale are increased by the premium originally
received. If a put option which the Portfolio has written is exercised, the
amount of the premium originally received reduces the cost of the security which
the Portfolio purchased upon exercise of the option.
During the six months ended September 30, 1998, transactions in written option
contracts were as follows:
<TABLE>
<CAPTION>
MULTI-MANAGED GROWTH
----------------------------
CONTRACTS AMOUNT
--------------- -----------
<S> <C> <C>
Written option contracts as of 3/31/98... 0 $ 0
Options written during the year.......... (85) (66,536)
Written options assigned during the
year................................... 3 1,603
Written options closed during the year... 47 20,872
Net realized gain on written options
closed................................. -- 16,732
--
-----------
Written option contracts as of 9/30/98... (35) ($ 27,329)
--
--
-----------
-----------
<CAPTION>
MULTI-MANAGED MODERATE
GROWTH
----------------------------
CONTRACTS AMOUNT
--------------- -----------
<S> <C> <C>
Written option contracts as of 3/31/98... 0 $ 0
Options written during the year.......... (80) (63,537)
Written options assigned during the
year................................... 2 1,069
Written options closed during the year... 43 19,266
Net realized gain on written options
closed................................. -- 15,873
--
-----------
Written option contracts as of 9/30/98... (35) ($ 27,329)
--
--
-----------
-----------
</TABLE>
4. PORTFOLIO SECURITIES: The Trust intends to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
distribute all of its taxable income, including any net realized gains on
investments, to its shareholders. Therefore, no federal tax provision is
required.
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities, including short-term securities at September 30, 1998, were as
follows:
<TABLE>
<CAPTION>
MULTI- MULTI-
MULTI- MANAGED MANAGED
MANAGED MODERATE INCOME/
GROWTH GROWTH EQUITY
------------- ------------- -------------
<S> <C> <C> <C>
Cost............................... $ 44,049,250 $ 47,430,645 $ 38,870,157
------------- ------------- -------------
------------- ------------- -------------
Aggregate unrealized
gain............................. $ 4,208,178 $ 3,782,264 $ 2,725,575
Aggregate unrealized
(loss)........................... (2,164,188) (1,969,985) (635,627)
------------- ------------- -------------
Unrealized gain (loss), net........ $ 2,043,990 $ 1,812,279 $ 2,089,948
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
ASSET
MULTI- ALLOCATION:
MANAGED DIVERSIFIED
INCOME GROWTH STOCK
------------- ------------- -------------
<S> <C> <C> <C>
Cost............................... $ 31,218,301 $ 81,576,311 $ 62,937,370
------------- ------------- -------------
------------- ------------- -------------
Aggregate unrealized
gain............................. $ 1,810,152 $ 3,037,291 $ 5,498,598
Aggregate unrealized
(loss)........................... (385,951) (5,918,278) (5,674,427)
------------- ------------- -------------
Unrealized gain (loss), net........ $ 1,424,201 $ (2,880,987) $ (175,829)
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
5. MANAGEMENT OF THE TRUST: The Trust, on behalf of each Portfolio, entered
into an Investment Advisory and Management Agreement (the "Management
Agreement") with SunAmerica to handle the Trust's day-to-day affairs, to provide
investment advisory services, office space, and other facilities for the
management of the affairs of the Trust, and to pay the compensation of certain
officers of the Trust who are affiliated persons of SunAmerica.
- ----------------
78
<PAGE>
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.
At September 30, 1998, the amounts repaid to the Adviser which are included in
the management fee along with the remaining balance subject to recoupment are as
follows:
<TABLE>
<CAPTION>
BALANCE
AMOUNT SUBJECT TO
RECOUPED RECOUPMENT
------------- -------------
<S> <C> <C>
Multi-Managed Growth Portfolio..... $ 19,221 $ 4,425
Multi-Managed Moderate Growth
Portfolio........................ 12,654 17,273
Multi-Managed Income/Equity
Portfolio........................ 1,730 36,414
Multi-Managed Income Portfolio..... -- 55,200
Asset Allocation: Diversified
Growth Portfolio................. -- 104,351
Stock Portfolio.................... 10,325 --
</TABLE>
6. PURCHASES AND SALES OF SECURITIES: Information with respect to purchases and
sales of long-term securities for the six months ended September 30, 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....................... $ 32,328,164 $ 33,123,057 $ 25,002,766
Sales of portfolio
securities....................... 21,149,592 19,355,351 11,485,735
U.S. government securities excluded
above were as follows:
Purchases of U.S. government
securities....................... 4,438,453 6,895,808 10,945,982
Sales of U.S. government
securities....................... 3,293,829 3,713,091 5,501,225
</TABLE>
<TABLE>
<CAPTION>
ASSET
MULTI- ALLOCATION:
MANAGED DIVERSIFIED
INCOME GROWTH STOCK
------------- ------------- -------------
<S> <C> <C> <C>
Purchases of portfolio
securities....................... $ 18,323,736 $ 77,765,426 $ 34,226,470
Sales of portfolio securities...... 5,523,311 46,204,369 12,337,546
U.S. government securities excluded
above were as follows:
Purchases of U.S. government
securities....................... 9,143,335 17,824,028 --
Sales of U.S. government
securities....................... 2,470,619 12,705,506 --
</TABLE>
----------------
79
<PAGE>
7. SUBSEQUENT EVENTS: On August 19, 1998, SunAmerica Inc. entered into an
agreement with American International Group, Inc. ("AIG"). Under the terms of
the agreement, SunAmerica Inc. will merge with and into AIG, and consequently,
SunAmerica Asset Management Corp. ("SAAMCo"), which acts as investment adviser
of the Trust, will become a subsidiary of AIG. SAAMCo will not change its name
and no organizational changes are currently planned which would affect services
provided to the Trust. As a result of the merger, contract owners of record as
of October 30, 1998 are being asked to submit voting instructions for the
approval of a new investment advisory and management agreement with SAAMCo, to
take effect upon consummation of the merger, as well as certain other matters.
The new agreement will be identical to the current agreement in all respects
except for its effective date and termination date and will have no effect on
the fees or expenses payable by the Trust or its contract owners. The merger
transaction is expected to be consummated in late 1998 or early 1999.
- ----------------
80
<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
9/30/98(5) 12.85 0.08 (0.28) (0.20) -- -- 12.65 (1.56) 45,971
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
9/30/98(5) 12.37 0.14 (0.18) (0.04) -- -- 12.33 (0.32) 49,161
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
9/30/98(5) 11.79 0.22 0.25 0.47 -- -- 12.26 3.99 41,324
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
9/30/98(5) 11.29 0.26 0.30 0.56 -- -- 11.85 4.96 33,052
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
9/30/98(5) 11.71 0.09 (1.04) (0.95) -- -- 10.76 (8.11) 76,398
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
9/30/98(5) 14.66 0.02 (1.50) (1.48) -- -- 13.18 (10.10) 62,491
<CAPTION>
- ---------- ---------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET PORTFOLIO
ENDED ASSETS(4)(6) ASSETS(4)(6) TURNOVER
- ----------
---------------------------------------
<S> <C> <C> <C>
Multi-Managed Growth Portfolio
4/15/97-
3/31/98 1.29% 1.52% 114%
9/30/98(5) 1.29 1.19 59
Multi-Managed Moderate Growth Portfolio
4/15/97-
3/31/98 1.21 2.36 101
9/30/98(5) 1.21 2.18 52
Multi-Managed Income/Equity Portfolio
4/15/97-
3/31/98 1.14 3.72 46
9/30/98(5) 1.14 3.57 37
Multi-Managed Income Portfolio
4/15/97-
3/31/98 1.06 4.69 47
9/30/98(5) 1.06 4.55 24
Asset Allocation: Diversified Growth
Portfolio
4/15/97-
3/31/98 1.21 2.06 166
9/30/98(5) 1.21 1.51 76
Stock Portfolio
4/15/97-
3/31/98 1.21 0.24 46
9/30/98(5) 1.14 0.32 25
</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) Annualized
(5) Unaudited
(6) 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>
NET INVESTMENT INCOME
EXPENSES (4) (4)
---------------------- ----------------------
3/31/98 9/30/98(5) 3/31/98 9/30/98(5)
-------- ----------- -------- -----------
<S> <C> <C> <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 1.15 4.25 4.46
Asset Allocation: Diversified Growth Portfolio.............. 1.53 1.29 1.74 1.43
Stock Portfolio............................................. 1.26 -- 0.19 --
</TABLE>
See Notes to Financial Statements
----------------
81
