STYLE SELECT SERIES INC, 485APOS, 1998-02-24

STYLE SELECT SERIES INC
485APOS, 1998-02-24

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<PAGE>

As filed with the Securities and Exchange Commission on February 24, 1998

File Nos. 33-11283; 811-07797
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 9
(Check appropriate box or boxes)

STYLE SELECT SERIES, INC.
(Exact Name of Registrant as Specified in Charter)

733 Third Avenue, The SunAmerica Center
New York, NY 10017
(Address of Principal Executive Office)(Zip Code)

Registrant's telephone number, including area code: (800) 858-8850

Robert M. Zakem, Esq.
Senior Vice President and General Counsel
SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
(Name and Address of Agent for Service)

Copies to:

Margery K. Neale, Esq.

Shereff, Friedman, Hoffman & Goodman LLP
919 Third Avenue
New York, NY 10022

It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
- ------
on (date) pursuant to paragraph (b)
- ------
60 days after filing pursuant to paragraph (a)
- ------

X On March 2, 1998 pursuant to paragraph (a) of Rule 485
- ------

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

<PAGE>

STYLE SELECT SERIES, INC.

CROSS REFERENCE SHEET
Pursuant to Rule 481(b)
Under the Securities Act of 1933

Part A
Item No. Registration Statement Caption Caption in Prospectus

1. Cover Page Cover Page

2. Synopsis - Fee Table *

3. Financial Highlights *

4. General description of Registrant Style Select Investing;
Investment Objectives and
Policies; General Information

5. Management of the Fund Management of the Fund

6. Capital Stock and Other Securities Dividends, Distributions and
Taxes

7. Purchase of Securities Being Purchase of Shares
Offered

8. Redemption or Repurchase Redemption of Shares

9. Pending Legal Proceedings *

Part B
Item No. Registration Statement Caption Caption in Statement

10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. General Information and History The Fund

13. Investment Objectives and Policies Investment Objectives and
Policies; Investment
Restrictions

14. Management of the Fund Directors and Officers

15. Contact Persons and Principal The Fund
Holders of Securities

<PAGE>

16. Investment Advisory and Other Advisers, Distributor
Services and Administrator; Additional
Information

17. Brokerage Allocation and Other Portfolio Transactions,
Practices Brokerage and Turnover

18. Capital Stock and Other Securities *

19. Purchase, Redemption and Pricing Additional Information
of Securities Being Offered Regarding Purchase of Shares;
Additional Information
Regarding Redemption of Shares

20. Tax Status Determination of Net Asset
Value Dividends, Distributions
and Taxes

21. Underwriters *

22. Calculation of Performance Data *

23. Financial Statements Financial Statements

*Omitted from the Prospectus or Statement of Additional Information because the
item is not applicable.

Part C

The information required to be included in Part C is set forth under the
Appropriate item, so numbered in Part C of this Registration Statement.

PROSPECTUS o MARCH 2, 1998
----------------------------------------------------------------------

Style Select Series
The SunAmerica Center
733 Third Avenue, New York, NY 10017-3204
General Marketing and Shareholder Information
(800) 858-8850

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

Style Select Series, Inc. (the 'Fund') is an open-end management investment
company. The Fund currently offers eight separate investment portfolios (each, a
'Portfolio'). The Fund is managed by SunAmerica Asset Management Corp.
('SunAmerica'). The assets of each Portfolio are normally allocated among at
least three investment advisers (each, an 'Adviser'), each of which is
independently responsible for advising its respective portion of the Portfolio's
assets. The Advisers may include SunAmerica, and otherwise will consist of
professional investment advisers selected by SunAmerica subject to the review
and approval of the Fund's Board of Directors. In choosing Advisers, SunAmerica
will seek to obtain, within each Portfolio's overall objective, a distinct
investment style.

An investor may invest in one or more of the following Portfolios:

THE GROWTH PORTFOLIOS

LARGE-CAP GROWTH PORTFOLIO seeks long-term growth of capital by investing
generally in equity securities of large-sized companies. The Advisers for
Large-Cap Growth Portfolio are JANUS CAPITAL CORPORATION ('Janus'), L. ROY PAPP
& ASSOCIATES ('Papp') and MONTAG & CALDWELL, INC. ('Montag & Caldwell').

MID-CAP GROWTH PORTFOLIO seeks long-term growth of capital by investing
generally in equity securities of medium-sized companies. The Advisers for
Mid-Cap Growth Portfolio are MILLER ANDERSON & SHERRERD, LLP ('MAS'), PILGRIM
BAXTER & ASSOCIATES, LTD. ('Pilgrim Baxter') and T. ROWE PRICE ASSOCIATES, INC.
('T. Rowe Price').

AGGRESSIVE GROWTH PORTFOLIO seeks long-term growth of capital by investing
generally in equity securities of small and medium-sized companies. The Advisers
for Aggressive Growth Portfolio are JANUS, SUNAMERICA and WARBURG PINCUS ASSET
MANAGEMENT, INC. ('Warburg').

THE BLEND PORTFOLIO

LARGE-CAP BLEND PORTFOLIO seeks long-term growth of capital and a reasonable
level of current income by investing generally in equity securities of
large-sized companies. The Advisers for Large-Cap Blend Portfolio are LAZARD
ASSET MANAGEMENT ('Lazard'), SUNAMERICA and T. ROWE PRICE.

(Cover continued on next page)

Each Portfolio currently offers Class A, Class B and Class C shares. The
offering price is the next-determined net asset value per share, plus for each
class a sales charge which, at the investor's option, may be (i) imposed at the
time of purchase (Class A shares) or (ii) deferred (purchases of Class B and
Class C shares, and purchases of Class A shares in excess of $1 million). Class
B shares may be subject to a declining contingent deferred sales charge ('CDSC')
imposed on redemptions made within six years of purchase. Class B shares of each
Portfolio will convert automatically to Class A shares on the first business day
of the month following the seventh anniversary of purchase. Class C shares may
be subject to a CDSC imposed on redemptions made within one year of purchase.
Each class makes distribution and account maintenance and service fee payments
under a distribution plan adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the '1940 Act'). See 'Purchase of Shares.'

As a result of the market risk inherent in any investment, there is no assurance
that the investment objective of any of the Portfolios will be achieved.

Shares of the Portfolios are not obligations of or guaranteed by the United
States Government, are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and are not insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other governmental agency.

This Prospectus explains concisely what you should know before investing in any
of the Portfolios. Please read it carefully before investing and retain it for
future reference. You can find more detailed information about the Fund in the
Statement of Additional Information dated March 2, 1998, which is incorporated
by reference into this Prospectus and further information about the performance
of the Portfolios in the Fund's Annual Report to Shareholders. The Statement of
Additional Information and Annual Report may be obtained without charge by
contacting the Fund at the address or telephone number listed above.

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

<PAGE>

Style Select Series (Servicemark)
2

(Continued from previous page)

THE VALUE PORTFOLIOS

LARGE-CAP VALUE PORTFOLIO seeks long-term growth of capital by investing in
equity securities of large-sized companies using a 'value' style of investing.

The Advisers for Large-Cap Value Portfolio are DAVID L. BABSON & CO., INC.
('Babson'), DAVIS SELECTED ADVISERS, L.P. ('Davis') and WELLINGTON MANAGEMENT
COMPANY, LLP ('Wellington Management').

VALUE PORTFOLIO seeks long-term growth of capital by investing in equity
securities (without regard to the size of the issuer), using a 'value' style of
investing. The Advisers for Value Portfolio are DAVIS, NEUBERGER&BERMAN, LLC
('Neuberger&Berman') and STRONG CAPITAL MANAGEMENT, INC. ('Strong'). Strong has
subcontracted with Schafer Capital Management, Inc. ('Schafer,' and together
with Strong, 'Strong/Schafer') to act as Adviser to its portion of the Value
Portfolio.

SMALL-CAP VALUE PORTFOLIO seeks long-term growth of capital by investing in
equity securities of small-sized companies using a 'value' style of investing.
The Advisers for Small-Cap Value Portfolio are BERGER ASSOCIATES, INC.
('Berger'), LAZARD and THE GLENMEDE TRUST COMPANY ('Glenmede'). Berger has
subcontracted with Perkins, Wolf, McDonnell & Company ('PWM,' and together with
Berger, 'Berger/PWM') to act as Adviser to its portion of the Small-Cap Value
Portfolio.

THE INTERNATIONAL PORTFOLIO

INTERNATIONAL EQUITY PORTFOLIO seeks long-term growth of capital by investing in
equity securities of issuers in countries other than the United States. The
Advisers for International Equity Portfolio are BANKERS TRUST COMPANY ('BT'),
ROWE PRICE-FLEMING INTERNATIONAL, INC. ('Rowe-Fleming'), and WARBURG.

CONTENTS
- ---------------------------------------------

1 Prospectus

3 Summary of Expenses

6 Financial Highlights

8 Style-Based Investing

8 Investment Objectives and Policies

9 The Growth Portfolios

10 The Blend Portfolio

11 The Value Portfolios

12 The International Portfolio

13 Advisers' Historical Performance Data

38 Investment Techniques and Risk Factors

45 Management of the Fund

54 Purchase of Shares

57 Redemption of Shares

58 Exchange Privilege

59 Portfolio Transactions, Brokerage and Turnover

59 Determination of Net Asset Value

60 Performance Data

60 Dividends, Distributions and Taxes

62 General Information

<PAGE>
Style Select Series (Servicemark)
3

Summary of Expenses
- --------------------------------------------------------------------------------

A general comparison of the sales arrangements and other expenses applicable to
Class A, Class B and Class C shares follows:

<TABLE>
<CAPTION>
LARGE-CAP MID-CAP AGGRESSIVE
GROWTH PORTFOLIO GROWTH PORTFOLIO GROWTH PORTFOLIO
Class Class Class Class Class Class Class Class Class
A B C A B C A B C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Load(1) 5.75% None None 5.75% None None 5.75% None None
Maximum Sales Load on Reinvested Dividends None None None None None None None None None
Maximum Deferred Sales Load(2) None 4.00% 1.00% None 4.00% 1.00% None 4.00% 1.00%
Redemption Fees(3) None None None None None None None None None
Exchange Fees None None None None None None None None None

ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Management Fees 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
12b-1 Fees(4) 0.35% 1.00% 1.00% 0.35% 1.00% 1.00% 0.35% 1.00% 1.00%
Other Expenses (net of fee waivers/ expense
reimbursements)(5) 0.43% 0.43% 0.43% 0.43% 0.43% 0.43% 0.43% 0.43% 0.43%

TOTAL OPERATING EXPENSES (NET OF FEE WAIVERS/ EXPENSE
REIMBURSEMENTS)(5) 1.78% 2.43% 2.43% 1.78% 2.43% 2.43% 1.78% 2.43% 2.43%
----- ----- ----- ----- ----- ----- ----- ----- -----

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

<CAPTION>
LARGE-CAP
BLEND PORTFOLIO
Class Class Class
A B C
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Load(1) 5.75% None None
Maximum Sales Load on Reinvested Dividends None None None
Maximum Deferred Sales Load(2) None 4.00% 1.00%
Redemption Fees(3) None None None
Exchange Fees None None None

ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Management Fees 1.00% 1.00% 1.00%
12b-1 Fees(4) 0.35% 1.00% 1.00%
Other Expenses (net of fee waivers/ expense
reimbursements)(5) 0.43% 0.43% 0.43%

TOTAL OPERATING EXPENSES (NET OF FEE WAIVERS/ EXPENSE
REIMBURSEMENTS)(5) 1.78% 2.43% 2.43%
----- ----- -----
----- ----- -----
</TABLE>

<TABLE>
<S> <C>
(1) The front-end sales charge on Class A shares decreases with the size of the
purchase to 0% for purchases of $1,000,000 or more. See 'Purchase of
Shares.'
(2) Purchases of Class A shares in excess of $1,000,000 will be subject to a
CDSC on redemptions made within one year of purchase. The CDSC on Class B
shares applies only if a redemption occurs within six years from their
purchase date. The CDSC on Class C shares applies only on redemptions made
within one year of purchase.
(3) A $15.00 fee may be imposed for wire redemptions.
(4) 0.25% of the 12b-1 fee comprises an Account Maintenance and Service Fee. A
portion of the Account Maintenance and Service Fee is paid for continuous
personal service to investors in the Portfolios, such as responding to
shareholder inquiries, quoting net asset values, providing current marketing
material and attending to other shareholder matters. Class B or Class C
shareholders who own their shares for an extended period of time may pay
more in Rule 12b-1 distribution fees than the economic equivalent of the
maximum front-end sales charge permitted under the Conduct Rules of the
National Association of Securities Dealers, Inc.
(5) SunAmerica has voluntarily agreed to waive fees or reimburse expenses, if
necessary, to keep operating expenses at or below an annual rate set forth
above under Total Operating Expenses. The information provided in the table
represents estimated amounts for the current fiscal year net of current fee

waivers/expense reimbursements. For the fiscal year ended October 31, 1997,
the Other Expenses and Total Operating Expenses (on a gross basis) were:
Mid-Cap Growth Portfolio, Class A, 0.84% and 2.19%; Mid-Cap Growth
Portfolio, Class B, 0.89% and 2.89%; Mid-Cap Growth Portfolio, Class C,
1.41% and 3.41%; Aggressive Growth Portfolio, Class A, 0.75% and 2.10%;
Agressive Growth Portfolio, Class B, 0.79% and 2.79%; Aggressive Growth
Portfolio, Class C, 1.18% and 3.18%. For the period October 15, 1997
(commencement of operations) through October 31, 1997, the Other Expenses
and Total Operating Expenses (on a gross basis) were: Large-Cap Growth
Portfolio, Class A, 1.02% and 2.37%; Large-Cap Growth Portfolio, Class B,
1.96% and 3.96%; Large-Cap Growth Portfolio, Class C, 3.72% and 5.72%;
Large-Cap Blend Portfolio, Class A, 1.01% and 2.36%; Large-Cap Blend
Portfolio, Class B, 1.69% and 3.69%; Large-Cap Blend Portfolio, Class C,
3.55% and 5.55%.
</TABLE>

<PAGE>

Style Select Series (Servicemark)
4

Summary of Expenses--(Continued)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
LARGE-CAP SMALL-CAP
VALUE PORTFOLIO VALUE PORTFOLIO VALUE PORTFOLIO
Class Class Class Class Class Class Class Class Class
A B C A B C A B C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Load(1) 5.75% None None 5.75% None None 5.75% None None
Maximum Sales Load on Reinvested Dividends None None None None None None None None None
Maximum Deferred Sales Load(2) None 4.00% 1.00% None 4.00% 1.00% None 4.00% 1.00%
Redemption Fees(3) None None None None None None None None None
Exchange Fees None None None None None None None None None

TOTAL OPERATING EXPENSES (NET OF FEE WAIVERS/ EXPENSE
REIMBURSEMENTS)(5) 1.78% 2.43% 2.43% 1.78% 2.43% 2.43% 1.78% 2.43% 2.43%
----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- -----

<CAPTION>
INTERNATIONAL

EQUITY PORTFOLIO
Class Class Class
A B C
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Load(1) 5.75% None None
Maximum Sales Load on Reinvested Dividends None None None
Maximum Deferred Sales Load(2) None 4.00% 1.00%
Redemption Fees(3) None None None
Exchange Fees None None None

ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Management Fees 1.10% 1.10% 1.10%
12b-1 Fees(4) 0.35% 1.00% 1.00%
Other Expenses (net of fee waivers/ expense
reimbursements)(5) 0.58% 0.58% 0.58%

TOTAL OPERATING EXPENSES (NET OF FEE WAIVERS/ EXPENSE
REIMBURSEMENTS)(5) 2.03% 2.68% 2.68%
----- ----- -----
----- ----- -----
</TABLE>

Equity Portfolio, Class A, 1.02% and 2.47%; International Equity Portfolio,
Class B, 1.07% and 3.17%; International Equity Portfolio, Class C, 1.47% and
3.57%. For the period October 15, 1997 (commencement of operations) through
October 31, 1997, the Other Expenses and Total Operating Expenses (on a
gross basis) were: Large-Cap Value Portfolio, Class A, 1.01% and 2.36%;
Large-Cap Value Portfolio, Class B, 1.59% and 3.59%; Large-Cap Value
Portfolio, Class C, 3.65% and 5.65%; Small-Cap Value Portfolio, Class A,
1.00% and 2.35%; Small-Cap Value Portfolio, Class B, 1.17% and 3.17%;
Small-Cap Value Portfolio, Class C, 1.85% and 3.85%.
</TABLE>

<PAGE>

Style Select Series (Servicemark)
5

EXAMPLE:
- --------------------------------------------------------------------------------

You would pay the following expenses on a $1,000 investment over various time
periods assuming (1) a 5% annual rate of return and (2) redemption at the end of
each time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
------------------------------------
LARGE-CAP GROWTH
PORTFOLIO
(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 65 $ 106 $ 150 $ 253
(Class C shares) $ 35 $ 76 $ 130 $ 275

MID-CAP GROWTH
PORTFOLIO
(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 65 $ 106 $ 150 $ 253
(Class C shares) $ 35 $ 76 $ 130 $ 275

AGGRESSIVE GROWTH
PORTFOLIO
(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 65 $ 106 $ 150 $ 253
(Class C shares) $ 35 $ 76 $ 130 $ 275

LARGE-CAP BLEND
PORTFOLIO

(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 65 $ 106 $ 150 $ 253
(Class C shares) $ 35 $ 76 $ 130 $ 275

LARGE-CAP VALUE
PORTFOLIO
(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 65 $ 106 $ 150 $ 253
(Class C shares) $ 35 $ 76 $ 130 $ 275

VALUE PORTFOLIO
(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 65 $ 106 $ 150 $ 253
(Class C shares) $ 35 $ 76 $ 130 $ 275

SMALL-CAP VALUE
PORTFOLIO
(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 65 $ 106 $ 150 $ 253
(Class C shares) $ 35 $ 76 $ 130 $ 275
INTERNATIONAL EQUITY
PORTFOLIO
(Class A shares) $ 77 $ 118 $ 161 $ 280
(Class B
shares)* $ 67 $ 113 $ 162 $ 278
(Class C shares) $ 37 $ 83 $ 142 $ 301
</TABLE>

You would pay the following expenses on the same investment, assuming no
redemption:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
------------------------------------
LARGE-CAP GROWTH
PORTFOLIO
(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 25 $ 76 $ 130 $ 253
(Class C shares) $ 25 $ 76 $ 130 $ 275

MID-CAP GROWTH
PORTFOLIO
(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 25 $ 76 $ 130 $ 253

(Class C shares) $ 25 $ 76 $ 130 $ 275

AGGRESSIVE GROWTH
PORTFOLIO
(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 25 $ 76 $ 130 $ 253
(Class C shares) $ 25 $ 76 $ 130 $ 275

LARGE-CAP BLEND
PORTFOLIO
(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 25 $ 76 $ 130 $ 253
(Class C shares) $ 25 $ 76 $ 130 $ 275

LARGE-CAP VALUE
PORTFOLIO
(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 25 $ 76 $ 130 $ 253
(Class C shares) $ 25 $ 76 $ 130 $ 275

VALUE PORTFOLIO
(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 25 $ 76 $ 130 $ 253
(Class C shares) $ 25 $ 76 $ 130 $ 275

SMALL-CAP VALUE
PORTFOLIO
(Class A shares) $ 75 $ 110 $ 148 $ 255
(Class B
shares)* $ 25 $ 76 $ 130 $ 253
(Class C shares) $ 25 $ 76 $ 130 $ 275

INTERNATIONAL EQUITY
PORTFOLIO
(Class A shares) $ 77 $ 118 $ 161 $ 280
(Class B
shares)* $ 27 $ 83 $ 142 $ 278
(Class C shares) $ 27 $ 83 $ 142 $ 301
</TABLE>

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

* Class B shares convert to Class A shares on the first business day of the
month following the seventh anniversary of the purchase of such Class B
shares. Therefore, with respect to the 10-year expense information, years 8, 9
and 10 reflect the expenses attributable to ownership of Class A shares.

The foregoing examples, including the 5% return and the expenses used, are
intended to assist investors in understanding the costs and expenses that a
shareholder in the Fund will bear directly or indirectly, and should not be
considered a representation of past or future performance or expenses. For more
complete descriptions of the various costs and expenses, see 'Purchase of
Shares.' Actual expenses may be greater or less than those shown.

<PAGE>

Style Select Series (Servicemark)
6

Financial Highlights
- --------------------------------------------------------------------------------

The following Financial Highlights are for the period November 19, 1996
(commencement of operations) through October 31, 1997 with respect to Class A
and Class B shares, and for the period March 6, 1997 (initial offering of Class
C shares) through October 31, 1997 with respect to Class C shares of the Mid-Cap
Growth Portfolio and Aggressive Growth Portfolio and for the period October 15,
1997 (commencement of operations) through October 31, 1997 with respect to Class
A, Class B and Class C shares of the Large-Cap Growth Portfolio and Large-Cap
Blend Portfolio. These Financial Highlights should be read in conjunction with
the audited financial statements and notes thereto, which are included in the
Statement of Additional Information and are incorporated by reference herein.

<TABLE>
<CAPTION>
NET
GAIN (LOSS) DIVIDENDS
ON INVEST- TOTAL FROM DISTRI- NET
NET ASSET NET MENTS (BOTH FROM NET BUTIONS ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
PERIOD OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ------------------ ---------- ---------- ----------- ---------- --------- ------- ------- ------ --------- ----------
LARGE-CAP GROWTH PORTFOLIO
CLASS A
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97 $12.50 $ -- $ (0.71) $(0.71) $-- $-- $-- $11.79 (5.68)% $ 23,609

CLASS B
-------
10/15/97-10/31/97 12.50 -- (0.71) (0.71) -- -- -- 11.79 (5.68) 773

CLASS C
-------
10/15/97-10/31/97 12.50 -- (0.72) (0.72) -- -- -- 11.78 (5.76) 166

<CAPTION>
MID-CAP GROWTH PORTFOLIO
CLASS A
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97 $12.50 $(0.16) $ 1.37 $ 1.21 $-- $-- $-- $13.71 9.68% $ 18,404

CLASS B
-------
11/19/96-10/31/97 12.50 (0.25) 1.38 1.13 -- -- -- 13.63 9.04 35,739

CLASS C
-------
3/06/97-10/31/97 11.93 (0.18) 1.89 1.71 -- -- -- 13.64 14.33 4,685

<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
CLASS A
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97 $12.50 $(0.11) $ 3.51 $ 3.40 $-- $-- $-- $15.90 27.20% $ 38,537

CLASS B
-------
11/19/96-10/31/97 12.50 (0.24) 3.54 3.30 -- -- -- 15.80 26.40 48,594

CLASS C
-------
3/06/97-10/31/97 13.38 (0.17) 2.59 2.42 -- -- -- 15.80 18.09 5,939

LARGE-CAP BLEND PORTFOLIO
CLASS A
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97 $12.50 $ 0.01 $ (0.53) $(0.52) $-- $-- $-- $11.98 (4.16)% $ 23,593

CLASS B
-------
10/15/97-10/31/97 12.50 -- (0.54) (0.54) -- -- -- 11.96 (4.32) 941

CLASS C
-------
10/15/97-10/31/97 12.50 -- (0.53) (0.53) -- -- -- 11.97 (4.24) 143

RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
TO AVERAGE TO AVERAGE COMMISSION
NET NET PORTFOLIO PER
PERIOD ASSETS(3)(4) ASSETS(3)(4) TURNOVER SHARE(5)
- ------------------ ------------ ------------ -------- ----------
LARGE-CAP GROWTH

PORTFOLIO
CLASS A
-------
<S> <C> <C> <C> <C>
10/15/97-10/31/97 1.78% 0.34% 1% $ 0.0414

CLASS B
-------
10/15/97-10/31/97 2.43 (0.84) 1 0.0414

CLASS C
-------
10/15/97-10/31/97 2.43 (0.42) 1 0.0414

<CAPTION>
MID-CAP GROWTH
PORTFOLIO
CLASS A
-------
<S> <C> <C> <C> <C>
11/19/96-10/31/97 1.85% (1.19)% 97% $ 0.0487

CLASS B
-------
11/19/96-10/31/97 2.47 (1.92) 97 0.0487

CLASS C
-------
3/06/97-10/31/97 2.45 (1.97) 97 0.0487

<CAPTION>
AGGRESSIVE GROWTH
PORTFOLIO

CLASS A
-------
<S> <C> <C> <C> <C>
11/19/96-10/31/97 1.84% (0.77)% 150% $ 0.0546

CLASS B
-------
11/19/96-10/31/97 2.47 (1.58) 150 0.0546

CLASS C
-------
3/06/97-10/31/97 2.45 (1.68) 150 0.0546

<CAPTION>
LARGE-CAP BLEND
PORTFOLIO
CLASS A
-------
<S> <C> <C> <C> <C>

10/15/97-10/31/97 1.78% 1.35% 2% $ 0.0361

CLASS B
-------
10/15/97-10/31/97 2.43 0.29 2 0.0361

CLASS C
-------
10/15/97-10/31/97 2.43 0.54 2 0.0361
</TABLE>

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

(1) Calculated based upon average shares outstanding

(2) Total return is not annualized and does not reflect sales load

(3) Annualized

(4) Net of the following expense reimbursements (based on average net assets):
Large-Cap Growth, Class A, 0.59%; Large-Cap Growth, Class B, 1.53%;
Large-Cap Growth, Class C, 3.29%; Mid-Cap Growth, Class A, 0.34%; Mid-Cap
Growth, Class B, 0.42%; Mid-Cap Growth, Class C, 0.96%; Aggressive Growth,
Class A, 0.26%; Aggressive Growth, Class B, 0.32%; Aggressive Growth, Class
C, 0.73%; Large-Cap Blend, Class A, 0.58%; Large-Cap Blend, Class B, 1.26%;
and Large-Cap Blend, Class C, 3.12%.

(5) The average commission per share is derived by taking the agency commissions
paid on equity securities trades and dividing by the number of shares
purchased and sold.

<PAGE>

Style Select Series (Servicemark)
7

Financial Highlights--(Continued)

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

The following Financial Highlights are for the period November 19, 1996
(commencement of operations) through October 31, 1997 with respect to Class A

and Class B shares, and for the period March 6, 1997 (initial offering of Class
C shares) through October 31, 1997 with respect to Class C shares of the Value
Portfolio and International Equity Portfolio, and for the period October 15,
1997 (commencement of operations) through October 31, 1997 with respect to Class
A, Class B and Class C shares of the Large-Cap Value Portfolio and Small-Cap
Value Portfolio. These Financial Highlights should be read in conjunction with
the audited financial statements and notes thereto, which are included in the
Statement of Additional Information and are incorporated by reference herein.

<TABLE>
<CAPTION>
NET
GAIN (LOSS) DIVIDENDS
ON INVEST- TOTAL FROM DISTRI- NET
NET ASSET NET MENTS (BOTH FROM NET BUTIONS ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
PERIOD OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ------------------ ---------- ---------- ----------- ---------- --------- ------- ------- ------ --------- ----------
LARGE-CAP VALUE PORTFOLIO
CLASS A
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97 $12.50 $ 0.01 $ (0.65) $(0.64) $-- $-- $-- $11.86 (5.12)% $ 23,240

CLASS B
-------
10/15/97-10/31/97 12.50 -- (0.64) (0.64) -- -- -- 11.86 (5.12) 1,325

CLASS C
-------
10/15/97-10/31/97 12.50 -- (0.64) (0.64) -- -- -- 11.86 (5.12) 172

<CAPTION>
VALUE PORTFOLIO
CLASS A
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97 $12.50 $ -- $ 3.59 $ 3.59 $-- $-- $-- $16.09 28.72% $ 48,377

CLASS B
-------
11/19/96-10/31/97 12.50 (0.11) 3.61 3.50 -- -- -- 16.00 28.00 77,534

CLASS C
-------
3/06/97-10/31/97 13.56 (0.08) 2.52 2.44 -- -- -- 16.00 17.99 9,384

<CAPTION>
SMALL-CAP VALUE PORTFOLIO
CLASS A
-------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97 $12.50 $ 0.01 $ (0.37) $(0.36) $-- $-- $-- $12.14 (2.88)% $ 21,346

CLASS B
-------
10/15/97-10/31/97 12.50 0.01 (0.38) (0.37) -- -- -- 12.13 (2.88) 3,112

CLASS C
-------
10/15/97-10/31/97 12.50 0.01 (0.37) (0.36) -- -- -- 12.14 (2.88) 525

<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
CLASS A
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97 $12.50 $ 0.01 $ (0.05) $(0.04) $-- $-- $-- $12.46 (0.32)% $ 24,365

CLASS B
-------
11/19/96-10/31/97 12.50 (0.09) (0.03) (0.12) -- -- -- 12.38 (0.96) 42,656

CLASS C
-------
3/06/97-10/31/97 12.50 (0.07) (0.15) 0.22 -- -- -- 12.38 (1.75) 4,459

CLASS B
-------
10/15/97-10/31/97 2.43 .22 -- 0.0445

CLASS C
-------
10/15/97-10/31/97 2.43 .53 -- 0.0445

<CAPTION>
VALUE PORTFOLIO
CLASS A
-------

<S> <C> <C> <C> <C>
11/19/96-10/31/97 1.84% --% 48% $ 0.0596

CLASS B
-------
11/19/96-10/31/97 2.46 (0.74) 48 0.0596

CLASS C
-------
3/06/97-10/31/97 2.45 (0.78) 48 0.0596

<CAPTION>
SMALL-CAP VALUE PORTFOLIO
CLASS A
-------
10/15/97-10/31/97 1.78% 2.57% --% $ 0.0571

CLASS B
-------
10/15/97-10/31/97 2.43 1.75 -- 0.0571

CLASS C
-------
10/15/97-10/31/97 2.43 1.75 -- 0.0571

<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
CLASS A
-------
11/19/96-10/31/97 2.10% 0.07% 70% $ 0.0179

CLASS B
-------
11/19/96-10/31/97 2.72 (0.69) 70 0.0179

CLASS C
-------
3/06/97-10/31/97 2.70 (0.75) 70 0.0179
</TABLE>

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

(1) Calculated based upon average shares outstanding

(2) Total return is not annualized and does not reflect sales load

(3) Annualized

(4) Net of the following expense reimbursements (based on average net assets):
Large-Cap Value, Class A, 0.58%; Large-Cap Value, Class B, 1.16%; Large-Cap
Value, Class C, 3.22%; Value, Class A, 0.28%; Value, Class B, 0.34%; Value,
Class C, 0.63%; Small-Cap Value, Class A, 0.57%; Small-Cap Value, Class B,
0.74%; Small-Cap Value, Class C, 1.42%; International Equity, Class A,
0.37%; International Equity, Class B, 0.45%; and International Equity, Class
C, 0.87%.

(5) The average commission per share is derived by taking the agency commissions
paid on equity securities trades and dividing by the number of shares
purchased and sold.

<PAGE>

Style Select Series (Servicemark)
8

Style-Based Investing
- --------------------------------------------------------------------------------

Each Portfolio of the Fund is intended to provide investors with access to
several different professional investment advisers, each seeking the same
investment objective and utilizing a similar investment style with respect to a
separate portion of the Portfolio's assets. Normally, the investment decisions
for each Portfolio will be made by at least three Advisers, which may include
SunAmerica. SunAmerica will select Advisers that it believes will provide each
Portfolio with the highest quality investment services, while obtaining, within
each Portfolio's overall investment objective, a distinct investment style.

SunAmerica will generally allocate investments in each Portfolio (and redemption
requests) equally among its three Advisers. The Fund expects that differences in
investment returns among the portions of a Portfolio managed by different
Advisers will cause the actual percentage of a Portfolio's assets managed by
each Adviser to vary over time. SunAmerica intends, on a quarterly basis, to
review the asset allocation in each Portfolio to ensure that no portion of
assets managed by an Adviser exceeds that portion managed by any other Adviser
to the Portfolio by more than 5%. If such a condition exists, SunAmerica will
then re-allocate cash flows among the three Advisers, differently from the
manner described above, in an effort to effect a re-balancing of the Portfolio's
asset allocation. SunAmerica does not intend, but reserves the right, to effect
such a re-balancing of asset allocation by re-allocating assets from one Adviser
to another. Re-balancing may involve re-directing cash flows from a better
performing Adviser to one with relatively lower returns.

From time to time, SunAmerica, with the approval of the Board, may add a new
Adviser for a Portfolio, replace an Adviser or reduce the number of Advisers for
a Portfolio. See 'Management of the Fund.'

Investment Objectives and Policies
- --------------------------------------------------------------------------------

The investment objective of each Portfolio is long-term growth of capital, and
each Portfolio seeks to achieve its investment objective primarily through
investment in equity securities. There can be no assurance that any Portfolio's
investment objective will be met or that the net return on an investment in a
Portfolio will exceed that which could have been obtained through other
investment or savings vehicles. The section 'Investment Techniques and Risk
Factors' contains a discussion of certain types of other securities in which
each Portfolio may invest and certain investment techniques that each Adviser
for the Portfolios may use. In addition, that section contains a discussion of
certain of the principal risks attendant to an investment in the Portfolios.
Although each Adviser for a Portfolio is permitted to invest in the various
types of securities and use the investment techniques indicated in that section,
no Adviser is required to invest in any particular type of permitted security or
to use any particular investment technique. Rather, each Adviser is given full
discretion to manage its portion of the assets of a Portfolio according to its
own investment philosophy.

Except as specifically indicated, each Portfolio's respective investment
objective and the investment policies and strategies described herein are not
fundamental policies of the Portfolio and may be changed by the Board without
the approval of shareholders. Certain investment restrictions may not be changed
without a majority vote of the outstanding voting securities of that Portfolio.
Each Portfolio's fundamental investment restrictions are described in the
Statement of Additional Information. For purposes of any investment policies or
restrictions discussed below, the percentage limitations of each Portfolio will
be applied by each Adviser to the portion of the Portfolio's assets managed by
that Adviser and will be determined at the time of an investment. SunAmerica,
however, is ultimately responsible for overseeing compliance by the Advisers,
and will in such capacity verify that in the aggregate the investments of each
Portfolio complies with applicable percentage limitations.

Each Portfolio is 'non-diversified' (as such term is defined under the 1940
Act), subject, however, to certain tax diversification requirements. See
'Dividends, Distributions and Taxes.'

<PAGE>

Style Select Series (Servicemark)
9

The Growth Portfolios
- --------------------------------------------------------------------------------

The Growth Portfolios consist of the Large-Cap Growth Portfolio, Mid-Cap Growth
Portfolio and Aggressive Growth Portfolio. Under normal conditions, at least 65%
of each Growth Portfolio's total assets will be invested in equity securities
(including common and preferred stocks and other securities having equity
features, such as convertible securities, warrants and rights). The issuers of
such securities are companies considered by the respective Advisers to have a
historical record of above-average growth rate; to have significant growth
potential; above-average earnings growth or value or the ability to sustain
earnings growth; to offer proven or unusual products or services; or to operate
in industries experiencing increasing demand. The Advisers may select certain of

such securities because they consider them to be undervalued in the market. Each
of the Growth Portfolios may also invest in debt securities that the Advisers
expect have the potential for capital appreciation which are rated as low as
'BBB' by Standard & Poor's Corporation, a Division of the McGraw-Hill Companies
('S&P'), or 'Baa' by Moody's Investors Service, Inc. ('Moody's') or, if unrated,
determined by the Adviser to be of equivalent quality. The Large-Cap Growth
Portfolio and the Aggressive Growth Portfolio may also invest in debt securities
rated below 'BBB' or 'Baa' or unrated securities of comparable quality (junk
bonds). See 'Fixed Income Securities' in 'Investment Techniques and Risk
Factors' below for a discussion of the risks associated with investing in such
securities. The investment polices and strategies specific to each of the Growth
Portfolios are described below.

Large-Cap Growth Portfolio. The Large-Cap Growth Portfolio, advised by Janus,
Papp and Montag & Caldwell, will invest, under normal circumstances, at least
65% of the Portfolio's total assets in the securities of companies that have, at
the time of purchase, a market capitalization in excess of $5 billion
('Large-Cap Companies').

Large-Cap Companies generally will be companies that have a substantial record
of operations (i.e., in business for at least five years) and are listed for
trading on the New York Stock Exchange ('NYSE'), American Stock Exchange
('AMEX') or on another national or international stock exchange or, in some
cases, are traded over-the-counter.

The Portfolio may also invest up to 35% of its total assets in securities of
issuers other than Large-Cap Companies. These investments may include equity
securities of companies with market capitalizations below $5 billion, including
companies with market capitalizations of less than $1 billion, and debt
securities that the Advisers expect have the potential for capital appreciation.
See 'Investment in Small-Cap Companies' and 'Fixed Income Securities' in
'Investment Techniques and Risk Factors' below for a discussion of the risks
associated with investing in such securities.

Mid-Cap Growth Portfolio. The Mid-Cap Growth Portfolio, advised by MAS, Pilgrim
Baxter and T. Rowe Price, will invest, under normal circumstances, at least 65%
of the Portfolio's total assets in the securities of medium-sized companies that
have, at the time of purchase, a market capitalization between $1 billion and $5
billion ('Mid-Cap Companies').

Mid-Cap Companies generally will be companies that have a substantial record of
operations (i.e., in business for at least five years) and are listed for
trading on the NYSE or another national or international stock exchange or, in
some cases, are traded over-the-counter. Such companies, however, may be less
seasoned than Large-Cap Companies, as defined in 'Large-Cap Growth Portfolio,'
above. In general, the securities of Mid-Cap Companies may be more volatile than
those of Large-Cap Companies.

The Portfolio may also invest up to 35% of its total assets in securities of
issuers other than Mid-Cap Companies. These investments may include equity
securities of Large-Cap Companies and companies with market capitalizations of
less than $1 billion, and debt securities that the Advisers expect have the
potential for capital appreciation. See 'Investment in Small-Cap Companies' and
'Fixed Income Securities' in 'Investment Techniques and Risk Factors' below for

a discussion of the risks associated with investing in such securities.

Aggressive Growth Portfolio. The Aggressive Growth Portfolio, advised by Janus,
SunAmerica and Warburg, will invest in equity securities to seek aggressively
and selectively long-term total return, without regard to the market
capitalization of an issuer. Generally, the Portfolio will invest in securities
of companies that have, at the time of purchase, a market capitalization of less
than $1 billion ('Small-Cap Companies') or Mid-Cap Companies, as defined in
'Mid-Cap Growth Portfolio,' above. The Advisers may also purchase securities of
Large-Cap Companies, as defined in 'Large-Cap Growth Portfolio,' above.

<PAGE>

Style Select Series (Servicemark)
10

Small-Cap Companies generally will be companies that, although not 'start-up'
companies, have been in business for a shorter period of time than Mid-Cap or
Large-Cap Companies. Small-Cap Companies frequently will be in businesses or
industries involving new, recently developed products, services, or
technologies, or may be in businesses that are out of favor with or have not yet
been discovered by the broader investment community. While some Small-Cap
Companies may be listed for trading on a securities exchange, it is expected
that a significant portion of such companies will be traded over-the-counter.

There is no requirement that any minimum percentage of assets of the Portfolio
be maintained in securities of either Small-Cap Companies or Mid-Cap Companies.
In general, to the extent that more of the Portfolio's assets are invested in
Small-Cap Companies, the Portfolio's net asset value may be subject to more
volatility than if such assets were invested in larger companies. See
'Investment in Small-Cap Companies' in 'Investment Techniques and Risk Factors.'
In addition, the Portfolio may invest up to 35% of its total assets in debt
securities that the Advisers expect have the potential for capital appreciation.
See 'Fixed Income Securities' in 'Investment Techniques and Risk Factors' below
for a discussion of the risks associated with investing in such securities.

The Blend Portfolio
- --------------------------------------------------------------------------------

The Fund currently offers one Blend Portfolio, the Large-Cap Blend Portfolio,
the investment policies and strategies of which are described below.

Large-Cap Blend Portfolio. The Large-Cap Blend Portfolio, advised by Lazard,
SunAmerica and T. Rowe Price, will invest, under normal circumstances, at least
65% of the Portfolio's total assets in equity securities (including common and
preferred stocks and other securities having equity features, such as
convertible securities, warrants and rights) of Large-Cap Companies. Large-Cap
Companies have, at the time of purchase, a market capitalization in excess of $5
billion. Large-Cap Companies generally will be companies that have a substantial
record of operations (i.e., in business for at least five years) and are listed
for trading on the NYSE, AMEX or on another national or international stock

exchange or, in some cases, are traded over-the-counter. In selecting equity
securities of Large-Cap Companies, an Adviser will seek to achieve a blend of
what it considers to be growth companies, value companies and companies that the
Adviser believes have elements of both growth and value. An Adviser will
normally select securities of companies whose earnings are expected by the
Adviser to grow and to be able to support a growing dividend payment, as well as
securities that do not pay dividends currently but offer prospects of
appreciation and future
income. Investments will be identified based upon
factors including undervalued assets or earnings potential, favorable operating
or price to cash flow ratios, a below-average price to book value ratio, a
below-average price to earnings ratio and, although current income will not
always be a significant factor in selecting securities, an above-average
dividend yield. Investments will also be identified based upon other factors
including above-average earnings growth and cash flow sufficient to support
growing dividends, as well as the prospect for capital appreciation and future
dividend payments with respect to securities that do not currently pay
dividends.

The Large-Cap Blend Portfolio may invest up to 35% of its total assets in
securities of issuers other than Large-Cap Companies. These investments may
include equity securities of companies with market capitalizations below $5
billion, including companies with market capitalizations of less than $1
billion. These investments may also include debt securities that the Advisers
expect to have the potential for capital appreciation, including debt securities
rated below 'BBB' by S&P, or 'Baa' by Moody's, or, if unrated, determined by the
Advisers to be of equivalent quality (junk bonds). See 'Investment in Small-Cap
Companies' and 'Fixed Income Securities' in 'Investment Techniques and Risk
Factors' below for a discussion of the risks associated with investing in such
securities.

<PAGE>

Style Select Series (Servicemark)
11

The Value Portfolios
- --------------------------------------------------------------------------------

The Value Portfolios consist of the Large-Cap Value Portfolio, Value Portfolio
and Small-Cap Value Portfolio. Under normal circumstances, at least 65% of each
Value Portfolio's total assets will be invested in equity securities (including
common and preferred stocks and other securities having equity features, such as
convertible securities, warrants and rights). The Advisers will normally select
securities that they believe are selling at a price that is low relative to
their worth. Investments will be identified based upon factors including
undervalued assets or earnings potential, favorable operating or price to cash
flow ratios, a below-average price to book value ratio, a below-average price to
earnings ratio and, although current income will not always be a significant
factor in selecting securities, an above-average dividend yield. In addition,
the Advisers may take into account such other factors as an issuer's product
demand and development, resources for expansion, quality of management, overall
favorable business prospects and industry fundamentals. While the Advisers seek

to identify investments with the potential for above-average appreciation, there
is a risk that other investors will not recognize the intrinsic worth of a
security owned by the Value Portfolios for a long period, if at all. In
addition, there is the risk that a security judged to be undervalued by the
Advisers is actually appropriately priced due to fundamental problems with the
issuer's business prospects that are not yet apparent. Each of the Value
Portfolios may invest in debt securities that the Advisers expect to have the
potential for capital appreciation, which are rated as low as 'BBB' by S&P, or
'Baa' by Moody's, or, if unrated, determined by the Advisers to be of equivalent
quality. The Value Portfolio and Small-Cap Value Portfolio may also invest in
debt securities rated below 'BBB' or 'Baa' or unrated securities of comparable
quality (junk bonds). See 'Fixed Income Securities' in 'Investment Techniques
and Risk Factors' below for a discussion of the risks associated with investing
in such securities. The investment policies and strategies specific to each of
the Value Portfolios are described below.

Large-Cap Value Portfolio. The Large-Cap Value Portfolio, advised by Babson,
Davis and Wellington Management, will invest, under normal circumstances, at
least 65% of the Portfolio's assets in securities of Large-Cap Companies that
the Advisers believe are selling at a price that is low relative to their worth.
Large-Cap Companies have, at the time of purchase, a market capitalization in
excess of $5 billion. Large-Cap Companies generally will be companies that have
a substantial record of operations (i.e., in business for at least five years)
and are listed for trading on the NYSE, AMEX or on another national or
international stock exchange or, in some cases, are traded over-the-counter.

The Portfolio may also invest up to 35% of its total assets in securities of
issuers other than Large-Cap Companies. These investments may include equity
companies with market capitalizations below $5 billion, including companies with
market capitalizations of less than $1 billion, and debt securities that the
Advisers expect to have the potential for capital appreciation. See 'Investment
in Small-Cap Companies' and 'Fixed Income Securities' in 'Investment Techniques
and Risk Factors' below for a discussion of the risks associated with investing
in such securities.

Value Portfolio. The Value Portfolio, advised by Davis, Neuberger&Berman, and
Strong/Schafer, will invest, under normal circumstances, in securities that the
Advisers believe are selling at a price that is low relative to their worth,
without regard to the market capitalization of the issuer. It is anticipated
that a significant portion of the Portfolio's assets as a whole will generally
be invested in securities of Mid-Cap Companies, which have, at the time of
purchase, a market capitalization between $1 billion and $5 billion; however,
any particular Adviser may not necessarily invest a significant portion of the
Portfolio's assets allocated to it in such companies. Mid-Cap Companies
generally will be companies that have a substantial record of operations (i.e.,
in business for at least five years) and are listed for trading on the NYSE,
AMEX or on another national or international stock exchange or, in some cases,
are traded over-the-counter. Investing in such companies may have greater risks
than investing in larger companies.

The Portfolio may also invest up to 35% of its total assets in debt securities
that the Advisers expect to have the potential for capital appreciation. See
'Fixed Income Securities' in 'Investment Techniques and Risk Factors.'

Small-Cap Value Portfolio. The Small-Cap Value Portfolio, advised by
Berger/PWM, Lazard and Glenmede, will invest under normal circumstances, at
least 65% of the Portfolio's total assets in securities of Small-Cap Companies
that the Advisers believe are selling at a price that is low relative to their
worth. Small-Cap Companies have, at the time

<PAGE>

Style Select Series (Servicemark)
12

of purchase, a market capitalization of less than $1 billion. Small-Cap
Companies generally will be companies that, although not 'start-up' companies,
have been in business for a shorter period of time than Mid-Cap or Large-Cap
Companies. Small-Cap Companies frequently will be in businesses or industries
involving new, recently developed products, services, or technologies, or may be
in businesses that are out of favor with or have not yet been discovered by the
broader investment community. While some Small-Cap Companies may be listed for
trading on a securities exchange, it is expected that a significant portion of
such companies will be traded over-the-counter. In general, to the extent that
the Portfolio's assets are invested in Small-Cap Companies, the Portfolio's net
asset value may be subject to more volatility than if such assets were invested
in larger companies. See 'Investment in Small-Cap Companies' in 'Investment
Techniques and Risk Factors.'

The Portfolio may also invest up to 35% of its total assets in equity securities
of issuers other than Small-Cap Companies and in debt securities that the
Advisers expect have the potential for capital appreciation. See 'Fixed Income
Securities' in 'Investment Techniques and Risk Factors' below for a discussion
of the risks associated with investing in such securities.

The International Portfolio
- --------------------------------------------------------------------------------

The Fund currently offers one International Portfolio, the International Equity
Portfolio, the investment policies and strategies of which are described below.

International Equity Portfolio. The International Equity Portfolio, advised by
BT, Warburg and Rowe-Fleming will invest, under normal circumstances, in
securities of non-U.S. issuers. Country selection is a significant part of each
Adviser's investment process. The Portfolio is permitted to invest in any
country where it is legal for U.S. investors to invest.

The Portfolio will invest in securities of companies without regard to their
market capitalization. However, investing in smaller companies may have greater
risks than investing in larger companies. See 'Investment in Small-Cap
Companies' in 'Investment Techniques and Risk Factors.' The Portfolio may also
invest from time to time in companies located in countries considered to be
emerging markets (i.e., those generally considered to be in emerging or
developing countries). Investment in foreign securities in general, and in
emerging markets in particular, involves certain risks not present when
investing in United States securities. See 'Foreign Securities' in 'Investment

Techniques and Risk Factors.'

Under normal conditions, at least 65% of the Portfolio's total assets will be
invested in equity securities (including common and preferred stocks and other
securities having equity features, such as convertible securities, warrants and
rights) of issuers in at least three countries other than the United States. The
Portfolio may purchase securities on foreign stock exchanges, on U.S. stock
exchanges, or in the over-the-counter market. In addition, the Portfolio may
invest in securities in the form of sponsored or unsponsored American Depositary
Receipts ('ADRs'), European Depositary Receipts ('EDRs'), Global Depositary
Receipts ('GDRs') or other similar securities representing a right to obtain
underlying securities of foreign issuers. The Portfolio may invest up to 35% of
its total assets in debt securities that the Advisers expect have the potential
for capital appreciation. The Portfolio may invest in such debt securities rated
below investment grade, that is below 'BBB' by S&P, or below 'Baa' by Moody's,
or, if unrated, determined by the Advisers to be of equivalent quality (junk
bonds). See 'Fixed Income Securities' in 'Investment Techniques and Risk
Factors' below for a discussion of the risks associated with investing in such
securities.

<PAGE>

Style Select Series (Servicemark)
13

Advisers' Historical Performance Data
- --------------------------------------------------------------------------------

Set forth below is historical performance data relating to each of the Advisers
selected by SunAmerica for the Portfolios. The performance information presented
below is based on data provided by each Adviser relating to accounts managed by
that Adviser that have investment objectives and policies similar (although not
necessarily identical) to the relevant Portfolio and are advised by that Adviser
using investment styles and strategies substantially similar to those to be
employed by that Adviser in advising its portion of the Portfolio. THE
PERFORMANCE INFORMATION SET FORTH BELOW FOR THE RESPECTIVE ADVISERS DOES NOT
REPRESENT THE PERFORMANCE OF THE FUND OR ANY PORTFOLIO. The Large-Cap Growth,
Large-Cap Blend, Large-Cap Value and Small-Cap Value Portfolios are recently
organized and have performance records of less than a year. The following
performance should not be considered a prediction of future performance of the
Fund or any Portfolio. The performance of a particular Portfolio may be higher
or lower than that of the respective Advisers shown below.

All of the Advisers' historical performance information reflects annualized
total return over the stated period of time. Total return shows how much an
investment has increased (decreased) over a specified period of time and
includes capital appreciation and income. The term 'annualized total return'
signifies that cumulative total returns for a stated time period (i.e., 1, 3, 5
or 10 years) have been annualized over such period. In order to present the
total return information in a consistent manner, all returns were calculated by
geometrically linking quarterly total return data for the relevant number of
quarters and annualizing the result over the equivalent number of years.

All information is based on data supplied by the Advisers or Morningstar, Inc.
('Morningstar') and believed by the Fund to be reliable. Where an Adviser's
performance is based on a single account, performance has been calculated in
accordance with prescribed Securities and Exchange Commission guidelines. Where
composite performance information is provided, the total return for each
Adviser's composite performance has been calculated in accordance with
Performance Presentation Standards of the Association for Investment Management
and Research ('AIMR'). Unless otherwise indicated, the performance, while having
been calculated in accordance with either Securities and Exchange Commission or
AIMR methodology, has not been independently verified or audited. AIMR's method
of calculating performance differs from that of the Securities and Exchange
Commission. Performance figures for any particular Adviser do not necessarily
reflect all of the Adviser's assets under management and may not accurately
reflect the performance of all accounts managed by the Adviser.

Where the performance information of an Adviser in the following tables
constitutes a single account, it is presented net of actual fees charged by the
individual Advisers, except as otherwise noted, and reflects the imposition of
any sales loads or charges to such account, if applicable. Where an Adviser
provides composite performance, one of two types of composites may be used, a
'net composite' or a 'gross composite.' In a net composite, the performance
return of each account in the composite is reduced by the actual fees charged to
that particular account. In a gross composite, the gross composite performance
return is reduced by the highest annual expenses charged to any account included
in the particular composite.

Certain of the client accounts that are included in an Adviser's past
performance record may not be registered investment companies. Such accounts
would not be subject to the same types of expenses to which the Fund is subject,
nor to the specific diversification and other restrictions and investment
limitations imposed on the Fund and its Portfolios by the 1940 Act or Subchapter
M of the Internal Revenue Code of 1986, as amended (the 'Code'). The performance
results that include accounts that are not registered investment companies might
have been less favorable had they been subject to regulation as investment
companies under the relevant federal laws.

Finally, for each period presented, the investment performance for the Advisers
of each Portfolio is compared to the average performance of a group of similar
mutual funds tracked by Morningstar. Morningstar calculates its group averages
by taking a mathematical average of the returns of the funds included in the
group.

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Advisers for Large-Cap Growth Portfolio
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The Advisers for the Large-Cap Growth Portfolio are:

JANUS CAPITAL CORPORATION (JANUS)
L. ROY PAPP & ASSOCIATES (PAPP)
MONTAG & CALDWELL, INC. (MONTAG & CALDWELL)

The performance results supplied by each Adviser were prepared as set forth
below under 'Individual Adviser Performance.'

PORTFOLIO PERFORMANCE

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

The Portfolio's (Class A shares) total return since inception (October 15, 1997)
through December 31, 1997 was 3.28%.

ANNUALIZED TOTAL RETURNS

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

PERIODS ENDED DECEMBER 31, 1997

Advisers' Past Performance (Bar Chart)

1 Year

Morningstar Large Growth Category 26.5%
Janus 26.5%
Papp 29.9%
Montag & Caldwell 32.7%

3 Years

Morningstar Large Growth Category 25.8%
Janus 30.6%
Papp 31.5%
Montag & Caldwell 35.3%

5 Years

Morningstar Large Growth Category 16.1%
Janus 16.9%
Papp 19.6%
Montag & Caldwell 22.5%

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NOTES (LARGE-CAP GROWTH PORTFOLIO)

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INDIVIDUAL ADVISER PERFORMANCE

Except as otherwise noted below, an Adviser's performance is presented net of
actual fees and reflects the imposition of any sales loads or charges, if
applicable. The Portfolio's fees and expenses may be greater than those charged
by the individual Advisers. Accordingly, the Portfolio's actual performance
results may be less.

Janus

Janus' historical performance data covers 10 years (the period since inception)
and reflects the performance of the Janus Earnings Growth Composite (which
includes mutual funds). The annualized return since inception of the composite
is 19.9% as of December 31, 1997. The composite includes all accounts over $5
million with investment objectives, policies and strategies substantially
similar to those to be used by Janus in managing its portion of the Large-Cap
Growth Portfolio. Fifteen such accounts, with net assets totaling $22 million
(less than 1% of the total assets in the 61 similar accounts), have been omitted
from the composite. Such omission, however, does not render the performance
information presented misleading. As of December 31, 1997, the composite
included 46 accounts with aggregate assets of $13.3 billion. The composite
returns are presented net of actual fees. None of the accounts included in the
composite bears any sales loads or charges.

Papp

Papp's historical performance data covers 6 years (the period since inception)
and reflects the performance of a single account, which is a no-load mutual
fund. The annualized return since inception of the account is 19.1% as of
December 31, 1997. This account represents the only account managed by Papp with
an investment objectives, policies and strategies substantially similar to those
to be used by Papp in managing its portion of the Large-Cap Growth Portfolio. As
of December 31, 1997, the account's net assets totaled $289.3 million. The
returns are presented net of actual fees.

Montag & Caldwell

Montag & Caldwell's historical performance data covers 10 years and reflects the
performance of the Montag & Caldwell Growth Composite. The annualized ten-year
return of the composite is 20.5% as of December 31, 1997. The composite includes
all accounts with investment objectives, policies and strategies substantially
similar to those used by Montag & Caldwell in managing its portion of the Large-

Cap Growth Portfolio, except that 14 such accounts, with net assets totaling $27
million (less than 1% of the total assets in the 151 similar accounts), have
been omitted from the composite. Such omission, however, does not render the
performance information presented misleading. As of December 31, 1997, the
composite included 137 accounts with aggregate assets of $6.2 billion. The
composite returns are presented net of actual fees. None of the accounts
included in the composite bears any sales load or charges.

Morningstar Large Growth Category

Developed by Morningstar, the Morningstar Large Growth Category currently
reflects a group of 268 mutual funds which have portfolios with median market
capitalizations, price/earnings ratios, and price/book ratios similar to those
expected for the Large-Cap Growth Portfolio.

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GROWTH OF A $10,000 INVESTMENT

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FIVE YEARS ENDED DECEMBER 31, 1997

Growth of a $10,000 Investment (Mountain Chart)

Morningstar
Large Growth
Janus Papp Montag & Caldwell Category

1992 $10,000 $10,000 $10,000 $10,000
1993 $10,443 $ 9,999 $11,140 $10,824
1994 $ 9,791 $10,756 $11,129 $10,585
1995 $13,731 $14,769 $15,569 $13,908
1996 $17,251 $18,853 $20,754 $16,678
1997 $21,822 $24,494 $27,540 $21,099

NOTE (LARGE-CAP GROWTH PORTFOLIO)

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

GROWTH OF A $10,000 INVESTMENT

The 'Growth of $10,000' chart reflects six years of performance data for the
Janus Earnings Growth Composite, a single mutual fund of Papp and the Montag &

Caldwell Growth Composite. The returns for Janus, Papp and Montag & Caldwell
are net of actual expenses.

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Advisers for Mid-Cap Growth Portfolio
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The Advisers for the Mid-Cap Growth Portfolio are:

MILLER ANDERSON & SHERRERD, LLP (MAS)
PILGRIM BAXTER & ASSOCIATES, LTD. (PILGRIM BAXTER)
T. ROWE PRICE ASSOCIATES, INC. (T. ROWE PRICE)

The performance results supplied by each Adviser were prepared as set forth
below under 'Individual Adviser Performance.'

PORTFOLIO PERFORMANCE

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

The Portfolio's (Class A shares) average annual total return since inception
(November 19, 1996) through December 31, 1997 was 5.46%.

ANNUALIZED TOTAL RETURNS

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

PERIODS ENDED DECEMBER 31, 1997

Advisers' Past Performance (Bar Chart)

1 Year

Morningstar Mid-Cap Growth 15.9%
Mid-Cap Growth Portfolio (Class A) 7.3%*
MAS 33.1%
Pilgrim Baxter -1.2%
T. Rowe Price 18.3%

3 Year

Morningstar Mid-Cap Growth 22.4%
MAS 29.2%
Pilgrim Baxter 18.6%

T. Rowe Price 27.7%
5 Year

Morningstar Mid-Cap Growth 15.7%
MAS 19.2%
Pilgrim Baxter 13.4%
T. Rowe Price 21.4%

- ------------------
*The Portfolio's performance constitutes average annual total return and
reflects the deduction of actual operating expenses and the imposition of a
front-end sales load.

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NOTES (MID-CAP GROWTH PORTFOLIO)

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INDIVIDUAL ADVISER PERFORMANCE

Except as otherwise noted below, an Adviser's performance is presented net of
actual fees and reflects the imposition of any sales load or charges, if
applicable. The Portfolio's fees and expenses may be greater than those charged
by the individual Advisers. Accordingly, the Portfolio's actual performance
results may be less.

MAS

MAS' historical performance data covers 7 3/4 years (the period since inception)
and reflects the performance of a single account, which is a no-load mutual
fund. The annualized return since inception of the account is 20.8% as of
December 31, 1997. MAS manages 2 accounts, including the Portfolio, with
investment objectives, and investment policies and strategies substantially
similar to those to be used by MAS in managing its portion of the Mid-Cap Growth
Portfolio. The omission of the Portfolio, with assets of approximately $24
million (less than 5% of the total assets in the 2 accounts), does not render
the performance information misleading. As of December 31, 1997, the account's
net assets totaled $483.2 million. The returns are presented net of actual fees.

Pilgrim Baxter

Pilgrim Baxter's historical performance data covers 10 years and reflects the
performance of the Pilgrim Baxter Mid-Cap Composite. The annualized ten-year
return of the composite is 14.5% as of December 31, 1997. The composite is AIMR
verified and includes all accounts with investment objectives, policies and
strategies substantially similar to those to be used by Pilgrim Baxter in

managing its portion of the Mid-Cap Growth Portfolio. As of December 31, 1997,
the composite included 10 accounts totaling $1.3 billion, which represented 9.4%
of all equity accounts under management. The composite returns are presented net
of actual fees. None of the accounts included in the composite bears any sales
loads or charges.

T. Rowe Price

T. Rowe Price's historical performance data covers over 5 years (the period
since inception) and reflects the performance of a single account, which is a
no-load mutual fund. The annualized return since inception of the account is
24.1% as of December 31, 1997. T. Rowe Price manages a total of 6 accounts (all
of which are mutual funds) with an investment objective, policies and strategy
substantially similar to those used in managing its portion of the Mid-Cap
Growth Portfolio. T. Rowe Price does not calculate composite performance for
mutual fund accounts. Of the other 5 accounts 2 do not have performance records
as of December 31, 1997. The omission of the other 3 accounts, with assets of
approximately $95.7 million (approximately 5% of the total assets in the 6
accounts), does not render the performance information presented misleading. As
of December 31, 1997, the account's net assets totaled approximately $1.8
billion. The returns are presented net of actual fees.

Morningstar Mid-Cap Growth Category

Developed by Morningstar, the Morningstar Mid-Cap Growth Category currently
reflects a group of 334 mutual funds which have portfolios with similar median
market capitalizations, price/earnings ratios, and price/book ratios similar to
those expected for the Mid-Cap Growth Portfolio.

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GROWTH OF A $10,000 INVESTMENT

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FIVE YEARS ENDED DECEMBER 31, 1997

Growth of a $10,000 Investment (Mountain Chart)

Pilgrim T. Rowe Morningstar Mid-Cap
MAS Baxter Price Category

1992 $10,000 $10,000 $10,000 $10,000
1993 $11,823 $11,613 $12,624 $11,620
1994 $11,186 $11,215 $12,661 $11,298
1995 $15,241 $16,687 $17,845 $15,337

1996 $18,104 $18,960 $22,278 $17,869
1997 $24,102 $18,733 $26,361 $20,705

NOTE (MID-CAP GROWTH PORTFOLIO)

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

GROWTH OF A $10,000 INVESTMENT

The 'Growth of $10,000' chart reflects five years of performance data for the
Pilgrim Baxter Mid Cap Composite, a single mutual fund of T. Rowe Price and a
single mutual fund of MAS. The returns for all time periods are net of actual
expenses.

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Advisers for Aggressive Growth Portfolio
- --------------------------------------------------------------------------------

The Advisers for the Aggressive Growth Portfolio are:

JANUS CAPITAL CORPORATION (JANUS)
SUNAMERICA ASSET MANAGEMENT CORP. (SUNAMERICA)
WARBURG PINCUS ASSET MANAGEMENT, INC. (WARBURG)

The performance results supplied by each Adviser were prepared as set forth
below under 'Individual Adviser Performance.'

PORTFOLIO PERFORMANCE

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

The Portfolio's (Class A Shares) average annual total return since inception
(November 19, 1996) through December 31, 1997 was 18.92%.

ANNUALIZED TOTAL RETURNS

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

PERIODS ENDED DECEMBER 31, 1997

1 Year

Morningstar Aggressive Growth 16.4%
Aggressive Growth Portfolio (Class A) 17.6%*

Janus 27.5%
SunAmerica -2.6%
Warburg 20.7%

3 Year

Morningstar Aggressive Growth 22.1%
Janus 35.7%
SunAmerica 18.9%
Warburg 24.3%
5 Year

Morningstar Aggressive Growth 16.4%
Janus 24.8%
SunAmerica 14.9%
Warburg 17.3%

- ------------------
* The Portfolio's performance constitutes average annual total return and
reflects the deduction of actual operating expenses and the imposition of a
front-end sales load.

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NOTES (AGGRESSIVE GROWTH PORTFOLIO)

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INDIVIDUAL ADVISER PERFORMANCE

Janus

Janus' historical performance data covers 8 years (the period since inception)
and reflects the performance of the Janus Aggressive Growth Composite (which
includes mutual funds). The annualized return since inception of the composite
is 24.2% as of December 31, 1997. The composite includes all accounts over $5
million with investment objectives, policies and strategies substantially
similar to those used by Janus in managing its portion of the Aggressive Growth
Portfolio. Fifteen such accounts, with net assets totaling $45 million (less
than 5% of the total assets in the 30 similar accounts), have been omitted from
the composite. Such omission, however, does not render the performance
information presented misleading. As of December 31, 1997, the composite
included 15 accounts with aggregate assets of $867 million. The composite
returns are presented net of actual fees. None of the accounts included in the

composite bears any sales loads or charges.

SunAmerica

SunAmerica's historical performance data covers 10 years and reflects the
performance of a single account, which is a front-end load mutual fund. The
annualized ten-year return of the account is 17.4% as of December 31, 1997.
SunAmerica manages a total of 3 accounts (all of which are mutual funds) with
investment objectives, policies and strategies substantially similar to those
used in managing its portion of the Aggressive Growth Portfolio. SunAmerica does
not calculate composite performance for mutual fund accounts. The omission of 2
of the accounts, with assets totaling $133.8 million (less than 34% of the total
assets in the 3 accounts), does not render the performance information presented
misleading. As of December 31, 1997, the account's net assets totaled $263.3
million. The returns presented in the chart are net of actual fees and reflect
the imposition of a sales charge of 5.75%.

Warburg

Warburg's historical performance data covers approximately 6 3/4 years and
reflects the performance of a single account, which is a mutual fund. The
annualized return since inception of the account is 7.1% as of December 31,
1997. Warburg manages a total of 3 accounts (1 of which is an institutional
account and 2 of which are mutual funds) with an investment objective, policies
and strategy substantially similar to those to be used in managing its portion
of the Aggressive Growth Portfolio. Warburg does not calculate a combined
composite performance for its mutual fund accounts, nor does it calculate a
combined composite of the institutional account's performance and the mutual
funds' performance. However, the performance for the other 2 accounts was, in
the aggregate, better than that shown for the account and, therefore, the
omission of such accounts does not render the performance information presented
misleading. As of December 31, 1997, the account's net assets totaled $420.6
million, which represented approximately 19.6% of the total assets in the 3
similar accounts. The returns are presented net of actual fees and sales
charges.

Morningstar Aggressive Growth Objective

Developed by Morningstar, the Morningstar Aggressive Growth Objective currently
reflects a group of 134 mutual funds which seek rapid growth of capital. The
group typically employ strategies that involve greater risk than those used by
most equity funds.

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GROWTH OF A $10,000 INVESTMENT

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SIX YEARS ENDED DECEMBER 31, 1997

Growth of a $10,000 Investment (Mountain Chart)

Morningstar
Aggressive
Janus SunAmerica Warburg Growth
Objective

1991 $10,000 $10,000 $10,000 $10,000
1992 $10,591 $11,442 $11,153 $11,016
1993 $12,192 $13,027 $13,111 $13,296
1994 $12,803 $13,643 $12,868 $12,921
1995 $21,571 $20,486 $18,724 $17,720
1996 $25,106 $23,543 $20,487 $20,189
1997 $32,011 $24,327 $24,728 $23,500

NOTE (AGGRESSIVE GROWTH PORTFOLIO)

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

GROWTH OF A $10,000 INVESTMENT

The 'Growth of $10,000' chart reflects six years of performance data for the
Janus Aggressive Growth Composite, a single mutual fund of SunAmerica and a
single mutual fund of Warburg. The returns for Janus, SunAmerica and Warburg are
net of actual expenses.

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Advisers for Large-Cap Blend Portfolio
- --------------------------------------------------------------------------------

The Advisers for the Large-Cap Blend Portfolio are:

LAZARD ASSET MANAGEMENT (LAZARD)
SUNAMERICA ASSET MANAGEMENT CORP. (SUNAMERICA)
T. ROWE PRICE ASSOCIATES, INC. (T. ROWE PRICE)

The performance results supplied by each Adviser were prepared as set forth

below under 'Individual Adviser Performance.'

PORTFOLIO PERFORMANCE

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

The Portfolio's (Class A shares) total return since inception (October 15, 1997)
through December 31, 1997 was 1.20%.

ANNUALIZED TOTAL RETURNS

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

PERIODS ENDED DECEMBER 31, 1997

Advisers' Past Performance (Bar Chart)

1 Year

Morningstar Large Blend 27.9%
Lazard 24.6%
SunAmerica 22.7%
T. Rowe Price 23.5%

3 Year

Morningstar Large Blend 26.7%
Lazard 27.5%
SunAmerica 27.8%
T. Rowe Price 26.7%

5 Year

Morningstar Large Blend 17.3%
Lazard 20.0%
T. Rowe Price 18.0%

10 Year

Morningstar Large Blend 15.9%
Lazard 17.2%
T. Rowe Price 16.5%

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NOTES (LARGE-CAP BLEND PORTFOLIO)

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INDIVIDUAL ADVISER PERFORMANCE

Except as otherwise noted below, an Adviser's performance is presented net of
actual fees, and reflects the imposition of any sales loads or charges, if
applicable. The Portfolio's fees and expenses may be greater than those charged
by the individual Advisers. Accordingly, the Portfolio's actual performance
results may be less.

Lazard

Lazard's historical performance data covers 10 years and reflects the
performance of Lazard's U.S. Equity Composite. The composite includes all
accounts with investment objectives, policies and strategies substantially
similar to those to be used by Lazard in managing its portion of the Large-Cap
Blend Portfolio, except that 45 such accounts, with net assets totaling $3.3
million (less than 1% of the total assets in the 102 similar accounts), have
been omitted from the composite. Such omission, however, does not render the
performance information presented misleading. As of December 31, 1997, the
composite included 57 accounts totaling over $6.3 billion in assets under
management. The returns are presented net of actual fees. None of the accounts
included in the composite bears any sales loads or charges.

SunAmerica

SunAmerica's historical performance data covers 3 1/2 years (the period since
inception) and reflects the performance of a single account, which is a
front-end load mutual fund. This account represents the only account managed by
SunAmerica with an investment objectives, policies and strategies substantially
similar to those to be used by SunAmerica in managing its portion of the Large-
Cap Blend Portfolio. As of December 31, 1997, the fund's net assets totaled
$116.9 million. The returns presented in the chart are net of actual fees and
reflect the imposition of a sales charge of 5.75%.

T. Rowe Price

T. Rowe Price's historical performance data covers 10 years and reflects the
performance of a single account, which is a no-load mutual fund. According to T.
Rowe Price, this account represents the only investment vehicle managed by T.
Rowe Price with an investment objectives, policies and strategies substantially
similar to those to be used by T. Rowe Price in managing its portion of the
Large-Cap Blend Portfolio. As of December 31, 1997, the account's net assets
totaled over $3.3 billion. The returns are presented net of actual fees.

Morningstar Large Blend Category

Developed by Morningstar, the Morningstar Large Blend Category currently
reflects a group of 715 mutual funds which have portfolios with median market
capitalizations, price/earnings ratios, and price/book ratios similar to those
expected for the Large-Cap Blend Portfolio.

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GROWTH OF A $10,000 INVESTMENT

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THREE YEARS ENDED DECEMBER 31, 1997

Growth of a $10,000 Investment (Mountain Chart)

Morningstar Large
Lazard SunAmerica T. Rowe Price Blend Category

1994 $10,000 $10,000 $10,000 $10,000
1995 $13,700 $12,801 $13,092 $13,195
1996 $16,618 $16,275 $16,449 $15,891
1997 $20,706 $21,187 $20,314 $20,324

NOTE (LARGE-CAP BLEND PORTFOLIO)

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

GROWTH OF A $10,000 INVESTMENT

The 'Growth of $10,000' chart reflects three years of performance data for the
Lazard U.S. Equity Composite, a single mutual fund of SunAmerica and a single
mutual fund of T. Rowe Price. The returns for Lazard, SunAmerica and T. Rowe
Price are net of actual expenses.

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Advisers for Large-Cap Value Portfolio
- --------------------------------------------------------------------------------

The Advisers for the Large-Cap Value Portfolio are:

DAVID L. BABSON & CO., INC. (BABSON)
DAVIS SELECTED ADVISERS, L.P. (DAVIS)
WELLINGTON MANAGEMENT COMPANY, LLP
(WELLINGTON MANAGEMENT)

The performance results supplied by each Adviser were prepared as set forth
below under 'Individual Adviser Performance.'

PORTFOLIO PERFORMANCE

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

The Portfolio's (Class A shares) total return since inception (October 15, 1997)
through December 31, 1997 was -2.0%.

ANNUALIZED TOTAL RETURNS

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

PERIODS ENDED DECEMBER 31, 1997

Advisers' Past Performance

1 Year

Morningstar Large Value 26.7%
Babson 27.1%
Davis 27.4%
Wellington Management 24.2%

3 Year

Morningstar Large Value 26.2%
Babson 27.7%
Davis 31.3%
Wellington Management 28.2%

5 Year

Morningstar Large Value 17.7%
Babson 21.5%
Davis 20.9%
Wellington Management 21.0%

10 Year

Morningstar Large Value 15.9%

Babson 17.5%
Davis 20.5%
Wellington Management 17.6%

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NOTES (LARGE-CAP VALUE PORTFOLIO)

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INDIVIDUAL ADVISER PERFORMANCE

Except as otherwise noted below, an Adviser's performance is presented net of
actual fees and reflects the imposition of any sales loads or charges, if
applicable. The Portfolio's fees and expenses may be greater than those
charged by the individual Advisers. Accordingly, the Portfolio's actual
performance results may be less.

Babson

Babson's historical performance data covers 10 years and reflects the
performance of the Babson Value Composite. According to Babson, the composite
includes all accounts with investment objectives, policies and strategies
substantially similar to those to be used by Babson in managing its portion of
the Large-Cap Value Portfolio. Composite returns with respect to the period
prior to 1995 are based on results from a single account, which is a no-load
mutual fund, and, with respect to the period from 1995 to present, are based
on results from fully discretionary separate accounts and no-load mutual funds
advised by Babson. As of December 31, 1997, the composite included 36 accounts
with aggregate assets of $1.6 billion. The composite returns are presented net
of actual fees. None of the accounts included in composite bears any sales
loads or charges.

Davis

Davis' historical performance data covers 10 years and reflects the
performance of a single account, which is a front-end load mutual fund. Davis
manages a total of 14 accounts (9 of which are institutional accounts and 5 of
which are mutual funds) with investment objectives, policies and strategies
substantially similar to those used in managing its portion of the Large-Cap
Value Portfolio. Davis does not calculate composite performance for either its
institutional accounts or its mutual fund accounts, nor does it calculate a
combined composite of the institutional accounts' performance and the mutual
funds' performance. However, the performance for the other 13 accounts was, in
the aggregate, better than that shown for the account and, therefore, the
omission of such accounts does not render the performance information
presented misleading. As of December 31, 1997, the account's net assets
totaled $7.9 billion, which represented approximately 81% of the total assets
in the 12 similar accounts. The returns presented in the chart are net of

actual fees and reflect the imposition of a sales charge of 4.75%.

Wellington Management

Wellington Management's historical performance data covers 10 years and
reflects the performance of the Wellington Management Value/Yield Composite.
The composite includes all accounts with investment objectives, policies and
strategies substantially similar to those to be used by Wellington Management
in managing its portion of the Large-Cap Value Portfolio. As of December 31,
1997, the composite included 13 separately managed accounts totaling $4.0
billion of assets under management. The returns for the composite were
supplied to the Fund by Wellington Management gross of certain fees, but have
been adjusted to reflect the highest fees charged to any account included in
the composite for the reporting period. None of the accounts in the composite
bears any sales loads or charges.

Morningstar Large Value Category

Developed by Morningstar, the Morningstar Large Value Category reflects a
group of 397 mutual funds which have portfolios with median market
capitalizations, price/earnings ratios, and price/book ratios similar to those
expected for the Large-Cap Value Portfolio.

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GROWTH OF A $10,000 INVESTMENT

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TEN YEARS ENDED DECEMBER 31, 1997

Growth of a $10,000 Investment (Mountain Chart)

Morningstar
Large
Wellington Value
Babson Davis Management Category

1987 $10,000 $10,000 $10,000 $10,000
1988 $11,948 $11,663 $12,251 $11,751
1989 $14,183 $15,716 $15,096 $14,484
1990 $12,632 $15,260 $13,989 $13,537
1991 $16,352 $21,448 $17,857 $17,544

1992 $18,958 $24,030 $19,709 $19,283
1993 $23,395 $27,897 $24,082 $21,839
1994 $24,106 $27,359 $24,270 $21,724
1995 $31,974 $38,455 $32,245 $28,706
1996 $39,661 $48,661 $41,142 $34,458
1997 $50,161 $65,050 $51,111 $43,659

NOTE (LARGE-CAP VALUE PORTFOLIO)

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

GROWTH OF A $10,000 INVESTMENT

The 'Growth of $10,000' chart reflects ten years of performance data for the
Babson Value Composite, a single mutual fund of Davis, and the Wellington
Management Value/Yield Composite. The returns for the Babson Value Composite
and the Davis fund are net of actual expenses. The returns for the Wellington
Management Value/Yield Composite have been adjusted to give effect to the
account in the composite with the highest annualized expense for each 1, 3, 5,
and 10 year period.

<PAGE>

Style Select Series (Servicemark)
29

Advisers for Value Portfolio

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

The Advisers for the Value Portfolio are:

DAVIS SELECTED ADVISERS, L.P. (DAVIS) NEUBERGER&BERMAN, LLC (NEUBERGER&BERMAN)
STRONG CAPITAL MANAGEMENT, INC. (subcontracted to Schafer Capital Management,
Inc., together with Strong Capital Management, Inc. referred to as
'Strong/Schafer').

The performance results supplied by each Adviser were prepared as set forth
below under 'Individual Adviser Performance.'

PORTFOLIO PERFORMANCE

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

The Portfolio's (Class A shares) average annual total return since inception
(November 19, 1996) through December 31, 1997 was 21.91%.

ANNUALIZED TOTAL RETURNS

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

PERIODS ENDED DECEMBER 31, 1997

Advisers' Past Performance (Bar Chart)

1 Year

Morningstar Mid-Cap Value 27.0%
Value Portfolio (Class A) 21.9%*
Davis 27.4%
Neuberger&Berman 29.2%
Strong/Schafer 30.8%

3 Year

Morningstar Mid-Cap Value 25.6%
Davis 31.3%
Neuberger&Berman 30.3%
Strong/Schafer 28.8%

5 Year

Morningstar Mid-Cap Value 17.4%
Davis 20.9%
Neuberger&Berman 20.4%
Strong/Schafer 20.5%

10 Year

Morningstar Mid-Cap Value 15.8%
Davis 20.5%
Neuberger&Berman 17.2%
Strong/Schafer 19.3%

- ------------------
*The Portfolio's performance constitutes averge annual total return and reflects
the deduction of actual operating expenses and the imposition of a front-end
sales load.

<PAGE>

Style Select Series (Servicemark)
30

NOTES (VALUE PORTFOLIO)

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

INDIVIDUAL ADVISER PERFORMANCE

Except as otherwise noted below, an Adviser's performance is presented net of

actual fees and reflects the imposition of any sales loads or charges, if
applicable. The Portfolio's fees and expenses may be greater than those
charged by the individual Advisers. Accordingly, the Portfolio's actual
performance results may be less.

Davis

Davis' historical performance data covers 10 years and reflects the
performance of a single account, which is a front-end load mutual fund. Davis
manages a total of 13 accounts (9 of which are institutional accounts and 4 of
which are mutual funds) with investment objectives, policies and strategies
substantially similar to those to be used in managing its portion of the Value
Portfolio. Davis does not calculate composite performance for either its
institutional accounts or its mutual fund accounts, nor does it calculate a
combined composite of the institutional accounts' performance and the mutual
funds' performance. However, the performance for the other 12 accounts was, in
the aggregate, better than that shown for the account and, therefore, the
omission of such accounts does not render the performance information
presented misleading. As of December 31, 1997, the account's net assets
totaled $7.9 billion, which represented approximately 81% of the total assets
in the 13 similar accounts. The returns presented in the chart are net of
actual fees and reflect the imposition of a sales charge of 4.75%.

Neuberger&Berman

Neuberger&Berman's historical performance data covers 10 years and reflects
the performance of a single account, which is a no-load mutual fund.
Neuberger&Berman manages 2 accounts, including the Portfolio, with investment
objectives, policies and strategies substantially similar to those to be used
by Neuberger&Berman in managing its portion of the Value Portfolio. The
omission of the Portfolio, with assets of approximately $52.0 million (less
than 2% of the total assets in the 2 accounts), does not render the
performance information misleading. As of December 31, 1997, the account's net
assets totaled $3.83 billion. The returns are presented net of actual fees.

Strong/Schafer

Strong/Schafer's historical performance data covers 10 years and reflects the
performance of the Schafer Capital Equity Composite. The composite includes
all accounts with investment objectives, policies and strategies substantially
similar to those to be used by Strong/Schafer in managing its portion of the
Value Portfolio. As of December 31, 1997, the composite included 3 separately
managed accounts and 2 mutual funds totaling approximately $1.7 billion of
assets under management. The returns are presented net of actual fees. None of
the accounts in the composite bears any sales loads or charges. Prior to
January 1, 1993, not all composite calculations complied with AIMR.
Accordingly, performance results prior to January 1, 1993 do not comply with
AIMR.

Morningstar Mid-Cap Value Category

Developed by Morningstar, the Morningstar Mid-Cap Value Category currently
reflects a group of 195 mutual funds which have portfolios with median market
capitalizations, price/earnings ratios, and price/book ratios similar to those
expected for the Value Portfolio.

<PAGE>

Style Select Series (Servicemark)
31

GROWTH OF A $10,000 INVESTMENT

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

TEN YEARS ENDED DECEMBER 31, 1997

Growth of a $10,000 Investment (Mountain Chart)

Neuberger& Morningstar
Davis Berman Strong/Schafer Mid-Cap Value

1987 $10,000 $10,000 $10,000 $10,000
1988 $11,663 $11,546 $11,535 $12,028
1989 $15,715 $14,176 $14,598 $14,568
1990 $15,260 $13,452 $12,955 $13,401
1991 $21,448 $16,460 $17,868 $17,194
1992 $24,030 $19,343 $20,116 $19,488
1993 $27,897 $22,527 $24,282 $22,343
1994 $27,359 $22,101 $23,228 $21,929
1995 $38,455 $29,883 $30,963 $27,969
1996 $48,661 $37,799 $37,991 $34,200
1997 $65,050 $48,837 $49,685 $43,424

NOTE (VALUE PORTFOLIO)

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

GROWTH OF A $10,000 INVESTMENT

The 'Growth of $10,000' chart reflects ten years of performance data for a
single mutual fund of Davis, a single mutual fund of Neuberger&Berman and the
Schafer Capital Equity Composite. The returns for Davis, Neuberger&Berman and
Schafer are net of actual expenses.

<PAGE>

Style Select Series (Servicemark)
32

Advisers for Small-Cap Value Portfolio
- ------------------------------------------------------------------------------

The Advisers for the Small-Cap Value Portfolio are:

BERGER ASSOCIATES, INC. (subcontracted to Perkins, Wolf, McDonnell & Company,
together with Berger Associates, Inc. referred to as 'Berger/PWM') LAZARD
ASSET MANAGEMENT (LAZARD)

THE GLENMEDE TRUST COMPANY (GLENMEDE)

The performance results supplied by each Adviser were prepared as set forth
below under 'Individual Adviser Performance.'

PORTFOLIO PERFORMANCE
- ------------------------------------------------------------------------------

The Portfolio's (Class A shares) total return since inception (October 15,
1997) through December 31, 1997 was -2.04%.

ANNUALIZED TOTAL RETURNS
- ------------------------------------------------------------------------------

PERIODS ENDED DECEMBER 31, 1997

Advisers' Past Performance (Bar Chart)

1 Year

Morningstar Small Value 27.8%
Berger 36.5%
Lazard 27.8%
Glenmede 29.0%

3 Year

Morningstar Small Value 24.1%
Berger 29.3%
Lazard 26.1%
Glenmede 26.6%

5 Year

Morningstar Small Value 17.4%
Berger 21.8%
Lazard 21.0%

Glenmede 19.7%

<PAGE>

Style Select Series (Servicemark)

STYLE SELECT SERIES
ACCOUNT APPLICATION

<TABLE>
<S> <C>
The SunAmerica Center
Complete this application to open a new Style Select Series account. 733 Third Avenue
Please complete sections 1, 2, 3, 4, 5, 9 and 10. Shaded sections 6, 7 New York, NY 10017-3204
and 8 are optional. DO NOT USE THIS FORM TO ESTABLISH AN IRA ACCOUNT. 800.858.8850, ext. 5125
</TABLE>

1 ACCOUNT INFORMATION

Please indicate which Style Select Series Portfolio you are investing in and the
Class of shares you wish to purchase.

NOTE: PURCHASES OF $1,000,000 OR MORE SHOULD NOT BE MADE IN CLASS B SHARES.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
STYLE SELECT SERIES-LARGE-CAP GROWTH PORTFOLIO / / (709) $ / / (719) $ / / (779) $
STYLE SELECT SERIES-MID-CAP GROWTH PORTFOLIO / / (702) $ / / (712) $ / / (772) $
STYLE SELECT SERIES-AGGRESSIVE GROWTH PORTFOLIO / / (701) $ / / (711) $ / / (771) $
STYLE SELECT SERIES-LARGE-CAP BLEND PORTFOLIO / / (708) $ / / (728) $ / / (778) $
STYLE SELECT SERIES-LARGE-CAP VALUE PORTFOLIO / / (706) $ / / (716) $ / / (776) $
STYLE SELECT SERIES-VALUE PORTFOLIO / / (704) $ / / (714) $ / / (774) $
STYLE SELECT SERIES-SMALL-CAP VALUE PORTFOLIO / / (705) $ / / (715) $ / / (775) $
STYLE SELECT SERIES-INTERNATIONAL EQUITY PORTFOLIO / / (703) $ / / (713) $ / / (773) $
SUNAMERICA MONEY MARKET FUND / / (35) $ / / (535) $ / / (735) $
</TABLE>

/ / CHECK ENCLOSED FOR $___________ (MAKE CHECK PAYABLE TO THE NAMED PORTFOLIO
ABOVE OR TO STYLE SELECT SERIES WHEN INVESTING IN TWO OR MORE.)

/ / My investment dealer purchased $__________ on ________________ (date).
Wire order confirm number (if applicable)________________

2 REGISTRATION

Please check only one registration type. DO NOT USE THIS FORM TO ESTABLISH AN
IRA ACCOUNT.

/ / INDIVIDUAL

/ / JOINT OWNER (Joint tenants with rights of survivorship is assumed unless
otherwise specified)

/ / UNIFORM TRANSFERS TO MINORS ACT (UTMA) OR UNIFORM GIFTS TO MINORS ACT (UGMA)
- Use the name of the adult custodian on the shareholder line and the name
of the minor on the co-shareholder line. Use the minor's Social Security
number.

/ / TRUST OR OTHER ENTITY - Please indicate the name of the trustee(s)
authorized to act on behalf of the trust on the shareholder line and the
name of the trust and date of the trust on the co-shareholder line.

/ / OTHER form of ownership (please specify) ___________________________________

________________________________________________________________________________
Name of Shareholder Name of Co-Shareholder (if any)

3 MAILING ADDRESS

________________________________________________________________________________
Address Apt./Suite

________________________________________________________________________________
City State Zip Code Daytime Phone Number

4 SOCIAL SECURITY OR TAX ID NUMBER (SIGNATURE REQUIRED)

/ / SOCIAL SECURITY or / / TAX-ID #
For Individual or Joint accounts use Social Security number of owner.
For Custodial accounts use minor's Social Security number.

/ / U.S. Citizen / / Resident Alien / / Non-Resident Alien
(Specify Country)

I/We certify under penalties of perjury (1) that the Social Security or Taxpayer
Identification Number (TIN) provided is correct and (2) that
the IRS has never notified me/us that I/we are subject to backup withholding.

OR check applicable box:

/ / I (we) have been notified by the IRS that I am (we are) subject to backup
withholding for failure to report all interest or dividends.

/ / I (we) do not have a Taxpayer Identification Number but have applied for one
and understand that if the TIN is not provided to the Portfolio within 60
days the required withholding will begin.

________________________________________________________________________________
SIGNATURE Date Title or capacity, if applicable

<PAGE>

5 DISTRIBUTIONS (ALL DIVIDENDS AND CAPITAL GAINS WILL BE REINVESTED UNLESS

OTHERWISE NOTED BELOW)

DIVIDENDS (CHECK ONE)

/ / REINVEST DIVIDENDS IN SAME PORTFOLIO

/ / Reinvest dividends in another Style Select Series Portfolio
or SunAmerica Fund*

----------------------------------------------------
Portfolio Name Account Number (if existing)

/ / Send dividends by check to address of record

/ / Send dividends to bank account via Automated Clearing House
electronic funds transfer. Complete the ACH Cash
Distribution and Banking Information Sections on the
Supplemental Application

/ / Send dividend check to payee specified below

CAPITAL GAINS (CHECK ONE)
/ / REINVEST CAPITAL GAINS IN SAME PORTFOLIO

/ / Reinvest capital gains in another Style Select Series
Portfolio or SunAmerica Fund*

-------------------------------------------------------
Portfolio Name Account Number (if existing)

/ / Send capital gains by check to address of record

/ / Send capital gains to bank account via Automated Clearing
House electronic funds transfer. Complete the ACH Cash
Distribution and Banking Information Sections on the
Supplemental Application

/ / Send capital gains check to payee specified below

- --------------------------------------------------------------------------------
Name (payee) Address

- --------------------------------------------------------------------------------
City State Zip Code

*Dividends and capital gains can only be reinvested into the same Class of
shares in another Portfolio/Fund.

6 CONSOLIDATED STATEMENT AND INTERESTED PARTY STATEMENTS

/ / I want to receive a consolidated statement for all my Style Select Series

Portfolios. (Statements are mailed quarterly.)

/ / I wish to have duplicate confirmation statements sent to the interested
party listed below.

- --------------------------------------------------------------------------------
Name (Interested Party) Address

- --------------------------------------------------------------------------------
City State Zip Code

7 REDUCED SALES CHARGE (CLASS A SHARE PURCHASE ONLY)

PLEASE INDICATE HOW YOU WOULD LIKE TO REDUCE YOUR SALES CHARGE.

A. RIGHTS OF ACCUMULATION

/ / Please link the accounts listed below for Rights of Accumulation
privileges, so that this and future purchases will receive any discount for
which they are eligible. The sales charge for this purchase will be based
on the sum of the current purchase added to the value of all shares in
other Style Select Series Portfolio(s) or SunAmerica Fund(s) at the
previous day's Net Asset Value.

B. LETTER OF INTENT

/ / I want to reduce my sales charge. I agree to invest $_____________
over a 13-month period beginning _____________________ , 19__
(not more than 30 days prior to this application). I understand that an
additional sales charge must be paid if I do not complete my purchase.
NOTE: The amount required for discounts varies by Portfolio/Fund; see sales
charge table in the 'How to Buy Shares' section of your Portfolio/Fund
prospectus.

- --------------------------------------------------------------------------------
Name(s) on account

- --------------------------------------------------------------------------------
Portfolio(s) / account number(s)

8 SPECIAL ACCOUNT OPTIONS (ANY OPTION SELECTED REQUIRES THE SUPPLEMENTAL
ACCOUNT APPLICATION)

/ / I have completed and attached the Supplemental Account Application for:

/ / Dollar Cost Averaging / / Systematic Withdrawal Plan
/ / Systematic Exchange Program / / Cash Distributions via ACH

9 SIGNATURE

Each person signing on behalf of an entity represents that his or her actions
are authorized.

I have received and read each appropriate portfolio prospectus and understand

that its terms are incorporated by reference into this application.

I understand that this application is subject to acceptance and that certain
redemptions may be subject to a contingent deferred sales charge.
It is agreed that the Portfolio(s)/Fund(s), all SunAmerica companies and their
officers, directors, agents and employees will not be liable for any loss,
liability, damage or expense for relying upon this application or any
instruction believed to be genuine.
If you are not signing as an individual, state your title or capacity.

- --------------------------------------------------------------------------------
Shareholder Signature Date Title or capacity, if applicable

- --------------------------------------------------------------------------------
Joint Owner Signature Date

10 DEALER INFORMATION (FOR BROKER/DEALER USE ONLY) -- PLEASE PRINT
- --------------------------------------------------------------------------------

This application is submitted in accordance with our selling agreement with
SunAmerica Capital Services (SACS), the portfolio's prospectus and this
application. We will notify SACS of any purchase made under a Letter of Intent,
Rights of Accumulation or Sponsored Arrangement. We guarantee the signatures on
this application and the legal capacity of the signers.

- --------------------------------------------------------------------------------
Dealer Name Representative's Branch Office Location Line 1

- --------------------------------------------------------------------------------
Authorized Signature Representative's Branch Office Location Line 2

- --------------------------------------------------------------------------------
Dealer account number for client Representative's Branch Office Number

- --------------------------------------------------------------------------------
Representative's branch phone number Representative's Name

- --------------------------------------------------------------------------------
Representative's Number

<PAGE>
Style Select Series (Servicemark)

STYLE SELECT SERIES
SUPPLEMENTAL ACCOUNT APPLICATION

<TABLE>
<S> <C>
The SunAmerica Center
733 Third Avenue
Complete this application ONLY if you wish to add options New York, NY 10017-3204

to a new or existing Style Select Series account. 800.858.8850 ext. 5125
</TABLE>

- --------------------------------------------------------------------------------
ACCOUNT INFORMATION

- --------------------------------------------------------------------------------
Portfolio Name and Class Account Number

- --------------------------------------------------------------------------------
Shareholder Name

- --------------------------------------------------------------------------------
Social Security Number or Tax-ID Number

- --------------------------------------------------------------------------------
ACH CASH DISTRIBUTIONS

PLEASE COMPLETE THE BANKING INFORMATION SECTION ON THE REVERSE SIDE IF YOU ELECT
THIS OPTION.

/ / I wish to have my distributions sent to the bank account listed on the
reverse side.

- --------------------------------------------------------------------------------
DOLLAR COST AVERAGING

PLEASE COMPLETE THE BANKING INFORMATION SECTION ON THE REVERSE SIDE IF YOU ELECT
THIS OPTION.

Note: Purchases may take up to two business days to reflect in the account.

/ / I wish to establish Dollar Cost Averaging privileges for (Portfolio
name(s)) ________________________________________________________________

Monthly investment amount per Portfolio $ ____________(at least $25).

Please indicate the purchase dates: / / 1ST AND/OR / / 15TH

I would like the electronic transfer(s) to begin the month of
________________________

CIRCLE WHICH MONTH(S) YOU WOULD LIKE TO TRANSFER FUNDS: ALL MONTHS

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN (A MINIMUM $5,000 BALANCE IS REQUIRED)

/ / I wish to establish a Systematic Withdrawal Plan for (Portfolio name(s))

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

Please redeem shares from my account in the amount of $ _______________ per

Portfolio (not less than $50), or _______________ % per year

CIRCLE WHICH MONTH(S) YOU WOULD LIKE TO RECEIVE PAYMENT: ALL MONTHS

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

I would like payments to begin on the 20th of _____________________(month for
payment to begin).

Please send payment to:

/ / My address of record (Up to a maximum of $100,000).

/ / My bank via the Automated Clearing House System. (Please complete the
Banking Information Section on the reverse side).

/ / The Payee listed below. For more than one payee, please list the amount, the
name and the address of each payee on a separate piece of paper.

- --------------------------------------------------------------------------------
Name of Payee

- --------------------------------------------------------------------------------
Bank Account Number (if applicable)

- --------------------------------------------------------------------------------
Address

- --------------------------------------------------------------------------------
City State Zip Code

<PAGE>

- --------------------------------------------------------------------------------
BANKING INFORMATION

Please complete the following information if you wish to utilize the Automated
Clearing House (ACH), electronic movement of money to/from your bank account,
for use with Cash Distributions, Dollar Cost Averaging or a Systematic
Withdrawal Plan.

<TABLE>
<S> <C>
- ------------------------------------------------------------ ------------------------------------------------------------
Name of Bank Name of Account

- ------------------------------------------------------------ ------------------------------------------------------------
Street Name of Joint Owner

- ------------------------------------------------------------ ------------------------------------------------------------
City State Zip Code Checking Account Number

------------------------------------------------------------
Attach a 'VOIDED' Check or photo-copy for the 9 digit ABA Routing Number (Please verify with your bank)

above-referenced checking account (NO deposit slips)
</TABLE>

- --------------------------------------------------------------------------------
SYSTEMATIC EXCHANGE PROGRAM

/ / I wish to utilize the Systematic Exchange Program

<TABLE>
EXCHANGE FROM: EXCHANGE TO:

Portfolio Name Account # (if existing) Amount ($50 min) Portfolio Name Account # (if existing)
<S> <C> <C> <C> <C>
$
- ------------------------- ------------------- ---------------- ------------------------- -----------------------

$
- ------------------------- ------------------- ---------------- ------------------------- -----------------------
</TABLE>

I would like the exchanges to occur on the ______________ (choose date)
of the month.

I would like the exchanges to begin the month of _____________.

Circle which month(s) you would like exchanges to occur: ALL MONTHS

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

- --------------------------------------------------------------------------------
SIGNATURES

Each person signing on behalf of an entity represents that his or her actions
are authorized.

I have received and read each appropriate Portfolio prospectus and understand
that its terms are incorporated by reference into this application. I understand
that this application is subject to acceptance. I understand that certain
redemptions may be subject to a contingent deferred sales charge.

It is agreed that the Portfolio(s)/Fund(s), all SunAmerica companies and their
officers, directors, agents and employees will not be liable for any loss,
liability, damage or expense for relying upon this application or any
instruction believed to be genuine.

If you are not signing as an individual, state your title or capacity.

- -------------------------------------------------------------------------------
SHAREHOLDER SIGNATURE Date Title or capacity, if applicable

- -------------------------------------------------------------------------------
JOINT OWNER SIGNATURE Date

Signature Guarantee Stamp, if necessary

NOTE: A Signature Guarantee IS required if this is NOT being sent with the
original application and the Cash Distributions or Systematic
Withdrawal Plan proceeds are going to a special payee or somewhere other than
the address of record.

SSAPP-03/98

<PAGE>

Style Select Series (Servicemark)
33

NOTES (SMALL-CAP VALUE PORTFOLIO)

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

INDIVIDUAL ADVISER PERFORMANCE

Except as otherwise noted below, an Adviser's performance is presented net of
actual fees and reflects the imposition of any sales loads or charges, if
applicable. The Portfolio's fees and expenses may be greater than those
charged by the individual Advisers. Accordingly, the Portfolio's actual
performance results may be less.

Berger/PWM

Berger/PWM's historical performance data covers approximately 10 years and
reflects the performance of a single account, which is a no-load mutual fund.
The annualized total return since inception of the account is 16.86% as of
December 31, 1997. This account represents the only account managed by
Berger/PWM with an investment objectives, policies and strategies substantially
similar to those to be used by Berger/PWM in managing its portion of the
Small-Cap Value Portfolio. As of December 31, 1997, the account's net assets
totaled $135.4 million. The returns are presented net of actual fees.

Lazard

Lazard's historical performance data covers 10 years and reflects the
performance of the Lazard U.S. Small Cap Equity Composite. The annualized
total return since inception of the composite is 17.3% as of December 31,
1997. The composite includes all accounts with investment objectives, policies
and strategies substantially similar to those to be used by Lazard in managing
its portion of the Small-Cap Value Portfolio, except that 14 such accounts,
with net assets totaling $305.1 million (less than 14% of the total assets in
the 39 accounts), have been omitted from the composite. Such omission,
however, does not render the performance information presented misleading. As
of December 31, 1997, the composite included 25 accounts totaling $1.5 billion
in assets under management. The returns for the composite were supplied to the
Fund by Lazard gross of certain fees, but have been adjusted to reflect the
highest fees charged to any account included in the composite for the
reporting period. None of the accounts included in the composite bears any
sales loads or charges.

Glenmede

Glenmede's historical performance data covers approximately 6 3/4 years (the

period since inception) and reflects the performance of a single account,
which is a no-load mutual fund. The annualized return since inception of the
account is 18.8% as of December 31, 1997. This account represents the only
account managed by Glenmede with an investment objective and investment
policies and strategies substantially similar to those to be used by Glenmede
in managing its portion of the Small-Cap Value Portfolio. As of December 31,
1997, the account's net assets totaled $443 million. The returns for the
account were supplied to the Fund by Glenmede gross of certain fees, but have
been adjusted to reflect the highest fees charged to the account for the
reporting period.

Morningstar Small Value Category

Developed by Morningstar, the Morningstar Small Value Category currently
reflects a group of 235 mutual funds which have portfolios with median market
capitalizations, price/earnings ratios, and price/book ratios similar to those
expected for the Small-Cap Value Portfolio.

<PAGE>

Style Select Series (Servicemark)
34

GROWTH OF A $10,000 INVESTMENT

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

SIX YEARS ENDED DECEMBER 31, 1997

Growth of a $10,000 Investment (Mountain Chart)

Morningstar
Berger Lazard Glenmede Small Value

1991 $10,000 $10,000 $10,000 $10,000
1992 $11,972 $12,060 $11,249 $11,915
1993 $13,898 $14,476 $13,656 $14,007
1994 $14,827 $15,914 $13,800 $13,892
1995 $18,695 $19,579 $17,607 $17,110
1996 $23,481 $24,474 $22,026 $20,746
1997 $32,051 $31,278 $28,403 $26,513

NOTE (SMALL-CAP VALUE PORTFOLIO)

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

GROWTH OF A $10,000 INVESTMENT

The 'Growth of $10,000' chart reflects five years of performance data for a
single mutual fund of Berger/PWM, a single mutual fund of Glenmede and the
Lazard U.S. Small Cap Equity Composite. The performance for Berger, Glenmede
and Lazard reflect net-of-fee data.

<PAGE>
Style Select Series (Servicemark)
35

Advisers for International Equity Portfolio
- ------------------------------------------------------------------------------

The Advisers for the International Equity Portfolio are:
BANKERS TRUST COMPANY (BT)
ROWE PRICE-FLEMING INTERNATIONAL, INC.
(ROWE-FLEMING)
WARBURG PINCUS ASSET MANAGEMENT, INC. (WARBURG)

The performance results supplied by each Adviser were prepared as set forth
below under 'Individual Adviser Performance.'

PORTFOLIO PERFORMANCE
- ------------------------------------------------------------------------------

The Portfolio's (Class A shares) average annual total return since inception
(November 19, 1996) through December 31, 1997 was -7.12%.1

ANNUALIZED TOTAL RETURNS
- ------------------------------------------------------------------------------

PERIODS ENDED DECEMBER 31, 1997

Advisers' Past Performance (Bar Chart)

1 Year

Morningstar Foreign Stock 4.5%
International Equity Portfolio (Class A) -8.3%*
BT 12.2%
Rowe-Fleming 2.7%
Warburg -4.9%

3 Year

Morningstar Foreign Stock 8.5%
BT 10.8%
Rowe-Fleming 9.9%
Warburg 4.8%

5 Year

Morningstar Foreign Stock 11.4%
BT 14.3%
Rowe-Fleming 13.0%
Warburg 11.6%

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

(1) The Portfolio's performance reflects the performance of the predecessor
Subadviser to BT, which was Strong.

* The Portfolio's performance constitutes average annual total return and
reflects the deduction of actual operating exepenses and the imposition of
a front-end sales load.

<PAGE>

Style Select Series (Servicemark)
36

NOTES (INTERNATIONAL EQUITY PORTFOLIO)

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

INDIVIDUAL ADVISER PERFORMANCE

Except as otherwise noted below, an Adviser's performance is presented net of
actual fees. The Portfolio's fees and expenses may be greater than those
charged by the individual Advisers. Accordingly, the Portfolio's actual
performance results may be less.

BT's historical performance data covers approximately 10 years and reflects
the performance of the BT International Equity Composite, which
consists of two accounts, one of which is a mutual fund and the other an
institutional account. The 10 year annualized return since inception of the
accounts is 7.7% as of December 31, 1997. These accounts represent all those
accounts managed by BT with an investment objective, policies and strategy
substantially similar to those to be used in managing its portion of the
International Equity Portfolio. As of December 31, 1997, the net assets
managed under the two accounts totaled approximately $1.1 billion. The returns
are presented net of actual fees and sales charges.

Rowe-Fleming

Rowe-Fleming's historical performance data covers 10 years and reflects the
performance of a single account, which is a no-load mutual fund. The ten-year

annualized return of the account is 10.6% as of December 31, 1997.
Rowe-Fleming manages a total of 34 accounts (18 of which are institutional
accounts and 16 of which are mutual funds) with investment objectives,
policies and strategies substantially similar to those to be used in managing
its portfolio of the International Equity Portfolio. Although Rowe-Fleming
calculates composite performance for its institutional accounts, it does not
calculate composite performance for mutual fund accounts, nor does it
calculate a composite which combines the institutional accounts' composite
performance with the mutual funds' performance. However, the performance for
the other 33 accounts was, in the aggregate, better than that shown for the
account and, therefore, the omission of such accounts does not render the
performance information presented misleading. As of December 31, 1997, the
account's net assets totaled approximately $9.7 billion, which represented
approximately 51.9% of the total assets in the 34 similar accounts. The
returns are presented net of actual fees.

Warburg

Warburg's historical performance data covers approximately 6 3/4 years and
reflects the performance of a single account, which is a mutual fund. The
annualized return since inception of the account is 8.3% as of December 31,
1997. Warburg manages a total of 9 accounts (1 of which is an institutional
account and 8 of which are mutual funds) with an investment objective,
policies and strategy substantially similar to those to be used in managing
its portion of the International Equity Portfolio. Warburg does not calculate
a combined composite performance for its mutual fund accounts, nor does it
calculate a combined composite of the institutional account's performance and
the mutual funds' performance. However, the performance for the other 8
accounts was, in the aggregate, better than that shown for the account and,
therefore, the omission of such accounts does not render the performance
information presented misleading. As of December 31, 1997, the account's net
assets totaled $446.5 million, which represented approximately 9.6% of the
total assets in the 9 similar accounts. The returns are presented net of
actual fees and sales charges.

Morningstar Foreign Stock Category

Developed by Morningstar, the Morningstar Foreign Stock Category currently
reflects a group of 469 mutual funds which invest most of their assets in
foreign stocks.

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GROWTH OF A $10,000 INVESTMENT

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FIVE YEARS ENDED DECEMBER 31, 1997

Growth of a $10,000 Investment (Mountain Chart)

Morningstar
Rowe-Fleming Btrust Warburg Foreign Stock

1992 $10,000 $10,000 $10,000 $10,000
1993 $14,011 $13,870 $15,058 $13,557
1994 $13,905 $14,300 $15,019 $13,443
1995 $15,488 $15,473 $16,498 $14,683
1996 $17,965 $17,362 $18,158 $16,437
1997 $18,450 $19,480 $17,277 $17,182

NOTE (INTERNATIONAL EQUITY PORTFOLIO)

- ------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT

The 'Growth of $10,000' chart reflects five years of performance data for the
BT International Equity Composite, the T. Rowe Price International Stock Fund
Composite and a single mutual fund of Warburg. The returns for BT,
Rowe-Fleming and Warburg are net of actual expenses.

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Investment Techniques and Risk Factors
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Unless otherwise specified, each Portfolio may invest in the following
securities. As used herein, the term 'Adviser' shall mean either SunAmerica or
one of the Advisers chosen by SunAmerica. Also, the stated percentage
limitations are applied to an investment at the time of purchase unless
otherwise indicated.

Convertible Securities, Preferred Stocks, Warrants and Rights--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 which combine higher or lower
current income with options and other features. Generally, preferred stock has

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

Warrants are options to buy a stated number of shares of common stock at a
specified price any time during the life of the warrants (generally two or
more years). 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.

Investment in Small-Cap Companies--Each Portfolio may invest in small
companies having market capitalizations of under $1 billion. 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. Securities of small
or emerging growth companies may be subject to more abrupt or erratic market
movements and less market liquidity than larger, more established companies or
the market average in general. 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. In addition, certain smaller issuers may have a higher probability
of facing 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. While smaller companies may be subject to these additional risks,
they may also realize more substantial growth than larger, more established
companies.

Foreign Securities--Each Portfolio (other than the International Equity
Portfolio) is authorized to invest up to 30% of its total assets, and the
International Equity Portfolio invests without limitation, in foreign
securities. Each Portfolio may also invest in U.S. dollar denominated
securities of foreign issuers, including ADRs, as well as EDRs, GDRs or other
similar securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. Each Portfolio also may invest in
securities denominated in European Currency Units (ECUs). An ECU is a 'basket'
consisting of specified amounts of currencies of certain of the twelve member
states of the European Community. In addition, each Portfolio may invest in
securities denominated in other currency 'baskets.' Each Portfolio may also
seek to gain exposure to certain foreign markets, including developing
countries or emerging markets, where direct investment may be difficult or
impracticable, through investment in domestic closed-end mutual funds which
invest predominately in such markets. See the Statement of Additional
Information for a further discussion of foreign securities.

Risks of Foreign Securities. Foreign investments may be affected favorably or
unfavorably by changes in currency rates and exchange-control regulations and
costs will be incurred in connection with conversions between various
currencies. The value of a security may fluctuate as a result of currency
exchange rates in a manner unrelated to the underlying value of the security.
There may be less publicly available information about a foreign company than
about a U.S. company, and foreign companies may not be subject to uniform
accounting, auditing

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and financial reporting standards and requirements comparable to those
applicable to U.S. companies.

Securities of some foreign companies may be less liquid or more volatile than
securities of U.S. companies, and foreign brokerage commissions and custodian
fees are generally higher than in the U.S. In addition, there is generally
less governmental regulation of stock exchanges, brokers and listed companies
abroad than in the U.S. Investments in foreign securities may also be subject
to other risks, different from those affecting U.S. investments, including
local political or economic developments, expropriation or nationalization of
assets, confiscatory taxation and imposition of withholding taxes on income
from sources within such countries.

Emerging Markets. Investments may be made from time to time in issuers
domiciled in, or government securities of, developing countries or emerging
markets. Although there is no universally accepted definition, a developing
country is generally considered to be a country in the initial stages of its
industrialization cycle with a low per capita gross national product.
Historical experience indicates that the markets of developing countries or
emerging markets have been more volatile than the markets of developed
countries; however, such markets can provide higher rates of return to
investors. Investment in an emerging market country may involve certain risks,
including a less diverse and mature economic structure, a less stable
political system, an economy based on only a few industries or dependent on
international aid or development assistance, the vulnerability to local or
global trade conditions, extreme debt burdens, or volatile inflation rates.
See 'Foreign Investment Companies' below for a discussion of investing in
investment companies which invest in emerging markets.

Foreign Currency Transactions. Each Portfolio has the ability to hold a
portion of its assets in foreign currencies and to enter into forward foreign
currency exchange contracts. It may also purchase and sell exchange-traded
futures contracts relating to foreign currency and purchase and sell put and
call options on currencies and futures contracts.

Each Portfolio may enter into forward foreign currency exchange contracts to
reduce the risks of fluctuations in exchange rates; however, these contracts
cannot eliminate all such risks and do not eliminate fluctuations in the
prices of the Portfolio's portfolio securities.

Each Portfolio may purchase and write put and call options on currencies for
the purpose of protecting against declines in the U.S. dollar value of foreign
portfolio securities and against increases in the U.S. dollar cost of foreign
securities to be acquired. 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. As with other kinds of option transactions, however, the
writing of an option on currency will constitute only a partial hedge, up to
the amount of the premium received, and a Portfolio could be required to
purchase or sell currencies at disadvantageous exchange rates, thereby
incurring losses.

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

Each 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

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transactions. To the extent that the net amount of a swap is held in a
segregated account consisting of cash or liquid securities, the Fund believes
that swaps do not constitute senior securities under the 1940 Act and,
accordingly, they will not be treated as being subject to the Portfolio's

borrowing restrictions. The use of currency swaps is a highly specialized
activity which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. If an Adviser is
incorrect in its forecasts of market values and currency exchange rates, the
investment performance of a Portfolio would be less favorable than it would
have been if this investment technique were not used.

Foreign Investment Companies--Each Portfolio may invest in domestic closed-end
investment companies which invest in certain foreign markets, including
developing countries or emerging markets. The Large-Cap Growth, Aggressive
Growth and International Equity Portfolios may also invest in foreign
investment companies which invest in such markets. Some of the countries in
which the Portfolios invest may not permit direct investment by foreign
investors such as the Portfolios. Investments in such countries may only be
permitted through foreign government-approved or authorized investment
vehicles, which may include other investment companies. In addition, it may be
less expensive and more expedient for the Portfolios to invest in investment
companies in a country that permits direct foreign investment. Investing
through such vehicles may involve frequent or layered fees or expenses and may
also be subject to limitation under the 1940 Act. Under the 1940 Act, a fund
may invest up to 10% of its assets in shares of other investment companies and
up to 5% of its assets in any one investment company as long as the investment
does not represent more than 3% of the voting stock of the acquired investment
company. The Portfolios do not intend to invest in such investment companies
unless, in the judgment of the Advisers, the potential benefits of such
investments justify the payment of any associated fees and expenses. See
'Foreign Securities' and 'Emerging Markets' above and the Statement of
Additional Information.

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

The market values of fixed income securities tend to vary inversely with the
level of interest rates--when interest rates rise, their values will tend to
decline; when interest rates decline, their values generally will tend to
rise. The potential for capital appreciation with respect to variable rate
obligations or floating rate instruments will be less than with respect to
fixed-rate obligations. Long-term instruments are generally more sensitive to
these changes than short-term instruments. The market value of fixed income

securities and therefore their yield is also affected by the perceived ability
of the issuer to make timely payments of principal and interest.

U.S. Government Securities--Securities guaranteed by the U.S. government
include the following: (1) direct obligations of the U.S. Treasury (such as
Treasury bills, notes and bonds) and (2) federal agency obligations guaranteed
as to principal and interest by the U.S. Treasury (such as Government National
Mortgage Association certificates and Federal Housing Administration
debentures). 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.

Securities issued by U.S. government instrumentalities and certain federal
agencies 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

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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, Farmers Home Administration, Central
Bank for Cooperatives, Federal Intermediate Credit Banks and Federal Home Loan
Banks.

Corporate Debt Instruments--These instruments, such as bonds, represent the
obligation of the issuer to repay a principal amount of indebtedness at a
stated time in the future and, in the usual case, to make periodic interim
payments of interest at a stated rate.

Investment Grade--A designation applied to intermediate and long-term
corporate debt securities rated within the highest four rating categories
assigned by S&P (AAA, AA, A or BBB) or by Moody's (Aaa, Aa, A or Baa), or, if
unrated, considered by the Adviser to be of comparable quality. The ability of
the issuer of an investment grade debt security to pay interest and to repay
principal is considered to vary from extremely strong (for the highest
ratings) through adequate (for the lowest ratings given above), although the
lower-rated investment grade securities may be viewed as having speculative
elements as well.

High-Yield, High-Risk Bonds--A designation applied to intermediate and
long-term corporate debt securities that are not investment grade; commonly
referred to as 'junk bonds.' These include bonds rated below BBB by S&P, or
Baa by Moody's, or which are unrated but considered by the Adviser to be of
equivalent quality. These securities are considered speculative. See the

Statement of Additional Information for a complete description of bond
ratings.

The Mid-Cap Growth Portfolio and Large-Cap Value Portfolio may invest in debt
securities rated as low as 'BBB' by S&P, 'Baa' by Moody's, or unrated
securities determined by the Adviser to be of comparable quality. The
Large-Cap Growth, Aggressive Growth, Large-Cap Blend, Value, Small-Cap Value
and International Equity Portfolios may invest in debt securities rated below
investment grade (i.e., below 'BBB' by S&P, or below 'Baa' by Moody's), or if
unrated, determined by the Adviser to be of equivalent quality.

Risk Factors Relating to High-Yield, High-Risk Bonds-- High-yield, high-risk
bonds are subject to greater fluctuations in value than are higher rated bonds
because the values of high-yield bonds tend to reflect short-term corporate,
economic and market developments and investor perceptions of the issuer's
credit quality to a greater extent. Although under normal market conditions
longer-term securities yield more than shorter-term securities, they are
subject to greater price fluctuations. Fluctuations in the value of a
Portfolio's investments will be reflected in its net asset value per share.
The growth of the high-yield bond market paralleled a long economic expansion,
followed by an economic downturn which severely disrupted the market for high-
yield bonds and adversely affected the value of outstanding bonds and the
ability of the issuers to repay principal and interest. The economy may affect
the market for high-yield bonds in a similar fashion in the future including
an increased incidence of defaults on such bonds. From time to time,
legislation may be enacted which could have a negative effect on the market
for high-yield bonds.

High-yield bonds present the following risks:

Sensitivity to Interest Rate and Economic Changes-- High-yield, high-risk
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 defaulted on its obligations to pay
interest or principal or entered 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 (and therefore yields) of
high-yield bonds and the Portfolio's net asset value.

Payment Expectations--High-yield, high-risk bonds may contain redemption or
call provisions. If an issuer exercised these provisions in a declining
interest-rate market, an Adviser would have to replace the security with a
lower-yielding security, resulting in a decreased return for investors.
Conversely, a high-yield bond's value will decrease in a rising interest rate
market, as will the value of the Portfolio's assets. If the Portfolio
experiences unexpected net redemptions, this may force it to sell high-yield
bonds without regard to their investment merits, thereby decreasing the asset
base upon

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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.

Under such circumstances, the task of accurate valuation becomes more
difficult and judgment would play a greater role due to the relative lack of
reliable and objective data. 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 thinly traded market.

Each Adviser attempts to reduce these risks through diversification of the
assets under its control and by credit analysis of each issuer, as well as by
monitoring broad economic trends and corporate and legislative developments.
If a high-yield bond previously acquired by a Portfolio is downgraded, the
Advisers, as appropriate, will evaluate the security and determine whether to
retain or dispose of it.

Asset-Backed Securities--These 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. See the Statement of Additional Information
for a further discussion of these types of securities.

Zero Coupon Bonds, Step-Coupon Bonds, Deferred Interest Bonds and PIK
Bonds. Fixed income securities in which a 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 which 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 which 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 disad-vantageous circumstances to satisfy the Portfolio's distribution
obligations.

REITs--The Large-Cap Blend and each of the Value Portfolios may invest in Real
Estate Investment Trusts ('REITs'), which 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.

Short-Term and Temporary Defensive Investments--In addition to their primary
investments, each Portfolio may also invest up to 25% of its total assets in
both U.S. and non-U.S. dollar denominated money market instruments (a) for
liquidity purposes (to meet redemptions and expenses) or (b) to generate a
return on idle cash held in a Portfolio's portfolio during periods when an
Adviser is unable to locate favorable investment opportunities. For temporary
defensive purposes, each Portfolio may invest up to 100% of its total assets
in cash and short-term fixed income securities, including corporate debt
obligations and money market instruments rated in one of the two highest
categories by a nationally recognized statistical rating organization (or
determined by the Adviser to be of equivalent quality). In addition, Janus and
Neuberger&Berman may invest idle cash of the assets under their control in
money market mutual funds that they manage. Such an investment may entail
additional fees. See the Statement of Additional Information for a description
of short-term debt securities and the Appendix to the Statement of Additional
Information for a description of securities ratings.

Repurchase Agreements--Under these types of agreements, a Portfolio buys a
security and obtains a simultaneous commitment from the seller to repurchase
the security at a specified time and price. The seller must maintain
appropriate collateral with the Fund's custodian (or at an appropriate
sub-custodian in the case of tri- or quad-party repurchase agreements). A
Portfolio will only enter into repurchase agreements involving securities in
which it could otherwise invest and with selected banks and securities dealers
whose financial condition is monitored by the Adviser, subject to the guidance
of the Directors. 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. If bankruptcy proceedings are
commenced with

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respect to the seller, realization of the collateral by the Portfolio may be
delayed or limited.

Hedging and Income Enhancement Strategies--Each Portfolio may write covered
calls to enhance income. After writing such a covered call 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). For hedging purposes or income enhancement,
each Portfolio may use interest rate futures, and stock and bond index
futures, including futures on U.S. government securities (together,
'Futures'); forward contracts on foreign currencies; and call and put options

on equity and debt securities, Futures, stock and bond indices and foreign
currencies (all of the foregoing are referred to as 'Hedging Instruments').
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
be listed on a national securities or commodities exchange or on U.S. over-
the-counter markets.

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

Special Risks of Hedging and Income Enhancement Strategies. 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 Advisers' 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. Risks
inherent in the use of options, foreign currency and Futures contracts and
options on Futures contracts include (1) dependence on the Advisers' ability
to predict correctly movements in the direction of interest rates, securities
prices and currency markets; (2) imperfect correlation between the price of
options and Futures contracts and options thereon and movements in the prices
of the securities or currencies being hedged; (3) the fact that skills needed
to use these strategies are different from those needed to select portfolio
securities; (4) the possible absence of a liquid secondary market for any
particular instrument at any time; (5) the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences; and (6) the
possible inability of the Portfolio to purchase or sell a portfolio security
at a time that otherwise would be favorable for it to do so, or the possible
need for the Portfolio to sell a portfolio security at a disadvantageous time,
due to the need for the Portfolio to maintain 'cover' or to segregate
securities in connection with hedging transactions. A transaction is 'covered'
when the Portfolio owns the security subject to the option on such security,
or some other security acceptable for applicable segregation requirements. See
the Statement of Additional Information for further information concerning
income enhancement and hedging strategies and the regulation requirements
relating thereto.

Illiquid and Restricted Securities--No more than 15% of the value of a

Portfolio's net assets may be invested in securities which are illiquid,
including repurchase agreements that have a maturity of longer than seven
days, interest rate swaps, currency swaps, caps, floors and collars. For this
purpose, not all securities which are restricted are deemed to be illiquid.
For example, restricted securities which the Board of Directors, or the
Adviser pursuant to guidelines established by the Board of Directors, has
determined to be marketable, such as securities eligible for sale under Rule
144A promulgated under the Securities Act of 1933, as amended, or certain
private placements of commercial paper issued in reliance on an exemption from
such Act pursuant to Section 4(2) thereof, may be deemed to be liquid for
purposes of this restriction. This investment practice could have the effect
of increasing the level of illiquidity in the Portfolio to the extent that
qualified institutional buyers (as defined in Rule 144A) become for a time
uninterested in purchasing these

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restricted securities. In addition, a repurchase agreement which by its terms
can be liquidated before its nominal fixed-term on seven days or less notice
is regarded as a liquid instrument. 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.
See 'Illiquid Securities' in the Statement of Additional Information for a
further discussion of investments in such securities.

Hybrid Instruments--These instruments, including indexed or 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.

Borrowing--As a matter of fundamental policy, each Portfolio is authorized to
borrow up to 33 1/3% of its total assets from banks for temporary or emergency
purposes. In seeking to enhance investment performance, each 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 of a Portfolio in an
amount greater than would otherwise be the case when the market values of the
securities purchased through borrowing increase. In the event the return on an
investment of borrowed monies does not fully recover the costs of such
borrowing, the value of the Portfolio's assets would be reduced by a greater
amount than would otherwise be the case. The effect of leverage will therefore
tend to magnify the gains or losses to the Portfolio as a result of investing
the 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 Portfolio 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). The time and extent to which
a Portfolio may employ leverage will be determined by the Adviser in light of

changing facts and circumstances, including general economic and market
conditions, and will be subject to applicable lending regulations of the Board
of Governors of the Federal Reserve Board.

Securities Lending--Each Portfolio may lend portfolio securities in amounts up
to 33 1/3% of its respective total assets to brokers, dealers and other
financial institutions, provided such loans are callable at any time by the
Portfolio and are at all times secured by cash or equivalent collateral. By
lending its portfolio securities, a Portfolio will receive income while
retaining the securities' potential for capital appreciation. As with any
extensions of credit, there are risks of delay in recovery and, in some cases,
even loss of rights in the collateral should the borrower of the securities
fail financially. However, these loans of portfolio securities will be made
only to firms deemed by the Adviser to be creditworthy. The proceeds of such
loans will be invested in high-quality short-term debt securities, including
repurchase agreements.

When-Issued, Delayed Delivery and Forward Transactions--These generally
involve the purchase or sale of a security with payment and delivery at some
time in the future--i.e., beyond normal settlement. A Portfolio does not earn
interest on securities purchased in this manner until settlement and bears the
risk of market value fluctuations in between the purchase and settlement
dates. New issues of stocks and bonds, private placements and U.S. government
securities may be sold in this manner. One form of when-issued or delayed
delivery security that each 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.

Short Sales--Each 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 which accrue during
the period of the loan. To borrow the security, the Portfolio also may be
required to pay a premium, which would increase the cost of the security sold.
The proceeds of the short sale will be retained by the broker, to the extent
necessary to meet margin requirements, until the short position is closed out.
Until the Portfolio replaces a borrowed security, the Portfolio will

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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 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, securities identical to those sold short. 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.

Special Situations--A 'special situation' arises when, in the opinion of the
Adviser, the securities of a particular issuer will be recognized and
appreciate in value due to a specific development with respect to that 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.

Future Developments--Each Portfolio may invest in securities and other
instruments which 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 will be amended or
supplemented as appropriate to discuss any such new investments.

See the Statement of Additional Information for further information concerning
these and other types of securities and investment techniques in which the
Portfolio may from time to time invest, including dollar rolls, standby
commitments and reverse repurchase agreements.

Management of the Fund
- ------------------------------------------------------------------------------

Directors. The Directors of the Fund are responsible for the overall
supervision of the operations of the Fund and each Portfolio and perform
various duties imposed on directors of investment companies by the 1940 Act
and by the State of Maryland.

Center, Los Angeles, CA 90067-6022. In addition to managing the Fund and
serving as an Adviser to the Aggressive Growth Portfolio and Large-Cap Blend
Portfolio, SunAmerica serves as adviser, manager and/or administrator for
Anchor Pathway Fund, Anchor Series Trust, Seasons Series Trust, SunAmerica
Equity Funds, SunAmerica Income Funds, SunAmerica Money Market Funds, Inc.,
and SunAmerica Series Trust. SunAmerica managed, advised and/or administered
assets in excess of $12 billion as of December 31, 1997 for investment
companies, individuals, pension accounts, and corporate and trust accounts.

SunAmerica selects the Advisers for and/or manages the investments of each
Portfolio, provides various administrative services and supervises the
Portfolio's daily business affairs, subject to general review by the
Directors. The Investment Advisory and Management Agreement entered into
between SunAmerica and the Fund, on behalf of each Portfolio (the 'Management
Agreement') authorizes SunAmerica to manage the assets of each Portfolio
and/or to retain the Advisers to do so. SunAmerica monitors the activities of
the Advisers, and from time to time will recommend the replacement of an
Adviser on the basis of investment performance, style drift, or other
considerations.

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The annual rate of the investment advisory fee
payable to SunAmerica that applies to each of the Growth Portfolios, Large-Cap
Blend Portfolio and Value Portfolios is 1.00% of Assets. The annual rate of
the investment advisory fee payable to SunAmerica that applies to the
International Equity Portfolio is 1.10% of Assets. The term 'Assets' means the
average daily net assets of the Portfolio. The investment advisory fees are
accrued daily and paid monthly, and may be higher than those charged to other
funds.

For the fiscal year ended October 31, 1997, each Portfolio paid SunAmerica a
fee equal to the following percentages of average daily net assets: Large-Cap
Growth Portfolio 1.00%; Mid-Cap Growth Portfolio 1.00%; Aggressive Growth
Portfolio 1.00%; Large-Cap Blend Portfolio 1.00%; Large-Cap Value Portfolio
1.00%; Value Portfolio 1.00%; Small-Cap Value Portfolio 1.00%; and
International Equity Portfolio 1.10%. SunAmerica has voluntarily agreed to
waive fees or reimburse expenses, if necessary, to keep operating expenses at
or below an annual rate of 1.78% of the Assets of Class A shares and 2.43% of
the Assets of Class B and Class C shares for each Portfolio (other than the
International Equity Portfolio) and 2.03% of the Assets of Class A shares and
2.68% of the Assets of Class B and Class C shares for the International Equity
Portfolio. 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 Advisers. The organizations described below act as Advisers to the
respective Portfolio pursuant to agreements with SunAmerica (each, a
'Subadvisory Agreement' and collectively the 'Subadvisory Agreements'). The
duties of each Adviser include furnishing continuing advice and
recommendations to the relevant portion of the respective Portfolio regarding
securities to be purchased and sold. Each Adviser, therefore, generally
formulates the continuing program for management of the Assets under its
control consistent with the Portfolio's investment objectives and the
investment policies established by the Board. Because each Adviser manages its
portion of its respective Portfolio independently of the Portfolio's other
Advisers, the same security may be held in two different portions of the same
Portfolio, or may be acquired for one portion of the Portfolio at the time
that the Adviser to another portion of the Portfolio deems it appropriate to
dispose of the security from that other portion. Under some market conditions,
one or more of the Advisers may believe that temporary, defensive investments
in short-term instruments or cash are appropriate when another Adviser or
Advisers believe continued exposure to the equity markets is appropriate for
their portions of the Portfolio.

Each of the Advisers (other than SunAmerica) is independent of SunAmerica and
discharges its responsibilities subject to the oversight and supervision of
SunAmerica, which pays the Advisers' fees. Each Adviser is paid monthly by
SunAmerica a fee equal to a percentage of the Assets of the Portfolio
allocated to the Adviser. The annual rate as a percentage of daily net assets,
of the fees payable by SunAmerica to the Advisers for each Portfolio may vary
according to the level of Assets of each Portfolio. The actual aggregate
annual rates of such fees would be the following, expressed as a percentage of
the Assets of each Portfolio: Large-Cap Growth Portfolio, 0.48%; Mid-Cap
Growth Portfolio, 0.50%; Aggressive Growth Portfolio, 0.37%; Large-Cap Blend
Portfolio, 0.32%; Large-Cap Value Portfolio, 0.41%; Value Portfolio, 0.50%;
Small-Cap Value Portfolio, 0.55%; and International Equity Portfolio, 0.65%.

SunAmerica may terminate any Subadvisory Agreement without shareholder
approval. Moreover, SunAmerica has received an exemptive order from the
Securities and Exchange Commission which permits SunAmerica, subject to
certain conditions, to enter into Subadvisory Agreements relating to the Fund
with Advisers approved by the Board without obtaining shareholder approval.
The exemptive order also permits SunAmerica, subject to the approval of the
Board but without shareholder approval, to employ new Advisers for new or
existing Portfolios, change the terms of particular Subadvisory Agreements or
continue the employment of existing Advisers after events that would otherwise
cause an automatic termination of a Subadvisory Agreement. Shareholders of a
Portfolio have the right to terminate a Subadvisory Agreement for such
Portfolio at any time by a vote of the majority of the outstanding voting
securities of such Portfolio. Shareholders will be notified of any Adviser
changes. The order also permits the Fund

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to disclose to shareholders the Advisers' fees only in the aggregate for each
Portfolio.

LARGE-CAP GROWTH PORTFOLIO

The Advisers for the Large-Cap Growth Portfolio are Janus, Papp and Montag &
Caldwell.

Janus Capital Corporation. Janus is a Colorado corporation located at 100
Fillmore Street, Denver, Colorado 80206-4923, and serves as investment adviser
or subadviser to mutual funds and individual, corporate, charitable and
retirement accounts. Kansas City Southern Industries, Inc. ('KCSI') owns
approximately 83% of the outstanding voting stock of Janus. KCSI is a 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. As of December 31, 1997, Janus
had under management approximately $67 billion in assets.

Marc Pinto serves as the Portfolio Manager for Janus' portion of the Large-Cap
Growth Portfolio. Mr. Pinto has been the Vice President of Portfolio
Management of Janus since 1994. From 1993 to 1994, he was Co-President of
Creative Retail Technology, a producer of hardware for retail clients. From
1991 to 1993, Mr. Pinto was an equity analyst at Priority Investments Ltd., a
family owned business.

L. Roy Papp & Associates. Papp is an Arizona partnership located at 4400
North 32nd Street, Suite 280, Phoenix, Arizona 85018. Papp serves as
investment adviser to individuals, trusts, retirement plans, endowments, and
foundations. As of December 31, 1997, assets under management exceeded $1.1
million.

L. Roy Papp and Rosellen C. Papp, partners of Papp, serve as the Portfolio
Managers of Papp's portion of the Large-Cap Growth Portfolio. Except for two
years when he was United States director of, and ambassador to, the Asian
Development Bank, Manila, Philippines, Mr. Papp has been in the money
management field since 1955. He has served as managing general partner of Papp
since 1989. Rosellen C. Papp has been the Director of Research of Papp since
1981.

Montag & Caldwell, Inc. Montag & Caldwell is a Georgia corporation located at
3343 Peachtree Road, Suite 1100, Atlanta, Georgia 30326-1022. Montag &
Caldwell was founded in 1945 and is an indirect, wholly owned subsidiary of
Alleghany Corporation. Montag & Caldwell serves as investment adviser to
employee benefit, endowment, charitable and other institutional clients, as
well as high net worth individuals. As of December 31, 1997, Montag & Caldwell

had in excess of $15 billion in assets under management.

Montag & Caldwell's portion of the Large-Cap Growth Portfolio is advised by an
investment management team headed by Ronald E. Canakaris. He has been in the
money management business since 1970 and has served as President and Chief
Investment Officer of Montag & Caldwell since 1984.

MID-CAP GROWTH PORTFOLIO

The Advisers for the Mid-Cap Growth Portfolio are MAS, Pilgrim Baxter and T.
Rowe Price.

Miller Anderson & Sherrerd, LLP. MAS, a Pennsylvania limited liability
partnership founded in 1969, is located at One Tower Bridge, West
Conshohocken, Pennsylvania 19428. MAS provides investment services to employee
benefit plans, endowment funds, foundations and other institutional investors.
MAS is a subsidiary of Morgan Stanley, Dean Witter, Discover & Co., a
financial services company with three major businesses: full service
brokerage, credit services and asset management. As of December 31, 1997, MAS
had in excess of $61 billion in assets under management.

Arden C. Armstrong serves as Portfolio Manager for MAS's portion of the
Mid-Cap Growth Portfolio. Ms. Armstrong joined MAS as a Portfolio Manager in
1986.

Pilgrim Baxter & Associates, Ltd. Pilgrim Baxter, a Delaware corporation, is
located at 825 Duportail Road, Wayne, Pennsylvania 19087, and is a
professional investment management firm and registered investment adviser
that, along with its predecessors, has been in business since 1982. Pilgrim
Baxter provides advisory services to pension and profit-sharing plans,
charitable institutions, corporations, individual investors, trusts and
estates, and other investment companies. The controlling shareholder of
Pilgrim Baxter is United Asset Management Corporation ('UAM'), an NYSE listed
holding company principally engaged, through affiliated firms, in providing
institutional investment management services and acquiring institutional
investment management firms. UAM's corporate headquarters are located at One
International Place, Boston, Massachusetts 02110. As of December 31, 1997,
Pilgrim Baxter had assets under management of approximately $16.0 billion.

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Jeffrey A. Wrona, CFA, serves as primary manager and Gary L. Pilgrim, CFA,
serves as co-manager for Pilgrim Baxter's portion of the Mid-Cap Growth
Portfolio. Mr. Wrona joined Pilgrim Baxter in 1997 from Munder Capital
Management, where he was a Senior Portfolio Manager for seven years. Mr.
Pilgrim has served as the Chief Investment Officer for Pilgrim Baxter for over

six years. He has been involved in growth-stock investing throughout his
career.

T. Rowe Price Associates, Inc. T. Rowe Price is a Maryland corporation
located at 100 East Pratt Street, Baltimore, Maryland 21202. Founded in 1937
by the late Thomas Rowe Price, Jr., T. Rowe Price and its affiliates managed
over $126 billion for over four and a half million individual and
institutional investor accounts as of December 31, 1997. T. Rowe Price is a
publicly traded company.

T. Rowe Price's portion of the Mid-Cap Growth Portfolio is advised by an
Investment Advisory Committee composed of Brian W.H. Berghuis, Chairman, Marc
L. Baylin, James A.C. Kennedy and John F. Wakeman. Mr. Berghuis has day-to-day
responsibility for managing the assets and works with the committee in
developing and executing T. Rowe Price's portion of the investment program.
Mr. Berghuis has been managing investments since joining T. Rowe Price in
1985.

AGGRESSIVE GROWTH PORTFOLIO

The Advisers for the Aggressive Growth Portfolio are Janus, SunAmerica and
Warburg.

Janus Capital Corporation. Janus is a Colorado corporation located at 100
Fillmore Street, Denver, Colorado 80206-4923, and serves as investment adviser
or subadviser to mutual funds and individual, corporate, charitable and
retirement accounts. Kansas City Southern Industries, Inc. ('KCSI') owns
approximately 83% of the outstanding voting stock of Janus. KCSI is a 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. As of December 31, 1997, Janus
had under management approximately $67 billion in assets.

Scott W. Schoelzel serves as Portfolio Manager for Janus' portion of the
Aggressive Growth Portfolio. Mr. Schoelzel joined Janus in January 1994. From
1991 to 1993, Mr. Schoelzel was a portfolio manager with Founders Asset
Management, Inc.

Equity Funds, SunAmerica Income Funds, SunAmerica Money Market Funds, Inc.,
and SunAmerica Series Trust. SunAmerica managed, advised and/or administered
assets in excess of $12 billion as of December 31, 1997 for investment
companies, individuals, pension accounts, and corporate and trust accounts.

Donna Calder serves as Portfolio Manager for SunAmerica's portion of the
Aggressive Growth Portfolio. Prior to joining SunAmerica, Ms. Calder served as
a General Partner of Manhattan Capital Partners, L.P.

Warburg Pincus Asset Management, Inc. Warburg is a professional investment
advisory firm which provides investment serrvices to investment companies,
employee benefit plans, endowment funds, foundations and other institutions
and individuals. As of December 31, 1997, Warburg managed approximately $19.7
billion in assets. Incorporated in 1970, Warburg is indirectly controlled by
Warburg, Pincus & Co. which has no businesses other than being a holding
company of Warburg and its affiliates. Warburg is located at 466 Lexington
Avenue, New York, NY 10017-3147.

The Portfolio Managers of Warburg's portion of the Aggressive Growth Portfolio
are Elizabeth B. Dater and Stephen J. Lurito. Ms. Dater is a Senior Managing
Director of Warburg and has been a Portfolio Manager of Warburg since 1978.
Mr. Lurito is a Managing Director of Warburg and has been a Portfolio Manager
of Warburg since 1987.

LARGE-CAP BLEND PORTFOLIO

Lazard Asset Management. Lazard is a division of Lazard Freres & Co. LLC, a
New York limited liability company. Located at 30 Rockefeller Plaza, New York,
New York 10112, Lazard provides investment management services to individual
and institutional clients. As of December 31, 1997, Lazard and its affiliated
companies managed client discretionary accounts with assets totaling
approximately $60 billion.

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Lazard manages assets on a team basis. Herbert W. Gullquist oversees the
investment team which is responsible for Lazard's portion of the Large-Cap
Blend Portfolio. Mr. Gullquist is Vice Chairman of Lazard and has been with
Lazard since 1982. Michael S. Rome is the member of the investment team who is
primarily responsible for the day-to-day management of Lazard's portion of the
Large-Cap Blend Portfolio. Mr. Rome is the Managing Director responsible for
U.S./global equity management of Lazard and for overseeing the day-to-day
operations of the U.S. core equity investment team. He has been with Lazard
since 1991.

SunAmerica Asset Management Corp. SunAmerica is an indirect wholly owned
subsidiary of SunAmerica Inc., an investment-grade financial services company
which, as of December 31, 1997, held more than $52 billion in assets.
SunAmerica Inc.'s principal executive offices are located at 1 SunAmerica
Center, Los Angeles, CA 90067-6022. In addition to managing the Fund and
serving as an Adviser to the Aggressive Growth Portfolio and Large-Cap Blend
Portfolio, SunAmerica serves as adviser, manager and/or administrator for
Anchor Pathway Fund, Anchor Series Trust, Seasons Series Trust, SunAmerica
Equity Funds, SunAmerica Income Funds, SunAmerica Money Market Funds, Inc.,
and SunAmerica Series Trust. SunAmerica managed, advised and/or administered
assets in excess of $12 billion as of December 31, 1997 for investment
companies, individuals, pension accounts, and corporate and trust accounts.

The Domestic Equity Investment Team is responsible for the management of
SunAmerica's portion of the Large-Cap Blend Portfolio. The Team is composed of
nine portfolio managers, research analysts and traders. Individual members of
the Team may focus more heavily on particular aspects of the domestic equity
markets.

T. Rowe Price's portion of the Large-Cap Blend Portfolio is advised by an
Investment Advisory Committee composed of Stephen W. Boesel, Chairman, Andrew
M. Brooks, Arthur B. Cecil III, Gregory A. McCrickard, Mark J. Vaselkiv, and
Richard T. Whitney. The committee chairman has day-to-day responsibility for
managing T. Rowe Price's portion of the Large-Cap Blend Portfolio and works
with the committee in developing and executing the Portfolio's investment
program. Mr. Boesel has been the chairman of such committee since 1987. He has
been managing investments since joining T. Rowe Price in 1973.

LARGE-CAP VALUE PORTFOLIO

The Advisers for the Large-Cap Value Portfolio are Babson, Davis and
Wellington Management.

David L. Babson & Co., Inc. Babson is a Massachusetts corporation, located at
One Memorial Drive, Cambridge, Massachusetts 02142. Babson is a wholly owned
subsidiary of DLB Acquisition Corp., a holding company, which is controlled by
Mass Mutual Holding Company, a holding company and wholly owned subsidiary of

Massachusetts Mutual Life Insurance Company, a mutual life insurance company.
Babson provides investment advisory services to a substantial number of
institutional and other investors, including other registered investment
companies. As of December 31, 1997, Babson had over $18.3 billion in assets
under management.

Roland W. Whitridge is primarily responsible for the day-to-day management of
the portion of the Large-Cap Value Portfolio allocated to Babson. Mr.
Whitridge has been employed by Babson in portfolio management for over twenty
years.

Davis Selected Advisers, L.P. Davis is a Colorado limited partnership,
located at 124 East Marcy Street, Santa Fe, New Mexico 87501, and Venture
Advisers, Inc. is Davis' sole general partner. Shelby M.C. Davis is the
controlling shareholder of the general partner. As of December 31, 1997, Davis
had assets under management of approximately $14.4 billion. In performing its
investment advisory services, Davis, while remaining ultimately responsible
for its management of the portion of the assets of the Large-Cap Value
Portfolio allocated to it, is able to draw on the portfolio management,
research and market expertise of its affiliates (including Davis Selected
Advisers--NY, Inc.) in performing such services.

Christopher C. Davis is responsible for the day-to-day management of Davis'
portion of the Large-Cap Value Portfolio. He joined Davis in September 1989 as
an assistant portfolio manager and research analyst.

Wellington Management Company, LLP. Wellington Management is a Massachusetts
limited liability partnership, located at 75 State Street, Boston
Massachusetts 02109. Wellington Management is a

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professional investment counseling firm which provides investment services to
investment companies, employee benefit plans, endowments, foundations, and
other institutions and individuals. The following persons are managing
partners of Wellington Management: Robert W. Doran, Duncan M. McFarland and
John R. Ryan. As of December 31, 1997, Wellington Management had investment
management authority with respect to approximately $174.5 billion of assets.

Wellington Management's Value/Yield Team manages the day-to-day operations of
the portion of the Large-Cap Value Portfolio allocated to it. The Value/Yield
Team, headed by John R. Ryan, is comprised of five specialized fundamental
analysts. The group is supported by Wellington Management's twenty-eight
industry analysts and specialized fundamental, quantitative and technical

analysts, macroanalysts and traders. Mr. Ryan is a Senior Vice President and
Managing Partner of Wellington Management, and has been with the firm for
sixteen years.

VALUE PORTFOLIO

The Advisers for the Value Portfolio are Davis, Neuberger&Berman and Strong.
Schafer, pursuant to a subcontract with Strong, serves as Adviser to Strong's
portion of the Value Portfolio.

Christopher C. Davis, formerly co-manager for the Davis portion of the Value
Portfolio, assumed full responsibility for the management of Davis' portion
effective February 19, 1997. Mr. Davis joined Davis in September 1989 as an
assistant portfolio manager and research analyst. Prior to February 19, 1997,
Shelby M.C. Davis served as co-manager of the Davis portion of the Value
Portfolio. He will continue to consult with Christopher Davis in his capacity
of Chief Investment Officer of Davis.

Neuberger&Berman, LLC. Neuberger&Berman is a Delaware limited liability
company located at 605 Third Avenue, New York, New York 10158-0180.
Neuberger&Berman has been in the investment advisory business since 1939. As
of December 31, 1997, Neuberger&Berman and its affiliates had assets under
management of approximately $52.8 billion.

Michael M. Kassen and Robert I. Gendelman serve as Portfolio Managers to
Neuberger&Berman's portion of the Value Portfolio. Mr. Kassen has been
Managing Director since January 1994 and a Vice President and Portfolio
Manager since June 1990, of Neuberger&Berman Management, Inc. and a principal
of Neuberger&Berman since January 1993. Mr. Gendelman is a senior portfolio
manager for Neuberger&Berman and an Assistant Vice President of
Neuberger&Berman Management, Inc. and a principal of Neuberger&Berman since
December 1996. He was a portfolio manager for another mutual fund manager from
1992 to 1993.

Schafer Capital Management, Inc. Schafer is a Delaware corporation, located
at 645 Fifth Avenue, New York, New York 10022, and serves as investment
adviser to a number of equity accounts. An affiliate of Schafer, Schafer
Cullen Capital Management, Inc., serves as investment adviser to equity
accounts for individuals, tax-exempt equity accounts, charitable foundation
accounts and other equity accounts. David K. Schafer is Schafer's controlling
person (within the meaning of the 1940 Act) and sole shareholder. As of
December 31, 1997, Schafer had assets under management of approximately $1.7
million.

David K. Schafer serves as the Portfolio Manager of Strong's portion of the
Value Portfolio. Mr. Schafer has been in the investment management business
for more than twenty-five years. Mr. Schafer founded Schafer in 1984, and is
the President of Schafer and also a minority shareholder of Schafer Cullen
Capital Management, Inc.

SMALL-CAP VALUE PORTFOLIO

The Advisers for the Small-Cap Value Portfolio are Berger, Lazard and
Glenmede. PWM, pursuant to a subcontract with Berger, serves as Adviser to
Berger's portion of Small-Cap Value Portfolio.

Berger Associates, Inc. Berger is a Delaware corporation, located at 210
University Boulevard, Suite 900, Denver Colorado 80206, and serves as
investment adviser, sub-adviser, administrator, or sub-administrator to mutual
funds, and institutional and private investors. Kansas City Southern
Industries, Inc. ('KCSI') owns approximately 100% of the outstanding shares of
Berger. KCSI is a publicly traded holding company with principal operations in
rail transportation, through its subsidiary The Kansas City Southern Railway
Company, and financial asset management businesses. As of December 31, 1997,
Berger had assets under management of more than $13.4 billion. Pursuant to an
agreement between

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Berger and PWM under which PWM manages Berger's portion of the Small-Cap Value
Portfolio, SunAmerica pays an advisory fee directly to Berger, and Berger pays
PWM's fee.

Perkins, Wolf, McDonnell & Company. PWM, located at 53 West Jackson
Boulevard, Suite 818, Chicago, Illinois 60604, was organized as a Delaware
corporation in 1980 under the name Mac-Per-Wolf Co. to operate as a securities
broker-dealer. In September 1983, it changed its name to Perkins, Wolf,
McDonnell & Company. PWM is a member of the National Association of Securities
Dealers, Inc. and, in 1984, registered with the Securities and Exchange
Commission as an investment adviser. As of December 31, 1997, PWM had assets
under management of approximately $163 million.

Robert H. Perkins is primarily responsible for the investment management of
the portion of the Small-Cap Value Portfolio allocated to Berger. Mr. Perkins
owns 49% of PWM's outstanding common stock and serves as President and Chief
Investment Officer and as a director of PWM.

Lazard Asset Management. Lazard is a division of Lazard Freres & Co. LLC, a

New York limited liability company. Located at 30 Rockefeller Plaza, New York,
New York 10112, Lazard provides investment management services to individual
and institutional clients. As of December 31, 1997, Lazard and its affiliated
companies managed client discretionary accounts with assets totaling
approximately $60 billion.

Lazard manages assets on a team basis. Herbert W. Gullquist oversees the
investment team which is responsible for Lazard's portion of the Small-Cap
Value Portfolio. Mr. Gullquist is Vice Chairman of Lazard and has been with
Lazard since 1982. Eileen D. Alexanderson is the member of the investment team
who is primarily responsible for the day-to-day management of Lazard's portion
of the Small-Cap Value Portfolio. Ms. Alexanderson is a Managing Director of
Lazard and Portfolio Manager for small and mid-cap equity management of
Lazard, and has been with Lazard since 1979.

The Glenmede Trust Company. Glenmede is a privately-owned, independent trust
company devoted exclusively to investment management and trust services.
Glenmede is a wholly-owned subsidiary of The Glenmede Corporation and is
located at One Liberty Place, 1650 Market Street, Suite 1200, Philadelphia,
Pennsylvania 19103. As of December 31, 1997, Glenmede had approximately $12.8
billion in assets under management.

Robert J. Mancuso, CFA, is the primary Portfolio Manager responsible for
Glenmede's portion of the Small-Cap Value Portfolio. Scott R. Abernethy, CFA,
Thomas R. Angers, CFA, Larry R. Bernstein, CFA, Barry D. Kohout, CFA, Robert
T. Niemeyer, Sr., CFA, and Anthony J. Albuquerque are Glenmede's equity
research analysts. Mr. Mancuso joined Glenmede in 1992 and has 18 years of
experience in equity research and portfolio management.

INTERNATIONAL EQUITY PORTFOLIO

The Advisers for the International Equity Portfolio are BT, Rowe-Fleming and
Warburg.

BT is a wholly-owned subsidiary of Bankers Trust New York Corporation, with
principal offices at 130 Liberty Street (One Bankers Trust Plaza), New York
10006. BT is a worldwide merchant bank that provides investment management
services for the nation's largest corporations and institutions. As of December
31, 1997, BT managed approximately $300 billion in assets globally.

The Co-Portfolio Managers for BT's portion of the International Equity Portfolio
are Michael Levy and Robert L. Reiner, Managing Directors of Bankers Trust

Funds Management. Mr. Levy heads BT's international equity team, which is
responsible for the day-to-day management of BT's portion of the Portfolio.
Mr. Levy's experience prior to joining BT includes investment banking and
equity analysis with Oppenheimer & Company, and he has more than twenty-six
years of business experience, of which sixteen years have been in the
investment industry. Mr. Reiner has 16 years of investment industry experience,
previously at Scudder, Stevens & Clark, he was responsible for providing equity
research and macroeconimic/market coverage.

Rowe Price-Fleming International, Inc. Rowe-Fleming is a Maryland
corporation, incorporated in 1979 as a joint venture between T. Rowe Price and
Robert Flemings Holding Limited ('Flemings'). It is located at 100 East Pratt
Street, Baltimore, Maryland 21202. T. Rowe Price, Flemings and Jardine Fleming
Group Limited ('Jardine Fleming') are the owners of Rowe-Fleming. The common
stock of Rowe-Fleming is 50% owned by a wholly owned subsidiary of T. Rowe
Price, 25% by a subsidiary of Flemings, and 25% by Jardine Fleming. (Half of
Jardine Fleming is owned by Flemings and half by Jardine Matheson Holdings
Limited.) T. Rowe Price has the right to elect a majority of the Board of
Directors of Rowe-Fleming, and Flemings has the right to elect the remaining
directors, one of whom will be nominated by Jardine Fleming. As of December
31, 1997, Rowe-Fleming managed over $30 billion of foreign assets.

The Portfolio Managers for Rowe-Fleming's portion of the International Equity
Portfolio are Martin G. Wade, Peter B. Askew, Mark J.T. Edwards, John R.

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Ford, James B.M. Seddon, and David J.L. Warren. Martin Wade joined
Rowe-Fleming in 1979 and has 27 years of experience with the Fleming Group in
research, client service, and investment management. (Fleming Group includes
Flemings and/or Jardine Fleming.) Peter Askew joined Rowe-Fleming in 1988 and
has 21 years of experience managing multi-currency fixed income portfolios.
Mark Edwards joined Rowe-Fleming in 1986 and has 15 years of experience in
financial analysis. John Ford joined Rowe-Fleming in 1982 and has 16 years of
experience with Fleming Group in research and portfolio management. James
Seddon joined Rowe-Fleming in 1987 and has 11 years of experience in portfolio
management. David Warren joined Price-Fleming in 1984 and has 16 years of
experience in equity research, fixed income research, and portfolio
management.

Warburg Pincus Asset Management, Inc. Warburg is a professional investment
advisory firm which provides investment services to investment companies,
employee benefit plans, endowment funds, foundations and other institutions
and individuals. As of December 31, 1997, Warburg managed approximately $19.7
billion in assets. Incorporated in 1970, Warburg is indirectly controlled by

Warburg, Pincus & Co. which has no businesses other than being a holding
company of Warburg and its affiliates. Warburg is located at 466 Lexington
Avenue, New York, NY 10017-3147.

Richard H. King is Portfolio Manager of Warburg's portion of the International
Equity Portfolio, and
P. Nicholas Edwards, Harold W. Ehrlich and
Vincent J. McBride are Associate Portfolio Managers. Mr. King, a Senior
Managing Director of Warburg, has been with Warburg since 1989.

The Distributor. SunAmerica Capital Services, Inc. (the 'Distributor'), an
indirect wholly owned subsidiary of SunAmerica Inc., acts as distributor of
the shares of each Portfolio pursuant to the Distribution Agreement between
the Distributor and the Fund on behalf of each Portfolio. The Distributor
receives all initial and deferred sales charges in connection with the sale of
Fund shares, all or a portion of which it may reallow to other broker-dealers.
The Distributor and other broker-dealers pay commissions to salespersons, as
well as the cost of printing and mailing prospectuses to potential investors
and of any advertising expenses incurred by them in connection with their
distribution of Portfolio shares.

The Distributor, at its expense, may from time to time provide additional
compensation to broker-dealers (including in some instances affiliates of the
Distributor) in connection with sales of shares of the Fund. Such compensation
may include (i) full re-allowance of the front-end sales charge on Class A
shares; (ii) additional compensation with respect to the sale of Class A,
Class B or Class C shares; or (iii) financial assistance to broker-dealers in
connection with conferences, sales or training programs for their employees,
seminars for the public, advertising campaigns regarding one or more of the
Portfolios, and/or other broker-dealer sponsored special events. In some
instances, this compensation will be made available only to certain
broker-dealers whose representatives have sold a significant amount of shares
of the Fund. Compensation may also include payment for travel expenses,
including lodging, incurred in connection with trips taken by invited
registered representatives for meetings or seminars of a business nature. In
addition, the following types of non-cash compensation may be offered through
sales contests: (i) travel mileage on major air carriers; (ii) tickets for
entertainment events (such as concerts or sporting events); or (iii)
merchandise (such as clothing, trophies, clocks, pens or other electronic
equipment). Broker-dealers may not use sales of the Funds' shares to qualify
for this compensation to the extent receipt of such compensation may be
prohibited by the laws of any state or any self-regulatory agency, such as,
for example, the National Association of Securities Dealers, Inc. Dealers who
receive bonuses or other incentives may be deemed to be underwriters under the
Securities Act of 1933.

Certain laws and regulations limit the ability of banks and other depository
institutions to underwrite and distribute securities. However, in the opinion
of SunAmerica based upon the advice of counsel, these laws and regulations do
not prohibit such depository institutions from providing other services to
investment companies of the type contemplated by the Distribution Plans (as

described below). The Directors will consider appropriate modifications to the
operations of the Portfolios, including discontinuance of payments under the
Distribution Plans to banks and other depository institutions, in the event
such institutions can no longer provide the services called for under their
agreements. Banks and other financial services firms may be subject to various
state laws regarding services described, and may be required to register as
dealers pursuant to state law.

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Distribution Plans. Rule 12b-1 under the 1940 Act permits an investment
company directly or indirectly to pay expenses associated with the
distribution of its shares in accordance with a plan adopted by the investment
company's board of directors and approved by its shareholders. Pursuant to
such rule, the Directors and the shareholders of each class of shares of each
Portfolio have adopted distribution plans hereinafter referred to as the
'Class A Plan,' the 'Class B Plan' and the 'Class C Plan,' and collectively as
the 'Distribution Plans.' In adopting each Distribution Plan, the Directors
determined that there was a reasonable likelihood that each such Plan would
benefit the Portfolios and the shareholders of each respective class. The
sales charge and distribution fees of a particular class will not be used to
subsidize the sale of shares of any other class.

Under the Class A Plan, the Distributor may receive payments from a Portfolio
at an annual rate of up to 0.10% of average daily net assets of such
Portfolio's Class A shares to compensate the Distributor and certain
securities firms for providing sales and promotional activities for
distributing that class of shares. Under the Class B and Class C Plans, the
Distributor may receive payments from a Portfolio at the annual rate of up to
0.75% of the average daily net assets of such Portfolio's Class B and Class C
shares, respectively, to compensate the Distributor and certain securities
firms for providing sales and promotional activities for distributing each
such class of shares. The distribution costs for which the Distributor may be
reimbursed out of such distribution fees include fees paid to broker-dealers
that have sold Portfolio shares, commissions, and other expenses such as those
incurred for sales literature, prospectus printing and distribution and
compensa-tion to wholesalers. It is possible that in any given year the amount
paid to the Distributor under one or more of the Distribution Plans may exceed
the Distributor's distribution costs as described above. The Distribution
Plans provide that each class of shares of each Portfolio may also pay the
Distributor an account maintenance and service fee of up to 0.25% of the
aggregate average daily net assets of such class of shares for payments to
broker-dealers
for providing continuing account maintenance. In this regard, some payments
are used to compensate broker-dealers with account maintenance and service
fees in an amount up to 0.25% per year of the assets maintained in a Portfolio
by their customers.

For the fiscal year ended October 31, 1997, under the Class A Plan, each
Portfolio paid the Distributor a fee equal to the following percentages of
average daily net assets: Large-Cap Growth Portfolio 0.35%; Mid-Cap Growth
Portfolio 0.35%; Aggressive Growth Portfolio 0.35%; Large-Cap Blend Portfolio
0.35%; Large-Cap Value Portfolio 0.35%; Value Portfolio 0.35%; Small-Cap Value
Portfolio 0.35%; and International Equity Portfolio 0.35%. For the fiscal year
ended October 31, 1997, under the Class B and Class C Plans, each Portfolio
paid the Distributor a fee equal to the following percentages of average daily
net assets: Large-Cap Growth Portfolio, 1.00%; Mid-Cap Growth Portfolio 1.00%;
Aggressive Growth Portfolio 1.00%; Large-Cap Blend Portfolio 1.00%; Large-Cap
Value Portfolio 1.00%; Value Portfolio 1.00%; Small-Cap Value Portfolio 1.00%;
and International Equity Portfolio 1.00%.

The Administrator. The Fund has entered into a Service Agreement under the
terms of which SunAmerica Fund Services, Inc. ('SAFS'), an indirect wholly
owned subsidiary of SunAmerica Inc., assists the transfer agent in providing
shareholder services. Pursuant to the Service Agreement, as compensation for
services rendered, SAFS receives a fee from the Fund, calculated and payable
monthly, at an annual rate of 0.22% of average daily net assets (in addition
to out-of-pocket charges reimbursed by the Fund). See the Statement of
Additional Information for further information.

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Purchase of Shares
- --------------------------------------------------------------------------------

General. Shares of each of the Portfolios are sold at the respective net asset
value next calculated after receipt of a purchase order, plus a sales charge,
which, at the election of the investor, may be imposed either (i) at the time of
purchase (Class A shares), or (ii) on a deferred basis (Class B and Class C
shares and certain Class A shares).

The minimum initial investment in each Portfolio is $500 and the minimum
subsequent investment is $100. However, for (i) wrap or certain other advisory
accounts for the benefit of clients of broker-dealers, financial institutions,
registered investment advisers or financial planners adhering to certain
standards established by the Distributor, and (ii) Individual Retirement
Accounts ('IRAs'), Keogh Plan accounts and accounts for other qualified plans,
the minimum initial investment is $250 and the minimum subsequent investment is
$25. The decision as to which class is most beneficial to an investor depends on
the amount and intended length of the investment. Investors should consult their
investment adviser for help in determining which class of shares is most
appropriate for them. Generally, investors making large investments, qualifying
for a reduced initial sales charge, might consider Class A shares because there
is a lower distribution fee than Class B and Class C shares. Shareholders who

purchase $1,000,000 or more of shares of the Portfolios should purchase only
Class A shares. Investors making small investments might consider Class B or
Class C shares because 100% of the purchase price is invested immediately.
Investors should consider the CDSC period and any conversion rights in the
context of their investment time frame. For example, while Class C shares have a
shorter CDSC period than Class B shares, Class C shares do not have a conversion
feature and, therefore, are subject to an ongoing distribution fee. Accordingly,
Class B shares may be more appropriate than Class C shares for investors with a
longer term investment time frame. Dealers may receive different levels of
compensation depending on which class of shares they sell.

Upon making an investment in shares of a Portfolio, an open account will be
established under which shares of the applicable Portfolio and additional shares
acquired through reinvestment of dividends and distributions will be held for
each shareholder's account by State Street Bank and Trust Company ('State
Street') and its affiliate, National Financial Data Services ('NFDS')
(collectively, the 'Transfer Agent'). Shareholders will not be issued
certificates for their shares unless they specifically so request in writing,
but no certificate is issued for fractional shares. Shareholders receive regular
statements from the Transfer Agent that report each transaction affecting their
accounts. Further information may be obtained by calling Shareholder/Dealer
Services at (800) 858-8850.

Class A Shares. Class A shares are offered at net asset value plus an initial
sales charge, which varies with the size of the purchase as follows:

<TABLE>
<CAPTION>
CONCESSION OF
SALES CHARGE DEALERS
--------------------- --------------
% OF % OF % OF
OFFERING NET AMOUNT OFFERING
SIZE OF PURCHASE PRICE INVESTED PRICE
- --------------------------------------- -------- ---------- --------------
<S> <C> <C> <C>
Less than $50,000...................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000......... 4.75% 4.99% 4.00%
$100,000 but less than $250,000........ 3.75% 3.90% 3.00%
$250,000 but less than $500,000........ 3.00% 3.09% 2.25%
$500,000 but less than $1,000,000...... 2.10% 2.15% 1.35%
$1,000,000 or more..................... None None see below
</TABLE>

No sales charge is payable at the time of purchase on investments of $1 million
or more. In addition, subject to the conditions listed below, shares may be
purchased at net asset value, without payment of a sales charge, by employee
benefit plans qualified under Sections 401 or 457 of the Code, or employee
benefit plans created pursuant to Section 403(b) of the Code and sponsored by
nonprofit organizations defined under Section 501(c)(3) of the Code
(collectively, 'Plans'). A Plan will qualify for purchases at net asset value
provided that (a) the initial amount invested in one or more of the Portfolios
(or in combination with the shares of other funds in the SunAmerica Mutual

Funds, which consist of the SunAmerica Equity Funds, SunAmerica Income Funds and
SunAmerica Money Market Funds) is at least $1,000,000, (b) the sponsor signs a
$1,000,000 Letter of Intent, (c) such shares are purchased by an
employer-sponsored plan with at least 100 eligible employees, or (d) the
purchases are by trustees or other fiduciaries for certain employer-sponsored
plans, the trustee, fiduciary or administrator for which has an agreement with
the Distributor with respect to such purchases and all such transactions for the
plan are executed through a single omnibus

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account. Nevertheless, the Distributor will pay a commission to any dealer who
initiates or is responsible for such an investment, in the amount of 1.00% of
the amount invested. Redemptions of such shares within the twelve months
following their purchase will be subject to a CDSC at the rate of 1.00% of the
lesser of the net asset value of the shares being redeemed (exclusive of
reinvested dividends and distributions) or the total cost of such shares. This
CDSC is paid to the Distributor. Redemptions of such shares held longer than
twelve months would not be subject to a CDSC. However, one-half of the
commission paid with respect to such a purchase is subject to forfeiture by the
dealer in the event the redemption occurs during the second year from the date
of purchase. In determining whether a deferred sales charge is payable, it is
assumed that shares purchased with reinvested dividends and distributions and
then other shares held the longest are redeemed first.

To the extent that sales are made for personal investment purposes, the sales
charge is waived as to Class A shares purchased by current or retired officers,
directors, and other full-time employees of SunAmerica Inc. and its affiliates,
as well as members of the selling group and family members of the foregoing. In
addition, the sales charge is waived with respect to shares purchased by wrap or
certain other advisory accounts for the benefit of clients of broker-dealers,
financial institutions, registered investment advisers or financial planners
adhering to certain standards established by the Distributor. Shares purchased
under this waiver are subject to certain limitations described in the Statement
of Additional Information. Complete details concerning how an investor may
purchase shares at reduced sales charges may be obtained by contacting
Shareholder/Dealer Services at (800) 858-8850.

There are certain special purchase plans for Class A shares which can reduce the
amount of the initial sales charge to investors in the Portfolios. For more
information about 'Rights of Accumulation,' the 'Letter of Intent,' 'Combined
Purchase Privilege' and 'Reduced Sales Charges for Group Purchases,' see the
Statement of Additional Information.

Class B Shares. Class B shares are offered at net asset value. Certain
redemptions of Class B shares within the first six years of the date of purchase
are subject to a CDSC. The charge is assessed on an amount equal to the lesser
of the then-current market value or the purchase price of the shares being
redeemed. No charge is assessed on shares derived from reinvestment of dividends
or capital gains distributions. In determining whether the CDSC is applicable to

a redemption, the calculation is determined in the manner that results in the
lowest possible rate being charged. Therefore, it is assumed that the redemption
is first of any shares of a class other than Class B, in the shareholder's
Portfolio account, second of any shares in such account that are not subject to
a CDSC (i.e., shares representing reinvested dividends and distributions), third
of Class B shares held for more than six years and fourth of such shares held
the longest during the six-year period. The CDSC will not be applied to dollar
amounts representing an increase in the net asset value of the shares being
redeemed since the time of purchase of such redeemed shares. The amount of the
CDSC, if any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of redemption of such
shares. Solely for purposes of determining the number of years from the time of
any payment for the purchase of shares, all payments during a month are
aggregated and deemed to have been made on the first day of the month. The
following table sets forth the rates of the CDSC.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLARS INVESTED OR
PAYMENT WAS MADE REDEMPTION PROCEEDS
- -------------------------- -------------------------
<S> <C>
First..................... 4%
Second.................... 4%
Third..................... 3%
Fourth.................... 3%
Fifth..................... 2%
Sixth..................... 1%
Seventh and thereafter.... 0%
</TABLE>

Conversion Feature--Class B Shares. Class B shares (including a pro rata portion
of the Class B shares purchased through the reinvestment of dividends and
distributions) will convert automatically to Class A shares on the first
business day of the month following the seventh anniversary of the issuance of
such Class B shares. Subsequent to the conversion of a Class B share to a Class
A share, such shares will no longer be subject to the higher distribution fee of
Class B shares. Such conversion will be on the basis of the relative net asset
values of Class B shares and Class A shares, without the imposition of any sales
load, fee or charge.

Class C Shares. Class C shares are offered at net asset value. Certain
redemptions of Class C shares within the first year of the date of purchase are
subject to a CDSC of 1%. The method for calculating any such CDSC will be the
same method used for

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calculating the CDSC for Class B shares. See 'Class B Shares' above.

Waiver of CDSC. The CDSC applicable to Class B and Class C shares will be
waived, subject to certain conditions, in connection with redemptions that are
(a) requested within one year of the death of the shareholder of an individual
account or of a joint tenant where the surviving joint tenant is the deceased's
spouse; (b) requested within one year after the shareholder of an individual
account or a joint tenant on a spousal joint account becomes disabled; or the
initial determination of disability of a shareholder; (c) taxable distributions
or loans to participants made by qualified retirement plans or retirement
accounts (not including rollovers) for which SunAmerica serves as fiduciary
(e.g., prepares all necessary tax reporting documents); provided that, in the
case of a taxable distribution, the plan participant or account holder has
attained the age of 59 1/2 at the time the redemption is made; and (d) made
pursuant to a Systematic Withdrawal Plan, up to a maximum amount of 12% per year
from a shareholder account based on the value of the account at the time the
Plan is established, provided, however, that all dividends and capital gains
distributions are reinvested in Portfolio shares. See the Statement of
Additional Information for further information concerning conditions with
respect to (a) and (b) above. For information on the waiver of the CDSC contact
Shareholder/Dealer services at (800) 858-8850.

Other CDSC Information. For Federal income tax purposes, the amount of the CDSC
will reduce the amount realized on the redemption of shares, concomitantly
reducing gain or increasing loss. For information on the imposition of the CDSC,
contact Shareholder/Dealer Services at (800) 858-8850.

Additional Purchase Information. All purchases are confirmed to each
shareholder. The Fund reserves the right to reject any purchase order and may at
any time discontinue the sale of any class of shares of any Portfolio.

Shares of the Portfolios may be purchased through the Distributor or SAFS, by
check or federal funds wire and through a dollar cost averaging program. Checks
should be made payable to the specific Portfolio of the Fund. If the payment is
for a retirement plan account for which the Adviser serves as fiduciary, please
indicate on the check that payment is for such an account. Payments to open new
accounts should be mailed to SunAmerica Fund Services, Inc., Mutual Fund
Operations, The SunAmerica Center, 733 Third Avenue, New York, New York
10017-3204, together with a completed New Account Application. Payment for
subsequent purchases should be mailed to SunAmerica Fund Services, Inc., c/o
NFDS, P.O. Box 419373, Kansas City, Missouri 64141-6373 and the shareholder's
account number for the Portfolio should appear on the check. For fiduciary
retirement plan accounts, both initial and subsequent purchases should be mailed
to SunAmerica Fund Services, Inc., Mutual Fund Operations, The SunAmerica
Center, 733 Third Avenue, New York, New York 10017-3204. SAFS reserves the right
to reject any check made payable other than in the manner indicated above. Under
certain circumstances, the Fund will accept a multi-party check (e.g., a check
made payable to the shareholder by another party and then endorsed by the
shareholder to the Fund in payment for the purchase of shares); however, the

processing of such a check may be subject to a delay. The Fund does not verify
the authenticity of the endorsement of such multi-party check, and acceptance of
the check by the Fund should not be considered verification thereof. Neither the
Fund nor its affiliates will be held liable for any losses incurred as a result
of a fraudulent endorsement. Shares will be priced at the net asset value next
determined after the order is placed with the Distributor or SAFS. See
'Additional Information Regarding Purchase of Shares' in the Statement of
Additional Information for more information regarding these services and the
procedures involved and when orders are deemed to be placed.

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Redemption of Shares
- --------------------------------------------------------------------------------

Shares of any Portfolio may be redeemed at any time at their net asset value
next determined, less any applicable CDSC, after receipt by the Fund of a
redemption request in proper form. Any capital gain or loss realized by a
shareholder upon any redemption of shares will be recognized for federal income
tax purposes, subject to certain loss deferral rules. See 'Dividends,
Distributions and Taxes.'

General. Normally payment is made by check mailed on the next business day for
shares redeemed, but in any event, payment is made by check mailed within seven
days after receipt by the Transfer Agent of share certificates or of a
redemption request, or both, in proper form. Under unusual circumstances, the
Portfolio may suspend repurchases or postpone payment for up to seven days or
longer, as permitted by the federal securities laws.

Regular Redemption. Shareholders may redeem their shares by sending a written
request to SAFS, Mutual Fund Operations, The SunAmerica Center, 733 Third
Avenue, New York, NY 10017-3204. Requests for redemption of shares with a value
of less than $100,000 will be made by check made payable to the shareholders(s)
and mailed to the address of record. All written requests for redemption of
shares with a value of $100,000 or more, or those mailed to an address other
than the address of record, must be endorsed by the shareholder(s) with
signature(s) guaranteed by an 'eligible guarantor institution' which includes:
banks, brokers, dealers, credit unions, securities and exchange associations,
clearing agencies and savings associations. Guarantees must be signed by an
authorized signatory of the eligible guarantor and the words 'Signature
Guaranteed' must appear with the signature. Signature guarantees by notaries
will not be accepted. SAFS may request further documentation from corporations,
executors, administrators, trustees or guardians.

Repurchase Through The Distributor. The Distributor is authorized, as agent for
the Portfolios, to offer to repurchase shares which are presented by telephone

to the Distributor by investment dealers. Orders received by dealers must be at
least $500. The repurchase price is the net asset value per share of the
applicable class of shares of a Portfolio next-determined after the repurchase
order is received, less any applicable CDSC. Repurchase orders received by the
Distributor after the Fund's close of business, will be priced based on the next
business day's close. Dealers may charge for their services in connection with
the repurchase, but neither the Portfolios nor the Distributor imposes any such
service charge. The offer to repurchase may be suspended at any time, as
described below.

Telephone Redemption. The Fund accepts telephone requests for redemption of
shares with a value of less than $100,000. The proceeds of a telephone
redemption may be sent by check payable to the shareholder(s) and mailed to the
address of record by wire to the shareholder's bank account as set forth in the
New Account Application Form or in a subsequent written authorization.
Shareholders utilizing the redemption through the electronic funds transfer
method will incur a $15.00 transaction fee. The Fund will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Failure to do so may result in liability to the Fund for losses incurred due to
unauthorized or fraudulent telephone instructions. Such procedures include, but
are not limited to, requiring some form of personal identification prior to
acting upon instructions received by telephone and/or tape recording of
telephone instructions.

A shareholder making a telephone redemption should call Shareholder/Dealer
Services at (800) 858-8850, and state (i) the name of the shareholder(s)
appearing on the Fund's records, (ii) his or her account number with the Fund,
(iii) the name of the Portfolio, (iv) the amount to be redeemed, and (v) the
name of the person(s) requesting the redemption. The Fund reserves the right to
terminate or modify the telephone redemption service at any time.

Systematic Withdrawal Plan. Shareholders who have invested at least $5,000 in
any of the Portfolios may provide for the periodic payment from the account
pursuant to the Systematic Withdrawal Plan. At the shareholder's election, such
payment may be made directly to the shareholder or to a third party on a
monthly, quarterly, semi-annual or annual basis. The minimum periodic payment is
$50. Maintenance of a withdrawal plan concurrently with purchases of additional
shares may be disadvantageous to a shareholder because of the sales charge
applicable to such purchases. Shareholders who have been issued share
certificates will not be eligible to participate in the Systematic Withdrawal
Plan

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and will have to comply with certain additional procedures in order to redeem
shares. Further information may be obtained by calling Shareholder/ Dealer
Services at (800) 858-8850.

Other Redemption Information. At various times, a Portfolio may be requested to

redeem shares for which it has not yet received good payment. A Portfolio may
delay or cause to be delayed the mailing of a redemption check until such time
as good payment (e.g., cash or certified check drawn on a United States bank)
has been collected for the purchase of such shares, which will not exceed 15
days.

Because of the high cost of maintaining smaller shareholder accounts, the
Portfolio may redeem, on at least 60 days' written notice and without
shareholder consent, any account that has a net asset value of less than $500
($250 for retirement plan accounts), as of the close of business on the day
preceding such notice, unless such shareholder increases the account balance to
at least $500 during such 60-day period. In the alternative, the applicable
Portfolio may impose a $2.00 monthly charge on accounts below the minimum
account size.

If a shareholder redeems shares of any class of a Portfolio and then within one
year from the date of redemption decides the shares should not have been
redeemed, the shareholder may use all or any part of the redemption proceeds to
reinstate, free of sales charges (Class A shares) and with the crediting of any
CDSC paid with respect to such reinstated shares at the time of redemption
(Class B and Class C shares), all or any part of the redemption proceeds in
shares of the Portfolio at the then-current net asset value. Reinstatement may
affect the tax status of the prior redemption.

Exchange Privilege
- --------------------------------------------------------------------------------

General. Shareholders in any of the Portfolios may exchange their shares for
the same class of shares of any other Portfolio or other SunAmerica Fund that
offers such class at the respective net asset value per share. Before making an
exchange, a shareholder should obtain and review the prospectus of the fund
whose shares are being acquired. All exchanges are subject to applicable minimum
initial investment requirements and can only be effected if the shares to be
acquired are qualified for sale in the state in which the shareholder resides.
Exchanges of shares generally will constitute a taxable transaction except for
IRAs, Keogh Plans and other qualified or tax-exempt accounts. The exchange
privilege may be terminated or modified upon 60 days' written notice. Further
information about the exchange privilege may be obtained by calling Shareholder/
Dealer Services at (800) 858-8850.

If a shareholder acquires Class A shares through an exchange from another fund
in the SunAmerica Family of Mutual Funds where the original purchase of such
fund's Class A shares was not subject to an initial sales charge because the
purchase was in excess of $1 million, such shareholder will remain subject to
the 1% CDSC, if any, applicable to such redemptions. In such event, the period
for which the original shares were held prior to the exchange will be 'tacked'
with the holding period of the shares acquired in the exchange for purposes of
determining whether the 1% CDSC is applicable upon a redemption of any of such
shares.

A shareholder who acquires Class B or Class C shares through an exchange from
another fund in the SunAmerica Family of Mutual Funds will retain liability for
any CDSC outstanding on the date of the exchange. In such event, the period for

which the original shares were held prior to the exchange will be 'tacked' with
the holding period of the shares acquired in the exchange for purposes of
determining what, if any, CDSC is applicable upon a redemption of any of such
shares and of determining the timing of conversion of Class B shares to Class A.

Restrictions on Exchanges. Because excessive trading (including short-term
'market timing' trading) can hurt a Portfolio's performance, each Portfolio may
refuse any exchange sell order (1) if it appears to be a market timing
transaction involving a significant portion of a Portfolio's assets or (2) from
any shareholder account if previous use of the exchange privilege is considered
excessive. Accounts under common ownership or control, including, but not
limited to, those with the same taxpayer identification number and those
administered so as to redeem or purchase shares based upon certain predetermined
market indications, will be considered one account for this purpose.

In addition, a Portfolio reserves the right to refuse any exchange purchase
order if, in the judgment of

<PAGE>

Style Select Series (Servicemark)
59

SunAmerica, the Portfolio would be unable to invest effectively in accordance
with its investment objective and policies, or would otherwise potentially be
adversely affected. A shareholder's purchase exchange may be restricted or
refused if the Portfolio receives or anticipates simultaneous orders affecting
significant portions of the Portfolio's assets. In particular, a pattern of
exchanges that coincide with a 'market timing' strategy may be disruptive to the
Portfolio and may therefore be refused.

Finally, as indicated under 'Purchase of Shares,' the Fund and Distributor
reserve the right to refuse any order for the purchase of shares.

Portfolio Transactions, Brokerage and Turnover
- --------------------------------------------------------------------------------

The Advisers are responsible for decisions to buy and sell securities for the
Portfolios, selection of broker-dealers and negotiation of commission rates for
their respective portion of the relevant Portfolio. 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 the security usually includes a profit to the dealer). In underwritten
offerings, securities are purchased at a fixed price which includes an
underwriter's concession or discount. On occasion, certain money market
securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid.

As a general matter, the Advisers select broker-dealers which, in their best
judgment, provide prompt and reliable execution at favorable security prices and
reasonable commission rates. The Advisers may select broker-dealers which
provide them with research services and may cause a Portfolio to pay such

broker-dealers commissions which exceed those which other broker-dealers may
have charged, if in the Adviser's view the commissions are reasonable in
relation to the value of the brokerage and/or research services provided by the
broker-dealer. Brokerage arrangements may take into account the distribution of
Fund shares by broker-dealers, subject to best price and execution. In addition,
brokerage may be allocated to brokers that pay (or cause to be paid) expenses of
the respective Portfolio, subject to best price and execution. The Advisers may
effect portfolio transactions through an affiliated broker-dealer, acting as
agent and not as principal, in accordance with Rule 17e-1 under the 1940 Act and
other applicable securities laws.

Each Portfolio has no limitation regarding its policy with respect to portfolio
turnover. The portfolio turnover rate is calculated by dividing the lesser of
sales or purchases of portfolio securities, excluding short-term securities, by
the average monthly value of the Portfolio's long-term portfolio securities.
Under certain market conditions, the investment policies of the Portfolios may
result in high portfolio turnover. Because each of the Advisers to each
Portfolio manages its portion of the Portfolio's assets independently, it is
possible that the same security may be purchased and sold on the same day by two
or more Advisers to the same Portfolio, resulting in higher brokerage
commissions for the Portfolio. Notwithstanding the foregoing, however, the
portfolio turnover rates for any Portfolio are not expected to exceed 200%. High
portfolio turnover involves correspondingly greater brokerage commissions and
other transaction costs which will be borne directly by the Portfolio. In
addition, high portfolio turnover may result in increased short-term capital
gains, which, when distributed to shareholders, are currently treated as
ordinary income.

Determination of Net Asset Value
- --------------------------------------------------------------------------------

Each Portfolio is open for business on any day the 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 each class of its shares separately by dividing the total value
of each class's net assets by the shares outstanding of each class. Investments
for which market quotations are readily available are valued at market. All
other securities and assets are valued at fair value following procedures
approved by the Directors.

<PAGE>

Style Select Series (Servicemark)
60

Performance Data
- --------------------------------------------------------------------------------

Each Portfolio may advertise performance data that reflect its total investment
return. A brief summary of the computations is provided below and a detailed
discussion is in the Statement of Additional Information. Total return is based

on historical earnings and is not intended to indicate future performance.

Total return performance data may be advertised by each Portfolio. The average
annual total return may be calculated for one-, five- and ten-year periods
or for the lesser period since inception. These
performance data represent the average annual percentage changes of a
hypothetical $1,000 investment and assumes the reinvestment of all dividends and
distributions and includes sales charges and recurring fees that are charged to
shareholder accounts. A Portfolio's advertisements may also reflect total return
performance data calculated by means of cumulative, aggregate, average, year-to-
date, or other total return figures. Further, the Portfolio may advertise total
return performance for periods of time in addition to those noted above.

Although expenses for Class B and Class C shares may be higher than those for
Class A shares, the performance of Class B and Class C shares may be higher than
the performance of Class A shares after giving effect to the impact of the sales
charges and 12b-1 fees applicable to each class of shares.

Dividends, Distributions and Taxes
- --------------------------------------------------------------------------------

Dividends and Distributions. For each Portfolio other than the Large-Cap Blend
Portfolio, dividends from net investment income, if any, are to be paid at least
annually. For the Large-Cap Blend Portfolio, dividends from net investment
income, if any, are to be paid quarterly. Dividends and distributions generally
are taxable in the year in which they are paid, except any dividends paid in
January which were declared in the previous calendar quarter will be treated as
paid in December of the previous year. Dividends and distributions are to be
paid in additional shares based on the next determined net asset value, unless
the shareholder elects in writing, not less than five business days prior to the
payment date, to receive amounts in excess of $10 in cash.

If a shareholder has elected to receive dividends and/or capital gain
distributions in cash, and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, no interest will accrue
on amounts represented by uncashed dividend or distribution checks.

In addition to having the dividends and distributions of a Portfolio reinvested
in shares of such Portfolio, a shareholder may, if he or she so elects on the
New Account Application, have dividends and distributions invested in the same
class of shares of any other SunAmerica Mutual Fund or any other Portfolio of
the Fund at the then-current net asset value of such fund(s).

The excess of net realized capital gains from the sale of assets held for more
than 12 months over net capital losses ('net capital gains'), if any, with
respect to each Portfolio, will be distributed to the shareholders at least
annually. Each Portfolio's policy is to offset any prior year capital loss carry
forward against any realized capital gains, and accordingly, no distribution of
capital gains will be made until gains have been realized in excess of any such
loss carry forward.

Taxes. Each Portfolio intends to qualify and elect to be taxed as a regulated
investment company under the Code. While so qualified, the Fund and each of the
Portfolios will not be subject to U.S. Federal income tax on the portion of its

investment company taxable income and net capital gains distributed to its
shareholders.

Dividends of net investment income and distributions of any net realized
short-term capital gain ('ordinary income dividends'), whether paid in cash or
reinvested in shares of the Portfolios, are taxable to shareholders as ordinary
income. Distributions made from the Fund's net capital gains (including gains
from certain transactions in futures and options) are taxable to shareholders as
capital gains, regardless of the length of time the shareholder has owned Fund
shares. To the extent a Portfolio's income is derived from certain dividends
received from domestic corporations, a portion of the dividends paid to
corporate shareholders of such Portfolios will be eligible for the 70%
dividends-received deduction. It generally is not anticipated that dividends
paid by the International Equity Portfolio will qualify for the dividends-
received deduction.

Ordinary income dividends paid by the Fund to shareholders who are non-resident
aliens or foreign

<PAGE>

Style Select Series (Servicemark)
61

entities generally will be subject to a 30% United States withholding tax under
existing provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law. Nonresident shareholders are urged to consult their
own tax advisers concerning the applicability of the United States withholding
tax.

Income and capital gains received by each Portfolio with respect to foreign
investments may give rise to withholding and other taxes imposed by foreign
countries. Tax conventions between certain countries and the U.S. may reduce or
eliminate such taxes. Shareholders may be able to claim U.S. foreign tax credits
with respect to such taxes, subject to certain provisions and limitations
contained in the Code. If more than 50% in value of the Portfolio's total assets
at the close of its taxable year consists of securities of foreign corporations,
the Portfolio will be eligible and may choose to file an election with the
Internal Revenue Service pursuant to which shareholders of the Portfolio may
include their proportionate share of such withholding taxes in their U.S. income
tax returns as gross income, treat such proportionate share as taxes paid by
them, and deduct such proportionate share in computing their taxable incomes or,
alternatively, subject to certain limitations and other provisions, use them as
foreign tax credits against their U.S. income taxes. No deductions for foreign
taxes, however, may be claimed by non-corporate shareholders who do not itemize
deductions. Of course, certain retirement accounts which are not subject to tax
cannot claim foreign tax credits on investments in foreign securities held in
the Fund. A shareholder that is a nonresident alien individual or a foreign
corporation may be subject to U.S. withholding tax on the income resulting from
the Portfolio's election described in this paragraph but may not be able to
claim a credit or deduction against such U.S. tax for the foreign taxes treated
as having been paid by such shareholder. The Portfolio will report annually to

its shareholders the amount per share of such withholding taxes. It is not
anticipated that the Portfolios, other than the International Equity Portfolio,
will qualify to elect to pass foreign taxes through to their shareholders.

No gain or loss will be recognized by Class B shareholders on the conversion of
their Class B shares into Class A shares. A shareholder's basis in the Class A
shares acquired will be the same as such shareholder's basis in the Class B
shares converted, and the holding period of the acquired Class A shares will
include the holding period for the converted Class B shares.

A shareholder who holds shares as a capital asset (i.e., generally, for
investment) generally will recognize a capital gain or loss upon the sale or
exchange of such shares. In the case of an individual, any such capital gain
will be treated as short-term capital gain if the shares were held for not more
than 12 months, capital gain taxable at the maximum rate of 28%, if such shares
were held for more than 12, but not more than 18 months, and capital gain
taxable at the maximum rate of 20%, if such shares were held for more than 18
months. In the case of a corporation, any such capital gain will be treated as
long-tem capital gain, taxable at the same rates as ordinary income, if such
shares were held for more than 12 months. Any such capital loss will be a long-
term capital loss if such shares were held for more than one year. However, any
loss realized by a shareholder who held shares for six months or less will be
treated as a long-term capital loss to the extent of any distributions of net
capital gains received by the shareholder with respect to such shares.

If a shareholder exercises the exchange privilege within 90 days of acquiring
such shares, then the loss the shareholder can recognize on the exchange will be
reduced (or the gain increased) to the extent the sales charge paid to the Fund
reduces any charges the shareholder would have owed upon the purchase of the new
shares in the absence of the exchange privilege. Instead, such sales charge will
be treated as an amount paid for the new shares. See 'Exchange Privilege.'

A loss realized on a sale or exchange of shares of the Fund will be disallowed
if other Fund shares are acquired (whether through the automatic reinvestment of
dividends or otherwise) within a 61-day period beginning 30 days before and
ending 30 days after the date that the shares are disposed of. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss.

Under certain provisions of the Code, some shareholders may be subject to a 31%
withholding tax on ordinary income dividends, capital gains distributions and
redemption payments ('backup withholding'). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number. When establishing an account, an investor must certify
under penalty of perjury that such number is correct and that the investor is
not otherwise subject to backup withholding.

Statements as to the tax status of distributions to shareholders of the Fund
will be mailed annually. Shareholders are urged to consult their own tax
advisers regarding specific questions as to federal,

<PAGE>

Style Select Series (Servicemark)
62

state or local taxes. Foreign shareholders are also urged to consult their own
tax advisers regarding the foreign tax consequences of ownership of interests in
a Portfolio. See 'Dividends, Distributions and Taxes' in the Statement of
Additional Information.

General Information
- --------------------------------------------------------------------------------

Reports to Shareholders. The Fund sends to its shareholders audited annual and
unaudited semi-annual reports for the Portfolios. The financial statements
appearing in annual reports are audited by independent accountants. In addition,
the Transfer Agent sends to each shareholder having an account directly with the
Fund a statement confirming transactions in the account.

Organization. The Fund, a corporation organized under the laws of the state of
Maryland on July 3, 1996, is an open-end management investment company, commonly
referred to as a mutual fund. The total number of shares which the Fund has
authority to issue is one billion (1,000,000,000) shares of common stock (par
value $0.0001 per share), amounting in aggregate par value to one hundred
thousand dollars ($100,000.00). All of such shares of common stock are
classified into eight separate Portfolios known as the Large-Cap Growth
Portfolio, the Mid-Cap Growth Portfolio, the Aggressive Growth Portfolio, the
Large-Cap Blend Portfolio, the Large-Cap Value Portfolio, the Value Portfolio,
the Small-Cap Value Portfolio and the International Equity Portfolio. All of the
shares of each such Portfolio are initially classified into four classes: Class
A, Class B, Class C or Class Z. Each such Portfolio initially consists of
twenty-five million (25,000,000) shares of each class. Only Class A, Class B and
Class C shares are currently being offered to the public.

The Fund does not hold annual shareholder meetings. The Directors are required
to call a meeting of shareholders for the purpose of voting upon the question of
removal of any Director when so requested in writing by the shareholders of
record holding at least 10% of the Fund's outstanding shares. Each share of each
Portfolio has equal voting rights on each matter pertaining to that Portfolio or
matters to be voted upon by the Fund. Each share of each Portfolio is entitled
to participate equally with the other shares of that Portfolio in dividends and
other distributions and the proceeds of any liquidation, except that, due to the
differing expenses borne by the classes, such dividends and proceeds are likely
to be lower for Class B and Class C shares than for Class A shares. See the
Statement of Additional Information for more information with respect to the
distinctions among classes.

Independent Accountants and Legal Counsel. Price Waterhouse LLP has been
selected as independent accountants for the Fund. The firm of Shereff, Friedman,
Hoffman & Goodman, LLP has been selected as legal counsel for the Fund.

Shareholder Inquiries. All inquiries regarding the Fund should be directed to
the Fund at the telephone number or address on the cover page of this
Prospectus. For questions concerning share ownership, dividends, transfer of
ownership or share redemption, contact SAFS, Mutual Fund Operations, The
SunAmerica Center, 733 Third Avenue, New York, NY 10017-3204, or call
Shareholder/ Dealer Services at (800) 858-8850.

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS,
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE STATEMENT OF ADDITIONAL
INFORMATION AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND, SUNAMERICA, ANY
ADVISER OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY MAY
NOT LAWFULLY BE MADE.

<PAGE>

STYLE SELECT SERIES
Statement of Additional Information
dated March 2, 1998

The SunAmerica Center General Marketing and
733 Third Avenue Shareholder Information
New York, NY 10017-3204 (800) 858-8850

Style Select Series, Inc. (the "Fund") is a mutual fund consisting of
eight different investment portfolios: the Large-Cap Growth Portfolio, the
Mid-Cap Growth Portfolio, the Aggressive Growth Portfolio, the Large-Cap Blend
Portfolio, the Large-Cap Value Portfolio, the Value Portfolio, the Small-Cap
Value Portfolio, and the International Equity Portfolio (each, a "Portfolio").
Each Portfolio is managed by SunAmerica Asset Management Corp. ("SunAmerica").
The assets of each Portfolio are normally allocated among at least three
investment advisers (each, an "Adviser"), each of which is independently
responsible for advising its respective portion of the Portfolio's assets. The
Advisers may include SunAmerica, and otherwise will consist of professional
investment advisers selected by SunAmerica subject to the review and approval
of the Fund's Board of Directors. In choosing Advisers, SunAmerica will seek
to obtain, within each Portfolio's overall objective, a distinct investment
style.

This Statement of Additional Information is not a Prospectus, but
should be read in conjunction with the Fund's Prospectus dated March 2, 1998.
To obtain a Prospectus, please call the Fund at (800) 858-8850. Capitalized
terms used herein but not defined have the meanings assigned to them in the
Prospectus.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
The Fund .......................................................................................................B-2
Investment Objectives and Policies..............................................................................B-2
Portfolio Turnover.............................................................................................B-29
Investment Restrictions....................................................................................... B-30
Directors and Officers.........................................................................................B-31
Advisers, Distributor and Administrator........................................................................B-36
Portfolio Transactions and Brokerage...........................................................................B-43

Additional Information Regarding Purchase of Shares............................................................B-44
Additional Information Regarding Redemption of Shares..........................................................B-50
Determination of Net Asset Value...............................................................................B-51
Performance Data...............................................................................................B-51
Dividends, Distributions and Taxes.............................................................................B-56
Retirement Plans...............................................................................................B-61
Description of Shares..........................................................................................B-62
Additional Information.........................................................................................B-64
Financial Statements...........................................................................................B-66
Appendix.................................................................................................Appendix-1
</TABLE>

No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than those contained in this
Statement of Additional Information or in the Prospectus, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund, SunAmerica, any Adviser or SunAmerica
Capital Services (the "Distributor"). This Statement of Additional Information
and the Prospectus do not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction in which
such an offer to sell or solicitation of an offer to buy may not lawfully be
made.

<PAGE>

THE FUND

The Fund, organized as a Maryland corporation on July 3, 1996, is an
open-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"). The Fund consists of eight
Portfolios, each consisting of Class A, Class B, Class C and Class Z shares.
Class A, Class B and Class C shares of all of the Portfolios are currently
being offered to the public. The Aggressive Growth Portfolio, Large-Cap Value
Portfolio, Value Portfolio, Small-Cap Value Portfolio and International Equity
Portfolio will commence offering Class Z shares on April 1, 1998.

INVESTMENT OBJECTIVES AND POLICIES

The investment objective and policies of each of the Portfolios are
described in the Fund's Prospectus. Certain types of securities in which the
Portfolios may invest and certain investment practices which the Portfolios
may employ, which are described under "Investment Techniques and Risk Factors"
in the Prospectus, are discussed more fully below.

Warrants. A Portfolio may invest in warrants which give the holder of
the warrant a right to purchase a given number of shares of a particular issue
at a specified price until expiration. Such investments generally can provide
a greater potential for profit or loss than investments of equivalent amounts
in the underlying common stock. The prices of warrants do not necessarily move
with the prices of the underlying securities. If the holder does not sell the

warrant, he risks the loss of his entire investment if the market price of the
underlying stock does not, before the expiration date, exceed the exercise
price of the warrant plus the cost thereof. Investment in warrants is a
speculative activity. Warrants pay no dividends and confer no rights (other
than the right to purchase the underlying stock) with respect to the assets of
the issuer.

Investment in Small, Unseasoned Companies. As described in the
Prospectus, each Portfolio may invest in the securities of small companies
having market capitalizations under $1 billion. These securities may have a
limited trading market, which may adversely affect their disposition and can
result in their being priced lower than might otherwise be the case. If other
investment companies and investors who invest in such issuers trade the same
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. 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

B-2

<PAGE>

or business cycles different from those of the U.S., or to reduce fluctuations
in portfolio value by taking advantage of foreign stock markets that do not
move in a manner parallel to U.S. markets.

Each Portfolio may invest in securities of foreign issuers in the
form of American Depositary Receipts (ADRs), European Depositary Receipts
(EDRs), Global Depositary Receipts (GDRs) or other similar securities
convertible into securities of foreign issuers. ADRs are securities, typically
issued by a U.S. financial institution, that evidence ownership interests in a
security or a pool of securities issued by a foreign issuer and deposited with
the depository. ADRs may be sponsored or unsponsored. A sponsored ADR is
issued by a depository which has an exclusive relationship with the issuer of
the underlying security. An unsponsored ADR may be issued by any number of
U.S. depositories. Holders of unsponsored ADRs generally bear all the costs
associated with establishing the unsponsored ADR. The depository of an
unsponsored ADR is under no obligation to distribute shareholder
communications received from the underlying issuer or to pass through to the
holders of the unsponsored ADR voting rights with respect to the deposited
securities or pool of securities. A Portfolio may invest in either type of
ADR. Although the U.S. investor holds a substitute receipt of ownership rather
than direct stock certificates, the use of the depository receipts in the
United States can reduce costs and delays as well as potential currency

exchange and other difficulties. The Portfolio may purchase securities in
local markets and direct delivery of these ordinary shares to the local
depository of an ADR agent bank in the foreign country. Simultaneously, the
ADR agents create a certificate which settles at the Fund's custodian in three
days. The Portfolio may also execute trades on the U.S. markets using existing
ADRs. A foreign issuer of the security underlying an ADR is generally not
subject to the same reporting requirements in the United States as a domestic
issuer. Accordingly the information available to a U.S. investor will be
limited to the information the foreign issuer is required to disclose in its
own country and the market value of an ADR may not reflect undisclosed
material information concerning the issuer of the underlying security. For
purposes of a Portfolio's investment policies, the Portfolio's investments in
these types of securities will be deemed to be investments in the underlying
securities. Generally ADRs, in registered form, are dollar denominated
securities designed for use in the U.S. securities markets, which represent
and may be converted into the underlying foreign security. EDRs, in bearer
form, are designed for use in the European securities markets.

Investments in foreign securities, including securities of developing
countries, present special additional investment risks and considerations not
typically associated with investments in domestic securities, including
reduction of income by foreign taxes; fluctuation in value of foreign
portfolio investments due to changes in currency rates and control regulations
(e.g., currency blockage); transaction charges for currency exchange; lack of
public information about foreign issuers; lack of uniform accounting, auditing
and financial reporting standards comparable to those applicable to domestic
issuers; less volume on foreign exchanges than on U.S. exchanges; greater
volatility and less liquidity on foreign markets than in the U.S.; less
regulation of foreign issuers, stock exchanges and brokers than the U.S.;
greater difficulties in commencing lawsuits; higher brokerage commission rates
than the U.S.; increased possibilities in some countries of expropriation,
confiscatory taxation, political, financial or social instability or adverse
diplomatic developments; and differences (which may be favorable or
unfavorable) between the U.S. economy and foreign economies.

B-3

<PAGE>

Passive Foreign Investment Companies ("PFICs"). The Large-Cap Growth
Portfolio, Aggressive Growth Portfolio and International Equity Portfolio may
invest in PFICs, which are any foreign corporations which generate certain
amounts of passive income or hold certain amounts of assets for the production
of passive income. Passive income includes dividends, interest, royalties,
rents and annuities. To the extent that a Portfolio invests in PFICs, income
tax regulations may require the Portfolio to recognize income associated with
the PFIC prior to the actual receipt of any such income.

U.S. Government Securities. A Portfolio may invest in U.S. Treasury
securities, including bills, notes, bonds and other debt securities issued by
the U.S. Treasury. These instruments are direct obligations of the U.S.
government and, as such, are backed by the "full faith and credit" of the
United States. They differ primarily in their interest rates, the lengths of

their maturities and the dates of their issuances. A Portfolio may also invest
in securities issued by agencies of the U.S. government or instrumentalities
of the U.S. government. These obligations, including those which are
guaranteed by federal agencies or instrumentalities, may or may not be backed
by the "full faith and credit" of the United States. Obligations of the
Government National Mortgage Association ("GNMA"), the Farmers Home
Administration and the Export-Import Bank are backed by the full faith and
credit of the United States. In the case of securities not backed by the full
faith and credit of the United States, a Portfolio must look principally to
the agency issuing or guaranteeing the obligation for ultimate repayment and
may not be able to assert a claim against the United States if the agency or
instrumentality does not meet its commitments.

A Portfolio may, in addition to the U.S. government securities noted
above, invest in mortgage-backed securities (including private mortgage-backed
securities), such as GNMA, FNMA or FHLMC certificates (as defined below),
which represent an undivided ownership interest in a pool of mortgages. The
mortgages backing these securities include conventional thirty-year fixed-rate
mortgages, fifteen-year fixed-rate mortgages, graduated payment mortgages and
adjustable rate mortgages. These certificates are in most cases pass-through
instruments, through which the holder receives a share of all interest and
principal payments, including prepayments, on the mortgages underlying the
certificate, net of certain fees.

The yield on mortgage-backed securities is based on the average
expected life of the underlying pool of mortgage loans. The actual life of any
particular pool will be shortened by any unscheduled or early payments of
principal and interest. Principal prepayments generally 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.

B-4

<PAGE>

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
which evidence an undivided interest in a pool or pools of mortgages. GNMA
Certificates that a Portfolio may purchase are the modified pass-through type,
which entitle the holder to receive timely payment of all interest and
principal payments due on the mortgage pool, net of fees paid to the issuer
and GNMA, regardless of whether or not the mortgagor actually makes the
payment.

GNMA guarantees the timely payment of principal and interest on
securities backed by a pool of mortgages insured by the Federal Housing
Administration or the Farmers' Home Administration, 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 Federal Home Loan Mortgage Corporation
("FHLMC") issues two types of mortgage pass-through securities: mortgage
participation certificates ("PCS") and guaranteed mortgage certificates
("GMCs") (collectively, "FHLMC Certificates"). PCS resemble

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GNMA Certificates in that each PC represents a pro rata share of all interest
and principal payments made and owed on the underlying pool. The FHLMC
guarantees timely monthly payment of interest (and, under certain
circumstances, principal) of PCS and the ultimate payment of principal.

GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return principal
once a year in guaranteed minimum payments. The expected average life of these
securities is approximately ten years. The FHLMC guarantee is not backed by
the full faith and credit of the U.S. Government.

FNMA Certificates. The Federal National Mortgage Association ("FNMA")
issues guaranteed mortgage pass-through certificates ("FNMA Certificates").
FNMA Certificates represent a pro rata share of all interest and principal
payments made and owed on the underlying pool. FNMA guarantees timely payment
of interest and principal on FNMA Certificates. The FNMA guarantee is not
backed by the full faith and credit of the U.S. Government.

Conventional mortgage pass-through securities ("Conventional Mortgage
Pass-Throughs") represent participation interests in pools of mortgage loans
that are issued by trusts formed by originators of the institutional investors
in mortgage loans (or represent custodial arrangements administered by such
institutions). These originators and institutions include commercial banks,
savings and loans associations, credit unions, savings banks, insurance
companies, investment banks or special purpose subsidiaries of the foregoing.
For federal income tax purposes, such trusts are generally treated as grantor
trusts or REMICs and, in either case, are generally not subject to any
significant amount of federal income tax at the entity level.

The mortgage pools underlying Conventional Mortgage Pass-Throughs
consist of conventional mortgage loans evidenced by promissory notes secured
by first mortgages or first deeds of trust or other similar security
instruments creating a first lien on residential or mixed residential and
commercial properties. Conventional Mortgage Pass-Throughs (whether fixed or
adjustable rate) provide for monthly payments that are a "pass-through" of the
monthly interest and principal payments (including any prepayments) made by
the individual borrowers on the pooled mortgage loans, net of any fees or
other amount paid to any guarantor, administrator and/or servicer of the
underlying mortgage loans. A trust fund with 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.

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Another type of mortgage-backed security in which each Portfolio may

invest is a collateralized mortgage obligation ("CMO"). CMOs are fully
collateralized bonds which are the general obligations of the issuer thereof
(e.g., the U.S. government, a U.S. government instrumentality, or a private
issuer). Such bonds generally are secured by an assignment to a trustee (under
the indenture pursuant to which the bonds are issued) of collateral consisting
of a pool of mortgages. Payments with respect to the underlying mortgages
generally are made to the trustee under the indenture. Payments of principal
and interest on the underlying mortgages are not passed through to the holders
of the CMOs as such (i.e., the character of payments of principal and interest
is not passed through, and therefore payments to holders of CMOs attributable
to interest paid and principal repaid on the underlying mortgages do not
necessarily constitute income and return of capital, respectively, to such
holders), but such payments are dedicated to payment of interest on and
repayment of principal of the CMOs.

Principal and interest on the underlying mortgage assets may be
allocated among the several classes of CMOs in various ways. In certain
structures (known as "sequential pay" CMOs), payments of principal, including
any principal prepayments, on the mortgage assets generally are applied to the
classes of CMOs in the order of their respective final distribution dates.
Thus, no payment of principal will be made on any class of sequential pay CMOs
until all other classes having an earlier final distribution date have been
paid in full.

Additional structures of CMOs include, among others, "parallel pay"
CMOs. Parallel pay CMOs are those which are structured to apply principal
payments and prepayments of the mortgage assets to two or more classes
concurrently on a proportionate or disproportionate basis. These simultaneous
payments are taken into account in calculating the final distribution date of
each class.

A wide variety of CMOs may be issued in the parallel pay or
sequential pay structures. These securities include accrual certificates (also
known as "Z-Bonds"), which only accrue interest at a specified rate until all
other certificates having an earlier final distribution date have been retired
and are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay CMOs which
generally require that specified amounts of principal be applied on each
payment date to one or more classes of CMOs (the "PAC Certificates"), even
though all other principal payments and prepayments of the mortgage assets are
then required to be applied to one or more other classes of the certificates.
The scheduled principal payments for the PAC Certificates generally have the
highest priority on each payment date after interest due has been paid to all
classes entitled to receive interest currently. Shortfalls, if any, are added
to the amount payable on the next payment date. The PAC Certificate payment
schedule is taken into account in calculating the final distribution date of
each class of PAC. In order to create PAC tranches, one or more tranches
generally must be created to absorb most of the volatility in the underlying
mortgage assets. These tranches tend to have market prices and yields which
are much more volatile than the PAC classes.

Each Portfolio may also invest in stripped mortgage-backed
securities. Stripped mortgage-backed securities are often structured with two
classes that receive different proportions of the

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<PAGE>

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
Directors 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. These bonds
present certain risks which are discussed below:

Sensitivity to Interest Rate and Economic Changes -
High-yield bonds are very sensitive to adverse economic changes and
corporate developments. During an economic downturn or substantial
period of rising interest rates, highly leveraged issuers may
experience financial stress that would adversely affect their ability
to service their principal and interest payment obligations, to meet
projected business goals, and to obtain additional financing. If the
issuer of a bond defaults on its obligations to pay interest or
principal or enters into bankruptcy proceedings, a Portfolio may
incur losses or expenses in seeking recovery of amounts owed to it.
In addition, periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices of
high-yield bonds and the Portfolio's net asset value.

Payment Expectations - High-yield bonds may contain
redemption or call provisions. If an issuer exercises these
provisions in a declining interest rate market, a Portfolio would
have to replace the security with a lower yielding security,
resulting in a decreased return for investors. Conversely, a
high-yield bond's value will decrease in a rising interest rate
market, as will the value of the Portfolio's assets. If the Portfolio
experiences unexpected net redemptions, this may force it to sell
high-yield bonds without regard to their investment merits, thereby
decreasing the asset base upon which expenses can be spread and
possibly reducing the Portfolio's rate of return.

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<PAGE>

Liquidity and Valuation - There may be little trading in the
secondary market for particular bonds, which may affect adversely a
Portfolio's ability to value accurately or dispose of such bonds.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of
high-yield bonds, especially in a thin market.

Asset-Backed Securities. Each Portfolio may invest in asset-backed
securities. These securities, issued by trusts and special purpose
corporations, are backed by a pool of assets, such as credit card and
automobile loan receivables, representing the obligations of a number of
different parties.

Asset-backed securities present certain risks. For instance, in the
case of credit card receivables, these securities may not have the benefit of
any security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing
the balance due. Most issuers of automobile receivables permit the servicer to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in
a typical issuance and technical requirements under state laws, the trustee
for the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there
is the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.

Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors to make payments on underlying assets, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of
payments on the underlying pool occurs in a timely fashion. Protection against
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.

Loan Participations. Each 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.

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<PAGE>

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 which sold the loan participations. Because loan participations are
undivided interests in a loan made by the issuing bank, the Portfolio may not
have the right to proceed against the loan participations borrower without the
consent of other holders of the loan participations. In addition, loan
participations will be treated as illiquid if, in the judgment of the Adviser,
they can not be sold within seven days.

Short-Term Debt Securities. As described in the Prospectus, in
addition to its primary investments, a Portfolio may also invest in the
following types of money market and short-term fixed-income securities:

Money Market Securities - Money Market securities may
include securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities, repurchase agreements, commercial
paper, bankers' acceptances, time deposits and certificates of
deposit.

Commercial Bank Obligations - Certificates of deposit
(interest-bearing time deposits), including Eurodollar certificates
of deposit (certificates of deposit issued by domestic or foreign
banks located outside the U.S.) and Yankee certificates of deposit
(certificates of deposit issued by branches of foreign banks located
in the U.S.), domestic and foreign 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 with total assets in excess of $1
billion, based on the latest published reports. A Portfolio may also
invest in obligations issued by U.S. commercial banks with total
assets of less than $1 billion if the principal amount of these
obligations owned by the Portfolio is fully insured by the Federal
Deposit Insurance Corporation ("FDIC"). A Portfolio may also invest
in notes and obligations issued by foreign branches of U.S. and
foreign commercial banks.

Savings Association Obligations - Certificates of deposit
(interest-bearing time deposits) issued by mutual savings banks or
savings and loan associations with assets in excess of $1 billion and

whose deposits are insured by the FDIC. A 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 Portfolio is fully
insured by the FDIC.

Commercial Paper - Short-term notes (up to 12 months) issued
by domestic and foreign corporations or governmental bodies. A
Portfolio may only purchase commercial paper judged by the Adviser to
be of suitable investment quality. This includes commercial paper
that is (a) rated in the two highest categories by Standard & Poor's
Corporation ("Standard & Poor's") and by Moody's Investors Service,
Inc.

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<PAGE>

("Moody's"), or (b) other commercial paper deemed on the basis of the
issuer's creditworthiness to be of a quality appropriate for the
Portfolio. See "Description of Commercial Paper and Bond Ratings" for
a description of the ratings. A Portfolio will not purchase
commercial paper described in (b) above if such paper would in the
aggregate exceed 15% of its total assets after such purchase. The
commercial paper in which a Portfolio may invest includes variable
amount master demand notes. Variable amount master demand notes
permit a Portfolio to invest varying amounts at fluctuating rates of
interest pursuant to the agreement in the master note. These are
direct lending obligations between the lender and borrower, they are
generally not traded, and there is no secondary market. Such
instruments are payable with accrued interest in whole or in part on
demand. The amounts of the instruments are subject to daily
fluctuations as the participants increase or decrease the extent of
their participation. Investments in these instruments are limited to
those that have a demand feature enabling the Portfolio
unconditionally to receive the amount invested from the issuer upon
seven or fewer days' notice. In connection with master demand note
arrangements, the Adviser, subject to the direction of the Directors,
monitors on an ongoing basis, the earning power, cash flow and other
liquidity ratios of the borrower, and its ability to pay principal
and interest on demand. The Adviser also considers the extent to
which the variable amount master demand notes are backed by bank
letters of credit. These notes generally are not rated by Moody's or
Standard & Poor's and a Portfolio may invest in them only if it is
determined that at the time of investment the notes are of comparable
quality to the other commercial paper in which the Portfolio may
invest. Master demand notes are considered to have a maturity equal
to the repayment notice period unless the Adviser has reason to
believe that the borrower could not make timely repayment upon
demand.

Corporate Bonds and Notes - A Portfolio may purchase
corporate obligations that mature or that may be redeemed in one year

or less. These obligations originally may have been issued with
maturities in excess of one year. A 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. A Portfolio may also purchase securities issued or
guaranteed by a foreign government, its agencies or
instrumentalities. See "Foreign Securities" above.

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<PAGE>

Repurchase Agreements. A Portfolio may enter into repurchase
agreements with banks, brokers or securities dealers. In such agreements, the
seller agrees to repurchase the security at a mutually agreed-upon time and
price. The period of maturity is usually quite short, either overnight or a
few days, although it may extend over a number of months. The repurchase price
is in excess of the purchase price by an amount which reflects an agreed-upon
rate of return effective for the period of time a Portfolio's money is
invested in the security. Whenever a Portfolio enters into a repurchase
agreement, it obtains collateral having a value equal to at least 102% (100%
if such collateral is in the form of cash) of the repurchase price, including
accrued interest. The instruments held as collateral are valued daily and if
the value of the instruments declines, the Portfolio will require additional
collateral. If the seller defaults and the value of the collateral securing
the repurchase agreements declines, the Portfolio may incur a loss. In
addition, if bankruptcy proceedings are commenced with respect to the seller
of the security, realization of the collateral by the Portfolio may be delayed
or limited. The Directors have established guidelines to be used by the
Adviser in connection with transactions in repurchase agreements and will
regularly monitor each Portfolio's use of repurchase agreements. A Portfolio
will not invest in repurchase agreements maturing in more than seven days if
the aggregate of such investments along with other illiquid securities exceeds
15% of the value of its net assets. However, there is no limit on the amount
of a Portfolio's net assets that may be subject to repurchase agreements
having a maturity of seven days or less for temporary defensive purposes.

Hedging and Income Enhancement Strategies. Each Portfolio may write
(i.e., sell) call options ("calls") on securities that are traded on U.S. and
foreign securities exchanges and over-the-counter markets to enhance income
through the receipt of premiums from expired calls and any net profits from
closing purchase transactions. After writing such a covered call, 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.

Primarily for hedging purposes, and from time to time for income
enhancement, each Portfolio may use interest rate futures contracts, foreign
currency futures contracts and stock and bond index futures contracts,
including futures on U.S. government securities (together, "Futures"); forward
contracts on foreign currencies ("Forward Contracts"); and call and put
options on equity and debt securities, Futures, stock and bond indices and
foreign currencies (all the foregoing referred to as "Hedging Instruments").
Hedging Instruments may be used to attempt to: (i) protect against possible
declines in the market value of a Portfolio's portfolio resulting from
downward trends in the equity and debt securities markets (generally due to a
rise in interest rates); (ii) protect a Portfolio's unrealized gains in the
value of its equity and debt securities which have appreciated; (iii)
facilitate selling securities for investment reasons; (iv) establish a
position in the equity and debt securities markets as a temporary substitute
for purchasing particular equity and debt securities; or (v) reduce the risk
of adverse currency fluctuations.

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A Portfolio's strategy of hedging with Futures and options on Futures
will be incidental to its activities in the underlying cash market. When
hedging to attempt to protect against declines in the market value of the
portfolio, to permit a Portfolio to retain unrealized gains in the value of
portfolio securities which have appreciated, or to facilitate selling
securities for investment reasons, a Portfolio could: (i) sell Futures; (ii)
purchase puts on such Futures or securities; or (iii) write calls on
securities held by it or on Futures. When hedging to attempt to protect
against the possibility that portfolio securities are not fully included in a
rise in value of the debt securities market, a Portfolio could: (i) purchase
Futures, or (ii) purchase calls on such Futures or on securities. When hedging
to protect against declines in the dollar value of a foreign
currency-denominated security, a Portfolio could: (i) purchase puts on that
foreign currency and on foreign currency Futures; (ii) write calls on that
currency or on such Futures; or (iii) enter into Forward Contracts at a lower
rate than the spot ("cash") rate. Additional information about the Hedging
Instruments the Portfolio may use is provided below.

Options

Options on Securities. As noted above, each Portfolio may write and
purchase call and put options on equity and debt securities.

When a Portfolio writes a call on a security, it receives a premium
and agrees to sell the underlying security to a purchaser of a corresponding
call on the same security during the call period (usually not more than 9
months) at a fixed price (which may differ from the market price of the
underlying security), regardless of market price changes during the call
period. A Portfolio has retained the risk of loss should the price of the
underlying security decline during the call period, which may be offset to
some extent by the premium.

To terminate its obligation on a call it has written, a Portfolio may
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of the
option transaction costs and the premium received on the call written was more
or less than the price of the call subsequently purchased. A profit may also
be realized if the call expires unexercised, because a Portfolio retains the
underlying security and the premium received. If a Portfolio could not effect
a closing purchase transaction due to lack of a market, it would hold the
callable securities until the call expired or was exercised.

When a Portfolio purchases a call (other than in a closing purchase
transaction), it pays a premium and has the right to buy the underlying
investment from a seller of a corresponding call on the same investment during
the call period at a fixed exercise price. A Portfolio benefits only if the
call is sold at a profit or if, during the call period, the market price of
the underlying investment is above the sum of the call price plus the
transaction costs and the premium paid and the call is exercised. If the call
is not exercised or sold (whether or not at a profit), it will become
worthless at its expiration date and a Portfolio will lose its premium payment
and the right to purchase the underlying investment.

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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.

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

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such option was sold, requiring a Portfolio to take delivery of the underlying
security against payment of the exercise price. A Portfolio has no control
over when it may be required to purchase the underlying security, since it may
be assigned an exercise notice at any time prior to the termination of its
obligation as the writer of the put. This obligation terminates upon
expiration of the put, or such earlier time at which a Portfolio effects a
closing purchase transaction by purchasing a put of the same series as that
previously sold. Once a Portfolio has been assigned an exercise notice, it is

thereafter not allowed to effect a closing purchase transaction.

Options on Foreign Currencies. Each Portfolio may write and purchase
puts and calls on foreign currencies. A call written on a foreign currency by
a Portfolio is "covered" if the Portfolio owns the underlying foreign currency
covered by the call or has an absolute and immediate right to acquire that
foreign currency without additional cash consideration (or for additional cash
consideration held in a segregated account by the Portfolio) upon conversion
or exchange of other foreign currency held in its portfolio. A put option is
"covered" if the Portfolio segregates cash or liquid securities with a value
at least equal to the exercise price of the put option. A call written by a
Portfolio on a foreign currency is for cross-hedging purposes if it is not
covered, but is designed to provide a hedge against a decline in the U.S.
dollar value of a security which the Portfolio owns or has the right to
acquire and which is denominated in the currency underlying the option due to
an adverse change in the exchange rate. In such circumstances, a Portfolio
collateralizes the option by segregating cash or liquid securities in an
amount not less than the value of the underlying foreign currency in U.S.
dollars marked-to-market daily.

Options on Securities Indices. As noted above, each Portfolio may
write and purchase call and put options on securities indices. Puts and calls
on broadly-based securities indices are similar to puts and calls on
securities except that all settlements are in cash and gain or loss depends on
changes in the index in question (and thus on price movements in the
securities market generally) rather than on price movements in individual
securities or Futures. When a Portfolio buys a call on a securities index, it
pays a premium. During the call period, upon exercise of a call by a
Portfolio, a seller of a corresponding call on the same investment will pay
the Portfolio an amount of cash to settle the call if the closing level of the
securities index upon which the call is based is greater than the exercise
price of the call. That cash payment is equal to the difference between the
closing price of the index and the exercise price of the call times a
specified multiple (the "multiplier") which determines the total dollar value
for each point of difference. When a Portfolio buys a put on a securities
index, it pays a premium and has the right during the put period to require a
seller of a corresponding put, upon the Portfolio's exercise of its put, to
deliver to the Portfolio an amount of cash to settle the put if the closing
level of the securities index upon which the put is based is less than the
exercise price of the put. That cash payment is determined by the multiplier,
in the same manner as described above as to calls.

Futures and Options on Futures

Futures. Upon entering into a Futures transaction, a Portfolio will
be required to deposit an initial margin payment with the futures commission
merchant (the "futures broker"). The initial margin will be deposited with the
Fund's custodian in an account registered in the futures broker's

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name; however the futures broker can gain access to that account only under
specified conditions. As the Future is marked-to-market to reflect changes in
its market value, subsequent margin payments, called variation margin, will be
paid to or by the futures broker on a daily basis. Prior to expiration of the
Future, if a Portfolio elects to close out its position by taking an opposite
position, a final determination of variation margin is made, additional cash
is required to be paid by or released to the Portfolio, and any loss or gain
is realized for tax purposes. All Futures transactions are effected through a
clearinghouse associated with the exchange on which the Futures are traded.

Interest rate futures contracts are purchased or sold for hedging
purposes to attempt to protect against the effects of interest rate changes on
a Portfolio's current or intended investments in fixed-income securities. For
example, if a Portfolio owned long-term bonds and interest rates were expected
to increase, that Portfolio might sell interest rate futures contracts. Such a
sale would have much the same effect as selling some of the long-term bonds in
that Portfolio's portfolio. However, since the Futures market is more liquid
than the cash market, the use of interest rate futures contracts as a hedging
technique allows a Portfolio to hedge its interest rate risk without having to
sell its portfolio securities. If interest rates did increase, the value of
the debt securities in the portfolio would decline, but the value of that
Portfolio's interest rate futures contracts would be expected to increase at
approximately the same rate, thereby keeping the net asset value of that
Portfolio from declining as much as it otherwise would have. On the other
hand, if interest rates were expected to decline, interest rate futures
contracts may be purchased to hedge in anticipation of subsequent purchases of
long-term bonds at higher prices. Since the fluctuations in the value of the
interest rate futures contracts should be similar to that of long-term bonds,
a Portfolio could protect itself against the effects of the anticipated rise
in the value of long-term bonds without actually buying them until the
necessary cash became available or the market had stabilized. At that time,
the interest rate futures contracts could be liquidated and that Portfolio's
cash reserves could then be used to buy long-term bonds on the cash market.

Purchases or sales of stock or bond index futures contracts are used
for hedging purposes to attempt to protect a Portfolio's current or intended
investments from broad fluctuations in stock or bond prices. For example, a
Portfolio may sell stock or bond index futures contracts in anticipation of or
during a market decline to attempt to offset the decrease in market value of
the Portfolio's securities portfolio that might otherwise result. If such
decline occurs, the loss in value of portfolio securities may be offset, in
whole or part, by gains on the Futures position. When a Portfolio is not fully
invested in the securities market and anticipates a significant market
advance, it may purchase stock or bond index futures contracts in order to
gain rapid market exposure that may, in part or entirely, offset increases in
the cost of securities that the Portfolio intends to purchase. As such
purchases are made, the corresponding positions in stock or bond index futures
contracts will be closed out.

As noted above, each Portfolio may purchase and sell foreign currency
futures contracts for hedging or income enhancement purposes to attempt to
protect its current or intended investments from fluctuations in currency

exchange rates. Such fluctuations could reduce the dollar value of portfolio
securities denominated in foreign currencies, or increase the cost of
foreign-denominated securities to be acquired, even if the value of such
securities in the currencies in which they are denominated remains constant.
Each Portfolio may sell futures contracts on a foreign currency, for

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example, when it holds securities denominated in such currency and it
anticipates a decline in the value of such currency relative to the dollar. In
the event such decline occurs, the resulting adverse effect on the value of
foreign-denominated securities may be offset, in whole or in part, by gains on
the Futures contracts. However, if the value of the foreign currency increases
relative to the dollar, the Portfolio's loss on the foreign currency futures
contract may or may not be offset by an increase in the value of the
securities since a decline in the price of the security stated in terms of the
foreign currency may be greater than the increase in value as a result of the
change in exchange rates.

Conversely, each Portfolio could protect against a rise in the dollar
cost of foreign-denominated securities to be acquired by purchasing Futures
contracts on the relevant currency, which could offset, in whole or in part,
the increased cost of such securities resulting from a rise in the dollar
value of the underlying currencies. When a Portfolio purchases futures
contracts under such circumstances, however, and the price of securities to be
acquired instead declines as a result of appreciation of the dollar, the
Portfolio will sustain losses on its futures position which could reduce or
eliminate the benefits of the reduced cost of portfolio securities to be
acquired.

Options on Futures. As noted above, the Portfolio may purchase and
write options on interest rate futures contracts, stock and bond index futures
contracts, forward contracts and foreign currency futures contracts. (Unless
otherwise specified, options on interest rate futures contracts, options on
stock and bond index futures contracts and options on foreign currency futures
contracts are collectively referred to as "Options on Futures.")

The writing of a call option on a Futures contract constitutes a
partial hedge against declining prices of the securities in the portfolio. If
the Futures price at expiration of the option is below the exercise price, the
Portfolio will retain the full amount of the option premium, which provides a
partial hedge against any decline that may have occurred in the portfolio
holdings. The writing of a put option on a Futures contract constitutes a
partial hedge against increasing prices of the securities or other instruments
required to be delivered under the terms of the Futures contract. If the
Futures price at expiration of the put option is higher than the exercise
price, a Portfolio will retain the full amount of the option premium which
provides a partial hedge against any increase in the price of securities which
the Portfolio intends to purchase. If a put or call option a Portfolio has
written is exercised, the Portfolio will incur a loss which will be reduced by
the amount of the 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.

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Where it is projected that the value of securities to be acquired by a
Portfolio will increase prior to acquisition, due to a market advance or
changes in interest or exchange rates, a Portfolio could purchase call Options
on Futures, rather than purchasing the underlying Futures contract. If the
market advances, the increased cost of securities to be purchased may be
offset by a profit on the call. However, if the market declines, the Portfolio
will suffer a loss equal to the price of the call but the securities which the
Portfolio intends to purchase may be less expensive.

Forward Contracts

A Forward Contract involves bilateral obligations of one party to
purchase, and another party to sell, a specific currency at a future date
(which may be any fixed number of days from the date of the contract agreed
upon by the parties), at a price set at the time the contract is entered into.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. No
price is paid or received upon the purchase or sale of a Forward Contract.

A Portfolio may use Forward Contracts to protect against uncertainty
in the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities a Portfolio
owns or intends to acquire, but it does fix a rate of exchange in advance. In
addition, although Forward Contracts limit the risk of loss due to a decline
in the value of the hedged currencies, at the same time they limit any
potential gain that might result should the value of the currencies increase.

A Portfolio may enter into Forward Contracts with respect to specific
transactions. For example, when a Portfolio enters into a contract for the
purchase or sale of a security denominated in 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 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

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contract will fall whenever there is a decline in the U.S. dollar value of the
currency in which portfolio securities of the Portfolio are denominated
("cross-hedged"). A Portfolio may also hedge investments denominated in a
foreign currency by entering into forward currency contracts with respect to a
foreign currency that is expected to correlate to the currency in which the
investments are denominated ("proxy hedging").

The Portfolio 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 Portfolio will segregate cash or liquid securities
having a value equal to the aggregate amount of the Portfolio's commitments
under Forward Contracts entered into with respect to position hedges and
cross-hedges. If the value of the segregated securities declines, additional
cash or securities will be segregated on a daily basis so that the value of
the segregated assets will equal the amount of the Portfolio's commitments
with respect to such contracts. As an alternative to segregating assets, 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

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Contract under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates of the first
contract and offsetting contract.

The cost to a Portfolio of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because Forward Contracts are usually
entered into on a principal basis, no fees or commissions are involved.
Because such contracts are not traded on an exchange, a Portfolio must
evaluate the credit and performance risk of each particular counterparty under
a Forward Contract.

Although a Portfolio values its assets daily in terms of U.S.
dollars, it does not intend to convert its holdings of foreign currencies into
U.S. dollars on a daily basis. A Portfolio may convert foreign currency from
time to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion, but
they do seek to realize a profit based on the difference between the prices at

which they buy and sell various currencies. Thus, a dealer may offer to sell a
foreign currency to a Portfolio at one rate, while offering a lesser rate of
exchange should the Portfolio desire to resell that currency to the dealer.

Additional Information About Hedging Instruments and Their Use

The Fund's custodian, or a securities depository acting for the
custodian, will act as the Portfolios' 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 which provides
secondary trading for options of the same series and there is no assurance
that a liquid secondary market will exist for any particular option. A
Portfolio's option activities may affect its turnover rate and brokerage
commissions. The exercise by a Portfolio of puts on securities will cause the
sale of related investments, increasing portfolio turnover. Although such
exercise is within a Portfolio's control, holding a put might cause the
Portfolio to sell the related investments for reasons which would not exist in
the absence of the put. A Portfolio will pay a brokerage commission each time
it buys a put or call, sells a call, or buys or sells an underlying investment
in connection with the exercise of a put or call. Such commissions may be
higher than those which would apply to direct purchases or sales of such
underlying investments. Premiums paid for options are small in relation to the
market value of the related investments, and consequently, put and call
options offer large amounts of leverage. The leverage offered by trading in
options could result in a Portfolio's net asset value being more sensitive to
changes in the value of the underlying investments.

In the future, each Portfolio may employ Hedging Instruments and
strategies that are not presently contemplated but which may be developed, to
the extent such investment methods are consistent with a Portfolio's
investment objectives, legally permissible and adequately disclosed.

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Regulatory Aspects of Hedging Instruments

Each Portfolio must operate within certain restrictions as to its
long and short positions in Futures and options thereon under a rule (the
"CFTC Rule") adopted by the Commodity Futures Trading Commission (the "CFTC")
under the Commodity Exchange Act (the "CEA"), which excludes the Portfolio
from registration with the CFTC as a "commodity pool operator" (as defined in
the CEA) if it complies with the CFTC Rule. In particular, the Portfolio may
(i) purchase and sell Futures and options thereon for bona fide hedging
purposes, as defined under CFTC regulations, without regard to the percentage
of the Portfolio's assets committed to margin and option premiums, and (ii)
enter into non-hedging transactions, provided that the Portfolio may not enter

into such non-hedging transactions if, immediately thereafter, the sum of the
amount of initial margin deposits on the Portfolio's existing Futures
positions and option premiums would exceed 5% of the fair value of its
portfolio, after taking into account unrealized profits and unrealized losses
on any such transactions. Margin deposits may consist of cash or securities
acceptable to the broker and the relevant contract market.

Transactions in options by a Portfolio are subject to limitations
established by each of the exchanges governing the maximum number of options
which may be written or held by a single investor or group of investors acting
in concert, regardless of whether the options were written or purchased on the
same or different exchanges or are held in one or more accounts or through one
or more exchanges or brokers. Thus, the number of options which a Portfolio
may write or hold may be affected by options written or held by other
entities, including other investment companies having the same or an
affiliated investment adviser. Position limits also apply to Futures. An
exchange may order the liquidation of positions found to be in violation of
those limits and may impose certain other sanctions. Due to requirements under
the 1940 Act, when a Portfolio purchases a Future, the Portfolio will
segregate 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 Hedging

In addition to the risks discussed in the Prospectus and above, there
is a risk in using short hedging by selling Futures to attempt to protect
against decline in value of the portfolio securities (due to an increase in
interest rates) that the prices of such Futures will correlate imperfectly
with the behavior of the cash (i.e., market value) prices of the Portfolio's
securities. The ordinary spreads between prices in the cash and Futures
markets are subject to distortions due to differences in the natures of those
markets. First, all participants in the Futures markets are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close Futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
Futures markets. Second, the liquidity of the Futures markets depends on
participants entering into offsetting transactions rather than making or
taking delivery. To the extent participants decide to make or take delivery,
liquidity in the Futures markets could be reduced, thus producing distortion.
Third, from the point-of-view of speculators, the deposit requirements in the
Futures markets are less onerous than margin requirements in the securities

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markets. Therefore, increased participation by speculators in the Futures
markets may cause temporary price distortions.

If a Portfolio uses Hedging Instruments to establish a position in

the debt securities markets as a temporary substitute for the purchase of
individual debt securities (long hedging) by buying Futures and/or calls on
such Futures or on debt securities, it is possible that the market may
decline; if the Adviser then determines not to invest in such securities at
that time because of concerns as to possible further market decline or for
other reasons, the Portfolio will realize a loss on the Hedging Instruments
that is not offset by a reduction in the price of the debt securities
purchased.

Illiquid and Restricted Securities. No more than 15% of the value of
a Portfolio's net assets, determined as of the date of purchase, may be
invested in illiquid securities including repurchase agreements which have a
maturity of longer than seven days, interest-rate swaps, currency swaps, caps,
floors and collars, or in other securities that are illiquid by virtue of the
absence of a readily available market or legal or contractual restrictions on
resale. Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), securities which are otherwise not readily marketable and repurchase
agreements having a maturity of longer than seven days. Repurchase agreements
subject to demand are deemed to have a maturity equal to the notice period.
Securities which have not been registered under the Securities Act are
referred to as private placements or restricted securities and are purchased
directly from the issuer or in the secondary market. Mutual funds do not
typically hold a significant amount of these restricted or other illiquid
securities because of the potential for delays on resale and uncertainty in
valuation. Limitations on resale may have an adverse effect on the
marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days. A mutual fund might also have to register such restricted
securities in order to dispose of them, resulting in additional expense and
delay. There will generally be a lapse of time between a mutual fund's
decision to sell an unregistered security and the registration of such
security promoting sale. Adverse market conditions could impede a public
offering of such securities. When purchasing unregistered securities, each of
the Portfolios will seek to obtain the right of registration at the expense of
the issuer (except in the case of Rule 144A securities).

In recent years, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for repayment. The
fact that there are contractual or legal restrictions on resale to the general
public or to certain institutions may not be indicative of the liquidity of
such investments.

Restricted securities eligible for resale pursuant to Rule 144A under
the Securities Act for which there is a readily available market may be deemed
to be liquid. The Adviser will monitor the

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liquidity of such restricted securities subject to the supervision of the
Directors. In reaching liquidity decisions the Adviser will consider, inter
alia, pursuant to guidelines and procedures established by the Directors, 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).

Commercial paper issues in which a Portfolio's net assets may be
invested include securities issued by major corporations without registration
under the Securities Act in reliance on the exemption from such registration
afforded by Section 3(a)(3) thereof, and commercial paper issued in reliance
on the so-called private placement exemption from registration which is
afforded by Section 4(2) of the Securities Act ("Section 4(2) paper"). Section
4(2) paper is restricted as to disposition under the federal securities laws
in that any resale must similarly be made in an exempt transaction. Section
4(2) paper is normally resold to other institutional investors through or with
the assistance of investment dealers who make a market in Section 4(2) paper,
thus providing liquidity. Section 4(2) paper that is issued by a company that
files reports under the Securities Exchange Act of 1934 is generally eligible
to be sold in reliance on the safe harbor of Rule 144A described above. A
Portfolio's 15% limitation on investments in illiquid securities includes
Section 4(2) paper other than Section 4(2) paper that the Adviser has
determined to be liquid pursuant to guidelines established by the Directors.
The Directors have delegated to the Advisers the function of making day-to-day
determinations of liquidity with respect to Section 4(2) paper, pursuant to
guidelines approved by the Directors that require the Advisers to take into
account the same factors described above for other restricted securities and
require the Advisers to perform the same monitoring and reporting functions.

Hybrid Instruments; Indexed/Structured Securities. Hybrid
Instruments, including indexed or structured securities, have been developed
and combine the elements of futures contracts or options with those of debt,
preferred equity or a depository instrument. 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

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transactions costs associated with buying and currency-hedging the foreign
bond positions. One solution would be to purchase a U.S. dollar-denominated
Hybrid Instrument whose redemption price is linked to the average three year
interest rate in a designated group of countries. The redemption price formula
would provide for payoffs of greater than par if the average interest rate was
lower than a specified level, and payoffs of less than par if rates were above
the specified level. Furthermore, the Portfolio could limit the downside risk
of the security by establishing a minimum redemption price so that the
principal paid at maturity could not be below a predetermined minimum level if
interest rates were to rise significantly. The purpose of this arrangement,
known as a structured security with an embedded put option, would be to give
the Portfolio the desired European bond exposure while avoiding currency risk,
limiting downside market risk, and lowering transactions costs. Of course,
there is no guarantee that the strategy will be successful and the Portfolio
could lose money if, for example, interest rates do not move as anticipated or
credit problems develop with the issuer of the Hybrid.

The risks of investing in Hybrid Instruments reflect a combination of
the risks of investing in securities, options, futures and currencies. Thus,
an investment in a Hybrid Instrument may entail significant risks that are not
associated with a similar investment in a traditional debt instrument that has
a fixed principal amount, is denominated in U.S. dollars or bears interest
either at a fixed rate or a floating rate determined by reference to a common,
nationally published Benchmark. The risks of a particular Hybrid Instrument
will, of course, depend upon the terms of the instrument, but may include,
without limitation, the possibility of significant changes in the Benchmarks
or the prices of Underlying Assets to which the instrument is linked. Such
risks generally depend upon factors which are unrelated to the operations or
credit quality of the issuer of the Hybrid Instrument and which may not be
readily foreseen by the purchaser, such as economic and political events, the
supply and demand for the Underlying Assets and interest rate movements. In
recent years, various Benchmarks and prices for Underlying Assets have been
highly volatile, and such volatility may be expected in the future. Reference
is also made to the discussion of futures, options, and forward contracts
herein for a discussion of the risks associated with such investments.

Hybrid Instruments are potentially more volatile and carry greater
market risks than traditional debt instruments. Depending on the structure of
the particular Hybrid Instrument, changes in a Benchmark may be magnified by
the terms of the Hybrid Instrument and have an even more dramatic and
substantial effect upon the value of the Hybrid Instrument. Also, the prices
of the Hybrid Instrument and the Benchmark or Underlying Asset may not move in

the same direction or at the same time.

Hybrid Instruments may bear interest or pay preferred dividends at
below market (or even relatively nominal) rates. Alternatively, Hybrid
Instruments may bear interest at above market rates but bear an increased risk
of principal loss (or gain). The latter scenario may result if "leverage" is
used to structure the Hybrid Instrument. Leverage risk occurs when the Hybrid
Instrument is structured so that a given change in a Benchmark or Underlying
Asset is multiplied to produce a greater value change in the Hybrid
Instrument, thereby magnifying the risk of loss as well as the potential for
gain.

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Hybrid Instruments may also carry liquidity risk since the
instruments are often "customized" to meet the portfolio needs of a particular
investor, and therefore, the number of investors that are willing and able to
buy such instruments in the secondary market may be smaller than that for more
traditional debt securities. In addition, because the purchase and sale of
Hybrid Instruments could take place in an over-the-counter market without the
guarantee of a central clearing organization or in a transaction between the
Portfolio and the issuer of the Hybrid Instrument, the creditworthiness of the
counter party or issuer of the Hybrid Instrument would be an additional risk
factor which the Portfolio would have to consider and monitor. Hybrid
Instruments also may not be subject to regulation of the CFTC, which generally
regulates the trading of commodity futures by U.S. persons, the Securities and
Exchange Commission (the "SEC"), which regulates the offer and sale of
securities by and to U.S. persons, or any other governmental regulatory
authority.

The various risks discussed above, particularly the market risk of
such instruments, may in turn cause significant fluctuations in the net asset
value of the Portfolio. Accordingly, each Portfolio will limit its investments
in Hybrid Instruments to 10% of total assets at the time of purchase. However,
because of their volatility, it is possible that a Portfolio's investment in
Hybrid Instruments will account for more than 10% of the Portfolio's return
(positive or negative).

When-Issued Securities and Firm Commitment Agreement. A Portfolio may
purchase or sell securities on a "when-issued" or "delayed delivery" basis and
may purchase securities on a firm commitment basis. Although a Portfolio will
enter into such transactions for the purpose of acquiring securities for its
portfolio or for delivery pursuant to options contracts it has entered into,
the Portfolio may dispose of a commitment prior to settlement. "When-issued"
or "delayed delivery" refers to securities whose terms and indenture are
available and for which a market exists, but which are not available for
immediate delivery. When such transactions are negotiated, the price (which is
generally expressed in yield terms) is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
During the period between commitment by a Portfolio and settlement (generally

within two months but not to exceed 120 days), no payment is made for the
securities purchased by the purchaser, and no interest accrues to the
purchaser from the transaction. Such securities are subject to market
fluctuation, and the value at delivery may be less than the purchase price. A
Portfolio will maintain a segregated account with its Custodian, consisting of
cash or liquid securities at least equal to the value of purchase commitments
until payment is made. A Portfolio will likewise segregate liquid assets in
respect of securities sold on a delayed delivery basis.

A Portfolio will engage in when-issued transactions in order to
secure what is considered to be an advantageous price and yield at the time of
entering into the obligation. When a Portfolio engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the case
may be, to consummate the transaction. Failure to do so may result 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

B-25

<PAGE>

records the transaction and reflects the value of the security purchased, or
if a sale, the proceeds to be received in determining its net asset value.)

To the extent a Portfolio engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling securities
consistent with its investment objectives and policies and not for the
purposes of investment leverage. A Portfolio enters into such transactions
only with the intention of actually receiving or delivering the securities,
although (as noted above) when-issued securities and firm commitments may be
sold prior to the settlement date. In addition, changes in interest rates in a
direction other than that expected by the Adviser before settlement of a
purchase will affect the value of such securities and may cause a loss to a
Portfolio.

When-issued transactions and firm commitments may be used to offset
anticipated changes in interest rates and prices. For instance, in periods of
rising interest rates and falling prices, a Portfolio might sell securities in
its portfolio on a forward commitment basis to attempt to limit its exposure
to anticipated falling prices. In periods of falling interest rates and rising
prices, a Portfolio might sell portfolio securities and purchase the same or
similar securities on a when-issued or forward commitment basis, thereby
obtaining the benefit of currently higher cash yields.

Loans of Portfolio Securities. Consistent with applicable regulatory
requirements, each 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 short-term obligations. A loan may be terminated by the
borrower on one business day's notice or by a Portfolio at any time. If the
borrower fails to maintain the requisite amount of collateral, the loan
automatically terminates, and the Portfolio could use the collateral to
replace the securities while holding the borrower liable for any excess of
replacement cost over collateral. As with any extensions of credit, there are
risks of delay in recovery and in some cases even loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms deemed by the
Adviser to be creditworthy. On termination of the loan, the borrower is
required to return the securities to a Portfolio; and any gain or loss in the
market price of the loaned security during the loan would inure to the
Portfolio. Each 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 which accompany loaned securities pass
to the borrower, each Portfolio will follow the policy of calling the loan, in
whole or in part as may be appropriate, to permit the exercise of such rights
if the matters involved would have a material effect on the Portfolio's
investment in the securities which are the subject of the loan.

B-26

<PAGE>

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 Adviser to be
creditworthy. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. It may
also be viewed as the borrowing of money by the Portfolio. The Portfolio's
investment of the proceeds of a reverse repurchase agreement is the
speculative factor known as leverage. A Portfolio will enter into a reverse
repurchase agreement only if the interest income from investment of the
proceeds is expected to be greater than the interest expense of the
transaction and the proceeds are invested for a period no longer than the term
of the agreement. The Portfolio will maintain with the Custodian a separate
account with a segregated portfolio of cash or liquid securities in an amount
at least equal to its purchase obligations under these agreements (including
accrued interest). In the event that the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the buyer or
its trustee or receiver may receive an extension of time to determine whether
to enforce the Portfolio's repurchase obligation, and the Portfolio's use of
proceeds of the agreement may effectively be restricted pending such decision.

Reverse repurchase agreements are considered to be borrowings and are subject
to the percentage limitations on borrowings. See "Investment Restrictions."

Dollar Rolls. Each Portfolio may enter into "dollar rolls" in which a
Portfolio sells mortgage or other asset-backed securities ("Roll Securities")
for delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type, coupon and maturity) securities on a
specified future date. During the roll period, the Portfolio foregoes
principal and interest paid on the Roll Securities. The Portfolio is
compensated by the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") as
well as by the interest earned on the cash proceeds of the initial sale. The
Portfolio also could be compensated through the receipt of fee income
equivalent to a lower forward price. A "covered roll" is a specific type of
dollar roll for which there is an offsetting cash position or a cash
equivalent security position which matures on or before the forward settlement
date of the dollar roll transaction. A Portfolio will only enter into covered
rolls. Because "roll" transactions involve both the sale and purchase of a
security, they may cause the reported portfolio turnover rate to be higher
than that reflecting typical portfolio management activities.

Dollar rolls involve certain risks including the following: if the
broker-dealer to whom the Portfolio sells the security becomes insolvent, the
Portfolio's right to purchase or repurchase the security subject to the dollar
roll may be restricted and the instrument which the Portfolio is required to
repurchase may be worth less than an instrument which the Portfolio originally
held. Successful use of dollar rolls will depend upon the Adviser'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

B-27

<PAGE>

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 Adviser 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 Portfolio; 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 portfolios from interest rate fluctuations and
to hedge against fluctuations in the fixed income market in which certain of
the Portfolios' investments are traded, the Portfolio may enter into
interest-rate swaps and mortgage swaps or purchase or sell interest-rate caps,
floors or collars. The Portfolio will enter into these hedging transactions
primarily to preserve a return or spread on a particular investment or portion
of the portfolio and to protect against any increase in the price of
securities the Portfolio anticipates purchasing at a later date. The Portfolio
may also enter into interest-rate swaps for non-hedging purposes.
Interest-rate swaps are individually negotiated, and the Portfolio expects to
achieve an acceptable degree of correlation between its portfolio investments
and interest-rate positions. A Portfolio will only enter into interest-rate
swaps on a net basis, which means that the two payment streams are netted out,
with the Portfolio receiving or paying, as the case may be, only the net
amount of the two payments. Interest-rate swaps do not involve the delivery of
securities, other underlying assets or principal. Accordingly, the risk of
loss with respect to interest-rate swaps is limited to the net amount of
interest payments that the Portfolio is contractually obligated to make. If
the other party to an interest-rate swap defaults, the Portfolio's risk of
loss consists of the net amount of interest payments that the Portfolio is
contractually entitled to receive. The use of interest-rate swaps is a highly
specialized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. All of
these investments may be deemed to be illiquid for purposes of the Portfolio's
limitation on investment in such securities. Inasmuch as these investments are
entered into for good faith hedging purposes, and inasmuch as segregated
accounts will be established with respect to such transactions, the Fund
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.

B-28

<PAGE>

A Portfolio will enter into these transactions only with banks and
recognized securities dealers believed by the Adviser to present minimal
credit risk in accordance with guidelines established by the Board of

Directors. If there is a default by the other party to such a transaction, the
Portfolio will have to rely on its contractual remedies (which may be limited
by bankruptcy, insolvency or similar laws) pursuant to the agreements related
to the transaction.

The swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. Caps, collars and floors are
more recent innovations for which documentation is less standardized, and
accordingly, they are less liquid than swaps.

Mortgage swaps are similar to interest-rate swaps in that they
represent commitments to pay and receive interest. The notional principal
amount, upon which the value of the interest payments is based, is tied to
reference pool or pools of mortgages.

The purchase of an interest-rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to
receive payments of interest on a notional principal amount from the party
selling such interest-rate cap. The purchase of an interest-rate floor
entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest-rate floor.

PORTFOLIO TURNOVER

The portfolio turnover rate is calculated for each Portfolio by
dividing (a) the lesser of purchases or sales of portfolio securities for the
fiscal year by (b) the monthly average of the value of portfolio securities
owned during the fiscal year. For purposes of this calculation, securities
which at the time of purchase had a remaining maturity of one year or less are
excluded from the numerator and the denominator. Transactions in Futures or
the exercise of calls written by a Portfolio may cause the Portfolio to sell
portfolio securities, thus increasing its turnover rate. The exercise of puts
also may cause a sale of securities and increase turnover; although such
exercise is within a Portfolio's control, holding a protective put might cause
the Portfolio to sell the underlying securities for reasons which would not
exist in the absence of the put. A Portfolio will pay a brokerage commission
each time it buys or sells a security in connection with the exercise of a put
or call. Some commissions may be higher than those which would apply to direct
purchases or sales of portfolio securities. Because each of the Advisers to
each Portfolio manages its portion of the Portfolio's assets independently, it
is possible that the same security may be purchased and sold on the same day
by two or more Advisers to the same Portfolio, resulting in higher brokerage
commissions for the Portfolio. It is not anticipated that the annual rate of
portfolio turnover will exceed 200%.

High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs which will be borne directly by a
Portfolio. High portfolio turnover may also involve a possible increase in
short-term capital gains or losses.

B-29

<PAGE>

INVESTMENT RESTRICTIONS

The Fund 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. 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.

2. Invest in real estate (including limited partnership interests but
excluding securities of companies, such as real estate investment trusts,
which deal in real estate or interests therein); provided that a Portfolio may
hold or sell real estate acquired as a result of the ownership of securities.

3. Purchase or sell commodities or commodity contracts, except to the
extent that the Portfolio may do so in accordance with applicable law and the
Prospectus and Statement of Additional Information, as they may be amended
from time to time, and without registering as a commodity pool operator under
the Commodity Exchange Act. Any Portfolio may engage in transactions in put
and call options on securities, indices and currencies, spread transactions,
forward and futures contracts on securities, indices and currencies, put and
call options on such futures contracts, forward commitment transactions,
forward foreign currency exchange contracts, interest rate, mortgage and
currency swaps and interest rate floors and caps and may purchase hybrid
instruments.

4. Make loans to others except for (a) the purchase of debt
securities; (b) entering into repurchase agreements; and (c) the lending of
its portfolio securities.

5. Borrow money, except that (i) each Portfolio may borrow from banks
in amounts up to 33 1/3% of its total assets for temporary or emergency
purposes, (ii) each Portfolio may borrow for investment purposes to the
maximum extent permissible under the 1940 Act (i.e., presently 50% of net
assets), 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.

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

agreements, dollar rolls, lend its portfolio securities and borrow money from
banks, as described above, and engage in similar investment strategies

B-30

<PAGE>

described in the Prospectus and Statement of Additional Information, as they
may be amended from time to time.

7. 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 Directors without a vote of shareholders. Each
Portfolio may not:

8. Purchase securities on margin, provided that margin deposits in
connection with futures contracts, options on futures contracts and other
derivative instruments shall not constitute purchasing securities on margin.

9. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and, to the extent related to the
segregation of assets in connection with the writing of covered put and call
options and the purchase of securities or currencies on a forward commitment
or delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to forward contracts, options, futures contracts and
options on futures contracts. In addition, a Portfolio may pledge assets in
reverse repurchase agreements, dollar rolls and similar investment strategies
described in the Prospectus and Statement of Additional Information, as they
may be amended from time to time.

10. Invest in securities of other registered investment companies,
except by purchases in the open market, involving only customary brokerage
commissions and as a result of which not more than 10% of its total assets
(determined at the time of investment) would be invested in such securities,
or except as part of a merger, consolidation or other acquisition.

11. Enter into any repurchase agreement maturing in more than seven
days or investing in any other illiquid security if, as a result, more than
15% of a Portfolio's net assets would be so invested. Restricted securities
eligible for resale pursuant to Rule 144A under the Securities Act that have a
readily available market, and commercial paper exempted from registration
under the Securities Act pursuant to Section 4(2) of that Act that may be
offered and sold to "qualified institutional buyers" as defined in Rule 144A,
which the Adviser has determined to be liquid pursuant to guidelines
established by the Directors, will not be considered illiquid for purposes of
this 15% limitation on illiquid securities.

DIRECTORS AND OFFICERS

The following table lists the Directors and executive officers of the
Fund, their ages, business addresses, and principal occupations during the
past five years. The SunAmerica Mutual Funds ("SAMF") consist of SunAmerica
Equity Funds, SunAmerica Income Funds and SunAmerica Money Market Funds, Inc.
An asterisk indicates those Directors who are interested persons of the Fund
within the meaning of the 1940 Act.

B-31

<PAGE>

<TABLE>
<CAPTION>
Position Principal Occupations
Name, Age and Address with the Fund During Past 5 Years
- --------------------- ------------- -------------------
<S> <C> <C>
S. James Coppersmith, 64 Director Director/Trustee of the Boston Stock
Emerson College Exchange, Uno Restaurant Corp.,
100 Beacon Street Waban Corp., Kushner-Locke Co.,
Boston, MA 02116 Chayron Inc.; Chairman of the Board of
Emerson College; formerly, President
and General Manager, WCVB-TV, a
division of the Hearst Corporation,
from 1982 to 1994) (retired); Director/
Trustee of the SAMF and Anchor Series
Trust ("AST").

Samuel M. Eisenstat, 57 Chairman of the Attorney in private practice; President
430 East 86th Street Board and Chief Executive Officer, Abjac
New York, NY 10028 Energy Corporation; Director/Trustee of
Atlantic Realty Trust, UMB Bank and
Trust (a subsidiary of United Mizrachi
Bank), North European Royalty Trust,
Volt Information Sciences Funding, Inc.
(a subsidiary of Volt Information
Sciences, Inc.) and Venture Partners
International (an Israeli venture capital
fund); Chairman of the Boards of
Directors/Trustees of SAMF and AST.

Stephen J. Gutman, 54 Director Partner and Chief Operating Officer of
515 East 79th Street B.B. Associates LLC (menswear
New York, NY 10021 specialty retailing and other activities)
since May 1989; Director/Trustee of
SAMF and AST.
</TABLE>

B-32

<PAGE>

<TABLE>
<CAPTION>
Position Principal Occupations
Name, Age and Address with the Fund During Past 5 Years
- --------------------- ------------- -------------------
<S> <C> <C>
Peter A. Harbeck,*44 Director and Director and President, SunAmerica
The SunAmerica Center President Asset Management Corp.
733 Third Avenue ("SunAmerica"); Director, SunAmerica
New York, NY 10017-3204 Capital Services, Inc. ("SACS"), since
February 1993; Director and President,
SunAmerica Fund Services, Inc.
("SAFS"), since May 1988; President,
SAMF and AST; Executive Vice President
and Chief Operating Officer,
SunAmerica, from May 1988 to August
1995; Executive Vice President, SACS,
from November 1991 to August 1995;
Director, Resources Trust Company.

J. Steven Neamtz, 38 Vice President Executive Vice President, SunAmerica,
The SunAmerica Center since April 1996; President, SACS, since
733 Third Avenue April 1996; formerly, Executive Vice
New York, NY 10017-3204 President, New England Funds, L.P.
from July 1990 to April 1996.

Peter McMillan III,*39 Director Executive Vice President and Chief
1 SunAmerica Center Investment Officer, SunAmerica
Los Angeles, CA 90067 Investments, Inc., since August 1989;
Director/Trustee of the SAMF; Director,
Resources Trust Company.

Sebastiano Sterpa, 68 Director Founder of Sterpa Realty, Inc., a full
Suite 200 service real estate firm, since 1962;
200 West Glenoaks Blvd. Chairman of the Sterpa Group, real
Glendale, CA 91202 estate investments and management
company, since 1962; Director/Trustee
of the SAMF.
</TABLE>

B-33

<PAGE>

<TABLE>
<CAPTION>
Position Principal Occupations

Name, Age and Address with the Fund During Past 5 Years
- --------------------- ------------- -------------------
<S> <C> <C>
Robert M. Zakem, 40 Secretary Senior Vice President and General
The SunAmerica Center Counsel, SunAmerica, since April 1993;
733 Third Avenue Executive Vice President, General
New York, NY 10017-3204 Counsel and Director, SACS, since
April 1993; Vice President, General
Counsel and Assistant Secretary, SAFS,
since January 1994; Vice President and
Assistant Secretary, SunAmerica Series
Trust ("SAST") and Anchor Pathway Fund
("APF"), since April 1993; Vice
President and Assistant Secretary,
Seasons Series Trust, since April 1997;
Secretary, SAMF and AST; formerly, Vice
President and Associate General
Counsel, SunAmerica, from March 1992 to
April 1993.

Peter C. Sutton, 33 Treasurer Senior Vice President, SunAmerica,
The SunAmerica Center since April 1997; Treasurer, SAMF and
733 Third Avenue AST, since February 1996; Vice
New York, NY 10017-3204 President, SAST, APF, since October
1994; Vice President, Seasons Series
Trust, since April 1997; formerly, Vice
President, SunAmerica, from 1994 to
1997; Controller, SAMF and AST, from
March 1993 to February 1996; Assistant
Controller, SAMF and AST, from 1990 to
1993.
</TABLE>

Directors and officers of the Fund are also Directors and officers of
some or all of the other investment companies managed, administered or advised
by SunAmerica, and distributed by SunAmerica Capital Services ("SACS" or the
"Distributor") and other affiliates of SunAmerica Inc.

The Fund pays each Director who is not an interested person of the
Fund, SunAmerica or any Adviser, nor a party to any Management Agreement or
Subadvisory Agreement (collectively, the "Disinterested Directors") annual
compensation in addition to reimbursement of out-of-pocket expenses in
connection with attendance at meetings of the Directors. Specifically, each
Disinterested Director receives an aggregate of up to $60,000 in annual
compensation for acting as director or trustee to the SAMF, AST and/or the
Fund, a pro rata portion of which, based on relative net assets, is borne by
the Fund.

B-34

<PAGE>

In addition, each Disinterested Director also serves on the Audit
Committee of the Board of Directors. Each member of the Audit Committee
receives an aggregate of up to $5,000 in annual compensation for serving on
the Audit Committees of the SAMF, AST and/or the Fund, a pro rata portion of
which, based on relative net assets, is borne by the Fund. The Fund also has a
Nominating Committee, comprised solely of Disinterested Directors, which
recommends to the Directors those persons to be nominated for election as
Directors by shareholders and selects and proposes nominees for election by
Directors between shareholders' meetings. Members of the Nominating Committee
serve without compensation.

The Directors (and Trustees) of the SAMF, AST and the Fund have
adopted the SunAmerica Disinterested Trustees' and Directors' Retirement Plan
(the "Retirement Plan") effective January 1, 1993 for the unaffiliated
Directors. The Retirement Plan provides generally that if a Disinterested
Director who has at least 10 years of consecutive service as a Disinterested
Director of any of the SAMF, AST or the Fund (an "Eligible Director") retires
after reaching age 60 but before age 70 or dies while a Director, such person
will be eligible to receive a retirement or death benefit from each SunAmerica
mutual fund with respect to which he or she is an Eligible Director. As of
each birthday, prior to the 70th birthday, each Eligible Director will be
credited with an amount equal to (i) 50% of his or her regular fees (excluding
committee fees) for services as a Disinterested Director of each SunAmerica
mutual fund for the calendar year in which such birthday occurs, plus (ii)
8.5% of any amounts credited under clause (i) during prior years. An Eligible
Director may receive any benefits payable under the Retirement Plan, at his or
her election, either in one lump sum or in up to fifteen annual installments.

The following table sets forth information summarizing the
compensation that the Fund paid each Disinterested Director for his services
as Director for the fiscal year ended October 31, 1997. The Directors who are
interested persons of the Fund receive no compensation.

ESTIMATED COMPENSATION TABLE*

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Pension or Total Compensation
Aggregate Retirement Benefits Estimated Annual from Registrant and
Compensation Accrued as Part of Benefits Upon Fund Complex Paid
Director from Fund Fund Expenses** Retirement**+ to Directors**
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S. James Coppersmith $3,200 N/A $29,670 $65,000

- ------------------------------------------------------------------------------------------------------------------------------
Samuel M. Eisenstat*** $3,500 N/A $46,089 $69,000
- ------------------------------------------------------------------------------------------------------------------------------
Stephen J. Gutman $3,200 N/A $60,912 $65,000
- ------------------------------------------------------------------------------------------------------------------------------
Sebastiano Sterpa $3,200 N/A $7,900 $43,333
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Assumes Fund assets of $400 million at fiscal year end.
** Information is for the five investment companies in the complex which
pay fees to these directors/trustees. The complex consists of the SAMF,
AST and the Fund.
*** Mr. Eisenstat receives additional compensation for serving as Chairman
of each of the boards in the complex, $300 of which is payable by the
Fund.
**** Mr. Sterpa is not a trustee of AST.
+ Assuming participant elects to receive benefits in 15 yearly
installments.

B-35

<PAGE>

As of February 2, 1998, the Directors and officers of the Fund owned in
the aggregate less than 1% of the Fund's total outstanding shares.

The following shareholders owned of record or beneficially 5% or more of
the indicated Portfolio Class' shares outstanding as of February 2, 1998:
Large-Cap Growth Portfolio - Class A - SunAmerica Inc., Los Angeles, CA 90067
- - owned beneficially 85%; Class B - Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL 32246 - owned of record 10%; Class C - Prudential
Securities, Inc. - owned of record 16%; Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL 32246 - owned of record 18%; Mid-Cap Growth Portfolio -
Class A - Paine Webber for benefit of Tramco, Inc. Profit Sharing Plan Trust,
Wichita, KS 67214 - owned of record 7%; Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL 32246 - owned of record 29%; Class B - Merrill Lynch,
Pierce, Fenner & Smith, Inc., Jacksonville, FL 32246 - owned of record 9%;
Class C - Paine Webber for benefit of Tramco, Inc. Profit Sharing Plan Trust,
Wichita, KS 67214 - owned of record 9%; Aggressive Growth Portfolio - Class B
- - Paine Webber for benefit of Tramco, Inc. Profit Sharing Plan Trust, Wichita,
KS 67214 - owned of record 8%; Class C - Paine Webber for benefit of Tramco,
Inc. Profit Sharing Plan Trust, Wichita, KS 67214 - owned of record 7%;
Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL 32246 owned of
record 32%; Large-Cap Blend Portfolio - Class A - SunAmerica Inc., Los
Angeles, CA 90067 owned beneficially 82%; Class B - Merrill Lynch, Pierce,
Fenner & Smith, Inc., Jacksonville, FL 32246 owned of record 7%; Class C -

SunAmerica Asset Management Corp., New York, NY 10017 - owned of record 16%;
Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL 32246 - owned of
record 22%; Large-Cap Value Portfolio - Class A - SunAmerica Inc., Los
Angeles, CA 90067 - owned beneficially 60%; Class B - Merrill Lynch, Pierce,
Fenner & Smith, Inc., Jacksonville, FL 32246 - owned of record 5%; Class C -
Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL 32246 - owned of
record 12%; Small-Cap Value Portfolio - Class A - SunAmerica Asset Management
Corp., New York, NY 10017 - owned of record 24%; Class B - Merrill Lynch,
Pierce, Fenner & Smith, Inc., Jacksonville, FL 32246 - owned of record 8%;
Class C - Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL 32246
- - owned of record 21%; Prudential Securities, Inc. - owned of record 12%;
Value Portfolio - Class B - Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL 32246 - owned of record 7%; Class C - Merrill Lynch, Pierce,
Fenner & Smith, Inc., Jacksonville, FL 32246 - owned of record 22%;
International Equity Portfolio - Class A - SunAmerica Inc., Los Angeles, CA
90067 - owned beneficially 7%; Class B - Merrill Lynch, Pierce, Fenner &
Smith, Inc., Jacksonville, FL 32246 - owned of record 6%; Class C - Prudential
Securities, Inc. - owned of record 5%; Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL 32246 - owned of record 39%. A shareholder who owns
beneficially, directly or indirectly, 25% or more of a Portfolio's outstanding
voting securities may be deemed to "control" (as defined in the 1940 Act) that
Portfolio.

ADVISERS, DISTRIBUTOR AND ADMINISTRATOR

SunAmerica Asset Management Corp. SunAmerica, organized as a Delaware
corporation in 1982, is located at The SunAmerica Center, 733 Third Avenue,
New York, NY 10017-3204, and acts as the investment manager to each of the
Portfolios pursuant to the Investment Advisory and Management Agreement (the
"Management Agreement") with the Fund, on behalf of each Portfolio. SunAmerica
is an indirect wholly owned subsidiary of SunAmerica Inc. SunAmerica Inc. is
incorporated in the State of Maryland and maintains its principal executive
offices at 1 SunAmerica Center, Los Angeles, CA 90067-6022, telephone (310)
772-6000.

B-36

<PAGE>

Under the Management Agreement, and except as delegated to the
Advisers under the Subadvisory Agreements (as defined below), SunAmerica
manages the investment of the assets of each Portfolio and obtains and
evaluates economic, statistical and financial information to formulate and
implement investment policies for each Portfolio. Any investment program
undertaken by SunAmerica will at all times be subject to the policies and
control of the Directors. SunAmerica also provides certain administrative
services to each Portfolio.

Except to the extent otherwise specified in the Management Agreement,
each Portfolio pays, or causes to be paid, all other expenses of the Fund and
each of the Portfolios, including, without limitation, charges and expenses of
any registrar, custodian, transfer and dividend disbursing agent; brokerage

commissions; taxes; engraving and printing of share certificates; registration
costs of the Portfolios and their shares under Federal and state securities
laws; the cost and expense of printing, including typesetting, and
distributing Prospectuses and Statements of Additional Information respecting
the Portfolios, and supplements thereto, to the shareholders of the
Portfolios; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing proxy statements and reports to shareholders;
all expenses incident to any dividend, withdrawal or redemption options; fees
and expenses of legal counsel and independent accountants; membership dues of
industry associations; interest on borrowings of the Portfolios; postage;
insurance premiums on property or personnel (including Officers and Directors)
of the Fund which inure to its benefit; extraordinary expenses (including, but
not limited to, legal claims and liabilities and litigation costs and any
indemnification relating thereto); and all other costs of the Fund's
operation.

The annual rate of the investment advisory fees that apply to each
Portfolio are set forth in the Prospectus.

Effective June 17, 1997, with respect to the Mid-Cap Growth
Portfolio, Aggressive Growth Portfolio, Value Portfolio and International
Equity Portfolio, and the date of commencement of operations with respect to
the Large-Cap Growth Portfolio, Large-Cap Blend Portfolio, Large-Cap Value
Portfolio and Small-Cap Value Portfolio; SunAmerica has voluntarily agreed to
waive fees or reimburse expenses, if necessary, to keep operating expenses at
or below an annual rate of 1.78% of the Assets of Class A shares and 2.43% of
the Assets of Class B and Class C shares for each such Portfolio (other than
the International Equity Portfolio) and 2.03% of the Assets of Class A shares
and 2.68% of the Assets of Class B and Class C shares for the International
Equity Portfolio. Prior to June 17, 1997, with respect to the Mid-Cap Growth
Portfolio, Aggressive Growth Portfolio, Value Portfolio and International
Equity Portfolio, SunAmerica voluntarily agreed to waive fees or reimburse
expenses to keep annual operating expenses at or below an annual rate of 1.90%
of the Assets of Class A shares and 2.55% of the Assets of Class B and Class C
shares for each such Portfolio (other than the International Equity Portfolio)
and 2.15% of the Assets of Class A shares and 2.80% of the Assets of Class B
and Class C shares for the International Equity Portfolio. 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 potential reimbursements are accounted for
as possible contingent liabilities that are not recordable on the balance
sheet of a Portfolio until collection is probable, but appear as footnote
disclosure to each Portfolio's financial statements. At such time as it
appears probable that

B-37

<PAGE>

a Portfolio is able to effect such reimbursement and that SunAmerica intends
to seek such reimbursement, the amount of the reimbursement will be accrued as
an expense of the Portfolio for that current period.

The Management Agreement will continue in effect with respect to each
Portfolio, for a period of two years from the date of execution unless
terminated sooner, and thereafter from year to year, if approved at least
annually by vote of a majority of the Directors or by the holders of a
majority of the respective Portfolio's outstanding voting securities. Any such
continuation also requires approval by a majority of the Disinterested
Directors by vote cast in person at a meeting called for such purpose. The
Management Agreement may be terminated with respect to a Portfolio at any
time, without penalty, on 60 days' written notice by the Directors, by the
holders of a majority of the respective Portfolio's outstanding voting
securities or by SunAmerica. The Management Agreement automatically terminates
with respect to each Portfolio in the event of its assignment (as defined in
the 1940 Act and the rules thereunder).

Under the terms of the Management Agreement, SunAmerica is not liable
to the Portfolios, or their shareholders, for any act or omission by it or for
any losses sustained by the Portfolios or their shareholders, except in the
case of willful misfeasance, bad faith, gross negligence or reckless disregard
of duty.

The Advisers. The organizations identified in the Prospectus act as Advisers
to the Fund and its Portfolios pursuant to the Subadvisory Agreements with
SunAmerica.

As described in the Prospectus, SunAmerica will initially allocate
the assets of each Portfolio equally among the Advisers for that Portfolio,
and subsequently, allocations of new cash flow and of redemption requests will
be made equally among the Advisers of each Portfolio unless SunAmerica
determines, subject to the review of the Directors, that a different
allocation of assets would be in the best interests of a Portfolio and its
shareholders. The Fund expects that differences in investment returns among
the portions of a Portfolio managed by different Advisers will cause the
actual percentage of a Portfolio's assets managed by each Adviser to vary over
time. In general, a Portfolio's assets once allocated to one Adviser will not
be reallocated (or "rebalanced") to another Adviser for the Portfolio.
However, SunAmerica reserves the right, subject to the review of the Board, to
reallocate assets from one Adviser to another when deemed in the best
interests of a Portfolio and its shareholders. In some instances, where a
reallocation results in any rebalancing of the Portfolio from a previous
allocation, the effect of the reallocation will be to shift assets from a
better performing Adviser to a portion of the Portfolio with a relatively
lower total return.

Each Adviser is paid monthly by SunAmerica a fee equal to a
percentage of the average daily net assets of the Portfolio allocated to the

Adviser. The aggregate annual rates of the fees payable by SunAmerica to the
Advisers for each Portfolio may vary according to the level of Assets of each
Portfolio. The highest aggregate annual rates of such fees would be the
following, expressed as a percentage of the Assets of each Portfolio:
Large-Cap Growth Portfolio, 0.48%; Mid-Cap Growth Portfolio, 0.50%; Aggressive
Growth Portfolio, 0.55%; Large-Cap Blend Portfolio, 0.48%; Large-Cap Value
Portfolio, 0.43%; Value Portfolio, 0.50%; Small-Cap Value Portfolio, 0.55%;
and International Equity Portfolio, 0.65%.

B-38

<PAGE>

The following table sets forth the total advisory fees incurred by
each Portfolio pursuant to the Management Agreement, or waived by the Adviser,
for the fiscal year ended October 31, 1997.

ADVISORY FEES

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ADVISORY FEES
PORTFOLIO ADVISORY FEES WAIVED
- -------------------------------------------------------------------------------
<S> <C> <C>
Large-Cap Growth Portfolio $11,611 $6,846
- -------------------------------------------------------------------------------
Mid-Cap Growth Portfolio $390,221 $132,696
- -------------------------------------------------------------------------------
Aggressive Growth Portfolio $533,055 $136,500
- -------------------------------------------------------------------------------
Large-Cap Blend Portfolio $11,730 $6,854
- -------------------------------------------------------------------------------
Large-Cap Value Portfolio $11,729 $6,854
- -------------------------------------------------------------------------------
Value Portfolio $671,560 $188,985
- -------------------------------------------------------------------------------
Small-Cap Value Portfolio $12,079 $6,891
- -------------------------------------------------------------------------------
International Equity Portfolio $440,671 $147,973
- -------------------------------------------------------------------------------
</TABLE>

The Subadvisory Agreements will continue in effect for a period of
two years from the date of their execution, unless terminated sooner. They 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. Under the terms of the Subadvisory Agreements, no
Adviser is liable to the Portfolios, or their shareholders, for any act or
omission by it or for any losses sustained by the Portfolios or their
shareholders, except in the case of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties.

B-39

<PAGE>

The following table sets forth the total subadvisory fees incurred by
each Portfolio pursuant to the Subadvisory Agreements, for the fiscal year
ended October 31, 1997.

SUBADVISORY FEES

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
PORTFOLIO SUBADVISORY FEES
- -------------------------------------------------------------------------------
<S> <C>
Large-Cap Growth Portfolio $5,613
- -------------------------------------------------------------------------------
Mid-Cap Growth Portfolio $195,077
- -------------------------------------------------------------------------------
Aggressive Growth Portfolio $199,051
- -------------------------------------------------------------------------------
Large-Cap Blend Portfolio $3,714
- -------------------------------------------------------------------------------
Large-Cap Value Portfolio $4,769
- -------------------------------------------------------------------------------
Value Portfolio $333,308
- -------------------------------------------------------------------------------
Small-Cap Value Portfolio $6,649
- -------------------------------------------------------------------------------
International Equity Portfolio $259,404
- -------------------------------------------------------------------------------
</TABLE>

Personal Trading. The Fund and SunAmerica have adopted a written Code of
Ethics (the "Code") which prescribes general rules of conduct and sets forth
guidelines with respect to personal securities trading by "Access Persons"
thereof. An Access Person as defined in the Code is an individual who is a
trustee, director, officer, general partner or advisory person of the Fund 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 director. 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 Directors on a quarterly basis, as
to whether there were any violations of the Code by Access Persons of the Fund
or SunAmerica during the quarter.

The Advisers have each adopted a written Code of Ethics, and have
represented that the provisions of such Code of Ethics are substantially
similar to those in the Code. Further, the Advisers report to SunAmerica on a
quarterly basis, as to whether there were any Code of Ethics violations by
employees thereof who may be deemed Access Persons of the Fund insofar as such
violations related to the Fund. In turn, SunAmerica reports to the Board of
Directors as to whether there were any violations of the Code by Access
Persons of the Fund or SunAmerica.

The Distributor. The Fund, on behalf of each Portfolio, has entered into a
distribution agreement (the "Distribution Agreement") with the Distributor, a
registered broker-dealer and an indirect wholly owned subsidiary of SunAmerica
Inc., to act as the principal underwriter of the shares of each Portfolio. The
address of the Distributor is The SunAmerica Center, 733 Third Avenue, New
York, NY 10017-3204. The Distribution Agreement provides that the Distributor
has the exclusive right to distribute shares of the Portfolios through its
registered representatives and authorized broker-dealers. The Distribution
Agreement also provides that the Distributor will pay the promotional
expenses, including the incremental cost of printing prospectuses, annual
reports and other periodic reports respecting each Portfolio, for

B-40

<PAGE>

distribution to persons who are not shareholders of such Portfolio and the
costs of preparing and distributing any other supplemental sales literature.
However, certain promotional expenses may be borne by the Portfolio (see
"Distribution Plans" below).

SACS serves as Distributor of Class Z shares, with respect to the
Aggressive Growth Portfolio, Large-Cap Value Portfolio, Value Portfolio,
Small-Cap Value Portfolio and International Equity Portfolio, and incurs the
expenses of distributing the Portfolio's Class Z shares under the Distribution
Agreement, none of which are reimbursed or paid by the Fund.

The Distribution Agreement with respect to each Portfolio will remain
in effect for two years from the date of execution unless terminated sooner,
and thereafter from year to year if such continuance is approved at least
annually by the Directors, including a majority of the Disinterested

Directors. The Fund and the Distributor each has the right to terminate the
Distribution Agreement with respect to a Portfolio on 60 days' written notice,
without penalty. The Distribution Agreement will terminate automatically in
the event of its assignment as defined in the 1940 Act and the rules
thereunder.

The Distributor may, from time to time, pay additional commissions or
promotional incentives to brokers, dealers or other financial services firms
that sell shares of the Portfolios. In some instances, such additional
commissions, fees or other incentives may be offered only to certain firms,
including Royal Alliance Associates, SunAmerica Securities, Inc., Koegler
Morgan & Company, Financial Service Corporation and Advantage Capital
Corporation, affiliates of the Distributor, that sell or are expected to sell
during specified time periods certain minimum amounts of shares of the
Portfolios, or of other funds underwritten by the Distributor. In addition,
the terms and conditions of any given promotional incentive may differ from
firm to firm. Such differences will, nevertheless, be fair and equitable, and
based on such factors as size, geographic location, or other reasonable
determinants, and will in no way affect the amount paid to any investor.

Distribution Plans. As indicated in the Prospectus, the Directors of the Fund
have adopted Distribution Plans (the "Class A Plan," the "Class B Plan" and
the "Class C Plan" and collectively, the "Distribution Plans") pursuant to
Rule 12b-1 under the 1940 Act. There is no Distribution Plan in effect for
Class Z shares. Reference is made to "Management of the Fund - Distribution
Plans" in the Prospectus for certain information with respect to the
Distribution Plans.

Under the Class A Plan, the Distributor may receive payments from a
Portfolio at an annual rate of up to 0.10% of average daily net assets of such
Portfolio's Class A shares to compensate the Distributor and certain
securities firms for providing sales and promotional activities for
distributing that class of shares. Under the Class B and Class C Plans, the
Distributor may receive payments from a Portfolio at the annual rate of up to
0.75% of the average daily net assets of such Portfolio's Class B and Class C
shares to compensate the Distributor and certain securities firms for
providing sales and promotional activities for distributing each such class of
shares. The distribution costs for which the Distributor may be reimbursed out
of such distribution fees include fees paid to broker-dealers that have sold
Portfolio shares, commissions and other expenses such as sales literature,
prospectus printing and distribution and compensation to wholesalers. It is
possible that in any given year the amount paid to the Distributor under the
Class A Plan, the Class B Plan or the Class C Plan will exceed the
Distributor's distribution costs as described above. The Distribution Plans
provide that each class of shares of each Portfolio may also pay the
Distributor an account maintenance and service fee of up to 0.25% of the
aggregate average daily net assets of such class of shares for payments to
broker-dealers for providing

B-41

<PAGE>

continuing account maintenance. In this regard, some payments are used to
compensate broker-dealers with trail commissions or account maintenance and
service fees in an amount up to 0.25% per year of the assets maintained in a
Portfolio by their customers.

DISTRIBUTION AND ACCOUNT MAINTENANCE AND SERVICE FEES

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
PORTFOLIO Class A Class B Class C
------- ------- -------
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Large-Cap Growth Portfolio $3,983 $173 $59
- -------------------------------------------------------------------------------
Mid-Cap Growth Portfolio $73,691 $164,888 $14,787
- -------------------------------------------------------------------------------
Aggressive Growth Portfolio $106,377 $209,795 $19,327
- -------------------------------------------------------------------------------
Large-Cap Blend Portfolio $4,000 $239 $63
- -------------------------------------------------------------------------------
Large-Cap Value Portfolio $3,986 $281 $60
- -------------------------------------------------------------------------------
Value Portfolio $116,913 $309,027 $28,306
- -------------------------------------------------------------------------------
Small-Cap Value Portfolio $3,849 $900 $184
- -------------------------------------------------------------------------------
International Equity Portfolio $77,057 $162,796 $17,650
- -------------------------------------------------------------------------------
</TABLE>

Continuance of the Distribution Plans with respect to each Portfolio
is subject to annual approval by vote of the Directors, including a majority
of the Independent Directors. A Distribution Plan may not be amended to
increase materially the amount authorized to be spent thereunder with respect
to a class of shares of a Portfolio, without approval of the shareholders of
the affected class of shares of the Portfolio. In addition, all material
amendments to the Distribution Plans must be approved by the Directors in the
manner described above. A Distribution Plan may be terminated at any time with
respect to a Portfolio without payment of any penalty by vote of a majority of
the Independent Directors or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the affected class of shares of the
Portfolio. So long as the Distribution Plans are in effect, the election and
nomination of the Independent Directors of the Fund shall be committed to the

discretion of the Independent Directors. In the Directors' quarterly review of
the Distribution Plans, they will consider the continued appropriateness of,
and the level of, compensation provided in the Distribution Plans. In their
consideration of the Distribution Plans with respect to a Portfolio, the
Directors must consider all factors they deem relevant, including information
as to the benefits of the Portfolio and the shareholders of the relevant class
of the Portfolio.

The Administrator. The Fund has entered into a Service Agreement, under the
terms of which SunAmerica Fund Services ("SAFS"), an indirect wholly owned
subsidiary of SunAmerica Inc., acts as a servicing agent assisting State
Street Bank and Trust Company ("State Street") in connection with certain
services offered to the shareholders of each of the Portfolios. Under the
terms of the Service Agreement, SAFS may receive reimbursement of its costs in
providing such shareholder services. SAFS is located at The SunAmerica Center,
733 Third Avenue, New York, NY 10017-3204.

B-42

<PAGE>

The Service Agreement will remain in effect for two years from the
date of approval with respect to each Portfolio and from year to year
thereafter provided its continuance is approved annually by vote of the
Directors including a majority of the Disinterested Directors.

Pursuant to the Service Agreement, as compensation for services
rendered, SAFS receives a fee from the Fund, computed and payable monthly
based upon an annual rate of 0.22% of average daily net assets. This fee
represents the full cost of providing shareholder and transfer agency services
to the Fund. From this fee, SAFS pays a fee to State Street, and its
affiliate, National Financial Data Services ("NFDS" and with State Street, the
"Transfer Agent") (other than out-of-pocket charges which would be paid by the
Fund). No portion of such fee is paid or reimbursed by Class Z shares. For
further information regarding the Transfer Agent see the section entitled
"Additional Information" below.

PORTFOLIO TRANSACTIONS AND BROKERAGE

As discussed in the Prospectus, the Advisers are responsible for
decisions to buy and sell securities for each respective Portfolio, selection
of broker-dealers and negotiation of commission rates. Purchases and sales of
securities on a securities exchange are effected through broker-dealers who
charge a negotiated commission for their services. Orders may be directed to
any broker-dealer including, to the extent and in the manner permitted by
applicable law, an affiliated brokerage subsidiary of SunAmerica or another
Adviser.

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 the security usually includes a
profit to the dealer). In underwritten offerings, securities are purchased at
a fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. On
occasion, certain money market instruments may be purchased directly from an
issuer, in which case no commissions or discounts are paid.

An Adviser's primary consideration in effecting a security
transaction is to obtain the best net price and the most favorable execution
of the order. However, the Adviser may select broker-dealers that provide it
with research services and may cause a Portfolio to pay such broker-dealers
commissions that exceed those that 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. Certain
research services furnished by brokers may be useful to the Adviser with
respect to clients other than the Fund. No specific value can be determined
for research services furnished without cost to the Adviser by a broker. The
Advisers are of the opinion that because the material must be analyzed and
reviewed by its staff, its receipt does not tend to reduce expenses, but may
be beneficial in supplementing the Adviser's research and analysis. Therefore,
it may tend to benefit the Portfolio by improving the quality of the Adviser's
investment advice. The investment advisory fees paid by the Portfolio are not
reduced because the Adviser receives such services. When making purchases of
underwritten issues with fixed underwriting fees, the Adviser may designate
the use of broker-dealers who have agreed to provide the Adviser with certain
statistical, research and other information.

Subject to applicable law and regulations, consideration may also be
given to the willingness of particular brokers to sell shares of a Portfolio
as a factor in the selection of brokers for transactions effected on behalf of
a Portfolio, subject to the requirement of best price and execution.

B-43

<PAGE>

Although the objectives of other accounts or investment companies
that the Adviser manages may differ from those of the Portfolio, it is
possible that, at times, identical securities will be acceptable for purchase
by one or more of the Portfolios and one or more other accounts or investment
companies that the Adviser manages. However, the position of each account or
company in the securities of the same issue may vary with the length of the
time that each account or company may choose to hold its investment in those
securities. The timing and amount of purchase by each account and company will
also be determined by its cash position. If the purchase or sale of a security
is consistent with the investment policies of one or more of the Portfolios
and one or more of these other accounts or companies is considered at or about
the same time, transactions in such securities will be allocated in a manner
deemed equitable by the Adviser. The Adviser may combine such transactions, in
accordance with applicable laws and regulations. However, simultaneous
transactions could adversely affect the ability of a Portfolio to obtain or

dispose of the full amount of a security, which it seeks to purchase or sell,
or the price at which such security can be purchased or sold.

The following table sets forth the brokerage commissions paid by the
Portfolios and the amounts of the brokerage commissions which were paid to
affiliated broker-dealers by the Portfolios for the fiscal year ended October
31, 1997.

BROKERAGE COMMISSIONS

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Percentage Paid
Aggregate Brokerage Amount Paid to to Affiliated
PORTFOLIO Commissions Affiliated Broker-Dealers Broker-Dealers
----------- ------------------------- --------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Large-Cap Growth Portfolio $14,945 -- --
- ----------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio $86,452 -- --
- ----------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio $128,678 -- --
- ----------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio $17,998 -- --
- ----------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio $20,352 -- --
- ----------------------------------------------------------------------------------------------------------
Value Portfolio $218,608 $47,675 21.80%
- ----------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio $30,356 -- --
- ----------------------------------------------------------------------------------------------------------
International Equity Portfolio $338,366 $61,259 18.10%
- ----------------------------------------------------------------------------------------------------------
</TABLE>

ADDITIONAL INFORMATION REGARDING PURCHASE OF SHARES

Shares of each of the Portfolios are sold at the respective net asset
value next determined after receipt of a purchase order, plus a sales charge,
which, at the election of the investor, may be imposed either (i) at the time
of purchase (Class A shares), or (ii) on a deferred basis (Class B and Class C
shares, and certain Class A shares). Reference is made to "Purchase of Shares"
in the Prospectus for certain information as to the purchase of Portfolio
shares.

B-44

<PAGE>

The following table sets forth the front-end sales concessions with
respect to Class A shares of each Portfolio, the amount of the front-end sales
concessions which was reallowed to affiliated broker-dealers, and the
contingent deferred sales charges with respect to Class B and Class C shares
of each Portfolio, received by the Distributor for the fiscal year ended
October 31, 1997.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Contingent
Front-End Sales Amount Reallowed Amount Reallowed Contingent Deferred Deferred
Concessions- to Affiliated to Non-Affiliated Sales Charge- Sales Charge-
Portfolio Class A Shares Broker-Dealers Broker-Dealers Class B Shares Class C Shares
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Large-Cap Growth
Portfolio $15,599 $2,885 $10,059 -- --
- ----------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio $802,237 $257,754 $440,666 $25,643 $268
- ----------------------------------------------------------------------------------------------------------------------------
Aggressive Growth
Portfolio $1,394,623 $545,170 $668,387 $26,249 $937
- ----------------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio $22,528 $9,732 $9,440 -- --
- ----------------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio $38,564 $6,352 $25,006 -- --
- ----------------------------------------------------------------------------------------------------------------------------
Value Portfolio $1,925,092 $715,034 $949,290 $30,795 $945
- ----------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio $59,419 $18,399 $32,100 -- --
- ----------------------------------------------------------------------------------------------------------------------------
International Equity
Portfolio $699,157 $225,890 $383,626 $18,872 $426
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

Waiver of Contingent Deferred Sales Charges. As discussed under "Purchase of
Shares" in the Prospectus, the CDSC may be waived on redemptions of Class B
and Class C shares under certain circumstances. The conditions set forth below
are applicable with respect to the following situations with the proper
documentation:

Death. CDSCs may be waived on redemptions within one year following
the death (i) of the sole shareholder on an individual account, (ii) of a
joint tenant where the surviving joint tenant is the deceased's spouse, or
(iii) of the beneficiary of a Uniform Gifts to Minors Act, Uniform Transfers

to Minors Act or other custodial account. The CDSC waiver is also applicable
in the case where the shareholder account is registered as community property.
If, upon the occurrence of one of the foregoing, the account is transferred to
an account registered in the name of the deceased's estate, the CDSC will be
waived on any redemption from the estate account occurring within one year of
the death. If Class B shares are not redeemed within one year of the death,
they will remain Class B shares and be subject to the applicable CDSC, when
redeemed.

Disability. A CDSC may be waived on redemptions occurring within one
year after the sole shareholder on an individual account or a joint tenant on
a spousal joint tenant account becomes disabled (as defined in Section
72(m)(7) of the Internal Revenue Code). To be eligible for such waiver, (i)
the disability must arise after the purchase of shares and (ii) the disabled
shareholder must have been under age 65 at the time of the initial
determination of disability. If the account is transferred to a new
registration and then a redemption is requested, the applicable CDSC will be
charged.

B-45

<PAGE>

Purchases through the Distributor. An investor may purchase shares of a
Portfolio through dealers which have entered into selected dealer agreements
with the Distributor. An investor's dealer who has entered into a distribution
arrangement with the Distributor is expected to forward purchase orders and
payment promptly to the Portfolio. Orders received by the Distributor before
the close of business will be executed at the offering price determined at the
close of regular trading on the New York Stock Exchange (the "NYSE") that day.
Orders received by the Distributor after the close of business will be
executed at the offering price determined after the close of the NYSE on the
next trading day. The Distributor reserves the right to cancel any purchase
order for which payment has not been received by the fifth business day
following the investment. A Portfolio will not be responsible for delays
caused by dealers.

Purchase by Check. Checks should be made payable to the specific Portfolio or
to "SunAmerica Funds." If the payment is for a retirement plan account for
which SunAmerica serves as fiduciary, please note on the check that payment is
for such an account. In the case of a new account, purchase orders by check
must be submitted directly by mail to SunAmerica Fund Services, Inc., Mutual
Fund Operations, The SunAmerica Center, 733 Third Avenue, New York, New York
10017-3204, together with payment for the purchase price of such shares and a
completed New Account Application. Payment for subsequent purchases should be
mailed to SunAmerica Fund Services, Inc., c/o NFDS, P.O. Box 419373, Kansas
City, Missouri 64141-6373 and the shareholder's Portfolio account number
should appear on the check. For fiduciary retirement plan accounts, both
initial and subsequent purchases should be mailed to SunAmerica Fund Services,
Inc., Mutual Fund Operations, The SunAmerica Center, 733 Third Avenue, New
York, New York 10017-3204. Certified checks are not necessary but checks are
accepted subject to collection at full face value in United States funds and

must be drawn on a bank located in the United States. Upon receipt of the
completed New Account Application and payment check, the Transfer Agent will
purchase full and fractional shares of the applicable Portfolio at the net
asset value next computed after the check is received, plus the applicable
sales charge. Subsequent purchases of shares of each Portfolio may be
purchased directly through the Transfer Agent. SAFS reserves the right to
reject any check made payable other than in the manner indicated above. Under
certain circumstances, the Fund will accept a multi-party check (e.g., a check
made payable to the shareholder by another party and then endorsed by the
shareholder to the Fund in payment for the purchase of shares); however, the
processing of such a check may be subject to a delay. The Fund does not verify
the authenticity of the endorsement of such multi-party check, and acceptance
of the check by the Fund should not be considered verification thereof.
Neither the Fund nor its affiliates will be held liable for any losses
incurred as a result of a fraudulent endorsement. There are restrictions on
the redemption of shares purchased by check for which funds are being
collected. (See "Redemption of Shares" in the Prospectus.)

Purchase through SAFS. SAFS will effect a purchase order on behalf of a
customer who has an investment account upon confirmation of a verified credit
balance at least equal to the amount of the purchase order (subject to the
minimum $500 investment requirement for wire orders). If such order is
received at or prior to the Fund's close of business, the purchase of shares
of a Fund will be effected on that day. If the order is received after the
Fund's close of business, the order will be effected on the next business day.

B-46

<PAGE>

Purchase by Federal Funds Wire. An investor may make purchases by having his
or her bank wire Federal funds to the Fund's Transfer Agent. Federal funds
purchase orders will be accepted only on a day on which the Fund and the
Transfer Agent are open for business. In order to insure prompt receipt of a
Federal funds wire, it is important that these steps be followed:

1. You must have an existing SunAmerica Fund Account before wiring
funds. To establish an account, complete the New Account
Application and send it via facsimile to SAFS at: (212)
551-5343.

2. Call SunAmerica Fund Services' Shareholder/Dealer Services, toll
free at (800) 858-8850, extension 5125 to obtain your new
account number.

3. Instruct the bank to wire the specified amount to the Transfer
Agent: State Street Bank and Trust Company, Boston, MA, ABA#
0110-00028; DDA# 99029712, SunAmerica [name of Portfolio, Class

__] (include shareholder name and account number).

Waiver of Sales Charges with Respect to Certain Purchases of Class A Shares.
To the extent that sales are made for personal investment purposes, the sales
charge is waived as to Class A shares purchased by current or retired
officers, directors, and other full-time employees of SunAmerica and its
affiliates, as well as members of the selling group and family members of the
foregoing. In addition, the sales charge is waived with respect to shares
purchased by certain qualified retirement plans or employee benefit plans
(other than IRAs), which are sponsored or administered by SunAmerica or an
affiliate thereof. Such plans may include certain employee benefit plans
qualified under Sections 401 or 457 of the Internal Revenue Code (the "Code"),
or employee benefit plans created pursuant to Section 403(b) of the Code and
sponsored by nonprofit organizations defined under Section 501(c)(3) of the
Internal Revenue Code (collectively, "Plans"). A Plan will qualify for
purchases at net asset value provided that (a) the initial amount invested in
one or more of the Portfolios (or in combination with the shares of other
SAMF) is at least $1,000,000, (b) the sponsor signs a $1,000,000 Letter of
Intent, (c) such shares are purchased by an employer-sponsored plan with at
least 100 eligible employees, or (d) the purchases are by trustees or other
fiduciaries for certain employer-sponsored plans, the trustee, fiduciary or
administrator for which has an agreement with the Distributor with respect to
such purchases and all such transactions for the plan are executed through a
single omnibus account. Further, the sales charge is waived with respect to
shares purchased by "wrap accounts" for the benefit of clients of
broker-dealers, financial institutions, financial planners or registered
investment advisers adhering to the following standards established by the
Distributor: (i) the broker-dealer, financial institution or financial planner
charges its client(s) an advisory fee based on the assets under management on
an annual basis, and (ii) such broker-dealer, financial institution or
financial planner does not advertise that shares of the Portfolio may be
purchased by clients at net asset value. Shares purchased under this waiver
may not be resold except to the Portfolio. Shares are offered at net asset
value to the foregoing persons because of anticipated economies in sales
effort and sales related expenses. Reductions in sales charges apply to
purchases or shares by a "single person" including an individual; members of a
family unit comprising husband, wife and minor children; or a trustee or other
fiduciary purchasing for a single fiduciary account. Complete details
concerning how an investor may purchase shares at reduced sales charges may be
obtained by contacting the Distributor.

B-47

<PAGE>

Reduced Sales Charges (Class A Shares only). As discussed under "Purchase of
Shares" in the Prospectus, investors in Class A shares of a Portfolio may be
entitled to reduced sales charges pursuant to the following special purchase
plans made available by the Fund.

Combined Purchase Privilege. The following persons may qualify for

the sales charge reductions or eliminations by combining purchases of
Portfolio shares into a single transaction:

(i) an individual, or a "company" as defined in Section 2(a)(8) of
the 1940 Act (which includes corporations which are corporate affiliates of
each other);

(ii) an individual, his or her spouse and their minor children,
purchasing for his, her or their own account;

(iii) a trustee or other fiduciary purchasing for a single trust
estate or single fiduciary account (including a pension, profit-sharing, or
other employee benefit trust created pursuant to a plan qualified under
Section 401 of the Code);

(iv) tax-exempt organizations qualifying under Section 501(c)(3) of
the Code (not including 403(b) plans);

(v) employee benefit plans of a single employer or of affiliated
employers, other than 403(b) plans; and

(vi) group purchases as described below.

A combined purchase currently may also include shares of other funds
in the SAMF (other than money market funds) purchased at the same time through
a single investment dealer, if the dealer places the order for such shares
directly with the Distributor.

Rights of Accumulation. A purchaser of Portfolio shares may qualify
for a reduced sales charge by combining a current purchase (or combined
purchases as described above) with shares previously purchased and still
owned; provided the cumulative value of such shares (valued at cost or current
net asset value, whichever is higher), amounts to $50,000 or more. In
determining the shares previously purchased, the calculation will include, in
addition to other Class A shares of the particular Portfolio that were
previously purchased, shares of the other classes of the same Portfolio, as
well as shares of any class of any other Portfolio or of any of the other
Portfolios advised by SunAmerica, as long as such shares were sold with a
sales charge or acquired in exchange for shares purchased with such a sales
charge.

The shareholder's dealer, if any, or the shareholder, must notify the
Distributor at the time an order is placed of the applicability of the reduced
charge under the Right of Accumulation. Such notification must be in writing
by the dealer or shareholder when such an order is placed by mail. The reduced
sales charge will not be granted if: (a) such information is not furnished at
the time of the order; or (b) a review of the Distributor's or the Transfer
Agent's records fails to confirm the investor's represented holdings.

B-48

<PAGE>

Letter of Intent. A reduction of sales charges is also available to
an investor who, pursuant to a written Letter of Intent which is set forth in
the New Account Application in the Prospectus, establishes a total investment
goal in Class A shares of one or more Portfolios to be achieved through any
number of investments over a thirteen-month period, of $50,000 or more. Each
investment in such Portfolios made during the period will be subject to a
reduced sales charge applicable to the goal amount. The initial purchase must
be at least 5% of the stated investment goal and shares totaling 5% of the
dollar amount of the Letter of Intent will be held in escrow by the Transfer
Agent, in the name of the investor. Shares of any class of shares of any
Portfolio, or of other funds advised by SunAmerica which impose a sales charge
at the time of purchase, which the investor intends to purchase or has
previously purchased during a 30-day period prior to the date of execution of
the Letter of Intent and still owns, may also be included in determining the
applicable reduction; provided, the dealer or shareholder notifies the
Distributor of such prior purchase(s).

The Letter of Intent does not obligate the investor to purchase, nor
the Fund to sell, the indicated amounts of the investment goal. In the event
the investment goal is not achieved within the thirteen-month period, the
investor is required to pay the difference between the sales charge otherwise
applicable to the purchases made during this period and sales charges actually
paid. Such payment may be made directly to the Distributor or, if not paid,
the Distributor is authorized by the Letter of Intent to liquidate a
sufficient number of escrowed shares to obtain such difference. If the goal is
exceeded and purchases pass the next sales charge break-point, the sales
charge on the entire amount of the purchase that results in passing that
break-point, and on subsequent purchases, will be subject to a further reduced
sales charge in the same manner as set forth above under "Rights of
Accumulation," but there will be no retroactive reduction of sales charges on
previous purchases. At any time while a Letter of Intent is in effect, a
shareholder may, by written notice to the Distributor, increase the amount of
the stated goal. In that event, shares of the applicable Portfolio purchased
during the previous 90-day period and still owned by the shareholder will be
included in determining the applicable sales charge. The 5% escrow and the
minimum purchase requirement will be applicable to the new stated goal.
Investors electing to purchase shares of one or more of the Portfolios
pursuant to this purchase plan should carefully read such Letter of Intent.

Reduced Sales Charge for Group Purchases. Members of qualified groups
may purchase Class A shares of the Portfolios under the combined purchase
privilege as described above.

To receive a rate based on combined purchases, group members must
purchase Class A shares of a Portfolio through a single investment dealer
designated by the group. The designated dealer must transmit each member's
initial purchase to the Distributor, together with payment and completed New
Account Application. After the initial purchase, a member may send funds for

the purchase of Class A shares directly to the Transfer Agent. Purchases of a
Portfolio's shares are made at the public offering price based on the net
asset value next determined after the Distributor or the Transfer Agent
receives payment for the Class A shares. The minimum investment requirements
described above apply to purchases by any group member.

Qualified groups include the employees of a corporation or a sole
proprietorship, members and employees of a partnership or association, or
other organized groups of persons (the members of which may include other
qualified groups) provided that: (i) the group has at least 25 members of
which at least ten members participate in the initial purchase; (ii) the group
has been in existence for at least six months; (iii) the group has some
purpose in addition to the purchase of investment company shares at a reduced

B-49

<PAGE>

sales charge; (iv) the group's sole organizational nexus or connection is not
that the members are credit card customers of a bank or broker-dealer, clients
of an investment adviser or security holders of a company; (v) the group
agrees to provide its designated investment dealer access to the group's
membership by means of written communication or direct presentation to the
membership at a meeting on not less frequently than an annual basis; (vi) the
group or its investment dealer will provide annual certification, in form
satisfactory to the Transfer Agent, that the group then has at least 25
members and that at least ten members participated in group purchases during
the immediately preceding 12 calendar months; and (vii) the group or its
investment dealer will provide periodic certification, in form satisfactory to
the Transfer Agent, as to the eligibility of the purchasing members of the
group.

Members of a qualified group include: (i) any group which meets the
requirements stated above and which is a constituent member of a qualified
group; (ii) any individual purchasing for his or her own account who is
carried on the records of the group or on the records of any constituent
member of the group as being a good standing employee, partner, member or
person of like status of the group or constituent member; or (iii) any
fiduciary purchasing shares for the account of a member of a qualified group
or a member's beneficiary. For example, a qualified group could consist of a
trade association which would have as its members individuals, sole
proprietors, partnerships and corporations. The members of the group would
then consist of the individuals, the sole proprietors and their employees, the
members of the partnership and their employees, and the corporations and their
employees, as well as the trustees of employee benefit trusts acquiring a
Portfolio's shares for the benefit of any of the foregoing.

Interested groups should contact their investment dealer or the
Distributor. The Fund reserves the right to revise the terms of or to suspend
or discontinue group sales with respect to shares of the Portfolio at any
time.

ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES

Reference is made to "Redemption of Shares" in the Prospectus for
certain information as to the redemption of Portfolio shares.

If the Directors determine that it would be detrimental to the best
interests of the remaining shareholders of a Portfolio to make payment wholly
or partly in cash, the Fund, having filed with the SEC a notification of
election pursuant to Rule 18f-1 on behalf of each of the Portfolios, may pay
the redemption price in whole, or in part, by a distribution in kind of
securities from a Portfolio in lieu of cash. In conformity with applicable
rules of the SEC, the Portfolios are committed to pay in cash all requests for
redemption, by any shareholder of record, limited in amount with respect to
each shareholder during any 90-day period to the lesser of (i) $250,000, or
(ii) 1% of the net asset value of the applicable Portfolio at the beginning of
such period. If shares are redeemed in kind, the redeeming shareholder would
incur brokerage costs in converting the assets into cash. The method of
valuing portfolio securities is described below in the section entitled
"Determination of Net Asset Value," and such valuation will be made as of the
same time the redemption price is determined.

B-50

<PAGE>

DETERMINATION OF NET ASSET VALUE

The Fund is open for business on any day the 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 each class of its shares separately by dividing the total value
of each class's net assets by the shares outstanding of such class.

Stocks are valued 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 SunAmerica 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
Fund if acquired within 60 days of maturity or, if already held by the Fund on

the 60th day, are amortized to maturity based on the value determined on the
61st day. Options traded on national securities exchanges are valued as of the
close of the exchange on which they are traded. Futures and options traded on
commodities exchanges are valued at their last sale price as of the close of
such exchange. Other securities are valued on the basis of last sale or bid
price (if a last sale price is not available) in what is, in the opinion of
the SunAmerica, 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 Directors.
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.

PERFORMANCE DATA

Each Portfolio may advertise performance data that reflects various
measures of total return and each Portfolio may advertise data that reflects
yield. An explanation of the data presented and the methods of computation
that will be used are as follows.

A Portfolio's performance may be compared to the historical returns
of various investments, performance indices of those investments or economic
indicators, including, but not limited to, stocks, bonds, certificates of
deposit, money market funds and U.S. Treasury Bills. Certain of these
alternative investments may offer fixed rates of return and guaranteed
principal and may be insured.

Average annual total return is determined separately for Class A,
Class B, Class C and Class Z shares in accordance with a formula specified by
the SEC. Average annual total return is computed by finding the average annual
compounded rates of return for the 1-, 5-, and 10-year periods or for the
lesser included periods of effectiveness. The formula used is as follows:

B-51

<PAGE>

n
P(1 + T) = ERV

P = a hypothetical initial purchase payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10- year periods at the end of the 1-,
5-, or 10-year periods (or fractional portion thereof).

The above formula assumes that:

1. The maximum sales load (i.e., either the front-end sales load
in the case of the Class A shares or the deferred sales load
that would be applicable to a complete redemption of the
investment at the end of the specified period in the case of
the Class B or Class C shares) is deducted from the initial
$1,000 purchase payment;

2. All dividends and distributions are reinvested at net asset
value; and

3. Complete redemption occurs at the end of the 1-, 5-, or 10-
year periods or fractional portion thereof with all
nonrecurring charges deducted accordingly.

Each Portfolios' average annual total return for the 1-, 5- and
10-year periods (or from date of inception, if sooner) ended October 31, 1997
is as follows:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Since One Five Ten
Class A Shares Inception Year Years Years
- -------------- --------- ---- ----- -----
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Large-Cap Growth Portfolio (5.68%)((1)) N/A N/A N/A
- ------------------------------------------------------------------------------
Mid-Cap Growth Portfolio 9.68% N/A N/A N/A
- ------------------------------------------------------------------------------
Aggressive Growth Portfolio 27.20% N/A N/A N/A
- ------------------------------------------------------------------------------
Large-Cap Blend Portfolio (4.16%)((1)) N/A N/A N/A
- ------------------------------------------------------------------------------
Large-Cap Value Portfolio (5.12%)((1)) N/A N/A N/A
- ------------------------------------------------------------------------------
Value Portfolio 28.72% N/A N/A N/A
- ------------------------------------------------------------------------------
Small-Cap Value Portfolio (2.88%)((1)) N/A N/A N/A
- ------------------------------------------------------------------------------
International Equity Portfolio (0.32%) N/A N/A N/A
- ------------------------------------------------------------------------------
</TABLE>

- ----------------
((1)) From date of inception of October 15, 1997.

B-52

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Since One Five Ten
Class B Shares Inception Year Years Years
- -------------- --------- ---- ----- -----
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Large-Cap Growth Portfolio (5.68%)((1)) N/A N/A N/A
- ------------------------------------------------------------------------------
Mid-Cap Growth Portfolio 9.04% N/A N/A N/A
- ------------------------------------------------------------------------------
Aggressive Growth Portfolio 26.40% N/A N/A N/A
- ------------------------------------------------------------------------------
Large-Cap Blend Portfolio (4.32%)((1)) N/A N/A N/A
- ------------------------------------------------------------------------------
Large-Cap Value Portfolio (5.12%)((1)) N/A N/A N/A
- ------------------------------------------------------------------------------
Value Portfolio 28.00% N/A N/A N/A
- ------------------------------------------------------------------------------
Small-Cap Value Portfolio (2.88%)((1)) N/A N/A N/A
- ------------------------------------------------------------------------------
International Equity Portfolio (0.96%) N/A N/A N/A
- ------------------------------------------------------------------------------
</TABLE>

- ----------------
((1)) From date of inception of October 15, 1997.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Since One Five Ten
Class C Shares Inception Year Years Years
- -------------- --------- ---- ----- -----
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Large-Cap Growth Portfolio (5.76%)((1)) N/A N/A N/A
- ------------------------------------------------------------------------------
Mid-Cap Growth Portfolio 14.33% N/A N/A N/A
- ------------------------------------------------------------------------------
Aggressive Growth Portfolio 18.09% N/A N/A N/A
- ------------------------------------------------------------------------------
Large-Cap Blend Portfolio (4.24%)((1)) N/A N/A N/A
- ------------------------------------------------------------------------------
Large-Cap Value Portfolio (5.12%)((1)) N/A N/A N/A

- ------------------------------------------------------------------------------
Value Portfolio 17.99% N/A N/A N/A
- ------------------------------------------------------------------------------
Small-Cap Value Portfolio (2.88%)((1)) N/A N/A N/A
- ------------------------------------------------------------------------------
International Equity Portfolio (1.75%) N/A N/A N/A
- ------------------------------------------------------------------------------
</TABLE>

- ----------------
((1)) From date of inception of October 15, 1997.

Each Portfolio may advertise cumulative, rather than average return,
for each class of its shares for periods of time other than the 1-, 5-, and
10-year periods or fractions thereof, as discussed above. Such return data
will be computed in the same manner as that of average annual total return,
except that the actual cumulative return will be computed.

B-53

<PAGE>

Comparisons

Each Portfolio may compare its total return or yield to similar
measures as calculated by various publications, services, indices, or
averages. Such comparisons are made to assist in evaluating an investment in a
Portfolio. The following references may be used:

a) Dow Jones Composite Average or its component averages -- an
unmanaged index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks (Dow Jones Utilities
Average), and 20 transportation company stocks (Dow Jones Transportation
Average). Comparisons of performance assume reinvestment of dividends.

b) Standard & Poor's 500 Stock Index or its component indices -- an
unmanaged index composed of 400 industrial stocks, 40 financial stocks, 40
utilities stocks, and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividends.

Standard & Poor's 100 Stock Index -- an unmanaged index based
on the prices of 100 blue chip stocks, including 92 industrials, one utility,
two transportation companies, and five financial institutions. The Standard &
Poor's 100 Stock Index is a smaller, more flexible index for options trading.

c) The New York Stock Exchange composite or component indices --
unmanaged indices of all industrial, utilities, transportation, and finance
stocks listed on the New York Stock Exchange.

d) Wilshire 5000 Equity Index or its component indices -- represents

the return on the market value of all common equity securities for which daily
pricing is available. Comparisons of performance assume reinvestment of
dividends.

e) Lipper: Mutual Fund Performance Analysis, Fixed Income Analysis,
and Mutual Fund Indices -- measures total return and average current yield for
the mutual fund industry. Ranks individual mutual fund performance over
specified time periods assuming reinvestment of all distributions, exclusive
of sales charges.

f) CDA Mutual Fund Report, published by CDA Investment Technologies,
analyzes price, current yield, risk, total return, and average rate of return
(average annual compounded growth rate) over specified time periods for the
mutual fund industry.

g) Mutual Fund Source Book, Principia and other publications and
information services provided by Morningstar, Inc. -- analyzes price, risk and
total return for the mutual fund industry.

h) Financial publications: Wall Street Journal, Business Week,
Changing Times, Financial World, Forbes, Fortune, Money, Pension and
Investment Age, United Mutual Fund Selector, and Wiesenberger Investment
Companies Service, and other publications containing financial analyses which
rate mutual fund performance over specified time periods.

i) Consumer Price Index (or Cost of Living Index), published by the
U.S. Bureau of Labor Statistics -- a statistical measure of periodic change in
the price of goods and services in major expenditure groups.

B-54

<PAGE>

j) Stocks, Bonds, Bills, and Inflation, published by Ibbotson
Associates -- historical measure of yield, price, and total return for common
and small company stock, long-term government bonds, treasury bills, and
inflation.

k) Savings and Loan Historical Interest Rates as published in the
U.S. Savings & Loan League Fact Book.

l) Shearson-Lehman Municipal Bond Index and Government/Corporate Bond
Index -- unmanaged indices that track a basket of intermediate and long-term
bonds. Reflect total return and yield and assume dividend reinvestment.

m) Salomon GNMA Index published by Salomon Brothers Inc. -- Market
value of all outstanding 30-year GNMA Mortgage Pass-Through Securities that
includes single family and graduated payment mortgages.

Salomon Mortgage Pass-Through Index published by Salomon
Brothers Inc. --Market value of all outstanding agency mortgage pass-through

securities that includes 15- and 30-year FNMA, FHLMC and GNMA Securities.

n) Value Line Geometric Index -- broad based index made up of
approximately 1700 stocks each of which have an equal weighting.

o) Morgan Stanley Capital International EAFE Index -- an arithmetic,
market value-weighted average of the performance of over 900 securities on the
stock exchanges of countries in Europe, Australia and the Far East.

p) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred stocks. The original list of names was generated by
screening for convertible issues of $100 million or more in market
capitalization. The index is priced monthly.

q) Salomon Brothers High Grade Corporate Bond Index -- consists of
publicly issued, non-convertible corporate bonds rated "AA" or "AAA." It is a
value-weighted, total return index, including approximately 800 issues.

r) Salomon Brothers Broad Investment Grade Bond Index -- is a
market-weighted index that contains approximately 4700 individually priced
investment grade corporate bonds rated "BBB" or better, U.S. Treasury/agency
issues and mortgage pass-through securities.

s) Salomon Brothers World Bond Index -- measures the total return
performance of high-quality securities in major sectors of the international
bond market. The index covers approximately 600 bonds from 10 currencies:

Australian Dollars Netherlands Guilders
Canadian Dollars Swiss Francs
European Currency Units UK Pound Sterling
French Francs U.S. Dollars
Japanese Yen German Deutsche Marks

B-55

<PAGE>

t) J.P. Morgan Global Government Bond Index -- a total return, market
capitalization-weighted index, rebalanced monthly, consisting of the following
countries: Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan,
The Netherlands, Spain, Sweden, the United Kingdom, and the United States.

u) Shearson Lehman Long-Term Treasury Bond Index -- is comprised of
all bonds covered by the Shearson Lehman Hutton Treasury Bond Index with
maturities of 10 years or greater.

v) NASDAQ Industrial Index -- is comprised of more than 3,000
industrial issues. It is a value-weighted index calculated on pure change only
and does not include income.

w) The MSCI Combined Far East Free ex Japan Index -- a market
capitalization weighted index comprised of stocks in Hong Kong, Indonesia,
Korea, Malaysia, Philippines, Singapore and Thailand. Korea is included in

this index at 20% of its market capitalization.

x) First Boston High Yield Index -- generally includes over 180
issues with an average maturity range of seven to ten years with a minimum
capitalization of $100 million. All issues are individually trader-priced
monthly.

y) Morgan Stanley Capital International World Index -- An arithmetic,
market value-weighted average of the performance of over 1,470 securities
listed on the stock exchanges of countries in Europe, Australia, the Far East,
Canada and the United States.

z) Russell 2000 and 3000 Indices -- represents the top 2,000 and the
next 3,000 stocks traded on the New York Stock Exchange, American Stock
Exchange and National Association of Securities Dealers Automated Quotations,
by market capitalizations.

aa) Russell Midcap Growth Index -- contains those Russell Midcap
securities with a greater-than-average growth orientation. The stocks are also
members of the Russell 1000 Growth Index, the securities in which tend to
exhibit higher price-to-book and price earnings ratios, lower dividend yields
and higher forecasted growth values than the Value universe.

In assessing such comparisons of performance, an investor should keep
in mind that the composition of the investments in the reported indices and
averages is not identical to a Portfolio's portfolio, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by a Portfolio to calculate
its figures. Specifically, a Portfolio may compare its performance to that of
certain indices which include securities with government guarantees. However,
a Portfolio's shares do not contain any such guarantees. In addition, there
can be no assurance that a Portfolio will continue its performance as compared
to such other standards.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Dividends and Distributions. Each Portfolio intends to distribute to the
registered holders of its shares substantially all of its net investment
income, which includes dividends, interest and net short-term capital gains,
if any, in excess of any net long-term capital losses. Each Portfolio intends
to distribute any net capital gains from the sale of assets held for more than
12 months in excess of any net short-term capital

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<PAGE>

losses. The current policy of each Portfolio other than the Large-Cap Blend
Portfolio, is to pay investment income dividends, if any, at least annually.
Large-Cap Blend Portfolio's current policy is to pay investment income
dividends, if any, on a quarterly basis. Each Portfolio intends to pay net
capital gains, if any, annually. In determining amounts of capital gains to be
distributed, any capital loss carry-forwards from prior years will be offset

against capital gains.

Distributions will be paid in additional Portfolio shares based on
the net asset value at the close of business on the Ex or reinvestment date,
unless the dividends total in excess of $10.00 per distribution period and the
shareholder notifies the Portfolio at least five business days prior to the
payment date to receive such distributions in cash.

Taxes. Each Portfolio intends to qualify and elect to be taxed as a regulated
investment company under Subchapter M of the Code for each taxable year. In
order to be qualified as a regulated investment company, each Portfolio
generally must, among other things, (a) derive at least 90% of its gross
income from dividends, interest, proceeds from loans of stock or securities
and certain other related income; and (b) diversify its holdings so that, at
the end of each fiscal quarter, (i) 50% of the market value of each
Portfolio's assets is represented by cash, government securities, securities
of other regulated investment companies and other securities limited, in
respect of any one issuer, to an amount no greater than 5% of each Portfolio's
assets and not greater than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in
the securities of any one issuer (other than government securities or the
securities of other regulated investment companies).

As a regulated investment company, each Portfolio will not be subject
to U.S. Federal income tax on its income and capital gains which it
distributes as dividends or capital gains distributions to shareholders
provided that it distributes to shareholders at least 90% of its investment
company taxable income for the taxable year. Each Portfolio intends to
distribute sufficient income to meet this qualification requirement.

Under the Code, amounts not distributed on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To avoid the tax, each Portfolio must distribute
during each calendar year (1) at least 98% of its ordinary income (not taking
into account any capital gains or losses) for the calendar year, (2) at least
98% of its capital gains in excess of its capital losses for the 12-month
period ending on October 31 of the calendar year, and (3) all ordinary income
and net capital gains for the previous years that were not distributed during
such years. To avoid application of the excise tax, each Portfolio intends to
make distributions in accordance with the calendar year distribution
requirement. A distribution will be treated as paid during the calendar year
if actually paid during such year. Additionally, a distribution will be
treated as paid on December 31 of a calender year if it is declared by a
Portfolio in October, November or December of such year, payable to
shareholders of record on a date in such month and paid by such Portfolio
during January of the following year. Any such distributions paid during

January of the following year will be taxable to shareholders as of such
December 31, rather than the date on which the distributions are received.

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<PAGE>

Distributions of net investment income and short-term capital gains
are taxable to the shareholder as ordinary dividend income regardless of
whether the shareholder receives such distributions in additional shares or in
cash. The portion of such dividends received from each Portfolio that will be
eligible for the dividends received deduction for corporations will be
determined on the basis of the amount of each Portfolio's gross income,
exclusive of capital gains from sales of stock or securities, which is derived
as dividends from domestic corporations, other than certain tax-exempt
corporations and certain real estate investment trusts, and will be designated
as such in a written notice to shareholders mailed not later than 60 days
after the end of each fiscal year. It is not anticipated that the dividends
paid by the International Equity Portfolio will be eligible for the
dividends-received deduction. Distributions of net capital gains, if any, are
taxable as capital gains regardless of whether the shareholder receives such
distributions in additional shares or in cash or how long the investor has
held his or her shares, and are not eligible for the dividends received
deduction for corporations.

Upon a sale or exchange of its shares, a shareholder will realize a
taxable gain or loss depending upon its basis in the shares. Such gain or loss
will be treated as capital gain or loss if the shares are capital assets in
the shareholder's hands. In the case of an individual, any such capital gain
will be treated as short-term capital gain if the shares were held for not
more than 12 months, capital gain taxable at the maximum rate of 28% if such
shares were held for more than 12, but not more than 18 months, and capital
gain, taxable at the maximum rate of 20%, if such shares were held for more
than 18 months. In the case of a corporation, any such capital gain will be
treated as long-term capital gain, taxable at the same rates as ordinary
income, if such shares were held for more than 12 months. Any such capital
loss will be long-term capital loss if the shares have been held for more than
one year. Generally, any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced within a period
of 61 days beginning 30 days before and ending 30 days after the shares are
disposed of. Any loss recognized by a shareholder on the sale of shares of a
Portfolio held by the shareholder for six months or less will be treated for
tax purposes as a long-term capital loss to the extent of any distributions of
net capital gains received by the shareholder with respect to such shares.

Under certain circumstances (such as the exercise of an exchange
privilege), the tax effect of sales load charges imposed on the purchase of
shares in a regulated investment company is deferred if the shareholder does

not hold the shares for at least 90 days.

Income received by a Portfolio from sources within foreign countries
may be subject to withholding and other taxes imposed by such countries.
Income tax treaties between certain countries and the United States may reduce
or eliminate such taxes. It is impossible to determine in advance the
effective rate of foreign tax to which a Portfolio will be subject, since the
amount of that Portfolio's assets to be invested in various countries is not
known. It is not anticipated that any Portfolio (other than the International
Equity Portfolio) will qualify to pass through to its shareholders the ability
to claim as a foreign tax credit their respective shares of foreign taxes paid
by such Portfolio. If more than 50% in value of the Portfolio's total assets
at the close of its taxable year consists of securities of foreign
corporations, the Portfolio will be eligible, and intends, to file an election
with the Internal Revenue Service pursuant to which shareholders of the
Portfolio will be required to include their proportionate share of such
foreign taxes in their U.S. income tax returns as gross income, treat such
proportionate share as taxes paid by them, and deduct such proportionate share
in computing their taxable incomes or, alternatively, subject to certain
limitations, and the Portfolio and the shareholders satisfying certain holding
period requirements, use them as foreign tax credits against their U.S. income
taxes. No deductions for foreign taxes, however, may be claimed by
non-corporate shareholders who do not itemize

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<PAGE>

deductions. Of course, certain retirement accounts which are not subject to
tax cannot claim foreign tax credits on investments in foreign securities held
in the Portfolio. A shareholder that is a nonresident alien individual or a
foreign corporation may be subject to U.S. withholding tax on the income
resulting from the Portfolio's election described in this paragraph but may
not be able to claim a credit or deduction against such U.S. tax for the
foreign taxes treated as having been paid by such shareholder.

Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Portfolio accrues interest or
other receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time such Portfolio actually collects such
receivables or pays such liabilities are treated as ordinary income or
ordinary loss. Similarly, gains or losses on forward foreign currency exchange
contracts, foreign currency gains or losses from futures contracts that are
not "regulated futures contracts" and from unlisted non-equity options, gains
or losses from sale of currencies or dispositions of debt securities
denominated in a foreign currency attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the security and the
date of disposition generally also are treated as ordinary gain or loss. These

gains, referred to under the Code as "Section 988" gains or losses, increase
or decrease the amount of each Portfolio's investment company taxable income
available to be distributed to its shareholders as ordinary income.
Additionally, if Code Section 988 losses exceed other investment company
taxable income during a taxable year, a Portfolio would not be able to make
any ordinary dividend distributions, and any distributions made in the same
taxable year may be recharacterized as a return of capital to shareholders,
thereby reducing the basis of each shareholder's Portfolio shares. In certain
cases, a Portfolio may be entitled to elect to treat foreign currency gains on
forward or futures contracts, or options thereon, as capital gains.

The Code includes special rules applicable to the listed non-equity
options, regulated futures contracts, and options on futures contracts which a
Portfolio may write, purchase or sell. Such options and contracts are
classified as Section 1256 contracts under the Code. The character of gain or
loss resulting from the sale, disposition, closing out, expiration or other
termination of Section 1256 contracts, except forward foreign currency
exchange contracts, is generally treated as long-term capital gain or loss to
the extent of 60% thereof and short-term capital gain or loss to the extent of
40% thereof ("60/40 gain or loss"). Such contracts, when held by a Portfolio
at the end of a fiscal year, generally are required to be treated as sold at
market value on the last day of such fiscal year for Federal income tax
purposes ("marked-to-market"). Over-the-counter options are not classified as
Section 1256 contracts and are not subject to the marked-to-market rule or to
60/40 gain or loss treatment. Any gains or losses recognized by a Portfolio
from transactions in over-the-counter options generally constitute short-term
capital gains or losses. When call options written, or put options purchased,
by a Portfolio are exercised, the gain or loss realized on the sale of the
underlying securities may be either short-term or long-term, depending on the
holding period of the securities. In determining the amount of gain or loss,
the sales proceeds are reduced by the premium paid for the puts or increased
by the premium received for calls.

A substantial portion of each Portfolio's transactions in options,
futures contracts and options on futures contracts, particularly its hedging
transactions, may constitute "straddles" which are defined in the Code as
offsetting positions with respect to personal property. A straddle consisting
of a listed option, futures contract, or option on a futures contract and of
U.S. Government securities would constitute a "mixed straddle" under the Code.
The Code generally provides with respect to straddles (i) "loss deferral"
rules which may postpone recognition for tax purposes of losses from certain
closing purchase transactions or other dispositions of a position in the
straddle to the extent of unrealized gains in the offsetting position, (ii)
"wash sale" rules which may postpone recognition for tax purposes of losses

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<PAGE>

where a position is sold and a new offsetting position is acquired within a
prescribed period, (iii) "short sale" rules which may terminate the holding
period of securities owned by a Portfolio when offsetting positions are
established and which may convert certain losses from short-term to long-term,
and (iv) "conversion transaction" rules which recharacterize capital gains as
ordinary income. The Code provides that certain elections may be made for
mixed straddles that can alter the character of the capital gain or loss
recognized upon disposition of positions which form part of a straddle.
Certain other elections also are provided in the Code; no determination has
been reached to make any of these elections.

Newly-enacted Code Section 1259 will require the recognition of gain
(but not loss) if a Portfolio makes a "constructive sale" of an appreciated
financial position (e.g., stock). A Portfolio generally will be considered to
make a constructive sale of an appreciated financial position if it sells the
same or substantially identical property short, enters into a futures or
forward contract to deliver the same or substantially identical property, or
enters into certain other similar transactions.

Each Portfolio may purchase debt securities (such as zero-coupon or
pay-in-kind securities) that contain original issue discount. Original issue
discount that accrues in a taxable year is treated as earned by a Portfolio
and therefore is subject to the distribution requirements of the Code. Because
the original issue discount earned by the Portfolio in a taxable year may not
be represented by cash income, the Portfolio may have to dispose of other
securities and use the proceeds to make distributions to shareholders.

A Portfolio may be required to backup withhold U.S. Federal income
tax at the rate of 31% of all taxable distributions payable to shareholders
who fail to provide their correct taxpayer identification number or fail to
make required certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against a shareholder's U.S. Federal income tax liability. Any distributions
of net investment income or short-term capital gains made to a foreign
shareholder will be subject to U.S. withholding tax of 30% (or a lower treaty
rate if applicable to such shareholder).

Each of the Large-Cap Growth Portfolio, Aggressive Growth Portfolio
and International Equity Portfolio may, from time to time, invest in "passive
foreign investment companies" (PFICs). A PFIC is a foreign corporation that,
in general, meets either of the following tests: (a) at least 75% of its gross
income is passive or (b) an average of at least 50% of its assets produce, or
are held for the production of, passive income. If any such Portfolio acquires
and holds stock in a PFIC beyond the end of the year of its acquisition, the
Portfolio will be subject to federal income tax on a portion of any "excess
distribution" received on the stock or of any gain from disposition of the
stock (collectively, PFIC income), plus interest thereon, even if the
Portfolio distributes the PFIC income as a taxable dividend to its

shareholders. The balance of the PFIC income will be included in the
Portfolio's investment company taxable income and, accordingly, will not be
taxable to it to the extent that income is distributed to its shareholders.
Proposed Treasury regulations provide that the Portfolio may make a
"mark-to-market" election with respect to any stock it holds of a PFIC. If the
election is in effect, at the end of the Fund's taxable year, the Portfolio
will recognize the amount of gains, if any, with respect to PFIC stock.
Recently enacted legislation codified this "mark-to-market" election effective
for tax years beginning after December 31, 1997. Any gains resulting from such
elections will be treated as ordinary income. No loss will be recognized on
PFIC stock. Alternatively, the Portfolio may elect to treat any PFIC in which
it invests as a "qualified electing fund," in which case, in lieu of the
foregoing tax and interest obligation, the Portfolio will be required to
include in income each year its pro rata share of the qualified electing

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<PAGE>

fund's annual ordinary earnings and net capital gain, even if they are not
distributed to the Portfolio; those amounts would be subject to the
distribution requirements applicable to the Portfolio described above. It may
be very difficult, if not impossible, to make this election because of certain
requirements thereof.

Each of the Large-Cap Blend and Value Portfolios may invest in real
estate investment trusts ("REITs") that hold residual interests in real estate
mortgage investment conduits ("REMICs"). Under Treasury regulations that have
not yet been issued, but may apply retroactively, a portion of the Portfolio's
income from a REIT that is attributable to the REIT's residual interest in a
REMIC (referred to in the Code as an "excess inclusion") will be subject to
federal income tax. These regulations are also expected to provide that excess
inclusion income of a regulated investment company, such as the Fund, will be
allocated to shareholders of the regulated investment company in proportion to
the dividends received by such shareholders, with the same consequences as if
the shareholders held the related REMIC residual interest directly. In
general, excess inclusion income allocated to shareholders (i) cannot be
offset by net operating losses (subject to a limited exception for certain
thrift institutions), (ii) will constitute unrelated business taxable income
to entities (including a qualified pension plan, an individual retirement
account, a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to
tax on unrelated business income, thereby potentially requiring such an entity
that is allocated excess inclusion income, and otherwise might not be required
to file a tax return, to file a tax return and pay tax on such income, and
(iii) in the case of a foreign shareholder, will not qualify for any reduction
in U.S. federal withholding tax. In addition, if at any time during any
taxable year a "disqualified organization" (as defined in the Code) is a
record holder of a share in a regulated investment company, then the regulated
investment company will be subject to a tax equal to that portion of its
excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations currently in effect.
Shareholders are urged to consult their tax advisors regarding specific
questions as to Federal, state and local taxes. In addition, foreign investors
should consult with their own tax advisors regarding the particular tax
consequences to them of an investment in each Portfolio. Qualification as a
regulated investment company under the Code for tax purposes does not entail
government supervision of management and investment policies.

RETIREMENT PLANS

Shares of each Portfolio are eligible to be purchased in conjunction
with various types of qualified retirement plans. The summary below is only a
brief description of the Federal income tax laws for each plan and does not
purport to be complete. Further information or an application to invest in
shares of a Portfolio by establishing any of the retirement plans described
below may be obtained by calling Retirement Plans at (800) 858-8850. However,
it is recommended that a shareholder considering any retirement plan consult a
tax adviser before participating.

Pension and Profit-Sharing Plans. Sections 401(a) and 401(k) of the Code
permit business employers and certain associations to establish pension and
profit sharing plans for employees. Shares of a Portfolio may be purchased by
those who would have been covered under the rules governing old H.R. 10
(Keogh) Plans, as well as by corporate plans. Each business retirement plan
provides tax advantages for owners and participants. Contributions made by the
employer are tax-deductible, and participants do not pay taxes on
contributions or earnings until withdrawn.

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<PAGE>

Tax-Sheltered Custodial Accounts. Section 403(b)(7) of the Code permits public
school employees and employees of certain types of charitable, educational and
scientific organizations specified in Section 501(c)(3) of the Code, to
purchase shares of a Portfolio and, subject to certain limitations, exclude
the amount of purchase payments from gross income for tax purposes.

Individual Retirement Accounts (IRA). Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program, including
Simplified Employee Pension Plans, commonly referred to as SEP-IRA. Section

408A of the Code treats Roth IRAs as IRAs subject to certain special rules
applicable thereto. IRAs are subject to limitations with respect to the amount
that may be contributed, the eligibility of individuals to make contributions,
the amount if any, entitled to be contributed on a deductible basis, and the
time in which distributions would be allowed to commence. In addition, certain
distributions from some other types of retirement plans may be placed on a
tax-deferred basis in an IRA.

Salary Reduction Simplified Employee Pension (SARSEP). This plan was
introduced by a provision of the Tax Reform Act of 1986 as a unique way for
small employers to provide the benefit of retirement planning for their
employees. Contributions are deducted from the employee's paycheck before tax
deductions and are deposited into an IRA by the employer. These contributions
are not included in the employee's income and therefore are not reported or
deducted on his or her tax return.

Savings Incentive Match Plan for Employees ("SIMPLE IRA"). This plan was
introduced by a provision of the Small Business Job Protection Act of 1996 to
provide small employers with a simplified tax-favored retirement plan.
Contributions are deducted from the employee's paycheck before taxes and are
deposited into a SIMPLE IRA by the employer, who must make either matching
contributions or nonelective contributions. Contributions are tax-deductible
for the employer and participants do not pay taxes on contributions on
earnings until they are withdrawn.

Roth IRA. This plan, introduced by Section 302 of the Taxpayer Relief Act of
1997, generally permits individuals with adjusted gross income of up to
$95,000, and married couples with joint adjusted gross income of up to
$150,000, to contribute to a "Roth IRA." Contributions are not tax-deductible,
but distribution of assets (contributions and earnings) held in the account
for at least five years may be distributed tax-free under certain qualifying
conditions.

Education IRA. Established by the Taxpayer Relief Act of 1997, under Section
530 of the Code, this plan permits individuals to contribute to an IRA on
behalf of any child under the age of 18. Contributions are not tax-deductible
but distributions are tax-free if used for qualified educational expenses.

DESCRIPTION OF SHARES

Ownership of the Fund is represented by shares of common stock. The
total number of shares which the Fund has authority to issue is one billion
(1,000,000,000) shares of common stock (par value $0.0001 per share),
amounting in aggregate par value to one hundred thousand dollars
($100,000.00).

Currently, eight Portfolios of shares of the Fund have been
authorized pursuant to the Fund's Articles of Incorporation ("Articles"): the
Large-Cap Growth Portfolio, the Mid-Cap Growth Portfolio, the Aggressive
Growth Portfolio, the Large-Cap Blend Portfolio, the Large-Cap Value
Portfolio, the Value Portfolio, the Small-Cap Value Portfolio and the
International Equity Portfolio. Each Portfolio

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<PAGE>

has been divided into four classes of shares, designated as Class A, Class B,
Class C and Class Z. The Directors may authorize the creation of additional
Portfolios of shares so as to be able to offer to investors additional
investment portfolios within the Fund that would operate independently from
the Fund's present portfolios, or to distinguish among shareholders, as may be
necessary, to comply with future regulations or other unforeseen
circumstances. Each Portfolio of the Fund's shares represents the interests of
the shareholders of that Portfolio in a particular portfolio of Fund assets.
In addition, the Directors may authorize the creation of additional classes of
shares in the future, which may have fee structures different from those of
existing classes and/or may be offered only to certain qualified investors.

Shareholders are entitled to a full vote for each full share held.
The Directors have terms of unlimited duration (subject to certain removal
procedures) and have the power to alter the number of Directors, and appoint
their own successors, provided that at all times at least a majority of the
Directors have been elected by shareholders. The voting rights of shareholders
are not cumulative, so that holders of more than 50% of the shares voting can,
if they choose, elect all Directors being elected, while the holders of the
remaining shares would be unable to elect any Directors. Although the Fund
need not hold annual meetings of shareholders, the Directors may call special
meetings of shareholders for action by shareholder vote as may be required by
the 1940 Act or the Articles. Also, a shareholders meeting must be called, if
so requested in writing by the holders of record of 10% or more of the
outstanding shares of the Fund. In addition, the Directors may be removed by
the action of the holders of record of two-thirds or more of the outstanding
shares. All Portfolios of shares will vote with respect to certain matters,
such as election of Directors. When all Portfolios are not affected by a
matter to be voted upon, such as approval of investment advisory agreements or
changes in a Portfolio's policies, only shareholders of the Portfolios
affected by the matter may be entitled to vote.

The classes of shares of a given Portfolio are identical in all
respects, except that (i) each class may bear differing amounts of certain
class-specific expenses, (ii) Class A shares are subject to an initial sales
charge, a distribution fee and an ongoing account maintenance and service fee,
(iii) Class B shares are subject to a CDSC, a distribution fee and an ongoing
account maintenance and service fee, (iv) Class B shares convert automatically
to Class A shares on the first business day of the month seven years after the
purchase of such Class B Shares, (v) Class C shares are subject to a CDSC, and
an ongoing account maintenance and service fee, (vi) each class has voting

rights on matters that pertain to the Rule 12b-1 plan adopted with respect to
such class, except that under certain circumstances, the holders of Class B
shares may be entitled to vote on material changes to the Class A Rule 12b-1
plan, and (vii) each class of shares will be exchangeable only into the same
class of shares of any other Portfolio or other SunAmerica Funds that offer
that class. All shares of the Fund issued and outstanding and all shares
offered by the Prospectus when issued, are fully paid and non-assessable.
Shares have no preemptive or other subscription rights and are freely
transferable on the books of the Fund. In addition, shares have no conversion
rights, except as described above.

The Articles provide that no Director, officer, employee or agent of
the Fund is liable to the Fund or to a shareholder, nor is any Director,
officer, employee or agent liable to any third persons in connection with the
affairs of the Fund, except as such liability may arise from his or its own
bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties. It also provides that all third persons shall look solely to the
Fund's property for satisfaction of claims arising in connection with the
affairs of the Fund. With the exceptions stated, the Articles provides that a
Director, officer, employee or agent is entitled to be indemnified against all
liability in connection with the affairs of the Fund. The

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<PAGE>

Fund shall continue, without limitation of time, subject to the provisions in
the Articles concerning termination by action of the shareholders.

ADDITIONAL INFORMATION

Computation of Offering Price per Share

The following is the offering price calculation for each Class of
shares of the Portfolios. The Class A, Class B and Class C calculations are
based on the value of each Portfolio's net assets and number of shares
outstanding on October 31, 1997.

<TABLE>
<CAPTION>
Large-Cap Growth Portfolio Mid-Cap Growth Portfolio
-------------------------------------------- -------------------------------------------
Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Assets............... $23,609,458 $733,141 $165,960 $18,403,666 $35,739,146 $4,685,386

Number of Shares
Outstanding.............. $2,002,887 $65,591 $14,084 $1,342,354 $2,622,082 $343,493

Net Asset Value Per
Share (net assets
divided by number of
shares) ................. $ 11.79 $ 11.79 $ 11.78 $ 13.71 $ 13.63 $ 13.64

Sales charge for
Class A Shares:
5.75% of offering
price (6.10% of net
asset value per
share)*.................. $ 0.72 -- -- $ 0.84 -- --

Offering Price........... $ 12.51 -- -- $ 14.55 -- --
</TABLE>

- -----------------------
* Rounded to nearest one-hundredth percent; assumes maximum sales charge
is applicable.

<TABLE>
<CAPTION>
Aggressive Growth Portfolio Large-Cap Blend Portfolio
-------------------------------------------- -------------------------------------------
Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Assets............... $38,537,314 $48,593,950 $5,939,097 $23,592,872 $941,244 $142,864

Number of Shares
Outstanding ............. $2,424,338 $3,075,503 $375,792 $1,969,995 $78,691 $11,932

Net Asset Value Per
Share (net assets
divided by number of
shares) ................. $ 15.90 $ 15.80 $15.80 $ 11.98 $ 11.96 $ 11.97

Sales charge for
Class A Shares:
5.25% of offering
price (5.54 of net
asset value per
share)* ................. $ 0.97 -- -- $ 0.73 -- --

Offering Price........... $ 16.87 -- -- $ 12.71 -- --
</TABLE>

- -----------------------
* Rounded to nearest one-hundredth percent; assumes maximum sales
charge is applicable.

B-64

<PAGE>

<TABLE>
<CAPTION>
Large-Cap Value Portfolio Value Portfolio
-------------------------------------------- -------------------------------------------
Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Assets............... $23,240,000 $1,324,918 $172,432 $48,377,302 $77,534,354 $9,383,790

Number of Shares
Outstanding ............. $1,959,444 $111,740 $14,544 $3,007,062 $4,846,859 $586,579

Net Asset Value Per
Share (net assets
divided by number of
shares) ................. $ 11.86 $ 11.86 $ 11.86 $ 16.09 $ 16.00 $ 16.00

Sales charge for
Class A Shares:
5.25% of offering
price (5.54 of net
asset value per
share)* ................. $ 0.72 -- -- $ 0.98 -- --

Offering Price........... $ 12.58 -- -- $ 17.07 -- --
</TABLE>

- -----------------------
* Rounded to nearest one-hundredth percent; assumes maximum sales
charge is applicable.

<TABLE>
<CAPTION>
Small-Cap Value Portfolio International Equity Portfolio
-------------------------------------------- -------------------------------------------
Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Assets............... $21,345,618 $3,112,115 $525,428 $24,365,250 $42,656,451 $4,458,695

Number of Shares
Outstanding ............. $1,758,084 $256,483 $43,289 $1,955,691 $3,446,902 $360,269

Net Asset Value Per
Share (net assets
divided by number of
shares) ................. $ 12.14 $ 12.13 $ 12.14 $ 12.46 $ 12.38 $ 12.38

Sales charge for
Class A Shares:
5.25% of offering
price (5.54 of net
asset value per
share)* ................. $ 0.74 -- -- $ 0.76 -- --

Offering Price........... $ 12.88 -- -- $ 13.22 -- --
</TABLE>

- -----------------------
* Rounded to nearest one-hundredth percent; assumes maximum sales
charge is applicable.

Reports to Shareholders. The Fund sends audited annual and unaudited
semi-annual reports to shareholders of each of the Portfolios. In addition,
the Transfer Agent sends a statement to each shareholder having an account
directly with the Fund to confirm transactions in the account.

B-65

<PAGE>

Custodian and Transfer Agency. State Street Bank and Trust Company, 1776
Heritage Drive, North Quincy, MA 02171, serves as Custodian and Transfer Agent
for the Portfolios and in those capacities maintains certain financial and
accounting books and records pursuant to agreements with the Fund. Transfer
agent functions are performed for State Street by National Financial Data
Services, P.O. Box 419572, Kansas City, MO 64141-6572, an affiliate of State
Street.

Independent Accountants and Legal Counsel. Price Waterhouse LLP, 1177 Avenue
of the Americas, New York, NY 10036, has been selected to serve as the Fund's
independent accountants and in that capacity examines the annual financial
statements of the Fund. The firm of Shereff, Friedman, Hoffman & Goodman, LLP,
919 Third Avenue, New York, NY 10022, has been selected as legal counsel to
the Fund.

FINANCIAL STATEMENTS

Set forth following this Statement of Additional Information is the
financial statements of Style Select Series, Inc. with respect to the
Registrant's fiscal year ended October 31, 1997.

B-66

<PAGE>

5
STATEMENT OF ASSETS AND LIABILITIES -- October 31, 1997

ASSETS:

Investment securities, at value (identified cost
$25,063,825; $49,356,737; $70,323,902; and
$24,276,499, respectively)...................... $23,794,419 $56,153,029 $83,929,240 $23,234,499

Repurchase agreements (cost equals market)........ 380,000 -- 8,269,000 580,000

Short-term securities (cost equals market)........ 199,937 2,257,482 1,999,372 811,948

Cash.............................................. 78,326 18,320 74,005 2,755

Receivable for shares of beneficial interest
sold............................................ 483,181 634,568 1,078,124 386,291

Receivable for investments sold................... 93,497 588,107 183,491 141,619

Prepaid expenses and other assets................. 58,300 8,115 8,340 58,300

Receivable from investment adviser................ 7,167 26,477 35,677 7,175

Interest and dividends receivable................. 4,214 12,330 17,300 14,315

Deferred organizational expenses.................. 8,215 36,320 36,320 8,215
----------- ----------- ----------- -----------

Total assets.................................... 25,107,256 59,734,748 95,630,869 25,245,117
----------- ----------- ----------- -----------

LIABILITIES:

Payable for investments purchased................. 361,985 704,029 2,312,449 328,109

Payable for fund shares repurchased............... 161,000 27,879 12,843 204,000

Other accrued expenses............................ 19,886 81,184 95,030 19,996

Investment advisory and management fees payable... 11,611 52,375 80,893 11,730

Distribution and service maintenance fees
payable......................................... 4,215 41,083 59,293 4,302
----------- ----------- ----------- -----------

Total liabilities............................... 558,697 906,550 2,560,508 568,137
----------- ----------- ----------- -----------

Net assets.................................... $24,548,559 $58,828,198 $93,070,361 $24,676,980
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

<PAGE>

</TABLE>

6
STATEMENT OF ASSETS AND LIABILITIES -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>
LARGE-CAP MID-CAP AGGRESSIVE LARGE-CAP
GROWTH GROWTH GROWTH BLEND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSETS WERE COMPOSED OF:

Common Stock, $.0001 par value (1 billion shares
authorized)..................................... $ 208 $ 431 $ 588 $ 206

Paid-in capital................................... 25,994,433 52,176,682 78,876,692 25,747,077
----------- ----------- ----------- -----------

25,994,641 52,177,113 78,877,280 25,747,283

Accumulated undistributed net investment
income (loss)................................... 7,889 (643) (761) 20,057

Accumulated undistributed net realized gain (loss)
on investments, foreign currency, other assets
and liabilities................................. (184,565) (144,564) 588,504 (48,360)

Net unrealized appreciation (depreciation) of
investments..................................... (1,269,406) 6,796,292 13,605,338 (1,042,000)
----------- ----------- ----------- -----------

Net assets.................................... $24,548,559 $58,828,198 $93,070,361 $24,676,980
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

CLASS A:

Net assets........................................ $23,609,458 $18,403,666 $38,537,314 $23,592,872

Shares outstanding................................ 2,002,887 1,342,354 2,424,338 1,969,995

Net asset value and redemption price per share.... $ 11.79 $ 13.71 $ 15.90 $ 11.98

Maximum sales charge (5.75% of offering price).... 0.72 0.84 0.97 0.73
----------- ----------- ----------- -----------

Maximum offering price to public.................. $ 12.51 $ 14.55 $ 16.87 $ 12.71
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

CLASS B:

Net assets........................................ $ 773,141 $35,739,146 $48,593,950 $ 941,244

Shares outstanding................................ 65,591 2,622,082 3,075,503 78,691

Net asset value, offering and redemption price per
share (excluding any applicable contingent
deferred sales charge).......................... $ 11.79 $ 13.63 $ 15.80 $ 11.96
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

CLASS C:

Net assets........................................ $ 165,960 $ 4,685,386 $ 5,939,097 $ 142,864

Shares outstanding................................ 14,084 343,493 375,792 11,932

Net asset value, offering and redemption price per
share (excluding any applicable contingent
deferred sales charge).......................... $ 11.78 $ 13.64 $ 15.80 $ 11.97
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

See Notes to Financial Statements

<PAGE>

7
STATEMENT OF ASSETS AND LIABILITIES -- October 31, 1997 -- (continued)

<TABLE>
<CAPTION>
LARGE-CAP SMALL-CAP INTERNATIONAL
VALUE VALUE VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------
<S> <C> <C> <C> <C>

ASSETS:

Investment securities, at value (identified cost
$24,049,833; $115,531,354; $20,506,477; and
$66,834,816, respectively)...................... $22,714,037 $126,261,475 $19,738,475 $ 63,894,899

Repurchase agreements (cost equals market)........ 130,000 5,678,000 3,378,000 6,679,000

Short-term securities (cost equals market)........ 1,250,485 5,353,968 1,695,611 835,000

Cash.............................................. 49,474 8,661 77,093 --

Foreign cash (cost $472,003)...................... -- -- -- 473,138

Receivable for shares of beneficial interest
sold............................................ 857,034 1,732,952 1,215,264 433,421

Prepaid expenses and other assets................. 58,300 8,634 58,300 8,999

Interest and dividends receivable................. 12,290 110,398 18,280 180,938

Deferred organizational expenses.................. 8,215 36,320 8,215 36,320

Receivable from investment adviser................ 7,175 49,699 7,200 33,065

Receivable for investments sold................... -- 14,525 -- 1,005,239

Foreign currency contracts........................ -- -- -- 2,361,542

Unrealized appreciation of foreign currency
contracts....................................... -- -- -- 124,603
----------- ------------ ----------- -------------

Total assets.................................... 25,087,010 139,254,632 26,196,438 76,066,164
----------- ------------ ----------- -------------

LIABILITIES:

Payable for fund shares repurchased............... 280,383 298,801 687,050 179,917

Payable for investments purchased................. 33,178 3,279,098 489,096 1,728,804

Other accrued expenses............................ 20,043 178,207 20,121 150,070

Investment advisory and management fees payable... 11,729 115,150 12,079 71,869

Distribution and service maintenance fees
payable......................................... 4,327 87,930 4,931 50,400

Foreign currency contracts........................ -- -- -- 2,364,584

Unrealized depreciation of foreign currency
contracts....................................... -- -- -- 39,360

Due to custodian bank............................. -- -- -- 764

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

Total liabilities............................... 349,660 3,959,186 1,213,277 4,585,768
----------- ------------ ----------- -------------

Net assets.................................... $24,737,350 $135,295,446 $24,983,161 $ 71,480,396
----------- ------------ ----------- -------------
----------- ------------ ----------- -------------

<PAGE>

</TABLE>

8
STATEMENT OF ASSETS AND LIABILITIES -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>
LARGE-CAP SMALL-CAP INTERNATIONAL
VALUE VALUE VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSETS WERE COMPOSED OF:

Common Stock, $.0001 par value (1 billion shares
authorized)..................................... $ 209 $ 844 $ 206 $ 576

Paid-in capital................................... 26,056,306 119,171,979 25,715,849 73,360,146
----------- ------------ ----------- -------------

26,056,515 119,172,823 25,716,055 73,360,722

Accumulated undistributed net investment income
(loss).......................................... 16,631 (680) 35,108 122,861

Accumulated undistributed net realized gain on
investments, foreign currency, other assets and
liabilities..................................... -- 5,393,253 -- 843,851

Net unrealized appreciation (depreciation) of
investments..................................... (1,335,796) 10,730,121 (768,002) (2,939,917)

Net unrealized appreciation (depreciation) of
foreign currency, other assets and
liabilities..................................... -- (71) -- 92,879
----------- ------------ ----------- -------------

Net assets.................................... $24,737,350 $135,295,446 $24,983,161 $ 71,480,396
----------- ------------ ----------- -------------
----------- ------------ ----------- -------------

CLASS A:

Net assets........................................ $23,240,000 $ 48,377,302 $21,345,618 $ 24,365,250

Shares outstanding................................ 1,959,444 3,007,062 1,758,084 1,955,961

Net asset value and redemption price per share.... $ 11.86 $ 16.09 $ 12.14 $ 12.46

Maximum sales charge (5.75% of offering price).... 0.72 0.98 0.74 0.76
----------- ------------ ----------- -------------

Maximum offering price to public.................. $ 12.58 $ 17.07 $ 12.88 $ 13.22
----------- ------------ ----------- -------------
----------- ------------ ----------- -------------

CLASS B:

Net assets........................................ $ 1,324,918 $ 77,534,354 $ 3,112,115 $ 42,656,451

Shares outstanding................................ 111,740 4,846,859 256,483 3,446,902

Net asset value, offering and redemption price per
share (excluding any applicable contingent
deferred sales charge).......................... $ 11.86 $ 16.00 $ 12.13 $ 12.38
----------- ------------ ----------- -------------
----------- ------------ ----------- -------------

CLASS C:

Net assets........................................ $ 172,432 $ 9,383,790 $ 525,428 $ 4,458,695

Shares outstanding................................ 14,544 586,579 43,289 360,269

Net asset value, offering and redemption price per
share (excluding any applicable contingent
deferred sales charge).......................... $ 11.86 $ 16.00 $ 12.14 $ 12.38
----------- ------------ ----------- -------------
----------- ------------ ----------- -------------
</TABLE>

See Notes to Financial Statements

<PAGE>

9
STATEMENT OF OPERATIONS -- For the year ended October 31, 1997

<TABLE>
<CAPTION>
LARGE-CAP MID-CAP AGGRESSIVE LARGE-CAP
GROWTH GROWTH GROWTH BLEND
PORTFOLIO@ PORTFOLIO# PORTFOLIO# PORTFOLIO@
-------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest........................................ $ 20,331 $ 158,291 $ 336,477 $ 22,465

Dividends*...................................... 4,162 78,175 189,639 14,175
----------- ---------- ----------- -----------
Total investment income....................... 24,493 236,466 526,116 36,640
----------- ---------- ----------- -----------
Expenses:
Investment advisory and management fees......... 11,611 390,221 533,055 11,730
Distribution and service maintenance fees
Class A....................................... 3,983 73,691 106,377 4,000
Class B....................................... 173 164,888 209,795 239
Class C....................................... 59 14,787 19,327 63
Transfer agent fees and expenses
Class A....................................... 3,186 59,267 85,695 3,200
Class B....................................... 49 47,325 60,341 67
Class C....................................... 16 4,293 5,602 17
Registration fees
Class A....................................... 734 46,990 48,528 737
Class B....................................... 174 47,988 42,038 177
Class C....................................... 162 12,101 11,523 162
Audit and tax consulting fees................... 2,805 26,025 30,795 2,805
Printing expense................................ 2,550 16,195 18,380 2,550
Custodian fees and expenses..................... 1,974 66,338 90,617 1,994
Legal fees and expenses......................... 340 6,945 8,000 340
Directors' fees and expenses.................... 85 3,323 4,641 85
Miscellaneous expenses.......................... 85 2,660 3,330 85
Amortization of organizational expenses......... -- 4,144 4,144 --
Insurance expense............................... -- 32 46 --
----------- ---------- ----------- -----------
Total expenses................................ 27,986 987,213 1,282,234 28,251
Less: expenses waived/reimbursed by investment
adviser..................................... (7,167) (155,055) (158,172) (7,175)
----------- ---------- ----------- -----------
Net expenses.................................. 20,819 832,158 1,124,062 21,076
----------- ---------- ----------- -----------
Net investment income (loss)...................... 3,674 (595,692) (597,946) 15,564
----------- ---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments........... (184,565) 208,124 1,155,918 (48,360)
Net realized gain (loss) on foreign currency and
other assets and liabilities.................... -- (1,597) -- 191
Net unrealized appreciation/depreciation of
investments..................................... (1,269,406) 6,796,292 13,605,338 (1,042,000)
----------- ---------- ----------- -----------
Net realized and unrealized gain (loss) on
investments, foreign currency and other assets
and liabilities................................. (1,453,971) 7,002,819 14,761,256 (1,090,169)
----------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS: $(1,450,297) $6,407,127 $14,163,310 $(1,074,605)
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------

*Net of foreign withholding taxes on dividends
of.............................................. $ -- $ 187 $ 628 $ 51

----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>

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

@ Commenced operations October 15, 1997
# Commenced operations November 19, 1996
See Notes to Financial Statements

<PAGE>

10
STATEMENT OF OPERATIONS -- For the year ended October 31, 1997 -- (continued)

<TABLE>
<CAPTION>
LARGE-CAP SMALL-CAP INTERNATIONAL
VALUE VALUE VALUE EQUITY
PORTFOLIO@ PORTFOLIO# PORTFOLIO@ PORTFOLIO#
---------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest........................................ $ 21,267 $ 316,689 $ 34,643 $ 216,533
Dividends*...................................... 12,137 877,812 17,738 624,686
----------- ----------- ---------- -------------
Total investment income....................... 33,404 1,194,501 52,381 841,219
----------- ----------- ---------- -------------
Expenses:
Investment advisory and management fees......... 11,729 671,560 12,079 440,671
Distribution and service maintenance fees
Class A....................................... 3,986 116,913 3,849 77,057
Class B....................................... 281 309,027 900 162,796
Class C....................................... 60 28,306 184 17,650
Transfer agent fees and expenses
Class A....................................... 3,189 89,362 3,079 59,709
Class B....................................... 79 86,613 252 47,087
Class C....................................... 17 7,998 51 5,118
Registration fees
Class A....................................... 734 71,485 715 52,381
Class B....................................... 179 78,528 211 51,454
Class C....................................... 162 14,974 168 12,951
Audit and tax consulting fees................... 2,805 30,795 2,805 30,720
Printing expense................................ 2,550 18,370 2,550 16,050
Custodian fees and expenses..................... 1,994 113,843 2,053 130,328
Legal fees and expenses......................... 340 9,770 340 6,945
Directors' fees and expenses.................... 85 5,054 85 3,647
Miscellaneous expenses.......................... 85 4,330 85 2,491
Amortization of organizational expenses......... -- 4,144 -- 4,144
Insurance expense............................... -- 64 -- 19
----------- ----------- ---------- -------------
Total expenses................................ 28,275 1,661,136 29,406 1,121,218
Less: expenses waived/reimbursed by investment

adviser..................................... (7,175) (217,432) (7,200) (169,822)
----------- ----------- ---------- -------------
Net expenses.................................. 21,100 1,443,704 22,206 951,396
----------- ----------- ---------- -------------
Net investment income (loss)...................... 12,304 (249,203) 30,175 (110,177)
----------- ----------- ---------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on investments.................. -- 5,614,072 -- 843,851
Net realized gain (loss) on foreign currency and
other assets and liabilities.................... -- (19) -- 209,293
Net unrealized appreciation/depreciation of
investments..................................... (1,335,796) 10,730,121 (768,002) (4,158,649)
Net unrealized appreciation/depreciation of
foreign currency and other assets and
liabilities..................................... -- (71) -- 94,498
----------- ----------- ---------- -------------
Net realized and unrealized gain (loss) on
investments, foreign currency and other assets
and liabilities................................. (1,335,796) 16,344,103 (768,002) (3,011,007)
----------- ----------- ---------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS: $(1,323,492) $16,094,900 $ (737,827) $ (3,121,184)
----------- ----------- ---------- -------------
----------- ----------- ---------- -------------

*Net of foreign withholding taxes on dividends
of.............................................. $ 99 $ 9,190 $ -- $ 81,620
----------- ----------- ---------- -------------
----------- ----------- ---------- -------------
</TABLE>

- ------------------
@ Commenced operations October 15, 1997
# Commenced operations November 19, 1996

See Notes to Financial Statements

<PAGE>

11
STATEMENT OF CHANGES IN NET ASSETS -- For the year ended October 31, 1997

<TABLE>
<CAPTION>
LARGE-CAP MID-CAP AGGRESSIVE LARGE-CAP
GROWTH GROWTH GROWTH BLEND
PORTFOLIO@ PORTFOLIO# PORTFOLIO# PORTFOLIO@
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income (loss).................... $ 3,674 $ (595,692) $ (597,946) $ 15,564
Net realized gain (loss) on investments......... (184,565) 208,124 1,155,918 (48,360)

Net realized gain (loss) on foreign currency and
other assets and liabilities.................. -- (1,597) -- 191
Net unrealized appreciation/depreciation of
investments................................... (1,269,406) 6,796,292 13,605,338 (1,042,000)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from operations............................... (1,450,297) 6,407,127 14,163,310 (1,074,605)
-------------- -------------- -------------- --------------

NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL
SHARE TRANSACTIONS (NOTE 9)..................... 25,998,856 52,396,071 78,882,051 25,751,585
-------------- -------------- -------------- --------------

TOTAL INCREASE IN NET ASSETS...................... 24,548,559 58,803,198 93,045,361 24,676,980

NET ASSETS:
Beginning of period............................... -- 25,000 25,000 --
-------------- -------------- -------------- --------------
End of period [including undistributed net
investment income (loss) at October 31, 1997 of
$7,889, $(643), $(761) and $20,057,
respectively]................................... $ 24,548,559 $ 58,828,198 $ 93,070,361 $ 24,676,980
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>

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

@ Commenced operations October 15, 1997
# Commenced operations November 19, 1996

<PAGE>

STATEMENT OF CHANGES IN NET ASSETS -- For the year ended October 31,
1997 -- (continued)

<TABLE>
<CAPTION>
LARGE-CAP SMALL-CAP INTERNATIONAL
VALUE VALUE VALUE EQUITY
PORTFOLIO@ PORTFOLIO# PORTFOLIO@ PORTFOLIO#
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income (loss).................... $ 12,304 $ (249,203) $ 30,175 $ (110,177)
Net realized gain on investments................ -- 5,614,072 -- 843,851
Net realized gain (loss) on foreign currency and
other assets and liabilities.................. -- (19) -- 209,293
Net unrealized appreciation/depreciation of
investments................................... (1,335,796) 10,730,121 (768,002) (4,158,649)
Net unrealized appreciation/depreciation of

foreign currency and other assets and
liabilities................................... -- (71) -- 94,498
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting
from operations............................... (1,323,492) 16,094,900 (737,827) (3,121,184)
-------------- -------------- -------------- --------------

NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL
SHARE TRANSACTIONS (NOTE 9)..................... 26,060,842 119,175,546 25,720,988 74,576,580
-------------- -------------- -------------- --------------

TOTAL INCREASE IN NET ASSETS...................... 24,737,350 135,270,446 24,983,161 71,455,396

NET ASSETS:
Beginning of period............................... -- 25,000 -- 25,000
-------------- -------------- -------------- --------------
End of period [including undistributed net
investment income (loss) at October 31, 1997 of
$16,631, $(680), $35,108 and $122,861,
respectively]................................... $ 24,737,350 $ 135,295,446 $ 24,983,161 $ 71,480,396
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>

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

@ Commenced operations October 15, 1997
# Commenced operations November 19, 1996
See Notes to Financial Statements

<PAGE>

13
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
NET
GAIN(LOSS) DIVIDENDS
ON INVEST- TOTAL FROM DISTRI-
NET ASSET NET MENTS(BOTH FROM NET BUTIONS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI-
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS
- ------------------- ---------- ---------- ----------- ---------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
LARGE-CAP GROWTH PORTFOLIO
- --------------------------

<CAPTION>
CLASS A
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97... $12.50 $ -- $ (0.71) $(0.71) $-- $-- $--
<CAPTION>

CLASS B
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97... 12.50 -- (0.71) (0.71) -- -- --
<CAPTION>
CLASS C
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97... 12.50 -- (0.72) (0.72) -- -- --

RATIO OF NET
NET RATIO OF INVESTMENT
ASSET NET ASSETS EXPENSES INCOME AVERAGE
VALUE, END OF TO AVERAGE TO AVERAGE COMMISSION
PERIOD END OF TOTAL PERIOD NET NET PORTFOLIO PER
ENDED PERIOD RETURN(2) (000'S) ASSETS(3)(4) ASSETS(3)(4) TURNOVER SHARE(5)
- ------------------- ------ --------- ---------- ------------ ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LARGE-CAP GROWTH PO
- -------------------
10/15/97-10/31/97.. $11.79 (5.68)% $ 23,609 1.78% 0.34% 1% $ 0.0414

<S> <C> <C> <C> <C>
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97.. 11.79 (5.68) 773 2.43 (0.84) 1 0.0414

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97.. 11.78 (5.76) 166 2.43 (0.42) 1 0.0414
</TABLE>

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MID-CAP GROWTH PORTFOLIO
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
- -------------------------------------------------------------------------------------------------------
11/19/96-10/31/97... $12.50 $(0.16) $ 1.37 $ 1.21 $-- $-- $--

<CAPTION>
CLASS B
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97... 12.50 (0.25) 1.38 1.13 -- -- --
<CAPTION>
CLASS C
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/06/97-10/31/97... 11.93 (0.18) 1.89 1.71 -- -- --

<CAPTION>
MID-CAP GROWTH PORT
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>

- -------------------
11/19/96-10/31/97.. $13.71 9.68% $ 18,404 1.85% (1.19)% 97% $ 0.0487

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97.. 13.63 9.04 35,739 2.47 (1.92) 97 0.0487

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/06/97-10/31/97... 13.64 14.33 4,685 2.45 (1.97) 97 0.0487
</TABLE>

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

AGGRESSIVE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
CLASS A
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97... $12.50 $(0.11) $ 3.51 $ 3.40 $-- $-- $--

<CAPTION>
CLASS B
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97... 12.50 (0.24) 3.54 3.30 -- -- --
<CAPTION>
CLASS C
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/06/97-10/31/97... 13.38 (0.17) 2.59 2.42 -- -- --

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97.. $15.90 27.20% $ 38,537 1.84% (0.77)% 150% $ 0.0546

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97.. 15.80 26.40 48,594 2.47 (1.58) 150 0.0546

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/06/97-10/31/97... 15.80 18.09 5,939 2.45 (1.68) 150 0.0546
</TABLE>

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

LARGE-CAP BLEND PORTFOLIO
<TABLE>
<CAPTION>
CLASS A
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97... $12.50 $ 0.01 $ (0.53) $(0.52) $-- $-- $--

<CAPTION>
CLASS B
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97... 12.50 -- (0.54) (0.54) -- -- --
<CAPTION>
CLASS C
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97... 12.50 -- (0.53) (0.53) -- -- --

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97.. $11.98 (4.16)% $ 23,593 1.78% 1.35% 2% $ 0.0361

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97.. 11.96 (4.32) 941 2.43 0.29 2 0.0361

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97.. 11.97 (4.24) 143 2.43 0.54 2 0.0361
</TABLE>

- ------------------------
(1) Calculated based upon average shares outstanding

(2) Total return is not annualized and does not reflect sales load

(3) Annualized

(4) Net of the following expense reimbursements (based on average net assets):

<TABLE>
<S> <C>
Large-Cap Growth A....... .59%
Large-Cap Growth B....... 1.53%
Large-Cap Growth C....... 3.29%
Mid-Cap Growth A......... .34%
Mid-Cap Growth B......... .42%
Mid-Cap Growth C......... .96%
Aggressive Growth A...... .26%

Aggressive Growth B...... .32%
Aggressive Growth C...... .73%
Large-Cap Blend A........ .58%
Large-Cap Blend B........ 1.26%
Large-Cap Blend C........ 3.12%
</TABLE>

(5) The average commission per share is derived by taking the agency commissions
paid on equity securities trades and dividing by the number of shares
purchased and sold.
See Notes to Financial Statements

<PAGE>

14
FINANCIAL HIGHLIGHTS -- (continued)
<TABLE>
<CAPTION>
NET
GAIN(LOSS) DIVIDENDS
ON INVEST- TOTAL FROM DISTRI-
NET ASSET NET MENTS(BOTH FROM NET BUTIONS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI-
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS
- ------------------- ---------- --------- ----------- ---------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
LARGE-CAP VALUE PORTFOLIO
- -------------------------------------------

<CAPTION>
CLASS A
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97... $12.50 $ 0.01 $ (0.65) $(0.64) $-- $-- $--
<CAPTION>
CLASS B
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97... 12.50 -- (0.64) (0.64) -- -- --
<CAPTION>
CLASS C
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97... 12.50 -- (0.64) (0.64) -- -- --

- ------------------- ------ --------- ---------- ------------ ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LARGE-CAP VALUE POR
- -------------------

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97.. $11.86 (5.12)% $ 23,240 1.78% 1.07% --% $ 0.0445

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97.. 11.86 (5.12) 1,325 2.43 .22 -- 0.0445

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97.. 11.86 (5.12) 172 2.43 .53 -- 0.0445
</TABLE>

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
- ------------------------------------------------------------------------------------------------------
11/19/96-10/31/97... $12.50 $ -- $ 3.59 $ 3.59 $-- $-- $--

<CAPTION>
CLASS B
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97... 12.50 (0.11) 3.61 3.50 -- -- --
<CAPTION>
CLASS C
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/06/97-10/31/97... 13.56 (0.08) 2.52 2.44 -- -- --

<CAPTION>
VALUE PORTFOLIO
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>

- -------------------
11/19/96-10/31/97.. $16.09 28.72% $ 48,377 1.84% --% 48% $ 0.0596

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97.. 16.00 28.00 77,534 2.46 (0.74) 48 0.0596

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/06/97-10/31/97... 16.00 17.99 9,384 2.45 (0.78) 48 0.0596

</TABLE>

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL-CAP VALUE PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
- ------------------------------------------------------------------------------------------------------
10/15/97-10/31/97... $12.50 $ 0.01 $ (0.37) $(0.36) $-- $-- $--

<CAPTION>
CLASS B
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97... 12.50 0.01 (0.38) (0.37) -- -- --
<CAPTION>
CLASS C
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97... 12.50 0.01 (0.37) (0.36) -- -- --

<CAPTION>
SMALL-CAP VALUE POR
<S> <C> <C> <C> <C> <C> <C> <C>

- -------------------
10/15/97-10/31/97.. $12.14 (2.88)% $ 21,346 1.78% 2.57% --% $ 0.0571

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97.. 12.13 (2.88) 3,112 2.43 1.75 -- 0.0571

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97.. 12.14 (2.88) 525 2.43 1.75 -- 0.0571
</TABLE>

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

INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
CLASS A
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97... $12.50 $ 0.01 $ (0.05) $(0.04) $-- $-- $--

CLASS C
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/06/97-10/31/97... 12.60 (0.07) (0.15) (0.22) -- -- --

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97.. $12.46 (0.32)% $ 24,365 2.10% 0.07% 70% $ 0.0179

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97.. 12.38 (0.96) 42,656 2.72 (0.69) 70 0.0179

- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/06/97-10/31/97... 12.38 (1.75) 4,459 2.70 (0.75) 70 0.0179
</TABLE>

- ------------------------
(1) Calculated based upon average shares outstanding

(2) Total return is not annualized and does not reflect sales load

(3) Annualized

(4) Net of the following expense reimbursements (based on average net assets):

<TABLE>
<S> <C>
Large-Cap Value A........ .58%
Large-Cap Value B........ 1.16%
Large-Cap Value C........ 3.22%
Value A.................. .28%
Value B.................. .34%
Value C.................. .63%
Small-Cap Value A........ .57%
Small-Cap Value B........ .74%
Small-Cap Value C........ 1.42%
International Equity A... .37%
International Equity B... .45%
International Equity C... .87%
</TABLE>

<PAGE>

Large-Cap Growth Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--96.9%
AUTOMOTIVE--1.2%
Harley-Davidson, Inc.(1)............................. 4,500 $ 124,875
Volkswagen AG ADR.................................... 1,525 179,950
-----------
304,825
-----------
BANKS--2.4%
BankAmerica Corp..................................... 1,400 100,100
Citicorp............................................. 900 112,556
State Street Corp.................................... 6,800 379,100
-----------
591,756
-----------
BROADCASTING & MEDIA--2.4%
Interpublic Group of Cos., Inc....................... 12,400 589,000
-----------
BUSINESS SERVICES--7.2%
Adaptec, Inc.+....................................... 3,500 169,531
America Online, Inc.+................................ 1,025 78,925
CUC International, Inc.+............................. 9,400 277,300
Manpower, Inc........................................ 16,800 644,700
Service Corp. International.......................... 11,400 346,988
TransCoastal Marine Services, Inc.+.................. 10,600 257,050
-----------
1,774,494
-----------
CHEMICALS--4.0%
du Pont (E.I.) de Nemours & Co....................... 5,725 325,609
Monsanto Co.......................................... 4,175 178,481
Sigma-Aldrich Corp................................... 7,800 272,025
Solutia, Inc......................................... 8,925 197,466
-----------
973,581
-----------
COMMUNICATION EQUIPMENT--0.8%
MMC Networks, Inc.+.................................. 9,000 196,875
-----------
COMPUTERS & BUSINESS EQUIPMENT--4.6%
3Com Corp.+.......................................... 5,800 240,338
Compaq Computer Corp................................. 3,300 210,375
Dell Computer Corp.+................................. 1,775 142,222
Hewlett-Packard Co................................... 6,200 382,462

Seagate Technology, Inc.+............................ 6,000 162,750
-----------
1,138,147
-----------
DRUGS--7.8%
Bristol-Myers Squibb Co.............................. 5,925 519,919
Lilly (Eli) & Co..................................... 4,000 267,500
Merck & Co., Inc..................................... 6,300 562,275
Omnicare, Inc........................................ 2,575 71,617
Pfizer, Inc.......................................... 6,875 486,406
-----------
1,907,717
-----------

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
ELECTRONICS--12.0%
Arrow Electronics, Inc.+............................. 12,000 $ 340,500
ASM Lithography Holdings NV+......................... 2,500 183,125
Emerson Electric Co.................................. 5,500 288,406
Intel Corp........................................... 12,275 945,175
KLA-Tencor Corp.+.................................... 3,425 149,844
Motorola, Inc........................................ 5,400 333,450
Philips Electronics NV-
NY Shares.......................................... 3,075 241,003
Solectron Corp.+..................................... 4,500 176,625
Teradyne, Inc.+(1)................................... 2,400 89,850
Texas Instruments, Inc............................... 1,750 186,703
-----------
2,934,681
-----------
ENERGY SERVICES--2.6%
Diamond Offshore Drilling, Inc....................... 4,750 295,688
Schlumberger Ltd..................................... 3,950 345,625
-----------
641,313
-----------
ENERGY SOURCES--0.8%
Exxon Corp........................................... 3,300 202,744
-----------
ENTERTAINMENT PRODUCTS--2.5%
Mattel, Inc.......................................... 15,900 618,113
-----------
FINANCIAL SERVICES--6.2%
American Express Co.................................. 3,100 241,800
Charles Schwab Corp.................................. 6,000 204,750
Federal Home Loan Mortgage Corp...................... 4,650 176,119
Federal National Mortgage Association................ 4,350 210,703
First Data Corp...................................... 3,600 104,625
Merrill Lynch & Co., Inc............................. 1,675 113,272

Morgan Stanley, Dean Witter, Discover & Co........... 4,350 213,150
SLM Holding Corp..................................... 1,825 256,184
-----------
1,520,603
-----------
FOOD, BEVERAGE & TOBACCO--4.9%
Coca-Cola Co......................................... 7,900 446,350
Coca-Cola Enterprises, Inc........................... 4,375 123,047
Delta & Pine Land Co................................. 6,075 226,293
Pioneer Hi-Bred International, Inc................... 1,800 164,925
Sara Lee Corp........................................ 4,775 244,122
-----------
1,204,737
-----------
HEALTH SERVICES--0.6%
United Healthcare Corp............................... 3,275 151,673
-----------
</TABLE>

<PAGE>

Large-Cap Growth Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
HOUSEHOLD PRODUCTS--3.7%
Gillette Co.......................................... 4,600 $ 409,688
Procter & Gamble Co.................................. 4,300 292,400
Warner-Lambert Co.................................... 1,500 214,781
-----------
916,869
-----------
HOUSING--1.2%
Home Depot, Inc...................................... 5,100 283,688
-----------
INSURANCE--2.1%
American International Group, Inc.................... 2,400 244,950
MGIC Investment Corp................................. 4,350 262,359
-----------
507,309
-----------
LEISURE & TOURISM--4.5%
Cracker Barrel Old Country Store, Inc................ 3,600 105,300

Delta Air Lines, Inc................................. 1,200 120,900
Disney (Walt) Co..................................... 2,200 180,950
Marriott International, Inc.......................... 3,000 209,250
McDonald's Corp...................................... 10,800 483,975
-----------
1,100,375
-----------
MEDICAL PRODUCTS--4.2%
Johnson & Johnson Co................................. 9,900 568,013
Medtronic, Inc....................................... 10,500 456,750
-----------
1,024,763
-----------
MULTI-INDUSTRY--4.6%
General Electric Co.................................. 15,700 1,013,631
Tyco International Ltd............................... 3,000 113,250
-----------
1,126,881
-----------
RETAIL--3.6%
CompUSA, Inc.+....................................... 2,300 75,325
Fred Meyer, Inc.+.................................... 3,200 91,400
Gap, Inc............................................. 4,000 212,750
Viking Office Products, Inc.+........................ 21,100 503,763
-----------
883,238
-----------
SOFTWARE--9.0%
American Power Conversion Corp.+..................... 11,000 295,625
Cadence Design Systems, Inc.+........................ 2,975 158,419
Cisco Systems, Inc.+................................. 4,600 377,200
Electronic Arts, Inc.+............................... 3,200 108,000
Microsoft Corp.+..................................... 6,650 863,668
Oracle Systems Corp.+................................ 7,200 257,400
Parametric Technology Corp.+......................... 3,500 154,000
-----------
2,214,312
<CAPTION>
SHARES/
PRINCIPAL
AMOUNT
(IN VALUE
SECURITY DESCRIPTION THOUSANDS) (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS--2.7%
Ericsson (L.M.) Telecommu-
nications Co., Class B ADR......................... 9,600 $ 424,800
Hong Kong Telecommu-
nications Ltd. ADR................................. 12,400 237,925
-----------
662,725
-----------
TRANSPORTATION--1.3%

Air Express International Corp....................... 10,800 324,000
-----------
TOTAL INVESTMENT SECURITIES--96.9%
(cost $25,063,825)................................... 23,794,419
-----------
SHORT-TERM SECURITIES--0.8%
Federal Home Loan Mortgage Discount Notes
5.65% due 11/03/97
(cost: $199,937)................................... $ 200 199,937
-----------
REPURCHASE
AGREEMENT--1.6%
Agreement with State Street
Bank and Trust Co., bearing
5.00%, dated 10/31/97 to be
repurchased 11/03/97 in the
amount of $380,158
collaterized by $390,000
U.S. Treasury Note 5.875%,
due 2/28/99 approximate
aggregate value $394,927
(cost $380,000).................................... 380 380,000
-----------
TOTAL INVESTMENTS--
(cost $25,643,762)................................... 99.3% 24,374,356
Other assets less liabilities.......................... 0.7 174,203
------- -----------
NET ASSETS-- 100.0% $24,548,559
------- -----------
------- -----------
</TABLE>

- ------------------
+ Non-income producing security

ADR ('American Depositary Receipt')
(1) Security is traded with rights attached

See Notes to Financial Statements

<PAGE>

Mid-Cap Growth Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------

<S> <C> <C>
COMMON STOCK--95.5%
AEROSPACE & MILITARY TECHNOLOGY--0.3%
BE Aerospace, Inc.+................................ 7,200 $ 201,600
-----------
APPAREL & TEXTILES--3.1%
Danaher Corp....................................... 10,900 597,456
Jones Apparel Group, Inc.+......................... 5,400 274,725
Nautica Enterprises, Inc.+......................... 8,600 228,438
Polo Ralph Lauren Corp., Class A+.................. 4,400 114,400
Tommy Hilfiger Corp.+.............................. 6,500 257,156
Warnaco Group, Inc. Class A........................ 13,400 378,550
-----------
1,850,725
-----------
AUTOMOTIVE--0.8%
Harley-Davidson, Inc............................... 8,200 227,550
OEA, Inc........................................... 5,300 213,325
-----------
440,875
-----------
BANKS--0.6%
State Street Corp.................................. 6,800 379,100
-----------
BROADCASTING & MEDIA--8.1%
360 Communications Co.+............................ 13,900 293,638
At Home Corp., Series A+........................... 7,050 170,081
Cinar Films, Inc., Class B+........................ 7,200 279,900
Clear Channel Communications, Inc.+................ 6,800 448,800
Comcast Corp., Class A............................. 19,900 544,762
Heftel Broadcasting Corp., Class A+................ 3,100 202,275
Imax Corp.+........................................ 9,300 234,825
Jacor Communications, Inc.+........................ 11,600 482,850
Metro Networks, Inc.+.............................. 6,400 196,800
Outdoor Systems, Inc.+............................. 19,700 605,775
Tele-Communications Liberty Media Group, Inc.,
Series A......................................... 9,750 338,813
Tele-Communications TCI Group, Series A+........... 11,862 271,343
TV Azteca SA de CV ADR+............................ 8,800 168,300
Univision Communications, Inc., Class A+........... 3,800 235,600
Valassis Communications, Inc....................... 7,000 206,500
Vanguard Cellular Systems, Inc., Class A+.......... 5,100 69,806
-----------
4,750,068
-----------
BUSINESS SERVICES--11.3%
AccuStaff, Inc.+................................... 14,900 425,581
Adaptec, Inc.+..................................... 6,900 334,219
ADVO, Inc.+........................................ 3,000 67,313
Allied Waste Industries, Inc.+..................... 20,800 421,200

VALUE

SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES (CONTINUED)
American Disposal Services, Inc.+.................. 7,000 $ 243,250
Apollo Group, Inc., Class A+....................... 8,000 332,000
Catalina Marketing Corp.+.......................... 4,700 214,731
Cintas Corp........................................ 4,600 329,475
Coinstar, Inc...................................... 5,600 56,000
Complete Busines Solutions, Inc.................... 5,400 189,000
Concord EFS, Inc.+................................. 6,600 195,525
Corporate Express, Inc.+........................... 18,100 264,712
Corrections Corp. of America+...................... 6,800 207,400
CUC International, Inc.+........................... 7,500 221,250
Gartner Group, Inc., Class A+...................... 17,000 478,125
Interim Services, Inc.+............................ 12,100 316,869
McDermot International, Inc........................ 2,700 111,713
National Data Corp................................. 5,400 199,462
Paychex, Inc....................................... 9,050 343,900
Republic Industries, Inc.+......................... 10,300 303,850
Saville Systems PLC ADR+........................... 2,200 129,800
Solectron Corp.+................................... 4,200 164,850
Stewart Enterprises, Inc., Class A................. 4,800 199,200
Superior Services, Inc.+........................... 4,300 113,412
US Filter Corp.+................................... 5,800 232,725
USA Waste Services, Inc.+.......................... 14,575 539,275
-----------
6,634,837
-----------
CHEMICALS--0.6%
Great Lakes Chemical Corp.......................... 4,800 225,600
Zoltek Cos., Inc.+................................. 2,900 136,300
-----------
361,900
-----------
COMMUNICATION EQUIPMENT--6.9%
3Com Corp.+........................................ 8,875 367,758
ADC Telecommunications, Inc.+...................... 10,600 351,125
Advanced Fibre Communications, Inc.+............... 10,400 301,600
America Online, Inc.+.............................. 3,700 284,900
Anixter International, Inc.+....................... 6,900 130,238
CIENA Corp.+....................................... 3,800 209,000
Computer Horizons Corp.+........................... 9,600 290,400
Cox Communications, Inc., Class A+................. 7,700 236,775
Digital Microwave Corp.+........................... 4,100 146,575
Loral Space & Communications Corp.+................ 14,900 312,900
Metromedia Fiber Network, Inc., Class A............ 4,000 95,000
Newbridge Networks Corp. ADR+...................... 3,900 206,700
P-COM, Inc.+....................................... 4,600 91,425
PanAmSat Corp.+.................................... 5,300 220,612
Qwest Communications International, Inc.+.......... 2,400 148,200
</TABLE>

<PAGE>

Mid-Cap Growth Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
COMMUNICATION EQUIPMENT (CONTINUED)
Tellabs, Inc.+..................................... 12,600 $ 679,612
-----------
4,072,820
-----------
COMPUTERS & BUSINESS EQUIPMENT--1.2%
BDM International, Inc.+........................... 10,600 233,200
Checkfree Corp.+................................... 5,700 153,900
Ikon Office Solutions, Inc......................... 3,700 104,756
Security Dynamics Technologies, Inc.+.............. 6,900 231,582
-----------
723,438
-----------
DRUGS--2.4%
BioChem Pharma, Inc.+.............................. 7,100 177,500
Biogen, Inc.+...................................... 10,600 352,450
Dura Pharmaceuticals, Inc.+........................ 7,600 367,650
Gilead Sciences, Inc.+............................. 6,400 216,800
Medicis Pharmaceutical Corp., Class A+............. 2,100 99,750
Omnicare, Inc...................................... 7,400 205,812
-----------
1,419,962
-----------
ELECTRICAL EQUIPMENT--1.0%
Creative Technology Ltd.+.......................... 10,900 277,269
Jabil Circuit, Inc.+............................... 3,400 153,000
Microchip Technology, Inc.+........................ 4,600 181,125
-----------
611,394
-----------
ELECTRONICS--4.0%
Analog Devices, Inc.+.............................. 5,800 177,262
Helix Technology Corp.............................. 3,000 135,000
Integrated Process Equipment Corp.................. 2,200 48,538
Lattice Semiconductor Corp.+....................... 4,000 199,000
Linear Technology Corp............................. 5,200 326,300
Maxim Integrated Products, Inc.+................... 3,000 198,562
Novellus Systems, Inc.+............................ 3,400 150,875

SpeedFam International, Inc.+...................... 1,300 48,100
Teleflex, Inc...................................... 7,700 286,825
Teradyne, Inc.+.................................... 4,200 157,238
Uniphase Corp.+.................................... 4,300 282,725
Vitesse Semiconductor Corp.+....................... 6,200 268,925
Xilinx, Inc.+...................................... 2,500 84,844
-----------
2,364,194
-----------
ENERGY SERVICES--6.1%
BJ Services Co.+................................... 3,300 279,675
Camco International, Inc........................... 7,200 520,200
Cliffs Drilling Co.+............................... 2,000 145,375
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------
<S> <C> <C>
ENERGY SERVICES (CONTINUED)
Cooper Cameron Corp.+.............................. 6,700 484,075
Diamond Offshore Drilling, Inc..................... 3,100 $ 192,975
ENSCO International, Inc........................... 6,200 260,788
Global Marine, Inc.+............................... 16,100 501,112
Santa Fe International Corp.+...................... 9,000 442,687
Tidewater, Inc..................................... 7,300 479,519
Weatherford Enterra, Inc.+......................... 5,300 270,631
-----------
3,577,037
-----------
ENERGY SOURCES--0.4%
United Meridian Corp.+............................. 6,300 213,806
-----------
FINANCIAL SERVICES--3.5%
AMRESCO, Inc.+..................................... 600 18,750
Edwards (A.G.), Inc................................ 6,400 210,000
FINOVA Group, Inc.................................. 5,700 250,444
Franklin Resources, Inc............................ 7,050 633,619
Money Store, Inc................................... 11,200 317,800
Ocwen Financial Corp............................... 2,100 115,369
Sirrom Capital Corp................................ 7,200 362,700
Tele-Communications TCI Ventures Group, Series
A+............................................... 6,538 150,782
-----------
2,059,464
-----------
FOOD, BEVERAGE & TOBACCO--1.7%
Beringer Wine Estates Holdings, Inc., Class B+..... 1,800 55,575
Fresh Del Monte Produce, Inc.+..................... 4,000 64,500
JP Foodservice, Inc.+.............................. 9,000 287,438
Robert Mondavi Corp., Class A+..................... 4,600 233,450
Suiza Foods Corp.+................................. 6,500 327,437
-----------
968,400

-----------
FOREST PRODUCTS--0.4%
Sealed Air Corp.+.................................. 4,100 211,406
-----------
HEALTH SERVICES--7.3%
AmeriPath, Inc..................................... 4,300 70,950
Covance, Inc.+..................................... 12,900 228,169
HBO & Co........................................... 19,200 832,800
Health Management Associates, Inc., Class A+....... 27,150 661,782
HEALTHSOUTH Corp.+................................. 12,500 319,531
Lincare Holdings, Inc.+............................ 11,600 622,050
Orthodontic Centers of America, Inc.+.............. 12,400 214,675
Pediatrix Medical Group, Inc.+..................... 5,100 215,475
Quintiles Transnational Corp.+..................... 4,400 319,000
Quorum Health Group, Inc.+......................... 10,950 264,853
Total Renal Care Holdings, Inc.+................... 13,300 409,806
</TABLE>

<PAGE>

Mid-Cap Growth Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
HEALTH SERVICES (CONTINUED)
Vencor, Inc.+...................................... 4,200 $ 113,400
-----------
4,272,491
-----------
HOUSEHOLD PRODUCTS--2.0%
Culligan Water Technologies, Inc.+................. 5,000 213,125
Estee Lauder Cos., Inc., Class A................... 5,400 239,963
Omnipoint Corp. +.................................. 5,600 129,500
Rexall Sundown, Inc.+.............................. 11,600 249,400
United States Office Products Co................... 4,500 139,500
Wesley Jessen Visioncare, Inc...................... 7,000 201,250
-----------
1,172,738
-----------
INSURANCE--1.8%
Ace Ltd............................................ 4,500 418,219
Fairfax Financial Holdings Ltd.+................... 800 196,970
Healthcare Recoveries, Inc.+....................... 7,800 141,375

PartnerRe Ltd...................................... 6,800 278,800
-----------
1,035,364
-----------
LEISURE & TOURISM--2.9%
Anchor Gaming+..................................... 1,100 85,800
Callaway Golf Co................................... 5,400 174,150
CapStar Hotel Co.+................................. 2,800 99,225
Galileo International, Inc......................... 10,000 251,250
HFS, Inc.+......................................... 2,300 162,150
La Quinta Inns, Inc................................ 10,300 184,112
Outback Steakhouse, Inc.+.......................... 6,800 184,025
Premier Parks, Inc.+............................... 5,500 217,250
Royal Caribbean Cruises Ltd........................ 6,500 301,844
Signature Resorts, Inc.+........................... 1,300 33,638
-----------
1,693,444
-----------
MACHINERY--1.3%
Flextronics International Ltd.+.................... 3,500 131,250
McDermott International, Inc....................... 3,100 112,569
MSC Industrial Direct Co., Inc., Class A+.......... 4,800 199,800
Smith International, Inc.+......................... 4,100 312,625
-----------
756,244
-----------
MEDICAL PRODUCTS--1.6%
Cardinal Health, Inc............................... 2,900 215,325
Cyberonics, Inc.+.................................. 7,800 104,325
St. Jude Medical, Inc.+............................ 6,100 184,906
Sybron International Corp.+........................ 5,200 208,650
US Surgical Corp................................... 8,400 226,275
-----------
939,481
-----------
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------
<S> <C> <C>
METALS & MINERALS--1.3%
Battle Mountain Gold Co............................ 29,800 $ 182,525
Cambior, Inc....................................... 13,300 104,738
TriMas Corp........................................ 12,100 353,925
TVX Gold, Inc.+.................................... 30,900 131,325
-----------
772,513
-----------
REAL ESTATE COMPANIES--0.7%
Security Capital Group, Inc., Class B+............. 9,000 288,000
Security Capital US Realty+ ....................... 2,000 28,200
Security Capital US Realty+ ....................... 5,500 77,550
-----------

393,750
-----------
REAL ESTATE INVESTMENT TRUSTS--0.7%
INMC Mortgage Holdings, Inc........................ 8,000 190,000
Security Capital Industrial Trust ................. 9,072 222,831
-----------
412,831
-----------
RETAIL--8.3%
Bed Bath & Beyond, Inc.+........................... 13,100 415,925
BJ's Wholesale Club, Inc.+......................... 7,200 207,900
Borders Group, Inc.+............................... 14,600 378,687
Brylane, Inc....................................... 2,600 112,938
CDW Computer Centers, Inc.+........................ 4,400 270,600
Circuit City Stores, Inc.+......................... 7,500 299,062
CompUSA, Inc.+..................................... 6,400 209,600
Costco Cos., Inc.+................................. 6,000 229,500
CVS Corp........................................... 5,500 337,219
Dollar Tree Stores, Inc.+.......................... 5,500 222,750
Fastenal Co........................................ 2,300 112,700
General Nutrition Cos., Inc.+...................... 14,900 465,625
Gymboree Corp.+.................................... 9,700 234,012
Hibbett Sporting Goods, Inc.+...................... 3,000 81,750
Kohl's Corp.+...................................... 3,600 241,650
Office Depot, Inc.+................................ 4,700 96,938
Richfood Holdings, Inc............................. 8,000 193,000
ShopKo Stores, Inc.+............................... 6,300 157,894
Stage Stores, Inc.................................. 4,100 147,600
Staples, Inc.+..................................... 12,400 323,950
Tiffany & Co....................................... 3,500 138,250
-----------
4,877,550
-----------
SOFTWARE--11.0%
Affiliated Computer Services Inc., Class A+........ 13,600 341,700
BMC Software, Inc.+................................ 12,600 757,575
DST Systems, Inc.+................................. 6,700 236,594
Electronics For Imaging, Inc.+..................... 11,300 526,862
Fiserv, Inc.+...................................... 6,300 279,562
HNC Software, Inc.+................................ 4,490 163,885
</TABLE>

<PAGE>

Mid-Cap Growth Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
SOFTWARE (CONTINUED)
Inter-Tel, Inc..................................... 8,600 $ 212,850
Intuit, Inc.+...................................... 2,800 90,650
J.D. Edwards & Co.+................................ 8,900 300,375
Keane, Inc.+....................................... 4,000 118,500
Mapics, Inc........................................ 16,900 188,012
McAfee Associates, Inc.+........................... 7,800 387,075
Micro Focus Group PLC ADR+......................... 6,000 201,000
Network General Corp.+............................. 9,300 187,163
PeopleSoft, Inc.+.................................. 12,200 765,550
Platinum Technology, Inc.+ ........................ 5,400 129,938
Sapient Corp.+..................................... 3,000 156,000
Sterling Commerce, Inc.+........................... 6,100 202,444
SunGard Data Systems, Inc.+........................ 10,100 238,612
Synopsys, Inc.+.................................... 4,700 182,125
Viasoft, Inc.+..................................... 4,500 182,813
Visio Corp.+....................................... 4,000 147,000
VocalTec Communications Ltd.+...................... 4,400 114,400
Wind River Systems+................................ 10,150 386,969
-----------
6,497,654
-----------

TELECOMMUNICATIONS--2.2%
DSC Communications Corp.+.......................... 7,300 177,937
Globalstar Telecommunications Ltd.+................ 13,108 606,245
Intermedia Communications, Inc.+................... 3,100 139,500
MRV Communications, Inc.+.......................... 2,500 72,500
Positron Fiber Systems Corp., Class A.............. 7,000 54,906
Tel-Save Holdings, Inc.+........................... 6,300 134,663
World Access, Inc.+................................ 3,900 101,888
-----------
1,287,639
-----------

TELEPHONE--2.0%
Cellular Communications International, Inc.+....... 3,800 150,575
Cincinnati Bell, Inc............................... 9,800 264,600
Ionica Group PLC ADR............................... 5,700 88,350
MCI Communications Corp............................ 5,900 209,081
NEXTLINK Communications, Inc., Class A+............ 6,400 144,000
WorldCom, Inc.+.................................... 10,180 341,666
-----------
1,198,272
-----------
TOTAL COMMON STOCK
(cost $49,352,989)................................. 56,150,997
-----------
</TABLE>

<TABLE>
<CAPTION>
WARRANTS/
PRINCIPAL
AMOUNT
(IN VALUE
SECURITY DESCRIPTION THOUSANDS) (NOTE 3)
- -----------------------------------------------------------------------------
<S> <C> <C>
WARRANTS--0.0%+
REAL ESTATE COMPANIES--0.0%
Security Capital Group, Inc., Class B 9/18/98
(cost $3,748).................................... 422 $ 2,032
-----------
TOTAL INVESTMENT SECURITIES--95.5%
(cost $49,356,737)................................. 56,153,029
-----------

SHORT-TERM SECURITIES--3.8%
Cayman Island Time Deposit with State Street Bank
and Trust Co. 3.00% due 11/03/97................. $ 373 373,000
Cayman Island Time Deposit with State Street Bank
and Trust Co. 4.50% due 11/03/97................. 1,258 1,258,000
Federal Home Loan Mortgage Discount Notes 5.415%
due 11/28/97..................................... 115 114,533
Federal Home Loan Mortgage Discount Notes 5.49% due
11/24/97......................................... 135 134,526
Federal Home Loan Mortgage Discount Notes 5.50% due
11/13/97......................................... 270 269,505
Federal National Mortgage Association Discount
Notes 5.47% due 11/06/97......................... 108 107,918
-----------
TOTAL SHORT-TERM SECURITIES
(cost $2,257,482).................................. 2,257,482
-----------
TOTAL INVESTMENTS--
(cost $51,614,219)................................. 99.3% 58,410,511
Other assets less liabilities........................ 0.7 417,687
------ -----------
NET ASSETS-- 100.0% $58,828,198
------ -----------
------ -----------
</TABLE>

- ------------------
+ Non-income producing security
ADR ('American Depositary Receipt')

See Notes to Financial Statements

<PAGE>

Aggressive Growth Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--90.2%
AEROSPACE & MILITARY TECHNOLOGY--1.6%
DONCASTERS PLC ADR+.................................. 10,100 $ 272,069
Gulfstream Aerospace Corp.+.......................... 10,400 301,600
REMEC, Inc.+......................................... 29,450 728,887
Tracor, Inc.+........................................ 8,400 221,550
-----------
1,524,106
-----------
APPAREL & TEXTILES--0.2%
Track 'n Trail, Inc.+................................ 24,000 234,000
-----------
AUTOMOTIVE--0.2%
Budget Group, Inc., Class A+......................... 5,300 185,500
-----------
BANKS--6.1%
Bank United Corp., Class A........................... 6,000 252,000
BankAmerica Corp..................................... 20,950 1,497,925
Citicorp............................................. 4,075 509,630
City National Corp................................... 9,300 279,581
Cullen/Frost Bankers, Inc.(1)........................ 5,500 277,750
First American Corp.................................. 11,200 530,600
Hamilton Bancorp, Inc.+.............................. 20,000 560,000
Hibernia Corp., Class A.............................. 10,000 178,125
PNC Bank Corp........................................ 5,000 237,500
Summit Bancorp....................................... 15,000 640,313
U.S. Bancorp......................................... 7,000 711,812
-----------
5,675,236
-----------
BROADCASTING & MEDIA--5.7%
At Home Corp., Series A+............................. 28,875 696,609
Central European Media Enterprises Ltd., Class A+.... 10,600 306,075
Central Newspapers, Inc., Class A.................... 4,900 321,869
Cinar Films, Inc., Class B+.......................... 13,000 505,375
DeVry, Inc.+......................................... 8,100 213,637
Heftel Broadcasting Corp., Class A+.................. 3,100 202,275
Houghton Mifflin Co.................................. 7,300 259,150
ITT Educational Services, Inc.+...................... 8,300 200,238
Outdoor Systems, Inc.+............................... 11,725 360,544
Paging Network, Inc.+................................ 23,800 291,550
Universal Outdoor Holdings, Inc.+ ................... 7,500 315,000

Univision Communications, Inc., Class A+............. 17,400 1,078,800
Valassis Communications, Inc. ....................... 9,000 265,500
Wiley (John) & Sons, Inc., Class A................... 6,000 263,250
-----------
5,279,872
-----------

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES--6.9%
Allied Waste Industries, Inc.+....................... 13,400 $ 271,350
America Online, Inc.+................................ 17,550 1,351,350
American Disposal Services, Inc.+ 20,000 695,000
Apollo Group, Inc., Class A+......................... 13,125 544,687
CHS Electronics, Inc.+............................... 12,150 294,638
Corporate Express, Inc.+............................. 13,800 201,825
Lason Holdings, Inc.................................. 10,000 253,750
Nabors Industries, Inc.+............................. 10,900 448,262
Norrell Corp......................................... 5,900 171,838
Pre-Paid Legal Services, Inc.+....................... 5,000 151,250
QuickResponse Services, Inc.+........................ 6,900 222,525
Robert Half International, Inc.+..................... 10,200 417,562
ScanSource, Inc.+.................................... 10,000 198,750
SITEL Corp.+......................................... 24,700 219,213
TransCoastal Marine Services, Inc.+ ................. 11,000 266,750
Transcrypt Internaional, Inc.+....................... 5,200 111,150
USA Waste Services, Inc.+............................ 9,700 358,900
Vestcom International, Inc.+......................... 15,000 268,125
-----------
6,446,925
-----------
COMMUNICATION EQUIPMENT--4.9%
Advanced Fibre Communications, Inc.+................. 30,000 870,000
CIENA Corp.+......................................... 5,000 275,000
Concord Communications, Inc.+ 1,500 27,000
Digital Microwave Corp.+............................. 10,000 357,500
EchoStar Communications Corp., Class A+.............. 20,000 380,000
Newbridge Networks Corp.+............................ 10,000 530,000
Qwest Communications International, Inc.+............ 15,850 978,737
Tekelec, Inc.+....................................... 10,000 417,500
Tellabs, Inc.+....................................... 8,000 431,500
Yurie System, Inc.+.................................. 10,000 302,500
-----------
4,569,737
-----------
COMPUTERS & BUSINESS EQUIPMENT--2.0%
Dell Computer Corp.+................................. 18,450 1,478,306
Miller (Herman), Inc................................. 7,900 386,113
-----------
1,864,419

-----------
</TABLE>

<PAGE>

Aggressive Growth Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
DRUGS--3.8%
Gilead Sciences, Inc.+............................... 5,900 $ 199,863
IDEC Pharmaceuticals Corp.+.......................... 15,000 571,875
Lilly (Eli) & Co..................................... 7,950 531,656
Mylan Laboratories, Inc.............................. 5,000 109,688
Omnicare, Inc........................................ 18,875 524,961
Pfizer, Inc.......................................... 11,650 824,237
Sepracor, Inc.+...................................... 7,400 263,625
Teva Pharmaceutical Industries Ltd. ADR.............. 4,000 186,750
Watson Pharmaceuticals, Inc.+........................ 9,000 285,750
-----------
3,498,405
-----------
ELECTRIC UTILITIES--1.0%
AES Corp.+........................................... 23,525 932,178
-----------

ELECTRICAL EQUIPMENT--0.3%
Etec Systems, Inc.+.................................. 5,400 240,975
-----------

ELECTRONICS--7.9%
Aehr Test Systems+................................... 14,700 194,775
Alpha Industries, Inc.+(1)........................... 10,000 158,750
Altera Corp.+........................................ 5,100 225,994
ATMI, Inc.+.......................................... 17,100 453,150
Burr-Brown Corp.+.................................... 8,600 256,925
DII Group, Inc.+..................................... 20,000 487,500
GaSonics International Corp.+........................ 6,200 96,100
Intel Corp........................................... 5,900 454,300
KLA-Tencor Corp.+.................................... 7,600 332,500
Lam Research Corp.+.................................. 17,725 638,100
Maxim Integrated Products, Inc.+..................... 14,900 986,194
Microchip Technology, Inc.+.......................... 9,250 364,219

SIPEX Corp.+......................................... 24,500 805,437
SpeedFam International, Inc.+........................ 5,800 214,600
Teradyne, Inc.+(1)................................... 8,650 323,834
Uniphase Corp.+...................................... 2,500 164,375
Veeco Instruments, Inc.+............................. 8,700 343,650
Vitesse Semiconductor Corp.+......................... 14,600 633,275
Xilinx, Inc.+........................................ 7,800 264,713
-----------
7,398,391
-----------
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
ENERGY SERVICES--6.6%
Diamond Offshore Drilling, Inc....................... 14,750 $ 918,187
EVI, Inc.+........................................... 5,425 348,217
Falcon Drilling Co., Inc.+........................... 9,050 329,194
Friede Goldman International, Inc.+.................. 20,000 792,500
Global Industries Ltd.+.............................. 13,600 272,000
Halliburton Co....................................... 15,100 900,338
National-Oilwell, Inc.+.............................. 4,150 317,734
Noble Drilling Corp.+................................ 10,225 363,627
Petroleum Geo-Services ADR+.......................... 7,100 491,675
Pride International, Inc.+........................... 15,400 508,200
Schlumberger Ltd..................................... 6,500 568,750
Transocean Offshore, Inc............................. 900 48,600
Trico Marine Services, Inc.+......................... 7,200 264,600
-----------
6,123,622
-----------
ENERGY SOURCES--0.9%
Brown (Tom), Inc.+................................... 9,200 225,400
Chieftain International, Inc.+....................... 11,300 276,850
KCS Energy, Inc...................................... 12,100 318,381
-----------
820,631
-----------
ENTERTAINMENT PRODUCTS--0.4%
Mattel, Inc.......................................... 10,000 388,750
-----------
FINANCIAL SERVICES--3.2%
American Express Co.................................. 6,450 503,100
Healthcare Financial Partners, Inc.+................. 13,600 459,000
Jackson Hewitt, Inc.+................................ 4,500 201,375
Legg Mason, Inc...................................... 4,667 228,958
Merrill Lynch & Co., Inc............................. 4,925 333,053
Morgan Stanley, Dean Witter, Discover & Co........... 11,750 575,750
Nationwide Financial Services, Inc., Class A......... 13,700 416,994
Price (T. Rowe) Associates, Inc...................... 4,100 271,625
-----------
2,989,855

-----------
FOOD, BEVERAGE & TOBACCO--1.7%
Coca-Cola Co......................................... 4,300 242,950
Consolidated Cigar Holdings, Inc., Class A+.......... 10,400 408,200
Fresh Del Monte Produce, Inc.+....................... 15,000 241,875
Sara Lee Corp........................................ 13,050 667,181
-----------
1,560,206
-----------
</TABLE>

<PAGE>

Aggressive Growth Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
HEALTH SERVICES--1.1%
HBO & Co............................................. 10,000 $ 433,750
HEALTHSOUTH Corp.+................................... 5,000 127,812
Mid Atlantic Medical Services, Inc.+ ................ 18,400 267,950
PhyCor, Inc.+........................................ 10,000 229,375
-----------
1,058,887
-----------

HOUSEHOLD PRODUCTS--3.0%
Alberto-Culver Co., Class A.......................... 9,200 238,625
Central Garden & Pet Co.+............................ 12,500 321,875
Gillette Co.......................................... 4,225 376,289
Sunbeam Corp......................................... 10,000 453,125
Warner-Lambert Co.................................... 9,675 1,385,339
-----------
2,775,253
-----------

HOUSING--0.3%
Furniture Brands International, Inc.+ ............... 10,000 167,500
Toll Brothers, Inc.+................................. 5,000 110,625
-----------
278,125
-----------
INSURANCE--1.8%

Allmerica Financial Corp............................. 7,251 339,890
American International Group, Inc.................... 2,862 292,103
Frontier Insurance Group, Inc........................ 8,100 272,869
Penncorp Financial Group, Inc........................ 5,100 166,069
Protective Life Corp................................. 5,000 264,375
Provident Cos., Inc.................................. 10,000 333,750
-----------
1,669,056
-----------

LEISURE & TOURISM--1.1%
Doubletree Corp.+.................................... 5,100 211,012
Premier Parks, Inc.+................................. 7,200 284,400
Ryan's Family Steak Houses, Inc.+ 19,000 161,500
Vistana, Inc.+....................................... 16,100 362,250
-----------
1,019,162
-----------
MACHINERY--0.8%
Kennametal, Inc...................................... 10,000 485,000
Smith International, Inc.+........................... 3,950 301,188
-----------
786,188
-----------
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
MEDICAL PRODUCTS--2.9%
Andrx Corp.+......................................... 5,000 $ 186,875
Arterial Vascular Engineering, Inc.+ ................ 15,000 795,000
Bergen Brunswig Corp., Class A....................... 5,175 207,323
Cardinal Health, Inc................................. 3,275 243,169
Conceptus, Inc.+..................................... 11,200 78,400
ESC Medical Systems Ltd.+............................ 7,900 306,125
Guidant Corp......................................... 2,500 143,750
Henry Schein, Inc.+.................................. 6,400 207,200
Nitinol Medical Technologies, Inc.+ ................. 13,500 187,313
SangStat Medical Corp.+.............................. 10,400 317,200
-----------
2,672,355
-----------
METALS & MINERALS--0.5%
NS Group, Inc.+...................................... 15,800 422,650
-----------
MULTI-INDUSTRY--0.4%
Corning, Inc......................................... 5,000 225,625
General Electric Co.................................. 2,850 184,003
-----------
409,628
-----------
REAL ESTATE COMPANIES--1.2%

LaSalle Partners, Inc.+.............................. 31,375 1,147,148
-----------
REAL ESTATE INVESTMENT TRUSTS--0.5%
CarrAmerica Realty Corp.............................. 7,400 220,613
Security Capital Pacific Trust....................... 9,600 214,800
-----------
435,413
-----------
RETAIL--4.5%
Borders Group, Inc.+................................. 18,800 487,625
Gap, Inc............................................. 5,000 265,938
Guitar Center, Inc.+................................. 5,000 107,500
Home Depot, Inc...................................... 30,625 1,703,516
Kohl's Corp.+........................................ 5,000 335,625
Payless ShoeSource, Inc.+............................ 4,700 262,025
Proffitt's, Inc.+.................................... 20,000 573,750
Staples, Inc.+....................................... 12,100 316,112
Sunglass Hut International, Inc.+ 20,000 157,500
-----------
4,209,591
-----------
SOFTWARE--12.5%
Acceler8 Technology Corp.+........................... 4,925 97,884
Adobe Systems, Inc................................... 5,500 261,938
Aspect Development, Inc.+............................ 10,000 462,500
</TABLE>

<PAGE>

Aggressive Growth Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
SOFTWARE (CONTINUED)
Avant Corp.+......................................... 11,700 $ 304,200
BMC Software, Inc.+.................................. 9,400 565,175
Cambridge Technology Partners, Inc.+................. 6,900 251,850
CBT Group PLC ADR+................................... 14,150 1,086,012
Check Point Software Technologies, Ltd.+............. 10,000 425,000
Cisco Systems, Inc.+................................. 11,700 959,400
Compuware Corp.+..................................... 5,000 329,375
Dataworks Corp.+..................................... 8,100 160,481
Electronics For Imaging, Inc.+....................... 2,450 114,231

Harbinger Corp.+..................................... 6,050 176,206
Industri-Matematik International Corp.+.............. 10,000 212,500
JDA Software Group, Inc.............................. 5,000 155,625
Keane, Inc.+......................................... 6,000 177,750
Microsoft Corp.+..................................... 9,950 1,292,256
National Instruments Corp.+.......................... 7,100 315,950
Novell, Inc.+........................................ 7,000 58,625
PeopleSoft, Inc.+.................................... 8,000 502,000
PLATINUM Technology, Inc.+........................... 13,600 327,250
QuadraMed Corp.+..................................... 4,000 93,500
Sterling Commerce, Inc.+............................. 8,000 265,500
Structural Dynamics Research Corp.+(1) .............. 10,200 193,800
SunGard Data Systems, Inc.+.......................... 13,000 307,125
Technology Solutions Co.+............................ 9,350 292,188
Transaction Systems Architects, Inc., Class A+....... 10,500 406,875
VERITAS Software Corp.+.............................. 30,950 1,284,425
Visio Corp.+......................................... 8,000 294,000
Yahoo!, Inc.+........................................ 5,000 219,063
-----------
11,592,684
-----------
TELECOMMUNICATIONS--3.8%
Comdial Corp.+....................................... 10,000 113,750
ITC DeltaCom, Inc.+.................................. 5,000 96,250
Lucent Technologies, Inc............................. 22,750 1,875,453
MasTec, Inc.+........................................ 10,000 324,375
McLeodUSA, Inc., Class A+............................ 10,700 395,900
Teleport Communications Group Inc., Class A+......... 10,000 482,500
TTI Team Telecom International, Ltd.+................ 39,700 223,313
-----------
3,511,541
-----------
TRANSPORTATION--2.4%
Caliber System, Inc.................................. 15,000 781,875
CNF Transportation, Inc.............................. 5,000 223,125
<CAPTION>
SHARES/WARRANTS/
PRINCIPAL
AMOUNT
(IN VALUE
SECURITY DESCRIPTION THOUSANDS) (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION (CONTINUED)
Coach USA, Inc.+..................................... 9,900 $ 294,525
Consolidated Freightways Corp.+...................... 4,000 56,500
Federal Express Corp.+............................... 325 21,694
Heartland Express, Inc.+............................. 9,200 243,800
M.S. Carriers, Inc.+................................. 11,200 280,000
Swift Transportation Co., Inc.+...................... 9,600 304,800
-----------
2,206,319
-----------
TOTAL COMMON STOCK

(cost $70,319,416)................................... 83,926,808
-----------
WARRANTS--0.0%+
REAL ESTATE COMPANIES--0.0%
Security Capital Group, Inc., Class B 9/18/98
(cost $4,486)...................................... 505 2,432
-----------
TOTAL INVESTMENT SECURITIES--90.2%
(cost $70,323,902)............................................. 83,929,240
-----------
SHORT-TERM SECURITIES--2.1%
Federal Home Loan Mortgage Discount Notes
5.65% due 11/03/97
(cost $1,999,372).................................. $ 2,000 1,999,372
-----------
REPURCHASE AGREEMENTS--8.9%
Agreement with State Street Bank and Trust Co.,
bearing 5.55% dated 10/31/97 to be repurchased
11/03/97 in the amount of $5,610,594,
collateralized by $5,670,000 U.S. Treasury Note
6.375%, due 4/30/99 approximate aggregate value
$5,731,234.
(cost $5,608,000) ................................. 5,608 5,608,000
Joint Repurchase Agreement Account (Note 3)
(cost $2,661,000).................................. 2,661 2,661,000
-----------
TOTAL REPURCHASE AGREEMENTS
(cost $8,269,000).................................... 8,269,000
-----------
TOTAL INVESTMENTS--
(cost $80,592,274) .................................. 101.2% 94,197,612
Liabilities in excess of other assets.................. (1.2) (1,127,251)
------- -----------
NET ASSETS-- 100.0% $93,070,361
------- -----------
------- -----------
</TABLE>

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

+ Non-income producing security
ADR ('American Depositary Receipt')
(1) Security is traded with rights attached
See Notes to Financial Statements

<PAGE>

Large-Cap Blend Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997
<TABLE>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--94.2%
AEROSPACE & MILITARY TECHNOLOGY--1.7%
AlliedSignal, Inc.................................... 6,600 $ 237,600
Boeing Co............................................ 2,000 95,750
Lockheed Martin Corp................................. 800 76,050
-----------
409,400
-----------
AUTOMOTIVE--0.7%
Chrysler Corp........................................ 2,400 84,600
General Motors Corp.................................. 1,500 96,281
-----------
180,881
-----------
BANKS--9.2%
Banc One Corp........................................ 1,300 67,763
Bank of New York Cos., Inc........................... 1,700 80,006
BankAmerica Corp..................................... 2,500 178,750
Bankers Trust New York Corp.......................... 800 94,400
Chase Manhattan Corp................................. 3,500 403,812
Citicorp............................................. 1,700 212,606
First Union Corp..................................... 3,000 147,188
Firstar Corp.(1)..................................... 1,000 36,125
Fleet Financial Group, Inc........................... 1,600 102,900
KeyCorp.............................................. 3,300 201,919
Mellon Bank Corp..................................... 4,900 252,656
National City Corp................................... 700 41,825
Summit Bancorp....................................... 3,000 128,063
Wells Fargo & Co..................................... 1,100 320,512
-----------
2,268,525
-----------
BROADCASTING & MEDIA--3.7%
Eastman Kodak Co..................................... 900 53,888
Gannett Co., Inc..................................... 2,600 136,662
Knight-Ridder, Inc................................... 2,200 114,950
New York Times Co.,
Class A............................................ 5,400 295,650
Readers Digest Association, Inc., Class A............ 2,500 56,875
Readers Digest Association, Inc., Class B............ 2,100 48,825
Reuters Holdings PLC, Class B ADR.................... 2,000 131,000
Vodafone Group PLC ADR............................... 1,400 76,825
-----------
914,675
-----------
BUSINESS SERVICES--1.9%
Cognizant Corp....................................... 2,500 97,969
Gartner Group, Inc., Class A+........................ 4,000 112,500

Newell Co............................................ 1,600 61,400
Service Corp. International.......................... 4,000 121,750
Waste Management, Inc................................ 3,500 81,812
-----------
475,431
-----------

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
CHEMICALS--2.5%
Dow Chemical Co...................................... 1,100 $ 99,825
du Pont (E.I.) de Nemours & Co....................... 6,500 369,687
IMC Global, Inc...................................... 3,000 101,063
Schulman (A), Inc.................................... 1,900 42,750
-----------
613,325
-----------
COMMUNICATION EQUIPMENT--0.6%
MMC Networks, Inc.+.................................. 3,500 76,562
SBC Communications, Inc.............................. 1,100 69,988
-----------
146,550
-----------
COMPUTERS & BUSINESS EQUIPMENT--3.4%
Compaq Computer Corp................................. 1,500 95,625
Computer Sciences Corp.+............................. 1,500 106,406
Hewlett-Packard Co................................... 2,900 178,894
International Business Machines Corp................. 3,700 362,831
NCR Corp.+........................................... 3,100 93,969
-----------
837,725
-----------
DRUGS--6.2%
Abbott Laboratories, Inc............................. 2,500 153,281
American Home Products
Corp............................................... 3,900 289,087
Amgen, Inc.+......................................... 1,200 59,025
Astra AB ADR......................................... 5,300 84,469
Bristol-Myers Squibb Co.............................. 3,100 272,025
IDEC Pharmaceuticals Corp.+.......................... 2,000 76,250
Merck & Co., Inc..................................... 1,500 133,875
Pfizer, Inc.......................................... 4,500 318,375
Pharmacia & Upjohn, Inc.............................. 2,000 63,500
SmithKline Beecham PLC ADR........................... 1,700 80,963
-----------
1,530,850
-----------
ELECTRIC UTILITIES--3.8%
Dominion Resources, Inc.............................. 800 29,750
DQE, Inc............................................. 1,600 49,500

Duke Energy Corp..................................... 4,200 202,650
Edison International................................. 9,000 230,625
Entergy Corp......................................... 2,200 53,763
GPU, Inc............................................. 3,000 108,562
National Power PLC ADR............................... 3,600 119,700
Niagara Mohawk Power Corp............................ 2,800 27,125
Unicom Corp.......................................... 3,900 109,200
-----------
930,875
-----------
ELECTRICAL EQUIPMENT--2.0%
Honeywell, Inc....................................... 4,500 306,281
</TABLE>

<PAGE>

Large-Cap Blend Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
Hubbell, Inc., Class B............................... 4,400 $ 193,875
-----------
500,156
-----------
ELECTRONICS--2.0%
Advanced Micro Devices, Inc.+........................ 3,800 87,400
Emerson Electric Co.................................. 2,000 104,875
LSI Logic Corp.+..................................... 3,700 80,706
Micron Technology, Inc.+............................. 1,800 48,263
Millipore Corp....................................... 1,500 58,687
Motorola, Inc........................................ 2,000 123,500
-----------
503,431
-----------
ENERGY SERVICES--1.1%
ENSCO International, Inc............................. 3,000 126,188
Schlumberger Ltd..................................... 1,600 140,000
-----------
266,188
-----------
ENERGY SOURCES--7.3%
Atlantic Richfield Co................................ 2,700 222,244
British Petroleum Co.

PLC ADS............................................ 2,300 201,825
Burlington Resources, Inc............................ 2,400 117,450
Elf Aquitaine SA ADR................................. 2,000 123,500
Exxon Corp........................................... 2,000 122,875
Halliburton Co....................................... 3,800 226,575
Mobil Corp........................................... 2,600 189,312
Noble Affiliates, Inc................................ 2,200 90,337
Royal Dutch Petroleum Co.--
NY Registry Shares GDR............................. 2,000 105,250
Texaco, Inc.......................................... 4,100 233,444
Unocal Corp.......................................... 1,400 57,750
USX-Marathon Group, Inc.............................. 2,900 103,675
-----------
1,794,237
-----------
ENTERTAINMENT PRODUCTS--1.1%
EMI Group PLC ADR.................................... 6,500 106,438
Mattel, Inc.......................................... 4,000 155,500
-----------
261,938
-----------
FINANCIAL SERVICES--4.7%
American Express Co.................................. 3,100 241,800
Bear Stearns Cos., Inc............................... 1,700 67,469
Beneficial Corp.(1).................................. 700 53,681
ContiFinancial Corp.+................................ 2,000 56,875
Federal National Mortgage Association................ 5,100 247,031
First Data Corp...................................... 1,500 43,594
H&R Block, Inc....................................... 3,200 118,400
Household International, Inc......................... 2,000 226,500
Salomon, Inc......................................... 1,500 116,531
-----------
1,171,881
-----------
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
FOOD, BEVERAGE & TOBACCO--6.6%
Anheuser-Busch Cos., Inc............................. 1,000 $ 39,938
Brown-Forman Corp., Class B.......................... 700 34,431
Cadbury Schweppes PLC ADR............................ 3,200 130,000
General Mills, Inc................................... 900 59,400
Heineken NV ADR...................................... 600 96,450
Heinz (H.J.) Co...................................... 2,900 134,669
McCormick & Co., Inc................................. 1,300 32,500
Nabisco Holdings Corp.,
Class A............................................ 1,100 45,238
PepsiCo, Inc......................................... 5,500 202,469
Philip Morris Cos., Inc.............................. 10,900 431,912
Ralston-Purina Group................................. 1,000 89,750
RJR Nabisco Holdings Corp............................ 1,800 57,037

Sara Lee Corp........................................ 2,200 112,475
Sysco Corp........................................... 2,000 80,000
UST, Inc............................................. 3,000 89,812
-----------
1,636,081
-----------
FOREST PRODUCTS--2.0%
Bowater, Inc......................................... 2,500 104,531
Champion International Corp.......................... 1,500 82,781
Fort James Corp...................................... 2,900 115,094
Georgia-Pacific Corp................................. 1,200 101,775
Owens-Illinois, Inc.+................................ 3,000 103,500
-----------
507,681
-----------
GAS & PIPELINE UTILITIES--0.5%
Enron Corp........................................... 3,000 114,000
-----------
HOUSEHOLD PRODUCTS--3.3%
Gillette Co.......................................... 1,500 133,594
International Flavors & Fragrances, Inc.............. 500 24,187
Kimberly-Clark Corp.................................. 3,300 171,394
Procter & Gamble Co.................................. 3,200 217,600
Sola International, Inc.+............................ 3,000 102,375
Tupperware Corp...................................... 1,100 27,569
Warner-Lambert Co.................................... 900 128,869
-----------
805,588
-----------
HOUSING--0.7%
American Standard Cos., Inc.+........................ 1,700 60,775
Home Depot, Inc...................................... 2,000 111,250
-----------
172,025
-----------
INSURANCE--5.4%
Aetna, Inc........................................... 1,500 106,594
Allstate Corp........................................ 2,800 232,225
American General Corp................................ 1,700 86,700
Chubb Corp........................................... 2,000 132,500
EXEL Ltd............................................. 900 54,394
Hartford Financial Services, Inc..................... 1,800 145,800
</TABLE>

<PAGE>

Large-Cap Blend Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
INSURANCE (CONTINUED)
<S> <C> <C>
St. Paul Co., Inc.................................... 1,700 $ 135,894
Travelers Group, Inc................................. 3,100 217,000
Travelers Property Casualty Corp., Class A........... 2,100 75,862
UNUM Corp............................................ 1,300 63,375
Willis Corroon Group
PLC ADR............................................ 7,100 76,769
-----------
1,327,113
-----------
LEISURE & TOURISM--2.0%
Brunswick Corp....................................... 3,500 118,125
Host Marriott Corp.+................................. 2,300 48,013
McDonald's Corp...................................... 5,300 237,506
UAL Corp.+........................................... 1,100 96,387
-----------
500,031
-----------
MACHINERY--0.6%
Deere & Co........................................... 2,700 142,088
-----------
MEDICAL PRODUCTS--2.0%
Baxter International, Inc............................ 2,000 92,500
Johnson & Johnson Co................................. 3,700 212,288
Pall Corp............................................ 4,100 84,819
Smith & Nephew PLC................................... 17,000 49,485
St. Jude Medical, Inc.+.............................. 1,900 57,594
-----------
496,686
-----------
METALS & MINERALS--1.6%
Aluminum Co. of America.............................. 1,000 73,000
Great Lakes Chemical Corp............................ 2,800 131,600
Newmont Mining Corp.................................. 2,400 84,000
Nucor Corp........................................... 600 31,350
Reynolds Metals Co................................... 1,100 67,031
-----------
386,981
-----------
MULTI-INDUSTRY--2.7%
Cooper Industries, Inc............................... 1,400 72,975
Corning, Inc......................................... 5,100 230,137
FMC Corp............................................. 600 48,488
General Electric Co.................................. 4,600 296,987
Tomkins PLC.......................................... 5,000 25,670
-----------
674,257
-----------

REAL ESTATE COMPANIES--0.2%
Rouse Co............................................. 1,600 44,400
-----------
REAL ESTATE INVESTMENT TRUSTS--1.6%
Federal Realty Investment Trust...................... 1,600 40,500
Imperial Credit Commercial Mortgage Investment
Corp............................................... 5,500 90,062
Patriot American Hospitality, Inc.................... 2,300 75,900
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Reckson Associates Realty Corp....................... 1,400 $ 36,663
Security Capital Industrial Trust.................... 900 22,106
Simon De Bartolo Group, Inc.......................... 2,400 74,250
Spieker Properties, Inc.............................. 200 7,825
United Dominion Realty Trust, Inc.................... 2,800 38,850
-----------
386,156
-----------
RETAIL--5.8%
American Stores Co................................... 7,000 179,813
CVS Corp............................................. 2,000 122,625
Dayton Hudson Corp................................... 1,900 119,344
Federated Department Stores, Inc.+................... 3,200 140,800
Limited, Inc......................................... 1,500 35,344
Lowe's Co., Inc...................................... 2,200 91,575
Office Depot, Inc.+.................................. 2,000 41,250
Penney (J.C.), Inc................................... 3,800 223,012
Safeway, Inc.+....................................... 1,800 104,625
Sears, Roebuck & Co.................................. 2,700 113,063
Wal-Mart Stores, Inc................................. 7,500 263,437
-----------
1,434,888
-----------
SOFTWARE--1.8%
Cisco Systems, Inc.+................................. 1,500 123,000
Electronic Data Systems Corp.+....................... 2,900 112,194
Microsoft Corp.+..................................... 1,000 129,875
Novell, Inc.+........................................ 8,000 67,000
TJX Cos., Inc........................................ 200 5,925
-----------
437,994
-----------
TELECOMMUNICATIONS--0.5%
Lucent Technologies, Inc............................. 1,500 123,656
-----------
TELEPHONE--3.9%
Ameritech Corp....................................... 2,400 156,000
AT&T Corp............................................ 5,100 249,581
Bell Atlantic Corp................................... 3,800 303,525

BellSouth Corp....................................... 400 18,925
Frontier Corp........................................ 4,600 99,475
GTE Corp............................................. 3,200 135,800
-----------
963,306
-----------
TRANSPORTATION--1.1%
Burlington Northern Santa Fe......................... 2,900 275,500
-----------
TOTAL INVESTMENT SECURITIES (cost $24,276,499)......... 23,234,499
-----------
</TABLE>

<PAGE>

Large-Cap Blend Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

PRINCIPAL
AMOUNT
(IN VALUE
SECURITY DESCRIPTION THOUSANDS) (NOTE 3)
- --------------------------------------------------------------------------------
SHORT-TERM SECURITIES--3.3%
<S> <C> <C>
Schering Corp. 5.52% due 11/4/97..................... $ 255 $ 254,883
Student Loan Marketing Association Discount Note
5.48% due 11/12/97................................. 558 557,065
-----------
TOTAL SHORT-TERM SECURITIES (cost $811,948)............ 811,948
-----------
<CAPTION>

PRINCIPAL
AMOUNT
(IN VALUE
SECURITY DESCRIPTION THOUSANDS) (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>

REPURCHASE AGREEMENTS--2.3%
Agreement with State Street Bank and Trust Co.,
bearing 5.55%, dated 10/31/97 to be repurchased
11/03/97 in the amount of $307,142, collateralized
by $290,000 U.S. Treasury Note 7.50%, due 11/15/01
approximate aggregate value $318,105 (cost
$307,000).......................................... $ 307 $ 307,000

Joint Repurchase Agreement Account (Note 3) (cost
$273,000).......................................... 273 273,000
-----------
TOTAL REPURCHASE AGREEMENTS (cost $580,000)............ 580,000
-----------
TOTAL INVESTMENTS-- (cost $25,668,447)................. 99.8% 24,626,447
Other assets less liabilities.......................... 0.2 50,533
------- -----------
NET ASSETS-- 100.0% $24,676,980
------- -----------
------- -----------
</TABLE>

- ------------------
+ Non-income producing security
ADR ('American Depositary Receipt')
ADS ('American Depositary Shares')
GDR ('Global Depositary Receipt')
(1) Security is traded with rights attached

See Notes to Financial Statements

<PAGE>

Large-Cap Value Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--91.7%
AEROSPACE & MILITARY TECHNOLOGY--3.7%
Boeing Co.......................................... 7,500 $ 359,062
Goodrich (B.F.) Co................................. 1,800 80,212
Gulfstream Aerospace Corp.+........................ 1,500 43,500
Lockheed Martin Corp............................... 1,500 142,594
Northrop Grumman Corp.............................. 1,500 163,875
Precision Castparts Corp.(1)....................... 2,000 117,625
-----------
906,868
-----------
APPAREL & TEXTILES--1.4%
Nike, Inc., Class B................................ 2,200 103,400
Reebok International Ltd.+......................... 4,400 162,250
Tommy Hilfiger Corp.+.............................. 1,900 75,169
-----------
340,819

-----------
AUTOMOTIVE--1.7%
Dana Corp.......................................... 3,800 177,888
Goodyear Tire & Rubber Co.......................... 3,800 237,975
-----------
415,863
-----------
BANKS--9.5%
Banc One Corp...................................... 2,000 104,250
BankAmerica Corp................................... 4,300 307,450
Chase Manhattan Corp............................... 2,300 265,362
Citicorp........................................... 2,300 287,644
Coast Savings Financial, Inc.+..................... 1,400 82,162
First Union Corp................................... 2,000 98,125
Golden West Financial Corp......................... 500 43,375
National City Corp................................. 5,300 316,675
State Street Corp.................................. 1,200 66,900
TCF Financial Corp................................. 300 17,063
U.S. Bancorp....................................... 2,900 294,894
Wells Fargo & Co................................... 1,600 466,200
-----------
2,350,100
-----------
BROADCASTING & MEDIA--1.4%
360 Communications Co.+............................ 2,200 46,475
Eastman Kodak Co................................... 2,300 137,712
Gannett Co., Inc................................... 1,400 73,588
News Corp., Ltd. ADR............................... 3,300 58,575
Tribune Co.(1)..................................... 700 38,588
-----------
354,938
-----------
BUSINESS SERVICES--0.8%
Crescent Operating, Inc.+.......................... 300 6,975
Safety-Kleen Corp.................................. 8,800 194,700
-----------
201,675
-----------
CHEMICALS--2.7%
Air Products & Chemicals, Inc...................... 2,300 174,800
du Pont (E.I.) de Nemours & Co..................... 3,500 199,063

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
CHEMICALS (CONTINUED)
Ferro Corp......................................... 1,500 $ 56,156
Millenium Chemicals, Inc........................... 4,300 101,050
Nalco Chemical Co.................................. 3,200 128,000
-----------
659,069

-----------
COMMUNICATION EQUIPMENT--1.4%
AirTouch Communications, Inc.+..................... 3,000 115,875
Loral Space & Communications Corp.+................ 600 12,600
Qwest Communications International, Inc.+.......... 1,000 61,750
SBC Communications, Inc............................ 2,300 146,338
-----------
336,563
-----------
COMPUTERS & BUSINESS EQUIPMENT--6.2%
Apple Computer, Inc.+.............................. 9,000 153,000
Harris Corp........................................ 1,200 52,350
Hewlett-Packard Co................................. 4,400 271,425
International Business Machines Corp............... 6,600 647,212
Wallace Computer Services, Inc..................... 5,600 215,250
Xerox Corp......................................... 2,400 190,350
-----------
1,529,587
-----------
DRUGS--2.1%
Bristol-Myers Squibb Co............................ 400 35,100
Lilly (Eli) & Co................................... 400 26,750
Merck & Co., Inc................................... 200 17,850
Novartis AG ADR.................................... 900 70,200
Pfizer, Inc........................................ 1,400 99,050
Pharmacia & Upjohn, Inc............................ 3,600 114,300
SmithKline Beecham PLC ADR......................... 3,300 157,163
-----------
520,413
-----------
ELECTRIC UTILITIES--3.2%
Central & South West Corp.......................... 3,000 64,687
Duke Energy Corp................................... 1,700 82,025
GPU, Inc........................................... 2,500 90,469
Illinova Corp...................................... 9,700 215,825
New England Electric Systems....................... 1,700 66,619
Southern Co........................................ 3,600 82,575
Texas Utilities Co................................. 5,600 200,900
-----------
803,100
-----------
ELECTRICAL EQUIPMENT--0.1%
Molex, Inc......................................... 500 18,750
-----------
ELECTRONICS--1.7%
Intel Corp......................................... 1,400 107,800
</TABLE>

<PAGE>

Large-Cap Value Portfolio

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

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
ELECTRONICS (CONTINUED)
Motorola, Inc...................................... 1,500 $ 92,625
Novellus Systems, Inc.+............................ 1,400 62,125
Texas Instruments, Inc............................. 1,500 160,031
-----------
422,581
-----------
ENERGY SERVICES--2.8%
Cooper Cameron Corp.+.............................. 1,400 101,150
EVI, Inc.+......................................... 1,200 77,025
Halliburton Co..................................... 3,700 220,612
Nabors Industries, Inc.+........................... 300 12,338
Noble Drilling Corp.+.............................. 5,000 177,812
Schlumberger Ltd................................... 1,100 96,250
-----------
685,187
-----------
ENERGY SOURCES--5.2%
Amoco Corp......................................... 900 82,519
Atlantic Richfield Co.............................. 2,400 197,550
British Petroleum Co. PLC ADS...................... 600 52,650
Burlington Resources, Inc.......................... 2,100 102,769
Chevron Corp....................................... 1,000 82,937
Enron Oil & Gas Co................................. 3,400 71,613
Exxon Corp......................................... 200 12,288
Noble Affiliates, Inc.............................. 1,600 65,700
Royal Dutch Petroleum Co. NY-Registry Shares GDR... 3,600 189,450
Texaco, Inc........................................ 1,500 85,406
Tosco Corp......................................... 900 29,700
Union Texas Petroleum Holdings, Inc................ 5,000 113,750
USX-Marathon Group, Inc............................ 5,800 207,350
-----------
1,293,682
-----------
FINANCIAL SERVICES--6.7%
American Express Co................................ 5,500 429,000
Donaldson, Lufkin & Jenrette, Inc.................. 800 56,200
Federal Home Loan Mortgage Corp.................... 2,500 94,687
Federal National Mortgage Association.............. 1,800 87,188
Morgan (J.P.) & Co., Inc........................... 600 65,850
Morgan Stanley, Dean Witter, Discover & Co......... 5,400 264,600
Ryder System, Inc.................................. 2,300 80,500
Salomon, Inc....................................... 2,700 209,756

SLM Holding Corp................................... 1,200 168,450
Student Loan Corp.................................. 4,000 196,750
-----------
1,652,981
-----------
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
FOOD, BEVERAGE & TOBACCO--3.8%
Archer-Daniels-Midland Co.......................... 9,800 $ 218,050
Coca-Cola Co....................................... 100 5,650
Flowers Industries, Inc............................ 5,900 112,100
Grand Metropolitan PLC ADR......................... 5,000 186,875
Nestle SA ADR...................................... 2,200 154,000
Philip Morris Cos., Inc............................ 4,200 166,425
Tyson Foods, Inc., Class A......................... 2,000 37,750
Universal Corp..................................... 1,500 57,656
-----------
938,506
-----------
FOREST PRODUCTS--2.9%
Mead Corp.......................................... 2,200 133,100
Potlatch Corp...................................... 4,000 199,500
Sonoco Products Co................................. 1,500 48,281
Weyerhaeuser Co.................................... 3,500 167,125
Willamette Industries, Inc.(1)..................... 5,200 171,925
-----------
719,931
-----------
GAS & PIPELINE UTILITIES--0.7%
Equitable Resources, Inc........................... 2,400 76,350
MCN Corp........................................... 2,800 96,950
-----------
173,300
-----------
HEALTH SERVICES--2.3%
Columbia/HCA Healthcare Corp....................... 4,300 121,475
Tenet Healthcare Corp.+............................ 6,600 201,712
United Healthcare Corp............................. 3,900 180,619
Wellpoint Health Networks, Inc., Class A+.......... 1,500 68,625
-----------
572,431
-----------
HOUSEHOLD PRODUCTS--0.4%
Kimberly-Clark Corp................................ 1,700 88,294
-----------
HOUSING--0.7%
Masco Corp......................................... 3,800 166,725
-----------
INSURANCE--10.0%
20th Century Industries............................ 1,100 27,500

Aetna, Inc......................................... 3,600 255,825
Allstate Corp...................................... 7,400 613,737
American International Group, Inc.................. 500 51,031
Berkley (W.R.) Corp................................ 1,500 60,938
Chubb Corp......................................... 3,600 238,500
Frontier Insurance Group, Inc...................... 500 16,844
General Re Corp.................................... 2,300 453,531
Progressive Corp................................... 700 72,975
Transamerica Corp.................................. 2,000 201,875
Transatlantic Holdings, Inc........................ 1,100 76,106
Travelers Group, Inc............................... 5,500 385,000
</TABLE>

<PAGE>

Large-Cap Value Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
INSURANCE (CONTINUED)
UNUM Corp.......................................... 400 $ 19,500
-----------
2,473,362
-----------
INVESTMENT COMPANIES--0.1%
Morgan Stanley Asia-Pacific Fund................... 3,500 28,219
-----------
LEISURE & TOURISM--2.5%
Brunswick Corp..................................... 4,000 135,000
Delta Air Lines, Inc............................... 900 90,675
KLM Royal Dutch Air Lines NV....................... 5,400 184,275
McDonald's Corp.................................... 4,900 219,581
-----------
629,531
-----------
MACHINERY--1.8%
Cincinnati Milacron, Inc........................... 1,800 49,950
Deere & Co......................................... 3,800 199,975
Kennametal, Inc.................................... 800 38,800
New Holland N.V.................................... 2,200 62,563
Smith International, Inc.+......................... 1,400 106,750
-----------
458,038

-----------
MEDICAL PRODUCTS--0.8%
Baxter International, Inc.......................... 2,000 92,500
Johnson & Johnson Co............................... 400 22,950
Mallinckrodt, Inc.................................. 2,300 86,250
-----------
201,700
-----------
METALS & MINERALS--2.5%
Alcan Aluminium Ltd. .............................. 3,300 94,256
Aluminum Co. of America............................ 4,100 299,300
Hanson PLC ADR..................................... 4,000 102,000
Martin Marietta Materials, Inc..................... 3,400 118,575
-----------
614,131
-----------
MULTI-INDUSTRY--0.3%
Cooper Industries, Inc............................. 1,500 78,188
General Electric Co................................ 100 6,456
-----------
84,644
-----------
REAL ESTATE COMPANIES--0.2%
Rouse Co........................................... 1,700 47,175
-----------
REAL ESTATE INVESTMENT TRUSTS--1.0%
Crescent Real Estate Equities Co................... 3,300 118,800
Federal Realty Investment Trust.................... 400 10,125
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
General Growth Properties, Inc..................... 1,500 $ 51,750
Kimco Realty Corp.................................. 100 3,200
Saul Centers, Inc.................................. 200 3,525
United Dominion Realty Trust, Inc.................. 400 5,550
Vornado Realty Trust............................... 1,200 53,550
Weingarten Realty Investors........................ 100 3,981
-----------
250,481
-----------
RETAIL--6.2%
Harcourt General, Inc.............................. 5,000 250,312
Kmart Corp.+....................................... 14,600 192,538
Limited, Inc....................................... 8,600 202,637
May Department Stores Co........................... 2,200 118,525
Penney (J.C.), Inc................................. 5,500 322,781
Sears, Roebuck & Co................................ 3,800 159,125
The Sports Authority, Inc.+........................ 4,200 79,538
Toys 'R' Us, Inc.+................................. 3,700 126,031
Wal-Mart Stores, Inc............................... 2,400 84,300

-----------
1,535,787
-----------
SOFTWARE--0.2%
Sun Microsystems, Inc.+............................ 1,100 37,606
-----------
TELECOMMUNICATIONS--0.0%
Globalstar Telecommunications Ltd.+................ 200 9,250
-----------
TELEPHONE--1.3%
AT&T Corp.......................................... 4,600 225,112
Bell Atlantic Corp................................. 1,300 103,838
-----------
328,950
-----------
TRANSPORTATION--3.4%
Burlington Northern Santa Fe....................... 2,000 190,000
Canadian National Railway Co....................... 1,100 59,331
CSX Corp........................................... 2,200 120,313
Illinois Central Corp.............................. 1,600 57,000
Overseas Shipholding Group, Inc.................... 8,000 198,000
Union Pacific Corp................................. 3,400 208,250
-----------
832,894
-----------
TOTAL COMMON STOCK
(cost $24,017,971)............................................. 22,683,131
-----------
</TABLE>

<PAGE>

Large-Cap Value Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL
AMOUNT
(IN VALUE
SECURITY DESCRIPTION THOUSANDS) (NOTE 3)
- --------------------------------------------------------------------------------
PREFERRED STOCK--0.1%
<S> <C> <C>
COMMUNICATION EQUIPMENT--0.0%
AirTouch Communications, Inc. Series C 4.25%......... 200 $ 12,000
-----------
FINANCIAL SERVICES--0.1%
Devon Financing Trust 6.50%........................ 200 16,362

-----------
TOTAL PREFERRED STOCK
(cost $28,987)..................................... 28,362
-----------
BONDS & NOTES--0.0%
COMPUTERS & BUSINESS EQUIPMENT--0.0%
Hewlett-Packard Co.
zero coupon due 10/14/17 (cost $2,875)........... 5,000 2,544
-----------
TOTAL INVESTMENT SECURITIES--91.8%
(cost $24,049,833)................................. 22,714,037
-----------
SHORT-TERM SECURITIES--5.1%
Cayman Island Time Deposit with State Street Bank
and Trust Co.
3.00% due 11/03/97............................... $ 406 406,000
Federal National Mortgage Association Discount
Notes
5.48% due 11/05/97............................... 845 844,485
-----------
TOTAL SHORT-TERM SECURITIES
(cost $1,250,485).................................. 1,250,485
-----------
<CAPTION>

PRINCIPAL
AMOUNT
(IN VALUE
SECURITY DESCRIPTION THOUSANDS) (NOTE 3)
- --------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT--0.5%
Joint Repurchase Agreement Account (Note 3)
(cost $130,000).................................. $ 130 $ 130,000
-----------
TOTAL INVESTMENTS-- (cost $25,430,318)............... 97.4% 24,094,522
Other assets less liabilities........................ 2.6 642,828
--------- -----------
NET ASSETS-- 100.0% $24,737,350
--------- -----------
--------- -----------
</TABLE>

See Notes to Financial Statements

<PAGE>

Value Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--93.2%
AEROSPACE & MILITARY TECHNOLOGY--0.8%
Boeing Co.......................................... 22,000 $ 1,053,250
------------
APPAREL & TEXTILES--1.6%
Burlington Industries, Inc.+....................... 53,300 796,169
Gucci Group NV-NY Registry Shares.................. 13,800 501,975
Nike, Inc., Class B................................ 17,800 836,600
------------
2,134,744
------------
AUTOMOTIVE--5.6%
Borg-Warner Automotive, Inc........................ 13,200 719,400
Chrysler Corp...................................... 30,500 1,075,125
Cummins Engine Co., Inc............................ 25,300 1,553,906
Ford Motor Co...................................... 16,250 709,922
General Motors Corp................................ 11,550 741,366
Goodyear Tire & Rubber Co.......................... 23,700 1,484,212
Lear Corp.+........................................ 10,100 485,431
PACCAR, Inc........................................ 19,800 891,000
------------
7,660,362
------------
BANKS--8.1%
Banc One Corp...................................... 11,100 578,588
BankAmerica Corp................................... 15,900 1,136,850
Barnett Banks, Inc................................. 100 6,900
Chase Manhattan Corp............................... 6,400 738,400
Citicorp........................................... 19,800 2,476,237
First Union Corp................................... 1,300 63,781
Golden West Financial Corp......................... 2,800 242,900
KeyCorp............................................ 13,400 819,913
Mellon Bank Corp................................... 17,300 892,031
National Bank of Canada............................ 50,400 715,223
Northern Trust Corp................................ 13,100 763,894
State Street Corp.................................. 6,400 356,800
TCF Financial Corp................................. 1,600 91,000
U.S. Bancorp....................................... 5,100 518,606
Wells Fargo & Co................................... 5,200 1,515,150
------------
10,916,273

------------
BROADCASTING & MEDIA--2.3%
360 Communications Co.+............................ 11,400 240,825
Comcast Corp., Class A............................. 32,500 889,687
Donnelley(RR) & Sons Co............................ 13,300 433,912
Gannett Co., Inc................................... 7,400 388,963
Knight-Ridder, Inc................................. 6,100 318,725
Scripps (E.W) Co., Class A......................... 16,700 700,356
Tribune Co.(1)..................................... 3,300 181,913
------------
3,154,381
------------
BUSINESS SERVICES--2.1%
ACNielson Corp.+................................... 16,500 377,438
Crescent Operating, Inc.+.......................... 1,470 34,178

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -------------------------------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES (CONTINUED)
Federal Express Corp.+............................. 13,350 $ 891,112
Owens Corning Co................................... 20,050 686,712
Philip Services Corp.+............................. 51,900 908,250
Waste Management, Inc.............................. 100 2,338
------------
2,900,028
------------
CHEMICALS--3.9%
Cabot Corp......................................... 36,500 896,531
Cyprus Amax Minerals Co............................ 35,800 749,563
du Pont (E.I.) de Nemours & Co..................... 16,000 910,000
Morton International, Inc.......................... 15,700 518,100
Praxair, Inc....................................... 21,000 914,812
Raychem Corp....................................... 7,500 679,219
W.R. Grace & Co.................................... 8,500 578,000
------------
5,246,225
------------
COMMUNICATION EQUIPMENT--2.0%
AirTouch Communications, Inc.+..................... 32,400 1,251,450
Loral Space & Communications Corp.+................ 2,400 50,400
Qwest Communications International, Inc.+.......... 5,200 321,100
SBC Communications, Inc............................ 11,750 747,594
Seagate Technology, Inc.+.......................... 11,800 320,075
------------
2,690,619
------------
COMPUTERS & BUSINESS EQUIPMENT--3.2%
Cabletron Systems, Inc.+........................... 12,100 350,900
Hewlett-Packard Co................................. 24,100 1,486,669
International Business Machines Corp............... 16,500 1,618,031

Komag, Inc.+....................................... 22,800 391,875
Western Digital Corp.+(1).......................... 17,200 514,925
------------
4,362,400
------------
DRUGS--3.2%
Alza Corp.+........................................ 15,400 401,362
American Home Products Corp........................ 100 7,413
Amgen, Inc.+....................................... 14,200 698,462
Biogen, Inc.+...................................... 17,800 591,850
Bristol-Myers Squibb Co............................ 2,000 175,500
Crescendo Pharmaceuticals Corp.+................... 770 8,663
Lilly (Eli) & Co................................... 2,200 147,125
Merck & Co., Inc................................... 800 71,400
Novartis AG ADR.................................... 10,859 842,299
Pfizer, Inc........................................ 7,400 523,550
SmithKline Beecham PLC ADR......................... 17,800 847,725
------------
4,315,349
------------
</TABLE>

<PAGE>

Value Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
ELECTRIC UTILITIES--1.4%
Duke Energy Corp................................... 100 $ 4,825
Edison International............................... 100 2,562
Northeast Utilities+............................... 88,900 1,022,350
Southern Co........................................ 100 2,294
Western Resources, Inc............................. 22,400 834,400
------------
1,866,431
------------
ELECTRICAL EQUIPMENT--0.8%
Harman International Industries, Inc.+............. 18,400 993,600
Molex, Inc......................................... 2,250 84,375
------------
1,077,975
------------

ELECTRONICS--5.6%
Arrow Electronics, Inc.+........................... 29,800 845,575
Avnet, Inc......................................... 11,750 739,516
Intel Corp......................................... 7,800 600,600
Lam Research Corp.+................................ 11,800 424,800
LSI Logic Corp.+................................... 24,300 530,044
Micron Technology, Inc.+........................... 17,300 463,856
Millipore Corp..................................... 12,700 496,888
Motorola, Inc...................................... 9,400 580,450
Novellus Systems, Inc.+............................ 7,200 319,500
Philips Electronics NV-
NY Shares........................................ 9,350 732,806
Tektronix, Inc..................................... 16,200 638,550
Texas Instruments, Inc............................. 11,400 1,216,237
------------
7,588,822
------------
ENERGY SERVICES--3.7%
Amerada Hess Corp.+................................ 100 6,144
Cooper Cameron Corp.+.............................. 7,400 534,650
EVI, Inc.+......................................... 6,600 423,638
Gulf Canada Resources Ltd.+........................ 55,600 465,650
Halliburton Co..................................... 20,100 1,198,462
Nabors Industries, Inc.+........................... 1,500 61,688
Reading & Bates Corp.+............................. 24,900 1,055,137
Schlumberger Ltd................................... 5,800 507,500
YPF Sociedad Anonima, Class D ADR.................. 21,950 702,400
------------
4,955,269
------------
ENERGY SOURCES--4.6%
Atlantic Richfield Co.............................. 11,400 938,362
British Petroleum Co. PLC ADS...................... 3,100 272,025
Burlington Resources, Inc.......................... 13,000 636,188
Chevron Corp....................................... 200 16,588
Exxon Corp......................................... 700 43,006
Noble Affiliates, Inc.............................. 19,800 813,037
Phillips Petroleum Co.............................. 14,400 696,600
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -------------------------------------------------------------------------------
<S> <C> <C>
ENERGY SOURCES (CONTINUED)
Repsol SA ADR...................................... 19,900 $ 845,750
Sonat, Inc......................................... 100 4,594
Tosco Corp......................................... 4,700 155,100
Triton Energy Ltd.+................................ 6,500 254,313
Ultramar Diamond Shamrock Corp..................... 26,700 824,362
Union Pacific Resources Group, Inc................. 28,200 694,425
------------
6,194,350
------------

FINANCIAL SERVICES--4.8%
American Express Co................................ 17,100 1,333,800
Capital One Financial Corp......................... 11,400 520,125
Countrywide Credit Industries, Inc................. 16,400 562,725
Donaldson, Lufkin & Jenrette, Inc.................. 4,100 288,025
Federal Home Loan Mortgage Corp.................... 13,300 503,737
Kansas City Southern
Industries, Inc.................................. 12,300 375,150
Morgan (J.P.) & Co., Inc........................... 3,200 351,200
Morgan Stanley, Dean Witter, Discover & Co......... 34,502 1,690,598
Paine Webber Group, Inc............................ 18,100 799,794
Salomon, Inc....................................... 1,400 108,762
------------
6,533,916
------------
FOOD, BEVERAGE & TOBACCO--4.5%
Anheuser-Busch Cos., Inc........................... 15,100 603,056
Archer-Daniels-Midland Co.......................... 24,055 535,224
Coca-Cola Co....................................... 500 28,250
Gallaher Group PLC................................. 200 3,837
IBP, Inc........................................... 55,850 1,295,022
Nestle SA ADR...................................... 11,800 833,630
Philip Morris Cos., Inc............................ 43,700 1,731,612
Tyson Foods, Inc., Class A......................... 10,800 203,850
UST, Inc........................................... 28,900 865,194
------------
6,099,675
------------
FOREST PRODUCTS--2.8%
Asia Pulp & Paper Ltd. ADR+........................ 49,500 563,063
International Paper Co............................. 100 4,500
Mead Corp.......................................... 7,900 477,950
Owens Illinois, Inc.+.............................. 20,200 696,900
Temple-Inland, Inc................................. 7,400 424,575
Union Camp Corp.................................... 13,800 747,787
Weyerhaeuser Co.................................... 17,400 830,850
------------
3,745,625
------------
</TABLE>

<PAGE>

Value Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE

SECURITY DESCRIPTION SHARES (NOTE 3)
- -------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
HEALTH SERVICES--0.7%
Columbia/HCA Healthcare Corp....................... 33,100 $ 935,075
------------
HOUSEHOLD PRODUCTS--0.4%
Singer Co., Inc.+.................................. 40,100 543,856
------------
HOUSING--1.9%
Armstrong World Industries, Inc. 13,300 885,281
Champion Enterprises, Inc.+........................ 43,500 763,969
Masco Corp......................................... 21,100 925,763
Maytag Corp........................................ 200 6,675
------------
2,581,688
------------
INSURANCE--8.3%
20th Century Industries............................ 5,900 147,500
Allstate Corp...................................... 13,300 1,103,069
American International Group, Inc.................. 2,450 250,053
Berkley (W.R.) Corp................................ 25,700 1,044,062
Chubb Corp......................................... 7,000 463,750
EXEL Ltd........................................... 11,500 695,031
General Re Corp.................................... 7,200 1,419,750
LaSalle Re Holdings Ltd............................ 20,900 700,150
Old Republic International Corp.................... 21,400 765,050
PartnerRe Ltd...................................... 34,400 1,410,400
Progressive Corp................................... 15,800 1,647,150
Transatlantic Holdings, Inc........................ 5,700 394,369
Travelers Group, Inc............................... 15,600 1,092,000
UNUM Corp.......................................... 2,400 117,000
------------
11,249,334
------------
INVESTMENT COMPANIES--0.1%
Morgan Stanley Asia-Pacific Fund 16,700 134,644
------------
LEISURE & TOURISM--4.2%
Continental Airlines, Inc., Class B+............... 13,400 579,550
Delta Air Lines, Inc............................... 8,200 826,150
Host Marriott Corp.+............................... 37,300 778,638
La Quinta Inns, Inc................................ 18,000 321,750
McDonald's Corp.................................... 42,200 1,891,087
Mirage Resorts, Inc.+.............................. 19,900 497,500
Southwest Airlines Co.............................. 25,500 831,937
------------
5,726,612
------------
MACHINERY--1.7%
Harnischfeger Industries, Inc...................... 20,700 815,062
New Holland N.V.................................... 31,350 891,516
Smith International, Inc.+......................... 7,700 587,125

------------
2,293,703
------------
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -------------------------------------------------------------------------------
<S> <C> <C>
MEDICAL PRODUCTS--0.1%
Johnson & Johnson Co............................... 1,900 $ 109,013
------------
METALS & MINERALS--4.6%
AK Steel Holding Corp.............................. 14,900 627,663
Carpenter Technology Corp.......................... 14,950 723,206
Cleveland-Cliffs, Inc.............................. 18,600 807,937
Crown, Cork & Seal Co., Inc........................ 23,700 1,067,981
Lafarge Corp....................................... 25,900 786,713
Martin Marietta Materials, Inc..................... 12,400 432,450
Southdown, Inc..................................... 15,150 838,931
UCAR International, Inc.+.......................... 23,700 888,750
------------
6,173,631
------------
MULTI-INDUSTRY--0.7%
Corning, Inc....................................... 9,200 415,150
Fortune Brands, Inc................................ 200 6,612
General Electric Co................................ 400 25,825
Tenneco, Inc....................................... 10,100 453,869
------------
901,456
------------
REAL ESTATE COMPANIES--0.2%
Rouse Co........................................... 10,200 283,050
------------
REAL ESTATE INVESTMENT TRUSTS--1.0%
Crescent Real Estate Equities Co................... 18,000 648,000
Federal Realty Investment
Trust............................................ 1,400 35,438
General Growth Properties, Inc..................... 8,800 303,600
Kimco Realty Corp.................................. 300 9,600
Saul Centers, Inc.................................. 800 14,100
United Dominion Realty Trust, Inc.................. 1,500 20,813
Vornado Realty Trust............................... 6,500 290,062
Weingarten Realty Investors........................ 500 19,906
------------
1,341,519
------------
RETAIL--3.1%
Costco Cos., Inc.+................................. 21,100 807,075
Harcourt General, Inc.............................. 23,900 1,196,494
May Department Stores Co........................... 16,250 875,469
TJX Cos., Inc...................................... 20,500 607,312
Wal-Mart Stores, Inc............................... 19,400 681,425

------------
4,167,775
------------
SOFTWARE--2.0%
Adobe Systems, Inc................................. 10,500 500,062
Autodesk, Inc...................................... 8,100 298,688
Electronic Data Systems Corp.+ . 23,400 905,287
Siebel Systems, Inc.+.............................. 35 1,400
Storage Technology Corp.+.......................... 16,500 968,344
------------
2,673,781
------------
</TABLE>

<PAGE>

Value Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
TELECOMMUNICATIONS--0.0%
Globalstar Telecommunications Ltd.+................ 622 $ 28,768
------------
TELEPHONE--0.6%
GTE Corp........................................... 20,000 848,750
------------
TRANSPORTATION--2.6%
Burlington Northern Santa Fe....................... 28,050 2,664,750
Illinois Central Corp.............................. 8,300 295,688
Union Pacific Corp................................. 10,100 618,625
------------
3,579,063
------------
TOTAL COMMON STOCK
(cost $115,364,588)................................ 126,067,412
------------
PREFERRED STOCK--0.1%
BANKS--0.0%
Banc One Corp. Series C 3.50%...................... 200 19,875
------------
COMMUNICATION EQUIPMENT--0.0%
AirTouch Communications, Inc. Series C 4.25%....... 900 54,000
------------

FINANCIAL SERVICES--0.1%
Devon Financing Trust 6.50%........................ 1,000 81,813
------------
REAL ESTATE COMPANIES--0.0%
Rouse Co. Series B 3.00%........................... 400 18,800
------------
REAL ESTATE INVESTMENT TRUSTS--0.0%
Vornado Realty Trust Series A 6.50%................ 300 19,575
------------
TOTAL PREFERRED STOCK
(cost $166,766).................................... 194,063
------------
TOTAL INVESTMENT SECURITIES--93.3%
(cost $115,531,354)................................ 126,261,475
------------
</TABLE>

PRINCIPAL
AMOUNT (IN VALUE
SECURITY DESCRIPTION THOUSANDS) (NOTE 3)
- -----------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM SECURITIES--4.0%
Cayman Island Time Deposit
with State Street Bank and Trust Co.
4.50% due 11/03/97............................... $2,696 $ 2,696,000
Federal Home Loan
Mortgage Discount Notes
5.50% due 11/06/97............................... 2,660 2,657,968
------------
TOTAL SHORT-TERM SECURITIES
(cost $5,353,968).................................. 5,353,968
------------
REPURCHASE AGREEMENTS--4.2%
Agreement with State Street Bank and Trust Co.,
bearing 5.00%, dated 10/31/97 to be repurchased
11/03/97 in the amount of $2,368,987
collateralized by $2,385,000 U.S. Treasury Note
6.25%, due 3/31/99 approximate aggregate value
$2,411,768 (cost $2,368,000)..................... 2,368 2,368,000
Agreement with State Street Bank and Trust Co.,
bearing 5.57%, dated 10/31/97 to be repurchased
11/03/97 in the amount of $3,311,536
collateralized by $3,275,000 Federal National
Mortgage Association 6.25%, due 11/10/99
approximate aggregate value $3,377,003 (cost
$3,310,000)...................................... 3,310 3,310,000
------------
TOTAL REPURCHASE AGREEMENTS
(cost $5,678,000).................................. 5,678,000
------------

TOTAL INVESTMENTS--
(cost $126,563,322)................................ 101.5% 137,293,443
Liabilities in excess of other assets.............. (1.5) (1,997,997)
------- ------------
NET ASSETS-- 100.0% $135,295,446
------- ------------
------- ------------
</TABLE>

- ------------------
+ Non-income producing security
ADR ('American Depositary Receipt')
ADS ('American Depositary Shares')
(1) Security is traded with rights attached
See Notes to Financial Statements

<PAGE>

Small-Cap Value Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--79.0%
AEROSPACE & MILITARY TECHNOLOGY--0.6%
AAR Corp.(1)....................................... 3,200 $ 114,600
Moog, Inc., Class A................................ 1,100 41,250
-----------
155,850
-----------
APPAREL & TEXTILES--1.6%
Footstar, Inc.+.................................... 3,500 95,156
Just For Feet, Inc.+............................... 14,000 206,500
Kellwood Co........................................ 2,200 76,037
Tarrant Apparel Group, Inc.+....................... 2,700 32,063
-----------
409,756
-----------
AUTOMOTIVE--4.4%
Borg-Warner Automotive, Inc........................ 3,500 190,750
Breed Technologies, Inc............................ 2,600 57,362
Excel Industries, Inc.............................. 2,200 39,188
Polaris Industries, Inc............................ 4,800 146,100
Rollins Truck Leasing Corp......................... 7,800 129,675
Simpson Industries, Inc............................ 22,000 255,750
Titan International, Inc........................... 3,200 66,400

Tower Automotive, Inc.+............................ 3,000 125,625
Walbro Corp........................................ 4,000 83,000
-----------
1,093,850
-----------
BANKS--12.7%
Bank United Corp., Class A......................... 1,500 63,000
BankAtlantic Bancorp., Inc., Class A............... 1,700 23,375
Banknorth Group, Inc............................... 1,200 71,700
CCB Financial Corp.(1)............................. 4,000 364,000
CFX Corp........................................... 14,000 344,750
First Hawaiian, Inc................................ 1,500 58,500
First Republic Bank+............................... 11,300 319,225
HUBCO, Inc......................................... 3,300 114,675
Long Island Bancorp, Inc........................... 2,100 93,450
PonceBank.......................................... 14,000 279,125
Riverview Bancorp, Inc.+........................... 29,000 384,250
Trans Financial, Inc............................... 2,000 64,000
UST Corp........................................... 16,000 410,000
Vermont Financial Services......................... 14,000 353,500
Warren Bancorp, Inc................................ 12,000 231,000
-----------
3,174,550
-----------
BROADCASTING & MEDIA--2.5%
Carmike Cinemas, Inc., Class A+.................... 1,700 55,250
Jones Intercable, Inc., Class A+ .................. 31,000 395,250
Pulitzer Publishing Co............................. 1,700 91,587
Regal Cinemas, Inc.+............................... 3,800 87,163
-----------
629,250
-----------

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES--2.7%
Banta Corp......................................... 8,000 $ 208,000
Bowne & Co., Inc................................... 3,400 118,575
CDI Corp.+......................................... 200 7,850
Flowserve Corp..................................... 3,300 98,175
Granite Construction, Inc.......................... 4,200 88,725
Pittston Brink's Group............................. 3,300 119,212
York Group, Inc.................................... 1,900 42,750
-----------
683,287
-----------
CHEMICALS--0.9%
ChemFirst, Inc..................................... 2,300 58,075
Mississippi Chemical Corp.......................... 3,800 69,825
Schulman (A), Inc.................................. 3,900 87,750

-----------
215,650
-----------
COMMUNICATION EQUIPMENT--1.9%
Anixter International, Inc.+....................... 5,700 107,587
Belden, Inc........................................ 4,200 143,850
Dynatech Corp.+.................................... 4,100 139,912
Glenayre Technologies, Inc.+....................... 3,300 42,488
Network Equipment Technologies, Inc.+(1)........... 2,000 34,000
-----------
467,837
-----------
COMPUTERS & BUSINESS EQUIPMENT--1.8%
Bell & Howell Co.+................................. 4,200 115,763
Data General Corp.+................................ 2,900 55,825
In Focus System, Inc.+............................. 2,400 78,600
Stratus Computer, Inc.+............................ 5,300 187,487
-----------
437,675
-----------
DRUGS--0.4%
Perrigo Co.+....................................... 6,800 102,850
-----------
ELECTRIC UTILITIES--0.8%
Calpine Corp.+..................................... 5,500 87,313
Eastern Enterprises................................ 800 31,350
Eastern Utilities Associates....................... 2,000 42,250
Public Service Co. of New Mexico................... 2,300 44,706
-----------
205,619
-----------
ELECTRICAL EQUIPMENT--2.1%
Helix Technology Corp.............................. 500 22,438
Juno Lighting, Inc.(1)............................. 12,000 210,000
Scotsman Industries, Inc........................... 2,500 66,094
Silicon Valley Group, Inc.+........................ 2,100 59,850
Watts Industries, Inc.,
Class A.......................................... 6,900 175,087
-----------
533,469
-----------
</TABLE>

<PAGE>

Small-Cap Value Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
ELECTRONICS--1.8%
Allen Telecom, Inc.+............................... 5,300 $ 100,369
Benchmark Electronics,
Inc.+............................................ 1,100 27,431
Fluke Corp......................................... 3,000 72,188
International Rectifier
Corp.+........................................... 10,600 145,087
S3, Inc.+.......................................... 3,200 28,200
Watkins-Johnson Co................................. 1,900 58,900
Xicor, Inc.+....................................... 3,200 17,600
-----------
449,775
-----------
ENERGY SOURCES--1.8%
Barrett Resources Corp.+........................... 2,700 95,006
Belco Oil & Gas Corp.+............................. 2,800 60,550
Chieftain International, Inc.+..................... 5,000 122,500
Comstock Resources,
Inc.+............................................ 3,300 55,275
Tesoro Petroleum Corp.+............................ 2,500 40,625
Zeigler Coal Holding Co............................ 3,700 66,138
-----------
440,094
-----------
ENTERTAINMENT PRODUCTS--1.0%
Harman International Industries, Inc.+............. 4,600 248,400
-----------
FINANCIAL SERVICES--1.1%
AMRESCO, Inc.+..................................... 4,400 137,500
Pioneer Group, Inc................................. 5,000 148,125
-----------
285,625
-----------
FOOD, BEVERAGE & TOBACCO--1.5%
Canandaigua Brands, Inc., Class A+................. 1,900 94,287
Consolidated Cigar Holdings, Inc., Class A+........ 2,600 102,050
Swisher International Group, Inc., Class A+........ 4,100 81,231
Universal Corp..................................... 2,200 84,563
-----------
362,131
-----------
FOREST PRODUCTS--1.4%
Albany International Corp., Class A................ 3,300 80,437
Caraustar Industries, Inc.......................... 2,300 79,063
First Brands Corp.................................. 7,900 201,450
-----------
360,950
-----------

GAS & PIPELINE UTILITIES--0.7%
New Jersey Resources
Corp............................................. 1,700 55,037
Northwest Natural Gas Co........................... 1,100 27,088
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------
<S> <C> <C>
GAS & PIPELINE UTILITIES (CONTINUED)
Piedmont Natural Gas,
Inc.............................................. 1,100 $ 30,800
Washington Gas Light Co............................ 1,100 28,256
WICOR, Inc......................................... 900 38,813
-----------
179,994
-----------
HEALTH SERVICES--3.9%
Apria Healthcare Group, Inc.+...................... 7,700 116,944
Integrated Health Services, Inc.................... 7,100 225,425
Magellan Health Services, Inc.+.................... 5,000 144,062
Mariner Health Group,
Inc.+............................................ 7,000 102,375
Sierra Health Services,
Inc.+............................................ 6,500 240,094
Sun Healthcare Group,
Inc.+............................................ 7,100 141,112
-----------
970,012
-----------
HOUSEHOLD PRODUCTS--0.8%
Libbey, Inc........................................ 2,900 108,387
Oakley, Inc.+...................................... 8,700 85,913
-----------
194,300
-----------
HOUSING--2.9%
American Buildings Co.............................. 2,300 62,100
Bassett Furniture Industries, Inc.................. 1,200 32,700
Cavalier Homes, Inc................................ 16,000 157,000
Furniture Brands International, Inc.+.............. 9,000 150,750
Homebase, Inc.+.................................... 3,500 32,156
Kaufman & Broad Home Corp.......................... 4,200 89,512
Kimball International, Inc., Class B............... 1,200 48,900
La-Z-Boy, Inc...................................... 900 33,638
Mohawk Industries, Inc.+........................... 3,800 115,900
-----------
722,656
-----------
INSURANCE--3.3%
American Bankers Insurance Group, Inc.............. 2,100 78,487
Amerin Corp.+...................................... 3,300 74,869
AmerUs Life Holdings, Inc., Class A................ 1,100 33,550

Enhance Financial Services Group, Inc.............. 2,000 105,625
Harleysville Group, Inc............................ 2,400 60,300
Lawyers Title Corp................................. 1,000 31,750
Liberty Corp....................................... 2,400 102,750
Orion Capital Corp................................. 2,800 126,000
Presidential Life Corp............................. 2,000 39,250
</TABLE>

<PAGE>

Small-Cap Value Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
INSURANCE (CONTINUED)
Reliance Group Holdings, Inc....................... 7,800 $ 98,475
Selective Insurance Group, Inc..................... 1,300 69,388
-----------
820,444
-----------
INVESTMENT COMPANIES--1.9%
Emerging Markets
Telecommunications Fund, Inc..................... 9,000 143,438
G.T. Global Eastern European Fund.................. 8,000 131,000
Morgan Stanley Asia-Pacific Fund................... 25,000 201,562
-----------
476,000
-----------
LEISURE & TOURISM--0.9%
Applebee's International, Inc...................... 1,700 37,400
Bob Evans Farms, Inc............................... 3,000 56,438
Lone Star Steakhouse & Saloon, Inc.+............... 2,000 46,250
Sbarro, Inc........................................ 2,700 71,381
-----------
211,469
-----------
MACHINERY--3.2%
Briggs & Stratton Corp............................. 2,500 124,375
Cincinnati Milacron, Inc........................... 2,400 66,600
JLG Industries, Inc................................ 12,000 152,250
Kaydon Corp........................................ 3,400 103,275
McDermott International, Inc....................... 2,200 79,887
Regal-Beloit Corp.................................. 1,900 51,063

Stewart & Stevenson Services, Inc.................. 4,800 104,400
United Dominion Industries Ltd..................... 4,600 120,175
-----------
802,025
-----------
MEDICAL PRODUCTS--1.2%
CONMED Corp.+...................................... 2,000 41,000
Hologic, Inc.+..................................... 2,200 55,275
Sunrise Medical, Inc.+............................. 5,000 77,188
West Co., Inc...................................... 3,700 124,412
-----------
297,875
-----------
METALS & MINERALS--2.1%
Carpenter Technology
Corp............................................. 1,700 82,238
Cleveland-Cliffs, Inc.............................. 1,500 65,156
Intermet Corp...................................... 3,300 61,875
Lukens, Inc........................................ 6,100 109,800
Martin Marietta Materials, Inc..................... 2,400 83,700
Texas Industries, Inc.............................. 1,500 71,156
Titanium Metals Corp.+............................. 1,700 52,275
-----------
526,200
-----------
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------
<S> <C> <C>
MULTI-INDUSTRY--2.7%
Carlisle Cos, Inc.................................. 1,700 $ 73,525
Crane Co........................................... 2,500 103,906
Dexter Corp........................................ 2,300 90,275
Eltron International, Inc.+........................ 4,000 114,500
Mark IV Industries, Inc............................ 4,300 104,275
Roper Industries, Inc.............................. 3,400 90,738
Standex International Corp.(1)..................... 1,500 52,500
Zurn Industries, Inc............................... 1,300 43,631
-----------
673,350
-----------
REAL ESTATE COMPANIES--0.2%
Insignia Financial Group, Inc., Class A+........... 2,500 54,063
-----------
REAL ESTATE INVESTMENT TRUSTS--4.5%
Amli Residential Properties Trust.................. 1,900 44,175
Apartment Investment &
Management Co., Class A.......................... 1,300 46,069
Arden Realty Group, Inc............................ 1,500 45,750
Bedford Property Investors, Inc.................... 2,900 59,450
Bradley Real Estate, Inc........................... 2,000 39,250
CBL & Associates Properties, Inc................... 1,900 45,837

Chateau Communities, Inc........................... 3,300 98,175
Chelsea GCA Realty, Inc............................ 1,300 53,137
FelCor Suite Hotels, Inc........................... 1,100 40,288
Glenborough Realty Trust, Inc...................... 7,800 199,875
Kilroy Realty Corp................................. 2,000 53,000
Koger Equity, Inc.................................. 2,000 43,250
Liberty Property Trust............................. 1,500 42,000
MGI Properties, Inc................................ 1,100 25,300
Pacific Gulf Properties, Inc....................... 1,500 33,938
Summit Properties, Inc............................. 6,000 124,125
TriNet Corporate Realty Trust, Inc................. 3,400 123,037
-----------
1,116,656
-----------
RETAIL--4.6%
AnnTaylor Stores Corp.+............................ 5,400 77,288
BJ's Wholesale Club, Inc.+......................... 1,900 54,863
Fingerhut Co., Inc................................. 4,000 88,500
Gibson Greetings, Inc.+............................ 3,400 82,025
Global DirectMail Corp.+........................... 5,600 102,900
Haverty Furniture Co., Inc......................... 2,400 30,600
Jostens, Inc.(1)................................... 17,000 396,312
K2, Inc............................................ 3,300 83,531
ShopKo Stores, Inc.+............................... 4,400 110,275
Toro Co............................................ 2,000 85,500
Wet Seal, Inc. Class A+............................ 1,800 41,175
-----------
1,152,969
-----------
</TABLE>

<PAGE>

Small-Cap Value Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- -----------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
SOFTWARE--1.2%
BancTec, Inc.+(1).................................. 2,900 $ 66,338
Policy Management Systems Corp.+................... 1,500 91,875
Sterling Software, Inc.+........................... 2,200 75,075
Symantec Corp.+.................................... 3,300 71,775
-----------

305,063
-----------
TELECOMMUNICATIONS--0.9%
General Communication, Inc., Class A+.............. 31,000 232,500
-----------
TELEPHONE--0.3%
Vanguard Cellular Systems, Inc., Class A+.......... 5,300 72,544
-----------
TRANSPORTATION--2.7%
Knightsbridge Tankers Ltd.......................... 13,000 385,125
Pittston Burlington Co............................. 5,000 135,937
Teekay Shipping Corp............................... 1,900 60,800
Trico Marine Services, Inc.+....................... 2,500 91,875
-----------
673,737
-----------
TOTAL INVESTMENT SECURITIES--79.0%
(cost $20,506,477)................................. 19,738,475
-----------
</TABLE>

PRINCIPAL
AMOUNT (IN VALUE
SECURITY DESCRIPTION THOUSANDS) (NOTE 3)
- ----------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM SECURITIES--6.8%
Cayman Island Time Deposit with State Street Bank
and Trust Co.
3.00% due 11/03/97............................... $ 701 $ 701,000
United States Treasury Bills 4.85% due 12/11/97.... 1,000 994,611
-----------
TOTAL SHORT-TERM SECURITIES
(cost $1,695,611).................................. 1,695,611
-----------
REPURCHASE
AGREEMENTS--13.5%
Agreement with State Street Bank and Trust Co.,
bearing 5.00%, dated 10/31/97 to be repurchased
11/03/97 in the amount of $2,438,015
collateralized by $2,090,000 U.S. Treasury Note
7.625% due 2/15/25 approximate aggregate value
$2,502,431 (cost $2,437,000)..................... 2,437 2,437,000
Agreement with State Street Bank and Trust Co.,
bearing 5.55%, dated 10/31/97 to be repurchased
11/03/97 in the amount of $941,435 collateralized
by $880,000 U.S. Treasury Note 7.50% due 11/15/01
approximate aggregate value $965,284 (cost
$941,000)........................................ 941 941,000
-----------
TOTAL REPURCHASE AGREEMENTS

(cost $3,378,000).................................. 3,378,000
-----------
TOTAL INVESTMENTS--
(cost $25,580,088)................................. 99.3% 24,812,086
Other assets less liabilities...................... 0.7 171,075
------- -----------
NET ASSETS-- 100.0% $24,983,161
------- -----------
------- -----------
</TABLE>

- ------------------
+ Non-income producing security

(1) Security is traded with rights attached

See Notes to Financial Statements

<PAGE>

International Equity Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--88.5%
ARGENTINA--1.2%
Banco Frances del Rio de la Plata SA, Class B ADR
(Finance).............................................. 560 $ 13,790
Banco de Galicia y Buenos Aires SA de CV, Class B ADR
(Finance).............................................. 710 17,218
Banco Rio de La Plata SA, Class B ADR+ (Finance)......... 7,800 81,900
Freeport-McMoran Copper & Gold, Inc., Class B
(Materials)............................................ 6,000 143,250
Perez Cos. SA (Multi-industry) .......................... 5,053 31,651
Telefonica de Argentina SA, Class B ADR+ (Utilities)..... 5,120 144,000
TV Azteca SA de CV ADR+
(Information & Entertainment) 1,100 21,037
YPF Sociedad Anonima, Class D ADR (Energy)............... 11,766 376,512
-----------
829,358
-----------
AUSTRALIA--2.1%
AAPC Ltd.
(Information & Entertainment) 557,100 195,890
Australia & New Zealand Banking Group Ltd. (Finance)..... 2,000 13,952

Australian Gas Light Co., Ltd. (Utilities)............... 5,000 33,404
Boral Ltd. (Materials)................................... 4,000 10,521
Brambles Industries Ltd. (Multi-industry)................ 1,000 19,227
Broken Hill Proprietary Co., Ltd. (Materials)............ 4,400 43,630
Commonwealth Bank of Australia (Finance)................. 117 1,345
Commonwealth Installment Receipt Trustee Ltd. (Finance).. 3,000 22,174
Fairfax (John) Holdings Ltd.
(Information & Entertainment) 8,000 17,666
Fosters Brewing Group Ltd.
(Consumer Staples) .................................... 8,000 15,190
Lend Lease Corp., Ltd. (Finance)......................... 1,016 20,806
National Australia Bank Ltd. (Finance)................... 11,100 151,828
News Corp., Ltd.
(Information & Entertainment) 12,333 59,064
Normandy Mining Ltd.
(Energy)............................................... 324,366 353,571
Publishing & Broadcasting Ltd.
(Information & Entertainment) 4,000 23,207

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
<S> <C> <C>
AUSTRALIA (CONTINUED)
Ramsey Health Care, Inc. (Healthcare).................... 131,000 $ 177,803
Simeon Wines
(Consumer Staples) .................................... 3,000 7,384
St. George Bank Ltd. (Finance)........................... 2,068 12,528
TABCORP Holdings Ltd.
(Information & Entertainment) 3,000 13,756
Western Mining Corp. Holdings Ltd. (Materials)........... 3,000 10,654
Westpac Banking Corp., Ltd. (Finance).................... 4,000 23,292
Woodside Petroleum Ltd. (Energy)......................... 3,000 25,338
Woolworths Ltd.+
(Consumer Discretionary)............................... 82,300 265,658
-----------
1,517,888
-----------
AUSTRIA--0.9%
Austria Tabakwerke AG*
(Consumer Staples) .................................... 6,000 249,722
Boehler-Uddeholm AG (Materials).......................... 544 39,006
VA Technologie AG
(Industrial & Commercial) ............................. 930 165,022
VAE Eisenbahnsysteme AG (Industrial & Commercial) ...... 1,776 174,182
-----------
627,932
-----------
BELGIUM--0.4%
Credit Dexia/Communal Holding+ (Finance)................. 104 11,364
Generale de Banque Belge Pour l'Etranger SA (Finance).... 130 53,175
Kredietbank NV (Finance)................................. 430 180,428

UCB SA (Healthcare)...................................... 4 13,821
-----------
258,788
-----------
BRAZIL--0.7%
Centrais Eletricas Brasileiras SA ADR+ (Utilities)....... 2,000 42,179
Companhia de Saneamento Basico do Estado de Sao Paulo
(Utilities)............................................ 295,000 54,587
Compania Brasileira de Distribuidora GDR
(Industrial & Commercial) ............................. 1,000 19,048
Compania Energetica de Minas ADR (Materials) ............ 1,543 61,597
</TABLE>

<PAGE>

International Equity Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
BRAZIL (CONTINUED)
Telecomunicacoes
Brasileras SA ADR
(Information Technology) .............................. 2,700 $ 274,050
Usinas Siderurgicas de Minas Gerais SA ADR
(Materials) ........................................... 6,000 44,900
-----------
496,361
-----------
CANADA--0.9%
Abitibi Consolidated, Inc.
(Consumer Discretionary) .............................. 1,460 20,719
Alcan Aluminium Ltd. (Materials)......................... 970 27,565
BCE, Inc. (Utilities).................................... 989 27,526
Bell Canada International, Inc.+ (Utilities)............. 11,000 184,250
Bombardier, Inc., Class B (Industrial & Commercial) ..... 1,284 24,598
CAE, Inc.
(Industrial & Commercial) ............................. 23,000 194,203
Inco Ltd. (Materials).................................... 1,015 20,813
Royal Bank of Canada (Finance)........................... 310 16,585
Seagram Co., Ltd.
(Consumer Staples) .................................... 755 25,500
Suncor Energy, Inc. (Energy) ............................ 1,087 39,142
Toronto Dominion Bank (Finance).......................... 933 34,193

TransCanada Pipelines Ltd. (Utilities)................... 1,550 28,760
Trizec Hahn Corp.
(Real Estate) ......................................... 1,373 34,438
-----------
678,292
-----------
CHILE--1.1%
Banco Santander-Chile, Class A ADR (Finance)............. 2,500 32,500
Chilectra SA ADR (Utilities)............................. 422 11,400
Chilgener SA ADR (Utilities) ............................ 589 16,050
Compania de Telecomunicaciones
de Chile SA ADR (Utilities)............................ 480 13,320
Distribucion y Servicio D&S SA+
(Consumer Discretionary) .............................. 14,500 254,656
Empresa Nacional de Electricidad
SA ADR (Utilities)..................................... 765 15,396
Enersis SA ADR (Energy).................................. 369 12,177
Maderas y Sinteticos SA ADR
(Consumer Discretionary) .............................. 1,267 15,521
Quinenco Sa (Multi-industry) ............................ 9,000 131,625
Santa Isabel SA ADR
(Consumer Discretionary) .............................. 11,175 206,737
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
<S> <C> <C>
CHILE (CONTINUED)
Sociedad Quimica Minera ADR (Materials).................. 2,100 $ 108,938
-----------
818,320
-----------
CHINA--0.3%
China Southern Airlines Ltd. ADR+
(Information & Entertainment) . 12,000 249,000
-----------
DENMARK--0.3%
Den Danske Bank+
(Finance).............................................. 280 31,614
Falck A/S
(Industrial & Commercial) ............................. 800 37,034
ISS International Service Systems A/S, Class B
(Industrial & Commercial) ............................. 1,900 57,690
Ostasiatiske Kompagnis Holdings+(Multi-industry) ........ 1,800 20,873
SAS Danmark A/S
(Industrial & Commercial) ............................. 4,700 81,035
Unidanmark A/S (Finance)................................. 200 13,518
-----------
241,764
-----------
FINLAND--1.2%
Huhtamaki Oy
(Consumer Staples) .................................... 6,541 269,315

Nokia Corp. AB, Class A ADR
(Information Technology) .............................. 770 67,277
Rauma Oy
(Industrial & Commercial) ............................. 6,137 115,070
UPM-Kymmene Oy (Materials) .............................. 7,134 158,725
Valmet Oyj
(Industrial & Commercial) ............................. 14,500 227,033
-----------
837,420
-----------
FRANCE--9.6%
Accor SA
(Information & Entertainment) 580 107,991
Alcatel Alsthom Compagnie Generael D' Electricite
(Information Technology) .............................. 770 92,909
Assurance General de France+ (Finance)................... 570 29,991
AXA SA de CV+
(Information Technology) .............................. 6,470 443,055
Banque Nationale de Paris (Finance)...................... 1,500 66,311
Bertrand Faure SA
(Consumer Discretionary) .............................. 1,700 102,561
Canal Plus
(Information & Entertainment) 220 38,292
</TABLE>

<PAGE>

International Equity Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
FRANCE (CONTINUED)
Carrefour SA
(Consumer Discretionary) .............................. 133 $ 69,402
Castorama Dubois Investisse
(Consumer Discretionary) .............................. 2,300 239,639
Club Mediterranee SA
(Information & Entertainment) 500 36,406
Compagnie de St. Gobain (Materials)...................... 2,220 318,669
Compagnie Generale des Eaux (Industrial & Commercial) ... 3,387 395,172
Credit Commerce France (Finance)......................... 530 30,027
Credit Local de France+ (Finance)........................ 95 9,536
EDAP TMS SA ADR+ (Healthcare)............................ 25,000 175,000

Elf Aquitaine SA (Energy)................................ 760 94,074
France Telecom SA+ (Utilities) .......................... 40,000 1,513,804
Genset ADR+ (Healthcare)................................. 16,000 294,000
Groupe Danone
(Consumer Staples) .................................... 1,720 262,998
Guilbert SA
(Information Technology) .............................. 120 15,665
L' Oreal (Consumer Staples) ............................. 60 21,261
L'Air Liquide SA (Materials) ............................ 467 72,460
Lapeyre (Materials)...................................... 340 19,864
Legrand SA
(Information Technology) .............................. 130 24,205
Louis Dreyfus Citrus+
(Consumer Staples) .................................... 4,000 119,274
Louis Vuitton
(Consumer Staples) .................................... 316 53,687
Pathe SA
(Information & Entertainment) 50 8,972
Pernod-Ricard
(Consumer Staples) .................................... 1,400 64,876
Pinault Printemps Redoute
(Consumer Discretionary) .............................. 370 169,212
Primagaz Cie (Utilities)................................. 120 8,945
Rhone-Poulenc Ltd. (Healthcare).......................... 8,059 351,378
Sanofi SA (Healthcare)................................... 916 87,023
Schneider SA+
(Industrial & Commercial) ............................. 4,431 236,597
Societe Francaise d'Investissements Immobiliers et de
Gestion+ (Real Estate) ................................ 4,000 242,708
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
<S> <C> <C>
FRANCE (CONTINUED)
Societe Generale d'Enterprises SA+
(Industrial & Commercial) ............................. 10,500 $ 269,042
Societe Generale+ (Finance).............................. 2,539 347,733
Sodexho SA
(Information & Entertainment) 97 48,380
Television Francais (Utilities) ......................... 625 58,185
Total SA, Class B (Energy)............................... 2,990 331,747
-----------
6,871,051
-----------
GERMANY--4.7%
Adidas AG
(Information & Entertainment) 2,634 381,241
Allianz AG (Finance)..................................... 430 95,788
Ashanti Goldfields Co., Ltd. GDR (Materials)............. 10,158 100,310
Ava Allgemeneine Handelsgesellschaft
der Verbraucher AG
(Consumer Discretionary) .............................. 600 153,150

Bayer AG (Materials)..................................... 1,983 69,597
Bayerische Hypotheken Und Bank AG (Finance).............. 1,426 59,148
Bayerische Motoren Werke AG
(Consumer Discretionary) .............................. 118 85,361
Bayerische Vereinsbank AG (Finance)...................... 348 20,188
Bilfinger & Berger Bau AG (Industrial & Commercial) ..... 410 14,723
Commerzbank AG (Finance) ................................ 440 14,932
Deutsche Bank AG (Finance) .............................. 3,944 258,083
Deutsche Telekom AG
(Information Technology) .............................. 1,346 25,221
Fresenius Medical Care AG (Healthcare)................... 5,600 394,709
Gehe AG
(Consumer Discretionary) .............................. 1,930 100,766
Hoechst AG (Healthcare).................................. 10,530 400,724
Holsten Brauerei AG
(Consumer Staples) .................................... 900 180,125
Leica Camera AG+
(Information & Entertainment) 10,000 232,045
Mannesmann AG
(Industrial & Commercial) ............................. 61 25,762
Rhon-Klinikum AG
(Consumer Discretionary) .............................. 400 38,288
SAP AG
(Information Technology) .............................. 300 86,060
Siemens AG (Multi-industry).............................. 1,259 77,492
VEBA AG (Utilities)...................................... 7,670 427,594
</TABLE>

<PAGE>

International Equity Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
GERMANY (CONTINUED)
Volkswagen AG
(Consumer Discretionary) .............................. 170 $ 100,493
-----------
3,341,800
-----------
HONG KONG--1.8%
CDL Hotels International Ltd.
(Information & Entertainment) 122,062 35,127

Cheung Kong (Holdings) Ltd.
(Real Estate) ......................................... 12,333 85,740
China Hong Kong Photo Products Holdings Ltd.
(Information & Entertainment) 110,000 27,744
China Light & Power Co., Ltd. (Utilities)................ 2,000 10,528
Dao Heng Bank Group Ltd. (Finance)....................... 11,000 25,325
First Pacific Co., Ltd.
(Industrial & Commercial) ............................. 190,000 119,802
Guoco Group Ltd. (Finance) .............................. 30,000 65,576
Henderson Land Development
Co., Ltd. (Real Estate) ............................... 3,000 16,607
Hong Kong Land Holdings Ltd. ADR (Finance)............... 42,946 97,917
HSBC Holdings PLC+ (Finance)............................. 2,133 48,280
Hutchison Whampoa Ltd. (Multi-industry).................. 27,000 186,833
Jardine Matheson Holdings Ltd. ADR (Industrial &
Commercial) 18,501 118,406
New World Development Co.,
Ltd. (Real Estate) .................................... 29,165 102,605
New World Infrastructure Ltd.+ (Industrial &
Commercial) ........................................... 62,000 122,693
Sun Hung Kai Properties Ltd.+
(Real Estate) ......................................... 1,000 7,372
Swire Pacific Ltd., Class A (Multi-industry)............. 11,000 58,760
Wharf Holdings Ltd.
(Real Estate) ......................................... 19,000 38,828
Wing Hang Bank Ltd (Finance)............................. 37,500 96,521
-----------
1,264,664
-----------
INDIA--1.2%
Hindalco Industries Ltd. GDR+* (Materials)............... 5,900 170,510
State Bank of India GDR+ (Finance)....................... 9,400 172,960
Tata Engineering & Locomotive Co., Ltd. GDR
(Consumer Discretionary) .............................. 21,650 189,619
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
<S> <C> <C>
INDIA (CONTINUED)
The Indian Smaller Companies Fund Ltd.
(Investment Companies)................................. 44,749 $ 364,253
-----------
897,342
-----------
INDONESIA--0.5%
Gulf Indonesia Resources Ltd. (Energy)................... 7,000 147,000
PT Indosat
(Information Technology) .............................. 31,500 70,995
PT Semen Cibinong TBK (Materials)........................ 280,000 36,893
Sampoerna International Finance Co. (Finance)............ 67,000 116,623
-----------
371,511

-----------
IRELAND--0.8%
Fyffes PLC
(Consumer Staples) .................................... 126,000 186,029
Kerry Group, Class A+
(Consumer Staples) .................................... 33,000 399,511
-----------
585,540
-----------
ISRAEL--0.9%
Blue Square Israel Ltd. ADR
(Consumer Staples) .................................... 4,100 47,662
ECI Telecommunications Ltd.
(Information Technology) .............................. 20,800 569,400
-----------
617,062
-----------
ITALY--3.6%
Assicurazione Generali SpA (Finance)..................... 13,900 310,759
Banca Commerciale Italiana+ (Finance).................... 3,000 8,186
Banca Popolar di Milano (Finance)........................ 10,000 55,227
BCA Fideuram SpA (Finance)............................... 3,198 12,184
Brembo SpA
(Consumer Discretionary) .............................. 20,000 199,055
Credito Italiano SpA (Finance) .......................... 32,408 86,428
CSP International Industria Calze SpA+
(Consumer Discretionary) .............................. 23,000 253,367
ENI SpA (Energy)......................................... 81,371 457,562
Industrie Natuzzi SpA ADR
(Consumer Discretionary) .............................. 11,700 261,787
Istituto Mobiliare Italiano (Finance).................... 4,000 35,771
Mediolanum SpA (Finance)................................. 1,756 29,457
</TABLE>

<PAGE>

International Equity Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

Telecom Italia SpA
(Information Technology) .............................. 41,000 152,085
Telecom Italia SpA
(Information Technology) .............................. 20,000 80,803
Telecom Italia SpA
(Information Technology) .............................. 54,777 343,287
Zucchini SpA
(Information Technology) .............................. 29,600 208,931
-----------
2,572,065
-----------
JAPAN--17.8%
Advantest Corp.
(Information Technology) .............................. 5,380 444,794
Aiwa Co., Ltd.
(Information Technology) .............................. 3,000 67,054
Alps Electric Co., Ltd.
(Information Technology) .............................. 4,000 44,869
Amada Co., Ltd.
(Industrial & Commercial) ............................. 4,000 21,271
Bank of Tokyo-Mitsubishi Ltd. (Finance).................. 23,000 300,042
Canon, Inc.
(Information Technology) .............................. 23,000 558,039
Citizen Watch Co.
(Consumer Discretionary) .............................. 3,000 19,144
Daiichi Pharmaceutical (Healthcare)...................... 6,000 85,251
Dainippon Screen MFG Co., Ltd.
(Information Technology) .............................. 5,000 40,548
Daiwa House Industry Co., Ltd.
(Consumer Discretionary) .............................. 8,000 77,108
DDI Corp. (Utilities).................................... 36 120,249
East Japan Railway Co. (Industrial & Commercial) ........ 19 92,356
Fanuc Ltd.
(Information Technology) .............................. 1,400 56,535
Fontaine Co., Ltd.
(Consumer Staples) .................................... 13,200 265,426
Fuji Bank Ltd. (Finance)................................. 22,000 190,112
Fujikura Ltd.
(Information Technology) .............................. 35,000 239,925
Fujitsu Denso
(Industrial & Commercial) ............................. 2,000 31,242
Fujitsu Ltd.
(Information Technology) .............................. 22,000 241,296
Hankyu Realty Co.
(Real Estate) ......................................... 17,000 110,320
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONTINUED)
Hitachi Ltd.+
(Information Technology) .............................. 9,000 $ 69,173

Hitachi Zosen Corp.
(Industrial & Commercial) ............................. 4,000 8,808
Honda Motor Co., Ltd.
(Consumer Discretionary) .............................. 13,000 437,474
Imagineer Co., Ltd.+
(Information & Entertainment) 3,600 40,382
Inax Corp.
(Consumer Staples) .................................... 2,000 8,708
Industrial Bank of Japan Ltd. (Finance).................. 21,000 207,644
Ito-Yokado Co., Ltd.
(Consumer Discretionary) .............................. 3,000 149,065
Japan Associate Finance EDR+ (Finance)................... 2,000 94,724
Jusco Co., Ltd.
(Consumer Discretionary) .............................. 2,000 44,703
KAO Corp.
(Consumer Staples) .................................... 22,000 307,104
Kokuyo Co., Ltd. (Materials) ............................ 3,000 70,794
Komatsu Ltd.
(Industrial & Commercial) ............................. 6,000 32,057
Komori Co., Ltd.
(Industrial & Commercial) ............................. 2,000 36,560
Kuraray Co., Ltd. (Healthcare) .......................... 7,000 62,817
Kyocera Corp.
(Information Technology) .............................. 8,000 457,998
Long-Term Credit Bank of
Japan Ltd. (Finance)................................... 6,000 20,291
Makita Corp.
(Industrial & Commercial) ............................. 4,000 56,170
Marui Co., Ltd.
(Consumer Discretionary) .............................. 6,000 101,205
Matsushita Electric
Industrial Co., Ltd.+
(Information Technology) .............................. 10,000 167,844
Matsushita Electric Works Ltd. (Industrial & Commercial)
...................................................... 24,000 217,366
Meiwa Estate Co.+ (Real Estate) ........................ 2,600 30,677
Mitsubishi Corp.
(Consumer Discretionary) .............................. 4,000 34,234
Mitsubishi Estate Co., Ltd.
(Real Estate) ......................................... 5,000 63,149
Mitsubishi Heavy Industries Ltd.
(Industrial & Commercial) ............................. 80,900 397,274
Mitsubishi Motor Corp.+
(Consumer Discretionary) .............................. 30,000 131,616
</TABLE>

<PAGE>

International Equity Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
JAPAN (CONTINUED)
Mitsui Fudosan Co., Ltd.
(Real Estate) ......................................... 30,000 $ 339,011
Miyota Co.
(Information Technology) .............................. 13,000 140,424
Murata Manufacturing Co. Ltd.
(Information Technology) .............................. 3,000 121,645
Mycal Corp.
(Consumer Discretionary) .............................. 4,000 38,222
NEC Corp.
(Information Technology) .............................. 58,900 646,016
Nichiei Co., Ltd.
(Industrial & Commercial) ............................. 700 76,776
Nippon Denso Co., Ltd. (Industrial & Commercial) ........ 9,000 194,433
Nippon Steel Corp. (Materials) .......................... 41,000 84,487
Nippon Telegraph & Telephone Corp. (Utilities)........... 74 627,171
Nippon Television Network
(Information & Entertainment) 900 320,066
Nomura Securities Co., Ltd. (Finance).................... 10,000 116,327
Orix Corp. (Finance)..................................... 4,000 273,203
Pioneer Electronic Corp. (Industrial & Commercial) ...... 9,000 148,068
Rohm Co.
(Information Technology) .............................. 3,000 296,635
Sankyo Co., Ltd. (Healthcare) ........................... 12,000 395,845
Sega Enterprises Ltd.
(Information Technology) .............................. 900 22,135
Sekisui Chemical Co., Ltd. (Materials)................... 8,000 62,950
Sekisui House Ltd.
(Consumer Discretionary) .............................. 6,000 51,350
Seven-Eleven Japan Co., Ltd.
(Consumer Discretionary) .............................. 1,000 74,782
Sharp Corp.
(Information Technology) .............................. 8,000 62,152
Shin-Etsu Chemical Co. Ltd. (Materials).................. 5,000 122,144
Shiseido Co., Ltd.
(Consumer Staples) .................................... 1,000 13,627
Shohkoh Fund & Co., Ltd. (Investment Companies).......... 600 194,433
Sony Corp.
(Information Technology) .............................. 6,300 522,950
Sumitomo Corp.
(Industrial & Commercial) ............................. 11,000 78,604
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)

- ------------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONTINUED)
Sumitomo Electric Industries Ltd.
(Industrial & Commercial) ............................. 19,000 $ 251,018
Sumitomo Forestry Co., Ltd. (Materials).................. 2,000 14,458
Sumitomo Trust & Banking
Co., Ltd. (Finance).................................... 20,000 212,713
TDK Corp.
(Information Technology) .............................. 2,000 165,850
Teijin Ltd.
(Consumer Discretionary) .............................. 13,000 42,667
Tokio Marine & Fire Insurance Co., Ltd. (Finance)........ 14,000 139,593
Tokyo Electron Ltd.
(Information Technology) .............................. 5,000 249,273
Tokyo Steel Manufacturing Co. (Materials)................ 2,000 14,125
Toppan Printing Co., Ltd.
(Information & Entertainment) 5,000 62,734
Toray Industries, Inc. (Materials)....................... 9,000 50,104
UNY Co., Ltd.
(Consumer Staples) .................................... 2,000 32,406
Yamanouchi Pharmaceutical
Co., Ltd. (Healthcare)................................. 8,000 196,759
-----------
12,708,574
-----------
KAZAKHSTAN--0.3%
Firebird Republics Fund Ltd. (1)
(Investment Companies)................................. 975 189,534
-----------
KOREA--0.4%
Housing & Commercial Bank, Korea GDR* (Finance).......... 25,400 219,075
Kookmin Bank GDR* (Finance).............................. 1 4
Korea Electric Power Corp. ADR (Utilities)............... 6,500 53,219
Korea Fund, Inc. (Investment Companies).................. 2,800 22,925
-----------
295,223
-----------
LUXEMBOURG--0.1%
Millicom International Cellular SA+
(Information & Entertainment) 1,000 41,750
-----------
MALAYSIA--0.1%
Berjaya Sports Toto Bhd
(Information & Entertainment) 11,000 30,029
Commerce Asset Holding Bhd (Finance)..................... 13,200 10,295
Resorts World Bhd
(Information & Entertainment) 5,000 8,925
</TABLE>

<PAGE>

International Equity Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
MALAYSIA (CONTINUED)
Time Engineering Bhd+
(Information Technology) .............................. 6,000 $ 2,592
United Engineers Bhd
(Industrial & Commercial) ............................. 6,000 14,219
-----------
66,060
-----------
MEXICO--1.4%
Alfa SA de CV, Class A+ (Multi-industry)................. 22,240 162,324
Cemex SA de CV ADR (Materials)........................... 3,000 23,409
Cemex SA de CV, Class B ADR (Materials).................. 17,667 77,537
Cifra SA de CV ADR
(Consumer Staples) .................................... 1,455 2,834
Fomento Economico Mexicano SA de CV, Class B +
(Consumer Staples) .................................... 4,000 28,146
Grupo Mexico SA de CV,
Series L (Materials)................................... 46,100 136,348
Gruma SA ADR*
(Consumer Staples) .................................... 622 9,692
Gruma SA+
(Consumer Staples) .................................... 5,040 19,715
Grupo Financiero Banamex-Accival SA de CV., Class B
(Finance).............................................. 69,000 136,601
Grupo Industrial Maseca SA de CV, Class B
(Industrial & Commercial) ............................. 9,000 8,694
Grupo Modelo SA de CV, Class C (Consumer Staples) ...... 2,000 14,788
Kimberly-Clark de Mexico SA de CV ADR (Materials)........ 6,526 28,641
Panamerican Beverages, Inc., Class A ADR
(Consumer Staples) .................................... 7,400 229,400
Telefonos de Mexico SA ADR (Utilities)................... 3,100 134,075
-----------
1,012,204
-----------
NETHERLANDS--5.0%
ABN Amro Holdings NV (Finance)........................... 5,698 114,752
Ahrend NV
(Information Technology) .............................. 2,267 75,547
Akzo Nobel NV + (Multi-industry)......................... 180 31,717
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
<S> <C> <C>
NETHERLANDS (CONTINUED)
ASM Lithography Holdings NV+
(Information Technology) .............................. 2,200 $ 161,150
Baan Co NV+
(Information Technology) .............................. 583 41,289
Baan Co. NV+
(Information Technology) .............................. 250 17,531
CSM NV
(Consumer Staples) .................................... 1,700 77,579
Elsevier NV
(Consumer Discretionary) .............................. 19,520 306,650
Fortis Amev NV (Finance)................................. 2,120 83,315
Gucci Group NV-NY Registry Shares
(Consumer Discretionary) .............................. 532 19,352
Heineken NV
(Consumer Staples) .................................... 1,000 162,658
ING Groep NV (Finance)................................... 6,310 264,880
Koninkijke Nutricia Verenigde Bedrijuen NV
(Consumer Staples) .................................... 1,580 45,166
Koninklijke Ahold NV
(Consumer Discretionary) .............................. 2,054 52,580
Koninlijke PTT Nederland NV (Utilities).................. 290 11,083
Philips Electronics NV
(Information Technology) .............................. 5,300 414,937
PolyGram NV
(Information & Entertainment) 2,330 132,491
Royal Dutch Petroleum Co. (Energy)....................... 16,640 880,210
Unilever NV & PLC (Multi-industry)....................... 2,960 157,338
Volker Wessels Stevin NV+ (Industrial & Commercial) ..... 2,667 81,047
Wolters Kluwer NV+
(Information & Entertainment) 3,480 427,315
-----------
3,558,587
-----------
NEW ZEALAND--2.2%
Air New Zealand Ltd.+
(Information & Entertainment) 74,000 156,659
Brierley Investments Ltd. (Finance)...................... 314,900 243,130
Carter Holt Harvey Ltd.
(Consumer Staples) .................................... 4,000 6,974
CDL Hotels New Zealand Ltd.+
(Information & Entertainment) 575,000 150,370
Fletcher Challenge Ltd.
building shares+ (Multi-industry)...................... 4,000 12,079
</TABLE>

<PAGE>

International Equity Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
NEW ZEALAND (CONTINUED)
Fletcher Challenge Ltd.
energy shares+ (Multi-industry)........................ 3,000 $ 13,449
Fletcher Challenge Ltd.
forest shares+ (Multi-industry)........................ 221,460 213,733
Fletcher Challenge Ltd.
paper shares+ (Multi-industry)......................... 5,900 9,698
Kiwi Income Property Trust
(Real Estate) ......................................... 275,000 196,913
Pacific Capital Assets Ltd.
(Real Estate) ......................................... 560,000 108,092
Restaurant Brands
New Zealand Ltd.
(Information & Entertainment) 330,000 427,387
Telecommunications Corp. of New Zealand Ltd.
(Information Technology) .............................. 3,000 14,533
Wrightson Ltd. (Multi-industry).......................... 112,000 59,973
-----------
1,612,990
-----------
NORWAY--1.6%
Alvern Norway ASA+
(Information & Entertainment) 9,000 56,755
Fred Olsen Energy ASA+ (Energy).......................... 13,000 327,916
Norsk Hydro ASA (Energy)................................. 3,760 207,739
Orkla ASA
(Consumer Discretionary) .............................. 2,260 208,270
Saga Petroleum ASA, Class B (Energy)..................... 770 13,684
SAS Norge ASA
(Information & Entertainment) 3,900 65,956
Smedvig ASA ADR (Energy)................................. 1,850 53,419
Smedvig ASA, Class B (Energy)............................ 6,300 186,000
-----------
1,119,739
-----------
PERU--0.3%
Cerveceria Per Backus Jo
(Consumer Staples) .................................... 218,872 199,927
Telefonica del Peru SA ADR (Industrial & Commercial) .... 346 6,834
-----------
206,761

-----------
PHILIPPINES--0.5%
Cosmos Bottling
(Consumer Staples) .................................... 1,400,000 229,055
San Miguel
(Consumer Staples) .................................... 98,000 109,196
-----------
338,251
-----------
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
<S> <C> <C>
PORTUGAL--0.6%
Cimpor-Cimentos de Portugal SA (Materials)............... 7,100 $ 179,670
Establecimentos Jeronimo Martins & Filho SA
(Consumer Discretionary) .............................. 519 33,941
Mota & Companhia SA (Industrial & Commercial) ........... 7,900 132,528
Portugal Telecom SA ADR (Utilities)...................... 2,500 103,125
-----------
449,264
-----------
SINGAPORE--2.2%
City Developments Ltd.
(Real Estate) ......................................... 3,333 13,967
Cycle & Carriage Ltd.
(Consumer Discretionary) .............................. 12,000 52,571
DBS Land Ltd.
(Real Estate) ......................................... 51,000 86,781
Development Bank of Singapore Ltd. alien shares
(Finance) ............................................. 67,500 630,000
FJ Benjamin Holdings Ltd.+
(Consumer Discretionary) .............................. 230,000 59,143
Fraser & Neave Ltd.
(Consumer Staples) .................................... 3,000 15,047
Keppel Bank (Finance).................................... 106,000 172,965
Overseas Chinese Banking Corp., Ltd. alien shares
(Finance).............................................. 1,200 6,667
Overseas Union Bank Ltd.
alien shares (Finance)................................. 6,000 20,000
Sembawang Shipyard Ltd. (Industrial & Commercial) ....... 61,000 187,454
Singapore Land Ltd.
(Real Estate) ......................................... 6,000 17,067
Singapore Press Holdings Ltd. alien shares
(Information & Entertainment) 4,667 64,301
United Overseas Bank Ltd.
alien shares (Finance)................................. 40,000 220,952
Want Want Holding, Class A
(Consumer Staples) .................................... 1,600 3,104
Want Want Holding+
(Consumer Staples) .................................... 8,000 16,000
-----------

1,566,019
-----------
SOUTH AFRICA--0.7%
De Beers Centenary AG (Industrial & Commercial) ......... 12,000 286,255
</TABLE>

<PAGE>

International Equity Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
SOUTH AFRICA (CONTINUED)
Dimension Data Holdings Ltd.+
(Information Technology) .............................. 45,000 $ 187,013
-----------
473,268
-----------
SPAIN--0.9%
Banco Bilbao Vizcaya SA (Finance)........................ 540 14,440
Banco Popular Espanol SA (Finance)....................... 880 51,964
Banco Santander SA (Finance) ............................ 2,897 81,153
Baron de Ley
(Consumer Staples) .................................... 12,500 236,303
Centros Com Pryca
(Consumer Discretionary) .............................. 800 12,704
Corporation Bancaria de Espana SA (Finance).............. 540 29,994
Empresa Nacional de Electricidad SA (Utilities).......... 3,240 61,027
Gas Natural SDG SA (Utilities) .......................... 640 29,653
Iberdrola SA (Utilities)................................. 3,190 38,156
Repsol SA (Energy)....................................... 1,084 45,455
Telefonica de Espana SA (Utilities)...................... 2,517 68,691
-----------
669,540
-----------
SWEDEN--2.1%
ABB AB, Class A (Utilities).............................. 3,710 43,342
ABB AB + (Utilities)..................................... 120 156,401
Astra AB, Class A (Healthcare) .......................... 2,844 45,945
Astra AB, Class B (Healthcare) .......................... 13,330 206,449
Atlas Copco AB, Class B (Industrial & Commercial) ....... 2,280 67,731
Electrolux AB, Series B
(Consumer Discretionary) .............................. 7,520 622,491

Granges AB+ (Materials).................................. 380 6,215
Hennes & Mauritz AB, Class B
(Consumer Discretionary) .............................. 2,850 116,627
Nordbanken AB (Finance).................................. 1,330 41,729
Sandvik AB, Class B
(Industrial & Commercial) ............................. 2,240 68,188
Scania AB, Class A
(Consumer Discretionary) .............................. 2,133 51,546
Volvo AB, Class A
(Consumer Discretionary) .............................. 2,217 57,572
-----------
1,484,236
-----------
SWITZERLAND--5.0%
Adia SA+
(Industrial & Commercial) ............................. 290 92,162
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
<S> <C> <C>
SWITZERLAND (CONTINUED)
Alusuisse-Lonza Holdings AG (Materials).................. 67 $ 60,050
CS Holding AG+ (Finance)................................. 3,310 466,272
Julius Baer Holdings AG (Finance)........................ 339 505,988
Munters AB
(Industrial & Commercial) ............................. 10,000 101,470
Nestle SA+
(Consumer Staples) .................................... 180 253,626
Novartis AG (Healthcare)................................. 290 454,183
Oerlikon Buhrle Holding AG+ (Multi-industry)............. 2,100 268,452
Roche Holdings AG (Healthcare)........................... 63 553,626
SGS Societe Generale de Surance Holding SA (Finance)..... 100 192,823
SMH AG
(Consumer Discretionary) .............................. 730 407,163
Swiss Bank Corp.+ (Finance) ............................. 270 72,598
TAG Heuer International SA+
(Consumer Discretionary) .............................. 1,049 119,865
-----------
3,548,278
-----------
THAILAND--0.6%
Advanced Information Services PCL alien shares
(Information & Entertainment) 1,000 5,216
Industrial Finance Corp. of Thailand alien shares
(Finance).............................................. 303,200 251,281
Royal Garden Resort PLC
alien shares
(Information & Entertainment) 500,000 140,159
Siam City Cement PCL
alien shares (Materials)............................... 4,700 39,181
-----------
435,837

-----------
UNITED KINGDOM--14.5%
Abbey National PLC (Finance)............................. 5,000 79,525
Airtours PLC
(Information & Entertainment) 13,333 265,078
Argos PLC
(Consumer Staples) .................................... 9,000 95,883
Argyll Group PLC+
(Consumer Staples) .................................... 14,000 91,194
ASDA Group PLC
(Consumer Staples) .................................... 17,000 44,209
BG PLC (Utilities)....................................... 6,000 26,374
Biocompatibles International PLC (Healthcare)............ 3,400 32,515
</TABLE>

<PAGE>

International Equity Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Bluebird Toys PLC
(Information & Entertainment) 125,000 $ 224,399
British Petroleum Co. PLC (Energy)....................... 7,000 102,880
Burton Group PLC
(Consumer Discretionary) .............................. 116,000 245,220
Cable & Wireless PLC
(Information Technology) .............................. 41,667 332,757
Cadbury Schweppes PLC
(Consumer Staples) .................................... 11,000 110,732
Caradon PLC (Materials).................................. 10,800 34,427
Centrica PLC+ (Utilities)................................ 6,000 8,431
Compass Group PLC
(Industrial & Commercial) ............................. 3,000 31,710
Cookson Group PLC (Multi-industry)....................... 58,400 235,154
Eidos
(Information Technology) .............................. 15,000 173,647
Electrocomponents PLC
(Information Technology) .............................. 6,000 46,809
General Electric Co. PLC (Industrial & Commercial) ...... 38,000 242,745
GKN PLC
(Consumer Discretionary) .............................. 1,000 22,432

Glaxo Wellcome PLC (Healthcare).......................... 26,333 564,623
Grand Metropolitan PLC
(Information & Entertainment) 21,000 189,552
Guinness PLC (Consumer Staples).......................... 18,000 160,963
Hanson PLC
(Industrial & Commercial) ............................. 22,125 113,217
Imperial Chemical Industries PLC
(Materials)............................................ 20,100 296,761
Inchcape PLC (Multi-industry) ........................... 66,000 241,395
Kingfisher PLC
(Consumer Staples) .................................... 19,000 273,507
Ladbroke Group PLC
(Information & Entertainment) 11,000 49,276
Laporte PLC (Materials).................................. 20,000 220,792
Legal & General PLC (Finance)............................ 36,667 304,515
Lonrho PLC (Multi-industry) ............................. 38,000 62,479
LucasVarity PLC
(Consumer Discretionary) .............................. 60,000 205,860
Medeva PLC (Healthcare).................................. 33,700 117,038
Morgan Stanley Emerging Market Fund, Inc.
(Investment Companies) ................................ 3,600 48,375
<CAPTION>

VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ------------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
National Westminster Bank PLC (Finance).................. 52,000 $ 747,673
Orange PLC+
(Information & Entertainment) 114,000 435,603
Pearson PLC
(Information & Entertainment) 34,000 444,940
Pilkington PLC
(Consumer Staples) .................................... 85,900 216,178
Randgold Resources Ltd. GDR (Materials).................. 10,000 95,000
Rank Group PLC
(Information & Entertainment) 12,000 67,043
Reed International PLC
(Information & Entertainment) 30,000 296,710
Rio Tinto PLC (Materials)................................ 8,000 103,081
Rolls Royce PLC
(Industrial & Commercial) ............................. 41,400 148,642
Sainsbury (J.) PLC+
(Consumer Staples) .................................... 35,000 292,138
Shell Transport & Trading Co. PLC (Energy)............... 44,000 312,078
Smith (David S) Holdings PLC (Materials)................. 5,000 19,126
Smith (W.H.) Group PLC
(Consumer Discretionary) .............................. 45,000 285,242
Smithkline Beecham PLC (Healthcare)...................... 42,800 405,714
T & N PLC
(Consumer Discretionary) .............................. 7,000 29,551
Tanjong PLC
(Information & Entertainment) 14,000 24,779

Tarmac PLC (Materials)................................... 133,333 261,729
Tesco PLC (Consumer Staples) ............................ 12,000 96,085
Thistle Hotels PLC
(Information & Entertainment).......................... 58,300 148,676
Tomkins PLC (Consumer Staples)........................... 33,000 169,419
United News & Media PLC (Information & Entertainment).... 13,000 163,581
Vickers PLC (Multi-industry)............................. 43,000 164,847
Williams Holdings PLC
(Industrial & Commercial) ............................. 28,724 172,526
-----------
10,394,835
-----------
VENEZUELA--0.0%
Compania Anon Nacional Tele de Venezuela ADR
(Utilities)............................................ 230 10,063
-----------
TOTAL COMMON STOCK
(cost $66,167,044)....................................... 63,257,171
-----------
</TABLE>

<PAGE>

International Equity Portfolio
- --------------------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS -- October 31, 1997 -- (continued)

<TABLE>
<CAPTION>
SHARES/WARRANTS/
PRINCIPAL
AMOUNT
(IN VALUE
SECURITY DESCRIPTION THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK--0.6%
AUSTRALIA--0.0%
News Corp., Ltd.
(Information & Entertainment) ................... 2,116 $ 9,390
Sydney Harbour Casualty (Finance).................. 12,600 12,848
-----------
22,238
-----------
GERMANY--0.1%
Fresenius AG (Healthcare).......................... 100 16,882
Hornbach Holding AG
(Consumer Discretionary) ........................ 250 16,823

SAP AG
(Information Technology) ........................ 90 26,810
-----------
60,515
-----------
ITALY--0.3%
Istituto Finanziario (Finance) ...................... 18,600 234,560
-----------
UNITED KINGDOM--0.2%
Simba Fund Ltd.
(Investment Companies)........................... 14,000 136,500
-----------
TOTAL PREFERRED STOCK
(cost $462,453).................................... 453,813
-----------
OPTIONS--0.0%+
SINGAPORE--0.0%
DBS 50 Index, Jan 1998/403 Call(1)................. 83 0
DBS 50 Index, Jan 1998/404 Call(1)................. 23 0
DBS 50 Index, Jan 1998/407 Call(1)................. 80 0
DBS 50 Index, Jan 1998/407 Call(1)................. 79 0
-----------
TOTAL OPTIONS (cost $11,500)......................... 0
-----------
WARRANTS--0.0%+
FRANCE--0.0%
Compagnie Generale des Eaux
5/02/01
(Industrial & Commercial)........................ 1,760 930
Rhone-Poulenc Ltd. 11/05/01
(Healthcare)..................................... 2,026 6,410
-----------
TOTAL WARRANTS (cost $338)........................... 7,340
-----------
CONVERTIBLE BONDS--0.3%
CHINA--0.2%
Qingling Motors Co., Ltd.
3.50% 2002....................................... $ 156 156,780
-----------
THAILAND--0.1%
Bangkok Bank PCL alien shares 3.25% 2004........... 37 19,795
-----------
TOTAL CONVERTIBLE BONDS
(cost $193,481).................................... 176,575
-----------
TOTAL INVESTMENT SECURITIES
(cost $66,834,816)................................. 63,894,899
-----------

PRINCIPAL
AMOUNT
(IN VALUE

SECURITY DESCRIPTION THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM SECURITIES--1.2%
Cayman Island Time Deposit with State Street Bank and
Trust Co. 3.00% due 11/03/97 (cost $835,000)....... $ 835 $ 835,000
-----------
REPURCHASE AGREEMENTS--9.3%
Agreement with State Street Bank and Trust Co.,
bearing 5.00%, dated 10/31/97 to be repurchased
11/03/97 in the amount of $5,256,189
collateralized by $5,310,000 U.S. Treasury Note
6.375%, due 4/30/99 approximate aggregate value
$5,366,419
(cost $5,254,000)................................ 5,254 5,254,000
Agreement with State Street Bank and Trust Co.,
bearing 5.55%, dated 10/31/97 to be repurchased
11/03/97 in the amount of $1,425,659
collateralized by $1,225,000 U.S. Treasury Note
7.625%, due 2/15/25 approximate aggregate value
$1,466,736
(cost $1,425,000)................................ 1,425 1,425,000
-----------
TOTAL REPURCHASE AGREEMENTS
(cost $6,679,000).................................. 6,679,000
-----------
TOTAL INVESTMENTS--
(cost $74,348,816)................................. 99.9% 71,408,899
Other assets less liabilities--.................... 0.1 71,497
------- -----------
NET ASSETS-- 100.0% $71,480,396
------- -----------
------- -----------
</TABLE>

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

+ Non-income producing security
* Resale restricted to qualified institutional buyers
ADR ('American Depositary Receipt')
EDR ('European Depositary Receipt')
GDR ('Global Depositary Receipt')
(1) Fair valued security, see Note 3

See Notes to Financial Statements

<PAGE>

52
NOTES TO FINANCIAL STATEMENTS -- October 31, 1997

Note 1. Organization

Style Select Series, Inc. (the 'Fund') is an open-end diversified management
investment company organized as a Maryland corporation on July 3, 1996. The Fund
is managed by SunAmerica Asset Management Corp. ('SunAmerica'), an indirect
wholly-owned subsidiary of SunAmerica Inc. The Fund currently offers eight
separate investment portfolios (each, a 'Portfolio'). The assets of each
Portfolio are normally allocated among at least three investment advisers (each,
an 'Adviser'), each of which will be independently responsible for advising its
respective portion of the Portfolio's assets. The investment objectives for each
of the Portfolios are as follows:

Large-Cap Growth Portfolio seeks long-term growth of capital by investing
generally in equity securities of large-sized companies.

Mid-Cap Growth Portfolio seeks long-term growth of capital by investing
primarily in equity securities which have a market capitalization of $1 billion
to $5 billion.

Aggressive Growth Portfolio seeks long-term growth of capital by investing
primarily in equity securities which have a market capitalization of less than
$1 billion.

Large-Cap Blend Portfolio seeks long-term growth of capital and a reasonable
level of current income by investing generally in equity securities of
large-sized companies.

Large-Cap Value Portfolio seeks long-term growth of capital by investing in
equity securities of large-sized companies using a 'value' style of investing.

Value Portfolio seeks long-term growth of capital by investing primarily in
equity securities using a 'value' style of investing.

Small-Cap Value Portfolio seeks long-term growth of capital by investing in
equity securities of small-sized companies using a 'value' style of investing.

International Equity Portfolio seeks long-term growth of capital by investing in
equity securities of issuers in countries other than the United States.

Each Portfolio currently offers three classes of shares. Class A shares are
offered at net asset value per share plus an initial sales charge. Class B
shares are offered without an initial sales charge, although a declining
contingent sales charge may be imposed on redemptions made within six years of
purchase. Any purchases of Class A shares in excess of $1,000,000 will be
subject to a contingent deferred sales charge on redemptions made within one
year of purchase. Class B shares of each Portfolio will convert automatically to
Class A shares on the first business day of the month after seven years from the
issuance of such Class B shares and at such time will be subject to the lower
distribution fee applicable to Class A shares. Class C shares are offered at net
asset value, although they may be subject to a contingent deferred sales charge
on redemptions made within one year of purchase. Each class of shares bears the
same voting, dividend, liquidation and other rights and conditions and each
makes distribution and account maintenance and service fee payments under the
distribution plans pursuant to Rule 12b-1 under the Investment Company Act of

1940 (the '1940 Act'), except that Class B shares and Class C shares are subject
to higher distribution fee rates.

Note 2. Reorganization

On September 29, 1997, International Equity Portfolio acquired all of the assets
and liabilities of SunAmerica Global Balanced Fund ('Global Balanced Fund'), a
regulated investment company registered under the 1940 Act. The agreement was
adopted as a tax-free reorganization of Global Balanced Fund. In exchange for
all of the assets of Global Balanced Fund, International Equity Portfolio issued
495,830 Class A shares and 1,063,431 Class B shares at net asset values of
$13.50 and $13.42, respectively, to Class A shareholders and Class B

<PAGE>

53
NOTES TO FINANCIAL STATEMENTS -- October 31, 1997 -- (continued)
shareholders of Global Balanced Fund. As of the close of business on September
29, 1997, the total net assets of Global Balanced were $20,964,949 (including
$1,218,731 of unrealized appreciation on investments and $1,619 of unrealized
depreciation of foreign currency). The net assets of International Equity
Portfolio were $56,392,003 on September 29, 1997.

Note 3. 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. The following is a summary of the
significant accounting policies followed by the Portfolios in the preparation of
their financial statements:

SECURITY VALUATIONS: Securities that are actively traded in the over-the-counter
market, including listed securities for which the primary market is believed by
the Adviser to be over-the-counter, are valued at the quoted bid price provided
by principal market makers. Securities listed on the New York Stock Exchange
('NYSE') or other national securities exchanges, are valued on the basis of the
last sale price on the exchange on which they are primarily traded. If there is
no sale on that day, then securities are valued at the closing bid price on the
NYSE or other primary exchange for that day. However, if the last sale price on
the NYSE is different than the last sale price on any other exchange, the NYSE
price is used. Securities that are traded on foreign exchanges are ordinarily
valued at the last quoted sales price available before the time when the assets
are valued. 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. Values of portfolio securities primarily traded on foreign exchanges
are already translated into U.S. dollars when received from a quotation service.
Options traded on national securities exchanges are valued as of the close of
the exchange on which they are traded. Futures and options traded on commodities
exchanges are valued at their last sale price as of the close of such exchange.
The Portfolios may make use of a pricing service in the determination of their
net asset values. Securities for which market quotations are not readily
available and other assets are valued at fair value as determined pursuant to
procedures adopted in good faith by the Directors. Short-term investments which

mature in less than 60 days are valued at amortized cost, if their original
maturity was 60 days or less, or by amortizing their value on the 61st day prior
to maturity, if their original term to maturity exceeded 60 days.

REPURCHASE AGREEMENTS: The Portfolios, along with other affiliated registered
investment companies, may transfer uninvested cash balances into a single joint
account, the daily aggregate balance of which is invested in one or more
repurchase agreements collateralized by U.S. Treasury or federal agency
obligations. The Portfolios' custodian takes possession of the collateral
pledged for investments in such repurchase agreements. The underlying collateral
is valued daily on a mark to market basis to ensure that the value, at the time
the agreement is entered into, is equal to at least 102% of the repurchase
price, including accrued interest. In the event of default of the obligation to
repurchase, a Portfolio 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
Portfolio may be delayed or limited.

Pursuant to exemptive relief granted by the Securities and Exchange Commission,
the Portfolios are permitted to participate in joint repurchase agreement
transactions with other affiliated mutual funds.

As of October 31, 1997, the Aggressive Growth Portfolio and the Large-Cap Blend
Portfolio had a 2.9% and 0.3% undivided interest, respectively, which
represented $2,661,000 and $273,000, respectively, in principal

<PAGE>

54
NOTES TO FINANCIAL STATEMENTS -- October 31, 1997 -- (continued)
amount in a joint repurchase agreement with PaineWebber, Inc. As of such date,
the repurchase agreement in the joint account and the collateral therefore were
as follows:

PaineWebber, Inc. Repurchase Agreement, 5.60% dated 10/31/97, in the principal
amount of $91,372,000 repurchase price $91,414,640 due 11/03/97, collateralized
by $93,235,000 U.S. Treasury Notes 5.625% due 10/31/99, approximate aggregate
value $93,249,918.

As of October 31, 1997, the Large Cap Value Portfolio had a 0.2% undivided
interest which represented $130,000 in principal amount in a joint repurchase
agreement with PaineWebber, Inc. As of such date, the repurchase agreement in
the joint account and the collateral therefore were as follows:

PaineWebber, Inc. Repurchase Agreement 5.67% dated 10/31/97, in the principal
amount of $65,665,000 repurchase price $65,696,027 due 11/03/97 collateralized
by $15,710,000 U.S. Treasury Notes 5.625% due 1/31/98 and $50,000,000 U.S.
Treasury Note 5.375% due 5/31/98, approximate aggregate value $67,016,362.

SECURITIES TRANSACTIONS, INVESTMENT INCOME, EXPENSES, DIVIDENDS AND
DISTRIBUTIONS TO SHAREHOLDERS: Securities transactions are recorded on a trade
date basis. Realized gains and losses on sales of investments are calculated on
the identified cost basis. Interest income is recorded on the accrual basis;

dividend income is recorded on the ex-dividend date. Portfolios investing in
foreign securities may be subject to taxes imposed by countries in which they
invest. Such taxes are generally based on either income or gains earned or
repatriated. The Portfolios accrue such taxes when the related income is earned.
The Portfolios amortize premiums and accrue discounts including original issue
discounts as required for federal income tax purposes.

Net investment income, other than class specific expenses and realized and
unrealized gains and losses, is allocated daily to each class of shares based
upon the relative net asset value of outstanding shares of each class of shares
at the beginning of the day (after adjusting for the current capital shares
activity of the respective class).

Expenses common to all Portfolios, not directly related to individual
Portfolios, are allocated among the Portfolios based upon their relative net
asset value or other appropriate methods.

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. Net investment income/loss, net
realized gain/loss, and net assets were not affected.

For the period ended October 31, 1997, the following reclassifications arising
from book/tax differences were primarily the result of reclassifications due to
net operating losses.

<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED PAID
NET REALIZED NET INVESTMENT IN
GAIN/LOSS INCOME/LOSS CAPITAL
------------- -------------- ---------
<S> <C> <C> <C>
Large-Cap Growth Portfolio................................................ $ -- $ 4,215 $ (4,215)
Mid-Cap Growth Portfolio.................................................. (351,091) 595,049 (243,958)
Aggressive Growth Portfolio............................................... (567,414) 597,185 (29,771)
Large-Cap Blend Portfolio................................................. (191) 4,493 (4,302)
Large-Cap Value Portfolio................................................. -- 4,327 (4,327)
Value Portfolio........................................................... (220,800) 248,523 (27,723)
Small-Cap Value Portfolio................................................. -- 4,933 (4,933)
International Equity Portfolio............................................ (209,293) 233,038 (23,745)
</TABLE>

<PAGE>

55
NOTES TO FINANCIAL STATEMENTS -- October 31, 1997 -- (continued)

FOREIGN CURRENCY TRANSACTION: The books and records of the Fund 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 Fund 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 Fund 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 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 a Portfolio'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 other assets and liabilities arising as a result of
changes in the exchange rate.

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 realized foreign exchange 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: 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 option 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 basis
of the security which the Portfolio purchased upon exercise of the option.

ORGANIZATIONAL EXPENSES: Costs incurred by SAAMCo in connection with the
organization of each Portfolio are being amortized on a straight line basis by
the Portfolios over a period not to exceed 60 months from the date the
Portfolios commenced operations.

<PAGE>

56
NOTES TO FINANCIAL STATEMENTS -- October 31, 1997 -- (continued)

Note 4. Investment Advisory and Management Agreement, Distribution Agreement and
Service Agreement

The Fund, on behalf of each Portfolio, has entered into an Investment Advisory
and Management Agreement (the 'Agreement') with SunAmerica. Under the Agreement,
SunAmerica provides continuous supervision of the respective Portfolios and
administers their corporate affairs, subject to general review by the Board of
Directors (the 'Directors'). In connection therewith, SunAmerica furnishes the
Fund with office facilities, maintains certain of the Fund's books and records,
and pays for the salaries and expenses of all personnel, including officers of
the Fund who are employees of SunAmerica and its affiliates. The annual rate of
the investment advisory and management fee payable by each Portfolio to
SunAmerica as full compensation for services and facilities furnished to the
Fund is as follows: 1.00% of the average daily net assets of the Large-Cap
Growth, Mid-Cap Growth, Aggressive Growth, Large-Cap Blend, Large-Cap Value,
Value and Small-Cap Value Portfolios, respectively, and 1.10% of the average
daily net assets of the International Equity Portfolio.

The organizations described below act as Advisers to the Fund pursuant to
Subadvisory Agreements with SunAmerica. Under the Subadvisory Agreements, the
Advisers manage the investment and reinvestment of the assets of the respective
Portfolios for which they are responsible. Each of the following Advisers is
independent of SunAmerica (with the exception of the Aggressive Growth and
Large-Cap Blend Portfolios, for which SunAmerica acts as an Adviser) and
discharges its responsibilities subject to the policies of the Directors and the
oversight and supervision of SunAmerica, which pays the Advisers' fees. The
Advisers for the Large-Cap Growth Portfolio are Janus Capital Corporation; L.
Roy Papp & Associates; and Montag & Caldwell, Inc. The Advisers for the Mid-Cap
Growth Portfolio are Miller Anderson & Sherrerd, LLP; Pilgrim Baxter &
Associates, Ltd.; and T. Rowe Price Associates, Inc. The Advisers for the
Aggressive Growth Portfolio are Janus Capital Corporation; SunAmerica; and
Warburg, Pincus Asset Management, Inc. The Advisers for the Large-Cap Blend
Portfolio are Lazard Asset Management; SunAmerica; and T. Rowe Price Associates,
Inc. The Advisers for the Large-Cap Value Portfolio are David L. Babson & Co.,
Inc.; Davis Selected Advisers, L.P; and Wellington Management. The Advisers for
the Value Portfolio are Davis Selected Advisers, L.P.; Neuberger & Berman, LLC.;

and Strong Capital Management, Inc. The Advisers for the Small-Cap Value are
Berger Associates, Inc.; Lazard Asset Management; and The Glenmede Trust
Company. The Advisers for the International Equity Portfolio are Rowe
Price-Fleming International, Inc.; Strong Capital Management, Inc.; and Warburg,
Pincus Counsellors, Inc. Each Adviser is paid monthly by SunAmerica a fee equal
to a percentage of the average daily net assets of the Portfolio allocated to
the Adviser. Through October 31, 1997, SunAmerica paid the Advisers for each
Portfolio the following, expressed as an annual percentage of the average daily
net assets of each Portfolio: Large-Cap Growth Portfolio, .48%; Mid-Cap Growth
Portfolio, .50%; Aggressive Growth Portfolio, .37%; Large-Cap Blend Portfolio,
.32%; Large-Cap Value Portfolio, .41%; Value Portfolio, .50%; Small-Cap Value
Portfolio, .55% and International Equity Portfolio, .65%.

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 Portfolio's average net assets: Large-Cap Growth Portfolio,
Mid-Cap Growth Portfolio, Aggressive Growth Portfolio, Large-Cap Blend
Portfolio, Large-Cap Value Portfolio, Value Portfolio and Small-Cap Value
Portfolio 1.78% for Class A shares and 2.43% for Class B shares and Class C
shares, respectively. International Equity Portfolio 2.03% for Class A shares
and 2.68% for Class B and Class C shares. Prior to June 17, 1997, SunAmerica
voluntarily agreed to waive fees or reimburse expenses, if necessary, to keep
annual operating expenses at or below an annual rate of 1.90% of the average
daily net assets of Class A and 2.55% of the average daily net assets of Class B
and Class C shares for the Mid-Cap Growth Portfolio, Aggressive Growth Portfolio
and Value Portfolio, and 2.15% of the average daily net assets of Class A shares
and 2.80% of the average daily net asets of Class B and Class C shares for the
International Equity Portfolio. SunAmerica also may voluntarily waive or
reimburse additional amounts to increase the investment return to a Portfolio's
investors. Further, any waivers or reimbursements made by SunAmerica with
respect to a Portfolio are subject to recoupment from that Portfolio within the
following two

<PAGE>

57
NOTES TO FINANCIAL STATEMENTS -- October 31, 1997 -- (continued)
years, provided that the Portfolio is able to effect such payment to SunAmerica
and remain in compliance with the foregoing expense limitations.

At October 31, 1997, expenses previously waived or reimbursed by SAAMCO that are
subject to recoupment are as follows:
<TABLE>
<CAPTION>
MANAGEMENT OTHER
FEES EXPENSES
REIMBURSED REIMBURSED
---------- ----------
<S> <C> <C>
Large-Cap Growth A............. $ 6,709 --
Large-Cap Growth B............. 102 $ 163
Large-Cap Growth C............. 35 158
Mid-Cap Growth A............... 71,761 --
Mid-Cap Growth B............... 55,863 13,191

Mid-Cap Growth C............... 5,072 9,168
Aggressive Growth A............ 78,040 --
Aggressive Growth B............ 53,505 12,588
Aggressive Growth C............ 4,955 9,084
Large-Cap Blend A.............. 6,679 --
Large-Cap Blend B.............. 139 163
Large-Cap Blend C.............. 36 158

<CAPTION>
MANAGEMENT OTHER
FEES EXPENSES
REIMBURSED REIMBURSED
---------- ----------
<S> <C> <C>

Large-Cap Value A.............. $ 6,656 --
Large-Cap Value B.............. 163 $ 163
Large-Cap Value C.............. 35 158
Value A........................ 95,010 --
Value B........................ 86,174 18,541
Value C........................ 7,801 9,906
Small-Cap Value A.............. 6,269 --
Small-Cap Value B.............. 516 153
Small-Cap Value C.............. 106 156
International Equity A......... 80,880 --
International Equity B......... 60,595 13,024
International Equity C......... 6,498 8,825
</TABLE>

The Fund, on behalf of each Portfolio, has entered into a Distribution Agreement
with SunAmerica Capital Services, Inc. ('SACS' or the 'Distributor'), an
indirect wholly-owned subsidiary of SunAmerica Inc. Each Portfolio has adopted a
Distribution Plan (the 'Plan') in accordance with the provisions of Rule 12b-1
under the Act. Rule 12b-1 under the Act permits an investment company directly
or indirectly to pay expenses associated with the distribution of its shares
('distribution expenses') in accordance with a plan adopted by the investment
company's Board of Directors. Pursuant to such rule, the Directors and the
shareholders of each class of shares of each Portfolio have adopted Distribution
Plans hereinafter referred to as the 'Class A Plan,' the 'Class B Plan' and the
'Class C Plan.' In adopting the Class A Plan, the Class B Plan and the Class C
Plan, the Directors determined that there was a reasonable likelihood that each
such Plan would benefit the Fund and the shareholders of the respective class.
The sales charge and distribution fees of a particular class will not be used to
subsidize the sale of shares of any other class.

Under the Class A Plan, the Distributor receives payments from a Portfolio at an
annual rate of up to 0.10% of average daily net assets of such Portfolio's Class
A shares to compensate the Distributor and certain securities firms for
providing sales and promotional activities for distributing that class of
shares. Under the Class B and Class C Plans, the Distributor may receive
payments from a Portfolio at the annual rate of up to 0.75% of the average daily
net assets of such Portfolio's Class B and Class C shares, respectively, to
compensate the Distributor and certain securities firms for providing sales and
promotional activities for distributing each such class of shares. The

distribution costs for which the Distributor may be reimbursed out of such
distribution fees include fees paid to broker-dealers that have sold Portfolio
shares, commissions, and other expenses such as those incurred for sales
literature, prospectus printing and distribution and compensation to
wholesalers. It is possible that in any given year the amount paid to the
Distributor under the Class A Plan, Class B Plan or Class C Plan may exceed the
Distributor's distribution costs as described above. The Distribution Plans also
provide that each class of shares of each Portfolio may also pay the Distributor
an account maintenance and service fee up to an annual rate of 0.25% of the
average daily net assets of such class of shares for payments to broker-dealers
for providing continuing account maintenance. Accordingly, through October 31,
1997, SACS received fees (see Statement of Operations) based upon the
aforementioned rates.

<PAGE>

58
NOTES TO FINANCIAL STATEMENTS -- October 31, 1997 -- (continued)

SACS receives sales charges on each Portfolio's Class A shares, portions of
which are reallowed to affiliated broker-dealers and non-affiliated
broker-dealers. SACS also receives the proceeds of contingent deferred sales
charges paid by investors in connection with certain redemptions of each
Portfolio's Class B and Class C shares. SACS has advised the Portfolios that for
the period ended October 31, 1997, the proceeds received from Class A sales (and
paid out to affiliated and non-affiliated broker-dealers), Class B and Class C
redemptions are as follows:

<TABLE>
<CAPTION>
CLASS B
CLASS A ----------- CLASS C
------------------------------------------ CONTINGENT -------------
AFFILIATED NON-AFFILIATED DEFERRED CONTINGENT
SALES BROKER- BROKER- SALES DEFERRED
CHARGES DEALERS DEALERS CHARGES SALES CHARGES
---------- ---------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Large-Cap Growth Portfolio....... $ 15,599 $ 2,885 $ 10,059 $ -- $ --
Mid-Cap Growth Portfolio......... 802,237 257,754 440,666 25,643 268
Aggressive Growth Portfolio...... 1,394,623 545,170 668,387 26,249 937
Large-Cap Blend Portfolio........ 22,528 9,732 9,440 -- --
Large-Cap Value Portfolio........ 38,564 6,352 25,006 -- --
Value Portfolio.................. 1,925,092 715,034 949,290 30,795 945
Small-Cap Value Portfolio........ 59,419 18,399 32,100 -- --
International Equity Portfolio... 699,157 225,890 383,626 18,872 426
</TABLE>

The Fund, on behalf of each Portfolio, has entered into a Service Agreement with
SunAmerica Fund Services, Inc. ('SAFS'), an indirect wholly-owned subsidiary of
SunAmerica Inc. Under the Service Agreement, SAFS performs certain shareholder
account functions by assisting the Portfolios' transfer agent in connection with
the services that it offers to the shareholders of the Portfolios. The Service
Agreement, which permits the Portfolios to compensate SAFS for services rendered

based upon an annual rate of 0.22% of average daily net assets, is approved
annually by the Directors. For the period ended October 31, 1997, the Portfolios
incurred the following expenses, which are included in transfer agent fees in
the Statement of Operations, to compensate SAFS pursuant to the terms of the
Service Agreement.

<TABLE>
<CAPTION>
PAYABLE
EXPENSE OCTOBER 31, 1997
----------------------------- -----------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Large-Cap Growth Portfolio....... $ 2,503 $ 38 $ 13 $ 2,503 $ 38 $ 13
Mid-Cap Growth Portfolio......... 46,320 36,275 3,253 3,822 6,805 895
Aggressive Growth Portfolio...... 66,865 46,155 4,252 7,311 9,373 1,113
Large-Cap Blend Portfolio........ 2,514 53 14 2,514 53 14
Large-Cap Value Portfolio........ 2,506 62 13 2,506 62 13
Value Portfolio.................. 73,489 67,984 6,227 9,217 14,451 1,665
Small-Cap Value Portfolio........ 2,419 198 40 2,419 198 40
International Equity Portfolio... 48,437 35,815 3,883 4,983 8,495 897
</TABLE>

Note 5. Purchases and Sales of Investment Securities

The aggregate cost of purchase and proceeds from sales and maturities of
investments (excluding U.S. Government securities and short-term investments)
through October 31, 1997 were as follows:

<TABLE>
<CAPTION>
LARGE-CAP MID-CAP AGGRESSIVE LARGE-CAP
GROWTH GROWTH GROWTH BLEND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Aggregate purchases... $25,441,617 $ 82,570,008 $138,188,608 $24,729,190
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
Aggregate sales....... $ 193,228 $ 33,441,496 $ 68,985,566 $ 404,332
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
</TABLE>

<PAGE>

59
NOTES TO FINANCIAL STATEMENTS -- October 31, 1997 -- (continued)

<TABLE>
<CAPTION>
LARGE-CAP SMALL-CAP INTERNATIONAL

VALUE VALUE VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Aggregate purchases... $24,049,833 $138,953,561 $ 20,506,477 $79,766,373
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
Aggregate sales....... $ -- $ 29,039,505 $ -- $24,762,382
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
</TABLE>

Note 6. Transactions with Affiliates

The following Portfolios incurred brokerage commissions with an affiliated
broker:

<TABLE>
<CAPTION>
ROWE-PRICE FLEMING
NEUBERGER & WARBURG, PINCUS INTERNATIONAL,
BERMAN LLC COUNSELLORS, INC. INC.
----------- ----------------- ------------------
<S> <C> <C> <C>
Value Portfolio...................................................... $47,675 $ -- $ --
International Equity Portfolio....................................... -- 29,176 32,083
</TABLE>

Note 7. Federal Income Taxes

The Portfolios intend to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and distribute all of their
taxable income, including any net realized gain on investments, to their
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, for federal income tax purposes
were as follows:

<TABLE>
<CAPTION>
LARGE-CAP MID-CAP AGGRESSIVE LARGE-CAP
GROWTH GROWTH GROWTH BLEND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Cost.................... $25,668,948 $ 51,758,783 $80,701,326 $25,703,119
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Appreciation............ $ 340,711 $ 8,133,111 $15,848,328 $ 155,425
Depreciation............ (1,635,303) (1,481,383) (2,352,042) (1,232,097)
----------- ------------ ----------- -----------
Net unrealized
appreciation

(depreciation)........ $(1,294,592) $ 6,651,728 $13,496,286 $(1,076,672)
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>

<TABLE>
<CAPTION>
LARGE-CAP SMALL-CAP INTERNATIONAL
VALUE VALUE VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Cost.................... $25,430,318 $126,615,682 $25,580,088 $74,567,051
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Appreciation............ $ 88,336 $ 14,096,438 $ 155,011 $ 4,195,553
Depreciation............ (1,424,132) (3,418,677) (923,013) (7,353,705)
----------- ------------ ----------- -----------
Net unrealized
appreciation
(depreciation)........ $(1,335,796) $ 10,677,761 $ (768,002) $(3,158,152)
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>

At October 31, 1997, Large-Cap Growth and Large-Cap Blend had capital loss
carryforwards of $159,379 and $13,688, respectively, which are available to the
extent provided in the regulations and which will expire 2005.

<PAGE>

60
NOTES TO FINANCIAL STATEMENTS -- October 31, 1997 -- (continued)

Note 8. Open Forward Currency Contracts

At October 31, 1997, the International Equity Portfolio held forward foreign
currency exchange contracts ('forward contracts') in order to hedge against
changes in future foreign exchange rates and enhance return. Forward contracts
involve elements of market risk in excess of the amount reflected in the
Statement of Assets and Liabilities. The Portfolio bears the risk of an
unfavorable change in the foreign exchange rate underlying the forward
contracts. International Equity Portfolio held the following forward currency
contracts at October 31, 1997.
<TABLE>
<CAPTION>
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
- --------------- -------------- -------- -----------
<S> <C> <C> <C>
JPY 359,766,450 USD 3,106,791 11/28/97 $ 105,458
*JPY 25,102,350 USD 216,773 11/28/97 7,358
*JPY 19,161,200 USD 165,468 11/28/97 5,617

*USD 566,866 FRF 3,300,000 12/12/97 6,170
-----------
124,603
-----------

GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE DEPRECIATION
- --------------- -------------- -------- -----------
<S> <C> <C> <C>
JPY 161,114,900 USD 1,340,000 11/28/97 $ (4,093)
*USD 210,000 JPY 25,102,350 11/28/97 (585)
*USD 160,000 JPY 19,161,200 11/28/97 (149)
*FRF 3,300,000 USD 538,503 12/12/97 (34,533)
-----------
(39,360)
-----------
Net Appreciation........................... $ 85,243
-----------
-----------
</TABLE>

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

<TABLE>
<S> <C>
FRF --French Franc
JPY --Japanese Yen
USD --United States Dollar
</TABLE>

Note 9. Capital Share Transactions

At October 31, 1997, SunAmerica Inc. owned shares in each class as follows:
<TABLE>
<CAPTION>

SHARES PERCENTAGE OF NET ASSETS
------------------------------------ --------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Large-Cap Growth Portfolio 1,946,082 8,000 8,000 93.46% .38% .38%
Mid-Cap Growth Portfolio 1,000 1,000 838 .02 .02 .02
Aggressive Growth Portfolio 1,000 1,000 747 .02 .02 .01
Large-Cap Blend Portfolio 1,919,330 8,000 8,000 93.18 .39 .39
Large-Cap Value Portfolio 1,859,065 8,000 8,000 89.13 .38 .38
Value Portfolio 1,000 1,000 737 .01 .01 .01
Small-Cap Value Portfolio 1,601,147 8,000 8,000 77.80 .39 .39
International Equity Portfolio 282,513 1,000 794 4.92 .02 .01
</TABLE>

<PAGE>

61
NOTES TO FINANCIAL STATEMENTS -- October 31, 1997 -- (continued)

Transactions in shares of each class of each series were as follows:
<TABLE>
<CAPTION>
LARGE-CAP GROWTH PORTFOLIO
-------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------- ------------------------ ----------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
OCTOBER 15, 1997* OCTOBER 15, 1997 OCTOBER 15, 1997
THROUGH THROUGH THROUGH
OCTOBER 31, 1997 OCTOBER 31, 1997 OCTOBER 31, 1997
------------------------- ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............ 2,056,806 $25,693,489 65,591 $ 793,598 14,084 $ 172,781
Reinvested dividends... -- -- -- -- -- --
Shares redeemed........ (53,919) (661,012) -- -- -- --
---------- ----------- --------- ----------- -------- ----------
Net increase........... 2,002,887 $25,032,477 65,591 $ 793,598 14,084 $ 172,781
---------- ----------- --------- ----------- -------- ----------
---------- ----------- --------- ----------- -------- ----------

MID-CAP GROWTH PORTFOLIO
-------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------- ------------------------ ----------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
NOVEMBER 19, 1996* NOVEMBER 19, 1996 MARCH 6, 1997
THROUGH THROUGH THROUGH
OCTOBER 31, 1997 OCTOBER 31, 1997 OCTOBER 31, 1997
------------------------- ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............ 3,264,892 $40,663,001 2,969,116 $37,170,139 458,934 $5,975,048
Reinvested dividends... -- -- -- -- -- --
Shares redeemed........ (1,923,538) (25,255,844) (348,034) (4,559,436) (115,441) (1,596,837)
---------- ----------- --------- ----------- -------- ----------
Net increase........... 1,341,354 $15,407,157 2,621,082 $32,610,703 343,493 $4,378,211
---------- ----------- --------- ----------- -------- ----------
---------- ----------- --------- ----------- -------- ----------
<CAPTION>

AGGRESSIVE GROWTH PORTFOLIO
-------------------------------------------------------------------------------

CLASS A CLASS B CLASS C
------------------------- ------------------------ ----------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
NOVEMBER 19, 1996* NOVEMBER 19, 1996 MARCH 6, 1997
THROUGH THROUGH THROUGH
OCTOBER 31, 1997 OCTOBER 31, 1997 OCTOBER 31, 1997
------------------------- ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............ 3,856,767 $52,508,769 3,420,491 $48,609,878 411,297 $5,980,151
Reinvested dividends... -- -- -- -- -- --
Shares redeemed........ (1,433,429) (22,546,557) (345,988) (5,157,472) (35,505) (512,718)
---------- ----------- --------- ----------- -------- ----------
Net increase........... 2,423,338 $29,962,212 3,074,503 $43,452,406 375,792 $5,467,433
---------- ----------- --------- ----------- -------- ----------
---------- ----------- --------- ----------- -------- ----------
<CAPTION>

LARGE-CAP BLEND PORTFOLIO
-------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------- ------------------------ ----------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
OCTOBER 15, 1997* OCTOBER 15, 1997 OCTOBER 15, 1997
THROUGH THROUGH THROUGH
OCTOBER 31, 1997 OCTOBER 31, 1997 OCTOBER 31, 1997
------------------------- ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............ 2,050,665 $25,623,294 78,691 $ 969,619 11,932 $ 148,672
Reinvested dividends... -- -- -- -- -- --
Shares redeemed........ (80,670) (990,000) -- -- -- --
---------- ----------- --------- ----------- -------- ----------
Net increase........... 1,969,995 $24,633,294 78,691 $ 969,619 11,932 $ 148,672
---------- ----------- --------- ----------- -------- ----------
---------- ----------- --------- ----------- -------- ----------

<PAGE>

</TABLE>

62
NOTES TO FINANCIAL STATEMENTS -- October 31, 1997 -- (continued)
<TABLE>
<CAPTION>
LARGE-CAP VALUE PORTFOLIO
-------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------- ------------------------ ----------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
OCTOBER 15, 1997* OCTOBER 15, 1997 OCTOBER 15, 1997
THROUGH THROUGH THROUGH

OCTOBER 31, 1997 OCTOBER 31, 1997 OCTOBER 31, 1997
------------------------- ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- -------- ----------
Shares sold............ 2,100,495 $26,218,938 111,740 $ 1,361,527 14,544 $ 178,760
<S> <C> <C> <C> <C> <C> <C>
Reinvested dividends... -- -- -- -- -- --
Shares redeemed........ (141,051) (1,698,383) -- -- -- --
---------- ----------- --------- ----------- -------- ----------
Net increase........... 1,959,444 $24,520,555 111,740 $ 1,361,527 14,544 $ 178,760
---------- ----------- --------- ----------- -------- ----------
---------- ----------- --------- ----------- -------- ----------
<CAPTION>

VALUE PORTFOLIO
-------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------- ------------------------ ----------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
NOVEMBER 19, 1996* NOVEMBER 19, 1996 MARCH 6, 1997
THROUGH THROUGH THROUGH
OCTOBER 31, 1997 OCTOBER 31, 1997 OCTOBER 31, 1997
------------------------- ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............ 4,671,463 $65,290,119 5,001,111 $73,400,374 633,085 $9,591,079
Reinvested dividends... -- -- -- -- -- --
Shares redeemed........ (1,665,401) (26,013,487) (155,252) (2,394,393) (46,506) (698,146)
---------- ----------- --------- ----------- -------- ----------
Net increase........... 3,006,062 $39,276,632 4,845,859 $71,005,981 586,579 $8,892,933
---------- ----------- --------- ----------- -------- ----------
---------- ----------- --------- ----------- -------- ----------
<CAPTION>

SMALL-CAP VALUE PORTFOLIO
-------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------- ------------------------ ----------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
OCTOBER 15, 1997* OCTOBER 15, 1997 OCTOBER 15, 1997
THROUGH THROUGH THROUGH
OCTOBER 31, 1997 OCTOBER 31, 1997 OCTOBER 31, 1997
------------------------- ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............ 2,177,614 $27,190,002 256,511 $ 3,168,460 43,289 $ 536,921
Reinvested dividends... -- -- -- -- -- --
Shares redeemed........ (419,530) (5,174,050) (28) (345) -- --
---------- ----------- --------- ----------- -------- ----------
Net increase........... 1,758,084 $22,015,952 256,483 $ 3,168,115 43,289 $ 536,921
---------- ----------- --------- ----------- -------- ----------
---------- ----------- --------- ----------- -------- ----------

INTERNATIONAL EQUITY PORTFOLIO
-------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------- ------------------------ ----------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
NOVEMBER 19, 1996* NOVEMBER 19, 1996 MARCH 6, 1997
THROUGH THROUGH THROUGH
OCTOBER 31, 1997 OCTOBER 31, 1997 OCTOBER 31, 1997
------------------------- ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............ 3,085,642 $39,324,047 2,566,019 $33,369,226 404,951 $5,319,147
Shares issued in
acquisition of the
Global Balanced Fund
(Note 2)............. 495,830 6,693,711 1,063,431 14,271,238 -- --
Reinvested dividends... -- -- -- -- -- --
Shares redeemed........ (1,626,511) (21,418,365) (183,548) (2,395,962) (44,682) (586,462)
---------- ----------- --------- ----------- -------- ----------
Net increase........... 1,954,961 $24,599,393 3,445,902 $45,244,502 360,269 $4,732,685
---------- ----------- --------- ----------- -------- ----------
---------- ----------- --------- ----------- -------- ----------
</TABLE>

*Date of commencement of operations

<PAGE>

63
NOTES TO FINANCIAL STATEMENTS -- October 31, 1997 -- (continued)

Note 10. Directors' Retirement Plan

The Directors (and Trustees) of the SunAmerica Family of Mutual Funds have
adopted the SunAmerica Disinterested Trustees' and Directors' Retirement Plan
(the 'Retirement Plan') effective January 1, 1993 for the unafilliated
Directors. The Retirement Plan provides generally that if a disinterested
Director who has at least 10 years of consecutive service as a Disinterested
Director of any of the SunAmerica mutual funds (an 'Eligible Director') retires
after reaching age 60 but before age 70 or dies while a Director, such person
will be eligible to receive a retirement or death benefit from each SunAmerica
mutual fund with respect to which he or she is an Eligible Director. As of each
birthday, prior to the 70th birthday, but in no event for a period greater than
10 years, each Eligible Director will be credited with an amount equal to 50% of
his or her regular fees (excluding committee fees) for services as a
Disinterested Director of each SunAmerica mutual fund for the calendar year in
which such birthday occurs. In addition, an amount equal to 8.5% of any amounts
credited under the preceding clause during prior years, is added to each
Eligible Director's account until such Eligible Trustee reaches his or her 70th
birthday. An Eligible Director may receive any benefits payable under the
Retirement Plan, at his or her election, either in one lump sum or in up to

fifteen annual installments. As of October 31, 1997, Mid-Cap Growth Portfolio,
Aggressive Growth Portfolio, Value Portfolio and International Equity Portfolio
had accrued $643, $761, $680 and $637, respectively, for the Retirement Plan,
which is included in accrued expenses on the Statement of Assets and
Liabilities, and as of October 31, 1997 expensed $643, $761, $680 and $637,
respectively, for the Retirement Plan, which is included in Directors' fees and
expenses on the Statement of Operations.

<PAGE>

64
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF STYLE SELECT SERIES, INC.

In our opinion, the accompanying statement of assets and liabilities, including
the portfolios of investments, 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 Large-Cap Growth Portfolio, Mid-Cap
Growth Portfolio, Aggressive Growth Portfolio, Large-Cap Blend Portfolio,
Large-Cap Value Portfolio, Value Portfolio, Small-Cap Value Portfolio and
International Equity Portfolio (constituting the eight portfolios of Style
Select Series, Inc., hereafter referred to as the 'Fund') at October 31, 1997,
and the results of each of their operations, the changes in each of their net
assets and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as 'financial
statements') are the responsibility of the Fund'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 October 31, 1997 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
December 4, 1997

<PAGE>

APPENDIX

CORPORATE BOND AND COMMERCIAL PAPER RATINGS

Description of Moody's Investors Service's Corporate Ratings

Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest
payments are protected by a large 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 most unlikely to impair the
fundamentally strong position of such issues.

Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise
what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.

A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment
sometime in the future.

Baa Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor
poorly secured. 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 Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may
be very moderate, and therefore not well safeguarded during
both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B Bonds which are rated B generally lack characteristics of
desirable investments. 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 Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger
with respect to principal or interest.

Appendix-1

<PAGE>

Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in
default or have other marked shortcomings.

C Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.

Note: 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.

Description of Moody's Commercial Paper Ratings

The term "commercial paper" as used by Moody's means promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representations as to whether such commercial paper is by any other
definition "commercial paper" or is exempt from registration under the
Securities Act.

Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Moody's makes no representation that such
obligations are exempt from registration under the Securities Act, nor does it
represent that any specific note is a valid obligation of a rated issuer or
issued in conformity with any applicable law. Moody's employs the following
three designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers:

Issuers rated Prime-1 (or related supporting institutions) 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
-- Well established access to a range of financial markets and
assured sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting institutions) 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

Appendix-2

<PAGE>

variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or related supporting institutions) 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 earnings and profitability may result in changes in
level of debt protection measurements and the requirement for relatively high
financial leverage.
Adequate alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating
categories.

If an issuer represents to Moody's that its commercial paper
obligations are supported by the credit of another entity or entities, then
the name or names of such supporting entity or entities are listed within
parentheses beneath the name of the issuer, or there is a footnote referring
the reader to another page for the name or names of the supporting entity or
entities. In assigning ratings to such issuers, Moody's evaluates the
financial strength of the indicated affiliated corporations, commercial banks,
insurance companies, foreign governments or other entities, but only as one
factor in the total rating assessment. Moody's makes no representation and
gives no opinion on the legal validity or enforceability of any support
arrangement. You are cautioned to review with your counsel any questions
regarding particular support arrangements.

Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative type risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by management
of obligations which may be present or may arise as a result of public
interest questions and preparations to meet such obligations.

Description of Standard & Poor's Corporate Debt Ratings

A Standards & Poor's corporate or municipal rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligers such as
guarantors, insurers, or lessees.

The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability
for a particular investor.

The ratings are based on current information furnished by the issuer
or obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings

Appendix-3

<PAGE>

may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other reasons.

The ratings are based, in varying degrees, on the following
considerations: (1) likelihood of default capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation; (2) nature of and provisions of
the obligation; and (3) protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other arrangement
under the laws of bankruptcy and other laws affecting creditors' rights.

AAA Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is
extremely strong.

AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest-rated issues
only in small degree.

A Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher-rated categories.

BBB Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher-rated
categories.

Debt rated BB, B, CCC, CC and C are regarded as having
predominantly speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates
the least degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by
large uncertainties or major risk exposure to adverse
conditions.

BB Debt rated BB has less near-term vulnerability to default
than other speculative grade debt. However, it faces major
ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payment. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or
implied BBB- rating.

B Debt rated B has a greater vulnerability to default but
presently has the capacity to meet interest payments and
principal repayments. Adverse business, financial or
economic conditions would likely impair capacity or
willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.

Appendix-4

<PAGE>

CCC Debt rated CCC has a current identifiable vulnerability to
default, and is dependent upon favorable business, financial
and economic conditions to meet timely payments of interest
and repayments of principal. In the event of adverse
business, financial or economic conditions, it is not likely
to have the capacity to pay interest and repay principal.
The CCC rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied B or B-
rating.

CC The rating CC is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC
rating.

C The rating C is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC- debt
rating. The C rating may be used to cover a situation where
a bankruptcy petition has been filed but debt service
payments are continued.

CI The rating CI is reserved for income bonds on which no
interest is being paid.

D Debt rated D is in default. The D rating is assigned on the
day an interest or principal payment is missed. The D rating
also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.

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.

Provisional ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on
the likelihood or risk of default upon failure of such completion. The
investor should exercise judgment with respect to such likelihood and risk.

L The letter "L" indicates that the rating pertains to the
principal amount of those bonds to the extent that the
underlying deposit collateral is insured by the Federal
Savings & Loan Insurance Corp. or the Federal Deposit
Insurance Corp. and interest is adequately collateralized.

* Continuance of the rating is contingent upon Standard &
Poor's receipt of an executed copy of the escrow agreement
or closing documentation confirming investments and cash
flows.

NR Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that
Standard & Poor's does not rate a particular type of
obligation as a matter of policy.

Appendix-5

<PAGE>

Debt Obligations of Issuers outside the United States and its
territories are rated on the same basis as domestic corporate and municipal
issues. The ratings measure the credit-worthiness of the obligor but do not
take into account currency exchange and related uncertainties.

Bond Investment Quality Standards: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories ("AAA", "AA", "A", "BBB", commonly known as "investment grade"
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments impose certain rating
or other standards for obligations eligible for investment by savings banks,
trust companies, insurance companies and fiduciaries generally.

Description of Standard & Poor's Commercial Paper Ratings.

A Standard & Poor's commercial paper rating is a current assessment
of the likelihood of timely payment of debt having an original maturity of not
more than 365 days. Ratings 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 the 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 are denoted with a plus (+) sign
designation.

A-2 Capacity for timely payment on issues with this designation
is strong. However, the relative degree of safety is not as
high as for issues designated "A-1".

A-3 Issues carrying this designation have a satisfactory
capacity for timely payment. They are, however, somewhat
more vulnerable to the adverse effect of changes in
circumstances than obligations carrying the higher
designations.

B Issues rated "B" 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 This rating indicates that the issue is either in default or
is expected to be in default upon maturity.

Appendix-6

<PAGE>

The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based on current information furnished to
Standard & Poor's by the issuer or obtained from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information.

Appendix-7

<PAGE>

PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits.

(a) Financial Statements.

Set forth in the Statement of Additional Information are the
audited financial statements of Style Select Series, Inc.
with respect to Registrant's fiscal year ended October 31,
1997. The Financial Highlights are set forth in of the
Prospectus under the caption "Financial Highlights."

(b) Exhibit Number

(l)(a) Articles of Incorporation of Registrant, as amended, are
incorporated by reference to Exhibit 1(A) of Pre-Effective
Amendment No. 1 on form N-1A, filed with the Securities and
Exchange Commission on November 14, 1996.

(l)(b) Articles Supplementary are incorporated by reference to
Exhibit 1(B) of Pre-Effective Amendment No. 1 on form N-1A,
filed with the Securities and Exchange Commission on
November 14, 1996.

(l)(c) Articles of Amendment are incorporated by reference to
Exhibit 1(C) of Pre-Effective Amendment No. 1 on form N-1A,
filed with the Securities and Exchange Commission on
November 14, 1996.

(l)(d) Articles of Amendment dated November 13, 1996 are incorporated
by reference to Exhibit 1(D) of Pre-Effective Amendment No. 1
on form N-1A, filed with the Securities and Exchange Commission
on November 14, 1996.

(2) By-Laws of Registrant are incorporated by reference to Exhibit
2 of Pre-Effective Amendment No. 1 on form N-1A, filed with
the Securities and Exchange Commission on November 14, 1996.

(3) Voting Trust Agreement. Inapplicable.

(4) Instruments Defining Rights of Shareholders are incorporated by
reference to Exhibits 1 and 2 above and incorporated by
reference to Exhibit 4 of Pre-Effective Amendment No. 1 on form
N-1A, filed with the Securities and Exchange Commission on
November 14, 1996.

<PAGE>

(5)(a) Investment Advisory and Management Agreement between Registrant
and SunAmerica Asset Management Corp. is incorporated by
reference to Exhibit 5(a) of Pre-Effective Amendment No. 1 on
form N-1A, filed with the Securities and Exchange Commission on
November 14, 1996.

(5)(b)(1) Subadvisory Agreement between SunAmerica and Miller, Anderson &
Sherrerd, LLP is incorporated by reference to the same numbered
Exhibit of Post-Effective Amendment No. 4 on form N-1A, filed
with the Securities and Exchange Commission on August 5, 1997.

(5)(b)(2) Subadvisory Agreement between SunAmerica and Pilgrim Baxter &
Associates is incorporated by reference to the same numbered
Exhibit of Post-Effective Amendment No. 4 on form N-1A, filed
with the Securities and Exchange Commission on August 5, 1997.

(5)(b)(3) Subadvisory Agreement between SunAmerica and T. Rowe Price
Associates, Inc. is incorporated by reference to the same
numbered Exhibit of Post-Effective Amendment No. 4 on form
N-1A, filed with the Securities and Exchange Commission on
August 5, 1997.

(5)(b)(4) Subadvisory Agreement between SunAmerica and Janus Capital
Corporation is incorporated by reference to the same numbered
Exhibit of Post-Effective Amendment No. 4 on form N-1A, filed
with the Securities and Exchange Commission on August 5, 1997.

(5)(b)(5) Subadvisory Agreement between SunAmerica and Warburg, Pincus
Counsellors, Inc. is incorporated by reference to the same
numbered Exhibit of Post-Effective Amendment No. 4 on form
N1-A, filed with the Securities and Exchange Commission on
August 5, 1997.

(5)(b)(6) Subadvisory Agreement between SunAmerica and Davis Selected
Advisers, L.P. is incorporated by reference to the same
numbered Exhibit of Post-Effective Amendment No. 4 on form
N1-A, filed with the Securities and Exchange Commission on
August 5, 1997.

(5)(b)(7) Subadvisory Agreement between SunAmerica and Neuberger&Berman,
L.P. is incorporated by reference to the same numbered Exhibit
of Post-Effective Amendment No. 4 on form N-1A, filed with the
Securities and Exchange Commission on August 5, 1997.

<PAGE>

(5)(b)(8) Subadvisory Agreement between SunAmerica and Strong Capital
Management, Inc. is incorporated by reference to the same

numbered Exhibit of Post-Effective Amendment No. 4 on form
N1-A, filed with the Securities and Exchange Commission on
August 5, 1997.

(5)(b)(9) Subadvisory Agreement between SunAmerica and Rowe Price-Fleming
International, Inc. is incorporated by reference to the same
numbered Exhibit of Post-Effective Amendment No. 4 on form
N1-A, filed with the Securities and Exchange Commission on
August 5, 1997.

(6) Distribution Agreement is incorporated by reference to Exhibit
6 of Pre-Effective Amendment No. 1 on form N1-A, filed with the
Securities and Exchange Commission on November 14, 1996.

(7) Disinterested Trustees and Directors' Retirement Plan is
incorporated by reference to Exhibit 7 of Pre-Effective
Amendment No. 1 on form N1-A, filed with the Securities and
Exchange Commission on November 14, 1996.

(8) Custodian Agreement is incorporated by reference to Exhibit 8
of Pre-Effective Amendment No. 1 on form N1-A, filed with the
Securities and Exchange Commission on November 14, 1996.

(9)(a) Service Agreement between Registrant and SunAmerica Fund
Services Inc. is incorporated by reference to Exhibit 9(a) of
Pre-Effective Amendment No. 1 on form N1-A, filed with the
Securities and Exchange Commission on November 14, 1996.

(9)(b) Transfer Agency Agreement is incorporated by reference to
Exhibit 9(b) of Pre-Effective Amendment No. 1 on form N1-A,
filed with the Securities and Exchange Commission on November
14, 1996.

(10) Opinion and Consent of Counsel is/are incorporated by reference
to Exhibit 10 of Pre-Effective Amendment No. 1 on form N1-A,
filed with the Securities and Exchange Commission on November
14, 1996.

(11) Consent of Independent Accountants.

(12) Financial Statements Omitted from Item 23. Inapplicable.

(13) Initial Capitalization Agreement. Inapplicable.

(14) Model Retirement Plan. Inapplicable.

<PAGE>

(15) Rule 12b-1 Plan for Class C Shares is incorporated by reference

to Exhibit 15 of Post-Effective Amendment No. 2 on form N-1A,
filed with the Securities and Exchange Commission on March 3,
1997.

Rule 12b-1 Plans for Class A Shares and Class B Shares are
incorporated by reference to Exhibit 15 of Pre-Effective
Amendment No. 1 on form N1-A, filed with the Securities and
Exchange Commission on November 14, 1996.

(16) Performance Computations. Inapplicable.

(17)(a) Other Exhibits.

Powers of Attorney of Trustees and Officers are incorporated by
reference to Exhibit 5(a) of Pre-Effective Amendment No. 1 on
form N1-A, filed with the Securities and Exchange Commission on
November 14, 1996.

(17)(b) Financial Data Schedules.

(18) 18f-3 Plan is incorporated by reference to Exhibit 18 of
Pre-Effective Amendment No. 1 on form N1-A, filed with the
Securities and Exchange Commission on November 14, 1996.

Item 25. Persons Controlled by or Under Common Control with Registrant.

SunAmerica Life Insurance Company; Anchor National Life Insurance
Company; Saamsun Holdings Corp.; SAM Holdings Corp. and SunAmerica
Asset Management Corp.

Item 26. Number of Holders of Securities.

As of January 29, 1998, the number of record holders of Style Select
Series was as follows:

Number of
Portfolio Title of Class Record Holders
--------- -------------- --------------
Aggressive Growth Class A 5,727
Portfolio Class B 6,126
Class C 605

Mid-Cap Growth Class A 2,399
Portfolio Class B 4,102
Class C 468

<PAGE>

Value Portfolio Class A 5,715
Class B 7,258

Class C 786

International Equity Class A 2,927
Portfolio Class B 5,229
Class C 448

Large-Cap Growth Class A 375
Portfolio Class B 571
Class C 120

Large-Cap Value Class A 497
Portfolio Class B 803
Class C 177

Large-Cap Blend Class A 341
Portfolio Class B 499
Class C 48

Small-Cap Value Class A 798
Portfolio Class B 1,180
Class C 217

Item 27. Indemnification.

Article V of the Registrant's By-Laws relating to the indemnification
of officers and directors is quoted below.

ARTICLE V
INDEMNIFICATION

5.01 Indemnification of Directors and Officers. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than a proceeding by
or in the right of the Corporation in which such person shall have been
adjudged to be liable to the Corporation), by reason of being or having been a
director or officer of the Corporation, or serving or having served at the
request of the Corporation as a director, officer, partner, trustee, employee
or agent of another entity in which the Corporation has an interest as a
shareholder, creditor or otherwise (a "Covered Person"), against all
liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and reasonable expenses
(including attorney's fees) actually incurred by the Covered Person in
connection with any such action, suit or proceeding, except (i) liability in
connection with any proceeding in

<PAGE>

which it is determined that (A) the act or omission of the Covered Person was
material to the matter giving rise to the proceeding, and was committed in bad
faith or was the result of active and deliberate dishonesty, or (B) the Covered

Person actually received an improper personal benefit in money, property or
services, or (C) in the case of any criminal proceeding, the Covered Person had
reasonable cause to believe that the act or omission was unlawful, and (ii)
liability to the Corporation or its security holders to which the Covered Person
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office (any or all of the conduct referred to in clauses (i) and (ii) being
hereinafter referred to as "Disabling Conduct").

5.02 Procedure for Indemnification. Any indemnification under Section
5.01 shall (unless ordered by a court) be made by the Corporation only as
authorized for a specific proceeding by (i) a final decision on the merits by
a court or other body before whom the proceeding was brought that the Covered
Person to be indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of the proceeding against the Covered Person for insufficiency of
evidence of any Disabling Conduct, or (iii) a reasonable determination, based
upon a review of the facts, by a majority of a quorum of the directors who are
neither "interested persons" of the Corporation as defined in the Investment
Company Act of 1940 nor parties to the proceeding ("Disinterested Non-Party
Directors"), or an independent legal counsel in a written opinion, that the
Covered Person was not liable by reason of Disabling Conduct. The termination
of any proceeding by judgment, order or settlement shall not create a
presumption that the Covered Person did not meet the required standard of
conduct; the termination of any proceeding by conviction, or a plea of nolo
contendere or its equivalent, or an entry of an order of probation prior to
judgment, shall create a rebuttable presumption that the Covered Person did
not meet the required standard of conduct. Any determination pursuant to this
Section 5.02 shall not prevent recovery from any Covered Person of any amount
paid to him in accordance with this By-Law as indemnification if such Covered
Person is subsequently adjudicated by a court of competent jurisdiction to be
liable by reason of Disabling Conduct.

5.03 Advance Payment of Expenses. Reasonable expenses (including
attorneys' fees) incurred by a Covered Person may be paid or reimbursed by the
Corporation in advance of the final disposition of an action, suit or
proceeding upon receipt by the Corporation of (i) a written affirmation by the
Covered Person of his good faith belief that the standard of conduct necessary
for indemnification under this By-Law has been met and (ii) a written
undertaking by or on behalf of the Covered Person to repay the amount if it is
ultimately determined that such standard of conduct has not been met, so long
as either (A) the Covered Person has provided a security for his undertaking,
(B) the Corporation is insured against losses arising by reason of any lawful
advances, or (C) a majority of a quorum of the Disinterested Non-Party
Directors, or an independent legal counsel in a written opinion, has
determined, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the Covered Person
ultimately will be found entitled to indemnification.

5.04 Exclusivity, Etc. The indemnification and advance of expenses
provided by this By-Law shall not be deemed exclusive of any other rights to
which a Covered Person seeking

<PAGE>

indemnification or advance or expenses may be entitled under any law (common or
statutory), or any agreement, vote of stockholders or disinterested directors,
or other provision that is consistent with law, both as to action in an official
capacity and as to action in another capacity while holding office or while
employed by or acting as agent for the Corporation, shall continue in respect of
all events occurring while the Covered Person was a director or officer after
such Covered Person has ceased to be a director or officer, and shall inure to
the benefit of the estate, heirs, executors and administrators of such Covered
Person. The Corporation shall not be liable for any payment under this By-Law in
connection with a claim made by a director or officer to the extent such
director or officer has otherwise actually received payment, under an insurance
policy, agreement, vote or otherwise, of the amounts otherwise indemnifiable
hereunder. All rights to indemnification and advance of expenses under the
Charter and hereunder shall be deemed to be a contract between the Corporation
and each director or officer of the Corporation who serves or served in such
capacity at any time while this By-Law is in effect. Nothing herein shall
prevent the amendment of this By-Law, provided that no such amendment shall
diminish the rights of any Covered Person hereunder with respect to events
occurring or claims made before its adoption or as to claims made after its
adoption in respect of events occurring before its adoption. Any repeal or
modification of this By-Law shall not in any way diminish any rights to
indemnification or advance of expenses of a Covered Person or the obligations of
the Corporation arising hereunder with respect to events occurring, or claims
made, while this By-Law or any provision hereof is in force.

5.05 Insurance. The Corporation may purchase and maintain insurance
on behalf of any Covered Person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such;
provided, however, that the Corporation shall not purchase insurance to
indemnify any Covered Person against liability for Disabling Conduct.

5.06 Severability: Definitions. The invalidity or unenforceability of
any provision of this Article V shall not affect the validity or
enforceability of any other provision hereof. The phrase "this By-Law" in this
Article V means this Article V in its entirety.

Section 8 of the Article of Incorporation provides as
follows:
(5) The Corporation shall indemnify (i) its directors and
officers, whether serving the Corporation or at its request any other entity,
to the full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under
the procedures and to the full extent permitted by law, and (ii) other
employees and agents to such extent as shall be authorized by the Board of
Directors or the By-Laws of the Corporation and as permitted by law. The
foregoing rights of indemnification shall not be exclusive of any other rights
to which those seeking indemnification may be entitled. The Board of Directors
may take such action as is necessary to carry out these indemnification
provisions and is expressly empowered to adopt, approve and amend from time to
time such By-Laws, resolutions or contracts implementing such provisions or
such further indemnification arrangements as may be permitted by law. The

right of indemnification provided hereunder shall not be construed to protect
any director or officer of the Corporation against any liability to the
Corporation or its security holders to which he would

<PAGE>

otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.

(6) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no director or officer of the
Corporation shall be personally liable to the Corporation or its stockholders
for money damages; provided, however, that this provision shall not be
construed to protect any director or officer against any liability to the
Corporation or its security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. No amendment,
modification or repeal of this provision shall adversely affect any right or
protection provided hereunder that exists at the time of such amendment,
modification or repeal.

Item 28. Business and other Connections of Investment Adviser.

SunAmerica Asset Management Corp. ("SunAmerica"), the Investment
Adviser of the Registrant, is primarily in the business of providing
investment management, advisory and administrative services.
Reference is made to the most recent Form ADV and schedules thereto
of SunAmerica on file with the Commission (File No. 801-19813) for a
description of the names and employment of the directors and officers
of SunAmerica and other required information.

Janus Capital Corporation, L. Roy Papp & Associates, Montag & Caldwell,
Inc., Miller Anderson & Sherrerd, LLP, Pilgrim Baxter & Associates,
Ltd., T. Rowe Price Associates, Inc., Warburg, Pincus Counsellors,
Inc., Lazard Asset Management, David L. Babson & Co., Inc., Davis
Selected Advisers, L.P., Wellington Management, LLP, Neuberger&Berman,
L.P., Strong Capital Management, Inc., Schafer Capital Management,
Inc., Bankers Trust Company, Berger Associates, Inc., Perkins, Wolf,
McDonnell & Company, The Glenmede Trust Company, and Rowe-Price
Fleming International, Inc., the current and/or proposed Advisers of
certain of the Portfolios of the Registrant, are primarily engaged in
the business of rendering investment advisory services. Reference is
made to the recent Form ADV and schedules thereto on file with the
Commission for a description of the names and employment of the
directors and officers of the following Advisers, and other required
information:

File No.
--------
Janus Capital Corporation 801-13991
L. Roy Papp & Associates 801-35594

Montag & Caldwell, Inc. 801-15398
Miller Anderson & Sherrerd, LLP 801-10437
Pilgrim Baxter & Associates, Ltd. 801-48872
T. Rowe Price Associates, Inc. 801-856
Warburg, Pincus Counsellors, Inc. 801-07321
Lazard Asset Management 801-6568
David L. Babson & Co., Inc. 801-241

<PAGE>

Davis Selected Advisers, L.P. 801-31648
Wellington Management, LLP 801-15908
Neuberger&Berman, L.P. 801-3908
Strong Capital Management 801-10724
Schafer Capital Management 801-25825
Berger Associates, Inc. 801-9451
Perkins, Wolf, McDonnell & Company 801-19974
Rowe-Price Fleming International 801-14713

Item 29. Principal Underwriters.

(a) The principal underwriter of the Registrant also acts as
principal underwriter for:

SunAmerica Income Funds
SunAmerica Money Market Funds, Inc.
SunAmerica Equity Funds

(b) The following persons are the officers and directors of
SunAmerica Capital Services, Inc., the principal underwriter
of Registrant's Shares:

Name and Principal Position Position with the
Business Address With Underwriter Registrant
- ---------------- ---------------- ----------
Peter A. Harbeck Director President &
The SunAmerica Center Director
733 Third Avenue
New York, NY 10017-3204

J. Steven Neamtz President None
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204

Robert M. Zakem Executive Vice Secretary and Chief
The SunAmerica Center President Compliance Officer
733 Third Avenue and Director
New York, NY 10017-3204

Susan L. Harris Secretary None

SunAmerica Inc.
1 SunAmerica Center
Los Angeles, CA 90067-6022

<PAGE>

Steven E. Rothstein Treasurer None
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204

Item 30. Location of Accounts and Records.

State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, and its affiliate, National Financial Data
Services, collectively act as custodian, transfer agent and dividend
paying agent. They maintain books, records and accounts pursuant to
the instructions of the Fund.

SunAmerica Asset Management Corp., ("SunAmerica") is located at The
SunAmerica Center, 733 Third Avenue, New York, New York 10017-3204.
SunAmerica has contracted with Callan Associates, Inc. ("Callan") to
compile historical performance data relating to the Advisers, both
individually and on a composite basis. Registrant's records relating
thereto are maintained by Callan. Callan is located at 71 Stevenson
Street, Suite 1300, San Francisco, CA 94105.

Janus Capital Corporation is located at 100 Fillmore Street, Denver,
Colorado 80206-4923.

L. Roy Papp & Associates is located at 4400 North 32nd Street, Suite
280, Phoenix, Arizona 85018.

Montag & Caldwell, Inc. is located at 3343 Peachtree Road, NE, Suite
1100, Atlanta, Georgia 30326-1022.

Miller Anderson & Sherrerd, LLP is located at One Tower Bridge, West
Conshohocken, Pennsylvania 19428.

Pilgrim Baxter & Associates, Ltd. is located at 1255 Drummers Lane,
Suite 300, Wayne, Pennsylvania 19087.

T. Rowe Price Associates, Inc. is located at 100 East Pratt Street,
Baltimore, Maryland 21202.

Warburg, Pincus Counsellors, Inc. is located at 466 Lexington Avenue,
New York, New York, 10017-3147

Lazard Asset Management is located at 30 Rockefeller Plaza, New York,

New York 10020.

<PAGE>

David L. Babson & Co. Inc. is located at one Memorial Drive,
Cambridge, Massachusetts 02142-1300.

Davis Selected Advisers, L.P. is located at 124 East March Street,
Santa Fe, New Mexico, 87501.

Wellington Management Company, LLP is located at 75 State Street,
Boston, Massachusetts 02109.

Neuberger&Berman, L.P. is located at 605 Third Avenue, New York, New
York 10158-0180.

Strong Capital Management, Inc. has a principal mailing address at
P.O. Box 2936, Milwaukee, Wisconsin 53201.

Schafer Capital Management is located at 645 Fifth Avenue, New York,
New York 10022.

Berger Associates Investment Management Services is located at 210
University Boulevard, Suite 900, Denver, Colorado 80206.

Perkins, Wolf, McDonnell & Company is located at 53 West Jackson
Boulevard, Suite 818, Chicago, Illinois 60604.

The Glenmede Trust Co. is located at One Liberty Place, 1650 Market
Street, Suite 1200, Philadelphia, Pennsylvania 19103-7391.

Rowe Price-Fleming International, Inc. is located at 100 East Pratt
Street, Baltimore, Maryland 21202.

Bankers Trust Company is located at 130 Liberty Street, New York, New
York 10006.

Each of the Advisers maintains the books, accounts and records required to be
maintained pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder.

Item 31. Management Services.

None.

Item 32. Undertakings.

Registrant hereby undertakes to furnish each investor to whom a

Prospectus is delivered with a copy of Registrant's latest annual
report to shareholders, upon request and without charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, and the State of New York, on the 23rd day of February, 1998.

STYLE SELECT SERIES, INC.

By: /s/ Peter A. Harbeck
------------------------
Peter A. Harbeck
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 8 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.

/s/ Peter A. Harbeck President and Director February 24, 1998
- -------------------- (Principal Executive Officer)
Peter A. Harbeck

* Treasurer February 24, 1998
- --------------------- (Principal Accounting and
Peter C. Sutton Financial Officer)

* Trustee February 24, 1998
- --------------------
S. James Coppersmith

* Trustee February 24, 1998
- --------------------
Samuel M. Eisenstat

* Trustee February 24, 1998
- --------------------
Stephen J. Gutman

*By: /s/ Robert M. Zakem
-------------------
Robert M. Zakem, Attorney-in-Fact

<PAGE>

STYLE SELECT SERIES, INC.

EXHIBIT INDEX

Exhibit No. Name

11 Consent of Accountants

27 Financial Data Schedules

<PAGE>

Consent of Independent Accountants

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 8 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
December 4, 1997, relating to the financial statements and financial highlights
of Style Select Series, Inc., which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Additional Information -
Independent Accountants and Legal Counsel" in such Statement of Additional
Information and to the reference to us under the heading "General Information -
Independent Accountants and Legal Counsel" in such Prospectus.

/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP

1177 Avenue of the Americas
New York, New York
February 20, 1998

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 011
<NAME> STYLE SELECT SERIES AGGRESSIVE GROWTH CLASS A

<GROSS-EXPENSE> 1,282,234<F1>
<AVERAGE-NET-ASSETS> 31,969,874<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> (0.11)<F2>
<PER-SHARE-GAIN-APPREC> 3.51<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 15.90<F2>
<EXPENSE-RATIO> 1.84<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Aggressive Growth Fund as a whole
<F2>Information give pertains to Style Select Aggressive Growth Fund Class A
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 012
<NAME> STYLE SELECT SERIES AGGRESSIVE GROWTH CLASS B

<GROSS-EXPENSE> 1,282,234<F1>
<AVERAGE-NET-ASSETS> 22,067,786<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> (0.24)<F2>
<PER-SHARE-GAIN-APPREC> 3.54<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 15.80<F2>
<EXPENSE-RATIO> 2.47<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Aggressive Growth Fund as a whole
<F2>Information give pertains to Style Select Aggressive Growth Fund Class B
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 013
<NAME> STYLE SELECT SERIES AGGRESSIVE GROWTH CLASS C

<GROSS-EXPENSE> 1,282,234<F1>
<AVERAGE-NET-ASSETS> 2,939,381<F2>
<PER-SHARE-NAV-BEGIN> 13.38<F2>
<PER-SHARE-NII> (0.17)<F2>
<PER-SHARE-GAIN-APPREC> 2.59<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 15.80<F2>
<EXPENSE-RATIO> 2.45<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Aggressive Growth Fund as a whole
<F2>Information give pertains to Style Select Aggressive Growth Fund Class C
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 021
<NAME> STYLE SELECT SERIES INTERNATIONAL CLASS A

<GROSS-EXPENSE> 1,121,218<F1>
<AVERAGE-NET-ASSETS> 23,158,468<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> 0.01<F2>
<PER-SHARE-GAIN-APPREC> (0.05)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.46<F2>
<EXPENSE-RATIO> 2.10<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select International Fund as a whole
<F2>Information given pertains to Style Select International Fund Class A
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 022
<NAME> STYLE SELECT SERIES INTERNATIONAL CLASS B

<GROSS-EXPENSE> 1,121,218<F1>
<AVERAGE-NET-ASSETS> 17,124,033<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> (0.09)<F2>
<PER-SHARE-GAIN-APPREC> (0.03)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.38<F2>
<EXPENSE-RATIO> 2.72<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select International Fund as a whole
<F2>Information given pertains to Style Select International Fund Class B
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 023
<NAME> STYLE SELECT SERIES INTERNATIONAL CLASS C

<GROSS-EXPENSE> 1,121,218<F1>
<AVERAGE-NET-ASSETS> 2,684,330<F2>
<PER-SHARE-NAV-BEGIN> 12.60<F2>
<PER-SHARE-NII> (.07)<F2>
<PER-SHARE-GAIN-APPREC> (0.15)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.38<F2>
<EXPENSE-RATIO> 2.70<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select International Fund as a whole
<F2>Information given pertains to Style Select International Fund Class C
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 031
<NAME> STYLE SELECT SERIES SMALL CAP VALUE CLASS A

<GROSS-EXPENSE> 29,406<F1>
<AVERAGE-NET-ASSETS> 23,610,462<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> 0.01<F2>
<PER-SHARE-GAIN-APPREC> (0.37)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.14<F2>
<EXPENSE-RATIO> 1.78<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Small Cap Value Fund as a whole
<F2>Information given pertains to Style Select Small Cap Value Fund Class A
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 032
<NAME> STYLE SELECT SERIES SMALL CAP VALUE CLASS B

<GROSS-EXPENSE> 29,406<F1>
<AVERAGE-NET-ASSETS> 1,929,698<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> 0.01<F2>
<PER-SHARE-GAIN-APPREC> (0.38)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.13<F2>
<EXPENSE-RATIO> 2.43<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Small Cap Value Fund as a whole
<F2>Information given pertains to Style Select Small Cap Value Fund Class B
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 033
<NAME> STYLE SELECT SERIES SMALL CAP VALUE CLASS C

<GROSS-EXPENSE> 29,406<F1>
<AVERAGE-NET-ASSETS> 394,551<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> 0.01<F2>
<PER-SHARE-GAIN-APPREC> (0.37)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.14<F2>
<EXPENSE-RATIO> 2.43<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Small Cap Value Fund as a whole
<F2>Information given pertains to Style Select Small Cap Value Fund Class C
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC.
<SERIES>
<NUMBER> 041
<NAME> STYLE SELECT SERIES VALUE CLASS A

<GROSS-EXPENSE> 1,661,136<F1>
<AVERAGE-NET-ASSETS> 35,136,740<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> 0<F2>
<PER-SHARE-GAIN-APPREC> 3.59<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 16.09<F2>
<EXPENSE-RATIO> 1.84<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Series Value Fund as a whole
<F2>Information given pertains to Style Select Value Fund Class A
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC.
<SERIES>
<NUMBER> 042
<NAME> STYLE SELECT SERIES VALUE CLASS B

<GROSS-EXPENSE> 1,661,136<F1>
<AVERAGE-NET-ASSETS> 32,504,889<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> (0.11)<F2>
<PER-SHARE-GAIN-APPREC> 3.61<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 16.00<F2>
<EXPENSE-RATIO> 2.46<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Series Value Fund as a whole
<F2>Information given pertains to Style Select Value Fund Class B
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC.
<SERIES>
<NUMBER> 043
<NAME> STYLE SELECT SERIES VALUE CLASS C

<GROSS-EXPENSE> 1,661,136<F1>
<AVERAGE-NET-ASSETS> 4,304,677<F2>
<PER-SHARE-NAV-BEGIN> 13.56<F2>
<PER-SHARE-NII> (0.08)<F2>
<PER-SHARE-GAIN-APPREC> 2.52<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 16.00<F2>
<EXPENSE-RATIO> 2.45<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Series Value Fund as a whole
<F2>Information given pertains to Style Select Value Fund Class C
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 051
<NAME> STYLE SELECT SERIES LARGE CAP VALUE CLASS A

<GROSS-EXPENSE> 28,275<F1>
<AVERAGE-NET-ASSETS> 24,452,958<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> 0.01<F2>
<PER-SHARE-GAIN-APPREC> (0.65)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 11.86<F2>
<EXPENSE-RATIO> 1.78<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Large Cap Value as a whole
<F2>Infoprmation given pertains to Style Select Large Cap Value Class A
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 052
<NAME> STYLE SELECT SERIES LARGE CAP VALUE CLASS B

<GROSS-EXPENSE> 28,275<F1>
<AVERAGE-NET-ASSETS> 602,209<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> 0<F2>
<PER-SHARE-GAIN-APPREC> (0.64)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 11.86<F2>
<EXPENSE-RATIO> 2.43<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Large Cap Value as a whole
<F2>Infoprmation given pertains to Style Select Large Cap Value Class B
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 053
<NAME> STYLE SELECT SERIES LARGE CAP VALUE CLASS C

<GROSS-EXPENSE> 28,275<F1>
<AVERAGE-NET-ASSETS> 128,757<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> 0<F2>
<PER-SHARE-GAIN-APPREC> (0.64)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 11.86<F2>
<EXPENSE-RATIO> 2.43<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Large Cap Value as a whole
<F2>Infoprmation given pertains to Style Select Large Cap Value Class C
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 061
<NAME> STYLE SELECT SERIES LARGE CAP BLEND CLASS A

<GROSS-EXPENSE> 28,251<F1>
<AVERAGE-NET-ASSETS> 24,538,268<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2><F1>
<PER-SHARE-NII> 0.01<F2>
<PER-SHARE-GAIN-APPREC> (0.53)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 11.98<F2>
<EXPENSE-RATIO> 1.78<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Large Cap Blend as a whole
<F2>Information given pertains to Style Select Large Cap Blend Class A
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 062
<NAME> STYLE SELECT SERIES LARGE CAP BLEND CLASS B

<GROSS-EXPENSE> 28,251<F1>
<AVERAGE-NET-ASSETS> 513,871<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2><F1>
<PER-SHARE-NII> 0<F2>
<PER-SHARE-GAIN-APPREC> (0.54)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 11.96<F2>
<EXPENSE-RATIO> 2.43<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Large Cap Blend as a whole
<F2>Information given pertains to Style Select Large Cap Blend Class B
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 063
<NAME> STYLE SELECT SERIES LARGE CAP BLEND CLASS C

<GROSS-EXPENSE> 28,251<F1>
<AVERAGE-NET-ASSETS> 133665<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2><F1>
<PER-SHARE-NII> 0<F2>
<PER-SHARE-GAIN-APPREC> (0.53)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 11.97<F2>
<EXPENSE-RATIO> 2.43<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Large Cap Blend as a whole
<F2>Information given pertains to Style Select Large Cap Blend Class C
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC.
<SERIES>
<NUMBER> 071
<NAME> STYLE SELECT LARGE CAP GROWTH CLASS A

<GROSS-EXPENSE> 27986<F1>
<AVERAGE-NET-ASSETS> 24431872<F1>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> 0<F2>
<PER-SHARE-GAIN-APPREC> (.71)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 11.79<F2>
<EXPENSE-RATIO> 1.78<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Large Cap Growth as a whole
<F2>Information given pertains to Style Select Large Cap Growth Class A
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC.
<SERIES>
<NUMBER> 072
<NAME> STYLE SELECT LARGE CAP GROWTH CLASS B

<GROSS-EXPENSE> 27986<F1>
<AVERAGE-NET-ASSETS> 372020<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> 0<F2>
<PER-SHARE-GAIN-APPREC> (.71)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 11.79<F2>
<EXPENSE-RATIO> 2.43<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Large Cap Growth as a whole
<F2>Information given pertains to Style Select Large Cap Growth Class B
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC.
<SERIES>
<NUMBER> 073
<NAME> STYLE SELECT LARGE CAP GROWTH CLASS C

<GROSS-EXPENSE> 27986<F1>
<AVERAGE-NET-ASSETS> 125765<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> 0<F2>
<PER-SHARE-GAIN-APPREC> (.72)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 11.78<F2>
<EXPENSE-RATIO> 2.43<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Large Cap Growth as a whole
<F2>Information given pertains to Style Select Large Cap Growth Class C
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 081
<NAME> STYLE SELECT SERIES MID-CAP GROWTH CLASS A

<GROSS-EXPENSE> 987213<F1>
<AVERAGE-NET-ASSETS> 22146845<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> (.16)<F2>
<PER-SHARE-GAIN-APPREC> 1.37<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 13.71<F2>
<EXPENSE-RATIO> 1.85<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Mid Cap Growth as a whole
<F2>Information given pertains to Style Select Mid Cap Growth Class A
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 082
<NAME> STYLE SELECT SERIES MID-CAP GROWTH CLASS B

<GROSS-EXPENSE> 987213<F1>
<AVERAGE-NET-ASSETS> 17344067<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> (.25)<F2>
<PER-SHARE-GAIN-APPREC> 1.38<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 13.63<F2>
<EXPENSE-RATIO> 2.47<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Mid Cap Growth as a whole
<F2>Information given pertains to Style Select Mid Cap Growth Class B
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 083
<NAME> STYLE SELECT SERIES MID-CAP GROWTH CLASS C

<GROSS-EXPENSE> 987213<F1>
<AVERAGE-NET-ASSETS> 2248793<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> (.18)<F2>
<PER-SHARE-GAIN-APPREC> 1.89<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 13.64<F2>
<EXPENSE-RATIO> 2.45<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Mid Cap Growth as a whole
<F2>Information given pertains to Style Select Mid Cap Growth Class C
</FN>

</TABLE>