<PAGE>
As filed with the Securities and Exchange Commission on April 16, 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. 9 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 10
(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)
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X 60 days after filing pursuant to paragraph (a)
- ------
On June 15, 1998 pursuant to paragraph (a) of Rule 485
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<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.
<PAGE>
PROSPECTUS o JUNE 15, 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 nine separate investment portfolios (each, a
'Portfolio'). This prospectus relates to eight of the nine Portfolios. 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'), MORGAN STANLEY ASSET MANAGEMENT INC. ('MSAM') 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 June 1, 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>
2
STYLE SELECT SERIES (Service Mark)
(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>
3
STYLE SELECT SERIES (Service Mark)
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 5.00% 1.00% None 5.00% 1.00% None 5.00% 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 5.00% 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>
4
STYLE SELECT SERIES (Service Mark)
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
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>
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>
<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 the 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: Value Portfolio, Class A, 0.77% and 2.12%; Value Portfolio, Class B,
0.80% and 2.80%; Value Portfolio, Class C, 1.08% and 3.08%; International
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>
5
STYLE SELECT SERIES (Service Mark)
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>
6
STYLE SELECT SERIES (Service Mark)
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
<CAPTION>
CLASS B
- --------------------------------------------------------------------------------------------------------------------------------
<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) 773
<CAPTION>
CLASS C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97 12.50 -- (0.72) (0.72) -- -- -- 11.78 (5.76) 166
- -----------------------------------------------------------------------------------------------------------------
MID-CAP GROWTH PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
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
<CAPTION>
CLASS B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97 12.50 (0.25) 1.38 1.13 -- -- -- 13.63 9.04 35,739
<CAPTION>
CLASS C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/06/97-10/31/97 11.93 (0.18) 1.89 1.71 -- -- -- 13.64 14.33 4,685
- -----------------------------------------------------------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO
<CAPTION>
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
<CAPTION>
CLASS B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97 12.50 (0.24) 3.54 3.30 -- -- -- 15.80 26.40 48,594
<CAPTION>
CLASS C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <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
<CAPTION>
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
<CAPTION>
CLASS B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97 12.50 -- (0.54) (0.54) -- -- -- 11.96 (4.32) 941
<CAPTION>
CLASS C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97 12.50 -- (0.53) (0.53) -- -- -- 11.97 (4.24) 143
<CAPTION>
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
- ---------------------------
- ---------------------------
<S> <C> <C> <C> <C>
10/15/97-10/31/97 1.78% 0.34% 1% $ 0.0414
<CAPTION>
- ---------------------------
<S> <C> <C> <C> <C>
10/15/97-10/31/97 2.43 (0.84) 1 0.0414
<CAPTION>
- ---------------------------
<S> <C> <C> <C> <C>
10/15/97-10/31/97 2.43 (0.42) 1 0.0414
<CAPTION>
- ---------------------------
MID-CAP GROWTH PORTFOLIO
- ---------------------------
- ---------------------------
<S> <C> <C> <C> <C>
11/19/96-10/31/97 1.85% (1.19)% 97% $ 0.0487
<CAPTION>
- ---------------------------
<S> <C> <C> <C> <C>
11/19/96-10/31/97 2.47 (1.92) 97 0.0487
<CAPTION>
- ---------------------------
<S> <C> <C> <C> <C>
3/06/97-10/31/97 2.45 (1.97) 97 0.0487
<CAPTION>
- ---------------------------
AGGRESSIVE GROWTH PORTFOLIO
- ---------------------------
<S> <C> <C> <C> <C>
11/19/96-10/31/97 1.84% (0.77)% 150% $ 0.0546
<CAPTION>
- ---------------------------
<S> <C> <C> <C> <C>
11/19/96-10/31/97 2.47 (1.58) 150 0.0546
<CAPTION>
- ---------------------------
<S> <C> <C> <C> <C>
3/06/97-10/31/97 2.45 (1.68) 150 0.0546
<CAPTION>
- ---------------------------
LARGE-CAP BLEND PORTFOLIO
- ---------------------------
<S> <C> <C> <C> <C>
10/15/97-10/31/97 1.78% 1.35% 2% $ 0.0361
<CAPTION>
- ---------------------------
<S> <C> <C> <C> <C>
10/15/97-10/31/97 2.43 0.29 2 0.0361
<CAPTION>
- ---------------------------
<S> <C> <C> <C> <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>
7
STYLE SELECT SERIES (Service Mark)
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)
- ------------------ ---------- ---------- ----------- ---------- --------- ------- ------- ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LARGE-CAP VALUE PORTFOLIO
- ------------------------------------------------------------------
<CAPTION>
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
<CAPTION>
CLASS B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97 12.50 -- (0.64) (0.64) -- -- -- 11.86 (5.12) 1,325
<CAPTION>
CLASS C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97 12.50 -- (0.64) (0.64) -- -- -- 11.86 (5.12) 172
- -----------------------------------------------------------------------------------------------------------------
VALUE PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
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
<CAPTION>
CLASS B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97 12.50 (0.11) 3.61 3.50 -- -- -- 16.00 28.00 77,534
<CAPTION>
CLASS C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/06/97-10/31/97 13.56 (0.08) 2.52 2.44 -- -- -- 16.00 17.99 9,384
- -----------------------------------------------------------------------------------------------------------------
SMALL-CAP VALUE PORTFOLIO
<CAPTION>
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
<CAPTION>
CLASS B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/15/97-10/31/97 12.50 0.01 (0.38) (0.37) -- -- -- 12.13 (2.96) 3,112
<CAPTION>
CLASS C
- --------------------------------------------------------------------------------------------------------------------------------
<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) 525
- -----------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
<CAPTION>
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
<CAPTION>
CLASS B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/19/96-10/31/97 12.50 (0.09) (0.03) (0.12) -- -- -- 12.38 (0.96) 42,656
<CAPTION>
CLASS C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/06/97-10/31/97 12.50 (0.07) (0.15) 0.22 -- -- -- 12.38 (1.75) 4,459
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
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)
- ------------------------------ ------------ ------------ -------- ----------
<S> <C> <C> <C> <C>
LARGE-CAP VALUE PORTFOLIO
- -----------------------------
<CAPTION>
- ------------------------------
<S> <C> <C> <C> <C>
10/15/97-10/31/97 1.78% 1.07% --% $ 0.0445
<CAPTION>
- ------------------------------
<S> <C> <C> <C> <C>
10/15/97-10/31/97 2.43 .22 -- 0.0445
<CAPTION>
- ------------------------------
<S> <C> <C> <C> <C>
10/15/97-10/31/97 2.43 .53 -- 0.0445
<CAPTION>
- ------------------------------
VALUE PORTFOLIO
- ------------------------------
- ------------------------------
<S> <C> <C> <C> <C>
11/19/96-10/31/97 1.84% --% 48% $ 0.0596
<CAPTION>
- ------------------------------
<S> <C> <C> <C> <C>
11/19/96-10/31/97 2.46 (0.74) 48 0.0596
<CAPTION>
- ------------------------------
<S> <C> <C> <C> <C>
3/06/97-10/31/97 2.45 (0.78) 48 0.0596
<CAPTION>
- ------------------------------
<S> <C> <C> <C> <C>
SMALL-CAP VALUE PORTFOLIO
<CAPTION>
- ------------------------------
<S> <C> <C> <C> <C>
10/15/97-10/31/97 1.78% 2.57% --% $ 0.0571
<CAPTION>
- ------------------------------
<S> <C> <C> <C> <C>
10/15/97-10/31/97 2.43 1.75 -- 0.0571
<CAPTION>
- ------------------------------
<S> <C> <C> <C> <C>
10/15/97-10/31/97 2.43 1.75 -- 0.0571
<CAPTION>
- ------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------
<S> <C> <C> <C> <C>
11/19/96-10/31/97 2.10% 0.07% 70% $ 0.0179
<CAPTION>
- ------------------------------
<S> <C> <C> <C> <C>
11/19/96-10/31/97 2.72 (0.69) 70 0.0179
<CAPTION>
- ------------------------------
<S> <C> <C> <C> <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>
8
STYLE SELECT SERIES (Service Mark)
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>
9
STYLE SELECT SERIES (Service Mark)
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>
10
STYLE SELECT SERIES (Service Mark)
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,
MSAM 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>
11
STYLE SELECT SERIES (Service Mark)
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>
12
STYLE SELECT SERIES (Service Mark)
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, Rowe-Fleming and Warburg 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>
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STYLE SELECT SERIES (Service Mark)
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.
<PAGE>
14
STYLE SELECT SERIES (Service Mark)
Advisers for Large-Cap Growth Portfolio
- --------------------------------------------------------------------------------
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
[CHART]
1 YEAR
Morningstar Large Growth 26.5%
Janus 26.5%
Papp 29.9%
Montage & Caldwell 32.7%
3 YEAR
Morningstar Large Growth 25.8%
Janus 30.6%
Papp 31.5%
Montage & Caldwell 35.3%
5 YEAR
Morningstar Large Growth 16.1%
Janus 16.9%
Papp 19.6%
Montage & Caldwell 22.5%
<PAGE>
15
STYLE SELECT SERIES (Service Mark)
NOTES (LARGE-CAP GROWTH 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.
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.
<PAGE>
16
STYLE SELECT SERIES (Service Mark)
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
FIVE YEARS ENDED DECEMBER 31, 1997
[GRAPH]
Montag & Morningstar
Janus Papp Caldwell Large Growth
1992 10,000 10,000 10,000 10,000
1993 10,443 9,999 11,140 10,824
1994 9,791 10,775 11,128 10,584
1995 13,731 14,769 15,569 13,908
1996 17,250 18,853 20,753 16,677
1997 21,822 24,494 27,540 21,098
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 Montag &
Caldwell Growth Composite. The returns for Janus, Papp and Montag & Caldwell are
net of actual expenses.
<PAGE>
17
STYLE SELECT SERIES (Service Mark)
Advisers for Mid-Cap Growth Portfolio
- --------------------------------------------------------------------------------
The Advisers for the Mid-Cap Growth Portfolio are:
MILLER ANDERSON & SHERRERD, LLP (MAS)
WELLINGTON MANAGEMENT COMPANY, LLP (WELLINGTON MANAGEMENT)
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
[CHART]
1 YEAR
Morningstar Mid-Cap Growth 15.9%
Mid-Cap Growth Portfolio (Class A) 7.3%
MAS 33.1%
T. Rowe Price 18.3%
Wellington Management 26.9%
3 YEAR
Morningstar Mid-Cap Growth 22.4%
MAS 29.2%
T. Rowe Price 27.7%
Wellington Management 25.5%
5 YEAR
Morningstar Mid-Cap Growth 15.7%
MAS 19.2%
T. Rowe Price 21.4%
Wellington Management 18.4%
- ------------------
*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.
<PAGE>
18
STYLE SELECT SERIES (Service Mark)
NOTES (MID-CAP GROWTH 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 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.
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.
Wellington Management
Wellington Management's historical performance data covers six and a half years
and reflects the performance of the Wellington Management Mid-Cap Growth
Composite. The annualized return since inception of the Composite is 19.7%. 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 Mid-Cap Growth Portfolio. As of December 31, 1997
the Composite included 20 separately managed accounts totaling $1,038.0 million
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 fee currently charged to any account.
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.
<PAGE>
19
STYLE SELECT SERIES (Service Mark)
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
FIVE YEARS ENDED DECEMBER 31, 1997
[GRAPH]
Wellington Morningstar
MAS Management T. Rowe Price Mid-Cap Growth
1992 10,000 10,000 10,000 10,000
1993 11,823 11,256 12,624 11,620
1994 11,185 11,745 12,660 11,298
1995 15,240 15,352 17,845 15,337
1996 18,104 18,311 22,277 17,869
1997 24,102 23,231 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
Welllington Management Mid-Cap Growth 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.
<PAGE>
20
STYLE SELECT SERIES (Service Mark)
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
[CHART]
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 acutal operating expenses and the imposition of
a fron-end sales load.
<PAGE>
21
STYLE SELECT SERIES (Service Mark)
NOTES (AGGRESSIVE GROWTH 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.
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.
<PAGE>
22
STYLE SELECT SERIES (Service Mark)
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
SIX YEARS ENDED DECEMBER 31, 1997
[GRAPH]
Morninstar
Janus SunAmerica Warburg Aggressive Growth
1991 10,000 10,000 10,000 10,000
1992 10,591 11,442 11,153 11,016
1993 12,192 13,026 13,111 13,296
1994 12,803 13,642 12,867 12,921
1995 21,570 20,486 18,723 17,720
1996 25,106 23,542 20,487 20,188
1997 32,011 24,327 24,728 23,499
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.
<PAGE>
23
STYLE SELECT SERIES (Service Mark)
Advisers for Large-Cap Blend Portfolio
- --------------------------------------------------------------------------------
The Advisers for the Large-Cap Blend Portfolio are:
LAZARD ASSET MANAGEMENT (LAZARD)
MORGAN STANLEY ASSET
MANAGEMENT INC. (MSAM)
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
[CHART]
1 YEAR
Morningstar Large Blend 16.4%
Lazard 24.7%
MSAM 31.2%
T. Rowe Price 23.5%
3 YEAR
Morningstar Large Blend 26.7%
Lazard 27.5%
MSAM 35.6%
T. Rowe Price 26.7%
5 YEAR
Morningstar Large Blend 17.3%
Lazard 20.1%
MSAM 21.9%
T. Rowe Price 18.0%
10 YEAR
Morningstar Large Blend 15.9%
Lazard 17.2%
T. Rowe Price 16.5%
<PAGE>
24
STYLE SELECT SERIES (Service Mark)
NOTES (LARGE-CAP BLEND 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.
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.
MSAM
MSAM's historical performance data covers 6 1/2 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. MSAM manages a total of 13 accounts (11 of which are
institutional accounts and 2 of which are mutual funds) with investment
objectives, policies and strategies substantially similar to those to be used in
managing its portion of the Large-Cap Blend Portfolio. MSAM does not calculate
composite performance for 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 fund and, therefore, the omission
of such accounts does not render the performance information presented
misleading. As of December 31, 1997, the fund's net assets totaled $619.4
million, which represented approximately 52.2% of the total assets in the 13
similar accounts. The returns presented in the chart are net of actual fees.
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.
<PAGE>
25
STYLE SELECT SERIES (Service Mark)
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
THREE YEARS ENDED DECEMBER 31, 1997
[GRAPH]
Morningstar
Lazard MSAM Large Blend T. Rowe Price
1994 10,000 10,000 10,000 10,000
1995 13,700 14,490 13,092 13,195
1996 16,618 19,002 16,488 15,891
1997 20,706 24,935 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 MSAM and a single mutual
fund of T. Rowe Price. The returns for Lazard, MSAM and T. Rowe Price are net of
actual expenses.
<PAGE>
26
STYLE SELECT SERIES (Service Mark)
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
[CHART]
1 YEAR
Morningstar Large Value 26.7%
Babson 26.1%
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%
<PAGE>
27
STYLE SELECT SERIES (Service Mark)
NOTES (LARGE-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.
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.
<PAGE>
28
STYLE SELECT SERIES (Service Mark)
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
TEN YEARS ENDED DECEMBER 31, 1997
[GRAPH]
Morningstar
Davis Neuberger&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 14,597 14,568
1990 15,260 13,451 12,955 13,401
1991 21,448 16,459 17,868 17,194
1992 24,030 19,343 20,115 19,487
1993 27,897 22,527 24,281 22,342
1994 27,358 22,101 23,227 21,929
1995 38,455 29,883 30,962 27,968
1996 48,661 37,799 37,991 34,200
1997 65,050 48,836 49,685 43,423
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>
29
STYLE SELECT SERIES (Service Mark)
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
[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%
<PAGE>
30
STYLE SELECT SERIES (Service Mark)
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>
31
STYLE SELECT SERIES (Service Mark)
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
TEN YEARS ENDED DECEMBER 31, 1997
[GRAPH]
Morningstar
Davis Neuberger&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 14,597 14,568
1990 15,260 13,451 12,955 13,401
1991 21,448 16,459 17,868 17,194
1992 24,030 19,343 20,115 19,487
1993 27,897 22,527 24,281 22,342
1994 27,358 22,101 23,227 21,929
1995 38,455 29,883 30,962 27,968
1996 48,661 37,799 37,991 34,200
1997 65,050 48,836 49,685 43,423
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>
32
STYLE SELECT SERIES (Service Mark)
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
[CHART]
1 YEAR
Morningstar Small Value 27.0%
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>
33
STYLE SELECT SERIES (Service Mark)
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>
34
STYLE SELECT SERIES (Service Mark)
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
SIX YEARS ENDED DECEMBER 31, 1997
[GRAPH]
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 14,785 13,656 14,007
1994 14,826 15,613 13,799 13,892
1995 18,695 19,579 17,607 17,109
1996 23,480 24,474 22,026 20,745
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>
35
STYLE SELECT SERIES (Service Mark)
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
[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 expenses and the imposition
of a fron-end sales load.
<PAGE>
36
STYLE SELECT SERIES (Service Mark)
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
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 of those 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.
<PAGE>
37
STYLE SELECT SERIES (Service Mark)
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
FIVE YEARS ENDED DECEMBER 31, 1997
Int'l 4
Job#16718--IEP4--Mech.01--3/30/98--Cycle:01--MAC:Illustrator.eps/DR
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.
<PAGE>
38
STYLE SELECT SERIES (Service Mark)
Investment Techniques and Risk Factors
- --------------------------------------------------------------------------------
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
<PAGE>
39
STYLE SELECT SERIES (Service Mark)
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.
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 $12.5 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 aggregate annual rates, 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. For the fiscal year ended
October 31, 1997, SunAmerica paid fees to the Advisers equal to the following
aggregate annual rates, 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
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Adviser changes. The order also permits the Fund 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 billion.
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, T. Rowe Price and
Wellington Managemnt.
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.
Wellington Management Company, LLP. Wellington Management is a Massachusetts
limited liability partnership, located at 75 State Street, Boston, Massachusetts
02109. Wellington Management is a 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 Portion of the Mid-Cap Growth Portfolio is managed by
Portfolio Manager Frank V. Wisneski. Mr. Wisneski is a Senior Vice President and
has 29 years of professional experience with Wellington Management.
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STYLE SELECT SERIES (Service Mark)
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.
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.
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.
The Advisers for the Large-Cap Blend Portfolio are Lazard, MSAM and T. Rowe
Price. 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
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STYLE SELECT SERIES (Service Mark)
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 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.
Morgan Stanley Asset Management Inc. MSAM is a wholly owned subsidiary of
Morgan Stanley, Dean Witter & Co., with principal offices at 1221 Avenue of the
Americas, New York, New York 10020. MSAM offers investment management and
fiduciary services to taxable and tax-exempt funds and institutions,
international organizations and individuals investing in U.S. and international
equity and fixed income securities. As of December 31, 1997, MSAM, together with
its institutional investment management affiliates, had approximately $147.1
billion of combined assets under management as investment managers or fiduciary
advisers.
The Portfolio Managers for MSAM's portion of the Large-Cap Blend Portfolio are
Kurt A. Feuerman and Margaret Kinsley Johnson, Managing Director and Principal,
respectively, of MSAM. Mr. Feuerman has been a Managing Director in MSAM's
Institutional Equity Group since 1993. From 1990 to 1993, he had been a Managing
Director in Morgan Stanley & Co.'s Equity Research Department. Ms. Johnson has
been a portfolio manager at MSAM since 1989 and is a Chartered Financial
Analyst.
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 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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STYLE SELECT SERIES (Service Mark)
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. 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.
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 billion.
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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STYLE SELECT SERIES (Service Mark)
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, where he was responsible for providing equity research and
macroeconomic/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,
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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. 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
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53
STYLE SELECT SERIES (Service Mark)
firms may be subject to various state laws regarding services described, and may
be required to register as dealers pursuant to state law.
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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STYLE SELECT SERIES (Service Mark)
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
<PAGE>
56
STYLE SELECT SERIES (Service Mark)
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 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.
<PAGE>
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STYLE SELECT SERIES (Service Mark)
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
<PAGE>
58
STYLE SELECT SERIES (Service Mark)
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. Additionally,
Class C shareholders of a Portfolio may exchange their shares for Class II
shares of another SunAmerica Fund. 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.
<PAGE>
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STYLE SELECT SERIES (Service Mark)
In addition, a Portfolio reserves the right to refuse any exchange purchase
order if, in the judgment of 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 per share of each class separately by dividing the total value of
each class's net assets by the number of shares outstanding of each class.
Investments for which market quotations are readily available are valued at
market at their closing price. All other securities and assets are valued at
fair value following procedures approved by the Directors. For a complete
description of the procedures involved in valuing various Fund assets, see the
Statement of Additional Information.
<PAGE>
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STYLE SELECT SERIES (Service Mark)
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>
61
STYLE SELECT SERIES (Service Mark)
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, state or
<PAGE>
62
STYLE SELECT SERIES (Service Mark)
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 nine 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, the International Equity Portfolio and the Focus
Portfolio. Except for the Focus 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 Focus Portfolio is offered through a
separate prospectus which can be obtained by contacting Shareholder/Dealer
Services at (800) 858-8850.
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.
Year 2000 Compliance. Many services provided to the Fund and the shareholders
by the Adviser, the Distributor and the Administrator rely on the smooth
functioning of both their computer and computer-based systems as well as those
of their outside providers. Many computer and computer-based systems cannot
distinguish the year 2000 from the year 1900 because of the way the systems
encode and calculate dates. This Year 2000 Issue potentially could have an
adverse impact on the handling of security trades, the payment of interest and
dividends, pricing and account services. The Adviser, the Distributor and the
Administrator recognize the importance of the Year 2000 Issue and are taking the
appropriate steps necessary in preparation of the year 2000. The Adviser, the
Distributor and the Administrator fully anticipate that their systems and those
of their outside service providers will be adapted in time for the year 2000,
and to further this goal the Adviser, the Distributor and the Administrator have
coordinated a plan to repair, adapt or replace systems that are not Year 2000
compliant and have obtained similar assurances from their outside service
providers. The Adviser, the Distributor and the Administrator expect to complete
their plan significantly by the end of the 1998 calendar year and then perform
appropriate systems testing in the 1999 calendar year.
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
<PAGE>
63
STYLE SELECT SERIES (Service Mark)
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 (Service Mark)
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>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
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.
<S> <C> <C> <C>
CLASS A CLASS B CLASS 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) $
<S> <C>
/ / 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)________________
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
2 REGISTRATION
- ------------------------------------------------------------------------------------------------------------------------------------
Please check only one registration type. DO NOT USE THIS FORM TO ESTABLISH AN IRA ACCOUNT.
<S> <C>
/ / 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) _______________________________________________________________________________________
<S> <C>
____________________________________________________________________________________________________________________________________
Name of Shareholder Name of Co-Shareholder (if any)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
3 MAILING ADDRESS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
____________________________________________________________________________________________________________________________________
Address Apt./Suite
____________________________________________________________________________________________________________________________________
City State Zip Code Daytime Phone Number
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
4 SOCIAL SECURITY OR TAX ID NUMBER (SIGNATURE REQUIRED)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
/ / SOCIAL SECURITY or / / TAX-ID #__________________________________ / / U.S. Citizen
For Individual or Joint accounts use Social Security number of owner. / / Resident Alien
For Custodial accounts use minor's Social Security number. / / Non-Resident Alien ___________________
(Specify Country)
<CAPTION>
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:
<S> <C>
/ / 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.
<S> <C> <C>
____________________________________________________________________________________________________________________________________
SIGNATURE Date Title or capacity, if applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
5 DISTRIBUTIONS (ALL DIVIDENDS AND CAPITAL GAINS WILL BE REINVESTED UNLESS OTHERWISE NOTED BELOW)
- ------------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS (CHECK ONE) CAPITAL GAINS (CHECK ONE)
<S> <C> <C> <C>
/ / REINVEST DIVIDENDS IN SAME PORTFOLIO / / REINVEST CAPITAL GAINS IN SAME PORTFOLIO
/ / Reinvest dividends in another Style Select Series Portfolio / / Reinvest capital gains in another Style Select Series
or SunAmerica Fund* Portfolio or SunAmerica Fund*
_________________________________________________________ _______________________________________________________
Portfolio Name Account Number (if existing) Portfolio Name Account Number (if existing)
/ / Send dividends by check to address of record / / Send capital gains by check to address of record
/ / Send dividends to bank account via Automated Clearing House / / Send capital gains to bank account via Automated Clearing
electronic funds transfer. Complete the ACH Cash House electronic funds transfer. Complete the ACH Cash
Distribution and Banking Information Sections on the Distribution and Banking Information Sections on the
Supplemental Application Supplemental Application
/ / Send dividend check to payee specified below / / Send capital gains check to payee specified below
<S> <C> <C>
____________________________________________________________________________________________________________________________________
Name (payee) Address
____________________________________________________________________________________________________________________________________
City State Zip Code
<S> <C>
* Dividends and capital gains can only be reinvested into the same Class of shares in another Portfolio/Fund.
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
6 CONSOLIDATED STATEMENT AND INTERESTED PARTY STATEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
/ / 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.
<S> <C> <C>
____________________________________________________________________________________________________________________________________
Name (Interested Party) Address
____________________________________________________________________________________________________________________________________
City State Zip Code
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
7 REDUCED SALES CHARGE (CLASS A SHARE PURCHASE ONLY)
- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE INDICATE HOW YOU WOULD LIKE TO REDUCE YOUR SALES CHARGE.
<S> <C>
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.
<CAPTION>
____________________________________________________________________________________________________________________________________
Name(s) on account
____________________________________________________________________________________________________________________________________
Portfolio(s) / account number(s)
- ------------------------------------------------------------------------------------------------------------------------------------
8 SPECIAL ACCOUNT OPTIONS (ANY OPTION SELECTED REQUIRES THE SUPPLEMENTAL ACCOUNT APPLICATION)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
/ / I have completed and attached the Supplemental Account Application for:
<S> <C> <C> <C>
/ / Dollar Cost Averaging / / Systematic Withdrawal Plan / / Systematic Exchange Program / / Cash Distributions via ACH
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
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.
<S> <C> <C>
____________________________________________________________________________________________________________________________________
Shareholder Signature Date Title or capacity, if applicable
____________________________________________________________________________________________________________________________________
Joint Owner Signature Date
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
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.
<S> <C> <C>
____________________________________________________________________________________________________________________________________
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
</TABLE>
<PAGE>
STYLE SELECT SERIES (Service Mark)
STYLE SELECT SERIES
SUPPLEMENTAL ACCOUNT APPLICATION
<TABLE>
<CAPTION>
The SunAmerica Center
733 Third Avenue
Complete this application ONLY if you wish to add options to a new or New York, NY 10017-3204
existing Style Select Series account. 800.858.8850 ext. 5125
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
____________________________________________________________________________________________________________________________________
Portfolio Name and Class Account Number
____________________________________________________________________________________________________________________________________
Shareholder Name
____________________________________________________________________________________________________________________________________
Social Security Number or Tax-ID Number
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ACH CASH DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE COMPLETE THE BANKING INFORMATION SECTION ON THE REVERSE SIDE IF YOU ELECT THIS OPTION.
<S> <C>
/ / I wish to have my distributions sent to the bank account listed on the reverse side.
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
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.
<S> <C>
/ / I wish to establish Dollar Cost Averaging privileges for (Portfolio name(s)) __________________________________________________
<S> <C> <C>
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
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN (A MINIMUM $5,000 BALANCE IS REQUIRED)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
/ / I wish to establish a Systematic Withdrawal Plan for (Portfolio name(s))
<CAPTION>
_______________________________________________________________
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:
<S> <C>
/ / 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.
<S> <C> <C>
____________________________________________________________________________________________________________________________________
Name of Payee
____________________________________________________________________________________________________________________________________
Bank Account Number (if applicable)
____________________________________________________________________________________________________________________________________
Address
____________________________________________________________________________________________________________________________________
City State Zip Code
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
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.
<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)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SYSTEMATIC EXCHANGE PROGRAM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
/ / I wish to utilize the Systematic Exchange Program
<CAPTION>
EXCHANGE FROM: EXCHANGE TO:
Portfolio Name Account # (if existing) Amount ($50 min) Portfolio Name Account # (if existing)
<S> <C> <C> <C> <C>
__________________________ _________________________ $________________ __________________________ _____________________________
__________________________ _________________________ $________________ __________________________ _____________________________
<CAPTION>
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.
<S> <C> <C> <C>
________________________________________________________________________________________
SHAREHOLDER SIGNATURE Date Title or capacity, if applicable
________________________________________________________________________________________ Signature Guarantee Stamp, if necessary
JOINT OWNER SIGNATURE Date
<CAPTION>
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.
</TABLE>
SSAPP-03/98
<PAGE>
STYLE SELECT SERIES
Statement of Additional Information
dated June 15, 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
nine 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, the International Equity Portfolio and the Focus Portfolio
(each, a "Portfolio"). This Statement of Additional Information relates to all
Portfolios except the Focus 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 June 1, 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>
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Page
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<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-57
Retirement Plans...............................................................................................B-62
Description of Shares..........................................................................................B-63
Additional Information.........................................................................................B-65
Financial Statements...........................................................................................B-67
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.
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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 nine Portfolios;
except for the Focus Portfolio, each consists of Class A, Class B, Class C and
Class Z shares.
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 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.
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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.
Passive Foreign Investment Companies ("PFICs"). The Large-Cap Growth
Portfolio, Aggressive Growth Portfolio and International Equity Portfolio may
invest in PFICs, which are any
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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.
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
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<PAGE>
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 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.
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<PAGE>
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.
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
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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 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
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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.
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,
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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.
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
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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. ("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
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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.
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
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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
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denominated remains constant. Each Portfolio may sell futures contracts on a
foreign currency, for example, when it holds securities denominated in such
currency and it anticipates a decline in the value of such currency relative to
the dollar. In the event such decline occurs, the resulting adverse effect on
the value of foreign-denominated securities may be offset, in whole or in part,
by gains on the Futures contracts. However, if the value of the foreign currency
increases relative to the dollar, the Portfolio's loss on the foreign currency
futures contract may or may not be offset by an increase in the value of the
securities since a decline in the price of the security stated in terms of the
foreign currency may be greater than the increase in value as a result of the
change in exchange rates.
Conversely, each Portfolio could protect against a rise in the dollar
cost of foreign-denominated securities to be acquired by purchasing Futures
contracts on the relevant currency, which could offset, in whole or in part, the
increased cost of such securities resulting from a rise in the dollar value of
the underlying currencies. When a Portfolio purchases futures contracts under
such circumstances, however, and the price of securities to be acquired instead
declines as a result of appreciation of the dollar, the Portfolio will sustain
losses on its futures position which could reduce or eliminate the benefits of
the reduced cost of portfolio securities to be acquired.
Options on Futures. As noted above, the 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.
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If the market decline does not occur, the Portfolio will suffer a loss equal to
the price of the put. Where it is projected that the value of securities to be
acquired by a Portfolio will increase prior to acquisition, due to a market
advance or changes in interest or exchange rates, a Portfolio could purchase
call Options on Futures, rather than purchasing the underlying Futures contract.
If the market advances, the increased cost of securities to be purchased may be
offset by a profit on the call. However, if the market declines, the Portfolio
will suffer a loss equal to the price of the call but the securities which the
Portfolio intends to purchase may be less expensive.
Forward Contracts
A Forward Contract involves bilateral obligations of one party to
purchase, and another party to sell, a specific currency at a future date (which
may be any fixed number of days from the date of the contract agreed upon by the
parties), at a price set at the time the contract is entered into. These
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. No price is paid
or received upon the purchase or sale of a Forward Contract.
A Portfolio may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities a Portfolio
owns or intends to acquire, but it does fix a rate of exchange in advance. In
addition, although Forward Contracts limit the risk of loss due to a decline in
the value of the hedged currencies, at the same time they limit any potential
gain that might result should the value of the currencies increase.
A Portfolio may enter into Forward Contracts with respect to specific
transactions. For example, when a Portfolio enters into a contract for the
purchase or sale of a security denominated in 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
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the Portfolio believes that the U.S. dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a decline in the
U.S. dollar value of the currency in which portfolio securities of the Portfolio
are denominated ("cross-hedged"). A Portfolio may also hedge investments
denominated in a foreign currency by entering into forward currency contracts
with respect to a foreign currency that is expected to correlate to the currency
in which the investments are denominated ("proxy hedging").
The 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.
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A Portfolio would realize a gain or loss as a result of entering into such an
offsetting Forward Contract under either circumstance to the extent the exchange
rate or rates between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to a Portfolio of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because Forward Contracts are usually
entered into on a principal basis, no fees or commissions are involved. Because
such contracts are not traded on an exchange, a Portfolio must evaluate the
credit and performance risk of each particular counterparty under a Forward
Contract.
Although a Portfolio values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. A Portfolio may convert foreign currency from time to
time, and investors should be aware of the costs of currency conversion. Foreign
exchange dealers do not charge a fee for conversion, but they do seek to realize
a profit based on the difference between the prices at which they buy and sell
various currencies. Thus, a dealer may offer to sell a foreign currency to a
Portfolio at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer.
Additional Information About Hedging Instruments and Their Use
The 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
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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.
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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
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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.
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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.
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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
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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 Exchange, Uno Restaurant
Emerson College Corp., Waban Corp., Kushner-Locke Co., Chayron Inc.; Chairman
100 Beacon Street of the Board of Emerson College; formerly President and
Boston, MA 02116 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 and Chief Executive
430 East 86th Street Board Officer, Abjac Energy Corporation; Director/Trustee of
New York, NY 10028 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 B.B. Associates LLC
515 East 79th Street (menswear specialty retailing and other activities) since May
New York, NY 10021 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 Asset Management Corp.
The SunAmerica Center President ("SunAmerica"); Director, SunAmerica Capital Services, Inc.
733 Third Avenue ("SACS"), since February 1993; Director and President, SunAmerica
New York, NY 10017-3204 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, since April 1996;
The SunAmerica Center President, SACS, SACS, since April 1996; formerly, Executive
733 Third Avenue Vice President, New England Funds, L.P. from July 1990 to April
New York, NY 10017-3204 1996.
Peter McMillan III,*39 Director Executive Vice President and Chief Investment Officer, SunAmerica
1 SunAmerica Center Investments, Inc., since August 1989; Director/Trustee of the
Los Angeles, CA 90067 SAMF; Director, Resources Trust Company.
Sebastiano Sterpa, 68 Director Founder of Sterpa Realty, Inc., a full service real estate
Suite 200 firm, since 1962; Chairman of the Sterpa Group, real
200 West Glenoaks Blvd. estate investments and management company, since 1962;
Glendale, CA 91202 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 Counsel, SunAmerica, since
The SunAmerica Center April 1993; Executive Vice President, General Counsel and
733 Third Avenue Director, SACS, since April 1993; Vice President, General Counsel
New York, NY 10017-3204 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, since April 1997; Treasurer,
The SunAmerica Center SAMF and AST, since February 1996; Vice President, SAST, APF,
733 Third Avenue since October 1994; Vice President, Seasons Series Trust, since
New York, NY 10017-3204 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.
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 $4,570 $37,812 $29,670 $65,000
Samuel M. Eisenstat** $7,100 $33,285 $46,089 $69,000
Stephen J. Gutman $4,570 $34,414 $60,912 $65,000
Sebastiano Sterpa*** $4,570 $23,173 $ 7,900 $43,333
</TABLE>
* 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 March 31, 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 March 23, 1998:
Large-Cap Blend Portfolio - Class A - SunAmerica Inc., Los Angeles, CA 90067 -
owned beneficially 72%; Class B - Merrill Lynch, Pierce, Fenner & Smith, Inc.
("Merrill Lynch"), Jacksonville, FL 32246 - owned of record 6%;
Class C - Merrill Lynch, Jacksonville, FL 32246 - owned of record 18%;
SunAmerica Asset Management Co., New York, NY 10017 - owned of record 8%;
Wexford Clearing Services Corp., Las Vegas, Nevada 89128 - owned of record 5%;
Large-Cap Growth Portfolio - Class A - SunAmerica Inc., Los Angeles, CA 90067 -
owned beneficially 70%; Class B - Merrill Lynch, Jacksonville, FL 32246 - owned
of record 11%; Class C - Merrill Lynch, Jacksonville, FL 32246 - owned of record
18%; Evereen Clearing Corp., Milwaukee, WI 53202 - owned of record 10%;
Prudential Securities Inc., Salt Lake City, UT 84165 - owned of record 8%;
Aggressive Growth Portfolio - Class B - Merrill Lynch, Jacksonville, FL 32246 -
owned of record 8%; Class C - Merrill Lynch, Jacksonville, FL 32246 - owned of
record 34%; PaineWebber, Wichita, KS 67214 - owned of record 6%; Mid-Cap Growth
Portfolio - Class B - Merrill Lynch, Jacksonville, FL 32246 - owned of record
9%; Class C - Merrill Lynch, Jacksonville, FL 32246 - owned of record 31%;
PaineWebber, Wichita, KS 67214 - owned of record 7%; Small-Cap Value Portfolio
- - Class B - Merrill Lynch, Jacksonville, FL 32246 - owned of record 8%; Class
C - Merrill Lynch, Jacksonville, FL 32246 - owned of record 21%; Prudential
Securities Inc., Salt Lake City, UT 84165 - owned of record 8%; Donaldson
Lufkin Jenrette Securities Corporation Inc., Jersey City, NJ 07303 - owned of
record 6%; PaineWebber, North Andover, MA 01845 - owned of record 6%; Large-Cap
Value Portfolio - Class B - Merrill Lynch, Jacksonville, FL 32246 - owned of
record 6%; Value Portfolio - Class B - Merrill Lynch, Jacksonville, FL 32246 -
owned of record 7%; Class C - Merrill Lynch, Jacksonville, FL 32246 - owned of
record 21%; Donaldson Lufkin Jenrette Securities Corporation Inc., Jersey City,
NJ 07303 - owned of record 8%; Prudential Securities Inc., Bonita, CA 91902 -
owned of record 6%; International Equity Portfolio - Class B - Merrill Lynch,
Jacksonville, FL 32246 - owned of record 6%; Class C - Merrill Lynch,
Jacksonville, FL 32246 - owned of record 37%. 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, 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. For the fiscal year ended October 31, 1997,
SunAmerica paid fees to the Advisers equal to the following aggregate annual
rates, 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
ADVISORY FEES
PORTFOLIO ADVISORY FEES WAIVED
- ---------- ------------- --------------
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
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
PORTFOLIO SUBADVISORY FEES
- --------- ----------------
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
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
PORTFOLIO Class A Class B Class 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
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.
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<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.
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<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
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<PAGE>
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.
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
B-46
<PAGE>
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.
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
B-47
<PAGE>
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.
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
B-48
<PAGE>
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.
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
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<PAGE>
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 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
B-50
<PAGE>
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.
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,
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<PAGE>
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:
P(1 + T)n = 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.
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<PAGE>
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:
Since One Five Ten
Class A Shares Inception Year Years Years
- -------------- --------- ---- ----- -----
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
- ----------------
(1) From date of inception of October 15, 1997.
Since One Five Ten
Class B Shares Inception Year Years Years
- -------------- --------- ---- ----- -----
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
- ----------------
(1) From date of inception of October 15, 1997.
B-53
<PAGE>
Since One Five Ten
Class C Shares Inception Year Years Years
- -------------- --------- ---- ----- -----
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
- ----------------
(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.
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.
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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.
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.
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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
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.
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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 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.
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.
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 the sales or other disposition of securities, dividends, interest, proceeds
from loans of stock or
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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.
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
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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
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
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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 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
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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 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
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(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.
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
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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.
Except for the Focus Portfolio, each Portfolio 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
B-63
<PAGE>
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 Fund shall continue, without
limitation of time, subject to the provisions in the Articles concerning
termination by action of the shareholders.
B-64
<PAGE>
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.
<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>
</TABLE>
B-65
<PAGE>
<TABLE>
<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.
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.
B-66
<PAGE>
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-67
<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 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.
2
<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.
(5)(b)(10) Subadvisory Agreement between SunAmerica and Bankers Trust
Company.
(5)(b)(11) Subadvisory Agreement between SunAmerica and Morgan Stanley Asset
Management Inc.
(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 is incorporated by reference
to Exhibit 11 of Post-Effective Amendment No. 8 on form N1-A,
filed with the Securities and Exchange Commission on February 27,
1998.
(12) Financial Statements Omitted from Item 23. Inapplicable.
(13) Initial Capitalization Agreement. Inapplicable.
(14) Model Retirement Plan. Inapplicable.
3
<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
5
<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
6
<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
7
<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, Morgan Stanley Asset Management Inc.,
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
Morgan Stanley Asset Management Inc. 801-15757
David L. Babson & Co., Inc. 801-241
8
<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
9
<PAGE>
Steven E. Rothstein Treasurer None
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
(c) Inapplicable.
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.
Morgan Stanley Asset Management Inc. is located at 1221 Avenue of the
Americas, New York, New York 10020.
10
<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.
11
<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 15th day of April, 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. 9 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 April 15, 1998
- -------------------- (Principal Executive Officer)
Peter A. Harbeck
* Treasurer April 15, 1998
- --------------------- (Principal Accounting and
Peter C. Sutton Financial Officer)
* Trustee April 15, 1998
- --------------------
S. James Coppersmith
* Trustee April 15, 1998
- --------------------
Samuel M. Eisenstat
* Trustee April 15, 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
5(b)(10) Subadvisory Agreement between SunAmerica and Bankers
Trust Company.
5(b)(11) Subadvisory Agreement between SunAmerica and Morgan
Stanley Asset Management Inc.
27 Financial Data Schedules
<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of February 18, 1998 by
and between SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the
"Adviser"), and BANKERS TRUST COMPANY (the "Subadviser"), a wholly owned
subsidiary of Bankers Trust New York Corporation.
WITNESSETH:
WHEREAS, the Adviser and Style Select Series Inc., a Maryland
corporation (the "Corporation"), have entered into an Investment Advisory and
Management Agreement dated as of September 17, 1996, as amended August 20, 1997
(the "Advisory Agreement"), pursuant to which the Adviser has agreed to provide
investment management, advisory and administrative services to the Corporation;
and
WHEREAS, the Corporation is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company
and may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is a "bank" as defined under the Investment
Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment series of the Corporation listed
on Schedule A attached hereto (the "Portfolio"), and the Subadviser is willing
to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the
services of the Subadviser in furtherance of its Investment Advisory and
Management Agreement with the Corporation. Pursuant to this Subadvisory
Agreement and subject to the oversight and review of the Adviser, the Subadviser
will manage the investment and reinvestment of a portion of the assets of each
Portfolio listed on Schedule A attached hereto. The Subadviser will determine,
in its discretion and subject to the oversight and review of the Adviser, the
securities to be purchased or sold, will provide the Adviser with records
concerning its activities which the Adviser of the Corporation is required to
maintain, and will render regular reports to the Adviser and to officers and
Directors of the Corporation concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Directors of the Corporation and
in compliance with such policies as the Directors of the Corporation may from
time to time establish, and in compliance with (a) the objectives, policies, and
limitations for the Portfolio set forth in the Corporation's current prospectus
and statement of additional information, and (b) applicable laws and
regulations.
The Subadviser represents and warrants to the Adviser that the
portion of the assets which it manages of the Portfolio set forth in Schedule A
will at all times be operated and managed in compliance with all applicable
federal and state laws governing its operations and investments. Without
limiting the foregoing, the Subadviser represents and warrants (1)
qualification, election and maintenance of such election by each Portfolio to be
treated as a "regulated investment company" under Subchapter M, chapter 1 of the
Internal Revenue Code of 1986, as amended (the "Code"), and (2) compliance with
(a) the provisions of the Act and rules adopted thereunder; (b) applicable
federal and state securities, commodities and banking laws; and (c) the
distribution requirements necessary to avoid payment of any excise tax pursuant
to Section 4982 of the Code. The Subadviser further represents and warrants that
to the extent any statements or omissions made in any Registration Statement for
shares of the corporation, or any amendment or supplement thereto, are made in
reliance upon and in conformity with information furnished by the Subadviser
expressly for use therein, such Registration Statement and any amendments or
supplements thereto will, when they become effective, conform in all material
respects to the requirements of the Securities Act of 1933 and the rules and
regulations of the Commission thereunder (the "1933 Act") and the Act and will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
<PAGE>
The Subadviser accepts such employment and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees: (i) to maintain a level of errors
and omissions or professional liability insurance coverage that, at all times
during the course of this Agreement, is appropriate given the nature of its
business, and (ii) from time to time and upon reasonable request, to supply
evidence of such coverage to the Adviser.
2. Portfolio Transactions. The Subadviser is responsible for decisions
to buy or sell securities and other investments for a portion of the assets of
each Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgment, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and, consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member of an exchange,
broker or dealer viewed in terms of either that particular transaction or the
Subadviser's overall responsibilities with respect to such Portfolio and to
other clients as to which the Subadviser exercises investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and
subject to any other applicable laws and regulations including Section 17(e) of
the Act and Rule 17e-1 thereunder, the Subadviser may engage its affilates, the
Adviser and its affiliates or any other subadviser to the corporation and its
respective affilates, as broker-dealers or futures commission merchants to
effect Portfolio transactions in securities and other investments for a
Portfolio. The Subadviser will promptly communicate to the Adviser and to the
officers and the Directors of the Corporation such information relating to
Portfolio transactions as they may reasonably request. To the extent consistent
with applicable law, the Subadviser may aggregate purchase or sell orders for
the Portfolio with contemporaneous purchase or sell orders of other clients of
the Subadviser or its affilated persons. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
determines to be equitable and consistent with its and its affilates' fiduciary
obligations to the Portfolio and to such other clients. The Adviser hereby
acknowledges that such aggregation of orders may not result in more favorable
pricing or lower brokerage commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled
to receive any payment from the Corporation and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation for
the Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser
a fee at the annual rate set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for the Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser,
the Subadviser in its discretion may make available to the Corporation office
facilities, equipment, personnel and other services in order to facilitate
meetings or other similar functions. Such office facilities, equipment,
personnel and services shall be provided for or rendered by the Subadviser and
billed to the Corporation or the Adviser at the Subadviser's cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders,
-2-
<PAGE>
certified copies of their financial statement, and such other information with
regard to their affairs and that of the Corporation as each may reasonably
request.
6. Status of the Subadviser. The services of the Subadviser to the
Adviser and the corporation are not be deemed exclusive, and the Subadviser
shall be free to render similar services to others so long as its services to
the Corporation are not impaired thereby. The Subadviser shall be deemed to be
an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of that
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request.
The Subadviser agrees that all accounts, books and other
records maintained and preserved by it as required hereby shall be subject at
any time, and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Corporation's
auditors, the Corporation or any representative of the Corporation, the Adviser,
or any governmental agency or other instrumentality having regulatory authority
over the Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser
or any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties ("disabling conduct") hereunder on the part of the Subadviser (and its
officers, directors, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Subadviser) the Subadviser shall
not be subject to liability to the Corporation or to any shareholder of the
Corporation for any act or omission in the course of, or connected with,
rendering services hereunder, including without limitation, any error of
judgment or mistake of law or for any loss suffered by any of them in connection
with the matters to which this Agreement relates, except to the extent specified
in Section 36(b) of the Act concerning loss resulting from a beach of fiduciary
duty with respect to the receipt of compensation for services. Except for such
disabling conduct, the Adviser shall indemnify the Subadviser (and its officers,
directors, partners, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Subadviser) (collectively, the
"Indemnified Parties") from any liability arising from the Subadviser's conduct
under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the
Adviser and its affiliates and each of its directors and officers and each
person, if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any an all losses, claims, damages, liabilities or litigation
(including legal and other expenses), to which the Adviser or its affiliates or
such directors, officers or controlling person may become subject under the 1933
Act, under other statutes, at common law or otherwise, which may be based upon
(i) any wrongful act or breach of this Agreement by the Subadviser, or (ii) any
failure by the Subadviser to comply with the representations and warranties set
forth in Section 1 of this Agreement; provided, however, that in no case is the
Subadviser's indemnity in favor of any person deemed to protect such other
persons against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i)
any acts of the Adviser or any other subadviser to the Portfolio with respect to
the portion of the assets of a Portfolio not managed by Subadviser and (ii) acts
of the Subadviser which result from acts of the Adviser, including, but not
limited to: (A) a failure of the Adviser to provide accurate and current
information with respect to any records maintained by Adviser or any other
subadviser to a Portfolio, which records are not also maintained by or otherwise
available to the Subadviser upon reasonable request; and (B) acts of the
Subadviser that were made in reasonable reliance upon information provided to it
by the Adviser. The Adviser agrees that Subadviser shall manage the portion of
the assets of a Portfolio allocated to it as if it was a separate operating
Portfolio and shall comply with subsections (a) and (b) of Section 1 of this
Subadvisory
-3-
<PAGE>
Agreement (including, but not limited to, the investment objectives, policies
and restrictions applicable to a Portfolio and qualifications of a Portfolio as
a regulated investment company under the Code) with respect to the portion of
assets of a Portfolio allocated to Subadviser. The Adviser shall indemnify the
Indemnified Parties from any liability arising from the conduct of the Adviser
and any other subadviser with respect to the portion of a Portfolio's assets not
allocated to Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are
or may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force
and effect with respect to each Portfolio until two years from the date hereof,
and from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to the Portfolio, this Agreement may be
terminated at any time, without payment of a penalty by the Portfolio or the
Corporation, by vote of a majority of the Directors, or by vote of a majority of
the outstanding voting securities (as defined in the Act) of the Portfolio,
voting separately from any other series of the Corporation, or by the Adviser,
on not less than 30 nor more than 60 days' written notice to the Subadviser.
With respect to each Portfolio, this Agreement may be terminated by the
Subadviser at any time, without the payment of any penalty, on 90 days' written
notice to the Adviser and the Corporation; provided, however, that this
Agreement may not be terminated by the Subadviser unless another subadvisory
agreement has been approved by the Corporation in accordance with the Act, or
after six months' written notice, whichever is earlier. The termination of this
Agreement with respect to any Portfolio or the addition of any Portfolio to
Schedule A hereto (in the manner required by the Act) shall not affect the
continue effectiveness of this Agreement with respect to each other Portfolio
subject hereto. This Agreement shall automatically terminate in the event of its
assignment (as defined by the Act).
This Agreement will also terminate in the event that the
Advisory Agreement by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
13. Amendments. This Agreement may be amended by mutual consent in
writing, but the consent of the Corporation must be obtained in conformity with
the requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York and the applicable provisions of the Act. To
the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given
when delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Bankers Trust Company
130 Liberty Street, 26th Floor, Mail Stop 2265
New York, New York 10006
Attention: Lawrence S. Lafer
Vice President
U.S. Investment Management Documentation
-4-
<PAGE>
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/ Peter A. Harbeck
----------------------------
Name: Peter A. Harbeck
Title: President
BANKERS TRUST COMPANY
By: /s/ Irene S. Greenberg
----------------------------
Name: Irene S. Greenberg
Title: Vice President
-5-
<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of April 1, 1998 by and
between SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the
"Adviser"), and MORGAN STANLEY ASSET MANAGEMENT INC., a Delaware corporation
(the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland
corporation (the "Corporation"), have entered into an Investment Advisory and
Management Agreement dated as of September 17, 1996, as amended August 20, 1997
(the "Advisory Agreement") pursuant to which the Adviser has agreed to provide
investment management, advisory and administrative services to the Corporation;
and
WHEREAS, the Corporation is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company
and may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment series of the Corporation listed
on Schedule A attached hereto (the "Portfolio"), and the Subadviser is willing
to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. Duties of the Subadviser. The Adviser hereby engages the services of
the Subadviser in furtherance of its Investment Advisory and Management
Agreement with the Corporation. Pursuant to this Subadvisory Agreement and
subject to the oversight and review of the Adviser, the Subadviser will manage
the investment and reinvestment of a portion of the assets of each Portfolio
listed on Schedule A attached hereto. The Subadviser will determine in its
discretion and subject to the oversight and review of the Adviser, the
securities to be purchased or sold, will provide the Adviser with records
concerning its activities which the Adviser or the Corporation is required to
maintain, and will render regular reports to the Adviser and to officers and
Directors of the Corporation concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Directors of the Corporation and
in compliance with such policies as the Directors of the Corporation may from
time to time establish, and in compliance with (a) the objectives, policies, and
limitations for the Portfolio set forth in the Corporation's current prospectus
and statement of additional information, and (b) applicable laws and
regulations.
The Subadviser represents and warrants to the Adviser that the
portion of the assets which it manages of the Portfolio set forth in Schedule A
will at all times be operated and managed in compliance with all applicable
federal and state laws governing its operations and investments. Without
limiting the foregoing, the Subadviser represents and warrants (1)
qualification, election and maintenance of such election by each Portfolio to be
treated as a "regulated investment company" under subchapter M, chapter 1 of the
Internal Revenue Code of 1986, as amended (the
<PAGE>
"Code"), and (2) compliance with (a) the provisions of the Act and rules adopted
thereunder; (b) applicable federal and state securities, commodities and banking
laws; and (c) the distribution requirements necessary to avoid payment of any
excise tax pursuant to Section 4982 of the Code. The Subadviser further
represents and warrants that to the extent that any statements or omissions made
in any Registration Statement for shares of the Corporation, or any amendment or
supplement thereto, are made in reliance upon and in conformity with information
furnished by the Subadviser expressly for use therein, such Registration
Statement and any amendments or supplements thereto will, when they become
effective, conform in all material respects to the requirements of the
Securities Act of 1933 and the rules and regulations of the Commission
thereunder (the "1933 Act") and the Act and will not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstance under which they were
made not misleading.
The Subadviser accepts such employment and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement.
2. Portfolio Transactions. The Subadviser is responsible for decisions
to buy or sell securities and other investments for a portion of the assets of
each Portfolio, the selection of broker-dealers and futures commission
merchants', and negotiation of brokerage commission and futures commission
merchants' rates. As a general matter, in executing Portfolio transactions, the
Subadviser may employ or deal with such broker-dealers or futures commission
merchants as may, in the Subadviser's best judgement, provide prompt and
reliable execution of the transactions at favorable prices and reasonable
commission rates. In selecting such broker-dealers or futures commission
merchants, the Subadviser shall consider all relevant factors including price
(including the applicable brokerage commission, dealer spread or futures
commission merchant rate), the size of the order, the nature of the market for
the security or other investment, the timing of the transaction, the reputation,
experience and financial stability of the broker-dealer or futures commission
merchant involved, the quality of the service, the difficulty of execution, the
execution capabilities and operational facilities of the firm involved, and, in
the case of securities, the firm's risk in positioning a block of securities.
Subject to such policies as the Directors may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), the Subadviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of the
Subadviser's having caused a Portfolio to pay a member of an exchange, broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another member of an exchange, broker or dealer
would have charged for effecting that transaction, if the Subadviser determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such member of an
exchange, broker or dealer viewed in terms of either that particular transaction
or the Subadviser's overall responsibilities with respect to such Portfolio and
to other clients as to which the Subadviser exercises investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and
subject to any other applicable laws and regulations including Section 17(e) of
the Act and Rule 17e-1 thereunder, the Subadviser may engage its affiliates, the
Adviser and its affiliates or any other subadviser to the Corporation and its
respective affiliates, as broker-dealers or futures commission merchants to
effect Portfolio transactions in securities and other investments for a
Portfolio. The Subadviser will promptly communicate to the Adviser and to the
officers and the
-2-
<PAGE>
Directors of the Corporation such information relating to Portfolio transactions
as they may reasonably request. To the extent consistent with applicable law,
the Subadviser may aggregate purchase or sell orders for the Portfolio with
contemporaneous purchase or sell orders of other clients of the Subadviser or
its affiliated persons. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
the Subadviser in the manner the Subadviser determines to be equitable and
consistent with its and its affiliates' fiduciary obligations to the Portfolio
and to such other clients. The Adviser hereby acknowledges that such aggregation
of orders may not result in more favorable pricing or lower brokerage
commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled
to receive any payment from the Corporation and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation for
the Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser
a fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser,
the Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser as agreed upon by the
Corporation or the Adviser and the Subadviser.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the
Adviser and the Corporation are not to be deemed exclusive, and the Subadviser
shall be free to render similar services to others so long as its services to
the Corporation are not impaired thereby. The Subadviser shall be deemed to be
an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of that
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request.
-3-
<PAGE>
The Subadviser agrees that all accounts, books and other
records maintained and preserved by it as required hereby shall be subject at
any time, and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Corporation's
auditors, the Corporation or any representative of the Corporation, the Adviser,
or any governmental agency or other instrumentality having regulatory authority
over the Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser
or any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Subadviser (and its officers, directors,
employees, controlling persons, shareholders and any other person or entity
affiliated with the Subadviser) the Subadviser shall not be subject to liability
to the Corporation or to any shareholder of the Corporation for any act or
omission in the course of, or connected with, rendering services hereunder,
including without limitation, any error of judgment or mistake of law or for any
loss suffered by any of them in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b) of the Act
concerning loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services.
(b) The Adviser agrees to indemnify and hold harmless the
Subadviser and its affiliates and each of their directors and officers and each
persons, if any, who controls the Subadviser within the meaning of Section 15 of
the 1933 Act against any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses), to which the
Subadviser or its affiliates or such directors, officers or controlling person
may become subject under the 1933 Act, under an other statute, at common law or
otherwise, which may be based upon any breach of this Agreement by the Adviser;
provided, however, that in no case is the Adviser's indemnity in favor of any
persons deemed to protect such person against any liability to which such person
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his, here or its duties or by reasons of his,
her or its reckless disregard of obligations and duties under this Agreement.
(c) The Subadviser agrees to indemnify and hold harmless the
Adviser and its affiliates and each of its directors and officers and each
person, if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses), to which the Adviser or its
affiliates or such directors, officers or controlling person may become subject
under the 1933 Act, under other statutes, at common law or otherwise, which may
be based upon (i) breach of this Agreement by the Subadviser, or (ii) any
failure by the Subadviser to comply with the representations and warranties set
forth in Section 1 of this Agreement; provided, however, that in no case is the
Subadviser's indemnity in favor of any person deemed to protect such other
persons against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of obligation and duties under this Agreement.
-4-
<PAGE>
(d) The Subadviser shall not be liable to the Adviser for (i)
any acts of the Adviser or any other subadviser to the Portfolio with respect to
the portion of the assets of a Portfolio not managed by Subadviser or (ii) acts
of the Subadviser which result from acts of the Adviser, including, but not
limited to, a failure of the Adviser to provide accurate and current information
with respect to any records maintained by Adviser or any other subadviser to a
Portfolio, which records are not also maintained by or otherwise available to
the Subadviser upon reasonable request. The Adviser agrees that Subadviser shall
manage the portion of the assets of a Portfolio allocated to it as if it was a
separate operating Portfolio and shall comply with subsections (a) and (b) of
Section I of this Subadvisory Agreement (including, but not limited to, the
investment objectives, policies and restrictions applicable to a Portfolio and
qualifications of a Portfolio as a regulated investment company under the Code)
with respect to the portion of assets of a Portfolio allocated to Subadviser.
The Adviser shall indemnify the Indemnified Parties from any liability arising
from the conduct of the Adviser and any other subadviser with respect to the
portion of a Portfolio's assets not allocated to Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are
or may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force
and effect with respect to each Portfolio until two years from the date hereof,
and from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be
terminated at any time, without payment of a penalty by the Portfolio or the
Corporation, by vote of a majority of the Directors, or by vote of a majority of
the outstanding voting securities (as defined in the Act) of the Portfolio,
voting separately from any other series of the Corporation, or by the Adviser,
on not less than 30 nor more than 60 days' written notice to the Subadviser.
With respect to each Portfolio, this Agreement may be terminated by the
Subadviser at any time, without the payment of any penalty, on 90 days' written
notice to the Adviser and the Corporation; provided, however, that this
Agreement may not be terminated by the Subadviser unless another subadvisory
agreement has been approved by the Corporation in accordance with the Act, or
after six months' written notice, whichever is earlier. The termination of this
Agreement with respect to any Portfolio or the addition of any Portfolio to
Schedule A hereto (in the manner required by the Act) shall not affect the
continued effectiveness of this Agreement with respect to each other Portfolio
subject hereto. This Agreement shall automatically terminate in the event of its
assignment (as defined by the Act).
This Agreement will also terminate in the event that the
Advisory Agreement by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
-5-
<PAGE>
13. Amendments. This Agreement may be amended by mutual consent in
writing, but the consent of the Corporation must be obtained in conformity with
the requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York and the applicable provisions of the Act. To
the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given
when delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaff, Jr.
General Counsel
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/ Peter A. Harbeck
---------------------------------
Name: Peter A. Harbeck
Title: President
MORGAN STANLEY ASSET MANAGEMENT INC.
By: /s/ Harold J. Schaff, Jr.
---------------------------------
Name: Harold J. Schaff, Jr.
Title: General Counsel
-6-
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 011
<NAME> STYLE SELECT SERIES AGGRESSIVE GROWTH CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-19-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 80,592,274<F1>
<INVESTMENTS-AT-VALUE> 94,197,612<F1>
<RECEIVABLES> 1,314,592<F1>
<ASSETS-OTHER> 44,660<F1>
<OTHER-ITEMS-ASSETS> 74,005<F1>
<TOTAL-ASSETS> 95,630,869<F1>
<PAYABLE-FOR-SECURITIES> 2,312,449<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 248,059<F1>
<TOTAL-LIABILITIES> 2,560,508<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 78,877,280<F1>
<SHARES-COMMON-STOCK> 2,424,338<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> (761)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 588,504<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 13,605,338<F1>
<NET-ASSETS> 93,070,361<F1>
<DIVIDEND-INCOME> 189,639<F1>
<INTEREST-INCOME> 336,477<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,124,062<F1>
<NET-INVESTMENT-INCOME> (597,946)<F1>
<REALIZED-GAINS-CURRENT> 1,155,918<F1>
<APPREC-INCREASE-CURRENT> 13,605,338<F1>
<NET-CHANGE-FROM-OPS> 14,163,310<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
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<NUMBER-OF-SHARES-SOLD> 3,856,767<F2>
<NUMBER-OF-SHARES-REDEEMED> (1,433,429)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 93,045,361<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
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<AVERAGE-NET-ASSETS> 31,969,874<F2>
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<PER-SHARE-GAIN-APPREC> 3.51<F2>
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<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 given pertains to Style Select Aggressive Growth Fund Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 012
<NAME> STYLE SELECT SERIES AGGRESSIVE GROWTH CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-19-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 80,592,274<F1>
<INVESTMENTS-AT-VALUE> 94,197,612<F1>
<RECEIVABLES> 1,314,592<F1>
<ASSETS-OTHER> 44,660<F1>
<OTHER-ITEMS-ASSETS> 74,005<F1>
<TOTAL-ASSETS> 95,630,869<F1>
<PAYABLE-FOR-SECURITIES> 2,312,449<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 248,059<F1>
<TOTAL-LIABILITIES> 2,560,508<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 78,877,280<F1>
<SHARES-COMMON-STOCK> 3,075,503<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> (761)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 588,504<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 13,605,338<F1>
<NET-ASSETS> 93,070,361<F1>
<DIVIDEND-INCOME> 189,639<F1>
<INTEREST-INCOME> 336,477<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,124,062<F1>
<NET-INVESTMENT-INCOME> (597,946)<F1>
<REALIZED-GAINS-CURRENT> 1,155,918<F1>
<APPREC-INCREASE-CURRENT> 13,605,338<F1>
<NET-CHANGE-FROM-OPS> 14,163,310<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 3,420,491<F2>
<NUMBER-OF-SHARES-REDEEMED> (345,988)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 93,045,361<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 533,055<F1>
<INTEREST-EXPENSE> 0<F1>
<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 given pertains to Style Select Aggressive Growth Fund Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 013
<NAME> STYLE SELECT SERIES AGGRESSIVE GROWTH CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-19-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 80,592,274<F1>
<INVESTMENTS-AT-VALUE> 94,197,612<F1>
<RECEIVABLES> 1,314,592<F1>
<ASSETS-OTHER> 44,660<F1>
<OTHER-ITEMS-ASSETS> 74,005<F1>
<TOTAL-ASSETS> 95,630,869<F1>
<PAYABLE-FOR-SECURITIES> 2,312,449<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 248,059<F1>
<TOTAL-LIABILITIES> 2,560,508<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 78,877,280<F1>
<SHARES-COMMON-STOCK> 375,792<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> (761)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 588,504<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 13,605,338<F1>
<NET-ASSETS> 93,070,361<F1>
<DIVIDEND-INCOME> 189,639<F1>
<INTEREST-INCOME> 336,477<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,124,062<F1>
<NET-INVESTMENT-INCOME> (597,946)<F1>
<REALIZED-GAINS-CURRENT> 1,155,918<F1>
<APPREC-INCREASE-CURRENT> 13,605,338<F1>
<NET-CHANGE-FROM-OPS> 14,163,310<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 411,297<F2>
<NUMBER-OF-SHARES-REDEEMED> (35,505)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 93,045,361<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 533,055<F1>
<INTEREST-EXPENSE> 0<F1>
<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 given pertains to Style Select Aggressive Growth Fund Class C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 021
<NAME> STYLE SELECT SERIES INTERNATIONAL CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-19-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 74,348,816<F1>
<INVESTMENTS-AT-VALUE> 71,408,899<F1>
<RECEIVABLES> 1,652,663<F1>
<ASSETS-OTHER> 2,531,464<F1>
<OTHER-ITEMS-ASSETS> 473,138<F1>
<TOTAL-ASSETS> 76,066,164<F1>
<PAYABLE-FOR-SECURITIES> 1,728,804<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,856,964<F1>
<TOTAL-LIABILITIES> 4,585,768<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 73,360,722<F1>
<SHARES-COMMON-STOCK> 1,955,961<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 122,861<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 843,851<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (2,847,038)<F1>
<NET-ASSETS> 71,480,396<F1>
<DIVIDEND-INCOME> 624,686<F1>
<INTEREST-INCOME> 216,533<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 951,396<F1>
<NET-INVESTMENT-INCOME> (110,177)<F1>
<REALIZED-GAINS-CURRENT> 1,053,144<F1>
<APPREC-INCREASE-CURRENT> (4,064,151)<F1>
<NET-CHANGE-FROM-OPS> (3,121,184)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 3,581,472<F2>
<NUMBER-OF-SHARES-REDEEMED> (1,626,511)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 71,455,396<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 440,671<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 022
<NAME> STYLE SELECT SERIES INTERNATIONAL CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-19-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 74,348,816<F1>
<INVESTMENTS-AT-VALUE> 71,408,899<F1>
<RECEIVABLES> 1,652,663<F1>
<ASSETS-OTHER> 2,531,464<F1>
<OTHER-ITEMS-ASSETS> 473,138<F1>
<TOTAL-ASSETS> 76,066,164<F1>
<PAYABLE-FOR-SECURITIES> 1,728,804<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,856,964<F1>
<TOTAL-LIABILITIES> 4,585,768<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 73,360,722<F1>
<SHARES-COMMON-STOCK> 3,446,902<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 122,861<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 843,851<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (2,847,038)<F1>
<NET-ASSETS> 71,480,396<F1>
<DIVIDEND-INCOME> 624,686<F1>
<INTEREST-INCOME> 216,533<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 951,396<F1>
<NET-INVESTMENT-INCOME> (110,177)<F1>
<REALIZED-GAINS-CURRENT> 1,053,144<F1>
<APPREC-INCREASE-CURRENT> (4,064,151)<F1>
<NET-CHANGE-FROM-OPS> (3,121,184)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 3,629,450<F2>
<NUMBER-OF-SHARES-REDEEMED> (183,548)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 71,455,396<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 440,671<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 023
<NAME> STYLE SELECT SERIES INTERNATIONAL CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-19-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 74,348,816<F1>
<INVESTMENTS-AT-VALUE> 71,408,899<F1>
<RECEIVABLES> 1,652,663<F1>
<ASSETS-OTHER> 2,531,464<F1>
<OTHER-ITEMS-ASSETS> 473,138<F1>
<TOTAL-ASSETS> 76,066,164<F1>
<PAYABLE-FOR-SECURITIES> 1,728,804<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,856,964<F1>
<TOTAL-LIABILITIES> 4,585,768<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 73,360,722<F1>
<SHARES-COMMON-STOCK> 360,269<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 122,861<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 843,851<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (2,847,038)<F1>
<NET-ASSETS> 71,480,396<F1>
<DIVIDEND-INCOME> 624,686<F1>
<INTEREST-INCOME> 216,533<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 951,396<F1>
<NET-INVESTMENT-INCOME> (110,177)<F1>
<REALIZED-GAINS-CURRENT> 1,053,144<F1>
<APPREC-INCREASE-CURRENT> (4,064,151)<F1>
<NET-CHANGE-FROM-OPS> (3,121,184)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 404,951<F2>
<NUMBER-OF-SHARES-REDEEMED> (44,682)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 71,455,396<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 440,671<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 031
<NAME> STYLE SELECT SERIES SMALL CAP VALUE CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-15-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 25,580,088<F1>
<INVESTMENTS-AT-VALUE> 24,812,086<F1>
<RECEIVABLES> 1,240,744<F1>
<ASSETS-OTHER> 66,515<F1>
<OTHER-ITEMS-ASSETS> 77,093<F1>
<TOTAL-ASSETS> 26,196,438<F1>
<PAYABLE-FOR-SECURITIES> 489,096<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 724,181<F1>
<TOTAL-LIABILITIES> 1,213,277<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 25,716,055<F1>
<SHARES-COMMON-STOCK> 1,758,084<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 35,108<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (768,002)<F1>
<NET-ASSETS> 24,983,161<F1>
<DIVIDEND-INCOME> 17,738<F1>
<INTEREST-INCOME> 34,643<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 22,206<F1>
<NET-INVESTMENT-INCOME> 30,175<F1>
<REALIZED-GAINS-CURRENT> 0<F1>
<APPREC-INCREASE-CURRENT> (768,002)<F1>
<NET-CHANGE-FROM-OPS> (737,827)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2,177,614<F2>
<NUMBER-OF-SHARES-REDEEMED> (419,530)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 24,983,161<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 12,079<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 032
<NAME> STYLE SELECT SERIES SMALL CAP VALUE CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-15-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 25,580,088<F1>
<INVESTMENTS-AT-VALUE> 24,812,086<F1>
<RECEIVABLES> 1,240,744<F1>
<ASSETS-OTHER> 66,515<F1>
<OTHER-ITEMS-ASSETS> 77,093<F1>
<TOTAL-ASSETS> 26,196,438<F1>
<PAYABLE-FOR-SECURITIES> 489,096<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 724,181<F1>
<TOTAL-LIABILITIES> 1,213,277<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 25,716,055<F1>
<SHARES-COMMON-STOCK> 256,483<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 35,108<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (768,002)<F1>
<NET-ASSETS> 24,983,161<F1>
<DIVIDEND-INCOME> 17,738<F1>
<INTEREST-INCOME> 34,643<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 22,206<F1>
<NET-INVESTMENT-INCOME> 30,175<F1>
<REALIZED-GAINS-CURRENT> 0<F1>
<APPREC-INCREASE-CURRENT> (768,002)<F1>
<NET-CHANGE-FROM-OPS> (737,827)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 256,511<F2>
<NUMBER-OF-SHARES-REDEEMED> (28)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 24,983,161<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 12,079<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 033
<NAME> STYLE SELECT SERIES SMALL CAP VALUE CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-15-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 25,580,088<F1>
<INVESTMENTS-AT-VALUE> 24,812,086<F1>
<RECEIVABLES> 1,240,744<F1>
<ASSETS-OTHER> 66,515<F1>
<OTHER-ITEMS-ASSETS> 77,093<F1>
<TOTAL-ASSETS> 26,196,438<F1>
<PAYABLE-FOR-SECURITIES> 489,096<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 724,181<F1>
<TOTAL-LIABILITIES> 1,213,277<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 25,716,055<F1>
<SHARES-COMMON-STOCK> 43,289<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 35,108<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (768,002)<F1>
<NET-ASSETS> 24,983,161<F1>
<DIVIDEND-INCOME> 17,738<F1>
<INTEREST-INCOME> 34,643<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 22,206<F1>
<NET-INVESTMENT-INCOME> 30,175<F1>
<REALIZED-GAINS-CURRENT> 0<F1>
<APPREC-INCREASE-CURRENT> (768,002)<F1>
<NET-CHANGE-FROM-OPS> (737,827)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 43,289<F2>
<NUMBER-OF-SHARES-REDEEMED> 0<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 24,983,161<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 12,079<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC.
<SERIES>
<NUMBER> 041
<NAME> STYLE SELECT SERIES VALUE CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-19-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 126,563,322<F1>
<INVESTMENTS-AT-VALUE> 137,293,443<F1>
<RECEIVABLES> 1,907,574<F1>
<ASSETS-OTHER> 44,954<F1>
<OTHER-ITEMS-ASSETS> 8,661<F1>
<TOTAL-ASSETS> 139,254,632<F1>
<PAYABLE-FOR-SECURITIES> 3,279,098<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 680,088<F1>
<TOTAL-LIABILITIES> 3,959,186<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 119,172,823<F1>
<SHARES-COMMON-STOCK> 3,007,062<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> (680)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 5,393,253<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 10,730,050<F1>
<NET-ASSETS> 135,295,446<F1>
<DIVIDEND-INCOME> 877,812<F1>
<INTEREST-INCOME> 316,689<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,443,704<F1>
<NET-INVESTMENT-INCOME> (249,203)<F1>
<REALIZED-GAINS-CURRENT> 5,614,053<F1>
<APPREC-INCREASE-CURRENT> 10,730,050<F1>
<NET-CHANGE-FROM-OPS> 16,094,900<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 4,671,463<F2>
<NUMBER-OF-SHARES-REDEEMED> (1,665,401)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 135,270,446<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 671,560<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC.
<SERIES>
<NUMBER> 042
<NAME> STYLE SELECT SERIES VALUE CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-19-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 126,563,322<F1>
<INVESTMENTS-AT-VALUE> 137,293,443<F1>
<RECEIVABLES> 1,907,574<F1>
<ASSETS-OTHER> 44,954<F1>
<OTHER-ITEMS-ASSETS> 8,661<F1>
<TOTAL-ASSETS> 139,254,632<F1>
<PAYABLE-FOR-SECURITIES> 3,279,098<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 680,088<F1>
<TOTAL-LIABILITIES> 3,959,186<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 119,172,823<F1>
<SHARES-COMMON-STOCK> 4,846,859<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> (680)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 5,393,253<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 10,730,050<F1>
<NET-ASSETS> 135,295,446<F1>
<DIVIDEND-INCOME> 877,812<F1>
<INTEREST-INCOME> 316,689<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,443,704<F1>
<NET-INVESTMENT-INCOME> (249,203)<F1>
<REALIZED-GAINS-CURRENT> 5,614,053<F1>
<APPREC-INCREASE-CURRENT> 10,730,050<F1>
<NET-CHANGE-FROM-OPS> 16,094,900<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 5,001,111<F2>
<NUMBER-OF-SHARES-REDEEMED> (155,252)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 135,270,446<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 671,560<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC.
<SERIES>
<NUMBER> 043
<NAME> STYLE SELECT SERIES VALUE CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-19-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 126,563,322<F1>
<INVESTMENTS-AT-VALUE> 137,293,443<F1>
<RECEIVABLES> 1,907,574<F1>
<ASSETS-OTHER> 44,954<F1>
<OTHER-ITEMS-ASSETS> 8,661<F1>
<TOTAL-ASSETS> 139,254,632<F1>
<PAYABLE-FOR-SECURITIES> 3,279,098<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 680,088<F1>
<TOTAL-LIABILITIES> 3,959,186<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 119,172,823<F1>
<SHARES-COMMON-STOCK> 586,579<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> (680)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 5,393,253<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 10,730,050<F1>
<NET-ASSETS> 135,295,446<F1>
<DIVIDEND-INCOME> 877,812<F1>
<INTEREST-INCOME> 316,689<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,443,704<F1>
<NET-INVESTMENT-INCOME> (249,203)<F1>
<REALIZED-GAINS-CURRENT> 5,614,053<F1>
<APPREC-INCREASE-CURRENT> 10,730,050<F1>
<NET-CHANGE-FROM-OPS> 16,094,900<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 633,085<F2>
<NUMBER-OF-SHARES-REDEEMED> (46,506)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 135,270,446<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 671,560<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 051
<NAME> STYLE SELECT SERIES LARGE CAP VALUE CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-15-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 25,430,318<F1>
<INVESTMENTS-AT-VALUE> 24,094,522<F1>
<RECEIVABLES> 876,499<F1>
<ASSETS-OTHER> 66,515<F1>
<OTHER-ITEMS-ASSETS> 49,474<F1>
<TOTAL-ASSETS> 25,087,010<F1>
<PAYABLE-FOR-SECURITIES> 33,178<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 316,482<F1>
<TOTAL-LIABILITIES> 349,660<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 26,056,515<F1>
<SHARES-COMMON-STOCK> 1,959,444<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 16,631<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1,335,796)<F1>
<NET-ASSETS> 24,737,350<F1>
<DIVIDEND-INCOME> 12,137<F1>
<INTEREST-INCOME> 21,267<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 21,100<F1>
<NET-INVESTMENT-INCOME> 12,304<F1>
<REALIZED-GAINS-CURRENT> 0<F1>
<APPREC-INCREASE-CURRENT> (1,335,796)<F1>
<NET-CHANGE-FROM-OPS> (1,323,492)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2,100,495<F2>
<NUMBER-OF-SHARES-REDEEMED> (141,051)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 24,737,350<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11,729<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 052
<NAME> STYLE SELECT SERIES LARGE CAP VALUE CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-15-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 25,430,318<F1>
<INVESTMENTS-AT-VALUE> 24,094,522<F1>
<RECEIVABLES> 876,499<F1>
<ASSETS-OTHER> 66,515<F1>
<OTHER-ITEMS-ASSETS> 49,474<F1>
<TOTAL-ASSETS> 25,087,010<F1>
<PAYABLE-FOR-SECURITIES> 33,178<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 316,482<F1>
<TOTAL-LIABILITIES> 349,660<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 26,056,515<F1>
<SHARES-COMMON-STOCK> 111,740<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 16,631<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1,335,796)<F1>
<NET-ASSETS> 24,737,350<F1>
<DIVIDEND-INCOME> 12,137<F1>
<INTEREST-INCOME> 21,267<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 21,100<F1>
<NET-INVESTMENT-INCOME> 12,304<F1>
<REALIZED-GAINS-CURRENT> 0<F1>
<APPREC-INCREASE-CURRENT> (1,335,796)<F1>
<NET-CHANGE-FROM-OPS> (1,323,492)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 111,740<F2>
<NUMBER-OF-SHARES-REDEEMED> 0<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 24,737,350<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11,729<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 053
<NAME> STYLE SELECT SERIES LARGE CAP VALUE CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-15-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 25,430,318<F1>
<INVESTMENTS-AT-VALUE> 24,094,522<F1>
<RECEIVABLES> 876,499<F1>
<ASSETS-OTHER> 66,515<F1>
<OTHER-ITEMS-ASSETS> 49,474<F1>
<TOTAL-ASSETS> 25,087,010<F1>
<PAYABLE-FOR-SECURITIES> 33,178<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 316,482<F1>
<TOTAL-LIABILITIES> 349,660<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 26,056,515<F1>
<SHARES-COMMON-STOCK> 14,544<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 16,631<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1,335,796)<F1>
<NET-ASSETS> 24,737,350<F1>
<DIVIDEND-INCOME> 12,137<F1>
<INTEREST-INCOME> 21,267<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 21,100<F1>
<NET-INVESTMENT-INCOME> 12,304<F1>
<REALIZED-GAINS-CURRENT> 0<F1>
<APPREC-INCREASE-CURRENT> (1,335,796)<F1>
<NET-CHANGE-FROM-OPS> (1,323,492)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 14,544<F2>
<NUMBER-OF-SHARES-REDEEMED> (0)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 24,737,350<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11,729<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 061
<NAME> STYLE SELECT SERIES LARGE CAP BLEND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-15-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 25,668,447<F1>
<INVESTMENTS-AT-VALUE> 24,626,447
<RECEIVABLES> 549,400<F1>
<ASSETS-OTHER> 66,515<F1>
<OTHER-ITEMS-ASSETS> 2,755<F1>
<TOTAL-ASSETS> 25,245,117<F1>
<PAYABLE-FOR-SECURITIES> 328,109<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 240,028<F1>
<TOTAL-LIABILITIES> 568,137<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 25,747,283<F1>
<SHARES-COMMON-STOCK> 1,969,995<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 20,057<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (48,360)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1,042,000)<F1>
<NET-ASSETS> 24,676,980<F1>
<DIVIDEND-INCOME> 14,175<F1>
<INTEREST-INCOME> 22,465<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 21,076<F1>
<NET-INVESTMENT-INCOME> 15,564<F1>
<REALIZED-GAINS-CURRENT> (48,169)<F1>
<APPREC-INCREASE-CURRENT> (1,042,000)<F1>
<NET-CHANGE-FROM-OPS> (1,074,605)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2,050,665<F2>
<NUMBER-OF-SHARES-REDEEMED> (80,670)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 24,676,980<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11,730<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 062
<NAME> STYLE SELECT SERIES LARGE CAP BLEND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-15-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 25,668,447<F1>
<INVESTMENTS-AT-VALUE> 24,626,447
<RECEIVABLES> 549,400<F1>
<ASSETS-OTHER> 66,515<F1>
<OTHER-ITEMS-ASSETS> 2,755<F1>
<TOTAL-ASSETS> 25,245,117<F1>
<PAYABLE-FOR-SECURITIES> 328,109<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 240,028<F1>
<TOTAL-LIABILITIES> 568,137<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 25,747,283<F1>
<SHARES-COMMON-STOCK> 78,691<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 20,057<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (48,360)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1,042,000)<F1>
<NET-ASSETS> 24,676,980<F1>
<DIVIDEND-INCOME> 14,175<F1>
<INTEREST-INCOME> 22,465<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 21,076<F1>
<NET-INVESTMENT-INCOME> 15,564<F1>
<REALIZED-GAINS-CURRENT> (48,169)<F1>
<APPREC-INCREASE-CURRENT> (1,042,000)<F1>
<NET-CHANGE-FROM-OPS> (1,074,605)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 78,691<F2>
<NUMBER-OF-SHARES-REDEEMED> 0<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 24,676,980<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11,730<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 063
<NAME> STYLE SELECT SERIES LARGE CAP BLEND CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-15-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 25,668,447<F1>
<INVESTMENTS-AT-VALUE> 24,626,447
<RECEIVABLES> 549,400<F1>
<ASSETS-OTHER> 66,515<F1>
<OTHER-ITEMS-ASSETS> 2,755<F1>
<TOTAL-ASSETS> 25,245,117<F1>
<PAYABLE-FOR-SECURITIES> 328,109<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 240,028<F1>
<TOTAL-LIABILITIES> 568,137<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 25,747,283<F1>
<SHARES-COMMON-STOCK> 11932<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 20,057<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (48,360)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1,042,000)<F1>
<NET-ASSETS> 24,676,980<F1>
<DIVIDEND-INCOME> 14,175<F1>
<INTEREST-INCOME> 22,465<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 21,076<F1>
<NET-INVESTMENT-INCOME> 15,564<F1>
<REALIZED-GAINS-CURRENT> (48,169)<F1>
<APPREC-INCREASE-CURRENT> (1,042,000)<F1>
<NET-CHANGE-FROM-OPS> (1,074,605)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 11932<F2>
<NUMBER-OF-SHARES-REDEEMED> 0<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 24,676,980<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11,730<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC.
<SERIES>
<NUMBER> 071
<NAME> STYLE SELECT LARGE CAP GROWTH CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-15-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 25643762<F1>
<INVESTMENTS-AT-VALUE> 24374356<F1>
<RECEIVABLES> 588059<F1>
<ASSETS-OTHER> 66515<F1>
<OTHER-ITEMS-ASSETS> 78326<F1>
<TOTAL-ASSETS> 25107256<F1>
<PAYABLE-FOR-SECURITIES> 361985<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 196712<F1>
<TOTAL-LIABILITIES> 558697<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 25994641<F1>
<SHARES-COMMON-STOCK> 2002887<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 7889<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (184565)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1269406)<F1>
<NET-ASSETS> 24548559<F1>
<DIVIDEND-INCOME> 4162<F1>
<INTEREST-INCOME> 20331<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 20819<F1>
<NET-INVESTMENT-INCOME> 3674<F1>
<REALIZED-GAINS-CURRENT> (184565)<F1>
<APPREC-INCREASE-CURRENT> (1269406)<F1>
<NET-CHANGE-FROM-OPS> (1450297)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2056806<F2>
<NUMBER-OF-SHARES-REDEEMED> (53919)<F2>
<SHARES-REINVESTED> 0<F2><F1>
<NET-CHANGE-IN-ASSETS> 24548559<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11611<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC.
<SERIES>
<NUMBER> 072
<NAME> STYLE SELECT LARGE CAP GROWTH CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-15-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 25643762<F1>
<INVESTMENTS-AT-VALUE> 24374356<F1>
<RECEIVABLES> 588059<F1>
<ASSETS-OTHER> 66515<F1>
<OTHER-ITEMS-ASSETS> 78326<F1>
<TOTAL-ASSETS> 25107256<F1>
<PAYABLE-FOR-SECURITIES> 361985<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 196712<F1>
<TOTAL-LIABILITIES> 558697<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 25994641<F1>
<SHARES-COMMON-STOCK> 65591<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 7899<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (184565)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1269406)<F1>
<NET-ASSETS> 24548559<F1>
<DIVIDEND-INCOME> 4162<F1>
<INTEREST-INCOME> 20331<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 20819<F1>
<NET-INVESTMENT-INCOME> 3674<F1>
<REALIZED-GAINS-CURRENT> (184565)<F1>
<APPREC-INCREASE-CURRENT> (1269406)<F1>
<NET-CHANGE-FROM-OPS> (1450297)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 65591<F2>
<NUMBER-OF-SHARES-REDEEMED> 0<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 24548559<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11611<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC.
<SERIES>
<NUMBER> 073
<NAME> STYLE SELECT LARGE CAP GROWTH CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-15-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 25643762<F1>
<INVESTMENTS-AT-VALUE> 24374356<F1>
<RECEIVABLES> 588059<F1>
<ASSETS-OTHER> 66515<F1>
<OTHER-ITEMS-ASSETS> 78326<F1>
<TOTAL-ASSETS> 25107256<F1>
<PAYABLE-FOR-SECURITIES> 361985<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 196712<F1>
<TOTAL-LIABILITIES> 558697<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 25994641<F1>
<SHARES-COMMON-STOCK> 14084<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 7899<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (184565)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1269406)<F1>
<NET-ASSETS> 24548559<F1>
<DIVIDEND-INCOME> 4162<F1>
<INTEREST-INCOME> 20331<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 20819<F1>
<NET-INVESTMENT-INCOME> 3674<F1>
<REALIZED-GAINS-CURRENT> (184565)<F1>
<APPREC-INCREASE-CURRENT> (1269406)<F1>
<NET-CHANGE-FROM-OPS> (1450297)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 14084<F2>
<NUMBER-OF-SHARES-REDEEMED> 0<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 24548559<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11611<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 081
<NAME> STYLE SELECT SERIES MID-CAP GROWTH CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-19-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 51614219<F1>
<INVESTMENTS-AT-VALUE> 58410511<F1>
<RECEIVABLES> 1261482<F1>
<ASSETS-OTHER> 44435<F1>
<OTHER-ITEMS-ASSETS> 18320<F1>
<TOTAL-ASSETS> 59734748<F1>
<PAYABLE-FOR-SECURITIES> 704029<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 202521<F1>
<TOTAL-LIABILITIES> 906550<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 52177113<F1>
<SHARES-COMMON-STOCK> 1342354<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> (643)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (144564)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 6796292<F1>
<NET-ASSETS> 58828198<F1>
<DIVIDEND-INCOME> 78175<F1>
<INTEREST-INCOME> 158291<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 832158<F1>
<NET-INVESTMENT-INCOME> (595692)<F1>
<REALIZED-GAINS-CURRENT> 206527<F1>
<APPREC-INCREASE-CURRENT> 6796292<F1>
<NET-CHANGE-FROM-OPS> 6407127<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 3264892<F2>
<NUMBER-OF-SHARES-REDEEMED> (1923538)<F2>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 58803198<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 390221<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 082
<NAME> STYLE SELECT SERIES MID-CAP GROWTH CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-19-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 51614219<F1>
<INVESTMENTS-AT-VALUE> 58410511<F1>
<RECEIVABLES> 1261482<F1>
<ASSETS-OTHER> 44435<F1>
<OTHER-ITEMS-ASSETS> 18320<F1>
<TOTAL-ASSETS> 59734748<F1>
<PAYABLE-FOR-SECURITIES> 704029<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 202521<F1>
<TOTAL-LIABILITIES> 906550<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 52177113<F1>
<SHARES-COMMON-STOCK> 2622082<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> (643)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (144564)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 6796292<F1>
<NET-ASSETS> 58828198<F1>
<DIVIDEND-INCOME> 78175<F1>
<INTEREST-INCOME> 158291<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 832158<F1>
<NET-INVESTMENT-INCOME> (595692)<F1>
<REALIZED-GAINS-CURRENT> 206527<F1>
<APPREC-INCREASE-CURRENT> 6796292<F1>
<NET-CHANGE-FROM-OPS> 6407127<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2969116<F2>
<NUMBER-OF-SHARES-REDEEMED> (348034)<F2>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 58803198<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 390221<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES INC
<SERIES>
<NUMBER> 083
<NAME> STYLE SELECT SERIES MID-CAP GROWTH CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-19-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 51614219<F1>
<INVESTMENTS-AT-VALUE> 58410511<F1>
<RECEIVABLES> 1261482<F1>
<ASSETS-OTHER> 44435<F1>
<OTHER-ITEMS-ASSETS> 18320<F1>
<TOTAL-ASSETS> 59734748<F1>
<PAYABLE-FOR-SECURITIES> 704029<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 202521<F1>
<TOTAL-LIABILITIES> 906550<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 52177113<F1>
<SHARES-COMMON-STOCK> 343493<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> (643)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (144564)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 6796292<F1>
<NET-ASSETS> 58828198<F1>
<DIVIDEND-INCOME> 78175<F1>
<INTEREST-INCOME> 158291<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 832158<F1>
<NET-INVESTMENT-INCOME> (595692)<F1>
<REALIZED-GAINS-CURRENT> 206527<F1>
<APPREC-INCREASE-CURRENT> 6796292<F1>
<NET-CHANGE-FROM-OPS> 6407127<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 458934<F2>
<NUMBER-OF-SHARES-REDEEMED> (115441)<F2>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 58803198<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 390221<F1>
<INTEREST-EXPENSE> 0<F1>
<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>
